OMB APPROVAL
OMB Number: 3235-0570
Expires: September 30, 2007
Estimated average burden
hours per response: 19.4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR/A
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-3153
FRANK RUSSELL INVESTMENT COMPANY
(Exact name of registrant as specified in charter)
909 A STREET, TACOMA WASHINGTON 98402
(Address of principal executive offices) (Zip code)
GREGORY J. LYONS, ASSISTANT SECRETARY
FRANK RUSSELL INVESTMENT COMPANY
909 A STREET
TACOMA, WASHINGTON 98402
253-439-2406
-------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 253-439-9500
Date of fiscal year end: OCTOBER 31
Date of reporting period: November 1, 2004 to April 30, 2005
ITEM 1. REPORTS TO STOCKHOLDERS
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
2005 SEMIANNUAL REPORT
CLASS A AND S SHARES:
MONEY MARKET FUND
CLASS S SHARES:
US GOVERNMENT MONEY MARKET FUND
TAX FREE MONEY MARKET FUND
APRIL 30, 2005
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
Frank Russell Investment Company is a series investment company with 34
different investment portfolios referred to as Funds. These financial statements
report on three of these Funds.
Frank Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Frank Russell Investment Company
Money Market Funds
Semiannual Report
April 30, 2005 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Money Market Fund.................................................... 3
US Government Money Market Fund...................................... 8
Tax Free Money Market Fund........................................... 11
Notes to Schedules of Investments.................................... 20
Statement of Assets and Liabilities.................................. 21
Statement of Operations.............................................. 22
Statement of Changes in Net Assets................................... 24
Financial Highlights................................................. 26
Notes to Financial Statements........................................ 28
Shareholder Requests for Other Information........................... 33
Basis for Approval of Investment Advisory Contracts.................. 34
Disclosure of Information about Fund Directors....................... 37
Manager, Money Managers and Service Providers........................ 42
</Table>
Frank Russell Investment Company - Money Market Funds
Copyright (c) Frank Russell Company 2005. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. Russell Fund Distributors, Inc., is the distributor of
Frank Russell Investment Company.
[Blank Page]
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds.
To do so, compare this 5% hypothetical example with the 5% hypothetical examples
that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS A PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,010.90 $ 1,023.86
Expenses Paid During
Period* $ 1.15 $ 1.15
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.23%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,011.30 $ 1,024.31
Expenses Paid During
Period* $ 0.70 $ 0.70
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.14%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
Money Market Fund 3
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 34.0%
Allstate Corp. 29,756 7.875 05/01/05 29,756
Allstate Financial Global Funding 5,000 6.150 02/01/06 5,087
Allstate Financial Global Funding (E) 10,000 3.175 12/20/05 10,009
Associates Corp. of NA (E) 12,950 3.190 06/27/05 12,950
Bank One Corp. 8,942 7.625 08/01/05 9,047
Bank One NA Illinois (E) 14,500 3.260 01/13/06 14,516
Bear Stearns Master Note (E) 130,000 3.150 12/01/10 130,000
Citigroup Global Markets (E) 30,000 3.221 07/25/05 30,006
Citigroup Global Markets (E) 10,750 3.380 01/27/06 10,769
Citigroup Global Markets (E) 50,000 3.030 03/16/06 50,023
Federal National Mortgage Association Note 30,000 1.360 05/03/05 30,000
General Electric Capital Corp. (E) 11,400 2.870 05/12/05 11,400
Goldman Sachs Group, Inc. (E) 50,000 3.160 07/29/05 50,000
Goldman Sachs Group, Inc. (E) 15,000 3.054 05/15/06 14,997
Heller Financial, Inc. 17,040 8.000 06/15/05 17,160
HSBC Finance 40,841 8.000 05/09/05 40,893
HSBC Finance (E) 10,400 3.330 06/17/05 10,405
Merrill Lynch & Co Inc (E) 15,000 3.430 04/18/06 15,045
Morgan Stanley (E) 49,225 3.370 03/27/06 49,362
Morgan Stanley (E) 80,000 2.730 05/03/06 80,001
New York Life Insurance Co. (E) 25,000 2.908 05/18/05 25,000
New York Life Insurance Co. (E) 50,000 2.928 11/18/05 50,000
Pacific Life Insurance Co. (E) 50,000 3.210 07/25/05 50,000
Presbyterian Homes & Services Series B2 (E) 17,024 2.860 12/01/28 17,024
Principal Life Global Funding I (E) 50,000 3.060 02/24/06 50,088
Protective Life Insurance Co. (E) 50,000 3.010 02/26/06 50,000
Tango Finance Corp. (E) 15,000 3.131 01/17/06 15,001
The Travelers Insurance Co. (E) 75,000 3.190 11/10/05 75,000
------------
TOTAL CORPORATE BONDS AND NOTES (amortized cost $953,539) 953,539
------------
MUNICIPAL BONDS - 1.1%
Illinois Health Facilities Authority Revenue, weekly demand
(E)(n) 3,655 2.850 07/01/24 3,655
Illinois Health Facilities Authority Revenue, weekly demand
(E)(n) 27,300 3.060 01/01/28 27,300
------------
TOTAL MUNICIPAL BONDS (amortized cost $30,955) 30,955
------------
REGISTERED INVESTMENT COMPANY FUNDS - 0.0%
Merrill Lynch Premier Institutional Fund 361,495 361
Reserve Primary Fund Class 8 226,422 226
------------
TOTAL REGISTERED INVESTMENT COMPANY FUNDS (cost $587) 587
------------
DOMESTIC CERTIFICATES OF DEPOSIT - 8.4%
Bank of the West 50,000 2.900 05/02/05 50,000
Bank of the West 40,000 2.980 05/12/05 40,000
Bank of the West 25,000 3.040 06/15/05 25,000
Bank of the West 25,000 3.070 06/27/05 25,000
Bank of the West 50,000 3.095 06/30/05 50,000
</Table>
4 Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Citibank NA 34,055 2.740 05/13/05 34,055
Wilmington Trust Co. 13,000 3.090 07/11/05 12,999
------------
TOTAL DOMESTIC CERTIFICATES OF DEPOSIT (amortized cost
$237,054) 237,054
------------
DOMESTIC COMMERCIAL PAPER - 51.9%
Atlantis One Funding Corp. 13,700 2.590 05/05/05 13,696
Atlantis One Funding Corp. 50,000 2.950 07/25/05 49,652
Banco Continental de Panama SA 21,000 2.980 05/27/05 20,955
BTM Capital Corp. 50,000 2.820 05/04/05 49,988
BTM Capital Corp. 15,000 2.840 05/05/05 14,995
BTM Capital Corp. 10,000 3.030 06/13/05 9,964
BTM Capital Corp. 45,000 3.060 06/21/05 44,805
BTM Capital Corp. 15,000 3.110 07/12/05 14,907
Co-Op Association of Tractor Dealers - Series A 3,290 2.640 06/08/05 3,281
Co-Op Association of Tractor Dealers - Series A 4,100 2.750 06/10/05 4,087
Co-Op Association of Tractor Dealers - Series A 6,100 2.750 06/13/05 6,079
Co-Op Association of Tractor Dealers - Series A 5,100 2.700 06/14/05 5,083
Co-Op Association of Tractor Dealers - Series A 8,700 2.700 06/15/05 8,671
Co-Op Association of Tractor Dealers - Series A 3,200 2.750 06/20/05 3,188
Co-Op Association of Tractor Dealers - Series A 3,000 2.750 06/24/05 2,988
Co-Op Association of Tractor Dealers - Series A 6,100 2.900 07/08/05 6,067
Co-Op Association of Tractor Dealers - Series A 1,500 2.980 08/15/05 1,487
Co-Op Association of Tractor Dealers - Series A 6,000 3.100 08/26/05 5,940
Co-Op Association of Tractor Dealers - Series B 4,300 2.570 05/06/05 4,298
Co-Op Association of Tractor Dealers - Series B 7,100 2.750 06/20/05 7,073
Co-Op Association of Tractor Dealers - Series B 5,000 2.750 06/24/05 4,979
Co-Op Association of Tractor Dealers - Series B 26,300 3.150 08/01/05 26,094
Co-Op Association of Tractor Dealers - Series B 20,700 2.950 08/10/05 20,529
Co-Op Association of Tractor Dealers - Series B 5,100 2.980 08/15/05 5,055
Co-Op Association of Tractor Dealers - Series B 5,000 3.250 09/20/05 4,935
Co-Op Association of Tractor Dealers - Series B 9,500 3.300 09/23/05 9,374
Credit Suisse First Boston USA, Inc. 25,000 2.690 05/09/05 24,985
Eiffel Funding LLC 42,000 2.810 05/02/05 41,997
Eiffel Funding LLC 20,300 2.790 05/09/05 20,287
Eiffel Funding LLC 15,000 2.860 06/02/05 14,962
Fairway Finance 5,470 2.850 05/09/05 5,467
Fairway Finance 30,000 3.000 05/31/05 29,925
Fairway Finance 49,227 2.940 06/14/05 49,050
Galleon Capital Corp. 41,419 2.860 05/09/05 41,393
Galleon Capital Corp. 50,000 2.700 05/12/05 49,959
Galleon Capital Corp. 30,000 2.620 06/09/05 29,915
General Electric Capital Corp. 75,000 2.980 05/02/05 74,994
General Electric Capital Corp. 50,000 2.980 05/31/05 49,882
Giro Balanced Funding Corp. 20,000 2.830 05/23/05 19,966
Gotham Funding Corp. 75,000 3.000 05/16/05 74,908
Gotham Funding Corp. 45,000 3.030 05/23/05 44,917
Gotham Funding Corp. 20,000 3.040 05/31/05 19,949
HSBC Finance 45,000 2.850 05/31/05 44,893
Ivory Funding Corp. 6,466 2.850 05/09/05 6,462
Ivory Funding Corp. 25,906 2.740 05/16/05 25,876
Ivory Funding Corp. 32,818 2.760 05/18/05 32,775
</Table>
Money Market Fund 5
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Ivory Funding Corp. 36,290 3.130 07/27/05 36,015
Lockhart Funding LLC 10,000 2.875 05/04/05 9,998
Lockhart Funding LLC 6,000 2.980 06/02/05 5,984
Lockhart Funding LLC 8,000 3.010 06/06/05 7,976
Lockhart Funding LLC 50,000 3.040 06/16/05 49,806
Lockhart Funding LLC 58,000 3.030 06/20/05 57,756
Long Lane Master Trust IV 7,188 2.820 05/03/05 7,187
Long Lane Master Trust IV 50,000 2.860 05/06/05 49,980
Long Lane Master Trust IV 46,806 2.790 05/16/05 46,752
Long Lane Master Trust IV 33,091 3.040 05/31/05 33,007
Principal Financial Services, Inc. 25,000 3.000 05/05/05 24,992
Tango Finance Corp. 9,500 2.690 05/03/05 9,499
Tango Finance Corp. 34,490 2.940 06/30/05 34,321
Three Pillars Funding Corp. 20,051 2.900 05/13/05 20,032
Three Rivers Funding Corp. 12,529 2.830 05/06/05 12,524
------------
TOTAL DOMESTIC COMMERCIAL PAPER (amortized cost $1,456,561) 1,456,561
------------
EURODOLLAR CERTIFICATES OF DEPOSIT - 1.8%
Societe Generale (Cayman) 50,350 2.940 05/02/05 50,350
------------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (amortized cost
$50,350) 50,350
------------
UNITED STATES GOVERNMENT AGENCIES - 1.0%
AID to INH Portugal Guaranteed Note, weekly demand (LIBOR
Floater) (E) 8,125 3.600 12/01/17 8,212
Federal Home Loan Bank Note 6,095 1.560 05/13/05 6,095
Federal National Mortgage Association Note 15,000 1.750 05/23/05 15,000
------------
TOTAL UNITED STATES GOVERNMENT AGENCIES (amortized cost
$29,307) 29,307
------------
YANKEE CERTIFICATES OF DEPOSIT - 1.8%
Deutsche Bank AG (NY) 25,000 2.110 06/14/05 25,000
Royal Bank of Scotland PLC 25,000 1.490 05/04/05 24,999
------------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (amortized cost
$49,999) 49,999
------------
TOTAL INVESTMENTS - 100.0% (amortized cost $2,808,352) (+) 2,808,352
OTHER ASSETS AND LIABILITIES, NET - 0.0% 749
------------
NET ASSETS - 100.0% 2,809,101
============
</Table>
See accompanying notes which are an integral part of the financial statements.
6 Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Corporate Bonds & Notes 34.0
Municipal Bonds 1.1
Registered Investment Company Funds --*
Domestic Certificates of Deposit 8.4
Domestic Commercial Paper 51.9
Eurodollar Certificates of Deposit 1.8
United States Government Agencies 1.0
Yankee Certificates of Deposit 1.8
---------------
Total Investments 100.0
Other Assets and Liabilities, Net --*
---------------
Net Assets 100.0
===============
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
Money Market Fund 7
FRANK RUSSELL INVESTMENT COMPANY
US GOVERNMENT MONEY MARKET FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,009.00 $ 1,022.57
Expenses Paid During
Period* $ 2.44 $ 2.46
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.49%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
8 US Government Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
US GOVERNMENT MONEY MARKET FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCIES - 32.8%
Aid to Sri Lanka Guaranteed Note (LIBOR Floater) (E) 1,875 3.600 06/15/12 1,884
Federal Farm Credit Bank Note 150 2.250 09/08/05 149
Federal Farm Credit Bank Note (E) 1,350 2.920 06/20/06 1,350
Federal Home Loan Bank 350 1.760 05/27/05 350
Federal Home Loan Bank 2,000 2.060 06/10/05 1,999
Federal Home Loan Bank 1,000 2.250 06/16/05 999
Federal Home Loan Bank 1,500 1.625 06/17/05 1,497
Federal Home Loan Bank 300 6.425 06/27/05 302
Federal Home Loan Bank 1,000 1.420 07/08/05 997
Federal Home Loan Bank 125 1.750 08/12/05 124
Federal Home Loan Bank (E) 600 2.760 06/02/06 600
Federal National Mortgage Association 500 1.610 05/13/05 500
Federal National Mortgage Association 310 1.750 05/23/05 310
Federal National Mortgage Association 100 6.350 06/10/05 100
Federal National Mortgage Association 950 4.250 06/15/05 951
Federal National Mortgage Association 1,440 5.750 06/15/05 1,445
Federal National Mortgage Association 150 6.440 06/21/05 151
Student Loan Marketing Association Note 1,000 1.450 06/15/05 998
------------
TOTAL INVESTMENTS - 32.8% (amortized cost $14,706) 14,706
------------
REPURCHASE AGREEMENTS - 67.1%
Agreement with ABN-AMRO Bank and The Bank of New York
(Tri-party) of $30,030 dated April 29, 2005 at 2.870% to
be repurchased at $30,037 on May 2, 2005, collateralized
by: $30,636 par various U.S. Government Agency Notes,
valued at $30,632 30,030
------------
TOTAL REPURCHASE AGREEMENTS (identified cost $30,030) 30,030
------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS - 99.9%
(cost $44,736) (+) 44,736
OTHER ASSETS AND LIABILITIES, NET - 0.1% 28
------------
NET ASSETS - 100.0% 44,764
============
</Table>
See accompanying notes which are an integral part of the financial statements.
US Government Money Market Fund 9
FRANK RUSSELL INVESTMENT COMPANY
US GOVERNMENT MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
United States Government Agencies 32.8
Repurchase Agreements 67.1
---------------
Total Investments and Repurchase Agreements 99.9
Other Assets and Liabilities, Net 0.1
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
10 US Government Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,007.50 $ 1,023.21
Expenses Paid During
Period* $ 1.79 $ 1.81
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.36%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Tax Free Money Market Fund 11
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM TAX-EXEMPT OBLIGATIONS - 99.7%
Alabama - 1.3%
Lauderdale County Public Park Recreation Board Revenue
Bonds, weekly demand (E) 600 3.000 12/01/20 600
Spring Hill College Educational Building Authority Revenue
Bonds, weekly demand (E) 1,000 3.030 09/01/24 1,000
------------
1,600
------------
Arizona - 0.6%
Maricopa County Industrial Development Authority Revenue
Bonds, weekly demand (E) 805 3.000 04/15/30 805
------------
California - 1.3%
CSUCI Financing Authority Revenue Bonds, annual demand (E) 500 1.600 08/01/31 500
GAF Tax Exempt Bond Grantor Trust, monthly demand (E) 1,000 2.800 10/01/12 1,000
Rohnert Park California Revenue Bonds, weekly demand (E) 115 3.040 06/15/25 115
------------
1,615
------------
Colorado - 7.9%
Arapahoe County Water & Wastewater Authority Revenue Bonds,
annual demand (E) 2,000 3.020 12/01/33 2,000
City of Colorado Springs Colorado Revenue Bonds, weekly
demand (E) 1,800 3.000 11/01/29 1,800
Colorado Health Facilities Authority Revenue Bonds, weekly
demand (E) 500 3.150 10/01/30 500
Denver City & County Colorado Revenue Bonds, weekly demand
(E) 2,685 3.050 12/01/29 2,685
SBC Metropolitan District General Obligation, Ltd., weekly
demand (E) 1,930 3.090 12/01/17 1,930
Superior Metropolitan District No. 1 Revenue Bonds, annual
demand (E)(u) 1,000 2.300 12/01/20 1,000
------------
9,915
------------
Delaware - 0.6%
Delaware State Economic Development Authority Revenue Bonds,
weekly demand (E) 300 3.030 05/01/15 300
Delaware State Economic Development Authority Revenue Bonds,
weekly demand (E) 450 3.000 12/01/15 450
------------
750
------------
District of Columbia - 0.5%
District of Columbia Revenue Bonds, weekly demand (E) 600 3.100 12/01/23 600
------------
Florida - 0.6%
Fort Pierce Florida Revenue Bonds, weekly demand (E) 300 3.000 10/01/17 300
Pinellas County Health Facility Authority Revenue Bonds,
weekly demand (E) 500 3.050 12/01/15 500
------------
800
------------
Georgia - 7.0%
Dalton Georgia Revenue Bonds, weekly demand (E) 1,080 3.080 01/01/12 1,080
De Kalb County Housing Authority Revenue Bonds, weekly
demand (E) 400 3.080 06/15/25 400
Fulton County Housing Authority Revenue Bonds, weekly demand
(E) 1,000 3.000 06/01/23 1,000
Gainesville & Hall County Development Authority Revenue
Bonds, weekly demand (E)(u) 700 3.050 11/15/33 700
</Table>
12 Tax Free Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Gwinnett County Development Authority Revenue Bonds, weekly
demand (E) 65 3.000 03/01/17 65
Gwinnett County Development Authority Revenue Bonds, weekly
demand (E) 2,900 3.000 04/01/18 2,900
Gwinnett County Development Authority Revenue Bonds, weekly
demand (E) 900 3.000 03/01/21 900
Gwinnett County Hospital Authority Revenue Bonds, weekly
demand (E)(u) 600 3.000 07/01/32 600
Marietta Housing Authority Revenue Bonds, weekly demand (E) 1,250 3.040 02/01/26 1,250
------------
8,895
------------
Idaho - 0.3%
Idaho Health Facilities Authority Revenue Bonds, weekly
demand (E)(u) 400 3.050 05/01/22 400
------------
Illinois - 7.1%
Belleville Illinois Revenue Bonds, weekly demand (E) 500 3.010 12/01/08 500
Illinois Educational Facilities Authority Revenue Bonds,
semi-annual demand 450 8.750 07/01/05 455
Illinois Educational Facilities Authority Revenue Bonds,
weekly demand (E) 100 3.000 11/01/25 100
Illinois Educational Facilities Authority Revenue Bonds,
weekly demand (E) 1,465 2.970 07/01/29 1,465
Illinois Educational Facilities Authority Revenue Bonds,
weekly demand (E) 1,000 3.000 08/01/30 1,000
Illinois Educational Facilities Authority Revenue Bonds,
weekly demand (E) 400 3.000 03/01/34 400
Illinois Finance Authority Revenue Bonds, weekly demand (E) 800 3.100 04/01/21 800
Illinois Finance Authority Revenue Bonds, weekly demand (E) 700 3.100 08/01/26 700
Illinois Finance Authority Revenue Bonds, weekly demand (E) 575 3.030 07/01/33 575
Illinois Finance Authority Revenue Bonds, weekly demand
(E)(u) 845 3.030 02/01/19 845
Oakbrook Terrace Illinois Revenue Bonds, weekly demand (E) 2,100 2.350 12/01/25 2,100
------------
8,940
------------
Indiana - 2.7%
Indiana Educational Facilities Authority Revenue Bonds,
weekly demand (E)(u) 100 3.050 07/01/32 100
Indiana Health Facility Financing Authority Revenue Bonds,
weekly demand (E) 1,000 3.000 01/01/20 1,000
Indiana Health Facility Financing Authority Revenue Bonds,
weekly demand (E) 750 3.100 12/01/29 750
Indiana University Revenue Bonds, weekly demand (E) 1,100 2.950 11/01/18 1,100
Tippecanoe School Corp. General Obligation Unlimited 400 2.000 07/01/05 400
------------
3,350
------------
Iowa - 1.2%
Iowa Finance Authority Revenue Bonds, weekly demand (E) 400 3.100 07/01/31 400
Iowa Finance Authority Revenue Bonds, weekly demand (E) 400 3.100 11/01/32 400
Iowa Finance Authority Revenue Bonds, weekly demand (E)(u) 200 3.050 07/01/24 200
Iowa Finance Authority Revenue Bonds, weekly demand (E)(u) 100 3.100 07/01/26 100
Iowa Higher Education Loan Authority Revenue Bonds, weekly
demand (E)(u) 400 3.050 11/01/32 400
------------
1,500
------------
Kansas - 3.2%
Kansas Development Finance Authority Revenue Bonds, weekly
demand (E) 2,100 3.050 12/01/18 2,100
Kansas Development Finance Authority Revenue Bonds, weekly
demand (E) 800 3.050 12/01/34 800
Prairie Village Kansas Revenue Bonds, weekly demand (E) 1,150 3.000 11/01/30 1,150
------------
4,050
------------
</Table>
Tax Free Money Market Fund 13
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Kentucky - 5.6%
County of Jefferson Kentucky Revenue Bonds, weekly demand
(E) 1,700 3.010 10/01/19 1,700
Kentucky Asset Liability Commission Revenue Notes 2,500 3.000 06/29/05 2,506
Kentucky Association of Counties Certificate of
Participation 2,500 3.000 06/30/05 2,505
Lexington-Fayette Urban County Government Revenue Bonds,
annual demand (E)(u) 380 2.750 04/01/15 380
------------
7,091
------------
Louisiana - 1.3%
Louisiana Public Facilities Authority Revenue Notes 1,690 3.000 10/20/05 1,700
------------
Maryland - 0.8%
County of Montgomery Maryland, monthly demand (E) 641 2.350 04/01/14 641
Maryland State Economic Development Corp. Revenue Bonds,
weekly demand (E) 400 3.000 09/01/24 400
------------
1,041
------------
Massachusetts - 2.4%
Commonwealth of Massachusetts General Obligation Unlimited,
weekly demand (E)(u) 1,520 3.070 12/01/24 1,520
Hull Massachusetts General Obligation, Ltd. Notes 1,500 3.000 07/14/05 1,504
------------
3,024
------------
Michigan - 6.5%
Lansing Economic Development Corp. Revenue Bonds,
semi-annual demand (E) 1,490 2.250 05/01/12 1,490
Leelanau County Economic Development Corp., semi-annual
demand (E) 265 2.350 06/15/06 265
Michigan State Housing Development Authority Revenue Bonds,
weekly demand (E) 2,600 3.000 08/15/32 2,600
Michigan State Job Development Authority Revenue Bonds,
monthly demand (E) 1,900 2.400 11/01/14 1,900
Michigan Strategic Fund Revenue Bonds, semi-annual demand
(E) 90 2.650 10/15/05 90
Northern Michigan University Revenue Bonds, weekly demand
(E) 200 3.050 06/01/31 200
Northville Township Economic Development Corp. Revenue
Bonds, weekly demand (E) 500 2.990 05/01/14 500
Oakland County Economic Development Corp. Revenue Bonds,
semi-annual demand (E) 725 2.500 08/01/15 725
Sterling Heights Economic Development Corp. Revenue Bonds,
weekly demand (E) 470 3.010 12/01/10 470
------------
8,240
------------
Minnesota - 2.8%
Arden Hills Minnesota Revenue Bonds, weekly demand (E) 496 3.100 09/01/29 496
City of Austin Minnesota Revenue Bonds, weekly demand (E) 1,400 3.100 12/01/13 1,400
City of Minneapolis Minnesota Revenue Bonds, weekly demand
(E) 500 3.150 05/01/26 500
St. Paul Housing & Redevelopment Authority Revenue Bonds,
weekly demand (E) 1,155 3.150 08/01/25 1,155
------------
3,551
------------
</Table>
14 Tax Free Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Missouri - 4.1%
Clayton Industrial Development Authority Revenue Bonds,
weekly demand (E) 1,000 3.160 01/01/09 1,000
Kansas City Industrial Development Authority Revenue Bonds,
weekly demand (E) 100 3.050 04/01/27 100
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E) 160 3.100 10/01/09 160
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E) 1,000 3.100 10/01/24 1,000
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E) 350 3.050 06/01/26 350
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E) 100 3.100 07/01/32 100
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E)(u) 100 3.100 08/15/28 100
St. Charles County Industrial Development Authority Revenue
Bonds, weekly demand (E) 2,300 3.090 12/01/27 2,300
------------
5,110
------------
Montana - 2.5%
Montana Health Facilities Authority Revenue Bonds, weekly
demand (E)(u) 3,095 3.000 12/01/15 3,096
------------
Multi-State and Other - 0.7%
Greystone Municipal Lease Certificate Trust Certificate of
Participation, weekly demand (E)(a) 205 3.160 07/01/05 205
Greystone Revenue Bond Certificate Trust Series 1998-1 Class
SR, weekly demand (E)(e) 700 3.120 05/01/28 700
------------
905
------------
New Jersey - 1.7%
Dumont New Jersey Notes 2,075 3.625 04/06/06 2,087
------------
New York - 2.3%
Albany Industrial Development Agency Revenue Bonds, weekly
demand (E) 480 3.080 07/01/32 480
Herkimer County Industrial Development Agency Revenue Bonds,
weekly demand (E)(u) 1,270 3.070 12/01/14 1,270
Marlboro Central School District General Obligation
Unlimited Notes 1,200 3.750 04/13/06 1,209
------------
2,959
------------
North Carolina - 2.2%
Mcdowell County Industrial Facilities & Pollution Control
Financing Authority Revenue Bonds, weekly demand (E) 1,870 3.020 05/01/22 1,870
North Carolina Medical Care Commission Revenue Bonds, weekly
demand (E)(u) 840 3.050 11/15/09 840
------------
2,710
------------
Ohio - 6.0%
American Municipal Power-Ohio, Inc. Revenue Notes 580 2.850 03/31/06 580
Clermont County Ohio Revenue Bonds, semi-annual demand (E) 1,470 1.850 05/01/12 1,470
New Albany Community Authority Revenue Bonds, weekly demand
(E) 1,165 3.000 02/01/25 1,165
</Table>
Tax Free Money Market Fund 15
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Stark County Ohio Revenue Bonds, semi-annual demand (E) 1,465 2.500 09/01/15 1,465
Stark County Ohio Revenue Bonds, weekly demand (E) 1,685 1.300 09/15/16 1,685
University of Toledo Revenue Bonds, weekly demand (E)(u) 100 3.050 06/01/32 100
Wapakonetka Ohio General Obligation, Ltd. Notes 1,100 2.200 06/16/05 1,100
------------
7,565
------------
Oklahoma - 0.8%
Tulsa County Industrial Authority Revenue Bonds, annual
demand 1,000 2.050 05/15/17 1,000
------------
Pennsylvania - 0.5%
City of Philadelphia Pennsylvania Revenue Bonds, weekly
demand (E) 100 2.990 06/15/23 100
Pennsylvania Higher Educational Facilities Authority Revenue
Bonds, annual demand 500 1.950 11/01/31 500
------------
600
------------
Tennessee - 3.7%
Franklin County Health & Educational Facilities Board
Revenue Bonds, semi-annual demand (E) 1,375 2.550 09/01/10 1,375
Knox County Health Educational & Housing Facilities Board
Revenue Bonds, weekly demand (E) 320 3.000 03/01/19 320
Knox County Industrial Development Board Revenue Bonds,
weekly demand (E) 1,900 2.650 12/01/14 1,900
Wilson County Industrial Development Board, weekly demand
(E) 1,100 3.030 07/01/26 1,100
------------
4,695
------------
Texas - 5.0%
City of Houston Texas Revenue Bonds, weekly demand (E) 1,000 3.080 05/15/26 1,000
City of Houston Texas Revenue Bonds, weekly demand (E) 1,990 3.080 05/15/27 1,990
Garland Health Facilities Development Corp. Revenue Bonds,
weekly demand (E) 400 3.000 11/15/32 400
Gulf Coast Waste Disposal Authority Revenue Bonds, weekly
demand (E) 490 3.010 12/01/08 490
State of Texas Notes 2,000 3.000 08/31/05 2,009
Tarrant County Housing Finance Corp. Revenue Bonds, weekly
demand (E) 460 3.040 02/15/27 460
------------
6,349
------------
Utah - 2.5%
Utah Transit Authority Revenue Bonds, weekly demand (E)(u) 3,200 3.000 09/01/32 3,201
------------
Vermont - 2.2%
Vermont Educational & Health Buildings Financing Agency
Revenue Bonds, weekly demand (E) 1,345 3.100 06/01/22 1,345
Vermont Educational & Health Buildings Financing Agency
Revenue Bonds, weekly demand (E) 695 3.100 06/01/27 695
Vermont Educational & Health Buildings Financing Agency
Revenue Bonds, weekly demand (E)(u) 126 3.050 08/01/05 126
Vermont Industrial Development Authority Revenue Bonds,
monthly demand (E)(u) 545 2.350 12/01/13 545
------------
2,711
------------
</Table>
16 Tax Free Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Virginia - 0.6%
Harrisonburg Redevelopment & Housing Authority Revenue
Bonds, weekly demand (E) 700 3.080 02/01/07 700
------------
Washington - 4.6%
Washington State Housing Finance Commission Revenue Bonds,
weekly demand (E) 1,255 3.050 08/01/24 1,255
Washington State Housing Finance Commission Revenue Bonds,
weekly demand (E) 1,000 3.050 12/01/33 1,000
Washington State Housing Finance Commission Revenue Bonds,
weekly demand (E)(u) 2,200 3.050 08/01/19 2,200
Washington State Housing Finance Commission Revenue Bonds,
weekly demand (E)(u) 1,310 3.050 01/01/34 1,310
------------
5,765
------------
West Virginia - 0.8%
Marshall County West Virginia Revenue Bonds, weekly demand
(E) 1,000 3.150 03/01/26 1,000
------------
Wisconsin - 5.8%
City of Milwaukee Wisconsin Revenue Bonds, weekly demand (E) 550 3.000 06/01/29 550
Delavan Darien School District Revenue Notes 1,000 3.000 08/26/05 1,004
Milwaukee Redevelopment Authority Revenue Bonds, weekly
demand (E) 600 3.150 07/01/21 600
Sturgeon Bay School District Revenue Notes 1,000 2.090 10/26/05 1,000
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E) 200 3.100 11/01/17 200
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E) 1,855 3.050 06/01/19 1,855
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E) 1,340 3.030 08/15/30 1,340
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E)(u) 700 3.100 12/01/32 700
------------
7,249
------------
TOTAL SHORT-TERM TAX-EXEMPT OBLIGATIONS (cost $125,569) 125,569
------------
TOTAL INVESTMENTS - 99.7% (identified cost $125,569) (+) 125,569
OTHER ASSETS AND LIABILITIES, NET - 0.3% 416
------------
NET ASSETS - 100.0% 125,985
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 17
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
- ----------------------------------------------------------------------------
QUALITY RATINGS AS A % OF VALUE
P-1/A-1; MIG1/SP-1/F1 or equivalent 100%
ECONOMIC SECTOR EMPHASIS AS A % OF VALUE
Non-Profit 16
Industrial Revenue Bond 13
Multi-Family Housing Bond 11
Education (colleges and universities) 9
Nursing Home 8
Cashflow Note 7
Hospital 7
School District 7
Water and Sewer 5
Annual Appropriation 3
Electric 3
Special Tax 3
Bond Anticipation Note 2
Local General Obligation 2
Asset Backed 1
General Obligation 1
Miscellaneous Revenue 1
Single-Family Housing Bond 1
Escrow to Maturity --
-----
100%
=====
</Table>
See accompanying notes which are an integral part of the financial statements.
18 Tax Free Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------------------
Alabama 1.3
Arizona 0.6
California 1.3
Colorado 7.9
Delaware 0.6
District of Columbia 0.5
Florida 0.6
Georgia 7.0
Idaho 0.3
Illinois 7.1
Indiana 2.7
Iowa 1.2
Kansas 3.2
Kentucky 5.6
Louisiana 1.3
Maryland 0.8
Massachusetts 2.4
Michigan 6.5
Minnesota 2.8
Missouri 4.1
Montana 2.5
Multi-State and Other 0.7
New Jersey 1.7
New York 2.3
North Carolina 2.2
Ohio 6.0
Oklahoma 0.8
Pennsylvania 0.5
Tennessee 3.7
Texas 5.0
Utah 2.5
Vermont 2.2
Virginia 0.6
Washington 4.6
West Virginia 0.8
Wisconsin 5.8
---------------
Total Investments 99.7
Other Assets and Liabilities, Net 0.3
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 19
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(E) Adjustable or floating rate security. Rate shown reflects rate in effect
at period end. Variable Rate.
(u) Bond is insured by a guarantor.
(ae) Pre-refunded: These bonds are collateralized by US Treasury securities,
which are held in escrow by a trustee and used to pay principal and
interest in the tax-exempt issue and to retire the bonds in full at the
earliest refunding date. The rate noted is for descriptive purposes;
effective yield may vary.
(+) The identified cost for Federal income tax purpose is the same as shown
above.
(n) Taxable security.
(a) Multi-State bond issue including Alabama, California, Colorado,
Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky,
Massachusetts, New Hampshire, New Jersey, New York, Ohio, Oklahoma,
Pennsylvania, South Carolina, Texas, and Virginia.
(e) Multi-State bond issue including Arkansas, Florida, Georgia, Kansas,
Kentucky, Tennessee, and Virginia.
# All securities with a maturity date greater than thirteen months have a
demand feature or an optional or mandatory put, or are pre-refunded,
resulting in an effective maturity of thirteen months or less.
Additionally, all daily and weekly demand securities are backed by direct
payment of letters of credit.
ABBREVIATIONS:
LIBOR - London Interbank Offered Rate
A-1 - A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's for commercial paper obligations. The obligor's capacity to
meet its financial commitment on the obligation is strong. Within this category,
certain obligations are designated with a plus (+) sign. This indicates that the
obligor's capacity to meet its financial commitment on these obligations is
extremely strong.
F-1 - Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; (may have an added "+" to denote any
exceptionally strong credit feature.)
MIG1 - This designation denotes superior credit quality. Excellent protection is
afforded by established cash flows, highly reliable liquidity support, or
demonstrated broad-based access to the markets for refinancing.
P-1 - The highest tax-exempt rating given by Moody's Investor Services to
commercial paper with a "superior capacity for repayment."
SP-1 - The highest short-term municipal note credit rating given by Standard &
Poor's Corporation to notes with a "very strong or strong capacity to pay
principal and interest."
20 Notes to Schedules of Investments
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
MONEY MARKET US GOVERNMENT TAX FREE
AMOUNTS IN THOUSANDS FUND MONEY MARKET FUND MONEY MARKET FUND
- ------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments at amortized cost which approximates
value $ 2,808,352 $ 14,706 $ 125,569
Repurchase agreements at cost which approximates
value -- 30,030 --
Cash -- -- 52
Receivables:
Interest 7,469 139 622
Fund shares sold 113 -- --
Prepaid expenses 8 1 15
------------------- ------------------- --------------------
Total assets 2,815,942 44,876 126,258
------------------- ------------------- --------------------
LIABILITIES
Payables:
Due to Custodian 330 -- --
Accrued fees to affiliates 279 21 38
Other accrued expenses 123 11 11
Dividends 6,109 80 224
------------------- ------------------- --------------------
Total liabilities 6,841 112 273
------------------- ------------------- --------------------
NET ASSETS $ 2,809,101 $ 44,764 $ 125,985
=================== =================== ====================
NET ASSETS CONSIST OF:
Undistributed (overdistributed) net investment
income $ (25) $ -- $ --
Accumulated net realized gain (loss) (138) (49) (126)
Shares of beneficial interest 28,093 448 1,261
Additional paid-in capital 2,781,171 44,365 124,850
------------------- ------------------- --------------------
NET ASSETS $ 2,809,101 $ 44,764 $ 125,985
=================== =================== ====================
NET ASSET VALUE, per share:
Net asset value per share: Class A* $ 1.00 $ -- $ --
Class A - Net assets $ 8,941,593 $ -- $ --
Class A - Shares outstanding ($.01 par
value) 8,941,591 -- --
Net asset value per share: Class S* $ 1.00 $ 1.00 $ 1.00
Class S - Net assets $ 2,800,159,366 $ 44,763,619 $ 125,985,412
Class S - Shares outstanding ($.01 par
value) 2,800,325,475 44,812,487 126,111,911
- ------------------------------------------------------------------------------------------------------------------------
</Table>
* Net asset value per share equals class level net assets divided by class
level shares of beneficial interest outstanding.
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 21
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
MONEY MARKET US GOVERNMENT TAX FREE
AMOUNTS IN THOUSANDS FUND MONEY MARKET FUND MONEY MARKET FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 368 $ -- $ --
Interest 34,342 542 1,278
------------------- ------------------- --------------------
Total investment income 34,710 542 1,278
------------------- ------------------- --------------------
EXPENSES
Advisory fees 2,849 47 135
Administrative fees 712 12 34
Custodian fees 290 17 32
Distribution fees - Class A 3 -- --
Transfer agent fees 100 22 15
Professional fees 52 7 8
Registration fees 96 9 14
Trustees' fees 38 1 2
Printing fees 36 2 2
Miscellaneous 29 1 2
------------------- ------------------- --------------------
Expenses before reductions 4,205 118 244
Expense reductions (2,142) (2) (3)
------------------- ------------------- --------------------
Net expenses 2,063 116 241
------------------- ------------------- --------------------
Net investment income (loss) 32,647 426 1,037
------------------- ------------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments (27) (1) --
------------------- ------------------- --------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 32,620 $ 425 $ 1,037
=================== =================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
22 Statement of Operations
(This page intentionally left blank)
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
MONEY MARKET
FUND
-------------------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2005 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2004
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 32,622 $ 32,881
Net realized gain (loss) (2) 33
------------------- --------------------
Net increase (decrease) in net assets from operations 32,620 32,914
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A (77) (26)
Class S (32,227) (33,031)
------------------- --------------------
Net decrease in net assets from distributions (32,304) (33,057)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions (153,896) 598,520
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS (153,580) 598,377
NET ASSETS
Beginning of period 2,962,681 2,364,304
------------------- --------------------
End of period $ 2,809,101 $ 2,962,681
=================== ====================
Undistributed (overdistributed) net investment income included in net
assets $ -- $ (343)
</Table>
See accompanying notes which are an integral part of the financial statements.
24 Statement of Changes in Net Assets
<Table>
<Caption>
US GOVERNMENT TAX FREE
MONEY MARKET FUND MONEY MARKET FUND
----------------------------------------------------- ------------------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- -------------------------------------------------------------------------------------------------------
$ 426 $ 465 $ 1,037 $ 1,147
(1) (5) -- (4)
------------------------------ ------------------- ------------------- -------------------
425 460 1,037 1,143
------------------------------ ------------------- ------------------- -------------------
-- -- -- --
(426) (465) (1,023) (1,161)
------------------------------ ------------------- ------------------- -------------------
(426) (465) (1,023) (1,161)
------------------------------ ------------------- ------------------- -------------------
(9,858) (7,591) (14,801) 3,112
------------------------------ ------------------- ------------------- -------------------
(9,859) (7,596) (14,787) 3,094
54,623 62,219 140,772 137,678
------------------------------ ------------------- ------------------- -------------------
$ 44,764 $ 54,623 $ 125,985 $ 140,772
============================== =================== =================== ===================
$ -- $ -- $ -- $ (14)
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 25
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET TOTAL FROM DISTRIBUTIONS
BEGINNING OF INVESTMENT INVESTMENT FROM NET
PERIOD INCOME (LOSS)(A) OPERATIONS INVESTMENT INCOME
- --------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
Class A
April 30, 2005 * 1.0000 .0108 .0108 (.0108)
October 31, 2004 1.0000 .0108 .0108 (.0108)
October 31, 2003 (1) 1.0000 .0051 .0051 (.0051)
- --------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 1.0000 .0113 .0113 (.0113)
October 31, 2004 1.0000 .0117 .0117 (.0117)
October 31, 2003 1.0000 .0121 .0121 (.0121)
October 31, 2002 1.0000 .0185 .0185 (.0185)
October 31, 2001 1.0000 .0483 .0483 (.0483)
October 31, 2000 (2) 1.0000 .0519 .0519 (.0519)
December 31, 1999 1.0000 .0515 .0515 (.0515)
- --------------------------------------------------------------------------------------------------------------------
US GOVERNMENT MONEY MARKET FUND
Class S
April 30, 2005 * 1.0000 .0090 .0090 (.0090)
October 31, 2004 1.0000 .0081 .0081 (.0081)
October 31, 2003 1.0000 .0085 .0085 (.0085)
October 31, 2002 1.0000 .0173 .0173 (.0173)
October 31, 2001 1.0000 .0446 .0446 (.0446)
October 31, 2000 (2) 1.0000 .0500 .0500 (.0500)
December 31, 1999 1.0000 .0483 .0483 (.0483)
- --------------------------------------------------------------------------------------------------------------------
TAX FREE MONEY MARKET FUND
Class S
April 30, 2005 * 1.0000 .0075 .0075 (.0075)
October 31, 2004 1.0000 .0085 .0085 (.0085)
October 31, 2003 1.0000 .0094 .0094 (.0094)
October 31, 2002 1.0000 .0152 .0152 (.0152)
October 31, 2001 1.0000 .0317 .0317 (.0317)
October 31, 2000 (2) 1.0000 .0333 .0333 (.0333)
December 31, 1999 1.0000 .0326 .0326 (.0326)
- --------------------------------------------------------------------------------------------------------------------
</Table>
* For the six months ended April 30, 2005 (Unaudited).
(1) For the period April 21, 2003 (commencement of operations) to October 31,
2003.
(2) For the ten months ended October 31, 2000.
(a) Average month-end shares were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) May reflect amounts waived and/or reimbursed by the investment advisor and
for certain funds, custody credit arrangements. The custody credit
arrangements had an impact of less than .005%.
See accompanying notes which are an integral part of the financial statements.
26 Financial Highlights
<Table>
<Caption>
%
$ $ RATIO OF EXPENSES
$ NET ASSET VALUE, % NET ASSETS, TO AVERAGE
TOTAL END OF TOTAL END OF PERIOD NET ASSETS,
DISTRIBUTIONS PERIOD RETURN(B) (000) NET(C)(D)
- -------------------------------------------------------------------------------------------------
(.0108) 1.0000 1.09 8,942 .23
(.0108) 1.0000 1.08 3,989 .25
(.0051) 1.0000 .59 682 .26
- -------------------------------------------------------------------------------------------------
(.0113) 1.0000 1.13 2,800,159 .14
(.0117) 1.0000 1.17 2,958,692 .15
(.0121) 1.0000 1.28 2,363,623 .16
(.0185) 1.0000 1.87 1,904,819 .14
(.0483) 1.0000 4.94 1,886,741 .14
(.0519) 1.0000 5.32 1,757,430 .17
(.0515) 1.0000 5.27 2,026,717 .17
- -------------------------------------------------------------------------------------------------
(.0090) 1.0000 .90 44,764 .49
(.0081) 1.0000 .82 54,623 .47
(.0085) 1.0000 .86 62,219 .41
(.0173) 1.0000 1.74 93,182 .25
(.0446) 1.0000 4.55 108,884 .37
(.0500) 1.0000 5.12 81,316 .32
(.0483) 1.0000 4.93 190,150 .30
- -------------------------------------------------------------------------------------------------
(.0075) 1.0000 .75 125,985 .36
(.0085) 1.0000 .85 140,772 .36
(.0094) 1.0000 .94 137,678 .32
(.0152) 1.0000 1.53 174,623 .25
(.0317) 1.0000 3.22 180,699 .30
(.0333) 1.0000 3.38 169,808 .34
(.0326) 1.0000 3.31 246,695 .21
- -------------------------------------------------------------------------------------------------
<Caption>
% %
RATIO OF EXPENSES RATIO OF NET
TO AVERAGE INVESTMENT INCOME
NET ASSETS, TO AVERAGE
GROSS(C) NET ASSETS(C)(D)
- ------------------------------------------
.38 2.25
.40 1.18
5.24 .96
- ------------------------------------------
.29 2.29
.30 1.16
.31 1.21
.29 1.84
.29 4.78
.32 6.23
.32 5.15
- ------------------------------------------
.50 1.80
.47 .81
.48 .87
.45 1.73
.63 4.43
.58 5.91
.54 4.83
- ------------------------------------------
.36 1.54
.37 .84
.36 .95
.35 1.52
.40 3.17
.44 3.96
.31 3.28
- ------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 27
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
investment company with 34 different investment portfolios referred to as
Funds. These financial statements report on three of these Funds. The
Investment Company is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. It is organized and
operates as a Massachusetts business trust under an amended and restated
master trust agreement dated August 19, 2002. The Investment Company's master
trust agreement permits the Board of Trustees to issue an unlimited number of
shares of beneficial interest at a $.01 par value per share.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") which
require the use of management estimates and assumptions at the date of the
financial statements. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements.
Security valuation
The Funds' portfolio investments are valued using the amortized cost method.
Under this method, a portfolio instrument is initially valued at cost and
thereafter a constant accretion/amortization to maturity of any discount or
premium is assumed. While amortized cost provides certainty in valuation, it
may result in periods when the value of an instrument is higher or lower than
the price a Fund would receive if it sold the instrument.
Investments in other mutual funds are valued at their net asset value per
share, calculated at the close of business.
Investment transactions
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the basis of specific
identified cost.
Investment income
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis.
Federal income taxes
Since the Investment Company is a Massachusetts business trust, each Fund is
a separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to each Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
It is each Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income and capital gains. Therefore, no federal
income tax provision was required for the Funds.
Dividends and distributions to shareholders
The Money Market, US Government Money Market and Tax Free Money Market Funds
declare and record dividends daily and pay them monthly. Capital gain
distributions are generally declared and paid annually. An additional
distribution may be paid by the Funds to avoid imposition of federal income
and excise tax on any remaining undistributed capital gains and net
investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from GAAP. As a result, net investment income and net realized
gain (or loss) on investment for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in certain securities
sold at a loss and capital loss carryforwards. Accordingly, a Fund may
periodically make reclassifications among certain of its capital accounts
without impacting its net asset value.
28 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Expenses
The Funds will pay their own expenses other than those expressly assumed by
Frank Russell Investment Management Company ("FRIMCo" or "Advisor"). Most
expenses can be directly attributed to the individual Funds. Expenses which
cannot be directly attributed to a specific Fund are allocated among all
Funds principally based on their relative net assets.
Class Allocation
The Money Market Fund offers the following classes of shares: Class A and
Class S. All share classes have identical voting, dividend, liquidation, and
other rights and the same terms and conditions. The separate classes of
shares differ principally in the distribution fees. Shareholders of each
class bear certain expenses that pertain to that particular class. Realized
and unrealized gains (losses), net investment income, and expenses with the
exception of class level expenses, are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.
Repurchase agreements
The Funds may engage in repurchase agreements with several financial
institutions whereby a Fund, through its custodian, receives delivery of
underlying securities as collateral. Each Fund's money manager will monitor
repurchase agreements daily to determine that the market value (including
accrued interest) of the underlying securities at Fed wire closing time
remains at least equal to 102% of the repurchase price. The money manager
will notify the seller to immediately increase the collateral on the
repurchase agreement to 102% of the repurchase price if collateral value
falls below 102%. If the seller defaults, and the fair value of the
collateral declines, realization of the collateral by the Fund may be delayed
or limited.
Guarantees
In the normal course of business the Funds enter into contracts that contain
a variety of representations which provide general indemnifications. The
Funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds expect the risk of loss to be remote.
3. RELATED PARTIES
Advisor and Administrator
FRIMCo advises and administers all of the Funds which comprise the Investment
Company. FRIMCo is a wholly-owned subsidiary of Frank Russell Company (a
subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell
Company provides consulting and money manager evaluation to FRIMCo.
The Investment Company Funds are permitted to invest their cash reserves
(i.e., cash awaiting investment or cash held to meet redemption requests or
to pay expenses) in the Money Market, US Government Money Market, and Tax
Free Money Market Funds. As of April 30, 2005, $1,658,334,099, $4,803,000,
and $11,409,848, respectively, represents the investments of other FRIC Funds
not presented herein. In addition, a portion of the collateral received from
the Investment Company's securities lending program in the amount of
$550,000,000 is invested in the Money Market Fund.
The advisory and administrative fees, which are based upon the average daily
net assets of the Money Market Funds and the rates specified in the table
below, are payable monthly and total $3,031,678 and $757,919 respectively,
for the period ended April 30, 2005.
<Table>
<Caption>
ANNUAL RATE
ADVISOR ADMINISTRATOR
----------------------------------------------------------------------
Money Market 0.20% 0.05%
US Government Money Market 0.20 0.05
Tax Free Money Market 0.20 0.05
</Table>
The Advisor has contractually agreed to waive 0.15% of its 0.25% combined
advisory and administrative fees, at least until February 28, 2006, for the
Money Market Fund. The amount of such waiver for the period ended April 30,
2005 was $2,136,971. The advisor does not have the ability to recover amounts
waived for the period ended April 30, 2005 or previous periods.
Notes to Financial Statements 29
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Custodian
The Funds have entered into arrangements with their Custodian whereby custody
credits realized as a result of uninvested cash balances were used to reduce
a portion of the Funds' expenses. During the period ended April 30, 2005, the
Funds' custodian fees were reduced by the following amounts under these
arrangements:
<Table>
Money Market $ 948
US Government Money Market 87
Tax Free Money Market 1,672
</Table>
Transfer agent
The Investment Company has a contract with FRIMCo to provide transfer agent
services to the Funds. Total fees for the Funds reported herein for the
period ended April 30, 2005 were $138,048.
For the period ended April 30, 2005, the Advisor paid the following amounts
to certain Funds with respect to referral fees received:
<Table>
<Caption>
AMOUNT
FUNDS PAID
- -------------------------------------------------------
Money Market $ 3,882
US Government Money Market 1,786
Tax Free Money Market 1,164
</Table>
Distributor
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to Russell Fund Distributors, Inc. (the
"Distributor") a wholly-owned subsidiary of FRIMCo, or any Selling Agents, as
defined in the Plan, for sales support services provided, and related
expenses incurred which are primarily intended to result in the sale of the
Class A shares subject to the Distribution Plan. The 12b-1 distribution
payments shall not exceed 0.15% of the average daily net assets of a Fund's
Class A shares on an annual basis.
Accrued Fees to Affiliates
Accrued fees payable to affiliates as of April 30, 2005 were as follows:
<Table>
<Caption>
US GOVERNMENT TAX FREE
MONEY MARKET MONEY MARKET MONEY MARKET
---------------------------------------------------------------------------------------------
Advisory fees $ 112,308 $ 7,068 $ 21,902
Administration fees 112,524 1,766 5,476
Distribution fees 695 -- --
Transfer agent fees 43,925 11,902 10,604
Trustee fees 9,859 240 475
---------------- ---------------- ----------------
$ 279,311 $ 20,976 $ 38,457
================ ================ ================
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company
("FRIC"), which has 34 Funds, and Russell Investment Funds ("RIF"), which has
five Funds. Each of the Trustees is a Trustee for both FRIC and RIF. During
the period, the Russell Fund Complex paid each of its Trustees not affiliated
with FRIMCo 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 $2,000 for each Audit Committee meeting or Nominating and
Governance Committee meeting or any other committee meeting established and
approved by the Board that is attended in person. Each Trustee receives a
$500 fee for attending the meetings (quarterly, special, committee) by phone
instead of receiving the full fee had the member attended in person.
Trustees' out of pocket expenses are also paid by the Russell Fund Complex.
During the period, the Lead Trustee was paid a fee of $10,000 per year. The
Audit Committee Chair was paid a fee of $12,000 per year and the Nominating
and Governance Committee Chair was paid a fee of $6,000 per year.
30 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
4. FEDERAL INCOME TAXES
At October 31, 2004, certain Funds had net tax basis capital loss
carryforwards which may be applied against any realized net taxable gains in
each succeeding year or until their respective expiration dates, whichever
occurs first. Available capital loss carryforwards and expiration dates are
as follows:
<Table>
<Caption>
10/31/05 10/31/06 10/31/07
---------------------------------------------------------------------------------------------
Money Market $ -- $ -- $ --
US Government Money Market 1,570 762 1,782
Tax Free Money Market -- -- --
</Table>
<Table>
<Caption>
10/31/08 10/31/09 10/31/10 10/31/11 10/31/12
-----------------------------------------------------------------------------------------------------------------------
Money Market $ 90,627 $ 35,378 $ -- $ 43,223 $ --
US Government Money Market 8,484 15,034 2,688 17,267 4,791
Tax Free Money Market 68,310 59,628 19 -- 4,408
<Caption>
TOTALS
-----------------------------------
Money Market $ 169,228
US Government Money Market 52,378
Tax Free Money Market 132,365
</Table>
5. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2005 and October 31, 2004
were as follows:
<Table>
<Caption>
CLASS A CLASS S
ON A CONSTANT DOLLAR BASIS ON A CONSTANT DOLLAR BASIS
------------------------------------- -------------------------------------
2005 2004 2005 2004
----------------- ----------------- ----------------- -----------------
Money Market
Proceeds from shares sold $ 12,248 $ 8,470 $ 10,503,974 $ 16,907,677
Proceeds from reinvestment of
distributions 56 20 3,852 4,172
Payments for shares redeemed (7,352) (5,186) (10,666,674) (16,316,633)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) $ 4,952 $ 3,304 $ (158,848) $ 595,216
================= ================= ================= =================
US Government Money Market
Proceeds from shares sold $ -- $ -- $ 48,877 $ 92,918
Proceeds from reinvestment of
distributions -- -- 324 340
Payments for shares redeemed -- -- (59,059) (100,849)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) $ -- $ -- $ (9,858) $ (7,591)
================= ================= ================= =================
Tax Free Money Market
Proceeds from shares sold $ -- $ -- $ 180,174 $ 327,582
Proceeds from reinvestment of
distributions -- -- 712 827
Payments for shares redeemed -- -- (195,687) (325,297)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) $ -- $ -- $ (14,801) $ 3,112
================= ================= ================= =================
</Table>
6. LINE OF CREDIT
The Investment Company has a $75 million revolving credit facility for
temporary or emergency purposes, including the meeting of redemption requests
that otherwise might require the untimely disposition of securities. The
Funds are charged an annual commitment fee of .125% on the average daily
unused amount of the aggregate commitment, which is allocated among each of
the Funds. Interest is calculated at the Federal Fund Rate plus .50%
annually. The Funds may borrow up to a maximum of 33.33% of the value of
their net assets under the agreement. The agreement will expire December 21,
2005 and will be reviewed at such time for possible renewal. The Funds did
not have any drawdowns for the period ended April 30, 2005.
Notes to Financial Statements 31
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
7. BENEFICIAL INTEREST
As of April 30, 2005, the following table includes each shareholder with
shares of beneficial interest of greater than 10% of the total outstanding
shares of each respective Fund:
<Table>
<Caption>
FUNDS # OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Money Market 1 19.6
US Government Money Market 3 58.4
Tax Free Money Market 2 55.3
</Table>
32 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
SHAREHOLDER REQUESTS FOR OTHER INFORMATION -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund has adopted to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling the Fund at (800) 787-7354, and (ii) on
the Securities and Exchange Commission's website at www.sec.gov. Information on
how the Funds voted proxies relating to portfolio securities during the 12-month
period ended June 30, 2004 is available at www.russell.com and on the Securities
and Exchange Commission's website at www.sec.gov.
The Funds will file their complete schedule of investments with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Funds' Form N-Q is available (i) without charge, upon request, by
calling the Fund at (800) 787-7354, (ii) at www.russell.com, (iii) on the
Securities and Exchange Commission's website at www.sec.gov., and (iv) the
Securities and Exchange Commission's public reference room.
Shareholder Requests for Other Information 33
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS (UNAUDITED)
- --------------------------------------------------------------------------------
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees, including all of the Independent Trustees, last
considered and approved the continuation of the advisory agreement with FRIMCo
and the portfolio management contract (together, the "investment advisory
agreements") with each Money Manager of the Funds at a meeting held on February
23, 2005. During the course of a year, the Trustees received a wide variety of
materials regarding the investment performance of the Funds, sales and
redemptions of the Funds' shares, and the management of the Funds by FRIMCo. In
preparation for the annual review, the Board, with the advice and assistance of
independent counsel, also received and considered (1) information and reports
prepared by FRIMCo relating to the services provided by FRIMCo (and its
affiliates) to the Funds, including information requested by the Trustees, and
(2) information received from an independent, nationally recognized provider of
investment company information comparing the performance of each of the Funds
and its operating expenses over various periods of time with other peer funds
("Comparable Funds") not managed by FRIMCo believed by the provider to be
generally comparable in investment objectives and size to the Funds
(collectively, the "Agreement Renewal Information").
Prior to voting, the Independent Trustees reviewed the proposed continuance of
the investment advisory agreements with management and independent counsel and
received a memorandum from independent counsel discussing the legal standards
for their consideration of the proposed continuances. The Independent Trustees
also reviewed the proposed continuance in a private session with independent
counsel at which no representatives of FRIMCo or management were present. The
discussion below reflects both of these reviews.
In evaluating the advisory agreement with FRIMCo and the portfolio management
contracts with the Money Managers of the Funds, the Board considered that the
Tax Free Money Market 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.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the investment advisory agreement for determining, implementing and
maintaining the investment program for each Fund.
FRIMCo is responsible for selecting Money Managers for the Tax Free Money Market
Fund. The Money Manager for this 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 FRIMCo in accordance
with the Fund's applicable investment objective, policies and restrictions
(each, a "segment"). FRIMCo is responsible for communicating performance
expectations and evaluations to the Money Manager; supervising compliance by the
Money Manager with this Fund's investment objectives and policies; authorizing
the Money Manager to engage in certain investment strategies for this Fund; and
recommending annually to the Board whether a portfolio management contract
should be renewed, modified or terminated. In addition to its annual
recommendation as to the renewal, modification or termination of the portfolio
management contract, FRIMCo is responsible for recommending to the Board the
restructuring of Fund segments and additions of new Money Managers or
replacements of existing Money Managers at any time when, based on FRIMCo's
research and analysis, such actions are appropriate. FRIMCo may develop specific
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 a fund in a complementary manner. Therefore, FRIMCo's
selection of Money Managers is made not only on the basis of performance
considerations but anticipated compatibility with other Money Managers in the
same fund, if any. The performance of individual Money Managers for a fund may
reflect the roles assigned to them by FRIMCo in the fund's investment activities
and any constraints placed by FRIMCo upon their selection of portfolio
securities. In light of the foregoing, the overall performance of the Tax Free
Money Market Fund over appropriate periods reflects in great part the
performance of FRIMCo in designing this Fund's investment program, structuring
Fund segments, selecting an effective Money Manager for each segment with a
style that is complementary to the styles of the Money Managers of other Fund
segments, and in multi-manager funds, allocating assets among the Money Managers
in a manner designed to achieve the objectives of the fund.
The Board also considered that the prospectus for the Tax Free Money Market Fund
emphasizes to investors FRIMCo'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 the information into account when deciding to purchase shares of the
Fund.
34 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
In addition to these general factors relating to the manager of managers
structure of the Tax Free Money Market Fund, the Trustees considered, with
respect to each Fund, various specific factors on the basis of the Agreement
Renewal Information in evaluating renewal of the advisory agreement with FRIMCo,
including the following:
1. The nature, scope and quality of the services provided to the Fund by FRIMCo;
2. The advisory fee paid by the Fund to FRIMCo and the fact that it encompasses
all investment advisory fees paid by the Fund, including the fees for any Money
Managers of such Fund;
3. Information provided by FRIMCo as to other fees and benefits received by
FRIMCo or its affiliates from the Fund, including any administrative, transfer
agent, cash management and securities lending fees, soft dollar arrangements and
commissions in connection with portfolio securities transactions;
4. Information provided by FRIMCo as to investment advisory fees paid by
Comparable Funds;
5. Information provided by FRIMCo as to expenses incurred by the Fund;
6. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from each Fund; and
7. The importance of supporting quality, long-term service by FRIMCo to help
achieve the Fund's investment performance, including the continuing need of
FRIMCo to retain and attract qualified investment and service professionals to
serve the Funds.
On the basis of the information received, the Board, in respect of each Fund,
found the advisory fees charged and costs and expenses incurred by FRIMCo to be
fair and reasonable; after giving effect to waivers and/or reimbursements; and
considering the composition of the Comparable Funds, the relative performance
and expense ratio of the Fund were comparable to those of peer funds; FRIMCo's
methodology of allocating expenses of operating funds in the complex was
reasonable; and FRIMCo's profitability with respect to the Fund was reasonable
in light of the nature, scope and quality of the services provided by FRIMCo.
The Board also considered the special expertise of FRIMCo with respect to the
manager of managers structure of the Funds and the likelihood that, at the
current expense ratio of the Tax Free Money Market Fund, there would be no
acceptable alternative investment managers to replace FRIMCo on comparable terms
given the need to conduct the manager of managers, strategy of this Fund
selected by its shareholders in purchasing their shares.
With respect to the evaluation of the terms of portfolio management contracts
with the Money Manager of the Tax Free Money Market Fund, the Board received and
considered information from FRIMCo reporting for the Money Manager, among other
things, the Money Manager's performance over various periods; FRIMCo's
assessment of the performance of the Money Manager; any significant business
relationships between the Money Manager and Fund, FRIMCo or FRIMCo's affiliates;
and FRIMCo's recommendation to retain the Money Manager at the current fee rate,
to retain the Money Manager at a reduced fee rate or to terminate the Money
Manager. FRIMCo recommended that the Money Manager be retained at its current
fee rate. FRIMCo advised the Board that it does not regard Money Manager
profitability as relevant to its evaluation of the investment advisory
agreements with Money Managers because the willingness of Money Managers to
serve in such capacity depends upon arm's-length negotiations with FRIMCo;
FRIMCo is aware of the fees charged by Money Managers to other clients; and
FRIMCo believes that the fees agreed upon with Money Managers are fair and
reasonable in light of the anticipated quality of investment advisory services
to be rendered. The Board accepted FRIMCo's explanation in light of the Board's
findings as to the fairness and reasonableness of the aggregate investment
advisory fees paid by the Tax Free Money Market Fund and the fact that the Money
Manager's fee is paid by FRIMCo.
Based substantially upon FRIMCo's recommendations together with the information
received from FRIMCo in support of its recommendations, the Board concluded that
the fees paid to the Money Managers of the Tax Free Money Market Fund were fair
and reasonable in light of the quality of the investment advisory services
provided and that continuation of the portfolio management agreement with the
Money Manager of the Tax Free Money Market Fund was in the interests of
shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the investment advisory agreement with FRIMCo or, other than FRIMCo's
recommendation, the portfolio management agreement with the Money Manager that
was all-important or controlling and each Trustee attributed different weights
to the various factors considered. The Trustees evaluated all information
available to them on a Fund-by-Fund basis and their determinations were made in
respect of each Fund.
Basis for Approval of Investment Advisory Contracts 35
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
At a meeting held on March 24, 2005, the Trustees received a proposal from
FRIMCo to effect a Money Manager change for the Tax Free Money Market Fund. In
the case of such Fund, the Trustees approved the terms of the proposed portfolio
management agreements with the successor Money Manager based substantially upon
FRIMCo's recommendation; its explanation as to the lack of relevance of
profitability to the evaluation of portfolio management agreements with Money
Managers; and its belief that the proposed investment advisory fees for the
successor Money Manager would be fair and reasonable in light of the anticipated
quality of investment advisory services to be rendered. The Trustees also
considered their findings at the February 23, 2005 meeting as to the fairness
and reasonableness of the aggregate investment advisory fees paid by the Fund,
and the fact that the aggregate investment advisory fees paid by such Fund would
not increase as a result of the implementation of any proposed Money Manager
change because each Money Manager's investment advisory fee is paid by FRIMCo.
36 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Frank Russell
Investment Company ("FRIC"), which has 34 funds, and Russell Investment Funds
("RIF"), which has five funds. Each of the trustees is a trustee of both FRIC
and RIF. The first table provides information for trustees who are interested
trustees. The second table provides information for the independent trustees.
The third table provides information for the trustees emeritus. The fourth table
provides information for the officers.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
*Lynn L. Anderson, Trustee since Appointed until - Vice Chairman, FRC 39 - Trustee, The
Born April 22, 1987 successor is - Chairman of the Board, FRIC SSgA Funds
1939 duly elected and RIF (investment
and qualified - CEO, Russell Fund company)
909 A Street Distributors, Inc.
Tacoma, Washington (broker-dealer "RFD")
98402-1616 - President and Chairman of
the Board, SSgA Funds
(investment company)
- Chairman of the Board, FRTC
- Until July 2004, Director,
Frank Russell Investments
(Ireland) Limited (Irish
limited company) and Frank
Russell Investments (Cayman)
Ltd. (manager of variable
capital investment
companies)
- Until October 2002,
President and CEO, FRIC and
RIF
- Until January 2005, Chairman
of the Board, RFD and FRIMCo
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
*Michael J.A. Trustee since Appointed until - Chairman of the Board, FRC 39 None
Phillips, 2002 successor is - 1990-2003, President, FRC
Born January 20, duly elected - 1993-2003, CEO, FRC Trustee,
1948 and qualified FRIC and RIF
- Director, FRTC; Frank
909 A Street Russell Investments (Suisse)
Tacoma, Washington S.A. (global investment
98402-1616 services); Frank Russell
Company Limited (consultant
to institutional investors
in Europe and the UK)
- Chairman of the Board and
President, Russell 20-20
Association; and Frank
Russell Investments
(Delaware), Inc. (general
partner in various limited
partnerships ("FRIDI")
- Until 2004, Director,
Russell Investment Group
Pty. Limited (consultant to
superannuation funds in
Australia); and Frank
Russell Japan Co., Ltd.
(consultant to institutional
investors in Japan)
- Director, Harold LeMay
Museum (classic car museum)
- Advisory board member,
University of Washington,
Tacoma (educational
institution)
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Each of Messrs. Anderson and Phillips is also an officer and/or director of
one or more an affiliates of FRIC and RIF and is therefore an interested
trustee.
Disclosure of Information about Fund Directors 37
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - 1996 to present, President, 39 None
Born October 15, 1984 successor is Anderson Management Group
1931 duly elected LLC (private investments
and qualified consulting)
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee WM Group
Born January 22, 2000 successor is Blake, P.S. (accounting of Funds
1954 duly elected services) (investment
and qualified company);
909 A Street - Director, Avista
Tacoma, Washington Corp
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 - Director, Gold
Born June 6, 1946 2003 successor is Vice President and Chief Banc
duly elected Financial Officer, Waddell & Corporation,
909 A Street and qualified Reed Financial, Inc. Inc.
Tacoma, Washington - 2003, Retired
98402-1616 - 2001-2003, Vice President
and Chief Financial Officer,
Janus Capital Group Inc.
- 1979-2001, Audit and
Accounting Partner,
PricewaterhouseCoopers LLP
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jonathan Fine, Trustee since Appointed until - President and Chief 39 None
Born July 8, 1954 2004 successor is Executive Officer, United
duly elected Way of King County, WA
909 A Street and qualified - 1996-2000, Chief Executive
Tacoma, Washington Officer, Seattle/King County
98402-1616 Chapter of the American Red
Cross
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee since Appointed until - Retired since 1995 39 None
Born October 6, 1984 successor is
1930 duly elected
and qualified
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - Currently, President, 39 None
Tennison, Jr., 2000 successor is Simpson Investment Company
Born December 21, duly elected and several additional
1955 and qualified subsidiary companies,
including Simpson Timber
909 A Street Company, Simpson Paper
Tacoma, Washington Company and Simpson Tacoma
98402-1616 Kraft Company
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
38 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2000, Arbitrator,
1943 duly elected The American Arbitration
and qualified Association Commercial Panel
909 A Street - 1995 to 1999, Hearing
Tacoma, Washington Officer, University of
98402-1616 Washington
- 1987 to 2002, Director,
Smith Barney Fundamental
Value Fund
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 39 None
Jr., and Chairman resignation or Russell Company (investment
Born July 3, 1932 Emeritus since removal consultant to institutional
1999 investors ("FRC"); and
909 A Street FRIMCo
Tacoma, Washington - Chairman Emeritus, FRIC and
98402-1616 RIF; Frank Russell
Securities, Inc.
(broker-dealer and
investment advisor ("FRS");
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC")
- Chairman, Sunshine
Management Services, LLC
(investment advisor)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 39 None
Born December 1, since 2003 - Trustee of FRIC and RIF
1919 until 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 39 None
Born June 8, 1925 since 2004 - Trustee of FRIC and RIF
until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 39 None
Born May 5, 1926 since 2004 - Trustee of FRIC and RIF
until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
Disclosure of Information about Fund Directors 39
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------
Name, Position(s) Held Term Principal Occupation(s)
Age, with Fund and Length of During the
Address of Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------------------------------------------
Cheryl Wichers Chief Compliance Until removed - Chief Compliance Officer, FRIC
Born December 16, Officer since 2005 by Trustees - Chief Compliance Officer, RIF
1966 - Chief Compliance Officer, FRIMCo
- April 2002-May 2005, Manager, Global Regulatory
909 A Street Policy
Tacoma, Washington - 1998-2003, Compliance Supervisor, Russell Investment
98402-1616 Group
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Chief Annual and - President and CEO, FRIC and RIF
Born May 3, 1968 Executive Officer until successor - Chairman of the Board, President and CEO, FRIMCo
since 2004 is chosen and - Chairman of the Board and President, RFD and Russell
909 A Street qualified by Insurance Agency, Inc. (insurance agency ("RIA")
Tacoma, Washington Trustees - Until 2004, Managing Director of Individual Investor
98402-1616 Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- 1998 to 2000, Representative Director, Frank Russell
Company, Ltd. (asset manager in Japan)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Chief Annual and - Treasurer and Chief Accounting Officer, FRIC and RIF
Born November 26, Accounting Officer until successor - Director, Funds Administration, FRIMCo, FRTC and RFD
1963 since 1998 is chosen and - Treasurer and Principal Accounting Officer, SSgA
qualified by Funds
909 A Street Trustees
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Thomas F. Hanly, Chief Investment Until removed - Chief Investment Officer, FRIC, RIF, FRC, FRTC
Born November 17, Officer since 2004 by Trustees - Director and Chief Investment Officer, FRIMCo and RFD
1964 - Director, Frank Russell International Services Co.,
Inc. (provide services to U.S. personnel secunded to
909 A Street overseas enterprises ("FRISCo")
Tacoma, Washington - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
98402-1616 RIF
- --------------------------------------------------------------------------------------------------------------------
</Table>
40 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------
Name, Position(s) Held Term Principal Occupation(s)
Age, with Fund and Length of During the
Address of Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------
OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary and Annual and - Secretary and General Counsel, FRIC, RIF, FRIMCo,
Born October 8, General Counsel until successor FRTC, and RFD
1941 since 1994 is chosen and - Secretary, General Counsel and Managing Director of
qualified Law and Government Affairs, FRC
909 A Street - Director, Secretary and General Counsel, Frank
Tacoma, Washington Russell Capital Inc. (investment advisor); Russell
98402-1616 Real Estate Advisors, Inc. (real estate investment
advisor)
- Director and Secretary, Russell 20-20 Association;
RIA; A Street Investment Associates, Inc. (real
estate leasing); FRIDI; and FRISCo
- Director and Assistant Secretary, Frank Russell
Company Limited and Russell Systems Limited (limited
company)
- Director, FRS, Russell Investment Group Pty. Ltd.;
Frank Russell Japan Co., Ltd. (holding company);
Frank Russell Investment Company Plc Frank Russell
Institutional Funds Plc, Frank Russell Multi-Manager
Funds plc; Frank Russell Investment Company II plc,
Frank Russell Investment Company III plc, Russell
Alternative Investment Fund plc, and Russell
Diversified Alternatives Fund (each, an investment
company); Frank Russell Asset Management (Cayman) LLC
(general partner of limited partnerships); Russell
Investment Group Limited (institutional consultant);
Russell Investment Management Ltd. (institutional
investment management); Russell Investment Group
Private Limited (investment and fund management
advisory services); and Frank Russell Investments
(Ireland) Ltd.
- Statutory Auditor, Frank Russell Company, Ltd. (asset
management and consulting)
- --------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 41
MONEY MARKET FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Lee C. Gingrich
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, PhD
William E. Baxter
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer (effective May 17, 2005)
Thomas F. Hanly, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Karl J. Ege, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Allan Forbes Building
150 Newport Avenue AFB35
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF APRIL 30, 2005
Money Market Fund
Frank Russell Investment Management Company, Tacoma, WA
US Government Money Market Fund
Frank Russell Investment Management Company, Tacoma, WA
Tax Free Money Market Fund
Neuberger Berman Management, Inc., New York, NY
This report is prepared from the books and records of the Funds and is submitted
for the general information of shareholders and is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus. Nothing herein contained is to be considered an offer of
sale or a solicitation of an offer to buy shares of Frank Russell Investment
Company. Such offering is made only by Prospectus, which includes details as to
offering price and other material information.
42 Manager, Money Managers and Service Providers
(FRANK RUSSELL LOGO)
FRANK RUSSELL INVESTMENT COMPANY
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com 36-08-070 (1 04/05)
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
2005 SEMIANNUAL REPORT
CLASS A AND B SHARES:
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
APRIL 30, 2005
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
Frank Russell Investment Company is a series investment company with 34
different investment portfolios referred to as Funds. These financial statements
report on one of these Funds.
Frank Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Frank Russell Investment Company
Russell Multi-Manager Principal Protected Fund
Semiannual Report
April 30, 2005 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Shareholder Expense Example.......................................... 3
Schedule of Investments.............................................. 4
Notes to Schedule of Investments..................................... 7
Statement of Assets and Liabilities.................................. 8
Statement of Operations.............................................. 9
Statement of Changes in Net Assets................................... 10
Financial Highlights - Class A....................................... 11
Financial Highlights - Class B....................................... 12
Notes to Financial Statements........................................ 13
Shareholder Requests for Other Information........................... 21
Basis for Approval of Investment Advisory Contracts.................. 22
Disclosure of Information about Fund Directors....................... 25
Manager, Money Managers and Service Providers........................ 30
</Table>
Frank Russell Investment Company - Russell Multi-Manager Principal Protected
Fund
Copyright (c) Frank Russell Company 2005. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. Russell Fund Distributors, Inc., is the distributor of
Frank Russell Investment Company.
[Blank Page]
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING THE FUND'S
EXPENSE EXAMPLE. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE
EXAMPLE FOR THE FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS A PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 946.70 $ 1,014.69
Expenses Paid During
Period* $ 10.04 $ 10.39
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.08%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS B PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 943.20 $ 1,010.97
Expenses Paid During
Period* $ 13.64 $ 14.11
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.83%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Shareholder Expense Example 3
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 27.8%
Auto and Transportation - 0.5%
Canadian National Railway Co. 1,256 72
CNF, Inc. 510 22
FedEx Corp. 1,160 99
Union Pacific Corp. 1,073 69
United Parcel Service, Inc. Class B 863 62
------------
324
------------
Consumer Discretionary - 3.4%
Accenture, Ltd. Class A (AE) 3,530 77
Carnival Corp. 2,860 140
eBay, Inc. (AE) 2,380 76
Electronic Arts, Inc. (AE) 2,530 135
Federated Department Stores, Inc. 326 19
Gap, Inc. (The) 5,730 122
Gillette Co. (The) 1,534 79
Interpublic Group of Cos., Inc. (AE) 5,230 67
Kimberly-Clark Corp. 1,041 65
Newell Rubbermaid, Inc. 2,120 46
Nike, Inc. Class B 610 47
Staples, Inc. 6,640 127
Target Corp. 4,424 205
Tiffany & Co. 800 24
TJX Cos., Inc. 6,160 140
Tribune Co. 1,433 55
Univision Communications, Inc. Class A (AE) 3,380 89
Viacom, Inc. Class B 4,260 147
Wal-Mart Stores, Inc. 3,570 168
Walt Disney Co. 10,420 275
Waste Management, Inc. 2,175 62
Yahoo!, Inc. (AE) 2,810 97
------------
2,262
------------
Consumer Staples - 2.5%
Altria Group, Inc. 2,700 175
Campbell Soup Co. 1,548 46
Clorox Co. 1,002 63
Colgate-Palmolive Co. 5,760 287
CVS Corp. 1,430 74
General Mills, Inc. 1,400 69
HJ Heinz Co. 1,737 64
Kraft Foods, Inc. Class A 4,444 144
Kroger Co. (The) (AE) 6,171 97
PepsiCo, Inc. 5,596 311
Procter & Gamble Co. 6,340 343
------------
1,673
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Financial Services - 4.9%
American Express Co. 3,470 183
American International Group, Inc. 8,361 425
Automatic Data Processing, Inc. 653 28
Bank of America Corp. 7,222 325
Bank of New York Co., Inc. (The) 2,788 78
Chubb Corp. 170 14
Cigna Corp. 631 58
Citigroup, Inc. 4,407 207
Golden West Financial Corp. 1,170 73
Goldman Sachs Group, Inc. 3,184 340
Hartford Financial Services Group, Inc. 896 65
JPMorgan Chase & Co. 9,862 350
Legg Mason, Inc. 2,445 173
Lehman Brothers Holdings, Inc. 1,440 132
Marshall & Ilsley Corp. 822 35
MBNA Corp. 1,112 22
Mellon Financial Corp. 2,290 63
Merrill Lynch & Co., Inc. 1,419 77
SLM Corp. 3,380 161
Wachovia Corp. 848 43
Wells Fargo & Co. 5,995 359
------------
3,211
------------
Health Care - 5.0%
Abbott Laboratories 4,570 225
Amgen, Inc. (AE) 3,240 189
Baxter International, Inc. 3,186 118
Boston Scientific Corp. (AE) 4,490 133
Bristol-Myers Squibb Co. 1,862 48
Cardinal Health, Inc. 1,954 109
Eli Lilly & Co. 4,370 256
Genzyme Corp. (AE) 2,820 165
Gilead Sciences, Inc. (AE) 4,140 154
GlaxoSmithKline PLC ADR 1,464 74
Guidant Corp. 1,966 146
Johnson & Johnson 5,760 395
Medimmune, Inc. (AE) 1,947 49
Medtronic, Inc. 3,960 209
Merck & Co., Inc. 2,086 71
Novartis AG ADR 2,649 129
Pfizer, Inc. 4,821 131
Roche Holding AG ADR 1,290 78
Schering-Plough Corp. 2,627 55
Wyeth 8,901 400
Zimmer Holdings, Inc. (AE) 1,760 143
------------
3,277
------------
</Table>
4 Schedule of Investments
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Integrated Oils - 1.5%
BP PLC ADR 188 11
ChevronTexaco Corp. 300 16
ConocoPhillips 2,420 254
Exxon Mobil Corp. 11,346 648
Total SA ADR 590 65
------------
994
------------
Materials and Processing - 1.8%
Alcoa, Inc. 1,593 46
Barrick Gold Corp. 1,358 30
Dow Chemical Co. (The) 2,640 121
EI Du Pont de Nemours & Co. 2,749 130
Fluor Corp. 300 15
International Paper Co. 3,261 112
Masco Corp. 4,390 138
Monsanto Co. 4,661 273
Newmont Mining Corp. 2,738 104
Potash Corp. of Saskatchewan (AE) 472 40
Praxair, Inc. 4,119 193
------------
1,202
------------
Miscellaneous - 0.8%
Eaton Corp. 1,252 73
General Electric Co. 4,679 169
Honeywell International, Inc. 1,427 51
Tyco International, Ltd. 6,629 208
------------
501
------------
Other Energy - 1.2%
Baker Hughes, Inc. 1,974 87
El Paso Corp. 2,710 27
EOG Resources, Inc. 2,870 136
Halliburton Co. 4,710 196
Noble Corp. 4,170 212
Schlumberger, Ltd. 1,670 114
------------
772
------------
Producer Durables - 1.8%
Caterpillar, Inc. 2,646 233
Deere & Co. 2,275 142
Emerson Electric Co. 868 54
Illinois Tool Works, Inc. 890 75
Lexmark International, Inc. Class A (AE) 610 42
Lockheed Martin Corp. 3,650 222
Pall Corp. 602 16
Parker Hannifin Corp. 1,161 70
United Technologies Corp. 2,560 260
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Xerox Corp. (AE) 4,659 62
------------
1,176
------------
Technology - 3.1%
Amdocs, Ltd. (AE) 1,040 28
Analog Devices, Inc. 5,285 180
Apple Computer, Inc. (AE) 2,020 73
Cisco Systems, Inc. (AE) 11,690 202
Dell, Inc. (AE) 7,640 266
EMC Corp. (AE) 25,549 335
General Dynamics Corp. 457 48
Hewlett-Packard Co. 2,566 53
International Business Machines Corp. 527 40
Mercury Interactive Corp. (AE) 1,800 74
Microsoft Corp. 5,102 129
Motorola, Inc. 6,509 100
Oracle Corp. (AE) 20,110 232
Qualcomm, Inc. (AE) 1,760 61
Raytheon Co. 338 13
Sun Microsystems, Inc. (AE) 16,300 59
Texas Instruments, Inc. 1,440 36
Veritas Software Corp. (AE) 3,630 75
Xilinx, Inc. 2,780 75
------------
2,079
------------
Utilities - 1.3%
Comcast Corp. Special Class A (AE) 3,836 122
Entergy Corp. 570 42
Exelon Corp. 2,980 148
SBC Communications, Inc. 2,882 69
Sprint Corp. 8,737 194
Verizon Communications, Inc. 3,097 111
Vodafone Group PLC ADR 5,986 156
------------
842
------------
TOTAL COMMON STOCKS
(cost $15,766) 18,313
------------
LONG-TERM DEBT OBLIGATIONS - 64.4%
United States Government Treasuries - 64.4%
United States Treasury Strip
Principal Only
Zero Coupon due 02/15/08 38,090 34,383
Zero Coupon due 05/15/08 9,070 8,111
------------
TOTAL LONG-TERM DEBT OBLIGATIONS
(cost $43,473) 42,494
------------
</Table>
Schedule of Investments 5
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 8.0%
Frank Russell Investment Company Money Market
Fund 137,000 137
Frank Russell Investment Company US Government
Money Market Fund 4,803,000 4,803
United States Treasury Bills (c)(z)(sec.)
2.710% due 06/09/05 350 349
2.720% due 06/09/05 30 30
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $5,319) 5,319
------------
TOTAL INVESTMENTS - 100.2%
(identified cost $64,558) 66,126
OTHER ASSETS AND LIABILITIES,
NET - (0.2%) (120)
------------
NET ASSETS - 100.0% 66,006
============
</Table>
<Table>
<Caption>
UNREALIZED
FUTURES CONTRACTS NOTIONAL APPRECIATION
(NUMBER OF CONTRACTS) AMOUNT (DEPRECIATION)
$ $
- ------------------------------------------------------------------------------------
Long Positions
S&P 500 Index
expiration date 06/05 (1) 290 --
United States Treasury 2 Year Notes
expiration date 06/05 (12) 2,492 (3)
United States Treasury 5 Year Notes
expiration date 06/05 (18) 1,952 1
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (2)
===============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Auto and Transportation 0.5
Consumer Discretionary 3.4
Consumer Staples 2.5
Financial Services 4.9
Health Care 5.0
Integrated Oils 1.5
Materials and Processing 1.8
Miscellaneous 0.8
Other Energy 1.2
Producer Durables 1.8
Technology 3.1
Utilities 1.3
Long-Term Debt Obligations 64.4
Short-Term Investments 8.0
---------------
Total Investments 100.2
Other Assets and Liabilities, Net (0.2)
---------------
Net Assets 100.0
===============
Futures Contracts --*
</Table>
* Less than .05%
See accompanying notes which are an integral part of the financial statements.
6 Schedule of Investments
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(AE) Nonincome-producing security.
(o) Real Estate Investment Trust (REIT).
(sec.) All or a portion of the shares of this security are held as collateral
in connection with futures contracts purchased (sold) or options
written by
the Fund.
(z) Rate noted is yield-to-maturity from date of acquisition.
(c) At amortized cost, which approximates market.
ABBREVIATIONS:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
ADS - American Depositary Share
CMO - Collateralized Mortgage Obligation
GDS - Global Depositary Share
LIBOR - London Interbank Offered Rate
FDIC - Federal Deposit Insurance Company
STRIP - Separate Trading of Registered Interest and Principal of Securities
Notes to Schedule of Investments 7
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
ASSETS
Investments at market (identified cost $64,558)..................................... $ 66,126
Receivables:
Dividends and interest........................................................... 26
Dividends from affiliated money market funds..................................... 7
Investments sold................................................................. 114
From Advisor..................................................................... 46
Daily variation margin on futures contracts...................................... 4
Prepaid expenses.................................................................... 24
----------------------
Total assets........................................................................ 66,347
----------------------
LIABILITIES
Payables:
Investments purchased................................. $ 28
Fund shares redeemed.................................. 107
Accrued fees to affiliates............................ 115
Other accrued expenses................................ 84
Daily variation margin on futures contracts........... 7
--------------------
Total liabilities................................................................... 341
----------------------
NET ASSETS.......................................................................... $ 66,006
======================
Net Assets Consist of:
Net investment loss................................................................. $ (115)
Accumulated net realized gain (loss)................................................ 656
Unrealized appreciation (depreciation) on:
Investments...................................................................... 1,568
Futures contracts................................................................ (2)
Shares of beneficial interest....................................................... 65
Additional paid-in capital.......................................................... 63,834
----------------------
NET ASSETS.......................................................................... $ 66,006
======================
NET ASSET VALUE, PER SHARE:
Class A ($2,266,822 divided by 218,900 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 10.36
======================
Class B ($63,739,250 divided by 6,256,746 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 10.19
======================
</Table>
See accompanying notes which are an integral part of the financial statements.
8 Statement of Assets and Liabilities
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME
Dividends........................................................................ $ 178
Dividends from affiliated money market funds..................................... 45
Interest......................................................................... 669
----------------------
Total investment income............................................................. 892
EXPENSES
Advisory fees............................................ $ 315
Administrative fees...................................... 18
Custodian fees........................................... 50
Distribution fees - Class B.............................. 260
Transfer agent fees...................................... 35
Professional fees........................................ 30
Registration fees........................................ 12
Shareholder servicing fees - Class A..................... 3
Shareholder servicing fees - Class B..................... 87
Trustees' fees........................................... 1
Insurance policy fees.................................... 269
Printing fees............................................ 1
Miscellaneous............................................ 1
--------------------
Expenses before reductions............................... 1,082
Expense reductions....................................... (75)
--------------------
Net expenses........................................................................ 1,007
----------------------
Net investment income (loss)........................................................ (115)
----------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments.............................................. 775
Futures contracts........................................ (7) 768
--------------------
Net change in unrealized appreciation (depreciation) on:
Investments.............................................. (1,085)
Futures contracts........................................ (3) (1,088)
-------------------- ----------------------
Net realized and unrealized gain (loss)............................................. (320)
----------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............................... $ (435)
======================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 9
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2005 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2004
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss)............................. $ (115) $ (439)
Net realized gain (loss)................................. 768 1,019
Net change in unrealized appreciation (depreciation)..... (1,088) 975
-------------------- ----------------------
Net increase (decrease) in net assets from operations....... (435) 1,555
-------------------- ----------------------
DISTRIBUTIONS
From net realized gain
Class A............................................... (20) (29)
Class B............................................... (579) (801)
-------------------- ----------------------
Net decrease in net assets from distributions............... (599) (830)
-------------------- ----------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions........................................... (9,496) (13,785)
-------------------- ----------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS................. (10,530) (13,060)
NET ASSETS
Beginning of period...................................... 76,536 89,596
-------------------- ----------------------
End of period............................................ $ 66,006 $ 76,536
==================== ======================
</Table>
See accompanying notes which are an integral part of the financial statements.
10 Statement of Changes in Net Assets
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
FINANCIAL HIGHLIGHTS - CLASS A
For a Share Outstanding Throughout each Period.
<Table>
<Caption>
FISCAL YEAR ENDED OCTOBER 31,
------------------------------
2005* 2004 2003**
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.48 $ 10.31 $ 10.00
------------ ------------ --------------
INCOME FROM OPERATIONS
Net investment income (loss) (a)......................... .02 .02 .02
Net realized and unrealized gain (loss).................. (.06) .17 .29
------------ ------------ --------------
Total income (loss) from operations................... (.04) .19 .31
------------ ------------ --------------
DISTRIBUTIONS
From net investment income (b)........................... -- -- --
From net realized gain................................... (.08) (.02) --
------------ ------------ --------------
Total distributions................................... (.08) (.02) --
------------ ------------ --------------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.36 $ 10.48 $ 10.31
============ ============ ==============
TOTAL RETURN (%) (c)(d)..................................... (5.33) 2.61 3.17
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)................. 2,267 2,567 3,521
Ratios to average net assets (%) (e):
Operating expenses, net (f)........................... 2.08 2.10 2.02
Operating expenses, gross............................. 2.29 2.34 2.24
Net investment income (loss) (f)...................... .40 .19 .27
Portfolio turnover rate (%) (c).......................... 8.79 81.15 38.14
</Table>
* For the six months ended April 30, 2005 (Unaudited).
** For the period January 21, 2003 (commencement of operations) to October
31, 2003.
(a) Average month-end shares were used for this calculation.
(b) Less than $.01 per share for the period ended October 31, 2003.
(c) Periods less than one year are not annualized.
(d) Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
(e) The ratios for periods less than one year are annualized.
(f) May reflect amounts waived and/or reimbursed by the investment advisor and
for certain funds, custody credit arrangements. The custody credit
arrangements had an impact of less than .005%.
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 11
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
FINANCIAL HIGHLIGHTS - CLASS B
For a Share Outstanding Throughout each Period.
<Table>
<Caption>
FISCAL YEAR ENDED OCTOBER 31,
------------------------------
2005* 2004 2003**
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.35 $ 10.26 $ 10.00
------------ ------------ --------------
INCOME FROM OPERATIONS
Net investment income (loss) (a)......................... (.02) (.06) (.04)
Net realized and unrealized gain (loss).................. (.06) .17 .30
------------ ------------ --------------
Total income (loss) from operations................... (.08) .11 .26
------------ ------------ --------------
DISTRIBUTIONS
From net investment income (b)........................... -- -- --
From net realized gain................................... (.08) (.02) --
------------ ------------ --------------
Total distributions................................... (.08) (.02) --
------------ ------------ --------------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.19 $ 10.35 $ 10.26
============ ============ ==============
TOTAL RETURN (%) (c)(d)..................................... (5.68) 1.83 2.60
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)................. 63,739 73,969 86,075
Ratios to average net assets (%) (e):
Operating expenses, net (f)........................... 2.83 2.85 2.79
Operating expenses, gross............................. 3.04 3.09 3.01
Net investment income (loss) (f)...................... (.35) (.56) (.49)
Portfolio turnover rate (%) (c).......................... 8.79 81.15 38.14
</Table>
* For the six months ended April 30, 2005 (Unaudited).
** For the period January 21, 2003 (commencement of operations) to October
31, 2003.
(a) Average month-end shares were used for this calculation.
(b) Less than $.01 per share for the period ended October 31, 2003.
(c) Periods less than one year are not annualized.
(d) Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
(e) The ratios for periods less than one year are annualized.
(f) May reflect amounts waived and/or reimbursed by the investment advisor and
for certain funds, custody credit arrangements. The custody credit
arrangements had an impact of less than .005%.
See accompanying notes which are an integral part of the financial statements.
12 Financial Highlights
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
investment company with 34 different investment portfolios referred to as
Funds. These financial statements report on one of these Funds. The
Investment Company is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. It is organized and
operates as a Massachusetts business trust under an amended and restated
master trust agreement dated August 19, 2002. The Investment Company's master
trust agreement permits the Board of Trustees to issue an unlimited number of
shares of beneficial interest at a $.01 par value per share.
The Fund has an Offering Period, a Guarantee Period and a Post Guarantee
Period. Shares of the Fund were offered during the Offering Period but are
not offered during the Guarantee Period, except in connection with
reinvestment of distributions and dividends. Shares of the Fund will be
offered on a continuous basis during the Post Guarantee Period without the
principal protection feature. During the Guarantee Period, the Fund seeks
some capital growth, while seeking to preserve principal. As of April 30,
2005, the Fund's allocation to equity securities was approximately 30% and
the Fund's allocation to fixed income securities was approximately 70% of
total net assets. Provided that all dividends and distributions received from
the Fund have been reinvested and no shares have been redeemed by a
shareholder, the Fund guarantees that the amount distributed, if any, to each
shareholder at the end of the Guarantee Period will be no less than the value
of that shareholder's investment as of the inception of the Guarantee Period
less certain expenses. Certain extraordinary expenses which are not covered
by the Expense Limitation Agreement, such as litigation and other expenses
not incurred in the ordinary course of the Fund's business, will reduce the
Guarantee Amount. The Fund's Guarantee is backed by an unconditional and
irrevocable financial guarantee from Ambac Assurance Corporation ("Ambac"), a
financial guarantor and an operating subsidiary of Ambac Financial Group,
Inc., pursuant to a financial guarantee insurance policy issued by Ambac for
the benefit of the shareholders of the Fund. The Fund will pay to Ambac a fee
equal to 0.75% per annum of the average daily net assets of the Fund during
the Guarantee Period for providing the financial guarantee insurance policy.
If the value of a shareholder's account is less than the Guaranteed Amount on
the Guarantee Maturity Date, the Fund will be unable to meet its obligations
under the Guarantee. If the Fund is unable to meet its obligations under the
Guarantee on the Guarantee Maturity Date, the insurance policy requires Ambac
to pay the Fund an amount sufficient to ensure that all shareholders would be
able to redeem their shares on the Guarantee Maturity Date for an amount
equal to their respective Guaranteed Amounts on the Guarantee Maturity Date.
During the Post Guarantee Period, which will commence immediately following
the Guarantee Period, the Fund seeks long-term growth of capital through
investments primarily in common stocks and other equity securities. The
following table presents the time periods of the Fund's three phases:
<Table>
Offering Period 01/21/03 - 02/27/03
Guarantee Period 03/03/03 - 03/03/08
Post Guarantee Period Commencement 03/04/08
</Table>
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") which
require the use of management estimates and assumptions at the date of the
financial statements. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
Security valuation
The Fund values portfolio securities according to Board-approved Securities
Valuation Procedures, including Market Value Procedures, Fair Value
Procedures and Pricing Services. Money market fund securities are priced
using the amortized cost method of valuation. Debt obligation securities
maturing within 60 days of the date of purchase are priced using the
amortized cost method of valuation, unless the Board determines that
amortized cost does not represent market value of short-term debt
obligations.
Notes to Financial Statements 13
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Ordinarily, the Fund values each portfolio security based on market
quotations provided by Pricing Services or alternative pricing services or
dealers (when permitted by the Market Value Procedures). Generally, Fund
securities are valued at the close of the market on which they are traded as
follows:
- US listed equities; equity and fixed income options: Last sale price; last
bid price if no sales;
- US over-the-counter equities: Official closing price; last bid price if no
closing price;
- Listed ADRs/GDRs: Last sale price; last bid price if no sales;
- Municipal bonds, US bonds: Evaluated bid price; broker quote if no
evaluated bid price;
- Futures: Settlement price.
- Investments in other mutual funds are valued at their net asset value per
share, calculated at the close of business.
- Short-term investments purchased by the Fund and maturing within 60 days of
the date of purchase are valued at "amortized cost" unless the Board of
Trustees determines that amortized cost does not represent fair value.
- The value of swap agreements is equal to the Fund's obligation (or rights)
under swap contracts which will generally be equal to the net amounts to be
paid or received under the contracts based upon the relative values of the
positions held by each party to the contracts.
If market quotations are not readily available for a security or if
subsequent events suggest that a market quotation is not reliable, the Fund
will use the security's fair value, as determined in accordance with the Fair
Value Procedures. This generally means that equity securities and fixed
income securities listed and traded principally on any national securities
exchange are valued on the basis of the last sale price or, lacking any
sales, at the closing bid price, on the primary exchange on which the
security is traded. The effect of fair value pricing is that securities may
not be priced on the basis of quotations from the primary market in which
they are traded, but rather may be priced by another method that the Fund's
Board of Trustees believes reflects fair value. The use of fair value pricing
by the Fund may cause the net asset value of its shares to differ
significantly from the net asset value that would be calculated using current
market values. Fair value pricing could also cause discrepancies between the
daily movement of the value of Fund shares and the daily movement of the
benchmark index if the index is valued using another pricing method.
This policy is intended to assure that the Fund's net asset values fairly
reflect security values as of the time of pricing. Events or circumstances
affecting the values of Fund securities that occur between the closing of the
principal markets on which they trade and the time the net asset value of
Fund Shares is determined may be reflected in the calculation of net asset
values for the Fund when the Fund deems that the particular event or
circumstance would materially affect the Fund's net asset value. Investments
in frequently traded exchange listed securities will use fair value pricing
in limited circumstances since reliable market quotations will often be
readily available. Examples of events that could trigger fair value pricing
of one or more securities are: a material market movement (defined in the
Fair Value Procedures as the movement by any two of four major US Indexes
greater than a certain percentage); a company event such as a material
business development, dividend declaration, stock split or rights offering; a
material disaster or an armed conflict.
Investment transactions
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the basis of specific
identified cost incurred by each money manager within a particular Fund.
Investment income
Dividend income is recorded on the ex-dividend date and interest income is
recorded on an accrual basis. All premiums and discounts, including original
issue discounts, are amortized/accreted using the interest method.
Federal income taxes
Since the Investment Company is a Massachusetts business trust, each Fund is
a separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to each Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
14 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
It is each Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income and capital gains. Therefore, no federal
income or excise tax provision was required for the Fund.
Dividends and distributions to shareholders
Income, dividends and capital gain distributions, if any, are recorded on the
ex-dividend date. Dividends and capital gain distributions are generally
declared and paid annually. An additional distribution may be paid by the
Fund to avoid imposition of federal income tax on any remaining undistributed
capital gains and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from GAAP. As a result, net investment income and net realized
gain (or loss) on investments for a reporting period may differ significantly
from distributions during such period. The differences between tax
regulations and GAAP primarily relate to investments in futures, wash sale
deferrals, and certain securities sold at a loss.
Expenses
The Fund will pay its own expenses other than those expressly assumed by
Frank Russell Investment Management Company ("FRIMCo" or "Advisor"). Most
expenses can be directly attributed to the individual Fund. Expenses which
cannot be directly attributed to a specific Fund are allocated among all
Funds principally based on their relative net assets.
Class Allocation
The Fund presented herein offers the following classes of shares: Class A and
Class B. All share classes have identical voting, dividend, liquidation and
other rights and the same terms and conditions. The separate classes of
shares differ principally in the applicable sales charges, distribution fees
and shareholder servicing fees. Class B Shares were purchased at net asset
value without paying an initial sales charge. However, if a shareholder
redeems his or her Class B Shares within five years of the purchase date, the
shareholder will pay a deferred sales charge calculated as a percentage of
NAV at time of purchase. Shareholders of each class bear certain expenses
that pertain to that particular class. Realized and unrealized gains
(losses), net investment income, and expenses with the exception of class
level expenses, are allocated daily to each class of Shares based upon the
relative proportion of net assets of each class. Class B Shares, along with
their pro rata reinvested dividend shares, automatically convert to Class A
Shares eight years after purchase.
Derivatives
To the extent permitted by the investment objectives, restrictions and
policies set forth in the Fund's Prospectus and Statement of Additional
Information, the Fund may participate in various derivative-based
transactions. Derivative securities are instruments or agreements whose value
is derived from an underlying security or index. They include options,
futures, swaps, forwards, structured notes and stripped securities. These
instruments offer unique characteristics and risks that assist the Fund in
meeting its investment strategies.
The Fund typically uses derivatives in two ways: hedging and return
enhancement. The Fund may use a hedging strategy for its cash reserves to
achieve a strategy of being fully invested by exposing those reserves to the
performance of appropriate markets by purchasing equity or fixed income
securities, as appropriate, and/or derivatives. Hedging is also used by the
Fund to limit or control risks, such as adverse movements in exchange rates
and interest rates. Return enhancement can be accomplished through the use of
derivatives in a Fund. By purchasing certain instruments, the Fund may more
effectively achieve the desired portfolio characteristics that assist the
Fund in meeting its investment objectives. Depending on how the derivatives
are structured and utilized, the risks associated with them may vary widely.
These risks are generally categorized as market risk, liquidity risk and
counterparty or credit risk.
Options
The Fund may purchase and sell (write) call and put options on securities and
securities indices, provided such options are traded on a national securities
exchange or in an over-the-counter market.
When the Fund writes a covered call or a put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the option written. The Fund receives a premium on the sale of a
call
Notes to Financial Statements 15
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
option but gives up the opportunity to profit from any increase in stock
value above the exercise price of the option, and when the Fund writes a put
option it is exposed to a decline in the price of the underlying security.
If an option which the Fund has written either expires on its stipulated
expiration date or the Fund enters into a closing purchase transaction, the
Fund realizes a gain (or loss, if the cost of a closing purchase transaction
exceeds the premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability related
to such option is extinguished. If a call option which the Fund has written
is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by the
premium originally received. When a put option which a Fund has written is
exercised, the amount of the premium originally received will reduce the cost
of the security which a Fund purchases upon exercise of the option. Realized
gains (losses) on purchased options are included in net realized gain (loss)
from investments.
The Fund's use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets and
Liabilities. The face or contract amounts of these instruments reflect the
extent of the Fund's exposure to market risk. The risks may be caused by an
imperfect correlation between movements in the price of the instrument and
the price of the underlying securities and interest rates.
Futures Contracts
The Fund utilizes futures contracts to manage allocations between equity and
fixed-income weightings. The face or contract amounts of these instruments
reflect the extent of the Fund's exposure to market risk. The primary risks
associated with the use of futures contracts are an imperfect correlation
between the change in market value of the securities held by the Fund and the
prices of futures contracts, and the possibility of an illiquid market. Upon
entering into a futures contract, the Funds are required to deposit with a
broker an amount, termed the initial margin, which typically represents 5% of
the purchase price indicated in the futures contract. Payments to and from
the broker, known as variation margin, are required to be made on a daily
basis as the price of the futures contract fluctuates. Changes in initial
settlement value are accounted for as unrealized appreciation (depreciation)
until the contracts are terminated, at which time realized gains and losses
are recognized.
Index Swap Agreements
The Fund may enter into index swap agreements as an additional hedging
strategy for cash reserves held by the Fund or to effect investment
transactions consistent with the Fund's investment objectives and strategies.
Swap agreements are two party contracts entered into primarily by
institutional investors for periods ranging from a few weeks to more than one
year. In a standard swap transaction, the two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on
particular investments or instruments. The returns to be exchanged between
the parties are calculated with respect to a "notional amount" (i.e. a
specified dollar amount that is hypothetically invested in a "basket" of
securities representing a particular index). Amounts paid to and received
from the swap counterparties representing capital appreciation and
depreciation on the underlying securities and accrued interest expense and
interest income are recorded as net realized gain (loss). The Fund is exposed
to credit risk in the event of non-performance by the swap counterparties;
however, the Fund does not anticipate non-performance by the counterparties.
Interest Rate Swap Agreements
The Fund may enter into interest rate swap agreements, on either an
asset-based or liability-based basis, depending on whether they are hedging
their assets or their liabilities, and will usually enter into interest rate
swaps on a net basis, i.e., the two payment streams are netted out, with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments. When the Fund engages in an interest rate swap, it exchanges its
obligations to pay or rights to receive payments for the obligations or
rights to receive payments of another party (i.e., an exchange of floating
rate payments for fixed rate payments).
The Fund expects to enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of their portfolios or
to protect against any increase in the price of securities they anticipate
purchasing at a later date. The net amount of the excess, if any, of the
Fund's obligations over their entitlements with respect to each interest rate
swap will be accrued on a daily basis and an amount of cash or liquid
high-grade debt securities having an aggregate net asset value at least equal
to the accrued excess will be maintained in a segregated account by the
Fund's custodian. To the extent that the Funds enter into interest rate swaps
on other than a net basis, the amount maintained in a segregated account will
be the full amount of
16 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
the Funds' obligations, if any, with respect to such interest rate swaps,
accrued on a daily basis. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to the
agreement related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid.
Guarantees
In the normal course of business the Fund enters into contracts that contain
a variety of representations which provide general indemnifications. The
Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund expects the risk of loss to be remote.
3. INVESTMENT TRANSACTIONS
Securities
During the period ended April 30, 2005, purchases and sales of investment
securities (excluding US Government and Agency obligations, short-term
investments, options, futures and repurchase agreements) were $35,326,065 and
$44,691,174, respectively. There were no purchases and sales of US Government
and Agency obligations (excluding short-term instruments, options, futures
and repurchase agreements). Under the Financial Guarantee Agreement with
Ambac, the Fund has certain restrictions with respect to the type, weighting,
and duration of securities for which it may enter into transactions.
Securities Lending
The Investment Company has a securities lending program whereby each Fund can
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (US currency), US Government or US Government
agency obligations as collateral against the loaned securities. To the extent
that a loan is collateralized by cash, such collateral shall be invested by
the securities lending agent, State Street Bank and Trust Company ("State
Street"), in short-term instruments, money market mutual funds, and such
other short-term investments, provided the investments meet certain quality
and diversification requirements. The collateral received is recorded on the
Fund's statement of assets and liabilities along with the related obligation
to return the collateral. Income generated from the investment of cash
collateral, less negotiated rebate fees paid to participating brokers and
transaction costs, is divided between the Fund and State Street and is
recorded as income for the Fund. To the extent that a loan is secured by
non-cash collateral, brokers pay the Fund negotiated lenders' fees, which are
divided between the Fund and State Street and are recorded as securities
lending income for the Fund. All collateral received will be in an amount at
least equal to 102% (for loans of US securities) or 105% (for non-US
securities) of the market value of the loaned securities at the inception of
each loan. The market value of the loaned securities is determined at the
close of business of the Funds and any additional required collateral is
delivered to the Fund the next day. Should the borrower of the securities
fail financially, there is a risk of delay in recovery of the securities or
loss of rights in the collateral. Consequently, loans are made only to
borrowers which are deemed to be of good financial standing. There were no
outstanding securities on loan and no income was earned on securities lending
as of April 30, 2005.
4. RELATED PARTIES
Advisor and Administrator
FRIMCo advises and administers all of the Funds which comprise the Investment
Company. FRIMCo is a wholly-owned subsidiary of Frank Russell Company (a
subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell
Company provides consulting and money manager evaluation services to FRIMCo.
The Fund is permitted to invest its cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses) in
Frank Russell Investment Company's Money Market Fund and US Government Money
Market Fund (collectively the "Money Market Funds") (two of the Investment
Portfolios of the Investment Company not presented herein). As of April 30,
2005, $137,000 of the Money Market Fund's net assets represents investments
by this Fund and $1,658,197,099 represents the investments of other FRIC
Funds not presented herein. As of April 30, 2005, $4,803,000 of the US
Government Money Market Fund's net assets represents investment by this Fund.
Notes to Financial Statements 17
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The advisory and administrative fees are based upon the average daily net
assets of the Fund and the rate specified in the table below. The advisory
and administrative fees are payable monthly and total $315,565 and $17,930,
respectively, for the period ended April 30, 2005.
<Table>
<Caption>
ANNUAL RATE
ADVISOR ADMINISTRATOR
----------------------------------------------------------------------
Guarantee Period 0.88% 0.05%
Post Guarantee Period 0.88 0.05
</Table>
Pursuant to an expense limitation agreement (the "Expense Limitation
Agreement") and subject to possible reimbursement to the Advisor within three
years, the Advisor has contractually agreed to waive, during the Guarantee
Period ending March 3, 2008, up to the full amount of its 0.93% combined
advisory and administrative fees and to reimburse the Fund to the extent that
expenses for Class A and Class B Shares exceed 2.10% and 2.85%, respectively,
of average net assets on an annualized basis. Certain expenses that are not
covered by the Expense Limitation Agreement, such as extraordinary expenses
and other expenses not incurred in the ordinary course of the Fund's
business, will reduce the Guaranteed Amount. The total amount of the waiver
for the period ended April 30, 2005 was $69,061.
To the extent fees are waived by the Advisor, the Fund may reimburse the
Advisor for any reductions in the Fund's expenses during the three years
following the reduction if such reimbursement is requested by the Advisor, if
such reimbursement can be achieved within the specified expense limitation
and if the Board of Trustees approves the reimbursement as not inconsistent
with the best interest of the Fund. For the periods ended April 30, 2005,
October 31, 2004 and October 31, 2003, the Advisor has not recouped waivers
of $69,061, $201,841 and $140,944, respectively.
The Fund's expense ratio was less than its expense cap for the period ended
April 30, 2005 due to a one-time expense reimbursement from the Advisor
during the period.
The Advisor reimbursed the Fund for amounts previously paid by the Fund to
Russell/Mellon Analytical Services for analytical services received. The
amount of the reimbursement for the period ended April 30, 2005 was $6,508.
Custodian
The Fund has entered into arrangements with its Custodian whereby custody
credits realized as a result of uninvested cash balances were used to reduce
a portion of the Fund's expenses. During the period ended April 30, 2005, the
Fund's custodian fees were reduced $22 under these arrangements.
Transfer agent
The Investment Company has a contract with FRIMCo to provide transfer agent
services to the Fund. Total fees for the Fund reported herein for the period
ended April 30, 2005 were $35,096.
Distributor and Shareholder Servicing
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to Russell Fund Distributors, Inc. (the
"Distributor") a wholly-owned subsidiary of FRIMCo, or any Selling Agents, as
defined in the Plan, for sales support services provided and related expenses
incurred which were primarily intended to result in the sale of the Class B
Shares subject to the Distribution Plan. The 12b-1 distribution payments
shall not exceed 0.75% of the average daily net assets of a Fund's Class B
Shares on an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which the Fund may make payments to the
Distributor or any Servicing Agent for any activities or expenses primarily
intended to assist, support or service the Servicing Agents' clients who
beneficially own Class A or Class B Shares of the Fund. The shareholder
servicing payments shall not exceed 0.25% of the average daily net assets of
a Fund's Class A and Class B Shares on an annual basis.
Pursuant to the rules of the National Association of Securities Dealers, Inc.
("NASD"), the aggregate initial sales charges, deferred sales charges and
asset-based sales charges on Shares of the Fund may not exceed 6.25% of total
gross sales, subject to certain exclusions. This 6.25% limitation is imposed
at the class level on each of the Class A Shares and the Class B Shares of
the Fund rather than on a per shareholder basis. Therefore, long-term
shareholders of the Class A and Class B Shares may pay more than the economic
equivalent of the maximum sales charges permitted by the NASD.
18 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Accrued fees payable to affiliates as of April 30, 2005 were as follows:
<Table>
<Caption>
RUSSELL
MULTI-MANAGER
PRINCIPAL PROTECTED
----------------------------------------------------------
Advisory fees $ 49,321
Administration fees 2,800
Distribution fees 40,586
Shareholder servicing fees 13,952
Transfer agent fees 8,338
Trustee fees 344
----------------
$ 115,341
================
</Table>
Brokerage commissions
The Fund will effect transactions through Frank Russell Securities, Inc.
("FRS") and its global network of correspondent brokers. FRS is an affiliate
of FRIMCo. Trades placed through FRS and its correspondents are used to
obtain either research services for FRIMCo, to assist it in its capacity as a
manager of managers, to generate commission rebates to the Funds on whose
behalf the trades were made or to manage trading associated with changes in
managers, rebalancing across existing managers, cash flows and other
portfolio transitions. For purposes of trading to obtain research services
for FRIMCo or to generate commission rebates to the Fund, the Fund's money
managers are requested to and FRIMCo may, with respect to transactions it
places, effect transactions with or through FRS or other brokers and its
correspondents or other brokers only to the extent that the Fund will receive
competitive execution, price and commissions. Research services provided to
FRIMCo by FRS or other brokers include performance measurement statistics,
fund analytics systems and market monitoring systems. Research services will
be obtained from unaffiliated third parties at market rates. Research
provided to FRIMCo will benefit the particular Funds generating the trading
activity and may also benefit other Funds within FRIC and other funds and
clients managed or advised by FRIMCo or its affiliates. Similarly, the Fund
will benefit from research provided with respect to trading by those other
funds and clients. In some cases, research may also be provided by
non-affiliated brokers.
FRS or other brokers may also rebate to the Fund a portion of commissions
earned on certain trading by the Fund through FRS and its correspondents in
the form of commission recapture. Commission recapture is paid solely to the
Fund generating the applicable trades. Commission recapture is generated on
the instructions of the Soft Dollar Committee once FRIMCo's research budget
has been met. For the period ended April 30, 2005, there was no commission
recapture for the Fund.
FRS retains a portion of all commissions generated, regardless of whether the
trades were used to provide research services to FRIMCo or commission
recapture to the Funds. Trades through FRS for transition services and
manager funding (i.e. brokerage arrangements designed to reduce costs and
optimize performance during the transition of Fund assets upon the hiring,
termination or additional funding of a money manager) and are at ordinary and
customary commission rates and do not result in commission rebates or accrued
credits for the procurement of research related services.
The amount retained by Frank Russell Securities, Inc. for the period ended
April 30, 2005 was $591.
Additionally, the Fund paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Advisor.
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company
("FRIC"), which has 34 Funds, and Russell Investment Funds ("RIF"), which has
five Funds. Each of the Trustees is a Trustee for both FRIC and RIF. During
the period, the Russell Fund Complex paid each of its Trustees not affiliated
with FRIMCo 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 $2,000 for each Audit Committee meeting or Nominating and
Governance Committee meeting or any other committee meeting established and
approved by the Board that is attended in person. Each Trustee receives a
$500 fee for attending the meetings (quarterly, special, committee) by phone
instead of receiving the full fee had the member attended in person.
Trustees' out of pocket expenses are also paid by the Russell Fund Complex.
During the period, the Lead Trustee was paid a fee of $10,000 per year.
Notes to Financial Statements 19
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The Audit Committee Chair was paid a fee of $12,000 per year and the
Nominating and Governance Committee Chair was paid a fee of $6,000 per year.
5. FEDERAL INCOME TAXES
At April 30, 2005, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
Cost of Investments $ 64,687,646
================
Unrealized Appreciation 2,681,512
Unrealized Depreciation (1,243,384)
----------------
Net Unrealized Appreciation
(Depreciation) $ 1,438,128
================
</Table>
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2005 and October 31, 2004
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
RUSSELL MULTI-MANAGER PRINCIPAL 2005 2004 2005 2004
PROTECTED FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold -- -- $ -- $ --
Proceeds from reinvestment of
distributions 2 3 19 28
Payments for shares redeemed (28) (99) (293) (1,028)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (26) (96) (274) (1,000)
----------------- ----------------- ----------------- -----------------
Class B
Proceeds from shares sold -- -- -- --
Proceeds from reinvestment of
distributions 52 73 545 753
Payments for shares redeemed (945) (1,312) (9,767) (13,538)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (893) (1,239) (9,222) (12,785)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (919) (1,335) $ (9,496) $ (13,785)
================= ================= ================= =================
</Table>
7. LINE OF CREDIT
The Investment Company has a $75 million revolving credit facility for
temporary or emergency purposes, including the meeting of redemption requests
that otherwise might require the untimely disposition of securities. The
Funds are charged an annual commitment fee of .125% on the average daily
unused amount of the aggregate commitment, which is allocated among each of
the Funds. Interest is calculated at the Federal Fund Rate plus .50%
annually. The Fund may borrow up to a maximum of 33.33% of the value of its
net assets under the agreement. The agreement will expire December 21, 2005
and will be reviewed at such time for possible renewal. The Fund did not have
any drawdowns for the period ended April 30, 2005.
8. BENEFICIAL INTEREST
As of April 30, 2005, the Fund had no shareholders with shares of beneficial
interest of greater than 10% of the total outstanding shares.
20 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SHAREHOLDER REQUESTS FOR OTHER INFORMATION -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund has adopted to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling the Fund at (800) 787-7354, and (ii) on
the Securities and Exchange Commission's website at www.sec.gov. Information on
how the Funds voted proxies relating to portfolio securities during the 12-month
period ended June 30, 2004 is available at www.russell.com and on the Securities
and Exchange Commission's website at www.sec.gov.
The Funds will file their complete schedule of investments with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Funds' Form N-Q is available (i) without charge, upon request, by
calling the Fund at (800) 787-7354, (ii) at www.russell.com, (iii) on the
Securities and Exchange Commission's website at www.sec.gov., and (iv) the
Securities and Exchange Commission's public reference room.
Ambac Assurance Corporation, a Wisconsin domiciled stock insurance company (the
"Insurer"), is the issuer of a financial guarantee policy for the benefit of
shareholders of the Fund. If the Fund is unable to meet its obligations under
the guarantee on the Guarantee Maturity Date, the insurance policy requires
Ambac to pay the Fund an amount sufficient to ensure that all shareholders would
be able to redeem their shares on the Guarantee Maturity Date for an amount
equal to their respective guaranteed amounts on the Guarantee Maturity Date.
Ambac is a wholly-owned subsidiary of AFG, a publicly-held company. AFG is
subject to the informational requirements of the Securities Exchange Act, and in
accordance therewith files reports and other information with the SEC. Such
reports and other information, including AFG's most recent annual or quarterly
report, may be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission, or may be obtained free of
charge by calling the Fund at (800) 787-7354.
Shareholder Requests for Other Information 21
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS (UNAUDITED)
- --------------------------------------------------------------------------------
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees, including all of the Independent Trustees, last
considered and approved the continuation of the advisory agreement with FRIMCo
and the portfolio management contract (together, the "investment advisory
agreements") with each Money Manager of the Fund at a meeting held on February
23, 2005. During the course of a year, the Trustees received a wide variety of
materials regarding the investment performance of the Fund, sales and
redemptions of the Fund's shares, and the management of the Fund by FRIMCo. In
preparation for the annual review, the Board, with the advice and assistance of
independent counsel, also received and considered (1) information and reports
prepared by FRIMCo relating to the services provided by FRIMCo (and its
affiliates) to the Fund, including information requested by the Trustees, and
(2) information received from an independent, nationally recognized provider of
investment company information comparing the performance of the Fund and its
operating expenses over various periods of time with other peer funds
("Comparable Funds") not managed by FRIMCo believed by the provider to be
generally comparable in investment objectives and size to the Fund
(collectively, the "Agreement Renewal Information").
Prior to voting, the Independent Trustees reviewed the proposed continuance of
the investment advisory agreements with management and independent counsel and
received a memorandum from independent counsel discussing the legal standards
for their consideration of the proposed continuances. The Independent Trustees
also reviewed the proposed continuance in a private session with independent
counsel at which no representatives of FRIMCo or management were present. The
discussion below reflects both of these reviews.
In evaluating the advisory agreement with FRIMCo and the portfolio management
contracts with the Money Managers of the Fund, 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.
The Board considered that FRIMCo (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 have been
allocated among multiple Money Managers.
FRIMCo is responsible for selecting Money Managers for the Fund and for
determining allocations and reallocations of assets among the Money Managers.
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 FRIMCo in accordance with the Fund's
investment objective, policies and restrictions (each, a "segment"). FRIMCo is
responsible for communicating performance expectations and evaluations to each
Money Manager; supervising compliance by each Money Manager with the Fund's
investment objectives 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, FRIMCo is
responsible for recommending to the Board the restructuring of Fund segments and
additions of new Money Managers or replacements of existing Money Managers at
any time when, based on FRIMCo's research and analysis, such actions are
appropriate. FRIMCo may develop specific 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, FRIMCo's selection of Money Managers is made
not only on the basis of performance considerations but anticipated
compatibility with other Money Managers in the Fund. The performance of
individual Money Managers for the Fund may reflect the roles assigned to them by
FRIMCo in the Fund's investment activities and any constraints placed by FRIMCo
upon their selection of portfolio securities. In light of the foregoing, the
overall performance of the Fund over appropriate periods reflects in great part
the performance of FRIMCo in designing the Fund's investment program,
structuring Fund segments, selecting an effective Money Manager for each segment
with a style 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 also considered that the prospectus for the Fund emphasizes to
investors FRIMCo's role as the principal investment manager for the Fund, rather
than the investment selection role of the Fund's Money Managers, and describes
the manner in which the Fund operates so that investors may take the information
into account when deciding to purchase shares of the Fund.
22 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
In addition to these general factors relating to the manager of managers
structure of the Fund, the Trustees considered various specific factors on the
basis of the Agreement Renewal Information in evaluating renewal of the advisory
agreement with FRIMCo, including the following:
1. The nature, scope and quality of the services provided to the Fund by FRIMCo;
2. The advisory fee paid by the Fund to FRIMCo and the fact that it encompasses
all investment advisory fees paid by the Fund, including the fees for any Money
Managers of the Fund;
3. Information provided by FRIMCo as to other fees and benefits received by
FRIMCo or its affiliates from the Fund, including any administrative, transfer
agent, cash management and securities lending fees, soft dollar arrangements and
commissions in connection with portfolio securities transactions;
4. Information provided by FRIMCo as to investment advisory fees paid by
Comparable Funds;
5. Information provided by FRIMCo as to expenses incurred by the Fund;
6. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from the Fund; and
7. The importance of supporting quality, long-term service by FRIMCo to help
achieve the Fund's investment performance, including the continuing need of
FRIMCo to retain and attract qualified investment and service professionals to
serve the Fund.
On the basis of the information received, the Board, in respect of the Fund,
found the advisory fees charged and costs and expenses incurred by FRIMCo to be
fair and reasonable; after giving effect to waivers and/or reimbursements; and
considering the composition of the Comparable Funds, the relative performance
and expense ratio of the Fund were comparable to those of peer funds; FRIMCo's
methodology of allocating expenses of operating funds in the complex was
reasonable; and FRIMCo's profitability with respect to the Fund was reasonable
in light of the nature, scope and quality of the services provided by FRIMCo.
The Board considered for the Fund whether economies of scale have been realized
and whether the fees for the Fund appropriately reflect or should be revised to
reflect any such economies. In its deliberations, the Board noted its findings
reached at a meeting held on December 6, 2004 that the investment advisory fees
for the Fund appropriately reflect any economies of scale realized by the Fund.
Its findings at the earlier meeting were based upon information and analyses
prepared by FRIMCo, including information as to variability of Money Manager
investment advisory fees and other factors associated with the manager of
managers structure employed by the Fund relevant to the Board's deliberations,
and took into consideration the Fund's rising costs of compliance with
applicable laws, rules and regulations.
The Trustees considered that fees payable to FRIMCo by institutional clients
with investment objectives similar to those of the Fund are lower, and may, in
some cases, be substantially lower, than the rates paid by the Fund. FRIMCo
reviewed with the Trustees the differences in the scope of services it provides
to institutional clients and the Fund. For example, institutional clients have
fewer administrative needs than the Fund. It was further noted that since the
Fund must be able to constantly redeem its shares, it is more difficult to
manage than institutional accounts, where assets are relatively stable.
Accordingly, the Trustees did not regard these fee differences as relevant to
their deliberations.
The Board also considered the special expertise of FRIMCo with respect to the
manager of managers structure of the Fund and the likelihood that, at the
current expense ratio of the Fund, there would be no acceptable alternative
investment managers to replace FRIMCo on comparable terms given the need to
conduct the manager of managers, multi-style strategy of the Fund selected by
its shareholders in purchasing their shares.
With respect to the evaluation of the terms of portfolio management contracts
with Money Managers, the Board received and considered information from FRIMCo
reporting for each Money Manager, among other things, the Money Manager's
performance over various periods; FRIMCo's assessment of the performance of each
Money Manager; any significant business relationships between the Money Manager
and the Fund, FRIMCo or FRIMCo's affiliates; and FRIMCo's recommendation to
retain the Money Manager at the current fee rate, to retain the Money Manager at
a reduced fee rate or to terminate the Money Manager. FRIMCo recommended that
each Money Manager be retained at its current fee rate. FRIMCo advised the Board
that it does not regard Money Manager profitability as relevant to its
evaluation of the investment advisory agreements with Money Managers because the
Basis for Approval of Investment Advisory Contracts 23
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
willingness of Money Managers to serve in such capacity depends upon
arm's-length negotiations with FRIMCo; FRIMCo is aware of the fees charged by
Money Managers to other clients; and FRIMCo believes that the fees agreed upon
with Money Managers are fair and reasonable in light of the anticipated quality
of investment advisory services to be rendered. The Board accepted FRIMCo's
explanation in light of the Board's findings as to the fairness and
reasonableness of the aggregate investment advisory fees paid by the Fund and
the fact that each Money Manager's fee is paid by FRIMCo.
Based substantially upon FRIMCo's recommendations together with the information
received from FRIMCo in support of its recommendations, the Board concluded that
the fees paid to the Money Managers of the Fund were fair and reasonable in
light of the quality of the investment advisory services provided and that
continuation of the portfolio management agreement with each Money Manager of
the Fund was in the interests of shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the investment advisory agreement with FRIMCo or, other than FRIMCo's
recommendation, the portfolio management agreement with any Money Manager that
was all-important or controlling and each Trustee attributed different weights
to the various factors considered. The Trustees evaluated all information
available to them and their determinations were made in respect of the Fund.
24 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Frank Russell
Investment Company ("FRIC"), which has 34 funds, and Russell Investment Funds
("RIF"), which has five funds. Each of the trustees is a trustee of both FRIC
and RIF. The first table provides information for trustees who are interested
trustees. The second table provides information for the independent trustees.
The third table provides information for the trustees emeritus. The fourth table
provides information for the officers.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
*Lynn L. Anderson, Trustee since Appointed until - Vice Chairman, FRC 39 - Trustee, The
Born April 22, 1987 successor is - Chairman of the Board, FRIC SSgA Funds
1939 duly elected and RIF (investment
and qualified - CEO, Russell Fund company)
909 A Street Distributors, Inc.
Tacoma, Washington (broker-dealer "RFD")
98402-1616 - President and Chairman of
the Board, SSgA Funds
(investment company)
- Chairman of the Board, FRTC
- Until July 2004, Director,
Frank Russell Investments
(Ireland) Limited (Irish
limited company) and Frank
Russell Investments (Cayman)
Ltd. (manager of variable
capital investment
companies)
- Until October 2002,
President and CEO, FRIC and
RIF
- Until January 2005, Chairman
of the Board, RFD and FRIMCo
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
*Michael J.A. Trustee Since Appointed until - Chairman of the Board, FRC 39 None
Phillips, 2002 successor is - 1990-2003, President, FRC
Born January 20, duly elected - 1993-2003, CEO, FRC Trustee,
1948 and qualified. FRIC and RIF
- Director, FRTC; Frank
909 A Street Russell Investments (Suisse)
Tacoma, Washington S.A. (global investment
98402-1616 services); Frank Russell
Company Limited (consultant
to institutional investors
in Europe and the UK)
- Chairman of the Board and
President, Russell 20-20
Association; and Frank
Russell Investments
(Delaware), Inc. (general
partner in various limited
partnerships ("FRIDI")
- Until 2004, Director,
Russell Investment Group
Pty. Limited (consultant to
superannuation funds in
Australia); and Frank
Russell Japan Co., Ltd.
(consultant to institutional
investors in Japan)
- Director, Harold LeMay
Museum (classic car museum)
Advisory board member,
University of Washington,
Tacoma (educational
institution)
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Each of Messrs. Anderson and Phillips is also an officer and/or director of
one or more an affiliates of FRIC and RIF and is therefore an interested
trustee.
Disclosure of Information about Fund Directors 25
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - 1996 to present, President, 39 None
Born October 15, 1984 successor is Anderson Management Group
1931 duly elected LLC (private investments
and qualified consulting)
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee WM Group
Born January 22, 2000 successor is Blake, P.S. (accounting of Funds
1954 duly elected services) (investment
and qualified company);
909 A Street - Director, Avista
Tacoma, Washington Corp
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy Trustee since Appointed until - June 2004 to present, Senior 39 - Director, Gold
Born June 6, 1946 2003 successor is Vice President and Chief Banc
duly elected Financial Officer, Waddell & Corporation,
909 A Street and qualified Reed Financial, Inc. Inc.
Tacoma, Washington - 2003, Retired
98402-1616 - 2001-2003, Vice President
and Chief Financial Officer,
Janus Capital Group Inc.
- 1979-2001, Audit and
Accounting Partner,
PricewaterhouseCoopers LLP
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jonathan Fine Trustee since Appointed until - President and Chief 39 None
Born July 8, 1954 2004 successor is Executive Officer, United
duly elected Way of King County, WA
909 A Street and qualified - 1996-2000, Chief Executive
Tacoma, Washington Officer, Seattle/King County
98402-1616 Chapter of the American Red
Cross
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee since Appointed until - Retired since 1995 39 None
Born October 6, 1984 successor is
1930 duly elected
and qualified
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - Currently, President, 39 None
Tennison, Jr. 2000 successor is Simpson Investment Company
Born December 21, duly elected and several additional
1955 and qualified subsidiary companies,
including Simpson Timber
909 A Street Company, Simpson Paper
Tacoma, Washington Company and Simpson Tacoma
98402-1616 Kraft Company
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
26 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2000, Arbitrator,
1943 duly elected The American Arbitration
and qualified Association Commercial Panel
909 A Street - 1995 to 1999, Hearing
Tacoma, Washington Officer, University of
98402-1616 Washington
- 1987 to 2002, Director,
Smith Barney Fundamental
Value Fund
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 39 None
Jr., and Chairman resignation or Russell Company (investment
Born July 3, 1932 Emeritus since removal consultant to institutional
1999 investors ("FRC"); and
909 A Street FRIMCo
Tacoma, Washington - Chairman Emeritus, FRIC and
98402-1616 RIF; Frank Russell
Securities, Inc.
(broker-dealer and
investment advisor ("FRS");
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC")
- Chairman, Sunshine
Management Services, LLC
(investment advisor)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 39 None
Born December 1, since 2003 - Trustee of FRIC and RIF
1919 Until 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 39 None
Born June 8, 1925 since 2004 - Trustee of FRIC and RIF
Until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 39 None
Born May 5, 1926 since 2004 - Trustee of FRIC and RIF
Until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
Disclosure of Information about Fund Directors 27
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, with Fund and Term Principal Occupation(s)
Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------------------------------------------------
Cheryl Wichers Chief Compliance Until removed - Chief Compliance Officer, FRIC
Born December 16, 1966 Officer since by Trustees - Chief Compliance Officer, RIF
2005 - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2003, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Annual and - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive until successor - Chairman of the Board, President and CEO, FRIMCo
Officer since is chosen and - Chairman of the Board and President, RFD and Russell
909 A Street 2004 qualified by Insurance Agency, Inc. (insurance agency ("RIA")
Tacoma, Washington Trustees - Until 2004, Managing Director of Individual Investor
98402-1616 Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- 1998 to 2000, Representative Director, Frank Russell
Company, Ltd. (asset manager in Japan)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Annual and - Treasurer and Chief Accounting Officer, FRIC and RIF
Born November 26, 1963 Chief Accounting until successor - Director, Funds Administration, FRIMCo, FRTC and RFD
Officer since is chosen and - Treasurer and Principal Accounting Officer, SSgA
909 A Street 1998 qualified by Funds
Tacoma, Washington Trustees
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Thomas F. Hanly, Chief Investment Until removed - Chief Investment Officer, FRIC, RIF, FRC, FRTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, FRIMCo and RFD
2004 - Director, Frank Russell International Services Co.,
909 A Street Inc. (provide services to U.S. personnel secunded to
Tacoma, Washington overseas enterprises ("FRISCo")
98402-1616 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
RIF
- --------------------------------------------------------------------------------------------------------------------------
</Table>
28 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, with Fund and Term Principal Occupation(s)
Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary and Annual and - Secretary and General Counsel, FRIC, RIF, FRIMCo,
Born October 8, 1941 General Counsel until successor FRTC, and RFD
since 1994 is chosen and - Secretary, General Counsel and Managing Director of
909 A Street qualified. Law and Government Affairs, FRC
Tacoma, Washington - Director, Secretary and General Counsel, Frank
98402-1616 Russell Capital Inc. (investment advisor); Russell
Real Estate Advisors, Inc. (real estate investment
advisor)
- Director and Secretary, Russell 20-20 Association;
RIA; A Street Investment Associates, Inc. (real
estate leasing); FRIDI; and FRISCo
- Director and Assistant Secretary, Frank Russell
Company Limited and Russell Systems Limited (limited
company)
- Director, FRS, Russell Investment Group Pty. Ltd.;
Frank Russell Japan Co., Ltd. (holding company);
Frank Russell Investment Company Plc Frank Russell
Institutional Funds Plc, Frank Russell Multi-Manager
Funds plc; Frank Russell Investment Company II plc,
Frank Russell Investment Company III plc, Russell
Alternative Investment Fund plc, and Russell
Diversified Alternatives Fund (each, an investment
company); Frank Russell Asset Management (Cayman) LLC
(general partner of limited partnerships); Russell
Investment Group Limited (institutional consultant);
Russell Investment Management Ltd. (institutional
investment management); Russell Investment Group
Private Limited (investment and fund management
advisory services); and Frank Russell Investments
(Ireland) Ltd.
- Statutory Auditor, Frank Russell Company, Ltd. (asset
management and consulting)
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 29
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Lee C. Gingrich
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, PhD
William E. Baxter
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer (effective May 17,
2005)
Thomas F. Hanly, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Karl J. Ege, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Allan Forbes Building
150 Newport Avenue AFB35
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF APRIL 30, 2005
Lehman Brothers Asset Management LLC, Chicago, IL
Lord, Abbett & Co., Jersey City, NJ
MFS Institutional Advisors, Inc., Boston, MA
This report is prepared from the books and records of the Funds and is submitted
for the general information of shareholders and is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus. Nothing herein contained is to be considered an offer of
sale or a solicitation of an offer to buy shares of Frank Russell Investment
Company. Such offering is made only by Prospectus, which includes details as to
offering price and other material information.
30 Manager, Money Managers and Service Providers
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax:253-591-3495
www.russell.com 36-08-095 (1 04/05)
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
2005 SEMIANNUAL REPORT
CLASS A, C, D, E, AND S SHARES:
EQUITY AGGRESSIVE STRATEGY FUND
AGGRESSIVE STRATEGY FUND
BALANCED STRATEGY FUND
MODERATE STRATEGY FUND
CONSERVATIVE STRATEGY FUND
CLASS D, E, AND S SHARES:
2010 STRATEGY FUND
2020 STRATEGY FUND
2030 STRATEGY FUND
2040 STRATEGY FUND
APRIL 30, 2005
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
Frank Russell Investment Company is a series investment company with 34
different investment portfolios referred to as Funds. These financial statements
report on nine of these Funds.
Frank Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Frank Russell Investment Company
LifePoints(R) Funds
Semiannual Report
April 30, 2005 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Equity Aggressive Strategy Fund...................................... 3
Aggressive Strategy Fund............................................. 6
Balanced Strategy Fund............................................... 9
Moderate Strategy Fund............................................... 12
Conservative Strategy Fund........................................... 15
2010 Strategy Fund................................................... 18
2020 Strategy Fund................................................... 20
2030 Strategy Fund................................................... 22
2040 Strategy Fund................................................... 24
Statement of Assets and Liabilities.................................. 26
Statement of Operations.............................................. 28
Statement of Changes in Net Assets................................... 30
Financial Highlights................................................. 34
Notes to Financial Highlights........................................ 46
Notes to Financial Statements........................................ 47
Shareholder Requests for Other Information........................... 63
Basis for Approval of Investment Advisory Contracts.................. 64
Disclosure of Information about Fund Directors....................... 68
Manager, Money Managers and Service Providers........................ 72
</Table>
Frank Russell Investment Company - LifePoints Funds
Copyright (c) Frank Russell Company 2005. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. Russell Fund Distributors, Inc., is the distributor of
Frank Russell Investment Company.
[Blank Page]
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) EQUITY AGGRESSIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS A PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 992.20 $ 1,023.76
Expenses Paid During
Period* $ 1.23 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,048.50 $ 1,020.04
Expenses Paid During
Period* $ 5.08 $ 5.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS D PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,051.70 $ 1,022.52
Expenses Paid During
Period* $ 2.54 $ 2.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.50%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,053.00 $ 1,023.76
Expenses Paid During
Period* $ 1.27 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
LifePoints(R) Equity Aggressive Strategy Fund 3
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) EQUITY AGGRESSIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,054.80 $ 1,025.00
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
4 LifePoints(R) Equity Aggressive Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) EQUITY AGGRESSIVE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.9%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Domestic Equities - 71.0%
Diversified Equity Fund 5,972,250 247,669
Quantitative Equity Fund 6,865,992 247,588
Real Estate Securities Fund 1,468,745 63,479
Special Growth Fund 1,168,228 55,397
------------
614,133
------------
International Equities - 28.9%
Emerging Markets Fund 2,935,049 43,057
International Securities Fund 3,459,027 207,196
------------
250,253
------------
TOTAL INVESTMENTS - 99.9%
(identified cost $751,217) 864,386
OTHER ASSETS AND LIABILITIES,
NET - 0.1% 881
------------
NET ASSETS - 100.0% 865,267
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Domestic Equities 71.0
International Equities 28.9
---------------
Total Investments 99.9
Other Assets and Liabilities, Net 0.1
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
LifePoints(R) Equity Aggressive Strategy Fund 5
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) AGGRESSIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS A PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 983.90 $ 1,023.76
Expenses Paid During
Period* $ 1.23 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,040.70 $ 1,020.04
Expenses Paid During
Period* $ 5.06 $ 5.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS D PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,043.80 $ 1,022.52
Expenses Paid During
Period* $ 2.53 $ 2.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.50%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,044.00 $ 1,023.76
Expenses Paid During
Period* $ 1.27 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
6 LifePoints(R) Aggressive Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) AGGRESSIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,046.10 $ 1,025.00
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
LifePoints(R) Aggressive Strategy Fund 7
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) AGGRESSIVE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Bonds - 20.3%
Multistrategy Bond Fund 36,911,733 387,204
------------
Domestic Equities - 56.7%
Diversified Equity Fund 10,366,121 429,883
Quantitative Equity Fund 11,911,825 429,540
Real Estate Securities Fund 2,746,754 118,715
Special Growth Fund 2,126,110 100,820
------------
1,078,958
------------
International Equities - 22.8%
Emerging Markets Fund 5,124,102 75,171
International Securities Fund 5,978,175 358,093
------------
433,264
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $1,731,802) 1,899,426
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 3,330
------------
NET ASSETS - 100.0% 1,902,756
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Bonds 20.3
Domestic Equities 56.7
International Equities 22.8
---------------
Total Investments 99.8
Other Assets and Liabilities, Net 0.2
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
8 LifePoints(R) Aggressive Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) BALANCED STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS A PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 977.40 $ 1,023.76
Expenses Paid During
Period* $ 1.23 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,032.40 $ 1,020.04
Expenses Paid During
Period* $ 5.04 $ 5.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS D PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,034.60 $ 1,022.52
Expenses Paid During
Period* $ 2.52 $ 2.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.50%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,035.80 $ 1,023.76
Expenses Paid During
Period* $ 1.26 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
LifePoints(R) Balanced Strategy Fund 9
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) BALANCED STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,037.90 $ 1,025.00
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
10 LifePoints(R) Balanced Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) BALANCED STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Bonds - 40.2%
Diversified Bond Fund 24,818,531 588,696
Multistrategy Bond Fund 56,425,133 591,900
------------
1,180,596
------------
Domestic Equities - 40.8%
Diversified Equity Fund 11,141,530 462,039
Quantitative Equity Fund 12,808,827 461,886
Real Estate Securities Fund 3,499,177 151,234
Special Growth Fund 2,639,189 125,150
------------
1,200,309
------------
International Equities - 18.8%
Emerging Markets Fund 5,929,992 86,993
International Securities Fund 7,782,102 466,148
------------
553,141
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $2,657,328) 2,934,046
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 7,149
------------
NET ASSETS - 100.0% 2,941,195
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Bonds 40.2
Domestic Equities 40.8
International Equities 18.8
---------------
Total Investments 99.8
Other Assets and Liabilities, Net 0.2
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
LifePoints(R) Balanced Strategy Fund 11
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) MODERATE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS A PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 962.00 $ 1,023.76
Expenses Paid During
Period* $ 1.22 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,017.90 $ 1,020.04
Expenses Paid During
Period* $ 5.00 $ 5.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS D PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,021.20 $ 1,022.52
Expenses Paid During
Period* $ 2.51 $ 2.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.50%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,021.50 $ 1,023.76
Expenses Paid During
Period* $ 1.25 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
12 LifePoints(R) Moderate Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) MODERATE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,023.60 $ 1,025.00
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
LifePoints(R) Moderate Strategy Fund 13
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) MODERATE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Bonds - 60.1%
Diversified Bond Fund 8,876,071 210,540
Short Duration Bond Fund 13,557,256 255,419
------------
465,959
------------
Domestic Equities - 28.9%
Diversified Equity Fund 2,016,103 83,608
Quantitative Equity Fund 2,311,122 83,339
Real Estate Securities Fund 741,067 32,029
Special Growth Fund 520,403 24,678
------------
223,654
------------
International Equities - 10.8%
International Securities Fund 1,402,376 84,002
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $720,578) 773,615
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 1,546
------------
NET ASSETS - 100.0% 775,161
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Bonds 60.1
Domestic Equities 28.9
International Equities 10.8
---------------
Total Investments 99.8
Other Assets and Liabilities, Net 0.2
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
14 LifePoints(R) Moderate Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) CONSERVATIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS A PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 952.70 $ 1,023.76
Expenses Paid During
Period* $ 1.21 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,007.00 $ 1,020.04
Expenses Paid During
Period* $ 4.98 $ 5.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS D PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,010.30 $ 1,022.52
Expenses Paid During
Period* $ 2.49 $ 2.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.50%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,010.60 $ 1,023.76
Expenses Paid During
Period* $ 1.25 $ 1.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
LifePoints(R) Conservative Strategy Fund 15
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) CONSERVATIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 1,011.90 $ 1,025.00
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
16 LifePoints(R) Conservative Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) CONSERVATIVE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Bonds - 79.7%
Diversified Bond Fund 4,649,878 110,295
Short Duration Bond Fund 15,398,096 290,100
------------
400,395
------------
Domestic Equities - 17.1%
Diversified Equity Fund 843,962 34,999
Quantitative Equity Fund 971,232 35,023
Real Estate Securities Fund 356,491 15,408
------------
85,430
------------
International Equities - 3.0%
International Securities Fund 253,646 15,193
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $477,641) 501,018
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 1,201
------------
NET ASSETS - 100.0% 502,219
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Bonds 79.7
Domestic Equities 17.1
International Equities 3.0
---------------
Total Investments 99.8
Other Assets and Liabilities, Net 0.2
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
LifePoints(R) Conservative Strategy Fund 17
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) 2010 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from January 1, 2005 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS D PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 983.30 $ 1,014.96
Expenses Paid During
Period* $ 1.60 $ 1.62
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.49%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 983.90 $ 1,015.75
Expenses Paid During
Period* $ 0.82 $ 0.83
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 984.50 $ 1,016.57
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
18 LifePoints(R) 2010 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) 2010 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 100.0%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Bonds - 56.1%
Diversified Bond Fund 32,133 762
Multistrategy Bond Fund 14,403 151
Short Duration Bond Fund 39,469 744
------------
1,657
------------
Domestic Equities - 31.1%
Diversified Equity Fund 8,528 354
Quantitative Equity Fund 9,735 351
Real Estate Securities Fund 2,881 125
Special Growth Fund 1,875 89
------------
919
------------
International Equities - 12.8%
Emerging Markets Fund 1,501 22
International Securities Fund 5,937 355
------------
377
------------
TOTAL INVESTMENTS - 100.0%
(identified cost $3,012) 2,953
OTHER ASSETS AND LIABILITIES,
NET - (0.0%) (1)
------------
NET ASSETS - 100.0% 2,952
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Bonds 56.1
Domestic Equities 31.1
International Equities 12.8
---------------
Total Investments 100.0
Other Assets and Liabilities, Net --*
---------------
Net Assets 100.0
===============
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
LifePoints(R) 2010 Strategy Fund 19
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) 2020 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from January 1, 2005 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS D PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 979.80 $ 1,014.96
Expenses Paid During
Period* $ 1.59 $ 1.62
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.49%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 980.40 $ 1,015.75
Expenses Paid During
Period* $ 0.81 $ 0.83
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 981.00 $ 1,016.57
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
20 LifePoints(R) 2020 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) 2020 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 100.0%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Bonds - 46.1%
Diversified Bond Fund 27,680 657
Multistrategy Bond Fund 43,210 453
Short Duration Bond Fund 13,157 248
------------
1,358
------------
Domestic Equities - 37.1%
Diversified Equity Fund 10,269 426
Quantitative Equity Fund 11,723 423
Real Estate Securities Fund 3,220 139
Special Growth Fund 2,164 103
------------
1,091
------------
International Equities - 16.8%
Emerging Markets Fund 4,505 66
International Securities Fund 7,150 428
------------
494
------------
TOTAL INVESTMENTS - 100.0%
(identified cost $3,011) 2,943
OTHER ASSETS AND LIABILITIES,
NET - (0.0%) (1)
------------
NET ASSETS - 100.0% 2,942
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Bonds 46.1
Domestic Equities 37.1
International Equities 16.8
---------------
Total Investments 100.0
Other Assets and Liabilities, Net --*
---------------
Net Assets 100.0
===============
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
LifePoints(R) 2020 Strategy Fund 21
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) 2030 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from January 1, 2005 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS D PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 976.30 $ 1,014.96
Expenses Paid During
Period* $ 1.59 $ 1.62
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.49%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 976.90 $ 1,015.75
Expenses Paid During
Period* $ 0.81 $ 0.83
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 977.50 $ 1,016.57
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
22 LifePoints(R) 2030 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) 2030 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 100.0%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Bonds - 37.0%
Diversified Bond Fund 20,362 483
Multistrategy Bond Fund 57,614 604
------------
1,087
------------
Domestic Equities - 43.3%
Diversified Equity Fund 12,115 503
Quantitative Equity Fund 13,830 499
Real Estate Securities Fund 3,525 152
Special Growth Fund 2,423 115
------------
1,269
------------
International Equities - 19.7%
Emerging Markets Fund 6,409 94
International Securities Fund 8,048 482
------------
576
------------
TOTAL INVESTMENTS - 100.0%
(identified cost $3,009) 2,932
OTHER ASSETS AND LIABILITIES,
NET - (0.0%) (1)
------------
NET ASSETS - 100.0% 2,931
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Bonds 37.0
Domestic Equities 43.3
International Equities 19.7
---------------
Total Investments 100.0
Other Assets and Liabilities, Net --*
---------------
Net Assets 100.0
===============
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
LifePoints(R) 2030 Strategy Fund 23
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) 2040 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from January 1, 2005 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS D PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 972.70 $ 1,014.96
Expenses Paid During
Period* $ 1.59 $ 1.62
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.49%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 973.30 $ 1,015.75
Expenses Paid During
Period* $ 0.81 $ 0.83
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.25%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
January 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2005 $ 973.90 $ 1,016.57
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 120/365 (to
reflect the period since inception). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
24 LifePoints(R) 2040 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) 2040 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 100.0%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Bonds - 29.0%
Diversified Bond Fund 10,180 242
Multistrategy Bond Fund 57,611 604
------------
846
------------
Domestic Equities - 49.7%
Diversified Equity Fund 14,065 583
Quantitative Equity Fund 16,055 579
Real Estate Securities Fund 3,796 164
Special Growth Fund 2,654 126
------------
1,452
------------
International Equities - 21.3%
Emerging Markets Fund 7,210 106
International Securities Fund 8,630 517
------------
623
------------
TOTAL INVESTMENTS - 100.0%
(identified cost $3,007) 2,921
OTHER ASSETS AND LIABILITIES,
NET - (0.0%) (1)
------------
NET ASSETS - 100.0% 2,920
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Bonds 29.0
Domestic Equities 49.7
International Equities 21.3
---------------
Total Investments 100.0
Other Assets and Liabilities, Net --*
---------------
Net Assets 100.0
===============
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
LifePoints(R) 2040 Strategy Fund 25
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
EQUITY AGGRESSIVE AGGRESSIVE STRATEGY BALANCED STRATEGY MODERATE STRATEGY
AMOUNTS IN THOUSANDS STRATEGY FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 751,217 $ 1,731,802 $ 2,657,328 $ 720,578
- --------------------------------------------------------------------------------------------------------------------------
Investments, at market 864,386 1,899,426 2,934,046 773,615
Receivables:
Fund shares sold 3,270 7,250 13,119 3,247
----------------- ----------------- ----------------- -------------------
Total assets 867,656 1,906,676 2,947,165 776,862
----------------- ----------------- ----------------- -------------------
LIABILITIES
Payables:
Investments purchased 1,180 1,887 2,722 551
Fund shares redeemed 858 1,304 2,103 854
Accrued fees to affiliates 351 729 1,145 296
----------------- ----------------- ----------------- -------------------
Total liabilities 2,389 3,920 5,970 1,701
----------------- ----------------- ----------------- -------------------
NET ASSETS $ 865,267 $ 1,902,756 $ 2,941,195 $ 775,161
================= ================= ================= ===================
Net Assets Consist of:
Undistributed (overdistributed)
net investment income $ (360) $ (730) $ (1,150) $ (304)
Accumulated net realized gain
(loss) (48,648) (18,353) (39,369) (5,684)
Unrealized appreciation
(depreciation) on investments 113,169 167,624 276,718 53,037
Shares of beneficial interest 899 1,854 2,791 733
Additional paid-in capital 800,207 1,752,361 2,702,205 727,379
----------------- ----------------- ----------------- -------------------
NET ASSETS $ 865,267 $ 1,902,756 $ 2,941,195 $ 775,161
================= ================= ================= ===================
NET ASSET VALUE, offering and
redemption price per share:
Net asset value per share:
Class A* $ 9.81 $ 10.26 $ 10.54 $ 10.56
Maximum offering price per
share (Net asset value plus
sales charge of 5.75%):
Class A $ 10.41 $ 10.89 $ 11.18 $ 11.20
Class A -- Net assets $ 68,441,628 $ 260,657,091 $ 434,352,841 $ 82,832,813
Class A -- Shares
outstanding ($.01 par
value) 6,975,239 25,403,982 41,225,956 7,840,334
Net asset value per share:
Class C* $ 9.44 $ 10.20 $ 10.49 $ 10.52
Class C -- Net assets $ 236,387,317 $ 472,867,728 $ 792,373,357 $ 163,868,937
Class C -- Shares
outstanding ($.01 par
value) 25,028,331 46,359,125 75,562,924 15,572,454
Net asset value per share:
Class D* $ 9.66 $ 10.29 $ 10.55 $ 10.60
Class D -- Net assets $ 262,418,483 $ 540,200,521 $ 792,226,084 $ 283,698,388
Class D -- Shares
outstanding ($.01 par
value) 27,177,543 52,500,539 75,058,947 26,776,578
Net asset value per share:
Class E* $ 9.66 $ 10.27 $ 10.55 $ 10.57
Class E -- Net assets $ 175,958,560 $ 345,571,517 $ 458,037,056 $ 141,997,766
Class E -- Shares
outstanding ($.01 par
value) 18,224,431 33,644,262 43,403,378 13,435,233
Net asset value per share:
Class S* $ 9.77 $ 10.32 $ 10.60 $ 10.60
Class S -- Net assets $ 122,060,803 $ 283,459,038 $ 464,205,593 $ 102,762,645
Class S -- Shares
outstanding ($.01 par
value) 12,495,960 27,468,530 43,804,347 9,698,354
</Table>
* Net asset value per share equals class level net assets divided class
level shares of beneficial interest outstanding.
See accompanying notes which are an integral part of the financial statements.
26 Statement of Assets and Liabilities
<Table>
<Caption>
CONSERVATIVE STRATEGY 2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------
$ 477,641 $ 3,012 $ 3,011 $ 3,009 $ 3,007
- -------------------------------------------------------------------------------------------------
501,018 2,953 2,943 2,932 2,921
2,196 -- -- -- --
-------------- -------------- -------------- -------------- --------------
503,214 2,953 2,943 2,932 2,921
-------------- -------------- -------------- -------------- --------------
437 -- -- -- --
384 -- -- -- --
174 1 1 1 1
-------------- -------------- -------------- -------------- --------------
995 1 1 1 1
-------------- -------------- -------------- -------------- --------------
$ 502,219 $ 2,952 $ 2,942 $ 2,931 $ 2,920
============== ============== ============== ============== ==============
$ (173) $ (1) $ (1) $ (1) $ (1)
(924) -- -- -- --
23,377 (59) (68) (77) (86)
473 3 3 3 3
479,466 3,009 3,008 3,006 3,004
-------------- -------------- -------------- -------------- --------------
$ 502,219 $ 2,952 $ 2,942 $ 2,931 $ 2,920
============== ============== ============== ============== ==============
$ 10.61 $ -- $ -- $ -- $ --
$ 11.26 $ -- $ -- $ -- $ --
$ 33,275,114 $ -- $ -- $ -- $ --
3,136,197 -- -- -- --
$ 10.57 $ -- $ -- $ -- $ --
$ 85,098,148 $ -- $ -- $ -- $ --
8,052,077 -- -- -- --
$ 10.66 $ 9.80 $ 9.77 $ 9.74 $ 9.71
$ 153,451,432 $ 983,218 $ 979,850 $ 976,277 $ 972,565
14,398,675 100,347 100,298 100,243 100,188
$ 10.62 $ 9.80 $ 9.77 $ 9.74 $ 9.71
$ 183,115,471 $ 984,013 $ 980,621 $ 977,067 $ 973,352
17,234,773 100,407 100,357 100,304 100,249
$ 10.66 $ 9.80 $ 9.77 $ 9.74 $ 9.71
$ 47,279,142 $ 984,808 $ 981,413 $ 977,857 $ 974,138
4,434,954 100,468 100,418 100,365 100,309
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 27
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
EQUITY AGGRESSIVE AGGRESSIVE STRATEGY BALANCED STRATEGY MODERATE STRATEGY
AMOUNTS IN THOUSANDS STRATEGY FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income distributions from
Underlying Funds $ 9,342 $ 23,439 $ 39,433 $ 9,574
----------------- ----------------- ----------------- -------------------
EXPENSES
Advisory fees 820 1,758 2,723 739
Administrative fees 190 404 630 173
Custodian fees 16 17 19 16
Distribution fees - Class A 70 262 447 88
Distribution fees - Class C 825 1,632 2,733 593
Distribution fees - Class D 317 638 934 338
Transfer agent fees 419 742 843 232
Professional fees 24 31 42 22
Registration fees 36 59 78 32
Shareholder servicing fees - Class
C 275 544 911 198
Shareholder servicing fees - Class
D 317 638 934 339
Shareholder servicing fees - Class
E 213 418 556 170
Trustees' fees 9 19 30 8
Printing fees 8 14 24 6
Offering costs -- -- -- --
Miscellaneous 5 8 12 4
----------------- ----------------- ----------------- -------------------
Expenses before reductions 3,544 7,184 10,916 2,958
Expense reductions (1,527) (3,052) (4,400) (1,233)
----------------- ----------------- ----------------- -------------------
Net Expenses 2,017 4,132 6,516 1,725
----------------- ----------------- ----------------- -------------------
Net investment income (loss) 7,325 19,307 32,917 7,849
----------------- ----------------- ----------------- -------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 95 (9) (41) 757
Capital gain distributions from
Underlying Funds 6,965 14,399 21,778 4,587
----------------- ----------------- ----------------- -------------------
Net realized gain (loss) 7,060 14,390 21,737 5,344
----------------- ----------------- ----------------- -------------------
Net change in unrealized appreciation
(depreciation) on investments 21,251 29,565 28,263 726
----------------- ----------------- ----------------- -------------------
Net realized and unrealized gain (loss) 28,311 43,955 50,000 6,070
----------------- ----------------- ----------------- -------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 35,636 $ 63,262 $ 82,917 $ 13,919
================= ================= ================= ===================
</Table>
* For the period January 1, 2005 (commencement of operations) to April 30, 2005.
See accompanying notes which are an integral part of the financial statements.
28 Statement of Operations
<Table>
<Caption>
CONSERVATIVE STRATEGY 2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND* FUND* FUND* FUND*
- ------------------------------------------------------------------------------------------------------------------
$ 5,826 $ 14 $ 12 $ 10 $ 9
----------------- ----------------- ----------------- ----------------- -------------------
486 2 2 2 2
115 1 1 1 1
16 1 1 1 1
35 -- -- -- --
296 -- -- -- --
188 1 1 1 1
152 -- -- -- --
21 2 1 2 1
25 2 2 1 2
99 -- -- -- --
188 1 1 1 1
232 1 1 1 1
6 -- -- -- --
5 1 1 1 1
-- 26 26 26 27
3 -- -- -- --
----------------- ----------------- ----------------- ----------------- -------------------
1,867 38 37 37 38
(829) (35) (35) (35) (35)
----------------- ----------------- ----------------- ----------------- -------------------
1,038 3 2 2 3
----------------- ----------------- ----------------- ----------------- -------------------
4,788 11 10 8 6
----------------- ----------------- ----------------- ----------------- -------------------
267 -- -- -- --
1,699 -- -- -- --
----------------- ----------------- ----------------- ----------------- -------------------
1,966 -- -- -- --
----------------- ----------------- ----------------- ----------------- -------------------
(2,005) (59) (68) (77) (86)
----------------- ----------------- ----------------- ----------------- -------------------
(39) (59) (68) (77) (86)
----------------- ----------------- ----------------- ----------------- -------------------
$ 4,749 $ (48) $ (58) $ (69) $ (80)
================= ================= ================= ================= ===================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 29
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
EQUITY AGGRESSIVE
STRATEGY FUND
-------------------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2005 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2004
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 7,325 $ 4,299
Net realized gain (loss) 7,060 (6,186)
Net change in unrealized appreciation (depreciation) 21,251 65,506
------------------- --------------------
Net increase (decrease) in net assets from operations 35,636 63,619
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A (550) (146)
Class C (1,602) (797)
Class D (2,336) (1,482)
Class E (1,791) (1,610)
Class S (1,406) (1,016)
From net realized gain
Class A -- --
Class C -- --
Class D -- --
Class E -- --
Class S -- --
------------------- --------------------
Net decrease in net assets from distributions (7,685) (5,051)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions 112,915 184,563
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 140,866 243,131
NET ASSETS
Beginning of period 724,401 481,270
------------------- --------------------
End of period $ 865,267 $ 724,401
=================== ====================
Undistributed (overdistributed) net investment income included
in net assets $ (360) $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
30 Statement of Changes in Net Assets
<Table>
<Caption>
AGGRESSIVE STRATEGY BALANCED STRATEGY MODERATE STRATEGY
FUND FUND FUND
------------------------------ ------------------------------ ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004 (UNAUDITED) 2004
- ----------------------------------------------------------------------------------------------------
$ 19,307 $ 14,808 $ 32,917 $ 35,837 $ 7,849 $ 9,164
14,390 (1,926) 21,737 (2,021) 5,344 1,608
29,565 99,616 28,263 138,025 726 24,258
------------- ------------- ------------- ------------- ------------- -------------
63,262 112,498 82,917 171,841 13,919 35,030
------------- ------------- ------------- ------------- ------------- -------------
(2,533) (1,015) (4,837) (2,365) (860) (571)
(3,883) (2,834) (7,316) (7,408) (1,332) (1,516)
(5,734) (4,386) (9,209) (9,658) (2,925) (3,286)
(4,194) (3,904) (6,078) (8,770) (1,647) (2,034)
(3,693) (3,281) (6,627) (7,636) (1,389) (1,757)
-- -- (830) (75) (172) (54)
-- -- (1,779) (266) (416) (232)
-- -- (1,814) (277) (707) (379)
-- -- (1,104) (202) (357) (225)
-- -- (1,097) (179) (281) (175)
------------- ------------- ------------- ------------- ------------- -------------
(20,037) (15,420) (40,691) (36,836) (10,086) 10,229
------------- ------------- ------------- ------------- ------------- -------------
316,585 572,605 444,390 773,815 76,851 226,452
------------- ------------- ------------- ------------- ------------- -------------
359,810 669,683 486,616 908,820 80,684 251,253
1,542,946 873,263 2,454,579 1,545,759 694,477 443,224
------------- ------------- ------------- ------------- ------------- -------------
$ 1,902,756 $ 1,542,946 $ 2,941,195 $ 2,454,579 $ 775,161 $ 694,477
============= ============= ============= ============= ============= =============
$ (730) $ -- $ (1,150) $ -- $ (304) $ --
<Caption>
CONSERVATIVE STRATEGY
FUND
------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2005 OCTOBER 31,
(UNAUDITED) 2004
- ---
$ 4,788 $ 7,561
1,966 1,507
(2,005) 9,209
------------- -------------
4,749 18,277
------------- -------------
(326) (239)
(589) (783)
(1,483) (2,034)
(2,019) (3,670)
(544) (835)
(91) (31)
(275) (222)
(515) (394)
(646) (742)
(147) (137)
------------- -------------
(6,635) (9,087)
------------- -------------
30,248 76,427
------------- -------------
28,362 85,617
473,857 388,240
------------- -------------
$ 502,219 $ 473,857
============= =============
$ (173) $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 31
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
<Table>
<Caption>
2010 STRATEGY
AMOUNTS IN THOUSANDS FUND*
- ----------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 11
Net realized gain (loss) --
Net change in unrealized appreciation (depreciation) (59)
--------------------
Net increase (decrease) in net assets from operations (48)
--------------------
DISTRIBUTIONS
From net investment income
Class A --
Class C --
Class D (3)
Class E (4)
Class S (5)
From net realized gain
Class A --
Class C --
Class D --
Class E --
Class S --
--------------------
Net decrease in net assets from distributions (12)
--------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions 3,012
--------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 2,952
NET ASSETS
Beginning of period --
--------------------
End of period $ 2,952
====================
Undistributed (overdistributed) net investment income included
in net assets $ (1)
</Table>
* For the period January 1, 2005 (commencement of operations) to April 30, 2005
(Unaudited).
See accompanying notes which are an integral part of the financial statements.
32 Statement of Changes in Net Assets
<Table>
<Caption>
2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND* FUND* FUND*
- -------------------------------------------------------------------
$ 10 $ 8 $ 6
-- -- --
(68) (77) (86)
------------- ------------- -------------
(58) (69) (80)
------------- ------------- -------------
-- -- --
-- -- --
(3) (2) (2)
(4) (3) (2)
(4) (4) (3)
-- -- --
-- -- --
-- -- --
-- -- --
-- -- --
------------- ------------- -------------
(11) (9) (7)
------------- ------------- -------------
3,011 3,009 3,007
------------- ------------- -------------
2,942 2,931 2,920
-- -- --
------------- ------------- -------------
$ 2,942 $ 2,931 $ 2,920
============= ============= =============
$ (1) $ (1) $ (1)
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 33
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
EQUITY AGGRESSIVE STRATEGY FUND
Class A
April 30, 2005 * 9.42 .09 .41 .50
October 31, 2004 8.50 .06 .95 1.01
October 31, 2003 (2) 6.38 .02 2.13 2.15
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2005 * 9.07 .06 .38 .44
October 31, 2004 8.23 .01 .89 .90
October 31, 2003 6.60 (.01) 1.65 1.64
October 31, 2002 7.70 (.02) (.93) (.95)
October 31, 2001 10.24 (.04) (2.30) (2.34)
October 31, 2000 (5) 11.38 (.04) (.35) (.39)
December 31, 1999 (7) 9.80 .06 1.98 2.04
- -----------------------------------------------------------------------------------------------------------------
Class D
April 30, 2005 * 9.27 .09 .39 .48
October 31, 2004 8.38 .06 .91 .97
October 31, 2003 6.70 .02 1.69 1.71
October 31, 2002 7.79 .01 (.94) (.93)
October 31, 2001 10.33 --(e) (2.32) (2.32)
October 31, 2000 (5) 11.43 --(e) (.34) (.34)
December 31, 1999 9.81 .06 2.01 2.07
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 * 9.27 .10 .39 .49
October 31, 2004 8.37 .08 .91 .99
October 31, 2003 6.69 .04 1.68 1.72
October 31, 2002 7.76 .03 (.93) (.90)
October 31, 2001 10.28 .03 (2.32) (2.29)
October 31, 2000 (5) 11.39 .03 (.35) (.32)
December 31, 1999 9.80 .10 2.00 2.10
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 9.37 .12 .40 .52
October 31, 2004 8.45 .11 .91 1.02
October 31, 2003 6.75 .07 1.69 1.76
October 31, 2002 7.83 .06 (.96) (.90)
October 31, 2001 10.34 .05 (2.33) (2.28)
October 31, 2000 (8) 10.91 .04 .17 .21
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
EQUITY AGGRESSIVE STRATEGY FUND
Class A
April 30, 2005 * (.11) -- (.11)
October 31, 2004 (.09) -- (.09)
October 31, 2003 (2) (.03) -- (.03)
- -------------------------------------------------------------------------------------------
Class C
April 30, 2005 * (.07) -- (.07)
October 31, 2004 (.06) -- (.06)
October 31, 2003 (.01) -- (.01)
October 31, 2002 (.01) (.14) (.15)
October 31, 2001 (.12) (.08) (.20)
October 31, 2000 (5) (.14) (.61) (.75)
December 31, 1999 (7) (.30) (.16) (.46)
- -------------------------------------------------------------------------------------------
Class D
April 30, 2005 * (.09) -- (.09)
October 31, 2004 (.08) -- (.08)
October 31, 2003 (.03) -- (.03)
October 31, 2002 (.02) (.14) (.16)
October 31, 2001 (.14) (.08) (.22)
October 31, 2000 (5) (.15) (.61) (.76)
December 31, 1999 (.29) (.16) (.45)
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005 * (.10) -- (.10)
October 31, 2004 (.09) -- (.09)
October 31, 2003 (.04) -- (.04)
October 31, 2002 (.03) (.14) (.17)
October 31, 2001 (.15) (.08) (.23)
October 31, 2000 (5) (.18) (.61) (.79)
December 31, 1999 (.35) (.16) (.51)
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005 * (.12) -- (.12)
October 31, 2004 (.10) -- (.10)
October 31, 2003 (.06) -- (.06)
October 31, 2002 (.04) (.14) (.18)
October 31, 2001 (.15) (.08) (.23)
October 31, 2000 (8) (.17) (.61) (.78)
- -------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
34 Financial Highlights
<Table>
<Caption>
%
$ $ RATIO OF EXPENSES
NET ASSET VALUE, % NET ASSETS, TO AVERAGE
END OF TOTAL END OF PERIOD NET ASSETS,
PERIOD RETURN(%)(C)(F) (000) NET(D)(H)
- ------------------------------------------------------------------------------
9.81 5.22 68,442 .25
9.42 11.92 43,148 .25
8.50 33.75 7,399 .25
- ------------------------------------------------------------------------------
9.44 4.85 236,387 1.00
9.07 10.94 192,211 1.00
8.23 24.91 99,808 1.00
6.60 (12.73) 45,267 1.00
7.70 (23.24) 40,982 1.00
10.24 (3.37) 43,005 1.00
11.38 21.26 15,860 1.00
- ------------------------------------------------------------------------------
9.66 5.17 262,418 .50
9.27 11.59 225,187 .50
8.38 25.60 128,624 .50
6.70 (12.34) 36,092 .50
7.79 (22.91) 12,208 .50
10.33 (2.90) 12,592 .50
11.43 21.58 3,732 .50
- ------------------------------------------------------------------------------
9.66 5.30 175,959 .25
9.27 11.83 152,589 .25
8.37 25.89 155,984 .25
6.69 (12.05) 111,765 .25
7.76 (22.72) 156,698 .25
10.28 (2.75) 190,273 .25
11.39 21.96 202,066 .25
- ------------------------------------------------------------------------------
9.77 5.48 122,061 --
9.37 12.09 111,266 --
8.45 26.26 89,455 --
6.75 (11.95) 58,236 --
7.83 (22.43) 46,029 --
10.34 1.93 25,524 --
- ------------------------------------------------------------------------------
<Caption>
% %
RATIO OF EXPENSES RATIO OF NET
TO AVERAGE INVESTMENT INCOME %
NET ASSETS, TO AVERAGE PORTFOLIO
GROSS(D)(G) NET ASSETS(C)(H) TURNOVER RATE(C)
- -------------------------------------------------------------
.62 .96 .93
.65 .69 12.46
1.19 .30 17.81
- -------------------------------------------------------------
1.37 .61 .93
1.40 .13 12.46
1.43 (.19) 17.81
1.42 (.32) 29.86
1.39 (.45) 47.86
1.35 (.35) 58.41
1.34 .59 76.20
- -------------------------------------------------------------
.87 .89 .93
.90 .64 12.46
.93 .24 17.81
.92 .20 29.86
.89 .05 47.86
.85 .01 58.41
.84 .64 76.20
- -------------------------------------------------------------
.62 1.01 .93
.65 .89 12.46
.68 .59 17.81
.67 .44 29.86
.64 .30 47.86
.60 .24 58.41
.59 .99 76.20
- -------------------------------------------------------------
.37 1.17 .93
.40 1.21 12.46
.43 .90 17.81
.42 .72 29.86
.39 .59 47.86
.35 .45 58.41
- -------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 35
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
AGGRESSIVE STRATEGY FUND
Class A
April 30, 2005 * 9.95 .12 .32 .44
October 31, 2004 9.12 .11 .87 .98
October 31, 2003 (4) 7.20 .04 1.94 1.98
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2005 * 9.89 .09 .31 .40
October 31, 2004 9.09 .06 .84 .90
October 31, 2003 7.49 .02 1.61 1.63
October 31, 2002 8.46 .04 (.79) (.75)
October 31, 2001 10.35 .05 (1.80) (1.75)
October 31, 2000 (5) 11.15 .05 (.29) (.24)
December 31, 1999 (6) 10.11 .13 1.36 1.49
- -----------------------------------------------------------------------------------------------------------------
Class D
April 30, 2005 * 9.97 .11 .33 .44
October 31, 2004 9.15 .11 .84 .95
October 31, 2003 7.54 .05 1.63 1.68
October 31, 2002 8.52 .08 (.79) (.71)
October 31, 2001 10.41 .10 (1.81) (1.71)
October 31, 2000 (5) 11.20 .09 (.28) (.19)
December 31, 1999 9.95 .15 1.57 1.72
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 * 9.96 .13 .31 .44
October 31, 2004 9.13 .15 .82 .97
October 31, 2003 7.51 .08 1.63 1.71
October 31, 2002 8.49 .11 (.81) (.70)
October 31, 2001 10.38 .12 (1.80) (1.68)
October 31, 2000 (5) 11.17 .11 (.28) (.17)
December 31, 1999 9.94 .18 1.56 1.74
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 10.00 .14 .32 .46
October 31, 2004 9.16 .16 .84 1.00
October 31, 2003 7.54 .10 1.63 1.73
October 31, 2002 8.52 .13 (.81) (.68)
October 31, 2001 10.41 .14 (1.80) (1.66)
October 31, 2000 (9) 10.82 .11 .09 .20
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
AGGRESSIVE STRATEGY FUND
Class A
April 30, 2005 * (.13) -- (.13)
October 31, 2004 (.15) -- (.15)
October 31, 2003 (4) (.06) -- (.06)
- -------------------------------------------------------------------------------------------
Class C
April 30, 2005 * (.09) -- (.09)
October 31, 2004 (.10) -- (.10)
October 31, 2003 (.03) -- (.03)
October 31, 2002 (.05) (.17) (.22)
October 31, 2001 (.10) (.04) (.14)
October 31, 2000 (5) (.18) (.38) (.56)
December 31, 1999 (6) (.29) (.16) (.45)
- -------------------------------------------------------------------------------------------
Class D
April 30, 2005 * (.12) -- (.12)
October 31, 2004 (.13) -- (.13)
October 31, 2003 (.07) -- (.07)
October 31, 2002 (.10) (.17) (.27)
October 31, 2001 (.14) (.04) (.18)
October 31, 2000 (5) (.22) (.38) (.60)
December 31, 1999 (.31) (.16) (.47)
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005 * (.13) -- (.13)
October 31, 2004 (.14) -- (.14)
October 31, 2003 (.09) -- (.09)
October 31, 2002 (.11) (.17) (.28)
October 31, 2001 (.17) (.04) (.21)
October 31, 2000 (5) (.24) (.38) (.62)
December 31, 1999 (.35) (.16) (.51)
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005 * (.14) -- (.14)
October 31, 2004 (.16) -- (.16)
October 31, 2003 (.11) -- (.11)
October 31, 2002 (.13) (.17) (.30)
October 31, 2001 (.19) (.04) (.23)
October 31, 2000 (9) (.23) (.38) (.61)
- -------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
36 Financial Highlights
<Table>
<Caption>
%
$ $ RATIO OF EXPENSES
NET ASSET VALUE, % NET ASSETS, TO AVERAGE
END OF TOTAL END OF PERIOD NET ASSETS,
PERIOD RETURN(%)(C)(F) (000) NET(D)(H)
- ------------------------------------------------------------------------------
10.26 4.42 260,657 .25
9.95 10.76 154,884 .25
9.12 27.35 27,700 .25
- ------------------------------------------------------------------------------
10.20 4.07 472,868 1.00
9.89 9.90 381,245 1.00
9.09 21.89 219,946 1.00
7.49 (9.20) 102,324 1.00
8.46 (17.06) 80,514 1.00
10.35 (2.15) 67,296 1.00
11.15 15.21 29,365 1.00
- ------------------------------------------------------------------------------
10.29 4.38 540,200 .50
9.97 10.41 452,502 .50
9.15 22.44 232,636 .50
7.54 (8.78) 58,031 .50
8.52 (16.58) 15,307 .50
10.41 (1.72) 12,628 .50
11.20 17.69 6,096 .50
- ------------------------------------------------------------------------------
10.27 4.40 345,572 .25
9.96 10.72 307,304 .25
9.13 22.90 233,112 .25
7.51 (8.64) 152,805 .25
8.49 (16.40) 177,992 .25
10.38 (1.50) 193,351 .25
11.17 17.95 167,677 .25
- ------------------------------------------------------------------------------
10.32 4.61 283,459 --
10.00 10.99 247,011 --
9.16 23.10 159,869 --
7.54 (8.37) 108,267 --
8.52 (16.15) 86,466 --
10.41 1.59 35,585 --
- ------------------------------------------------------------------------------
<Caption>
% %
RATIO OF EXPENSES RATIO OF NET
TO AVERAGE INVESTMENT INCOME %
NET ASSETS, TO AVERAGE PORTFOLIO
GROSS(D)(G) NET ASSETS(C)(H) TURNOVER RATE(C)
- -------------------------------------------------------------
.60 1.12 .11
.63 1.11 2.22
.74 .51 15.15
- -------------------------------------------------------------
1.35 .82 .11
1.38 .67 2.22
1.41 .24 15.15
1.39 .51 11.73
1.38 .53 13.12
1.35 .43 40.57
1.38 1.50 71.44
- -------------------------------------------------------------
.85 1.08 .11
.88 1.14 2.22
.91 .66 15.15
.89 .92 11.73
.88 1.02 13.12
.85 .81 40.57
.88 1.48 71.44
- -------------------------------------------------------------
.60 1.22 .11
.63 1.54 2.22
.66 1.02 15.15
.64 1.29 11.73
.63 1.30 13.12
.60 1.04 40.57
.63 1.73 71.44
- -------------------------------------------------------------
.35 1.34 .11
.38 1.70 2.22
.41 1.30 15.15
.39 1.51 11.73
.38 1.50 13.12
.35 1.15 40.57
- -------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 37
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
BALANCED STRATEGY FUND
Class A
April 30, 2005 * 10.33 .13 .25 .38
October 31, 2004 9.64 .16 .74 .90
October 31, 2003 (2) 8.20 .06 1.47 1.53
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2005 * 10.29 .10 .24 .34
October 31, 2004 9.61 .12 .72 .84
October 31, 2003 8.33 .09 1.31 1.40
October 31, 2002 9.04 .12 (.59) (.47)
October 31, 2001 10.20 .16 (1.09) (.93)
October 31, 2000 (5) 10.72 .15 (.11) .04
December 31,1999 (6) 10.26 .25 .70 .95
- -----------------------------------------------------------------------------------------------------------------
Class D
April 30, 2005 * 10.35 .13 .23 .36
October 31, 2004 9.66 .17 .71 .88
October 31, 2003 8.36 .12 1.34 1.46
October 31, 2002 9.08 .16 (.59) (.43)
October 31, 2001 10.25 .21 (1.10) (.89)
October 31, 2000 (5) 10.77 .17 (.09) .08
December 31, 1999 10.13 .30 .84 1.14
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 * 10.35 .14 .23 .37
October 31, 2004 9.65 .22 .69 .91
October 31, 2003 8.35 .17 1.31 1.48
October 31, 2002 9.06 .19 (.60) (.41)
October 31, 2001 10.22 .24 (1.11) (.87)
October 31, 2000 (5) 10.74 .21 (.11) .10
December 31, 1999 10.12 .30 .86 1.16
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 10.39 .16 .24 .40
October 31, 2004 9.68 .23 .71 .94
October 31, 2003 8.38 .19 1.31 1.50
October 31, 2002 9.09 .22 (.60) (.38)
October 31, 2001 10.25 .28 (1.12) (.84)
October 31, 2000 (8) 10.45 .19 .23 .42
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
BALANCED STRATEGY FUND
Class A
April 30, 2005 * (.15) (.02) (.17)
October 31, 2004 (.21) -- (.21)
October 31, 2003 (2) (.09) -- (.09)
- -------------------------------------------------------------------------------------------
Class C
April 30, 2005 * (.11) (.03) (.14)
October 31, 2004 (.16) -- (.16)
October 31, 2003 (.12) -- (.12)
October 31, 2002 (.13) (.11) (.24)
October 31, 2001 (.20) (.03) (.23)
October 31, 2000 (5) (.24) (.32) (.56)
December 31,1999 (6) (.37) (.12) (.49)
- -------------------------------------------------------------------------------------------
Class D
April 30, 2005 * (.13) (.03) (.16)
October 31, 2004 (.19) -- (.19)
October 31, 2003 (.16) -- (.16)
October 31, 2002 (.18) (.11) (.29)
October 31, 2001 (.25) (.03) (.28)
October 31, 2000 (5) (.28) (.32) (.60)
December 31, 1999 (.38) (.12) (.50)
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005 * (.14) (.03) (.17)
October 31, 2004 (.21) -- (.21)
October 31, 2003 (.18) -- (.18)
October 31, 2002 (.19) (.11) (.30)
October 31, 2001 (.26) (.03) (.29)
October 31, 2000 (5) (.30) (.32) (.62)
December 31, 1999 (.42) (.12) (.54)
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005 * (.16) (.03) (.19)
October 31, 2004 (.23) -- (.23)
October 31, 2003 (.20) -- (.20)
October 31, 2002 (.22) (.11) (.33)
October 31, 2001 (.29) (.03) (.32)
October 31, 2000 (8) (.30) (.32) (.62)
- -------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
38 Financial Highlights
<Table>
<Caption>
%
$ $ RATIO OF EXPENSES
NET ASSET VALUE, % NET ASSETS, TO AVERAGE
END OF TOTAL END OF PERIOD NET ASSETS,
PERIOD RETURN(%)(C)(F) (000) NET(D)(H)
- ------------------------------------------------------------------------------
10.54 3.69 434,353 .25
10.33 9.49 281,685 .25
9.64 18.80 60,696 .25
- ------------------------------------------------------------------------------
10.49 3.24 792,373 1.00
10.29 8.82 653,463 1.00
9.61 17.02 396,344 1.00
8.33 (5.42) 186,825 1.00
9.04 (9.25) 136,748 1.00
10.20 .43 81,188 1.00
10.72 9.53 39,325 1.00
- ------------------------------------------------------------------------------
10.55 3.46 792,226 .50
10.35 9.25 676,342 .50
9.66 17.76 396,545 .50
8.36 (5.01) 121,077 .50
9.08 (8.83) 38,381 .50
10.25 .84 17,296 .50
10.77 11.64 9,075 .50
- ------------------------------------------------------------------------------
10.55 3.58 458,037 .25
10.35 9.54 416,942 .25
9.65 18.00 414,051 .25
8.35 (4.73) 269,458 .25
9.06 (8.59) 288,164 .25
10.22 1.04 296,435 .25
10.74 11.80 295,542 .25
- ------------------------------------------------------------------------------
10.60 3.79 464,206 --
10.39 9.82 426,147 --
9.68 18.22 278,123 --
8.38 (4.47) 155,977 --
9.09 (8.35) 96,801 --
10.25 4.09 36,898 --
- ------------------------------------------------------------------------------
<Caption>
% %
RATIO OF EXPENSES RATIO OF NET
TO AVERAGE INVESTMENT INCOME %
NET ASSETS, TO AVERAGE PORTFOLIO
GROSS(D)(G) NET ASSETS(C)(H) TURNOVER RATE(C)
- -------------------------------------------------------------
.57 1.26 .15
.59 1.63 6.42
.66 .74 18.55
- -------------------------------------------------------------
1.32 .94 .15
1.34 1.23 6.42
1.36 1.05 18.55
1.34 1.38 12.18
1.34 1.71 33.42
1.30 1.43 31.70
1.31 2.96 64.63
- -------------------------------------------------------------
.82 1.19 .15
.84 1.70 6.42
.86 1.38 18.55
.84 1.75 12.18
.84 2.25 33.42
.80 1.67 31.70
.81 3.07 64.63
- -------------------------------------------------------------
.57 1.34 .15
.59 2.25 6.42
.61 1.88 18.55
.59 2.17 12.18
.59 2.51 33.42
.55 2.02 31.70
.56 2.89 64.63
- -------------------------------------------------------------
.32 1.46 .15
.34 2.23 6.42
.36 2.12 18.55
.34 2.40 12.18
.34 2.64 33.42
.30 2.05 31.70
- -------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 39
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
MODERATE STRATEGY FUND
Class A
April 30, 2005 * 10.50 .12 .10 .22
October 31, 2004 10.03 .17 .51 .68
October 31, 2003 (3) 9.02 .07 1.06 1.13
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2005 * 10.45 .08 .11 .19
October 31, 2004 10.01 .05 .55 .60
October 31, 2003 9.15 .12 .91 1.03
October 31, 2002 9.59 .19 (.38) (.19)
October 31, 2001 10.20 .29 (.58) (.29)
October 31, 2000 (5) 10.46 .24 (.02) .22
December 31, 1999 (7) 10.15 .32 .48 .80
- -----------------------------------------------------------------------------------------------------------------
Class D
April 30, 2005 * 10.52 .11 .11 .22
October 31, 2004 10.06 .16 .49 .65
October 31, 2003 9.19 .16 .92 1.08
October 31, 2002 9.64 .23 (.38) (.15)
October 31, 2001 10.24 .33 (.56) (.23)
October 31, 2000 (5) 10.49 .28 (.02) .26
December 31, 1999 10.15 .33 .50 .83
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 * 10.50 .12 .11 .23
October 31, 2004 10.03 .19 .49 .68
October 31, 2003 9.16 .21 .89 1.10
October 31, 2002 9.59 .27 (.38) (.11)
October 31, 2001 10.20 .36 (.58) (.22)
October 31, 2000 (5) 10.46 .28 --(e) .28
December 31, 1999 10.15 .40 .46 .86
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 10.52 .14 .11 .25
October 31, 2004 10.05 .21 .49 .70
October 31, 2003 9.17 .23 .90 1.13
October 31, 2002 9.61 .28 (.38) (.10)
October 31, 2001 10.21 .39 (.58) (.19)
October 31, 2000 (9) 10.27 .29 .19 .48
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
MODERATE STRATEGY FUND
Class A
April 30, 2005 * (.13) (.03) (.16)
October 31, 2004 (.19) (.02) (.21)
October 31, 2003 (3) (.12) -- (.12)
- -------------------------------------------------------------------------------------------
Class C
April 30, 2005 * (.09) (.03) (.12)
October 31, 2004 (.14) (.02) (.16)
October 31, 2003 (.17) -- (.17)
October 31, 2002 (.20) (.05) (.25)
October 31, 2001 (.30) (.02) (.32)
October 31, 2000 (5) (.28) (.20) (.48)
December 31, 1999 (7) (.40) (.09) (.49)
- -------------------------------------------------------------------------------------------
Class D
April 30, 2005 * (.11) (.03) (.14)
October 31, 2004 (.17) (.02) (.19)
October 31, 2003 (.21) -- (.21)
October 31, 2002 (.25) (.05) (.30)
October 31, 2001 (.35) (.02) (.37)
October 31, 2000 (5) (.31) (.20) (.51)
December 31, 1999 (.40) (.09) (.49)
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005 * (.13) (.03) (.16)
October 31, 2004 (.19) (.02) (.21)
October 31, 2003 (.23) -- (.23)
October 31, 2002 (.27) (.05) (.32)
October 31, 2001 (.37) (.02) (.39)
October 31, 2000 (5) (.34) (.20) (.54)
December 31, 1999 (.46) (.09) (.55)
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005 * (.14) (.03) (.17)
October 31, 2004 (.21) (.02) (.23)
October 31, 2003 (.25) -- (.25)
October 31, 2002 (.29) (.05) (.34)
October 31, 2001 (.39) (.02) (.41)
October 31, 2000 (9) (.34) (.20) (.54)
- -------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
40 Financial Highlights
<Table>
<Caption>
%
$ $ RATIO OF EXPENSES
NET ASSET VALUE, % NET ASSETS, TO AVERAGE
END OF TOTAL END OF PERIOD NET ASSETS,
PERIOD RETURN(C)(F) (000) NET(D)(H)
- ------------------------------------------------------------------------------
10.56 2.06 82,833 .25
10.50 6.87 55,049 .25
10.03 12.56 18,820 .25
- ------------------------------------------------------------------------------
10.52 1.79 163,869 1.00
10.45 6.00 146,515 1.00
10.01 11.36 96,231 1.00
9.15 (2.00) 39,694 1.00
9.59 (2.87) 20,859 1.00
10.20 2.20 10,392 1.00
10.46 8.03 4,139 1.00
- ------------------------------------------------------------------------------
10.60 2.12 283,698 .50
10.52 6.55 254,060 .50
10.06 11.94 154,267 .50
9.19 (1.58) 38,170 .50
9.64 (2.33) 5,545 .50
10.24 2.65 3,157 .50
10.49 8.40 1,367 .50
- ------------------------------------------------------------------------------
10.57 2.15 141,998 .25
10.50 6.85 132,822 .25
10.03 12.19 99,926 .25
9.16 (1.22) 66,462 .25
9.59 (2.19) 57,885 .25
10.20 2.81 49,818 .25
10.46 8.65 45,350 .25
- ------------------------------------------------------------------------------
10.60 2.36 102,763 --
10.52 7.03 106,031 --
10.05 12.55 73,980 --
9.17 (1.08) 45,579 --
9.61 (1.87) 24,078 --
10.21 4.09 7,584 --
- ------------------------------------------------------------------------------
<Caption>
% %
RATIO OF EXPENSES RATIO OF NET
TO AVERAGE INVESTMENT INCOME %
NET ASSETS, TO AVERAGE PORTFOLIO
GROSS(D)(G) NET ASSETS(C)(H) TURNOVER RATE(C)
- -------------------------------------------------------------
.58 1.14 2.91
.63 1.71 3.99
.77 .84 11.08
- -------------------------------------------------------------
1.33 .78 2.91
1.37 .48 3.99
1.42 1.29 11.08
1.46 2.05 15.16
1.54 2.95 42.49
1.64 2.30 39.55
1.67 3.35 120.04
- -------------------------------------------------------------
.83 1.04 2.91
.87 1.55 3.99
.92 1.62 11.08
.96 2.51 15.16
1.04 3.39 42.49
1.14 2.66 39.55
1.17 3.28 120.04
- -------------------------------------------------------------
.58 1.17 2.91
.62 1.85 3.99
.67 2.22 11.08
.71 2.84 15.16
.79 3.60 42.49
.89 2.77 39.55
.92 3.87 120.04
- -------------------------------------------------------------
.33 1.30 2.91
.37 2.04 3.99
.42 2.44 11.08
.46 2.97 15.16
.54 3.97 42.49
.64 3.12 39.55
- -------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 41
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
CONSERVATIVE STRATEGY FUND
Class A
April 30, 2005 * 10.65 .12 --(e) .12
October 31, 2004 10.42 .20 .28 .48
October 31, 2003 (1) 9.94 .09 .50 .59
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2005 * 10.61 .07 .01 .08
October 31, 2004 10.38 .12 .28 .40
October 31, 2003 9.90 .12 .52 .64
October 31, 2002 10.10 .28 (.18) .10
October 31, 2001 10.17 .42 (.07) .35
October 31, 2000 (5) 10.12 .31 .07 .38
December 31, 1999 (7) 10.26 .43 .04 .47
- -----------------------------------------------------------------------------------------------------------------
Class D
April 30, 2005 * 10.69 .10 .01 .11
October 31, 2004 10.47 .18 .26 .44
October 31, 2003 9.97 .16 .55 .71
October 31, 2002 10.17 .33 (.18) .15
October 31, 2001 10.21 .44 (.03) .41
October 31, 2000 (5) 10.16 .33 .09 .42
December 31, 1999 10.25 .44 .08 .52
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 * 10.66 .11 --(e) .11
October 31, 2004 10.43 .20 .27 .47
October 31, 2003 9.94 .20 .52 .72
October 31, 2002 10.13 .36 (.18) .18
October 31, 2001 10.19 .49 (.07) .42
October 31, 2000 (5) 10.14 .34 .10 .44
December 31, 1999 10.24 .49 .06 .55
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 10.70 .13 --(e) .13
October 31, 2004 10.47 .23 .27 .50
October 31, 2003 9.97 .23 .52 .75
October 31, 2002 10.16 .38 (.18) .20
October 31, 2001 10.21 .55 (.10) .45
October 31, 2000 (10) 10.09 .37 .14 .51
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
CONSERVATIVE STRATEGY FUND
Class A
April 30, 2005 * (.12) (.04) (.16)
October 31, 2004 (.21) (.04) (.25)
October 31, 2003 (1) (.11) -- (.11)
- -------------------------------------------------------------------------------------------
Class C
April 30, 2005 * (.08) (.04) (.12)
October 31, 2004 (.13) (.04) (.17)
October 31, 2003 (.16) -- (.16)
October 31, 2002 (.29) (.01) (.30)
October 31, 2001 (.42) -- (.42)
October 31, 2000 (5) (.33) -- (.33)
December 31, 1999 (7) (.56) (.05) (.61)
- -------------------------------------------------------------------------------------------
Class D
April 30, 2005 * (.10) (.04) (.14)
October 31, 2004 (.18) (.04) (.22)
October 31, 2003 (.21) -- (.21)
October 31, 2002 (.34) (.01) (.35)
October 31, 2001 (.45) -- (.45)
October 31, 2000 (5) (.37) -- (.37)
December 31, 1999 (.56) (.05) (.61)
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005 * (.11) (.04) (.15)
October 31, 2004 (.20) (.04) (.24)
October 31, 2003 (.23) -- (.23)
October 31, 2002 (.36) (.01) (.37)
October 31, 2001 (.48) -- (.48)
October 31, 2000 (5) (.39) -- (.39)
December 31, 1999 (.60) (.05) (.65)
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005 * (.13) (.04) (.17)
October 31, 2004 (.23) (.04) (.27)
October 31, 2003 (.25) -- (.25)
October 31, 2002 (.38) (.01) (.39)
October 31, 2001 (.50) -- (.50)
October 31, 2000 (10) (.39) -- (.39)
- -------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
42 Financial Highlights
<Table>
<Caption>
%
$ $ RATIO OF EXPENSES
NET ASSET VALUE, % NET ASSETS, TO AVERAGE
END OF TOTAL END OF PERIOD NET ASSETS,
PERIOD RETURN(%)(C)(F) (000) NET(D)(H)
- ------------------------------------------------------------------------------
10.61 1.08 33,275 .25
10.65 4.62 20,709 .25
10.42 6.01 5,526 .25
- ------------------------------------------------------------------------------
10.57 0.70 85,098 1.00
10.61 3.87 75,976 1.00
10.38 6.51 54,674 1.00
9.90 1.01 24,739 1.00
10.10 3.49 9,850 1.00
10.17 3.76 2,500 1.00
10.12 4.67 1,697 1.00
- ------------------------------------------------------------------------------
10.66 1.03 153,451 .50
10.69 4.23 146,230 .50
10.47 7.17 92,430 .50
9.97 1.52 25,145 .50
10.17 4.11 3,066 .50
10.21 4.20 1,162 .50
10.16 5.18 1,001 .50
- ------------------------------------------------------------------------------
10.62 1.06 183,116 .25
10.66 4.57 187,993 .25
10.43 7.33 199,230 .25
9.94 1.79 35,385 .25
10.13 4.21 24,070 .25
10.19 4.44 14,076 .25
10.14 5.54 16,875 .25
- ------------------------------------------------------------------------------
10.66 1.19 47,279 --
10.70 4.82 42,949 --
10.47 7.63 36,380 --
9.97 2.02 24,953 --
10.16 4.52 11,429 --
10.21 5.17 2,643 --
- ------------------------------------------------------------------------------
<Caption>
% %
RATIO OF EXPENSES RATIO OF NET
TO AVERAGE INVESTMENT INCOME %
NET ASSETS, TO AVERAGE PORTFOLIO
GROSS(D)(G) NET ASSETS(C)(H) TURNOVER RATE(C)
- -------------------------------------------------------------
.59 1.09 4.80
.66 1.89 6.18
.97 .97 30.98
- -------------------------------------------------------------
1.34 .69 4.80
1.38 1.15 6.18
1.43 1.21 30.98
1.59 2.78 35.08
1.98 4.20 54.86
2.63 3.04 53.89
2.39 4.77 125.01
- -------------------------------------------------------------
.84 .94 4.80
.88 1.65 6.18
.93 1.57 30.98
1.09 3.33 35.08
1.48 4.06 54.86
2.13 3.27 53.89
1.89 4.24 125.01
- -------------------------------------------------------------
.59 1.06 4.80
.63 1.95 6.18
.68 1.86 30.98
.84 3.54 35.08
1.23 4.83 54.86
1.88 3.40 53.89
1.64 4.76 125.01
- -------------------------------------------------------------
.34 1.19 4.80
.38 2.17 6.18
.43 2.27 30.98
.59 3.79 35.08
.98 5.49 54.86
1.63 3.71 53.89
- -------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 43
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
2010 STRATEGY FUND
Class D
April 30, 2005 (11) 10.00 .03 (.20) (.17)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 (11) 10.00 .04 (.20) (.16)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 (11) 10.00 .05 (.20) (.15)
- -----------------------------------------------------------------------------------------------------------------
2020 STRATEGY FUND
Class D
April 30, 2005 (11) 10.00 .02 (.22) (.20)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 (11) 10.00 .02 (.22) (.20)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 (11) 10.00 .04 (.23) (.19)
- -----------------------------------------------------------------------------------------------------------------
2030 STRATEGY FUND
Class D
April 30, 2005 (11) 10.00 .02 (.26) (.24)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 (11) 10.00 .03 (.26) (.23)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 (11) 10.00 .03 (.26) (.23)
- -----------------------------------------------------------------------------------------------------------------
2040 STRATEGY FUND
Class D
April 30, 2005 (11) 10.00 .01 (.28) (.27)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 (11) 10.00 .02 (.29) (.27)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 (11) 10.00 .03 (.29) (.26)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- -------------------------------------------------------------------------------------------
2010 STRATEGY FUND
Class D
April 30, 2005 (11) (.03) -- (.03)
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005 (11) (.04) -- (.04)
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005 (11) (.05) -- (.05)
- -------------------------------------------------------------------------------------------
2020 STRATEGY FUND
Class D
April 30, 2005 (11) (.03) -- (.03)
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005 (11) (.03) -- (.03)
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005 (11) (.04) -- (.04)
- -------------------------------------------------------------------------------------------
2030 STRATEGY FUND
Class D
April 30, 2005 (11) (.02) -- (.02)
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005 (11) (.03) -- (.03)
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005 (11) (.03) -- (.03)
- -------------------------------------------------------------------------------------------
2040 STRATEGY FUND
Class D
April 30, 2005 (11) (.02) -- (.02)
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005 (11) (.02) -- (.02)
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005 (11) (.03) -- (.03)
- -------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
44 Financial Highlights
<Table>
<Caption>
%
$ $ RATIO OF EXPENSES
NET ASSET VALUE, % NET ASSETS, TO AVERAGE
END OF TOTAL END OF PERIOD NET ASSETS,
PERIOD RETURN(%)(C)(F) (000) NET(D)(H)
- ------------------------------------------------------------------------------
9.80 (1.67) 983 .49
- ------------------------------------------------------------------------------
9.80 (1.61) 984 .25
- ------------------------------------------------------------------------------
9.80 (1.55) 985 --
- ------------------------------------------------------------------------------
9.77 (2.02) 980 .49
- ------------------------------------------------------------------------------
9.77 (1.96) 981 .25
- ------------------------------------------------------------------------------
9.77 (1.90) 981 --
- ------------------------------------------------------------------------------
9.74 (2.37) 976 .49
- ------------------------------------------------------------------------------
9.74 (2.31) 977 .25
- ------------------------------------------------------------------------------
9.74 (2.25) 978 --
- ------------------------------------------------------------------------------
9.71 (2.73) 973 .49
- ------------------------------------------------------------------------------
9.71 (2.67) 973 .25
- ------------------------------------------------------------------------------
9.71 (2.61) 974 --
- ------------------------------------------------------------------------------
<Caption>
% %
RATIO OF EXPENSES RATIO OF NET
TO AVERAGE INVESTMENT INCOME %
NET ASSETS, TO AVERAGE PORTFOLIO
GROSS(D)(G) NET ASSETS(C)(H) TURNOVER RATE(C)
- -------------------------------------------------------------
4.12 .29 .06
- -------------------------------------------------------------
3.88 .37 .06
- -------------------------------------------------------------
3.63 .46 .06
- -------------------------------------------------------------
4.13 .24 .06
- -------------------------------------------------------------
3.88 .32 .06
- -------------------------------------------------------------
3.64 .41 .06
- -------------------------------------------------------------
4.13 .19 .06
- -------------------------------------------------------------
3.89 .27 .06
- -------------------------------------------------------------
3.64 .35 .06
- -------------------------------------------------------------
4.14 .14 .06
- -------------------------------------------------------------
3.89 .22 .06
- -------------------------------------------------------------
3.64 .30 .06
- -------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 45
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2005 (Unaudited).
(1) For the period March 3, 2003 (commencement of operations) to October 31,
2003.
(2) For the period March 4, 2003 (commencement of operations) to October 31,
2003.
(3) For the period March 5, 2003 (commencement of operations) to October 31,
2003.
(4) For the period March 10, 2003 (commencement of operations) to October 31,
2003.
(5) For the ten months ended October 31, 2000.
(6) For the period January 29, 1999 (commencement of sale) to December 31,
1999.
(7) For the period February 11, 1999 (commencement of sale) to December 31,
1999.
(8) For the period January 31, 2000 (commencement of sale) to October 31,
2000.
(9) For the period February 1, 2000 (commencement of sale) to October 31,
2000.
(10) For the period February 14, 2000 (commencement of sale) to October 31,
2000.
(11) For the period January 1, 2005 (commencement of operations) to April 30,
2005 (Unaudited).
(a) Average month-end shares outstanding were used for this calculation.
(b) Recognition of net investment income by the Fund is affected by the timing
of the declaration of dividends by the underlying companies in which the
Fund invests.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
(e) Less than $.01 per share for the period.
(f) Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
(g) The calculation includes only those expenses charged directly to the Funds
including those fees of the Funds pushed down to the Underlying Funds as
described in Note 4 to the financial statements.
(h) May reflect amounts waived and/or reimbursed by the investment advisor and
for certain funds, custody credit arrangements. The custody credit
arrangements had an impact of less than .005%.
See accompanying notes which are an integral part of the financial statements.
46 Notes to Financial Highlights
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
investment company with 34 different investment portfolios referred to as
Funds. These financial statements report on nine of these Funds. The
Investment Company is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. It is organized and
operates as a Massachusetts business trust under an amended and restated
master trust agreement dated August 19, 2002. The Investment Company's master
trust agreement permits the Board of Trustees to issue an unlimited number of
shares of beneficial interest at a $.01 par value per share.
Each of the LifePoints Funds allocates its assets by investing in a
combination of Class S shares of other of the Investment Company's Funds (the
"Underlying Funds"). Each of the LifePoints Funds may adjust its investments
within set limits based on Frank Russell Investment Management Company's
("FRIMCo" or "Advisor") outlook for the economy, financial markets and
relative market valuation of the asset classes represented by each Underlying
Fund. However, the LifePoints Funds may deviate from set limits when, in
FRIMCo's opinion, it is necessary to pursue a LifePoints Fund's investment
objective. The amounts allocated to each Underlying Fund by each LifePoints
Fund will generally vary within 10% of the percentages specified below:
<Table>
<Caption>
ASSET ALLOCATION TARGETS
-------------------------------------------------------------------------------------------------
EQUITY AGGRESSIVE AGGRESSIVE BALANCED MODERATE CONSERVATIVE
ASSET CLASS/UNDERLYING FUNDS STRATEGY FUND STRATEGY FUND STRATEGY FUND STRATEGY FUND STRATEGY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
Equities
US Equities
Diversified Equity
Fund 29% 23% 16% 11% 7%
Special Growth Fund 6 5 4 3 --
Quantitative Equity
Fund 29 23 16 11 7
Real Estate
Securities Fund 7 6 5 4 3
International Equities
International
Securities Fund 24 19 16 11 3
Emerging Markets Fund 5 4 3 -- --
Bonds
Diversified Bond Fund -- -- 20 27 22
Short Duration Bond
Fund -- -- -- 33 58
Multistrategy Bond
Fund -- 20 20 -- --
--- --- --- --- ---
100 100 100 100 100
</Table>
<Table>
<Caption>
ASSET ALLOCATION TARGETS
-----------------------------------------------------------------------------
2010 2020 2030 2040
ASSET CLASS/UNDERLYING FUNDS STRATEGY FUND STRATEGY FUND STRATEGY FUND STRATEGY FUND
- -------------------------------------------------------------------------------------------------------------
Equities
US Equities
Diversified Equity
Fund 12% 15% 17% 20%
Special Growth Fund 3 4 4 5
Quantitative Equity
Fund 12 15 17 20
Real Estate
Securities Fund 4 5 5 6
International Equities
International
Securities Fund 12 15 17 17
Emerging Markets Fund 1 2 3 4
Bonds
Diversified Bond Fund 26 21 16 8
Short Duration Bond
Fund 25 8 -- --
Multistrategy Bond
Fund 5 15 21 20
--- --- --- ---
100 100 100 100
</Table>
Notes to Financial Statements 47
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Investment Objectives of the Underlying Funds:
Diversified Equity Fund
Seeks to provide long term capital growth.
Special Growth Fund
Seeks to provide long term capital growth.
Quantitative Equity Fund
Seeks to provide long term capital growth.
Real Estate Securities Fund
Seeks to provide current income and long term capital growth.
International Securities Fund
Seeks to provide long term capital growth.
Emerging Markets Fund
Seeks to provide long term capital growth.
Diversified Bond Fund
Seeks to provide current income and the preservation of capital.
Short Duration Bond Fund
Seeks to provide current income and preservation of capital with a focus on
short duration securities.
Multistrategy Bond Fund
Seeks to provide current income and capital appreciation.
Financial statements of the Underlying Funds can be obtained by calling the
Office of Shareholder Inquiries at (800) 787-7354.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") which
require the use of management estimates and assumptions at the date of the
financial statements. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements.
Security valuation
The Funds value their portfolio securities, the shares of the Underlying
Funds, at the current net asset value per share of each Underlying Fund.
The Underlying Funds value portfolio securities according to Board-approved
Securities Valuation Procedures, including Market Value Procedures, Fair
Value Procedures and Pricing Services. Money market fund securities are
priced using the amortized cost method of valuation, as are debt obligation
securities maturing within 60 days of the date of purchase, unless the Board
determines that amortized cost does not represent market value of short-term
debt obligations. The Board has delegated the responsibility for
administration of the Securities Valuation Procedures to FRIMCo.
48 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Ordinarily, the Underlying Funds value each portfolio security based on
market quotations provided by Pricing Services or alternative pricing
services or dealers (when permitted by the Market Value Procedures).
Generally, Underlying Fund securities are valued at the close of the market
on which they are traded as follows:
- US listed equities; equity and fixed income options: Last sale price; last
bid price if no sales;
- US over-the-counter equities: Official closing price; last bid price if no
closing price;
- Foreign equities: Official closing price, where available, or last sale
price; last bid price if no closing price;
- Listed ADRs/GDRs: Last sale price; last bid price if no sales;
- Municipal bonds, US bonds, Eurobonds/foreign bonds: Evaluated bid price;
broker quote if no evaluated bid price;
- Futures: Settlement price.
- Investments in other mutual funds are valued at their net asset value per
share, calculated at 4 p.m. Eastern time or as of the close of the NYSE,
whichever is earlier.
- The value of swap agreements are equal to the Funds' obligation (or rights)
under swap contracts which will generally be equal to the net amounts to be
paid or received under the contracts based upon the relative values of the
positions held by each party to the contracts.
If market quotations are not readily available for a security or if
subsequent events suggest that a market quotation is not reliable, the
Underlying Funds will use the security's fair value, as determined in
accordance with the Fair Value Procedures. This generally means that equity
securities and fixed income securities listed and traded principally on any
national securities exchange are valued on the basis of the last sale price
or, lacking any sales, at the closing bid price, on the primary exchange on
which the security is traded. The Fair Value Procedures may involve
subjective judgments as to the fair value of securities. The effect of fair
value pricing is that securities may not be priced on the basis of quotations
from the primary market in which they are traded, but rather may be priced by
another method that the Board of Trustees believes reflects fair value. The
use of fair value pricing by an Underlying Fund may cause the net asset value
of its shares to differ significantly from the net asset value that would be
calculated using current market values. Fair value pricing could also cause
discrepancies between the daily movement of the value of Underlying Fund
shares and the daily movement of the benchmark index if the index is valued
using another pricing method.
This policy is intended to assure that the Underlying Funds' net asset values
fairly reflect security values as of the time of pricing. Events or
circumstances affecting the values of Underlying Fund securities that occur
between the closing of the principal markets on which they trade and the time
the net asset value of Underlying Fund Shares is determined may be reflected
in the calculation of net asset values for each applicable Underlying Fund
(and each Fund which invests in such Underlying Fund) when the Underlying
Funds deem that the particular event or circumstance would materially affect
such Underlying Fund's net asset value. Underlying Funds that invest
primarily in frequently traded exchange listed securities will use fair value
pricing in limited circumstances since reliable market quotations will often
be readily available. Underlying Funds that invest in foreign securities are
likely to use fair value pricing more often since significant events may
occur between the close of foreign markets and the time of pricing which
would trigger fair value pricing of the foreign securities. Underlying Funds
that invest in low rated debt securities are also likely to use fair value
pricing more often since the markets in which such securities are traded are
generally thinner, more limited and less active than those for higher rated
securities. Examples of events that could trigger fair value pricing of one
or more securities are: a material market movement (defined in the Fair Value
Procedures as the movement by any two of four major US Indexes greater than a
certain percentage); a company event such as a material business development,
dividend declaration, stock split or rights offering; a material disaster; or
an armed conflict.
Because foreign securities can trade on non-business days, the net asset
value of a Fund's portfolio that includes an Underlying Fund which invests in
foreign securities may change on days when shareholders will not be able to
purchase or redeem fund shares.
Investment transactions
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the basis of specific
identified cost.
Notes to Financial Statements 49
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Investment income
Distributions of income and capital gains from the Underlying Funds are
recorded on the ex-dividend date.
Federal income taxes
Since the Investment Company is a Massachusetts business trust, each Fund is
a separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to each Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
It is each Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income and capital gains. Therefore, no federal
income tax provision was required for the Funds.
Dividends and distributions to shareholders
Income, dividends and capital gain distributions, if any, are recorded on the
ex-dividend date. Income dividends are generally declared and paid quarterly.
Capital gain distributions are generally declared and paid annually. An
additional distribution may be paid by the Funds to avoid imposition of
federal income and excise tax on any remaining undistributed capital gains
and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from GAAP. As a result, net investment income and net realized
gain (or loss) from investment transactions for a reporting period may differ
significantly from distributions during such period. The differences between
tax regulations and GAAP relate primarily to investments in the Underlying
Funds sold at a loss, wash sale deferrals, capital loss carryforwards.
Accordingly, the Funds may periodically make reclassifications among certain
of their capital accounts without impacting their net asset value.
Expenses
Expenses included in the accompanying financial statements reflect the
expenses of each Fund and do not include those expenses incurred by the
Underlying Funds. Because the Underlying Funds have varied expense and fee
levels and the Funds may own different proportions of the Underlying Funds at
different times, the amount of the fees and expenses incurred indirectly by
the Funds will vary.
Class Allocation
The Funds presented herein offer the following classes of shares: Class A,
Class C, Class D, Class E and Class S. All share classes have identical
voting, dividend, liquidation and other rights and the same terms and
conditions. The separate classes of shares differ principally in the
applicable sales charges, distribution fees and shareholder servicing fees.
Shareholders of each class bear certain expenses that pertain to that
particular class. Realized and unrealized gains (losses), net investment
income, and expenses with the exception of class level expenses, are
allocated daily to each class of shares based upon the relative proportion of
net assets of each class.
Guarantees
In the normal course of business the Funds enter into contracts that contain
a variety of representations which provide general indemnifications. The
Funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds expect the risk of loss to be remote.
50 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Securities
During the period ended April 30, 2005, purchases and sales of the Underlying
Funds were as follows:
<Table>
<Caption>
FUNDS PURCHASES SALES
--------------------------------------------------------------------------------
Equity Aggressive Strategy $ 127,823,569 $ 7,605,263
Aggressive Strategy 332,396,677 1,960,581
Balanced Strategy 459,055,115 4,136,267
Moderate Strategy 101,601,214 21,555,291
Conservative Strategy 53,365,755 23,493,932
2010 Strategy 3,013,836 1,801
2020 Strategy 3,012,349 1,792
2030 Strategy 3,010,761 1,791
2040 Strategy 3,009,127 1,789
</Table>
4. RELATED PARTIES
Advisor and Administrator
FRIMCo advises and administers all of the Funds which comprise the Investment
Company. FRIMCo is a wholly-owned subsidiary of Frank Russell Company (a
subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell
Company provides consulting and money manager evaluation services to FRIMCo.
The Funds are charged an advisory fee equal to 0.20% and an administrative
fee equal to 0.05% of average daily net assets. For the period ended April
30, 2005, the Advisor contractually agreed to waive the advisory fee for all
Funds at least through February 28, 2006. The advisor does not have the
ability to recover amounts waived for the period ended April 30, 2005 or
previous periods. The administrative fees were charged to the Underlying
Funds in accordance with the special servicing agreements discussed below.
Operating expenses include those expenses arising from accounting,
administrative, custody, auditing, legal, trustee and transfer agent
services. They do not include expenses attributable to the advisor (which are
currently waived by FRIMCo), any Rule 12b-1 distribution fees, any
shareholder service fees, or any nonrecurring extraordinary expenses. During
the period, LifePoints Fund's operating expenses were borne either by the
Underlying Funds in which the LifePoints Fund invests or by FRIMCo. This
arrangement is governed by Special Servicing Agreements among each of the
affected Funds and FRIMCo as described below.
Special Service Charge
A special servicing agreement was entered into in February 1999 by the
Advisor and has been approved annually by the Funds' Board of Trustees. The
special servicing agreement is between the Fund of Funds (a group of nine
LifePoints Funds which invest in a combination of Class S shares of the
Investment Company's portfolios) and the Underlying Funds, in which the Fund
of Funds invest. In accordance with the special services agreement, expenses
from the operation of the Fund of Funds are borne by the Underlying Funds
based on each Underlying Fund's proportionate share of assets owned by the
Fund of Funds. No Underlying Funds will be charged expenses that exceed the
estimated savings to each respective Underlying Fund. These estimated savings
appear in the form of reduced transfer agent costs resulting from the
elimination of separate shareholder accounts which either currently are or
have potential to be invested in the Underlying Funds. Rather than having
each investor open a shareholder account to invest individually in the
Underlying Funds, the Fund of Funds act as omnibus accounts combining
thousands of individual shareholder accounts into a single account. This
benefits the Underlying Funds, by significantly reducing the number of
shareholder accounts that need to be maintained, and by the omnibus accounts'
netting out the trades of individual shareholders to a point where the Fund
of Funds only execute one trade each day with each Underlying Fund. In the
event that the financial benefits to the Underlying Funds do not exceed
aggregate expenses of any Fund of Fund, the Advisor will reimburse the
respective Underlying Funds. This arrangement will be discontinued on July 1,
2005. However, the Advisor will enter into a new arrangement to waive or
reimburse certain direct expenses of the Fund of Funds and it is not expected
that the expense ratios of the Fund of Funds will increase as a result of the
discontinuation of the current arrangements.
Notes to Financial Statements 51
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
For the period ended April 30, 2005, the special servicing expense pushed
down to the Underlying Funds amounted to:
<Table>
<Caption>
FUNDS AMOUNT
-------------------------------------------------------
Equity Aggressive Strategy $ 706,694
Aggressive Strategy 1,294,226
Balanced Strategy 1,676,911
Moderate Strategy 494,203
Conservative Strategy 342,693
2010 Strategy 33,564
2020 Strategy 33,563
2030 Strategy 33,562
2040 Strategy 33,561
</Table>
Transfer agent
The Investment Company has a contract with FRIMCo to provide transfer agent
services to the Funds. Total fees for the Funds presented herein for the
period ended April 30, 2005 were $2,387,207. The Underlying Funds have borne
this expense pursuant to the special servicing arrangements described above.
Distributor and Shareholder Servicing
Pursuant to the Distribution Agreement with the Investment Company, Russell
Fund Distributors, Inc. ("Distributor"), a wholly-owned subsidiary of FRIMCo,
serves as distributor for all Investment Company portfolio shares, including
Class A, Class C, Class D, and Class E shares of the Funds.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor or any Selling Agents, as
defined in the Plan for sales support services provided, and related expenses
incurred which are primarily intended to result in the sale of the Class A,
Class C and Class D shares subject to the Distribution Plan. The 12b-1
distribution payments shall not exceed 0.25% of the average daily net assets
of a Fund's Class A or Class D shares or 0.75% of the average daily net
assets of a Fund's Class C shares on an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which the Funds may make payments to the
Distributor or any Servicing Agent for any activities or expenses primarily
intended to assist, support or service the Servicing Agents' clients who
beneficially own Class C, Class D, and Class E shares of the Funds. The
shareholder servicing payments shall not exceed 0.25% of the average daily
net assets of a Fund's Class C, Class D, and Class E shares on an annual
basis.
Pursuant to the rules of the National Association of Securities Dealers, Inc.
("NASD"), the aggregate initial sales charges and asset-based sales charges
on Shares of the Funds may not exceed 6.25% of total gross sales, subject to
certain exclusions. This 6.25% limitation is imposed at the class level on
each of the Class A shares, Class C and Class D shares of each Fund rather
than on a per shareholder basis. Therefore, long-term shareholders of the
Class A, Class C and Class D shares may pay more than the economic equivalent
of the maximum sales charges permitted by the NASD. For the period ended
April 30, 2005, the sales commissions paid to the distributors for the sale
of Class A shares are as follows:
<Table>
<Caption>
AGGREGATE CLASS A FRONT-END
FRONT-END SALES SALES CHARGES
CHARGES ON RETAINED BY
FUNDS CLASS A SHARES DISTRIBUTOR
--------------------------------------------------------------------------
Equity Aggressive Strategy $ 650,390 $ 115,733
Aggressive Strategy 2,838,905 539,921
Balanced Strategy 3,541,431 698,520
Moderate Strategy 571,623 102,104
Conservative Strategy 244,388 34,982
</Table>
52 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Accrued fees payable to affiliates as of April 30, 2005 were as follows:
<Table>
<Caption>
EQUITY AGGRESSIVE AGGRESSIVE BALANCED MODERATE
STRATEGY STRATEGY STRATEGY STRATEGY
-----------------------------------------------------------------------------------------------------------------
Distribution fees $ 212,544 $ 451,328 $ 728,772 $ 175,244
Shareholder servicing fees 138,658 277,905 415,815 120,443
---------------- ---------------- ---------------- ----------------
$ 351,202 $ 729,233 $ 1,144,587 $ 295,687
================ ================ ================ ================
<Caption>
CONSERVATIVE
STRATEGY
--------------------------------------------------
Distribution fees $ 88,050
Shareholder servicing fees 85,508
----------------
$ 173,558
================
</Table>
<Table>
<Caption>
2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
----------------------------------------------------------------------------------------------------------
Distribution fees $ 202 $ 202 $ 202 $ 201
Shareholder servicing fees 405 404 403 402
---------------- ---------------- ---------------- ----------------
$ 607 $ 606 $ 605 $ 603
================ ================ ================ ================
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company
("FRIC"), which has 34 Funds, and Russell Investment Funds ("RIF"), which has
five Funds. Each of the Trustees is a Trustee for both FRIC and RIF. During
the period, the Russell Fund Complex paid each of its Trustees not affiliated
with FRIMCo 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 $2,000 for each Audit Committee meeting or Nominating and
Governance Committee meeting or any other committee meeting established and
approved by the Board that is attended in person. Each Trustee receives a
$500 fee for attending the meetings (quarterly, special, committee) by phone
instead of receiving the full fee had the member attended in person.
Trustees' out of pocket expenses are also paid by the Russell Fund Complex.
During the period, the Lead Trustee was paid a fee of $10,000 per year. The
Audit Committee Chair was paid a fee of $12,000 per year and the Nominating
and Governance Committee Chair was paid a fee of $6,000 per year.
Transactions With Affiliated Companies
An affiliated company is a company in which a Fund has ownership of at least
5% of the voting securities. Transactions during the period ended April 30,
2005 with Underlying Funds which are or were affiliates are as follows:
<Table>
<Caption>
PURCHASES SALES INCOME CAPITAL GAINS
AFFILIATE COST COST DISTRIBUTIONS DISTRIBUTIONS
----------------------------------------------------------------------------------------------------------------------------
Equity Aggressive Strategy
Diversified Equity $ 30,688,913 $ 1,395,144 $ 1,066,747 $ --
Special Growth 18,111,063 454,828 2,005,232 3,392,021
Quantitative Equity 34,382,235 1,420,272 1,301,691 --
International Securities 25,783,562 1,403,106 3,153,861 --
Emerging Markets 3,663,139 1,580,736 427,340 --
Real Estate Securities 15,194,657 1,255,873 1,386,691 3,572,684
----------------- ----------------- ----------------- -----------------
$ 127,823,569 $ 7,509,959 $ 9,341,562 $ 6,964,705
================= ================= ================= =================
Aggressive Strategy
Diversified Equity $ 61,372,774 $ -- $ 1,804,393 $ --
Special Growth 34,128,723 1,193 3,555,707 6,014,780
Quantitative Equity 67,073,249 -- 2,198,773 --
International Securities 50,751,722 832,049 5,289,357 --
Emerging Markets 6,067,558 805,953 723,992 --
Real Estate Securities 27,919,944 324,756 2,553,639 6,561,402
Multistrategy Bond 85,082,708 5,433 7,312,795 1,822,524
----------------- ----------------- ----------------- -----------------
$ 332,396,678 $ 1,969,384 $ 23,438,656 $ 14,398,706
================= ================= ================= =================
</Table>
Notes to Financial Statements 53
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PURCHASES SALES INCOME CAPITAL GAINS
AFFILIATE COST COST DISTRIBUTIONS DISTRIBUTIONS
----------------------------------------------------------------------------------------------------------------------------
Balanced Strategy
Diversified Equity $ 51,457,811 $ 629,507 $ 1,957,828 $ --
Special Growth 38,966,142 91,487 4,466,252 7,622,706
Quantitative Equity 58,056,133 670,082 2,386,803 --
International Securities 54,346,752 1,403,101 6,943,369 --
Emerging Markets 4,475,821 949,867 855,646 --
Real Estate Securities 29,651,186 149,351 3,334,652 8,614,265
Diversified Bond 108,962,483 150,915 8,104,933 2,698,080
Multistrategy Bond 113,138,787 132,665 11,343,444 2,842,466
----------------- ----------------- ----------------- -----------------
$ 459,055,115 $ 4,176,975 $ 39,392,927 $ 21,777,517
================= ================= ================= =================
Moderate Strategy
Short Duration Bond $ 32,661,631 $ 1,052,860 $ 2,806,110 $ 158,876
Diversified Bond 28,899,245 1,490,472 2,995,421 999,800
----------------- ----------------- ----------------- -----------------
$ 61,560,876 $ 2,543,332 $ 5,801,531 $ 1,158,676
================= ================= ================= =================
Conservative Strategy
Short Duration Bond $ 27,517,268 $ 8,276,790 $ 3,248,071 $ 187,675
Diversified Bond 11,503,122 3,809,088 1,621,259 547,223
----------------- ----------------- ----------------- -----------------
$ 39,020,390 $ 12,085,878 $ 4,869,330 $ 734,898
================= ================= ================= =================
</Table>
For the period ended April 30, 2005 the 2010 Strategy Fund, 2020 Strategy
Fund, 2030 Strategy Fund or 2040 Strategy Fund did not own more than 5% of
the voting securities in the Underlying Funds.
5. FEDERAL INCOME TAXES
At October 31, 2004, certain Funds had net tax basis capital loss
carryforwards which may be applied against any realized net taxable gains in
each succeeding year or until their respective expiration dates, whichever
occurs first. Available capital loss carryforwards and expiration dates are
as follows:
<Table>
<Caption>
FUNDS 10/31/10 10/31/11 TOTALS
------------------------------------------------------------------------------------------------------
Equity Aggressive Strategy $ 539,797 $ 333,051 $ 872,848
Aggressive Strategy -- 2,494,492 2,494,492
</Table>
At April 30, 2005, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
<Caption>
EQUITY AGGRESSIVE AGGRESSIVE BALANCED MODERATE CONSERVATIVE
STRATEGY STRATEGY STRATEGY STRATEGY STRATEGY
------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 806,255,045 $ 1,762,100,178 $ 2,718,029,114 $ 731,431,613 $ 480,407,749
================ ================ ================ ================ ================
Unrealized Appreciation $ 58,131,280 $ 137,325,441 $ 216,017,289 $ 43,152,671 $ 22,044,140
Unrealized Depreciation -- -- -- (969,574) (1,433,964)
---------------- ---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 58,131,280 $ 137,325,441 $ 216,017,289 $ 42,183,097 $ 20,610,176
================ ================ ================ ================ ================
</Table>
<Table>
<Caption>
2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
-----------------------------------------------------------------------------------------------------------
Cost of Investments $ 3,012,055 $ 3,010,584 $ 3,009,002 $ 3,007,372
================ ================ ================ ================
Unrealized Appreciation $ 5 $ 16 $ 21 $ 21
Unrealized Depreciation (59,413) (68,110) (77,217) (86,734)
---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ (59,408) $ (68,094) $ (77,196) $ (86,713)
================ ================ ================ ================
</Table>
54 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2005 and October 31, 2004
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
EQUITY AGGRESSIVE STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 2,561 3,956 $ 25,701 $ 35,957
Proceeds from reinvestment of
distributions 53 16 535 146
Payments for shares redeemed (221) (260) (2,213) (2,356)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,393 3,712 24,023 33,747
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 5,384 12,340 51,933 107,801
Proceeds from reinvestment of
distributions 160 91 1,559 779
Payments for shares redeemed (1,704) (3,374) (16,428) (29,412)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,840 9,057 37,064 79,168
----------------- ----------------- ----------------- -----------------
Class D
Proceeds from shares sold 4,372 12,353 43,070 109,960
Proceeds from reinvestment of
distributions 235 168 2,336 1,482
Payments for shares redeemed (1,726) (3,572) (17,078) (32,004)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,881 8,949 28,328 79,438
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 3,507 7,666 34,563 68,614
Proceeds from reinvestment of
distributions 177 180 1,775 1,591
Payments for shares redeemed (1,926) (10,021) (19,061) (89,981)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,758 (2,175) 17,277 (19,776)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,781 5,868 27,743 52,957
Proceeds from reinvestment of
distributions 131 109 1,321 974
Payments for shares redeemed (2,285) (4,692) (22,841) (41,945)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 627 1,285 6,223 11,986
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 11,499 20,828 $ 112,915 $ 184,563
================= ================= ================= =================
</Table>
Notes to Financial Statements 55
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
AGGRESSIVE STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 10,302 12,939 $ 107,547 $ 124,598
Proceeds from reinvestment of
distributions 238 103 2,507 1,008
Payments for shares redeemed (708) (506) (7,371) (4,896)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 9,832 12,536 102,683 120,710
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 10,935 19,726 113,367 188,886
Proceeds from reinvestment of
distributions 365 289 3,815 2,791
Payments for shares redeemed (3,491) (5,656) (36,141) (53,981)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 7,809 14,359 81,041 137,696
----------------- ----------------- ----------------- -----------------
Class D
Proceeds from shares sold 8,063 22,477 84,378 217,015
Proceeds from reinvestment of
distributions 544 450 5,734 4,386
Payments for shares redeemed (1,476) (2,974) (15,415) (28,740)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 7,131 19,953 74,697 192,661
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 4,961 12,109 51,815 116,639
Proceeds from reinvestment of
distributions 397 399 4,170 3,876
Payments for shares redeemed (2,581) (7,178) (26,958) (69,050)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,777 5,330 29,027 51,465
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 5,028 11,280 52,780 109,104
Proceeds from reinvestment of
distributions 312 302 3,283 2,949
Payments for shares redeemed (2,568) (4,333) (26,926) (41,980)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,772 7,249 29,137 70,073
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 30,321 59,427 $ 316,585 $ 572,605
================= ================= ================= =================
</Table>
56 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
BALANCED STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 14,968 21,684 $ 159,723 $ 217,864
Proceeds from reinvestment of
distributions 512 236 5,488 2,379
Payments for shares redeemed (1,510) (960) (16,153) (9,597)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 13,970 20,960 149,058 210,646
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 16,944 30,947 179,833 308,764
Proceeds from reinvestment of
distributions 834 758 8,906 7,536
Payments for shares redeemed (5,732) (9,413) (60,843) (93,840)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 12,046 22,292 127,896 222,460
----------------- ----------------- ----------------- -----------------
Class D
Proceeds from shares sold 10,766 27,719 114,985 278,061
Proceeds from reinvestment of
distributions 1,027 991 11,023 9,935
Payments for shares redeemed (2,063) (4,429) (22,043) (44,562)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 9,730 24,281 103,965 243,434
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 5,609 15,502 59,980 155,584
Proceeds from reinvestment of
distributions 663 886 7,109 8,853
Payments for shares redeemed (3,150) (19,006) (33,684) (190,604)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,122 (2,618) 33,405 (26,167)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 7,501 19,356 80,439 194,884
Proceeds from reinvestment of
distributions 633 685 6,813 6,888
Payments for shares redeemed (5,333) (7,762) (57,186) (78,330)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,801 12,279 30,066 123,442
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 41,669 77,194 $ 444,390 $ 773,815
================= ================= ================= =================
</Table>
Notes to Financial Statements 57
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
MODERATE STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 2,859 3,834 $ 30,509 $ 39,433
Proceeds from reinvestment of
distributions 88 57 942 592
Payments for shares redeemed (351) (523) (3,747) (5,380)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,596 3,368 27,704 34,645
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 3,373 7,479 35,840 76,703
Proceeds from reinvestment of
distributions 158 163 1,683 1,677
Payments for shares redeemed (1,974) (3,239) (20,958) (33,207)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,557 4,403 16,565 45,173
----------------- ----------------- ----------------- -----------------
Class D
Proceeds from shares sold 3,325 10,719 35,578 110,616
Proceeds from reinvestment of
distributions 339 354 3,632 3,665
Payments for shares redeemed (1,028) (2,263) (10,982) (23,166)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,636 8,810 28,228 91,115
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 2,420 6,293 25,856 64,629
Proceeds from reinvestment of
distributions 187 218 1,997 2,243
Payments for shares redeemed (1,824) (3,822) (19,469) (39,271)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 783 2,689 8,384 27,601
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 1,269 5,323 13,578 54,914
Proceeds from reinvestment of
distributions 140 167 1,498 1,728
Payments for shares redeemed (1,786) (2,778) (19,106) (28,724)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (377) 2,712 (4,030) 27,918
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 7,195 21,982 $ 76,851 $ 226,452
================= ================= ================= =================
</Table>
58 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
CONSERVATIVE STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 1,462 1,577 $ 15,639 $ 16,639
Proceeds from reinvestment of
distributions 36 22 382 229
Payments for shares redeemed (307) (184) (3,277) (1,937)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,191 1,415 12,744 14,931
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 2,292 3,975 24,356 41,731
Proceeds from reinvestment of
distributions 78 91 832 954
Payments for shares redeemed (1,481) (2,168) (15,749) (22,715)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 889 1,898 9,439 19,970
----------------- ----------------- ----------------- -----------------
Class D
Proceeds from shares sold 2,104 6,212 22,598 65,717
Proceeds from reinvestment of
distributions 187 229 1,997 2,427
Payments for shares redeemed (1,566) (1,600) (16,771) (16,889)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 725 4,841 7,824 51,255
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 1,197 3,147 12,789 33,167
Proceeds from reinvestment of
distributions 249 417 2,656 4,398
Payments for shares redeemed (1,844) (5,031) (19,720) (53,005)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (398) (1,467) (4,275) (15,440)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 1,112 2,026 11,954 21,477
Proceeds from reinvestment of
distributions 59 84 630 886
Payments for shares redeemed (751) (1,571) (8,068) (16,652)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 420 539 4,516 5,711
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,827 7,226 $ 30,248 $ 76,427
================= ================= ================= =================
</Table>
Notes to Financial Statements 59
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
----------------- -----------------
2005* 2005*
2010 STRATEGY ----------------- -----------------
Class D
Proceeds from shares sold 100 $ 1,000
Proceeds from reinvestment of distributions -- 3
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,003
----------------- -----------------
Class E
Proceeds from shares sold 100 1,000
Proceeds from reinvestment of distributions -- 4
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,004
----------------- -----------------
Class S
Proceeds from shares sold 100 1,000
Proceeds from reinvestment of distributions -- 5
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,005
----------------- -----------------
Total increase (decrease) 300 $ 3,012
================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
----------------- -----------------
2005* 2005*
2020 STRATEGY ----------------- -----------------
Class D
Proceeds from shares sold 100 $ 1,000
Proceeds from reinvestment of distributions -- 3
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,003
----------------- -----------------
Class E
Proceeds from shares sold 100 1,000
Proceeds from reinvestment of distributions -- 4
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,004
----------------- -----------------
Class S
Proceeds from shares sold 100 1,000
Proceeds from reinvestment of distributions -- 4
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,004
----------------- -----------------
Total increase (decrease) 300 $ 3,011
================= =================
</Table>
60 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
----------------- -----------------
2005* 2005*
2030 STRATEGY ----------------- -----------------
Class D
Proceeds from shares sold 100 $ 1,000
Proceeds from reinvestment of distributions -- 3
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,003
----------------- -----------------
Class E
Proceeds from shares sold 100 1,000
Proceeds from reinvestment of distributions -- 3
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,003
----------------- -----------------
Class S
Proceeds from shares sold 100 1,000
Proceeds from reinvestment of distributions -- 3
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,003
----------------- -----------------
Total increase (decrease) 300 $ 3,009
================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
----------------- -----------------
2005* 2005*
2040 STRATEGY ----------------- -----------------
Class D
Proceeds from shares sold 100 $ 1,000
Proceeds from reinvestment of distributions -- 2
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,002
----------------- -----------------
Class E
Proceeds from shares sold 100 1,000
Proceeds from reinvestment of distributions -- 2
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,002
----------------- -----------------
Class S
Proceeds from shares sold 100 1,000
Proceeds from reinvestment of distributions -- 3
Payments for shares redeemed -- --
----------------- -----------------
Net increase (decrease) 100 1,003
----------------- -----------------
Total increase (decrease) 300 $ 3,007
================= =================
</Table>
* For the period January 1, 2005 (commencement of operations) to April 30,
2005.
7. LINE OF CREDIT
The Investment Company has a $75 million revolving credit facility for
temporary or emergency purposes, including the meeting of redemption requests
that otherwise might require the untimely disposition of securities. The
Funds are charged an
Notes to Financial Statements 61
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
annual commitment fee of .125% on the average daily unused amount of the
aggregate commitment, which is allocated among each of the Funds. Interest is
calculated at the Federal Fund Rate plus .50% annually. The Funds may borrow
up to a maximum of 33.33% of the value of their net assets under the
agreement. The agreement will expire December 21, 2005 and will be reviewed
at such time for possible renewal. The Funds did not have any drawdowns for
the period ended April 30, 2005.
8. BENEFICIAL INTEREST
As of April 30, 2005, the following table includes shareholders with shares
of beneficial interest of greater than 10% of the total outstanding shares of
each respective Fund. Northwestern Mutual Life Insurance Company was the only
shareholder in the 2010 Strategy, 2020 Strategy, 2030 Strategy and 2040
Strategy Funds.
<Table>
<Caption>
FUNDS # OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Equity Aggressive Strategy 2 35.6
Aggressive Strategy 2 31.9
Balanced Strategy 1 20.8
Moderate Strategy 1 28.6
Conservative Strategy 2 47.9
2010 Strategy 1 100.0
2020 Strategy 1 100.0
2030 Strategy 1 100.0
2040 Strategy 1 100.0
</Table>
62 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
SHAREHOLDER REQUESTS FOR OTHER INFORMATION -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund has adopted to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling the Fund at (800) 787-7354, and (ii) on
the Securities and Exchange Commission's website at www.sec.gov. Information on
how the Funds voted proxies relating to portfolio securities during the 12-month
period ended June 30, 2004 is available at www.russell.com and on the Securities
and Exchange Commission's website at www.sec.gov.
The Funds will file their complete schedule of investments with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Funds' Form N-Q is available (i) without charge, upon request, by
calling the Fund at (800) 787-7354, (ii) at www.russell.com, (iii) on the
Securities and Exchange Commission's website at www.sec.gov., and (iv) at the
Securities and Exchange Commission's public reference room.
Shareholder Requests for Other Information 63
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS (UNAUDITED)
- --------------------------------------------------------------------------------
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees, including all of the Independent Trustees, last
considered and approved the continuation of the advisory agreement with FRIMCo
and the portfolio management contract (together, the "investment advisory
agreements") with each Money Manager of the Underlying Funds at a meeting held
on February 23, 2005. During the course of a year, the Trustees received a wide
variety of materials regarding the investment performance of the Funds and the
Underlying Funds, sales and redemptions of the Funds' and the Underlying Funds'
shares, and the management of the Funds and the Underlying Funds by FRIMCo. In
preparation for the annual review, the Board, with the advice and assistance of
independent counsel, also received and considered (1) information and reports
prepared by FRIMCo relating to the services provided by FRIMCo (and its
affiliates) to the Funds and the Underlying Funds, including information
requested by the Trustees, and (2) information received from an independent,
nationally recognized provider of investment company information comparing the
performance of each of the Funds and the Underlying Funds and their operating
expenses over various periods of time with other peer funds ("Comparable Funds")
not managed by FRIMCo believed by the provider to be generally comparable in
investment objectives and size to the Funds and the Underlying Funds
(collectively, the "Agreement Renewal Information").
Prior to voting, the Independent Trustees reviewed the proposed continuance of
the investment advisory agreements with management and independent counsel and
received a memorandum from independent counsel discussing the legal standards
for their consideration of the proposed continuances. The Independent Trustees
also reviewed the proposed continuance in a private session with independent
counsel at which no representatives of FRIMCo or management were present. The
discussion below reflects both of these reviews.
In evaluating the advisory agreement with FRIMCo and the portfolio management
contracts with the Money Managers of the Underlying Funds, the Board considered
that the Underlying Funds, in employing a manager-of-managers method of
investment, operate 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. All Underlying Funds have multiple Money Managers.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the investment advisory agreement for determining, implementing and
maintaining the investment program for each Underlying Fund. Assets of each
Underlying Fund have been allocated among multiple Money Managers.
FRIMCo is responsible for selecting Money Managers for each Underlying Fund and
for determining allocations and reallocations of assets among the Money
Managers. Each Money Manager for an Underlying Fund in effect performs the
function of an individual portfolio manager who is responsible for selecting
portfolio securities for the portion of the Underlying Fund assigned to it by
FRIMCo in accordance with the Underlying Fund's applicable investment objective,
policies and restrictions (each, a "segment"). FRIMCo is responsible for
communicating performance expectations and evaluations to each Money Manager;
supervising compliance by each Money Manager with each Underlying Fund's
investment objectives and policies; authorizing Money Managers to engage in
certain investment strategies for an Underlying 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, FRIMCo is
responsible for recommending to the Board the restructuring of Underlying Fund
segments and additions of new Money Managers or replacements of existing Money
Managers at any time when, based on FRIMCo's research and analysis, such actions
are appropriate. FRIMCo may develop specific 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 an Underlying
Fund in a complementary manner. Therefore, FRIMCo's selection of Money Managers
is made not only on the basis of performance considerations but anticipated
compatibility with other Money Managers in the same Underlying Fund. The
performance of individual Money Managers for an Underlying Fund may reflect the
roles assigned to them by FRIMCo in the Underlying Fund's investment activities
and any constraints placed by FRIMCo upon their selection of portfolio
securities. In light of the foregoing, the overall performance of each Fund and
Underlying Fund over appropriate periods reflects in great part the performance
of FRIMCo in designing the Underlying Fund's investment program, structuring
Underlying Fund segments, selecting an effective Money Manager for each segment
with a style that is complementary to the styles of the Money Managers of other
Underlying Fund segments, and allocating assets among the Money Managers in a
manner designed to achieve the objectives of the Underlying Fund.
The Board also considered that the prospectuses for the Funds and Underlying
Funds emphasize to investors FRIMCo's role as the principal investment manager
for each Fund and Underlying Fund, rather than the investment selection role of
the Underlying
64 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
Funds' Money Managers, and describe the manner in which the Funds and Underlying
Funds operate so that investors may take the information into account when
deciding to purchase shares of any such Fund.
In addition to these general factors relating to the manager of managers
structure of the Underlying Funds, the Trustees considered, with respect to each
Fund and Underlying Fund, various specific factors on the basis of the Agreement
Renewal Information in evaluating renewal of the advisory agreement with FRIMCo,
including the following:
1. The nature, scope and quality of the services provided to the Fund and the
Underlying Funds by FRIMCo;
2. The advisory fee paid by the Fund or Underlying Fund to FRIMCo and the fact
that it encompasses all investment advisory fees paid by the Fund or Underlying
Fund, including the fees for any Money Managers of such Underlying Fund;
3. Information provided by FRIMCo as to other fees and benefits received by
FRIMCo or its affiliates from the Fund or Underlying Fund, including any
administrative, transfer agent, cash management and securities lending fees,
soft dollar arrangements and commissions in connection with portfolio securities
transactions;
4. Information provided by FRIMCo as to investment advisory fees paid by
Comparable Funds;
5. Information provided by FRIMCo as to expenses incurred by the Fund or
Underlying Fund;
6. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from each Fund and Underlying Fund; and
7. The importance of supporting quality, long-term service by FRIMCo to help
achieve the Fund's or Underlying Fund's investment performance, including the
continuing need of FRIMCo to retain and attract qualified investment and service
professionals to serve the Funds and Underlying Funds.
On the basis of the information received, the Board, in respect of each Fund and
Underlying Fund, found the advisory fees charged and costs and expenses incurred
by FRIMCo to be fair and reasonable; after giving effect to waivers and/or
reimbursements; and considering the composition of the Comparable Funds, the
relative performance and expense ratio of the Fund or Underlying Fund were
comparable to those of peer funds; FRIMCo's methodology of allocating expenses
of operating funds in the complex was reasonable; and FRIMCo's profitability
with respect to the Fund or Underlying Fund was reasonable in light of the
nature, scope and quality of the services provided by FRIMCo.
The Board considered for each Fund and Underlying Fund whether economies of
scale have been realized and whether the fees for such Fund or Underlying Fund
appropriately reflect or should be revised to reflect any such economies. In its
deliberations, the Board noted its findings reached at a meeting held on
December 6, 2004 that the investment advisory fees for each Fund and Underlying
Fund appropriately reflect any economies of scale realized by that Fund or
Underlying Fund. Its findings at the earlier meeting were based upon information
and analyses prepared by FRIMCo, including information as to variability of
Money Manager investment advisory fees and other factors associated with the
manager of managers structure employed by most Underlying Funds relevant to the
Board's deliberations, and took into consideration the Funds' and Underlying
Funds' rising costs of compliance with applicable laws, rules and regulations.
The Trustees considered that fees payable to FRIMCo by institutional clients
with investment objectives similar to those of Underlying Funds are lower, and
may, in some cases, be substantially lower, than the rates paid by the
Underlying Funds. FRIMCo reviewed with the Trustees the differences in the scope
of services it provides to institutional clients and Underlying Funds. For
example, institutional clients have fewer administrative needs than the
Underlying Funds. It was further noted that since the Underlying Funds must
constantly issue and redeem their shares, they are more difficult to manage than
institutional accounts, where assets are relatively stable. Accordingly, the
Trustees did not regard these fee differences as relevant to their
deliberations.
The Board also considered the special expertise of FRIMCo with respect to the
manager of managers structure of the Underlying Funds and the likelihood that,
at the current expense ratio of each such Fund or Underlying Fund, there would
be no acceptable alternative investment managers to replace FRIMCo on comparable
terms given the need to conduct the manager of managers, multi-style strategy of
such Fund or Underlying Fund selected by its shareholders in purchasing their
shares.
With respect to the evaluation of the terms of portfolio management contracts
with Money Managers, the Board received and considered information from FRIMCo
reporting for each Money Manager, among other things, the Money Manager's
performance over various periods; FRIMCo's assessment of the performance of each
Money Manager; any significant business relationships
Basis for Approval of Investment Advisory Contracts 65
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
between the Money Manager and the Funds, the Underlying Funds, FRIMCo or
FRIMCo's affiliates; and FRIMCo's recommendation to retain the Money Manager at
the current fee rate, to retain the Money Manager at a reduced fee rate or to
terminate the Money Manager. FRIMCo recommended that each Money Manager be
retained at its current fee rate. FRIMCo advised the Board that it does not
regard Money Manager profitability as relevant to its evaluation of the
investment advisory agreements with Money Managers because the willingness of
Money Managers to serve in such capacity depends upon arm's-length negotiations
with FRIMCo; FRIMCo is aware of the fees charged by Money Managers to other
clients; and FRIMCo believes that the fees agreed upon with Money Managers are
fair and reasonable in light of the anticipated quality of investment advisory
services to be rendered. The Board accepted FRIMCo's explanation in light of the
Board's findings as to the fairness and reasonableness of the aggregate
investment advisory fees paid by each Fund and Underlying Fund and the fact that
each Money Manager's fee is paid by FRIMCo.
Based substantially upon FRIMCo's recommendations together with the information
received from FRIMCo in support of its recommendations, the Board concluded that
the fees paid to the Money Managers of each Underlying Fund were fair and
reasonable in light of the quality of the investment advisory services provided
and that continuation of the portfolio management agreement with each Money
Manager of each Underlying Fund was in the interests of shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the investment advisory agreement with FRIMCo or, other than FRIMCo's
recommendation, the portfolio management agreement with any Money Manager that
was all-important or controlling and each Trustee attributed different weights
to the various factors considered. The Trustees evaluated all information
available to them on a Fund-by-Fund basis and their determinations were made in
respect of each Fund and Underlying Fund.
At a meeting held on March 24, 2005, the Trustees received proposals from FRIMCo
to effect certain Money Manager changes for the International Securities Fund;
and at a meeting held on May 17, 2005 received proposals from FRIMCo to effect
certain Money Manager changes for the Special Growth Fund. In the case of each
such Underlying Fund, the Trustees approved the terms of the proposed portfolio
management agreements with the successor Money Manager(s) based substantially
upon FRIMCo's recommendation; its explanation as to the lack of relevance of
profitability to the evaluation of portfolio management agreements with Money
Managers; and its belief that the proposed investment advisory fees for the
successor Money Manager(s) would be fair and reasonable in light of the
anticipated quality of investment advisory services to be rendered. The Trustees
also considered their findings at the February 23, 2005 meeting as to the
fairness and reasonableness of the aggregate investment advisory fees paid by
each affected Underlying Fund, and the fact that the aggregate investment
advisory fees paid by such Underlying Fund would not increase as a result of the
implementation of any proposed Money Manager change because each Money Manager's
investment advisory fee is paid by FRIMCo.
At the meeting held on May 17, 2005, the Trustees also received a proposal from
FRIMCo to manage directly approximately 5% of the assets of the Diversified
Equity Fund (a "Participating Fund") utilizing a "select holdings strategy"
pursuant to the terms of the Advisory Agreement between the Underlying Fund and
FRIMCo. Under this strategy, FRIMCo analyzes the stocks purchased for a
Participating Fund by each of the Underlying Fund's Money Managers to identify
particular stocks that are concurrently overweighted by two or more of the Money
Managers. FRIMCo uses a proprietary model to rank these stocks. Based on this
ranking, FRIMCo will purchase additional shares of certain stocks for the
Participating Fund. The strategy is designed to increase the Participating
Fund's exposure to stocks that are collectively viewed as attractive by multiple
Money Managers to the Participating Fund. Implementation of this strategy
includes periodic rebalancing of the Participating Fund's holdings. The Trustees
received and considered information from FRIMCo regarding the potential
enhancements to the Participating Funds' performance based upon FRIMCo's limited
experience in employing the same strategy for other types of investment accounts
under its management. The Trustees also considered that FRIMCo would not be
required to pay investment advisory fees to a Money Manager with respect to
assets for which the select holdings strategy is utilized and that the profits
derived by FRIMCo generally and from each Participating Fund consequently may
increase incrementally. The Board, however, considered FRIMCo's advice that it
will pay certain Money Managers additional fees for providing information and
other services in connection with the select holdings strategy and expects to
incur additional costs in implementing and carrying out the select holdings
strategy; the limited amount of assets that would be managed directly by FRIMCo
pursuant to the select holdings strategy; the fact that the aggregate investment
advisory fees paid the Participating Fund would not increase as a result of the
implementation of the select holdings strategy; and its findings at the meeting
held on February 23, 2005 that the aggregate fees payable by the Participating
Fund are fair and reasonable. Based upon the Agreement Renewal Information
received from FRIMCo at the meeting held on February 23, 2005 and information
concerning implementation of the select holdings strategy received from FRIMCo
at the meetings held on February 23,
66 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
2005 and May 17, 2005, the Board in the case of the Participating Fund accepted
FRIMCo's select holdings strategy proposal, concluding in doing so that the
investment advisory fees paid to FRIMCo by such Underlying Fund under its
advisory agreement with FRIMCo continue to be fair and reasonable in light of
the nature and anticipated quality of the investment advisory services to be
rendered by FRIMCo.
Basis for Approval of Investment Advisory Contracts 67
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Frank Russell
Investment Company ("FRIC"), which has 34 funds, and Russell Investment Funds
("RIF"), which has five funds. Each of the trustees is a trustee of both FRIC
and RIF. The first table provides information for trustees who are interested
trustees. The second table provides information for the independent trustees.
The third table provides information for the trustees emeritus. The fourth table
provides information for the officers.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
*Lynn L. Anderson, Trustee since Appointed until - Vice Chairman, FRC 39 - Trustee, The
Born April 22, 1939 1987 successor is - Chairman of the Board, FRIC SSgA Funds
duly elected and RIF (investment
909 A Street and qualified - CEO, Russell Fund company)
Tacoma, Washington Distributors, Inc.
98402-1616 (broker-dealer "RFD"))
- President and Chairman of
the Board, SSgA Funds
(investment company)
- Chairman of the Board, FRTC
- Until July 2004, Director,
Frank Russell Investments
(Ireland) Limited (Irish
limited company) and Frank
Russell Investments (Cayman)
Ltd. (manager of variable
capital investment companies)
- Until October 2002,
President and CEO, FRIC and
RIF
- Until January 2005, Chairman
of the Board, RFD and FRIMCo
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
*Michael J.A. Trustee Since Appointed until - Chairman of the Board, FRC 39 None
Phillips, 2002 successor is - 1990-2003, President, FRC
Born January 20, duly elected - 1993-2003, CEO, FRC
1948 and qualified. - Trustee, FRIC and RIF
- Director, FRTC; Frank
909 A Street Russell Investments (Suisse)
Tacoma, Washington S.A. (global investment
98402-1616 services); Frank Russell
Company Limited (consultant
to institutional investors in
Europe and the UK)
- Chairman of the Board and
President, Russell 20-20
Association; and Frank
Russell Investments
(Delaware), Inc. (general
partner in various limited
partnerships ("FRIDI"))
- Until 2004, Director,
Russell Investment Group Pty.
Limited (consultant to
superannuation funds in
Australia); and Frank Russell
Japan Co., Ltd. (consultant
to institutional investors in
Japan)
- Director, Harold LeMay
Museum (classic car museum)
- Advisory board member,
University of Washington,
Tacoma (educational
institution)
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Each of Messrs. Anderson and Phillips is also an officer and/or director of
one or more an affiliates of FRIC and RIF and is therefore an interested
trustee.
68 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - 1996 to present, President, 39 None
Born October 15, 1984 successor is Anderson Management Group LLC
1931 duly elected (private investments
and qualified consulting)
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee WM Group
Born January 22, 2000 successor is Blake, P.S. (accounting of Funds
1954 duly elected services) (investment
and qualified company);
909 A Street - Director, Avista
Tacoma, Washington Corp
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 - Director, Gold
Born June 6, 1946 2003 successor is Vice President and Chief Banc Corporation,
duly elected Financial Officer, Waddell & Inc.
909 A Street and qualified Reed Financial, Inc.
Tacoma, Washington - 2003, Retired
98402-1616 - 2001-2003, Vice President
and Chief Financial Officer,
Janus Capital Group Inc.
- 1979-2001, Audit and
Accounting Partner,
PricewaterhouseCoopers LLP
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jonathan Fine, Trustee since Appointed until - President and Chief 39 None
Born July 8, 1954 2004 successor is Executive Officer, United Way
duly elected of King County, WA
909 A Street and qualified - 1996-2000, Chief Executive
Tacoma, Washington Officer, Seattle/King County
98402-1616 Chapter of the American Red
Cross
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee since Appointed until - Retired since 1995 39 None
Born October 6, 1984 successor is
1930 duly elected
and qualified
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - Currently, President, 39 None
Tennison, Jr., 2000 successor is Simpson Investment Company
Born December 21, duly elected and several additional
1955 and qualified subsidiary companies,
including Simpson Timber
909 A Street Company, Simpson Paper
Tacoma, Washington Company and Simpson Tacoma
98402-1616 Kraft Company
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 69
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2000, Arbitrator,
1943 duly elected The American Arbitration
and qualified Association Commercial Panel
909 A Street - 1995 to 1999, Hearing
Tacoma, Washington Officer, University of
98402-1616 Washington
- 1987 to 2002, Director,
Smith Barney Fundamental
Value Fund
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 39 None
Jr., and Chairman resignation or Russell Company (investment
Born July 3, 1932 Emeritus since removal consultant to institutional
1999 investors ("FRC")); and
909 A Street FRIMCo
Tacoma, Washington - Chairman Emeritus, FRIC and
98402-1616 RIF; Frank Russell
Securities, Inc.
(broker-dealer and investment
advisor ("FRS")); Russell
20-20 Association (non-profit
corporation); and Frank
Russell Trust Company
(non-depository trust company
("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment advisor)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 39 None
Born December 1, since 2003 - Trustee of FRIC and RIF
1919 until 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 39 None
Born June 8, 1925 since 2004 - Trustee of FRIC and RIF
until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 39 None
Born May 5, 1926 since 2004 - Trustee of FRIC and RIF
until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
70 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, with Fund and Term Principal Occupation(s)
Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------------------------------------------------
Cheryl Wichers Chief Compliance Until removed - Chief Compliance Officer, FRIC
Born December 16, 1966 Officer since by Trustees - Chief Compliance Officer, RIF
2005 - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2003, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Annual and - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive until successor - Chairman of the Board, President and CEO, FRIMCo
Officer since is chosen and - Chairman of the Board and President, RFD and Russell
909 A Street 2004 qualified by Insurance Agency, Inc. (insurance agency ("RIA"))
Tacoma, Washington Trustees - Until 2004, Managing Director of Individual Investor
98402-1616 Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- 1998 to 2000, Representative Director, Frank Russell
Company, Ltd. (asset manager in Japan)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Annual and - Treasurer and Chief Accounting Officer, FRIC and RIF
Born November 26, 1963 Chief Accounting until successor - Director, Funds Administration, FRIMCo, FRTC and RFD
Officer since is chosen and - Treasurer and Principal Accounting Officer, SSgA
909 A Street 1998 qualified by Funds
Tacoma, Washington Trustees
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Thomas F. Hanly, Chief Investment Until removed - Chief Investment Officer, FRIC, RIF, FRC, FRTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, FRIMCo and RFD
2004 - Director, Frank Russell International Services Co.,
909 A Street Inc. (provide services to U.S. personnel secunded to
Tacoma, Washington overseas enterprises ("FRISCo"))
98402-1616 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
RIF
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary and Annual and - Secretary and General Counsel, FRIC, RIF, FRIMCo,
Born October 8, 1941 General Counsel until successor FRTC, and RFD
since 1994 is chosen and - Secretary, General Counsel and Managing Director of
909 A Street qualified. Law and Government Affairs, FRC
Tacoma, Washington - Director, Secretary and General Counsel, Frank
98402-1616 Russell Capital Inc. (investment advisor); Russell
Real Estate Advisors, Inc. (real estate investment
advisor)
- Director and Secretary, Russell 20-20 Association;
RIA; A Street Investment Associates, Inc. (real estate
leasing); FRIDI; and FRISCo
- Director and Assistant Secretary, Frank Russell
Company Limited and Russell Systems Limited (limited
company)
- Director, FRS, Russell Investment Group Pty. Ltd.;
Frank Russell Japan Co., Ltd. (holding company); Frank
Russell Investment Company Plc Frank Russell
Institutional Funds Plc, Frank Russell Multi-Manager
Funds plc; Frank Russell Investment Company II plc,
Frank Russell Investment Company III plc, Russell
Alternative Investment Fund plc, and Russell
Diversified Alternatives Fund (each, an investment
company); Frank Russell Asset Management (Cayman) LLC
(general partner of limited partnerships); Russell
Investment Group Limited (institutional consultant);
Russell Investment Management Ltd. (institutional
investment management); Russell Investment Group
Private Limited (investment and fund management
advisory services); and Frank Russell Investments
(Ireland) Ltd.
- Statutory Auditor, Frank Russell Company, Ltd. (asset
management and consulting)
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 71
LIFEPOINTS(R) FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Lee C. Gingrich
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, PhD
William E. Baxter
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer (effective May 17, 2005)
Thomas F. Hanly, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Karl J. Ege, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Allan Forbes Building 150
Newport Avenue AFB35
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS OF UNDERLYING FUNDS AS OF APRIL 30, 2005
Diversified Equity Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
Ark Asset Management Co., Inc., New York, NY
Institutional Capital Corporation, Chicago, IL
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Marsico Capital Management, LLC, Denver, CO
MFS Institutional Advisors, Inc., Boston, MA
Montag & Caldwell, Inc., Atlanta, GA
Schneider Capital Management Corporation, Wayne, PA
Suffolk Capital Management, LLC, New York, NY
Turner Investment Partners, Inc., Berwyn, PA
Quantitative Equity Fund
Aronson + Johnson + Ortiz, LP, Philadelphia, PA
Franklin Portfolio Associates, LLC, Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Special Growth Fund
CapitalWorks Investment Partners, LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Gould Investment Partners LLC, Berwyn, PA
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Nicholas-Applegate Capital Management LLC, San Diego, CA
Roxbury Capital Management, LLC, Santa Monica, CA
TimesSquare Capital Management, LLC, New York, NY
Real Estate Securities Fund
AEW Management and Advisors, L.P., Boston, MA
Heitman Real Estate Securities LLC, Chicago, IL
INVESCO Institutional (N.A.), Inc., which acts as a money manager to the Fund
through its INVESCO Real Estate division, Dallas, TX
RREEF America L.L.C., Chicago, IL
International Securities Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
AQR Capital Management, LLC, New York, NY
Axiom International Investors LLC, Greenwich, CT
Fidelity Management & Research Company, Boston, MA
Marvin & Palmer Associates, Inc., Wilmington, DE
MFS Institutional Advisors, Inc., Boston, MA
Mondrian Investment Partners Limited, London, England
The Boston Company Asset Management, LLC, Boston, MA
Wellington Management Company, LLP, Boston, MA
72 Manager, Money Managers and Service Providers
LIFEPOINTS(R) FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
Emerging Markets Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
Arrowstreet Capital, Limited Partnership, Cambridge, MA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
T. Rowe Price International, Inc., Baltimore, MD
Wells Capital Management Inc., San Francisco, CA
Diversified Bond Fund
Bear Stearns Asset Management Inc., New York, NY
Lehman Brothers Asset Management LLC, Chicago, IL
Pacific Investment Management Company LLC, Newport Beach, CA
Western Asset Management Company, Pasadena, CA
Multistrategy Bond Fund
Bear Stearns Asset Management Inc., New York, NY
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Morgan Stanley Investment Management Inc., West Conshohocken, PA
Pacific Investment Management Company LLC, Newport Beach, CA
Short Duration Bond Fund
Merganser Capital Management L.P., Boston, MA
Pacific Investment Management Company LLC, Newport Beach, CA
STW Fixed Income Management, Carpinteria, CA
This report is prepared from the books and records of the Funds and is submitted
for the general information of shareholders and is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus. Nothing herein contained is to be considered an offer of
sale or a solicitation of an offer to buy shares of Frank Russell Investment
Company. Such offering is made only by Prospectus, which includes details as to
offering price and other material information.
Manager, Money Managers and Service Providers 73
(This page intentionally left blank)
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax:253-591-3495
www.russell.com 36-08-071 (1 04/05)
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
2005 SEMIANNUAL REPORT
CLASS C, E, AND S SHARES:
TAX-MANAGED GLOBAL EQUITY FUND
APRIL 30, 2005
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
Frank Russell Investment Company is a series investment company with 34
different investment portfolios referred to as Funds. These financial statements
report on one of these Funds.
Frank Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Frank Russell Investment Company
Tax-Managed Global Equity Fund
Semiannual Report
April 30, 2005 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Shareholder Expense Example.......................................... 3
Schedule of Investments.............................................. 4
Statement of Assets and Liabilities.................................. 5
Statement of Operations.............................................. 6
Statement of Changes in Net Assets................................... 7
Financial Highlights - Class C....................................... 8
Financial Highlights - Class S....................................... 9
Notes to Financial Statements........................................ 10
Shareholder Requests for Other Information........................... 16
Basis for Approval of Investment Advisory Contracts.................. 17
Disclosure of Information about Fund Directors....................... 20
Manager, Money Managers and Service Providers........................ 25
</Table>
Frank Russell Investment Company - Tax-Managed Global Equity Fund
Copyright (c) Frank Russell Company 2005. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. Russell Fund Distributors, Inc., is the distributor of
Frank Russell Investment Company.
[Blank Page]
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING THE FUND'S
EXPENSE EXAMPLE. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE
EXAMPLE FOR THE FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,035.50 $ 1,020.04
Expenses Paid During
Period* $ 5.05 $ 5.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,040.50 $ 1,025.00
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
Shareholder Expense Example 3
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Portfolios of the Frank Russell
Investment Company Series
Mutual Fund - Class S Shares
Domestic Equities - 74.7%
Quantitative Equity Fund 143,190 5,163
Tax-Managed Large Cap Fund 1,513,855 26,099
Tax-Managed Mid & Small Cap Fund 705,133 7,658
------------
38,920
------------
International Equities - 25.1%
Emerging Markets Fund 176,820 2,594
International Securities Fund 175,301 10,500
------------
13,094
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $39,766) 52,014
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 81
------------
NET ASSETS - 100.0% 52,095
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Domestic Equities 74.7
International Equities 25.1
---------------
Total Investments 99.8
Other Assets and Liabilities, Net 0.2
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
4 Schedule of Investments
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
ASSETS
Investments at market (identified cost $39,766)..................................... $ 52,014
Receivable for fund shares sold..................................................... 105
----------------------
Total assets........................................................................ 52,119
----------------------
LIABILITIES
Payables:
Investments purchased................................. $ 12
Fund shares redeemed.................................. 1
Accrued fees to affiliates............................ 11
--------------------
Total liabilities................................................................... 24
----------------------
NET ASSETS.......................................................................... $ 52,095
======================
Net Assets Consist of:
Undistributed (overdistributed) net investment income............................... $ 72
Accumulated net realized gain (loss)................................................ (18,084)
Unrealized appreciation (depreciation) on investments............................... 12,248
Shares of beneficial interest....................................................... 59
Additional paid-in capital.......................................................... 57,800
----------------------
NET ASSETS.......................................................................... $ 52,095
======================
NET ASSET VALUE, offering and redemption price per share:
Class C ($13,478,061 divided by 1,542,408 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 8.74
======================
Class S ($38,617,054 divided by 4,320,368 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 8.94
======================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 5
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME
Income distributions from Underlying Funds....................................... $ 477
EXPENSES
Advisory fees............................................ $ 51
Administrative fees...................................... 12
Custodian fees........................................... 8
Distribution fees - Class C.............................. 50
Transfer agent fees...................................... 24
Professional fees........................................ 16
Registration fees........................................ 9
Shareholder servicing fees - Class C..................... 16
Trustees' fees........................................... 1
Printing fees............................................ 1
--------------------
Expenses before reductions............................... 188
Expense reductions....................................... (122)
--------------------
Net expenses........................................................................ 66
----------------------
Net investment income (loss)........................................................ 411
----------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments............................................. 155
Net change in unrealized appreciation (depreciation) on investments................. 1,220
----------------------
Net realized and unrealized gain (loss)............................................. 1,375
----------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............................... $ 1,786
======================
</Table>
See accompanying notes which are an integral part of the financial statements.
6 Statement of Operations
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2005 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2004
- ----------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss)............................. $ 411 $ 278
Net realized gain (loss)................................. 155 232
Net change in unrealized appreciation (depreciation)..... 1,220 4,742
---------------------- ----------------------
Net increase (decrease) in net assets from operations....... 1,786 5,252
---------------------- ----------------------
DISTRIBUTIONS
From net investment income
Class C............................................... -- (10)
Class S............................................... (339) (317)
---------------------- ----------------------
Net decrease in net assets from distributions............... (339) (327)
---------------------- ----------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions.......................................... 3,174 (1,835)
---------------------- ----------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS................. 4,621 3,090
NET ASSETS
Beginning of period...................................... 47,474 44,384
---------------------- ----------------------
End of period (including undistributed (overdistributed)
net investment income of $72 and $0, respectively).... $ 52,095 $ 47,474
====================== ======================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 7
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
For a Share Outstanding Throughout each Period.
<Table>
<Caption>
FISCAL YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2005* 2004 2003 2002 2001 2000**
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 8.44 $ 7.61 $ 6.15 $ 7.29 $ 9.73 $ 10.00
------------ ------------ ------------ ------------ ------------ --------------
INCOME FROM OPERATIONS
Net investment income (loss)
(a)(b).......................... .04 (.02) (.02) (.05) (.06) (.06)
Net realized and unrealized gain
(loss).......................... .26 .86 1.48 (1.03) (2.38) (.19)
------------ ------------ ------------ ------------ ------------ --------------
Total from investment
operations................... .30 .84 1.46 (1.08) (2.44) (.25)
------------ ------------ ------------ ------------ ------------ --------------
DISTRIBUTIONS
From net investment income......... -- (.01) -- -- -- (.02)
From net realized gain............. -- -- -- (.06) -- --
------------ ------------ ------------ ------------ ------------ --------------
Total distributions............. -- (.01) -- (.06) -- (.02)
------------ ------------ ------------ ------------ ------------ --------------
NET ASSET VALUE, END OF PERIOD........ $ 8.74 $ 8.44 $ 7.61 $ 6.15 $ 7.29 $ 9.73
============ ============ ============ ============ ============ ==============
TOTAL RETURN (%) (c).................. 3.55 10.99 23.74 (14.94) (25.08) (2.55)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in
thousands)...................... 13,478 12,766 11,523 10,130 8,104 7,133
Ratios to average net assets (%):
Operating expenses, net
(d)(f)....................... 1.00 1.00 1.00 1.00 1.00 1.00
Operating expenses, gross
(d)(e)....................... 1.48 1.58 1.72 1.64 1.77 3.08
Net investment income (loss)
(c)(f)....................... .45 (.19) (.25) (.68) (.73) (.68)
Portfolio turnover rate (%) (c).... 5.35 21.28 59.50 52.55 30.55 44.04
</Table>
* For the six months ended April 30, 2005 (Unaudited).
** For the period January 31, 2000 (commencement of operations) to October
31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) Recognition of net investment income by the Fund is affected by the timing
of the declarations of dividends by the underlying companies in which the
Fund invests.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
(e) The calculation includes those expenses charged directly to the Funds,
including those fees of the Funds pushed down to the Underlying Funds as
described in Note 4 to the financial statements.
(f) May reflect amounts waived and/or reimbursed by the investment advisor and
for certain funds, custody credit arrangements. The custody credit
arrangements had an impact of less than .005%. Expenses are shown net of
those expenses pushed down to underlying Funds.
See accompanying notes which are an integral part of the financial statements.
8 Financial Highlights
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS S
For a Share Outstanding Throughout each Period.
<Table>
<Caption>
FISCAL YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------
2005* 2004 2003 2002 2001 2000**
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 8.67 $ 7.80 $ 6.27 $ 7.38 $ 9.77 $ 10.00
------------ ------------ ------------ ------------ ------------ --------------
INCOME FROM OPERATIONS
Net investment income (loss)
(a)(b).......................... .09 .07 .05 .03 .02 .01
Net realized and unrealized gain
(loss).......................... .26 .87 1.52 (1.06) (2.39) (.22)
------------ ------------ ------------ ------------ ------------ --------------
Total from investment
operations................... .35 .94 1.57 (1.03) (2.37) (.21)
------------ ------------ ------------ ------------ ------------ --------------
DISTRIBUTIONS
From net investment income......... (.08) (.07) (.04) (.02) (.02) (.02)
From net realized gain............. -- -- -- (.06) -- --
------------ ------------ ------------ ------------ ------------ --------------
Total distributions............. (.08) (.07) (.04) (.08) (.02) (.02)
------------ ------------ ------------ ------------ ------------ --------------
NET ASSET VALUE, END OF PERIOD........ $ 8.94 $ 8.67 $ 7.80 $ 6.27 $ 7.38 $ 9.77
============ ============ ============ ============ ============ ==============
TOTAL RETURN (%) (c).................. 4.05 12.14 25.09 (14.10) (24.27) (2.12)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in
thousands)...................... 38,617 34,708 32,861 29,968 34,661 26,802
Ratios to average net assets (%):
Operating expenses, net
(d)(f)....................... -- -- -- -- -- --
Operating expenses, gross
(d)(e)....................... .48 .58 .72 .64 .77 2.08
Net investment income (loss)
(c)(f)....................... .93 .87 .77 .39 .29 .06
Portfolio turnover rate (%) (c).... 5.35 21.28 59.50 52.55 30.55 44.04
</Table>
* For the six months ended April 30, 2005 (Unaudited).
** For the period February 1, 2000 (commencement of operations) to October
31, 2000.
(a) Average month-end shares outstanding were used for this calculation.
(b) Recognition of net investment income by the Fund is affected by the timing
of the declarations of dividends by the underlying companies in which the
fund invests.
(c) Periods less than one year are not annualized.
(d) The ratios for periods less than one year are annualized.
(e) The calculation includes those expenses charged directly to the Funds,
including those fees of the Funds pushed down to the Underlying Funds as
described in Note 4 to the financial statements.
(f) May reflect amounts waived and/or reimbursed by the investment advisor and
for certain funds, custody credit arrangements. The custody credit
arrangements had an impact of less than .005%. Expenses are shown net of
those expenses pushed down to underlying Funds.
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 9
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
investment company with 34 different investment portfolios referred to as
Funds. These financial statements report on one of these Funds. The
Investment Company is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. It is organized and
operates as a Massachusetts business trust under an amended and restated
master trust agreement dated August 19, 2002. The Investment Company's master
trust agreement permits the Board of Trustees to issue an unlimited number of
shares of beneficial interest at a $.01 par value per share.
The Fund allocates its assets by investing in a combination of Class S shares
of other of the Investment Company's Funds (the "Underlying Funds"). The Fund
may adjust its investments within set limits based on Frank Russell
Investment Management Company's ("FRIMCo" or "Advisor") outlook for the
economy, financial markets and relative market valuation of the asset classes
represented by each Underlying Fund. However, the Fund may deviate from set
limits when, in FRIMCo's opinion, it is necessary to pursue the Fund's
investment objective. The amounts allocated to each Underlying Fund by the
Fund will generally vary within 10% of the percentages specified below:
<Table>
<Caption>
ASSET ALLOCATION
ASSET CLASS/UNDERLYING FUNDS TARGETS
- ------------------------------------------------------------
Equities
US Equities
Tax-Managed Large Cap Fund 50%
Tax-Managed Mid & Small Cap Fund 15
Quantitative Equity Fund 10
International Equities
International Securities Fund 20
Emerging Markets Fund 5
---
100
</Table>
Investment Objectives of the Underlying Funds:
Tax-Managed Large Cap Fund
Seeks to provide long term capital growth on an after-tax basis.
Tax-Managed Mid & Small Cap Fund
Seeks to provide long term capital growth on an after-tax basis.
Quantitative Equity Fund
Seeks to provide long term capital growth.
International Securities Fund
Seeks to provide long term capital growth.
Emerging Markets Fund
Seeks to provide long term capital growth.
Financial statements of the Underlying Funds can be obtained by calling the
Office of Shareholder Inquiries at (800) 787-7354.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") which
require the use of management estimates and assumptions at the date of the
financial statements. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
10 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Security valuation
The Funds value their portfolio securities, the shares of the Underlying
Funds, at the current net asset value per share of each Underlying Fund.
The Underlying Funds value portfolio securities according to Board-approved
Securities Valuation Procedures, including Market Value Procedures, Fair
Value Procedures and Pricing Services. Money market fund securities are
priced using the amortized cost method of valuation, as are debt obligation
securities maturing within 60 days of the date of purchase, unless the Board
determines that amortized cost does not represent market value of short-term
debt obligations. The Board has delegated the responsibility for
administration of the Securities Valuation Procedures to FRIMCo.
Ordinarily, the Underlying Funds value each portfolio security based on
market quotations provided by Pricing Services or alternative pricing
services or dealers (when permitted by the Market Value Procedures).
Generally, Underlying Fund securities are valued at the close of the market
on which they are traded as follows:
- US listed equities; equity and fixed income options: Last sale price; last
bid price if no sales;
- US over-the-counter equities: Official closing price; last bid price if no
closing price;
- Foreign equities: Official closing price, where available, or last sale
price; last bid price if no closing price;
- Listed ADRs/GDRs: Last sale price; last bid price if no sales;
- Municipal bonds, US bonds, Eurobonds/foreign bonds: Evaluated bid price;
broker quote if no evaluated bid price;
- Futures: Settlement price.
- Investments in other mutual funds are valued at their net asset value per
share, calculated at 4 p.m. Eastern time or as of the close of the NYSE,
whichever is earlier.
- The value of swap agreements are equal to the Funds' obligation (or rights)
under swap contracts which will generally be equal to the net amounts to be
paid or received under the contracts based upon the relative values of the
positions held by each party to the contracts.
If market quotations are not readily available for a security or if
subsequent events suggest that a market quotation is not reliable, the
Underlying Funds will use the security's fair value, as determined in
accordance with the Fair Value Procedures. This generally means that equity
securities and fixed income securities listed and traded principally on any
national securities exchange are valued on the basis of the last sale price
or, lacking any sales, at the closing bid price, on the primary exchange on
which the security is traded. The Fair Value Procedures may involve
subjective judgments as to the fair value of securities. The effect of fair
value pricing is that securities may not be priced on the basis of quotations
from the primary market in which they are traded, but rather may be priced by
another method that the Board of Trustees believes reflects fair value. The
use of fair value pricing by an Underlying Fund may cause the net asset value
of its shares to differ significantly from the net asset value that would be
calculated using current market values. Fair value pricing could also cause
discrepancies between the daily movement of the value of Underlying Fund
shares and the daily movement of the benchmark index if the index is valued
using another pricing method.
This policy is intended to assure that the Underlying Funds' net asset values
fairly reflect security values as of the time of pricing. Events or
circumstances affecting the values of Underlying Fund securities that occur
between the closing of the principal markets on which they trade and the time
the net asset value of Underlying Fund Shares is determined may be reflected
in the calculation of net asset values for each applicable Underlying Fund
(and each Fund which invests in such Underlying Fund) when the Underlying
Funds deem that the particular event or circumstance would materially affect
such Underlying Fund's net asset value. Underlying Funds that invest
primarily in frequently traded exchange listed securities will use fair value
pricing in limited circumstances since reliable market quotations will often
be readily available. Underlying Funds that invest in foreign securities are
likely to use fair value pricing more often since significant events may
occur between the close of foreign markets and the time of pricing which
would trigger fair value pricing of the foreign securities. Underlying Funds
that invest in low rated debt securities are also likely to use fair value
pricing more often since the markets in which such securities are traded are
generally thinner, more limited and less active than those for higher rated
securities. Examples of events that could trigger fair value pricing of one
or more securities are: a material market movement (defined in the Fair Value
Notes to Financial Statements 11
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Procedures as the movement by any two of the four major US Indexes greater
than a certain percentage); a company event such as a material business
development, dividend declaration, stock split or rights offering; a material
disaster; or an armed conflict.
Because foreign securities can trade on non-business days, the net asset
value of an Fund's portfolio that includes an Underlying Fund which invests
in foreign securities may change on days when shareholders will not be able
to purchase or redeem fund shares.
Investment transactions
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the basis of specific
identified cost.
Investment income
Distributions of income and capital gains from the Underlying Funds are
recorded on the ex-dividend date.
Federal income taxes
Since the Investment Company is a Massachusetts business trust, the Fund is a
separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to the Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
It is the Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income and capital gains. Therefore, no federal
income tax provision was required for the Fund.
Dividends and distributions to shareholders
Income, dividends and capital gain distributions, if any, are recorded on the
ex-dividend date. Income dividends are generally declared and paid quarterly.
Capital gain distributions are generally declared and paid annually. An
additional distribution may be paid by the Fund to avoid imposition of
federal income and excise tax on any remaining undistributed capital gains
and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from GAAP. As a result, net investment income and net realized
gain (or loss) from investment transactions for a reporting period may differ
significantly from distributions during such period. The differences between
tax regulations and GAAP relate primarily to wash sale deferrals and capital
loss carryforwards. Accordingly, the Fund may periodically make
reclassifications among certain of its capital accounts without impacting its
net asset value.
Expenses
Expenses included in the accompanying financial statements reflect the
expenses of each Fund and do not include those expenses incurred by the
Underlying Funds. Because the Underlying Funds have varied expense and fee
levels and the Funds may own different proportions of the Underlying Funds at
different times, the amount of the fees and expenses incurred indirectly by
the Funds will vary.
Class allocation
The Fund presented herein offers the following classes of shares: Class C and
Class S. All share classes have identical voting, dividend, liquidation and
other rights and the same terms and conditions. The separate classes of
shares differ principally in the applicable distribution fees and shareholder
servicing fees. Shareholders of each class bear certain expenses that pertain
to that particular class. Realized and unrealized gains (losses), net
investment income, and expenses with the exception of class level expenses,
are allocated daily to each class of shares based upon the relative
proportion of net assets of each class.
Guarantees
In the normal course of business the Fund enters into contracts that contain
a variety of representations which provide general indemnifications. The
Fund's maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Fund that have not yet
occurred. However, the Fund expects the risk of loss to be remote.
12 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Securities
During the period ended April 30, 2005, the Fund had purchases and sales of
the Underlying Funds of $5,986,035 and $2,725,465, respectively.
4. RELATED PARTIES
Advisor and Administrator
FRIMCo advises and administers all of the Funds which comprise the Investment
Company. FRIMCo is a wholly-owned subsidiary of Frank Russell Company (a
subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell
Company provides consulting and money manager evaluation services to FRIMCo.
The Fund is charged an advisory fee equal to 0.20% of average daily net
assets. For the period ended April 30, 2005, the Advisor contractually agreed
to waive the advisory fee at least through February 28, 2006. The Advisor
does not have the ability to recover amounts waived from the period ended
April 30, 2005, or previous periods. The administrative fee was charged to
the Underlying Funds in accordance with the special servicing agreements
discussed below.
Operating expenses include those expenses arising from accounting,
administrative, custody, auditing, legal, trustee and transfer agent
services. They do not include expenses attributable to advisory fees (which
are currently waived by FRIMCo), any Rule 12b-1 distribution fee, any
shareholder service fees, or any nonrecurring extraordinary expenses. During
the period, the Fund's operating expenses were borne either by the Underlying
Funds in which the Fund invests or by FRIMCo. This arrangement is governed by
special servicing agreements among each of the affected Funds and FRIMCo as
described below.
Special Servicing Agreement
A special servicing agreement was entered into in February 1999 by the
Advisor and has been approved annually by the Funds' Board of Trustees. The
special servicing agreement is between the Tax-Managed Global Equity Fund and
the Underlying Funds in which the Fund invests. In accordance with the
special services agreement, expenses from the operation of the Fund are borne
by the Underlying Funds based on each Underlying Fund's proportionate share
of assets owned by the Fund. No Underlying Funds will be charged expenses
that exceed the estimated savings to each respective Underlying Fund. These
estimated savings appear in the form of reduced transfer agent costs
resulting from the elimination of separate shareholder accounts which either
currently are or have potential to be invested in the Underlying Funds.
Rather than having each investor open a shareholder account to invest
individually in the Underlying Funds, the Fund acts as an omnibus account
combining thousands of individual shareholder accounts into a single account.
This benefits the Underlying Funds, by significantly reducing the number of
shareholder accounts that need to be maintained, and by the omnibus account's
netting out the trades of individual shareholders to a point where the Fund
only executes one trade each day with each Underlying Fund. In the event that
the financial benefits to the Underlying Funds do not exceed aggregate
expenses of the Fund, the Advisor will reimburse the respective Underlying
Funds. This arrangement will be discontinued July 1, 2005. However, the
Advisor will enter into a new arrangement to waive or reimburse certain
direct expenses of the Tax Managed Global Equity Fund.
For the period ended April 30, 2005, the special servicing expense pushed
down to the Underlying Funds amounted to $70,658.
Transfer agent
The Investment Company has a contract with FRIMCo to provide transfer agent
services to the Fund. Total fees for the Fund presented herein for the period
ended April 30, 2005 were $24,437. The Underlying Funds have borne this
expense pursuant to the special servicing arrangements described above.
Distributor and Shareholder Servicing
Pursuant to the Distribution Agreement with the Investment Company, Russell
Fund Distributors, Inc. ("Distributor"), a wholly-owned subsidiary of FRIMCo,
serves as distributor for all Investment Company portfolio shares, including
Class C and Class S shares of the Fund.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor or any Selling Agents, as
defined in the Plan for sales
Notes to Financial Statements 13
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
support services provided, and related expenses incurred which are primarily
intended to result in the sale of Class C shares subject to the Distribution
Plan. The 12b-1 distribution payments shall not exceed 0.75% of the average
daily net assets of the Fund's Class C shares on an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which the Fund may make payments to the
Distributor or any Servicing Agent for any activities or expenses primarily
intended to assist, support or service the Servicing Agents' clients who
beneficially own Class C shares of the Fund. The shareholder servicing
payments shall not exceed 0.25% of the average daily net assets of a Fund's
Class C shares on an annual basis.
Accrued Shareholder Servicing and Distribution fees payable to affiliates as
of April 30, 2005 were as follows:
<Table>
<Caption>
TAX MANAGED
GLOBAL EQUITY
----------------------------------------------------------
Distribution fees $ 8,282
Shareholder servicing fees 2,748
-------------------
$ 11,030
===================
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company
("FRIC"), which has 34 Funds, and Russell Investment Funds ("RIF"), which has
five Funds. Each of the Trustees is a Trustee for both FRIC and RIF. During
the period, the Russell Fund Complex paid each of its Trustees not affiliated
with FRIMCo 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 $2,000 for each Audit Committee meeting or Nominating and
Governance Committee meeting or any other committee meeting established and
approved by the Board that is attended in person. Each Trustee receives a
$500 fee for attending the meetings (quarterly, special, committee) by phone
instead of receiving the full fee had the member attended in person.
Trustees' out of pocket expenses are also paid by the Russell Fund Complex.
During the period, the Lead Trustee was paid a fee of $10,000 per year. The
Audit Committee Chair was paid a fee of $12,000 per year and the Nominating
and Governance Committee Chair was paid a fee of $6,000 per year.
Transactions With Affiliated Companies
An affiliated company is a company in which a Fund has ownership of at least
5% of the voting securities. Transactions during the period ended April 30,
2005 with Underlying Funds which are or were affiliates are as follows:
<Table>
<Caption>
PURCHASE SALES INCOME CAPITAL GAINS
AFFILIATE COST COST DISTRIBUTIONS DISTRIBUTIONS
------------------------------------------------------------------------------------------------------------------------------
Tax-Managed Global Equity
Tax-Managed Mid & Small Cap $ 807,015 $ 329,239 $ -- $ --
Tax-Managed Large Cap 3,020,130 954,669 256,239 --
------------------- ------------------- ------------------- -------------------
$ 3,827,145 $ 1,283,908 $ 256,239 $ --
=================== =================== =================== ===================
</Table>
5. FEDERAL INCOME TAXES
At October 31, 2004, the Fund had a net tax basis capital loss carryforward
which may be applied against any net realized taxable gains in each
succeeding year or until their respective expiration dates, whichever occurs
first. Available capital carryforwards and expiration dates are as follows:
<Table>
<Caption>
10/31/10 10/31/11 TOTAL
--------------------------------------------------------------------------------------------
Tax-Managed Global Equity $ 2,177,121 $ 3,565,354 $ 5,742,475
</Table>
14 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
At April 30, 2005, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
Cost of Investments $ 52,291,451
================
Unrealized Appreciation $ --
Unrealized Depreciation (276,959)
----------------
Net Unrealized Appreciation (Depreciation) $ (276,959)
================
</Table>
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2005 and October 31, 2004
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
TAX-MANAGED GLOBAL EQUITY ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 161 421 $ 1,442 $ 3,451
Proceeds from reinvestment of
distributions -- 1 -- 10
Payments for shares redeemed (131) (424) (1,171) (3,484)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 30 (2) 271 (23)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 577 952 5,270 7,887
Proceeds from reinvestment of
distributions 35 38 328 309
Payments for shares redeemed (296) (1,201) (2,695) (10,008)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 316 (211) 2,903 (1,812)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 346 (213) $ 3,174 $ (1,835)
================= ================= ================= =================
</Table>
7. LINE OF CREDIT
The Investment Company has a $75 million revolving credit facility for
temporary or emergency purposes, including the meeting of redemption requests
that otherwise might require the untimely disposition of securities. The
Funds are charged an annual commitment fee of .125% on the average daily
unused amount of the aggregate commitment, which is allocated among each of
the Funds. Interest is calculated at the Federal Fund Rate plus .50%
annually. The Fund may borrow up to a maximum of 33.33% of the value of its
net assets under the agreement. The agreement will expire December 21, 2005
and will be reviewed at such time for possible renewal. The Fund did not have
any drawdowns for the period ended April 30, 2005.
8. BENEFICIAL INTEREST
As of April 30, 2005, the following table includes one shareholder with
shares of beneficial interest of greater than 10% of the total outstanding
shares of the Fund:
<Table>
<Caption>
FUND # OF SHAREHOLDERS %
----------------------------------------------------------------------------
Tax-Managed Global Equity 1 17.2
</Table>
Notes to Financial Statements 15
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
SHAREHOLDER REQUESTS FOR OTHER INFORMATION -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund has adopted to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling the Fund at (800) 787-7354, and (ii) on
the Securities and Exchange Commission's website at www.sec.gov. Information on
how the Funds voted proxies relating to portfolio securities during the 12-month
period ended June 30, 2004 is available at www.russell.com and on the Securities
and Exchange Commission's website at www.sec.gov.
The Funds will file their complete schedule of investments with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Funds' Form N-Q is available (i) without charge, upon request, by
calling the Fund at (800) 787-7354, (ii) at www.russell.com, (iii) on the
Securities and Exchange Commission's website at www.sec.gov., and (iv) at the
Securities and Exchange Commission's public reference room.
16 Shareholder Requests for Other Information
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS (UNAUDITED)
- --------------------------------------------------------------------------------
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees, including all of the Independent Trustees, last
considered and approved the continuation of the advisory agreement with FRIMCo
and the portfolio management contract (together, the "investment advisory
agreements") with each Money Manager of the Underlying Funds at a meeting held
on February 23, 2005. During the course of a year, the Trustees received a wide
variety of materials regarding the investment performance of the Fund and the
Underlying Funds, sales and redemptions of the Fund's and the Underlying Funds'
shares, and the management of the Fund and the Underlying Funds by FRIMCo. In
preparation for the annual review, the Board, with the advice and assistance of
independent counsel, also received and considered (1) information and reports
prepared by FRIMCo relating to the services provided by FRIMCo (and its
affiliates) to the Fund and the Underlying Funds, including information
requested by the Trustees, and (2) information received from an independent,
nationally recognized provider of investment company information comparing the
performance of each of the Fund and the Underlying Funds and their operating
expenses over various periods of time with other peer funds ("Comparable Funds")
not managed by FRIMCo believed by the provider to be generally comparable in
investment objectives and size to the Fund and the Underlying Funds
(collectively, the "Agreement Renewal Information").
Prior to voting, the Independent Trustees reviewed the proposed continuance of
the investment advisory agreements with management and independent counsel and
received a memorandum from independent counsel discussing the legal standards
for their consideration of the proposed continuances. The Independent Trustees
also reviewed the proposed continuance in a private session with independent
counsel at which no representatives of FRIMCo or management were present. The
discussion below reflects both of these reviews.
In evaluating the advisory agreement with FRIMCo and the portfolio management
contracts with the Money Managers of the Underlying Funds, the Board considered
that the Underlying Funds, in employing a manager-of-managers method of
investment, operate 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. All Underlying Funds have multiple Money Managers.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the investment advisory agreement for determining, implementing and
maintaining the investment program for each Underlying Fund. Assets of each
Underlying Fund have been allocated among multiple Money Managers.
FRIMCo is responsible for selecting Money Managers for each Underlying Fund and
for determining allocations and reallocations of assets among the Money
Managers. Each Money Manager for an Underlying Fund in effect performs the
function of an individual portfolio manager who is responsible for selecting
portfolio securities for the portion of the Underlying Fund assigned to it by
FRIMCo in accordance with the Underlying Fund's applicable investment objective,
policies and restrictions (each, a "segment"). FRIMCo is responsible for
communicating performance expectations and evaluations to each Money Manager;
supervising compliance by each Money Manager with each Underlying Fund's
investment objectives and policies; authorizing Money Managers to engage in
certain investment strategies for an Underlying 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, FRIMCo is
responsible for recommending to the Board the restructuring of Underlying Fund
segments and additions of new Money Managers or replacements of existing Money
Managers at any time when, based on FRIMCo's research and analysis, such actions
are appropriate. FRIMCo may develop specific 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 an Underlying
Fund in a complementary manner. Therefore, FRIMCo's selection of Money Managers
is made not only on the basis of performance considerations but anticipated
compatibility with other Money Managers in the same Underlying Fund. The
performance of individual Money Managers for an Underlying Fund may reflect the
roles assigned to them by FRIMCo in the Underlying Fund's investment activities
and any constraints placed by FRIMCo upon their selection of portfolio
securities. In light of the foregoing, the overall performance of the Fund and
the Underlying Funds over appropriate periods reflects in great part the
performance of FRIMCo in designing the Underlying Fund's investment program,
structuring Underlying Fund segments, selecting an effective Money Manager for
each segment with a style that is complementary to the styles of the Money
Managers of other Underlying Fund segments, and allocating assets among the
Money Managers in a manner designed to achieve the objectives of the Underlying
Fund.
The Board also considered that the prospectuses for the Fund and Underlying
Funds emphasize to investors FRIMCo's role as the principal investment manager
for the Fund and each Underlying Fund, rather than the investment selection role
of the Underlying
Basis for Approval of Investment Advisory Contracts 17
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
Funds' Money Managers, and describe the manner in which the Fund and the
Underlying Funds operate so that investors may take the information into account
when deciding to purchase shares of the Fund.
In addition to these general factors relating to the manager of managers
structure of the Underlying Funds, the Trustees considered, with respect to the
Fund and each Underlying Fund, various specific factors on the basis of the
Agreement Renewal Information in evaluating renewal of the advisory agreement
with FRIMCo, including the following:
1. The nature, scope and quality of the services provided to the Fund and the
Underlying Funds by FRIMCo;
2. The advisory fee paid by the Fund or Underlying Fund to FRIMCo and the fact
that it encompasses all investment advisory fees paid by the Fund or Underlying
Fund, including the fees for any Money Managers of such Underlying Fund;
3. Information provided by FRIMCo as to other fees and benefits received by
FRIMCo or its affiliates from the Fund or Underlying Fund, including any
administrative, transfer agent, cash management and securities lending fees,
soft dollar arrangements and commissions in connection with portfolio securities
transactions;
4. Information provided by FRIMCo as to investment advisory fees paid by
Comparable Funds;
5. Information provided by FRIMCo as to expenses incurred by the Fund or
Underlying Fund;
6. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from the Fund and each Underlying Fund; and
7. The importance of supporting quality, long-term service by FRIMCo to help
achieve the Fund's or Underlying Fund's investment performance, including the
continuing need of FRIMCo to retain and attract qualified investment and service
professionals to serve the Fund and the Underlying Funds.
On the basis of the information received, the Board, in respect of the Fund and
each Underlying Fund, found the advisory fees charged and costs and expenses
incurred by FRIMCo to be fair and reasonable; after giving effect to waivers
and/or reimbursements; and considering the composition of the Comparable Funds,
the relative performance and expense ratio of the Fund or Underlying Fund were
comparable to those of peer funds; FRIMCo's methodology of allocating expenses
of operating funds in the complex was reasonable; and FRIMCo's profitability
with respect to the Fund or Underlying Fund was reasonable in light of the
nature, scope and quality of the services provided by FRIMCo.
The Board considered for the Fund and each Underlying Fund whether economies of
scale have been realized and whether the fees for the Fund or such Underlying
Fund appropriately reflect or should be revised to reflect any such economies.
In its deliberations, the Board noted its findings reached at a meeting held on
December 6, 2004 that the investment advisory fees for the Fund and each
Underlying Fund appropriately reflect any economies of scale realized by the
Fund or that Underlying Fund. Its findings at the earlier meeting were based
upon information and analyses prepared by FRIMCo, including information as to
variability of Money Manager investment advisory fees and other factors
associated with the manager of managers structure employed by most Underlying
Funds relevant to the Board's deliberations, and took into consideration the
Fund's and Underlying Funds' rising costs of compliance with applicable laws,
rules and regulations.
The Trustees considered that fees payable to FRIMCo by institutional clients
with investment objectives similar to those of the Underlying Funds are lower,
and may, in some cases, be substantially lower, than the rates paid by the
Underlying Funds. FRIMCo reviewed with the Trustees the differences in the scope
of services it provides to institutional clients and the Underlying Funds. For
example, institutional clients have fewer administrative needs than the
Underlying Funds. It was further noted that since the Underlying Funds must
constantly issue and redeem their shares, they are more difficult to manage than
institutional accounts, where assets are relatively stable. Accordingly, the
Trustees did not regard these fee differences as relevant to their
deliberations.
The Board also considered the special expertise of FRIMCo with respect to the
manager of managers structure of the Underlying Funds and the likelihood that,
at the current expense ratio of the Fund or each such Underlying Fund, there
would be no acceptable alternative investment managers to replace FRIMCo on
comparable terms given the need to conduct the manager of managers, multi-style
strategy of the Fund or such Underlying Fund selected by its shareholders in
purchasing their shares.
With respect to the evaluation of the terms of portfolio management contracts
with Money Managers, the Board received and considered information from FRIMCo
reporting for each Money Manager, among other things, the Money Manager's
performance over various periods; FRIMCo's assessment of the performance of each
Money Manager; any significant business relationships
18 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
between the Money Manager and the Fund, the Underlying Funds, FRIMCo or FRIMCo's
affiliates; and FRIMCo's recommendation to retain the Money Manager at the
current fee rate, to retain the Money Manager at a reduced fee rate or to
terminate the Money Manager. FRIMCo recommended that each Money Manager be
retained at its current fee rate. FRIMCo advised the Board that it does not
regard Money Manager profitability as relevant to its evaluation of the
investment advisory agreements with Money Managers because the willingness of
Money Managers to serve in such capacity depends upon arm's-length negotiations
with FRIMCo; FRIMCo is aware of the fees charged by Money Managers to other
clients; and FRIMCo believes that the fees agreed upon with Money Managers are
fair and reasonable in light of the anticipated quality of investment advisory
services to be rendered. The Board accepted FRIMCo's explanation in light of the
Board's findings as to the fairness and reasonableness of the aggregate
investment advisory fees paid by the Fund and each Underlying Fund and the fact
that each Money Manager's fee is paid by FRIMCo.
Based substantially upon FRIMCo's recommendations together with the information
received from FRIMCo in support of its recommendations, the Board concluded that
the fees paid to the Money Managers of each Underlying Fund were fair and
reasonable in light of the quality of the investment advisory services provided
and that continuation of the portfolio management agreement with each Money
Manager of each Underlying Fund was in the interests of shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the investment advisory agreement with FRIMCo or, other than FRIMCo's
recommendation, the portfolio management agreement with any Money Manager that
was all-important or controlling and each Trustee attributed different weights
to the various factors considered. The Trustees evaluated all information
available to them on a Fund-by-Fund basis and their determinations were made in
respect of the Fund and each Underlying Fund.
At a meeting held on March 24, 2005, the Trustees received proposals from FRIMCo
to effect certain Money Manager changes for the International Securities and
Tax-Managed Large Cap Funds. In the case of each such Underlying Fund, the
Trustees approved the terms of the proposed portfolio management agreements with
the successor Money Manager(s) based substantially upon FRIMCo's recommendation;
its explanation as to the lack of relevance of profitability to the evaluation
of portfolio management agreements with Money Managers; and its belief that the
proposed investment advisory fees for the successor Money Manager(s) would be
fair and reasonable in light of the anticipated quality of investment advisory
services to be rendered. The Trustees also considered their findings at the
February 23, 2005 meeting as to the fairness and reasonableness of the aggregate
investment advisory fees paid by each affected Underlying Fund, and the fact
that the aggregate investment advisory fees paid by such Underlying Fund would
not increase as a result of the implementation of any proposed Money Manager
change because each Money Manager's investment advisory fee is paid by FRIMCo.
Basis for Approval of Investment Advisory Contracts 19
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Frank Russell
Investment Company ("FRIC"), which has 34 funds, and Russell Investment Funds
("RIF"), which has five funds. Each of the trustees is a trustee of both FRIC
and RIF. The first table provides information for trustees who are interested
trustees. The second table provides information for the independent trustees.
The third table provides information for the trustees emeritus. The fourth table
provides information for the officers.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
*Lynn L. Anderson, Trustee since Appointed until - Vice Chairman, FRC Chairman 39 - Trustee, The
Born April 22, 1987 successor is of the Board, FRIC and RIF SSgA Funds
1939 duly elected CEO, Russell Fund (investment
and qualified Distributors, Inc. company)
909 A Street (broker-dealer "RFD"))
Tacoma, Washington - President and Chairman of
98402-1616 the Board, SSgA Funds
(investment company)
- Chairman of the Board, FRTC
- Until July 2004, Director,
Frank Russell Investments
(Ireland) Limited (Irish
limited company) and Frank
Russell Investments (Cayman)
Ltd. (manager of variable
capital investment
companies)
- Until October 2002,
President and CEO, FRIC and
RIF
- Until January 2005, Chairman
of the Board, RFD and FRIMCo
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
*Michael J.A. Trustee since Appointed until - Chairman of the Board, FRC 39 None
Phillips, 2002 successor is - 1990-2003, President, FRC
Born January 20, duly elected - 1993-2003, CEO, FRC
1948 and qualified. - Trustee, FRIC and RIF
- Director, FRTC; Frank
909 A Street Russell Investments (Suisse)
Tacoma, Washington S.A. (global investment
98402-1616 services); Frank Russell
Company Limited (consultant
to institutional investors
in Europe and the UK)
- Chairman of the Board and
President, Russell 20-20
Association; and Frank
Russell Investments
(Delaware), Inc. (general
partner in various limited
partnerships ("FRIDI"))
- Until 2004, Director,
Russell Investment Group
Pty. Limited (consultant to
superannuation funds in
Australia); and Frank
Russell Japan Co., Ltd.
(consultant to institutional
investors in Japan)
- Director, Harold LeMay
Museum (classic car museum)
- Advisory board member,
University of Washington,
Tacoma (educational
institution)
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Each of Messrs. Anderson and Phillips is also an officer and/or director of
one or more an affiliates of FRIC and RIF and is therefore an interested
trustee.
20 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - 1996 to present, President, 39 None
Born October 15, 1984 successor is Anderson Management Group
1931 duly elected LLC (private investments
and qualified consulting)
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee WM Group
Born January 22, 2000 successor is Blake, P.S. (accounting of Funds
1954 duly elected services) (investment
and qualified company);
909 A Street - Director, Avista
Tacoma, Washington Corp
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 - Director, Gold
Born June 6, 1946 2003 successor is Vice President and Chief Banc
duly elected Financial Officer, Waddell & Corporation,
909 A Street and qualified Reed Financial, Inc. Inc.
Tacoma, Washington - 2003, Retired
98402-1616 - 2001-2003, Vice President
and Chief Financial Officer,
Janus Capital Group Inc.
- 1979-2001, Audit and
Accounting Partner,
PricewaterhouseCoopers LLP
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jonathan Fine, Trustee since Appointed until - President and Chief 39 None
Born July 8, 1954 2004 successor is Executive Officer, United
duly elected Way of King County, WA
909 A Street and qualified - 1996-2000, Chief Executive
Tacoma, Washington Officer, Seattle/King County
98402-1616 Chapter of the American Red
Cross
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee since Appointed until - Retired since 1995 39 None
Born October 6, 1984 successor is
1930 duly elected
and qualified
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - Currently, President, 39 None
Tennison, Jr., 2000 successor is Simpson Investment Company
Born December 21, duly elected and several additional
1955 and qualified subsidiary companies,
including Simpson Timber
909 A Street Company, Simpson Paper
Tacoma, Washington Company and Simpson Tacoma
98402-1616 Kraft Company
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 21
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2000, Arbitrator,
1943 duly elected The American Arbitration
and qualified Association Commercial Panel
909 A Street - 1995 to 1999, Hearing
Tacoma, Washington Officer, University of
98402-1616 Washington
- 1987 to 2002, Director,
Smith Barney Fundamental
Value Fund
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 39 None
Jr., and Chairman resignation or Russell Company (investment
Born July 3, 1932 Emeritus since removal consultant to institutional
1999 investors ('FRC')); and
909 A Street FRIMCo
Tacoma, Washington - Chairman Emeritus, FRIC and
98402-1616 RIF; Frank Russell
Securities, Inc.
(broker-dealer and
investment advisor ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment advisor)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 39 None
Born December 1, since 2003 - Trustee of FRIC and RIF
1919 until 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 39 None
Born June 8, 1925 since 2004 - Trustee of FRIC and RIF
until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 39 None
Born May 5, 1926 since 2004 - Trustee of FRIC and RIF
until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
22 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, with Fund and Term Principal Occupation(s)
Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------------------------------------------------
Cheryl Wichers Chief Compliance Until removed - Chief Compliance Officer, FRIC
Born December 16, 1966 Officer since by Trustees - Chief Compliance Officer, RIF
2005 - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2003, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Annual and - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive until successor - Chairman of the Board, President and CEO, FRIMCo
Officer since is chosen and - Chairman of the Board and President, RFD and Russell
909 A Street 2004 qualified by Insurance Agency, Inc. (insurance agency ("RIA"))
Tacoma, Washington Trustees - Until 2004, Managing Director of Individual Investor
98402-1616 Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- 1998 to 2000, Representative Director, Frank Russell
Company, Ltd. (asset manager in Japan)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Annual and - Treasurer and Chief Accounting Officer, FRIC and RIF
Born November 26, 1963 Chief Accounting until successor - Director, Funds Administration, FRIMCo, FRTC and RFD
Officer since is chosen and - Treasurer and Principal Accounting Officer, SSgA
909 A Street 1998 qualified by Funds
Tacoma, Washington Trustees
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Thomas F. Hanly, Chief Investment Until removed - Chief Investment Officer, FRIC, RIF, FRC, FRTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, FRIMCo and RFD
2004 - Director, Frank Russell International Services Co.,
909 A Street Inc. (provide services to U.S. personnel secunded to
Tacoma, Washington overseas enterprises ("FRISCo"))
98402-1616 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
RIF
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 23
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, with Fund and Term Principal Occupation(s)
Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary and Annual and - Secretary and General Counsel, FRIC, RIF, FRIMCo,
Born October 8, 1941 General Counsel until successor FRTC, and RFD
since 1994 is chosen and - Secretary, General Counsel and Managing Director of
909 A Street qualified Law and Government Affairs, FRC
Tacoma, Washington - Director, Secretary and General Counsel, Frank
98402-1616 Russell Capital Inc. (investment advisor); Russell
Real Estate Advisors, Inc. (real estate investment
advisor)
- Director and Secretary, Russell 20-20 Association;
RIA; A Street Investment Associates, Inc. (real
estate leasing); FRIDI; and FRISCo
- Director and Assistant Secretary, Frank Russell
Company Limited and Russell Systems Limited (limited
company)
- Director, FRS, Russell Investment Group Pty. Ltd.;
Frank Russell Japan Co., Ltd. (holding company);
Frank Russell Investment Company Plc Frank Russell
Institutional Funds Plc, Frank Russell Multi-Manager
Funds plc; Frank Russell Investment Company II plc,
Frank Russell Investment Company III plc, Russell
Alternative Investment Fund plc, and Russell
Diversified Alternatives Fund (each, an investment
company); Frank Russell Asset Management (Cayman) LLC
(general partner of limited partnerships); Russell
Investment Group Limited (institutional consultant);
Russell Investment Management Ltd. (institutional
investment management); Russell Investment Group
Private Limited (investment and fund management
advisory services); and Frank Russell Investments
(Ireland) Ltd.
- Statutory Auditor, Frank Russell Company, Ltd. (asset
management and consulting)
- --------------------------------------------------------------------------------------------------------------------------
</Table>
24 Disclosure of Information about Fund Directors
TAX-MANAGED GLOBAL EQUITY FUND
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Lee C. Gingrich
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, PhD
William E. Baxter
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer (effective May 17,
2005)
Thomas F. Hanly, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Karl J. Ege, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Allan Forbes Building
150 Newport Avenue AFB35
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS OF UNDERLYING FUNDS AS OF APRIL 30, 2005
Quantitative Equity Fund
Aronson + Johnson + Ortiz, LP, Philadelphia, PA
Franklin Portfolio Associates, LLC, Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Tax-Managed Large Cap Fund
Kayne Anderson Rudnick Investment Management, LLC, Los Angeles, CA
John A. Levin & Co., Inc., New York, NY
J.P. Morgan Investment Management Inc., New York, NY
Sands Capital Management, Inc., Arlington, VA
Turner Investment Partners, Inc., Berwyn, PA
Tax-Managed Mid & Small Cap Fund
Chartwell Investment Partners, Berwyn, PA
Netols Asset Management, Inc., Mequon, WI
Parametric Portfolio Associates LLC, Seattle, WA
Turner Investment Partners, Inc., Berwyn, PA
Westcap Investors, LLC, Los Angeles, CA
International Securities Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
AQR Capital Management, LLC, New York, NY
Axiom International Investors LLC, Greenwich, CT
Fidelity Management & Research Company, Boston, MA
Marvin & Palmer Associates, Inc., Wilmington, DE
MFS Institutional Advisors, Inc., Boston, MA
Mondrian Investment Partners Limited, London, England
The Boston Company Asset Management, LLC, Boston, MA
Wellington Management Company, LLP, Boston, MA
Emerging Markets Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
Arrowstreet Capital, Limited Partnership, Cambridge, MA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
T. Rowe Price International, Inc., Baltimore, MD
Wells Capital Management Inc., San Francisco, CA
This report is prepared from the books and records of the Funds and is submitted
for the general information of shareholders and is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus. Nothing herein contained is to be considered an offer of
sale or a solicitation of an offer to buy shares of Frank Russell Investment
Company. Such offering is made only by Prospectus, which includes details as to
offering price and other material information.
Manager, Money Managers and Service Providers 25
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax:253-591-3495
www.russell.com 36-08-092 (1 04/05)
RUSSELL FUNDS
FRANK RUSSELL INVESTMENT COMPANY
2005 SEMIANNUAL REPORT
CLASS C, E, AND S SHARES:
DIVERSIFIED EQUITY FUND
SPECIAL GROWTH FUND
QUANTITATIVE EQUITY FUND
INTERNATIONAL SECURITIES FUND
EMERGING MARKETS FUND
REAL ESTATE SECURITIES FUND
SHORT DURATION BOND FUND (formerly Short Term Bond Fund)
DIVERSIFIED BOND FUND
MULTISTRATEGY BOND FUND
TAX EXEMPT BOND FUND
TAX-MANAGED LARGE CAP FUND
TAX-MANAGED MID & SMALL CAP FUND
CLASS C, E, I, AND S SHARES:
SELECT GROWTH FUND
SELECT VALUE FUND
APRIL 30, 2005
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
Frank Russell Investment Company is a series investment company with 34
different investment portfolios referred to as Funds. These financial statements
report on fourteen of these Funds.
Frank Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Frank Russell Investment Company
Russell Funds
Semiannual Report
April 30, 2005 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Diversified Equity Fund.............................................. 3
Special Growth Fund.................................................. 11
Quantitative Equity Fund............................................. 23
International Securities Fund........................................ 30
Emerging Markets Fund................................................ 49
Real Estate Securities Fund.......................................... 59
Short Duration Bond Fund............................................. 63
Diversified Bond Fund................................................ 78
Multistrategy Bond Fund.............................................. 100
Tax Exempt Bond Fund................................................. 127
Tax-Managed Large Cap Fund........................................... 141
Tax-Managed Mid & Small Cap Fund..................................... 146
Select Growth Fund................................................... 155
Select Value Fund.................................................... 161
Notes to Schedules of Investments.................................... 167
Statement of Assets and Liabilities.................................. 168
Statement of Operations.............................................. 176
Statement of Changes in Net Assets................................... 180
Financial Highlights................................................. 184
Notes to Financial Highlights........................................ 198
Notes to Financial Statements........................................ 199
Shareholder Requests for Other Information........................... 226
Basis for Approval of Investment Advisory Contracts.................. 227
Disclosure of Information about Fund Directors....................... 230
Manager, Money Managers and Service Providers........................ 236
</Table>
Frank Russell Investment Company - Russell Funds
Copyright (c) Frank Russell Company 2005. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. Russell Fund Distributors, Inc., is the distributor of
Frank Russell Investment Company.
[Blank Page]
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,042.90 $ 1,015.28
Expenses Paid During
Period* $ 9.93 $ 9.79
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.96%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,046.70 $ 1,019.00
Expenses Paid During
Period* $ 6.14 $ 6.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.21%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,048.00 $ 1,020.24
Expenses Paid During
Period* $ 4.87 $ 4.81
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.96%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Diversified Equity Fund 3
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 92.7%
Auto and Transportation - 2.8%
American Axle & Manufacturing Holdings, Inc. (N) 25,700 513
Autoliv, Inc. 5,800 257
BorgWarner, Inc. 11,900 544
Burlington Northern Santa Fe Corp. 155,310 7,494
CNF, Inc. 21,520 920
Cooper Tire & Rubber Co. (N) 26,000 454
CSX Corp. 410,500 16,473
Dana Corp. 31,500 360
Delphi Corp. (N) 120,400 397
FedEx Corp. 192,564 16,358
Forward Air Corp. 3,200 77
General Motors Corp. (N) 51,400 1,371
Honda Motor Co., Ltd. ADR 177,275 4,272
Landstar System, Inc. (AE)(N) 6,700 205
Magna International, Inc. Class A 5,600 342
Navistar International Corp. (AE) 135,250 3,994
Norfolk Southern Corp. 37,000 1,162
Oshkosh Truck Corp. (N) 18,300 1,375
Overnite Corp. (N) 3,400 102
Skywest, Inc. (N) 3,000 54
Southwest Airlines Co. 154,450 2,298
Swift Transportation Co., Inc. (AE) 61,800 1,318
Union Pacific Corp. 7,600 486
United Parcel Service, Inc. Class B 68,600 4,892
Visteon Corp. 294,250 1,030
------------
66,748
------------
Consumer Discretionary - 14.4%
Abercrombie & Fitch Co. Class A 5,500 297
Accenture, Ltd. Class A (AE) 168,590 3,658
Activision, Inc. (AE) 14,000 202
Advance Auto Parts, Inc. (AE) 3,200 171
American Eagle Outfitters, Inc. 8,100 212
Arbitron, Inc. 3,200 135
Avon Products, Inc. 22,700 910
Bebe Stores, Inc. (N) 8,550 276
Bed Bath & Beyond, Inc. (AE) 147,200 5,477
Bright Horizons Family Solutions, Inc. (AE)(N) 2,400 81
Brinker International, Inc. (AE) 12,600 426
Brink's Co. (The) 6,500 210
Carnival Corp. 138,650 6,777
CDW Corp. 47,840 2,616
Cendant Corp. 658,650 13,114
Charming Shoppes, Inc. (AE)(N) 15,300 114
Chico's FAS, Inc. (AE) 100,850 2,585
Choice Hotels International, Inc. 2,100 127
Circuit City Stores, Inc. 164,550 2,600
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Citadel Broadcasting Corp. (AE)(N) 5,700 72
Coach, Inc. (AE) 185,180 4,963
Coldwater Creek, Inc. (AE) 4,700 79
Convergys Corp. (AE) 24,750 321
Darden Restaurants, Inc. 25,400 762
DreamWorks Animation SKG, Inc. Class A (AE) 50,000 1,875
Eastman Kodak Co. 63,000 1,575
eBay, Inc. (AE) 93,700 2,973
Education Management Corp. (AE) 100 3
Electronic Arts, Inc. (AE) 112,747 6,020
Estee Lauder Cos., Inc. (The) Class A 88,000 3,380
Fisher Scientific International, Inc. (AE) 56,470 3,353
Foot Locker, Inc. 21,900 584
Fossil, Inc. (AE)(N) 5,500 128
Four Seasons Hotels, Inc. (N) 55,788 3,541
Gannett Co., Inc. 8,700 670
Gap, Inc. (The) 177,680 3,793
Gillette Co. (The) 224,700 11,604
Google, Inc. Class A (AE) 72,064 15,854
GTECH Holdings Corp. 27,500 673
Harman International Industries, Inc. 14,099 1,108
Harrah's Entertainment, Inc. 3,550 233
Hasbro, Inc. 53,490 1,012
Hilton Hotels Corp. 77,900 1,701
Home Depot, Inc. 295,800 10,462
International Game Technology 79,150 2,128
Interpublic Group of Cos., Inc. (AE)(N) 67,000 862
JC Penney Co., Inc. Holding Co. 157,350 7,460
Jones Apparel Group, Inc. 23,600 719
Kimberly-Clark Corp. 95,180 5,944
Kohl's Corp. (AE) 243,650 11,598
Liberty Media Corp. Class A (AE) 589,150 5,915
Liberty Media International, Inc. Class A (AE) 114,497 4,748
Limited Brands, Inc. 55,600 1,206
Linens 'N Things, Inc. (AE) 47,500 1,108
Liz Claiborne, Inc. 5,500 195
Lowe's Cos., Inc. 149,475 7,789
Marriott International, Inc. Class A 144,690 9,079
Mattel, Inc. 25,200 455
Maytag Corp. (N) 8,000 78
McDonald's Corp. 816,080 23,919
McGraw-Hill Cos., Inc. (The) 6,400 557
MGM Mirage (AE)(N) 87,104 6,081
Michaels Stores, Inc. 9,500 315
</Table>
4 Diversified Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Newell Rubbermaid, Inc. (N) 119,950 2,607
News Corp. Class A 66,600 1,018
Nike, Inc. Class B 96,438 7,407
Nordstrom, Inc. 91,000 4,626
Office Depot, Inc. (AE) 84,200 1,649
Omnicom Group 65,000 5,389
Petsmart, Inc. 42,400 1,130
PHH Corp. (AE)(N) 525 12
Pixar (AE) 9,138 418
Priceline.com, Inc. (AE)(N) 55,100 1,397
Reebok International, Ltd. (N) 115,500 4,690
Reed Elsevier PLC ADR (N) 55,430 2,188
Ross Stores, Inc. 42,900 1,146
Royal Caribbean Cruises, Ltd. (N) 191,702 8,055
RR Donnelley & Sons Co. 211,350 6,956
Saks, Inc. 237,800 4,052
SCP Pool Corp. (N) 5,100 166
Sirius Satellite Radio, Inc. (AE) 437,450 2,082
Staples, Inc. 53,700 1,024
Starbucks Corp. (AE) 104,907 5,195
Target Corp. 61,981 2,877
Tech Data Corp. (AE) 16,800 614
Time Warner, Inc. (AE) 706,330 11,873
TJX Cos., Inc. 124,610 2,822
Tribune Co. (N) 50,650 1,955
ValueClick, Inc. (AE)(N) 8,100 84
VeriSign, Inc. (AE)(N) 244,510 6,470
VF Corp. 17,200 973
Viacom, Inc. Class B 148,909 5,155
Wal-Mart Stores, Inc. 69,100 3,257
Walt Disney Co. 427,350 11,282
Waste Management, Inc. 38,900 1,108
Wynn Resorts, Ltd. (AE)(N) 54,973 2,910
XM Satellite Radio Holdings, Inc. Class A
(AE)(N) 63,400 1,759
Yahoo!, Inc. (AE) 378,950 13,078
Yum! Brands, Inc. 158,007 7,420
------------
341,727
------------
Consumer Staples - 7.5%
Altria Group, Inc. 513,280 33,358
Cadbury Schweppes PLC ADR (N) 140,300 5,703
Chiquita Brands International, Inc. (N) 5,200 130
Coca-Cola Co. (The) 210,800 9,157
Coca-Cola Enterprises, Inc. 19,000 386
Colgate-Palmolive Co. 176,500 8,788
CVS Corp. 60,090 3,099
Dean Foods Co. (AE) 61,100 2,099
Diageo PLC ADR (N) 56,920 3,401
HJ Heinz Co. 56,790 2,093
Kellogg Co. 92,920 4,177
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kraft Foods, Inc. Class A 19,700 638
Kroger Co. (The) (AE) 118,500 1,869
Nestle SA ADR (N) 10,620 698
PepsiCo, Inc. 759,770 42,274
Procter & Gamble Co. 760,826 41,199
Reynolds American, Inc. (N) 18,200 1,419
Safeway, Inc. (AE) 56,400 1,201
Sara Lee Corp. 154,360 3,302
Smithfield Foods, Inc. (AE) 47,300 1,431
Sysco Corp. 120,730 4,177
Unilever NV 6,300 406
UST, Inc. 24,700 1,131
Walgreen Co. 70,764 3,047
Whole Foods Market, Inc. 31,500 3,141
------------
178,324
------------
Financial Services - 17.3%
ACE, Ltd. 8,000 344
Aflac, Inc. 40,510 1,647
Alliance Data Systems Corp. (AE) 72,170 2,916
Allstate Corp. (The) 122,960 6,905
American Express Co. 354,940 18,705
American International Group, Inc. 170,105 8,650
Ameritrade Holding Corp. (AE) 11,000 115
AON Corp. 195,100 4,068
Archstone-Smith Trust (o) 9,700 349
Astoria Financial Corp. 28,350 752
Automatic Data Processing, Inc. 80,200 3,484
Bank of America Corp. 994,304 44,782
Bank of New York Co., Inc. (The) 24,700 690
BB&T Corp. 29,200 1,145
Capital One Financial Corp. 88,500 6,274
CB Richard Ellis Group, Inc. (AE) 90,650 3,150
Checkfree Corp. (AE) 165,100 6,056
Chicago Mercantile Exchange 13,752 2,689
Chubb Corp. 35,540 2,906
Cigna Corp. 18,800 1,729
Citigroup, Inc. 1,033,520 48,533
CNA Financial Corp. (AE)(N) 400 11
Comerica, Inc. 23,100 1,323
Commerce Bancorp, Inc. (N) 41,600 1,164
Countrywide Financial Corp. 241,966 8,757
Deluxe Corp. (N) 16,000 639
Dun & Bradstreet Corp. (AE) 2,100 131
Eaton Vance Corp. (N) 9,700 227
</Table>
Diversified Equity Fund 5
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Equity Office Properties Trust (o) 77,300 2,433
Equity Residential (o) 34,500 1,185
Factset Research Systems, Inc. (N) 6,100 169
Fannie Mae 111,630 6,022
Federated Investors, Inc. Class B 22,300 634
First American Corp. (N) 9,700 347
Fiserv, Inc. (AE) 35,700 1,510
Franklin Resources, Inc. 86,980 5,974
Freddie Mac 144,590 8,895
Genworth Financial, Inc. Class A 251,550 7,031
Goldman Sachs Group, Inc. 335,905 35,871
Hartford Financial Services Group, Inc. 134,780 9,754
Host Marriott Corp. (o) 27,400 461
HRPT Properties Trust (o) 2,200 26
Huntington Bancshares, Inc. 44,600 1,049
iShares Russell 1000 Value Index Fund 33,900 2,192
JPMorgan Chase & Co. 557,839 19,798
KeyCorp 48,100 1,595
La Quinta Corp. (AE)(o) 11,400 99
LandAmerica Financial Group, Inc. (N) 100 5
Legg Mason, Inc. 9,100 645
Lehman Brothers Holdings, Inc. 39,810 3,651
Lincoln National Corp. 103,900 4,672
Loews Corp. 47,500 3,367
Manulife Financial Corp. (N) 13,743 630
MBNA Corp. 291,640 5,760
Mellon Financial Corp. 94,580 2,619
Merrill Lynch & Co., Inc. 94,820 5,114
Metlife, Inc. 201,360 7,833
MGIC Investment Corp. 14,400 850
Moody's Corp. 6,700 550
Morgan Stanley 26,000 1,368
National City Corp. 59,740 2,029
Nationwide Financial Services, Inc. 2,800 99
PartnerRe, Ltd. 8,300 484
Paychex, Inc. 240,200 7,350
PMI Group, Inc. (The) 27,800 977
PNC Financial Services Group, Inc. 79,660 4,240
Protective Life Corp. 4,500 172
Prudential Financial, Inc. 25,300 1,446
Regions Financial Corp. 12,099 405
RenaissanceRe Holdings, Ltd. (N) 7,400 331
SLM Corp. 224,350 10,688
St. Paul Travelers Cos., Inc. (The) 438,070 15,683
Starwood Hotels & Resorts Worldwide, Inc. (o) 201,350 10,941
SunTrust Banks, Inc. 113,860 8,292
T Rowe Price Group, Inc. (N) 59,230 3,268
Torchmark Corp. 18,850 1,007
Trizec Properties, Inc. (o) 131,550 2,630
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
UBS AG (N) 51,839 4,163
UCBH Holdings, Inc. (N) 54,998 865
UnumProvident Corp. (N) 59,400 993
US Bancorp 125,756 3,509
W Holding Co., Inc. (N) 7,400 60
Wachovia Corp. 34,400 1,761
Waddell & Reed Financial, Inc. Class A (N) 23,450 408
Washington Mutual, Inc. 65,380 2,702
Wells Fargo & Co. 89,010 5,335
XL Capital, Ltd. Class A 5,000 352
------------
410,440
------------
Health Care - 14.6%
Abbott Laboratories 116,010 5,703
Aetna, Inc. 56,860 4,172
Affymetrix, Inc. (AE)(N) 34,900 1,609
AMERIGROUP Corp. (AE) 7,400 260
AmerisourceBergen Corp. 48,300 2,960
Amgen, Inc. (AE) 265,580 15,459
Amylin Pharmaceuticals, Inc. (AE)(N) 52,800 898
Applera Corp. - Celera Genomics Group (AE) 6,000 55
Baxter International, Inc. 192,080 7,126
Beckman Coulter, Inc. 21,500 1,435
Boston Scientific Corp. (AE) 273,600 8,093
Bristol-Myers Squibb Co. 109,100 2,837
Cardinal Health, Inc. 19,500 1,084
Caremark Rx, Inc. (AE) 317,370 12,711
Celgene Corp. (AE)(N) 111,500 4,227
Community Health Systems, Inc. (AE)(N) 40,000 1,458
Cooper Cos., Inc. (N) 31,050 2,097
Coventry Health Care, Inc. (AE) 6,500 445
CR Bard, Inc. 63,770 4,539
DaVita, Inc. (AE) 27,900 1,124
Eli Lilly & Co. 189,040 11,053
Express Scripts, Inc. (AE) 16,900 1,515
Eyetech Pharmaceuticals, Inc. (AE)(N) 46,100 1,060
Genentech, Inc. (AE) 381,871 27,090
Gilead Sciences, Inc. (AE) 127,790 4,741
HCA, Inc. 82,480 4,606
Health Net, Inc. (AE) 162,500 5,530
Hospira, Inc. (AE) 9,900 332
Humana, Inc. (AE) 20,470 709
IMS Health, Inc. 19,300 463
</Table>
6 Diversified Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
IVAX Corp. (AE) 262,600 4,963
Johnson & Johnson 772,413 53,010
Kinetic Concepts, Inc. (AE) 36,600 2,249
McKesson Corp. 6,700 248
Medarex, Inc. (AE)(N) 100 1
Medco Health Solutions, Inc. (AE) 62,400 3,181
Medimmune, Inc. (AE) 237,000 6,013
Medtronic, Inc. 242,196 12,764
Merck & Co., Inc. 146,310 4,960
Novartis AG ADR 48,510 2,364
Pacificare Health Systems (AE) 16,269 972
Pfizer, Inc. 1,153,691 31,346
Quest Diagnostics, Inc. 32,341 3,422
Roche Holding AG ADR 32,630 1,968
Sanofi-Aventis ADR (N) 205,236 9,106
Schering-Plough Corp. 188,100 3,926
Sepracor, Inc. (AE)(N) 42,220 2,530
St. Jude Medical, Inc. (AE) 151,229 5,902
Stryker Corp. 35,300 1,714
Tenet Healthcare Corp. (AE) 195,450 2,340
Triad Hospitals, Inc. (AE) 28,300 1,450
UnitedHealth Group, Inc. 239,920 22,675
Valeant Pharmaceuticals International (N) 52,300 1,085
Varian Medical Systems, Inc. (AE) 20,600 695
WellPoint, Inc. (AE) 81,870 10,459
Wyeth 148,290 6,664
Zimmer Holdings, Inc. (AE) 185,755 15,124
------------
346,522
------------
Integrated Oils - 5.4%
Amerada Hess Corp. 14,700 1,377
ChevronTexaco Corp. 161,494 8,398
ConocoPhillips 355,136 37,236
Exxon Mobil Corp. 715,103 40,782
Marathon Oil Corp. 302,919 14,107
Occidental Petroleum Corp. 228,800 15,787
Suncor Energy, Inc. 116,300 4,287
Total SA ADR (N) 25,560 2,835
Unocal Corp. 81,430 4,442
------------
129,251
------------
Materials and Processing - 4.1%
Air Products & Chemicals, Inc. 50,890 2,989
American Standard Cos., Inc. 27,200 1,216
Archer-Daniels-Midland Co. 598,225 10,762
Ashland, Inc. 12,900 867
BASF AG ADR 105,600 6,853
Bayer AG ADR 51,520 1,662
Bemis Co. 11,000 303
Bowater, Inc. (N) 63,640 2,068
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bunge, Ltd. (N) 12,800 727
Cia Vale do Rio Doce ADR 64,170 1,729
Commercial Metals Co. 6,800 173
Corn Products International, Inc. 182,200 4,012
Dow Chemical Co. (The) 107,000 4,915
Eastman Chemical Co. 12,100 653
Ecolab, Inc. 22,000 720
EI Du Pont de Nemours & Co. 144,625 6,813
Freeport-McMoRan Copper & Gold, Inc. Class B 85,500 2,963
Georgia-Pacific Corp. 10,700 367
Hercules, Inc. (AE) 26,800 355
Hughes Supply, Inc. 51,900 1,355
International Paper Co. 257,670 8,836
Lafarge North America, Inc. 4,000 222
Lennar Corp. Class B (N) 2,688 129
Lone Star Technologies, Inc. (AE) 7,200 280
Lubrizol Corp. 22,100 857
Lyondell Chemical Co. 122,680 3,078
Martin Marietta Materials, Inc. 5,300 291
Masco Corp. 116,810 3,678
Monsanto Co. 127,160 7,454
Mosaic Co. (The) (AE) 343,950 4,420
Nalco Holding Co. (AE)(N) 25,260 455
Newmont Mining Corp. 7,000 266
OM Group, Inc. (AE) 5,600 123
Pactiv Corp. (AE) 26,650 571
Phelps Dodge Corp. 5,200 446
PPG Industries, Inc. 70,520 4,764
Praxair, Inc. 18,380 861
Reliance Steel & Aluminum Co. (N) 3,200 121
Sherwin-Williams Co. (The) 13,600 606
Smurfit-Stone Container Corp. (AE) 109,180 1,431
Sonoco Products Co. 25,900 702
St. Joe Co. (The) 60,576 4,215
Syngenta AG ADR 110,570 2,292
United States Steel Corp. 24,500 1,048
URS Corp. (AE)(N) 2,600 80
------------
98,728
------------
Miscellaneous - 4.2%
3M Co. 139,300 10,652
ABB, Ltd. ADR (AE) 58,300 367
Brunswick Corp. 7,500 315
Eaton Corp. 19,700 1,155
</Table>
Diversified Equity Fund 7
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fortune Brands, Inc. 32,470 2,746
General Electric Co. 1,539,884 55,743
Honeywell International, Inc. 246,100 8,801
ITT Industries, Inc. 11,700 1,058
Johnson Controls, Inc. 8,800 483
SPX Corp. (N) 15,500 600
Textron, Inc. 17,100 1,288
Tyco International, Ltd. 515,250 16,132
------------
99,340
------------
Other Energy - 2.3%
Anadarko Petroleum Corp. 4,200 307
Apache Corp. 93,700 5,274
Burlington Resources, Inc. 24,100 1,172
Devon Energy Corp. 33,030 1,492
El Paso Corp. 87,000 869
EOG Resources, Inc. 85,120 4,047
GlobalSantaFe Corp. 38,220 1,284
Grey Wolf, Inc. (AE)(N) 20,300 122
Halliburton Co. 228,650 9,510
Houston Exploration Co. (AE) 5,600 285
Newfield Exploration Co. (AE)(N) 19,000 1,350
Noble Corp. 51,960 2,645
NRG Energy, Inc. (AE) 72,950 2,269
Peabody Energy Corp. 41,580 1,820
Premcor, Inc. 64,750 4,283
Pride International, Inc. (AE) 16,200 361
Reliant Energy, Inc. (AE) 632,500 6,433
Schlumberger, Ltd. 122,400 8,373
Todco Class A (AE) 10,000 223
Transocean, Inc. (AE) 33,700 1,563
------------
53,682
------------
Producer Durables - 5.7%
Agilent Technologies, Inc. (AE) 83,250 1,727
American Power Conversion Corp. 550 13
Applied Materials, Inc. 153,180 2,278
Boeing Co. 381,700 22,719
Caterpillar, Inc. 210,083 18,498
Centex Corp. 12,900 745
Cooper Industries, Ltd. Class A 29,380 1,870
Danaher Corp. 81,060 4,104
Deere & Co. 263,430 16,475
DR Horton, Inc. 36,000 1,098
Emerson Electric Co. 43,620 2,734
Empresa Brasileira de Aeronautica SA ADR 16,950 489
Goodrich Corp. 63,470 2,558
Herman Miller, Inc. 39,100 1,118
Hubbell, Inc. Class B 11,000 478
Illinois Tool Works, Inc. 81,930 6,867
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Joy Global, Inc. 9,200 312
KB Home 47,148 2,687
Kla-Tencor Corp. 49,020 1,913
Lennar Corp. Class A 77,226 3,975
Lockheed Martin Corp. 140,320 8,553
MDC Holdings, Inc. 42,775 2,797
Northrop Grumman Corp. 95,460 5,235
Pitney Bowes, Inc. 12,000 537
Pulte Homes, Inc. 17,900 1,279
Sandvik AB ADR (N) 20,250 790
Steelcase, Inc. Class A (N) 3,100 41
Teradyne, Inc. (AE) 156,150 1,721
Thermo Electron Corp. (AE) 202,900 5,068
Toll Brothers, Inc. (AE) 22,763 1,725
United Technologies Corp. 149,358 15,193
------------
135,597
------------
Technology - 10.4%
ADC Telecommunications, Inc. (AE)(N) 151,600 344
Adobe Systems, Inc. 12,900 767
Altera Corp. (AE) 392,800 8,143
Amphenol Corp. Class A 6,100 241
Analog Devices, Inc. 31,290 1,067
Apple Computer, Inc. (AE) 131,300 4,735
Applied Micro Circuits Corp. (AE) 70,300 188
Arrow Electronics, Inc. (AE) 56,300 1,370
Autodesk, Inc. 17,200 547
Avnet, Inc. (AE) 174,650 3,299
BearingPoint, Inc. (AE) 419,250 2,595
Broadcom Corp. Class A (AE) 156,050 4,667
Ciena Corp. (AE) 34,200 79
Cisco Systems, Inc. (AE) 594,700 10,276
Cognizant Technology Solutions Corp. Class A
(AE) 67,180 2,822
Computer Sciences Corp. (AE) 9,100 396
Comverse Technology, Inc. (AE) 129,140 2,943
Corning, Inc. (AE) 128,870 1,772
Dell, Inc. (AE) 295,548 10,294
Electronic Data Systems Corp. 93,000 1,800
EMC Corp. (AE) 230,660 3,026
Flextronics International, Ltd. (AE) 24,000 268
Freescale Semiconductor, Inc. Class B (AE) 224,316 4,231
General Dynamics Corp. 80,485 8,455
Hewlett-Packard Co. 483,760 9,903
</Table>
8 Diversified Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ingram Micro, Inc. Class A (AE) 31,400 523
Intel Corp. 443,080 10,421
International Business Machines Corp. 19,950 1,524
Juniper Networks, Inc. (AE) 428,890 9,689
L-3 Communications Holdings, Inc. 69,700 4,947
Lucent Technologies, Inc. (AE)(N) 77,000 187
Macrovision Corp. (AE)(N) 44,900 918
Marvell Technology Group, Ltd. (AE) 63,640 2,131
Maxim Integrated Products, Inc. 266,400 9,963
McAfee, Inc. (AE) 10,000 209
Micros Systems, Inc. (AE)(N) 3,200 127
Microsoft Corp. 1,627,728 41,182
Motorola, Inc. 361,600 5,547
National Semiconductor Corp. 198,000 3,778
Nvidia Corp. (AE)(N) 136,300 2,990
Oracle Corp. (AE) 1,085,600 12,550
Parametric Technology Corp. (AE) 28,400 151
PerkinElmer, Inc. 92,000 1,702
PMC - Sierra, Inc. (AE)(N) 186,500 1,503
Qualcomm, Inc. (AE) 491,604 17,152
Raytheon Co. 9,200 346
Research In Motion, Ltd. (AE) 31,600 2,035
Rockwell Automation, Inc. 58,610 2,710
SanDisk Corp. (AE) 83,800 1,986
Sanmina-SCI Corp. (AE) 902,650 3,620
Siemens AG ADR (N) 94,400 6,940
Silicon Image, Inc. (AE) 115,900 1,167
Solectron Corp. (AE)(N) 119,500 394
Sony Corp. ADR 81,700 2,999
Symantec Corp. (AE) 63,470 1,192
Tellabs, Inc. (AE) 22,800 177
Texas Instruments, Inc. 372,950 9,309
Western Digital Corp. (AE) 18,600 236
Xilinx, Inc. 121,450 3,272
------------
247,805
------------
Utilities - 4.0%
Alltel Corp. 13,700 780
American Electric Power Co., Inc. 12,500 440
BellSouth Corp. 518,050 13,723
Cinergy Corp. (N) 20,910 828
Comcast Corp. Class A (AE) 379,273 12,178
Comcast Corp. Special Class A (AE) 42,550 1,350
Dominion Resources, Inc. 73,900 5,572
DTE Energy Co. 16,900 777
Edison International 22,200 806
Entergy Corp. 103,510 7,587
Exelon Corp. 38,900 1,926
FirstEnergy Corp. 31,500 1,371
FPL Group, Inc. 11,340 463
Northeast Utilities 37,100 679
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pepco Holdings, Inc. 18,300 397
Pinnacle West Capital Corp. 9,600 402
PPL Corp. 29,490 1,600
Progress Energy, Inc. 13,900 584
Progress Energy, Inc. - CVO 5,500 1
Public Service Enterprise Group, Inc. (N) 19,700 1,145
Puget Energy, Inc. (N) 7,000 150
Questar Corp. 41,050 2,397
SBC Communications, Inc. 171,947 4,092
Sempra Energy 33,200 1,341
Sprint Corp. 617,390 13,743
Telephone & Data Systems, Inc. 39,600 3,057
TXU Corp. 56,625 4,858
Verizon Communications, Inc. 252,540 9,041
Vodafone Group PLC ADR (N) 133,713 3,495
------------
94,783
------------
TOTAL COMMON STOCKS
(cost $1,980,863) 2,202,947
------------
LONG-TERM INVESTMENTS - 0.0%
Corporate Bonds and Notes - 0.0%
Delta Air Lines, Inc.
8.000% due 06/03/23 1,500 518
------------
TOTAL LONG-TERM INVESTMENTS
(cost $959) 518
------------
WARRANTS & RIGHTS - 0.0%
Lucent Technologies, Inc.
2007 Warrants (AE) 11,975 6
------------
TOTAL WARRANTS & RIGHTS
(cost $0) 6
------------
</Table>
Diversified Equity Fund 9
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 6.8%
Frank Russell Investment Company Money Market
Fund 151,867,922 151,868
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 10,000 9,971
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $161,839) 161,839
------------
OTHER SECURITIES - 3.2%
Frank Russell Investment Company Money Market
Fund (X) 18,459,170 18,459
State Street Securities Lending Quality Trust
(X) 58,158,913 58,159
------------
TOTAL OTHER SECURITIES
(cost $76,618) 76,618
------------
TOTAL INVESTMENTS - 102.7%
(identified cost $2,220,279) 2,441,928
OTHER ASSETS AND LIABILITIES,
NET - (2.7%) (65,586)
------------
NET ASSETS - 100.0% 2,376,342
============
</Table>
<Table>
<Caption>
FUTURES CONTRACTS
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/05 (43) 13,422 (615)
S&P 500 E-Mini Index
expiration date 06/05 (968) 56,071 (2,300)
S&P 500 Index
expiration date 06/05 (228) 66,035 (910)
S&P Midcap 400 Index
expiration date 06/05 (111) 35,201 (2,227)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (6,052)
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Auto and Transportation 2.8
Consumer Discretionary 14.4
Consumer Staples 7.5
</Table>
<Table>
- -------------------------------------------------------------
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
Financial Services 17.3
Health Care 14.6
Integrated Oils 5.4
Materials and Processing 4.1
Miscellaneous 4.2
Other Energy 2.3
Producer Durables 5.7
Technology 10.4
Utilities 4.0
Long-Term Investments --*
Warrants & Rights --*
Short-Term Investments 6.8
Other Securities 3.2
------------
Total Investments 102.7
Other Assets and Liabilities, Net (2.7)
------------
Net Assets 100.0
============
Futures Contracts 0.3
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
10 Diversified Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,005.70 $ 1,013.74
Expenses Paid During
Period* $ 11.29 $ 11.33
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.27%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,009.50 $ 1,017.46
Expenses Paid During
Period* $ 7.57 $ 7.60
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.52%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,010.80 $ 1,018.75
Expenses Paid During
Period* $ 6.28 $ 6.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.26%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Special Growth Fund 11
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 91.8%
Auto and Transportation - 5.1%
American Axle & Manufacturing Holdings, Inc. (N) 15,500 309
Arctic Cat, Inc. (N) 6,200 147
ArvinMeritor, Inc. 30,600 364
Autoliv, Inc. 106,510 4,714
Aviall, Inc. (AE) 31,500 921
Celadon Group, Inc. (AE) 5,100 83
CNF, Inc. 48,800 2,086
Dana Corp. 89,900 1,027
Delphi Corp. 51,300 169
DryShips, Inc. (AE) 40,000 635
ExpressJet Holdings, Inc. (AE) 47,300 420
FLYi, Inc. (AE)(N) 67,000 49
Frontier Airlines, Inc. (AE)(N) 18,600 181
General Maritime Corp. (AE)(N) 31,000 1,359
Gentex Corp. (N) 10,200 331
Grupo TMM SA ADR Series A (AE)(N) 75,900 227
Heartland Express, Inc. 45,900 851
HUB Group, Inc. Class A (AE) 4,940 272
JB Hunt Transport Services, Inc. 32,160 1,257
Kansas City Southern (AE)(N) 35,000 662
Kirby Corp. (AE) 30,200 1,230
Laidlaw International, Inc. (AE) 60,600 1,357
Landstar System, Inc. (AE) 30,200 926
Lear Corp. 8,000 271
Marten Transport, Ltd. (AE) 7,400 141
Navistar International Corp. (AE) 26,300 777
Offshore Logistics, Inc. (AE) 29,950 868
OMI Corp. (N) 58,300 1,060
Oshkosh Truck Corp. 11,195 841
Overnite Corp. 108,905 3,265
Overseas Shipholding Group, Inc. 32,400 1,828
Pacer International, Inc. (AE) 109,100 2,262
Polaris Industries, Inc. (N) 21,670 1,247
Republic Airways Holdings, Inc. (AE) 18,500 226
SCS Transportation, Inc. (AE) 8,600 131
Skywest, Inc. 31,100 562
Stolt-Nielsen SA ADR (AE) 17,200 587
Swift Transportation Co., Inc. (AE)(N) 13,800 294
TBC Corp. (AE)(N) 1,100 29
Teekay Shipping Corp. (N) 23,200 973
Tidewater, Inc. (N) 24,290 837
TRW Automotive Holdings Corp. (AE) 20,700 369
Tsakos Energy Navigation, Ltd. (N) 13,185 505
UTI Worldwide, Inc. (N) 27,100 1,738
Visteon Corp. (N) 90,100 315
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Werner Enterprises, Inc. 97,605 1,814
Westinghouse Air Brake Technologies Corp. 75,100 1,502
Yellow Roadway Corp. (AE) 31,900 1,563
------------
43,582
------------
Consumer Discretionary - 18.5%
Abercrombie & Fitch Co. Class A 48,100 2,595
ABM Industries, Inc. 15,200 276
AC Moore Arts & Crafts, Inc. (AE)(N) 38,900 1,012
Activision, Inc. (AE) 30,400 440
Adesa, Inc. 60,800 1,471
Advance Auto Parts, Inc. (AE) 76,300 4,072
Advo, Inc. 53,000 1,527
Alderwoods Group, Inc. (AE) 17,600 230
Alliance Gaming Corp. (AE)(N) 57,000 650
American Eagle Outfitters, Inc. 37,400 981
American Greetings Corp. Class A (N) 48,420 1,097
American Woodmark Corp. (N) 1,429 45
AMN Healthcare Services, Inc. (AE)(N) 83,200 1,229
aQuantive, Inc. (AE)(N) 81,900 909
Arbitron, Inc. 39,330 1,664
Asbury Automotive Group, Inc. (AE) 13,800 190
Banta Corp. 19,900 829
Blue Nile, Inc. (AE)(N) 20,465 515
Borders Group, Inc. 53,800 1,301
Brightpoint, Inc. (AE) 6,800 144
Brinker International, Inc. (AE) 11,100 375
Brink's Co. (The) 49,870 1,609
Brown Shoe Co., Inc. 14,200 439
Buckle, Inc. (The) (N) 2,100 72
Burlington Coat Factory Warehouse Corp. 13,600 375
Catalina Marketing Corp. 6,600 153
Cato Corp. (The) Class A 12,700 326
Central European Distribution Corp. (AE)(N) 72,100 2,676
Central Garden and Pet Co. (AE)(N) 22,200 923
Charles River Associates, Inc. (AE) 22,300 1,169
Charming Shoppes, Inc. (AE) 182,200 1,356
Chemed Corp. 17,100 1,211
Choice Hotels International, Inc. 18,040 1,092
ChoicePoint, Inc. (AE) 31,933 1,260
Circuit City Stores, Inc. 75,942 1,200
CKE Restaurants, Inc. (AE)(N) 32,810 487
Claire's Stores, Inc. 58,800 1,283
Clark, Inc. (N) 100 1
CNS, Inc. 54,300 1,020
</Table>
12 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Cogent, Inc. (AE) 4,500 101
Consolidated Graphics, Inc. (AE) 5,200 239
Convergys Corp. (AE) 106,120 1,375
Corinthian Colleges, Inc. (AE)(N) 55,200 784
Corporate Executive Board Co. 65,300 4,293
Corrections Corp. of America (AE) 12,085 457
Cost Plus, Inc. (AE) 30,255 702
CoStar Group, Inc. (AE)(N) 20,100 795
Cross Country Healthcare, Inc. (AE) 34,300 553
CSK Auto Corp. (AE) 15,000 233
Ctrip.com International, Ltd. ADR (AE)(N) 30,200 1,325
Darden Restaurants, Inc. 54,000 1,620
DeVry, Inc. (AE) 31,700 723
Dillard's, Inc. Class A 54,800 1,275
Dolby Laboratories, Inc. Class A (AE) 72,300 1,479
DreamWorks Animation SKG, Inc. Class A (AE) 6,300 236
Earthlink, Inc. (AE) 82,000 753
Eastern Co. (The) (N) 40,025 891
Education Management Corp. (AE) 104,500 2,926
Electronics Boutique Holdings Corp. (AE)(N) 17,800 992
Entercom Communications Corp. (AE) 36,900 1,189
Entravision Communications Corp. Class A (AE) 27,400 216
Ethan Allen Interiors, Inc. (N) 26,000 783
Ezcorp, Inc. Class A (AE) 28,400 348
Famous Dave's of America, Inc. (AE) 49,200 532
Federated Department Stores, Inc. 14,600 840
Finish Line, Inc. (The) Class A (N) 62,780 1,131
Furniture Brands International, Inc. (N) 35,100 680
G&K Services, Inc. Class A 6,600 253
Gemstar-TV Guide International, Inc. (AE) 241,100 928
Geo Group, Inc. (The) (AE)(N) 4,900 129
Getty Images, Inc. (AE) 30,300 2,168
Gildan Activewear, Inc. (AE) 13,000 549
Handleman Co. 30,830 535
Harte-Hanks, Inc. 33,800 963
Hasbro, Inc. 84,800 1,604
Haverty Furniture Cos., Inc. (N) 9,100 131
Hearst-Argyle Television, Inc. 95,590 2,399
Helen of Troy, Ltd. (AE)(N) 35,930 1,004
Hewitt Associates, Inc. Class A (AE)(N) 36,431 969
Hilton Hotels Corp. 39,600 864
Hot Topic, Inc. (AE)(N) 112,145 2,242
IKON Office Solutions, Inc. 61,600 533
International Speedway Corp. Class A 12,100 644
Jack in the Box, Inc. (AE) 38,980 1,425
Jo-Ann Stores, Inc. (AE) 29,600 749
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Jones Apparel Group, Inc. 36,100 1,099
Jos A Bank Clothiers, Inc. (AE)(N) 28,500 935
Korn/Ferry International (AE) 18,100 261
Labor Ready, Inc. (AE)(N) 164,550 2,746
Lamar Advertising Co. Class A (AE) 46,700 1,746
Laureate Education, Inc. (AE) 31,573 1,402
La-Z-Boy, Inc. (N) 89,900 1,064
Leapfrog Enterprises, Inc. (AE)(N) 44,100 441
Lee Enterprises, Inc. 23,500 975
Life Time Fitness, Inc. (AE)(N) 44,600 1,207
Lin TV Corp. Class A (AE) 59,910 934
Lithia Motors, Inc. Class A (N) 17,170 423
Liz Claiborne, Inc. 26,600 942
Lone Star Steakhouse & Saloon, Inc. 5,100 145
Manpower, Inc. 8,200 316
Marcus Corp. 36,100 691
MarineMax, Inc. (AE)(N) 12,500 338
Marvel Enterprises, Inc. (AE)(N) 61,600 1,207
MAXIMUS, Inc. (AE) 11,200 344
McClatchy Co. Class A 21,375 1,511
Media General, Inc. Class A 19,800 1,213
Men's Wearhouse, Inc. (AE) 32,400 1,337
Mohawk Industries, Inc. (AE) 20,200 1,572
Movado Group, Inc. 5,600 90
Movie Gallery, Inc. (N) 10,920 295
Nautilus Group, Inc. (N) 58,600 1,457
Navigant Consulting, Inc. (AE) 120,715 2,833
Netratings, Inc. (AE)(N) 9,500 138
Oakley, Inc. 33,400 446
Orient-Express Hotels, Ltd. Class A 71,500 1,878
Oshkosh B'Gosh, Inc. Class A (N) 218 6
Pacific Sunwear of California, Inc. (AE) 93,900 2,123
Penn National Gaming, Inc. (AE) 16,000 504
Petco Animal Supplies, Inc. (AE) 13,460 421
PF Chang's China Bistro, Inc. (AE)(N) 7,300 405
Phillips-Van Heusen Corp. 28,200 730
Pier 1 Imports, Inc. (N) 26,000 378
Pixar (AE) 7,940 363
PLATO Learning, Inc. (AE)(N) 11,426 84
Playtex Products, Inc. (AE) 51,800 526
Polo Ralph Lauren Corp. 60,000 2,106
Pre-Paid Legal Services, Inc. (N) 20,210 722
Prestige Brands Holdings, Inc. (AE) 47,500 855
Providence Service Corp. (The) (AE) 48,800 1,249
Pulitzer, Inc. 7,700 490
Radio One, Inc. Class D (AE)(N) 116,685 1,525
Reebok International, Ltd. 5,100 207
</Table>
Special Growth Fund 13
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Regal Entertainment Group Class A (N) 6,600 134
Rent-Way, Inc. (AE)(N) 19,100 149
Resources Connection, Inc. (AE)(N) 39,800 761
Retail Ventures, Inc. (AE) 4,600 46
Rocky Shoes & Boots, Inc. (AE) 4,100 110
RR Donnelley & Sons Co. 50,691 1,668
Ruby Tuesday, Inc. 27,660 622
Russ Berrie & Co., Inc. (N) 5,600 72
Russell Corp. 22,400 392
Ryan's Restaurant Group, Inc. (AE) 111,300 1,411
Sabre Holdings Corp. Class A 39,800 778
Scholastic Corp. (AE) 15,200 530
SCP Pool Corp. 112,500 3,666
ServiceMaster Co. (The) 54,800 703
Shoe Carnival, Inc. (AE) 4,700 90
ShopKo Stores, Inc. (AE)(N) 57,480 1,377
Six Flags, Inc. (AE)(N) 68,000 265
Sonic Automotive, Inc. 26,100 513
Speedway Motorsports, Inc. (N) 6,900 237
Sports Authority, Inc. (The) (AE)(N) 54,000 1,436
Stage Stores, Inc. (AE) 40,131 1,518
Stanley Works (The) 29,400 1,265
Steinway Musical Instruments, Inc. (AE)(N) 2,500 76
Stewart Enterprises, Inc. Class A (N) 39,500 213
Stride Rite Corp. 12,200 149
Tech Data Corp. (AE) 36,050 1,317
TeleTech Holdings, Inc. (AE)(N) 22,000 231
Tempur-Pedic International, Inc. (AE)(N) 125,190 2,390
Too, Inc. (AE) 31,100 716
Toro Co. 3,280 136
Trans World Entertainment, Corp. (AE)(N) 16,600 220
Trizetto Group, Inc. (The) (AE) 20,900 221
United Auto Group, Inc. 15,100 428
United Stationers, Inc. (AE) 13,100 553
USANA Health Sciences, Inc. (AE)(N) 37,540 1,552
Vail Resorts, Inc. (AE)(N) 14,900 385
Valassis Communications, Inc. (AE) 15,300 539
Valuevision Media, Inc. Class A (AE) 14,800 147
Volt Information Sciences, Inc. (AE) 3,100 61
Washington Post, Inc. Class B 1,100 951
WESCO International, Inc. (AE) 50,075 1,211
West Corp. (AE) 53,000 1,717
Wilsons The Leather Experts Inc. (AE)(N) 800 4
Wolverine World Wide, Inc. 47,460 963
------------
158,367
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Consumer Staples - 1.5%
7-Eleven, Inc. (AE) 31,000 725
Boston Beer Co., Inc. Class A (AE)(N) 5,800 116
Chiquita Brands International, Inc. 23,400 586
Coca-Cola Bottling Co. Consolidated 19,077 910
Constellation Brands, Inc. Class A (AE) 43,600 2,298
Flowers Foods, Inc. 14,000 404
Longs Drug Stores Corp. (N) 24,160 878
Molson Coors Brewing Co. Class B (N) 18,900 1,167
NBTY, Inc. (AE) 12,275 262
Pathmark Stores, Inc. (AE) 51,900 401
Pepsi Bottling Group, Inc. 31,000 889
Pilgrim's Pride Corp. (N) 34,200 1,234
Provide Commerce, Inc. (AE) 26,690 464
Ralcorp Holdings, Inc. 15,800 626
Ruddick Corp. 13,700 308
Spartan Stores, Inc. (AE) 79,300 906
Tootsie Roll Industries, Inc. 8,003 247
Tyson Foods, Inc. Class A 16,700 282
Weis Markets, Inc. 2,600 99
------------
12,802
------------
Financial Services - 17.1%
Advent Software, Inc. (AE) 65,100 1,161
Affiliated Managers Group, Inc. (AE)(N) 15,200 950
Alexandria Real Estate Equities, Inc. (o) 10,770 741
Alliance Data Systems Corp. (AE) 161,575 6,529
Allmerica Financial Corp. (AE) 38,810 1,303
AMB Property Corp. (o) 35,000 1,365
American Financial Group, Inc. 10,140 315
American Home Mortgage Investment Corp. (o) 18,300 598
American Physicians Capital, Inc. (AE) 7,800 242
AmeriCredit Corp. (AE) 63,410 1,484
AmerUs Group Co. (N) 7,570 356
Anthracite Capital, Inc. (o) 24,052 267
Anworth Mortgage Asset Corp. (N) 44,800 418
Apartment Investment & Management Co. Class A
(o) 22,100 842
Arbor Realty Trust, Inc. (o)(N) 7,200 176
Arden Realty, Inc. (o) 23,200 828
</Table>
14 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Aspen Insurance Holdings, Ltd. 46,500 1,269
Associated Banc-Corp 43,625 1,349
Assurant, Inc. 8,100 268
Astoria Financial Corp. 9,295 246
AvalonBay Communities, Inc. (o) 28,200 2,030
Axis Capital Holdings, Ltd. 24,200 644
Bank of Hawaii Corp. 39,880 1,888
BankAtlantic Bancorp, Inc. Class A 30,600 522
Bear Stearns Cos., Inc. (The) 8,600 814
BISYS Group, Inc. (The) (AE) 149,200 2,107
BOK Financial Corp. (AE) 4,429 185
Brandywine Realty Trust (o) 31,300 886
Capital Automotive REIT (o) 9,500 323
CapitalSource, Inc. (AE)(N) 123,100 2,585
CarrAmerica Realty Corp. (o) 16,900 558
Cathay General Bancorp (N) 16,800 552
CB Richard Ellis Group, Inc. (AE) 64,800 2,252
CBL & Associates Properties, Inc. (o) 24,490 1,895
CCC Information Services Group (AE) 5,600 131
Central Pacific Financial Corp. 17,270 563
Certegy, Inc. 19,300 703
CharterMac 21,200 443
Checkfree Corp. (AE) 48,800 1,790
Chemical Financial Corp. (N) 195 6
CIT Group, Inc. 20,000 806
City National Corp. 12,800 902
CNA Surety Corp. (AE) 59,700 784
Colonial BancGroup, Inc. (The) 112,300 2,477
Commerce Group, Inc. 7,900 467
Commercial Federal Corp. 32,200 841
Commercial Net Lease Realty (o)(N) 40,060 760
Community Bank System, Inc. 36,660 811
Correctional Properties Trust (o)(N) 3,100 80
Corus Bankshares, Inc. 6,600 322
Cousins Properties, Inc. (o) 17,300 467
Credit Acceptance Corp. (AE) 17,500 328
CRT Properties, Inc. (o) 7,010 162
Downey Financial Corp. 19,655 1,272
Duke Realty Corp. (o) 55,900 1,711
EastGroup Properties, Inc. (o)(N) 8,800 330
eFunds Corp. (AE) 23,039 504
Entertainment Properties Trust (o) 10,500 454
Equifax, Inc. 26,900 905
Euronet Worldwide, Inc. (AE)(N) 102,900 3,042
Fair Isaac Corp. 28,000 921
FelCor Lodging Trust, Inc. (AE)(o) 26,300 322
Fidelity Bankshares, Inc. 8,000 184
Fidelity National Financial, Inc. 29,000 931
First American Corp. 47,200 1,690
First BanCorp 4,850 176
First Marblehead Corp. (The) (AE) 23,500 905
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
First Niagara Financial Group, Inc. 19,900 250
FirstFed Financial Corp. (AE) 3,180 161
Fremont General Corp. (N) 7,910 172
GATX Corp. 58,000 1,898
Getty Realty Corp. (o)(N) 10,000 252
Glacier Bancorp, Inc. (N) 2,900 78
Global Payments, Inc. (N) 62,560 4,052
Hancock Holding Co. (N) 6,300 188
Hanmi Financial Corp. (N) 26,500 388
Health Care Property Investors, Inc. (o) 38,740 993
Health Care REIT, Inc. (o)(N) 31,500 1,055
HealthExtras, Inc. (AE)(N) 128,800 2,132
Heritage Property Investment Trust (o) 16,800 517
Highwoods Properties, Inc. (o) 34,700 976
Home Properties, Inc. (o) 28,200 1,180
Hospitality Properties Trust (o) 4,300 180
HRPT Properties Trust (o)(N) 209,550 2,462
Independence Community Bank Corp. 12,700 453
Infinity Property & Casualty Corp. (N) 18,200 591
Innkeepers USA Trust (o) 30,700 407
Investment Technology Group, Inc. (AE) 69,300 1,317
Investors Financial Services Corp. (N) 70,100 2,941
IPC Holdings, Ltd. 25,200 948
iStar Financial, Inc. (o) 8,100 323
Jack Henry & Associates, Inc. 89,800 1,544
Jefferies Group, Inc. 34,100 1,234
Jones Lang LaSalle, Inc. (AE) 41,900 1,571
Knight Trading Group, Inc. Class A (AE)(N) 84,500 712
Kronos, Inc. (AE) 8,115 317
La Quinta Corp. (AE)(o) 179,800 1,564
LandAmerica Financial Group, Inc. (N) 51,865 2,573
Legg Mason, Inc. 13,150 932
Lexington Corporate Properties Trust (o)(N) 30,100 692
Luminent Mortgage Capital, Inc. (o) 32,700 325
Macerich Co. (The) (o) 14,200 856
Mack-Cali Realty Corp. (o) 36,800 1,619
Markel Corp. (AE) 7,500 2,573
McGrath Rentcorp 46,100 1,023
Meristar Hospitality Corp. (AE)(o)(N) 69,900 479
MFA Mortgage Investments, Inc. (o)(N) 16,700 120
Mid-America Apartment Communities, Inc. (o)(N) 9,300 356
Montpelier Re Holdings, Ltd. (N) 32,400 1,075
MortgageIT Holdings, Inc. (o) 8,500 145
National Financial Partners Corp. (N) 7,000 268
</Table>
Special Growth Fund 15
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
National Penn Bancshares, Inc. (N) 4,805 108
Nationwide Financial Services, Inc. 16,600 588
Navigators Group, Inc. (AE) 523 17
NAVTEQ Corp. (AE) 7,900 288
NBT Bancorp, Inc. (N) 2,700 56
New Century Financial Corp. (o)(N) 28,940 1,315
North Fork BanCorp., Inc. 30,000 845
Nuveen Investments, Inc. Class A 23,020 782
OceanFirst Financial Corp. (N) 4,200 90
Ohio Casualty Corp. (AE) 15,360 360
Old Republic International Corp. 9,500 224
Omega Healthcare Investors, Inc. (o) 11,900 134
Pacific Capital Bancorp (N) 10,532 304
Parkway Properties, Inc. (o) 5,900 269
People's Bank 5,200 216
PFF Bancorp, Inc. (N) 12,420 347
Philadelphia Consolidated Holding Co. (AE) 4,291 322
Portfolio Recovery Associates, Inc. (AE)(N) 33,330 1,198
PRG-Schultz International, Inc. (AE)(N) 19,500 93
Primus Guaranty, Ltd. (AE)(N) 62,000 707
ProAssurance Corp. (AE) 1,100 41
Protective Life Corp. 31,400 1,201
Provident Bankshares Corp. 7,276 213
Provident Financial Services, Inc. (N) 300 5
PS Business Parks, Inc. (o) 6,900 278
Radian Group, Inc. 18,300 813
Raymond James Financial, Inc. 34,200 922
Redwood Trust, Inc. (o)(N) 21,100 1,058
Regency Centers Corp. (o) 10,800 569
RenaissanceRe Holdings, Ltd. (N) 22,800 1,021
Republic Bancorp, Inc. Class A (N) 44,069 931
Ryder System, Inc. 35,560 1,313
Senior Housing Properties Trust (o) 55,620 962
Signature Bank (AE) 32,285 795
Silicon Valley Bancshares (AE) 29,600 1,403
Sky Financial Group, Inc. 8,900 232
SL Green Realty Corp. (o) 1,480 90
Sotheby's Holdings Class A (AE) 39,305 644
Southwest Bancorp, Inc. 36,500 688
Sovereign Bancorp, Inc. (N) 40,200 827
Sovran Self Storage, Inc. (o)(N) 31,400 1,342
State Auto Financial Corp. 8,000 218
Sterling Bancorp 1,191 27
Sterling Bancshares, Inc. 16,900 227
Sterling Financial Corp. (AE) 26,672 872
Stewart Information Services Corp. (N) 29,900 1,077
TCF Financial Corp. 22,100 559
TD Banknorth, Inc. (AE) 48,270 1,487
Trizec Properties, Inc. (o) 54,820 1,096
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
UCBH Holdings, Inc. 55,100 867
UICI 50,770 1,179
UMB Financial Corp. 2,700 146
United Bankshares, Inc. 9,900 303
United Rentals, Inc. (AE) 10,700 197
Universal Health Realty Income Trust (o)(N) 4,200 138
W Holding Co., Inc. (N) 48,960 396
Webster Financial Corp. 21,300 968
WellChoice, Inc. (AE) 26,900 1,512
Whitney Holding Corp. 7,400 335
World Acceptance Corp. (AE) 240 6
WR Berkley Corp. 26,835 872
Wright Express Corp. (AE) 60,300 1,007
Zenith National Insurance Corp. (N) 6,780 390
Zions BanCorp. 12,500 875
------------
146,395
------------
Health Care - 12.7%
Abaxis, Inc. (AE)(N) 58,600 557
Able Laboratories, Inc. (AE)(N) 151,600 3,614
Accelrys, Inc. (AE)(N) 72,300 374
Affymetrix, Inc. (AE)(N) 60,800 2,803
Alliance Imaging, Inc. (AE) 67,800 708
Alpharma, Inc. Class A 48,300 456
Amedisys, Inc. (AE)(N) 81,635 2,450
American Healthways, Inc. (AE)(N) 44,700 1,670
American Medical Systems Holdings, Inc. (AE) 4,460 78
AMERIGROUP Corp. (AE) 21,900 769
Animas Corp. (AE)(N) 29,565 554
Applera Corp. - Celera Genomics Group (AE) 134,300 1,236
Apria Healthcare Group, Inc. (AE) 5,330 160
Arthrocare Corp. (AE)(N) 64,200 1,886
Barr Pharmaceuticals, Inc. (AE) 30,700 1,592
Bausch & Lomb, Inc. 15,600 1,170
Bio-Rad Laboratories, Inc. Class A (AE) 24,600 1,189
Biosite, Inc. (AE)(N) 1,640 93
Cardiome Pharma Corp. (AE)(N) 37,795 223
Centene Corp. (AE) 17,620 491
Cephalon, Inc. (AE)(N) 32,430 1,424
Charles River Laboratories International, Inc.
(AE) 53,000 2,511
Cholestech Corp. (AE) 57,300 589
Community Health Systems, Inc. (AE) 67,600 2,464
</Table>
16 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Connetics Corp. (AE)(N) 15,650 340
Cooper Cos., Inc. 4,300 290
Covance, Inc. (AE) 18,800 858
CuraGen Corp. (AE)(N) 1,900 6
Cytyc Corp. (AE) 35,900 765
Dade Behring Holdings, Inc. (AE) 54,080 3,335
Datascope Corp. 3,200 92
DaVita, Inc. (AE)(N) 124,339 5,012
Digene Corp. (AE)(N) 24,425 465
DJ Orthopedics, Inc. (AE) 81,700 2,055
Dov Pharmaceutical, Inc. (AE)(N) 23,095 360
Edwards Lifesciences Corp. (AE) 43,350 1,909
Enzon Pharmaceuticals, Inc. (AE) 6,430 50
First Horizon Pharmaceutical Corp. (AE)(N) 9,690 175
Flamel Technologies SA ADR (AE)(N) 4,500 72
Foxhollow Technologies, Inc. (AE)(N) 16,100 499
Genesis HealthCare Corp. (AE) 57,900 2,310
Gen-Probe, Inc. (AE) 12,910 648
Gentiva Health Services, Inc. (AE) 75,000 1,469
Haemonetics Corp. (AE) 32,700 1,399
Health Net, Inc. (AE) 34,400 1,171
HealthTronics, Inc. (AE) 88,500 1,097
Henry Schein, Inc. (AE) 24,940 935
Hologic, Inc. (AE) 42,400 1,509
Human Genome Sciences, Inc. (AE)(N) 72,800 753
Humana, Inc. (AE) 82,710 2,866
Hythiam, Inc. (AE)(N) 81,100 607
ICON PLC ADR (AE) 19,910 662
Idenix Pharmaceuticals, Inc. (AE)(N) 34,200 647
Immucor, Inc. (AE) 27,990 835
Intralase Corp. (AE) 93,650 1,566
Intuitive Surgical, Inc. (AE) 18,300 786
Kindred Healthcare, Inc. (AE)(N) 26,900 885
Kos Pharmaceuticals, Inc. (AE) 14,701 708
Lifecore Biomedical, Inc. (AE) 53,000 652
Lifeline Systems, Inc. (AE) 24,700 842
LifePoint Hospitals, Inc. (AE) 14,400 640
Lincare Holdings, Inc. (AE) 26,400 1,127
Magellan Health Services, Inc. (AE)(N) 44,600 1,519
MannKind Corp. (AE)(N) 3,200 44
Martek Biosciences Corp. (AE)(N) 38,050 1,456
Matria Healthcare, Inc. (AE)(N) 64,450 1,781
Maxygen, Inc. (AE)(N) 7,600 57
Medarex, Inc. (AE)(N) 15,800 112
Mentor Corp. (N) 6,840 251
Myriad Genetics, Inc. (AE)(N) 14,400 233
Nabi Biopharmaceuticals (AE) 83,143 906
Neurocrine Biosciences, Inc. (AE)(N) 24,525 857
Orthofix International NV (AE) 15,000 705
OSI Pharmaceuticals, Inc. (AE) 11,700 554
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PacifiCare Health Systems, Inc. (AE) 31,700 1,894
Parexel International Corp. (AE)(N) 26,800 489
Pediatrix Medical Group, Inc. (AE) 31,700 2,158
Pharmaceutical Product Development, Inc. (AE) 12,400 563
Pharmacopeia Drug Discovery, Inc. (AE) 46,950 230
PolyMedica Corp. (N) 35,800 1,109
Qiagen NV (AE)(N) 43,800 569
Quidel Corp. (AE)(N) 10,000 43
Res-Care, Inc. (AE) 13,300 190
Resmed, Inc. (AE) 26,727 1,660
Respironics, Inc. (AE) 38,390 2,426
Sepracor, Inc. (AE) 11,200 671
Sierra Health Services, Inc. (AE)(N) 17,560 1,136
SonoSite, Inc. (AE) 26,090 759
Stericycle, Inc. (AE) 48,200 2,346
Sunrise Senior Living, Inc. (AE)(N) 4,200 215
Sybron Dental Specialties, Inc. (AE) 74,566 2,778
Symbion, Inc. (AE)(N) 40,800 868
United Surgical Partners International, Inc.
(AE) 32,092 1,420
United Therapeutics Corp. (AE)(N) 16,060 771
Valeant Pharmaceuticals International 60,900 1,264
Vaxgen, Inc. (AE)(N) 50,035 563
VCA Antech, Inc. (AE) 82,000 1,909
Ventana Medical Systems, Inc. (AE)(N) 73,480 2,926
Vertex Pharmaceuticals, Inc. (AE)(N) 37,900 362
Viasys Healthcare, Inc. (AE) 100 2
Vicuron Pharmaceuticals, Inc. (AE)(N) 47,380 775
Wright Medical Group, Inc. (AE) 33,700 837
------------
108,866
------------
Materials and Processing - 8.0%
Aceto Corp. 51,600 348
Agrium, Inc. 62,700 1,116
Airgas, Inc. 39,065 856
Albany International Corp. Class A 16,200 508
AM Castle & Co. (AE) 83,700 1,000
Aptargroup, Inc. (N) 15,400 743
Armor Holdings, Inc. (AE) 23,845 835
Ashland, Inc. 31,300 2,105
Ball Corp. 32,500 1,284
Brady Corp. Class A (N) 19,200 569
Building Material Holding Corp. 13,400 736
Cabot Corp. 38,400 1,173
Calgon Carbon Corp. (N) 61,420 530
</Table>
Special Growth Fund 17
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Carpenter Technology Corp. 11,300 625
Chicago Bridge & Iron Co. NV 62,300 1,394
Clarcor, Inc. 39,230 1,985
Cleveland-Cliffs, Inc. 8,400 487
Comfort Systems USA, Inc. (AE) 13,410 96
Commercial Metals Co. 48,300 1,232
Compass Minerals International, Inc. 46,100 1,113
Constar International, Inc. (AE) 45,000 222
Crompton Corp. 73,700 1,035
Crown Holdings, Inc. (AE) 73,600 1,108
Cytec Industries, Inc. 28,000 1,291
Dycom Industries, Inc. (AE) 20,495 477
ElkCorp (N) 7,000 193
EMCOR Group, Inc. (AE) 5,200 232
Energizer Holdings, Inc. (AE) 12,430 708
Engelhard Corp. 38,000 1,164
Exide Technologies (AE)(N) 44,100 459
Florida Rock Industries, Inc. 18,800 1,092
FMC Corp. (AE) 19,500 956
Freightcar America, Inc. (AE) 21,850 424
Georgia Gulf Corp. 12,300 454
Greif, Inc. Class A 5,300 368
Griffon Corp. (AE)(N) 9,140 175
Harsco Corp. 33,800 1,813
Hercules, Inc. (AE) 123,100 1,629
Hexcel Corp. (AE) 26,800 440
Hughes Supply, Inc. 62,370 1,628
Insituform Technologies, Inc. Class A (AE) 74,000 1,103
Jacuzzi Brands, Inc. (AE)(N) 104,500 946
Lafarge North America, Inc. 47,400 2,631
Lone Star Technologies, Inc. (AE) 4,900 191
Louisiana-Pacific Corp. 55,700 1,370
Lubrizol Corp. 19,300 748
Lyondell Chemical Co. 22,400 562
Martin Marietta Materials, Inc. 37,000 2,035
Mesabi Trust 53,300 780
Mosaic Co. (The) (AE) 35,600 457
Mueller Industries, Inc. 19,600 508
NewMarket Corp. (AE) 4,500 67
NL Industries (AE) 4,900 79
NS Group, Inc. (AE)(N) 26,600 765
Octel Corp. 7,900 136
Olympic Steel, Inc. (AE)(N) 39,115 572
OM Group, Inc. (AE) 24,800 544
Oregon Steel Mills, Inc. (AE)(N) 27,600 459
Pactiv Corp. (AE) 47,400 1,016
Perini Corp. (AE) 9,477 131
PolyOne Corp. (AE) 48,100 371
Pope & Talbot, Inc. 16,200 211
Precision Castparts Corp. 2,100 155
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Quanex Corp. 46,500 2,346
Quanta Services, Inc. (AE)(N) 271,700 2,168
Reliance Steel & Aluminum Co. 10,900 411
Rock-Tenn Co. Class A 9,200 93
Ryerson Tull, Inc. (N) 7,500 78
Sealed Air Corp. (AE) 19,700 954
Shaw Group, Inc. (The) (AE)(N) 48,500 876
Silgan Holdings, Inc. 27,200 1,664
Simpson Manufacturing Co., Inc. 13,100 354
Southern Peru Copper Corp. (N) 3,700 189
Steel Technologies, Inc. (N) 7,200 138
Symyx Technologies, Inc. (AE) 35,800 872
Terra Industries, Inc. (AE)(N) 65,300 451
Texas Industries, Inc. 47,150 2,177
Trammell Crow Co. (AE) 34,070 726
UAP Holding Corp. (AE) 20,100 289
Unifi, Inc. (AE)(N) 44,500 137
United States Steel Corp. 30,300 1,296
URS Corp. (AE) 21,700 667
USEC, Inc. (N) 60,170 791
USG Corp. (AE)(N) 33,940 1,425
------------
68,542
------------
Miscellaneous - 0.5%
Brunswick Corp. 32,000 1,344
Johnson Controls, Inc. 15,000 823
Walter Industries, Inc. 9,300 319
Wesco Financial Corp. 3,563 1,347
------------
3,833
------------
Other Energy - 7.1%
Alliance Resource Partners, LP 7,300 475
Alpha Natural Resources, Inc. (AE) 21,600 500
Atwood Oceanics, Inc. (AE) 51,200 2,922
Berry Petroleum Co. Class A 17,000 794
Cal Dive International, Inc. (AE) 90,600 4,031
Carrizo Oil & Gas, Inc. (AE)(N) 14,400 238
Cimarex Energy Co. (AE)(N) 57,300 2,034
Consol Energy, Inc. 27,000 1,167
Cooper Cameron Corp. (AE) 18,900 1,038
Denbury Resources, Inc. (AE) 76,600 2,431
Diamond Offshore Drilling, Inc. 25,700 1,134
Dril-Quip, Inc. (AE) 4,700 137
Dynegy, Inc. Class A (AE) 91,600 307
Enbridge Energy Partners, LP (N) 21,000 1,065
ENSCO International, Inc. 51,400 1,676
</Table>
18 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Equitable Resources, Inc. 9,490 547
Frontier Oil Corp. 25,100 1,056
Global Industries, Ltd. (AE) 36,600 353
Goodrich Petroleum Corp. (AE) 59,200 1,003
Grant Prideco, Inc. (AE) 90,500 2,005
Harvest Natural Resources, Inc. (AE) 36,900 398
Houston Exploration Co. (AE) 66,420 3,383
Hydril (AE) 11,400 600
Input/Output, Inc. (AE)(N) 45,300 274
National-Oilwell Varco, Inc. (AE) 28,200 1,121
Newpark Resources, Inc. (AE) 66,310 399
Noble Energy, Inc. (N) 4,050 260
NRG Energy, Inc. (AE) 60,320 1,876
Oil States International, Inc. (AE) 30,600 621
Parker Drilling Co. (AE)(N) 10,000 53
Patina Oil & Gas Corp. 41,900 1,609
Patterson-UTI Energy, Inc. 52,400 1,256
Petroquest Energy, Inc. (AE) 121,200 745
Pride International, Inc. (AE) 3,600 80
Quicksilver Resources, Inc. (AE)(N) 25,300 1,299
Range Resources Corp. (N) 58,595 1,327
Remington Oil & Gas Corp. (AE) 7,120 208
Rowan Cos., Inc. 34,000 902
Smith International, Inc. 17,000 989
Stone Energy Corp. (AE) 3,500 158
Superior Energy Services, Inc. (AE) 77,100 1,147
Swift Energy Co. (AE)(N) 19,347 509
Talisman Energy, Inc. (N) 28,555 861
TC Pipelines, LP 12,000 382
TEPPCO Partners, LP (N) 26,200 1,158
Todco Class A (AE)(N) 246,940 5,495
Unit Corp. (AE) 40,248 1,544
Universal Compression Holdings, Inc. (AE) 92,955 3,263
Veritas DGC, Inc. (AE) 30,830 789
Vintage Petroleum, Inc. 56,900 1,644
XTO Energy, Inc. 43,409 1,310
------------
60,573
------------
Producer Durables - 5.6%
American Tower Corp. Class A (AE) 39,300 677
Ametek, Inc. 11,900 451
Applied Films Corp. (AE) 22,190 531
Applied Industrial Technologies, Inc. 23,200 647
Arris Group, Inc. (AE)(N) 89,300 678
Axcelis Technologies, Inc. (AE) 89,100 553
BE Aerospace, Inc. (AE) 26,600 323
Belden CDT, Inc. 43,700 801
Briggs & Stratton Corp. 27,610 894
Cascade Corp. 32,100 1,011
Champion Enterprises, Inc. (AE)(N) 67,948 641
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CNH Global NV 48,800 876
Cognex Corp. 30,500 666
Credence Systems Corp. (AE)(N) 100,295 631
Crown Castle International Corp. (AE) 80,700 1,302
Curtiss-Wright Corp. (N) 6,380 346
Cymer, Inc. (AE)(N) 40,000 992
Dominion Homes, Inc. (AE)(N) 3,100 43
DR Horton, Inc. 33,666 1,027
Ducommun, Inc. (AE)(N) 40,900 730
Electro Scientific Industries, Inc. (AE) 44,515 736
Engineered Support Systems, Inc. 18,900 668
ESCO Technologies, Inc. (AE) 9,475 695
Faro Technologies, Inc. (AE)(N) 22,300 599
Federal Signal Corp. 41,800 586
Flowserve Corp. (AE) 15,800 439
Genlyte Group, Inc. (AE) 9,300 738
Goodrich Corp. 48,400 1,951
Graco, Inc. 27,895 942
HNI Corp. 2,100 106
IDEX Corp. 44,760 1,667
JLG Industries, Inc. (N) 10,000 204
Joy Global, Inc. 40,100 1,358
KB Home 38,200 2,177
Kennametal, Inc. 10,800 489
Kimball International, Inc. Class B 6,430 73
Knoll, Inc. 29,985 487
Lennar Corp. Class A 20,950 1,078
Manitowoc Co. 25,500 1,020
MDC Holdings, Inc. 23,655 1,547
Meritage Homes Corp. (AE) 12,315 779
Milacron, Inc. (AE)(N) 144,829 304
National RV Holdings, Inc. (AE) 62,900 601
Orbital Sciences Corp. (AE)(N) 34,600 322
Orleans Homebuilders, Inc. (N) 5,700 99
Pall Corp. 50,200 1,347
Paxar Corp. (AE) 4,150 74
Photon Dynamics, Inc. (AE)(N) 41,100 795
Spatialight, Inc. (AE)(N) 152,291 688
Standard-Pacific Corp. 29,402 2,105
Steelcase, Inc. Class A (N) 21,700 285
Symmetricom, Inc. (AE) 58,665 604
Technical Olympic USA, Inc. (N) 14,750 310
Tecumseh Products Co. Class A 18,210 633
Teledyne Technologies, Inc. (AE) 20,700 630
Tennant Co. (N) 1,910 68
Terex Corp. (AE) 15,000 561
</Table>
Special Growth Fund 19
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Thermo Electron Corp. (AE) 17,200 430
Thomas & Betts Corp. (AE) 33,800 1,052
Toll Brothers, Inc. (AE) 16,400 1,243
United Industrial Corp. (N) 3,160 89
Varian Semiconductor Equipment Associates, Inc.
(AE) 31,000 1,156
Xyratex, Ltd. (AE)(N) 114,700 1,906
------------
47,461
------------
Technology - 12.9%
ActivCard Corp. (AE) 12,300 64
Acxiom Corp. 40,790 775
ADC Telecommunications, Inc. (AE)(N) 633,700 1,438
Aeroflex, Inc. (AE) 93,800 744
Agile Software Corp. (AE) 278,100 1,827
Alliance Semiconductor Corp. (AE) 61,300 97
American Reprographics Co. (AE)(N) 45,700 642
Anixter International, Inc. (AE) 40,160 1,483
Ansys, Inc. (AE) 4,800 146
Anteon International Corp. (AE) 30,600 1,279
Ascential Software Corp. (AE) 92,575 1,710
AsiaInfo Holdings, Inc. (AE)(N) 23,800 116
ATI Technologies, Inc. (AE) 177,700 2,630
Atmel Corp. (AE) 80,840 187
Avaya, Inc. (AE) 48,700 423
Avnet, Inc. (AE) 48,000 907
AVX Corp. (N) 72,000 784
BearingPoint, Inc. (AE)(N) 152,800 946
BEI Technologies, Inc. 25,185 579
Blackbaud, Inc. (AE)(N) 12,200 159
Brocade Communications Systems, Inc. (AE) 114,400 499
Cadence Design Systems, Inc. (AE) 40,400 566
Ceridian Corp. (AE) 41,200 695
Cognos, Inc. (AE) 61,500 2,327
Coherent, Inc. (AE) 4,120 132
Comtech Telecommunications Corp. (AE) 24,250 851
Comverse Technology, Inc. (AE) 125,700 2,865
Cryptologic, Inc. 33,600 981
CSG Systems International, Inc. (AE) 5,700 98
Digitas, Inc. (AE)(N) 148,285 1,478
Dot Hill Systems Corp. (AE)(N) 65,930 311
DRS Technologies, Inc. (AE) 32,000 1,416
E.piphany, Inc. (AE) 111,300 342
EDO Corp. 43,600 1,301
Epicor Software Corp. (AE) 42,290 466
Equinix, Inc. (AE)(N) 87,400 3,057
Fairchild Semiconductor International, Inc. (AE) 130,015 1,749
Filenet Corp. (AE) 36,500 967
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Formfactor, Inc. (AE)(N) 82,200 1,877
Foundry Networks, Inc. (AE) 38,400 323
Freescale Semiconductor, Inc. Class B (AE) 91,600 1,728
GTSI Corp. (AE)(N) 70,000 645
Harmonic, Inc. (AE)(N) 78,090 430
Harris Corp. 36,200 1,021
Hutchinson Technology, Inc. (AE) 42,100 1,559
Imergent, Inc. (AE)(N) 34,845 376
InFocus Corp. (AE) 55,600 200
Informatica Corp. (AE) 120,500 931
Ingram Micro, Inc. Class A (AE) 130,300 2,171
Innovative Solutions & Support, Inc. (AE)(N) 2,770 87
Integrated Device Technology, Inc. (AE) 95,600 1,023
Integrated Silicon Solutions, Inc. (AE)(N) 92,000 594
Intergraph Corp. (AE)(N) 9,930 294
Intermagnetics General Corp. (AE)(N) 37,575 923
Internet Security Systems, Inc. (AE) 9,300 181
Intersil Corp. Class A 178,700 3,120
Interwoven, Inc. (AE) 29,700 229
j2 Global Communications, Inc. (AE)(N) 36,300 1,297
Keane, Inc. (AE)(N) 19,500 232
Keynote Systems, Inc. (AE) 51,700 566
Komag, Inc. (AE) 61,265 1,441
Kongzhong Corp. ADR (AE)(N) 35,700 250
LeCroy Corp. (AE) 14,650 193
Macromedia, Inc. (AE) 31,400 1,244
Manhattan Associates, Inc. (AE) 42,705 806
Matrixone, Inc. (AE) 419,700 1,792
Maxtor Corp. (AE) 532,200 2,581
McAfee, Inc. (AE) 59,200 1,238
McData Corp. Class A (AE)(N) 162,700 501
MEMC Electronic Materials, Inc. (AE) 109,400 1,283
Mercury Computer Systems, Inc. (AE) 44,900 1,182
Methode Electronics, Inc. 6,090 69
Microsemi Corp. (AE) 65,100 1,101
MicroStrategy, Inc. Class A (AE) 9,352 407
Microtune, Inc. (AE) 83,845 288
MRV Communications, Inc. (AE)(N) 107,100 205
M-Systems Flash Disk Pioneers Ltd. (AE) 60,200 1,141
Nam Tai Electronics, Inc. 48,100 1,114
Netlogic Microsystems, Inc. (AE)(N) 164,300 1,932
Network Engines, Inc. (AE) 33,835 54
</Table>
20 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Niku Corp. (AE)(N) 43,001 678
Novatel Wireless, Inc. (AE)(N) 51,920 465
Parametric Technology Corp. (AE) 237,200 1,262
PerkinElmer, Inc. 88,500 1,637
Perot Systems Corp. Class A (AE) 5,600 71
Phoenix Technologies, Ltd. (AE) 52,900 428
PLX Technology, Inc. (AE)(N) 36,985 332
PMC - Sierra, Inc. (AE) 82,000 661
QLogic Corp. (AE) 9,200 306
Quantum Corp. (AE)(N) 397,300 954
Quest Software, Inc. (AE) 57,100 677
Radisys Corp. (AE)(N) 34,805 487
RADWARE, Ltd. (AE)(N) 60,520 1,324
Redback Networks, Inc. (AE)(N) 33,900 182
Sapient Corp. (AE)(N) 145,000 1,037
Seachange International, Inc. (AE)(N) 72,490 747
Semtech Corp. (AE)(N) 45,800 774
Serena Software, Inc. (AE)(N) 89,590 1,705
Sigma Designs, Inc. (AE)(N) 41,240 315
Sigmatel, Inc. (AE)(N) 10,160 266
SimpleTech, Inc. (AE) 20,900 78
SiRF Technology Holdings, Inc. (AE) 59,425 678
Spectrasite, Inc. (AE) 34,600 1,942
SPSS, Inc. (AE) 5,900 95
Stellent, Inc. (AE) 12,700 90
Superior Essex, Inc. (AE) 33,575 561
Sybase, Inc. (AE) 7,300 138
SYKES Enterprises, Inc. (AE)(N) 10,200 71
Talx Corp. 79,700 1,970
Tekelec (AE)(N) 49,700 676
Tellabs, Inc. (AE) 63,680 494
TIBCO Software, Inc. (AE) 83,500 596
Ultimate Software Group, Inc. (AE)(N) 65,500 1,015
Unisys Corp. (AE) 150,200 975
Utstarcom, Inc. (AE)(N) 36,800 350
Virage Logic Corp. (AE) 33,650 310
WatchGuard Technologies, Inc. (AE) 36,200 117
Wavecom SA ADR (AE) 52,400 356
Websense, Inc. (AE) 52,410 2,780
Western Digital Corp. (AE) 352,200 4,470
Wind River Systems, Inc. (AE)(N) 76,020 987
Witness Systems, Inc. (AE)(N) 52,240 920
Zoran Corp. (AE) 24,200 256
------------
109,899
------------
Utilities - 2.8%
AGL Resources, Inc. 6,400 221
Alamosa Holdings, Inc. (AE)(N) 133,300 1,732
Allete, Inc. 12,866 536
Alliant Energy Corp. 39,500 1,040
Avista Corp. 19,290 324
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Cablevision Systems Corp. Class A (AE) 46,600 1,209
Centerpoint Energy, Inc. 48,800 578
CMS Energy Corp. (AE)(N) 67,700 875
Commonwealth Telephone Enterprises, Inc. (AE) 1,880 87
El Paso Electric Co. (AE) 9,590 187
Energen Corp. 16,600 1,028
Hawaiian Electric Industries, Inc. (N) 13,300 336
Laclede Group, Inc. (The) (N) 4,400 120
MDU Resources Group, Inc. 42,200 1,141
National Fuel Gas Co. 54,920 1,495
Northeast Utilities 76,810 1,406
Northwest Natural Gas Co. (N) 4,500 160
OGE Energy Corp. 35,500 980
Oneok, Inc. 15,200 439
Pepco Holdings, Inc. 66,500 1,441
Pinnacle West Capital Corp. 3,700 155
Premiere Global Services, Inc. (AE) 100,790 1,089
Questar Corp. 12,300 718
SCANA Corp. 9,900 385
Sierra Pacific Resources (AE)(N) 62,820 680
South Jersey Industries, Inc. 3,800 207
Southwest Gas Corp. 700 17
UGI Corp. 32,900 1,653
US Cellular Corp. (AE) 15,770 729
Westar Energy, Inc. 34,400 788
Western Gas Resources, Inc. 16,000 535
WGL Holdings, Inc. 24,300 737
WPS Resources Corp. (N) 8,500 448
------------
23,476
------------
TOTAL COMMON STOCKS
(cost $702,839) 783,796
------------
WARRANTS & RIGHTS - 0.0%
Dime Bancorp. Inc.
2005 Warrants (AE) 210,900 30
------------
TOTAL WARRANTS & RIGHTS
(cost $45) 30
------------
</Table>
Special Growth Fund 21
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 8.1%
Frank Russell Investment Company Money Market
Fund 65,713,445 65,713
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 3,500 3,490
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $69,203) 69,203
------------
OTHER SECURITIES - 15.9%
Frank Russell Investment Company Money Market
Fund (X) 32,812,750 32,813
State Street Securities Lending Quality Trust
(X) 103,382,431 103,382
------------
TOTAL OTHER SECURITIES
(cost $136,195) 136,195
------------
TOTAL INVESTMENTS - 115.8%
(identified cost $908,282) 989,224
OTHER ASSETS AND LIABILITIES, NET - (15.8%) (134,787)
------------
NET ASSETS - 100.0% 854,437
============
</Table>
<Table>
<Caption>
FUTURES CONTRACTS
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
Russell 2000 E-Mini Index
expiration date 06/05 (334) 19,402 (1,541)
Russell 2000 Index
expiration date 06/05 (126) 36,597 (2,534)
S&P 500 E-Mini Index
expiration date 06/05 (171) 9,905 (414)
S&P 500 Index
expiration date 06/05 (16) 4,634 (46)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (4,535)
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Auto and Transportation 5.1
Consumer Discretionary 18.5
Consumer Staples 1.5
Financial Services 17.1
Health Care 12.7
Materials and Processing 8.0
Miscellaneous 0.5
Other Energy 7.1
Producer Durables 5.6
Technology 12.9
Utilities 2.8
Warrants & Rights --*
Short-Term Investments 8.1
Other Securities 15.9
---------------
Total Investments 115.8
Other Assets and Liabilities, Net (15.8)
---------------
Net Assets 100.0
===============
Futures Contracts 0.5
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
22 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,027.10 $ 1,015.28
Expenses Paid During
Period* $ 9.85 $ 9.79
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.96%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,030.80 $ 1,019.00
Expenses Paid During
Period* $ 6.09 $ 6.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.21%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,032.20 $ 1,020.24
Expenses Paid During
Period* $ 4.84 $ 4.81
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.96%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Quantitative Equity Fund 23
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.7%
Auto and Transportation - 2.8%
Autoliv, Inc. 45,200 2,000
Burlington Northern Santa Fe Corp. 273,202 13,182
CNF, Inc. 41,100 1,757
CSX Corp. 86,300 3,463
Dana Corp. 46,800 534
Delphi Corp. (N) 116,100 383
FedEx Corp. 70,200 5,963
Ford Motor Co. (N) 871,564 7,940
Forward Air Corp. 14,400 346
Harley-Davidson, Inc. 127,800 6,009
Heartland Express, Inc. (N) 17,400 323
JB Hunt Transport Services, Inc. 95,800 3,745
Landstar System, Inc. (AE) 33,900 1,039
Norfolk Southern Corp. 199,400 6,261
Overnite Corp. (N) 12,400 372
Overseas Shipholding Group, Inc. 17,400 982
Paccar, Inc. 109,414 7,429
Polaris Industries, Inc. 28,200 1,623
Skywest, Inc. (N) 36,500 660
Southwest Airlines Co. 240,200 3,574
Swift Transportation Co., Inc. (AE) 28,200 602
Union Pacific Corp. 17,700 1,132
United Parcel Service, Inc. Class B 7,600 542
------------
69,861
------------
Consumer Discretionary - 13.2%
Abercrombie & Fitch Co. Class A 35,700 1,926
Activision, Inc. (AE) 226,133 3,270
Advance Auto Parts, Inc. (AE) 24,000 1,280
American Eagle Outfitters, Inc. 205,000 5,375
American Greetings Corp. Class A 83,500 1,891
Arbitron, Inc. 13,600 576
Autonation, Inc. (AE) 96,500 1,763
Avon Products, Inc. 90,700 3,635
Barnes & Noble, Inc. (AE) 22,800 812
Bebe Stores, Inc. (N) 35,550 1,149
Belo Corp. Class A 24,200 567
Black & Decker Corp. 69,500 5,812
Bright Horizons Family Solutions, Inc. (AE) 10,500 356
Brinker International, Inc. (AE) 44,900 1,518
Brink's Co. (The) 22,400 723
Career Education Corp. (AE)(N) 46,600 1,465
Cendant Corp. 900,700 17,933
Charming Shoppes, Inc. (AE)(N) 51,300 382
Childrens Place (AE)(N) 9,600 357
Choice Hotels International, Inc. 500 30
Circuit City Stores, Inc. 260,540 4,117
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Clear Channel Communications, Inc. (N) 90,400 2,887
Coach, Inc. (AE) 317,500 8,509
Coldwater Creek, Inc. (AE)(N) 20,500 343
Convergys Corp. (AE) 42,100 546
Costco Wholesale Corp. 230,900 9,370
Darden Restaurants, Inc. 102,700 3,081
Dillard's, Inc. Class A 215,600 5,017
Dollar General Corp. 53,900 1,097
DreamWorks Animation SKG, Inc. Class A (AE) 14,700 551
Earthlink, Inc. (AE)(N) 30,200 277
Eastman Kodak Co. 134,300 3,358
eBay, Inc. (AE) 155,616 4,938
EchoStar Communications Corp. 17,800 515
Education Management Corp. (AE) 10,000 280
Estee Lauder Cos., Inc. (The) Class A 123,200 4,732
Federated Department Stores, Inc. 122,300 7,032
Fossil, Inc. (AE)(N) 19,900 463
Gannett Co., Inc. 30,800 2,372
Gap, Inc. (The) 99,600 2,126
Getty Images, Inc. (AE)(N) 14,400 1,030
Gillette Co. (The) 51,600 2,665
Google, Inc. Class A (AE) 11,500 2,530
GTECH Holdings Corp. 55,800 1,365
Harman International Industries, Inc. 58,300 4,581
Harte-Hanks, Inc. 11,300 322
Hilton Hotels Corp. 80,300 1,753
Home Depot, Inc. 558,771 19,764
Kimberly-Clark Corp. 160,485 10,022
Liberty Media Corp. Class A (AE) 693,200 6,960
Limited Brands, Inc. 249,100 5,403
Manpower, Inc. 11,800 455
Marriott International, Inc. Class A 109,300 6,859
Mattel, Inc. 190,200 3,433
McDonald's Corp. 220,500 6,463
McGraw-Hill Cos., Inc. (The) 84,900 7,393
MGM Mirage (AE) 14,800 1,033
Michaels Stores, Inc. 67,100 2,228
Nike, Inc. Class B 63,800 4,900
Nordstrom, Inc. 36,200 1,840
Office Depot, Inc. (AE) 46,000 901
Pacific Sunwear of California, Inc. (AE) 51,300 1,160
Payless Shoesource, Inc. (AE) 39,500 540
Penn National Gaming, Inc. (AE) 23,800 750
Robert Half International, Inc. 28,800 715
Sabre Holdings Corp. Class A (N) 119,900 2,345
</Table>
24 Quantitative Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SCP Pool Corp. (N) 19,000 619
ServiceMaster Co. (The) 30,900 396
Stanley Works (The) (N) 37,700 1,622
Staples, Inc. 552,300 10,532
Time Warner, Inc. (AE) 1,736,200 29,186
TJX Cos., Inc. 99,600 2,256
ValueClick, Inc. (AE)(N) 46,800 485
VeriSign, Inc. (AE) 53,000 1,402
Viacom, Inc. Class B 554,622 19,201
Wal-Mart Stores, Inc. 321,116 15,137
Walt Disney Co. 737,500 19,470
Waste Management, Inc. 111,000 3,162
Yahoo!, Inc. (AE) 231,080 7,975
Yankee Candle Co., Inc. (N) 19,800 550
Yum! Brands, Inc. 124,300 5,837
------------
327,671
------------
Consumer Staples - 5.7%
Albertson's, Inc. 264,400 5,232
Altria Group, Inc. 211,791 13,764
Chiquita Brands International, Inc. (N) 10,000 251
Clorox Co. 126,800 8,026
Coca-Cola Co. (The) 54,078 2,349
Coca-Cola Enterprises, Inc. 57,000 1,157
Colgate-Palmolive Co. 106,000 5,278
CVS Corp. 20,000 1,032
General Mills, Inc. 188,000 9,287
Hershey Foods Corp. 39,700 2,537
Kraft Foods, Inc. Class A (N) 90,500 2,933
Kroger Co. (The) (AE) 451,349 7,118
Pepsi Bottling Group, Inc. 267,800 7,678
PepsiCo, Inc. 211,200 11,751
Pilgrim's Pride Corp. 83,800 3,024
Procter & Gamble Co. 562,888 30,480
Reynolds American, Inc. 77,600 6,050
Safeway, Inc. (AE)(N) 241,000 5,131
Sara Lee Corp. 295,100 6,312
Supervalu, Inc. 42,100 1,329
Tyson Foods, Inc. Class A 317,200 5,358
UST, Inc. 68,100 3,119
Walgreen Co. 43,600 1,877
------------
141,073
------------
Financial Services - 20.5%
Allmerica Financial Corp. (AE) 18,600 624
Allstate Corp. (The) 142,200 7,986
Ambac Financial Group, Inc. 7,000 468
American Express Co. 391,300 20,622
American Financial Group, Inc. 84,600 2,630
American International Group, Inc. 98,430 5,005
Ameritrade Holding Corp. (AE) 51,300 538
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
AmerUs Group Co. 45,100 2,120
Annaly Mortgage Management, Inc. (o) 43,700 836
AON Corp. 41,400 863
Associated Banc-Corp (N) 25,600 792
Assurant, Inc. 10,000 331
Automatic Data Processing, Inc. 129,600 5,630
Bank of America Corp. 1,226,211 55,228
Bank of Hawaii Corp. 53,000 2,510
BB&T Corp. 29,100 1,141
Bear Stearns Cos., Inc. (The) 56,400 5,339
CapitalSource, Inc. (AE)(N) 23,400 491
Catellus Development Corp. (o) 26,000 720
CBL & Associates Properties, Inc. (o) 16,400 1,269
Charles Schwab Corp. (The) 66,100 684
Checkfree Corp. (AE) 15,700 576
Chubb Corp. 17,900 1,464
Cigna Corp. 59,700 5,491
Cincinnati Financial Corp. 76,587 3,082
CIT Group, Inc. 60,110 2,421
Citigroup, Inc. 1,012,533 47,548
CNA Financial Corp. (AE)(N) 20,900 574
Comerica, Inc. 85,893 4,918
Countrywide Financial Corp. 216,600 7,839
Doral Financial Corp. (N) 126,650 1,779
Dun & Bradstreet Corp. (AE) 22,900 1,430
E*Trade Financial Corp. (AE) 106,200 1,180
Eaton Vance Corp. (N) 41,300 968
eFunds Corp. (AE)(N) 17,500 383
Equity Office Properties Trust (o) 328,700 10,344
Factset Research Systems, Inc. (N) 26,900 747
Fannie Mae 59,800 3,226
Fidelity National Financial, Inc. 43,562 1,399
First American Corp. (N) 103,800 3,716
First Horizon National Corp. (N) 8,500 353
Fiserv, Inc. (AE) 126,800 5,364
Franklin Resources, Inc. 8,300 570
Freddie Mac 98,400 6,054
Friedman Billings Ramsey Group, Inc. Class A
(o)(N) 180,800 2,186
Genworth Financial, Inc. Class A 93,000 2,599
Golden West Financial Corp. 41,100 2,562
Goldman Sachs Group, Inc. 148,300 15,837
H&R Block, Inc. (N) 70,800 3,527
Health Care REIT, Inc. (o)(N) 8,500 285
JPMorgan Chase & Co. 682,188 24,211
KeyCorp (N) 289,553 9,602
</Table>
Quantitative Equity Fund 25
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kimco Realty Corp. (o) 17,600 975
La Quinta Corp. (AE)(o) 43,700 380
Legg Mason, Inc. 27,800 1,970
Lehman Brothers Holdings, Inc. 112,800 10,346
Leucadia National Corp. 16,400 570
Lincoln National Corp. 102,800 4,623
Loews Corp. 166,700 11,816
Mack-Cali Realty Corp. (o) 21,900 963
MBIA, Inc. 117,900 6,176
MBNA Corp. 125,462 2,478
Merrill Lynch & Co., Inc. 290,500 15,667
Metlife, Inc. 419,300 16,311
Mills Corp. (The) (o) 20,700 1,183
Moody's Corp. 119,400 9,808
Morgan Stanley 109,500 5,762
National City Corp. 61,400 2,085
Nationwide Financial Services, Inc. 27,200 964
North Fork BanCorp., Inc. 83,500 2,351
Old Republic International Corp. 79,600 1,879
Paychex, Inc. 117,700 3,602
Plum Creek Timber Co., Inc. (o) 64,400 2,224
PNC Financial Services Group, Inc. 68,300 3,636
Principal Financial Group, Inc. 62,000 2,423
Progressive Corp. (The) 61,900 5,650
Protective Life Corp. 7,600 291
Providian Financial Corp. (AE) 34,500 575
Prudential Financial, Inc. 83,800 4,789
Regency Centers Corp. (o) 11,900 627
Regions Financial Corp. 133,913 4,485
Ryder System, Inc. 87,000 3,213
Stancorp Financial Group, Inc. 8,900 681
Starwood Hotels & Resorts Worldwide, Inc. (o) 64,700 3,516
SunTrust Banks, Inc. 83,512 6,082
TCF Financial Corp. (N) 2,520 64
UnionBanCal Corp. (N) 121,500 7,480
United Rentals, Inc. (AE) 27,800 511
US Bancorp 305,918 8,535
Vornado Realty Trust (o) 27,100 2,072
W Holding Co., Inc. (N) 10,000 81
Wachovia Corp. 323,800 16,572
Washington Mutual, Inc. 340,700 14,078
WellChoice, Inc. (AE)(N) 13,900 781
Wells Fargo & Co. 516,600 30,965
WR Berkley Corp. 15,150 492
XL Capital, Ltd. Class A 10,800 759
------------
508,553
------------
Health Care - 14.4%
Abbott Laboratories 524,082 25,764
Aetna, Inc. 302,134 22,168
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Allergan, Inc. 77,700 5,469
AMERIGROUP Corp. (AE) 38,000 1,335
AmerisourceBergen Corp. 60,300 3,695
Amgen, Inc. (AE) 484,900 28,226
Bausch & Lomb, Inc. 17,400 1,305
Becton Dickinson & Co. 374,000 21,886
Biogen Idec, Inc. (AE) 44,900 1,627
Bristol-Myers Squibb Co. 242,800 6,313
Cardinal Health, Inc. 182,700 10,153
Caremark Rx, Inc. (AE) 23,100 925
Celgene Corp. (AE)(N) 19,600 743
Coventry Health Care, Inc. (AE) 87,450 5,984
CR Bard, Inc. 90,000 6,405
Edwards Lifesciences Corp. (AE) 75,100 3,307
Eli Lilly & Co. 7,700 450
Express Scripts, Inc. (AE) 9,900 887
Forest Laboratories, Inc. (AE) 215,700 7,696
Genzyme Corp. (AE) 86,400 5,064
Gilead Sciences, Inc. (AE) 259,700 9,635
Guidant Corp. 16,500 1,222
HCA, Inc. 135,700 7,577
Health Management Associates, Inc. Class A 30,000 742
Humana, Inc. (AE) 65,300 2,263
ImClone Systems, Inc. (AE) 134,900 4,297
IMS Health, Inc. 42,600 1,022
Johnson & Johnson 988,700 67,853
Lincare Holdings, Inc. (AE) 20,500 875
McKesson Corp. 133,420 4,937
Medarex, Inc. (AE)(N) 17,112 121
Medco Health Solutions, Inc. (AE) 86,800 4,424
Medtronic, Inc. 162,100 8,543
Merck & Co., Inc. 457,300 15,502
Pfizer, Inc. 1,659,387 45,086
Schering-Plough Corp. 237,000 4,946
St. Jude Medical, Inc. (AE) 95,200 3,716
UnitedHealth Group, Inc. 89,300 8,440
Varian Medical Systems, Inc. (AE) 74,000 2,497
Vertex Pharmaceuticals, Inc. (AE)(N) 21,300 203
Wyeth 90,200 4,054
------------
357,357
------------
Integrated Oils - 6.5%
Amerada Hess Corp. (N) 53,119 4,975
ChevronTexaco Corp. 466,200 24,242
</Table>
26 Quantitative Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ConocoPhillips 384,774 40,344
Exxon Mobil Corp. 1,416,008 80,754
Marathon Oil Corp. 61,668 2,872
Occidental Petroleum Corp. 93,900 6,479
------------
159,666
------------
Materials and Processing - 3.8%
American Standard Cos., Inc. 80,100 3,581
Archer-Daniels-Midland Co. 648,451 11,666
Ashland, Inc. 53,040 3,566
Bemis Co. 22,200 612
Brady Corp. Class A 10,100 299
Commercial Metals Co. 30,200 770
Dow Chemical Co. (The) 244,000 11,207
Ecolab, Inc. 65,300 2,136
EI Du Pont de Nemours & Co. 7,900 372
Energizer Holdings, Inc. (AE) 32,000 1,823
Georgia-Pacific Corp. (N) 187,600 6,429
Granite Construction, Inc. 21,700 490
Hughes Supply, Inc. (N) 26,600 694
Lone Star Technologies, Inc. (AE)(N) 29,600 1,153
Masco Corp. 171,900 5,413
Monsanto Co. 109,300 6,407
Newmont Mining Corp. 12,900 490
Nucor Corp. 308,075 15,743
OM Group, Inc. (AE)(N) 6,100 134
Phelps Dodge Corp. 88,100 7,563
Reliance Steel & Aluminum Co. (N) 20,100 758
Rohm & Haas Co. 30,000 1,310
Sherwin-Williams Co. (The) 65,900 2,937
Sigma-Aldrich Corp. 29,100 1,700
St. Joe Co. (The) 7,100 494
Stillwater Mining Co. (AE)(N) 14,900 109
United States Steel Corp. 135,700 5,803
Worthington Industries, Inc. (N) 56,700 922
------------
94,581
------------
Miscellaneous - 2.5%
3M Co. 6,200 474
Fortune Brands, Inc. 62,700 5,303
General Electric Co. 1,409,600 51,027
ITT Industries, Inc. 38,300 3,465
Tyco International, Ltd. 22,700 711
------------
60,980
------------
Other Energy - 2.2%
Anadarko Petroleum Corp. 96,700 7,063
Apache Corp. 43,800 2,466
Burlington Resources, Inc. 229,400 11,151
Devon Energy Corp. 93,700 4,232
EOG Resources, Inc. 45,600 2,168
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Equitable Resources, Inc. 9,800 565
Grey Wolf, Inc. (AE)(N) 53,000 318
Houston Exploration Co. (AE) 20,200 1,029
Pride International, Inc. (AE) 23,900 533
Sunoco, Inc. 105,900 10,512
Todco Class A (AE) 31,900 710
Valero Energy Corp. 87,300 5,983
XTO Energy, Inc. 228,433 6,892
------------
53,622
------------
Producer Durables - 4.4%
Ametek, Inc. 58,700 2,223
Boeing Co. 191,900 11,422
Caterpillar, Inc. 120,900 10,645
Centex Corp. 43,600 2,517
Danaher Corp. 20,000 1,013
DR Horton, Inc. 514,851 15,703
Hovnanian Enterprises, Inc. Class A (AE)(N) 11,300 574
Joy Global, Inc. 35,900 1,216
Lennar Corp. Class A 40,700 2,095
Lexmark International, Inc. Class A (AE) 22,800 1,583
Lockheed Martin Corp. 175,700 10,709
MDC Holdings, Inc. 15,700 1,026
Northrop Grumman Corp. 516,596 28,330
Pitney Bowes, Inc. 50,600 2,263
Plantronics, Inc. 9,400 296
Pulte Homes, Inc. 49,900 3,565
Standard-Pacific Corp. 24,400 1,747
Tektronix, Inc. 19,200 416
Toll Brothers, Inc. (AE) 8,200 622
United Technologies Corp. 108,700 11,057
------------
109,022
------------
Technology - 13.2%
Acxiom Corp. 105,500 2,005
Adobe Systems, Inc. 149,500 8,891
Adtran, Inc. (N) 35,500 736
Affiliated Computer Services, Inc. Class A (AE) 44,500 2,121
Altera Corp. (AE) 82,800 1,716
Amphenol Corp. Class A 38,600 1,522
Apple Computer, Inc. (AE) 295,364 10,651
Applied Micro Circuits Corp. (AE) 245,600 656
</Table>
Quantitative Equity Fund 27
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Autodesk, Inc. 343,900 10,946
Cisco Systems, Inc. (AE) 1,102,900 19,058
Cognizant Technology Solutions Corp. Class A
(AE) 12,900 533
Computer Sciences Corp. (AE) 182,200 7,922
Cree, Inc. (AE) 131,400 3,179
Dell, Inc. (AE) 478,300 16,659
EMC Corp. (AE) 863,300 11,326
General Dynamics Corp. 99,600 10,463
Harris Corp. 124,100 3,500
Hewlett-Packard Co. 603,700 12,358
Ingram Micro, Inc. Class A (AE) 221,600 3,692
Integrated Device Technology, Inc. (AE) 46,800 501
Intel Corp. 2,372,700 55,805
International Business Machines Corp. 122,947 9,391
Intersil Corp. Class A 15,361 268
Intuit, Inc. (AE) 55,900 2,253
Jabil Circuit, Inc. (AE) 131,700 3,635
L-3 Communications Holdings, Inc. 8,700 617
McAfee, Inc. (AE) 117,600 2,459
Micron Technology, Inc. (AE) 417,000 4,049
Micros Systems, Inc. (AE)(N) 17,100 678
Microsoft Corp. 2,286,602 57,850
Motorola, Inc. 695,600 10,671
National Semiconductor Corp. 57,900 1,105
NCR Corp. (AE) 123,000 4,059
Nvidia Corp. (AE) 38,200 838
Oracle Corp. (AE) 1,674,300 19,355
Parametric Technology Corp. (AE) 92,000 489
Qualcomm, Inc. (AE) 46,800 1,633
Raytheon Co. 161,100 6,059
Rockwell Automation, Inc. 101,300 4,683
Storage Technology Corp. (AE) 20,700 575
Symantec Corp. (AE) 270,100 5,072
Texas Instruments, Inc. 198,000 4,942
Veritas Software Corp. (AE) 9,200 189
Western Digital Corp. (AE) 130,900 1,661
------------
326,771
------------
Utilities - 5.5%
AES Corp. (The) (AE) 76,700 1,233
Alltel Corp. 115,400 6,573
AT&T Corp. 113,600 2,173
BellSouth Corp. (N) 332,700 8,813
CenturyTel, Inc. 189,100 5,803
Citizens Communications Co. (N) 80,800 1,030
Comcast Corp. Class A (AE) 422,200 13,557
Comcast Corp. Special Class A (AE) 42,300 1,342
Consolidated Edison, Inc. (N) 41,000 1,774
Constellation Energy Group, Inc. (N) 110,200 5,792
DTE Energy Co. 45,700 2,100
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Duke Energy Corp. 135,200 3,946
Edison International 342,641 12,438
Exelon Corp. 32,300 1,599
FirstEnergy Corp. 40,300 1,754
FPL Group, Inc. 31,500 1,286
National Fuel Gas Co. (N) 30,900 841
Nextel Partners, Inc. Class A (AE)(N) 131,200 3,086
Oneok, Inc. (N) 68,600 1,980
PG&E Corp. 186,600 6,479
SBC Communications, Inc. 382,400 9,101
Sempra Energy 97,500 3,937
Sierra Pacific Resources (AE) 120,100 1,299
Southern Co. (The) 27,200 896
Sprint Corp. 144,800 3,223
TXU Corp. 86,310 7,405
Verizon Communications, Inc. 734,976 26,312
Xcel Energy, Inc. (N) 54,000 929
------------
136,701
------------
TOTAL COMMON STOCKS
(cost $2,151,080) 2,345,858
------------
WARRANTS & RIGHTS - 0.0%
Lucent Technologies, Inc.
2007 Warrants (AE) 4,412 2
------------
TOTAL WARRANTS & RIGHTS
(cost $0) 2
------------
SHORT-TERM INVESTMENTS - 5.3%
Frank Russell Investment Company Money Market
Fund 124,380,000 124,380
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 7,000 6,980
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $131,360) 131,360
------------
</Table>
28 Quantitative Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 1.9%
Frank Russell Investment Company Money Market
Fund (X) 11,607,580 11,607
State Street Securities Lending Quality Trust
(X) 36,571,753 36,572
------------
TOTAL OTHER SECURITIES
(cost $48,179) 48,179
------------
TOTAL INVESTMENTS - 101.9%
(identified cost $2,330,619) 2,525,399
OTHER ASSETS AND LIABILITIES,
NET - (1.9%) (47,703)
------------
NET ASSETS - 100.0% 2,477,696
============
</Table>
<Table>
<Caption>
FUTURES CONTRACTS
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/05 (37) 11,550 (529)
S&P 500 E-Mini Index
expiration date 06/05 (490) 28,383 (471)
S&P 500 Index
expiration date 06/05 (167) 48,367 (451)
S&P Midcap 400 Index
expiration date 06/05 (144) 45,666 (1,887)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (3,338)
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Auto and Transportation 2.8
Consumer Discretionary 13.2
Consumer Staples 5.7
Financial Services 20.5
Health Care 14.4
Integrated Oils 6.5
Materials and Processing 3.8
Miscellaneous 2.5
Other Energy 2.2
Producer Durables 4.4
Technology 13.2
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Utilities 5.5
Warrants & Rights --*
Short-Term Investments 5.3
Other Securities 1.9
------------
Total Investments 101.9
Other Assets and Liabilities, Net (1.9)
------------
Net Assets 100.0
============
Futures Contracts 0.1
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 29
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,066.10 $ 1,013.99
Expenses Paid During
Period* $ 11.37 $ 11.09
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.22%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,069.90 $ 1,017.71
Expenses Paid During
Period* $ 7.54 $ 7.35
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.47%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,071.30 $ 1,019.00
Expenses Paid During
Period* $ 6.21 $ 6.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.21%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
30 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 88.3%
Australia - 3.8%
ABC Learning Centres, Ltd. 2,500 11
Amcor, Ltd. 1,096,500 5,585
AMP Ltd. 248,200 1,313
Ansell, Ltd. 6,000 44
Aristocrat Leisure, Ltd. 3,700 28
Australia & New Zealand Banking Group, Ltd. 169,918 2,874
Australian Gas Light Co., Ltd. 36,800 414
AXA Asia Pacific Holdings, Ltd. 67,400 226
BHP Billiton, Ltd. 551,687 6,969
Billabong International, Ltd. (N) 46,550 419
BlueScope Steel, Ltd. 215,500 1,292
Boral, Ltd. 16,400 74
Brambles Industries, Ltd. (N) 82,000 504
CFS Gandel Retail Trust 155,100 192
Coca-Cola Amatil, Ltd. 11,000 71
Coles Myer, Ltd. (N) 524,561 3,524
Commonwealth Bank of Australia 38,200 1,088
Commonwealth Property Office Fund 84,700 84
ConnectEast Group 244,125 128
CSL, Ltd. 37,125 922
CSR, Ltd. 118,400 222
David Jones, Ltd. (N) 112,300 154
DB RREEF Trust (o) 54,042 55
Downer EDI, Ltd. 58,917 209
Foster's Group, Ltd. 1,901,240 7,635
Futuris Corp., Ltd. (N) 64,300 95
General Property Trust 127,200 369
Harvey Norman Holdings, Ltd. (N) 215,900 418
Iluka Resources, Ltd. 4,400 20
ING Industrial Fund (N) 20,400 33
Insurance Australia Group, Ltd. 75,800 361
Lend Lease Corp., Ltd. 21,900 205
Lion Nathan, Ltd. (N) 27,700 158
Macquarie Airports 1,172,500 3,084
Macquarie Bank, Ltd. 123,420 4,438
Macquarie Goodman Group 12,300 38
Macquarie Infrastructure Group 390,600 1,114
Mayne Group, Ltd. 7,500 21
National Australia Bank, Ltd. 488,400 11,154
OneSteel, Ltd. 131,600 227
Orica, Ltd. 35,700 441
Origin Energy, Ltd. 5,900 32
PaperlinX, Ltd. (N) 125,710 279
Promina Group, Ltd. 579,269 2,323
Publishing & Broadcasting, Ltd. 95,240 1,066
Qantas Airways, Ltd. 48,300 122
QBE Insurance Group, Ltd. (N) 392,470 4,596
Rinker Group, Ltd. 344,020 3,073
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Rio Tinto, Ltd. (N) 21,200 688
Santos, Ltd. 40,100 290
Seek, Ltd. (AE)(N) 13,000 24
Sons of Gwalia, Ltd. (AE)(N)(B) 34,800 --
Stockland 38,200 175
Suncorp-Metway, Ltd. (N) 24,100 372
TABCORP Holdings, Ltd. 15,800 192
Telstra Corp., Ltd. (N) 1,052,024 3,983
Transurban Group 63,300 367
United Group, Ltd. (N) 26,600 172
Wesfarmers, Ltd. 19,682 555
Westfield Group (N) 193,176 2,462
Westpac Banking Corp. 83,300 1,269
WMC Resources, Ltd. 114,200 708
Woodside Petroleum, Ltd. 30,100 554
Woolworths, Ltd. 21,365 256
------------
79,771
------------
Austria - 0.7%
Bank Austria Creditanstalt AG (N) 21,900 2,020
BetandWin.com Interactive Entertainment AG
(AE)(N) 8,570 1,258
Erste Bank der Oesterreichischen Sparkassen AG 165,908 8,015
OMV AG (N) 1,825 561
Raiffeisen International Bank Holding AG (AE) 11,600 597
Telekom Austria AG (AE) 144,100 2,769
------------
15,220
------------
Belgium - 1.4%
Belgacom SA 50,400 1,934
Colruyt SA (N) 9,740 1,472
Compagnie Maritime Belge SA 1,400 53
Cumerio (AE) 3,500 47
Delhaize Group (N) 45,000 2,969
Dexia (N) 19,700 454
Electrabel (N) 11,714 5,444
Fortis (N) 307,310 8,529
Groupe Bruxelles Lambert SA (N) 5,400 487
KBC Group SA (N) 34,100 2,698
Mobistar SA (AE)(N) 29,700 2,530
Solvay SA Class A 19,000 2,162
Umicore 3,500 304
------------
29,083
------------
</Table>
International Securities Fund 31
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Brazil - 0.3%
Cia Vale do Rio Doce ADR 151,600 4,086
Petroleo Brasileiro SA ADR 34,850 1,461
Telecomunicacoes Brasileiras SA ADR (N) 46,700 1,309
------------
6,856
------------
Canada - 1.6%
Alcan, Inc. (N) 57,500 1,864
Bank of Montreal (N) 3 --
Bank of Nova Scotia (N) 94,033 2,988
Canadian National Railway Co. 99,800 5,716
Canadian Pacific Railway, Ltd. (AE) 59,100 2,064
EnCana Corp. (AE) 46,200 2,957
Inco, Ltd. (AE) 79,700 2,848
Manulife Financial Corp. (N) 57,400 2,631
Nexen, Inc. 17,500 838
Petro-Canada 90,200 5,008
Precision Drilling Corp. (AE) 40,500 2,923
Rogers Communications, Inc. Class B (N) 47,900 1,380
RONA, Inc. (AE) 28,300 544
SNC-Lavalin Group, Inc. (AE) 9,500 551
Talisman Energy, Inc. (N) 71,300 2,152
------------
34,464
------------
Cayman Islands - 0.1%
Seagate Technology (AE) 109,400 1,923
------------
China - 0.1%
China Shipping Development Co., Ltd. Class H 1,242,000 1,099
------------
Denmark - 0.4%
AP Moller - Maersk A/S Class B (N) 148 1,308
Danske Bank A/S Class R 121,631 3,563
DSV A/S (N) 2,150 164
East Asiatic Co., Ltd. A/S (N) 2,550 151
Novo-Nordisk A/S Class B 75,419 3,803
Novozymes A/S (N) 3,500 170
TDC A/S 3,300 141
------------
9,300
------------
Finland - 1.0%
Elisa Corp. Class S (N) 1,300 19
Fortum OYJ (N) 131,757 1,995
Kesko OYJ Class B (N) 6,300 152
M-real OYJ Class S (N) 350,700 1,900
Neste Oil OYJ (AE)(N) 32,939 736
Nokia OYJ (N) 251,750 4,023
Nokia OYJ ADR 364,550 5,826
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Orion OYJ Class B (N) 4,600 78
Pohjola Group PLC (N) 13,500 174
Rautaruukki OYJ 19,800 254
Sampo OYJ 104,500 1,457
Stora Enso OYJ Class R 1,800 24
UPM-Kymmene OYJ (N) 206,349 4,126
Wartsila OYJ Class S (AE) 5,100 135
------------
20,899
------------
France - 9.0%
Air Liquide SA (N) 37,995 6,781
Areva SA (AE) 300 119
Assurances Generales de France (N) 56,300 4,504
Axa SA (N) 444,053 10,947
BNP Paribas (N) 156,443 10,309
Bouygues (N) 33,400 1,331
Business Objects SA (AE) 82,303 2,133
Carrefour SA (N) 89,240 4,337
Christian Dior SA (N) 14,700 1,025
Cie de Saint-Gobain (N) 116,965 6,600
Cie Generale d'Optique Essilor International SA
(N) 28,100 2,007
CNP Assurances (N) 26,529 1,801
Compagnie Generale des Etablissements Michelin
Class B (N) 20,100 1,217
Credit Agricole SA (N) 310,336 8,035
Dassault Systemes SA (AE) 35,400 1,662
Eiffage (N) 2,300 270
France Telecom SA (N) 227,354 6,655
Groupe Danone (AE)(N) 105,219 9,861
Lafarge SA (N) 1,651 150
Lagardere SCA (N) 13,200 955
LVMH Moet Hennessy Louis
Vuitton SA 34,105 2,410
Pernod-Ricard (N) 23,400 3,545
Peugeot SA (N) 30,700 1,819
Renault SA (N) 40,700 3,409
Sanofi-Aventis Class S 3,196 282
Sanofi-Aventis (N) 135,831 12,028
Schneider Electric SA (N) 104,089 7,494
Societe BIC SA (N) 3,100 168
Societe Generale (N) 113,050 11,271
Societe Television Francaise 1 38,168 1,080
Technip SA (N) 11,100 1,882
Thales SA (AE)(N) 6,000 243
</Table>
32 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Thomson (N) 88,800 2,191
Total SA (N) 144,819 32,137
Total SA ADR (N) 27,636 3,065
Unibail 14,350 1,771
Valeo SA (N) 62,200 2,717
Vallourec (AE) 300 63
Veolia Environnement (AE)(N) 212,502 8,012
Vinci SA (N) 42,050 6,318
Vivendi Universal SA (AE)(N) 238,978 7,100
Zodiac SA (N) 2,000 97
------------
189,801
------------
Germany - 4.9%
Adidas-Salomon AG (N) 24,200 3,751
Allianz AG (N) 53,620 6,419
AMB Generali Holding AG (N) 4,000 328
BASF AG (N) 39,100 2,531
Bayer AG (N) 156,042 5,120
Bayerische Hypo-und Vereinsbank AG (AE) 380,418 9,005
Celesio AG (N) 14,800 1,173
Commerzbank AG (AE)(N) 27,400 602
Continental AG (N) 89,000 6,557
DaimlerChrysler AG (N) 13,600 534
Deutsche Bank AG 26,181 2,139
Deutsche Boerse AG (N) 35,361 2,674
Deutsche Lufthansa AG (AE)(N) 116,124 1,499
Deutsche Post AG 117,531 2,752
Deutsche Postbank AG (AE)(N) 35,544 1,658
Deutsche Telekom AG (N) 141,400 2,643
E.ON AG (N) 140,044 11,804
Fresenius Medical Care AG (N) 16,300 1,309
Hannover Rueckversicherung AG (N) 37,400 1,395
HeidelbergCement AG (AE) 2,426 138
HeidelbergCement AG 31,540 1,826
Heidelberger Druckmaschinen (AE)(N) 37,597 1,061
Infineon Technologies AG (AE)(N) 169,900 1,417
KarstadtQuelle AG (N) 185,886 1,794
Lanxess (AE)(N) 2,730 56
MAN AG (N) 87,400 3,677
Medion AG (N) 28,000 424
Merck KGaA (N) 50,300 3,851
Metro AG (N) 12,200 644
MLP AG (AE)(N) 2,600 42
Muenchener Rueckversicherungs-Gesellschaft AG
(N) 27,883 3,059
Premiere AG (AE) 5,612 215
Puma AG Rudolf Dassler Sport 3,632 836
RWE AG (N) 160,603 9,601
SAP AG (N) 10,300 1,620
Schering AG (N) 46,953 3,099
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Siemens AG 16,450 1,206
ThyssenKrupp AG (N) 15,000 276
TUI AG (N) 50,700 1,223
Volkswagen AG (N) 101,177 4,213
------------
104,171
------------
Greece - 0.6%
Alpha Bank AE 28,100 907
EFG Eurobank Ergasias SA 163,100 4,916
National Bank of Greece SA (AE) 51,200 1,715
OPAP SA 131,580 3,444
Public Power Corp. (AE) 23,300 626
------------
11,608
------------
Hong Kong - 2.0%
Bank of East Asia, Ltd. 665,460 1,955
BOC Hong Kong Holdings, Ltd. (N) 112,500 214
Cathay Pacific Airways, Ltd. (N) 56,000 107
Cheung Kong Holdings, Ltd. 64,800 613
China Mobile Hong Kong, Ltd. 529,000 1,847
Citic Pacific, Ltd. 94,600 286
CLP Holdings, Ltd. 60,500 344
CNOOC, Ltd. 8,653,000 4,661
COSCO Pacific, Ltd. (N) 668,000 1,454
Esprit Holdings, Ltd. 1,382,500 10,349
Hang Seng Bank, Ltd. 10,300 141
Henderson Land Development Co., Ltd. 10,000 47
HongKong Electric Holdings 778,000 3,561
Hopewell Holdings 91,000 222
Hutchison Telecommunications International, Ltd.
(AE) 861,000 818
Hutchison Whampoa, Ltd. (N) 147,000 1,318
Jardine Matheson Holdings, Ltd. 161,300 2,912
Kerry Properties, Ltd. (N) 80,000 175
Li & Fung, Ltd. 488,000 937
Melco International Development (AE) 436,000 1,129
MTR Corp. (N) 67,500 108
New World Development, Ltd. 1,236,000 1,340
Orient Overseas International, Ltd. (N) 44,000 212
PCCW, Ltd. (N) 514,000 305
Shangri-La Asia, Ltd. (N) 28,000 43
Sino Land Co. (N) 1,370,000 1,300
Sun Hung Kai Properties, Ltd. 51,000 490
Swire Pacific, Ltd. 141,300 1,187
Techtronic Industries Co. (N) 273,000 612
Television Broadcasts, Ltd. 15,000 75
Texwinca Holdings, Ltd. 32,000 27
</Table>
International Securities Fund 33
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Wharf Holdings, Ltd. 1,119,862 3,749
------------
42,538
------------
Hungary - 0.4%
Mol Magyar Olaj- es Gazipari Rt. (AE) 11,200 920
OTP Bank Rt GDR 49,805 3,110
OTP Bank Rt 109,500 3,367
------------
7,397
------------
Indonesia - 0.1%
Bank Central Asia Tbk PT 2,350,500 756
Telekomunikasi Indonesia Tbk PT 2,340,000 1,047
Telekomunikasi Indonesia Tbk PT ADR 6,742 121
------------
1,924
------------
Ireland - 0.8%
Allied Irish Banks PLC 109,900 2,236
Anglo Irish Bank Corp. PLC 192,400 2,212
Bank of Ireland 267,858 4,035
CRH PLC 140,040 3,485
Depfa Bank PLC (AE) 295,767 4,560
Ryanair Holdings PLC ADR (AE) 26,606 1,068
------------
17,596
------------
Israel - 0.1%
Bank Leumi Le-Israel BM 383,500 1,084
Check Point Software Technologies (AE) 4,900 100
------------
1,184
------------
Italy - 3.0%
Arnoldo Mondadori Editore SpA (N) 28,700 298
Autostrade SpA (N) 62,352 1,647
Banca Intesa SpA (N) 2,505,721 11,988
Banca Popolare di Milano SCRL (N) 14,900 142
Banche Popolari Unite SCRL (N) 52,521 1,113
Banco Popolare di Verona e Novara SCRL (N) 100,986 1,862
Benetton Group SpA (N) 153,241 1,411
Capitalia SpA (N) 20,400 109
CIR-Compagnie Industriali
Riunite SpA 54,800 144
Enel SpA (N) 66,200 628
ENI SpA (N) 819,589 20,584
ERG SpA 10,300 158
FASTWEB (AE) 35,179 1,577
Finmeccanica SpA 2,127,820 1,977
Fondiaria-Sai SpA (N) 32,000 822
Gruppo Editoriale L'Espresso SpA (N) 46,900 271
Hera SpA 84,800 238
Italcementi SpA (N) 53,000 863
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lottomatica SpA (N) 21,000 713
Mediaset SpA (N) 62,000 806
Milano Assicurazioni SpA (N) 62,500 383
Parmalat Finanziaria SpA (AE)(N) 42,200 6
Riunione Adriatica di Sicurta SpA (N) 245,790 5,355
Saipem SpA 181,200 2,265
Snam Rete Gas SpA (N) 269,600 1,517
Telecom Italia Media SpA (AE) 170,500 83
Telecom Italia SpA (N) 1,034,792 3,107
UniCredito Italiano SpA (N) 723,770 4,061
------------
64,128
------------
Japan - 17.9%
77 Bank, Ltd. (The) 304,800 2,071
Acom Co., Ltd. 1,760 113
Aeon Co., Ltd. 162,000 2,518
Aiful Corp. 48,100 3,595
Aiful Corp. (AE) 25,025 1,826
Aioi Insurance Co., Ltd. 72,000 373
Aisin Seiki Co., Ltd. 47,100 1,025
All Nippon Airways Co., Ltd. 35,000 113
Alps Electric Co., Ltd. (N) 108,300 1,702
Amano Corp. 7,000 77
Aoyama Trading Co., Ltd. 1,400 37
Arrk Corp. 14,800 579
Aruze Corp. 9,900 221
Asahi Breweries, Ltd. 8,300 106
Asahi Glass Co., Ltd. 551,000 6,111
Asahi Kasei Corp. (N) 30,000 145
Astellas Pharma, Inc. 38,604 1,403
Autobacs Seven Co., Ltd. (N) 2,700 88
Bandai Visual Co., Ltd. 25 86
Bank of Yokohama, Ltd. (The) 233,000 1,333
Belluna Co., Ltd. 4,455 145
Benesse Corp. 3,800 123
Bridgestone Corp. 267,000 5,131
BSL Corp. (N) 97,000 233
Canon, Inc. 424,800 22,156
Chiba Bank, Ltd. (The) 40,000 247
Chiyoda Corp. (N) 133,000 1,497
Chubu Electric Power Co., Inc. (N) 32,800 787
Chugai Pharmaceutical Co., Ltd. 107,000 1,672
Citizen Watch Co., Ltd. (N) 38,700 354
Cosmo Oil Co., Ltd. 51,000 170
Credit Saison Co., Ltd. (N) 81,050 2,775
Dai Nippon Printing Co., Ltd. 18,000 289
</Table>
34 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Daihatsu Motor Co., Ltd. 13,000 104
Daiichi Pharmaceutical Co., Ltd. 5,200 121
Daikin Industries, Ltd. 30,100 752
Daimaru, Inc. 27,000 236
Dainippon Ink and Chemicals, Inc. 9,000 24
Dainippon Screen Manufacturing Co., Ltd. (N) 90,000 611
Daito Trust Construction Co., Ltd. 50 2
Daiwa House Industry Co., Ltd. 107,000 1,202
Daiwa Securities Group, Inc. (N) 162,000 1,026
Denki Kagaku Kogyo Kabushiki Kaisha 32,000 111
Denso Corp. 3,700 87
Dentsu, Inc. (N) 569 1,455
Don Quijote Co., Ltd. (N) 10,500 641
East Japan Railway Co. 596 3,105
Eisai Co., Ltd. 165,300 5,508
Fast Retailing Co., Ltd. 15,700 930
Frontier Real Estate Investment Corp. (o) 20 131
Fuji Heavy Industries, Ltd. (N) 426,800 1,959
Fuji Photo Film Co., Ltd. 87,500 2,899
Fujitsu, Ltd. 229,000 1,264
Funai Electric Co., Ltd. (N) 16,100 1,813
Hachijuni Bank, Ltd. (The) 7,000 48
Hankyu Department Stores (N) 12,000 85
HIS Co., Ltd. 14,700 338
Hitachi Cable, Ltd. 6,000 26
Hitachi Chemical Co., Ltd. 7,800 134
Hitachi Kokusai Electric, Inc. 45,000 359
Hitachi Zosen Corp. (AE) 28,500 40
Hitachi, Ltd. 816,000 4,796
Hokkaido Electric Power Co., Inc. 7,100 143
Hokuhoku Financial Group, Inc. (N) 285,000 808
Hokuriku Electric Power Co. 200 4
Honda Motor Co., Ltd. 122,400 5,898
Hoya Corp. 14,600 1,527
Isuzu Motors, Ltd. (N) 65,000 167
Itochu Corp. 696,000 3,443
Ito-Yokado Co., Ltd. 23,700 814
Japan Logistics Fund, Inc. (AE)(o) 2 10
Japan Radio Co., Ltd. (AE)(N) 59,000 229
Japan Tobacco, Inc. 879 11,321
JFE Holdings, Inc. (N) 116,300 3,228
Joyo Bank, Ltd. (The) 21,000 105
JS Group Corp. 72,200 1,299
JSR Corp. 18,000 364
Kadokawa Holdings, Inc. (N) 21,900 815
Kaken Pharmaceutical Co., Ltd. (N) 9,000 65
Kamigumi Co., Ltd. 65,000 509
Kaneka Corp. 112,000 1,221
Kansai Electric Power Co., Inc. (The) (N) 40,900 823
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kao Corp. 114,700 2,638
Kawasaki Heavy Industries, Ltd. (N) 114,000 221
Kawasaki Kisen Kaisha, Ltd. (N) 185,000 1,208
KDDI Corp. 1,300 6,017
Keihin Corp. 5,400 91
Keio Electric Railway Co., Ltd. 56,000 317
Keyence Corp. 11,900 2,635
Kirin Brewery Co., Ltd. 9,000 88
Kobe Steel, Ltd. 757,000 1,369
Koei Co., Ltd. 15,500 410
Komatsu, Ltd. 166,000 1,173
Konica Minolta Holdings, Inc. 57,000 551
Koyo Seiko Co., Ltd. (N) 14,000 189
Kubota Corp. 56,000 290
Kuraray Co., Ltd. 145,200 1,345
Kyocera Corp. 4,700 344
Kyorin Pharmaceutical Co., Ltd. (N) 4,000 56
Kyowa Hakko Kogyo Co., Ltd. 40,000 297
Kyushu Electric Power Co., Inc. 18,600 400
Lawson, Inc. 31,200 1,212
Leopalace21 Corp. (N) 22,500 345
Livedoor Co., Ltd. (AE)(N) 137,485 421
Mabuchi Motor Co., Ltd. (N) 36,300 2,182
Makita Corp. (N) 12,000 227
Mars Engineering Corp. 9,200 299
Marubeni Corp. 135,000 441
Matsui Securities Co., Ltd. (AE) 68,000 918
Matsumotokiyoshi Co., Ltd. 41,100 1,163
Matsushita Electric Industrial Co., Ltd. 391,000 5,731
Matsushita Electric Works, Ltd. (AE) 13,000 110
Meiji Dairies Corp. (N) 27,000 150
Meitec Corp. 11,500 380
Millea Holdings, Inc. 228 3,108
Minebea Co., Ltd. (N) 428,000 1,704
Mitsubishi Chemical Corp. (N) 155,000 493
Mitsubishi Corp. (N) 21,000 288
Mitsubishi Electric Corp. (N) 72,000 382
Mitsubishi Estate Co., Ltd. (N) 31,000 333
Mitsubishi Gas Chemical Co., Inc. 22,000 108
Mitsubishi Heavy Industries, Ltd. 102,000 271
Mitsubishi Rayon Co., Ltd. (N) 192,000 726
Mitsubishi Securities Co., Ltd. (N) 70,000 584
Mitsubishi Tokyo Financial Group, Inc. 851 7,393
Mitsui & Co., Ltd. 175,000 1,665
Mitsui Engineering & Shipbuilding Co., Ltd. (N) 111,000 241
</Table>
International Securities Fund 35
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mitsui Fudosan Co., Ltd. 119,000 1,329
Mitsui OSK Lines, Ltd. 247,000 1,562
Mitsui Sumitomo Insurance Co., Ltd. 40,000 364
Mitsui Trust Holdings, Inc. 33,000 328
Mizuho Financial Group, Inc. 793 3,732
Murata Manufacturing Co., Ltd. 65,800 3,276
Namco, Ltd. (N) 4,400 59
NEC Corp. (N) 85,000 469
NET One Systems Co., Ltd. (N) 226 574
Nichirei Corp. 7,000 26
Nidec Copal Corp. (N) 9,500 124
Nidec Corp. (N) 9,000 1,057
Nikko Cordial Corp. 76,000 356
Nintendo Co., Ltd. 40,400 4,612
Nippon Electric Glass Co., Ltd. (N) 254,000 4,059
Nippon Express Co., Ltd. 734,900 3,571
Nippon Kayaku Co., Ltd. 6,000 34
Nippon Light Metal Co., Ltd. (N) 113,000 289
Nippon Meat Packers, Inc. 130,000 1,644
Nippon Mining Holdings, Inc. 157,500 951
Nippon Oil Corp. 175,000 1,232
Nippon Shokubai Co., Ltd. 3,000 27
Nippon Steel Corp. (N) 861,000 2,184
Nippon Telegraph & Telephone Corp. 833 3,489
Nippon Yusen Kabushiki Kaisha 400,000 2,368
Nishi-Nippon City Bank, Ltd. (The) 178,000 705
Nissan Motor Co., Ltd. 356,600 3,523
Nissen Co., Ltd. 7,800 103
Nissha Printing Co., Ltd. 16,000 262
Nisshin Seifun Group, Inc. 4,000 42
Nisshin Steel Co., Ltd. 120,000 309
Nisshinbo Industries, Inc. 7,000 55
Nitto Denko Corp. 99,700 5,448
NOK Corp. (N) 18,000 472
Nomura Holdings, Inc. 48,000 611
NS Solutions Corp. 9,400 193
NSK, Ltd. 72,000 356
NTT DoCoMo, Inc. 195 302
NTT Urban Development Corp. 83 374
Obayashi Corp. 21,000 123
OJI Paper Co., Ltd. (N) 105,000 561
Olympus Corp. (N) 11,000 223
Ono Pharmaceutical Co., Ltd. 2,000 102
Onward Kashiyama Co., Ltd. 2,000 26
ORIX Corp. 74,300 10,132
Otsuka Corp. 400 30
Parco Co., Ltd. 49,000 329
Promise Co., Ltd. 37,850 2,453
Renown D'urban Holdings, Inc. (AE) 18,700 176
Resona Holdings, Inc. (AE) 66,000 125
Ricoh Co., Ltd. (N) 78,000 1,246
Rinnai Corp. (N) 84,900 2,175
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Rohm Co., Ltd. 26,000 2,454
Sanken Electric Co., Ltd. (N) 50,000 678
Sankyo Co., Ltd. 21,500 577
Sanyo Electric Co., Ltd. (N) 103,000 297
Sanyo Shinpan Finance Co., Ltd. 11,900 807
Sega Sammy Holdings, Inc. 74,900 4,377
Seino Transportation Co., Ltd. 17,000 162
Sekisui Chemical Co., Ltd. 325,000 2,358
Sekisui House, Ltd. 351,700 3,723
Senshukai Co., Ltd. (N) 13,000 116
SFCG Co., Ltd. (N) 3,710 955
Shimachu Co., Ltd. 4,500 116
Shin-Etsu Chemical Co., Ltd. Class D 69,400 2,568
Shinko Electric Industries Co., Ltd. (N) 2,900 100
Shinsei Bank, Ltd. 550,000 2,987
Shiseido Co., Ltd. (N) 12,000 153
Shizuoka Bank, Ltd. (The) (N) 68,000 634
Showa Denko KK 78,000 198
Showa Shell Sekiyu KK (N) 19,900 200
Skylark Co., Ltd. (N) 119,000 1,979
SMC Corp. 5,900 622
Softbank Corp. (N) 28,700 1,156
Sohgo Security Services Co., Ltd. 70,390 1,019
Sompo Japan Insurance, Inc. 37,000 360
Sony Corp. 47,100 1,738
Stanley Electric Co., Ltd. (N) 47,700 775
STB Leasing Co., Ltd. (N) 14,900 265
Sumisho Lease Co., Ltd. 24,800 900
Sumitomo Bakelite Co., Ltd. (N) 280,700 1,752
Sumitomo Chemical Co., Ltd. 389,700 1,996
Sumitomo Corp. 98,000 830
Sumitomo Electric Industries, Ltd. 83,000 868
Sumitomo Forestry Co., Ltd. 68,000 619
Sumitomo Heavy Industries, Ltd. (N) 554,000 2,254
Sumitomo Metal Industries, Ltd. 861,000 1,527
Sumitomo Mitsui Financial Group, Inc. (N) 1,633 10,559
Sumitomo Osaka Cement Co., Ltd. 240,000 610
Sumitomo Rubber Industries, Inc. 49,000 478
Sumitomo Trust & Banking Co., Ltd. (The) 42,000 263
Suzuken Co., Ltd. 200 5
Suzuki Motor Corp. 87,800 1,500
T&D Holdings, Inc. 37,050 1,832
Taiheiyo Cement Corp. 56,000 157
Taisei Corp. 5,000 18
</Table>
36 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Taiyo Nippon Sanso Corp. 8,000 45
Takashimaya Co., Ltd. (N) 10,000 89
Takeda Pharmaceutical Co., Ltd. 257,900 12,569
Takefuji Corp. 51,880 3,285
Tanabe Seiyaku Co., Ltd. 4,000 42
TDK Corp. 16,500 1,156
Teijin, Ltd. (N) 58,000 263
Telewave, Inc. (AE) 87 382
Terumo Corp. 128,400 3,824
Tobu Railway Co., Ltd. 19,000 71
Toda Corp. 5,000 25
Tohoku Electric Power Co., Inc. 11,100 214
Tokai Rika Co., Ltd. 14,000 229
Tokyo Electric Power Co., Inc. (The) 141,500 3,398
Tokyo Gas Co., Ltd. (N) 1,456,000 5,839
Tokyo Tomin Bank, Ltd. (The) 12,500 361
Toppan Printing Co., Ltd. (N) 27,000 295
Toray Industries, Inc. 524,000 2,341
Toshiba Corp. (N) 158,000 648
Toyo Seikan Kaisha, Ltd. (N) 17,000 313
Toyobo Co., Ltd. 45,000 106
Toyoda Gosei Co., Ltd. (N) 93,300 1,705
Toyota Motor Corp. 649,300 23,644
Toyota Tsusho Corp. 6,000 100
Trend Micro, Inc. 36,000 1,324
UFJ Holdings, Inc. 420 2,213
Uniden Corp. (N) 32,000 645
UNY Co., Ltd. 70,000 814
USS Co., Ltd. 6,620 524
West Japan Railway Co. 541 2,008
World Co., Ltd. 3,000 100
Xebio Co., Ltd. 7,500 226
Yahoo! Japan Corp. (N) 180 403
Yamada Denki Co., Ltd. (N) 54,400 2,617
Yamaha Motor Co., Ltd. 157,000 2,758
Yamato Transport Co., Ltd. 203,000 2,687
Yamazaki Baking Co., Ltd. 10,000 89
Yokogawa Electric Corp. (N) 34,000 444
York-Benimaru Co., Ltd. 14,000 402
------------
376,127
------------
Luxembourg - 0.3%
Arcelor (N) 123,040 2,491
Arcelor 60,000 1,235
SES Global 103,351 1,415
------------
5,141
------------
Mexico - 0.7%
America Movil SA de CV ADR Class L 39,600 1,966
Coca-Cola Femsa SA de CV ADR (N) 67,500 1,541
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Grupo Televisa SA ADR (AE) 148,800 8,360
Telefonos de Mexico SA de CV ADR 49,850 1,690
Wal-Mart de Mexico SA de CV 396,000 1,468
------------
15,025
------------
Netherlands - 4.3%
ABN AMRO Holding NV (N) 130,332 3,190
Aegon NV (N) 214,634 2,693
Akzo Nobel NV (N) 16,600 682
ASML Holding NV Class G (AE) 133,500 1,934
Buhrmann NV (N) 80,700 719
CSM Class A 6,400 188
DSM NV 24,200 1,625
European Aeronautic Defense and Space Co. (N) 246,100 7,005
Heineken Holding NV Class A 2,035 58
Heineken NV (N) 80,800 2,568
ING Groep NV (N) 706,930 19,383
Koninklijke Ahold NV (AE) 680,500 5,164
Koninklijke Philips Electronics NV 297,930 7,425
OCE NV (N) 11,200 167
Randstad Holdings NV 41,300 1,682
Reed Elsevier NV (N) 517,389 7,447
Rodamco Europe NV (N) 14,000 1,058
Royal Dutch Petroleum Co. (N) 260,482 15,192
Royal KPN NV 40,400 337
Royal Numico NV (AE) 228,360 9,457
Royal P&O Nedlloyd NV (AE)(N) 4,900 239
TNT NV 13,700 373
Vedior NV (N) 900 14
Wolters Kluwer NV 149,461 2,661
------------
91,261
------------
New Zealand - 0.3%
Carter Holt Harvey, Ltd. 757,050 1,030
Sky City Entertainment Group, Ltd. (N) 26,600 86
Telecom Corp. of New Zealand, Ltd. 1,189,841 5,279
------------
6,395
------------
Norway - 0.7%
Aker Kvaerner ASA (AE) 28,400 1,013
DNB NOR ASA (N) 632,363 6,033
Norsk Hydro ASA (N) 17,400 1,371
Petroleum Geo-Services ASA (AE)(N) 24,100 1,452
</Table>
International Securities Fund 37
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Statoil ASA (N) 237,800 4,187
Yara International ASA (AE)(N) 17,400 232
------------
14,288
------------
Poland - 0.1%
Powszechna Kasa Oszczednosci Bank Polski SA (AE) 166,888 1,265
------------
Portugal - 0.1%
Energias de Portugal SA (N) 557,090 1,507
------------
Russia - 0.1%
OAO Gazprom ADR 900 30
Vimpel-Communications ADR (AE)(N) 41,200 1,348
------------
1,378
------------
Singapore - 1.1%
CapitaLand, Ltd. (N) 304,000 474
City Developments, Ltd. 82,000 346
ComfortDelgro Corp., Ltd. 16,000 17
DBS Group Holdings, Ltd. 597,240 5,225
Flextronics International, Ltd. (AE) 130,600 1,456
Fraser and Neave, Ltd. 19,000 180
Hyflux, Ltd. (AE) 44,000 91
Jardine Cycle & Carriage, Ltd. 25,000 187
Keppel Corp., Ltd. (N) 437,000 2,860
Keppel Land, Ltd. (N) 20,000 31
MobileOne, Ltd. 202,000 253
NatSteel, Ltd. 50,000 68
Neptune Orient Lines, Ltd. 94,000 196
Oversea-Chinese Banking Corp. 288,000 2,364
Parkway Holdings, Ltd. 286,000 291
SembCorp Industries, Ltd. 48,000 58
Singapore Airlines, Ltd. 23,000 158
Singapore Telecommunications, Ltd. 4,509,430 7,060
SMRT Corp., Ltd. 14,000 8
United Overseas Bank, Ltd. 276,900 2,424
United Overseas Land, Ltd. (N) 27,000 37
Venture Corp., Ltd. 35,000 298
------------
24,082
------------
South Africa - 0.1%
MTN Group, Ltd. 163,100 1,156
Nedcor, Ltd. 125,918 1,555
------------
2,711
------------
South Korea - 0.7%
Korea Electric Power Corp. ADR (N) 125,800 1,862
KT Corp. ADR 75,900 1,532
LG.Philips LCD Co., Ltd. (AE) 99,700 4,617
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
POSCO 3,500 634
Samsung Electronics Co., Ltd. 14,194 6,512
------------
15,157
------------
Spain - 3.9%
Acciona SA (N) 3,000 258
Acerinox SA (N) 31,000 462
ACS Actividades Cons y Serv 135,693 3,310
Altadis SA (N) 196,604 8,344
Amadeus Global Travel Distribution SA Class A 98,800 923
Antena 3 de Television SA 15,200 303
Banco Bilbao Vizcaya Argentaria SA (N) 488,884 7,573
Banco de Sabadell SA (N) 130,680 3,265
Banco Popular Espanol SA (N) 53,800 3,352
Banco Santander Central Hispano SA (N) 425,839 4,972
Bankinter SA (N) 11,500 556
Cia de Distribucion Integral Logista SA 1,700 85
Corp Mapfre SA (N) 91,710 1,365
Ebro Puleva SA (N) 20,400 344
Endesa SA (N) 326,765 7,140
Fomento de Construcciones y Contratas SA (N) 5,600 303
Gestevision Telecinco SA (N) 51,100 1,169
Grupo Ferrovial SA (N) 17,600 1,003
Iberdrola SA (N) 325,272 8,482
Iberia Lineas Aereas de Espana (N) 137,100 424
Indra Sistemas SA 79,600 1,378
Repsol YPF SA (N) 163,900 4,166
Repsol YPF SA ADR (N) 102,316 2,588
Sociedad General de Aguas de Barcelona SA Class
A 2,400 49
Telefonica SA (N) 1,122,404 19,086
Union Fenosa SA 56,900 1,708
------------
82,608
------------
Sweden - 2.5%
Atlas Copco AB Class A (N) 109,000 4,955
Billerud AB (N) 13,900 188
Electrolux AB (N) 117,950 2,384
Elekta AB (AE) 4,800 168
Gambro AB Class A (N) 10,400 140
Hennes & Mauritz AB Class B (N) 290,111 10,012
</Table>
38 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lundin Petroleum AB (AE)(N) 26,000 195
Nordea Bank AB (N) 340,700 3,235
OMX AB (AE)(N) 6,400 74
Sandvik AB (N) 151,600 5,941
Securitas AB Class B (N) 140,752 2,261
Skandia Forsakrings AB (N) 440,470 2,071
Skandinaviska Enskilda Banken AB Class A (N) 27,200 480
Skanska AB Class B (N) 29,500 355
Svenska Cellulosa AB Class B (N) 115,780 4,030
Svenska Handelsbanken Class A (N) 100,949 2,270
Swedish Match AB (N) 1,400 17
Tele2 AB Class B (N) 5,600 177
Telefonaktiebolaget LM Ericsson Class B (N) 3,841,217 11,391
TeliaSonera AB (N) 78,500 411
Volvo AB Class A (N) 6,000 234
Volvo AB Class B (N) 52,200 2,117
------------
53,106
------------
Switzerland - 5.6%
ABB, Ltd. (AE) 366,167 2,274
Adecco SA (N) 8,700 420
Ciba Specialty Chemicals AG 50,321 3,150
Compagnie Financiere Richemont AG Class A (AE) 78,444 2,337
Credit Suisse Group (AE)(N) 308,094 12,969
Georg Fischer AG (AE) 1,051 306
Givaudan (N) 2,660 1,674
Holcim, Ltd. (N) 11,400 693
Kuehne & Nagel International AG 4,132 846
Kuoni Reisen Holding (AE) 100 39
Lonza Group AG (N) 21,623 1,302
Micronas Semiconductor Holding AG (AE) 16,400 595
Nestle SA (N) 48,002 12,605
Novartis AG 253,930 12,357
PubliGroupe SA (N) 341 101
Rieter Holding AG (N) 923 259
Roche Holding AG 210,526 25,469
Schindler Holding AG (N) 400 146
Straumann Holding AG 4,856 1,048
Sulzer AG (N) 1,994 809
Swatch Group AG (AE) 34,635 909
Swiss Life Holding (AE)(N) 171 24
Swiss Reinsurance (N) 44,420 2,945
Swisscom AG (N) 4,615 1,593
Syngenta AG (AE) 28,182 2,915
Synthes, Inc. 36,027 4,086
UBS AG (N) 295,767 23,714
Valora Holding AG (N) 319 70
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Xstrata PLC 167,380 2,880
Zurich Financial Services AG (AE) 11,129 1,880
------------
120,415
------------
Taiwan - 0.8%
AU Optronics Corp. ADR (AE) 378,500 6,139
Chi Mei Optoelectronics Corp. 3,174,000 5,440
Taiwan Semiconductor Manufacturing Co., Ltd. ADR 290,700 2,503
United Microelectronics Corp. ADR (AE)(N) 569,271 1,850
------------
15,932
------------
Thailand - 0.1%
Bangkok Bank PCL 504,800 1,374
Siam City Bank PCL (N) 883,100 528
------------
1,902
------------
Turkey - 0.1%
Turkcell Iletisim Hizmet AS 162,999 1,001
Turkiye Garanti Bankasi AS (AE) 302,100 1,076
------------
2,077
------------
United Kingdom - 18.4%
3i Group PLC 318,278 3,889
Alliance & Leicester PLC 18,300 289
Alliance Unichem PLC 66,000 1,006
Amvescap PLC 457,169 2,658
Anglo American PLC 137,812 3,071
Arriva PLC 41,500 401
Associated British Foods PLC 115,400 1,621
AstraZeneca PLC 313,260 13,728
Aviva PLC 823,726 9,297
AWG PLC 22,000 367
BAA PLC 144,700 1,603
BAE Systems PLC 1,189,656 5,809
Barclays PLC 789,166 8,128
Barratt Developments PLC 38,300 436
Berkeley Group Holdings PLC (AE) 4,500 66
BG Group PLC 1,467,098 11,340
BHP Billiton PLC 216,700 2,641
BOC Group PLC 350,285 6,491
Boots Group PLC 778,511 8,949
BP PLC 3,019,123 30,752
Bradford & Bingley PLC (N) 78,200 456
Brambles Industries PLC 789,796 4,406
</Table>
International Securities Fund 39
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Britannic Group PLC 15,000 130
British Airways PLC (AE) 103,100 471
British American Tobacco PLC 113,500 2,124
British Land Co. PLC 152,400 2,386
British Sky Broadcasting PLC 114,683 1,187
BT Group PLC 1,343,275 5,133
Bunzl PLC 182,523 1,781
Cable & Wireless PLC 221,000 507
Cairn Energy PLC (AE) 3,000 67
Capita Group PLC 849,500 6,112
Carnival PLC 139,142 7,183
Cattles PLC 8,100 47
Centrica PLC 437,410 1,856
Colt Telecom Group PLC (N)(AE) 9,500 9
Compass Group PLC 30,700 137
Corus Group PLC (AE) 646,666 539
Davis Service Group PLC 2,400 20
Diageo PLC 517,219 7,657
Dixons Group PLC 13,800 38
EMI Group PLC 129,300 588
Firstgroup PLC 44,000 268
GKN PLC 1,160,511 5,116
GlaxoSmithKline PLC 1,159,542 29,185
GUS PLC 133,500 2,128
HBOS PLC 685,368 10,129
Hilton Group PLC 678,101 3,543
HMV Group PLC 160,700 697
HSBC Holdings PLC 690,758 11,042
HSBC Holdings PLC (N) 33,877 545
Imperial Chemical Industries PLC 195,000 941
Imperial Tobacco Group PLC 244,900 7,007
Inchcape PLC 20,500 696
Intercontinental Hotels Group PLC 302,164 3,590
ITV PLC 399,055 924
J Sainsbury PLC 472,615 2,552
Kelda Group PLC 34,400 415
Kesa Electricals PLC 244,228 1,240
Kingfisher PLC 925,249 4,361
Land Securities Group PLC 13,800 351
Legal & General Group PLC 88,600 177
Lloyds TSB Group PLC 1,122,197 9,637
Man Group PLC 2,100 49
Marconi Corp. PLC (AE) 11,000 55
Marks & Spencer Group PLC 334,500 2,159
Meggitt PLC 88,000 433
MFI Furniture PLC 29,900 58
Mitchells & Butlers PLC 522,626 2,992
Next PLC 94,090 2,666
Northern Foods PLC 230,200 677
O2 PLC (AE) 434,100 975
Old Mutual PLC 578,300 1,394
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Peninsular and Oriental Steam Navigation Co.
(The) 21,000 108
Pennon Group PLC 21,000 394
Persimmon PLC 107,000 1,385
Pilkington PLC 157,000 325
Prudential PLC 231,622 2,089
Punch Taverns PLC 292,440 3,536
Reckitt Benckiser PLC 349,597 11,351
Reed Elsevier PLC 23,300 228
Reuters Group PLC 389,800 2,871
Rexam PLC 143,541 1,262
Rio Tinto PLC 306,413 9,241
Rolls-Royce Group PLC 184,756 839
Rolls-Royce Group PLC Class B 9,237,800 18
Royal & Sun Alliance Insurance Group 917,414 1,327
Royal Bank of Scotland Group PLC 375,403 11,326
SABMiller PLC 80,400 1,192
Scottish & Newcastle PLC 25,400 221
Scottish & Southern Energy PLC 138,600 2,487
Scottish Power PLC 76,700 621
Shell Transport & Trading Co. PLC 1,528,797 13,691
Shire Pharmaceuticals PLC 51,300 533
Smith & Nephew PLC 207,548 2,137
Somerfield PLC 90,000 340
Sportingbet PLC (AE) 155,200 845
SSL International PLC 21,000 110
Stagecoach Group PLC 206,162 408
Standard Chartered PLC 136,960 2,470
Tate & Lyle PLC 255,000 2,265
Taylor Woodrow PLC 247,397 1,357
Tesco PLC 695,300 4,103
Trinity Mirror PLC 133,300 1,626
Unilever PLC 784,841 7,470
United Business Media PLC 53,263 505
United Utilities PLC (N) 25,900 315
United Utilities PLC 71,001 612
Vodafone Group PLC 10,326,475 26,954
Whitbread PLC (N) 94,890 1,543
William Hill PLC 431,334 4,441
Wimpey George PLC 218,300 1,630
Wolseley PLC 3,000 60
WPP Group PLC 51,500 560
Yell Group PLC 322,548 2,475
------------
388,649
------------
</Table>
40 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States - 0.2%
Transocean, Inc. (AE) 68,600 3,181
------------
TOTAL COMMON STOCKS
(cost $1,609,558) 1,861,169
------------
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.1%
Belgium - 0.1%
Bel 20 Index Futures
May 2005 3,156.47 (EUR) Call (247) 10,033 1,589
------------
Switzerland - 0.0%
Swiss Market Index
Jun 2005 5,925.17 (CHF) Put (174) 8,625 834
Jun 2005 5,869.19 (CHF) Put (39) 1,915 169
------------
1,003
------------
TOTAL OPTIONS PURCHASED
(cost $2,512) 2,592
------------
</Table>
<Table>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
<Caption>
PREFERRED STOCKS - 0.3%
Brazil - 0.1%
Banco Itau Holding Financeira SA 6,750 1,180
------------
Germany - 0.2%
Fresenius AG 21,300 2,483
Fresenius Medical Care AG (N) 5,000 288
Henkel KGaA (N) 21,600 1,865
Invesco Perpetual UK Smaller Companies
Investment Trust PLC 8,100 139
------------
4,775
------------
Italy - 0.0%
Unipol SpA 108,600 383
------------
TOTAL PREFERRED STOCKS
(cost $5,273) 6,338
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
WARRANTS & RIGHTS - 0.1%
Hong Kong - 0.0%
Kingboard Chemical Holdings, Ltd.
2006 Warrants (AE) 1,800 2
------------
Japan - 0.0%
BSL Corp.
2010 Rights (AE) 9,700 3
------------
Luxembourg - 0.1%
Bharti Televentures
2009 Warrants (AE) 213,700 988
Satyam Computer Services, Ltd.
2007 Warrants (AE) 150,400 1,411
------------
2,399
------------
TOTAL WARRANTS & RIGHTS
(cost $2,427) 2,404
------------
SHORT-TERM INVESTMENTS - 9.8%
United States - 9.8%
Frank Russell Investment Company Money Market
Fund 188,794,000 188,794
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 10,000 9,971
2.710% due 07/14/05 7,000 6,953
------------
205,718
------------
Switzerland - 0.0%
Credit Suisse Group Finance Guernsey, Ltd.
6.000% due 12/23/05 97 113
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $205,804) 205,831
------------
</Table>
International Securities Fund 41
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 26.0%
Frank Russell Investment Company Money Market
Fund (X) 131,810,523 131,810
State Street Securities Lending Quality Trust
(X) 415,292,593 415,293
------------
TOTAL OTHER SECURITIES
(cost $547,103) 547,103
------------
TOTAL INVESTMENTS - 124.6%
(identified cost $2,372,677) 2,625,437
OTHER ASSETS AND LIABILITIES,
NET - (24.6)% (518,419)
------------
NET ASSETS - 100.0% 2,107,018
============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
42 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
AEX Index (Netherlands)
expiration date 05/05 (231) 20,708 (1,214)
CAC-40 Index (France)
expiration date 05/05 (400) 20,072 (838)
expiration date 06/05 (247) 12,240 (459)
DAX Index (Germany)
expiration date 06/05 (144) 19,556 (678)
EUR STOXX 50 Index (EMU)
expiration date 06/05 (1,195) 44,861 (1,455)
FTSE-100 Index (UK)
expiration date 06/05 (579) 53,036 (1,658)
Hang Seng Index (Hong Kong)
expiration date 05/05 (47) 4,139 (13)
IBEX Plus Index (Spain)
expiration date 05/05 (15) 1,732 (63)
SPI 200 Index (Australia)
expiration date 06/05 (136) 10,584 (537)
TOPIX Index (Japan)
expiration date 06/05 (380) 40,675 (2,097)
Short Positions
DAX Index (Germany)
expiration date 06/05 (3) 407 13
Hang Seng Index (Hong Kong)
expiration date 05/05 (26) 2,290 (7)
MIB-30 (Italy)
expiration date 06/05 (11) 2,169 73
SPI 200 Index (Australia)
expiration date 06/05 (53) 4,125 167
TOPIX Index (Japan)
expiration date 06/05 (106) 11,345 524
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (8,242)
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Belgium
Bel 20 Index Futures
May 2005 3,156.47 (EUR) Put (247) 10,033 (2,007)
Switzerland
Swiss Market Index
June 2005 5,925.17 (CHF) Call (174) 8,625 (728)
June 2005 5,869.19 (CHF) Call (39) 1,915 (163)
---------------
Total Liability for Options Written
(premiums received $2,507) (2,898)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 43
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 155 AUD 200 05/02/05 1
USD 65 AUD 84 05/03/05 --
USD 171 AUD 219 05/03/05 --
USD 11 AUD 14 05/04/05 --
USD 25 AUD 32 05/04/05 --
USD 28 AUD 35 05/04/05 --
USD 40 AUD 51 05/04/05 --
USD 1,051 AUD 1,350 05/20/05 1
USD 388 AUD 500 06/15/05 1
USD 390 AUD 500 06/15/05 (1)
USD 392 AUD 500 06/15/05 (3)
USD 395 AUD 500 06/15/05 (6)
USD 471 AUD 600 06/15/05 (4)
USD 471 AUD 600 06/15/05 (4)
USD 761 AUD 1,000 06/15/05 17
USD 769 AUD 1,000 06/15/05 9
USD 933 AUD 1,200 06/15/05 --
USD 1,175 AUD 1,500 06/15/05 (8)
USD 3,530 AUD 4,500 06/15/05 (28)
USD 18,209 AUD 23,141 06/15/05 (198)
USD 816 CHF 973 05/02/05 (2)
USD 75 CHF 89 05/03/05 (1)
USD 350 CHF 417 05/03/05 (1)
USD 1,403 CHF 1,673 05/03/05 (3)
USD 408 CHF 486 05/04/05 (1)
USD 412 CHF 490 05/20/05 (2)
USD 2,713 CHF 3,105 06/15/05 (107)
USD 4,092 CHF 4,803 06/15/05 (61)
USD 14,973 CHF 17,564 06/15/05 (233)
USD 276 DKK 1,580 05/20/05 (2)
USD 47 DKK 269 06/15/05 --
USD 723 DKK 3,992 06/15/05 (32)
USD 143 EUR 110 05/02/05 (1)
USD 415 EUR 321 05/02/05 (2)
USD 799 EUR 616 05/02/05 (6)
USD 682 EUR 529 05/03/05 (1)
USD 42 EUR 33 05/04/05 --
USD 312 EUR 242 05/04/05 (1)
USD 4,419 EUR 3,400 05/20/05 (41)
USD 258 EUR 200 06/15/05 --
USD 1,284 EUR 1,000 06/15/05 4
USD 1,289 EUR 1,000 06/15/05 --
USD 1,291 EUR 1,000 06/15/05 (2)
USD 1,293 EUR 1,000 06/15/05 (4)
USD 1,299 EUR 1,000 06/15/05 (10)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 1,299 EUR 1,000 06/15/05 (10)
USD 1,310 EUR 1,000 06/15/05 (21)
USD 1,334 EUR 1,000 06/15/05 (46)
USD 1,344 EUR 1,000 06/15/05 (55)
USD 2,020 EUR 1,500 06/15/05 (87)
USD 2,570 EUR 2,000 06/15/05 7
USD 2,582 EUR 2,000 06/15/05 (5)
USD 2,599 EUR 2,000 06/15/05 (22)
USD 2,617 EUR 2,000 06/15/05 (40)
USD 2,675 EUR 2,000 06/15/05 (98)
USD 2,688 EUR 2,000 06/15/05 (111)
USD 2,965 EUR 2,200 06/15/05 (131)
USD 3,862 EUR 3,000 06/15/05 4
USD 4,558 EUR 3,500 06/15/05 (48)
USD 5,195 EUR 4,000 06/15/05 (41)
USD 15,117 EUR 11,250 06/15/05 (621)
USD 32,321 EUR 24,000 06/15/05 (1,396)
USD 35,398 EUR 27,253 06/15/05 (281)
USD 75 GBP 39 05/03/05 --
USD 509 GBP 267 05/04/05 --
USD 73 GBP 38 05/05/05 --
USD 155 GBP 81 05/05/05 --
USD 1,505 GBP 788 05/05/05 (3)
USD 1,329 GBP 700 05/20/05 5
USD 934 GBP 500 06/15/05 17
USD 951 GBP 500 06/15/05 1
USD 957 GBP 500 06/15/05 (6)
USD 960 GBP 500 06/15/05 (9)
USD 1,866 GBP 1,000 06/15/05 37
USD 1,871 GBP 1,000 06/15/05 32
USD 1,876 GBP 1,000 06/15/05 26
USD 3,766 GBP 2,000 06/15/05 39
USD 3,814 GBP 2,000 06/15/05 (9)
USD 4,117 GBP 2,150 06/15/05 (26)
USD 7,380 GBP 3,858 06/15/05 (39)
USD 13,018 GBP 6,800 06/15/05 (78)
USD 20,577 GBP 10,750 06/15/05 (122)
USD 58,144 GBP 30,363 06/15/05 (368)
USD 15 HKD 120 05/03/05 --
USD 421 HKD 3,287 05/03/05 --
USD 820 HKD 6,393 05/03/05 --
USD 20 HKD 157 05/04/05 --
USD 108 HKD 845 05/04/05 --
USD 1,029 HKD 8,010 06/15/05 --
USD 4 JPY 466 05/02/05 --
</Table>
See accompanying notes which are an integral part of the financial statements.
44 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 6 JPY 681 05/02/05 --
USD 10 JPY 1,102 05/02/05 --
USD 11 JPY 1,146 05/02/05 --
USD 41 JPY 4,299 05/02/05 --
USD 94 JPY 9,934 05/02/05 1
USD 338 JPY 35,816 05/02/05 3
USD 6 JPY 683 05/06/05 --
USD 9 JPY 934 05/06/05 --
USD 11 JPY 1,143 05/06/05 --
USD 29 JPY 3,052 05/06/05 --
USD 47 JPY 4,997 05/06/05 --
USD 200 JPY 21,142 05/06/05 2
USD 298 JPY 31,599 05/06/05 3
USD 4 JPY 467 05/09/05 --
USD 5 JPY 550 05/09/05 --
USD 5 JPY 550 05/09/05 --
USD 6 JPY 686 05/09/05 --
USD 17 JPY 1,806 05/09/05 --
USD 46 JPY 4,908 05/09/05 1
USD 568 JPY 60,198 05/09/05 6
USD 1,804 JPY 191,190 05/20/05 23
USD 484 JPY 50,000 06/15/05 (5)
USD 927 JPY 100,000 06/15/05 31
USD 929 JPY 100,000 06/15/05 29
USD 939 JPY 100,000 06/15/05 19
USD 947 JPY 100,000 06/15/05 11
USD 964 JPY 100,000 06/15/05 (6)
USD 968 JPY 100,000 06/15/05 (10)
USD 1,203 JPY 130,000 06/15/05 42
USD 1,453 JPY 150,000 06/15/05 (17)
USD 1,882 JPY 200,000 06/15/05 34
USD 2,376 JPY 250,000 06/15/05 18
USD 2,776 JPY 300,000 06/15/05 97
USD 2,815 JPY 300,000 06/15/05 58
USD 3,389 JPY 350,000 06/15/05 (37)
USD 6,789 JPY 722,326 06/15/05 128
USD 7,725 JPY 821,611 06/15/05 143
USD 27,596 JPY 2,850,000 06/15/05 (303)
USD 186 MXN 2,074 05/02/05 1
USD 18 MXN 196 05/03/05 --
USD 80 NOK 505 05/02/05 --
USD 171 NOK 1,079 05/04/05 --
USD 526 NOK 3,320 05/20/05 --
USD 1,713 NOK 10,812 06/15/05 3
USD 1,768 NOK 11,169 06/15/05 4
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 1,806 NZD 2,495 06/15/05 8
USD 5,562 NZD 7,683 06/15/05 25
USD 224 PLN 736 05/02/05 (3)
USD 584 SEK 4,130 05/20/05 (5)
USD 12,475 SEK 83,934 06/15/05 (705)
USD 32 SGD 53 05/03/05 --
AUD 469 USD 364 05/02/05 (3)
AUD 78 USD 61 05/03/05 --
AUD 438 USD 341 05/03/05 (1)
AUD 12 USD 9 05/04/05 --
AUD 31 USD 24 05/04/05 --
AUD 83 USD 65 05/04/05 --
AUD 448 USD 350 05/04/05 1
AUD 1,350 USD 1,027 05/20/05 (26)
AUD 300 USD 235 06/15/05 1
AUD 1,921 USD 1,484 06/15/05 (11)
AUD 2,881 USD 2,207 06/15/05 (35)
AUD 3,841 USD 2,951 06/15/05 (38)
AUD 4,771 USD 3,666 06/15/05 (47)
AUD 8,604 USD 6,644 06/15/05 (53)
CAD 456 USD 365 05/02/05 2
CAD 153 USD 122 05/03/05 1
CHF 529 USD 443 05/02/05 --
CHF 837 USD 701 05/02/05 1
CHF 862 USD 722 05/02/05 2
CHF 490 USD 405 05/20/05 (6)
CHF 2,281 USD 1,911 06/15/05 (3)
CHF 19,309 USD 16,205 06/15/05 --
DKK 394 USD 68 05/03/05 --
DKK 1,270 USD 220 05/03/05 --
DKK 1,580 USD 272 05/20/05 (1)
DKK 67 USD 12 06/15/05 --
DKK 1,404 USD 244 06/15/05 1
EUR 373 USD 483 05/02/05 4
EUR 1,125 USD 1,454 05/02/05 7
EUR 141 USD 182 05/03/05 --
EUR 293 USD 380 05/03/05 3
EUR 575 USD 744 05/03/05 4
EUR 74 USD 96 05/04/05 --
EUR 131 USD 169 05/04/05 --
EUR 167 USD 215 05/04/05 --
EUR 3,400 USD 4,359 05/20/05 (18)
EUR 500 USD 649 06/15/05 5
EUR 2,200 USD 2,906 06/15/05 71
EUR 4,150 USD 5,587 06/15/05 239
</Table>
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 45
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 7,618 USD 9,865 06/15/05 48
EUR 7,823 USD 10,262 06/15/05 182
EUR 17,646 USD 23,783 06/15/05 1,045
GBP 217 USD 414 05/04/05 --
GBP 237 USD 453 05/05/05 1
GBP 700 USD 1,309 05/20/05 (25)
GBP 200 USD 382 06/15/05 2
GBP 300 USD 566 06/15/05 (4)
GBP 1,000 USD 1,915 06/15/05 12
GBP 4,000 USD 7,655 06/15/05 44
GBP 4,720 USD 8,838 06/15/05 (144)
GBP 9,193 USD 17,299 06/15/05 (194)
GBP 12,852 USD 24,403 07/29/05 (7)
HKD 198 USD 25 05/03/05 --
HKD 205 USD 26 05/03/05 --
HKD 52 USD 7 05/04/05 --
HKD 416 USD 53 05/04/05 --
HKD 874 USD 112 05/04/05 --
HKD 46 USD 6 06/15/05 --
HKD 320 USD 41 06/15/05 --
HKD 2,847 USD 365 06/15/05 (1)
JPY 4,284 USD 40 05/02/05 (1)
JPY 11,775 USD 111 05/02/05 (2)
JPY 88,182 USD 832 05/02/05 (9)
JPY 155,128 USD 1,464 05/02/05 (16)
JPY 5,159 USD 49 05/06/05 --
JPY 35,237 USD 332 05/06/05 (4)
JPY 43,874 USD 414 05/06/05 (5)
JPY 1,737 USD 16 05/09/05 --
JPY 1,740 USD 16 05/09/05 --
JPY 4,329 USD 41 05/09/05 --
JPY 14,119 USD 134 05/09/05 (1)
JPY 191,190 USD 1,765 05/20/05 (62)
JPY 150,000 USD 1,438 06/15/05 1
JPY 245,498 USD 2,301 06/15/05 (50)
JPY 788,211 USD 7,379 06/15/05 (169)
JPY 950,000 USD 9,200 06/15/05 102
JPY 1,143,534 USD 10,715 06/15/05 (237)
JPY 1,635,803 USD 15,847 06/15/05 181
NOK 696 USD 110 05/03/05 --
NOK 3,320 USD 521 05/20/05 (5)
NOK 7,244 USD 1,164 06/15/05 15
SEK 5,769 USD 816 05/02/05 8
SEK 1,261 USD 177 05/03/05 1
SEK 4,473 USD 630 05/03/05 4
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
SEK 4,130 USD 578 05/20/05 (1)
SEK 455 USD 65 06/15/05 1
SEK 6,781 USD 962 06/15/05 11
SEK 72,473 USD 10,274 06/15/05 113
SGD 39 USD 24 06/15/05 --
SGD 50 USD 30 06/15/05 --
SGD 241 USD 146 06/15/05 (1)
SGD 796 USD 493 06/15/05 7
ZAR 635 USD 105 05/03/05 2
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions (3,696)
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
46 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 5.6 117,873
Consumer Discretionary 9.4 197,850
Consumer Staples 7.0 147,171
Financial Services 22.3 470,136
Health Care 7.1 149,149
Integrated Oils 7.0 147,027
Materials and Processing 9.0 189,805
Miscellaneous 0.7 15,851
Other Energy 1.3 27,410
Producer Durables 6.0 127,213
Technology 3.2 67,120
Utilities 10.0 210,902
Options 0.1 2,592
Warrants and Rights 0.1 2,404
Short-Term Investments 9.8 205,831
Other Securities 26.0 547,103
--------------- ---------------
Total Investments 124.6 2,625,437
Other Assets and Liabilities, Net (24.6) (518,419)
--------------- ---------------
Net Assets 100.0 2,107,018
=============== ===============
</Table>
<Table>
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 0.1 2,711
Asia 8.9 188,805
Europe 40.3 849,801
Japan 17.9 376,130
Latin America 1.1 23,061
Middle East 0.1 1,185
Other 1.9 39,569
United Kingdom 18.4 388,649
Options 0.1 2,592
Short-Term Investments 9.8 205,831
Other Securities 26.0 547,103
--------------- ---------------
Total Investments 124.6 2,625,437
Other Assets and Liabilities, Net (24.6) (518,419)
--------------- ---------------
Net Assets 100.0 2,107,018
=============== ===============
</Table>
<Table>
<Caption>
INDEX SWAPS
- ---------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NOTIONAL APPRECIATION
FUND RECEIVES COUNTER AMOUNT FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY $ FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
MSCI Belgium
Local Net Total Return 1 Month Euro LIBOR
Index Merrill Lynch 8,084 BBA minus 0.40% 01/18/06 (126)
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swaps (126)
================
</Table>
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 47
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Australia 3.8
Austria 0.7
Belgium 1.4
Brazil 0.3
Canada 1.6
Cayman Island 0.1
China 0.1
Denmark 0.4
Finland 1.0
France 9.0
Germany 4.9
Greece 0.6
Hong Kong 2.0
Hungary 0.4
Indonesia 0.1
Ireland 0.8
Israel 0.1
Italy 3.0
Japan 17.9
Luxembourg 0.3
Mexico 0.7
Netherlands 4.3
New Zealand 0.3
Norway 0.7
Poland 0.1
Portugal 0.1
Russia 0.1
Singapore 1.1
South Africa 0.1
South Korea 0.7
Spain 3.9
Sweden 2.5
Switzerland 5.6
Taiwan 0.8
Thailand 0.1
Turkey 0.1
United Kingdom 18.4
United States 0.2
Options Purchased 0.1
Preferred Stocks 0.3
Warrants & Rights 0.1
Short-Term Investments 9.8
Other Securities 26.0
---------------
Total Investments 124.6
Other Assets and Liabilities, Net (24.6)
---------------
Net Assets 100.0
===============
Futures Contracts --*
Options Written --*
Foreign Currency Exchange Contracts --*
</Table>
* Less than .05%
See accompanying notes which are an integral part of the financial statements.
48 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,140.10 $ 1,011.41
Expenses Paid During
Period* $ 14.54 $ 13.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.74%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,144.30 $ 1,015.23
Expenses Paid During
Period* $ 10.47 $ 9.84
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.97%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,145.70 $ 1,016.52
Expenses Paid During
Period* $ 9.10 $ 8.55
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.71%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Emerging Markets Fund 49
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 86.8%
Argentina - 0.1%
Acindar Industria Argentina de
Aceros SA 155,000 314
Central Costanera SA Class T (AE) 233,100 280
IRSA Inversiones y Representaciones SA (AE) 6 --
IRSA Inversiones y Representaciones SA GDR
(AE)(N) 15,500 175
------------
769
------------
Austria - 0.1%
Raiffeisen International Bank Holding AG (AE) 9,500 489
------------
Brazil - 7.5%
Banco do Brasil SA 67,500 781
Brasil Telecom Participacoes SA ADR (N) 42,400 1,386
Braskem SA ADR 78,500 3,078
Centrais Eletricas Brasileiras SA 28,300 --
Cia Brasileira de Distribuicao Grupo Pao de
Acucar ADR 100,800 2,026
Cia de Bebidas das Americas ADR 46,600 1,263
Cia de Concessoes Rodoviarias 38,200 801
Cia de Saneamento Basico do Estado de Sao Paulo 27,260,000 1,418
Cia Energetica de Minas Gerais ADR 106,000 2,934
Cia Siderurgica Nacional SA 80,406 1,754
Cia Vale do Rio Doce 61,300 1,661
Cia Vale do Rio Doce - SP ADR (N) 168,600 3,912
Cia Vale do Rio Doce ADR 54,500 1,469
Gerdau SA ADR (N) 175,800 1,714
Gol Linhas Aereas Inteligentes SA - ADR ADR (N) 14,600 414
Natura Cosmeticos SA 165,763 4,982
Petroleo Brasileiro SA 70,039 2,978
Petroleo Brasileiro SA ADR (N) 153,700 6,445
Petroleo Brasileiro SA ADR (N) 98,944 3,636
Souza Cruz SA 13,200 153
Tele Centro Oeste Celular Participacoes SA ADR
(N) 20,100 211
Tele Norte Leste Participacoes SA 49,692 990
Tele Norte Leste Participacoes SA ADR (N) 163,200 2,415
Telesp Celular Participacoes SA ADR (N) 83,099 439
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Uniao de Bancos Brasileiros SA 390,708 2,593
Unibanco - Uniao de Bancos Brasileiros SA GDR 73,500 2,439
------------
51,892
------------
Canada - 0.1%
PetroKazakhstan, Inc. Class A 24,265 704
------------
Chile - 0.2%
Coca-Cola Embonor SA ADR (AE) 107,000 679
Embotelladora Andina SA ADR Class B (N) 54,400 730
------------
1,409
------------
China - 2.2%
China Petroleum & Chemical Corp. Class A 7,919,254 3,128
China Telecom Corp., Ltd. 1,492,000 508
Datang International Power Generation Co., Ltd.
Class H 114,000 88
Huadian Power International Co. Class H 2,886,000 894
Jiangsu Express Class H 1,579,400 728
Jiangxi Copper Co., Ltd. 280,000 136
PetroChina Co., Ltd. 6,266,176 3,721
Ping An Insurance Group Co. of China, Ltd. (AE) 1,044,500 1,600
Semiconductor Manufacturing International Corp.
(AE) 4,468,400 863
Shanghai Forte Land Co. Class H 1,282,000 338
Sinopec Shanghai Petrochemical Co., Ltd. Class H 2,689,000 994
Sinopec Yizheng Chemical Fibre Co., Ltd. Class H 628,000 110
Sinotrans, Ltd. Class H 805,000 238
Travelsky Technology, Ltd. Class H 200,000 165
Yanzhou Coal Mining Co., Ltd. Class H 615,000 846
Zijin Mining Group Co., Ltd. 680,000 145
ZTE Corp. Class H 260,800 750
------------
15,252
------------
Colombia - 0.1%
BanColombia SA ADR 30,400 449
Cementos Argos SA 26,400 242
Inversiones Nacionales de Chocolates SA 54,121 207
------------
898
------------
</Table>
50 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Croatia - 0.2%
Pliva DD GDR 100,700 1,098
------------
Czech Republic - 0.1%
Komercni Banka AS 5,053 639
------------
Ecuador - 0.4%
Holcim Ecuador SA GDR 72,000 2,196
Holcim Ecuador SA GDR (p) 10,500 320
------------
2,516
------------
Egypt - 2.3%
Commercial International Bank 184,393 1,486
Commercial International Bank GDR 15,600 122
Egyptian Co. for Mobile Services Class V 134,602 4,409
Orascom Construction Industries (AE) 251,028 5,713
Orascom Telecom Holding SAE (AE) 19,170 1,569
Orascom Telecom Holding SAE GDR (AE) 28,410 1,166
Vodafone Egypt Telecommunications SAE 107,395 1,434
------------
15,899
------------
Hong Kong - 1.5%
China Insurance International Holdings Co., Ltd. 1,274,000 480
China Netcom Group Corp. Hong Kong, Ltd. (AE) 917,500 1,239
China Overseas Land & Investment, Ltd. 9,470,000 1,955
China Resources Enterprise 206,000 292
China Resources Power Holdings Co. 2,444,000 1,353
China Unicom, Ltd. (AE) 650,000 526
Citic Pacific, Ltd. 280,000 846
CNOOC, Ltd. 3,897,000 2,099
Kingboard Chemical Holdings, Ltd. (AE) 126,000 375
Luen Thai Holdings, Ltd. (AE) 924,000 348
Panva Gas Holdings, Ltd. (AE) 470,000 193
Shanghai Industrial Holdings, Ltd. 59,000 121
Silver Grant International (AE) 842,000 412
Tom Group, Ltd. (AE) 2,150,000 401
------------
10,640
------------
Hungary - 2.2%
Matav Rt 538,562 2,369
Matav Rt. ADR (N) 1,800 40
Mol Magyar Olaj- es Gazipari Rt. 43,871 3,604
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mol Magyar Olaj- es Gazipari Rt. GDR 44,900 3,686
OTP Bank Rt. 180,831 5,561
------------
15,260
------------
India - 5.1%
Andhra Bank (AE) 429,000 919
Arvind Mills, Ltd. (AE) 374,200 1,008
Ballarpur Industries, Ltd. 115,100 275
Bank of Baroda 220,000 868
Bank of India (AE) 444,000 837
Bharti Televentures (AE) 193,000 918
Chennai Petroleum Corp., Ltd. (AE) 75,530 381
GAIL India, Ltd. GDR 54,700 1,552
Genesis Indian Investment Co. (AE) 665,719 14,698
HDFC Bank, Ltd. ADR (N) 23,200 1,007
I-Flex Solutions, Ltd. 48,600 674
ITC, Ltd. 25,350 836
Kotak Mahindra Bank, Ltd. 121,000 842
Larsen & Toubro, Ltd. 25,397 562
LIC Housing Finance (AE) 107,498 616
National Thermal Power Corp., Ltd. 543,300 1,027
Oriental Bank of Commerce (AE) 23,000 145
Petronet LNG, Ltd. (AE) 804,000 725
Power Trading Corp. of India, Ltd. 276,519 268
State Bank of India, Ltd. GDR 72,210 2,623
Tata TEA, Ltd. 56,600 667
Union Bank Of India (AE) 118,000 263
UTI Bank, Ltd. (AE) 182,800 968
UTI Bank, Ltd. GDR (AE) 65,600 328
Videsh Sanchar Nigam, Ltd. ADR (AE)(N) 110,100 1,029
ZEE Telefilms, Ltd. 380,800 1,148
------------
35,184
------------
Indonesia - 4.1%
Aneka Tambang Tbk PT (AE) 3,549,646 790
Astra Agro Lestari Tbk PT 244,789 92
Astra International Tbk PT 3,553,777 3,932
Bank Central Asia Tbk PT 5,909,181 1,901
Bank Danamon Indonesia Tbk PT 1,754,700 854
Bank Mandiri Persero Tbk PT 34,314,003 5,752
Bank Rakyat Indonesia 17,299,472 4,861
Bumi Resources Tbk PT 11,399,809 908
Gudang Garam Tbk PT 91,000 144
HM Sampoerna Tbk PT 23,310 25
Indofood Sukses Makmur Tbk PT 7,540,300 806
Indonesian Satellite Corp. Tbk PT 2,414,500 1,091
Indosat Tbk PT ADR (N) 1,562 35
</Table>
Emerging Markets Fund 51
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Industriesocement Tunggal Prakarsa Tbk PT (AE) 350,000 97
Ramayana Lestari Sentosa Tbk PT 6,547,500 528
Telekomunikasi Indonesia Tbk PT 15,253,490 6,826
Telekomunikasi Indonesia Tbk PT ADR 1,079 19
------------
28,661
------------
Israel - 2.2%
Bank Hapoalim, Ltd. 1,345,500 4,626
Bank Leumi Le-Israel BM 1,702,502 4,814
Check Point Software Technologies (AE) 80,800 1,693
Israel Chemicals, Ltd. 98,129 289
Makhteshim-Agan Industries, Ltd. 193,200 1,205
Teva Pharmaceutical Industries, Ltd. ADR 83,000 2,593
------------
15,220
------------
Luxembourg - 0.3%
Quilmes Industrial SA 392,600 416
Quilmes Industrial SA ADR (N) 8,627 206
Tenaris SA ADR 31,413 1,795
------------
2,417
------------
Malaysia - 1.7%
Astro All Asia Networks PLC (AE) 890,700 1,221
British American Tobacco Malaysia BHD 66,000 748
CIMB BHD 599,100 783
Hong Leong Bank BHD 371,800 500
IJM Corp. BHD 357,200 449
IOI Corp. BHD 423,900 1,022
Magnum Corp. BHD 2,164,800 1,181
Malakoff BHD 1,118,000 2,165
Malayan Banking BHD 381,600 1,169
Malaysian Industrial Development Finance 902,500 297
MK Land Holdings BHD 1,015,200 361
OYL Industries BHD 122,200 1,142
Symphony House BHD 163,400 23
TAN Chong Motor Holdings BHD 908,000 407
Tenaga Nasional BHD 195,000 544
------------
12,012
------------
Mexico - 6.4%
Alfa SA de CV Class A (AE) 427,900 2,165
America Movil SA de CV ADR 127,300 6,320
Cemex SA de CV 1,335,104 9,637
Cemex SA de CV ADR 29,749 1,071
Corp GEO SA de CV (AE) 37,200 78
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fomento Economico Mexicano SA de CV ADR 74,400 3,798
Grupo Aeroportuario del Sureste SA de CV ADR 16,600 491
Grupo Financiero Banorte SA de CV 809,581 5,228
Grupo Mexico SA de CV (AE) 527,562 2,473
Grupo Modelo SA 475,900 1,356
Grupo Televisa SA ADR 22,173 1,246
Organizacion Soriana SA de CV Class B (AE) 191,900 708
Telefonos de Mexico SA de CV ADR 114,200 3,871
Urbi Desarrollos Urbanos SA de CV (AE) 165,000 806
Wal-Mart de Mexico SA de CV 1,353,828 5,019
------------
44,267
------------
Pakistan - 1.3%
Engro Chemical Pakistan, Ltd. 1,071,300 2,143
Fauji Fertilizer Co., Ltd. 949,617 2,314
HUB Power Co. 1,220,092 584
ICI Pakistan, Ltd. 752,200 1,134
Pakistan Telecommunication Co., Ltd. 3,025,923 3,147
SUI Northern Gas Pipeline 73,274 68
------------
9,390
------------
Philippines - 0.4%
Ayala Land, Inc. 2,732,300 395
Globe Telecom, Inc. 18,000 269
Philippine Long Distance Telephone 86,000 2,205
------------
2,869
------------
Russia - 2.3%
LUKOIL ADR 79,340 10,751
MMC Norilsk Nickel ADR (N) 891 49
Mobile Telesystems ADR (N) 64,400 2,164
OAO Gazprom ADR (N) 13,600 459
Rostelecom ADR (N) 8,200 106
Sberbank RF (AE) 990 648
Tatneft ADR (N) 4,300 143
Vimpel-Communications ADR (AE)(N) 43,500 1,423
------------
15,743
------------
South Africa - 11.5%
ABSA Group, Ltd. 324,852 4,150
Aeci, Ltd. 236,900 1,611
African Bank Investments, Ltd. 343,200 917
</Table>
52 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Alexander Forbes, Ltd. 300,000 548
AngloGold Ashanti, Ltd. 15,500 495
AngloGold Ashanti, Ltd. ADR (N) 38,334 1,218
Aveng, Ltd. 192,823 340
AVI, Ltd. 263,900 563
Barloworld, Ltd. 236,505 3,576
Bidvest Group, Ltd. 62,437 702
Consol, Ltd. (AE) 285,700 483
Edgars Consolidated Stores, Ltd. 92,585 3,826
FirstRand, Ltd. 1,611,184 3,423
Foschini, Ltd. 119,945 704
Imperial Holdings, Ltd. 198,680 3,050
Investec, Ltd. 28,900 833
JD Group, Ltd. 211,641 2,173
Liberty Group, Ltd. 22,671 231
Massmart Holdings, Ltd. 87,200 630
Mittal Steel South Africa, Ltd. 131,448 1,096
MTN Group, Ltd. 1,230,500 8,724
Murray & Roberts Holdings, Ltd. 455,000 1,033
Nampak, Ltd. 142,996 365
Naspers, Ltd. 361,608 4,371
Network Healthcare Holdings, Ltd. 1,165,000 1,062
Pick'n Pay Stores, Ltd. 148,900 553
Reunert, Ltd. 35,300 206
Sanlam, Ltd. 2,759,937 5,217
Sappi, Ltd. 284,571 2,827
Sasol, Ltd. 258,600 6,054
Standard Bank Group, Ltd. 1,269,461 12,724
Sun International, Ltd. 75,200 721
Telkom SA, Ltd. 125,179 2,178
Truworths International, Ltd. 689,100 1,819
VenFin, Ltd. 291,200 1,230
------------
79,653
------------
South Korea - 17.4%
Amorepacific Corp. (N) 6,670 1,653
Cheil Communications, Inc. 3,320 547
CJ Internet Corp. 17,330 157
Daelim Industrial Co. 45,020 2,236
Daewoo Engineering & Construction Co., Ltd. 30,620 227
Daewoo Shipbuilding & Marine Engineering Co.,
Ltd. 30,190 549
GS Engineering & Construction Corp. 6,690 201
Hanaro Telecom, Inc. (AE) 149,374 380
Hanjin Shipping Co., Ltd. 64,500 1,780
Hankook Tire Co., Ltd. 190,597 1,940
Hanwha Chem Corp. 153,190 1,823
Hite Brewery Co., Ltd. 15,710 1,451
Honam Petrochemical Corp. 6,000 269
Hyundai Department Store Co., Ltd. 9,470 418
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hyundai Development Co. 40,000 796
Hyundai Heavy Industries 8,920 457
Hyundai Mipo Dockyard 31,050 2,003
Hyundai Mobis 73,300 4,801
Hyundai Motor Co. 69,660 3,800
Hyundai Motor Co. GDR (p) 13,900 369
Industrial Bank of Korea 248,000 2,164
Industrial Bank of Korea GDR 21,540 187
INI Steel Co. 120,920 1,917
KCC Corp. 7,310 1,231
Kookmin Bank 287,736 12,205
Kookmin Bank ADR (N) 4,200 180
Korea Electric Power Corp. 216,330 6,284
Korea Electric Power Corp. ADR (N) 83,180 1,231
KT Corp. 54,000 2,061
KT Corp. ADR 13,400 271
KT Freetel Co., Ltd. 46,700 1,074
KT&G Corp. 81,100 2,926
KT&G Corp. GDR (p) 53,100 945
LG Chem, Ltd. 20,020 763
LG Electronics, Inc. 20,020 1,345
LG Petrochemical Co., Ltd. 7,520 183
Lotte Chilsung Beverage Co., Ltd. 950 936
NCSoft Corp. (AE) 8,974 695
Nong Shim Co., Ltd. 4,943 1,517
Poongsan Corp. 51,080 631
POSCO 73,439 13,307
POSCO ADR 14,200 647
S1 Corp. 45,781 1,778
Samsung Electronics Co., Ltd. 34,931 16,025
Samsung Electronics Co., Ltd. GDR 2,300 522
Samsung Electronics Co., Ltd. GDR (p) 10,059 1,481
Samsung Fire & Marine Insurance Co., Ltd. 29,150 1,994
Samsung Securities Co., Ltd. (AE)(N) 55,580 1,334
Shinhan Financial Group Co., Ltd. 270,960 7,029
Shinsegae Co., Ltd. 4,040 1,294
SK Corp. 33,710 1,888
SK Telecom Co., Ltd. 11,720 1,926
SK Telecom Co., Ltd. ADR 14,700 286
S-Oil Corp. Class N 76,260 5,307
Tae Young Corp. 11,339 429
Woori Finance Holdings Co., Ltd. 130,740 1,200
------------
121,050
------------
</Table>
Emerging Markets Fund 53
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Taiwan - 8.0%
Acer, Inc. 255,000 419
Advantech Co., Ltd. 605,126 1,415
Asustek Computer, Inc. 761,000 2,049
AU Optronics Corp. ADR (N) 7,500 122
Basso Industry Corp. 250,800 622
Cathay Financial Holding Co., Ltd. 2,339,000 4,253
China Steel Corp. 1,629,150 1,684
China Steel Corp. GDR 59,610 1,222
Chinatrust Financial Holding Co. 1,296,455 1,490
Chunghwa Telecom Co., Ltd. 904,000 1,783
Chunghwa Telecom Co., Ltd. ADR 68,600 1,391
CMC Magnetics Corp. 5,893,000 2,368
Compal Electronics, Inc. 4,112,453 3,839
Compal Electronics, Inc. GDR (N) 31,219 146
E.Sun Financial Holding Co., Ltd. (AE) 1,433,000 1,173
Far Eastern Department Stores Co., Ltd. 655,000 313
Far Eastern Textile Co., Ltd. 1,052,442 719
Far EasTone Telecommunications Co., Ltd. 935,000 1,147
Far EasTone Telecommunications Co., Ltd. GDR (p) 11,000 202
Faraday Technology Corp. 272,647 479
Formosa Petrochemical Corp. (AE) 271,000 566
Foxconn Technology Co., Ltd. (AE) 229,000 656
Gigabyte Technology Co., Ltd. 1,036,875 1,032
HON HAI Precision Industry 1,800,963 8,615
MediaTek, Inc. 76,000 581
Phoenixtec Power Co., Ltd. 565,629 623
Polaris Securities Co., Ltd. 637,000 282
Quanta Computer, Inc. 1,411,801 2,369
Ritek Corp. 2,653,161 792
Taishin Financial Holdings Co., Ltd. 1,316,921 1,186
Taiwan Cellular Corp. 2,123,520 2,129
Taiwan Semiconductor Manufacturing Co., Ltd. 4,811,969 8,042
Taiwan Semiconductor Manufacturing Co., Ltd. ADR 6,776 58
United Microelectronics Corp. ADR (AE)(N) 64,700 210
Vanguard International Semiconductor Corp. (AE) 1,105,000 854
Via Technologies, Inc. (AE) 570,693 294
Yuanta Core Pacific Securities Co. 459,622 329
Zyxel Communications Corp. 180,000 418
------------
55,872
------------
Thailand - 2.6%
Advanced Info Service PCL 363,500 871
Airports of Thailand PCL 1,072,600 1,149
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bangkok Bank PCL 341,900 858
Bank of Ayudhya PCL (AE) 6,588,900 1,994
Banpu PCL 382,900 1,563
CP Seven Eleven PCL 410,400 310
Glow Energy PCL 642,500 370
Kasikornbank PCL 634,600 861
Kiatnakin Finance PCL 681,400 479
Land and Houses PCL 2,842,700 508
National Petrochemical PCL 517,000 1,573
PTT Exploration & Production PCL 320,800 2,830
PTT PCL 424,000 2,150
Ratchaburi Electricity Generating Holding PCL 522,100 513
Shin Corp. PCL 435,500 414
Siam City Bank PCL 1,492,600 938
Siam City Cement PCL 17,500 123
Siam Commercial Bank PCL 235,000 280
True Corp. PCL (AE) 3,553,500 631
------------
18,415
------------
Turkey - 3.8%
Akbank TAS 618,823 2,976
Akcansa Cimento AS 65,996 189
Anadolu Efes Biracilik Ve Malt Sanayii AS 125,130 2,431
Arcelik 87,000 395
Cimsa Cimento Sanayi VE Tica 105,260 328
Denizbank AS 328,906 918
Dogan Yayin Holding (AE) 294,307 707
Dogus Otomotiv Servis ve Ticaret AS (AE) 20,000 48
Eregli Demir ve Celik Fabrikalari TAS (AE) 476,060 2,022
Finansbank (AE) 454,500 1,235
Ford Otomotiv Sanayi AS 267,000 1,785
Hurriyet Gazetecilik AS (AE) 504,000 900
Is Gayrimenkul Yatirim Ortakligi AS (AE) 1,921,600 2,266
Migros Turk TAS (AE) 219,555 1,508
Trakya Cam Sanayi AS (AE) 241,747 702
Tupras Turkiye Petrol Rafine (AE) 251,573 3,164
Turkcell Iletisim Hizmet AS (AE) 82,600 507
Turkcell Iletisim Hizmet AS ADR (N) 7,077 110
</Table>
54 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Turkiye Garanti Bankasi AS (AE) 239,500 853
Turkiye Is Bankasi 631,900 3,209
------------
26,253
------------
United Kingdom - 2.5%
Anglo American PLC 182,345 4,015
Antofagasta PLC 35,936 768
Genesis Smaller Companies 236,384 8,803
Old Mutual PLC 1,097,246 2,658
Old Mutual PLC 2,300 6
SABMiller PLC 54,300 803
------------
17,053
------------
Venezuela - 0.0%
Siderurgica Venezolana Sivensa SACA (AE) 1,306,495 30
------------
Zimbabwe - 0.2%
Delta Corp., Ltd. (B) 1,113,646 1,038
OK Zimbabwe (B) 6,402,949 146
------------
1,184
------------
TOTAL COMMON STOCKS
(cost $469,056) 602,738
------------
PREFERRED STOCKS - 6.3%
Brazil - 5.7%
All America Latina Logistica SA 339,945 1,983
Aracruz Celulose SA 96,908 299
Banco Bradesco SA 119,183 3,666
Banco Itau Holding Financeira SA 24,421 4,269
Braskem SA 50,450,000 1,991
Caemi Mineracao e Metalurgica SA 1,614,600 1,232
Cia de Tecidos do Norte de Minas - Coteminas 5,276,440 447
Cia Energetica de Minas Gerais 24,039,000 674
Cia Siderurgica de Tubarao 44,300,000 2,199
Cia Vale do Rio Doce 195,500 4,531
Empresa Brasileira de Aeronautica SA 39,168 279
Gerdau SA 154,550 1,519
Klabin SA 389,000 589
Petroleo Brasileiro SA 238,943 8,779
Suzano Bahia Sul Papel e Celulose SA 230,000 973
Tele Centro Oeste Celular Participacoes SA 132,396,304 465
Usinas Siderurgicas de Minas Gerais SA 213,100 4,214
Votorantim Celulose e Papel SA 153,327 1,683
------------
39,792
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Colombia - 0.0%
BanColombia SA 7,200 27
------------
South Korea - 0.6%
Hyundai Motor Co. 41,560 1,448
Samsung Electronics Co., Ltd. 8,050 2,431
------------
3,879
------------
TOTAL PREFERRED STOCKS
(cost $30,861) 43,698
------------
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.4%
Brazil - 0.0%
Bovespa Index Futures Jun 2005 26,380.00 (BRL)
Call (200) 6,260 71
South Korea - 0.4%
Kospi 200 Index Jun 2005 110.54 (KRW) Call (181) 10,033 2,678
------------
TOTAL OPTIONS PURCHASED
(cost $2,730) 2,749
------------
</Table>
Emerging Markets Fund 55
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
WARRANTS & RIGHTS - 0.0%
Brazil - 0.0%
Tele Norte Leste Participacoes SA Rights (AE) 514 1
------------
Malaysia - 0.0%
Symphony House BHD
2009 Warrants (AE) 137,280 5
------------
Pakistan - 0.0%
Muslim Community Bank Rights (AE) 53,076 44
------------
TOTAL WARRANTS & RIGHTS
(cost $421) 50
------------
SHORT-TERM INVESTMENTS - 6.1%
United States - 6.1%
Frank Russell Investment Company
Money Market Fund 37,780,000 37,780
United States Treasury Bills (c)(z)(sec.)
2.781% due 06/09/05 3,300 3,290
2.673% due 06/09/05 500 499
2.640% due 06/09/05 1,000 997
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $42,566) 42,566
------------
OTHER SECURITIES - 1.8%
Frank Russell Investment Company
Money Market Fund (X) 3,055,877 3,056
State Street Securities Lending Quality Trust
(X) 9,628,088 9,628
------------
TOTAL OTHER SECURITIES
(cost $12,684) 12,684
------------
TOTAL INVESTMENTS - 101.4%
(identified cost $558,318) 704,485
OTHER ASSETS AND LIABILITIES,
NET - (1.4%) (9,728)
------------
NET ASSETS - 100.0% 694,757
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Hang Seng Index (Hong Kong)
expiration date 05/05 (64) 5,636 (19)
JSE-40 Index (South Africa)
expiration date 06/05 (380) 7,098 (647)
MSCI Taiwan Index
expiration date 05/05 (446) 10,726 25
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts (641)
===============
</Table>
<Table>
<Caption>
OPTIONS WRITTEN
NOTIONAL MARKET
AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Brazil - 0.1%
Bovespa Index Futures
Jun 2005 26,380.00 (BRL) Put (200) 6,260 (421)
---------------
South Korea - 0.3%
Kospi 200 Index Futures
Jun 2005 110.54 (KRW) Put (181) 10,033 (2,020)
---------------
Total Liability for Options Written (premiums
received $971) (2,441)
===============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
56 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- -------------------- -------------------- ----------- --------------
USD 358 BRL 1,000 06/15/05 30
USD 557 BRL 1,500 06/15/05 25
USD 707 BRL 2,000 06/15/05 69
USD 855 BRL 2,400 06/15/05 76
USD 1,950 BRL 5,500 06/15/05 183
USD 1,989 BRL 5,600 06/15/05 183
USD 1,020 HKD 7,951 05/05/05 --
USD 1,682 HKD 13,114 05/05/05 --
USD 34 IDR 320,539 05/02/05 --
USD 19 IDR 184,781 05/03/05 --
USD 3,798 KRW 3,800,000 06/15/05 12
USD 8,391 KRW 8,400,000 06/15/05 31
USD 23 PHP 1,223 05/03/05 --
USD 169 ZAR 1,000 06/15/05 (6)
USD 2,199 ZAR 13,000 06/15/05 (76)
USD 5,443 ZAR 32,000 06/15/05 (215)
BRL 1,262 USD 498 05/02/05 (1)
BRL 2,000 USD 753 06/15/05 (23)
HKD 181 USD 23 05/03/05 --
ILS 197 USD 45 05/02/05 --
KRW 2,400,000 USD 2,395 06/15/05 (11)
MXN 315 USD 28 05/02/05 (1)
MYR 65 USD 17 05/03/05 --
MYR 215 USD 56 05/04/05 --
PKR 3,900 USD 65 04/29/05 --
PHP 1,873 USD 35 05/02/05 --
ZAR 2,283 USD 373 05/05/05 (2)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions 274
==============
</Table>
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 3.4 23,615
Consumer Discretionary 5.4 37,488
Consumer Staples 4.9 33,972
Financial Services 24.4 169,288
Health Care 0.7 4,752
Integrated Oils 7.9 55,073
Materials and Processing 17.8 123,863
Miscellaneous 2.0 13,583
Other Energy 3.0 20,715
Producer Durables 3.7 25,983
Technology 5.7 39,591
Utilities 14.2 98,513
Options 0.4 2,749
Warrants and Rights 0.0 50
Short-Term Investments 6.1 42,566
Other Securities 1.8 12,684
--------------- ---------------
Total Investments 101.4 704,485
Other Assets and Liabilities, Net (1.4) (9,728)
--------------- ---------------
Net Assets 100.0 694,757
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 11.7 80,837
Asia 45.0 313,273
Europe 8.9 61,901
Latin America 20.4 141,600
Middle East 4.5 31,118
Other 0.1 704
United Kingdom 2.5 17,053
Options 0.4 2,749
Short-Term Investments 6.1 42,566
Other Securities 1.8 12,684
--------------- ---------------
Total Investments 101.4 704,485
Other Assets and Liabilities, Net (1.4) (9,728)
--------------- ---------------
Net Assets 100.0 694,757
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 57
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Argentina 0.1
Austria 0.1
Brazil 7.5
Canada 0.1
Chile 0.2
China 2.2
Colombia 0.1
Croatia 0.2
Czech Republic 0.1
Ecuador 0.4
Egypt 2.3
Hong Kong 1.5
Hungary 2.2
India 5.1
Indonesia 4.1
Israel 2.2
Luxembourg 0.3
Malaysia 1.7
Mexico 6.4
Pakistan 1.3
Philippines 0.4
Russia 2.3
South Africa 11.5
South Korea 17.4
Taiwan 8.0
Thailand 2.6
Turkey 3.8
United Kingdom 2.5
Venezuela --*
Zimbabwe 0.2
Preferred Stock 6.3
Options Purchased 0.4
Warrants & Rights --*
Short-Term Investments 6.1
Other Securities 1.8
---------------
Total Investments 101.4
Other Assets and Liabilities Net (1.4)
---------------
Net Assets 100.0
===============
Futures Contracts 0.1
Foreign Currency Exchange Contracts --*
Options Written 0.4
</Table>
* Less than .05%
See accompanying notes which are an integral part of the financial statements.
58 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,074.30 $ 1,014.64
Expenses Paid During
Period* $ 10.75 $ 10.44
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.09%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,078.30 $ 1,018.36
Expenses Paid During
Period* $ 6.91 $ 6.71
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.34%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,079.30 $ 1,019.59
Expenses Paid During
Period* $ 5.62 $ 5.46
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.09%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Real Estate Securities Fund 59
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 96.5%
Apartments - 16.5%
Apartment Investment & Management Co. Class A
(o) 547,075 20,854
Archstone-Smith Trust (o) 790,605 28,438
AvalonBay Communities, Inc. (o)(N) 760,500 54,756
BRE Properties Class A (o)(N) 288,100 10,723
Camden Property Trust (o)(N) 383,499 19,558
Equity Residential (o)(N) 2,038,800 70,033
Essex Property Trust, Inc. (o)(N) 134,400 10,208
Home Properties, Inc. (o) 206,800 8,655
United Dominion Realty Trust, Inc. (o) 504,200 11,168
------------
234,393
------------
Diversified - 5.6%
iStar Financial, Inc. (o)(N) 101,900 4,060
Sizeler Property Investors (o) 154,900 1,784
Spirit Finance Corp. (o)(N) 118,000 1,221
Vornado Realty Trust (o) 942,575 72,060
------------
79,125
------------
Free Standing Retail - 0.1%
Realty Income Corp. (o)(N) 80,400 1,938
------------
Health Care - 2.6%
Health Care REIT, Inc. (o)(N) 57,700 1,933
Healthcare Realty Trust, Inc. (o)(N) 178,000 6,873
LTC Properties, Inc. (o) 210,000 3,856
National Health Investors, Inc. (o) 153,150 4,013
Omega Healthcare Investors, Inc. (o)(N) 243,300 2,730
Ventas, Inc. (o)(N) 621,250 16,761
------------
36,166
------------
Industrial - 8.4%
AMB Property Corp. (o) 302,100 11,779
Catellus Development Corp. (o)(N) 997,471 27,630
Centerpoint Properties Trust (o)(N) 270,300 11,139
EastGroup Properties (o) 107,700 4,039
First Potomac Realty Trust (o)(N) 191,900 4,300
ProLogis (o)(N) 1,526,300 60,426
------------
119,313
------------
Lodging/Resorts - 10.9%
Fairmont Hotels & Resorts, Inc. (N) 56,260 1,764
Hilton Hotels Corp. 1,775,500 38,759
Hospitality Properties Trust (o)(N) 67,000 2,799
Host Marriott Corp. (o)(N) 3,144,100 52,884
La Quinta Corp. (AE)(o) 755,500 6,573
LaSalle Hotel Properties (o)(N) 233,520 7,094
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. (o) 799,983 43,471
Strategic Hotel Capital, Inc. (o)(N) 106,200 1,498
------------
154,842
------------
Manufactured Homes - 0.9%
Sun Communities, Inc. (o) 67,900 2,366
Equity Lifestyle Properties, Inc. (o) 262,000 9,589
------------
11,955
------------
Mixed Industrial/Office - 2.3%
Bedford Property Investors (o) 135,355 2,882
Duke Realty Corp. (o) 147,000 4,498
Liberty Property Trust (o) 541,100 21,552
PS Business Parks, Inc. (o) 90,000 3,632
------------
32,564
------------
Office - 18.4%
Alexandria Real Estate Equities, Inc. (o) 166,200 11,438
American Financial Realty Trust (o)(N) 1,132,300 17,358
Arden Realty, Inc. (o)(N) 440,300 15,714
BioMed Realty Trust, Inc. (o) 285,950 5,776
Boston Properties, Inc. (o) 971,800 64,596
Brandywine Realty Trust (o)(N) 284,400 8,049
Brookfield Properties Co. 941,450 23,903
CarrAmerica Realty Corp. (o) 219,000 7,236
Corporate Office Properties Trust (o) 83,000 2,183
CRT Properties, Inc. (o) 211,400 4,881
Equity Office Properties Trust (o) 265,000 8,340
Glenborough Realty Trust, Inc. (o)(N) 183,925 3,778
Highwoods Properties, Inc. (o) 574,400 16,158
Kilroy Realty Corp. (o)(N) 286,300 12,491
Mack-Cali Realty Corp. (o)(N) 363,781 16,003
Prentiss Properties Trust (o)(N) 178,500 5,930
Reckson Associates Realty Corp. (o)(N) 127,800 4,122
SL Green Realty Corp. (o) 265,400 16,189
Trizec Properties, Inc. (o)(N) 822,900 16,450
------------
260,595
------------
Regional Malls - 16.5%
General Growth Properties, Inc. (o)(N) 1,364,500 53,366
Macerich Co. (The) (o) 398,300 24,017
Mills Corp. (The) (o)(N) 398,375 22,763
Pennsylvania Real Estate Investment Trust (o)(N) 279,971 11,801
</Table>
60 Real Estate Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Simon Property Group, Inc. (o) 1,715,800 113,362
Taubman Centers, Inc. (o) 281,000 8,318
------------
233,627
------------
Self Storage - 2.4%
Extra Space Storage, Inc. (o)(N) 80,700 1,049
Public Storage, Inc. (o) 473,000 27,765
Shurgard Storage Centers, Inc. Class A (o)(N) 130,000 5,438
Sovran Self Storage, Inc. (o) 2,400 103
------------
34,355
------------
Shopping Center - 10.4%
Developers Diversified Realty Corp. (o) 842,700 35,764
Federal Realty Investors Trust (o)(N) 480,900 25,728
Inland Real Estate Corp. (o) 407,500 6,255
Kimco Realty Corp. (o) 151,000 8,364
Kite Realty Group Trust (o)(N) 206,300 2,888
Pan Pacific Retail Properties, Inc. (o) 460,213 27,806
Regency Centers Corp. (o) 780,600 41,099
------------
147,904
------------
Specialty - 1.5%
Capital Automotive REIT (o)(N) 391,700 13,310
Plum Creek Timber Co., Inc. (o)(N) 240,700 8,314
------------
21,624
------------
TOTAL COMMON STOCKS
(cost $961,332) 1,368,401
------------
SHORT-TERM INVESTMENTS - 3.4%
Frank Russell Investment Company
Money Market Fund 48,840,000 48,840
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $48,840) 48,840
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 6.9%
Frank Russell Investment Company
Money Market Fund (X) 23,536,350 23,536
State Street Securities Lending Quality Trust
(X) 74,155,474 74,156
------------
TOTAL OTHER SECURITIES
(cost $97,692) 97,692
------------
TOTAL INVESTMENTS - 106.8%
(identified cost $1,107,864) 1,514,933
OTHER ASSETS AND LIABILITIES,
NET - (6.8%) (96,313)
------------
NET ASSETS - 100.0% 1,418,620
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 61
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Apartments 16.5
Diversified 5.6
Free Standing Retail 0.1
Health Care 2.6
Industrial 8.4
Lodging/Resorts 10.9
Manufactured Homes 0.9
Mixed Industrial/Office 2.3
Office 18.4
Regional Malls 16.5
Self Storage 2.4
Shopping Center 10.4
Specialty 1.5
Short-Term Investments 3.4
Other Securities 6.9
---------------
Total Investments 106.8
Other Assets and Liabilities, Net (6.8)
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
62 Real Estate Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 994.90 $ 1,016.82
Expenses Paid During
Period* $ 8.16 $ 8.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.65%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 998.60 $ 1,020.54
Expenses Paid During
Period* $ 4.46 $ 4.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.90%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 999.90 $ 1,021.78
Expenses Paid During
Period* $ 3.22 $ 3.26
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Short Duration Bond Fund 63
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 72.1%
Asset-Backed Securities - 24.8%
ACE Securities Corp. (E)
Series 2004-OP1 Class A2A
2.528% due 04/25/34 322 322
Aegis Asset Backed Securities Trust (E)
Series 2005-1 Class 1A1
2.770% due 03/25/35 474 474
Alter Moneta Receivables LLC (p)
Series 2003-1 Class NOTE
2.563% due 03/15/11 1,214 1,206
AmeriCredit Automobile Receivables Trust
Series 2005-AX Class A3
3.630% due 01/06/10 2,000 1,985
Amortizing Residential Collateral Trust (E)
Series 2002-BC5 Class A
3.170% due 07/25/32 36 36
Argent Securities, Inc. (E)
Series 2004-W11 Class A2
3.030% due 11/25/34 708 708
Asset Backed Securities Corp. Home Equity (E)
Series 2002-HE1 Class M1
3.580% due 03/15/32 1,400 1,440
Bank One Issuance Trust
Series 2002-A2 Class A2
4.160% due 01/15/08 6,000 6,003
Bay View Auto Trust
Series 2003-LJ1 Class A3
2.430% due 07/25/08 640 637
BMW Vehicle Owner Trust
Series 2004-A Class A4
3.320% due 02/25/09 4,200 4,144
California Infrastructure PG&E-1
Series 1997-1 Class A7
6.420% due 09/25/08 1,451 1,480
Series 1997-1 Class A8
6.480% due 12/26/09 3,000 3,147
California Infrastructure SCE-1
Series 1997-1 Class A7
6.420% due 12/26/09 7,450 7,805
California Infrastructure SDG&E-1
Series 1997-1 Class A6
6.310% due 09/25/08 402 410
Capital Auto Receivables Asset Trust
Series 2002-3 Class A3
3.580% due 10/16/06 5,525 5,529
Series 2002-4 Class A4
2.640% due 03/17/08 1,874 1,860
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-2 Class A2
3.350% due 02/15/08 3,000 2,969
Capital One Auto Finance Trust
Series 2001-B Class A4
4.880% due 09/15/08 1,100 1,107
Capital One Master Trust
Series 2002-4A Class A
4.900% due 03/15/10 1,000 1,018
Capital One Multi-Asset Execution Trust
Series 2003-A6 Class A6
2.950% due 08/17/09 1,000 987
Capital One Prime Auto Receivables Trust
Series 2004-3 Class A4
3.690% due 06/15/10 1,000 986
Series 2004-3 Class B
3.860% due 08/15/11 1,500 1,484
Carmax Auto Owner Trust
Series 2004-2 Class A4
3.460% due 09/15/11 2,500 2,449
Caterpillar Financial Asset Trust
Series 2002-A Class A3
3.150% due 02/25/08 370 370
Centex Home Equity
Series 2003-C Class AF4
4.960% due 04/25/32 1,750 1,771
Centex Home Equity (E)
Series 2004-B Class AV2
2.950% due 03/25/34 310 310
Chase Credit Card Master Trust (E)
Series 2004-2 Class A
2.850% due 09/15/09 2,500 2,501
Chase Issuance Trust
Series 2004-A9 Class A9
3.220% due 06/15/10 3,000 2,943
Chase Manhattan Auto Owner Trust
Series 2002-B Class A4
4.210% due 01/15/09 6,799 6,826
Series 2004-A Class A4
2.830% due 09/15/10 1,800 1,752
Chemical Master Credit Card Trust 1
Series 1996-2 Class A
5.980% due 09/15/08 4,000 4,063
CIT Equipment Collateral
Series 2003-VT1 Class A3B
1.630% due 04/20/07 291 288
</Table>
64 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-VT1 Class A3
2.200% due 03/20/08 1,500 1,479
CIT Marine Trust
Series 1999-A Class A4
6.250% due 11/15/19 1,000 1,018
CIT RV Trust
Series 1998-A Class A5
6.120% due 11/15/13 979 999
Citibank Credit Card Issuance Trust
Series 2003-A3 Class A3
3.100% due 03/10/10 1,000 972
Series 2003-A5 Class A5
2.500% due 04/07/08 1,700 1,681
Series 2004-A1 Class A1
2.550% due 01/20/09 6,975 6,816
Series 2004-A4 Class A4
3.200% due 08/24/09 4,960 4,868
CNH Equipment Trust
Series 2003-A Class A3B
1.890% due 07/16/07 653 649
CNH Wholesale Master Note Trust (E)
Series 2003-1 Class A
3.010% due 08/15/08 2,000 2,000
Community Program Loan Trust
Series 1987-A Class A4
4.500% due 10/01/18 2,601 2,605
Connecticut RRB Special Purpose Trust CL&P
Series 2001-1 Class A5
6.210% due 12/30/11 1,000 1,081
Countrywide Asset-Backed Certificates
Series 2004-7 Class AF2
3.324% due 12/25/23 1,000 989
Countrywide Asset-Backed Certificates (E)
Series 2001-BC3 Class A
3.090% due 12/25/31 358 358
Series 2004-5 Class 4A1
2.530% due 08/25/23 138 138
Series 2004-6 Class 2A1
3.040% due 10/25/21 1,143 1,143
Series 2004-7 Class 2AV1
3.000% due 12/25/22 1,398 1,398
Series 2004-BC4 Class 2A1
3.030% due 07/25/21 1,291 1,291
Credit-Based Asset Servicing and Securitization
(E)
Series 2004-CB5 Class AV1
2.980% due 09/25/21 777 777
Daimler Chrysler Auto Trust
Series 2005-A Class A3
3.490% due 12/08/08 2,200 2,184
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-A Class A4
3.740% due 02/08/10 8,100 8,019
Dillard Credit Card Master Trust
Series 2002-2 Class A
3.800% due 09/15/10 3,300 3,298
Discover Card Master Trust I
Series 1996-3 Class A
6.050% due 08/18/08 2,225 2,266
Distribution Financial Services Floorplan Master
Trust (E)
Series 2003-1 Class A
2.550% due 04/15/07 3,000 3,000
Equity One ABS, Inc.
Series 2004-3 Class AF2
3.799% due 07/25/34 2,000 1,984
Equity One ABS, Inc. (E)
Series 2004-2 Class AF1
2.960% due 07/25/34 1,006 1,006
E-Trade RV and Marine Trust
Series 2004-1 Class A3
3.620% due 10/08/18 1,300 1,281
Federal Farm Credit Bank
12.250% due 02/01/07 3,169 3,363
Fifth Third Auto Trust
Series 2004-A Class A3
3.190% due 02/20/08 2,000 1,982
First Franklin Mortgage Loan Asset Backed
Certificates (E)
Series 2003-FF3 Class 2A1
2.650% due 07/25/33 274 274
First National Master Note Trust (E)
Series 2003-1 Class A
2.910% due 08/15/08 1,000 1,001
Fleet Credit Card Master Trust II
Series 2000-C Class A
7.020% due 02/15/08 1,211 1,224
Series 2001-B Class A
5.600% due 12/15/08 3,000 3,058
Ford Credit Auto Owner Trust
Series 2002-A Class A4A
4.360% due 09/15/06 434 435
Series 2005-A Class A3
3.480% due 11/15/08 7,725 7,672
Series 2005-B Class B
4.640% due 04/15/10 1,250 1,257
</Table>
Short Duration Bond Fund 65
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Franklin Auto Trust
Series 2003-1 Class A4
2.270% due 05/20/11 1,170 1,146
Fremont Home Loan Trust (E)
Series 2004-4 Class 2A1
2.690% due 03/25/35 3,022 3,022
GE Commercial Equipment Financing LLC (E)
Series 2004-1 Class B
2.700% due 12/20/15 745 745
GE Corporate Aircraft Financing LLC (E)(p)
Series 2004-1A Class B
3.380% due 01/25/18 828 828
GE Dealer Floorplan Master Note Trust (E)
Series 2004-2 Class B
3.140% due 07/20/09 1,000 1,003
GMAC Mortgage Corp. Loan Trust
Series 2004-GH1 Class A2
4.390% due 12/25/25 1,500 1,501
GMAC Mortgage Corp. Loan Trust (E)
Series 2004-HE2 Class A1C
2.630% due 10/25/33 840 840
GS Auto Loan Trust
Series 2004-1 Class A3
2.130% due 11/15/07 2,000 1,976
GSAMP Trust (E)
Series 2003-HE1 Class A2A
2.670% due 06/20/33 65 65
Series 2004-AR2 Class A3A
2.680% due 08/25/34 188 188
Series 2004-NC2 Class A2A
2.710% due 10/01/34 1,673 1,674
Series 2004-SEA2 Class A2A
3.140% due 03/25/34 1,225 1,225
Home Equity Mortgage Trust (E)
Series 2004-4 Class A2
3.000% due 12/25/34 890 890
Honda Auto Receivables Owner Trust
Series 2003-2 Class A4
2.160% due 10/21/08 7,000 6,832
Series 2003-3 Class A4
2.770% due 11/21/08 2,000 1,959
Series 2003-4 Class A4
2.790% due 03/16/09 1,000 980
Series 2003-5 Class A3
2.300% due 10/18/07 1,000 989
Series 2003-5 Class A4
2.960% due 04/20/09 2,135 2,091
Series 2004-3 Class A4
3.280% due 02/18/10 2,000 1,947
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Household Automotive Trust
Series 2002-2 Class A3
2.850% due 03/19/07 235 234
Household Mortgage Loan Trust (E)
Series 2003-HC1 Class A
3.200% due 02/20/33 808 811
Household Private Label Credit Card Master Note
Trust I (E)
Series 2002-2 Class A
2.980% due 01/18/11 1,000 1,001
Hyundai Auto Receivables Trust
Series 2003-A Class A3
2.330% due 11/15/07 1,500 1,487
Series 2004-A Class A3
2.970% due 05/15/09 1,000 986
Hyundai Auto Receivables Trust (p)
Series 2002-A Class A3
2.800% due 02/15/07 336 335
Illinois Power Special Purpose Trust
Series 1998-1 Class A5
5.380% due 06/25/07 114 115
Series 1998-1 Class A6
5.540% due 06/25/09 4,725 4,819
Irwin Home Equity (E)
Series 2002-1 Class 2A1
2.820% due 06/25/29 8 8
IXIS Real Estate Capital Trust (E)
Series 2005-HE2 Class A1
3.144% due 09/25/35 1,200 1,200
MBNA Credit Card Master Note Trust
Series 2001-A1 Class A1
5.750% due 10/15/08 1,000 1,020
Series 2004-A4 Class A4
2.700% due 09/15/09 11,005 10,747
MBNA Master Credit Card Trust USA
Series 1995-C Class A
6.450% due 02/15/08 1,430 1,436
Merrill Lynch Mortgage Investors, Inc. (E)
Series 2004-WMC3 Class A2A
2.970% due 01/25/35 48 48
Morgan Stanley Dean Witter Capital I (E)
Series 2002-HE1 Class A2
2.860% due 07/25/32 20 20
National City Auto Receivables Trust
Series 2002-A Class A4
4.830% due 08/15/09 1,408 1,419
</Table>
66 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-A Class A3
2.110% due 07/15/08 1,500 1,478
National City Bank
2.700% due 08/24/09 2,045 1,974
Navistar Financial Corp. Owner Trust
Series 2001-B Class A4
4.370% due 11/17/08 1,477 1,478
Series 2002-A Class A4
4.760% due 04/15/09 786 790
Nelnet Education Loan Funding, Inc.
Series 2001-A Class A1
5.760% due 07/01/12 785 802
Nelnet Student Loan Trust (E)
Series 2002-2 Class A3
2.649% due 09/25/13 1,047 1,050
Series 2004-4 Class A1
2.690% due 04/25/11 294 294
Nissan Auto Receivables Owner Trust
Series 2005-A Class A3
3.540% due 10/15/08 1,650 1,638
Nordstrom Private Label Credit Card Master Note
Trust (p)
Series 2001-1A Class A
4.820% due 04/15/10 3,500 3,544
Onyx Acceptance Grantor Trust
Series 2005-A Class A4
3.910% due 09/15/11 2,000 1,981
Option One Mortgage Loan Trust (E)
Series 2005-1 Class A2
2.573% due 02/25/35 3,268 3,268
PBG Equipment Trust (p)
Series 1998-1A Class A
6.270% due 01/20/12 973 979
Peco Energy Transition Trust
Series 1999-A Class A6
6.050% due 03/01/09 2,500 2,564
PG&E Energy Recovery Funding LLC
Series 2005-1 Class A2
3.870% due 06/25/11 2,905 2,895
PNC Student Loan Trust I
Series 1997-2 Class A7
6.728% due 01/25/07 1,245 1,269
Popular ABS Mortgage Pass-Through Trust
Series 2004-5 Class AF2
3.735% due 12/25/34 965 956
Provident Auto Lease ABS Trust (p)
Series 1999-1 Class A2
7.025% due 01/14/12 187 190
Providian Gateway Master Trust (p)
Series 2004-FA Class A
3.650% due 11/15/11 1,200 1,184
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PSE&G Transition Funding LLC
Series 2001-1 Class A3
5.980% due 06/15/08 3,000 3,044
Public Service New Hampshire Funding LLC
Series 2001-1 Class A2
5.730% due 11/01/10 1,436 1,473
Railcar Leasing LLC (p)
Series 1997-1 Class A2
7.125% due 01/15/13 1,000 1,088
Regions Auto Receivables Trust
Series 2003-2 Class A3
2.310% due 01/15/08 1,500 1,488
Renaissance Home Equity Loan Trust (E)
Series 2004-2 Class AF1
3.050% due 07/25/34 2,098 2,099
Residential Asset Mortgage Products, Inc.
Series 2003-RZ5 Class A2
3.180% due 03/25/27 1,758 1,753
Residential Asset Mortgage Products, Inc. (E)
Series 2004-RS2 Class AIIB
2.780% due 02/25/34 2,075 2,078
Series 2004-RS8 Class AII1
2.990% due 05/25/26 2,424 2,425
Sears Credit Account Master Trust
Series 1999-3 Class A
6.450% due 11/17/09 846 852
Series 2000-2 Class A
6.750% due 09/16/09 2,000 2,023
Sears Credit Account Master Trust (E)
Series 2002-4 Class A
2.940% due 08/18/09 3,700 3,701
Series 2002-5 Class A
3.190% due 11/17/09 3,500 3,507
SLM Student Loan Trust (E)
Series 2003-8 Class A2
2.530% due 06/15/11 558 558
Series 2004-10 Class A1
2.063% due 07/27/09 1,494 1,494
SLM Student Loan Trust (p)
Series 2003-4 Class A5B
3.390% due 03/15/33 3,000 2,902
</Table>
Short Duration Bond Fund 67
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Susquehanna Auto Lease Trust (p)
Series 2003-1 Class A3
2.460% due 01/14/07 869 864
Series 2005-1 Class A3
4.430% due 06/16/08 2,000 2,011
Toyota Auto Receivables Owner Trust
Series 2003-B Class A4
2.790% due 01/15/10 4,670 4,593
Triad Auto Receivables Owner Trust
Series 2002-A Class A4
3.240% due 08/12/09 2,000 1,992
Series 2003-B Class A3
2.480% due 03/12/08 1,000 994
Series 2004-A Class A3
1.900% due 07/14/08 1,000 985
USAA Auto Owner Trust
Series 2004-2 Class A4
3.580% due 02/15/11 1,700 1,682
Volkswagen Auto Loan Enhanced Trust
Series 2003-2 Class A3
2.270% due 10/22/07 3,000 2,974
Wachovia Auto Owner Trust
Series 2004-A Class A3
3.190% due 06/20/08 2,000 1,986
Series 2004-A Class A4
3.660% due 07/20/10 10,500 10,392
Series 2004-B Class A3
2.910% due 04/20/09 5,000 4,931
Wells Fargo Financial Auto Owner Trust
Series 2004-A Class A4
2.670% due 08/16/10 2,000 1,954
Wells Fargo Home Equity Trust (E)
Series 2004-2 Class A31
3.010% due 06/25/19 225 225
West Penn Funding LLC Transition Bonds
Series 1999-A Class A3
6.810% due 09/25/08 1,232 1,257
WFS Financial Owner Trust
Series 2002-3 Class A4
3.500% due 02/20/10 2,000 1,997
Series 2004-1 Class A3
2.190% due 06/20/08 1,500 1,481
Whole Auto Loan Trust
Series 2002-1 Class A3
2.600% due 08/15/06 270 270
Series 2003-1 Class A3B
1.990% due 05/15/07 1,900 1,885
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-1 Class B
2.240% due 03/15/10 615 607
------------
300,062
------------
Corporate Bonds and Notes - 14.0%
Abbott Laboratories
5.625% due 07/01/06 1,500 1,528
ABN Amro Bank NV
7.125% due 06/18/07 1,500 1,589
Allstate Financial Global Funding (p)
2.500% due 06/20/08 4,080 3,858
Allstate Life Global Funding Trusts
3.850% due 01/25/08 4,050 4,006
Altria Group, Inc.
7.650% due 07/01/08 1,500 1,640
American Express Centurion Bank
Series BKNT
4.375% due 07/30/09 3,440 3,442
American General Finance Corp. (E)(N)
Series MTNG
3.093% due 03/23/07 200 200
Amsouth Bank NA
Series BKNT
2.820% due 11/03/06 2,000 1,967
Associates Corp. of North America
6.250% due 11/01/08 1,000 1,065
8.550% due 07/15/09 750 867
Series MTNH
7.250% due 05/08/06 2,000 2,066
7.240% due 05/17/06 1,000 1,034
Bank of America Corp.
6.375% due 02/15/08 3,000 3,161
Bank of Montreal
7.800% due 04/01/07 1,000 1,066
BankAmerica Corp.
7.125% due 03/01/09 1,500 1,640
BB&T Corp. (E)
Series BKNT
3.000% due 06/04/07 3,500 3,505
CIT Group, Inc.
7.375% due 04/02/07 6,800 7,190
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
2.999% due 03/07/08 1,600 1,599
Citigroup, Inc.
5.750% due 05/10/06 1,370 1,397
Citigroup, Inc. (E)
2.498% due 06/04/07 1,000 1,000
</Table>
68 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ConocoPhillips
8.750% due 05/25/10 1,000 1,196
DaimlerChrysler NA Holding Corp.
6.400% due 05/15/06 1,200 1,220
4.125% due 03/07/07 2,830 2,785
4.750% due 01/15/08 1,548 1,527
Deutsche Bank Financial, Inc.
7.500% due 04/25/09 2,000 2,219
Entergy Mississippi, Inc.
4.350% due 04/01/08 500 498
Fifth Third Bancorp
Series BKNT
3.375% due 08/15/08 2,000 1,947
Ford Motor Credit Co.
6.500% due 01/25/07 1,500 1,500
Ford Motor Credit Co. (E)
4.000% due 03/21/07 2,400 2,336
General Electric Capital Corp.
4.125% due 03/04/08 5,800 5,787
8.500% due 07/24/08 1,000 1,121
8.300% due 09/20/09 1,000 1,150
Series MTNA
3.450% due 07/16/07 700 689
8.125% due 04/01/08 1,000 1,104
General Motors Acceptance Corp.
6.125% due 09/15/06 300 298
General Motors Acceptance Corp. (E)
3.695% due 05/18/06 400 392
4.050% due 01/16/07 200 191
Goldman Sachs Group, Inc. (E)
2.750% due 01/09/07 3,000 3,004
Series MTNB
3.023% due 07/23/09 2,000 2,008
Harrah's Operating Co., Inc.
7.500% due 01/15/09 1,500 1,640
Household Finance Corp.
4.625% due 01/15/08 8,800 8,870
Household Finance Corp. (E)
3.130% due 02/28/07 3,200 3,199
John Hancock Global Funding II
6.000% due 12/28/06 2,450 2,524
KFW International Finance
Series DTC
5.250% due 06/28/06 2,000 2,033
Lehman Brothers Holdings, Inc.
8.250% due 06/15/07 3,500 3,793
7.875% due 08/15/10 1,000 1,153
Lehman Brothers, Inc.
6.625% due 02/15/08 1,500 1,591
Medco Health Solutions, Inc.
7.250% due 08/15/13 1,750 1,945
Metropolitan Life Global Funding I (p)
4.250% due 07/30/09 1,500 1,494
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MGM Mirage
9.750% due 06/01/07 1,200 1,293
Morgan Stanley
3.875% due 01/15/09 2,000 1,961
Morgan Stanley (E)
2.825% due 07/27/07 3,000 3,003
National City Bank
Series BKNT
4.250% due 01/29/10 1,375 1,363
National Rural Utilities Cooperative Finance
Corp.
Series MTNC
6.500% due 03/01/07 2,200 2,288
New York Life Global Funding (E)(p)
2.441% due 02/26/07 2,500 2,501
Principal Life Global Funding I (p)
5.125% due 06/28/07 2,000 2,034
Prudential Financial, Inc. (N)
4.104% due 11/15/06 500 503
SBC Communications Capital Corp.
Series MTND
6.680% due 11/28/07 1,075 1,133
SLM Corp.
3.625% due 03/17/08 7,200 7,073
Swiss Bank Corp. New York
7.250% due 09/01/06 1,500 1,563
TIAA Global Markets (p)
5.000% due 03/01/07 3,625 3,684
Tosco Corp.
7.250% due 01/01/07 1,500 1,571
Toyota Motor Credit Corp.
2.750% due 08/06/09 3,273 3,115
Unilever Capital Corp.
7.125% due 11/01/10 1,000 1,130
Union Bank Switzerland
7.250% due 07/15/06 1,000 1,034
US Bancorp
Series MTNN
5.100% due 07/15/07 3,000 3,061
US Central Credit Union
2.750% due 05/30/08 1,880 1,818
USAA Capital Corp. (p)
Series MTNB
4.640% due 12/15/09 595 598
Verizon Global Funding Corp.
4.000% due 01/15/08 2,500 2,483
</Table>
Short Duration Bond Fund 69
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Wachovia Corp. (E)
Series *
2.940% due 07/20/07 3,500 3,500
Washington Mutual Financial Corp.
6.250% due 05/15/06 1,745 1,787
7.250% due 06/15/06 3,005 3,112
Wells Fargo (N)
4.125% due 03/10/08 820 818
Wells Fargo & Co.
6.250% due 04/15/08 8,337 8,801
Series MTNH
6.750% due 10/01/06 1,930 2,010
Wells Fargo & Co. (E)
3.100% due 09/15/06 3,000 3,003
------------
169,274
------------
International Debt - 2.4%
Brazilian Government International Bond
10.000% due 01/16/07 1,800 1,933
8.000% due 04/15/14 106 105
Brazilian Government International Bond (E)
8.840% due 06/29/09 1,150 1,314
3.125% due 04/15/12 165 154
HBOS Treasury Services PLC (E)(p)
2.700% due 01/12/07 900 901
HBOS Treasury Services PLC (p)
3.500% due 11/30/07 2,000 1,969
3.750% due 09/30/08 1,000 986
HSBC Bank PLC
7.625% due 06/15/06 4,500 4,681
6.950% due 03/15/11 1,000 1,139
Inter-American Development Bank
12.250% due 12/15/08 1,250 1,589
Interstar Millennium Trust (E)
Series 2004-2G Class A
3.210% due 03/14/36 2,180 2,181
Mexico Government International Bond
4.625% due 10/08/08 3,250 3,227
National Westminster Bank PLC
7.375% due 10/01/09 1,000 1,119
Panama Government International Bond
8.250% due 04/22/08 1,300 1,407
Peru Government International Bond (N)
9.125% due 01/15/08 1,000 1,100
Province of British Columbia
4.625% due 10/03/06 2,000 2,027
Province of Manitoba Canada
4.250% due 11/20/06 1,000 1,007
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Province of Ontario
5.500% due 10/01/08 1,500 1,569
------------
28,408
------------
Mortgage-Backed Securities - 15.5%
Banc of America Commercial Mortgage, Inc.
Series 2004-2 Class A1
2.764% due 11/10/38 2,573 2,494
Bank of America Mortgage Securities
Series 2004-2 Class 5A1
6.500% due 10/25/31 494 510
Bank of America Mortgage Securities (E)
Series 2002-K Class 2A1
5.591% due 10/20/32 78 79
Bear Stearns Adjustable Rate Mortgage Trust
Series 2002-9 Class 2A
5.271% due 10/25/32 27 27
Series 2003-1 Class 5A1
5.437% due 04/25/33 628 622
Bear Stearns Adjustable Rate Mortgage Trust (E)
Series 2003-8 Class 2A1
4.881% due 01/25/34 780 771
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.446% due 05/25/35 1,900 1,920
Bear Stearns Asset Backed Securities, Inc.
Series 2003-AC3 Class A1
4.000% due 07/25/33 771 767
Bear Stearns Commercial Mortgage Securities
Series 1998-C1 Class A1
6.340% due 06/16/30 557 572
Series 1999-C1 Class A2
6.020% due 02/14/31 2,000 2,105
Series 2001-TOP4 Class A1
5.060% due 11/15/16 869 884
Series 2003-PWR2 Class A1
3.432% due 05/11/39 818 801
Series 2003-T10 Class A1
4.000% due 03/13/40 1,541 1,513
Series 2003-T12 Class A1
2.960% due 08/13/39 1,564 1,517
</Table>
70 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Carrington Mortgage Loan Trust
Series 2005-OTP2 Class A1A
3.180% due 05/01/35 900 900
Commercial Mortgage Pass Through Certificates
Series 2004-LB2A Class A2
3.600% due 03/10/39 1,000 974
Countrywide Alternative Loan Trust
Series 2003-6T2 Class A1
6.500% due 06/25/33 517 523
Series 2003-J2 Class A1
6.000% due 10/25/33 942 951
Credit Suisse First Boston Mortgage (p)
1.691% due 08/25/33 495 497
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2002-AR27 Class 2A2
5.673% due 10/25/32 62 62
Series 2003-C4 Class A2
3.908% due 08/15/36 1,000 987
Series 2003-CK2 Class A1
3.006% due 03/15/36 981 959
Series 2004-C1 Class A1
2.254% due 01/15/37 2,286 2,226
Fannie Mae
15 Year TBA (I) 1,000 1,007
5.000%
30 Year TBA (I)
5.500% 38,000 38,357
6.000% due 2008 133 138
5.500% due 2009 3,041 3,111
6.000% due 2010 277 287
6.500% due 2010 208 217
6.000% due 2011 271 282
6.500% due 2011 189 197
4.500% due 2013 3,419 3,425
5.000% due 2013 3,484 3,542
5.500% due 2013 465 479
6.000% due 2013 554 575
6.000% due 2014 2,794 2,900
5.500% due 2016 1,631 1,671
5.000% due 2017 116 117
5.500% due 2017 2,272 2,329
6.000% due 2017 249 258
4.500% due 2018 147 146
5.000% due 2018 5,020 5,063
4.500% due 2019 834 826
5.500% due 2019 497 509
5.500% due 2020 498 510
5.500% due 2022 1,581 1,602
6.000% due 2033 43 45
5.500% due 2034 160 162
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 1994-1 Class K
6.500% due 06/25/13 213 215
Series 2003-129 Class PQ
4.500% due 07/25/33 721 723
Series 2003-24 Class PU
3.500% due 11/25/15 407 399
Series 2003-27 Class TJ
4.000% due 10/25/16 1,089 1,087
Series 2003-46 Class PQ
3.000% due 06/25/19 3,500 3,431
Series 2003-62 Class OD
3.500% due 04/25/26 1,250 1,204
Series 2003-63 Class GU
4.000% due 07/25/33 3,189 3,155
Series 2003-75 Class NB
3.250% due 08/25/18 814 791
Series 2003-92 Class BR
5.000% due 04/25/14 1,479 1,484
Series 2004-17 Class HA
3.000% due 01/25/19 2,525 2,372
Series 2004-21 Class QA
4.000% due 11/25/17 3,500 3,491
Fannie Mae (E)
3.272% due 2041 2,969 3,010
3.222% due 2042 3,077 3,103
Fannie Mae-Aces
Series 1998-M1 Class A2
6.250% due 01/25/08 1,701 1,767
Federal Home Loan Bank System
Series 2004-9009 Class 1
3.920% due 09/25/09 1,987 1,960
Federal Home Loan Mortgage Corp.
Structured Pass Through
Securities
Series 2003-H009 Class A2
1.876% due 03/15/08 638 628
Freddie Mac
4.000% due 2007 1,235 1,233
4.000% due 2008 1,107 1,104
4.500% due 2008 1,224 1,232
5.500% due 2008 169 173
6.500% due 2008 152 157
5.500% due 2009 369 379
6.000% due 2009 244 252
6.500% due 2009 542 563
6.000% due 2010 218 226
8.000% due 2010 76 78
6.000% due 2011 700 726
</Table>
Short Duration Bond Fund 71
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.000% due 2013 176 183
5.500% due 2014 766 786
6.000% due 2014 185 192
6.000% due 2016 810 840
5.500% due 2017 1,192 1,222
5.000% due 2018 730 736
6.000% due 2028 155 160
5.500% due 2029 1,098 1,118
6.000% due 2029 336 346
6.000% due 2031 464 477
6.000% due 2032 625 642
6.000% due 2033 1,032 1,062
Series 1993-1645 Class PD
4.500% due 09/15/08 206 207
Series 2003-2557 Class MA
4.500% due 07/15/16 297 297
Series 2003-2559 Class PB
5.500% due 08/15/30 213 211
Series 2003-2580 Class QK
4.000% due 04/15/22 1,500 1,499
Series 2003-2586 Class NS
3.250% due 09/15/15 1,846 1,802
Series 2003-2614 Class JA
3.760% due 03/15/29 1,571 1,531
Series 2003-2632 Class YH
3.500% due 08/15/22 1,250 1,235
Series 2003-2638 Class NK
4.000% due 02/15/15 1,445 1,445
Series 2003-2685 Class MX
4.000% due 07/15/16 2,797 2,763
Series 2003-2715 Class OJ
3.500% due 03/15/11 2,564 2,561
Series 2004-2760 Class EA
4.500% due 04/15/13 1,920 1,929
Series 2004-2851 Class BA
4.500% due 02/15/20 1,834 1,825
GE Capital Commercial Mortgage Corp.
Series 2001-3 Class A1
5.560% due 06/10/38 1,647 1,699
Series 2004-C3 Class A1
3.752% due 07/10/39 3,171 3,133
Series 2005-C1 Class A1
4.012% due 06/10/48 1,943 1,936
Ginnie Mae I
7.000% due 2007 6 6
6.000% due 2008 128 132
9.500% due 2017 1 1
Ginnie Mae II (E)
3.750% due 2027 181 183
3.000% due 2032 403 408
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Government National Mortgage Association
Series 2004-78 Class A
3.590% due 11/16/17 2,910 2,860
GSR Mortgage Loan Trust (E)
Series 2004-7 Class 1A1
3.454% due 06/25/34 2,574 2,540
Impac CMB Trust (E)
Series 2004-2 Class A2
2.780% due 04/25/34 783 782
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C2 Class A1
4.326% due 12/12/34 845 841
LB-UBS Commercial Mortgage Trust
Series 2003-C1 Class A1
2.720% due 03/15/27 1,522 1,483
Series 2003-C3 Class A1
2.599% due 05/15/27 2,035 1,971
Lehman Large Loan
Series 1997-LLI Class A2
6.840% due 10/12/34 109 111
Mellon Residential Funding Corp. (E)
Series 2000-TBC2 Class A1
3.050% due 06/15/30 1,736 1,733
Morgan Stanley Capital I
Series 1998-WF2 Class A1
6.340% due 07/15/30 44 44
Series 2003-T11 Class A1
3.260% due 06/13/41 1,639 1,605
Series 2004-T13 Class A1
2.850% due 09/13/45 845 821
Morgan Stanley Dean Witter Capital I
Series 2001-TOP5 Class A1
5.020% due 10/15/35 337 341
Series 2002-HQ Class A2
6.090% due 04/15/34 500 521
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
3.250% due 02/25/34 357 357
Series 2004-CL1 Class 2A2
3.250% due 02/25/19 90 90
SACO I, Inc. (E)(p)
Series 2004-2 Class A2
3.040% due 07/25/19 1,735 1,735
Salomon Brothers Mortgage Securities VII
Series 2003-UP2 Class A1
4.000% due 12/25/18 1,505 1,471
</Table>
72 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Structured Asset Mortgage Investments, Inc. (E)
Series 2002-AR3 Class A1
2.830% due 09/19/32 182 182
Structured Asset Securities Corp. (E)
Series 2001-21A Class 1A1
6.250% due 01/25/32 170 174
Vendee Mortgage Trust
Series 2001-3 Class J
6.500% due 05/15/08 528 545
Wachovia Bank Commercial Mortgage Trust
Series 2002-C2 Class A2
4.043% due 11/15/34 2,080 2,051
Series 2003-C4 Class A1
3.003% due 04/15/35 1,869 1,825
Washington Mutual
Series 2002-AR10 Class A6
4.816% due 10/25/32 1,074 1,067
Washington Mutual (E)
Series 2002-AR9 Class 1A
3.286% due 08/25/42 2,033 2,045
Washington Mutual MSC Mortgage Pass-Through CTFS
(E)
Series 2002-AR2 Class 2A1
6.110% due 07/25/32 25 25
Washington Mutual, Inc. (E)
Series 2002-AR6 Class A
3.571% due 06/25/42 1,821 1,840
------------
186,986
------------
Non-US Bonds - 0.1%
Deutsche Bundesrepublik
5.500% due 01/04/31 EUR 400 642
France Government Bond OAT
5.750% due 10/25/32 EUR 200 334
Landwirtschaftliche Rentenbank
0.650% due 09/30/08 JPY 60,000 580
------------
1,556
------------
United States Government Agencies - 0.5%
Fannie Mae (E)
2.925% due 09/22/06 1,600 1,599
Federal Home Loan Bank System
5.925% due 04/09/08 1,600 1,686
Zero coupon due 04/27/10 1,097 1,017
Freddie Mac
5.810% due 04/04/08 1,000 1,048
------------
5,350
------------
United States Government Treasuries - 14.8%
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Treasury Inflation Indexed Bonds
3.625% due 01/15/08 5,460 5,873
2.000% due 01/15/14 311 323
3.625% due 04/15/28 119 158
United States Treasury Notes
2.375% due 08/15/06 84,250 83,063
4.375% due 05/15/07 47,000 47,664
2.750% due 08/15/07 12,900 12,641
3.000% due 11/15/07 29,730 29,235
------------
178,957
------------
TOTAL LONG-TERM INVESTMENTS
(cost $878,131) 870,593
------------
PREFERRED STOCKS - 0.2%
Financial Services - 0.2%
DG Funding Trust (p) 219 2,368
------------
TOTAL PREFERRED STOCKS
(cost $2,308) 2,368
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
- -----------------------------------------------------------------------------
OPTIONS PURCHASED - 0.0%
Eurodollar Futures
Sep 2005 93.75 Put (159) 398 1
Sep 2005 95.50 Put (25) 63 --
------------
TOTAL OPTIONS PURCHASED
(cost $2) 1
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 31.1%
Abbey National PLC
6.690% due 10/17/05 2,000 2,029
ABN Amro Bank NV
7.250% due 05/31/05 1,000 1,003
Bank of America Corp. (z)
3.010% due 07/06/05 1,100 1,092
</Table>
Short Duration Bond Fund 73
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America Corp. (E)
3.140% due 08/26/05 1,000 1,001
Bank of Montreal
6.100% due 09/15/05 2,000 2,019
BankAmerica Corp.
6.200% due 02/15/06 750 764
Barclays US Funding, LLC (c)(z)
2.770% due 05/09/05 10,500 10,494
2.935% due 05/20/05 1,200 1,198
Brazilian Government International Bond (E)
3.063% due 04/15/06 416 417
Capital Auto Receivables Asset Trust (E)
Series 2003-3 Class A1B
2.860% due 01/16/06 247 247
Citibank New York Commercial Paper (z)
3.130% due 07/29/05 11,000 11,000
Citigroup, Inc.
6.750% due 12/01/05 6,500 6,617
DaimlerChrysler NA Holding Corp.
7.750% due 06/15/05 2,700 2,711
Danske Corp. Discount Note (z)
3.020% due 07/15/05 5,700 5,653
Deutsche Telekom International Finance BV
8.250% due 06/15/05 1,050 1,056
European Investment Bank
Series DTC
5.625% due 01/24/06 575 584
Fannie Mae Discount Notes (c)(z)
2.485% due 05/25/05 2,800 2,795
2.674% due 06/13/05 100 100
Fannie Mae Discount Notes (z)
2.985% due 07/20/05 10,700 10,621
2.990% due 07/20/05 10,700 10,619
3.010% due 07/27/05 10,700 10,619
Federal Home Loan Bank Discount Notes (c)(z)
2.691% due 05/02/05 4,800 4,799
2.860% due 06/10/05 10,232 10,199
Ford Motor Credit Co.
7.600% due 08/01/05 1,900 1,913
6.125% due 01/09/06 1,675 1,683
Ford Motor Credit Co. (E)
3.540% due 06/30/05 200 200
3.573% due 07/07/05 1,900 1,888
France Telecom SA
7.450% due 03/01/06 1,200 1,235
Frank Russell Investment Company Money Market
Fund 64,145,553 64,145
Freddie Mac
9.000% due 09/01/05 1 1
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Freddie Mac Discount Notes (c)(z)
2.720% due 05/04/05 100 100
2.670% due 05/27/05 10,600 10,580
2.810% due 06/07/05 6,800 6,780
2.815% due 06/07/05 100 100
2.669% due 06/15/05 3,400 3,388
2.683% due 06/15/05 10,600 10,563
2.687% due 06/15/05 2,500 2,492
2.690% due 06/20/05 2,000 1,993
Freddie Mac Discount Notes (z)
2.930% due 06/30/05 100 99
2.890% due 07/12/05 1,600 1,583
3.000% due 07/26/05 200 198
3.020% due 08/01/05 1,000 988
2.995% due 08/09/05 300 297
General Electric Capital Corp. (E)
Series MTNA
2.950% due 02/03/06 2,000 2,004
General Electric Capital Corp. Discount Note
(c)(z)
2.970% due 06/20/05 10,600 10,556
General Electric Capital Corp. Discount Note (z)
3.090% due 07/25/05 1,100 1,092
General Motors Acceptance Corp.
7.500% due 07/15/05 200 201
6.750% due 01/15/06 2,000 2,015
General Motors Acceptance Corp. (E)
4.750% due 05/19/05 300 300
4.395% due 10/20/05 200 200
4.070% due 04/13/06 2,300 2,261
Government Trust Certificate
8.500% due 04/01/06 448 468
GTE Corp.
6.360% due 04/15/06 2,000 2,044
HBOS Treasury Services, PLC (c)(z)
2.870% due 06/07/05 1,100 1,097
HBOS Treasury Services, PLC (z)
3.080% due 07/27/05 8,000 7,937
Heller Financial, Inc.
6.375% due 03/15/06 1,000 1,022
Hydro Quebec
Series MTNB
6.520% due 02/23/06 1,000 1,022
Nordea Bank Finland PLC
6.500% due 01/15/06 3,000 3,062
</Table>
74 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Province of Ontario
7.000% due 08/04/05 1,500 1,515
Province of Quebec
6.500% due 01/17/06 1,560 1,594
Rabobank USA Financial Corp. (c)(z)
2.890% due 05/02/05 1,000 1,000
2.780% due 05/03/05 10,700 10,698
Royal Bank of Scotland (c)(z)
2.960% due 05/25/05 10,700 10,679
Russia Government International Bond
8.750% due 07/24/05 3,500 3,538
SouthTrust Bank (E)
Series BKNT
2.950% due 12/14/05 3,000 3,001
Spintab Swedish Mortgage (z)
3.080% due 08/11/05 7,800 7,723
3.180% due 09/01/05 3,900 3,849
Sprint Capital Corp.
7.125% due 01/30/06 1,000 1,022
SunTrust Bank (E)
Series BKNT
3.120% due 10/03/05 2,000 2,000
Telefonica Europe BV
7.350% due 09/15/05 6,700 6,792
UBS Financial Del, LLC (c)(z)
2.830% due 05/02/05 1,800 1,800
2.795% due 05/04/05 100 100
2.870% due 05/16/05 9,700 9,688
2.670% due 05/25/05 100 100
United States Treasury Bills (c)(z)(sec.)
2.680% due 06/02/05 20 20
2.690% due 06/02/05 20 20
2.710% due 06/02/05 75 75
2.740% due 06/16/05 1,350 1,345
United States Treasury Bills (z)
2.781% due 06/09/05 (sec.) 150 150
2.805% due 07/21/05 (sec.) 1,000 989
2.882% due 08/04/05 (sec.) 3,400 3,361
2.835% due 08/18/05 (sec.) 54,800 54,256
2.976% due 09/08/05 400 395
US Bancorp
7.625% due 05/01/05 1,000 1,000
US Bank NA (E)
Series BKNT
2.950% due 12/05/05 1,500 1,500
Verizon Wireless Capital LLC (E)(p)
2.930% due 05/23/05 1,400 1,400
Wachovia Corp.
6.800% due 06/01/05 1,500 1,504
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Westpac Capital Corp. (c)(z)
2.940% due 06/10/05 700 698
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $376,539) 374,956
------------
OTHER SECURITIES - 0.1%
Frank Russell Investment Company Money Market
Fund (X) 385,601 386
State Street Securities Lending Quality Trust
(X) 1,214,904 1,215
------------
TOTAL OTHER SECURITIES
(cost $1,601) 1,601
------------
TOTAL INVESTMENTS - 103.5%
(identified cost $1,258,581) 1,249,519
OTHER ASSETS AND LIABILITIES,
NET - (3.5%) (41,816)
------------
NET ASSETS - 100.0% 1,207,703
------------
------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund 75
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Eurodollar Futures
expiration date 06/05 (25) 6,036 (41)
expiration date 09/05 (897) 215,852 (1,209)
expiration date 12/05 (388) 93,183 (249)
expiration date 03/06 (190) 45,572 60
expiration date 09/06 (14) 3,351 (2)
United States Treasury 2 Year Notes
expiration date 06/05 (131) 27,209 38
United States Treasury 10 Year Notes
expiration date 06/05 (10) 1,114 13
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (1,390)
===============
</Table>
<Table>
<Caption>
OPTIONS WRITTEN NOTIONAL MARKET
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
United States Treasury Notes
10 Year Futures
May 2005 111.00 Call (5) 555 (4)
May 2005 108.00 Put (5) 540 --
---------------
Total Liability for Options Written (premiums
received $3) (4)
===============
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 85 USD 110 05/18/05 1
EUR 376 USD 486 05/18/05 2
EUR 378 USD 495 05/25/05 8
JPY 61,632 USD 572 06/13/05 (18)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions (7)
==============
</Table>
<Table>
<Caption>
INTEREST RATE SWAPS
- ------------------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
COUNTER AMOUNT TERMINATION VALUE
PARTY $ FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ---------------------- -------------------- ---------------- ----------------
UBS USD 34,800 4.000% Three Month LIBOR 06/15/07 (17)
----------------
Total Market Value of Interest Rate Swaps Premiums Paid (Received) - ($208) (17)
================
</Table>
See accompanying notes which are an integral part of the financial statements.
76 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Asset-Backed Securities 24.8
Corporate Bonds and Notes 14.0
International Debt 2.4
Mortgage-Backed Securities 15.5
Non-US Bonds 0.1
United States Government Agencies 0.5
United States Government Treasuries 14.8
Preferred Stock 0.2
Options Purchased --*
Short-Term Investments 31.1
Other Securities 0.1
---------------
Total Investments 103.5
Other Assets and Liabilities, Net (3.5)
---------------
Net Assets 100.0
===============
Futures Contracts 0.1
Options Written --*
Interest Rate Swaps --*
Foreign Currency Exchange Contracts --*
</Table>
* Less than .05%
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund 77
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,002.10 $ 1,016.87
Expenses Paid During
Period* $ 8.14 $ 8.20
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.64%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,005.50 $ 1,020.59
Expenses Paid During
Period* $ 4.43 $ 4.46
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.89%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,006.80 $ 1,021.83
Expenses Paid During
Period* $ 3.18 $ 3.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.64%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
78 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 93.2%
Asset-Backed Securities - 6.4%
ABSC NIMs Trust (p)
Series 2004-HE5 Class A1
5.000% due 08/27/34 157 156
American Airlines, Inc.
7.858% due 10/01/11 335 346
Ameriquest Mortgage Securities, Inc. (E)
Series 2002-D Class M1
5.350% due 02/25/33 205 208
Argent Securities, Inc. (E)
Series 2004-W11 Class A2
3.030% due 11/25/34 354 354
Asset Backed Funding Corp. NIMs Trust (p)
Series 2003-OPT1 Class NOTE
6.900% due 07/26/33 32 32
CDC Mortgage Capital Trust (E)
Series 2002-HE2 Class A
2.820% due 01/25/33 15 15
Centex Home Equity (E)
Series 2003-A Class AV1
3.130% due 03/25/33 69 69
Series 2004-B Class AV2
2.950% due 03/25/34 164 164
Chase Credit Card Master Trust (E)
Series 2002-7 Class A
2.930% due 02/15/10 3,420 3,428
Series 2003-1 Class A
2.860% due 04/15/08 6,955 6,957
Chase Funding Mortgage Loan Asset-Backed
Certificates (E)
Series 2002-2 Class 2A1
3.100% due 05/25/32 391 392
Series 2004-1 Class 1A1
2.960% due 11/25/18 208 208
Citibank Credit Card Issuance Trust (E)
Series 2003-A4 Class A4
3.120% due 03/20/09 2,485 2,487
Citifinancial Mortgage Securities, Inc. (E)
Series 2003-4 Class AF1
3.020% due 10/25/33 75 75
Countrywide Asset-Backed Certificates
Series 2004-13 Class AF2
3.683% due 08/25/24 1,085 1,074
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-7 Class AF2
3.324% due 12/25/23 620 613
Countrywide Asset-Backed Certificates (E)
Series 2001-BC3 Class A
3.090% due 12/25/31 191 191
Series 2003-BC2 Class 2A1
3.150% due 06/25/33 86 87
Series 2003-BC4 Class 2A2
3.170% due 09/25/33 306 306
Series 2003-S2 Class A1
3.020% due 12/25/18 169 169
Series 2004-7 Class 2AV1
3.000% due 12/25/22 699 699
Series 2004-S1 Class A1
3.070% due 12/25/18 2,924 2,925
Countrywide Asset-Backed Certificates (p)
Series 2003-5NF Class NF
6.750% due 02/25/34 40 40
Series 2004-14N Class N
5.000% due 06/25/36 300 301
Credit-Based Asset Servicing and Securitization
(E)
Series 2004-CB5 Class AV1
2.980% due 09/25/21 401 401
Series 2004-CB6 Class AF1
3.040% due 07/25/35 710 710
Daimler Chrysler Auto Trust
Series 2005-A Class A3
3.490% due 12/08/08 1,460 1,449
Discover Card Master Trust I (E)
Series 2005-1 Class A
2.820% due 09/16/10 3,870 3,862
Distribution Financial Services Floorplan Master
Trust (E)
Series 2003-2 Class A
2.910% due 04/15/08 1,790 1,791
Equifirst Mortgage Loan Trust (E)
Series 2004-1 Class 2A1
2.950% due 01/25/34 595 595
Series 2005-1 Class A1
2.890% due 04/25/35 1,396 1,396
Equity One ABS, Inc. (E)
Series 2004-2 Class AF1
2.960% due 07/25/34 503 503
Series 1992-10 Class ZD
8.000% due 11/25/21 1,165 1,206
</Table>
Diversified Bond Fund 79
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae Grantor Trust (E)
Series 2002-T13 Class A1
2.630% due 08/25/32 51 51
Series 2002-T5 Class A1
2.970% due 05/25/32 459 459
Series 2002-T7 Class A1
2.960% due 07/25/32 261 261
Series 2003-T3 Class 1A
2.970% due 06/25/33 433 433
Series 2003-T4 Class 1A
2.960% due 09/26/33 1,332 1,332
Series 2004-T4 Class A1
2.610% due 06/25/17 1,264 1,264
Fannie Mae Whole Loan (E)
Series 2002-W2 Class AV1
2.980% due 06/25/32 396 396
Series 2003-W16 Class AV1
3.000% due 11/25/33 509 509
First Franklin NIMs Trust (p)
Series 2004-FF5 Class N1
3.475% due 08/25/34 512 512
Series 2004-FFH1 Class N1
3.967% due 04/25/34 544 544
Series 2004-FFH2 Class N1
4.212% due 03/25/34 189 189
Series 2004-FFH2 Class N2
7.385% due 03/25/34 300 300
Series 2005-FF11 Class N1
4.213% due 01/25/35 1,394 1,390
First National Master Note Trust (E)
Series 2003-1 Class A
2.910% due 08/15/08 465 465
First USA Credit Card Master Trust (E)
Series 1998-4 Class A
2.954% due 03/18/08 820 820
Ford Credit Auto Owner Trust
Series 2005-A Class A3
3.480% due 11/15/08 630 626
Ford Credit Floorplan Master Owner Trust (E)
Series 2001-2 Class A
2.950% due 07/15/08 1,400 1,402
Series 2004-1 Class A
2.850% due 07/15/09 2,275 2,276
Fremont Home Loan Trust (E)
Series 2005-A Class 2A1
2.960% due 01/25/35 177 177
Fremont NIMs Trust
3.750% due 01/25/35 1,073 1,071
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fremont NIMs Trust (p)
Series 2004-B Class NOTE
4.703% due 05/25/34 179 178
GE Dealer Floorplan Master Note Trust (E)
Series 2005-1 Class A
3.100% due 04/20/10 1,800 1,802
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 725 718
GMAC Mortgage Corp. Loan Trust (E)
Series 1999-1 Class A
3.124% due 06/18/27 501 502
Green Tree Financial Corp.
Series 1995-5 Class M1
7.650% due 09/15/26 1,100 1,172
GSAMP Trust (E)
Series 2003-AHL Class A2A
3.050% due 10/25/33 408 408
Series 2004-NC2 Class A2A
2.710% due 10/01/34 1,054 1,054
Home Equity Mortgage Trust (E)
Series 2004-4 Class A2
3.000% due 12/25/34 424 424
Household Credit Card Master Note Trust I (E)
Series 2002-1 Class A
2.940% due 07/15/08 760 760
Household Mortgage Loan Trust (E)
Series 2002-HC1 Class A
2.800% due 05/20/32 59 59
IndyMac Residential Asset Backed Trust (E)
Series 2005-A Class AII1
2.881% due 03/25/35 1,581 1,581
Long Beach Asset Holdings Corp. (p)
Series 2005-1 Class N1
4.115% due 02/25/35 888 888
Long Beach Mortgage Loan Trust (E)
Series 2003-1 Class A2
3.250% due 03/25/33 15 15
Series 2003-2 Class M2
4.920% due 06/25/33 670 685
Series 2004-1 Class A4
2.980% due 02/25/34 77 77
Series 2004-A Class A
3.000% due 02/25/24 172 172
</Table>
80 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mastr Asset Backed Securities Trust (E)
Series 2004-OPT1 Class A3
3.110% due 02/25/34 420 420
MBNA Credit Card Master Note Trust
Series 2002-C1 Class C1
6.800% due 07/15/14 1,180 1,302
Merrill Lynch Mortgage Investors, Inc. (E)
Series 2003-WMC1 Class A2
3.210% due 11/25/33 40 40
Series 2003-WMC2 Class A2
3.190% due 02/25/34 104 105
Series 2004-WMC1 Class A2
3.150% due 10/25/34 613 615
Merrill Lynch Mortgage Investors, Inc. (p)
Series 2003-OP1N Class N1
7.250% due 09/25/34 93 93
Series 2004-WM1N Class N1
4.500% due 10/25/34 153 152
Morgan Stanley ABS Capital I (E)
Series 2003-NC10 Class A2
3.050% due 10/25/33 67 67
Series 2003-NC5 Class A2
3.130% due 04/25/33 141 141
Morgan Stanley Capital I, Inc. (p)
5.450% due 10/28/33 1,475 1,516
Morgan Stanley Dean Witter Capital I (E)
Series 2003-NC4 Class A2
3.220% due 04/25/33 105 105
MSDWCC Heloc Trust (E)
Series 2005-1 Class A
2.740% due 07/25/17 286 286
Navistar Financial Corp. Owner Trust (E)
Series 2003-B Class A3
3.010% due 04/15/08 785 786
Nelnet Student Loan Trust (E)
Series 2004-4 Class A1
2.690% due 04/25/11 161 161
Novastar Home Equity Loan (E)
Series 2004-4 Class A2A
3.040% due 03/25/35 889 889
Novastar NIMs Trust (p)
Series 2004-N1 Class NOTE
4.458% due 02/25/34 234 234
Series 2004-N2 Class NOTE
4.458% due 06/26/34 439 436
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Option One Mortgage Loan Trust (E)
Series 2001-4 Class A
3.150% due 01/25/32 239 239
Series 2002-2 Class A
3.120% due 06/25/32 137 137
Series 2003-1 Class A2
3.270% due 02/25/33 396 397
Series 2003-2 Class A2
3.150% due 04/25/33 186 186
Series 2003-2 Class M2
4.720% due 04/25/33 835 850
Series 2003-4 Class M2
4.670% due 07/25/33 835 851
Option One Mortgage Securities Corp. NIMs Trust
(E)(p)
Series 2003-6A Class NOTE
2.764% due 10/26/10 158 158
Pacificamerica Home Equity Loan
Series 1998-2 Class AF
6.590% due 06/26/28 17 17
Park Place Securities NIMs Trust (p)
Series 2004-MCW1 Class A
4.458% due 09/25/34 225 225
Park Place Securities, Inc. (E)
Series 2005-WCH1 Class A3A
2.970% due 01/25/36 842 842
Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF2
3.914% due 05/25/35 200 198
Renaissance Home Equity Loan Trust
Series 2005-1 Class AF3
4.456% due 05/25/35 495 494
Renaissance NIMs Trust (p)
Series 2003-D Class NOTE
6.657% due 03/26/34 88 89
Series 2004-B Class NOTE
5.193% due 08/26/34 271 271
Series 2004-D Class NOTE
4.459% due 02/25/35 553 553
Residential Asset Mortgage Products, Inc.
Series 2004-RS4 Class AI3
4.003% due 01/25/30 470 469
Series 2004-RS6 Class AI3
4.540% due 08/25/28 375 377
</Table>
Diversified Bond Fund 81
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-RS7 Class AI3
4.450% due 07/25/28 885 888
Series 2004-RS8 Class AI2
3.810% due 01/25/26 375 373
Series 2004-RS8 Class AI3
4.230% due 05/25/29 245 245
Residential Asset Mortgage Products, Inc. (E)
Series 2002-RS5 Class AII
3.220% due 09/25/32 278 279
Series 2003-RS1 Class AII
3.240% due 02/25/33 375 377
Series 2003-RS2 Class AII
3.190% due 03/25/33 376 377
Series 2003-RS3 Class AII
3.210% due 04/25/33 291 292
Series 2004-RS6 Class AI1
3.000% due 08/25/22 776 776
Series 2004-RS8 Class AI1
3.030% due 12/25/23 1,368 1,369
Series 2004-RS8 Class AII1
2.990% due 05/25/26 1,212 1,212
Residential Asset Securities Corp.
Series 2004-KS8 Class AI2
3.340% due 10/25/24 915 906
Residential Asset Securities Corp. (E)
Series 2001-KS1 Class AII
3.085% due 03/25/32 190 190
Series 2002-KS3 Class A1B
3.100% due 05/25/32 398 398
Series 2003-KS1 Class M2
4.770% due 01/25/33 455 459
Saxon Asset Securities Trust (E)
Series 2003-1 Class AV1
3.160% due 06/25/33 239 239
Series 2004-1 Class A
2.920% due 03/25/35 881 882
Saxon Net Interest Margin Trust (p)
Series 2003-A Class A
6.656% due 08/26/33 38 38
Sears Credit Account Master Trust (E)
Series 2002-4 Class A
2.940% due 08/18/09 1,896 1,897
Series 2002-5 Class A
3.190% due 11/17/09 1,700 1,704
Securitized Asset Backed Receivables LLC Trust
(E)
Series 2004-OP1 Class A2
3.100% due 02/25/34 461 461
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sharps SP I LLC Net Interest Margin Trust (p)
Series 2004-FM1N Class N
6.160% due 09/25/33 84 84
SLM Student Loan Trust (E)
Series 2004-9 Class A1
2.690% due 10/26/09 881 881
Series 2005-2 Class A1
2.710% due 04/26/10 800 800
Specialty Underwriting & Residential Finance (E)
Series 2003-BC1 Class A
3.190% due 01/25/34 154 154
Series 2004-BC2 Class A2
3.120% due 05/25/35 718 720
Structured Asset Investment Loan Trust (E)
Series 2003-BC8 Class M3
4.950% due 08/25/33 520 533
Structured Asset Securities Corp.
Series 2004-19XS Class A2
4.370% due 10/25/34 900 892
Series 2005-2XS Class 1A2A
4.510% due 02/25/35 835 833
Structured Asset Securities Corp. (E)
Series 2002-HF1 Class A
3.140% due 01/25/33 17 17
Series 2003-BC1 Class A
3.350% due 05/25/32 356 357
Tenaska Alabama II Partners, LP (p)
6.125% due 03/30/23 262 272
Toyota Auto Receivables Owner Trust (E)
Series 2002-C Class A4
2.530% due 05/15/09 880 880
Volkswagen Credit Auto Master Trust (E)
Series 2000-1 Class A
2.655% due 08/20/07 1,870 1,871
Wachovia Asset Securitization, Inc. (E)
Series 2003-HE3 Class A
3.100% due 11/25/33 425 426
Wells Fargo Home Equity Trust (E)
Series 2004-2 Class A31
3.010% due 06/25/19 113 113
</Table>
82 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Whole Auto Loan Trust
Series 2004-1 Class A4
3.260% due 03/15/11 1,370 1,343
------------
95,420
------------
Corporate Bonds and Notes - 15.7%
Altria Group, Inc.
7.000% due 11/04/13 730 806
Amerada Hess Corp.
7.300% due 08/15/31 955 1,092
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 85 87
American General Finance Corp. (E)(N)
Series MTNG
3.093% due 03/23/07 1,700 1,696
American RE Corp.
Series B
7.450% due 12/15/26 565 651
Anheuser-Busch Cos., Inc.
4.950% due 01/15/14 675 685
ASIF Global Financing (E)(p)
3.040% due 05/30/06 2,000 2,002
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 1,075 1,172
Bank of America Corp.
3.875% due 01/15/08 880 874
7.800% due 02/15/10 120 137
4.375% due 12/01/10 1,535 1,529
Banque Paribas
6.875% due 03/01/09 440 480
Bear Stearns Cos., Inc. (The)
2.875% due 07/02/08 765 731
BellSouth Corp.
4.200% due 09/15/09 140 138
5.200% due 12/15/16 80 80
Berkshire Hathaway Finance Corp. (p)
4.125% due 01/15/10 1,585 1,562
Boeing Capital Corp. (N)
6.100% due 03/01/11 165 177
Burlington Northern Santa Fe Corp.
6.875% due 12/01/27 55 64
Campbell Soup Co.
5.875% due 10/01/08 160 168
Carolina Power & Light Co.
6.500% due 07/15/12 15 16
5.150% due 04/01/15 765 774
Caterpillar Financial Services Corp.
4.875% due 06/15/07 445 451
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 210 221
CIT Group, Inc.
2.994% due 02/15/07 (E) 2,000 2,004
5.750% due 09/25/07 (N) 155 160
6.875% due 11/01/09 100 109
Citicorp
7.250% due 10/15/11 370 424
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
2.999% due 03/07/08 1,300 1,299
Citigroup, Inc.
3.500% due 02/01/08 1,710 1,679
4.125% due 02/22/10 1,025 1,010
5.125% due 05/05/14 1,170 1,197
5.000% due 09/15/14 6,105 6,145
Clear Channel Communications, Inc.
4.250% due 05/15/09 60 58
4.400% due 05/15/11 760 705
5.000% due 03/15/12 720 682
Clear Channel Communications, Inc. (N)
5.750% due 01/15/13 125 122
5.500% due 09/15/14 405 384
Clorox Co. (p)
4.200% due 01/15/10 250 248
5.000% due 01/15/15 155 157
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 100 104
Comcast Cable Communications
6.875% due 06/15/09 1,500 1,628
Comcast Cable Communications Holdings, Inc.
8.375% due 03/15/13 3,215 3,903
Comcast Corp.
5.850% due 01/15/10 (N) 260 273
6.500% due 01/15/15 985 1,084
ConocoPhillips Holding Co.
6.950% due 04/15/29 920 1,122
Constellation Energy Group, Inc.
6.125% due 09/01/09 235 249
</Table>
Diversified Bond Fund 83
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Continental Airlines, Inc.
Series 00-1
7.918% due 05/01/10 480 477
Countrywide Home Loans, Inc.
Series MTNK
5.500% due 02/01/07 110 112
COX Communications, Inc.
3.875% due 10/01/08 300 292
4.625% due 01/15/10 (p) 4,770 4,699
Credit Suisse First Boston USA, Inc.
4.625% due 01/15/08 130 131
3.875% due 01/15/09 575 564
6.500% due 01/15/12 55 61
5.500% due 08/15/13 115 120
DaimlerChrysler NA Holding Corp.
3.470% due 05/24/06 (E) 400 400
4.750% due 01/15/08 300 296
4.050% due 06/04/08 1,320 1,272
Detroit Edison Co.
6.125% due 10/01/10 220 236
6.350% due 10/15/32 95 107
Devon Energy Corp.
2.750% due 08/01/06 705 690
7.950% due 04/15/32 540 689
Devon Financing Corp. ULC
6.875% due 09/30/11 200 222
Dominion Resources, Inc.
4.125% due 02/15/08 515 512
5.700% due 09/17/12 465 487
Series B
6.250% due 06/30/12 80 86
Dresdner Funding Trust I (p)
8.151% due 06/30/31 430 533
DTE Energy Co.
6.450% due 06/01/06 265 272
Duke Capital Corp.
4.302% due 05/18/06 170 170
Duke Energy Corp.
5.625% due 11/30/12 560 586
Duke Energy Field Services LLC
5.750% due 11/15/06 60 61
6.875% due 02/01/11 (N) 40 44
Eastman Kodak Co.
7.250% due 11/15/13 40 41
EI Du Pont de Nemours & Co.
8.250% due 09/15/06 465 490
Eli Lilly & Co.
6.770% due 01/01/36 565 693
EOP Operating, LP
4.650% due 10/01/10 2,600 2,561
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
FedEx Corp.
7.600% due 07/01/97 155 192
Fifth Third Bank
7.750% due 08/15/10 330 333
Financing Corp.
Principal Only Strip
Series 10P
Zero coupon due 11/30/17 1,165 642
Series 15P
Zero coupon due 03/07/19 165 84
FirstEnergy Corp.
Series B
6.450% due 11/15/11 680 730
Series C
7.375% due 11/15/31 1,930 2,275
FleetBoston Financial Corp.
4.875% due 12/01/06 645 654
Ford Motor Co.
6.375% due 02/01/29 90 67
7.450% due 07/16/31 360 296
Ford Motor Credit Co.
4.950% due 01/15/08 410 386
7.375% due 10/28/09 2,430 2,338
7.875% due 06/15/10 1,940 1,867
7.375% due 02/01/11 1,055 988
Ford Motor Credit Co. (E)
3.750% due 11/16/06 900 883
4.000% due 03/21/07 1,800 1,752
FPL Group Capital, Inc.
6.125% due 05/15/07 510 529
General Electric Capital Corp.
3.050% due 03/09/07 2,200 2,203
4.125% due 03/04/08 435 434
3.250% due 06/15/09 1,155 1,107
4.875% due 03/04/15 3,205 3,212
Series MTNA
4.250% due 01/15/08 740 741
4.250% due 12/01/10 85 84
6.000% due 06/15/12 1,750 1,881
General Electric Capital Corp. (N)
Series MTNA
4.750% due 09/15/14 210 209
General Electric Co.
5.000% due 02/01/13 2,265 2,305
General Motors Acceptance Corp.
3.695% due 05/18/06 (E) 600 588
6.125% due 09/15/06 80 80
6.125% due 02/01/07 250 246
</Table>
84 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.150% due 04/05/07 150 147
6.125% due 08/28/07 900 877
5.625% due 05/15/09 1,765 1,598
7.750% due 01/19/10 340 320
7.250% due 03/02/11 1,980 1,776
6.875% due 09/15/11 1,660 1,454
7.000% due 02/01/12 1,060 922
6.875% due 08/28/12 1,680 1,447
General Motors Corp.
8.375% due 07/15/33 110 84
Golden West Financial Corp.
4.125% due 08/15/07 220 221
Goldman Sachs Group, Inc.
4.125% due 01/15/08 680 678
7.350% due 10/01/09 545 606
6.875% due 01/15/11 625 691
4.750% due 07/15/13 995 978
5.125% due 01/15/15 2,550 2,547
6.345% due 02/15/34 2,135 2,235
Goldman Sachs Group, Inc. (E)
Series MTNB
2.630% due 08/01/06 1,400 1,399
3.190% due 03/30/07 2,000 2,001
Historic TW, Inc.
9.125% due 01/15/13 220 276
8.050% due 01/15/16 (N) 485 582
6.950% due 01/15/28 860 968
HJ Heinz Co. (N)
6.375% due 07/15/28 50 57
HJ Heinz Finance Co.
6.750% due 03/15/32 115 137
6.000% due 03/15/12 40 43
Household Finance Corp.
5.750% due 01/30/07 480 493
4.750% due 05/15/09 4,425 4,462
4.125% due 11/16/09 2,800 2,748
7.000% due 05/15/12 1,485 1,675
6.375% due 11/27/12 285 312
4.750% due 07/15/13 1,415 1,399
2.920% due 02/09/07 (E) 2,000 2,004
HVB Funding Trust I (p)
8.741% due 06/30/31 360 457
International Lease Finance Corp.
6.375% due 03/15/09 2,165 2,301
4.750% due 07/01/09 1,370 1,374
5.875% due 05/01/13 495 517
Series MTNP
3.125% due 05/03/07 1,235 1,211
International Paper Co.
5.500% due 01/15/14 675 680
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ITT Industries, Inc.
7.400% due 11/15/25 240 288
JP Morgan & Co., Inc.
Series MTNA
6.000% due 01/15/09 310 327
JP Morgan Chase Capital XV
5.875% due 03/15/35 5,120 5,088
JPMorgan Chase & Co.
4.500% due 01/15/12 1,880 1,846
5.125% due 09/15/14 1,175 1,186
Kellogg Co.
Series B
6.600% due 04/01/11 955 1,056
KeyCorp
7.500% due 06/15/06 565 586
Kraft Foods, Inc.
4.000% due 10/01/08 1,330 1,312
5.625% due 11/01/11 1,725 1,809
Kroger Co. (The) (N)
7.500% due 04/01/31 70 82
Lehman Brothers Holdings, Inc.
4.000% due 01/22/08 490 487
6.625% due 01/18/12 325 359
Lockheed Martin Corp.
8.500% due 12/01/29 410 569
M&I Marshall & Ilsley Bank
Series BKNT
4.400% due 03/15/10 1,370 1,366
Mach One Trust Commercial Mortgage-Backed (p)
5.220% due 05/28/40 1,480 1,502
Manufacturers & Traders Trust Co.
8.000% due 10/01/10 145 169
May Department Stores Co. (The) (N)
4.800% due 07/15/09 90 90
5.750% due 07/15/14 240 249
Merrill Lynch & Co., Inc.
Series MTNB
3.125% due 07/15/08 1,165 1,121
Series MTNC
5.000% due 01/15/15 915 916
Merrill Lynch & Co., Inc. (E)
Series MTNC
4.056% due 03/12/07 340 338
Merrill Lynch & Co., Inc. (E)(N)
2.870% due 10/27/06 2,000 2,003
</Table>
Diversified Bond Fund 85
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Metropolitan Life Global Funding I (E)(p)
3.090% due 03/16/07 2,000 2,001
Miller Brewing Co. (p)
5.500% due 08/15/13 330 339
Morgan Stanley
2.200% due 01/12/07 (E) 2,000 2,003
3.625% due 04/01/08 795 779
3.875% due 01/15/09 730 716
6.750% due 04/15/11 475 525
4.750% due 04/01/14 280 271
Series MTNF
2.795% due 01/18/08 1,400 1,399
Natexis Ambs Co. LLC (p)(f)
8.440% due 12/29/49 270 301
National City Bank
4.500% due 03/15/10 1,910 1,913
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 1,055 1,106
New Cingular Wireless Services, Inc.
7.875% due 03/01/11 1,905 2,192
8.750% due 03/01/31 1,265 1,725
News America Holdings
7.750% due 12/01/45 45 54
7.900% due 12/01/95 230 277
8.250% due 10/17/96 75 92
News America, Inc.
6.750% due 01/09/38 45 50
Series WI
6.200% due 12/15/34 7,420 7,486
Nisource Finance Corp.
7.875% due 11/15/10 355 410
Norfolk Southern Corp.
6.200% due 04/15/09 845 897
7.050% due 05/01/37 420 505
7.900% due 05/15/97 190 253
Northern States Power Co.
Series B
8.000% due 08/28/12 860 1,036
Occidental Petroleum Corp.
9.250% due 08/01/19 185 254
Ohio Power Co.
Series F
5.500% due 02/15/13 35 36
Pacific Gas & Electric Co.
3.820% due 04/03/06 (E) 2,200 2,205
3.600% due 03/01/09 125 122
4.200% due 03/01/11 115 112
6.050% due 03/01/34 640 684
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pacificorp
4.300% due 09/15/08 615 614
Pemex Project Funding Master Trust
7.375% due 12/15/14 1,600 1,738
Progress Energy, Inc.
5.850% due 10/30/08 850 881
7.100% due 03/01/11 1,100 1,205
7.750% due 03/01/31 170 206
7.000% due 10/30/31 90 100
Raytheon Co.
6.750% due 08/15/07 439 462
RBS Capital Trust I (f)
5.512% due 09/29/49 525 534
Safeway, Inc. (N)
7.250% due 02/01/31 45 50
SBC Communications, Inc.
4.125% due 09/15/09 185 182
5.100% due 09/15/14 255 255
Simon Property Group, LP
4.875% due 08/15/10 1,945 1,950
Southern California Edison Co.
8.000% due 02/15/07 288 307
Sovereign Bank
5.125% due 03/15/13 445 447
Sprint Capital Corp.
6.000% due 01/15/07 1,225 1,257
6.125% due 11/15/08 1,175 1,235
7.625% due 01/30/11 2,870 3,240
8.375% due 03/15/12 280 332
6.875% due 11/15/28 425 474
8.750% due 03/15/32 (N) 3,185 4,283
Tele-Communications-TCI Group
9.800% due 02/01/12 330 420
7.875% due 08/01/13 915 1,080
Time Warner Entertainment Co., LP
Series *
8.375% due 03/15/23 675 849
8.375% due 07/15/33 2,210 2,876
Time Warner, Inc.
6.750% due 04/15/11 1,170 1,285
6.875% due 05/01/12 610 679
7.625% due 04/15/31 610 743
7.700% due 05/01/32 570 702
Travelers Property Casualty Corp. (N)
5.000% due 03/15/13 160 161
TXU Corp. (p)
6.550% due 11/15/34 610 601
</Table>
86 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TXU Electric Delivery Co.
6.375% due 05/01/12 25 27
6.375% due 01/15/15 180 197
TXU Energy Co. LLC (N)
7.000% due 03/15/13 545 605
Unilever Capital Corp. (N)
5.900% due 11/15/32 325 350
United Technologies Corp.
4.875% due 05/01/15 1,010 1,011
Univision Communications, Inc.
3.500% due 10/15/07 780 765
US Bancorp
3.125% due 03/15/08 1,380 1,341
US Bank NA (N)
5.700% due 12/15/08 70 73
Verizon Global Funding Corp.
7.250% due 12/01/10 480 539
7.375% due 09/01/12 670 773
7.750% due 12/01/30 1,380 1,717
Verizon Maryland, Inc.
Series A
6.125% due 03/01/12 1,110 1,175
Verizon Wireless Capital LLC
5.375% due 12/15/06 555 566
Viacom, Inc.
6.625% due 05/15/11 995 1,061
Virginia Electric and Power Co.
Series A
5.375% due 02/01/07 1,500 1,529
Wachovia Corp.
5.250% due 08/01/14 3,570 3,656
6.550% due 10/15/35 275 321
Waste Management, Inc.
6.375% due 11/15/12 445 490
Wells Fargo & Co.
4.200% due 01/15/10 455 450
4.950% due 10/16/13 240 242
4.750% due 02/09/15 4,825 4,785
Weyerhaeuser Co.
6.125% due 03/15/07 249 257
6.750% due 03/15/12 1,085 1,158
Wyeth
6.950% due 03/15/11 2,180 2,427
5.500% due 03/15/13 85 88
5.500% due 02/01/14 85 88
XTO Energy, Inc.
6.250% due 04/15/13 450 488
Yum! Brands, Inc.
8.875% due 04/15/11 165 199
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Zurich Capital Trust I (p)
8.376% due 06/01/37 1,250 1,355
------------
235,399
------------
International Debt - 3.7%
Abbey National PLC
(Step Up, 6/15/08, 7.570%) (f)
6.700% due 06/29/49 550 584
Anadarko Finance Co.
Series B
7.500% due 05/01/31 400 502
Apache Finance Canada Corp.
4.375% due 05/15/15 615 599
Argent NIMs Trust (p)
Series 2004-WN2 Class A
4.550% due 04/25/34 89 89
Axa SA
8.600% due 12/15/30 330 440
British Sky Broadcasting PLC
8.200% due 07/15/09 365 413
British Telecommunications PLC
8.875% due 12/15/30 125 171
Chalet Finance PLC (E)(p)
Series 2003-2A Class A1
2.580% due 11/26/13 1,070 1,071
ChevronTexaco Capital Co.
3.500% due 09/17/07 590 583
Chile Government International Bond
5.625% due 07/23/07 675 693
Conoco Funding Co.
6.350% due 10/15/11 950 1,050
Credit-Based Asset Servicing and Securitization
CBO, Ltd. (E)(p)
Series 2004-9A Class A1
2.970% due 04/08/39 2,312 2,312
Crest, Ltd. (p)
Series 2003-2A Class C2
5.709% due 12/28/38 1,655 1,698
Deutsche Telekom International Finance BV
8.500% due 06/15/10 1,295 1,502
5.250% due 07/22/13 190 194
8.750% due 06/15/30 4,020 5,387
Diageo Finance BV
3.000% due 12/15/06 705 693
Domtar, Inc.
7.875% due 10/15/11 1,925 2,070
</Table>
Diversified Bond Fund 87
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
EnCana Corp.
6.500% due 08/15/34 95 107
Equifirst Mortgage Loan Trust NIMs Notes (p)
Series 2004-2 Class N1
3.967% due 10/25/34 903 904
Export-Import Bank of Korea (p)
4.125% due 02/10/09 290 285
First Franklin NIMs Trust (p)
Series 2004-FF5 Class N1
4.212% due 04/25/34 152 152
France Telecom SA
8.000% due 03/01/11 755 870
8.750% due 03/01/31 115 156
G-Force CDO, Ltd. (p)
Series 2003-1A Class CFX
5.700% due 12/25/38 750 758
Intelsat, Ltd.
6.500% due 11/01/13 375 297
Interstar Millennium Trust (E)
Series 2003-5G Class A2
2.920% due 01/20/36 1,172 1,172
Korea Development Bank
4.250% due 11/13/07 820 818
Korea Electric Power Corp. (p)
5.125% due 04/23/34 145 146
Medallion Trust (E)
Series 2003-1G Class A
3.240% due 12/21/33 587 589
Mexico Government International Bond
8.375% due 01/14/11 1,160 1,328
6.375% due 01/16/13 2,010 2,096
8.300% due 08/15/31 490 574
7.500% due 04/08/33 2,886 3,124
6.750% due 09/27/34 1,770 1,763
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 410 424
Monumental Global Funding, Ltd. (p)
4.625% due 03/15/10 190 192
Mound Financing PLC (E)(p)
Series 2001-2A Class A2
2.410% due 11/08/07 1,480 1,480
Newcastle CDO I, Ltd. (p)
Series 2004-4A Class 3FX
5.110% due 03/24/39 870 849
Nexen, Inc.
5.875% due 03/10/35 1,685 1,624
Province of Quebec
7.500% due 07/15/23 480 617
5.000% due 07/17/09 (N) 40 41
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Russia Government International Bond (p)
5.000% due 03/31/30 3,350 3,562
5.000% due 03/31/30 (N) 715 759
Santander Financial Issuances
6.375% due 02/15/11 120 131
Sanwa Finance Aruba AEC
8.350% due 07/15/09 285 324
Scottish Power PLC
5.375% due 03/15/15 2,990 3,034
Systems 2001 AT LLC (p)
7.156% due 12/15/11 229 247
Telecom Italia Capital SA
6.375% due 11/15/33 225 235
Telecom Italia Capital SA (p)
4.000% due 01/15/10 1,620 1,565
4.950% due 09/30/14 745 726
6.000% due 09/30/34 1,235 1,223
Telefonos de Mexico SA de CV
4.500% due 11/19/08 495 488
Tengizchevroil Finance Co. (p)
6.124% due 11/15/14 325 326
Tyco International Group SA
6.375% due 10/15/11 445 482
6.000% due 11/15/13 905 967
UFJ Finance Aruba AEC
6.750% due 07/15/13 60 66
United Utilities PLC
5.375% due 02/01/19 80 79
Vodafone Group PLC
7.750% due 02/15/10 350 398
Wells Fargo Home Equity Trust (p)
Series 2004-2N Class N1
4.450% due 10/26/34 243 243
------------
55,272
------------
Mortgage-Backed Securities - 38.1%
Arcap Reit, Inc. (p)
Series 2004-RR3 Class B
5.040% due 09/21/45 460 452
</Table>
88 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 1,000 1,015
Series 2004-4 Class A3
4.128% due 07/10/42 685 677
Bank of America Mortgage Securities
Series 2004-1 Class 5A1
6.500% due 09/25/33 70 71
Bear Stearns Adjustable Rate Mortgage Trust
Series 2002-11 Class 1A1
5.638% due 02/25/33 57 58
Series 2002-11 Class 1A2
5.348% due 02/25/33 118 119
Series 2003-1 Class 6A1
5.095% due 04/25/33 217 216
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.446% due 05/25/35 1,400 1,415
Bear Stearns Commercial Mortgage Securities
Series 2005-PWR7 Class A1
4.386% due 02/11/41 1,143 1,147
Commercial Mortgage Acceptance Corp.
Series 1998-C2 Class A3
6.040% due 09/15/30 4,770 4,998
Country Wide Loans
Series 2005-2 Class N
4.500% due 06/15/08 570 566
Countrywide Home Loan Mortgage Pass Through
Trust (E)
Series 2003-42 Class 2A1
2.780% due 10/25/33 209 208
Series 2005-3 Class 1A2
3.140% due 04/25/35 292 292
Series 2005-9 Class M6
4.170% due 05/25/35 310 311
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2003-C5 Class A1
3.093% due 12/15/36 2,500 2,442
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 835 875
Downey Savings & Loan Association Mortgage Loan
Trust (E)
Series 2004-AR3 Class 1A1B
4.218% due 07/19/44 834 834
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae
9.500% due 2006 2 2
7.000% due 2007 9 10
7.200% due 2007 687 719
7.000% due 2008 23 24
7.000% due 2009 44 48
8.000% due 2010 4 4
10.500% due 2010 1 1
7.000% due 2011 19 20
8.000% due 2011 4 5
7.000% due 2012 7 7
6.500% due 2013 44 46
5.500% due 2014 46 47
6.500% due 2015 33 34
7.000% due 2015 19 20
5.500% due 2016 10 10
6.000% due 2016 1,025 1,061
6.500% due 2016 191 199
9.000% due 2016 3 4
5.000% due 2017 2,299 2,319
5.500% due 2017 1,394 1,429
6.000% due 2017 2,885 2,991
6.500% due 2017 713 744
8.000% due 2017 59 65
8.500% due 2017 8 9
4.500% due 2018 13,425 13,315
5.000% due 2018 16,184 16,323
5.500% due 2018 1,870 1,916
6.000% due 2018 344 357
6.500% due 2018 485 506
4.500% due 2019 83 82
5.000% due 2019 7,470 7,529
5.500% due 2019 158 162
6.500% due 2019 206 215
4.500% due 2020 230 228
5.000% due 2020 893 900
6.500% due 2020 78 81
8.000% due 2020 7 7
6.500% due 2022 124 129
7.500% due 2022 25 27
7.500% due 2023 2 2
7.500% due 2024 60 66
8.000% due 2024 151 165
7.000% due 2025 9 9
7.500% due 2025 15 15
</Table>
Diversified Bond Fund 89
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
8.500% due 2025 4 5
7.000% due 2026 7 7
7.500% due 2027 4 5
6.500% due 2028 632 659
7.000% due 2028 578 613
7.500% due 2028 12 12
6.500% due 2029 2,084 2,171
6.500% due 2030 278 290
8.000% due 2030 317 346
6.500% due 2031 1,247 1,300
7.500% due 2031 179 192
6.000% due 2032 2,027 2,084
6.500% due 2032 1,830 1,905
7.000% due 2032 1,408 1,486
4.500% due 2033 1,854 1,794
5.000% due 2033 5,539 5,500
5.500% due 2033 21,530 21,761
6.000% due 2033 24 24
6.500% due 2033 371 386
7.000% due 2033 673 712
4.500% due 2034 1,237 1,195
5.000% due 2034 25,442 25,262
5.500% due 2034 6,817 6,889
6.000% due 2034 17,789 18,277
6.500% due 2034 1,265 1,318
4.500% due 2035 2,302 2,224
6.000% due 2035 3,953 4,062
Series 1993-134 Class H
6.500% due 08/25/08 1,045 1,084
Series 1997-81 Class PC
5.000% due 04/18/27 33 33
Series 2004-27 Class JC
5.000% due 05/25/34 571 568
Fannie Mae (E)
Series 1993-208 Class SA
Interest Only Strip
0.450% due 02/25/23 773 2
Fannie Mae
15 Year TBA (I)
4.500% 5,485 5,425
5.000% 13,870 13,965
30 Year TBA (I)
4.500% 8,730 8,476
5.000% 20,865 20,630
5.500% 114,295 115,489
6.000% 28,180 28,922
6.500% 19,325 20,093
Fannie Mae Grantor Trust
Series 2001-T6 Class B
6.088% due 05/25/11 1,150 1,248
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae Whole Loan
Series 2003-W1 Class 1A1
6.500% due 12/25/42 134 139
Fannie Mae Whole Loan (E)
Series 2003-W5 Class A
2.960% due 04/25/33 922 925
Series 2003-W9 Class A
2.970% due 06/25/33 1,496 1,495
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2003-H010 Class A1
1.582% due 09/15/08 513 506
Series 2004-H017 Class A1
2.614% due 07/15/11 1,841 1,822
Freddie Mac
7.000% due 2008 35 37
8.000% due 2008 4 4
8.500% due 2008 2 2
8.000% due 2009 11 12
7.000% due 2010 15 16
8.000% due 2010 2 2
6.000% due 2011 517 538
7.000% due 2011 6 6
8.000% due 2011 25 27
6.000% due 2012 8 8
8.000% due 2012 17 18
7.000% due 2014 106 112
12.000% due 2014 17 19
12.000% due 2015 3 4
6.000% due 2016 15 16
9.000% due 2016 66 71
6.000% due 2017 534 553
8.000% due 2017 29 31
4.500% due 2018 2,276 2,258
5.000% due 2018 659 665
4.500% due 2019 826 818
5.500% due 2019 5,909 6,057
5.500% due 2020 350 359
9.000% due 2024 5 6
6.500% due 2025 11 11
8.500% due 2025 38 42
9.000% due 2025 9 10
9.000% due 2026 1 2
8.500% due 2027 162 177
6.500% due 2028 112 117
6.500% due 2029 271 282
</Table>
90 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.500% due 2031 3,221 3,354
7.500% due 2031 108 116
6.000% due 2032 306 316
6.500% due 2032 377 393
7.000% due 2032 777 821
5.000% due 2033 2,564 2,546
5.500% due 2033 8,811 8,920
6.000% due 2033 473 486
6.500% due 2033 846 880
4.500% due 2034 226 218
5.000% due 2034 8,281 8,204
5.500% due 2034 369 374
6.000% due 2034 7,178 7,371
6.500% due 2034 23 23
6.000% due 2035 29 30
Series 1991-1053 Class G
7.000% due 03/15/21 83 83
Series 2003-2632 Class YH
3.500% due 08/15/22 1,500 1,482
Series 2003-2634 Class IO
Interest Only Strip
5.000% due 10/15/27 1,496 163
Series 2003-2644 Class IC
Interest Only Strip
5.000% due 05/15/22 1,730 167
Series 2004-2824 Class EI
Interest Only Strip
5.000% due 09/15/20 694 95
Series 2004-2858 Class YJ
Interest Only Strip
5.500% due 03/15/20 1,635 121
Series 2004-2887 Class QI
Interest Only Strip
5.500% due 02/15/24 754 77
Series 2005-2927 Class IG
Interest Only Strip
5.000% due 04/15/23 596 96
Freddie Mac (E)
7.652% due 2030 9 10
Freddie Mac
15 Year TBA (I)
4.500% 870 861
5.000% 8,495 8,450
5.500% 14,520 14,675
30 Year TBA (I)
6.000% 5,125 5,260
GE Capital Commercial Mortgage Corp.
Series 2005-C1 Class A1
4.012% due 06/10/48 962 958
Series 2005-C1 Class A5
4.772% due 06/10/48 500 497
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
G-Force LLC
4.830% due 09/22/13 2,105 2,107
Ginnie Mae I
8.000% due 2007 1 1
6.500% due 2008 17 18
6.500% due 2009 228 237
7.000% due 2011 2 2
8.000% due 2016 1 1
9.500% due 2016 12 14
8.000% due 2017 8 9
10.500% due 2020 13 15
8.000% due 2022 38 41
8.500% due 2022 19 21
7.500% due 2025 22 23
8.000% due 2025 70 76
9.000% due 2025 351 385
7.000% due 2029 9 9
7.500% due 2029 87 93
8.500% due 2029 11 11
7.500% due 2030 335 360
8.000% due 2030 839 909
8.500% due 2030 60 66
7.000% due 2031 715 757
7.500% due 2031 26 28
8.000% due 2031 6 6
6.000% due 2032 478 494
7.000% due 2032 56 60
7.500% due 2032 178 191
8.000% due 2032 25 27
5.000% due 2033 2,425 2,425
5.500% due 2033 4,943 5,036
6.000% due 2033 438 452
6.000% due 2034 2,291 2,365
Ginnie Mae I
30 Year TBA (I)
5.500% 4,980 5,064
6.000% 13,860 14,289
6.500% 3,700 3,872
Ginnie Mae II (E)
3.375% due 2023 368 375
4.125% due 2023 189 192
4.625% due 2023 257 261
3.375% due 2024 229 231
</Table>
Diversified Bond Fund 91
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GMAC Mortgage Corp. Loan Trust (E)
Series 2003-AR1 Class A1
3.010% due 10/19/33 89 89
Series 2003-AR2 Class 2A1
3.040% due 12/19/33 427 427
Government National Mortgage Association
Series 1998-23 Class ZA
6.500% due 09/20/28 4,386 4,586
Series 2002-61 Class A
3.261% due 12/16/16 27 27
Series 2002-61 Class BA
4.648% due 03/16/26 785 790
Government National Mortgage Association I
30 Year TBA (I)
5.000% 9,365 9,345
Government National Mortgage Association II
30 Year TBA (I)
5.000% 2,715 2,757
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 1,560 1,614
Series 2005-GG3 Class A1
3.919% due 08/10/42 1,237 1,230
GS Mortgage Securities Corp. II
Series 1998-C1 Class A2
6.620% due 10/18/30 1,575 1,671
IndyMac Loan Trust (E)(p)
Series 2003-L1 Class A1
2.910% due 11/25/08 453 453
Series 2004-L1 Class A1
2.810% due 07/25/09 971 971
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2004-C3 Class A4
4.657% due 01/15/42 1,410 1,404
Series 2004-LN2 Class A1
4.475% due 07/15/41 908 903
Series 2005-CB11 Class A1
4.520% due 08/12/37 1,756 1,766
Series 2005-CB11 Class A3
5.197% due 08/12/37 890 916
Series 2005-CB11 Class A4
5.335% due 08/12/37 1,850 1,913
Series 2005-LDP1 Class A1
4.116% due 03/15/46 897 896
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
JP Morgan Mortgage Trust
Series 2005-A2 Class 3A1
4.933% due 04/25/35 2,350 2,355
LB-UBS Commercial Mortgage Trust
Series 2001-C3 Class A1
6.058% due 06/15/20 421 438
Series 2003-C3 Class A1
2.599% due 05/15/27 883 855
Series 2004-C4 Class A3
4.987% due 06/15/29 1,455 1,499
Mastr Reperforming Loan Trust (p)
Series 2005-1 Class 1A1
6.000% due 08/25/34 1,163 1,192
Merrill Lynch Mortgage Trust
Series 2004-MKB1 Class A2
4.353% due 02/12/42 880 876
Series 2005-MKB2 Class A1
4.446% due 09/12/42 1,560 1,568
Series 2005-MKB2 Class A4
5.204% due 09/12/42 725 741
Morgan Stanley Capital I
Series 2004-HQ3 Class A1
3.100% due 01/13/41 1,503 1,464
Series 2005-HQ5 Class A4
5.168% due 01/14/42 1,150 1,177
Series 2005-IQ9 Class A1
3.990% due 07/15/56 976 972
Series 2005-T17 Class A5
4.780% due 12/13/41 285 284
Morgan Stanley Dean Witter Capital I
Series 2001-TOP3 Class A3
6.200% due 07/15/33 790 830
Mortgage Capital Funding, Inc.
Series 1998-MC2 Class A2
6.423% due 06/18/30 1,641 1,726
Nationslink Funding Corp.
Series 1999-SL Class A4
6.654% due 11/10/30 298 304
Nomura Asset Securities Corp.
Series 1998-D6 Class A1B
6.590% due 03/15/30 980 1,040
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
3.250% due 02/25/34 178 179
Series 2004-CL1 Class 2A2
3.250% due 02/25/19 45 45
SACO I, Inc. (E)(p)
Series 2004-2 Class A2
3.040% due 07/25/19 868 868
</Table>
92 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Small Business Administration
Series 1999-P10B Class 1
7.540% due 08/10/09 904 966
Series 2000-10B Class 1
7.452% due 09/01/10 3,194 3,412
Series 2000-P10B Class 1
7.449% due 08/01/10 121 129
Structured Asset Securities Corp.
Series 2004-21XS Class 1A3
4.440% due 12/25/34 1,515 1,500
Wachovia Bank Commercial Mortgage Trust
Series 2005-C16 Class A2
4.380% due 10/15/41 1,510 1,503
Series 2005-C17 Class A1
4.430% due 03/15/42 4,000 4,020
Washington Mutual (E)
Series 2004-AR13 Class A1B1
2.978% due 11/25/34 1,192 1,192
Washington Mutual, Inc. (E)
Series 2005-AR6 Class B3
3.690% due 04/25/45 590 590
------------
572,182
------------
Municipal Bonds - 0.3%
Badger TOB Asset Securitization Corp. Revenue
Bonds, semi-annual demand
6.375% due 06/01/32 700 715
City of New York New York General Obligation
Unlimited, semi-annual demand
5.000% due 03/01/30 200 208
Golden State Tobacco Securitization Corp.
Revenue Bonds, semi-annual demand
5.000% due 06/01/21 820 826
New York City Municipal Water Finance Authority
Revenue Bonds, semi-annual demand
5.000% due 06/15/34 100 104
University of Illinois Revenue Bonds,
semi-annual demand (u)
5.000% due 04/01/29 2,800 2,931
University of Texas Revenue Bonds, semi-annual
demand
5.000% due 08/15/33 100 104
------------
4,888
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Non-US Bonds - 1.3%
Australia Government Bond
5.250% due 08/15/10 AUD 1,390 1,082
Bundesobligation
3.250% due 04/17/09 EUR 4,340 5,712
Canadian Government Bond
5.750% due 06/01/33 CAD 200 188
3.000% due 12/01/36 CAD 102 101
Deutsche Bundesrepublik
4.250% due 01/04/14 EUR 2,100 2,895
5.625% due 01/04/28 EUR 200 323
5.500% due 01/04/31 EUR 300 482
4.750% due 07/04/34 EUR 500 730
France Government Bond OAT
3.000% due 07/25/09 EUR 2,235 3,159
5.750% due 10/25/32 EUR 900 1,502
4.750% due 04/25/35 EUR 700 1,021
4.000% due 04/25/55 EUR 200 258
General Motors Corp.
8.375% due 07/05/33 EUR 90 88
Poland Government Bond
6.000% due 05/24/09 PLN 2,840 865
Spain Government Bond
5.750% due 07/30/32 EUR 300 500
4.200% due 01/31/37 EUR 200 266
------------
19,172
------------
United States Government Agencies - 5.7%
Fannie Mae
5.500% due 02/15/06 2,200 2,232
3.550% due 01/12/07 5,625 5,598
3.375% due 05/15/07 4,375 4,330
6.625% due 10/15/07 2,430 2,580
3.250% due 01/15/08 3,275 3,212
3.250% due 02/15/09 1,270 1,231
4.250% due 05/15/09 5,525 5,544
7.250% due 01/15/10 885 998
4.750% due 04/19/10 3,845 3,868
6.125% due 03/15/12 580 638
Zero coupon due 07/05/14 2,570 1,688
5.250% due 03/24/15 730 740
5.000% due 04/26/17 1,755 1,754
6.625% due 11/15/30 2,450 3,021
6.210% due 08/06/38 240 288
Fannie Mae (N)
2.500% due 06/15/08 6,075 5,802
3.875% due 02/15/10 1,630 1,607
4.375% due 03/15/13 1,125 1,119
</Table>
Diversified Bond Fund 93
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae (E)
2.925% due 09/22/06 1,200 1,199
Federal Home Loan Bank System
2.500% due 03/13/06 5,990 5,935
3.250% due 07/21/06 1,395 1,387
2.625% due 10/16/06 3,000 2,951
5.375% due 02/15/07 1,520 1,557
3.375% due 02/23/07 460 456
4.875% due 05/15/07 2,680 2,728
3.250% due 12/17/07 3,510 3,447
4.500% due 09/16/13 960 962
5.250% due 06/18/14 910 956
5.125% due 08/15/19 420 432
Financing Corp.
Principal Only Strip
Zero coupon due 08/03/18 765 406
Zero coupon due 05/11/18 90 48
Zero coupon due 12/06/18 155 81
Zero coupon due 04/05/19 875 446
Zero coupon due 09/26/19 585 291
Freddie Mac
3.750% due 04/15/07 2,675 2,668
6.625% due 09/15/09 3,110 3,411
4.500% due 11/15/11 1,095 1,089
5.750% due 01/15/12 5,190 5,590
5.050% due 01/26/15 1,485 1,494
6.750% due 03/15/31 520 654
Freddie Mac (N)
4.000% due 12/15/09 1,645 1,635
------------
86,073
------------
United States Government Treasuries - 22.0%
United States Treasury Inflation Indexed Bonds
(N)
3.875% due 01/15/09 3,391 3,747
0.875% due 04/15/10 15,285 15,077
3.000% due 07/15/12 1,813 2,017
1.875% due 07/15/13 209 215
2.000% due 01/15/14 311 323
2.000% due 07/15/14 2,543 2,639
1.625% due 01/15/15 904 906
2.375% due 01/15/25 6,511 7,111
3.625% due 04/15/28 237 317
United States Treasury Notes
7.000% due 07/15/06 6,405 6,668
2.375% due 08/31/06 11,115 10,951
2.500% due 10/31/06 24,395 24,026
2.875% due 11/30/06 16,210 16,039
3.750% due 03/31/07 600 601
3.125% due 05/15/07 18,925 18,731
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.625% due 05/15/07 7,495 7,929
6.125% due 08/15/07 3,175 3,346
3.000% due 02/15/08 5,660 5,552
3.375% due 02/15/08 450 446
3.375% due 12/15/08 17,955 17,701
3.250% due 01/15/09 6,685 6,558
4.000% due 06/15/09 840 845
3.625% due 07/15/09 6,725 6,668
3.375% due 09/15/09 2,750 2,697
3.625% due 01/15/10 6,470 6,398
4.000% due 03/15/10 6,670 6,700
5.750% due 08/15/10 300 326
5.000% due 08/15/11 3,080 3,252
4.875% due 02/15/12 70 74
4.000% due 11/15/12 355 355
4.250% due 08/15/13 1,135 1,144
12.000% due 08/15/13 420 526
4.250% due 11/15/13 3,970 3,999
13.250% due 05/15/14 680 917
4.250% due 08/15/14 13,010 13,065
12.500% due 08/15/14 1,235 1,651
9.250% due 02/15/16 2,555 3,643
7.250% due 05/15/16 7,590 9,533
7.500% due 11/15/16 1,000 1,285
8.125% due 08/15/19 6,040 8,343
8.125% due 08/15/21 4,570 6,436
7.125% due 02/15/23 8,250 10,771
6.875% due 08/15/25 955 1,238
6.125% due 11/15/27 600 726
6.125% due 08/15/29 305 372
6.250% due 05/15/30 2,570 3,200
5.375% due 02/15/31 16,660 18,818
United States Treasury Notes (N)
3.000% due 12/31/06 3,960 3,922
4.375% due 05/15/07 4,255 4,315
3.500% due 12/15/09 14,875 14,637
5.000% due 02/15/11 1,550 1,634
4.750% due 05/15/14 11,974 12,482
8.750% due 05/15/17 2,560 3,603
6.000% due 02/15/26 20,445 24,192
</Table>
94 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Treasury
Principal Only Strip
Zero coupon due 11/15/21 3,640 1,678
------------
330,345
------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,391,380) 1,398,751
------------
PREFERRED STOCKS - 0.1%
Auto and Transportation - 0.0%
General Motors Corp. (AE) 17,025 282
------------
Financial Services - 0.1%
DG Funding Trust (p) 103 1,114
Fannie Mae (AE) 7,800 433
------------
1,547
------------
TOTAL PREFERRED STOCKS
(cost $1,791) 1,829
------------
<Caption>
NOTIONAL
AMOUNT
$
------------
- -----------------------------------------------------------------------------
OPTIONS PURCHASED - 0.0%
Euribor Futures
Dec 2005 93.25 (EUR) Put (15) 4,500 --
Eurodollar Futures
Sep 2005 95.50 Call (13) 3,104 25
Sep 2005 94.50 Put (163) 38,509 1
------------
TOTAL OPTIONS
(cost $37) 26
------------
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 25.4%
ABN Amro North America (c)(z)
2.770% due 05/02/05 2,100 2,100
Bank of America Corp. (z)
3.010% due 07/07/05 1,800 1,786
Bank of Ireland Governor & Co. (c)(z)
2.560% due 05/05/05 7,200 7,198
Banque Et Caisse D'Epargne (c)(z)
2.980% due 05/27/05 2,200 2,195
Barclays US Funding, LLC (c)(z)
2.935% due 05/20/05 5,400 5,392
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
2.685% due 05/24/05 1,200 1,198
Citigroup Global Markets Holdings, Inc. (c)(z)
2.760% due 05/03/05 2,100 2,100
Countrywide Financial Corp. (E)
Series MTNA
3.120% due 03/21/06 1,600 1,599
DaimlerChrysler NA Holding Corp.
7.750% due 06/15/05 2,200 2,209
Danske Corp. Discount Notes (z)
2.530% due 05/06/05 (c) 5,500 5,498
2.665% due 05/09/05 (c) 200 200
2.800% due 05/09/05 (c) 2,800 2,798
3.020% due 07/15/05 100 99
Deutsche Telekom International Finance BV
8.250% due 06/15/05 1,000 1,006
Dexia Delaware (c)(z)
2.995% due 06/01/05 1,800 1,795
DNB Nor Bank ASA (c)(z)
2.700% due 05/31/05 1,300 1,297
Du Pont E I De Nemours & Co. Commercial Paper
(c)(z)
2.740% due 05/05/05 2,100 2,099
Fannie Mae
9.500% due 12/01/05 2 2
6.000% due 12/15/05 2,100 2,133
Fannie Mae Discount Notes (z)
2.680% due 05/02/05 (c) 2,100 2,100
2.800% due 06/01/05 (c) 600 599
2.683% due 06/13/05 (c) 1,700 1,694
2.950% due 06/29/05 (c)(sec.) 380 378
2.950% due 07/06/05 5,100 5,062
2.960% due 07/13/05 4,000 3,970
3.010% due 07/27/05 4,500 4,466
3.030% due 08/03/05 5,200 5,141
3.050% due 08/05/05 100 99
Fannie Mae Discount Notes (N)
2.789% due 07/20/05 7,100 7,014
Ford Motor Credit Co.
7.600% due 08/01/05 200 201
6.875% due 02/01/06 800 809
France Telecom SA
7.450% due 03/01/06 800 823
Frank Russell Investment Company Money Market
Fund 202,053,000 202,053
</Table>
Diversified Bond Fund 95
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Freddie Mac Discount Notes (z)
2.790% due 05/31/05 (c) 4,900 4,889
2.970% due 06/28/05 (c) 4,600 4,578
2.920% due 06/30/05 1,600 1,586
2.960% due 07/05/05 7,800 7,741
3.000% due 07/26/05 400 397
Freddie Mac Discount Notes (z)
2.917% due 07/12/05 4,000 3,970
3.020% due 08/09/05 5,700 5,631
General Electric Capital Corp. Discount Notes
(z)
2.970% due 06/20/05 (c) 1,400 1,394
3.090% due 07/25/05 5,000 4,962
General Motors Acceptance Corp.
7.500% due 07/15/05 500 502
General Motors Acceptance Corp. (E)
4.750% due 05/19/05 800 800
Halliburton Co. (E)
4.160% due 10/17/05 2,000 2,012
HBOS Treasury Services, PLC (c)(z)
2.780% due 05/04/05 2,100 2,100
2.830% due 05/31/05 800 798
2.870% due 06/07/05 2,000 1,994
International Business Machines
2.720% due 05/05/05 2,100 2,099
Ixis Capital Corp. (z)
2.980% due 06/21/05 (c) 7,800 7,768
2.940% due 07/08/05 800 792
KFW International Finance, Inc. (c)(z)
2.850% due 05/16/05 7,000 6,992
National Australia Funding, Inc. (c)(z)
3.000% due 06/01/05 2,200 2,194
Nordea North America, Inc. (c)(z)
2.665% due 05/02/05 1,200 1,200
NPF XII, Inc. (E)(p)(O)
Series 2002-1A Class A
2.390% due 05/02/05 1,825 128
Rabobank USA Financial Corp. (c)(z)
2.785% due 05/09/05 1,400 1,399
Santander Financial Issuances
6.800% due 07/15/05 90 91
Skandinaviska Enskilda Banken (c)(z)
2.680% due 05/03/05 1,100 1,100
2.665% due 05/23/05 7,100 7,088
Svenska Handlesbanken, Inc. (z)
3.050% due 07/20/05 7,900 7,839
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Swedbank Forenings (c)(z)
2.710% due 05/31/05 700 698
Tennessee Valley Authority
6.375% due 06/15/05 15 15
Total Fina Elf (c)(z)
2.810% due 05/09/05 4,200 4,197
Toyota Motor Credit Co. (c)(z)
2.740% due 05/05/05 2,100 2,099
UBS Financial Del, LLC (c)(z)
2.770% due 05/02/05 2,200 2,200
2.860% due 05/03/05 400 400
2.795% due 05/04/05 100 100
2.565% due 05/06/05 7,200 7,197
2.670% due 05/25/05 200 200
2.675% due 05/26/05 800 798
United States Treasury Bills (c)(z)(sec.)
2.680% due 06/02/05 120 120
2.690% due 06/02/05 120 120
2.710% due 06/02/05 860 857
2.781% due 06/09/05 800 798
2.800% due 06/16/05 100 100
2.740% due 06/16/05 30 30
United States Treasury Note
6.750% due 05/15/05 710 711
US Bank NA
Series BKNT
5.625% due 11/30/05 500 506
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $381,935) 380,303
------------
OTHER SECURITIES - 6.3%
Frank Russell Investment Company Money Market
Fund (X) 22,536,042 22,536
State Street Securities Lending Quality Trust
(X) 71,003,824 71,004
------------
TOTAL OTHER SECURITIES
(cost $93,540) 93,540
------------
TOTAL INVESTMENTS - 125.0%
(identified cost $1,868,683) 1,874,449
OTHER ASSETS AND LIABILITIES,
NET - (25.0%) (375,087)
------------
NET ASSETS - 100.0% 1,499,362
============
</Table>
See accompanying notes which are an integral part of the financial statements.
96 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
10 Year Interest Rate Swap Futures
expiration date 06/05 (54) 5,965 82
Eurodollar Futures
expiration date 06/05 (6) 1,449 (3)
expiration date 09/05 (519) 124,891 (468)
expiration date 12/05 (234) 56,198 (179)
expiration date 03/06 (85) 20,387 43
expiration date 09/06 (4) 957 (1)
United States Treasury Bonds
expiration date 06/05 (64) 7,350 191
United States Treasury 2 Year Notes
expiration date 06/05 (215) 44,656 19
United States Treasury 5 Year Notes
expiration date 06/05 (819) 88,823 595
United States Treasury 10 Year Notes
expiration date 06/05 (456) 50,808 581
Short Positions
United States Treasury Bonds
expiration date 06/05 (197) 22,624 (777)
United States Treasury 5 Year Notes
expiration date 06/05 (123) 13,340 (33)
United States Treasury 10 Year Notes
expiration date 06/05 (277) 30,864 (403)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (353)
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Euribor Futures
Jun 2005 97.75 (EUR) Put (27) 8,491 (3)
United States Treasury Notes
May 2005 116.00 Call (11) 1,276 (5)
May 2005 118.00 Call (2) 236 --
May 2005 108.00 Put (92) 9,936 (1)
May 2005 111.00 Put (21) 2,331 (2)
United States Treasury Notes
10 Year Futures
May 2005 112.00 Call (19) 2,128 (7)
May 2005 113.00 Call (69) 7,797 (9)
May 2005 114.00 Call (29) 3,306 (2)
Aug 2005 110.00 Call (18) 18,920 (40)
May 2005 108.00 Put (97) 10,476 (3)
---------------
Total Liability for Options Written (premiums
received $163) (72)
===============
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
- -------------------------------------------------------------------------
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 5,201 EUR 4,015 05/04/05 (36)
USD 3,129 EUR 2,432 05/10/05 14
USD 6,588 EUR 5,071 05/10/05 (34)
USD 17,685 EUR 13,665 05/10/05 (26)
USD 131 EUR 101 05/18/05 (1)
USD 300 JPY 31,689 05/17/05 3
USD 1,034 JPY 110,694 06/13/05 26
USD 2,547 JPY 274,480 06/13/05 81
USD 933 PLN 3,025 05/10/05 (20)
CAD 355 USD 287 06/09/05 5
EUR 21,168 USD 27,668 05/10/05 314
EUR 168 USD 218 05/18/05 2
EUR 3,559 USD 4,602 05/18/05 20
EUR 398 USD 521 05/25/05 8
EUR 4,015 USD 5,216 08/10/05 13
EUR 5,071 USD 6,605 08/10/05 33
PLN 1,507 USD 509 05/10/05 54
PLN 1,518 USD 493 05/10/05 35
PLN 3,025 USD 928 08/10/05 20
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions 511
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 97
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAPS
- ------------------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
COUNTER AMOUNT TERMINATION VALUE
PARTY $ FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ---------------------- -------------------- ---------------- ----------------
Bank of America CAD 300 6.000% Three Month LIBOR 06/16/15 1
Barclays GBP 300 5.000% Six Month LIBOR 03/15/32 (17)
Barclays EUR 300 6.000% Six Month LIBOR 03/15/32 36
----------------
Total Market Value of Interest Rate Swaps Premiums Paid (Received) - $22 20
================
</Table>
<Table>
<Caption>
CREDIT DEFAULT SWAPS
- ---------------------------------------------------------------------------------------------------------------------------
NOTIONAL RECEIVE MARKET
COUNTER REFERENCE AMOUNT FIXED TERMINATION VALUE
PARTY ENTITY $ RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
Eastman Kodak
Deutsche Bank Co. 100 1.250% 03/20/10 (2)
Eastman Kodak
Goldman Sachs Co. 100 1.670% 03/20/15 (6)
----------------
Total Market Value of Credit Default Swaps (8)
================
</Table>
See accompanying notes which are an integral part of the financial statements.
98 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Asset-Backed Securities 6.4
Corporate Bonds and Notes 15.7
International Debt 3.7
Mortgage-Backed Securities 38.1
Municipal Bonds 0.3
Non-US Bonds 1.3
United States Government Agencies 5.7
United States Government Treasuries 22.0
Preferred Stock 0.1
Options Purchased --*
Short-Term Investments 25.4
Other Securities 6.3
---------------
Total Investments 125.0
Other Assets and Liabilities, Net (25.0)
---------------
Net Assets 100.0
===============
Futures Contracts --*
Written Options --*
Foreign Currency Exchange Contracts --*
Interest Rate Swaps --*
Credit Default Swaps --*
* Less than .05%
</Table>
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 99
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,006.50 $ 1,015.83
Expenses Paid During
Period* $ 9.20 $ 9.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.85%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,010.30 $ 1,019.55
Expenses Paid During
Period* $ 5.48 $ 5.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.10%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,011.50 $ 1,020.78
Expenses Paid During
Period* $ 4.24 $ 4.26
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.85%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
100 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 83.2%
Asset-Backed Securities - 7.5%
ABSC NIMs Trust
Series 2004-HE1 Class A
7.000% due 01/17/34 114 114
Alliance Capital Funding LLC (p)
Series 1998-1 Class A3
5.840% due 02/15/10 85 85
American Airlines, Inc.
6.817% due 05/23/11 615 574
7.858% due 10/01/11 635 655
American Express Credit Account Master Trust (E)
Series 2002-1 Class A
2.920% due 09/15/09 1,600 1,602
Series 2002-2 Class A
2.920% due 11/16/09 2,175 2,178
Series 2002-3 Class A
2.920% due 12/15/09 1,800 1,804
Ameriquest Mortgage Securities, Inc. (E)
Series 2002-D Class M1
5.350% due 02/25/33 450 457
Asset Backed Funding Certificates (E)
Series 2004-HE1 Class A1
2.980% due 06/25/22 408 408
Series 2004-OPT5 Class A2
3.040% due 06/25/25 1,338 1,338
Series 2005-WF1 Class A2A
3.140% due 01/25/35 3,050 3,050
BA Master Credit Card Trust (E)
Series 1999-C Class A
3.060% due 08/15/08 2,000 2,006
Bear Stearns Asset Backed Securities, Inc. (E)
Series 2004-BO1 Class 1A1
3.050% due 09/25/34 1,593 1,594
Capital Auto Receivables Asset Trust
Series 2003-2 Class A3A
1.440% due 02/15/07 642 637
Series 2004-2 Class A2
3.350% due 02/15/08 900 891
Capital Auto Receivables Asset Trust (E)
Series 2003-3 Class A3B
2.890% due 01/15/08 1,000 1,001
Capital One Multi-Asset Execution Trust
Series 2003-C2 Class C2
4.320% due 04/15/09 205 206
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Cendant Timeshare Receivables Funding LLC (p)
Series 2004-1A Class A1
3.670% due 05/20/16 345 340
Chancellor/Triton CBO, Ltd. (p)
Series 1998-1A Class A1
6.710% due 08/05/10 339 344
Chase Funding Net Interest Margin (p)
Series 2003-6A Class NOTE
5.000% due 01/27/35 1 1
Citibank Credit Card Issuance Trust
Series 2000-A3 Class A3
6.875% due 11/16/09 900 961
Citifinancial Mortgage Securities, Inc.
Series 2003-3 Class AF2
3.082% due 08/25/33 360 357
Series 2003-4 Class AF3
3.221% due 10/25/33 370 366
Conseco Finance (E)
Series 2000-C Class A
3.180% due 12/15/29 547 547
Continental Airlines, Inc.
6.648% due 09/15/17 402 384
Countrywide Asset-Backed Certificates
Series 2004-10 Class AF2
3.323% due 05/25/22 920 909
Series 2004-13 Class AF2
3.683% due 08/25/24 695 688
Series 2004-7 Class AF2
3.324% due 12/25/23 1,310 1,295
Series 2004-9 Class AF2
3.337% due 09/25/23 625 618
Series 2004-S1 Class A2
3.872% due 03/25/20 745 738
Series 2004-5 Class 4A1 (E)
2.530% due 08/25/23 117 117
Series 2005-3 Class AF1A (E)
2.970% due 08/25/35 693 693
Series 2004-1 NIMs Class NOTE (p)
6.000% due 05/25/34 145 146
Entergy Gulf States, Inc. (E)
2.800% due 12/01/09 335 336
</Table>
Multistrategy Bond Fund 101
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Equifirst Mortgage Loan Trust (E)
Series 2005-1 Class A1
2.890% due 04/25/35 1,097 1,097
Equity One ABS, Inc. (E)
Series 2004-2 Class AF1
2.960% due 07/25/34 1,062 1,062
Fannie Mae
Series 1992-10 Class ZD
8.000% due 11/25/21 1,137 1,177
Series 1996-46 Class ZA
7.500% due 11/25/26 427 459
Series 2005-1 Class KZ
5.000% due 02/25/35 633 579
Fannie Mae Grantor Trust
Series 2004-T4 Class A2
3.930% due 02/25/20 685 682
Series 2004-T4 Class A3
4.420% due 08/25/24 610 610
FHA 221D4
7.430% due 07/02/22 98 99
Freddie Mac
Series 2001-2326 Class ZQ
6.500% due 06/15/31 1,705 1,813
GE Capital Credit Card Master Note Trust (E)
Series 2004-1 Class A
2.640% due 06/15/10 800 800
Series 2004-2 Class A
2.850% due 09/15/10 1,950 1,950
GE Dealer Floorplan Master Note Trust (E)
Series 2004-1 Class A
2.900% due 07/20/08 1,050 1,050
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 1,570 1,555
Series 2004-HE4 Class A1 (E)
2.960% due 03/25/35 1,300 1,301
Golden Tree High Yield Opportunities, LP
Series 2000-1 Class C1
9.404% due 10/31/07 1,100 1,126
GSAA Trust (p)
Series 2004-4N Class NOTE
6.250% due 05/25/34 460 460
GSAMP Trust (E)
Series 2005-AHL Class A1
3.154% due 04/25/35 1,100 1,100
Harley-Davidson Motorcycle Trust
Series 2003-1 Class A1
1.560% due 05/15/07 14 14
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-2 Class A1
2.180% due 01/15/09 978 970
HFC Home Equity Loan Asset Backed Certificates
(E)
Series 2003-1 Class A
3.200% due 10/20/32 672 673
Honda Auto Receivables Owner Trust
Series 2004-2 Class A2
2.520% due 02/15/07 1,289 1,285
IXIS Real Estate Capital Trust (E)
Series 2005-HE2 Class A1
3.144% due 09/25/35 1,600 1,600
Long Beach Mortgage Loan Trust (E)
Series 2003-1 Class A2
3.250% due 03/25/33 31 31
Series 2003-2 Class M2
4.920% due 06/25/33 1,555 1,590
Series 2004-A Class A
3.000% due 02/25/24 365 365
Series 2005-1 Class 2A1
2.990% due 02/25/35 1,515 1,515
Series 2005-2 Class 2A1
2.950% due 04/25/35 2,050 2,050
Mastr Asset Backed Securities Trust (E)
Series 2005-OPT1 Class A3
3.190% due 03/25/35 1,225 1,225
MBNA Credit Card Master Note Trust (E)
Series 2002-A10 Class A10
2.950% due 02/16/10 1,700 1,705
MBNA Master Credit Card Trust USA
Series 2000-E Class A
7.800% due 10/15/12 600 695
Series 1996-B Class A (E)
3.070% due 08/15/08 45 45
Merrill Lynch Mortgage Investors, Inc.
Series 2004-HE2 Class A2A (E)
3.050% due 08/25/35 823 823
Series 2004-WMC5 Class A2B1 (E)
3.030% due 07/25/35 643 643
Series 2004-WMC5 Class A2B2 (E)
3.200% due 07/25/35 810 813
Series 2005-NC1 Class A2B (E)
3.070% due 10/25/35 300 300
</Table>
102 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-WMC1 Class A2A (E)
2.950% due 09/25/35 1,069 1,069
Series 2005-WMC1 Class A2B (E)
3.070% due 09/25/35 865 866
Series 2003-WM1N Class N1 (p)
7.000% due 11/25/33 24 24
Mid-State Trust
Series 2003-11 Class A1
4.864% due 07/15/38 183 178
Series 2004-1 Class A
6.005% due 08/15/37 254 257
Nelnet Student Loan Trust (E)
Series 2004-4 Class A1
2.690% due 04/25/11 321 321
New Century Home Equity Loan Trust (E)
Series 2004-4 Class A3
2.990% due 02/25/35 1,687 1,687
Series 2004-A Class AII1
3.030% due 08/25/34 499 499
Novastar Home Equity Loan (E)
Series 2004-4 Class A2B
3.190% due 03/25/35 1,020 1,024
Option One Mortgage Loan Trust (E)
Series 2003-2 Class M2
4.720% due 04/25/33 1,930 1,964
Series 2003-4 Class M2
4.670% due 07/25/33 1,930 1,967
Ownit Mortgage Loan Asset Backed Certificates
(E)
Series 2005-2 Class A2A
3.130% due 03/25/36 1,212 1,212
Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF2
3.914% due 05/25/35 445 442
Power Contract Financing LLC (p)
6.256% due 02/01/10 450 467
Premium Asset Trust
2.950% due 02/02/07 760 760
Renaissance Home Equity Loan Trust
Series 2004-4 Class AF2
3.856% due 02/25/35 765 759
Series 2005-1 Class AF3
4.456% due 05/25/35 1,075 1,073
Series 2004-2 Class AF1 (E)
3.050% due 07/25/34 2,098 2,099
Residential Asset Mortgage Products, Inc.
Series 2004-RS10 Class AI2
3.620% due 07/25/26 670 665
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-RS4 Class AI3
4.003% due 01/25/30 975 974
Series 2004-RS6 Class AI3
4.540% due 08/25/28 785 789
Series 2004-RS7 Class AI3
4.450% due 07/25/28 1,690 1,696
Series 2004-RS8 Class AI2
3.810% due 01/25/26 780 777
Series 2004-RS8 Class AI3
4.230% due 05/25/29 505 504
Series 2004-RZ2 Class AI3
4.300% due 01/25/31 480 480
Series 2004-RS12 Class AII2 (E)
3.080% due 12/25/34 410 411
Series 2004-RS8 Class AII1 (E)
2.990% due 05/25/26 2,492 2,492
Series 2005-RS1 Class AII1 (E)
2.960% due 01/25/35 1,100 1,100
Residential Asset Securities Corp.
Series 2004-KS8 Class AI2
3.340% due 10/25/24 1,915 1,895
Residential Asset Securities Corp. (E)
Series 2003-KS1 Class M2
4.770% due 01/25/33 1,035 1,044
Series 2004-KS9 Class AI1
3.020% due 07/25/21 405 405
Residential Funding Mortgage Securities II (E)
Series 2004-HI2 Class A1
3.000% due 02/25/13 223 223
Sankaty Market Value CDO (p)
Series 2001-3 Class B1
7.379% due 04/30/09 480 487
Saxon Asset Securities Trust (E)
Series 2005-1 Class A2A
2.960% due 05/25/35 1,083 1,083
Series 2005-1 Class A2B
3.070% due 05/25/35 1,605 1,606
Sears Credit Account Master Trust (E)
Series 2002-4 Class A
2.940% due 08/18/09 3,900 3,901
Series 2002-5 Class A
3.190% due 11/17/09 3,600 3,608
</Table>
Multistrategy Bond Fund 103
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sharps SP I LLC Net Interest Margin Trust (p)
Series 2004-HE1N Class N
6.900% due 11/25/33 71 71
Sharps SP I, LLC
6.850% due 03/01/23 160 160
7.000% due 01/25/34 262 262
SLM Student Loan Trust (E)
Series 2004-1 Class A1
2.740% due 01/26/15 351 351
Series 2004-3 Class A3
2.790% due 04/25/16 905 907
Series 2004-6 Class A2
2.740% due 01/25/13 991 992
Series 2004-8 Class A3
2.790% due 07/27/15 1,000 1,002
Series 2004-9 Class A2
2.720% due 10/25/12 1,950 1,949
Small Business Administration Participation
Certificates
7.500% due 04/01/17 2,193 2,338
Structured Asset Investment Loan Trust (E)
Series 2003-BC8 Class M3
4.950% due 08/25/33 1,200 1,229
Series 2004-3 Class A4
2.950% due 04/25/34 560 560
Series 2005-2 Class A2
2.970% due 03/25/35 1,167 1,167
Structured Asset Securities Corp.
Series 2001-SB1 Class A2
3.375% due 08/25/31 648 609
Series 2004-19XS Class A2
4.370% due 10/25/34 2,125 2,105
Series 2005-2XS Class 1A2A
4.510% due 02/25/35 1,770 1,766
Tenaska Alabama II Partners, LP (p)
6.125% due 03/30/23 485 504
Terwin Mortgage Trust (E)
Series 2004-22SL Class A
3.240% due 11/25/35 1,487 1,491
TXU Electric Delivery Transition Bond Co.
Series 2004-1 Class A2
4.810% due 11/17/14 300 304
USAA Auto Owner Trust
Series 2004-2 Class A2
2.410% due 02/15/07 529 527
Wachovia Auto Owner Trust
Series 2004-B Class A2
2.400% due 05/21/07 1,100 1,096
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Wells Fargo Financial Auto Owner Trust
Series 2004-A Class A2
1.470% due 03/15/07 390 389
Wells Fargo Home Equity Trust (E)
Series 2004-2 Class A31
3.010% due 06/25/19 225 225
World Financial Properties (p)
6.910% due 09/01/13 706 762
6.950% due 09/01/13 208 225
World Omni Auto Receivables Trust
Series 2004-A Class A2
2.580% due 07/12/07 913 910
------------
123,411
------------
Corporate Bonds and Notes - 13.5%
Aetna, Inc.
7.875% due 03/01/11 755 870
AIG SunAmerica Global Financing VI (p)
6.300% due 05/10/11 950 1,028
Albertson's, Inc.
7.450% due 08/01/29 245 269
Alltel Corp.
4.656% due 05/17/07 710 716
Altria Group, Inc.
7.000% due 11/04/13 (N) 350 387
7.750% due 01/15/27 180 211
Amerada Hess Corp.
6.650% due 08/15/11 225 242
7.300% due 08/15/31 525 600
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 100 103
American General Finance Corp.
Series MTNI
4.625% due 05/15/09 220 221
American General Finance Corp. (N)
Series MTNH
4.625% due 09/01/10 45 45
Series MTNG (E)
3.093% due 03/23/07 300 299
American RE Corp.
Series B
7.450% due 12/15/26 1,155 1,330
</Table>
104 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Arizona Public Service Co.
6.750% due 11/15/06 180 187
5.800% due 06/30/14 365 386
AT&T Corp.
9.050% due 11/15/11 85 97
9.750% due 11/15/31 535 666
Atmos Energy Corp. (E)
3.035% due 10/15/07 575 576
Autonation, Inc.
9.000% due 08/01/08 120 131
Avista Capital Trust III
6.500% due 04/01/34 980 1,000
Avista Corp.
7.750% due 01/01/07 55 58
9.750% due 06/01/08 610 697
AXA Financial, Inc.
6.500% due 04/01/08 120 127
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 2,600 2,835
Bank of America Corp.
7.800% due 02/15/10 460 524
BellSouth Corp.
4.200% due 09/15/09 295 291
4.750% due 11/15/12 520 517
5.200% due 12/15/16 185 185
Boeing Capital Corp. (N)
6.100% due 03/01/11 315 338
Boyd Gaming Corp.
9.250% due 08/01/09 349 368
Burlington Northern and Santa Fe Railway Co.
4.575% due 01/15/21 240 237
Burlington Northern Santa Fe Corp.
6.875% due 12/01/27 55 64
6.750% due 03/15/29 (N) 110 127
Campbell Soup Co.
5.875% due 10/01/08 430 452
Caremark Rx, Inc.
7.375% due 10/01/06 1,170 1,215
Carolina Power & Light Co.
6.500% due 07/15/12 50 55
Caterpillar Financial Services Corp.
Series MTNF
3.625% due 11/15/07 160 158
Series MTNF (E)
2.920% due 08/20/07 470 470
CC Funding Trust I
6.900% due 02/16/07 85 89
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 470 494
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CenterPoint Energy Resources Corp.
7.875% due 04/01/13 1,130 1,331
Centex Corp. (E)
2.993% due 08/01/07 665 666
Cincinnati Gas & Electric
5.700% due 09/15/12 210 221
CIT Group, Inc.
5.750% due 09/25/07 (N) 345 357
3.650% due 11/23/07 260 256
6.875% due 11/01/09 140 153
Citicorp
Series MTNF
6.375% due 11/15/08 265 282
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
2.999% due 03/07/08 1,800 1,799
Citigroup, Inc.
3.500% due 02/01/08 3,110 3,054
4.125% due 02/22/10 480 473
6.000% due 02/21/12 305 329
5.625% due 08/27/12 535 564
5.000% due 09/15/14 785 790
5.875% due 02/22/33 1,375 1,442
Citizens Communications Co.
9.250% due 05/15/11 675 731
Clear Channel Communications, Inc.
5.750% due 01/15/13 (N) 275 268
5.500% due 09/15/14 (N) 935 886
Clorox Co. (p)
2.544% due 12/14/07 (E) 525 526
4.200% due 01/15/10 525 521
5.000% due 01/15/15 340 345
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 315 327
Comcast Cable Communications
8.375% due 05/01/07 705 760
6.750% due 01/30/11 375 412
Comcast Corp.
7.625% due 02/15/08 100 108
5.850% due 01/15/10 (N) 700 736
Consolidated Natural Gas Co.
5.000% due 12/01/14 410 408
</Table>
Multistrategy Bond Fund 105
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series A
5.000% due 03/01/14 105 105
Series C
6.250% due 11/01/11 155 168
Consumers Energy Co.
4.800% due 02/17/09 325 327
4.000% due 05/15/10 85 82
5.375% due 04/15/13 95 97
Continental Airlines, Inc.
Series 00-1
7.918% due 05/01/10 1,155 1,149
Series 01-1
6.503% due 06/15/11 370 354
Corrections Corp. of America
7.500% due 05/01/11 380 392
Countrywide Home Loans, Inc.
3.250% due 05/21/08 520 502
Series MTNK
5.500% due 02/01/07 135 138
COX Communications, Inc. (p)
4.625% due 01/15/10 845 832
Credit Suisse First Boston USA, Inc.
4.625% due 01/15/08 200 202
6.500% due 01/15/12 215 237
5.500% due 08/15/13 (N) 230 240
CSC Holdings, Inc.
10.500% due 05/15/16 665 727
CSX Corp.
3.050% due 08/03/06 (E) 365 366
9.000% due 08/15/06 175 185
DaimlerChrysler NA Holding Corp.
3.450% due 09/10/07 890 881
7.300% due 01/15/12 (N) 155 166
8.500% due 01/18/31 (N) 165 188
Series MTND (E)
3.150% due 11/17/06 2,800 2,789
Detroit Edison Co.
6.125% due 10/01/10 305 327
4.800% due 02/15/15 (p) 395 390
6.350% due 10/15/32 275 309
Developers Diversified Realty Corp.
4.625% due 08/01/10 755 740
Devon Financing Corp. ULC
6.875% due 09/30/11 420 466
Dominion Resources, Inc.
Series A
7.195% due 09/15/14 520 600
Series B
6.250% due 06/30/12 120 130
DPL, Inc.
6.875% due 09/01/11 685 730
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
DR Horton, Inc.
5.250% due 02/15/15 485 452
5.625% due 01/15/16 785 755
Dresdner Funding Trust I (p)
8.151% due 06/30/31 1,005 1,247
Duke Capital Corp.
4.302% due 05/18/06 320 320
Duke Energy Field Services LLC
5.750% due 11/15/06 80 82
6.875% due 02/01/11 (N) 60 66
Echostar DBS Corp.
6.375% due 10/01/11 595 588
El Paso Corp.
6.950% due 12/15/07 2,600 2,594
El Paso Natural Gas Co.
Series A
7.625% due 08/01/10 225 235
Eli Lilly & Co.
6.770% due 01/01/36 1,170 1,436
Entergy Gulf States, Inc.
3.600% due 06/01/08 120 117
Enterprise Products Operating, LP
4.000% due 10/15/07 700 687
4.625% due 10/15/09 565 556
EOP Operating, LP
7.500% due 04/19/29 297 344
4.750% due 03/15/14 (N) 70 67
Erac USA Finance Co. (p)
7.350% due 06/15/08 560 607
Exelon Corp.
6.750% due 05/01/11 215 236
Farmers Exchange Capital (p)
7.050% due 07/15/28 1,890 1,997
Farmers Insurance Exchange (p)
6.000% due 08/01/14 570 585
8.625% due 05/01/24 875 1,080
FedEx Corp.
2.650% due 04/01/07 220 214
7.600% due 07/01/97 225 279
Fifth Third Bank
7.750% due 08/15/10 540 544
Financing Corp.
Series 10P
Principal Only Strip
Zero Coupon due 11/30/17 2,700 1,487
</Table>
106 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 15P
Principal Only Strip
Zero Coupon due 03/07/19 390 200
Series 2P
Principal Only Strip
Zero Coupon due 11/30/17 1,180 650
FirstEnergy Corp.
Series B
6.450% due 11/15/11 1,965 2,110
Series C
7.375% due 11/15/31 345 407
Fisher Scientific International, Inc. (p)
6.750% due 08/15/14 245 247
FMC Corp.
10.250% due 11/01/09 35 39
Ford Motor Co.
6.375% due 02/01/29 260 193
7.450% due 07/16/31 (N) 1,005 826
Ford Motor Credit Co.
3.200% due 03/13/07 (E) 2,250 2,102
5.625% due 10/01/08 (N) 465 439
5.800% due 01/12/09 500 465
7.375% due 10/28/09 160 154
5.700% due 01/15/10 405 366
7.875% due 06/15/10 1,175 1,131
7.375% due 02/01/11 2,265 2,121
7.250% due 10/25/11 195 180
7.000% due 10/01/13 475 427
FPL Group Capital, Inc.
4.086% due 02/16/07 1,255 1,253
General Electric Capital Corp.
3.005% due 01/15/08 700 700
4.125% due 03/04/08 1,450 1,447
Series MTNA
4.250% due 12/01/10 395 391
6.000% due 06/15/12 100 108
6.750% due 03/15/32 465 555
Series MTNA (N)
4.750% due 09/15/14 520 516
General Electric Co.
5.000% due 02/01/13 1,470 1,496
General Motors Acceptance Corp.
4.500% due 07/15/06 (N) 115 112
6.125% due 09/15/06 (N) 2,100 2,087
4.050% due 01/16/07 (E) 1,500 1,432
3.610% due 07/16/07 (E) 770 721
7.250% due 03/02/11 285 256
6.875% due 09/15/11 3,720 3,259
7.000% due 02/01/12 275 239
Zero coupon due 06/15/15 2,290 944
8.000% due 11/01/31 440 370
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
General Motors Corp. (N)
8.375% due 07/15/33 1,220 929
Georgia-Pacific Corp.
8.125% due 05/15/11 1,000 1,094
Glencore Funding LLC (p)
6.000% due 04/15/14 300 284
Golden West Financial Corp.
4.125% due 08/15/07 360 361
Goldman Sachs Group, Inc.
6.875% due 01/15/11 1,745 1,929
6.600% due 01/15/12 150 165
5.250% due 10/15/13 425 431
6.345% due 02/15/34 945 989
Great Atlantic & Pacific Tea Co.
7.750% due 04/15/07 320 322
GTE Hawaiian Telephone Co.
7.375% due 09/01/06 200 202
Halliburton Co.
5.500% due 10/15/10 355 369
Hartford Financial Services Group, Inc.
2.375% due 06/01/06 40 39
7.900% due 06/15/10 80 91
HCA, Inc.
5.500% due 12/01/09 800 794
7.875% due 02/01/11 50 54
6.950% due 05/01/12 395 412
7.500% due 12/15/23 400 405
Health Net, Inc.
9.875% due 04/15/11 550 663
Historic TW, Inc.
8.180% due 08/15/07 1,350 1,459
9.125% due 01/15/13 430 540
8.050% due 01/15/16 1,490 1,787
6.625% due 05/15/29 140 152
HJ Heinz Finance Co.
6.750% due 03/15/32 250 298
6.000% due 03/15/12 320 346
Household Finance Corp.
4.125% due 12/15/08 (N) 175 173
5.875% due 02/01/09 660 691
4.750% due 05/15/09 1,570 1,583
4.125% due 11/16/09 270 265
8.000% due 07/15/10 165 191
6.375% due 11/27/12 625 685
HSBC Bank USA NA
Series BKNT
3.875% due 09/15/09 855 835
</Table>
Multistrategy Bond Fund 107
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
HVB Funding Trust I (p)
8.741% due 06/30/31 730 927
Hyatt Equities LLC (p)
6.875% due 06/15/07 335 347
ICI Wilmington, Inc.
4.375% due 12/01/08 210 208
International Lease Finance Corp.
6.375% due 03/15/09 350 372
International Paper Co.
5.500% due 01/15/14 905 911
Interpublic Group of Cos., Inc.
5.400% due 11/15/09 285 276
Iron Mountain, Inc.
7.750% due 01/15/15 185 177
6.625% due 01/01/16 200 178
ITT Industries, Inc.
7.400% due 11/15/25 455 547
John Hancock Financial Services, Inc.
5.625% due 12/01/08 120 125
John Hancock Global Funding II (p)
7.900% due 07/02/10 440 508
Jones Apparel Group, Inc. (p)
4.250% due 11/15/09 470 452
JP Morgan & Co., Inc.
Series MTNA
6.000% due 01/15/09 495 521
JPMorgan Chase & Co.
5.350% due 03/01/07 160 163
6.000% due 02/15/09 170 179
7.000% due 11/15/09 65 71
6.750% due 02/01/11 235 260
6.625% due 03/15/12 95 105
Kellogg Co.
Series B
6.600% due 04/01/11 2,205 2,438
Kerr-McGee Corp.
5.875% due 09/15/06 45 45
7.875% due 09/15/31 300 301
KeySpan Corp. (N)
7.625% due 11/15/10 525 603
Kraft Foods, Inc.
5.250% due 06/01/07 170 173
4.125% due 11/12/09 1,000 982
5.625% due 11/01/11 3,915 4,107
Kroger Co. (The)
7.250% due 06/01/09 270 295
8.000% due 09/15/29 210 256
Lehman Brothers Holdings, Inc.
6.625% due 01/18/12 745 823
Levi Strauss & Co.
12.250% due 12/15/12 540 572
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Liberty Media Corp. (E)
4.510% due 09/17/06 1,725 1,745
Liberty Mutual Group (p)
7.000% due 03/15/34 785 811
Limited Brands (N)
6.950% due 03/01/33 685 705
Lockheed Martin Corp.
8.500% due 12/01/29 255 354
Lodgenet Entertainment Corp.
9.500% due 06/15/13 395 425
Lubrizol Corp.
4.625% due 10/01/09 565 560
M&I Marshall & Ilsley Bank
Series BKNT
3.800% due 02/08/08 755 747
Manufacturers & Traders Trust Co.
8.000% due 10/01/10 220 257
Marsh & McLennan Cos., Inc.
5.375% due 03/15/07 1,165 1,185
2.770% due 07/13/07 (E) 580 576
5.375% due 07/15/14 (N) 465 453
5.875% due 08/01/33 270 255
May Department Stores Co. (The)
4.800% due 07/15/09 195 195
5.750% due 07/15/14 515 533
MBNA America Bank NA
7.125% due 11/15/12 85 95
MBNA Corp.
6.125% due 03/01/13 650 688
3.640% due 05/05/08 (E) 585 585
MCI, Inc.
6.908% due 05/01/07 1,440 1,462
7.688% due 05/01/09 465 480
Medco Health Solutions, Inc.
7.250% due 08/15/13 1,180 1,312
MGM Mirage
9.750% due 06/01/07 755 814
8.500% due 09/15/10 545 594
6.750% due 09/01/12 220 220
Michaels Stores, Inc.
9.250% due 07/01/09 655 689
Midland Funding II
Series B
13.250% due 07/23/06 700 750
Miller Brewing Co. (p)
4.250% due 08/15/08 445 441
5.500% due 08/15/13 705 725
</Table>
108 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mohawk Industries, Inc.
Series D
7.200% due 04/15/12 220 249
Monongahela Power Co.
5.000% due 10/01/06 630 635
Morgan Stanley
6.750% due 04/15/11 1,025 1,132
4.750% due 04/01/14 795 768
Motorola, Inc.
4.608% due 11/16/07 1,335 1,344
Natexis Ambs Co. LLC (p)(f)
8.440% due 12/29/49 430 480
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 200 210
Nationwide Financial Services
6.250% due 11/15/11 395 430
Nationwide Mutual Insurance Co. (p)
7.875% due 04/01/33 655 808
Nevada Power Co.
9.000% due 08/15/13 190 209
New Cingular Wireless Services, Inc.
7.875% due 03/01/11 100 115
8.750% due 03/01/31 90 123
News America Holdings
8.875% due 04/26/23 120 156
7.750% due 12/01/45 200 239
7.900% due 12/01/95 410 494
8.250% due 10/17/96 135 166
News America, Inc.
7.125% due 04/08/28 75 84
7.300% due 04/30/28 310 356
6.750% due 01/09/38 65 73
Series WI
5.300% due 12/15/14 100 100
Nisource Finance Corp.
3.430% due 11/23/09 (E) 280 282
7.875% due 11/15/10 735 849
Norfolk Southern Corp.
7.350% due 05/15/07 110 117
7.050% due 05/01/37 280 337
7.900% due 05/15/97 930 1,240
North Front Pass-Through Trust (p)
5.810% due 12/15/24 1,700 1,741
Occidental Petroleum Corp.
9.250% due 08/01/19 285 391
Ohio Edison Co. (N)
5.450% due 05/01/15 155 158
Ohio Power Co. (N)
Series F
5.500% due 02/15/13 55 57
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pacific Gas & Electric Co.
3.600% due 03/01/09 325 316
4.200% due 03/01/11 290 283
6.050% due 03/01/34 770 823
Panhandle Eastern Pipe Line
2.750% due 03/15/07 125 121
Pemex Project Funding Master Trust
7.375% due 12/15/14 385 418
8.625% due 02/01/22 1,165 1,348
Pinnacle Entertainment, Inc.
8.250% due 03/15/12 545 534
Pinnacle West Energy Corp. (E)(p)
3.630% due 04/01/07 760 760
Plains Exploration & Production Co.
7.125% due 06/15/14 80 83
Popular North America Capital Trust I
6.564% due 09/15/34 785 855
Progress Energy, Inc.
7.100% due 03/01/11 330 361
6.850% due 04/15/12 90 98
7.000% due 10/30/31 620 691
Prudential Holdings LLC (p)
Series FSA
7.245% due 12/18/23 155 187
PSEG Energy Holdings LLC
7.750% due 04/16/07 1,645 1,686
8.625% due 02/15/08 230 242
Qwest Capital Funding, Inc.
7.000% due 08/03/09 (N) 65 59
6.500% due 11/15/18 30 22
Qwest Corp. (p)
7.875% due 09/01/11 1,440 1,462
Qwest Services Corp. (p)
13.500% due 12/15/07 275 300
14.000% due 12/15/10 475 534
Rabobank Capital Funding II (p)(f)
5.260% due 12/31/49 550 554
Raytheon Co.
8.300% due 03/01/10 125 144
RBS Capital Trust I (f)
5.512% due 09/29/49 1,050 1,068
RC Trust 1 Equity Preferred
3.500% due 05/15/06 1,340 689
Reckson Operating Partnership, LP
5.150% due 01/15/11 310 312
</Table>
Multistrategy Bond Fund 109
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Reliant Energy, Inc.
6.750% due 12/15/14 50 44
Roundy's, Inc.
Series B
8.875% due 06/15/12 500 518
Safeway, Inc. (N)
5.800% due 08/15/12 110 114
7.250% due 02/01/31 345 381
SBC Communications, Inc.
4.125% due 09/15/09 605 595
5.100% due 09/15/14 545 545
6.150% due 09/15/34 865 898
SCANA Corp. (E)
3.109% due 03/01/08 680 680
Sealed Air Corp. (p)
5.625% due 07/15/13 465 473
Sempra Energy
4.621% due 05/17/07 1,175 1,180
3.318% due 05/21/08 (E) 810 812
SLM Corp.
4.000% due 01/15/10 430 422
Smithfield Foods, Inc.
Series B
8.000% due 10/15/09 430 460
7.750% due 05/15/13 80 86
Southern California Edison Co.
3.075% due 12/13/07 (E) 730 729
7.625% due 01/15/10 800 902
5.000% due 01/15/14 120 121
6.000% due 01/15/34 (N) 455 491
Sprint Capital Corp.
4.780% due 08/17/06 485 488
6.375% due 05/01/09 265 282
8.375% due 03/15/12 (N) 2,425 2,872
6.875% due 11/15/28 775 864
8.750% due 03/15/32 1,900 2,555
Starwood Hotels & Resorts Worldwide, Inc. (o)
7.375% due 05/01/07 65 67
7.875% due 05/01/12 505 554
TCI Communications, Inc.
7.875% due 02/15/26 145 181
TECO Energy, Inc. (N)
7.200% due 05/01/11 490 518
Tele-Communications-TCI Group
9.800% due 02/01/12 990 1,261
7.875% due 08/01/13 1,665 1,965
Temple-Inland, Inc.
5.003% due 05/17/07 740 747
Tenet Healthcare Corp.
7.375% due 02/01/13 (N) 115 108
6.875% due 11/15/31 85 69
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Tesoro Corp.
8.000% due 04/15/08 725 759
Texas Eastern Transmission, LP
7.000% due 07/15/32 180 213
Texas Genco LLC (p)
6.875% due 12/15/14 1,220 1,196
Texas-New Mexico Power Co.
6.250% due 01/15/09 220 231
Time Warner Entertainment Co., LP
8.375% due 03/15/23 480 604
Time Warner, Inc.
6.750% due 04/15/11 2,215 2,433
7.625% due 04/15/31 190 232
7.700% due 05/01/32 65 80
TNP Enterprises, Inc.
10.250% due 04/01/10 215 227
Travelers Property Casualty Corp. (N)
5.000% due 03/15/13 250 251
Twin Reefs Pass-Through Trust (E)(p)(f)
3.910% due 12/10/49 900 904
TXU Corp.
4.800% due 11/15/09 (p) (N) 1,740 1,706
5.550% due 11/15/14 (p) 2,550 2,458
Series J
6.375% due 06/15/06 125 128
TXU Energy Co. LLC (N)
7.000% due 03/15/13 420 466
Tyson Foods, Inc. (N)
8.250% due 10/01/11 280 329
Union Pacific Corp.
6.625% due 02/01/08 175 185
6.650% due 01/15/11 145 159
6.125% due 01/15/12 800 859
Series MTNE (N)
6.790% due 11/09/07 110 117
Union Planters Corp.
7.750% due 03/01/11 265 307
Valero Logistics Operations, LP
6.050% due 03/15/13 775 823
Verizon
6.500% due 09/15/11 70 76
Verizon Global Funding Corp.
7.250% due 12/01/10 1,105 1,241
Vintage Petroleum, Inc. (N)
7.875% due 05/15/11 500 520
</Table>
110 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Washington Mutual, Inc.
8.250% due 04/01/10 560 642
WellPoint, Inc. (p)
3.750% due 12/14/07 625 617
4.250% due 12/15/09 520 513
Wells Fargo & Co.
4.950% due 10/16/13 390 394
Wells Fargo Bank NA
7.550% due 06/21/10 250 285
Weyerhaeuser Co.
6.000% due 08/01/06 105 108
6.750% due 03/15/12 240 256
Williams Gas Pipelines (p)
7.375% due 11/15/06 630 658
Wisconsin Electric Power
3.500% due 12/01/07 145 143
Witco Corp.
7.750% due 04/01/23 660 680
6.875% due 02/01/26 605 581
Wyeth
5.500% due 03/15/13 255 264
5.500% due 02/01/14 105 109
Xerox Corp.
7.125% due 06/15/10 350 367
6.875% due 08/15/11 285 296
Yum! Brands, Inc.
8.875% due 04/15/11 625 755
Zurich Capital Trust I (p)
8.376% due 06/01/37 1,195 1,295
------------
221,605
------------
International Debt - 5.3%
Abbey National PLC
(Step Up, 06/15/08, 7.570%)(f)
6.700% due 06/26/49 775 823
Abitibi-Consolidated, Inc. (N)
6.950% due 12/15/06 1,103 1,106
8.550% due 08/01/10 500 481
8.850% due 08/01/30 585 497
Amvescap PLC
4.500% due 12/15/09 1,015 1,009
Argentina Government International Bond
11.375% due 03/15/10 265 77
11.375% due 01/30/17 1,035 300
Arlington Street CDO, Ltd. (p)
Series 2000-1A Class A2
7.660% due 06/10/12 1,796 1,850
AXA
8.600% due 12/15/30 255 340
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Banco Santander Chile (E)(p)
3.310% due 12/09/09 610 610
Batterson Park CBO I, Ltd.
Series 1998-1A Class A4
6.130% due 01/02/11 51 51
Bowater Canada Finance
7.950% due 11/15/11 790 782
Brazilian Government International Bond
3.063% due 04/15/06 (E) 16 16
8.840% due 06/29/09 (E) 1,100 1,257
9.250% due 10/22/10 (N) 295 318
11.000% due 01/11/12 1,820 2,107
3.125% due 04/15/12 (E) 9 8
8.000% due 04/15/14 1,583 1,571
10.500% due 07/14/14 (N) 35 39
8.875% due 04/15/24 (N) 1,940 1,892
11.000% due 08/17/40 400 453
British Sky Broadcasting PLC
8.200% due 07/15/09 1,055 1,194
British Telecommunications PLC
8.375% due 12/15/10 585 686
8.875% due 12/15/30 55 75
Canadian Oil Sands, Ltd. (p)
4.800% due 08/10/09 460 460
Chile Government International Bond
5.500% due 01/15/13 3,500 3,639
Conoco Funding Co.
6.350% due 10/15/11 2,050 2,266
Deutsche Telekom International Finance BV
8.500% due 06/15/10 1,400 1,624
8.750% due 06/15/30 1,310 1,755
El Salvador Government International Bond
8.250% due 04/10/32 780 802
EnCana Corp.
6.500% due 08/15/34 195 220
Export-Import Bank of Korea
4.250% due 11/27/07 90 90
4.125% due 02/10/09(p) 540 531
France Telecom SA
8.000% due 03/01/11 1,425 1,642
8.750% due 03/01/31 765 1,036
Hanarotelecom, Inc. (p)
7.000% due 02/01/12 900 863
</Table>
Multistrategy Bond Fund 111
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hutchison Whampoa International 03/13, Ltd. (p)
6.500% due 02/13/13 335 359
Hutchison Whampoa International 03/33, Ltd. (p)
5.450% due 11/24/10 150 154
Intelsat Bermuda, Ltd.
7.805% due 01/15/12 (E)(p) 445 446
8.250% due 01/15/13 (p) 270 272
6.500% due 11/01/13 1,040 824
Ispat Inland ULC
9.750% due 04/01/14 1,699 1,941
Juniper CBO, Ltd. (p)
Series 1999-1A Class A1
6.830% due 04/15/11 570 580
Korea Development Bank
4.250% due 11/13/07 140 140
Korea Electric Power Corp. (p)
5.125% due 04/23/34 285 286
Mantis Reef, Ltd. (p)
4.692% due 11/14/08 585 584
Mexico Government International Bond
9.875% due 02/01/10 100 119
8.375% due 01/14/11 700 801
6.375% due 01/16/13 260 271
8.125% due 12/30/19 2,400 2,810
8.000% due 09/24/22 (N) 665 771
8.300% due 08/15/31 1,255 1,470
6.750% due 09/27/34 (N) 530 528
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 1,490 1,543
Monumental Global Funding, Ltd. (p)
4.625% due 03/15/10 320 323
Morgan Stanley Bank AG for OAO Gazprom (p)
9.625% due 03/01/13 340 399
NAK Naftogaz Ukrainy
8.125% due 09/30/09 1,300 1,336
Nationwide Building Society (p)
4.250% due 02/01/10 360 356
Nexen, Inc.
5.875% due 03/10/35 445 429
Norske Skog Canada, Ltd.
Series D
8.625% due 06/15/11 665 678
Oil Insurance, Ltd. (p)
5.150% due 08/15/33 1,580 1,596
Panama Government International Bond
8.875% due 09/30/27 300 336
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Petroleum Geo-Services ASA (N)
8.000% due 11/05/06 225 230
Poland Government International Bond
4.750% due 10/27/24 750 725
Province of Quebec
5.000% due 07/17/09 (N) 265 272
7.500% due 07/15/23 955 1,227
Ras Laffan Liquefied Natural Gas Co., Ltd. (p)
8.294% due 03/15/14 290 338
Rogers Wireless Communications, Inc.
7.250% due 12/15/12 135 138
Royal Bank of Scotland Group PLC (f)
Series 1
9.118% due 03/31/49 2,350 2,800
Russia Government International Bond (p)
5.000% due 03/31/30 3,500 3,721
5.000% due 03/31/30 (N) 3,750 3,982
Salomon Brothers AG for OAO Siberian Oil Co.
Series REGS
10.750% due 01/15/09 1,540 1,713
Salomon Brothers AG for Tyumen Oil Co. (p)
Series REGS
11.000% due 11/06/07 890 986
Santander Financial Issuances
6.375% due 02/15/11 540 589
Sanwa Finance Aruba AEC
8.350% due 07/15/09 495 564
Sappi Papier Holding AG (p)
6.750% due 06/15/12 240 261
Secunda International, Ltd. (E)
11.141% due 09/01/12 660 647
Shaw Communications, Inc.
8.250% due 04/11/10 875 958
7.200% due 12/15/11 (N) 190 201
South Street CBO, Ltd.
Series 1999-1A Class A1
7.160% due 07/01/11 774 680
Stora Enso OYJ (N)
7.375% due 05/15/11 255 287
Systems 2001 AT LLC (p)
7.156% due 12/15/11 335 360
6.664% due 09/15/13 413 451
</Table>
112 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Telecom Italia Capital SA
4.000% due 01/15/10 (p) 5,195 5,018
6.375% due 11/15/33 450 469
6.000% due 09/30/34 (p) 455 451
Telefonos de Mexico SA de CV
4.500% due 11/19/08 1,080 1,064
TELUS Corp.
7.500% due 06/01/07 705 749
8.000% due 06/01/11 1,975 2,281
Tengizchevroil Finance Co. (p)
6.124% due 11/15/14 810 812
TuranAlem Finance BV (p)
7.875% due 06/02/10 710 712
Tyco International Group SA
6.375% due 10/15/11 1,500 1,626
UFJ Finance Aruba AEC
6.750% due 07/15/13 65 72
Venezuela Government International Bond (N)
9.375% due 01/13/34 795 786
Western Oil Sands, Inc.
8.375% due 05/01/12 475 527
WPP Finance UK Corp. (N)
5.875% due 06/15/14 350 364
------------
87,883
------------
Mortgage-Backed Securities - 32.9%
Banc of America Commercial Mortgage, Inc.
4.877% due 11/10/42 2,515 2,557
Series 2004-3 Class A3
4.875% due 06/10/39 2,170 2,203
Series 2004-4 Class A3
4.128% due 07/10/42 1,475 1,457
Series 2004-5 Class A3
4.561% due 11/10/41 550 547
Banc of America Funding Corp.
Series 2004-3 Class 2A2
5.000% due 09/25/19 807 807
Bank of America Alternative Loan Trust
6.000% due 12/25/34 598 617
Series 2003-10 Class 2A1
6.000% due 12/25/33 850 868
Series 2004-10 Class 1CB1
6.000% due 11/25/34 538 555
Series 2004-2 Class 1A1
6.000% due 03/25/34 558 570
Series 2005-3 Class 2A1
5.500% due 04/25/20 790 805
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America Mortgage Securities
Series 2004-1 Class 5A1
6.500% due 09/25/33 174 177
Series 2003-D Class 1A2 (E)
3.428% due 05/25/33 25 25
Series 2003-I Class 2A4 (E)
3.828% due 10/25/33 760 755
Series 2004-A Class 1A1 (E)
3.491% due 02/25/34 385 383
Series 2004-E Class 1A1 (E)
3.533% due 06/25/34 788 783
Series 2004-G Class 2A6 (E)
4.657% due 08/25/34 785 793
Series 2005-A Class 2A1 (E)
4.494% due 02/25/35 624 622
Series 2005-B Class 2A1 (E)
4.428% due 03/25/35 1,181 1,174
Bear Stearns Adjustable Rate Mortgage Trust
Series 2003-8 Class 4A1
4.736% due 01/25/34 942 926
Bear Stearns Alternative Loan Trust
Series 2005-4 Class 23A1
5.446% due 05/25/35 2,400 2,425
Bear Stearns Commercial Mortgage Securities (p)
Series 2004-ESA Class E
5.064% due 05/14/16 825 837
Carrington Mortgage Loan Trust
Series 2005-OTP2 Class A1A
3.180% due 05/01/35 1,100 1,100
Citigroup Commercial Mortgage Trust (E)(p)
Series 2004-FL1 Class A1
2.610% due 07/15/18 1,075 1,076
Countrywide Alternative Loan Trust
Series 2004-J7 Class 1A2
4.673% due 08/25/34 710 712
Series 2004-J5 Class 1A1 (E)
3.040% due 07/25/34 236 237
Countrywide Home Loan Mortgage Pass Through
Trust (E)
Series 2005-9 Class M6
4.170% due 05/25/35 719 722
</Table>
Multistrategy Bond Fund 113
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2003-29 Class 5A1
7.000% due 12/25/33 487 504
Series 2004-1 Class 3A1
7.000% due 02/25/34 148 153
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2003-3 Class 2A3
4.500% due 10/25/33 420 421
Deutsche Mortgage Securities, Inc.
Series 2004-4 Class 1A2
4.010% due 04/25/34 480 480
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 1,880 1,971
DLJ Mortgage Acceptance Corp. (E)
Series 1996-Q5 Class A1
3.030% due 06/25/26 13 13
Downey Savings & Loan Association Mortgage Loan
Trust (E)
Series 2004-AR3 Class 1A1B
4.218% due 07/19/44 1,812 1,812
Fannie Mae
15 Year TBA (I)
4.500% 14,190 14,014
5.000% 29,585 29,788
5.500% 10,620 10,866
30 Year TBA (I)
5.000% 40,665 40,181
5.500% 90,740 91,571
6.000% 22,730 23,300
6.500% 28,100 29,215
7.000% 2,250 2,375
5.500% due 2016 150 153
6.000% due 2016 1,744 1,808
11.000% due 2016 152 172
5.000% due 2017 890 899
5.500% due 2017 687 704
6.000% due 2017 1,102 1,143
6.500% due 2017 570 594
5.000% due 2018 16,473 16,614
5.000% due 2019 1,984 2,001
4.500% due 2020 992 982
7.500% due 2024 20 21
3.772% due 2026 (E) 485 496
7.000% due 2026 55 58
9.000% due 2026 92 101
7.500% due 2027 18 19
6.500% due 2028 5 5
5.500% due 2029 2,336 2,372
7.500% due 2029 168 179
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.500% due 2030 811 869
8.000% due 2030 761 830
8.500% due 2030 1,626 1,774
9.500% due 2030 165 183
6.500% due 2031 6 6
7.000% due 2031 444 469
7.500% due 2031 1,107 1,188
8.000% due 2031 1,196 1,305
8.500% due 2031 1,010 1,102
6.000% due 2032 4,547 4,675
6.500% due 2032 3,031 3,157
7.000% due 2032 2,264 2,387
7.500% due 2032 690 739
8.000% due 2032 7 8
8.500% due 2032 115 126
5.000% due 2033 6,061 6,030
5.500% due 2033 1,972 1,993
6.000% due 2033 46 47
6.500% due 2033 2,221 2,312
5.000% due 2034 21,225 21,077
5.500% due 2034 3,321 3,355
6.000% due 2034 7,231 7,430
6.500% due 2034 1,477 1,538
7.500% due 2034 752 805
5.000% due 2035 3,060 3,029
5.500% due 2035 1,904 1,924
6.000% due 2035 3,112 3,198
3.077% due 2040 (E) 1,169 1,187
Series 1997-281 Class 2
Interest Only Strip
9.000% due 11/01/26 78 17
Series 2000-306 Class IO
Interest Only Strip
8.000% due 05/01/30 94 20
Series 2001-317 Class 2
Interest Only Strip
8.000% due 08/01/31 199 40
Series 2002-320 Class 2
Interest Only Strip
7.000% due 03/01/32 59 12
Series 2003-16 Class NI
Interest Only Strip
5.000% due 02/25/15 1,226 76
Series 2003-25 Class IK
Interest Only Strip
7.000% due 04/25/33 690 136
</Table>
114 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-32 Class UI
Interest Only Strip
6.000% due 05/25/33 665 125
Series 2003-33 Class IA
Interest Only Strip
6.500% due 05/25/33 3,452 600
Series 2003-35 Class IU
Interest Only Strip
6.000% due 05/25/33 780 146
Series 2003-35 Class UI
Interest Only Strip
6.500% due 05/25/33 832 169
Series 2003-64 Class JI
Interest Only Strip
6.000% due 07/25/33 785 144
Series 2003-82 Class WI
Interest Only Strip
6.000% due 08/25/32 181 20
Series 1997-68 Class SC
Interest Only Strip
6.000% due 05/18/27 198 21
Series 2001-4 Class SA
Interest Only Strip
5.070% due 02/17/31 359 33
Series 2002-50 Class SC
Interest Only Strip
5.250% due 12/25/29 107 5
Series 2004-27 Class JC
5.000% due 05/25/34 1,206 1,200
Series 2004-90 Class PC
5.000% due 03/25/27 520 525
Fannie Mae Grantor Trust
Series 1999-T2 Class A1
7.500% due 01/19/39 68 72
Series 2001-T8 Class A2
9.500% due 07/25/41 397 437
Fannie Mae Whole Loan
Series 2003-W14 Class 1A5
4.710% due 09/25/43 106 106
Series 2003-W17 Class 1A6
5.310% due 08/25/33 5,400 5,384
Series 2004-W9 Class 2A1
6.500% due 02/25/44 570 590
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2003-58 Class 1A2
3.108% due 05/25/35 379 377
Series 2003-58 Class 2A
6.500% due 09/25/43 525 545
Series 2004-H017 Class A1
2.614% due 07/15/11 3,612 3,575
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Federal National Mortgage Association
Series 2003-82 Class IA
Interest Only Strip
6.000% due 08/25/32 945 83
First Horizon Alternative Mortgage Securities
Series 2004-FA1 Class 1A1
6.250% due 10/25/34 1,288 1,327
First Horizon Asset Securities, Inc.
Series 2003-5 Class 1A17
8.000% due 07/25/33 179 189
Series 2004-AR5 Class 4A1 (E)
5.664% due 10/25/34 638 638
First Nationwide Trust (E)
Series 2001-4 Class 3A5
3.450% due 09/25/31 6 6
Freddie Mac
15 Year TBA (I)
5.000% 6,630 6,608
5.500% 25,830 26,188
30 Year TBA (I)
6.000% 1,400 1,437
12.000% due 2013 20 22
12.000% due 2014 22 24
11.000% due 2015 22 25
6.000% due 2016 214 222
10.000% due 2016 67 74
12.000% due 2016 12 12
5.000% due 2018 355 358
5.500% due 2019 8,012 8,211
8.000% due 2020 206 225
11.000% due 2020 115 130
10.500% due 2021 50 57
5.500% due 2024 6,096 6,177
8.500% due 2025 64 70
7.000% due 2027 373 395
8.500% due 2027 334 367
7.500% due 2028 88 95
7.500% due 2029 150 161
6.500% due 2030 49 51
7.500% due 2030 477 512
7.652% due 2030 (E) 17 17
8.000% due 2030 241 265
8.500% due 2030 475 519
7.000% due 2031 837 883
7.500% due 2031 590 633
8.000% due 2031 469 512
</Table>
Multistrategy Bond Fund 115
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.000% due 2032 506 535
7.500% due 2032 233 250
5.000% due 2033 2,685 2,677
5.500% due 2033 2,372 2,402
6.500% due 2033 578 600
7.000% due 2033 139 147
7.500% due 2033 204 219
3.732% due 2034 (E) 642 652
5.000% due 2034 1,310 1,298
6.000% due 2034 1,554 1,596
Series 1991-1037 Class Z
9.000% due 02/15/21 104 104
Series 1998-191 Class IO
Interest Only Strip
8.000% due 01/01/28 64 13
Series 1998-194 Class IO
Interest Only Strip
6.500% due 04/01/28 391 78
Series 2001-212 Class IO
Interest Only Strip
6.000% due 05/01/31 621 114
Series 2001-215 Class IO
Interest Only Strip
8.000% due 06/01/31 322 64
Series 2002-2468 Class VC
6.000% due 10/15/27 10 10
Series 2003-2564 Class IM
Interest Only Strip
5.000% due 09/15/14 1,413 121
Series 2003-2591 Class IQ
Interest Only Strip
5.000% due 06/15/17 2,267 311
Series 2003-2613 Class DI
Interest Only Strip
5.500% due 05/15/27 2,748 196
Series 2003-2632 Class YH
3.500% due 08/15/22 3,310 3,271
Series 2003-2634 Class IO
Interest Only Strip
5.000% due 10/15/27 3,160 344
Series 2003-2644 Class IC
Interest Only Strip
5.000% due 05/15/22 3,655 353
Series 2003-2649 Class IM
Interest Only Strip
7.000% due 07/15/33 785 137
Series 2004-2727 Class PM
4.500% due 01/15/34 535 497
Series 2004-2859 Class PI
Interest Only Strip
5.500% due 05/15/24 1,913 211
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-2878 Class IA
Interest Only Strip
5.500% due 04/15/24 1,205 125
Series 2004-2887 Class QI
Interest Only Strip
5.500% due 02/15/24 1,624 166
Series 2004-2889 Class OE
5.000% due 01/15/30 835 838
Series 2004-2890 Class PC
5.000% due 07/15/30 1,060 1,064
Series 2004-2902 Class LC
5.500% due 12/15/17 770 787
Series 2005-2922 Class IT
Interest Only Strip
5.000% due 07/15/23 1,367 226
Series 2005-2927 Class IG
Interest Only Strip
5.000% due 04/15/23 1,380 223
Series 1999-2129 Class SG
Interest Only Strip
4.000% due 06/17/27 3,262 210
Series 2000-2247 Class S
Interest Only Strip
4.690% due 08/15/30 127 6
Series 2000-2266 Class F
3.260% due 11/15/30 191 192
Series 2002-2463 Class SJ
Interest Only Strip
5.520% due 03/15/32 489 41
GE Capital Commercial Mortgage Corp.
Series 2004-C2 Class A4
4.893% due 03/10/40 3,110 3,124
Ginnie Mae I
30 Year TBA (I)
5.500% 10,035 10,186
6.500% 855 895
11.000% due 2010 53 58
11.500% due 2010 10 12
11.000% due 2013 18 19
10.500% due 2015 60 67
11.000% due 2015 14 16
10.500% due 2016 117 133
10.500% due 2017 37 43
10.000% due 2020 10 11
10.500% due 2021 94 109
10.000% due 2022 105 118
</Table>
116 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
9.500% due 2023 452 501
10.000% due 2025 138 157
7.500% due 2031 93 100
Ginnie Mae II
3.375% due 2023 (E) 191 195
3.750% due 2023 (E) 36 36
4.125% due 2023 (E) 57 58
3.750% due 2024 (E) 248 251
4.125% due 2024 (E) 134 136
4.625% due 2024 (E) 126 129
3.375% due 2025 (E) 547 557
3.750% due 2025 (E) 18 18
4.625% due 2025 (E) 24 24
4.625% due 2026 (E) 117 119
8.500% due 2026 88 95
3.375% due 2027 (E) 213 218
3.750% due 2027 (E) 302 307
4.000% due 2029 920 933
Global Signal Trust (p)
Series 2004-2A Class A
4.232% due 12/15/14 655 645
GMAC Commercial Mortgage Securities, Inc.
Series 1998-C2 Class A2
6.420% due 05/15/35 753 796
Government National Mortgage Association
Series 2002-62 Class B
4.763% due 01/16/25 325 328
Series 2003-5 Class B
4.486% due 10/16/25 795 793
Series 1999-27 Class SE
Interest Only Strip (E)
5.780% due 08/16/29 200 21
Series 1999-44 Class SA
Interest Only Strip (E)
6.070% due 12/16/29 341 38
Series 2001-46 Class SA
Interest Only Strip (E)
5.100% due 09/16/31 99 5
Government National Mortgage Association I
30 Year TBA (I)
5.000% 3,860 3,852
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 1,575 1,629
GSMPS Mortgage Loan Trust (p)
Series 1998-3 Class A
7.750% due 09/19/27 243 260
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 1999-3 Class A
8.000% due 08/19/29 470 506
Series 2005-RP1 Class 1A3
8.000% due 01/25/35 732 791
Series 2005-RP1 Class 1A4
8.500% due 01/25/35 432 476
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.454% due 06/25/34 2,574 2,540
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C1 Class A3
5.376% due 07/12/37 655 682
Series 2003-C1 Class A2
4.985% due 01/12/37 1,101 1,120
Series 2004-LN2 Class A1
4.475% due 07/15/41 1,918 1,909
Series 2005-CB11 Class A3
5.197% due 08/12/37 2,000 2,058
Series 2004-FL1A Class A1 (E)(p)
2.760% due 04/16/19 1,140 1,141
LB-UBS Commercial Mortgage Trust
Series 2004-C4 Class A3
4.987% due 06/15/29 3,135 3,229
Series 2005-C2 Class A2
4.821% due 04/15/30 785 796
Mastr Alternative Loans Trust
Series 2003-9 Class 1A1
5.500% due 12/25/18 603 618
Series 2003-6 Class 3A1
8.000% due 09/25/33 259 270
Series 2005-3 Class 7A1
6.000% due 04/25/35 1,115 1,139
Mastr Reperforming Loan Trust (p)
Series 2005-1 Class 1A5
8.000% due 08/25/34 1,086 1,164
Mellon Residential Funding Corp. (E)
Series 2000-TBC2 Class A1
3.050% due 06/15/30 1,640 1,636
Merrill Lynch Mortgage Trust
4.351% due 11/15/10 180 180
4.330% due 11/25/10 185 185
Series 2004-BPC1 Class A3
4.467% due 10/12/41 365 361
Series 2004-MKB1 Class A2
4.353% due 02/12/42 1,835 1,827
</Table>
Multistrategy Bond Fund 117
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-MKB2 Class A4
5.204% due 09/12/42 850 869
Series 2002-MW1 Class J (p)
5.695% due 07/12/34 365 354
Nationslink Funding Corp.
Series 1999-SL Class A4
6.654% due 11/10/30 298 304
Nomura Asset Acceptance Corp.
Series 2004-AP2 Class A2
4.099% due 07/25/34 595 594
Nomura Asset Securities Corp.
Series 1998-D6 Class A1B
6.590% due 03/15/30 725 770
Prime Mortgage Trust
Series 2004-CL1 Class 1A1
6.000% due 02/25/34 433 439
Series 2004-CL1 Class 1A2 (E)
3.250% due 02/25/34 312 313
Series 2004-CL1 Class 2A2 (E)
3.250% due 02/25/19 90 90
Residential Asset Mortgage Products, Inc.
Series 2004-SL1 Class A3
7.000% due 11/25/31 473 485
Series 2004-SL4 Class A3
6.500% due 07/25/32 729 754
SACO I, Inc. (E)(p)
Series 2004-2 Class A2
3.040% due 07/25/19 1,735 1,735
Small Business Administration
Series 2000-P10B Class 1
7.449% due 08/01/10 242 259
Structured Adjustable Rate Mortgage Loan Trust
Series 2004-18 Class 5A
5.500% due 12/25/34 579 586
Structured Asset Securities Corp.
Series 2002-22H Class 1A
6.998% due 11/25/32 182 187
Series 2004-12H Class 1A
6.000% due 05/25/34 720 732
Series 2004-21XS Class 1A3
4.440% due 12/25/34 3,410 3,375
Thornburg Mortgage Securities Trust (E)
Series 2004-2 Class A2
2.800% due 06/25/44 445 445
Vendee Mortgage Trust
Series 2000-1 Class 2G
7.250% due 06/15/09 225 226
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust
Series 2005-C16 Class A2
4.380% due 10/15/41 3,330 3,314
Washington Mutual
Series 2004-CB3 Class 1A
6.000% due 10/25/34 453 466
Series 2004-CB3 Class 4A
6.000% due 10/25/19 1,018 1,055
Series 2002-AR9 Class 1A (E)
3.286% due 08/25/42 1,775 1,786
Series 2003-AR4 Class A7 (E)
3.950% due 05/25/33 180 178
Series 2003-AR9 Class 1A7 (E)
4.058% due 09/25/33 1,104 1,095
Series 2004-AR10 Class A2C (E)
2.948% due 07/25/44 457 458
Series 2004-AR12 Class A3 (E)
2.948% due 10/25/44 1,039 1,048
Series 2005-AR3 Class A1
4.661% due 03/25/35 987 986
Series 2005-AR6 Class B3 (E)
3.690% due 04/25/45 1,370 1,370
Wells Fargo Mortgage Backed Securities Trust
Series 2004-I Class 1A1
3.391% due 07/25/34 1,367 1,368
Series 2003-K Class 2A5 (E)
4.522% due 11/25/33 440 423
Series 2004-DD Class 2A3 (E)
4.545% due 01/25/35 840 838
Series 2004-DD Class 2A6 (E)
4.545% due 01/25/35 1,335 1,353
Series 2004-T Class A1 (E)
3.455% due 09/25/34 937 935
------------
541,217
------------
Municipal Bonds - 1.1%
California State University Revenue Bonds,
weekly demand (u)
5.000% due 11/01/30 435 460
City of Forsyth Montana Revenue Bonds, annual
demand (E)
5.200% due 05/01/33 220 232
</Table>
118 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
City of New York, New York General Obligation
Unlimited, weekly demand
5.000% due 03/01/30 300 311
Colorado Department of Transportation Revenue
Bonds (u)
5.000% due 12/15/13 1,570 1,746
County of Clark Nevada General Obligation
Limited, weekly demand
5.000% due 06/01/32 100 103
Golden State Tobacco Securitization Corp.
Revenue Bonds, weekly demand
5.625% due 06/01/38 415 451
New Jersey Economic Development Authority
Revenue Bonds, weekly demand
5.750% due 06/15/34 745 782
New York State Environmental Facilities Corp.
Revenue Bonds, weekly demand
5.000% due 06/15/33 300 314
New York State Urban Development Corp. Revenue
Bonds, weekly demand (u)
5.250% due 03/15/34 540 577
Puerto Rico Public Buildings Authority Revenue
Bonds, weekly demand
5.250% due 07/01/33 1,010 1,075
Sales Tax Asset Receivables Corp. Revenue Bonds,
weekly demand (u)
5.250% due 10/15/27 690 752
State of California General Obligation
Unlimited, weekly demand
5.250% due 07/01/13 590 660
5.000% due 02/01/33 370 382
State of Illinois General Obligation Unlimited
5.100% due 06/01/33 480 473
State of Oregon General Obligation Unlimited
5.892% due 06/01/27 555 607
Tobacco Settlement Financing Corp. Revenue
Bonds, weekly demand
5.750% due 06/01/32 2,700 2,698
University of Illinois Revenue Bonds, weekly
demand (u)
5.000% due 04/01/29 4,700 4,920
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
West Virginia Economic Development Authority
Revenue Bonds
5.370% due 07/01/20 (u) 200 207
6.070% due 07/01/26 655 708
------------
17,458
------------
Non-US Bonds - 2.0%
Canada Housing Trust No. 1
3.750% due 03/15/10 CAD 1,548 1,230
Canadian Government Bond
5.750% due 06/01/33 CAD 400 376
3.000% due 12/01/36 CAD 200 197
Deutsche Bundesrepublik
5.000% due 07/04/11 EUR 1,097 1,570
5.625% due 01/04/28 EUR 400 646
5.500% due 01/04/31 EUR 700 1,124
4.750% due 07/04/34 EUR 700 1,022
France Government Bond OAT
5.750% due 10/25/32 EUR 1,600 2,671
4.750% due 04/25/35 EUR 1,200 1,750
4.000% due 04/25/55 EUR 300 386
Inter-American Development Bank
1.900% due 07/08/09 JPY 222,000 2,263
Italy Buoni Poliennali Del Tesoro
4.250% due 02/01/15 EUR 2,045 2,785
Norway Government Bond
5.000% due 05/15/15 DKK 17,246 3,005
Poland Government Bond
6.000% due 05/24/09 PLN 1,284 391
Russia Paris Club Participant (p)
2.025% due 08/20/20 JPY 98,490 859
Spain Government Bond
5.750% due 07/30/32 EUR 600 1,000
4.200% due 01/31/37 EUR 300 400
Sweden Government Bond
5.000% due 12/01/20 SEK 9,445 1,565
United Kingdom Gilt
5.750% due 12/07/09 EUR 2,800 5,615
8.000% due 09/27/13 EUR 675 1,598
8.000% due 06/07/21 EUR 598 1,590
------------
32,043
------------
Registered Investment Company Fund - 0.0%
Pacific Investment Management Co. Series High
Yield Portfolio Institutional 19,535 160
------------
</Table>
Multistrategy Bond Fund 119
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Government Agencies - 1.1%
Fannie Mae
2.925% due 09/22/06 (E) 2,000 1,998
3.875% due 02/15/10 (N) 3,405 3,358
5.250% due 08/01/12 1,565 1,622
4.375% due 03/15/13 (N) 1,270 1,264
5.000% due 04/15/15 (N) 430 444
Zero coupon due 10/09/19 1,290 605
Financing Corp.
Principal Only Strip
Zero Coupon due 08/03/18 1,665 883
Zero Coupon due 12/06/18 385 200
Zero Coupon due 04/05/19 1,445 737
Zero Coupon due 09/26/19 990 492
Freddie Mac
2.750% due 03/15/08 (N) 1,060 1,026
4.000% due 12/15/09 (N) 3,445 3,424
5.125% due 11/07/13 1,700 1,705
Residual Funding
Principal Only Strip (N)
Zero Coupon due 10/15/20 400 191
Small Business Administration Participation
Certificates
5.520% due 06/01/24 393 406
------------
18,355
------------
United States Government Treasuries - 19.8%
United States Treasury Inflation Indexed Bonds
(N)
3.375% due 01/15/07 744 781
3.875% due 01/15/09 5,028 5,556
4.250% due 01/15/10 684 782
0.875% due 04/15/10 9,358 9,231
3.500% due 01/15/11 1,102 1,240
3.375% due 01/15/12 216 244
3.000% due 07/15/12 6,271 6,976
1.875% due 07/15/13 2,610 2,691
2.000% due 01/15/14 415 431
2.000% due 07/15/14 8,871 9,206
1.625% due 01/15/15 6,352 6,370
2.375% due 01/15/25 7,060 7,711
3.625% due 04/15/28 474 634
United States Treasury Notes
4.625% due 05/15/06 (N) 620 628
3.500% due 11/15/06 (N) 23,400 23,384
3.000% due 12/31/06 5,745 5,690
3.375% due 02/28/07 (N) 625 622
3.125% due 05/15/07 (N) 28,250 27,959
4.375% due 05/15/07 (N) 11,125 11,282
3.500% due 12/15/09 (N) 32,005 31,494
6.500% due 02/15/10 (N) 7,750 8,627
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
4.000% due 03/15/10 (N) 485 487
4.000% due 04/15/10 (N) 2,440 2,451
5.000% due 08/15/11 (N) 1,000 1,056
3.875% due 02/15/13 (N) 13,350 13,172
4.250% due 08/15/13 (N) 34,225 34,501
4.750% due 05/15/14 (N) 22,222 23,165
4.000% due 02/15/15 (N) 7,220 7,103
8.750% due 05/15/17 (N) 4,710 6,629
8.125% due 08/15/19 (N) 12,825 17,715
7.625% due 02/15/25 (N) 2,500 3,474
6.000% due 02/15/26 (N) 15,120 17,891
6.375% due 08/15/27 (N) 4,175 5,190
5.250% due 11/15/28 (N) 3,900 4,254
6.125% due 08/15/29 (N) 10,375 12,662
5.375% due 02/15/31 (N)(sec.) 7,420 8,381
United States Treasury
Principal Only Strip (N)
Zero Coupon due 02/15/25 7,750 3,049
Zero Coupon due 02/15/27 7,750 2,787
------------
325,506
------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,350,651) 1,367,638
------------
PREFERRED STOCKS - 0.1%
Financial Services - 0.1%
DG Funding Trust (p) 191 2,065
------------
Other Energy - 0.0%
Nexen, Inc. 12,590 331
------------
TOTAL PREFERRED STOCKS
(cost $2,328) 2,396
------------
WARRANTS & RIGHTS - 0.0%
Materials & Processing - 0.0%
Solutia, Inc. 2009 Warrants (AE)(p) 850 --
------------
Miscellaneous - 0.0%
Mexico Government International Bond Value
Recovery Rights (AE)
Series C 5,900,000 35
Series D 5,887,000 146
Series E 3,950,000 89
------------
270
------------
</Table>
120 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Utilities - 0.0%
GT Group Telecom, Inc. 2010 Warrants (AE)(p) 676 --
------------
TOTAL WARRANTS & RIGHTS
(cost $211) 270
------------
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Eurodollar Futures
Sep 2005 94.75 Put (110) 26,056 1
Dec 2005 93.75 Put (140) 32,813 1
------------
TOTAL OPTIONS PURCHASED
(cost $3) 2
------------
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
SHORT-TERM INVESTMENTS - 34.8%
Ares Leveraged Investment Fund, LP (E)(p)
6.800% due 10/31/05 930 930
Barclays US Funding, LLC (c)(z)
2.665% due 05/02/05 1,800 1,800
2.770% due 05/09/05 12,300 12,292
2.935% due 05/20/05 600 599
Bombardier Capital, Inc. (E)(p)
5.100% due 05/30/05 1,090 1,090
CBA (DE) Finance Discount Note (c)(z)
2.745% due 05/17/05 11,900 11,885
Citibank New York Commercial Paper (z)
3.130% due 07/29/05 4,000 4,000
Comcast Corp. (c)(z)
3.190% due 05/18/05 400 399
CSX Corp.
2.750% due 02/15/06 170 168
Danske Corp. Discount Notes (z)
2.650% due 05/23/05 (c) 11,900 11,881
2.725% due 06/06/05 (c) 1,600 1,596
3.020% due 07/15/05 700 694
Delta Air Lines, Inc.
Series 00-1
7.779% due 11/18/05 1 1
DNB Nor Bank ASA (c)(z)
2.680% due 05/09/05 6,800 6,796
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae Discount Notes (z)
2.490% due 05/04/05 (c) 10,600 10,598
2.645% due 06/01/05 (c) 100 100
2.674% due 06/13/05 (c) 1,900 1,894
2.875% due 06/27/05 (c) 1,400 1,394
2.960% due 06/29/05 (c) 3,900 3,881
2.943% due 07/06/05 11,400 11,316
2.955% due 07/06/05 3,000 2,978
2.784% due 07/13/05 2,100 2,084
2.970% due 07/18/05 1,400 1,389
2.988% due 07/20/05 (N) 10,100 10,024
3.010% due 07/27/05 3,400 3,374
Federal Home Loan Bank Discount Notes (c)(z)
2.710% due 05/11/05 200 200
2.885% due 05/25/05 13,400 13,374
2.838% due 06/10/05 29,900 29,805
Ford Motor Credit Co.
2.520% due 08/26/05 (z) 300 296
7.600% due 08/01/05 700 705
6.875% due 02/01/06 (N) 100 101
France Telecom SA (N)
7.450% due 03/01/06 1,420 1,461
Frank Russell Investment Company Money Market
Fund 262,716,000 262,716
Freddie Mac Discount Notes (z)
2.772% due 05/31/05 (c) 2,750 2,744
2.790% due 05/31/05 (c) 9,300 9,278
2.687% due 06/15/05 (c) 1,000 997
3.000% due 07/26/05 6,100 6,053
2.720% due 05/04/05 (c) 1,600 1,600
2.720% due 05/05/05 (c) 8,800 8,797
2.670% due 05/27/05 (c) 1,000 998
2.815% due 06/07/05 (c) 4,100 4,088
2.665% due 06/13/05 (c) 2,100 2,093
2.710% due 06/17/05 (c) 100 100
2.690% due 06/20/05 (c) 800 797
2.890% due 07/12/05 100 99
2.939% due 08/01/05 100 99
2.995% due 08/09/05 11,400 11,301
General Electric Capital Corp. Discount Note
(c)(z)
2.970% due 06/20/05 12,800 12,748
General Motors Acceptance Corp.
7.500% due 07/15/05 1,300 1,306
</Table>
Multistrategy Bond Fund 121
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GTE Hawaiian Telephone Co.
Series A
7.000% due 02/01/06 630 634
HBOS Treasury Services, PLC (z)
2.715% due 05/17/05 (c) 2,200 2,197
3.080% due 07/27/05 10,000 9,922
Lone Star Industries (p)
8.850% due 06/15/05 655 660
Niagara Mohawk Power Corp.
Series F
7.625% due 10/01/05 510 519
Nisource Finance Corp.
7.625% due 11/15/05 315 321
Power Contract Financing LLC (p)
5.200% due 02/01/06 510 514
Rabobank USA Financial Corp. (c)(z)
2.890% due 05/02/05 7,200 7,198
Santander Financial Issuances
6.800% due 07/15/05 155 156
Smurfit Capital Funding PLC
6.750% due 11/20/05 1,150 1,150
Spintab Swedish Mortgage (z)
3.080% due 08/11/05 1,600 1,584
Swedbank Forenings (c)(z)
2.710% due 05/31/05 1,200 1,197
UBS Financial Del, LLC (c)(z)
2.910% due 05/03/05 5,700 5,699
2.805% due 05/06/05 2,000 1,999
2.865% due 05/13/05 500 500
2.640% due 05/18/05 2,800 2,797
2.870% due 05/20/05 3,100 3,095
2.670% due 05/25/05 200 200
2.975% due 05/27/05 100 99
2.730% due 06/02/05 300 299
United States Treasury Bills (z)(sec.)
2.690% due 06/02/05 (c) 345 344
2.710% due 06/16/05 (c) 200 199
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
2.745% due 06/16/05 (c) 25 25
2.780% due 06/16/05 (c) 2,035 2,028
2.790% due 07/14/05 100 99
2.883% due 07/14/05 (sec.) 350 347
2.835% due 08/18/05 (N) 31,900 31,583
2.955% due 09/08/05 (N) 1,200 1,185
United States Treasury Notes (N)
2.000% due 08/31/05 1,910 1,904
1.875% due 01/31/06 4,600 4,553
Wachovia Corp. (N)
7.550% due 08/18/05 875 886
Westpac Capital Corp. (c)(z)
2.860% due 06/07/05 12,500 12,463
2.940% due 06/07/05 1,600 1,595
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $572,963) 572,870
------------
OTHER SECURITIES - 24.1%
Frank Russell Investment Company Money Market
Fund (X) 95,559,112 95,559
State Street Securities Lending Quality Trust
Fund (X) 301,076,050 301,076
------------
TOTAL OTHER SECURITIES
(cost $396,635) 396,635
------------
TOTAL INVESTMENTS - 142.2%
(identified cost $2,322,791) 2,339,811
OTHER ASSETS AND LIABILITIES,
NET - (42.2%) (694,649)
------------
NET ASSETS - 100.0% 1,645,162
============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
122 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FUTURES CONTRACTS
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
10 Year Japan Government Bond Futures
expiration date 06/05 (5) 6,701 149
Eurodollar Futures
expiration date 06/05 (8) 1,932 (4)
expiration date 09/05 (456) 109,731 (613)
expiration date 12/05 (392) 94,144 (306)
expiration date 03/06 (98) 23,505 36
expiration date 09/06 (4) 957 (1)
United States Treasury Bonds
expiration date 06/05 (88) 10,106 122
United States Treasury 2 Year Notes
expiration date 06/05 (343) 71,242 (18)
United States Treasury 5 Year Notes
expiration date 06/05 (66) 7,158 46
United States Treasury 10 Year Notes
expiration date 06/05 (1,278) 142,399 2,014
Short Positions
United States Treasury Bonds
expiration date 06/05 (41) 4,710 (69)
United States Treasury 2 Year Notes
expiration date 06/05 (388) 80,589 104
United States Treasury 5 Year Notes
expiration date 06/05 (604) 65,505 (368)
United States Treasury 10 Year Notes
expiration date 06/05 (55) 6,128 (36)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,056
============
</Table>
<Table>
<Caption>
OPTIONS WRITTEN
NOTIONAL MARKET
AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- -----------------------------------------------------------------------------
Eurodollar Futures
June 2005 94.25 (GBP) Put (22) 4,943 --
June 2005 97.75 (EUR) Put (57) 17,925 --
United States Treasury Bonds
May 2005 116.00 Call (14) 1,624 (7)
May 2005 108.00 Put (132) 14,256 (2)
May 2005 111.00 Put (30) 3,330 (3)
United States Treasury Notes
10 Year Futures
May 2005 112.00 Call (31) 3,472 (11)
May 2005 113.00 Call (114) 12,882 (14)
May 2005 114.00 Call (24) 2,736 (1)
May 2005 108.00 Put (159) 17,172 (5)
------------
Total Liability for Options Written (premiums
received $232) (43)
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 123
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 2,762 AUD 3,506 05/27/05 (29)
USD 177 BRL 500 09/08/05 11
USD 177 BRL 500 09/08/05 11
USD 211 BRL 600 09/08/05 14
USD 400 BRL 1,142 09/09/05 28
USD 125 EUR 95 05/27/05 (2)
USD 383 EUR 286 05/27/05 (14)
USD 414 EUR 318 05/20/05 (5)
USD 186 JPY 19,360 05/10/05 (1)
USD 276 JPY 29,039 05/10/05 1
USD 276 JPY 29,041 05/10/05 1
USD 500 JPY 52,815 05/17/05 5
USD 2,315 JPY 243,005 05/20/05 7
USD 342 JPY 36,631 06/13/05 9
USD 681 JPY 71,752 06/13/05 6
USD 5,181 JPY 558,222 06/13/05 164
USD 2,812 JPY 300,000 06/30/05 65
USD 419 PLN 1,230 05/27/05 (50)
AUD 3,506 USD 2,740 05/27/05 8
CAD 709 USD 573 06/09/05 9
BRL 450 USD 170 09/08/05 1
EUR 156 USD 200 05/20/05 (1)
EUR 393 USD 510 05/18/05 4
EUR 3,207 USD 4,147 05/18/05 18
EUR 610 USD 795 05/20/05 9
EUR 3,841 USD 5,031 05/25/05 85
EUR 382 USD 498 05/27/05 6
EUR 2,142 USD 2,879 05/27/05 120
EUR 2,152 USD 2,787 06/30/05 13
GBP 805 USD 1,510 05/27/05 (22)
GBP 812 USD 1,524 05/27/05 (22)
JPY 103,253 USD 981 05/10/05 (4)
JPY 243,005 USD 2,265 05/20/05 (57)
JPY 3,325 USD 31 05/27/05 (1)
NOK 19,311 USD 3,172 05/27/05 110
PLN 1,335 USD 414 05/20/05 13
PLN 1,230 USD 399 05/27/05 30
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions 540
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
124 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INDEX SWAPS
- ----------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NOTIONAL APPRECIATION
FUND RECEIVES COUNTER AMOUNT FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY $ FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ------------------------ -------------- ----------------
Lehman Brothers 1 Month USD LIBOR -
CMBS Index - AAA Goldman Sachs 4,685 BBA minus 0.10% 07/05/05 58
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swaps 58
================
</Table>
<Table>
<Caption>
INTEREST RATE SWAPS
- ------------------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
COUNTER AMOUNT TERMINATION VALUE
PARTY $ FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ---------------------- -------------------- ---------------- ----------------
Bank of America CAD 400 6.000% Three Month LIBOR 12/16/19 2
Barclays GBP 400 5.000% Six Month LIBOR 03/15/32 (22)
Barclays EUR 400 6.000% Six Month LIBOR 03/15/32 48
Goldman JPY 129,100 2.000% Six Month LIBOR 06/15/12 (93)
Goldman JPY 130,000 2.000% Six Month LIBOR 06/15/12 (94)
JP Morgan EUR 1,000 6.000% Six Month LIBOR 06/18/34 168
Merrill Lynch EUR 500 6.000% Six Month LIBOR 06/18/34 84
Morgan Stanley JPY 130,000 2.000% Six Month LIBOR 06/15/12 (93)
UBS JPY 250,000 2.000% Six Month LIBOR 06/15/12 (180)
----------------
Total Market Value of Interest Rate Swaps Premiums Paid (Received) - $1 (180)
================
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 125
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Asset-Backed Securities 7.5
Corporate Bonds and Notes 13.5
International Debt 5.3
Mortgage-Backed Securities 32.9
Municipal Bonds 1.1
Non-US Bonds 2.0
Registered Investment Company Funds --*
United States Government Agencies 1.1
United States Government Treasuries 19.8
Preferred Stocks 0.1
Warrants & Rights --*
Options Purchased --*
Short-Term Investments 34.8
Other Securities 24.1
------------
Total Investments 142.2
Other Assets and Liabilities, Net (42.2)
------------
Net Assets 100.0
============
Futures Contracts 0.1
Options Written --*
Foreign Currency Contracts --*
Index Swaps --*
Interest Rate Swaps --*
* Less than .05%
</Table>
See accompanying notes which are an integral part of the financial statements.
126 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 999.90 $ 1,017.61
Expenses Paid During
Period* $ 7.39 $ 7.45
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.49%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,003.70 $ 1,021.33
Expenses Paid During
Period* $ 3.68 $ 3.71
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.74%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,005.40 $ 1,022.57
Expenses Paid During
Period* $ 2.44 $ 2.46
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.49%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Tax Exempt Bond Fund 127
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 93.8%
Alabama - 1.5%
City of Tuscaloosa Alabama General Obligation Unlimited 340 5.000 02/15/07 353
County of Baldwin Alabama General Obligation Unlimited 545 5.000 02/01/14 600
County of Jefferson Alabama General Obligation Unlimited 500 5.000 04/01/10 542
Courtland Industrial Development Board Revenue Bonds 250 5.000 11/01/13 264
Huntsville Health Care Authority Revenue Bonds 200 5.250 06/01/05 200
Marshall County Health Care Authority Revenue Bonds 160 4.500 01/01/06 161
Mobile County Board of School Commissioners General
Obligation Unlimited, weekly demand 375 5.000 03/01/12 405
Montgomery BMC Special Care Facilities Financing Authority
Revenue Bonds (E) 960 Zero coupon 11/15/15 914
------------
3,439
------------
Alaska - 0.5%
City of Anchorage Alaska General Obligation Unlimited (ae) 500 5.750 12/01/16 566
State of Alaska General Obligation Unlimited 595 5.250 07/15/11 661
------------
1,227
------------
Arizona - 3.3%
Arizona Health Facilities Authority Revenue Bonds 200 4.000 04/01/09 204
Arizona School Facilities Board Certificate of Participation 1,000 5.000 09/01/08 1,062
Arizona State Transportation Board Revenue Bonds 1,500 5.000 07/01/14 1,669
Arizona State Transportation Board Revenue Bonds, weekly
demand 500 5.250 07/01/12 554
Maricopa County Pollution Control Corp. Revenue Bonds,
annual demand (E) 1,000 4.000 01/01/38 1,010
Maricopa County Pollution Control Corp. Revenue Bonds,
annual demand (E) 200 2.900 06/01/35 195
Mesa Arizona General Obligation Unlimited (u)(ae) 1,000 5.000 07/01/17 1,078
Phoenix Civic Improvement Corp. Revenue Bonds 250 5.500 07/01/07 263
Phoenix Civic Plaza Building Corp. Revenue Bonds, weekly
demand 1,000 5.900 07/01/10 1,015
State of Arizona Certificate of Participation 200 5.500 05/01/10 222
University of Arizona Revenue Bonds 430 5.000 06/01/06 440
------------
7,712
------------
Arkansas - 0.3%
University of Arkansas Revenue Bond Series A 750 5.000 11/01/10 819
------------
California - 9.9%
Abag Finance Authority for Nonprofit Corps. Certificate of
Participation, weekly demand 600 5.700 08/15/14 643
California Health Facilities Financing Authority Revenue
Bonds, annual demand (E) 1,500 4.950 07/01/26 1,579
California State Department of Water Resources Revenue Bonds 250 5.500 05/01/10 275
California State Department of Water Resources Revenue Bonds 500 5.250 05/01/11 555
California State Department of Water Resources Revenue Bonds 1,000 5.250 05/01/12 1,117
California State Public Works Board Revenue Bonds 630 5.000 06/01/10 678
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 1,000 5.200 12/01/29 1,059
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 1,250 2.300 04/01/33 1,226
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 1,100 2.625 04/01/34 1,078
</Table>
128 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 500 3.450 04/01/35 493
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 900 4.350 11/01/36 920
Golden State Tobacco Securitization Corp. Revenue Bonds,
weekly demand 665 5.250 06/01/16 666
Golden State Tobacco Securitization Corp. Revenue Bonds,
weekly demand 405 5.500 06/01/18 424
Golden State Tobacco Securitization Corp. Revenue Bonds,
weekly demand 920 5.000 06/01/21 927
Kings River Conservation District Certificate of
Participation 850 5.000 05/01/15 906
Southern California Public Power Authority Revenue Bonds 405 5.375 01/01/12 455
State of California General Obligation Unlimited 1,000 6.600 02/01/10 1,143
State of California General Obligation Unlimited 1,000 5.000 10/01/11 1,091
State of California General Obligation Unlimited 1,000 5.000 02/01/12 1,089
State of California General Obligation Unlimited 1,050 5.000 02/01/12 1,144
State of California General Obligation Unlimited 1,000 5.250 07/01/12 1,116
State of California General Obligation Unlimited 1,000 5.250 07/01/14 1,120
State of California General Obligation Unlimited, annual
demand (E) 1,000 3.500 07/01/23 1,013
State of California General Obligation Unlimited, annual
demand (E) 255 5.000 07/01/23 270
State of California General Obligation Unlimited, weekly
demand 500 5.250 02/01/14 553
University of California Revenue Bonds 1,500 5.000 05/15/13 1,665
------------
23,205
------------
Colorado - 1.2%
Colorado Department of Transportation Revenue Bonds 265 6.000 06/15/08 289
Colorado Health Facilities Authority Revenue Bonds 205 5.000 09/01/10 216
Colorado Health Facilities Authority Revenue Bonds 210 5.000 09/01/11 221
Colorado Health Facilities Authority Revenue Bonds, annual
demand (E) 265 3.750 06/01/34 264
Colorado Housing & Finance Authority Revenue Bonds (E) 80 6.300 08/01/16 83
Colorado Housing & Finance Authority Revenue Bonds,
semi-annual demand 110 6.300 08/01/12 115
Colorado Housing & Finance Authority Revenue Bonds, weekly
demand 80 7.250 04/01/10 83
Colorado Housing & Finance Authority Revenue Bonds, weekly
demand 50 6.700 10/01/16 51
Highlands Ranch Metropolitan District No. 1 General
Obligation Unlimited 750 5.750 09/01/12 858
Jefferson County School District R-001 General Obligation
Unlimited (u) 500 5.000 12/15/14 556
------------
2,736
------------
Delaware - 0.4%
Delaware State Economic Development Authority Revenue Bonds 630 6.500 01/01/08 665
Delaware State Economic Development Authority Revenue Bonds,
annual demand (E) 250 4.900 05/01/26 269
------------
934
------------
District of Columbia - 0.9%
District of Columbia Certificate of Participation 500 5.250 01/01/08 528
District of Columbia General Obligation Unlimited 70 5.500 06/01/09 77
District of Columbia General Obligation Unlimited 930 5.500 06/01/09 1,015
District of Columbia Revenue Bonds 400 Zero coupon 07/01/05 398
District of Columbia TOB Settlement Financing Corp. Revenue
Bonds 200 5.200 05/15/08 207
------------
2,225
------------
Florida - 5.3%
City of Tallahassee Florida Revenue Bonds 500 5.000 10/01/11 550
County of Escambia Florida Revenue Bonds, weekly demand 740 5.250 10/01/14 820
County of Hillsborough Florida Revenue Bonds, semi-annual
demand 100 6.200 12/01/08 105
</Table>
Tax Exempt Bond Fund 129
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Escambia County Health Facilities Authority Revenue Bonds 1,000 5.000 11/15/06 1,031
Florida State Board of Education General Obligation
Unlimited 1,000 6.500 06/01/07 1,073
Florida State Division Of Bond Finance Revenue Bonds 500 5.750 07/01/06 517
Florida State Division Of Bond Finance Revenue Bonds, weekly
demand (u) 1,600 5.250 07/01/13 1,731
Florida Water Pollution Control Financing Corp. Revenue
Bonds, weekly demand 500 5.500 01/15/12 559
Hillsborough County Educational Facilities Authority Revenue
Bonds, semi-annual demand 870 5.750 04/01/18 943
Martin County Health Facilities Authority Revenue Bonds 200 5.250 11/15/08 207
Miami-Dade County Educational Facilities Authority Revenue
Bonds, weekly demand 1,500 5.000 04/01/17 1,623
North Miami Florida Revenue Bonds 1,325 5.000 04/01/10 1,434
Orlando Utilities Commission Revenue Bonds 1,225 5.900 10/01/08 1,341
State of Florida General Obligation Unlimited (ae) 500 5.800 07/01/18 508
------------
12,442
------------
Georgia - 2.9%
City of Atlanta Georgia Revenue Bonds 1,000 5.500 11/01/14 1,151
Columbia County Georgia Revenue Bonds 750 6.000 06/01/20 910
Dalton Georgia Revenue Bonds 500 5.750 01/01/09 548
Fayette County School District General Obligation Unlimited
(u)(E) 290 Zero coupon 03/01/14 235
Fayette County School District General Obligation Unlimited
(u) 145 1.000 03/01/16 116
Georgia Municipal Electric Authority Revenue Bonds 850 6.250 01/01/17 1,042
Georgia State Road & Tollway Authority Revenue Bonds 590 5.250 03/01/11 654
Gwinnett County Water & Sewer Authority Revenue Bonds,
weekly demand 265 5.200 08/01/14 284
Private Colleges & Universities Authority Revenue Bonds 70 6.000 06/01/05 70
State of Georgia General Obligation Unlimited 1,000 5.750 08/01/08 1,088
State of Georgia General Obligation Unlimited 600 6.500 12/01/09 689
------------
6,787
------------
Hawaii - 1.1%
Honolulu City & County Hawaii General Obligation Unlimited 1,000 5.000 07/01/14 1,110
Kauai County Hawaii General Obligation Unlimited (ae) 375 6.250 08/01/19 432
State of Hawaii General Obligation Unlimited 1,000 5.750 01/01/10 1,114
------------
2,656
------------
Idaho - 0.4%
Idaho Health Facilities Authority Revenue Bonds, weekly
demand (E) 900 2.950 07/01/30 900
------------
Illinois - 5.7%
Chicago Metropolitan Water Reclamation District-Greater
Chicago General Obligation Unlimited 2,000 6.500 12/01/07 2,177
City of Chicago Illinois General Obligation Unlimited,
weekly demand 750 6.000 01/01/11 845
City of Chicago Illinois Tax Allocation 700 Zero coupon 12/01/07 645
Cook County Community Consolidated School District No.
15-Palatine General Obligation, Ltd. 1,000 Zero coupon 12/01/11 778
Cook County Community Consolidated School District No.
15-Palatine General Obligation, Ltd. 2,235 Zero coupon 12/01/13 1,575
Illinois Educational Facilities Authority Revenue Bonds,
annual demand 450 3.350 03/01/34 443
Illinois Finance Authority Revenue Bonds (ae) 420 7.375 07/01/21 450
Illinois Finance Authority Revenue Bonds 400 Zero coupon 01/01/10 338
</Table>
130 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Illinois Finance Authority Revenue Bonds 670 5.500 10/01/12 742
Illinois Finance Authority Revenue Bonds 750 5.000 06/01/14 789
Illinois Health Facilities Authority Revenue Bonds 240 5.500 08/01/07 253
Illinois Health Facilities Authority Revenue Bonds 545 6.000 05/15/10 583
Illinois Housing Development Authority Revenue Bonds (E) 1,000 2.790 08/01/17 998
Lake County Community Unit School District No. 116-Round
Lake General Obligation Unlimited 400 7.600 02/01/14 518
Lake County Forest Preservation District General Obligation
Unlimited 1,215 Zero coupon 12/01/07 1,118
State of Illinois Revenue Bonds 1,000 5.000 06/15/08 1,060
------------
13,312
------------
Indiana - 3.0%
Allen County Jail Building Corp. Revenue Bonds 300 5.750 10/01/09 333
City of Indianapolis Indiana Revenue Bonds 450 5.000 10/01/06 463
Columbus Multi School Building Corp. Indiana Revenue Bonds 450 5.000 01/10/10 486
Dyer Redevelopment Authority Economic Development Lease Rent
Revenue Bonds 260 5.000 01/15/11 280
Franklin Township School Building Corp./Marion County
Indiana Revenue Bonds 500 5.750 07/15/06 518
Indiana Health Facility Financing Authority 560 5.375 12/01/08 601
Indiana Health Facility Financing Authority Revenue Bonds
(E)(ae) 1,255 5.000 11/01/26 1,307
Indiana Health Facility Financing Authority Revenue Bonds 1,000 5.500 11/15/10 1,099
Indiana Health Facility Financing Authority Revenue Bonds 1,000 5.000 11/01/11 1,079
Indiana Housing Finance Authority Revenue Bonds, weekly
demand 130 6.600 07/01/05 131
Indiana University Revenue Bonds, weekly demand 500 5.750 08/01/10 559
Lawrenceburg Indiana Revenue Bonds, annual demand (E) 225 2.625 10/01/19 223
------------
7,079
------------
Iowa - 0.1%
Iowa Finance Authority Revenue Bonds 290 6.000 07/01/10 320
------------
Kansas - 1.1%
Butler & Sedgwick Counties Unified School District No. 385
Andover General Obligation Unlimited 500 5.000 09/01/09 540
City of Burlington Kansas Revenue Bonds, annual demand (E) 750 2.650 06/01/31 749
Kansas Development Finance Authority Revenue Bonds 150 5.000 08/01/10 163
Kansas Development Finance Authority Revenue Bonds 1,000 5.000 08/01/13 1,105
------------
2,557
------------
Louisiana - 0.5%
Jefferson Parish Hospital Service District No. 2 Revenue
Bonds, annual demand 1,000 5.250 12/01/15 1,016
Louisiana Energy & Power Authority Revenue Bonds 200 5.500 01/01/08 213
------------
1,229
------------
Massachusetts - 2.5%
Commonwealth of Massachusetts General Obligation, Ltd. 1,000 5.500 10/01/16 1,147
Commonwealth of Massachusetts General Obligation, Ltd. (ae) 430 6.000 02/01/11 485
Commonwealth of Massachusetts General Obligation, Ltd. (ae) 1,000 5.750 10/01/19 1,123
Commonwealth of Massachusetts General Obligation, Ltd. (ae) 1,000 5.250 01/01/22 1,113
Massachusetts Bay Transportation Authority Revenue Bonds 500 6.000 03/01/06 513
</Table>
Tax Exempt Bond Fund 131
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Massachusetts Development Finance Agency Revenue Bonds 360 5.750 08/01/05 362
Massachusetts Development Finance Agency Revenue Bonds 165 5.125 12/01/11 172
Massachusetts Development Finance Agency Revenue Bonds 50 5.150 10/01/14 52
Massachusetts Health & Educational Facilities Authority
Revenue Bonds 110 4.500 10/01/05 110
Massachusetts Health & Educational Facilities Authority
Revenue Bonds 100 5.000 07/01/07 103
Massachusetts Health & Educational Facilities Authority
Revenue Bonds 145 5.000 07/01/09 152
Massachusetts State Port Authority Revenue Bonds 200 6.000 07/01/06 207
Massachusetts State Port Authority Revenue Bonds 125 5.250 07/01/07 131
Massachusetts State Port Authority Revenue Bonds 150 5.750 07/01/10 166
------------
5,836
------------
Michigan - 1.8%
Bishop International Airport Authority Revenue Bonds 750 5.000 12/01/10 786
Ferndale Michigan General Obligation Unlimited, semi-annual
demand 250 5.000 04/01/15 272
Kent Hospital Finance Authority Revenue Bonds 250 5.250 01/15/07 258
Manistee Area Public Schools General Obligation Unlimited 235 6.000 05/01/08 255
Michigan Municipal Bond Authority Revenue Bonds 665 5.000 05/01/13 735
Michigan Municipal Bond Authority Revenue Bonds (ae) 500 5.750 10/01/11 570
Michigan State Hospital Finance Authority Revenue Bonds 250 5.000 05/15/07 260
Woodhaven Brownstown School District General Obligation
Unlimited, weekly demand (u) 900 5.125 05/01/13 991
------------
4,127
------------
Minnesota - 0.4%
City of State Cloud Minnesota Revenue Bonds 340 5.500 05/01/06 348
State of Minnesota General Obligation Unlimited 500 6.000 08/01/05 504
Virginia Housing & Redevelopment Authority Revenue Bonds 40 5.250 10/01/12 42
Virginia Housing & Redevelopment Authority Revenue Bonds 95 5.250 10/01/13 100
------------
994
------------
Mississippi - 0.1%
State of Mississippi General Obligation Unlimited 300 5.375 07/01/17 343
------------
Missouri - 0.4%
Jackson County Reorganized School District No. 7 General
Obligation Unlimited 250 4.375 03/01/11 265
Joplin Missouri Industrial Development Authority Health
Revenue Bonds 270 5.500 02/15/13 294
Missouri Housing Development Commission Revenue Bonds 195 4.350 12/01/07 198
Southeast Missouri State University Revenue Bonds 250 5.625 04/01/10 278
------------
1,035
------------
Montana - 0.5%
Montana State Board of Regents Revenue Bonds 500 4.750 05/15/13 543
Montana State Board of Regents Revenue Bonds 500 4.750 05/15/14 543
------------
1,086
------------
Nevada - 1.4%
Clark County School District General Obligation Limited
(ae)(E) 330 5.250 06/15/10 359
Clark County School District General Obligation Limited,
weekly demand (E) 670 5.250 06/15/10 724
Henderson Nevada General Obligation, Ltd. 475 6.000 06/01/06 491
</Table>
132 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Las Vegas Valley Water District General Obligation, Ltd.,
weekly demand (u) 1,050 5.250 06/01/14 1,169
Truckee Meadows Water Authority Revenue Bonds 500 5.500 07/01/11 559
------------
3,302
------------
New Hampshire - 0.3%
New Hampshire Health & Education Facilities Authority
Revenue Bonds 325 4.600 10/01/07 333
New Hampshire Health & Education Facilities Authority
Revenue Bonds 350 5.000 07/01/14 371
------------
704
------------
New Jersey - 4.5%
New Jersey Economic Development Authority Revenue Bonds 1,000 5.000 09/01/12 1,087
New Jersey Economic Development Authority Revenue Bonds 1,000 5.000 06/15/12 1,094
New Jersey Economic Development Authority Revenue Bonds (E) 1,020 5.375 06/15/15 1,115
New Jersey State Educational Facilities Authority Revenue
Bonds 1,000 5.750 09/01/10 1,120
New Jersey State Housing & Mortgage Finance Agency Revenue
Bonds 1,000 4.300 11/01/07 1,029
New Jersey State Transit Corp. Certificate of Participation 1,350 5.500 09/15/07 1,425
New Jersey State Turnpike Authority Revenue Bonds 500 5.500 01/01/09 543
New Jersey Transportation Trust Fund Authority Revenue Bonds
(u) 1,000 5.250 12/15/14 1,122
New Jersey Transportation Trust Fund Authority Revenue Bonds 1,000 6.000 06/15/06 1,034
New Jersey Transportation Trust Fund Authority Revenue Bonds 500 6.000 06/15/07 533
Tobacco Settlement Financing Corp. Revenue Bonds, weekly
demand 500 4.375 06/01/19 503
------------
10,605
------------
New Mexico - 1.8%
Farmington New Mexico Revenue Bonds, annual demand (E)(u) 2,965 3.550 04/01/29 2,987
New Mexico Finance Authority Revenue Bonds, weekly demand 500 5.000 04/01/15 546
New Mexico State Highway Commission Revenue Bonds 570 5.500 06/15/06 587
------------
4,120
------------
New York - 9.4%
City of New York New York General Obligation Unlimited 1,000 5.500 08/15/08 1,073
City of New York New York General Obligation Unlimited 1,000 5.500 08/01/09 1,088
City of New York New York General Obligation Unlimited 250 5.250 12/01/09 270
City of New York New York General Obligation Unlimited 730 5.000 06/01/10 786
City of New York New York General Obligation Unlimited 500 5.000 08/01/11 541
City of New York New York General Obligation Unlimited 850 5.000 03/01/12 921
City of New York New York General Obligation Unlimited 750 5.000 11/01/12 813
City of New York New York General Obligation Unlimited 470 5.000 08/01/13 510
City of New York New York General Obligation Unlimited,
weekly demand 130 5.000 08/01/10 139
City of New York New York General Obligation Unlimited,
weekly demand 125 5.750 08/01/11 140
City of New York New York General Obligation Unlimited,
weekly demand 235 5.250 11/01/12 259
Long Island Power Authority Revenue Bonds 250 5.000 06/01/09 265
Metropolitan Transportation Authority Revenue Bonds 500 5.300 07/01/05 502
New York City Municipal Water Finance Authority Revenue
Bonds 1,500 5.250 06/15/12 1,669
New York Local Government Assistance Corp. Revenue Bonds,
semi-annual demand (u) 1,000 5.200 04/01/12 1,051
New York State Dormitory Authority Revenue Bonds 1,415 7.000 07/01/09 1,525
New York State Dormitory Authority Revenue Bonds (u) 960 5.000 02/15/13 1,053
New York State Dormitory Authority Revenue Bonds (u) 1,000 5.000 07/01/15 1,113
New York State Dormitory Authority Revenue Bonds, annual
demand (E) 2,000 5.250 11/15/23 2,197
New York State Dormitory Authority Revenue Bonds, annual
demand (E) 650 5.250 11/15/29 722
New York State Environmental Facilities Corp. Revenue Bonds 1,000 6.000 06/15/12 1,166
</Table>
Tax Exempt Bond Fund 133
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
New York State Urban Development Corp. Revenue Bonds, annual
demand 500 5.250 01/01/21 534
New York State Urban Development Corp. Revenue Bonds, weekly
demand 225 5.125 07/01/15 248
Niagara County Industrial Development Agency Revenue Bonds,
annual demand (E) 350 5.550 11/15/24 372
Saratoga County Industrial Development Agency Revenue Bonds 80 5.000 12/01/14 85
Suffolk County Judicial Facilities Agency Revenue Bonds 500 5.500 04/15/09 546
Tobacco Settlement Financing Authority Revenue Bonds, weekly
demand 1,000 5.500 06/01/10 1,002
Tobacco Settlement Financing Authority Revenue Bonds, weekly
demand 300 5.250 06/01/13 319
TSASC, Inc. Revenue Bonds 1,000 5.500 07/15/13 1,054
------------
21,963
------------
North Carolina - 1.6%
North Carolina Eastern Municipal Power Agency Revenue Bonds 250 5.500 01/01/10 268
North Carolina Municipal Power Agency No. 1 Catawba Revenue
Bonds 200 5.500 01/01/13 222
North Carolina Municipal Power Agency No. 1 Catawba Revenue
Bonds, semi-annual demand 1,500 6.000 01/01/12 1,729
Onslow Water & Sewer Authority Revenue Bonds, annual demand 1,425 5.000 06/01/17 1,549
------------
3,768
------------
Ohio - 2.7%
Columbus Ohio General Obligation, Ltd. 585 5.250 01/01/11 647
County of Hamilton Ohio Revenue Bonds 250 6.000 12/01/05 255
Jackson Local School District Stark & Summit Counties
General Obligation Unlimited 500 Zero coupon 12/01/07 462
Ohio State Building Authority Revenue Bonds 500 6.000 04/01/06 515
Ohio State Building Authority Revenue Bonds 575 5.750 04/01/08 620
Ohio State Higher Educational Facility Commission Revenue
Bonds 1,000 5.000 12/01/09 1,074
State of Ohio General Obligation Unlimited 550 5.500 05/01/08 590
State of Ohio General Obligation Unlimited 1,500 5.000 02/01/10 1,624
Steubenville Ohio Revenue Bonds 280 5.700 10/01/10 304
University of Cincinnati Revenue Bonds 300 5.500 06/01/08 322
------------
6,413
------------
Oklahoma - 0.3%
Grand River Dam Authority Revenue Bonds 250 5.000 06/01/12 275
Oklahoma Development Finance Authority Revenue Bonds 275 5.000 10/01/13 288
Oklahoma Housing Finance Agency Revenue Bonds, weekly demand 115 7.600 09/01/15 123
------------
686
------------
Oregon - 2.3%
Clackamas County School Distrist No. 62C Oregon City General
Obligation Unlimited (ae) 435 6.000 06/15/11 494
Deschutes County Administrative School District No. 1
General Obligation Unlimited (u) 1,000 5.000 06/15/10 1,085
Oregon State Department of Administrative Services Revenue
Bonds 1,000 5.000 09/01/08 1,064
Oregon State Department of Administrative Services Revenue
Bonds, weekly demand 750 5.250 04/01/10 816
Oregon State Department of Transportation Revenue Bonds 1,000 5.000 11/15/13 1,110
State of Oregon General Obligation, Ltd., weekly demand 895 5.700 10/01/32 921
------------
5,490
------------
</Table>
134 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 3.5%
Allegheny County Port Authority Revenue Bonds, weekly demand 250 5.500 03/01/17 276
Berks County Vocational Technical School Authority Revenue
Bonds (u) 1,260 5.000 06/01/15 1,394
City of Philadelphia Pennsylvania Revenue Bonds 500 6.750 08/01/05 505
City of Philadelphia Pennsylvania Revenue Bonds 500 5.500 07/01/07 527
City of Philadelphia Pennsylvania Revenue Bonds 750 5.250 08/01/13 836
County of Allegheny Pennsylvania General Obligation
Unlimited 1,000 5.000 10/01/15 1,110
Erie County Industrial Development Authority Revenue Bonds 180 5.300 04/01/12 193
Hempfield Township Municipal Authority Revenue Bonds (u) 355 5.000 09/01/13 393
Norwin School District General Obligation Unlimited (ae) 250 6.000 04/01/20 281
Owen J Roberts School District General Obligation Unlimited 500 5.000 08/15/12 551
Pennsylvania Higher Educational Facilities Authority Revenue
Bonds (u) 715 5.000 08/15/14 783
Pittsburgh Public Parking Authority Revenue Bonds, weekly
demand (u) 310 5.000 12/01/16 336
Sayre Health Care Facilities Authority Revenue Bonds, weekly
demand 690 5.300 12/01/12 736
St. Mary Hospital Authority Revenue Bonds 300 5.000 11/15/13 317
------------
8,238
------------
Puerto Rico - 2.1%
Puerto Rico Electric Power Authority Revenue Bonds 1,000 5.000 07/01/13 1,109
Puerto Rico Electric Power Authority Revenue Bonds 500 5.500 07/01/17 582
Puerto Rico Public Buildings Authority Revenue Bonds ,
annual demand (E) 1,000 4.500 07/01/22 1,025
Puerto Rico Public Finance Corp. Revenue Bonds, annual
demand (E) 2,000 5.750 08/01/27 2,222
------------
4,938
------------
Rhode Island - 0.1%
Rhode Island Health & Educational Building Corp. Revenue
Bonds 150 5.750 08/15/10 161
------------
South Carolina - 1.1%
Richland-Lexington Airport District Revenue Bonds 250 5.000 01/01/06 254
Richland-Lexington Airport District Revenue Bonds 500 5.000 01/01/09 532
Richland-Lexington Airport District Revenue Bonds 440 5.000 01/01/10 470
Rock Hill South Carolina Revenue Bonds 250 5.000 01/01/10 271
South Carolina State Public Service Authority Revenue Bonds,
weekly demand 375 5.500 01/01/11 414
Spartanburg County South Carolina Revenue Bonds 500 6.000 04/15/07 529
------------
2,470
------------
South Dakota - 0.7%
Sioux Falls South Dakota Revenue Bonds 250 5.500 11/15/10 278
South Dakota State Building Authority Revenue Bonds 1,330 5.000 09/01/12 1,461
------------
1,739
------------
Tennessee - 1.6%
County of Williamson Tennessee General Obligation Unlimited 500 6.000 03/01/06 514
Maury County Tennessee General Obligation Unlimited, weekly
demand 1,000 5.000 04/01/16 1,092
Metropolitan Government Nashville & Davidson County Health &
Educational Facility Board Revenue Bonds 920 5.000 11/01/06 950
</Table>
Tax Exempt Bond Fund 135
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Metropolitan Government Nashville & Davidson County
Tennessee Revenue Bonds 180 5.250 01/01/13 201
Tennessee Housing Development Agency Revenue Bonds, weekly
demand 925 5.375 01/01/18 964
------------
3,721
------------
Texas - 9.6%
Alvin Independent School District General Obligation
Unlimited 515 6.750 08/15/09 590
Alvin Independent School District General Obligation
Unlimited 545 6.750 08/15/10 639
Brazos River Authority Revenue Bonds 500 3.625 04/01/12 502
Brazos River Authority Revenue Bonds, annual demand (E) 220 5.400 10/01/29 238
Brazos River Harbor Navigation District Revenue Bonds,
annual demand (E) 220 4.750 05/15/33 227
City of Houston Texas Revenue Bonds 515 5.250 05/15/14 579
City of San Antonio Texas Revenue Bonds 1,000 5.250 02/01/13 1,115
County of Harris Texas General Obligation, Ltd. 1,435 5.250 08/15/09 1,557
County of Travis Texas General Obligation, Ltd. 1,000 5.250 03/01/10 1,092
County of Harris Texas Revenue Bonds, annual demand (E) 1,500 5.000 08/15/21 1,601
Cypress-Fairbanks Independent School District General
Obligation Unlimited, annual demand (E) 500 5.000 02/15/19 540
Dallas Independent School District General Obligation
Unlimited 2,100 5.000 02/15/14 2,317
El Paso Independent School District General Obligation
Unlimited 1,000 5.375 08/15/09 1,092
Fort Bend County Industrial Development Corp. Revenue Bonds,
annual demand 250 3.000 10/01/11 250
Gregory-Portland Independent School District General
Obligation Unlimited Revenue Bonds, weekly demand 1,250 5.000 02/15/15 1,370
Highland Park Independent School District General Obligation
Unlimited 960 5.000 02/15/13 1,055
Nueces River Authority Revenue Bonds (u) 245 5.000 07/15/13 270
Port of Corpus Christi Authority of Nueces County Texas
Revenue Bonds, weekly demand 385 5.350 11/01/10 396
Red River Texas Revenue Bonds, weekly demand, annual demand
(E) 250 2.750 03/01/31 242
Round Rock Independent School District General Obligation
Unlimited 1,000 6.500 08/01/10 1,159
Round Rock Independent School District General Obligation
Unlimited 430 5.375 08/01/12 483
Round Rock Independent School District General Obligation
Unlimited, weekly demand 750 6.500 08/01/11 868
Texas A & M University Revenue Bonds 1,000 5.000 07/01/08 1,060
Titus County Hospital District General Obligation Limited 1,000 5.000 08/15/13 1,099
Tyler Independent School District General Obligation
Unlimited 1,350 5.000 02/15/10 1,455
University of Texas Permanent University Fund Revenue Bonds 420 5.000 07/01/09 451
Waco Health Facilities Development Corp. Revenue Bonds 250 5.200 11/15/06 259
------------
22,506
------------
Utah - 0.8%
County of Utah Utah Revenue Bonds, annual demand 200 5.050 11/01/17 216
Intermountain Power Agency Revenue Bonds 1,400 6.500 07/01/10 1,609
------------
1,825
------------
Virgin Islands - 0.2%
Virgin Islands Public Finance Authority Revenue Bonds 200 5.000 10/01/13 216
Virgin Islands Public Finance Authority Revenue Bonds 250 5.000 10/01/14 271
------------
487
------------
</Table>
136 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Virginia - 2.4%
City of Richmond Virginia General Obligation Unlimited,
weekly demand 1,000 5.000 07/15/15 1,105
County of Fairfax Virginia Certificate of Participation,
weekly demand 200 5.750 04/15/13 218
Hampton Virginia Revenue Bonds 240 5.000 01/01/14 258
Middle River Regional Jail Authority Revenue Bonds, weekly
demand 1,015 5.000 05/15/15 1,120
Peninsula Ports Authority Revenue Bonds, annual demand (E) 225 3.300 10/01/33 224
Prince William County Service Authority Revenue Bonds 555 5.500 07/01/05 558
Virginia Commonwealth Transportation Board Revenue Bonds,
weekly demand 360 5.375 05/15/12 400
Virginia Commonwealth Transportation Board Revenue Bonds,
weekly demand 1,000 5.250 05/15/16 1,096
Virginia Public Building Authority Revenue Bonds 500 5.750 08/01/07 532
------------
5,511
------------
Washington - 1.8%
Clallam County Public Utility District No. 1 Revenue Bonds 385 5.000 01/01/08 405
Energy Northwest Revenue Bonds (u) 220 5.000 07/01/11 240
Energy Northwest Revenue Bonds (u) 440 5.000 07/01/12 482
Energy Northwest Revenue Bonds (u) 220 5.000 07/01/13 242
Kitsap County Washington General Obligation, Ltd., weekly
demand 775 5.750 07/01/14 869
Tobacco Settlement Authority of Washington Revenue Bonds,
weekly demand 900 6.500 06/01/26 940
Washington Public Power Supply System Revenue Bonds 1,000 7.000 07/01/08 1,119
------------
4,297
------------
West Virginia - 0.1%
West Virginia State Hospital Finance Authority Revenue Bonds 150 6.500 09/01/05 152
------------
Wisconsin - 1.7%
City of Madison Wisconsin Revenue Bonds, annual demand 280 4.875 10/01/27 300
Oconto Falls Public School District General Obligation
Unlimited (ae) 750 5.750 03/01/13 853
State of Wisconsin General Obligation Unlimited 625 5.125 11/01/11 688
Wisconsin Housing & Economic Development Authority Revenue
Bonds, weekly demand 50 6.850 11/01/12 50
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds 70 5.000 07/01/06 71
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds 1,425 5.000 12/01/10 1,541
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds 210 5.250 05/01/12 222
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds 220 5.250 05/01/13 231
------------
3,956
------------
TOTAL MUNICIPAL BONDS
(cost $215,158) 220,052
------------
</Table>
Tax Exempt Bond Fund 137
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL
AMOUNT ($) VALUE
OR SHARES $
- ------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.9%
Frank Russell Investment Company Tax Free Money Market Fund 11,409,848 11,410
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $11,410) 11,410
------------
TOTAL INVESTMENTS - 98.7%
(identified cost $226,568) 231,462
OTHER ASSETS AND LIABILITIES, NET - 1.3% 3,031
------------
NET ASSETS - 100.0% 234,493
============
</Table>
See accompanying notes which are an integral part of the financial statements.
138 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
- ----------------------------------------------------------------------------
QUALITY RATINGS AS A % OF VALUE
AAA 57%
AA 23
A 14
BBB 6
---
100%
===
ECONOMIC SECTOR EMPHASIS AS A % OF VALUE
General Obligation 30%
Other 17
Utility Revenue 13
Universities 12
Healthcare Revenue 9
Housing Revenue 5
Cash Equivalents 5
Pollution Control Revenue 4
State & Community Lease 4
Prerefunded Revenue 1
---
100%
===
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 139
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Alabama 1.5
Alaska 0.5
Arizona 3.3
Arkansas 0.3
California 9.9
Colorado 1.2
Delaware 0.4
District of Columbia 0.9
Florida 5.3
Georgia 2.9
Hawaii 1.1
Idaho 0.4
Illinois 5.7
Indiana 3.0
Iowa 0.1
Kansas 1.1
Louisiana 0.5
Massachusetts 2.5
Michigan 1.8
Minnesota 0.4
Mississippi 0.1
Missouri 0.4
Montana 0.5
Nevada 1.4
New Hampshire 0.3
New Jersey 4.5
New Mexico 1.8
New York 9.4
North Carolina 1.6
Ohio 2.7
Oklahoma 0.3
Oregon 2.3
Pennsylvania 3.5
Puerto Rico 2.1
Rhode Island 0.1
South Carolina 1.1
South Dakota 0.7
Tennessee 1.6
Texas 9.6
Utah 0.8
Virgin Islands 0.2
Virginia 2.4
Washington 1.8
West Virginia 0.1
Wisconsin 1.7
Short-Term Investments 4.9
---------------
Total Investments 98.7
Other Assets and Liabilities, Net 1.3
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
140 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,020.40 $ 1,015.68
Expenses Paid During
Period* $ 9.42 $ 9.40
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.88%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,024.20 $ 1,019.40
Expenses Paid During
Period* $ 5.67 $ 5.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.13%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,025.10 $ 1,020.64
Expenses Paid During
Period* $ 4.42 $ 4.41
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.88%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Tax-Managed Large Cap Fund 141
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.8%
Auto and Transportation - 1.1%
Burlington Northern Santa Fe Corp. 4,200 203
CSX Corp. 6,900 277
FedEx Corp. 300 25
Harley-Davidson, Inc. 43,800 2,059
Lear Corp. 10,600 359
Norfolk Southern Corp. 4,500 141
Union Pacific Corp. 1,700 109
United Parcel Service, Inc. Class B 14,500 1,034
------------
4,207
------------
Consumer Discretionary - 16.3%
Abercrombie & Fitch Co. Class A 9,300 502
Accenture, Ltd. Class A (AE) 26,300 571
Apollo Group, Inc. Class A (AE) 60,300 4,349
Bed Bath & Beyond, Inc. (AE) 42,300 1,574
CDW Corp. 7,000 383
Cintas Corp. 35,000 1,351
Clear Channel Communications, Inc. 36,800 1,175
Coach, Inc. (AE) 26,200 702
eBay, Inc. (AE) 164,400 5,216
EchoStar Communications Corp. 25,000 724
Electronic Arts, Inc. (AE) 3,400 182
EW Scripps Co. Class A 8,200 418
Fisher Scientific International, Inc. (AE) 14,600 867
Gannett Co., Inc. 29,900 2,302
Gap, Inc. (The) 14,400 307
Gillette Co. (The) 12,600 651
Google, Inc. Class A (AE) 20,600 4,532
Hilton Hotels Corp. 6,600 144
Home Depot, Inc. 114,600 4,053
International Game Technology 14,500 390
Iron Mountain, Inc. (AE) 26,400 784
Jones Apparel Group, Inc. 29,700 904
Kohl's Corp. (AE) 41,000 1,952
Leggett & Platt, Inc. 60,600 1,634
Limited Brands, Inc. 38,008 824
Lowe's Cos., Inc. 77,700 4,049
Mattel, Inc. 1,800 32
McDonald's Corp. 21,200 621
MGM Mirage (AE) 7,000 489
News Corp. Class A 73,300 1,120
Nike, Inc. Class B 12,800 983
Regal Entertainment Group Class A 40,225 816
Starbucks Corp. (AE) 104,700 5,185
Target Corp. 22,900 1,063
Tiffany & Co. 37,900 1,143
Time Warner, Inc. (AE) 99,300 1,669
Viacom, Inc. Class B 43,300 1,499
Wal-Mart Stores, Inc. 108,200 5,101
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Walt Disney Co. 28,800 760
Wendy's International, Inc. 1,900 82
Yahoo!, Inc. (AE) 24,000 828
Yum! Brands, Inc. 8,000 376
------------
62,307
------------
Consumer Staples - 8.6%
Altria Group, Inc. 61,400 3,990
Anheuser-Busch Cos., Inc. 24,000 1,125
Coca-Cola Co. (The) 101,700 4,418
Colgate-Palmolive Co. 15,000 747
ConAgra Foods, Inc. 21,200 567
Constellation Brands, Inc. Class A (AE) 7,020 370
CVS Corp. 17,700 913
Diageo PLC ADR 28,800 1,721
General Mills, Inc. 15,900 785
HJ Heinz Co. 13,400 494
Kraft Foods, Inc. Class A (N) 100 3
PepsiCo, Inc. 90,300 5,024
Procter & Gamble Co. 124,160 6,723
Sysco Corp. 74,900 2,592
Walgreen Co. 41,500 1,787
Whole Foods Market, Inc. 6,600 658
WM Wrigley Jr Co. 12,000 830
------------
32,747
------------
Financial Services - 18.8%
Aflac, Inc. 34,000 1,382
Allstate Corp. (The) 26,200 1,471
Ambac Financial Group, Inc. 23,800 1,591
American Express Co. 35,800 1,887
American International Group, Inc. 14,600 742
Automatic Data Processing, Inc. 43,400 1,885
Bank of America Corp. 167,388 7,539
Bank of New York Co., Inc. (The) 67,000 1,872
Capital One Financial Corp. (N) 56,300 3,991
CarrAmerica Realty Corp. (o) 4,300 142
Checkfree Corp. (AE) 19,800 726
Cigna Corp. 8,900 819
CIT Group, Inc. 19,000 765
Citigroup, Inc. 224,200 10,528
City National Corp. 500 35
Compass Bancshares, Inc. 6,000 258
Countrywide Financial Corp. 44,700 1,618
E*Trade Financial Corp. (AE) 18,600 207
</Table>
142 Tax-Managed Large Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Equity Office Properties Trust (o) 7,500 236
Fifth Third Bancorp 53,400 2,323
First Data Corp. 16,300 620
Freddie Mac 11,700 720
Genworth Financial, Inc. Class A 7,600 212
Goldman Sachs Group, Inc. 20,400 2,179
Hartford Financial Services Group, Inc. 5,200 376
Hibernia Corp. Class A 5,800 181
JPMorgan Chase & Co. 52,904 1,878
MBIA, Inc. 11,600 608
MBNA Corp. 23,500 464
Mellon Financial Corp. 7,100 197
Moody's Corp. 21,900 1,799
Morgan Stanley 53,800 2,831
North Fork BanCorp., Inc. 54,200 1,526
Nuveen Investments, Inc. Class A 20,700 704
Paychex, Inc. 36,200 1,108
Piper Jaffray Cos., Inc. (AE)(N) 700 19
ProLogis (o) 7,200 285
Regions Financial Corp. 26,759 896
St. Paul Travelers Cos., Inc. (The) 6,700 240
Starwood Hotels & Resorts Worldwide, Inc. (o) 2,900 158
State Street Corp. 57,000 2,635
SunTrust Banks, Inc. 4,200 306
Synovus Financial Corp. 40,400 1,132
Torchmark Corp. 7,900 422
US Bancorp 95,900 2,676
Wachovia Corp. 52,500 2,687
Washington Mutual, Inc. 21,400 884
Wells Fargo & Co. 70,600 4,232
WR Berkley Corp. 1,300 42
------------
72,034
------------
Health Care - 15.4%
Aetna, Inc. 20,400 1,497
Allergan, Inc. 27,900 1,964
Amgen, Inc. (AE) 65,100 3,789
Biomet, Inc. 3,100 120
Boston Scientific Corp. (AE) 25,100 742
Bristol-Myers Squibb Co. 38,200 993
Caremark Rx, Inc. (AE) 16,200 649
Cooper Cos., Inc. 5,500 372
Eli Lilly & Co. 49,700 2,906
Forest Laboratories, Inc. (AE) 12,100 432
Genentech, Inc. (AE) 74,600 5,292
Genzyme Corp. (AE) 37,800 2,215
Gilead Sciences, Inc. (AE) 28,500 1,057
Guidant Corp. 21,600 1,600
HCA, Inc. 6,000 335
Johnson & Johnson 129,500 8,888
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kinetic Concepts, Inc. (AE) 7,700 473
Medicis Pharmaceutical Corp. Class A (N) 7,800 219
Medtronic, Inc. 80,900 4,263
OSI Pharmaceuticals, Inc. (AE)(N) 7,100 336
Patterson Cos., Inc. (AE) 27,300 1,380
Pfizer, Inc. 220,650 5,995
Schering-Plough Corp. 20,900 436
Sepracor, Inc. (AE)(N) 12,600 755
Stryker Corp. 40,800 1,981
Teva Pharmaceutical Industries, Ltd. ADR 93,500 2,921
Watson Pharmaceuticals, Inc. (AE) 2,000 60
WellPoint, Inc. (AE) 15,300 1,955
Wyeth 64,600 2,903
Zimmer Holdings, Inc. (AE) 28,800 2,345
------------
58,873
------------
Integrated Oils - 5.0%
BP PLC ADR 38,930 2,371
ChevronTexaco Corp. 89,460 4,652
ConocoPhillips 20,300 2,128
Exxon Mobil Corp. 158,540 9,042
Unocal Corp. 19,320 1,054
------------
19,247
------------
Materials and Processing - 2.6%
Air Products & Chemicals, Inc. 8,300 487
Alcan, Inc. 7,300 236
Alcoa, Inc. 24,300 705
Aracruz Celulose SA ADR 13,300 408
Archer-Daniels-Midland Co. 5,100 92
Dow Chemical Co. (The) 37,700 1,732
Eastman Chemical Co. 6,900 373
EI Du Pont de Nemours & Co. 44,000 2,073
Georgia-Pacific Corp. 2,500 86
Lyondell Chemical Co. 27,300 685
Masco Corp. 14,600 460
Monsanto Co. 7,300 428
Nalco Holding Co. (AE) 10,900 196
PPG Industries, Inc. 6,100 412
Praxair, Inc. 3,200 150
Sappi, Ltd. ADR 27,500 274
</Table>
Tax-Managed Large Cap Fund 143
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Temple-Inland, Inc. 11,600 392
United States Steel Corp. 21,500 919
------------
10,108
------------
Miscellaneous - 5.2%
3M Co. 1,600 122
Fortune Brands, Inc. 2,000 169
General Electric Co. 328,800 11,904
Honeywell International, Inc. 31,700 1,134
Johnson Controls, Inc. 10,700 587
SPX Corp. 500 19
Textron, Inc. 20,300 1,530
Tyco International, Ltd. 138,200 4,327
------------
19,792
------------
Other Energy - 1.2%
Anadarko Petroleum Corp. 20,000 1,461
Apache Corp. 10,200 574
Devon Energy Corp. 11,900 538
Dynegy, Inc. Class A (AE)(N) 9,700 32
Pride International, Inc. (AE) 100 2
Valero Energy Corp. 3,300 226
Williams Cos., Inc. 55,300 941
XTO Energy, Inc. 27,400 827
------------
4,601
------------
Producer Durables - 4.6%
Applied Materials, Inc. 18,700 278
Boeing Co. 8,200 488
Caterpillar, Inc. 6,100 537
Centex Corp. 1,400 81
Deere & Co. 6,300 394
DR Horton, Inc. 2,800 85
Emerson Electric Co. 48,800 3,058
Hubbell, Inc. Class B 8,700 378
Illinois Tool Works, Inc. 12,300 1,031
Ingersoll-Rand Co. Class A 10,200 784
KB Home 1,800 103
Koninklijke Philips Electronics NV 58,200 1,443
Lennar Corp. Class A (N) 1,400 72
Lexmark International, Inc. Class A (AE) 2,200 153
Lockheed Martin Corp. 30,500 1,859
Northrop Grumman Corp. 53,600 2,939
Pitney Bowes, Inc. 21,500 961
Pulte Homes, Inc. 200 14
Teradyne, Inc. (AE) 200 2
United Technologies Corp. 28,800 2,930
------------
17,590
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Technology - 11.9%
Altera Corp. (AE) 50,100 1,039
Analog Devices, Inc. 13,500 460
Apple Computer, Inc. (AE) 16,100 581
Cisco Systems, Inc. (AE) 250,700 4,332
Computer Sciences Corp. (AE) 12,200 530
Corning, Inc. (AE) 51,600 710
Dell, Inc. (AE) 183,300 6,384
EMC Corp. (AE) 95,700 1,256
Hewlett-Packard Co. 32,200 659
Intel Corp. 187,400 4,408
International Business Machines Corp. 47,600 3,636
Intersil Corp. Class A 1,700 30
Juniper Networks, Inc. (AE) 10,000 226
Linear Technology Corp. 53,100 1,898
Marvell Technology Group, Ltd. (AE) 20,900 700
Microsoft Corp. 357,200 9,037
NCR Corp. (AE) 22,300 736
Oracle Corp. (AE) 136,200 1,574
Qualcomm, Inc. (AE) 100,500 3,506
Raytheon Co. 11,500 433
Red Hat, Inc. (AE) 73,300 788
Rockwell Automation, Inc. 13,000 601
Texas Instruments, Inc. 28,200 704
Xilinx, Inc. 42,400 1,142
------------
45,370
------------
Utilities - 5.1%
Ameren Corp. 13,500 698
Cinergy Corp. 32,900 1,303
Comcast Corp. Class A (AE) 10,100 324
Comcast Corp. Special Class A (AE) 800 25
Constellation Energy Group, Inc. 1,100 58
Dominion Resources, Inc. 2,300 173
Edison International 24,600 893
Entergy Corp. 17,100 1,253
Exelon Corp. 3,200 158
Nextel Communications, Inc. Class A (AE) 11,800 330
PanAmSat Holding Corp. 35,800 632
PG&E Corp. 46,600 1,618
Pinnacle West Capital Corp. (N) 19,500 817
PPL Corp. 21,800 1,183
Public Service Enterprise Group, Inc. 14,700 854
</Table>
144 Tax-Managed Large Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SBC Communications, Inc. 181,300 4,315
Sprint Corp. 7,900 176
TXU Corp. 2,200 189
Verizon Communications, Inc. 103,000 3,687
Western Gas Resources, Inc. 13,000 434
Xcel Energy, Inc. 15,100 259
------------
19,379
------------
TOTAL COMMON STOCKS
(cost $291,071) 366,255
------------
SHORT-TERM INVESTMENTS - 4.4%
Frank Russell Investment Company Money Market
Fund 15,392,000 15,392
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 1,500 1,496
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $16,888) 16,888
------------
OTHER SECURITIES - 0.7%
Frank Russell Investment Company Money Market
Fund (X) 633,945 634
State Street Securities Lending Quality Trust
Fund (X) 1,997,357 1,997
------------
TOTAL OTHER SECURITIES
(cost $2,631) 2,631
------------
TOTAL INVESTMENTS - 100.9%
(identified cost $310,590) 385,774
OTHER ASSETS AND LIABILITIES, NET - (0.9%) (3,457)
------------
NET ASSETS - 100.0% 382,317
============
</Table>
<Table>
<Caption>
FUTURES CONTRACTS
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
S&P 500 E-Mini Index
expiration date 06/05 (147) 8,515 (462)
S&P 500 Index
expiration date 06/05 (28) 8,109 (286)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (748)
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Auto and Transportation 1.1
Consumer Discretionary 16.3
Consumer Staples 8.6
Financial Services 18.8
Health Care 15.4
Integrated Oils 5.0
Materials and Processing 2.6
Miscellaneous 5.2
Other Energy 1.2
Producer Durables 4.6
Technology 11.9
Utilities 5.1
Short-Term Investments 4.4
Other Securities 0.7
------------
Total Investments 100.9
Other Assets and Liabilities, Net (0.9)
------------
Net Assets 100.0
============
Futures Contracts 0.2
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Large Cap Fund 145
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,014.70 $ 1,013.99
Expenses Paid During
Period* $ 11.09 $ 11.09
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.22%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,018.00 $ 1,017.76
Expenses Paid During
Period* $ 7.31 $ 7.30
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.46%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,019.70 $ 1,019.05
Expenses Paid During
Period* $ 6.01 $ 6.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.20%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
146 Tax-Managed Mid & Small Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.0%
Auto and Transportation - 4.1%
AAR Corp. (AE) 28,750 423
AMR Corp. (AE)(N) 9,300 97
Arkansas Best Corp. 2,175 69
ArvinMeritor, Inc. 7,500 89
Autoliv, Inc. 7,010 310
Aviall, Inc. (AE) 19,214 562
CH Robinson Worldwide, Inc. 5,890 304
CNF, Inc. 3,100 133
Cooper Tire & Rubber Co. 10,100 176
Fleetwood Enterprises, Inc. (AE)(N) 39,217 300
Forward Air Corp. 8,366 201
Genesee & Wyoming, Inc. Class A (AE) 3,554 85
Gentex Corp. (N) 13,972 454
Keystone Automotive Industries, Inc. (AE) 14,561 292
Lear Corp. 693 23
Modine Manufacturing Co. 2,700 73
Overnite Corp. 8,216 246
Overseas Shipholding Group, Inc. 4,800 271
RailAmerica, Inc. (AE) 9,000 93
Skywest, Inc. 3,600 65
TRW Automotive Holdings Corp. (AE) 9,175 163
Wabash National Corp. (N) 13,321 340
Westinghouse Air Brake Technologies Corp. 28,800 576
Winnebago Industries (N) 11,044 322
------------
5,667
------------
Consumer Discretionary - 21.2%
99 Cents Only Stores (AE)(N) 8,656 96
Aaron Rents, Inc. 11,869 261
Administaff, Inc. 33,200 454
Advisory Board Co. (The) (AE) 5,987 244
Advo, Inc. 8,475 244
Aeropostale, Inc. (AE) 9,200 257
Alderwoods Group, Inc. (AE) 4,200 55
Amazon.Com, Inc. (AE) 900 29
America's Car Mart, Inc. (AE) 2,397 51
AnnTaylor Stores Corp. (AE) 4,200 103
Applebees International, Inc. 8,535 211
aQuantive, Inc. (AE)(N) 33,800 375
Ask Jeeves (AE)(N) 9,464 257
Atari, Inc. (AE)(N) 4,435 12
Big 5 Sporting Goods Corp. 24,250 579
Bright Horizons Family Solutions, Inc. (AE) 7,400 251
Brookstone, Inc. (AE) 2,750 54
Caesars Entertainment, Inc. (AE) 5,200 104
California Pizza Kitchen, Inc. (AE) 18,000 410
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Carmax, Inc. (AE) 3,100 85
Carmike Cinemas, Inc. 8,550 299
Casella Waste Systems, Inc. Class A (AE) 19,900 235
CBRL Group, Inc. 6,254 241
Central European Distribution Corp. (AE)(N) 7,875 292
Chemed Corp. 3,725 264
Chico's FAS, Inc. (AE) 15,680 402
ChoicePoint, Inc. (AE) 10,329 408
Citadel Broadcasting Corp. (AE)(N) 17,359 218
Cogent, Inc. (AE) 10,420 234
Copart, Inc. (AE) 18,700 405
Corinthian Colleges, Inc. (AE) 29,800 423
Corporate Executive Board Co. 4,060 267
Corrections Corp. of America (AE) 3,435 130
Cox Radio, Inc. Class A (AE) 16,110 253
Crown Media Holdings, Inc. Class A (AE)(N) 6,625 58
DeVry, Inc. (AE) 20,250 462
Dollar Thrifty Automotive Group (AE) 6,925 234
Dollar Tree Stores, Inc. (AE) 4,100 100
DoubleClick, Inc. (AE)(N) 14,317 115
Earthlink, Inc. (AE) 9,100 84
EchoStar Communications Corp. 4,900 142
Education Management Corp. (AE) 19,803 554
Elizabeth Arden, Inc. (AE) 12,375 271
Emmis Communications Corp. Class A (AE) 17,317 267
Entravision Communications Corp. Class A (AE) 23,401 184
Fisher Scientific International, Inc. (AE) 10,020 595
Fossil, Inc. (AE)(N) 23,323 542
Fred's, Inc. (N) 39,221 566
FTI Consulting, Inc. (AE)(N) 32,756 723
Gaylord Entertainment Co. (AE) 6,720 269
Getty Images, Inc. (AE) 3,337 239
Global Imaging Systems, Inc. (AE)(N) 9,133 317
Gymboree Corp. (AE) 14,450 165
Hancock Fabrics, Inc. (N) 19,491 115
Harman International Industries, Inc. 3,200 251
Hearst-Argyle Television, Inc. 2,071 52
IAC/InterActiveCorp (AE)(N) 7,900 172
International Speedway Corp. Class A 1,900 101
Ipass, Inc. (AE) 35,082 185
iVillage, Inc. (AE) 43,790 287
</Table>
Tax-Managed Mid & Small Cap Fund 147
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Jarden Corp. (AE)(N) 9,605 429
Jos A Bank Clothiers, Inc. (AE)(N) 1,407 46
Journal Communications, Inc. Class A 8,825 136
Kelly Services, Inc. Class A 3,500 92
Lamar Advertising Co. Class A (AE) 3,000 112
Landry's Restaurants, Inc. 6,600 172
La-Z-Boy, Inc. (N) 16,286 193
Lee Enterprises, Inc. 2,600 108
Liberty Media Corp. Class A (AE) 39,000 392
Linens 'N Things, Inc. (AE) 22,015 514
LKQ Corp. (AE)(N) 15,600 314
Lodgenet Entertainment Corp. (AE) 6,000 98
Matthews International Corp. Class A 5,400 192
MAXIMUS, Inc. (AE) 2,102 65
Men's Wearhouse, Inc. (AE) 2,000 83
MGM Mirage (AE) 1,000 70
Michaels Stores, Inc. 3,900 129
Monster Worldwide, Inc. (AE) 11,020 254
MPS Group, Inc. (AE) 12,500 100
MSC Industrial Direct Co., Inc. Class A 8,069 217
Navigant Consulting, Inc. (AE) 4,100 96
O'Charleys, Inc. (AE) 17,125 341
Overstock.com, Inc. (AE)(N) 5,290 187
Oxford Industries, Inc. (N) 7,600 278
PEP Boys-Manny Moe & Jack (N) 19,876 282
Petco Animal Supplies, Inc. (AE) 18,910 592
Petsmart, Inc. 4,300 115
PF Chang's China Bistro, Inc. (AE)(N) 4,270 237
Playboy Enterprises, Inc. Class B (AE)(N) 29,916 361
Polo Ralph Lauren Corp. 5,800 204
Rare Hospitality International, Inc. (AE)(N) 11,138 310
RC2 Corp. (AE) 6,642 230
Reader's Digest Association, Inc. (The) 21,398 364
Red Robin Gourmet Burgers, Inc. (AE) 4,800 233
Regis Corp. 6,500 232
Rent-A-Center, Inc. (AE) 3,277 79
Revlon, Inc. Class A (AE)(N) 31,424 92
Ross Stores, Inc. 4,600 123
Ruby Tuesday, Inc. 24,598 553
Saks, Inc. 5,400 92
School Specialty, Inc. (AE) 2,100 78
Scientific Games Corp. Class A (AE) 10,570 227
Service Corp. International 50,270 354
Skechers U.S.A., Inc. Class A (AE) 15,375 188
Source Interlink Cos., Inc. (AE) 44,925 470
Sports Authority, Inc. (The) (AE)(N) 15,400 410
Station Casinos, Inc. 10,410 672
Tetra Tech, Inc. (AE) 3,737 40
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Toro Co. 3,800 157
Tractor Supply Co. (AE) 17,725 713
United Natural Foods, Inc. (AE) 5,170 139
United Online, Inc. (AE)(N) 10,126 89
USANA Health Sciences, Inc. (AE)(N) 1,176 49
ValueClick, Inc. (AE) 33,518 347
Ventiv Health, Inc. (AE)(N) 4,950 103
VeriSign, Inc. (AE) 5,600 148
Watson Wyatt & Co. Holdings 4,051 107
WESCO International, Inc. (AE) 8,100 196
Westwood One, Inc. (AE) 20,819 381
Williams-Sonoma, Inc. (AE) 8,510 285
WMS Industries, Inc. (AE)(N) 7,890 200
XM Satellite Radio Holdings, Inc. Class A
(AE)(N) 3,900 108
Yankee Candle Co., Inc. 9,500 264
------------
29,695
------------
Consumer Staples - 2.8%
7-Eleven, Inc. (AE) 3,484 81
American Italian Pasta Co. Class A (N) 17,772 420
Coca-Cola Bottling Co. Consolidated 1,200 57
Cott Corp. (AE)(N) 7,550 169
Del Monte Foods Co. (AE) 32,400 338
DIMON, Inc. (N) 43,032 256
Hain Celestial Group, Inc. (AE) 3,384 60
Lance, Inc. 10,842 179
Loews Corp. 1,700 54
Longs Drug Stores Corp. 2,500 91
Performance Food Group Co. (AE) 35,541 957
Ralcorp Holdings, Inc. 6,725 266
Rite Aid Corp. (AE)(N) 28,200 102
Ruddick Corp. 4,200 94
Sensient Technologies Corp. 14,774 296
SunOpta, Inc. (AE)(N) 59,445 274
Tootsie Roll Industries, Inc. 2,472 76
Tyson Foods, Inc. Class A 3,723 63
Weis Markets, Inc. 2,100 80
------------
3,913
------------
Financial Services - 17.0%
Advanta Corp. Class A 650 15
Advanta Corp. Class B 2,725 64
Affiliated Managers Group, Inc. (AE)(N) 12,878 805
Alfa Corp. 6,100 84
Allmerica Financial Corp. (AE) 8,086 271
</Table>
148 Tax-Managed Mid & Small Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
American Financial Realty Trust (o) 19,077 292
Ameritrade Holding Corp. (AE) 13,900 146
AmerUs Group Co. (N) 5,475 257
Argonaut Group, Inc. (AE) 16,900 332
Bank of the Ozarks, Inc. (N) 7,400 229
BioMed Realty Trust, Inc. (o) 12,825 259
BISYS Group, Inc. (The) (AE) 27,700 391
Blackrock, Inc. Class A 1,400 105
Capital Automotive REIT (o) 3,500 119
Capital Trust (o)(N) 2,485 84
CapitalSource, Inc. (AE)(N) 10,910 229
CarrAmerica Realty Corp. (o) 4,300 142
Cedar Shopping Centers, Inc. (o) 23,050 318
Center Financial Corp. 10,925 218
Checkfree Corp. (AE) 3,000 110
Chemical Financial Corp. 3,010 90
CIT Group, Inc. 6,400 258
Citizens Banking Corp. 7,100 190
Crescent Real Estate Equities Co. (o)(N) 5,923 100
Cullen/Frost Bankers, Inc. 5,775 250
Delphi Financial Group Class A 4,300 179
Digital Insight Corp. (AE) 40,974 823
Doral Financial Corp. (N) 7,450 105
East-West Bancorp, Inc. 5,030 162
Factset Research Systems, Inc. 8,209 228
Fair Isaac Corp. 20,229 665
Federal Realty Investors Trust (o) 3,200 171
FelCor Lodging Trust, Inc. (AE)(o) 6,585 81
Fidelity National Financial, Inc. 7,154 230
First Commonwealth Financial Corp. 8,000 105
First Industrial Realty Trust, Inc. (o)(N) 10,200 390
First Midwest Bancorp, Inc. (N) 7,750 253
First Potomac Realty Trust (o) 9,600 215
GATX Corp. 22,800 746
General Growth Properties, Inc. (o) 11,300 442
Glacier Bancorp, Inc. 4,375 117
Global Payments, Inc. 3,320 215
Government Properties Trust, Inc. (o)(N) 6,600 65
Gramercy Capital Corp. (AE) 11,625 231
Greenhill & Co., Inc. 7,290 230
Harbor Florida Bancshares, Inc. 6,575 227
HCC Insurance Holdings, Inc. 6,810 242
Healthcare Realty Trust, Inc. (o) 4,100 158
Hibernia Corp. Class A 6,500 203
Hilb Rogal & Hobbs Co. 7,940 278
Home Properties, Inc. (o) 3,200 134
Host Marriott Corp. (o) 6,300 106
IndyMac Bancorp, Inc. 2,200 85
Innkeepers USA Trust (o) 13,125 174
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Integra Bank Corp. 4,300 88
Investment Technology Group, Inc. (AE) 8,161 155
Investors Financial Services Corp. (N) 4,600 193
Investors Real Estate Trust (o)(N) 8,500 77
Jack Henry & Associates, Inc. 24,288 418
Jefferies Group, Inc. 9,419 341
Kilroy Realty Corp. (o) 5,850 255
Kronos, Inc. (AE) 12,011 469
LaBranche & Co., Inc. (AE)(N) 11,607 77
LandAmerica Financial Group, Inc. 1,592 79
Legg Mason, Inc. 2,900 205
Leucadia National Corp. (N) 4,635 161
Mercury General Corp. 2,200 116
Mid-America Apartment Communities, Inc. (o) 3,300 126
Mills Corp. (The) (o) 2,514 144
Montpelier Re Holdings, Ltd. (N) 10,475 348
National Penn Bancshares, Inc. (N) 4,400 99
Nationwide Health Properties, Inc. (o)(N) 5,300 114
New York Community Bancorp, Inc. 5,600 99
Nuveen Investments, Inc. Class A 1,400 48
Old Republic International Corp. 10,350 244
Omega Financial Corp. (N) 5,900 167
Pacific Capital Bancorp 9,300 268
Phoenix Cos., Inc. (The) (N) 6,100 69
PMI Group, Inc. (The) 3,500 123
Popular, Inc. 13,900 322
Post Properties, Inc. (o) 8,105 264
Provident Bankshares Corp. 3,256 95
R&G Financial Corp. Class B 1,318 19
Radian Group, Inc. 2,332 104
Ramco-Gershenson Properties Trust (o)(N) 6,850 190
Raymond James Financial, Inc. 4,992 135
Reckson Associates Realty Corp. (o) 8,900 287
Reinsurance Group of America, Inc. 2,500 112
RLI Corp. 6,575 282
Scottish Re Group, Ltd. (N) 11,325 266
SEI Investments Co. 4,300 141
Selective Insurance Group, Inc. 2,700 119
Shurgard Storage Centers, Inc. Class A (o) 3,400 142
Signature Bank (AE) 11,950 294
Silicon Valley Bancshares (AE) 4,130 196
Sky Financial Group, Inc. (N) 10,000 261
South Financial Group, Inc. (The) 8,425 222
</Table>
Tax-Managed Mid & Small Cap Fund 149
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sovereign Bancorp, Inc. (N) 11,394 234
State Auto Financial Corp. 800 22
Sterling Financial Corp. (AE) 3,872 127
TD Banknorth, Inc. (AE) 4,931 152
Town & Country Trust (The) (o)(N) 3,300 89
UnionBanCal Corp. 3,300 203
United Bankshares, Inc. (N) 8,100 248
Valley National Bancorp (N) 8,000 198
Vornado Realty Trust (o) 5,300 405
W Holding Co., Inc. (N) 33,255 269
Waddell & Reed Financial, Inc. Class A 24,441 426
Washington Real Estate Investment Trust (o) 6,500 194
Wilmington Trust Corp. 7,703 272
Wintrust Financial Corp. 7,532 346
WR Berkley Corp. 1,813 59
------------
23,796
------------
Health Care - 12.8%
Advanced Medical Optics, Inc. (AE)(N) 1,167 43
Advanced Neuromodulation Systems, Inc. (AE)(N) 10,010 301
Amedisys, Inc. (AE)(N) 3,500 105
Amsurg Corp. (AE)(N) 23,583 611
Apria Healthcare Group, Inc. (AE) 10,371 312
Arrow International, Inc. (N) 1,700 56
Barr Pharmaceuticals, Inc. (AE) 1,500 78
Beckman Coulter, Inc. 3,231 216
CancerVax Corp. (AE)(N) 4,900 13
Celgene Corp. (AE)(N) 8,400 318
Cephalon, Inc. (AE)(N) 900 40
Charles River Laboratories International, Inc.
(AE) 1,008 48
Community Health Systems, Inc. (AE) 15,129 551
Connetics Corp. (AE)(N) 7,865 171
Cooper Cos., Inc. 9,889 668
Coventry Health Care, Inc. (AE) 5,700 390
CV Therapeutics, Inc. (AE)(N) 1,814 36
Cytyc Corp. (AE) 11,911 254
DaVita, Inc. (AE) 10,160 409
Diagnostic Products Corp. 100 5
Durect Corp. (AE)(N) 69,949 193
Edwards Lifesciences Corp. (AE) 6,105 269
Endo Pharmaceuticals Holdings, Inc. (AE) 20,339 404
Eyetech Pharmaceuticals, Inc. (AE)(N) 10,745 247
Genentech, Inc. (AE) 12,100 859
Gentiva Health Services, Inc. (AE) 30,900 605
Henry Schein, Inc. (AE) 15,758 591
ICOS Corp. (AE) 800 18
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Idexx Laboratories, Inc. (AE) 3,692 209
ImClone Systems, Inc. (AE)(N) 2,100 67
Inamed Corp. (AE) 13,100 797
Invitrogen Corp. (AE) 9,823 720
IVAX Corp. (AE) 5,500 104
KV Pharmaceutical Co. Class A (AE)(N) 28,041 656
LabOne, Inc. (AE) 7,250 254
LifePoint Hospitals, Inc. (AE) 21,475 956
Lincare Holdings, Inc. (AE) 3,000 128
MGI Pharma, Inc. (AE) 9,570 211
Millennium Pharmaceuticals, Inc. (AE) 9,600 84
Molina Healthcare, Inc. (AE) 1,900 83
Nabi Biopharmaceuticals (AE) 22,985 251
Omnicare, Inc. 3,000 104
Omnicell, Inc. (AE)(N) 4,970 31
Orthologic Corp. (AE) 7,200 31
Pacificare Health Systems (AE) 8,860 529
Par Pharmaceutical Cos., Inc. (AE)(N) 8,686 261
Patterson Cos., Inc. (AE) 2,100 106
Pediatrix Medical Group, Inc. (AE) 3,900 266
PolyMedica Corp. 12,268 380
PSS World Medical, Inc. (AE) 70,298 785
Quality Systems, Inc. (AE)(N) 6,000 285
Rotech Healthcare, Inc. (AE)(N) 13,700 340
Sepracor, Inc. (AE) 6,320 379
Stericycle, Inc. (AE) 12,988 632
Sunrise Senior Living, Inc. (AE)(N) 9,600 492
Techne Corp. (AE) 2,200 92
Telik, Inc. (AE) 3,100 50
United Therapeutics Corp. (AE) 5,270 253
US Physical Therapy, Inc. (AE) 15,544 224
Varian Medical Systems, Inc. (AE) 3,900 132
WebMD Corp. (AE)(N) 10,200 97
WellCare Health Plans, Inc. (AE) 3,700 109
Zymogenetics, Inc. (AE) 2,252 35
------------
17,944
------------
Integrated Oils - 0.2%
Murphy Oil Corp. 2,300 205
------------
Materials and Processing - 5.6%
Agrium, Inc. 23,115 411
Airgas, Inc. 16,800 368
Albany International Corp. Class A 6,775 212
Allegheny Technologies, Inc. 15,390 345
Apogee Enterprises, Inc. 14,450 186
</Table>
150 Tax-Managed Mid & Small Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Armor Holdings, Inc. (AE) 6,200 217
Ashland, Inc. 3,650 245
Cabot Microelectronics Corp. (AE)(N) 4,588 132
Coeur d'Alene Mines Corp. (AE)(N) 37,850 117
Crompton Corp. 39,700 558
Crown Holdings, Inc. (AE) 17,900 269
Cytec Industries, Inc. 5,800 267
Dycom Industries, Inc. (AE) 2,500 58
Eagle Materials, Inc. (N) 2,375 179
EMCOR Group, Inc. (AE) 5,650 252
FMC Corp. (AE) 3,400 167
Integrated Electrical Services, Inc. (AE)(N) 34,575 52
Jacobs Engineering Group, Inc. (AE) 14,537 708
Jacuzzi Brands, Inc. (AE) 19,200 174
Kaydon Corp. 9,275 255
Lennox International, Inc. 3,600 70
NCI Building Systems, Inc. (AE) 5,625 182
Olin Corp. 15,500 275
PAN American Silver Corp. (AE)(N) 7,970 109
PolyOne Corp. (AE) 21,300 164
Precision Castparts Corp. 2,500 184
Royal Gold, Inc. (N) 2,800 53
RPM International, Inc. 8,201 141
Smurfit-Stone Container Corp. (AE) 6,200 81
Sonoco Products Co. 5,300 144
Southern Peru Copper Corp. (N) 4,000 205
Standard Register Co. (The) 20,000 249
Universal Forest Products, Inc. (N) 3,500 133
URS Corp. (AE) 500 15
USG Corp. (AE)(N) 5,492 231
Washington Group International, Inc. (AE) 1,346 56
WCI Communities, Inc. (AE) 12,639 354
------------
7,818
------------
Miscellaneous - 0.5%
Carlisle Cos., Inc. 1,591 114
Hillenbrand Industries, Inc. 2,600 144
Lancaster Colony Corp. 4,400 183
Walter Industries, Inc. (N) 7,353 252
------------
693
------------
Other Energy - 6.1%
Arch Coal, Inc. 3,900 173
Cal Dive International, Inc. (AE) 15,840 705
CARBO Ceramics, Inc. (N) 1,700 113
Comstock Resources, Inc. (AE) 9,750 247
Cooper Cameron Corp. (AE) 11,571 636
Encore Acquisition Co. (AE) 10,675 392
Forest Oil Corp. (AE) 20,279 781
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Foundation Coal Holdings, Inc. 10,075 235
Global Industries, Ltd. (AE) 28,916 279
Global Power Equipment Group, Inc. (AE) 29,375 266
Grant Prideco, Inc. (AE) 13,405 297
Grey Wolf, Inc. (AE) 13,100 79
Hanover Compressor Co. (AE) 33,400 346
Helmerich & Payne, Inc. 8,450 325
Houston Exploration Co. (AE) 4,700 239
Key Energy Services, Inc. (AE) 3,500 39
National-Oilwell Varco, Inc. (AE) 8,458 336
Oil States International, Inc. (AE) 4,100 83
Patterson-UTI Energy, Inc. 5,300 127
Peabody Energy Corp. 14,600 639
Plains Exploration & Production Co. (AE) 8,967 289
Range Resources Corp. 11,690 265
Remington Oil & Gas Corp. (AE) 15,600 455
SEACOR Holdings, Inc. (AE) 4,550 259
Tesoro Corp. (AE) 9,100 345
Universal Compression Holdings, Inc. (AE) 2,100 74
W-H Energy Services, Inc. (AE) 12,850 283
XTO Energy, Inc. 8,533 257
------------
8,564
------------
Producer Durables - 7.4%
American Tower Corp. Class A (AE) 3,600 62
Ametek, Inc. 8,100 307
Andrew Corp. (AE) 26,424 324
Applied Industrial Technologies, Inc. 5,707 159
Applied Signal Technology, Inc. 10,018 195
BE Aerospace, Inc. (AE) 74,874 910
Belden CDT, Inc. 10,500 193
Brooks Automation, Inc. (AE) 686 9
Bucyrus International, Inc. 3,675 143
Champion Enterprises, Inc. (AE) 46,900 443
Crane Co. 13,300 340
Crown Castle International Corp. (AE) 19,400 313
Cymer, Inc. (AE) 11,220 278
Diebold, Inc. 3,200 155
Dionex Corp. (AE) 4,800 206
Donaldson Co., Inc. 6,600 196
Duratek, Inc. (AE) 11,750 272
Engineered Support Systems, Inc. 14,700 519
</Table>
Tax-Managed Mid & Small Cap Fund 151
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Entegris, Inc. (AE) 5,800 50
Esterline Technologies Corp. (AE) 14,700 475
IDEX Corp. 11,600 432
Joy Global, Inc. 10,750 364
Kadant, Inc. (AE) 11,000 189
Lam Research Corp. (AE) 17,440 447
Lennar Corp. Class A 6,700 345
Littelfuse, Inc. (AE) 13,859 373
Mattson Technology, Inc. (AE) 29,350 186
MDC Holdings, Inc. 4,047 265
Orbital Sciences Corp. (AE)(N) 11,051 103
Park-Ohio Holdings Corp. (AE) 12,950 183
Pentair, Inc. 8,100 322
Photon Dynamics, Inc. (AE) 23,031 446
Powerwave Technologies, Inc. (AE)(N) 36,250 262
Stewart & Stevenson Services 7,125 171
Technical Olympic USA, Inc. 12,036 253
Tecumseh Products Co. Class A 2,200 76
Terex Corp. (AE) 6,700 250
Varian Semiconductor Equipment Associates, Inc.
(AE) 4,950 185
------------
10,401
------------
Technology - 11.4%
3Com Corp. (AE) 17,200 54
ActivCard Corp. (AE) 20,033 105
Agere Systems, Inc. Class B (AE) 76,166 90
Agile Software Corp. (AE) 32,240 212
Altiris, Inc. (AE)(N) 25,919 422
AMIS Holdings, Inc. (AE) 12,500 141
Anixter International, Inc. (AE) 13,225 488
Ansys, Inc. (AE) 8,300 253
Aspect Communications Corp. (AE) 34,150 291
Avid Technology, Inc. (AE) 3,660 181
Avnet, Inc. (AE) 4,100 77
Avocent Corp. (AE) 27,178 683
BEA Systems, Inc. (AE) 11,300 78
BEI Technologies, Inc. 9,800 225
Benchmark Electronics, Inc. (AE) 20,567 556
Black Box Corp. 1,531 50
Cognizant Technology Solutions Corp. Class A
(AE) 12,020 505
Comverse Technology, Inc. (AE) 14,380 328
CSG Systems International, Inc. (AE) 3,803 65
Cypress Semiconductor Corp. (AE)(N) 4,700 56
Ditech Communications Corp. (AE) 13,200 149
Emulex Corp. (AE) 3,448 54
F5 Networks, Inc. (AE) 4,840 207
Filenet Corp. (AE) 30,083 797
Formfactor, Inc. (AE) 2,374 54
Harris Corp. 4,100 116
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hyperion Solutions Corp. (AE) 10,652 433
Informatica Corp. (AE) 48,466 375
Internet Security Systems, Inc. (AE) 14,830 288
Intersil Corp. Class A 19,456 340
InterVoice, Inc. (AE) 25,100 269
Interwoven, Inc. (AE) 100 1
IXYS Corp. (AE) 30,900 314
JDA Software Group, Inc. (AE) 21,194 217
Juniper Networks, Inc. (AE) 15,300 346
Keane, Inc. (AE) 16,275 194
Komag, Inc. (AE) 12,975 305
Lattice Semiconductor Corp. (AE) 8,400 38
Lawson Software, Inc. (AE) 5,533 29
Lions Gate Entertainment Corp. (AE)(N) 22,840 221
Macromedia, Inc. (AE) 9,130 362
Macrovision Corp. (AE) 14,047 287
Mantech International Corp. Class A (AE) 23,577 567
McAfee, Inc. (AE) 3,400 71
Mentor Graphics Corp. (AE) 19,865 178
Mercury Interactive Corp. (AE) 6,130 253
Microchip Technology, Inc. 13,250 377
Mindspeed Technologies, Inc. (AE)(N) 13,465 18
NetIQ Corp. (AE) 34,350 368
ON Semiconductor Corp. (AE) 9,500 33
Progress Software Corp. (AE) 11,900 317
Redback Networks, Inc. (AE)(N) 32,402 174
SanDisk Corp. (AE) 4,360 103
Semtech Corp. (AE) 17,030 288
Serena Software, Inc. (AE)(N) 17,917 341
Silicon Laboratories, Inc. (AE)(N) 7,358 187
SRA International, Inc. Class A (AE) 2,200 144
Sybase, Inc. (AE) 12,797 242
Sycamore Networks, Inc. (AE) 15,200 51
Syntel, Inc. (N) 5,141 82
Titan Corp. (AE) 26,000 467
Trimble Navigation, Ltd. (AE) 9,220 317
UNOVA, Inc. (AE)(N) 18,127 322
Varian, Inc. (AE) 7,898 262
Vignette Corp. (AE) 9,776 11
Vitesse Semiconductor Corp. (AE)(N) 12,556 26
Western Digital Corp. (AE) 6,300 80
Witness Systems, Inc. (AE) 13,970 246
Zebra Technologies Corp. Class A (AE) 2,100 100
------------
15,881
------------
</Table>
152 Tax-Managed Mid & Small Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Utilities - 3.9%
Alaska Communications Systems Group, Inc. (N) 27,300 257
Cablevision Systems Corp. Class A (AE) 4,300 112
CMS Energy Corp. (AE)(N) 30,075 389
El Paso Electric Co. (AE) 6,600 129
Great Plains Energy, Inc. (N) 5,200 159
Laclede Group, Inc. (The) 9,300 255
New Jersey Resources Corp. 4,300 186
Northwest Natural Gas Co. (N) 6,950 247
NorthWestern Corp. 7,000 196
NSTAR 3,038 164
NTL, Inc. (AE) 1,900 122
Oneok, Inc. 12,700 367
Otter Tail Corp. (N) 4,600 113
PNM Resources, Inc. 7,000 194
Premiere Global Services, Inc. (AE) 5,268 57
Questar Corp. 3,710 217
SCANA Corp. 8,400 326
Sierra Pacific Resources (AE)(N) 44,000 476
Southwest Gas Corp. 7,455 182
Southwestern Energy Co. (AE) 5,400 317
Telephone & Data Systems, Inc. 1,200 93
UnitedGlobalCom, Inc. Class A (AE) 7,100 64
Western Gas Resources, Inc. 11,317 378
Western Wireless Corp. Class A (AE) 1,400 55
Wisconsin Energy Corp. 9,500 336
------------
5,391
------------
TOTAL COMMON STOCKS
(cost $116,089) 129,968
------------
SHORT-TERM INVESTMENTS - 7.2%
Frank Russell Investment Company Money Market
Fund 9,299,000 9,299
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 800 798
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $10,097) 10,097
------------
OTHER SECURITIES - 14.7%
Frank Russell Investment Company Money Market
Fund (X) 4,959,292 4,959
State Street Securities Lending Quality Trust
(X) 15,625,135 15,625
------------
TOTAL OTHER SECURITIES
(cost $20,584) 20,584
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 114.9%
(identified cost $146,770) 160,649
OTHER ASSETS AND LIABILITIES,
NET - (14.9%) (20,801)
------------
NET ASSETS - 100.0% 139,848
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Mid & Small Cap Fund 153
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
Russell 2000 E-Mini Index
expiration date 06/05 (46) 2,672 (229)
Russell 2000 Index
expiration date 06/05 (18) 5,228 (579)
S&P 500 E-Mini Index
expiration date 06/05 (19) 1,101 (19)
S&P 500 Index
expiration date 06/05 (4) 1,158 (6)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (833)
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Auto and Transportation 4.1
Consumer Discretionary 21.2
Consumer Staples 2.8
Financial Services 17.0
Health Care 12.8
Integrated Oils 0.2
Materials and Processing 5.6
Miscellaneous 0.5
Other Energy 6.1
Producer Durables 7.4
Technology 11.4
Utilities 3.9
Short-Term Investments 7.2
Other Securities 14.7
------------
Total Investments 114.9
Other Assets and Liabilities, Net (14.9)
------------
Net Assets 100.0
============
Futures Contracts 0.6
</Table>
See accompanying notes which are an integral part of the financial statements.
154 Tax-Managed Mid & Small Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 995.60 $ 1,014.19
Expenses Paid During
Period* $ 10.79 $ 10.89
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.18%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,000.00 $ 1,018.90
Expenses Paid During
Period* $ 6.10 $ 6.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.23%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,002.80 $ 1,020.59
Expenses Paid During
Period* $ 4.42 $ 4.46
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.89%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,001.40 $ 1,020.09
Expenses Paid During
Period* $ 4.91 $ 4.96
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.99%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
Select Growth Fund 155
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 91.8%
Auto and Transportation - 2.0%
Autoliv, Inc. 2,600 115
Burlington Northern Santa Fe Corp. 9,610 464
Expeditors International Washington, Inc. 15,000 737
FedEx Corp. 5,650 480
Oshkosh Truck Corp. 5,000 376
Pacer International, Inc. (AE) 9,100 189
United Parcel Service, Inc. Class B 14,000 998
------------
3,359
------------
Consumer Discretionary - 19.1%
Abercrombie & Fitch Co. Class A 2,100 113
AC Moore Arts & Crafts, Inc. (AE) 5,300 138
Action Performance Cos., Inc. (N) 6,800 72
Advance Auto Parts, Inc. (AE) 5,600 299
Advo, Inc. 7,200 207
AMN Healthcare Services, Inc. (AE)(N) 11,300 167
Buca, Inc. (AE)(N) 20,800 92
Buffalo Wild Wings, Inc. (AE)(N) 3,600 110
Casual Male Retail Group, Inc. (AE)(N) 20,200 134
Charlotte Russe Holding, Inc. (AE)(N) 10,300 110
Chemed Corp. 2,400 170
Circuit City Stores, Inc. 33,000 521
Coach, Inc. (AE) 29,140 781
Cross Country Healthcare, Inc. (AE) 4,700 76
Crown Media Holdings, Inc. Class A (AE)(N) 12,800 112
DeVry, Inc. (AE) 4,300 98
DiamondCluster International, Inc. (AE) 10,800 134
Dolby Laboratories, Inc. Class A (AE) 5,500 112
DreamWorks Animation SKG, Inc. Class A (AE) 13,600 510
eBay, Inc. (AE) 16,000 508
eCost.com, Inc. (AE)(N) 12,877 54
Electronic Arts, Inc. (AE) 8,800 470
Emerson Radio (AE) 23,200 68
Gander Mountain Co. (AE)(N) 4,800 50
Gillette Co. (The) 16,000 826
Google, Inc. Class A (AE) 9,832 2,163
Hilton Hotels Corp. 21,300 465
Home Depot, Inc. 53,900 1,906
Hot Topic, Inc. (AE) 11,200 224
Image Entertainment, Inc. (AE)(N) 11,600 44
International Game Technology 44,587 1,199
JC Penney Co., Inc. Holding Co. 15,900 754
Jos A Bank Clothiers, Inc. (AE)(N) 3,800 125
Kimberly-Clark Corp. 7,500 468
Kohl's Corp. (AE) 12,700 605
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Liberty Media International, Inc. Class A (AE) 20,000 829
Linens 'N Things, Inc. (AE) 13,200 308
Marriott International, Inc. Class A 38,074 2,389
MGM Mirage (AE) 18,460 1,289
Multimedia Games, Inc. (AE) 3,100 25
Nautilus Group, Inc. (N) 8,000 199
Navigant Consulting, Inc. (AE) 8,000 188
New Frontier Media, Inc. (AE) 11,400 69
News Corp. Class A 18,100 277
PC Mall, Inc. (AE)(N) 5,200 28
PeopleSupport, Inc. (AE) 3,600 33
Petsmart, Inc. 11,400 304
Priceline.com, Inc. (AE)(N) 15,000 380
Ross Stores, Inc. 11,600 310
Sports Authority, Inc. (The) (AE)(N) 7,300 194
Staples, Inc. 45,000 858
Starbucks Corp. (AE) 12,808 634
Tempur-Pedic International, Inc. (AE) 1,400 27
Time Warner, Inc. (AE) 89,290 1,501
Tweeter Home Entertainment Group, Inc. (AE)(N) 13,300 49
Ventiv Health, Inc. (AE)(N) 8,700 181
VeriSign, Inc. (AE) 31,400 831
Wal-Mart Stores, Inc. 16,000 754
Walt Disney Co. 25,000 660
Waste Management, Inc. 10,700 305
Weight Watchers International, Inc. (AE)(N) 17,000 710
XM Satellite Radio Holdings, Inc. Class A
(AE)(N) 41,200 1,143
Yahoo!, Inc. (AE) 76,759 2,649
Yum! Brands, Inc. 15,928 748
------------
31,757
------------
Consumer Staples - 7.1%
Coca-Cola Co. (The) 16,300 708
Colgate-Palmolive Co. 25,020 1,246
Hansen Natural Corp. (AE)(N) 3,700 210
PepsiCo, Inc. 65,400 3,638
Procter & Gamble Co. 71,242 3,857
Sysco Corp. 36,900 1,277
Walgreen Co. 20,000 861
------------
11,797
------------
</Table>
156 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Financial Services - 9.6%
Advent Software, Inc. (AE) 8,900 159
American Express Co. 49,344 2,600
American International Group, Inc. 14,800 753
American Land Lease, Inc. (o) 3,600 78
Automatic Data Processing, Inc. 38,420 1,669
Capital One Financial Corp. 24,100 1,708
Checkfree Corp. (AE) 11,500 422
Chicago Mercantile Exchange 3,400 665
Citigroup, Inc. 16,730 786
Commerce Bancorp, Inc. (N) 11,200 313
Cybersource Corp. (AE) 15,296 93
First Data Corp. 27,000 1,027
Goldman Sachs Group, Inc. 12,041 1,286
Great American Financial Resources, Inc. 4,300 68
La Quinta Corp. (AE)(o) 13,900 121
Lakeland Bancorp, Inc. (N) 5,100 76
MCF Corp. (AE)(N) 19,600 26
McGrath Rentcorp 6,200 138
Mercer Insurance Group, Inc. (AE) 9,200 120
Moody's Corp. 10,000 821
Paychex, Inc. 52,776 1,615
Pico Holdings, Inc. (AE)(N) 3,800 92
Santander BanCorp (N) 4,390 97
Starwood Hotels & Resorts Worldwide, Inc. (o) 23,400 1,272
------------
16,005
------------
Health Care - 22.3%
Abaxis, Inc. (AE) 8,000 76
Able Laboratories, Inc. (AE)(N) 11,000 262
Aetna, Inc. 12,540 920
Albany Molecular Research, Inc. (AE) 7,900 75
Allergan, Inc. 12,000 845
Amgen, Inc. (AE) 42,290 2,462
Amylin Pharmaceuticals, Inc. (AE)(N) 14,400 245
Arthrocare Corp. (AE)(N) 8,700 256
Barr Pharmaceuticals, Inc. (AE) 4,100 213
Bruker BioSciences Corp. (AE) 20,400 67
Caremark Rx, Inc. (AE) 54,045 2,165
Cellegy Pharmaceuticals, Inc. (AE) 14,300 29
Charles River Laboratories International, Inc.
(AE) 6,100 289
Community Health Systems, Inc. (AE) 10,900 397
Cutera, Inc. (AE) 6,300 108
DaVita, Inc. (AE) 7,500 302
Dendreon Corp. (AE)(N) 11,900 55
Express Scripts, Inc. (AE) 3,700 332
Eyetech Pharmaceuticals, Inc. (AE)(N) 12,500 287
Genentech, Inc. (AE) 26,030 1,847
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Gentiva Health Services, Inc. (AE) 4,500 88
Gilead Sciences, Inc. (AE) 28,565 1,060
GTx, Inc. (AE)(N) 9,100 81
Guilford Pharmaceuticals, Inc. (AE)(N) 14,900 35
HCA, Inc. 9,300 519
Hologic, Inc. (AE) 3,300 117
Idenix Pharmaceuticals, Inc. (AE)(N) 4,700 89
IRIS International, Inc. (AE) 3,400 49
Johnson & Johnson 88,520 6,074
Kinetic Concepts, Inc. (AE) 9,900 608
LCA-Vision, Inc. 6,401 251
Lifecore Biomedical, Inc. (AE) 6,700 82
Lifeline Systems, Inc. (AE) 3,400 116
Medco Health Solutions, Inc. (AE) 7,500 382
Medtronic, Inc. 9,000 474
Nabi Biopharmaceuticals (AE) 11,442 125
Natus Medical, Inc. (AE)(N) 10,800 92
Neose Technologies, Inc. (AE) 16,300 43
Novartis AG ADR 6,700 326
Novavax, Inc. (AE)(N) 18,400 29
Omnicell, Inc. (AE) 14,800 91
Palomar Medical Technologies, Inc. (AE)(N) 4,500 101
Pfizer, Inc. 207,570 5,639
Pharmaceutical Product Development, Inc. (AE) 1,700 77
Schering-Plough Corp. 37,100 774
St. Jude Medical, Inc. (AE) 10,000 390
Stryker Corp. 9,600 466
Sybron Dental Specialties, Inc. (AE) 5,500 205
UnitedHealth Group, Inc. 6,300 595
Valeant Pharmaceuticals International (N) 22,600 469
VistaCare, Inc. Class A (AE) 6,300 113
WellPoint, Inc. (AE) 22,850 2,919
Wright Medical Group, Inc. (AE) 4,600 114
Wyeth 14,200 638
Zimmer Holdings, Inc. (AE) 33,417 2,721
------------
37,184
------------
Materials and Processing - 2.5%
Chicago Bridge & Iron Co. NV 8,500 190
DHB Industries, Inc. (AE)(N) 9,300 62
Dow Chemical Co. (The) 17,600 808
EI Du Pont de Nemours & Co. 16,300 768
</Table>
Select Growth Fund 157
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Harsco Corp. 4,600 247
Housevalues, Inc. (AE) 5,000 65
Insituform Technologies, Inc. Class A (AE) 10,200 152
Layne Christensen Co. (AE) 4,600 71
Lifecell Corp. (AE) 8,800 106
Monsanto Co. 6,900 404
Praxair, Inc. 19,000 890
Quanta Services, Inc. (AE)(N) 20,000 160
Symyx Technologies, Inc. (AE) 4,900 119
Unifi, Inc. (AE) 21,400 66
------------
4,108
------------
Miscellaneous - 3.5%
Fortune Brands, Inc. 5,630 476
General Electric Co. 102,278 3,701
Honeywell International, Inc. 19,000 679
Tyco International, Ltd. 28,590 895
------------
5,751
------------
Other Energy - 1.3%
ENSCO International, Inc. 7,100 231
EOG Resources, Inc. 12,800 609
Grant Prideco, Inc. (AE) 7,400 164
National-Oilwell Varco, Inc. (AE) 2,300 91
Newfield Exploration Co. (AE) 5,200 369
Superior Energy Services, Inc. (AE) 10,600 158
Todco Class A (AE) 5,600 125
Valero Energy Corp. 4,930 338
Westmoreland Coal Co. (AE)(N) 4,200 74
------------
2,159
------------
Producer Durables - 3.0%
ADE Corp. (AE)(N) 4,900 105
Applied Materials, Inc. 46,587 693
Boeing Co. 14,200 845
Caterpillar, Inc. 6,800 599
Danaher Corp. 12,300 623
Faro Technologies, Inc. (AE)(N) 3,000 81
General Cable Corp. (AE)(N) 8,000 97
Herman Miller, Inc. 10,600 303
Kla-Tencor Corp. 10,900 425
Lexmark International, Inc. Class A (AE) 8,000 556
Measurement Specialties, Inc. (AE)(N) 2,800 62
Photon Dynamics, Inc. (AE)(N) 5,700 110
Radyne Comstream Corp. (AE)(N) 11,300 86
Southern Energy Homes, Inc. (AE) 23,700 134
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Stamps.com, Inc. (AE) 2,100 41
Varian Semiconductor Equipment Associates, Inc.
(AE) 4,200 157
------------
4,917
------------
Technology - 20.9%
@Road, Inc. (AE)(N) 15,400 52
ACT Teleconferencing, Inc. (AE)(N) 32,900 12
Actuate Corp. (AE) 16,200 31
ADC Telecommunications, Inc. (AE) 74,100 168
Aeroflex, Inc. (AE) 12,700 101
Agile Software Corp. (AE) 36,500 240
Altera Corp. (AE) 32,300 670
Apple Computer, Inc. (AE) 15,754 568
Arrow Electronics, Inc. (AE) 11,900 290
ATI Technologies, Inc. (AE) 6,300 93
Avaya, Inc. (AE) 6,600 57
Blue Coat Systems, Inc. (AE)(N) 5,000 72
Broadcom Corp. Class A (AE) 31,640 946
Captaris, Inc. (AE) 15,100 55
Centillium Communications, Inc. (AE) 26,526 53
Cisco Systems, Inc. (AE) 55,100 952
Cognos, Inc. (AE) 4,100 155
Comverse Technology, Inc. (AE) 10,200 232
Corning, Inc. (AE) 21,800 300
Dell, Inc. (AE) 42,241 1,471
Diodes, Inc. (AE) 4,600 135
DRS Technologies, Inc. (AE) 4,400 195
EDO Corp. 6,000 179
EMC Corp. (AE) 66,477 872
Equinix, Inc. (AE)(N) 5,600 196
Formfactor, Inc. (AE) 5,200 119
Freescale Semiconductor, Inc. Class B (AE) 12,400 234
Ibasis, Inc. (AE)(N) 19,800 46
Integrated Device Technology, Inc. (AE) 11,300 121
Intel Corp. 88,630 2,085
Intersil Corp. Class A 17,000 297
Intuit, Inc. (AE) 18,000 725
Juniper Networks, Inc. (AE)(N) 55,580 1,256
Macrovision Corp. (AE) 12,300 252
Manugistics Group, Inc. (AE) 1,900 3
Marvell Technology Group, Ltd. (AE) 17,410 583
Matrixone, Inc. (AE) 57,100 244
Maxim Integrated Products, Inc. 15,300 572
Mercury Computer Systems, Inc. (AE) 6,100 161
Microsoft Corp. 278,610 7,048
MIPS Technologies, Inc. (AE) 12,300 86
</Table>
158 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Motorola, Inc. 84,400 1,295
Nam Tai Electronics, Inc. 6,500 150
National Semiconductor Corp. 50,300 960
Nvidia Corp. (AE) 34,100 748
Parametric Technology Corp. (AE) 21,000 112
Phoenix Technologies, Ltd. (AE) 11,100 90
PMC - Sierra, Inc. (AE) 50,600 408
Qualcomm, Inc. (AE) 92,550 3,229
Quest Software, Inc. (AE) 7,800 93
Redback Networks, Inc. (AE) 24,045 129
Rockwell Automation, Inc. 10,040 464
Saba Software, Inc. (AE)(N) 18,325 77
SanDisk Corp. (AE) 47,500 1,126
Selectica, Inc. (AE) 13,800 45
Silicon Image, Inc. (AE) 31,500 317
Texas Instruments, Inc. 96,781 2,416
Three-Five Systems, Inc. (AE) 11,400 9
Transwitch Corp. (AE)(N) 49,800 62
WatchGuard Technologies (AE) 15,500 50
Witness Systems, Inc. (AE) 9,500 167
WJ Communications (AE) 13,300 26
Xilinx, Inc. 34,384 926
------------
34,826
------------
Utilities - 0.5%
Alamosa Holdings, Inc. (AE) 8,700 113
America Movil SA de CV ADR Class L 9,938 493
MDU Communications International, Inc. (AE)(N) 29,200 72
Primus Telecommunications GP (AE)(N) 18,300 28
Talk America Holdings, Inc. (AE) 11,400 98
Ubiquitel, Inc. (AE) 16,400 119
------------
923
------------
TOTAL COMMON STOCKS
(cost $147,623) 152,786
------------
SHORT-TERM INVESTMENTS - 7.9%
Frank Russell Investment Company Money Market
Fund 11,854,000 11,854
United States Treasury Bill (c)(z)(sec.)
2.734% due 06/09/05 1,200 1,195
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $13,049) 13,049
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 4.8%
Frank Russell Investment Company Money Market
Fund (X) 1,928,636 1,929
State Street Securities Lending Quality Trust
(X) 6,076,513 6,077
------------
TOTAL OTHER SECURITIES
(cost $8,006) 8,006
------------
TOTAL INVESTMENTS - 104.5%
(identified cost $168,678) 173,841
OTHER ASSETS AND LIABILITIES,
NET - (4.5%) (7,416)
------------
NET ASSETS - 100.0% 166,425
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Growth Fund 159
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
Nasdaq 100 Index
expiration date 06/05 (35) 4,989 (268)
Russell 1000 Growth Index
expiration date 06/05 (6) 1,392 (67)
S&P 500 E-Mini Index
expiration date 06/05 (30) 1,738 (58)
S&P 500 Index
expiration date 06/05 (18) 5,213 (99)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (492)
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Auto and Transportation 2.0
Consumer Discretionary 19.1
Consumer Staples 7.1
Financial Services 9.6
Health Care 22.3
Materials and Processing 2.5
Miscellaneous 3.5
Other Energy 1.3
Producer Durables 3.0
Technology 20.9
Utilities 0.5
Short-Term Investments 7.9
Other Securities 4.8
------------
Total Investments 104.5
Other Assets and Liabilities, Net (4.5)
------------
Net Assets 100.0
============
Futures Contracts 0.3
</Table>
See accompanying notes which are an integral part of the financial statements.
160 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,054.10 $ 1,014.19
Expenses Paid During
Period* $ 11.10 $ 10.89
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.18%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,058.80 $ 1,019.00
Expenses Paid During
Period* $ 6.18 $ 6.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.21%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,061.40 $ 1,021.08
Expenses Paid During
Period* $ 4.04 $ 3.96
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.79%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,059.60 $ 1,019.89
Expenses Paid During
Period* $ 5.26 $ 5.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.03%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
Select Value Fund 161
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.0%
Auto and Transportation - 1.6%
Autoliv, Inc. 20,500 907
Aviall, Inc. (AE) 18,676 546
Burlington Northern Santa Fe Corp. 18,370 886
CNF, Inc. 3,950 169
Fleetwood Enterprises, Inc. (AE)(N) 37,535 287
Keystone Automotive Industries, Inc. (AE) 13,918 279
Union Pacific Corp. 10,000 639
United Parcel Service, Inc. Class B 12,900 920
Wabash National Corp. 11,646 297
Westinghouse Air Brake Technologies Corp. 28,058 561
------------
5,491
------------
Consumer Discretionary - 12.9%
Accenture, Ltd. Class A (AE) 54,360 1,180
Administaff, Inc. (N) 29,913 409
Advance Auto Parts, Inc. (AE) 20,900 1,115
California Pizza Kitchen, Inc. (AE) 17,157 391
CBRL Group, Inc. 5,978 230
Clear Channel Communications, Inc. 34,900 1,115
Copart, Inc. (AE) 17,818 386
Corinthian Colleges, Inc. (AE) 28,250 401
Darden Restaurants, Inc. 45,200 1,356
DeVry, Inc. (AE) 19,354 441
DreamWorks Animation SKG, Inc. Class A (AE) 10,900 409
Gap, Inc. (The) 49,990 1,067
Gillette Co. (The) 15,700 811
Hancock Fabrics, Inc. (N) 18,014 107
Harrah's Entertainment, Inc. 45,900 3,012
Hasbro, Inc. 49,510 937
Home Depot, Inc. 33,700 1,192
Jarden Corp. (AE)(N) 3,783 169
JC Penney Co., Inc. Holding Co. 48,800 2,314
Kimberly-Clark Corp. 34,610 2,161
Knight-Ridder, Inc. (N) 14,900 964
La-Z-Boy, Inc. (N) 15,572 184
Liberty Media Corp. Class A (AE) 265,800 2,669
Lowe's Cos., Inc. 9,800 511
May Department Stores Co. (The) 27,600 968
McDonald's Corp. 117,660 3,449
Newell Rubbermaid, Inc. 42,800 930
Nike, Inc. Class B 9,600 737
PEP Boys-Manny Moe & Jack (N) 19,027 270
Playboy Enterprises, Inc. Class B (AE) 25,108 303
Reader's Digest Association, Inc. (The) 20,451 348
Reed Elsevier PLC ADR (N) 17,210 679
RR Donnelley & Sons Co. 13,878 457
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sabre Holdings Corp. Class A 26,100 511
Service Corp. International 36,888 260
Source Interlink Cos., Inc. (AE) 23,004 241
Sports Authority, Inc. (The) (AE)(N) 14,552 387
Thomson ADR (N) 80,400 1,987
Time Warner, Inc. (AE) 53,560 900
TJX Cos., Inc. 30,410 689
Tribune Co. (N) 15,120 584
VeriSign, Inc. (AE) 23,900 632
Viacom, Inc. Class B 35,554 1,231
Walt Disney Co. 64,750 1,709
Waste Management, Inc. 36,800 1,048
Westwood One, Inc. (AE) 16,400 300
Yum! Brands, Inc. 49,900 2,343
------------
44,494
------------
Consumer Staples - 5.5%
Altria Group, Inc. 60,760 3,949
American Italian Pasta Co. Class A (N) 16,992 402
Campbell Soup Co. 12,700 378
Coca-Cola Co. (The) 9,900 430
Coca-Cola Enterprises, Inc. 43,700 887
Colgate-Palmolive Co. 42,500 2,116
ConAgra Foods, Inc. 38,500 1,030
Dean Foods Co. (AE) 18,500 636
Del Monte Foods Co. (AE) 27,100 283
Diageo PLC ADR 6,730 402
DIMON, Inc. (N) 39,501 235
General Mills, Inc. 11,000 543
HJ Heinz Co. 51,150 1,885
JM Smucker Co. (The) (N) 10,200 506
Kellogg Co. 30,530 1,372
Lance, Inc. 10,374 171
Molson Coors Brewing Co. Class B (N) 8,800 543
Nestle SA ADR (N) 3,490 229
PepsiCo, Inc. 10,020 558
Performance Food Group Co. (AE) 14,372 386
Procter & Gamble Co. 7,500 406
Sara Lee Corp. 53,230 1,139
Sensient Technologies Corp. 9,854 197
Unilever NV 6,200 399
------------
19,082
------------
</Table>
162 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Financial Services - 24.0%
Aflac, Inc. 12,780 520
AG Edwards, Inc. 12,100 480
Allmerica Financial Corp. (AE) 7,735 260
Allstate Corp. (The) 72,770 4,087
American Express Co. 18,210 960
American International Group, Inc. 21,800 1,109
AmSouth Bancorp 19,500 513
Bank of America Corp. 197,846 8,912
Bank of New York Co., Inc. (The) 39,100 1,092
Bear Stearns Cos., Inc. (The) 8,700 824
BISYS Group, Inc. (The) (AE) 26,909 380
CB Richard Ellis Group, Inc. (AE) 36,200 1,258
Chubb Corp. 5,620 460
Cigna Corp. 10,700 984
Citigroup, Inc. 182,250 8,559
Comerica, Inc. 18,500 1,059
Commerce Bancshares, Inc. (N) 20,327 980
Dow Jones & Co., Inc. (N) 29,700 993
E*Trade Financial Corp. (AE) 83,400 927
Fannie Mae 27,100 1,462
Federated Investors, Inc. Class B 20,000 569
First Data Corp. 88,013 3,347
First Industrial Realty Trust, Inc. (o) 9,951 380
Fiserv, Inc. (AE) 11,530 488
Franklin Resources, Inc. 29,730 2,042
Freddie Mac 50,200 3,088
GATX Corp. 13,869 454
Genworth Financial, Inc. Class A (N) 54,100 1,512
Goldman Sachs Group, Inc. 39,000 4,165
Hartford Financial Services Group, Inc. 26,520 1,919
Hilb Rogal & Hobbs Co. 7,597 266
Huntington Bancshares, Inc. 42,000 987
Jefferson-Pilot Corp. 20,200 1,014
JPMorgan Chase & Co. 89,266 3,168
Kronos, Inc. (AE) 4,881 191
Lehman Brothers Holdings, Inc. 5,220 479
Loews Corp. 12,000 851
MBNA Corp. 18,060 357
Mellon Financial Corp. 28,530 790
Merrill Lynch & Co., Inc. 55,330 2,984
Metlife, Inc. 51,570 2,006
Montpelier Re Holdings, Ltd. 10,025 333
Morgan Stanley 23,600 1,242
Nationwide Financial Services, Inc. 27,800 985
Northern Trust Corp. 19,800 892
PNC Financial Services Group, Inc. 38,370 2,042
Providian Financial Corp. (AE) 75,300 1,255
Prudential Financial, Inc. 17,900 1,023
Regions Financial Corp. 15,500 519
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. (o) 9,400 511
SunTrust Banks, Inc. 40,240 2,931
US Bancorp 77,700 2,168
W Holding Co., Inc. (N) 31,799 257
Wachovia Corp. 16,600 850
Wells Fargo & Co. 12,930 775
Zions BanCorp. 4,600 322
------------
82,981
------------
Health Care - 10.4%
Abbott Laboratories 22,230 1,093
Amgen, Inc. (AE) 35,400 2,061
Baxter International, Inc. 59,550 2,209
Biogen Idec, Inc. (AE) 90,215 3,269
Boston Scientific Corp. (AE) 100,200 2,964
Caremark Rx, Inc. (AE) 39,200 1,570
Eli Lilly & Co. 18,580 1,086
Gentiva Health Services, Inc. (AE) 29,522 578
Genzyme Corp. (AE) 33,900 1,987
HCA, Inc. 15,500 866
Invitrogen Corp. (AE) 11,600 850
IVAX Corp. (AE) 23,900 452
Johnson & Johnson 35,010 2,403
KV Pharmaceutical Co. Class A (AE)(N) 16,239 380
LifePoint Hospitals, Inc. (AE) 13,238 588
McKesson Corp. 16,000 592
Merck & Co., Inc. 55,200 1,871
Novartis AG ADR 7,560 368
Par Pharmaceutical Cos., Inc. (AE) 8,302 249
Pfizer, Inc. 47,750 1,297
PolyMedica Corp. (N) 11,712 363
PSS World Medical, Inc. (AE) 45,276 505
Roche Holding AG ADR 10,490 633
Rotech Healthcare, Inc. (AE)(N) 14,235 353
Sunrise Senior Living, Inc. (AE)(N) 9,232 473
UnitedHealth Group, Inc. 20,000 1,890
US Physical Therapy, Inc. (AE)(N) 13,889 200
WellPoint, Inc. (AE) 23,700 3,028
Wyeth 39,350 1,768
------------
35,946
------------
Integrated Oils - 5.3%
ChevronTexaco Corp. 71,042 3,694
ConocoPhillips 42,550 4,461
Exxon Mobil Corp. 113,150 6,454
Marathon Oil Corp. 21,900 1,020
</Table>
Select Value Fund 163
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Total SA ADR (N) 8,260 916
Unocal Corp. 35,530 1,938
------------
18,483
------------
Materials and Processing - 8.3%
Air Products & Chemicals, Inc. 18,040 1,059
Airgas, Inc. 15,838 347
Alcoa, Inc. 37,200 1,080
American Standard Cos., Inc. 45,700 2,043
Archer-Daniels-Midland Co. 46,140 830
Avery Dennison Corp. 16,900 885
Bemis Co. 31,900 879
Bowater, Inc. (N) 36,480 1,185
Cabot Corp. 14,200 434
Cabot Microelectronics Corp. (AE)(N) 4,388 126
Crompton Corp. 38,200 537
Dow Chemical Co. (The) 110,580 5,079
EI Du Pont de Nemours & Co. 45,080 2,124
Engelhard Corp. 2,600 80
International Paper Co. 62,660 2,149
Masco Corp. 27,180 856
MeadWestvaco Corp. 20,600 607
Monsanto Co. 33,190 1,946
Nalco Holding Co. (AE) 8,380 151
PPG Industries, Inc. 22,160 1,497
Praxair, Inc. 38,690 1,812
Rohm & Haas Co. 14,500 633
Smurfit-Stone Container Corp. (AE) 19,460 255
Syngenta AG ADR 34,190 709
United States Steel Corp. 22,100 945
Valspar Corp. (N) 15,000 620
------------
28,868
------------
Miscellaneous - 3.6%
General Electric Co. 91,400 3,309
Hillenbrand Industries, Inc. 10,700 591
Honeywell International, Inc. 32,000 1,144
Teleflex, Inc. (N) 5,000 267
Textron, Inc. 17,100 1,288
Tyco International, Ltd. 119,600 3,745
Vivendi Universal SA ADR (N) 69,500 2,061
------------
12,405
------------
Other Energy - 3.4%
Burlington Resources, Inc. 30,800 1,497
Cal Dive International, Inc. (AE) 8,366 372
Chesapeake Energy Corp. 83,800 1,612
Devon Energy Corp. 56,580 2,556
Encore Acquisition Co. (AE) 10,211 375
EOG Resources, Inc. 12,620 600
Forest Oil Corp. (AE) 10,150 391
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Global Industries, Ltd. (AE) 27,658 267
GlobalSantaFe Corp. 7,260 244
Hanover Compressor Co. (AE)(N) 33,395 346
Noble Corp. 16,190 824
NRG Energy, Inc. (AE) 14,300 445
Remington Oil & Gas Corp. (AE) 16,095 469
Sunoco, Inc. 16,400 1,628
------------
11,626
------------
Producer Durables - 5.8%
Ametek, Inc. 7,750 293
Applied Signal Technology, Inc. 9,579 187
BE Aerospace, Inc. (AE) 52,936 643
Champion Enterprises, Inc. (AE) 45,587 430
Cooper Industries, Ltd. Class A 8,500 541
Crane Co. 11,816 302
Deere & Co. 20,790 1,300
Duratek, Inc. (AE) 11,245 261
Emerson Electric Co. 28,160 1,765
Engineered Support Systems, Inc. 13,995 494
Esterline Technologies Corp. (AE) 14,092 455
IDEX Corp. 11,169 416
Illinois Tool Works, Inc. 9,620 806
Ingersoll-Rand Co. Class A 21,000 1,614
Lennar Corp. Class A 48,000 2,471
Lockheed Martin Corp. 25,910 1,579
Northrop Grumman Corp. 23,530 1,290
Park-Ohio Holdings Corp. (AE) 12,397 175
Pulte Homes, Inc. 14,200 1,015
Sandvik AB ADR (N) 6,520 254
United Technologies Corp. 33,710 3,429
Varian Semiconductor Equipment Associates, Inc.
(AE) 4,725 176
------------
19,896
------------
Technology - 5.0%
Analog Devices, Inc. 10,110 345
BEI Technologies, Inc. 9,340 215
Citrix Systems, Inc. (AE) 34,700 781
Filenet Corp. (AE) 10,860 288
General Dynamics Corp. 20,000 2,101
Hewlett-Packard Co. 86,900 1,779
Intel Corp. 92,700 2,180
International Business Machines Corp. 26,420 2,018
Internet Security Systems, Inc. (AE) 14,192 276
</Table>
164 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
InterVoice, Inc. (AE) 24,024 258
IXYS Corp. (AE) 28,430 289
JDA Software Group, Inc. (AE) 20,271 208
Mantech International Corp. Class A (AE)(N) 18,702 450
Mentor Graphics Corp. (AE) 19,039 170
Motorola, Inc. 25,400 390
National Semiconductor Corp. 25,200 481
QLogic Corp. (AE) 18,100 602
Seagate Technology 97,800 1,719
Sybase, Inc. (AE) 12,245 232
Symantec Corp. (AE) 44,600 838
Tellabs, Inc. (AE) 106,700 828
Texas Instruments, Inc. 21,600 539
Titan Corp. (AE) 24,875 447
------------
17,434
------------
Utilities - 8.2%
Alltel Corp. 18,300 1,042
America Movil SA de CV ADR Class L 27,800 1,380
BellSouth Corp. 33,900 898
Cinergy Corp. 6,720 266
Citizens Communications Co. 62,300 794
Comcast Corp. Special Class A (AE) 2,310 73
Constellation Energy Group, Inc. 12,200 641
Dominion Resources, Inc. 23,590 1,779
Duke Energy Corp. 51,700 1,509
Edison International 11,600 421
Energy East Corp. 10,000 260
Entergy Corp. 5,120 375
Exelon Corp. 27,800 1,376
FPL Group, Inc. 4,000 163
Northeast Utilities 13,600 249
Oneok, Inc. 34,935 1,008
PPL Corp. 21,010 1,140
Progress Energy, Inc. 1,300 --
Public Service Enterprise Group, Inc. (N) 6,460 375
SBC Communications, Inc. 73,500 1,749
Sierra Pacific Resources (AE)(N) 43,694 473
Sprint Corp. 281,950 6,276
TXU Corp. 8,840 758
Verizon Communications, Inc. 122,380 4,381
Vodafone Group PLC ADR (N) 41,393 1,082
------------
28,468
------------
TOTAL COMMON STOCKS
(cost $292,505) 325,174
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 5.7%
Frank Russell Investment Company Money Market
Fund 18,608,000 18,608
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 1,100 1,097
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $19,705) 19,705
------------
OTHER SECURITIES - 4.9%
Frank Russell Investment Company Money Market
Fund (X) 4,116,596 4,117
State Street Securities Lending Quality Trust
(X) 12,970,070 12,970
------------
TOTAL OTHER SECURITIES
(cost $17,087) 17,087
------------
TOTAL INVESTMENTS - 104.6%
(identified cost $329,297) 361,966
OTHER ASSETS AND LIABILITIES,
NET - (4.6%) (15,926)
------------
NET ASSETS - 100.0% 346,040
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Value Fund 165
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FUTURES CONTRACTS
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
Russell 1000 Value Index
expiration date 06/05 (27) 8,657 (345)
S&P 500 E-Mini Index
expiration date 06/05 (100) 5,793 (271)
S&P 500 Index
expiration date 06/05 (21) 6,082 (111)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (727)
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Auto and Transportation 1.6
Consumer Discretionary 12.9
Consumer Staples 5.5
Financial Services 24.0
Health Care 10.4
Integrated Oils 5.3
Materials and Processing 8.3
Miscellaneous 3.6
Other Energy 3.4
Producer Durables 5.8
Technology 5.0
Utilities 8.2
Short-Term Investments 5.7
Other Securities 4.9
------------
Total Investments 104.6
Other Assets and Liabilities, Net (4.6)
------------
Net Assets 100.0
============
Futures Contracts 0.2
</Table>
See accompanying notes which are an integral part of the financial statements.
166 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(AE) Nonincome-producing security.
(I) Forward commitment.
(E) Adjustable or floating rate security. Rate shown reflects rate in effect
at period end. Variable Rate.
(f) Perpetual floating rate security. Rate shown reflects rate in effect at
period end.
(o) Real Estate Investment Trust (REIT).
(u) Bond is insured by a guarantor.
(B) Illiquid security.
(O) In default.
(c) At amortized cost, which approximates market.
(z) Rate noted is yield-to-maturity from date of acquisition.
(ae) Pre-refunded: These bonds are collateralized by US Treasury securities,
which are held in escrow by a trustee and used to pay principal and
interest in the tax-exempt issue and to retire the bonds in full at the
earliest refunding date. The rate noted is for descriptive purposes;
effective yield may vary.
(S) All or a portion of the shares of this security are held as collateral in
connection with futures contracts purchased (sold), options written, or
swaps entered into by the Fund.
(x) The security is purchased with the cash collateral from the securities
loaned.
(N) All or a portion of the shares of this security are on loan.
(p) Restricted security. Security may have contractual restrictions on resale,
may have been offered in a private placement transaction, and may not be
registered under the Securities Act of 1933.
ABBREVIATIONS:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
ADS - American Depositary Share
CMO - Collateralized Mortgage Obligation
CVO - Contingent Value Obligation
GDS - Global Depositary Share
LIBOR - London Interbank Offered Rate
PIK - Payment in Kind
FDIC - Federal Deposit Insurance Company
REMIC - Real Estate Mortgage Investment Conduit
STRIP - Separate Trading of Registered Interest and Principal of Securities
TBA - To Be Announced Security
FOREIGN CURRENCY ABBREVIATIONS:
<Table>
ARS - Argentine peso HKD - Hong Kong dollar PHP - Philippine peso
AUD - Australian dollar HUF - Hungarian forint PKR - Pakistani rupee
BRL - Brazilian real IDR - Indonesian rupiah PLN - Polish zloty
CAD - Canadian dollar ILS - Israeli shekel RUB - Russian ruble
CHF - Swiss franc INR - Indian rupee SEK - Swedish krona
CLP - Chilean peso ITL - Italian lira SGD - Singapore dollar
CNY - Chinese renminbi yuan JPY - Japanese yen SKK - Slovakian koruna
COP - Colombian peso KES - Kenyan schilling THB - Thai baht
CRC - Costa Rica colon KRW - South Korean won TRY - Turkish lira
CZK - Czech koruna MXN - Mexican peso TWD - Taiwanese dollar
DKK - Danish krone MYR - Malaysian ringgit USD - United States dollar
EGP - Egyptian pound NOK - Norwegian krone VEB - Venezuelan bolivar
EUR - Euro NZD - New Zealand dollar VND - Vietnam dong
GBP - British pound sterling PEN - Peruvian nouveau sol ZAR - South African rand
</Table>
Notes to Schedules of Investments 167
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 2,220,279 $ 908,282
- ---------------------------------------------------------------------------------------------------------------------
Investments, at market*** 2,441,928 989,224
Cash -- --
Foreign currency holdings* -- --
Unrealized appreciation on foreign currency exchange contracts -- --
Receivables:
Dividends and interest 2,692 377
Dividends from affiliated money market funds 330 129
Investments sold 27,650 8,219
Fund shares sold 4,675 2,669
Foreign taxes recoverable -- --
From Advisor 7 2
Daily variation margin on futures contracts 2,096 815
Prepaid expenses 69 47
Unrealized appreciation on index swap contracts -- --
Interest rate swap contracts, at market value**** -- --
------------------- --------------------
Total assets 2,479,447 1,001,482
------------------- --------------------
LIABILITIES
Payables:
Due to custodian -- --
Investments purchased 23,317 9,264
Fund shares redeemed 937 417
Accrued fees to affiliates 2,043 1,097
Other accrued expenses 190 72
Daily variation margin on futures contracts -- --
Deferred tax liability -- --
Unrealized depreciation on foreign currency exchange contracts -- --
Options written, at market value** -- --
Payable upon return of securities loaned 76,618 136,195
Unrealized depreciation on index swap contracts -- --
Interest rate swap contracts, at market value**** -- --
Unrealized depreciation on credit default swaps -- --
------------------- --------------------
Total liabilities 103,105 147,045
------------------- --------------------
NET ASSETS $ 2,376,342 $ 854,437
=================== ====================
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 1,129 $ (813)
Accumulated net realized gain (loss) (53,783) 49,760
Unrealized appreciation (depreciation) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of foreign capital gains taxes) 221,649 80,942
Futures contracts (6,052) (4,535)
Options written -- --
Credit default swaps -- --
Index swap contracts -- --
Interest rate swap contracts -- --
Foreign currency-related transactions -- --
Shares of beneficial interest 574 181
Additional paid-in capital 2,212,825 728,902
------------------- --------------------
NET ASSETS $ 2,376,342 $ 854,437
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
168 Statement of Assets and Liabilities
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES EMERGING MARKETS REAL ESTATE SHORT DURATION
FUND FUND FUND SECURITIES FUND BOND FUND
- ------------------------------------------------------------------------------------------------------------
$ 2,330,619 $ 2,372,677 $ 558,318 $ 1,107,864 $ 1,258,581
- ------------------------------------------------------------------------------------------------------------
2,525,399 2,625,437 704,485 1,514,933 1,249,519
-- -- -- -- --
-- 9,229 8,188 -- 93
-- 3,013 609 -- 11
2,713 7,648 1,929 748 6,608
203 371 81 93 144
41,643 34,053 2,408 3,844 --
4,826 5,937 1,703 2,484 3,006
-- 351 4 -- --
7 6 1 2 4
1,660 261 -- -- --
67 42 8 51 19
-- -- -- -- --
-- -- -- -- --
-------------- -------------- -------------- -------------- --------------
2,576,518 2,686,348 719,416 1,522,155 1,259,404
-------------- -------------- -------------- -------------- --------------
-- 33 -- -- 479
47,530 19,541 6,697 3,046 48,038
822 554 236 1,227 484
2,164 2,168 947 1,482 710
127 198 182 88 100
-- -- 61 -- 250
-- -- 1,076 -- --
-- 6,709 335 -- 18
-- 2,898 2,441 -- 4
48,179 547,103 12,684 97,692 1,601
-- 126 -- -- --
-- -- -- -- 17
-- -- -- -- --
-------------- -------------- -------------- -------------- --------------
98,822 579,330 24,659 103,535 51,701
-------------- -------------- -------------- -------------- --------------
$ 2,477,696 $ 2,107,018 $ 694,757 $ 1,418,620 $ 1,207,703
============== ============== ============== ============== ==============
$ 725 $ (5,443) $ (4,395) $ (1,568) $ 2,559
64,401 27,232 (20,572) 80,695 (3,211)
194,780 252,760 145,090 407,069 (9,062)
(3,338) (8,242) (641) -- (1,390)
-- (391) (1,470) -- (1)
-- -- -- -- --
-- (126) -- -- --
-- -- -- -- 191
-- (3,707) 333 -- (8)
688 353 474 329 641
2,220,440 1,844,582 575,938 932,095 1,217,984
-------------- -------------- -------------- -------------- --------------
$ 2,477,696 $ 2,107,018 $ 694,757 $ 1,418,620 $ 1,207,703
============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 169
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share:
Net asset value per share: Class C***** $ 40.26 $ 43.42
Class C -- Net assets $ 112,133,158 $ 49,715,285
Class C -- Shares outstanding ($.01 par value) 2,785,161 1,144,908
Net asset value per share: Class E***** $ 41.47 $ 45.92
Class E -- Net assets $ 48,082,105 $ 32,905,481
Class E -- Shares outstanding ($.01 par value) 1,159,516 716,609
Net asset value per share: Class I***** $ -- $ --
Class I -- Net assets $ -- $ --
Class I -- Shares outstanding ($.01 par value) -- --
Net asset value per share: Class S***** $ 41.46 $ 47.42
Class S -- Net assets $ 2,216,126,587 $ 771,816,137
Class S -- Shares outstanding ($.01 par value) 53,446,328 16,276,133
- ---------------------------------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings - cost $ -- $ --
** Premiums received on options written $ -- $ --
*** Securities on loan included in investments $ 75,299 $ 133,302
**** Interest rate swap contracts - premiums paid (received) $ -- $ --
***** Net asset value per share equals class level net assets divided
by class level shares of beneficial interest outstanding.
</Table>
See accompanying notes which are an integral part of the financial statements.
170 Statement of Assets and Liabilities
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES EMERGING MARKETS REAL ESTATE SHORT DURATION
FUND FUND FUND SECURITIES FUND BOND FUND
- ------------------------------------------------------------------------------------------------------------
$ 35.10 $ 57.44 $ 14.23 $ 42.36 $ 18.80
$ 114,906,575 $ 102,736,208 $ 26,390,545 $ 72,146,383 $ 33,083,980
3,273,971 1,788,564 1,854,794 1,703,254 1,759,909
$ 35.96 $ 59.34 $ 14.67 $ 42.85 $ 18.87
$ 51,101,931 $ 40,758,666 $ 15,496,920 $ 34,604,739 $ 23,959,819
1,420,986 686,817 1,056,644 807,629 1,269,999
$ -- $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ --
-- -- -- -- --
$ 36.06 $ 59.90 $ 14.67 $ 43.22 $ 18.84
$2,311,687,710 $1,963,523,398 $ 652,869,070 $1,311,868,725 $1,150,659,181
64,107,789 32,780,544 44,509,395 30,350,884 61,076,326
- ------------------------------------------------------------------------------------------------------------
$ -- $ 9,147 $ 8,143 $ -- $ 95
$ -- $ 2,507 $ 971 $ -- $ 3
$ 46,895 $ 519,864 $ 12,475 $ 96,851 $ 1,561
$ -- $ -- $ -- $ -- $ (208)
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 171
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED BOND MULTISTRATEGY BOND
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 1,868,683 $ 2,322,791
- ---------------------------------------------------------------------------------------------------------------------
Investments, at market*** 1,874,449 2,339,811
Cash 12 944
Foreign currency holdings* 228 590
Unrealized appreciation on foreign currency exchange contracts 628 748
Receivables:
Dividends and interest 10,992 11,728
Dividends from affiliated money market funds 432 516
Investments sold 77,398 162,181
Fund shares sold 2,550 3,134
Foreign taxes recoverable -- --
From Advisor 8 7
Daily variation margin on futures contracts 4 186
Prepaid expenses 94 72
Unrealized appreciation on index swap contracts -- 58
Interest rate swap contracts, at market value**** 37 302
------------------- --------------------
Total assets 1,966,832 2,520,277
------------------- --------------------
LIABILITIES
Payables:
Due to custodian -- --
Investments purchased 371,639 475,147
Fund shares redeemed 730 821
Accrued fees to affiliates 868 1,186
Other accrued expenses 93 94
Daily variation margin on futures contracts 386 499
Deferred tax liability -- --
Unrealized depreciation on foreign currency exchange contracts 117 208
Options written, at market value** 72 43
Payable upon return of securities loaned 93,540 396,635
Unrealized depreciation on index swap contracts -- 482
Interest rate swap contracts, at market value**** 17 --
Unrealized depreciation on credit default swaps 8 --
------------------- --------------------
Total liabilities 467,470 875,115
------------------- --------------------
NET ASSETS $ 1,499,362 $ 1,645,162
=================== ====================
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 4,147 $ 4,874
Accumulated net realized gain (loss) 563 3,048
Unrealized appreciation (depreciation) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of foreign capital gains taxes) 5,766 17,020
Futures contracts (353) 1,056
Options written 91 189
Credit default swap contracts (8) --
Index swap contracts -- 58
Interest rate swap contracts (2) (181)
Foreign currency-related transactions 519 454
Shares of beneficial interest 631 1,568
Additional paid-in capital 1,488,008 1,617,076
------------------- --------------------
NET ASSETS $ 1,499,362 $ 1,645,162
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
172 Statement of Assets and Liabilities
<Table>
<Caption>
TAX EXEMPT TAX-MANAGED TAX-MANAGED MID & SELECT GROWTH SELECT VALUE
BOND FUND LARGE CAP FUND SMALL CAP FUND FUND FUND
- ---------------------------------------------------------------------------------------------
$ 226,568 $ 310,590 $ 146,770 $ 168,678 $ 329,297
- ---------------------------------------------------------------------------------------------
231,462 385,774 160,649 173,841 361,966
-- 40 -- -- 11
-- -- -- -- --
-- -- -- -- --
3,024 425 56 70 432
18 40 25 25 40
-- 1,286 549 2,038 4,567
754 365 217 378 655
-- -- -- -- --
-- -- 19 48 --
-- 222 119 149 273
24 23 18 9 4
-- -- -- -- --
-- -- -- -- --
-------------- -------------- -------------- -------------- --------------
235,282 388,175 161,652 176,558 367,948
-------------- -------------- -------------- -------------- --------------
-- -- -- 7 --
599 2,811 1,001 1,898 4,290
55 39 15 24 106
111 352 171 147 382
24 25 33 51 43
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- 2,631 20,584 8,006 17,087
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-------------- -------------- -------------- -------------- --------------
789 5,858 21,804 10,133 21,908
-------------- -------------- -------------- -------------- --------------
$ 234,493 $ 382,317 $ 139,848 $ 166,425 $ 346,040
============== ============== ============== ============== ==============
$ 656 $ 550 $ (53) $ 167 $ 309
(1,227) (101,565) (13,916) (20,603) (4,510)
4,894 75,184 13,879 5,163 32,669
-- (748) (833) (492) (727)
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
107 222 129 232 319
230,063 408,674 140,642 181,958 317,980
-------------- -------------- -------------- -------------- --------------
$ 234,493 $ 382,317 $ 139,848 $ 166,425 $ 346,040
============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 173
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED BOND MULTISTRATEGY BOND
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share:
Net asset value per share: Class C***** $ 24.23 $ 10.47
Class C -- Net assets $ 50,911,319 $ 63,511,126
Class C -- Shares outstanding ($.01 par value) 2,101,469 6,063,767
Net asset value per share: Class E***** $ 24.30 $ 10.48
Class E -- Net assets $ 47,994,942 $ 35,621,806
Class E -- Shares outstanding ($.01 par value) 1,974,776 3,397,418
Net asset value per share: Class I***** $ -- $ --
Class I -- Net assets $ -- $ --
Class I -- Shares outstanding ($.01 par value) -- --
Net asset value per share: Class S***** $ 23.72 $ 10.49
Class S -- Net assets $ 1,400,463,247 $ 1,546,028,989
Class S -- Shares outstanding ($.01 par value) 59,045,428 147,324,088
- ---------------------------------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings - cost $ 229 $ 591
** Premiums received on options written $ 163 $ 232
*** Securities on loan included in investments $ 91,432 $ 387,916
**** Interest rate swap contracts - premiums paid (received) $ 22 $ 1
***** Net asset value per share equals class level net assets divided
by class level shares of beneficial interest outstanding.
</Table>
See accompanying notes which are an integral part of the financial statements.
174 Statement of Assets and Liabilities
<Table>
<Caption>
TAX EXEMPT TAX-MANAGED TAX-MANAGED SELECT GROWTH SELECT VALUE
BOND FUND LARGE CAP FUND MID & SMALL CAP FUND FUND FUND
- ------------------------------------------------------------------------------------------------
$ 21.80 $ 16.87 $ 10.32 $ 6.82 $ 10.68
$ 11,597,585 $ 15,389,555 $ 7,574,853 $ 7,639,936 $ 20,119,259
532,115 912,267 734,348 1,120,531 1,883,892
$ 21.86 $ 17.20 $ 10.75 $ 7.08 $ 10.83
$ 7,485,652 $ 7,053,730 $ 1,275,323 $ 5,987,861 $ 10,079,910
342,398 410,213 118,599 846,299 930,663
$ -- $ -- $ -- $ 7.20 $ 10.86
$ -- $ -- $ -- $ 91,719,735 $ 121,079,757
-- -- -- 12,746,214 11,151,085
$ 21.84 $ 17.25 $ 10.86 $ 7.16 $ 10.84
$ 215,410,075 $ 359,874,046 $ 130,997,595 $ 61,077,027 $ 194,760,930
9,864,936 20,868,233 12,059,571 8,527,888 17,971,997
- ------------------------------------------------------------------------------------------------
$ -- $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ --
$ -- $ 2,571 $ 20,114 $ 7,731 $ 16,798
$ -- $ -- $ -- $ -- $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 175
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 20,346 $ 4,102
Dividends from affiliated money market funds 1,328 563
Interest 163 40
Securities lending income 59 182
Less foreign taxes withheld -- --
------------------- --------------------
Total investment income 21,896 4,887
------------------- --------------------
EXPENSES
Advisory fees 8,299 3,859
Administrative fees 569 214
Custodian fees 300 222
Distribution fees - Class C 401 191
Transfer agent fees 797 919
Transfer agent fees - Class C -- --
Transfer agent fees - Class E -- --
Transfer agent fees - Class I -- --
Transfer agent fees - Class S -- --
Professional fees 56 31
Registration fees 68 38
Shareholder servicing fees - Class C 134 63
Shareholder servicing fees - Class E 60 43
Trustees' fees 27 10
Printing fees 48 19
LifePoints funds fees 870 194
Miscellaneous 20 9
------------------- --------------------
Expenses before reductions 11,649 5,812
Expense reductions (144) (112)
------------------- --------------------
Net expenses 11,505 5,700
------------------- --------------------
Net investment income (loss) 10,391 (813)
------------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of foreign capital gains taxes) 68,910 50,252
Futures contracts 10,880 5,340
Options written -- --
Credit default swaps -- --
Index swap contracts -- --
Interest rate swap contracts -- --
Short sales -- --
Foreign currency-related transactions -- --
------------------- --------------------
Net realized gain (loss) 79,790 55,592
------------------- --------------------
Net change in unrealized appreciation (depreciation) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of deferred tax liability for foreign capital gains
taxes) 14,680 (44,008)
Futures contracts (8,554) (5,763)
Options written -- --
Credit default swaps -- --
Index swap contracts -- --
Interest rate swap contracts -- --
Foreign currency-related transactions -- --
------------------- --------------------
Net change in unrealized appreciation (depreciation) 6,126 (49,771)
------------------- --------------------
Net realized and unrealized gain (loss) 85,916 5,821
------------------- --------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 96,307 $ 5,008
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
176 Statement of Operations
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES EMERGING MARKETS REAL ESTATE SHORT DURATION
FUND FUND FUND SECURITIES FUND BOND FUND
- ------------------------------------------------------------------------------------------------------------
$ 23,782 $ 25,574 $ 9,576 $ 20,775 $ 48
1,018 1,518 397 432 950
78 -- 7 -- 17,315
40 706 14 33 3
-- (2,845) (953) -- --
------------- -------------- ---------------- -------------- ------------
24,918 24,953 9,041 21,240 18,316
------------- -------------- ---------------- -------------- ------------
8,717 9,036 3,871 5,316 2,697
598 502 168 332 300
286 1,038 768 148 160
413 359 95 248 129
871 815 821 1,080 235
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
51 66 44 36 37
69 116 84 39 49
138 120 32 83 43
64 53 20 41 29
28 23 8 16 15
23 19 15 17 13
878 782 144 247 382
22 17 8 33 12
------------- -------------- ---------------- -------------- ------------
12,158 12,946 6,078 7,636 4,101
(75) (288) (160) (47) (21)
------------- -------------- ---------------- -------------- ------------
12,083 12,658 5,918 7,589 4,080
------------- -------------- ---------------- -------------- ------------
12,835 12,295 3,123 13,651 14,236
------------- -------------- ---------------- -------------- ------------
103,598 103,262 50,827 58,712 (1,500)
9,518 13,568 1,272 -- (985)
-- 1,348 1,433 -- --
-- -- -- -- --
-- (352) -- -- --
-- -- -- -- (387)
-- -- -- -- --
-- 9,077 2,748 -- (6)
------------- -------------- ---------------- -------------- ------------
113,116 126,903 56,280 58,712 (2,878)
------------- -------------- ---------------- -------------- ------------
(55,226) 2,980 28,061 31,385 (9,862)
(5,252) (7,562) (910) -- (1,721)
-- (269) (1,269) -- (12)
-- -- -- -- --
-- (126) -- -- --
-- -- -- -- (302)
-- (8,634) (477) -- 6
------------- -------------- ---------------- -------------- ------------
(60,478) (13,611) 25,405 31,385 (11,891)
------------- -------------- ---------------- -------------- ------------
52,638 113,292 81,685 90,097 (14,769)
------------- -------------- ---------------- -------------- ------------
$ 65,473 $ 125,587 $ 84,808 $ 103,748 $ (533)
============= ============== ================ ============== ============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 177
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED BOND MULTISTRATEGY BOND
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 47 $ 143
Dividends from affiliated money market funds 2,203 2,746
Interest 24,451 26,819
Securities lending income 59 132
Less foreign taxes withheld -- --
------------------- --------------------
Total investment income 26,760 29,840
------------------- --------------------
EXPENSES
Advisory fees 2,809 4,518
Administrative fees 351 377
Custodian fees 268 280
Distribution fees - Class C 178 219
Transfer agent fees 376 492
Transfer agent fees - Class C -- --
Transfer agent fees - Class E -- --
Transfer agent fees - Class I -- --
Transfer agent fees - Class S -- --
Professional fees 44 39
Registration fees 57 69
Shareholder servicing fees - Class C 60 73
Shareholder servicing fees - Class E 57 41
Trustees' fees 17 17
Printing fees 14 14
LifePoints funds fees 566 608
Miscellaneous 14 13
------------------- --------------------
Expenses before reductions 4,811 6,760
Expense reductions (25) (33)
------------------- --------------------
Net expenses 4,786 6,727
------------------- --------------------
Net investment income (loss) 21,974 23,113
------------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of foreign capital gains taxes) 2,037 4,188
Futures contracts 378 435
Options written 253 469
Credit default swaps -- --
Index swap contracts -- 116
Interest rate swap contracts 119 618
Short sales -- --
Foreign currency-related transactions (404) (1,396)
------------------- --------------------
Net realized gain (loss) 2,383 4,430
------------------- --------------------
Net change in unrealized appreciation (depreciation) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of deferred tax liability for foreign capital gains
taxes) (13,364) (9,838)
Futures contracts (1,774) (478)
Options written 19 57
Credit default swaps (8) --
Index swap contracts -- (106)
Interest rate swap contracts 152 (191)
Foreign currency-related transactions 770 1,087
------------------- --------------------
Net change in unrealized appreciation (depreciation) (14,205) (9,469)
------------------- --------------------
Net realized and unrealized gain (loss) (11,822) (5,039)
------------------- --------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 10,152 $ 18,074
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
178 Statement of Operations
<Table>
<Caption>
TAX EXEMPT TAX-MANAGED TAX-MANAGED MID & SELECT GROWTH SELECT VALUE
BOND FUND LARGE CAP FUND SMALL CAP FUND FUND FUND
- ------------------------------------------------------------------------------------------
$ -- $ 4,222 $ 654 $ 788 $ 3,308
94 228 132 104 189
4,140 17 32 10 16
-- 1 23 10 13
-- -- -- -- --
------------- -------------- ---------------- -------------- ------------
4,234 4,468 841 912 3,526
------------- -------------- ---------------- -------------- ------------
326 1,344 700 596 1,163
54 96 36 37 83
53 77 70 75 93
42 56 28 26 72
57 105 87 -- --
-- -- -- 9 34
-- -- -- 4 10
-- -- -- 25 29
-- -- -- 40 231
18 20 15 18 30
20 23 16 28 32
14 19 9 9 24
9 8 2 7 13
3 5 2 2 4
2 5 3 1 6
-- 37 11 -- --
2 4 1 -- 3
------------- -------------- ---------------- -------------- ------------
600 1,799 980 877 1,827
(4) (34) (86) (132) (133)
------------- -------------- ---------------- -------------- ------------
596 1,765 894 745 1,694
------------- -------------- ---------------- -------------- ------------
3,638 2,703 (53) 167 1,832
------------- -------------- ---------------- -------------- ------------
89 7,334 3,241 5,039 12,225
-- 1,533 809 552 1,689
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
------------- -------------- ---------------- -------------- ------------
89 8,867 4,050 5,591 13,914
------------- -------------- ---------------- -------------- ------------
(2,612) (1,810) (716) (6,809) 2,452
-- (918) (1,037) (713) (898)
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
------------- -------------- ---------------- -------------- ------------
(2,612) (2,728) (1,753) (7,522) 1,554
------------- -------------- ---------------- -------------- ------------
(2,523) 6,139 2,297 (1,931) 15,468
------------- -------------- ---------------- -------------- ------------
$ 1,115 $ 8,842 $ 2,244 $ (1,764) $ 17,300
============= ============== ================ ============== ============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 179
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
FUND FUND
-------------------------------- -----------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2004 (UNAUDITED) 2004
- -------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 10,391 $ 9,268 $ (813) $ (1,566)
Net realized gain (loss) 79,790 111,848 55,592 82,068
Net change in unrealized
appreciation (depreciation) 6,126 5,936 (49,771) (19,814)
-------------- -------------- -------------- -----------------
Net increase (decrease) in net assets
from operations 96,307 127,052 5,008 60,688
-------------- -------------- -------------- -----------------
DISTRIBUTIONS
From net investment income
Class C (101) -- -- --
Class E (159) (101) -- --
Class I -- -- -- --
Class S (9,623) (9,386) -- --
From net realized gain
Class C -- -- (6,286) (1,069)
Class E -- -- (4,121) (460)
Class I -- -- -- --
Class S -- -- (86,903) (16,646)
-------------- -------------- -------------- -----------------
Net decrease in net assets from
distributions (9,883) (9,487) (97,310) (18,175)
-------------- -------------- -------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net
assets from share transactions 206,259 422,431 159,940 60,095
-------------- -------------- -------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET
ASSETS 292,683 539,996 67,638 102,608
NET ASSETS
Beginning of period 2,083,659 1,543,663 786,799 684,191
-------------- -------------- -------------- -----------------
End of period $ 2,376,342 $ 2,083,659 $ 854,437 $ 786,799
============== ============== ============== =================
Undistributed (overdistributed)
net investment income included
in net assets $ 1,129 $ 621 $ (813) $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
180 Statement of Changes in Net Assets
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES EMERGING MARKETS
FUND FUND FUND
------------------------------ ------------------------------ ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004 (UNAUDITED) 2004
- ----------------------------------------------------------------------------------------------------
$ 12,835 $ 11,855 $ 12,295 $ 14,542 $ 3,123 $ 4,745
113,116 125,222 126,903 111,751 56,280 69,315
(60,478) 11,187 (13,611) 87,348 25,405 19,464
------------- ------------- ------------- ------------- ------------- -------------
65,473 148,264 125,587 213,641 84,808 93,524
------------- ------------- ------------- ------------- ------------- -------------
(209) -- (820) (769) (73) (309)
(222) (176) (605) (530) (134) (262)
-- -- -- -- -- --
(12,387) (11,810) (29,701) (26,815) (6,429) (11,244)
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
(12,818) (11,986) (31,126) (28,114) (6,636) (11,815)
------------- ------------- ------------- ------------- ------------- -------------
221,301 409,483 219,789 285,993 32,323 94,089
------------- ------------- ------------- ------------- ------------- -------------
273,956 545,761 314,250 471,520 110,495 175,798
2,203,740 1,657,979 1,792,768 1,321,248 584,262 408,464
------------- ------------- ------------- ------------- ------------- -------------
$ 2,477,696 $ 2,203,740 $ 2,107,018 $ 1,792,768 $ 694,757 $ 584,262
============= ============= ============= ============= ============= =============
$ 725 $ 708 $ (5,443) $ 13,388 $ (4,395) $ (882)
<Caption>
REAL ESTATE SECURITIES SHORT DURATION BOND
FUND FUND
------------------------------ ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- ---
$ 13,651 $ 23,181 $ 14,236 $ 21,573
58,712 108,208 (2,878) 1,882
31,385 170,285 (11,891) (1,952)
------------- ------------- ------------- -------------
103,748 301,674 (533) 21,503
------------- ------------- ------------- -------------
(447) (1,500) (233) (323)
(332) (831) (239) (359)
-- -- -- --
(14,055) (39,826) (13,096) (19,418)
(5,310) (7) (24) --
(2,607) (4) (16) --
-- -- -- --
(98,198) (175) (767) --
------------- ------------- ------------- -------------
(120,949) (42,343) (14,375) (20,100)
------------- ------------- ------------- -------------
173,783 122,824 25,671 175,555
------------- ------------- ------------- -------------
156,582 382,155 10,763 176,958
1,262,038 879,883 1,196,940 1,019,982
------------- ------------- ------------- -------------
$ 1,418,620 $ 1,262,038 $ 1,207,703 $ 1,196,940
============= ============= ============= =============
$ (1,568) $ (385) $ 2,559 $ 1,891
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 181
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
DIVERSIFIED BOND MULTISTRATEGY BOND
FUND FUND
-------------------------------- -----------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2004 (UNAUDITED) 2004
- -------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 21,974 $ 31,532 $ 23,113 $ 29,625
Net realized gain (loss) 2,383 21,908 4,430 24,425
Net change in unrealized
appreciation (depreciation) (14,205) 7,044 (9,469) 10,982
-------------- -------------- -------------- -----------------
Net increase (decrease) in net assets
from operations 10,152 60,484 18,074 65,032
-------------- -------------- -------------- -----------------
DISTRIBUTIONS
From net investment income
Class C (467) (696) (538) (976)
Class E (621) (924) (425) (746)
Class I -- -- -- --
Class S (19,775) (29,740) (19,941) (34,171)
From net realized gain
Class C (234) (812) (700) (524)
Class E (231) (761) (403) (301)
Class I
Class S (6,573) (22,429) (16,986) (12,913)
-------------- -------------- -------------- -----------------
Net decrease in net assets from
distributions (27,901) (55,362) (38,993) (49,631)
-------------- -------------- -------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net
assets from share transactions 194,841 269,049 296,367 410,345
-------------- -------------- -------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET
ASSETS 177,092 274,171 275,448 425,746
NET ASSETS
Beginning of period 1,322,270 1,048,099 1,369,714 943,968
-------------- -------------- -------------- -----------------
End of period $ 1,499,362 $ 1,322,270 $ 1,645,162 $ 1,369,714
============== ============== ============== =================
Undistributed (overdistributed)
net investment income included
in net assets $ 4,147 $ 3,036 $ 4,874 $ 2,665
</Table>
See accompanying notes which are an integral part of the financial statements.
182 Statement of Changes in Net Assets
<Table>
<Caption>
TAX EXEMPT TAX-MANAGED TAX-MANAGED MID &
BOND FUND LARGE CAP FUND SMALL CAP FUND
------------------------------ ------------------------------ ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004 (UNAUDITED) 2004
- ----------------------------------------------------------------------------------------------------
$ 3,638 $ 6,089 $ 2,703 $ 2,023 $ (53) $ (454)
89 (357) 8,867 6,442 4,050 18,422
(2,612) 596 (2,728) 27,366 (1,753) (6,322)
------------- ------------- ------------- ------------- ------------- -------------
1,115 6,328 8,842 35,831 2,244 11,646
------------- ------------- ------------- ------------- ------------- -------------
(121) (256) (14) -- -- --
(101) (202) (55) (17) -- --
-- -- -- -- -- --
(3,160) (5,538) (3,707) (1,649) -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
(3,382) (5,996) (3,776) (1,666) -- --
------------- ------------- ------------- ------------- ------------- -------------
34,075 43,401 15,315 5,548 7,238 6,107
------------- ------------- ------------- ------------- ------------- -------------
31,808 43,733 20,381 39,713 9,482 17,753
202,685 158,952 361,936 322,223 130,366 112,613
------------- ------------- ------------- ------------- ------------- -------------
$ 234,493 $ 202,685 $ 382,317 $ 361,936 $ 139,848 $ 130,366
============= ============= ============= ============= ============= =============
$ 656 $ 400 $ 550 $ 1,623 $ (53) $ --
<Caption>
SELECT GROWTH SELECT VALUE
FUND FUND
------------------------------ ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004
- ---
$ 167 $ (400) $ 1,832 $ 2,091
5,591 1,953 13,914 21,405
(7,522) (947) 1,554 10,251
------------- ------------- ------------- -------------
(1,764) 606 17,300 33,747
------------- ------------- ------------- -------------
-- -- (18) (8)
-- -- (42) (45)
-- -- (656) (832)
-- -- (962) (1,175)
-- -- (14) --
-- -- (8) --
-- -- (83) --
-- -- (145) --
------------- ------------- ------------- -------------
-- -- (1,928) (2,060)
------------- ------------- ------------- -------------
44,923 40,106 28,636 49,612
------------- ------------- ------------- -------------
43,159 40,712 44,008 81,299
123,266 82,554 302,032 220,733
------------- ------------- ------------- -------------
$ 166,425 $ 123,266 $ 346,040 $ 302,032
============= ============= ============= =============
$ 167 $ -- $ 309 $ 155
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 183
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$
$ $ $ $ DISTRIBUTIONS
NET ASSET VALUE, NET NET REALIZED TOTAL INCOME FROM NET
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
DIVERSIFIED EQUITY FUND
Class C
April 30, 2005* 38.64 (.01) 1.67 1.66 (.04)
October 31, 2004 36.27 (.17) 2.54 2.37 --
October 31, 2003 30.52 (.13) 5.88 5.75 --(d)
October 31, 2002 35.83 (.18) (5.13) (5.31) --
October 31, 2001 50.12 (.24) (13.82) (14.06) --
October 31, 2000 (1) 54.13 (.24) (2.55) (2.79) --
December 31, 1999 (2) 52.04 (.20) 8.14 7.94 (.03)
- -----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 39.75 .15 1.71 1.86 (.14)
October 31, 2004 37.12 .12 2.61 2.73 (.10)
October 31, 2003 31.10 .12 6.00 6.12 (.10)
October 31, 2002 36.35 .08 (5.23) (5.15) (.09)
October 31, 2001 50.55 .07 (13.96) (13.89) (.08)
October 31, 2000 (1) 54.43 .08 (2.57) (2.49) (.17)
December 31, 1999 51.40 .13 8.81 8.94 (.09)
- -----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 39.74 .20 1.71 1.91 (.19)
October 31, 2004 37.13 .22 2.60 2.82 (.21)
October 31, 2003 31.09 .20 6.01 6.21 (.17)
October 31, 2002 36.35 .16 (5.23) (5.07) (.16)
October 31, 2001 50.55 .18 (13.97) (13.79) (.18)
October 31, 2000 (1) 54.33 .19 (2.57) (2.38) (.18)
December 31, 1999 51.39 .28 8.79 9.07 (.31)
- -----------------------------------------------------------------------------------------------------------------------------------
SPECIAL GROWTH FUND
Class C
April 30, 2005* 49.16 (.27) 1.03 .76 --
October 31, 2004 46.99 (.56) 4.05 3.49 --
October 31, 2003 33.52 (.46) 13.93 13.47 --
October 31, 2002 37.42 (.45) (3.45) (3.90) --
October 31, 2001 51.05 (.38) (7.12) (7.50) --
October 31, 2000 (1) 48.22 (.38) 4.56 4.18 --
December 31, 1999 (2) 42.17 (.45) 9.72 9.27 --
- -----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 51.47 (.10) 1.05 .95 --
October 31, 2004 48.77 (.20) 4.22 4.02 --
October 31, 2003 34.53 (.18) 14.42 14.24 --
October 31, 2002 38.27 (.16) (3.58) (3.74) --
October 31, 2001 51.74 (.06) (7.25) (7.31) (.03)
October 31, 2000 (1) 48.55 (.07) 4.61 4.54 --
December 31, 1999 42.91 (.16) 9.02 8.86 --
- -----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 52.89 (.03) 1.06 1.03 --
October 31, 2004 49.95 (.07) 4.33 4.26 --
October 31, 2003 35.28 (.08) 14.75 14.67 --
October 31, 2002 39.01 (.07) (3.66) (3.73) --
October 31, 2001 52.52 .05 (7.37) (7.32) (.06)
October 31, 2000 (1) 49.18 .04 4.67 4.71 (.02)
December 31, 1999 43.34 (.05) 9.12 9.07 (.01)
- -----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- -----------------------------------------------------------------------
DIVERSIFIED EQUITY FUND
Class C
April 30, 2005* -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (.23) --
October 31, 2000 (1) (1.22) --
December 31, 1999 (2) (5.82) --
- -----------------------------------------------------------------------
Class E
April 30, 2005* -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- (.01)
October 31, 2001 (.23) --
October 31, 2000 (1) (1.22) --
December 31, 1999 (5.82) --
- -----------------------------------------------------------------------
Class S
April 30, 2005* -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- (.03)
October 31, 2001 (.23) --
October 31, 2000 (1) (1.22) --
December 31, 1999 (5.82) --
- -----------------------------------------------------------------------
SPECIAL GROWTH FUND
Class C
April 30, 2005* (6.50) --
October 31, 2004 (1.32) --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (6.13) --
October 31, 2000 (1) (1.35) --
December 31, 1999 (2) (3.22) --
- -----------------------------------------------------------------------
Class E
April 30, 2005* (6.50) --
October 31, 2004 (1.32) --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (6.13) --
October 31, 2000 (1) (1.35) --
December 31, 1999 (3.22) --
- -----------------------------------------------------------------------
Class S
April 30, 2005* (6.50) --
October 31, 2004 (1.32) --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (6.13) --
October 31, 2000 (1) (1.35) --
December 31, 1999 (3.22) --
- -----------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
184 Financial Highlights
<Table>
<Caption>
$ $
NET ASSET VALUE, % NET ASSETS,
$ END OF TOTAL END OF PERIOD
TOTAL DISTRIBUTIONS PERIOD RETURN(B) (000)
- --------------------------------------------------------------------------------
(.04) 40.26 4.29 112,133
-- 38.64 6.53 94,663
-- 36.27 18.88 64,316
-- 30.52 (14.85) 33,858
(.23) 35.83 (28.14) 20,222
(1.22) 50.12 (5.07) 21,526
(5.85) 54.13 15.83 14,787
- --------------------------------------------------------------------------------
(.14) 41.47 4.67 48,082
(.10) 39.75 7.33 45,413
(.10) 37.12 19.77 34,229
(.10) 31.10 (14.22) 23,656
(.31) 36.35 (27.59) 23,586
(1.39) 50.55 (4.49) 19,666
(5.91) 54.43 17.95 12,958
- --------------------------------------------------------------------------------
(.19) 41.46 4.80 2,216,127
(.21) 39.74 7.61 1,943,583
(.17) 37.13 20.09 1,445,118
(.19) 31.09 (14.02) 972,139
(.41) 36.35 (27.41) 1,119,120
(1.40) 50.55 (4.28) 1,516,448
(6.13) 54.33 18.21 1,569,920
- --------------------------------------------------------------------------------
(6.50) 43.42 .57 49,715
(1.32) 49.16 7.54 46,919
-- 46.99 40.19 36,364
-- 33.52 (10.42) 18,583
(6.13) 37.42 (15.93) 11,662
(1.35) 51.05 8.83 10,762
(3.22) 48.22 22.53 5,990
- --------------------------------------------------------------------------------
(6.50) 45.92 .95 32,906
(1.32) 51.47 8.37 32,028
-- 48.77 41.24 16,581
-- 34.53 (9.77) 11,731
(6.16) 38.27 (15.29) 11,051
(1.35) 51.74 9.53 9,678
(3.22) 48.55 21.19 5,411
- --------------------------------------------------------------------------------
(6.50) 47.42 1.08 771,816
(1.32) 52.89 8.64 707,851
-- 49.95 41.61 631,246
-- 35.28 (9.56) 520,666
(6.19) 39.01 (15.05) 608,921
(1.37) 52.52 9.76 759,435
(3.23) 49.18 21.45 697,211
- --------------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ----------------------------------------------------------------------------------
1.96 1.97 (.05) 54.31
2.00 2.00 (.45) 125.03
2.05 2.05 (.39) 109.50
2.03 2.03 (.51) 128.80
1.99 1.99 (.58) 146.81
1.94 1.94 (.56) 141.75
1.94 1.94 (.41) 110.36
- ----------------------------------------------------------------------------------
1.21 1.22 .72 54.31
1.24 1.25 .30 125.03
1.30 1.30 .36 109.50
1.28 1.28 .21 128.80
1.24 1.24 .17 146.81
1.19 1.19 .19 141.75
1.19 1.19 .23 110.36
- ----------------------------------------------------------------------------------
.96 .97 .97 54.31
.99 1.00 .55 125.03
1.04 1.04 .61 109.50
1.03 1.03 .46 128.80
.99 .99 .42 146.81
.94 .94 .45 141.75
.93 .93 .51 110.36
- ----------------------------------------------------------------------------------
2.27 2.29 (1.13) 85.86
2.29 2.29 (1.15) 124.97
2.36 2.36 (1.21) 127.15
2.31 2.31 (1.15) 125.06
2.27 2.27 (.89) 126.83
2.21 2.22 (.91) 136.00
2.23 2.23 (1.10) 111.98
- ----------------------------------------------------------------------------------
1.52 1.54 (.39) 85.86
1.54 1.54 (.39) 124.97
1.62 1.62 (.46) 127.15
1.56 1.56 (.40) 125.06
1.52 1.52 (.14) 126.83
1.46 1.47 (.16) 136.00
1.49 1.49 (.36) 111.98
- ----------------------------------------------------------------------------------
1.26 1.29 (.12) 85.86
1.29 1.29 (.14) 124.97
1.35 1.35 (.19) 127.15
1.32 1.32 (.17) 125.06
1.27 1.27 .11 126.83
1.21 1.22 .08 136.00
1.24 1.24 (.10) 111.98
- ----------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 185
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL INCOME
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
QUANTITATIVE EQUITY FUND
Class C
April 30, 2005* 34.24 .02 .91 .93
October 31, 2004 31.92 (.12) 2.44 2.32
October 31, 2003 26.53 (.09) 5.49 5.40
October 31, 2002 31.88 (.15) (5.20) (5.35)
October 31, 2001 43.88 (.21) (10.47) (10.68)
October 31, 2000 (1) 44.94 (.22) .07 (.15)
December 31, 1999 (2) 43.02 (.20) 8.00 7.80
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 35.04 .16 .92 1.08
October 31, 2004 32.55 .14 2.49 2.63
October 31, 2003 26.94 .12 5.60 5.72
October 31, 2002 32.28 .07 (5.27) (5.20)
October 31, 2001 44.17 .07 (10.57) (10.50)
October 31, 2000 (1) 45.19 .06 (.08) (.02)
December 31, 1999 42.50 .13 8.50 8.63
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 35.13 .21 .93 1.14
October 31, 2004 32.64 .22 2.49 2.71
October 31, 2003 27.01 .20 5.61 5.81
October 31, 2002 32.36 .15 (5.28) (5.13)
October 31, 2001 44.27 .16 (10.59) (10.43)
October 31, 2000 (1) 45.19 .15 (.02) .13
December 31, 1999 42.53 .24 8.50 8.74
- --------------------------------------------------------------------------------------------------------------
INTERNATIONAL SECURITIES FUND
Class C
April 30, 2005* 54.38 .08 3.50 3.58
October 31, 2004 48.46 -- 6.65 6.65
October 31, 2003 38.51 (.05) 10.21 10.16
October 31, 2002 44.53 (.18) (5.84) (6.02)
October 31, 2001 62.46 (.19) (14.94) (15.13)
October 31, 2000 (1) 74.51 .17 (9.68) (9.51)
December 31, 1999 (2) 60.66 (.32) 17.92 17.60
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 56.28 .29 3.63 3.92
October 31, 2004 49.98 .39 6.87 7.26
October 31, 2003 39.61 .28 10.50 10.78
October 31, 2002 45.47 .13 (5.99) (5.86)
October 31, 2001 63.24 .21 (15.18) (14.97)
October 31, 2000 (1) 74.95 .57 (9.74) (9.17)
December 31, 1999 60.68 .40 17.72 18.12
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 56.84 .39 3.66 4.05
October 31, 2004 50.44 .53 6.92 7.45
October 31, 2003 39.98 .38 10.59 10.97
October 31, 2002 45.78 .25 (6.05) (5.80)
October 31, 2001 63.51 .34 (15.26) (14.92)
October 31, 2000 (1) 75.11 .76 (9.82) (9.06)
December 31, 1999 60.86 .51 17.82 18.33
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ------------------------------------------------------------------------------------------
QUANTITATIVE EQUITY FUND
Class C
April 30, 2005* (.07) -- --
October 31, 2004 -- -- --
October 31, 2003 (.01) -- --
October 31, 2002 -- -- --
October 31, 2001 -- (1.32) --
October 31, 2000 (1) -- (.91) --
December 31, 1999 (2) (.04) (5.84) --
- ------------------------------------------------------------------------------------------
Class E
April 30, 2005* (.16) -- --
October 31, 2004 (.14) -- --
October 31, 2003 (.11) -- --
October 31, 2002 (.13) -- (.01)
October 31, 2001 (.07) (1.32) --
October 31, 2000 (1) (.09) (.91) --
December 31, 1999 (.10) (5.84) --
- ------------------------------------------------------------------------------------------
Class S
April 30, 2005* (.21) -- --
October 31, 2004 (.22) -- --
October 31, 2003 (.18) -- --
October 31, 2002 (.20) -- (.02)
October 31, 2001 (.16) (1.32) --
October 31, 2000 (1) (.14) (.91) --
December 31, 1999 (.24) (5.84) --
- ------------------------------------------------------------------------------------------
INTERNATIONAL SECURITIES FUND
Class C
April 30, 2005* (.52) -- --
October 31, 2004 (.73) -- --
October 31, 2003 (.21) -- --
October 31, 2002 -- -- --
October 31, 2001 -- (2.80) --
October 31, 2000 (1) -- (2.54) --
December 31, 1999 (2) (.17) (3.58) --
- ------------------------------------------------------------------------------------------
Class E
April 30, 2005* (.86) -- --
October 31, 2004 (.96) -- --
October 31, 2003 (.41) -- --
October 31, 2002 -- -- --
October 31, 2001 -- (2.80) --
October 31, 2000 (1) -- (2.54) --
December 31, 1999 (.27) (3.58) --
- ------------------------------------------------------------------------------------------
Class S
April 30, 2005* (.99) -- --
October 31, 2004 (1.05) -- --
October 31, 2003 (.51) -- --
October 31, 2002 -- -- --
October 31, 2001 (.01) (2.80) --
October 31, 2000 (1) -- (2.54) --
December 31, 1999 (.50) (3.58) --
- ------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
186 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.07) 35.10 2.71 114,907
-- 34.24 7.27 98,012
(.01) 31.92 20.35 65,096
-- 26.53 (16.78) 34,113
(1.32) 31.88 (24.87) 20,530
(.91) 43.88 (.16) 20,935
(5.88) 44.94 18.89 13,613
- -----------------------------------------------------------------------------
(.16) 35.96 3.08 51,102
(.14) 35.04 8.08 48,646
(.11) 32.55 21.28 37,594
(.14) 26.94 (16.16) 25,667
(1.39) 32.28 (24.30) 23,700
(1.00) 44.17 .11 15,314
(5.94) 45.19 21.11 7,987
- -----------------------------------------------------------------------------
(.21) 36.06 3.22 2,311,687
(.22) 35.13 8.32 2,057,082
(.18) 32.64 21.58 1,555,289
(.22) 27.01 (15.94) 1,070,673
(1.48) 32.36 (24.11) 1,200,247
(1.05) 44.27 .47 1,556,534
(6.08) 45.19 21.37 1,545,021
- -----------------------------------------------------------------------------
(.52) 57.44 6.61 102,736
(.73) 54.38 13.83 80,622
(.21) 48.46 26.52 47,087
-- 38.51 (13.52) 21,860
(2.80) 44.53 (25.29) 12,470
(2.54) 62.46 (13.13) 11,849
(3.75) 74.51 29.39 7,522
- -----------------------------------------------------------------------------
(.86) 59.34 6.99 40,759
(.96) 56.28 14.68 38,630
(.41) 49.98 27.57 26,768
-- 39.61 (12.91) 16,796
(2.80) 45.47 (24.70) 15,897
(2.54) 63.24 (12.58) 9,964
(3.85) 74.95 30.21 5,552
- -----------------------------------------------------------------------------
(.99) 59.90 7.13 1,963,523
(1.05) 56.84 14.98 1,673,516
(.51) 50.44 27.81 1,247,393
-- 39.98 (12.67) 774,146
(2.81) 45.78 (24.51) 812,857
(2.54) 63.51 (12.40) 1,061,171
(4.08) 75.11 30.52 1,133,495
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ----------------------------------------------------------------------------------
1.96 1.97 .11 67.80
1.99 1.99 (.35) 91.31
2.02 2.02 (.32) 108.71
2.02 2.02 (.49) 71.10
1.98 1.98 (.57) 85.00
1.92 1.92 (.60) 59.25
1.93 1.93 (.47) 89.52
- ----------------------------------------------------------------------------------
1.21 1.22 .89 67.80
1.24 1.24 .40 91.31
1.28 1.28 .43 108.71
1.27 1.27 .24 71.10
1.22 1.22 .18 85.00
1.17 1.17 .15 59.25
1.18 1.18 .28 89.52
- ----------------------------------------------------------------------------------
.96 .97 1.13 67.80
.99 .99 .65 91.31
1.02 1.02 .69 108.71
1.02 1.02 .48 71.10
.98 .98 .43 85.00
.92 .92 .42 59.25
.93 .93 .53 89.52
- ----------------------------------------------------------------------------------
2.22 2.24 .29 50.35
2.29 2.29 -- 76.01
2.42 2.42 (.12) 69.11
2.46 2.46 (.42) 79.09
2.41 2.41 (.36) 104.65
2.29 2.30 .30 101.84
2.30 2.30 (.51) 120.52
- ----------------------------------------------------------------------------------
1.47 1.49 .96 50.35
1.54 1.54 .72 76.01
1.67 1.67 .67 69.11
1.72 1.72 .30 79.09
1.66 1.66 .41 104.65
1.54 1.55 1.00 101.84
1.55 1.55 .61 120.52
- ----------------------------------------------------------------------------------
1.21 1.24 1.28 50.35
1.29 1.29 .98 76.01
1.42 1.42 .90 69.11
1.47 1.47 .55 79.09
1.42 1.42 .62 104.65
1.29 1.30 1.31 101.84
1.30 1.30 .79 120.52
- ----------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 187
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL INCOME
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
EMERGING MARKETS FUND
Class C
April 30, 2005* 12.52 --(d) 1.75 1.75
October 31, 2004 10.68 --(d) 2.08 2.08
October 31, 2003 7.22 .02 3.44 3.46
October 31, 2002 6.89 (.09) .42 .33
October 31, 2001 9.15 (.04) (2.22) (2.26)
October 31, 2000 (1) 12.47 (.10) (3.20) (3.30)
December 31, 1999 (2) 8.07 (.12) 4.57 4.45
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 12.93 .05 1.81 1.86
October 31, 2004 10.98 .09 2.15 2.24
October 31, 2003 7.41 .09 3.49 3.58
October 31, 2002 7.01 (.02) .42 .40
October 31, 2001 9.24 .02 (2.25) (2.23)
October 31, 2000 (1) 12.51 (.03) (3.20) (3.23)
December 31, 1999 8.48 (.04) 4.14 4.10
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 12.94 .07 1.81 1.88
October 31, 2004 10.98 .12 2.15 2.27
October 31, 2003 7.43 .11 3.48 3.59
October 31, 2002 7.05 --(d) .40 .40
October 31, 2001 9.25 .04 (2.24) (2.20)
October 31, 2000 (1) 12.52 --(d) (3.21) (3.21)
December 31, 1999 8.48 .03 4.10 4.13
- --------------------------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class C
April 30, 2005* 43.10 .23 2.99 3.22
October 31, 2004 33.94 .46 9.92 10.38
October 31, 2003 26.52 1.11 7.53 8.64
October 31, 2002 26.97 1.07 (.01) 1.06
October 31, 2001 25.93 1.16 1.02 2.18
October 31, 2000 (1) 22.69 .84 3.11 3.95
December 31, 1999 (2) 24.13 1.08 (1.06) .02
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 43.55 .40 3.02 3.42
October 31, 2004 34.24 .75 10.04 10.79
October 31, 2003 26.72 1.34 7.60 8.94
October 31, 2002 27.14 1.32 (.06) 1.26
October 31, 2001 26.07 1.38 1.03 2.41
October 31, 2000 (1) 22.76 .98 3.14 4.12
December 31, 1999 24.27 1.28 (1.24) .04
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 43.90 .45 3.04 3.49
October 31, 2004 34.51 .87 10.09 10.96
October 31, 2003 26.89 1.42 7.67 9.09
October 31, 2002 27.31 1.41 (.06) 1.35
October 31, 2001 26.22 1.46 1.03 2.49
October 31, 2000 (1) 22.86 1.04 3.15 4.19
December 31, 1999 24.44 1.30 (1.20) .10
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ------------------------------------------------------------------------------------------
EMERGING MARKETS FUND
Class C
April 30, 2005* (.04) -- --
October 31, 2004 (.24) -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
October 31, 2000 (1) (.02) -- --
December 31, 1999 (2) (.05) -- --
- ------------------------------------------------------------------------------------------
Class E
April 30, 2005* (.12) -- --
October 31, 2004 (.29) -- --
October 31, 2003 (.01) -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
October 31, 2000 (1) (.04) -- --
December 31, 1999 (.07) -- --
- ------------------------------------------------------------------------------------------
Class S
April 30, 2005* (.15) -- --
October 31, 2004 (.31) -- --
October 31, 2003 (.04) -- --
October 31, 2002 (.02) -- --
October 31, 2001 -- -- --
October 31, 2000 (1) (.06) -- --
December 31, 1999 (.09) -- --
- ------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class C
April 30, 2005* (.29) (3.67) --
October 31, 2004 (1.21) (.01) --
October 31, 2003 (1.11) (.11) --
October 31, 2002 (1.51) -- --
October 31, 2001 (1.14) -- --
October 31, 2000 (1) (.71) -- --
December 31, 1999 (2) (1.46) -- --
- ------------------------------------------------------------------------------------------
Class E
April 30, 2005* (.45) (3.67) --
October 31, 2004 (1.47) (.01) --
October 31, 2003 (1.31) (.11) --
October 31, 2002 (1.68) -- --
October 31, 2001 (1.34) -- --
October 31, 2000 (1) (.81) -- --
December 31, 1999 (1.55) -- --
- ------------------------------------------------------------------------------------------
Class S
April 30, 2005* (.50) (3.67) --
October 31, 2004 (1.56) (.01) --
October 31, 2003 (1.36) (.11) --
October 31, 2002 (1.77) -- --
October 31, 2001 (1.40) -- --
October 31, 2000 (1) (.83) -- --
December 31, 1999 (1.68) -- --
- ------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
188 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.04) 14.23 14.01 26,391
(.24) 12.52 20.04 20,467
-- 10.68 47.58 12,306
-- 7.22 4.94 5,194
-- 6.89 (24.70) 2,377
(.02) 9.15 (26.51) 2,228
(.05) 12.47 55.43 1,631
- -----------------------------------------------------------------------------
(.12) 14.67 14.43 15,497
(.29) 12.93 20.88 14,169
(.01) 10.98 48.39 9,598
-- 7.41 5.71 6,478
-- 7.01 (24.13) 6,959
(.04) 9.24 (25.90) 6,388
(.07) 12.51 48.71 6,314
- -----------------------------------------------------------------------------
(.15) 14.67 14.57 652,869
(.31) 12.94 21.22 549,626
(.04) 10.98 48.27 386,560
(.02) 7.43 5.91 263,563
-- 7.05 (23.89) 273,486
(.06) 9.25 (25.79) 359,201
(.09) 12.52 49.03 430,794
- -----------------------------------------------------------------------------
(3.96) 42.36 7.43 72,146
(1.22) 43.10 30.97 61,089
(1.22) 33.94 33.23 32,784
(1.51) 26.52 3.56 15,712
(1.14) 26.97 8.41 5,718
(.71) 25.93 17.54 3,393
(1.46) 22.69 .19 1,771
- -----------------------------------------------------------------------------
(4.12) 42.85 7.83 34,605
(1.48) 43.55 32.00 29,436
(1.42) 34.24 34.21 16,651
(1.68) 26.72 4.27 10,661
(1.34) 27.14 9.23 11,415
(.81) 26.07 18.24 9,094
(1.55) 22.76 .30 7,134
- -----------------------------------------------------------------------------
(4.17) 43.22 7.93 1,311,869
(1.57) 43.90 32.30 1,171,514
(1.47) 34.51 34.58 830,448
(1.77) 26.89 4.55 598,133
(1.40) 27.31 9.48 607,280
(.83) 26.22 18.53 669,529
(1.68) 22.86 .55 589,300
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ----------------------------------------------------------------------------------
2.74 2.76 (.02) 45.03
2.83 2.87 .02 82.02
3.09 3.09 .19 95.13
3.12 3.12 (1.08) 90.21
3.08 3.09 (.55) 83.74
2.91 2.92 (1.02) 73.11
2.91 2.91 (1.23) 94.85
- ----------------------------------------------------------------------------------
1.97 2.01 .69 45.03
2.07 2.12 .75 82.02
2.36 2.37 1.02 95.13
2.38 2.38 (.29) 90.21
2.33 2.33 .21 83.74
2.16 2.17 (.30) 73.11
2.17 2.17 (.40) 94.85
- ----------------------------------------------------------------------------------
1.71 1.76 .97 45.03
1.83 1.87 1.00 82.02
2.11 2.11 1.30 95.13
2.14 2.14 (.02) 90.21
2.09 2.09 .44 83.74
1.91 1.92 (.02) 73.11
1.91 1.91 .26 94.85
- ----------------------------------------------------------------------------------
2.09 2.09 1.12 32.44
2.12 2.12 1.20 38.04
2.20 2.30 3.67 46.09
2.19 2.59 3.74 67.70
2.17 2.17 4.20 44.50
2.16 2.16 4.06 53.30
2.14 2.14 5.12 42.69
- ----------------------------------------------------------------------------------
1.34 1.34 1.87 32.44
1.37 1.37 1.95 38.04
1.43 1.62 4.46 46.09
1.46 1.82 4.54 67.70
1.42 1.42 4.96 44.50
1.41 1.41 4.78 53.30
1.39 1.39 5.42 42.69
- ----------------------------------------------------------------------------------
1.09 1.09 2.11 32.44
1.11 1.11 2.23 38.04
1.18 1.18 4.66 46.09
1.19 1.19 4.82 67.70
1.17 1.18 5.19 44.50
1.16 1.16 5.00 53.30
1.14 1.14 5.41 42.69
- ----------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 189
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL INCOME
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
SHORT DURATION BOND FUND
Class C
April 30, 2005* 19.04 .13 (.23) (.10)
October 31, 2004 19.01 .19 (.01) .18
October 31, 2003 18.98 .31 .06 .37
October 31, 2002 19.01 .56 .13 .69
October 31, 2001 18.23 .85 .89 1.74
October 31, 2000 (1) 18.13 .79 .04 .83
December 31, 1999 (4) 18.36 .68 (.31) .37
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 19.10 .20 (.23) (.03)
October 31, 2004 19.08 .34 (.01) .33
October 31, 2003 19.04 .48 .03 .51
October 31, 2002 19.02 .77 .06 .83
October 31, 2001 18.24 1.02 .85 1.87
October 31, 2000 (1) 18.08 .88 .07 .95
December 31, 1999 (3) 18.51 .80 (.34) .46
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 19.07 .23 (.23) --
October 31, 2004 19.05 .38 (.01) .37
October 31, 2003 19.01 .52 .03 .55
October 31, 2002 18.99 .80 .08 .88
October 31, 2001 18.22 1.07 .83 1.90
October 31, 2000 (1) 18.03 .91 .09 1.00
December 31, 1999 18.46 .90 (.36) .54
- --------------------------------------------------------------------------------------------------------------
DIVERSIFIED BOND FUND
Class C
April 30, 2005* 24.54 .26 (.17) .09
October 31, 2004 24.49 .41 .58 .99
October 31, 2003 24.68 .48 .38 .86
October 31, 2002 24.49 .74 .23 .97
October 31, 2001 22.71 1.06 1.81 2.87
October 31, 2000 (1) 22.24 .99 .41 1.40
December 31, 1999 (2) 24.00 1.03 (1.61) (.58)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 24.62 .35 (.22) .13
October 31, 2004 24.56 .60 .58 1.18
October 31, 2003 24.74 .67 .37 1.04
October 31, 2002 24.54 .92 .24 1.16
October 31, 2001 22.75 1.22 1.84 3.06
October 31, 2000 (1) 22.23 1.13 .44 1.57
December 31, 1999 23.92 1.30 (1.65) (.35)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 24.04 .37 (.21) .16
October 31, 2004 24.00 .64 .58 1.22
October 31, 2003 24.21 .71 .36 1.07
October 31, 2002 24.03 .97 .23 1.20
October 31, 2001 22.31 1.29 1.75 3.04
October 31, 2000 (1) 21.77 1.16 .41 1.57
December 31, 1999 23.53 1.31 (1.60) (.29)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- --------------------------------------------------------------------------------------------
SHORT DURATION BOND FUND
Class C
April 30, 2005* (.13) (.01) --
October 31, 2004 (.15) -- --
October 31, 2003 (.34) -- --
October 31, 2002 (.72) -- --
October 31, 2001 (.96) -- --
October 31, 2000 (1) (.73) -- --
December 31, 1999 (4) (.60) -- --
- --------------------------------------------------------------------------------------------
Class E
April 30, 2005* (.19) (.01) --
October 31, 2004 (.31) -- --
October 31, 2003 (.47) -- --
October 31, 2002 (.81) -- --
October 31, 2001 (1.09) -- --
October 31, 2000 (1) (.79) -- --
December 31, 1999 (3) (.89) -- --
- --------------------------------------------------------------------------------------------
Class S
April 30, 2005* (.22) (.01) --
October 31, 2004 (.35) -- --
October 31, 2003 (.51) -- --
October 31, 2002 (.86) -- --
October 31, 2001 (1.13) -- --
October 31, 2000 (1) (.81) -- --
December 31, 1999 (.97) -- --
- --------------------------------------------------------------------------------------------
DIVERSIFIED BOND FUND
Class C
April 30, 2005* (.28) (.12) --
October 31, 2004 (.41) (.53) --
October 31, 2003 (.49) (.56) --
October 31, 2002 (.78) -- --
October 31, 2001 (1.09) -- --
October 31, 2000 (1) (.93) -- --
December 31, 1999 (2) (1.05) (.13) --
- --------------------------------------------------------------------------------------------
Class E
April 30, 2005* (.33) (.12) --
October 31, 2004 (.59) (.53) --
October 31, 2003 (.66) (.56) --
October 31, 2002 (.96) -- --
October 31, 2001 (1.27) -- --
October 31, 2000 (1) (1.05) -- --
December 31, 1999 (1.21) (.13) --
- --------------------------------------------------------------------------------------------
Class S
April 30, 2005* (.36) (.12) --
October 31, 2004 (.65) (.53) --
October 31, 2003 (.72) (.56) --
October 31, 2002 (1.02) -- --
October 31, 2001 (1.32) -- --
October 31, 2000 (1) (1.03) -- --
December 31, 1999 (1.32) (.13) (.02)
- --------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
190 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.14) 18.80 (.51) 33,084
(.15) 19.04 .97 38,427
(.34) 19.01 1.97 41,644
(.72) 18.98 3.73 16,294
(.96) 19.01 9.77 1,709
(.73) 18.23 4.67 672
(.60) 18.13 2.02 801
- -----------------------------------------------------------------------------
(.20) 18.87 (.14) 23,960
(.31) 19.10 1.74 23,181
(.47) 19.08 2.70 20,274
(.81) 19.04 4.53 17,516
(1.09) 19.02 10.54 17,685
(.79) 18.24 5.36 9,898
(.89) 18.08 2.53 8,693
- -----------------------------------------------------------------------------
(.23) 18.84 (.01) 1,150,659
(.35) 19.07 1.98 1,135,332
(.51) 19.05 2.95 958,064
(.86) 19.01 4.81 599,795
(1.13) 18.99 10.76 401,137
(.81) 18.22 5.64 422,884
(.97) 18.03 3.03 447,590
- -----------------------------------------------------------------------------
(.40) 24.23 .21 50,912
(.94) 24.54 4.16 45,970
(1.05) 24.49 3.58 36,159
(.78) 24.68 4.11 26,915
(1.09) 24.49 13.02 15,027
(.93) 22.71 6.44 7,315
(1.18) 22.24 (2.47) 4,652
- -----------------------------------------------------------------------------
(.45) 24.30 .55 47,995
(1.12) 24.62 4.97 43,724
(1.22) 24.56 4.36 34,339
(.96) 24.74 4.90 26,985
(1.27) 24.54 13.87 17,763
(1.05) 22.75 7.25 5,492
(1.34) 22.23 (1.51) 3,639
- -----------------------------------------------------------------------------
(.48) 23.72 .68 1,400,455
(1.18) 24.04 5.22 1,232,576
(1.28) 24.00 4.63 977,601
(1.02) 24.21 5.18 783,332
(1.32) 24.03 14.11 745,020
(1.03) 22.31 7.40 714,153
(1.47) 21.77 (1.26) 765,674
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C)(E) NET ASSETS(B) TURNOVER RATE(B)
- ---------------------------------------------------------------------------------
1.65 1.65 1.39 140.53
1.63 1.66 1.00 131.57
1.56 1.72 1.63 187.92
1.52 1.70 3.08 163.86
1.52 1.66 4.72 260.94
1.64 1.66 5.01 92.31
1.72 1.72 4.41 177.08
- ---------------------------------------------------------------------------------
.90 .90 2.16 140.53
.88 .91 1.76 131.57
.80 .97 2.52 187.92
.77 .96 4.04 163.86
.77 .91 5.48 260.94
.89 .91 5.77 92.31
.97 .97 5.05 177.08
- ---------------------------------------------------------------------------------
.65 .65 2.41 140.53
.63 .66 2.01 131.57
.56 .72 2.70 187.92
.52 .71 4.26 163.86
.52 .67 5.76 260.94
.64 .66 6.00 92.31
.74 .74 5.22 177.08
- ---------------------------------------------------------------------------------
1.64 1.65 2.17 143.36
1.66 1.66 1.71 140.92
1.69 1.70 1.94 147.44
1.66 1.66 3.09 156.21
1.64 1.64 4.53 155.87
1.62 1.63 5.37 128.88
1.62 1.62 4.88 152.23
- ---------------------------------------------------------------------------------
.89 .90 2.92 143.36
.91 .91 2.46 140.92
.94 .94 2.70 147.44
.91 .91 3.85 156.21
.89 .89 5.22 155.87
.87 .88 6.13 128.88
.87 .87 5.49 152.23
- ---------------------------------------------------------------------------------
.64 .64 3.17 143.36
.66 .66 2.71 140.92
.69 .69 2.95 147.44
.66 .66 4.11 156.21
.64 .65 5.60 155.87
.62 .63 6.35 128.88
.61 .61 5.78 152.23
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 191
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$
$ $ $ $ DISTRIBUTIONS
NET ASSET VALUE, NET NET REALIZED TOTAL INCOME FROM NET
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
MULTISTRATEGY BOND FUND
Class C
April 30, 2005* 10.63 .11 (.04) .07 (.10)
October 31, 2004 10.54 .17 .31 .48 (.24)
October 31, 2003 10.03 .23 .50 .73 (.22)
October 31, 2002 10.20 .30 (.04) .26 (.43)
October 31, 2001 9.60 .46 .62 1.08 (.48)
October 31, 2000 (1) 9.47 .44 .09 .53 (.40)
December 31, 1999 (2) 10.14 .42 (.63) (.21) (.45)
- -----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 10.64 .15 (.04) .11 (.14)
October 31, 2004 10.55 .24 .32 .56 (.32)
October 31, 2003 10.03 .31 .50 .81 (.29)
October 31, 2002 10.21 .38 (.06) .32 (.50)
October 31, 2001 9.61 .53 .62 1.15 (.55)
October 31, 2000 (1) 9.47 .49 .11 .60 (.46)
December 31, 1999 10.10 .56 (.66) (.10) (.52)
- -----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 10.65 .16 (.04) .12 (.15)
October 31, 2004 10.56 .27 .31 .58 (.34)
October 31, 2003 10.04 .34 .50 .84 (.32)
October 31, 2002 10.22 .40 (.05) .35 (.53)
October 31, 2001 9.61 .56 .63 1.19 (.58)
October 31, 2000 (1) 9.46 .52 .08 .60 (.45)
December 31, 1999 10.11 .57 (.65) (.08) (.56)
- -----------------------------------------------------------------------------------------------------------------------------------
TAX EXEMPT BOND FUND
Class C
April 30, 2005* 22.03 .26 (.25) .01 (.24)
October 31, 2004 21.99 .53 .04 .57 (.53)
October 31, 2003 21.94 .58 .07 .65 (.60)
October 31, 2002 21.76 .60 .22 .82 (.64)
October 31, 2001 20.83 .68 .95 1.63 (.70)
October 31, 2000 (1) 20.45 .59 .32 .91 (.53)
December 31, 1999 (5) 21.38 .45 (.84) (.39) (.54)
- -----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 22.10 .34 (.26) .08 (.32)
October 31, 2004 22.06 .69 .04 .73 (.69)
October 31, 2003 21.99 .75 .06 .81 (.74)
October 31, 2002 21.81 .78 .18 .96 (.78)
October 31, 2001 20.87 .84 .95 1.79 (.85)
October 31, 2000 (1) 20.47 .71 .33 1.04 (.64)
December 31, 1999 (6) 21.19 .50 (.71) (.21) (.51)
- -----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 22.07 .37 (.25) .12 (.35)
October 31, 2004 22.03 .75 .03 .78 (.74)
October 31, 2003 21.96 .80 .07 .87 (.80)
October 31, 2002 21.79 .83 .18 1.01 (.84)
October 31, 2001 20.84 .89 .96 1.85 (.90)
October 31, 2000 (1) 20.42 .75 .33 1.08 (.66)
December 31, 1999 21.39 .84 (.95) (.11) (.86)
- -----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- ------------------------------------------------------------------------
MULTISTRATEGY BOND FUND
Class C
April 30, 2005* (.13) --
October 31, 2004 (.15) --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
October 31, 2000 (1) -- --
December 31, 1999 (2) (.01) --
- ------------------------------------------------------------------------
Class E
April 30, 2005* (.13) --
October 31, 2004 (.15) --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
October 31, 2000 (1) -- --
December 31, 1999 (.01) --
- ------------------------------------------------------------------------
Class S
April 30, 2005* (.13) --
October 31, 2004 (.15) --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
October 31, 2000 (1) -- --
December 31, 1999 (.01) --
- ------------------------------------------------------------------------
TAX EXEMPT BOND FUND
Class C
April 30, 2005* -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
October 31, 2000 (1) -- --
December 31, 1999 (5) -- --
- ------------------------------------------------------------------------
Class E
April 30, 2005* -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
October 31, 2000 (1) -- --
December 31, 1999 (6) -- --
- ------------------------------------------------------------------------
Class S
April 30, 2005* -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
October 31, 2000 (1) -- --
December 31, 1999 -- --
- ------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
192 Financial Highlights
<Table>
<Caption>
$ $
NET ASSET VALUE, % NET ASSETS,
$ END OF TOTAL END OF PERIOD
TOTAL DISTRIBUTIONS PERIOD RETURN(B) (000)
- --------------------------------------------------------------------------------
(.23) 10.47 .65 63,511
(.39) 10.63 4.66 53,573
(.22) 10.54 7.37 36,397
(.43) 10.03 2.71 24,569
(.48) 10.20 11.58 15,926
(.40) 9.60 5.77 10,879
(.46) 9.47 (2.10) 6,666
- --------------------------------------------------------------------------------
(.27) 10.48 1.03 35,622
(.47) 10.64 5.43 31,621
(.29) 10.55 8.23 20,975
(.50) 10.03 3.36 14,017
(.55) 10.21 12.40 12,675
(.46) 9.61 6.46 6,182
(.53) 9.47 (1.08) 3,248
- --------------------------------------------------------------------------------
(.28) 10.49 1.15 1,546,029
(.49) 10.65 5.68 1,284,520
(.32) 10.56 8.49 886,596
(.53) 10.04 3.72 595,577
(.58) 10.22 12.68 622,518
(.45) 9.61 6.56 593,020
(.57) 9.46 (.81) 556,703
- --------------------------------------------------------------------------------
(.24) 21.80 (.01) 11,598
(.53) 22.03 2.62 10,611
(.60) 21.99 2.98 8,701
(.64) 21.94 3.84 7,179
(.70) 21.76 7.95 2,248
(.53) 20.83 4.53 780
(.54) 20.45 (1.82) 474
- --------------------------------------------------------------------------------
(.32) 21.86 .37 7,486
(.69) 22.10 3.38 6,488
(.74) 22.06 3.75 5,849
(.78) 21.99 4.54 5,051
(.85) 21.81 8.77 6,398
(.64) 20.87 5.17 3,445
(.51) 20.47 (.99) 2,854
- --------------------------------------------------------------------------------
(.35) 21.84 .54 215,409
(.74) 22.07 3.64 185,587
(.80) 22.03 4.01 144,402
(.84) 21.96 4.77 148,675
(.90) 21.79 9.09 140,352
(.66) 20.84 5.37 129,084
(.86) 20.42 (.52) 123,960
- --------------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- -----------------------------------------------------------------------------------
1.85 1.86 2.11 274.46
1.89 1.89 1.58 221.31
1.94 1.95 2.22 281.71
1.85 1.85 3.08 252.09
1.89 1.89 4.63 176.44
1.86 1.90 5.56 105.03
1.80 1.84 4.80 134.11
- -----------------------------------------------------------------------------------
1.10 1.11 2.86 274.46
1.14 1.14 2.32 221.31
1.18 1.19 3.01 281.71
1.17 1.17 3.80 252.09
1.14 1.14 5.33 176.44
1.11 1.15 6.31 105.03
1.05 1.11 5.54 134.11
- -----------------------------------------------------------------------------------
.85 .85 3.11 274.46
.89 .89 2.58 221.31
.94 .94 3.22 281.71
.92 .92 4.06 252.09
.89 .89 5.66 176.44
.86 .90 6.54 105.03
.80 .86 5.79 134.11
- -----------------------------------------------------------------------------------
1.49 1.50 2.40 17.19
1.53 1.53 2.39 36.68
1.56 1.56 2.62 37.46
1.56 1.56 2.82 39.83
1.53 1.53 3.18 31.16
1.64 1.64 3.48 38.16
1.57 1.57 3.12 119.34
- -----------------------------------------------------------------------------------
.74 .74 3.15 17.19
.78 .78 3.14 36.68
.81 .81 3.37 37.46
.83 .83 3.57 39.83
.78 .78 3.93 31.16
.89 .89 4.08 38.16
.82 .82 3.76 119.34
- -----------------------------------------------------------------------------------
.49 .49 3.40 17.19
.53 .53 3.39 36.68
.56 .56 3.62 37.46
.57 .57 3.84 39.83
.53 .53 4.21 31.16
.64 .64 4.32 38.16
.57 .57 3.99 119.34
- -----------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 193
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL INCOME
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
TAX-MANAGED LARGE CAP FUND
Class C
April 30, 2005* 16.55 .03 .31 .34
October 31, 2004 15.02 (.06) 1.59 1.53
October 31, 2003 12.61 (.04) 2.45 2.41
October 31, 2002 15.60 (.06) (2.93) (2.99)
October 31, 2001 20.68 (.10) (4.98) (5.08)
October 31, 2000 (1) 21.17 (.10) (.39) (.49)
December 31, 1999 (7) 20.92 --(d) .35 .35
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 16.93 .10 .31 .41
October 31, 2004 15.30 .06 1.63 1.69
October 31, 2003 12.83 .06 2.50 2.56
October 31, 2002 15.78 .05 (2.95) (2.90)
October 31, 2001 (8) 20.10 .03 (4.25) (4.22)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 16.99 .13 .31 .44
October 31, 2004 15.34 .10 1.63 1.73
October 31, 2003 12.87 .10 2.48 2.58
October 31, 2002 15.81 .09 (2.95) (2.86)
October 31, 2001 20.87 .08 (5.04) (4.96)
October 31, 2000 (1) 21.17 .08 (.37) (.29)
December 31, 1999 18.26 .14 2.88 3.02
- --------------------------------------------------------------------------------------------------------------
TAX-MANAGED MID & SMALL CAP FUND
Class C
April 30, 2005* 10.17 (.06) .21 .15
October 31, 2004 9.33 (.13) .97 .84
October 31, 2003 7.12 (.08) 2.29 2.21
October 31, 2002 7.88 (.09) (.67) (.76)
October 31, 2001 11.07 .12 (3.31) (3.19)
October 31, 2000 (1) 10.71 (.10) .47 .37
December 31, 1999 (7) 10.00 --(d) .71 .71
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 10.56 (.02) .21 .19
October 31, 2004 9.62 (.06) 1.00 .94
October 31, 2003 7.28 (.02) 2.36 2.34
October 31, 2002 8.00 (.03) (.69) (.72)
October 31, 2001 (8) 10.00 (.01) (1.99) (2.00)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 10.65 --(d) .21 .21
October 31, 2004 9.68 (.03) 1.00 .97
October 31, 2003 7.31 --(d) 2.37 2.37
October 31, 2002 8.02 (.01) (.69) (.70)
October 31, 2001 11.15 .01 (3.14) (3.13)
October 31, 2000 (1) 10.73 --(d) .43 .43
December 31, 1999 (7) 10.00 .01 .72 .73
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ---------------------------------------------------------------------------------------------
TAX-MANAGED LARGE CAP FUND
Class C
April 30, 2005* (.02) -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
October 31, 2000 (1) -- -- --
December 31, 1999 (7) (.10) -- --
- ---------------------------------------------------------------------------------------------
Class E
April 30, 2005* (.14) -- --
October 31, 2004 (.06) -- --
October 31, 2003 (.09) -- --
October 31, 2002 (.05) -- --
October 31, 2001 (8) (.10) -- --
- ---------------------------------------------------------------------------------------------
Class S
April 30, 2005* (.18) -- --
October 31, 2004 (.08) -- --
October 31, 2003 (.11) -- --
October 31, 2002 (.08) -- --
October 31, 2001 (.10) -- --
October 31, 2000 (1) (.01) -- --
December 31, 1999 (.11) -- --
- ---------------------------------------------------------------------------------------------
TAX-MANAGED MID & SMALL CAP FUND
Class C
April 30, 2005* -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
October 31, 2000 (1) (.01) -- --
December 31, 1999 (7) -- -- --
- ---------------------------------------------------------------------------------------------
Class E
April 30, 2005* -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (8) -- -- --
- ---------------------------------------------------------------------------------------------
Class S
April 30, 2005* -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 (.01) -- --
October 31, 2001 -- -- --
October 31, 2000 (1) (.01) -- --
December 31, 1999 (7) -- -- --
- ---------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
194 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.02) 16.87 2.04 15,389
-- 16.55 10.19 13,304
-- 15.02 19.11 10,022
-- 12.61 (19.17) 7,740
-- 15.60 (24.57) 7,611
-- 20.68 (2.30) 6,596
(.10) 21.17 2.24 308
- -----------------------------------------------------------------------------
(.14) 17.20 2.42 7,054
(.06) 16.93 11.05 5,991
(.09) 15.30 20.04 4,743
(.05) 12.83 (18.47) 2,618
(.10) 15.78 (21.10) 3,359
- -----------------------------------------------------------------------------
(.18) 17.25 2.51 359,874
(.08) 16.99 11.33 342,640
(.11) 15.34 20.24 307,458
(.08) 12.87 (18.21) 345,335
(.10) 15.81 (23.86) 448,557
(.01) 20.87 (1.39) 674,460
(.11) 21.17 16.57 566,001
- -----------------------------------------------------------------------------
-- 10.32 1.47 7,575
-- 10.17 9.00 6,041
-- 9.33 31.04 5,025
-- 7.12 (9.65) 3,450
-- 7.88 (28.88) 2,688
(.01) 11.07 3.52 2,414
-- 10.71 7.10 222
- -----------------------------------------------------------------------------
-- 10.75 1.80 1,275
-- 10.56 9.77 1,279
-- 9.62 32.14 850
-- 7.28 (9.00) 885
-- 8.00 (20.00) 837
- -----------------------------------------------------------------------------
-- 10.86 1.97 130,998
-- 10.65 10.02 123,045
-- 9.68 32.42 106,738
(.01) 7.31 (8.77) 82,523
-- 8.02 (28.14) 90,095
(.01) 11.15 4.08 105,630
-- 10.73 7.30 29,053
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- -----------------------------------------------------------------------------------
1.88 1.89 .40 27.42
1.92 1.92 (.38) 32.15
1.94 1.94 (.30) 127.47
1.91 1.91 (.40) 65.39
1.88 1.88 (.56) 52.57
1.86 1.86 (.58) 43.48
1.57 1.57 (.28) 48.35
- -----------------------------------------------------------------------------------
1.13 1.14 1.19 27.42
1.17 1.17 .37 32.15
1.19 1.19 .46 127.47
1.16 1.16 .36 65.39
1.15 1.15 .16 52.57
- -----------------------------------------------------------------------------------
.88 .89 1.45 27.42
.92 .92 .62 32.15
.94 .94 .71 127.47
.91 .91 .58 65.39
.88 .88 .45 52.57
.86 .86 .46 43.48
.85 .85 .71 48.35
- -----------------------------------------------------------------------------------
2.22 2.32 (1.02) 28.37
2.25 2.34 (1.33) 203.33
2.25 2.49 (1.06) 81.91
2.25 2.53 (1.12) 89.13
2.25 2.54 (.93) 105.31
2.25 2.77 (1.05) 71.20
2.18 8.78 .73 3.33
- -----------------------------------------------------------------------------------
1.46 1.57 (.29) 28.37
1.50 1.59 (.58) 203.33
1.50 1.74 (.31) 81.91
1.50 1.78 (.37) 89.13
1.50 1.84 (.16) 105.31
- -----------------------------------------------------------------------------------
1.20 1.32 (.02) 28.37
1.25 1.34 (.32) 203.33
1.25 1.49 (.06) 81.91
1.25 1.53 (.13) 89.13
1.25 1.54 .07 105.31
1.25 1.85 (.04) 71.20
1.25 7.95 1.92 3.33
- -----------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 195
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL INCOME
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
SELECT GROWTH FUND
Class C
April 30, 2005* 6.85 (.03) -- (.03)
October 31, 2004 6.85 (.11) .11 --
October 31, 2003 5.23 (.09) 1.71 1.62
October 31, 2002 6.65 (.10) (1.32) (1.42)
October 31, 2001 (9) 10.00 (.08) (3.27) (3.35)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 7.08 --(d) --(d) --
October 31, 2004 7.03 (.05) .10 .05
October 31, 2003 5.31 (.04) 1.76 1.72
October 31, 2002 6.68 (.04) (1.33) (1.37)
October 31, 2001 (9) 10.00 (.02) (3.30) (3.32)
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005* 7.19 .01 --(d) .01
October 31, 2004 7.10 (.02) .11 .09
October 31, 2003 5.35 (.02) 1.77 1.75
October 31, 2002 6.71 (.02) (1.34) (1.36)
October 31, 2001 (9) 10.00 --(d) (3.29) (3.29)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 7.15 .01 --(d) .01
October 31, 2004 7.08 (.03) .10 .07
October 31, 2003 5.34 (.02) 1.76 1.74
October 31, 2002 6.71 (.02) (1.35) (1.37)
October 31, 2001 (9) 10.00 --(d) (3.29) (3.29)
- --------------------------------------------------------------------------------------------------------------
SELECT VALUE FUND
Class C
April 30, 2005* 10.15 --(d) .55 .55
October 31, 2004 8.97 (.03) 1.22 1.19
October 31, 2003 7.41 (.01) 1.58 1.57
October 31, 2002 8.51 (.02) (1.07) (1.09)
October 31, 2001 (9) 10.00 --(d) (1.48) (1.48)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 10.28 .05 .55 .60
October 31, 2004 9.05 .05 1.23 1.28
October 31, 2003 7.46 .06 1.58 1.64
October 31, 2002 8.53 .06 (1.07) (1.01)
October 31, 2001 (9) 10.00 .05 (1.48) (1.43)
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005* 10.30 .07 .56 .63
October 31, 2004 9.07 .10 1.22 1.32
October 31, 2003 7.46 .08 1.61 1.69
October 31, 2002 8.54 .08 (1.07) (.99)
October 31, 2001 (9) 10.00 .09 (1.48) (1.39)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005* 10.29 .06 .55 .61
October 31, 2004 9.05 .08 1.24 1.32
October 31, 2003 7.45 .07 1.60 1.67
October 31, 2002 8.53 .07 (1.07) (1.00)
October 31, 2001 (9) 10.00 .08 (1.48) (1.40)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- -------------------------------------------------------------------------------------------
SELECT GROWTH FUND
Class C
April 30, 2005* -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (9) -- -- --
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005* -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (9) -- -- --
- -------------------------------------------------------------------------------------------
Class I
April 30, 2005* -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (9) -- -- --
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005* -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (9) -- -- --
- -------------------------------------------------------------------------------------------
SELECT VALUE FUND
Class C
April 30, 2005* (.01) (.01) --
October 31, 2004 (.01) -- --
October 31, 2003 (.01) -- --
October 31, 2002 (.01) -- --
October 31, 2001 (9) (.01) -- --
- -------------------------------------------------------------------------------------------
Class E
April 30, 2005* (.04) (.01) --
October 31, 2004 (.05) -- --
October 31, 2003 (.05) -- --
October 31, 2002 (.06) -- --
October 31, 2001 (9) (.04) -- --
- -------------------------------------------------------------------------------------------
Class I
April 30, 2005* (.06) (.01) --
October 31, 2004 (.09) -- --
October 31, 2003 (.08) -- --
October 31, 2002 (.09) -- --
October 31, 2001 (9) (.07) -- --
- -------------------------------------------------------------------------------------------
Class S
April 30, 2005* (.05) (.01) --
October 31, 2004 (.08) -- --
October 31, 2003 (.07) -- --
October 31, 2002 (.08) -- --
October 31, 2001 (9) (.07) -- --
- -------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
196 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
-- 6.82 (.44) 7,640
-- 6.85 (.15) 5,942
-- 6.85 31.17 3,265
-- 5.23 (21.35) 1,341
-- 6.65 (33.50) 1,017
- -----------------------------------------------------------------------------
-- 7.08 -- 5,988
-- 7.08 .71 5,749
-- 7.03 32.39 4,865
-- 5.31 (20.51) 2,814
-- 6.68 (33.20) 2,714
- -----------------------------------------------------------------------------
-- 7.20 .28 91,720
-- 7.19 1.13 60,006
-- 7.10 32.71 32,003
-- 5.35 (20.27) 18,150
-- 6.71 (32.90) 21,044
- -----------------------------------------------------------------------------
-- 7.16 .14 61,077
-- 7.15 .99 51,569
-- 7.08 32.58 42,421
-- 5.34 (20.42) 24,389
-- 6.71 (32.90) 24,072
- -----------------------------------------------------------------------------
(.02) 10.68 5.41 20,119
(.01) 10.15 13.24 16,834
(.01) 8.97 21.19 9,972
(.01) 7.41 (12.82) 2,061
(.01) 8.51 (14.76) 1,844
- -----------------------------------------------------------------------------
(.05) 10.83 5.88 10,080
(.05) 10.28 14.31 9,167
(.05) 9.05 22.01 7,778
(.06) 7.46 (11.86) 3,314
(.04) 8.53 (14.33) 3,155
- -----------------------------------------------------------------------------
(.07) 10.86 6.14 121,080
(.09) 10.30 14.77 102,397
(.08) 9.07 22.60 74,600
(.09) 7.46 (11.72) 35,169
(.07) 8.54 (13.92) 28,983
- -----------------------------------------------------------------------------
(.06) 10.84 5.96 194,761
(.08) 10.29 14.61 173,635
(.07) 9.05 22.53 128,383
(.08) 7.45 (11.78) 31,806
(.07) 8.53 (14.04) 31,288
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ----------------------------------------------------------------------------------
2.18 2.29 (.95) 64.77
2.25 2.50 (1.53) 134.00
2.20 2.74 (1.57) 149.76
2.11 2.82 (1.53) 212.37
2.17 2.97 (1.32) 169.36
- ----------------------------------------------------------------------------------
1.23 1.40 .05 64.77
1.36 1.54 (.65) 134.00
1.26 1.79 (.62) 149.76
1.16 1.87 (.58) 212.37
1.29 2.05 (.45) 169.36
- ----------------------------------------------------------------------------------
.89 1.08 .30 64.77
.95 1.20 (.23) 134.00
.93 1.58 (.31) 149.76
.89 1.65 (.31) 212.37
.89 1.75 (.03) 169.36
- ----------------------------------------------------------------------------------
.99 1.16 .27 64.77
1.09 1.27 (.38) 134.00
1.03 1.56 (.40) 149.76
.97 1.68 (.39) 212.37
.94 1.74 (.09) 169.36
- ----------------------------------------------------------------------------------
2.18 2.21 (.07) 42.78
2.25 2.32 (.31) 96.07
2.15 2.42 (.12) 105.71
2.00 2.40 (.27) 92.95
2.00 2.64 .00 71.75
- ----------------------------------------------------------------------------------
1.21 1.31 .91 42.78
1.39 1.39 .55 96.07
1.21 1.48 .77 105.71
1.04 1.43 .70 92.95
1.25 1.85 .76 71.75
- ----------------------------------------------------------------------------------
.79 .90 1.33 42.78
.95 .95 1.00 96.07
.90 1.23 1.12 105.71
.79 1.22 .95 92.95
.79 1.48 1.25 71.75
- ----------------------------------------------------------------------------------
1.03 1.10 1.09 42.78
1.10 1.10 .84 96.07
1.01 1.28 1.03 105.71
.87 1.27 .86 92.95
.86 1.50 1.18 71.75
- ----------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 197
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2005 (Unaudited).
(1) For the ten months ended October 31, 2000.
(2) For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(3) For the period February 18, 1999 (commencement of sale) to December 31,
1999.
(4) For the period March 3, 1999 (commencement of sale) to December 31, 1999.
(5) For the period March 29, 1999 (commencement of sale) to December 31, 1999.
(6) For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(7) For the period December 1, 1999 (commencement of operations) to December
31, 1999.
(8) For the period December 6, 2000 (commencement of sale) to October 31,
2001.
(9) For the period January 31, 2001 (commencement of operations) to October
31, 2001.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) Less than $.01 per share.
(e) May reflect amounts waived and/or reimbursed by the investment advisor and
for certain funds, custody credit arrangements.
The custody credit arrangements had an impact of less than .005%.
See accompanying notes which are an integral part of the financial statements.
198 Notes to Financial Highlights
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
investment company with 34 different investment portfolios referred to as
Funds. These financial statements report on fourteen of these Funds. The
Investment Company is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. It is organized and
operates as a Massachusetts business trust under an amended and restated
master trust agreement dated August 19, 2002. The Investment Company's master
trust agreement permits the Board of Trustees to issue an unlimited number of
shares of beneficial interest at a $.01 par value per share.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") which
require the use of management estimates and assumptions at the date of the
financial statements. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements.
Security valuation
The Funds value portfolio securities according to Board-approved Securities
Valuation Procedures, including Market Value Procedures, Fair Value
Procedures and Pricing Services. Money market fund securities are priced
using the amortized cost method of valuation, as are debt obligation
securities maturing within 60 days of the date of purchase, unless the Board
determines that amortized cost does not represent market value of short-term
debt obligations. The Board has delegated the responsibility for
administration of the Securities Valuation Procedures to FRIMCo.
Ordinarily, the Funds value each portfolio security based on market
quotations provided by Pricing Services or alternative pricing services or
dealers (when permitted by the Market Value Procedures). Generally, Fund
securities are valued at the close of the market on which they are traded as
follows:
- US listed equities; equity and fixed income options: Last sale price; last
bid price if no sales;
- US over-the-counter equities: Official closing price; last bid price if no
closing price;
- Foreign equities: Official closing price, where available, or last sale
price; last bid price if no closing price;
- Listed ADRs/GDRs: Last sale price; last bid price if no sales;
- Municipal bonds, US bonds, Eurobonds/foreign bonds: Evaluated bid price;
broker quote if no evaluated bid price;
- Futures: Settlement price.
- Investments in other mutual funds are valued at their net asset value per
share, calculated at 4 p.m. Eastern time or as of the close of the NYSE,
whichever is earlier.
- The value of swap agreements are equal to the Funds' obligation (or rights)
under swap contracts which will generally be equal to the net amounts to be
paid or received under the contracts based upon the relative values of the
positions held by each party to the contracts.
- International equity securities traded on a national securities foreign
exchange or an over-the-counter market (foreign or domestic) are valued on
the basis of the official closing price, or lacking the official closing
price, at the last sale price on the primary exchange on which the security
is traded.
If market quotations are not readily available for a security or if
subsequent events suggest that a market quotation is not reliable, the Funds
will use the security's fair value, as determined in accordance with the Fair
Value Procedures. This generally means that equity securities and fixed
income securities listed and traded principally on any national securities
exchange are valued on the basis of the last sale price or, lacking any
sales, at the closing bid price, on the primary exchange on which the
security is traded. The Fair Value Procedures may involve subjective
judgments as to the fair value of securities. The effect of fair value
pricing is that securities may not be priced on the basis of quotations from
the primary market in which they are traded, but rather may be priced by
another method that the Funds' Board of Trustees believes reflects fair
value. The use of fair value pricing by a Fund may cause the net asset value
of its shares to differ significantly from the net asset value that would
Notes to Financial Statements 199
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
be calculated using current market values. Fair value pricing could also
cause discrepancies between the daily movement of the value of Fund shares
and the daily movement of the benchmark index if the index is valued using
another pricing method.
This policy is intended to assure that the Funds' net asset values fairly
reflect security values as of the time of pricing. Events or circumstances
affecting the values of Fund securities that occur between the closing of the
principal markets on which they trade and the time the net asset value of
Fund Shares is determined may be reflected in the calculation of net asset
values for each applicable Fund when the Funds deem that the particular event
or circumstance would materially affect such Fund's net asset value. FRIC
Funds that invest primarily in frequently traded exchange listed securities
will use fair value pricing in limited circumstances since reliable market
quotations will often be readily available. FRIC Funds that invest in foreign
securities are likely to use fair value pricing more often since significant
events may occur between the close of foreign markets and the time of pricing
which would trigger fair value pricing of the foreign securities. FRIC Funds
that invest in low rated debt securities are also likely to use fair value
pricing more often since the markets in which such securities are traded are
generally thinner, more limited and less active than those for higher rated
securities. Examples of events that could trigger fair value pricing of one
or more securities are: a material market movement (defined in the Fair Value
Procedures as the movement by any two of four major US Indexes greater than a
certain percentage); a company event such as a material business development,
dividend declaration, stock split or rights offering; a material disaster; or
an armed conflict.
Because foreign securities can trade on non-business days, the net asset
value of a Fund's portfolio that includes foreign securities may change on
days when shareholders will not be able to purchase or redeem fund shares.
Investment transactions
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the basis of specific
identified cost incurred by each money manager within a particular Fund.
Investment income
Dividend income is recorded net of applicable withholding taxes on the
ex-dividend date, except that certain dividends from foreign securities are
recorded as soon thereafter as the Funds are informed of the ex-dividend
date. Interest income is recorded daily on the accrual basis. All premiums
and discounts, including original issue discounts, are amortized/accreted
using the interest method.
Federal income taxes
Since the Investment Company is a Massachusetts business trust, each Fund is
a separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to each Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
It is each Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income and capital gains. Therefore, no federal
income or excise tax provision was required for the Funds.
Dividends and distributions to shareholders
For all Funds, income, dividends and capital gain distributions, if any, are
recorded on the ex-dividend date. Dividends are generally declared and paid
quarterly for the domestic equity Funds, annually for the international
Funds, and monthly for the fixed income Funds. Capital gain distributions are
generally declared and paid annually. An additional distribution may be paid
by the Funds to avoid imposition of federal income and excise tax on any
remaining undistributed capital gains and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from GAAP. As a result, net investment income and net realized
gain (or loss) on investment and foreign currency-related transactions for a
reporting period may differ significantly from distributions during such
period. The differences between tax regulations and GAAP primarily relate to
investments in options, futures, forward contracts, swap contracts, passive
foreign investment companies, foreign-denominated investments,
mortgage-backed securities, certain securities sold at a loss and capital
loss carryforwards.
200 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Expenses
The Funds will pay their own expenses other than those expressly assumed by
Frank Russell Investment Management Company ("FRIMCo" or "Advisor"). Most
expenses can be directly attributed to the individual Funds. Expenses which
cannot be directly attributed to a specific Fund are allocated among all
Funds principally based on their relative net assets.
Class Allocation
The Funds presented herein offer the following classes of shares: Class C,
Class E, Class I and Class S. All share classes have identical voting,
dividend, liquidation and other rights and the same terms and conditions. The
separate classes of shares differ principally in the applicable distribution
fees and shareholder servicing fees. Shareholders of each class bear certain
expenses that pertain to that particular class. Realized and unrealized gains
(losses), net investment income, and expenses with the exception of class
level expenses, are allocated daily to each class of shares based upon the
relative proportion of net assets of each class.
Foreign currency translations
The books and records of the Funds are maintained in US dollars. Foreign
currency amounts and transactions of the Funds are translated into US dollars
on the following basis:
(a) Market value of investment securities, other assets and liabilities at
the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing
rate of exchange prevailing on the respective trade dates of such
transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from: sales and maturities of short-term securities; sales
of foreign currencies; currency gains or losses realized between the trade
and settlement dates on securities transactions; the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Funds' books and the US dollar equivalent of the amounts actually received or
paid. Net unrealized gains or losses from foreign currency-related
transactions arise from changes in the value of assets and liabilities, other
than investments in securities, at year-end, as a result of changes in the
exchange rates.
The Funds do not isolate that portion of the results of operations of the
Funds that arises as a result of changes in exchange rates from that portion
that arises from changes in market prices of investments during the year.
Such fluctuations are included with the net realized and unrealized gain or
loss from investments. However, for federal income tax purposes the Funds do
isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
Capital Gains Taxes
The International Securities Fund and Emerging Markets Fund may be subject to
capital gains taxes and repatriation taxes imposed by certain countries in
which they invest. The Funds have recorded a deferred tax liability in
respect of unrealized appreciation on foreign securities for potential
capital gains and repatriation taxes at April 30, 2005. The accrual for
capital gains and repatriation taxes is included in net unrealized
appreciation (depreciation) on investments in the Statement of Asset and
Liabilities for the Funds. The amounts related to capital gains taxes are
included in net realized gain (loss) on investments in the Statements of
Operations for the Funds.
<Table>
<Caption>
DEFERRED TAX CAPITAL GAINS
FUNDS LIABILITY TAXES
--------------------------------------------------------------------------------------
International Securities Fund $ -- $ 129,751
Emerging Markets Fund 1,076,405 260,330
</Table>
Derivatives
To the extent permitted by the investment objectives, restrictions and
policies set forth in the Funds' Prospectus and Statement of Additional
Information, the Funds may participate in various derivative-based
transactions. Derivative securities are instruments or agreements whose value
is derived from an underlying security or index. They include options,
futures, swaps, swaptions, forwards, structured notes and stripped
securities. These instruments offer unique characteristics that assist the
Funds in meeting their investment strategies.
Notes to Financial Statements 201
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The Funds typically use derivatives in two ways: hedging and return
enhancement. The Funds may use a hedging strategy for their cash reserves to
achieve a strategy of being fully invested by exposing those reserves to the
performance of appropriate markets by purchasing equity or fixed income
securities, as appropriate, and/or derivatives. Hedging is also used by some
Funds to limit or control risks, such as adverse movements in exchange rates
and interest rates. Return enhancement can be accomplished through the use of
derivatives in a Fund. By purchasing certain instruments, Funds may more
effectively achieve the desired portfolio characteristics that assist them in
meeting their investment objectives. Depending on how the derivatives are
structured and utilized, the risks associated with them may vary widely.
These risks are generally categorized as market risk, liquidity risk and
counterparty or credit risk.
Foreign currency exchange contracts
In connection with portfolio purchases and sales of securities denominated in
a foreign currency, certain Funds may enter into foreign currency exchange
spot contracts and forward foreign currency exchange contracts ("contracts").
The International Securities Fund may enter into forward foreign currency
overlays on liquidity reserve balances. Additionally, from time to time the
International Securities, Emerging Markets, Short Duration Bond, Diversified
Bond and Multistrategy Bond Funds may enter into contracts to hedge certain
foreign currency-denominated assets. Contracts are recorded at market value.
Certain risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and are
generally limited to the amount of unrealized gain on the contracts, if any,
that are recognized in the Statement of Assets and Liabilities. Realized
gains or losses arising from such transactions are included in net realized
gain (or loss) from foreign currency-related transactions. Open contracts at
April 30, 2005 are presented on the Schedule of Investments for the
applicable Funds.
Forward commitments
The Funds may contract to purchase securities for a fixed price at a future
date beyond customary settlement time (not to exceed 120 days) consistent
with a Fund's ability to manage its investment portfolio and meet redemption
requests. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Funds may dispose of a forward commitment
transaction prior to settlement if it is appropriate to do so and realize
short-term gains (or losses) upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund in a
dollar amount sufficient to make payment for the portfolio securities to be
purchased will be segregated on the Fund's records at the trade date and
maintained until the transaction is settled. A forward commitment transaction
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date or the other party to the transaction fails to
complete the transaction.
Options
The Funds may purchase and sell (write) call and put options on securities
and securities indices, provided such options are traded on a national
securities exchange or in an over-the-counter market. The Funds may also
purchase and sell call and put options on foreign currencies. The domestic
equity Funds may utilize options to equitize liquidity reserve balances.
When a Fund writes a covered call or a put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the option written. The Fund receives a premium on the sale of a
call option but gives up the opportunity to profit from any increase in stock
value above the exercise price of the option, and when the Fund writes a put
option it is exposed to a decline in the price of the underlying security.
Whether an option which the Fund has written expires on its stipulated
expiration date or the Fund enters into a closing purchase transaction, the
Fund realizes a gain (or loss, if the cost of a closing purchase transaction
exceeds the premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability related
to such option is extinguished. If a call option which the Fund has written
is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by the
premium originally received. When a put option which a Fund has written is
exercised, the amount of the premium originally received will reduce the cost
of the security which a Fund purchases upon exercise of the option. Realized
gains (losses) on purchased options are included in net realized gain (loss)
from investments.
202 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The Funds' use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets and
Liabilities. The face or contract amounts of these instruments reflect the
extent of the Funds' exposure to market risk. The risks may be caused by an
imperfect correlation between movements in the price of the instrument and
the price of the underlying securities and interest rates.
Futures Contracts
The funds presented herein may invest in futures contracts (i.e., interest
rate, foreign currency and index futures contracts) to a limited extent. The
face or contract amounts of these instruments reflect the extent of the
Funds' exposure to off balance sheet risk. The primary risks associated with
the use of futures contracts are an imperfect correlation between the change
in market value of the securities held by the Fund and the prices of futures
contracts and the possibility of an illiquid market. Upon entering into a
futures contract, the Funds are required to deposit with a broker an amount,
termed the initial margin, which typically represents 5% of the purchase
price indicated in the futures contract. Payments to and from the broker,
known as variation margin, are required to be made on a daily basis as the
price of the futures contract fluctuates. Changes in initial settlement value
are accounted for as unrealized appreciation (depreciation) until the
contracts are terminated, at which time realized gains and losses are
recognized.
Index Swap Agreements
The Funds may enter into swap agreements as an additional hedging strategy
for cash reserves held by those Funds or to effect investment transactions
consistent with these Funds' investment objectives and strategies. Swap
agreements are two party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard swap transaction, the two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular
investments or instruments. The returns to be exchanged between the parties
are calculated with respect to a "notional amount" (i.e. a specified dollar
amount that is hypothetically invested in a "basket" of securities
representing a particular index). Amounts paid to and received from the swap
counterparties representing capital appreciation and depreciation on the
underlying securities and accrued interest expense and interest income are
recorded as net realized gain (loss). The Fund is exposed to credit risk in
the event of non-performance by the swap counterparties; however, the Fund
does not anticipate non-performance by the counterparties.
Swap Agreements
The Short Duration Bond, Diversified Bond and Multistrategy Bond Funds may
enter into swap agreements, on either an asset-based or liability-based
basis, depending on whether they are hedging their assets or their
liabilities, and will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out, with the Funds receiving or paying, as the
case may be, only the net amount of the two payments. When a Fund engages in
a swap, it exchanges its obligations to pay or rights to receive payments for
the obligations or rights to receive payments of another party (i.e., an
exchange of floating rate payments for fixed rate payments).
The Fund may enter into several different types of agreements including
interest rate, credit default and currency swaps. Interest rate swaps are a
counterparty agreement and can be customized to meet each parties needs and
involves the exchange of a fixed payment per period for a payment that is not
fixed. Currency swaps are an agreement where two parties exchange specified
amounts of different currencies which are followed by a series of interest
payments that are exchanged based on the principal cash flow. At maturity the
principal amounts are exchanged back. Credit default swaps are a counterparty
agreement which allows the transfer of third party credit risk (the
possibility that a issuer will default on their obligation by failing to pay
principal or interest in a timely manner ) from one party to another. The
lender faces the credit risk from a third party and the counterparty in the
swap agrees to insure this risk in exchange for regular periodic payments.
The Fund expects to enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of their portfolios or
to protect against any increase in the price of securities they anticipate
purchasing at a later date. The net amount of the excess, if any, of the
Funds' obligations over their entitlements with respect to each swap will be
accrued on a daily basis and an amount of cash or liquid high-grade debt
securities having an aggregate net asset value at least equal to the accrued
excess will be maintained in a segregated account by the Funds' custodian. To
the extent that the Funds enter into swaps on other than a net basis, the
amount maintained in a segregated account will be the full amount of the
Funds' obligations, if any, with respect to such interest rate swaps, accrued
on a daily basis. If there is a default by the other party to such a
transaction, the Funds will have contractual remedies pursuant to the
agreement related to the transaction. The swap
Notes to Financial Statements 203
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid.
Investments in emerging markets
Investing in emerging markets may involve special risks and considerations
for the Emerging Markets Fund not typically associated with investing in the
United States markets. These risks include revaluation of currencies, high
rates of inflation, repatriation, restrictions on income and capital, and
future adverse political and economic developments. Moreover, securities
issued in these markets may be less liquid, subject to government ownership
controls, delayed settlements, and their prices may be more volatile than
those of comparable securities in the United States.
Guarantees
In the normal course of business the Funds enter into contracts that contain
a variety of representations which provide general indemnifications. The
Funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds expect the risk of loss to be remote.
3. INVESTMENT TRANSACTIONS
Securities
During the period ended April 30, 2005, purchases and sales of investment
securities (excluding US Government and Agency obligations, short-term
investments, options, futures and repurchase agreements) were as follows:
<Table>
<Caption>
FUNDS PURCHASES SALES
- ---------------------------------------------------------------
Diversified Equity $ 1,346,209,855 $ 1,160,551,555
Special Growth 729,870,089 693,737,005
Quantitative Equity 1,764,364,482 1,554,535,143
International Securities 1,051,796,765 922,580,730
Emerging Markets 310,186,957 277,335,501
Real Estate Securities 484,499,646 419,846,878
Short Duration Bond 994,798,055 995,428,992
Diversified Bond 1,377,792,368 1,102,619,782
</Table>
<Table>
<Caption>
FUNDS PURCHASES SALES
- ---------------------------------------------------------------
Multistrategy Bond $ 636,514,423 $ 587,235,184
Tax Exempt Bond 66,554,503 35,777,180
Tax-Managed Large Cap 119,086,082 99,118,911
Tax-Managed Mid & Small
Cap 43,281,267 37,081,925
Select Growth 130,784,827 90,774,972
Select Value 161,776,019 134,730,829
</Table>
Purchases and sales of US Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
<Table>
<Caption>
FUNDS PURCHASES SALES
--------------------------------------------------------------------------------
Short Duration Bond $ 266,800,748 $ 255,861,555
Diversified Bond 784,428,115 778,738,423
Multistrategy Bond 904,152,064 720,539,155
Tax-Managed Large Cap 369,274 431,409
</Table>
Written Options Contracts
Fund transactions in written options contracts for the period ended April 30,
2005 were as follows:
<Table>
<Caption>
INTERNATIONAL SECURITIES EMERGING MARKETS
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2004 433 $ 3,730,200 461 $ 1,319,478
Opened 2,614 20,286,195 1,087 2,425,523
Closed (2,587) (21,509,146) (1,167) (2,773,980)
Expired -- -- -- --
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2005 460 $ 2,507,249 381 $ 971,021
=================== =================== =================== ===================
</Table>
204 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHORT DURATION BOND DIVERSIFIED BOND
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2004 12 $ 13,167 240 $ 149,231
Opened 10 3,009 737 283,187
Closed (12) (13,167) -- --
Expired -- -- (592) (269,119)
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2005 10 $ 3,009 385 $ 163,299
=================== =================== =================== ===================
</Table>
<Table>
<Caption>
MULTISTRATEGY BOND
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------------------------------------------------------------------------------------
Outstanding October 31, 2004 504 $ 562,722
Opened 1,131 402,409
Closed (11) (11,161)
Expired (1,041) (722,432)
------------------- -------------------
Outstanding April 30, 2005 583 $ 231,538
=================== ===================
</Table>
Securities Lending
The Investment Company has a securities lending program whereby each Fund can
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (US currency), US Government or US Government
agency obligations as collateral against the loaned securities. To the extent
that a loan is collateralized by cash, such collateral shall be invested by
the securities lending agent, State Street Bank and Trust Company ("State
Street") in short-term instruments, money market mutual funds, and such other
short-term investments, provided the investments meet certain quality and
diversification requirements. Cash collateral invested in money market funds
is included in the Schedules of Investments. The collateral received is
recorded on the Fund's statement of assets and liabilities along with the
related obligation to return the collateral.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is divided
between the Fund and State Street and is recorded as income for the Fund. To
the extent that a loan is secured by non-cash collateral, brokers pay the
Fund negotiated lenders' fees, which are divided between the Fund and State
Street and are recorded as securities lending income for the Fund. All
collateral received will be in an amount at least equal to 102% (for loans of
US securities) or 105% (for non-US securities) of the market value of the
loaned securities at the inception of each loan. The market value of the
loaned securities is determined at the close of business of the Funds and any
additional required collateral is delivered to the Fund the next day. Should
the borrower of the securities fail financially, there is a risk of delay in
recovery of the securities or loss of rights in the collateral. Consequently,
loans are made only to borrowers which are deemed to be of good financial
standing. As of April 30, 2005, the value of outstanding securities on loan
and the value of collateral amounted to as follows:
<Table>
<Caption>
VALUE OF VALUE OF
FUNDS SECURITIES ON LOAN CASH COLLATERAL
- ----------------------------------------------------------------
Diversified Equity $ 75,298,689 $ 76,618,083
Special Growth 133,302,064 136,195,181
Quantitative Equity 46,894,691 48,179,333
International Securities 519,864,064 547,103,116
Emerging Markets 12,474,787 12,683,965
Real Estate Securities 96,850,817 97,691,824
Short Duration Bond 1,560,708 1,600,505
</Table>
<Table>
<Caption>
VALUE OF VALUE OF
FUNDS SECURITIES ON LOAN CASH COLLATERAL
- ----------------------------------------------------------------
Diversified Bond $ 91,431,877 $ 93,539,866
Multistrategy Bond 387,915,896 396,635,162
Tax-Managed Large Cap 2,571,012 2,631,302
Tax-Managed Mid & Small
Cap 20,114,027 20,584,427
Select Growth 7,730,686 8,005,149
Select Value 16,798,378 17,086,666
</Table>
Notes to Financial Statements 205
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
As of April 30, 2005, the cash collateral received for the securities on loan
are invested as follows:
<Table>
<Caption>
STATE STREET
SECURITIES LENDING
FUNDS FRIC MONEY MARKET QUALITY TRUST
- ----------------------------------------------------------------
Diversified Equity $ 18,459,170 $ 58,158,913
Special Growth 32,812,750 103,382,431
Quantitative Equity 11,607,580 36,571,753
International Securities 131,810,523 415,292,593
Emerging Markets 3,055,877 9,628,088
Real Estate Securities 23,536,350 74,155,474
Short Duration Bond 385,601 1,214,904
</Table>
<Table>
<Caption>
STATE STREET
SECURITIES LENDING
FUNDS FRIC MONEY MARKET QUALITY TRUST
- ----------------------------------------------------------------
Diversified Bond $ 22,536,042 $ 71,003,824
Multistrategy Bond 95,559,112 301,076,050
Tax-Managed Large Cap 633,945 1,997,357
Tax-Managed Mid & Small
Cap 4,959,292 15,625,135
Select Growth 1,928,636 6,076,513
Select Value 4,116,596 12,970,070
</Table>
As of April 30, 2005, the non-cash collateral received for the securities on
loan in the following funds was:
<Table>
<Caption>
NON-CASH
FUNDS COLLATERAL VALUE NON-CASH COLLATERAL HOLDING
-----------------------------------------------------------------------------------------------
Special Growth $ 195,989 Pool of US Government securities
International Securities 666,411 Pool of US Government securities
Tax-Managed Mid & Small Cap 20,879 Pool of US Government securities
</Table>
4. RELATED PARTIES
Advisor and Administrator
FRIMCo advises and administers all of the Funds which comprise the Investment
Company. FRIMCo is a wholly-owned subsidiary of Frank Russell Company (a
subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell
Company provides consulting and money manager evaluation services to FRIMCo.
The Funds are permitted to invest their cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses) and a
portion of the collateral received from the Investment Company's securities
lending program, in the Frank Russell Investment Company Money Market and Tax
Free Money Market Funds (series of the Investment Company not presented
herein). As of April 30, 2005, $1,201,442,727 of the Money Market Fund's net
assets and $11,409,848 of the Tax Free Money Market Fund's net assets
represents investments by the Funds presented herein and $456,891,372 of the
Money Market Funds' net assets represents the investments of other FRIC Funds
not presented herein.
The advisory and administrative fees, which are based upon the average daily
net assets of each Fund and the rates specified in the table below, are
payable monthly and total $53,251,549 and $3,717,524 respectively, for the
period ended April 30, 2005.
<Table>
<Caption>
ANNUAL RATE
FUNDS ADVISOR ADMINISTRATOR
- --------------------------------------------------------------
Diversified Equity .73% .05%
Special Growth .90 .05
Quantitative Equity .73 .05
International Securities .90 .05
Emerging Markets 1.15 .05
Real Estate Securities .80 .05
Short Duration Bond .45 .05
</Table>
<Table>
<Caption>
ANNUAL RATE
FUNDS ADVISOR ADMINISTRATOR
- --------------------------------------------------------------
Diversified Bond .40% .05%
Multistrategy Bond .60 .05
Tax Exempt Bond .30 .05
Tax-Managed Large Cap .70 .05
Tax-Managed Mid & Small Cap .98 .05
Select Growth .80 .05
Select Value .70 .05
</Table>
For the Tax-Managed Mid & Small Cap Fund, FRIMCo has contractually agreed to
waive, at least until February 28, 2006, up to the full amount of its 1.03%
combined advisory and administrative fees and to reimburse the Fund to the
extent that Fund-level expenses exceed 1.25% of the average daily net assets
of that Fund on an annual basis. Fund-level expenses for the Tax-Managed Mid
& Small Cap Fund do not include 12b-1 fees or shareholder servicing fees. The
total amount of the waiver for the period ended April 30, 2005 was $48,487.
There were no reimbursements for the period ended April 30, 2005. This Fund's
expense ratio was less than its expense cap for the period ended April 30,
2005 due to a one-time expense reimbursement from the Advisor during the
period.
206 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
For the Select Growth Fund, FRIMCo has contractually agreed to waive, at
least until February 28, 2006, up to the full amount of its transfer agency
fees, administrative fees, and advisory fees to the extent that expenses for
Class C, Class E, Class I and Class S exceed 2.25%, 1.40%, 0.95% and 1.15%,
respectively, of the average daily net assets of each such class on an annual
basis. If a waiver of advisory or administrative fees is required for any
class of shares of the Fund, advisory or administrative fees will be waived
equally across all classes of the Fund. This may result in a waiver amount
that is greater than what is required to reduce total net operating expense
for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%,
respectively. The total amount of the waiver for the period ended April 30,
2005 was $71,269. There were no reimbursements for the period ended April 30,
2005. This Fund's expense ratio was less than its expense cap for the period
ended April 30, 2005 due to a one-time expense reimbursement from the Advisor
during the period.
For the Select Value Fund, FRIMCo has contractually agreed to waive, at least
until February 28, 2006, up to the full amount of its transfer agency fees,
administrative fees, and advisory fees to the extent that expenses for Class
C, Class E, Class I and Class S exceed 2.25%, 1.40%, 0.95% and 1.15%,
respectively, of the average daily net assets of each such class on an annual
basis. If a waiver of advisory or administrative fees is required for any
class of shares of the Fund, advisory or administrative fees will be waived
equally across all classes of the Fund. This may result in a waiver amount
that is greater than what is required to reduce total net operating expense
for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%,
respectively. There were no waivers or reimbursements for the period ended
April 30, 2005.
The Advisor does not have the ability to recover amounts waived or reimbursed
from previous periods.
The Advisor reimbursed certain Funds for amounts previously paid by those
Funds to Russell/Mellon Analytical Services for analytical services received.
The amounts of the reimbursement for the period ended April 30, 2005 were:
<Table>
<Caption>
REIMBURSEMENT
FUNDS AMOUNT
- -----------------------------------------------------------
Diversified Equity $ 115,652
Special Growth 84,774
Quantitative Equity 43,883
International Securities 259,457
Emerging Markets 132,307
</Table>
<Table>
<Caption>
REIMBURSEMENT
FUNDS AMOUNT
- -----------------------------------------------------------
Real Estate Securities $ 9,951
Tax-Managed Large Cap 26,721
Tax-Managed Mid & Small Cap 31,643
Select Growth 56,745
Select Value 124,522
</Table>
Special Service Charge
A special servicing agreement was entered into in February 1999 by the
Advisor and has been approved annually by the Funds' Board of Trustees. The
special servicing agreement is between the Fund of Funds (a group of nine
LifePoints Funds and the Tax-Managed Global Equity Fund which invest in a
combination of Class S shares of the Investment Company's portfolios) and the
Funds listed below, the "Underlying Funds," in which the Fund of Funds
invest. In accordance with the special services agreement, expenses from the
operation of the Fund of Funds are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Fund of
Funds. No Underlying Funds will be charged expenses that exceed the estimated
savings to each respective Underlying Fund. These estimated savings appear in
the form of reduced transfer agent costs resulting from the elimination of
separate shareholder accounts which either currently are or have potential to
be invested in the Underlying Funds. Rather than having each investor open a
shareholder account to invest individually in the Underlying Funds, the Fund
of Funds act as omnibus accounts combining thousands of individual
shareholder accounts into a single account. This benefits the Underlying
Funds, by reducing the number of shareholder accounts that need to be
maintained, and by the omnibus accounts' netting out the trades of individual
shareholders to a point where the Fund of Funds only execute one trade each
day with each Underlying Fund. In the event that the financial benefits to
the Underlying Funds do not exceed aggregate expenses of any Fund of Fund,
the Advisor will reimburse the respective Underlying Funds. The Advisor does
not have the ability to recover amounts reimbursed from previous periods.
These arrangements will be discontinued on July 1, 2005. However, the Advisor
will enter into a new arrangement to waive or reimburse certain direct
expenses of the Fund of Funds and it is not expected that the expense ratios
of the Fund of Funds will increase as a result of the discontinuation of the
current arrangement.
Notes to Financial Statements 207
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
For the period ended April 30, 2005, the special servicing expense charged to
the Underlying Funds amounted to:
<Table>
<Caption>
AMOUNT
UNDERLYING FUNDS PAID
- -----------------------------------------------------------
Diversified Equity $ 870,186
Special Growth 193,718
Quantitative Equity 877,560
International Securities 781,998
Emerging Markets 144,029
Real Estate Securities 247,370
</Table>
<Table>
<Caption>
AMOUNT
UNDERLYING FUNDS PAID
- -----------------------------------------------------------
Short Duration Bond $ 382,093
Diversified Bond 566,361
Multistrategy Bond 608,393
Tax-Managed Large Cap 36,868
Tax-Managed Mid & Small Cap 11,061
</Table>
For the period ended April 30, 2005, the Advisor reimbursement to the
Underlying Funds amounted to:
<Table>
<Caption>
AMOUNT
UNDERLYING FUNDS PAID
- -----------------------------------------------------------
Diversified Equity $ 7,039
Special Growth 1,722
Quantitative Equity 7,039
International Securities 6,690
Emerging Markets 1,068
</Table>
<Table>
<Caption>
AMOUNT
UNDERLYING FUNDS PAID
- -----------------------------------------------------------
Real Estate Securities $ 2,158
Short Duration Bond 3,593
Diversified Bond 7,733
Multistrategy Bond 6,539
</Table>
Custodian
The Funds have entered into arrangements with their Custodian whereby custody
credits realized as a result of uninvested cash balances were used to reduce
a portion of the Fund's expenses. During the period ended April 30, 2005, the
Fund's custodian fees were reduced by the following amounts under these
arrangements:
<Table>
<Caption>
AMOUNT
FUNDS PAID
- -----------------------------------------------------------
Diversified Equity $ 1,020
Special Growth 593
Quantitative Equity 427
International Securities 842
Emerging Markets 685
Real Estate Securities 244
Short Duration Bond 3,987
</Table>
<Table>
<Caption>
AMOUNT
FUNDS PAID
- -----------------------------------------------------------
Diversified Bond $ 6,636
Multistrategy Bond 12,113
Tax Exempt Bond 333
Tax-Managed Large Cap 45
Tax-Managed Mid & Small Cap 82
Select Growth 262
Select Value 274
</Table>
Transfer agent
The Investment Company has a contract with FRIMCo to provide transfer agent
services to the Funds. Total fees for the Funds reported herein for the
period ended April 30, 2005 were $7,036,322.
In addition, FRIMCo has contractually agreed to waive, at least until
February 28, 2006, a portion of its transfer agency fees for certain Funds.
The total transfer agent fee waivers for the period ended April 30, 2005 were
as follows:
<Table>
<Caption>
TA FEE
FUNDS WAIVER AMOUNT
- -------------------------------------------------------
Select Growth $ 24,608
</Table>
208 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
For the period ended April 30, 2005, the Advisor paid the following amounts
to certain Funds with respect to referral fees received:
<Table>
<Caption>
AMOUNT
FUNDS PAID
- ------------------------------------------------
Diversified Equity $ 20,053
Special Growth 25,059
Quantitative Equity 24,002
International Securities 21,438
Emerging Markets 26,082
Real Estate Securities 34,883
Short Duration Bond 13,305
</Table>
<Table>
<Caption>
AMOUNT
FUNDS PAID
- ------------------------------------------------
Diversified Bond $ 10,186
Multistrategy Bond 14,604
Tax Exempt Bond 3,397
Tax-Managed Large Cap 6,987
Tax-Managed Mid & Small Cap 6,159
Select Growth 3,524
Select Value 8,513
</Table>
Distributor and Shareholder Servicing
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to Russell Fund Distributors, Inc. (the
"Distributor"), a wholly-owned subsidiary of FRIMCo, or any Selling Agents,
as defined in the Plan, for sales support services provided and related
expenses incurred which were primarily intended to result in the sale of the
Class C shares subject to the Distribution Plan. The 12b-1 distribution
payments shall not exceed 0.75% of the average daily net assets of a Fund's
Class C shares on an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which the Funds may make payments to the
Distributor or any Servicing Agent for any activities or expenses primarily
intended to assist, support or service the Servicing Agents' clients who
beneficially own Class C or Class E shares of the Funds. The shareholder
servicing payments shall not exceed 0.25% of the average daily net assets of
a Fund's Class C and Class E shares on an annual basis.
Pursuant to the rules of the National Association of Securities Dealers, Inc.
("NASD"), the asset-based sales charges on Shares of the Funds may not exceed
6.25% of total gross sales, subject to certain exclusions. This 6.25%
limitation is imposed at the class level of each Fund rather than on a per
shareholder basis. Therefore, long-term shareholders may pay more than the
economic equivalent of the maximum sales charges permitted by the NASD.
Brokerage commissions
The Funds will effect transactions through Frank Russell Securities, Inc.
("FRS") and its global network of correspondent brokers. FRS is an affiliate
of FRIMCo. Trades placed through FRS and its correspondents are used to
obtain either research services for FRIMCo, to assist it in its capacity as a
manager of managers, to generate commission rebates to the Funds on whose
behalf the trades were made or to manage trading associated with changes in
managers, rebalancing across existing managers, cash flows and other
portfolio transitions. For purposes of trading to obtain research services
for FRIMCo or to generate commission rebates to the Funds, the Funds' money
managers are requested to and FRIMCo may, with respect to transactions it
places, effect transactions with or through FRS or other brokers and its
correspondents or other brokers only to the extent that the Funds will
receive competitive execution, price and commissions. Research services
provided to FRIMCo by FRS or other brokers include performance measurement
statistics, fund analytics systems and market monitoring systems. Research
services will be obtained from unaffiliated third parties at market rates.
Research provided to FRIMCo will benefit the particular Funds generating the
trading activity and may also benefit other Funds within FRIC and other funds
and clients managed or advised by FRIMCo or its affiliates. Similarly, the
Funds will benefit from research provided with respect to trading by those
other funds and clients. In some cases, research may also be provided by
non-affiliated brokers.
FRS or other brokers may also rebate to the Funds a portion of commissions
earned on certain trading by the Funds through FRS and its correspondents in
the form of commission recapture. Commission recapture is paid solely to
those Funds generating the applicable trades. Commission recapture is
generated on the instructions of the Soft Dollar Committee once FRIMCo's
research budget has been met. For the period ended April 30, 2005, there was
no commission recapture for the Funds.
FRS retains a portion of all commissions generated, regardless of whether the
trades were used to provide research services to FRIMCo or commission
recapture to the Funds. Trades through FRS for transition services and
manager funding (i.e. brokerage arrangements designed to reduce costs and
optimize performance during the transition of Fund assets upon the hiring,
termination or additional funding of a money manager) and are at ordinary and
customary commission rates and do not result in commission rebates or accrued
credits for the procurement of research related services.
Notes to Financial Statements 209
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Amounts retained by Frank Russell Securities, Inc. for the period ended April
30, 2005 were as follows:
<Table>
<Caption>
FUNDS AMOUNT
- ------------------------------------------------
Diversified Equity $ 77,988
Special Growth 23,738
International Securities 96,447
Emerging Markets 23,635
Real Estate Securities 15,415
</Table>
<Table>
<Caption>
FUNDS AMOUNT
- ------------------------------------------------
Tax-Managed Large Cap $ 7,257
Tax-Managed Mid & Small Cap 1,532
Select Growth 14,525
Select Value 18,801
</Table>
Additionally, the Funds paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Advisor.
Accrued fees payable to affiliates as of April 30, 2005 were as follows:
<Table>
<Caption>
DIVERSIFIED SPECIAL QUANTITATIVE INTERNATIONAL EMERGING
EQUITY GROWTH EQUITY SECURITIES MARKETS
------------------------------------------------------------------------------------------------------------------------------
Advisory fees $ 1,424,833 $ 644,086 $ 1,488,040 $ 1,566,470 $ 662,282
Administration fees 99,498 36,768 101,904 88,438 29,135
Analytic services -- 3,238 15 8,835 48
Distribution fees 69,157 31,338 70,984 63,758 16,440
Shareholder servicing fees 32,992 17,366 34,246 29,740 8,700
Transfer agent fees 410,993 362,042 463,152 406,839 229,649
Trustee fees 5,094 1,867 5,733 4,199 473
---------------- ---------------- ---------------- ---------------- ----------------
$ 2,042,567 $ 1,096,705 $ 2,164,074 $ 2,168,279 $ 946,727
================ ================ ================ ================ ================
</Table>
<Table>
<Caption>
REAL ESTATE SHORT DURATION DIVERSIFIED MULTISTRATEGY TAX EXEMPT
SECURITIES BOND BOND BOND BOND
------------------------------------------------------------------------------------------------------------------------------
Advisory fees $ 896,839 $ 446,457 $ 488,129 $ 801,433 $ 57,131
Administration fees 56,297 50,624 60,538 66,796 9,510
Analytic services 52 -- -- -- 3
Distribution fees 42,346 20,041 30,751 38,666 7,239
Shareholder servicing fees 20,883 11,592 19,970 20,091 3,946
Transfer agent fees 463,323 173,533 266,528 257,525 33,153
Trustee fees 2,608 7,798 1,833 1,123 390
---------------- ---------------- ---------------- ---------------- ----------------
$ 1,482,348 $ 710,045 $ 867,749 $ 1,185,634 $ 111,372
================ ================ ================ ================ ================
</Table>
<Table>
<Caption>
TAX MANAGED TAX MANAGED SELECT SELECT
LARGE CAP MID & SMALL CAP GROWTH VALUE
-----------------------------------------------------------------------------------------------------------
Advisory fees $ 221,791 $ 120,637 $ 107,235 $ 194,760
Administration fees 16,640 6,242 6,675 13,901
Analytic services 362 56 327 --
Distribution fees 9,596 4,649 4,516 12,105
Shareholder servicing fees 4,632 1,810 2,729 6,106
Transfer agent fees 96,992 36,729 25,585 154,814
Trustee fees 1,895 605 99 448
---------------- ---------------- ---------------- ----------------
$ 351,908 $ 170,728 $ 147,166 $ 382,134
================ ================ ================ ================
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company
("FRIC"), which has 34 Funds, and Russell Investment Funds ("RIF"), which has
five Funds. Each of the Trustees is a Trustee for both FRIC and RIF. During
the period, the Russell Fund Complex paid each of its Trustees not affiliated
with FRIMCo a retainer of $52,000 per year, $5,000 for each
210 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
regular quarterly meeting attended in person, $2,000 for each special meeting
attended in person, and $2,000 for each Audit Committee meeting or Nominating
and Governance Committee meeting or any other committee meeting established
and approved by the Board that is attended in person. Each Trustee receives a
$500 fee for attending the meetings (quarterly, special, committee) by phone
instead of receiving the full fee had the member attended in person.
Trustees' out of pocket expenses are also paid by the Russell Fund Complex.
During the period, the Lead Trustee was paid a fee of $10,000 per year. The
Audit Committee Chair was paid a fee of $12,000 per year and the Nominating
and Governance Committee Chair was paid a fee of $6,000 per year.
5. FEDERAL INCOME TAXES
At October 31, 2004, the following Funds had net tax basis capital loss
carryforwards which may be applied against any net realized taxable gains in
each succeeding year or until their respective expiration dates, whichever
occurs first. Available capital loss carryforwards and expiration dates are
as follows:
<Table>
<Caption>
FUNDS 10/31/07 10/31/08 10/31/09 10/31/10
----------------------------------------------------------------------------------------------------------------
Diversified Equity $ -- $ -- $ -- $ 101,420,004
Special Growth -- -- -- --
Quantitative Equity -- -- -- 27,832,702
International Securities -- -- -- 77,156,255
Emerging Markets -- -- 55,313,580 24,430,000
Real Estate Securities -- -- -- --
Short Duration Bond -- -- -- --
Diversified Bond -- -- -- --
Multistrategy Bond -- -- -- --
Tax Exempt Bond -- 959,198 -- --
Tax-Managed Large Cap -- 10,228,116 40,037,533 59,069,223
Tax-Managed Mid & Small Cap -- -- 3,502,465 14,180,832
Select Growth -- -- 10,693,422 14,206,106
Select Value 13,798,385 451,724 2,362,680 362,611
</Table>
<Table>
<Caption>
FUNDS 10/31/11 10/31/12 TOTALS
---------------------------------------------------------------------------------------------
Diversified Equity $ 7,188,070 $ -- $ 108,608,074
Special Growth -- -- --
Quantitative Equity 9,012,101 -- 36,844,803
International Securities 28,103,645 -- 105,259,900
Emerging Markets -- -- 79,743,580
Real Estate Securities -- -- --
Short Duration Bond -- -- --
Diversified Bond -- -- --
Multistrategy Bond -- -- --
Tax Exempt Bond -- 357,343 1,316,541
Tax-Managed Large Cap -- -- 109,334,872
Tax-Managed Mid & Small Cap -- -- 17,683,297
Select Growth 263,497 -- 25,163,025
Select Value -- -- 16,975,400
</Table>
Select Value Fund had a capital loss carryforward of $16,975,400 that it
acquired from the Equity Income Fund and Equity III Fund of which
$13,798,385, $451,724, $2,362,680, and $362,611 will expire on October 31 of
the years 2007, 2008, 2009 and 2010, respectively. This capital loss
carryforward can be utilized at a pace of up to $5,101,116 each year with any
unused capital loss annual limitation carried over to each succeeding year or
until its respective expiration dates, whichever occurs first.
Notes to Financial Statements 211
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
At April 30, 2005, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
<Caption>
INTERNATIONAL
DIVERSIFIED EQUITY SPECIAL GROWTH QUANTITATIVE EQUITY SECURITIES EMERGING MARKETS
------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 2,246,240,683 $ 914,249,445 $ 2,343,972,179 $ 2,377,462,482 $ 565,636,693
================ ================ ================ ================ ================
Unrealized Appreciation $ 253,530,787 $ 112,559,900 $ 254,095,914 $ 279,554,882 $ 155,696,511
Unrealized Depreciation (57,843,679) (37,585,155) (72,669,560) (31,580,250) (16,848,518)
---------------- ---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 195,687,108 $ 74,974,745 $ 181,426,354 $ 247,974,632 $ 138,847,993
================ ================ ================ ================ ================
</Table>
<Table>
<Caption>
REAL ESTATE SHORT DURATION
SECURITIES BOND DIVERSIFIED BOND MULTISTRATEGY BOND TAX EXEMPT BOND
------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 1,086,197,203 $ 1,258,703,938 $ 1,870,650,776 $ 2,324,223,224 $ 226,568,496
================ ================ ================ ================ ================
Unrealized Appreciation $ 429,731,911 $ 1,837,884 $ 11,773,635 $ 21,568,267 $ 5,526,832
Unrealized Depreciation (995,909) (11,022,881) (7,172,707) (5,980,738) (633,316)
---------------- ---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 428,736,002 $ (9,184,997) $ 4,600,928 $ 15,587,529 $ 4,893,516
================ ================ ================ ================ ================
</Table>
<Table>
<Caption>
TAX-MANAGED TAX-MANAGED MID
LARGE CAP & SMALL CAP SELECT GROWTH SELECT VALUE
------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 311,525,400 $ 146,895,931 $ 169,735,586 $ 330,714,147
================ ================ ================ ================
Unrealized Appreciation $ 77,704,533 $ 19,290,799 $ 9,383,223 $ 39,785,856
Unrealized Depreciation (3,455,453) (5,538,154) (5,277,520) (8,534,267)
---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 74,249,080 $ 13,752,645 $ 4,105,703 $ 31,251,589
================ ================ ================ ================
</Table>
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2005 and October 31, 2004
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
DIVERSIFIED EQUITY ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 571 1,067 $ 23,470 $ 40,591
Proceeds from reinvestment of
distributions 2 -- 97 --
Payments for shares redeemed (238) (390) (9,771) (14,807)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 335 677 13,796 25,784
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 176 430 7,477 16,840
Proceeds from reinvestment of
distributions 4 3 159 100
Payments for shares redeemed (163) (212) (6,907) (8,287)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 17 221 729 8,653
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 7,320 16,792 308,876 654,907
Proceeds from reinvestment of
distributions 128 105 5,420 4,125
Payments for shares redeemed (2,904) (6,913) (122,562) (271,038)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 4,544 9,984 191,734 387,994
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 4,896 10,882 $ 206,259 $ 422,431
================= ================= ================= =================
</Table>
212 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
SPECIAL GROWTH ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 194 385 $ 9,226 $ 18,776
Proceeds from reinvestment of
distributions 130 22 6,105 1,039
Payments for shares redeemed (133) (227) (6,348) (10,972)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 191 180 8,983 8,843
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 141 416 7,209 20,969
Proceeds from reinvestment of
distributions 83 9 4,119 445
Payments for shares redeemed (129) (143) (6,604) (7,150)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 95 282 4,724 14,264
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,776 4,368 141,119 226,455
Proceeds from reinvestment of
distributions 1,596 223 81,481 11,203
Payments for shares redeemed (1,479) (3,844) (76,367) (200,670)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,893 747 146,233 36,988
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 3,179 1,209 $ 159,940 $ 60,095
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
QUANTITATIVE EQUITY ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 685 1,244 $ 24,747 $ 41,854
Proceeds from reinvestment of
distributions 6 -- 199 --
Payments for shares redeemed (279) (421) (10,066) (14,144)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 412 823 14,880 27,710
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 179 417 6,626 14,350
Proceeds from reinvestment of
distributions 6 5 221 173
Payments for shares redeemed (152) (189) (5,642) (6,517)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 33 233 1,205 8,006
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 9,016 19,903 333,370 684,881
Proceeds from reinvestment of
distributions 183 156 6,788 5,367
Payments for shares redeemed (3,643) (9,164) (134,942) (316,481)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,556 10,895 205,216 373,767
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 6,001 11,951 $ 221,301 $ 409,483
================= ================= ================= =================
</Table>
Notes to Financial Statements 213
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
INTERNATIONAL SECURITIES ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 425 719 $ 24,871 $ 37,388
Proceeds from reinvestment of
distributions 14 15 784 743
Payments for shares redeemed (133) (223) (7,786) (11,610)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 306 511 17,869 26,521
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 99 238 5,948 12,850
Proceeds from reinvestment of
distributions 10 10 605 526
Payments for shares redeemed (108) (98) (6,651) (5,275)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1 150 (98) 8,101
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 4,552 10,417 276,846 560,800
Proceeds from reinvestment of
distributions 478 235 28,532 12,187
Payments for shares redeemed (1,694) (5,939) (103,360) (321,616)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,336 4,713 202,018 251,371
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 3,643 5,374 $ 219,789 $ 285,993
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
EMERGING MARKETS ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 416 743 $ 5,958 $ 8,601
Proceeds from reinvestment of
distributions 5 27 70 295
Payments for shares redeemed (201) (289) (2,928) (3,350)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 220 481 3,100 5,546
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 175 444 2,601 5,367
Proceeds from reinvestment of
distributions 9 22 132 254
Payments for shares redeemed (223) (244) (3,373) (2,940)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (39) 222 (640) 2,681
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 5,313 15,089 78,565 180,417
Proceeds from reinvestment of
distributions 424 638 6,032 7,205
Payments for shares redeemed (3,700) (8,459) (54,734) (101,760)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,037 7,268 29,863 85,862
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,218 7,971 $ 32,323 $ 94,089
================= ================= ================= =================
</Table>
214 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
REAL ESTATE SECURITIES ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 315 648 $ 13,233 $ 24,331
Proceeds from reinvestment of
distributions 130 36 5,570 1,425
Payments for shares redeemed (159) (233) (6,696) (8,932)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 286 451 12,107 16,824
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 187 314 7,941 12,184
Proceeds from reinvestment of
distributions 68 21 2,936 829
Payments for shares redeemed (123) (145) (5,177) (5,628)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 132 190 5,700 7,385
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 4,880 7,890 207,728 $ 300,908
Proceeds from reinvestment of
distributions 1,746 631 75,833 25,106
Payments for shares redeemed (2,963) (5,898) (127,585) (227,399)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,663 2,623 155,976 98,615
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 4,081 3,264 $ 173,783 $ 122,824
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
SHORT DURATION BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 333 939 $ 6,288 $ 17,894
Proceeds from reinvestment of
distributions 13 15 236 293
Payments for shares redeemed (604) (1,127) (11,406) (21,451)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (258) (173) (4,882) (3,264)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 181 411 3,436 7,864
Proceeds from reinvestment of
distributions 12 17 230 319
Payments for shares redeemed (137) (277) (2,599) (5,285)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 56 151 1,067 2,898
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 8,980 22,446 169,885 428,176
Proceeds from reinvestment of
distributions 684 508 12,878 9,675
Payments for shares redeemed (8,111) (13,721) (153,277) (261,930)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,553 9,233 29,486 175,921
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,351 9,211 $ 25,671 $ 175,555
================= ================= ================= =================
</Table>
Notes to Financial Statements 215
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
DIVERSIFIED BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 431 787 $ 10,467 $ 19,032
Proceeds from reinvestment of
distributions 28 60 670 1,438
Payments for shares redeemed (231) (451) (5,605) (10,947)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 228 396 5,532 9,523
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 391 663 9,499 16,074
Proceeds from reinvestment of
distributions 35 69 848 1,674
Payments for shares redeemed (227) (354) (5,532) (8,570)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 199 378 4,815 9,178
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 10,023 18,971 238,069 449,420
Proceeds from reinvestment of
distributions 898 823 21,250 19,405
Payments for shares redeemed (3,156) (9,239) (74,825) (218,477)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 7,765 10,555 184,494 250,348
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 8,192 11,329 $ 194,841 $ 269,049
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
MULTISTRATEGY BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 1,551 2,363 $ 16,281 $ 24,666
Proceeds from reinvestment of
distributions 115 140 1,205 1,455
Payments for shares redeemed (642) (917) (6,734) (9,601)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,024 1,586 10,752 16,520
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 557 1,164 5,836 12,178
Proceeds from reinvestment of
distributions 79 100 827 1,046
Payments for shares redeemed (210) (281) (2,203) (2,937)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 426 983 4,460 10,287
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 29,342 49,689 308,780 520,355
Proceeds from reinvestment of
distributions 3,082 1,718 32,272 17,900
Payments for shares redeemed (5,705) (14,788) (59,897) (154,717)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 26,719 36,619 281,155 383,538
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 28,169 39,188 $ 296,367 $ 410,345
================= ================= ================= =================
</Table>
216 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
TAX EXEMPT BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 125 248 $ 2,710 $ 5,453
Proceeds from reinvestment of
distributions 4 9 91 207
Payments for shares redeemed (78) (171) (1,694) (3,757)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 51 86 1,107 1,903
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 90 121 1,965 2,664
Proceeds from reinvestment of
distributions 5 9 100 201
Payments for shares redeemed (46) (101) (1,001) (2,210)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 49 29 1,064 655
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,568 4,071 56,156 89,463
Proceeds from reinvestment of
distributions 119 212 2,604 4,645
Payments for shares redeemed (1,230) (2,430) (26,856) (53,265)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,457 1,853 31,904 40,843
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,557 1,968 $ 34,075 $ 43,401
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
TAX-MANAGED LARGE CAP ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 260 319 $ 4,533 $ 5,153
Proceeds from reinvestment of
distributions 1 -- 14 --
Payments for shares redeemed (153) (182) (2,635) (2,945)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 108 137 1,912 2,208
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 92 102 1,613 1,689
Proceeds from reinvestment of
distributions 3 1 55 17
Payments for shares redeemed (39) (59) (680) (971)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 56 44 988 735
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,796 4,291 49,437 70,925
Proceeds from reinvestment of
distributions 193 90 3,437 1,429
Payments for shares redeemed (2,288) (4,253) (40,459) (69,749)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 701 128 12,415 2,605
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 865 309 $ 15,315 $ 5,548
================= ================= ================= =================
</Table>
Notes to Financial Statements 217
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
TAX-MANAGED MID & SMALL CAP ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 265 212 $ 2,902 $ 2,098
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (125) (157) (1,360) (1,544)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 140 55 1,542 554
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 29 49 321 505
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (31) (16) (354) (167)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (2) 33 (33) 338
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 1,742 2,549 19,765 25,974
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (1,232) (2,031) (14,036) (20,759)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 510 518 5,729 5,215
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 648 606 $ 7,238 $ 6,107
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
SELECT GROWTH ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 353 552 $ 2,513 $ 3,849
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (99) (161) (699) (1,128)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 254 391 1,814 2,721
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 88 213 648 1,533
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (55) (92) (407) (658)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 33 121 241 875
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 5,134 4,627 38,560 33,510
Proceeds from reinvestment of
distributions -- -- --
Payments for shares redeemed (739) (784) (5,490) (5,601)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 4,395 3,843 33,070 27,909
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,066 3,538 15,387 25,490
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (748) (2,318) (5,589) (16,889)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,318 1,220 9,798 8,601
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 6,000 5,575 $ 44,923 $ 40,106
================= ================= ================= =================
</Table>
218 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
SELECT VALUE ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 366 836 $ 3,991 $ 8,118
Proceeds from reinvestment of
distributions 3 1 31 8
Payments for shares redeemed (143) (290) (1,558) (2,835)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 226 547 2,464 5,291
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 91 164 1,008 1,610
Proceeds from reinvestment of
distributions 4 5 49 45
Payments for shares redeemed (56) (136) (616) (1,345)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 39 33 441 310
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 2,614 4,468 29,152 44,188
Proceeds from reinvestment of
distributions 62 75 683 740
Payments for shares redeemed (1,462) (2,833) (16,168) (27,980)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,214 1,710 13,667 16,948
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,506 6,828 27,611 67,750
Proceeds from reinvestment of
distributions 95 110 1,036 1,084
Payments for shares redeemed (1,505) (4,241) (16,583) (41,771)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,096 2,697 12,064 27,063
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,575 4,987 $ 28,636 $ 49,612
================= ================= ================= =================
</Table>
7. LINE OF CREDIT
The Investment Company has a $75 million revolving credit facility for
temporary or emergency purposes, including the meeting of redemption requests
that otherwise might require the untimely disposition of securities. The
Funds are charged an annual commitment fee of .125% on the average daily
unused amount of the aggregate commitment, which is allocated among each of
the Funds. Interest is calculated at the Federal Fund Rate plus .50%
annually. The Funds may borrow up to a maximum of 33.33% of the value of
their net assets under the agreement. The agreement will expire December 21,
2005 and will be reviewed at such time for possible renewal. The Funds did
not have any drawdowns for the period ended April 30, 2005.
Notes to Financial Statements 219
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
8. BENEFICIAL INTEREST
As of April 30, 2005, the following table includes shareholders with shares
of beneficial interest of greater than 10% of the total outstanding shares of
each respective Fund:
<Table>
<Caption>
FUND # OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Diversified Equity 3 47.9
Special Growth 3 42.9
Quantitative Equity 2 35.9
International Securities 2 39.1
Emerging Markets 3 47.3
Real Estate Securities 2 30.8
Short Duration Bond 3 65.1
Diversified Bond 2 53.4
Multistrategy Bond 2 59.6
Tax Exempt Bond 1 42.2
Tax-Managed Large Cap 2 52.9
Tax-Managed Mid & Small Cap 1 51.7
Select Growth 2 48.9
Select Value 2 42.5
</Table>
9. ILLIQUID OR RESTRICTED SECURITIES
A Fund may invest a portion of its net assets not to exceed 15% in securities
that are illiquid. Illiquid securities are securities that may not be readily
marketable, and that cannot be sold within seven days in the ordinary course
of business at the approximate amount at which the Fund has valued the
securities. Illiquid and restricted securities may be priced by the Funds
using fair value procedures approved by the Board of Trustees. Restricted
securities are subject to contractual limitations on resale, are often issued
in private placement transactions, and are not registered under the
Securities Act of 1933 (the "Act"). The most common types of restricted
securities are those sold under Rule 144A of the Act and commercial paper
sold under Section 4(2) of the Act. Certain illiquid securities are not
subject to the 15% limitation if the Adviser or a money manager determines
that such security is liquid pursuant to procedures approved by the Board of
Trustees. As of April 30, 2005, Illiquid Securities held by the Funds were as
follows:
Illiquid Securities
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND - % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
------------------------------------------------------------------------------------------------------------------------------
International Securities Fund - 0.0%
Sons of Gwalia, Ltd 02/28/03 34,800 2.07 72 --
============
Emerging Markets Fund - 0.0%
Delta Corp. Inc. 08/07/97 1,113,646 5,700.00 435 1,038
OK Zimbabwe 12/03/01 6,402,949 139.00 149 146
------------
1,184
============
</Table>
220 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Pursuant to procedures adopted by the Board of Trustees, the Adviser or a
money manager has determined that a liquid trading market exists for the
following restricted securities held as of April 30, 2005:
Restricted Securities
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND - % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
------------------------------------------------------------------------------------------------------------------------------
Emerging Markets - 0.5%
Far EasTone Telecommunications Co., Ltd. GDR 01/12/05 11,000 17.74 195 202
Holcim Ecuador SA GDR 07/24/96 10,500 12.67 133 320
Hyundai Motor Co. GDR 09/16/99 13,900 19.92 277 369
KT&G Corp. GDR 01/29/02 53,100 9.28 493 945
Samsung Electronics Co., Ltd. GDR 05/21/96 10,059 9.43 95 1,481
------------
3,317
============
Short Duration Bond Fund - 3.2%
Allstate Financial Global Funding 01/31/05 4,080,000 95.82 3,909 3,858
Alter Moneta Receivables LLC 09/17/03 1,213,798 100.38 1,218 1,206
DG Funding Trust 11/04/03 219 10,537.12 2,308 2,368
GE Corporate Aircraft Financing LLC 10/05/04 827,616 100.00 828 828
HBOS Treasury Services PLC 09/11/03 1,000,000 99.87 999 986
HBOS Treasury Services PLC 01/06/04 900,000 100.00 900 901
HBOS Treasury Services PLC 11/05/04 2,000,000 99.93 1,999 1,969
Hyundai Auto Receivables Trust 09/18/02 335,806 100.00 336 335
Metropolitan Life Global Funding I 07/19/04 1,500,000 99.96 1,499 1,494
New York Life Global Funding 02/23/04 2,500,000 100.00 2,500 2,501
Nordstrom Private Label Credit Card Master
Note Trust 05/01/02 3,500,000 103.51 3,623 3,544
PBG Equipment Trust 06/13/01 972,760 103.63 1,008 979
Principal Life Global Funding I 06/03/04 2,000,000 102.84 2,057 2,034
Provident Auto Lease ABS Trust 08/20/03 187,414 103.48 194 190
Providian Gateway Master Trust 11/16/04 1,200,000 99.94 1,199 1,184
Railcar Leasing LLC 06/11/03 1,000,000 116.75 1,167 1,088
SACO I, Inc. 09/30/04 1,735,057 100.00 1,735 1,735
SLM Student Loan Trust 03/05/04 3,000,000 101.87 3,056 2,902
Susquehanna Auto Lease Trust 11/19/03 869,347 99.72 867 864
Susquehanna Auto Lease Trust 03/24/05 2,000,000 100.00 2,000 2,011
TIAA Global Markets 10/26/04 3,625,000 103.44 3,750 3,684
USAA Capital Corp. 09/29/04 595,000 103.15 614 598
Verizon Wireless Capital LLC 02/02/04 1,400,000 99.99 1,400 1,400
------------
38,659
============
</Table>
<Table>
<Caption>
Diversified Bond Fund - 3.3%
ABSC NIMs Trust 07/30/04 157,331 99.61 157 156
Arcap Reit, Inc. 09/21/04 460,000 100.98 465 452
Argent NIMs Trust 03/04/04 89,095 100.00 89 89
ASIF Global Financing 03/07/05 2,000,000 100.16 2,003 2,002
Asset Backed Funding Corp. NIMs Trust 08/22/03 31,555 100.00 32 32
BAE Systems Holdings, Inc. 11/28/01 1,075,000 102.12 1,098 1,172
Berkshire Hathaway Finance Corp. 01/04/05 1,585,000 99.88 1,583 1,562
Chalet Finance PLC 10/08/03 1,070,000 100.00 1,070 1,071
Clorox Co. 11/30/04 155,000 99.69 155 157
Clorox Co. 11/30/04 250,000 100.08 250 248
</Table>
Notes to Financial Statements 221
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Countrywide Asset-Backed Certificates 11/20/03 40,210 99.89 40 40
Countrywide Asset-Backed Certificates 12/21/04 300,142 100.04 300 301
COX Communications, Inc. 12/10/04 4,770,000 99.86 4,763 4,699
Credit-Based Asset Servicing and
Securitization CBO, Ltd. 03/04/04 2,311,983 100.00 2,312 2,312
Crest, Ltd. 11/25/03 1,655,000 100.00 1,655 1,698
DG Funding Trust 11/04/03 103 10,537.12 1,085 1,114
Dresdner Funding Trust I 04/09/03 430,000 103.76 446 533
Equifirst Mortgage Loan Trust NIMs Notes 02/02/05 903,370 100.06 904 904
Export Import Bank of Korea 02/03/04 290,000 99.61 289 285
First Franklin NIMs Trust 05/20/04 189,447 100.00 189 189
First Franklin NIMs Trust 05/20/04 300,000 100.00 300 300
First Franklin NIMs Trust 06/03/04 151,632 100.00 152 152
First Franklin NIMs Trust 09/01/04 544,103 100.00 544 544
First Franklin NIMs Trust 11/18/04 512,279 100.06 513 512
First Franklin NIMs Trust 04/01/05 1,393,949 99.73 1,390 1,390
Fremont NIMs Trust 05/20/04 178,551 100.00 179 178
G-Force CDO, Ltd. 12/08/03 750,000 99.98 750 758
HVB Funding Trust I 05/01/03 360,000 97.68 352 457
IndyMac Loan Trust 10/17/03 452,783 100.00 453 453
IndyMac Loan Trust 06/10/04 971,280 100.00 971 971
Korea Electric Power Corp. 04/20/04 145,000 98.46 143 146
Long Beach Asset Holdings Corp. 11/19/05 887,569 100.00 888 888
Mach One Trust Commercial Mortgage-Backed 07/12/04 1,480,000 100.97 1,494 1,502
Mastr Reperforming Loan Trust 03/09/05 1,163,008 102.41 1,191 1,192
Merrill Lynch Mortgage Investors, Inc. 11/12/04 93,048 99.75 93 93
Merrill Lynch Mortgage Investors, Inc. 02/19/04 153,307 99.56 153 152
Metropolitan Life Global Funding I 03/07/05 2,000,000 100.11 2,002 2,001
Miller Brewing Co. 08/06/03 330,000 100.17 331 339
Mizuho Financial Group Cayman, Ltd. 02/27/04 410,000 101.05 414 424
Monumental Global Funding, Ltd. 03/09/05 190,000 100.00 190 192
Morgan Stanley Capital I, Inc. 06/17/04 1,475,000 101.06 1,491 1,516
Mound Financing PLC 07/24/03 1,480,000 100.09 1,481 1,480
Natexis Ambs Co. LLC 06/24/98 270,000 108.77 294 301
Newcastle CDO I, Ltd. 03/11/04 870,000 99.94 869 849
Novastar NIMs Trust 01/30/04 233,851 100.00 234 234
Novastar NIMs Trust 07/20/04 438,672 100.11 439 436
NPF XII, Inc. 05/29/02 1,825,000 88.65 1,618 128
Option One Mortgage Securities Corp. NIMs
Trust 12/08/03 157,530 100.00 158 158
Park Place Securities NIMs Trust 09/22/04 224,579 100.00 225 225
Renaissance NIMs Trust 12/09/03 88,474 100.00 88 89
Renaissance NIMs Trust 06/25/04 271,254 100.00 271 271
Renaissance NIMs Trust 12/16/04 552,580 100.00 553 553
Russia Government International Bond 03/08/05 1,900,000 106.16 2,017 2,020
Russia Government International Bond 02/01/05 715,000 104.20 745 759
Russia Government International Bond 01/10/05 1,450,000 101.86 1,477 1,542
SACO I, Inc. 09/30/04 867,529 100.00 868 868
Saxon Net Interest Margin Trust 09/23/03 37,557 100.00 38 38
Sharps SP I LLC Net Interest Margin Trust 02/13/04 83,677 99.99 84 84
Systems 2001 AT LLC 03/08/02 228,951 101.85 233 247
Telecom Italia Capital SA 10/19/04 745,000 99.18 739 726
Telecom Italia Capital SA 10/08/04 1,030,000 97.06 1,000 1,020
Telecom Italia Capital SA 12/20/04 1,620,000 96.66 1,566 1,565
</Table>
222 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Telecom Italia Capital SA 09/28/04 205,000 99.09 203 203
Tenaska Alabama II Partners, LP 10/09/03 261,656 100.04 262 272
Tengizchevroil Finance Co. 11/23/04 325,000 100.27 326 326
TXU Corp. 03/31/05 610,000 95.41 582 601
Wells Fargo Home Equity Trust 10/01/04 243,427 99.99 243 243
Zurich Capital Trust I 07/11/00 650,000 105.93 689 705
Zurich Capital Trust I 11/10/03 600,000 95.11 571 650
------------
49,769
============
Multistrategy Bond Fund - 4.9%
AIG SunAmerica Global Financing VI 05/02/01 950,000 108.02 1,026 1,028
Alliance Capital Funding LLC 03/03/04 85,255 101.79 87 85
Ares Leveraged Investment Fund, LP 12/19/03 930,000 99.48 925 930
Arlington Street CDO, Ltd. 06/04/03 1,795,813 102.46 1,840 1,850
BAE Systems Holdings, Inc. 12/28/01 2,600,000 104.48 2,717 2,835
Banco Santander Chile 01/11/05 610,000 99.81 609 610
Bear Stearns Commercial Mortgage Securities 04/19/05 825,000 101.75 839 837
Bombardier Capital, Inc. 05/27/04 1,090,000 99.74 1,087 1,090
Canadian Oil Sands, Ltd. 08/03/04 460,000 99.92 460 460
Cendant Timeshare Receivables Funding LLC 05/18/04 345,498 100.00 345 340
Chancellor/Triton CBO, Ltd. 11/12/03 338,521 96.58 327 344
Chase Funding Net Interest Margin 12/10/03 527 99.81 1 1
Citigroup Commercial Mortgage Trust 12/07/04 1,075,039 100.02 1,075 1,076
Clorox Co. 11/30/04 340,000 99.70 339 345
Clorox Co. 11/30/04 525,000 100.03 525 521
Clorox Co. 11/30/04 525,000 100.08 525 526
Countrywide Asset-Backed Certificates 02/25/04 145,258 99.68 145 146
COX Communications, Inc. 12/10/04 495,000 99.91 495 487
COX Communications, Inc. 12/10/04 350,000 99.90 350 345
Detroit Edison Co. 02/02/05 395,000 99.82 394 390
DG Funding Trust 11/04/03 191 10,537.12 2,013 2,065
Dresdner Funding Trust I 04/09/03 1,005,000 108.57 1,091 1,247
Erac USA Finance Co. 07/01/02 560,000 108.16 606 607
Export Import Bank of Korea 02/03/04 540,000 99.61 538 531
Farmers Exchange Capital 01/26/04 900,000 103.67 933 951
Farmers Exchange Capital 01/28/02 990,000 91.87 909 1,046
Farmers Insurance Exchange 11/27/02 875,000 79.23 693 1,080
Farmers Insurance Exchange 08/04/04 570,000 99.58 568 585
Fisher Scientific International, Inc. 07/22/04 245,000 100.11 245 247
Glencore Funding LLC 05/12/04 300,000 91.55 275 284
Global Signal Trust 11/18/04 655,000 100.00 655 645
GSAA Trust 09/16/04 460,125 99.88 460 460
GSMPS Mortgage Loan Trust 05/27/04 243,248 107.45 261 260
GSMPS Mortgage Loan Trust 08/30/04 470,365 109.22 514 506
GSMPS Mortgage Loan Trust 03/17/05 732,093 107.37 786 791
GSMPS Mortgage Loan Trust 02/16/05 432,117 108.78 470 476
GT Group Telecom, Inc. 2010 Warrants 01/27/00 676 48.53 33 --
Hanarotelecom, Inc. 01/25/05 900,000 100.28 902 863
Hutchison Whampoa International 03/13, Ltd. 06/17/03 335,000 105.66 354 359
Hutchison Whampoa International 03/33, Ltd. 11/19/03 150,000 99.79 150 154
HVB Funding Trust I 05/01/03 730,000 103.23 754 927
Hyatt Equities LLC 06/12/02 335,000 101.97 342 347
Intelsat Bermuda, Ltd. 01/24/05 445,000 100.00 445 446
</Table>
Notes to Financial Statements 223
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Intelsat Bermuda, Ltd. 01/24/05 270,000 100.00 270 272
John Hancock Global Funding II 07/29/03 440,000 115.02 506 508
Jones Apparel Group, Inc. 11/17/04 470,000 99.90 470 452
JP Morgan Chase Commercial Mortgage
Securities Corp. 08/04/04 1,140,194 100.00 1,140 1,141
Juniper CBO, Ltd. 01/15/04 569,681 102.94 586 580
Korea Electric Power Corp. 04/20/04 285,000 98.46 281 286
Liberty Mutual Group 03/16/04 785,000 108.85 854 811
Lone Star Industries 02/21/03 655,000 99.76 653 660
Mantis Reef, Ltd. 10/28/03 585,000 99.73 583 584
Mastr Reperforming Loan Trust 03/09/05 1,086,023 107.37 1,166 1,164
Merrill Lynch Mortgage Investors, Inc. 05/20/03 23,940 98.47 24 24
Merrill Lynch Mortgage Trust 06/26/04 365,000 79.26 289 354
Miller Brewing Co. 08/06/03 705,000 100.86 711 725
Miller Brewing Co. 08/06/03 445,000 100.26 446 441
Mizuho Financial Group Cayman, Ltd. 02/27/04 835,000 101.10 844 864
Mizuho Financial Group Cayman, Ltd. 06/16/04 185,000 97.37 180 193
Mizuho Financial Group Cayman, Ltd. 02/27/04 470,000 99.96 470 486
Monumental Global Funding, Ltd. 03/09/05 320,000 100.00 320 323
Morgan Stanley Bank AG for OAO Gazprom 02/21/03 340,000 109.70 373 399
Natexis Ambs Co. LLC 06/24/98 430,000 108.77 468 480
Nationwide Building Society 02/16/05 360,000 98.68 355 356
Nationwide Mutual Insurance Co. 03/20/03 655,000 103.33 677 808
North Front Pass-Through Trust 12/08/04 1,700,000 100.58 1,710 1,741
Oil Insurance, Ltd. 08/19/03 1,580,000 100.98 1,595 1,596
Pinnacle West Energy Corp. 04/06/05 760,000 100.00 760 760
Power Contract Financing LLC 06/11/03 450,000 102.68 462 467
Power Contract Financing LLC 06/11/03 509,575 100.25 511 514
Prudential Holdings LLC 06/05/02 155,000 103.18 160 187
Qwest Corp. 08/12/04 1,440,000 104.10 1,499 1,462
Qwest Services Corp. 03/25/04 225,000 114.93 259 253
Qwest Services Corp. 03/01/05 275,000 112.20 309 300
Qwest Services Corp. 04/27/05 250,000 113.25 283 281
Rabobank Capital Funding II 11/14/03 550,000 101.25 557 554
Ras Laffan Liquefied Natural Gas Co., Ltd. 03/07/01 290,000 112.27 326 338
Russia Government International Bond 12/10/04 3,500,000 102.01 3,570 3,721
Russia Government International Bond 06/17/02 3,050,000 91.29 2,784 3,239
Russia Government International Bond 11/23/04 700,000 101.86 713 743
Russia Paris Club Participant 04/06/04 98,490,300 0.81 798 859
SACO I, Inc. 09/30/04 1,735,057 100.00 1,735 1,735
Salomon Brothers AG for Tyumen Oil Co. 04/10/03 890,000 112.57 1,002 986
Sankaty Market Value CDO 12/19/03 480,000 104.71 503 487
Sappi Papier Holding AG 07/11/02 240,000 106.54 256 261
Sealed Air Corp. 07/01/03 465,000 99.46 462 473
Sharps SP I LLC Net Interest Margin Trust 12/19/04 71,062 100.00 71 71
Solutia, Inc. 2009 Warrants 07/02/02 850 85.33 73 --
Systems 2001 AT LLC 03/08/02 334,621 101.85 341 360
Systems 2001 AT LLC 06/04/01 413,009 103.87 429 451
Telecom Italia Capital SA 12/20/04 4,060,000 96.49 3,918 3,922
Telecom Italia Capital SA 09/28/04 455,000 99.09 451 451
Telecom Italia Capital SA 09/28/04 485,000 99.71 484 468
Telecom Italia Capital SA 11/24/04 650,000 97.32 633 628
Tenaska Alabama II Partners, LP 10/09/03 485,253 100.24 486 504
</Table>
224 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
Tengizchevroil Finance Co. 11/23/04 810,000 100.23 812 812
Texas Genco LLC 12/08/04 1,220,000 100.24 1,223 1,196
TuranAlem Finance BV 11/18/04 710,000 103.75 737 712
Twin Reefs Pass-Through Trust 12/07/04 900,000 100.12 901 904
TXU Corp. 11/22/04 755,000 99.94 755 740
TXU Corp. 11/22/04 1,805,000 96.57 1,743 1,740
TXU Corp. 11/22/04 985,000 99.95 985 966
TXU Corp. 11/22/04 745,000 99.88 744 718
WellPoint, Inc. 12/06/04 465,000 99.93 465 459
WellPoint, Inc. 12/06/04 370,000 99.82 369 365
WellPoint, Inc. 12/06/04 160,000 99.93 160 158
WellPoint, Inc. 12/06/04 150,000 99.81 150 148
Williams Gas Pipelines 01/30/04 630,000 105.01 662 658
World Financial Properties 11/14/02 705,511 108.59 766 762
World Financial Properties 11/08/02 208,426 106.25 221 225
Zurich Capital Trust I 01/10/03 1,195,000 98.50 1,177 1,295
------------
80,704
============
</Table>
10. DIVIDENDS
On May 2, 2005, the Funds declared the following dividends from net
investment income and capital gains, respectively, payable on May 5, 2005 to
shareholders on record May 3, 2005.
<Table>
<Caption>
NET INVESTMENT
FUNDS INCOME
- -----------------------------------------------------------
Diversified Bond - Class C $ 0.0473
Diversified Bond - Class E 0.0620
Diversified Bond - Class S 0.0670
Multistrategy Bond - Class C 0.0213
Multistrategy Bond - Class E 0.0277
</Table>
<Table>
- -----------------------------------------------------------
<Caption>
NET INVESTMENT
FUNDS INCOME
Multistrategy Bond - Class S $ 0.0299
Tax Exempt Bond - Class C 0.0437
Tax Exempt Bond - Class E 0.0576
Tax Exempt Bond - Class S 0.0621
</Table>
On June 1, 2005, the Funds declared the following dividends from net
investment income and capital gains, respectively, payable on June 6, 2005 to
shareholders on record June 2, 2005.
<Table>
<Caption>
NET INVESTMENT
FUNDS INCOME
- -----------------------------------------------------------
Diversified Bond - Class C $ 0.0492
Diversified Bond - Class E 0.0646
Diversified Bond - Class S 0.0697
Multistrategy Bond - Class C 0.0208
Multistrategy Bond - Class E 0.0274
</Table>
<Table>
- -----------------------------------------------------------
<Caption>
NET INVESTMENT
FUNDS INCOME
Multistrategy Bond - Class S $ 0.0296
Tax Exempt Bond - Class C 0.0425
Tax Exempt Bond - Class E 0.0564
Tax Exempt Bond - Class S 0.0609
</Table>
Notes to Financial Statements 225
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
SHAREHOLDER REQUESTS FOR OTHER INFORMATION -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund has adopted to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling the Fund at (800) 787-7354, and (ii) on
the Securities and Exchange Commission's website at www.sec.gov. Information on
how the Funds voted proxies relating to portfolio securities during the 12-month
period ended June 30, 2004 is available at www.russell.com and on the Securities
and Exchange Commission's website at www.sec.gov.
The Funds will file their complete schedule of investments with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Funds' Form N-Q is available (i) without charge, upon request, by
calling the Fund at (800) 787-7354, (ii) at www.russell.com, (iii) on the
Securities and Exchange Commission's website at www.sec.gov, and (iv) at the
Securities and Exchange Commission's public reference room.
226 Shareholder Requests for Other Information
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS (UNAUDITED)
- --------------------------------------------------------------------------------
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees, including all of the Independent Trustees, last
considered and approved the continuation of the advisory agreement with FRIMCo
and the portfolio management contract (together, the "investment advisory
agreements") with each Money Manager of the Funds at a meeting held on February
23, 2005. During the course of a year, the Trustees received a wide variety of
materials regarding the investment performance of the Funds, sales and
redemptions of the Funds' shares, and the management of the Funds by FRIMCo. In
preparation for the annual review, the Board, with the advice and assistance of
independent counsel, also received and considered (1) information and reports
prepared by FRIMCo relating to the services provided by FRIMCo (and its
affiliates) to the Funds, including information requested by the Trustees, and
(2) information received from an independent, nationally recognized provider of
investment company information comparing the performance of each of the Funds
and its operating expenses over various periods of time with other peer funds
("Comparable Funds") not managed by FRIMCo believed by the provider to be
generally comparable in investment objectives and size to the Funds
(collectively, the "Agreement Renewal Information").
Prior to voting, the Independent Trustees reviewed the proposed continuance of
the investment advisory agreements with management and independent counsel and
received a memorandum from independent counsel discussing the legal standards
for their consideration of the proposed continuances. The Independent Trustees
also reviewed the proposed continuance in a private session with independent
counsel at which no representatives of FRIMCo or management were present. The
discussion below reflects both of these reviews.
In evaluating the advisory agreement with FRIMCo and the portfolio management
contracts with the Money Managers of the Funds, the Board considered that the
Funds, in employing a manager-of-managers method of investment, operate 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. All Funds have multiple
Money Managers.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the investment advisory agreement for determining, implementing and
maintaining the investment program for each Fund. Assets of each Fund have been
allocated among multiple Money Managers.
FRIMCo is responsible for selecting Money Managers for each Fund and for
determining allocations and reallocations of assets among the Money Managers.
Each Money Manager for a 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 FRIMCo in accordance with the Fund's
applicable investment objective, policies and restrictions (each, a "segment").
FRIMCo is responsible for communicating performance expectations and evaluations
to each Money Manager; supervising compliance by each Money Manager with each
Fund's investment objectives and policies; authorizing Money Managers to engage
in certain investment strategies for a 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, FRIMCo is
responsible for recommending to the Board the restructuring of Fund segments and
additions of new Money Managers or replacements of existing Money Managers at
any time when, based on FRIMCo's research and analysis, such actions are
appropriate. FRIMCo may develop specific 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 a Fund in a
complementary manner. Therefore, FRIMCo's selection of Money Managers is made
not only on the basis of performance considerations but anticipated
compatibility with other Money Managers in the same Fund. The performance of
individual Money Managers for a Fund may reflect the roles assigned to them by
FRIMCo in the Fund's investment activities and any constraints placed by FRIMCo
upon their selection of portfolio securities. In light of the foregoing, the
overall performance of each Fund over appropriate periods reflects in great part
the performance of FRIMCo in designing the Fund's investment program,
structuring Fund segments, selecting an effective Money Manager for each segment
with a style 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 also considered that the prospectuses for the Funds emphasize to
investors FRIMCo's role as the principal investment manager for each Fund,
rather than the investment selection role of the Funds' Money Managers, and
describe the manner in which the Funds operate so that investors may take the
information into account when deciding to purchase shares of any such Fund.
Basis for Approval of Investment Advisory Contracts 227
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
In addition to these general factors relating to the manager of managers
structure of the Funds, the Trustees considered, with respect to each Fund,
various specific factors on the basis of the Agreement Renewal Information in
evaluating renewal of the advisory agreement with FRIMCo, including the
following:
1. The nature, scope and quality of the services provided to the Fund by FRIMCo;
2. The advisory fee paid by the Fund to FRIMCo and the fact that it encompasses
all investment advisory fees paid by the Fund, including the fees for any Money
Managers of such Fund;
3. Information provided by FRIMCo as to other fees and benefits received by
FRIMCo or its affiliates from the Fund, including any administrative, transfer
agent, cash management and securities lending fees, soft dollar arrangements and
commissions in connection with portfolio securities transactions;
4. Information provided by FRIMCo as to investment advisory fees paid by
Comparable Funds;
5. Information provided by FRIMCo as to expenses incurred by the Fund;
6. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from each Fund; and
7. The importance of supporting quality, long-term service by FRIMCo to help
achieve the Fund's investment performance, including the continuing need of
FRIMCo to retain and attract qualified investment and service professionals to
serve the Funds.
On the basis of the information received, the Board, in respect of each Fund,
found the advisory fees charged and costs and expenses incurred by FRIMCo to be
fair and reasonable; after giving effect to waivers and/or reimbursements; and
considering the composition of the Comparable Funds, the relative performance
and expense ratio of the Fund were comparable to those of peer funds; FRIMCo's
methodology of allocating expenses of operating funds in the complex was
reasonable; and FRIMCo's profitability with respect to the Fund was reasonable
in light of the nature, scope and quality of the services provided by FRIMCo.
The Board considered for each Fund whether economies of scale have been realized
and whether the fees for such Fund appropriately reflect or should be revised to
reflect any such economies. In its deliberations, the Board noted its findings
reached at a meeting held on December 6, 2004 that the investment advisory fees
for each Fund appropriately reflect any economies of scale realized by that
Fund. Its findings at the earlier meeting were based upon information and
analyses prepared by FRIMCo, including information as to variability of Money
Manager investment advisory fees and other factors associated with the manager
of managers structure employed by most Funds relevant to the Board's
deliberations, and took into consideration the Funds' rising costs of compliance
with applicable laws, rules and regulations.
The Trustees considered that fees payable to FRIMCo by institutional clients
with investment objectives similar to those of the Funds are lower, and may, in
some cases, be substantially lower, than the rates paid by the Funds. FRIMCo
reviewed with the Trustees the differences in the scope of services it provides
to institutional clients and the Funds. For example, institutional clients have
fewer administrative needs than the Funds. It was further noted that since the
Funds must constantly issue and redeem their shares, they are more difficult to
manage than institutional accounts, where assets are relatively stable.
Accordingly, the Trustees did not regard these fee differences as relevant to
their deliberations.
The Board also considered the special expertise of FRIMCo with respect to the
manager of managers structure of the Funds and the likelihood that, at the
current expense ratio of each such Fund, there would be no acceptable
alternative investment managers to replace FRIMCo on comparable terms given the
need to conduct the manager of managers, multi-style strategy of such Fund
selected by its shareholders in purchasing their shares.
With respect to the evaluation of the terms of portfolio management contracts
with Money Managers, the Board received and considered information from FRIMCo
reporting for each Money Manager, among other things, the Money Manager's
performance over various periods; FRIMCo's assessment of the performance of each
Money Manager; any significant business relationships between the Money Manager
and Funds, FRIMCo or FRIMCo's affiliates; and FRIMCo's recommendation to retain
the Money Manager at the current fee rate, to retain the Money Manager at a
reduced fee rate or to terminate the Money Manager. FRIMCo recommended that each
Money Manager be retained at its current fee rate. FRIMCo advised the Board that
it does not regard Money Manager profitability as relevant to its evaluation of
the investment advisory agreements with Money Managers because the willingness
of Money Managers to serve in such capacity depends upon arm's-length
negotiations with FRIMCo; FRIMCo is aware of the fees charged by Money Managers
to other clients; and FRIMCo believes that the fees agreed upon with Money
Managers are
228 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
fair and reasonable in light of the anticipated quality of investment advisory
services to be rendered. The Board accepted FRIMCo's explanation in light of the
Board's findings as to the fairness and reasonableness of the aggregate
investment advisory fees paid by each Fund and the fact that each Money
Manager's fee is paid by FRIMCo.
Based substantially upon FRIMCo's recommendations together with the information
received from FRIMCo in support of its recommendations, the Board concluded that
the fees paid to the Money Managers of each Fund were fair and reasonable in
light of the quality of the investment advisory services provided and that
continuation of the portfolio management agreement with each Money Manager of
each Fund was in the interests of shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the investment advisory agreement with FRIMCo or, other than FRIMCo's
recommendation, the portfolio management agreement with any Money Manager that
was all-important or controlling and each Trustee attributed different weights
to the various factors considered. The Trustees evaluated all information
available to them on a Fund-by-Fund basis and their determinations were made in
respect of each Fund.
At a meeting held on March 24, 2005, the Trustees received proposals from FRIMCo
to effect certain Money Manager changes for the International Securities and
Tax-Managed Large Cap Funds; and at a meeting held on May 17, 2005 received
proposals from FRIMCo to effect certain Money Manager changes for the Special
Growth and Select Growth Funds. In the case of each such Fund, the Trustees
approved the terms of the proposed portfolio management agreements with the
successor Money Manager(s) based substantially upon FRIMCo's recommendation; its
explanation as to the lack of relevance of profitability to the evaluation of
portfolio management agreements with Money Managers; and its belief that the
proposed investment advisory fees for the successor Money Manager(s) would be
fair and reasonable in light of the anticipated quality of investment advisory
services to be rendered. The Trustees also considered their findings at the
February 23, 2005 meeting as to the fairness and reasonableness of the aggregate
investment advisory fees paid by each affected Fund, and the fact that the
aggregate investment advisory fees paid by such Fund would not increase as a
result of the implementation of any proposed Money Manager change because each
Money Manager's investment advisory fee is paid by FRIMCo.
At the meeting held on May 17, 2005, the Trustees also received a proposal from
FRIMCo to manage directly approximately 5% of the assets of the Diversified
Equity Fund (a "Participating Fund") utilizing a "select holdings strategy"
pursuant to the terms of the Advisory Agreement between the Fund and FRIMCo.
Under this strategy, FRIMCo analyzes the stocks purchased for a Participating
Fund by each of the Fund's Money Managers to identify particular stocks that are
concurrently overweighted by two or more of the Money Managers. FRIMCo uses a
proprietary model to rank these stocks. Based on this ranking, FRIMCo will
purchase additional shares of certain stocks for the Participating Fund. The
strategy is designed to increase the Participating Fund's exposure to stocks
that are collectively viewed as attractive by multiple Money Managers to the
Participating Fund. Implementation of this strategy includes periodic
rebalancing of the Participating Fund's holdings. The Trustees received and
considered information from FRIMCo regarding the potential enhancements to the
Participating Fund's performance based upon FRIMCo's limited experience in
employing the same strategy for other types of investment accounts under its
management. The Trustees also considered that FRIMCo would not be required to
pay investment advisory fees to a Money Manager with respect to assets for which
the select holdings strategy is utilized and that the profits derived by FRIMCo
generally and from the Participating Fund consequently may increase
incrementally. The Board, however, considered FRIMCo's advice that it will pay
certain Money Managers additional fees for providing information and other
services in connection with the select holdings strategy and expects to incur
additional costs in implementing and carrying out the select holdings strategy;
the limited amount of assets that would be managed directly by FRIMCo pursuant
to the select holdings strategy; the fact that the aggregate investment advisory
fees paid by the Participating Fund would not increase as a result of the
implementation of the select holdings strategy; and its findings at the meeting
held on February 23, 2005 that the aggregate fees payable by the Participating
Fund are fair and reasonable. Based upon the Agreement Renewal Information
received from FRIMCo at the meeting held on February 23, 2005 and information
concerning implementation of the select holdings strategy received from FRIMCo
at the meetings held on February 23, 2005 and May 17, 2005, the Board in the
case of the Participating Fund accepted FRIMCo's select holdings strategy
proposal, concluding in doing so that the investment advisory fees paid to
FRIMCo by such Fund under its advisory agreement with FRIMCo continue to be fair
and reasonable in light of the nature and anticipated quality of the investment
advisory services to be rendered by FRIMCo.
Basis for Approval of Investment Advisory Contracts 229
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Frank Russell
Investment Company ("FRIC"), which has 34 funds, and Russell Investment Funds
("RIF"), which has five funds. Each of the trustees is a trustee of both FRIC
and RIF. The first table provides information for trustees who are interested
trustees. The second table provides information for the independent trustees.
The third table provides information for the trustees emeritus. The fourth table
provides information for the officers.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
*Lynn L. Anderson, Trustee since Appointed until - Vice Chairman, FRC 39 - Trustee, The
Born April 22, 1987 successor is - Chairman of the Board, FRIC SSgA Funds
1939 duly elected and RIF (investment
and qualified - CEO, Russell Fund company)
909 A Street Distributors, Inc.
Tacoma, Washington (broker-dealer "RFD"))
98402-1616 - President and Chairman of
the Board, SSgA Funds
(investment company)
- Chairman of the Board, FRTC
- Until July 2004, Director,
Frank Russell Investments
(Ireland) Limited (Irish
limited company) and Frank
Russell Investments (Cayman)
Ltd. (manager of variable
capital investment
companies)
- Until October 2002,
President and CEO, FRIC and
RIF
- Until January 2005, Chairman
of the Board, RFD and FRIMCo
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Each of Messrs. Anderson and Phillips is also an officer and/or director of
one or more an affiliates of FRIC and RIF and is therefore an interested
trustee.
230 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
*Michael J.A. Trustee Since Appointed until - Chairman of the Board, FRC 39 - None
Phillips, 2002 successor is - 1990-2003, President, FRC
Born January 20, duly elected - 1993-2003, CEO, FRC
1948 and qualified. - Trustee, FRIC and RIF
- Director, FRTC; Frank
909 A Street Russell Investments (Suisse)
Tacoma, Washington S.A. (global investment
98402-1616 services); Frank Russell
Company Limited (consultant
to institutional investors
in Europe and the UK)
- Chairman of the Board and
President, Russell 20-20
Association; and Frank
Russell Investments
(Delaware), Inc. (general
partner in various limited
partnerships ("FRIDI"))
- Until 2004, Director,
Russell Investment Group
Pty. Limited (consultant to
superannuation funds in
Australia); and Frank
Russell Japan Co., Ltd.
(consultant to institutional
investors in Japan)
- Director, Harold LeMay
Museum (classic car museum)
- Advisory board member,
University of Washington,
Tacoma (educational
institution)
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - 1996 to present, President, 39 None
Born October 15, 1984 successor is Anderson Management Group
1931 duly elected LLC (private investments
and qualified consulting)
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee WM Group
Born January 22, 2000 successor is Blake, P.S. (accounting of Funds
1954 duly elected services) (investment
and qualified company);
909 A Street - Director, Avista
Tacoma, Washington Corp
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Each of Messrs. Anderson and Phillips is also an officer and/or director of
one or more an affiliates of FRIC and RIF and is therefore an interested
trustee.
Disclosure of Information about Fund Directors 231
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy Trustee since Appointed until - June 2004 to present, Senior 39 - Director, Gold
Born June 6, 1946 2003 successor is Vice President and Chief Banc
duly elected Financial Officer, Waddell & Corporation,
909 A Street and qualified Reed Financial, Inc. Inc.
Tacoma, Washington - 2003, Retired
98402-1616 - 2001-2003, Vice President
and Chief Financial Officer,
Janus Capital Group Inc.
- 1979-2001, Audit and
Accounting Partner,
PricewaterhouseCoopers LLP
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jonathan Fine Trustee since Appointed until - President and Chief 39 None
Born July 8, 1954 2004 successor is Executive Officer, United
duly elected Way of King County, WA
909 A Street and qualified - 1996-2000, Chief Executive
Tacoma, Washington Officer, Seattle/King County
98402-1616 Chapter of the American Red
Cross
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee since Appointed until - Retired since 1995 39 None
Born October 6, 1984 successor is
1930 duly elected
and qualified
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - Currently, President, 39 None
Tennison, Jr. 2000 successor is Simpson Investment Company
Born December 21, duly elected and several additional
1955 and qualified subsidiary companies,
including Simpson Timber
909 A Street Company, Simpson Paper
Tacoma, Washington Company and Simpson Tacoma
98402-1616 Kraft Company
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2000, Arbitrator,
1943 duly elected The American Arbitration
and qualified Association Commercial Panel
909 A Street - 1995 to 1999, Hearing
Tacoma, Washington Officer, University of
98402-1616 Washington
- 1987 to 2002, Director,
Smith Barney Fundamental
Value Fund
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
232 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 39 None
Jr., and Chairman resignation or Russell Company (investment
Born July 3, 1932 Emeritus since removal consultant to institutional
1999 investors ("FRC")); and
909 A Street FRIMCo
Tacoma, Washington - Chairman Emeritus, FRIC and
98402-1616 RIF; Frank Russell
Securities, Inc.
(broker-dealer and
investment advisor ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment advisor)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 39 None
Born December 1, since 2003 - Trustee of FRIC and RIF
1919 Until 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 39 None
Born June 8, 1925 since 2004 - Trustee of FRIC and RIF
Until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 39 None
Born May 5, 1926 since 2004 - Trustee of FRIC and RIF
Until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
Disclosure of Information about Fund Directors 233
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, with Fund and Term Principal Occupation(s)
Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------------------------------------------------
Cheryl Wichers Chief Compliance Until removed - Chief Compliance Officer, FRIC
Born December 16, 1966 Officer since by Trustees - Chief Compliance Officer, RIF
2005 - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, WA Policy
98402-1616 - 1998-2003, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Annual and - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive until successor - Chairman of the Board, President and CEO, FRIMCo
Officer since is chosen and - Chairman of the Board and President, RFD and Russell
909 A Street 2004 qualified by Insurance Agency, Inc. (insurance agency ("RIA"))
Tacoma, Washington Trustees - Until 2004, Managing Director of Individual Investor
98402-1616 Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- 1998 to 2000, Representative Director, Frank Russell
Company, Ltd. (asset manager in Japan)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Annual and - Treasurer and Chief Accounting Officer, FRIC and RIF
Born November 26, 1963 Chief Accounting until successor - Director, Funds Administration, FRIMCo, FRTC and RFD
Officer since is chosen and - Treasurer and Principal Accounting Officer, SSgA
909 A Street 1998 qualified by Funds
Tacoma, Washington Trustees
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Thomas F. Hanly, Chief Investment Until removed - Chief Investment Officer, FRIC, RIF, FRC, FRTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, FRIMCo and RFD
2004 - Director, Frank Russell International Services Co.,
909 A Street Inc. (provide services to U.S. personnel secunded to
Tacoma, Washington overseas enterprises ("FRISCo"))
98402-1616 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
RIF
- --------------------------------------------------------------------------------------------------------------------------
</Table>
234 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, with Fund and Term Principal Occupation(s)
Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary and Annual and - Secretary and General Counsel, FRIC, RIF, FRIMCo,
Born October 8, 1941 General Counsel until successor FRTC, and RFD
since 1994 is chosen and - Secretary, General Counsel and Managing Director of
909 A Street qualified Law and Government Affairs, FRC
Tacoma, Washington - Director, Secretary and General Counsel, Frank
98402-1616 Russell Capital Inc. (investment advisor); Russell
Real Estate Advisors, Inc. (real estate investment
advisor)
- Director and Secretary, Russell 20-20 Association;
RIA; A Street Investment Associates, Inc. (real
estate leasing); FRIDI; and FRISCo
- Director and Assistant Secretary, Frank Russell
Company Limited and Russell Systems Limited (limited
company)
- Director, FRS, Russell Investment Group Pty. Ltd.;
Frank Russell Japan Co., Ltd. (holding company);
Frank Russell Investment Company Plc Frank Russell
Institutional Funds Plc, Frank Russell Multi-Manager
Funds plc; Frank Russell Investment Company II plc,
Frank Russell Investment Company III plc, Russell
Alternative Investment Fund plc, and Russell
Diversified Alternatives Fund (each, an investment
company); Frank Russell Asset Management (Cayman) LLC
(general partner of limited partnerships); Russell
Investment Group Limited (institutional consultant);
Russell Investment Management Ltd. (institutional
investment management); Russell Investment Group
Private Limited (investment and fund management
advisory services); and Frank Russell Investments
(Ireland) Ltd.
- Statutory Auditor, Frank Russell Company, Ltd. (asset
management and consulting)
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 235
RUSSELL FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Lee C. Gingrich
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, PhD
William E. Baxter
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wickers, Chief Compliance Officer (effective May 17, 2005)
Thomas F. Hanly, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Karl J. Ege, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Allan Forbes Building
150 Newport Avenue AFB35
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF APRIL 30, 2005
Diversified Equity Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
Ark Asset Management Co., Inc., New York, NY
Institutional Capital Corporation, Chicago, IL
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Marsico Capital Management, LLC, Denver, CO
MFS Institutional Advisors, Inc., Boston, MA
Montag & Caldwell, Inc., Atlanta, GA
Schneider Capital Management Corporation, Wayne, PA
Suffolk Capital Management, LLC, New York, NY
Turner Investment Partners, Inc., Berwyn, PA
Special Growth Fund
CapitalWorks Investment Partners, LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Gould Investment Partners LLC, Berwyn, PA
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Nicholas-Applegate Capital Management LLC, San Diego, CA
Roxbury Capital Management, LLC, Santa Monica, CA
TimesSquare Capital Management, LLC, New York, NY
Quantitative Equity Fund
Aronson + Johnson + Ortiz, LP, Philadelphia, PA
Franklin Portfolio Associates, LLC, Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Jacobs Levy Equity Management, Inc., Florham Park, NJ
International Securities Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
AQR Capital Management, LLC, New York, NY
Axiom International Investors LLC, Greenwich, CT
Fidelity Management & Research Company, Boston, MA
Marvin & Palmer Associates, Inc., Wilmington, DE
MFS Institutional Advisors, Inc., Boston, MA
Mondrian Investment Partners Limited, London, England
The Boston Company Asset Management, LLC, Boston, MA
Wellington Management Company, LLP, Boston, MA
Emerging Markets Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
Arrowstreet Capital, Limited Partnership, Cambridge, MA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
T. Rowe Price International, Inc., Baltimore, MD
Wells Capital Management Inc., San Francisco, CA
236 Manager, Money Managers and Service Providers
RUSSELL FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
Real Estate Securities Fund
AEW Management and Advisors, L.P., Boston, MA
Heitman Real Estate Securities LLC, Chicago, IL
INVESCO Institutional (N.A.), Inc., which acts as a money manager to the Fund
through its INVESCO Real Estate division, Dallas, TX
RREEF America L.L.C., Chicago, IL
Short Duration Bond Fund
Merganser Capital Management L.P., Boston, MA
Pacific Investment Management Company LLC, Newport Beach, CA
STW Fixed Income Management, Carpinteria, CA
Diversified Bond Fund
Bear Stearns Asset Management Inc., New York, NY
Lehman Brothers Asset Management LLC, Chicago, IL
Pacific Investment Management Company LLC, Newport Beach, CA
Western Asset Management Company, Pasadena, CA
Multistrategy Bond Fund
Bear Stearns Asset Management Inc., New York, NY
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Morgan Stanley Investment Management Inc., West Conshohocken, PA
Pacific Investment Management Company LLC, Newport Beach, CA
Tax Exempt Bond Fund
MFS Institutional Advisors, Inc., Boston, MA
Standish Mellon Asset Management Company LLC, Boston, MA
Tax-Managed Large Cap Fund
Kayne Anderson Rudnick Investment Management, LLC, Los Angeles, CA
John A. Levin & Co., Inc., New York, NY
J.P. Morgan Investment Management Inc., New York, NY
Sands Capital Management, Inc., Arlington, VA
Turner Investment Partners, Inc., Berwyn, PA
Tax-Managed Mid & Small Cap Fund
Chartwell Investment Partners, Berwyn, PA
Netols Asset Management, Inc., Mequon, WI
Parametric Portfolio Associates LLC, Seattle, WA
Turner Investment Partners, Inc., Berwyn, PA
Westcap Investors, LLC, Los Angeles CA
Select Growth Fund
Ark Asset Management Co., Inc., New York, NY
CapitalWorks Investment Partners, LLC, San Diego, CA
Fuller & Thaler Asset Management, Inc., San Mateo, CA
Transamerica Investment Management, LLC, Denver, CO
Turner Investment Partners, Inc., Berwyn, PA
Select Value Fund
DePrince, Race & Zollo, Inc., Orlando, FL
Iridian Asset Management LLC, Westport, CT
MFS Institutional Advisors, Inc., Boston, MA
Netols Asset Management, Inc., Mequon, WI
Systematic Financial Management, L.P., Teaneck, NJ
This report is prepared from the books and records of the Funds and is submitted
for the general information of shareholders and is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus. Nothing herein contained is to be considered an offer of
sale or a solicitation of an offer to buy shares of Frank Russell Investment
Company. Such offering is made only by Prospectus, which includes details as to
offering price and other material information.
Manager, Money Managers and Service Providers 237
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com 36-08-067 (1 04/05)
INSTITUTIONAL FUNDS
FRANK RUSSELL INVESTMENT COMPANY
2005 SEMIANNUAL REPORT
CLASS E, I, AND Y SHARES:
EQUITY I FUND
EQUITY II FUND
EQUITY Q FUND
INTERNATIONAL FUND
FIXED INCOME I FUND
FIXED INCOME III FUND
CLASS C, E, AND S SHARES:
EMERGING MARKETS FUND
REAL ESTATE SECURITIES FUND
SHORT DURATION BOND FUND (formerly Short Term Bond Fund)
CLASS C, E, I, AND S SHARES:
SELECT GROWTH FUND
SELECT VALUE FUND
APRIL 30, 2005
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
Frank Russell Investment Company is a series investment company with 34
different investment portfolios referred to as Funds. These financial statements
report on eleven of these Funds.
Frank Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Frank Russell Investment Company
Institutional Funds
Semiannual Report
April 30, 2005 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Equity I Fund........................................................ 3
Equity II Fund....................................................... 11
Equity Q Fund........................................................ 23
International Fund................................................... 30
Fixed Income I Fund.................................................. 48
Fixed Income III Fund................................................ 71
Emerging Markets Fund................................................ 98
Real Estate Securities Fund.......................................... 108
Short Duration Bond Fund............................................. 112
Select Growth Fund................................................... 127
Select Value Fund.................................................... 133
Notes to Schedules of Investments.................................... 139
Statement of Assets and Liabilities.................................. 140
Statement of Operations.............................................. 144
Statement of Changes in Net Assets................................... 146
Financial Highlights................................................. 150
Notes to Financial Highlights........................................ 162
Notes to Financial Statements........................................ 163
Shareholder Requests for Other Information........................... 188
Basis for Approval of Investment Advisory Contracts.................. 189
Disclosure of Information about Fund Directors....................... 192
Manager, Money Managers and Service Providers........................ 197
</Table>
Frank Russell Investment Company - Institutional Funds
Copyright (c) Frank Russell Company 2005. All rights reserved. This material is
proprietary and may not be reproduced, transferred, or distributed in any form
without prior written permission from Frank Russell Company. It is delivered on
an "as is" basis without warranty. The Russell logo is a trademark and service
mark of Frank Russell Company. Frank Russell Company and Standard & Poor's
Corporation are the owners of the trademarks, service marks, and copyrights
related to their respective indexes. This material must be accompanied or
preceded by a current Frank Russell Investment Company Prospectus containing
complete information concerning the investment objectives and operations of the
Company, charges, and expenses. The Prospectus should be read carefully before
an investment is made. Russell Fund Distributors, Inc., is the distributor of
Frank Russell Investment Company.
[Blank Page]
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,048.10 $ 1,020.54
Expenses Paid During
Period* $ 4.57 $ 4.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.90%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,049.40 $ 1,021.78
Expenses Paid During
Period* $ 3.30 $ 3.26
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,049.30 $ 1,021.83
Expenses Paid During
Period* $ 3.25 $ 3.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.64%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Equity I Fund 3
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.2%
Auto and Transportation - 2.8%
American Axle & Manufacturing Holdings, Inc. (N) 14,200 283
Autoliv, Inc. 8,800 389
BorgWarner, Inc. 3,200 146
Burlington Northern Santa Fe Corp. 57,840 2,791
CNF, Inc. 8,360 357
Cooper Tire & Rubber Co. 11,500 201
CSX Corp. 163,900 6,577
Dana Corp. (N) 9,100 104
Delphi Corp. (N) 51,400 170
FedEx Corp. 75,211 6,389
Forward Air Corp. 900 22
General Motors Corp. (N) 18,500 494
Honda Motor Co., Ltd. ADR 69,150 1,667
Landstar System, Inc. (AE) 2,500 77
Magna International, Inc. Class A 2,800 171
Navistar International Corp. (AE) 52,900 1,562
Norfolk Southern Corp. 22,200 697
Oshkosh Truck Corp. 7,300 549
Southwest Airlines Co. 59,550 886
Swift Transportation Co., Inc. (AE) 24,200 516
Union Pacific Corp. 4,100 262
United Parcel Service, Inc. Class B 28,500 2,032
Visteon Corp. 118,450 415
------------
26,757
------------
Consumer Discretionary - 14.9%
Abercrombie & Fitch Co. Class A 2,000 108
Accenture, Ltd. Class A (AE) 69,280 1,503
Activision, Inc. (AE) 4,800 69
Advance Auto Parts, Inc. (AE) 4,500 240
American Eagle Outfitters, Inc. 2,900 76
Arbitron, Inc. 1,100 47
Avon Products, Inc. 8,300 333
Bebe Stores, Inc. (N) 3,150 102
Bed Bath & Beyond, Inc. (AE) 64,700 2,407
Bright Horizons Family Solutions, Inc. (AE) 900 31
Brinker International, Inc. (AE) 4,100 139
Brink's Co. (The) 2,000 65
Carnival Corp. 56,300 2,752
CDW Corp. 18,180 994
Cendant Corp. 275,400 5,483
Charming Shoppes, Inc. (AE) 4,800 36
Chico's FAS, Inc. (AE)(N) 38,320 982
Childrens Place (AE) 800 30
Choice Hotels International, Inc. 700 42
Circuit City Stores, Inc. 64,950 1,026
Citadel Broadcasting Corp. (AE) 2,100 26
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Coach, Inc. (AE) 69,480 1,862
Coldwater Creek, Inc. (AE) 1,700 28
Convergys Corp. (AE) 8,750 113
Darden Restaurants, Inc. 9,200 276
DreamWorks Animation SKG, Inc. Class A (AE) 19,900 746
Eastman Kodak Co. 24,600 615
eBay, Inc. (AE) 39,900 1,266
Education Management Corp. (AE) 4,000 112
Electronic Arts, Inc. (AE) 45,921 2,452
Estee Lauder Cos., Inc. (The) Class A 40,500 1,556
Fisher Scientific International, Inc. (AE)(N) 25,560 1,518
Foot Locker, Inc. 8,750 233
Fossil, Inc. (AE) 1,900 44
Four Seasons Hotels, Inc. (N) 52,879 3,356
Gannett Co., Inc. 3,300 254
Gap, Inc. (The) 71,250 1,521
Gillette Co. (The) 92,700 4,787
Google, Inc. Class A (AE) 29,125 6,408
GTECH Holdings Corp. 10,700 262
Harman International Industries, Inc. 5,432 427
Hasbro, Inc. 22,120 419
Hilton Hotels Corp. 23,100 504
Home Depot, Inc. 134,300 4,750
International Game Technology 30,070 809
Interpublic Group of Cos., Inc. (AE)(N) 25,100 323
JC Penney Co., Inc. Holding Co. 62,050 2,942
Jones Apparel Group, Inc. 9,900 301
Kimberly-Clark Corp. 44,870 2,802
Kohl's Corp. (AE) 101,900 4,850
Liberty Media Corp. Class A (AE) 230,550 2,315
Liberty Media International, Inc. Class A (AE) 43,101 1,787
Limited Brands, Inc. 21,650 470
Linens 'N Things, Inc. (AE) 19,300 450
Lowe's Cos., Inc. 65,045 3,389
Marriott International, Inc. Class A 56,350 3,536
Mattel, Inc. 12,200 220
Maytag Corp. (N) 22,400 217
McDonald's Corp. 346,670 10,161
McGraw-Hill Cos., Inc. (The) 4,200 366
Men's Wearhouse, Inc. (AE) 1,700 70
MGM Mirage (AE)(N) 33,334 2,327
Michaels Stores, Inc. 3,500 116
Newell Rubbermaid, Inc. 37,700 819
</Table>
4 Equity I Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
News Corp. Class A 26,600 406
Nike, Inc. Class B 38,894 2,987
Nordstrom, Inc. 35,800 1,820
Office Depot, Inc. (AE) 36,400 713
Omnicom Group 28,600 2,371
Petsmart, Inc. 16,700 445
Pixar (AE)(N) 3,925 180
Priceline.com, Inc. (AE)(N) 22,000 558
Reebok International, Ltd. 49,800 2,022
Reed Elsevier PLC ADR (N) 22,710 897
Ross Stores, Inc. 17,100 457
Royal Caribbean Cruises, Ltd. (N) 82,396 3,462
RR Donnelley & Sons Co. 80,750 2,657
Saks, Inc. 96,600 1,646
Sirius Satellite Radio, Inc. (AE)(N) 166,100 791
Sonic Corp. (AE) 1,300 42
Staples, Inc. 16,950 323
Starbucks Corp. (AE) 41,875 2,074
Target Corp. 49,771 2,310
Tech Data Corp. (AE) 7,600 278
Time Warner, Inc. (AE) 272,090 4,574
TJX Cos., Inc. 54,440 1,233
Too, Inc. (AE) 1,200 28
Tribune Co. (N) 20,930 808
ValueClick, Inc. (AE) 2,600 27
VeriSign, Inc. (AE) 96,220 2,546
VF Corp. 7,700 436
Viacom, Inc. Class B 48,610 1,683
Wal-Mart Stores, Inc. 38,600 1,820
Walt Disney Co. 182,030 4,806
Waste Management, Inc. 15,400 439
Wynn Resorts, Ltd. (AE)(N) 13,729 727
XM Satellite Radio Holdings, Inc. Class A
(AE)(N) 25,300 702
Yahoo!, Inc. (AE) 157,580 5,438
Yankee Candle Co., Inc. 2,000 56
Yum! Brands, Inc. 63,271 2,971
------------
143,003
------------
Consumer Staples - 7.6%
Altria Group, Inc. 213,540 13,878
Cadbury Schweppes PLC ADR (N) 56,850 2,311
Chiquita Brands International, Inc. 1,500 38
Coca-Cola Co. (The) 87,100 3,784
Coca-Cola Enterprises, Inc. 5,200 106
Colgate-Palmolive Co. 73,600 3,665
CVS Corp. 18,851 972
Dean Foods Co. (AE) 23,900 821
Diageo PLC ADR (N) 22,300 1,332
HJ Heinz Co. 23,350 860
Kellogg Co. 46,270 2,080
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kraft Foods, Inc. Class A 9,900 321
Kroger Co. (The) (AE) 49,200 776
Nestle SA ADR (N) 4,400 289
PepsiCo, Inc. 299,060 16,639
Procter & Gamble Co. 316,122 17,117
Reynolds American, Inc. (N) 7,400 577
Safeway, Inc. (AE) 31,900 679
Sara Lee Corp. 64,460 1,379
Smithfield Foods, Inc. (AE) 18,350 555
Supervalu, Inc. (N) 3,800 120
Sysco Corp. 46,720 1,617
Unilever NV 2,800 180
UST, Inc. 11,200 513
Walgreen Co. 31,884 1,373
Whole Foods Market, Inc. 11,970 1,194
------------
73,176
------------
Financial Services - 17.5%
ACE, Ltd. 5,300 228
Aflac, Inc. 17,170 698
Alliance Data Systems Corp. (AE) 27,430 1,108
Allstate Corp. (The) 46,750 2,625
American Express Co. 143,250 7,549
American International Group, Inc. 77,700 3,951
Ameritrade Holding Corp. (AE) 4,000 42
AON Corp. 75,350 1,571
Archstone-Smith Trust (o) 3,600 129
Astoria Financial Corp. 8,400 223
Automatic Data Processing, Inc. 31,700 1,377
Bank of America Corp. 416,778 18,771
Bank of New York Co., Inc. (The) 15,700 439
BB&T Corp. 22,000 863
Capital One Financial Corp. 37,400 2,651
CB Richard Ellis Group, Inc. (AE) 35,450 1,232
Checkfree Corp. (AE) 63,500 2,329
Chicago Mercantile Exchange 7,144 1,397
Chubb Corp. 15,530 1,270
Cigna Corp. 7,100 653
Citigroup, Inc. 435,610 20,455
Comerica, Inc. 9,800 561
Commerce Bancorp, Inc. (N) 16,600 465
Countrywide Financial Corp. 86,070 3,115
Deluxe Corp. (N) 8,650 345
Eaton Vance Corp. 3,600 84
Equity Office Properties Trust (o) 29,000 913
</Table>
Equity I Fund 5
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Equity Residential (o) 15,700 539
Factset Research Systems, Inc. 1,700 47
Fannie Mae 45,290 2,443
Federated Investors, Inc. Class B 8,600 245
First American Corp. 3,100 111
Fiserv, Inc. (AE) 14,680 621
Franklin Resources, Inc. 37,100 2,548
Freddie Mac 56,970 3,505
Genworth Financial, Inc. Class A 103,450 2,891
Goldman Sachs Group, Inc. 136,569 14,584
Hartford Financial Services Group, Inc. 56,960 4,122
Highwoods Properties, Inc. (o) 1,500 42
Host Marriott Corp. (o) 10,900 183
HRPT Properties Trust (o) 800 9
Huntington Bancshares, Inc. 12,900 303
iShares Russell 1000 Value Index Fund 13,100 847
JPMorgan Chase & Co. 225,279 7,995
KeyCorp 19,900 660
La Quinta Corp. (AE)(o) 4,200 37
Legg Mason, Inc. 6,100 432
Lehman Brothers Holdings, Inc. 14,980 1,374
Lincoln National Corp. 43,900 1,974
Loews Corp. 18,550 1,315
Mack-Cali Realty Corp. (o) 1,800 79
Manulife Financial Corp. (N) 5,982 274
MBIA, Inc. 2,500 131
MBNA Corp. 122,490 2,419
Mellon Financial Corp. 38,740 1,073
Merrill Lynch & Co., Inc. 42,960 2,317
Metlife, Inc. 83,080 3,232
MGIC Investment Corp. 5,300 313
Morgan Stanley 11,200 589
National City Corp. 26,610 904
Nationwide Financial Services, Inc. 1,000 35
Old Republic International Corp. 7,100 168
PartnerRe, Ltd. 3,500 204
Paychex, Inc. 99,250 3,037
PMI Group, Inc. (The) 12,000 422
PNC Financial Services Group, Inc. 32,270 1,718
Protective Life Corp. 1,600 61
Prudential Financial, Inc. 8,100 463
RenaissanceRe Holdings, Ltd. (N) 3,600 161
SLM Corp. 85,142 4,056
St. Paul Travelers Cos., Inc. (The) 175,164 6,271
Starwood Hotels & Resorts Worldwide, Inc. (o) 79,250 4,306
SunTrust Banks, Inc. 45,300 3,299
T Rowe Price Group, Inc. 22,500 1,241
Torchmark Corp. 3,400 182
Trizec Properties, Inc. (o) 52,200 1,043
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
UBS AG (N) 7,384 593
UCBH Holdings, Inc. (N) 24,566 386
UnumProvident Corp. (N) 23,000 385
US Bancorp 65,074 1,816
W Holding Co., Inc. (N) 2,700 22
Wachovia Corp. 24,100 1,233
Waddell & Reed Financial, Inc. Class A (N) 9,200 160
Washington Mutual, Inc. 25,385 1,049
Wells Fargo & Co. 34,300 2,056
XL Capital, Ltd. Class A 2,900 204
------------
167,773
------------
Health Care - 14.9%
Abbott Laboratories 49,140 2,416
Aetna, Inc. 27,731 2,035
Affymetrix, Inc. (AE)(N) 15,600 719
AMERIGROUP Corp. (AE) 2,900 102
AmerisourceBergen Corp. 18,800 1,152
Amgen, Inc. (AE) 109,000 6,345
Amylin Pharmaceuticals, Inc. (AE)(N) 20,900 355
Applera Corp. - Celera Genomics Group (AE) 2,100 19
Baxter International, Inc. 78,220 2,902
Beckman Coulter, Inc. 10,100 674
Boston Scientific Corp. (AE) 119,600 3,538
Bristol-Myers Squibb Co. 46,450 1,208
Cardinal Health, Inc. 5,100 283
Caremark Rx, Inc. (AE) 131,030 5,248
Celgene Corp. (AE)(N) 44,500 1,687
Community Health Systems, Inc. (AE) 16,000 583
Cooper Cos., Inc. (N) 11,800 797
Coventry Health Care, Inc. (AE) 2,500 171
CR Bard, Inc. 18,500 1,317
DaVita, Inc. (AE) 11,000 443
Eli Lilly & Co. 82,890 4,847
Express Scripts, Inc. (AE) 6,500 583
Eyetech Pharmaceuticals, Inc. (AE)(N) 18,300 421
Genentech, Inc. (AE) 163,646 11,609
Gilead Sciences, Inc. (AE) 48,580 1,802
HCA Inc. 26,400 1,474
Health Net, Inc. (AE) 69,700 2,372
Humana, Inc. (AE) 6,300 218
IMS Health, Inc. 5,100 122
IVAX Corp. (AE) 113,200 2,139
Johnson & Johnson 316,362 21,711
</Table>
6 Equity I Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kinetic Concepts, Inc. (AE) 14,600 897
McKesson Corp. 6,000 222
Medco Health Solutions, Inc. (AE) 24,000 1,223
Medimmune, Inc. (AE) 97,300 2,469
Medtronic, Inc. 107,462 5,663
Merck & Co., Inc. 57,680 1,955
Novartis AG ADR 19,590 955
Pacificare Health Systems (AE) 8,569 512
Pfizer, Inc. 478,995 13,014
Quest Diagnostics, Inc. 13,459 1,424
Roche Holding AG ADR (N) 13,350 805
Sanofi-Aventis ADR (N) 67,882 3,012
Schering-Plough Corp. 74,000 1,544
Sepracor, Inc. (AE)(N) 16,050 962
St. Jude Medical, Inc. (AE) 56,984 2,224
Stryker Corp. 14,000 680
Tenet Healthcare Corp. (AE) 76,600 917
Triad Hospitals, Inc. (AE) 11,050 566
UnitedHealth Group, Inc. 103,554 9,787
Valeant Pharmaceuticals International (N) 20,800 432
Varian Medical Systems, Inc. (AE) 8,300 280
Vertex Pharmaceuticals, Inc. (AE) 2,600 25
WellPoint, Inc. (AE) 36,746 4,694
Wyeth 52,860 2,376
Zimmer Holdings, Inc. (AE) 80,184 6,529
------------
142,459
------------
Integrated Oils - 5.6%
Amerada Hess Corp. 4,600 431
ChevronTexaco Corp. 68,248 3,549
ConocoPhillips 147,545 15,470
Exxon Mobil Corp. 289,737 16,523
Marathon Oil Corp. 128,853 6,001
Occidental Petroleum Corp. 94,400 6,514
Suncor Energy, Inc. 50,400 1,858
Total SA ADR (N) 10,520 1,167
Unocal Corp. 33,500 1,827
------------
53,340
------------
Materials and Processing - 4.2%
Air Products & Chemicals, Inc. 20,540 1,206
American Standard Cos., Inc. 10,300 461
Archer-Daniels-Midland Co. 240,426 4,325
Ashland, Inc. 4,000 269
Ball Corp. 4,000 158
BASF AG ADR 44,250 2,872
Bayer AG ADR 20,150 650
Bemis Co. 4,000 110
Bowater, Inc. (N) 23,880 776
Bunge, Ltd. (N) 5,000 284
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Cia Vale do Rio Doce ADR 24,380 657
Commercial Metals Co. 2,500 64
Corn Products International, Inc. 71,200 1,568
Dow Chemical Co. (The) 42,790 1,965
Eastman Chemical Co. 7,900 427
EI Du Pont de Nemours & Co. 59,630 2,809
Freeport-McMoRan Copper & Gold, Inc. Class B 33,675 1,167
Hercules, Inc. (AE)(N) 7,500 99
Hughes Supply, Inc. 19,750 515
International Paper Co. 106,460 3,651
Lafarge North America, Inc. 1,500 83
Lone Star Technologies, Inc. (AE) 900 35
Lubrizol Corp. 8,950 347
Lyondell Chemical Co. 48,670 1,221
Martin Marietta Materials, Inc. 2,500 137
Masco Corp. 48,920 1,540
Monsanto Co. 53,390 3,130
Mosaic Co. (The) (AE) 134,500 1,728
Nalco Holding Co. (AE) 10,210 184
Newmont Mining Corp. 900 34
Pactiv Corp. (AE) 10,450 224
Phelps Dodge Corp. 2,000 172
PPG Industries, Inc. 30,910 2,088
Praxair, Inc. 7,550 354
Reliance Steel & Aluminum Co. 1,600 60
Sherwin-Williams Co. (The) 4,200 187
Smurfit-Stone Container Corp. (AE) 44,270 580
Sonoco Products Co. 6,300 171
St. Joe Co. (The) 28,366 1,974
Syngenta AG ADR 45,400 941
United States Steel Corp. 11,700 500
URS Corp. (AE) 900 28
------------
39,751
------------
Miscellaneous - 4.1%
3M Co. 60,900 4,657
ABB, Ltd. ADR (AE) 24,250 153
Brunswick Corp. 2,650 111
Eaton Corp. 8,900 522
Fortune Brands, Inc. 9,570 809
General Electric Co. 601,212 21,763
Honeywell International, Inc. 100,100 3,580
ITT Industries, Inc. 5,000 452
Johnson Controls, Inc. 4,700 258
</Table>
Equity I Fund 7
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SPX Corp. 8,950 346
Textron, Inc. 7,300 550
Tyco International, Ltd. 208,040 6,514
------------
39,715
------------
Other Energy - 2.3%
Apache Corp. 39,500 2,223
Burlington Resources, Inc. 2,600 126
Devon Energy Corp. 17,220 778
El Paso Corp. 46,600 466
EOG Resources, Inc. 34,270 1,630
GlobalSantaFe Corp. 13,900 467
Grey Wolf, Inc. (AE) 7,400 44
Halliburton Co. 95,900 3,988
Houston Exploration Co. (AE) 2,000 102
Newfield Exploration Co. (AE) 7,500 533
Noble Corp. 21,360 1,087
NRG Energy, Inc. (AE) 28,650 891
Peabody Energy Corp. 15,800 692
Premcor, Inc. 25,450 1,684
Pride International, Inc. (AE) 11,900 265
Reliant Energy, Inc. (AE) 258,550 2,629
Schlumberger, Ltd. 53,800 3,680
Todco Class A (AE) 2,600 58
Transocean, Inc. (AE) 12,800 594
------------
21,937
------------
Producer Durables - 5.8%
Agilent Technologies, Inc. (AE) 32,500 674
American Power Conversion Corp. 200 5
Applied Materials, Inc. 58,220 866
Boeing Co. 153,900 9,160
Caterpillar, Inc. 86,237 7,593
Centex Corp. 4,200 242
Cooper Industries, Ltd. Class A 12,890 821
Danaher Corp. 30,810 1,560
Deere & Co. 106,920 6,687
DR Horton, Inc. 13,133 401
Emerson Electric Co. 17,880 1,121
Empresa Brasileira de Aeronautica SA ADR 6,650 192
Goodrich Corp. 25,850 1,042
Herman Miller, Inc. 15,500 443
Hubbell, Inc. Class B 4,500 196
Illinois Tool Works, Inc. 35,110 2,943
Joy Global, Inc. 3,000 102
KB Home 21,444 1,222
Kla-Tencor Corp. 18,640 727
Lennar Corp. Class A 28,654 1,475
Lockheed Martin Corp. 61,081 3,723
MDC Holdings, Inc. (N) 14,788 967
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Northrop Grumman Corp. 42,800 2,347
Parker Hannifin Corp. 2,100 126
Pitney Bowes, Inc. 3,500 157
Pulte Homes, Inc. 6,600 472
Sandvik AB ADR (N) 8,330 325
Teradyne, Inc. (AE) 60,850 671
Thermo Electron Corp. (AE) 87,400 2,183
Toll Brothers, Inc. (AE) 8,796 667
United Technologies Corp. 62,586 6,366
------------
55,476
------------
Technology - 10.4%
ADC Telecommunications, Inc. (AE)(N) 64,200 146
Adobe Systems, Inc. 4,600 274
Altera Corp. (AE) 164,100 3,402
Amphenol Corp. Class A 2,100 83
Analog Devices, Inc. 12,860 439
Apple Computer, Inc. (AE) 49,330 1,779
Applied Micro Circuits Corp. (AE) 12,700 34
Arrow Electronics, Inc. (AE) 25,300 616
Autodesk, Inc. 6,300 201
Avnet, Inc. (AE) 70,850 1,338
BearingPoint, Inc. (AE) 164,450 1,018
Broadcom Corp. Class A (AE) 60,850 1,815
Ciena Corp. (AE) 11,100 26
Cisco Systems, Inc. (AE) 242,400 4,189
Cognizant Technology Solutions Corp. Class A
(AE) 25,500 1,071
Computer Sciences Corp. (AE) 3,800 165
Comverse Technology, Inc. (AE) 49,060 1,118
Corning, Inc. (AE) 48,990 674
Dell, Inc. (AE) 114,286 3,981
Electronic Data Systems Corp. 45,350 878
EMC Corp. (AE) 87,680 1,150
Flextronics International, Ltd. (AE) 12,500 139
Freescale Semiconductor, Inc. Class B (AE) 66,816 1,260
General Dynamics Corp. 34,822 3,658
Hewlett-Packard Co. 195,597 4,004
Ingram Micro, Inc. Class A (AE) 5,400 90
Integrated Device Technology, Inc. (AE) 4,200 45
Intel Corp. 165,200 3,886
International Business Machines Corp. 10,110 772
Juniper Networks, Inc. (AE) 178,220 4,026
L-3 Communications Holdings, Inc. 30,100 2,136
</Table>
8 Equity I Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LSI Logic Corp. (AE)(N) 3,800 20
Lucent Technologies, Inc. (AE)(N) 29,200 71
Macrovision Corp. (AE) 17,900 366
Marvell Technology Group, Ltd. (AE) 24,150 809
Maxim Integrated Products, Inc. 113,800 4,256
Micros Systems, Inc. (AE) 1,200 48
Microsoft Corp. 651,233 16,476
Motorola, Inc. 142,800 2,191
National Semiconductor Corp. 78,400 1,496
Nvidia Corp. (AE) 53,900 1,183
Oracle Corp. (AE) 464,500 5,370
Parametric Technology Corp. (AE) 10,300 55
PerkinElmer, Inc. 40,500 749
Perot Systems Corp. Class A (AE) 1,900 24
PMC - Sierra, Inc. (AE) 74,300 599
Qualcomm, Inc. (AE) 196,525 6,857
Research In Motion, Ltd. (AE) 13,900 895
Rockwell Automation, Inc. 22,170 1,025
SanDisk Corp. (AE) 33,000 782
Sanmina-SCI Corp. (AE) 349,300 1,401
Siemens AG ADR 38,750 2,849
Silicon Image, Inc. (AE)(N) 46,200 465
Solectron Corp. (AE)(N) 54,000 178
Sony Corp. ADR (N) 33,800 1,241
Symantec Corp. (AE) 26,060 489
Tellabs, Inc. (AE) 9,600 74
Texas Instruments, Inc. 160,600 4,009
Veritas Software Corp. (AE) 3,700 76
Xilinx, Inc. 46,170 1,244
------------
99,711
------------
Utilities - 4.1%
Alltel Corp. 4,500 256
American Electric Power Co., Inc. 4,600 162
BellSouth Corp. 213,550 5,657
Cinergy Corp. 8,600 341
Comcast Corp. Class A (AE) 159,383 5,118
Comcast Corp. Special Class A (AE) 6,530 207
Consolidated Edison, Inc. 4,900 212
Dominion Resources, Inc. 30,480 2,298
DTE Energy Co. 4,700 216
Edison International 8,400 305
Entergy Corp. 41,980 3,077
Exelon Corp. 14,550 720
FirstEnergy Corp. 6,100 265
FPL Group, Inc. 5,080 207
Northeast Utilities 16,800 308
Pepco Holdings, Inc. 3,700 80
Pinnacle West Capital Corp. 4,600 193
PPL Corp. 11,890 645
Progress Energy, Inc. 3,200 --
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Progress Energy, Inc. - CVO 10,000 420
Public Service Enterprise Group, Inc. 8,100 471
Puget Energy, Inc. (N) 3,600 77
Questar Corp. (N) 15,600 911
SBC Communications, Inc. 76,900 1,830
Sempra Energy 13,000 525
Sprint Corp. 264,220 5,882
Telephone & Data Systems, Inc. 15,500 1,196
TXU Corp. 23,786 2,041
Verizon Communications, Inc. 105,559 3,779
Vodafone Group PLC ADR (N) 54,880 1,435
Xcel Energy, Inc. 13,000 223
------------
39,057
------------
TOTAL COMMON STOCKS
(cost $806,549) 902,155
------------
LONG-TERM INVESTMENTS - 0.0%
Corporate Bonds and Notes - 0.0%
Delta Air Lines, Inc.
8.000% due 06/03/23 542 187
------------
TOTAL LONG-TERM INVESTMENTS
(cost $359) 187
------------
WARRANTS & RIGHTS - 0.0%
Lucent Technologies, Inc.
2007 Warrants (AE) 24,303 12
------------
TOTAL WARRANTS & RIGHTS
(cost $0) 12
------------
SHORT-TERM INVESTMENTS - 5.2%
Frank Russell Investment Company
Money Market Fund 45,295,285 45,295
United States Treasury Bill (c)(z)(sec.)
2.75% due 06/09/05 5,000 4,985
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $50,280) 50,280
------------
</Table>
Equity I Fund 9
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 3.5%
Frank Russell Investment Company Money Market
Fund (X) 8,087,084 8,087
State Street Securities Lending Quality Trust
(X) 25,479,804 25,480
------------
TOTAL OTHER SECURITIES
(cost $33,567) 33,567
------------
TOTAL INVESTMENTS - 102.9%
(identified cost $890,755) 986,201
OTHER ASSETS AND LIABILITIES,
NET - (2.9%) (28,199)
------------
NET ASSETS - 100.0% 958,002
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/05 (16) 4,994 (229)
Russell 1000 Index (CME)
expiration date 06/05 (10) 624 (2)
S&P 500 E-Mini Index
expiration date 06/05 (192) 11,122 (441)
S&P 500 Index
expiration date 06/05 (82) 23,749 (422)
S&P Midcap 400 Index
expiration date 06/05 (44) 13,954 (992)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (2,086)
===============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Auto and Transportation 2.8
Consumer Discretionary 14.9
Consumer Staples 7.6
Financial Services 17.5
Health Care 14.9
Integrated Oils 5.6
Materials and Processing 4.2
Miscellaneous 4.1
Other Energy 2.3
Producer Durables 5.8
Technology 10.4
Utilities 4.1
Long-Term Investments --*
Warrants & Rights --*
Short-Term Investments 5.2
Other Securities 3.5
---------------
Total Investments 102.9
Other Assets and Liabilities, Net (2.9)
---------------
Net Assets 100.0
===============
Futures Contracts 0.2
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
10 Equity I Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,010.00 $ 1,019.74
Expenses Paid During
Period* $ 5.28 $ 5.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.06%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,010.80 $ 1,020.83
Expenses Paid During
Period* $ 4.19 $ 4.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.84%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,011.20 $ 1,021.08
Expenses Paid During
Period* $ 3.94 $ 3.96
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.79%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Equity II Fund 11
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.9%
Auto and Transportation - 5.4%
Alaska Air Group, Inc. (AE) 18,200 485
American Axle & Manufacturing Holdings, Inc. (N) 17,600 351
Arctic Cat, Inc. (N) 6,409 152
ArvinMeritor, Inc. 33,200 394
Autoliv, Inc. 108,920 4,820
Aviall, Inc. (AE) 34,600 1,012
Celadon Group, Inc. (AE) 5,300 86
CNF, Inc. 55,600 2,377
Dana Corp. 92,100 1,052
Delphi Corp. 49,200 162
DryShips, Inc. (AE) 44,000 698
ExpressJet Holdings, Inc. (AE) 53,800 478
FLYi, Inc. (AE)(N) 57,700 42
Frontier Airlines, Inc. (AE)(N) 18,600 181
General Maritime Corp. (AE)(N) 34,100 1,495
Gentex Corp. (N) 10,000 325
Grupo TMM SA ADR (AE)(N) 93,600 280
Heartland Express, Inc. 49,900 925
HUB Group, Inc. Class A (AE)(N) 4,810 265
JB Hunt Transport Services, Inc. 31,470 1,230
Kansas City Southern (AE)(N) 37,800 715
Kirby Corp. (AE) 33,600 1,369
Laidlaw International, Inc. (AE) 69,100 1,547
Landstar System, Inc. (AE) 30,900 947
Lear Corp. 8,100 275
Martin Midstream Partners, LP (N) 33,225 1,007
Navistar International Corp. (AE) 28,500 842
Offshore Logistics, Inc. (AE) 4,350 126
OMI Corp. (N) 66,200 1,204
Oshkosh Truck Corp. 12,635 950
Overnite Corp. 103,571 3,105
Overseas Shipholding Group, Inc. 25,500 1,439
Pacer International, Inc. (AE) 111,100 2,303
Polaris Industries, Inc. (N) 21,120 1,216
Republic Airways Holdings, Inc. (AE) 20,000 244
SCS Transportation, Inc. (AE) 11,600 177
Skywest, Inc. 35,800 647
Stolt-Nielsen SA ADR (AE) 19,500 666
Swift Transportation Co., Inc. (AE)(N) 13,500 288
Teekay Shipping Corp. (N) 28,000 1,174
Tidewater, Inc. 27,420 945
TRW Automotive Holdings Corp. (AE) 19,300 344
Tsakos Energy Navigation, Ltd. (N) 14,920 571
UTI Worldwide, Inc. (N) 27,200 1,745
Visteon Corp. 97,800 342
Werner Enterprises, Inc. 105,510 1,960
Westinghouse Air Brake Technologies Corp. 85,700 1,714
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Yellow Roadway Corp. (AE) 33,700 1,651
------------
46,323
------------
Consumer Discretionary - 19.3%
Abercrombie & Fitch Co. Class A 48,900 2,638
ABM Industries, Inc. 24,400 443
AC Moore Arts & Crafts, Inc. (AE) 42,100 1,095
Activision, Inc. (AE) 31,200 451
Adesa, Inc. 60,100 1,454
Advance Auto Parts, Inc. (AE) 79,400 4,236
Advo, Inc. 57,500 1,657
Alderwoods Group, Inc. (AE) 18,100 236
Alliance Gaming Corp. (AE)(N) 61,800 705
American Eagle Outfitters, Inc. 60,600 1,589
American Greetings Corp. Class A 47,300 1,071
American Woodmark Corp. 4,500 143
AMN Healthcare Services, Inc. (AE)(N) 90,200 1,332
aQuantive, Inc. (AE)(N) 83,900 931
Arbitron, Inc. 38,630 1,635
Asbury Automotive Group, Inc. (AE)(N) 16,550 227
Banta Corp. 25,700 1,070
Blue Nile, Inc. (AE)(N) 23,145 583
Borders Group, Inc. 55,100 1,333
Brightpoint, Inc. (AE) 20,900 441
Brink's Co. (The) 50,470 1,628
Brown Shoe Co., Inc. 14,600 451
Buckle, Inc. (The) 1,800 62
Burlington Coat Factory Warehouse Corp. 14,700 405
Catalina Marketing Corp. (N) 6,400 149
Cato Corp. (The) Class A 14,100 362
Central European Distribution Corp. (AE)(N) 73,800 2,739
Central Garden and Pet Co. (AE) 22,000 915
Charles River Associates, Inc. (AE)(N) 22,800 1,195
Charming Shoppes, Inc. (AE) 219,973 1,637
Chemed Corp. 18,800 1,332
Choice Hotels International, Inc. 17,700 1,071
ChoicePoint, Inc. (AE) 31,600 1,247
Circuit City Stores, Inc. 74,229 1,173
CKE Restaurants, Inc. (AE)(N) 32,070 476
Claire's Stores, Inc. 67,300 1,468
CNS, Inc. 61,400 1,154
Cogent, Inc. (AE) 4,400 99
Consolidated Graphics, Inc. (AE) 7,200 330
</Table>
12 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Convergys Corp. (AE) 125,340 1,624
Corinthian Colleges, Inc. (AE)(N) 54,600 776
Corporate Executive Board Co. 67,350 4,427
Corrections Corp. of America (AE) 13,645 516
Cost Plus, Inc. (AE) 34,150 792
CoStar Group, Inc. (AE)(N) 19,900 787
Cross Country Healthcare, Inc. (AE) 37,200 599
CSK Auto Corp. (AE) 17,500 271
Ctrip.com International, Ltd. ADR (AE)(N) 31,000 1,360
Darden Restaurants, Inc. 61,500 1,845
DeVry, Inc. (AE) 34,500 787
Dillard's, Inc. Class A 58,310 1,357
Dolby Laboratories, Inc. Class A (AE) 75,400 1,542
DreamWorks Animation SKG, Inc. Class A (AE) 12,600 473
Earthlink, Inc. (AE) 69,000 633
Education Management Corp. (AE) 103,300 2,892
Electronics Boutique Holdings Corp. (AE)(N) 18,200 1,014
Entercom Communications Corp. (AE) 36,500 1,176
Entravision Communications Corp. Class A (AE) 27,300 215
Ethan Allen Interiors, Inc. (N) 29,000 874
Ezcorp, Inc. Class A (AE) 32,100 393
Famous Dave's of America, Inc. (AE) 55,600 601
Federated Department Stores, Inc. 16,200 932
Finish Line, Inc. (The) Class A (N) 71,180 1,283
Furniture Brands International, Inc. (N) 37,500 727
Gemstar-TV Guide International, Inc. (AE) 271,700 1,046
Geo Group, Inc. (The) (AE) 4,000 105
Getty Images, Inc. (AE)(N) 29,900 2,139
Gildan Activewear, Inc. (AE) 14,700 621
Handleman Co. (N) 36,400 632
Harte-Hanks, Inc. 36,500 1,040
Hartmarx Corp. (AE)(N) 13,800 119
Hasbro, Inc. 86,800 1,642
Haverty Furniture Cos., Inc. 9,000 129
Hearst-Argyle Television, Inc. 100,630 2,526
Helen of Troy, Ltd. (AE)(N) 40,200 1,123
Hewitt Associates, Inc. Class A (AE) 35,958 957
Hilton Hotels Corp. 42,900 937
Hot Topic, Inc. (AE) 122,980 2,458
IKON Office Solutions, Inc. 10,200 88
International Speedway Corp. Class A 14,800 787
Jack in the Box, Inc. (AE) 44,040 1,610
Jo-Ann Stores, Inc. (AE) 32,200 815
Jones Apparel Group, Inc. 39,400 1,200
Jos A Bank Clothiers, Inc. (AE)(N) 30,900 1,014
Korn/Ferry International (AE) 20,400 294
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Labor Ready, Inc. (AE)(N) 167,850 2,801
Lamar Advertising Co. Class A (AE) 46,200 1,727
Laureate Education, Inc. (AE) 35,645 1,583
La-Z-Boy, Inc. (N) 32,400 384
Leapfrog Enterprises, Inc. (AE)(N) 47,900 479
Lee Enterprises, Inc. (N) 27,000 1,121
Life Time Fitness, Inc. (AE)(N) 45,700 1,237
Lin TV Corp. Class A (AE)(N) 64,000 998
Lithia Motors, Inc. Class A (N) 17,400 429
Liz Claiborne, Inc. 31,000 1,098
Lone Star Steakhouse & Saloon, Inc. 300 9
Manpower, Inc. 8,400 324
Marcus Corp. 40,800 781
Marvel Enterprises, Inc. (AE)(N) 60,950 1,195
McClatchy Co. Class A 23,400 1,654
Media General, Inc. Class A 22,400 1,373
Men's Wearhouse, Inc. (AE) 43,800 1,808
Mohawk Industries, Inc. (AE) 20,000 1,556
Movado Group, Inc. 6,600 106
Movie Gallery, Inc. (N) 10,730 290
Nautilus Group, Inc. (N) 63,500 1,579
Navigant Consulting, Inc. (AE)(N) 129,555 3,041
Netratings, Inc. (AE)(N) 4,500 65
Oakley, Inc. 37,800 505
Orient-Express Hotels, Ltd. Class A 76,900 2,020
Oshkosh B'Gosh, Inc. Class A (N) 2,900 76
Outback Steakhouse, Inc. 24,000 970
Pacific Sunwear of California, Inc. (AE) 102,100 2,308
Penn National Gaming, Inc. (AE) 18,100 570
Petco Animal Supplies, Inc. (AE) 13,150 412
PF Chang's China Bistro, Inc. (AE)(N) 7,500 416
Phillips-Van Heusen Corp. 28,900 748
Pier 1 Imports, Inc. (N) 30,600 444
Pixar (AE) 7,740 354
PLATO Learning, Inc. (AE)(N) 11,139 82
Playtex Products, Inc. (AE) 47,200 479
Polo Ralph Lauren Corp. 59,200 2,078
Pre-Paid Legal Services, Inc. (N) 19,770 706
Prestige Brands Holdings, Inc. (AE) 48,600 875
Providence Service Corp. (The) (AE)(N) 50,000 1,280
Pulitzer, Inc. 8,600 547
Radio One, Inc. Class D (AE)(N) 126,315 1,651
Regal Entertainment Group Class A (N) 6,500 132
Rent-Way, Inc. (AE)(N) 18,500 144
Resources Connection, Inc. (AE)(N) 39,400 753
Rocky Shoes & Boots, Inc. (AE) 4,300 115
</Table>
Equity II Fund 13
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
RR Donnelley & Sons Co. 50,977 1,678
Ruby Tuesday, Inc. 31,225 703
Russ Berrie & Co., Inc. (N) 4,600 59
Russell Corp. 16,100 282
Ryan's Restaurant Group, Inc. (AE) 130,850 1,659
Sabre Holdings Corp. Class A 39,700 777
Scholastic Corp. (AE) 17,700 617
SCP Pool Corp. 111,800 3,642
Service Corp. International 7,000 49
ServiceMaster Co. (The) 59,000 757
Shoe Carnival, Inc. (AE) 500 10
ShopKo Stores, Inc. (AE) 56,220 1,347
Six Flags, Inc. (AE)(N) 12,200 48
Sonic Automotive, Inc. 23,500 462
Speedway Motorsports, Inc. (N) 10,800 370
Sports Authority, Inc. (The) (AE)(N) 58,600 1,559
Stage Stores, Inc. (AE)(N) 42,860 1,621
Stanley Works (The) 33,200 1,429
Steinway Musical Instruments, Inc. (AE) 1,800 54
Stewart Enterprises, Inc. Class A (N) 40,400 218
Tech Data Corp. (AE) 35,320 1,290
TeleTech Holdings, Inc. (AE)(N) 21,530 226
Tempur-Pedic International, Inc. (AE)(N) 130,675 2,495
Too, Inc. (AE) 39,400 907
Toro Co. 3,220 133
Trans World Entertainment (AE)(N) 16,900 224
Trizetto Group (AE) 18,300 193
United Auto Group, Inc. 14,900 422
United Stationers, Inc. (AE) 13,500 569
USANA Health Sciences, Inc. (AE)(N) 37,510 1,550
Vail Resorts, Inc. (AE) 15,600 404
Valassis Communications, Inc. (AE) 28,000 987
Valuevision Media, Inc. Class A (AE) 15,300 151
Volt Information Sciences, Inc. (AE) 1,800 36
Washington Post, Inc. Class B 1,170 1,011
Watson Wyatt & Co. Holdings 14,600 385
WESCO International, Inc. (AE) 53,540 1,295
West Corp. (AE) 52,500 1,700
Wolverine World Wide, Inc. 43,570 884
------------
165,847
------------
Consumer Staples - 1.5%
7-Eleven, Inc. (AE) 35,100 821
Boston Beer Co., Inc. Class A (AE) 200 4
Chiquita Brands International, Inc. 24,000 601
Coca-Cola Bottling Co. Consolidated 20,444 976
Constellation Brands, Inc. Class A (AE) 44,700 2,356
DIMON, Inc. (N) 6,200 37
Flowers Foods, Inc. 15,800 456
Longs Drug Stores Corp. (N) 23,640 859
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Molson Coors Brewing Co. Class B (N) 20,500 1,266
NBTY, Inc. (AE)(N) 13,855 295
Pathmark Stores, Inc. (AE) 39,900 308
Pepsi Bottling Group, Inc. 34,000 975
Pilgrim's Pride Corp. (N) 33,390 1,205
Provide Commerce, Inc. (AE) 30,125 524
Ralcorp Holdings, Inc. 17,900 709
Ruddick Corp. 1,300 29
Spartan Stores, Inc. (AE) 89,600 1,024
Tootsie Roll Industries, Inc. 7,890 244
Tyson Foods, Inc. Class A 19,700 333
Weis Markets, Inc. 1,200 45
------------
13,067
------------
Financial Services - 17.8%
Advent Software, Inc. (AE) 71,300 1,272
Affiliated Managers Group, Inc. (AE)(N) 17,155 1,073
Alexandria Real Estate Equities, Inc. (o) 12,160 837
Alliance Data Systems Corp. (AE) 168,060 6,791
Allmerica Financial Corp. (AE) 39,300 1,319
AMB Property Corp. (o) 35,800 1,396
American Financial Group, Inc. 31,800 989
American Home Mortgage Investment Corp. (o) 17,910 586
American Physicians Capital, Inc. (AE) 8,300 258
AmeriCredit Corp. (AE) 61,980 1,450
AmerUs Group Co. (N) 7,360 346
Anthracite Capital, Inc. (o) 24,700 274
Anworth Mortgage Asset Corp. (N) 46,200 431
Apartment Investment & Management Co. Class A
(o) 13,600 518
Arbor Realty Trust, Inc. (o)(N) 6,100 149
Arden Realty, Inc. (o) 23,900 853
Aspen Insurance Holdings, Ltd. 49,400 1,349
Associated Banc-Corp 54,170 1,675
Assurant, Inc. 22,200 735
Astoria Financial Corp. 9,060 240
AvalonBay Communities, Inc. (o) 28,900 2,081
Axis Capital Holdings, Ltd. 27,400 729
Bank of Hawaii Corp. 32,330 1,531
BankAtlantic Bancorp, Inc. Class A 30,700 524
Bear Stearns Cos., Inc. (The) 10,200 966
BISYS Group, Inc. (The) (AE) 176,300 2,489
BOK Financial Corp. (AE) 5,420 227
</Table>
14 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CapitalSource, Inc. (AE)(N) 121,700 2,556
CarrAmerica Realty Corp. (o) 17,100 565
Cathay General Bancorp (N) 15,600 513
CB Richard Ellis Group, Inc. (AE) 64,100 2,227
CBL & Associates Properties, Inc. (o) 29,990 2,320
CCC Information Services Group (AE) 493 12
Central Pacific Financial Corp. 18,880 615
Certegy, Inc. 19,100 696
CharterMac 26,400 552
Checkfree Corp. (AE) 50,600 1,856
Chemical Financial Corp. (N) 3,990 120
Chittenden Corp. (N) 14,600 367
CIT Group, Inc. 21,600 870
City National Corp. 12,600 888
CNA Surety Corp. (AE) 80,000 1,051
Colonial BancGroup, Inc. (The) 122,300 2,698
Commerce Group, Inc. 2,800 165
Commercial Federal Corp. 37,800 987
Commercial Net Lease Realty (o)(N) 44,570 846
Community Bank System, Inc. 44,600 987
Correctional Properties Trust (o) 4,600 118
Corus Bankshares, Inc. 6,600 322
Cousins Properties, Inc. (o) 16,910 457
Credit Acceptance Corp. (AE) 19,700 369
CRT Properties, Inc. (o) 6,850 158
CVB Financial Corp. (N) 7,500 129
Downey Financial Corp. (N) 20,500 1,327
Duke Realty Corp. (o) 29,600 906
Eastgroup Properties (o)(N) 9,500 356
eFunds Corp. (AE) 19,100 418
Entertainment Properties Trust (o) 9,100 393
Equifax, Inc. 27,600 929
Euronet Worldwide, Inc. (AE) 105,500 3,119
Fair Isaac Corp. 27,300 898
FelCor Lodging Trust, Inc. (AE)(o)(N) 30,400 372
Fidelity Bankshares, Inc. 6,300 145
Fidelity National Financial, Inc. 31,300 1,005
First American Corp. 70,900 2,538
First BanCorp (N) 4,750 172
First Marblehead Corp. (The) (AE) 26,600 1,025
First Niagara Financial Group, Inc. 29,014 364
First Republic Bank 2,700 84
FirstFed Financial Corp. (AE) 3,180 161
Fremont General Corp. (N) 7,720 167
GATX Corp. 63,800 2,088
Getty Realty Corp. (o)(N) 12,800 323
Glacier Bancorp, Inc. 7,200 193
Global Payments, Inc. (N) 64,150 4,154
Hancock Holding Co. (N) 4,400 131
Hanmi Financial Corp. 27,200 398
HCC Insurance Holdings, Inc. 16,100 573
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Health Care REIT, Inc. (o)(N) 32,500 1,089
HealthExtras, Inc. (AE)(N) 132,100 2,186
Heritage Property Investment Trust (o) 21,600 665
Home Properties, Inc. (o) 26,500 1,109
HRPT Properties Trust (o) 201,820 2,371
Infinity Property & Casualty Corp. (N) 18,000 584
Innkeepers USA Trust (o) 39,000 518
Investment Technology Group, Inc. (AE) 56,700 1,078
Investors Financial Services Corp. (N) 70,000 2,937
IPC Holdings, Ltd. 28,900 1,088
iStar Financial, Inc. (o) 10,600 422
Jack Henry & Associates, Inc. 88,800 1,526
Jefferies Group, Inc. 33,600 1,216
Jones Lang LaSalle, Inc. (AE) 46,500 1,744
Knight Trading Group, Inc. Class A (AE)(N) 100,968 851
Kronos, Inc. (AE) 9,160 358
La Quinta Corp. (AE)(o) 202,600 1,763
LandAmerica Financial Group, Inc. (N) 52,971 2,627
Legg Mason, Inc. 13,000 921
Lexington Corporate Properties Trust (o)(N) 29,700 683
Liberty Property Trust (o) 6,000 239
Luminent Mortgage Capital, Inc. (o) 34,000 338
Macerich Co. (The) (o) 21,200 1,278
Mack-Cali Realty Corp. (o) 37,800 1,663
Markel Corp. (AE) 7,500 2,573
McGrath Rentcorp 49,800 1,106
Meristar Hospitality Corp. (AE)(o)(N) 61,300 420
MFA Mortgage Investments, Inc. (o) 16,300 117
Mid-America Apartment Communities, Inc. (o) 9,500 363
MoneyGram International, Inc. 10,000 194
Montpelier Re Holdings, Ltd. (N) 35,500 1,178
MortgageIT Holdings, Inc. (o)(N) 9,200 156
National Financial Partners Corp. (N) 7,200 275
National Penn Bancshares, Inc. (N) 4,987 112
Nationwide Financial Services, Inc. 17,000 602
NAVTEQ Corp. (AE) 7,800 284
New Century Financial Corp. (o)(N) 28,260 1,284
North Fork BanCorp., Inc. 34,500 971
Nuveen Investments, Inc. Class A 24,430 830
OceanFirst Financial Corp. (N) 6,300 135
Odyssey Re Holdings Corp. (N) 12,500 284
Ohio Casualty Corp. (AE) 10,055 236
Old Republic International Corp. 14,100 333
Omega Healthcare Investors, Inc. (o) 12,400 139
</Table>
Equity II Fund 15
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pacific Capital Bancorp (N) 13,500 389
Pan Pacific Retail Properties, Inc. (o) 3,000 181
Parkway Properties, Inc. (o) 6,400 292
People's Bank 5,800 241
PFF Bancorp, Inc. (N) 11,225 313
Philadelphia Consolidated Holding Co. (AE) 4,845 363
Portfolio Recovery Associates, Inc. (AE)(N) 29,640 1,066
PRG-Schultz International, Inc. (AE)(N) 10,000 48
Primus Guaranty, Ltd. (AE) 61,300 699
Protective Life Corp. 35,400 1,354
Provident Bankshares Corp. 11,498 337
PS Business Parks, Inc. (o) 10,400 420
Radian Group, Inc. 22,500 1,000
Raymond James Financial, Inc. 35,000 944
Redwood Trust, Inc. (o)(N) 26,800 1,343
Regency Centers Corp. (o) 10,550 555
RenaissanceRe Holdings, Ltd. 28,375 1,270
Republic Bancorp, Inc. Class A 52,008 1,099
Ryder System, Inc. 37,120 1,371
Safety Insurance Group, Inc. 4,200 119
Senior Housing Properties Trust (o)(N) 60,080 1,039
Signature Bank (AE) 36,450 898
Silicon Valley Bancshares (AE) 23,560 1,117
Sky Financial Group, Inc. 10,000 261
SL Green Realty Corp. (o) 1,480 90
Sotheby's Holdings Class A (AE) 44,375 727
Southwest Bancorp, Inc. 37,000 698
Sovereign Bancorp, Inc. (N) 41,000 843
Sovran Self Storage, Inc. (o)(N) 27,900 1,193
State Auto Financial Corp. 6,700 183
Sterling Bancorp (N) 3,871 89
Sterling Bancshares, Inc. 20,100 270
Sterling Financial Corp. (AE) 30,110 984
Stewart Information Services Corp. (N) 29,050 1,046
TCF Financial Corp. 21,000 531
TD Banknorth, Inc. (AE) 50,948 1,569
Trizec Properties, Inc. (o) 65,530 1,310
UCBH Holdings, Inc. (N) 54,500 857
UICI 45,880 1,065
UMB Financial Corp. (N) 2,590 140
United Rentals, Inc. (AE)(N) 10,500 193
Universal Health Realty Income Trust (o)(N) 6,500 213
W Holding Co., Inc. (N) 61,047 494
Washington Federal, Inc. 13,209 294
Webster Financial Corp. 24,500 1,114
WellChoice, Inc. (AE) 35,200 1,978
Whitney Holding Corp. (N) 7,900 358
World Acceptance Corp. (AE)(N) 230 6
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
WR Berkley Corp. 26,205 852
Wright Express Corp. (AE) 59,600 995
Zenith National Insurance Corp. (N) 6,660 383
Zions BanCorp. 13,700 959
------------
152,770
------------
Health Care - 13.2%
Abaxis, Inc. (AE)(N) 63,600 604
Able Laboratories, Inc. (AE)(N) 160,300 3,822
Accelrys, Inc. (AE)(N) 78,300 405
Affymetrix, Inc. (AE)(N) 62,300 2,873
Alliance Imaging, Inc. (AE) 76,600 800
Alpharma, Inc. Class A 54,500 514
Amedisys, Inc. (AE)(N) 92,100 2,764
American Healthways, Inc. (AE)(N) 45,800 1,711
American Medical Systems Holdings, Inc. (AE) 4,360 76
AMERIGROUP Corp. (AE) 22,400 787
Animas Corp. (AE)(N) 33,440 627
Applera Corp. - Celera Genomics Group (AE) 149,200 1,373
Apria Healthcare Group, Inc. (AE) 5,230 157
Arthrocare Corp. (AE)(N) 69,600 2,045
Barr Pharmaceuticals, Inc. (AE) 33,300 1,727
Bausch & Lomb, Inc. 15,400 1,155
Bio-Rad Laboratories, Inc. Class A (AE) 24,300 1,175
Biosite, Inc. (AE)(N) 1,650 94
Cardiome Pharma Corp. (AE) 42,665 252
Centene Corp. (AE) 17,230 480
Cephalon, Inc. (AE)(N) 31,800 1,396
Charles River Laboratories International, Inc.
(AE) 56,500 2,676
Cholestech Corp. (AE) 64,800 666
Community Health Systems, Inc. (AE) 73,800 2,690
Connetics Corp. (AE)(N) 15,360 334
Cooper Cos., Inc. 4,200 284
Covance, Inc. (AE) 21,300 972
CuraGen Corp. (AE)(N) 15,200 47
Cytyc Corp. (AE) 35,500 757
Dade Behring Holdings, Inc. (AE) 43,020 2,653
Datascope Corp. 5,100 146
DaVita, Inc. (AE) 122,991 4,957
Digene Corp. (AE)(N) 27,620 526
DJ Orthopedics, Inc. (AE) 83,800 2,108
Dov Pharmaceutical, Inc. (AE)(N) 26,070 406
Edwards Lifesciences Corp. (AE) 42,860 1,888
</Table>
16 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Enzon Pharmaceuticals, Inc. (AE)(N) 6,330 49
First Horizon Pharmaceutical Corp. (AE)(N) 9,500 172
Flamel Technologies SA ADR (AE)(N) 4,900 78
Foxhollow Technologies, Inc. (AE)(N) 16,500 511
Genesis HealthCare Corp. (AE) 58,900 2,350
Gen-Probe, Inc. (AE) 12,640 634
Gentiva Health Services, Inc. (AE)(N) 78,800 1,543
Haemonetics Corp. (AE) 36,700 1,570
Health Net, Inc. (AE) 37,300 1,269
HealthTronics, Inc. (AE) 100,000 1,240
Henry Schein, Inc. (AE) 28,160 1,056
Hologic, Inc. (AE) 46,800 1,665
Human Genome Sciences, Inc. (AE)(N) 72,000 744
Humana, Inc. (AE) 81,700 2,831
Hythiam, Inc. (AE)(N) 83,100 622
ICON PLC ADR (AE) 22,480 747
Idenix Pharmaceuticals, Inc. (AE)(N) 37,100 702
Immucor, Inc. (AE) 27,745 828
Intralase Corp. (AE) 95,975 1,605
Intuitive Surgical, Inc. (AE) 18,700 803
Kindred Healthcare, Inc. (AE)(N) 26,270 864
Kos Pharmaceuticals, Inc. (AE)(N) 14,306 689
Lifecore Biomedical, Inc. (AE) 59,900 737
Lifeline Systems, Inc. (AE) 26,900 917
LifePoint Hospitals, Inc. (AE) 16,200 720
Lincare Holdings, Inc. (AE) 26,200 1,118
Magellan Health Services, Inc. (AE)(N) 45,700 1,557
MannKind Corp. (AE)(N) 10,200 141
Martek Biosciences Corp. (AE)(N) 39,000 1,493
Matria Healthcare, Inc. (AE)(N) 66,000 1,824
Maxygen, Inc. (AE)(N) 8,300 62
Mentor Corp. (N) 6,650 244
Molina Healthcare, Inc. (AE) 6,900 302
Myriad Genetics, Inc. (AE)(N) 16,900 273
Nabi Biopharmaceuticals (AE) 91,061 993
Neurocrine Biosciences, Inc. (AE)(N) 27,690 968
Option Care, Inc. (N) 11,100 158
Orthofix International NV (AE) 16,900 794
OSI Pharmaceuticals, Inc. (AE) 13,200 625
Owens & Minor, Inc. 11,600 337
Pacificare Health Systems (AE) 32,500 1,942
Parexel International Corp. (AE) 29,100 530
Pediatrix Medical Group, Inc. (AE) 31,400 2,138
Pharmaceutical Product Development, Inc. (AE) 13,400 608
Pharmacopeia Drug Discovery, Inc. (AE) 51,000 250
PolyMedica Corp. (N) 35,400 1,097
Qiagen NV (AE)(N) 43,300 563
Quidel Corp. (AE)(N) 10,000 43
Res-Care, Inc. (AE) 12,800 183
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Resmed, Inc. (AE) 27,228 1,691
Respironics, Inc. (AE) 37,850 2,392
Sepracor, Inc. (AE) 12,700 761
Sierra Health Services, Inc. (AE) 17,170 1,111
SonoSite, Inc. (AE)(N) 29,445 857
Stericycle, Inc. (AE) 47,700 2,322
Sunrise Senior Living, Inc. (AE)(N) 4,100 210
Sybron Dental Specialties, Inc. (AE) 81,199 3,025
Symbion, Inc. (AE)(N) 46,060 980
United Surgical Partners International, Inc.
(AE) 35,610 1,576
United Therapeutics Corp. (AE)(N) 15,670 752
Valeant Pharmaceuticals International 66,100 1,372
Vaxgen, Inc. (AE)(N) 56,475 636
VCA Antech, Inc. (AE) 81,000 1,886
Ventana Medical Systems, Inc. (AE)(N) 75,080 2,990
Vertex Pharmaceuticals, Inc. (AE) 27,600 263
Vicuron Pharmaceuticals, Inc. (AE)(N) 53,510 875
Wright Medical Group, Inc. (AE) 36,800 914
------------
113,749
------------
Materials and Processing - 8.3%
Aceto Corp. 53,100 358
Agrium, Inc. 70,900 1,262
Airgas, Inc. 44,100 967
Albany International Corp. Class A 18,400 577
AM Castle & Co. (AE)(N) 56,800 679
Aptargroup, Inc. 5,000 241
Armor Holdings, Inc. (AE) 26,920 942
Ashland, Inc. 36,500 2,454
Ball Corp. 19,900 786
Brady Corp. Class A 19,200 569
Building Material Holding Corp. 11,200 615
Cabot Corp. 46,100 1,408
Calgon Carbon Corp. (N) 72,000 621
Carpenter Technology 8,500 470
Chicago Bridge & Iron Co. NV 67,600 1,513
Clarcor, Inc. 41,835 2,117
Cleveland-Cliffs, Inc. 9,400 545
Comfort Systems USA, Inc. (AE)(N) 13,110 94
Commercial Metals Co. 49,500 1,263
Compass Minerals International, Inc. 52,200 1,261
Constar International, Inc. (AE) 49,100 243
Crompton Corp. 83,300 1,170
Crown Holdings, Inc. (AE) 86,200 1,297
Cytec Industries, Inc. 52,900 2,440
</Table>
Equity II Fund 17
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Dycom Industries, Inc. (AE) 23,140 538
ElkCorp 7,200 198
EMCOR Group, Inc. (AE) 5,100 228
Energizer Holdings, Inc. (AE) 12,140 692
Engelhard Corp. 55,200 1,691
Exide Technologies (AE)(N) 47,900 498
Florida Rock Industries, Inc. 19,300 1,121
FMC Corp. (AE) 2,400 118
Freightcar America, Inc. (AE) 24,670 479
Georgia Gulf Corp. 12,600 465
Greif, Inc. Class A 3,500 243
Griffon Corp. (AE)(N) 8,930 171
Harsco Corp. 36,700 1,969
Hercules, Inc. (AE) 134,200 1,775
Hexcel Corp. (AE) 30,200 495
Hughes Supply, Inc. 56,186 1,466
Insituform Technologies, Inc. Class A (AE)(N) 81,100 1,209
Jacuzzi Brands, Inc. (AE) 113,000 1,023
Lafarge North America, Inc. 54,000 2,998
Lone Star Technologies, Inc. (AE) 6,600 257
Louisiana-Pacific Corp. 57,100 1,405
LSI Industries, Inc. (N) 4,900 59
Lubrizol Corp. 18,900 733
Lyondell Chemical Co. 6,100 153
Martin Marietta Materials, Inc. 34,600 1,903
Mesabi Trust 60,200 881
Metal Management, Inc. 46,500 938
Mosaic Co. (The) (AE) 37,800 486
Mueller Industries, Inc. 16,400 425
NewMarket Corp. (AE) 7,900 117
NS Group, Inc. (AE) 23,100 664
Octel Corp. 7,200 124
Olympic Steel, Inc. (AE)(N) 42,786 626
OM Group, Inc. (AE) 25,400 557
Oregon Steel Mills, Inc. (AE)(N) 30,800 512
Pactiv Corp. (AE) 46,800 1,003
Perini Corp. (AE) 10,676 148
PolyOne Corp. (AE) 56,900 439
Pope & Talbot, Inc. 18,800 245
Precision Castparts Corp. 2,400 177
Quanex Corp. (N) 46,630 2,353
Quanta Services, Inc. (AE)(N) 305,900 2,441
Reliance Steel & Aluminum Co. 10,700 404
Rock-Tenn Co. Class A 9,500 96
Ryerson Tull, Inc. (N) 7,400 77
Sealed Air Corp. (AE) 19,500 945
Silgan Holdings, Inc. (N) 27,500 1,682
Simpson Manufacturing Co., Inc. 14,800 400
Southern Peru Copper Corp. (N) 3,800 194
Steel Technologies, Inc. (N) 6,600 127
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Stillwater Mining Co. (AE) 14,300 104
Symyx Technologies, Inc. (AE) 38,800 946
Terra Industries, Inc. (AE)(N) 63,900 441
Texas Industries, Inc. 42,800 1,977
Trammell Crow Co. (AE) 36,980 788
UAP Holding Corp. (AE) 20,100 289
Unifi, Inc. (AE) 47,800 147
United States Steel Corp. 29,700 1,270
URS Corp. (AE) 25,900 796
USEC, Inc. (N) 58,840 774
USG Corp. (AE)(N) 35,340 1,484
Valmont Industries, Inc. 2,200 51
------------
70,907
------------
Miscellaneous - 0.5%
Brunswick Corp. 32,800 1,378
Johnson Controls, Inc. 16,500 905
Walter Industries, Inc. 10,500 360
Wesco Financial Corp. 3,800 1,436
------------
4,079
------------
Other Energy - 7.4%
Alliance Resource Partners, LP 8,300 540
Alpha Natural Resources, Inc. (AE) 21,400 495
Atwood Oceanics, Inc. (AE) 54,500 3,110
Berry Petroleum Co. Class A 19,100 892
Cal Dive International, Inc. (AE) 95,500 4,248
Carrizo Oil & Gas, Inc. (AE)(N) 14,700 243
Cimarex Energy Co. (AE)(N) 59,700 2,119
Consol Energy, Inc. 19,400 839
Cooper Cameron Corp. (AE) 18,700 1,027
Denbury Resources, Inc. (AE) 80,400 2,552
Diamond Offshore Drilling, Inc. 29,100 1,284
Dril-Quip, Inc. (AE) 5,400 157
Dynegy, Inc. Class A (AE) 103,200 346
Enbridge Energy Partners, LP (N) 22,400 1,136
ENSCO International, Inc. 56,300 1,835
Equitable Resources, Inc. 9,300 536
Frontier Oil Corp. 28,400 1,195
Global Industries, Ltd. (AE) 32,600 314
Goodrich Petroleum Corp. (AE) 66,700 1,130
Grant Prideco, Inc. (AE) 99,700 2,208
Harvest Natural Resources, Inc. (AE) 41,700 450
Houston Exploration Co. (AE) 66,840 3,405
Hydril (AE) 13,600 715
Input/Output, Inc. (AE)(N) 49,000 296
</Table>
18 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
National-Oilwell Varco, Inc. (AE) 30,600 1,216
Newfield Exploration Co. (AE) 7,300 519
Newpark Resources, Inc. (AE) 74,865 450
Noble Energy, Inc. (N) 3,960 254
NRG Energy, Inc. (AE) 46,300 1,440
Oil States International, Inc. (AE) 30,200 613
Parker Drilling Co. (AE)(N) 20,000 107
Patina Oil & Gas Corp. 42,900 1,647
Patterson-UTI Energy, Inc. 51,800 1,242
Petroquest Energy, Inc. (AE) 136,900 842
Pride International, Inc. (AE) 3,500 78
Quicksilver Resources, Inc. (AE)(N) 25,000 1,283
Range Resources Corp. (N) 61,675 1,397
Remington Oil & Gas Corp. (AE)(N) 6,930 202
Rowan Cos., Inc. 40,000 1,061
Smith International, Inc. 17,700 1,030
Stone Energy Corp. (AE) 200 9
Superior Energy Services, Inc. (AE) 84,400 1,256
Swift Energy Co. (AE)(N) 19,343 509
Talisman Energy, Inc. 31,000 935
TC Pipelines, LP 13,500 430
TEPPCO Partners, LP (N) 31,500 1,392
Todco Class A (AE) 259,540 5,776
Unit Corp. (AE) 42,875 1,645
Universal Compression Holdings, Inc. (AE) 97,540 3,424
Veritas DGC, Inc. (AE) 30,070 770
Vintage Petroleum, Inc. 6,900 199
Whiting Petroleum Corp. (AE) 39,700 1,202
XTO Energy, Inc. 49,330 1,488
------------
63,488
------------
Producer Durables - 5.9%
American Tower Corp. Class A (AE) 38,900 670
Ametek, Inc. 13,400 507
Applied Films Corp. (AE) 25,052 599
Applied Industrial Technologies, Inc. 23,800 664
Arris Group, Inc. (AE)(N) 97,300 739
Axcelis Technologies, Inc. (AE) 85,300 530
BE Aerospace, Inc. (AE) 30,000 364
Belden CDT, Inc. 55,200 1,012
Briggs & Stratton Corp. 57,320 1,855
Cascade Corp. 32,800 1,033
Champion Enterprises, Inc. (AE)(N) 76,715 724
CNH Global NV 54,380 977
Cognex Corp. 30,100 657
Credence Systems Corp. (AE)(N) 113,225 712
Crown Castle International Corp. (AE) 91,200 1,471
Curtiss-Wright Corp. (N) 6,220 337
Cymer, Inc. (AE)(N) 39,400 977
Dominion Homes, Inc. (AE)(N) 3,900 54
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
DR Horton, Inc. 37,300 1,138
Electro Scientific Industries, Inc. (AE) 48,485 801
Engineered Support Systems, Inc. (N) 19,200 678
ESCO Technologies, Inc. (AE) 10,700 785
Faro Technologies, Inc. (AE)(N) 24,200 650
Federal Signal Corp. 47,300 664
Flowserve Corp. (AE) 17,100 475
Genlyte Group, Inc. (AE) 7,490 594
Goodrich Corp. 60,700 2,446
Graco, Inc. 27,995 945
HNI Corp. 2,100 106
IDEX Corp. 47,025 1,752
Joy Global, Inc. 41,300 1,399
KB Home 40,000 2,280
Kennametal, Inc. 10,900 494
Kimball International, Inc. Class B 6,360 72
Knoll, Inc. 33,850 550
Lennar Corp. Class A 24,200 1,246
Manitowoc Co. 27,700 1,108
MDC Holdings, Inc. 24,215 1,583
Meritage Homes Corp. (AE) 12,800 810
Milacron, Inc. (AE)(N) 138,058 290
Orbital Sciences Corp. (AE)(N) 40,800 380
Orleans Homebuilders, Inc. (N) 4,400 76
Pall Corp. 54,500 1,462
Paxar Corp. (AE) 4,060 73
Photon Dynamics, Inc. (AE)(N) 45,100 873
Spatialight, Inc. (AE)(N) 156,094 706
Standard-Pacific Corp. 33,230 2,380
Steelcase, Inc. Class A (N) 27,600 363
Symmetricom, Inc. (AE) 66,230 682
Technical Olympic USA, Inc. (N) 17,000 358
Tecumseh Products Co. Class A 21,810 758
Teledyne Technologies, Inc. (AE) 22,000 669
Tennant Co. (N) 1,880 67
Terex Corp. (AE) 16,900 632
Thermo Electron Corp. (AE) 19,500 487
Thomas & Betts Corp. (AE) 38,200 1,189
Toll Brothers, Inc. (AE) 17,400 1,319
United Industrial Corp. (N) 3,170 89
Varian Semiconductor Equipment Associates, Inc.
(AE) 33,600 1,253
Woodward Governor Co. 100 7
Xyratex, Ltd. (AE)(N) 117,500 1,953
------------
50,524
------------
</Table>
Equity II Fund 19
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Technology - 13.9%
ActivCard Corp. (AE) 15,500 81
Acxiom Corp. 42,320 804
ADC Telecommunications, Inc. (AE)(N) 718,900 1,632
Aeroflex, Inc. (AE) 101,200 803
Agile Software Corp. (AE)(N) 291,100 1,913
Alliance Semiconductor Corp. (AE) 66,500 105
American Reprographics Co. (AE) 45,200 635
Anixter International, Inc. (AE) 39,350 1,453
Ansys, Inc. (AE) 11,391 347
Anteon International Corp. (AE)(N) 30,300 1,267
Ascential Software Corp. (AE) 84,975 1,569
AsiaInfo Holdings, Inc. (AE)(N) 24,100 117
ATI Technologies, Inc. (AE) 180,100 2,665
Atmel Corp. (AE) 79,000 182
Avaya, Inc. (AE) 52,800 458
Avnet, Inc. (AE) 51,500 973
AVX Corp. (N) 105,000 1,143
BearingPoint, Inc. (AE)(N) 165,600 1,025
BEI Technologies, Inc. 28,435 654
Blackbaud, Inc. (AE) 12,500 163
Brocade Communications Systems, Inc. (AE) 129,300 564
Cadence Design Systems, Inc. (AE) 39,500 553
Ceridian Corp. (AE) 61,800 1,043
Cognos, Inc. (AE) 63,700 2,410
Coherent, Inc. (AE)(N) 4,050 130
Comtech Telecommunications Corp. (AE)(N) 26,550 932
Comverse Technology, Inc. (AE) 134,400 3,063
Cryptologic, Inc. 38,000 1,109
CSG Systems International, Inc. (AE) 5,600 96
Digitas, Inc. (AE) 158,315 1,578
Dot Hill Systems Corp. (AE)(N) 74,405 351
DRS Technologies, Inc. (AE) 35,000 1,549
E.piphany, Inc. (AE) 124,600 383
EDO Corp. 47,800 1,426
Epicor Software Corp. (AE) 47,745 526
Equinix, Inc. (AE)(N) 92,000 3,218
Fairchild Semiconductor International, Inc. (AE) 143,350 1,928
Filenet Corp. (AE)(N) 36,100 957
Formfactor, Inc. (AE)(N) 85,100 1,944
Foundry Networks, Inc. (AE) 41,600 349
Freescale Semiconductor, Inc. Class B (AE) 99,300 1,873
GTSI Corp. (AE)(N) 96,791 892
Harmonic, Inc. (AE)(N) 88,150 486
Harris Corp. 56,400 1,590
Hutchinson Technology, Inc. (AE)(N) 43,200 1,600
Imergent, Inc. (AE)(N) 39,340 425
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
InFocus Corp. (AE)(N) 60,400 217
Informatica Corp. (AE) 120,500 931
Ingram Micro, Inc. Class A (AE) 143,100 2,384
Innovative Solutions & Support, Inc. (AE)(N) 2,770 87
Integrated Device Technology, Inc. (AE) 113,400 1,213
Integrated Silicon Solutions, Inc. (AE)(N) 108,142 699
Intergraph Corp. (AE)(N) 9,740 288
Intermagnetics General Corp. (AE)(N) 42,415 1,042
Internet Security Systems, Inc. (AE) 11,400 222
Intersil Corp. Class A 188,800 3,296
Interwoven, Inc. (AE)(N) 37,300 288
j2 Global Communications, Inc. (AE)(N) 35,500 1,268
Keane, Inc. (AE) 24,000 286
Keynote Systems, Inc. (AE) 56,200 615
Komag, Inc. (AE) 66,960 1,575
Kongzhong Corp. ADR (AE)(N) 36,600 256
LeCroy Corp. (AE) 16,535 218
LSI Logic Corp. (AE)(N) 19,400 104
Macromedia, Inc. (AE) 31,100 1,232
Manhattan Associates, Inc. (AE) 48,210 910
Matrixone, Inc. (AE) 455,200 1,944
Maxtor Corp. (AE) 586,700 2,845
McAfee, Inc. (AE) 68,800 1,439
McData Corp. Class A (AE)(N) 176,800 545
MEMC Electronic Materials, Inc. (AE) 149,800 1,757
Mercury Computer Systems, Inc. (AE) 48,700 1,282
Methode Electronics, Inc. (N) 5,940 67
Microsemi Corp. (AE) 64,400 1,090
MicroStrategy, Inc. Class A (AE) 10,555 459
Microtune, Inc. (AE) 94,657 326
MRV Communications, Inc. (AE)(N) 105,800 202
M-Systems Flash Disk Pioneers (AE)(N) 61,300 1,162
Nam Tai Electronics, Inc. 52,100 1,206
Netlogic Microsystems, Inc. (AE)(N) 168,400 1,980
Network Engines, Inc. (AE) 52,700 85
Niku Corp. (AE)(N) 48,951 771
Novatel Wireless, Inc. (AE)(N) 58,610 525
Parametric Technology Corp. (AE) 267,300 1,422
PC-Tel, Inc. (AE)(N) 2,170 16
PerkinElmer, Inc. 81,700 1,511
Perot Systems Corp. Class A (AE) 10,000 126
Phoenix Technologies, Ltd. (AE) 59,600 482
PLX Technology, Inc. (AE)(N) 41,745 375
PMC - Sierra, Inc. (AE) 81,100 654
QLogic Corp. (AE) 9,400 312
</Table>
20 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Quantum Corp. (AE)(N) 426,600 1,024
Quest Software, Inc. (AE) 61,900 734
Radisys Corp. (AE)(N) 39,345 551
RADWARE, Ltd. (AE) 67,595 1,478
Redback Networks, Inc. (AE)(N) 39,800 213
Sapient Corp. (AE)(N) 143,500 1,026
Seachange International, Inc. (AE)(N) 78,170 806
Semtech Corp. (AE)(N) 45,300 765
Serena Software, Inc. (AE)(N) 95,470 1,817
Sigma Designs, Inc. (AE)(N) 46,550 356
Sigmatel, Inc. (AE)(N) 9,880 259
SimpleTech, Inc. (AE) 12,700 47
SiRF Technology Holdings, Inc. (AE) 67,095 766
Spectrasite, Inc. (AE) 34,200 1,920
SPSS, Inc. (AE) 6,300 101
Stellent, Inc. (AE) 15,700 111
Superior Essex, Inc. (AE) 37,895 633
Sybase, Inc. (AE) 7,110 135
SYKES Enterprises, Inc. (AE) 13,000 91
Talx Corp. (N) 83,500 2,064
Tekelec (AE)(N) 49,000 667
Tellabs, Inc. (AE) 62,240 483
TIBCO Software, Inc. (AE) 90,700 648
Ultimate Software Group, Inc. (AE)(N) 67,200 1,042
Unisys Corp. (AE) 162,900 1,057
Utstarcom, Inc. (AE)(N) 37,300 355
Vignette Corp. (AE) 55,000 64
Virage Logic Corp. (AE) 37,991 350
WatchGuard Technologies (AE) 39,400 128
Wavecom SA ADR (AE)(N) 58,500 398
Websense, Inc. (AE) 52,540 2,787
Western Digital Corp. (AE) 399,100 5,065
Wind River Systems, Inc. (AE)(N) 82,400 1,070
Witness Systems, Inc. (AE) 58,940 1,038
Zoran Corp. (AE) 26,300 278
------------
119,005
------------
Utilities - 2.7%
Alamosa Holdings, Inc. (AE) 138,000 1,793
Allete, Inc. 14,000 583
Alliant Energy Corp. 21,900 577
Avista Corp. 18,910 317
Cablevision Systems Corp. Class A (AE) 52,700 1,368
Centerpoint Energy, Inc. 53,000 628
CMS Energy Corp. (AE)(N) 73,300 947
Commonwealth Telephone Enterprises, Inc. (AE)(N) 1,880 87
El Paso Electric Co. (AE) 9,400 183
Energen Corp. 23,600 1,462
Hawaiian Electric Industries (N) 100 3
Laclede Group, Inc. (The) 5,400 148
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MDU Resources Group, Inc. 38,400 1,038
National Fuel Gas Co. 79,530 2,166
Northeast Utilities 75,100 1,375
OGE Energy Corp. 39,000 1,076
Oneok, Inc. 17,100 494
Pepco Holdings, Inc. 68,100 1,476
Pinnacle West Capital Corp. 13,200 553
Premiere Global Services, Inc. (AE)(N) 113,785 1,229
Questar Corp. 12,000 701
Sierra Pacific Resources (AE)(N) 61,410 664
South Jersey Industries, Inc. (N) 3,200 174
UGI Corp. 36,000 1,808
US Cellular Corp. (AE) 15,430 713
Westar Energy, Inc. 38,700 886
WGL Holdings, Inc. 24,500 743
------------
23,192
------------
TOTAL COMMON STOCKS
(cost $730,714) 822,951
------------
WARRANTS & RIGHTS - 0.0%
Dime Bancorp.
2005 Warrants (AE) 184,500 26
------------
TOTAL WARRANTS & RIGHTS
(cost $37) 26
------------
SHORT-TERM INVESTMENTS - 4.0%
Frank Russell Investment Company
Money Market Fund 30,345,002 30,345
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 4,000 3,988
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $34,333) 34,333
------------
</Table>
Equity II Fund 21
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 17.8%
Frank Russell Investment Company
Money Market Fund (X) 36,858,211 36,858
State Street Securities Lending Quality Trust
(X) 116,128,378 116,128
------------
TOTAL OTHER SECURITIES
(cost $152,986) 152,986
------------
TOTAL INVESTMENTS - 117.7%
(identified cost $918,070) 1,010,296
OTHER ASSETS AND LIABILITIES
NET - (17.7)% (151,978)
------------
NET ASSETS - 100.0% 858,318
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 2000 E-Mini Index
expiration date 06/05 (307) 17,834 (1,625)
Russell 2000 Index
expiration date 06/05 (34) 6,875 (858)
S&P 500 E-Mini Index
expiration date 06/05 (35) 2,027 (72)
S&P 500 Index
expiration date 06/05 (22) 6,372 (7)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (2,562)
===============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Auto and Transportation 5.4
Consumer Discretionary 19.3
Consumer Staples 1.5
Financial Services 17.8
Health Care 13.2
Materials and Processing 8.3
Miscellaneous 0.5
Other Energy 7.4
Producer Durables 5.9
Technology 13.9
Utilities 2.7
Warrants & Rights --*
Short-Term Investments 4.0
Other Securities 17.8
---------------
Total Investments 117.7
Other Assets and Liabilities, Net (17.7)
---------------
Net Assets 100.0
===============
Futures Contracts 0.3
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
22 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,032.00 $ 1,020.54
Expenses Paid During
Period* $ 4.53 $ 4.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.90%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,033.20 $ 1,021.78
Expenses Paid During
Period* $ 3.28 $ 3.26
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,033.40 $ 1,021.93
Expenses Paid During
Period* $ 3.13 $ 3.11
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.62%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Equity Q Fund 23
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 96.2%
Auto and Transportation - 3.1%
Autoliv, Inc. 27,200 1,204
Burlington Northern Santa Fe Corp. 159,079 7,676
CNF, Inc. 21,800 932
CSX Corp. 45,900 1,842
Dana Corp. 25,700 293
Delphi Corp. (N) 65,100 215
FedEx Corp. 42,300 3,593
Ford Motor Co. 499,850 4,554
Forward Air Corp. 6,900 166
Harley-Davidson, Inc. (N) 75,900 3,569
JB Hunt Transport Services, Inc. 57,000 2,228
Knight Transportation, Inc. (N) 11,100 235
Landstar System, Inc. (AE)(N) 20,500 628
Norfolk Southern Corp. 106,400 3,341
Overnite Corp. (N) 7,400 222
Overseas Shipholding Group, Inc. 16,300 920
Paccar, Inc. 60,012 4,075
Polaris Industries, Inc. 16,800 967
Skywest, Inc. 37,300 674
Southwest Airlines Co. 146,000 2,172
Swift Transportation Co., Inc. (AE) 16,800 358
Union Pacific Corp. 22,400 1,432
United Parcel Service, Inc. Class B 3,600 257
Werner Enterprises, Inc. (N) 15,400 286
------------
41,839
------------
Consumer Discretionary - 13.2%
Abercrombie & Fitch Co. Class A 20,000 1,079
Activision, Inc. (AE) 123,833 1,791
Advance Auto Parts, Inc. (AE) 6,000 320
American Eagle Outfitters, Inc. 115,200 3,021
American Greetings Corp. Class A 49,700 1,126
Arbitron, Inc. 7,200 305
Autonation, Inc. (AE)(N) 67,500 1,233
Avon Products, Inc. 57,700 2,313
Barnes & Noble, Inc. (AE) 13,600 484
Bebe Stores, Inc. (N) 25,900 837
Belo Corp. Class A 14,400 337
Black & Decker Corp. 41,000 3,429
Bright Horizons Family Solutions, Inc. (AE) 5,600 190
Brinker International, Inc. (AE) 24,600 831
Brink's Co. (The) 14,600 471
Career Education Corp. (AE) 27,600 868
Catalina Marketing Corp. (N) 18,100 421
Cendant Corp. 494,200 9,840
Charming Shoppes, Inc. (AE)(N) 33,400 248
Choice Hotels International, Inc. 4,500 272
Circuit City Stores, Inc. 155,189 2,452
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Citadel Broadcasting Corp. (AE)(N) 15,600 196
Clear Channel Communications, Inc. (N) 54,500 1,741
Coach, Inc. (AE) 218,800 5,864
Coldwater Creek, Inc. (AE)(N) 10,900 182
Convergys Corp. (AE) 33,300 432
Costco Wholesale Corp. 139,600 5,665
Darden Restaurants, Inc. 51,400 1,542
Dillard's, Inc. Class A 128,400 2,988
Dollar General Corp. 85,500 1,740
DreamWorks Animation SKG, Inc. Class A (AE) 8,300 311
Eastman Kodak Co. 93,200 2,330
eBay, Inc. (AE) 94,200 2,989
EchoStar Communications Corp. 10,600 307
Estee Lauder Cos., Inc. (The) Class A 48,271 1,854
Federated Department Stores, Inc. 63,100 3,628
Fossil, Inc. (AE)(N) 12,000 279
Gannett Co., Inc. 14,500 1,117
Gap, Inc. (The) 60,100 1,283
Getty Images, Inc. (AE)(N) 8,500 608
Gillette Co. (The) 30,800 1,591
Google, Inc. Class A (AE) 6,800 1,496
GTECH Holdings Corp. 33,300 815
Harman International Industries, Inc. 34,700 2,727
Hilton Hotels Corp. 30,400 664
Home Depot, Inc. 223,990 7,923
Kimberly-Clark Corp. 100,935 6,303
Liberty Media Corp. Class A (AE) 413,000 4,147
Limited Brands, Inc. (N) 136,900 2,969
Manpower, Inc. 5,700 220
Marriott International, Inc. Class A 40,000 2,510
Mattel, Inc. 105,600 1,906
McDonald's Corp. 120,200 3,523
McGraw-Hill Cos., Inc. (The) 37,000 3,222
MGM Mirage (AE) 8,800 614
Michaels Stores, Inc. 34,600 1,149
Nike, Inc. Class B 30,600 2,350
Nordstrom, Inc. 44,400 2,257
Office Depot, Inc. (AE) 36,100 707
Pacific Sunwear of California, Inc. (AE) 30,300 685
Payless Shoesource, Inc. (AE) 23,600 322
Penn National Gaming, Inc. (AE) 13,100 413
Robert Half International, Inc. 16,800 417
Sabre Holdings Corp. Class A 71,200 1,393
SCP Pool Corp. (N) 11,250 367
</Table>
24 Equity Q Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Stanley Works (The) (N) 22,400 964
Staples, Inc. 325,200 6,202
Tempur-Pedic International, Inc. (AE)(N) 100 2
Time Warner, Inc. (AE) 864,800 14,537
TJX Cos., Inc. 62,300 1,411
ValueClick, Inc. (AE)(N) 29,500 306
VeriSign, Inc. (AE) 25,700 680
Viacom, Inc. Class B 320,857 11,108
Wal-Mart Stores, Inc. 169,543 7,992
Walt Disney Co. 407,616 10,761
Waste Management, Inc. 65,900 1,877
Yahoo!, Inc. (AE) 140,031 4,832
Yankee Candle Co., Inc. (N) 12,500 347
Yum! Brands, Inc. 66,000 3,099
------------
181,732
------------
Consumer Staples - 5.6%
Albertson's, Inc. 157,500 3,117
Altria Group, Inc. 115,700 7,519
Chiquita Brands International, Inc. (N) 13,900 348
Clorox Co. 84,800 5,368
Coca-Cola Co. (The) 10,600 460
Colgate-Palmolive Co. 64,400 3,206
CVS Corp. 11,900 614
General Mills, Inc. 111,600 5,513
Kraft Foods, Inc. Class A (N) 50,500 1,637
Kroger Co. (The) (AE) 270,735 4,269
Pepsi Bottling Group, Inc. 151,700 4,349
PepsiCo, Inc. 54,500 3,032
Pilgrim's Pride Corp. 49,900 1,801
Procter & Gamble Co. 317,645 17,200
Reynolds American, Inc. 46,200 3,602
Safeway, Inc. (AE)(N) 155,200 3,304
Sara Lee Corp. 175,000 3,743
Supervalu, Inc. 25,100 792
Tyson Foods, Inc. Class A 189,000 3,192
UST, Inc. 46,100 2,111
Walgreen Co. 41,000 1,765
------------
76,942
------------
Financial Services - 21.2%
Allstate Corp. (The) 75,500 4,240
Ambac Financial Group, Inc. 4,100 274
American Express Co. 222,600 11,731
American Financial Group, Inc. 50,400 1,567
American International Group, Inc. 60,171 3,060
Ameritrade Holding Corp. (AE) 22,800 239
AmerUs Group Co. 26,900 1,265
Annaly Mortgage Management, Inc. (o) 26,000 497
AON Corp. 24,600 513
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Archstone-Smith Trust (o) 8,600 309
Associated Banc-Corp (N) 15,200 470
Assurant, Inc. 7,400 245
Automatic Data Processing, Inc. 79,000 3,432
Bank of America Corp. 755,771 34,040
Bank of Hawaii Corp. 31,600 1,496
Bear Stearns Cos., Inc. (The) 19,900 1,884
CapitalSource, Inc. (AE)(N) 13,900 292
Catellus Development Corp. (o)(N) 15,900 440
CBL & Associates Properties, Inc. (o) 9,800 758
Charles Schwab Corp. (The) 45,300 469
Checkfree Corp. (AE) 9,300 341
Chubb Corp. 10,600 867
Cigna Corp. 40,000 3,679
Cincinnati Financial Corp. 45,523 1,832
CIT Group, Inc. 34,221 1,378
Citigroup, Inc. 592,968 27,846
Comerica, Inc. 53,800 3,081
Countrywide Financial Corp. 145,500 5,266
Doral Financial Corp. (N) 75,200 1,057
Dun & Bradstreet Corp. (AE) 4,000 250
E*Trade Financial Corp. (AE) 63,100 701
Eaton Vance Corp. (N) 24,600 576
Equity Office Properties Trust (o) 192,700 6,064
Factset Research Systems, Inc. (N) 14,400 400
Fannie Mae 32,600 1,759
Fidelity National Financial, Inc. 25,922 832
First American Corp. 58,800 2,105
First Horizon National Corp. (N) 5,100 212
Fiserv, Inc. (AE) 70,800 2,995
Franklin Resources, Inc. 4,900 337
Freddie Mac 51,100 3,144
Friedman Billings Ramsey Group, Inc. Class A
(o)(N) 106,200 1,284
Genworth Financial, Inc. Class A 55,400 1,548
Golden West Financial Corp. 24,500 1,527
Goldman Sachs Group, Inc. 78,700 8,404
H&R Block, Inc. (N) 58,100 2,894
HRPT Properties Trust (o)(N) 10,400 122
JPMorgan Chase & Co. 421,160 14,947
KeyCorp 160,110 5,309
Kimco Realty Corp. (o) 16,500 914
La Quinta Corp. (AE)(o) 26,400 230
Legg Mason, Inc. 23,000 1,630
Lehman Brothers Holdings, Inc. 63,400 5,815
Leucadia National Corp. (N) 9,800 341
Lincoln National Corp. 59,200 2,662
</Table>
Equity Q Fund 25
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Loews Corp. 87,400 6,195
MBIA, Inc. 70,300 3,682
MBNA Corp. 74,459 1,471
Merrill Lynch & Co., Inc. 190,800 10,290
Metlife, Inc. 234,400 9,118
Mills Corp. (The) (o) 12,300 703
Moody's Corp. 63,200 5,191
Morgan Stanley 62,000 3,262
National City Corp. 37,300 1,267
Nationwide Financial Services, Inc. 15,600 553
North Fork BanCorp., Inc. 67,300 1,894
Old Republic International Corp. 28,900 682
Paychex, Inc. 62,600 1,916
Plum Creek Timber Co., Inc. (o) 38,400 1,326
PNC Financial Services Group, Inc. 40,000 2,129
Principal Financial Group, Inc. 32,900 1,286
Progressive Corp. (The) 35,100 3,204
Protective Life Corp. 8,900 340
Providian Financial Corp. (AE) 20,600 343
Prudential Financial, Inc. 38,600 2,206
Regency Centers Corp. (o) 7,100 374
Regions Financial Corp. 89,690 3,004
Ryder System, Inc. 51,800 1,913
St. Paul Travelers Cos., Inc. (The) 17,640 632
Stancorp Financial Group, Inc. 5,300 406
Starwood Hotels & Resorts Worldwide, Inc. (o) 39,000 2,119
SunTrust Banks, Inc. 49,593 3,612
TCF Financial Corp. (N) 10,000 253
UnionBanCal Corp. 66,700 4,106
United Rentals, Inc. (AE) 16,600 305
US Bancorp 179,800 5,016
Vornado Realty Trust (o) 16,100 1,231
W Holding Co., Inc. (N) 19,700 159
Wachovia Corp. 194,500 9,955
Washington Mutual, Inc. 178,000 7,355
WellChoice, Inc. (AE)(N) 8,300 466
Wells Fargo & Co. 220,000 13,187
WR Berkley Corp. 12,000 390
XL Capital, Ltd. Class A 6,500 457
------------
291,568
------------
Health Care - 14.5%
Abbott Laboratories 284,700 13,996
Aetna, Inc. 161,300 11,835
Allergan, Inc. 46,300 3,259
American Medical Systems Holdings, Inc. (AE)(N) 12,950 226
AMERIGROUP Corp. (AE) 22,900 804
AmerisourceBergen Corp. (N) 35,900 2,200
Amgen, Inc. (AE) 234,500 13,650
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Applera Corp. - Celera Genomics Group (AE) 6,000 55
Bausch & Lomb, Inc. (N) 10,400 780
Becton Dickinson & Co. 198,000 11,587
Biogen Idec, Inc. (AE) 26,800 971
Bristol-Myers Squibb Co. 116,200 3,021
Cardinal Health, Inc. 109,700 6,096
Caremark Rx, Inc. (AE) 13,700 549
Celgene Corp. (AE) 7,800 296
Coventry Health Care, Inc. (AE) 52,200 3,572
CR Bard, Inc. 26,600 1,893
Edwards Lifesciences Corp. (AE) 44,700 1,969
Eli Lilly & Co. 4,900 287
Express Scripts, Inc. (AE) 8,200 735
Forest Laboratories, Inc. (AE) 128,100 4,571
Genzyme Corp. (AE) 51,500 3,018
Gilead Sciences, Inc. (AE) 154,200 5,721
Guidant Corp. 9,900 733
HCA Inc. (N) 62,900 3,512
Health Management Associates, Inc. Class A 18,000 445
Hospira, Inc. (AE) 10,800 362
Humana, Inc. (AE) 44,100 1,528
ImClone Systems, Inc. (AE) 80,400 2,561
IMS Health, Inc. 48,400 1,161
Johnson & Johnson 571,500 39,222
Lincare Holdings, Inc. (AE) 12,500 534
McKesson Corp. 98,200 3,633
Medco Health Solutions, Inc. (AE) 54,900 2,798
Medtronic, Inc. 81,500 4,295
Merck & Co., Inc. 275,100 9,326
Pfizer, Inc. 920,594 25,013
Quest Diagnostics, Inc. 13,235 1,400
Schering-Plough Corp. 82,800 1,728
St. Jude Medical, Inc. (AE) 61,100 2,385
UnitedHealth Group, Inc. 53,100 5,018
Varian Medical Systems, Inc. (AE) 46,800 1,579
Vertex Pharmaceuticals, Inc. (AE)(N) 19,000 181
Wyeth 21,000 944
------------
199,449
------------
Integrated Oils - 6.5%
Amerada Hess Corp. 12,500 1,171
ChevronTexaco Corp. 291,283 15,147
ConocoPhillips 226,857 23,786
</Table>
26 Equity Q Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Exxon Mobil Corp. 761,022 43,402
Marathon Oil Corp. 29,600 1,378
Occidental Petroleum Corp. 59,200 4,085
------------
88,969
------------
Materials and Processing - 4.0%
American Standard Cos., Inc. 45,900 2,052
Archer-Daniels-Midland Co. 446,898 8,040
Ashland, Inc. 29,300 1,970
Bemis Co. 13,100 361
Brady Corp. Class A 6,100 181
Commercial Metals Co. 16,000 408
Dow Chemical Co. (The) 142,800 6,559
Ecolab, Inc. 33,900 1,109
EI Du Pont de Nemours & Co. 5,000 236
Energizer Holdings, Inc. (AE) 19,100 1,088
Georgia-Pacific Corp. 97,400 3,338
Granite Construction, Inc. 12,900 291
Hughes Supply, Inc. (N) 8,600 224
Lafarge North America, Inc. 9,500 527
Lone Star Technologies, Inc. (AE)(N) 6,400 249
Masco Corp. 87,965 2,770
Monsanto Co. 65,100 3,816
Newmont Mining Corp. 7,700 292
Nucor Corp. 177,951 9,093
Phelps Dodge Corp. 54,900 4,713
Reliance Steel & Aluminum Co. (N) 8,700 328
Rohm & Haas Co. 17,800 777
Sherwin-Williams Co. (The) 39,100 1,743
Sigma-Aldrich Corp. 17,300 1,011
United States Steel Corp. 81,000 3,464
Worthington Industries, Inc. 33,600 546
------------
55,186
------------
Miscellaneous - 2.7%
3M Co. 3,900 298
Fortune Brands, Inc. 27,400 2,317
General Electric Co. 927,840 33,588
ITT Industries, Inc. 3,900 353
Tyco International, Ltd. 13,500 423
------------
36,979
------------
Other Energy - 2.3%
Anadarko Petroleum Corp. 50,000 3,652
Apache Corp. 19,300 1,086
Burlington Resources, Inc. 192,800 9,372
Devon Energy Corp. 55,800 2,520
EOG Resources, Inc. 27,200 1,293
Equitable Resources, Inc. 5,900 340
Grey Wolf, Inc. (AE)(N) 33,500 201
Houston Exploration Co. (AE) 12,800 652
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pride International, Inc. (AE) 14,300 319
Sunoco, Inc. 53,200 5,281
Todco Class A (AE) 10,000 223
Valero Energy Corp. 46,400 3,180
XTO Energy, Inc. 120,733 3,643
------------
31,762
------------
Producer Durables - 4.4%
Ametek, Inc. 34,900 1,322
Boeing Co. 102,700 6,113
Caterpillar, Inc. 32,900 2,897
Centex Corp. 29,200 1,685
Danaher Corp. 11,900 602
DR Horton, Inc. 307,031 9,364
Genlyte Group, Inc. (AE) 2,700 214
Hovnanian Enterprises, Inc. Class A (AE) 6,700 340
Joy Global, Inc. 26,000 881
Lennar Corp. Class A (N) 21,900 1,127
Lexmark International, Inc. Class A (AE) 13,500 938
Lockheed Martin Corp. 97,000 5,912
MDC Holdings, Inc. (N) 9,500 621
Northrop Grumman Corp. 306,600 16,814
Pitney Bowes, Inc. 26,900 1,203
Pulte Homes, Inc. 31,500 2,251
Standard-Pacific Corp. 7,100 508
Steelcase, Inc. Class A (N) 8,300 109
Tektronix, Inc. 11,400 247
Toll Brothers, Inc. (AE) 4,900 371
United Technologies Corp. 64,500 6,561
------------
60,080
------------
Technology - 13.3%
Acxiom Corp. 62,800 1,193
Adobe Systems, Inc. 83,600 4,972
Adtran, Inc. 21,100 437
Altera Corp. (AE) 49,900 1,034
Amphenol Corp. Class A 18,600 734
Apple Computer, Inc. (AE) 166,920 6,019
Applied Micro Circuits Corp. (AE) 132,100 353
Autodesk, Inc. 200,800 6,391
Ciena Corp. (AE)(N) 80,900 186
Cisco Systems, Inc. (AE) 587,900 10,159
Computer Sciences Corp. (AE) 104,800 4,557
</Table>
Equity Q Fund 27
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Cree, Inc. (AE) 78,300 1,894
Dell, Inc. (AE) 283,700 9,881
EMC Corp. (AE) 512,600 6,725
General Dynamics Corp. 47,600 5,000
Harris Corp. 73,600 2,076
Hewlett-Packard Co. 378,600 7,750
Ingram Micro, Inc. Class A (AE) 119,200 1,986
Intel Corp. 1,398,000 32,881
International Business Machines Corp. 58,784 4,490
Intuit, Inc. (AE) 29,700 1,197
Jabil Circuit, Inc. (AE) 78,200 2,158
L-3 Communications Holdings, Inc. 5,100 362
LSI Logic Corp. (AE)(N) 10,000 54
McAfee, Inc. (AE) 57,900 1,211
Micron Technology, Inc. (AE) 248,400 2,412
Micros Systems, Inc. (AE)(N) 8,800 349
Microsoft Corp. 1,344,652 34,020
Motorola, Inc. 312,700 4,797
National Semiconductor Corp. 36,700 700
NCR Corp. (AE) 73,100 2,412
Nvidia Corp. (AE) 24,100 529
Oracle Corp. (AE) 921,600 10,654
Parametric Technology Corp. (AE) 51,300 273
Qualcomm, Inc. (AE) 28,400 991
Raytheon Co. 98,300 3,697
Rockwell Automation, Inc. 60,700 2,806
Storage Technology Corp. (AE) 12,400 345
Symantec Corp. (AE) 160,100 3,007
Texas Instruments, Inc. 47,600 1,188
Western Digital Corp. (AE) 72,100 915
------------
182,795
------------
Utilities - 5.4%
AES Corp. (The) (AE) 52,200 839
Alltel Corp. 69,800 3,976
AT&T Corp. 67,800 1,297
BellSouth Corp. 136,700 3,621
CenturyTel, Inc. 112,600 3,456
Citizens Communications Co. (N) 48,000 612
Comcast Corp. Class A (AE) 156,700 5,032
Comcast Corp. Special Class A (AE) 25,200 800
Consolidated Edison, Inc. (N) 24,200 1,047
Constellation Energy Group, Inc. (N) 58,300 3,064
Duke Energy Corp. 80,600 2,353
Edison International (N) 195,100 7,082
Exelon Corp. 19,200 950
FirstEnergy Corp. 23,900 1,040
FPL Group, Inc. 18,700 763
National Fuel Gas Co. (N) 16,700 455
Nextel Partners, Inc. Class A (AE) 77,900 1,832
Oneok, Inc. (N) 40,700 1,175
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pepco Holdings, Inc. 18,900 410
PG&E Corp. 111,200 3,861
Pinnacle West Capital Corp. 6,400 268
SBC Communications, Inc. 243,100 5,786
Sempra Energy 31,900 1,288
Sierra Pacific Resources (AE) 71,500 774
Southern Co. (The) 16,400 540
Sprint Corp. 86,300 1,921
TXU Corp. 42,100 3,612
Verizon Communications, Inc. 427,800 15,315
Xcel Energy, Inc. (N) 31,600 543
------------
73,712
------------
TOTAL COMMON STOCKS
(cost $1,187,671) 1,321,013
------------
WARRANTS & RIGHTS - 0.0%
Lucent Technologies, Inc.
2007 Warrants (AE) 5,094 2
------------
TOTAL WARRANTS & RIGHTS
(cost $0) 2
------------
SHORT-TERM INVESTMENTS - 3.9%
Frank Russell Investment Company
Money Market Fund 48,112,900 48,113
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 5,000 4,985
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $53,098) 53,098
------------
</Table>
28 Equity Q Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 2.2%
Frank Russell Investment Company
Money Market Fund (X) 7,374,036 7,374
State Street Securities Lending Quality Trust
Fund (X) 23,233,218 23,233
------------
TOTAL OTHER SECURITIES
(cost $30,607) 30,607
------------
TOTAL INVESTMENTS - 102.3%
(identified cost $1,271,376) 1,404,720
OTHER ASSETS AND LIABILITIES,
NET - (2.3%) (31,501)
------------
NET ASSETS - 100.0% 1,373,219
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/05 (20) 6,243 (286)
Russell 1000 Index (CME)
expiration date 06/05 (18) 1,124 (65)
S&P 500 E-Mini Index
expiration date 06/05 (82) 4,750 (93)
S&P 500 Index
expiration date 06/05 (77) 22,301 (236)
S&P Midcap 400 Index
expiration date 06/05 (67) 21,247 (709)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (1,389)
===============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Auto and Transportation 3.1
Consumer Discretionary 13.2
Consumer Staples 5.6
Financial Services 21.2
Health Care 14.5
Integrated Oils 6.5
Materials and Processing 4.0
Miscellaneous 2.7
Other Energy 2.3
Producer Durables 4.4
Technology 13.3
Utilities 5.4
Warrants & Rights --*
Short-Term Investments 3.9
Other Securities 2.2
---------------
Total Investments 102.3
Other Assets and Liabilities, Net (2.3)
---------------
Net Assets 100.0
===============
Futures Contracts 0.1
</Table>
* Less than .05%.
See accompanying notes which are an integral part of the financial statements.
Equity Q Fund 29
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,072.50 $ 1,019.45
Expenses Paid During
Period* $ 5.76 $ 5.61
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.12%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,074.00 $ 1,020.74
Expenses Paid During
Period* $ 4.42 $ 4.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.86%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,074.30 $ 1,020.83
Expenses Paid During
Period* $ 4.32 $ 4.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.84%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
30 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 90.2%
Australia - 3.8%
ABC Learning Centres, Ltd. 2,500 11
Amcor, Ltd. 837,165 4,264
AMP Ltd. 185,100 979
Aristocrat Leisure, Ltd. 3,200 24
Australia & New Zealand Banking Group, Ltd. 125,084 2,116
Australian Gas Light Co., Ltd. 23,200 261
AXA Asia Pacific Holdings, Ltd. 53,800 181
BHP Billiton, Ltd. (N) 418,562 5,288
Billabong International, Ltd. (N) 37,540 338
BlueScope Steel, Ltd. 167,500 1,004
Brambles Industries, Ltd. (N) 58,000 357
CFS Gandel Retail Trust 118,400 147
Coca-Cola Amatil, Ltd. 12,000 78
Coles Myer, Ltd. (N) 373,829 2,512
Commonwealth Bank of Australia 27,100 772
Commonwealth Property Office Fund 81,900 81
ConnectEast Group 196,100 103
CSL, Ltd. 29,064 722
CSR, Ltd. 89,100 167
David Jones, Ltd. (N) 88,000 121
DB RREEF Trust (o) 47,660 49
Downer EDI, Ltd. 47,272 167
Foster's Group, Ltd. 1,404,037 5,638
Futuris Corp., Ltd. (N) 43,900 65
General Property Trust 114,800 333
Harvey Norman Holdings, Ltd. (N) 173,200 336
Iluka Resources, Ltd. 4,100 19
ING Industrial Fund (N) 20,400 33
Insurance Australia Group, Ltd. 47,400 226
Lend Lease Corp., Ltd. 15,600 146
Lion Nathan, Ltd. (N) 19,200 110
Macquarie Airports 881,200 2,318
Macquarie Bank, Ltd. 93,790 3,373
Macquarie Infrastructure Group 367,300 1,047
Mayne Group, Ltd. 6,600 18
National Australia Bank, Ltd. 376,263 8,593
OneSteel, Ltd. 93,700 161
Orica, Ltd. 29,100 359
Origin Energy, Ltd. 5,900 32
PaperlinX, Ltd. (N) 99,610 221
Promina Group, Ltd. (N) 391,229 1,569
Publishing & Broadcasting, Ltd. 77,730 870
Qantas Airways, Ltd. 43,200 109
QBE Insurance Group, Ltd. (N) 285,439 3,342
Rinker Group, Ltd. 258,260 2,307
Rio Tinto, Ltd. (N) 15,300 497
Santos, Ltd. 28,500 206
Seek, Ltd. (AE)(N) 13,000 24
Sons of Gwalia, Ltd. (AE)(N)(B) 22,400 --
Stockland 32,300 148
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Suncorp-Metway, Ltd. (N) 11,700 181
TABCORP Holdings, Ltd. 12,300 150
Telstra Corp., Ltd. (N) 731,163 2,768
Transurban Group 49,700 288
United Group, Ltd. (N) 19,600 127
Wesfarmers, Ltd. (N) 13,674 386
Westfield Group (N) 145,396 1,853
Westpac Banking Corp. 64,800 987
WMC Resources, Ltd. 85,800 532
Woodside Petroleum, Ltd. 22,200 408
Woolworths, Ltd. 11,743 141
------------
59,663
------------
Austria - 0.7%
Bank Austria Creditanstalt AG (N) 16,100 1,485
BetandWin.com Interactive Entertainment AG
(AE)(N) 7,090 1,041
Erste Bank der Oesterreichischen Sparkassen AG
(AE) 122,486 5,918
OMV AG 2,470 760
Raiffeisen International Bank Holding AG (AE) 9,700 499
Telekom Austria AG (AE) 105,500 2,028
------------
11,731
------------
Belgium - 1.5%
Belgacom SA 49,100 1,884
Colruyt SA 7,985 1,207
Compagnie Maritime Belge SA 1,400 53
Cumerio (AE) 1,000 13
Delhaize Group (N) 30,900 2,039
Dexia (N) 16,900 389
Electrabel (N) 8,843 4,110
Fortis (N) 241,834 6,712
KBC Group SA (N) 39,100 3,094
Mobistar SA (AE)(N) 23,300 1,985
Solvay SA Class A 14,800 1,684
Umicore 1,000 87
------------
23,257
------------
Brazil - 0.3%
Cia Vale do Rio Doce ADR 112,000 3,018
Petroleo Brasileiro SA ADR (N) 33,180 1,391
Telecomunicacoes Brasileiras SA ADR (N) 39,900 1,119
------------
5,528
------------
</Table>
International Fund 31
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Canada - 1.7%
Alcan, Inc. (N) 46,700 1,514
Bank of Nova Scotia (N) 63,039 2,003
Canadian National Railway Co. (AE) 72,100 4,130
Canadian Pacific Railway, Ltd. (AE) 45,500 1,589
EnCana Corp. (AE) 32,700 2,093
Inco, Ltd. (AE) 61,300 2,191
Manulife Financial Corp. (N) 40,600 1,861
Petro-Canada 79,600 4,419
Precision Drilling Corp. (AE) 33,600 2,424
Rogers Communications, Inc. Class B (AE)(N) 39,800 1,147
RONA, Inc. (AE) 23,700 455
SNC-Lavalin Group, Inc. (AE) 10,800 627
Talisman Energy, Inc. (AE)(N) 53,800 1,623
------------
26,076
------------
Cayman Islands - 0.1%
Seagate Technology (AE) 90,800 1,596
------------
China - 0.0%
China Shipping Development Co., Ltd. Class H 958,000 848
------------
Denmark - 0.5%
AP Moller - Maersk A/S Class B (N) 109 963
Danske Bank A/S Class R 119,225 3,493
East Asiatic Co., Ltd. A/S (N) 1,500 89
FLS Industries A/S Class B (N) 800 14
Novo-Nordisk A/S Class B 58,172 2,934
Novozymes A/S (N) 500 24
TDC A/S 3,200 137
Topdanmark A/S (AE)(N) 1,050 75
------------
7,729
------------
Finland - 1.0%
Elisa Corp. Class S (N) 8,000 114
Fortum OYJ (N) 101,671 1,539
Kesko OYJ Class B 2,000 48
M-real OYJ Class S (N) 301,100 1,632
Neste Oil OYJ (AE)(N) 25,417 568
Nokia OYJ (N) 170,600 2,726
Nokia OYJ ADR 293,963 4,698
Orion OYJ Class B (N) 4,600 78
Pohjola Group PLC 9,400 121
Sampo OYJ (N) 87,600 1,222
UPM-Kymmene OYJ (N) 160,261 3,205
Wartsila OYJ Class S (AE) 4,200 111
------------
16,062
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
France - 9.1%
Air Liquide SA 26,666 4,759
Areva SA (AE) 300 119
Assurances Generales de France (N) 46,400 3,712
Axa SA (N) 323,377 7,972
BNP Paribas (N) 121,818 8,027
Bouygues (N) 24,500 977
Business Objects SA (AE) 57,612 1,493
Cap Gemini SA (AE) 7,200 224
Carrefour SA (N) 74,340 3,613
Christian Dior SA (N) 12,700 886
Cie de Saint-Gobain (N) 84,316 4,758
Cie Generale d'Optique Essilor International SA
(N) 21,600 1,543
CNP Assurances (N) 22,015 1,494
Compagnie Generale des Etablissements Michelin
Class B (N) 15,803 957
Credit Agricole SA (N) 236,504 6,123
Dassault Systemes SA (AE) 27,300 1,282
Eiffage (N) 1,700 199
France Telecom SA (N) 163,025 4,772
Groupe Danone (AE)(N) 77,084 7,224
Lafarge SA (N) 1,371 125
Lagardere SCA (N) 10,600 767
LVMH Moet Hennessy Louis Vuitton SA 23,874 1,687
Pernod-Ricard (N) 15,100 2,288
Peugeot SA (N) 21,000 1,244
Renault SA (N) 25,400 2,127
Sanofi-Aventis Class S 2,746 242
Sanofi-Aventis (N) 104,386 9,243
Schneider Electric SA (N) 75,866 5,462
Societe BIC SA (N) 2,800 151
Societe Generale (N) 91,539 9,126
Societe Television Francaise 1 26,718 756
Technip SA (N) 8,200 1,390
Thomson (N) 62,800 1,549
Total SA (N) 111,183 24,675
Total SA ADR (N) 21,926 2,432
Unibail 11,055 1,364
Valeo SA (N) 53,206 2,324
Vallourec (AE) 300 63
Veolia Environnement (AE)(N) 153,582 5,790
Vinci SA (N) 31,450 4,725
Vivendi Universal SA (AE)(N) 188,051 5,587
Zodiac SA (N) 2,100 102
------------
143,353
------------
</Table>
32 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Germany - 5.1%
Adidas-Salomon AG (N) 19,000 2,945
Allianz AG (N) 42,550 5,094
Altana AG (N) 4,000 250
AMB Generali Holding AG (N) 2,000 164
BASF AG (N) 29,200 1,890
Bayer AG (N) 116,626 3,827
Bayerische Hypo-und Vereinsbank AG (AE) 264,105 6,252
Celanese AG 1,200 74
Celesio AG (N) 9,200 729
Commerzbank AG (AE)(N) 14,700 323
Continental AG (N) 68,100 5,017
DaimlerChrysler AG (N) 14,000 550
Deutsche Bank AG 22,451 1,834
Deutsche Boerse AG (N) 28,137 2,128
Deutsche Lufthansa AG (AE)(N) 101,792 1,314
Deutsche Post AG 100,890 2,362
Deutsche Postbank AG (AE)(N) 31,039 1,448
Deutsche Telekom AG (N) 129,900 2,428
E.ON AG (N) 112,292 9,465
Fresenius Medical Care AG (N) 6,600 530
Hannover Rueckversicherung AG (N) 32,400 1,208
HeidelbergCement AG 29,943 1,734
HeidelbergCement AG (AE) 2,303 131
Heidelberger Druckmaschinen (AE)(N) 32,300 911
Infineon Technologies AG (AE)(N) 149,740 1,249
KarstadtQuelle AG (N) 155,059 1,497
Lanxess (AE) 950 20
MAN AG (N) 58,700 2,470
Medion AG (N) 24,750 375
Merck KGaA (N) 46,300 3,545
Metro AG (N) 10,200 539
MLP AG (AE)(N) 2,400 39
Muenchener Rueckversicherungs-Gesellschaft AG
(N) 19,273 2,115
Premiere AG (AE) 3,928 151
Puma AG Rudolf Dassler Sport 1,292 297
RWE AG (N) 118,320 7,073
SAP AG 7,900 1,243
Schering AG 32,867 2,170
Siemens AG 9,050 663
ThyssenKrupp AG (N) 11,600 213
TUI AG (N) 36,100 871
Volkswagen AG (N) 71,788 2,989
------------
80,127
------------
Greece - 0.6%
Alpha Bank AE 23,300 752
EFG Eurobank Ergasias SA 125,600 3,786
National Bank of Greece SA (AE) 37,500 1,256
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OPAP SA 106,760 2,794
Public Power Corp. 18,500 497
------------
9,085
------------
Hong Kong - 2.1%
Bank of East Asia, Ltd. 563,334 1,655
BOC Hong Kong Holdings, Ltd. (N) 71,500 136
Cathay Pacific Airways, Ltd. 31,000 59
Cheung Kong Holdings, Ltd. 50,200 475
China Mobile Hong Kong, Ltd. 478,800 1,672
Citic Pacific, Ltd. 82,700 250
CLP Holdings, Ltd. 46,500 265
CNOOC, Ltd. 6,239,000 3,360
COSCO Pacific, Ltd. 490,000 1,066
Esprit Holdings, Ltd. 1,029,000 7,703
Hang Seng Bank, Ltd. 7,200 99
Henderson Land Development Co., Ltd. 9,000 42
Hong Kong & China Gas 6,000 12
HongKong Electric Holdings 560,500 2,565
Hopewell Holdings 58,000 142
Hutchison Telecommunications International, Ltd.
(AE) 605,000 575
Hutchison Whampoa, Ltd. (N) 117,000 1,049
Jardine Matheson Holdings, Ltd. 129,300 2,334
Kerry Properties, Ltd. (N) 62,000 136
Li & Fung, Ltd. 390,000 749
Melco International Development (AE) 360,000 932
MTR Corp. (N) 26,500 42
New World Development, Ltd. 979,000 1,061
Orient Overseas International, Ltd. (N) 31,900 154
PCCW, Ltd. (N) 386,000 229
Shangri-La Asia, Ltd. (N) 12,000 18
Sino Land Co. (N) 1,106,000 1,049
Sun Hung Kai Properties, Ltd. 54,000 519
Swire Pacific, Ltd. 109,900 923
Techtronic Industries Co. (N) 219,500 492
Television Broadcasts, Ltd. 10,000 50
Wharf Holdings, Ltd. 850,537 2,847
------------
32,660
------------
Hungary - 0.4%
Mol Magyar Olaj- es Gazipari Rt. (AE) 9,300 764
OTP Bank Rt GDR 35,365 2,209
OTP Bank Rt 90,800 2,792
------------
5,765
------------
</Table>
International Fund 33
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Indonesia - 0.1%
Bank Central Asia Tbk PT 1,645,500 529
Telekomunikasi Indonesia Tbk PT 1,940,500 868
Telekomunikasi Indonesia Tbk PT ADR 5,423 98
------------
1,495
------------
Ireland - 0.9%
Allied Irish Banks PLC 80,300 1,634
Anglo Irish Bank Corp. PLC 141,000 1,621
Bank of Ireland PLC 234,184 3,528
CRH PLC 112,639 2,804
Depfa Bank PLC (AE) 220,595 3,401
Ryanair Holdings PLC ADR (AE) 20,413 820
------------
13,808
------------
Israel - 0.1%
Bank Leumi Le-Israel BM 318,100 899
Check Point Software Technologies (AE) 3,400 70
------------
969
------------
Italy - 3.1%
Arnoldo Mondadori Editore SpA (N) 24,600 256
Autostrade SpA (N) 50,436 1,332
Banca Intesa SpA (N) 1,767,216 8,455
Banca Popolare di Milano SCRL (N) 15,700 149
Banche Popolari Unite SCRL (AE)(N) 45,081 955
Banco Popolare di Verona e Novara SCRL (N) 79,778 1,471
Benetton Group SpA (N) 121,270 1,117
CIR-Compagnie Industriali Riunite SpA (N) 33,600 88
Enel SpA (N) 68,700 652
ENI SpA (N) 625,574 15,711
ERG SpA 8,600 132
FASTWEB (AE) 24,625 1,104
Finmeccanica SpA (N) 1,826,402 1,697
Fondiaria-Sai SpA (N) 31,200 802
Gruppo Editoriale L'Espresso SpA (N) 6,500 38
Hera SpA (N) 58,000 163
Italcementi SpA (N) 41,500 676
Lottomatica SpA (N) 16,700 567
Mediaset SpA (N) 43,800 570
Milano Assicurazioni SpA (N) 62,500 383
Parmalat Finanziaria SpA (AE)(N) 46,200 7
Riunione Adriatica di Sicurta SpA (N) 152,239 3,317
Saipem SpA 132,600 1,657
Snam Rete Gas SpA 220,200 1,239
Telecom Italia Media SpA (AE)(N) 319,300 155
Telecom Italia SpA (N) 802,671 2,405
UniCredito Italiano SpA (N) 564,250 3,166
------------
48,264
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Japan - 18.3%
77 Bank, Ltd. (The) 266,100 1,808
Acom Co., Ltd. 1,900 122
Aeon Co., Ltd. 138,000 2,145
Aiful Corp. (AE) 19,500 1,423
Aiful Corp. (N) 37,300 2,788
Aioi Insurance Co., Ltd. 34,000 176
Aisin Seiki Co., Ltd. 35,600 775
All Nippon Airways Co., Ltd. 24,000 78
Alps Electric Co., Ltd. (N) 82,700 1,299
Amano Corp. 3,000 33
Aoyama Trading Co., Ltd. 1,400 37
Arrk Corp. 11,700 457
Aruze Corp. 7,700 172
Asahi Breweries, Ltd. (AE) 11,600 148
Asahi Glass Co., Ltd. 381,000 4,226
Asahi Kasei Corp. (N) 39,000 189
Astellas Pharma, Inc. 31,749 1,154
Autobacs Seven Co., Ltd. (N) 2,400 78
Bandai Visual Co., Ltd. 24 82
Bank of Yokohama, Ltd. (The) 180,000 1,030
Benesse Corp. 200 6
Bridgestone Corp. 186,000 3,574
BSL Corp. (N) 77,000 185
Canon, Inc. 313,590 16,356
Central Glass Co., Ltd. (N) 3,000 21
Chiba Bank, Ltd. (The) 42,000 259
Chiyoda Corp. (N) 110,000 1,238
Chubu Electric Power Co., Inc. (N) 23,200 556
Chugai Pharmaceutical Co., Ltd. 74,900 1,170
Circle K Sunkus Co., Ltd. 9,100 220
Citizen Watch Co., Ltd. (N) 25,700 235
Cosmo Oil Co., Ltd. 47,000 156
Credit Saison Co., Ltd. (N) 68,600 2,349
CSK Corp. (N) 400 15
Dai Nippon Printing Co., Ltd. 6,000 96
Daicel Chemical Industries, Ltd. 3,000 16
Daihatsu Motor Co., Ltd. 13,000 104
Daiichi Pharmaceutical Co., Ltd. 2,900 67
Daikin Industries, Ltd. 24,500 612
Daimaru, Inc. 28,000 245
Dainippon Ink and Chemicals, Inc. 9,000 24
Dainippon Pharmaceutical Co., Ltd. 4,000 39
Dainippon Screen Manufacturing Co., Ltd. (N) 71,000 482
Daito Trust Construction Co., Ltd. 90 4
</Table>
34 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Daiwa House Industry Co., Ltd. 80,000 899
Daiwa Securities Group, Inc. (N) 121,000 767
Denki Kagaku Kogyo Kabushiki Kaisha 5,000 17
Denso Corp. 2,800 66
Dentsu, Inc. (N) 488 1,248
Don Quijote Co., Ltd. (N) 8,300 507
East Japan Railway Co. 542 2,824
Eisai Co., Ltd. 121,200 4,039
Fanuc, Ltd. 200 12
Fast Retailing Co., Ltd. 12,400 735
Frontier Real Estate Investment Corp. (o) 18 118
Fuji Electric Holdings Co., Ltd. 25,000 75
Fuji Heavy Industries, Ltd. 363,900 1,670
Fuji Photo Film Co., Ltd. 62,800 2,081
Fujitsu, Ltd. 177,000 977
Funai Electric Co., Ltd. (N) 13,850 1,559
Hachijuni Bank, Ltd. (The) 5,000 34
Hankyu Department Stores (N) 7,000 50
HIS Co., Ltd. 15,100 347
Hitachi Cable, Ltd. 6,000 26
Hitachi Chemical Co., Ltd. 6,700 115
Hitachi Kokusai Electric, Inc. 35,000 279
Hitachi, Ltd. 610,000 3,586
Hokkaido Electric Power Co., Inc. 4,000 80
Hokuhoku Financial Group, Inc. (N) 221,000 627
Honda Motor Co., Ltd. 95,000 4,578
Hoya Corp. 11,600 1,214
Isuzu Motors, Ltd. (N) 56,000 144
Itochu Corp. 530,000 2,622
Ito-Yokado Co., Ltd. 13,700 470
Japan Logistics Fund, Inc. (AE)(o) 2 10
Japan Radio Co., Ltd. (AE)(N) 35,000 136
Japan Tobacco, Inc. 661 8,514
JFE Holdings, Inc. (N) 66,100 1,834
Joyo Bank, Ltd. (The) 9,000 45
JS Group Corp. 62,000 1,116
JSR Corp. 14,100 285
Kadokawa Holdings, Inc. (N) 17,300 643
Kaken Pharmaceutical Co., Ltd. (N) 6,000 43
Kamigumi Co., Ltd. 51,000 399
Kaneka Corp. 86,000 937
Kansai Electric Power Co., Inc. (The) (N) 28,900 582
Kao Corp. 100,700 2,316
Kawasaki Heavy Industries, Ltd. (N) 82,000 159
Kawasaki Kisen Kaisha, Ltd. (N) 162,000 1,058
KDDI Corp. 997 4,614
Keihin Corp. 3,300 55
Keio Electric Railway Co., Ltd. 44,000 249
Keyence Corp. 9,100 2,015
Kirin Brewery Co., Ltd. 13,000 127
Kobe Steel, Ltd. 567,000 1,026
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Koei Co., Ltd. 12,200 323
Komatsu, Ltd. 126,000 890
Konica Minolta Holdings, Inc. 44,000 425
Koyo Seiko Co., Ltd. (N) 3,000 41
Kubota Corp. 53,000 274
Kuraray Co., Ltd. 124,600 1,154
Kyocera Corp. 3,900 285
Kyowa Hakko Kogyo Co., Ltd. 33,000 245
Kyushu Electric Power Co., Inc. 10,800 232
Lawson, Inc. 26,800 1,041
Leopalace21 Corp. 11,300 173
Livedoor Co., Ltd. (AE)(N) 104,869 321
Mabuchi Motor Co., Ltd. (N) 31,200 1,875
Makita Corp. (N) 10,000 189
Mars Engineering Corp. 7,200 234
Marubeni Corp. 97,000 317
Matsui Securities Co., Ltd. (AE) 56,400 761
Matsumotokiyoshi Co., Ltd. 32,000 905
Matsushita Electric Industrial Co., Ltd. (N) 297,000 4,353
Matsushita Electric Works, Ltd. (AE) 13,000 110
Meiji Dairies Corp. (N) 12,000 67
Meitec Corp. (N) 9,000 298
Millea Holdings, Inc. 163 2,222
Minebea Co., Ltd. (N) 380,000 1,513
Mitsubishi Chemical Corp. (N) 97,000 308
Mitsubishi Corp. (N) 23,900 327
Mitsubishi Electric Corp. (N) 73,000 387
Mitsubishi Estate Co., Ltd. 14,000 150
Mitsubishi Gas Chemical Co., Inc. 23,000 113
Mitsubishi Heavy Industries, Ltd. 69,000 184
Mitsubishi Rayon Co., Ltd. (N) 152,000 574
Mitsubishi Securities Co., Ltd. (N) 55,000 459
Mitsubishi Tokyo Financial Group, Inc. (N) 648 5,630
Mitsui & Co., Ltd. (N) 134,000 1,275
Mitsui Engineering & Shipbuilding Co., Ltd. (N) 34,000 74
Mitsui Fudosan Co., Ltd. (N) 86,000 960
Mitsui OSK Lines, Ltd. 191,000 1,208
Mitsui Sumitomo Insurance Co., Ltd. 29,000 264
Mitsui Trust Holdings, Inc. (N) 26,000 258
Mizuho Financial Group, Inc. 595 2,800
Murata Manufacturing Co., Ltd. 51,100 2,544
Namco, Ltd. (N) 900 12
NEC Corp. (N) 67,000 370
NET One Systems Co., Ltd. (N) 179 454
</Table>
International Fund 35
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Nichirei Corp. 3,000 11
Nidec Copal Corp. (N) 7,500 98
Nidec Corp. (N) 6,900 810
Nikko Cordial Corp. 52,000 243
Nintendo Co., Ltd. 28,900 3,299
Nippon Electric Glass Co., Ltd. (N) 250,000 3,995
Nippon Express Co., Ltd. 630,800 3,065
Nippon Kayaku Co., Ltd. 5,000 28
Nippon Light Metal Co., Ltd. (N) 56,000 143
Nippon Meat Packers, Inc. 95,000 1,201
Nippon Mining Holdings, Inc. 231,000 1,394
Nippon Oil Corp. 136,000 957
Nippon Shokubai Co., Ltd. 5,000 45
Nippon Steel Corp. (N) 675,000 1,712
Nippon Telegraph & Telephone Corp. 616 2,580
Nippon Yusen Kabushiki Kaisha 294,000 1,741
Nishi-Nippon City Bank, Ltd. (The) 141,000 559
Nissan Motor Co., Ltd. (N) 279,400 2,760
Nissen Co., Ltd. 7,000 93
Nissha Printing Co., Ltd. 10,000 164
Nisshin Seifun Group, Inc. 1,000 10
Nisshin Steel Co., Ltd. 94,000 242
Nisshinbo Industries, Inc. 7,000 55
Nitto Denko Corp. 72,800 3,978
NOK Corp. (N) 10,800 283
Nomura Holdings, Inc. 39,000 496
NS Solutions Corp. 7,400 152
NSK, Ltd. 18,000 89
NTT DoCoMo, Inc. 148 229
NTT Urban Development Corp. 65 293
Obayashi Corp. 17,000 100
OJI Paper Co., Ltd. (N) 89,000 475
Olympus Corp. (N) 10,000 203
Onward Kashiyama Co., Ltd. 2,000 26
ORIX Corp. 58,600 7,991
Parco Co., Ltd. 38,000 256
Promise Co., Ltd. 29,400 1,906
Rengo Co., Ltd. (N) 8,000 40
Renown D'urban Holdings, Inc. (AE) 11,200 105
Resona Holdings, Inc. (AE) 71,000 134
Ricoh Co., Ltd. (N) 60,000 959
Rinnai Corp. 72,770 1,864
Rohm Co., Ltd. 22,300 2,105
Sanken Electric Co., Ltd. (N) 36,000 488
Sankyo Co., Ltd. 17,700 481
Sanyo Electric Co., Ltd. (N) 81,000 234
Sanyo Shinpan Finance Co., Ltd. 11,500 779
Secom Co., Ltd. 500 20
Sega Sammy Holdings, Inc. 49,500 2,893
Sekisui Chemical Co., Ltd. 228,000 1,654
Sekisui House, Ltd. 284,300 3,010
Senshukai Co., Ltd. (N) 7,000 63
SFCG Co., Ltd. (N) 2,930 754
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Shimachu Co., Ltd. 4,800 124
Shin-Etsu Chemical Co., Ltd. Class D 60,600 2,242
Shinko Electric Industries Co., Ltd. (N) 3,200 110
Shinsei Bank, Ltd. 385,000 2,091
Shizuoka Bank, Ltd. (The) (N) 40,000 373
Showa Denko KK (N) 56,000 142
Showa Shell Sekiyu KK (N) 20,300 204
Skylark Co., Ltd. (N) 102,100 1,698
SMC Corp. 4,700 496
Softbank Corp. (N) 22,300 898
Sohgo Security Services Co., Ltd. 60,388 874
Sompo Japan Insurance, Inc. 31,000 301
Sony Corp. 33,200 1,225
Stanley Electric Co., Ltd. (N) 37,700 613
STB Leasing Co., Ltd. (N) 11,700 208
Sumisho Lease Co., Ltd. 19,600 711
Sumitomo Bakelite Co., Ltd. (N) 242,800 1,516
Sumitomo Chemical Co., Ltd. 306,000 1,567
Sumitomo Corp. 68,000 576
Sumitomo Electric Industries, Ltd. 65,000 680
Sumitomo Forestry Co., Ltd. 54,000 492
Sumitomo Heavy Industries, Ltd. (N) 360,000 1,464
Sumitomo Metal Industries, Ltd. 607,000 1,077
Sumitomo Mitsui Financial Group, Inc. (N) 1,264 8,173
Sumitomo Osaka Cement Co., Ltd. 158,000 401
Sumitomo Rubber Industries, Inc. 38,000 371
Sumitomo Trust & Banking Co., Ltd. (The) 31,000 194
Suzuki Motor Corp. 67,500 1,153
T&D Holdings, Inc. 28,950 1,432
Taiheiyo Cement Corp. 52,000 146
Taiyo Nippon Sanso Corp. 3,000 17
Takashimaya Co., Ltd. 1,000 9
Takeda Pharmaceutical Co., Ltd. 197,100 9,606
Takefuji Corp. 41,980 2,658
Takuma Co., Ltd. 3,000 24
Tanabe Seiyaku Co., Ltd. 3,000 32
TDK Corp. 14,000 981
Teijin, Ltd. (N) 57,000 258
Telewave, Inc. (AE) 66 290
Terumo Corp. 103,200 3,073
Tobu Railway Co., Ltd. 28,000 105
Toda Corp. 12,000 59
Tohoku Electric Power Co., Inc. 6,700 129
Tokai Rika Co., Ltd. 8,100 132
Tokyo Electric Power Co., Inc. (The) 100,800 2,420
</Table>
36 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Tokyo Gas Co., Ltd. (N) 931,000 3,733
Tokyo Tomin Bank, Ltd. (The) 9,700 280
Toppan Printing Co., Ltd. (N) 14,000 153
Toray Industries, Inc. 367,000 1,639
Toshiba Corp. (N) 113,000 463
Tosoh Corp. (N) 17,000 80
Toyo Seikan Kaisha, Ltd. (N) 13,000 240
Toyobo Co., Ltd. 45,000 106
Toyoda Gosei Co., Ltd. (N) 80,400 1,469
Toyota Motor Corp. 483,700 17,614
Toyota Tsusho Corp. 2,000 33
Trend Micro, Inc. 27,500 1,011
UFJ Holdings, Inc. 324 1,707
Uniden Corp. (N) 26,000 524
UNY Co., Ltd. 19,000 221
USS Co., Ltd. 5,230 414
West Japan Railway Co. 403 1,496
World Co., Ltd. 3,000 100
Xebio Co., Ltd. 5,900 178
Yahoo Japan Corp. (AE) 140 314
Yamada Denki Co., Ltd. (N) 42,400 2,040
Yamaha Motor Co., Ltd. 131,200 2,305
Yamato Transport Co., Ltd. 159,000 2,105
Yokogawa Electric Corp. (N) 26,700 349
Yokohama Rubber Co., Ltd. (The) 4,000 16
York-Benimaru Co., Ltd. Class D 11,000 316
------------
288,293
------------
Luxembourg - 0.2%
Arcelor (N) 129,099 2,613
SES Global 77,974 1,067
------------
3,680
------------
Mexico - 0.7%
America Movil SA de CV ADR Class L 31,400 1,559
Coca-Cola Femsa SA de CV ADR (N) 57,200 1,306
Grupo Televisa SA ADR (AE) 112,400 6,315
Telefonos de Mexico SA de CV ADR 42,800 1,451
Wal-Mart de Mexico SA de CV 277,200 1,028
------------
11,659
------------
Netherlands - 4.5%
ABN AMRO Holding NV (N) 150,094 3,674
Aegon NV (N) 156,042 1,958
Akzo Nobel NV (N) 5,100 209
ASML Holding NV Class G (AE) 102,700 1,488
Buhrmann NV (N) 75,300 671
CSM Class A 4,500 132
DSM NV 14,100 947
European Aeronautic Defense and Space Co. (N) 183,300 5,218
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Heineken Holding NV Class A 1,700 49
Heineken NV (N) 71,502 2,272
ING Groep NV (N) 537,246 14,730
Koninklijke Ahold NV (AE) 523,500 3,973
Koninklijke Philips Electronics NV 229,678 5,721
OCE NV (N) 15,500 231
Randstad Holdings NV (AE) 34,300 1,397
Reed Elsevier NV (N) 369,255 5,315
Rodamco Europe NV (N) 11,000 831
Royal Dutch Petroleum Co. (N) 199,858 11,656
Royal KPN NV 48,100 401
Royal Numico NV (AE) 172,116 7,128
Royal P&O Nedlloyd NV (AE)(N) 4,900 239
TNT NV 4,400 120
Wolters Kluwer NV 128,927 2,295
------------
70,655
------------
New Zealand - 0.3%
Carter Holt Harvey, Ltd. 642,080 874
Sky City Entertainment Group, Ltd. 22,400 72
Telecom Corp. of New Zealand, Ltd. 851,612 3,778
------------
4,724
------------
Norway - 0.7%
Aker Kvaerner ASA (AE) 23,600 841
DNB NOR ASA (N) 501,163 4,781
Norsk Hydro ASA (N) 12,800 1,008
Petroleum Geo-Services ASA (AE) 20,000 1,205
Statoil ASA (N) 175,000 3,081
Yara International ASA (AE)(N) 13,300 177
------------
11,093
------------
Poland - 0.1%
Powszechna Kasa Oszczednosci Bank Polski SA (AE) 116,532 883
------------
Portugal - 0.1%
Energias de Portugal SA (N) 478,190 1,293
------------
Russia - 0.1%
OAO Gazprom ADR 700 24
Vimpel-Communications ADR (AE) 34,200 1,119
------------
1,143
------------
</Table>
International Fund 37
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Singapore - 1.2%
CapitaLand, Ltd. (N) 210,000 328
City Developments, Ltd. 64,000 270
ComfortDelgro Corp., Ltd. 34,000 36
DBS Group Holdings, Ltd. 471,340 4,123
Flextronics International, Ltd. (AE) 106,600 1,189
Fraser and Neave, Ltd. 15,000 142
Hyflux, Ltd. (AE) 35,000 73
Jardine Cycle & Carriage, Ltd. 21,000 157
Keppel Corp., Ltd. (N) 332,000 2,173
MobileOne, Ltd. 159,000 199
NatSteel, Ltd. (N) 49,400 67
Neptune Orient Lines, Ltd. 67,000 140
Oversea-Chinese Banking Corp. 214,000 1,757
Parkway Holdings, Ltd. 229,000 233
SembCorp Industries, Ltd. 7,000 8
Singapore Airlines, Ltd. 17,000 116
Singapore Telecommunications, Ltd. 3,252,940 5,093
United Overseas Bank, Ltd. (N) 215,100 1,883
United Overseas Land, Ltd. (N) 3,000 4
Venture Corp., Ltd. 27,000 230
------------
18,221
------------
South Africa - 0.1%
MTN Group, Ltd. 135,400 960
Nedcor, Ltd. 108,557 1,341
------------
2,301
------------
South Korea - 0.7%
Korea Electric Power Corp. ADR (N) 102,500 1,517
KT Corp. ADR 66,200 1,337
LG.Philips LCD Co., Ltd. (AE) 76,700 3,552
POSCO 2,600 471
Samsung Electronics Co., Ltd. 10,071 4,621
------------
11,498
------------
Spain - 3.9%
Acciona SA (N) 1,100 95
Acerinox SA (N) 14,400 215
ACS Actividades Cons y Serv 103,792 2,532
Altadis SA (N) 148,721 6,311
Amadeus Global Travel Distribution SA Class A 65,100 608
Antena 3 de Television SA 16,800 335
Banco Bilbao Vizcaya Argentaria SA 347,129 5,377
Banco de Sabadell SA (N) 104,710 2,616
Banco Popular Espanol SA (N) 41,500 2,586
Banco Santander Central Hispano SA (N) 318,446 3,718
Bankinter SA (N) 11,400 552
Cia de Distribucion Integral Logista SA 1,700 85
Corp Mapfre SA (N) 73,380 1,092
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ebro Puleva SA (N) 11,600 196
Endesa SA (N) 241,157 5,269
Fomento de Construcciones y Contratas SA (N) 5,800 313
Gestevision Telecinco SA (N) 31,200 714
Grupo Ferrovial SA (N) 14,600 832
Iberdrola SA (N) 232,348 6,059
Iberia Lineas Aereas de Espana (N) 88,700 274
Indra Sistemas SA 66,000 1,142
Repsol YPF SA (N) 137,800 3,502
Repsol YPF SA ADR (N) 93,883 2,374
Sociedad General de Aguas de Barcelona SA Class
A 2,400 49
Telefonica SA (N) 841,245 14,305
Union Fenosa SA (N) 24,400 732
------------
61,883
------------
Sweden - 2.5%
Atlas Copco AB Class A (N) 78,400 3,564
Billerud AB (N) 6,000 81
Electrolux AB (N) 89,520 1,809
Gambro AB Class A (N) 15,100 204
Hennes & Mauritz AB Class B (N) 214,256 7,394
Lundin Petroleum AB (AE) 22,600 169
Nordea Bank AB (N) 259,400 2,463
OMX AB (AE)(N) 9,800 114
Sandvik AB (N) 108,900 4,268
Securitas AB Class B (N) 106,041 1,703
Skandia Forsakrings AB (N) 403,508 1,897
Skandinaviska Enskilda Banken AB Class A (N) 22,000 388
Skanska AB Class B (N) 8,200 99
Svenska Cellulosa AB Class B (N) 91,170 3,174
Svenska Handelsbanken Class A (N) 83,550 1,879
Swedish Match AB (N) 7,500 89
Tele2 AB Class B (N) 5,850 185
Telefonaktiebolaget LM Ericsson Class B (N) 2,919,197 8,657
TeliaSonera AB (N) 27,500 144
Trelleborg AB Class B (N) 5,200 76
Volvo AB Class B (N) 33,500 1,359
Volvo AB Class A (N) 6,200 242
------------
39,958
------------
Switzerland - 5.9%
ABB, Ltd. (AE) 289,664 1,799
Adecco SA (N) 6,700 324
Ciba Specialty Chemicals AG (N) 41,780 2,616
</Table>
38 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Compagnie Financiere Richemont AG Class A 61,559 1,834
Credit Suisse Group (AE)(N) 208,740 8,787
Georg Fischer AG (AE) 816 238
Givaudan (N) 1,759 1,107
Holcim, Ltd. (N) 9,500 577
Kuehne & Nagel International AG (N) 3,024 619
Kuoni Reisen Holding (AE) 100 39
Lonza Group AG (N) 19,573 1,178
Micronas Semiconductor Holding AG (AE) 7,500 272
Nestle SA (N) 39,486 10,369
Novartis AG 213,955 10,412
PubliGroupe SA (N) 164 49
Rieter Holding AG (N) 923 259
Roche Holding AG (N) 152,966 18,506
Schindler Holding AG (N) 200 73
Straumann Holding AG 3,159 682
Sulzer AG (N) 2,169 880
Swatch Group AG (AE) 26,699 701
Swatch Group AG Class B (N) 1,800 230
Swiss Life Holding (AE)(N) 589 81
Swiss Reinsurance (N) 38,180 2,532
Swisscom AG (N) 2,316 799
Syngenta AG (AE) 27,047 2,798
Synthes, Inc. 26,798 3,039
UBS AG (N) 228,793 18,344
Valora Holding AG (N) 523 114
Xstrata PLC 123,660 2,128
Zurich Financial Services AG (AE) 8,702 1,470
------------
92,856
------------
Taiwan - 0.8%
AU Optronics Corp. ADR (AE) 291,200 4,723
Chi Mei Optoelectronics Corp. 2,441,000 4,184
Taiwan Semiconductor Manufacturing Co., Ltd. ADR 223,600 1,925
United Microelectronics Corp. ADR (AE)(N) 488,713 1,588
------------
12,420
------------
Thailand - 0.1%
Bangkok Bank PCL 353,400 962
Siam City Bank PCL (N) 732,400 438
------------
1,400
------------
Turkey - 0.1%
Turkcell Iletisim Hizmet AS 134,999 829
Turkiye Garanti Bankasi AS (AE) 250,600 893
------------
1,722
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United Kingdom - 18.6%
3i Group PLC 251,522 3,073
Alliance & Leicester PLC 16,400 259
Alliance Unichem PLC 29,400 448
Amvescap PLC 320,018 1,860
Anglo American PLC 114,923 2,561
Arriva PLC 34,500 334
Associated British Foods PLC 44,800 629
AstraZeneca PLC 223,717 9,805
Aviva PLC 594,230 6,707
AWG PLC 6,599 110
BAA PLC 138,400 1,533
BAE Systems PLC 976,637 4,769
Barclays PLC 652,468 6,720
Barratt Developments PLC 38,600 439
Berkeley Group Holdings PLC (AE) 3,500 52
BG Group PLC 1,104,272 8,536
BHP Billiton PLC 160,800 1,960
BOC Group PLC 252,387 4,677
Boots Group PLC 599,757 6,894
BP PLC 2,274,255 23,166
Bradford & Bingley PLC 41,900 244
Brambles Industries PLC 590,610 3,295
Britannic Group PLC 16,500 142
British Airways PLC (AE) 76,700 350
British American Tobacco PLC 93,300 1,746
British Land Co. PLC 122,000 1,910
British Sky Broadcasting PLC 91,040 942
BT Group PLC 1,100,957 4,207
Bunzl PLC 149,568 1,460
Cable & Wireless PLC 157,500 361
Cairn Energy PLC (AE) 2,000 44
Capita Group PLC (AE) 645,300 4,643
Carnival PLC 110,018 5,679
Centrica PLC 375,453 1,593
Colt Telecom Group PLC (AE)(N) 6,500 6
Compass Group PLC 26,600 119
Corus Group PLC (AE) 460,783 384
Diageo PLC 397,485 5,885
EMI Group PLC 104,900 477
Firstgroup PLC 8,300 51
FKI PLC 28,500 51
GKN PLC 849,148 3,743
GlaxoSmithKline PLC 893,100 22,480
GUS PLC 102,700 1,637
</Table>
International Fund 39
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
HBOS PLC 506,538 7,486
Hilton Group PLC 474,671 2,480
HMV Group PLC 125,100 542
HSBC Holdings PLC 561,408 8,976
Imperial Chemical Industries PLC 137,700 665
Imperial Tobacco Group PLC 184,200 5,270
Inchcape PLC 16,800 570
Intercontinental Hotels Group PLC 244,351 2,903
ITV PLC 316,921 734
J Sainsbury PLC 387,336 2,091
Kesa Electricals PLC 201,255 1,022
Kingfisher PLC 647,674 3,053
Land Securities Group PLC 6,000 153
Lloyds TSB Group PLC 848,213 7,284
Man Group PLC 1,700 40
Marconi Corp. PLC (AE) 13,500 67
Marks & Spencer Group PLC 268,200 1,731
Meggitt PLC 64,400 317
Mitchells & Butlers PLC 428,250 2,451
MyTravel Group PLC (AE) 8,300 1
Next PLC 65,863 1,866
Northern Foods PLC 165,000 485
O2 PLC (AE) 338,300 760
Old Mutual PLC 123,100 297
Pennon Group PLC 21,300 399
Persimmon PLC 84,200 1,090
Pilkington PLC 94,000 194
Prudential PLC 173,871 1,568
Punch Taverns PLC 209,220 2,530
Reckitt Benckiser PLC 246,408 8,000
Reed Elsevier PLC 17,100 167
Reuters Group PLC 294,100 2,166
Rexam PLC 123,836 1,089
Rio Tinto PLC 233,239 7,034
Rolls-Royce Group PLC 7,509,500 14
Rolls-Royce Group PLC Class B 150,190 682
Royal & Sun Alliance Insurance Group 961,327 1,391
Royal Bank of Scotland Group PLC 289,943 8,748
SABMiller PLC 10,900 162
Scottish & Newcastle PLC 15,900 138
Scottish & Southern Energy PLC 106,800 1,917
Scottish Power PLC 68,100 551
Shell Transport & Trading Co. PLC 1,233,238 11,044
Shire Pharmaceuticals PLC 46,600 484
Smith & Nephew PLC 145,284 1,496
Somerfield PLC 73,500 278
Sportingbet PLC (AE) 128,800 702
SSL International PLC 15,000 79
Stagecoach Group PLC 162,937 322
Standard Chartered PLC 107,308 1,935
Tate & Lyle PLC 218,700 1,943
Taylor Woodrow PLC 81,900 449
Tesco PLC 563,000 3,323
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Trinity Mirror PLC 74,900 913
Unilever PLC 621,642 5,917
United Business Media PLC 42,311 401
United Utilities PLC 28,500 246
United Utilities PLC (N) 21,300 259
Vodafone Group PLC 7,809,541 20,384
Whitbread PLC (N) 84,000 1,366
William Hill PLC 301,934 3,109
Wimpey George PLC 150,400 1,123
Yell Group PLC 232,234 1,782
------------
292,620
------------
United States - 0.2%
Logitech International SA (AE) 600 35
Transocean, Inc. (AE) 56,900 2,638
------------
2,673
------------
TOTAL COMMON STOCKS
(cost $1,202,499) 1,418,991
------------
<Caption>
NOTIONAL
AMOUNT
$
------------
- -----------------------------------------------------------------------------
OPTIONS PURCHASED - 0.1%
Belgium - 0.1%
Bel 20 Index Futures
May 2005 3,156.47 (EUR) Call (180) 7,311 1,158
------------
Switzerland - 0.0%
Swiss Market Index Jun 2005 5,925.17 (CHF) Put
(153) 7,584 733
------------
TOTAL OPTIONS PURCHASED
(cost $1,826) 1,891
------------
</Table>
40 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 0.3%
Brazil - 0.1%
Banco Itau Holding Financeira SA (AE) 5,600 979
------------
Germany - 0.2%
Fresenius AG 17,400 2,028
Fresenius Medical Care AG 4,000 230
Henkel KGaA (AE)(N) 17,600 1,519
Invesco Perpetual UK Smaller Companies
Investment Trust PLC (AE) 5,800 100
------------
3,877
------------
Italy - 0.0%
Unipol SpA 108,600 383
------------
TOTAL PREFERRED STOCKS
(cost $4,426) 5,239
------------
WARRANTS & RIGHTS - 0.1%
Hong Kong - 0.0%
Kingboard Chemical Holdings, Ltd.
2006 Warrants (AE) 1,800 2
------------
Japan - 0.0%
BSL Corp.
2010 Rights (AE) 7,600 2
------------
Luxembourg - 0.1%
Bharti Televentures
2009 Warrants (AE) 177,300 819
Satyam Computer Services, Ltd.
2007 Warrants (AE) 124,700 1,170
------------
TOTAL WARRANTS & RIGHTS
(cost $2,012) 1,993
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 8.1%
United States - 8.1%
Frank Russell Investment Company Money Market
Fund 114,911,001 114,911
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 8,000 7,978
2.710% due 07/14/05 5,000 4,966
------------
127,855
------------
Switzerland - 0.0%
Credit Suisse Group Finance Guernsey, Ltd.
6.000% due 12/23/05 61 71
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $127,904) 127,926
------------
OTHER SECURITES - 27.0%
Frank Russell Investment Company Money Market
Fund (X) 102,406,969 102,407
State Street Securities Lending Quality Trust
(X) 322,651,448 322,651
------------
TOTAL OTHER SECURITIES
(cost $425,058) 425,058
------------
TOTAL INVESTMENTS - 125.8%
(identified cost $1,763,725) 1,981,098
OTHER ASSETS AND LIABILITIES, NET - (25.8%) (407,209)
------------
NET ASSETS - 100.0% 1,573,889
============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
International Fund 41
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
AEX Index (Netherlands)
expiration date 05/05 (164) 14,702 (862)
CAC-40 Index (France)
expiration date 05/05 (238) 11,943 (617)
expiration date 06/05 (191) 9,465 (355)
DAX Index (Germany)
expiration date 06/05 (92) 12,494 (491)
EUR STOXX 50 Index (EMU)
expiration date 06/05 (755) 28,342 (897)
FTSE-100 Index (UK)
expiration date 06/05 (368) 33,709 (1,201)
Hang Seng Index (Hong Kong)
expiration date 05/05 (29) 2,554 (10)
IBEX Plus Index (Spain)
expiration date 05/05 (11) 1,270 (47)
SPI 200 Index (Australia)
expiration date 06/05 (86) 6,693 (412)
TOPIX Index (Japan)
expiration date 06/05 (248) 26,546 (1,480)
Short Positions
DAX Index (Germany)
expiration date 06/05 (2) 272 8
Hang Seng Index (Hong Kong)
expiration date 05/05 (18) 1,585 (5)
MIB-30 (Italy)
expiration date 06/05 (7) 1,380 31
SPI 200 Index (Australia)
expiration date 06/05 (39) 3,035 123
TOPIX Index (Japan)
expiration date 06/05 (75) 8,028 375
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (5,840)
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Belgium
Bel 20 Index Futures
May 2005 3,156.47 (EUR) Put (180) 7,311 (1,463)
Switzerland
Swiss Market Index Jun 2005 5,925.17 (CHF) Call
(153) 7,584 (640)
---------------
Total Liability for Options Written (premiums
received $1,822) (2,103)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
42 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 114 AUD 147 05/02/05 1
USD 51 AUD 66 05/03/05 --
USD 142 AUD 181 05/03/05 --
USD 11 AUD 14 05/04/05 --
USD 20 AUD 25 05/04/05 --
USD 24 AUD 31 05/04/05 --
USD 30 AUD 38 05/04/05 --
USD 771 AUD 990 05/20/05 1
USD 233 AUD 300 06/15/05 --
USD 235 AUD 300 06/15/05 (2)
USD 311 AUD 400 06/15/05 1
USD 316 AUD 400 06/15/05 (4)
USD 7,217 AUD 9,200 06/15/05 (57)
USD 11,865 AUD 15,078 06/15/05 (129)
USD 600 CHF 715 05/02/05 (2)
USD 63 CHF 75 05/03/05 --
USD 289 CHF 345 05/03/05 --
USD 1,028 CHF 1,226 05/03/05 (2)
USD 300 CHF 358 05/04/05 (1)
USD 303 CHF 360 05/20/05 (1)
USD 23 CHF 28 06/15/05 --
USD 28 CHF 32 06/15/05 (1)
USD 2,924 CHF 3,432 06/15/05 (44)
USD 10,699 CHF 12,550 06/15/05 (166)
USD 202 DKK 1,160 05/20/05 (2)
USD 37 DKK 214 06/15/05 --
USD 364 DKK 2,009 06/15/05 (16)
USD 120 EUR 92 05/02/05 (1)
USD 305 EUR 236 05/02/05 (2)
USD 578 EUR 445 05/02/05 (4)
USD 530 EUR 411 05/03/05 (1)
USD 36 EUR 28 05/04/05 --
USD 229 EUR 178 05/04/05 --
USD 3,250 EUR 2,500 05/20/05 (31)
USD 643 EUR 500 06/15/05 1
USD 649 EUR 500 06/15/05 (5)
USD 1,284 EUR 1,000 06/15/05 4
USD 1,289 EUR 1,000 06/15/05 --
USD 1,291 EUR 1,000 06/15/05 (2)
USD 1,300 EUR 1,000 06/15/05 (11)
USD 1,310 EUR 1,000 06/15/05 (21)
USD 1,334 EUR 1,000 06/15/05 (46)
USD 1,344 EUR 1,000 06/15/05 (55)
USD 1,348 EUR 1,000 06/15/05 (59)
USD 1,349 EUR 1,000 06/15/05 (60)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 1,939 EUR 1,500 06/15/05 (7)
USD 2,019 EUR 1,500 06/15/05 (86)
USD 10,011 EUR 7,450 06/15/05 (411)
USD 12,095 EUR 9,000 06/15/05 (498)
USD 24,090 EUR 18,547 06/15/05 (191)
USD 32,313 EUR 24,000 06/15/05 (1,388)
USD 62 GBP 32 05/03/05 --
USD 422 GBP 221 05/04/05 --
USD 57 GBP 30 05/05/05 --
USD 123 GBP 64 05/05/05 --
USD 1,105 GBP 578 05/05/05 (2)
USD 968 GBP 510 05/20/05 4
USD 286 GBP 150 06/15/05 (1)
USD 381 GBP 200 06/15/05 (1)
USD 570 GBP 300 06/15/05 --
USD 572 GBP 300 06/15/05 (1)
USD 576 GBP 300 06/15/05 (5)
USD 935 GBP 500 06/15/05 16
USD 951 GBP 500 06/15/05 --
USD 953 GBP 500 06/15/05 (2)
USD 957 GBP 500 06/15/05 (6)
USD 1,053 GBP 550 06/15/05 (7)
USD 1,914 GBP 1,000 06/15/05 (11)
USD 2,967 GBP 1,550 06/15/05 (18)
USD 5,305 GBP 2,773 06/15/05 (28)
USD 8,612 GBP 4,500 06/15/05 (49)
USD 21,056 GBP 11,000 06/15/05 (125)
USD 35,469 GBP 18,522 06/15/05 (225)
USD 15 HKD 120 05/03/05 --
USD 301 HKD 2,348 05/03/05 --
USD 574 HKD 4,475 05/03/05 --
USD 14 HKD 106 05/04/05 --
USD 76 HKD 593 05/04/05 --
USD 41 HKD 322 06/15/05 --
USD 447 HKD 3,477 06/15/05 --
USD 2 JPY 249 05/02/05 --
USD 4 JPY 466 05/02/05 --
USD 6 JPY 681 05/02/05 --
USD 7 JPY 735 05/02/05 --
USD 8 JPY 859 05/02/05 --
USD 35 JPY 3,685 05/02/05 --
USD 73 JPY 7,727 05/02/05 1
USD 295 JPY 31,194 05/02/05 3
USD 4 JPY 467 05/06/05 --
USD 6 JPY 683 05/06/05 --
</Table>
See accompanying notes which are an integral part of the financial statements.
International Fund 43
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 8 JPY 857 05/06/05 --
USD 23 JPY 2,442 05/06/05 --
USD 43 JPY 4,504 05/06/05 --
USD 155 JPY 16,380 05/06/05 2
USD 220 JPY 23,284 05/06/05 2
USD 4 JPY 467 05/09/05 --
USD 5 JPY 550 05/09/05 --
USD 5 JPY 550 05/09/05 --
USD 6 JPY 686 05/09/05 --
USD 14 JPY 1,505 05/09/05 --
USD 35 JPY 3,681 05/09/05 --
USD 386 JPY 40,889 05/09/05 4
USD 1,326 JPY 140,530 05/20/05 17
USD 463 JPY 50,000 06/15/05 16
USD 740 JPY 80,000 06/15/05 26
USD 939 JPY 100,000 06/15/05 19
USD 941 JPY 100,000 06/15/05 17
USD 947 JPY 100,000 06/15/05 11
USD 950 JPY 100,000 06/15/05 7
USD 967 JPY 100,000 06/15/05 (9)
USD 969 JPY 100,000 06/15/05 (11)
USD 1,936 JPY 200,000 06/15/05 (20)
USD 4,824 JPY 513,224 06/15/05 91
USD 5,489 JPY 583,768 06/15/05 101
USD 13,079 JPY 1,350,000 06/15/05 (151)
USD 14,525 JPY 1,500,000 06/15/05 (160)
USD 130 MXN 1,449 05/02/05 1
USD 13 MXN 140 05/03/05 --
USD 65 NOK 408 05/02/05 --
USD 134 NOK 847 05/04/05 --
USD 387 NOK 2,440 05/20/05 --
USD 1,221 NOK 7,709 06/15/05 2
USD 1,261 NOK 7,963 06/15/05 3
USD 1,288 NZD 1,780 06/15/05 6
USD 3,967 NZD 5,480 06/15/05 18
USD 155 PLN 507 05/02/05 (2)
USD 428 SEK 3,030 05/20/05 (4)
USD 7,655 SEK 51,506 06/15/05 (433)
USD 24 SGD 40 05/03/05 --
USD 27 SGD 45 06/15/05 --
AUD 345 USD 267 05/02/05 (2)
AUD 63 USD 49 05/03/05 --
AUD 321 USD 250 05/03/05 (1)
AUD 25 USD 20 05/04/05 --
AUD 60 USD 47 05/04/05 --
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
AUD 66 USD 51 05/04/05 --
AUD 371 USD 291 05/04/05 --
AUD 990 USD 753 05/20/05 (19)
AUD 717 USD 549 06/15/05 (9)
AUD 1,100 USD 862 06/15/05 6
AUD 1,371 USD 1,060 06/15/05 (8)
AUD 1,500 USD 1,177 06/15/05 9
AUD 2,695 USD 2,070 06/15/05 (27)
AUD 3,347 USD 2,572 06/15/05 (33)
AUD 6,143 USD 4,743 06/15/05 (38)
CAD 302 USD 241 05/02/05 2
CAD 97 USD 77 05/03/05 --
CHF 416 USD 348 05/02/05 --
CHF 615 USD 516 05/02/05 1
CHF 685 USD 573 05/02/05 --
CHF 360 USD 297 05/20/05 (4)
CHF 13,272 USD 11,138 06/15/05 --
DKK 333 USD 58 05/03/05 --
DKK 1,023 USD 177 05/03/05 --
DKK 1,160 USD 200 05/20/05 (1)
DKK 46 USD 8 06/15/05 --
DKK 213 USD 37 06/15/05 --
EUR 297 USD 385 05/02/05 3
EUR 813 USD 1,051 05/02/05 5
EUR 137 USD 176 05/03/05 --
EUR 244 USD 316 05/03/05 2
EUR 423 USD 547 05/03/05 3
EUR 64 USD 83 05/04/05 --
EUR 91 USD 117 05/04/05 --
EUR 131 USD 169 05/04/05 --
EUR 2,500 USD 3,206 05/20/05 (13)
EUR 74 USD 96 06/15/05 --
EUR 600 USD 792 06/15/05 19
EUR 1,350 USD 1,817 06/15/05 78
EUR 2,000 USD 2,617 06/15/05 39
EUR 2,000 USD 2,675 06/15/05 98
EUR 5,630 USD 7,385 06/15/05 131
EUR 6,700 USD 9,023 06/15/05 390
EUR 17,040 USD 22,967 06/15/05 1,009
GBP 159 USD 304 05/04/05 --
GBP 174 USD 333 05/05/05 1
GBP 510 USD 954 05/20/05 (18)
GBP 100 USD 189 06/15/05 (1)
GBP 300 USD 573 06/15/05 3
GBP 400 USD 764 06/15/05 3
</Table>
See accompanying notes which are an integral part of the financial statements.
44 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
GBP 405 USD 758 06/15/05 (12)
GBP 1,000 USD 1,915 06/15/05 12
GBP 1,000 USD 1,921 06/15/05 18
GBP 4,100 USD 7,849 06/15/05 47
GBP 6,376 USD 11,998 06/15/05 (135)
GBP 9,176 USD 17,423 07/29/05 (5)
HKD 154 USD 20 05/03/05 --
HKD 154 USD 20 05/03/05 --
HKD 26 USD 3 05/04/05 --
HKD 346 USD 44 05/04/05 --
HKD 48 USD 6 06/15/05 --
HKD 135 USD 17 06/15/05 --
JPY 10,151 USD 96 05/02/05 (1)
JPY 68,920 USD 650 05/02/05 (7)
JPY 98,252 USD 927 05/02/05 (10)
JPY 21,904 USD 207 05/06/05 (2)
JPY 32,905 USD 311 05/06/05 (4)
JPY 869 USD 8 05/09/05 --
JPY 1,740 USD 16 05/09/05 --
JPY 12,028 USD 114 05/09/05 (1)
JPY 140,530 USD 1,297 05/20/05 (46)
JPY 50,000 USD 470 06/15/05 (9)
JPY 76,949 USD 720 06/15/05 (17)
JPY 100,000 USD 964 06/15/05 7
JPY 175,246 USD 1,642 06/15/05 (36)
JPY 200,000 USD 1,895 06/15/05 (21)
JPY 350,000 USD 3,389 06/15/05 38
JPY 470,000 USD 4,551 06/15/05 50
JPY 816,302 USD 7,649 06/15/05 (169)
JPY 1,647,383 USD 15,959 06/15/05 183
NOK 569 USD 90 05/03/05 --
NOK 2,440 USD 383 05/20/05 (4)
NOK 5,170 USD 831 06/15/05 10
SEK 4,044 USD 572 05/02/05 6
SEK 906 USD 127 05/03/05 1
SEK 3,376 USD 475 05/03/05 3
SEK 3,030 USD 424 05/20/05 (1)
SEK 382 USD 54 06/15/05 1
SEK 392 USD 56 06/15/05 1
SEK 47,719 USD 6,765 06/15/05 75
SGD 28 USD 17 06/15/05 --
SGD 32 USD 19 06/15/05 --
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
SGD 806 USD 499 06/15/05 7
ZAR 439 USD 72 05/03/05 --
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions (2,595)
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
International Fund 45
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 5.7 89,486
Consumer Discretionary 9.5 149,610
Consumer Staples 7.1 111,265
Financial Services 23.0 361,944
Health Care 7.2 113,098
Integrated Oils 7.3 114,520
Materials and Processing 9.1 143,860
Miscellaneous 0.8 12,196
Other Energy 1.3 20,688
Producer Durables 6.0 95,489
Technology 3.4 53,409
Utilities 10.1 158,665
Options 0.1 1,891
Warrants and Rights 0.1 1,993
Short-Term Investments 8.1 127,926
Other Securities 27.0 425,058
--------------- ---------------
Total Investments 125.8 1,981,098
Other Assets and Liabilities, Net (25.8) (407,209)
--------------- ---------------
Net Assets 100.0 1,573,889
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 0.1 2,301
Asia 9.1 142,930
Europe 41.3 650,597
Japan 18.3 288,295
Latin America 1.2 18,165
Middle East 0.1 969
United Kingdom 18.6 292,620
Options 0.1 1,891
Other 1.9 30,346
Short-Term Investments 8.1 127,926
Other Securities 27.0 425,058
--------------- ---------------
Total Investments 125.8 1,981,098
Other Assets and Liabilities, Net (25.8) (407,209)
--------------- ---------------
Net Assets 100.0 1,573,889
=============== ===============
</Table>
<Table>
<Caption>
INDEX SWAPS
- --------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NOTIONAL APPRECIATION
FUND RECEIVES COUNTER AMOUNT FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY $ FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ---------------------- -------------- ----------------
MSCI Belgium
Local Net Total Return 1 Month Euro LIBOR
Index Merrill Lynch 5,688 BBA minus 0.4% 01/18/06 (89)
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swaps (89)
================
</Table>
See accompanying notes which are an integral part of the financial statements.
46 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Australia 3.8
Austria 0.7
Belgium 1.5
Brazil 0.3
Canada 1.7
Cayman Island 0.1
China --*
Denmark 0.5
Finland 1.0
France 9.1
Germany 5.1
Greece 0.6
Hong Kong 2.1
Hungary 0.4
Indonesia 0.1
Ireland 0.9
Israel 0.1
Italy 3.1
Japan 18.3
Luxembourg 0.2
Mexico 0.7
Netherlands 4.5
New Zealand 0.3
Norway 0.7
Poland 0.1
Portugal 0.1
Russia 0.1
Singapore 1.2
South Africa 0.1
South Korea 0.7
Spain 3.9
Sweden 2.5
Switzerland 5.9
Taiwan 0.8
Thailand 0.1
Turkey 0.1
United Kingdom 18.6
United States 0.2
Options Purchased 0.1
Preferred Stocks 0.3
Warrants & Rights 0.1
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Short-Term Investments 8.1
Other Securities 27.0
------------
Total Investments 125.8
Other Assets and Liabilities, Net (25.8)
------------
Net Assets 100.0
============
Futures Contracts --*
Options Written --*
Foreign Currency Exchange Contracts --*
Index Swap Contracts --*
</Table>
* Less than .05%
See accompanying notes which are an integral part of the financial statements.
International Fund 47
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,007.40 $ 1,021.88
Expenses Paid During
Period* $ 3.14 $ 3.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.63%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,008.40 $ 1,023.17
Expenses Paid During
Period* $ 1.84 $ 1.86
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.37%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,008.60 $ 1,023.26
Expenses Paid During
Period* $ 1.74 $ 1.76
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.35%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
48 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 93.9%
Asset-Backed Securities - 6.9%
ABSC NIMs Trust (p)
Series 2004-HE5 Class A1
5.000% due 08/27/34 145 144
American Airlines, Inc.
7.858% due 10/01/11 325 336
Ameriquest Mortgage Securities, Inc. (E)
Series 2002-D Class M1
5.350% due 02/25/33 155 158
Amortizing Residential Collateral Trust (E)
Series 2002-BC5 Class A
3.170% due 07/25/32 17 17
Argent Securities, Inc. (E)
Series 2004-W7 Class A3
2.640% due 05/25/34 430 430
Asset Backed Funding Corp. NIMs Trust (p)
Series 2003-OPT1 Class NOTE
6.900% due 07/26/33 39 39
Bank One Issuance Trust (E)
Series 2003-A1 Class A1
2.930% due 09/15/10 1,600 1,603
Centex Home Equity (E)
Series 2003-A Class AV1
3.130% due 03/25/33 96 96
Chase Credit Card Master Trust (E)
Series 2002-7 Class A
2.930% due 02/15/10 2,620 2,626
Chase Funding Mortgage Loan Asset-Backed
Certificates (E)
Series 2002-2 Class 2A1
3.100% due 05/25/32 512 513
Series 2004-1 Class 1A1
2.960% due 11/25/18 201 201
Citifinancial Mortgage Securities, Inc. (E)
Series 2003-4 Class AF1
3.020% due 10/25/33 78 78
Countrywide Asset-Backed Certificates
Series 2004-13 Class AF2
3.683% due 08/25/24 860 851
Series 2004-7 Class AF2
3.324% due 12/25/23 555 549
Series 2001-BC3 Class A (E)
3.090% due 12/25/31 167 167
Series 2003-BC2 Class 2A1 (E)
3.150% due 06/25/33 121 122
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-BC4 Class 2A2 (E)
3.170% due 09/25/33 399 400
Series 2003-S2 Class A1 (E)
3.020% due 12/25/18 180 180
Series 2004-7 Class 2AV1 (E)
3.000% due 12/25/22 591 591
Series 2004-S1 Class A1 (E)
3.070% due 12/25/18 2,323 2,323
Series 2003-5NF Class NF (p)
6.750% due 02/25/34 41 42
Series 2004-14N Class N (p)
5.000% due 06/25/36 241 242
Credit-Based Asset Servicing and Securitization
(E)
Series 2004-CB6 Class AF1
3.040% due 07/25/35 649 649
Daimler Chrysler Auto Trust
Series 2005-A Class A3
3.490% due 12/08/08 1,165 1,157
Discover Card Master Trust I (E)
Series 2005-1 Class A
2.820% due 09/16/10 3,075 3,069
Distribution Financial Services Floorplan Master
Trust (E)
Series 2003-2 Class A
2.910% due 04/15/08 1,415 1,416
Equifirst Mortgage Loan Trust (E)
Series 2004-1 Class 2A1
2.950% due 01/25/34 691 691
Series 2005-1 Class A1
2.890% due 04/25/35 1,072 1,072
Equity One ABS, Inc. (E)
Series 2004-2 Class AF1
2.960% due 07/25/34 363 363
Fannie Mae
4.750% due 04/19/10 2,950 2,968
Series 1992-158 Class ZZ
7.750% due 08/25/22 439 470
Fannie Mae Grantor Trust (E)
Series 2002-T13 Class A1
2.630% due 08/25/32 13 13
Series 2002-T5 Class A1
2.970% due 05/25/32 872 873
Series 2004-T4 Class A1
2.610% due 06/25/17 1,152 1,152
</Table>
Fixed Income I Fund 49
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae Whole Loan (E)
Series 2002-W2 Class AV1
2.980% due 06/25/32 472 472
Series 2003-W16 Class AV1
3.000% due 11/25/33 561 561
FHA Proj Citi 68 NP
7.430% due 06/27/21 266 272
First Franklin NIMs Trust (p)
Series 2004-FF5 Class N1
3.475% due 08/25/34 417 417
Series 2004-FFH1 Class N1
3.967% due 04/25/34 496 496
Series 2004-FFH2 Class N1
4.212% due 03/25/34 178 178
Series 2004-FFH2 Class N2
7.385% due 03/25/34 285 285
Series 2005-FF11 Class N1
4.213% due 01/25/35 1,069 1,066
First National Master Note Trust (E)
Series 2003-1 Class A
2.910% due 08/15/08 660 660
First USA Credit Card Master Trust (E)
Series 1998-4 Class A
2.954% due 03/18/08 765 765
Ford Credit Auto Owner Trust
Series 2005-A Class A3
3.480% due 11/15/08 505 502
Ford Credit Floorplan Master Owner Trust (E)
Series 2001-2 Class A
2.950% due 07/15/08 1,115 1,117
Series 2004-1 Class A
2.850% due 07/15/09 1,770 1,771
Freddie Mac
Series 1998-2104 Class ZM
6.000% due 12/15/28 1,070 1,103
Fremont NIMs Trust
3.750% due 01/25/35 855 853
Series 2004-B Class NOTE (p)
4.703% due 05/25/34 169 169
GE Dealer Floorplan Master Note Trust (E)
Series 2005-1 Class A
3.100% due 04/20/10 1,425 1,426
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 590 585
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GMAC Mortgage Corp. Loan Trust (E)
Series 1999-1 Class A
3.124% due 06/18/27 689 689
Series 2004-HE2 Class A1C
2.630% due 10/25/33 519 519
Green Tree Financial Corp.
Series 1995-5 Class M1
7.650% due 09/15/26 1,065 1,135
GSAMP Trust (E)
Series 2003-AHL Class A2A
3.050% due 10/25/33 436 436
Series 2004-AR2 Class A3A
2.680% due 08/25/34 94 94
Series 2004-SEA1 Class A1A
2.720% due 10/25/33 669 670
GSAMP Trust (p)
Series 2004-FM1N Class NOTE
5.250% due 11/25/33 153 152
HFC Home Equity Loan Asset Backed Certificates
(E)
Series 2003-1 Class A
3.200% due 10/20/32 350 350
Home Equity Mortgage Trust (E)
Series 2004-4 Class A2
3.000% due 12/25/34 382 382
IndyMac Residential Asset Backed Trust (E)
Series 2005-A Class AII1
2.881% due 03/25/35 1,264 1,264
Long Beach Asset Holdings Corp. (p)
Series 2005-1 Class N1
4.115% due 02/25/35 708 708
Long Beach Mortgage Loan Trust (E)
Series 2003-1 Class A2
3.250% due 03/25/33 13 13
Series 2003-2 Class M2
4.920% due 06/25/33 540 552
Series 2004-1 Class A4
2.980% due 02/25/34 76 76
Mastr Asset Backed Securities Trust (E)
Series 2004-OPT1 Class A3
3.110% due 02/25/34 408 408
MBNA Credit Card Master Note Trust
Series 2002-C1 Class C1
6.800% due 07/15/14 935 1,032
</Table>
50 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc. (E)
Series 2003-WMC1 Class A2
3.210% due 11/25/33 56 56
Series 2003-WMC2 Class A2
3.190% due 02/25/34 146 146
Series 2004-WMC1 Class A2
3.150% due 10/25/34 600 601
Merrill Lynch Mortgage Investors, Inc. (p)
Series 2003-OP1N Class N1
7.250% due 09/25/34 92 92
Series 2004-WM1N Class N1
4.500% due 10/25/34 148 147
Morgan Stanley ABS Capital I (E)
Series 2003-NC10 Class A2
3.050% due 10/25/33 74 74
Series 2003-NC5 Class A2
3.130% due 04/25/33 194 194
Series 2005-HE1 Class A3A
2.980% due 12/25/34 1,660 1,660
Morgan Stanley Capital I, Inc. (p)
5.450% due 10/28/33 1,370 1,408
Morgan Stanley Dean Witter Capital I (E)
Series 2003-NC4 Class A2
3.220% due 04/25/33 145 145
Navistar Financial Corp. Owner Trust (E)
Series 2003-B Class A3
3.010% due 04/15/08 840 841
North Carolina State Education Assistance
Authority (E)
Series 2000-200 Class G
2.560% due 06/01/09 15 15
Novastar Home Equity Loan (E)
Series 2004-4 Class A2A
3.040% due 03/25/35 720 720
Novastar NIMs Trust (p)
Series 2004-N1 Class NOTE
4.458% due 02/25/34 212 212
Series 2004-N2 Class NOTE
4.458% due 06/26/34 384 382
Option One Mortgage Loan Trust (E)
Series 2001-4 Class A
3.150% due 01/25/32 328 328
Series 2002-2 Class A
3.120% due 06/25/32 179 179
Series 2003-1 Class A2
3.270% due 02/25/33 558 560
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-2 Class A2
3.150% due 04/25/33 260 261
Series 2003-2 Class M2
4.720% due 04/25/33 670 682
Series 2003-4 Class M2
4.670% due 07/25/33 670 683
Series 2005-1 Class A2
2.573% due 02/25/35 1,760 1,760
Option One Mortgage Securities Corp. NIMs Trust
(E)(p)
Series 2003-6A Class NOTE
2.764% due 10/26/10 169 169
Pacificamerica Home Equity Loan
Series 1998-2 Class AF
6.590% due 06/26/28 20 20
Park Place Securities, Inc. (E)
Series 2005-WCH1 Class A3A
2.970% due 01/25/36 672 672
Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF2
3.914% due 05/25/35 160 159
Renaissance Home Equity Loan Trust
Series 2005-1 Class AF3
4.456% due 05/25/35 400 399
Renaissance NIMs Trust (p)
Series 2003-D Class NOTE
6.657% due 03/26/34 90 90
Series 2004-B Class NOTE
5.193% due 08/26/34 251 251
Series 2004-D Class NOTE
4.459% due 02/25/35 441 441
Residential Asset Mortgage Products, Inc.
Series 2004-RS4 Class AI3
4.003% due 01/25/30 420 420
Series 2004-RS6 Class AI3
4.540% due 08/25/28 335 337
Series 2004-RS7 Class AI3
4.450% due 07/25/28 620 622
Series 2004-RS8 Class AI2
3.810% due 01/25/26 335 334
Series 2004-RS8 Class AI3
4.230% due 05/25/29 220 220
</Table>
Fixed Income I Fund 51
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc. (E)
Series 2002-RS5 Class AII
3.220% due 09/25/32 442 443
Series 2003-RS1 Class AII
3.240% due 02/25/33 514 516
Series 2003-RS2 Class AII
3.190% due 03/25/33 526 528
Series 2003-RS3 Class AII
3.210% due 04/25/33 400 401
Series 2004-RS2 Class AIIB
2.780% due 02/25/34 976 978
Series 2004-RS6 Class AI1
3.000% due 08/25/22 720 720
Series 2004-RS8 Class AI1
3.030% due 12/25/23 1,244 1,245
Series 2004-RS8 Class AII1
2.990% due 05/25/26 1,077 1,078
Residential Asset Securities Corp.
Series 2004-KS8 Class AI2
3.340% due 10/25/24 820 812
Residential Asset Securities Corp. (E)
Series 2001-KS1 Class AII
3.085% due 03/25/32 246 246
Series 2002-KS3 Class A1B
3.100% due 05/25/32 547 548
Series 2003-KS1 Class M2
4.770% due 01/25/33 365 368
Saxon Asset Securities Trust (E)
Series 2003-1 Class AV1
3.160% due 06/25/33 331 332
Series 2004-1 Class A
2.920% due 03/25/35 861 862
Saxon Net Interest Margin Trust (p)
Series 2003-A Class A
6.656% due 08/26/33 43 43
Securitized Asset Backed Receivables LLC Trust
(E)
Series 2004-OP1 Class A2
3.100% due 02/25/34 446 446
Sharp SP I LLC Net Interest Margin Trust (p)
Series 2004-FM1N Class N
6.160% due 09/25/33 81 81
Series 2004-OP1N Class NA
4.450% due 12/25/33 247 247
SLM Student Loan Trust (E)
Series 2003-8 Class A2
2.530% due 06/15/11 321 321
Series 2004-10 Class A1
2.063% due 07/27/09 805 805
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-9 Class A1
2.690% due 10/26/09 717 717
Series 2005-2 Class A1
2.710% due 04/26/10 515 515
Specialty Underwriting & Residential Finance (E)
Series 2003-BC1 Class A
3.190% due 01/25/34 216 217
Series 2004-BC2 Class A2
3.120% due 05/25/35 696 698
Structured Asset Investment Loan Trust (E)
Series 2003-BC8 Class M3
4.950% due 08/25/33 415 425
Structured Asset Securities Corp.
Series 2004-19XS Class A2
4.370% due 10/25/34 765 758
Series 2005-2XS Class 1A2A
4.510% due 02/25/35 635 634
Structured Asset Securities Corp. (E)
Series 2003-BC1 Class A
3.350% due 05/25/32 488 489
Tenaska Alabama II Partners, LP (p)
6.125% due 03/30/23 233 242
Volkswagen Credit Auto Master Trust (E)
Series 2000-1 Class A
2.655% due 08/20/07 1,485 1,486
Wachovia Asset Securitization, Inc. (E)
Series 2003-HE3 Class A
3.100% due 11/25/33 456 457
Whole Auto Loan Trust
Series 2004-1 Class A4
3.260% due 03/15/11 1,085 1,064
------------
80,781
------------
Corporate Bonds and Notes - 14.8%
Altria Group, Inc.
7.000% due 11/04/13 580 640
Amerada Hess Corp.
7.300% due 08/15/31 750 857
</Table>
52 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 35 36
American General Finance Corp. (E)(N)
Series MTNG
3.093% due 03/23/07 1,400 1,397
American RE Corp.
Series B
7.450% due 12/15/26 495 570
Anheuser-Busch Cos., Inc.
4.950% due 01/15/14 535 543
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 775 845
Bank of America Corp.
3.875% due 01/15/08 700 695
4.375% due 12/01/10 1,395 1,390
Banque Paribas
6.875% due 03/01/09 350 381
Bear Stearns Cos., Inc. (The)
2.875% due 07/02/08 655 626
BellSouth Corp.
4.200% due 09/15/09 115 114
5.200% due 12/15/16 70 70
Berkshire Hathaway Finance Corp. (p)
4.125% due 01/15/10 1,260 1,242
Boeing Capital Corp. (N)
6.100% due 03/01/11 150 161
Burlington Northern Santa Fe Corp.
6.875% due 12/01/27 80 93
Campbell Soup Co.
5.875% due 10/01/08 165 173
Carolina Power & Light Co.
5.150% due 04/01/15 590 597
Caterpillar Financial Services Corp.
4.875% due 06/15/07 460 466
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 195 205
CIT Group, Inc.
5.750% due 09/25/07 120 124
6.875% due 11/01/09 80 87
Citicorp
7.250% due 10/15/11 455 521
Citigroup, Inc.
5.750% due 05/10/06 790 805
3.500% due 02/01/08 985 967
4.125% due 02/22/10 60 59
5.125% due 05/05/14 910 931
5.000% due 09/15/14 4,670 4,701
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Clear Channel Communications, Inc.
4.250% due 05/15/09 40 38
4.400% due 05/15/11 595 552
5.000% due 03/15/12 575 544
Clear Channel Communications, Inc. (N)
5.750% due 01/15/13 100 98
5.500% due 09/15/14 325 308
Clorox Co. (p)
4.200% due 01/15/10 165 164
5.000% due 01/15/15 125 127
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 105 109
Comcast Cable Communications
6.875% due 06/15/09 1,220 1,324
Comcast Cable Communications Holdings, Inc.
8.375% due 03/15/13 2,565 3,114
Comcast Corp.
6.500% due 01/15/15 785 864
Comcast Corp. (N)
5.850% due 01/15/10 135 142
ConocoPhillips Holding Co.
6.950% due 04/15/29 735 896
Constellation Energy Group, Inc.
6.125% due 09/01/09 380 403
Continental Airlines, Inc.
Series 00-1
7.918% due 05/01/10 335 333
Countrywide Home Loans, Inc.
Series MTNK
5.500% due 02/01/07 100 102
COX Communications, Inc.
3.875% due 10/01/08 240 233
4.625% due 01/15/10 (p) 3,810 3,754
Credit Suisse First Boston USA, Inc.
4.625% due 01/15/08 155 156
3.875% due 01/15/09 580 569
6.500% due 01/15/12 20 22
5.500% due 08/15/13 95 99
DaimlerChrysler NA Holding Corp.
4.050% due 06/04/08 1,105 1,064
DaimlerChrysler NA Holding Corp. (E)
3.200% due 03/07/07 2,200 2,178
</Table>
Fixed Income I Fund 53
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Detroit Edison Co.
6.125% due 10/01/10 120 129
6.350% due 10/15/32 105 118
Devon Energy Corp.
2.750% due 08/01/06 535 523
7.950% due 04/15/32 430 549
Dominion Resources, Inc.
4.125% due 02/15/08 455 452
5.700% due 09/17/12 370 388
Series B
6.250% due 06/30/12 90 97
Dresdner Funding Trust I (p)
8.151% due 06/30/31 335 416
DTE Energy Co.
6.450% due 06/01/06 475 487
Duke Capital Corp.
4.302% due 05/18/06 165 165
Duke Energy Corp.
5.625% due 11/30/12 445 466
Duke Energy Field Services LLC
5.750% due 11/15/06 50 51
6.875% due 02/01/11 (N) 35 39
Eastman Kodak Co.
7.250% due 11/15/13 30 31
EI Du Pont de Nemours & Co.
8.250% due 09/15/06 585 617
Eli Lilly & Co.
6.770% due 01/01/36 485 595
EOP Operating, LP
4.650% due 10/01/10 2,075 2,044
FedEx Corp.
7.600% due 07/01/97 135 168
Fifth Third Bank (N)
7.750% due 08/15/10 450 454
Financing Corp.
Series 10P
Principal Only Strip
Zero Coupon due 11/30/17 940 518
FirstEnergy Corp.
Series B
6.450% due 11/15/11 625 671
Series C
7.375% due 11/15/31 685 807
FleetBoston Financial Corp.
4.875% due 12/01/06 655 665
Ford Motor Co.
6.375% due 02/01/29 185 138
7.450% due 07/16/31 290 238
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ford Motor Credit Co.
4.950% due 01/15/08 320 301
7.375% due 10/28/09 1,890 1,818
7.875% due 06/15/10 1,685 1,622
7.375% due 02/01/11 720 674
FPL Group Capital, Inc.
6.125% due 05/15/07 355 368
General Electric Capital Corp.
4.125% due 03/04/08 275 274
4.875% due 03/04/15 2,560 2,566
3.250% due 06/15/09 900 863
Series MTNA
4.250% due 01/15/08 590 591
4.250% due 12/01/10 55 54
6.000% due 06/15/12 800 860
Series MTNA (N)
4.750% due 09/15/14 170 169
General Electric Co.
5.000% due 02/01/13 2,505 2,549
General Motors Acceptance Corp.
3.695% due 05/18/06 (E) 400 392
6.125% due 09/15/06 1,060 1,054
6.125% due 02/01/07 200 196
6.150% due 04/05/07 120 118
6.125% due 08/28/07 700 682
5.625% due 05/15/09 1,375 1,245
7.750% due 01/19/10 260 245
7.250% due 03/02/11 1,630 1,462
6.875% due 09/15/11 1,390 1,218
7.000% due 02/01/12 160 139
6.875% due 08/28/12 1,365 1,176
General Motors Corp.
8.375% due 07/15/33 90 69
Golden West Financial Corp.
4.125% due 08/15/07 270 271
Goldman Sachs Group, Inc.
4.125% due 01/15/08 540 539
7.350% due 10/01/09 550 611
6.875% due 01/15/11 480 530
4.750% due 07/15/13 730 717
5.125% due 01/15/15 2,085 2,082
6.345% due 02/15/34 1,695 1,774
Series MTNB (E)
2.630% due 08/01/06 1,100 1,100
Historic TW, Inc.
9.125% due 01/15/13 70 88
8.050% due 01/15/16 (N) 460 552
6.950% due 01/15/28 705 793
</Table>
54 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
HJ Heinz Finance Co.
6.750% due 03/15/32 145 173
Household Finance Corp.
5.750% due 01/30/07 385 395
4.750% due 05/15/09 3,470 3,499
4.125% due 11/16/09 2,220 2,179
7.000% due 05/15/12 1,285 1,450
6.375% due 11/27/12 265 290
4.750% due 07/15/13 1,085 1,073
HVB Funding Trust I (p)
8.741% due 06/30/31 315 400
International Lease Finance Corp.
6.375% due 03/15/09 1,780 1,892
4.750% due 07/01/09 1,085 1,088
5.875% due 05/01/13 380 397
Series MTNP
3.125% due 05/03/07 1,170 1,147
International Paper Co.
5.500% due 01/15/14 545 549
ITT Industries, Inc.
7.400% due 11/15/25 195 234
JP Morgan & Co., Inc.
Series MTNA
6.000% due 01/15/09 260 274
JP Morgan Chase Capital XV
5.875% due 03/15/35 3,925 3,901
JPMorgan Chase & Co.
4.500% due 01/15/12 1,500 1,473
5.125% due 09/15/14 980 989
Kellogg Co.
Series B
6.600% due 04/01/11 765 846
KeyCorp
7.500% due 06/15/06 645 669
Kraft Foods, Inc.
4.000% due 10/01/08 1,180 1,164
5.625% due 11/01/11 1,380 1,448
Kroger Co. (The) (N)
7.500% due 04/01/31 65 76
Lehman Brothers Holdings, Inc.
4.000% due 01/22/08 390 388
6.625% due 01/18/12 300 331
Lockheed Martin Corp.
8.500% due 12/01/29 330 458
M&I Marshall & Ilsley Bank
Series BKNT
4.400% due 03/15/10 1,095 1,092
Mach One Trust Commercial Mortgage-Backed (p)
5.220% due 05/28/40 1,350 1,370
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Manufacturers & Traders Trust Co.
8.000% due 10/01/10 160 187
May Department Stores Co. (The)
5.750% due 07/15/14 185 192
4.800% due 07/15/09 (N) 80 80
Merrill Lynch & Co., Inc.
Series MTNB
3.125% due 07/15/08 1,125 1,083
Series MTNC
5.000% due 01/15/15 725 726
Series MTNC (E)
4.056% due 03/12/07 270 269
Miller Brewing Co. (p)
5.500% due 08/15/13 250 257
Morgan Stanley
3.625% due 04/01/08 630 617
6.750% due 04/15/11 345 381
4.750% due 04/01/14 250 242
3.875% due 01/15/09 690 676
Series MTNF (E)
2.795% due 01/18/08 1,100 1,099
Natexis Ambs Co. LLC (p)(f)
8.440% due 12/29/49 300 335
National City Bank
4.500% due 03/15/10 1,525 1,527
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 890 933
New Cingular Wireless Services, Inc.
7.875% due 03/01/11 1,480 1,703
8.750% due 03/01/31 1,035 1,411
News America Holdings
7.900% due 12/01/95 250 301
8.250% due 10/17/96 50 62
News America, Inc.
Series WI
6.200% due 12/15/34 5,860 5,912
Nisource Finance Corp.
7.875% due 11/15/10 265 306
Norfolk Southern Corp.
6.200% due 04/15/09 645 684
7.050% due 05/01/37 355 427
7.900% due 05/15/97 135 180
Northern States Power Co.
Series B
8.000% due 08/28/12 780 939
</Table>
Fixed Income I Fund 55
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Occidental Petroleum Corp.
9.250% due 08/01/19 215 295
Ohio Power Co.
Series F
5.500% due 02/15/13 45 47
Pacific Gas & Electric Co.
3.600% due 03/01/09 50 49
4.200% due 03/01/11 115 112
6.050% due 03/01/34 535 572
Pacificorp
4.300% due 09/15/08 730 729
Pemex Project Funding Master Trust
7.375% due 12/15/14 600 652
8.625% due 02/01/22 100 116
Progress Energy, Inc.
5.850% due 10/30/08 760 788
7.100% due 03/01/11 870 953
7.750% due 03/01/31 95 115
7.000% due 10/30/31 165 184
Raytheon Co.
6.750% due 08/15/07 420 442
RBS Capital Trust I (f)
5.512% due 09/29/49 425 432
Safeway, Inc. (N)
7.250% due 02/01/31 45 50
SBC Communications, Inc.
4.125% due 09/15/09 150 148
5.100% due 09/15/14 190 190
Simon Property Group, LP
4.875% due 08/15/10 1,555 1,559
Southern California Edison Co.
8.000% due 02/15/07 288 307
Sovereign Bank
5.125% due 03/15/13 400 402
Sprint Capital Corp.
6.000% due 01/15/07 975 1,001
6.125% due 11/15/08 660 694
7.625% due 01/30/11 2,290 2,585
8.375% due 03/15/12 230 272
6.875% due 11/15/28 420 468
8.750% due 03/15/32 2,495 3,355
Tele-Communications-TCI Group
9.800% due 02/01/12 385 491
7.875% due 08/01/13 675 796
Time Warner Entertainment Co., LP
8.375% due 03/15/23 540 679
8.375% due 07/15/33 1,705 2,218
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Time Warner, Inc.
6.750% due 04/15/11 970 1,066
6.875% due 05/01/12 485 540
7.625% due 04/15/31 480 585
7.700% due 05/01/32 455 561
Travelers Property Casualty Corp. (N)
5.000% due 03/15/13 180 181
TXU Corp. (p)
6.550% due 11/15/34 475 468
TXU Electric Delivery Co.
6.375% due 05/01/12 25 27
6.375% due 01/15/15 140 153
TXU Energy Co. LLC (N)
7.000% due 03/15/13 465 516
Unilever Capital Corp. (N)
5.900% due 11/15/32 315 339
United Technologies Corp.
4.875% due 05/01/15 800 801
Univision Communications, Inc.
3.500% due 10/15/07 675 662
US Bancorp
3.125% due 03/15/08 1,250 1,214
US Bank NA (N)
5.700% due 12/15/08 70 73
Verizon Global Funding Corp.
7.250% due 12/01/10 410 460
7.375% due 09/01/12 535 617
7.750% due 12/01/30 1,090 1,356
Verizon Maryland, Inc.
Series A
6.125% due 03/01/12 985 1,042
Verizon Wireless Capital LLC
5.375% due 12/15/06 405 413
Viacom, Inc.
6.625% due 05/15/11 840 896
Virginia Electric and Power Co.
Series A
5.375% due 02/01/07 1,300 1,325
Wachovia Corp.
5.250% due 08/01/14 2,980 3,052
6.550% due 10/15/35 370 432
Waste Management, Inc.
6.375% due 11/15/12 355 391
Wells Fargo & Co.
4.200% due 01/15/10 360 356
4.950% due 10/16/13 215 217
4.750% due 02/09/15 3,835 3,803
</Table>
56 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Weyerhaeuser Co.
6.125% due 03/15/07 223 231
6.750% due 03/15/12 880 939
Wyeth
6.950% due 03/15/11 1,745 1,943
5.500% due 03/15/13 70 72
5.500% due 02/01/14 55 57
XTO Energy, Inc.
6.250% due 04/15/13 360 391
Yum! Brands, Inc.
8.875% due 04/15/11 130 157
Zurich Capital Trust I (p)
8.376% due 06/01/37 1,365 1,479
------------
174,367
------------
International Debt - 4.0%
Abbey National PLC
(Step Up, 06/15/08, 7.750%) (f)
6.700% due 06/29/49 720 764
Anadarko Finance Co.
Series B
7.500% due 05/01/31 315 395
Apache Finance Canada Corp.
4.375% due 05/15/15 490 477
Argent NIMs Trust (p)
Series 2004-WN2 Class A
4.550% due 04/25/34 86 86
Series 2004-WN4 Class A
4.459% due 03/25/34 74 73
AXA
8.600% due 12/15/30 270 360
Banque Centrale de Tunisie
8.250% due 09/19/27 550 667
British Sky Broadcasting PLC
8.200% due 07/15/09 290 328
British Telecommunications PLC
8.875% due 12/15/30 90 123
Chalet Finance PLC (E)(p)
Series 2003-2A Class A1
2.580% due 11/26/13 1,190 1,191
ChevronTexaco Capital Co.
3.500% due 09/17/07 470 465
Chile Government International Bond
5.625% due 07/23/07 420 431
Conoco Funding Co.
6.350% due 10/15/11 705 779
Credit-Based Asset Servicing and Securitization
CBO, Ltd. (E)(p)
Series 2004-9A Class A1
2.970% due 04/08/39 2,239 2,239
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Crest, Ltd. (p)
Series 2003-2A Class C2
5.709% due 12/28/38 1,710 1,754
Deutsche Telekom International Finance BV
8.500% due 06/15/10 970 1,125
5.250% due 07/22/13 155 158
8.750% due 06/15/30 3,200 4,288
Diageo Finance BV
3.000% due 12/15/06 705 693
Domtar, Inc.
7.875% due 10/15/11 1,540 1,656
EnCana Corp.
6.500% due 08/15/34 75 84
Equifirst Mortgage Loan Trust NIMs Notes (p)
Series 2004-2 Class N1
3.967% due 10/25/34 703 703
Export Import Bank of Korea (p)
4.125% due 02/10/09 255 251
First Franklin NIMs Trust (p)
Series 2004-FF5 Class N1
4.212% due 04/25/34 141 141
France Telecom SA
8.000% due 03/01/11 215 248
8.750% due 03/01/31 215 291
G-Force CDO, Ltd. (p)
Series 2003-1A Class CFX
5.700% due 12/25/38 765 773
Intelsat, Ltd.
6.500% due 11/01/13 335 265
Interstar Millennium Trust (E)
Series 2003-5G Class A2
2.920% due 01/20/36 1,251 1,251
Korea Development Bank
4.250% due 11/13/07 710 709
Korea Electric Power Corp. (p)
5.125% due 04/23/34 125 125
Medallion Trust (E)
Series 2003-1G Class A
3.240% due 12/21/33 825 827
Mexico Government International Bond
8.375% due 01/14/11 1,050 1,202
6.375% due 01/16/13 1,080 1,126
8.125% due 12/30/19 900 1,054
</Table>
Fixed Income I Fund 57
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
8.300% due 08/15/31 395 463
7.500% due 04/08/33 2,300 2,490
6.750% due 09/27/34 1,445 1,439
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 280 290
Monumental Global Funding, Ltd. (p)
4.625% due 03/15/10 200 202
Mound Financing PLC (E)(p)
Series 2001-2A Class A2
2.410% due 11/08/07 1,935 1,935
Newcastle CDO I, Ltd. (p)
Series 2004-4A Class 3FX
5.110% due 03/24/39 845 825
Nexen, Inc.
5.875% due 03/10/35 1,290 1,244
Province of Quebec
7.500% due 07/15/23 435 559
Royal Bank of Scotland Group PLC ADR (f)
Series 1
9.118% due 03/31/49 200 238
Russia Government International Bond (p)
5.000% due 03/31/30 1,150 1,223
5.000% due 03/31/30 (N) 575 611
Santander Financial Issuances
6.375% due 02/15/11 120 131
Sanwa Finance Aruba AEC
8.350% due 07/15/09 350 398
Scottish Power PLC
5.375% due 03/15/15 2,285 2,318
Systems 2001 AT LLC (p)
7.156% due 12/15/11 343 370
Telecom Italia Capital SA
6.375% due 11/15/33 160 167
4.000% due 01/15/10 (p) 1,340 1,294
4.950% due 09/30/14 (p) 590 575
6.000% due 09/30/34 (p) 995 986
Telefonos de Mexico SA de CV
4.500% due 11/19/08 515 507
Tengizchevroil Finance Co. (p)
6.124% due 11/15/14 245 246
Tyco International Group SA
6.375% due 10/15/11 355 385
6.000% due 11/15/13 720 769
United Utilities PLC
5.375% due 02/01/19 70 69
Vodafone Group PLC
7.750% due 02/15/10 375 427
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Wells Fargo Home Equity Trust (p)
Series 2004-2N Class N1
4.450% due 10/26/34 203 203
------------
47,466
------------
Mortgage-Backed Securities - 39.3%
Arcap Reit, Inc. (p)
Series 2004-RR3 Class B
5.040% due 09/21/45 420 413
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 850 863
Series 2004-4 Class A3
4.128% due 07/10/42 580 573
Bank of America Mortgage Securities
Series 2004-1 Class 5A1
6.500% due 09/25/33 70 71
Series 2004-2 Class 5A1
6.500% due 10/25/31 228 236
Bear Stearns Alternative Loan Trust
Series 2005-4 Class 23A1
5.446% due 05/25/35 1,100 1,112
Bear Stearns Commercial Mortgage Securities
Series 2004-PWR5 Class A3
4.565% due 07/11/42 35 35
Series 2005-PWR7 Class A1
4.386% due 02/11/41 876 879
Commercial Mortgage Acceptance Corp.
Series 1998-C2 Class A3
6.040% due 09/15/30 3,715 3,892
Country Wide Loans
Series 2005-2 Class N
4.500% due 08/25/36 450 447
Countrywide Home Loan Mortgage Pass Through
Trust (E)
Series 2003-42 Class 2A1
2.780% due 10/25/33 265 265
Series 2004-7 Class 5A2
2.800% due 05/25/34 499 497
Series 2005-3 Class 1A2
3.140% due 04/25/35 195 195
Series 2005-9 Class M6
4.170% due 05/25/35 250 251
</Table>
58 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CS First Boston Mortgage Securities Corp.
Series 2003-C5 Class A1
3.093% due 12/15/36 1,916 1,872
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 675 708
Downey Savings & Loan Association Mortgage Loan
Trust (E)
Series 2004-AR3 Class 1A1B
4.218% due 07/19/44 671 671
Fannie Mae
15 Year TBA (I)
4.500% 4,770 4,718
5.000% 14,115 14,212
30 Year TBA (I)
4.500% 7,330 7,112
5.000% 24,030 23,752
5.500% 78,545 79,365
6.000% 19,130 19,626
6.500% 12,505 13,001
7.200% due 2007 672 703
7.000% due 2011 15 16
8.000% due 2011 9 10
5.500% due 2013 20 21
6.500% due 2013 74 79
6.500% due 2015 48 50
7.000% due 2015 16 17
6.000% due 2016 434 450
6.500% due 2016 46 48
5.000% due 2017 341 344
5.500% due 2017 813 833
6.000% due 2017 6,769 7,019
6.500% due 2017 550 573
7.500% due 2017 1 1
9.000% due 2017 4 4
4.500% due 2018 9,968 9,882
5.000% due 2018 10,035 10,121
5.500% due 2018 2,346 2,405
6.000% due 2018 340 353
6.500% due 2018 585 606
8.500% due 2018 8 9
4.500% due 2019 358 354
5.000% due 2019 10,033 10,113
6.500% due 2019 268 278
4.500% due 2020 623 617
5.000% due 2020 10,470 10,552
6.500% due 2020 101 105
7.500% due 2022 1 1
7.500% due 2023 5 6
7.500% due 2024 169 181
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
8.000% due 2024 221 241
8.500% due 2024 36 40
9.000% due 2024 9 10
7.000% due 2025 45 48
7.500% due 2025 41 44
8.000% due 2025 4 5
8.500% due 2025 49 56
7.000% due 2026 43 46
7.500% due 2026 7 8
9.000% due 2026 7 8
7.000% due 2027 10 11
7.500% due 2027 11 12
9.000% due 2027 2 3
6.500% due 2028 834 868
7.500% due 2028 30 33
6.500% due 2029 1,701 1,776
7.000% due 2029 275 291
7.500% due 2029 162 174
6.500% due 2030 16 16
7.500% due 2030 2 2
8.000% due 2030 305 333
6.500% due 2031 368 384
7.500% due 2031 57 61
8.000% due 2031 313 342
6.000% due 2032 2,633 2,708
6.500% due 2032 213 222
6.500% due 2032 1,568 1,633
7.000% due 2032 1,371 1,447
8.000% due 2032 13 13
4.500% due 2033 1,226 1,187
5.000% due 2033 2,145 2,130
5.500% due 2033 14,523 14,678
6.000% due 2033 27 28
6.500% due 2033 1,058 1,102
4.500% due 2034 1,211 1,170
5.000% due 2034 20,693 20,545
5.500% due 2034 7,170 7,247
6.000% due 2034 15,355 15,776
6.500% due 2034 1,122 1,171
4.500% due 2035 1,493 1,442
6.000% due 2035 2,412 2,478
Series 1993-134 Class H
6.500% due 08/25/08 1,420 1,473
Series 1997-81 Class PC
5.000% due 04/18/27 45 45
Series 2004-27 Class JC
5.000% due 05/25/34 465 463
</Table>
Fixed Income I Fund 59
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae Grantor Trust
Series 2001-T6 Class B
6.088% due 05/25/11 1,810 1,964
Fannie Mae Whole Loan (E)
Series 2004-W2 Class 5AF
2.880% due 03/25/44 1,110 1,110
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2003-H010 Class A1
1.582% due 09/15/08 650 642
Series 2004-H017 Class A1
2.614% due 07/15/11 1,556 1,541
Freddie Mac
15 Year TBA (I)
5.000% 1,300 1,309
5.500% 700 717
30 Year TBA (I)
5.000% 5,855 5,797
5.500% 11,010 11,117
6.000% 2,470 2,535
7.000% due 2008 26 27
8.000% due 2009 12 13
6.000% due 2010 60 63
7.000% due 2010 143 151
8.000% due 2010 31 32
6.000% due 2011 297 309
7.000% due 2011 17 18
6.000% due 2012 6 6
6.000% due 2013 63 65
12.000% due 2014 34 38
6.000% due 2016 666 690
9.000% due 2016 120 130
6.000% due 2017 601 624
4.500% due 2018 1,437 1,425
5.000% due 2018 945 953
4.500% due 2019 1,251 1,239
5.000% due 2019 494 498
5.500% due 2019 5,048 5,173
7.500% due 2024 10 11
6.500% due 2025 28 29
8.000% due 2025 45 49
9.000% due 2025 5 5
9.000% due 2026 1 2
3.711% due 2027 (E) 98 101
6.500% due 2027 3 3
8.500% due 2027 111 121
6.500% due 2028 312 325
6.500% due 2029 591 616
7.500% due 2029 1 1
7.652% due 2030 (E) 13 13
6.000% due 2031 25 26
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.500% due 2031 1,349 1,405
7.500% due 2031 65 69
6.500% due 2032 1,172 1,219
7.000% due 2032 545 575
7.500% due 2032 170 183
5.000% due 2033 3,039 3,018
5.500% due 2033 7,438 7,529
6.000% due 2033 910 935
4.500% due 2034 172 166
5.000% due 2034 4,807 4,763
6.000% due 2034 6,743 6,924
Series 1993-1606 Class I
Interest Only Strip
6.500% due 11/15/08 244 17
Series 2003-2632 Class YH
3.500% due 08/15/22 1,190 1,176
Series 2003-2634 Class IO
Interest Only Strip
5.000% due 10/15/27 1,214 132
Series 2003-2644 Class IC
Interest Only Strip
5.000% due 05/15/22 1,405 136
Series 2004-2824 Class EI
Interest Only Strip
5.000% due 09/15/20 563 77
Series 2004-2858 Class YJ
Interest Only Strip
5.500% due 03/15/20 1,318 97
Series 2004-2887 Class QI
Interest Only Strip
5.500% due 02/15/24 610 62
Series 2005-2927 Class IG
Interest Only Strip
5.000% due 04/15/23 478 77
Series 2000-2266 Class F
3.260% due 11/15/30 24 24
GE Capital Commercial Mortgage Corp.
Series 2005-C1 Class A1
4.012% due 06/10/48 748 745
Series 2005-C1 Class A5
4.772% due 06/10/48 400 398
G-Force LLC
4.830% due 09/22/13 1,670 1,672
</Table>
60 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ginnie Mae I
30 Year TBA (I)
5.500% 7,500 7,616
6.000% 12,100 12,474
6.500% 2,900 3,035
6.500% due 2008 13 13
6.500% due 2009 82 85
6.500% due 2010 13 14
7.000% due 2011 18 19
9.500% due 2016 7 7
8.000% due 2017 11 12
10.500% due 2020 65 74
8.000% due 2022 33 36
8.500% due 2022 3 3
8.500% due 2024 27 30
8.000% due 2025 55 60
8.000% due 2026 218 236
8.000% due 2029 94 102
8.500% due 2029 53 57
7.500% due 2030 198 212
8.000% due 2030 164 177
8.500% due 2030 19 20
7.000% due 2031 432 457
7.500% due 2031 43 47
6.000% due 2032 217 224
7.000% due 2032 145 153
7.500% due 2032 381 409
5.000% due 2033 1,771 1,771
5.500% due 2033 3,949 4,022
6.000% due 2033 215 222
7.000% due 2033 47 50
6.000% due 2034 1,066 1,102
Ginnie Mae II
4.125% due 2027 (E) 86 87
3.375% due 2030 (E) 72 73
3.500% due 2030 (E) 387 392
7.500% due 3032 45 48
GMAC Mortgage Corp. Loan Trust (E)
Series 2003-AR1 Class A1
3.010% due 10/19/33 108 108
Series 2003-AR2 Class 2A1
3.040% due 12/19/33 457 457
Government National Mortgage Association
Series 2002-61 Class A
3.261% due 12/16/16 33 33
Series 2002-61 Class BA
4.648% due 03/16/26 975 982
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Government National Mortgage Association I
30 Year TBA (I)
5.000% 6,440 6,426
Government National Mortgage Association II
30 Year TBA
5.500% 940 954
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 1,400 1,448
Series 2005-GG3 Class A1
3.919% due 08/10/42 980 975
GS Mortgage Securities Corp. II
Series 1998-C1 Class A2
6.620% due 10/18/30 1,465 1,555
Impac CMB Trust (E)
Series 2004-2 Class A2
2.780% due 04/25/34 362 361
IndyMac Loan Trust (E)(#)
Series 2003-L1 Class A1
2.910% due 11/25/08 480 481
Series 2004-L1 Class A1
2.810% due 07/25/09 901 901
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2004-C3 Class A4
4.657% due 01/15/42 1,120 1,115
Series 2004-LN2 Class A1
4.475% due 07/15/41 737 733
Series 2005-CB11 Class A1
4.520% due 08/12/37 1,345 1,353
Series 2005-CB11 Class A3
5.197% due 08/12/37 715 736
Series 2005-CB11 Class A4
5.335% due 08/12/37 1,415 1,463
Series 2005-LDP1 Class A1
4.116% due 03/15/46 720 719
JP Morgan Mortgage Trust
Series 2005-A2 Class 3A1
4.933% due 04/25/35 1,875 1,879
LB-UBS Commercial Mortgage Trust
Series 2001-C3 Class A1
6.058% due 06/15/20 585 609
Series 2003-C3 Class A1
2.599% due 05/15/27 674 653
Series 2004-C4 Class A3
4.987% due 06/15/29 1,180 1,215
</Table>
Fixed Income I Fund 61
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mastr Reperforming Loan Trust (p)
Series 2005-1 Class 1A1
6.000% due 08/25/34 969 994
Merrill Lynch Mortgage Trust
Series 2004-MKB1 Class A2
4.353% due 02/12/42 790 786
Series 2005-MKB2 Class A1
4.446% due 09/12/42 1,183 1,188
Series 2005-MKB2 Class A4
5.204% due 09/12/42 555 567
Morgan Stanley Capital I
Series 2004-HQ3 Class A1
3.100% due 01/13/41 1,169 1,139
Series 2005-HQ5 Class A4
5.168% due 01/14/42 880 900
Series 2005-IQ9 Class A1
3.990% due 07/15/56 781 779
Series 2005-T17 Class A5
4.780% due 12/13/41 250 249
Morgan Stanley Dean Witter Capital I
Series 2001-TOP3 Class A3
6.200% due 07/15/33 845 888
Mortgage Capital Funding, Inc.
Series 1998-MC2 Class A2
6.423% due 06/18/30 2,131 2,241
Nomura Asset Securities Corp.
Series 1998-D6 Class A1B
6.590% due 03/15/30 785 833
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
3.250% due 02/25/34 178 179
Series 2004-CL1 Class 2A2
3.250% due 02/25/19 45 45
Salomon Brothers Mortgage Securities VII
Series 2003-UP2 Class A1
4.000% due 12/25/18 711 695
Small Business Administration
Series 1999-P10B Class 1
7.540% due 08/10/09 542 580
Series 2000-P10B Class 1
7.449% due 08/01/10 242 259
Small Business Administration Participation
Certificates
Series 2003-20I Class 1
5.130% due 09/01/23 92 94
Structured Asset Securities Corp.
Series 2004-21XS Class 1A3
4.440% due 12/25/34 1,230 1,218
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Wachovia Bank Commercial Mortgage Trust
Series 2005-C16 Class A2
4.380% due 10/15/41 1,195 1,189
Series 2005-C17 Class A1
4.430% due 03/15/42 3,037 3,052
Washington Mutual (E)
Series 2004-AR13 Class A1B1
2.978% due 11/25/34 965 965
Washington Mutual, Inc. (E)
Series 2005-AR6 Class B3
3.690% due 04/25/45 475 475
------------
460,984
------------
Municipal Bonds - 0.3%
City of New York General Obligation Unlimited,
weekly demand
5.000% due 03/01/30 100 104
Golden State Tobacco Securitization Corp.
Revenue Bonds, weekly demand
6.250% due 06/01/33 650 671
Metropolitan Pier & Exposition Authority Revenue
Bonds (u)
Zero Coupon due 12/15/34 6,200 1,424
New York State Environmental Facilities Corp.
Revenue Bonds, weekly demand
5.000% due 07/15/33 100 105
Tobacco Settlement Financing Corp. Revenue
Bonds, weekly demand
6.125% due 06/01/24 150 154
6.750% due 06/01/39 700 742
------------
3,200
------------
Non-US Bonds - 1.7%
Australia Government Bond
5.250% due 08/15/10 AUD 1,080 841
Bundesobligation
3.250% due 04/17/09 EUR 3,450 4,541
Canadian Government Bond
4.000% due 12/01/31 CAD 729 831
5.750% due 06/01/33 CAD 200 188
3.000% due 12/01/36 CAD 102 101
Deutsche Bundesrepublik
4.250% due 01/04/14 EUR 1,540 2,123
4.750% due 07/04/28 EUR 5,000 7,224
</Table>
62 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
France Government Bond OAT
3.000% due 07/25/09 EUR 1,739 2,459
4.000% due 04/25/55 EUR 200 258
General Motors Corp.
8.375% due 07/05/33 EUR 70 68
Poland Government Bond
6.000% due 05/24/09 PLN 2,400 731
Spain Government Bond
5.750% due 07/30/32 EUR 300 500
4.200% due 01/31/37 EUR 200 266
------------
20,131
------------
United States Government Agencies - 5.1%
Fannie Mae
2.925% due 09/22/06 (E) 900 899
3.550% due 01/12/07 4,260 4,240
3.375% due 05/15/07 3,480 3,444
6.625% due 10/15/07 1,595 1,694
2.500% due 06/15/08 (N) 4,620 4,413
3.250% due 01/15/08 3,800 3,727
3.250% due 02/15/09 695 674
4.250% due 05/15/09 5,015 5,032
3.875% due 02/15/10 1,495 1,474
6.125% due 03/15/12 555 610
4.375% due 03/15/13 (N) 1,025 1,020
Zero Coupon due 07/05/14 2,280 1,498
5.250% due 03/24/15 495 502
5.000% due 04/26/17 945 944
6.625% due 11/15/30 630 777
6.210% due 08/06/38 420 504
Federal Home Loan Bank System
2.500% due 03/13/06 1,890 1,873
3.250% due 07/21/06 185 184
2.625% due 10/16/06 2,615 2,573
5.375% due 02/15/07 560 574
4.875% due 05/15/07 2,240 2,280
3.250% due 12/17/07 3,375 3,314
4.500% due 09/16/13 920 922
5.250% due 06/18/14 830 872
5.125% due 08/15/19 330 339
Financing Corp.
Principal Only Strip
Zero Coupon due 08/03/18 585 310
Zero Coupon due 04/05/19 1,200 612
Zero Coupon due 09/26/19 800 397
Freddie Mae
3.750% due 04/15/07 2,240 2,235
4.000% due 12/15/09 (N) 1,505 1,496
6.625% due 09/15/09 2,985 3,274
4.500% due 11/15/11 870 866
5.750% due 01/15/12 3,020 3,253
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.050% due 01/26/15 1,155 1,162
6.750% due 03/15/31 1,422 1,788
------------
59,776
------------
United States Government Treasuries - 21.8%
United States Treasury Inflation Indexed Bonds
3.875% due 01/15/09 (N) 3,157 3,489
4.250% due 01/15/10 (N) 1,140 1,304
0.875% due 04/15/10 (N) 10,325 10,184
3.500% due 01/15/11 (N) 2,093 2,355
3.375% due 01/15/12 (N) 864 978
3.000% due 07/15/12 (N) 1,067 1,186
2.000% due 01/15/14 (N) 311 323
1.625% due 01/15/15 (N) 703 705
2.375% due 01/15/25 4,476 4,889
United States Treasury Notes
7.000% due 07/15/06 6,115 6,366
2.375% due 08/31/06 11,290 11,124
2.500% due 10/31/06 7,490 7,376
2.875% due 11/30/06 14,170 14,021
3.000% due 12/31/06 (N) 3,180 3,149
3.750% due 03/31/07 500 501
3.125% due 05/15/07 8,215 8,130
4.375% due 05/15/07 (N) 4,330 4,391
6.625% due 05/15/07 2,340 2,476
3.250% due 08/15/07 2,655 2,631
6.125% due 08/15/07 3,295 3,472
3.000% due 02/15/08 7,445 7,302
3.375% due 02/15/08 400 396
3.375% due 12/15/08 16,780 16,541
3.250% due 01/15/09 4,390 4,306
4.000% due 06/15/09 875 880
3.625% due 07/15/09 4,055 4,021
3.375% due 09/15/09 1,585 1,555
3.500% due 12/15/09 (N) 12,800 12,595
3.625% due 01/15/10 5,150 5,092
4.000% due 03/15/10 5,385 5,409
4.000% due 04/15/10 780 784
5.750% due 08/15/10 230 250
5.000% due 02/15/11 1,205 1,270
13.875% due 05/15/11 3,365 3,718
</Table>
Fixed Income I Fund 63
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.000% due 08/15/11 1,435 1,515
14.000% due 11/15/11 1,590 1,836
4.875% due 02/15/12 220 231
4.000% due 11/15/12 1,415 1,414
10.375% due 11/15/12 2,840 3,293
4.250% due 08/15/13 125 126
4.250% due 11/15/13 1,710 1,722
4.750% due 05/15/14 (N) 10,161 10,592
4.250% due 08/15/14 10,190 10,233
9.250% due 02/15/16 1,765 2,516
7.250% due 05/15/16 6,440 8,088
7.500% due 11/15/16 1,925 2,473
8.750% due 05/15/17 (N) 2,460 3,462
8.125% due 08/15/19 6,045 8,350
8.125% due 08/15/21 3,400 4,788
7.125% due 02/15/23 4,380 5,718
6.000% due 02/15/26 (N) 13,285 15,719
6.125% due 11/15/27 610 738
6.125% due 08/15/29 70 85
6.250% due 05/15/30 1,790 2,229
5.375% due 02/15/31 13,250 14,966
United States Treasury
Principal Only Strip
Zero Coupon due 11/15/09 90 75
Zero Coupon due 11/15/21 4,835 2,228
------------
255,566
------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,096,044) 1,102,271
------------
PREFERRED STOCKS - 0.1%
Auto and Transportation - 0.0%
General Motors Corp. (AE) 11,500 191
------------
Financial Services - 0.1%
DG Funding Trust (p) 94 1,016
Fannie Mae (AE) 6,200 344
------------
1,360
------------
TOTAL PREFERRED STOCKS
(cost $1,511) 1,551
------------
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
($) $
- -----------------------------------------------------------------------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Euribor Futures
Dec 2005 92.00 (EUR) Put (48) 14,207 --
Dec 2005 93.25 (EUR) Put (8) 2,400 --
Eurodollar Futures
Sep 2005 95.50 Call (10) 2,388 19
Jun 2005 94.50 Put (43) 10,159 --
Sep 2005 94.75 Put (70) 16,581 --
Sep 2005 94.88 Put (80) 18,975 --
Sep 2005 95.00 Put (50) 11,875 1
------------
TOTAL OPTIONS PURCHASED
(cost $31) 20
------------
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
SHORT-TERM INVESTMENTS - 24.5%
ABN Amro North America (c)(z)
2.770% due 05/02/05 1,600 1,600
Altria Group, Inc.
7.000% due 07/15/05 1,100 1,107
ANZ National, Ltd. Commercial Paper (c)(z)
2.830% due 05/31/05 4,100 4,090
Bank of Ireland Governor & Co. (c)(z)
2.560% due 05/05/05 5,700 5,698
Barclays US Funding, LLC (c)(z)
2.665% due 05/02/05 300 300
2.665% due 05/04/05 300 300
2.930% due 06/14/05 300 299
Citigroup Global Markets Holdings, Inc. (c)(z)
2.760% due 05/03/05 1,700 1,700
Countrywide Financial Corp. (E)
Series MTNA
3.120% due 03/21/06 1,300 1,299
Danske Corp. Discount Note (c)
3.010% due 07/07/05 4,900 4,862
3.020% due 07/15/05 1,700 1,686
Deutsche Telekom International Finance BV
8.250% due 06/15/05 800 804
</Table>
64 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Dexia Delaware, LLC (c)(z)
2.800% due 05/06/05 2,900 2,899
2.995% due 06/01/05 1,500 1,496
2.975% due 06/27/05 1,600 1,593
DNB Nor Bank ASA (c)(z)
2.700% due 05/31/05 1,100 1,098
Du Pont E I De Nemours & Co. Commercial Paper
(c)(z)
2.740% due 05/05/05 1,600 1,600
Fannie Mae
6.000% due 12/15/05 1,700 1,726
5.500% due 02/15/06 1,700 1,725
Fannie Mae Discount Note (c)
2.680% due 05/02/05 (z) 1,600 1,600
2.950% due 06/22/05 (z) 2,100 2,091
2.950% due 06/29/05 (sec.) 325 324
2.960% due 06/29/05 800 796
2.943% due 07/06/05 1,200 1,191
2.970% due 07/18/05 3,600 3,568
3.030% due 08/03/05 4,400 4,350
Ford Motor Credit Co.
7.600% due 08/01/05 1,400 1,410
6.875% due 02/01/06 600 607
3.573% due 07/07/05 (E) 900 894
Frank Russell Investment Company Money Market
Fund 150,119,183 150,119
Freddie Mac Discount Note (c)
2.920% due 06/30/05 7,600 7,537
2.875% due 07/12/05 2,700 2,680
3.020% due 08/09/05 4,400 4,346
General Electric Capital Corp. Discount Note
(c)(z)
2.840% due 06/01/05 1,300 1,297
2.970% die 06/20/05 5,300 5,278
General Motors Acceptance Corp.
7.500% due 07/15/05 300 301
4.750% due 05/19/05 (E) 500 500
HBOS Treasury Services, PLC (c)
2.780% due 05/04/05 (z) 1,600 1,600
3.030% due 07/11/05 3,900 3,870
International Business Machines (c)(z)
2.720% due 05/05/05 1,700 1,699
Ixis Capital Corp. (c)(z)
2.870% due 06/13/05 4,400 4,385
Nordea North America, Inc. (c)(z)
2.680% due 05/09/05 5,800 5,797
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
NPF XII, Inc. (E)(p)(O)
Series 2002-1A Class A
2.390% due 05/02/05 3,235 226
Pacific Gas & Electric Co. (E)
3.820% due 04/03/06 200 200
Rabobank USA Financial Corp. (c)(z)
2.640% due 05/20/05 4,000 3,995
2.950% due 06/21/05 2,600 2,589
Santander Financial Issuances
6.800% due 07/15/05 110 111
Skandinaviska Enskilda Banken (c)(z)
2.680% due 05/03/05 500 500
2.665% due 05/23/05 5,800 5,790
Svenska Handlesbanken, Inc. (c)
3.050% due 07/20/05 4,400 4,366
Swedbank Forenings (c)
2.800% due 05/24/05 (z) 1,500 1,497
2.980% due 06/29/05 900 896
3.005% due 07/01/05 1,500 1,491
Tennessee Valley Authority
6.375% due 06/15/05 625 627
Total Fina Elf (c)(z)
2.810% due 05/09/05 6,000 5,996
Toyota Motor Credit Co. (c)
2.740% due 05/05/05 (z) 1,700 1,700
3.020% due 07/11/05 3,400 3,374
UBS Financial Del, LLC (c)(z)
2.770% due 05/02/05 1,700 1,700
2.565% due 05/06/05 5,700 5,698
2.675% due 05/26/05 500 499
United States Treasury Bills (c)(z)(sec.)
2.690% due 06/02/05 220 220
2.710% due 06/02/05 675 673
2.780% due 06/09/05 700 698
2.740% due 06/16/05 120 120
US Bank NA
Series BKNT
5.625% due 11/30/05 560 567
Verizon Wireless Capital LLC (E)(p)
2.415% due 05/23/05 700 700
Westpac Capital Corp. (c)
3.010% due 07/08/05 600 595
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $289,705) 286,950
------------
</Table>
Fixed Income I Fund 65
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 5.3%
Frank Russell Investment Company Money Market
Fund (X) 14,968,779 14,969
State Street Securities Lending Quality Trust
Fund (X) 47,161,812 47,162
------------
TOTAL OTHER SECURITIES
(cost $62,131) 62,131
------------
TOTAL INVESTMENTS - 123.8%
(identified cost $1,449,422) 1,452,923
OTHER ASSETS AND LIABILITIES,
NET - (23.8%) (279,311)
------------
NET ASSETS - 100.0% 1,173,612
============
</Table>
See accompanying notes which are an integral part of the financial statements.
66 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
10 Year Interest Rate Swap Futures
expiration date 06/05 (38) 4,198 52
Eurodollar Futures
expiration date 06/05 (8) 1,932 (4)
expiration date 09/05 (419) 100,827 (363)
expiration date 12/05 (177) 42,509 (132)
expiration date 03/06 (82) 19,668 40
expiration date 09/06 (5) 1,197 (1)
United States Treasury Bonds
expiration date 06/05 (53) 6,087 153
United States Treasury 2 Year Notes
expiration date 06/05 (154) 31,986 17
United States Treasury 5 Year Notes
expiration date 06/05 (713) 77,327 518
United States Treasury 10 Year Notes
expiration date 06/05 (271) 30,195 488
Short Positions
United States Treasury Bonds
expiration date 06/05 (152) 17,456 (567)
United States Treasury 5 Year Notes
expiration date 06/05 (86) 9,327 (39)
United States Treasury 10 Year Notes
expiration date 06/05 (246) 27,410 (376)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (214)
===============
</Table>
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Euribor Futures
Jun 2005 97.75 (EUR) Put (21) 6,604 (1)
United States Treasury Bonds
May 2005 116.00 Call (12) 1,392 (6)
May 2005 118.00 Call (2) 236 --
May 2005 108.00 Put (71) 1,278 (1)
May 2005 111.00 Put (20) 2,220 (2)
United States Treasury Notes
10 Year Futures
May 2005 112.00 Call (14) 1,568 (5)
May 2005 113.00 Call (36) 4,068 (4)
May 2005 114.00 Call (23) 2,622 (1)
Aug 2005 110.00 Call (14) 1,540 (31)
May 2005 108.00 Put (56) 6,048 (2)
---------------
Total Liability for Options Written
(premiums received $121) (53)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 67
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 3,863 EUR 2,982 05/04/05 (27)
USD 2,439 EUR 1,902 05/10/05 19
USD 7,741 EUR 5,959 05/10/05 (40)
USD 14,057 EUR 10,862 05/10/05 (21)
USD 1,858 EUR 1,437 05/18/05 (8)
USD 2,473 EUR 1,902 08/10/05 (8)
USD 200 JPY 21,126 05/17/05 2
USD 667 JPY 71,396 06/13/05 17
USD 2,108 JPY 227,117 06/13/05 67
USD 789 PLN 2,556 05/10/05 (17)
CAD 355 USD 287 06/09/05 5
EUR 244 USD 317 05/18/05 3
EUR 1,902 USD 2,466 05/10/05 8
EUR 16,821 USD 21,986 05/10/05 249
EUR 2,982 USD 3,874 08/10/05 10
EUR 5,959 USD 7,762 08/10/05 39
EUR 7,843 USD 10,258 05/25/05 158
PLN 1,273 USD 430 05/10/05 46
PLN 1,283 USD 417 05/10/05 30
PLN 2,556 USD 784 08/10/05 17
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions 549
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
68 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAPS
- ------------------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
COUNTER AMOUNT TERMINATION VALUE
PARTY $ FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ---------------------- -------------------- ---------------- ----------------
Bank of America CAD 200 6.000% Three Month LIBOR 12/16/19 1
Barclays GBP 200 5.000% Six Month LIBOR 03/15/32 (11)
Barclays EUR 200 6.000% Six Month LIBOR 03/15/32 24
----------------
Total Market Value of Interest Rate Swaps Premiums Paid (Received) - $15 14
================
</Table>
<Table>
<Caption>
CREDIT DEFAULT SWAPS
- ---------------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
COUNTER REFERENCE AMOUNT RECEIVE TERMINATION VALUE
PARTY ENTITY $ FIXED RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
Eastman Kodak
Deutsche Bank Company 100 1.250% 03/20/10 (2)
Eastman Kodak
Goldman Sachs Company 100 1.670% 03/20/15 (6)
----------------
Total Market Value of Credit Default Swaps (8)
================
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 69
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Asset-Backed Securities 6.9
Corporate Bonds and Notes 14.8
International Debt 4.0
Mortgage-Backed Securities 39.3
Municipal Bonds 0.3
Non-US Bonds 1.7
United States Government Agencies 5.1
United States Government Treasuries 21.8
Preferred Stock 0.1
Options Purchased --*
Short-Term Investments 24.5
Other Securities 5.3
---------------
Total Investments 123.8
Other Assets and Liabilities, Net (23.8)
---------------
Net Assets 100.0
===============
Futures Contracts --*
Written Options --*
Interest Rate Swaps --*
Credit Default Swaps --*
Foreign Currency Exchange Contracts --*
</Table>
* Less than .05%
See accompanying notes which are an integral part of the financial statements.
70 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,011.60 $ 1,020.49
Expenses Paid During
Period* $ 4.54 $ 4.56
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.91%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,012.20 $ 1,021.73
Expenses Paid During
Period* $ 3.29 $ 3.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.66%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
Fixed Income III Fund 71
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 85.0%
Asset-Backed Securities - 8.1%
ABSC NIMs Trust
Series 2004-HE1 Class A
7.000% due 01/17/34 34 34
Alliance Capital Funding LLC (p)
Series 1998-1 Class A3
5.840% due 02/15/10 24 24
American Airlines, Inc.
6.817% due 05/23/11 205 191
7.858% due 10/01/11 195 201
American Express Credit Account Master Trust (E)
Series 2002-1 Class A
2.920% due 09/15/09 500 501
Series 2002-2 Class A
2.920% due 11/16/09 675 676
Series 2002-3 Class A
2.920% due 12/15/09 575 576
Ameriquest Mortgage Securities, Inc. (E)
Series 2002-D Class M1
5.350% due 02/25/33 145 147
Asset Backed Funding Certificates (E)
Series 2004-HE1 Class A1
2.980% due 06/25/22 129 129
Series 2004-OPT5 Class A2
3.040% due 06/25/25 414 414
Series 2005-WF1 Class A2A
3.140% due 01/25/35 500 500
BA Master Credit Card Trust (E)
Series 1999-C Class A
3.060% due 08/15/08 825 827
Bear Stearns Asset Backed Securities, Inc. (E)
Series 2004-BO1 Class 1A1
3.050% due 09/25/34 519 519
Capital Auto Receivables Asset Trust
Series 2003-2 Class A3A
1.440% due 02/15/07 206 205
Series 2004-2 Class A2
3.350% due 02/15/08 300 297
Capital Auto Receivables Asset Trust (E)
Series 2003-3 Class A3B
2.890% due 01/15/08 350 350
Capital One Multi-Asset Execution Trust
Series 2003-C2 Class C2
4.320% due 04/15/09 85 85
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Carrington Mortgage Loan Trust (E)
Series 2005-NC1 Class A1A
2.980% due 01/25/35 402 402
Chancellor/Triton CBO, Ltd. (p)
Series 1998-1A Class A1
6.710% due 08/05/10 113 115
Citibank Credit Card Issuance Trust
Series 2000-A3 Class A3
6.875% due 11/16/09 200 214
Citifinancial Mortgage Securities, Inc.
Series 2003-3 Class AF2
3.082% due 08/25/33 110 109
Series 2003-4 Class AF3
3.221% due 10/25/33 115 114
Continental Airlines, Inc.
6.648% due 09/15/17 58 55
Countrywide Asset-Backed Certificates
Series 2004-10 Class AF2
3.323% due 05/25/22 285 282
Series 2004-13 Class AF2
3.683% due 08/25/24 235 233
Series 2004-7 Class AF2
3.324% due 12/25/23 405 400
Series 2004-9 Class AF2
3.337% due 09/25/23 195 193
Series 2004-S1 Class A2
3.872% due 03/25/20 245 243
Countrywide Asset-Backed Certificates (E)
Series 2004-6 Class 2A1
3.040% due 10/25/21 333 334
Countrywide Asset-Backed Certificates (p)
Series 2004-1NIMs Class NOTE
6.000% due 05/25/34 44 44
Entergy Gulf States, Inc. (E)
2.800% due 12/01/09 100 100
Equifirst Mortgage Loan Trust (E)
Series 2005-1 Class A1
2.890% due 04/25/35 349 349
Equity One ABS, Inc. (E)
Series 2004-2 Class AF1
2.960% due 07/25/34 335 335
</Table>
72 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae
Series 1992-10 Class ZD
8.000% due 11/25/21 1,137 1,177
Series 1996-46 Class ZA
7.500% due 11/25/26 132 142
Series 2005-1 Class KZ
5.000% due 02/25/35 208 190
Fannie Mae Grantor Trust
Series 2004-T4 Class A2
3.930% due 02/25/20 235 234
Series 2004-T4 Class A3
4.420% due 08/25/24 185 185
Freddie Mac
Series 2001-2326 Class ZQ
6.500% due 06/15/31 551 586
GE Capital Credit Card Master Note Trust (E)
Series 2004-1 Class A
2.640% due 06/15/10 300 300
Series 2004-2 Class A
2.850% due 09/15/10 600 600
GE Dealer Floorplan Master Note Trust (E)
Series 2004-1 Class A
2.900% due 07/20/08 350 350
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 530 525
GMAC Mortgage Corp. Loan Trust (E)
Series 2004-HE4 Class A1
2.960% due 03/25/35 400 400
GSAA Trust (p)
Series 2004-4N Class NOTE
6.250% due 05/25/34 87 87
GSAMP Trust (E)
Series 2004-NC2 Class A2A
2.710% due 10/01/34 682 682
Series 2004-SEA2 Class A2A
3.140% due 03/25/34 408 408
Series 2005-AHL Class A1
3.154% due 04/25/35 350 350
Harley-Davidson Motorcycle Trust
Series 2003-1 Class A1
1.560% due 05/15/07 6 6
Series 2004-2 Class A1
2.180% due 01/15/09 326 323
Honda Auto Receivables Owner Trust
Series 2004-2 Class A2
2.520% due 02/15/07 430 428
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Long Beach Mortgage Loan Trust (E)
Series 2003-2 Class M2
4.920% due 06/25/33 485 496
Series 2004-A Class A
3.000% due 02/25/24 118 118
Series 2005-1 Class 2A1
2.990% due 02/25/35 490 490
Series 2005-2 Class 2A1
2.93% due 04/25/35 650 650
Mastr Asset Backed Securities Trust (E)
Series 2005-OPT1 Class A3
3.190% due 03/25/35 400 400
MBNA Credit Card Master Note Trust (E)
Series 2002-A10 Class A10
2.950% due 02/16/10 550 552
MBNA Master Credit Card Trust USA
Series 2000-E Class A
7.800% due 10/15/12 705 817
Merrill Lynch Mortgage Investors, Inc. (E)
Series 2004-HE2 Class A2A
3.050% due 08/25/35 253 253
Series 2004-WMC5 Class A2B1
3.030% due 07/25/35 214 214
Series 2004-WMC5 Class A2B2
3.200% due 07/25/35 255 256
Series 2005-NC1 Class A2B
3.070% due 10/25/35 95 95
Series 2005-WMC1 Class A2A
2.950% due 09/25/35 401 401
Series 2005-WMC1 Class A2B
3.070% due 09/25/35 280 280
Mid-State Trust
Series 2003-11 Class A1
4.864% due 07/15/38 66 64
Series 2004-1 Class A
6.005% due 08/15/37 70 71
Nelnet Student Loan Trust (E)
Series 2004-4 Class A1
2.690% due 04/25/11 107 107
New Century Home Equity Loan Trust (E)
Series 2004-4 Class A3
2.990% due 02/25/35 548 548
Series 2004-A Class AII1
3.030% due 08/25/34 185 185
</Table>
Fixed Income III Fund 73
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Novastar Home Equity Loan (E)
Series 2004-4 Class A2B
3.190% due 03/25/35 320 321
Option One Mortgage Loan Trust (E)
Series 2003-2 Class M2
4.720% due 04/25/33 615 626
Series 2003-4 Class M2
4.670% due 07/25/33 615 627
Ownit Mortgage Loan Asset Backed Certificates
(E)
Series 2005-2 Class A2A
3.130% due 03/25/36 396 396
Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF2
3.914% due 05/25/35 145 144
Power Contract Financing LLC (p)
6.256% due 02/01/10 165 171
Premium Asset Trust
2.950% due 02/02/07 245 245
Renaissance Home Equity Loan Trust
Series 2004-4 Class AF2
3.856% due 02/25/35 260 258
Series 2005-1 Class AF3
4.456% due 05/25/35 345 345
Renaissance Home Equity Loan Trust (E)
Series 2004-2 Class AF1
3.050% due 07/25/34 641 641
Residential Asset Mortgage Products, Inc.
Series 2004-RS10 Class AI2
3.620% due 07/25/26 210 208
Series 2004-RS4 Class AI3
4.003% due 01/25/30 310 310
Series 2004-RS6 Class AI3
4.540% due 08/25/28 245 246
Series 2004-RS7 Class AI3
4.450% due 07/25/28 530 532
Series 2004-RS8 Class AI2
3.810% due 01/25/26 245 244
Series 2004-RS8 Class AI3
4.230% due 05/25/29 160 160
Series 2004-RZ2 Class AI3
4.300% due 01/25/31 155 155
Residential Asset Mortgage Products, Inc. (E)
Series 2004-RS12 Class AII2
3.080% due 12/25/34 130 130
Series 2004-RS8 Class AII1
2.990% due 05/25/26 808 808
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-RS1 Class AII1
2.960% due 01/25/35 367 367
Residential Asset Securities Corp.
Series 2004-KS8 Class AI2
3.340% due 10/25/24 600 594
Residential Asset Securities Corp. (E)
Series 2003-KS1 Class M2
4.770% due 01/25/33 330 333
Series 2004-KS9 Class AI1
3.020% due 07/25/21 135 135
Residential Funding Mortgage Securities II (E)
Series 2004-HI2 Class A1
3.000% due 02/25/13 61 61
Saxon Asset Securities Trust (E)
Series 2005-1 Class A2A
2.960% due 05/25/35 316 316
Series 2005-1 Class A2B
3.070% due 05/25/35 385 385
Sears Credit Account Master Trust (E)
Series 2002-4 Class A
2.940% due 08/18/09 1,200 1,200
Series 2002-5 Class A
3.190% due 11/17/09 1,100 1,102
Sharps SP I LLC Net Interest Margin Trust (p)
Series 2004-HE1N Class N
6.900% due 11/25/33 21 21
Sharps SP I LLC
6.850% due 03/01/23 73 73
7.000% due 01/25/34 81 81
SLM Student Loan Trust (E)
Series 2004-1 Class A1
2.740% due 01/26/15 109 109
Series 2004-3 Class A3
2.790% due 04/25/16 300 301
Series 2004-6 Class A2
2.740% due 01/25/13 456 456
Series 2004-8 Class A3
2.790% due 07/27/15 330 331
Series 2004-9 Class A2
2.720% due 10/25/12 600 600
Small Business Administration Participation
Certificates
7.500% due 04/01/17 2,193 2,338
</Table>
74 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Structured Asset Investment Loan Trust (E)
Series 2003-BC8 Class M3
4.950% due 08/25/33 375 384
Series 2004-3 Class A4
2.950% due 04/25/34 187 187
Series 2005-2 Class A2
2.970% due 03/25/35 381 381
Structured Asset Securities Corp.
Series 2001-SB1 Class A2
3.375% due 08/25/31 216 203
Series 2004-19XS Class A2
4.370% due 10/25/34 600 594
Series 2005-2XS Class 1A2A
4.510% due 02/25/35 585 584
Tenaska Alabama II Partners, LP (p)
6.125% due 03/30/23 157 163
Terwin Mortgage Trust (E)
Series 2004-22SL Class A
3.240% due 11/25/35 461 462
TXU Electric Delivery Transition Bond Co.
Series 2004-1 Class A2
4.810% due 11/17/14 100 101
USAA Auto Owner Trust
Series 2004-2 Class A2
2.410% due 02/15/07 176 176
Wachovia Auto Owner Trust
Series 2004-B Class A2
2.400% due 05/21/07 350 349
Wells Fargo Financial Auto Owner Trust
Series 2004-A Class A2
1.470% due 03/15/07 106 106
Wells Fargo Home Equity Trust (E)
Series 2004-2 Class A31
3.010% due 06/25/19 56 56
World Financial Properties (p)
6.910% due 09/01/13 174 187
6.950% due 09/01/13 208 225
World Omni Auto Receivables Trust
Series 2004-A Class A2
2.580% due 07/12/07 291 290
------------
41,986
------------
Corporate Bonds and Notes - 13.4%
Aetna, Inc.
7.875% due 03/01/11 235 271
AIG SunAmerica Global Financing VI (p)
6.300% due 05/10/11 300 325
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Albertson's, Inc.
7.450% due 08/01/29 85 93
Alltel Corp.
4.656% due 05/17/07 230 232
Altria Group, Inc.
7.750% due 01/15/27 60 70
Altria Group, Inc. (N)
7.000% due 11/04/13 110 121
Amerada Hess Corp.
6.650% due 08/15/11 55 59
7.300% due 08/15/31 170 194
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 40 41
American General Finance Corp.
Series MTNH
4.625% due 09/01/10 20 20
Series MTNI
4.625% due 05/15/09 70 70
American General Finance Corp. (E)(N)
Series MTNG
3.093% due 03/23/07 100 100
American RE Corp.
Series B
7.450% due 12/15/26 365 420
Arizona Public Service Co.
6.750% due 11/15/06 60 62
5.800% due 06/30/14 120 127
AT&T Corp.
9.050% due 11/15/11 28 32
9.750% due 11/15/31 175 218
Atmos Energy Corp. (E)
3.035% due 10/15/07 190 190
Autonation, Inc.
9.000% due 08/01/08 40 44
Avista Capital Trust III
6.500% due 04/01/34 350 357
Avista Corp.
9.750% due 06/01/08 220 251
AXA Financial, Inc.
6.500% due 04/01/08 40 42
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 775 845
Bank of America Corp.
7.800% due 02/15/10 65 74
</Table>
Fixed Income III Fund 75
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America Corp. (N)
4.250% due 10/01/10 45 45
BellSouth Corp.
4.200% due 09/15/09 100 99
4.750% due 11/15/12 170 169
5.200% due 12/15/16 65 65
Boeing Capital Corp. (N)
6.100% due 03/01/11 100 107
Boyd Gaming Corp.
9.250% due 08/01/09 110 116
Burlington Northern and Santa Fe Railway Co.
4.575% due 01/15/21 80 79
Burlington Northern Santa Fe Corp.
6.875% due 12/01/27 60 70
Campbell Soup Co.
5.875% due 10/01/08 115 121
Caremark Rx, Inc.
7.375% due 10/01/06 350 364
Carolina Power & Light Co.
6.500% due 07/15/12 45 49
Caterpillar Financial Services Corp.
Series MTNF
3.625% due 11/15/07 60 59
Caterpillar Financial Services Corp. (E)
Series MTNF
2.920% due 08/20/07 155 155
CC Funding Trust I
6.900% due 02/16/07 30 31
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 135 142
CenterPoint Energy Resources Corp.
7.875% due 04/01/13 360 424
Centex Corp. (E)
2.993% due 08/01/07 215 215
Cincinnati Gas & Electric
5.700% due 09/15/12 65 68
CIT Group, Inc.
3.650% due 11/23/07 90 88
6.875% due 11/01/09 55 60
CIT Group, Inc. (N)
5.750% due 09/25/07 90 93
Citicorp
Series MTNF
6.375% due 11/15/08 205 218
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
2.999% due 03/07/08 700 700
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Citigroup, Inc.
3.500% due 02/01/08 805 790
4.125% due 02/22/10 40 39
6.000% due 02/21/12 40 43
5.625% due 08/27/12 115 121
5.000% due 09/15/14 365 367
5.875% due 02/22/33 435 456
Citizens Communications Co.
9.250% due 05/15/11 210 227
Clear Channel Communications, Inc. (N)
5.750% due 01/15/13 90 88
5.500% due 09/15/14 290 275
Clorox Co. (E)(p)
2.544% due 12/14/07 165 165
Clorox Co. (p)
4.200% due 01/15/10 155 154
5.000% due 01/15/15 115 117
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 80 83
Comcast Cable Communications
8.375% due 05/01/07 320 345
6.750% due 01/30/11 125 137
Comcast Corp. (N)
5.850% due 01/15/10 280 294
Consolidated Natural Gas Co.
5.000% due 12/01/14 135 134
Series C
6.250% due 11/01/11 80 87
Consumers Energy Co.
4.800% due 02/17/09 115 116
4.000% due 05/15/10 30 29
5.375% due 04/15/13 20 20
Continental Airlines, Inc.
Series 00-1
7.918% due 05/01/10 380 378
Series 01-1
6.503% due 06/15/11 115 110
Corrections Corp. of America
7.500% due 05/01/11 125 129
Countrywide Home Loans, Inc.
3.250% due 05/21/08 165 159
Series MTNK
5.500% due 02/01/07 70 71
</Table>
76 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COX Communications, Inc. (p)
4.625% due 01/15/10 280 276
Credit Suisse First Boston USA, Inc.
4.625% due 01/15/08 100 101
6.500% due 01/15/12 70 77
5.500% due 08/15/13 55 57
CSC Holdings, Inc.
10.500% due 05/15/16 200 219
CSX Corp.
9.000% due 08/15/06 55 58
CSX Corp. (E)
3.050% due 08/03/06 120 120
DaimlerChrysler NA Holding Corp. (N)
7.300% due 01/15/12 15 16
8.500% due 01/18/31 100 114
DaimlerChrysler NA Holding Corp. (E)
Series MTND
3.150% due 11/17/06 900 896
3.450% due 09/10/07 285 282
Detroit Edison Co.
6.125% due 10/01/10 15 16
6.350% due 10/15/32 130 146
Detroit Edison Co. (p)
4.800% due 02/15/15 130 128
Developers Diversified Realty Corp.
4.625% due 08/01/10 255 250
Devon Financing Corp. ULC
6.875% due 09/30/11 130 144
Dominion Resources, Inc.
Series A
7.195% due 09/15/14 190 219
Series B
6.250% due 06/30/12 60 65
DPL, Inc.
6.875% due 09/01/11 215 229
DR Horton, Inc.
5.250% due 02/15/15 155 144
5.625% due 01/15/16 245 236
Dresdner Funding Trust I (p)
8.151% due 06/30/31 310 385
Duke Capital Corp.
4.302% due 05/18/06 95 95
Duke Energy Field Services LLC
5.750% due 11/15/06 40 41
Duke Energy Field Services LLC (N)
6.875% due 02/01/11 20 22
Echostar DBS Corp.
6.375% due 10/01/11 195 193
El Paso Corp. (N)
7.875% due 06/15/12 300 293
8.050% due 10/15/30 500 469
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
El Paso Natural Gas Co.
Series A
7.625% due 08/01/10 65 68
Eli Lilly & Co.
6.770% due 01/01/36 370 454
Entergy Gulf States, Inc.
3.600% due 06/01/08 40 39
Enterprise Products Operating, LP
4.000% due 10/15/07 255 250
4.625% due 10/15/09 175 172
EOP Operating, LP
7.500% due 04/19/29 95 110
EOP Operating, LP (N)
4.750% due 03/15/14 20 19
Erac USA Finance Co. (p)
7.350% due 06/15/08 215 233
Exelon Corp.
6.750% due 05/01/11 70 77
Farmers Exchange Capital (p)
7.050% due 07/15/28 550 581
Farmers Insurance Exchange (p)
6.000% due 08/01/14 225 231
8.625% due 05/01/24 310 382
FedEx Corp.
2.650% due 04/01/07 70 68
7.600% due 07/01/97 90 112
Fifth Third Bank (N)
7.750% due 08/15/10 330 333
Financing Corp.
Principal Only Strip
Series 10P Zero Coupon due 11/30/17 840 463
Series 15P Zero Coupon due 03/07/19 90 46
Series 2P Zero Coupon due 11/30/17 340 187
FirstEnergy Corp.
Series B
6.450% due 11/15/11 530 569
Series C
7.375% due 11/15/31 140 165
Fisher Scientific International, Inc. (p)
6.750% due 08/15/14 80 81
FMC Corp.
10.250% due 11/01/09 15 17
</Table>
Fixed Income III Fund 77
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ford Motor Co.
6.375% due 02/01/29 130 97
Ford Motor Co. (N)
7.450% due 07/16/31 315 259
Ford Motor Credit Co.
5.800% due 01/12/09 400 372
5.700% due 01/15/10 130 117
7.875% due 06/15/10 450 433
7.375% due 02/01/11 610 571
7.000% due 10/01/13 150 135
Ford Motor Credit Co. (N)
5.625% due 10/01/08 145 137
Ford Motor Credit Co. (E)
3.750% due 11/16/06 400 393
Ford Motor Credit Co. (E)(N)
4.000% due 03/21/07 900 876
FPL Group Capital, Inc.
4.086% due 02/16/07 360 359
General Electric Capital Corp.
4.125% due 03/04/08 335 334
Series MTNA
4.250% due 12/01/10 55 54
6.000% due 06/15/12 50 54
6.750% due 03/15/32 150 179
General Electric Capital Corp. (N)
Series MTNA
4.750% due 09/15/14 185 184
General Electric Co.
5.000% due 02/01/13 535 544
General Motors Acceptance Corp.
7.250% due 03/02/11 145 130
6.875% due 09/15/11 1,175 1,029
7.000% due 02/01/12 70 61
Zero Coupon due 06/15/15 710 293
8.000% due 11/01/31 55 46
General Motors Acceptance Corp. (N)
4.500% due 07/15/06 45 44
General Motors Acceptance Corp. (E)
4.050% due 01/16/07 200 191
3.610% due 07/16/07 250 234
General Motors Corp. (N)
8.375% due 07/15/33 465 354
Glencore Funding LLC (p)
6.000% due 04/15/14 95 90
Golden West Financial Corp.
4.125% due 08/15/07 160 160
Goldman Sachs Group, Inc.
6.875% due 01/15/11 605 669
5.250% due 10/15/13 185 188
6.345% due 02/15/34 305 319
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Great Atlantic & Pacific Tea Co.
7.750% due 04/15/07 100 101
GTE Hawaiian Telephone Co.
7.375% due 09/01/06 65 66
Halliburton Co.
5.500% due 10/15/10 115 120
Hartford Financial Services Group, Inc.
7.900% due 06/15/10 35 40
HCA, Inc.
5.500% due 12/01/09 245 243
7.875% due 02/01/11 40 44
6.950% due 05/01/12 30 31
7.500% due 12/15/23 200 202
Health Net, Inc.
9.875% due 04/15/11 190 229
Historic TW, Inc.
8.180% due 08/15/07 270 292
9.125% due 01/15/13 190 239
8.050% due 01/15/16 580 696
6.625% due 05/15/29 25 27
HJ Heinz Finance Co.
6.750% due 03/15/32 105 125
6.000% due 03/15/12 50 54
Household Finance Corp.
5.875% due 02/01/09 260 272
4.750% due 05/15/09 610 615
4.125% due 11/16/09 105 103
8.000% due 07/15/10 45 52
6.375% due 11/27/12 150 164
HSBC Bank USA NA
Series BKNT
3.875% due 09/15/09 265 259
HVB Funding Trust I (p)
8.741% due 06/30/31 185 235
HVB Funding Trust III (p)
9.000% due 10/22/31 40 52
Hyatt Equities LLC (p)
6.875% due 06/15/07 110 114
ICI Wilmington, Inc.
4.375% due 12/01/08 65 64
International Lease Finance Corp.
6.375% due 03/15/09 155 165
International Paper Co.
5.500% due 01/15/14 280 282
Interpublic Group of Cos., Inc.
5.400% due 11/15/09 100 97
Iron Mountain, Inc.
7.750% due 01/15/15 80 76
</Table>
78 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Iron Mountain, Inc. (N)
6.625% due 01/01/16 40 36
ITT Industries, Inc.
7.400% due 11/15/25 135 162
John Hancock Global Funding II (p)
7.900% due 07/02/10 200 231
Jones Apparel Group, Inc. (p)
4.250% due 11/15/09 155 149
JP Morgan & Co., Inc.
Series MTNA
6.000% due 01/15/09 165 174
JPMorgan Chase & Co.
5.350% due 03/01/07 75 77
7.000% due 11/15/09 10 11
6.750% due 02/01/11 90 99
6.625% due 03/15/12 35 39
Kellogg Co.
Series B
6.600% due 04/01/11 685 758
Kerr-McGee Corp.
5.875% due 09/15/06 20 20
7.875% due 09/15/31 100 100
Kraft Foods, Inc.
5.250% due 06/01/07 75 76
4.125% due 11/12/09 340 334
5.625% due 11/01/11 1,230 1,290
Kroger Co. (The)
7.250% due 06/01/09 175 191
8.000% due 09/15/29 75 92
Lehman Brothers Holdings, Inc.
6.625% due 01/18/12 275 304
Levi Strauss & Co.
12.250% due 12/15/12 170 180
Liberty Media Corp. (E)
4.510% due 09/17/06 550 557
Liberty Mutual Group (p)
7.000% due 03/15/34 255 263
Limited Brands (N)
6.950% due 03/01/33 220 226
Lockheed Martin Corp.
8.500% due 12/01/29 35 49
Lodgenet Entertainment Corp.
9.500% due 06/15/13 120 129
Lubrizol Corp.
4.625% due 10/01/09 190 188
M&I Marshall & Ilsley Bank
Series BKNT
3.800% due 02/08/08 245 242
Manufacturers & Traders Trust Co.
8.000% due 10/01/10 115 134
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Marsh & McLennan Cos., Inc.
5.375% due 03/15/07 345 351
5.875% due 08/01/33 80 76
Marsh & McLennan Cos., Inc. (N)
5.375% due 07/15/14 150 146
Marsh & McLennan Cos., Inc. (E)
2.770% due 07/13/07 220 219
May Department Stores Co. (The)
5.750% due 07/15/14 170 176
May Department Stores Co. (The) (N)
4.800% due 07/15/09 60 60
MBNA America Bank NA
7.125% due 11/15/12 30 34
MBNA Corp.
6.125% due 03/01/13 210 222
MBNA Corp. (E)
3.640% due 05/05/08 190 190
MCI, Inc.
6.908% due 05/01/07 465 472
7.688% due 05/01/09 155 160
Medco Health Solutions, Inc.
7.250% due 08/15/13 380 422
MGM Mirage
9.750% due 06/01/07 265 286
8.500% due 09/15/10 170 185
6.750% due 09/01/12 80 80
Michaels Stores, Inc.
9.250% due 07/01/09 240 253
Midland Funding II
Series B
13.250% due 07/23/06 220 236
Miller Brewing Co. (p)
4.250% due 08/15/08 145 144
5.500% due 08/15/13 230 237
Mohawk Industries, Inc.
Series D
7.200% due 04/15/12 75 85
Monongahela Power Co.
5.000% due 10/01/06 210 212
Morgan Stanley
6.750% due 04/15/11 335 370
4.750% due 04/01/14 180 174
Motorola, Inc.
4.608% due 11/16/07 400 403
Natexis Ambs Co. LLC (p)(f)
8.440% due 12/30/49 185 206
</Table>
Fixed Income III Fund 79
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 85 89
Nationwide Financial Services
6.250% due 11/15/11 265 289
Nationwide Mutual Insurance Co. (p)
7.875% due 04/01/33 235 290
Nevada Power Co.
9.000% due 08/15/13 60 66
New Cingular Wireless Services, Inc.
8.750% due 03/01/31 65 89
News America Holdings
9.250% due 02/01/13 25 32
7.750% due 12/01/45 85 102
7.900% due 12/01/95 120 145
8.250% due 10/17/96 45 55
News America, Inc.
7.125% due 04/08/28 30 33
7.300% due 04/30/28 135 155
Series WI
5.300% due 12/15/14 45 45
Nisource Finance Corp.
7.875% due 11/15/10 225 260
Nisource Finance Corp. (E)
3.430% due 11/23/09 95 96
Norfolk Southern Corp.
7.350% due 05/15/07 35 37
7.050% due 05/01/37 115 138
7.900% due 05/15/97 285 380
North Front Pass-Through Trust (p)
5.810% due 12/15/24 500 512
Occidental Petroleum Corp.
9.250% due 08/01/19 135 185
Ohio Edison Co. (N)
5.450% due 05/01/15 45 46
Ohio Power Co. (N)
Series F
5.500% due 02/15/13 25 26
Pacific Gas & Electric Co.
3.600% due 03/01/09 165 160
4.200% due 03/01/11 90 88
6.050% due 03/01/34 245 262
Panhandle Eastern Pipe Line
2.750% due 03/15/07 45 44
Pemex Project Funding Master Trust
8.000% due 11/15/11 20 22
7.375% due 12/15/14 200 217
8.625% due 02/01/22 285 330
Pinnacle Entertainment, Inc.
8.250% due 03/15/12 170 167
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pinnacle West Energy Corp. (E)(p)
3.630% due 04/01/07 245 245
Plains Exploration & Production Co. (N)
7.125% due 06/15/14 30 31
Popular North America Capital Trust I
6.564% due 09/15/34 240 261
Progress Energy, Inc.
7.100% due 03/01/11 55 60
7.000% due 10/30/31 210 234
PSEG Energy Holdings LLC
7.750% due 04/16/07 450 461
8.625% due 02/15/08 105 110
Qwest Capital Funding, Inc.
6.500% due 11/15/18 25 19
Qwest Capital Funding, Inc. (N)
7.000% due 08/03/09 25 23
Qwest Corp. (p)
7.875% due 09/01/11 470 477
Qwest Services Corp. (p)
13.500% due 12/15/07 90 98
14.000% due 12/15/10 135 152
Rabobank Capital Funding II (p)(f)
5.260% due 12/31/49 205 207
Raytheon Co.
8.300% due 03/01/10 50 58
RBS Capital Trust I (f)
5.512% due 9/29/49 385 391
RC Trust 1 Equity Preferred
7.000% due 05/15/06 420 216
5.150% due 01/15/11 95 96
Reliant Energy, Inc.
6.750% due 12/15/14 25 22
Safeway, Inc. (N)
5.800% due 08/15/12 70 72
7.250% due 02/01/31 90 99
SBC Communications, Inc.
4.125% due 09/15/09 195 192
5.100% due 09/15/14 185 185
6.150% due 09/15/34 325 337
SCANA Corp. (E)
3.109% due 03/01/08 220 220
Sealed Air Corp. (p)
5.625% due 07/15/13 135 137
Sempra Energy
4.621% due 05/17/07 380 382
</Table>
80 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sempra Energy (E)
3.318% due 05/21/08 260 261
SLM Corp.
4.000% due 01/15/10 140 137
Smithfield Foods, Inc.
7.000% due 08/01/11 35 36
Series B
8.000% due 10/15/09 105 112
7.750% due 05/15/13 30 32
Southern California Edison Co.
7.625% due 01/15/10 240 270
5.000% due 01/15/14 40 40
Southern California Edison Co. (N)
6.000% due 01/15/34 170 183
Southern California Edison Co. (E)
3.075% due 12/13/07 235 235
Sprint Capital Corp.
4.780% due 08/17/06 185 186
6.375% due 05/01/09 75 80
6.875% due 11/15/28 285 318
8.750% due 03/15/32 610 820
Sprint Capital Corp. (N)
8.375% due 03/15/12 650 770
Starwood Hotels & Resorts Worldwide, Inc. (o)
7.375% due 05/01/07 20 21
7.875% due 05/01/12 165 181
TCI Communications, Inc.
7.875% due 02/15/26 80 100
TECO Energy, Inc. (N)
7.200% due 05/01/11 160 169
Tele-Communications-TCI Group
9.800% due 02/01/12 300 382
7.875% due 08/01/13 465 549
Temple-Inland, Inc.
5.003% due 05/17/07 240 242
Tenet Healthcare Corp.
6.875% due 11/15/31 35 28
Tenet Healthcare Corp. (N)
7.375% due 02/01/13 50 47
Tesoro Corp.
8.000% due 04/15/08 220 230
Texas Eastern Transmission, LP
7.000% due 07/15/32 45 53
Texas Genco LLC (p)
6.875% due 12/15/14 380 372
Texas-New Mexico Power Co.
6.250% due 01/15/09 70 74
Time Warner Cos., Inc.
7.570% due 02/01/24 35 42
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Time Warner Entertainment Co., LP
Series *
8.375% due 03/15/23 175 220
Time Warner, Inc.
6.750% due 04/15/11 425 467
7.625% due 04/15/31 50 61
7.700% due 05/01/32 20 25
TNP Enterprises, Inc.
10.250% due 04/01/10 70 74
Travelers Property Casualty Corp. (N)
5.000% due 03/15/13 110 111
Twin Reefs Pass-Through Trust (E)(p)(f)
3.77% due 12/10/49 300 301
TXU Corp.
Series J
6.375% due 06/15/06 40 41
TXU Corp. (p)
5.550% due 11/15/14 810 781
TXU Corp. (p)(N)
4.800% due 11/15/09 625 613
TXU Energy Co. LLC (N)
7.000% due 03/15/13 135 150
Tyson Foods, Inc. (N)
8.250% due 10/01/11 90 106
Union Pacific Corp.
5.750% due 10/15/07 45 46
6.625% due 02/01/08 60 63
6.650% due 01/15/11 45 49
6.125% due 01/15/12 195 209
Series MTNE
6.790% due 11/09/07 35 37
Union Planters Corp.
7.750% due 03/01/11 125 145
Valero Logistics Operations, LP
6.050% due 03/15/13 295 313
Verizon
6.500% due 09/15/11 40 43
Verizon Global Funding Corp.
7.250% due 12/01/10 345 387
Washington Mutual, Inc.
8.250% due 04/01/10 180 206
WellPoint, Inc. (p)
3.750% due 12/14/07 205 203
4.250% due 12/15/09 170 168
Wells Fargo & Co.
4.950% due 10/16/13 155 157
</Table>
Fixed Income III Fund 81
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Weyerhaeuser Co.
6.000% due 08/01/06 30 31
6.750% due 03/15/12 65 69
Williams Gas Pipelines (p)
7.375% due 11/15/06 200 209
Wisconsin Electric Power
3.500% due 12/01/07 65 64
Witco Corp.
7.750% due 04/01/23 200 206
6.875% due 02/01/26 210 202
Wyeth
5.500% due 03/15/13 100 104
5.500% due 02/01/14 15 16
Xerox Corp.
7.125% due 06/15/10 115 120
6.875% due 08/15/11 100 104
Yum! Brands, Inc.
8.875% due 04/15/11 205 248
Zurich Capital Trust I (p)
8.376% due 06/01/37 370 401
------------
70,017
------------
International Debt - 5.6%
Abbey National PLC (f)
(Step Up, 06/15/08, 7.750%)
6.700% due 06/15/49 275 292
Abitibi-Consolidated, Inc.
6.950% due 12/15/06 338 339
Abitibi-Consolidated, Inc. (N)
8.550% due 08/01/10 140 135
8.850% due 08/01/30 215 183
Amvescap PLC
4.500% due 12/15/09 340 338
Argentina Government International Bond
11.375% due 03/15/10 80 23
11.375% due 01/30/17 320 93
Arlington Street CDO, Ltd. (p)
Series 2000-1A Class A2
7.660% due 06/10/12 898 925
Axa SA
8.600% due 12/15/30 85 113
Banco Santander Chile (E)(p)
3.310% due 12/09/09 195 195
Batterson Park CBO I, Ltd.
Series 1998-1A Class A4
6.130% due 01/02/11 32 33
Bowater Canada Finance
7.950% due 11/15/11 245 243
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Brazilian Government International Bond
11.000% due 01/11/12 300 347
8.000% due 04/15/14 223 221
8.875% due 04/15/24 530 517
11.000% due 08/17/40 800 906
Brazilian Government International Bond (N)
9.250% due 10/22/10 90 97
Brazilian Government International Bond (E)
3.125% due 04/15/09 735 721
8.840% due 06/29/09 100 114
3.125% due 04/15/12 124 116
British Sky Broadcasting PLC
8.200% due 07/15/09 345 391
British Telecommunications PLC
8.375% due 12/15/10 185 217
8.875% due 12/15/30 20 27
Canadian Oil Sands, Ltd. (p)
4.800% due 08/10/09 140 140
Chile Government International Bond
5.500% due 01/15/13 1,500 1,560
Conoco Funding Co.
6.350% due 10/15/11 675 746
Deutsche Telekom International Finance BV
8.500% due 06/15/10 595 690
8.750% due 06/15/30 375 503
El Salvador Government International Bond
8.250% due 04/10/32 250 257
EnCana Corp.
6.500% due 08/15/34 60 68
Export-Import Bank of Korea (p)
4.125% due 02/10/09 160 157
Export-Import Bank of Korea
4.250% due 11/27/07 80 80
France Telecom SA
8.000% due 03/01/11 550 634
8.750% due 03/01/31 220 298
Hanarotelecom, Inc. (p)
7.000% due 02/01/12 300 288
Hutchison Whampoa International 03/13, Ltd.
(p)(N)
6.500% due 02/13/13 165 177
</Table>
82 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Intelsat Bermuda, Ltd. (E)(p)
7.805% due 01/15/12 145 145
Intelsat Bermuda, Ltd. (p)
8.250% due 01/15/13 90 91
Intelsat, Ltd.
6.500% due 11/01/13 325 258
Ispat Inland ULC
9.750% due 04/01/14 529 604
Juniper CBO, Ltd. (p)
Series 1999-1A Class A1
6.830% due 04/15/11 176 179
Korea Development Bank (N)
4.250% due 11/13/07 45 45
Korea Electric Power Corp. (p)
5.125% due 04/23/34 85 85
Mantis Reef, Ltd. (p)
4.692% due 11/14/08 200 200
Mexico Government International Bond
8.375% due 01/14/11 100 114
6.375% due 01/16/13 100 104
8.125% due 12/30/19 200 234
8.300% due 08/15/31 505 591
Mexico Government International Bond (N)
8.000% due 09/24/22 405 470
6.750% due 09/27/34 170 169
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 380 393
Monumental Global Funding, Ltd. (p)
4.625% due 03/15/10 135 136
Morgan Stanley Bank AG for OAO Gazprom (p)
9.625% due 03/01/13 110 129
NAK Naftogaz Ukrainy
8.125% due 09/30/09 400 411
Nationwide Building Society (p)
4.250% due 02/01/10 115 114
Nexen, Inc.
5.875% due 03/10/35 145 140
Norske Skog Canada, Ltd.
Series D
8.625% due 06/15/11 215 219
Oil Insurance, Ltd. (p)
5.150% due 08/15/33 520 525
Peru Government International Bond
9.125% due 02/21/12 100 115
Petroleum Geo-Services ASA
8.000% due 11/05/06 299 304
Province of Quebec
7.500% due 07/15/23 300 386
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Province of Quebec (N)
5.000% due 07/17/09 25 26
Ras Laffan Liquefied Natural Gas Co., Ltd. (p)
8.294% due 03/15/14 85 99
Rogers Wireless Communications, Inc.
7.250% due 12/15/12 50 51
Royal Bank of Scotland Group PLC (f)
Series 1
9.118% due 03/31/49 600 715
Russia Government International Bond (p)
5.000% due 03/31/30 1,100 1,170
Russia Government International Bond (p)(N)
5.000% due 03/31/30 1,170 1,242
Salomon Brothers AG for OAO Siberian Oil Co.
Series REGS
10.750% due 01/15/09 535 595
Salomon Brothers AG for Tyumen Oil Co. (p)
Series REGS
11.000% due 11/06/07 290 321
Santander Financial Issuances
6.375% due 02/15/11 180 196
Sanwa Finance Aruba AEC
8.350% due 07/15/09 170 194
Sappi Papier Holding AG (p)
6.750% due 06/15/12 65 71
Secunda International, Ltd. (E)
11.141% due 09/01/12 220 216
Shaw Communications, Inc.
8.250% due 04/11/10 265 290
7.200% due 12/15/11 65 69
South Street CBO, Ltd.
Series 1999-1A Class A1
7.160% due 07/01/11 217 191
Stora Enso OYJ (N)
7.375% due 05/15/11 105 118
Systems 2001 AT LLC (p)
7.156% due 12/15/11 176 190
6.664% due 09/15/13 133 146
Telecom Italia Capital SA
6.375% due 11/15/33 145 151
</Table>
Fixed Income III Fund 83
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Telecom Italia Capital SA (p)
4.000% due 01/15/10 1,645 1,589
6.000% due 09/30/34 135 134
Telefonos de Mexico SA de CV
4.500% due 11/19/08 340 335
Telus Corp.
7.500% due 06/01/07 240 255
8.000% due 06/01/11 650 751
Tengizchevroil Finance Co. (p)
6.124% due 11/15/14 250 251
TuranAlem Finance BV (p)
7.875% due 06/02/10 240 241
Tyco International Group SA
6.375% due 10/15/11 600 650
UFJ Finance Aruba AEC
6.750% due 07/15/13 120 132
Venezuela Government International Bond (N)
9.375% due 01/13/34 255 252
Western Oil Sands, Inc.
8.375% due 05/01/12 145 161
WPP Finance UK Corp. (N)
5.875% due 06/15/14 115 120
------------
29,267
------------
Mortgage-Backed Securities - 31.8%
Banc of America Commercial Mortgage, Inc.
4.877% due 11/10/42 810 823
Series 2004-3 Class A3
4.875% due 06/10/39 675 685
Series 2004-4 Class A3
4.128% due 07/10/42 455 449
Series 2004-5 Class A3
4.561% due 11/10/41 185 184
Banc of America Funding Corp.
Series 2004-3 Class 2A2
5.000% due 09/25/19 254 254
Bank of America Alternative Loan Trust
6.000% due 12/25/34 187 193
Series 2003-10 Class 2A1
6.000% due 12/25/33 284 291
Series 2004-10 Class 1CB1
6.000% due 11/25/34 167 172
Series 2004-2 Class 1A1
6.000% due 03/25/34 157 160
Series 2005-3 Class 2A1
5.500% due 04/25/20 250 255
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America Mortgage Securities
Series 2004-1 Class 5A1
6.500% due 09/25/33 35 35
Bank of America Mortgage Securities (E)
Series 2003-D Class 1A2
3.428% due 05/25/33 10 10
Series 2003-I Class 2A4
3.828% due 10/25/33 265 263
Series 2004-A Class 1A1
3.491% due 02/25/34 114 114
Series 2004-E Class 1A1
3.533% due 06/25/34 253 252
Series 2004-G Class 2A6
4.657% due 08/25/34 245 247
Series 2005-A Class 2A1
4.494% due 02/25/35 172 171
Series 2005-B Class 2A1
4.428% due 03/25/35 341 339
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.446% due 05/25/35 800 808
Bear Stearns Commercial Mortgage Securities (p)
Series 2004-ESA Class E
5.064% due 05/14/16 265 269
Citigroup Commercial Mortgage Trust (E)(p)
Series 2004-FL1 Class A1
2.610% due 07/15/18 364 364
Countrywide Alternative Loan Trust
Series 2004-J7 Class 1A2
4.673% due 08/25/34 230 231
Countrywide Alternative Loan Trust (E)
Series 2004-J5 Class 1A1
3.040% due 07/25/34 79 79
Countrywide Home Loan Mortgage Pass Through
Trust (E)
Series 2005-9 Class M6
4.170% due 05/25/35 225 226
CS First Boston Mortgage Securities Corp.
Series 2003-29 Class 5A1
7.000% due 12/25/33 151 156
Series 2004-1 Class 3A1
7.000% due 02/25/34 48 49
</Table>
84 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2003-3 Class 2A3
4.500% due 10/25/33 140 140
Deutsche Mortgage Securities, Inc.
Series 2004-4 Class 1A2
4.010% due 04/25/34 145 145
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 605 634
DLJ Mortgage Acceptance Corp. (E)
Series 1996-Q5 Class A1
3.030% due 06/25/26 13 13
Downey Savings & Loan Association Mortgage Loan
Trust (E)
Series 2004-AR3 Class 1A1B
4.218% due 07/19/44 585 585
Fannie Mae
6.000% due 2016 46 48
5.000% due 2017 16 16
5.500% due 2017 63 64
6.000% due 2017 96 100
6.500% due 2017 267 279
5.000% due 2018 1,526 1,539
10.000% due 2018 51 57
10.000% due 2024 62 70
7.500% due 2027 20 22
7.000% due 2028 49 51
5.500% due 2029 751 762
6.500% due 2029 5 5
7.000% due 2029 180 190
7.500% due 2029 145 155
8.000% due 2029 21 23
8.500% due 2029 6 6
7.000% due 2030 16 17
7.500% due 2030 103 110
8.500% due 2030 524 571
9.500% due 2030 132 147
7.000% due 2031 303 320
7.500% due 2031 374 401
8.000% due 2031 554 606
8.500% due 2031 538 587
6.000% due 2032 1,412 1,452
6.500% due 2032 3,148 3,280
7.000% due 2032 466 491
7.500% due 2032 371 397
8.000% due 2032 67 73
5.000% due 2033 1,758 1,750
5.500% due 2033 704 711
6.500% due 2033 1,072 1,116
5.000% due 2034 5,648 5,607
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.500% due 2034 1,206 1,218
6.000% due 2034 2,132 2,191
6.500% due 2034 390 406
7.500% due 2034 357 382
5.000% due 2035 824 818
5.500% due 2035 1,300 1,313
6.000% due 2035 855 879
Series 1997-281 Class 2
Interest Only Strip
9.000% due 11/01/26 63 14
Series 2000-306 Class IO
Interest Only Strip
8.000% due 05/01/30 72 15
Series 2001-317 Class 2
Interest Only Strip
8.000% due 08/01/31 78 16
Series 2002-320 Class 2
Interest Only Strip
7.000% due 03/01/32 35 7
Series 2003-16 Class NI
Interest Only Strip
5.000% due 02/25/15 482 30
Series 2003-25 Class IK
Interest Only Strip
7.000% due 04/25/33 172 34
Series 2003-32 Class UI
Interest Only Strip
6.000% due 05/25/33 193 36
Series 2003-33 Class IA
Interest Only Strip
6.500% due 05/25/33 1,342 233
Series 2003-35 Class IU
Interest Only Strip
6.000% due 05/25/33 260 49
Series 2003-35 Class UI
Interest Only Strip
6.500% due 05/25/33 274 55
Series 2003-64 Class JI
Interest Only Strip
6.000% due 07/25/33 248 45
Series 2003-82 Class WI
Interest Only Strip
6.000% due 08/25/32 68 7
Series 2004-27 Class JC
5.000% due 05/25/34 376 374
Series 2004-90 Class PC
5.000% due 03/25/27 170 172
</Table>
Fixed Income III Fund 85
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae (E)
4.251% due 11/01/25 44 45
3.772% due 08/01/26 356 365
Series 2002-50 Class SC
Interest Only Strip
5.250% due 12/25/29 60 3
Fannie Mae
15 Year TBA (I)
4.500% 4,300 4,246
5.000% 7,875 7,930
30 Year TBA (I)
5.000% 13,430 13,266
5.500% 31,570 31,913
6.000% 8,935 9,164
6.500% 6,080 6,322
7.000% 685 723
Fannie Mae Grantor Trust
Series 2001-T8 Class A2
9.500% due 07/25/41 122 135
Fannie Mae Whole Loan
Series 2003-W14 Class 1A5
4.710% due 09/25/43 25 25
Series 2003-W17 Class 1A6
5.310% due 08/25/33 1,700 1,695
Series 2004-W9 Class 2A1
6.500% due 02/25/44 179 185
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2003-58 Class 1A2
3.108% due 05/25/35 129 129
Series 2003-58 Class 2A
6.500% due 09/25/43 168 174
Series 2004-H017 Class A1
2.614% due 07/15/11 1,181 1,169
Federal National Mortgage Association
Series 2003-82 Class IA
6.000% due 08/25/32 276 24
First Horizon Alternative Mortgage Securities
Series 2004-FA1 Class 1A1
6.250% due 10/25/34 429 442
First Horizon Asset Securities, Inc.
Series 2003-5 Class 1A17
8.000% due 07/25/33 68 72
First Horizon Asset Securities, Inc. (E)
Series 2004-AR5 Class 4A1
5.664% due 10/25/34 203 203
First Nationwide Trust (E)
Series 2001-4 Class 3A5
3.450% due 09/25/31 4 4
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Freddie Mac
6.000% due 2016 86 89
8.500% due 2017 86 93
10.500% due 2017 36 41
5.000% due 2018 135 137
5.500% due 2019 2,580 2,644
10.000% due 2020 86 96
5.500% due 2024 1,967 1,994
8.500% due 2027 193 211
7.000% due 2030 185 195
7.500% due 2030 302 326
8.000% due 2030 113 123
7.000% due 2031 284 300
7.500% due 2031 27 29
8.000% due 2031 37 41
7.500% due 2032 166 178
5.000% due 2033 892 891
5.500% due 2033 1,221 1,236
6.500% due 2033 88 92
7.000% due 2033 70 74
5.000% due 2034 405 402
6.000% due 2034 510 524
Series 1991-1037 Class Z
9.000% due 02/15/21 104 104
Series 1998-191 Class IO
Interest Only Strip
8.000% due 01/01/28 51 10
Series 1998-194 Class IO
Interest Only Strip
6.500% due 04/01/28 171 34
Series 2001-212 Class IO
Interest Only Strip
6.000% due 05/01/31 133 25
Series 2001-215 Class IO
Interest Only Strip
8.000% due 06/01/31 108 21
Series 2002-2468 Class VC
6.000% due 10/15/27 3 3
Series 2003-2591 Class IQ
Interest Only Strip
5.000% due 06/15/17 463 64
Series 2003-2610 Class UI
Interest Only Strip
6.500% due 05/15/33 188 33
</Table>
86 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-2613 Class DI
Interest Only Strip
5.500% due 05/15/27 476 34
Series 2003-2632 Class YH
3.500% due 08/15/22 1,065 1,052
Series 2003-2634 Class IO
Interest Only Strip
5.000% due 10/15/27 989 108
Series 2003-2644 Class IC
Interest Only Strip
5.000% due 05/15/22 1,140 110
Series 2003-2649 Class IM
Interest Only Strip
7.000% due 07/15/33 243 42
Series 2004-2727 Class PM
4.500% due 01/15/34 170 158
Series 2004-2859 Class PI
Interest Only Strip
5.500% due 05/15/24 647 72
Series 2004-2878 Class IA
Interest Only Strip
5.500% due 04/15/24 406 42
Series 2004-2887 Class QI
Interest Only Strip
5.500% due 02/15/24 553 57
Series 2004-2889 Class OE
5.000% due 01/15/30 290 291
Series 2004-2890 Class PC
5.000% due 07/15/30 340 341
Series 2004-2902 Class LC
5.500% due 12/15/17 250 256
Series 2005-2922 Class IT
Interest Only Strip
5.000% due 07/15/23 391 65
Series 2005-2927 Class IG
Interest Only Strip
5.000% due 04/15/23 439 71
Freddie Mac (E)
3.711% due 2027 104 108
4.308% due 2028 68 70
4.088% due 2028 73 75
7.652% due 2030 13 13
3.732% due 2034 203 206
Series 1999-2129 Class SG
Interest Only Strip
4.000% due 06/17/27 799 51
Freddie Mac
15 Year TBA (I)
5.000% 800 806
5.500% 2,875 2,943
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
30 Year TBA (I)
5.000% 1,255 1,242
5.500% 2,785 2,809
6.000% 200 205
GE Capital Commercial Mortgage Corp.
Series 2004-C2 Class A4
4.893% due 03/10/40 1,105 1,110
Ginnie Mae I
30 Year TBA (I)
5.000% 80 80
5.500% 6,330 6,432
6.500% 290 304
10.500% due 2016 29 33
11.000% due 2020 85 94
10.000% due 2022 69 78
7.500% due 2024 50 54
7.500% due 2032 53 57
Ginnie Mae II (E)
3.750% due 2023 36 36
4.125% due 2023 57 58
4.625% due 2023 35 36
3.750% due 2024 256 259
4.125% due 2024 134 136
4.625% due 2024 126 129
3.375% due 2025 324 329
3.750% due 2025 8 8
4.625% due 2026 117 119
3.375% due 2027 224 229
3.750% due 2027 169 171
4.625% due 2027 16 17
3.375% due 2028 7 7
3.375% due 2030 473 480
Global Signal Trust (p)
Series 2004-2A Class A
4.232% due 12/15/14 225 222
GMAC Commercial Mortgage Securities, Inc.
Series 1998-C2 Class A2
6.420% due 05/15/35 144 152
Government National Mortgage Association
Series 2002-62 Class B
4.763% due 01/16/25 160 161
Series 2002-67 Class IL
Interest Only Strip
6.000% due 05/20/29 5,153 89
</Table>
Fixed Income III Fund 87
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Government National Mortgage Association (E)
Series 1999-27 Class SE
Interest Only Strip
5.780% due 08/16/29 266 28
Series 1999-44 Class SA
Interest Only Strip
6.070% due 12/16/29 266 29
Series 2000-29 Class S
Interest Only Strip
6.000% due 09/20/30 87 5
Series 2002-27 Class SA
Interest Only Strip
5.520% due 05/16/32 128 8
Government National Mortgage Association I
30 Year TBA (I)
5.000% 1,250 1,247
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 435 450
GSMPS Mortgage Loan Trust (p)
Series 1998-3 Class A
7.750% due 09/19/27 80 86
Series 1999-3 Class A
8.000% due 08/19/29 141 152
Series 2005-RP1 Class 1A3
8.000% due 01/25/35 236 255
Series 2005-RP1 Class 1A4
8.500% due 01/25/35 134 148
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.454% due 06/25/34 780 770
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C1 Class A3
5.376% due 07/12/37 220 229
Series 2003-C1 Class A2
4.985% due 01/12/37 337 343
Series 2004-LN2 Class A1
4.475% due 07/15/41 600 597
Series 2005-CB11 Class A3
5.197% due 08/12/37 665 684
JP Morgan Chase Commercial Mortgage Securities
Corp. (E)(p)
Series 2004-FL1A Class A1
2.760% due 04/16/19 397 397
LB-UBS Commercial Mortgage Trust
Series 2004-C4 Class A3
4.987% due 06/15/29 1,055 1,087
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-C2 Class A2
4.821% due 04/15/30 255 259
Mastr Alternative Loans Trust
Series 2003-9 Class 1A1
5.500% due 12/25/18 219 225
Series 2003-6 Class 3A1
8.000% due 09/25/33 71 75
Series 2005-3 Class 7A1
6.000% due 04/25/35 365 373
Mastr Reperforming Loan Trust (p)
Series 2005-1 Class 1A5
8.000% due 08/25/34 354 379
Mellon Residential Funding Corp. (E)
Series 2000-TBC2 Class A1
3.050% due 06/15/30 531 529
Merrill Lynch Mortgage Trust
4.351% due 11/15/10 105 105
4.330% due 11/25/10 105 105
Series 2004-BPC1 Class A3
4.467% due 10/12/41 115 114
Series 2004-MKB1 Class A2
4.353% due 02/12/42 580 577
Series 2005-MKB2 Class A4
5.204% due 09/12/42 300 307
Merrill Lynch Mortgage Trust (p)
Series 2002-MW1 Class J
5.695% due 07/12/34 185 180
Nomura Asset Acceptance Corp.
Series 2004-AP2 Class A2
4.099% due 07/25/34 195 195
Nomura Asset Securities Corp.
Series 1998-D6 Class A1B
6.590% due 03/15/30 205 218
Prime Mortgage Trust
Series 2004-CL1 Class 1A1
6.000% due 02/25/34 134 136
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
3.250% due 02/25/34 89 89
Series 2004-CL1 Class 2A2
3.250% due 02/25/19 45 45
Residential Asset Mortgage Products, Inc.
Series 2004-SL1 Class A3
7.000% due 11/25/31 145 148
</Table>
88 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-SL4 Class A3
6.500% due 07/25/32 236 244
Small Business Administration
Series 2000-P10B Class 1
7.449% due 08/01/10 201 216
Structured Adjustable Rate Mortgage Loan Trust
Series 2004-18 Class 5A
5.500% due 12/25/34 200 203
Structured Asset Securities Corp.
Series 2002-22H Class 1A
6.998% due 11/25/32 60 61
Series 2004-12H Class 1A
6.000% due 05/25/34 236 240
Series 2004-21XS Class 1A3
4.440% due 12/25/34 1,105 1,094
Thornburg Mortgage Securities Trust (E)
Series 2004-2 Class A2
2.800% due 06/25/44 127 127
Vendee Mortgage Trust
Series 2000-1 Class 2G
7.250% due 06/15/09 178 178
Wachovia Bank Commercial Mortgage Trust
Series 2005-C16 Class A2
4.380% due 10/15/41 1,095 1,090
Washington Mutual
Series 2004-CB3 Class 1A
6.000% due 10/25/34 120 123
Series 2004-CB3 Class 4A
6.000% due 10/25/19 311 322
Washington Mutual (E)
Series 2003-AR4 Class A7
3.950% due 05/25/33 60 59
Series 2003-AR9 Class 1A7
4.058% due 09/25/33 236 234
Series 2004-AR10 Class A2C
2.948% due 07/25/44 137 137
Series 2004-AR12 Class A3
2.948% due 10/25/44 330 333
Washington Mutual, Inc.
Series 2005-AR3 Class A1
4.661% due 03/25/35 311 311
Washington Mutual, Inc. (E)
Series 2005-AR6 Class B3
3.690% due 04/25/45 425 425
Wells Fargo Mortgage Backed Securities Trust
Series 2004-I Class 1A1
3.391% due 07/25/34 442 442
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Wells Fargo Mortgage Backed Securities Trust (E)
Series 2003-K Class 2A5
4.522% due 11/25/33 160 154
Series 2004-DD Class 2A3
4.545% due 01/25/35 280 279
Series 2004-DD Class 2A6
4.545% due 01/25/35 445 451
Series 2004-T Class A1
3.455% due 09/25/34 295 294
------------
165,855
------------
Municipal Bonds - 1.2%
Badger TOB Asset Securitization Corp. Revenue
Bonds, weekly demand
6.375% due 06/01/32 800 817
California State University Revenue Bonds,
weekly demand (u)
5.000% due 11/01/30 140 148
City of Colorado Springs Colorado Revenue Bonds,
weekly demand
5.000% due 11/15/33 200 209
City of Forsyth Montana Revenue Bonds, annual
demand (E)
5.200% due 05/01/33 70 74
City of New York New York General Obligation
Unlimited, weekly demand
5.000% due 03/01/30 100 104
Colorado Department of Transportation Revenue
Bonds (u)
5.000% due 12/15/13 480 534
Golden State Tobacco Securitization Corp.
Revenue Bonds, weekly demand
6.250% due 06/01/33 435 449
5.625% due 06/01/38 140 152
New Jersey Economic Development Authority
Revenue Bonds, weekly demand
5.750% due 06/15/34 235 247
</Table>
Fixed Income III Fund 89
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
New York State Urban Development Corp. Revenue
Bonds, weekly demand (u)
5.250% due 03/15/34 180 192
Puerto Rico Public Buildings Authority Revenue
Bonds, weekly demand
5.250% due 07/01/33 325 346
Sales Tax Asset Receivables Corp. Revenue Bonds,
weekly demand (u)
5.250% due 10/15/27 215 234
State of California General Obligation Unlimited
5.250% due 07/01/13 190 212
State of California General Obligation
Unlimited, weekly demand
5.000% due 02/01/33 100 103
State of Illinois General Obligation Unlimited
5.100% due 06/01/33 150 148
State of Oregon General Obligation Unlimited
5.892% due 06/01/27 175 191
University of Illinois Revenue Bonds, weekly
demand (u)
5.000% due 04/01/29 1,500 1,570
West Virginia Economic Development Authority
Revenue Bonds
6.070% due 07/01/26 200 216
West Virginia Economic Development Authority
Revenue Bonds (u)
5.370% due 07/01/20 65 67
------------
6,013
------------
Non-US Bonds - 2.1%
Canada Housing Trust No. 1
3.750% due 03/15/10 CAD 499 396
Canadian Government Bond
5.750% due 06/01/33 CAD 100 94
3.000% due 12/01/36 CAD 100 99
Deutsche Bundesrepublik
5.000% due 07/04/11 EUR 362 518
5.625% due 01/04/28 EUR 100 162
5.500% due 01/04/31 EUR 200 321
4.750% due 07/04/34 EUR 200 292
France Government Bond OAT
5.750% due 10/25/32 EUR 400 668
4.750% due 04/25/35 EUR 400 583
4.000% due 04/25/55 EUR 100 129
Inter-American Development Bank
1.900% due 07/08/09 JAP 73,000 744
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Italy Buoni Poliennali Del Tesoro
4.250% due 02/01/15 EUR 660 899
KBC Bank Funding Trust I (f)
6.875% due 06/09/49 EUR 600 879
Norway Government Bond
5.000% due 05/15/15 NOK 5,565 970
Poland Government Bond
6.000% due 05/24/09 PLN 435 132
Russia Paris Club Participant (p)
2.025% due 08/20/20 JPY 30,207 263
Spain Government Bond
5.750% due 07/30/32 EUR 200 333
4.200% due 01/31/37 EUR 100 133
Sweden Government Bond
5.000% due 12/01/20 SEK 3,055 506
United Kingdom Gilt
5.750% due 12/07/09 GBP 900 1,805
8.000% due 09/27/13 GBP 234 554
8.000% due 06/07/21 GBP 193 513
------------
10,993
------------
Registered Investment Company Funds - 0.0%
Pacific Investment Management Co.
Series High Yield Portfolio Institutional 6,289 51
------------
United States Government Agencies - 1.1%
Fannie Mae
5.250% due 08/01/12 505 523
Zero coupon due 10/09/19 455 213
Fannie Mae (N)
3.875% due 02/15/10 1,075 1,060
4.375% due 03/15/13 435 433
5.000% due 04/15/15 200 207
Fannie Mae (E)
2.925% due 09/22/06 600 599
Financing Corp.
Principal Only Strip
Zero Coupon due 08/03/18 535 284
Zero Coupon due 04/05/19 475 242
Zero Coupon due 09/26/19 535 266
Freddie Mac
5.125% due 11/07/13 530 532
</Table>
90 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Freddie Mac (N)
2.750% due 03/15/08 280 271
4.000% due 12/15/09 1,080 1,073
------------
5,703
------------
United States Government Treasuries - 21.7%
United States Treasury Inflation Indexed Bonds
(N)
3.375% due 01/15/07 (sec.) 1,204 1,264
3.875% due 01/15/09 702 775
4.250% due 01/15/10 2,394 2,738
0.875% due 04/15/10 481 474
3.375% due 01/15/12 1,620 1,833
3.000% due 07/15/12 3,514 3,909
2.000% due 07/15/14 2,828 2,935
1.625% due 01/15/15 1,763 1,767
2.375% due 01/15/25 1,857 2,028
3.625% due 04/15/28 593 792
United States Treasury Notes (N)
4.625% due 05/15/06 1,820 1,842
7.000% due 07/15/06 170 177
3.500% due 11/15/06 7,850 7,846
3.000% due 12/31/06 2,555 2,530
3.375% due 02/28/07 385 383
3.125% due 05/15/07 6,150 6,088
4.375% due 05/15/07 3,710 3,762
3.500% due 12/15/09 11,380 11,199
6.500% due 02/15/10 3,050 3,395
4.000% due 03/15/10 55 55
4.000% due 04/15/10 1,035 1,040
5.000% due 08/15/11 350 370
3.875% due 02/15/13 4,375 4,317
4.250% due 08/15/13 11,175 11,266
4.750% due 05/15/14 8,094 8,438
4.000% due 02/15/15 2,320 2,282
8.750% due 05/15/17 775 1,091
8.125% due 08/15/19 4,950 6,838
7.625% due 02/15/25 1,450 2,015
6.000% due 02/15/26 4,860 5,751
6.375% due 08/15/27 745 926
5.250% due 11/15/28 4,100 4,472
6.125% due 08/15/29 3,185 3,887
5.375% due 02/15/31 (sec.) 2,700 3,050
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Treasury
Principal Only Strip (N)
Zero Coupon due 02/15/25 2,450 964
Zero Coupon due 02/15/27 2,450 881
------------
113,380
------------
TOTAL LONG-TERM INVESTMENTS
(cost $436,981) 443,265
------------
PREFERRED STOCKS - 0.1%
Financial Services - 0.1%
DG Funding Trust (p) 59 638
------------
Producer Durables - 0.0%
Nexen, Inc.
7.350% due 11/01/43 4,055 107
------------
TOTAL PREFERRED STOCKS
(cost $723) 745
------------
WARRANTS & RIGHTS - 0.0%
Consumer Discretionary - 0.0%
Travelcenters of America, Inc.
2009 Warrants (AE) 20 --
------------
Materials and Processing - 0.0%
Solutia, Inc.
2009 Warrants (AE)(p) 450 --
------------
Miscellaneous - 0.0%
Mexico Government International Bond Value
Recovery Rights (AE)
Series C 2,000,000 12
Series D 1,996,000 29
Series E 1,300,000 50
------------
91
------------
Utilities - 0.0%
GT Group Telecom, Inc.
2010 Warrants (AE)(p) 450 --
------------
TOTAL WARRANTS & RIGHTS
(cost $93) 91
------------
SHORT-TERM INVESTMENTS - 32.3%
ANZ Delaware, Inc. (c)(z)
2.840% due 06/03/05 3,100 3,092
</Table>
Fixed Income III Fund 91
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ares Leveraged Investment Fund, LP (E)(p)
6.800% due 10/31/05 280 280
Barclays US Funding, LLC
2.665% due 05/02/05 (c)(z) 100 100
2.770% due 05/09/05 (c)(z) 600 600
2.925% due 05/19/05 (c)(z) 2,700 2,696
3.085% due 08/18/05 (c) 1,000 989
Bombardier Capital, Inc. (E)(p)
5.100% due 05/30/05 395 395
Brazilian Government International Bond (E)
3.063% due 04/15/06 152 152
Comcast Corp. (c)(z)
3.109% due 05/18/05 300 300
CSX Corp.
2.750% due 02/15/06 55 54
Danske Corp. Discount Notes (c)
2.980% due 06/30/05 500 496
3.010% due 07/07/05 4,100 4,069
Dexia Delaware
2.710% due 05/16/05 (c)(z) 700 699
2.995% due 06/01/05 (c)(z) 3,500 3,491
3.000% due 07/05/05 (c) 400 397
DNB Nor Bank ASA (c)
2.700% due 05/31/05 3,900 3,891
2.775% due 06/14/05 600 598
Fannie Mae Discount Notes
2.490% due 05/04/05 (c)(z) 1,000 1,000
2.627% due 06/01/05 (c)(z) 2,800 2,793
2.645% due 06/01/05 (c)(z) 100 100
2.710% due 06/01/05 (c) 400 397
2.604% due 06/08/05 (c) 2,400 2,383
2.675% due 06/13/05 (c)(z) 400 399
2.875% due 06/27/05 (c) 2,500 2,478
2.955% due 07/06/05 (c) 700 695
2.866% due 07/13/05 (c) 2,000 1,986
3.010% due 07/27/05 (c) 1,200 1,191
Federal Home Loan Bank Discount Note (c)
2.838% due 06/10/05 10,000 9,930
3.030% due 08/08/05 900 892
Ford Motor Credit Co.
7.600% due 08/01/05 200 201
6.875% due 02/01/06 300 303
France Telecom SA
7.450% due 03/01/06 750 772
Frank Russell Investment Company Money Market
Fund 67,971,000 67,971
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Freddie Mac Discount Notes
2.720% due 05/05/05 (c)(z) 1,100 1,100
2.655% due 05/17/05 (c)(z) 3,200 3,196
2.790% due 05/31/05 (c)(z) 1,500 1,497
2.680% due 06/15/05 (c)(z) 3,300 3,289
2.710% due 06/17/05 (c) 100 100
2.690% due 06/20/05 (c)(z) 2,200 2,192
3.000% due 07/26/05 (c) 1,500 1,489
3.000% due 08/08/05 (c) 2,700 2,666
General Electric Capital Corp. Discount Note (z)
2.840% due 06/01/05 (c)(z) 1,900 1,896
2.970% due 06/20/05 (c)(z) 200 199
3.040% due 07/11/05 (c) 2,200 2,183
General Motors Acceptance Corp.
7.500% due 07/15/05 300 301
3.580% due 04/13/06 1,100 1,081
GTE Hawaiian Telephone Co.
Series A
7.000% due 02/01/06 195 196
HBOS Treasury Services, PLC
2.705% due 05/11/05 (c)(z) 1,500 1,499
2.870% due 05/17/05 (c)(z) 3,100 3,096
ING US Funding, LLC
2.960% due 06/21/05 (c)(z) 2,800 2,788
3.090 due 07/26/05 (c) 1,600 1,588
Lone Star Industries (p)
8.850% due 06/15/05 195 196
Niagara Mohawk Power Corp.
Series F
7.625% due 10/01/05 435 442
Nisource Finance Corp.
7.625% due 11/15/05 95 97
Power Contract Financing LLC (p)
5.200% due 02/01/06 154 156
Rabobank USA Financial Corp. (c)(z)
2.640% due 05/20/05 3,900 3,895
Smurfit Capital Funding PLC
6.750% due 11/20/05 1,320 1,320
Svenska Handlesbanken, Inc. (c)
3.050% due 07/20/05 4,100 4,068
Swedbank Forenings
2.710% due 05/31/05 (c)(z) 1,000 998
2.980% due 07/01/05 (c) 3,400 3,374
UBS Financial Del, LLC
2.565% due 05/06/05 (c)(z) 400 400
2.800% due 05/06/05 (c)(z) 200 200
2.670% due 05/25/05 (c)(z) 100 100
</Table>
92 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
2.950% due 05/25/05 (c)(z) 1,400 1,397
3.020% due 07/22/05 (c) 2,500 2,474
United States Treasury Bills (c)(z)(sec.)
2.680% due 06/02/05 25 25
2.740% due 06/16/05 300 299
2.883% due 07/14/05 200 198
United States Treasury Notes (N)
2.000% due 08/31/05 610 608
1.875% due 01/31/06 1,500 1,485
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $167,963) 167,878
------------
OTHER SECURITIES - 23.0%
Frank Russell Investment Company Money Market
Fund (X) 28,903,445 28,903
State Street Securities Lending Quality Trust
(X) 91,065,467 91,066
------------
TOTAL OTHER SECURITIES
(cost $119,968) 119,969
------------
TOTAL INVESTMENTS - 140.4%
(identified cost $725,728) 731,948
OTHER ASSETS AND LIABILITIES,
NET - (40.4%) (210,671)
------------
NET ASSETS - 100.0% 521,277
============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 93
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
10 Year Japan Government Bond Futures
expiration date 06/05 (1) 1,340 31
Eurodollar Futures
expiration date 06/05 (1) 241 --
expiration date 09/05 (66) 15,882 (44)
expiration date 12/05 (39) 9,366 (13)
expiration date 03/06 (30) 7,196 10
expiration date 09/06 (2) 479 --
United States Treasury Bonds
expiration date 06/05 (41) 4,709 40
United States Treasury 2 Year Notes
expiration date 06/05 (109) 22,640 (3)
United States Treasury 5 Year Notes
expiration date 06/05 (13) 1,410 10
United States Treasury 10 Year Notes
expiration date 06/05 (347) 38,663 497
Short Positions
United States Treasury Bonds
expiration date 06/05 (11) 1,263 (19)
United States Treasury 2 Year Notes
expiration date 06/05 (113) 23,470 31
United States Treasury 5 Year Notes
expiration date 06/05 (197) 21,365 (94)
United States Treasury 10 Year Notes
expiration date 06/05 (21) 2,340 (20)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 426
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Euribor Futures
Jun 2005 94.25 (GBP) Put (7) 1,573 --
Jun 2005 97.00 (EUR) Put (18) 5,661 --
United States Treasury Bonds
May 2005 116.00 Call (3) 348 (1)
May 2005 108 Put (42) 4,536 (1)
United States Treasury Notes
10 Year Futures
May 2005 112.00 Call (10) 1,120 (3)
May 2005 113.00 Call (36) 4,068 (5)
May 2005 114.00 Call (7) 798 --
May 2005 108 Put (51) 5,508 (2)
May 2005 111 Put (9) 999 (1)
---------------
Total Liability for Options Written
(premiums received $72) (13)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
94 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 891 AUD 1,131 05/27/05 (10)
USD 106 BRL 300 09/08/05 7
USD 100 BRL 285 09/09/05 7
USD 85 EUR 66 05/18/05 --
USD 134 EUR 103 05/20/05 (2)
USD 40 EUR 31 05/27/05 (1)
USD 123 EUR 92 05/27/05 (5)
USD 58 JPY 6,047 05/10/05 --
USD 77 JPY 8,062 05/10/05 --
USD 86 JPY 9,069 05/10/05 --
USD 86 JPY 9,071 05/10/05 --
USD 100 JPY 10,563 05/17/05 1
USD 747 JPY 78,427 05/20/05 2
USD 310 JPY 32,691 06/13/05 3
USD 1,620 JPY 174,586 06/13/05 51
USD 937 JPY 100,000 06/30/05 22
USD 65 PLN 215 05/20/05 --
USD 136 PLN 400 05/27/05 (16)
AUD 1,131 USD 884 05/27/05 3
BRL 83 USD 31 09/08/05 --
BRL 84 USD 32 09/08/05 --
CAD 238 USD 192 06/09/05 3
EUR 91 USD 118 05/18/05 1
EUR 1,979 USD 2,559 05/18/05 11
EUR 50 USD 65 05/20/05 --
EUR 197 USD 257 05/20/05 3
EUR 869 USD 1,138 05/25/05 19
EUR 122 USD 160 05/27/05 2
EUR 691 USD 929 05/27/05 39
EUR 709 USD 918 06/30/05 4
GBP 13 USD 25 05/27/05 --
GBP 22 USD 42 05/27/05 --
GBP 247 USD 464 05/27/05 (7)
GBP 271 USD 509 05/27/05 (7)
JPY 32,250 USD 307 05/10/05 (1)
JPY 78,427 USD 731 05/20/05 (19)
JPY 1,099 USD 10 05/27/05 --
NOK 6,232 USD 1,024 05/27/05 36
PLN 431 USD 134 05/20/05 4
PLN 400 USD 130 05/27/05 10
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions 160
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 95
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INDEX SWAPS
- ---------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NOTIONAL APPRECIATION
FUND RECEIVES COUNTER AMOUNT FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY $ FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
Lehman Brothers CMBS Index - 1 Month USD LIBOR-
AAA Goldman Sachs 1,510 BBA minus 0.10% 07/01/05 19
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swaps 19
================
</Table>
<Table>
<Caption>
INTEREST RATE SWAPS
- ------------------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
COUNTER AMOUNT TERMINATION VALUE
PARTY $ FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ---------------------- -------------------- ---------------- ----------------
Bank of America CAD 100 6.000% Six Month LIBOR 12/16/19 1
Barclay's GBP 100 5.000% Six Month LIBOR 03/15/32 (6)
Barclay's EUR 100 6.000% Six Month LIBOR 03/15/32 12
JP Morgan EUR 500 6.000% Three Month LIBOR 06/18/34 84
Merrill EUR 200 6.000% Six Month LIBOR 06/18/15 34
UBS JPY 125,000 2.000% Six Month LIBOR 06/15/12 (90)
----------------
Total Market Value of Interest Rate Swaps Premiums Paid (Received) - $24 35
================
</Table>
See accompanying notes which are an integral part of the financial statements.
96 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Asset-Backed Securities 8.1
Corporate Bonds and Notes 13.4
International Debt 5.6
Mortgage-Backed Securities 31.8
Municipal Bonds 1.2
Non-US Bonds 2.1
Registered Investment Company Funds --*
United States Government Agencies 1.1
United States Government Treasuries 21.7
Preferred Stocks 0.1
Warrants & Rights --*
Short Term Investments 32.3
Other Securities 23.0
---------------
Total Investments 140.4
Other Assets and Liabilities, Net (40.4)
---------------
Net Assets 100.0
===============
Futures Contracts 0.1
Options Written --*
Foreign Currency Contracts --*
Index Swap Contracts --*
Interest Rate Swap Contracts --*
</Table>
* Less than .05%
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 97
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,140.10 $ 1,011.41
Expenses Paid During
Period* $ 14.54 $ 13.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.74%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,144.30 $ 1,015.23
Expenses Paid During
Period* $ 10.47 $ 9.84
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.97%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,145.70 $ 1,016.52
Expenses Paid During
Period* $ 9.10 $ 8.55
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.71%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
98 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 86.8%
Argentina - 0.1%
Acindar Industria Argentina de
Aceros SA 155,000 314
Central Costanera SA Class T (AE) 233,100 280
IRSA Inversiones y Representaciones SA (AE) 6 --
IRSA Inversiones y Representaciones SA GDR
(AE)(N) 15,500 175
------------
769
------------
Austria - 0.1%
Raiffeisen International Bank Holding AG (AE) 9,500 489
------------
Brazil - 7.5%
Banco do Brasil SA 67,500 781
Brasil Telecom Participacoes SA ADR (N) 42,400 1,386
Braskem SA ADR 78,500 3,078
Centrais Eletricas Brasileiras SA 28,300 --
Cia Brasileira de Distribuicao Grupo Pao de
Acucar ADR 100,800 2,026
Cia de Bebidas das Americas ADR 46,600 1,263
Cia de Concessoes Rodoviarias 38,200 801
Cia de Saneamento Basico do Estado de Sao Paulo 27,260,000 1,418
Cia Energetica de Minas Gerais ADR 106,000 2,934
Cia Siderurgica Nacional SA 80,406 1,754
Cia Vale do Rio Doce 61,300 1,661
Cia Vale do Rio Doce - SP ADR (N) 168,600 3,912
Cia Vale do Rio Doce ADR 54,500 1,469
Gerdau SA ADR (N) 175,800 1,714
Gol Linhas Aereas Inteligentes SA - ADR ADR (N) 14,600 414
Natura Cosmeticos SA 165,763 4,982
Petroleo Brasileiro SA 70,039 2,978
Petroleo Brasileiro SA ADR (N) 153,700 6,445
Petroleo Brasileiro SA ADR (N) 98,944 3,636
Souza Cruz SA 13,200 153
Tele Centro Oeste Celular Participacoes SA ADR
(N) 20,100 211
Tele Norte Leste Participacoes SA 49,692 990
Tele Norte Leste Participacoes SA ADR (N) 163,200 2,415
Telesp Celular Participacoes SA ADR (N) 83,099 439
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Uniao de Bancos Brasileiros SA 390,708 2,593
Unibanco - Uniao de Bancos Brasileiros SA GDR 73,500 2,439
------------
51,892
------------
Canada - 0.1%
PetroKazakhstan, Inc. Class A 24,265 704
------------
Chile - 0.2%
Coca-Cola Embonor SA ADR (AE) 107,000 679
Embotelladora Andina SA ADR Class B (N) 54,400 730
------------
1,409
------------
China - 2.2%
China Petroleum & Chemical Corp. Class A 7,919,254 3,128
China Telecom Corp., Ltd. 1,492,000 508
Datang International Power Generation Co., Ltd.
Class H 114,000 88
Huadian Power International Co. Class H 2,886,000 894
Jiangsu Express Class H 1,579,400 728
Jiangxi Copper Co., Ltd. 280,000 136
PetroChina Co., Ltd. 6,266,176 3,721
Ping An Insurance Group Co. of China, Ltd. (AE) 1,044,500 1,600
Semiconductor Manufacturing International Corp.
(AE) 4,468,400 863
Shanghai Forte Land Co. Class H 1,282,000 338
Sinopec Shanghai Petrochemical Co., Ltd. Class H 2,689,000 994
Sinopec Yizheng Chemical Fibre Co., Ltd. Class H 628,000 110
Sinotrans, Ltd. Class H 805,000 238
Travelsky Technology, Ltd. Class H 200,000 165
Yanzhou Coal Mining Co., Ltd. Class H 615,000 846
Zijin Mining Group Co., Ltd. 680,000 145
ZTE Corp. Class H 260,800 750
------------
15,252
------------
Colombia - 0.1%
BanColombia SA ADR 30,400 449
Cementos Argos SA 26,400 242
Inversiones Nacionales de Chocolates SA 54,121 207
------------
898
------------
</Table>
Emerging Markets Fund 99
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Croatia - 0.2%
Pliva DD GDR 100,700 1,098
------------
Czech Republic - 0.1%
Komercni Banka AS 5,053 639
------------
Ecuador - 0.4%
Holcim Ecuador SA GDR 72,000 2,196
Holcim Ecuador SA GDR (p) 10,500 320
------------
2,516
------------
Egypt - 2.3%
Commercial International Bank 184,393 1,486
Commercial International Bank GDR 15,600 122
Egyptian Co. for Mobile Services Class V 134,602 4,409
Orascom Construction Industries (AE) 251,028 5,713
Orascom Telecom Holding SAE (AE) 19,170 1,569
Orascom Telecom Holding SAE GDR (AE) 28,410 1,166
Vodafone Egypt Telecommunications SAE 107,395 1,434
------------
15,899
------------
Hong Kong - 1.5%
China Insurance International Holdings Co., Ltd. 1,274,000 480
China Netcom Group Corp. Hong Kong, Ltd. (AE) 917,500 1,239
China Overseas Land & Investment, Ltd. 9,470,000 1,955
China Resources Enterprise 206,000 292
China Resources Power Holdings Co. 2,444,000 1,353
China Unicom, Ltd. (AE) 650,000 526
Citic Pacific, Ltd. 280,000 846
CNOOC, Ltd. 3,897,000 2,099
Kingboard Chemical Holdings, Ltd. (AE) 126,000 375
Luen Thai Holdings, Ltd. (AE) 924,000 348
Panva Gas Holdings, Ltd. (AE) 470,000 193
Shanghai Industrial Holdings, Ltd. 59,000 121
Silver Grant International (AE) 842,000 412
Tom Group, Ltd. (AE) 2,150,000 401
------------
10,640
------------
Hungary - 2.2%
Matav Rt 538,562 2,369
Matav Rt. ADR (N) 1,800 40
Mol Magyar Olaj- es Gazipari Rt. 43,871 3,604
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mol Magyar Olaj- es Gazipari Rt. GDR 44,900 3,686
OTP Bank Rt. 180,831 5,561
------------
15,260
------------
India - 5.1%
Andhra Bank (AE) 429,000 919
Arvind Mills, Ltd. (AE) 374,200 1,008
Ballarpur Industries, Ltd. 115,100 275
Bank of Baroda 220,000 868
Bank of India (AE) 444,000 837
Bharti Televentures (AE) 193,000 918
Chennai Petroleum Corp., Ltd. (AE) 75,530 381
GAIL India, Ltd. GDR 54,700 1,552
Genesis Indian Investment Co. (AE) 665,719 14,698
HDFC Bank, Ltd. ADR (N) 23,200 1,007
I-Flex Solutions, Ltd. 48,600 674
ITC, Ltd. 25,350 836
Kotak Mahindra Bank, Ltd. 121,000 842
Larsen & Toubro, Ltd. 25,397 562
LIC Housing Finance (AE) 107,498 616
National Thermal Power Corp., Ltd. 543,300 1,027
Oriental Bank of Commerce (AE) 23,000 145
Petronet LNG, Ltd. (AE) 804,000 725
Power Trading Corp. of India, Ltd. 276,519 268
State Bank of India, Ltd. GDR 72,210 2,623
Tata TEA, Ltd. 56,600 667
Union Bank Of India (AE) 118,000 263
UTI Bank, Ltd. (AE) 182,800 968
UTI Bank, Ltd. GDR (AE) 65,600 328
Videsh Sanchar Nigam, Ltd. ADR (AE)(N) 110,100 1,029
ZEE Telefilms, Ltd. 380,800 1,148
------------
35,184
------------
Indonesia - 4.1%
Aneka Tambang Tbk PT (AE) 3,549,646 790
Astra Agro Lestari Tbk PT 244,789 92
Astra International Tbk PT 3,553,777 3,932
Bank Central Asia Tbk PT 5,909,181 1,901
Bank Danamon Indonesia Tbk PT 1,754,700 854
Bank Mandiri Persero Tbk PT 34,314,003 5,752
Bank Rakyat Indonesia 17,299,472 4,861
Bumi Resources Tbk PT 11,399,809 908
Gudang Garam Tbk PT 91,000 144
HM Sampoerna Tbk PT 23,310 25
Indofood Sukses Makmur Tbk PT 7,540,300 806
Indonesian Satellite Corp. Tbk PT 2,414,500 1,091
Indosat Tbk PT ADR (N) 1,562 35
</Table>
100 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Industriesocement Tunggal Prakarsa Tbk PT (AE) 350,000 97
Ramayana Lestari Sentosa Tbk PT 6,547,500 528
Telekomunikasi Indonesia Tbk PT 15,253,490 6,826
Telekomunikasi Indonesia Tbk PT ADR 1,079 19
------------
28,661
------------
Israel - 2.2%
Bank Hapoalim, Ltd. 1,345,500 4,626
Bank Leumi Le-Israel BM 1,702,502 4,814
Check Point Software Technologies (AE) 80,800 1,693
Israel Chemicals, Ltd. 98,129 289
Makhteshim-Agan Industries, Ltd. 193,200 1,205
Teva Pharmaceutical Industries, Ltd. ADR 83,000 2,593
------------
15,220
------------
Luxembourg - 0.3%
Quilmes Industrial SA 392,600 416
Quilmes Industrial SA ADR (N) 8,627 206
Tenaris SA ADR 31,413 1,795
------------
2,417
------------
Malaysia - 1.7%
Astro All Asia Networks PLC (AE) 890,700 1,221
British American Tobacco Malaysia BHD 66,000 748
CIMB BHD 599,100 783
Hong Leong Bank BHD 371,800 500
IJM Corp. BHD 357,200 449
IOI Corp. BHD 423,900 1,022
Magnum Corp. BHD 2,164,800 1,181
Malakoff BHD 1,118,000 2,165
Malayan Banking BHD 381,600 1,169
Malaysian Industrial Development Finance 902,500 297
MK Land Holdings BHD 1,015,200 361
OYL Industries BHD 122,200 1,142
Symphony House BHD 163,400 23
TAN Chong Motor Holdings BHD 908,000 407
Tenaga Nasional BHD 195,000 544
------------
12,012
------------
Mexico - 6.4%
Alfa SA de CV Class A (AE) 427,900 2,165
America Movil SA de CV ADR 127,300 6,320
Cemex SA de CV 1,335,104 9,637
Cemex SA de CV ADR 29,749 1,071
Corp GEO SA de CV (AE) 37,200 78
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fomento Economico Mexicano SA de CV ADR 74,400 3,798
Grupo Aeroportuario del Sureste SA de CV ADR 16,600 491
Grupo Financiero Banorte SA de CV 809,581 5,228
Grupo Mexico SA de CV (AE) 527,562 2,473
Grupo Modelo SA 475,900 1,356
Grupo Televisa SA ADR 22,173 1,246
Organizacion Soriana SA de CV Class B (AE) 191,900 708
Telefonos de Mexico SA de CV ADR 114,200 3,871
Urbi Desarrollos Urbanos SA de CV (AE) 165,000 806
Wal-Mart de Mexico SA de CV 1,353,828 5,019
------------
44,267
------------
Pakistan - 1.3%
Engro Chemical Pakistan, Ltd. 1,071,300 2,143
Fauji Fertilizer Co., Ltd. 949,617 2,314
HUB Power Co. 1,220,092 584
ICI Pakistan, Ltd. 752,200 1,134
Pakistan Telecommunication Co., Ltd. 3,025,923 3,147
SUI Northern Gas Pipeline 73,274 68
------------
9,390
------------
Philippines - 0.4%
Ayala Land, Inc. 2,732,300 395
Globe Telecom, Inc. 18,000 269
Philippine Long Distance Telephone 86,000 2,205
------------
2,869
------------
Russia - 2.3%
LUKOIL ADR 79,340 10,751
MMC Norilsk Nickel ADR (N) 891 49
Mobile Telesystems ADR (N) 64,400 2,164
OAO Gazprom ADR (N) 13,600 459
Rostelecom ADR (N) 8,200 106
Sberbank RF (AE) 990 648
Tatneft ADR (N) 4,300 143
Vimpel-Communications ADR (AE)(N) 43,500 1,423
------------
15,743
------------
South Africa - 11.5%
ABSA Group, Ltd. 324,852 4,150
Aeci, Ltd. 236,900 1,611
African Bank Investments, Ltd. 343,200 917
</Table>
Emerging Markets Fund 101
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Alexander Forbes, Ltd. 300,000 548
AngloGold Ashanti, Ltd. 15,500 495
AngloGold Ashanti, Ltd. ADR (N) 38,334 1,218
Aveng, Ltd. 192,823 340
AVI, Ltd. 263,900 563
Barloworld, Ltd. 236,505 3,576
Bidvest Group, Ltd. 62,437 702
Consol, Ltd. (AE) 285,700 483
Edgars Consolidated Stores, Ltd. 92,585 3,826
FirstRand, Ltd. 1,611,184 3,423
Foschini, Ltd. 119,945 704
Imperial Holdings, Ltd. 198,680 3,050
Investec, Ltd. 28,900 833
JD Group, Ltd. 211,641 2,173
Liberty Group, Ltd. 22,671 231
Massmart Holdings, Ltd. 87,200 630
Mittal Steel South Africa, Ltd. 131,448 1,096
MTN Group, Ltd. 1,230,500 8,724
Murray & Roberts Holdings, Ltd. 455,000 1,033
Nampak, Ltd. 142,996 365
Naspers, Ltd. 361,608 4,371
Network Healthcare Holdings, Ltd. 1,165,000 1,062
Pick'n Pay Stores, Ltd. 148,900 553
Reunert, Ltd. 35,300 206
Sanlam, Ltd. 2,759,937 5,217
Sappi, Ltd. 284,571 2,827
Sasol, Ltd. 258,600 6,054
Standard Bank Group, Ltd. 1,269,461 12,724
Sun International, Ltd. 75,200 721
Telkom SA, Ltd. 125,179 2,178
Truworths International, Ltd. 689,100 1,819
VenFin, Ltd. 291,200 1,230
------------
79,653
------------
South Korea - 17.4%
Amorepacific Corp. (N) 6,670 1,653
Cheil Communications, Inc. 3,320 547
CJ Internet Corp. 17,330 157
Daelim Industrial Co. 45,020 2,236
Daewoo Engineering & Construction Co., Ltd. 30,620 227
Daewoo Shipbuilding & Marine Engineering Co.,
Ltd. 30,190 549
GS Engineering & Construction Corp. 6,690 201
Hanaro Telecom, Inc. (AE) 149,374 380
Hanjin Shipping Co., Ltd. 64,500 1,780
Hankook Tire Co., Ltd. 190,597 1,940
Hanwha Chem Corp. 153,190 1,823
Hite Brewery Co., Ltd. 15,710 1,451
Honam Petrochemical Corp. 6,000 269
Hyundai Department Store Co., Ltd. 9,470 418
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hyundai Development Co. 40,000 796
Hyundai Heavy Industries 8,920 457
Hyundai Mipo Dockyard 31,050 2,003
Hyundai Mobis 73,300 4,801
Hyundai Motor Co. 69,660 3,800
Hyundai Motor Co. GDR (p) 13,900 369
Industrial Bank of Korea 248,000 2,164
Industrial Bank of Korea GDR 21,540 187
INI Steel Co. 120,920 1,917
KCC Corp. 7,310 1,231
Kookmin Bank 287,736 12,205
Kookmin Bank ADR (N) 4,200 180
Korea Electric Power Corp. 216,330 6,284
Korea Electric Power Corp. ADR (N) 83,180 1,231
KT Corp. 54,000 2,061
KT Corp. ADR 13,400 271
KT Freetel Co., Ltd. 46,700 1,074
KT&G Corp. 81,100 2,926
KT&G Corp. GDR (p) 53,100 945
LG Chem, Ltd. 20,020 763
LG Electronics, Inc. 20,020 1,345
LG Petrochemical Co., Ltd. 7,520 183
Lotte Chilsung Beverage Co., Ltd. 950 936
NCSoft Corp. (AE) 8,974 695
Nong Shim Co., Ltd. 4,943 1,517
Poongsan Corp. 51,080 631
POSCO 73,439 13,307
POSCO ADR 14,200 647
S1 Corp. 45,781 1,778
Samsung Electronics Co., Ltd. 34,931 16,025
Samsung Electronics Co., Ltd. GDR 2,300 522
Samsung Electronics Co., Ltd. GDR (p) 10,059 1,481
Samsung Fire & Marine Insurance Co., Ltd. 29,150 1,994
Samsung Securities Co., Ltd. (AE)(N) 55,580 1,334
Shinhan Financial Group Co., Ltd. 270,960 7,029
Shinsegae Co., Ltd. 4,040 1,294
SK Corp. 33,710 1,888
SK Telecom Co., Ltd. 11,720 1,926
SK Telecom Co., Ltd. ADR 14,700 286
S-Oil Corp. Class N 76,260 5,307
Tae Young Corp. 11,339 429
Woori Finance Holdings Co., Ltd. 130,740 1,200
------------
121,050
------------
</Table>
102 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Taiwan - 8.0%
Acer, Inc. 255,000 419
Advantech Co., Ltd. 605,126 1,415
Asustek Computer, Inc. 761,000 2,049
AU Optronics Corp. ADR (N) 7,500 122
Basso Industry Corp. 250,800 622
Cathay Financial Holding Co., Ltd. 2,339,000 4,253
China Steel Corp. 1,629,150 1,684
China Steel Corp. GDR 59,610 1,222
Chinatrust Financial Holding Co. 1,296,455 1,490
Chunghwa Telecom Co., Ltd. 904,000 1,783
Chunghwa Telecom Co., Ltd. ADR 68,600 1,391
CMC Magnetics Corp. 5,893,000 2,368
Compal Electronics, Inc. 4,112,453 3,839
Compal Electronics, Inc. GDR (N) 31,219 146
E.Sun Financial Holding Co., Ltd. (AE) 1,433,000 1,173
Far Eastern Department Stores Co., Ltd. 655,000 313
Far Eastern Textile Co., Ltd. 1,052,442 719
Far EasTone Telecommunications Co., Ltd. 935,000 1,147
Far EasTone Telecommunications Co., Ltd. GDR (p) 11,000 202
Faraday Technology Corp. 272,647 479
Formosa Petrochemical Corp. (AE) 271,000 566
Foxconn Technology Co., Ltd. (AE) 229,000 656
Gigabyte Technology Co., Ltd. 1,036,875 1,032
HON HAI Precision Industry 1,800,963 8,615
MediaTek, Inc. 76,000 581
Phoenixtec Power Co., Ltd. 565,629 623
Polaris Securities Co., Ltd. 637,000 282
Quanta Computer, Inc. 1,411,801 2,369
Ritek Corp. 2,653,161 792
Taishin Financial Holdings Co., Ltd. 1,316,921 1,186
Taiwan Cellular Corp. 2,123,520 2,129
Taiwan Semiconductor Manufacturing Co., Ltd. 4,811,969 8,042
Taiwan Semiconductor Manufacturing Co., Ltd. ADR 6,776 58
United Microelectronics Corp. ADR (AE)(N) 64,700 210
Vanguard International Semiconductor Corp. (AE) 1,105,000 854
Via Technologies, Inc. (AE) 570,693 294
Yuanta Core Pacific Securities Co. 459,622 329
Zyxel Communications Corp. 180,000 418
------------
55,872
------------
Thailand - 2.6%
Advanced Info Service PCL 363,500 871
Airports of Thailand PCL 1,072,600 1,149
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bangkok Bank PCL 341,900 858
Bank of Ayudhya PCL (AE) 6,588,900 1,994
Banpu PCL 382,900 1,563
CP Seven Eleven PCL 410,400 310
Glow Energy PCL 642,500 370
Kasikornbank PCL 634,600 861
Kiatnakin Finance PCL 681,400 479
Land and Houses PCL 2,842,700 508
National Petrochemical PCL 517,000 1,573
PTT Exploration & Production PCL 320,800 2,830
PTT PCL 424,000 2,150
Ratchaburi Electricity Generating Holding PCL 522,100 513
Shin Corp. PCL 435,500 414
Siam City Bank PCL 1,492,600 938
Siam City Cement PCL 17,500 123
Siam Commercial Bank PCL 235,000 280
True Corp. PCL (AE) 3,553,500 631
------------
18,415
------------
Turkey - 3.8%
Akbank TAS 618,823 2,976
Akcansa Cimento AS 65,996 189
Anadolu Efes Biracilik Ve Malt Sanayii AS 125,130 2,431
Arcelik 87,000 395
Cimsa Cimento Sanayi VE Tica 105,260 328
Denizbank AS 328,906 918
Dogan Yayin Holding (AE) 294,307 707
Dogus Otomotiv Servis ve Ticaret AS (AE) 20,000 48
Eregli Demir ve Celik Fabrikalari TAS (AE) 476,060 2,022
Finansbank (AE) 454,500 1,235
Ford Otomotiv Sanayi AS 267,000 1,785
Hurriyet Gazetecilik AS (AE) 504,000 900
Is Gayrimenkul Yatirim Ortakligi AS (AE) 1,921,600 2,266
Migros Turk TAS (AE) 219,555 1,508
Trakya Cam Sanayi AS (AE) 241,747 702
Tupras Turkiye Petrol Rafine (AE) 251,573 3,164
Turkcell Iletisim Hizmet AS (AE) 82,600 507
Turkcell Iletisim Hizmet AS ADR (N) 7,077 110
</Table>
Emerging Markets Fund 103
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Turkiye Garanti Bankasi AS (AE) 239,500 853
Turkiye Is Bankasi 631,900 3,209
------------
26,253
------------
United Kingdom - 2.5%
Anglo American PLC 182,345 4,015
Antofagasta PLC 35,936 768
Genesis Smaller Companies 236,384 8,803
Old Mutual PLC 1,097,246 2,658
Old Mutual PLC 2,300 6
SABMiller PLC 54,300 803
------------
17,053
------------
Venezuela - 0.0%
Siderurgica Venezolana Sivensa SACA (AE) 1,306,495 30
------------
Zimbabwe - 0.2%
Delta Corp., Ltd. (B) 1,113,646 1,038
OK Zimbabwe (B) 6,402,949 146
------------
1,184
------------
TOTAL COMMON STOCKS
(cost $469,056) 602,738
------------
PREFERRED STOCKS - 6.3%
Brazil - 5.7%
All America Latina Logistica SA 339,945 1,983
Aracruz Celulose SA 96,908 299
Banco Bradesco SA 119,183 3,666
Banco Itau Holding Financeira SA 24,421 4,269
Braskem SA 50,450,000 1,991
Caemi Mineracao e Metalurgica SA 1,614,600 1,232
Cia de Tecidos do Norte de Minas - Coteminas 5,276,440 447
Cia Energetica de Minas Gerais 24,039,000 674
Cia Siderurgica de Tubarao 44,300,000 2,199
Cia Vale do Rio Doce 195,500 4,531
Empresa Brasileira de Aeronautica SA 39,168 279
Gerdau SA 154,550 1,519
Klabin SA 389,000 589
Petroleo Brasileiro SA 238,943 8,779
Suzano Bahia Sul Papel e Celulose SA 230,000 973
Tele Centro Oeste Celular Participacoes SA 132,396,304 465
Usinas Siderurgicas de Minas Gerais SA 213,100 4,214
Votorantim Celulose e Papel SA 153,327 1,683
------------
39,792
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Colombia - 0.0%
BanColombia SA 7,200 27
------------
South Korea - 0.6%
Hyundai Motor Co. 41,560 1,448
Samsung Electronics Co., Ltd. 8,050 2,431
------------
3,879
------------
TOTAL PREFERRED STOCKS
(cost $30,861) 43,698
------------
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.4%
Brazil - 0.0%
Bovespa Index Futures Jun 2005 26,380.00 (BRL)
Call (200) 6,260 71
South Korea - 0.4%
Kospi 200 Index Jun 2005 110.54 (KRW) Call (181) 10,033 2,678
------------
TOTAL OPTIONS PURCHASED
(cost $2,730) 2,749
------------
</Table>
104 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
WARRANTS & RIGHTS - 0.0%
Brazil - 0.0%
Tele Norte Leste Participacoes SA Rights (AE) 514 1
------------
Malaysia - 0.0%
Symphony House BHD
2009 Warrants (AE) 137,280 5
------------
Pakistan - 0.0%
Muslim Community Bank Rights (AE) 53,076 44
------------
TOTAL WARRANTS & RIGHTS
(cost $421) 50
------------
SHORT-TERM INVESTMENTS - 6.1%
United States - 6.1%
Frank Russell Investment Company
Money Market Fund 37,780,000 37,780
United States Treasury Bills (c)(z)(sec.)
2.781% due 06/09/05 3,300 3,290
2.673% due 06/09/05 500 499
2.640% due 06/09/05 1,000 997
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $42,566) 42,566
------------
OTHER SECURITIES - 1.8%
Frank Russell Investment Company
Money Market Fund (X) 3,055,877 3,056
State Street Securities Lending Quality Trust
(X) 9,628,088 9,628
------------
TOTAL OTHER SECURITIES
(cost $12,684) 12,684
------------
TOTAL INVESTMENTS - 101.4%
(identified cost $558,318) 704,485
OTHER ASSETS AND LIABILITIES,
NET - (1.4%) (9,728)
------------
NET ASSETS - 100.0% 694,757
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Hang Seng Index (Hong Kong)
expiration date 05/05 (64) 5,636 (19)
JSE-40 Index (South Africa)
expiration date 06/05 (380) 7,098 (647)
MSCI Taiwan Index
expiration date 05/05 (446) 10,726 25
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts (641)
===============
</Table>
<Table>
<Caption>
OPTIONS WRITTEN
NOTIONAL MARKET
AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Brazil - 0.1%
Bovespa Index Futures
Jun 2005 26,380.00 (BRL) Put (200) 6,260 (421)
---------------
South Korea - 0.3%
Kospi 200 Index Futures
Jun 2005 110.54 (KRW) Put (181) 10,033 (2,020)
---------------
Total Liability for Options Written (premiums
received $971) (2,441)
===============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 105
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- -------------------- -------------------- ----------- --------------
USD 358 BRL 1,000 06/15/05 30
USD 557 BRL 1,500 06/15/05 25
USD 707 BRL 2,000 06/15/05 69
USD 855 BRL 2,400 06/15/05 76
USD 1,950 BRL 5,500 06/15/05 183
USD 1,989 BRL 5,600 06/15/05 183
USD 1,020 HKD 7,951 05/05/05 --
USD 1,682 HKD 13,114 05/05/05 --
USD 34 IDR 320,539 05/02/05 --
USD 19 IDR 184,781 05/03/05 --
USD 3,798 KRW 3,800,000 06/15/05 12
USD 8,391 KRW 8,400,000 06/15/05 31
USD 23 PHP 1,223 05/03/05 --
USD 169 ZAR 1,000 06/15/05 (6)
USD 2,199 ZAR 13,000 06/15/05 (76)
USD 5,443 ZAR 32,000 06/15/05 (215)
BRL 1,262 USD 498 05/02/05 (1)
BRL 2,000 USD 753 06/15/05 (23)
HKD 181 USD 23 05/03/05 --
ILS 197 USD 45 05/02/05 --
KRW 2,400,000 USD 2,395 06/15/05 (11)
MXN 315 USD 28 05/02/05 (1)
MYR 65 USD 17 05/03/05 --
MYR 215 USD 56 05/04/05 --
PKR 3,900 USD 65 04/29/05 --
PHP 1,873 USD 35 05/02/05 --
ZAR 2,283 USD 373 05/05/05 (2)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions 274
==============
</Table>
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 3.4 23,615
Consumer Discretionary 5.4 37,488
Consumer Staples 4.9 33,972
Financial Services 24.4 169,288
Health Care 0.7 4,752
Integrated Oils 7.9 55,073
Materials and Processing 17.8 123,863
Miscellaneous 2.0 13,583
Other Energy 3.0 20,715
Producer Durables 3.7 25,983
Technology 5.7 39,591
Utilities 14.2 98,513
Options 0.4 2,749
Warrants and Rights 0.0 50
Short-Term Investments 6.1 42,566
Other Securities 1.8 12,684
--------------- ---------------
Total Investments 101.4 704,485
Other Assets and Liabilities, Net (1.4) (9,728)
--------------- ---------------
Net Assets 100.0 694,757
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 11.7 80,837
Asia 45.0 313,273
Europe 8.9 61,901
Latin America 20.4 141,600
Middle East 4.5 31,118
Other 0.1 704
United Kingdom 2.5 17,053
Options 0.4 2,749
Short-Term Investments 6.1 42,566
Other Securities 1.8 12,684
--------------- ---------------
Total Investments 101.4 704,485
Other Assets and Liabilities, Net (1.4) (9,728)
--------------- ---------------
Net Assets 100.0 694,757
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
106 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Argentina 0.1
Austria 0.1
Brazil 7.5
Canada 0.1
Chile 0.2
China 2.2
Colombia 0.1
Croatia 0.2
Czech Republic 0.1
Ecuador 0.4
Egypt 2.3
Hong Kong 1.5
Hungary 2.2
India 5.1
Indonesia 4.1
Israel 2.2
Luxembourg 0.3
Malaysia 1.7
Mexico 6.4
Pakistan 1.3
Philippines 0.4
Russia 2.3
South Africa 11.5
South Korea 17.4
Taiwan 8.0
Thailand 2.6
Turkey 3.8
United Kingdom 2.5
Venezuela --*
Zimbabwe 0.2
Preferred Stock 6.3
Options Purchased 0.4
Warrants & Rights --*
Short-Term Investments 6.1
Other Securities 1.8
---------------
Total Investments 101.4
Other Assets and Liabilities Net (1.4)
---------------
Net Assets 100.0
===============
Futures Contracts 0.1
Foreign Currency Exchange Contracts --*
Options Written 0.4
</Table>
* Less than .05%
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 107
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,074.30 $ 1,014.64
Expenses Paid During
Period* $ 10.75 $ 10.44
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.09%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,078.30 $ 1,018.36
Expenses Paid During
Period* $ 6.91 $ 6.71
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.34%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,079.30 $ 1,019.59
Expenses Paid During
Period* $ 5.62 $ 5.46
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.09%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
108 Real Estate Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 96.5%
Apartments - 16.5%
Apartment Investment & Management Co. Class A
(o) 547,075 20,854
Archstone-Smith Trust (o) 790,605 28,438
AvalonBay Communities, Inc. (o)(N) 760,500 54,756
BRE Properties Class A (o)(N) 288,100 10,723
Camden Property Trust (o)(N) 383,499 19,558
Equity Residential (o)(N) 2,038,800 70,033
Essex Property Trust, Inc. (o)(N) 134,400 10,208
Home Properties, Inc. (o) 206,800 8,655
United Dominion Realty Trust, Inc. (o) 504,200 11,168
------------
234,393
------------
Diversified - 5.6%
iStar Financial, Inc. (o)(N) 101,900 4,060
Sizeler Property Investors (o) 154,900 1,784
Spirit Finance Corp. (o)(N) 118,000 1,221
Vornado Realty Trust (o) 942,575 72,060
------------
79,125
------------
Free Standing Retail - 0.1%
Realty Income Corp. (o)(N) 80,400 1,938
------------
Health Care - 2.6%
Health Care REIT, Inc. (o)(N) 57,700 1,933
Healthcare Realty Trust, Inc. (o)(N) 178,000 6,873
LTC Properties, Inc. (o) 210,000 3,856
National Health Investors, Inc. (o) 153,150 4,013
Omega Healthcare Investors, Inc. (o)(N) 243,300 2,730
Ventas, Inc. (o)(N) 621,250 16,761
------------
36,166
------------
Industrial - 8.4%
AMB Property Corp. (o) 302,100 11,779
Catellus Development Corp. (o)(N) 997,471 27,630
Centerpoint Properties Trust (o)(N) 270,300 11,139
EastGroup Properties (o) 107,700 4,039
First Potomac Realty Trust (o)(N) 191,900 4,300
ProLogis (o)(N) 1,526,300 60,426
------------
119,313
------------
Lodging/Resorts - 10.9%
Fairmont Hotels & Resorts, Inc. (N) 56,260 1,764
Hilton Hotels Corp. 1,775,500 38,759
Hospitality Properties Trust (o)(N) 67,000 2,799
Host Marriott Corp. (o)(N) 3,144,100 52,884
La Quinta Corp. (AE)(o) 755,500 6,573
LaSalle Hotel Properties (o)(N) 233,520 7,094
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. (o) 799,983 43,471
Strategic Hotel Capital, Inc. (o)(N) 106,200 1,498
------------
154,842
------------
Manufactured Homes - 0.9%
Sun Communities, Inc. (o) 67,900 2,366
Equity Lifestyle Properties, Inc. (o) 262,000 9,589
------------
11,955
------------
Mixed Industrial/Office - 2.3%
Bedford Property Investors (o) 135,355 2,882
Duke Realty Corp. (o) 147,000 4,498
Liberty Property Trust (o) 541,100 21,552
PS Business Parks, Inc. (o) 90,000 3,632
------------
32,564
------------
Office - 18.4%
Alexandria Real Estate Equities, Inc. (o) 166,200 11,438
American Financial Realty Trust (o)(N) 1,132,300 17,358
Arden Realty, Inc. (o)(N) 440,300 15,714
BioMed Realty Trust, Inc. (o) 285,950 5,776
Boston Properties, Inc. (o) 971,800 64,596
Brandywine Realty Trust (o)(N) 284,400 8,049
Brookfield Properties Co. 941,450 23,903
CarrAmerica Realty Corp. (o) 219,000 7,236
Corporate Office Properties Trust (o) 83,000 2,183
CRT Properties, Inc. (o) 211,400 4,881
Equity Office Properties Trust (o) 265,000 8,340
Glenborough Realty Trust, Inc. (o)(N) 183,925 3,778
Highwoods Properties, Inc. (o) 574,400 16,158
Kilroy Realty Corp. (o)(N) 286,300 12,491
Mack-Cali Realty Corp. (o)(N) 363,781 16,003
Prentiss Properties Trust (o)(N) 178,500 5,930
Reckson Associates Realty Corp. (o)(N) 127,800 4,122
SL Green Realty Corp. (o) 265,400 16,189
Trizec Properties, Inc. (o)(N) 822,900 16,450
------------
260,595
------------
Regional Malls - 16.5%
General Growth Properties, Inc. (o)(N) 1,364,500 53,366
Macerich Co. (The) (o) 398,300 24,017
Mills Corp. (The) (o)(N) 398,375 22,763
Pennsylvania Real Estate Investment Trust (o)(N) 279,971 11,801
</Table>
Real Estate Securities Fund 109
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Simon Property Group, Inc. (o) 1,715,800 113,362
Taubman Centers, Inc. (o) 281,000 8,318
------------
233,627
------------
Self Storage - 2.4%
Extra Space Storage, Inc. (o)(N) 80,700 1,049
Public Storage, Inc. (o) 473,000 27,765
Shurgard Storage Centers, Inc. Class A (o)(N) 130,000 5,438
Sovran Self Storage, Inc. (o) 2,400 103
------------
34,355
------------
Shopping Center - 10.4%
Developers Diversified Realty Corp. (o) 842,700 35,764
Federal Realty Investors Trust (o)(N) 480,900 25,728
Inland Real Estate Corp. (o) 407,500 6,255
Kimco Realty Corp. (o) 151,000 8,364
Kite Realty Group Trust (o)(N) 206,300 2,888
Pan Pacific Retail Properties, Inc. (o) 460,213 27,806
Regency Centers Corp. (o) 780,600 41,099
------------
147,904
------------
Specialty - 1.5%
Capital Automotive REIT (o)(N) 391,700 13,310
Plum Creek Timber Co., Inc. (o)(N) 240,700 8,314
------------
21,624
------------
TOTAL COMMON STOCKS
(cost $961,332) 1,368,401
------------
SHORT-TERM INVESTMENTS - 3.4%
Frank Russell Investment Company
Money Market Fund 48,840,000 48,840
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $48,840) 48,840
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 6.9%
Frank Russell Investment Company
Money Market Fund (X) 23,536,350 23,536
State Street Securities Lending Quality Trust
(X) 74,155,474 74,156
------------
TOTAL OTHER SECURITIES
(cost $97,692) 97,692
------------
TOTAL INVESTMENTS - 106.8%
(identified cost $1,107,864) 1,514,933
OTHER ASSETS AND LIABILITIES,
NET - (6.8%) (96,313)
------------
NET ASSETS - 100.0% 1,418,620
============
</Table>
See accompanying notes which are an integral part of the financial statements.
110 Real Estate Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Apartments 16.5
Diversified 5.6
Free Standing Retail 0.1
Health Care 2.6
Industrial 8.4
Lodging/Resorts 10.9
Manufactured Homes 0.9
Mixed Industrial/Office 2.3
Office 18.4
Regional Malls 16.5
Self Storage 2.4
Shopping Center 10.4
Specialty 1.5
Short-Term Investments 3.4
Other Securities 6.9
---------------
Total Investments 106.8
Other Assets and Liabilities, Net (6.8)
---------------
Net Assets 100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 111
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 994.90 $ 1,016.82
Expenses Paid During
Period* $ 8.16 $ 8.25
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.65%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 998.60 $ 1,020.54
Expenses Paid During
Period* $ 4.46 $ 4.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.90%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 999.90 $ 1,021.78
Expenses Paid During
Period* $ 3.22 $ 3.26
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.65%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period).
112 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 72.1%
Asset-Backed Securities - 24.8%
ACE Securities Corp. (E)
Series 2004-OP1 Class A2A
2.528% due 04/25/34 322 322
Aegis Asset Backed Securities Trust (E)
Series 2005-1 Class 1A1
2.770% due 03/25/35 474 474
Alter Moneta Receivables LLC (p)
Series 2003-1 Class NOTE
2.563% due 03/15/11 1,214 1,206
AmeriCredit Automobile Receivables Trust
Series 2005-AX Class A3
3.630% due 01/06/10 2,000 1,985
Amortizing Residential Collateral Trust (E)
Series 2002-BC5 Class A
3.170% due 07/25/32 36 36
Argent Securities, Inc. (E)
Series 2004-W11 Class A2
3.030% due 11/25/34 708 708
Asset Backed Securities Corp. Home Equity (E)
Series 2002-HE1 Class M1
3.580% due 03/15/32 1,400 1,440
Bank One Issuance Trust
Series 2002-A2 Class A2
4.160% due 01/15/08 6,000 6,003
Bay View Auto Trust
Series 2003-LJ1 Class A3
2.430% due 07/25/08 640 637
BMW Vehicle Owner Trust
Series 2004-A Class A4
3.320% due 02/25/09 4,200 4,144
California Infrastructure PG&E-1
Series 1997-1 Class A7
6.420% due 09/25/08 1,451 1,480
Series 1997-1 Class A8
6.480% due 12/26/09 3,000 3,147
California Infrastructure SCE-1
Series 1997-1 Class A7
6.420% due 12/26/09 7,450 7,805
California Infrastructure SDG&E-1
Series 1997-1 Class A6
6.310% due 09/25/08 402 410
Capital Auto Receivables Asset Trust
Series 2002-3 Class A3
3.580% due 10/16/06 5,525 5,529
Series 2002-4 Class A4
2.640% due 03/17/08 1,874 1,860
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-2 Class A2
3.350% due 02/15/08 3,000 2,969
Capital One Auto Finance Trust
Series 2001-B Class A4
4.880% due 09/15/08 1,100 1,107
Capital One Master Trust
Series 2002-4A Class A
4.900% due 03/15/10 1,000 1,018
Capital One Multi-Asset Execution Trust
Series 2003-A6 Class A6
2.950% due 08/17/09 1,000 987
Capital One Prime Auto Receivables Trust
Series 2004-3 Class A4
3.690% due 06/15/10 1,000 986
Series 2004-3 Class B
3.860% due 08/15/11 1,500 1,484
Carmax Auto Owner Trust
Series 2004-2 Class A4
3.460% due 09/15/11 2,500 2,449
Caterpillar Financial Asset Trust
Series 2002-A Class A3
3.150% due 02/25/08 370 370
Centex Home Equity
Series 2003-C Class AF4
4.960% due 04/25/32 1,750 1,771
Centex Home Equity (E)
Series 2004-B Class AV2
2.950% due 03/25/34 310 310
Chase Credit Card Master Trust (E)
Series 2004-2 Class A
2.850% due 09/15/09 2,500 2,501
Chase Issuance Trust
Series 2004-A9 Class A9
3.220% due 06/15/10 3,000 2,943
Chase Manhattan Auto Owner Trust
Series 2002-B Class A4
4.210% due 01/15/09 6,799 6,826
Series 2004-A Class A4
2.830% due 09/15/10 1,800 1,752
Chemical Master Credit Card Trust 1
Series 1996-2 Class A
5.980% due 09/15/08 4,000 4,063
CIT Equipment Collateral
Series 2003-VT1 Class A3B
1.630% due 04/20/07 291 288
</Table>
Short Duration Bond Fund 113
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-VT1 Class A3
2.200% due 03/20/08 1,500 1,479
CIT Marine Trust
Series 1999-A Class A4
6.250% due 11/15/19 1,000 1,018
CIT RV Trust
Series 1998-A Class A5
6.120% due 11/15/13 979 999
Citibank Credit Card Issuance Trust
Series 2003-A3 Class A3
3.100% due 03/10/10 1,000 972
Series 2003-A5 Class A5
2.500% due 04/07/08 1,700 1,681
Series 2004-A1 Class A1
2.550% due 01/20/09 6,975 6,816
Series 2004-A4 Class A4
3.200% due 08/24/09 4,960 4,868
CNH Equipment Trust
Series 2003-A Class A3B
1.890% due 07/16/07 653 649
CNH Wholesale Master Note Trust (E)
Series 2003-1 Class A
3.010% due 08/15/08 2,000 2,000
Community Program Loan Trust
Series 1987-A Class A4
4.500% due 10/01/18 2,601 2,605
Connecticut RRB Special Purpose Trust CL&P
Series 2001-1 Class A5
6.210% due 12/30/11 1,000 1,081
Countrywide Asset-Backed Certificates
Series 2004-7 Class AF2
3.324% due 12/25/23 1,000 989
Countrywide Asset-Backed Certificates (E)
Series 2001-BC3 Class A
3.090% due 12/25/31 358 358
Series 2004-5 Class 4A1
2.530% due 08/25/23 138 138
Series 2004-6 Class 2A1
3.040% due 10/25/21 1,143 1,143
Series 2004-7 Class 2AV1
3.000% due 12/25/22 1,398 1,398
Series 2004-BC4 Class 2A1
3.030% due 07/25/21 1,291 1,291
Credit-Based Asset Servicing and Securitization
(E)
Series 2004-CB5 Class AV1
2.980% due 09/25/21 777 777
Daimler Chrysler Auto Trust
Series 2005-A Class A3
3.490% due 12/08/08 2,200 2,184
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-A Class A4
3.740% due 02/08/10 8,100 8,019
Dillard Credit Card Master Trust
Series 2002-2 Class A
3.800% due 09/15/10 3,300 3,298
Discover Card Master Trust I
Series 1996-3 Class A
6.050% due 08/18/08 2,225 2,266
Distribution Financial Services Floorplan Master
Trust (E)
Series 2003-1 Class A
2.550% due 04/15/07 3,000 3,000
Equity One ABS, Inc.
Series 2004-3 Class AF2
3.799% due 07/25/34 2,000 1,984
Equity One ABS, Inc. (E)
Series 2004-2 Class AF1
2.960% due 07/25/34 1,006 1,006
E-Trade RV and Marine Trust
Series 2004-1 Class A3
3.620% due 10/08/18 1,300 1,281
Federal Farm Credit Bank
12.250% due 02/01/07 3,169 3,363
Fifth Third Auto Trust
Series 2004-A Class A3
3.190% due 02/20/08 2,000 1,982
First Franklin Mortgage Loan Asset Backed
Certificates (E)
Series 2003-FF3 Class 2A1
2.650% due 07/25/33 274 274
First National Master Note Trust (E)
Series 2003-1 Class A
2.910% due 08/15/08 1,000 1,001
Fleet Credit Card Master Trust II
Series 2000-C Class A
7.020% due 02/15/08 1,211 1,224
Series 2001-B Class A
5.600% due 12/15/08 3,000 3,058
Ford Credit Auto Owner Trust
Series 2002-A Class A4A
4.360% due 09/15/06 434 435
Series 2005-A Class A3
3.480% due 11/15/08 7,725 7,672
Series 2005-B Class B
4.640% due 04/15/10 1,250 1,257
</Table>
114 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Franklin Auto Trust
Series 2003-1 Class A4
2.270% due 05/20/11 1,170 1,146
Fremont Home Loan Trust (E)
Series 2004-4 Class 2A1
2.690% due 03/25/35 3,022 3,022
GE Commercial Equipment Financing LLC (E)
Series 2004-1 Class B
2.700% due 12/20/15 745 745
GE Corporate Aircraft Financing LLC (E)(p)
Series 2004-1A Class B
3.380% due 01/25/18 828 828
GE Dealer Floorplan Master Note Trust (E)
Series 2004-2 Class B
3.140% due 07/20/09 1,000 1,003
GMAC Mortgage Corp. Loan Trust
Series 2004-GH1 Class A2
4.390% due 12/25/25 1,500 1,501
GMAC Mortgage Corp. Loan Trust (E)
Series 2004-HE2 Class A1C
2.630% due 10/25/33 840 840
GS Auto Loan Trust
Series 2004-1 Class A3
2.130% due 11/15/07 2,000 1,976
GSAMP Trust (E)
Series 2003-HE1 Class A2A
2.670% due 06/20/33 65 65
Series 2004-AR2 Class A3A
2.680% due 08/25/34 188 188
Series 2004-NC2 Class A2A
2.710% due 10/01/34 1,673 1,674
Series 2004-SEA2 Class A2A
3.140% due 03/25/34 1,225 1,225
Home Equity Mortgage Trust (E)
Series 2004-4 Class A2
3.000% due 12/25/34 890 890
Honda Auto Receivables Owner Trust
Series 2003-2 Class A4
2.160% due 10/21/08 7,000 6,832
Series 2003-3 Class A4
2.770% due 11/21/08 2,000 1,959
Series 2003-4 Class A4
2.790% due 03/16/09 1,000 980
Series 2003-5 Class A3
2.300% due 10/18/07 1,000 989
Series 2003-5 Class A4
2.960% due 04/20/09 2,135 2,091
Series 2004-3 Class A4
3.280% due 02/18/10 2,000 1,947
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Household Automotive Trust
Series 2002-2 Class A3
2.850% due 03/19/07 235 234
Household Mortgage Loan Trust (E)
Series 2003-HC1 Class A
3.200% due 02/20/33 808 811
Household Private Label Credit Card Master Note
Trust I (E)
Series 2002-2 Class A
2.980% due 01/18/11 1,000 1,001
Hyundai Auto Receivables Trust
Series 2003-A Class A3
2.330% due 11/15/07 1,500 1,487
Series 2004-A Class A3
2.970% due 05/15/09 1,000 986
Hyundai Auto Receivables Trust (p)
Series 2002-A Class A3
2.800% due 02/15/07 336 335
Illinois Power Special Purpose Trust
Series 1998-1 Class A5
5.380% due 06/25/07 114 115
Series 1998-1 Class A6
5.540% due 06/25/09 4,725 4,819
Irwin Home Equity (E)
Series 2002-1 Class 2A1
2.820% due 06/25/29 8 8
IXIS Real Estate Capital Trust (E)
Series 2005-HE2 Class A1
3.144% due 09/25/35 1,200 1,200
MBNA Credit Card Master Note Trust
Series 2001-A1 Class A1
5.750% due 10/15/08 1,000 1,020
Series 2004-A4 Class A4
2.700% due 09/15/09 11,005 10,747
MBNA Master Credit Card Trust USA
Series 1995-C Class A
6.450% due 02/15/08 1,430 1,436
Merrill Lynch Mortgage Investors, Inc. (E)
Series 2004-WMC3 Class A2A
2.970% due 01/25/35 48 48
Morgan Stanley Dean Witter Capital I (E)
Series 2002-HE1 Class A2
2.860% due 07/25/32 20 20
National City Auto Receivables Trust
Series 2002-A Class A4
4.830% due 08/15/09 1,408 1,419
</Table>
Short Duration Bond Fund 115
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-A Class A3
2.110% due 07/15/08 1,500 1,478
National City Bank
2.700% due 08/24/09 2,045 1,974
Navistar Financial Corp. Owner Trust
Series 2001-B Class A4
4.370% due 11/17/08 1,477 1,478
Series 2002-A Class A4
4.760% due 04/15/09 786 790
Nelnet Education Loan Funding, Inc.
Series 2001-A Class A1
5.760% due 07/01/12 785 802
Nelnet Student Loan Trust (E)
Series 2002-2 Class A3
2.649% due 09/25/13 1,047 1,050
Series 2004-4 Class A1
2.690% due 04/25/11 294 294
Nissan Auto Receivables Owner Trust
Series 2005-A Class A3
3.540% due 10/15/08 1,650 1,638
Nordstrom Private Label Credit Card Master Note
Trust (p)
Series 2001-1A Class A
4.820% due 04/15/10 3,500 3,544
Onyx Acceptance Grantor Trust
Series 2005-A Class A4
3.910% due 09/15/11 2,000 1,981
Option One Mortgage Loan Trust (E)
Series 2005-1 Class A2
2.573% due 02/25/35 3,268 3,268
PBG Equipment Trust (p)
Series 1998-1A Class A
6.270% due 01/20/12 973 979
Peco Energy Transition Trust
Series 1999-A Class A6
6.050% due 03/01/09 2,500 2,564
PG&E Energy Recovery Funding LLC
Series 2005-1 Class A2
3.870% due 06/25/11 2,905 2,895
PNC Student Loan Trust I
Series 1997-2 Class A7
6.728% due 01/25/07 1,245 1,269
Popular ABS Mortgage Pass-Through Trust
Series 2004-5 Class AF2
3.735% due 12/25/34 965 956
Provident Auto Lease ABS Trust (p)
Series 1999-1 Class A2
7.025% due 01/14/12 187 190
Providian Gateway Master Trust (p)
Series 2004-FA Class A
3.650% due 11/15/11 1,200 1,184
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PSE&G Transition Funding LLC
Series 2001-1 Class A3
5.980% due 06/15/08 3,000 3,044
Public Service New Hampshire Funding LLC
Series 2001-1 Class A2
5.730% due 11/01/10 1,436 1,473
Railcar Leasing LLC (p)
Series 1997-1 Class A2
7.125% due 01/15/13 1,000 1,088
Regions Auto Receivables Trust
Series 2003-2 Class A3
2.310% due 01/15/08 1,500 1,488
Renaissance Home Equity Loan Trust (E)
Series 2004-2 Class AF1
3.050% due 07/25/34 2,098 2,099
Residential Asset Mortgage Products, Inc.
Series 2003-RZ5 Class A2
3.180% due 03/25/27 1,758 1,753
Residential Asset Mortgage Products, Inc. (E)
Series 2004-RS2 Class AIIB
2.780% due 02/25/34 2,075 2,078
Series 2004-RS8 Class AII1
2.990% due 05/25/26 2,424 2,425
Sears Credit Account Master Trust
Series 1999-3 Class A
6.450% due 11/17/09 846 852
Series 2000-2 Class A
6.750% due 09/16/09 2,000 2,023
Sears Credit Account Master Trust (E)
Series 2002-4 Class A
2.940% due 08/18/09 3,700 3,701
Series 2002-5 Class A
3.190% due 11/17/09 3,500 3,507
SLM Student Loan Trust (E)
Series 2003-8 Class A2
2.530% due 06/15/11 558 558
Series 2004-10 Class A1
2.063% due 07/27/09 1,494 1,494
SLM Student Loan Trust (p)
Series 2003-4 Class A5B
3.390% due 03/15/33 3,000 2,902
</Table>
116 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Susquehanna Auto Lease Trust (p)
Series 2003-1 Class A3
2.460% due 01/14/07 869 864
Series 2005-1 Class A3
4.430% due 06/16/08 2,000 2,011
Toyota Auto Receivables Owner Trust
Series 2003-B Class A4
2.790% due 01/15/10 4,670 4,593
Triad Auto Receivables Owner Trust
Series 2002-A Class A4
3.240% due 08/12/09 2,000 1,992
Series 2003-B Class A3
2.480% due 03/12/08 1,000 994
Series 2004-A Class A3
1.900% due 07/14/08 1,000 985
USAA Auto Owner Trust
Series 2004-2 Class A4
3.580% due 02/15/11 1,700 1,682
Volkswagen Auto Loan Enhanced Trust
Series 2003-2 Class A3
2.270% due 10/22/07 3,000 2,974
Wachovia Auto Owner Trust
Series 2004-A Class A3
3.190% due 06/20/08 2,000 1,986
Series 2004-A Class A4
3.660% due 07/20/10 10,500 10,392
Series 2004-B Class A3
2.910% due 04/20/09 5,000 4,931
Wells Fargo Financial Auto Owner Trust
Series 2004-A Class A4
2.670% due 08/16/10 2,000 1,954
Wells Fargo Home Equity Trust (E)
Series 2004-2 Class A31
3.010% due 06/25/19 225 225
West Penn Funding LLC Transition Bonds
Series 1999-A Class A3
6.810% due 09/25/08 1,232 1,257
WFS Financial Owner Trust
Series 2002-3 Class A4
3.500% due 02/20/10 2,000 1,997
Series 2004-1 Class A3
2.190% due 06/20/08 1,500 1,481
Whole Auto Loan Trust
Series 2002-1 Class A3
2.600% due 08/15/06 270 270
Series 2003-1 Class A3B
1.990% due 05/15/07 1,900 1,885
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-1 Class B
2.240% due 03/15/10 615 607
------------
300,062
------------
Corporate Bonds and Notes - 14.0%
Abbott Laboratories
5.625% due 07/01/06 1,500 1,528
ABN Amro Bank NV
7.125% due 06/18/07 1,500 1,589
Allstate Financial Global Funding (p)
2.500% due 06/20/08 4,080 3,858
Allstate Life Global Funding Trusts
3.850% due 01/25/08 4,050 4,006
Altria Group, Inc.
7.650% due 07/01/08 1,500 1,640
American Express Centurion Bank
Series BKNT
4.375% due 07/30/09 3,440 3,442
American General Finance Corp. (E)(N)
Series MTNG
3.093% due 03/23/07 200 200
Amsouth Bank NA
Series BKNT
2.820% due 11/03/06 2,000 1,967
Associates Corp. of North America
6.250% due 11/01/08 1,000 1,065
8.550% due 07/15/09 750 867
Series MTNH
7.250% due 05/08/06 2,000 2,066
7.240% due 05/17/06 1,000 1,034
Bank of America Corp.
6.375% due 02/15/08 3,000 3,161
Bank of Montreal
7.800% due 04/01/07 1,000 1,066
BankAmerica Corp.
7.125% due 03/01/09 1,500 1,640
BB&T Corp. (E)
Series BKNT
3.000% due 06/04/07 3,500 3,505
CIT Group, Inc.
7.375% due 04/02/07 6,800 7,190
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
2.999% due 03/07/08 1,600 1,599
Citigroup, Inc.
5.750% due 05/10/06 1,370 1,397
Citigroup, Inc. (E)
2.498% due 06/04/07 1,000 1,000
</Table>
Short Duration Bond Fund 117
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ConocoPhillips
8.750% due 05/25/10 1,000 1,196
DaimlerChrysler NA Holding Corp.
6.400% due 05/15/06 1,200 1,220
4.125% due 03/07/07 2,830 2,785
4.750% due 01/15/08 1,548 1,527
Deutsche Bank Financial, Inc.
7.500% due 04/25/09 2,000 2,219
Entergy Mississippi, Inc.
4.350% due 04/01/08 500 498
Fifth Third Bancorp
Series BKNT
3.375% due 08/15/08 2,000 1,947
Ford Motor Credit Co.
6.500% due 01/25/07 1,500 1,500
Ford Motor Credit Co. (E)
4.000% due 03/21/07 2,400 2,336
General Electric Capital Corp.
4.125% due 03/04/08 5,800 5,787
8.500% due 07/24/08 1,000 1,121
8.300% due 09/20/09 1,000 1,150
Series MTNA
3.450% due 07/16/07 700 689
8.125% due 04/01/08 1,000 1,104
General Motors Acceptance Corp.
6.125% due 09/15/06 300 298
General Motors Acceptance Corp. (E)
3.695% due 05/18/06 400 392
4.050% due 01/16/07 200 191
Goldman Sachs Group, Inc. (E)
2.750% due 01/09/07 3,000 3,004
Series MTNB
3.023% due 07/23/09 2,000 2,008
Harrah's Operating Co., Inc.
7.500% due 01/15/09 1,500 1,640
Household Finance Corp.
4.625% due 01/15/08 8,800 8,870
Household Finance Corp. (E)
3.130% due 02/28/07 3,200 3,199
John Hancock Global Funding II
6.000% due 12/28/06 2,450 2,524
KFW International Finance
Series DTC
5.250% due 06/28/06 2,000 2,033
Lehman Brothers Holdings, Inc.
8.250% due 06/15/07 3,500 3,793
7.875% due 08/15/10 1,000 1,153
Lehman Brothers, Inc.
6.625% due 02/15/08 1,500 1,591
Medco Health Solutions, Inc.
7.250% due 08/15/13 1,750 1,945
Metropolitan Life Global Funding I (p)
4.250% due 07/30/09 1,500 1,494
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MGM Mirage
9.750% due 06/01/07 1,200 1,293
Morgan Stanley
3.875% due 01/15/09 2,000 1,961
Morgan Stanley (E)
2.825% due 07/27/07 3,000 3,003
National City Bank
Series BKNT
4.250% due 01/29/10 1,375 1,363
National Rural Utilities Cooperative Finance
Corp.
Series MTNC
6.500% due 03/01/07 2,200 2,288
New York Life Global Funding (E)(p)
2.441% due 02/26/07 2,500 2,501
Principal Life Global Funding I (p)
5.125% due 06/28/07 2,000 2,034
Prudential Financial, Inc. (N)
4.104% due 11/15/06 500 503
SBC Communications Capital Corp.
Series MTND
6.680% due 11/28/07 1,075 1,133
SLM Corp.
3.625% due 03/17/08 7,200 7,073
Swiss Bank Corp. New York
7.250% due 09/01/06 1,500 1,563
TIAA Global Markets (p)
5.000% due 03/01/07 3,625 3,684
Tosco Corp.
7.250% due 01/01/07 1,500 1,571
Toyota Motor Credit Corp.
2.750% due 08/06/09 3,273 3,115
Unilever Capital Corp.
7.125% due 11/01/10 1,000 1,130
Union Bank Switzerland
7.250% due 07/15/06 1,000 1,034
US Bancorp
Series MTNN
5.100% due 07/15/07 3,000 3,061
US Central Credit Union
2.750% due 05/30/08 1,880 1,818
USAA Capital Corp. (p)
Series MTNB
4.640% due 12/15/09 595 598
Verizon Global Funding Corp.
4.000% due 01/15/08 2,500 2,483
</Table>
118 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Wachovia Corp. (E)
Series *
2.940% due 07/20/07 3,500 3,500
Washington Mutual Financial Corp.
6.250% due 05/15/06 1,745 1,787
7.250% due 06/15/06 3,005 3,112
Wells Fargo (N)
4.125% due 03/10/08 820 818
Wells Fargo & Co.
6.250% due 04/15/08 8,337 8,801
Series MTNH
6.750% due 10/01/06 1,930 2,010
Wells Fargo & Co. (E)
3.100% due 09/15/06 3,000 3,003
------------
169,274
------------
International Debt - 2.4%
Brazilian Government International Bond
10.000% due 01/16/07 1,800 1,933
8.000% due 04/15/14 106 105
Brazilian Government International Bond (E)
8.840% due 06/29/09 1,150 1,314
3.125% due 04/15/12 165 154
HBOS Treasury Services PLC (E)(p)
2.700% due 01/12/07 900 901
HBOS Treasury Services PLC (p)
3.500% due 11/30/07 2,000 1,969
3.750% due 09/30/08 1,000 986
HSBC Bank PLC
7.625% due 06/15/06 4,500 4,681
6.950% due 03/15/11 1,000 1,139
Inter-American Development Bank
12.250% due 12/15/08 1,250 1,589
Interstar Millennium Trust (E)
Series 2004-2G Class A
3.210% due 03/14/36 2,180 2,181
Mexico Government International Bond
4.625% due 10/08/08 3,250 3,227
National Westminster Bank PLC
7.375% due 10/01/09 1,000 1,119
Panama Government International Bond
8.250% due 04/22/08 1,300 1,407
Peru Government International Bond (N)
9.125% due 01/15/08 1,000 1,100
Province of British Columbia
4.625% due 10/03/06 2,000 2,027
Province of Manitoba Canada
4.250% due 11/20/06 1,000 1,007
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Province of Ontario
5.500% due 10/01/08 1,500 1,569
------------
28,408
------------
Mortgage-Backed Securities - 15.5%
Banc of America Commercial Mortgage, Inc.
Series 2004-2 Class A1
2.764% due 11/10/38 2,573 2,494
Bank of America Mortgage Securities
Series 2004-2 Class 5A1
6.500% due 10/25/31 494 510
Bank of America Mortgage Securities (E)
Series 2002-K Class 2A1
5.591% due 10/20/32 78 79
Bear Stearns Adjustable Rate Mortgage Trust
Series 2002-9 Class 2A
5.271% due 10/25/32 27 27
Series 2003-1 Class 5A1
5.437% due 04/25/33 628 622
Bear Stearns Adjustable Rate Mortgage Trust (E)
Series 2003-8 Class 2A1
4.881% due 01/25/34 780 771
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.446% due 05/25/35 1,900 1,920
Bear Stearns Asset Backed Securities, Inc.
Series 2003-AC3 Class A1
4.000% due 07/25/33 771 767
Bear Stearns Commercial Mortgage Securities
Series 1998-C1 Class A1
6.340% due 06/16/30 557 572
Series 1999-C1 Class A2
6.020% due 02/14/31 2,000 2,105
Series 2001-TOP4 Class A1
5.060% due 11/15/16 869 884
Series 2003-PWR2 Class A1
3.432% due 05/11/39 818 801
Series 2003-T10 Class A1
4.000% due 03/13/40 1,541 1,513
Series 2003-T12 Class A1
2.960% due 08/13/39 1,564 1,517
</Table>
Short Duration Bond Fund 119
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Carrington Mortgage Loan Trust
Series 2005-OTP2 Class A1A
3.180% due 05/01/35 900 900
Commercial Mortgage Pass Through Certificates
Series 2004-LB2A Class A2
3.600% due 03/10/39 1,000 974
Countrywide Alternative Loan Trust
Series 2003-6T2 Class A1
6.500% due 06/25/33 517 523
Series 2003-J2 Class A1
6.000% due 10/25/33 942 951
Credit Suisse First Boston Mortgage (p)
1.691% due 08/25/33 495 497
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2002-AR27 Class 2A2
5.673% due 10/25/32 62 62
Series 2003-C4 Class A2
3.908% due 08/15/36 1,000 987
Series 2003-CK2 Class A1
3.006% due 03/15/36 981 959
Series 2004-C1 Class A1
2.254% due 01/15/37 2,286 2,226
Fannie Mae
15 Year TBA (I) 1,000 1,007
5.000%
30 Year TBA (I)
5.500% 38,000 38,357
6.000% due 2008 133 138
5.500% due 2009 3,041 3,111
6.000% due 2010 277 287
6.500% due 2010 208 217
6.000% due 2011 271 282
6.500% due 2011 189 197
4.500% due 2013 3,419 3,425
5.000% due 2013 3,484 3,542
5.500% due 2013 465 479
6.000% due 2013 554 575
6.000% due 2014 2,794 2,900
5.500% due 2016 1,631 1,671
5.000% due 2017 116 117
5.500% due 2017 2,272 2,329
6.000% due 2017 249 258
4.500% due 2018 147 146
5.000% due 2018 5,020 5,063
4.500% due 2019 834 826
5.500% due 2019 497 509
5.500% due 2020 498 510
5.500% due 2022 1,581 1,602
6.000% due 2033 43 45
5.500% due 2034 160 162
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 1994-1 Class K
6.500% due 06/25/13 213 215
Series 2003-129 Class PQ
4.500% due 07/25/33 721 723
Series 2003-24 Class PU
3.500% due 11/25/15 407 399
Series 2003-27 Class TJ
4.000% due 10/25/16 1,089 1,087
Series 2003-46 Class PQ
3.000% due 06/25/19 3,500 3,431
Series 2003-62 Class OD
3.500% due 04/25/26 1,250 1,204
Series 2003-63 Class GU
4.000% due 07/25/33 3,189 3,155
Series 2003-75 Class NB
3.250% due 08/25/18 814 791
Series 2003-92 Class BR
5.000% due 04/25/14 1,479 1,484
Series 2004-17 Class HA
3.000% due 01/25/19 2,525 2,372
Series 2004-21 Class QA
4.000% due 11/25/17 3,500 3,491
Fannie Mae (E)
3.272% due 2041 2,969 3,010
3.222% due 2042 3,077 3,103
Fannie Mae-Aces
Series 1998-M1 Class A2
6.250% due 01/25/08 1,701 1,767
Federal Home Loan Bank System
Series 2004-9009 Class 1
3.920% due 09/25/09 1,987 1,960
Federal Home Loan Mortgage Corp.
Structured Pass Through
Securities
Series 2003-H009 Class A2
1.876% due 03/15/08 638 628
Freddie Mac
4.000% due 2007 1,235 1,233
4.000% due 2008 1,107 1,104
4.500% due 2008 1,224 1,232
5.500% due 2008 169 173
6.500% due 2008 152 157
5.500% due 2009 369 379
6.000% due 2009 244 252
6.500% due 2009 542 563
6.000% due 2010 218 226
8.000% due 2010 76 78
6.000% due 2011 700 726
</Table>
120 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.000% due 2013 176 183
5.500% due 2014 766 786
6.000% due 2014 185 192
6.000% due 2016 810 840
5.500% due 2017 1,192 1,222
5.000% due 2018 730 736
6.000% due 2028 155 160
5.500% due 2029 1,098 1,118
6.000% due 2029 336 346
6.000% due 2031 464 477
6.000% due 2032 625 642
6.000% due 2033 1,032 1,062
Series 1993-1645 Class PD
4.500% due 09/15/08 206 207
Series 2003-2557 Class MA
4.500% due 07/15/16 297 297
Series 2003-2559 Class PB
5.500% due 08/15/30 213 211
Series 2003-2580 Class QK
4.000% due 04/15/22 1,500 1,499
Series 2003-2586 Class NS
3.250% due 09/15/15 1,846 1,802
Series 2003-2614 Class JA
3.760% due 03/15/29 1,571 1,531
Series 2003-2632 Class YH
3.500% due 08/15/22 1,250 1,235
Series 2003-2638 Class NK
4.000% due 02/15/15 1,445 1,445
Series 2003-2685 Class MX
4.000% due 07/15/16 2,797 2,763
Series 2003-2715 Class OJ
3.500% due 03/15/11 2,564 2,561
Series 2004-2760 Class EA
4.500% due 04/15/13 1,920 1,929
Series 2004-2851 Class BA
4.500% due 02/15/20 1,834 1,825
GE Capital Commercial Mortgage Corp.
Series 2001-3 Class A1
5.560% due 06/10/38 1,647 1,699
Series 2004-C3 Class A1
3.752% due 07/10/39 3,171 3,133
Series 2005-C1 Class A1
4.012% due 06/10/48 1,943 1,936
Ginnie Mae I
7.000% due 2007 6 6
6.000% due 2008 128 132
9.500% due 2017 1 1
Ginnie Mae II (E)
3.750% due 2027 181 183
3.000% due 2032 403 408
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Government National Mortgage Association
Series 2004-78 Class A
3.590% due 11/16/17 2,910 2,860
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.454% due 06/25/34 2,574 2,540
Impac CMB Trust (E)
Series 2004-2 Class A2
2.780% due 04/25/34 783 782
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C2 Class A1
4.326% due 12/12/34 845 841
LB-UBS Commercial Mortgage Trust
Series 2003-C1 Class A1
2.720% due 03/15/27 1,522 1,483
Series 2003-C3 Class A1
2.599% due 05/15/27 2,035 1,971
Lehman Large Loan
Series 1997-LLI Class A2
6.840% due 10/12/34 109 111
Mellon Residential Funding Corp. (E)
Series 2000-TBC2 Class A1
3.050% due 06/15/30 1,736 1,733
Morgan Stanley Capital I
Series 1998-WF2 Class A1
6.340% due 07/15/30 44 44
Series 2003-T11 Class A1
3.260% due 06/13/41 1,639 1,605
Series 2004-T13 Class A1
2.850% due 09/13/45 845 821
Morgan Stanley Dean Witter Capital I
Series 2001-TOP5 Class A1
5.020% due 10/15/35 337 341
Series 2002-HQ Class A2
6.090% due 04/15/34 500 521
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
3.250% due 02/25/34 357 357
Series 2004-CL1 Class 2A2
3.250% due 02/25/19 90 90
SACO I, Inc. (E)(p)
Series 2004-2 Class A2
3.040% due 07/25/19 1,735 1,735
Salomon Brothers Mortgage Securities VII
Series 2003-UP2 Class A1
4.000% due 12/25/18 1,505 1,471
</Table>
Short Duration Bond Fund 121
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Structured Asset Mortgage Investments, Inc. (E)
Series 2002-AR3 Class A1
2.830% due 09/19/32 182 182
Structured Asset Securities Corp. (E)
Series 2001-21A Class 1A1
6.250% due 01/25/32 170 174
Vendee Mortgage Trust
Series 2001-3 Class J
6.500% due 05/15/08 528 545
Wachovia Bank Commercial Mortgage Trust
Series 2002-C2 Class A2
4.043% due 11/15/34 2,080 2,051
Series 2003-C4 Class A1
3.003% due 04/15/35 1,869 1,825
Washington Mutual
Series 2002-AR10 Class A6
4.816% due 10/25/32 1,074 1,067
Washington Mutual (E)
Series 2002-AR9 Class 1A
3.286% due 08/25/42 2,033 2,045
Washington Mutual MSC Mortgage Pass-Through CTFS
(E)
Series 2002-AR2 Class 2A1
6.110% due 07/25/32 25 25
Washington Mutual, Inc. (E)
Series 2002-AR6 Class A
3.571% due 06/25/42 1,821 1,840
------------
186,986
------------
Non-US Bonds - 0.1%
Deutsche Bundesrepublik
5.500% due 01/04/31 EUR 400 642
France Government Bond OAT
5.750% due 10/25/32 EUR 200 334
Landwirtschaftliche Rentenbank
0.650% due 09/30/08 JPY 60,000 580
------------
1,556
------------
United States Government Agencies - 0.5%
Fannie Mae (E)
2.925% due 09/22/06 1,600 1,599
Federal Home Loan Bank System
5.925% due 04/09/08 1,600 1,686
Zero coupon due 04/27/10 1,097 1,017
Freddie Mac
5.810% due 04/04/08 1,000 1,048
------------
5,350
------------
United States Government Treasuries - 14.8%
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Treasury Inflation Indexed Bonds
3.625% due 01/15/08 5,460 5,873
2.000% due 01/15/14 311 323
3.625% due 04/15/28 119 158
United States Treasury Notes
2.375% due 08/15/06 84,250 83,063
4.375% due 05/15/07 47,000 47,664
2.750% due 08/15/07 12,900 12,641
3.000% due 11/15/07 29,730 29,235
------------
178,957
------------
TOTAL LONG-TERM INVESTMENTS
(cost $878,131) 870,593
------------
PREFERRED STOCKS - 0.2%
Financial Services - 0.2%
DG Funding Trust (p) 219 2,368
------------
TOTAL PREFERRED STOCKS
(cost $2,308) 2,368
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
- -----------------------------------------------------------------------------
OPTIONS PURCHASED - 0.0%
Eurodollar Futures
Sep 2005 93.75 Put (159) 398 1
Sep 2005 95.50 Put (25) 63 --
------------
TOTAL OPTIONS PURCHASED
(cost $2) 1
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 31.1%
Abbey National PLC
6.690% due 10/17/05 2,000 2,029
ABN Amro Bank NV
7.250% due 05/31/05 1,000 1,003
Bank of America Corp. (z)
3.010% due 07/06/05 1,100 1,092
</Table>
122 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America Corp. (E)
3.140% due 08/26/05 1,000 1,001
Bank of Montreal
6.100% due 09/15/05 2,000 2,019
BankAmerica Corp.
6.200% due 02/15/06 750 764
Barclays US Funding, LLC (c)(z)
2.770% due 05/09/05 10,500 10,494
2.935% due 05/20/05 1,200 1,198
Brazilian Government International Bond (E)
3.063% due 04/15/06 416 417
Capital Auto Receivables Asset Trust (E)
Series 2003-3 Class A1B
2.860% due 01/16/06 247 247
Citibank New York Commercial Paper (z)
3.130% due 07/29/05 11,000 11,000
Citigroup, Inc.
6.750% due 12/01/05 6,500 6,617
DaimlerChrysler NA Holding Corp.
7.750% due 06/15/05 2,700 2,711
Danske Corp. Discount Note (z)
3.020% due 07/15/05 5,700 5,653
Deutsche Telekom International Finance BV
8.250% due 06/15/05 1,050 1,056
European Investment Bank
Series DTC
5.625% due 01/24/06 575 584
Fannie Mae Discount Notes (c)(z)
2.485% due 05/25/05 2,800 2,795
2.674% due 06/13/05 100 100
Fannie Mae Discount Notes (z)
2.985% due 07/20/05 10,700 10,621
2.990% due 07/20/05 10,700 10,619
3.010% due 07/27/05 10,700 10,619
Federal Home Loan Bank Discount Notes (c)(z)
2.691% due 05/02/05 4,800 4,799
2.860% due 06/10/05 10,232 10,199
Ford Motor Credit Co.
7.600% due 08/01/05 1,900 1,913
6.125% due 01/09/06 1,675 1,683
Ford Motor Credit Co. (E)
3.540% due 06/30/05 200 200
3.573% due 07/07/05 1,900 1,888
France Telecom SA
7.450% due 03/01/06 1,200 1,235
Frank Russell Investment Company Money Market
Fund 64,145,553 64,145
Freddie Mac
9.000% due 09/01/05 1 1
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Freddie Mac Discount Notes (c)(z)
2.720% due 05/04/05 100 100
2.670% due 05/27/05 10,600 10,580
2.810% due 06/07/05 6,800 6,780
2.815% due 06/07/05 100 100
2.669% due 06/15/05 3,400 3,388
2.683% due 06/15/05 10,600 10,563
2.687% due 06/15/05 2,500 2,492
2.690% due 06/20/05 2,000 1,993
Freddie Mac Discount Notes (z)
2.930% due 06/30/05 100 99
2.890% due 07/12/05 1,600 1,583
3.000% due 07/26/05 200 198
3.020% due 08/01/05 1,000 988
2.995% due 08/09/05 300 297
General Electric Capital Corp. (E)
Series MTNA
2.950% due 02/03/06 2,000 2,004
General Electric Capital Corp. Discount Note
(c)(z)
2.970% due 06/20/05 10,600 10,556
General Electric Capital Corp. Discount Note (z)
3.090% due 07/25/05 1,100 1,092
General Motors Acceptance Corp.
7.500% due 07/15/05 200 201
6.750% due 01/15/06 2,000 2,015
General Motors Acceptance Corp. (E)
4.750% due 05/19/05 300 300
4.395% due 10/20/05 200 200
4.070% due 04/13/06 2,300 2,261
Government Trust Certificate
8.500% due 04/01/06 448 468
GTE Corp.
6.360% due 04/15/06 2,000 2,044
HBOS Treasury Services, PLC (c)(z)
2.870% due 06/07/05 1,100 1,097
HBOS Treasury Services, PLC (z)
3.080% due 07/27/05 8,000 7,937
Heller Financial, Inc.
6.375% due 03/15/06 1,000 1,022
Hydro Quebec
Series MTNB
6.520% due 02/23/06 1,000 1,022
Nordea Bank Finland PLC
6.500% due 01/15/06 3,000 3,062
</Table>
Short Duration Bond Fund 123
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Province of Ontario
7.000% due 08/04/05 1,500 1,515
Province of Quebec
6.500% due 01/17/06 1,560 1,594
Rabobank USA Financial Corp. (c)(z)
2.890% due 05/02/05 1,000 1,000
2.780% due 05/03/05 10,700 10,698
Royal Bank of Scotland (c)(z)
2.960% due 05/25/05 10,700 10,679
Russia Government International Bond
8.750% due 07/24/05 3,500 3,538
SouthTrust Bank (E)
Series BKNT
2.950% due 12/14/05 3,000 3,001
Spintab Swedish Mortgage (z)
3.080% due 08/11/05 7,800 7,723
3.180% due 09/01/05 3,900 3,849
Sprint Capital Corp.
7.125% due 01/30/06 1,000 1,022
SunTrust Bank (E)
Series BKNT
3.120% due 10/03/05 2,000 2,000
Telefonica Europe BV
7.350% due 09/15/05 6,700 6,792
UBS Financial Del, LLC (c)(z)
2.830% due 05/02/05 1,800 1,800
2.795% due 05/04/05 100 100
2.870% due 05/16/05 9,700 9,688
2.670% due 05/25/05 100 100
United States Treasury Bills (c)(z)(sec.)
2.680% due 06/02/05 20 20
2.690% due 06/02/05 20 20
2.710% due 06/02/05 75 75
2.740% due 06/16/05 1,350 1,345
United States Treasury Bills (z)
2.781% due 06/09/05 (sec.) 150 150
2.805% due 07/21/05 (sec.) 1,000 989
2.882% due 08/04/05 (sec.) 3,400 3,361
2.835% due 08/18/05 (sec.) 54,800 54,256
2.976% due 09/08/05 400 395
US Bancorp
7.625% due 05/01/05 1,000 1,000
US Bank NA (E)
Series BKNT
2.950% due 12/05/05 1,500 1,500
Verizon Wireless Capital LLC (E)(p)
2.930% due 05/23/05 1,400 1,400
Wachovia Corp.
6.800% due 06/01/05 1,500 1,504
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Westpac Capital Corp. (c)(z)
2.940% due 06/10/05 700 698
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $376,539) 374,956
------------
OTHER SECURITIES - 0.1%
Frank Russell Investment Company Money Market
Fund (X) 385,601 386
State Street Securities Lending Quality Trust
(X) 1,214,904 1,215
------------
TOTAL OTHER SECURITIES
(cost $1,601) 1,601
------------
TOTAL INVESTMENTS - 103.5%
(identified cost $1,258,581) 1,249,519
OTHER ASSETS AND LIABILITIES,
NET - (3.5%) (41,816)
------------
NET ASSETS - 100.0% 1,207,703
------------
------------
</Table>
See accompanying notes which are an integral part of the financial statements.
124 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Eurodollar Futures
expiration date 06/05 (25) 6,036 (41)
expiration date 09/05 (897) 215,852 (1,209)
expiration date 12/05 (388) 93,183 (249)
expiration date 03/06 (190) 45,572 60
expiration date 09/06 (14) 3,351 (2)
United States Treasury 2 Year Notes
expiration date 06/05 (131) 27,209 38
United States Treasury 10 Year Notes
expiration date 06/05 (10) 1,114 13
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (1,390)
===============
</Table>
<Table>
<Caption>
OPTIONS WRITTEN NOTIONAL MARKET
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
United States Treasury Notes
10 Year Futures
May 2005 111.00 Call (5) 555 (4)
May 2005 108.00 Put (5) 540 --
---------------
Total Liability for Options Written (premiums
received $3) (4)
===============
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 85 USD 110 05/18/05 1
EUR 376 USD 486 05/18/05 2
EUR 378 USD 495 05/25/05 8
JPY 61,632 USD 572 06/13/05 (18)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Related Transactions (7)
==============
</Table>
<Table>
<Caption>
INTEREST RATE SWAPS
- ------------------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
COUNTER AMOUNT TERMINATION VALUE
PARTY $ FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ---------------------- -------------------- ---------------- ----------------
UBS USD 34,800 4.000% Three Month LIBOR 06/15/07 (17)
----------------
Total Market Value of Interest Rate Swaps Premiums Paid (Received) - ($208) (17)
================
</Table>
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund 125
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------------
Asset-Backed Securities 24.8
Corporate Bonds and Notes 14.0
International Debt 2.4
Mortgage-Backed Securities 15.5
Non-US Bonds 0.1
United States Government Agencies 0.5
United States Government Treasuries 14.8
Preferred Stock 0.2
Options Purchased --*
Short-Term Investments 31.1
Other Securities 0.1
---------------
Total Investments 103.5
Other Assets and Liabilities, Net (3.5)
---------------
Net Assets 100.0
===============
Futures Contracts 0.1
Options Written --*
Interest Rate Swaps --*
Foreign Currency Exchange Contracts --*
</Table>
* Less than .05%
See accompanying notes which are an integral part of the financial statements.
126 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 995.60 $ 1,014.19
Expenses Paid During
Period* $ 10.79 $ 10.89
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.18%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,000.00 $ 1,018.90
Expenses Paid During
Period* $ 6.10 $ 6.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.23%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,002.80 $ 1,020.59
Expenses Paid During
Period* $ 4.42 $ 4.46
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.89%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,001.40 $ 1,020.09
Expenses Paid During
Period* $ 4.91 $ 4.96
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.99%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
Select Growth Fund 127
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 91.8%
Auto and Transportation - 2.0%
Autoliv, Inc. 2,600 115
Burlington Northern Santa Fe Corp. 9,610 464
Expeditors International Washington, Inc. 15,000 737
FedEx Corp. 5,650 480
Oshkosh Truck Corp. 5,000 376
Pacer International, Inc. (AE) 9,100 189
United Parcel Service, Inc. Class B 14,000 998
------------
3,359
------------
Consumer Discretionary - 19.1%
Abercrombie & Fitch Co. Class A 2,100 113
AC Moore Arts & Crafts, Inc. (AE) 5,300 138
Action Performance Cos., Inc. (N) 6,800 72
Advance Auto Parts, Inc. (AE) 5,600 299
Advo, Inc. 7,200 207
AMN Healthcare Services, Inc. (AE)(N) 11,300 167
Buca, Inc. (AE)(N) 20,800 92
Buffalo Wild Wings, Inc. (AE)(N) 3,600 110
Casual Male Retail Group, Inc. (AE)(N) 20,200 134
Charlotte Russe Holding, Inc. (AE)(N) 10,300 110
Chemed Corp. 2,400 170
Circuit City Stores, Inc. 33,000 521
Coach, Inc. (AE) 29,140 781
Cross Country Healthcare, Inc. (AE) 4,700 76
Crown Media Holdings, Inc. Class A (AE)(N) 12,800 112
DeVry, Inc. (AE) 4,300 98
DiamondCluster International, Inc. (AE) 10,800 134
Dolby Laboratories, Inc. Class A (AE) 5,500 112
DreamWorks Animation SKG, Inc. Class A (AE) 13,600 510
eBay, Inc. (AE) 16,000 508
eCost.com, Inc. (AE)(N) 12,877 54
Electronic Arts, Inc. (AE) 8,800 470
Emerson Radio (AE) 23,200 68
Gander Mountain Co. (AE)(N) 4,800 50
Gillette Co. (The) 16,000 826
Google, Inc. Class A (AE) 9,832 2,163
Hilton Hotels Corp. 21,300 465
Home Depot, Inc. 53,900 1,906
Hot Topic, Inc. (AE) 11,200 224
Image Entertainment, Inc. (AE)(N) 11,600 44
International Game Technology 44,587 1,199
JC Penney Co., Inc. Holding Co. 15,900 754
Jos A Bank Clothiers, Inc. (AE)(N) 3,800 125
Kimberly-Clark Corp. 7,500 468
Kohl's Corp. (AE) 12,700 605
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Liberty Media International, Inc. Class A (AE) 20,000 829
Linens 'N Things, Inc. (AE) 13,200 308
Marriott International, Inc. Class A 38,074 2,389
MGM Mirage (AE) 18,460 1,289
Multimedia Games, Inc. (AE) 3,100 25
Nautilus Group, Inc. (N) 8,000 199
Navigant Consulting, Inc. (AE) 8,000 188
New Frontier Media, Inc. (AE) 11,400 69
News Corp. Class A 18,100 277
PC Mall, Inc. (AE)(N) 5,200 28
PeopleSupport, Inc. (AE) 3,600 33
Petsmart, Inc. 11,400 304
Priceline.com, Inc. (AE)(N) 15,000 380
Ross Stores, Inc. 11,600 310
Sports Authority, Inc. (The) (AE)(N) 7,300 194
Staples, Inc. 45,000 858
Starbucks Corp. (AE) 12,808 634
Tempur-Pedic International, Inc. (AE) 1,400 27
Time Warner, Inc. (AE) 89,290 1,501
Tweeter Home Entertainment Group, Inc. (AE)(N) 13,300 49
Ventiv Health, Inc. (AE)(N) 8,700 181
VeriSign, Inc. (AE) 31,400 831
Wal-Mart Stores, Inc. 16,000 754
Walt Disney Co. 25,000 660
Waste Management, Inc. 10,700 305
Weight Watchers International, Inc. (AE)(N) 17,000 710
XM Satellite Radio Holdings, Inc. Class A
(AE)(N) 41,200 1,143
Yahoo!, Inc. (AE) 76,759 2,649
Yum! Brands, Inc. 15,928 748
------------
31,757
------------
Consumer Staples - 7.1%
Coca-Cola Co. (The) 16,300 708
Colgate-Palmolive Co. 25,020 1,246
Hansen Natural Corp. (AE)(N) 3,700 210
PepsiCo, Inc. 65,400 3,638
Procter & Gamble Co. 71,242 3,857
Sysco Corp. 36,900 1,277
Walgreen Co. 20,000 861
------------
11,797
------------
</Table>
128 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Financial Services - 9.6%
Advent Software, Inc. (AE) 8,900 159
American Express Co. 49,344 2,600
American International Group, Inc. 14,800 753
American Land Lease, Inc. (o) 3,600 78
Automatic Data Processing, Inc. 38,420 1,669
Capital One Financial Corp. 24,100 1,708
Checkfree Corp. (AE) 11,500 422
Chicago Mercantile Exchange 3,400 665
Citigroup, Inc. 16,730 786
Commerce Bancorp, Inc. (N) 11,200 313
Cybersource Corp. (AE) 15,296 93
First Data Corp. 27,000 1,027
Goldman Sachs Group, Inc. 12,041 1,286
Great American Financial Resources, Inc. 4,300 68
La Quinta Corp. (AE)(o) 13,900 121
Lakeland Bancorp, Inc. (N) 5,100 76
MCF Corp. (AE)(N) 19,600 26
McGrath Rentcorp 6,200 138
Mercer Insurance Group, Inc. (AE) 9,200 120
Moody's Corp. 10,000 821
Paychex, Inc. 52,776 1,615
Pico Holdings, Inc. (AE)(N) 3,800 92
Santander BanCorp (N) 4,390 97
Starwood Hotels & Resorts Worldwide, Inc. (o) 23,400 1,272
------------
16,005
------------
Health Care - 22.3%
Abaxis, Inc. (AE) 8,000 76
Able Laboratories, Inc. (AE)(N) 11,000 262
Aetna, Inc. 12,540 920
Albany Molecular Research, Inc. (AE) 7,900 75
Allergan, Inc. 12,000 845
Amgen, Inc. (AE) 42,290 2,462
Amylin Pharmaceuticals, Inc. (AE)(N) 14,400 245
Arthrocare Corp. (AE)(N) 8,700 256
Barr Pharmaceuticals, Inc. (AE) 4,100 213
Bruker BioSciences Corp. (AE) 20,400 67
Caremark Rx, Inc. (AE) 54,045 2,165
Cellegy Pharmaceuticals, Inc. (AE) 14,300 29
Charles River Laboratories International, Inc.
(AE) 6,100 289
Community Health Systems, Inc. (AE) 10,900 397
Cutera, Inc. (AE) 6,300 108
DaVita, Inc. (AE) 7,500 302
Dendreon Corp. (AE)(N) 11,900 55
Express Scripts, Inc. (AE) 3,700 332
Eyetech Pharmaceuticals, Inc. (AE)(N) 12,500 287
Genentech, Inc. (AE) 26,030 1,847
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Gentiva Health Services, Inc. (AE) 4,500 88
Gilead Sciences, Inc. (AE) 28,565 1,060
GTx, Inc. (AE)(N) 9,100 81
Guilford Pharmaceuticals, Inc. (AE)(N) 14,900 35
HCA Inc. 9,300 519
Hologic, Inc. (AE) 3,300 117
Idenix Pharmaceuticals, Inc. (AE)(N) 4,700 89
IRIS International, Inc. (AE) 3,400 49
Johnson & Johnson 88,520 6,074
Kinetic Concepts, Inc. (AE) 9,900 608
LCA-Vision, Inc. 6,401 251
Lifecore Biomedical, Inc. (AE) 6,700 82
Lifeline Systems, Inc. (AE) 3,400 116
Medco Health Solutions, Inc. (AE) 7,500 382
Medtronic, Inc. 9,000 474
Nabi Biopharmaceuticals (AE) 11,442 125
Natus Medical, Inc. (AE)(N) 10,800 92
Neose Technologies, Inc. (AE) 16,300 43
Novartis AG ADR 6,700 326
Novavax, Inc. (AE)(N) 18,400 29
Omnicell, Inc. (AE) 14,800 91
Palomar Medical Technologies, Inc. (AE)(N) 4,500 101
Pfizer, Inc. 207,570 5,639
Pharmaceutical Product Development, Inc. (AE) 1,700 77
Schering-Plough Corp. 37,100 774
St. Jude Medical, Inc. (AE) 10,000 390
Stryker Corp. 9,600 466
Sybron Dental Specialties, Inc. (AE) 5,500 205
UnitedHealth Group, Inc. 6,300 595
Valeant Pharmaceuticals International (N) 22,600 469
VistaCare, Inc. Class A (AE) 6,300 113
WellPoint, Inc. (AE) 22,850 2,919
Wright Medical Group, Inc. (AE) 4,600 114
Wyeth 14,200 638
Zimmer Holdings, Inc. (AE) 33,417 2,721
------------
37,184
------------
Materials and Processing - 2.5%
Chicago Bridge & Iron Co. NV 8,500 190
DHB Industries, Inc. (AE)(N) 9,300 62
Dow Chemical Co. (The) 17,600 808
EI Du Pont de Nemours & Co. 16,300 768
</Table>
Select Growth Fund 129
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Harsco Corp. 4,600 247
Housevalues, Inc. (AE) 5,000 65
Insituform Technologies, Inc. Class A (AE) 10,200 152
Layne Christensen Co. (AE) 4,600 71
Lifecell Corp. (AE) 8,800 106
Monsanto Co. 6,900 404
Praxair, Inc. 19,000 890
Quanta Services, Inc. (AE)(N) 20,000 160
Symyx Technologies, Inc. (AE) 4,900 119
Unifi, Inc. (AE) 21,400 66
------------
4,108
------------
Miscellaneous - 3.5%
Fortune Brands, Inc. 5,630 476
General Electric Co. 102,278 3,701
Honeywell International, Inc. 19,000 679
Tyco International, Ltd. 28,590 895
------------
5,751
------------
Other Energy - 1.3%
ENSCO International, Inc. 7,100 231
EOG Resources, Inc. 12,800 609
Grant Prideco, Inc. (AE) 7,400 164
National-Oilwell Varco, Inc. (AE) 2,300 91
Newfield Exploration Co. (AE) 5,200 369
Superior Energy Services, Inc. (AE) 10,600 158
Todco Class A (AE) 5,600 125
Valero Energy Corp. 4,930 338
Westmoreland Coal Co. (AE)(N) 4,200 74
------------
2,159
------------
Producer Durables - 3.0%
ADE Corp. (AE)(N) 4,900 105
Applied Materials, Inc. 46,587 693
Boeing Co. 14,200 845
Caterpillar, Inc. 6,800 599
Danaher Corp. 12,300 623
Faro Technologies, Inc. (AE)(N) 3,000 81
General Cable Corp. (AE)(N) 8,000 97
Herman Miller, Inc. 10,600 303
Kla-Tencor Corp. 10,900 425
Lexmark International, Inc. Class A (AE) 8,000 556
Measurement Specialties, Inc. (AE)(N) 2,800 62
Photon Dynamics, Inc. (AE)(N) 5,700 110
Radyne Comstream Corp. (AE)(N) 11,300 86
Southern Energy Homes, Inc. (AE) 23,700 134
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Stamps.com, Inc. (AE) 2,100 41
Varian Semiconductor Equipment Associates, Inc.
(AE) 4,200 157
------------
4,917
------------
Technology - 20.9%
@Road, Inc. (AE)(N) 15,400 52
ACT Teleconferencing, Inc. (AE)(N) 32,900 12
Actuate Corp. (AE) 16,200 31
ADC Telecommunications, Inc. (AE) 74,100 168
Aeroflex, Inc. (AE) 12,700 101
Agile Software Corp. (AE) 36,500 240
Altera Corp. (AE) 32,300 670
Apple Computer, Inc. (AE) 15,754 568
Arrow Electronics, Inc. (AE) 11,900 290
ATI Technologies, Inc. (AE) 6,300 93
Avaya, Inc. (AE) 6,600 57
Blue Coat Systems, Inc. (AE)(N) 5,000 72
Broadcom Corp. Class A (AE) 31,640 946
Captaris, Inc. (AE) 15,100 55
Centillium Communications, Inc. (AE) 26,526 53
Cisco Systems, Inc. (AE) 55,100 952
Cognos, Inc. (AE) 4,100 155
Comverse Technology, Inc. (AE) 10,200 232
Corning, Inc. (AE) 21,800 300
Dell, Inc. (AE) 42,241 1,471
Diodes, Inc. (AE) 4,600 135
DRS Technologies, Inc. (AE) 4,400 195
EDO Corp. 6,000 179
EMC Corp. (AE) 66,477 872
Equinix, Inc. (AE)(N) 5,600 196
Formfactor, Inc. (AE) 5,200 119
Freescale Semiconductor, Inc. Class B (AE) 12,400 234
Ibasis, Inc. (AE)(N) 19,800 46
Integrated Device Technology, Inc. (AE) 11,300 121
Intel Corp. 88,630 2,085
Intersil Corp. Class A 17,000 297
Intuit, Inc. (AE) 18,000 725
Juniper Networks, Inc. (AE)(N) 55,580 1,256
Macrovision Corp. (AE) 12,300 252
Manugistics Group, Inc. (AE) 1,900 3
Marvell Technology Group, Ltd. (AE) 17,410 583
Matrixone, Inc. (AE) 57,100 244
Maxim Integrated Products, Inc. 15,300 572
Mercury Computer Systems, Inc. (AE) 6,100 161
Microsoft Corp. 278,610 7,048
MIPS Technologies, Inc. (AE) 12,300 86
</Table>
130 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Motorola, Inc. 84,400 1,295
Nam Tai Electronics, Inc. 6,500 150
National Semiconductor Corp. 50,300 960
Nvidia Corp. (AE) 34,100 748
Parametric Technology Corp. (AE) 21,000 112
Phoenix Technologies, Ltd. (AE) 11,100 90
PMC - Sierra, Inc. (AE) 50,600 408
Qualcomm, Inc. (AE) 92,550 3,229
Quest Software, Inc. (AE) 7,800 93
Redback Networks, Inc. (AE) 24,045 129
Rockwell Automation, Inc. 10,040 464
Saba Software, Inc. (AE)(N) 18,325 77
SanDisk Corp. (AE) 47,500 1,126
Selectica, Inc. (AE) 13,800 45
Silicon Image, Inc. (AE) 31,500 317
Texas Instruments, Inc. 96,781 2,416
Three-Five Systems, Inc. (AE) 11,400 9
Transwitch Corp. (AE)(N) 49,800 62
WatchGuard Technologies (AE) 15,500 50
Witness Systems, Inc. (AE) 9,500 167
WJ Communications (AE) 13,300 26
Xilinx, Inc. 34,384 926
------------
34,826
------------
Utilities - 0.5%
Alamosa Holdings, Inc. (AE) 8,700 113
America Movil SA de CV ADR Class L 9,938 493
MDU Communications International, Inc. (AE)(N) 29,200 72
Primus Telecommunications GP (AE)(N) 18,300 28
Talk America Holdings, Inc. (AE) 11,400 98
Ubiquitel, Inc. (AE) 16,400 119
------------
923
------------
TOTAL COMMON STOCKS
(cost $147,623) 152,786
------------
SHORT-TERM INVESTMENTS - 7.9%
Frank Russell Investment Company Money Market
Fund 11,854,000 11,854
United States Treasury Bill (c)(z)(sec.)
2.734% due 06/09/05 1,200 1,195
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $13,049) 13,049
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 4.8%
Frank Russell Investment Company Money Market
Fund (X) 1,928,636 1,929
State Street Securities Lending Quality Trust
(X) 6,076,513 6,077
------------
TOTAL OTHER SECURITIES
(cost $8,006) 8,006
------------
TOTAL INVESTMENTS - 104.5%
(identified cost $168,678) 173,841
OTHER ASSETS AND LIABILITIES,
NET - (4.5%) (7,416)
------------
NET ASSETS - 100.0% 166,425
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Growth Fund 131
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
Nasdaq 100 Index
expiration date 06/05 (35) 4,989 (268)
Russell 1000 Growth Index
expiration date 06/05 (6) 1,392 (67)
S&P 500 E-Mini Index
expiration date 06/05 (30) 1,738 (58)
S&P 500 Index
expiration date 06/05 (18) 5,213 (99)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (492)
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Auto and Transportation 2.0
Consumer Discretionary 19.1
Consumer Staples 7.1
Financial Services 9.6
Health Care 22.3
Materials and Processing 2.5
Miscellaneous 3.5
Other Energy 1.3
Producer Durables 3.0
Technology 20.9
Utilities 0.5
Short-Term Investments 7.9
Other Securities 4.8
------------
Total Investments 104.5
Other Assets and Liabilities, Net (4.5)
------------
Net Assets 100.0
============
Futures Contracts 0.3
</Table>
See accompanying notes which are an integral part of the financial statements.
132 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FUND EXPENSES
THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S
EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS SEMIANNUAL
REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR
A FUND.
EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, and (2) ongoing costs, including advisory and administrative fees;
distribution and/or service (12b-1) fees; and other Fund expenses. The Example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Fund and to compare these costs with the ongoing costs of investing in
other mutual funds. The Example is based on an investment of $1,000 invested at
the beginning of the period and held for the entire period indicated, which for
this Fund is from November 1, 2004 to April 30, 2005.
ACTUAL EXPENSES
The information in the table under the heading "Actual Performance" provides
information about actual account values and actual expenses. You may use the
information in this column, together with the amount you invested, to estimate
the expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first column in the row entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The information in the table under the heading "Hypothetical Performance (5%
return before expenses)" provides information about hypothetical account values
and hypothetical expenses based on the Fund's actual expense ratio and an
assumed rate of return of 5% per year before expenses, which is not the Fund's
actual return. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
information under the heading "Hypothetical Performance (5% return before
expenses)" is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transactional costs were included, your costs would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,054.10 $ 1,014.19
Expenses Paid During
Period* $ 11.10 $ 10.89
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.18%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,058.80 $ 1,019.00
Expenses Paid During
Period* $ 6.18 $ 6.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.21%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,061.40 $ 1,021.08
Expenses Paid During
Period* $ 4.04 $ 3.96
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.79%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2004 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2005 $ 1,059.60 $ 1,019.89
Expenses Paid During
Period* $ 5.26 $ 5.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.03%, multiplied
by the average account value over the period, multiplied by 181/365 (to
reflect the one-half year period). Includes amounts waived and/or reimbursed
by the investment adviser. Without the waiver and/or reimbursement, expenses
would have been higher.
Select Value Fund 133
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.0%
Auto and Transportation - 1.6%
Autoliv, Inc. 20,500 907
Aviall, Inc. (AE) 18,676 546
Burlington Northern Santa Fe Corp. 18,370 886
CNF, Inc. 3,950 169
Fleetwood Enterprises, Inc. (AE)(N) 37,535 287
Keystone Automotive Industries, Inc. (AE) 13,918 279
Union Pacific Corp. 10,000 639
United Parcel Service, Inc. Class B 12,900 920
Wabash National Corp. 11,646 297
Westinghouse Air Brake Technologies Corp. 28,058 561
------------
5,491
------------
Consumer Discretionary - 12.9%
Accenture, Ltd. Class A (AE) 54,360 1,180
Administaff, Inc. (N) 29,913 409
Advance Auto Parts, Inc. (AE) 20,900 1,115
California Pizza Kitchen, Inc. (AE) 17,157 391
CBRL Group, Inc. 5,978 230
Clear Channel Communications, Inc. 34,900 1,115
Copart, Inc. (AE) 17,818 386
Corinthian Colleges, Inc. (AE) 28,250 401
Darden Restaurants, Inc. 45,200 1,356
DeVry, Inc. (AE) 19,354 441
DreamWorks Animation SKG, Inc. Class A (AE) 10,900 409
Gap, Inc. (The) 49,990 1,067
Gillette Co. (The) 15,700 811
Hancock Fabrics, Inc. (N) 18,014 107
Harrah's Entertainment, Inc. 45,900 3,012
Hasbro, Inc. 49,510 937
Home Depot, Inc. 33,700 1,192
Jarden Corp. (AE)(N) 3,783 169
JC Penney Co., Inc. Holding Co. 48,800 2,314
Kimberly-Clark Corp. 34,610 2,161
Knight-Ridder, Inc. (N) 14,900 964
La-Z-Boy, Inc. (N) 15,572 184
Liberty Media Corp. Class A (AE) 265,800 2,669
Lowe's Cos., Inc. 9,800 511
May Department Stores Co. (The) 27,600 968
McDonald's Corp. 117,660 3,449
Newell Rubbermaid, Inc. 42,800 930
Nike, Inc. Class B 9,600 737
PEP Boys-Manny Moe & Jack (N) 19,027 270
Playboy Enterprises, Inc. Class B (AE) 25,108 303
Reader's Digest Association, Inc. (The) 20,451 348
Reed Elsevier PLC ADR (N) 17,210 679
RR Donnelley & Sons Co. 13,878 457
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sabre Holdings Corp. Class A 26,100 511
Service Corp. International 36,888 260
Source Interlink Cos., Inc. (AE) 23,004 241
Sports Authority, Inc. (The) (AE)(N) 14,552 387
Thomson ADR (N) 80,400 1,987
Time Warner, Inc. (AE) 53,560 900
TJX Cos., Inc. 30,410 689
Tribune Co. (N) 15,120 584
VeriSign, Inc. (AE) 23,900 632
Viacom, Inc. Class B 35,554 1,231
Walt Disney Co. 64,750 1,709
Waste Management, Inc. 36,800 1,048
Westwood One, Inc. (AE) 16,400 300
Yum! Brands, Inc. 49,900 2,343
------------
44,494
------------
Consumer Staples - 5.5%
Altria Group, Inc. 60,760 3,949
American Italian Pasta Co. Class A (N) 16,992 402
Campbell Soup Co. 12,700 378
Coca-Cola Co. (The) 9,900 430
Coca-Cola Enterprises, Inc. 43,700 887
Colgate-Palmolive Co. 42,500 2,116
ConAgra Foods, Inc. 38,500 1,030
Dean Foods Co. (AE) 18,500 636
Del Monte Foods Co. (AE) 27,100 283
Diageo PLC ADR 6,730 402
DIMON, Inc. (N) 39,501 235
General Mills, Inc. 11,000 543
HJ Heinz Co. 51,150 1,885
JM Smucker Co. (The) (N) 10,200 506
Kellogg Co. 30,530 1,372
Lance, Inc. 10,374 171
Molson Coors Brewing Co. Class B (N) 8,800 543
Nestle SA ADR (N) 3,490 229
PepsiCo, Inc. 10,020 558
Performance Food Group Co. (AE) 14,372 386
Procter & Gamble Co. 7,500 406
Sara Lee Corp. 53,230 1,139
Sensient Technologies Corp. 9,854 197
Unilever NV 6,200 399
------------
19,082
------------
</Table>
134 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Financial Services - 24.0%
Aflac, Inc. 12,780 520
AG Edwards, Inc. 12,100 480
Allmerica Financial Corp. (AE) 7,735 260
Allstate Corp. (The) 72,770 4,087
American Express Co. 18,210 960
American International Group, Inc. 21,800 1,109
AmSouth Bancorp 19,500 513
Bank of America Corp. 197,846 8,912
Bank of New York Co., Inc. (The) 39,100 1,092
Bear Stearns Cos., Inc. (The) 8,700 824
BISYS Group, Inc. (The) (AE) 26,909 380
CB Richard Ellis Group, Inc. (AE) 36,200 1,258
Chubb Corp. 5,620 460
Cigna Corp. 10,700 984
Citigroup, Inc. 182,250 8,559
Comerica, Inc. 18,500 1,059
Commerce Bancshares, Inc. (N) 20,327 980
Dow Jones & Co., Inc. (N) 29,700 993
E*Trade Financial Corp. (AE) 83,400 927
Fannie Mae 27,100 1,462
Federated Investors, Inc. Class B 20,000 569
First Data Corp. 88,013 3,347
First Industrial Realty Trust, Inc. (o) 9,951 380
Fiserv, Inc. (AE) 11,530 488
Franklin Resources, Inc. 29,730 2,042
Freddie Mac 50,200 3,088
GATX Corp. 13,869 454
Genworth Financial, Inc. Class A (N) 54,100 1,512
Goldman Sachs Group, Inc. 39,000 4,165
Hartford Financial Services Group, Inc. 26,520 1,919
Hilb Rogal & Hobbs Co. 7,597 266
Huntington Bancshares, Inc. 42,000 987
Jefferson-Pilot Corp. 20,200 1,014
JPMorgan Chase & Co. 89,266 3,168
Kronos, Inc. (AE) 4,881 191
Lehman Brothers Holdings, Inc. 5,220 479
Loews Corp. 12,000 851
MBNA Corp. 18,060 357
Mellon Financial Corp. 28,530 790
Merrill Lynch & Co., Inc. 55,330 2,984
Metlife, Inc. 51,570 2,006
Montpelier Re Holdings, Ltd. 10,025 333
Morgan Stanley 23,600 1,242
Nationwide Financial Services, Inc. 27,800 985
Northern Trust Corp. 19,800 892
PNC Financial Services Group, Inc. 38,370 2,042
Providian Financial Corp. (AE) 75,300 1,255
Prudential Financial, Inc. 17,900 1,023
Regions Financial Corp. 15,500 519
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. (o) 9,400 511
SunTrust Banks, Inc. 40,240 2,931
US Bancorp 77,700 2,168
W Holding Co., Inc. (N) 31,799 257
Wachovia Corp. 16,600 850
Wells Fargo & Co. 12,930 775
Zions BanCorp. 4,600 322
------------
82,981
------------
Health Care - 10.4%
Abbott Laboratories 22,230 1,093
Amgen, Inc. (AE) 35,400 2,061
Baxter International, Inc. 59,550 2,209
Biogen Idec, Inc. (AE) 90,215 3,269
Boston Scientific Corp. (AE) 100,200 2,964
Caremark Rx, Inc. (AE) 39,200 1,570
Eli Lilly & Co. 18,580 1,086
Gentiva Health Services, Inc. (AE) 29,522 578
Genzyme Corp. (AE) 33,900 1,987
HCA Inc. 15,500 866
Invitrogen Corp. (AE) 11,600 850
IVAX Corp. (AE) 23,900 452
Johnson & Johnson 35,010 2,403
KV Pharmaceutical Co. Class A (AE)(N) 16,239 380
LifePoint Hospitals, Inc. (AE) 13,238 588
McKesson Corp. 16,000 592
Merck & Co., Inc. 55,200 1,871
Novartis AG ADR 7,560 368
Par Pharmaceutical Cos., Inc. (AE) 8,302 249
Pfizer, Inc. 47,750 1,297
PolyMedica Corp. (N) 11,712 363
PSS World Medical, Inc. (AE) 45,276 505
Roche Holding AG ADR 10,490 633
Rotech Healthcare, Inc. (AE)(N) 14,235 353
Sunrise Senior Living, Inc. (AE)(N) 9,232 473
UnitedHealth Group, Inc. 20,000 1,890
US Physical Therapy, Inc. (AE)(N) 13,889 200
WellPoint, Inc. (AE) 23,700 3,028
Wyeth 39,350 1,768
------------
35,946
------------
Integrated Oils - 5.3%
ChevronTexaco Corp. 71,042 3,694
ConocoPhillips 42,550 4,461
Exxon Mobil Corp. 113,150 6,454
Marathon Oil Corp. 21,900 1,020
</Table>
Select Value Fund 135
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Total SA ADR (N) 8,260 916
Unocal Corp. 35,530 1,938
------------
18,483
------------
Materials and Processing - 8.3%
Air Products & Chemicals, Inc. 18,040 1,059
Airgas, Inc. 15,838 347
Alcoa, Inc. 37,200 1,080
American Standard Cos., Inc. 45,700 2,043
Archer-Daniels-Midland Co. 46,140 830
Avery Dennison Corp. 16,900 885
Bemis Co. 31,900 879
Bowater, Inc. (N) 36,480 1,185
Cabot Corp. 14,200 434
Cabot Microelectronics Corp. (AE)(N) 4,388 126
Crompton Corp. 38,200 537
Dow Chemical Co. (The) 110,580 5,079
EI Du Pont de Nemours & Co. 45,080 2,124
Engelhard Corp. 2,600 80
International Paper Co. 62,660 2,149
Masco Corp. 27,180 856
MeadWestvaco Corp. 20,600 607
Monsanto Co. 33,190 1,946
Nalco Holding Co. (AE) 8,380 151
PPG Industries, Inc. 22,160 1,497
Praxair, Inc. 38,690 1,812
Rohm & Haas Co. 14,500 633
Smurfit-Stone Container Corp. (AE) 19,460 255
Syngenta AG ADR 34,190 709
United States Steel Corp. 22,100 945
Valspar Corp. (N) 15,000 620
------------
28,868
------------
Miscellaneous - 3.6%
General Electric Co. 91,400 3,309
Hillenbrand Industries, Inc. 10,700 591
Honeywell International, Inc. 32,000 1,144
Teleflex, Inc. (N) 5,000 267
Textron, Inc. 17,100 1,288
Tyco International, Ltd. 119,600 3,745
Vivendi Universal SA ADR (N) 69,500 2,061
------------
12,405
------------
Other Energy - 3.4%
Burlington Resources, Inc. 30,800 1,497
Cal Dive International, Inc. (AE) 8,366 372
Chesapeake Energy Corp. 83,800 1,612
Devon Energy Corp. 56,580 2,556
Encore Acquisition Co. (AE) 10,211 375
EOG Resources, Inc. 12,620 600
Forest Oil Corp. (AE) 10,150 391
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Global Industries, Ltd. (AE) 27,658 267
GlobalSantaFe Corp. 7,260 244
Hanover Compressor Co. (AE)(N) 33,395 346
Noble Corp. 16,190 824
NRG Energy, Inc. (AE) 14,300 445
Remington Oil & Gas Corp. (AE) 16,095 469
Sunoco, Inc. 16,400 1,628
------------
11,626
------------
Producer Durables - 5.8%
Ametek, Inc. 7,750 293
Applied Signal Technology, Inc. 9,579 187
BE Aerospace, Inc. (AE) 52,936 643
Champion Enterprises, Inc. (AE) 45,587 430
Cooper Industries, Ltd. Class A 8,500 541
Crane Co. 11,816 302
Deere & Co. 20,790 1,300
Duratek, Inc. (AE) 11,245 261
Emerson Electric Co. 28,160 1,765
Engineered Support Systems, Inc. 13,995 494
Esterline Technologies Corp. (AE) 14,092 455
IDEX Corp. 11,169 416
Illinois Tool Works, Inc. 9,620 806
Ingersoll-Rand Co. Class A 21,000 1,614
Lennar Corp. Class A 48,000 2,471
Lockheed Martin Corp. 25,910 1,579
Northrop Grumman Corp. 23,530 1,290
Park-Ohio Holdings Corp. (AE) 12,397 175
Pulte Homes, Inc. 14,200 1,015
Sandvik AB ADR (N) 6,520 254
United Technologies Corp. 33,710 3,429
Varian Semiconductor Equipment Associates, Inc.
(AE) 4,725 176
------------
19,896
------------
Technology - 5.0%
Analog Devices, Inc. 10,110 345
BEI Technologies, Inc. 9,340 215
Citrix Systems, Inc. (AE) 34,700 781
Filenet Corp. (AE) 10,860 288
General Dynamics Corp. 20,000 2,101
Hewlett-Packard Co. 86,900 1,779
Intel Corp. 92,700 2,180
International Business Machines Corp. 26,420 2,018
Internet Security Systems, Inc. (AE) 14,192 276
</Table>
136 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
InterVoice, Inc. (AE) 24,024 258
IXYS Corp. (AE) 28,430 289
JDA Software Group, Inc. (AE) 20,271 208
Mantech International Corp. Class A (AE)(N) 18,702 450
Mentor Graphics Corp. (AE) 19,039 170
Motorola, Inc. 25,400 390
National Semiconductor Corp. 25,200 481
QLogic Corp. (AE) 18,100 602
Seagate Technology 97,800 1,719
Sybase, Inc. (AE) 12,245 232
Symantec Corp. (AE) 44,600 838
Tellabs, Inc. (AE) 106,700 828
Texas Instruments, Inc. 21,600 539
Titan Corp. (AE) 24,875 447
------------
17,434
------------
Utilities - 8.2%
Alltel Corp. 18,300 1,042
America Movil SA de CV ADR Class L 27,800 1,380
BellSouth Corp. 33,900 898
Cinergy Corp. 6,720 266
Citizens Communications Co. 62,300 794
Comcast Corp. Special Class A (AE) 2,310 73
Constellation Energy Group, Inc. 12,200 641
Dominion Resources, Inc. 23,590 1,779
Duke Energy Corp. 51,700 1,509
Edison International 11,600 421
Energy East Corp. 10,000 260
Entergy Corp. 5,120 375
Exelon Corp. 27,800 1,376
FPL Group, Inc. 4,000 163
Northeast Utilities 13,600 249
Oneok, Inc. 34,935 1,008
PPL Corp. 21,010 1,140
Progress Energy, Inc. 1,300 --
Public Service Enterprise Group, Inc. (N) 6,460 375
SBC Communications, Inc. 73,500 1,749
Sierra Pacific Resources (AE)(N) 43,694 473
Sprint Corp. 281,950 6,276
TXU Corp. 8,840 758
Verizon Communications, Inc. 122,380 4,381
Vodafone Group PLC ADR (N) 41,393 1,082
------------
28,468
------------
TOTAL COMMON STOCKS
(cost $292,505) 325,174
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 5.7%
Frank Russell Investment Company Money Market
Fund 18,608,000 18,608
United States Treasury Bill (c)(z)(sec.)
2.755% due 06/09/05 1,100 1,097
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $19,705) 19,705
------------
OTHER SECURITIES - 4.9%
Frank Russell Investment Company Money Market
Fund (X) 4,116,596 4,117
State Street Securities Lending Quality Trust
(X) 12,970,070 12,970
------------
TOTAL OTHER SECURITIES
(cost $17,087) 17,087
------------
TOTAL INVESTMENTS - 104.6%
(identified cost $329,297) 361,966
OTHER ASSETS AND LIABILITIES,
NET - (4.6%) (15,926)
------------
NET ASSETS - 100.0% 346,040
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Value Fund 137
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FUTURES CONTRACTS
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
Russell 1000 Value Index
expiration date 06/05 (27) 8,657 (345)
S&P 500 E-Mini Index
expiration date 06/05 (100) 5,793 (271)
S&P 500 Index
expiration date 06/05 (21) 6,082 (111)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (727)
============
</Table>
<Table>
<Caption>
% OF
NET
PORTFOLIO SUMMARY ASSETS
- -------------------------------------------------------------
Auto and Transportation 1.6
Consumer Discretionary 12.9
Consumer Staples 5.5
Financial Services 24.0
Health Care 10.4
Integrated Oils 5.3
Materials and Processing 8.3
Miscellaneous 3.6
Other Energy 3.4
Producer Durables 5.8
Technology 5.0
Utilities 8.2
Short-Term Investments 5.7
Other Securities 4.9
------------
Total Investments 104.6
Other Assets and Liabilities, Net (4.6)
------------
Net Assets 100.0
============
Futures Contracts 0.2
</Table>
See accompanying notes which are an integral part of the financial statements.
138 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(AE) Nonincome-producing security.
(I) Forward commitment.
(E) Adjustable or floating rate security. Rate shown reflects rate in effect
at period end. Variable Rate.
(f) Perpetual floating rate security. Rate shown reflects rate in effect at
period end.
(o) Real Estate Investment Trust (REIT).
(u) Bond is insured by a guarantor.
(B) Illiquid security.
(O) In default.
(c) At amortized cost, which approximates market.
(z) Rate noted is yield-to-maturity from date of acquisition.
(ae) Pre-refunded: These bonds are collateralized by US Treasury securities,
which are held in escrow by a trustee and used to pay principal and
interest in the tax-exempt issue and to retire the bonds in full at the
earliest refunding date. The rate noted is for descriptive purposes;
effective yield may vary.
(sec.)All or a portion of the shares of this security are held as collateral in
connection with futures contracts purchased (sold), options written, or
swaps entered into by the Fund.
(X) The security is purchased with the cash collateral from the securities
loaned.
(N) All or a portion of the shares of this security are on loan.
(p) Restricted security. Security may have contractual restrictions on resale,
may have been offered in a private placement transaction, and may not be
registered under the Securities Act of 1933.
ABBREVIATIONS:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
ADS - American Depositary Share
CMO - Collateralized Mortgage Obligation
CVO - Contingent Value Obligation
GDS - Global Depositary Share
LIBOR - London Interbank Offered Rate
PIK - Payment in Kind
FDIC - Federal Deposit Insurance Company
REMIC - Real Estate Mortgage Investment Conduit
STRIP - Separate Trading of Registered Interest and Principal of Securities
TBA - To Be Announced Security
FOREIGN CURRENCY ABBREVIATIONS:
<Table>
ARS - Argentine peso HKD - Hong Kong dollar PHP - Philippine peso
AUD - Australian dollar HUF - Hungarian forint PKR - Pakistani rupee
BRL - Brazilian real IDR - Indonesian rupiah PLN - Polish zloty
CAD - Canadian dollar ILS - Israeli shekel RUB - Russian ruble
CHF - Swiss franc INR - Indian rupee SEK - Swedish krona
CLP - Chilean peso ITL - Italian lira SGD - Singapore dollar
CNY - Chinese renminbi yuan JPY - Japanese yen SKK - Slovakian koruna
COP - Colombian peso KES - Kenyan schilling THB - Thai baht
CRC - Costa Rica colon KRW - South Korean won TRY - Turkish lira
CZK - Czech koruna MXN - Mexican peso TWD - Taiwanese dollar
DKK - Danish krone MYR - Malaysian ringgit USD - United States dollar
EGP - Egyptian pound NOK - Norwegian Krone VEB - Venezuelan bolivar
EUR - Euro NZD - New Zealand dollar VND - Vietnam dong
GBP - British pound sterling PEN - Peruvian nouveau sol ZAR - South African rand
</Table>
Notes to Schedules of Investments 139
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
EQUITY I EQUITY II EQUITY Q INTERNATIONAL
AMOUNTS IN THOUSANDS FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 890,755 $ 918,070 $ 1,271,376 $ 1,763,725
- ---------------------------------------------------------------------------------------------------------------------------------
Investments, at market*** 986,201 1,010,296 1,404,720 1,981,098
Cash -- -- -- --
Foreign currency holdings* -- -- -- 8,104
Unrealized appreciation on foreign
currency exchange contracts -- -- -- 2,636
Receivables:
Dividends and interest 1,097 410 1,537 6,149
Dividends from affiliated
money market funds 129 71 104 239
Investments sold 11,361 9,377 25,017 22,449
Fund shares sold 1,832 2,290 2,120 2,517
Foreign taxes recoverable -- -- -- 279
From advisor -- -- -- --
Daily variation margin on
futures contracts 673 425 676 176
Prepaid expenses 34 17 16 5
Unrealized appreciation on index
swap contracts -- -- -- --
Interest rate swap contracts, at
market value**** -- -- -- --
------------------- ------------------- ------------------- --------------------
Total assets 1,001,327 1,022,886 1,434,190 2,023,652
------------------- ------------------- ------------------- --------------------
LIABILITIES
Payables:
Due to custodian -- -- -- 11
Investments purchased 8,685 9,817 26,161 15,621
Fund shares redeemed 408 920 3,296 351
Accrued fees to affiliates 592 773 829 1,111
Other accrued expenses 73 72 78 188
Daily variation margin on
futures contracts -- -- -- --
Deferred tax liability -- -- -- --
Unrealized depreciation on foreign
currency exchange contracts -- -- -- 5,231
Options written, at market value** -- -- -- 2,103
Payable upon return of securities
loaned 33,567 152,986 30,607 425,058
Unrealized depreciation on index
swap contracts -- -- -- 89
Interest rate swap contracts, at
market value**** -- -- -- --
Unrealized depreciation on credit
default swap contracts -- -- -- --
------------------- ------------------- ------------------- --------------------
Total liabilities 43,325 164,568 60,971 449,763
------------------- ------------------- ------------------- --------------------
NET ASSETS $ 958,002 $ 858,318 $ 1,373,219 $ 1,573,889
=================== =================== =================== ====================
Net Assets Consist of:
Undistributed (overdistributed) net
investment income $ 786 $ 392 $ 840 $ (3,252)
Accumulated net realized gain (loss) (2,405) 75,096 (7,881) (49,792)
Unrealized appreciation
(depreciation) on:
Investments (International
Fund and Emerging Markets
Fund - net of foreign
capital gains taxes) 95,446 92,226 133,344 217,373
Futures contracts (2,086) (2,562) (1,389) (5,840)
Options written -- -- -- (281)
Credit default swap contracts -- -- -- --
Index swap contracts -- -- -- (89)
Interest rate swap contracts -- -- -- --
Foreign currency-related
transactions -- -- -- (2,612)
Shares of beneficial interest 334 246 414 424
Additional paid-in capital 865,927 692,920 1,247,891 1,417,958
------------------- ------------------- ------------------- --------------------
NET ASSETS $ 958,002 $ 858,318 $ 1,373,219 $ 1,573,889
=================== =================== =================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
140 Statement of Assets and Liabilities
<Table>
<Caption>
FIXED INCOME I FIXED INCOME III EMERGING MARKETS REAL ESTATE SHORT DURATION SELECT GROWTH SELECT VALUE
FUND FUND FUND SECURITIES FUND BOND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------------
$ 1,449,422 $ 725,728 $ 558,318 $ 1,107,864 $ 1,258,581 $ 168,678 $ 329,297
- -----------------------------------------------------------------------------------------------------------------------------
1,452,923 731,948 704,485 1,514,933 1,249,519 173,841 361,966
13 53 -- -- -- -- 11
257 84 8,188 -- 93 -- --
670 228 609 -- 11 -- --
8,999 4,132 1,929 748 6,608 70 432
343 148 81 93 144 25 40
78,178 48,371 2,408 3,844 -- 2,038 4,567
3,052 1,197 1,703 2,484 3,006 378 655
-- -- 4 -- -- -- --
-- -- 1 2 4 48 --
13 62 -- -- -- 149 273
21 29 8 51 19 9 4
-- 19 -- -- -- -- --
25 131 -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- -------------- --------------
1,544,494 786,402 719,416 1,522,155 1,259,404 176,558 367,948
-------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- -- -- 479 7 --
307,332 144,488 6,697 3,046 48,038 1,898 4,290
462 42 236 1,227 484 24 106
349 296 947 1,482 710 147 382
100 27 182 88 100 51 43
315 126 61 -- 250 -- --
-- -- 1,076 -- -- -- --
121 68 335 -- 18 -- --
53 13 2,441 -- 4 -- --
62,131 119,969 12,684 97,692 1,601 8,006 17,087
-- -- -- -- -- -- --
11 96 -- -- 17 -- --
8 -- -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- -------------- --------------
370,882 265,125 24,659 103,535 51,701 10,133 21,908
-------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 1,173,612 $ 521,277 $ 694,757 $ 1,418,620 $ 1,207,703 $ 166,425 $ 346,040
============== ============== ============== ============== ============== ============== ==============
$ 2,753 $ 1,597 $ (4,395) $ (1,568) $ 2,559 $ 167 $ 309
1,201 539 (20,572) 80,695 (3,211) (20,603) (4,510)
3,501 6,220 145,090 407,069 (9,062) 5,163 32,669
(214) 426 (641) -- (1,390) (492) (727)
68 59 (1,470) -- (1) -- --
(8) -- -- -- -- -- --
-- 19 -- -- -- -- --
(1) 11 -- -- 191 -- --
556 132 333 -- (8) -- --
555 493 474 329 641 232 319
1,165,201 511,781 575,938 932,095 1,217,984 181,958 317,980
-------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 1,173,612 $ 521,277 $ 694,757 $ 1,418,620 $ 1,207,703 $ 166,425 $ 346,040
============== ============== ============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 141
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
EQUITY I FUND EQUITY II FUND EQUITY Q FUND INTERNATIONAL FUND
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and
redemption price per share:
Net asset value per share: Class
C***** $ -- $ -- $ -- $ --
Class C -- Net assets $ -- $ -- $ -- $ --
Class C -- Shares outstanding
($.01 par value) -- -- -- --
Net asset value per share: Class
E***** $ 28.75 $ 34.80 $ 33.15 $ 37.02
Class E -- Net assets $ 34,441,684 $ 80,870,286 $ 49,456,277 $ 38,178,925
Class E -- Shares outstanding
($.01 par value) 1,198,118 2,324,009 1,492,026 1,031,202
Net asset value per share: Class
I***** $ 28.73 $ 34.88 $ 33.15 $ 37.00
Class I -- Net assets $ 751,324,329 $ 620,545,866 $ 1,013,874,741 $ 1,027,458,613
Class I -- Shares outstanding
($.01 par value) 26,154,089 17,790,374 30,583,282 27,771,377
Net asset value per share: Class
S***** $ -- $ -- $ -- $ --
Class S -- Net assets $ -- $ -- $ -- $ --
Class S -- Shares outstanding
($.01 par value) -- -- -- --
Net asset value per share: Class
Y***** $ 28.71 $ 34.88 $ 33.15 $ 36.99
Class Y -- Net assets $ 172,235,733 $ 156,902,127 $ 309,887,975 $ 508,251,260
Class Y -- Shares outstanding
($.01 par value) 5,998,802 4,497,946 9,347,527 13,740,804
- --------------------------------------------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings -
cost $ -- $ -- $ -- $ 8,044
** Premiums received on options
written $ -- $ -- $ -- $ 1,822
*** Securities on loan included
in investments $ 32,922 $ 149,565 $ 29,967 $ 403,787
**** Interest rate swap contracts
- premiums paid (received) $ -- $ -- $ -- $ --
***** Net asset value per share
equals class level net assets
divided by class level shares
of beneficial interest
outstanding.
</Table>
See accompanying notes which are an integral part of the financial statements.
142 Statement of Assets and Liabilities
<Table>
<Caption>
REAL ESTATE
FIXED INCOME FIXED INCOME EMERGING SECURITIES SHORT DURATION SELECT SELECT
I FUND III FUND MARKETS FUND FUND BOND FUND GROWTH FUND VALUE FUND
- --------------------------------------------------------------------------------------------------------------
$ -- $ -- $ 14.23 $ 42.36 $ 18.80 $ 6.82 $ 10.68
$ -- $ -- $ 26,390,545 $ 72,146,383 $ 33,083,980 $ 7,639,936 $ 20,119,259
-- -- 1,854,794 1,703,254 1,759,909 1,120,531 1,883,892
$ 21.16 $ 10.59 $ 14.67 $ 42.85 $ 18.87 $ 7.08 $ 10.83
$ 29,411,821 $ 7,878,429 $ 15,496,920 $ 34,604,739 $ 23,959,819 $ 5,987,861 $ 10,079,910
1,389,970 743,891 1,056,644 807,629 1,269,999 846,299 930,663
$ 21.15 $ 10.57 $ -- $ -- $ -- $ 7.20 $ 10.86
$807,788,119 $513,398,324 $ -- $ -- $ -- $ 91,719,735 $121,079,757
38,184,446 48,555,291 -- -- -- 12,746,214 11,151,085
$ -- $ -- $ 14.67 $ 43.22 $ 18.84 $ 7.16 $ 10.84
$ -- $ -- $652,869,070 $1,311,868,725 $1,150,659,181 $ 61,077,027 $194,760,930
-- -- 44,509,395 30,350,884 61,076,326 8,527,888 17,971,997
$ 21.16 $ -- $ -- $ -- $ -- $ -- $ --
$336,411,950 $ -- $ -- $ -- $ -- $ -- $ --
15,896,069 -- -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------
$ 259 $ 85 $ 8,143 $ -- $ 95 $ -- $ --
$ 121 $ 72 $ 971 $ -- $ 3 $ -- $ --
$ 60,695 $ 117,330 $ 12,475 $ 96,851 $ 1,561 $ 7,731 $ 16,798
$ 15 $ 24 $ -- $ -- $ 208 $ -- $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 143
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2005 (UNAUDITED)
<Table>
<Caption>
EQUITY I EQUITY II EQUITY Q INTERNATIONAL
AMOUNTS IN THOUSANDS FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 7,914 $ 4,257 $ 14,760 $ 19,795
Dividends from affiliated money
market funds 636 456 385 1,000
Interest 86 245 54 --
Securities Lending Income 20 200 25 554
Less foreign taxes withheld -- -- -- (2,195)
-------------- -------------- -------------- -----------------
Total investment income 8,656 5,158 15,224 19,154
-------------- -------------- -------------- -----------------
EXPENSES
Advisory fees 2,487 3,236 3,958 5,443
Administrative fees 226 231 360 389
Custodian fees 190 233 214 878
Distribution fees - Class C -- -- -- --
Transfer agent fees -- -- -- --
Transfer agent fees - Class C -- -- -- --
Transfer agent fees - Class E 5 8 6 5
Transfer agent fees - Class I 138 245 166 167
Transfer agent fees - Class S -- -- -- --
Transfer agent fees - Class Y -- -- 1 --
Professional fees 43 32 47 62
Registration fees 41 35 47 96
Shareholder servicing fees - Class
C -- -- -- --
Shareholder servicing fees - Class
E 43 105 62 47
Trustees' fees 11 12 18 19
Printing fees 12 13 16 17
LifePoints funds fees -- -- -- --
Miscellaneous 9 10 15 14
-------------- -------------- -------------- -----------------
Expenses before reductions 3,205 4,160 4,910 7,137
Expense reductions (240) (219) (208) (428)
-------------- -------------- -------------- -----------------
Net expenses 2,965 3,941 4,702 6,709
-------------- -------------- -------------- -----------------
Net investment income (loss) 5,691 1,217 10,522 12,445
-------------- -------------- -------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (International Fund
and Emerging Markets Fund - net
of foreign capital gains taxes) 30,290 78,221 84,521 86,818
Futures contracts 5,049 3,165 5,853 9,403
Options written -- -- -- 1,062
Index swap contracts -- -- -- (247)
Interest rate swap contracts -- -- -- --
Foreign currency-related
transactions -- -- -- 9,066
-------------- -------------- -------------- -----------------
Net realized gain (loss) 35,339 81,386 90,374 106,102
-------------- -------------- -------------- -----------------
Net change in unrealized appreciation
(depreciation) on:
Investments (International Fund
and Emerging Markets Fund - net
of deferred tax liability for
foreign capital gains taxes) 1,105 (64,986) (49,595) (596)
Futures contracts (2,866) (3,388) (2,109) (5,196)
Options written -- -- -- (185)
Credit default swap contracts -- -- -- --
Index swap contracts -- -- -- (89)
Interest rate swap contracts -- -- -- --
Foreign currency-related
transactions -- -- -- (6,869)
-------------- -------------- -------------- -----------------
Net change in unrealized appreciation
(depreciation) (1,761) (68,374) (51,704) (12,935)
-------------- -------------- -------------- -----------------
Net realized and unrealized gain (loss) 33,578 13,012 38,670 93,167
-------------- -------------- -------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 39,269 $ 14,229 $ 49,192 $ 105,612
============== ============== ============== =================
</Table>
See accompanying notes which are an integral part of the financial statements.
144 Statement of Operations
<Table>
<Caption>
FIXED INCOME I FIXED INCOME III EMERGING MARKETS REAL ESTATE SHORT DURATION SELECT GROWTH SELECT VALUE
FUND FUND FUND SECURITIES FUND BOND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------
$ 1,378 $ 45 $ 9,576 $ 20,775 $ 48 $ 788 $ 3,308
344 855 397 432 950 104 189
20,382 9,075 7 -- 17,315 10 16
45 44 14 33 3 10 13
-- -- (953) -- -- -- --
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
22,149 10,019 9,041 21,240 18,316 912 3,526
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
1,387 1,226 3,871 5,316 2,697 596 1,163
277 123 168 332 300 37 83
254 167 768 148 160 75 93
-- -- 95 248 129 26 72
-- -- 821 1,080 235 -- --
-- -- -- -- -- 9 34
4 1 -- -- -- 4 10
78 84 -- -- -- 25 29
-- -- -- -- -- 40 231
1 -- -- -- -- -- --
50 24 44 36 37 18 30
57 38 84 39 49 28 32
-- -- 32 83 43 9 24
36 10 20 41 29 7 13
14 6 8 16 15 2 4
14 4 15 17 13 1 6
-- -- 144 247 382 -- --
13 4 8 33 12 -- 3
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
2,185 1,687 6,078 7,636 4,101 877 1,827
(121) (58) (160) (47) (21) (132) (133)
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
2,064 1,629 5,918 7,589 4,080 745 1,694
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
20,085 8,390 3,123 13,651 14,236 167 1,832
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
2,317 1,240 50,827 58,712 (1,500) 5,039 12,225
392 (93) 1,272 -- (985) 552 1,689
215 144 1,433 -- -- -- --
-- 37 -- -- -- -- --
72 159 -- -- (387) -- --
(482) (468) 2,748 -- (6) -- --
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
2,514 1,019 56,280 58,712 (2,878) 5,591 13,914
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
(12,042) (3,398) 28,061 31,385 (9,862) (6,809) 2,452
(1,137) 18 (910) -- (1,721) (713) (898)
6 13 (1,269) -- (12) -- --
(8) -- -- -- -- -- --
-- (34) -- -- -- -- --
134 35 -- -- (302) -- --
780 350 (477) -- 6 -- --
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
(12,267) (3,016) 25,405 31,385 (11,891) (7,522) 1,554
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
(9,753) (1,997) 81,685 90,097 (14,769) (1,931) 15,468
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
10,332
$ $ 6,393 $ 84,808 $ 103,748 $ (533) $ (1,764) $ 17,300
============= ============== ================ ================ =============== ========== ============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 145
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
EQUITY I EQUITY II
FUND FUND
---------------------------------- -----------------------------------
SIX MONTHS SIX MONTHS
ENDED FISCAL YEAR ENDED FISCAL YEAR
APRIL 30, 2005 ENDED APRIL 30, 2005 ENDED
AMOUNTS IN THOUSANDS (UNAUDITED) OCTOBER 31, 2004 (UNAUDITED) OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 5,691 $ 6,409 $ 1,217 $ 2,482
Net realized gain (loss) 35,339 69,170 81,386 101,303
Net change in unrealized
appreciation (depreciation) (1,761) (19,382) (68,374) (29,283)
-------------- -------------- -------------- -----------------
Net increase (decrease) in net assets
from operations 39,269 56,197 14,229 74,502
-------------- -------------- -------------- -----------------
DISTRIBUTIONS
From net investment income
Class C -- -- -- --
Class E (166) (202) (114) --
Class I (4,471) (5,442) (2,033) (774)
Class S -- -- -- --
Class Y (804) (820) (635) (478)
From net realized gain
Class C -- -- -- --
Class E -- -- (10,499) --
Class I -- -- (87,641) --
Class S -- -- -- --
Class Y -- -- (20,999) --
-------------- -------------- -------------- -----------------
Net decrease in net assets from
distributions (5,441) (6,464) (121,921) (1,252)
-------------- -------------- -------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net
assets from share transactions 89,054 83,154 51,368 (1,908)
-------------- -------------- -------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET
ASSETS 122,882 132,887 (56,324) 71,342
NET ASSETS
Beginning of period 835,120 702,233 914,642 843,300
-------------- -------------- -------------- -----------------
End of period $ 958,002 $ 835,120 $ 858,318 $ 914,642
============== ============== ============== =================
Undistributed (overdistributed)
net investment income included
in net assets $ 786 $ 536 $ 392 $ 1,957
</Table>
See accompanying notes which are an integral part of the financial statements.
146 Statement of Changes in Net Assets
<Table>
<Caption>
EQUITY Q INTERNATIONAL FIXED INCOME I
FUND FUND FUND
------------------------------ ------------------------------ ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31, APRIL 30, 2005 OCTOBER 31,
(UNAUDITED) 2004 (UNAUDITED) 2004 (UNAUDITED) 2004
- ----------------------------------------------------------------------------------------------------
$ 10,522 $ 12,632 $ 12,445 $ 17,751 $ 20,085 $ 34,754
90,374 147,227 106,102 115,380 2,514 19,100
(51,704) (61,134) (12,935) 56,347 (12,267) 4,457
------------- ------------- ------------- ------------- ------------- -------------
49,192 98,725 105,612 189,478 10,332 58,311
------------- ------------- ------------- ------------- ------------- -------------
-- -- -- -- -- --
(302) (366) (681) (655) (459) (859)
(7,765) (9,334) (20,055) (15,369) (13,308) (23,390)
-- -- -- -- -- --
(2,505) (3,409) (10,709) (14,740) (5,379) (13,121)
-- -- -- -- -- --
-- -- -- -- (690) (809)
-- -- -- -- (18,576) (18,686)
-- -- -- -- -- --
-- -- -- -- (7,263) (12,596)
------------- ------------- ------------- ------------- ------------- -------------
(10,572) (13,109) (31,445) (30,764) (45,675) (69,461)
------------- ------------- ------------- ------------- ------------- -------------
(68,613) (220,202) 56,956 94,361 143,983 9,666
------------- ------------- ------------- ------------- ------------- -------------
(29,993) (134,586) 131,123 253,075 108,640 (1,484)
1,403,212 1,537,798 1,442,766 1,189,691 1,064,972 1,066,456
------------- ------------- ------------- ------------- ------------- -------------
$ 1,373,219 $ 1,403,212 $ 1,573,889 $ 1,442,766 $ 1,173,612 $ 1,064,972
============= ============= ============= ============= ============= =============
$ 840 $ 890 $ (3,252) $ 15,748 $ 2,753 $ 1,814
<Caption>
FIXED INCOME III
FUND
------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2005 OCTOBER 31,
(UNAUDITED) 2004
- -----------------------------------
$ 8,390 $ 10,361
1,019 7,193
(3,016) 3,476
------------- -------------
6,393 21,030
------------- -------------
-- --
(105) (241)
(7,422) (12,760)
-- --
-- --
-- --
(62) (109)
(3,882) (4,989)
-- --
-- --
------------- -------------
(11,471) (18,099)
------------- -------------
56,900 162,317
------------- -------------
51,822 165,248
469,455 304,207
------------- -------------
$ 521,277 $ 469,455
============= =============
$ 1,597 $ 734
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 147
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
<Table>
<Caption>
EMERGING MARKETS REAL ESTATE
FUND SECURITIES FUND
---------------------------------- -----------------------------------
SIX MONTHS SIX MONTHS
ENDED FISCAL YEAR ENDED FISCAL YEAR
APRIL 30, 2005 ENDED APRIL 30, 2005 ENDED
AMOUNTS IN THOUSANDS (UNAUDITED) OCTOBER 31, 2004 (UNAUDITED) OCTOBER 31, 2004
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 3,123 $ 4,745 $ 13,651 $ 23,181
Net realized gain (loss) 56,280 69,315 58,712 108,208
Net change in unrealized
appreciation (depreciation) 25,405 19,464 31,385 170,285
-------------- -------------- -------------- -----------------
Net increase (decrease) in net assets
from operations 84,808 93,524 103,748 301,674
-------------- -------------- -------------- -----------------
DISTRIBUTIONS
From net investment income
Class C (73) (309) (447) (1,500)
Class E (134) (262) (332) (831)
Class I -- -- -- --
Class S (6,429) (11,244) (14,055) (39,826)
Class Y -- -- -- --
From net realized gain
Class C -- -- (5,310) (7)
Class E -- -- (2,607) (4)
Class I -- -- -- --
Class S -- -- (98,198) (175)
Class Y -- -- -- --
-------------- -------------- -------------- -----------------
Net decrease in net assets from
distributions (6,636) (11,815) (120,949) (42,343)
-------------- -------------- -------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net
assets from share transactions 32,323 94,089 173,783 122,824
-------------- -------------- -------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET
ASSETS 110,495 175,798 156,582 382,155
NET ASSETS
Beginning of period 584,262 408,464 1,262,038 879,883
-------------- -------------- -------------- -----------------
End of period $ 694,757 $ 584,262 $ 1,418,620 $ 1,262,038
============== ============== ============== =================
Undistributed (overdistributed)
net investment income included
in net assets $ (4,395) $ (882) $ (1,568) $ (385)
</Table>
See accompanying notes which are an integral part of the financial statements.
148 Statement of Changes in Net Assets
<Table>
<Caption>
SHORT DURATION SELECT GROWTH SELECT VALUE
BOND FUND FUND FUND
--------------------------------- --------------------------------- ---------------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR
APRIL 30, 2005 ENDED APRIL 30, 2005 ENDED APRIL 30, 2005 ENDED
(UNAUDITED) OCTOBER 31, 2004 (UNAUDITED) OCTOBER 31, 2004 (UNAUDITED) OCTOBER 31, 2004
- -------------------------------------------------------------------------------------------------------------
$ 14,236 $ 21,573 $ 167 $ (400) $ 1,832 $ 2,091
(2,878) 1,882 5,591 1,953 13,914 21,405
(11,891) (1,952) (7,522) (947) 1,554 10,251
------------- ------------- ------------- ------------- ------------- -------------
(533) 21,503 (1,764) 606 17,300 33,747
------------- ------------- ------------- ------------- ------------- -------------
(233) (323) -- -- (18) (8)
(239) (359) -- -- (42) (45)
-- -- -- -- (656) (832)
(13,096) (19,418) -- -- (962) (1,175)
-- -- -- -- -- --
(24) -- -- -- (14) --
(16) -- -- -- (8) --
-- -- -- -- (83) --
(767) -- -- -- (145) --
-- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
(14,375) (20,100) -- -- (1,928) (2,060)
------------- ------------- ------------- ------------- ------------- -------------
25,671 175,555 44,923 40,106 28,636 49,612
------------- ------------- ------------- ------------- ------------- -------------
10,763 176,958 43,159 40,712 44,008 81,299
1,196,940 1,019,982 123,266 82,554 302,032 220,733
------------- ------------- ------------- ------------- ------------- -------------
$ 1,207,703 $ 1,196,940 $ 166,425 $ 123,266 $ 346,040 $ 302,032
============= ============= ============= ============= ============= =============
$ 2,559 $ 1,891 $ 167 $ -- $ 309 $ 155
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 149
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
EQUITY I FUND
Class E
April 30, 2005 * 27.56 .15 1.18 1.33
October 31, 2004 25.75 .16 1.82 1.98
October 31, 2003 21.46 .15 4.28 4.43
October 31, 2002 25.25 .12 (3.69) (3.57)
October 31, 2001 35.21 .15 (9.62) (9.47)
October 31, 2000 (1) 37.51 .11 (1.64) (1.53)
December 31, 1999 (5) 38.01 .13 3.11 3.24
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005 * 27.54 .19 1.17 1.36
October 31, 2004 25.72 .23 1.82 2.05
October 31, 2003 21.44 .21 4.26 4.47
October 31, 2002 25.23 .19 (3.70) (3.51)
October 31, 2001 35.21 .22 (9.63) (9.41)
October 31, 2000 (1) 37.46 .19 (1.63) (1.44)
December 31, 1999 35.17 .27 6.18 6.45
- --------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2005 * 27.53 .18 1.18 1.36
October 31, 2004 25.72 .25 1.81 2.06
October 31, 2003 21.43 .23 4.27 4.50
October 31, 2002 25.24 .20 (3.71) (3.51)
October 31, 2001 35.21 .23 (9.61) (9.38)
October 31, 2000 (6) 36.90 .14 (1.64) (1.50)
- --------------------------------------------------------------------------------------------------------------
EQUITY II FUND
Class E
April 30, 2005 * 39.28 .01 .76 .77
October 31, 2004 36.12 .04 3.12 3.16
October 31, 2003 25.54 .01 10.65 10.66
October 31, 2002 28.24 .02 (2.65) (2.63)
October 31, 2001 38.33 .12 (5.36) (5.24)
October 31, 2000 (1) 35.71 .03 3.32 3.35
December 31, 1999 (5) 31.37 .02 5.99 6.01
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005 * 39.39 .05 .75 .80
October 31, 2004 36.19 .10 3.15 3.25
October 31, 2003 25.59 .06 10.66 10.72
October 31, 2002 28.29 .08 (2.65) (2.57)
October 31, 2001 38.35 .18 (5.37) (5.19)
October 31, 2000 (1) 35.71 .11 3.33 3.44
December 31, 1999 30.94 .10 6.68 6.78
- --------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2005 * 39.41 .06 .76 .82
October 31, 2004 36.22 .14 3.14 3.28
October 31, 2003 25.61 .10 10.67 10.77
October 31, 2002 28.32 .12 (2.65) (2.53)
October 31, 2001 38.35 .20 (5.35) (5.15)
October 31, 2000 (6) 38.89 .11 (.55) (.44)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
EQUITY I FUND
Class E
April 30, 2005 * (.14) -- --
October 31, 2004 (.17) -- --
October 31, 2003 (.14) -- --
October 31, 2002 (.16) -- (.06)
October 31, 2001 (.13) (.36) --
October 31, 2000 (1) (.14) (.63) --
December 31, 1999 (5) (.12) (3.62) --
- ----------------------------------------------------------------------------------------
Class I
April 30, 2005 * (.17) -- --
October 31, 2004 (.23) -- --
October 31, 2003 (.19) -- --
October 31, 2002 (.20) -- (.08)
October 31, 2001 (.21) (.36) --
October 31, 2000 (1) (.18) (.63) --
December 31, 1999 (.28) (3.88) --
- ----------------------------------------------------------------------------------------
Class Y
April 30, 2005 * (.18) -- --
October 31, 2004 (.25) -- --
October 31, 2003 (.21) -- --
October 31, 2002 (.22) -- (.08)
October 31, 2001 (.23) (.36) --
October 31, 2000 (6) (.19) -- --
- ----------------------------------------------------------------------------------------
EQUITY II FUND
Class E
April 30, 2005 * (.06) (5.19) --
October 31, 2004 -- -- --
October 31, 2003 (.08) -- --
October 31, 2002 (.07) -- --
October 31, 2001 (.07) (4.78) --
October 31, 2000 (1) (.02) (.71) --
December 31, 1999 (5) (.01) (1.66) --
- ----------------------------------------------------------------------------------------
Class I
April 30, 2005 * (.12) (5.19) --
October 31, 2004 (.05) -- --
October 31, 2003 (.12) -- --
October 31, 2002 (.13) -- --
October 31, 2001 (.09) (4.78) --
October 31, 2000 (1) (.09) (.71) --
December 31, 1999 (.10) (1.91) --
- ----------------------------------------------------------------------------------------
Class Y
April 30, 2005 * (.16) (5.19) --
October 31, 2004 (.09) -- --
October 31, 2003 (.16) -- --
October 31, 2002 (.18) -- --
October 31, 2001 (.10) (4.78) --
October 31, 2000 (6) (.10) -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
150 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.14) 28.75 4.81 34,442
(.17) 27.56 7.69 33,143
(.14) 25.75 20.79 32,632
(.22) 21.46 (14.26) 19,476
(.49) 25.25 (27.13) 30,646
(.77) 35.21 (4.02) 43,171
(3.74) 37.51 8.97 49,284
- -----------------------------------------------------------------------------
(.17) 28.73 4.94 751,324
(.23) 27.54 7.99 697,537
(.19) 25.72 21.02 580,055
(.28) 21.44 (14.04) 588,901
(.57) 25.23 (26.98) 813,827
(.81) 35.21 (3.80) 1,456,456
(4.16) 37.46 18.98 1,632,783
- -----------------------------------------------------------------------------
(.18) 28.71 4.93 172,236
(.25) 27.53 8.07 104,440
(.21) 25.72 21.09 89,546
(.30) 21.43 (13.96) 57,147
(.59) 25.24 (26.93) 146,156
(.19) 35.21 (4.03) 37,101
- -----------------------------------------------------------------------------
(5.25) 34.80 1.00 80,870
-- 39.28 8.72 80,542
(.08) 36.12 41.88 46,901
(.07) 25.54 (9.37) 25,874
(4.85) 28.24 (14.86) 29,647
(.73) 38.33 9.49 35,498
(1.67) 35.71 19.55 33,525
- -----------------------------------------------------------------------------
(5.31) 34.88 1.08 620,546
(.05) 39.39 8.98 674,280
(.12) 36.19 42.08 606,333
(.13) 25.59 (9.17) 464,113
(4.87) 28.29 (14.69) 584,718
(.80) 38.35 9.73 769,096
(2.01) 35.71 22.60 752,530
- -----------------------------------------------------------------------------
(5.35) 34.88 1.12 156,902
(.09) 39.41 9.05 159,820
(.16) 36.22 42.34 190,066
(.18) 25.61 (9.07) 147,610
(4.88) 28.32 (14.59) 126,876
(.10) 38.35 (1.15) 50,112
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ---------------------------------------------------------------------------------
.90 .94 1.02 54.75
.94 .96 .61 129.94
.99 .99 .68 115.73
.98 .98 .49 130.46
.92 .92 .51 144.94
.96 .96 .38 144.37
.95 .95 .57 111.56
- ---------------------------------------------------------------------------------
.65 .70 1.27 54.75
.71 .72 .84 129.94
.75 .75 .92 115.73
.74 .74 .74 130.46
.71 .71 .72 144.94
.69 .69 .64 144.37
.69 .69 .72 111.56
- ---------------------------------------------------------------------------------
.64 .67 1.24 54.75
.63 .65 .92 129.94
.66 .66 1.00 115.73
.64 .64 .85 130.46
.62 .62 .81 144.94
.62 .67 .65 144.37
- ---------------------------------------------------------------------------------
1.06 1.09 .06 86.28
1.09 1.09 .09 125.94
1.12 1.12 .04 132.27
1.12 1.12 .07 126.57
1.08 1.09 .37 134.79
1.13 1.13 .10 137.51
1.17 1.17 .09 111.89
- ---------------------------------------------------------------------------------
.84 .90 .27 86.28
.90 .90 .27 125.94
.94 .94 .22 132.27
.92 .92 .27 126.57
.90 .90 .55 134.79
.88 .88 .35 137.51
.92 .92 .31 111.89
- ---------------------------------------------------------------------------------
.79 .82 .33 86.28
.79 .79 .37 125.94
.81 .81 .36 132.27
.79 .79 .41 126.57
.78 .79 .65 134.79
.78 .83 .51 137.51
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 151
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
EQUITY Q FUND
Class E
April 30, 2005* 32.32 .20 .84 1.04
October 31, 2004 30.10 .23 2.24 2.47
October 31, 2003 24.90 .22 5.18 5.40
October 31, 2002 29.75 .17 (4.81) (4.64)
October 31, 2001 40.70 .20 (9.75) (9.55)
October 31, 2000 (1) 41.58 .13 (.12) .01
December 31, 1999 (5) 42.99 .14 4.35 4.49
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005 * 32.32 .25 .83 1.08
October 31, 2004 30.10 .30 2.24 2.54
October 31, 2003 24.89 .27 5.19 5.46
October 31, 2002 29.75 .24 (4.82) (4.58)
October 31, 2001 40.69 .26 (9.72) (9.46)
October 31, 2000 (1) 41.55 .22 (.11) .11
December 31, 1999 40.22 .34 8.03 8.37
- --------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2005 * 32.32 .26 .82 1.08
October 31, 2004 30.09 .32 2.25 2.57
October 31, 2003 24.89 .30 5.17 5.47
October 31, 2002 29.75 .27 (4.82) (4.55)
October 31, 2001 40.69 .28 (9.71) (9.43)
October 31, 2000 (7) 42.29 .16 (1.54) (1.38)
- --------------------------------------------------------------------------------------------------------------
INTERNATIONAL FUND
Class E
April 30, 2005 * 35.15 .25 2.30 2.55
October 31, 2004 31.22 .38 4.29 4.67
October 31, 2003 24.71 .30 6.59 6.89
October 31, 2002 28.34 .16 (3.75) (3.59)
October 31, 2001 39.51 .28 (9.53) (9.25)
October 31, 2000 (1) 46.68 .53 (6.26) (5.73)
December 31, 1999 (5) 39.07 .24 9.73 9.97
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005 * 35.16 .30 2.30 2.60
October 31, 2004 31.20 .46 4.29 4.75
October 31, 2003 24.74 .36 6.53 6.89
October 31, 2002 28.38 .26 (3.78) (3.52)
October 31, 2001 39.60 .34 (9.52) (9.18)
October 31, 2000 (1) 46.67 .64 (6.27) (5.63)
December 31, 1999 38.03 .43 10.93 11.36
- --------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2005 * 35.17 .30 2.30 2.60
October 31, 2004 31.21 .45 4.33 4.78
October 31, 2003 24.75 .38 6.54 6.92
October 31, 2002 28.42 .32 (3.83) (3.51)
October 31, 2001 39.62 .46 (9.60) (9.14)
October 31, 2000 (6) 46.09 .46 (6.93) (6.47)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
EQUITY Q FUND
Class E
April 30, 2005* (.21) -- --
October 31, 2004 (.25) -- --
October 31, 2003 (.20) -- --
October 31, 2002 (.21) -- --
October 31, 2001 (.17) (1.23) --
October 31, 2000 (1) (.13) (.76) --
December 31, 1999 (5) (.24) (5.66) --
- ----------------------------------------------------------------------------------------
Class I
April 30, 2005 * (.25) -- --
October 31, 2004 (.32) -- --
October 31, 2003 (.25) -- --
October 31, 2002 (.28) -- --
October 31, 2001 (.25) (1.23) --
October 31, 2000 (1) (.21) (.76) --
December 31, 1999 (.38) (6.66) --
- ----------------------------------------------------------------------------------------
Class Y
April 30, 2005 * (.25) -- --
October 31, 2004 (.34) -- --
October 31, 2003 (.27) -- --
October 31, 2002 (.31) -- --
October 31, 2001 (.28) (1.23) --
October 31, 2000 (7) (.22) -- --
- ----------------------------------------------------------------------------------------
INTERNATIONAL FUND
Class E
April 30, 2005 * (.68) -- --
October 31, 2004 (.74) -- --
October 31, 2003 (.38) -- --
October 31, 2002 (.04) -- --
October 31, 2001 -- (1.92) --
October 31, 2000 (1) -- (1.44) --
December 31, 1999 (5) (.38) (1.98) --
- ----------------------------------------------------------------------------------------
Class I
April 30, 2005 * (.76) -- --
October 31, 2004 (.79) -- --
October 31, 2003 (.43) -- --
October 31, 2002 (.12) -- --
October 31, 2001 (.12) (1.92) --
October 31, 2000 (1) -- (1.44) --
December 31, 1999 (.48) (2.24) --
- ----------------------------------------------------------------------------------------
Class Y
April 30, 2005 * (.78) -- --
October 31, 2004 (.82) -- --
October 31, 2003 (.46) -- --
October 31, 2002 (.16) -- --
October 31, 2001 (.14) (1.92) --
October 31, 2000 (6) -- -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
152 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.21) 33.15 3.20 49,456
(.25) 32.32 8.22 47,570
(.20) 30.10 21.76 40,924
(.21) 24.90 (15.70) 17,503
(1.40) 29.75 (23.98) 21,979
(.89) 40.70 .17 25,205
(5.90) 41.58 11.01 30,746
- -----------------------------------------------------------------------------
(.25) 33.15 3.32 1,013,875
(.32) 32.32 8.46 1,018,806
(.25) 30.10 22.04 822,548
(.28) 24.89 (15.50) 854,495
(1.48) 29.75 (23.82) 983,176
(.97) 40.69 .40 1,355,536
(7.04) 41.55 21.96 1,363,336
- -----------------------------------------------------------------------------
(.25) 33.15 3.34 309,888
(.34) 32.32 8.58 336,836
(.27) 30.09 22.13 674,326
(.31) 24.89 (15.41) 514,589
(1.51) 29.75 (23.74) 456,512
(.22) 40.69 (3.21) 38,812
- -----------------------------------------------------------------------------
(.68) 37.02 7.25 38,179
(.74) 35.15 15.20 35,442
(.38) 31.22 28.33 24,163
(.04) 24.71 (12.68) 11,965
(1.92) 28.34 (24.54) 19,449
(1.44) 39.51 (12.59) 25,984
(2.36) 46.68 25.87 30,541
- -----------------------------------------------------------------------------
(.76) 37.00 7.40 1,027,459
(.79) 35.16 15.47 915,469
(.43) 31.20 28.37 597,650
(.12) 24.74 (12.46) 527,791
(2.04) 28.38 (24.37) 658,920
(1.44) 39.60 (12.38) 1,104,284
(2.72) 46.67 30.46 1,263,676
- -----------------------------------------------------------------------------
(.78) 36.99 7.43 508,251
(.82) 35.17 15.54 491,855
(.46) 31.21 28.51 567,878
(.16) 24.75 (12.42) 395,955
(2.06) 28.42 (24.26) 386,538
-- 39.62 (14.04) 78,103
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS NET ASSETS TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ---------------------------------------------------------------------------------
.90 .92 1.21 72.04
.92 .93 .71 102.51
.94 .94 .80 114.72
.94 .94 .58 71.16
.89 .89 .58 79.24
.95 .96 .39 59.91
.94 .94 .55 90.16
- ---------------------------------------------------------------------------------
.65 .68 1.46 72.04
.69 .69 .94 102.51
.72 .72 1.02 114.72
.70 .70 .82 71.16
.70 .70 .77 79.24
.68 .68 .66 59.91
.69 .69 .80 90.16
- ---------------------------------------------------------------------------------
.62 .65 1.50 72.04
.61 .61 1.05 102.51
.63 .63 1.10 114.72
.60 .60 .93 71.16
.61 .61 .86 79.24
.61 .66 .68 59.91
- ---------------------------------------------------------------------------------
1.12 1.17 1.32 53.89
1.19 1.20 1.13 81.19
1.26 1.26 1.14 79.40
1.31 1.32 .57 87.84
1.26 1.26 .82 111.84
1.28 1.28 1.50 105.17
1.27 1.27 .92 118.99
- ---------------------------------------------------------------------------------
.86 .92 1.61 53.89
.95 .96 1.36 81.19
1.06 1.06 1.38 79.40
1.07 1.07 .92 87.84
1.06 1.06 1.00 111.84
1.00 1.00 1.76 105.17
1.00 1.00 1.07 118.99
- ---------------------------------------------------------------------------------
.84 .89 1.61 53.89
.87 .88 1.35 81.19
.96 .96 1.45 79.40
.97 .97 1.12 87.84
.96 .96 1.40 111.84
.91 .94 1.85 105.17
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 153
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
FIXED INCOME I FUND
Class E
April 30, 2005 * 21.88 .36 (.20) .16
October 31, 2004 22.12 .63 .48 1.11
October 31, 2003 22.15 .72 .36 1.08
October 31, 2002 22.32 .90 .17 1.07
October 31, 2001 20.79 1.19 1.58 2.77
October 31, 2000 (1) 20.30 1.07 .40 1.47
December 31, 1999 (5) 21.25 .74 (.81) (.07)
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005 * 21.87 .38 (.20) .18
October 31, 2004 22.11 .68 .49 1.17
October 31, 2003 22.15 .78 .35 1.13
October 31, 2002 22.32 .96 .17 1.13
October 31, 2001 20.79 1.24 1.58 2.82
October 31, 2000 (1) 20.27 1.13 .39 1.52
December 31, 1999 21.76 1.28 (1.50) (.22)
- --------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2005 * 21.88 .38 (.20) .18
October 31, 2004 22.12 .70 .48 1.18
October 31, 2003 22.16 .79 .36 1.15
October 31, 2002 22.32 .98 .18 1.16
October 31, 2001 20.79 1.23 1.61 2.84
October 31, 2000 (6) 20.61 .81 .37 1.18
- --------------------------------------------------------------------------------------------------------------
FIXED INCOME III FUND
Class E
April 30, 2005 * 10.70 .17 (.05) .12
October 31, 2004 10.67 .28 .31 .59
October 31, 2003 10.11 .38 .52 .90
October 31, 2002 10.37 .40 (.05) .35
October 31, 2001 9.77 .57 .61 1.18
October 31, 2000 (1) 9.61 .51 .11 .62
December 31, 1999 (5) 10.12 .35 (.43) (.08)
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005 * 10.69 .18 (.05) .13
October 31, 2004 10.65 .30 .32 .62
October 31, 2003 10.09 .40 .52 .92
October 31, 2002 10.36 .42 (.06) .36
October 31, 2001 9.76 .59 .63 1.22
October 31, 2000 (1) 9.59 .53 .11 .64
December 31, 1999 10.22 .59 (.62) (.03)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
FIXED INCOME I FUND
Class E
April 30, 2005 * (.35) (.53) --
October 31, 2004 (.69) (.66) --
October 31, 2003 (.67) (.44) --
October 31, 2002 (.97) (.27) --
October 31, 2001 (1.24) -- --
October 31, 2000 (1) (.98) -- --
December 31, 1999 (5) (.88) -- --
- ----------------------------------------------------------------------------------------
Class I
April 30, 2005 * (.37) (.53) --
October 31, 2004 (.75) (.66) --
October 31, 2003 (.73) (.44) --
October 31, 2002 (1.03) (.27) --
October 31, 2001 (1.29) -- --
October 31, 2000 (1) (1.00) -- --
December 31, 1999 (1.25) (.02) --
- ----------------------------------------------------------------------------------------
Class Y
April 30, 2005 * (.37) (.53) --
October 31, 2004 (.76) (.66) --
October 31, 2003 (.75) (.44) --
October 31, 2002 (1.05) (.27) --
October 31, 2001 (1.31) -- --
October 31, 2000 (6) (1.00) -- --
- ----------------------------------------------------------------------------------------
FIXED INCOME III FUND
Class E
April 30, 2005 * (.14) (.09) --
October 31, 2004 (.38) (.18) --
October 31, 2003 (.34) -- --
October 31, 2002 (.61) -- --
October 31, 2001 (.58) -- --
October 31, 2000 (1) (.46) -- --
December 31, 1999 (5) (.43) -- --
- ----------------------------------------------------------------------------------------
Class I
April 30, 2005 * (.16) (.09) --
October 31, 2004 (.40) (.18) --
October 31, 2003 (.36) -- --
October 31, 2002 (.63) -- --
October 31, 2001 (.62) -- --
October 31, 2000 (1) (.47) -- --
December 31, 1999 (.60) -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
154 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.88) 21.16 .74 29,412
(1.35) 21.88 5.22 27,515
(1.11) 22.12 5.01 27,009
(1.24) 22.15 5.10 27,576
(1.24) 22.32 13.72 35,123
(.98) 20.79 7.36 33,322
(.88) 20.30 (.32) 35,950
- -----------------------------------------------------------------------------
(.90) 21.15 .84 807,788
(1.41) 21.87 5.52 752,229
(1.17) 22.11 5.26 639,846
(1.30) 22.15 5.38 713,210
(1.29) 22.32 13.98 827,324
(1.00) 20.79 7.63 902,895
(1.27) 20.27 (1.04) 1,051,362
- -----------------------------------------------------------------------------
(.90) 21.16 .86 336,412
(1.42) 21.88 5.58 285,228
(1.19) 22.12 5.33 399,601
(1.32) 22.16 5.50 506,495
(1.31) 22.32 14.07 520,186
(1.00) 20.79 5.89 144,049
- -----------------------------------------------------------------------------
(.23) 10.59 1.16 7,879
(.56) 10.70 5.65 7,489
(.34) 10.67 9.05 6,481
(.61) 10.11 3.61 5,912
(.58) 10.37 12.47 6,037
(.46) 9.77 6.55 5,362
(.43) 9.61 (.83) 2,367
- -----------------------------------------------------------------------------
(.25) 10.57 1.22 513,398
(.58) 10.69 5.99 461,966
(.36) 10.65 9.27 297,726
(.63) 10.09 3.84 306,550
(.62) 10.36 12.76 408,341
(.47) 9.76 6.75 456,160
(.60) 9.59 (.29) 467,268
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS NET ASSETS TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ---------------------------------------------------------------------------------
.63 .65 3.36 43.62
.65 .66 2.88 153.79
.67 .67 3.25 184.29
.64 .66 4.17 165.28
.61 .61 5.51 188.97
.67 .68 6.31 117.94
.66 .66 5.79 138.69
- ---------------------------------------------------------------------------------
.37 .39 3.62 43.62
.39 .40 3.15 153.79
.41 .41 3.50 184.29
.38 .38 4.42 165.28
.39 .39 5.75 188.97
.40 .40 6.59 117.94
.39 .39 6.05 138.69
- ---------------------------------------------------------------------------------
.35 .37 3.65 43.62
.33 .34 3.18 153.79
.35 .35 3.53 184.29
.31 .31 4.45 165.28
.32 .32 5.62 188.97
.32 .34 6.63 117.94
- ---------------------------------------------------------------------------------
.91 .93 3.17 59.17
.96 .96 2.64 195.68
1.00 1.00 3.61 266.11
.97 .98 4.00 231.09
.93 .94 5.66 165.41
.99 1.15 6.37 108.08
.94 .94 5.63 131.38
- ---------------------------------------------------------------------------------
.66 .68 3.43 59.17
.72 .72 2.85 195.68
.78 .78 3.83 266.11
.76 .76 4.22 231.09
.72 .72 5.87 165.41
.73 .74 6.58 108.08
.69 .69 5.91 131.38
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 155
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
EMERGING MARKETS FUND
Class C
April 30, 2005 * 12.52 --(d) 1.75 1.75
October 31, 2004 10.68 --(d) 2.08 2.08
October 31, 2003 7.22 .02 3.44 3.46
October 31, 2002 6.89 (.09) .42 .33
October 31, 2001 9.15 (.04) (2.22) (2.26)
October 31, 2000 (1) 12.47 (.10) (3.20) (3.30)
December 31, 1999 (2) 8.07 (.12) 4.57 4.45
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 * 12.93 .05 1.81 1.86
October 31, 2004 10.98 .09 2.15 2.24
October 31, 2003 7.41 .09 3.49 3.58
October 31, 2002 7.01 (.02) .42 .40
October 31, 2001 9.24 .02 (2.25) (2.23)
October 31, 2000 (1) 12.51 (.03) (3.20) (3.23)
December 31, 1999 8.48 (.04) 4.14 4.10
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 12.94 .07 1.81 1.88
October 31, 2004 10.98 .12 2.15 2.27
October 31, 2003 7.43 .11 3.48 3.59
October 31, 2002 7.05 --(d) .40 .40
October 31, 2001 9.25 .04 (2.24) (2.20)
October 31, 2000 (1) 12.52 --(d) (3.21) (3.21)
December 31, 1999 8.48 .03 4.10 4.13
- --------------------------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class C
April 30, 2005 * 43.10 .23 2.99 3.22
October 31, 2004 33.94 .46 9.92 10.38
October 31, 2003 26.52 1.11 7.53 8.64
October 31, 2002 26.97 1.07 (.01) 1.06
October 31, 2001 25.93 1.16 1.02 2.18
October 31, 2000 (1) 22.69 .84 3.11 3.95
December 31, 1999 (2) 24.13 1.08 (1.06) .02
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 * 43.55 .40 3.02 3.42
October 31, 2004 34.24 .75 10.04 10.79
October 31, 2003 26.72 1.34 7.60 8.94
October 31, 2002 27.14 1.32 (.06) 1.26
October 31, 2001 26.07 1.38 1.03 2.41
October 31, 2000 (1) 22.76 .98 3.14 4.12
December 31, 1999 24.27 1.28 (1.24) .04
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 43.90 .45 3.04 3.49
October 31, 2004 34.51 .87 10.09 10.96
October 31, 2003 26.89 1.42 7.67 9.09
October 31, 2002 27.31 1.41 (.06) 1.35
October 31, 2001 26.22 1.46 1.03 2.49
October 31, 2000 (1) 22.86 1.04 3.15 4.19
December 31, 1999 24.44 1.30 (1.20) .10
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
EMERGING MARKETS FUND
Class C
April 30, 2005 * (.04) -- --
October 31, 2004 (.24) -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
October 31, 2000 (1) (.02) -- --
December 31, 1999 (2) (.05) -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2005 * (.12) -- --
October 31, 2004 (.29) -- --
October 31, 2003 (.01) -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
October 31, 2000 (1) (.04) -- --
December 31, 1999 (.07) -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2005 * (.15) -- --
October 31, 2004 (.31) -- --
October 31, 2003 (.04) -- --
October 31, 2002 (.02) -- --
October 31, 2001 -- -- --
October 31, 2000 (1) (.06) -- --
December 31, 1999 (.09) -- --
- ----------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class C
April 30, 2005 * (.29) (3.67) --
October 31, 2004 (1.21) (.01) --
October 31, 2003 (1.11) (.11) --
October 31, 2002 (1.51) -- --
October 31, 2001 (1.14) -- --
October 31, 2000 (1) (.71) -- --
December 31, 1999 (2) (1.46) -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2005 * (.45) (3.67) --
October 31, 2004 (1.47) (.01) --
October 31, 2003 (1.31) (.11) --
October 31, 2002 (1.68) -- --
October 31, 2001 (1.34) -- --
October 31, 2000 (1) (.81) -- --
December 31, 1999 (1.55) -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2005 * (.50) (3.67) --
October 31, 2004 (1.56) (.01) --
October 31, 2003 (1.36) (.11) --
October 31, 2002 (1.77) -- --
October 31, 2001 (1.40) -- --
October 31, 2000 (1) (.83) -- --
December 31, 1999 (1.68) -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
156 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.04) 14.23 14.01 26,391
(.24) 12.52 20.04 20,467
-- 10.68 47.58 12,306
-- 7.22 4.94 5,194
-- 6.89 (24.70) 2,377
(.02) 9.15 (26.51) 2,228
(.05) 12.47 55.43 1,631
- -----------------------------------------------------------------------------
(.12) 14.67 14.43 15,497
(.29) 12.93 20.88 14,169
(.01) 10.98 48.39 9,598
-- 7.41 5.71 6,478
-- 7.01 (24.13) 6,959
(.04) 9.24 (25.90) 6,388
(.07) 12.51 48.71 6,314
- -----------------------------------------------------------------------------
(.15) 14.67 14.57 652,869
(.31) 12.94 21.22 549,626
(.04) 10.98 48.27 386,560
(.02) 7.43 5.91 263,563
-- 7.05 (23.89) 273,486
(.06) 9.25 (25.79) 359,201
(.09) 12.52 49.03 430,794
- -----------------------------------------------------------------------------
(3.96) 42.36 7.43 72,146
(1.22) 43.10 30.97 61,089
(1.22) 33.94 33.23 32,784
(1.51) 26.52 3.56 15,712
(1.14) 26.97 8.41 5,718
(.71) 25.93 17.54 3,393
(1.46) 22.69 .19 1,771
- -----------------------------------------------------------------------------
(4.12) 42.85 7.83 34,605
(1.48) 43.55 32.00 29,436
(1.42) 34.24 34.21 16,651
(1.68) 26.72 4.27 10,661
(1.34) 27.14 9.23 11,415
(.81) 26.07 18.24 9,094
(1.55) 22.76 .30 7,134
- -----------------------------------------------------------------------------
(4.17) 43.22 7.93 1,311,869
(1.57) 43.90 32.30 1,171,513
(1.47) 34.51 34.58 830,448
(1.77) 26.89 4.55 598,133
(1.40) 27.31 9.48 607,280
(.83) 26.22 18.53 669,529
(1.68) 22.86 .55 589,300
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS NET ASSETS TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ---------------------------------------------------------------------------------
2.74 2.76 (.02) 45.03
2.83 2.87 .02 82.02
3.09 3.09 .19 95.13
3.12 3.12 (1.08) 90.21
3.08 3.09 (.55) 83.74
2.91 2.92 (1.02) 73.11
2.91 2.91 (1.23) 94.85
- ---------------------------------------------------------------------------------
1.97 2.01 .69 45.03
2.07 2.12 .75 82.02
2.36 2.37 1.02 95.13
2.38 2.38 (.29) 90.21
2.33 2.33 .21 83.74
2.16 2.17 (.30) 73.11
2.17 2.17 (.40) 94.85
- ---------------------------------------------------------------------------------
1.71 1.76 .97 45.03
1.83 1.87 1.00 82.02
2.11 2.11 1.30 95.13
2.14 2.14 (.02) 90.21
2.09 2.09 .44 83.74
1.91 1.92 (.02) 73.11
1.91 1.91 .26 94.85
- ---------------------------------------------------------------------------------
2.09 2.09 1.12 32.44
2.12 2.12 1.20 38.04
2.20 2.30 3.67 46.09
2.19 2.59 3.74 67.70
2.17 2.17 4.20 44.50
2.16 2.16 4.06 53.30
2.14 2.14 5.12 42.69
- ---------------------------------------------------------------------------------
1.34 1.34 1.87 32.44
1.37 1.37 1.95 38.04
1.43 1.62 4.46 46.09
1.46 1.82 4.54 67.70
1.42 1.42 4.96 44.50
1.41 1.41 4.78 53.30
1.39 1.39 5.42 42.69
- ---------------------------------------------------------------------------------
1.09 1.09 2.11 32.44
1.11 1.11 2.23 38.04
1.18 1.18 4.66 46.09
1.19 1.19 4.82 67.70
1.17 1.18 5.19 44.50
1.16 1.16 5.00 53.30
1.14 1.14 5.41 42.69
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 157
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
SHORT DURATION BOND FUND
Class C
April 30, 2005 * 19.04 .13 (.23) (.10)
October 31, 2004 19.01 .19 (.01) .18
October 31, 2003 18.98 .31 .06 .37
October 31, 2002 19.01 .56 .13 .69
October 31, 2001 18.23 .85 .89 1.74
October 31, 2000 (1) 18.13 .79 .04 .83
December 31, 1999 (4) 18.36 .68 (.31) .37
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 * 19.10 .20 (.23) (.03)
October 31, 2004 19.08 .34 (.01) .33
October 31, 2003 19.04 .48 .03 .51
October 31, 2002 19.02 .77 .06 .83
October 31, 2001 18.24 1.02 .85 1.87
October 31, 2000 (1) 18.08 .88 .07 .95
December 31, 1999 (3) 18.51 .80 (.34) .46
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 19.07 .23 (.23) --
October 31, 2004 19.05 .38 (.01) .37
October 31, 2003 19.01 .52 .03 .55
October 31, 2002 18.99 .80 .08 .88
October 31, 2001 18.22 1.07 .83 1.90
October 31, 2000 (1) 18.03 .91 .09 1.00
December 31, 1999 18.46 .90 (.36) .54
- --------------------------------------------------------------------------------------------------------------
SELECT GROWTH FUND
Class C
April 30, 2005 * 6.85 (.03) -- (.03)
October 31, 2004 6.85 (.11) .11 --
October 31, 2003 5.23 (.09) 1.71 1.62
October 31, 2002 6.65 (.10) (1.32) (1.42)
October 31, 2001 (8) 10.00 (.08) (3.27) (3.35)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005 * 7.08 --(d) --(d) --
October 31, 2004 7.03 (.05) .10 .05
October 31, 2003 5.31 (.04) 1.76 1.72
October 31, 2002 6.68 (.04) (1.33) (1.37)
October 31, 2001 (8) 10.00 (.02) (3.30) (3.32)
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005 * 7.19 .01 --(d) .01
October 31, 2004 7.10 (.02) .11 .09
October 31, 2003 5.35 (.02) 1.77 1.75
October 31, 2002 6.71 (.02) (1.34) (1.36)
October 31, 2001 (8) 10.00 --(d) (3.29) (3.29)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 7.15 .01 --(d) .01
October 31, 2004 7.08 (.03) .10 .07
October 31, 2003 5.34 (.02) 1.76 1.74
October 31, 2002 6.71 (.02) (1.35) (1.37)
October 31, 2001 (8) 10.00 --(d) (3.29) (3.29)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
SHORT DURATION BOND FUND
Class C
April 30, 2005 * (.13) (.01) --
October 31, 2004 (.15) -- --
October 31, 2003 (.34) -- --
October 31, 2002 (.72) -- --
October 31, 2001 (.96) -- --
October 31, 2000 (1) (.73) -- --
December 31, 1999 (4) (.60) -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2005 * (.19) (.01) --
October 31, 2004 (.31) -- --
October 31, 2003 (.47) -- --
October 31, 2002 (.81) -- --
October 31, 2001 (1.09) -- --
October 31, 2000 (1) (.79) -- --
December 31, 1999 (3) (.89) -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2005 * (.22) (.01) --
October 31, 2004 (.35) -- --
October 31, 2003 (.51) -- --
October 31, 2002 (.86) -- --
October 31, 2001 (1.13) -- --
October 31, 2000 (1) (.81) -- --
December 31, 1999 (.97) -- --
- ----------------------------------------------------------------------------------------
SELECT GROWTH FUND
Class C
April 30, 2005 * -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (8) -- -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2005 * -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (8) -- -- --
- ----------------------------------------------------------------------------------------
Class I
April 30, 2005 * -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (8) -- -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2005 * -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (8) -- -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
158 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.14) 18.80 (.51) 33,084
(.15) 19.04 .97 38,427
(.34) 19.01 1.97 41,644
(.72) 18.98 3.73 16,294
(.96) 19.01 9.77 1,709
(.73) 18.23 4.67 672
(.60) 18.13 2.02 801
- -----------------------------------------------------------------------------
(.20) 18.87 (.14) 23,960
(.31) 19.10 1.74 23,181
(.47) 19.08 2.70 20,274
(.81) 19.04 4.53 17,516
(1.09) 19.02 10.54 17,685
(.79) 18.24 5.36 9,898
(.89) 18.08 2.53 8,693
- -----------------------------------------------------------------------------
(.23) 18.84 (.01) 1,150,659
(.35) 19.07 1.98 1,135,332
(.51) 19.05 2.95 958,064
(.86) 19.01 4.81 599,795
(1.13) 18.99 10.76 401,137
(.81) 18.22 5.64 422,884
(.97) 18.03 3.03 447,590
- -----------------------------------------------------------------------------
-- 6.82 (.44) 7,640
-- 6.85 (.15) 5,942
-- 6.85 31.17 3,265
-- 5.23 (21.35) 1,341
-- 6.65 (33.50) 1,017
- -----------------------------------------------------------------------------
-- 7.08 -- 5,988
-- 7.08 .71 5,749
-- 7.03 32.39 4,865
-- 5.31 (20.51) 2,814
-- 6.68 (33.20) 2,714
- -----------------------------------------------------------------------------
-- 7.20 .28 91,720
-- 7.19 1.13 60,006
-- 7.10 32.71 32,003
-- 5.35 (20.27) 18,150
-- 6.71 (32.90) 21,044
- -----------------------------------------------------------------------------
-- 7.16 .14 61,077
-- 7.15 .99 51,569
-- 7.08 32.58 42,421
-- 5.34 (20.42) 24,389
-- 6.71 (32.90) 24,072
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS NET ASSETS TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ---------------------------------------------------------------------------------
1.65 1.65 1.39 140.53
1.63 1.66 1.00 131.57
1.56 1.72 1.63 187.92
1.52 1.70 3.08 163.86
1.52 1.66 4.72 260.94
1.64 1.66 5.01 92.31
1.72 1.72 4.41 177.08
- ---------------------------------------------------------------------------------
.90 .90 2.16 140.53
.88 .91 1.76 131.57
.80 .97 2.52 187.92
.77 .96 4.04 163.86
.77 .91 5.48 260.94
.89 .91 5.77 92.31
.97 .97 5.05 177.08
- ---------------------------------------------------------------------------------
.65 .65 2.41 140.53
.63 .66 2.01 131.57
.56 .72 2.70 187.92
.52 .71 4.26 163.86
.52 .67 5.76 260.94
.64 .66 6.00 92.31
.74 .74 5.22 177.08
- ---------------------------------------------------------------------------------
2.18 2.29 (.95) 64.77
2.25 2.50 (1.53) 134.00
2.20 2.74 (1.57) 149.76
2.11 2.82 (1.53) 212.37
2.17 2.97 (1.32) 169.36
- ---------------------------------------------------------------------------------
1.23 1.40 .05 64.77
1.36 1.54 (.65) 134.00
1.26 1.79 (.62) 149.76
1.16 1.87 (.58) 212.37
1.29 2.05 (.45) 169.36
- ---------------------------------------------------------------------------------
.89 1.08 .30 64.77
.95 1.20 (.23) 134.00
.93 1.58 (.31) 149.76
.89 1.65 (.31) 212.37
.89 1.75 (.03) 169.36
- ---------------------------------------------------------------------------------
.99 1.16 .27 64.77
1.09 1.27 (.38) 134.00
1.03 1.56 (.40) 149.76
.97 1.68 (.39) 212.37
.94 1.74 (.09) 169.36
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 159
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
SELECT VALUE FUND
Class C
April 30, 2005 * 10.15 --(d) .55 .55
October 31, 2004 8.97 (.03) 1.22 1.19
October 31, 2003 7.41 (.01) 1.58 1.57
October 31, 2002 8.51 (.02) (1.07) (1.09)
October 31, 2001 (8) 10.00 --(d) (1.48) (1.48)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2005* 10.28 .05 .55 .60
October 31, 2004 9.05 .05 1.23 1.28
October 31, 2003 7.46 .06 1.58 1.64
October 31, 2002 8.53 .06 (1.07) (1.01)
October 31, 2001 (8) 10.00 .05 (1.48) (1.43)
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2005 * 10.30 .07 .56 .63
October 31, 2004 9.07 .10 1.22 1.32
October 31, 2003 7.46 .08 1.61 1.69
October 31, 2002 8.54 .08 (1.07) (.99)
October 31, 2001 (8) 10.00 .09 (1.48) (1.39)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2005 * 10.29 .06 .55 .61
October 31, 2004 9.05 .08 1.24 1.32
October 31, 2003 7.45 .07 1.60 1.67
October 31, 2002 8.53 .07 (1.07) (1.00)
October 31, 2001 (8) 10.00 .08 (1.48) (1.40)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
SELECT VALUE FUND
Class C
April 30, 2005 * (.01) (.01) --
October 31, 2004 (.01) -- --
October 31, 2003 (.01) -- --
October 31, 2002 (.01) -- --
October 31, 2001 (8) (.01) -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2005* (.04) (.01) --
October 31, 2004 (.05) -- --
October 31, 2003 (.05) -- --
October 31, 2002 (.06) -- --
October 31, 2001 (8) (.04) -- --
- ----------------------------------------------------------------------------------------
Class I
April 30, 2005 * (.06) (.01) --
October 31, 2004 (.09) -- --
October 31, 2003 (.08) -- --
October 31, 2002 (.09) -- --
October 31, 2001 (8) (.07) -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2005 * (.05) (.01) --
October 31, 2004 (.08) -- --
October 31, 2003 (.07) -- --
October 31, 2002 (.08) -- --
October 31, 2001 (8) (.07) -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
160 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.02) 10.68 5.41 20,119
(.01) 10.15 13.24 16,834
(.01) 8.97 21.19 9,972
(.01) 7.41 (12.82) 2,061
(.01) 8.51 (14.76) 1,844
- -----------------------------------------------------------------------------
(.05) 10.83 5.88 10,080
(.05) 10.28 14.31 9,167
(.05) 9.05 22.01 7,778
(.06) 7.46 (11.86) 3,314
(.04) 8.53 (14.33) 3,155
- -----------------------------------------------------------------------------
(.07) 10.86 6.14 121,080
(.09) 10.30 14.77 102,396
(.08) 9.07 22.60 74,600
(.09) 7.46 (11.72) 35,169
(.07) 8.54 (13.92) 28,983
- -----------------------------------------------------------------------------
(.06) 10.84 5.96 194,761
(.08) 10.29 14.61 173,635
(.07) 9.05 22.53 128,383
(.08) 7.45 (11.78) 31,806
(.07) 8.53 (14.04) 31,288
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS NET ASSETS TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ---------------------------------------------------------------------------------
2.18 2.21 (.07) 42.78
2.25 2.32 (.31) 96.07
2.15 2.42 (.12) 105.71
2.00 2.40 (.27) 92.95
2.00 2.64 -- 71.75
- ---------------------------------------------------------------------------------
1.21 1.31 .91 42.78
1.39 1.39 .55 96.07
1.21 1.48 .77 105.71
1.04 1.43 .70 92.95
1.25 1.85 .76 71.75
- ---------------------------------------------------------------------------------
.79 .90 1.33 42.78
.95 .95 1.00 96.07
.90 1.23 1.12 105.71
.79 1.22 .95 92.95
.79 1.48 1.25 71.75
- ---------------------------------------------------------------------------------
1.03 1.10 1.09 42.78
1.10 1.10 .84 96.07
1.01 1.28 1.03 105.71
.87 1.27 .86 92.95
.86 1.50 1.18 71.75
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 161
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2005 (Unaudited).
(1) For the ten months ended October 31, 2000.
(2) For the period January 27, 1999 (commencement of sale) to December 31,
1999.
(3) For the period February 18, 1999 (commencement of sale) to December 31,
1999.
(4) For the period March 3, 1999 (commencement of sale) to December 31, 1999.
(5) For the period May 14, 1999 (commencement of sale) to December 31, 1999.
(6) For the period March 29, 2000 (commencement of sale) to October 31, 2000.
(7) For the period March 30, 2000 (commencement of sale) to October 31, 2000.
(8) For the period January 31, 2001 (commencement of operations) to October
31, 2001.
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) Less than $.01 per share.
(e) May reflect amounts waived and/or reimbursed by the investment advisor and
for certain funds, custody credit arrangements. The custody credit
arrangements had an impact of less than .005%.
See accompanying notes which are an integral part of the financial statements.
162 Notes to Financial Highlights
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company") is a series
investment company with 34 different investment portfolios referred to as
Funds. These financial statements report on eleven of these Funds. The
Investment Company is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company. It is organized and
operates as a Massachusetts business trust under an amended and restated
master trust agreement dated August 19, 2002. The Investment Company's master
trust agreement permits the Board of Trustees to issue an unlimited number of
shares of beneficial interest at a $.01 par value per share.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP") which
require the use of management estimates and assumptions at the date of the
financial statements. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements.
Security valuation
The Funds value portfolio securities according to Board-approved Securities
Valuation Procedures, including Market Value Procedures, Fair Value
Procedures and Pricing Services. Money market fund securities are priced
using the amortized cost method of valuation, as are debt obligation
securities maturing within 60 days of the date of purchase, unless the Board
determines that amortized cost does not represent market value of short-term
debt obligations. The Board has delegated the responsibility for
administration of the Securities Valuation Procedures to FRIMCo.
Ordinarily, the Funds value each portfolio security based on market
quotations provided by Pricing Services or alternative pricing services or
dealers (when permitted by the Market Value Procedures). Generally, Fund
securities are valued at the close of the market on which they are traded as
follows:
- US listed equities; equity and fixed income options: Last sale price; last
bid price if no sales;
- US over-the-counter equities: Official closing price; last bid price if no
closing price;
- Foreign equities: Official closing price, where available, or last sale
price; last bid price if no closing price;
- Listed ADRs/GDRs: Last sale price; last bid price if no sales;
- Municipal bonds, US bonds, Eurobonds/foreign bonds: Evaluated bid price;
broker quote if no evaluated bid price;
- Futures: Settlement price.
- Investments in other mutual funds are valued at their net asset value per
share, calculated at 4 p.m. Eastern time or as of the close of the NYSE,
whichever is earlier.
- The value of swap agreements are equal to the Funds' obligation (or rights)
under swap contracts which will generally be equal to the net amounts to be
paid or received under the contracts based upon the relative values of the
positions held by each party to the contracts.
- International equity securities traded on a national securities foreign
exchange or an over-the-counter market (foreign or domestic) are valued on
the basis of the official closing price, or lacking the official closing
price, at the last sale price on the primary exchange on which the security
is traded.
If market quotations are not readily available for a security or if
subsequent events suggest that a market quotation is not reliable, the Funds
will use the security's fair value, as determined in accordance with the Fair
Value Procedures. This generally means that equity securities and fixed
income securities listed and traded principally on any national securities
exchange are valued on the basis of the last sale price or, lacking any
sales, at the closing bid price, on the primary exchange on which the
security is traded. The Fair Value Procedures may involve subjective
judgments as to the fair value of securities. The effect of fair value
pricing is that securities may not be priced on the basis of quotations from
the primary market in which they are traded, but rather may be priced by
another method that the Funds' Board of Trustees believes reflects fair
value. The use of fair value pricing by a Fund may cause the net asset value
of its shares to differ significantly from the net asset value that would
Notes to Financial Statements 163
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
be calculated using current market values. Fair value pricing could also
cause discrepancies between the daily movement of the value of Fund shares
and the daily movement of the benchmark index if the index is valued using
another pricing method.
This policy is intended to assure that the Funds' net asset values fairly
reflect security values as of the time of pricing. Events or circumstances
affecting the values of Fund securities that occur between the closing of the
principal markets on which they trade and the time the net asset value of
Fund Shares is determined may be reflected in the calculation of net asset
values for each applicable Fund when the Funds deem that the particular event
or circumstance would materially affect such Fund's net asset value. FRIC
Funds that invest primarily in frequently traded exchange listed securities
will use fair value pricing in limited circumstances since reliable market
quotations will often be readily available. FRIC Funds that invest in foreign
securities are likely to use fair value pricing more often since significant
events may occur between the close of foreign markets and the time of pricing
which would trigger fair value pricing of the foreign securities. FRIC Funds
that invest in low rated debt securities are also likely to use fair value
pricing more often since the markets in which such securities are traded are
generally thinner, more limited and less active than those for higher rated
securities. Examples of events that could trigger fair value pricing of one
or more securities are: a material market movement (defined in the Fair Value
Procedures as the movement by any two of four major US Indexes greater than a
certain percentage); a company event such as a material business development,
dividend declaration, stock split or rights offering; a material disaster; or
an armed conflict.
Because foreign securities can trade on non-business days, the net asset
value of a Fund's portfolio that includes foreign securities may change on
days when shareholders will not be able to purchase or redeem fund shares.
Investment transactions
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions are recorded on the basis of specific
identified cost incurred by each money manager within a particular Fund.
Investment income
Dividend income is recorded net of applicable withholding taxes on the
ex-dividend date, except that certain dividends from foreign securities are
recorded as soon thereafter as the Funds are informed of the ex-dividend
date. Interest income is recorded daily on the accrual basis. All premiums
and discounts, including original issue discounts, are amortized/accreted
using the interest method.
Federal income taxes
Since the Investment Company is a Massachusetts business trust, each Fund is
a separate corporate taxpayer and determines its net investment income and
capital gains (or losses) and the amounts to be distributed to each Fund's
shareholders without regard to the income and capital gains (or losses) of
the other Funds.
It is each Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income and capital gains. Therefore, no federal
income or excise tax provision was required for the Funds.
Dividends and distributions to shareholders
For all Funds, income, dividends and capital gain distributions, if any, are
recorded on the ex-dividend date. Dividends are generally declared and paid
quarterly for the domestic equity Funds, annually for the international
Funds, and monthly for the fixed income Funds. Capital gain distributions are
generally declared and paid annually. An additional distribution may be paid
by the Funds to avoid imposition of federal income and excise tax on any
remaining undistributed capital gains and net investment income.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from GAAP. As a result, net investment income and net realized
gain (or loss) on investment and foreign currency-related transactions for a
reporting period may differ significantly from distributions during such
period. The differences between tax regulations and GAAP primarily relate to
investments in options, futures, forward contracts, swap contracts, passive
foreign investment companies, foreign-denominated investments,
mortgage-backed securities, certain securities sold at a loss and capital
loss carryforwards.
164 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Expenses
The Funds will pay their own expenses other than those expressly assumed by
Frank Russell Investment Management Company ("FRIMCo" or "Advisor"). Most
expenses can be directly attributed to the individual Funds. Expenses which
cannot be directly attributed to a specific Fund are allocated among all
Funds principally based on their relative net assets.
Class Allocation
The Funds presented herein offer the following classes of shares: Class C,
Class E, Class I, Class S and Class Y. All share classes have identical
voting, dividend, liquidation and other rights and the same terms and
conditions. The separate classes of shares differ principally in the
applicable distribution fees and shareholder servicing fees. Shareholders of
each class bear certain expenses that pertain to that particular class.
Realized and unrealized gains (losses), net investment income, and expenses
with the exception of class level expenses, are allocated daily to each class
of shares based upon the relative proportion of net assets of each class.
Foreign currency translations
The books and records of the Funds are maintained in US dollars. Foreign
currency amounts and transactions of the Funds are translated into US dollars
on the following basis:
(a) Market value of investment securities, other assets and liabilities at
the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing
rate of exchange prevailing on the respective trade dates of such
transactions.
Reported net realized gains or losses from foreign currency-related
transactions arise from: sales and maturities of short-term securities; sales
of foreign currencies; currency gains or losses realized between the trade
and settlement dates on securities transactions; the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Funds' books and the US dollar equivalent of the amounts actually received or
paid. Net unrealized gains or losses from foreign currency-related
transactions arise from changes in the value of assets and liabilities, other
than investments in securities, at year-end, as a result of changes in the
exchange rates.
The Funds do not isolate that portion of the results of operations of the
Funds that arises as a result of changes in exchange rates from that portion
that arises from changes in market prices of investments during the year.
Such fluctuations are included with the net realized and unrealized gain or
loss from investments. However, for federal income tax purposes the Funds do
isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
Capital Gains Taxes
The Emerging Markets Fund may be subject to capital gains taxes and
repatriation taxes imposed by certain countries in which they invest. The
Funds have recorded a deferred tax liability in respect of unrealized
appreciation on foreign securities for potential capital gains and
repatriation taxes at April 30, 2005. The accrual for capital gains and
repatriation taxes is included in net unrealized appreciation (depreciation)
on investments in the Statement of Asset and Liabilities for the Funds. The
amounts related to capital gains taxes are included in net realized gain
(loss) on investments in the Statements of Operations for the Funds.
<Table>
<Caption>
FUNDS DEFERRED TAX LIABILITY CAPITAL GAINS TAXES
-----------------------------------------------------------------------------------
International Fund $ -- $ 99,094
Emerging Markets Fund 1,076,405 260,330
</Table>
Derivatives
To the extent permitted by the investment objectives, restrictions and
policies set forth in the Funds' Prospectus and Statement of Additional
Information, the Funds may participate in various derivative-based
transactions. Derivative securities are instruments or agreements whose value
is derived from an underlying security or index. They include options,
futures, swaps, swaptions, forwards, structured notes and stripped
securities. These instruments offer unique characteristics that assist the
Funds in meeting their investment strategies.
Notes to Financial Statements 165
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The Funds typically use derivatives in two ways: hedging and return
enhancement. The Funds may use a hedging strategy for their cash reserves to
achieve a strategy of being fully invested by exposing those reserves to the
performance of appropriate markets by purchasing equity or fixed income
securities, as appropriate, and/or derivatives. Hedging is also used by some
Funds to limit or control risks, such as adverse movements in exchange rates
and interest rates. Return enhancement can be accomplished through the use of
derivatives in a Fund. By purchasing certain instruments, Funds may more
effectively achieve the desired portfolio characteristics that assist them in
meeting their investment objectives. Depending on how the derivatives are
structured and utilized, the risks associated with them may vary widely.
These risks are generally categorized as market risk, liquidity risk and
counterparty or credit risk.
Foreign currency exchange contracts
In connection with portfolio purchases and sales of securities denominated in
a foreign currency, certain Funds may enter into foreign currency exchange
spot contracts and forward foreign currency exchange contracts ("contracts").
The International Fund may enter into foreign currency forward overlays on
liquidity reserve balances. Additionally, from time to time the
International, Emerging Markets, Short Duration Bond, Fixed Income I and
Fixed Income III Funds may enter into contracts to hedge certain foreign
currency-denominated assets. Contracts are recorded at market value. Certain
risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and are
generally limited to the amount of unrealized gain on the contracts, if any,
that are recognized in the Statement of Assets and Liabilities. Realized
gains or losses arising from such transactions are included in net realized
gain (or loss) from foreign currency-related transactions. Open contracts at
April 30, 2005, are presented on the Schedule of Investments for the
applicable Funds.
Forward commitments
The Funds may contract to purchase securities for a fixed price at a future
date beyond customary settlement time (not to exceed 120 days) consistent
with a Fund's ability to manage its investment portfolio and meet redemption
requests. The price of the underlying securities and the date when the
securities will be delivered and paid for are fixed at the time the
transaction is negotiated. The Funds may dispose of a forward commitment
transaction prior to settlement if it is appropriate to do so and realize
short-term gains (or losses) upon such sale. When effecting such
transactions, cash or liquid high-grade debt obligations of the Fund in a
dollar amount sufficient to make payment for the portfolio securities to be
purchased will be segregated on the Fund's records at the trade date and
maintained until the transaction is settled. A forward commitment transaction
involves a risk of loss if the value of the security to be purchased declines
prior to the settlement date or the other party to the transaction fails to
complete the transaction.
Options
The Funds may purchase and sell (write) call and put options on securities
and securities indices, provided such options are traded on a national
securities exchange or in an over-the-counter market. The Funds may also
purchase and sell call and put options on foreign currencies. The domestic
equity Funds may utilize options to equitize liquidity reserve balances.
When a Fund writes a covered call or a put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the option written. The Fund receives a premium on the sale of a
call option but gives up the opportunity to profit from any increase in stock
value above the exercise price of the option, and when the Fund writes a put
option it is exposed to a decline in the price of the underlying security.
Whether an option which the Fund has written expires on its stipulated
expiration date or the Fund enters into a closing purchase transaction, the
Fund realizes a gain (or loss, if the cost of a closing purchase transaction
exceeds the premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability related
to such option is extinguished. If a call option which the Fund has written
is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by the
premium originally received. When a put option which a Fund has written is
exercised, the amount of the premium originally received will reduce the cost
of the security which a Fund purchases upon exercise of the option. Realized
gains (losses) on purchased options are included in net realized gain (loss)
from investments.
The Funds' use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets and
Liabilities. The face or contract amounts of these instruments reflect the
extent of the Funds' exposure
166 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
to market risk. The risks may be caused by an imperfect correlation between
movements in the price of the instrument and the price of the underlying
securities and interest rates.
Futures Contracts
The Funds presented herein may invest in futures contracts (i.e., interest
rate, foreign currency and index futures contracts) to a limited extent. The
face or contract amounts of these instruments reflect the extent of the
Funds' exposure to off balance sheet risk. The primary risks associated with
the use of futures contracts are an imperfect correlation between the change
in market value of the securities held by the Fund and the prices of futures
contracts and the possibility of an illiquid market. Upon entering into a
futures contract, the Funds are required to deposit with a broker an amount,
termed the initial margin, which typically represents 5% of the purchase
price indicated in the futures contract. Payments to and from the broker,
known as variation margin, are required to be made on a daily basis as the
price of the futures contract fluctuates. Changes in initial settlement value
are accounted for as unrealized appreciation (depreciation) until the
contracts are terminated, at which time realized gains and losses are
recognized.
Index Swap Agreements
The Funds may enter into swap agreements as an additional hedging strategy
for cash reserves held by those Funds or to effect investment transactions
consistent with these Funds' investment objectives and strategies. Swap
agreements are two party contracts entered into primarily by institutional
investors for periods ranging from a few weeks to more than one year. In a
standard swap transaction, the two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular
investments or instruments. The returns to be exchanged between the parties
are calculated with respect to a "notional amount" (i.e. a specified dollar
amount that is hypothetically invested in a "basket" of securities
representing a particular index). Amounts paid to and received from the swap
counterparties representing capital appreciation and depreciation on the
underlying securities and accrued interest expense and interest income are
recorded as net realized gain (loss). The Fund is exposed to credit risk in
the event of non-performance by the swap counterparties; however, the Fund
does not anticipate non-performance by the counterparties.
Swap Agreements
The Short Duration Bond, Fixed Income I and Fixed Income III Funds may enter
into swap agreements, on either an asset-based or liability-based basis,
depending on whether they are hedging their assets or their liabilities, and
will usually enter into swaps on a net basis, i.e., the two payment streams
are netted out, with the Funds receiving or paying, as the case may be, only
the net amount of the two payments. When a Fund engages in a swap, it
exchanges its obligations to pay or rights to receive payments for the
obligations or rights to receive payments of another party (i.e., an exchange
of floating rate payments for fixed rate payments).
The Fund may enter into several different types of agreements including
interest rate, credit default and currency swaps. Interest rate swaps are a
counterparty agreement and can be customized to meet each parties needs and
involves the exchange of a fixed payment per period for a payment that is not
fixed. Currency swaps are an agreement where two parties exchange specified
amounts of different currencies which are followed by a series of interest
payments that are exchanged based on the principal cash flow. At maturity the
principal amounts are exchanged back. Credit default swaps are a counterparty
agreement which allows the transfer of third party credit risk (the
possibility that a issuer will default on their obligation by failing to pay
principal or interest in a timely manner ) from one party to another. The
lender faces the credit risk from a third party and the counterparty in the
swap agrees to insure this risk in exchange for regular periodic payments.
The Fund expects to enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of their portfolios or
to protect against any increase in the price of securities they anticipate
purchasing at a later date. The net amount of the excess, if any, of the
Funds' obligations over their entitlements with respect to each swap will be
accrued on a daily basis and an amount of cash or liquid high-grade debt
securities having an aggregate net asset value at least equal to the accrued
excess will be maintained in a segregated account by the Funds' custodian. To
the extent that the Funds enter into swaps on other than a net basis, the
amount maintained in a segregated account will be the full amount of the
Funds' obligations, if any, with respect to such interest rate swaps, accrued
on a daily basis. If there is a default by the other party to such a
transaction, the Funds will have contractual remedies pursuant to the
agreement related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms
acting both as principals and as agents utilizing standardized swap
documentation. As a result, the swap market has become relatively liquid.
Notes to Financial Statements 167
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Investments in emerging markets
Investing in emerging markets may involve special risks and considerations
for the Emerging Markets Fund not typically associated with investing in the
United States markets. These risks include revaluation of currencies, high
rates of inflation, repatriation, restrictions on income and capital, and
future adverse political and economic developments. Moreover, securities
issued in these markets may be less liquid, subject to government ownership
controls, delayed settlements, and their prices may be more volatile than
those of comparable securities in the United States.
Guarantees
In the normal course of business the Funds enter into contracts that contain
a variety of representations which provide general indemnifications. The
Funds' maximum exposure under these arrangements is unknown as this would
involve future claims that may be made against the Funds that have not yet
occurred. However, the Funds expect the risk of loss to be remote.
3. INVESTMENT TRANSACTIONS
Securities
During the period ended April 30, 2005, purchases and sales of investment
securities (excluding US Government and Agency obligations, short-term
investments, options, futures and repurchase agreements) were as follows:
<Table>
<Caption>
FUNDS PURCHASES SALES
- ----------------------------------------------------------------
Equity I $ 576,250,396 $ 460,566,951
Equity II 758,494,714 815,481,935
Equity Q 999,579,345 1,037,941,605
International 769,287,496 707,484,863
Fixed Income I 634,270,345 688,661,895
Fixed Income III 218,084,058 186,300,045
</Table>
<Table>
- ----------------------------------------------------------------
<Caption>
FUNDS PURCHASES SALES
Emerging Markets $ 310,186,957 $ 277,335,501
Real Estate
Securities 484,499,646 419,846,878
Short Duration Bond 994,798,055 995,428,992
Select Growth 130,784,827 90,774,972
Select Value 161,776,019 134,730,829
</Table>
Purchases and sales of US Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
<Table>
<Caption>
FUNDS PURCHASES SALES
------------------------------------------------------------------
Fixed Income I $ 726,231,200 $ 754,645,393
Fixed Income III 310,229,323 238,403,499
Short Duration Bond 266,800,748 255,861,555
</Table>
Written Options Contracts
Fund transactions in written options contracts for the period ended April 30,
2005 were as follows:
<Table>
<Caption>
INTERNATIONAL FIXED INCOME I
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2004 342 $ 2,970,126 206 $ 130,230
Opened 1,970 15,514,384 560 219,676
Closed (1,979) (16,662,558) (38) (19,654)
Expired -- -- (459) (209,398)
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2005 333 $ 1,821,952 269 $ 120,854
=================== =================== =================== ===================
</Table>
168 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FIXED INCOME III EMERGING MARKETS
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2004 156 $ 94,089 461 $ 1,319,478
Opened 372 131,880 1,087 2,425,523
Closed -- -- (1,167) (2,773,980)
Expired (345) (154,146) -- --
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2005 183 $ 71,823 381 $ 971,021
=================== =================== =================== ===================
</Table>
<Table>
<Caption>
SHORT DURATION BOND
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Outstanding October 31, 2004 12 $ 13,167
Opened 10 3,009
Closed (12) (13,167)
Expired -- --
------------------- -------------------
Outstanding April 30, 2005 10 $ 3,009
=================== ===================
</Table>
Securities Lending
The Investment Company has a securities lending program whereby each Fund can
loan securities with a value up to 33 1/3% of its total assets to certain
brokers. The Fund receives cash (US currency), US Government or US Government
agency obligations as collateral against the loaned securities. To the extent
that a loan is collateralized by cash, such collateral shall be invested by
the securities lending agent, State Street Bank and Trust Company ("State
Street") in short-term instruments, money market mutual funds, and such other
short-term investments, provided the investments meet certain quality and
diversification requirements. Cash collateral invested in money market funds
is included in the Schedules of Investments. The collateral received is
recorded on the Fund's statement of assets and liabilities along with the
related obligation to return the collateral.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is divided
between the Fund and State Street and is recorded as income for the Fund. To
the extent that a loan is secured by non-cash collateral, brokers pay the
Fund negotiated lenders' fees, which are divided between the Fund and State
Street and are recorded as securities lending income for the Fund. All
collateral received will be in an amount at least equal to 102% (for loans of
US securities) or 105% (for non-US securities) of the market value of the
loaned securities at the inception of each loan. The market value of the
loaned securities is determined at the close of business of the Funds and any
additional required collateral is delivered to the Fund the next day. Should
the borrower of the securities fail financially, there is a risk of delay in
recovery of the securities or loss of rights in the collateral. Consequently,
loans are made only to borrowers which are deemed to be of good financial
standing. As of April 30, 2005, the value of outstanding securities on loan
and the value of collateral amounted to as follows:
<Table>
<Caption>
VALUE OF VALUE OF
FUNDS SECURITIES ON LOAN CASH COLLATERAL
- ----------------------------------------------------------------
Equity I $ 32,921,527 $ 33,566,888
Equity II 149,565,218 152,986,589
Equity Q 29,966,747 30,607,255
International 403,787,479 425,058,417
Fixed Income I 60,695,136 62,130,591
Fixed Income III 117,330,157 119,968,912
</Table>
<Table>
- ----------------------------------------------------------------
<Caption>
VALUE OF VALUE OF
FUNDS SECURITIES ON LOAN CASH COLLATERAL
Emerging Markets $ 12,474,787 $ 12,683,965
Real Estate
Securities 96,850,817 97,691,823
Short Duration Bond 1,560,708 1,600,505
Select Growth 7,730,686 8,005,150
Select Value 16,798,378 17,086,666
</Table>
Notes to Financial Statements 169
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
As of April 30, 2005, the cash collateral received for the securities on loan
are invested as follows:
<Table>
<Caption>
STATE STREET
SECURITIES LENDING
FUNDS FRIC MONEY MARKET QUALITY TRUST
- ----------------------------------------------------------------
Equity I $ 8,087,084 $ 25,479,804
Equity II 36,858,211 116,128,378
Equity Q 7,374,036 23,233,218
International 102,406,969 322,651,448
Fixed Income I 14,968,779 47,161,812
Fixed Income III 28,903,445 91,065,467
</Table>
<Table>
- ----------------------------------------------------------------
<Caption>
STATE STREET
SECURITIES LENDING
FUNDS FRIC MONEY MARKET QUALITY TRUST
Emerging Markets $ 3,055,877 $ 9,628,088
Real Estate
Securities 23,536,350 74,155,474
Short Duration Bond 385,601 1,214,904
Select Growth 1,928,636 6,076,513
Select Value 4,116,596 12,970,070
</Table>
As of April 30, 2005, the non-cash collateral received for the securities on
loan in the following funds was:
<Table>
<Caption>
NON-CASH COLLATERAL NON-CASH COLLATERAL
FUNDS VALUE HOLDING
----------------------------------------------------------------------------------------------
Equity II $ 18,752 Pool of US Government securities
International $ 564,128 Pool of US Government securities
</Table>
4. RELATED PARTIES
Advisor and Administrator
FRIMCo advises and administers all of the Funds which comprise the Investment
Company. FRIMCo is a wholly-owned subsidiary of Frank Russell Company (a
subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell
Company provides consulting and money manager evaluation services to FRIMCo.
The Funds are permitted to invest their cash reserves (i.e., cash awaiting
investment or cash held to meet redemption requests or to pay expenses), and
a portion of the collateral received from the Investment Company's securities
lending program in the Frank Russell Investment Company Money Market Fund (a
series of the Investment Company not presented herein). As of April 30, 2005,
$637,981,708 of the Money Market Fund's net assets represents investments by
the Funds presented herein, and $1,020,352,391 represents the investments of
other FRIC Funds not presented herein.
The advisory and administrative fees are based upon the average daily net
assets of each Fund and the rates specified in the table below. The advisory
and administrative fees are payable monthly and total $31,380,395 and
$2,526,380 respectively, for the period ended April 30, 2005.
<Table>
<Caption>
ANNUAL RATE
FUNDS ADVISOR ADMINISTRATOR
- ------------------------------------------------------------
Equity I .55% .05%
Equity II .70 .05
Equity Q .55 .05
International .70 .05
Fixed Income I .25 .05
Fixed Income III .50 .05
</Table>
<Table>
- ------------------------------------------------------------
<Caption>
ANNUAL RATE
FUNDS ADVISOR ADMINISTRATOR
Emerging Markets 1.15% .05%
Real Estate Securities .80 .05
Short Duration Bond .45 .05
Select Growth .80 .05
Select Value .70 .05
</Table>
For the Equity I, Equity II, Equity Q, International, Fixed Income I and
Fixed Income III Funds, FRIMCo has contractually agreed to waive 0.02% of its
administrative fees. The total amount of the waiver for the period ended
April 30, 2005 was $642,321.
For the Select Growth Fund, FRIMCo has contractually agreed to waive, at
least until February 28, 2006, up to the full amount of its transfer agency
fees, administrative fees, and advisory fees to the extent that expenses for
Class C, Class E, Class I and Class S exceed 2.25%, 1.40%, 0.95% and 1.15%,
respectively, of the average daily net assets of each such class on an annual
basis. If a waiver of advisory or administrative fees is required for any
class of shares of the Fund, advisory or administrative fees will be waived
equally across all classes of the Fund. This may result in a waiver amount
that is greater than what is required to reduce total net operating expense
for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%,
respectively. The total amount of the waiver for the period ended April 30,
2005 was $71,269. There were no reimbursements
170 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
for the period ended April 30, 2005. The expense ratio for the Select Growth
Fund was less than its expense cap for the period ended April 30, 2005 due to
a one-time expense reimbursement from the Advisor during the period.
For the Select Value Fund, FRIMCo has contractually agreed to waive, at least
until February 28, 2006, up to the full amount of its transfer agency fees,
administrative fees, and advisory fees to the extent that expenses for Class
C, Class E, Class I and Class S exceed 2.25%, 1.40%, 0.95% and 1.15%,
respectively, of the average daily net assets of each such class on an annual
basis. If a waiver of advisory or administrative fees is required for any
class of shares of the Fund, advisory or administrative fees will be waived
equally across all classes of the Fund. This may result in a waiver amount
that is greater than what is required to reduce total net operating expense
for Class C, Class E, Class I and Class S to 2.25%, 1.40%, 0.95% and 1.15%,
respectively. There were no waivers or reimbursements for the period ended
April 30, 2005.
The Advisor does not have the ability to recover amounts waived or reimbursed
from previous periods.
The Advisor reimbursed certain Funds for amounts previously paid by those
Funds to Russell/Mellon Analytical Services for analytical services received.
The amounts of the reimbursement for the period ended April 30, 2005 were:
<Table>
<Caption>
REIMBURSEMENT
FUNDS AMOUNT
- ----------------------------------------------------------
Equity I $ 138,930
Equity II 100,543
Equity Q 51,392
International 259,457
</Table>
<Table>
<Caption>
REIMBURSEMENT
FUNDS AMOUNT
- ----------------------------------------------------------
Emerging Markets $ 132,307
Real Estate Securities 9,951
Select Growth 56,745
Select Value 124,522
</Table>
Special Service Charge
A special servicing agreement was entered into in February 1999 by the
Advisor and has been approved annually by the Funds' Board of Trustees. The
special servicing agreement is between the Fund of Funds (a group of nine
LifePoints Funds and the Tax-Managed Global Equity Fund which invest in a
combination of Class S shares of the Investment Company's portfolios) and the
Funds listed below, the "Underlying Funds," in which the Fund of Funds
invest. In accordance with the special services agreement, expenses from the
operation of the Fund of Funds are borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Fund of
Funds. No Underlying Funds will be charged expenses that exceed the estimated
savings to each respective Underlying Fund. These estimated savings appear in
the form of reduced transfer agent costs resulting from the elimination of
separate shareholder accounts which either currently are or have potential to
be invested in the Underlying Funds. Rather than having each investor open a
shareholder account to invest individually in the Underlying Funds, the Fund
of Funds act as omnibus accounts combining thousands of individual
shareholder accounts into a single account. This benefits the Underlying
Funds, by reducing the number of shareholder accounts that need to be
maintained, and by the omnibus accounts' netting out the trades of individual
shareholders to a point where the Fund of Funds only execute one trade each
day with each Underlying Fund. In the event that the financial benefits to
the Underlying Funds do not exceed aggregate expenses of any Fund of Fund,
the Advisor will reimburse the respective Underlying Funds. The Advisor does
not have the ability to recover amounts reimbursed from previous periods.
These arrangements will be discontinued on July 1, 2005. However, the Advisor
will enter into a new arrangement to waive or reimburse certain direct
expenses of the Fund of Funds and it is not expected that the expense ratios
of the Fund of Funds will increase as a result of the discontinuation of the
current arrangement.
For the period ended April 30, 2005, the special servicing expense charged to
the Underlying Funds amounted to:
<Table>
<Caption>
AMOUNT
UNDERLYING FUNDS PAID
-------------------------------------------------------
Emerging Markets $ 144,029
Real Estate Securities 247,370
Short Duration Bond 382,093
</Table>
Notes to Financial Statements 171
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
For the period ended April 30, 2005, the Advisor reimbursement to the
Underlying Funds amounted to:
<Table>
<Caption>
AMOUNT
UNDERLYING FUNDS PAID
-------------------------------------------------------
Emerging Markets $ 1,068
Real Estate Securities 2,158
Short Duration Bond 3,593
</Table>
Custodian
The Funds have entered into arrangements with their Custodian whereby custody
credits realized as a result of uninvested cash balances were used to reduce
a portion of the Fund's expenses. During the period ended April 30, 2005, the
Fund's custodian fees were reduced by the following amounts under these
arrangements:
<Table>
<Caption>
CUSTODY CREDIT
FUNDS AMOUNT
- ---------------------------------------------------------
Equity I $ 336
Equity II 777
Equity Q 719
International 649
Fixed Income I 5,797
Fixed Income III 3,056
</Table>
<Table>
<Caption>
CUSTODY CREDIT
FUNDS AMOUNT
- ---------------------------------------------------------
Emerging Markets $ 685
Real Estate Securities 244
Short Duration Bond 3,987
Select Growth 262
Select Value 274
</Table>
Transfer agent
The Investment Company has a contract with FRIMCo to provide transfer agent
services to the Funds. Total fees for the Funds reported herein for the
period ended April 30, 2005 were $3,426,558.
In addition, FRIMCo has contractually agreed to waive, at least until
February 28, 2006, a portion of its transfer agency fees for certain Funds.
The total transfer agent fee waivers for the period ended April 30, 2005 were
as follows:
<Table>
<Caption>
TA FEE
FUNDS WAIVER AMOUNT
------------------------------------------------------------
Select Growth $ 24,608
</Table>
The Advisor paid the following amounts to certain Funds with respect to
referral fees received:
<Table>
<Caption>
AMOUNT
FUNDS PAID
- ---------------------------------------------------------
Equity I $ 10,307
Equity II 25,073
Equity Q 12,438
International 12,262
Fixed Income I 4,268
Fixed Income III 5,583
</Table>
<Table>
<Caption>
AMOUNT
FUNDS PAID
- ---------------------------------------------------------
Emerging Markets $ 26,082
Real Estate Securities 34,883
Short Duration Bond 13,305
Select Growth 3,524
Select Value 8,513
</Table>
Distributor and Shareholder Servicing
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to Russell Fund Distributors, Inc. (the
"Distributor"), a wholly-owned subsidiary of FRIMCo, or any Selling Agents,
as defined in the Plan, for sales support services provided and related
expenses incurred which were primarily intended to result in the sale of the
Class C shares subject to the Distribution Plan. The 12b-1 distribution
payments shall not exceed 0.75% of the average daily net assets of a Fund's
Class C shares on an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which the Funds may make payments to the
Distributor or any Servicing Agent for any activities or expenses primarily
intended to assist, support or service the Servicing Agents' clients who
beneficially own Class C or Class E shares of the Funds. The shareholder
servicing payments shall not exceed 0.25% of the average daily net assets of
a Fund's Class C and Class E shares on an annual basis.
172 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Pursuant to the rules of the National Association of Securities Dealers, Inc.
("NASD"), the asset-based sales charges on Shares of the Funds may not exceed
6.25% of total gross sales, subject to certain exclusions. This 6.25%
limitation is imposed at the class level of each Fund rather than on a per
shareholder basis. Therefore, long-term shareholders may pay more than the
economic equivalent of the maximum sales charges permitted by the NASD.
Brokerage commissions
The Funds will effect transactions through Frank Russell Securities, Inc.
("FRS") and its global network of correspondent brokers. FRS is an affiliate
of FRIMCo. Trades placed through FRS and its correspondents are used to
obtain either research services for FRIMCo, to assist it in its capacity as a
manager of managers, to generate commission rebates to the Funds on whose
behalf the trades were made or to manage trading associated with changes in
managers, rebalancing across existing managers, cash flows and other
portfolio transitions. For purposes of trading to obtain research services
for FRIMCo or to generate commission rebates to the Funds, the Funds' money
managers are requested to and FRIMCo may, with respect to transactions it
places, effect transactions with or through FRS or other brokers and its
correspondents or other brokers only to the extent that the Funds will
receive competitive execution, price and commissions. Research services
provided to FRIMCo by FRS or other brokers include performance measurement
statistics, fund analytics systems and market monitoring systems. Research
services will be obtained from unaffiliated third parties at market rates.
Research provided to FRIMCo will benefit the particular Funds generating the
trading activity and may also benefit other Funds within FRIC and other funds
and clients managed or advised by FRIMCo or its affiliates. Similarly, the
Funds will benefit from research provided with respect to trading by those
other funds and clients. In some cases, research may also be provided by
non-affiliated brokers.
FRS or other brokers may also rebate to the Funds a portion of commissions
earned on certain trading by the Funds through FRS and its correspondents in
the form of commission recapture. Commission recapture is paid solely to
those Funds generating the applicable trades. Commission recapture is
generated on the instructions of the Soft Dollar Committee once FRIMCo's
research budget has been met. For the period ended April 30, 2005, there was
no commission recapture for the Funds.
FRS retains a portion of all commissions generated, regardless of whether the
trades were used to provide research services to FRIMCo or commission
recapture to the Funds. Trades through FRS for transition services and
manager funding (i.e. brokerage arrangements designed to reduce costs and
optimize performance during the transition of Fund assets upon the hiring,
termination or additional funding of a money manager) and are at ordinary and
customary commission rates and do not result in commission rebates or accrued
credits for the procurement of research related services.
Amounts retained by Frank Russell Securities, Inc. for the period ended April
30, 2005 were as follows:
<Table>
<Caption>
FUNDS AMOUNT
- ----------------------------------------------------------
Equity I $ 56,685
Equity II 23,365
Equity Q 2,561
International 88,430
</Table>
<Table>
<Caption>
FUNDS AMOUNT
- ----------------------------------------------------------
Emerging Markets $ 23,635
Real Estate Securities 15,415
Select Growth 14,525
Select Value 18,801
</Table>
Additionally, the Funds paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Advisor.
Accrued fees payable to affiliates as of April 30, 2005 were as follows:
<Table>
<Caption>
FIXED FIXED
EQUITY I EQUITY II EQUITY Q INTERNATIONAL INCOME I INCOME III
----------------------------------------------------------------------------------------------------------------------
Advisory fees $ 435,899 $ 510,389 $ 631,616 $ 922,120 $ 240,102 $ 212,903
Administration fees 23,753 21,871 34,439 39,497 28,780 12,774
Analytic services 107 -- 15 90 -- --
Distribution fees -- -- -- -- -- --
Shareholder servicing
fees 7,102 16,966 10,223 9,044 5,933 1,615
Transfer agent fees 123,065 220,438 148,355 137,317 70,842 67,592
Trustee fees 2,223 3,048 3,989 3,312 3,526 668
------------ ------------ ------------ ------------ ------------ ------------
$ 592,149 $ 772,712 $ 828,637 $ 1,111,380 $ 349,183 $ 295,552
============ ============ ============ ============ ============ ============
<Caption>
EMERGING
MARKETS
-----------------------------------
Advisory fees $ 662,282
Administration fees 29,135
Analytic services 48
Distribution fees 16,440
Shareholder servicing
fees 8,700
Transfer agent fees 229,649
Trustee fees 473
------------
$ 946,727
============
</Table>
Notes to Financial Statements 173
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHORT
REAL ESTATE DURATION SELECT SELECT
SECURITIES BOND GROWTH VALUE
------------------------------------------------------------------------------------------------------------------------------
Advisory fees $ 896,839 $ 446,457 $ 107,235 $ 194,760
Administration fees 56,297 50,624 6,675 13,901
Analytic services 52 -- 327 --
Distribution fees 42,346 20,041 4,516 12,105
Shareholder servicing fees 20,883 11,592 2,729 6,106
Transfer agent fees 463,323 173,533 25,585 154,814
Trustee fees 2,608 7,798 99 448
------------------- ------------------- ------------------- -------------------
$ 1,482,348 $ 710,045 $ 147,166 $ 382,134
=================== =================== =================== ===================
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company
("FRIC"), which has 34 Funds, and Russell Investment Funds ("RIF"), which has
five Funds. Each of the Trustees is a Trustee for both FRIC and RIF. During
the period the Russell Fund Complex paid each of its Trustees not affiliated
with FRIMCo 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 $2,000 for each Audit Committee meeting or Nominating and
Governance Committee meeting or any other committee meeting established and
approved by the Board that is attended in person. Each Trustee receives a
$500 fee for attending the meetings (quarterly, special, committee) by phone
instead of receiving the full fee had the member attended in person.
Trustees' out of pocket expenses are also paid by the Russell Fund Complex.
During the period, the Lead Trustee was paid a fee of $10,000 per year. The
Audit Committee Chair was paid a fee of $12,000 per year and the Nominating
and Governance Committee Chair was paid a fee of $6,000 per year.
5. FEDERAL INCOME TAXES
At October 31, 2004, the following Funds had net tax basis capital loss
carryforwards which may be applied against any net realized taxable gains in
each succeeding year or until their respective expiration dates, whichever
occurs first. Available capital loss carryforwards and expiration dates are
as follows:
<Table>
<Caption>
FUNDS 10/31/07 10/31/08 10/31/09 10/31/10
----------------------------------------------------------------------------------------------------------------
Equity I $ -- $ -- $ -- $ 29,820,988
Equity II -- -- -- --
Equity Q -- -- -- 37,252,062
International -- -- -- 133,121,394
Emerging Markets 55,313,580 24,430,000
Real Estate Securities -- -- -- --
Short Duration Bond -- -- -- --
Select Growth -- -- 10,693,422 14,206,106
Select Value 13,798,385 451,724 2,362,680 362,611
</Table>
<Table>
<Caption>
FUNDS 10/31/11 10/31/12 TOTALS
---------------------------------------------------------------------------------------------
Equity I $ -- $ -- $ 29,820,988
Equity II -- -- --
Equity Q 50,946,922 -- 88,198,984
International 26,482,168 -- 159,603,562
Emerging Markets -- -- 79,743,580
Real Estate Securities -- -- --
Short Duration Bond -- -- --
Select Growth 263,497 -- 25,163,025
Select Value -- -- 16,975,400
</Table>
174 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
Select Value Fund had a capital loss carryforward of $16,975,400 that it
acquired from the Equity Income Fund and Equity III Fund of which
$13,798,385, $451,724, $2,362,680, and $362,611 will expire on October 31 of
the years 2007, 2008, 2009 and 2010, respectively. This capital loss
carryforward can be utilized at a pace of up to $5,101,116 each year with any
unused capital loss annual limitation carried over to each succeeding year or
until its respective expiration dates, whichever occurs first.
At April 30, 2005, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
<Caption>
EQUITY I EQUITY II EQUITY Q
--------------------------------------------------------------------------------------------------------
Cost of Investments $ 899,652,318 $ 924,098,087 $ 1,281,487,174
================= ================= =================
Unrealized Appreciation $ 110,936,854 $ 127,315,700 $ 164,272,656
Unrealized Depreciation (24,387,901) (41,118,208) (41,039,402)
----------------- ----------------- -----------------
Net Unrealized Appreciation (Depreciation) $ 86,548,953 $ 86,197,492 $ 123,233,254
================= ================= =================
</Table>
<Table>
<Caption>
INTERNATIONAL FIXED INCOME I FIXED INCOME III EMERGING MARKETS
----------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 1,768,332,726 $ 1,450,259,127 $ 726,273,675 $ 565,636,693
================= ================= ================= =================
Unrealized Appreciation $ 236,595,240 $ 9,926,222 $ 7,860,716 $ 155,696,511
Unrealized Depreciation (23,830,144) (7,262,533) (2,186,583) (16,848,518)
----------------- ----------------- ----------------- -----------------
Net Unrealized Appreciation (Depreciation) $ 212,765,096 $ 2,663,689 $ 5,674,133 $ 138,847,993
================= ================= ================= =================
</Table>
<Table>
<Caption>
REAL ESTATE SECURITIES SHORT DURATION BOND SELECT GROWTH SELECT VALUE
------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 1,086,197,203 $ 1,258,703,938 $ 169,735,586 $ 330,714,147
================= ================= ================= =================
Unrealized Appreciation $ 429,731,911 $ 1,837,884 $ 9,383,223 $ 39,785,856
Unrealized Depreciation (995,909) (11,022,881) (5,277,520) (8,534,267)
----------------- ----------------- ----------------- -----------------
Net Unrealized Appreciation
(Depreciation) $ 428,736,002 $ (9,184,997) $ 4,105,703 $ 31,251,589
================= ================= ================= =================
</Table>
Notes to Financial Statements 175
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2005 and October 31, 2004
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
EQUITY I ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 104 275 $ 3,018 $ 7,453
Proceeds from reinvestment of
distributions 5 7 155 191
Payments for shares redeemed (113) (346) (3,303) (9,361)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (4) (64) (130) (1,717)
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 3,899 10,260 114,170 279,847
Proceeds from reinvestment of
distributions 140 183 4,088 4,986
Payments for shares redeemed (3,214) (7,663) (94,547) (208,381)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 825 2,780 23,711 76,452
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 2,355 1,402 69,889 38,069
Proceeds from reinvestment of
distributions 28 30 804 820
Payments for shares redeemed (178) (1,120) (5,220) (30,470)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,205 312 65,473 8,419
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 3,026 3,028 $ 89,054 $ 83,154
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
EQUITY II ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 244 1,196 $ 9,099 $ 46,867
Proceeds from reinvestment of
distributions 280 -- 10,503 --
Payments for shares redeemed (250) (444) (9,467) (17,044)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 274 752 10,135 29,823
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 1,636 4,405 61,953 170,296
Proceeds from reinvestment of
distributions 2,231 19 83,814 720
Payments for shares redeemed (3,196) (4,058) (121,194) (155,941)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 671 366 24,573 15,075
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 17 145 634 5,562
Proceeds from reinvestment of
distributions 576 13 21,634 477
Payments for shares redeemed (150) (1,350) (5,608) (52,845)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 443 (1,192) 16,660 (46,806)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,388 (74) $ 51,368 $ (1,908)
================= ================= ================= =================
</Table>
176 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
EQUITY Q ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 135 468 $ 4,593 $ 14,766
Proceeds from reinvestment of
distributions 8 11 287 351
Payments for shares redeemed (123) (367) (4,178) (11,696)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 20 112 702 3,421
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 3,891 11,458 132,483 366,031
Proceeds from reinvestment of
distributions 206 267 7,004 8,488
Payments for shares redeemed (5,032) (7,537) (172,056) (239,252)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (935) 4,188 (32,569) 135,267
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 957 2,564 33,025 79,672
Proceeds from reinvestment of
distributions 72 106 2,436 3,374
Payments for shares redeemed (2,103) (14,659) (72,207) (441,936)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (1,074) (11,989) (36,746) (358,890)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (1,989) (7,689) $ (68,613) $ (220,202)
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
INTERNATIONAL ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 110 447 $ 4,126 $ 14,934
Proceeds from reinvestment of
distributions 18 20 661 638
Payments for shares redeemed (105) (233) (3,949) (7,850)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 23 234 838 7,722
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 3,929 10,893 147,936 366,536
Proceeds from reinvestment of
distributions 492 439 18,117 14,030
Payments for shares redeemed (2,686) (4,448) (101,297) (148,078)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,735 6,884 64,756 232,488
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 521 721 20,027 23,702
Proceeds from reinvestment of
distributions 232 399 8,518 12,741
Payments for shares redeemed (999) (5,329) (37,183) (182,292)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (246) (4,209) (8,638) (145,849)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,512 2,909 $ 56,956 $ 94,361
================= ================= ================= =================
</Table>
Notes to Financial Statements 177
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
FIXED INCOME I ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 220 300 $ 4,716 $ 6,491
Proceeds from reinvestment of
distributions 51 73 1,068 1,559
Payments for shares redeemed (139) (336) (2,955) (7,278)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 132 37 2,829 772
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 5,580 14,236 118,570 308,094
Proceeds from reinvestment of
distributions 1,313 1,773 27,670 38,028
Payments for shares redeemed (3,111) (10,546) (65,948) (228,621)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,782 5,463 80,292 117,501
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 2,682 5,959 57,247 130,103
Proceeds from reinvestment of
distributions 574 1,189 12,106 25,486
Payments for shares redeemed (399) (12,178) (8,491) (264,196)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,857 (5,030) 60,862 (108,607)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 6,771 470 $ 143,983 $ 9,666
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
FIXED INCOME III ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 99 236 $ 1,043 $ 2,466
Proceeds from reinvestment of
distributions 12 27 130 287
Payments for shares redeemed (67) (170) (707) (1,785)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 44 93 466 968
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 9,524 21,610 100,880 227,893
Proceeds from reinvestment of
distributions 1,020 1,646 10,684 17,162
Payments for shares redeemed (5,215) (7,977) (55,130) (83,706)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,329 15,279 56,434 161,349
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 5,373 15,372 $ 56,900 $ 162,317
================= ================= ================= =================
</Table>
178 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
EMERGING MARKETS ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 416 743 $ 5,958 $ 8,601
Proceeds from reinvestment of
distributions 5 27 70 295
Payments for shares redeemed (201) (289) (2,928) (3,350)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 220 481 3,100 5,546
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 175 444 2,601 5,367
Proceeds from reinvestment of
distributions 9 22 132 254
Payments for shares redeemed (223) (244) (3,373) (2,940)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (39) 222 (640) 2,681
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 5,313 15,089 78,565 180,417
Proceeds from reinvestment of
distributions 424 638 6,032 7,205
Payments for shares redeemed (3,700) (8,459) (54,734) (101,760)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,037 7,268 29,863 85,862
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,218 7,971 $ 32,323 $ 94,089
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
REAL ESTATE SECURITIES ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 315 648 $ 13,233 $ 24,331
Proceeds from reinvestment of
distributions 130 36 5,570 1,425
Payments for shares redeemed (159) (233) (6,696) (8,932)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 286 451 12,107 16,824
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 187 314 7,941 12,184
Proceeds from reinvestment of
distributions 68 21 2,936 829
Payments for shares redeemed (123) (145) (5,177) (5,628)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 132 190 5,700 7,385
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 4,880 7,890 207,728 300,908
Proceeds from reinvestment of
distributions 1,746 631 75,833 25,106
Payments for shares redeemed (2,963) (5,898) (127,585) (227,399)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,663 2,623 155,976 98,615
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 4,081 3,264 $ 173,783 $ 122,824
================= ================= ================= =================
</Table>
Notes to Financial Statements 179
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
SHORT DURATION BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 333 939 $ 6,288 $ 17,894
Proceeds from reinvestment of
distributions 13 15 236 293
Payments for shares redeemed (604) (1,127) (11,406) (21,451)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (258) (173) (4,882) (3,264)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 181 411 3,436 7,864
Proceeds from reinvestment of
distributions 12 17 230 319
Payments for shares redeemed (137) (277) (2,599) (5,285)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 56 151 1,067 2,898
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 8,980 22,446 169,885 428,176
Proceeds from reinvestment of
distributions 684 508 12,878 9,675
Payments for shares redeemed (8,111) (13,721) (153,277) (261,930)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,553 9,233 29,486 175,921
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,351 9,211 $ 25,671 $ 175,555
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
SELECT GROWTH ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 352 552 $ 2,513 $ 3,849
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (99) (161) (699) (1,128)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 253 391 1,814 2,721
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 89 213 648 1,533
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (55) (92) (407) (658)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 34 121 241 875
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 5,134 4,627 38,560 33,510
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (739) (784) (5,490) (5,601)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 4,395 3,843 33,070 27,909
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,066 3,538 15,387 25,490
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (748) (2,318) (5,589) (16,889)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,318 1,220 9,798 8,601
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 6,000 5,575 $ 44,923 $ 40,106
================= ================= ================= =================
</Table>
180 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2005 2004 2005 2004
SELECT VALUE ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 366 836 $ 3,991 $ 8,118
Shares issued in connection with
acquisition of Equity Income Fund
Proceeds from reinvestment of
distributions 3 1 31 8
Payments for shares redeemed (143) (290) (1,558) (2,835)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 226 547 2,464 5,291
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 91 164 1,008 1,610
Shares issued in connection with
acquisition of Equity Income Fund
Proceeds from reinvestment of
distributions 4 5 49 45
Payments for shares redeemed (56) (136) (616) (1,345)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 39 33 441 310
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 2,614 4,468 29,152 44,188
Shares issued in connection with
acquisition of Equity Income Fund
Proceeds from reinvestment of
distributions 62 75 683 740
Payments for shares redeemed (1,462) (2,833) (16,168) (27,980)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,214 1,710 13,667 16,948
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,506 6,828 27,611 67,750
Shares issued in connection with
acquisition of Equity Income Fund
Proceeds from reinvestment of
distributions 95 110 1,036 1,084
Payments for shares redeemed (1,505) (4,241) (16,583) (41,771)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,096 2,697 12,064 27,063
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,575 4,987 $ 28,636 $ 49,612
================= ================= ================= =================
</Table>
7. LINE OF CREDIT
The Investment Company has a $75 million revolving credit facility for
temporary or emergency purposes, including the meeting of redemption requests
that otherwise might require the untimely disposition of securities. The
Funds are charged an annual commitment fee of .125% on the average daily
unused amount of the aggregate commitment, which is allocated among each of
the Funds. Interest is calculated at the Federal Fund Rate plus .50%
annually. The Funds may borrow up to a maximum of 33.33% of the value of
their net assets under the agreement. The agreement will expire December 21,
2005 and will be reviewed at such time for possible renewal. The Funds did
not have any drawdowns for the period ended April 30, 2005.
Notes to Financial Statements 181
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
8. BENEFICIAL INTEREST
As of April 30, 2005, the following table includes shareholders with shares
of beneficial interest of greater than 10% of the total outstanding shares of
each respective Fund:
<Table>
<Caption>
FUNDS # OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Equity I 1 37.8
Equity II 1 42.4
Equity Q 1 34.8
International 2 44.3
Fixed Income I 1 18.3
Fixed Income III 1 43.4
Emerging Markets 3 47.3
Real Estate Securities 2 30.8
Short Duration Bond 3 65.1
Select Growth 2 48.9
Select Value 2 42.5
</Table>
9. ILLIQUID OR RESTRICTED SECURITIES
A Fund may invest a portion of its net assets not to exceed 15% in securities
that are illiquid. Illiquid securities are securities that may not be readily
marketable, and that cannot be sold within seven days in the ordinary course
of business at the approximate amount at which the Fund has valued the
securities. Illiquid and restricted securities may be priced by the Funds
using fair value procedures approved by the Board of Trustees. Restricted
securities are subject to contractual limitations on resale, are often issued
in private placement transactions, and are not registered under the
Securities Act of 1933 (the "Act"). The most common types of restricted
securities are those sold under Rule 144A of the Act and commercial paper
sold under Section 4(2) of the Act. Certain illiquid securities are not
subject to the 15% limitation if the Adviser or a money manager determines
that such security is liquid pursuant to procedures approved by the Board of
Trustees. As of April 30, 2005, illiquid securities held by the funds were as
follows:
Illiquid Securities
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND -- % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund - 0.0%
Delta Corp. Inc. 08/07/97 1,113,646 0.39 435 1,038
OK Zimbabwe 12/03/01 6,402,949 0.02 149 146
------------
1,184
============
International Fund - 0.0%
Sons of Gwalia, Ltd 02/28/03 22,400 2.24 50 --
============
</Table>
Pursuant to procedures adopted by the Board of Trustees, the Adviser or a
money manager has determined that a liquid trading market exists for the
following restricted securities held as of April 30, 2005:
Restricted Securities
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND -- % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
------------------------------------------------------------------------------------------------------------------------------
Fixed Income I Fund - 3.4%
ABSC NIMs Trust 07/30/04 144,745 99.61 144 144
Arcap Reit, Inc. 09/21/04 420,000 100.98 424 413
Argent NIMs Trust 03/04/04 85,951 99.99 86 86
Argent NIMs Trust 03/11/04 73,519 100.00 74 73
</Table>
182 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND -- % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
------------------------------------------------------------------------------------------------------------------------------
Asset Backed Funding Corp. NIMs Trust 08/22/03 38,632 100.00 39 39
BAE Systems Holdings, Inc. 12/28/01 775,000 104.87 813 845
Berkshire Hathaway Finance Corp. 01/04/05 1,260,000 99.88 1,259 1,242
Chalet Finance PLC 10/08/03 1,190,000 100.00 1,190 1,191
Clorox Co. 11/30/04 125,000 99.70 125 127
Clorox Co. 11/30/04 165,000 99.92 165 164
Countrywide Asset-Backed Certificates 11/20/03 41,370 99.89 41 42
Countrywide Asset-Backed Certificates 12/21/04 240,879 100.04 241 242
COX Communications, Inc. 12/10/04 3,810,000 99.86 3,805 3,754
Credit-Based Asset Servicing and
Securitization CBO, Ltd. 03/04/04 2,239,307 100.00 2,239 2,239
Crest, Ltd. 11/25/03 1,710,000 100.00 1,710 1,754
DG Funding Trust 11/04/03 94 10,537.12 990 1,016
Dresdner Funding Trust I 04/09/03 335,000 99.88 335 416
Equifirst Mortgage Loan Trust NIMs Notes 02/02/05 702,944 100.06 703 703
Export Import Bank of Korea 02/03/04 255,000 99.61 254 251
First Franklin NIMs Trust 05/20/04 178,479 100.00 178 178
First Franklin NIMs Trust 05/20/04 285,000 100.00 285 285
First Franklin NIMs Trust 06/03/04 141,175 100.00 141 141
First Franklin NIMs Trust 09/01/04 495,663 100.00 496 496
First Franklin NIMs Trust 11/18/04 417,496 100.06 418 417
First Franklin NIMs Trust 04/01/05 1,068,547 99.73 1,066 1,066
Fremont NIMs Trust 05/20/04 169,472 100.00 169 169
G-Force CDO, Ltd. 12/08/03 765,000 99.98 765 773
GSAMP Trust 02/27/04 152,703 99.87 153 152
HVB Funding Trust I 05/01/03 315,000 96.76 305 400
IndyMac Loan Trust 10/17/03 480,482 100.00 480 481
IndyMac Loan Trust 06/10/04 901,450 100.00 901 901
Korea Electric Power Corp. 04/20/04 125,000 98.46 123 125
Long Beach Asset Holdings Corp. 01/19/05 707,543 100.00 708 708
Mach One Trust Commercial Mortgage-Backed 07/12/04 1,350,000 100.97 1,363 1,370
Mastr Reperforming Loan Trust 03/09/05 969,174 102.41 992 994
Merrill Lynch Mortgage Investors, Inc. 01/12/04 92,224 99.75 92 92
Merrill Lynch Mortgage Investors, Inc. 02/19/04 148,231 99.56 148 147
Miller Brewing Co. 08/06/03 250,000 99.33 248 257
Mizuho Financial Group Cayman, Ltd. 02/27/04 280,000 99.96 280 290
Monumental Global Funding, Ltd. 03/09/05 200,000 100.00 200 202
Morgan Stanley Capital I 06/17/04 1,370,000 101.06 1,384 1,408
Mound Financing PLC 07/24/04 1,935,000 100.09 1,937 1,935
Natexis Ambs Co. LLC 06/24/98 300,000 108.75 326 335
Newcastle CDO I, Ltd. 03/11/04 845,000 99.94 845 825
Novastar NIMs Trust 01/30/04 211,703 100.00 212 212
Novastar NIMs Trust 07/20/04 383,838 100.10 384 382
NPF XII, Inc. 05/29/02 3,235,000 88.65 2,868 226
Option One Mortgage Securities Corp. NIMs
Trust 12/08/03 169,199 100.00 169 169
Renaissance NIMs Trust 12/09/03 89,594 100.00 90 90
Renaissance NIMs Trust 06/25/04 251,011 100.00 251 251
Renaissance NIMs Trust 12/16/04 440,519 100.00 441 441
Russia Government International Bond 02/01/05 575,000 104.13 599 611
Russia Government International Bond 01/10/05 1,150,000 101.86 1,171 1,223
</Table>
Notes to Financial Statements 183
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND -- % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
------------------------------------------------------------------------------------------------------------------------------
Saxon Net Interest Margin Trust 09/23/03 42,734 100.00 43 43
Sharps SP I LLC Net Interest Margin Trust 02/13/04 80,888 99.99 81 81
Sharps SP I LLC Net Interest Margin Trust 03/10/04 246,717 99.99 247 247
Systems 2001 AT LLC 03/08/02 343,427 101.89 350 370
Telecom Italia Capital SA 01/26/05 1,340,000 96.28 1,290 1,294
Telecom Italia Capital SA 09/28/04 175,000 99.09 173 173
Telecom Italia Capital SA 10/19/04 590,000 99.18 585 575
Telecom Italia Capital SA 10/08/04 820,000 97.05 796 812
Tenaska Alabama II Partners, LP 10/09/03 233,112 100.03 233 242
Tengizchevroil Finance Co. 11/23/04 245,000 100.30 246 246
TXU Corp. 03/31/05 475,000 95.39 453 468
Verizon Wireless Capital LLC 02/02/04 700,000 99.99 700 700
Wells Fargo Home Equity Trust 10/01/04 203,333 99.99 203 203
Zurich Capital Trust I 01/10/03 530,000 93.91 498 574
Zurich Capital Trust I 07/11/00 835,000 105.93 885 905
------------
39,426
============
Fixed Income III Fund -- 4.9%
AIG SunAmerica Global Financing VI 05/02/01 300,000 107.47 322 325
Alliance Capital Funding LLC 03/03/04 24,359 101.79 25 24
Ares Leveraged Investment Fund, LP 12/19/03 280,000 99.48 279 280
Arlington Street CDO, Ltd. 06/04/03 897,906 102.46 920 925
BAE Systems Holdings, Inc. 12/28/01 775,000 102.87 797 845
Banco Santander Chile 01/11/05 195,000 99.81 195 195
Bear Stearns Commercial Mortgage Securities 04/19/05 265,000 101.75 270 269
Bombardier Capital, Inc. 05/27/04 395,000 99.98 395 395
Canadian Oil Sands, Ltd. 08/03/04 140,000 99.92 140 140
Chancellor/Triton CBO, Ltd. 11/12/03 112,840 96.58 109 115
Chase Funding Net Interest Margin 12/10/03 176 100.00 -- --
Citigroup Commercial Mortgage Trust 12/07/04 363,616 100.02 364 364
Clorox Co. 11/30/04 115,000 99.69 115 117
Clorox Co. 11/30/04 155,000 99.92 155 154
Clorox Co. 11/30/04 165,000 100.07 165 165
Countrywide Asset-Backed Certificates 02/25/04 43,577 99.68 43 44
COX Communications, Inc. 12/10/04 165,000 99.90 165 163
COX Communications, Inc. 12/10/04 115,000 99.90 115 113
Detroit Edison Co. 02/02/05 130,000 99.81 130 128
DG Funding Trust 11/04/03 59 10,537.12 622 638
Dresdner Funding Trust I 04/09/03 310,000 106.72 331 385
Erac USA Finance Co. 07/01/02 215,000 107.42 231 233
Export Import Bank of Korea 02/03/04 160,000 99.61 159 157
Farmers Exchange Capital 12/15/04 300,000 105.19 316 317
Farmers Exchange Capital 01/28/02 250,000 82.17 205 264
Farmers Insurance Exchange 11/27/02 310,000 74.10 230 382
Farmers Insurance Exchange 08/04/04 225,000 100.05 225 231
Fisher Scientific International, Inc. 07/22/04 80,000 100.11 80 81
Glencore Funding LLC 05/12/04 95,000 91.55 87 90
Global Signal Trust 01/18/04 225,000 100.00 225 222
GSAA Trust 09/16/04 87,365 99.88 87 87
GSMPS Mortgage Loan Trust 05/27/04 80,082 107.45 86 86
</Table>
184 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND -- % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
------------------------------------------------------------------------------------------------------------------------------
GSMPS Mortgage Loan Trust 08/30/04 141,341 109.22 154 152
GSMPS Mortgage Loan Trust 03/17/05 236,159 107.37 254 255
GSMPS Mortgage Loan Trust 02/16/05 134,436 108.78 146 148
GT Group Telecom, Inc. 2010 Warrants 01/27/00 450 49.90 22 --
Hanarotelecom, Inc. 01/25/05 300,000 100.28 301 288
Home Equity Asset Trust 10/08/03 18 100.00 -- --
Hutchison Whampoa International 03/13, Ltd. 06/17/03 165,000 105.46 174 177
HVB Funding Trust I 05/01/03 185,000 96.88 179 235
HVB Funding Trust III 06/02/03 40,000 102.24 41 52
Hyatt Equities LLC 06/12/02 110,000 101.30 111 114
Intelsat Bermuda, Ltd. 01/24/05 145,000 100.00 145 145
Intelsat Bermuda, Ltd. 01/24/05 90,000 100.00 90 91
John Hancock Global Funding II 07/29/03 200,000 115.07 230 231
Jones Apparel Group, Inc. 01/17/04 155,000 99.92 155 149
JP Morgan Chase Commercial Mortgage
Securities Corp. 08/04/04 396,589 100.00 397 397
Juniper CBO, Ltd. 01/15/04 175,975 102.94 181 179
Korea Electric Power Corp. 04/20/04 85,000 98.46 84 85
Liberty Mutual Group 03/16/04 255,000 108.83 278 263
Lone Star Industries 02/21/03 195,000 99.76 195 196
Mantis Reef, Ltd. 10/28/03 200,000 100.00 200 200
Mastr Reperforming Loan Trust 03/09/05 353,817 107.37 380 379
Merrill Lynch Mortgage Trust 06/26/02 185,000 79.13 146 180
Miller Brewing Co. 08/06/03 230,000 100.68 232 237
Miller Brewing Co. 08/06/03 145,000 100.24 145 144
Mizuho Financial Group Cayman, Ltd. 02/27/04 230,000 100.81 232 238
Mizuho Financial Group Cayman, Ltd. 02/27/04 150,000 99.96 150 155
Monumental Global Funding, Ltd. 03/09/05 135,000 100.00 135 136
Morgan Stanley Bank AG for OAO Gazprom 02/21/03 110,000 109.70 121 129
Natexis Ambs Co. LLC 06/24/98 185,000 108.76 201 206
Nationwide Building Society 02/16/05 115,000 98.73 114 114
Nationwide Mutual Insurance Co. 03/20/03 235,000 104.01 244 290
North Front Pass-Through Trust 12/08/04 500,000 100.69 503 512
Oil Insurance, Ltd. 08/19/03 520,000 101.11 526 525
Pinnacle West Energy Corp. 04/06/05 245,000 100.00 245 245
Power Contract Financing LLC 06/11/03 165,000 101.37 167 171
Power Contract Financing LLC 06/11/03 154,213 100.84 156 156
Qwest Corp. 08/12/04 470,000 104.24 490 477
Qwest Services Corp. 03/25/04 55,000 114.93 63 62
Qwest Services Corp. 03/01/05 90,000 112.20 101 98
Qwest Services Corp. 04/27/05 80,000 113.25 91 90
Rabobank Capital Funding II 11/14/03 205,000 101.47 208 207
Ras Laffan Liquefied Natural Gas Co., Ltd. 03/07/01 85,000 111.88 95 99
Russia Government International Bond 12/09/04 1,100,000 102.60 1,129 1,170
Russia Government International Bond 06/17/02 940,000 89.86 845 998
Russia Government International Bond 11/23/04 230,000 101.86 234 244
Russia Paris Club Participant 04/06/04 30,206,900 0.81 245 263
Salomon Brothers AG for Tyumen Oil Co. 04/10/03 290,000 112.56 326 321
Sappi Papier Holding AG 07/11/02 65,000 104.70 68 71
Sealed Air Corp. 07/01/03 135,000 99.83 135 137
</Table>
Notes to Financial Statements 185
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND -- % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
------------------------------------------------------------------------------------------------------------------------------
Sharps SP I LLC Net Interest Margin Trust 12/09/04 20,901 100.00 21 21
Solutia, Inc. 2009 Warrants 07/02/02 450 85.33 38 --
Systems 2001 AT LLC 03/08/02 176,116 101.89 179 190
Systems 2001 AT LLC 06/04/01 133,334 102.41 137 146
Telecom Italia Capital SA 12/20/04 1,270,000 96.42 1,225 1,227
Telecom Italia Capital SA 09/28/04 135,000 99.09 134 134
Telecom Italia Capital SA 09/28/04 165,000 99.57 164 159
Telecom Italia Capital SA 11/24/04 210,000 97.25 204 203
Tenaska Alabama II Partners, LP 10/09/03 156,984 100.12 157 163
Tengizchevroil Finance Co. 11/23/04 250,000 100.24 251 251
Texas Genco LLC 12/08/04 380,000 100.26 381 372
TuranAlem Finance BV 11/18/04 240,000 103.75 249 241
Twin Reefs Pass-Through Trust 12/07/04 300,000 100.18 301 301
TXU Corp. 11/22/04 250,000 99.94 250 245
TXU Corp. 11/22/04 570,000 96.67 551 549
TXU Corp. 11/22/04 375,000 99.75 374 368
TXU Corp. 11/22/04 240,000 99.88 240 231
WellPoint, Inc. 12/06/04 150,000 99.93 150 148
WellPoint, Inc. 12/06/04 120,000 99.81 120 118
WellPoint, Inc. 12/06/04 55,000 99.93 55 54
WellPoint, Inc. 12/06/04 50,000 99.81 50 49
Williams Gas Pipelines 01/30/04 200,000 105.04 210 209
World Financial Properties 04/27/05 173,680 108.23 188 187
World Financial Properties 11/08/02 208,426 106.25 221 225
Zurich Capital Trust I 01/10/03 370,000 94.40 349 401
------------
25,537
============
Emerging Markets -- 0.5%
Far EasTone Telecommunications Co., Ltd. GDR 01/12/05 11,000 17.74 195 202
Holcim Ecuador SA GDR 07/24/96 10,500 12.67 133 320
Hyundai Motor Co. GDR 09/16/99 13,900 19.92 277 369
KT&G Corp. GDR 01/29/02 53,100 9.28 493 945
Samsung Electronics Co., Ltd. GDR 05/21/96 10,059 9.43 95 1,481
------------
3,317
============
Short Duration Bond Fund -- 3.2%
Allstate Financial Global Funding 01/31/05 4,080,000 95.82 3,909 3,858
Alter Moneta Receivables LLC 09/17/03 1,213,798 100.38 1,218 1,206
DG Funding Trust 11/04/03 219 10,537.12 2,308 2,368
GE Corporate Aircraft Financing LLC 10/05/04 827,616 100.00 828 828
HBOS Treasury Services PLC 09/11/03 1,000,000 99.87 999 986
HBOS Treasury Services PLC 01/06/04 900,000 100.00 900 901
HBOS Treasury Services PLC 11/05/04 2,000,000 99.93 1,999 1,969
Hyundai Auto Receivables Trust 09/18/02 335,806 100.00 336 335
Metropolitan Life Global Funding I 07/19/04 1,500,000 99.96 1,499 1,494
New York Life Global Funding 02/23/04 2,500,000 100.00 2,500 2,501
Nordstrom Private Label Credit Card Master
Note Trust 05/01/02 3,500,000 103.51 3,623 3,544
PBG Equipment Trust 06/13/01 972,760 103.63 1,008 979
Principal Life Global Funding I 06/03/04 2,000,000 102.84 2,057 2,034
Provident Auto Lease ABS Trust 08/20/03 187,414 103.48 194 190
</Table>
186 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND -- % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
------------------------------------------------------------------------------------------------------------------------------
Providian Gateway Master Trust 11/16/04 1,200,000 99.94 1,199 1,184
Railcar Leasing LLC 06/11/03 1,000,000 116.75 1,167 1,088
SACO I, Inc. 09/30/04 1,735,057 100.00 1,735 1,735
SLM Student Loan Trust 03/05/04 3,000,000 101.87 3,056 2,902
Susquehanna Auto Lease Trust 11/19/03 869,347 99.72 867 864
Susquehanna Auto Lease Trust 03/24/05 2,000,000 100.00 2,000 2,011
TIAA Global Markets 10/26/04 3,625,000 103.44 3,750 3,684
USAA Capital Corp. 09/29/04 595,000 103.15 614 598
Verizon Wireless Capital LLC 02/02/04 1,400,000 99.99 1,400 1,400
------------
38,659
============
</Table>
Notes to Financial Statements 187
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
SHAREHOLDER REQUESTS FOR OTHER INFORMATION -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
A description of the policies and procedures that the Fund has adopted to
determine how to vote proxies relating to portfolio securities is available (i)
without charge, upon request, by calling the Fund at (800) 787-7354, and (ii) on
the Securities and Exchange Commission's website at www.sec.gov. Information on
how the Funds voted proxies relating to portfolio securities during the 12 month
period ended June 30, 2004 is available at www.russell.com and on the Securities
and Exchange Commission's website at www.sec.gov.
The Funds will file their complete schedule of investments with the Securities
and Exchange Commission for the first and third quarters of each fiscal year on
Form N-Q. The Funds' Form N-Q is available (i) without charge, upon request, by
calling the Fund at (800) 787-7354, (ii) at www.russell.com, (iii) on the
Securities and Exchange Commission's website at www.sec.gov, and (iv) the
Securities and Exchange Commission's public reference room.
188 Shareholder Requests for Other Information
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS (UNAUDITED)
- --------------------------------------------------------------------------------
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
The Board of Trustees, including all of the Independent Trustees, last
considered and approved the continuation of the advisory agreement with FRIMCo
and the portfolio management contract (together, the "investment advisory
agreements") with each Money Manager of the Funds at a meeting held on February
23, 2005. During the course of a year, the Trustees received a wide variety of
materials regarding the investment performance of the Funds, sales and
redemptions of the Funds' shares, and the management of the Funds by FRIMCo. In
preparation for the annual review, the Board, with the advice and assistance of
independent counsel, also received and considered (1) information and reports
prepared by FRIMCo relating to the services provided by FRIMCo (and its
affiliates) to the Funds, including information requested by the Trustees, and
(2) information received from an independent, nationally recognized provider of
investment company information comparing the performance of each of the Funds
and its operating expenses over various periods of time with other peer funds
("Comparable Funds") not managed by FRIMCo believed by the provider to be
generally comparable in investment objectives and size to the Funds
(collectively, the "Agreement Renewal Information").
Prior to voting, the Independent Trustees reviewed the proposed continuance of
the investment advisory agreements with management and independent counsel and
received a memorandum from independent counsel discussing the legal standards
for their consideration of the proposed continuances. The Independent Trustees
also reviewed the proposed continuance in a private session with independent
counsel at which no representatives of FRIMCo or management were present. The
discussion below reflects both of these reviews.
In evaluating the advisory agreement with FRIMCo and the portfolio management
contracts with the Money Managers of the Funds, the Board considered that the
Funds, in employing a manager-of-managers method of investment, operate 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. All Funds have multiple
Money Managers.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the investment advisory agreement for determining, implementing and
maintaining the investment program for each Fund. Assets of each Fund have been
allocated among multiple Money Managers.
FRIMCo is responsible for selecting Money Managers for each Fund and for
determining allocations and reallocations of assets among the Money Managers.
Each Money Manager for a 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 FRIMCo in accordance with the Fund's
applicable investment objective, policies and restrictions (each, a "segment").
FRIMCo is responsible for communicating performance expectations and evaluations
to each Money Manager; supervising compliance by each Money Manager with each
Fund's investment objectives and policies; authorizing Money Managers to engage
in certain investment strategies for a 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, FRIMCo is
responsible for recommending to the Board the restructuring of Fund segments and
additions of new Money Managers or replacements of existing Money Managers at
any time when, based on FRIMCo's research and analysis, such actions are
appropriate. FRIMCo may develop specific 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 a Fund in a
complementary manner. Therefore, FRIMCo's selection of Money Managers is made
not only on the basis of performance considerations but anticipated
compatibility with other Money Managers in the same Fund. The performance of
individual Money Managers for a Fund may reflect the roles assigned to them by
FRIMCo in the Fund's investment activities and any constraints placed by FRIMCo
upon their selection of portfolio securities. In light of the foregoing, the
overall performance of each Fund over appropriate periods reflects in great part
the performance of FRIMCo in designing the Fund's investment program,
structuring Fund segments, selecting an effective Money Manager for each segment
with a style 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 also considered that the prospectuses for the Funds emphasize to
investors FRIMCo's role as the principal investment manager for each Fund,
rather than the investment selection role of the Funds' Money Managers, and
describe the manner in which the Funds operate so that investors may take the
information into account when deciding to purchase shares of any such Fund.
Basis for Approval of Investment Advisory Contracts 189
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
In addition to these general factors relating to the manager of managers
structure of the Funds, the Trustees considered, with respect to each Fund,
various specific factors on the basis of the Agreement Renewal Information in
evaluating renewal of the advisory agreement with FRIMCo, including the
following:
1. The nature, scope and quality of the services provided to the Fund by FRIMCo;
2. The advisory fee paid by the Fund to FRIMCo and the fact that it encompasses
all investment advisory fees paid by the Fund, including the fees for any Money
Managers of such Fund;
3. Information provided by FRIMCo as to other fees and benefits received by
FRIMCo or its affiliates from the Fund, including any administrative, transfer
agent, cash management and securities lending fees, soft dollar arrangements and
commissions in connection with portfolio securities transactions;
4. Information provided by FRIMCo as to investment advisory fees paid by
Comparable Funds;
5. Information provided by FRIMCo as to expenses incurred by the Fund;
6. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from each Fund; and
7. The importance of supporting quality, long-term service by FRIMCo to help
achieve the Fund's investment performance, including the continuing need of
FRIMCo to retain and attract qualified investment and service professionals to
serve the Funds.
On the basis of the information received, the Board, in respect of each Fund,
found the advisory fees charged and costs and expenses incurred by FRIMCo to be
fair and reasonable; after giving effect to waivers and/or reimbursements; and
considering the composition of the Comparable Funds, the relative performance
and expense ratio of the Fund were comparable to those of peer funds; FRIMCo's
methodology of allocating expenses of operating funds in the complex was
reasonable; and FRIMCo's profitability with respect to the Fund was reasonable
in light of the nature, scope and quality of the services provided by FRIMCo.
The Board considered for each Fund whether economies of scale have been realized
and whether the fees for such Fund appropriately reflect or should be revised to
reflect any such economies. In its deliberations, the Board noted its findings
reached at a meeting held on December 6, 2004 that the investment advisory fees
for each Fund appropriately reflect any economies of scale realized by that
Fund. Its findings at the earlier meeting were based upon information and
analyses prepared by FRIMCo, including information as to variability of Money
Manager investment advisory fees and other factors associated with the manager
of managers structure employed by most Funds relevant to the Board's
deliberations, and took into consideration the Funds' rising costs of compliance
with applicable laws, rules and regulations.
The Trustees considered that fees payable to FRIMCo by institutional clients
with investment objectives similar to those of the Funds are lower, and may, in
some cases, be substantially lower, than the rates paid by the Funds. FRIMCo
reviewed with the Trustees the differences in the scope of services it provides
to institutional clients and the Funds. For example, institutional clients have
fewer administrative needs than the Funds. It was further noted that since the
Funds must constantly issue and redeem their shares, they are more difficult to
manage than institutional accounts, where assets are relatively stable.
Accordingly, the Trustees did not regard these fee differences as relevant to
their deliberations.
The Board also considered the special expertise of FRIMCo with respect to the
manager of managers structure of the Funds and the likelihood that, at the
current expense ratio of each such Fund, there would be no acceptable
alternative investment managers to replace FRIMCo on comparable terms given the
need to conduct the manager of managers, multi-style strategy of such Fund
selected by its shareholders in purchasing their shares.
With respect to the evaluation of the terms of portfolio management contracts
with Money Managers, the Board received and considered information from FRIMCo
reporting for each Money Manager, among other things, the Money Manager's
performance over various periods; FRIMCo's assessment of the performance of each
Money Manager; any significant business relationships between the Money Manager
and Funds, FRIMCo or FRIMCo's affiliates; and FRIMCo's recommendation to retain
the Money Manager at the current fee rate, to retain the Money Manager at a
reduced fee rate or to terminate the Money Manager. FRIMCo recommended that each
Money Manager be retained at its current fee rate. FRIMCo advised the Board that
it does not regard Money Manager profitability as relevant to its evaluation of
the investment advisory agreements with Money Managers because the willingness
of Money Managers to serve in such capacity depends upon arm's-length
negotiations with FRIMCo; FRIMCo is aware of the fees charged by Money Managers
to other clients; and FRIMCo believes that the fees agreed upon with Money
Managers are
190 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
fair and reasonable in light of the anticipated quality of investment advisory
services to be rendered. The Board accepted FRIMCo's explanation in light of the
Board's findings as to the fairness and reasonableness of the aggregate
investment advisory fees paid by each Fund and the fact that each Money
Manager's fee is paid by FRIMCo.
Based substantially upon FRIMCo's recommendations together with the information
received from FRIMCo in support of its recommendations, the Board concluded that
the fees paid to the Money Managers of each Fund were fair and reasonable in
light of the quality of the investment advisory services provided and that
continuation of the portfolio management agreement with each Money Manager of
each Fund was in the interests of shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the investment advisory agreement with FRIMCo or, other than FRIMCo's
recommendation, the portfolio management agreement with any Money Manager that
was all-important or controlling and each Trustee attributed different weights
to the various factors considered. The Trustees evaluated all information
available to them on a Fund-by-Fund basis and their determinations were made in
respect of each Fund.
At a meeting held on March 24, 2005, the Trustees received proposals from FRIMCo
to effect certain Money Manager changes for the International Fund; and at a
meeting held on May 17, 2005 received proposals from FRIMCo to effect certain
Money Manager changes for the Equity II and Select Growth Funds. In the case of
each such Fund, the Trustees approved the terms of the proposed portfolio
management agreements with the successor Money Manager(s) based substantially
upon FRIMCo's recommendation; its explanation as to the lack of relevance of
profitability to the evaluation of portfolio management agreements with Money
Managers; and its belief that the proposed investment advisory fees for the
successor Money Manager(s) would be fair and reasonable in light of the
anticipated quality of investment advisory services to be rendered. The Trustees
also considered their findings at the February 23, 2005 meeting as to the
fairness and reasonableness of the aggregate investment advisory fees paid by
each affected Fund, and the fact that the aggregate investment advisory fees
paid by such Fund would not increase as a result of the implementation of any
proposed Money Manager change because each Money Manager's investment advisory
fee is paid by FRIMCo.
At the meeting held on May 17, 2005, the Trustees also received a proposal from
FRIMCo to manage directly approximately 5% of the assets of the Equity I Fund (a
"Participating Fund") utilizing a "select holdings strategy" pursuant to the
terms of the Advisory Agreement between the Fund and FRIMCo. Under this
strategy, FRIMCo analyzes the stocks purchased for a Participating Fund by each
of the Fund's Money Managers to identify particular stocks that are concurrently
overweighted by two or more of the Money Managers. FRIMCo uses a proprietary
model to rank these stocks. Based on this ranking, FRIMCo will purchase
additional shares of certain stocks for the Participating Fund. The strategy is
designed to increase the Participating Fund's exposure to stocks that are
collectively viewed as attractive by multiple Money Managers to the
Participating Fund. Implementation of this strategy includes periodic
rebalancing of the Participating Fund's holdings. The Trustees received and
considered information from FRIMCo regarding the potential enhancements to the
Participating Fund's performance based upon FRIMCo's limited experience in
employing the same strategy for other types of investment accounts under its
management. The Trustees also considered that FRIMCo would not be required to
pay investment advisory fees to a Money Manager with respect to assets for which
the select holdings strategy is utilized and that the profits derived by FRIMCo
generally and from the Participating Fund consequently may increase
incrementally. The Board, however, considered FRIMCo's advice that it will pay
certain Money Managers additional fees for providing information and other
services in connection with the select holdings strategy and expects to incur
additional costs in implementing and carrying out the select holdings strategy;
the limited amount of assets that would be managed directly by FRIMCo pursuant
to the select holdings strategy; the fact that the aggregate investment advisory
fees paid by the Participating Fund would not increase as a result of the
implementation of the select holdings strategy; and its findings at the meeting
held on February 23, 2005 that the aggregate fees payable by the Participating
Fund are fair and reasonable. Based upon the Agreement Renewal Information
received from FRIMCo at the meeting held on February 23, 2005 and information
concerning implementation of the select holdings strategy received from FRIMCo
at the meetings held on February 23, 2005 and May 17, 2005, the Board in the
case of the Participating Fund accepted FRIMCo's select holdings strategy
proposal, concluding in doing so that the investment advisory fees paid to
FRIMCo by such Fund under its advisory agreement with FRIMCo continue to be fair
and reasonable in light of the nature and anticipated quality of the investment
advisory services to be rendered by FRIMCo.
Basis for Approval of Investment Advisory Contracts 191
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Frank Russell
Investment Company ("FRIC"), which has 34 funds, and Russell Investment Funds
("RIF"), which has five funds. Each of the trustees is a trustee of both FRIC
and RIF. The first table provides information for trustees who are interested
trustees. The second table provides information for the independent trustees.
The third table provides information for the trustees emeritus. The fourth table
provides information for the officers.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
*Lynn L. Anderson, Trustee since Appointed until - Vice Chairman, FRC 39 - Trustee, The
Born April 22, 1987 successor is - Chairman of the Board, FRIC and RIF SSgA Funds
1939 duly elected - CEO, Russell Fund (investment
and qualified Distributors, Inc. company)
909 A Street (broker-dealer "RFD"))
Tacoma, Washington - President and Chairman of the Board,
98402-1616 SSgA Funds (investment
company)
- Chairman of the Board, FRTC
- Until July 2004, Director,
Frank Russell Investments
(Ireland) Limited (Irish
limited company) and Frank
Russell Investments (Cayman)
Ltd. (manager of variable
capital investment
companies)
- Until October 2002,
President and CEO, FRIC and
RIF
- Until January 2005, Chairman
of the Board, RFD and FRIMCo
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
*Michael J.A. Trustee Since Appointed until - Chairman of the Board, FRC 39 None
Phillips, 2002 successor is - 1990-2003, President, FRC
Born January 20, duly elected - 1993-2003, CEO, FRC
1948 and qualified. - Trustee, FRIC and RIF
- Director, FRTC; Frank
909 A Street Russell Investments (Suisse)
Tacoma, Washington S.A. (global investment
98402-1616 services); Frank Russell
Company Limited (consultant
to institutional investors
in Europe and the UK)
- Chairman of the Board and President,
Russell 20-20 Association;
and Frank Russell
Investments (Delaware), Inc.
(general partner in various
limited partnerships
("FRIDI"))
- Until 2004, Director,
Russell Investment Group
Pty. Limited (consultant to
superannuation funds in
Australia); and Frank
Russell Japan Co., Ltd.
(consultant to institutional
investors in Japan)
- Director, Harold LeMay
Museum (classic car museum)
- Advisory board member,
University of Washington,
Tacoma (educational
institution)
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Each of Messrs. Anderson and Phillips is also an officer and/or director of
one or more an affiliates of FRIC and RIF and is therefore an interested
trustee.
192 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - 1996 to present, President, 39 None
Born October 15, 1984 successor is Anderson Management Group
1931 duly elected LLC (private investments
and qualified consulting)
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee WM Group
Born January 22, 2000 successor is Blake, P.S. (accounting of Funds
1954 duly elected services) (investment
and qualified company);
909 A Street - Director, Avista
Tacoma, Washington Corp
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 - Director, Gold
Born June 6, 1946 2003 successor is Vice President and Chief Banc
duly elected Financial Officer, Waddell & Corporation,
909 A Street and qualified Reed Financial, Inc. Inc.
Tacoma, Washington - 2003, Retired
98402-1616 - 2001-2003, Vice President
and Chief Financial Officer,
Janus Capital Group Inc.
- 1979-2001, Audit and
Accounting Partner,
PricewaterhouseCoopers LLP
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jonathan Fine, Trustee since Appointed until - President and Chief 39 None
Born July 8, 1954 2004 successor is Executive Officer, United
duly elected Way of King County, WA
909 A Street and qualified - 1996-2000, Chief Executive
Tacoma, Washington Officer, Seattle/King County
98402-1616 Chapter of the American Red
Cross
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee since Appointed until - Retired since 1995 39 None
Born October 6, 1984 successor is
1930 duly elected
and qualified
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - Currently, President, 39 None
Tennison, Jr., 2000 successor is Simpson Investment Company
Born December 21, duly elected and several additional
1955 and qualified subsidiary companies,
including Simpson Timber
909 A Street Company, Simpson Paper
Tacoma, Washington Company and Simpson Tacoma
98402-1616 Kraft Company
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 193
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2000, Arbitrator,
1943 duly elected The American Arbitration
and qualified Association Commercial Panel
909 A Street - 1995 to 1999, Hearing
Tacoma, Washington Officer, University of
98402-1616 Washington
- 1987 to 2002, Director,
Smith Barney Fundamental
Value Fund
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 39 None
Jr., and Chairman resignation or Russell Company (investment
Born July 3, 1932 Emeritus since removal consultant to institutional
1999 investors ("FRC")); and
909 A Street FRIMCo
Tacoma, Washington - Chairman Emeritus, FRIC and
98402-1616 RIF; Frank Russell
Securities, Inc.
(broker-dealer and
investment advisor ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment advisor)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 39 None
Born December 1, since 2003 - Trustee of FRIC and RIF
1919 Until 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 39 None
Born June 8, 1925 since 2004 - Trustee of FRIC and RIF
Until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 39 None
Born May 5, 1926 since 2004 - Trustee of FRIC and RIF
Until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
194 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
with Fund and Term Principal Occupation(s)
Name, Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------------------------------------------------
Cheryl Wichers, Chief Compliance Until removed - Chief Compliance Officer, FRIC
Born December 16, 1966 Officer since by Trustees - Chief Compliance Officer, RIF
2005 - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2003, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Annual and - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive until successor - Chairman of the Board, President and CEO, FRIMCo
Officer since is chosen and - Chairman of the Board and President, RFD and Russell
909 A Street 2004 qualified by Insurance Agency, Inc. (insurance agency ("RIA"))
Tacoma, Washington Trustees - Until 2004, Managing Director of Individual Investor
98402-1616 Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- 1998 to 2000, Representative Director, Frank Russell
Company, Ltd. (asset manager in Japan)
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Annual and - Treasurer and Chief Accounting Officer, FRIC and RIF
Born November 26, 1963 Chief Accounting until successor - Director, Funds Administration, FRIMCo, FRTC and RFD
Officer since is chosen and - Treasurer and Principal Accounting Officer, SSgA
909 A Street 1998 qualified by Funds
Tacoma, Washington Trustees
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Thomas F. Hanly, Chief Investment Until removed - Chief Investment Officer, FRIC, RIF, FRC, FRTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, FRIMCo and RFD
2004 - Director, Frank Russell International Services Co.,
909 A Street Inc. (provide services to U.S. personnel secunded to
Tacoma, Washington overseas enterprises ("FRISCo"))
98402-1616 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
RIF
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 195
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2005
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
with Fund and Term Principal Occupation(s)
Name, Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary and Annual and - Secretary and General Counsel, FRIC, RIF, FRIMCo,
Born October 8, 1941 General Counsel until successor FRTC, and RFD
since 1994 is chosen and - Secretary, General Counsel and Managing Director of
909 A Street qualified. Law and Government Affairs, FRC
Tacoma, Washington - Director, Secretary and General Counsel, Frank
98402-1616 Russell Capital Inc. (investment advisor); Russell
Real Estate Advisors, Inc. (real estate investment
advisor)
- Director and Secretary, Russell 20-20 Association;
RIA; A Street Investment Associates, Inc. (real
estate leasing); FRIDI; and FRISCo
- Director and Assistant Secretary, Frank Russell
Company Limited and Russell Systems Limited (limited
company)
- Director, FRS, Russell Investment Group Pty. Ltd.;
Frank Russell Japan Co., Ltd. (holding company);
Frank Russell Investment Company Plc Frank Russell
Institutional Funds Plc, Frank Russell Multi-Manager
Funds plc; Frank Russell Investment Company II plc,
Frank Russell Investment Company III plc, Russell
Alternative Investment Fund plc, and Russell
Diversified Alternatives Fund (each, an investment
company); Frank Russell Asset Management (Cayman) LLC
(general partner of limited partnerships); Russell
Investment Group Limited (institutional consultant);
Russell Investment Management Ltd. (institutional
investment management); Russell Investment Group
Private Limited (investment and fund management
advisory services); and Frank Russell Investments
(Ireland) Ltd.
- Statutory Auditor, Frank Russell Company, Ltd. (asset
management and consulting)
- --------------------------------------------------------------------------------------------------------------------------
</Table>
196 Disclosure of Information about Fund Directors
INSTITUTIONAL FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Lynn L. Anderson
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Lee C. Gingrich
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, PhD
William E. Baxter
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer (effective May 17, 2005)
Thomas F. Hanly, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Karl J. Ege, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Allan Forbes Building
150 Newport Avenue AFB35
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF APRIL 30, 2005
Equity I Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
Ark Asset Management Co., Inc., New, York, NY
Institutional Capital Corporation, Chicago, IL
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Marsico Capital Management, LLC, Denver, CO
MFS Institutional Advisors, Inc., Boston, MA
Montag & Caldwell, Inc., Atlanta, GA
Schneider Capital Management Corporation, Wayne, PA
Suffolk Capital Management, LLC, New York, NY
Turner Investment Partners, Inc., Berwyn, PA
Equity II Fund
CapitalWorks Investment Partners, LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Gould Investment Partners LLC, Berwyn, PA
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Nicholas-Applegate Capital Management LLC, San Diego, CA
Roxbury Capital Management, LLC, Santa Monica, CA
TimesSquare Capital Management, LLC, New York, NY
Equity Q Fund
Aronson + Johnson + Ortiz, LP, Philadelphia, PA
Franklin Portfolio Associates, LLC, Boston, MA
Goldman Sachs Asset Management, L.P., New York, NY
Jacobs Levy Equity Management, Inc., Florham Park, NJ
International Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
AQR Capital Management, LLC, New York, NY
Axiom International Investors LLC, Greenwich, CT
Fidelity Management & Research Company, Boston, MA
Marvin & Palmer Associates, Inc., Wilmington, DE
MFS Institutional Advisors, Inc., Boston, MA
Mondrian Investment Partners Limited, London, England
The Boston Company Asset Management, LLC, Boston, MA
Wellington Management Company, LLP, Boston, MA
Emerging Markets Fund
Alliance Capital Management L.P., which acts as money manager to the Fund
through its Bernstein Investment Research and Management Unit, New York, NY
Arrowstreet Capital, Limited Partnership, Cambridge, MA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
T. Rowe Price International, Inc., Baltimore, MD
Wells Capital Management Inc., San Francisco, CA
Manager, Money Managers and Service Providers 197
INSTITUTIONAL FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
Real Estate Securities Fund
AEW Management and Advisors, L.P., Boston, MA
Heitman Real Estate Securities LLC, Chicago, IL
INVESCO Institutional (N.A.), Inc., which acts as a money manager to the Fund
through its INVESCO Real Estate division, Dallas, TX
RREEF America L.L.C., Chicago, IL
Short Duration Bond Fund
Merganser Capital Management L.P., Boston, MA
Pacific Investment Management Company LLC, Newport Beach, CA
STW Fixed Income Management, Carpinteria, CA
Fixed Income I Fund
Bear Stearns Asset Management Inc., New York, NY
Lehman Brothers Asset Management LLC, Chicago, IL
Pacific Investment Management Company LLC, Newport Beach, CA
Western Asset Management Company, Pasadena, CA
Fixed Income III Fund
Bear Stearns Asset Management Inc., New York, NY
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Morgan Stanley Investment Management Inc., West Conshohocken, PA
Pacific Investment Management Company LLC, Newport Beach, CA
Select Growth Fund
Ark Asset Management Co., Inc., New York, NY
CapitalWorks Investment Partners, LLC, San Diego, CA
Fuller & Thaler Asset Management, Inc., San Mateo, CA
Transamerica Investment Management, LLC, Denver, CO
Turner Investment Partners, Inc., Berwyn, PA
Select Value Fund
DePrince, Race & Zollo, Inc., Orlando, FL
Iridian Asset Management LLC, Westport, CT
MFS Institutional Advisors, Inc., Boston, MA
Netols Asset Management, Inc., Mequon, WI
Systematic Financial Management, L.P., Teaneck, NJ
This report is prepared from the books and records of the Funds and is submitted
for the general information of shareholders and is not authorized for
distribution to prospective investors unless accompanied or preceded by an
effective Prospectus. Nothing herein contained is to be considered an offer of
sale or a solicitation of an offer to buy shares of Frank Russell Investment
Company. Such offering is made only by Prospectus, which includes details as to
offering price and other material information.
198 Manager, Money Managers and Service Providers
(FRANK RUSSELL LOGO)
FRANK RUSSELL INVESTMENT COMPANY
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
36-08-068 (1 04/05)
www.russell.com
ITEM 2. CODE OF ETHICS [ANNUAL REPORT ONLY]
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. [ANNUAL REPORT ONLY]
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. [ANNUAL REPORT ONLY]
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. [ANNUAL REPORT ONLY]
ITEM 6. [INCLUDED IN ITEM 1]
ITEMS 7-9. [NOT APPLICABLE]
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no changes to the procedures by which shareholders may
recommend nominees to the Registrant's Board of Trustees that would
require disclosure herein.
ITEM 11. CONTROLS AND PROCEDURES
(a) Registrant's principal executive officer and principal financial
officer have concluded that Registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment Company Act
of 1940 (the "Act")) are effective, based on their evaluation of these
controls and procedures as of a date within 90 days of the date this
report is filed with the Securities and Exchange Commission.
(b) There were no significant changes in Registrant's internal controls
or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
ITEM 12. EXHIBIT LIST
(a) certification for principal executive officer of Registrant as
required by Rule 30a-2 under the Act and certification for principal
financial officer of Registrant as required by Rule 30a-2 under the Act.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FRANK RUSSELL INVESTMENT COMPANY
By: /s/ Greg J. Stark
-----------------------------------------------------------------------------
Greg J. Stark
Principal Executive Officer and Chief Executive Officer
Date: June 17, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Greg J. Stark
-----------------------------------------------------------------------------
Greg J. Stark
Principal Executive Officer and Chief Executive Officer
Date: June 17, 2005
By: /s/ Mark E. Swanson
-----------------------------------------------------------------------------
Mark E. Swanson
Principal Financial Officer, Principal Accounting Officer and Treasurer
Date: June 17, 2005