---------------------------
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
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-03153
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: 253-572-9500
Date of fiscal year end: OCTOBER 31
Date of reporting period: November 1, 2005 to April 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS
2006 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, 2006
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.
* On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment Management
Company.
[Blank Page]
Frank Russell Investment Company
Money Market Funds
Semiannual Report
April 30, 2006 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Money Market Fund.................................................... 3
US Government Money Market Fund...................................... 8
Tax Free Money Market Fund........................................... 10
Notes to Schedules of Investments.................................... 18
Statement of Assets and Liabilities.................................. 19
Statement of Operations.............................................. 20
Statement of Changes in Net Assets................................... 22
Financial Highlights................................................. 24
Notes to Financial Statements........................................ 26
Basis for Approval of Investment Advisory Contracts.................. 32
Shareholder Requests for Additional Information...................... 35
Disclosure of Information about Fund Directors....................... 36
Manager, Money Managers and Service Providers........................ 41
</Table>
Frank Russell Investment Company - Money Market Funds.
Copyright (c) Russell Investment Group 2006. All rights reserved.
Russell Investment Group is a Washington, USA corporation, which operates
through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual
Life Insurance Company.
FUND OBJECTIVES, RISKS, CHARGES AND EXPENSES SHOULD BE CAREFULLY CONSIDERED
BEFORE INVESTING. A PROSPECTUS CONTAINING THIS AND OTHER IMPORTANT INFORMATION
MUST PRECEDE OR ACCOMPANY THIS MATERIAL. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
SECURITIES DISTRIBUTED THROUGH RUSSELL FUND DISTRIBUTORS, INC. MEMBER NASD, PART
OF RUSSELL INVESTMENT GROUP.
Effective July 1, 2006 Frank Russell Investment Company ("FRIC") will change its
name to Russell Investment Company. FRIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Frank Russell Investment Management Company
("FRIMCo"). Effective July 1, 2006 FRIMCo will change its name to Russell
Investment Management Company.
Russell Investment Group and Standard & Poor's Corporation are the owners of the
trademarks, service marks, and copyrights related to their respective indexes.
Index performance is not indicative of the performance of any specific
investment. Indexes are not managed and may not be invested in directly.
Performance quoted represents past performance and does not guarantee future
results. The investment return and principal value of an investment will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Current to the most recent month-end performance data may be
obtained by visiting www.russell.com/us/fundperformance.
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,021.20 $ 1,023.60
Expenses Paid During
Period* $ 1.20 $ 1.20
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.24%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,021.70 $ 1,024.10
Expenses Paid During
Period* $ 0.70 $ 0.70
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.14%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 33.2%
Bank of the West (E) 50,000 4.705 08/08/06 50,003
BNP Paribas (E) 60,000 4.890 05/18/07 60,000
Goldman Sachs Group, Inc. (E) 46,000 5.060 03/30/07 46,054
Goldman Sachs Group, LP (E)(A) 15,000 5.001 01/16/07 15,000
HSBC Finance Corp. (E) 70,000 4.985 06/22/06 70,008
HSBC Finance Corp. 6,812 7.200 07/15/06 6,853
HSBC Finance Corp. (E) 10,200 5.160 10/27/06 10,203
HSBC Finance Corp. 14,847 7.875 03/01/07 15,183
HSBC USA, Inc. 10,000 7.000 11/01/06 10,106
Merrill Lynch & Co., Inc. (E) 12,027 5.170 05/22/06 12,030
Merrill Lynch & Co., Inc. (E) 21,500 5.060 05/26/06 21,505
MetLife Insurance Company of Connecticut (E) 75,000 4.810 11/10/06 75,000
Metropolitan Life Global Funding (E)(A) 10,000 4.880 05/22/06 10,001
Metropolitan Life Global Funding (E) 34,500 4.987 03/16/07 34,530
Metropolitan Life Insurance Co. (E) 75,000 5.148 10/13/06 75,000
Morgan Stanley (E) 22,500 4.874 02/15/07 22,527
Morgan Stanley (E) 90,000 4.920 04/03/07 90,002
New York Life Insurance Co. (E) 35,000 4.830 05/17/06 35,000
New York Life Insurance Co. (E) 50,000 4.840 11/17/06 50,000
Presbyterian Homes & Services Series B2, weekly
demand (E) 17,024 4.880 12/01/28 17,024
Principal Life Global Funding I (E) 100,250 4.880 11/13/06 100,332
Principal Life Global Funding I (E) 7,000 5.178 01/12/07 7,006
Principal Life Income Funding (E) 50,000 4.700 05/10/06 50,000
Protective Life Insurance Co. (E) 50,000 4.924 11/23/06 50,000
Protective Life US Funding 40,720 5.875 08/15/06 40,914
SLM Corp. (E) 180,000 4.876 05/02/07 179,998
Tango Finance Corp. (E)(A) 65,000 4.830 01/09/07 64,996
------------
TOTAL CORPORATE BONDS AND NOTES (amortized cost
$1,219,275) 1,219,275
------------
MUNICIPAL BONDS - 0.8%
Illinois Health Facilities Authority Revenue -
Elmhurst,
weekly demand (E)(n) 27,300 4.820 01/01/28 27,300
------------
TOTAL MUNICIPAL BONDS (amortized cost $27,300) 27,300
------------
REGISTERED INVESTMENT COMPANY FUNDS - 0.0%
Merrill Lynch Premier Institutional Fund 361,495 361
Reserve Primary Fund Class 8 992 1
------------
TOTAL REGISTERED INVESTMENT COMPANY FUNDS
(amortized cost $362) 362
------------
LEGAL NOTES - 1.8%
Bear Stearns Master Note, daily demand (E) 65,000 65,000
------------
TOTAL LEGAL NOTES (amortized cost $65,000) 65,000
------------
</Table>
4 Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------
DOMESTIC CERTIFICATES OF DEPOSIT - 2.7%
Bank of the West 100,000 4.900 05/10/06 100,000
------------
TOTAL DOMESTIC CERTIFICATES OF DEPOSIT
(amortized cost $100,000) 100,000
------------
DOMESTIC COMMERCIAL PAPER - 48.2%
Banco Continental de Panama SA 13,000 4.600 05/24/06 12,962
Banco Continental de Panama SA 27,000 4.510 05/30/06 26,902
Banco Continental de Panama SA 12,500 4.790 06/01/06 12,448
Banco Continental de Panama SA 21,050 5.000 06/02/06 20,956
BTM Capital Corp. 46,500 4.690 05/01/06 46,500
BTM Capital Corp. 45,000 4.895 06/05/06 44,786
BTM Capital Corp. 5,000 4.920 06/05/06 4,976
Central American Bank For Economic Integration 18,000 4.660 05/08/06 17,984
Central American Bank For Economic Integration 25,000 4.760 05/30/06 24,904
Citigroup Funding Inc. 100,000 4.820 05/03/06 99,973
Citigroup Funding Inc. 75,000 4.840 05/04/06 74,970
Co-Op Association of Tractor Dealers - Series B 19,830 4.820 05/01/06 19,830
Co-Op Association of Tractor Dealers - Series B 9,827 4.640 05/08/06 9,818
Co-Op Association of Tractor Dealers - Series B 9,300 4.650 05/08/06 9,292
Co-Op Association of Tractor Dealers - Series B 16,215 4.750 05/12/06 16,191
Co-Op Association of Tractor Dealers - Series B 15,094 4.870 05/17/06 15,061
Co-Op Association of Tractor Dealers - Series B 8,620 4.460 05/22/06 8,598
Co-Op Association of Tractor Dealers - Series B 9,000 4.990 05/26/06 8,969
Co-Op Association of Tractor Dealers - Series B 10,210 4.600 06/12/06 10,155
Co-Op Association of Tractor Dealers - Series B 5,050 4.950 06/16/06 5,018
Co-Op Association of Tractor Dealers - Series B 7,780 5.000 08/08/06 7,673
Co-Op Association of Tractor Dealers - Series B 10,248 5.000 09/01/06 10,073
Co-Op Association of Tractor Dealers - Series B 5,466 5.000 09/05/06 5,370
Co-Op Association of Tractor Dealers - Series B 10,142 5.000 09/25/06 9,935
Co-Op Association of Tractor Dealers - Series B 8,325 5.020 09/29/06 8,150
Cullinan Finance Corp. 36,407 4.630 05/05/06 36,388
Cullinan Finance Corp. 17,200 4.880 05/11/06 17,177
Cullinan Finance Corp. 5,153 4.930 05/22/06 5,138
Cullinan Finance Corp. 23,104 4.930 05/24/06 23,031
Dealers Capital Access Trust 9,000 4.810 05/02/06 8,999
Dealers Capital Access Trust 5,086 4.650 05/08/06 5,081
Dealers Capital Access Trust 15,180 3.189 05/16/06 15,149
Dealers Capital Access Trust 5,620 4.830 05/17/06 5,608
Dealers Capital Access Trust 6,910 4.570 05/22/06 6,891
Dealers Capital Access Trust 22,849 4.860 05/24/06 22,778
Dealers Capital Access Trust 7,266 4.890 06/20/06 7,217
Dealers Capital Access Trust 11,227 4.980 07/12/06 11,115
Dealers Capital Access Trust 6,205 4.930 07/17/06 6,140
Eiffel Funding LLC 80,000 4.800 05/01/06 80,000
Fairway Finance 31,447 4.760 05/02/06 31,443
Falcon Asset Securitization Corp. 50,000 4.800 05/10/06 49,940
Galleon Capital Corp. 40,000 4.790 05/08/06 39,963
Giro Balanced Funding Corp. 30,000 4.850 05/12/06 29,955
Giro Balanced Funding Corp. 35,000 4.890 06/15/06 34,786
Giro Balanced Funding Corp. 30,000 5.000 07/17/06 29,679
Gotham Funding Corp. 10,000 4.790 05/04/06 9,996
</Table>
Money Market Fund 5
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------
Gotham Funding Corp. 20,000 4.800 05/09/06 19,979
Gotham Funding Corp. 55,000 4.880 05/15/06 54,896
Gotham Funding Corp. 40,000 4.860 05/25/06 39,870
HSBC Finance Corp. 50,000 4.800 05/02/06 49,993
Ivory Funding Corp. 17,160 4.660 05/09/06 17,142
Ivory Funding Corp. 10,983 4.940 06/19/06 10,909
Liquid Funding, Ltd. 60,000 4.940 05/24/06 59,811
Lockhart Funding LLC 20,000 4.630 05/01/06 20,000
Lockhart Funding LLC 15,000 4.760 05/03/06 14,996
Lockhart Funding LLC 58,000 4.790 05/03/06 57,984
Lockhart Funding LLC 48,500 4.950 05/22/06 48,360
Lockhart Funding LLC 40,000 4.980 05/24/06 39,873
Long Lane Master Trust IV 68,033 4.860 06/08/06 67,684
North America Timber Co. California LLC 50,898 5.000 07/13/06 50,382
Three Pillars Funding Corp. 75,000 4.870 05/05/06 74,959
Three Pillars Funding Corp. 6,490 4.850 05/15/06 6,478
Three Pillars Funding Corp. 53,505 4.870 05/15/06 53,404
Three Pillars Funding Corp. 33,292 4.950 05/24/06 33,187
Victory Receivables Corp. 25,000 4.780 05/01/06 25,000
Victory Receivables Corp. 18,412 4.970 05/24/06 18,354
------------
TOTAL DOMESTIC COMMERCIAL PAPER (amortized cost
$1,771,229) 1,771,229
------------
EURODOLLAR CERTIFICATES OF DEPOSIT - 1.6%
Societe Generale (Cayman) 60,289 4.830 05/01/06 60,289
------------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT
(amortized cost $60,289) 60,289
------------
UNITED STATES GOVERNMENT AGENCIES - 0.2%
AID to INH Portugal Guaranteed Note, weekly
demand
(LIBOR Floater) (E)(B) 7,500 5.423 12/01/17 7,574
------------
TOTAL UNITED STATES GOVERNMENT AGENCIES
(amortized cost $7,574) 7,574
------------
YANKEE CERTIFICATES OF DEPOSIT - 11.5%
Bank of Tokyo-Mitsubishi UFJ Ltd. (NY) 10,000 4.800 05/10/06 10,000
Bank of Tokyo-Mitsubishi UFJ Ltd. (NY) 50,000 4.820 05/10/06 50,000
Bank of Tokyo-Mitsubishi UFJ Ltd. (NY) 50,000 4.840 05/11/06 50,000
Calyon New York 50,000 5.130 03/08/07 50,000
Calyon New York 66,500 5.250 04/03/07 66,500
Deutsche Bank AG (NY) 60,000 4.400 09/29/06 60,000
Deutsche Bank AG (NY) 60,000 4.540 10/16/06 60,000
Deutsche Bank AG (NY) 35,000 5.015 03/12/07 35,000
Royal Bank of Scotland PLC 40,000 4.725 11/27/06 39,982
------------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (amortized
cost $421,482) 421,482
------------
</Table>
6 Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
VALUE
$
- --------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.0%
(cost $3,672,511) (+) 3,672,511
OTHER ASSETS AND LIABILITIES, NET - 0.0% (664)
------------
NET ASSETS - 100.0% 3,671,847
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Corporate Bonds and Notes 33.2
Municipal Bonds 0.8
Registered Investment Company Funds --*
Legal Notes 1.8
Domestic Certificates of Deposit 2.7
Domestic Commercial Paper 48.2
Eurodollar Certificates of Deposit 1.6
United States Government Agencies 0.2
Yankee Certificates of Deposit 11.5
---------------
Total Investments 100.0
Other Assets and Liabilities, Net --*
---------------
100.0
===============
</Table>
* Less than .05% of net assets.
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, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,018.50 $ 1,021.62
Expenses Paid During
Period* $ 3.20 $ 3.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.64%
(representing the six month period annualized), 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, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCIES - 6.6%
Federal Farm Credit Bank Note (E) 1,350 4.853 06/20/06 1,350
Federal Home Loan Bank (E) 600 4.716 06/02/06 600
------------
TOTAL INVESTMENTS - 6.6% (amortized cost $1,950) 1,950
------------
REPURCHASE AGREEMENTS - 93.6%
Agreement with Barclays and The Bank of New York (Tri-party)
of
$27,612 dated April 28, 2006 at 4.670% to be repurchased
at
$27,623 on May 1, 2006, collateralized by:
$28,585 par US Government Agency Note, valued at $28,166 27,612
------------
TOTAL REPURCHASE AGREEMENTS (identified cost $27,612) 27,612
------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS - 100.2%
(cost $29,562) (+) 29,562
OTHER ASSETS AND LIABILITIES, NET - (0.2%) (57)
------------
NET ASSETS - 100.0% 29,505
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- ---------------------------------------------------------------------------------------
United States Government Agencies 6.6
Repurchase Agreements 93.6
---------------
Total Investments and Repurchase Agreements 100.2
Other Assets and Liabilities, Net (0.2)
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
US Government Money Market Fund 9
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,013.10 $ 1,022.12
Expenses Paid During
Period* $ 2.70 $ 2.71
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.54%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
10 Tax Free Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM TAX-EXEMPT OBLIGATIONS - 99.4%
Colorado - 1.6%
Colorado Health Facilities Authority Revenue Bonds, weekly
demand (E)(u) 500 3.950 10/01/30 500
Colorado Housing & Finance Authority Revenue Bonds, weekly
demand (E) 500 3.830 02/15/28 500
------------
1,000
------------
Delaware - 2.0%
Delaware State Economic Development Authority Revenue Bonds,
weekly demand (E)(u) 300 3.820 05/01/15 300
Delaware State Economic Development Authority Revenue Bonds,
weekly demand (E)(u) 450 3.900 12/01/15 450
New Castle County Delaware Revenue Bonds, weekly demand
(E)(u) 500 3.830 08/01/31 500
------------
1,250
------------
Florida - 2.3%
Florida Housing Finance Corp. Revenue Bonds, weekly demand
(E) 1,400 3.830 07/01/35 1,400
------------
Georgia - 5.6%
De Kalb County Housing Authority Revenue Bonds, weekly
demand (E) 400 3.860 12/01/07 400
De Kalb County Housing Authority Revenue Bonds, weekly
demand (E) 1,800 3.830 06/15/25 1,800
Fulton County Housing Authority Revenue Bonds, weekly demand
(E)(u) 1,000 3.830 10/01/25 1,000
Gwinnett County Development Authority Revenue Bonds, weekly
demand (E)(u) 65 3.800 03/01/17 65
Smyrna Housing Authority Revenue Bonds, weekly demand (E) 200 3.790 06/01/25 200
------------
3,465
------------
Illinois - 8.3%
Illinois Educational Facilities Authority Revenue Bonds,
weekly demand (E)(u) 100 3.870 11/01/25 100
Illinois Finance Authority Revenue Bonds, weekly demand
(E)(u) 845 3.820 02/01/19 845
Illinois Finance Authority Revenue Bonds, weekly demand
(E)(u) 750 3.920 04/01/21 750
Illinois Finance Authority Revenue Bonds, weekly demand
(E)(u) 600 3.900 08/01/26 600
Illinois Finance Authority Revenue Bonds, weekly demand (E) 125 3.820 07/01/33 125
Illinois Finance Authority Revenue Bonds, weekly demand (E) 600 3.820 02/01/35 600
Oakbrook Terrace Illinois Revenue Bonds, weekly demand
(E)(u) 2,100 3.400 12/01/25 2,100
------------
5,120
------------
Indiana - 2.6%
Indiana Health Facility Financing Authority Revenue Bonds,
weekly demand (E)(u) 100 3.470 10/01/32 100
Logansport Indiana Revenue Bonds, weekly demand (E)(u) 1,500 3.870 01/01/08 1,500
------------
1,600
------------
Iowa - 0.2%
Iowa Higher Education Loan Authority Revenue Bonds, weekly
demand (E)(u) 100 3.470 10/01/33 100
------------
</Table>
Tax Free Money Market Fund 11
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Kansas - 5.1%
City of Salina Kansas Revenue Bonds, weekly demand (E)(u) 1,350 4.000 12/01/14 1,350
Lenexa Kansas Revenue Bonds, weekly demand (E) 1,090 3.830 02/01/23 1,090
Prairie Village Kansas Revenue Bonds, weekly demand (E) 250 3.830 11/01/30 250
Wyandotte County-Kansas City Unified Government General
Obligation Unlimited Notes, weekly demand 480 3.730 04/01/07 480
------------
3,170
------------
Kentucky - 4.8%
County of Jefferson Kentucky Revenue Bonds, weekly demand
(E)(u) 1,700 3.820 10/01/19 1,700
Hardin County Water District No. 1 Revenue Bonds, weekly
demand (E)(u) 1,270 3.850 09/01/22 1,270
------------
2,970
------------
Maryland - 1.0%
County of Montgomery Maryland, monthly demand (E) 641 3.550 04/01/14 641
------------
Massachusetts - 2.7%
Massachusetts Development Finance Agency Revenue Bonds,
weekly demand (E) 850 3.550 07/01/29 850
Massachusetts Housing Finance Agency Revenue Bonds, weekly
demand (E) 795 3.830 06/01/34 795
------------
1,645
------------
Michigan - 9.4%
Lansing Economic Development Corp. Revenue Bonds, semiannual
demand (E)(u) 1,405 4.100 05/01/15 1,405
Michigan Higher Education Facilities Authority Revenue
Bonds, weekly demand (E)(u) 2,000 3.840 03/01/31 2,000
Michigan State Hospital Finance Authority Revenue Bonds,
weekly demand (E) 1,200 3.520 11/01/40 1,200
Northville Township Economic Development Corp. Revenue
Bonds, weekly demand (E)(u) 500 3.720 05/01/14 500
Oakland County Economic Development Corp. Revenue Bonds,
semiannual demand (E)(u) 685 3.500 08/01/15 685
------------
5,790
------------
Minnesota - 4.7%
Arden Hills Minnesota Revenue Bonds, weekly demand (E)(u) 100 3.470 09/01/29 100
City of Minneapolis Minnesota Revenue Bonds, weekly demand
(E)(u) 500 3.920 05/01/26 500
Mankato Minnesota Revenue Bonds, weekly demand (E)(u) 500 3.470 11/01/15 500
Roseville Minnesota Revenue Bonds, weekly demand (E)(u) 475 3.870 11/01/22 475
St. Paul Housing & Redevelopment Authority Revenue Bonds,
weekly demand (E)(u) 200 3.870 05/01/22 200
St. Paul Housing & Redevelopment Authority Revenue Bonds,
weekly demand (E)(u) 1,155 3.950 08/01/25 1,155
------------
2,930
------------
Missouri - 4.9%
Missouri Public Utilities Commission Revenue Notes 1,000 4.000 09/15/06 1,003
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E)(u) 100 3.870 08/15/28 100
</Table>
12 Tax Free Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E)(u) 200 3.870 10/01/31 200
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E)(u) 100 3.870 10/01/32 100
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E) 300 3.810 05/15/34 300
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E)(u) 1,300 3.870 12/01/35 1,300
------------
3,003
------------
New Jersey - 2.9%
Borough of Riverdale New Jersey General Obligation Unlimited
Notes 429 4.500 11/03/06 431
Garwood Board of Education Notes 550 4.500 03/14/07 554
New Jersey Economic Development Authority Revenue Bonds,
weekly demand (E)(u) 800 3.920 08/01/14 800
------------
1,785
------------
New York - 1.3%
Nassau County Industrial Development Agency Revenue Bonds,
weekly demand (E)(u) 500 3.800 12/01/36 500
New York City Municipal Water Finance Authority Revenue
Bonds, weekly demand (E) 300 3.820 06/15/36 300
------------
800
------------
North Carolina - 2.4%
North Carolina Capital Facilities Finance Agency Revenue
Bonds, weekly demand (E)(u) 1,500 3.820 11/01/25 1,500
------------
Ohio - 13.3%
American Municipal Power-Ohio, Inc. 835 3.350 11/16/06 835
American Municipal Power-Ohio, Inc. General Obligation, Ltd.
Notes 1,100 3.200 10/05/06 1,100
American Municipal Power-Ohio, Inc. General Obligation, Ltd.
Notes 475 3.450 12/07/06 475
American Municipal Power-Ohio, Inc. Revenue Notes 385 3.600 03/30/07 385
Clermont County Ohio Revenue Bonds, semiannual demand (E)(u) 1,330 3.250 05/01/12 1,330
Defiance City School District General Obligation Unlimited
Notes 1,000 4.500 01/25/07 1,008
Stark County Ohio Revenue Bonds, semiannual demand (E)(u) 1,370 3.500 09/01/15 1,370
Stark County Ohio Revenue Bonds, weekly demand (E)(u) 1,595 3.500 09/15/16 1,595
Westerville Ohio General Obligation, Ltd. Notes 125 4.000 09/21/06 125
------------
8,223
------------
Pennsylvania - 3.9%
City of Philadelphia Pennsylvania Revenue Bonds, weekly
demand (E)(u) 100 3.790 06/15/23 100
Langhorne Manor Boro Higher Education Authority Revenue
Bonds, weekly demand (E)(u) 600 3.440 10/01/32 600
Sayre Health Care Facilities Authority Revenue Bonds, weekly
demand (E)(u) 1,700 3.860 12/01/20 1,700
------------
2,400
------------
</Table>
Tax Free Money Market Fund 13
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 0.8%
Puerto Rico Highway & Transportation Authority Revenue
Bonds, annual demand (E)(u) 500 3.810 07/01/36 500
------------
Rhode Island - 1.7%
Rhode Island Economic Development Corp. Revenue Bonds,
weekly demand (E)(u) 1,065 3.840 07/01/23 1,065
------------
South Carolina - 1.9%
Greenville County School District Revenue Bonds, weekly
demand (E) 200 3.840 12/01/28 200
Three Rivers Solid Waste Authority Revenue Notes, weekly
demand 1,000 3.875 06/01/06 1,001
------------
1,201
------------
Tennessee - 4.4%
Knox County Industrial Development Board Revenue Bonds,
weekly demand (E)(u) 1,600 3.700 12/01/14 1,600
Wilson County Industrial Development Board, weekly demand 1,100 3.820 07/01/26 1,100
------------
2,700
------------
Vermont - 0.6%
Vermont Educational & Health Buildings Financing Agency
Revenue Bonds, weekly demand (E)(u) 390 3.870 06/01/27 390
------------
Virginia - 0.8%
Virginia Public Building Authority Revenue Bonds, weekly
demand (E)(u) 500 3.840 08/01/19 500
------------
Washington - 3.5%
Washington State Housing Finance Commission Revenue Bonds,
weekly demand (E)(u) 1,230 3.910 08/01/24 1,230
Washington State Housing Finance Commission Revenue Bonds,
weekly demand (E)(u) 200 3.930 01/01/30 200
Washington State Housing Finance Commission Revenue Bonds,
weekly demand (E)(u) 700 3.790 06/01/32 700
------------
2,130
------------
West Virginia - 1.6%
Marshall County West Virginia Revenue Bonds, weekly demand
(E) 1,000 3.940 03/01/26 1,000
------------
Wisconsin - 5.1%
Milwaukee Redevelopment Authority Revenue Bonds, weekly
demand (E)(u) 500 3.920 07/01/21 500
Wisconsin Health & Educational Facilities Authority Revenue
Bonds, weekly demand (E)(u) 200 3.870 11/01/17 200
Wisconsin Health & Educational Facilities Authority Revenue
Bonds, weekly demand (E)(u) 1,225 3.810 11/01/25 1,225
</Table>
14 Tax Free Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Wisconsin Health & Educational Facilities Authority Revenue
Bonds, weekly demand (E)(u) 1,000 3.820 04/01/28 1,000
Wisconsin Health & Educational Facilities Authority Revenue
Bonds, weekly demand (E)(u) 200 3.870 12/01/32 200
------------
3,125
------------
TOTAL INVESTMENTS - 99.4% (amortized cost $61,403) (+) 61,403
OTHER ASSETS AND LIABILITIES, NET - 0.6% 375
------------
NET ASSETS - 100% 61,778
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 15
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (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
Industrial Revenue Bond 20
Non-Profit 16
Multi-Family Housing Bond 14
Education (colleges and universities) 12
Hospital 9
Nursing Home 9
Bond Anticipation Note 8
Cashflow Note 3
Water and Sewer 3
Airport Revenue 2
Annual Appropriation 1
Local General Obligation 1
Miscellaneous Revenue 1
School District 1
---
100
===
</Table>
See accompanying notes which are an integral part of the financial statements.
16 Tax Free Money Market Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
Colorado 1.6
Delaware 2.0
Florida 2.3
Georgia 5.6
Illinois 8.3
Indiana 2.6
Iowa 0.2
Kansas 5.1
Kentucky 4.8
Maryland 1.0
Massachusetts 2.7
Michigan 9.4
Minnesota 4.7
Missouri 4.9
New Jersey 2.9
New York 1.3
North Carolina 2.4
Ohio 13.3
Pennsylvania 3.9
Puerto Rico 0.8
Rhode Island 1.7
South Carolina 1.9
Tennessee 4.4
Vermont 0.6
Virginia 0.8
Washington 3.5
West Virginia 1.6
Wisconsin 5.1
---------------
Total Investments 99.4
Other Assets and Liabilities, Net 0.6
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 17
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(E) Adjustable or floating rate security. Rate shown reflects rate in effect
at period end.
(u) Bond is insured by a guarantor.
(B) Illiquid security.
(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.
(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.
(A) Illiquid and restricted security.
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."
18 Notes to Schedules of Investments
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (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 $ 3,672,511 $ 1,950 $ 61,403
Repurchase agreements at cost which approximates value -- 27,612 --
Cash -- 71 218
Receivables:
Interest 14,193 15 345
Investments sold -- 3 --
Prepaid expenses 115 1 --
-------------------- -------------------- --------------------
Total assets 3,686,819 29,652 61,966
-------------------- -------------------- --------------------
LIABILITIES
Payables:
Due to custodian 13 -- --
Accrued fees to affiliates 334 10 17
Other accrued expenses 148 34 40
Dividends 14,477 103 131
-------------------- -------------------- --------------------
Total liabilities 14,972 147 188
-------------------- -------------------- --------------------
NET ASSETS $ 3,671,847 $ 29,505 $ 61,778
==================== ==================== ====================
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 25 $ 13 $ --
Accumulated net realized gain (loss) (175) -- --
Shares of beneficial interest 36,720 295 618
Additional paid-in capital 3,635,277 29,197 61,160
-------------------- -------------------- --------------------
NET ASSETS $ 3,671,847 $ 29,505 $ 61,778
==================== ==================== ====================
NET ASSET VALUE, per share:
Net asset value per share: Class A* $ 1.00 $ -- $ --
Class A - Net assets $ 29,379,139 $ -- $ --
Class A - Shares outstanding ($.01 par value) 29,379,155 -- --
Net asset value per share: Class S* $ 1.00 $ 1.00 $ 1.00
Class S - Net assets $ 3,642,468,198 $ 29,505,104 $ 61,778,380
Class S - Shares outstanding ($.01 par value) 3,642,610,743 29,502,514 61,772,514
- ---------------------------------------------------------------------------------------------------------------------------------
</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 19
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
MONEY MARKET US GOVERNMENT TAX FREE
AMOUNTS IN THOUSANDS FUND MONEY MARKET FUND MONEY MARKET FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 76,075 $ 693 $ 1,013
-------------------- -------------------- --------------------
EXPENSES
Advisory fees 3,371 32 64
Administrative fees 843 8 16
Custodian fees 297 13 28
Distribution fees - Class A 12 -- --
Transfer agent fees 169 26 32
Professional fees 52 10 10
Registration fees 74 10 18
Trustees' fees 39 -- 1
Printing fees 48 1 3
Miscellaneous 29 2 2
-------------------- -------------------- --------------------
Expenses before reductions 4,934 102 174
Expense reductions (2,533) -- (2)
-------------------- -------------------- --------------------
Net expenses 2,401 102 172
-------------------- -------------------- --------------------
Net investment income (loss) 73,674 591 841
-------------------- -------------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments (3) -- --
Capital contribution from Adviser -- 74 132
-------------------- -------------------- --------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 73,671 $ 665 $ 973
==================== ==================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
20 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, 2006 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005
- -----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS
Net investment income
(loss) $ 73,674 $ 83,888
Net realized gain (loss) (3) (3)
Capital contribution
from Adviser -- --
------------------- --------------------
Net increase (decrease) in net
assets from operations 73,671 83,885
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A (500) (292)
Class S (73,174) (83,253)
------------------- --------------------
Net decrease in net assets
from distributions (73,674) (83,545)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease)
in net assets from
share transactions 511,848 196,981
------------------- --------------------
TOTAL NET INCREASE (DECREASE)
IN NET ASSETS 511,845 197,321
NET ASSETS
Beginning of period 3,160,002 2,962,681
------------------- --------------------
End of period $ 3,671,847 $ 3,160,002
=================== ====================
Undistributed
(overdistributed) net
investment income included
in net assets $ 25 $ 25
</Table>
See accompanying notes which are an integral part of the financial statements.
22 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, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
- -------------------------------------------------------------------------------------------------------
$ 591 $ 955 $ 841 $ 1,903
-- (23) -- --
74 -- 132 --
------------------------------ ------------------- ------------------- -------------------
665 932 973 1,903
------------------------------ ------------------- ------------------- -------------------
-- -- -- --
(591) (955) (841) (1,889)
------------------------------ ------------------- ------------------- -------------------
(591) (955) (841) (1,889)
------------------------------ ------------------- ------------------- -------------------
(4,876) (20,293) (3,574) (75,566)
------------------------------ ------------------- ------------------- -------------------
(4,802) (20,316) (3,442) (75,552)
34,307 54,623 65,220 140,772
------------------------------ ------------------- ------------------- -------------------
$ 29,505 $ 34,307 $ 61,778 $ 65,220
============================== =================== =================== ===================
$ 13 $ 13 $ -- $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 23
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 NET REALIZED TOTAL FROM DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ---------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
Class A
April 30, 2006 * 1.0000 .0220 -- .0220 (.0220)
October 31, 2005 1.0000 .0271 -- .0271 (.0271)
October 31, 2004 1.0000 .0108 -- .0108 (.0108)
October 31, 2003 (1) 1.0000 .0051 -- .0051 (.0051)
- ---------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006 * 1.0000 .0218 -- .0218 (.0218)
October 31, 2005 1.0000 .0280 -- .0280 (.0280)
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)
- ---------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT MONEY MARKET FUND
Class S
April 30, 2006 * 1.0000 .0185 -- .0185 (.0185)
October 31, 2005 1.0000 .0234 (.0005) .0229 (.0229)
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)
- ---------------------------------------------------------------------------------------------------------------------------------
TAX FREE MONEY MARKET FUND
Class S
April 30, 2006 * 1.0000 .0130 -- .0130 (.0130)
October 31, 2005 1.0000 .0179 -- .0179 (.0179)
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)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
* For the six months ended April 30, 2006 (Unaudited).
(1) For the period April 21, 2003 (commencement of operations) to October 31,
2003.
(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 Frank Russell Investment
Management Company as the investment adviser and transfer agent.
See accompanying notes which are an integral part of the financial statements.
24 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)
- -------------------------------------------------------------------------------------------------
(.0220) 1.0000 2.12 29,379 .24
(.0271) 1.0000 2.74 14,410 .25
(.0108) 1.0000 1.08 3,989 .25
(.0051) 1.0000 .59 682 .26
- -------------------------------------------------------------------------------------------------
(.0218) 1.0000 2.17 3,642,468 .14
(.0280) 1.0000 2.82 3,145,592 .15
(.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
- -------------------------------------------------------------------------------------------------
(.0185) 1.0000 1.85 29,505 .64
(.0229) 1.0000 2.31 34,307 .55
(.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
- -------------------------------------------------------------------------------------------------
(.0130) 1.0000 1.31 61,778 .54
(.0179) 1.0000 1.80 65,220 .41
(.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
- -------------------------------------------------------------------------------------------------
<Caption>
% %
RATIO OF EXPENSES RATIO OF NET
TO AVERAGE INVESTMENT INCOME
NET ASSETS, TO AVERAGE
GROSS(C) NET ASSETS(C)(D)
- ---
.39 4.31
.40 2.91
.40 1.18
5.24 .96
- ---
.29 4.37
.30 2.83
.30 1.16
.31 1.21
.29 1.84
.29 4.78
- ---
.64 3.72
.56 2.22
.47 .81
.48 .87
.45 1.73
.63 4.43
- ---
.54 2.62
.42 1.74
.37 .84
.36 .95
.35 1.52
.40 3.17
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 25
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company" or "FRIC") 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 (the "Board") to issue an
unlimited number of shares of beneficial interest at a $.01 par value per
share.
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment
Management Company.
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 4 p.m. Eastern time or as of the close of the NYSE,
whichever is earlier.
Investment Transactions
Securities transactions are recorded on a trade date basis, which in most
instances is the same as the settlement date. Realized gains and losses from
securities transactions, if any, 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 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.
26 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Expenses
The Funds will pay their own expenses other than those expressly assumed by
Frank Russell Investment Management Company ("FRIMCo" or "Adviser"). 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 enter into repurchase agreements. The US Government Money
Market Fund currently invests primarily in repurchase agreements. A
repurchase agreement is an agreement under which the Fund acquires a fixed
income security (generally issued by the US government or an agency thereof,
a banker's acceptance or a certificate of deposit) from a commercial bank,
broker or dealer and simultaneously agrees to resell such security to the
seller at an agreed upon price and date (normally the next business day). The
resale price reflects an agreed upon interest rate effective for the period
the security is held by the Fund and is unrelated to the interest rate on the
security. The securities acquired by the Fund constitute collateral for the
repurchase obligation. In these transactions, the securities acquired by the
Fund (including accrued interest earned thereon) must have a total value in
excess of the value of the repurchase agreement and must be held by a
custodian bank until repurchased. In addition, FRIMCo will monitor the Fund's
repurchase agreement transactions generally and will evaluate the
creditworthiness of any bank, broker or dealer party to a repurchase
agreement with the Fund. Subject to the overall limitations described in
"Illiquid Securities", a Fund will not invest more than 10% of its net assets
(taken at current market value) in repurchase agreements maturing in more
than seven days.
The use of repurchase agreements involves certain risks. One risk is the
seller's ability to pay the agreed-upon repurchase price on the repurchase
date. If the seller defaults, the Fund may incur costs in disposing of the
collateral, which would reduce the amount realized thereon. If the seller
seeks relief under bankruptcy laws, the disposition of the collateral may be
delayed or limited. For example, if the other party to the agreement becomes
insolvent and subject to liquidation or reorganization under bankruptcy or
other laws, a court may determine that the underlying securities are
collateral for a loan by the Fund not within its control and therefore the
realization by the Fund on such collateral may be automatically stayed.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities and may be deemed an unsecured creditor
of the other party to the agreement.
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
Adviser 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 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 Investment Company's Money Market Fund, US Government
Money Market Fund, and Tax Free Money Market Fund. As of April 30, 2006,
$1,834,633,103, $2,047,000, and $7,005,848, respectively, represents
investment by other Investment Company Funds not presented herein and
investment by the Russell Investment Funds. The Russell Investment Funds
employ the same investment adviser as FRIC. In addition, a portion of the
collateral
Notes to Financial Statements 27
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
received from the Investment Company's securities lending program in the
amount of $1,000,000,000 is invested in the Money Market Fund.
The advisory and administrative fees are based upon the average daily net
assets of the Funds and the rates specified in the table below, are payable
monthly and total $3,466,798 and $866,729 respectively, for the period ended
April 30, 2006.
<Table>
<Caption>
ANNUAL RATE
-------------------------------
ADVISER 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 Adviser has contractually agreed to waive 0.15% of its 0.25% combined
advisory and administrative fees, at least until February 28, 2007, for the
Money Market Fund. The amount of such waiver for the period ended April 30,
2006 was $2,528,146. The adviser does not have the ability to recover amounts
waived for the period ended April 30, 2006 or previous periods.
In April 2006, the Adviser made a capital contribution of $73,653 and
$132,365 to U.S. Government Money Market Fund and Tax Free Money Market Fund,
respectively, to offset capital loss carryforwards and ensure the maintenance
of a $1.00 per share NAV on a going forward basis.
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, 2006, the
Funds' custodian fees were reduced by the following amounts under these
arrangements:
<Table>
Money Market $ 5,633
Tax Free Money Market 2,216
</Table>
Transfer Agent
FRIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, FRIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Funds. FRIMCo retains a portion
of this fee for its services provided to the Fund and pays the balance to
unaffiliated agents who assist in providing these services. Total fees for
the Funds presented herein for the period ended April 30, 2006 were $226,650.
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 for the six months ended April 30, 2006
were as follows:
<Table>
<Caption>
US GOVERNMENT TAX FREE
MONEY MARKET MONEY MARKET MONEY MARKET
------------------------------------------------------------------------------------------------------
Advisory fees $ 153,137 $ 4,911 $ 9,327
Administration fees 153,352 1,228 2,332
Distribution fees 2,331 -- --
Transfer agent fees 17,813 3,684 4,622
Trustee fees 7,553 229 683
------------------- ------------------- -------------------
$ 334,186 $ 10,052 $ 16,964
=================== =================== ===================
</Table>
28 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company, 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 independent Trustees a retainer of
$52,000 per year, $6,500 ($5,000 prior to January 1, 2006) 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, Nominating
and Governance Committee meeting or Investment 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 Audit Committee
Chair was paid a fee of $12,000 per year and the Nominating and Governance
Committee chair and the Investment Committee chairs were each paid a fee of
$6,000 per year. The chairperson of the Board receives an additional $52,000
per year.
4. FEDERAL INCOME TAXES
The Funds may have 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. At October
31, 2005, available capital loss carryforwards and expiration dates are as
follows:
<Table>
<Caption>
10/31/06 10/31/07 10/31/08 10/31/09
----------------------------------------------------------------------------------------------------------------
Money Market $ -- $ -- $ 90,626 $ 35,378
US Government Money Market 762 1,782 8,484 15,034
Tax Free Money Market -- -- 68,310 59,628
<Caption>
-------------------------------------
Money Market
US Government Money Market
Tax Free Money Market
</Table>
<Table>
<Caption>
10/31/10 10/31/11 10/31/12 10/31/13 TOTALS
-----------------------------------------------------------------------------------------------------------------------
Money Market $ -- $ 43,223 $ -- $ 3,147 $ 172,374
US Government Money Market 2,688 17,267 4,791 22,845 73,653
Tax Free Money Market 19 -- 4,408 -- 132,365
</Table>
Notes to Financial Statements 29
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
5. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the period ended April 30, 2006 and the year ended
October 31, 2005 were as follows:
<Table>
<Caption>
CLASS A CLASS S
ON A CONSTANT DOLLAR BASIS ON A CONSTANT DOLLAR BASIS
------------------------------------- -------------------------------------
2006 2005 2006 2005
----------------- ----------------- ----------------- -----------------
Money Market
Proceeds from shares sold $ 33,506 $ 26,116 $ 10,661,554 $ 20,243,631
Proceeds from reinvestment of
distributions 398 230 10,627 9,854
Payments for shares redeemed (18,934) (15,925) (10,175,303) (20,066,925)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) $ 14,970 $ 10,421 $ 496,878 $ 186,560
================= ================= ================= =================
US Government Money Market
Proceeds from shares sold $ -- $ -- $ 38,504 $ 89,516
Proceeds from reinvestment of
distributions -- -- 494 761
Payments for shares redeemed -- -- (43,874) (110,570)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) $ -- $ -- $ (4,876) $ (20,293)
================= ================= ================= =================
Tax Free Money Market
Proceeds from shares sold $ -- $ -- $ 177,944 $ 336,138
Proceeds from reinvestment of
distributions -- -- 514 1,190
Payments for shares redeemed -- -- (182,032) (412,894)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) $ -- $ -- $ (3,574) $ (75,566)
================= ================= ================= =================
</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
Investment Company is charged an annual commitment fee of .125% on the
average daily unused amount of the aggregate commitment, which is allocated
among each of the Investment Company's 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 20, 2006 and may be renewed at that time. The Funds did
not have any drawdowns for the six months ended April 30, 2006.
7. RECORD OWNERSHIP
As of April 30, 2006, the following table includes shareholders of record
with greater than 10% of the total outstanding shares of each respective
Fund:
<Table>
<Caption>
FUNDS # OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Money Market 1 27.3
US Government Money Market 2 43.0
Tax Free Money Market 2 48.7
</Table>
8. RESTRICTED SECURITIES
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.
30 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
A Fund may invest a portion of its net assets not to exceed 10% 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. Restricted securities are generally considered to be illiquid.
The following table lists restricted securities held by a Fund that are
illiquid. The following table does not include (1) securities deemed liquid
by FRIMCo or a money manager pursuant to Board approved policies and
procedures or (2) illiquid securities that are not restricted securities as
designated on the Fund's Schedule of Investments.
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND - % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
-----------------------------------------------------------------------------------------------------------------------------
Money Market Fund - 2.5%
Goldman Sachs Group, LP 09/11/02 15,000,000 100.00 15,000 15,000
Metropolitan Life Global Funding 08/23/05 10,000,000 100.00 10,001 10,001
Tango Finance Corp. 12/08/05 65,000,000 100.00 64,996 64,996
--------------
89,997
==============
</Table>
Illiquid securities may be priced by the Funds using fair value procedures
approved by the Board of Trustees.
Notes to Financial Statements 31
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
(the "FRIMCo Agreement") and the portfolio management contract with each Money
Manager of the Funds (collectively, the "portfolio management contracts") at a
meeting held on April 18, 2006. During the course of a year, the Trustees
receive 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 Independent Trustees,
with the advice and assistance of independent counsel, also requested and the
Board 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 Independent Trustees; (2) information (the
"Third-Party Information") received from an independent, nationally recognized
provider of investment company information comparing the performance of each of
the Funds and their respective 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 (3) an analysis of the Third-Party Information prepared by FRIMCo
(the "FRIMCo Analysis" and, with the other information requested by the
Independent Trustees or provided by FRIMCo in connection with the Board's
consideration of the portfolio management contracts, the "Agreement Renewal
Information") addressing, among other things, performance and expense
differentials between certain Funds and their respective Comparable Funds. The
Independent Trustees also received a memorandum from independent counsel
discussing the legal standards for their consideration of the proposed
continuances.
On April 17, 2006, the Independent Trustees met in person to review the
Agreement Renewal Information in a private session with independent counsel at
which no representatives of FRIMCo or management were present. At the April 18
meeting of the Board of Trustees, the Board, including the Independent Trustees,
reviewed the proposed continuance of the FRIMCo Agreement and the portfolio
management contracts with management and independent counsel to the Independent
Trustees. Following this review, but prior to voting, the Independent Trustees
again met in a private session with their independent counsel to evaluate
additional information and analysis received from FRIMCo and management at the
Board meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, 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. FRIMCo exercises investment discretion over Fund assets that FRIMCo
determines not to allocate to the money managers by selecting the individual
portfolio securities for those portions of assets. FRIMCo may also directly
manage portions of a Fund during transitions between money managers. FRIMCo has
engaged a Money Manager for the Tax Free Money Market Fund and FRIMCo currently
manages the Money Market and US Government Money Market Funds.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the FRIMCo 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 to the Money Manager; supervising compliance by the Money Manager
with the Fund's investment objective and policies; authorizing the Money Manager
to engage in certain investment strategies for the 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
the Money Manager intended to capitalize on the strengths of that Money Manager
or, if there are multiple Money Managers for the Tax Free Money Market Fund, to
coordinate the investment activities of Money Managers for that 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 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 Tax Free Money Market
Fund over appropriate periods
32 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
reflects in great part the performance of FRIMCo in designing the Fund's
investment program, structuring Fund segments if multiple Money Managers are
being employed, selecting an effective Money Manager for the Fund or, if there
are multiple Money Managers, 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 Tax Free Money Market Fund
and other public disclosures emphasize 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.
The Board also considered the special expertise of FRIMCo with respect to the
manager-of-managers structure of the Tax Free Money Market 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 strategy of the Fund selected
by shareholders in purchasing their shares.
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 in evaluating renewal of the
FRIMCo Agreement, 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, in the case of the
Tax Free Money Market Fund, 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 expenses incurred by the Fund; and
5. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from each Fund.
At the April 18 Board meeting, FRIMCo and management reviewed the reasonableness
of the Funds' investment advisory fees.
On the basis of the Agreement Renewal Information, including the FRIMCo
Analysis, and other information previously received by the Board from FRIMCo
during the course of the year or presented at the Board meeting by FRIMCo, the
Board, in respect of each Fund, found the advisory fee charged by FRIMCo to be
reasonable in light of the nature, scope and quality of the services provided to
the Funds, after giving effect to waivers and/or reimbursements and considering
differences in the composition and investment strategies of its Comparable
Funds. The Board also determined that the relative expense ratio of each Fund
was comparable to those of Comparable Funds; FRIMCo's methodology of allocating
expenses of operating funds in the complex was reasonable; and FRIMCo's
profitability with respect to each Fund was not excessive in light of the
nature, scope and quality of the services provided by FRIMCo.
The Board concluded that the performance of the Funds supported continuation of
the FRIMCo Agreement, again based upon the Agreement Renewal Information,
including the FRIMCo Analysis, and other information previously received by the
Board from FRIMCo during the course of the year or presented at the Board
meeting by FRIMCo. In evaluating performance, the Board considered each Fund's
absolute performance and its performance relative to appropriate benchmarks and
indices and its Comparable Funds.
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 February 28, 2006 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, in the case of the Tax Free Money Market
Fund, information as to variability of Money Manager investment advisory fees
and other factors associated with the manager-of-managers structure employed by
that Fund.
Basis for Approval of Investment Advisory Contracts 33
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
In voting to approve the continuation of the FRIMCo Agreement on its current
terms and conditions for each Fund, the Board, after considering the foregoing
and other relevant factors, determined that continuation of the FRIMCo Agreement
was in the best interests of the Funds and their respective shareholders.
With respect to the evaluation of the terms of portfolio management contract
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 FRIMCo or Russell Fund Distributors,
Inc., the Funds' underwriter; 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 for the Tax Free Money Market Fund be retained at its current fee rate.
FRIMCo has advised the Board that it does not regard Money Manager profitability
as relevant to its evaluation of the portfolio management contracts 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 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 aggregate
investment advisory fees paid by the Tax Free Money Market 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 Manager of the Tax Free Money Market Fund were
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 best interests of the Fund
and its shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the FRIMCo Agreement or, other than FRIMCo's recommendation, the portfolio
management agreement with the Money Manager for the Tax Free Money Market Fund
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.
34 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
As a courtesy to our Fund shareholders, a complete unaudited schedule of
investments is made available generally no later than 60 days after the end of
the first and third quarters of each fiscal year. These reports are available
(i) free of 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.
The Board has delegated to FRIMCo, as FRIC's investment adviser, the primary
responsibility for monitoring, evaluating and voting proxies solicited by or
with respect to issuers of securities in which assets of the Funds may be
invested. FRIMCo has established a proxy voting committee ("Committee") and has
adopted written proxy voting policies and procedures ("P&P") and proxy voting
guidelines ("Guidelines"). The Funds maintain a Portfolio Holdings Disclosure
Policy that governs the timing and circumstances of disclosure to shareholders
and third parties of information regarding the portfolio investments held by a
Fund. A description of the P&P, Guidelines and Portfolio Holdings Disclosure
Policy are contained in the Funds' Statement of Additional Information ("SAI").
The SAI is available (i) free of charge, upon request, by calling the Fund at
(800) 787-7354, (ii) at www.russell.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Shareholder Requests for Additional Information 35
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2006 (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
- ----------------------------------------------------------------------------------------------------------------------------
*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"))
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
**Thaddas L. Trustee since Appointed until - Senior Vice President, Larco 39 None
Alston, 2006 successor is Investments, Ltd.
Born April 7, duly elected
1945 and qualified
909 A Street
Tacoma,
Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - President, Anderson 39 None
Born October 15, 1984 successor is Management Group LLC
1931 duly elected (private investments
Chairman of the and qualified consulting)
909 A Street Nominating and - February 2002 to June 2005,
Tacoma, Washington Governance Appointed until Lead Trustee, FRIC and RIF
98402-1616 Committee since successor is
2006 duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Phillips is also an officer and/or director of one or more affiliates of
FRIC and RIF and is therefore an interested trustee.
** Mr. Alston was elected to the Board of Trustees effective May 1, 2006.
36 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee, WM
Born January 22, 2000 successor is Blake, P.S. (accounting Group of Funds
1954 duly elected services) (investment
Chairperson and qualified - Director and Chairman of the company);
909 A Street since 2005 Audit Committee, Avista - Director, Avista
Tacoma, Washington Annual Corp. Corp.
98402-1616 - Trustee and Chairman of the
Operations and Distribution
Committee, WM Group of Funds
- February 2002 to June 2005,
Chairman of the Audit
Committee, FRIC and RIF
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 None
Born June 6, 1946 2003 successor is Vice President and Chief
duly elected Financial Officer, Waddell &
909 A Street Chairman of and qualified Reed Financial, Inc.
Tacoma, Washington Audit Committee - 2003, Retired
98402-1616 since 2005 Appointed until - 2001-2003, Vice President
successor is and Chief Financial Officer,
duly elected Janus Capital Group Inc.
and qualified - 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
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 39 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected 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>
Mr. Michael Phillips is the Chairman of the Board of Frank Russell Company which
controls FRIMCo, the investment adviser of the Funds. He is also an Interested
Trustee of the Funds. On May 26, 2005, Mr. Phillips became a director of Simpson
Investment Company, a privately held company. Mr. Raymond P. Tennison, Jr., an
Independent Trustee of the Funds is the President of Simpson Investment Company.
Disclosure of Information about Fund Directors 37
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Jack Thompson, Trustee since Appointed until - September 2003 to present, 39 Director, Sparx
Born March 21, 1949 2005 successor is Independent Board Chair and Japan Fund
duly elected Chairman of the Audit
909 A Street and qualified Committee, Sparx Japan Fund
Tacoma, Washington - May 1999 to May 2003,
98402-1616 President, Chief Executive
Officer and Director, Berger
Financial Group, LLC
- May 1999 to May 2003,
President and Trustee,
Berger Funds
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2002, Director,
1943 duly elected Smith Barney Fundamental
Chairperson of and qualified Value Fund
909 A Street the Investment
Tacoma, Washington Committee since Appointed until
98402-1616 2006 successor is
duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
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 adviser ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
38 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 39 None
Born October 6, since 2006 - Trustee of FRIC and RIF
1930 until 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
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>
Disclosure of Information about Fund Directors 39
FRANK RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2002, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Until successor - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, FRIMCo
Officer since qualified by - Chairman of the Board, President and CEO, RFD
909 A Street 2004 Trustees - Chairman of the Board and President, Russell
Tacoma, Washington Insurance Agency, Inc. (insurance agency ("RIA"))
98402-1616 - Until 2004, Managing Director of Individual Investor
Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, FRIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, FRIMCo, FRTC and RFD
909 A Street 1998 Trustees - Treasurer and Principal Accounting Officer, SSgA
Tacoma, Washington Funds
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 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary and Until successor - General Counsel and Managing Director of Law and
Born October 8, 1941 General Counsel is chosen and Government Affairs, Secretary, FRC
since 1994 qualified by
909 A Street Trustees
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
40 Disclosure of Information about Fund Directors
MONEY MARKET FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, Ph.D.
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
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 JUNE 1, 2006
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.
Manager, Money Managers and Service Providers 41
(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
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment Management
Company expects to change its name to Russell Investment Management Company.
36-08-070 (1 04/06)
2006 SEMIANNUAL REPORT
CLASS A AND B SHARES:
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
APRIL 30, 2006
(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.
* On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment Management
Company.
[Blank Page]
Frank Russell Investment Company
Russell Multi-Manager Principal Protected Fund
Semiannual Report
April 30, 2006 (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
Investment Objective and Investment Strategy during the Guarantee
Period............................................................. 21
Basis for Approval of Investment Advisory Contracts.................. 22
Shareholder Requests for Additional Information...................... 25
Disclosure of Information about Fund Directors....................... 26
Manager, Money Managers and Service Providers........................ 31
</Table>
Frank Russell Investment Company - Multi-Manager Principal Protected Fund.
Copyright (c) Russell Investment Group 2006. All rights reserved.
Russell Investment Group is a Washington, USA corporation, which operates
through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual
Life Insurance Company.
FUND OBJECTIVES, RISKS, CHARGES AND EXPENSES SHOULD BE CAREFULLY CONSIDERED
BEFORE INVESTING. A PROSPECTUS CONTAINING THIS AND OTHER IMPORTANT INFORMATION
MUST PRECEDE OR ACCOMPANY THIS MATERIAL. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
SECURITIES DISTRIBUTED THROUGH RUSSELL FUND DISTRIBUTORS, INC. MEMBER NASD, PART
OF RUSSELL INVESTMENT GROUP.
Effective July 1, 2006 Frank Russell Investment Company ("FRIC") will change its
name to Russell Investment Company. FRIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Frank Russell Investment Management Company
("FRIMCo"). Effective July 1, 2006 FRIMCo will change its name to Russell
Investment Management Company.
Russell Investment Group and Standard & Poor's Corporation are the owners of the
trademarks, service marks, and copyrights related to their respective indexes.
Index performance is not indicative of the performance of any specific
investment. Indexes are not managed and may not be invested in directly.
Performance quoted represents past performance and does not guarantee future
results. The investment return and principal value of an investment will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Current to the most recent month-end performance data may be
obtained by visiting www.russell.com/us/fundperformance.
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,027.70 $ 1,014.38
Expenses Paid During
Period* $ 10.56 $ 10.49
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.10%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,024.30 $ 1,010.66
Expenses Paid During
Period* $ 14.30 $ 14.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.85%
(representing the six month period annualized), 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, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 38.7%
Auto and Transportation - 0.7%
Honda Motor Co., Ltd. - ADR 1,311 46
Union Pacific Corp. 1,213 111
United Parcel Service, Inc. Class B 2,656 215
------------
372
------------
Consumer Discretionary - 4.4%
Avon Products, Inc. 5,600 183
Cintas Corp. 5,034 211
Costco Wholesale Corp. 3,800 207
Federated Department Stores, Inc. 380 30
Gannett Co., Inc. 3,658 201
Home Depot, Inc. 6,723 268
InterActiveCorp (AE) 2,989 86
Kimberly-Clark Corp. 2,215 130
Nike, Inc. Class B 2,700 221
Tribune Co. 1,555 45
Wal-Mart Stores, Inc. 9,404 423
Waste Management, Inc. 5,070 190
------------
2,195
------------
Consumer Staples - 4.1%
Campbell Soup Co. 4,071 131
Clorox Co. 1,521 98
Coca-Cola Co. (The) 8,353 351
Coca-Cola Enterprises, Inc. 1,472 29
Diageo PLC - ADR 2,012 133
Kraft Foods, Inc. Class A 5,581 174
Kroger Co. (The) 5,767 117
PepsiCo, Inc. 6,050 352
Procter & Gamble Co. 11,199 652
------------
2,037
------------
Financial Services - 8.6%
ACE, Ltd. 939 52
Aflac, Inc. 6,618 315
American International Group, Inc. 6,634 433
Automatic Data Processing, Inc. 7,873 347
Bank of America Corp. 9,160 457
Bank of New York Co., Inc. (The) 5,223 184
Citigroup, Inc. 8,523 426
Commerce Bancorp, Inc. 914 37
Fannie Mae 1,236 62
Freddie Mac 918 56
JPMorgan Chase & Co. 3,885 176
Marshall & Ilsley Corp. 734 34
Metlife, Inc. 3,300 172
Mitsubishi UFJ Financial Group, Inc. - ADR 2,945 46
Morgan Stanley 4,847 312
Paychex, Inc. 5,003 202
PNC Financial Services Group, Inc. 1,538 110
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
State Street Corp. 2,700 176
SunTrust Banks, Inc. 376 29
Synovus Financial Corp. 6,140 172
US Bancorp 5,611 176
Wells Fargo & Co. 4,400 302
XL Capital, Ltd. Class A 617 41
------------
4,317
------------
Health Care - 5.1%
Abbott Laboratories 989 42
Baxter International, Inc. 3,226 122
Biomet, Inc. 4,800 178
Boston Scientific Corp. (AE) 3,036 71
GlaxoSmithKline PLC - ADR 1,617 92
Johnson & Johnson 8,421 494
Medco Health Solutions, Inc. (AE) 164 9
Medimmune, Inc. (AE) 1,383 43
Medtronic, Inc. 6,273 314
Merck & Co., Inc. 2,274 78
Novartis AG - ADR 2,917 168
Pfizer, Inc. 25,124 636
Schering-Plough Corp. 2,475 48
Teva Pharmaceutical Industries, Ltd. - ADR 1,336 54
Wyeth 4,675 228
------------
2,577
------------
Integrated Oils - 2.7%
BP PLC - ADR 411 30
Chevron Corp. 5,115 312
ConocoPhillips 3,875 259
Exxon Mobil Corp. 11,836 747
------------
1,348
------------
Materials and Processing - 2.2%
Barrick Gold Corp. 4,102 125
Fluor Corp. 1,112 103
International Paper Co. 5,796 211
Monsanto Co. 1,174 98
Newmont Mining Corp. 3,509 205
Praxair, Inc. 1,554 87
Sigma-Aldrich Corp. 4,070 279
------------
1,108
------------
Miscellaneous - 1.9%
3M Co. 3,040 260
Eaton Corp. 607 46
</Table>
4 Schedule of Investments
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
General Electric Co. 17,866 618
Honeywell International, Inc. 1,219 52
------------
976
------------
Other Energy - 1.0%
Apache Corp. 1,600 114
Baker Hughes, Inc. 1,231 100
El Paso Corp. 4,285 55
Schlumberger, Ltd. 3,215 222
------------
491
------------
Producer Durables - 2.0%
Boeing Co. 569 48
Caterpillar, Inc. 860 65
Deere & Co. 981 86
Diebold, Inc. 4,400 187
Dover Corp. 597 30
Emerson Electric Co. 2,210 188
Illinois Tool Works, Inc. 1,747 179
Lockheed Martin Corp. 207 16
Northrop Grumman Corp. 652 44
Pall Corp. 1,362 41
Parker Hannifin Corp. 1,620 131
------------
1,015
------------
Technology - 3.6%
Electronic Data Systems Corp. 4,173 113
General Dynamics Corp. 1,056 69
Hewlett-Packard Co. 3,478 113
Intel Corp. 15,921 318
International Business Machines Corp. 3,467 286
Linear Technology Corp. 7,700 273
Microsoft Corp. 14,431 349
Motorola, Inc. 3,206 68
Raytheon Co. 3,228 143
Sun Microsystems, Inc. (AE) 15,951 80
------------
1,812
------------
Utilities - 2.4%
Ameren Corp. 1,080 54
AT&T, Inc. 18,365 481
BellSouth Corp. 2,576 87
Comcast Corp. Special Class A (AE) 4,982 154
PG&E Corp. 2,073 83
Southern Co. (The) 6,680 215
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sprint Nextel Corp. 1,370 34
Verizon Communications, Inc. 3,240 107
------------
1,215
------------
TOTAL COMMON STOCKS
(cost $17,030) 19,463
------------
LONG-TERM DEBT OBLIGATIONS - 56.8%
United States Government Treasuries - 56.8%
United States Treasury
Principal Only STRIP
Zero coupon due 02/15/08 24,820 22,779
Zero coupon due 05/15/08 6,370 5,775
------------
TOTAL LONG-TERM DEBT OBLIGATIONS
(cost $29,054) 28,554
------------
SHORT-TERM INVESTMENTS - 4.7%
Frank Russell Investment Company
Money Market Fund 193,000 193
Frank Russell Investment Company
US Government Money Market Fund 2,047,000 2,047
United States Treasury Bills (c)(z)(sec.)
4.590% due 06/15/06 30 30
4.593% due 06/15/06 100 99
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,369) 2,369
------------
TOTAL INVESTMENTS - 100.2%
(identified cost $48,453) 50,386
OTHER ASSETS AND LIABILITIES,
NET - (0.2%) (84)
------------
NET ASSETS - 100.0% 50,302
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Schedule of Investments 5
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
United States Treasury 2 Year Notes
expiration date 06/06 (8) 1,630 (1)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (1)
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------------
Auto and Transportation 0.7
Consumer Discretionary 4.4
Consumer Staples 4.1
Financial Services 8.6
Health Care 5.1
Integrated Oils 2.7
Materials and Processing 2.2
Miscellaneous 1.9
Other Energy 1.0
Producer Durables 2.0
Technology 3.6
Utilities 2.4
Long-Term Debt Obligations 56.8
Short-Term Investments 4.7
---------------
Total Investments 100.2
Other Assets and Liabilities, Net (0.2)
---------------
100.0
===============
Futures Contracts (--)*
</Table>
* Less than .05% of net assets.
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, 2006 (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
ADS - American Depositary Share
CMO - Collateralized Mortgage Obligation
FDIC - Federal Deposit Insurance Company
GDR - Global Depositary Receipt
GDS - Global Depositary Share
LIBOR - London Interbank Offered Rate
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, 2006 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
ASSETS
Investments at market (identified cost $48,453)..................................... $ 50,386
Cash................................................................................ 60
Receivables:
Dividends and interest........................................................... 27
Dividends from affiliated money market funds..................................... 10
Investments sold................................................................. 223
From Adviser..................................................................... 18
Daily variation margin on futures contracts...................................... 1
Prepaid expenses.................................................................... 20
----------------------
Total assets........................................................................ 50,745
----------------------
LIABILITIES
Payables:
Investments purchased................................. $ 163
Fund shares redeemed.................................. 116
Accrued fees to affiliates............................ 92
Other accrued expenses................................ 72
--------------------
Total liabilities................................................................... 443
----------------------
NET ASSETS.......................................................................... $ 50,302
======================
Net Assets Consist of:
Undistributed (overdistributed) net investment income............................... $ 136
Accumulated net realized gain (loss)................................................ (17)
Unrealized appreciation (depreciation) on:
Investments................................................................... 1,933
Futures contracts............................................................. (1)
Shares of beneficial interest....................................................... 50
Additional paid-in capital.......................................................... 48,201
----------------------
NET ASSETS.......................................................................... $ 50,302
======================
NET ASSET VALUE, per share:
Class A ($1,795,761 divided by 172,989 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 10.38
======================
Class B ($48,506,387 divided by 4,789,450 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 10.13
======================
</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, 2006 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME
Dividends........................................................................ $ 212
Dividends from affiliated money market funds..................................... 67
Interest......................................................................... 627
----------------------
Total investment income............................................................. 906
EXPENSES
Advisory fees............................................ $ 240
Administrative fees...................................... 14
Custodian fees........................................... 44
Distribution fees - Class B.............................. 198
Transfer agent fees...................................... 68
Professional fees........................................ 28
Registration fees........................................ 15
Shareholder servicing fees - Class A..................... 2
Shareholder servicing fees - Class B..................... 66
Trustees' fees........................................... 1
Insurance policy fees.................................... 205
Printing fees............................................ 1
Miscellaneous............................................ 3
--------------------
Expenses before reductions............................... 885
Expense reductions....................................... (115)
--------------------
Net expenses........................................................................ 770
----------------------
Net investment income (loss)........................................................ 136
----------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments.............................................. 76
Futures contracts........................................ (27) 49
--------------------
Net change in unrealized appreciation (depreciation) on:
Investments.............................................. 1,133
Futures contracts........................................ 17 1,150
-------------------- ----------------------
Net realized and unrealized gain (loss)............................................. 1,199
----------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............................... $ 1,335
======================
</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, 2006 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss)............................. $ 136 $ (182)
Net realized gain (loss)................................. 49 1,902
Net change in unrealized appreciation (depreciation)..... 1,150 (1,872)
-------------------- ----------------------
Net increase (decrease) in net assets from operations....... 1,335 (152)
-------------------- ----------------------
DISTRIBUTIONS
From net realized gain
Class A............................................... (60) (20)
Class B............................................... (1,794) (579)
-------------------- ----------------------
Net decrease in net assets from distributions............... (1,854) (599)
-------------------- ----------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions........................................... (7,588) (17,376)
-------------------- ----------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS................. (8,107) (18,127)
NET ASSETS
Beginning of period...................................... 58,409 76,536
-------------------- ----------------------
End of period (including undistributed (overdistributed)
net investment income of $136 and $0, respectively).... $ 50,302 $ 58,409
==================== ======================
</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,
----------------------------------------------
2006* 2005 2004 2003**
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.43 $ 10.48 $ 10.31 $ 10.00
------------ ------------ ------------ --------------
INCOME FROM OPERATIONS
Net investment income (loss) (a)......................... .05 .05 .02 .02
Net realized and unrealized gain (loss).................. .24 (.02) .17 .29
------------ ------------ ------------ --------------
Total income (loss) from operations................... .29 .03 .19 .31
------------ ------------ ------------ --------------
DISTRIBUTIONS
From net investment income (b)........................... -- -- -- --
From net realized gain................................... (.34) (.08) (.02) --
------------ ------------ ------------ --------------
Total distributions................................... (.34) (.08) (.02) --
------------ ------------ ------------ --------------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.38 $ 10.43 $ 10.48 $ 10.31
============ ============ ============ ==============
TOTAL RETURN (%) (c)(d)..................................... 2.77 .31 2.61 3.17
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)................. 1,796 1,883 2,567 3,521
Ratios to average net assets (%) (e):
Operating expenses, net (f)........................... 2.10 2.09 2.10 2.02
Operating expenses, gross............................. 2.52 2.36 2.34 2.24
Net investment income (loss) (f)...................... 1.22 .46 .19 .27
Portfolio turnover rate (%) (c).......................... 7.71 78.54 81.15 38.14
</Table>
* For the six months ended April 30, 2006 (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 FRIMCo as the investment
adviser and transfer agent.
See accompanying notes which are an integral part of the financial statements.
Financial Highlights - Class A 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,
----------------------------------------------
2006* 2005 2004 2003**
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.22 $ 10.35 $ 10.26 $ 10.00
------------ ------------ ------------ --------------
INCOME FROM OPERATIONS
Net investment income (loss) (a)......................... .02 (.03) (.06) (.04)
Net realized and unrealized gain (loss).................. .23 (.02) .17 .30
------------ ------------ ------------ --------------
Total income (loss) from operations................... .25 (.05) .11 .26
------------ ------------ ------------ --------------
DISTRIBUTIONS
From net investment income (b)........................... -- -- -- --
From net realized gain................................... (.34) (.08) (.02) --
------------ ------------ ------------ --------------
Total distributions................................... (.34) (.08) (.02) --
------------ ------------ ------------ --------------
NET ASSET VALUE, END OF PERIOD.............................. $ 10.13 $ 10.22 $ 10.35 $ 10.26
============ ============ ============ ==============
TOTAL RETURN (%) (c)(d)..................................... 2.43 (.46) 1.83 2.60
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)................. 48,506 56,526 73,969 86,075
Ratios to average net assets (%) (e):
Operating expenses, net (f)........................... 2.85 2.84 2.85 2.79
Operating expenses, gross............................. 3.27 3.11 3.09 3.01
Net investment income (loss) (f)...................... .47 (.29) (.56) (.49)
Portfolio turnover rate (%) (c).......................... 7.71 78.54 81.15 38.14
</Table>
* For the six months ended April 30, 2006 (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 FRIMCo as the investment
adviser and transfer agent.
See accompanying notes which are an integral part of the financial statements.
12 Financial Highlights - Class B
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company" or "FRIC") is a
series investment company with 34 different investment portfolios referred to
as Funds. These financial statements report on one of these Funds (the
"Fund"). 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 (the "Board")
to issue an unlimited number of shares of beneficial interest at a $.01 par
value per share.
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment
Management Company.
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,
2006, the Fund's allocation to equity securities was approximately 40% and
the Fund's allocation to fixed income securities was approximately 60% 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 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 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 the Fund in the preparation of its financial statements.
Notes to Financial Statements 13
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Security Valuation
The Fund values portfolio securities according to Board-approved Securities
Valuation Procedures, including Market Value Procedures, Fair Value
Procedures and Pricing Services. Debt obligation securities maturing within
60 days at the time 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.
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 last sale price;
- 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 4 p.m. Eastern time or as of the close of the NYSE,
whichever is earlier.
- 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 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 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 in 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 on 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 of its share 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 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 of the US
securities market (defined in the Fair Value Procedures as the movement by
any two of four major US Indexes greater than a certain percentage) or other
significant event; foreign market holidays if on a daily basis fund exposure
exceeds 20% in aggregate (all closed markets combined); a company
development; a natural disaster; or an armed conflict.
Investment Transactions
Securities transactions are recorded on a trade date basis. Realized gains
and losses from securities transactions, if any, are recorded on the basis of
specific identified cost incurred by each money manager within a particular
Fund.
14 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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 "Adviser"). 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
Notes to Financial Statements 15
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 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 Funds' exposure to market risk. The risks may be caused by an
imperfect correlation between movements in the price of the instruments 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 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
16 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 extend 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 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, 2006, purchases and sales of investment
securities (excluding US Government and Agency obligations, short-term
investments, options, futures and repurchase agreements) were $3,924,576 and
$5,756,249, respectively. Purchases and sales of US Government and Agency
obligations (excluding short-term instruments, options, futures and
repurchase agreements) were $0 and $6,003,174, respectively. 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.
4. RELATED PARTIES
Adviser 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 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
the Investment Company's Money Market Fund and US Government Money Market
Fund (collectively the "Money Market Funds") (two of the Funds of the
Investment Company not presented herein). As of April 30, 2006, $193,000 of
the Money Market Fund's net assets represent investments by this Fund and
$1,741,011,103 represents the investment by other FRIC Funds not presented
herein. As of April 30, 2006, $2,047,000 of the US Government Money Market
Fund's net assets represents investment by this Fund.
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 $239,870 and $13,629,
respectively, for the period ended April 30, 2006.
<Table>
<Caption>
ANNUAL RATE
-------------------------------
ADVISER 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 investment adviser
within three years, the adviser 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
Notes to Financial Statements 17
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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, 2006 was $114,824.
To the extent fees are waived by the Adviser, the Fund may reimburse the
Adviser for any reductions in the Fund's expenses during the three years
following the reduction if such reimbursement is requested by the Adviser, 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, 2006,
October 31, 2005, October 31, 2004 and October 31, 2003, the Adviser has not
recouped waivers of $114,824, $174,205, $201,841 and $140,944, respectively.
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, 2006, the
Fund's custodian fees were reduced $153 under these arrangements.
Transfer Agent
FRIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, FRIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. FRIMCo retains a portion
of this fee for its services provided to the Fund and pays the balance to
unaffiliated agents who assist in providing these services. Total fees for
the Funds presented herein for the six months ended April 30, 2006 were
$68,145.
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.
Accrued fees payable to affiliates for the period ended April 30, 2006 were
as follows:
<Table>
<Caption>
MULTI-MANAGER
PRINCIPAL PROTECTED
----------------------------------------------------------
Advisory fees $ 38,157
Administration fees 2,134
Distribution fees 30,906
Shareholder servicing fees 10,338
Transfer agent fees 10,457
Trustee fees 311
-------------------
$ 92,303
===================
</Table>
18 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Brokerage Commissions
The Funds will effect transactions through Frank Russell Securities, Inc.
("FRS") and its global network of unaffiliated correspondent brokers. FRS is
a registered broker and investment adviser and an affiliate of FRIMCo. Trades
placed through FRS and its correspondents are used (i) to obtain research
services for FRIMCo to assist it in its capacity as a manager of managers,
(ii) to generate commission rebates to the Funds on whose behalf the trades
were made, (iii) to manage trading associated with changes in managers,
rebalancing across existing managers, cash flows and other portfolio
transitions or (iv) to execute portfolio securities transactions selected by
money managers. Effective January 1, 2006, the Funds began transitioning
trades used to obtain research services and to generate commission rebates
from FRS and LJR (as defined and described more fully below). During the
transition, some of these trades may continue to be executed through FRS. 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 and its correspondents or other brokers only to the
extent that the Funds will receive competitive execution, price and
commissions. In addition, FRIMCo recommends targets for the amount of trading
that money managers allocate through FRS based upon asset class, investment
style and other factors. 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 generally be
obtained from unaffiliated third parties at market rates. Research provided
to FRIMCo may benefit the particular Funds generating the trading activity
and may also benefit other Funds within the Investment Company and other
funds and clients managed or advised by FRIMCo or its affiliates. Similarly,
the Funds may 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.
Effective January 1, 2006, the Funds began effecting transactions though
Lynch, Jones & Ryan, Inc. ("LJR") and its global network of correspondent
brokers. LJR is a registered broker and is not an affiliate of the Funds or
FRIMCo. Trades placed through LJR and its correspondents are used (i) to
obtain research services for FRIMCo to assist it in its capacity as a manager
of managers and (ii) to generate commission rebates to the Funds on whose
behalf the trades were made. 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 LJR and its
correspondents or other brokers only to the extent that the Funds will
receive competitive execution, price and commissions. In addition, FRIMCo
recommends targets for the amount of trading that money managers allocate
through LJR based upon asset class, investment style and other factors.
Research services provided to FRIMCo by LJR or other brokers include
performance measurement statistics, fund analytics systems and market
monitoring systems. Research services will be generally obtained from
unaffiliated third parties at market rates. Research provided to FRIMCo may
benefit the particular Funds generating the trading activity and may also
benefit other Funds within the Investment Company and other funds and clients
managed or advised by FRIMCo or its affiliates. Similarly, the Funds may
benefit from research provided with respect to trading by those other funds
and clients.
FRS, LJR or other brokers also may rebate to the Funds a portion of
commissions earned on certain trading by the Funds through FRS, LJR and their
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, as determined annually in the Soft
Dollar Committee budgeting process.
There was no amount retained by Frank Russell Securities, Inc. for the period
ended April 30, 2006.
Additionally, the Fund paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Adviser.
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company, 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 independent Trustees a retainer of
$52,000 per year, $6,500 ($5,000 prior to January 1, 2006) 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, Nominating
and Governance Committee meeting or Investment 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 Audit Committee
Notes to Financial Statements 19
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Chair was paid a fee of $12,000 per year and the Nominating and Governance
Committee chair and the Investment Committee chairs were each paid a fee of
$6,000 per year. The chairperson of the Board receives an additional $52,000
per year.
5. FEDERAL INCOME TAXES
The Fund may have 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. At October
31, 2005, the Funds had no capital loss carryforwards.
At April 30, 2006, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
Cost of Investments $ 48,508,039
================
Unrealized Appreciation $ 2,673,995
Unrealized Depreciation (795,896)
----------------
Net Unrealized Appreciation
(Depreciation) $ 1,878,099
================
</Table>
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2006 and October 31, 2005
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
RUSSELL MULTI-MANAGER 2006 2005 2006 2005
PRINCIPAL PROTECTED FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold -- -- $ -- $ --
Proceeds from reinvestment of
distributions 5 2 58 19
Payments for shares redeemed (13) (66) (136) (693)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (8) (64) (78) (674)
----------------- ----------------- ----------------- -----------------
Class B
Proceeds from shares sold -- -- -- --
Proceeds from reinvestment of
distributions 168 52 1,691 552
Payments for shares redeemed (909) (1,672) (9,201) (17,254)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (741) (1,620) (7,510) (16,702)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (749) (1,684) $ (7,588) $ (17,376)
================= ================= ================= =================
</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
Investment Company is charged an annual commitment fee of .125% on the
average daily unused amount of the aggregate commitment, which is allocated
among each of the Investment Company's 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 20, 2006 and may be renewed at that time. The Fund did not
have any drawdowns for the period ended April 30, 2006.
8. RECORD OWNERSHIP
As of April 30, 2006, the Fund had no shareholders of record with greater
than 10% of the total outstanding shares.
20 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
INVESTMENT OBJECTIVE AND INVESTMENT STRATEGY DURING THE GUARANTEE PERIOD
(UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE DURING THE GUARANTEE PERIOD
During the Guarantee Period, the Fund seeks some capital growth, while seeking
to preserve principal.
INVESTMENT STRATEGY DURING THE GUARANTEE PERIOD
Under normal market conditions, during the Guarantee Period the Fund's assets
will be allocated between:
- - AN EQUITY COMPONENT, consisting primarily of common stocks and common stock
equivalents, such a preferred stocks and securities convertible into common
stocks; and
- - A FIXED INCOME COMPONENT, consisting primarily of high quality debt
instruments.
The Fund's investment adviser, FRIMCo, will allocate the Fund's assets on an
ongoing basis between the equity component and the fixed income component.
Assets not allocated to money managers are managed by FRIMCo. The Fund intends
to be fully invested at all times in fixed income securities, equity securities
and money market instruments or funds.
EQUITY COMPONENT. The equity component consists primarily of common stocks of
large and medium capitalization companies, most of which are US based. While
market capitalization changes over time and there is not one universally
accepted definition of the lines between large, medium and small capitalization
companies, the Fund generally defines large and medium capitalization stocks as
stocks of companies comprising the Russell 1000(R) Index.
The Fund employs a multi-manager approach whereby portions of the Fund are
allocated to different money managers whose approaches are intended to
complement one another. Assets not allocated to money managers are managed by
FRIMCo. The Fund generally pursues a market-oriented style of security
selection. Managers select securities from the broad large and medium
capitalization market rather than focusing exclusively on the growth or value
segments of the market. As a result, the Fund holds securities representing a
broad cross-section of companies and industries.
FIXED INCOME COMPONENT. The fixed income component consists primarily of high
quality debt instruments. The weighted average duration of the fixed income
component is expected to correspond (within approximately one month) to the
period remaining until the Guarantee Maturity Date. Generally, fixed income
securities with longer durations are more sensitive to changes in interest
rates. The fixed income component may include US Government securities and other
high quality debt securities, such as commercial paper. The US Government
securities may, but need not, be backed by the full faith and credit of the
United States. US Government securities include securities called STRIPS
(Separate Trading of Registered Interest and Principal of Securities). STRIPS
are created by separating the interest and principal components of an
outstanding US Treasury or agency note or bond and selling them as individual
securities. The Fund does not expect to invest in interest-only STRIPS. The
fixed income component may also include futures contracts or fixed income
securities, swaps and money market instruments.
FOR MORE INFORMATION, PLEASE REFER TO THE FUND'S MOST RECENT PROSPECTUS AND
STATEMENT OF ADDITIONAL INFORMATION.
Investment Objective and Investment Strategy during the Guarantee Period 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
(the "FRIMCo Agreement") for all funds overseen by the Board and the portfolio
management contract with each Money Manager of the Fund (collectively, the
"portfolio management contracts") and other funds overseen by the Board at a
meeting held on April 18, 2006. During the course of a year, the Trustees
receive 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 Independent Trustees, with
the advice and assistance of independent counsel, also requested and the Board
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 Independent Trustees; (2) information (the
"Third-Party 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; and (3) an
analysis of the Third-Party Information prepared by FRIMCo (the "FRIMCo
Analysis" and, with the other information requested by the Independent Trustees
or provided by FRIMCo in connection with the Board's consideration of the
portfolio management contracts, the "Agreement Renewal Information") addressing,
among other things, performance and expense differentials between the Fund and
its Comparable Funds. The Independent Trustees also received a memorandum from
independent counsel discussing the legal standards for their consideration of
the proposed continuances.
On April 17, 2006, the Independent Trustees met in person to review the
Agreement Renewal Information in a private session with independent counsel at
which no representatives of FRIMCo or management were present. At the April 18
meeting of the Board of Trustees, the Board, including the Independent Trustees,
reviewed the proposed continuance of the FRIMCo Agreement and the portfolio
management contracts with management and independent counsel to the Independent
Trustees. Presentations made by FRIMCo to the Board at this meeting encompassed
this Fund and all FRIMCo managed funds for which the Board has responsibility.
Following this review, but prior to voting, the Independent Trustees again met
in a private session with their independent counsel to evaluate additional
information and analysis received from FRIMCo and management at the Board
meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, 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. FRIMCo has engaged multiple
Money Managers for the Fund.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the FRIMCo Agreement for determining, implementing and maintaining the
investment program for the Fund with the constraints imposed by limitations
imposed upon the Fund contractually by the Fund's financial guarantee agreement.
Assets of the Fund have been allocated among the multiple Money Managers
selected by FRIMCo, subject to Board approval, for the Fund.
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
applicable investment objective, policies and restrictions (each, a "segment").
FRIMCo is responsible for communicating performance expectations to each Money
Manager; supervising compliance by each Money Manager with the Fund's investment
objective and policies; authorizing Money Managers to engage in certain
investment strategies for the Fund; and recommending annually to the Board
whether portfolio management contracts should be renewed, modified or
terminated. In addition to its annual recommendation as to the renewal,
modification or termination of portfolio management contracts, 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 same 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
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)
- --------------------------------------------------------------------------------
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 and other public
disclosures emphasize 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.
The Board also considered the special expertise of FRIMCo with respect to the
manager-of-managers structure of the funds under the Board's oversight,
including the Fund, and the likelihood that, at the current expense ratios of
the funds, 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 the Fund selected by shareholders in purchasing their
shares.
In addition to these general factors relating to the manager-of-managers
structure of the Fund, the Trustees considered, with respect to the Fund,
various specific factors in evaluating renewal of the FRIMCo Agreement,
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 expenses incurred by the Fund; and
5. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from the Fund.
At the April 18 Board meeting, FRIMCo and management reviewed the reasonableness
of the Fund's investment advisory fees. On the basis of the Agreement Renewal
Information, including the FRIMCo Analysis, and other information previously
received by the Board from FRIMCo during the course of the year or presented at
the April 18 Board meeting by FRIMCo, the Board, in respect of the Fund, found
the advisory fee charged by FRIMCo to be reasonable in light of the nature,
scope and quality of the services provided to the Fund, after giving effect to
waivers and/or reimbursements and considering differences in the composition and
investment strategies of its Comparable Funds. The Board also determined that
the relative expense ratio of the Fund was comparable to those of its Comparable
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
not excessive in light of the nature, scope and quality of the services provided
by FRIMCo.
The Board concluded that the performance of the Fund, in light of its particular
circumstances, supported continuation of the FRIMCo Agreement, again based upon
the Agreement Renewal Information, including the FRIMCo Analysis, and other
information previously received by the Board from FRIMCo during the course of
the year or presented at the Board meeting by FRIMCo. In evaluating performance,
the Board considered the Fund's absolute performance and its performance
relative to appropriate benchmarks and indices and its Comparable Funds. In the
case of the Fund, the Board considered that the Fund generally has a lower
allocation to equities than its Comparable Funds because of the market
environment at the time of the Fund's inception. The Fund's allocation to
equities is not determined by FRIMCo but rather is prescribed contractually by
the terms of the Fund's financial guarantee insurance agreement. The Board also
considered FRIMCo's undertaking to review the Fund's current money manager
structure in light of declining assets under management.
The Board considered for all funds under its supervision, 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 February 28, 2006 that the
investment advisory fees for the Fund reflect any economies of scale realized by
the Fund. In the case of the Fund, FRIMCo noted that assets have been declining
rather than increasing. The Trustees considered that fees payable to FRIMCo by
institutional clients with investment objectives similar to those of the funds
under the Board's supervision generally are lower, and may, in some cases, be
substantially lower, than the rates paid by such funds. FRIMCo reviewed with the
Trustees the differences in the scope of services it provides to institutional
clients and the funds supervised by
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)
- --------------------------------------------------------------------------------
the Board. For example, institutional clients have fewer administrative needs
than the funds supervised by the Board. It was further noted that since the
funds supervised by the Board must constantly issue and redeem 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.
In voting to approve the continuation of the FRIMCo Agreement on its current
terms and conditions for the Fund, the Board, after considering the foregoing
and other relevant factors, determined that continuation of the FRIMCo Agreement
was in the best interests of the Fund and its respective shareholders.
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 FRIMCo or Russell Fund Distributors, Inc., the Fund's underwriter; 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 pending its review of the Fund's Money Manager structure. FRIMCo has
advised the Board that it does not regard Money Manager profitability as
relevant to its evaluation of the portfolio management contracts 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 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 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, under the Fund's particular
circumstances, were 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 best interests of the
Fund and its shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the FRIMCo Agreement 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,
including the Fund.
24 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
As a courtesy to our Fund shareholders, a complete unaudited schedule of
investments is made available generally no later than 60 days after the end of
the first and third quarters of each fiscal year. These reports are available
(i) free of 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.
The Board has delegated to FRIMCo, as FRIC's investment adviser, the primary
responsibility for monitoring, evaluating and voting proxies solicited by or
with respect to issuers of securities in which assets of the Funds may be
invested. FRIMCo has established a proxy voting committee ("Committee") and has
adopted written proxy voting policies and procedures ("P&P") and proxy voting
guidelines ("Guidelines"). The Funds maintain a Portfolio Holdings Disclosure
Policy that governs the timing and circumstances of disclosure to shareholders
and third parties of information regarding the portfolio investments held by a
Fund. A description of the P&P, Guidelines and Portfolio Holdings Disclosure
Policy are contained in the Funds' Statement of Additional Information ("SAI").
The SAI is available (i) free of 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.
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 Additional Information 25
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2006 (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
- ----------------------------------------------------------------------------------------------------------------------------
*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"))
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
**Thaddas L. Trustee since Appointed until - Senior Vice President, Larco 39 None
Alston, 2006 successor is Investments, Ltd.
Born April 7, duly elected
1945 and qualified
909 A Street
Tacoma,
Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - President, Anderson 39 None
Born October 15, 1984 successor is Management Group LLC
1931 duly elected (private investments
Chairman of the and qualified consulting)
909 A Street Nominating and - February 2002 to June 2005,
Tacoma, Washington Governance Appointed until Lead Trustee, FRIC and RIF
98402-1616 Committee since successor is
2006 duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Phillips is also an officer and/or director of one or more affiliates of
FRIC and RIF and is therefore an interested trustee.
** Mr. Alston was elected to the Board of Trustees effective May 1, 2006.
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, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
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
Chairperson and qualified - Director and Chairman of the company);
909 A Street since 2005 Audit Committee, Avista - Director, Avista
Tacoma, Washington Annual Corp. Corp
98402-1616 - Trustee and Chairman of the
Operations and Distribution
Committee, WM Group of Funds
- February 2002 to June 2005,
Chairman of the Audit
Committee, FRIC and RIF
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 None
Born June 6, 1946 2003 successor is Vice President and Chief
duly elected Financial Officer, Waddell &
909 A Street Chairman of and qualified Reed Financial, Inc.
Tacoma, Washington Audit Committee - 2003, Retired
98402-1616 since 2005 Appointed until - 2001-2003, Vice President
successor is and Chief Financial Officer,
duly elected Janus Capital Group Inc.
and qualified - 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
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 39 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected 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>
Mr. Michael Phillips is the Chairman of the Board of Frank Russell Company which
controls FRIMCo, the investment adviser of the Funds. He is also an Interested
Trustee of the Funds. On May 26, 2005, Mr. Phillips became a director of Simpson
Investment Company, a privately held company. Mr. Raymond P. Tennison, Jr., an
Independent Trustee of the Funds is the President of Simpson Investment Company.
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, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Jack Thompson, Trustee since Appointed until - September 2003 to present, 39 - Director, Sparx
Born March 21, 1949 2005 successor is Independent Board Chair and Japan Fund
duly elected Chairman of the Audit
909 A Street and qualified Committee, Sparx Japan Fund
Tacoma, Washington - May 1999 to May 2003,
98402-1616 President, Chief Executive
Officer and Director, Berger
Financial Group, LLC
- May 1999 to May 2003,
President and Trustee,
Berger Funds
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2002, Director,
1943 duly elected Smith Barney Fundamental
Chairperson of and qualified Value Fund
909 A Street the Investment
Tacoma, Washington Committee since Appointed until
98402-1616 2006 successor is
duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
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 adviser ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
* Mr. Russell is also a director emeritus of one or more affiliates of 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, 2006
(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 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 39 None
Born October 6, since 2006 - Trustee of FRIC and RIF
1930 until 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
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>
Disclosure of Information about Fund Directors 29
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name with Fund and Principal Occupation(s)
Age, Length of During the
Address Time Served Term of Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------------------------------------------------
Cheryl Wichers, Chief Compliance Until removed - Chief Compliance Officer, FRIC
Born December 16, 1966 Officer since by Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2002, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Until successor - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, FRIMCo
Officer since qualified by - Chairman of the Board, President and CEO, RFD
909 A Street 2004 Trustees - Chairman of the Board and President, Russell
Tacoma, Washington Insurance Agency, Inc. (insurance agency ("RIA"))
98402-1616 - Until 2004, Managing Director of Individual Investor
Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, FRIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, FRIMCo, FRTC and RFD
909 A Street 1998 Trustees - Treasurer and Principal Accounting Officer, SSgA
Tacoma, Washington Funds
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 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary since Until successor - General Counsel and Managing Director of Law and
Born October 8, 1941 1994 is chosen and Government Affairs, Secretary, FRC
qualified by
909 A Street Trustees
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
30 Disclosure of Information about Fund Directors
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, Ph.D.
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
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 JUNE 9, 2006
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Lehman Brothers Asset Management LLC, Chicago, IL
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 31
(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
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment Management
Company expects to change its name to Russell Investment Management Company.
36-08-095 (1 04/06)
2006 SEMIANNUAL REPORT
CLASS A, C, E, R1, R2, R3*, AND S SHARES:
EQUITY AGGRESSIVE STRATEGY FUND (Effective July 1, 2006, the Fund will change
its name to the Equity Growth Strategy Fund.)
AGGRESSIVE STRATEGY FUND (Effective July 1, 2006, the Fund will change its name
to the Growth Strategy Fund.)
BALANCED STRATEGY FUND
MODERATE STRATEGY FUND
CONSERVATIVE STRATEGY FUND
CLASS A, E, R1, R2, R3*, AND S SHARES:
2010 STRATEGY FUND
2020 STRATEGY FUND
2030 STRATEGY FUND
2040 STRATEGY FUND
APRIL 30, 2006
* Effective March 1, 2006, Class D Shares of these Funds
were redesignated Class R3 Shares.
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.
* On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment Management
Company.
[Blank Page]
Frank Russell Investment Company
LifePoints(R) Funds
Semiannual Report
April 30, 2006 (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................................................... 21
2030 Strategy Fund................................................... 24
2040 Strategy Fund................................................... 27
Statement of Assets and Liabilities.................................. 30
Statement of Operations.............................................. 34
Statement of Changes in Net Assets................................... 36
Financial Highlights................................................. 40
Notes to Financial Highlights........................................ 54
Notes to Financial Statements........................................ 55
Basis for Approval of Investment Advisory Contracts.................. 74
Shareholder Requests for Additional Information...................... 78
Disclosure of Information about Fund Directors....................... 79
Manager, Money Managers and Service Providers........................ 84
</Table>
Frank Russell Investment Company - LifePoints(R) Funds.
Copyright (c) Russell Investment Group 2006. All rights reserved.
Russell Investment Group is a Washington, USA corporation, which operates
through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual
Life Insurance Company.
FUND OBJECTIVES, RISKS, CHARGES AND EXPENSES SHOULD BE CAREFULLY CONSIDERED
BEFORE INVESTING. A PROSPECTUS CONTAINING THIS AND OTHER IMPORTANT INFORMATION
MUST PRECEDE OR ACCOMPANY THIS MATERIAL. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
SECURITIES DISTRIBUTED THROUGH RUSSELL FUND DISTRIBUTORS, INC. MEMBER NASD, PART
OF RUSSELL INVESTMENT GROUP.
Effective July 1, 2006 Frank Russell Investment Company ("FRIC") will change its
name to Russell Investment Company. FRIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Frank Russell Investment Management Company
("FRIMCo"). Effective July 1, 2006 FRIMCo will change its name to Russell
Investment Management Company.
Russell Investment Group and Standard & Poor's Corporation are the owners of the
trademarks, service marks, and copyrights related to their respective indexes.
Index performance is not indicative of the performance of any specific
investment. Indexes are not managed and may not be invested in directly.
Performance quoted represents past performance and does not guarantee future
results. The investment return and principal value of an investment will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Current to the most recent month-end performance data may be
obtained by visiting www.russell.com/us/fundperformance.
FRANK RUSSELL INVESTMENT COMPANY
EQUITY AGGRESSIVE STRATEGY FUND*
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,157.10 $ 1,023.55
Expenses Paid During Period
(a) $ 1.34 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,152.80 $ 1,019.84
Expenses Paid During Period
(a) $ 5.34 $ 5.01
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 1.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,157.70 $ 1,023.55
Expenses Paid During Period
(a) $ 1.34 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
* Effective July 1, 2006, the Fund will change its name to the Equity Growth
Strategy Fund.
Equity Aggressive Strategy Fund 3
FRANK RUSSELL INVESTMENT COMPANY
EQUITY AGGRESSIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
March 29, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,029.40 $ 1,023.55
Expenses Paid During Period
(a) $ 0.23 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 33/365 (to reflect the period
since inception). Reflects 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 R3 (A) PERFORMANCE BEFORE EXPENSES)
- ------------ -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,155.30 $ 1,022.32
Expenses Paid During Period
(b) $ 2.67 $ 2.51
</Table>
(a)Effective March 1, 2006, Class D shares were redesignated Class R3 shares.
(b)Expenses are equal to the Fund's annualized expense ratio of 0.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,159.00 $ 1,024.79
Expenses Paid During Period
(a) $ 0.00 $ 0.00
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
4 Equity Aggressive Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY AGGRESSIVE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.7%
Other Frank Russell Investment Company Funds -
Class S Shares
Domestic Equities - 70.6%
Diversified Equity Fund 8,156,562 390,128
Quantitative Equity Fund 9,709,440 389,737
Real Estate Securities Fund 1,930,707 94,373
Special Growth Fund 1,412,024 80,641
------------
954,879
------------
International Equities - 29.1%
Emerging Markets Fund 3,003,420 68,118
International Securities Fund 4,195,158 325,670
------------
393,788
------------
TOTAL INVESTMENTS - 99.7%
(identified cost $1,048,510) 1,348,667
OTHER ASSETS AND LIABILITIES,
NET - 0.3% 4,493
------------
NET ASSETS - 100.0% 1,353,160
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Domestic Equities 70.6
International Equities 29.1
---------------
Total Investments 99.7
Other Assets and Liabilities, Net 0.3
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Equity Aggressive Strategy Fund 5
FRANK RUSSELL INVESTMENT COMPANY
AGGRESSIVE STRATEGY FUND*
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,126.10 $ 1,023.55
Expenses Paid During Period
(a) $ 1.32 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,121.00 $ 1,019.84
Expenses Paid During Period
(a) $ 5.26 $ 5.01
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 1.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,125.90 $ 1,023.55
Expenses Paid During Period
(a) $ 1.32 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
* Effective July 1, 2006, the Fund will change its name to the Growth Strategy
Fund.
6 Aggressive Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
AGGRESSIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
March 29, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,023.70 $ 1,023.55
Expenses Paid During Period
(a) $ 0.23 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 33/365 (to reflect the period
since inception). Reflects 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 R3 (A) PERFORMANCE BEFORE EXPENSES)
- ------------ -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,124.30 $ 1,022.32
Expenses Paid During Period
(b) $ 2.63 $ 2.51
</Table>
(a)Effective March 1, 2006, Class D shares were redesignated Class R3 shares.
(b)Expenses are equal to the Fund's annualized expense ratio of 0.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,126.60 $ 1,024.79
Expenses Paid During Period
(a) $ 0.00 $ 0.00
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
Aggressive Strategy Fund 7
FRANK RUSSELL INVESTMENT COMPANY
AGGRESSIVE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.7%
Other Frank Russell Investment
Company Funds - Class S Shares
Bonds - 19.9%
Multistrategy Bond Fund 56,380,476 573,390
Domestic Equities - 56.6%
Diversified Equity Fund 13,774,162 658,818
Quantitative Equity Fund 16,387,878 657,809
Real Estate Securities Fund 3,528,632 172,480
Special Growth Fund 2,504,539 143,034
------------
1,632,141
------------
International Equities - 23.2%
Emerging Markets Fund 5,246,455 118,990
International Securities Fund 7,098,008 551,018
------------
670,008
------------
TOTAL INVESTMENTS - 99.7%
(identified cost $2,396,034) 2,875,539
OTHER ASSETS AND LIABILITIES,
NET - 0.3% 8,516
------------
NET ASSETS - 100.0% 2,884,055
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 19.9
Domestic Equities 56.6
International Equities 23.2
---------------
Total Investments 99.7
Other Assets and Liabilities, Net 0.3
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
8 Aggressive Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
BALANCED STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,033.50 $ 1,023.55
Expenses Paid During Period
(a) $ 1.26 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,093.10 $ 1,019.84
Expenses Paid During Period
(a) $ 5.19 $ 5.01
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 1.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,097.20 $ 1,023.55
Expenses Paid During Period
(a) $ 1.30 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
Balanced Strategy Fund 9
FRANK RUSSELL INVESTMENT COMPANY
BALANCED STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
April 3, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,012.80 $ 1,023.55
Expenses Paid During Period
(a) $ 0.19 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 28/365 (to reflect the period
since inception). Reflects 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 R3 (A) PERFORMANCE BEFORE EXPENSES)
- ------------ -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,094.90 $ 1,022.32
Expenses Paid During Period
(b) $ 2.60 $ 2.51
</Table>
(a)Effective March 1, 2006, Class D shares were redesignated Class R3 shares.
(b)Expenses are equal to the Fund's annualized expense ratio of 0.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,098.10 $ 1,024.79
Expenses Paid During Period
(a) $ 0.00 $ 0.00
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
10 Balanced Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
BALANCED STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Other Frank Russell Investment
Company Funds - Class S Shares
Bonds - 39.7%
Diversified Bond Fund 36,697,144 840,365
Multistrategy Bond Fund 82,601,883 840,061
------------
1,680,426
------------
Domestic Equities - 40.6%
Diversified Equity Fund 14,043,939 671,722
Quantitative Equity Fund 16,697,595 670,241
Real Estate Securities Fund 4,307,571 210,554
Special Growth Fund 2,944,266 168,147
------------
1,720,664
------------
International Equities - 19.5%
Emerging Markets Fund 5,893,555 133,666
International Securities Fund 8,908,190 691,542
------------
825,208
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $3,614,270) 4,226,298
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 8,893
------------
NET ASSETS - 100.0% 4,235,191
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 39.7
Domestic Equities 40.6
International Equities 19.5
---------------
Total Investments 99.8
Other Assets and Liabilities, Net 0.2
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 11
FRANK RUSSELL INVESTMENT COMPANY
MODERATE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,064.40 $ 1,023.55
Expenses Paid During Period
(a) $ 1.28 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,059.80 $ 1,019.84
Expenses Paid During Period
(a) $ 5.11 $ 5.01
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 1.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,063.30 $ 1,023.55
Expenses Paid During Period
(a) $ 1.28 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
12 Moderate Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
MODERATE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
March 29, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,008.90 $ 1,023.55
Expenses Paid During Period
(a) $ 0.23 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 33/365 (to reflect the period
since inception). Reflects 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 R3 (A) PERFORMANCE BEFORE EXPENSES)
- ------------ -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,062.80 $ 1,022.32
Expenses Paid During Period
(b) $ 2.56 $ 2.51
</Table>
(a)Effective March 1, 2006, Class D shares were redesignated Class R3 shares.
(b)Expenses are equal to the Fund's annualized expense ratio of 0.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,065.50 $ 1,024.79
Expenses Paid During Period
(a) $ 0.00 $ 0.00
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
Moderate Strategy Fund 13
FRANK RUSSELL INVESTMENT COMPANY
MODERATE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Other Frank Russell Investment
Company Funds - Class S Shares
Bonds - 59.6%
Diversified Bond Fund 11,534,765 264,146
Short Duration Bond Fund 17,358,280 322,517
------------
586,663
------------
Domestic Equities - 28.9%
Diversified Equity Fund 2,253,969 107,807
Quantitative Equity Fund 2,677,050 107,457
Real Estate Securities Fund 804,512 39,324
Special Growth Fund 516,087 29,474
------------
284,062
------------
International Equities - 11.3%
International Securities Fund 1,429,416 110,966
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $883,520) 981,691
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 1,616
------------
NET ASSETS - 100.0% 983,307
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 59.6
Domestic Equities 28.9
International Equities 11.3
---------------
Total Investments 99.8
Other Assets and Liabilities, Net 0.2
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
14 Moderate Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
CONSERVATIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,033.40 $ 1,023.55
Expenses Paid During Period
(a) $ 1.26 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,029.50 $ 1,019.84
Expenses Paid During Period
(a) $ 5.03 $ 5.01
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 1.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,032.70 $ 1,023.55
Expenses Paid During Period
(a) $ 1.26 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
Conservative Strategy Fund 15
FRANK RUSSELL INVESTMENT COMPANY
CONSERVATIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
March 29, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,002.70 $ 1,023.55
Expenses Paid During Period
(a) $ 0.23 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 33/365 (to reflect the period
since inception). Reflects 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 R3 (A) PERFORMANCE BEFORE EXPENSES)
- ------------ -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,031.90 $ 1,022.32
Expenses Paid During Period
(b) $ 2.52 $ 2.51
</Table>
(a)Effective March 1, 2006, Class D shares were redesignated Class R3 shares.
(b)Expenses are equal to the Fund's annualized expense ratio of 0.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,033.50 $ 1,024.79
Expenses Paid During Period
(a) $ 0.00 $ 0.00
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
16 Conservative Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
CONSERVATIVE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.9%
Other Frank Russell Investment
Company Funds - Class S Shares
Bonds - 79.9%
Diversified Bond Fund 3,989,320 91,355
Short Duration Bond Fund 12,960,360 240,804
------------
332,159
------------
Domestic Equities - 17.0%
Diversified Equity Fund 607,605 29,062
Quantitative Equity Fund 722,171 28,988
Real Estate Securities Fund 254,931 12,461
------------
70,511
------------
International Equities - 3.0%
International Securities Fund 160,480 12,458
------------
TOTAL INVESTMENTS - 99.9%
(identified cost $390,797) 415,128
OTHER ASSETS AND LIABILITIES,
NET - 0.1% 518
------------
NET ASSETS - 100.0% 415,646
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 79.9
Domestic Equities 17.0
International Equities 3.0
---------------
Total Investments 99.9
Other Assets and Liabilities, Net 0.1
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Conservative Strategy Fund 17
FRANK RUSSELL INVESTMENT COMPANY
2010 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,071.60 $ 1,023.55
Expenses Paid During Period
(a) $ 1.28 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,071.50 $ 1,023.55
Expenses Paid During Period
(a) $ 1.28 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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 R3 (A) PERFORMANCE BEFORE EXPENSES)
- ------------ -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,069.10 $ 1,022.32
Expenses Paid During Period
(b) $ 2.57 $ 2.51
</Table>
(a)Effective March 1, 2006, Class D shares were redesignated Class R3 shares.
(b)Expenses are equal to the Fund's annualized expense ratio of 0.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
18 2010 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
2010 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,071.70 $ 1,024.79
Expenses Paid During Period
(a) $ 0.00 $ 0.00
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
2010 Strategy Fund 19
FRANK RUSSELL INVESTMENT COMPANY
2010 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.5%
Other Frank Russell Investment
Company Funds - Class S Shares
Bonds - 55.7%
Diversified Bond Fund 65,504 1,500
Multistrategy Bond Fund 23,041 234
Short Duration Bond Fund 83,239 1,547
------------
3,281
------------
Domestic Equities - 31.3%
Diversified Equity Fund 14,698 703
Quantitative Equity Fund 17,509 703
Real Estate Securities Fund 5,049 246
Special Growth Fund 3,291 188
------------
1,840
------------
International Equities - 12.5%
Emerging Markets Fund 1,570 36
International Securities Fund 9,057 703
------------
739
------------
TOTAL INVESTMENTS - 99.5%
(identified cost $5,663) 5,860
OTHER ASSETS AND LIABILITIES,
NET - 0.5% 30
------------
NET ASSETS - 100.0% 5,890
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 55.7
Domestic Equities 31.3
International Equities 12.5
---------------
Total Investments 99.5
Other Assets and Liabilities, Net 0.5
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
20 2010 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
2020 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,086.50 $ 1,023.55
Expenses Paid During Period
(a) $ 1.29 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,086.40 $ 1,023.55
Expenses Paid During Period
(a) $ 1.29 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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 R3 (A) PERFORMANCE BEFORE EXPENSES)
- ------------ -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,085.70 $ 1,022.32
Expenses Paid During Period
(b) $ 2.59 $ 2.51
</Table>
(a)Effective March 1, 2006, Class D shares were redesignated Class R3 shares.
(b)Expenses are equal to the Fund's annualized expense ratio of 0.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
2020 Strategy Fund 21
FRANK RUSSELL INVESTMENT COMPANY
2020 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,087.70 $ 1,024.79
Expenses Paid During Period
(a) $ 0.00 $ 0.00
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
22 2020 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
2020 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Other Frank Russell Investment Company Funds -
Class S Shares
Bonds - 45.9%
Diversified Bond Fund 115,721 2,650
Multistrategy Bond Fund 165,037 1,678
Short Duration Bond Fund 63,877 1,187
------------
5,515
------------
Domestic Equities - 37.3%
Diversified Equity Fund 36,347 1,738
Quantitative Equity Fund 43,298 1,738
Real Estate Securities Fund 11,573 566
Special Growth Fund 7,774 444
------------
4,486
------------
International Equities - 16.6%
Emerging Markets Fund 11,111 252
International Securities Fund 22,424 1,741
------------
1,993
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $11,603) 11,994
OTHER ASSETS AND LIABILITIES, NET - 0.2% 30
------------
NET ASSETS - 100.0% 12,024
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 45.9
Domestic Equities 37.3
International Equities 16.6
---------------
Total Investments 99.8
Other Assets and Liabilities, Net 0.2
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
2020 Strategy Fund 23
FRANK RUSSELL INVESTMENT COMPANY
2030 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,101.00 $ 1,023.55
Expenses Paid During Period
(a) $ 1.30 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,099.60 $ 1,023.55
Expenses Paid During Period
(a) $ 1.30 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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 R3 (A) PERFORMANCE BEFORE EXPENSES)
- ------------ -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,099.60 $ 1,022.32
Expenses Paid During Period
(b) $ 2.60 $ 2.51
</Table>
(a)Effective March 1, 2006, Class D shares were redesignated Class R3 shares.
(b)Expenses are equal to the Fund's annualized expense ratio of 0.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
24 2030 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
2030 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,101.90 $ 1,024.79
Expenses Paid During Period
(a) $ 0.00 $ 0.00
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
2030 Strategy Fund 25
FRANK RUSSELL INVESTMENT COMPANY
2030 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.6%
Other Frank Russell Investment
Company Funds - Class S Shares
Bonds - 36.6%
Diversified Bond Fund 60,686 1,390
Multistrategy Bond Fund 162,653 1,654
------------
3,044
------------
Domestic Equities - 43.4%
Diversified Equity Fund 29,611 1,416
Quantitative Equity Fund 35,263 1,416
Real Estate Securities Fund 8,783 429
Special Growth Fund 6,017 344
------------
3,605
------------
International Equities - 19.6%
Emerging Markets Fund 11,528 261
International Securities Fund 17,590 1,366
------------
1,627
------------
TOTAL INVESTMENTS - 99.6%
(identified cost $7,840) 8,276
OTHER ASSETS AND LIABILITIES,
NET - 0.4% 34
------------
NET ASSETS - 100.0% 8,310
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 36.6
Domestic Equities 43.4
International Equities 19.6
---------------
Total Investments 99.6
Other Assets and Liabilities, Net 0.4
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
26 2030 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
2040 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,112.60 $ 1,023.55
Expenses Paid During Period
(a) $ 1.31 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,112.40 $ 1,023.55
Expenses Paid During Period
(a) $ 1.31 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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 R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
March 17, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,013.50 $ 1,023.55
Expenses Paid During Period
(a) $ 0.31 $ 1.25
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 45/365 (to reflect the period
since inception). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
2040 Strategy Fund 27
FRANK RUSSELL INVESTMENT COMPANY
2040 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R3 (A) PERFORMANCE BEFORE EXPENSES)
- ------------ -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,110.00 $ 1,022.32
Expenses Paid During Period
(b) $ 2.62 $ 2.51
</Table>
(a)Effective March 1, 2006, Class D shares were redesignated Class R3 shares.
(b)Expenses are equal to the Fund's annualized expense ratio of 0.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,113.70 $ 1,024.79
Expenses Paid During Period
(a) $ 0.00 $ 0.00
</Table>
(a) Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-
half year period). Reflects amounts waived and/or reimbursed by the
investment adviser. Without the waiver and/or reimbursement, expenses would
have been higher.
28 2040 Strategy Fund
FRANK RUSSELL INVESTMENT COMPANY
2040 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.2%
Other Frank Russell Investment
Company Funds - Class S Shares
Bonds - 28.6%
Diversified Bond Fund 32,208 738
Multistrategy Bond Fund 164,828 1,676
------------
2,414
------------
Domestic Equities - 49.6%
Diversified Equity Fund 34,907 1,669
Quantitative Equity Fund 41,594 1,670
Real Estate Securities Fund 9,534 466
Special Growth Fund 6,692 382
------------
4,187
------------
International Equities - 21.0%
Emerging Markets Fund 13,156 298
International Securities Fund 19,089 1,482
------------
1,780
------------
TOTAL INVESTMENTS - 99.2%
(identified cost $7,903) 8,381
OTHER ASSETS AND LIABILITIES,
NET - 0.8% 65
------------
NET ASSETS - 100.0% 8,446
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 28.6
Domestic Equities 49.6
International Equities 21.0
---------------
Total Investments 99.2
Other Assets and Liabilities, Net 0.8
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
2040 Strategy Fund 29
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
EQUITY AGGRESSIVE AGGRESSIVE STRATEGY BALANCED STRATEGY MODERATE STRATEGY
AMOUNTS IN THOUSANDS STRATEGY FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 1,048,510 $ 2,396,034 $ 3,614,270 $ 883,520
- -------------------------------------------------------------------------------------------------------------------------------
Investments, at market 1,348,667 2,875,539 4,226,298 981,691
Receivables:
Investments sold -- -- -- 738
Fund shares sold 8,624 17,136 20,962 2,971
From Adviser 177 348 551 163
Prepaid expenses 68 95 92 38
------------------- ------------------- ------------------- --------------------
Total assets 1,357,536 2,893,118 4,247,903 985,601
------------------- ------------------- ------------------- --------------------
LIABILITIES
Payables:
Investments purchased 2,922 5,579 5,416 --
Fund shares redeemed 852 2,278 5,495 1,873
Accrued fees to affiliates 583 1,200 1,799 401
Other accrued expenses 19 6 2 20
------------------- ------------------- ------------------- --------------------
Total liabilities 4,376 9,063 12,712 2,294
------------------- ------------------- ------------------- --------------------
NET ASSETS $ 1,353,160 $ 2,884,055 $ 4,235,191 $ 983,307
=================== =================== =================== ====================
Net Assets Consist of:
Undistributed (overdistributed)
net investment income $ (510) $ (1,092) $ (1,633) $ (366)
Accumulated net realized gain
(loss) (12,674) 48,632 30,002 5,867
Unrealized appreciation
(depreciation) on investments 300,157 479,505 612,028 98,171
Shares of beneficial interest 1,140 2,388 3,582 872
Additional paid-in capital 1,065,047 2,354,622 3,591,212 878,763
------------------- ------------------- ------------------- --------------------
NET ASSETS $ 1,353,160 $ 2,884,055 $ 4,235,191 $ 983,307
=================== =================== =================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
30 Statement of Assets and Liabilities
<Table>
<Caption>
CONSERVATIVE STRATEGY 2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------
$ 390,797 $ 5,663 $ 11,603 $ 7,840 $ 7,903
- -------------------------------------------------------------------------------------------------
415,128 5,860 11,994 8,276 8,381
290 -- -- -- 21
1,483 4 12 16 46
94 23 23 21 25
33 34 35 36 33
-------------- -------------- -------------- -------------- --------------
417,028 5,921 12,064 8,349 8,506
-------------- -------------- -------------- -------------- --------------
-- 3 11 10 --
1,180 -- -- 1 33
176 2 3 3 2
26 26 26 25 25
-------------- -------------- -------------- -------------- --------------
1,382 31 40 39 60
-------------- -------------- -------------- -------------- --------------
$ 415,646 $ 5,890 $ 12,024 $ 8,310 $ 8,446
============== ============== ============== ============== ==============
$ (154) $ (1) $ (3) $ (2) $ (1)
6,624 93 107 112 146
24,331 197 391 436 478
385 6 11 7 8
384,460 5,595 11,518 7,757 7,815
-------------- -------------- -------------- -------------- --------------
$ 415,646 $ 5,890 $ 12,024 $ 8,310 $ 8,446
============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 31
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
EQUITY AGGRESSIVE AGGRESSIVE STRATEGY BALANCED STRATEGY MODERATE STRATEGY
STRATEGY FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and
redemption price per share:
Net asset value per share:
Class A* $ 12.11 $ 12.08 $ 11.82 $ 11.27
Maximum offering price per
share (Net asset value plus
sales charge of 5.75%):
Class A $ 12.85 $ 12.82 $ 12.54 $ 11.96
Class A -- Net assets $ 162,878,512 $ 533,891,811 $ 821,919,761 $ 148,480,617
Class A -- Shares
outstanding ($.01 par
value) 13,444,511 44,204,999 69,531,408 13,179,505
Net asset value per share:
Class C* $ 11.61 $ 12.00 $ 11.76 $ 11.22
Class C -- Net assets $ 382,358,894 $ 751,021,947 $ 1,193,581,863 $ 203,337,976
Class C -- Shares
outstanding ($.01 par
value) 32,921,778 62,580,819 101,494,049 18,123,753
Net asset value per share:
Class E* $ 11.92 $ 12.09 $ 11.84 $ 11.27
Class E -- Net assets $ 221,088,611 $ 461,776,385 $ 561,266,357 $ 171,422,212
Class E -- Shares
outstanding ($.01 par
value) 18,547,692 38,187,722 47,395,293 15,206,404
Net asset value per share:
Class R2* (2) $ 11.91 $ 12.09 $ 11.84 $ 11.26
Class R2 -- Net assets $ 17,138,981 $ 9,404,303 $ 7,819,547 $ 1,318,384
Class R2 -- Shares
outstanding ($.01 par
value) 1,438,437 777,936 660,482 117,083
Net asset value per share:
Class R3* (1) $ 11.91 $ 12.11 $ 11.84 $ 11.30
Class R3 -- Net assets $ 381,826,311 $ 747,473,619 $ 1,024,166,853 $ 338,743,027
Class R3 -- Shares
outstanding ($.01 par
value) 32,054,737 61,708,298 86,476,633 29,974,981
Net asset value per share:
Class S* $ 12.07 $ 12.15 $ 11.89 $ 11.30
Class S -- Net assets $ 187,868,369 $ 380,486,894 $ 626,436,581 $ 120,005,085
Class S -- Shares
outstanding ($.01 par
value) 15,565,840 31,312,901 52,668,411 10,617,492
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
* Net asset value per share equals class level net assets divided by class
level shares of beneficial interest outstanding.
(1) Effective March 1, 2006, Class D Shares of these Funds were redesignated
Class R3 Shares.
(2) 2040 Strategy Fund Class R2: For the period March 17, 2006 (commencement
of operations) to April 30, 2006.
Equity Aggressive Strategy, Aggressive Strategy, Moderate Strategy and
Conservative Strategy Funds Class R2: For the period March 29, 2006
(commencement of operations) to April 30, 2006.
Balanced Strategy Fund Class R2: For the period April 3, 2006
(commencement of operations) to April 30, 2006.
See accompanying notes which are an integral part of the financial statements.
32 Statement of Assets and Liabilities
<Table>
<Caption>
CONSERVATIVE STRATEGY 2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------
$ 10.77 $ 10.63 $ 10.87 $ 11.08 $ 11.25
$ 11.43 $ 11.28 $ 11.53 $ 11.76 $ 11.94
$ 42,313,580 $ 1,212,198 $ 1,439,080 $ 1,298,587 $ 1,505,955
3,929,749 114,077 132,396 117,253 133,903
$ 10.73 $ -- $ -- $ -- $ --
$ 81,780,776 $ -- $ -- $ -- $ --
7,623,699 -- -- -- --
$ 10.79 $ 10.64 $ 10.87 $ 11.08 $ 11.26
$ 74,859,222 $ 1,117,228 $ 1,423,920 $ 1,158,807 $ 1,236,653
6,936,931 105,007 130,957 104,542 109,859
$ 10.77 $ -- $ -- $ -- $ 11.25
$ 1,313,536 $ -- $ -- $ -- $ 1,013,196
121,928 -- -- -- 90,091
$ 10.82 $ 10.63 $ 10.86 $ 11.08 $ 11.25
$ 171,783,672 $ 2,263,252 $ 5,366,374 $ 4,187,450 $ 3,273,299
15,877,506 212,825 494,058 377,945 290,945
$ 10.82 $ 10.64 $ 10.87 $ 11.09 $ 11.26
$ 43,594,992 $ 1,296,789 $ 3,794,196 $ 1,665,235 $ 1,416,372
4,028,084 121,854 348,892 150,199 125,797
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 33
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2006 (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 $ 10,812 $ 30,015 $ 54,760 $ 14,349
-------------- ----------------- -------------- -----------------
EXPENSES
Advisory fees 1,171 2,553 3,840 937
Administrative fees 293 638 960 234
Custodian fees 18 19 21 18
Distribution fees - Class A 155 552 879 170
Distribution fees - Class C 1,234 2,461 4,029 721
Distribution fees - Class
R3* 436 851 1,198 406
Transfer agent fees 879 1,915 2,880 469
Professional fees 28 40 53 26
Registration fees 62 100 138 56
Shareholder servicing fees -
Class C 412 820 1,343 240
Shareholder servicing fees -
Class E 256 535 667 208
Shareholder servicing fees -
Class R2** 3 2 1 --
Shareholder servicing fees -
Class R3* 436 851 1,198 406
Trustees' fees 13 29 44 11
Printing fees 14 32 50 13
Offering costs -- -- -- --
Miscellaneous 7 17 25 8
-------------- ----------------- -------------- -----------------
Expenses before reductions 5,417 11,415 17,326 3,923
Expense reductions (2,485) (5,343) (8,011) (1,772)
-------------- ----------------- -------------- -----------------
Net expenses 2,932 6,072 9,315 2,151
-------------- ----------------- -------------- -----------------
Net investment income (loss) 7,880 23,943 45,445 12,198
-------------- ----------------- -------------- -----------------
NET REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investments 374 3,381 3,359 1,700
Capital gain distributions
from Underlying Funds 42,131 75,759 87,917 15,382
-------------- ----------------- -------------- -----------------
Net realized gain (loss) 42,505 79,140 91,276 17,082
Net change in unrealized
appreciation (depreciation) on
investments 116,454 192,127 209,900 27,703
-------------- ----------------- -------------- -----------------
Net realized and unrealized gain
(loss) 158,959 271,267 301,176 44,785
-------------- ----------------- -------------- -----------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 166,839 $ 295,210 $ 346,621 $ 56,983
============== ================= ============== =================
</Table>
* Class D Shares were redesignated Class R3 Shares on March 1, 2006.
** 2040 Strategy Fund Class R2: For the period March 17, 2006 (commencement
of operations) to April 30, 2006.
Equity Aggressive Strategy, Aggressive Strategy, Moderate Strategy and
Conservative Strategy Funds Class R2: For the period March 29, 2006
(commencement of operations) to April 30, 2006.
Balanced Strategy Fund Class R2: For the period April 3, 2006
(commencement of operations) to April 30, 2006.
See accompanying notes which are an integral part of the financial statements.
34 Statement of Operations
<Table>
<Caption>
CONSERVATIVE STRATEGY 2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------
$ 7,862 $ 79 $ 88 $ 85 $ 75
----------------- -------------- -------------- -------------- -----------------
486 5 7 7 6
122 1 2 2 2
18 3 3 3 3
51 1 2 2 2
325 -- -- -- --
208 3 3 4 3
242 1 2 2 2
23 20 21 19 20
41 12 10 11 11
108 -- -- -- --
184 1 1 1 1
-- -- -- -- --
208 3 4 3 3
7 -- -- -- --
9 -- -- -- --
-- 20 18 18 18
5 2 1 2 2
----------------- -------------- -------------- -------------- -----------------
2,037 72 74 74 73
(953) (64) (64) (64) (64)
----------------- -------------- -------------- -------------- -----------------
1,084 8 10 10 9
----------------- -------------- -------------- -------------- -----------------
6,778 71 78 75 66
----------------- -------------- -------------- -------------- -----------------
5,676 3 -- (16) --
4,175 90 106 128 146
----------------- -------------- -------------- -------------- -----------------
9,851 93 106 112 146
(765) 190 348 390 418
----------------- -------------- -------------- -------------- -----------------
9,086 283 454 502 564
----------------- -------------- -------------- -------------- -----------------
$ 15,864 $ 354 $ 532 $ 577 $ 630
================= ============== ============== ============== =================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 35
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, 2006 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 7,880 $ 7,557
Net realized gain (loss) 42,505 8,629
Net change in unrealized appreciation (depreciation) 116,454 91,785
------------------- --------------------
Net increase (decrease) in net assets from operations 166,839 107,971
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A (993) (597)
Class C (1,649) (1,601)
Class E (1,757) (1,889)
Class R2** (47) --
Class R3*** (2,476) (2,336)
Class S (1,468) (1,558)
From net realized gain
Class A (773) --
Class C (2,330) --
Class E (1,512) --
Class R3*** (2,450) --
Class S (1,035) --
------------------- --------------------
Net decrease in net assets from distributions (16,490) (7,981)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions 189,888 188,532
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 340,237 288,522
NET ASSETS
Beginning of period 1,012,923 724,401
------------------- --------------------
End of period $ 1,353,160 $ 1,012,923
=================== ====================
Undistributed (overdistributed) net investment income included
in net assets $ (510) $ --
</Table>
* For the period January 1, 2005 (commencement of operations) to October 31,
2005.
** 2040 Strategy Fund Class R2: For the period March 17, 2006 (commencement
of operations) to April 30, 2006.
Equity Aggressive Strategy, Aggressive Strategy, Moderate Strategy and
Conservative Strategy Funds Class R2: For the period March 29, 2006
(commencement of operations) to April 30, 2006.
Balanced Strategy Fund Class R2: For the period April 3, 2006
(commencement of operations) to April 30, 2006.
*** Class D Shares were redesignated Class R3 Shares on March 1, 2006.
See accompanying notes which are an integral part of the financial statements.
36 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, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005 (UNAUDITED) 2005
- ----------------------------------------------------------------------------------------------------
$ 23,943 $ 26,285 $ 45,445 $ 52,527 $ 12,198 $ 14,665
79,140 14,483 91,276 21,906 17,082 5,755
192,127 149,319 209,900 153,673 27,703 18,157
------------- ------------- ------------- ------------- ------------- -------------
295,210 190,087 346,621 228,106 56,983 38,577
------------- ------------- ------------- ------------- ------------- -------------
(4,800) (3,996) (9,460) (8,687) (1,989) (1,866)
(4,846) (4,357) (10,613) (10,605) (2,086) (2,301)
(4,686) (5,832) (7,080) (9,540) (2,380) (3,041)
(42) -- (45) -- (18) --
(6,546) (7,614) (11,618) (14,304) (4,267) (5,262)
(4,115) (5,375) (8,262) (10,795) (1,824) (2,538)
(2,041) -- (3,917) (830) (841) (172)
(3,153) -- (6,200) (1,779) (1,227) (416)
(2,130) -- (3,141) (1,104) (1,074) (357)
(3,285) -- (5,590) (1,814) (2,049) (707)
(1,639) -- (3,226) (1,097) (751) (281)
------------- ------------- ------------- ------------- ------------- -------------
(37,283) (27,174) (69,152) (60,555) (18,506) (16,941)
------------- ------------- ------------- ------------- ------------- -------------
368,399 551,870 482,568 853,024 52,970 175,747
------------- ------------- ------------- ------------- ------------- -------------
626,326 714,783 760,037 1,020,575 91,447 197,383
2,257,729 1,542,946 3,475,154 2,454,579 891,860 694,477
------------- ------------- ------------- ------------- ------------- -------------
$ 2,884,055 $ 2,257,729 $ 4,235,191 $ 3,475,154 $ 983,307 $ 891,860
============= ============= ============= ============= ============= =============
$ (1,092) $ -- $ (1,633) $ -- $ (366) $ --
<Caption>
CONSERVATIVE STRATEGY
FUND
-------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005
- ---
$ 6,778 $ 10,203
9,851 2,868
(765) (286)
------------- -------------
15,864 12,785
------------- -------------
(690) (756)
(1,074) (1,287)
(1,833) (4,078)
(24) --
(2,539) (3,135)
(772) (1,137)
(249) (91)
(548) (275)
(1,124) (646)
(1,006) (515)
(278) (147)
------------- -------------
(10,137) (12,067)
------------- -------------
(109,543) 44,887
------------- -------------
(103,816) 45,605
519,462 473,857
------------- -------------
$ 415,646 $ 519,462
============= =============
$ (154) $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 37
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
<Table>
<Caption>
2010 STRATEGY
FUND
-------------------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2006 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005*
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 71 $ 44
Net realized gain (loss) 93 --
Net change in unrealized appreciation (depreciation) 190 7
------------------- --------------------
Net increase (decrease) in net assets from operations 354 51
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A (15) (5)
Class C -- --
Class E (15) (13)
Class R2** -- --
Class R3*** (24) (13)
Class S (18) (14)
From net realized gain
Class A -- --
Class C -- --
Class E -- --
Class R3*** -- --
Class S -- --
------------------- --------------------
Net decrease in net assets from distributions (72) (45)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions 807 4,795
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 1,089 4,801
NET ASSETS
Beginning of period 4,801 --
------------------- --------------------
End of period $ 5,890 $ 4,801
=================== ====================
Undistributed (overdistributed) net investment income included
in net assets $ (1) $ --
</Table>
* For the period January 1, 2005 (commencement of operations) to October 31,
2005.
** 2040 Strategy Fund Class R2: For the period March 17, 2006 (commencement
of operations) to April 30, 2006.
Equity Aggressive Strategy, Aggressive Strategy, Moderate Strategy and
Conservative Strategy Funds Class R2: For the period March 29, 2006
(commencement of operations) to April 30, 2006.
Balanced Strategy Fund Class R2: For the period April 3, 2006
(commencement of operations) to April 30, 2006.
*** Class D Shares were redesignated Class R3 Shares on March 1, 2006.
See accompanying notes which are an integral part of the financial statements.
38 Statement of Changes in Net Assets
<Table>
<Caption>
2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND
------------------------------- ------------------------------- -------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005* (UNAUDITED) 2005* (UNAUDITED) 2005*
- ---------------------------------------------------------------------------------------------------------
$ 78 $ 39 $ 75 $ 32 $ 66 $ 27
106 2 112 1 146 1
348 43 390 46 418 60
------------- ------------- ------------- ------------- ------------- -------------
532 84 577 79 630 88
------------- ------------- ------------- ------------- ------------- -------------
(16) (4) (22) (4) (15) (3)
-- -- -- -- --
(14) (11) (13) (9) (13) (8)
-- -- -- (3) --
(33) (12) (25) (9) (21) (7)
(18) (13) (17) (11) (15) (10)
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
(81) (40) (77) (33) (67) (28)
------------- ------------- ------------- ------------- ------------- -------------
6,986 4,543 3,308 4,456 3,124 4,699
------------- ------------- ------------- ------------- ------------- -------------
7,437 4,587 3,808 4,502 3,687 4,759
4,587 -- 4,502 -- 4,759 --
------------- ------------- ------------- ------------- ------------- -------------
$ 12,024 $ 4,587 $ 8,310 $ 4,502 $ 8,446 $ 4,759
============= ============= ============= ============= ============= =============
$ (3) $ -- $ (2) $ -- $ (1) $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 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 INCOME
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM
PERIOD INCOME (LOSS)(A)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
EQUITY AGGRESSIVE STRATEGY FUND
Class A
April 30, 2006* 10.63 .09 1.57 1.66
October 31, 2005 9.42 .10 1.22 1.32
October 31, 2004 8.50 .06 .95 1.01
October 31, 2003 (2) 6.38 .02 2.13 2.15
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2006* 10.20 .04 1.51 1.55
October 31, 2005 9.07 .03 1.17 1.20
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)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 10.46 .10 1.54 1.64
October 31, 2005 9.27 .11 1.19 1.30
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)
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2006 (8) 11.60 .01 .33 .34
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2006* 10.46 .08 1.53 1.61
October 31, 2005 9.27 .09 1.19 1.28
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)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 10.59 .11 1.56 1.67
October 31, 2005 9.37 .15 1.20 1.35
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)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- ----------------------------------------
EQUITY AGGRESSIVE STRATEGY FUND
Class A
April 30, 2006* (.10) (.08) (.18)
October 31, 2005 (.11) -- (.11)
October 31, 2004 (.09) -- (.09)
October 31, 2003 (2) (.03) -- (.03)
- ----------------------------------------
Class C
April 30, 2006* (.06) (.08) (.14)
October 31, 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)
- ----------------------------------------
Class E
April 30, 2006* (.10) (.08) (.18)
October 31, 2005 (.11) -- (.11)
October 31, 2004 (.09) -- (.09)
October 31, 2003 (.04) -- (.04)
October 31, 2002 (.03) (.14) (.17)
October 31, 2001 (.15) (.08) (.23)
- ----------------------------------------
Class R2
April 30, 2006 (8) (.03) -- (.03)
- ----------------------------------------
Class R3 (9)
April 30, 2006* (.08) (.08) (.16)
October 31, 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)
- ----------------------------------------
Class S
April 30, 2006* (.11) (.08) (.19)
October 31, 2005 (.13) -- (.13)
October 31, 2004 (.10) -- (.10)
October 31, 2003 (.06) -- (.06)
October 31, 2002 (.04) (.14) (.18)
October 31, 2001 (.15) (.08) (.23)
- ----------------------------------------
</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)
- ------------------------------------------------------------------------------
12.11 15.71 162,879 .25
10.63 14.09 94,182 .25
9.42 11.92 43,148 .25
8.50 33.75 7,399 .25
- ------------------------------------------------------------------------------
11.61 15.28 382,359 1.00
10.20 13.29 284,152 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
- ------------------------------------------------------------------------------
11.92 15.77 221,089 .25
10.46 14.08 192,258 .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
- ------------------------------------------------------------------------------
11.91 2.94 17,139 .25
- ------------------------------------------------------------------------------
11.91 15.53 381,826 .50
10.46 13.88 308,388 .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
- ------------------------------------------------------------------------------
12.07 15.90 187,868 --
10.59 14.47 133,943 --
9.37 12.09 111,266 --
8.45 26.26 89,455 --
6.75 (11.95) 58,236 --
7.83 (22.43) 46,029 --
- ------------------------------------------------------------------------------
<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)
- ---
.68 .80 2.82
.66 .95 3.44
.65 .69 12.46
1.19 .30 17.81
- ---
1.42 .34 2.82
1.41 .31 3.44
1.40 .13 12.46
1.43 (.19) 17.81
1.42 (.32) 29.86
1.39 (.45) 47.86
- ---
.67 .86 2.82
.66 1.13 3.44
.65 .89 12.46
.68 .59 17.81
.67 .44 29.86
.64 .30 47.86
- ---
.72 .12 2.82
- ---
.92 .69 2.82
.91 .85 3.44
.90 .64 12.46
.93 .24 17.81
.92 .20 29.86
.89 .05 47.86
- ---
.42 .94 2.82
.41 1.42 3.44
.40 1.21 12.46
.43 .90 17.81
.42 .72 29.86
.39 .59 47.86
- ---
</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, CONTINUED -- 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)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
AGGRESSIVE STRATEGY FUND
Class A
April 30, 2006* 10.90 .12 1.24 1.36
October 31, 2005 9.95 .15 .98 1.13
October 31, 2004 9.12 .11 .87 .98
October 31, 2003 (4) 7.20 .04 1.94 1.98
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2006* 10.84 .07 1.23 1.30
October 31, 2005 9.89 .09 .96 1.05
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)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 10.91 .12 1.24 1.36
October 31, 2005 9.96 .17 .96 1.13
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)
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2006 (8) 11.86 .02 .26 .28
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2006* 10.93 .11 1.24 1.35
October 31, 2005 9.97 .14 .97 1.11
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)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 10.97 .14 1.24 1.38
October 31, 2005 10.00 .20 .98 1.18
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)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- ----------------------------------------
AGGRESSIVE STRATEGY FUND
Class A
April 30, 2006* (.12) (.06) (.18)
October 31, 2005 (.18) -- (.18)
October 31, 2004 (.15) -- (.15)
October 31, 2003 (4) (.06) -- (.06)
- ----------------------------------------
Class C
April 30, 2006* (.08) (.06) (.14)
October 31, 2005 (.10) -- (.10)
October 31, 2004 (.10) -- (.10)
October 31, 2003 (.03) -- (.03)
October 31, 2002 (.05) (.17) (.22)
October 31, 2001 (.10) (.04) (.14)
- ----------------------------------------
Class E
April 30, 2006* (.12) (.06) (.18)
October 31, 2005 (.18) -- (.18)
October 31, 2004 (.14) -- (.14)
October 31, 2003 (.09) -- (.09)
October 31, 2002 (.11) (.17) (.28)
October 31, 2001 (.17) (.04) (.21)
- ----------------------------------------
Class R2
April 30, 2006 (8) (.05) -- (.05)
- ----------------------------------------
Class R3 (9)
April 30, 2006* (.11) (.06) (.17)
October 31, 2005 (.15) -- (.15)
October 31, 2004 (.13) -- (.13)
October 31, 2003 (.07) -- (.07)
October 31, 2002 (.10) (.17) (.27)
October 31, 2001 (.14) (.04) (.18)
- ----------------------------------------
Class S
April 30, 2006* (.14) (.06) (.20)
October 31, 2005 (.21) -- (.21)
October 31, 2004 (.16) -- (.16)
October 31, 2003 (.11) -- (.11)
October 31, 2002 (.13) (.17) (.30)
October 31, 2001 (.19) (.04) (.23)
- ----------------------------------------
</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)
- ------------------------------------------------------------------------------
12.08 12.61 533,892 .25
10.90 11.44 365,024 .25
9.95 10.76 154,884 .25
9.12 27.35 27,700 .25
- ------------------------------------------------------------------------------
12.00 12.10 751,022 1.00
10.84 10.70 572,129 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
- ------------------------------------------------------------------------------
12.09 12.59 461,776 .25
10.91 11.40 394,842 .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
- ------------------------------------------------------------------------------
12.09 2.37 9,404 .25
- ------------------------------------------------------------------------------
12.11 12.43 747,474 .50
10.93 11.22 616,939 .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
- ------------------------------------------------------------------------------
12.15 12.66 380,487 --
10.97 11.83 308,795 --
10.00 10.99 247,011 --
9.16 23.10 159,869 --
7.54 (8.37) 108,267 --
8.52 (16.15) 86,466 --
- ------------------------------------------------------------------------------
<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)
- ---
.67 1.01 2.00
.64 1.43 .72
.63 1.11 2.22
.74 .51 15.15
- ---
1.42 .65 2.00
1.39 .82 .72
1.38 .67 2.22
1.41 .24 15.15
1.39 .51 11.73
1.38 .53 13.12
- ---
.67 1.07 2.00
.64 1.63 .72
.63 1.54 2.22
.66 1.02 15.15
.64 1.29 11.73
.63 1.30 13.12
- ---
.71 .19 2.00
- ---
.92 .93 2.00
.89 1.35 .72
.88 1.14 2.22
.91 .66 15.15
.89 .92 11.73
.88 1.02 13.12
- ---
.42 1.19 2.00
.39 1.88 .72
.38 1.70 2.22
.41 1.30 15.15
.39 1.51 11.73
.38 1.50 13.12
- ---
</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, CONTINUED -- 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)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
BALANCED STRATEGY FUND
Class A
April 30, 2006* 10.99 .15 .90 1.05
October 31, 2005 10.33 .20 .71 .91
October 31, 2004 9.64 .16 .74 .90
October 31, 2003 (2) 8.20 .06 1.47 1.53
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2006* 10.93 .10 .91 1.01
October 31, 2005 10.29 .13 .69 .82
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)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 11.00 .15 .91 1.06
October 31, 2005 10.35 .22 .68 .90
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)
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2006 (10) 11.76 .02 .13 .15
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2006* 11.01 .14 .90 1.04
October 31, 2005 10.35 .19 .70 .89
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)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 11.05 .17 .90 1.07
October 31, 2005 10.39 .25 .69 .94
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)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- ----------------------------------------
BALANCED STRATEGY FUND
Class A
April 30, 2006* (.15) (.07) (.22)
October 31, 2005 (.22) (.03) (.25)
October 31, 2004 (.21) -- (.21)
October 31, 2003 (2) (.09) -- (.09)
- ----------------------------------------
Class C
April 30, 2006* (.11) (.07) (.18)
October 31, 2005 (.15) (.03) (.18)
October 31, 2004 (.16) -- (.16)
October 31, 2003 (.12) -- (.12)
October 31, 2002 (.13) (.11) (.24)
October 31, 2001 (.20) (.03) (.23)
- ----------------------------------------
Class E
April 30, 2006* (.15) (.07) (.22)
October 31, 2005 (.22) (.03) (.25)
October 31, 2004 (.21) -- (.21)
October 31, 2003 (.18) -- (.18)
October 31, 2002 (.19) (.11) (.30)
October 31, 2001 (.26) (.03) (.29)
- ----------------------------------------
Class R2
April 30, 2006 (10) (.07) -- (.07)
- ----------------------------------------
Class R3 (9)
April 30, 2006* (.14) (.07) (.21)
October 31, 2005 (.20) (.03) (.23)
October 31, 2004 (.19) -- (.19)
October 31, 2003 (.16) -- (.16)
October 31, 2002 (.18) (.11) (.29)
October 31, 2001 (.25) (.03) (.28)
- ----------------------------------------
Class S
April 30, 2006* (.16) (.07) (.23)
October 31, 2005 (.25) (.03) (.28)
October 31, 2004 (.23) -- (.23)
October 31, 2003 (.20) -- (.20)
October 31, 2002 (.22) (.11) (.33)
October 31, 2001 (.29) (.03) (.32)
- ----------------------------------------
</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)
- ------------------------------------------------------------------------------
11.82 9.65 821,920 .25
10.99 8.91 593,609 .25
10.33 9.49 281,685 .25
9.64 18.80 60,696 .25
- ------------------------------------------------------------------------------
11.76 9.31 1,193,582 1.00
10.93 7.96 964,203 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
- ------------------------------------------------------------------------------
11.84 9.72 561,266 .25
11.00 8.77 506,587 .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
- ------------------------------------------------------------------------------
11.84 1.28 7,819 .25
- ------------------------------------------------------------------------------
11.84 9.49 1,024,167 .50
11.01 8.61 892,607 .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
- ------------------------------------------------------------------------------
11.89 9.81 626,437 --
11.05 9.10 518,148 --
10.39 9.82 426,147 --
9.68 18.22 278,123 --
8.38 (4.47) 155,977 --
9.09 (8.35) 96,801 --
- ------------------------------------------------------------------------------
<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)
- ---
.67 1.27 1.82
.62 1.88 .55
.59 1.63 6.42
.66 .74 18.55
- ---
1.42 .90 1.82
1.37 1.22 .55
1.34 1.23 6.42
1.36 1.05 18.55
1.34 1.38 12.18
1.34 1.71 33.42
- ---
.67 1.31 1.82
.62 2.03 .55
.59 2.25 6.42
.61 1.88 18.55
.59 2.17 12.18
.59 2.51 33.42
- ---
.71 .20 1.82
- ---
.92 1.18 1.82
.87 1.75 .55
.84 1.70 6.42
.86 1.38 18.55
.84 1.75 12.18
.84 2.25 33.42
- ---
.42 1.43 1.82
.37 2.28 .55
.34 2.23 6.42
.36 2.12 18.55
.34 2.40 12.18
.34 2.64 33.42
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 45
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS, CONTINUED -- 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)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
MODERATE STRATEGY FUND
Class A
April 30, 2006* 10.81 .15 .54 .69
October 31, 2005 10.50 .22 .35 .57
October 31, 2004 10.03 .17 .51 .68
October 31, 2003 (3) 9.02 .07 1.06 1.13
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2006* 10.77 .11 .53 .64
October 31, 2005 10.45 .14 .36 .50
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)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 10.82 .15 .53 .68
October 31, 2005 10.50 .22 .36 .58
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)
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2006 (8) 11.25 .09 .01 .10
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2006* 10.84 .14 .54 .68
October 31, 2005 10.52 .20 .35 .55
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)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 10.84 .17 .53 .70
October 31, 2005 10.52 .25 .35 .60
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)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- ----------------------------------------
MODERATE STRATEGY FUND
Class A
April 30, 2006* (.16) (.07) (.23)
October 31, 2005 (.23) (.03) (.26)
October 31, 2004 (.19) (.02) (.21)
October 31, 2003 (3) (.12) -- (.12)
- ----------------------------------------
Class C
April 30, 2006* (.12) (.07) (.19)
October 31, 2005 (.15) (.03) (.18)
October 31, 2004 (.14) (.02) (.16)
October 31, 2003 (.17) -- (.17)
October 31, 2002 (.20) (.05) (.25)
October 31, 2001 (.30) (.02) (.32)
- ----------------------------------------
Class E
April 30, 2006* (.16) (.07) (.23)
October 31, 2005 (.23) (.03) (.26)
October 31, 2004 (.19) (.02) (.21)
October 31, 2003 (.23) -- (.23)
October 31, 2002 (.27) (.05) (.32)
October 31, 2001 (.37) (.02) (.39)
- ----------------------------------------
Class R2
April 30, 2006 (8) (.09) -- (.09)
- ----------------------------------------
Class R3 (9)
April 30, 2006* (.15) (.07) (.22)
October 31, 2005 (.20) (.03) (.23)
October 31, 2004 (.17) (.02) (.19)
October 31, 2003 (.21) -- (.21)
October 31, 2002 (.25) (.05) (.30)
October 31, 2001 (.35) (.02) (.37)
- ----------------------------------------
Class S
April 30, 2006* (.17) (.07) (.24)
October 31, 2005 (.25) (.03) (.28)
October 31, 2004 (.21) (.02) (.23)
October 31, 2003 (.25) -- (.25)
October 31, 2002 (.29) (.05) (.34)
October 31, 2001 (.39) (.02) (.41)
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
46 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)
- ------------------------------------------------------------------------------
11.27 6.44 148,481 .25
10.81 5.44 121,343 .25
10.50 6.87 55,049 .25
10.03 12.56 18,820 .25
- ------------------------------------------------------------------------------
11.22 5.98 203,338 1.00
10.77 4.78 183,445 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
- ------------------------------------------------------------------------------
11.27 6.33 171,422 .25
10.82 5.52 164,151 .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
- ------------------------------------------------------------------------------
11.26 0.89 1,318 .25
- ------------------------------------------------------------------------------
11.30 6.28 338,743 .50
10.84 5.25 309,824 .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
- ------------------------------------------------------------------------------
11.30 6.55 120,005 --
10.84 5.76 113,097 --
10.52 7.03 106,031 --
10.05 12.55 73,980 --
9.17 (1.08) 45,579 --
9.61 (1.87) 24,078 --
- ------------------------------------------------------------------------------
<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)
- ---
.63 1.39 4.46
.61 2.03 4.54
.63 1.71 3.99
.77 .84 11.08
- ---
1.38 1.02 4.46
1.36 1.31 4.54
1.37 .48 3.99
1.42 1.29 11.08
1.46 2.05 15.16
1.54 2.95 42.49
- ---
.63 1.40 4.46
.61 2.07 4.54
.62 1.85 3.99
.67 2.22 11.08
.71 2.84 15.16
.79 3.60 42.49
- ---
.66 .82 4.46
- ---
.88 1.27 4.46
.86 1.81 4.54
.87 1.55 3.99
.92 1.62 11.08
.96 2.51 15.16
1.04 3.39 42.49
- ---
.38 1.52 4.46
.36 2.33 4.54
.37 2.04 3.99
.42 2.44 11.08
.46 2.97 15.16
.54 3.97 42.49
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 47
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS, CONTINUED -- 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)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
CONSERVATIVE STRATEGY FUND
Class A
April 30, 2006* 10.66 .17 .18 .35
October 31, 2005 10.65 .24 .05 .29
October 31, 2004 10.42 .20 .28 .48
October 31, 2003 (1) 9.94 .09 .50 .59
- -----------------------------------------------------------------------------------------------------------------
Class C
April 30, 2006* 10.62 .12 .19 .31
October 31, 2005 10.61 .16 .05 .21
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
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 10.68 .14 .21 .35
October 31, 2005 10.66 .24 .06 .30
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
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2006 (8) 10.86 .12 (.09) .03
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2006* 10.71 .15 .19 .34
October 31, 2005 10.69 .21 .06 .27
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
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 10.72 .18 .18 .36
October 31, 2005 10.70 .27 .05 .32
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
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- ----------------------------------------
CONSERVATIVE STRATEGY FUND
Class A
April 30, 2006* (.17) (.07) (.24)
October 31, 2005 (.24) (.04) (.28)
October 31, 2004 (.21) (.04) (.25)
October 31, 2003 (1) (.11) -- (.11)
- ----------------------------------------
Class C
April 30, 2006* (.13) (.07) (.20)
October 31, 2005 (.16) (.04) (.20)
October 31, 2004 (.13) (.04) (.17)
October 31, 2003 (.16) -- (.16)
October 31, 2002 (.29) (.01) (.30)
October 31, 2001 (.42) -- (.42)
- ----------------------------------------
Class E
April 30, 2006* (.17) (.07) (.24)
October 31, 2005 (.24) (.04) (.28)
October 31, 2004 (.20) (.04) (.25)
October 31, 2003 (.23) -- (.23)
October 31, 2002 (.36) (.01) (.37)
October 31, 2001 (.48) -- (.48)
- ----------------------------------------
Class R2
April 30, 2006 (8) (.12) -- (.12)
- ----------------------------------------
Class R3 (9)
April 30, 2006* (.16) (.07) (.23)
October 31, 2005 (.21) (.04) (.25)
October 31, 2004 (.18) (.04) (.22)
October 31, 2003 (.21) -- (.21)
October 31, 2002 (.34) (.01) (.35)
October 31, 2001 (.45) -- (.45)
- ----------------------------------------
Class S
April 30, 2006* (.19) (.07) (.26)
October 31, 2005 (.26) (.04) (.30)
October 31, 2004 (.23) (.04) (.27)
October 31, 2003 (.25) -- (.25)
October 31, 2002 (.38) (.01) (.39)
October 31, 2001 (.50) -- (.50)
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
48 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)
- ------------------------------------------------------------------------------
10.77 3.34 42,314 .25
10.66 2.74 40,225 .25
10.65 4.62 20,709 .25
10.42 6.01 5,526 .25
- ------------------------------------------------------------------------------
10.73 2.95 81,781 1.00
10.62 1.99 88,226 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
- ------------------------------------------------------------------------------
10.79 3.27 74,859 .25
10.68 2.81 183,219 .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
- ------------------------------------------------------------------------------
10.77 0.27 1,313 .25
- ------------------------------------------------------------------------------
10.82 3.19 171,784 .50
10.71 2.55 163,499 .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
- ------------------------------------------------------------------------------
10.82 3.35 43,595 --
10.72 3.06 44,293 --
10.70 4.82 42,949 --
10.47 7.63 36,380 --
9.97 2.02 24,953 --
10.16 4.52 11,429 --
- ------------------------------------------------------------------------------
<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)
- ---
.64 1.55 7.26
.62 2.26 9.45
.66 1.89 6.18
.97 .97 30.98
- ---
1.39 1.14 7.26
1.37 1.47 9.45
1.38 1.15 6.18
1.43 1.21 30.98
1.59 2.78 35.08
1.98 4.20 54.86
- ---
.64 1.37 7.26
.62 2.20 9.45
.63 1.95 6.18
.68 1.86 30.98
.84 3.54 35.08
1.23 4.83 54.86
- ---
.69 1.20 7.26
- ---
.89 1.40 7.26
.87 1.97 9.45
.88 1.65 6.18
.93 1.57 30.98
1.09 3.33 35.08
1.48 4.06 54.86
- ---
.39 1.64 7.26
.37 2.46 9.45
.38 2.17 6.18
.43 2.27 30.98
.59 3.79 35.08
.98 5.49 54.86
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 49
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS, CONTINUED -- 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)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
2010 STRATEGY FUND
Class A
April 30, 2006* 10.06 .15 .57 .72
October 31, 2005 (6) 10.21 .04 (.11) (.07)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 10.07 .15 .57 .72
October 31, 2005 (5) 10.00 .12 .07 .19
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2006* 10.07 .19 .50 .69
October 31, 2005 (5) 10.00 .10 .08 .18
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 10.08 .17 .55 .72
October 31, 2005 (5) 10.00 .15 .07 .22
- -----------------------------------------------------------------------------------------------------------------
2020 STRATEGY FUND
Class A
April 30, 2006* 10.14 .16 .71 .87
October 31, 2005 (6) 10.29 .03 (.11) (.08)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 10.14 .14 .73 .87
October 31, 2005 (5) 10.00 .11 .14 .25
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2006* 10.13 .22 .64 .86
October 31, 2005 (5) 10.00 .08 .14 .22
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 10.14 .18 .70 .88
October 31, 2005 (5) 10.00 .13 .14 .27
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- ----------------------------------------
2010 STRATEGY FUND
Class A
April 30, 2006* (.15) -- (.15)
October 31, 2005 (6) (.08) -- (.08)
- ----------------------------------------
Class E
April 30, 2006* (.15) -- (.15)
October 31, 2005 (5) (.12) -- (.12)
- ----------------------------------------
Class R3 (9)
April 30, 2006* (.13) -- (.13)
October 31, 2005 (5) (.11) -- (.11)
- ----------------------------------------
Class S
April 30, 2006* (.16) -- (.16)
October 31, 2005 (5) (.14) -- (.14)
- ----------------------------------------
2020 STRATEGY FUND
Class A
April 30, 2006* (.14) -- (.14)
October 31, 2005 (6) (.07) -- (.07)
- ----------------------------------------
Class E
April 30, 2006* (.14) -- (.14)
October 31, 2005 (5) (.11) -- (.11)
- ----------------------------------------
Class R3 (9)
April 30, 2006* (.13) -- (.13)
October 31, 2005 (5) (.09) -- (.09)
- ----------------------------------------
Class S
April 30, 2006* (.15) -- (.15)
October 31, 2005 (5) (.13) -- (.13)
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
50 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)
- ------------------------------------------------------------------------------
10.63 7.16 1,212 .25
10.06 (1.01) 990 .25
- ------------------------------------------------------------------------------
10.64 7.15 1,117 .25
10.07 1.96 1,020 .25
- ------------------------------------------------------------------------------
10.63 6.91 2,264 .50
10.07 1.79 1,768 .50
- ------------------------------------------------------------------------------
10.64 7.17 1,297 --
10.08 2.25 1,023 --
- ------------------------------------------------------------------------------
10.87 8.65 1,439 .25
10.14 (1.02) 990 .25
- ------------------------------------------------------------------------------
10.87 8.64 1,424 .25
10.14 2.52 1,025 .25
- ------------------------------------------------------------------------------
10.86 8.57 5,367 .50
10.13 2.23 1,545 .50
- ------------------------------------------------------------------------------
10.87 8.77 3,794 --
10.14 2.71 1,027 --
- ------------------------------------------------------------------------------
<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)
- ---
3.52 1.36 25.97
4.84 .37 .99
- ---
2.49 1.37 25.97
5.32 1.25 .99
- ---
2.67 1.18 25.97
5.56 1.06 .99
- ---
2.19 1.47 25.97
5.07 1.45 .99
- ---
3.13 1.27 5.27
4.74 .30 6.98
- ---
2.17 1.29 5.27
5.13 1.11 6.98
- ---
2.10 1.01 5.27
5.38 .89 6.98
- ---
1.74 1.26 5.27
4.88 1.31 6.98
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 51
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
FINANCIAL HIGHLIGHTS, CONTINUED -- 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)(B) GAIN (LOSS) OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
2030 STRATEGY FUND
Class A
April 30, 2006* 10.19 .22 .80 1.02
October 31, 2005 (6) 10.33 .03 (.11) (.08)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 10.20 .14 .87 1.01
October 31, 2005 (5) 10.00 .10 .19 .29
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2006* 10.19 .20 .81 1.01
October 31, 2005 (5) 10.00 .07 .20 .27
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 10.20 .17 .86 1.03
October 31, 2005 (5) 10.00 .12 .19 .31
- -----------------------------------------------------------------------------------------------------------------
2040 STRATEGY FUND
Class A
April 30, 2006* 10.23 .16 .99 1.15
October 31, 2005 (6) 10.36 .02 (.12) (.10)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 10.24 .13 1.02 1.15
October 31, 2005 (5) 10.00 .08 .24 .32
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2006 (7) 11.14 .02 .13 .15
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2006* 10.24 .17 .95 1.12
October 31, 2005 (5) 10.00 .06 .24 .30
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 10.24 .15 1.01 1.16
October 31, 2005 (5) 10.00 .10 .24 .34
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET TOTAL
INVESTMENT INCOME REALIZED GAIN DISTRIBUTIONS
- ----------------------------------------
2030 STRATEGY FUND
Class A
April 30, 2006* (.13) -- (.13)
October 31, 2005 (6) (.06) -- (.06)
- ----------------------------------------
Class E
April 30, 2006* (.13) -- (.13)
October 31, 2005 (5) (.09) -- (.09)
- ----------------------------------------
Class R3 (9)
April 30, 2006* (.12) -- (.12)
October 31, 2005 (5) (.08) -- (.08)
- ----------------------------------------
Class S
April 30, 2006* (.14) -- (.14)
October 31, 2005 (5) (.11) -- (.11)
- ----------------------------------------
2040 STRATEGY FUND
Class A
April 30, 2006* (.13) -- (.13)
October 31, 2005 (6) (.03) -- (.03)
- ----------------------------------------
Class E
April 30, 2006* (.13) -- (.13)
October 31, 2005 (5) (.08) -- (.08)
- ----------------------------------------
Class R2
April 30, 2006 (7) (.04) -- (.04)
- ----------------------------------------
Class R3 (9)
April 30, 2006* (.11) -- (.11)
October 31, 2005 (5) (.06) -- (.06)
- ----------------------------------------
Class S
April 30, 2006* (.14) -- (.14)
October 31, 2005 (5) (.10) -- (.10)
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
52 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)
- ------------------------------------------------------------------------------
11.08 10.10 1,299 .25
10.19 (1.01) 990 .25
- ------------------------------------------------------------------------------
11.08 9.96 1,159 .25
10.20 2.96 1,029 .25
- ------------------------------------------------------------------------------
11.08 9.96 4,187 .50
10.19 2.69 1,452 .50
- ------------------------------------------------------------------------------
11.09 10.19 1,665 --
10.20 3.15 1,031 --
- ------------------------------------------------------------------------------
11.25 11.26 1,506 .25
10.23 (.95) 991 .25
- ------------------------------------------------------------------------------
11.26 11.24 1,237 .25
10.24 3.20 1,032 .25
- ------------------------------------------------------------------------------
11.25 1.35 1,013 .25
- ------------------------------------------------------------------------------
11.25 11.00 3,273 .50
10.24 3.03 1,701 .50
- ------------------------------------------------------------------------------
11.26 11.37 1,417 --
10.24 3.39 1,035 --
- ------------------------------------------------------------------------------
<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)
- ---
2.63 1.21 36.60
4.86 .25 1.11
- ---
2.18 1.25 36.60
5.37 .95 1.11
- ---
2.14 .87 36.60
5.62 .75 1.11
- ---
1.80 1.27 36.60
5.12 1.16 1.11
- ---
3.05 1.14 19.87
4.81 .21 2.39
- ---
2.20 1.15 19.87
5.26 .78 2.39
- ---
1.42 .24 19.87
- ---
2.28 .85 19.87
5.52 .59 2.39
- ---
1.91 1.26 19.87
5.02 .99 2.39
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 53
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2006 (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 period January 1, 2005 (commencement of operations) to October 31,
2005.
(6) For the period September 1, 2005 (commencement of operations) to October
31, 2005.
(7) For the period March 17, 2006 (commencement of operations) to April 30,
2006.
(8) For the period March 29, 2006 (commencement of operations) to April 30,
2006.
(9) Class D Shares were redesignated Class R3 Shares on March 1, 2006.
(10) For the period April 3, 2006 (commencement of operations) to April 30,
2006.
(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 through June 30, 2005, as described in Note 4 to the financial
statements.
(h) May reflect amounts waived and/or reimbursed by FRIMCo as the investment
adviser and transfer agent. Expenses are shown net of those expenses
pushed down to Underlying Funds through June 30, 2005, as described in
Note 4 to the financial statements.
See accompanying notes which are an integral part of the financial statements.
54 Notes to Financial Highlights
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company" or "FRIC") 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 (the "Board") to issue an
unlimited number of shares of beneficial interest at a $.01 par value per
share.
Effective March 1, 2006, Class D shares of the Funds were redesignated Class
R3 shares.
No Class R1 shares of the Funds were issued during the period.
No Class R2 shares of the 2010 Strategy, 2020 Strategy and 2030 Strategy
Funds were issued during the period.
Effective July 1, 2006, the Aggressive Strategy Fund will change its name to
the Growth Strategy Fund and the Equity Aggressive Strategy Fund will change
its name to the Equity Growth Strategy Fund.
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment
Management Company.
Each of the Funds listed in the table below allocates its assets by investing
in a combination of Class S shares of other of the Investment Company's Funds
(the "Underlying Funds"). Frank Russell Investment Management Company
("FRIMCo"), the Funds' investment adviser, may modify the target asset
allocation for any Fund and modify the selection of Underlying Funds for any
Fund from time to time. From time to time, each Fund may adjust its
investments within set limits based on FRIMCo's outlook for the economy,
financial markets generally and relative to market valuation of the asset
classes represented by each Underlying Fund. Additionally, each Fund may
deviate from set limits when, in FRIMCo's opinion, it is necessary to do so
to pursue the Fund's investment objective. However, each Fund expects that
amounts it allocates to each Underlying Fund will generally vary only within
10% of the ranges 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>
Notes to Financial Statements 55
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Each of the Funds listed in the table below allocates its assets by investing
in a combination of Class S of the Underlying Funds. The allocation of these
Funds' assets to the Underlying Funds in which it invests will become more
conservative over time. Currently, FRIMCo will manage each Fund according to
its target asset allocation strategy and will not trade actively among
Underlying Funds or attempt to capture short-term market opportunities.
However, from time to time, FRIMCo may modify the target asset allocation for
any Fund and/or the Underlying Funds in which a Fund invests. Each Fund
expects that the amounts it allocates to each Underlying Fund will generally
vary only within 10% of the percentages specified in the Prospectus. The
following table shows the target allocation to each Underlying Fund as of
January 1, 2006:
<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% 14% 17% 20%
Special Growth Fund 3 4 4 4
Quantitative Equity Fund 12 14 17 20
Real Estate Securities Fund 4 5 5 6
International Equities
International Securities Fund 12 14 17 18
Emerging Markets Fund 1 2 3 3
Bonds
Diversified Bond Fund 26 23 17 9
Short Duration Bond Fund 26 10 -- --
Multistrategy Bond Fund 4 14 20 20
--- --- --- ---
100 100 100 100
</Table>
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.
56 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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 at the time 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 last sale;
- 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, 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.
- 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 of 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
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 on 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 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
Notes to Financial Statements 57
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
movement of the value of Underlying Fund shares and 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 of the US securities
market (defined in the Fair Value Procedures as the movement by any two of
four major US Indexes greater than a certain percentage) or other significant
event; foreign market holidays if on a daily basis, Fund exposure exceeds 20%
in aggregate (all closed markets combined); a company development; a natural
disaster; or an armed conflict.
Because foreign securities can trade on a 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, if any, 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, 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 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.
58 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 E, Class R1, Class R2, Class R3 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.
3. INVESTMENT TRANSACTIONS
Securities
During the six months ended April 30, 2006, purchases and sales of the
Underlying Funds were as follows:
<Table>
<Caption>
FUNDS PURCHASES SALES
- -------------------------------------------------------------
Equity Aggressive
Strategy $ 254,952,355 $ 33,156,830
Aggressive Strategy 478,974,570 51,280,176
Balanced Strategy 615,837,277 70,204,373
Moderate Strategy 103,559,050 42,135,379
Conservative Strategy 35,902,506 143,806,408
</Table>
<Table>
- -------------------------------------------------------------
<Caption>
FUNDS PURCHASES SALES
2010 Strategy $ 2,239,075 $ 1,378,128
2020 Strategy 7,417,657 364,160
2030 Strategy 5,806,795 2,411,172
2040 Strategy 4,460,043 1,260,303
</Table>
4. RELATED PARTIES
Adviser 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 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 six months ended
April 30, 2006, the Adviser contractually agreed to waive the advisory fee
for all Funds at least through February 28, 2007. The adviser does not have
the ability to recover amounts waived from the six months ended April 30,
2006 or previous periods. The administrative fees were charged to the
Underlying Funds or reimbursed by FRIMCo as discussed below.
Direct operating expenses include those arising from accounting,
administrative, custody, auditing, legal and transfer agent services. Until
June 30, 2005, the foregoing direct operating expenses were borne either by
the Underlying Funds in which a Fund invests pursuant to Special Servicing
Agreements (described below) between each affected Fund, Underlying Fund and
FRIMCo or by FRIMCo pursuant to a Letter Agreement. Direct operating expenses
also include expenses attributable to advisory fees (which are currently
waived by FRIMCo), any Rule 12b-1 distribution fee, any shareholder services
fees, or any nonrecurring extraordinary expenses, which will be borne by each
Fund or its appropriate Classes of Shares.
Notes to Financial Statements 59
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Special Servicing Agreement
The special servicing agreements were entered into in February 1999 by the
Adviser and were approved annually by the Funds' Board of Trustees. The
special servicing agreements were between each Fund and the Underlying Funds
in which the Fund invests. In accordance with the special servicing
agreements, certain expenses from the operation of the Funds were borne by
the Underlying Funds based on each Underlying Fund's proportionate share of
assets owned by the Funds. No Underlying Funds were charged expenses that
exceeded the estimated savings to each respective Underlying Fund. These
estimated savings appeared in the form of reduced transfer agent costs
resulting from the elimination of separate shareholder accounts which were
invested in the Underlying Funds. Rather than having each investor open a
shareholder account to invest individually in the Underlying Funds, the Funds
acted as omnibus accounts combining thousands of individual shareholder
accounts into a single account. This benefited the Underlying Funds, by
significantly reducing the number of shareholder accounts that needed to be
maintained, and by the omnibus accounts' netting out the trades of individual
shareholders to a point where the Fund of Funds only executed one trade each
day with each Underlying Fund. In the event that the financial benefits to
the Underlying Funds did not exceed aggregate expenses of any Fund of Fund,
the Adviser reimbursed the respective Underlying Funds. This arrangement was
discontinued on June 30, 2005.
Effective July 1, 2005, FRIMCo, as transfer agent, has agreed to waive its
transfer agency fees and to reimburse the Funds for all direct operating
expenses other than Rule 12b-1 distribution fees, shareholder services fees,
non-recurring expenses and extraordinary expenses.
For the six months ended April 30, 2006, the direct operating expenses
reimbursed by FRIMCo as transfer agent amounted to:
<Table>
<Caption>
FUNDS AMOUNT
- -------------------------------------------------------
Equity Aggressive Strategy $ 1,314,279
Aggressive Strategy 2,790,232
Balanced Strategy 4,170,359
Moderate Strategy 834,368
Conservative Strategy 466,505
</Table>
<Table>
- -------------------------------------------------------
<Caption>
FUNDS AMOUNT
2010 Strategy $ 58,956
2020 Strategy 57,554
2030 Strategy 57,388
2040 Strategy 57,307
</Table>
Transfer Agent
FRIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, FRIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. FRIMCo retains a portion
of this fee for its services provided to the Fund and pays the balance to
unaffiliated agents who assist in providing these services. Total fees for
the Funds presented herein for the six months ended April 30, 2006 were
$6,390,838. Effective July 1, 2005, FRIMCo has agreed to waive its transfer
agency fees for the Funds through at least February 28, 2007. Until June 30,
2005, the Underlying Funds and FRIMCo as transfer agent 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 E, Class R2 and Class R3 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 R3 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 R3 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 E, Class R2 and Class R3 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 E, Class R2 and Class R3 shares
on an annual basis.
60 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 R3 shares of each Fund rather
than on a per shareholder basis. Therefore, long-term shareholders of the
Class A, Class C and Class R3 shares may pay more than the economic
equivalent of the maximum sales charges permitted by the NASD.
For the six months ended April 30, 2006, the Distributor retained the
following amounts in sales charges:
<Table>
<Caption>
CONTINGENT DEFERRED SALES CHARGES CLASS A
----------------------------------------------------------
Equity Aggressive Strategy $ 4,406
Aggressive Strategy 1,669
Balanced Strategy 7,632
Moderate Strategy 2,803
Conservative Strategy 17,057
</Table>
For the six months ended April 30, 2006, the sales commissions paid to the
selling agents 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 $ 1,317,009 $ 242,785
Aggressive Strategy 3,654,672 713,749
Balanced Strategy 4,481,314 877,910
Moderate Strategy 512,162 96,196
Conservative Strategy 149,003 30,154
2010 Strategy 5,774 1,172
2020 Strategy 9,298 1,942
2030 Strategy 32,156 7,153
2040 Strategy 13,272 2,632
</Table>
Accrued fees payable to affiliates for the six months ended April 30, 2006
were as follows:
<Table>
<Caption>
EQUITY AGGRESSIVE AGGRESSIVE STRATEGY BALANCED STRATEGY MODERATE STRATEGY
STRATEGY FUND FUND FUND FUND
---------------------------------------------------------------------------------------------------------------
Administration fees $ 54,154 $ 115,772 $ 171,118 $ 40,007
Distribution fees 331,340 695,007 1,073,509 218,186
Shareholder servicing fees 196,832 388,076 551,999 141,985
Trustee fees 602 1,268 2,299 994
----------------- ----------------- ----------------- -----------------
$ 582,928 $ 1,200,123 $ 1,798,925 $ 401,172
================= ================= ================= =================
<Caption>
CONSERVATIVE STRATEGY
FUND
------------------------------
Administration fees $ 17,042
Distribution fees 92,250
Shareholder servicing fees 65,386
Trustee fees 1,105
-----------------
$ 175,783
=================
</Table>
<Table>
<Caption>
2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND FUND
----------------------------------------------------------------------------------------------------------
Administration fees $ 232 $ 423 $ 348 $ 329
Distribution fees 652 1,280 1,150 890
Shareholder servicing fees 636 1,260 1,011 1,047
Trustee fees 15 11 7 11
----------------- ----------------- ----------------- -----------------
$ 1,535 $ 2,974 $ 2,516 $ 2,277
================= ================= ================= =================
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company, 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 independent Trustees a retainer of
$52,000 per year, $6,500 ($5,000 prior to January 1, 2006) for each regular
quarterly meeting attended in person, $2,000 for each special meeting
attended in person, and $2,000 for each
Notes to Financial Statements 61
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Audit Committee meeting, Nominating and Governance Committee meeting or
Investment 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 Audit Committee Chair was paid a fee of $12,000 per
year and the Nominating and Governance Committee chair and the Investment
Committee chair were each paid a fee of $6,000 per year. The chairperson of
the Board receives an additional $52,000 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 six months ended April
30, 2006 with Underlying Funds which are or were an affiliated company are as
follows:
<Table>
<Caption>
PURCHASES SALES INCOME CAPITAL GAINS
AFFILIATE COST COST DISTRIBUTIONS DISTRIBUTIONS
--------------------------------------------------------------------------------------------------------------------------
Equity Aggressive Strategy Fund
Diversified Equity Fund $ 78,955,782 $ 2,976,402 $ 1,133,186 $ 8,259,672
Special Growth Fund 14,837,667 5,859,638 980,886 5,364,304
Quantitative Equity Fund 85,610,353 2,263,479 1,631,603 12,878,135
International Securities Fund 45,511,828 12,536,890 3,193,602 8,608,972
Emerging Markets Fund 5,395,921 4,116,775 1,264,966 1,265,259
Real Estate Securities Fund 24,640,804 5,030,101 2,608,020 5,755,079
------------------- ------------------- ------------------- -------------------
$ 254,952,355 $ 32,783,285 $ 10,812,263 $ 42,131,421
=================== =================== =================== ===================
Aggressive Strategy Fund
Diversified Equity Fund $ 104,720,952 $ -- $ 1,974,850 $ 14,473,405
Special Growth Fund 19,359,739 8,688,020 1,810,149 9,899,392
Quantitative Equity Fund 116,320,492 -- 2,819,258 22,557,442
International Securities Fund 62,016,694 21,096,829 5,593,808 15,079,193
Emerging Markets Fund 8,564,647 7,706,433 2,255,927 2,256,450
Real Estate Securities Fund 34,298,851 4,623,392 4,898,876 10,919,218
Multistrategy Bond Fund 133,693,195 5,784,864 10,662,186 574,021
------------------- ------------------- ------------------- -------------------
$ 478,974,570 $ 47,899,538 $ 30,015,054 $ 75,759,121
=================== =================== =================== ===================
Balanced Strategy Fund
Diversified Equity Fund $ 78,767,553 $ 653,759 $ 2,075,442 $ 15,263,309
Special Growth Fund 20,872,938 16,051,465 2,228,960 12,189,804
Quantitative Equity Fund 91,333,899 531,830 2,951,870 23,846,772
International Securities Fund 56,017,557 25,018,881 7,119,894 19,193,054
Emerging Markets Fund 9,657,931 10,840,953 2,617,906 2,618,513
Real Estate Securities Fund 36,690,377 9,350,976 6,212,595 13,940,938
Diversified Bond Fund 163,851,762 2,115,107 15,545,586 --
Multistrategy Bond Fund 158,645,260 2,088,361 16,008,042 864,729
------------------- ------------------- ------------------- -------------------
$ 615,837,277 $ 66,651,332 $ 54,760,295 $ 87,917,119
=================== =================== =================== ===================
Moderate Strategy Fund
Short Duration Bond Fund $ 37,501,644 $ 5,002,800 $ 5,421,847 $ --
Diversified Bond Fund 31,239,210 2,582,610 5,157,953 --
------------------- ------------------- ------------------- -------------------
$ 68,740,854 $ 7,585,410 $ 10,579,800 $ --
=================== =================== =================== ===================
Conservative Strategy Fund
Short Duration Bond Fund $ 18,261,935 $ 77,209,942 $ 4,689,765 $ --
------------------- ------------------- ------------------- -------------------
$ 18,261,935 $ 77,209,942 $ 4,689,765 $ --
=================== =================== =================== ===================
</Table>
62 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
For the six months ended April 30, 2006, 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
The Funds may have 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. At October
31, 2005, the Funds had no capital loss carryforwards.
For the six months ended April 30, 2006, the cost of investments, net
unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as
follows:
<Table>
<Caption>
EQUITY AGGRESSIVE AGGRESSIVE STRATEGY BALANCED STRATEGY MODERATE STRATEGY
STRATEGY FUND FUND FUND FUND
---------------------------------------------------------------------------------------------------------------
Cost of Investments $ 1,103,874,133 $ 2,425,733,397 $ 3,675,508,599 $ 894,515,052
================= ================= ================= =================
Unrealized Appreciation $ 244,792,523 $ 458,156,291 $ 582,168,177 $ 98,815,081
Unrealized Depreciation -- (8,350,976) (31,378,304) (11,639,197)
----------------- ----------------- ----------------- -----------------
Net Unrealized Appreciation
(Depreciation) $ 244,792,523 $ 449,805,315 $ 550,789,873 $ 87,175,884
================= ================= ================= =================
<Caption>
CONSERVATIVE STRATEGY
FUND
------------------------------
Cost of Investments $ 393,345,584
=================
Unrealized Appreciation $ 28,231,187
Unrealized Depreciation (6,449,048)
-----------------
Net Unrealized Appreciation
(Depreciation) $ 21,782,139
=================
</Table>
<Table>
<Caption>
2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND FUND
----------------------------------------------------------------------------------------------------------
Cost of Investments $ 5,672,386 $ 11,606,939 $ 7,866,764 $ 7,913,680
================= ================= ================= =================
Unrealized Appreciation $ 250,604 $ 469,478 $ 471,489 $ 516,109
Unrealized Depreciation (62,765) (82,223) (62,721) (48,302)
----------------- ----------------- ----------------- -----------------
Net Unrealized Appreciation
(Depreciation) $ 187,839 $ 387,255 $ 408,768 $ 467,807
================= ================= ================= =================
</Table>
Notes to Financial Statements 63
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the six months ended April 30, 2006 and the year ended
October 31, 2005 were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
EQUITY AGGRESSIVE STRATEGY FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 4,967 4,985 $ 57,415 $ 51,006
Proceeds from reinvestment of
distributions 151 57 1,703 580
Payments for shares redeemed (532) (765) (6,109) (7,983)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 4,586 4,277 53,009 43,603
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 7,199 10,044 79,648 98,816
Proceeds from reinvestment of
distributions 364 159 3,906 1,559
Payments for shares redeemed (2,494) (3,539) (27,525) (34,932)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,069 6,664 56,029 65,443
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 3,407 5,740 38,527 57,676
Proceeds from reinvestment of
distributions 293 188 3,248 1,871
Payments for shares redeemed (3,528) (4,018) (39,523) (40,455)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 172 1,910 2,252 19,092
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 1,538 -- 18,021 --
Proceeds from reinvestment of
distributions 4 -- 47 --
Payments for shares redeemed (104) -- (1,235) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,438(5) -- 16,833(5) --
----------------- ----------------- ----------------- -----------------
Class R3 (3)
Proceeds from shares sold 4,505 8,269 51,061 83,324
Proceeds from reinvestment of
distributions 446 234 4,926 2,336
Payments for shares redeemed (2,390) (3,307) (27,478) (33,426)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,561 5,196 28,509 52,234
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 4,391 5,235 50,114 53,376
Proceeds from reinvestment of
distributions 209 145 2,355 1,462
Payments for shares redeemed (1,681) (4,603) (19,213) (46,678)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,919 777 33,256 8,160
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 16,745 18,824 $ 189,888 $ 188,532
================= ================= ================= =================
</Table>
64 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
AGGRESSIVE STRATEGY FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 11,686 19,250 $ 136,043 $ 204,394
Proceeds from reinvestment of
distributions 589 373 6,777 3,957
Payments for shares redeemed (1,552) (1,712) (18,062) (18,244)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 10,723 17,911 124,758 190,107
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 13,365 21,081 154,373 222,508
Proceeds from reinvestment of
distributions 694 408 7,891 4,282
Payments for shares redeemed (4,278) (7,239) (49,432) (76,417)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 9,781 14,250 112,832 150,373
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 6,224 10,265 72,472 109,709
Proceeds from reinvestment of
distributions 591 547 6,790 5,800
Payments for shares redeemed (4,803) (5,503) (55,786) (58,370)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,012 5,309 23,476 57,139
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 859 -- 10,263 --
Proceeds from reinvestment of
distributions 3 -- 42 --
Payments for shares redeemed (84) -- (1,017) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 778(5) -- 9,288(5) --
----------------- ----------------- ----------------- -----------------
Class R3 (3)
Proceeds from shares sold 6,688 13,472 78,078 143,069
Proceeds from reinvestment of
distributions 855 718 9,831 7,615
Payments for shares redeemed (2,262) (3,132) (26,535) (33,301)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,281 11,058 61,374 117,383
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 7,737 9,469 90,116 101,117
Proceeds from reinvestment of
distributions 450 450 5,200 4,795
Payments for shares redeemed (5,033) (6,457) (58,645) (69,044)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,154 3,462 36,671 36,868
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 31,729 51,990 $ 368,399 $ 551,870
================= ================= ================= =================
</Table>
Notes to Financial Statements 65
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
BALANCED STRATEGY FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 17,450 29,097 $ 200,928 $ 314,909
Proceeds from reinvestment of
distributions 1,142 853 13,053 9,211
Payments for shares redeemed (3,094) (3,172) (35,655) (34,395)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 15,498 26,778 178,326 289,725
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 19,366 35,069 221,771 377,639
Proceeds from reinvestment of
distributions 1,448 1,129 16,426 12,115
Payments for shares redeemed (7,519) (11,516) (86,130) (123,958)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 13,295 24,682 152,067 265,796
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 6,932 12,088 80,162 131,403
Proceeds from reinvestment of
distributions 887 975 10,137 10,536
Payments for shares redeemed (6,457) (7,312) (74,549) (79,228)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,362 5,751 15,750 62,711
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 659 -- 7,760 --
Proceeds from reinvestment of
distributions 4 -- 45 --
Payments for shares redeemed (3) -- (33) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 660(6) -- 7,772(6) --
----------------- ----------------- ----------------- -----------------
Class R3 (3)
Proceeds from shares sold 7,539 19,279 86,919 208,441
Proceeds from reinvestment of
distributions 1,505 1,491 17,207 16,117
Payments for shares redeemed (3,668) (4,998) (42,395) (54,139)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,376 15,772 61,731 170,419
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 10,432 15,450 120,954 168,328
Proceeds from reinvestment of
distributions 889 966 10,218 10,478
Payments for shares redeemed (5,536) (10,535) (64,250) (114,433)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,785 5,881 66,922 64,373
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 41,976 78,864 $ 482,568 $ 853,024
================= ================= ================= =================
</Table>
66 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
MODERATE STRATEGY FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 2,613 6,610 $ 29,026 $ 71,204
Proceeds from reinvestment of
distributions 240 174 2,653 1,873
Payments for shares redeemed (898) (805) (10,009) (8,659)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,955 5,979 21,670 64,418
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 2,936 6,585 32,494 70,482
Proceeds from reinvestment of
distributions 289 244 3,179 2,608
Payments for shares redeemed (2,138) (3,808) (23,644) (40,766)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,087 3,021 12,029 32,324
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 2,552 5,891 28,427 63,511
Proceeds from reinvestment of
distributions 311 315 3,440 3,384
Payments for shares redeemed (2,832) (3,682) (31,514) (39,546)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 31 2,524 353 27,349
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 208 -- 2,342 --
Proceeds from reinvestment of
distributions 1 -- 18 --
Payments for shares redeemed (92) -- (1,038) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 117(5) -- 1,322(5) --
================= ================= ================= =================
Class R3 (3)
Proceeds from shares sold 2,857 6,568 31,767 70,858
Proceeds from reinvestment of
distributions 569 555 6,315 5,969
Payments for shares redeemed (2,024) (2,691) (22,533) (29,020)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,402 4,432 15,549 47,807
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,034 3,750 22,691 40,502
Proceeds from reinvestment of
distributions 210 234 2,332 2,522
Payments for shares redeemed (2,055) (3,630) (22,976) (39,175)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 189 354 2,047 3,849
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 4,781 16,310 $ 52,970 $ 175,747
================= ================= ================= =================
</Table>
Notes to Financial Statements 67
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
CONSERVATIVE STRATEGY FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 868 2,486 $ 9,367 $ 26,647
Proceeds from reinvestment of
distributions 79 73 847 778
Payments for shares redeemed (789) (732) (8,510) (7,843)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 158 1,827 1,704 19,582
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 1,005 3,968 10,780 42,285
Proceeds from reinvestment of
distributions 147 141 1,573 1,500
Payments for shares redeemed (1,833) (2,967) (19,688) (31,652)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (681) 1,142 (7,335) 12,133
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 1,294 2,650 13,968 28,397
Proceeds from reinvestment of
distributions 274 440 2,942 4,708
Payments for shares redeemed (11,784) (3,570) (127,665) (38,291)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (10,216) (480) (110,755) (5,186)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 213 -- 2,310 --
Proceeds from reinvestment of
distributions 2 -- 24 --
Payments for shares redeemed (93) -- (1,003) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 122(5) -- 1,331(5) --
----------------- ----------------- ----------------- -----------------
Class R3 (3)
Proceeds from shares sold 1,690 3,749 18,321 40,350
Proceeds from reinvestment of
distributions 329 340 3,544 3,648
Payments for shares redeemed (1,402) (2,503) (15,200) (26,877)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 617 1,586 6,665 17,121
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 962 2,080 10,430 22,426
Proceeds from reinvestment of
distributions 91 110 977 1,174
Payments for shares redeemed (1,158) (2,072) (12,560) (22,363)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (105) 118 (1,153) 1,237
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (10,105) 4,193 $ (109,543) $ 44,887
================= ================= ================= =================
</Table>
68 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
2010 STRATEGY FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 14 98 $ 149 $ 1,000
Proceeds from reinvestment of
distributions 2 -- 15 5
Payments for shares redeemed -- -- -- --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 16 98(2) 164 1,005(2)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 2 100 24 1,000
Proceeds from reinvestment of
distributions 2 1 15 12
Payments for shares redeemed -- -- -- --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 4 101(1) 39 1,012(1)
----------------- ----------------- ----------------- -----------------
Class R3 (3)
Proceeds from shares sold 151 174 1,581 1,751
Proceeds from reinvestment of
distributions 2 2 24 13
Payments for shares redeemed (116) -- (1,216) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 37 176(1) 389 1,764(1)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 19 100 201 1,000
Proceeds from reinvestment of
distributions 2 1 18 14
Payments for shares redeemed (1) -- (4) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 20 101(1) 215 1,014(1)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 77 476 $ 807 $ 4,795
================= ================= ================= =================
</Table>
Notes to Financial Statements 69
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
2020 STRATEGY FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 33 97 $ 350 $ 1,000
Proceeds from reinvestment of
distributions 2 1 16 4
Payments for shares redeemed -- -- -- --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 35 98(2) 366 1,004(2)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 29 100 307 1,000
Proceeds from reinvestment of
distributions 1 1 14 11
Payments for shares redeemed -- -- -- --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 30 101(1) 321 1,011(1)
----------------- ----------------- ----------------- -----------------
Class R3 (3)
Proceeds from shares sold 375 270 3,996 2,722
Proceeds from reinvestment of
distributions 3 1 33 12
Payments for shares redeemed (36) (119) (384) (1,219)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 342 152(1) 3,645 1,515(1)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 252 100 2,700 1,000
Proceeds from reinvestment of
distributions 2 1 19 13
Payments for shares redeemed (6) -- (65) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 248 101(1) 2,654 1,013(1)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 655 452 $ 6,986 $ 4,543
================= ================= ================= =================
</Table>
70 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
2030 STRATEGY FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 117 97 $ 1,246 $ 1,000
Proceeds from reinvestment of
distributions 2 -- 21 4
Payments for shares redeemed (99) -- (1,073) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 20 97(2) 194 1,004(2)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 3 100 26 1,000
Proceeds from reinvestment of
distributions 1 1 13 9
Payments for shares redeemed -- -- -- --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 4 101(1) 39 1,009(1)
----------------- ----------------- ----------------- -----------------
Class R3 (3)
Proceeds from shares sold 352 141 3,803 1,423
Proceeds from reinvestment of
distributions 2 1 25 9
Payments for shares redeemed (118) -- (1,283) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 236 142(1) 2,545 1,432(1)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 59 100 638 1,000
Proceeds from reinvestment of
distributions 2 1 17 11
Payments for shares redeemed (12) -- (125) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 49 101(1) 530 1,011(1)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 309 441 $ 3,308 $ 4,456
================= ================= ================= =================
</Table>
Notes to Financial Statements 71
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
2040 STRATEGY FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 36 97 $ 379 $ 1,000
Proceeds from reinvestment of
distributions 1 -- 15 3
Payments for shares redeemed -- -- -- --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 37 97(2) 394 1,003(2)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 8 100 88 1,000
Proceeds from reinvestment of
distributions 1 1 12 8
Payments for shares redeemed -- -- -- --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 9 101(1) 100 1,008(1)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 90 -- 1,001 --
Proceeds from reinvestment of
distributions -- -- 4 --
Payments for shares redeemed -- -- -- --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 90(4) -- 1,005(4) --
----------------- ----------------- ----------------- -----------------
Class R3 (3)
Proceeds from shares sold 245 167 2,670 1,686
Proceeds from reinvestment of
distributions 2 1 21 8
Payments for shares redeemed (122) (2) (1,338) (16)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 125 166(1) 1,353 1,678(1)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 24 100 265 1,000
Proceeds from reinvestment of
distributions 2 1 15 10
Payments for shares redeemed (1) -- (8) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 25 101(1) 272 1,010(1)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 286 465 $ 3,124 $ 4,699
================= ================= ================= =================
</Table>
(1) For the period January 1, 2005 (commencement of operations) to October
31, 2005.
(2) For the period September 1, 2005 (commencement of operations) to
October 31, 2005.
(3) Class D Shares were redesignated Class R3 Shares on March 1, 2006.
(4) For the period March 17, 2006 (commencement of operations) to April
30, 2006.
(5) For the period March 29, 2006 (commencement of operations) to April
30, 2006.
(6) For the period April 3, 2006 (commencement of operations) to April 30,
2006.
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
Investment Company is charged an annual commitment fee of .125% on the
average daily unused amount of the aggregate commitment, which is allocated
among each of the Investment Company's 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 20, 2006 and may be renewed at that time. The Funds did
not have any drawdowns for the six months ended April 30, 2006.
72 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
8. RECORD OWNERSHIP
As of April 30, 2006, the following table includes shareholders of record
with greater than 10% of the total outstanding shares of each respective
Fund:
<Table>
<Caption>
FUNDS # OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Equity Aggressive Strategy 2 31.5
Aggressive Strategy 1 19.1
Balanced Strategy 1 17.6
Moderate Strategy 1 25.9
Conservative Strategy 1 31.0
2010 Strategy 3 87.8
2020 Strategy 4 86.4
2030 Strategy 4 77.6
2040 Strategy 4 84.3
</Table>
Notes to Financial Statements 73
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
(the "FRIMCo Agreement") and the portfolio management contract with each Money
Manager of the Underlying Funds (collectively, the "portfolio management
contracts") at a meeting held on April 18, 2006. During the course of a year,
the Trustees receive 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
Underlying Funds by FRIMCo. In preparation for the annual review, the
Independent Trustees, with the advice and assistance of independent counsel,
also requested and the Board 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
Independent Trustees; (2) information (the "Third-Party 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 respective 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; and (3) an analysis of the Third-Party
Information prepared by FRIMCo (the "FRIMCo Analysis" and, with the other
information requested by the Independent Trustees or provided by FRIMCo in
connection with the Board's consideration of the portfolio management contracts,
the "Agreement Renewal Information") addressing, among other things, performance
and expense differentials between certain Funds and Underlying Funds and their
respective Comparable Funds. The Independent Trustees also received a memorandum
from independent counsel discussing the legal standards for their consideration
of the proposed continuances.
On April 17, 2006, the Independent Trustees met in person to review the
Agreement Renewal Information in a private session with independent counsel at
which no representatives of FRIMCo or management were present. At the April 18
meeting of the Board of Trustees, the Board, including the Independent Trustees,
reviewed the proposed continuance of the FRIMCo Agreement and the portfolio
management contracts with management and independent counsel to the Independent
Trustees. Following this review, but prior to voting, the Independent Trustees
again met in a private session with their independent counsel to evaluate
additional information and analysis received from FRIMCo and management at the
Board meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, 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. FRIMCo has
engaged multiple Money Managers for all Underlying Funds.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the FRIMCo Agreement for allocating assets of each Fund among its
Underlying Funds and for determining, implementing and maintaining the
investment program for each Underlying Fund. Assets of each Underlying Fund have
been allocated among the multiple Money Managers selected by FRIMCo, subject to
Board approval, for that Underlying Fund. FRIMCo manages directly a portion of
certain Underlying Fund's assets as described below and otherwise exercises
investment discretion over the portion of each Underlying Fund's assets that
FRIMCo determines not to allocate to the money managers and for each Underlying
Fund's cash reserves by selecting the individual portfolio securities for those
portions of assets. FRIMCo may also directly manage portions of an Underlying
Fund during transitions between 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 to each Money Manager; supervising
compliance by each Money Manager with each Underlying Fund's investment
objective 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
74 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
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 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 the Underlying
Funds and other public disclosures emphasize to investors FRIMCo's role as the
principal investment manager for each Underlying Fund, rather than the
investment selection role of the Underlying 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.
The Board also considered the special expertise of FRIMCo with respect to the
manager-of-managers structure of the Underlying Funds in which each Fund invests
and the likelihood that, at the current expense ratio of 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
strategy of each such Underlying Fund selected by shareholders in purchasing
their shares of a Fund or Underlying 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 in evaluating renewal of the
FRIMCo Agreement, 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 expenses incurred by the Fund or
Underlying Fund; and
5. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from each Fund or Underlying Fund.
At the April 18 Board meeting, FRIMCo and management reviewed the reasonableness
of the Funds' and Underlying Funds' investment advisory fees. In discussing
whether the Funds' and Underlying Funds' performance supported these fees,
FRIMCo noted differences between the investment strategies of certain Underlying
Funds and their respective Comparable Funds in pursuing their investment
objectives. With respect to the Underlying Funds, these strategies included
strategies which seek to achieve a lower tracking error (i.e. the difference,
whether positive or negative, between the return of a fund and its benchmark)
and resulting lower return volatility than Comparable Funds. According to
FRIMCo, these strategies may be expected to result, and for certain Underlying
Funds during the periods covered by the Third-Party Information did result, in
lower relative performance than that of some of their respective Comparable
Funds and, consequently, lower relative performance of the Funds than that of
some of their respective Comparable Funds. FRIMCo stated that the strategies
pursued by the Underlying Funds are intended to result in less volatile, more
moderate returns relative to each Underlying Funds' performance benchmark rather
than more volatile, more extreme returns that its Comparable Funds may
experience over time. FRIMCo stated that certain of the Funds have lower
allocations to equity Underlying Funds and higher allocations to fixed income
Underlying Funds than some of their respective Comparable Funds and, as a
result, those Funds had lower relative performance than that of some of their
respective Comparable Fund during the periods covered by the Third-Party
Information.
On the basis of the Agreement Renewal Information, including the FRIMCo
Analysis, and other information previously received by the Board from FRIMCo
during the course of the year or presented at the Board meeting by FRIMCo, the
Board, in respect of each Fund and Underlying Fund, found the advisory fee
charged by FRIMCo to be reasonable in light of the nature, scope and quality of
the services provided to the Funds or Underlying Funds, after giving effect to
waivers and/or reimbursements and considering
Basis for Approval of Investment Advisory Contracts 75
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
differences in the composition and investment strategies of their respective
Comparable Funds. The Board also determined that the relative expense ratio of
each Fund and Underlying Fund was comparable to those of its Comparable Funds;
FRIMCo's methodology of allocating expenses of operating funds in the complex
was reasonable; and FRIMCo's profitability with respect to each Fund and
Underlying Fund was not excessive in light of the nature, scope and quality of
the services provided by FRIMCo.
The Board concluded that the performance of the Funds and the Underlying Funds
supported continuation of the FRIMCo Agreement, again based upon the Agreement
Renewal Information, including the FRIMCo Analysis, and other information
previously received by the Board from FRIMCo during the course of the year or
presented at the Board meeting by FRIMCo. In evaluating performance, the Board
considered each Fund's and Underlying Fund's absolute performance and its
performance relative to appropriate benchmarks and indices and its Comparable
Funds. In evaluating the Underlying Funds' performance, the Board also
considered FRIMCo's investment strategy of managing the Underlying Funds in a
risk aware manner.
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
February 28, 2006 that the investment advisory fees for each Fund and Underlying
Fund, with the implementation of new breakpoints for the Multistrategy Bond Fund
proposed by FRIMCo at that meeting, 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 the
Underlying Funds. 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.
In voting to approve the continuation of the FRIMCo Agreement on its current
terms and conditions for each Fund and Underlying Fund, the Board, after
considering the foregoing and other relevant factors, determined that
continuation of the FRIMCo Agreement was in the best interests of the Funds and
the Underlying Funds and their respective shareholders.
With respect to the evaluation of the terms of portfolio management contracts
with Money Managers for the Underlying Funds, 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 FRIMCo or Russell Fund Distributors, Inc., the
Funds' and Underlying Funds' underwriter; 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 has advised the Board
that it does not regard Money Manager profitability as relevant to its
evaluation of the portfolio management contracts 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 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 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 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 best interests of the Fund and its shareholders.
During 2005 and 2006, the Trustees received proposals from FRIMCo to manage
directly approximately up to 10% of the assets of the Diversified Equity Fund,
the Quantitative Equity Fund and the International Securities Fund (each a
"Participating Underlying Fund") utilizing a "select holdings strategy" pursuant
to the terms of the FRIMCo Agreement, the actual allocation to be determined by
each Participating Underlying Fund's FRIMCo portfolio manager. Under this
strategy, FRIMCo analyzes the holdings of a Participating Underlying Fund's
Money Managers to identify particular stocks that are concurrently overweighted
by 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 Underlying Fund. The strategy is designed to increase the
Participating
76 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
Underlying Fund's exposure to stocks that are collectively viewed as attractive
by multiple Money Managers of a Participating Underlying Fund. Implementation of
this strategy includes periodic rebalancing of the Participating Underlying
Fund's holdings. In connection with FRIMCo's proposals, the Trustees received
and considered information from FRIMCo regarding the potential enhancements to
the Participating Underlying Fund's performance based upon FRIMCo's 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 Underlying 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 Underlying Fund would not increase as a result of
the implementation of the select holdings strategy. FRIMCo has advised the Board
that the select holdings strategy has been implemented for the Diversified
Equity and Quantitative Equity Funds, although a reasonable period of time is
needed to evaluate fairly its impact on those Participating Underlying Funds'
performance, and is expected to be implemented in the International Securities
Fund in the second quarter of 2006. Based upon the information received from
FRIMCo during 2005 and 2006 in connection with its select holdings strategy
proposals, the Agreement Renewal Information and additional discussion at the
April 18 meeting concerning the select holdings strategy, the Board in the case
of the Participating Underlying Funds concluded that the investment advisory
fees paid to FRIMCo by each such Underlying Fund under the FRIMCo Agreement in
connection with the select holdings strategy continue to be reasonable in light
of the nature and anticipated quality of the investment advisory services to be
rendered by FRIMCo.
In their deliberations, the Trustees did not identify any particular information
as to the FRIMCo Agreement or, other than FRIMCo's recommendation, the portfolio
management agreement with any Money Manager of an Underlying Fund 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.
Basis for Approval of Investment Advisory Contracts 77
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
As a courtesy to our Fund shareholders, a complete unaudited schedule of
investments is made available generally no later than 60 days after the end of
the first and third quarters of each fiscal year. These reports are available
(i) free of 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.
The Board has delegated to FRIMCo, as FRIC's investment adviser, the primary
responsibility for monitoring, evaluating and voting proxies solicited by or
with respect to issuers of securities in which assets of the Funds may be
invested. FRIMCo has established a proxy voting committee ("Committee") and has
adopted written proxy voting policies and procedures ("P&P") and proxy voting
guidelines ("Guidelines"). The Funds maintain a Portfolio Holdings Disclosure
Policy that governs the timing and circumstances of disclosure to shareholders
and third parties of information regarding the portfolio investments held by a
Fund. A description of the P&P, Guidelines and Portfolio Holdings Disclosure
Policy are contained in the Funds' Statement of Additional Information ("SAI").
The SAI is available (i) free of charge, upon request, by calling the Fund at
(800) 787-7354, (ii) at www.russell.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Financial Statements of the Underlying Funds can be obtained at no charge by
calling the Fund at (800) 787-7354.
78 Shareholder Requests for Additional Information
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2006 (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
- ----------------------------------------------------------------------------------------------------------------------------
*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"))
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
**Thaddas L. Trustee since Appointed until - Senior Vice President, Larco 39 None
Alston, 2006 successor is Investments, Ltd.
Born April 7, duly elected
1945 and qualified
909 A Street
Tacoma,
Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - President, Anderson 39 None
Born October 15, 1984 successor is Management Group LLC
1931 duly elected (private investments
Chairman of the and qualified consulting)
909 A Street Nominating and - February 2002 to June 2005,
Tacoma, Washington Governance Appointed until Lead Trustee, FRIC and RIF
98402-1616 Committee since successor is
2006 duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Phillips is also an officer and/or director of one or more affiliates of
FRIC and RIF and is therefore an interested trustee.
** Mr. Alston was elected to the Board of Trustees effective May 1, 2006.
Disclosure of Information about Fund Directors 79
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee, WM
Born January 22, 2000 successor is Blake, P.S. (accounting Group of Funds
1954 duly elected services) (investment
Chairperson and qualified - Director and Chairman of the company);
909 A Street since 2005 Audit Committee, Avista - Director, Avista
Tacoma, Washington Annual Corp. Corp.
98402-1616 - Trustee and Chairman of the
Operations and Distribution
Committee, WM Group of Funds
- February 2002 to June 2005,
Chairman of the Audit
Committee, FRIC and RIF
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 None
Born June 6, 1946 2003 successor is Vice President and Chief
duly elected Financial Officer, Waddell &
909 A Street Chairman of and qualified Reed Financial, Inc.
Tacoma, Washington Audit Committee - 2003, Retired
98402-1616 since 2005 Appointed until - 2001-2003, Vice President
successor is and Chief Financial Officer,
duly elected Janus Capital Group Inc.
and qualified - 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
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 39 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected 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>
Mr. Michael Phillips is the Chairman of the Board of Frank Russell Company which
controls FRIMCo, the investment adviser of the Funds. He is also an Interested
Trustee of the Funds. On May 26, 2005, Mr. Phillips became a director of Simpson
Investment Company, a privately held company. Mr. Raymond P. Tennison, Jr., an
Independent Trustee of the Funds is the President of Simpson Investment Company.
80 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Jack Thompson, Trustee since Appointed until - September 2003 to present, 39 - Director, Sparx
Born March 21, 1949 2005 successor is Independent Board Chair and Japan Fund
duly elected Chairman of the Audit
909 A Street and qualified Committee, Sparx Japan Fund
Tacoma, Washington - May 1999 to May 2003,
98402-1616 President, Chief Executive
Officer and Director, Berger
Financial Group, LLC
- May 1999 to May 2003,
President and Trustee,
Berger Funds
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2002, Director,
1943 duly elected Smith Barney Fundamental
Chairperson of and qualified Value Fund
909 A Street the Investment
Tacoma, Washington Committee since Appointed until
98402-1616 2006 successor is
duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
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 adviser ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and RIF.
</Table>
Disclosure of Information about Fund Directors 81
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 39 None
Born October 6, since 2006 - Trustee of FRIC and RIF
1930 Until 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
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>
82 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2002, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Until successor - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, FRIMCo
Officer since qualified by - Chairman of the Board, President and CEO, RFD
909 A Street 2004 Trustees - Chairman of the Board and President, Russell
Tacoma, Washington Insurance Agency, Inc. (insurance agency ("RIA"))
98402-1616 - Until 2004, Managing Director of Individual Investor
Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, FRIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, FRIMCo, FRTC and RFD
909 A Street 1998 Trustees - Treasurer and Principal Accounting Officer, SSgA
Tacoma, Washington Funds
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 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary since Until successor - General Counsel and Managing Director of Law and
Born October 8, 1941 1994 is chosen and Government Affairs, Secretary, FRC
qualified by
909 A Street Trustees
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 83
LIFEPOINTS(R) FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, Ph.D.
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
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 JUNE 1, 2006
Diversified Equity Fund
AllianceBernstein L.P., New York, NY
Ark Asset Management Co., Inc., New York, NY
Institutional Capital Corporation, Chicago, IL
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
PanAgora Asset Management, Inc., Boston, MA
Tygh Capital Management, Inc., Portland, OR
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
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
AllianceBernstein L.P., New York, NY
AQR Capital Management, LLC, Greenwich, CT
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
AllianceBernstein L.P., New York, NY
Arrowstreet Capital, Limited Partnership, Cambridge, MA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
Harding Loevner Management, L.P., Boston, MA
T. Rowe Price International, Inc., Baltimore, MD
84 Manager, Money Managers and Service Providers
LIFEPOINTS(R) FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
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
Western Asset Management Company Limited, London, England
Multistrategy Bond Fund
Bear Stearns Asset Management Inc., New York, NY
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Goldman Sachs Asset Management, L.P., New York, NY
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 85
(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
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment Management
Company expects to change its name to Russell Investment Management Company.
36-08-071 (1 04/06)
2006 SEMIANNUAL REPORT
CLASS C, E, AND S SHARES:
TAX-MANAGED GLOBAL EQUITY FUND
APRIL 30, 2006
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.
* On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment Management
Company.
[Blank Page]
Frank Russell Investment Company
Tax-Managed Global Equity Fund
Semiannual Report
April 30, 2006 (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
Basis for Approval of Investment Advisory Contracts.................. 17
Shareholder Requests for Additional Information...................... 21
Disclosure of Information about Fund Directors....................... 22
Manager, Money Managers and Service Providers........................ 27
</Table>
Frank Russell Investment Company - Tax-Managed Global Equity Fund.
Copyright (c) Russell Investment Group 2006. All rights reserved.
Russell Investment Group is a Washington, USA corporation, which operates
through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual
Life Insurance Company.
FUND OBJECTIVES, RISKS, CHARGES AND EXPENSES SHOULD BE CAREFULLY CONSIDERED
BEFORE INVESTING. A PROSPECTUS CONTAINING THIS AND OTHER IMPORTANT INFORMATION
MUST PRECEDE OR ACCOMPANY THIS MATERIAL. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
SECURITIES DISTRIBUTED THROUGH RUSSELL FUND DISTRIBUTORS, INC. MEMBER NASD, PART
OF RUSSELL INVESTMENT GROUP.
Effective July 1, 2006 Frank Russell Investment Company ("FRIC") will change its
name to Russell Investment Company. FRIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Frank Russell Investment Management Company
("FRIMCo"). Effective July 1, 2006 FRIMCo will change its name to Russell
Investment Management Company.
Russell Investment Group and Standard & Poor's Corporation are the owners of the
trademarks, service marks, and copyrights related to their respective indexes.
Index performance is not indicative of the performance of any specific
investment. Indexes are not managed and may not be invested in directly.
Performance quoted represents past performance and does not guarantee future
results. The investment return and principal value of an investment will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Current to the most recent month-end performance data may be
obtained by visiting www.russell.com/us/fundperformance.
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,133.10 $ 1,019.84
Expenses Paid During
Period* $ 5.29 $ 5.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,139.20 $ 1,024.79
Expenses Paid During
Period* $ 0.00 $ 0.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.00%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 100.0%
Other Frank Russell Investment
Company Funds - Class S Shares
Domestic Equities - 74.5%
Quantitative Equity Fund 170,495 6,844
Tax-Managed Large Cap Fund 1,762,548 34,211
Tax-Managed Mid & Small Cap Fund 717,811 10,293
------------
51,348
------------
International Equities - 25.5%
Emerging Markets Fund 156,218 3,543
International Securities Fund 180,974 14,049
------------
17,592
------------
TOTAL INVESTMENTS - 100.0%
(identified cost $45,875) 68,940
OTHER ASSETS AND LIABILITIES,
NET - 0.0% 5
------------
NET ASSETS - 100.0% 68,945
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Domestic Equities 74.5
International Equities 25.5
---------------
Total Investments 100.0
Other Assets and Liabilities, Net --
---------------
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, 2006 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
ASSETS
Investments at market (identified cost $45,875)..................................... $ 68,940
Receivables:
Fund shares sold................................................................. 19
From Adviser..................................................................... 30
Prepaid expenses.................................................................... 16
----------------------
Total assets........................................................................ 69,005
----------------------
LIABILITIES
Payables:
Investments purchased................................. $ 15
Fund shares redeemed.................................. 9
Accrued fees to affiliates............................ 18
Other accrued expenses................................ 18
--------------------
Total liabilities................................................................... 60
----------------------
NET ASSETS.......................................................................... $ 68,945
======================
Net Assets Consist of:
Undistributed (overdistributed) net investment income............................... $ 50
Accumulated net realized gain (loss)................................................ (17,005)
Unrealized appreciation (depreciation) on investments............................... 23,065
Shares of beneficial interest....................................................... 64
Additional paid-in capital.......................................................... 62,771
----------------------
NET ASSETS.......................................................................... $ 68,945
======================
NET ASSET VALUE, offering and redemption price per share:
Class C ($18,667,944 divided by 1,754,928 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 10.64
======================
Class S ($50,276,969 divided by 4,609,022 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 10.91
======================
</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, 2006 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME
Income distributions from Underlying Funds....................................... $ 484
EXPENSES
Advisory fees............................................ $ 64
Administrative fees...................................... 16
Custodian fees........................................... 9
Distribution fees - Class C.............................. 63
Transfer agent fees...................................... 48
Professional fees........................................ 17
Registration fees........................................ 22
Shareholder servicing fees - Class C..................... 21
Trustees' fees........................................... 1
Printing fees............................................ 1
Miscellaneous............................................ 1
--------------------
Expenses before reductions............................... 263
Expense reductions....................................... (179)
--------------------
Net expenses........................................................................ 84
----------------------
Net investment income (loss)........................................................ 400
----------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments...................................................................... 155
Capital gain distributions from Underlying Funds................................. 731
----------------------
Net realized gain (loss)............................................................ 886
Net change in unrealized appreciation (depreciation) on investments................. 6,815
----------------------
Net realized and unrealized gain (loss)............................................. 7,701
----------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............................... $ 8,101
======================
</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, 2006 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss)............................. $ 400 $ 373
Net realized gain (loss)................................. 886 348
Net change in unrealized appreciation (depreciation)..... 6,815 5,222
-------------------- ----------------------
Net increase (decrease) in net assets from operations....... 8,101 5,943
-------------------- ----------------------
DISTRIBUTIONS
From net investment income
Class S............................................... (350) (338)
-------------------- ----------------------
Net decrease in net assets from distributions............... (350) (338)
-------------------- ----------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions........................................... 3,797 4,318
-------------------- ----------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS................. 11,548 9,923
NET ASSETS
Beginning of period...................................... 57,397 47,474
-------------------- ----------------------
End of period (including undistributed (overdistributed)
net investment income of $50 and $0, respectively)..... $ 68,945 $ 57,397
==================== ======================
</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,
------------------------------------------------------------------------
2006* 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 9.39 $ 8.44 $ 7.61 $ 6.15 $ 7.29 $ 9.73
----------- ----------- ----------- ----------- ----------- ------------
INCOME FROM OPERATIONS
Net investment income (loss)
(a)(b).......................... .02 --(g) (.02) (.02) (.05) (.06)
Net realized and unrealized gain
(loss).......................... 1.23 .95 .86 1.48 (1.03) (2.38)
----------- ----------- ----------- ----------- ----------- ------------
Total from investment
operations................... 1.25 .95 .84 1.46 (1.08) (2.44)
----------- ----------- ----------- ----------- ----------- ------------
DISTRIBUTIONS
From net investment income......... -- -- (.01) -- -- --
From net realized gain............. -- -- -- -- (.06) --
----------- ----------- ----------- ----------- ----------- ------------
Total distributions............. -- -- (.01) -- (.06) --
----------- ----------- ----------- ----------- ----------- ------------
NET ASSET VALUE, END OF PERIOD........ $ 10.64 $ 9.39 $ 8.44 $ 7.61 $ 6.15 $ 7.29
=========== =========== =========== =========== =========== ============
TOTAL RETURN (%) (c).................. 13.31 11.26 10.99 23.74 (14.94) (25.08)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in
thousands)...................... 18,668 14,801 12,766 11,523 10,130 8,104
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)....................... 1.56 1.55 1.58 1.72 1.64 1.77
Net investment income (loss)
(c)(f)....................... .22 (.03) (.19) (.25) (.68) (.73)
Portfolio turnover rate (%) (c).... 4.28 12.46 21.28 59.50 52.55 30.55
</Table>
* For the six months ended April 30, 2006 (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 declarations of dividends by the Underlying Funds 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
through June 30, 2005, as described in Note 4 to the financial statements.
(f) May reflect amounts waived and/or reimbursed by FRIMCo as the investment
adviser and transfer agent. Expenses are shown net of those expenses
pushed down to Underlying Funds through June 30, 2005, as described in
Note 4 to the financial statements.
(g) Less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
8 Financial Highlights - Class C
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,
------------------------------------------------------------------------
2006* 2005 2004 2003 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 9.65 $ 8.67 $ 7.80 $ 6.27 $ 7.38 $ 9.77
----------- ----------- ----------- ----------- ----------- ------------
INCOME FROM OPERATIONS
Net investment income (loss)
(a)(b).......................... .08 .09 .07 .05 .03 .02
Net realized and unrealized gain
(loss).......................... 1.26 .97 .87 1.52 (1.06) (2.39)
----------- ----------- ----------- ----------- ----------- ------------
Total from investment
operations................... 1.34 1.06 .94 1.57 (1.03) (2.37)
----------- ----------- ----------- ----------- ----------- ------------
DISTRIBUTIONS
From net investment income......... (.08) (.08) (.07) (.04) (.02) (.02)
From net realized gain............. -- -- -- -- (.06) --
----------- ----------- ----------- ----------- ----------- ------------
Total distributions............. (.08) (.08) (.07) (.04) (.08) (.02)
----------- ----------- ----------- ----------- ----------- ------------
NET ASSET VALUE, END OF PERIOD........ $ 10.91 $ 9.65 $ 8.67 $ 7.80 $ 6.27 $ 7.38
=========== =========== =========== =========== =========== ============
TOTAL RETURN (%) (c).................. 13.92 12.31 12.14 25.09 (14.10) (24.27)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in
thousands)...................... 50,277 42,596 34,708 32,861 29,968 34,661
Ratios to average net assets (%):
Operating expenses, net
(d)(f)....................... -- -- -- -- -- --
Operating expenses, gross
(d)(e)....................... .56 .55 .58 .72 .64 .77
Net investment income (loss)
(c)(f)....................... .76 .95 .87 .77 .39 .29
Portfolio turnover rate (%) (c).... 4.28 12.46 21.28 59.50 52.55 30.55
</Table>
* For the six months ended April 30, 2006 (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 declarations of dividends by the Underlying Funds 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
through June 30, 2005, as described in Note 4 to the financial statements.
(f) May reflect amounts waived and/or reimbursed by FRIMCo as the investment
adviser and transfer agent. Expenses are shown net of those expenses
pushed down to Underlying Funds through June 30, 2005, as described in
Note 4 to the financial statements.
(g) Less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
Financial Highlights - Class S 9
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company" or "FRIC") is a
series investment company with 34 different investment portfolios referred to
as Funds. These financial statements report on one of these Funds (the
"Fund"). 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 (the "Board")
to issue an unlimited number of shares of beneficial interest at a $.01 par
value per share.
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment
Management Company.
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"). Frank
Russell Investment Management Company ("FRIMCo"), the Fund's investment
adviser, may modify the target asset allocation for the Fund and modify the
selection of Underlying Funds for the Fund from time to time. From time to
time, the Fund may adjust its investments within set limits based on FRIMCo's
outlook for the economy, financial markets generally and relative market
valuation of the asset classes represented by each Underlying Fund.
Additionally, the Fund may deviate from set limits when, in FRIMCo's opinion,
it is necessary to do so to pursue the Fund's investment objective. However,
the Fund expects that amounts it allocates to each Underlying Fund will
generally vary only within 10% of the ranges specified in the table 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.
10 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Emerging Markets Fund
Seeks to provide long term capital growth.
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 the Fund in the preparation of its financial statements.
Security Valuation
The Fund values its 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 at the time 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 last sale price;
- 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, 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.
- 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 of 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
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 on 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 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 daily movement of the benchmark index if the index
is valued using another pricing method.
Notes to Financial Statements 11
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 of the US securities
market (defined in the Fair Value Procedures as the movement by any two of
four major US Indexes greater than a certain percentage) or other significant
event; foreign market holidays if on a daily basis, Fund exposure exceeds 20%
in aggregate (all closed markets combined); a company development; a natural
disaster; or an armed conflict.
Because foreign securities can trade on a 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, if any, 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 the Fund and do not include those expenses incurred by the
Underlying Funds. Because the Underlying Funds have varied expense and fee
levels and the Fund may own different proportions of the Underlying Funds at
different times, the amount of the fees and expenses incurred indirectly by
the Fund will vary.
12 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
3. INVESTMENT TRANSACTIONS
Securities
During the period ended April 30, 2006, the Fund had purchases and sales of
the Underlying Funds of $7,436,015 and $2,735,786, respectively.
4. RELATED PARTIES
Adviser 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 money manager evaluation services to FRIMCo.
The Fund is charged an advisory fee equal to 0.20% of average daily net
assets. For the six months ended April 30, 2006, the Adviser contractually
agreed to waive the advisory fee at least through February 28, 2007. The
Adviser does not have the ability to recover amounts waived from the six
months ended April 30, 2006, or previous periods. The administrative fee was
charged to the Underlying Funds in accordance with the special servicing
agreements discussed below.
Direct operating expenses include those arising from accounting,
administrative, custody, auditing, legal and transfer agent services. Until
June 30, 2005, the foregoing direct operating expenses were borne either by
the Underlying Funds in which a Fund invests pursuant to Special Servicing
Agreements (described below) between the Fund, Underlying Funds and FRIMCo or
by FRIMCo pursuant to a Letter Agreement. Direct operating expenses also
include expenses attributable to advisory fees (which are currently waived by
FRIMCo), any Rule 12b-1 distribution fee, any shareholder services fees, or
any nonrecurring extraordinary expenses, which will be borne by the Fund or
its appropriate Classes of Shares.
Special Servicing Agreement
The special servicing agreement was entered into in February 1999 by the
Adviser and was approved annually by the Funds' Board of Trustees. The
special servicing agreement was between the Tax-Managed Global Equity Fund
and the Underlying Funds in which the Fund invests. In accordance with the
special servicing agreement, certain expenses from the operation of the Fund
were borne by the Underlying Funds based on each Underlying Fund's
proportionate share of assets owned by the Fund. No Underlying Funds were
charged expenses that exceeded the estimated savings to each respective
Underlying Fund. These estimated savings appeared in the form of reduced
transfer agent costs resulting from the elimination of separate shareholder
accounts which were invested in the Underlying Funds. Rather than having each
investor open a shareholder account to invest individually in the Underlying
Funds, the Fund acted as an omnibus account combining thousands of individual
shareholder accounts into a single account. This benefited the Underlying
Funds, by significantly reducing the number of shareholder accounts that
needed to be maintained, and by the omnibus account's netting out the trades
of individual shareholders to a point where the Fund only executed one trade
each day with each Underlying Fund. In the event that the financial benefits
to the Underlying Funds did not exceed aggregate expenses of the Fund, the
Adviser reimbursed the respective Underlying Funds. This arrangement was
discontinued June 30, 2005.
Notes to Financial Statements 13
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Effective July 1, 2005, FRIMCo, as transfer agent, has agreed to waive its
transfer agency fees and to reimburse the Funds for all direct operating
expenses other than Rule 12b-1 distribution fees, shareholder services fees,
non-recurring expenses and extraordinary expenses. The agreement to reimburse
expenses extends through February 28, 2007 and may be renewed thereafter. If
this arrangement is discontinued, Fund expenses may increase.
For the period ended April 30, 2006, the amount reimbursed by FRIMCo as
transfer agent amounted to $114,820.
Transfer Agent
FRIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, FRIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. FRIMCo retains a portion
of this fee for its services provided to the Fund and pays the balance to
unaffiliated agents who assist in providing these services. Total fees for
the Fund for the period ended April 30, 2006 were $47,849. Until June 30,
2005, the Underlying Funds and FRIMCo as transfer agent have borne this
expense pursuant to the special servicing arrangements described above.
Effective July 1, 2005, FRIMCo has agreed to waive its transfer agency fees
for the Fund through at least February 28, 2007.
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 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 fees payable to affiliates for the six months ended were as follows:
<Table>
<Caption>
TAX-MANAGED
GLOBAL EQUITY
----------------------------------------------------------
Administration fees $ 2,805
Distribution fees 11,184
Shareholder servicing fees 3,716
Trustee fees 74
-------------------
$ 17,779
===================
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company, 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 independent Trustees a retainer of
$52,000 per year, $6,500 ($5,000 prior to January 1, 2006) 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, Nominating
and Governance Committee meeting or Investment 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 Audit Committee
Chair was paid a fee of $12,000 per year and the Nominating and Governance
Committee chair and the Investment Committee chairs were each paid a fee of
$6,000 per year. The chairperson of the Board receives an additional $52,000
per year.
14 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 six months ended April
30, 2006 with Underlying Funds which are or were an affiliated company are as
follows:
<Table>
<Caption>
PURCHASE SALES INCOME CAPITAL GAINS
AFFILIATE COST COST DISTRIBUTIONS DISTRIBUTIONS
------------------------------------------------------------------------------------------------------------------------------
Tax-Managed Large Cap Fund $ 3,931,359 $ 483,082 $ 230,940 $ --
=================== =================== =================== ===================
</Table>
5. FEDERAL INCOME TAXES
The Fund may have 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. At October
31, 2005, available capital carryforwards and expiration dates are as
follows:
<Table>
<Caption>
10/31/10 10/31/11 TOTAL
------------------------------------------------------------------------------------------------------
Tax-Managed Global Equity $ 1,796,944 $ 3,565,354 $ 5,362,298
</Table>
At April 30, 2006, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
Cost of Investments $ 58,399,080
================
Unrealized Appreciation $ 10,541,121
Unrealized Depreciation --
----------------
Net Unrealized Appreciation
(Depreciation) $ 10,541,121
================
</Table>
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the period ended April 30, 2006 and the year ended
October 31, 2005 were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
TAX-MANAGED GLOBAL EQUITY ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 282 293 $ 2,851 $ 2,676
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (103) (229) (1,047) (2,085)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 179 64 1,804 591
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 397 1,110 4,084 10,337
Proceeds from reinvestment of
distributions 32 35 332 328
Payments for shares redeemed (233) (736) (2,423) (6,938)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 196 409 1,993 3,727
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 375 473 $ 3,797 $ 4,318
================= ================= ================= =================
</Table>
Notes to Financial Statements 15
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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
Investment Company is charged an annual commitment fee of .125% on the
average daily unused amount of the aggregate commitment, which is allocated
among each of the Investment Company's 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 20, 2006 and may be renewed at that time. The Funds did not
have any drawdowns for the six months ended April 30, 2006.
8. RECORD OWNERSHIP
As of April 30, 2006, the Fund had one shareholder of record with greater
than 10% of the total outstanding shares of the Fund in the amount of 16.8%.
16 Notes to Financial Statements
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
(the "FRIMCo Agreement") and the portfolio management contract with each Money
Manager of the Underlying Funds (collectively, the "portfolio management
contracts") at a meeting held on April 18, 2006. During the course of a year,
the Trustees receive 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
Underlying Funds by FRIMCo. In preparation for the annual review, the
Independent Trustees, with the advice and assistance of independent counsel,
also requested and the Board 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
Independent Trustees; (2) information (the "Third-Party Information") received
from an independent, nationally recognized provider of investment company
information comparing the performance of the Fund and the Underlying Funds and
their respective 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; and (3) an analysis of the Third-Party Information prepared by
FRIMCo (the "FRIMCo Analysis" and, with the other information requested by the
Independent Trustees or provided by FRIMCo in connection with the Board's
consideration of the portfolio management contracts, the "Agreement Renewal
Information") addressing, among other things, performance and expense
differentials between the Fund and Underlying Funds and their respective
Comparable Funds. The Independent Trustees also received a memorandum from
independent counsel discussing the legal standards for their consideration of
the proposed continuances.
On April 17, 2006, the Independent Trustees met in person to review the
Agreement Renewal Information in a private session with independent counsel at
which no representatives of FRIMCo or management were present. At the April 18
meeting of the Board of Trustees, the Board, including the Independent Trustees,
reviewed the proposed continuance of the FRIMCo Agreement and the portfolio
management contracts with management and independent counsel to the Independent
Trustees. Following this review, but prior to voting, the Independent Trustees
again met in a private session with their independent counsel to evaluate
additional information and analysis received from FRIMCo and management at the
Board meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, 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. FRIMCo has
engaged multiple Money Managers for all Underlying Funds.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the FRIMCo Agreement for allocating assets of each Fund among its
Underlying Funds and for determining, implementing and maintaining the
investment program for each Underlying Fund. Assets of each Underlying Fund have
been allocated among the multiple Money Managers selected by FRIMCo, subject to
Board approval, for that Underlying Fund. FRIMCo manages directly a portion of
certain Underlying Fund's assets as described below and otherwise exercises
investment discretion over the portion of each Underlying Fund's assets that
FRIMCo determines not to allocate to the money managers and for each Underlying
Fund's cash reserves by selecting the individual portfolio securities for those
portions of assets. FRIMCo may also directly manage portions of an Underlying
Fund during transitions between 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 to each Money Manager; supervising
compliance by each Money Manager with each Underlying Fund's investment
objective 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
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)
- --------------------------------------------------------------------------------
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 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 Fund and the Underlying
Funds and other public disclosures emphasize to investors FRIMCo's role as the
principal investment manager for each Underlying Fund, rather than the
investment selection role of the Underlying Funds' Money Managers, and describe
the manner in which the Fund and Underlying Funds operate so that investors may
take the information into account when deciding to purchase shares of the Fund.
The Board also considered the special expertise of FRIMCo with respect to the
manager-of-managers structure of the Underlying Funds in which the Fund invests
and the likelihood that, at the current expense ratio of 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
strategy of each such Underlying Fund selected by shareholders in purchasing
their shares of the Fund or an Underlying 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 Underlying Fund, various specific factors in evaluating renewal of the
FRIMCo Agreement, 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 expenses incurred by the Fund or
Underlying Fund; and
5. 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.
At the April 18 Board meeting, FRIMCo and management reviewed the reasonableness
of the Fund's and Underlying Funds' investment advisory fees. In discussing
whether the Fund's Underlying Funds' performance supported these fees, FRIMCo
noted differences between the investment strategies of certain Underlying Funds
and their respective Comparable Funds in pursuing their investment objectives.
With respect to the Underlying Funds, these strategies included strategies which
seek to achieve a lower tracking error (i.e. the difference, whether positive or
negative, between the return of a fund and its benchmark) and resulting lower
return volatility than Comparable Funds. According to FRIMCo, these strategies
may be expected to result, and for certain Underlying Funds during the periods
covered by the Third-Party Information did result, in lower relative performance
than that of some of their respective Comparable Funds and, consequently, lower
relative performance of the Fund than that of some of its respective Comparable
Funds. FRIMCo stated that the strategies pursued by the Underlying Funds are
intended to result in less volatile, more moderate returns relative to each
Underlying Fund's performance benchmark rather than more volatile, more extreme
returns that its Comparable Funds may experience over time. FRIMCo stated that
the Fund has a lower exposure to certain asset classes and investment styles
than some of its respective Comparable Funds and, as a result, the Fund had
lower relative performance than that of some of its Comparable Funds during the
periods covered by the Third-Party Information.
On the basis of the Agreement Renewal Information, including the FRIMCo
Analysis, and other information previously received by the Board from FRIMCo
during the course of the year or presented at the Board meeting by FRIMCo, the
Board, in respect of the Fund and Underlying Fund, found the advisory fee
charged by FRIMCo to be reasonable in light of the nature, scope and quality of
the services provided to the Fund or Underlying Funds, after giving effect to
waivers and/or reimbursements and considering differences in the composition and
investment strategies of their respective Comparable Funds. The Board also
determined that the
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)
- --------------------------------------------------------------------------------
relative expense ratio of the Fund and each Underlying Fund was comparable to
those of its Comparable Funds; FRIMCo's methodology of allocating expenses of
operating funds in the complex was reasonable; and FRIMCo's profitability with
respect to the Fund and each Underlying Fund was not excessive in light of the
nature, scope and quality of the services provided by FRIMCo.
The Board concluded that the performance of the Fund and the Underlying Funds
supported continuation of the FRIMCo Agreement, again based upon the Agreement
Renewal Information, including the FRIMCo Analysis, and other information
previously received by the Board from FRIMCo during the course of the year or
presented at the Board meeting by FRIMCo. In evaluating performance, the Board
considered the Fund's and Underlying Fund's absolute performance and its
performance relative to appropriate benchmarks and indices and its Comparable
Funds. In evaluating the Underlying Funds' performance, the Board also
considered FRIMCo's investment strategy of managing the Underlying Funds in a
risk aware manner.
The Board considered for the Fund and Underlying Fund whether economies of scale
have been realized and whether the fees for the 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
February 28, 2006 that the investment advisory fees for the Fund and each
Underlying Fund appropriately reflect any economies of scale realized by the
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 the Underlying
Funds. 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.
In voting to approve the continuation of the FRIMCo Agreement on its current
terms and conditions for the Fund and each Underlying Fund, the Board, after
considering the foregoing and other relevant factors, determined that
continuation of the FRIMCo Agreement was in the best interests of the Fund and
the Underlying Funds and their respective shareholders.
With respect to the evaluation of the terms of portfolio management contracts
with Money Managers for the Underlying Funds, 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 FRIMCo or Russell Fund Distributors, Inc., the
Fund's and Underlying Funds' underwriter; 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 has advised the Board
that it does not regard Money Manager profitability as relevant to its
evaluation of the portfolio management contracts 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 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 aggregate investment
advisory fees paid by the 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 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 best interests of the Fund and its shareholders.
During 2005 and 2006, the Trustees received proposals from FRIMCo to manage
directly approximately up to 10% of the assets of the Quantitative Equity Fund
and the International Securities Fund (each a "Participating Underlying Fund")
utilizing a "select holdings strategy" pursuant to the terms of the FRIMCo
Agreement, the actual allocation to be determined by each Participating
Underlying Fund's FRIMCo portfolio manager. Under this strategy, FRIMCo analyzes
the holdings of a Participating Underlying Fund's Money Managers to identify
particular stocks that are concurrently overweighted by 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
Underlying Fund. The strategy is designed to increase the Participating
Underlying Fund's exposure to stocks that are collectively viewed as attractive
by multiple Money Managers of a Participating Underlying Fund. Implementation of
this strategy
Basis for Approval of Investment Advisory Contracts 19
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
includes periodic rebalancing of the Participating Underlying Fund's holdings.
In connection with FRIMCo's proposals, the Trustees received and considered
information from FRIMCo regarding the potential enhancements to the
Participating Underlying Fund's performance based upon FRIMCo's 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 Underlying 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 Underlying Fund would not increase as a result of
the implementation of the select holdings strategy. FRIMCo has advised the Board
that the select holdings strategy has been implemented for the Quantitative
Equity Fund, although a reasonable period of time is needed to evaluate fairly
its impact on those Participating Underlying Funds' performance, and is expected
to be implemented in the International Securities Fund in the second quarter of
2006. Based upon the information received from FRIMCo during 2005 and 2006 in
connection with its select holdings strategy proposals, the Agreement Renewal
Information and additional discussion at the April 18 meeting concerning the
select holdings strategy, the Board in the case of the Participating Underlying
Funds concluded that the investment advisory fees paid to FRIMCo by each such
Underlying Fund under the FRIMCo Agreement in connection with the select
holdings strategy continue to be reasonable in light of the nature and
anticipated quality of the investment advisory services to be rendered by
FRIMCo.
In their deliberations, the Trustees did not identify any particular information
as to the FRIMCo Agreement or, other than FRIMCo's recommendation, the portfolio
management agreement with any Money Manager of an Underlying Fund 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.
20 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
As a courtesy to our Fund shareholders, a complete unaudited schedule of
investments is made available generally no later than 60 days after the end of
the first and third quarters of each fiscal year. These reports are available
(i) free of 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.
The Board has delegated to FRIMCo, as FRIC's investment adviser, the primary
responsibility for monitoring, evaluating and voting proxies solicited by or
with respect to issuers of securities in which assets of the Funds may be
invested. FRIMCo has established a proxy voting committee ("Committee") and has
adopted written proxy voting policies and procedures ("P&P") and proxy voting
guidelines ("Guidelines"). The Funds maintain a Portfolio Holdings Disclosure
Policy that governs the timing and circumstances of disclosure to shareholders
and third parties of information regarding the portfolio investments held by a
Fund. A description of the P&P, Guidelines and Portfolio Holdings Disclosure
Policy are contained in the Funds' Statement of Additional Information ("SAI").
The SAI is available (i) free of charge, upon request, by calling the Fund at
(800) 787-7354, (ii) at www.russell.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Financial Statements of the Underlying Funds can be obtained at no charge by
calling the Fund at (800) 787-7354.
Shareholder Requests for Additional Information 21
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2006 (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
- ----------------------------------------------------------------------------------------------------------------------------------
*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"))
- ----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------------
**Thaddas L. Alston, Trustee since Appointed until - Senior Vice President, Larco 39 None
Born April 7, 2006 successor is Investments, Ltd.
1945 duly
elected and
qualified
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - President, Anderson 39 None
Born October 15, 1984 successor is Management Group LLC
1931 duly elected (private investments
Chairman of the and qualified consulting)
909 A Street Nominating and - February 2002 to June 2005,
Tacoma, Washington Governance Appointed until Lead Trustee, FRIC and RIF
98402-1616 Committee since successor is
2006 duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Phillips is also an officer and/or director of one or more affiliates of
FRIC and RIF and is therefore an interested trustee.
** Mr. Alston was elected to the Board of Trustees effective May 1, 2006.
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, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
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
Chairperson and qualified - Director and Chairman of the company);
909 A Street since 2005 Audit Committee, Avista - Director, Avista
Tacoma, Washington Annual Corp. Corp
98402-1616 - Trustee and Chairman of the
Operations and Distribution
Committee, WM Group of Funds
- February 2002 to June 2005,
Chairman of the Audit
Committee, FRIC and RIF
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy Trustee since Appointed until - June 2004 to present, Senior 39 None
Born June 6, 1946 2003 successor is Vice President and Chief
duly elected Financial Officer, Waddell &
909 A Street Chairman of and qualified Reed Financial, Inc.
Tacoma, Washington Audit Committee - 2003, Retired
98402-1616 since 2005 Appointed until - 2001-2003, Vice President
successor is and Chief Financial Officer,
duly elected Janus Capital Group Inc.
and qualified - 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
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 39 None
Tennison, Jr. 2000 successor is Investment Company and
Born December 21, duly elected 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>
Mr. Michael Phillips is the Chairman of the Board of Frank Russell Company which
controls FRIMCo, the investment adviser of the Funds. He is also an Interested
Trustee of the Funds. On May 26, 2005, Mr. Phillips became a director of Simpson
Investment Company, a privately held company. Mr. Raymond P. Tennison, Jr., an
Independent Trustee of the Funds is the President of Simpson Investment Company.
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, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Jack Thompson, Trustee since Appointed until - September 2003 to present, 39 - Director, Sparx
Born March 21, 1949 2005 successor is Independent Board Chair and Japan Fund
duly elected Chairman of the Audit
909 A Street and qualified Committee, Sparx Japan Fund
Tacoma, Washington - May 1999 to May 2003,
98402-1616 President, Chief Executive
Officer and Director, Berger
Financial Group, LLC
- May 1999 to May 2003,
President and Trustee,
Berger Funds
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2002, Director,
1943 duly elected Smith Barney Fundamental
Chairperson of and qualified Value Fund
909 A Street the Investment
Tacoma, Washington Committee since Appointed until
98402-1616 2006 successor is
duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
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 adviser ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
24 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 39 None
Born October 6, since 2006 - Trustee of FRIC and RIF
1930 until 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
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>
Disclosure of Information about Fund Directors 25
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2002, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Until successor - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, FRIMCo
Officer since qualified by - Chairman of the Board, President and CEO, RFD
909 A Street 2004 Trustees - Chairman of the Board and President, Russell
Tacoma, Washington Insurance Agency, Inc. (insurance agency ("RIA"))
98402-1616 - Until 2004, Managing Director of Individual Investor
Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, FRIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, FRIMCo, FRTC and RFD
909 A Street 1998 Trustees - Treasurer and Principal Accounting Officer, SSgA
Tacoma, Washington Funds
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 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary since Until successor - General Counsel and Managing Director of Law and
Born October 8, 1941 1994 is chosen and Government Affairs, Secretary, FRC
qualified by
909 A Street Trustees
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
26 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
Thaddas L. Alston
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, Ph.D.
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
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 JUNE 1, 2006
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
J.P. Morgan Investment Management Inc., New York, NY
Nicholas Applegate Capital Management LLC, San Diego, CA
Palisades Investment Partners, LLC, Santa Monica, CA
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
Transamerica Investment Management, LLC, Dayton, OH
International Securities Fund
AllianceBernstein L.P., New York, NY
AQR Capital Management, LLC, Greenwich, CT
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
AllianceBernstein L.P., New York, NY
Arrowstreet Capital, Limited Partnership, Cambridge, MA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
Harding Loevner Management, L.P., Boston, MA
T. Rowe Price International, Inc., Baltimore, MD
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 27
(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
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment Management
Company expects to change its name to Russell Investment Management Company.
36-08-092 (1 04/06)
RUSSELL FUNDS
2006 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
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, 2006
(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.
* On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment Management
Company.
[Blank Page]
Frank Russell Investment Company
Russell Funds
Semiannual Report
April 30, 2006 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Diversified Equity Fund.............................................. 3
Special Growth Fund.................................................. 10
Quantitative Equity Fund............................................. 23
International Securities Fund........................................ 31
Emerging Markets Fund................................................ 48
Real Estate Securities Fund.......................................... 60
Short Duration Bond Fund............................................. 64
Diversified Bond Fund................................................ 79
Multistrategy Bond Fund.............................................. 104
Tax Exempt Bond Fund................................................. 137
Tax-Managed Large Cap Fund........................................... 151
Tax-Managed Mid & Small Cap Fund..................................... 157
Select Growth Fund................................................... 166
Select Value Fund.................................................... 173
Notes to Schedules of Investments.................................... 180
Statement of Assets and Liabilities.................................. 182
Statement of Operations.............................................. 190
Statement of Changes in Net Assets................................... 194
Financial Highlights................................................. 198
Notes to Financial Highlights........................................ 214
Notes to Financial Statements........................................ 215
Basis for Approval of Investment Advisory Contracts.................. 238
Shareholder Requests for Other Information........................... 242
Disclosure of Information about Fund Directors....................... 243
Manager, Money Managers and Service Providers........................ 248
</Table>
Frank Russell Investment Company - Russell Funds.
Copyright (c) Russell Investment Group 2006. All rights reserved.
Russell Investment Group is a Washington, USA corporation, which operates
through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual
Life Insurance Company.
FUND OBJECTIVES, RISKS, CHARGES AND EXPENSES SHOULD BE CAREFULLY CONSIDERED
BEFORE INVESTING. A PROSPECTUS CONTAINING THIS AND OTHER IMPORTANT INFORMATION
MUST PRECEDE OR ACCOMPANY THIS MATERIAL. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
SECURITIES DISTRIBUTED THROUGH RUSSELL FUND DISTRIBUTORS, INC. MEMBER NASD, PART
OF RUSSELL INVESTMENT GROUP.
Effective July 1, 2006 Frank Russell Investment Company ("FRIC") will change its
name to Russell Investment Company. FRIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Frank Russell Investment Management Company
("FRIMCo"). Effective July 1, 2006 FRIMCo will change its name to Russell
Investment Management Company.
Russell Investment Group and Standard & Poor's Corporation are the owners of the
trademarks, service marks, and copyrights related to their respective indexes.
Index performance is not indicative of the performance of any specific
investment. Indexes are not managed and may not be invested in directly.
Performance quoted represents past performance and does not guarantee future
results. The investment return and principal value of an investment will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Current to the most recent month-end performance data may be
obtained by visiting www.russell.com/us/fundperformance.
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,104.00 $ 1,015.03
Expenses Paid During
Period* $ 10.28 $ 9.84
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.97%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,107.90 $ 1,018.74
Expenses Paid During
Period* $ 6.38 $ 6.11
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.22%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,109.40 $ 1,019.98
Expenses Paid During
Period* $ 5.07 $ 4.86
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.97%
(representing the six month period annualized), 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, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.6%
Auto and Transportation - 4.2%
American Axle & Manufacturing Holdings, Inc. (N) 25,700 453
Autoliv, Inc. 17,700 979
BorgWarner, Inc. 16,100 978
Burlington Northern Santa Fe Corp. 269,662 21,446
CH Robinson Worldwide, Inc. 49,530 2,197
Cooper Tire & Rubber Co. (N) 44,600 566
CSX Corp. 481,800 32,998
FedEx Corp. 130,606 15,037
General Motors Corp. (N) 51,400 1,176
Honda Motor Co., Ltd. - ADR 153,175 5,427
Lear Corp. (N) 41,900 988
Magna International, Inc. Class A (N) 5,600 439
Navistar International Corp. (AE)(N) 275,200 7,260
Norfolk Southern Corp. 236,100 12,749
Southwest Airlines Co. 110,550 1,793
Swift Transportation Co., Inc. (AE)(N) 96,900 2,902
Toyota Motor Corp. - ADR (N) 85,092 9,967
Union Pacific Corp. 118,618 10,819
United Parcel Service, Inc. Class B 144,200 11,690
Visteon Corp. (AE)(N) 520,850 3,063
------------
142,927
------------
Consumer Discretionary - 13.8%
Accenture, Ltd. Class A 214,590 6,238
Activision, Inc. (AE) 288,650 4,096
Advance Auto Parts, Inc. 73,800 2,968
Bed Bath & Beyond, Inc. (AE) 87,300 3,348
Best Buy Co., Inc. 55,130 3,124
Blockbuster, Inc. Class A (N) 332,200 1,561
Boyd Gaming Corp. 28,700 1,430
Carnival Corp. 323,200 15,132
CBS Corp. Class B 214,830 5,472
Cendant Corp. 10,500 183
Chipotle Mexican Grill, Inc. Class A (AE)(N) 70,826 3,696
Coach, Inc. (AE) 281,796 9,305
Convergys Corp. (AE) 33,300 648
Costco Wholesale Corp. 66,100 3,598
Dick's Sporting Goods, Inc. (AE)(N) 40,000 1,686
eBay, Inc. (AE) 209,630 7,213
Electronic Arts, Inc. (AE) 147,600 8,384
Estee Lauder Cos., Inc. (The) Class A (N) 147,500 5,475
Four Seasons Hotels, Inc. (N) 55,788 3,014
GameStop Corp. Class A (AE)(N) 174,480 8,236
Gannett Co., Inc. 8,700 479
Gap, Inc. (The) 216,840 3,923
Google, Inc. Class A (AE) 98,190 41,038
GTECH Holdings Corp. 33,550 1,146
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hewitt Associates, Inc. Class A (AE)(N) 241,900 7,013
Hilton Hotels Corp. 319,650 8,611
Home Depot, Inc. 773,387 30,881
International Game Technology 142,300 5,397
Interpublic Group of Cos., Inc. (AE)(N) 67,000 642
Jones Apparel Group, Inc. 35,100 1,206
Kimberly-Clark Corp. 34,000 1,990
Kohl's Corp. (AE) 452,550 25,270
Las Vegas Sands Corp. (AE) 139,444 9,037
Liberty Global, Inc. (AE) Series A 134,247 2,780
Liberty Global, Inc. (AE) Series C 146,747 2,931
Liberty Media Corp. Class A (AE) 1,035,800 8,649
Limited Brands, Inc. 45,400 1,164
Liz Claiborne, Inc. 5,500 215
Lowe's Cos., Inc. 159,622 10,064
Mattel, Inc. 79,600 1,288
McDonald's Corp. 1,027,800 35,531
MGM Mirage 215,836 9,691
Monster Worldwide, Inc. (AE) 48,520 2,785
Newell Rubbermaid, Inc. 373,450 10,240
Nike, Inc. Class B 177,100 14,494
Nutri System, Inc. (AE)(N) 42,600 2,891
Office Depot, Inc. (AE) 141,100 5,726
OfficeMax, Inc. 48,300 1,869
Omnicom Group, Inc. 113,300 10,198
Quiksilver, Inc. (AE)(N) 353,200 4,828
Scientific Games Corp. Class A (AE)(N) 127,850 4,870
Sears Holdings Corp. (AE)(N) 74,400 10,691
Starbucks Corp. (AE) 250,205 9,325
Starwood Hotels & Resorts Worldwide, Inc. (o) 177,070 10,160
Station Casinos, Inc. 72,064 5,555
Target Corp. 96,957 5,148
Tech Data Corp. (AE) 23,500 863
Time Warner, Inc. 526,450 9,160
Urban Outfitters, Inc. (AE) 180,400 4,185
VF Corp. 22,100 1,352
Viacom, Inc. Class B (AE) 139,640 5,562
Wal-Mart Stores, Inc. 438,200 19,732
Walt Disney Co. 300,840 8,412
Wynn Resorts, Ltd. (AE)(N) 54,973 4,184
XM Satellite Radio Holdings, Inc. Class A
(AE)(N) 72,000 1,456
Yum! Brands, Inc. 111,226 5,748
------------
463,187
------------
</Table>
4 Diversified Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Consumer Staples - 5.9%
Altria Group, Inc. 667,980 48,869
Clorox Co. 25,000 1,605
Coca-Cola Co. (The) 151,800 6,370
Colgate-Palmolive Co. 233,600 13,810
ConAgra Foods, Inc. (N) 32,100 728
CVS Corp. 178,700 5,311
Dean Foods Co. (AE) 74,400 2,947
Diageo PLC - ADR (N) 123,920 8,210
Kellogg Co. 133,560 6,185
Kroger Co. (The) 83,600 1,694
PepsiCo, Inc. 681,000 39,661
Procter & Gamble Co. 828,619 48,234
Reynolds American, Inc. (N) 18,200 1,996
Safeway, Inc. (N) 48,400 1,216
Sara Lee Corp. 85,300 1,524
Tyson Foods, Inc. Class A 38,900 568
UST, Inc. (N) 24,700 1,085
Walgreen Co. 53,164 2,229
Whole Foods Market, Inc. 80,420 4,936
------------
197,178
------------
Financial Services - 19.8%
ACE, Ltd. 13,300 739
Allstate Corp. (The) 259,390 14,653
American Express Co. 449,400 24,182
American International Group, Inc. 663,435 43,289
AmSouth Bancorporation 12,500 362
Annaly Mortgage Management, Inc. (o)(N) 476,050 6,412
AON Corp. 260,800 10,930
Astoria Financial Corp. (N) 28,350 888
Bank of America Corp. 1,348,328 67,309
BB&T Corp. 25,500 1,095
Capital One Financial Corp. 159,700 13,836
CB Richard Ellis Group, Inc. Class A (AE) 51,330 4,511
Charles Schwab Corp. (The) (AE) 256,610 4,593
Chicago Mercantile Exchange Holdings, Inc. 27,409 12,553
Chubb Corp. 153,400 7,906
Cigna Corp. 35,410 3,789
Citigroup, Inc. 970,543 48,479
Comerica, Inc. 28,000 1,592
Commerce Bancorp, Inc. (N) 89,400 3,606
Countrywide Financial Corp. 587,950 23,906
Deluxe Corp. (N) 22,000 525
Fannie Mae 572,140 28,950
First Data Corp. 68,900 3,286
First Horizon National Corp. (N) 31,500 1,336
Freddie Mac 73,250 4,473
Genworth Financial, Inc. Class A 685,417 22,756
Global Payments, Inc. 69,650 3,304
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Golden West Financial Corp. 7,600 546
Goldman Sachs Group, Inc. 273,094 43,774
Hartford Financial Services Group, Inc. 276,000 25,373
Host Hotels & Resorts, Inc. (AE)(o) 119,602 2,514
Hudson City Bancorp, Inc. 105,000 1,408
Huntington Bancshares, Inc. (N) 44,600 1,077
JPMorgan Chase & Co. 1,196,323 54,289
KeyCorp 56,300 2,152
Lehman Brothers Holdings, Inc. 113,137 17,101
Lincoln National Corp. (N) 25,100 1,458
Loews Corp. 19,750 2,096
MBIA, Inc. 24,800 1,479
Merrill Lynch & Co., Inc. 165,800 12,644
Metlife, Inc. 284,210 14,807
MGIC Investment Corp. 19,600 1,386
Morgan Stanley 107,600 6,919
Nasdaq Stock Market, Inc. (The) (AE) 100,520 3,761
National City Corp. 68,890 2,542
North Fork Bancorporation, Inc. 331,800 9,997
PartnerRe, Ltd. (N) 8,300 519
Paychex, Inc. 218,800 8,837
PMI Group, Inc. (The) (N) 21,600 997
PNC Financial Services Group, Inc. 127,840 9,137
Progressive Corp. (The) (N) 26,135 2,836
RenaissanceRe Holdings, Ltd. 66,675 2,804
SLM Corp. 114,819 6,072
Sovereign Bancorp, Inc. (N) 27,550 611
St. Paul Travelers Cos., Inc. (The) 429,270 18,901
SunTrust Banks, Inc. 123,850 9,577
Trizec Properties, Inc. (o) 169,950 4,252
UBS AG 191,947 22,429
UnumProvident Corp. (N) 127,500 2,590
US Bancorp 12,756 401
Wachovia Corp. 81,400 4,872
Washington Mutual, Inc. (N) 97,630 4,399
Wells Fargo & Co. 19,800 1,360
XL Capital, Ltd. Class A 8,300 547
------------
665,724
------------
Health Care - 12.1%
Abbott Laboratories 344,200 14,711
Allergan, Inc. 34,150 3,508
AmerisourceBergen Corp. 163,650 7,061
Amgen, Inc. (AE) 328,900 22,266
Amylin Pharmaceuticals, Inc. (AE)(N) 147,194 6,410
AstraZeneca PLC - ADR 186,200 10,265
Baxter International, Inc. 457,100 17,233
Biomet, Inc. 82,000 3,049
</Table>
Diversified Equity Fund 5
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Boston Scientific Corp. (AE) 2,750 64
Cardinal Health, Inc. 149,500 10,069
Caremark Rx, Inc. 291,480 13,277
Celgene Corp. (AE)(N) 99,740 4,205
Cerner Corp. (AE)(N) 99,470 3,944
Charles River Laboratories International, Inc.
(AE) 65,100 3,076
Conor Medsystems, Inc. (AE)(N) 43,700 1,180
Coventry Health Care, Inc. (AE) 111,400 5,533
DaVita, Inc. (AE) 104,400 5,874
Eli Lilly & Co. 301,600 15,961
Express Scripts, Inc. (AE) 40,490 3,164
Fisher Scientific International, Inc. (AE) 73,700 5,200
Genentech, Inc. (AE) 484,340 38,607
Genzyme Corp. (AE) 33,483 2,048
Gilead Sciences, Inc. (AE) 149,200 8,579
Human Genome Sciences, Inc. (AE)(N) 529,100 6,037
Intuitive Surgical, Inc. (AE) 34,750 4,413
Johnson & Johnson 383,930 22,502
Kinetic Concepts, Inc. (AE) 49,600 2,166
McKesson Corp. 29,600 1,438
Medco Health Solutions, Inc. (AE) 79,700 4,242
Medimmune, Inc. (AE) 56,200 1,769
Medtronic, Inc. 336,625 16,872
Merck & Co., Inc. 392,120 13,497
Novartis AG - ADR 179,000 10,294
Omnicare, Inc. 148,230 8,406
Panacos Pharmaceuticals, Inc. (AE)(N) 197,600 1,381
PDL BioPharma, Inc. (AE)(N) 152,140 4,379
Pfizer, Inc. 787,940 19,958
Quest Diagnostics, Inc. 157,984 8,804
Stryker Corp. 224,300 9,813
Tenet Healthcare Corp. (AE) 59,900 498
Triad Hospitals, Inc. (AE) 114,150 4,703
UnitedHealth Group, Inc. 653,047 32,483
Varian Medical Systems, Inc. (AE) 29,100 1,524
WellPoint, Inc. (AE) 104,700 7,434
Wyeth 371,920 18,101
------------
405,998
------------
Integrated Oils - 4.1%
Amerada Hess Corp. 116,040 16,625
Chevron Corp. 167,307 10,209
ConocoPhillips 340,292 22,766
Exxon Mobil Corp. 679,400 42,857
Marathon Oil Corp. 228,319 18,119
Occidental Petroleum Corp. 141,520 14,540
Suncor Energy, Inc. 56,700 4,861
Total SA - ADR (N) 48,710 6,723
------------
136,700
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Materials and Processing - 3.3%
Air Products & Chemicals, Inc. 70,118 4,805
Allegheny Technologies, Inc. 45,700 3,169
American Standard Cos., Inc. 38,900 1,693
Archer-Daniels-Midland Co. 223,522 8,123
Ashland, Inc. 19,100 1,257
Bunge, Ltd. (N) 32,000 1,707
Cemex SA de CV - ADR 51,290 3,463
Chemtura Corp. 25,100 306
Corn Products International, Inc. (N) 240,650 6,738
Cytec Industries, Inc. 34,550 2,089
Dow Chemical Co. (The) 101,800 4,134
EI Du Pont de Nemours & Co. 17,985 793
Hercules, Inc. (AE) 26,800 381
International Paper Co. 436,960 15,884
Lubrizol Corp. 22,100 964
Lyondell Chemical Co. 70,500 1,699
Masco Corp. 276,530 8,821
Monsanto Co. 94,842 7,910
Mosaic Co. (The) (AE)(N) 296,750 4,451
Pactiv Corp. (AE) 90,550 2,204
Phelps Dodge Corp. 7,800 672
PPG Industries, Inc. 116,600 7,826
Smurfit-Stone Container Corp. (AE) 87,200 1,129
Sonoco Products Co. 9,000 282
St. Joe Co. (The) (N) 41,326 2,321
Syngenta AG - ADR (N) 267,660 7,436
Temple-Inland, Inc. 88,700 4,119
United States Steel Corp. (N) 88,300 6,049
------------
110,425
------------
Miscellaneous - 3.5%
3M Co. 189,200 16,164
Eaton Corp. 12,200 935
General Electric Co. 1,915,690 66,264
Honeywell International, Inc. 404,500 17,191
Johnson Controls, Inc. 5,200 424
SPX Corp. 23,100 1,265
Textron, Inc. 74,200 6,674
Tyco International, Ltd. 317,350 8,362
------------
117,279
------------
</Table>
6 Diversified Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Other Energy - 3.7%
Apache Corp. 96,700 6,870
Baker Hughes, Inc. 149,400 12,076
Devon Energy Corp. 88,520 5,321
Diamond Offshore Drilling, Inc. (N) 12,450 1,130
GlobalSantaFe Corp. 15,500 949
Halliburton Co. 604,600 47,250
National-Oilwell Varco, Inc. (AE) 43,900 3,028
Newfield Exploration Co. (AE)(N) 87,700 3,911
Noble Corp. 10,300 813
Peabody Energy Corp. 166,706 10,646
Pride International, Inc. (AE) 16,200 565
Reliant Energy, Inc. (AE)(N) 1,357,900 15,412
Rowan Cos., Inc. 23,500 1,042
Schlumberger, Ltd. 228,600 15,805
------------
124,818
------------
Producer Durables - 6.3%
Agilent Technologies, Inc. (AE) 96,311 3,700
Alcatel SA - ADR (AE)(N) 489,330 7,056
American Tower Corp. Class A (AE) 30,600 1,045
Andrew Corp. (AE) 147,200 1,557
Applied Materials, Inc. 829,380 14,887
Boeing Co. 435,770 36,365
Bombardier, Inc. Class B (AE) 1,144,450 4,402
Caterpillar, Inc. 397,669 30,119
Crown Castle International Corp. (AE) 143,270 4,821
Deere & Co. 165,704 14,546
Emerson Electric Co. 82,300 6,991
ESCO Technologies, Inc. (AE)(N) 42,900 2,175
Goodrich Corp. 92,120 4,099
Illinois Tool Works, Inc. 39,810 4,089
Ingersoll-Rand Co., Ltd. Class A 16,000 700
Itron, Inc. (AE) 17,400 1,167
Joy Global, Inc. 85,925 5,644
KB Home 74,021 4,557
Lennar Corp. Class A 72,069 3,959
Lockheed Martin Corp. 269,890 20,485
Northrop Grumman Corp. 228,560 15,291
Pitney Bowes, Inc. 12,000 502
Regal-Beloit Corp. (N) 32,700 1,526
Teradyne, Inc. (AE) 131,000 2,209
Thermo Electron Corp. (AE) 95,400 3,677
Toll Brothers, Inc. (AE) 35,148 1,130
United Technologies Corp. 150,407 9,447
WW Grainger, Inc. 50,920 3,917
------------
210,063
------------
Technology - 12.8%
ADC Telecommunications, Inc. (AE)(N) 44,457 995
Advanced Micro Devices, Inc. (AE) 206,930 6,694
Agere Systems, Inc. (AE) 39,200 616
Akamai Technologies, Inc. (AE)(N) 163,670 5,514
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Altera Corp. (AE) 328,100 7,166
Amkor Technology, Inc. (AE)(N) 129,100 1,561
Apple Computer, Inc. (AE) 191,970 13,513
Arrow Electronics, Inc. (AE) 29,500 1,068
AU Optronics Corp. - ADR (N) 407,233 6,691
Avnet, Inc. (AE) 101,700 2,659
BearingPoint, Inc. (AE)(N) 552,300 5,125
Broadcom Corp. Class A (AE) 225,030 9,251
Celestica, Inc. (AE)(N) 277,750 3,127
Cisco Systems, Inc. (AE) 990,549 20,752
Corning, Inc. (AE) 327,410 9,046
Dell, Inc. (AE) 222,400 5,827
Electronic Data Systems Corp. 60,400 1,636
EMC Corp. (AE) 48,700 658
F5 Networks, Inc. (AE)(N) 44,150 2,585
Flextronics International, Ltd. (AE) 45,600 518
Formfactor, Inc. (AE) 37,700 1,572
General Dynamics Corp. 163,576 10,734
Hewlett-Packard Co. 1,265,860 41,102
Intel Corp. 198,700 3,970
International Business Machines Corp. 228,700 18,831
International Rectifier Corp. (AE)(N) 129,450 5,851
Intersil Corp. Class A 50,900 1,507
JDS Uniphase Corp. (AE)(N) 3,088,030 10,777
Juniper Networks, Inc. (AE) 180,800 3,341
L-3 Communications Holdings, Inc. 82,200 6,716
Marvell Technology Group, Ltd. (AE) 72,100 4,116
Maxim Integrated Products, Inc. 523,200 18,448
Micron Technology, Inc. (AE) 458,960 7,789
Microsoft Corp. 1,833,138 44,270
Motorola, Inc. 759,320 16,211
National Semiconductor Corp. 228,900 6,862
Oracle Corp. (AE) 280,920 4,099
Qualcomm, Inc. 1,057,084 54,271
Red Hat, Inc. (AE)(N) 114,600 3,368
Research In Motion, Ltd. (AE) 104,800 8,031
Rockwell Automation, Inc. 63,750 4,619
Salesforce.com, Inc. (AE)(N) 94,340 3,307
SanDisk Corp. (AE) 89,200 5,694
Sanmina-SCI Corp. (AE) 56,000 291
Seagate Technology (N) 258,200 6,858
Seagate Technology, Inc. (AE) 9,200 --
Silicon Image, Inc. (AE)(N) 202,800 2,069
Silicon Laboratories, Inc. (AE) 43,500 2,027
Solectron Corp. (AE) 119,500 478
Sony Corp. - ADR 102,530 5,018
</Table>
Diversified Equity Fund 7
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Tellabs, Inc. (AE) 49,500 785
Texas Instruments, Inc. 416,311 14,450
Unisys Corp. (AE) 40,700 254
Vishay Intertechnology, Inc. (AE) 113,800 1,778
Xilinx, Inc. 121,900 3,373
------------
427,869
------------
Utilities - 4.1%
America Movil SA de CV - ADR
Series L 129,365 4,775
American Electric Power Co., Inc. 12,500 418
AT&T, Inc. 209,447 5,490
BellSouth Corp. 437,750 14,787
CMS Energy Corp. (AE) 83,100 1,107
Comcast Corp. Class A (AE) 247,444 7,658
Constellation Energy Group, Inc. 28,300 1,554
Dominion Resources, Inc. 319,380 23,912
DTE Energy Co. (N) 14,700 599
Entergy Corp. 158,900 11,114
NII Holdings, Inc. (AE)(N) 64,600 3,870
Pinnacle West Capital Corp. 28,400 1,139
Progress Energy, Inc. 27,500 944
Sprint Nextel Corp. 1,437,920 35,660
Telephone & Data Systems, Inc. 66,000 2,488
TXU Corp. 196,500 9,752
Verizon Communications, Inc. 349,680 11,550
Wisconsin Energy Corp. 28,000 1,093
------------
137,910
------------
TOTAL COMMON STOCKS
(cost $2,671,191) 3,140,078
------------
PREFERRED STOCKS - 0.1%
Auto and Transportation - 0.1%
General Motors Corp. (N) 156,850 2,857
------------
TOTAL PREFERRED STOCKS
(cost $2,712) 2,857
------------
LONG-TERM INVESTMENTS - 0.1%
Corporate Bonds and Notes - 0.1%
AMR Corp. (N)
4.250% due 09/23/23 1,762 2,751
------------
TOTAL LONG-TERM INVESTMENTS
(cost $2,017) 2,751
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 5.8%
Frank Russell Investment Company Money Market
Fund 184,641,992 184,642
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 8,000 7,955
4.604% due 06/15/06 1,000 994
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $193,591) 193,591
------------
OTHER SECURITIES - 6.2%
Frank Russell Investment Company Money Market
Fund (X) 54,382,857 54,383
State Street Securities Lending Quality Trust
(X) 153,203,380 153,203
------------
TOTAL OTHER SECURITIES
(cost $207,586) 207,586
------------
TOTAL INVESTMENTS - 105.8%
(identified cost $3,077,097) 3,546,863
OTHER ASSETS AND LIABILITIES,
NET - (5.8%) (195,167)
------------
NET ASSETS - 100.0% 3,351,696
============
</Table>
See accompanying notes which are an integral part of the financial statements.
8 Diversified Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/06 (43) 15,422 350
Russell 1000 Mini Index (CME) expiration date
06/06 (110) 7,890 82
S&P 500 E-Mini Index (CME) expiration date 06/06
(545) 35,858 741
S&P 500 Index (CME)
expiration date 06/06 (244) 80,270 235
S&P Midcap 400 E-Mini Index (CME)
expiration date 06/06 (630) 50,816 2,048
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 3,456
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 4.2
Consumer Discretionary 13.8
Consumer Staples 5.9
Financial Services 19.8
Health Care 12.1
Integrated Oils 4.1
Materials and Processing 3.3
Miscellaneous 3.5
Other Energy 3.7
Producer Durables 6.3
Technology 12.8
Utilities 4.1
Preferred Stocks 0.1
Long-Term Investments 0.1
Short-Term Investments 5.8
Other Securities 6.2
---------------
Total Investments 105.8
Other Assets and Liabilities, Net (5.8)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
Diversified Equity Fund 9
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,189.70 $ 1,013.84
Expenses Paid During
Period* $ 12.00 $ 11.03
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.21%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,194.00 $ 1,017.55
Expenses Paid During
Period* $ 7.94 $ 7.30
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.46%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,195.50 $ 1,018.79
Expenses Paid During
Period* $ 6.59 $ 6.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.21%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
10 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.2%
Auto and Transportation - 3.4%
AAR Corp. (AE)(N) 98,144 2,619
Aftermarket Technology Corp. (AE) 9,237 235
Airtran Holdings, Inc. (AE) 142,139 1,987
Alaska Air Group, Inc. (AE) 14,050 535
AMR Corp. (AE) 4,800 118
Arkansas Best Corp. (N) 36,625 1,574
ArvinMeritor, Inc. (N) 103,600 1,723
Bristow Group, Inc. (AE)(N) 34,000 1,220
Continental Airlines, Inc. Class B (AE) 20,200 526
Dana Corp. (AE)(N) 164,500 321
DryShips, Inc. (N) 58,400 554
EGL, Inc. (AE) 21,150 988
Expeditors International Washington, Inc. 19,548 1,674
Freightcar America, Inc. 16,700 1,117
Frozen Food Express Industries (AE)(N) 5,900 60
General Maritime Corp. (N) 41,371 1,374
Grupo TMM SA Series A (AE)(N) 66,800 334
Hayes Lemmerz International, Inc. (AE)(N) 24,900 83
Hub Group, Inc. Class A (AE) 45,955 2,256
Kansas City Southern (AE)(N) 30,500 741
Laidlaw International, Inc. 73,300 1,814
Marten Transport, Ltd. (AE) 9,912 216
Navistar International Corp. (AE) 73,300 1,934
Noble International, Ltd. (N) 3,000 48
OMI Corp. (N) 64,000 1,234
Overseas Shipholding Group, Inc. 3,700 181
Pacer International, Inc. 20,520 704
PAM Transportation Services (AE) 1,000 27
SCS Transportation, Inc. (AE) 22,471 591
Skywest, Inc. 15,200 358
Stolt-Nielsen SA - ADR 9,362 264
Swift Transportation Co., Inc. (AE) 12,000 359
Teekay Shipping Corp. (N) 26,800 1,031
Tenneco, Inc. (AE) 14,435 350
Thor Industries, Inc. 6,444 328
TRW Automotive Holdings Corp. (AE) 59,069 1,310
US Xpress Enterprises, Inc. Class A (AE)(N) 15,400 302
UTI Worldwide, Inc. 103,732 3,235
Visteon Corp. (AE)(N) 146,400 861
Wabtec Corp. 77,309 2,824
------------
38,010
------------
Consumer Discretionary - 16.6%
1-800-FLOWERS.COM, Inc. Class A (AE)(N) 22,700 164
24/7 Real Media, Inc. (AE)(N) 128,526 1,301
Abercrombie & Fitch Co. Class A 35,653 2,165
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ABM Industries, Inc. 10,000 172
Adesa, Inc. 60,800 1,551
Administaff, Inc. 31,350 1,810
Advisory Board Co. (The) (AE) 45,927 2,577
Alberto-Culver Co. 16,600 747
American Greetings Corp. Class A (N) 76,908 1,728
American Woodmark Corp. 4,829 171
Ameristar Casinos, Inc. (N) 9,500 234
AMN Healthcare Services, Inc. (AE)(N) 124,400 2,391
Applebees International, Inc. 8,150 189
Arbitron, Inc. (N) 38,080 1,358
Asbury Automotive Group, Inc. (AE)(N) 20,500 395
Bally Technologies, Inc. (AE)(N) 45,700 818
Banta Corp. 21,500 1,087
Big Lots, Inc. (AE) 45,960 669
BJ's Restaurants, Inc. (AE)(N) 21,200 558
Blair Corp. 1,200 49
Bob Evans Farms, Inc. 18,066 521
Bombay Co., Inc. (The) (AE)(N) 1,000 3
Bon-Ton Stores, Inc. (The) 12,120 347
Borders Group, Inc. 24,100 569
Boyd Gaming Corp. 34,650 1,726
Brightpoint, Inc. (AE) 161,835 5,418
Brinker International, Inc. 9,600 376
Brown Shoe Co., Inc. 9,450 359
Buffalo Wild Wings, Inc. (AE) 28,700 1,239
Callaway Golf Co. 147,452 2,355
Carter's, Inc. (AE) 32,640 2,199
Catalina Marketing Corp. (N) 30,200 715
Cato Corp. (The) Class A 20,450 463
Charlotte Russe Holding, Inc. (AE)(N) 6,500 140
Cheesecake Factory, Inc. (The) (AE) 72,430 2,286
Chemed Corp. (N) 96,215 5,241
Choice Hotels International, Inc. (N) 36,780 1,969
Christopher & Banks Corp. 91,952 2,430
Circuit City Stores, Inc. 126,642 3,641
Claire's Stores, Inc. 38,663 1,362
Convergys Corp. (AE) 72,400 1,410
Corinthian Colleges, Inc. (AE)(N) 68,000 1,013
Corporate Executive Board Co. 7,500 803
Cosi, Inc. (AE)(N) 57,721 542
Cox Radio, Inc. Class A (AE) 8,900 115
Crocs, Inc. (AE)(N) 98,886 2,957
Dillard's, Inc. Class A (N) 24,750 646
Dollar Thrifty Automotive Group (AE) 8,950 436
Dollar Tree Stores, Inc. (AE) 9,600 250
</Table>
Special Growth Fund 11
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Domino's Pizza, Inc. 19,800 521
DreamWorks Animation SKG, Inc. Class A (AE) 86,551 2,346
Dress Barn, Inc. (AE)(N) 89,236 2,258
DSW, Inc. Class A (AE) 11,985 375
EarthLink, Inc. (AE)(N) 102,800 934
Entercom Communications Corp. 7,200 191
Ethan Allen Interiors, Inc. (N) 33,500 1,504
Ezcorp, Inc. Class A (AE) 9,179 288
Federated Department Stores, Inc. 14,600 1,137
Forrester Research, Inc. (AE) 11,300 276
Furniture Brands International, Inc. (N) 69,250 1,593
Geo Group, Inc. (The) (AE)(N) 4,600 165
Getty Images, Inc. (AE) 23,108 1,479
Gildan Activewear, Inc. (AE) 12,355 589
Group 1 Automotive, Inc. 15,491 844
Guess?, Inc. (AE)(N) 8,500 337
Gymboree Corp. (AE) 12,643 383
Harris Interactive, Inc. (AE) 21,100 102
Hartmarx Corp. (AE)(N) 23,300 200
Hasbro, Inc. 91,700 1,807
Hearst-Argyle Television, Inc. (N) 105,940 2,439
Heidrick & Struggles International, Inc. (AE)(N) 20,700 749
Helen of Troy, Ltd. (AE)(N) 59,530 1,230
Iconix Brand Group, Inc. (AE)(N) 61,738 1,062
IKON Office Solutions, Inc. 16,600 219
Inter Parfums, Inc. 5,326 101
Internap Network Services Corp. (AE) 116,300 152
International Speedway Corp. Class A 22,200 1,092
Interstate Hotels & Resorts, Inc. (AE) 11,500 64
Intrawest Corp. 55,038 1,976
Jack in the Box, Inc. (AE) 71,788 3,002
Jo-Ann Stores, Inc. (AE)(N) 57,500 705
John Wiley & Sons, Inc. Class A 5,550 203
Jones Apparel Group, Inc. 30,400 1,044
Kellwood Co. (N) 18,400 590
Kelly Services, Inc. Class A 4,000 111
Korn/Ferry International (AE) 110,548 2,322
La-Z-Boy, Inc. 27,803 430
Labor Ready, Inc. (AE) 37,850 1,000
Leapfrog Enterprises, Inc. (AE)(N) 91,700 963
Lee Enterprises, Inc. 29,500 909
Liberty Global, Inc. Series A (AE) 9,050 188
LIFE TIME Fitness, Inc. (AE) 84,644 3,877
Lifetime Brands, Inc. (N) 4,400 130
Lightbridge, Inc. (AE) 11,882 151
Lin TV Corp. Class A (AE)(N) 67,910 600
Lithia Motors, Inc. Class A (N) 15,870 538
Liz Claiborne, Inc. 41,500 1,621
Luby's, Inc. (AE)(N) 28,000 332
Manpower, Inc. 71,133 4,634
Marcus Corp. 11,000 196
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MAXIMUS, Inc. 11,200 390
McClatchy Co. Class A (N) 20,600 931
McCormick & Schmick's Seafood Restaurants, Inc.
(AE) 2,467 61
Media General, Inc. Class A 1,500 62
Meredith Corp. 22,300 1,106
Monarch Casino & Resort, Inc. (AE) 9,090 290
Monster Worldwide, Inc. (AE) 52,244 2,999
MPS Group, Inc. (AE) 399,695 6,375
Multimedia Games, Inc. (AE) 17,950 248
NetEase.com, Inc. - ADR (AE)(N) 1,800 39
NetFlix, Inc. (AE)(N) 63,671 1,887
O'Reilly Automotive, Inc. (AE) 66,533 2,254
OfficeMax, Inc. 10,600 410
Orient-Express Hotels, Ltd. Class A 123,518 5,064
Pacific Sunwear of California, Inc. (AE) 45,500 1,060
Pantry, Inc. (The) (AE) 6,444 427
Papa John's International, Inc. (AE)(N) 39,988 1,337
Payless Shoesource, Inc. (AE)(N) 76,000 1,749
Pegasus Solutions, Inc. (AE) 22,700 215
Penn National Gaming, Inc. (AE) 113,876 4,637
Perficient, Inc. (AE)(N) 20,912 254
PHH Corp. (AE) 52,800 1,472
Phillips-Van Heusen Corp. 47,400 1,911
Pier 1 Imports, Inc. (N) 97,200 1,173
Pre-Paid Legal Services, Inc. (N) 18,460 624
ProQuest Co. (AE)(N) 38,700 608
Providence Service Corp. (The) (AE)(N) 45,871 1,437
Quiksilver, Inc. (AE) 66,800 913
RadioShack Corp. 66,300 1,127
Regal Entertainment Group Class A 90,293 1,898
RR Donnelley & Sons Co. 8,200 276
Ryan's Restaurant Group, Inc. (AE) 82,933 1,110
Scholastic Corp. (AE) 26,100 693
Select Comfort Corp. (AE)(N) 73,021 2,918
Service Corp. International 12,100 97
ServiceMaster Co. (The) 54,800 660
Shoe Carnival, Inc. (AE) 3,298 91
Six Flags, Inc. (AE)(N) 77,000 709
Skechers USA, Inc. Class A (AE) 11,600 317
Sonic Automotive, Inc. 42,900 1,159
Speedway Motorsports, Inc. (N) 2,900 110
Spherion Corp. (AE) 15,600 165
Stage Stores, Inc. (AE)(N) 50,721 1,586
Standard Parking Corp. (AE) 1,277 34
Stanley Furniture Co., Inc. (N) 10,724 290
Stanley Works (The) 80,137 4,185
Startek, Inc. 3,000 70
</Table>
12 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Steven Madden, Ltd. 7,444 403
Stride Rite Corp. 10,800 151
Tech Data Corp. (AE) 40,836 1,500
TeleTech Holdings, Inc. (AE)(N) 36,550 469
Tetra Tech, Inc. (AE) 62,088 1,206
Tiffany & Co. 22,200 775
Tweeter Home Entertainment Group, Inc. (AE)(N) 36,700 314
United Online, Inc. (N) 41,117 532
United Stationers, Inc. (AE) 11,344 610
Vail Resorts, Inc. (AE) 9,653 362
Valassis Communications, Inc. (AE) 28,700 840
Viad Corp. 10,900 358
Warnaco Group, Inc. (The) (AE) 19,948 444
Washington Post Co. (The) Class B 1,630 1,249
WebSideStory, Inc. (AE)(N) 56,700 974
WESCO International, Inc. (AE) 46,750 3,506
Wet Seal, Inc. (The) Class A (AE)(N) 55,828 321
Wolverine World Wide, Inc. 30,700 763
Zumiez, Inc. (AE)(N) 16,400 533
------------
184,362
------------
Consumer Staples - 0.8%
Casey's General Stores, Inc. 8,648 183
Chiquita Brands International, Inc. 15,200 246
Coca-Cola Bottling Co. Consolidated (N) 21,053 1,015
Del Monte Foods Co. 16,200 189
Flowers Foods, Inc. 3,800 107
J&J Snack Foods Corp. 7,100 243
Longs Drug Stores Corp. 31,806 1,508
Molson Coors Brewing Co. Class B 20,400 1,507
Pathmark Stores, Inc. (AE) 46,200 478
PepsiAmericas, Inc. 28,000 661
Performance Food Group Co. (AE)(N) 41,000 1,259
Pilgrim's Pride Corp. (N) 19,300 504
Premium Standard Farms, Inc. (N) 14,540 241
Seaboard Corp. (N) 400 617
Smart & Final, Inc. (AE) 7,545 126
Spartan Stores, Inc. 16,045 221
Weis Markets, Inc. 5,500 228
Wild Oats Markets, Inc. (AE)(N) 5,800 100
------------
9,433
------------
Financial Services - 15.9%
21st Century Holding Co. 1,700 31
21st Century Insurance Group (N) 9,200 148
Accredited Home Lenders Holding Co. (AE) 7,244 417
Advent Software, Inc. (AE) 80,200 2,823
Affiliated Managers Group, Inc. (AE) 38,667 3,917
AG Edwards, Inc. 41,700 2,203
Alfa Corp. (N) 6,200 104
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Alliance Data Systems Corp. (AE) 157,530 8,664
AllianceBernstein Holding, LP 5,950 383
AMB Property Corp. (o) 40,500 2,025
American Capital Strategies, Ltd. 55,742 1,941
American Home Mortgage Investment Corp. (o) 8,081 280
AmeriCredit Corp. (AE) 59,410 1,799
Apollo Investment Corp. 27,100 507
Ashford Hospitality Trust, Inc. (o)(N) 87,400 1,017
Aspen Insurance Holdings, Ltd. 45,700 1,113
Assurant, Inc. 53,358 2,570
Axis Capital Holdings, Ltd. 47,850 1,427
Bank of Hawaii Corp. 53,180 2,888
Banner Corp. 4,100 153
Bear Stearns Cos., Inc. (The) 8,600 1,226
BISYS Group, Inc. (The) (AE) 43,201 689
BOK Financial Corp. 6,529 318
Calamos Asset Management, Inc. Class A 77,866 3,019
Camden Property Trust (o) 6,400 440
Capital Trust, Inc. Class A (o)(N) 5,700 177
Cash America International, Inc. (AE) 14,640 484
CBL & Associates Properties, Inc. (o) 29,330 1,173
Central Pacific Financial Corp. 8,031 304
Checkfree Corp. (AE) 59,050 3,181
Chittenden Corp. 10,900 300
CIT Group, Inc. 20,000 1,080
City National Corp. 34,700 2,532
CNA Surety Corp. (AE)(N) 59,700 1,074
Colonial BancGroup, Inc. (The) 116,500 3,021
Colonial Properties Trust (o) 6,444 318
Commerce Group, Inc. 7,900 458
Commercial Net Lease Realty (o) 43,260 911
Community Bank System, Inc. (N) 7,400 152
Community Trust Bancorp, Inc. 3,900 131
CompuCredit Corp. (AE)(N) 15,200 607
Conseco, Inc. (AE) 7,300 184
Corus Bankshares, Inc. (N) 13,177 881
Cousins Properties, Inc. (o)(N) 26,900 846
CVB Financial Corp. 13,000 212
Cybersource Corp. (AE)(N) 121,400 1,134
Delphi Financial Group Class A 55,496 2,907
Digital Insight Corp. (AE) 40,000 1,380
Doral Financial Corp. (N) 87,600 693
Duke Realty Corp. (o) 30,000 1,062
Dun & Bradstreet Corp. (AE) 7,187 554
EMC Insurance Group, Inc. 1,500 43
Entertainment Properties Trust (o) 13,700 564
</Table>
Special Growth Fund 13
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Equity One, Inc. (o) 17,300 398
Euronet Worldwide, Inc. (AE)(N) 16,200 579
Fair Isaac Corp. 5,000 186
Federal Realty Investors Trust (o) 24,700 1,685
FelCor Lodging Trust, Inc. (o)(N) 56,391 1,222
Fidelity National Financial, Inc. 28,000 1,175
First American Corp. 92,900 3,958
First Cash Financial Services, Inc. (AE) 27,959 589
First Community Bancorp, Inc. 11,284 654
First Financial Bankshares, Inc. (N) 2,600 97
First Mutual Bancshares, Inc. (N) 6,300 164
First Place Financial Corp. 1,573 36
First Regional Bancorp (AE) 1,000 91
First Republic Bank 10,700 466
FirstFed Financial Corp. (AE)(N) 8,823 555
FPIC Insurance Group, Inc. (AE) 1,877 75
Fremont General Corp. (N) 79,360 1,765
Fulton Financial Corp. (N) 24,200 398
GATX Corp. 22,350 1,046
Global Payments, Inc. 34,300 1,627
Gramercy Capital Corp. 1,597 40
Greater Bay Bancorp 9,800 271
Greenhill & Co., Inc. (N) 10,341 733
Hanmi Financial Corp. 31,910 621
Hanover Insurance Group, Inc. (The) 29,710 1,572
Harbor Florida Bancshares, Inc. (N) 9,809 368
Harleysville Group, Inc. (N) 5,300 159
Health Care Property Investors, Inc. (o) 38,740 1,062
Health Care REIT, Inc. (o)(N) 31,500 1,096
Healthcare Realty Trust, Inc. (o) 31,659 1,199
HealthExtras, Inc. (AE)(N) 90,101 2,618
Heartland Payment Systems, Inc. (AE)(N) 34,300 900
Heritage Commerce Corp. 1,700 40
HomeBanc Corp. (o)(N) 24,100 198
Horace Mann Educators Corp. 24,100 420
Hospitality Properties Trust (o) 19,900 858
HRPT Properties Trust (o) 240,500 2,641
IBERIABANK Corp. (N) 2,900 170
Indus International, Inc. (AE) 21,379 71
Infinity Property & Casualty Corp. 18,200 816
infoUSA, Inc. 7,069 80
Inland Real Estate Corp. (o)(N) 6,700 97
Innkeepers USA Trust (o) 30,700 492
Intervest Bancshares Corp. (AE) 2,497 99
Investment Technology Group, Inc. (AE) 65,603 3,476
IPC Holdings, Ltd. 34,700 925
iStar Financial, Inc. (o) 31,500 1,205
Janus Capital Group, Inc. 5,200 101
Jones Lang LaSalle, Inc. 18,494 1,568
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Knight Capital Group, Inc. Class A (AE)(N) 121,376 2,037
Kronos, Inc. (AE) 25,290 1,154
LandAmerica Financial Group, Inc. (N) 54,259 3,765
LTC Properties, Inc. (o) 3,651 81
Macerich Co. (The) (o) 3,100 227
Mack-Cali Realty Corp. (o) 29,700 1,343
Markel Corp. (AE) 600 210
Mercantile Bank Corp. 3,700 152
Mid-America Apartment Communities, Inc. (o) 22,300 1,182
Midland Co. (The) 2,600 93
MoneyGram International, Inc. 36,700 1,244
Morningstar, Inc. (AE)(N) 26,400 1,123
Nara Bancorp, Inc. 55,267 1,039
Nasdaq Stock Market, Inc. (The) (AE) 13,850 518
National Penn Bancshares, Inc. (N) 6,006 119
Nationwide Financial Services, Inc. Class A 27,300 1,198
New Century Financial Corp. (o)(N) 36,400 1,864
New Plan Excel Realty Trust (o)(N) 35,400 873
North Fork Bancorporation, Inc. 33,500 1,009
NorthStar Realty Finance Corp. (o)(N) 21,213 238
OceanFirst Financial Corp. (N) 1,600 36
Ohio Casualty Corp. 17,300 513
Old Republic International Corp. 60,250 1,341
optionsXpress Holdings, Inc. (N) 7,700 243
Pan Pacific Retail Properties, Inc. (o) 7,500 500
Pegasystems, Inc. (AE) 1,198 10
PFF Bancorp, Inc. 10,790 370
Philadelphia Consolidated Holding Co. (AE) 24,500 812
Piper Jaffray Cos., Inc. (AE) 5,691 406
PMI Group, Inc. (The) 25,500 1,177
Portfolio Recovery Associates, Inc. (AE)(N) 2,330 120
ProAssurance Corp. (AE) 78,824 3,971
Protective Life Corp. 13,400 675
Provident Financial Holdings, Inc. 35,351 1,016
Provident Financial Services, Inc. 32,000 584
PS Business Parks, Inc. (o) 8,500 442
R&G Financial Corp. Class B (N) 35,200 367
Radian Group, Inc. 41,000 2,572
Raymond James Financial, Inc. 32,900 998
Regency Centers Corp. (o) 12,100 763
RenaissanceRe Holdings, Ltd. 24,000 1,009
Republic Bancorp, Inc. Class A (N) 63,153 1,310
RLI Corp. 9,900 491
</Table>
14 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ryder System, Inc. 58,000 3,025
Safety Insurance Group, Inc. (N) 12,964 600
Senior Housing Properties Trust (o)(N) 70,170 1,205
Sky Financial Group, Inc. 15,600 405
Southwest Bancorp, Inc. 45,529 1,023
Sovereign Bancorp, Inc. (N) 45,000 998
Sovran Self Storage, Inc. (o) 24,400 1,199
Stancorp Financial Group, Inc. 42,600 2,102
State Auto Financial Corp. (N) 8,000 281
Sterling Bancorp 6,405 134
Sterling Bancshares, Inc. 28,300 469
Sterling Financial Corp. (N) 1,400 29
Sterling Financial Corp. 15,885 511
Stewart Information Services Corp. (N) 38,250 1,652
Sunstone Hotel Investors, Inc. (o) 72,000 2,069
SVB Financial Group (AE) 19,500 990
SWS Group, Inc. 5,947 163
Taubman Centers, Inc. (o) 7,344 303
TCF Financial Corp. (N) 16,800 451
TD Banknorth, Inc. 37,448 1,112
Thornburg Mortgage, Inc. (o)(N) 37,000 1,070
TierOne Corp. 2,155 73
UMB Financial Corp. (N) 3,200 217
Umpqua Holdings Corp. (N) 20,000 528
United Bankshares, Inc. (N) 9,900 361
United Community Banks, Inc. (N) 5,900 175
United Fire & Casualty Co. (N) 7,700 231
United Rentals, Inc. (AE)(N) 51,900 1,851
Valley National Bancorp (N) 8,600 224
W Holding Co., Inc. (N) 76,860 576
Webster Financial Corp. 21,300 1,000
Whitney Holding Corp. 17,000 605
WR Berkley Corp. 86,952 3,254
Zenith National Insurance Corp. (N) 30,898 1,364
Zions Bancorporation 13,000 1,079
------------
177,651
------------
Health Care - 8.1%
Abaxis, Inc. (AE)(N) 51,418 1,343
Accelrys, Inc. (AE) 99,978 704
Affymetrix, Inc. (AE) 73,458 2,105
Air Methods Corp. (AE) 4,229 115
Albany Molecular Research, Inc. (AE) 7,096 71
Alkermes, Inc. (AE)(N) 49,800 1,069
Allscripts Healthcare Solutions, Inc. (AE) 127,042 2,164
Alpharma, Inc. Class A (N) 59,200 1,554
Amylin Pharmaceuticals, Inc. (AE)(N) 17,600 766
Analogic Corp. 41,000 2,587
Andrx Corp. (AE) 18,614 432
Applera Corp. - Celera Genomics Group (AE) 75,200 902
Arena Pharmaceuticals, Inc. (AE) 24,252 343
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Arthrocare Corp. (AE)(N) 43,870 1,989
Brookdale Senior Living, Inc. 8,001 304
Bruker BioSciences Corp. (AE) 7,047 42
Cell Genesys, Inc. (AE)(N) 7,900 54
Cephalon, Inc. (AE)(N) 6,100 401
Community Health Systems, Inc. (AE) 120,201 4,356
Computer Programs & Systems, Inc. 2,366 111
Cooper Cos., Inc. (The) 18,200 998
Cytyc Corp. (AE) 40,200 1,039
Datascope Corp. 969 37
DaVita, Inc. (AE) 95,677 5,383
DexCom, Inc. (AE)(N) 27,700 697
Digene Corp. (AE) 51,724 2,135
Discovery Laboratories, Inc. (AE) 34,200 100
Endo Pharmaceuticals Holdings, Inc. (AE) 43,600 1,371
ev3, Inc. (AE)(N) 65,000 1,020
Exelixis, Inc. (AE)(N) 12,600 136
Flamel Technologies SA - ADR (AE)(N) 12,800 259
Gene Logic, Inc. (AE) 13,600 39
Genesis HealthCare Corp. (AE) 5,750 272
Greatbatch, Inc. (AE)(N) 14,450 354
Haemonetics Corp. (AE) 13,900 758
Health Net, Inc. (AE) 45,050 1,834
Healthways, Inc. (AE) 40,005 1,963
Henry Schein, Inc. (AE) 83,579 3,896
Illumina, Inc. (AE)(N) 46,200 1,461
Immucor, Inc. (AE)(N) 25,790 749
Inspire Pharmaceuticals, Inc. (AE)(N) 21,800 111
Intralase Corp. (AE)(N) 153,190 3,290
Invitrogen Corp. (AE) 24,900 1,644
Kendle International, Inc. (AE) 23,197 871
King Pharmaceuticals, Inc. (AE) 81,500 1,417
Kos Pharmaceuticals, Inc. (AE)(N) 10,951 530
Kyphon, Inc. (AE) 9,900 418
Lifecell Corp. (AE)(N) 92,200 2,493
Lincare Holdings, Inc. (AE) 3,100 123
Magellan Health Services, Inc. (AE) 38,600 1,569
Maxygen, Inc. (AE)(N) 2,900 24
Medical Action Industries, Inc. (AE) 2,337 56
Medical Properties Trust, Inc. (o) 6,035 64
Mentor Corp. (N) 85,280 3,695
Millennium Pharmaceuticals, Inc. (AE) 23,050 209
Molecular Devices Corp. (AE)(N) 12,591 409
Molina Healthcare, Inc. (AE) 11,638 380
Myriad Genetics, Inc. (AE)(N) 34,100 874
</Table>
Special Growth Fund 15
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
National Medical Health Card Systems, Inc. (AE) 905 21
Natus Medical, Inc. (AE) 5,681 113
Neurometrix, Inc. (AE) 9,256 357
Odyssey HealthCare, Inc. (AE) 25,150 437
Palomar Medical Technologies, Inc. (AE) 10,291 433
Panacos Pharmaceuticals, Inc. (AE) 67,200 470
Parexel International Corp. (AE)(N) 32,300 955
PDL BioPharma, Inc. (AE) 78,500 2,259
Pediatrix Medical Group, Inc. (AE) 4,547 228
Perrigo Co. 23,600 377
Pharmacopeia Drug Discovery, Inc. (AE) 51,050 315
Pharmacyclics, Inc. (AE)(N) 8,500 41
Pharmion Corp. (AE) 12,338 236
Phase Forward, Inc. (AE)(N) 100,000 1,370
PSS World Medical, Inc. (AE) 17,071 309
Quality Systems, Inc. 46,097 1,547
Regeneron Pharmaceuticals, Inc. (AE) 26,000 377
Res-Care, Inc. (AE) 2,100 43
Resmed, Inc. (AE) 61,125 2,638
Schick Technologies, Inc. (AE) 8,744 330
Sciclone Pharmaceuticals, Inc. (AE)(N) 25,600 77
Sierra Health Services, Inc. (AE) 19,700 772
SonoSite, Inc. (AE)(N) 35,300 1,333
Steris Corp. 19,600 451
Sunrise Senior Living, Inc. (AE)(N) 23,800 885
SurModics, Inc. (AE)(N) 3,100 110
Tenet Healthcare Corp. (AE) 46,600 388
Thoratec Corp. (AE)(N) 37,776 680
United Surgical Partners International, Inc.
(AE) 75,576 2,495
Universal Health Services, Inc. Class B 11,900 604
Varian Medical Systems, Inc. (AE) 31,450 1,647
Vertex Pharmaceuticals, Inc. (AE) 6,050 220
Viasys Healthcare, Inc. (AE) 19,700 573
Vital Images, Inc. (AE) 4,443 150
Watson Pharmaceuticals, Inc. (AE) 38,200 1,086
WellCare Health Plans, Inc. (AE)(N) 18,800 787
Zoll Medical Corp. (AE) 30,634 812
------------
90,016
------------
Integrated Oils - 0.2%
Giant Industries, Inc. (AE) 5,742 415
KCS Energy, Inc. (AE)(N) 9,500 279
Occidental Petroleum Corp. 16,485 1,694
------------
2,388
------------
Materials and Processing - 8.2%
Acuity Brands, Inc. 13,676 567
AEP Industries, Inc. (AE) 1,797 64
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Airgas, Inc. 107,410 4,345
Albany International Corp. Class A 4,300 168
Aleris International, Inc. (AE) 50,165 2,320
AM Castle & Co. (N) 51,960 1,876
Andersons, Inc. (The) (N) 600 63
Apogee Enterprises, Inc. 7,900 128
Aptargroup, Inc. 15,400 807
Ashland, Inc. 8,200 540
Ball Corp. 38,300 1,531
Builders FirstSource, Inc. (AE) 4,845 104
Building Material Holding Corp. (N) 26,400 882
Cambrex Corp. (N) 45,700 927
Cameco Corp. 51,276 2,084
Caraustar Industries, Inc. (AE) 46,211 458
Celanese Corp. 61,600 1,352
Century Aluminum Co. (AE) 81,998 3,904
CF Industries Holdings, Inc. 42,700 739
Chaparral Steel Co. (AE) 7,700 486
Chemtura Corp. 52,300 638
Chesapeake Corp. 15,850 223
Chicago Bridge & Iron Co. NV 72,722 1,743
Comfort Systems USA, Inc. 40,710 621
Commercial Metals Co. 26,568 1,438
Constar International, Inc. (AE)(N) 48,500 157
Corn Products International, Inc. 37,100 1,039
Crown Holdings, Inc. (AE) 25,300 406
Cytec Industries, Inc. 50,800 3,072
Eagle Materials, Inc. 9,300 616
Eastern Co. (The) 41,625 880
Eastman Chemical Co. 9,300 505
EMCOR Group, Inc. (AE) 52,300 2,624
Encore Wire Corp. (AE)(N) 28,200 1,182
Energizer Holdings, Inc. (AE) 22,430 1,147
EnerSys (AE)(N) 7,600 107
Ennis, Inc. (N) 56,500 1,113
FMC Corp. 26,500 1,684
Georgia Gulf Corp. 38,000 1,127
Gerdau Ameristeel Corp. 78,900 832
Granite Construction, Inc. 33,991 1,573
Greif, Inc. Class A 6,900 447
Harsco Corp. 35,100 2,926
HB Fuller Co. 50,600 2,646
Hercules, Inc. (AE) 158,900 2,258
Infrasource Services, Inc. (AE)(N) 7,300 138
Insituform Technologies, Inc. Class A (AE)(N) 84,700 2,158
Insteel Industries, Inc. 12,900 482
</Table>
16 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Integra LifeSciences Holdings Corp. (AE) 9,338 393
Jacobs Engineering Group, Inc. (AE) 22,400 1,852
Kaydon Corp. 12,350 530
Lennox International, Inc. 37,488 1,226
Martin Marietta Materials, Inc. 18,900 2,006
Material Sciences Corp. (AE) 2,500 27
Metal Management, Inc. 11,606 378
Mueller Industries, Inc. 37,785 1,430
Myers Industries, Inc. (N) 16,607 294
NCI Building Systems, Inc. (AE) 6,139 402
NewMarket Corp. (N) 8,600 437
Novamerican Steel, Inc. (AE) 10,670 459
NS Group, Inc. (AE) 43,553 2,179
Olin Corp. 19,329 398
Owens-Illinois, Inc. (AE) 76,750 1,403
Pactiv Corp. (AE) 45,200 1,100
Pioneer Cos., Inc. (AE) 2,309 74
PolyOne Corp. (AE) 110,361 980
Pope & Talbot, Inc. (N) 11,200 90
Precision Castparts Corp. 8,600 542
Quanex Corp. 13,027 557
Reliance Steel & Aluminum Co. 31,300 2,784
Rock-Tenn Co. Class A 14,250 226
RPM International, Inc. 12,000 221
Ryerson, Inc. (AE)(N) 7,200 212
Schulman A, Inc. 8,700 208
Schweitzer-Mauduit International, Inc. 400 10
Scotts Miracle-Gro Co. (The) Class A 34,600 1,531
Silgan Holdings, Inc. 18,900 734
Spartech Corp. 34,400 813
Standard Register Co. (The) 2,542 35
Steel Dynamics, Inc. 27,900 1,742
Steel Technologies, Inc. (N) 9,728 224
Symyx Technologies, Inc. (AE) 23,100 673
Terra Industries, Inc. (AE)(N) 57,050 472
Trammell Crow Co. (AE) 8,400 327
UAP Holding Corp. 16,282 340
Universal Forest Products, Inc. (N) 3,200 239
URS Corp. (AE) 13,810 595
Valmont Industries, Inc. 21,529 985
Valspar Corp. 11,900 337
Washington Group International, Inc. 49,059 2,728
WD-40 Co. (N) 6,600 207
Westlake Chemical Corp. 60,050 1,823
------------
91,350
------------
Miscellaneous - 1.7%
Brunswick Corp. (N) 30,500 1,196
Foster Wheeler, Ltd. (AE) 23,200 1,034
Hillenbrand Industries, Inc. 26,200 1,346
Johnson Controls, Inc. 16,500 1,346
McDermott International, Inc. (AE) 80,107 4,871
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SPX Corp. 35,800 1,960
Teleflex, Inc. 10,550 688
Trinity Industries, Inc. (N) 36,800 2,337
Walter Industries, Inc. 37,179 2,466
Wesco Financial Corp. (N) 4,203 1,645
------------
18,889
------------
Other Energy - 7.9%
Alliance Resource Partners, LP 4,450 189
Alon USA Energy, Inc. 9,741 262
Atlas Pipeline Partners, LP (N) 27,000 1,131
Atwood Oceanics, Inc. (AE) 43,406 2,316
Basic Energy Services, Inc. (AE)(N) 64,605 2,153
Bronco Drilling Co., Inc. (AE)(N) 44,171 1,193
Cabot Oil & Gas Corp. 23,900 1,177
Comstock Resources, Inc. (AE) 35,500 1,103
Cooper Cameron Corp. (AE) 68,208 3,427
Core Laboratories NV (AE) 50,993 3,123
Dawson Geophysical Co. (AE)(N) 36,511 1,059
Denbury Resources, Inc. (AE) 49,000 1,597
Diamond Offshore Drilling, Inc. 23,427 2,127
Dresser-Rand Group, Inc. (AE) 3,200 80
Dril-Quip, Inc. (AE)(N) 4,700 338
Dynegy, Inc. Class A (AE) 43,100 214
Enbridge Energy Partners, LP (N) 25,500 1,127
ENSCO International, Inc. 28,500 1,524
Equitable Resources, Inc. 16,400 582
FMC Technologies, Inc. (AE) 45,239 2,469
Foundation Coal Holdings, Inc. (N) 51,400 2,606
Frontier Oil Corp. 18,310 1,108
Global Industries, Ltd. (AE) 67,000 1,063
Grey Wolf, Inc. (AE) 53,036 416
Helix Energy Solutions Group, Inc. (AE)(N) 91,055 3,535
Helmerich & Payne, Inc. 67,150 4,885
Hercules Offshore, Inc. (AE) 29,900 1,223
Hornbeck Offshore Services, Inc. (AE) 5,100 183
Input/Output, Inc. (AE)(N) 59,800 603
Meridian Resource Corp. (AE)(N) 98,500 382
National-Oilwell Varco, Inc. (AE) 56,522 3,898
NRG Energy, Inc. (AE) 33,100 1,575
Oil States International, Inc. (AE) 23,300 941
Ormat Technologies, Inc. (N) 10,900 373
Penn Virginia Corp. 13,044 940
Pioneer Drilling Co. (AE) 64,700 1,049
Pogo Producing Co. 9,200 457
Pride International, Inc. (AE) 29,400 1,026
Rowan Cos., Inc. 5,550 246
RPC, Inc. (N) 26,400 731
</Table>
Special Growth Fund 17
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SEACOR Holdings, Inc. (AE)(N) 20,700 1,831
St. Mary Land & Exploration Co. (N) 21,738 920
Swift Energy Co. (AE) 35,100 1,487
Talisman Energy, Inc. 28,955 1,635
TC Pipelines, LP 9,384 316
TEPPCO Partners, LP (N) 31,000 1,180
Tetra Technologies, Inc. (AE) 81,264 3,998
Todco Class A 39,700 1,821
Trico Marine Services, Inc. (AE)(N) 66,655 2,226
Unit Corp. (AE) 55,477 3,204
Veritas DGC, Inc. (AE)(N) 111,238 5,333
W&T Offshore, Inc. (N) 26,050 1,112
W-H Energy Services, Inc. (AE) 67,918 3,413
Weatherford International, Ltd. (AE) 49,612 2,626
Whiting Petroleum Corp. (AE)(N) 25,300 1,069
XTO Energy, Inc. 43,409 1,838
------------
88,440
------------
Producer Durables - 7.5%
Advanced Energy Industries, Inc. (AE) 23,613 374
AGCO Corp. (AE) 18,746 447
American Tower Corp. Class A (AE) 26,000 888
Andrew Corp. (AE) 128,492 1,359
AO Smith Corp. (N) 26,242 1,242
Applied Industrial Technologies, Inc. 3,450 143
Arris Group, Inc. (AE) 103,502 1,226
ASML Holding NV (AE) 144,175 3,049
Asyst Technologies, Inc. (AE)(N) 38,400 390
Axcelis Technologies, Inc. (AE) 94,900 559
BE Aerospace, Inc. (AE) 113,185 2,946
Briggs & Stratton Corp. 32,400 1,093
Brooks Automation, Inc. (AE) 91,854 1,242
Bucyrus International, Inc. Class A 62,650 3,252
CalAmp Corp. (AE) 9,793 132
Cascade Corp. (N) 30,500 1,266
ClearOne Communications, Inc. (AE) 358 1
CNH Global NV 19,700 527
Columbus McKinnon Corp. (AE) 40,124 1,074
Crane Co. 23,700 1,001
Credence Systems Corp. (AE)(N) 29,300 208
Crown Castle International Corp. (AE) 16,200 545
Cymer, Inc. (AE) 21,950 1,135
Desarrolladora Homex SA de CV - ADR (AE) 61,370 2,352
DR Horton, Inc. 31,366 942
Ducommun, Inc. (AE)(N) 56,900 1,358
Electro Scientific Industries, Inc. (AE) 9,600 192
EnPro Industries, Inc. (AE)(N) 7,100 262
Entegris, Inc. (AE) 142,427 1,450
ESCO Technologies, Inc. (AE) 47,448 2,403
Flowserve Corp. (AE) 13,800 794
Franklin Electric Co., Inc. 4,344 253
General Cable Corp. (AE) 8,800 278
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Genlyte Group, Inc. (AE) 20,797 1,431
GP Strategies Corp. (AE) 1,200 9
Itron, Inc. (AE) 34,063 2,285
JLG Industries, Inc. 68,300 1,959
Joy Global, Inc. 53,564 3,519
KB Home 5,200 320
Kennametal, Inc. 28,144 1,741
Kimball International, Inc. Class B (N) 14,174 215
Kulicke & Soffa Industries, Inc. (AE)(N) 17,400 158
Lennar Corp. Class A 19,550 1,074
Lindsay Manufacturing Co. 14,584 379
LTX Corp. (AE) 19,000 108
Manitowoc Co., Inc. (The) 23,736 1,179
Mastec, Inc. (AE)(N) 27,200 335
Mattson Technology, Inc. (AE) 35,850 412
Meritage Homes Corp. (AE) 17,015 1,116
Mettler Toledo International, Inc. (AE) 79,843 5,174
Milacron, Inc. (AE)(N) 154,829 218
MKS Instruments, Inc. (AE) 16,219 383
Molex, Inc. 26,900 999
Nordson Corp. 7,794 415
Novellus Systems, Inc. (AE) 4,500 111
Orbital Sciences Corp. (AE) 59,402 930
Orleans Homebuilders, Inc. (N) 1,900 39
Pall Corp. 61,200 1,847
Photon Dynamics, Inc. (AE) 7,400 141
Plantronics, Inc. 91,282 3,423
Polycom, Inc. (AE) 83,743 1,841
Regal-Beloit Corp. 8,644 406
Robbins & Myers, Inc. 32,500 790
Rofin-Sinar Technologies, Inc. (AE) 4,818 271
SBA Communications Corp. Class A (AE) 39,000 980
Steelcase, Inc. Class A (N) 21,700 406
Technical Olympic USA, Inc. (AE)(N) 52,750 1,108
Tecumseh Products Co. Class A (N) 44,000 1,010
Tektronix, Inc. 52,900 1,868
Teledyne Technologies, Inc. (AE) 21,500 783
Tennant Co. 9,372 477
Thermo Electron Corp. (AE) 22,200 856
Toll Brothers, Inc. (AE) 32,600 1,048
Tollgrade Communications, Inc. (AE) 6,461 74
Twin Disc, Inc. 2,100 70
Ultratech, Inc. (AE)(N) 30,100 591
United Industrial Corp. 1,900 124
Varian Semiconductor Equipment Associates, Inc.
(AE) 82,783 2,711
</Table>
18 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Vicor Corp. 12,700 270
Viisage Technology, Inc. (AE)(N) 43,800 735
Xyratex, Ltd. (AE) 70,581 2,111
Zygo Corp. (AE) 16,627 303
------------
83,136
------------
Technology - 19.6%
Acxiom Corp. 21,629 564
Adaptec, Inc. (AE) 208,500 1,153
ADC Telecommunications, Inc. (AE) 101,665 2,276
Advanced Digital Information Corp. (AE)(N) 132,600 1,126
Agile Software Corp. (AE)(N) 268,100 1,869
Akamai Technologies, Inc. (AE) 150,972 5,086
Alliance Semiconductor Corp. (AE)(N) 70,300 190
Altera Corp. (AE) 155,447 3,395
American Reprographics Co. (AE) 7,000 248
American Software, Inc. Class A 6,490 48
Amkor Technology, Inc. (AE)(N) 54,600 660
Amphenol Corp. Class A 109,021 6,301
Anaren, Inc. (AE) 3,889 80
Ansoft Corp. (AE) 7,374 324
Ansys, Inc. (AE) 1,300 74
Applera Corp. - Applied Biosystems Group 70,300 2,027
Applied Micro Circuits Corp. (AE)(N) 477,200 1,751
Ariba, Inc. (AE)(N) 52,900 489
Arrow Electronics, Inc. (AE) 14,200 514
ASE Test, Ltd. (AE)(N) 134,726 1,536
Aspen Technology, Inc. (AE)(N) 46,600 599
Atmel Corp. (AE) 27,934 146
Avanex Corp. (AE)(N) 160,500 368
Avid Technology, Inc. (AE)(N) 29,000 1,118
Avnet, Inc. (AE) 55,500 1,451
Avocent Corp. (AE) 10,700 288
AVX Corp. 7,500 134
Badger Meter, Inc. 5,200 322
BEA Systems, Inc. (AE) 291,800 3,866
BearingPoint, Inc. (AE)(N) 104,500 970
Benchmark Electronics, Inc. (AE) 22,900 625
Black Box Corp. 6,750 316
Blackbaud, Inc. 17,867 375
BMC Software, Inc. (AE) 17,400 375
Brocade Communications Systems, Inc. (AE) 272,200 1,677
Cadence Design Systems, Inc. (AE) 323,400 6,122
Cbeyond Communications, Inc. (AE)(N) 10,700 211
Checkpoint Systems, Inc. (AE) 47,582 1,256
Ciena Corp. (AE)(N) 921,613 3,769
Cirrus Logic, Inc. (AE)(N) 25,700 243
Citrix Systems, Inc. (AE) 48,500 1,936
Coherent, Inc. (AE) 26,558 986
CommScope, Inc. (AE) 21,695 712
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Compuware Corp. (AE) 52,958 407
Comverse Technology, Inc. (AE) 96,017 2,175
Conexant Systems, Inc. (AE)(N) 482,700 1,709
CSG Systems International, Inc. (AE) 15,779 399
Cubic Corp. (N) 21,946 505
Daktronics, Inc. (N) 61,100 2,396
Digitas, Inc. (AE) 31,070 438
Ditech Communications Corp. (AE) 20,200 190
Echelon Corp. (AE)(N) 4,100 34
Electronics for Imaging, Inc. (AE) 211,070 5,796
Emulex Corp. (AE) 24,036 449
Equinix, Inc. (AE)(N) 67,985 4,480
ESS Technology, Inc. (AE)(N) 31,600 100
F5 Networks, Inc. (AE) 38,918 2,279
Fairchild Semiconductor International, Inc. (AE) 61,200 1,265
Finisar Corp. (AE)(N) 203,849 958
Flir Systems, Inc. (AE)(N) 19,300 472
Formfactor, Inc. (AE)(N) 137,710 5,741
Foundry Networks, Inc. (AE) 30,100 428
Freescale Semiconductor, Inc. Class A (AE) 19,300 610
Gartner, Inc. Class A (AE)(N) 195,000 2,734
Harris Corp. 49,750 2,317
Hittite Microwave Corp. (AE)(N) 78,952 3,072
Hyperion Solutions Corp. (AE) 88,787 2,719
Ikanos Communications, Inc. (AE)(N) 38,818 719
Imation Corp. 19,900 836
Infocrossing, Inc. (AE) 10,250 128
InFocus Corp. (AE)(N) 85,400 416
Informatica Corp. (AE)(N) 70,800 1,088
Ingram Micro, Inc. Class A (AE) 53,900 991
Integrated Device Technology, Inc. (AE) 112,700 1,715
Integrated Silicon Solution, Inc. (AE)(N) 109,600 724
Intergraph Corp. (AE) 46,751 2,058
Intermagnetics General Corp. (AE)(N) 173,781 3,775
Internet Security Systems, Inc. (AE) 17,452 393
Intersil Corp. Class A 31,900 945
JDA Software Group, Inc. (AE)(N) 36,334 497
JDS Uniphase Corp. (AE) 361,800 1,263
Juniper Networks, Inc. (AE) 117,388 2,169
Keynote Systems, Inc. (AE) 60,900 671
Komag, Inc. (AE)(N) 20,244 857
Lawson Software, Inc. (AE)(N) 350,354 2,689
Logility, Inc. (AE) 942 9
LSI Logic Corp. (AE) 280,700 2,989
Maxtor Corp. (AE)(N) 235,800 2,283
</Table>
Special Growth Fund 19
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MEMC Electronic Materials, Inc. (AE) 44,700 1,815
Mentor Graphics Corp. (AE) 312,430 4,102
Merge Technologies, Inc. (AE) 13,900 176
Microsemi Corp. (AE) 27,002 738
MicroStrategy, Inc. Class A (AE) 3,994 380
MRO Software, Inc. (AE) 11,100 211
Napster, Inc. (AE)(N) 15,500 72
NAVTEQ Corp. (AE) 35,087 1,457
Netlogic Microsystems, Inc. (AE)(N) 61,355 2,471
Nuance Communications, Inc. (AE)(N) 149,600 1,919
Nvidia Corp. (AE) 95,500 2,791
Openwave Systems, Inc. (AE) 107,876 2,008
Opnet Technologies, Inc. (AE) 2,847 36
Optical Communication Products, Inc. (AE)(N) 12,700 31
Orckit Communications, Ltd. (AE)(N) 31,400 506
Park Electrochemical Corp. 75,555 2,340
PerkinElmer, Inc. 38,850 833
Plexus Corp. (AE) 20,600 897
PMC - Sierra, Inc. (AE) 132,700 1,649
Portalplayer, Inc. (AE) 31,417 349
PowerDsine, Ltd. (AE)(N) 42,000 350
Quantum Corp. (AE)(N) 342,400 1,171
Rackable Systems, Inc. (AE)(N) 9,800 504
Radisys Corp. (AE) 6,072 129
RADVision, Ltd. (AE) 77,000 1,344
RADWARE, Ltd. (AE)(N) 16,700 265
RealNetworks, Inc. (AE)(N) 70,155 703
Red Hat, Inc. (AE) 31,700 932
Redback Networks, Inc. (AE)(N) 175,332 3,927
Reynolds & Reynolds Co. (The) Class A 9,325 277
Rockwell Automation, Inc. 62,369 4,519
RSA Security, Inc. (AE) 177,500 3,717
Safeguard Scientifics, Inc. (AE) 72,200 186
Seachange International, Inc. (AE)(N) 85,200 573
Semtech Corp. (AE) 108,000 2,025
Sigma Designs, Inc. (AE)(N) 53,518 743
Silicon Laboratories, Inc. (AE) 27,800 1,296
Silicon Storage Technology, Inc. (AE)(N) 137,996 631
Skyworks Solutions, Inc. (AE) 209,300 1,496
Solectron Corp. (AE) 348,300 1,393
SPSS, Inc. (AE) 12,290 428
Stellent, Inc. 6,500 83
Sunpower Corp. Class A (AE)(N) 16,300 626
SupportSoft, Inc. (AE)(N) 29,600 135
Sycamore Networks, Inc. (AE) 393,350 1,849
SYKES Enterprises, Inc. (AE) 15,682 255
Synopsys, Inc. (AE) 115,300 2,517
Talx Corp. 8,100 211
Tekelec (AE) 70,400 1,005
Tellabs, Inc. (AE) 18,600 295
Tessera Technologies, Inc. (AE) 145,459 4,665
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TIBCO Software, Inc. (AE) 171,650 1,480
Transaction Systems Architects, Inc. Class A
(AE) 146,496 5,851
Trident Microsystems, Inc. (AE)(N) 63,500 1,689
Triquint Semiconductor, Inc. (AE) 63,357 344
Trizetto Group, Inc. (The) (AE)(N) 6,700 105
Tyler Technologies, Inc. (AE) 27,100 299
Ultimate Software Group, Inc. (AE)(N) 63,481 1,623
Unisys Corp. (AE) 439,000 2,739
Utstarcom, Inc. (AE)(N) 89,300 621
VeriFone Holdings, Inc. (AE) 84,605 2,619
Viasat, Inc. (AE) 45,700 1,377
Vignette Corp. (AE) 31,094 495
Vocus, Inc. (AE)(N) 103,352 1,577
Volterra Semiconductor Corp. (AE)(N) 54,800 900
WatchGuard Technologies, Inc. (AE) 40,000 208
Wavecom SA - ADR (AE)(N) 25,200 313
webMethods, Inc. (AE) 41,108 386
Websense, Inc. (AE) 44,220 1,099
Western Digital Corp. (AE) 154,400 3,249
Wind River Systems, Inc. (AE) 10,567 121
Woodhead Industries, Inc. 1,933 32
Zhone Technologies, Inc. (AE)(N) 23,700 57
Zoran Corp. (AE)(N) 53,550 1,469
------------
218,148
------------
Utilities - 3.3%
AGL Resources, Inc. 6,400 226
Allete, Inc. 32,200 1,506
Alliant Energy Corp. 51,800 1,655
Avista Corp. 24,490 514
Black Hills Corp. 11,365 412
Cablevision Systems Corp. Class A 21,900 444
Centerpoint Energy, Inc. (N) 48,800 587
CenturyTel, Inc. 75,250 2,837
Cleco Corp. 12,100 272
CMS Energy Corp. (AE) 67,700 902
Dobson Communications Corp. Class A (AE) 221,533 1,994
Energen Corp. 38,400 1,354
Laclede Group, Inc. (The) (N) 9,900 338
Leap Wireless International, Inc. (AE) 57,559 2,645
MDU Resources Group, Inc. 42,200 1,551
NeuStar, Inc. Class A (AE)(N) 94,788 3,327
New Jersey Resources Corp. (N) 15,400 682
Nicor, Inc. (N) 5,400 214
NII Holdings, Inc. (AE) 40,110 2,403
NorthWestern Corp. 12,550 441
</Table>
20 Special Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
NSTAR 43,700 1,208
OGE Energy Corp. 35,500 1,071
Pepco Holdings, Inc. 104,800 2,419
Pike Electric Corp. (AE) 11,500 220
Pinnacle West Capital Corp. 39,600 1,588
Premiere Global Services, Inc. (AE) 77,938 609
Sierra Pacific Resources (AE) 56,820 802
Southern Union Co. 47,900 1,242
Talk America Holdings, Inc. (AE)(N) 25,500 232
TECO Energy, Inc. 9,400 150
Telephone & Data Systems, Inc. 12,200 478
UGI Corp. 49,900 1,118
US Cellular Corp. (AE)(N) 13,170 822
Westar Energy, Inc. 16,260 340
------------
36,603
------------
TOTAL COMMON STOCKS
(cost $861,614) 1,038,426
------------
WARRANTS & RIGHTS - 0.0%
Financial Services - 0.0%
Washington Mutual, Inc. (AE)
2050 Warrants 211 35
------------
TOTAL WARRANTS & RIGHTS
(cost $45) 35
------------
SHORT-TERM INVESTMENTS - 9.7%
Frank Russell Investment Company
Money Market Fund 103,670,445 103,670
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 4,000 3,978
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $107,648) 107,648
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 16.1%
Frank Russell Investment Company
Money Market Fund (X) 46,926,432 46,926
State Street Securities Lending
Quality Trust (X) 132,197,689 132,198
------------
TOTAL OTHER SECURITIES
(cost $179,124) 179,124
------------
TOTAL INVESTMENTS - 119.0%
(identified cost $1,148,431) 1,325,233
OTHER ASSETS AND LIABILITIES,
NET - (19.0%) (211,756)
------------
NET ASSETS - 100.0% 1,113,477
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Special Growth Fund 21
FRANK RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 2000 Mini Index (CME)
expiration date 06/06 (1,045) 80,340 2,621
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 2,621
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 3.4
Consumer Discretionary 16.6
Consumer Staples 0.8
Financial Services 15.9
Health Care 8.1
Integrated Oils 0.2
Materials and Processing 8.2
Miscellaneous 1.7
Other Energy 7.9
Producer Durables 7.5
Technology 19.6
Utilities 3.3
Warrants & Rights --*
Short-Term Investments 9.7
Other Securities 16.1
---------------
Total Investments 119.0
Other Assets and Liabilities, Net (19.0)
---------------
100.0
===============
Futures Contracts 0.2
</Table>
* Less than .05% of net assets.
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, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,093.70 $ 1,015.03
Expenses Paid During
Period* $ 10.23 $ 9.84
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.97%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,097.70 $ 1,018.74
Expenses Paid During
Period* $ 6.35 $ 6.11
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.22%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2006 $ 1,099.00 $ 1,019.98
Expenses Paid During
Period* $ 5.05 $ 4.86
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.97%
(representing the six month period annualized), 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, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.9%
Auto and Transportation - 2.3%
Alaska Air Group, Inc. (AE) 43,400 1,647
American Commercial Lines, Inc. (AE)(N) 13,400 723
Burlington Northern Santa Fe Corp. 130,900 10,410
CSX Corp. 116,100 7,952
FedEx Corp. 96,500 11,110
Ford Motor Co. (N) 753,200 5,235
Harley-Davidson, Inc. (N) 117,700 5,984
JB Hunt Transport Services, Inc. (N) 112,300 2,676
Landstar System, Inc. (N) 14,100 599
Norfolk Southern Corp. 251,500 13,581
Oshkosh Truck Corp. 20,100 1,230
Paccar, Inc. 121,114 8,712
Southwest Airlines Co. 272,200 4,415
Swift Transportation Co., Inc. (AE) 63,700 1,908
TRW Automotive Holdings Corp. (AE) 23,900 530
Union Pacific Corp. 6,700 611
United Parcel Service, Inc. Class B 7,300 592
------------
77,915
------------
Consumer Discretionary - 13.2%
Abercrombie & Fitch Co. Class A 25,800 1,567
Accenture, Ltd. Class A 211,400 6,145
Advance Auto Parts, Inc. 54,300 2,184
Alberto-Culver Co. 46,400 2,087
American Greetings Corp. Class A 105,300 2,371
Ameristar Casinos, Inc. (N) 7,700 190
Aramark Corp. Class B (N) 41,200 1,158
Autonation, Inc. (AE) 239,500 5,394
Bebe Stores, Inc. (N) 5,100 90
Best Buy Co., Inc. 116,400 6,595
Black & Decker Corp. 95,500 8,940
Boyd Gaming Corp. (N) 12,700 633
Brinker International, Inc. 80,700 3,160
Career Education Corp. (AE) 62,400 2,301
CBS Corp. Class B 353,611 9,006
Cendant Corp. 251,500 4,384
Circuit City Stores, Inc. 299,440 8,609
Claire's Stores, Inc. 83,600 2,944
Clear Channel Communications, Inc. 108,400 3,093
Coach, Inc. (AE) 879,700 29,048
Convergys Corp. (AE) 42,100 820
Corporate Executive Board Co. 11,000 1,178
Costco Wholesale Corp. 71,400 3,886
Darden Restaurants, Inc. 187,200 7,413
Dillard's, Inc. Class A 262,800 6,854
DIRECTV Group, Inc. (The) (AE) 35,700 610
DreamWorks Animation SKG, Inc. Class A (AE)(N) 7,400 201
Dress Barn, Inc. (AE)(N) 58,400 1,477
Electronic Arts, Inc. (AE) 76,800 4,362
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Estee Lauder Cos., Inc. (The) Class A (N) 153,900 5,713
Gannett Co., Inc. 13,100 721
Gemstar-TV Guide International, Inc. (AE)(N) 84,700 280
Google, Inc. Class A (AE) 54,700 22,861
Guess?, Inc. (AE)(N) 1,200 48
Harman International Industries, Inc. 800 70
Harrah's Entertainment, Inc. 56,700 4,629
Hasbro, Inc. 97,300 1,918
Hilton Hotels Corp. 22,300 601
Home Depot, Inc. 619,871 24,751
International Game Technology 165,900 6,293
Jackson Hewitt Tax Service, Inc. 8,700 260
JC Penney Co., Inc. 117,400 7,685
Kimberly-Clark Corp. 150,800 8,826
Liberty Global, Inc. Series A (AE) 18,600 385
Liberty Media Corp. Class A (AE) 981,600 8,196
Limited Brands, Inc. 26,700 685
Lowe's Cos., Inc. 236,400 14,905
Manpower, Inc. 66,100 4,306
Marriott International, Inc. Class A 76,300 5,575
McDonald's Corp. 228,100 7,885
McGraw-Hill Cos., Inc. (The) 297,200 16,542
Men's Wearhouse, Inc. (The) (N) 32,300 1,145
MGM Mirage 38,000 1,706
Mohawk Industries, Inc. (AE) 21,100 1,690
News Corp. Class A 852,500 14,629
Nike, Inc. Class B 76,700 6,277
NTL, Inc. 10,075 277
Office Depot, Inc. (AE) 195,800 7,946
Omnicom Group, Inc. 30,200 2,718
PHH Corp. (AE)(N) 20,200 563
Phillips-Van Heusen Corp. (N) 9,500 382
Republic Services, Inc. 55,000 2,421
Robert Half International, Inc. 32,700 1,382
SCP Pool Corp. (N) 14,600 682
Six Flags, Inc. (AE)(N) 13,300 123
Staples, Inc. 229,150 6,052
Starbucks Corp. (AE) 354,500 13,212
Target Corp. 764,300 40,584
Time Warner, Inc. 2,217,600 38,586
Tribune Co. 33,800 974
Univision Communications, Inc. Class A (AE) 176,800 6,310
Vail Resorts, Inc. (AE)(N) 2,100 79
Viacom, Inc. Class B (AE) 59,911 2,386
</Table>
24 Quantitative Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Walt Disney Co. 391,500 10,946
Weight Watchers International, Inc. 28,300 1,397
Whirlpool Corp. 83,000 7,449
Yahoo!, Inc. (AE) 126,600 4,150
Yum! Brands, Inc. 196,800 10,171
------------
454,072
------------
Consumer Staples - 5.7%
Albertson's, Inc. 54,200 1,373
Altria Group, Inc. 149,500 10,937
Clorox Co. 17,800 1,142
Coca-Cola Co. (The) 384,200 16,121
Coca-Cola Enterprises, Inc. 74,000 1,445
Colgate-Palmolive Co. 165,100 9,761
CVS Corp. 156,200 4,642
Dean Foods Co. (AE) 25,100 994
General Mills, Inc. 317,500 15,666
Hershey Co. (The) (N) 60,200 3,211
Hormel Foods Corp. 49,800 1,671
Kellogg Co. 2,000 93
Kraft Foods, Inc. Class A (N) 45,200 1,412
Kroger Co. (The) 562,249 11,391
Loews Corp. 16,600 851
Pepsi Bottling Group, Inc. (N) 168,400 5,406
PepsiCo, Inc. 857,800 49,958
Pilgrim's Pride Corp. 30,400 794
Procter & Gamble Co. 692,403 40,305
Reynolds American, Inc. (N) 64,900 7,116
Safeway, Inc. 76,500 1,923
Supervalu, Inc. 82,000 2,379
Tyson Foods, Inc. Class A 408,600 5,966
Walgreen Co. 51,800 2,172
------------
196,729
------------
Financial Services - 20.6%
Aflac, Inc. 1,100 52
Alliance Data Systems Corp. (AE) 1,000 55
Allstate Corp. (The) 308,100 17,405
Ambac Financial Group, Inc. 25,900 2,133
American Express Co. 156,400 8,416
American International Group, Inc. 273,600 17,852
AmeriCredit Corp. (AE) 99,300 3,007
Ameriprise Financial, Inc. 74,400 3,649
AmerUs Group Co. 11,800 692
AON Corp. 79,800 3,344
Archstone-Smith Trust (o) 29,200 1,427
Automatic Data Processing, Inc. 157,500 6,943
Bank of America Corp. 1,844,712 92,088
Bank of Hawaii Corp. 79,800 4,334
Bank of New York Co., Inc. (The) 188,200 6,615
BB&T Corp. 29,100 1,250
Bear Stearns Cos., Inc. (The) 24,900 3,549
Brown & Brown, Inc. (N) 37,800 1,181
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CapitalSource, Inc. (N) 33,200 780
CBL & Associates Properties, Inc. (o) 48,400 1,936
Charles Schwab Corp. (The) (AE) 192,700 3,449
Checkfree Corp. (AE) 13,600 733
Chubb Corp. 167,800 8,648
Cigna Corp. 51,300 5,489
Cincinnati Financial Corp. (N) 74,187 3,163
CIT Group, Inc. 247,000 13,340
Citigroup, Inc. 866,200 43,267
Comerica, Inc. 112,600 6,404
Developers Diversified Realty Corp. (o) 14,800 787
E*Trade Financial Corp. (AE) 41,800 1,040
Fannie Mae 32,200 1,629
Fidelity National Financial, Inc. 243,662 10,229
Fidelity National Information Services, Inc. 20,900 794
First American Corp. 142,500 6,071
First Data Corp. 23,000 1,097
Fiserv, Inc. (AE) 293,700 13,240
Franklin Resources, Inc. 102,600 9,554
Genworth Financial, Inc. Class A 179,800 5,969
Global Payments, Inc. 1,800 85
Golden West Financial Corp. 30,300 2,178
Goldman Sachs Group, Inc. 83,200 13,336
Greenhill & Co., Inc. (N) 1,200 85
Hartford Financial Services Group, Inc. 8,500 781
Health Care Property Investors, Inc. (o) 23,500 644
Hospitality Properties Trust (o) 13,900 599
Host Hotels & Resorts, Inc. (AE)(o) 62,600 1,316
Hudson City Bancorp, Inc. 375,300 5,033
IndyMac Bancorp, Inc. (N) 36,100 1,744
JPMorgan Chase & Co. 745,196 33,817
KeyCorp 250,000 9,555
Kimco Realty Corp. (o) 70,700 2,625
Knight Capital Group, Inc. Class A (AE) 19,723 331
LandAmerica Financial Group, Inc. (N) 15,900 1,103
Lehman Brothers Holdings, Inc. 174,900 26,436
Leucadia National Corp. (N) 27,500 1,671
Loews Corp. 116,100 12,324
Markel Corp. (AE)(N) 600 210
MBIA, Inc. 121,478 7,244
Merrill Lynch & Co., Inc. 469,200 35,781
Metlife, Inc. 639,300 33,308
</Table>
Quantitative Equity Fund 25
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mid-America Apartment Communities, Inc. (o) 7,300 387
Moody's Corp. 133,600 8,285
Morgan Stanley 402,100 25,855
National City Corp. 122,000 4,502
Nationwide Financial Services, Inc. Class A 22,000 965
Old Republic International Corp. (N) 180,000 4,005
Paychex, Inc. 18,600 751
Philadelphia Consolidated Holding Co. (AE) 18,800 623
PNC Financial Services Group, Inc. 92,100 6,582
Principal Financial Group, Inc. 308,700 15,839
ProLogis (o) 150,301 7,548
Protective Life Corp. 9,400 474
Prudential Financial, Inc. 210,100 16,415
Public Storage, Inc. (o) 16,200 1,245
Radian Group, Inc. 37,000 2,321
Rayonier, Inc. (o)(N) 35,100 1,445
Regions Financial Corp. 26,313 961
Safeco Corp. 129,500 6,721
Simon Property Group, Inc. (o) 48,000 3,930
Sotheby's Holdings Class A (AE)(N) 17,700 531
Stancorp Financial Group, Inc. 19,000 937
State Street Corp. 45,800 2,992
SunTrust Banks, Inc. 119,012 9,203
Synovus Financial Corp. 20,800 582
TD Ameritrade Holding Corp. 488,200 9,061
UnionBanCal Corp. 174,900 12,259
United Rentals, Inc. (AE) 83,500 2,978
US Bancorp 553,618 17,406
Wachovia Corp. 113,500 6,793
Washington Mutual, Inc. 159,900 7,205
Wells Fargo & Co. 331,100 22,743
WR Berkley Corp. 81,825 3,062
Zions Bancorporation 13,100 1,088
------------
707,511
------------
Health Care - 12.8%
Abbott Laboratories 390,682 16,698
Aetna, Inc. 295,468 11,375
Allergan, Inc. 75,600 7,766
Alpharma, Inc. Class A (N) 1,400 37
AmerisourceBergen Corp. 670,300 28,923
Amgen, Inc. (AE) 380,100 25,733
Baxter International, Inc. 136,500 5,146
Becton Dickinson & Co. 483,800 30,499
Biogen Idec, Inc. (AE) 93,900 4,211
Boston Scientific Corp. (AE) -- --
Bristol-Myers Squibb Co. 181,900 4,617
Cardinal Health, Inc. 290,700 19,579
Caremark Rx, Inc. 408,900 18,625
Celgene Corp. (AE) 68,400 2,884
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Coventry Health Care, Inc. (AE) 32,100 1,594
CR Bard, Inc. 36,600 2,725
Dade Behring Holdings, Inc. 87,000 3,393
Endo Pharmaceuticals Holdings, Inc. (AE) 114,700 3,607
Express Scripts, Inc. (AE) 111,500 8,713
Forest Laboratories, Inc. (AE) 104,300 4,212
Genentech, Inc. (AE) 272,000 21,681
Gilead Sciences, Inc. (AE) 183,600 10,557
Humana, Inc. (AE) 87,700 3,962
Johnson & Johnson 716,900 42,017
Kinetic Concepts, Inc. (AE) 26,500 1,157
King Pharmaceuticals, Inc. (AE) 246,500 4,287
McKesson Corp. 644,100 31,297
Medco Health Solutions, Inc. (AE) 70,800 3,769
Medtronic, Inc. 161,500 8,094
Merck & Co., Inc. 569,100 19,588
Mylan Laboratories, Inc. 37,900 828
New River Pharmaceuticals, Inc. (AE)(N) 13,200 449
Pfizer, Inc. 2,496,900 63,246
Pharmaceutical Product Development, Inc. 37,800 1,356
Psychiatric Solutions, Inc. (AE)(N) 5,700 188
Schering-Plough Corp. 331,100 6,397
Sierra Health Services, Inc. (AE) 24,900 976
St. Jude Medical, Inc. (AE) 66,300 2,618
Stryker Corp. 10,300 451
Tenet Healthcare Corp. (AE) 162,700 1,354
UnitedHealth Group, Inc. 167,000 8,307
Wyeth 153,100 7,451
------------
440,367
------------
Integrated Oils - 5.5%
Chevron Corp. 90,500 5,522
ConocoPhillips 813,415 54,418
Exxon Mobil Corp. 1,868,908 117,891
Marathon Oil Corp. 152,500 12,102
Occidental Petroleum Corp. 7,100 729
------------
190,662
------------
Materials and Processing - 4.4%
Alcoa, Inc. 169,700 5,732
Archer-Daniels-Midland Co. 241,600 8,780
Ashland, Inc. 37,900 2,495
Avery Dennison Corp. 59,500 3,719
Celanese Corp. 3,200 70
Coeur d'Alene Mines Corp. (AE)(N) 31,400 219
</Table>
26 Quantitative Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Dow Chemical Co. (The) 62,400 2,534
Energizer Holdings, Inc. (AE) 87,100 4,455
Florida Rock Industries, Inc. 32,600 2,033
Freeport-McMoRan Copper & Gold, Inc. Class B (N) 558,900 36,094
Granite Construction, Inc. 17,900 830
Louisiana-Pacific Corp. 64,000 1,765
Martin Marietta Materials, Inc. 31,000 3,291
Monsanto Co. 102,500 8,548
Mosaic Co. (The) (AE)(N) 31,600 474
Mueller Industries, Inc. (N) 3,600 136
Newmont Mining Corp. 54,300 3,169
Nucor Corp. 351,000 38,196
Owens-Illinois, Inc. (AE) 60,400 1,104
Pactiv Corp. (AE) 8,200 200
Precision Castparts Corp. 16,200 1,020
Quanta Services, Inc. (AE)(N) 12,800 208
Rohm & Haas Co. 142,500 7,211
Scotts Miracle-Gro Co. (The) Class A 24,000 1,062
Sherwin-Williams Co. (The) 67,000 3,413
Southern Copper Corp. (N) 30,300 3,001
Steel Dynamics, Inc. 12,900 805
Vulcan Materials Co. 111,600 9,482
------------
150,046
------------
Miscellaneous - 3.0%
3M Co. 129,000 11,020
General Electric Co. 2,615,900 90,484
ITT Industries, Inc. 18,700 1,052
SPX Corp. 49,000 2,683
------------
105,239
------------
Other Energy - 3.3%
Anadarko Petroleum Corp. 163,000 17,086
Apache Corp. 88,500 6,287
Cooper Cameron Corp. (AE) 61,800 3,105
Denbury Resources, Inc. (AE) 23,200 756
Devon Energy Corp. 282,000 16,951
Diamond Offshore Drilling, Inc. (N) 29,700 2,696
ENSCO International, Inc. 38,600 2,065
EOG Resources, Inc. 118,500 8,322
Foundation Coal Holdings, Inc. (N) 30,900 1,567
Helix Energy Solutions Group, Inc. (AE)(N) 25,400 986
Hugoton Royalty Trust 1,115 31
Newfield Exploration Co. (AE) 52,100 2,324
Patterson-UTI Energy, Inc. 160,600 5,197
Pogo Producing Co. 17,200 855
Range Resources Corp. (N) 50,300 1,334
RPC, Inc. (N) 32,200 892
Schlumberger, Ltd. 93,000 6,430
SEACOR Holdings, Inc. (AE)(N) 8,300 734
Southwestern Energy Co. (AE) 46,800 1,686
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sunoco, Inc. 334,200 27,083
Ultra Petroleum Corp. (AE) 97,700 6,249
Unit Corp. (AE) 18,400 1,062
XTO Energy, Inc. 18,700 792
------------
114,490
------------
Producer Durables - 6.1%
Agilent Technologies, Inc. (AE) 113,887 4,375
Andrew Corp. (AE) 102,700 1,087
Applied Materials, Inc. 405,700 7,282
Boeing Co. 448,300 37,411
Brooks Automation, Inc. (AE)(N) 21,100 285
Caterpillar, Inc. 240,200 18,193
Cummins, Inc. (N) 10,900 1,139
Danaher Corp. 61,600 3,957
DR Horton, Inc. 322,970 9,696
Emerson Electric Co. 173,100 14,705
Illinois Tool Works, Inc. 35,700 3,666
Joy Global, Inc. 44,700 2,936
KB Home 13,000 800
Lam Research Corp. (AE) 36,200 1,769
Lennar Corp. Class A 99,300 5,455
Lockheed Martin Corp. 574,400 43,597
Manitowoc Co., Inc. (The) 7,400 367
Mettler Toledo International, Inc. (AE) 6,000 389
Molex, Inc. 12,500 464
Northrop Grumman Corp. 531,796 35,577
Pulte Homes, Inc. 15,800 590
Toll Brothers, Inc. (AE) 14,500 466
United Technologies Corp. 224,200 14,075
Waters Corp. (AE) 16,500 747
------------
209,028
------------
Technology - 13.9%
Acxiom Corp. 32,100 832
Advanced Micro Devices, Inc. (AE) 267,700 8,660
Agere Systems, Inc. (AE) 60,300 948
Amkor Technology, Inc. (AE)(N) 72,300 874
Apple Computer, Inc. (AE) 188,900 13,297
Applied Micro Circuits Corp. (AE) 192,900 708
Arrow Electronics, Inc. (AE) 108,900 3,942
Atmel Corp. (AE)(N) 205,204 1,075
Avnet, Inc. (AE) 25,900 677
AVX Corp. (N) 17,800 317
Broadcom Corp. Class A (AE) 77,500 3,186
Cadence Design Systems, Inc. (AE) 91,900 1,740
Ceridian Corp. (AE) 14,700 356
</Table>
Quantitative Equity Fund 27
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ciena Corp. (AE)(N) 90,300 369
Cisco Systems, Inc. (AE) 2,547,700 53,374
Citrix Systems, Inc. (AE) 43,200 1,725
Computer Sciences Corp. (AE) 233,900 13,695
Conexant Systems, Inc. (AE)(N) 68,200 241
Corning, Inc. (AE) 76,900 2,125
Electronic Data Systems Corp. 293,700 7,953
EMC Corp. (AE) 1,056,600 14,275
F5 Networks, Inc. (AE)(N) 53,700 3,145
Finisar Corp. (AE)(N) 78,100 367
Freescale Semiconductor, Inc. 200,600 6,353
General Dynamics Corp. 146,500 9,613
Harris Corp. 52,700 2,454
Hewlett-Packard Co. 1,481,500 48,104
Ingram Micro, Inc. Class A (AE) 92,900 1,708
Intel Corp. 515,900 10,308
Intermagnetics General Corp. (AE)(N) 12,400 269
International Business Machines Corp. 408,000 33,595
Intuit, Inc. (AE) 162,600 8,808
Jabil Circuit, Inc. (AE) 795,200 31,005
L-3 Communications Holdings, Inc. 33,500 2,737
LSI Logic Corp. (AE)(N) 108,100 1,151
Microchip Technology, Inc. 60,400 2,251
Micron Technology, Inc. (AE) 262,000 4,446
Microsoft Corp. 1,877,902 45,351
Motorola, Inc. 746,700 15,942
National Semiconductor Corp. 301,600 9,042
Novell, Inc. (AE) 401,800 3,303
Nvidia Corp. (AE) 326,800 9,549
Oracle Corp. (AE) 457,900 6,681
Qualcomm, Inc. 315,800 16,213
Raytheon Co. 141,200 6,251
Red Hat, Inc. (AE)(N) 129,200 3,797
Rockwell Automation, Inc. 36,700 2,659
Seagate Technology, Inc. (AE) 67,668 --
Silicon Laboratories, Inc. (AE) 6,800 317
Sun Microsystems, Inc. (AE) 686,300 3,432
Sycamore Networks, Inc. (AE)(N) 158,300 744
Synopsys, Inc. (AE) 116,000 2,532
Tellabs, Inc. (AE) 171,700 2,722
Texas Instruments, Inc. 1,205,200 41,833
Trident Microsystems, Inc. (AE)(N) 15,300 407
Unisys Corp. (AE) 125,000 780
Websense, Inc. (AE) 15,500 385
Western Digital Corp. (AE)(N) 453,409 9,540
Xilinx, Inc. 61,000 1,688
------------
479,851
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Utilities - 5.1%
Allete, Inc. (N) 2,700 126
American Electric Power Co., Inc. 94,500 3,162
AT&T, Inc. 349,842 9,169
BellSouth Corp. 117,800 3,979
CenturyTel, Inc. 243,400 9,176
Comcast Corp. Class A (AE) 29,500 913
Consolidated Edison, Inc. (N) 51,600 2,225
Constellation Energy Group, Inc. 92,000 5,053
DTE Energy Co. (N) 35,000 1,427
Duke Energy Corp. 326,500 9,508
Edison International 730,041 29,501
Entergy Corp. 65,200 4,560
FirstEnergy Corp. 34,500 1,750
FPL Group, Inc. 3,000 119
KeySpan Corp. 87,500 3,533
Leap Wireless International, Inc. (AE)(N) 14,200 653
Nextel Partners, Inc. Class A (AE) 241,600 6,847
Oneok, Inc. 4,800 158
PG&E Corp. 310,900 12,386
Sempra Energy 22,300 1,026
Sprint Nextel Corp. 159,500 3,956
Telephone & Data Systems, Inc. 40,000 1,568
TXU Corp. 548,500 27,222
Verizon Communications, Inc. 1,090,576 36,022
------------
174,039
------------
TOTAL COMMON STOCKS
(cost $2,878,402) 3,299,949
------------
SHORT-TERM INVESTMENTS - 4.2%
Frank Russell Investment Company
Money Market Fund 138,109,000 138,109
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 7,500 7,458
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $145,567) 145,567
------------
</Table>
28 Quantitative Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 2.1%
Frank Russell Investment Company
Money Market Fund (X) 18,545,409 18,545
State Street Securities Lending Quality Trust
(X) 52,244,760 52,245
------------
TOTAL OTHER SECURITIES
(cost $70,790) 70,790
------------
TOTAL INVESTMENTS - 102.2%
(identified cost $3,094,759) 3,516,306
OTHER ASSETS AND LIABILITIES,
NET - (2.2%) (76,527)
------------
NET ASSETS - 100.0% 3,439,779
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/06 (37) 13,270 301
Russell 1000 Mini Index (CME) expiration date
06/06 (60) 4,304 44
S&P 500 E-Mini Index (CME) expiration date 06/06
(375) 24,673 465
S&P 500 Index (CME) expiration date 06/06 (150) 49,346 297
S&P Midcap 400 E-Mini Index (CME) expiration
date 06/06 (630) 50,816 1,135
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 2,242
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 29
FRANK RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 2.3
Consumer Discretionary 13.2
Consumer Staples 5.7
Financial Services 20.6
Health Care 12.8
Integrated Oils 5.5
Materials and Processing 4.4
Miscellaneous 3.0
Other Energy 3.3
Producer Durables 6.1
Technology 13.9
Utilities 5.1
Short-Term Investments 4.2
Other Securities 2.1
---------------
Total Investments 102.2
Other Assets and Liabilities, Net (2.2)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
30 Quantitative Equity Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,236.20 $ 1,013.84
Expenses Paid During
Period* $ 12.25 $ 11.03
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.21%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,241.00 $ 1,017.55
Expenses Paid During
Period* $ 8.11 $ 7.30
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.46%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,242.40 $ 1,018.79
Expenses Paid During
Period* $ 6.73 $ 6.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.21%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
International Securities Fund 31
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 91.7%
Australia - 3.3%
Amcor, Ltd. (N) 1,186,829 6,519
AMP Ltd. 237,500 1,626
Australia & New Zealand Banking Group, Ltd. 145,787 3,096
Australian Gas Light Co., Ltd. 18,500 273
Australian Stock Exchange, Ltd. (N) 30,900 771
Australian Wealth Management, Ltd. (AE) 46,200 86
AXA Asia Pacific Holdings, Ltd. (N) 60,300 289
Babcock & Brown, Ltd. 10,800 150
BHP Billiton, Ltd. 553,287 12,317
Billabong International, Ltd. (N) 35,800 419
BlueScope Steel, Ltd. 39,100 228
Boral, Ltd. 34,500 250
Bradken, Ltd. 54,831 234
Burns Philp & Co., Ltd. (AE) 461,011 340
Caltex Australia, Ltd. 25,200 386
Centro Properties Group 36,700 181
CFS Gandel Retail Trust 81,600 115
Coca-Cola Amatil, Ltd. 61,950 343
Coles Myer, Ltd. 579,686 4,717
Commonwealth Bank of Australia 42,000 1,500
Computershare, Ltd. 230,500 1,380
ConnectEast Group 312,752 273
CSL, Ltd. 3,300 145
CSR, Ltd. 157,800 486
David Jones, Ltd. (N) 117,000 238
DB RREEF Trust (o) 129,442 144
Downer EDI, Ltd. 122,013 805
Dyno Nobel, Ltd. (AE) 75,800 151
Foster's Group, Ltd. 1,773,644 7,923
GPT Group 73,300 234
Gunns, Ltd. (N) 20,200 49
Insurance Australia Group, Ltd. (N) 289,910 1,244
Leighton Holdings, Ltd. 19,800 251
Lend Lease Corp., Ltd. 15,600 169
Lion Nathan, Ltd. 27,700 175
Macquarie Airports 912,800 2,275
Macquarie Bank, Ltd. (N) 45,120 2,448
Macquarie Goodman Group (N) 22,330 87
Macquarie Infrastructure Group 85,700 232
McGuigan Simeon Wines, Ltd. 101,631 244
Mirvac Group (N) 13,700 44
National Australia Bank, Ltd. 640,692 18,307
Oil Search, Ltd. (N) 161,500 528
OneSteel, Ltd. 138,800 419
Origin Energy, Ltd. 22,700 122
Pacific Brands, Ltd. 100,600 173
PaperlinX, Ltd. (N) 33,700 86
Patrick Corp., Ltd. 12,800 83
Promina Group, Ltd. 351,400 1,514
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Publishing & Broadcasting, Ltd. (N) 34,940 493
QBE Insurance Group, Ltd. (N) 433,053 7,363
Ramsay Health Care, Ltd. (N) 53,658 432
Rinker Group, Ltd. 112,820 1,817
Rio Tinto, Ltd. (N) 16,200 968
Santos, Ltd. 40,100 360
Select Managed Funds, Ltd. 5,400 34
Sons of Gwalia, Ltd. (AE)(N)(B) 34,800 --
Stockland (N) 45,700 239
Suncorp-Metway, Ltd. 29,400 454
Symbion Health, Ltd. 215,044 559
TABCORP Holdings, Ltd. (N) 181,040 2,104
Telstra Corp., Ltd. (N) 1,926,266 5,766
Transurban Group (N) 154,300 774
United Group, Ltd. (N) 56,700 569
Wesfarmers, Ltd. (N) 122,638 3,373
Westfield Group (N) 43,256 556
Westpac Banking Corp. 52,000 992
Woodside Petroleum, Ltd. 9,800 348
Woolworths, Ltd. 153,306 2,173
------------
103,443
------------
Austria - 0.4%
Erste Bank der Oesterreichischen Sparkassen AG 89,686 5,442
Erste Bank der Oesterreichischen Sparkassen Ag
(AE) 34,416 2,065
OMV AG 35,900 2,496
Voestalpine AG 22,300 3,256
------------
13,259
------------
Belgium - 0.9%
Delhaize Group (N) 27,786 2,002
Dexia (N) 19,700 520
Fortis 304,775 11,435
Fortis (N) 25,200 945
Groupe Bruxelles Lambert SA (N) 5,400 612
InBev NV (N) 1,400 71
KBC Groep NV (N) 99,407 11,532
Solvay SA Class A (N) 1,200 140
Umicore 3,000 478
------------
27,735
------------
Brazil - 0.2%
Banco Itau Holding Financeira SA - ADR 32,600 1,037
Cia Vale do Rio Doce Class A 38,800 1,999
</Table>
32 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Petroleo Brasileiro SA - ADR 29,550 2,920
Telecomunicacoes Brasileiras SA - ADR 11,120 410
Unibanco - Uniao de Bancos Brasileiros SA 47,700 752
------------
7,118
------------
Canada - 1.5%
Bank of Nova Scotia 12 1
Cameco Corp. 54,200 2,203
Canadian National Railway Co. 69,140 3,105
Canadian Natural Resources, Ltd. 100,900 6,065
Canadian Pacific Railway, Ltd. 29,900 1,589
Celestica, Inc. (AE) 147,500 1,658
EnCana Corp. (N) 25,400 1,270
Husky Energy, Inc. (N) 21,100 1,242
Inco, Ltd. 77,700 4,388
ING Canada, Inc. 37,900 2,040
Nexen, Inc. 26,000 1,519
Petro-Canada 66,300 3,262
SNC-Lavalin Group, Inc. 122,400 3,558
Suncor Energy, Inc. 63,800 5,463
Talisman Energy, Inc. (N) 27,700 1,564
Teck Cominco, Ltd. Class B (N) 87,500 6,032
Toronto-Dominion Bank (N) 52,600 2,938
------------
47,897
------------
China - 0.1%
China Construction Bank Class H (N)(p)(AE) 671,000 290
China Life Insurance Co., Ltd. Class H (N)(AE) 2,463,000 3,320
China Telecom Corp., Ltd. Class H 590,000 205
Foxconn International Holdings, Ltd. (AE)(N) 228,000 491
------------
4,306
------------
Denmark - 0.2%
Danske Bank A/S 96,931 3,856
East Asiatic Co., Ltd. A/S (N) 3,600 153
Novo-Nordisk A/S Series B 4,350 283
Novozymes A/S 50 4
Topdanmark A/S (AE) 2,700 354
------------
4,650
------------
Finland - 1.1%
Fortum OYJ (N) 165,857 4,189
Kesko OYJ Class B 10,700 369
M-real OYJ Class S (N) 251,430 1,637
Metso OYJ (N) 51,300 2,039
Neste Oil OYJ 41,688 1,455
Nokia OYJ (N) 223,300 5,085
Nokia OYJ - ADR 374,790 8,493
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Nokian Renkaat OYJ (N) 9,450 162
Rautaruukki OYJ 9,300 326
Sampo OYJ (N) 172,600 3,562
Stora Enso OYJ Class R 5,100 80
UPM-Kymmene OYJ (N) 336,969 7,907
Wartsila OYJ Class S 4,000 170
YIT-Yhtyma OYJ (N) 6,600 186
------------
35,660
------------
France - 10.9%
Air France-KLM (N) 41,800 973
Air Liquide SA (N) 49,535 10,718
Alstom RGPT (AE) 83,400 7,555
Altran Technologies SA (AE)(N) 182,254 2,642
Assurances Generales de France (N) 38,400 4,854
Axa SA (N) 604,143 22,172
BNP Paribas (N) 208,393 19,692
BNP Paribas (AE) 5,471 499
Cap Gemini SA (N)(AE) 31,400 1,680
Carrefour SA (N) 116,960 6,785
Christian Dior SA (N) 28,100 2,980
Cie de Saint-Gobain (N) 111,317 8,349
Cie Generale d'Optique Essilor International SA
(N) 36,571 3,668
CNP Assurances (N) 10,800 1,168
Credit Agricole SA (N) 361,446 14,565
Dassault Systemes SA (N) 22,455 1,218
Electricite de France (AE) 24,400 1,427
France Telecom SA (N) 263,760 6,159
Groupe Danone (N) 73,512 9,172
Lafarge SA (N) 34,431 4,235
Legrand SA (AE) 46,750 1,368
LVMH Moet Hennessy Louis Vuitton SA (N) 151,699 15,971
Natexis Banques Populaires (N) 1,900 515
Pernod-Ricard SA (N) 30,760 5,964
Peugeot SA (N) 107,937 7,095
Renault SA (N) 72,000 8,357
Sanofi-Aventis (N) 289,787 27,328
Sanofi-Aventis 3,305 312
Schneider Electric SA (N) 109,899 12,444
Societe BIC SA (N) 10,000 703
Societe Generale (N) 153,489 23,450
Societe Television Francaise 1 (N) 49,085 1,629
Sodexho Alliance SA (N) 42,800 2,060
Suez SA (N) 145,568 5,728
Suez SA (AE)(N) 40,348 1
Technip SA (N) 39,600 2,500
</Table>
International Securities Fund 33
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Thomson (N) 139,090 2,878
Total SA (N) 179,722 49,701
Total SA - ADR 27,636 3,814
Unibail 23,451 4,086
Valeo SA (N) 85,943 3,682
Vallourec SA (N) 10,267 13,341
Veolia Environnement (N) 385,900 23,057
------------
346,495
------------
Germany - 6.3%
Aareal Bank AG (AE) 20,211 954
Adidas-Salomon AG (N) 5,900 1,246
Allianz AG (N) 55,220 9,245
Altana AG (N) 11,600 744
BASF AG (N)(AE) 1,900 163
Bayer AG (N) 296,826 13,710
Bayerische Motoren Werke AG 26,500 1,441
Bilfinger Berger AG (N) 23,900 1,522
Celesio AG (N) 9,200 866
Commerzbank AG (N) 252,419 10,461
Continental AG (N) 90,600 10,787
DaimlerChrysler AG (N) 13,600 746
Deutsche Bank AG (N) 57,211 7,024
Deutsche Boerse AG (N) 59,881 8,660
Deutsche Lufthansa AG (N) 252,864 4,664
Deutsche Post AG 229,971 6,130
Deutsche Telekom AG (N) 308,820 5,579
E.ON AG (N) 214,874 26,168
Fresenius Medical Care AG (N) 7,800 936
Hannover Rueckversicherung AG (N) 107,820 3,998
Hochtief AG 20,400 1,395
Hypo Real Estate Holding AG 52,650 3,681
Infineon Technologies AG (AE) 288,830 3,531
Lanxess AG (AE)(N) 130 5
MAN AG (N) 87,700 6,648
Medion AG (N) 29,900 438
Merck KGaA 47,800 5,066
Metro AG (N) 43,450 2,461
MLP AG 2,400 59
Muenchener Rueckversicherungs AG (N) 44,783 6,346
RWE AG (N) 175,828 15,244
Salzgitter AG 23,300 1,849
SAP AG (N) 64,946 14,191
Schering AG (N) 52,453 5,633
Siemens AG 114,428 10,827
Suedzucker AG (N) 7,700 211
ThyssenKrupp AG (N) 24,300 801
TUI AG (AE)(N) 74,200 1,580
Volkswagen AG (N) 61,637 4,760
Wacker Chemie AG (AE) 5,600 735
------------
200,505
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Greece - 0.4%
EFG Eurobank Ergasias SA 85,200 3,394
National Bank of Greece SA 34,900 1,733
OPAP SA 158,464 5,858
Public Power Corp. 87,620 2,244
------------
13,229
------------
Hong Kong - 1.7%
Bank of East Asia, Ltd. 838,938 3,506
BOC Hong Kong Holdings, Ltd. 177,000 365
Cheung Kong Holdings, Ltd. 97,800 1,102
China Mobile Hong Kong, Ltd. 305,000 1,774
China Netcom Group Corp. Hong Kong, Ltd. 180,000 328
Citic Pacific, Ltd. 257,200 926
CLP Holdings, Ltd. 116,500 679
CNOOC, Ltd. (N) 5,756,000 4,640
Esprit Holdings, Ltd. 548,500 4,379
Hang Lung Properties, Ltd. 80,000 161
Henderson Land Development Co., Ltd. (N) 14,000 82
Hong Kong Exchanges and Clearing, Ltd. (N) 562,000 4,041
HongKong Electric Holdings (N) 1,091,000 5,375
Hopewell Holdings (N) 122,000 356
Hutchison Telecommunications International, Ltd.
(AE) 2,482,000 4,370
Hutchison Whampoa, Ltd. 143,000 1,404
Hysan Development Co., Ltd. (N) 5,000 14
Jardine Matheson Holdings, Ltd. (AE) 161,300 2,920
Kerry Properties, Ltd. (N) 27,500 97
Li & Fung, Ltd. 1,412,000 3,351
Link REIT (The) (AE)(o) 685,000 1,511
Melco International Development 108,000 243
New World Development, Ltd. 67,000 120
Noble Group, Ltd. (N) 142,000 119
Orient Overseas International, Ltd. (N) 69,000 259
Shangri-La Asia, Ltd. 176,000 312
Shun TAK Holdings, Ltd. (N) 1,721,100 2,187
Sino Land Co. (N) 1,119,600 1,863
Sun Hung Kai Properties, Ltd. 37,000 423
Swire Pacific, Ltd. 135,300 1,384
Television Broadcasts, Ltd. 77,000 481
Wharf Holdings, Ltd. 1,256,862 5,041
------------
53,813
------------
</Table>
34 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hungary - 0.1%
OTP Bank Rt. 65,500 2,541
------------
Indonesia - 0.1%
Bank Central Asia Tbk PT 4,550,500 2,266
Telekomunikasi Indonesia Tbk PT 1,847,200 1,587
Telekomunikasi Indonesia Tbk PT - ADR 6,742 233
------------
4,086
------------
Ireland - 0.5%
Allied Irish Banks PLC 70,900 1,710
Bank of Ireland 285,558 5,364
CRH PLC 148,040 5,437
Irish Life & Permanent PLC 21,800 555
Ryanair Holdings PLC - ADR (AE) 41,306 1,945
------------
15,011
------------
Israel - 0.1%
Teva Pharmaceutical Industries, Ltd. - ADR 50,800 2,057
------------
Italy - 3.3%
Assicurazioni Generali SpA (N) 143,280 5,370
Banca Intesa SpA (N) 2,417,490 14,365
Banco Popolare di Verona e Novara Scrl (N) 161,786 4,554
Benetton Group SpA (N) 18,500 282
Buzzi Unicem SpA (N) 90,900 2,327
CIR-Compagnie Industriali Riunite SpA 100 --
Enel SpA 502,340 4,345
Eni SpA (N) 753,689 23,030
Fastweb (N) 45,999 2,311
Fiat SpA (N)(AE) 83,600 1,178
Fondiaria-Sai SpA (N) 51,600 2,036
Hera SpA 2,400 8
Italcementi SpA (N) 88,200 2,323
Lottomatica SpA (N) 32,500 1,500
Mediaset SpA 178,020 2,252
Milano Assicurazioni SpA (N) 177,800 1,371
Parmalat Finanziaria SpA (AE)(N)(B) 42,200 --
Recordati SpA 91,300 708
Saipem SpA (N) 181,200 4,547
Seat Pagine Gialle SpA (N)(AE) 1,041,800 497
Snam Rete Gas SpA (N) 26,000 116
Telecom Italia SpA (N) 1,082,492 2,854
UniCredito Italiano SpA (N) 3,378,884 25,462
Unipol SpA (N) 626,160 2,100
------------
103,536
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Japan - 21.3%
77 Bank, Ltd. (The) 313,400 2,466
Access Co., Ltd. (AE)(N) 60 538
Advantest Corp. (N) 9,200 1,060
Aeon Co., Ltd. 215,700 5,371
Aida Engineering, Ltd. 67,000 493
Aiful Corp. (N) 72,107 4,306
Aioi Insurance Co., Ltd. 72,000 521
Aisin Seiki Co., Ltd. 44,300 1,665
Ajinomoto Co., Inc. 122,000 1,519
Alpen Co., Ltd. (N)(AE) 10,000 407
Alps Electric Co., Ltd. (N) 18,200 320
Arrk Corp. (N) 40,600 1,458
Aruze Corp. 18,000 440
Asahi Glass Co., Ltd. (N) 610,000 8,614
Asahi Kasei Corp. 107,000 791
Astellas Pharma, Inc. 85,300 3,558
Avex Group Holdings, Inc. 5,800 173
Bandai Visual Co., Ltd. 167 675
Bank of Fukuoka, Ltd. (The) (N) 30,000 258
Bank of Kyoto, Ltd. (The) (N) 32,000 371
Bank of Yokohama, Ltd. (The) 25,000 196
Bridgestone Corp. 260,000 6,336
BSL Corp. (N) 96,000 168
Canon Marketing Japan, Inc. 10,000 226
Canon, Inc. 455,312 34,829
Chiyoda Corp. (N) 52,000 1,169
Citizen Watch Co., Ltd. (N) 45,100 440
CMK Corp. 5,400 97
COMSYS Holdings Corp. 9,000 121
Cosmo Oil Co., Ltd. (N) 91,000 524
Credit Saison Co., Ltd. 66,000 3,460
Cyber Communications, Inc. (N) 114 369
Dai Nippon Printing Co., Ltd. 46,000 824
Daiei, Inc. (The) (AE)(N) 29,300 875
Daihatsu Motor Co., Ltd. 16,000 169
Daiichi Sankyo Co., Ltd. 64,700 1,668
Daikin Industries, Ltd. 30,700 1,070
Daimaru, Inc. (N) 19,000 277
Daiwa House Industry Co., Ltd. 53,000 903
Daiwa Securities Group, Inc. (N) 542,000 7,516
Denki Kagaku Kogyo Kabushiki Kaisha 87,000 399
Denso Corp. 37,600 1,476
Dentsu, Inc. (N) 1,721 5,985
East Japan Railway Co. 772 6,027
EDION Corp. 113,300 2,741
Eighteenth Bank, Ltd. (The) 41,000 248
Eisai Co., Ltd. 123,100 5,633
Exedy Corp. 22,600 711
Fanuc, Ltd. 32,400 3,065
</Table>
International Securities Fund 35
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
FCC Co., Ltd. 27,400 608
Frontier Real Estate Investment Corp. (o) 69 509
Fuji Photo Film Co., Ltd. 173,300 5,890
Fujikura, Ltd. 42,000 486
Fujitsu, Ltd. (N) 269,000 2,242
Funai Electric Co., Ltd. (N) 28,500 2,946
Glory, Ltd. 15,500 313
Hino Motors, Ltd. (N) 425,500 2,593
Hiroshima Bank, Ltd. (The) 81,000 519
Hitachi Chemical Co., Ltd. 8,000 233
Hitachi High-Technologies Corp. 9,600 296
Hitachi Koki Co., Ltd. (N) 67,000 1,186
Hitachi, Ltd. (N) 896,000 6,665
Hokkaido Electric Power Co., Inc. 12,700 283
Hokuhoku Financial Group, Inc. (N) 96,000 391
Honda Motor Co., Ltd. 59,400 4,220
Hoya Corp. 65,800 2,664
Index Corp. (N) 635 853
Isuzu Motors, Ltd. (N) 81,000 292
Itochu Corp. 678,000 6,157
Itochu-Shokuhin Co., Ltd. (N) 13,700 584
Japan Asia Investment Co., Ltd. 80,000 619
Japan Logistics Fund, Inc. (o) 98 757
Japan Tobacco, Inc. 2,980 11,987
JFE Holdings, Inc. (N) 211,500 8,210
JS Group Corp. 107,500 2,393
JSR Corp. (N) 215,200 6,634
JTEKT Corp. (N) 155,600 3,355
Kadokawa Holdings, Inc. 22,300 748
Kaken Pharmaceutical Co., Ltd. (N) 21,000 170
Kamigumi Co., Ltd. 66,000 526
Kaneka Corp. (N) 206,000 2,323
Kansai Electric Power Co., Inc. (The) 34,700 812
Kansai Paint Co., Ltd. (N) 101,000 997
Kanto Tsukuba Bank, Ltd. (The) (AE) 15,000 246
Kao Corp. 363,700 9,774
Kawasaki Kisen Kaisha, Ltd. (N) 83,000 522
KDDI Corp. 2,036 12,552
Keihin Corp. 10,600 316
Keyence Corp. 3,500 918
Kirin Beverage Corp. 14,500 386
Kirin Brewery Co., Ltd. (N) 24,000 356
Kobayashi Pharmaceutical Co., Ltd. (N) 13,500 478
Kobe Steel, Ltd. 851,000 2,892
Koei Co., Ltd. (N) 39,030 730
Koito Manufacturing Co., Ltd. (N) 42,000 605
Komatsu, Ltd. 598,000 12,788
Kose Corp. (N) 13,860 505
Kubota Corp. 113,000 1,277
Kuraray Co., Ltd. (N) 181,200 2,236
Kurita Water Industries, Ltd. (N) 27,700 564
Kyocera Corp. 20,800 1,942
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kyowa Hakko Kogyo Co., Ltd. 90,000 628
Kyushu Electric Power Co., Inc. 21,400 500
Kyushu-Shinwa Holdings, Inc. (N)(AE) 165,000 355
Leopalace21 Corp. 22,500 877
Mabuchi Motor Co., Ltd. (N) 43,400 2,447
Makita Corp. 29,000 861
Marubeni Corp. 101,000 582
Marui Co., Ltd. (N) 48,400 935
Matsumotokiyoshi Co., Ltd. (N) 73,044 2,130
Matsushita Electric Industrial Co., Ltd. 290,000 7,004
Matsushita Electric Works, Ltd. 32,000 388
Mazda Motor Corp. (N) 91,000 595
Meiji Dairies Corp. (N) 49,000 311
Millea Holdings, Inc. 247 4,924
Minebea Co., Ltd. 126,000 816
Mitsubishi Chemical Holdings Corp. 8,500 54
Mitsubishi Corp. 262,000 6,339
Mitsubishi Electric Corp. (N) 110,000 957
Mitsubishi Estate Co., Ltd. 52,000 1,137
Mitsubishi Gas Chemical Co., Inc. 123,000 1,634
Mitsubishi Logistics Corp. (N) 30,000 457
Mitsubishi Rayon Co., Ltd. (N) 318,000 2,930
Mitsubishi UFJ Financial Group, Inc. 1,619 25,451
Mitsui & Co., Ltd. (N) 404,000 6,106
Mitsui Chemicals, Inc. (N) 520,000 3,763
Mitsui Fudosan Co., Ltd. 427,000 9,563
Mitsui OSK Lines, Ltd. (N) 616,000 4,409
Mitsui Sumitomo Insurance Co., Ltd. 270,000 3,640
Mitsui Trust Holdings, Inc. 48,000 663
Mizuho Financial Group, Inc. 1,005 8,570
Mori Seiki Co., Ltd. (N) 17,800 383
Murata Manufacturing Co., Ltd. 16,000 1,165
Nabtesco Corp. (N) 23,000 292
Nafco Co., Ltd. 10,700 421
NEC Corp. 98,000 686
Netprice, Ltd. (AE)(N) 93 310
Nidec Corp. (N) 11,400 879
Nikko Cordial Corp. (N) 243,500 3,941
Nintendo Co., Ltd. 59,000 8,809
Nippon Electric Glass Co., Ltd. (N) 288,200 6,505
Nippon Express Co., Ltd. 1,049,000 5,537
Nippon Mining Holdings, Inc. 285,000 2,636
Nippon Oil Corp. 239,000 1,891
Nippon Paper Group, Inc. (N) 373 1,595
Nippon Shokubai Co., Ltd. 4,000 49
Nippon Steel Corp. 379,000 1,398
Nippon Telegraph & Telephone Corp. 609 2,728
</Table>
36 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Nippon Yusen KK (N) 145,000 889
Nissan Chemical Industries, Ltd. 27,000 458
Nissan Motor Co., Ltd. (N) 745,300 9,799
Nissha Printing Co., Ltd. 17,000 688
Nitto Denko Corp. 67,500 5,661
NOK Corp. (N) 22,900 696
Nomura Holdings, Inc. 111,500 2,522
NTN Corp. (N) 40,000 330
NTT Urban Development Corp. (N) 129 1,059
Obic Co., Ltd. 4,000 820
OJI Paper Co., Ltd. 118,000 705
Oki Electric Industry Co., Ltd. (N) 422,000 1,305
Omron Corp. 133,400 3,726
ORIX Corp. (N) 89,130 26,771
Osaka Gas Co., Ltd. 154,000 576
Parco Co., Ltd. 46,000 528
Rakuten, Inc. (N) 8,968 7,246
Rengo Co., Ltd. (N) 129,000 1,017
Resona Holdings, Inc. (N) 257 876
Ricoh Co., Ltd. 481,200 9,551
Rinnai Corp. (N) 73,500 2,027
Rohm Co., Ltd. (N) 44,600 4,747
Sanyo Shinpan Finance Co., Ltd. 19,160 1,132
SBI Holdings, Inc. 1,838 936
Secom Co., Ltd. 5,000 273
Sega Sammy Holdings, Inc. 55,900 2,229
Sekisui Chemical Co., Ltd. (N) 408,500 3,530
Sekisui House, Ltd. 220,700 3,417
Seven & I Holdings Co., Ltd. 21,700 840
SFCG Co., Ltd. 6,302 1,443
Sharp Corp. 320,200 5,621
Shin-Etsu Chemical Co., Ltd. Class D 112,900 6,524
Shinko Electric Industries Co., Ltd. 21,300 584
Shinsei Bank, Ltd. 1,694,000 11,857
Shionogi & Co., Ltd. (N) 29,000 489
Skylark Co., Ltd. (N) 132,800 2,426
Softbank Corp. (N) 7,400 190
Sohgo Security Services Co., Ltd. (N) 51,190 837
Sompo Japan Insurance, Inc. 205,000 2,971
Sony Corp. (N) 26,300 1,321
Stanley Electric Co., Ltd. (N) 48,600 1,131
Sumisho Lease Co., Ltd. 9,900 568
Sumitomo Chemical Co., Ltd. 88,000 771
Sumitomo Electric Industries, Ltd. (N) 84,000 1,334
Sumitomo Forestry Co., Ltd. 55,000 560
Sumitomo Heavy Industries, Ltd. (N) 550,000 5,796
Sumitomo Metal Industries, Ltd. 1,034,000 4,359
Sumitomo Mitsui Financial Group, Inc. (N) 2,203 24,184
Sumitomo Realty & Development Co., Ltd. (N) 169,000 4,482
Sumitomo Trust & Banking Co., Ltd. (The) 146,000 1,554
Sumitomo Warehouse Co., Ltd. (The) 50,000 389
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
T&D Holdings, Inc. 21,750 1,668
Take And Give Needs Co., Ltd. (N) 809 1,229
Takeda Pharmaceutical Co., Ltd. 234,200 14,316
Takefuji Corp. (N) 65,530 4,259
Tanabe Seiyaku Co., Ltd. 25,000 295
TDK Corp. 36,500 3,055
Teijin, Ltd. (N) 256,000 1,756
Telewave, Inc. (N) 164 475
Terumo Corp. 26,400 946
Toagosei Co., Ltd. (N) 69,000 294
Tohoku Electric Power Co., Inc. 18,900 436
Tokai Carbon Co., Ltd. (N) 105,000 654
Tokuyama Corp. (N) 79,500 1,312
Tokyo Electric Power Co., Inc. (The) 125,400 3,221
Tokyo Electron, Ltd. (N) 67,800 4,883
Tokyo Gas Co., Ltd. (N) 978,000 4,733
Toppan Printing Co., Ltd. (N) 53,000 708
Toshiba Corp. (N) 352,000 2,241
Toshiba Machine Co., Ltd. 20,000 239
Tosoh Corp. (N) 88,000 431
Toyoda Gosei Co., Ltd. (N) 64,700 1,784
Toyota Motor Corp. 867,100 50,717
Trend Micro, Inc. (N) 21,500 833
UFJ NICOS Co., Ltd. (N) 16,000 141
Ulvac, Inc. 3,900 170
UNY Co., Ltd. 40,000 715
Valor Co., Ltd. 19,200 391
West Japan Railway Co. 632 2,809
Xebio Co., Ltd. 15,000 510
Yahoo! Japan Corp. 1,852 1,080
Yamada Denki Co., Ltd. (N) 55,600 6,060
Yamaha Motor Co., Ltd. 27,500 758
Yamato Holdings Co., Ltd. 12,000 239
Yokogawa Electric Corp. (N) 34,600 548
Yokohama Rubber Co., Ltd. (The) (N) 59,000 309
------------
677,285
------------
Luxembourg - 0.5%
Arcelor (N) 5,340 220
Arcelor 56,700 2,333
SES Global SA (N) 380,616 6,237
Tenaris SA - ADR 155,500 7,137
------------
15,927
------------
Mexico - 0.9%
America Movil SA de CV Series L 247,000 9,117
Cemex SA de CV 195,000 1,318
</Table>
International Securities Fund 37
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Coca-Cola Femsa SA de CV - ADR 56,800 1,829
Fomento Economico Mexicano SA de CV - ADR (N) 21,200 1,969
Grupo Televisa SA - ADR 569,410 12,072
Telefonos de Mexico SA de CV
Series L 75,730 1,665
------------
27,970
------------
Netherlands - 4.0%
ABN AMRO Holding NV (N) 259,290 7,750
Aegon NV (N) 290,666 5,306
ASML Holding NV (AE) 222,456 4,715
Buhrmann NV (N) 126,200 2,447
CSM NV Class A 2,800 85
Euronext NV (N) 102,158 9,131
European Aeronautic Defense and Space Co. NV (N) 149,260 5,890
Hagemeyer NV (AE)(N) 100 1
Heineken Holding NV 2,035 73
Heineken NV (N) 137,820 5,583
Hunter Douglas NV 2,000 142
ING Groep NV (N) 597,999 24,338
Koninklijke BAM Groep NV 1,100 118
Koninklijke Philips Electronics NV 29,150 1,005
Koninklijke Philips Electronics NV (N) 423,603 14,616
OCE NV (N) 17,600 293
Randstad Holdings NV 47,700 3,171
Reed Elsevier NV (N) 442,071 6,553
Rodamco Europe NV (N) 16,700 1,797
Royal Dutch Shell PLC Class A 285,830 9,778
Royal KPN NV 168,700 1,982
Royal Numico NV (AE) 148,100 6,711
SBM Offshore NV 27,600 2,962
Unilever NV (N) 46,100 3,330
USG People NV 11,300 974
Vedior NV (N) 82,400 1,921
VNU NV 141,380 4,853
Wolters Kluwer NV 17,130 446
------------
125,971
------------
New Zealand - 0.1%
Telecom Corp. of New Zealand, Ltd. (N) 1,263,834 4,625
------------
Norway - 0.8%
Acergy SA (AE)(N) 92,900 1,514
Aker Kvaerner ASA (N) 63,600 6,190
DNB NOR ASA (N) 236,263 3,276
Norsk Hydro ASA (N) 5,400 831
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PAN Fish ASA (AE) 1,717,300 1,744
Statoil ASA (N) 374,700 12,338
Yara International ASA 57,000 918
------------
26,811
------------
Poland - 0.1%
Powszechna Kasa Oszczednosci Bank Polski SA 133,808 1,683
------------
Singapore - 1.1%
CapitaLand, Ltd. 242,000 750
City Developments, Ltd. 84,000 537
CSE Global, Ltd. 191,000 126
DBS Group Holdings, Ltd. (N) 666,340 7,503
Flextronics International, Ltd. (AE) 130,600 1,484
Fraser and Neave, Ltd. 22,000 307
Jardine Cycle & Carriage, Ltd. 44,000 312
Keppel Corp., Ltd. (N) 506,000 4,897
NatSteel, Ltd. 53,000 47
Neptune Orient Lines, Ltd. (N) 146,000 211
Oversea-Chinese Banking Corp. (N) 868,800 3,737
Parkway Holdings, Ltd. 328,000 541
SembCorp Industries, Ltd. 195,120 444
Singapore Airlines, Ltd. 24,000 216
Singapore Petroleum Co., Ltd. (N) 73,000 265
Singapore Post, Ltd. 402,000 287
Singapore Technologies Engineering, Ltd. 188,000 371
Singapore Telecommunications, Ltd. 5,001,500 8,669
United Overseas Bank, Ltd. 421,000 4,341
United Overseas Land, Ltd. 40,300 78
United Test and Assembly Center, Ltd. (AE) 544,000 354
------------
35,477
------------
South Africa - 0.1%
Nedbank Group, Ltd. 87,630 1,830
------------
South Korea - 1.1%
Daewoo Securities Co., Ltd. (N) 66,450 1,205
Hana Financial Group, Inc. 30,875 1,516
Kookmin Bank 16,170 1,449
Korea Electric Power Corp. - ADR 72,610 1,655
KT Corp. - ADR (N) 80,900 1,882
Lotte Shopping Co. - GDR (AE)(p) 103,600 2,164
NHN Corp. (AE) 11,888 4,222
Samsung Electronics Co., Ltd. 28,360 19,364
SK Telecom Co., Ltd. - ADR 99,790 2,664
------------
36,121
------------
</Table>
38 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Spain - 2.8%
Actividades de Construccion y Servicios SA 87,893 3,649
Altadis SA 167,304 7,940
Antena 3 de Television SA (N) 33,700 888
Banco Bilbao Vizcaya Argentaria SA (N) 548,674 12,121
Banco Santander Central Hispano SA (N) 788,991 12,233
Cia de Distribucion Integral Logista SA (N) 19,300 1,144
Corp Mapfre SA 157,810 3,337
Ebro Puleva SA (N) 34,600 684
Endesa SA (N) 146,300 4,858
Fomento de Construcciones y Contratas SA (N) 5,600 454
Gamesa Corp. Tecnologica SA (N) 45,070 980
Gas Natural SDG SA (N) 38,420 1,172
Gestevision Telecinco SA (N) 79,800 2,039
Iberdrola SA 373,411 12,164
Indra Sistemas SA 67,400 1,388
Repsol YPF SA (N) 192,470 5,750
Repsol YPF SA - ADR 102,316 3,055
Sociedad General de Aguas de Barcelona SA Class
A 2,400 67
Telefonica SA 931,642 14,927
Union Fenosa SA 8,760 339
------------
89,189
------------
Sweden - 1.8%
Alfa Laval AB 2,400 78
Atlas Copco AB Class A (N) 395,100 11,677
Billerud AB (N) 9,500 164
Electrolux AB (N) 24,500 734
Elekta AB Class B (N) 18,900 312
Fabege AB (N) 100 2
Hennes & Mauritz AB Series B (N) 89,994 3,418
Nordea Bank AB 125,500 1,616
Sandvik AB (N) 79,340 5,164
Securitas AB Series B (N) 144,093 3,006
Skandinaviska Enskilda Banken AB
Class A (N) 37,200 938
Skanska AB Class B (N) 29,500 511
Ssab Svenskt Stal AB (N)(AE) 16,500 941
Svenska Cellulosa AB Series B (N) 44,830 2,032
Svenska Handelsbanken Series A (N) 200,649 5,767
Swedish Match AB 9,800 147
Tele2 AB Class B (N) 10,000 127
Telefonaktiebolaget LM Ericsson
Series B (N) 5,809,030 20,681
TeliaSonera AB (N) 78,500 487
Volvo AB Class B (N) 200 10
------------
57,812
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Switzerland - 6.6%
ABB, Ltd. (N)(AE) 1,199,106 17,113
Ciba Specialty Chemicals AG (N) 72,781 4,466
Clariant AG (N) 107,930 1,680
Compagnie Financiere Richemont AG
Class A (N) 126,366 6,547
Credit Suisse Group (N) 331,845 20,844
Georg Fischer AG 251 122
Givaudan (N) 460 386
Julius Baer Holding AG Class B (N) 80,464 7,714
Kuehne & Nagel International AG (N) 2,804 1,017
Logitech International SA (AE) 122,514 5,087
Nestle SA (N) 77,040 23,496
Novartis AG (N) 281,001 16,121
Pargesa Holding SA Class B 11,624 1,181
PubliGroupe SA (AE) 41 13
Roche Holding AG (N) 225,893 34,735
Sulzer AG (AE) 1,794 1,513
Swatch Group AG (N) 111,865 4,104
Swatch Group AG Class B (N) 500 90
Swiss Reinsurance (N) 127,020 9,269
Swiss Reinsurance (AE) 127,020 --
Syngenta AG (AE) 34,490 4,811
Synthes, Inc. 43,911 5,453
UBS AG (N) 287,764 34,108
Xstrata PLC (N) 197,094 7,131
Zurich Financial Services AG 9,399 2,287
------------
209,288
------------
Taiwan - 0.2%
HON HAI Precision Industry Co. Ltd. 381,000 2,585
Taiwan Semiconductor Manufacturing Co., Ltd. -
ADR 48,500 508
United Microelectronics Corp. - ADR 685,858 2,586
------------
5,679
------------
Thailand - 0.1%
Bangkok Bank PCL (N) 672,780 2,133
------------
Turkey - 0.0%
Turkcell Iletisim Hizmet AS 1 --
------------
</Table>
International Securities Fund 39
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United Kingdom - 19.0%
3i Group PLC 292,967 4,765
Alliance Unichem PLC 19,200 311
Amvescap PLC 255,700 2,795
Anglo American PLC 225,580 9,605
Antofagasta PLC 23,200 996
ARM Holdings PLC 1,663,366 4,125
Associated British Foods PLC 49,400 686
AstraZeneca PLC 467,429 25,829
Aviva PLC 761,751 11,127
BAA PLC 22,900 354
BAE Systems PLC 1,661,000 12,646
Barclays PLC 1,352,998 16,901
Barratt Developments PLC 68,400 1,237
BG Group PLC 1,797,945 24,164
BHP Billiton PLC 602,836 12,411
BOC Group PLC 214,233 6,087
Boots Group PLC (N) 533,356 6,818
BP PLC 3,168,483 39,087
Bradford & Bingley PLC 123,000 1,086
Brambles Industries PLC 806,796 6,672
British Airways PLC (AE) 194,700 1,194
British American Tobacco PLC 553,100 14,141
British Land Co. PLC 226,100 5,179
BT Group PLC 924,274 3,695
Capita Group PLC 229,500 1,949
Carphone Warehouse Group PLC 1,082,678 6,629
Centrica PLC 1,064,400 5,799
Charter PLC (AE) 18,600 271
Compass Group PLC 240,683 1,038
Cookson Group PLC 63,600 616
Corus Group PLC 1,087,400 1,676
Diageo PLC 567,968 9,373
DSG International PLC (AE) 13,400 45
EMI Group PLC 1,210,173 6,223
Friends Provident PLC 713,080 2,558
George Wimpey PLC 304,200 2,904
GKN PLC 1,033,209 5,907
GlaxoSmithKline PLC 1,371,611 38,919
Hammerson PLC 9,000 191
Hanson PLC 201,400 2,690
Hays PLC 615,000 1,895
HBOS PLC 1,071,149 18,800
HMV Group PLC 180,900 590
HSBC Holdings PLC 812,238 14,034
Imperial Tobacco Group PLC 66,300 2,060
Inchcape PLC 8,900 443
Intercontinental Hotels Group PLC 86,561 1,526
International Power PLC 184,400 1,001
ITV PLC 60,000 126
J Sainsbury PLC 1,143,662 6,971
Ladbrokes PLC 551,470 4,219
Land Securities Group PLC 19,300 653
Legal & General Group PLC 335,400 847
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lloyds TSB Group PLC 1,311,737 12,761
London Stock Exchange PLC (AE) 385,900 8,705
Man Group PLC 131,059 6,039
Marks & Spencer Group PLC 382,200 4,081
Michael Page International PLC 153,700 1,073
Mitchells & Butlers PLC 266,164 2,389
Next PLC 168,730 4,960
Old Mutual PLC 1,370,097 4,803
PartyGaming PLC 196,600 540
Pearson PLC 392,062 5,434
Persimmon PLC 107,000 2,556
Prudential PLC 231,622 2,718
Punch Taverns PLC 142,740 2,280
Reckitt Benckiser PLC 584,358 21,301
Reed Elsevier PLC 299,020 2,972
Rentokil Initial PLC 67,570 197
Reuters Group PLC 441,600 3,133
RHM PLC 77,800 384
Rio Tinto PLC 173,500 9,542
Rolls-Royce Group PLC (AE) 16,538,497 32
Rolls-Royce Group PLC (AE) 372,307 3,235
Royal & Sun Alliance Insurance Group PLC 1,070,014 2,693
Royal Bank of Scotland Group PLC 776,833 25,371
Royal Dutch Shell PLC Class A (N) 464,243 15,919
Royal Dutch Shell PLC Class B 296,052 10,587
SABMiller PLC 72,200 1,523
Scottish & Southern Energy PLC 199,100 4,085
Smith & Nephew PLC 440,458 3,643
Smiths Group PLC 414,670 7,709
Sportingbet PLC 227,100 1,752
Standard Chartered PLC 423,393 11,241
Tate & Lyle PLC (N) 282,800 2,862
Taylor Woodrow PLC 418,697 2,924
Tesco PLC 1,504,740 8,767
Travis Perkins PLC 23,570 676
Trinity Mirror PLC 196,310 1,965
Unilever PLC 1,312,686 13,944
Vodafone Group PLC 9,283,048 21,922
Whitbread PLC 81,334 1,661
William Hill PLC 669,164 7,743
WPP Group PLC 216,990 2,679
Yell Group PLC 143,708 1,347
------------
602,012
------------
</Table>
40 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States - 0.1%
Schlumberger, Ltd. 15,000 1,037
Transocean, Inc. (AE) 26,700 2,164
Weatherford International, Ltd. (AE) 20,400 1,080
------------
4,281
------------
TOTAL COMMON STOCKS
(cost $2,134,261) 2,909,435
------------
PREFERRED STOCKS - 0.4%
Brazil - 0.1%
Banco Itau Holding Financeira SA 58,700 1,851
------------
Germany - 0.3%
Fresenius AG (N) 27,864 4,822
Porsche AG 2,501 2,494
ProSiebenSat.1 Media AG 158,789 4,399
------------
11,715
------------
Italy - 0.0%
Unipol SpA (N) 100 --
------------
TOTAL PREFERRED STOCKS
(cost $9,797) 13,566
------------
WARRANTS & RIGHTS - 0.0%
Hong Kong - 0.0%
Hutchison Whampoa Rights (AE) 143,007 --
------------
Luxembourg - 0.0%
Bharti Televentures, Ltd. (AE)
2009 Warrants 49 455
------------
Sweden - 0.0%
Ssab Svenskt Stal AB Rights
Series A (AE) 9,400 3
Series B (AE) 7,100 4
------------
7
------------
TOTAL WARRANTS & RIGHTS
(cost $232) 462
------------
</Table>
<Table>
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
($) $
- -----------------------------------------------------------------------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Belgium - 0.0%
Bel 20 Index
Apr 2006 3,977.11 (EUR) Call (16) 803 101
------------
Switzerland - 0.0%
Swiss Market Index
Jun 2006 7,983.03 (CHF) Call (98) 6,308 435
Jun 2006 8,016.00 (CHF) Call (16) 1,034 66
------------
501
------------
TOTAL OPTIONS PURCHASED
(cost $535) 602
------------
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
SHORT-TERM INVESTMENTS - 7.0%
United States - 7.0%
Frank Russell Investment Company Money Market
Fund 203,124,000 203,124
United States Treasury Bills (c)(z)(sec.)
4.594% due 06/15/06 11,000 10,938
4.591% due 06/22/06 7,000 6,955
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $221,017) 221,017
------------
OTHER SECURITIES - 33.6%
Frank Russell Investment Company Money Market
Fund (X) 279,487,770 279,488
State Street Securities Lending Quality Trust
(X) 787,352,368 787,352
------------
TOTAL OTHER SECURITIES
(cost $1,066,840) 1,066,840
------------
TOTAL INVESTMENTS - 132.7%
(identified cost $3,432,681) 4,211,922
OTHER ASSETS AND LIABILITIES,
NET - (32.7%) (1,037,814)
------------
NET ASSETS - 100.0% 3,174,108
============
</Table>
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 41
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FUTURES CONTRACTS
UNREALIZED
NOTIONAL APPRECIATION
AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
AEX Index (Netherlands)
expiration date 05/06 (159) 18,691 211
CAC-40 Index (France)
expiration date 05/06 (338) 21,837 142
expiration date 06/06 (214) 13,706 185
DAX Index (Germany)
expiration date 06/06 (114) 21,639 775
EUR STOXX 50 Index (EMU)
expiration date 06/06 (928) 44,280 (85)
FTSE-100 Index (UK)
expiration date 06/06 (527) 57,704 456
Hang Seng Index (Hong Kong)
expiration date 05/06 (39) 4,157 15
OMX Stockholm 30 Index (Sweden)
expiration date 05/06 (694) 9,735 (142)
SPI 200 Index (Australia)
expiration date 06/06 (113) 11,260 560
TOPIX Index (Japan)
expiration date 06/06 (610) 92,113 4,617
Short Positions
DAX Index (Germany)
expiration date 06/06 (26) 4,935 (49)
Hang Seng Index (Hong Kong)
expiration date 05/06 (34) 3,624 15
IBEX Plus Index (Spain)
expiration date 05/06 (89) 13,268 (313)
MIB-30 (Italy)
expiration date 06/06 (63) 14,830 42
MSCI Singapore Index
expiration date 05/06 (8) 311 (2)
SPI 200 Index (Australia)
expiration date 06/06 (148) 14,747 (776)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 5,651
============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Belgium
Bel 20 Index
Apr 2006 3,977.11 (EUR) Put (16) 803 (101)
Switzerland
Swiss Market Index
Jun 2006 7,983.03 (CHF) Put (98) 6,308 (395)
Jun 2006 8,016.00 (CHF) Put (16) 1,034 (65)
------------
Total Liability for Options Written
(premiums received $535) (561)
============
</Table>
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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 28 AUD 37 05/01/06 --
USD 244 AUD 325 05/01/06 3
USD 27 AUD 37 05/02/06 --
USD 382 AUD 505 05/02/06 2
USD 31 AUD 40 05/03/06 --
USD 34 AUD 45 05/03/06 --
USD 514 AUD 703 06/21/06 20
USD 965 AUD 1,300 06/21/06 22
USD 1,096 AUD 1,500 06/21/06 43
USD 1,929 AUD 2,599 06/21/06 44
USD 1,929 AUD 2,599 06/21/06 44
USD 2,893 AUD 3,899 06/21/06 67
USD 2,895 AUD 3,899 06/21/06 65
USD 3,827 AUD 5,154 06/21/06 85
USD 10,251 AUD 14,000 06/21/06 375
USD 100 CHF 126 05/03/06 2
USD 112 CHF 139 05/04/06 --
USD 366 CHF 461 06/21/06 8
USD 677 CHF 874 06/21/06 32
USD 6,185 CHF 7,794 06/21/06 136
USD 12,369 CHF 15,588 06/21/06 272
USD 41,560 CHF 54,145 06/21/06 2,348
USD 6 DKK 38 05/01/06 --
USD 68 DKK 420 06/21/06 3
USD 1,073 DKK 6,672 06/21/06 59
USD 124 EUR 100 05/01/06 3
USD 50 EUR 40 05/02/06 1
USD 279 EUR 223 05/02/06 3
USD 439 EUR 350 05/02/06 2
USD 483 EUR 388 05/02/06 6
USD 500 EUR 401 05/02/06 6
USD 1,740 EUR 1,388 05/02/06 10
USD 192 EUR 153 05/03/06 1
USD 250 EUR 200 06/21/06 3
USD 1,209 EUR 1,000 06/21/06 57
USD 1,216 EUR 1,000 06/21/06 50
USD 2,432 EUR 2,000 06/21/06 100
USD 2,435 EUR 2,000 06/21/06 97
USD 2,471 EUR 2,000 06/21/06 61
USD 2,477 EUR 2,000 06/21/06 55
USD 2,477 EUR 2,000 06/21/06 55
USD 3,244 EUR 2,668 06/21/06 133
USD 3,638 EUR 3,000 06/21/06 161
USD 5,981 EUR 5,000 06/21/06 349
USD 8,291 EUR 6,710 06/21/06 204
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 24,868 EUR 20,130 06/21/06 616
USD 30,647 EUR 24,806 06/21/06 758
USD 82,970 EUR 69,200 06/21/06 4,638
USD 1,031 GBP 577 05/02/06 22
USD 751 GBP 415 05/03/06 6
USD 1,009 GBP 560 05/03/06 12
USD 60 GBP 33 05/04/06 --
USD 636 GBP 348 05/04/06 (1)
USD 868 GBP 500 06/21/06 44
USD 890 GBP 500 06/21/06 22
USD 952 GBP 542 06/21/06 37
USD 1,738 GBP 1,000 06/21/06 87
USD 1,748 GBP 1,000 06/21/06 77
USD 1,751 GBP 1,000 06/21/06 74
USD 1,784 GBP 1,000 06/21/06 41
USD 2,362 GBP 1,348 06/21/06 98
USD 2,668 GBP 1,500 06/21/06 69
USD 3,076 GBP 1,724 06/21/06 71
USD 4,330 GBP 2,427 06/21/06 98
USD 4,682 GBP 2,669 06/21/06 190
USD 4,682 GBP 2,669 06/21/06 189
USD 46,952 GBP 27,000 06/21/06 2,321
USD 6 HKD 44 06/21/06 --
USD 165 HKD 1,279 06/21/06 --
USD 342 HKD 2,649 06/21/06 --
USD 359 HKD 2,783 06/21/06 --
USD 22 JPY 2,481 05/01/06 --
USD 1 JPY 155 05/02/06 --
USD 68 JPY 7,786 05/02/06 --
USD 94 JPY 10,742 05/02/06 --
USD 226 JPY 25,659 05/08/06 --
USD 851 JPY 100,000 06/21/06 34
USD 1,712 JPY 200,000 06/21/06 58
USD 1,715 JPY 200,000 06/21/06 55
USD 1,719 JPY 200,000 06/21/06 51
USD 1,722 JPY 200,000 06/21/06 48
USD 1,722 JPY 200,000 06/21/06 48
USD 1,726 JPY 200,000 06/21/06 44
USD 2,561 JPY 300,000 06/21/06 94
USD 2,588 JPY 303,546 06/21/06 98
USD 8,042 JPY 945,599 06/21/06 326
USD 51,581 JPY 6,000,000 06/21/06 1,516
USD 403 NOK 2,550 05/01/06 11
USD 82 NOK 528 06/21/06 4
USD 611 NOK 3,900 06/21/06 24
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 2,533 NOK 16,171 06/21/06 100
USD 3,798 NOK 24,256 06/21/06 151
USD 20,506 NOK 129,452 06/21/06 566
USD 28,876 NOK 182,339 06/21/06 806
USD 17 NZD 27 06/21/06 1
USD 662 SEK 4,957 05/02/06 11
USD 78 SEK 573 05/04/06 --
USD 241 SEK 1,850 06/21/06 11
USD 3,585 SEK 27,062 06/21/06 109
USD 5,373 SEK 40,593 06/21/06 168
USD 5,375 SEK 40,593 06/21/06 166
USD 15,723 SEK 118,706 06/21/06 475
USD 84 SGD 135 06/21/06 2
USD 2,487 SGD 3,966 06/21/06 28
USD 20,416 SGD 33,097 06/21/06 570
AUD 35 USD 26 05/01/06 --
AUD 12 USD 9 05/02/06 --
AUD 24 USD 18 05/02/06 --
AUD 63 USD 47 05/02/06 --
AUD 11 USD 8 05/03/06 --
AUD 38 USD 29 05/03/06 --
AUD 50 USD 38 05/03/06 --
AUD 500 USD 367 06/21/06 (13)
AUD 1,000 USD 731 06/21/06 (28)
AUD 2,000 USD 1,457 06/21/06 (61)
AUD 2,880 USD 2,090 06/21/06 (96)
AUD 19,421 USD 14,195 06/21/06 (546)
CHF 52 USD 41 05/02/06 (1)
CHF 68 USD 53 05/02/06 (1)
CHF 3 USD 2 05/03/06 --
CHF 847 USD 673 05/03/06 (10)
CHF 10,555 USD 8,281 06/21/06 (279)
CHF 31,673 USD 24,844 06/21/06 (841)
CHF 39,235 USD 30,773 06/21/06 (1,044)
DKK 54 USD 9 06/21/06 --
DKK 1,961 USD 323 06/21/06 (10)
EUR 17 USD 22 05/02/06 --
EUR 54 USD 67 05/02/06 (1)
EUR 940 USD 1,167 05/02/06 (18)
EUR 32 USD 40 05/03/06 (1)
EUR 58 USD 73 05/03/06 --
EUR 144 USD 181 05/03/06 (1)
EUR 173 USD 216 05/03/06 (2)
EUR 435 USD 546 05/03/06 (3)
EUR 1,027 USD 1,287 05/03/06 (9)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 9 USD 11 05/04/06 --
EUR 160 USD 202 05/04/06 --
EUR 645 USD 814 05/04/06 1
EUR 1,231 USD 1,527 06/21/06 (32)
EUR 2,000 USD 2,527 06/21/06 (5)
EUR 2,000 USD 2,497 06/21/06 (35)
EUR 4,000 USD 4,864 06/21/06 (200)
EUR 4,000 USD 4,880 06/21/06 (184)
EUR 4,141 USD 5,135 06/21/06 (107)
EUR 4,141 USD 5,134 06/21/06 (108)
EUR 11,000 USD 13,381 06/21/06 (545)
EUR 16,564 USD 20,542 06/21/06 (428)
EUR 23,466 USD 29,099 06/21/06 (609)
EUR 45,709 USD 54,819 06/21/06 (3,048)
GBP 57 USD 101 05/02/06 (2)
GBP 175 USD 313 05/02/06 (7)
GBP 190 USD 344 05/02/06 (3)
GBP 400 USD 714 05/02/06 (15)
GBP 400 USD 716 06/21/06 (14)
GBP 1,000 USD 1,788 06/21/06 (37)
GBP 1,000 USD 1,741 06/21/06 (84)
GBP 1,000 USD 1,826 06/21/06 1
GBP 1,500 USD 2,629 06/21/06 (109)
GBP 4,000 USD 6,975 06/21/06 (325)
GBP 14,211 USD 24,561 06/21/06 (1,372)
GBP 8,603 USD 15,381 07/31/06 (328)
HKD 287 USD 37 05/02/06 --
HKD 188 USD 24 05/03/06 --
IDR 473,531 USD 54 05/01/06 --
IDR 74,664 USD 8 05/02/06 --
IDR 280,462 USD 32 05/02/06 --
IDR 253,715 USD 29 05/03/06 --
JPY 855 USD 7 05/01/06 --
JPY 1,792 USD 16 05/01/06 --
JPY 9,692 USD 84 05/01/06 (1)
JPY 35,000 USD 305 05/01/06 (3)
JPY 66,091 USD 574 05/01/06 (7)
JPY 2,384 USD 21 05/02/06 --
JPY 3,782 USD 33 05/02/06 --
JPY 20,000 USD 175 05/02/06 --
JPY 103,192 USD 905 05/02/06 (1)
JPY 1,684 USD 15 05/08/06 --
JPY 100,000 USD 882 06/21/06 (3)
JPY 100,000 USD 865 06/21/06 (20)
JPY 200,000 USD 1,705 06/21/06 (65)
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
JPY 269,939 USD 2,318 06/21/06 (71)
JPY 284,833 USD 2,455 06/21/06 (65)
JPY 300,000 USD 2,576 06/21/06 (79)
JPY 402,983 USD 3,473 06/21/06 (93)
JPY 539,879 USD 4,635 06/21/06 (143)
JPY 539,879 USD 4,634 06/21/06 (143)
JPY 539,879 USD 4,634 06/21/06 (144)
JPY 809,818 USD 6,950 06/21/06 (216)
JPY 1,042,712 USD 8,947 06/21/06 (280)
JPY 1,300,000 USD 11,084 06/21/06 (420)
JPY 1,424,164 USD 12,275 06/21/06 (328)
JPY 1,708,997 USD 14,729 06/21/06 (395)
NZD 27 USD 17 06/21/06 --
PLN 369 USD 118 05/02/06 (2)
PLN 167 USD 54 05/04/06 --
SEK 6,853 USD 915 06/21/06 (21)
SEK 46,110 USD 6,154 06/21/06 (140)
SEK 67,286 USD 8,604 06/21/06 (580)
SEK 76,849 USD 10,260 06/21/06 (230)
SGD 1,297 USD 809 06/21/06 (14)
SGD 1,297 USD 808 06/21/06 (14)
SGD 2,594 USD 1,618 06/21/06 (27)
SGD 2,594 USD 1,617 06/21/06 (28)
SGD 2,594 USD 1,618 06/21/06 (27)
SGD 2,594 USD 1,618 06/21/06 (27)
SGD 3,382 USD 2,085 06/21/06 (60)
SGD 6,858 USD 4,276 06/21/06 (71)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 5,753
==============
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INDEX SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------
UNREALIZED
APPRECIATION
FUND RECEIVES COUNTER NOTIONAL FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY AMOUNT FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
MSCI Austria
Local Net Total Return 1 Month EUR LIBOR -
Index Merrill Lynch EUR 2,466 plus 0.15% 12/27/06 (11)
MSCI Norway I
Local Net Total Return 1 Month NOK NIBOR -
Index Merrill Lynch NOK 30,208 plus 0.15% 12/27/06 15
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts 4
================
</Table>
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 5.6 176,637
Consumer Discretionary 8.3 271,705
Consumer Staples 6.5 201,292
Financial Services 26.0 805,730
Health Care 6.5 207,604
Integrated Oils 6.7 213,437
Materials and Processing 10.5 341,962
Miscellaneous 1.1 32,988
Other Energy 1.0 39,989
Producer Durables 7.7 247,619
Technology 3.9 122,793
Utilities 8.3 261,245
Warrants & Rights -- 462
Options Purchased -- 602
Short-Term Investments 7.0 221,017
Other Securities 33.6 1,066,840
--------------- ---------------
Total Investments 132.7 4,211,922
Other Assets and Liabilities, Net (32.7) (1,037,814)
--------------- ---------------
Net Assets 100.0 3,174,108
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 0.1 1,830
Asia 7.8 249,683
Europe 41.0 1,302,081
Japan 21.3 677,285
Latin America 1.2 36,939
Middle East 0.1 2,057
Other Regions 8.6 273,195
United Kingdom 19.0 602,012
Other Securities 33.6 1,066,840
--------------- ---------------
Total Investments 132.7 4,211,922
Other Assets and Liabilities, Net (32.7) (1,037,814)
--------------- ---------------
Net Assets 100.0 3,174,108
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
46 International Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Australia 3.3
Austria 0.4
Belgium 0.9
Brazil 0.2
Canada 1.5
China 0.1
Denmark 0.2
Finland 1.1
France 10.9
Germany 6.3
Greece 0.4
Hong Kong 1.7
Hungary 0.1
Indonesia 0.1
Ireland 0.5
Israel 0.1
Italy 3.3
Japan 21.3
Luxembourg 0.5
Mexico 0.9
Netherlands 4.0
New Zealand 0.1
Norway 0.8
Poland 0.1
Singapore 1.1
South Africa 0.1
South Korea 1.1
Spain 2.8
Sweden 1.8
Switzerland 6.6
Taiwan 0.2
Thailand 0.1
Turkey 0.0
United Kingdom 19.0
United States 0.1
Preferred Stocks 0.4
Warrants & Rights --*
Options Purchased --*
Short-Term Investments 7.0
Other Securities 33.6
---------------
Total Investments 132.7
Other Assets and Liabilities, Net (32.7)
---------------
100.0
===============
Futures Contracts 0.2
Foreign Currency Exchange Contracts 0.2
Options Written (--*)
Index Swaps --*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 47
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,369.80 $ 1,011.55
Expenses Paid During
Period* $ 15.69 $ 13.32
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.67%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,375.50 $ 1,015.27
Expenses Paid During
Period* $ 11.31 $ 9.59
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.92%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,377.20 $ 1,016.56
Expenses Paid During
Period* $ 9.78 $ 8.30
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.66%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
48 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 87.5%
Argentina - 0.0%
Endesa Costanera SA Class T 145,200 150
------------
Bermuda - 0.1%
Credicorp, Ltd. (N) 56,500 1,531
------------
Brazil - 8.7%
Arcelor Brasil SA 139,702 2,577
Banco do Brasil SA 36,400 1,058
Banco Itau Holding Financeira SA - ADR 32,600 1,037
Brasil Telecom Participacoes SA - ADR 55,400 2,263
Centrais Eletricas Brasileiras SA 27,605,400 792
Cia Brasileira de Distribuicao Grupo Pao de
Acucar - ADR (N) 39,800 1,566
Cia de Bebidas das Americas - ADR (N) 26,500 1,227
Cia de Saneamento Basico do Estado de Sao Paulo 29,770,000 2,910
Cia Siderurgica Nacional SA 114,033 4,005
Cia Vale do Rio Doce 37,700 1,933
Cia Vale do Rio Doce - ADR 176,100 7,833
Cia Vale do Rio Doce Class A 64,400 3,318
Cosan SA Industria e Comercio (AE) 130,500 10,042
EDP - Energias do Brasil SA 78,300 1,163
Gerdau SA - ADR (N) 342,300 5,922
Gol Linhas Aereas Inteligentes SA - ADR (N) 14,200 526
Natura Cosmeticos SA 863,015 11,041
Perdigao SA 72,900 719
Petroleo Brasileiro SA 236,956 5,792
Petroleo Brasileiro SA - ADR 192,675 18,282
Tele Norte Leste Participacoes SA 43,706 1,780
Tele Norte Leste Participacoes SA - ADR 194,500 3,536
Unibanco - Uniao de Bancos Brasileiros SA 41,700 658
Unibanco - Uniao de Bancos Brasileiros SA - GDR 134,000 10,633
------------
100,613
------------
Chile - 0.2%
Banco de Credito e Inversiones 39,900 1,101
Coca-Cola Embonor SA - ADR 97,500 864
Embotelladora Andina SA Class B 53,300 791
------------
2,756
------------
China - 4.5%
Air China, Ltd. Class H (AE) 384,000 160
Angang New Steel Co., Ltd. Class H (AE) 290,000 252
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Anhui Co.nch Cement Co., Ltd. Class H (AE) 252,000 436
Bank of Communications Co., Ltd. Class H (AE)(p) 4,834,534 2,946
China Petroleum & Chemical Corp. Class H 7,387,254 4,693
China Petroleum & Chemical Corp. Class R (N) 17,900 1,151
China Shenhua Energy Co., Ltd. Class H 3,243,000 5,877
China Telecom Corp., Ltd. Class H 4,675,000 1,628
Jiangsu Express Class H 2,603,600 1,553
Jiangxi Copper Co., Ltd. Class H 1,665,000 1,750
Maanshan Iron & Steel Class H 92,000 33
PetroChina Co., Ltd. - ADR (N) 19,220 2,160
PetroChina Co., Ltd. Class H 20,884,176 23,030
Shenzhen Expressway Co., Ltd. Class H 270,000 130
Sinopec Shanghai Petrochemical Co., Ltd. Class H 2,519,000 1,495
Sinopec Yizheng Chemical Fibre Co., Ltd. Class H 628,000 188
Travelsky Technology, Ltd. Class H 200,000 237
Wumart Stores, Inc. Class H 47,000 155
Yanzhou Coal Mining Co., Ltd. Class H 3,174,000 2,702
ZTE Corp. Class H 190,600 651
------------
51,227
------------
Colombia - 0.5%
BanColombia SA 336,431 2,775
BanColombia SA - ADR (N) 90,100 3,118
------------
5,893
------------
Czech Republic - 0.0%
Philip Morris CR 177 110
------------
Ecuador - 0.3%
Holcim Ecuador SA - GDR (A) 10,500 383
Holcim Ecuador SA - GDR (A) 72,000 2,938
------------
3,321
------------
Egypt - 1.5%
Commercial International Bank 104,893 1,294
Commercial International Bank - GDR 13,800 180
Egyptian Co. for Mobile Services 124,182 3,431
</Table>
Emerging Markets Fund 49
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Orascom Construction Industries 199,951 8,242
Orascom Telecom Holding SAE 56,240 2,967
Vodafone Egypt Telecommunications SAE 77,675 1,161
------------
17,275
------------
Hong Kong - 1.8%
Beijing Enterprises Holdings, Ltd. 308,000 675
China Insurance International Holdings Co., Ltd. 1,680,000 910
China Mobile Hong Kong, Ltd. 458,500 2,667
China Mobile Hong Kong, Ltd. - ADR (N) 10,228 295
China Netcom Group Corp. Hong Kong, Ltd. 1,116,500 2,038
China Overseas Land & Investment, Ltd. 9,508,800 6,071
China Resources Power Holdings Co. 2,396,000 1,792
China Unicom, Ltd. 114,000 97
CNOOC, Ltd. 777,000 626
Hutchison Telecommunications International, Ltd.
(AE) 689,000 1,213
Kingboard Chemical Holdings, Ltd. 215,500 568
Luen Thai Holdings, Ltd. 1,471,000 432
Solomon Systemtech International, Ltd. 2,489,800 1,108
Techtronic Industries Co. 1,148,400 1,926
Tencent Holdings, Ltd. (AE) 409,000 828
------------
21,246
------------
Hungary - 1.2%
Magyar Telekom Telecommunications PLC 520,276 2,380
Mol Magyar Olaj-es Gazipari Rt. 56,500 6,725
Mol Magyar Olaj-es Gazipari Rt. - GDR 25,900 3,043
OTP Bank Rt. 48,100 1,866
------------
14,014
------------
India - 6.4%
Allahabad Bank 243,535 413
Andhra Bank 429,000 750
Arvind Mills, Ltd. 250,100 507
Associated Cement Co., Ltd. 101,300 2,151
Bajaj Auto, Ltd. 60,950 3,993
Bajaj Hindustham, Ltd. 687,750 7,909
Bank of Baroda 220,000 1,082
Bank of India 30,000 81
Bharti Tele Ventures, Ltd. (AE) 398,700 3,603
Chennai Petroleum Corp., Ltd. 194,660 1,045
Financial Technologies India, Ltd. 19,600 805
GAIL India, Ltd. 186,767 1,206
GAIL India, Ltd. - GDR 53,800 2,179
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Gateway Distriparks, Ltd. 118,467 640
Genesis Indian Investment Co. (AE) 612,819 20,480
Gujarat Ambuja Cements, Ltd. 592,221 1,533
Hawaiindustriesustan Zinc, Ltd. 330,340 7,194
HDFC Bank, Ltd. - ADR 34,500 2,029
I-Flex Solutions, Ltd. 34,900 921
IL&FS Investsmart, Ltd. (AE) 116,978 520
Indian Overseas Bank 250,000 547
Oriental Bank of Commerce 111,000 570
Petronet LNG, Ltd. (AE) 804,000 1,052
State Bank of India, Ltd. - GDR 72,210 3,679
Sun TV, Ltd. (AE) 53,291 1,512
Suzlon Energy, Ltd. 40,065 1,124
Tata Steel, Ltd. 333,370 4,708
Union Bank Of India 118,000 306
Videsh Sanchar Nigam, Ltd. 126,293 1,169
------------
73,708
------------
Indonesia - 2.8%
Aneka Tambang Tbk PT 3,141,646 2,056
Astra Agro Lestari Tbk PT 244,789 184
Bank Central Asia Tbk PT 725,681 362
Bank Danamon Indonesia Tbk PT 1,605,200 941
Bank Mandiri Persero Tbk PT 18,026,503 3,940
Bank Rakyat Indonesia 20,562,272 10,825
PT Astra International Tbk 2,744,277 3,733
Ramayana Lestari Sentosa Tbk PT 5,957,500 617
Telekomunikasi Indonesia Tbk PT 10,622,700 9,129
------------
31,787
------------
Israel - 1.6%
Bank Hapoalim BM 974,800 4,912
Bank Leumi Le-Israel BM 1,186,500 4,647
Check Point Software Technologies (AE) 200,200 3,874
Discount Investment Corp. 19,366 476
IDB Development Corp., Ltd. 11,903 388
Israel Chemicals, Ltd. 98,129 268
Tadiran Communications, Ltd. 13,949 480
Teva Pharmaceutical Industries, Ltd. - ADR 75,000 3,038
------------
18,083
------------
</Table>
50 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lebanon - 0.0%
Solidere - GDR (AE) 4,200 94
------------
Luxembourg - 0.4%
Quilmes Industrial SA - ADR (N) 1,027 46
Tenaris SA 1 --
Tenaris SA - ADR 96,565 4,432
------------
4,478
------------
Malaysia - 0.9%
AirAsia BHD (AE) 2,106,100 1,017
Astro All Asia Networks PLC 890,700 1,125
Bumiputra-Commerce Holdings BHD Class D 2,106,842 3,662
IOI Corp. BHD 416,200 1,630
Magnum Corp. BHD 2,122,400 1,159
MK Land Holdings BHD 1,015,200 228
OYL Industries BHD 848,500 1,114
Proton Holdings BHD 24,000 40
TAN Chong Motor Holdings BHD 908,000 398
------------
10,373
------------
Mexico - 4.7%
Alfa SA de CV Class A (N) 521,200 2,622
America Movil SA de CV - ADR
Series L 192,500 7,105
Cemex SA de CV 2,025,054 13,686
Cemex SA de CV - ADR 15,000 1,013
Corp Moctezuma SA de CV 314,600 654
Fomento Economico Mexicano SA de CV - ADR 44,924 4,172
Grupo Aeroportuario del Pacifico SA de CV - ADR 20,000 666
Grupo Aeroportuario del Sureste SA de CV - ADR
(AE)(N) 14,900 578
Grupo Financiero Banorte SA de CV Class O 977,200 2,552
Grupo Mexico SA de CV Series B 21,400 75
Grupo Modelo SA 300,000 1,143
Grupo Televisa SA - ADR 175,092 3,712
Industrias Penoles SA de CV 437,053 3,946
Organizacion Soriana SA de CV Class B (AE)(N) 174,100 785
Telefonos de Mexico SA de CV - ADR
Series L 70,000 1,539
Urbi Desarrollos Urbanos SA de CV (AE)(N) 207,200 1,695
Wal-Mart de Mexico SA de CV
Series V 2,684,118 7,651
------------
53,594
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pakistan - 0.9%
Engro Chemical Pakistan, Ltd. 1,047,300 3,395
Fauji Fertilizer Co., Ltd. 1,565,322 3,389
ICI Pakistan, Ltd. 265,200 631
Pakistan Petroleum, Ltd. 72,500 332
Pakistan Telecommunication Co., Ltd. 3,025,423 2,735
------------
10,482
------------
Philippines - 0.4%
Globe Telecom, Inc. 79,190 1,377
Philippine Long Distance Telephone Co. 79,800 3,152
------------
4,529
------------
Poland - 0.1%
Polski Koncern Naftowy Orlen (N) 36,658 764
------------
Russia - 6.7%
Baltika Brewery 37,747 1,472
LUKOIL - ADR 448,376 40,623
MMC Norilsk Nickel - ADR (N) 69,751 9,207
Mobile TeleSystems - ADR 159,400 5,206
NovaTek OAO - GDR (p) 105,700 3,863
OAO Gazprom - ADR (N) 130,070 5,905
Promstroibank State Petersburg (AE) 696,000 870
Pyaterochka Holding NV - GDR (AE) 49,700 947
RBC Information Systems (AE) 113,259 1,053
Sberbank RF 1,050 1,901
Seventh Continent 20,500 517
Surgutneftegaz - ADR 40,500 3,523
Tatneft - ADR (N) 12,532 1,495
Unified Energy System - GDR 801 62
------------
76,644
------------
South Africa - 10.2%
ABSA Group, Ltd. 259,975 5,132
African Bank Investments, Ltd. 183,140 1,023
Alexander Forbes, Ltd. 323,600 834
Anglo Platinum, Ltd. 7,511 726
AngloGold Ashanti, Ltd. 15,500 840
AngloGold Ashanti, Ltd. - ADR (N) 28,134 1,538
Aveng, Ltd. 571,300 2,258
Barloworld, Ltd. 193,615 4,251
Consol, Ltd. 460,900 1,115
DataTec, Ltd. (AE) 14,300 64
Edgars Consolidated Stores, Ltd. 497,100 3,142
FirstRand, Ltd. 776,114 2,556
Foschini, Ltd. 145,186 1,471
Gold Fields, Ltd. 224,320 5,643
Impala Platinum Holdings, Ltd. 24,454 4,637
</Table>
Emerging Markets Fund 51
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Imperial Holdings, Ltd. 158,144 4,393
Investec, Ltd. 20,500 1,168
JD Group, Ltd. 173,241 2,679
Massmart Holdings, Ltd. 91,300 893
Medi-Clinic Corp., Ltd. 167,563 591
MTN Group, Ltd. 766,400 7,648
Murray & Roberts Holdings, Ltd. 607,630 2,749
Naspers, Ltd. Class N 320,308 7,032
Network Healthcare Holdings, Ltd. 1,165,000 1,976
Pick'n Pay Stores, Ltd. 187,300 991
Reunert, Ltd. 35,300 440
Sanlam, Ltd. 2,521,443 6,513
Sasol, Ltd. (N) 563,592 23,715
Sasol, Ltd. - ADR 12,900 534
Standard Bank Group, Ltd. 778,619 11,111
Telkom SA, Ltd. 77,579 1,848
Tiger Brands, Ltd. 117,618 3,277
Truworths International, Ltd. 951,428 4,589
------------
117,377
------------
South Korea - 15.7%
Amorepacific Corp. 6,470 2,377
CJ Home Shopping 12,170 1,394
Daelim Industrial Co. 19,620 1,498
Daewoo Engineering & Construction Co., Ltd. 9,050 156
GS Engineering & Construction Corp. 16,880 1,224
Hanjin Heavy Industries & Construction Co., Ltd. 35,560 1,108
Hanjin Shipping Co., Ltd. (N) 67,460 1,860
Hankook Tire Co., Ltd. 186,497 2,808
Hanwha Chem Corp. (N) 157,670 1,881
Honam Petrochemical Corp. 26,400 1,679
Hyosung Corp. (AE)(N) 56,900 1,204
Hyundai Development Co. 31,020 1,799
Hyundai Heavy Industries (N) 9,280 889
Hyundai Mipo Dockyard 9,800 918
Hyundai Mobis 72,100 6,368
Hyundai Motor Co. (N) 60,280 5,298
Hyundai Steel Co. 28,720 1,110
Industrial Bank of Korea (N) 245,000 4,935
KCC Corp. 11,184 2,532
Kookmin Bank 178,606 16,001
Kookmin Bank - ADR 4,200 374
Korea Electric Power Corp. 298,210 13,247
Korea Electric Power Corp. - ADR 91,320 2,082
KT Corp. 80,670 3,626
KT Corp. - ADR 17,100 398
KT Freetel Co., Ltd. 29,700 987
KT&G Corp. 54,950 3,076
KT&G Corp. - GDR (p) 40,500 1,134
LG Electronics, Inc. 19,100 1,582
LG Household & Health Care, Ltd. 19,100 1,525
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LG International Corp. 3,160 89
LG Petrochemical Co., Ltd. 7,520 165
LG.Philips LCD Co., Ltd. (AE) 25,120 1,057
LG.Philips LCD Co., Ltd. - ADR (AE)(N) 26,200 552
Lotte Shopping Co. - GDR (AE)(p) 63,719 1,331
Lotte Shopping Co., Ltd. 3,532 1,475
LS Cable, Ltd. 6,300 261
NCSoft Corp. (AE) 12,484 1,046
NHN Corp. (AE) 2,224 790
Orion Corp. 2,442 640
Poongsan Corp. (N) 56,600 1,290
POSCO 44,335 12,362
S1 Corp. 16,230 724
Samsung Corp. 59,940 1,868
Samsung Electro-Mechanics Co., Ltd. (AE)(N) 14,790 561
Samsung Electronics Co., Ltd. (p) 4,560 1,555
Samsung Electronics Co., Ltd. 46,909 32,029
Samsung Electronics Co., Ltd. - GDR (p) 12,194 3,434
Samsung Fine Chemicals Co., Ltd. 13,910 428
Samsung Fire & Marine Insurance Co., Ltd. 16,250 2,334
Samsung Securities Co., Ltd. (N) 74,800 4,695
Shinhan Financial Group Co., Ltd. (N) 263,770 13,144
Shinsegae Co., Ltd. 4,300 2,102
SK Corp. 21,760 1,601
SK Telecom Co., Ltd. 11,520 2,705
SK Telecom Co., Ltd. - ADR 134,486 3,591
Tae Young Corp. (N) 11,339 950
Woori Finance Holdings Co., Ltd. 130,740 2,952
------------
180,801
------------
Taiwan - 10.1%
Accton Technology Corp. (AE) 924,000 557
Acer, Inc. 1,319,500 2,556
Advantech Co., Ltd. 672,921 1,845
Asia Cement Corp. 1,283,000 1,003
AU Optronics Corp. 776,000 1,272
AU Optronics Corp. - ADR (N) 65,800 1,081
Basso Industry Corp. 255,816 459
Cathay Financial Holding Co., Ltd. (AE) 1,376,000 3,084
Cathay Financial Holding Co., Ltd. - GDR 61,277 1,380
Chang Hwa Commercial Bank 2,120,000 1,372
China Steel Corp. 4,336,807 4,234
China Steel Corp. - GDR 93,236 1,827
</Table>
52 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Chinatrust Financial Holding Co. 265,000 218
Chunghwa Picture Tubes, Ltd. 1,884,000 561
Chunghwa Telecom Co., Ltd. 402,000 772
Chunghwa Telecom Co., Ltd. - ADR 100,200 2,064
CMC Magnetics Corp. (AE) 5,893,000 1,884
Compal Electronics, Inc. 2,308,924 2,540
Compal Electronics, Inc. - GDR 183,673 1,025
Delta Electronics, Inc. 806,000 2,511
Elitegroup Computer Systems (AE) 307,000 212
Far Eastern Textile Co., Ltd. 1,136,637 1,044
Far EasTone Telecommunications Co., Ltd. 1,324,000 1,647
Far EasTone Telecommunications Co., Ltd. - GDR
(p) 11,000 205
Faraday Technology Corp. 297,185 531
First Financial Holding Co., Ltd. 2,874,000 2,283
Formosa Chemicals & Fibre Corp. 336,000 546
Formosa Plastics Corp. 33,000 53
Foxconn Technology Co., Ltd. 207,000 1,554
Gigabyte Technology Co., Ltd. 1,088,718 860
High Tech Computer Corp. 211,000 6,745
Himax Technologies, Inc. - ADR (AE)(N) 113,500 1,010
HON HAI Precision Industry Co. Ltd. 2,077,424 14,096
Hua Nan Financial Holdings Co., Ltd. 483,000 374
Lite-On Technology Corp. 39,900 63
Macronix International Co., Ltd. (AE) 1,796,086 444
MediaTek, Inc. 255,200 2,979
Mega Financial Holding Co., Ltd. 6,456,000 5,038
Mitac International 1,449,000 1,680
Nan Ya Plastics Corp. 557,000 814
Phoenixtec Power Co., Ltd. 565,629 594
Quanta Computer, Inc. 1,120,250 1,977
Ritek Corp. (AE) 5,371,161 1,678
Siliconware Precision Industries Co. 1,224,000 1,776
Systex Corp. (AE) 194,000 58
Taishin Financial Holdings Co., Ltd. 856,000 563
Taiwan Cement Corp. 663,000 520
Taiwan Fertilizer Co., Ltd. 734,000 1,353
Taiwan Mobile Co., Ltd. 2,509,520 2,525
Taiwan Semiconductor Manufacturing Co., Ltd. 9,018,554 19,249
Taiwan Semiconductor Manufacturing Co., Ltd. -
ADR 206,963 2,169
U-Ming Marine Transport Corp. 870,000 991
Uni-President Enterprises Corp. 1,929,000 1,454
United Microelectronics Corp. 3,405,000 2,369
Vanguard International Semiconductor Corp. 1,946,518 1,452
Via Technologies, Inc. (AE) 570,693 570
Wintek Corp. 725,000 982
Yieh Phui Enterprise 2,005,000 896
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Zyxel Communications Corp. 469,680 873
------------
116,472
------------
Thailand - 1.5%
Airports of Thailand PCL 1,052,600 1,641
Bank of Ayudhya PCL 6,588,900 3,371
Charoen Pokphand Foods PCL 3,577,100 524
CP Seven Eleven PCL 5,188,300 1,051
Glow Energy PCL 942,500 816
Kasikornbank PCL 828,600 1,457
Land and Houses PCL 159,300 36
PTT Chemical PCL 943,579 2,175
PTT Exploration & Production PCL 533,500 1,791
PTT PCL 509,000 3,499
Regional Container Lines PCL 500,000 274
Siam City Bank PCL 411,000 260
Siam City Cement PCL 35,600 256
------------
17,151
------------
Turkey - 3.9%
Akbank TAS 831,927 6,920
Akcansa Cimento AS 75,895 580
Anadolu Efes Biracilik Ve Malt Sanayii AS 125,630 4,203
Arcelik 127,100 1,076
Cimsa Cimento Sanayi VE Tica 263,875 2,314
Denizbank AS (AE) 232,106 2,053
Eregli Demir ve Celik Fabrikalari TAS 646,715 3,863
Finansbank AS (AE) 331,533 1,730
Ford Otomotiv Sanayi AS 143,300 1,430
Hurriyet Gazetecilik AS 420,200 1,541
Migros Turk TAS 200,455 2,789
Trakya Cam Sanayi AS 241,747 1,078
Tupras Turkiye Petrol Rafine 273,707 5,795
Turkcell Iletisim Hizmet AS 226,187 1,437
Turkcell Iletisim Hizmet AS - ADR 8,900 152
Turkiye Garanti Bankasi AS 688,800 2,839
Turkiye Is Bankasi 373,580 3,136
Turkiye Vakiflar Bankasi Tao (AE) 184,100 1,162
Yapi ve Kredi Bankasi (AE) 375,377 880
------------
44,978
------------
United Kingdom - 2.2%
Anglo American PLC 190,753 8,217
Genesis Smaller Companies (AE) 266,584 15,585
Old Mutual PLC 2,300 8
SABMiller PLC 54,300 1,155
------------
24,965
------------
</Table>
Emerging Markets Fund 53
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States - 0.1%
Mechel OAO - ADR 41,100 1,114
Polyus Gold Co. (AE) 2,900 69
------------
1,183
------------
Venezuela - 0.1%
Cia Anonima Nacional Telefonos de Venezuela -
CANTV - ADR (N) 24,542 500
Siderurgica Venezolana Sivensa SACA (AE) 1,306,495 60
------------
560
------------
Zimbabwe - 0.0%
Delta Corp., Ltd. 1,138,003 407
OK Zimbabwe 6,402,949 142
------------
549
------------
TOTAL COMMON STOCKS
(cost $601,010) 1,006,708
------------
PREFERRED STOCKS - 6.5%
Brazil - 5.6%
Banco Bradesco SA 188,466 7,188
Banco Itau Holding Financeira SA 123,110 3,881
Braskem SA 212,335 1,496
Caemi Mineracao e Metalurgica SA 489,000 900
Centrais Eletricas Brasileiras SA 86,816,496 2,280
Cia Brasileira de Distribuicao Grupo Pao de
Acucar 16,750,000 648
Cia de Tecidos do Norte de Minas - Coteminas 7,256,440 713
Cia Vale do Rio Doce 180,500 8,000
Gerdau SA 9,600 166
Klabin SA 441,000 1,130
Petroleo Brasileiro SA 898,772 19,909
Suzano Bahia Sul Papel e Celulose SA 230,000 1,628
Tam SA 54,900 1,418
Usinas Siderurgicas de Minas Gerais SA 360,400 13,729
Votorantim Celulose e Papel SA 22,706 367
Weg SA 171,200 697
------------
64,150
------------
Colombia - 0.0%
BanColombia SA 7,200 61
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
South Korea - 0.9%
Hyundai Motor Co. 41,560 2,459
Samsung Electronics Co., Ltd. 15,792 8,555
------------
11,014
------------
TOTAL PREFERRED STOCKS
(cost $37,032) 75,225
------------
WARRANTS & RIGHTS - 0.0%
Pakistan - 0.0%
Engro Chemical Pakistan Rights (AE) 105 20
------------
TOTAL WARRANTS & RIGHTS
(cost $0) 20
------------
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.5%
(Number of Contracts)
Brazil - 0.0%
Bovespa Index Futures
Jun 2006 38,926.14 (BRL)
Call (315) 5,875 335
Jun 2006 39,290.00 (BRL)
Call (255) 4,801 227
------------
562
------------
South Korea - 0.5%
Kospi 200 Index Futures
Jun 2006 137.60 (KRW) Call (50) 3,647 1,507
Jun 2006 138.20 (KRW) Call (126) 9,231 3,757
------------
5,264
------------
TOTAL OPTIONS PURCHASED
(cost $4,086) 5,826
------------
</Table>
54 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.8%
United States - 4.8%
Frank Russell Investment Company Money Market
Fund 50,567,000 50,567
United States Treasury Bills (c)(z)(sec.)
4.594% due 06/15/06 4,600 4,574
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $55,141) 55,141
------------
OTHER SECURITIES - 2.8%
Frank Russell Investment Company Money Market
Fund (X) 8,403,018 8,403
State Street Securities Lending Quality Trust
(X) 23,672,364 23,672
------------
TOTAL OTHER SECURITIES
(cost $32,075) 32,075
------------
TOTAL INVESTMENTS - 102.1%
(identified cost $729,344) 1,174,995
OTHER ASSETS AND LIABILITIES,
NET - (2.1%) (23,804)
------------
NET ASSETS - 100.0% 1,151,191
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 55
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Hang Seng Index (Hong Kong)
expiration date 05/06 (86) 91,667 23
JSE-40 Index (South Africa)
expiration date 06/06 (375) 11,899 1,237
MSCI Taiwan Index
expiration date 05/06 (515) 15,661 276
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,536
===============
</Table>
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Brazil
Bovespa Index Futures
Jun 2006 38,926.14 (BRL) Put (315) 5,875 (45)
Jun 2006 39,290.00 (BRL) Put (255) 4,801 (37)
South Korea
Kospi 200 Index Futures
Jun 2006 137.60 (KRW) Put (50) 3,647 (265)
Jun 2006 138.20 (KRW) Put (126) 9,231 (668)
---------------
Total Liability for Options Written
(premiums received $980) (1,015)
===============
</Table>
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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 34 BRL 72 05/02/06 --
USD 461 BRL 969 05/02/06 3
USD 150 BRL 313 05/03/06 --
USD 1,076 BRL 2,400 06/21/06 56
USD 1,807 BRL 4,000 06/21/06 80
USD 2,242 BRL 5,000 06/21/06 117
USD 4,721 BRL 10,500 06/21/06 232
USD 14 HKD 105 05/02/06 --
USD 126 HKD 979 05/02/06 --
USD 306 KRW 300,000 06/21/06 12
USD 919 KRW 900,000 06/21/06 36
USD 1,060 KRW 1,000,000 06/21/06 2
USD 1,063 KRW 1,000,000 06/21/06 (1)
USD 1,939 KRW 1,900,000 06/21/06 79
USD 2,545 KRW 2,500,000 06/21/06 109
USD 8,618 KRW 8,400,000 06/21/06 302
USD 215 MXN 2,388 05/02/06 1
USD 20 THB 756 05/03/06 --
USD -- ZAR 1 05/05/06 --
USD 157 ZAR 1,000 06/21/06 9
USD 2,063 ZAR 13,000 06/21/06 93
USD 8,956 ZAR 57,000 06/21/06 495
BRL 86 USD 41 05/02/06 --
BRL 61 USD 29 05/03/06 --
BRL 900 USD 403 06/21/06 (22)
BRL 1,000 USD 454 06/21/06 (17)
BRL 2,000 USD 913 06/21/06 (31)
HKD 2,503 USD 323 05/02/06 --
IDR 761,426 USD 86 05/01/06 (1)
IDR 2,359,955 USD 267 05/01/06 (2)
IDR 2,364,624 USD 267 05/01/06 (2)
IDR 3,628,649 USD 410 05/01/06 (3)
IDR 43,260 USD 5 05/02/06 --
IDR 820,495 USD 93 05/02/06 --
KRW 1,000,000 USD 1,047 06/21/06 (15)
KRW 2,000,000 USD 2,098 06/21/06 (26)
KRW 2,000,000 USD 2,094 06/21/06 (30)
MXN 157 USD 14 05/02/06 --
MYR 70 USD 19 05/03/06 --
THB 240 USD 6 05/02/06 --
THB 517 USD 14 05/02/06 --
THB 719 USD 19 05/02/06 --
THB 1,089 USD 29 05/02/06 --
ZAR 200 USD 33 05/02/06 --
ZAR 355 USD 57 05/02/06 (2)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
ZAR 154 USD 26 05/03/06 --
ZAR 276 USD 45 05/04/06 (1)
ZAR 5,000 USD 811 06/21/06 (18)
ZAR 6,000 USD 986 06/21/06 (8)
ZAR 7,000 USD 1,131 06/21/06 (30)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 1,417
==============
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 3.0 34,372
Consumer Discretionary 5.2 59,626
Consumer Staples 5.3 61,297
Financial Services 20.2 232,655
Health Care 0.5 5,605
Integrated Oils 13.8 158,506
Materials and Processing 18.8 216,466
Miscellaneous 1.1 12,348
Other Energy 2.6 29,969
Producer Durables 1.2 13,356
Technology 11.6 133,714
Utilities 10.7 124,019
Warrants & Rights -- 20
Options Purchased 0.5 5,826
Short-Term Investments 4.8 55,141
Other Securities 2.8 32,075
--------------- ---------------
Total Investments 102.1 1,174,995
Other Assets and Liabilities, Net (2.1) (23,804)
--------------- ---------------
Net Assets 100.0 1,151,191
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 10.2 117,926
Asia 46.4 534,074
Europe 12.2 140,988
Latin America 20.3 233,191
Middle East 3.1 35,452
Other Regions 4.9 56,324
United Kingdom 2.2 24,965
Other Securities 2.8 32,075
--------------- ---------------
Total Investments 102.1 1,174,995
Other Assets and Liabilities, Net (2.1) (23,804)
--------------- ---------------
Net Assets 100.0 1,151,191
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
58 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Argentina --*
Bermuda 0.1
Brazil 8.7
Chile 0.2
China 4.5
Columbia 0.5
Czech Republic --*
Ecuador 0.3
Egypt 1.5
Hong Kong 1.8
Hungary 1.2
India 6.4
Indonesia 2.8
Israel 1.6
Lebanon --*
Luxembourg 0.4
Malaysia 0.9
Mexico 4.7
Pakistan 0.9
Philippines 0.4
Poland 0.1
Russia 6.7
South Africa 10.2
South Korea 15.7
Taiwan 10.1
Thailand 1.5
Turkey 3.9
United Kingdom 2.2
United States 0.1
Venezuela 0.1
Zimbabwe --*
Preferred Stock 6.5
Warrants & Rights --*
Options Purchased 0.5
Short-Term Investments 4.8
Other Securities 2.8
---------------
Total Investments 102.1
Other Assets and Liabilities Net (2.1)
---------------
100.0
===============
Futures Contracts 0.1
Options Written (0.1)
Foreign Currency Exchange Contracts 0.1
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 59
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,158.70 $ 1,014.48
Expenses Paid During
Period* $ 11.13 $ 10.39
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.08%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,163.20 $ 1,018.20
Expenses Paid During
Period* $ 7.13 $ 6.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.33%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,164.70 $ 1,019.44
Expenses Paid During
Period* $ 5.80 $ 5.41
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.08%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
60 Real Estate Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 97.7%
Apartments - 18.5%
Apartment Investment & Management Co. Class A
(o) 408,375 18,250
Archstone-Smith Trust (o) 1,506,429 73,634
AvalonBay Communities, Inc. (o) 762,700 82,143
BRE Properties, Inc. Class A (o) 84,800 4,569
Camden Property Trust (o)(N) 458,800 31,533
Equity Residential (o) 1,369,300 61,441
Essex Property Trust, Inc. (o) 236,900 25,846
GMH Communities Trust (o) 583,100 7,172
Home Properties, Inc. (o) 53,900 2,696
Mid-America Apartment Communities, Inc. (o) 49,100 2,602
United Dominion Realty Trust, Inc. (o)(N) 473,000 12,861
------------
322,747
------------
Diversified - 6.6%
Colonial Properties Trust (o) 131,200 6,460
iStar Financial, Inc. (o)(N) 125,700 4,809
Spirit Finance Corp. (o)(N) 934,600 10,841
Vornado Realty Trust (o)(N) 970,372 92,807
------------
114,917
------------
Free Standing Retail - 0.1%
Realty Income Corp. (o)(N) 96,500 2,188
------------
Health Care - 3.1%
Health Care REIT, Inc. (o)(N) 118,243 4,115
Healthcare Realty Trust, Inc. (o)(N) 186,200 7,051
LTC Properties, Inc. (o) 65,300 1,433
Nationwide Health Properties, Inc. (o)(N) 376,900 8,111
Omega Healthcare Investors,
Inc. (o)(N) 309,000 3,952
Ventas, Inc. (o) 931,450 30,430
------------
55,092
------------
Industrial - 6.7%
AMB Property Corp. (o)(N) 608,100 30,399
First Potomac Realty Trust (o)(N) 80,100 2,210
ProLogis (o)(N) 1,669,200 83,827
------------
116,436
------------
Lodging/Resorts - 10.1%
DiamondRock Hospitality Co. (o)(N) 104,200 1,491
FelCor Lodging Trust, Inc. (o) 369,100 7,991
Hilton Hotels Corp. 964,700 25,989
Hospitality Properties Trust (o) 67,000 2,888
Host Hotels & Resorts, Inc. (AE)(o) 3,639,275 76,497
LaSalle Hotel Properties (o)(N) 343,920 15,040
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. (o) 783,583 44,962
Strategic Hotels & Resorts, Inc. (AE)(o)(N) 95,000 2,155
------------
177,013
------------
Manufactured Homes - 0.5%
Equity Lifestyle Properties, Inc. (o) 187,800 8,261
------------
Mixed Industrial/Office - 2.4%
Duke Realty Corp. (o) 162,600 5,756
Liberty Property Trust (o) 586,775 26,229
PS Business Parks, Inc. (o)(N) 196,200 10,192
------------
42,177
------------
Office - 19.1%
Alexandria Real Estate Equities,
Inc. (o) 100,700 9,123
American Financial Realty
Trust (o)(N) 224,500 2,555
BioMed Realty Trust, Inc. (o)(N) 547,220 15,147
Boston Properties, Inc. (o)(N) 906,200 79,990
Brandywine Realty Trust (o)(N) 577,521 16,350
Brookfield Properties Corp. 1,075,700 34,530
CarrAmerica Realty Corp. (o) 240,600 10,769
Columbia Equity Trust, Inc. (o) 268,515 4,353
Corporate Office Properties
Trust (o)(N) 295,500 12,263
Equity Office Properties Trust (o) 702,700 22,697
Highwoods Properties, Inc. (o)(N) 270,000 8,516
Kilroy Realty Corp. (o) 235,400 16,789
Mack-Cali Realty Corp. (o)(N) 317,500 14,357
Reckson Associates Realty Corp. (o) 615,400 25,035
SL Green Realty Corp. (o) 302,200 29,918
Trizec Properties, Inc. (o)(N) 1,221,600 30,564
------------
332,956
------------
Regional Malls - 14.6%
CBL & Associates Properties,
Inc. (o)(N) 173,300 6,930
General Growth Properties, Inc. (o) 983,000 46,152
Macerich Co. (The) (o) 708,300 51,862
Simon Property Group, Inc. (o) 1,581,400 129,485
Taubman Centers, Inc. (o)(N) 484,256 19,922
------------
254,351
------------
</Table>
Real Estate Securities Fund 61
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Self Storage - 4.3%
Extra Space Storage, Inc. (o)(N) 331,400 5,210
Public Storage, Inc. (o)(N) 704,200 54,139
Shurgard Storage Centers, Inc. Class A (o) 90,600 5,706
U-Store-It Trust (o)(N) 590,100 10,787
------------
75,842
------------
Shopping Centers - 10.1%
Acadia Realty Trust (o) 304,100 6,864
Developers Diversified Realty Corp. (o) 802,400 42,688
Equity One, Inc. (o)(N) 167,600 3,852
Federal Realty Investors Trust (o) 481,700 32,866
Inland Real Estate Corp. (o)(N) 108,400 1,573
Kimco Realty Corp. (o)(N) 487,900 18,116
Kite Realty Group Trust (o) 197,800 3,020
Pan Pacific Retail Properties, Inc. (o) 187,400 12,488
Regency Centers Corp. (o) 877,100 55,336
------------
176,803
------------
Specialty - 1.6%
Digital Realty Trust, Inc. (o)(N) 543,530 15,328
Plum Creek Timber Co., Inc. (o)(N) 354,600 12,872
------------
28,200
------------
TOTAL COMMON STOCKS
(cost $1,120,382) 1,706,983
------------
SHORT-TERM INVESTMENTS - 2.0%
Frank Russell Investment Company Money Market
Fund 34,526,000 34,526
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $34,526) 34,526
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 5.6%
Frank Russell Investment Company Money Market
Fund (X) 25,656,215 25,656
State Street Securities Lending Quality Trust
(X) 72,276,799 72,277
------------
TOTAL OTHER SECURITIES
(cost $97,933) 97,933
------------
TOTAL INVESTMENTS - 105.3%
(identified cost $1,252,841) 1,839,442
OTHER ASSETS AND LIABILITIES,
NET - (5.3%) (92,428)
------------
NET ASSETS - 100.0% 1,747,014
============
</Table>
See accompanying notes which are an integral part of the financial statements.
62 Real Estate Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Apartments 18.5
Diversified 6.6
Free Standing Retail 0.1
Health Care 3.1
Industrial 6.7
Lodging/Resorts 10.1
Manufactured Homes 0.5
Mixed Industrial/Office 2.4
Office 19.1
Regional Malls 14.6
Self Storage 4.3
Shopping Center 10.1
Specialty 1.6
Short-Term Investments 2.0
Other Securities 5.6
---------------
Total Investments 105.3
Other Assets and Liabilities, Net (5.3)
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 63
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,007.50 $ 1,016.56
Expenses Paid During
Period* $ 8.26 $ 8.30
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.66%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,011.50 $ 1,020.28
Expenses Paid During
Period* $ 4.54 $ 4.56
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.91%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,012.80 $ 1,021.52
Expenses Paid During
Period* $ 3.29 $ 3.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.66%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
64 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 76.7%
Asset-Backed Securities - 18.5%
AAA Trust (p)
Series 2005-2 Class A1
5.059% due 11/26/35 327 328
AmeriCredit Automobile Receivables Trust
Series 2005-AX Class A3
3.630% due 01/06/10 2,000 1,980
Asset Backed Securities Corp. Home Equity (E)
Series 2002-HE1 Class M1
6.001% due 03/15/32 1,396 1,396
Banc of America Securities Auto Trust
Series 2005-WF1 Class A4
4.080% due 04/18/10 3,000 2,929
Bank One Issuance Trust
Series 2004-B2 Class B2
4.370% due 04/15/12 1,500 1,454
Bear Stearns Asset Backed Securities, Inc. (E)
Series 2004-BO1 Class 1A1
5.159% due 09/25/34 327 328
BMW Vehicle Owner Trust
Series 2004-A Class A4
3.320% due 02/25/09 4,200 4,112
Brazos Higher Education Authority
Series 2005-A Class A5
4.910% due 12/01/40 3,250 3,216
California Infrastructure PG&E-1
Series 1997-1 Class A7
6.420% due 09/25/08 388 389
Series 1997-1 Class A8
6.480% due 12/26/09 3,000 3,043
California Infrastructure SCE-1
Series 1997-1 Class A7
6.420% due 12/26/09 7,450 7,552
California Infrastructure SDG&E-1
Series 1997-1 Class A6
6.310% due 09/25/08 129 129
Capital Auto Receivables Asset Trust
Series 2004-1 Class A3
2.000% due 11/15/07 427 422
Series 2004-2 Class A2
3.350% due 02/15/08 3,000 2,969
Series 2006-1 Class A3
5.030% due 10/15/09 2,225 2,215
Capital One Auto Finance Trust
Series 2005-BSS Class A3
4.080% due 11/15/09 2,000 1,969
Capital One Master Trust
Series 2002-4A Class A
4.900% due 03/15/10 1,000 996
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Capital One Prime Auto Receivables Trust
Series 2004-3 Class A4
3.690% due 06/15/10 1,000 969
Series 2004-3 Class B
3.860% due 08/15/11 1,500 1,459
Carmax Auto Owner Trust
Series 2004-2 Class A4
3.460% due 09/15/11 2,500 2,420
Series 2005-2 Class A4
4.340% due 09/15/10 2,000 1,950
Carrington Mortgage Loan Trust (E)
Series 2005-NC3 Class A1A
5.039% due 06/25/35 150 150
Series 2005-OPT Class A1A
5.049% due 05/25/35 123 123
Centex Home Equity
Series 2003-C Class AF4
4.960% due 04/25/32 1,261 1,252
Chase Manhattan Auto Owner Trust
Series 2004-A Class A4 (N)
2.830% due 09/15/10 1,800 1,745
Series 2005-A Class A4
3.980% due 04/15/11 1,000 967
Series 2005-A Class CTFS
4.040% due 04/15/11 1,000 979
CIT Equipment Collateral
Series 2004-VT1 Class A3
2.200% due 03/20/08 608 600
Series 2005-VT1 Class A3
4.120% due 08/20/08 1,150 1,138
CIT Marine Trust
Series 1999-A Class A4
6.250% due 11/15/19 712 714
CIT RV Trust
Series 1998-A Class A5
6.120% due 11/15/13 472 472
Citibank Credit Card Issuance Trust
Series 2003-A3 Class A3
3.100% due 03/10/10 1,000 962
Citigroup Mortgage Loan Trust, Inc. (E)
Series 2005-HE3 Class A2A
5.069% due 09/25/35 679 680
CNH Wholesale Master Note Trust (E)
Series 2005-1 Class A
5.011% due 06/15/11 1,500 1,499
</Table>
Short Duration Bond Fund 65
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Community Program Loan Trust
Series 1987-A Class A4
4.500% due 10/01/18 2,106 2,055
Countrywide Asset-Backed Certificates (E)
Series 2001-BC3 Class A
5.439% due 12/25/31 199 199
Series 2005-4 Class 3AV1
5.039% due 10/25/35 990 990
Series 2005-5 Class 2A1
5.039% due 10/25/35 303 303
Series 2005-9 Class 2A1
5.059% due 08/25/35 738 738
Daimler Chrysler Auto Trust
Series 2005-A Class A3
3.490% due 12/08/08 2,330 2,303
Series 2005-A Class A4
3.740% due 02/08/10 8,100 7,903
Dillard Credit Card Master Trust
Series 2002-2 Class A
3.800% due 09/15/10 3,650 3,633
Discover Card Master Trust I
Series 2002-2 Class A
5.150% due 10/15/09 2,500 2,498
Series 2002-2 Class B
5.450% due 10/15/09 1,000 1,001
E-Trade RV and Marine Trust
Series 2004-1 Class A3
3.620% due 10/08/18 1,300 1,233
Equifirst Mortgage Loan Trust (E)
Series 2005-1 Class A1
5.019% due 04/25/35 676 676
Fifth Third Auto Trust
Series 2004-A Class A3
3.190% due 02/20/08 1,417 1,407
First NLC Trust (E)
Series 2005-2 Class AV1
5.069% due 09/25/35 405 405
Fleet Credit Card Master Trust II
Series 2001-B Class B
5.900% due 12/15/08 1,100 1,101
Ford Credit Auto Owner Trust
Series 2005-A Class A3
3.480% due 11/15/08 8,225 8,135
Series 2005-B Class A4
4.380% due 01/15/10 1,500 1,476
Series 2005-B Class B
4.640% due 04/15/10 1,250 1,228
Series 2005-C Class B
4.520% due 09/15/10 1,000 975
Series 2006-A Class A3
5.050% due 03/15/10 535 533
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Franklin Auto Trust
Series 2003-1 Class A4
2.270% due 05/20/11 738 720
GE Commercial Equipment Financing LLC (E)
Series 2004-1 Class B
5.123% due 12/20/15 475 475
GE Corporate Aircraft Financing LLC (E)(p)
Series 2004-1A Class B
5.809% due 01/25/18 530 530
GE Dealer Floorplan Master Note Trust (E)
Series 2004-2 Class B
5.213% due 07/20/09 1,000 1,002
GMAC Mortgage Corp. Loan Trust
Series 2004-GH1 Class A2
4.390% due 12/25/25 1,500 1,484
GS Auto Loan Trust
Series 2004-1 Class A3
2.130% due 11/15/07 743 737
Series 2005-1 Class A4
4.560% due 11/15/13 1,300 1,273
GSAMP Trust (E)
Series 2004-SEA Class A2A
5.249% due 03/25/34 704 704
Hertz Vehicle Financing LLC (p)
Series 2005-2A Class A2
4.930% due 02/25/10 2,500 2,472
Honda Auto Receivables Owner Trust
Series 2003-2 Class A4
2.160% due 10/21/08 3,036 2,995
Series 2003-3 Class A4
2.770% due 11/21/08 1,939 1,904
Series 2003-4 Class A4
2.790% due 03/16/09 1,000 982
Series 2003-5 Class A3
2.300% due 10/18/07 334 332
Series 2003-5 Class A4
2.960% due 04/20/09 2,135 2,085
Series 2004-3 Class A4
3.280% due 02/18/10 2,000 1,931
Household Automotive Trust
Series 2005-3 Class A2
4.700% due 01/17/09 2,600 2,595
Household Private Label Credit Card Master Note
Trust I
Series 2002-1 Class A
5.500% due 01/18/11 3,750 3,761
</Table>
66 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hyundai Auto Receivables Trust
Series 2004-A Class A3
2.970% due 05/15/09 977 963
Series-A Class A3
3.980% due 11/16/09 1,500 1,471
Illinois Power Special Purpose Trust
Series 1998-1 Class A6
5.540% due 06/25/09 2,662 2,667
IXIS Real Estate Capital Trust (E)
Series 2005-HE2 Class A1
5.039% due 09/25/35 68 68
Long Beach Auto Receivables Trust
Series 2005-B Class A3
4.406% due 05/15/10 1,500 1,481
Marlin Leasing Receivables LLC (p)
Series 2005-1A Class A3
4.630% due 11/17/08 1,650 1,631
MBNA Credit Card Master Note Trust
Series 2005-A7 Class A7
4.300% due 02/15/11 1,500 1,471
Merrill Auto Trust Securitization
Series 2005-1 Class A3
4.100% due 08/25/09 3,000 2,957
Morgan Stanley Dean Witter Capital I (E)
Series 2002-HE1 Class A2
5.289% due 07/25/32 3 3
National City Auto Receivables Trust
Series 2002-A Class A4
4.830% due 08/15/09 485 485
Series 2004-A Class A3
2.110% due 07/15/08 746 738
Nelnet Education Loan Funding, Inc.
Series 2001-A Class A1
5.760% due 07/01/12 1,917 1,932
Nissan Auto Lease Trust
Series 2005-A Class A3
4.700% due 10/15/08 3,000 2,980
Nissan Auto Receivables Owner Trust
Series 2005-A Class A3
3.540% due 10/15/08 1,650 1,629
Series 2005-B Class A3
3.990% due 07/15/09 1,600 1,578
Nordstrom Private Label Credit Card Master Note
Trust (p)
Series 2001-1A Class A
4.820% due 04/15/10 3,500 3,495
Onyx Acceptance Grantor Trust
Series 2005-A Class A4
3.910% due 09/15/11 2,000 1,947
PBG Equipment Trust (p)
Series 1998-1A Class A
6.270% due 01/20/12 575 576
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Peco Energy Transition Trust
Series 1999-A Class A6
6.050% due 03/01/09 1,410 1,416
PG&E Energy Recovery Funding LLC
Series 2005-1 Class A2
3.870% due 06/25/11 2,905 2,839
Series 2005-2 Class A1
4.850% due 06/25/11 1,325 1,317
Popular ABS Mortgage Pass-Through Trust
Series 2004-5 Class AF2
3.735% due 12/25/34 965 955
Series 2005-3 Class AF3
4.437% due 07/25/35 2,000 1,961
Providian Gateway Master Trust (p)
Series 2004-FA Class A
3.650% due 11/15/11 1,200 1,171
PSE&G Transition Funding LLC
Series 2001-1 Class A3
5.980% due 06/15/08 564 564
Public Service New Hampshire Funding LLC
Series 2001-1 Class A2
5.730% due 11/01/10 1,083 1,090
Railcar Leasing LLC (p)
Series 1997-1 Class A2
7.125% due 01/15/13 1,000 1,039
Regions Auto Receivables Trust
Series 2003-2 Class A3
2.310% due 01/15/08 277 276
Residential Asset Mortgage Products, Inc. (E)
Series 2004-RS1 Class AII1
5.089% due 06/25/27 477 477
Series 2004-RS2 Class AIIB
5.209% due 02/25/34 543 544
SLM Student Loan Trust (p)
Series 2003-4 Class A5B
3.390% due 03/15/33 3,000 2,896
Specialty Underwriting & Residential Finance (E)
Series 2004-BC4 Class A2A
5.109% due 10/25/35 214 214
Susquehanna Auto Lease Trust (p)
Series 2005-1 Class A3
4.430% due 06/16/08 4,000 3,953
Series 2005-1 Class B
4.710% due 07/14/08 1,700 1,678
</Table>
Short Duration Bond Fund 67
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Toyota Auto Receivables Owner Trust
Series 2003-B Class A4
2.790% due 01/15/10 4,670 4,614
Toyota Motor Credit Corp.
2.750% due 08/06/09 2,545 2,441
Triad Auto Receivables Owner Trust
Series 2002-A Class A4
3.240% due 08/12/09 991 982
Series 2003-B Class A3
2.480% due 03/12/08 145 145
Series 2004-A Class A3
1.900% due 07/14/08 393 392
Series 2006-A Class A3
4.770% due 01/12/11 2,000 1,981
USAA Auto Owner Trust
Series 2004-2 Class A3
3.030% due 06/16/08 3,096 3,070
Series 2004-2 Class A4
3.580% due 02/15/11 1,700 1,664
Series 2005-2 Class A4
4.170% due 02/15/11 4,000 3,888
Wachovia Auto Owner Trust
Series 2004-A Class A3
3.190% due 06/20/08 1,399 1,387
Series 2004-A Class A4
3.660% due 07/20/10 7,500 7,329
Series 2004-B Class A3
2.910% due 04/20/09 4,259 4,204
Wells Fargo Financial Auto Owner Trust
Series 2004-A Class A4
2.670% due 08/16/10 2,000 1,953
West Penn Funding LLC Transition Bonds
Series 1999-A Class A3
6.810% due 09/25/08 306 306
WFS Financial Owner Trust
Series 2002-3 Class A4
3.500% due 02/20/10 925 918
Series 2004-1 Class A3 (N)
2.190% due 06/20/08 500 498
Whole Auto Loan Trust
Series 2003-1 Class A3B
1.990% due 05/15/07 223 222
Series 2003-1 Class B
2.240% due 03/15/10 297 294
World Omni Auto Receivables Trust
Series 2006-A Class A2
5.050% due 10/15/08 3,000 2,997
------------
208,027
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Corporate Bonds and Notes - 16.9%
ABN Amro Bank NV (N)
7.125% due 06/18/07 1,700 1,732
Allstate Financial Global Funding (p)
2.500% due 06/20/08 4,080 3,850
Altria Group, Inc. (N)
7.650% due 07/01/08 1,500 1,563
American Express Centurion Bank
Series BKNT
4.375% due 07/30/09 3,440 3,343
Ameritech Capital Funding
6.250% due 05/18/09 2,000 2,023
Associates Corp. of North America
6.250% due 11/01/08 1,900 1,941
8.550% due 07/15/09 750 815
Bank of America Corp.
6.375% due 02/15/08 3,000 3,052
Bank One Corp.
2.625% due 06/30/08 5,675 5,363
BankAmerica Corp.
6.250% due 04/01/08 2,000 2,031
7.125% due 03/01/09 1,500 1,566
BellSouth Corp.
4.200% due 09/15/09 5,330 5,117
British Aerospace Finance, Inc. (p)
7.000% due 07/01/07 900 913
Capital One Financial Corp.
7.125% due 08/01/08 1,450 1,495
CIT Group, Inc.
5.160% due 09/20/07 (E) 3,800 3,809
5.000% due 11/24/08 7,050 6,986
4.250% due 02/01/10 2,325 2,224
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
4.890% due 03/07/08 1,600 1,600
Citigroup, Inc.
4.900% due 06/04/07 (E) 1,000 1,000
6.200% due 03/15/09 5,700 5,828
Consolidated Edison Co. of New York
Series B
7.150% due 12/01/09 1,000 1,055
Credit Suisse USA, Inc. (E)
5.000% due 12/09/08 3,500 3,503
CSX Corp.
6.250% due 10/15/08 2,000 2,036
Deutsche Bank Financial, Inc.
7.500% due 04/25/09 2,000 2,112
Entergy Mississippi, Inc.
4.350% due 04/01/08 500 488
</Table>
68 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
FleetBoston Financial Corp.
6.375% due 05/15/08 4,185 4,266
Ford Motor Credit Co. (E)(N)
7.680% due 11/02/07 200 196
GATX Rail Corp.
6.750% due 05/01/09 2,500 2,549
General Electric Capital Corp.
5.175% due 10/21/10 (E) 2,000 2,001
Series MTNA (N)
4.625% due 09/15/09 6,460 6,315
Goldman Sachs Group, Inc.
5.125% due 10/05/07 (E) 2,000 2,003
5.414% due 10/07/11 (E) 3,000 3,020
Series MTNB (E)
5.420% due 07/23/09 2,000 2,013
Harrah's Operating Co., Inc.
7.500% due 01/15/09 1,500 1,566
HSBC Finance Corp.
6.500% due 11/15/08 10,130 10,404
International Lease Finance Corp.
5.625% due 06/01/07 1,600 1,604
6.375% due 03/15/09 1,500 1,535
4.750% due 07/01/09 2,250 2,197
Series MTNP
3.125% due 05/03/07 2,200 2,150
Lehman Brothers Holdings, Inc.
7.875% due 08/15/10 1,000 1,087
Series MTNG
3.950% due 11/10/09 1,000 950
Lehman Brothers, Inc.
6.625% due 02/15/08 1,500 1,529
Medco Health Solutions, Inc.
7.250% due 08/15/13 1,750 1,866
Merrill Lynch & Co., Inc.
4.831% due 10/27/08 3,925 3,884
Metropolitan Life Global Funding I (p)
4.250% due 07/30/09 4,000 3,899
MGM Mirage
9.750% due 06/01/07 1,200 1,245
Morgan Stanley
5.235% due 07/27/07 (E) 3,000 3,003
3.875% due 01/15/09 2,000 1,923
National City Bank
Series BKNT
4.250% due 01/29/10 1,375 1,319
Northern States Power Co.
6.875% due 08/01/09 3,000 3,114
Ohio Edison Co.
4.000% due 05/01/08 1,100 1,068
Pepco Holdings, Inc.
5.500% due 08/15/07 400 400
Principal Life Global Funding I (p)
5.125% due 06/28/07 2,000 1,983
2.800% due 06/26/08 5,600 5,316
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Residential Capital Corp.
6.125% due 11/21/08 2,000 1,991
6.375% due 06/30/10 2,000 1,992
SLM Corp.
3.625% due 03/17/08 7,200 6,968
Sprint Capital Corp.
6.375% due 05/01/09 3,775 3,863
Texas Eastern Transmission, LP
5.250% due 07/15/07 2,900 2,889
Textron, Inc.
6.375% due 11/15/08 2,500 2,547
US Bancorp
Series MTNN
5.100% due 07/15/07 1,650 1,642
US Bank NA
Series BKNT
4.125% due 03/17/08 1,600 1,567
Wachovia Bank NA
Series BKNT
4.375% due 08/15/08 2,250 2,205
Wachovia Corp.
5.625% due 12/15/08 (N) 8,200 8,256
Series * (E)
5.040% due 07/20/07 3,500 3,504
Wells Fargo & Co.
4.125% due 03/10/08 820 803
6.250% due 04/15/08 8,337 8,477
5.000% due 03/23/10 (E) 3,000 2,999
------------
189,553
------------
International Debt - 3.2%
Brazilian Government International Bond (E)
10.710% due 06/29/09 850 987
British Telecommunications PLC
7.000% due 05/23/07 1,700 1,725
Eksportfinans A/S
4.750% due 12/15/08 7,800 7,715
Eli Lilly Services, Inc. (E)(p)
4.940% due 09/12/08 4,000 4,003
European Investment Bank
3.875% due 08/15/08 7,450 7,250
HBOS Treasury Services PLC (p)
3.500% due 11/30/07 2,000 1,948
3.750% due 09/30/08 1,000 964
Interstar Millennium Trust (E)
Series 2004-2G Class A
5.100% due 03/14/36 1,675 1,679
</Table>
Short Duration Bond Fund 69
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Network Rail MTN Finance PLC
2.625% due 03/26/08 9,270 8,846
Royal Bank of Scotland PLC (E)(p)
5.125% due 07/21/08 900 900
------------
36,017
------------
Mortgage-Backed Securities - 23.0%
American Home Mortgage Investment Trust (E)
Series 2004-3 Class 5A
4.290% due 10/25/34 2,155 2,107
Series 2004-4 Class 4A
4.390% due 02/25/45 744 722
Banc of America Commercial Mortgage, Inc.
Series 2004-2 Class A1
2.764% due 11/10/38 1,816 1,748
Banc of America Funding Corp.
Series 2005-D Class A1 (E)
4.115% due 05/25/35 9,576 9,267
Series 2006-2 Class 2A18
5.750% due 03/25/36 3,584 3,554
Banc of America Mortgage Securities
Series 2002-K Class 2A1 (E)
5.447% due 10/20/32 48 48
Series 2004-2 Class 2A1
5.250% due 03/25/34 1,193 1,180
Series 2004-2 Class 5A1
6.500% due 10/25/31 331 333
Bear Stearns Adjustable Rate Mortgage Trust
Series 2003-1 Class 5A1
5.450% due 04/25/33 512 505
Series 2003-8 Class 2A1 (E)
4.810% due 01/25/34 503 496
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.415% due 05/25/35 1,410 1,411
Bear Stearns Asset Backed Securities, Inc.
Series 2003-AC3 Class A1
4.000% due 07/25/33 505 493
Bear Stearns Commercial Mortgage Securities
Series 1998-C1 Class A1
6.340% due 06/16/30 333 336
Series 1999-C1 Class A2
6.020% due 02/14/31 2,000 2,027
Series 2001-TOP Class A1
5.060% due 11/15/16 485 481
Series 2003-PWR Class A1
3.432% due 05/11/39 694 666
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-T10 Class A1
4.000% due 03/13/40 1,436 1,374
Series 2003-T12 Class A1
2.960% due 08/13/39 1,333 1,280
Commercial Mortgage Pass Through Certificates
Series 2004-LB2 Class A2
3.600% due 03/10/39 1,000 957
Countrywide Alternative Loan Trust
Series 2003-6T2 Class A1
6.500% due 06/25/33 200 201
Series 2003-J2 Class A1
6.000% due 10/25/33 588 566
Series 2004-12C Class 1A1
5.000% due 07/25/19 2,942 2,842
Series 2005-34C Class 1A6
5.500% due 09/25/35 3,728 3,690
Series 2005-73C Class 1A8
5.500% due 01/25/36 3,870 3,818
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2005-HYB Class 5A1
5.250% due 02/20/36 1,330 1,315
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2002-AR2 Class 2A2
5.696% due 10/25/32 24 23
Series 2002-P3 Class A (E)(p)
5.509% due 08/25/33 218 219
Series 2003-C4 Class A2
3.908% due 08/15/36 1,000 969
Series 2003-CK2 Class A1
3.006% due 03/15/36 810 785
Series 2004-C1 Class A1
2.254% due 01/15/37 1,347 1,313
Series 2005-C5 Class A1
5.046% due 08/15/38 3,573 3,542
Fannie Mae
30 Year TBA (I)
5.000% 3,000 2,913
6.000% due 2008 78 78
5.500% due 2009 1,839 1,832
6.000% due 2010 169 170
6.500% due 2010 142 144
6.000% due 2011 188 190
6.500% due 2011 116 117
4.500% due 2013 2,656 2,579
5.000% due 2013 2,686 2,648
5.500% due 2013 348 347
</Table>
70 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.000% due 2013 409 414
6.000% due 2014 2,048 2,074
5.500% due 2016 1,222 1,214
5.000% due 2017 98 95
5.500% due 2017 1,897 1,886
6.000% due 2017 194 196
4.500% due 2018 132 126
5.000% due 2018 4,291 4,186
4.500% due 2019 325 309
5.000% due 2019 507 494
4.500% due 2020 414 395
5.000% due 2020 354 345
5.500% due 2022 1,362 1,337
5.500% due 2033 82 79
6.000% due 2033 31 31
5.500% due 2034 15,580 15,169
4.663% due 2035 (E) 3,888 3,791
4.676% due 2035 (E) 609 598
4.898% due 2035 (E) 34,324 33,697
5.500% due 2035 21,307 20,700
5.001% due 2041 (E) 1,117 1,128
4.951% due 2042 (E) 915 919
Series 2003-129 Class PQ
4.500% due 07/25/33 396 393
Series 2003-24 Class PU
3.500% due 11/25/15 286 273
Series 2003-27 Class TJ
4.000% due 10/25/16 34 34
Series 2003-46 Class PQ
3.000% due 06/25/19 3,500 3,455
Series 2003-62 Class OD
3.500% due 04/25/26 1,250 1,186
Series 2003-63 Class GU
4.000% due 07/25/33 2,159 2,115
Series 2003-67 Class TA
3.000% due 08/25/17 3,617 3,346
Series 2003-75 Class NB
3.250% due 08/25/18 635 602
Series 2004-17 Class HA
3.000% due 01/25/19 2,109 1,916
Series 2004-21 Class QA
4.000% due 11/25/17 2,158 2,137
Fannie Mae Grantor Trust (E)
Series 2002-T10 Class A1
5.199% due 06/25/32 5,437 5,437
Series 2005-T2 Class 1A1
4.667% due 11/28/35 116 116
Series 2005-T4 Class A1A
5.009% due 09/25/35 994 994
Fannie Mae-Aces
Series 1998-M1 Class A2
6.250% due 01/25/08 1,201 1,209
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Federal Home Loan Bank System
Series 2005-058 Class H
4.750% due 10/25/10 3,726 3,640
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2003-H00 Class A2
1.876% due 03/15/08 1 1
Series 2005-63 Class 1A1 (E)
4.951% due 02/25/45 1,615 1,628
Freddie Mac
8.000% due 2010 27 27
4.917% due 2035 (E) 933 917
Series 1993-164 Class PD
4.500% due 09/15/08 90 89
Series 2003-255 Class PB
5.500% due 08/15/30 59 58
Series 2003-258 Class NS
3.250% due 09/15/15 1,386 1,326
Series 2003-261 Class JA
3.760% due 03/15/29 1,316 1,248
Series 2003-262 Class KP
2.870% due 12/15/16 3,011 2,810
Series 2003-263 Class CD
4.000% due 10/15/26 1,500 1,436
Series 2003-263 Class NK
4.000% due 02/15/15 96 96
Series 2003-263 Class YH
3.500% due 08/15/22 633 628
Series 2003-268 Class MX
4.000% due 07/15/16 2,273 2,188
Series 2003-271 Class OJ
3.500% due 03/15/11 950 945
Series 2004-276 Class EA
4.500% due 04/15/13 1,374 1,359
Series 2004-276 Class NL
3.250% due 03/15/14 3,913 3,730
Series 2004-278 Class HE
4.000% due 09/15/17 3,591 3,422
Series 2004-282 Class EA
4.500% due 11/15/15 3,271 3,211
Series 2004-285 Class BA
4.500% due 02/15/20 1,502 1,464
Series 2005-305 Class AP
5.500% due 01/15/27 2,760 2,765
Freddie Mac Gold
4.000% due 2007 915 892
4.000% due 2008 753 731
4.500% due 2008 849 838
</Table>
Short Duration Bond Fund 71
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.500% due 2008 96 95
6.500% due 2008 91 92
5.500% due 2009 221 219
6.000% due 2009 142 143
6.500% due 2009 320 323
6.000% due 2010 129 129
6.000% due 2011 480 484
6.000% due 2013 130 131
5.500% due 2014 555 550
6.000% due 2014 135 136
6.000% due 2016 581 586
5.500% due 2017 934 927
5.000% due 2018 584 569
6.000% due 2028 131 131
5.500% due 2029 897 875
6.000% due 2029 263 264
6.000% due 2031 351 351
6.000% due 2032 444 443
6.000% due 2033 756 756
GE Capital Commercial Mortgage Corp.
Series 2001-3 Class A1
5.560% due 06/10/38 1,429 1,433
Series 2004-C3 Class A1
3.752% due 07/10/39 2,671 2,595
Series 2005-C1 Class A1
4.012% due 06/10/48 1,601 1,565
Ginnie Mae I
7.000% due 2007 3 3
6.000% due 2008 75 76
9.500% due 2017 1 1
Ginnie Mae II (E)
4.750% due 2027 128 129
4.000% due 2032 262 261
Government National Mortgage Association
Series 2004-78 Class A
3.590% due 11/16/17 2,695 2,599
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.404% due 06/25/34 1,878 1,841
Impac CMB Trust (E)
Series 2004-2 Class A2
5.209% due 04/25/34 323 323
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C2 Class A1
4.326% due 12/12/34 757 734
Series 2005-LDP Class A1
4.655% due 08/15/42 1,719 1,694
4.613% due 10/15/42 2,506 2,465
Series 2005-LDP Class A2
4.790% due 10/15/42 2,150 2,093
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust
Series 2003-C1 Class A1
2.720% due 03/15/27 1,203 1,164
Series 2003-C3 Class A1
2.599% due 05/15/27 1,748 1,680
Lehman Large Loan
Series 1997-LLI Class A2
6.840% due 10/12/34 30 31
Mellon Residential Funding Corp. (E)
Series 2000-TBC Class A1
5.141% due 06/15/30 1,332 1,364
Morgan Stanley Capital I
Series 2003-T11 Class A1
3.260% due 06/13/41 1,387 1,344
Series 2004-T13 Class A1
2.850% due 09/13/45 702 674
Series 2005-HQ6 Class A1
4.646% due 08/13/42 1,912 1,880
Morgan Stanley Dean Witter Capital I
Series 2001-TOP Class A1
5.020% due 10/15/35 207 207
Series 2002-HQ Class A2
6.090% due 04/15/34 167 168
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
5.359% due 02/25/34 236 237
Series 2004-CL1 Class 2A2
5.359% due 02/25/19 58 58
Residential Accredit Loans, Inc.
Series 2003-QS1 Class A1
5.000% due 09/25/18 3,759 3,641
Salomon Brothers Mortgage Securities VII
Series 2003-UP2 Class A1
4.000% due 12/25/18 1,081 1,014
Structured Asset Mortgage Investments, Inc. (E)
Series 2002-AR3 Class A1
5.240% due 09/19/32 88 88
Structured Asset Securities Corp. (E)
Series 2001-21A Class 1A1
6.250% due 01/25/32 103 103
Vendee Mortgage Trust
Series 2001-3 Class J
6.500% due 05/15/08 355 358
Wachovia Bank Commercial Mortgage Trust
Series 2002-C2 Class A2
4.043% due 11/15/34 1,868 1,803
</Table>
72 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-C4 Class A1
3.003% due 04/15/35 1,409 1,364
Washington Mutual, Inc.
Series 2002-AR1 Class A6
4.816% due 10/25/32 599 595
Series 2002-AR6 Class A (E)
5.288% due 06/25/42 500 501
Series 2002-AR9 Class 1A (E)
5.151% due 08/25/42 1,097 1,098
Series 2004-AR1 Class A2A (E)
5.245% due 11/25/34 2,357 2,366
Series 2005-AR1 Class A1A1 (E)
5.249% due 10/25/45 461 463
Wells Fargo Mortgage Backed Securities Trust
Series 2005-9 Class 1A1
4.750% due 10/25/35 2,844 2,763
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 1,277 1,253
------------
258,364
------------
Non-US Bonds - 0.1%
Landwirtschaftliche Rentenbank
0.650% due 09/30/08 JPY 60,000 525
------------
United States Government Agencies - 0.4%
Federal Home Loan Bank System
5.925% due 04/09/08 1,600 1,623
Series 2004-900 Class 1
3.920% due 09/25/09 1,586 1,522
Zero coupon due 04/27/10 749 681
Freddie Mac
5.810% due 04/04/08 1,000 1,012
------------
4,838
------------
United States Government Treasuries - 14.6%
United States Treasury Notes
3.125% due 05/15/07 18,590 18,252
3.625% due 06/30/07 86,215 84,949
2.625% due 05/15/08 22,175 21,217
3.375% due 12/15/08 3,450 3,324
3.375% due 10/15/09 37,850 36,032
------------
163,774
------------
TOTAL LONG-TERM INVESTMENTS
(cost $875,780) 861,098
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 0.2%
Financial Services - 0.2%
DG Funding Trust (p) 219 2,326
------------
TOTAL PREFERRED STOCKS
(cost $2,307) 2,326
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Eurodollar Futures
Jun 2006 93.50 Put (94) 21,973 1
Sep 2006 92.75 Put (591) 137,038 3
Dec 2006 92.25 Put (250) 57,656 2
Dec 2006 92.50 Put (100) 23,125 1
Dec 2006 92.75 Put (72) 16,695 --
Mar 2007 92.00 Put (292) 67,160 2
Swaptions
(Fund Pays/Fund Receives)
USD Three Month LIBOR/
USD 4.750%
Aug 2006 0.00 Call (1) 5,000 --
USD Three Month LIBOR/
USD 4.250%
Oct 2006 0.00 Call (3) 13,000 --
USD Three Month LIBOR/
USD 4.500%
Oct 2006 0.00 Call (3) 29,600 1
USD Three Month LIBOR/
USD 4.800%
Dec 2006 0.00 Call (1) 12,000 8
USD Three Month LIBOR/
USD 5.000%
Mar 2007 0.00 Call (2) 17,000 42
------------
TOTAL OPTIONS PURCHASED
(cost $354) 60
------------
</Table>
Short Duration Bond Fund 73
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 23.2%
American Electric Power Co., Inc.
Series A
6.125% due 05/15/06 5,790 5,792
American General Finance Corp. (E)
Series MTNG
4.980% due 03/23/07 200 200
ANZ, Inc. Discount Notes (c)(z)
4.645% due 05/16/06 11,600 11,578
Aristar, Inc.
7.250% due 06/15/06 3,005 3,012
Associates Corp. of North America
Series MTNH
7.250% due 05/08/06 2,000 2,001
7.240% due 05/17/06 1,000 1,001
Bank of Montreal
7.800% due 04/01/07 2,500 2,552
Barclays Bank PLC (z)
4.485% due 01/29/07 2,700 2,707
Barclays US Funding, LLC (z)
4.890% due 07/05/06 8,500 8,424
BNP Paribas Financial, Inc. (z)
5.000% due 08/28/06 6,800 6,686
Boeing Co.
8.100% due 11/15/06 2,375 2,409
British Sky Broadcasting PLC
7.300% due 10/15/06 2,000 2,015
CIT Equipment Collateral
Series 2003-VT1 Class A3B
1.630% due 04/20/07 32 32
Continental Cablevision, Inc.
8.300% due 05/15/06 400 401
COX Communications, Inc.
7.750% due 08/15/06 2,900 2,916
DaimlerChrysler NA Holding Corp.
6.400% due 05/15/06 1,200 1,200
5.380% due 05/24/06 (E) 2,800 2,800
Devon Energy Corp.
2.750% due 08/01/06 4,954 4,920
Dexia Del LLC (c)(z)
4.840% due 06/27/06 10,300 10,221
DNB NOR Bank ASA (c)(z)
4.840% due 06/12/06 2,700 2,685
Dominion Resources, Inc.
Series G
3.660% due 11/15/06 1,800 1,783
Fannie Mae (E)
4.810% due 09/22/06 1,600 1,599
Federal Farm Credit Bank
12.250% due 02/01/07 1,678 1,735
Federal Home Loan Bank Discount Notes (z)
4.885% due 07/26/06 13,600 13,432
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ford Motor Credit Co.
6.500% due 01/25/07 1,500 1,491
7.750% due 02/15/07 200 198
5.880% due 03/21/07 (E) 2,800 2,758
France Treasury Bills BTF
2.440% due 05/04/06 1,300 1,640
Frank Russell Investment Company Money Market
Fund 32,594,334 32,594
Freddie Mac Discount Notes (z)
4.625% due 08/01/06 10,300 10,170
General Electric Capital Corp. (z)
4.790% due 06/12/06 (c) 10,300 10,242
4.870% due 06/29/06 1,000 992
General Motors Acceptance Corp.
5.645% due 05/18/06 (E) 400 400
6.125% due 09/15/06 (N) 300 298
5.968% due 01/16/07 (E) 200 197
HBOS Treasury Services PLC (E)(p)
5.125% due 01/12/07 900 901
Historic TW, Inc.
8.110% due 08/15/06 2,000 2,014
HSBC Bank PLC
7.625% due 06/15/06 4,500 4,512
HSBC Finance Corp. (E)
4.850% due 02/28/07 3,200 3,201
ING US Funding, LLC (z)
4.930% due 06/21/06 (c) 10,300 10,228
4.960% due 06/26/06 400 397
John Hancock Global Funding II
6.000% due 12/28/06 2,450 2,457
Kroger Co. (The)
8.150% due 07/15/06 3,885 3,905
National Rural Utilities Cooperative Finance
Corp.
Series MTNC
6.500% due 03/01/07 2,200 2,220
New York Life Global Funding (E)(p)
4.860% due 02/26/07 2,500 2,501
Nisource Finance Corp.
3.200% due 11/01/06 2,795 2,765
NiSource, Inc.
3.628% due 11/01/06 1,300 1,288
Nordea North America, Inc. (c)(z)
4.605% due 05/09/06 11,100 11,089
PNC Student Loan Trust I
Series 1997-2 Class A7
6.728% due 01/25/07 205 205
</Table>
74 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Prudential Financial, Inc.
4.104% due 11/15/06 500 497
Rabobank USA Financial Corp. (c)(z)
4.820% due 05/01/06 4,000 4,000
Societe Generale NA (z)
4.985% due 08/22/06 4,100 4,035
4.990% due 08/22/06 6,900 6,790
Spintab Swedmortgage AB (z)
4.990% due 07/25/06 1,700 1,680
Sprint Capital Corp.
4.780% due 08/17/06 3,000 2,995
Susquehanna Auto Lease Trust (p)
Series 2003-1 Class A3
2.460% due 01/14/07 274 274
Swedbank (c)(z)
4.605% due 05/09/06 9,700 9,690
Swiss Bank Corp.
7.250% due 09/01/06 1,500 1,508
TIAA Global Markets (p)
5.000% due 03/01/07 3,625 3,610
UBS Financial Del, LLC (c)(z)
4.600% due 05/09/06 9,700 9,691
4.930% due 06/07/06 1,700 1,691
Union Bank Switzerland
7.250% due 07/15/06 1,000 1,004
United States Treasury Bills (z)
4.593% due 06/15/06 (c)(sec.) 50 50
4.615% due 06/15/06 (c)(sec.) 3,005 2,988
4.642% due 06/15/06 (c) 500 497
4.652% due 06/15/06 (c) 20 20
4.671% due 06/15/06 (c) 60 60
4.767% due 09/14/06 2,000 1,965
United States Treasury Notes (z)
3.000% due 12/31/06 5,000 4,934
Wells Fargo & Co.
Series MTNH
6.750% due 10/01/06 1,930 1,940
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $261,204) 260,683
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 0.5%
Frank Russell Investment Company
Money Market Fund (X) 1,319,406 1,319
State Street Securities Lending Quality Trust
(X) 3,716,934 3,717
------------
TOTAL OTHER SECURITIES
(cost $5,036) 5,036
------------
TOTAL INVESTMENTS - 100.6%
(identified cost $1,144,681) 1,129,203
OTHER ASSETS AND LIABILITIES,
NET - (0.6%) (6,463)
------------
NET ASSETS - 100.0% 1,122,740
============
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Eurodollar Futures (CME)
expiration date 12/06 (625) 148,055 (595)
expiration date 03/07 (788) 186,736 (856)
expiration date 06/07 (511) 121,120 (561)
expiration date 09/07 (364) 86,282 (385)
expiration date 12/07 (330) 78,214 (344)
United States Treasury 2 Year Notes
expiration date 06/06 (79) 16,095 (31)
Short Positions
Eurodollar Futures (CME)
expiration date 03/08 (47) 11,138 29
expiration date 06/08 (47) 11,134 31
expiration date 09/08 (47) 11,131 32
expiration date 12/08 (47) 11,125 34
United States Treasury 5 Year Notes
expiration date 06/06 (292) 30,414 253
United States Treasury 10 Year Notes
expiration date 06/06 (82) 8,657 170
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (2,223)
===============
</Table>
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Eurodollar Futures
Dec 2006 95.00 Put (12) 2,850 (10)
Dec 2006 95.25 Put (338) 80,486 (444)
Dec 2006 95.50 Put (40) 9,550 (75)
Mar 2007 94.75 Put (13) 3,079 (8)
Swaptions
(Fund Pays/Fund Receives)
GBP 4.500%/GBP Six Month LIBOR
Dec 2006 0.00 Put (1) 3,100 (15)
USD Three Month LIBOR/
USD 4.300%
Oct 2006 0.00 Call (1) 3,000 --
USD Three Month LIBOR/
USD 4.310%
Oct 2006 0.00 Call (2) 3,000 --
USD Three Month LIBOR/
USD 4.540%
Oct 2006 0.00 Call (2) 7,700 (1)
</Table>
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
USD Three Month LIBOR/
USD 4.560%
Oct 2006 0.00 Call (1) 6,000 (1)
USD Three Month LIBOR/
USD 4.780%
Aug 2006 0.00 Call (1) 2,000 --
USD Three Month LIBOR/
USD 4.850%
Dec 2006 0.00 Call (1) 5,000 (9)
USD Three Month LIBOR/
USD 5.040%
Mar 2007 0.00 Call (2) 7,000 (35)
---------------
Total Liability for Options Written
(premiums received $673) (598)
===============
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 1,292 USD 1,583 06/30/06 (54)
JPY 31,325 USD 267 05/15/06 (9)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts (63)
==============
</Table>
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- --------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ------------------ -------------------- ---------------- ----------------
Barclays Bank PLC GBP 2,800 5.000% Six Month LIBOR 06/15/07 8
Consumer Price Index
BNP Paribas EUR 1,200 2.090% (France) 10/15/10 --
Goldman Sachs USD 2,600 5.000% Three Month LIBOR 06/21/11 47
Lehman Brothers GBP 1,500 4.500% Six Month LIBOR 09/20/09 (31)
Merrill Lynch GBP 1,600 4.500% Six Month LIBOR 09/20/09 (34)
UBS USD 36,800 5.000% Three Month LIBOR 06/21/08 (216)
----------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - $45 (226)
================
</Table>
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund 77
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Asset-Backed Securities 18.5
Corporate Bonds and Notes 16.9
International Debt 3.2
Mortgage-Backed Securities 23.0
Non-US Bonds 0.1
United States Government Agencies 0.4
United States Government Treasuries 14.6
Preferred Stocks 0.2
Options Purchased --*
Short Term Investments 23.2
Other Securities 0.5
---------------
Total Investments 100.6
Other Assets and Liabilities, Net (0.6)
---------------
100.0
===============
Futures Contracts (0.2)
Options Written (0.1)
Foreign Currency Exchange Contracts (--)*
Interest Rate Swap Contracts (--)*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
78 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 999.00 $ 1,016.76
Expenses Paid During
Period* $ 8.03 $ 8.10
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.62%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,002.70 $ 1,020.48
Expenses Paid During
Period* $ 4.32 $ 4.36
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.87%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,004.40 $ 1,021.72
Expenses Paid During
Period* $ 3.08 $ 3.11
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.62%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
Diversified Bond Fund 79
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 94.8%
Asset-Backed Securities - 7.5%
AAA Trust
Series 2005-2 Class A1
5.059% due 11/26/35 343 343
ABSC NIMs Trust (p)
Series 2005-HE6 Class A1
5.050% due 08/27/35 313 310
Accredited Mortgage Loan Trust (E)
Series 2004-2 Class A2
5.259% due 07/25/34 212 212
ACE Securities Corp. (E)
Series 2005-SD3 Class A
5.359% due 08/25/45 1,219 1,220
American Express Credit Account Master Trust
(E)(p)
Series 2006-A Class A
4.891% due 08/15/11 2,420 2,419
Ameriquest Mortgage Securities, Inc.
Series 2002-D Class M1
7.459% due 02/25/33 205 206
Series 2004-R10 Class A5 (E)
5.349% due 11/25/34 285 285
Series 2004-R8 Class A5 (E)
5.329% due 09/25/34 964 966
Argent Securities, Inc.
Series 2004-W3 Class A2
5.179% due 02/25/34 8 8
Asset Backed Funding Corp.
NIMs Trust (p)
Series 2005-WF1 Class N1
4.750% due 03/26/35 286 284
Bayview Financial Acquisition Trust
Series 2004-C Class A1 (E)
5.420% due 05/28/44 1,074 1,077
Series 2006-A Class 1A3
5.865% due 02/28/41 450 440
Burlington Northern Santa Fe Corp. Pass-Through
Certificates
4.967% due 04/01/23 304 287
Carrington Mortgage Loan Trust
Series 2005-NC3 Class A1A
5.039% due 06/25/35 112 112
Chase Credit Card Master Trust (E)
Series 2004-2 Class A
4.941% due 09/15/09 2,190 2,191
Chase Funding Mortgage Loan Asset-Backed
Certificates (E)
Series 2002-2 Class 2A1
5.209% due 05/25/32 218 218
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Chase Issuance Trust
Series 2005-A1 Class A1 (E)
4.911% due 12/15/10 9,540 9,547
Series 2005-A3 Class A
4.921% due 10/17/11 4,035 4,037
Citigroup Mortgage Loan Trust, Inc. (E)
Series 2006-WFH Class A1B
4.928% due 01/25/36 2,490 2,491
Countrywide Asset-Backed Certificates
Series 2001-BC3 Class A (E)
5.439% due 12/25/31 106 106
Series 2003-BC2 Class 2A1 (E)
5.259% due 06/25/33 2 2
Series 2003-BC4 Class 2A2 (E)
5.279% due 09/25/33 41 41
Series 2004-13 Class AF2
3.683% due 08/25/24 1,085 1,080
Series 2004-14N Class N (p)
5.000% due 06/25/36 96 95
Series 2004-BC1 Class M1
5.459% due 02/25/34 235 236
Series 2004-S1 Class A1 (E)
5.179% due 12/25/18 660 660
Series 2005-11 Class AF1 (E)
5.139% due 02/25/36 1,971 1,971
Series 2005-17 Class 1AF1 (E)
5.159% due 12/25/36 2,061 2,061
Series 2005-17 Class 4AV1 (E)
5.069% due 12/25/36 2,240 2,240
Series 2005-2N Class N
4.500% due 08/25/36 214 210
Series 2005-5N Class N
5.000% due 07/25/36 219 206
Series 2005-SD2 Class A1A
5.119% due 08/25/35 785 785
Countrywide Home Equity Loan Trust (E)
Series 2005-A Class 2A
5.141% due 04/15/35 381 381
Series 2005-G Class 2A
5.131% due 12/15/35 1,799 1,799
Credit-Based Asset Servicing and Securitization
(E)
Series 2005-CB5 Class AV2
5.219% due 08/25/35 520 521
Series 2006-CB3 Class AV1
5.019% due 03/25/36 1,778 1,779
Discover Card Master Trust I (E)
Series 2005-1 Class A
4.911% due 09/16/10 3,870 3,871
</Table>
80 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Equifirst Mortgage Loan Trust
Series 2004-3 Class A2 (E)
5.289% due 12/25/34 3,523 3,528
Series 2005-1 Class A1
5.019% due 04/25/35 316 316
Equifirst Mortgage Loan Trust NIMs Notes
Series 2005-1 Class N1
4.458% due 04/25/35 674 671
Fannie Mae Grantor Trust
Series 2002-T13 Class A1 (E)
5.059% due 08/25/32 30 30
Series 2002-T5 Class A1 (E)
5.079% due 05/25/32 273 273
Series 2002-T7 Class A1 (E)
5.069% due 07/25/32 93 93
Series 2003-T3 Class 1A (E)
5.079% due 06/25/33 31 31
Series 2003-T4 Class 1A (E)
5.069% due 09/26/33 303 303
Series 2005-T3 Class A1A
4.999% due 07/25/35 2,263 2,263
Fannie Mae Whole Loan (E)
Series 2002-W2 Class AV1
5.219% due 06/25/32 179 179
Series 2003-W16 Class AV1
5.109% due 11/25/33 201 201
Series 2003-W5 Class A
5.069% due 04/25/33 425 426
Series 2003-W9 Class A
5.079% due 06/25/33 626 626
First Franklin Mortgage Loan
Asset Backed Certificates
Series 2004-FF1 Class A2 (E)
5.359% due 12/25/32 1,744 1,748
Series 2004-FFH Class 2A1
5.339% due 10/25/34 1,016 1,020
Series 2006-FF3 Class A2A (E)
5.039% due 02/25/36 1,786 1,786
Series 2006-FF5 Class 2A1 (E)
5.100% due 04/25/36 1,955 1,955
Ford Credit Floorplan Master Owner Trust
Series 2001-2 Class A (E)
5.041% due 07/15/08 1,400 1,400
Series 2004-1 Class A (E)
4.941% due 07/15/09 2,275 2,273
Fremont NIMs Trust
3.750% due 01/25/35 315 313
Series 2005-C Class NOTE (p)
5.584% due 07/25/35 136 136
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GE Dealer Floorplan Master Note Trust
Series 2004-2 Class A
5.003% due 07/20/09 1,240 1,241
Series 2005-1 Class A
4.963% due 04/20/10 1,800 1,800
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 725 714
Government National Mortgage Association
Series 1998-23 Class ZA
6.500% due 09/20/28 3,012 3,066
Greenpoint Mortgage Funding Trust (E)
Series 2005-HE4 Class 2A1C
5.069% due 07/25/30 885 885
GSAA Home Equity Trust
Series 2006-4 Class 1A2
5.989% due 03/25/36 728 725
GSAA Trust (E)
Series 2006-2 Class 2A3
5.229% due 12/25/35 785 787
GSAMP Trust
Series 2003-AHL Class A2A (E)
5.159% due 10/25/33 9 9
Series 2003-HE2 Class M1 (E)
5.609% due 08/25/33 420 422
Series 2004-NC1 Class A3
5.349% due 03/25/34 294 295
Harborview Mortgage Loan Trust
Series 2006-3 Class 1A1A
1.000% due 04/25/36 9,130 9,241
Home Equity Asset Trust (E)
Series 2003-5 Class M1
5.659% due 12/25/33 620 623
Series 2005-2 Class 2A2
5.159% due 07/25/35 420 420
HSI Asset Securitization Corp. Trust (E)
Series 2005-I1 Class 2A1
5.079% due 11/25/35 2,219 2,220
IndyMac Home Equity Loan
Asset-Backed Trust (E)
Series 2006-1 Class A1
5.089% due 05/25/36 1,930 1,931
IndyMac Residential
Asset Backed Trust
Series 2005-A Class AII1
5.069% due 03/25/35 69 69
</Table>
Diversified Bond Fund 81
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
JP Morgan Mortgage Acquisition Corp.
Series 2005-FLD Class A1
5.079% due 08/25/27 1,255 1,255
Lehman XS Trust
Series 2005-1 Class 2A1 (E)
4.660% due 07/25/35 1,520 1,497
Series 2005-1 Class 2A2
4.660% due 05/25/08 490 492
Long Beach Asset Holdings Corp. (p)
Series 2005-1 Class N1
4.115% due 02/25/35 146 145
Long Beach Mortgage Loan Trust (E)
Series 2005-WL1 Class 2A1
5.069% due 06/25/35 504 504
Mastr Asset Backed Securities Trust (E)
Series 2003-WMC Class M2
6.609% due 08/25/33 363 364
Series 2004-OPT Class A3
5.219% due 02/25/34 116 116
MBNA Credit Card Master Note Trust (E)
Series 2001-A3 Class A3
5.178% due 12/15/08 4,475 4,476
Series 2002-A4 Class A4
5.011% due 08/17/09 3,155 3,158
Merrill Auto Trust Securitization
Series 2005-1 Class A2B
4.969% due 04/25/08 1,188 1,188
Morgan Stanley ABS Capital I (E)
Series 2003-NC8 Class M3
7.059% due 09/25/33 490 496
MSDWCC Heloc Trust (E)
Series 2005-1 Class A
5.149% due 07/25/17 185 185
Navistar Financial Corp. Owner Trust (E)
Series 2003-B Class A3
5.101% due 04/15/08 419 420
New Century Home Equity Loan Trust (E)
Series 2004-4 Class M2
5.489% due 02/25/35 515 517
Nissan Master Owner Trust Receivables
Series 2005-A Class A
4.931% due 07/15/10 1,700 1,700
Novastar Home Equity Loan
Series 2005-1 Class A2A
5.079% due 06/25/35 484 484
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Option One Mortgage Loan Trust
Series 2001-4 Class A (E)
5.559% due 01/25/32 130 130
Series 2002-2 Class A (E)
5.499% due 06/25/32 137 137
Series 2003-1 Class A2 (E)
5.379% due 02/25/33 146 146
Series 2003-2 Class A2 (E)
5.259% due 04/25/33 59 59
Series 2003-2 Class M2
6.659% due 04/25/33 540 544
Series 2003-3 Class M3
6.959% due 06/25/33 345 347
Series 2003-4 Class M2
6.609% due 07/25/33 295 298
Option One Mortgage Securities Corp. NIMs Trust
(E)(p)
Series 2006-1A Class NOTE
5.059% due 12/25/10 3,118 3,118
Origen Manufactured Housing
Series 2005-B Class A4
5.910% due 01/15/37 400 387
Park Place Securities NIMs Trust
Series 2004-MCW Class A (p)
4.458% due 09/25/34 6 6
Series 2005-WCW Class A
5.500% due 07/25/35 358 356
Park Place Securities, Inc. (E)
Series 2004-WWF Class A1D
5.419% due 02/25/35 1,611 1,615
Series 2005-WCW Class M1
5.409% due 09/25/35 510 512
Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF2
3.914% due 05/25/35 200 197
Series 2005-6 Class A3
5.680% due 01/25/36 565 561
Ramp NIMs Trust
Series 2005-NM2 Class NOTE
5.193% due 04/25/35 205 204
Renaissance Home Equity Loan Trust
Series 2005-3 Class AF1 (E)
5.109% due 11/25/35 1,602 1,602
Series 2005-4 Class N (p)
7.142% due 02/25/36 587 587
Series 2006-1 Class AF6
5.746% due 05/25/36 425 421
Renaissance NIMs Trust (p)
Series 2004-D Class NOTE
4.459% due 02/25/35 102 101
</Table>
82 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc.
Series 2002-RS5 Class AII (E)
5.329% due 09/25/32 141 141
Series 2003-RS1 Class AI6A
5.980% due 12/25/33 480 482
Series 2003-RS1 Class AII (E)
5.349% due 02/25/33 176 177
Series 2003-RS2 Class AII (E)
5.299% due 03/25/33 169 169
Series 2003-RS3 Class AII (E)
5.319% due 04/25/33 123 123
Series 2004-RS8 Class AI2
3.810% due 01/25/26 82 82
Residential Asset Securities Corp.
Series 2001-KS1 Class AII (E)
5.194% due 03/25/32 104 104
Series 2001-KS3 Class AII
5.189% due 09/25/31 140 140
Series 2002-KS3 Class A1B (E)
5.209% due 05/25/32 163 163
Series 2003-KS1 Class M2
6.709% due 01/25/33 153 153
Series 2003-KS2 Class MI1
4.800% due 04/25/33 1,055 1,023
Series 2003-KS4 Class AIIB (E)
5.249% due 06/25/33 367 368
Series 2004-KS8 Class AI2
3.340% due 10/25/24 875 869
Residential Funding Mortgage Securities II
Series 2005-HI2 Class A1
5.099% due 05/25/35 1,567 1,568
Series 2005-HS1 Class AI1 (E)
5.079% due 09/25/35 1,751 1,747
Saxon Asset Securities Trust (E)
Series 2004-1 Class A
5.229% due 03/25/35 354 355
Securitized Asset Backed Receivables LLC Trust
(E)
Series 2004-OP1 Class A2
5.209% due 02/25/34 86 86
Series 2005-FR4 Class A3
5.159% due 01/25/36 785 786
SLM Student Loan Trust (E)
Series 2004-1 Class A1
5.140% due 01/26/15 2,401 2,403
Series 2006-1 Class A1
5.080% due 01/25/12 2,957 2,956
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Small Business Administration
Series 2000-P10 Class 1
7.449% due 08/01/10 51 54
Soundview NIMs Trust
4.703% due 06/25/35 354 353
Specialty Underwriting & Residential Finance (E)
Series 2003-BC1 Class A
5.299% due 01/25/34 11 11
Series 2004-BC2 Class A2
5.229% due 05/25/35 309 309
Series 2006-AB1 Class A2
4.958% due 12/25/36 1,225 1,225
Structured Asset Investment Loan Trust (E)
Series 2003-BC1 Class 3A5
5.439% due 10/25/33 97 97
Series 2004-7 Class A1
5.214% due 08/25/34 1,356 1,360
Series 2005-3 Class M2
5.399% due 04/25/35 290 291
Structured Asset Securities Corp.
Series 2002-AL1 Class A3
3.450% due 02/25/32 342 310
Series 2002-HF1 Class A (E)
5.249% due 01/25/33 13 13
Series 2003-BC1 Class A (E)
5.459% due 05/25/32 64 64
Series 2004-19X Class A2
4.370% due 10/25/34 900 892
Tenaska Alabama II Partners, LP (p)
6.125% due 03/30/23 255 250
Textron Financial Floorplan Master Note Trust
Series 2005-1A Class A
5.030% due 05/13/10 2,140 2,145
Volkswagen Credit Auto Master Trust (E)
Series 2005-1 Class A
4.943% due 07/20/10 1,870 1,870
Wachovia Asset Securitization, Inc. (E)
Series 2003-HE3 Class A
5.209% due 11/25/33 270 270
Wachovia Mortgage Loan Trust LLC (E)
Series 2005-WMC Class A1
5.069% due 10/25/35 1,289 1,289
------------
141,739
------------
</Table>
Diversified Bond Fund 83
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Corporate Bonds and Notes - 13.5%
Alabama Power Co. (N)
Series X
3.125% due 05/01/08 445 426
Allstate Life Global Funding Trusts
3.850% due 01/25/08 1,865 1,819
Altria Group, Inc.
7.000% due 11/04/13 1,220 1,294
Amerada Hess Corp.
7.300% due 08/15/31 955 1,038
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 85 84
American General Finance Corp.
Series MTNI
5.090% due 06/27/08 1,600 1,602
4.875% due 07/15/12 1,905 1,812
American International Group, Inc. (p)
4.700% due 10/01/10 635 614
5.050% due 10/01/15 645 607
American RE Corp.
Series B
7.450% due 12/15/26 595 633
Ameriprise Financial, Inc.
5.650% due 11/15/15 1,135 1,104
Anheuser-Busch Cos., Inc.
4.950% due 01/15/14 545 519
ASIF Global Financing
4.900% due 01/17/13 120 115
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 1,420 1,453
Bank of America Corp.
5.875% due 02/15/09 120 122
7.800% due 02/15/10 120 129
4.500% due 08/01/10 530 511
4.375% due 12/01/10 (N) 2,035 1,944
Bear Stearns Cos., Inc. (The) (N)
3.250% due 03/25/09 1,405 1,327
5.300% due 10/30/15 1,165 1,113
BellSouth Corp.
4.750% due 11/15/12 30 28
6.550% due 06/15/34 130 128
Boeing Capital Corp. (N)
6.100% due 03/01/11 165 169
Boston Scientific Corp. (N)
6.250% due 11/15/15 465 459
Burlington Northern Santa Fe Corp.
6.875% due 12/01/27 55 59
Campbell Soup Co.
5.875% due 10/01/08 160 161
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Carolina Power & Light Co.
6.500% due 07/15/12 15 15
5.150% due 04/01/15 1,115 1,056
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 210 207
CenterPoint Energy Resources Corp.
Series B
7.875% due 04/01/13 675 745
Cingular Wireless Services, Inc.
7.875% due 03/01/11 1,480 1,620
8.750% due 03/01/31 2,515 3,161
Cisco Systems, Inc. (N)
5.500% due 02/22/16 4,120 4,016
CIT Group, Inc.
5.750% due 09/25/07 155 156
6.875% due 11/01/09 (N) 100 104
4.125% due 11/03/09 50 48
5.400% due 03/07/13 1,915 1,865
Citicorp
7.250% due 10/15/11 370 397
Citigroup Global Markets Holdings, Inc.
Series MTNM
4.890% due 03/07/08 1,300 1,300
Citigroup, Inc.
3.500% due 02/01/08 1,900 1,845
4.125% due 02/22/10 210 201
6.500% due 01/18/11 485 504
5.125% due 02/14/11 (N) 970 955
5.000% due 09/15/14 7,350 6,961
Clear Channel Communications, Inc.
4.250% due 05/15/09 150 144
6.250% due 03/15/11 875 873
5.750% due 01/15/13 125 119
5.500% due 09/15/14 590 544
Clorox Co.
4.200% due 01/15/10 250 238
5.000% due 01/15/15 155 145
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 100 98
Comcast Cable Communications
6.875% due 06/15/09 665 689
Comcast Cable Communications Holdings, Inc.
8.375% due 03/15/13 3,350 3,750
</Table>
84 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Comcast Corp.
6.500% due 01/15/15 1,785 1,818
5.900% due 03/15/16 120 118
6.500% due 11/15/35 (N) 1,330 1,274
6.450% due 03/15/37 170 162
ConocoPhillips Holding Co.
6.950% due 04/15/29 1,570 1,731
Consolidated Edison Co. of New York (N)
5.375% due 12/15/15 960 932
Consolidated Natural Gas Co.
6.850% due 04/15/11 510 534
Constellation Energy Group, Inc.
6.125% due 09/01/09 785 798
COX Communications, Inc.
3.875% due 10/01/08 300 288
6.750% due 03/15/11 (N) 5,400 5,568
Credit Suisse First Boston USA, Inc.
3.875% due 01/15/09 820 790
4.875% due 08/15/10 155 151
6.500% due 01/15/12 55 57
5.500% due 08/15/13 115 113
5.125% due 08/15/15 (N) 2,765 2,611
Credit Suisse USA, Inc.
5.250% due 03/02/11 405 399
DaimlerChrysler NA Holding Corp.
4.750% due 01/15/08 300 296
4.050% due 06/04/08 285 277
5.875% due 03/15/11 300 299
8.500% due 01/18/31 (N) 1,335 1,548
Detroit Edison Co.
6.125% due 10/01/10 325 331
6.350% due 10/15/32 95 94
Devon Energy Corp.
7.950% due 04/15/32 1,040 1,240
Dominion Resources, Inc.
4.750% due 12/15/10 110 105
5.700% due 09/17/12 695 684
Series B
6.250% due 06/30/12 80 81
Series C
5.150% due 07/15/15 1,245 1,158
DR Horton, Inc.
6.500% due 04/15/16 900 886
Dresdner Funding Trust I (p)
8.151% due 06/30/31 565 645
DTE Energy Co.
7.050% due 06/01/11 1,835 1,932
Duke Energy Corp.
6.250% due 01/15/12 170 174
5.625% due 11/30/12 870 865
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Duke Energy Field Services LLC
6.875% due 02/01/11 40 42
Eastman Kodak Co. (N)
7.250% due 11/15/13 40 39
Electronic Data Systems Corp.
7.125% due 10/15/09 600 628
Eli Lilly & Co.
6.770% due 01/01/36 565 609
Enterprise Products Operating, LP
Series B
6.650% due 10/15/34 770 748
Erac USA Finance Co. (p)
5.900% due 11/15/15 1,570 1,534
Exelon Corp.
4.900% due 06/15/15 1,395 1,283
5.625% due 06/15/35 720 639
FedEx Corp.
7.600% due 07/01/97 180 198
Financing Corp.
Principal Only STRIP
Series 10P
Zero coupon due 11/30/17 1,165 619
Series 15P
Zero coupon due 03/07/19 165 81
Series 2P
Zero coupon due 11/30/17 140 74
Series 6P
Zero coupon due 08/03/18 715 364
FirstEnergy Corp.
Series B
6.450% due 11/15/11 3,750 3,867
Series C
7.375% due 11/15/31 2,480 2,695
Ford Motor Co. (N)
7.450% due 07/16/31 360 263
Ford Motor Credit Co.
4.950% due 01/15/08 410 381
7.375% due 10/28/09 3,210 2,966
General Electric Capital Corp.
3.250% due 06/15/09 (N) 1,400 1,318
4.875% due 10/21/10 1,810 1,768
5.500% due 04/28/11 320 320
4.250% due 06/15/12 1,125 1,049
4.875% due 03/04/15 950 896
Series MTNA
4.250% due 01/15/08 (N) 280 275
4.125% due 09/01/09 (N) 400 386
6.000% due 06/15/12 915 936
5.450% due 01/15/13 2,005 1,989
General Electric Co. (N)
5.000% due 02/01/13 375 363
</Table>
Diversified Bond Fund 85
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
General Motors Acceptance Corp.
6.125% due 08/28/07 970 943
5.625% due 05/15/09 1,765 1,653
7.750% due 01/19/10 300 295
General Motors Corp. (N)
8.375% due 07/15/33 120 89
Glencore Funding LLC (p)
6.000% due 04/15/14 680 641
Golden West Financial Corp.
4.125% due 08/15/07 220 217
Goldman Sachs Group, Inc.
5.000% due 01/15/11 200 195
6.875% due 01/15/11 870 915
4.750% due 07/15/13 (N) 1,380 1,296
5.350% due 01/15/16 (N) 1,640 1,568
Goldman Sachs Group, LP
4.500% due 06/15/10 1,360 1,309
Harrah's Operating Co., Inc.
5.625% due 06/01/15 2,545 2,416
Historic TW, Inc.
9.125% due 01/15/13 615 708
8.050% due 01/15/16 485 536
6.950% due 01/15/28 (N) 570 569
6.625% due 05/15/29 300 291
HJ Heinz Co.
6.428% due 12/01/08 (p) 100 102
6.375% due 07/15/28 50 46
HJ Heinz Finance Co.
6.000% due 03/15/12 40 40
6.750% due 03/15/32 115 111
Home Depot, Inc.
5.400% due 03/01/16 3,295 3,209
Household Finance Corp.
5.000% due 06/30/15 300 280
HSBC Finance Corp.
4.750% due 05/15/09 (N) 6,155 6,034
4.125% due 11/16/09 3,510 3,361
6.750% due 05/15/11 1,675 1,755
7.000% due 05/15/12 2,435 2,591
6.375% due 11/27/12 610 630
International Business Machines Corp.
7.125% due 12/01/96 620 672
International Lease Finance Corp.
6.375% due 03/15/09 (N) 1,905 1,949
3.500% due 04/01/09 745 706
4.750% due 07/01/09 (N) 1,820 1,777
Series MTNQ (N)
4.625% due 06/02/08 1,210 1,191
International Paper Co.
6.750% due 09/01/11 250 261
5.500% due 01/15/14 390 374
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ITT Industries, Inc.
7.400% due 11/15/25 240 265
John Deere Capital Corp.
4.875% due 03/16/09 1,895 1,869
Johnson Controls, Inc.
5.250% due 01/15/11 185 181
5.500% due 01/15/16 (N) 1,690 1,618
JP Morgan Chase Capital XV
5.875% due 03/15/35 2,845 2,582
JPMorgan Chase & Co.
5.125% due 09/15/14 735 699
5.150% due 10/01/15 1,005 951
Kaupthing Bank Hf (p)
5.790% due 04/12/11 1,020 1,020
Kellogg Co.
Series B
6.600% due 04/01/11 1,200 1,251
Kraft Foods, Inc.
4.000% due 10/01/08 (N) 1,575 1,523
5.625% due 11/01/11 1,755 1,749
Kroger Co. (The)
6.750% due 04/15/12 75 78
7.500% due 04/01/31 70 75
Lehman Brothers Holdings, Inc.
4.000% due 01/22/08 490 479
5.000% due 01/14/11 660 645
5.500% due 04/04/16 265 256
Lennar Corp. (N)
Series B
5.600% due 05/31/15 1,545 1,453
Manufacturers & Traders Trust Co.
5.585% due 12/28/20 163 157
Marshall & Ilsley Corp.
5.350% due 04/01/11 1,795 1,777
May Department Stores Co. (The)
4.800% due 07/15/09 140 137
5.750% due 07/15/14 240 236
Merrill Lynch & Co., Inc.
Series MTNB
3.125% due 07/15/08 1,490 1,424
Series MTNC
4.250% due 02/08/10 1,590 1,523
Metlife, Inc.
5.700% due 06/15/35 1,685 1,531
Midamerican Energy Holdings Co. (N)(p)
6.125% due 04/01/36 5,465 5,213
Miller Brewing Co. (p)
5.500% due 08/15/13 385 376
Monumental Global Funding II
4.625% due 03/15/10 190 184
</Table>
86 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Morgan Stanley
3.625% due 04/01/08 795 770
3.875% due 01/15/09 1,050 1,010
6.750% due 04/15/11 605 634
4.750% due 04/01/14 280 259
Series MTNF (E)
5.193% due 01/18/08 1,400 1,402
Natexis Ambs Co. LLC (f)(p)
8.440% due 12/29/49 270 285
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 2,555 2,578
News America Holdings, Inc.
7.750% due 12/01/45 130 139
7.900% due 12/01/95 230 240
8.250% due 10/17/96 75 80
News America, Inc.
6.400% due 12/15/35 (p) 1,625 1,536
6.750% due 01/09/38 45 46
Series WI
6.200% due 12/15/34 1,560 1,442
Nisource Finance Corp.
7.875% due 11/15/10 410 443
Nissan Motor Acceptance Corp. (p)
5.625% due 03/14/11 2,470 2,448
Norfolk Southern Corp.
6.200% due 04/15/09 845 862
7.050% due 05/01/37 310 339
7.900% due 05/15/97 190 222
6.000% due 03/15/05 565 501
Northern States Power Co.
Series B
8.000% due 08/28/12 860 965
Occidental Petroleum Corp.
9.250% due 08/01/19 185 238
Ohio Power Co.
Series F
5.500% due 02/15/13 35 34
Pacific Gas & Electric Co.
3.600% due 03/01/09 195 186
4.200% due 03/01/11 (N) 1,005 947
6.050% due 03/01/34 650 622
Pemex Project Funding Master Trust
7.375% due 12/15/14 1,600 1,696
5.750% due 12/15/15 (p) 300 284
6.625% due 06/15/35 (p) 390 369
Progress Energy, Inc.
5.850% due 10/30/08 (N) 850 857
7.100% due 03/01/11 485 512
7.750% due 03/01/31 170 193
7.000% due 10/30/31 90 94
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Prologis (p)
5.625% due 11/15/15 2,010 1,941
Rabobank Capital Funding II
5.260% due 12/31/49 30 28
Rabobank Capital Funding Trust III
5.254% due 12/29/49 60 56
Raytheon Co.
6.750% due 08/15/07 439 445
RBS Capital Trust III (f)
5.512% due 09/29/49 765 728
Regions Financial Corp.
4.500% due 08/08/08 1,625 1,595
Residential Capital Corp.
6.000% due 02/22/11 765 749
Safeway, Inc. (N)
7.250% due 02/01/31 60 62
SBC Communications, Inc.
4.125% due 09/15/09 (N) 2,325 2,224
5.300% due 11/15/10 (N) 3,670 3,625
5.100% due 09/15/14 465 438
6.450% due 06/15/34 10 10
6.150% due 09/15/34 300 283
Simon Property Group, LP
4.600% due 06/15/10 1,895 1,826
4.875% due 08/15/10 (N) 1,450 1,409
5.750% due 12/01/15 (p) 3,685 3,610
SLM Corp.
Series MTNA
4.000% due 01/15/09 2,995 2,879
Southern California Edison Co. (E)
4.768% due 02/02/09 600 600
Sovereign Bank
5.125% due 03/15/13 445 424
Sprint Capital Corp.
7.625% due 01/30/11 3,545 3,826
8.375% due 03/15/12 120 135
6.875% due 11/15/28 425 438
8.750% due 03/15/32 1,535 1,905
State Street Bank & Trust Co.
Series BKNT
5.300% due 01/15/16 250 240
Suntrust Bank
5.000% due 09/01/15 2,595 2,441
Tele-Communications-TCI Group
9.800% due 02/01/12 330 387
7.875% due 08/01/13 1,305 1,428
Time Warner Entertainment Co., LP
Series *
8.375% due 07/15/33 190 217
</Table>
Diversified Bond Fund 87
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Time Warner, Inc.
6.875% due 05/01/12 610 636
7.700% due 05/01/32 535 585
TXU Corp.
Series R
6.550% due 11/15/34 610 548
TXU Electric Delivery Co.
6.375% due 05/01/12 25 25
6.375% due 01/15/15 180 183
TXU Energy Co. LLC
7.000% due 03/15/13 545 564
Tyson Foods, Inc.
8.250% due 10/01/11 320 340
6.600% due 04/01/16 155 152
Unilever Capital Corp.
5.900% due 11/15/32 325 310
Union Pacific Corp.
3.625% due 06/01/10 625 580
United Technologies Corp.
5.400% due 05/01/35 80 73
UnitedHealth Group, Inc.
5.375% due 03/15/16 420 403
US Bancorp
5.300% due 04/28/09 1,980 1,976
US Bank NA
5.700% due 12/15/08 70 71
USB Capital IX (f)
6.189% due 03/29/49 100 99
Verizon Communications, Inc.
5.350% due 02/15/11 1,120 1,103
5.550% due 02/15/16 700 668
Verizon Global Funding Corp.
7.250% due 12/01/10 950 1,007
7.375% due 09/01/12 130 140
5.850% due 09/15/35 2,560 2,280
Verizon Maryland, Inc. (N)
Series A
6.125% due 03/01/12 1,335 1,331
Verizon Virginia, Inc.
Series A
4.625% due 03/15/13 1,165 1,051
Viacom, Inc. (p)
5.750% due 04/30/11 190 189
Wachovia Bank NA (N)
Series BKNT
5.800% due 12/01/08 340 344
Wachovia Capital Trust III (f)
5.800% due 08/29/49 615 603
Wachovia Corp.
5.250% due 08/01/14 2,680 2,567
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Waste Management, Inc.
6.375% due 11/15/12 445 458
WellPoint, Inc.
5.850% due 01/15/36 160 147
Wells Fargo & Co.
4.200% due 01/15/10 455 436
4.625% due 08/09/10 660 639
4.950% due 10/16/13 240 228
Weyerhaeuser Co. (N)
6.750% due 03/15/12 2,325 2,406
Wyeth
6.950% due 03/15/11 1,595 1,682
5.500% due 03/15/13 130 128
5.500% due 02/01/14 85 83
XTO Energy, Inc.
6.250% due 04/15/13 450 460
Zurich Capital Trust I (p)
8.376% due 06/01/37 1,250 1,334
------------
255,308
------------
International Debt - 2.8%
Abbey National PLC (f)
(Step Up, 7.570%, 06/15/08)
6.700% due 06/29/49 550 561
Aiful Corp. (p)
5.000% due 08/10/10 300 289
Anadarko Finance Co.
Series B
7.500% due 05/01/31 400 452
Apache Finance Canada Corp.
4.375% due 05/15/15 615 557
AXA SA
8.600% due 12/15/30 1,655 2,044
Banque Paribas
6.875% due 03/01/09 440 455
British Telecommunications PLC
8.875% due 12/15/30 195 246
ChevronTexaco Capital Co.
3.500% due 09/17/07 590 577
China Development Bank
5.000% due 10/15/15 100 93
Conoco Funding Co.
6.350% due 10/15/11 1,205 1,250
Crest, Ltd. (p)
Series 2003-2A Class C2
5.709% due 12/28/38 2,130 2,053
Deutsche Telekom International Finance BV
8.000% due 06/15/10 (E)(N) 710 772
5.750% due 03/23/16 300 290
8.250% due 06/15/30 (E) 200 237
</Table>
88 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Diageo Capital PLC
3.500% due 11/19/07 885 860
Egypt Government AID Bonds
4.450% due 09/15/15 915 855
EnCana Corp.
6.500% due 08/15/34 145 147
Equifirst Mortgage Loan Trust
NIMs Notes
Series 2004-2 Class N1
3.967% due 10/25/34 58 58
Export-Import Bank of China
4.875% due 07/21/15 640 596
Export-Import Bank of Korea
4.125% due 02/10/09 (p) 290 280
5.125% due 02/14/11 (N) 235 230
First Franklin NIMs Trust
Series 2005-FF1 Class N1
4.213% due 01/25/35 415 413
HBOS PLC (f)(p)
5.920% due 09/29/49 100 95
HSBC Holdings PLC
6.500% due 05/02/36 400 403
Ispat Inland ULC
9.750% due 04/01/14 615 692
Kinder Morgan Finance Co. ULC
5.350% due 01/05/11 (N) 1,405 1,380
5.700% due 01/05/16 1,200 1,156
Klio Funding, Ltd. (E)(p)
Series 2004-1A Class A1
5.260% due 04/23/39 2,180 2,200
Korea Development Bank
4.250% due 11/13/07 820 806
Korea Electric Power Corp. (p)
5.125% due 04/23/34 145 139
Mexico Government International Bond
5.625% due 01/15/17 (N) 134 128
8.300% due 08/15/31 495 588
7.500% due 04/08/33 2,180 2,381
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 445 440
MUFG Capital Finance 1, Ltd. (f)
6.346% due 04/25/49 270 265
Newcastle CDO, Ltd. (p)
Series 2004-4A Class 3FX
5.110% due 03/24/39 1,090 1,006
Petroleum Export, Ltd.
5.265% due 06/15/11 98 96
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Province of Quebec Canada
5.000% due 07/17/09 40 40
6.125% due 01/22/11 1,430 1,472
Ras Laffan Liquefied Natural Gas Co., Ltd. II
(p)
5.298% due 09/30/20 165 155
Ras Laffan LNG III (p)
5.838% due 09/30/27 300 277
Resona Bank, Ltd. (f)(p)
5.850% due 09/29/49 575 549
Resona Preferred Global Securities Cayman, Ltd.
7.191% due 12/29/49 375 386
Royal Bank of Scotland PLC (E)(p)
5.125% due 07/21/08 800 800
Royal KPN NV
8.000% due 10/01/10 1,415 1,517
Russia Government International Bond
5.000% due 03/31/30 2,170 2,352
Santander Financial Issuances
6.375% due 02/15/11 120 123
Sanwa Finance Aruba AEC
8.350% due 07/15/09 510 551
Shinsei Finance Cayman, Ltd. (f)(p)
6.418% due 01/29/49 660 641
Sumitomo Mitsui Banking Corp. (E)(f)(p)
5.625% due 07/29/49 200 191
Systems 2001 AT LLC (p)
7.156% due 12/15/11 201 207
Teck Cominco, Ltd. (N)
6.125% due 10/01/35 1,070 986
Telecom Italia Capital SA
4.000% due 01/15/10 1,245 1,172
5.250% due 10/01/15 7,775 7,186
Telefonica Europe BV
7.750% due 09/15/10 2,740 2,942
Telefonos de Mexico SA de CV (N)
4.500% due 11/19/08 495 481
TELUS Corp.
7.500% due 06/01/07 1,130 1,154
8.000% due 06/01/11 995 1,092
Tyco International Group SA
6.750% due 02/15/11 765 796
6.375% due 10/15/11 445 458
6.000% due 11/15/13 905 902
7.000% due 06/15/28 40 42
6.875% due 01/15/29 120 123
UFJ Finance Aruba AEC
6.750% due 07/15/13 60 63
</Table>
Diversified Bond Fund 89
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Vale Overseas, Ltd.
6.250% due 01/11/16 360 354
Vodafone Group PLC
7.750% due 02/15/10 525 561
Wells Fargo Home Equity Trust (p)
Series 2004-2N Class N1
4.450% due 10/26/34 5 5
Woori Bank (p)
6.125% due 05/03/16 260 260
------------
52,928
------------
Mortgage-Backed Securities - 49.9%
Adjustable Rate Mortgage Trust
Series 2004-5 Class 4A1
5.353% due 04/25/35 1,942 1,909
Series 2005-3 Class 8A2 (E)
5.199% due 07/25/35 1,051 1,052
Series 2005-8 Class 4A11 (E)
5.443% due 11/25/35 3,532 3,472
American Home Mortgage Investment Trust (E)
Series 2004-4 Class 4A
4.390% due 02/25/45 609 591
Series 2005-2 Class 5A2
5.109% due 09/25/35 1,381 1,381
Series 2005-3 Class 3A2
5.139% due 09/25/35 1,515 1,516
Series 2005-4 Class 1A1
5.249% due 11/25/45 2,237 2,242
Arcap Reit, Inc. (p)
Series 2004-RR3 Class B
5.040% due 09/21/45 460 434
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 1,050 1,030
Series 2004-4 Class A3
4.128% due 07/10/42 685 660
Series 2005-3 Class A4
4.668% due 07/10/43 1,700 1,577
Series 2005-5 Class A4
5.115% due 10/10/45 2,225 2,127
Series 2005-6 Class A1
5.001% due 09/10/47 2,603 2,579
Series 2005-6 Class A2
5.165% due 09/10/47 1,760 1,739
Series 2005-6 Class A4
5.354% due 09/10/47 1,545 1,492
Series 2006-1 Class A4
5.372% due 09/10/45 420 409
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Banc of America Funding Corp.
Series 2005-5 Class 1A11
5.500% due 09/25/35 1,332 1,282
Series 2005-D Class A1
4.115% due 05/25/35 609 590
Series 2006-3 Class 5A8
5.500% due 03/25/36 1,130 1,089
Series 2006-A Class 3A2
5.944% due 02/20/36 6,396 6,427
Series 2006-A Class 4A1 (E)
5.576% due 02/20/36 1,621 1,608
Series 2006-B Class 7A1 (E)
5.906% due 03/20/36 1,853 1,854
Banc of America Large Loan (E)(p)
Series 2004-BBA Class A1
5.021% due 06/15/18 3,156 3,155
Banc of America Mortgage Securities
Series 2004-1 Class 5A1
6.500% due 09/25/33 44 43
Series 2004-11 Class 2A1
5.750% due 01/25/35 1,130 1,104
Series 2005-L Class 3A1 (E)
5.457% due 01/25/36 627 620
Bank of America Alternative Loan Trust (E)
Series 2003-10 Class 2A2
5.409% due 12/25/33 690 695
Series 2003-2 Class CB2
5.459% due 04/25/33 329 330
Bear Stearns Adjustable Rate Mortgage Trust
Series 2002-11 Class 1A1
5.619% due 02/25/33 42 42
Series 2002-11 Class 1A2
5.345% due 02/25/33 68 67
Series 2003-1 Class 6A1
5.067% due 04/25/33 157 156
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.415% due 05/25/35 1,039 1,040
Bear Stearns Commercial Mortgage Securities
Series 2005-PWR Class A1
4.386% due 02/11/41 644 635
Chase Mortgage Finance Corp. (E)
Series 2005-A1 Class 2A2
5.252% due 12/25/35 2,800 2,773
</Table>
90 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Citigroup Mortgage Loan Trust, Inc.
Series 2005-11 Class A2A (E)
4.700% due 12/25/35 289 284
Series 2006-WF1 Class A2F
5.657% due 03/25/36 780 762
Commercial Mortgage Acceptance Corp.
Series 1998-C2 Class A3
6.040% due 09/15/30 4,770 4,827
Countrywide Alternative Loan Trust
Series 2004-2CB Class 1A4 (E)
5.359% due 03/25/34 1,349 1,353
Series 2005-56 Class 3A1 (E)
5.249% due 11/25/35 1,554 1,560
Series 2005-56 Class 4A1 (E)
5.269% due 11/25/35 2,356 2,363
Series 2005-59 Class 1A1 (E)
5.253% due 10/25/35 2,646 2,662
Series 2005-J12 Class 2A1 (E)
5.229% due 08/25/35 2,201 2,206
Series 2005-J13 Class 2A3
5.500% due 11/25/35 416 404
Countrywide Asset-Backed Certificates
Series 2005-IM1 Class A1
5.089% due 07/25/35 1,030 1,031
Series 2005-IM2 Class A3 (E)
4.851% due 01/25/36 3,475 3,481
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2004-16 Class 1A1 (E)
5.359% due 09/25/34 1,303 1,309
Series 2005-3 Class 1A2
5.249% due 04/25/35 208 209
Series 2005-R3 Class AF (p)(E)
5.359% due 09/25/35 2,084 2,092
Series 2006-HYB Class 2A1A
5.804% due 05/20/36 1,300 1,300
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2003-C5 Class A1
3.093% due 12/15/36 2,009 1,941
Series 2004-C1 Class A3
4.321% due 01/15/37 845 803
Series 2005-C4 Class A3
5.120% due 08/15/38 6,620 6,453
Series 2005-C6 Class A1
4.938% due 12/15/40 1,804 1,786
Series 2005-C6 Class A4
5.230% due 12/15/40 1,825 1,757
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Credit Suisse Mortgage Capital Certificates
Series 2006-C1 Class A1
4.367% due 02/15/39 595 581
Series 2006-C1 Class AAB
5.681% due 02/15/39 2,490 2,474
Series 2006-TFL Class A1 (p)(E)
5.021% due 03/15/08 2,695 2,695
Credit Suisse/Morgan Stanley Commercial Mortgage
Certificates (p)
Series 2006-HC1 Class A1
5.022% due 05/15/08 1,970 1,970
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2005-AR1 Class 2A3
5.031% due 08/25/35 1,145 1,129
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 754 764
Downey Savings & Loan Association Mortgage Loan
Trust
Series 2004-AR3 Class 1A1B
6.092% due 07/19/44 447 452
Fannie Mae
15 Year TBA (I)
4.000% 6,735 6,270
4.500% 6,820 6,492
5.000% 8,910 8,671
5.500% 2,805 2,783
30 Year TBA (I)
4.500% 2,555 2,339
5.000% 45,675 43,176
5.500% 85,650 83,155
6.000% 38,615 38,430
6.500% 14,225 14,465
7.000% due 2008 15 15
7.000% due 2009 28 28
8.000% due 2010 2 2
7.000% due 2011 13 13
8.000% due 2011 2 2
7.000% due 2012 4 4
6.500% due 2013 32 33
5.500% due 2014 35 34
6.500% due 2015 23 24
7.000% due 2015 14 14
5.500% due 2016 7 7
6.000% due 2016 759 769
6.500% due 2016 130 133
9.000% due 2016 3 3
5.000% due 2017 1,859 1,814
</Table>
Diversified Bond Fund 91
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.500% due 2017 1,098 1,089
6.000% due 2017 2,137 2,164
6.500% due 2017 520 532
8.000% due 2017 49 51
8.500% due 2017 6 6
4.500% due 2018 12,659 12,080
5.000% due 2018 2,168 2,116
5.500% due 2018 813 808
6.000% due 2018 249 252
6.500% due 2018 366 376
4.500% due 2019 4,677 4,459
5.000% due 2019 6,645 6,478
6.500% due 2019 165 168
4.500% due 2020 1,681 1,603
5.000% due 2020 4,778 4,655
6.500% due 2020 62 64
8.000% due 2020 6 7
6.500% due 2022 94 96
8.000% due 2024 107 114
7.000% due 2025 8 8
8.500% due 2025 4 5
7.000% due 2026 5 5
6.500% due 2028 457 464
7.000% due 2028 416 429
6.500% due 2029 1,523 1,553
6.500% due 2030 198 203
8.000% due 2030 204 217
6.500% due 2031 890 909
6.000% due 2032 1,561 1,558
6.500% due 2032 1,424 1,452
7.000% due 2032 1,015 1,044
3.908% due 2033 (E) 1,024 999
4.500% due 2033 1,679 1,542
4.666% due 2033 (E) 601 595
5.000% due 2033 11,690 11,099
5.500% due 2033 36,037 35,095
6.000% due 2033 2,452 2,446
6.500% due 2033 1,994 2,033
7.000% due 2033 409 419
4.500% due 2034 895 822
5.000% due 2034 17,404 16,513
5.500% due 2034 38,402 37,378
6.000% due 2034 12,611 12,569
6.500% due 2034 1,044 1,064
4.500% due 2035 6,253 5,730
5.000% due 2035 14,217 13,455
5.500% due 2035 88,432 85,968
5.777% due 2035 (E) 396 405
5.779% due 2035 (E) 486 497
5.782% due 2035 (E) 988 1,012
5.787% due 2035 (E) 391 400
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.000% due 2035 8,011 7,980
6.500% due 2035 158 161
6.000% due 2036 278 277
Series 1992-10 Class ZD
8.000% due 11/25/21 644 656
Series 1993-134 Class H
6.500% due 08/25/08 1,006 1,013
Series 1993-208 Class SA (E)
0.450% due 02/25/23 94 --
Series 2003-32 Class FH (E)
5.359% due 11/25/22 1,040 1,047
Series 2003-78 Class FI (E)
5.359% due 01/25/33 980 986
Series 2004-21 Class FL (E)
5.309% due 11/25/32 538 540
Series 2005-120 Class UF (E)
5.309% due 03/25/35 1,205 1,207
Series 2005-65 Class FP (E)
5.209% due 08/25/35 842 842
Series 2006-5 Class 3A2 (E)
4.685% due 05/25/35 200 195
Fannie Mae Grantor Trust
Series 2001-T6 Class B
6.088% due 05/25/11 1,150 1,183
Series 2005-T2 Class 1A1
4.667% due 11/28/35 93 93
Fannie Mae Whole Loan
Series 2003-W1 Class 1A1
6.500% due 12/25/42 92 93
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2004-H01 Class A1
2.614% due 07/15/11 244 242
First Horizon Asset Securities, Inc. (E)
Series 2005-AR5 Class 3A1
5.523% due 10/25/35 344 340
Freddie Mac
15 Year TBA (I)
5.000% 5,100 4,957
30 Year TBA (I)
5.000% 17,505 16,548
5.500% 24,590 23,883
6.000% 13,490 13,444
8.000% due 2008 1 1
8.500% due 2008 1 1
12.000% due 2014 13 14
9.000% due 2016 48 52
5.801% due 2030 (E) 6 7
4.630% due 2034 (E) 720 718
</Table>
92 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 1991-105 Class G
7.000% due 03/15/21 51 51
Series 2003-262 Class AB
2.900% due 11/15/14 1,076 1,033
Series 2003-263 Class YH
3.500% due 08/15/22 759 754
Series 2003-269 Class FE (E)
5.501% due 12/15/28 987 997
Series 2004-277 Class UF (E)
5.201% due 06/15/33 1,363 1,367
Series 2004-281 Class DF (E)
5.351% due 06/15/23 380 383
Series 2005-292 Class IG
5.000% due 04/15/23 509 93
Series 2005-294 Class FA (E)
5.071% due 03/15/20 745 745
Series 2005-305 Class JF (E)
5.201% due 10/15/35 849 849
Series 2006-R00 Class AK
5.750% due 12/15/18 960 956
Freddie Mac Gold
7.000% due 2008 20 21
8.000% due 2009 8 8
7.000% due 2010 9 10
8.000% due 2010 1 1
6.000% due 2011 335 339
7.000% due 2011 4 4
8.000% due 2011 19 19
6.000% due 2012 7 7
8.000% due 2012 10 10
7.000% due 2014 66 68
6.000% due 2016 11 11
6.000% due 2017 380 384
8.000% due 2017 22 23
4.500% due 2018 1,968 1,877
5.000% due 2018 536 522
4.500% due 2019 717 684
5.500% due 2019 1,062 1,053
4.500% due 2020 828 788
5.000% due 2020 741 721
5.500% due 2020 3,297 3,269
9.000% due 2024 5 6
6.500% due 2025 7 7
8.500% due 2025 30 32
9.000% due 2025 9 9
9.000% due 2026 1 2
8.500% due 2027 116 124
6.500% due 2029 201 204
6.500% due 2031 1,895 1,933
5.500% due 2032 5,269 5,135
6.000% due 2032 169 169
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.000% due 2032 453 463
5.000% due 2033 655 621
5.500% due 2033 8,605 8,380
6.000% due 2033 349 349
6.500% due 2033 675 688
4.500% due 2034 207 190
5.000% due 2034 3,543 3,362
5.500% due 2034 5,497 5,352
6.000% due 2034 1,299 1,297
6.500% due 2034 256 261
5.000% due 2035 9,366 8,857
5.500% due 2035 1,130 1,099
5.000% due 2036 11,127 10,522
GE Capital Commercial Mortgage Corp.
Series 2005-C1 Class A1
4.012% due 06/10/48 793 775
Series 2005-C1 Class A5
4.772% due 06/10/48 500 468
Series 2006-C1 Class A4
5.519% due 03/10/44 1,250 1,220
Ginnie Mae I
30 Year TBA (I)
5.000% 3,965 3,799
5.500% 6,290 6,174
6.000% 2,200 2,208
6.500% due 2008 9 9
6.500% due 2009 150 153
7.000% due 2011 1 1
9.500% due 2016 1 1
8.000% due 2017 -- 1
10.500% due 2020 13 13
8.000% due 2022 29 31
8.500% due 2022 10 10
8.000% due 2025 51 56
9.000% due 2025 261 281
7.000% due 2029 6 7
8.000% due 2030 597 638
8.500% due 2030 6 6
7.000% due 2031 467 485
8.000% due 2031 2 2
7.000% due 2032 23 23
8.000% due 2032 17 18
5.000% due 2033 4,355 4,177
5.000% due 2035 2,211 2,120
6.000% due 2035 6,602 6,631
5.000% due 2036 25 24
Ginnie Mae II
4.375% due 2023 (E) 262 264
5.125% due 2023 (E) 328 329
4.375% due 2024 (E) 221 221
4.500% due 2035 1,049 964
</Table>
Diversified Bond Fund 93
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GMAC Commercial Mortgage Securities, Inc.
Series 2005-C1 Class A2
4.471% due 05/10/43 605 585
GMAC Mortgage Corp. Loan Trust
Series 2005-AR5 Class 5A1 (E)
5.340% due 09/19/35 2,099 2,074
Series 2005-AR6 Class 3A1
5.299% due 11/19/35 1,089 1,074
Series 2006-AR1 Class 1A1 (E)
5.661% due 04/19/36 2,814 2,758
Government National Mortgage Association
Series 2002-61 Class BA
4.648% due 03/16/26 600 589
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 785 766
Series 2005-GG3 Class A1
3.919% due 08/10/42 1,013 990
Series 2005-GG5 Class A41
5.243% due 04/10/37 525 514
GS Mortgage Securities Corp. II
Series 1998-C1 Class A2
6.620% due 10/18/30 1,434 1,464
Series 2005-GG4 Class AABA
4.680% due 07/10/39 800 761
Series 2006-GG6 Class A4
5.553% due 04/10/38 420 414
GSAMP Mortgage Loan Trust
Series 2004-4 Class 1AF
5.359% due 06/25/34 1,829 1,838
Harborview Mortgage Loan Trust
Series 2004-4 Class 3A (E)
2.975% due 06/19/34 3,114 3,050
Series 2005-14 Class 3A1A
5.225% due 12/19/35 331 327
Series 2006-2 Class 1A
5.451% due 04/25/36 897 895
Impac CMB Trust
Series 2004-3 Class 1A
5.209% due 06/25/34 261 262
Impac Secured Assets CMN Owner Trust
Series 2004-3 Class 1A1
5.159% due 11/25/34 34 34
Series 2005-2 Class A1 (E)
5.279% due 05/25/36 2,399 2,404
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
IndyMac Index Mortgage Loan Trust
Series 2005-AR1 Class A1
5.552% due 10/25/35 3,426 3,404
Series 2005-AR1 Class A2
5.099% due 09/25/35 539 518
Series 2005-AR2 Class 4A1
5.467% due 11/25/35 2,026 2,000
Series 2006-AR3 Class 2A1A
6.447% due 03/25/36 12,575 12,681
IndyMac Loan Trust
Series 2004-L1 Class A1 (p)(E)
5.239% due 07/25/09 471 473
Series 2005-L1 Class A
5.159% due 06/25/10 1,664 1,667
Series 2005-L2 Class A1 (E)
5.179% due 01/25/11 3,893 3,902
JP Morgan Alternative Loan Trust
Series 2006-A2 Class 3A1
5.952% due 05/25/36 4,375 4,391
Series 2006-A2 Class 5A1
6.360% due 05/25/36 2,465 2,485
Series 2006-S1 Class 1A19
6.500% due 03/25/36 1,879 1,882
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2003-CB7 Class A3
4.449% due 01/12/38 1,250 1,198
Series 2004-LN2 Class A1
4.475% due 07/15/41 870 837
Series 2005-CB1 Class A1
4.520% due 08/12/37 1,480 1,456
Series 2005-CB1 Class A2
5.247% due 01/12/43 3,515 3,481
Series 2005-CB1 Class A4
4.895% due 09/12/37 80 75
Series 2005-FL1 Class A1
5.011% due 02/15/19 2,191 2,191
Series 2005-LDP Class A1
5.035% due 12/15/44 4,568 4,531
4.116% due 03/15/46 728 713
Series 2005-LDP Class A3
4.959% due 08/15/42 915 882
5.375% due 12/15/44 3,925 3,843
Series 2005-LDP Class A4
4.918% due 10/15/42 900 848
5.346% due 12/15/44 1,855 1,793
Series 2006-CB1 Class A3A (p)
5.491% due 12/12/44 1,875 1,861
Series 2006-CB1 Class A4
5.481% due 12/12/44 630 618
</Table>
94 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-CB1 Class ASB
5.506% due 12/12/44 500 496
Series 2006-FL1 Class A1A (p)(E)
4.991% due 02/15/20 3,605 3,605
Series 2006-LDP Class A4
5.475% due 04/15/43 2,515 2,460
JP Morgan Mortgage Trust
Series 2005-A1 Class 1A1
5.240% due 02/25/35 1,533 1,490
Series 2005-A2 Class 3A1
4.912% due 04/25/35 1,688 1,669
Series 2005-A3 Class 2A1
5.174% due 06/25/35 1,846 1,775
Series 2005-A3 Class 6A1
4.912% due 06/25/35 2,608 2,566
Series 2005-A4 Class 1A1
5.410% due 07/25/35 1,039 1,018
Series 2005-A6 Class 2A2
4.980% due 08/25/35 1,715 1,695
Series 2005-ALT Class 3A1
5.500% due 10/25/35 41 40
Series 2006-A2 Class 1A1
5.477% due 04/25/36 2,671 2,652
LB-UBS Commercial Mortgage Trust
Series 2001-C3 Class A1
6.058% due 06/15/20 360 364
Series 2003-C3 Class A1
2.599% due 05/15/27 759 729
Series 2004-C2 Class A1
2.946% due 03/15/29 1,867 1,773
Series 2004-C4 Class A3
5.155% due 06/15/29 1,455 1,436
Series 2005-C3 Class A5
4.739% due 07/15/30 480 448
Series 2005-C3 Class AAB
4.664% due 07/15/30 600 569
Lehman Mortgage Trust
Series 2005-3 Class 1A3
5.500% due 01/25/36 1,605 1,591
Lehman XS Trust (E)
Series 2005-5N Class A1
5.259% due 11/25/35 1,985 1,969
Mach One Trust Commercial Mortgage-Backed (p)
Series 2004-1A Class A3
5.220% due 05/28/40 1,480 1,431
Mastr Adjustable Rate Mortgages Trust
Series 2006-2 Class 3A1
4.852% due 01/25/36 1,300 1,274
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mastr Alternative Loans Trust
Series 2003-4 Class B1
5.655% due 06/25/33 491 483
Mastr Asset Securitization Trust
Series 2003-11 Class 6A8 (E)
5.459% due 12/25/33 1,099 1,103
Series 2005-2 Class 1A1
5.250% due 11/25/35 1,892 1,844
Mastr Reperforming Loan Trust
Series 2005-1 Class 1A1
6.000% due 08/25/34 917 911
Merrill Lynch Mortgage Investors, Inc.
Series 2005-A7 Class 2A1
5.400% due 09/25/35 1,965 1,927
Merrill Lynch Mortgage Trust
Series 2004-MKB Class A2
4.353% due 02/12/42 925 898
Series 2005-LC1 Class A1
5.017% due 01/12/44 1,729 1,714
Series 2005-LC1 Class A2
5.202% due 01/12/44 2,580 2,551
Series 2005-MKB Class A1
4.446% due 09/12/42 1,318 1,293
Series 2005-MKB Class A4
5.204% due 09/12/42 725 699
MLCC Mortgage Investors, Inc. (E)
Series 2004-HB1 Class A2
5.110% due 04/25/29 312 313
Morgan Stanley Capital I
Series 2004-HQ3 Class A1
3.100% due 01/13/41 1,340 1,290
Series 2004-RR2 Class A2 (p)
5.450% due 10/28/33 1,575 1,541
Series 2005-HQ5 Class A4
5.168% due 01/14/42 1,150 1,107
Series 2005-HQ6 Class A4A
4.989% due 08/13/42 720 683
Series 2005-IQ1 Class AAB
5.178% due 09/15/42 985 962
Series 2005-IQ9 Class A1
3.990% due 07/15/56 805 786
Series 2005-T17 Class A5
4.780% due 12/13/41 285 267
Series 2006-HQ8 Class A4
5.561% due 03/12/44 1,120 1,100
Morgan Stanley Dean Witter Capital I
Series 2001-TOP Class A3
6.200% due 07/15/33 708 718
Morgan Stanley Mortgage Loan Trust
Series 2006-3AR Class 2A3
5.917% due 03/25/36 871 873
</Table>
Diversified Bond Fund 95
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mortgage Capital Funding, Inc.
Series 1998-MC2 Class A2
6.423% due 06/18/30 1,374 1,396
Nationslink Funding Corp.
Series 1999-SL Class A4
6.654% due 11/10/30 94 94
Nomura Asset Acceptance Corp. (E)
Series 2005-AP1 Class 2A1
5.109% due 02/25/35 127 127
Nomura Asset Securities Corp.
Series 1998-D6 Class A1B
6.590% due 03/15/30 980 1,001
Novastar NIMs Trust
Series 2005-N1 Class NOTE
4.777% due 10/26/35 199 199
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
5.359% due 02/25/34 118 119
Series 2004-CL1 Class 2A2
5.359% due 02/25/19 29 29
Residential Accredit Loans, Inc.
Series 2004-QS5 Class A6 (E)
5.559% due 04/25/34 211 211
Series 2004-QS8 Class A4 (E)
5.359% due 06/25/34 1,024 1,028
Series 2005-QA1 Class A41
5.733% due 09/25/35 1,255 1,249
Series 2005-QA8 Class NB3
5.517% due 07/25/35 713 711
Series 2005-QO3 Class A1 (E)
5.359% due 10/25/45 2,275 2,281
Series 2006-QA1 Class A21
6.009% due 01/25/36 4,027 4,041
Residential Asset Securitization Trust (E)
Series 2003-A15 Class 1A2
5.409% due 02/25/34 1,174 1,177
Residential Funding Mortgage Securities I (E)
Series 2003-S14 Class A5
5.359% due 07/25/18 607 609
Series 2003-S5 Class 1A2
5.409% due 11/25/18 586 589
Sequoia Mortgage Trust (E)
Series 2004-3 Class A
5.306% due 05/20/34 1,991 1,991
Small Business Administration
Series 1999-P10 Class 1
7.540% due 08/10/09 470 491
Series 2000-10B Class 1
7.452% due 09/01/10 1,605 1,678
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Small Business Administration Participation
Certificates
Series 2005-20G Class 1
4.750% due 07/01/25 2,946 2,773
Structured Adjustable Rate Mortgage Loan Trust
(E)
Series 2005-19X Class 1A1
5.279% due 10/25/35 1,958 1,968
Structured Asset Securities Corp.
Series 2004-21X Class 1A3
4.440% due 12/25/34 1,515 1,488
Thornburg Mortgage Securities Trust (E)
Series 2005-3 Class 3A1
5.219% due 10/25/35 2,266 2,269
Series 2006-2 Class A1B
5.009% due 04/25/36 2,030 2,030
Wachovia Bank Commercial Mortgage Trust
Series 2003-C9 Class A1
3.291% due 12/15/35 1,672 1,613
Series 2005-C16 Class A2
4.380% due 10/15/41 1,510 1,459
Series 2005-C17 Class A1
4.430% due 03/15/42 3,401 3,344
Series 2005-C22 Class A3
5.461% due 12/15/44 2,685 2,638
Washington Mutual, Inc.
Series 2003-S9 Class A2 (E)
5.509% due 10/25/33 1,035 1,041
Series 2004-AR1 Class A1B1
5.165% due 11/25/34 514 515
Series 2005-AR1 Class 1A1
4.843% due 10/25/35 851 839
Series 2005-AR1 Class 3A1 (E)
5.501% due 08/25/35 1,760 1,760
Series 2005-AR1 Class A1A1 (E)
5.249% due 10/25/45 2,579 2,594
Series 2005-AR1 Class A1A2 (E)
5.239% due 11/25/45 2,305 2,312
5.249% due 12/25/45 2,996 3,005
Series 2005-AR1 Class A1C1 (E)
5.149% due 12/25/45 1,117 1,117
Series 2005-AR6 Class B3
5.619% due 04/25/45 590 588
Wells Fargo Mortgage Backed Securities Trust
Series 2005-AR1 Class 7A1 (E)
5.261% due 10/25/35 1,576 1,530
</Table>
96 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-2 Class 2A3
5.500% due 03/25/36 1,312 1,291
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 1,080 1,060
------------
942,645
------------
Municipal Bonds - 0.3%
Badger TOB Asset Securitization Corp. Revenue
Bonds, weekly demand
6.375% due 06/01/32 700 749
Golden State Tobacco Securitization Corp.
Revenue Bonds, weekly demand
5.000% due 06/01/21 605 609
New York City Municipal Water Finance Authority
Revenue Bonds, weekly demand
4.750% due 06/15/38 2,200 2,164
State of Texas General Obligation Unlimited,
weekly demand
4.750% due 04/01/35 400 399
Tobacco Settlement Financing Corp. Revenue
Bonds, weekly demand
5.500% due 06/01/26 1,500 1,535
------------
5,456
------------
Non-US Bonds - 0.1%
General Motors Corp.
8.375% due 07/05/33 EUR 90 83
Poland Government Bond
6.000% due 05/24/09 PLN 2,840 961
Quebec Residual
Zero coupon due 12/01/36 CAD 1,200 220
Queensland Treasury Corp.
6.000% due 06/14/11 AUD 1,370 1,050
------------
2,314
------------
United States Government Agencies - 4.8%
Fannie Mae
3.375% due 05/15/07 4,375 4,296
6.625% due 10/15/07 (N) 2,430 2,479
2.500% due 06/15/08 (N) 6,075 5,757
4.875% due 04/15/09 (N) 12,395 12,302
3.875% due 02/15/10 1,630 1,556
4.750% due 04/19/10 3,845 3,762
4.125% due 05/15/10 625 600
4.250% due 08/15/10 (N) 5,400 5,195
4.375% due 03/15/13 (N) 1,125 1,064
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Zero coupon due 07/05/14 2,570 1,662
5.250% due 03/24/15 730 710
5.000% due 03/15/16 640 620
5.000% due 04/26/17 1,755 1,648
6.625% due 11/15/30 500 571
6.210% due 08/06/38 240 261
Federal Home Loan Bank System
4.625% due 02/08/08 (N) 305 302
4.625% due 11/21/08 (N) 5,710 5,636
5.000% due 12/21/15 1,490 1,445
5.125% due 08/15/19 420 402
Financing Corp.
Principal Only STRIP
Zero coupon due 05/11/16 185 107
Zero coupon due 06/06/16 545 313
Zero coupon due 12/27/16 645 359
Zero coupon due 10/06/17 1,055 566
Zero coupon due 11/30/17 1,565 832
Zero coupon due 02/08/18 155 81
Zero coupon due 04/06/18 785 408
Zero coupon due 05/11/18 90 47
Zero coupon due 08/03/18 1,455 742
Zero coupon due 11/02/18 1,105 555
Zero coupon due 12/06/18 765 382
Zero coupon due 12/27/18 1,620 806
Zero coupon due 04/05/19 875 428
Zero coupon due 09/26/19 1,340 638
Freddie Mac
5.125% due 04/18/08 (N) 1,920 1,920
4.875% due 02/17/09 (N) 2,980 2,959
6.625% due 09/15/09 (N) 4,595 4,798
4.000% due 12/15/09 (N) 4,515 4,339
4.750% due 01/18/11 1,280 1,252
4.500% due 11/15/11 1,095 1,053
5.750% due 01/15/12 (N) 3,195 3,264
5.125% due 07/15/12 (N) 3,810 3,772
4.500% due 01/15/13 (N) 2,880 2,749
4.875% due 11/15/13 (N) 850 827
5.050% due 01/26/15 1,485 1,447
5.250% due 04/18/16 (N) 3,025 2,988
6.750% due 09/15/29 845 972
5.625% due 11/23/35 720 674
Tennessee Valley Authority
6.150% due 01/15/38 2,145 2,314
------------
91,860
------------
United States Government Treasuries - 15.9%
United States Treasury Inflation Indexed Bonds
0.875% due 04/15/10 2,360 2,244
3.375% due 01/15/12 2,579 2,737
</Table>
Diversified Bond Fund 97
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
2.000% due 07/15/14 8,074 7,869
1.625% due 01/15/15 156 147
1.875% due 07/15/15 3,698 3,550
2.375% due 01/15/25 6,377 6,300
2.000% due 01/15/26 1,321 1,229
3.625% due 04/15/28 614 739
3.875% due 04/15/29 338 425
United States Treasury Notes
3.125% due 05/15/07 1,805 1,772
4.375% due 05/15/07 4,185 4,162
6.625% due 05/15/07 1,920 1,953
4.375% due 12/31/07 2,510 2,489
3.000% due 02/15/08 130 126
3.375% due 02/15/08 2,685 2,616
3.750% due 05/15/08 3,190 3,121
3.125% due 09/15/08 9,225 8,866
4.375% due 11/15/08 17,080 16,874
3.250% due 01/15/09 9,615 9,222
3.625% due 07/15/09 230 221
3.625% due 01/15/10 12,410 11,877
4.000% due 03/15/10 18,665 18,077
4.000% due 04/15/10 230 223
3.625% due 06/15/10 1,755 1,672
4.125% due 08/15/10 1,560 1,513
3.875% due 09/15/10 2,430 2,331
4.250% due 10/15/10 430 419
4.500% due 11/15/10 3,610 3,550
4.375% due 12/15/10 28,150 27,520
5.000% due 02/15/11 870 874
4.500% due 02/28/11 1,300 1,276
5.000% due 08/15/11 2,985 2,997
4.375% due 08/15/12 8,290 8,026
4.000% due 11/15/12 6,015 5,688
3.875% due 02/15/13 760 712
4.250% due 08/15/13 5,150 4,913
12.000% due 08/15/13 420 484
4.250% due 11/15/13 4,855 4,621
4.750% due 05/15/14 7,050 6,919
13.250% due 05/15/14 680 839
12.500% due 08/15/14 1,235 1,518
4.250% due 11/15/14 4,570 4,320
4.125% due 05/15/15 5,855 5,464
4.250% due 08/15/15 4,960 4,664
4.500% due 11/15/15 640 612
4.500% due 02/15/16 240 230
9.250% due 02/15/16 2,365 3,114
7.500% due 11/15/16 1,605 1,910
8.750% due 05/15/17 1,765 2,292
8.875% due 08/15/17 990 1,300
8.125% due 08/15/19 7,055 8,974
8.125% due 08/15/21 11,670 15,105
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.125% due 02/15/23 13,810 16,570
6.875% due 08/15/25 2,285 2,712
6.000% due 02/15/26 10,950 11,861
5.250% due 02/15/29 1,000 992
6.125% due 08/15/29 22,810 25,299
6.250% due 05/15/30 1,490 1,684
5.375% due 02/15/31 5,265 5,344
4.500% due 02/15/36 3,365 3,024
United States Treasury Principal
Principal Only STRIP
Zero coupon due 11/15/21 3,640 1,590
------------
299,772
------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,825,046) 1,792,022
------------
PREFERRED STOCKS - 0.1%
Auto & Transportation - 0.0%
General Motors Corp. 23,425 387
------------
Financial Services - 0.1%
DG Funding Trust (f)(p) 103 1,093
------------
TOTAL PREFERRED STOCKS
(cost $1,512) 1,480
------------
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Eurodollar Futures
Sept 2006 94.75 Call (13) 3,079 4
Sept 2006 95.00 Call (20) 4,750 1
Sept 2006 92.75 Put (430) 99,706 3
Sept 2006 94.00 Put (100) 23,500 1
Dec 2006 91.75 Put (92) 21,103 1
Dec 2006 92.00 Put (183) 42,090 1
Dec 2006 92.25 Put (192) 44,280 1
Dec 2006 92.50 Put (222) 51,338 1
------------
TOTAL OPTIONS PURCHASED
(cost $37) 13
------------
</Table>
98 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 20.7%
American General Finance Corp.
Series MTNG
4.980% due 03/23/07 100 100
ASIF Global Financing
4.950% due 05/30/06 2,000 2,000
BNP Paribas Financial, Inc. (z)
4.660% due 05/22/06 (c) 2,900 2,892
5.000% due 08/28/06 7,900 7,768
Canada Government (z)
4.780% due 09/20/06 340 333
CIT Group, Inc.
4.949% due 02/15/07 2,000 2,003
Countrywide Home Loans, Inc.
Series MTNJ
5.500% due 08/01/06 1,600 1,601
Series MTNK
5.500% due 02/01/07 110 110
DaimlerChrysler NA Holding Corp. (E)
5.380% due 05/24/06 400 400
Danske Corp. (z)
4.700% due 06/01/06 (c) 1,800 1,793
4.710% due 06/02/06 (c) 1,600 1,593
4.740% due 06/08/06 (c) 600 597
4.980% due 07/26/06 6,800 6,713
Dexia Del LLC (z)
4.840% due 06/27/06 (c) 3,500 3,473
4.980% due 07/25/06 7,300 7,213
DNB NOR Bank ASA (z)
4.650% due 06/08/06 (c) 9,900 9,851
4.990% due 08/18/06 1,000 985
Duke Capital LLC
4.302% due 05/18/06 170 170
Duke Energy Field Services LLC
5.750% due 11/15/06 60 60
Fannie Mae
4.810% due 09/22/06 1,200 1,200
3.550% due 01/12/07 (N) 5,625 5,561
7.000% due 04/01/07 3 3
Fannie Mae Discount Notes (c)(z)
4.669% due 05/01/06 200 200
Zero coupon due 05/15/06 (sec.) 495 494
Ford Motor Credit Co.
5.700% due 11/16/06 (E) 900 896
5.880% due 03/21/07 1,800 1,773
France Treasury Bill BTF
Zero coupon due 08/03/06 EUR 1,130 1,416
France Treasury Bills BTF (z)
2.440% due 05/04/06 EUR 2,400 3,027
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Frank Russell Investment Company Money Market
Fund 163,090,032 163,090
General Electric Capital Corp.
4.600% due 05/09/06 (c)(z) 8,600 8,591
4.960% due 03/09/07 2,200 2,202
General Motors Acceptance Corp.
5.645% due 05/18/06 600 600
6.125% due 02/01/07 250 246
6.150% due 04/05/07 170 167
German Treasury Bill
Zero coupon due 07/12/06 EUR 600 753
Zero coupon due 09/13/06 EUR 1,700 2,123
Goldman Sachs Group, Inc.
Series MTNB
4.866% due 08/01/06 (E) 3,000 3,001
5.060% due 03/30/07 2,000 2,002
HBOS Treasury Service PLC (z)
4.660% due 05/17/06 (c) 3,100 3,094
4.985% due 07/26/06 7,600 7,509
HSBC Finance Corp.
4.870% due 02/09/07 2,000 2,003
Ixis Capital Corp. (c)(z)
4.600% due 05/04/06 9,900 9,896
Merrill Lynch & Co., Inc.
5.280% due 10/27/06 2,000 2,002
Series MTNC
4.400% due 03/12/07 340 338
Metropolitan Life Global Funding I
4.987% due 03/16/07 2,000 2,001
Morgan Stanley
5.185% due 01/12/07 2,000 2,002
Nordea North America, Inc. (c)(z)
4.605% due 05/09/06 700 699
Rabobank USA Financial Corp. (c)(z)
4.820% due 05/01/06 9,900 9,900
Skandinaviska Enskilda Banken
4.780% due 06/09/06 (c)(z) 9,900 9,849
4.830% due 06/22/06 (c)(z) 1,100 1,092
Societe Generale NA (c)(z)
4.670% due 05/22/06 2,900 2,892
4.760% due 06/12/06 7,900 7,856
Spintab Swedmortgage AB (c)(z)
4.700% due 05/26/06 700 698
Sprint Capital Corp.
6.000% due 01/15/07 1,225 1,230
Svenska Handelsbanken (z)
4.890% due 07/06/06 1,400 1,387
Swedbank (c)(z)
4.605% due 05/09/06 9,900 9,890
Total Fina Elf (c)(z)
4.830% due 05/01/06 9,900 9,900
</Table>
Diversified Bond Fund 99
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
UBS Financial Del, LLC
4.640% due 06/06/06 (c)(z) 8,700 8,660
4.990% due 08/22/06 2,200 2,165
United States Treasury Bills (z)(sec.)
4.549% due 06/01/06 (c) 30 30
4.559% due 06/01/06 (c) 100 100
4.569% due 06/01/06 (c) 60 60
4.573% due 06/01/06 (c) 20 20
4.583% due 06/01/06 (c) 100 100
4.588% due 06/01/06 (c) 30 30
4.625% due 06/01/06 (c) 1,610 1,604
4.594% due 06/15/06 (c) 500 497
4.597% due 06/15/06 (c) 20 20
4.607% due 06/15/06 (c) 30 30
4.609% due 06/15/06 (c) 295 293
4.614% due 06/15/06 (c) 40 40
4.633% due 06/15/06 (c) 70 70
4.641% due 06/15/06 (c) 40 40
4.646% due 06/15/06 (c) 60 60
4.652% due 06/15/06 (c) 50 50
4.656% due 06/15/06 (c) 20 20
4.659% due 06/15/06 (c) 120 119
4.661% due 06/15/06 (c) 30 30
4.674% due 06/15/06 (c) 120 119
4.745% due 08/31/06 50 49
4.759% due 08/31/06 100 98
United States Treasury Notes
2.500% due 10/31/06 9,780 9,663
2.875% due 11/30/06 16,210 16,018
3.000% due 12/31/06 5,760 5,686
3.750% due 03/31/07 600 594
3.625% due 04/30/07 2,220 2,198
Westpac Banking Corp. (c)(z)
4.700% due 05/23/06 1,000 997
Westpactrust Securities, Ltd. (c)(z)
4.660% due 05/22/06 10,000 9,973
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $390,772) 390,671
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 22.2%
Frank Russell Investment Company
Money Market Fund (X) 109,818,587 109,819
State Street Securities Lending Quality Trust
(X) 309,372,839 309,373
------------
TOTAL OTHER SECURITIES
(cost $419,192) 419,192
------------
TOTAL INVESTMENTS - 137.8%
(identified cost $2,636,559) 2,603,378
OTHER ASSETS AND LIABILITIES,
NET - (37.8%) (714,336)
------------
NET ASSETS - 100.0% 1,889,042
============
</Table>
See accompanying notes which are an integral part of the financial statements.
100 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Eurodollar Futures (CME)
expiration date 09/06 (114) 27,007 (35)
expiration date 12/06 (524) 124,129 (445)
expiration date 03/07 (504) 119,435 (482)
expiration date 06/07 (321) 76,085 (279)
expiration date 09/07 (360) 85,334 (245)
expiration date 12/07 (214) 50,721 (163)
expiration date 03/08 (33) 7,820 (4)
United States Treasury Bonds expiration date
06/06 (125) 13,355 (460)
United States Treasury 2 Year Notes
expiration date 06/06 (195) 39,728 (66)
United States Treasury 5 Year Notes
expiration date 06/06 (731) 76,138 (480)
United States Treasury 10 Year Notes
expiration date 06/06 (451) 47,616 (302)
Short Positions
United States Treasury Bonds
expiration date 06/06 (141) 15,065 515
United States Treasury 10 Year Notes
expiration date 06/06 (131) 13,827 124
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (2,322)
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Eurodollar Futures
Sep 2006 95.25 Call (20) 4,763 --
Sep 2006 95.50 Call (13) 3,104 --
Sep 2006 95.00 Put (25) 5,937 (18)
Sep 2006 95.25 Put (53) 12,621 (66)
Sep 2006 95.50 Put (13) 3,104 (24)
Dec 2006 95.00 Put (38) 9,025 (31)
Dec 2006 95.25 Put (346) 82,391 (454)
Dec 2006 95.50 Put (26) 6,208 (49)
Mar 2007 94.75 Put (12) 2,843 (7)
Mar 2007 95.25 Put (14) 3,334 (19)
United States Treasury Notes
10 Year Futures
May 2006 106.00 Call (34) 3,604 (10)
May 2006 108.00 Call (24) 2,592 --
May 2006 109.00 Call (55) 5,995 (1)
Aug 2006 107.00 Call (14) 1,498 (6)
May 2006 105.00 Put (124) 13,020 (31)
May 2006 108.00 Put (27) 2,916 (66)
---------------
Total Liability for Options Written
(premiums received $507) (782)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 101
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 1,043 AUD 1,401 05/10/06 22
USD 363 CNY 2,809 03/19/07 --
USD 547 EUR 440 05/03/06 8
USD 1,546 EUR 1,256 05/10/06 40
USD 4,852 EUR 3,999 05/10/06 197
USD 6,136 EUR 5,071 05/10/06 267
USD 4,609 EUR 3,731 05/25/06 107
USD 1,386 EUR 1,120 06/23/06 32
USD 4,447 EUR 3,720 06/23/06 263
USD 214 GBP 120 05/03/06 5
USD 1,611 GBP 918 05/03/06 63
USD 1,871 GBP 1,038 06/15/06 23
USD 178 JPY 20,400 05/01/06 1
USD 65 JPY 7,572 05/15/06 2
USD 90 JPY 10,559 05/15/06 3
USD 90 JPY 10,599 05/15/06 3
USD 153 JPY 17,945 05/15/06 5
USD 159 JPY 18,558 05/15/06 5
USD 488 JPY 56,975 05/15/06 14
USD 515 JPY 60,255 05/15/06 15
USD 1,381 JPY 161,041 05/15/06 37
USD 1,413 JPY 162,000 05/15/06 13
USD 3,274 JPY 384,022 05/15/06 107
USD 665 JPY 77,783 05/23/06 21
USD 1,293 JPY 143,730 09/20/06 (5)
USD 1,392 JPY 160,120 09/20/06 43
USD 1,403 JPY 158,650 09/20/06 18
USD 2,716 JPY 302,930 09/20/06 (1)
USD 973 PLN 3,025 05/10/06 13
AUD 1,401 USD 1,024 05/10/06 (40)
AUD 1,401 USD 1,041 08/08/06 (22)
EUR 5,071 USD 6,248 05/10/06 (155)
EUR 5,255 USD 6,355 05/10/06 (281)
EUR 410 USD 495 06/23/06 (24)
EUR 550 USD 675 06/23/06 (22)
EUR 550 USD 668 06/23/06 (29)
EUR 1,120 USD 1,396 06/23/06 (22)
EUR 6,481 USD 7,939 06/30/06 (270)
GBP 1,038 USD 1,870 05/03/06 (23)
JPY 20,400 USD 179 05/01/06 --
JPY 20,400 USD 179 05/23/06 (1)
JPY 160,120 USD 1,427 09/20/06 (8)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
JPY 302,380 USD 2,648 09/20/06 (61)
PLN 3,025 USD 965 05/10/06 (21)
PLN 3,025 USD 975 08/08/06 (13)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 329
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
102 Diversified Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- --------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ------------------ -------------------- ---------------- ----------------
Bank of America USD 1,100 5.000% Three Month LIBOR 06/21/36 (113)
Barclays Bank PLC GBP 7,700 5.000% Six Month LIBOR 06/15/07 23
Barclays Bank PLC USD 8,300 5.000% Three Month LIBOR 06/21/08 (49)
Consumer Price Index
BNP Paribas EUR 1,300 2.090% (France) 10/15/10 --
Deutsche Bank AG USD 1,000 5.000% Three Month LIBOR 06/21/36 (103)
Goldman Sachs USD 700 5.000% Three Month LIBOR 06/21/16 (31)
Lehman Brothers GBP 4,200 4.500% Six Month LIBOR 09/20/09 (88)
Lehman Brothers USD 5,400 5.000% Three Month LIBOR 06/21/11 (96)
Lehman Brothers USD 500 5.000% Three Month LIBOR 12/15/35 (31)
Merrill Lynch GBP 10,500 4.500% Six Month LIBOR 09/20/09 (220)
Merrill Lynch GBP 200 4.000% Six Month LIBOR 12/15/35 6
----------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($0) (702)
================
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Asset-Backed Securities 7.5
Corporate Bonds and Notes 13.5
International Debt 2.8
Mortgage-Backed Securities 49.9
Municipal Bonds 0.3
Non-US Bonds 0.1
United States Government Agencies 4.8
United States Government Treasuries 15.9
Preferred Stocks 0.1
Options Purchased --*
Short-Term Investments 20.7
Other Securities 22.2
---------------
Total Investments 137.8
Other Assets and Liabilities, Net (37.8)
---------------
100.0
===============
Futures Contracts (0.1)
Options Written (--)*
Foreign Currency Exchange Contracts --*
Interest Rate Swap Contracts (--)*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 103
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,001.70 $ 1,015.57
Expenses Paid During
Period* $ 9.23 $ 9.30
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.86%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,005.50 $ 1,019.29
Expenses Paid During
Period* $ 5.52 $ 5.56
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.11%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,006.70 $ 1,020.53
Expenses Paid During
Period* $ 4.28 $ 4.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.86%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
104 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 83.8%
Asset-Backed Securities - 6.7%
AAA Trust (p)
Series 2005-2 Class A1
5.059% due 11/26/35 452 452
ABSC NIMs Trust (p)
Series 2004-HE1 Class A
7.000% due 01/17/34 12 12
Accredited Mortgage Loan Trust (E)
Series 2004-2 Class A2
5.259% due 07/25/34 493 495
ACE Securities Corp. (E)
Series 2004-IN1 Class A1
5.279% due 05/25/34 1,452 1,457
Series 2005-SD3 Class A
5.359% due 08/25/45 2,907 2,908
Series 2006-HE2 Class A2A
5.060% due 05/25/36 3,100 3,100
Aegis Asset Backed Securities Trust (E)
Series 2005-4 Class 1A1
5.069% due 10/25/35 1,528 1,528
Alliance Capital Funding LLC (p)
Series 1998-1 Class A3
5.840% due 02/15/10 39 38
American Airlines, Inc.
6.817% due 05/23/11 380 373
American Express Credit Account Master Trust (E)
Series 2002-1 Class A
5.011% due 09/15/09 1,600 1,601
Series 2002-2 Class A
5.011% due 11/16/09 2,175 2,178
Series 2002-3 Class A
5.011% due 12/15/09 3,500 3,504
Ameriquest Mortgage Securities, Inc. (E)
Series 2002-D Class M1
7.459% due 02/25/33 450 453
Series 2004-R10 Class A5
5.349% due 11/25/34 656 657
Series 2004-R8 Class A5
5.329% due 09/25/34 3,355 3,362
Series 2005-R4 Class A2B
5.099% due 07/25/35 1,210 1,210
Series 2006-R1 Class A2C
5.149% due 03/25/36 820 821
Argent Securities, Inc. (E)
Series 2004-W3 Class A2
5.179% due 02/25/34 18 18
Asset Backed Funding Certificates (E)
Series 2005-WF1 Class A2A
5.039% due 01/25/35 241 241
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
BA Master Credit Card Trust (E)
Series 1999-C Class A
5.151% due 08/15/08 2,000 2,001
Bayview Financial Acquisition Trust
Series 2006-A Class 1A3
5.865% due 02/28/41 1,090 1,065
Bear Stearns Asset Backed Securities, Inc. (E)
Series 2004-BO1 Class 1A1
5.159% due 09/25/34 782 783
Series 2005-AQ1 Class 2A1
5.179% due 03/25/35 1,675 1,675
Series 2005-HE8 Class A1
5.079% due 08/25/35 857 857
Burlington Northern and Santa Fe Railway Co.
4.575% due 01/15/21 198 185
Capital Auto Receivables Asset Trust
Series 2003-3 Class A3B (E)
4.981% due 01/15/08 1,041 1,041
Series 2004-2 Class A2
3.350% due 02/15/08 900 891
Carrington Mortgage Loan Trust (E)
Series 2005-NC3 Class A1A
5.039% due 06/25/35 664 664
Series 2005-NC4 Class A1
5.109% due 09/25/35 1,125 1,125
Series 2005-OPT Class A1A
5.049% due 05/25/35 150 150
Cendant Timeshare Receivables Funding LLC (p)
Series 2004-1A Class A1
3.670% due 05/20/16 186 179
Chancellor/Triton CBO, Ltd. (p)
Series 1998-1A Class A1
6.710% due 08/05/10 183 176
Citibank Credit Card Issuance Trust
Series 2000-A3 Class A3
6.875% due 11/16/09 900 922
Citifinancial Mortgage Securities, Inc.
Series 2003-3 Class AF2
3.082% due 08/25/33 78 78
Series 2003-4 Class AF3
3.221% due 10/25/33 206 205
Conseco Finance (E)
Series 2000-C Class A
5.271% due 12/15/29 352 352
</Table>
Multistrategy Bond Fund 105
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Countrywide Asset-Backed Certificates
Series 2004-13 Class AF2
3.683% due 08/25/24 695 692
Series 2004-BC1 Class M1 (E)
5.459% due 02/25/34 545 548
Series 2004-S1 Class A2
3.872% due 03/25/20 745 732
Series 2005-12 Class 2A2
4.898% due 06/25/32 1,420 1,405
Series 2005-16 Class 2AF1 (E)
5.109% due 05/25/36 2,708 2,709
Series 2005-17 Class 1AF1 (E)
5.159% due 12/25/36 4,815 4,815
Series 2005-3 Class AF1A (E)
5.079% due 08/25/35 182 182
Series 2005-AB3 Class 2A1 (E)
5.079% due 02/25/36 1,692 1,693
Series 2006-3 Class 2A2 (E)
5.139% due 02/25/36 1,790 1,791
Series 2006-S2 Class A2
5.627% due 07/15/27 1,310 1,309
Credit-Based Asset Servicing and Securitization
Series 2005-CB4 Class AV1 (E)
5.059% due 08/25/35 1,138 1,138
Series 2005-CB5 Class AV1 (E)
5.069% due 08/25/35 1,390 1,390
Series 2005-CB8 Class AF1B
5.451% due 12/25/35 1,031 1,026
Entergy Gulf States, Inc. (E)
5.220% due 12/01/09 335 331
Equifirst Mortgage Loan Trust (E)
Series 2005-1 Class A1
5.019% due 04/25/35 406 406
Fannie Mae Grantor Trust
Series 2003-T4 Class 2A5
4.907% due 09/26/33 1,502 1,483
FBR Securitization Trust (E)
Series 2005-4 Class AV21
5.079% due 10/25/35 1,920 1,920
FHA 221D4
7.430% due 07/02/22 95 96
First Franklin Mortgage Loan Asset Backed
Certificates (E)
Series 2005-FF7 Class A2
5.059% due 07/25/35 1,297 1,297
Series 2006-FF2 Class A2
5.029% due 02/25/36 2,326 2,326
Fremont Home Loan Trust (E)
Series 2005-E Class 2A1
5.049% due 01/25/36 1,098 1,099
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GE Capital Credit Card Master Note Trust (E)
Series 2004-1 Class A
4.951% due 06/15/10 1,500 1,501
Series 2004-2 Class A
4.941% due 09/15/10 1,950 1,951
GE Dealer Floorplan Master Note Trust (E)
Series 2004-1 Class A
4.973% due 07/20/08 1,850 1,850
Series 2004-2 Class A
5.003% due 07/20/09 1,900 1,902
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 1,570 1,545
Golden Tree High Yield Opportunities, LP
Series 2000-1 Class C1
9.404% due 10/31/07 1,100 1,100
GSAA Home Equity Trust
Series 2006-4 Class 1A2
5.989% due 03/25/36 1,755 1,748
GSAA Trust
Series 2004-4N Class NOTE (p)
6.250% due 05/25/34 78 78
Series 2006-2 Class 2A3 (E)
5.229% due 12/25/35 1,890 1,894
GSAMP Trust
Series 2003-HE2 Class M1 (E)
5.609% due 08/25/33 975 979
Series 2004-NC1 Class A3 (E)
5.349% due 03/25/34 679 679
Series 2005-AHL Class A1 (E)
5.049% due 04/25/35 191 191
Series 2005-HE4 Class A2A (E)
5.079% due 07/25/45 1,429 1,429
Series 2005-S2 Class A (E)
5.129% due 11/25/34 857 858
Series 2006-S3 Class A1
6.085% due 05/25/36 1,760 1,760
Harley-Davidson Motorcycle Trust
Series 2004-2 Class A1
2.180% due 01/15/09 341 339
Home Equity Asset Trust (E)
Series 2003-5 Class M1
5.659% due 12/25/33 1,425 1,432
Series 2005-2 Class 2A2
5.159% due 07/25/35 980 981
IXIS Real Estate Capital Trust (E)
Series 2005-HE2 Class A1
5.039% due 09/25/35 91 91
</Table>
106 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lehman XS Trust (E)
Series 2005-1 Class 2A2
4.660% due 05/25/08 1,102 1,106
Long Beach Mortgage Loan Trust (E)
Series 2005-2 Class 2A1
5.039% due 10/01/09 206 206
Mastr Asset Backed Securities Trust (E)
Series 2003-WMC Class M2
6.609% due 08/25/33 836 839
Series 2005-OPT Class A3
5.049% due 03/25/35 325 325
MBNA Credit Card Master Note Trust (E)
Series 2002-A10 Class A10
5.041% due 02/16/10 2,175 2,179
MBNA Master Credit Card Trust USA
Series 2000-D Class A (E)
5.101% due 09/15/09 2,925 2,930
Series 2000-E Class A
7.800% due 10/15/12 600 657
Merrill Auto Trust Securitization (E)
Series 2005-1 Class A2B
4.969% due 04/25/08 2,061 2,061
Merrill Lynch Mortgage Investors, Inc.
Series 2005-NCB Class A1A
5.451% due 07/25/36 507 505
Series 2005-SL1 Class A (E)
5.159% due 06/25/35 514 514
Series 2005-WMC Class A2A (E)
5.059% due 09/25/35 13 13
Series 2006-AR1 Class A2C (E)
5.149% due 03/25/37 1,580 1,580
Metris Master Trust (E)
Series 2001-2 Class A
5.243% due 11/20/09 900 900
Mid-State Trust
Series 2003-11 Class A1
4.864% due 07/15/38 161 149
Series 2004-1 Class A
6.005% due 08/15/37 214 215
Series 2005-1 Class A
5.745% due 01/15/40 217 211
Morgan Stanley ABS Capital I (E)
Series 2003-NC8 Class M3
7.059% due 09/25/33 1,115 1,129
New Century Home Equity Loan Trust (E)
Series 2004-4 Class M2
5.489% due 02/25/35 1,205 1,211
Novastar Home Equity Loan (E)
Series 2005-1 Class A2A
5.079% due 06/25/35 563 563
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Option One Mortgage Loan Trust (E)
Series 2003-2 Class M2
6.659% due 04/25/33 1,250 1,258
Series 2003-3 Class M3
6.959% due 06/25/33 775 781
Series 2003-4 Class M2
6.609% due 07/25/33 730 737
Series 2005-4 Class A3
5.219% due 11/25/35 1,605 1,609
Ownit Mortgage Loan Asset Backed Certificates
Series 2005-2 Class A2A (E)
5.069% due 03/25/36 356 356
Series 2006-2 Class A2B
5.633% due 01/25/37 470 469
Park Place Securities, Inc. (E)
Series 2004-WWF Class A1D
5.419% due 02/25/35 3,845 3,853
Series 2005-WCW Class M1
5.409% due 09/25/35 1,195 1,199
Series 2005-WHQ Class A2A
5.039% due 06/25/35 402 402
Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF2
3.914% due 05/25/35 445 439
Series 2005-6 Class A3
5.680% due 01/25/36 1,290 1,280
Power Contract Financing LLC (p)
6.256% due 02/01/10 450 452
Quest Trust (E)(p)
Series 2005-X2 Class A1
5.039% due 10/25/35 599 599
RAAC Series (E)
Series 2006-SP1 Class A1
5.059% due 09/25/45 1,617 1,617
Renaissance Home Equity Loan Trust
Series 2004-4 Class AF2
3.856% due 02/25/35 696 691
Series 2005-2 Class AF2
4.361% due 08/25/35 1,385 1,364
Series 2005-4 Class A2
5.399% due 02/25/36 575 572
Series 2005-4 Class A3
5.565% due 02/25/36 360 357
Series 2006-1 Class AF6
5.746% due 05/25/36 1,020 1,010
</Table>
Multistrategy Bond Fund 107
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc.
Series 2003-RS1 Class AI6A
5.980% due 12/25/33 1,160 1,165
Series 2004-RS1 Class AI2
3.620% due 07/25/26 468 466
Series 2004-RS8 Class AI2
3.810% due 01/25/26 171 171
Series 2004-RZ2 Class AI3
4.300% due 01/25/31 480 474
Series 2005-RS1 Class AII1 (E)
5.069% due 01/25/35 255 255
Residential Asset Securities Corp.
Series 2001-KS3 Class AII (E)
5.189% due 09/25/31 325 326
Series 2003-KS1 Class M2 (E)
6.709% due 01/25/33 430 432
Series 2003-KS2 Class MI1
4.800% due 04/25/33 2,540 2,463
Series 2003-KS4 Class AIIB (E)
5.249% due 06/25/33 877 878
Series 2004-KS8 Class AI2
3.340% due 10/25/24 1,830 1,819
Series 2006-KS3 Class AI3 (E)
4.992% due 04/25/36 1,155 1,156
Saxon Asset Securities Trust (E)
Series 2005-1 Class A2A
5.069% due 05/25/35 32 32
Series 2005-2 Class A2A
5.049% due 09/25/35 761 761
Securitized Asset Backed Receivables LLC Trust
(E)
Series 2006-WM1 Class A2A
5.029% due 12/25/35 1,524 1,524
Sharp SP I LLC Net Interest Margin Trust (p)
Series 2004-HE1 Class N
6.900% due 11/25/33 8 8
Sharps SP I , LLC
6.850% due 03/01/23 2 2
7.000% due 01/25/34 90 90
SLM Student Loan Trust (E)
Series 2004-9 Class A2
5.120% due 10/25/12 337 336
Small Business Administration
Series 2000-P10 Class 1
7.449% due 08/01/10 102 107
Small Business Administration Participation
Certificates
7.500% due 04/01/17 1,794 1,872
Specialty Underwriting & Residential Finance (E)
Series 2005-BC2 Class A2A
5.059% due 12/25/35 472 472
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Structured Asset Investment Loan Trust (E)
Series 2003-BC1 Class 3A5
5.439% due 10/25/33 220 220
Series 2005-2 Class A2
5.079% due 03/25/35 204 204
Series 2005-3 Class M2
5.399% due 04/25/35 675 677
Series 2005-5 Class A6
5.049% due 06/25/35 438 438
Series 2005-HE1 Class A1
5.059% due 07/25/35 1,188 1,188
Structured Asset Securities Corp.
Series 2001-SB1 Class A2
3.375% due 08/25/31 530 478
Series 2004-16X Class A2
4.910% due 08/25/34 934 929
Series 2004-19X Class A2
4.370% due 10/25/34 2,125 2,106
Series 2005-GEL Class A (E)
5.309% due 12/25/34 1,554 1,555
Series 2005-S2 Class A2 (E)
5.159% due 06/25/35 2,350 2,351
Series 2005-WMC Class A1 (E)
5.039% due 01/25/35 336 336
Tenaska Alabama II Partners, LP (p)
6.125% due 03/30/23 474 463
Tenaska Alabama Partners, LP (p)
7.000% due 06/30/21 320 317
Terwin Mortgage Trust (E)
Series 2004-22S Class A
5.349% due 11/25/35 222 222
Series 2005-8HE Class A1 (p)
5.079% due 07/25/35 724 724
TXU Electric Delivery Transition Bond Co.
Series 2004-1 Class A2
4.810% due 11/17/14 300 290
World Financial Properties (p)
6.910% due 09/01/13 643 674
6.950% due 09/01/13 190 199
------------
151,971
------------
</Table>
108 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Corporate Bonds and Notes - 14.5%
Abitibi-Consolidated Finance, LP (N)
7.875% due 08/01/09 920 925
AIG SunAmerica Global Financing VI (p)
6.300% due 05/10/11 1,230 1,269
Amerada Hess Corp.
6.650% due 08/15/11 715 745
7.300% due 08/15/31 630 685
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 100 99
American Express Credit Corp. (E)
5.083% due 03/02/09 1,800 1,800
American General Finance Corp.
Series MTNH
4.625% due 09/01/10 45 43
Series MTNI
4.625% due 05/15/09 220 216
American International Group, Inc. (p)
4.700% due 10/01/10 1,470 1,422
5.050% due 10/01/15 (N) 1,750 1,648
American RE Corp.
Series B
7.450% due 12/15/26 1,445 1,537
AmerisourceBergen Corp. (p)
5.625% due 09/15/12 1,305 1,275
Arizona Public Service Co.
5.800% due 06/30/14 550 535
AT&T Corp.
9.050% due 11/15/11 885 954
9.750% due 11/15/31 685 812
AT&T, Inc. (E)
4.951% due 11/14/08 3,400 3,407
Atmos Energy Corp. (E)
5.443% due 10/15/07 625 626
Avista Capital Trust III
6.500% due 04/01/34 851 840
Avista Corp.
9.750% due 06/01/08 610 656
Axa Financial, Inc.
6.500% due 04/01/08 325 331
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 3,890 3,981
Ball Corp.
6.625% due 03/15/18 490 476
Bank of America Corp.
7.800% due 02/15/10 460 495
Barclays Bank PLC
6.278% due 12/15/34 200 182
BellSouth Corp.
4.200% due 09/15/09 465 446
6.550% due 06/15/34 340 335
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Boeing Capital Corp. (N)
6.100% due 03/01/11 620 635
Boston Scientific Corp. (N)
6.250% due 11/15/15 1,115 1,102
Bowater, Inc.
9.000% due 08/01/09 810 842
Burlington Northern Santa Fe Corp.
6.750% due 07/15/11 290 305
6.875% due 12/01/27 55 59
6.750% due 03/15/29 110 116
Campbell Soup Co.
5.875% due 10/01/08 430 434
Carolina Power & Light Co.
6.500% due 07/15/12 50 52
Caterpillar Financial Services Corp.
Series MTNF
4.840% due 08/20/07 (E) 470 470
3.625% due 11/15/07 160 156
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 470 464
CenterPoint Energy Resources Corp.
Series B
7.875% due 04/01/13 1,745 1,926
Centex Corp. (E)
4.930% due 08/01/07 736 736
Chemtura Corp.
6.875% due 06/01/16 325 324
Cincinnati Gas & Electric
5.700% due 09/15/12 370 367
Cingular Wireless Services, Inc.
8.750% due 03/01/31 410 515
CIT Group, Inc.
5.750% due 09/25/07 345 347
3.650% due 11/23/07 260 254
6.875% due 11/01/09 (N) 140 146
4.125% due 11/03/09 225 215
Citicorp
Series MTNF
6.375% due 11/15/08 265 272
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
4.890% due 03/07/08 1,800 1,800
</Table>
Multistrategy Bond Fund 109
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Citigroup, Inc.
4.200% due 12/20/07 (N) 3,600 3,536
3.500% due 02/01/08 3,110 3,020
6.500% due 01/18/11 1,655 1,720
4.700% due 05/29/15 815 753
5.875% due 02/22/33 1,545 1,455
Citizens Communications Co.
9.250% due 05/15/11 635 698
Clear Channel Communications, Inc.
6.250% due 03/15/11 2,210 2,205
5.750% due 01/15/13 275 261
Clorox Co.
5.025% due 12/14/07 (E) 705 706
4.200% due 01/15/10 525 500
5.000% due 01/15/15 340 319
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 315 308
Comcast Cable Communications
8.375% due 05/01/07 110 113
6.750% due 01/30/11 425 442
Comcast Corp.
5.900% due 03/15/16 445 436
6.500% due 11/15/35 580 555
6.450% due 03/15/37 410 390
ConAgra Foods, Inc.
7.000% due 10/01/28 (N) 215 217
8.250% due 09/15/30 275 315
Consolidated Natural Gas Co.
5.000% due 12/01/14 395 366
Series C
6.250% due 11/01/11 155 158
Consumers Energy Co.
Series F
4.000% due 05/15/10 175 164
Series H
4.800% due 02/17/09 325 318
Continental Airlines, Inc. (N)
Series 01-1
6.503% due 06/15/11 550 553
Cooper Industries, Inc.
5.250% due 11/15/12 500 487
Corrections Corp. of America
7.500% due 05/01/11 480 486
Countrywide Home Loans, Inc.
3.250% due 05/21/08 780 748
COX Communications, Inc.
4.625% due 01/15/10 545 524
Credit Suisse First Boston USA, Inc.
4.875% due 08/15/10 335 326
6.500% due 01/15/12 215 224
5.500% due 08/15/13 230 226
Credit Suisse USA, Inc.
5.250% due 03/02/11 1,025 1,010
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CSC Holdings, Inc.
10.500% due 05/15/16 350 369
Series B
8.125% due 07/15/09 325 337
8.125% due 08/15/09 185 192
DaimlerChrysler NA Holding Corp.
5.330% due 03/13/09 (E) 2,525 2,526
8.500% due 01/18/31 320 371
Detroit Edison Co.
6.125% due 10/01/10 955 973
6.350% due 10/15/32 275 272
Developers Diversified Realty Corp.
5.000% due 05/03/10 400 388
4.625% due 08/01/10 776 742
5.250% due 04/15/11 50 49
5.375% due 10/15/12 370 358
Dominion Resources, Inc.
5.687% due 05/15/08 755 757
Series B
5.265% due 09/28/07 (E) 1,095 1,096
6.250% due 06/30/12 120 122
DPL, Inc.
6.875% due 09/01/11 680 710
DR Horton, Inc.
5.250% due 02/15/15 905 824
Dresdner Funding Trust I (p)
8.151% due 06/30/31 1,440 1,644
Drummond Co., Inc. (p)
7.375% due 02/15/16 4,065 4,004
Duke Energy Field Services LLC
6.875% due 02/01/11 60 63
E*Trade Financial Corp.
8.000% due 06/15/11 1,370 1,415
Echostar DBS Corp.
6.375% due 10/01/11 595 581
6.625% due 10/01/14 280 270
El Paso Corp. (N)
6.950% due 12/15/07 2,600 2,616
El Paso Natural Gas Co.
Series A
7.625% due 08/01/10 750 777
Eli Lilly & Co.
6.770% due 01/01/36 1,170 1,260
</Table>
110 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Entergy Gulf States, Inc.
3.600% due 06/01/08 235 225
5.610% due 12/08/08 (E)(p) 570 570
Enterprise Products Operating, LP
4.000% due 10/15/07 700 684
4.625% due 10/15/09 880 850
EOP Operating, LP
4.750% due 03/15/14 70 64
7.500% due 04/19/29 297 314
Erac USA Finance Co. (p)
7.350% due 06/15/08 780 808
5.300% due 11/15/08 350 348
Farmers Exchange Capital (p)
7.050% due 07/15/28 2,290 2,225
Farmers Insurance Exchange (p)
6.000% due 08/01/14 570 555
8.625% due 05/01/24 1,140 1,298
FedEx Corp.
7.600% due 07/01/97 440 483
Financing Corp.
Series 10P
Zero coupon due 11/30/17 2,700 1,436
Series 15P
Zero coupon due 03/07/19 390 192
Series 2P
Zero coupon due 11/30/17 330 175
Series 6P
Zero coupon due 08/03/18 1,640 836
FirstEnergy Corp.
Series B
6.450% due 11/15/11 3,145 3,243
Series C
7.375% due 11/15/31 345 375
Ford Motor Co. (N)
7.450% due 07/16/31 1,705 1,245
Ford Motor Credit Co.
5.795% due 09/28/07 (E) 1,400 1,345
5.700% due 01/15/10 601 528
9.473% due 04/15/12 (E) 1,295 1,296
General Electric Capital Corp.
4.905% due (N) 700 701
4.875% due 10/21/10 4,515 4,410
5.500% due 04/28/11 785 785
5.223% due 01/08/16 (E) 1,100 1,101
Series MTNA
4.250% due 12/01/10 180 171
5.875% due 02/15/12 (N) 320 325
4.750% due 09/15/14 (N) 80 75
6.750% due 03/15/32 465 502
General Motors Acceptance Corp.
6.875% due 09/15/11 5,131 4,807
6.750% due 12/01/14 (N) 790 720
8.000% due 11/01/31 (N) 4,245 4,025
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
General Motors Corp. (N)
8.375% due 07/15/33 2,765 2,060
Georgia-Pacific Corp.
8.125% due 05/15/11 1,000 1,038
8.875% due 05/15/31 1,617 1,694
Glencore Funding LLC (p)
6.000% due 04/15/14 1,610 1,518
Glencore Nickel Ltd.
9.000% due 12/01/14 305 --
Golden West Financial Corp.
4.125% due 08/15/07 360 354
Goldman Sachs Group, Inc.
6.875% due 01/15/11 2,030 2,135
5.250% due 10/15/13 425 410
5.350% due 01/15/16 (N) 4,345 4,153
6.345% due 02/15/34 1,375 1,319
Series MTNB (E)
5.420% due 07/23/09 1,500 1,510
Hartford Financial Services Group, Inc.
7.900% due 06/15/10 80 87
HCA, Inc.
5.500% due 12/01/09 1,200 1,168
7.500% due 12/15/23 400 385
Health Net, Inc.
9.875% due 04/15/11 805 907
Hertz Corp. (p)
8.875% due 01/01/14 835 887
Historic TW, Inc.
8.180% due 08/15/07 1,603 1,657
9.125% due 01/15/13 1,460 1,681
8.050% due 01/15/16 1,490 1,646
6.625% due 05/15/29 680 659
HJ Heinz Co. (p)
6.428% due 12/01/08 200 203
HJ Heinz Finance Co.
6.000% due 03/15/12 320 318
6.750% due 03/15/32 250 241
Home Depot, Inc.
5.400% due 03/01/16 1,560 1,519
Household Finance Corp.
5.000% due 06/30/15 665 620
HRPT Properties Trust
5.750% due 02/15/14 670 650
HSBC Finance Capital Trust IX
5.911% due 11/30/35 900 870
</Table>
Multistrategy Bond Fund 111
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
HSBC Finance Corp.
5.040% due 10/04/07 (E) 2,200 2,201
5.040% due 09/15/08 (E) 3,600 3,607
4.125% due 12/15/08 175 170
5.875% due 02/01/09 660 668
4.750% due 05/15/09 -- --
4.125% due 11/16/09 270 259
8.000% due 07/15/10 165 179
4.625% due 09/15/10 600 578
6.375% due 10/15/11 365 377
6.375% due 11/27/12 1,595 1,648
Huntsman International LLC
Series *
10.125% due 07/01/09 605 616
Hyatt Equities LLC (p)
6.875% due 06/15/07 435 440
ICI Wilmington, Inc.
4.375% due 12/01/08 210 202
Innophos Investments Holdings, Inc. (E)
12.749% due 02/15/15 1,455 1,491
Insight Midwest, LP
10.500% due 11/01/10 351 369
International Business Machines Corp. (N)
7.125% due 12/01/96 1,490 1,615
International Lease Finance Corp.
3.750% due 08/01/07 115 113
6.375% due 03/15/09 (N) 350 358
International Paper Co.
6.750% due 09/01/11 650 679
5.500% due 01/15/14 905 868
Interpublic Group of Cos., Inc.
5.400% due 11/15/09 410 375
ITT Industries, Inc.
7.400% due 11/15/25 455 503
JC Penney Co., Inc.
7.375% due 08/15/08 510 528
7.650% due 08/15/16 325 354
7.400% due 04/01/37 220 235
John Hancock Financial Services, Inc.
5.625% due 12/01/08 120 121
John Hancock Global Funding II (p)
7.900% due 07/02/10 440 482
Johnson Controls, Inc.
5.250% due 01/15/11 440 432
5.500% due 01/15/16 880 842
JP Morgan Chase Bank NA
1.000% due 08/16/10 608 537
6.000% due 08/16/10 (E) 707 625
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
JPMorgan Chase & Co.
6.000% due 02/15/09 170 172
7.000% due 11/15/09 65 68
6.750% due 02/01/11 235 246
5.150% due 10/01/15 1,415 1,339
Kellogg Co.
Series B
6.600% due 04/01/11 2,895 3,019
KeySpan Corp.
7.625% due 11/15/10 525 565
Kraft Foods, Inc.
5.250% due 06/01/07 170 170
4.125% due 11/12/09 1,747 1,668
5.625% due 11/01/11 3,595 3,582
6.500% due 11/01/31 170 173
Kroger Co. (The)
7.250% due 06/01/09 270 282
6.750% due 04/15/12 100 104
8.000% due 09/15/29 210 233
LaBranche & Co., Inc.
9.500% due 05/15/09 790 845
Lehman Brothers Holdings, Inc.
5.000% due 01/14/11 1,540 1,505
5.500% due 04/04/16 670 647
Lenfest Communications, Inc.
7.625% due 02/15/08 100 103
Limited Brands, Inc. (N)
6.950% due 03/01/33 375 359
Lodgenet Entertainment Corp.
9.500% due 06/15/13 720 776
Lubrizol Corp.
4.625% due 10/01/09 631 612
M&I Marshall & Ilsley Bank
Series BKNT
3.800% due 02/08/08 755 736
Manufacturers & Traders Trust Co.
5.585% due 12/28/20 248 240
Marsh & McLennan Cos., Inc.
5.190% due 07/13/07 (E) 630 629
5.150% due 09/15/10 825 801
5.375% due 07/15/14 465 436
5.875% due 08/01/33 (N) 545 468
May Department Stores Co. (The)
4.800% due 07/15/09 480 470
5.750% due 07/15/14 515 506
MBNA Corp. (E)
5.140% due 05/05/08 780 786
MCI, Inc.
6.908% due 05/01/07 1,830 1,839
Medco Health Solutions, Inc.
7.250% due 08/15/13 1,482 1,580
</Table>
112 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Merrill Lynch & Co., Inc.
Series MTNC
4.250% due 02/08/10 3,975 3,809
Metlife, Inc.
5.000% due 06/15/15 520 487
5.700% due 06/15/35 130 118
MGM Mirage
9.750% due 06/01/07 795 825
Midamerican Energy Holdings Co. (p)
6.125% due 04/01/36 600 572
Midamerican Funding LLC
6.750% due 03/01/11 590 616
Miller Brewing Co. (p)
4.250% due 08/15/08 445 434
5.500% due 08/15/13 925 904
Mohawk Industries, Inc.
6.125% due 01/15/16 350 344
Series D
7.200% due 04/15/12 340 353
Monumental Global Funding II (p)
4.625% due 03/15/10 320 310
Morgan Stanley
5.050% due 01/21/11 455 444
6.750% due 04/15/11 1,530 1,604
5.375% due 10/15/15 1,935 1,850
Series GMTN (E)
4.830% due 02/09/09 3,100 3,104
Motorola, Inc.
4.608% due 11/16/07 1,378 1,363
Natexis Ambs Co. LLC (f)(p)
8.440% due 12/29/49 430 454
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 200 202
Nationwide Financial Services
6.250% due 11/15/11 395 404
Nationwide Mutual Insurance Co. (p)
7.875% due 04/01/33 867 962
Neiman-Marcus Group, Inc. (N)(p)
10.375% due 10/15/15 650 696
News America Holdings, Inc.
7.750% due 12/01/45 535 572
7.900% due 12/01/95 410 428
8.250% due 10/17/96 135 144
News America, Inc.
7.125% due 04/08/28 75 76
6.400% due 12/15/35 (p) 495 468
6.750% due 01/09/38 65 66
Nextel Communications, Inc.
Series E
6.875% due 10/31/13 955 980
Nisource Finance Corp.
5.344% due 11/23/09 (E) 370 371
7.875% due 11/15/10 990 1,069
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Norfolk Southern Corp.
7.350% due 05/15/07 320 327
7.050% due 05/01/37 280 306
7.900% due 05/15/97 930 1,085
6.000% due 03/15/2105 745 660
North Front Pass-Through Trust (p)
5.810% due 12/15/24 1,700 1,629
NRG Energy, Inc.
7.375% due 02/01/16 1,450 1,463
Occidental Petroleum Corp.
9.250% due 08/01/19 285 367
Ohio Power Co. (N)
Series F
5.500% due 02/15/13 55 54
Oneok, Inc.
5.510% due 02/16/08 775 774
Pacific Gas & Electric Co.
3.600% due 03/01/09 600 571
4.200% due 03/01/11 1,015 956
6.050% due 03/01/34 885 847
Pemex Project Funding Master Trust
5.750% due 12/15/15 (p) 500 474
6.625% due 06/15/35 (p) 1,130 1,068
6.625% due 06/15/35 (N) 205 194
Pepco Holdings, Inc.
5.500% due 08/15/07 1,070 1,070
5.445% due 06/01/10 (E) 885 887
Pilgrim's Pride Corp.
9.625% due 09/15/11 140 146
Platinum Underwriters Finance, Inc. (N)
Series B
7.500% due 06/01/17 520 508
Plum Creek Timberlands, LP
5.875% due 11/15/15 660 639
Popular North America Capital Trust I
6.564% due 09/15/34 1,057 996
Popular North America, Inc. (E)
5.410% due 04/06/09 705 705
Progress Energy, Inc.
7.100% due 03/01/11 1,155 1,220
6.850% due 04/15/12 90 94
7.000% due 10/30/31 620 649
PSEG Energy Holdings LLC
8.625% due 02/15/08 230 239
Qwest Corp.
7.875% due 09/01/11 1,320 1,384
7.625% due 06/15/15 1,000 1,040
</Table>
Multistrategy Bond Fund 113
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Rabobank Capital Funding II (f)(p)
5.260% due 12/31/49 995 944
RBS Capital Trust III (f)
5.512% due 09/29/49 1,600 1,522
Reckson Operating Partnership, LP
5.150% due 01/15/11 310 299
Residential Capital Corp.
6.125% due 11/21/08 835 831
6.898% due 04/17/09 (E)(p) 1,365 1,364
6.375% due 06/30/10 1,752 1,745
6.000% due 02/22/11 1,970 1,930
6.500% due 04/17/13 1,130 1,126
6.875% due 06/30/15 (N) 3,245 3,290
RJ Reynolds Tobacco Holdings, Inc.
6.500% due 06/01/07 450 451
Safeway, Inc.
5.315% due 03/27/09 (E) 1,085 1,085
5.800% due 08/15/12 (N) 110 109
7.250% due 02/01/31 (N) 105 109
SBC Communications, Inc.
4.125% due 09/15/09 -- --
5.100% due 09/15/14 325 306
6.450% due 06/15/34 40 39
6.150% due 09/15/34 1,115 1,050
SCANA Corp. (E)(N)
4.970% due 03/01/08 1,131 1,132
Sealed Air Corp. (p)
5.625% due 07/15/13 765 743
Sempra Energy
4.621% due 05/17/07 642 637
5.240% due 05/21/08 (E) 891 892
SESI LLC
8.875% due 05/15/11 365 381
Simmons Co. (N)
10.000% due 12/15/14 425 293
Six Flags, Inc.
9.625% due 06/01/14 1,360 1,377
SLM Corp.
4.000% due 01/15/10 540 512
Series MTNA (E)
5.310% due 07/25/08 6,200 6,220
Smurfit-Stone Container Enterprises, Inc. (N)
9.250% due 02/01/08 360 372
Southern California Edison Co.
4.965% due 12/13/07 (E) 231 231
7.625% due 01/15/10 260 276
6.000% due 01/15/34 581 559
Southern Copper Corp. (N)
7.500% due 07/27/35 1,255 1,217
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sprint Capital Corp.
7.625% due 01/30/11 1,055 1,139
8.375% due 03/15/12 120 135
6.875% due 11/15/28 775 798
8.750% due 03/15/32 1,950 2,420
St. Paul Travelers Cos., Inc. (The)
5.010% due 08/16/07 1,340 1,332
Starwood Hotels & Resorts Worldwide, Inc. (o)
7.375% due 05/01/07 65 66
Suncom Wireless, Inc.
8.500% due 06/01/13 770 735
Sungard Data Systems, Inc. (p)
9.125% due 08/15/13 720 769
TCI Communications, Inc.
7.875% due 02/15/26 145 156
TECO Energy, Inc.
7.200% due 05/01/11 715 742
Tele-Communications-TCI Group
9.800% due 02/01/12 990 1,160
7.875% due 08/01/13 3,135 3,430
Texas Eastern Transmission, LP
7.000% due 07/15/32 280 299
Time Warner Entertainment Co., LP Series *
8.375% due 03/15/23 426 478
Tronox Worldwide LLC (p)
9.500% due 12/01/12 1,490 1,565
Twin Reefs Pass-Through Trust (E)(f)(p)
5.849% due 12/10/49 900 900
Tyson Foods, Inc.
8.250% due 10/01/11 770 818
6.600% due 04/01/16 380 373
Union Pacific Corp.
6.625% due 02/01/08 265 270
3.625% due 06/01/10 380 352
6.650% due 01/15/11 145 151
6.125% due 01/15/12 800 814
Series MTNE (N)
6.790% due 11/09/07 110 112
Union Planters Corp.
7.750% due 03/01/11 265 289
UnitedHealth Group, Inc.
5.375% due 03/15/16 1,745 1,675
5.800% due 03/15/36 545 502
US Oncology, Inc.
9.000% due 08/15/12 465 493
US Unwired, Inc.
Series B
10.000% due 06/15/12 440 493
</Table>
114 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
USB Capital IX (f) (N)
6.189% due 03/29/49 1,145 1,131
Valero Logistics Operations, LP
6.050% due 03/15/13 1,117 1,117
Vanguard Health Holding Co. II LLC
9.000% due 10/01/14 640 661
Verizon
6.500% due 09/15/11 70 71
Verizon Communications, Inc.
5.550% due 02/15/16 2,175 2,075
Verizon Global Funding Corp.
7.250% due 12/01/10 2,310 2,448
5.850% due 09/15/35 1,685 1,501
Viacom, Inc. (p)
5.750% due 04/30/11 935 929
6.875% due 04/30/36 270 266
Visteon Corp. (N)
8.250% due 08/01/10 2,085 1,871
7.000% due 03/10/14 270 219
Wachovia Capital Trust III (f)
5.800% due 08/29/49 5,160 5,059
Wachovia Corp. (E)
5.176% due 10/28/08 3,000 3,001
Washington Mutual, Inc.
8.250% due 04/01/10 755 818
WellPoint, Inc.
3.750% due 12/14/07 270 263
4.250% due 12/15/09 532 510
5.850% due 01/15/36 880 808
Wells Fargo & Co.
4.625% due 08/09/10 2,090 2,023
4.950% due 10/16/13 390 371
Weyerhaeuser Co.
7.125% due 07/15/23 970 983
Willis North America, Inc.
5.125% due 07/15/10 680 663
5.625% due 07/15/15 785 751
Wisconsin Electric Power
3.500% due 12/01/07 145 141
Wyeth
5.500% due 03/15/13 420 413
5.500% due 02/01/14 1,215 1,187
Xlliac Global Funding (p)
4.800% due 08/10/10 730 705
Yum! Brands, Inc.
8.875% due 04/15/11 245 275
ZFS Finance USA Trust I (p)
6.450% due 12/15/65 2,480 2,336
Zurich Capital Trust I (p)
8.376% due 06/01/37 1,345 1,436
------------
328,290
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
International Debt - 4.6%
Abbey National PLC (f)
(Step Up, 7.570%, 06/15/08)
6.700% due 06/29/49 775 790
Abitibi-Consolidated, Inc. (N)
8.550% due 08/01/10 -- --
8.850% due 08/01/30 1,045 961
Amvescap PLC
4.500% due 12/15/09 1,337 1,285
Arlington Street CDO, Ltd. (p)
Series 2000-1A Class A2
7.660% due 06/10/12 1,742 1,755
AXA SA
8.600% due 12/15/30 255 315
Banco Santander Chile (E)(p)
5.220% due 12/09/09 635 636
Batterson Park CBO I, Ltd.
Series 1998-1A Class A4
6.130% due 01/02/11 7 7
Biovail Corp.
7.875% due 04/01/10 1,363 1,377
Bowater Canada Finance
7.950% due 11/15/11 1,095 1,098
Brascan Corp.
7.125% due 06/15/12 565 596
Brazilian Government International Bond
10.710% due 06/29/09 (E) 800 929
10.500% due 07/14/14 (N) 35 43
8.000% due 01/15/18 800 868
8.875% due 10/14/19 100 115
8.875% due 04/15/24 3,685 4,210
British Telecommunications PLC
8.375% due 12/15/10 585 650
8.875% due 12/15/30 780 986
Canadian Oil Sands, Ltd. (p)
4.800% due 08/10/09 481 466
Catalyst Paper Corp.
Series D
8.625% due 06/15/11 875 877
China Development Bank
5.000% due 10/15/15 200 187
Colombia Government International Bond
8.125% due 05/21/24 795 884
Conoco Funding Co.
6.350% due 10/15/11 2,965 3,077
</Table>
Multistrategy Bond Fund 115
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Deutsche Telekom International Finance BV (E)
8.250% due 06/15/30 1,130 1,342
Donohue Forest Products
7.625% due 05/15/07 665 672
Egypt Government AID Bonds
4.450% due 09/15/15 2,210 2,065
EnCana Corp.
6.500% due 08/15/34 345 350
Export-Import Bank of China (p)
4.875% due 07/21/15 1,470 1,368
Export-Import Bank of Korea
4.125% due 02/10/09 (p) 540 521
5.125% due 02/14/11 (N) 735 718
FBG Finance, Ltd. (p)
5.125% due 06/15/15 585 540
France Telecom SA
8.500% due 03/01/31 570 703
Galaxy Entertainment Finance Co., Ltd. (p)
9.655% due 12/15/10 (E)(N) 370 385
9.875% due 12/15/12 925 957
Gaz Capital for Gazprom (p)
8.625% due 04/28/34 450 545
Hanarotelecom, Inc. (p)
7.000% due 02/01/12 1,120 1,098
HBOS PLC (f)(p)
5.920% due 09/29/49 700 666
HSBC Holdings PLC
6.500% due 05/02/36 970 978
ICICI Bank, Ltd. (N)(p)
5.750% due 11/16/10 1,215 1,198
Ispat Inland ULC
9.750% due 04/01/14 1,739 1,956
Juniper CBO, Ltd. (p)
Series 1999-1A Class A1
6.830% due 04/15/11 156 157
Kerzner International, Ltd.
6.750% due 10/01/15 790 820
Kinder Morgan Finance Co. ULC
5.350% due 01/05/11 425 418
Korea Development Bank
4.250% due 11/13/07 140 138
Korea Electric Power Corp. (p)
5.125% due 04/23/34 285 273
LG Electronics, Inc. (p)
5.000% due 06/17/10 390 376
Mantis Reef, Ltd. (p)
4.692% due 11/14/08 585 568
Mexico Government International Bond
8.300% due 08/15/31 1,455 1,728
Mizuho Financial Group Cayman, Ltd.
5.790% due 04/15/14 (p) 1,375 1,360
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series REGS
5.790% due 04/15/14 185 182
MUFG Capital Finance 1, Ltd. (f)
6.346% due 04/25/49 560 549
Nationwide Building Society (p)
4.250% due 02/01/10 770 737
Nexen, Inc.
5.875% due 03/10/35 461 418
Nippon Life Insurance (p)
4.875% due 08/09/10 935 903
Oil Insurance, Ltd. (p)
5.150% due 08/15/33 1,633 1,606
Panama Government International Bond
8.875% due 09/30/27 300 358
Petrobras International Finance Co.
8.375% due 12/10/18 1,615 1,809
Petroleum Export, Ltd. (p)
5.265% due 06/15/11 197 192
Philippine Government International Bond (N)
7.750% due 01/14/31 1,365 1,375
Platinum Underwriters Holdings, Ltd.
Series B
6.371% due 11/16/07 405 403
Poland Government International Bond
(Step Up, 5.000%, 10/27/14)
4.750% due 10/27/24 750 670
Province of Quebec Canada
5.000% due 07/17/09 265 263
6.125% due 01/22/11 (N) 3,470 3,571
Ras Laffan Liquefied Natural Gas Co., Ltd. II
(p)
5.298% due 09/30/20 885 833
Ras Laffan LNG III (p)
5.838% due 09/30/27 1,310 1,210
Resona Bank, Ltd. (f)(N)(p)
5.850% due 09/29/49 2,705 2,583
Resona Preferred Global Securities Cayman, Ltd.
(E)(f)(p)
7.191% due 12/29/49 3,175 3,264
Royal Bank of Scotland Group PLC (f)
Series 1
9.118% due 03/31/49 2,350 2,620
Royal KPN NV
8.000% due 10/01/10 1,645 1,764
</Table>
116 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Russia Government International Bond (p)
5.000% due 03/31/30 2,335 2,533
Salomon Brothers AG for OAO Siberian Oil Co.
Series REGS
10.750% due 01/15/09 2,020 2,247
Salomon Brothers AG for Tyumen Oil Co.
Series REGS
11.000% due 11/06/07 1,010 1,081
Santander Financial Issuances
6.375% due 02/15/11 540 555
Sanwa Finance Aruba AEC (N)
8.350% due 07/15/09 1,000 1,080
Sappi Papier Holding AG (p)
6.750% due 06/15/12 240 228
Secunda International, Ltd. (E)
13.068% due 09/01/12 660 696
Shinsei Finance Cayman, Ltd. (f)(p)
6.418% due 01/29/49 860 835
South Street CBO, Ltd.
Series 1999-1A Class A1
7.160% due 07/01/11 227 228
Stora Enso Oyj (p)
7.250% due 04/15/36 795 797
Sumitomo Mitsui Banking Corp. (E)(f)(p)
5.625% due 07/29/49 495 473
Systems 2001 AT LLC (p)
7.156% due 12/15/11 294 303
6.664% due 09/15/13 393 408
Talisman Energy, Inc.
5.125% due 05/15/15 415 392
Telecom Italia Capital SA
4.000% due 01/15/10 5,201 4,898
5.250% due 10/01/15 2,730 2,523
Telefonica Europe BV
7.750% due 09/15/10 3,925 4,214
Telefonos de Mexico SA de CV
4.500% due 11/19/08 1,288 1,252
TELUS Corp.
8.000% due 06/01/11 2,430 2,667
Terra LNR (p)
5.031% due 10/15/07 1,250 1,250
Tyco International Group SA
6.750% due 02/15/11 1,825 1,899
UFJ Finance Aruba AEC
6.750% due 07/15/13 220 231
UnumProvident Finance Co. PLC (p)
6.850% due 11/15/15 625 622
Vale Overseas, Ltd.
6.250% due 01/11/16 1,465 1,439
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Venezuela Government International Bond
6.000% due 12/09/20 1,115 1,017
Woori Bank (p)
6.125% due 05/03/16 1,330 1,329
WPP Finance UK Corp.
5.875% due 06/15/14 350 341
------------
104,860
------------
Loan Agreements - 0.3%
Avis Budget Holdings, Term Loan
6.350% due 06/12/30 520 520
AWAS, Second Lien Term Loan
11.000% due 03/13/21 700 700
Georgia Pacific Corp., First Lien Term Loan
6.880% due 12/20/12 1,047 1,053
6.979% due 12/20/12 50 50
Georgia Pacific Corp., Second Lien Term Loan
7.880% due 12/23/13 266 271
7.920% due 12/23/13 178 182
7.958% due 12/23/13 178 182
8.029% due 12/23/13 178 182
Healthsouth Corp., Term Loan B
8.150% due 03/10/13 1,900 1,900
NRG Energy, Inc., Term Loan
6.820% due 02/01/13 814 814
NRG Energy, Inc., Credit-Linked Deposit
6.979% due 02/01/13 186 186
United Air Lines, Inc., Term Loan B
8.625% due 02/01/12 1,138 1,144
United Air Lines, Inc., Term Loan
8.750% due 02/01/12 163 163
------------
7,347
------------
Mortgage-Backed Securities - 43.1%
Adjustable Rate Mortgage Trust (E)
Series 2005-3 Class 8A2
5.199% due 07/25/35 2,387 2,391
American Home Mortgage Investment Trust (E)
Series 2004-1 Class 1A
5.309% due 04/25/44 988 991
Series 2004-2 Class 4A2
3.635% due 02/25/44 53 53
</Table>
Multistrategy Bond Fund 117
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-4 Class 4A
4.390% due 02/25/45 1,014 985
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 2,290 2,247
Series 2004-4 Class A3
4.128% due 07/10/42 1,475 1,421
Series 2005-2 Class A5
4.857% due 07/10/43 290 273
Series 2006-1 Class A4
5.372% due 09/10/45 1,010 983
Series 2006-1 Class AJ
5.460% due 09/10/45 550 536
Banc of America Funding Corp.
Series 2005-5 Class 1A11
5.500% due 09/25/35 3,258 3,135
Series 2005-D Class A1 (E)
4.115% due 05/25/35 1,045 1,011
Series 2005-F Class 1A2 (E)
5.273% due 09/20/35 867 872
Series 2006-3 Class 5A8
5.500% due 03/25/36 2,800 2,698
Series 2006-A Class 3A2
5.944% due 02/20/36 1,467 1,474
Series 2006-A Class 4A1 (E)
5.576% due 02/20/36 2,978 2,953
Banc of America Mortgage Securities
Series 2003-D Class 1A2 (E)
5.499% due 05/25/33 14 14
Series 2003-I Class 2A4 (E)
3.828% due 10/25/33 521 517
Series 2004-1 Class 5A1
6.500% due 09/25/33 109 108
Series 2004-11 Class 2A1
5.750% due 01/25/35 2,645 2,583
Series 2005-9 Class 2A1
4.750% due 10/25/20 1,398 1,347
Series 2005-E Class 2A1 (E)
4.978% due 06/25/35 10 10
Series 2005-L Class 3A1 (E)
5.457% due 01/25/36 1,471 1,454
Bank of America Alternative Loan Trust
6.000% due 12/25/34 508 502
Series 2003-10 Class 2A1
6.000% due 12/25/33 673 667
Series 2003-10 Class 2A2 (E)
5.409% due 12/25/33 1,546 1,556
Series 2003-2 Class CB2 (E)
5.459% due 04/25/33 746 749
Series 2004-10 Class 1CB1
6.000% due 11/25/34 442 436
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-2 Class 1A1
6.000% due 03/25/34 452 448
Series 2005-3 Class 2A1
5.500% due 04/25/20 678 671
Series 2005-5 Class 2CB1
6.000% due 06/25/35 827 819
Series 2005-6 Class 7A1
5.500% due 07/25/20 898 887
Series 2005-9 Class 5A1
5.500% due 10/25/20 1,045 1,032
Bear Stearns Adjustable Rate Mortgage Trust
Series 2003-8 Class 4A1
4.679% due 01/25/34 688 677
Series 2005-10 Class A1 (E)
4.750% due 10/25/35 4,790 4,718
Series 2005-7 Class 1A2 (E)
4.750% due 08/25/35 456 443
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.415% due 05/25/35 1,781 1,782
Series 2006-3 Class 33A1
6.207% due 05/25/36 1,845 1,860
Bear Stearns Asset Backed Securities, Inc.
Series 2005-AC8 Class A5
5.500% due 11/25/35 1,462 1,445
Bear Stearns Commercial Mortgage Securities (p)
Series 2004-ESA Class E
5.064% due 05/14/16 825 818
Chase Mortgage Finance Corp.
Series 2003-S8 Class A2
5.000% due 09/25/18 2,097 2,027
Citigroup Mortgage Loan Trust, Inc.
Series 2005-11 Class A2A (E)
4.700% due 12/25/35 385 379
Series 2006-WF1 Class A2F
5.657% due 03/25/36 1,925 1,881
Citigroup/Deutsche Bank Commercial Mortgage
Trust
Series 2005-CD1 Class AJ
5.400% due 09/15/20 320 308
Commercial Mortgage Pass Through Certificates
(p)
Series 2001-J1A Class A2
6.457% due 02/14/34 705 728
</Table>
118 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Countrywide Alternative Loan Trust
Series 2004-28C Class 6A1
6.000% due 01/25/35 715 709
Series 2004-2CB Class 1A4 (E)
5.359% due 03/25/34 3,103 3,113
Series 2004-J7 Class 1A2
4.673% due 08/25/34 542 537
Series 2005-59 Class 1A2B (E)
5.183% due 11/20/35 1,640 1,646
Series 2005-63 Class 3A1
5.904% due 11/25/35 1,524 1,525
Series 2005-81 Class X1
6.483% due 02/25/37 7,900 442
Series 2005-J13 Class 2A3
5.500% due 11/25/35 1,028 999
Series 2006-2CB Class A3
5.500% due 03/25/36 1,141 1,133
Series 2006-OA1 Class 2X
Interest Only STRIP Zero coupon due 03/20/46 11,800 610
Series 2006-OA6 Class 1A3 (E)
5.279% due 04/25/36 1,700 1,700
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2004-16 Class 1A1 (E)
5.359% due 09/25/34 3,001 3,015
Series 2005-HYB Class 3A2 (E)
5.250% due 11/20/25 474 468
Series 2006-1 Class A2
6.000% due 03/25/36 1,190 1,166
Series 2006-HYB Class 2A1A
5.804% due 05/20/36 1,715 1,715
Series 2006-HYB Class 3A1A
6.143% due 05/20/36 1,680 1,691
Credit Suisse First Boston Mortgage Securities
Corp.
5.121% due 11/15/19 (E)(p) 2,056 2,056
Series 2001-SPG Class A2 (p)
6.515% due 08/13/18 400 419
Series 2003-29 Class 5A1
7.000% due 12/25/33 223 226
Series 2004-1 Class 3A1
7.000% due 02/25/34 85 86
Series 2004-C1 Class A3
4.321% due 01/15/37 1,895 1,801
Crown Castle Towers LLC (p)
5.074% due 06/15/35 460 442
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2003-3 Class 2A3
4.500% due 10/25/33 54 54
Series 2005-AR1 Class 2A3
5.031% due 08/25/35 2,810 2,771
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 1,699 1,720
Series 1999-CG1 Class S
1.033% due 03/10/32 19,546 458
Downey Savings & Loan Association Mortgage Loan
Trust
Series 2004-AR3 Class 1A1B (E)
6.092% due 07/19/44 970 981
Series 2006-AR1 Class 2A1A (E)
4.828% due 2,712 2,712
Fannie Mae
15 Year TBA (I)
4.500% 5,715 5,440
5.000% 15,090 14,687
5.500% 4,235 4,202
30 Year TBA (I)
4.500% 5,720 5,236
5.000% 78,580 74,307
6.000% 33,635 33,477
6.500% 9,620 9,780
7.000% 10,545 10,838
7.500% 825 858
7.000% due 2009 98 99
5.500% due 2016 115 115
6.000% due 2016 1,256 1,273
11.000% due 2016 121 133
5.000% due 2017 870 849
5.500% due 2017 555 551
6.000% due 2017 915 928
6.500% due 2017 413 422
4.500% due 2018 2,224 2,122
5.000% due 2018 18,196 17,752
5.000% due 2019 3,469 3,384
4.500% due 2020 2,348 2,240
5.000% due 2020 9,689 9,440
5.500% due 2020 642 637
7.500% due 2024 11 12
5.500% due 2025 1,218 1,192
5.791% due 2026 (E) 332 340
7.000% due 2026 355 366
9.000% due 2026 58 63
7.000% due 2027 10 11
7.500% due 2027 9 10
6.500% due 2028 3 3
7.000% due 2028 242 249
5.500% due 2029 2,011 1,962
7.000% due 2029 2,839 2,925
7.500% due 2029 69 74
</Table>
Multistrategy Bond Fund 119
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.000% due 2030 1,187 1,223
7.500% due 2030 475 494
8.000% due 2030 490 521
8.500% due 2030 1,095 1,183
9.500% due 2030 123 134
7.000% due 2031 2,332 2,402
7.500% due 2031 635 663
8.000% due 2031 875 933
8.500% due 2031 670 720
6.000% due 2032 3,502 3,496
6.500% due 2032 468 477
7.000% due 2032 7,420 7,639
7.500% due 2032 392 407
8.000% due 2032 4 5
8.500% due 2032 77 83
3.908% due 2033 (E) 2,454 2,395
4.666% due 2033 (E) 1,487 1,473
5.000% due 2033 4,602 4,377
5.500% due 2033 4,975 4,846
6.000% due 2033 1,141 1,137
7.000% due 2033 695 715
5.000% due 2034 5,321 5,056
5.500% due 2034 47,622 46,362
6.000% due 2034 2,127 2,121
7.000% due 2034 531 546
7.500% due 2034 364 379
4.202% due 2035 (E) 5,100 5,011
4.625% due 2035 (E) 3,655 3,615
4.836% due 2035 (E) 4,974 4,876
5.000% due 2035 1045 993
5.500% due 2035 76,214 74,071
6.000% due 2035 5,212 5,192
7.000% due 2035 19,821 20,388
7.500% due 2035 1,676 1,746
5.000% due 2036 1,853 1,766
5.500% due 2036 424 412
6.000% due 2036 669 666
7.000% due 2036 2,438 2,506
5.151% due 2040 (E) 868 876
30 Year TBA (I)
5.500% 131,015 127,207
Series 1992-10 Class ZD
8.000% due 11/25/21 629 641
Series 1996-46 Class ZA
7.500% due 11/25/26 303 322
Series 1997-281 Class 2
Interest Only STRIP
9.000% due 11/01/26 57 15
Series 1997-68 Class SC (E)
Interest Only STRIP
3.563% due 05/18/27 141 12
Series 2000-306 Class IO
Interest Only STRIP
8.000% due 05/01/30 63 16
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2001-317 Class 2
Interest Only STRIP
8.000% due 08/01/31 130 31
Series 2001-4 Class SA (E)
Interest Only STRIP
2.640% due 02/17/31 264 11
Series 2002-320 Class 2
Interest Only STRIP
7.000% due 03/01/32 39 10
Series 2002-50 Class SC (E)
Interest Only STRIP
3.141% due 12/25/29 47 1
Series 2003-122 Class AJ
4.500% due 02/25/28 514 498
Series 2003-16 Class NI
Interest Only STRIP
5.000% due 02/25/15 715 33
Series 2003-25 Class IK
Interest Only STRIP
7.000% due 04/25/33 457 109
Series 2003-32 Class FH (E)
5.359% due 11/25/22 2,428 2,443
Series 2003-32 Class UI
Interest Only STRIP
6.000% due 05/25/33 526 129
Series 2003-33 Class IA
6.500% due 05/25/33 2,413 406
Series 2003-35 Class IU
Interest Only STRIP
6.000% due 05/25/33 587 144
Series 2003-35 Class UI
Interest Only STRIP
6.500% due 05/25/33 585 146
Series 2003-64 Class JI
Interest Only STRIP
6.000% due 07/25/33 558 139
Series 2003-78 Class FI (E)
5.359% due 01/25/33 2,344 2,359
Series 2003-82 Class IA
Interest Only STRIP
6.000% due 08/25/32 595 101
Series 2003-82 Class WI
Interest Only STRIP
6.000% due 08/25/32 95 12
Series 2004-21 Class FL (E)
5.309% due 11/25/32 1,239 1,245
Series 2005-110 Class MB
5.500% due 09/25/35 1,875 1,859
</Table>
120 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-120 Class UF (E)
5.309% due 03/25/35 4,070 4,077
Series 2005-65 Class FP (E)
5.209% due 08/25/35 1,943 1,942
Series 2006-5 Class 3A2 (E)
4.685% due 05/25/35 300 292
Fannie Mae Grantor Trust
Series 1999-T2 Class A1
7.500% due 01/19/39 49 51
Series 2001-T8 Class A2
9.500% due 07/25/41 280 302
Series 2005-T2 Class 1A1 (E)
4.667% due 11/28/35 139 139
Fannie Mae Whole Loan
Series 2003-W17 Class 1A6
5.310% due 08/25/33 5,400 5,188
Series 2004-W11 Class 1A2
6.500% due 05/25/44 754 766
Series 2004-W9 Class 2A1
6.500% due 02/25/44 411 418
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2003-58 Class 1A2
3.108% due 05/25/35 12 12
Series 2003-58 Class 2A
6.500% due 09/25/43 383 388
Series 2004-H01 Class A1
2.614% due 07/15/11 508 504
Series 2005-63 Class 1A1 (E)
4.951% due 02/25/45 311 314
First Horizon Alternative Mortgage Securities
Series 2004-FA1 Class 1A1
6.250% due 10/25/34 1,204 1,205
First Horizon Asset Securities, Inc.
Series 2003-5 Class 1A17
8.000% due 07/25/33 149 157
Series 2004-AR5 Class 4A1 (E)
5.673% due 10/25/34 462 457
Series 2004-AR7 Class 1A1 (E)
4.467% due 02/25/35 589 588
Series 2005-AR5 Class 3A1 (E)
5.523% due 10/25/35 800 791
First Union-Lehman Brothers-Bank of America
Series 1998-C2 Class A2
6.560% due 11/18/35 17 17
Freddie Mac
15 Year TBA (I)
5.500% 11,150 11,049
30 Year TBA (I)
5.000% 23,025 21,766
5.500% 18,655 18,119
6.000% 1,340 1,335
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
12.000% due 2013 13 14
12.000% due 2014 18 19
11.000% due 2015 17 19
10.000% due 2016 56 61
12.000% due 2016 5 6
11.000% due 2020 64 71
5.801% due 2030 (E) 11 12
3.914% due 2034 (E) 419 416
4.630% due 2034 (E) 1,782 1,776
4.910% due 2034 (E) 3,585 3,527
4.820% due 2035 (E) 3,217 3,184
4.872% due 2035 (E) 5,184 5,085
Series 1991-103 Class Z
9.000% due 02/15/21 79 79
Series 1994-173 Class Z
7.000% due 05/15/24 400 420
Series 1998-191 Class IO
Interest Only STRIP
8.000% due 01/01/28 48 11
Series 1998-194 Class IO
Interest Only STRIP
6.500% due 04/01/28 284 67
Series 1999-212 Class SG (E)
Interest Only STRIP
2.063% due 06/17/27 2,281 83
Series 2000-224 Class SC (E)
Interest Only STRIP
2.599% due 08/15/30 91 3
Series 2000-226 Class F (E)
5.351% due 11/15/30 118 119
Series 2001-212 Class IO
Interest Only STRIP
6.000% due 05/01/31 450 108
Series 2001-215 Class IO
Interest Only STRIP
8.000% due 06/01/31 216 52
Series 2001-232 Class ZQ
6.500% due 06/15/31 1,819 1,889
Series 2002-246 Class SJ (E)
Interest Only STRIP
3.099% due 03/15/32 317 19
Series 2003-256 Class IM
Interest Only STRIP
5.000% due 09/15/14 869 44
Series 2003-259 Class IQ
Interest Only STRIP
5.000% due 06/15/17 1,700 211
</Table>
Multistrategy Bond Fund 121
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-261 Class DI
Interest Only STRIP
5.500% due 05/15/27 929 33
Series 2003-262 Class AB
2.900% due 11/15/14 2,659 2,553
Series 2003-263 Class YH
3.500% due 08/15/22 1,676 1,663
Series 2003-264 Class IM
Interest Only STRIP
7.000% due 07/15/33 537 130
Series 2003-266 Class MA
4.500% due 10/15/31 966 944
Series 2003-269 Class FE (E)
5.501% due 12/15/28 2,268 2,291
Series 2004-276 Class IP
Interest Only STRIP
5.500% due 07/15/23 2,601 167
Series 2004-277 Class UF (E)
5.201% due 06/15/33 3,094 3,103
Series 2004-281 Class DF (E)
5.351% due 06/15/23 875 881
Series 2004-287 Class GC
5.000% due 11/15/29 520 501
Series 2004-289 Class PC
5.000% due 07/15/30 1,060 1,023
Series 2005-291 Class KP
5.000% due 11/15/29 1,155 1,118
Series 2005-292 Class IG
Interest Only STRIP
5.000% due 04/15/23 1,178 216
Series 2005-292 Class NA
5.000% due 12/15/20 1,981 1,973
Series 2005-294 Class FA (E)
5.071% due 03/15/20 1,714 1,712
Series 2005-302 Class MB
5.000% due 12/15/28 640 625
Series 2005-303 Class AQ
4.500% due 10/15/22 4,859 4,810
Series 2005-305 Class JF (E)
5.201% due 10/15/35 1,952 1,952
Series 2005-306 Class PC
5.000% due 02/15/29 1,795 1,746
Series 2006-R00 Class AK
5.750% due 12/15/18 2,360 2,351
Freddie Mac Gold
6.000% due 2016 154 155
5.000% due 2018 294 286
5.500% due 2020 6,632 6,578
8.000% due 2020 154 164
10.500% due 2021 39 43
5.500% due 2024 896 878
8.500% due 2025 50 53
7.000% due 2027 286 295
8.500% due 2027 239 257
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.500% due 2028 67 70
7.500% due 2029 113 118
6.500% due 2030 8 8
7.500% due 2030 363 378
8.000% due 2030 118 127
8.500% due 2030 286 307
7.000% due 2031 560 576
7.500% due 2031 249 260
8.000% due 2031 324 343
7.000% due 2032 337 347
7.500% due 2032 202 210
5.000% due 2033 2,167 2,065
6.500% due 2033 388 395
7.000% due 2033 91 93
7.500% due 2033 143 150
GE Capital Commercial Mortgage Corp.
Series 2002-1A Class A3
6.269% due 12/10/35 710 735
Series 2002-3A Class A1
4.229% due 12/10/37 4,479 4,350
Series 2005-C3 Class A3FX
4.863% due 07/10/45 160 157
Series 2006-C1 Class A4
5.519% due 03/10/44 3,010 2,938
Ginnie Mae I
30 Year TBA (I)
5.500% 3,420 3,357
11.000% due 2010 38 41
11.500% due 2010 -- --
11.000% due 2013 12 13
10.500% due 2015 47 51
11.000% due 2015 3 4
10.500% due 2016 77 84
10.500% due 2021 78 89
10.000% due 2022 81 89
9.500% due 2023 328 359
10.000% due 2025 99 109
7.500% due 2031 92 96
Ginnie Mae II
4.375% due 2023 (E) 136 137
4.750% due 2023 (E) 26 26
5.125% due 2023 (E) 43 43
4.750% due 2024 (E) 183 184
5.125% due 2024 (E) 195 197
4.375% due 2025 (E) 395 398
4.750% due 2025 (E) 11 11
5.125% due 2025 (E) 17 17
</Table>
122 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.125% due 2026 (E) 91 91
8.500% due 2026 63 67
4.375% due 2027 (E) 150 151
4.750% due 2027 (E) 221 222
5.125% due 2029 (E) 606 610
Global Signal Trust (p)
Series 2004-2A Class A
4.232% due 12/15/14 655 631
Series 2006-1 Class B
5.588% due 02/15/36 415 411
Series 2006-1 Class C
5.707% due 02/15/36 635 629
GMAC Mortgage Corp. Loan Trust
Series 2005-AR2 Class 4A (E)
5.195% due 05/25/35 1,278 1,237
Series 2005-AR6 Class 3A1
5.299% due 11/19/35 2,538 2,502
Government National Mortgage Association
Series 1999-27 Class SE (E)
Interest Only STRIP
3.690% due 08/16/29 139 10
Series 1999-44 Class SA (E)
Interest Only STRIP
3.640% due 12/16/29 256 23
Series 2001-46 Class SA (E)
Interest Only STRIP
2.670% due 09/16/31 59 3
Series 2003-5 Class B
4.486% due 10/16/25 795 765
Greenpoint Mortgage Funding Trust
Series 2005-AR3 Class X1
Interest Only STRIP
5.148% due 08/25/45 9,334 308
Series 2005-AR4 Class X4
Interest Only STRIP Zero Coupon due 10/25/45 11,469 371
Series 2006-AR2 Class 3A2 (E)
5.279% due 08/25/35 2,628 2,631
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 1,575 1,537
Series 2005-GG5 Class A41
5.243% due 04/10/37 2,155 2,109
GS Mortgage Securities Corp. (p)
Series 2006-01A
2.076% due 11/26/28 7,600 338
GS Mortgage Securities Corp. II
Series 2006-GG6 Class A4
5.553% due 04/10/38 1,015 1,001
Series 2006-GG6 Class AJ
5.782% due 04/10/38 675 668
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GSMPS Mortgage Loan Trust (p)
Series 1998-3 Class A
7.750% due 09/19/27 187 194
Series 1999-3 Class A
8.000% due 08/19/29 346 362
Series 2005-RP1 Class 1A3
8.000% due 01/25/35 1,007 1,057
Series 2005-RP1 Class 1A4
8.500% due 01/25/35 555 589
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.404% due 06/25/34 1,878 1,841
Series 2005-AR6 Class 2A1 (E)
4.540% due 09/25/35 4,856 4,745
Harborview Mortgage Loan Trust
Series 2005-10 Class 2A1B (E)
5.290% due 11/19/35 1,450 1,460
Series 2005-14 Class 3A1A
5.225% due 12/19/35 796 788
Series 2005-16 Class 3A1B (E)
5.250% due 01/19/36 1,884 1,888
Series 2005-16 Class X1
Interest Only STRIP
1.683% due 01/19/36 7,471 266
Series 2005-16 Class X3
Interest Only STRIP
1.373% due 01/19/36 19,405 685
Series 2005-2 Class X
Interest Only STRIP
1.098% due 05/19/35 14,971 393
Series 2005-3 Class X2
Interest Only STRIP
0.792% due 06/19/35 13,690 359
Series 2005-5 Class 2A1B (E)
5.200% due 07/19/45 979 981
Series 2006-1 Class 2A1A (E)
5.150% due 03/19/37 1,815 1,814
Series 2006-1 Class PO1
Principal Only STRIP
Zero coupon due 03/19/37 -- --
Series 2006-1 Class X1
Interest Only STRIP
1.321% due 03/19/37 10,800 560
Impac CMB Trust (E)
Series 2004-3 Class 1A
5.209% due 06/25/34 596 597
</Table>
Multistrategy Bond Fund 123
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Impac Secured Assets CMN Owner Trust (E)
Series 2004-3 Class 1A1
5.159% due 11/25/34 80 80
IndyMac Index Mortgage Loan Trust
Series 2004-AR4 Class 1A
4.583% due 08/25/34 1,147 1,141
Series 2005-AR1 Class AX2
Interest Only STRIP
0.807% due 07/25/35 10,130 367
Series 2005-AR2 Class 1A21
5.900% due 12/25/35 1,118 1,119
Series 2005-AR3 Class 1A1 (E)
5.201% due 01/25/36 2,591 2,574
Series 2006-AR6 Class 2A1B (E)
5.220% due 06/25/47 2,625 2,625
Series 2006-AR7 Class 5A1
6.166% due 05/25/36 1,195 1,199
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C1 Class A3
5.376% due 07/12/37 1,155 1,144
Series 2003-C1 Class A2
4.985% due 01/12/37 1,526 1,473
Series 2004-FL1 Class A1 (E)(p)
5.071% due 04/16/19 366 366
Series 2004-LN2 Class A1
4.475% due 07/15/41 1,838 1,768
Series 2005-CB1 Class A4
5.335% due 08/12/37 1,410 1,370
Series 2005-LDP Class A4
5.346% due 12/15/44 1,985 1,919
Series 2005-LDP Class AJ
4.842% due 07/15/42 820 764
Series 2006-CB1 Class A4
5.481% due 12/12/44 1,520 1,491
Series 2006-CB1 Class AJ
5.679% due 12/12/44 275 270
Series 2006-LDP Class D
5.776% due 04/15/43 185 181
JP Morgan Mortgage Trust
Series 2005-A2 Class 2A1
4.711% due 04/25/35 603 606
Series 2005-A6 Class 1A2
5.153% due 09/25/35 1,470 1,423
LB-UBS Commercial Mortgage Trust
Series 2004-C4 Class A3
5.155% due 06/15/29 3,135 3,095
Series 2005-C5 Class A2
4.885% due 09/15/30 1,315 1,290
Series 2006-C1 Class A2
5.084% due 02/15/31 395 389
Series 2006-C3 Class AJ
5.720% due 03/15/39 75 74
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lehman Mortgage Trust
Series 2005-2 Class 2A3
5.500% due 12/25/35 1,190 1,184
Series 2005-3 Class 1A3
5.500% due 01/25/36 3,880 3,847
Luminent Mortgage Trust (E)
Series 2006-1 Class A1
5.199% due 04/25/36 1,837 1,837
Series 2006-3 Class 11A2
5.220% due 09/25/35 1,700 1,700
Mastr Alternative Loans Trust
Series 2003-4 Class B1
5.655% due 06/25/33 1,186 1,167
Series 2003-6 Class 3A1
8.000% due 09/25/33 155 157
Series 2003-9 Class 1A1
5.500% due 12/25/18 481 475
Series 2005-3 Class 7A1
6.000% due 04/25/35 894 886
Mastr Asset Securitization Trust
Series 2003-11 Class 6A8 (E)
5.459% due 12/25/33 2,655 2,663
Series 2005-2 Class 1A1
5.250% due 11/25/35 4,404 4,293
Mastr Reperforming Loan Trust
Series 2005-1 Class 1A5 (p)
8.000% due 08/25/34 785 823
Series 2005-2 Class 1A4 (p)
8.000% due 05/25/35 1,254 1,262
Mastr Specialized Loan Trust(p)
5.150% due 07/25/35 673 659
Mellon Residential Funding Corp. (E)
Series 2000-TBC Class A1
5.141% due 06/15/30 1,258 1,288
Merrill Lynch Mortgage Investors, Inc. (E)
Series 2005-A6 Class 2A1
5.079% due 08/25/35 1,487 1,487
Merrill Lynch Mortgage Trust
4.350% due 11/15/10 (p) 180 177
4.330% due 11/25/10 (p) 185 182
Series 2002-MW1 Class J (p)
5.695% due 07/12/34 365 343
Series 2004-BPC Class A3
4.467% due 10/12/41 365 347
Series 2004-MKB Class A2
4.353% due 02/12/42 1,940 1,884
</Table>
124 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-CIP Class A2
4.960% due 07/12/38 225 221
Series 2005-CIP Class B
5.274% due 07/12/38 400 383
MLCC Mortgage Investors, Inc.
Series 2004-HB1 Class A2 (E)
5.110% due 04/25/29 726 726
Series 2005-1 Class 1A
4.738% due 04/25/35 822 825
Morgan Stanley Capital I
Series 1999-FNV Class G (p)
6.120% due 03/15/31 400 402
Series 2005-HQ6 Class A2A
4.882% due 08/13/42 595 582
Series 2005-IQ1 Class AAB
5.178% due 09/15/42 2,510 2,451
Series 2006-HQ8 Class A4
5.561% due 03/12/44 2,685 2,637
Morgan Stanley Mortgage Loan Trust
Series 2006-2 Class 6A
6.500% due 02/25/36 734 743
Nationslink Funding Corp.
Series 1999-SL Class A4
6.654% due 11/10/30 94 94
Nomura Asset Acceptance Corp.
Series 2005-AP1 Class 2A1 (E)
5.109% due 02/25/35 289 289
Series 2005-WF1 Class 2A2
4.786% due 03/25/35 1,285 1,259
Prime Mortgage Trust
Series 2004-CL1 Class 1A1
6.000% due 02/25/34 287 282
Series 2004-CL1 Class 1A2 (E)
5.359% due 02/25/34 207 207
Series 2004-CL1 Class 2A2 (E)
5.359% due 02/25/19 58 58
Residential Accredit Loans, Inc.
Series 2004-QS5 Class A6 (E)
5.559% due 04/25/34 505 506
Series 2004-QS8 Class A4 (E)
5.359% due 06/25/34 2,356 2,366
Series 2005-QA1 Class A41
5.733% due 09/25/35 2,929 2,913
Series 2005-QA8 Class NB3
5.517% due 07/25/35 1,607 1,602
Series 2006-QO1 Class 1A1 (E)
5.219% due 02/25/46 1,109 1,107
Series 2006-QO1 Class 2A1 (E)
5.229% due 02/25/46 947 950
Residential Asset Mortgage Products, Inc.
Series 2004-SL1 Class A3
7.000% due 11/25/31 294 299
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-SL4 Class A3
6.500% due 07/25/32 523 531
Series 2005-SL1 Class A2
6.000% due 05/25/32 787 794
Residential Asset Securitization Trust (E)
Series 2003-A15 Class 1A2
5.409% due 02/25/34 2,633 2,642
Residential Funding Mortgage Securities I (E)
Series 2003-S14 Class A5
5.359% due 07/25/18 1,985 1,993
Series 2003-S5 Class 1A2
5.409% due 11/25/18 1,311 1,319
Sequoia Mortgage Trust (E)
Series 2004-3 Class A
5.306% due 05/20/34 4,747 4,748
Small Business Administration Participation
Certificates
5.520% due 06/01/24 368 366
Structured Adjustable Rate Mortgage Loan Trust
Series 2004-18 Class 5A
5.500% due 12/25/34 522 513
Structured Asset Mortgage Investments, Inc.
Series 2006-AR3 Class 11A2 (E)
5.270% due 04/25/36 3,175 3,175
Series 2006-AR3 Class 3A1 (E)
5.180% due 02/25/36 1,790 1,790
Series 2006-AR5 Class 182
5.000% due 05/25/45 2,075 2,075
Structured Asset Securities Corp.
Series 2002-22H Class 1A
6.983% due 11/25/32 117 119
Series 2004-12H Class 1A
6.000% due 05/25/34 508 501
Series 2004-21X Class 1A3
4.440% due 12/25/34 3,410 3,349
Thornburg Mortgage Securities Trust (E)
Series 2005-3 Class 1A1
5.189% due 10/25/35 1,199 1,200
Wachovia Bank Commercial Mortgage Trust
Series 2005-C16 Class A2
4.380% due 10/15/41 3,330 3,218
</Table>
Multistrategy Bond Fund 125
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-C23 Class AJ
5.515% due 01/15/45 160 156
Washington Mutual Alternative Mortgage
Pass-Through Certificates
Series 2005-9 Class 3CB
5.500% due 10/25/20 745 736
Series 2006-2 Class 2CB
6.500% due 03/25/36 1,091 1,093
Series 2006-AR2 Class A1A (E)
4.951% due 04/25/46 2,115 2,117
Washington Mutual, Inc.
Series 2002-AR9 Class 1A (E)
5.151% due 08/25/42 958 959
Series 2003-AR4 Class A7 (E)
3.950% due 05/25/33 134 130
Series 2003-AR9 Class 1A7 (E)
4.052% due 09/25/33 910 888
Series 2003-S9 Class A2 (E)
5.509% due 10/25/33 2,494 2,507
Series 2004-AR1 Class A2C (E)
5.135% due 07/25/44 184 184
Series 2004-AR1 Class A3 (E)
5.135% due 10/25/44 431 433
Series 2004-AR1 Class X
0.609% due 07/25/44 13,156 247
0.634% due 10/25/44 20,425 357
Series 2004-AR8 Class X
0.381% due 06/25/44 7,560 135
Series 2004-CB3 Class 1A
6.000% due 10/25/34 377 371
Series 2004-CB3 Class 4A
6.000% due 10/25/19 862 870
Series 2005-AR1 Class 1A1
4.843% due 10/25/35 1,990 1,962
Series 2005-AR1 Class A1A1 (E)
5.249% due 10/25/45 645 649
Series 2005-AR1 Class A1B1 (E)
5.249% due 08/25/45 1,102 1,105
5.219% due 10/25/45 1,877 1,881
5.209% due 11/25/45 1,505 1,509
5.209% due 12/25/45 3,124 3,123
Series 2005-AR1 Class A1C1 (E)
5.149% due 12/25/45 2,536 2,536
Series 2005-AR6 Class B3 (E)
5.619% due 04/25/45 1,369 1,365
Series 2005-AR8 Class 2AB3 (E)
5.319% due 07/25/45 1,547 1,555
Series 2006-AR4 Class 1A1B (E)
4.828% due 05/25/46 2,250 2,246
Wells Fargo Mortgage Backed Securities Trust
Series 2004-I Class 1A1
3.387% due 07/25/34 929 936
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-T Class A1 (E)
3.452% due 09/25/34 898 899
Series 2005-12 Class 1A7
5.500% due 11/25/35 1,643 1,566
Series 2005-17 Class 1A1
5.500% due 01/25/36 1,605 1,539
Series 2005-17 Class 1A2
5.500% due 01/25/36 1,281 1,226
Series 2005-AR1 Class 2A1
4.946% due 10/25/35 579 573
Series 2006-1 Class A3
5.000% due 03/25/21 1,617 1,561
Series 2006-2 Class 2A3
5.500% due 03/25/36 3,162 3,112
Series 2006-2 Class 3A1
5.750% due 03/25/36 1,726 1,690
Series 2006-4 Class 1A8
5.750% due 04/25/36 1,035 1,026
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 2,062 2,024
Series 2006-AR4 Class 1A1 (E)
5.870% due 04/25/36 2,157 2,148
Series 2006-AR4 Class 2A1 (E)
5.798% due 04/25/36 3,356 3,326
Series 2006-AR5 Class 2A1 (E)
5.552% due 04/25/36 560 557
------------
976,275
------------
Municipal Bonds - 0.6%
California State University Revenue Bonds weekly
demand (u)
5.000% due 11/01/30 435 450
New Jersey Economic Development Authority
Revenue Bonds weekly demand
5.750% due 06/15/34 745 785
New York City Municipal Water Finance Authority
Revenue Bonds weekly demand
4.750% due 06/15/38 4,800 4,722
New York State Urban Development Corp. Revenue
Bonds weekly demand (u)
5.250% due 03/15/34 540 572
State of California General Obligation
Unlimited, weekly demand
5.000% due 02/01/33 370 376
</Table>
126 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
State of Illinois General Obligation Unlimited
5.100% due 06/01/33 480 431
State of Oregon General Obligation Unlimited
5.892% due 06/01/27 555 551
State of Texas General Obligation Unlimited
weekly demand
4.750% due 04/01/35 450 449
Tobacco Settlement Authority of Iowa
6.500% due 06/01/23 400 393
Tobacco Settlement Financing Corp. Revenue Bonds
weekly demand
5.750% due 06/01/32 4,155 4,311
West Virginia Economic Development Authority
Revenue Bonds
5.370% due 07/01/20 (u) 200 191
6.070% due 07/01/26 655 641
------------
13,872
------------
Non-US Bonds - 0.9%
Brazilian Government International Bond
12.500% due 01/05/16 BRL 1,788 852
Bundesrepublik Deutschland
5.000% due 07/04/11 EUR 1,355 1,808
General Motors Corp. (p)
7.250% due 07/03/13 EUR 310 301
International Bank for Reconstruction &
Development
Zero coupon due 08/20/07 NZD 950 556
Mexican Bonos
10.000% due 12/05/24 MXN 9,130 914
Poland Government Bond
6.250% due 10/24/15 PLN 1,190 418
Province of Ontario
4.500% due 03/08/15 CAD 890 783
Province of Quebec Canada
5.000% due 12/01/15 CAD 1,529 1,380
Quebec Residual Zero coupon due 12/01/36 CAD 2,790 513
Queensland Treasury Corp.
6.000% due 10/14/15 AUD 2,854 2,195
Russia Paris Club Participant (A)
1.975% due 08/20/20 JPY 54,946 483
Sweden Government Bond
4.000% due 12/01/09 SEK 6,855 949
4.500% due 08/12/15 SEK 3,480 497
5.000% due 12/01/20 SEK 2,005 304
United Kingdom Gilt
5.750% due 12/07/09 GBP 2,800 5,286
8.000% due 09/27/13 GBP 1,050 2,313
------------
19,552
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Registered Investment Company Funds - 0.0%
Pacific Investment Management Co.
Series High Yield Portfolio Institutional 21 175
------------
United States Government Agencies - 1.1%
Fannie Mae
3.875% due 02/15/10 3,405 3,250
4.375% due 03/15/13 (N) 1,270 1,202
Zero coupon due 10/09/19 2,155 972
Financing Corp.
Zero coupon due 05/11/16 400 231
Zero coupon due 06/06/16 1,185 681
Zero coupon due 12/27/16 1,410 784
Zero coupon due 10/06/17 2,385 1,280
Zero coupon due 11/30/17 3,540 1,883
Zero coupon due 02/08/18 365 192
Zero coupon due 04/06/18 1,805 939
Zero coupon due 08/03/18 3,205 1,634
Zero coupon due 11/02/18 2,485 1,248
Zero coupon due 12/06/18 1,770 883
Zero coupon due 12/27/18 3,800 1,890
Zero coupon due 04/05/19 1,445 707
Zero coupon due 09/26/19 3,000 1,428
Freddie Mac
4.375% due 11/16/07 465 460
2.750% due 03/15/08 (N) 1,060 1,015
4.750% due 01/18/11 2,685 2,627
4.750% due 01/19/16 (N) 1,070 1,019
Residual Funding (N)
Principal Only STRIP
Zero coupon due 10/15/20 400 182
------------
24,507
------------
United States Government Treasuries - 12.0%
United States Treasury (N)
Principal Only STRIP
Zero coupon due 11/15/13 4,645 3,182
</Table>
Multistrategy Bond Fund 127
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Treasury Inflation Indexed Bonds
3.875% due 01/15/09 (N) 3,441 3,612
2.375% due 04/15/11 3,694 3,717
3.375% due 01/15/12 (N) 6,344 6,733
3.000% due 07/15/12 (N) 3,812 3,974
2.000% due 07/15/14 (N) 21,745 21,192
1.875% due 07/15/15 (N) 403 387
2.000% due 01/15/16 (N) 110 106
2.375% due 01/15/25 (N) 4,216 4,165
2.000% due 01/15/26 (N) 1,001 931
3.625% due 04/15/28 (N) 614 739
United States Treasury Notes
3.125% due 05/15/07 (N) 21,250 20,864
4.375% due 05/15/07 (N) 10,750 10,692
4.375% due 12/31/07 (N) 4,255 4,220
3.375% due 02/15/08 (N) 9,000 8,769
4.875% due 04/30/08 20,885 20,887
4.375% due 12/15/10 (N) 47,420 46,359
5.000% due 02/15/11 (N) 1,380 1,386
4.500% due 02/28/11 (N) 370 363
4.750% due 03/31/11 (N) 4,065 4,033
5.000% due 08/15/11 (N) 1,000 1,004
3.875% due 02/15/13 7,100 6,647
4.250% due 08/15/15 (N) -- --
4.500% due 02/15/16 (N) 3,615 3,457
8.750% due 05/15/17 (N) 445 578
8.125% due 08/15/19 (N) 13,425 17,076
8.125% due 08/15/21 (N) 1,275 1,650
6.250% due 08/15/23 (N) 750 829
7.625% due 02/15/25 (N) 2,500 3,180
6.000% due 02/15/26 (N) 25,665 27,800
6.375% due 08/15/27 (N) 7,675 8,703
Principal Only STRIP
Zero coupon due 02/15/27 (N) 7,750 2,576
6.125% due 08/15/29 (N) 14,650 16,249
5.375% due 02/15/31 (N)(sec.) 2,065 2,096
4.500% due 02/15/36 (N) 14,555 13,080
------------
271,236
------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,921,969) 1,898,085
------------
COMMON STOCKS - 0.1%
Financial Services - 0.1%
Emerging Market Local Currency (AE) 285,202 3,258
------------
TOTAL COMMON STOCKS
(cost $3,201) 3,258
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 0.2%
Financial Services - 0.1%
DG Funding Trust (p) 191 2,030
------------
Producer Durables - 0.0%
Nexen, Inc. 12,590 319
------------
Utilities - 0.1%
Rural Cellular Corp. (AE) 1,725 1,984
------------
TOTAL PREFERRED STOCKS
(cost $4,329) 4,333
------------
WARRANTS & RIGHTS - 0.0%
Consumer Discretionary - 0.0%
Travelcenters of America, Inc. (AE)
2009 Warrants 30 --
------------
Materials and Processing - 0.0%
Solutia, Inc. (AE)(p)
2009 Warrants 850 --
------------
Miscellaneous - 0.0%
Mexico Government International Bond Value
Recovery Rights (AE)
Series D 5,887,000 38
Series E 3,950,000 103
------------
141
------------
Utilities - 0.0%
GT Group Telecom, Inc. (AE)(p)
2010 Warrants 1 --
------------
TOTAL WARRANTS & RIGHTS
(cost $183) 141
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.1%
Cross Currency Options
(Fund Pays/Fund Receives)
USD/JPY May 2006 115.00 Put (3) 3,600 65
</Table>
128 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
$ $
- -----------------------------------------------------------------------------
Eurodollar Futures
Sept 2006 92.50 Put (168) 420 1
Sept 2006 93.00 Put (167) 418 1
Sept 2006 94.00 Put (225) 563 2
Dec 2006 91.75 Put (186) 465 1
Dec 2006 92.00 Put (504) 1,260 3
Dec 2006 92.25 Put (209) 523 1
Dec 2006 92.50 Put (226) 565 1
Dec 2006 92.75 Put (150) 375 1
May 2007 92.25 Put (310) 775 2
Forward Volatility Agreements
(Fund Pays/Fund Receives)
USD/JPY 1 Year
Aug 2006 117.15 Call (3) 8,000 1,113
Swaptions
(Fund Pay/Fund Receives)
USD Three Month LIBOR/USD 5.000%
Mar 2006 0.00 Call (2) 30,000 74
USD Three Month LIBOR/USD 4.750%
Aug 2006 0.00 Call (1) 7,000 1
USD Three Month LIBOR/USD 4.250%
Oct 2006 0.00 Call (2) 16,000 --
USD Three Month LIBOR/USD 4.500%
Oct 2006 0.00 Call (4) 45,900 2
USD Three Month LIBOR/ USD 4.800%
Dec 2006 0.00 Call (1) 17,000 12
------------
TOTAL OPTIONS PURCHASED
(cost $582) 1,280
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
SHORT-TERM INVESTMENTS - 32.2%
Abitibi-Consolidated, Inc. (N)
6.950% due 12/15/06 438 440
American General Finance Corp. (E)
Series MTNG
4.980% due 03/23/07 300 300
ANZ, Inc. Discount Notes (c)(z)
4.645% due 05/16/06 18,000 17,965
Arizona Public Service Co.
6.750% due 11/15/06 180 181
Avista Corp.
7.750% due 01/01/07 55 56
Bank of Ireland Governor & Co. (c)(z)
4.680% due 05/23/06 17,200 17,151
</Table>
<Table>
- -----------------------------------------------------------------------------
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
------------
Barclays Bank PLC (z)
4.485% due 01/29/07 6,200 6,215
Barclays US Funding, LLC
4.645% due 05/15/06 (c)(z) 12,400 12,378
4.890% due 07/05/06 1,500 1,487
BNP Paribas Financial, Inc. (z)
4.480% due 05/10/06 (c) 16,300 16,282
4.930% due 07/13/06 3,800 3,761
Caremark Rx, Inc.
7.375% due 10/01/06 1,742 1,756
CC Funding Trust I
6.900% due 02/16/07 685 692
Countrywide Home Loans, Inc. (N)
Series MTNK
5.500% due 02/01/07 135 135
CSX Corp. (E)
4.990% due 08/03/06 282 282
DaimlerChrysler NA Holding Corp. (E)
Series MTND
5.100% due 11/17/06 2,800 2,803
Danske Corp. (z)
4.740% due 06/08/06 (c) 1,100 1,094
4.840% due 06/27/06 (c) 600 595
4.955% due 07/20/06 14,200 14,042
4.980% due 07/26/06 4,200 4,146
Dexia Del LLC (z)
4.755% due 05/05/06 18,000 17,990
DNB NOR Bank ASA (c)(z)
4.840% due 06/12/06 2,300 2,287
Duke Capital LLC
4.302% due 05/18/06 320 320
Duke Energy Field Services LLC
5.750% due 11/15/06 80 80
Fannie Mae (E)(N)
4.810% due 09/22/06 2,000 1,999
Fannie Mae Discount Notes (z)
4.669% due 05/01/06 (c) 2,800 2,800
Zero coupon due 06/30/06 3,685 3,655
Federal Home Loan Bank Discount Note (c)(z)
Zero coupon due 06/07/06 2,275 2,264
Federal Home Loan Bank Discount Notes (c)(z)
4.660% due 05/02/06 18,300 18,298
4.670% due 05/04/06 1,000 1,000
</Table>
Multistrategy Bond Fund 129
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
FedEx Corp.
2.650% due 04/01/07 220 214
Ford Motor Credit Co. (E)
5.090% due 03/13/07 2,250 2,194
FPL Group Capital, Inc.
4.086% due 02/16/07 486 481
France Treasury Bills BTF
Zero coupon due 05/04/06 EUR 2,900 3,658
Frank Russell Investment Company Money Market
Fund 291,534,000 291,534
Freddie Mac Discount Notes (z)
Zero coupon due 06/12/06 (c) 13,050 12,980
Zero coupon due 06/26/06 (c) 12,000 11,914
Zero coupon due 06/28/06 11,750 11,658
Zero coupon due 06/30/06 3,210 3,184
General Electric Capital Corp. (z)
4.975% due 07/24/06 18,800 18,580
General Motors Acceptance Corp.
6.125% due 09/15/06 (N) 2,100 2,083
5.968% due 01/16/07 (E) 1,500 1,474
German Treasury Bill
Zero coupon due 07/12/06 EUR 1,300 1,632
Zero coupon due 09/13/06 EUR 3,000 3,746
GTE Hawaiian Telephone Co.
Series B
7.375% due 09/01/06 200 200
Hartford Financial Services Group, Inc.
2.375% due 06/01/06 40 40
HBOS Treasury Service PLC (z)
4.985% due 07/28/06 18,900 18,667
Healthsouth Corp.
8.150% due 03/10/07 500 496
ING US Funding, LLC (c)(z)
4.870% due 06/27/06 5,000 4,961
4.885% due 06/27/06 14,000 13,892
JPMorgan Chase & Co.
5.350% due 03/01/07 160 160
Kerr-McGee Corp.
5.875% due 09/15/06 45 45
Liberty Media Corp. (E)
6.410% due 09/17/06 1,128 1,132
Marsh & McLennan Cos., Inc.
5.375% due 03/15/07 1,480 1,475
Monongahela Power Co.
5.000% due 10/01/06 630 628
Netherlands Government Bond
5.750% due 02/15/07 EUR 490 631
Northrop Grumman Corp.
4.079% due 11/16/06 155 154
Panhandle Eastern Pipe Line
Series B
2.750% due 03/15/07 125 122
</Table>
<Table>
- -----------------------------------------------------------------------------
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
Premium Asset Trust (p)
5.103% due 02/02/07 780 779
Rabobank USA Financial Corp. (c)(z)
4.820% due 05/01/06 18,800 18,800
RC Trust 1 Equity Preferred
7.000% due 05/15/06 1,340 670
Skandinaviska Enskilda Banken (z)
4.830% due 06/22/06 (c) 1,400 1,390
4.840% due 06/22/06 (c) 17,400 17,278
4.960% due 07/20/06 1,300 1,283
Societe Generale NA (z)
4.670% due 05/23/06 (c) 1,000 997
4.760% due 06/24/06 (c) 2,000 1,989
4.940% due 07/11/06 9,400 9,307
4.990% due 08/22/06 7,700 7,578
Sprint Capital Corp.
4.780% due 08/17/06 626 625
Swedbank (c)(z)
4.790% due 06/14/06 17,700 17,596
Total Fina Elf (c)(z)
4.830% due 05/01/06 18,800 18,800
Toyota Motor Corp.
Zero coupon due 03/10/07 500 496
TXU Corp.
Series J
6.375% due 06/15/06 125 125
UBS Financial Del, LLC (z)
4.820% due 05/01/06 (c) 600 600
4.600% due 05/08/06 (c) 7,100 7,094
4.850% due 06/29/06 1,400 1,389
4.930% due 07/10/06 10,900 10,794
4.990% due 08/22/06 800 787
United States Treasury Bills (z)
4.592% due 06/01/06 (c)(sec.) 1,540 1,534
4.622% due 06/01/06 (c)(sec.) 250 249
4.625% due 06/01/06 (c)(sec.) 1,275 1,270
4.606% due 06/15/06 (c)(N)(sec.) 500 497
4.615% due 06/15/06 (c)(N)(sec.) 2,000 1,989
4.616% due 06/15/06 (c)(N)(sec.) 275 273
4.641% due 06/15/06 (c)(N) 25 25
4.648% due 06/15/06 (c)(N) 25 25
4.652% due 06/15/06 (c)(N) 100 99
4.664% due 06/15/06 (c)(N) 25 25
4.672% due 06/15/06 (c)(N) 50 50
4.683% due 06/15/06 (c)(N) 20 20
4.414% due 07/13/06 (sec.) 650 644
4.745% due 08/31/06 (sec.) 50 49
4.758% due 08/31/06 (sec.) 200 197
</Table>
130 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Treasury Notes (N)
4.625% due 05/15/06 620 620
3.500% due 11/15/06 14,400 14,288
3.000% due 12/31/06 15,770 15,566
3.750% due 03/31/07 7,815 7,731
Westpac Banking Corp. (z)
4.715% due 05/30/06 (c) 5,200 5,180
4.980% due 07/24/06 1,200 1,186
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $730,178) 730,283
------------
OTHER SECURITIES - 13.9%
Frank Russell Investment Company Money Market
Fund (X) 82,520,368 82,520
State Street Securities Lending Quality Trust
(X) 232,470,307 232,470
------------
TOTAL OTHER SECURITIES
(cost $314,990) 314,990
------------
TOTAL INVESTMENTS - 130.3%
(identified cost $2,975,432) 2,952,370
OTHER ASSETS AND LIABILITIES,
NET - (30.3%) (686,536)
------------
NET ASSETS - 100.0% 2,265,834
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 131
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Eurodollar Futures (CME)
expiration date 09/06 (100) 23,690 8
expiration date 12/06 (675) 159,899 (596)
expiration date 03/07 (657) 155,693 (721)
expiration date 06/07 (606) 143,637 (574)
expiration date 09/07 (516) 122,311 (464)
expiration date 12/07 (352) 83,428 (288)
expiration date 03/08 (88) 20,854 (12)
United States Treasury Bonds
expiration date 06/06 (109) 11,646 (592)
United States Treasury 2 Year Notes
expiration date 06/06 (410) 85,531 (166)
United States Treasury 5 Year Notes
expiration date 06/06 (215) 22,394 (151)
United States Treasury 10 Year Notes
expiration date 06/06 (1,682) 177,582 (2,795)
Short Positions
Germany, Federal Republic
10 Year Bonds
expiration date 06/06 (2) 317 11
United States Treasury Bonds
expiration date 06/06 (33) 3,526 177
United States Treasury 2 Year Notes
expiration date 06/06 (37) 7,538 22
United States Treasury 5 Year Notes
expiration date 06/06 (257) 26,761 298
United States Treasury 10 Year Notes
expiration date 06/06 (227) 24,433 211
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (a) (5,632)
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Cross Currency Options
(Fund Pays/Fund Receives)
USD/JPY May 2006 112.00 Put (3) 3,600 (19)
USD/JPY May 2006 116.00 Put (1) 1,300 (33)
USD/JPY Jul 2006 116.00 Put (1) 500 (3)
Eurodollar Futures
Sep 2006 95.50 Call (23) 5,941 --
Sep 2006 95.00 Put (43) 10,213 (31)
Sep 2006 95.25 Put (93) 22,146 (114)
Sep 2006 95.50 Put (23) 5,491 (43)
Dec 2006 95.00 Put (17) 4,038 (14)
Dec 2006 95.25 Put (565) 134,541 (741)
Dec 2006 95.50 Put (44) 10,505 (83)
Mar 2007 95.25 Put (24) 5,715 (32)
Mar 2007 94.75 Put (22) 5,211 (13)
Swaptions
(Fund Pay/Fund Receives)
GBP Six Month LIBOR/GBP 4.500%
Dec 2006 0.00 Put (1) 10,800 (98)
USD Three Month LIBOR/ USD 4.300%
Oct 2006 0.00 Call (1) 4,000 --
USD Three Month LIBOR/ USD 4.310%
Oct 2006 0.00 Call (2) 4,000 --
USD Three Month LIBOR/ USD 4.540%
Oct 2006 0.00 Call (2) 10,100 (1)
USD Three Month LIBOR/ USD 4.560%
Oct 2006 0.00 Call (1) 8,000 (2)
USD Three Month LIBOR/ USD 4.780%
Aug 2006 0.00 Call (1) 3,000 (1)
USD Three Month LIBOR/ USD 4.850%
Dec 2006 0.00 Call (1) 7,000 (12)
USD Three Month LIBOR/ USD 5.040%
Mar 2007 0.00 Call (2) 13,000 (66)
United States Treasury Notes
10 Year Futures
May 2006 106.00 Call (62) 6,572 (18)
May 2006 108.00 Call (19) 2,052 --
May 2006 109.00 Call (98) 10,682 (2)
May 2006 105.00 Put (221) 23,205 (55)
---------------
Total Liability for Options Written
(premiums received $1,380) (1,381)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
132 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 412 AUD 568 05/08/06 19
USD 440 AUD 597 05/08/06 13
USD 456 AUD 629 05/08/06 22
USD 519 AUD 695 05/08/06 9
USD 75 CAD 87 05/03/06 3
USD 462 CAD 536 05/08/06 18
USD 78 CAD 87 06/15/06 --
USD 469 CNY 3,629 03/19/07 --
USD 200 CNY 1,544 03/20/07 --
USD 697 EUR 560 05/03/06 10
USD 6 EUR 5 05/08/06 --
USD 444 EUR 360 05/08/06 10
USD 453 EUR 367 05/08/06 11
USD 455 EUR 369 05/08/06 11
USD 589 EUR 478 05/08/06 14
USD 595 EUR 492 05/08/06 27
USD 599 EUR 478 05/08/06 5
USD 1,080 EUR 906 05/08/06 64
USD 1,107 EUR 913 05/08/06 46
USD 1,635 EUR 1,359 05/08/06 80
USD 2,053 EUR 1,673 05/08/06 59
USD 520 EUR 421 05/25/06 12
USD 582 EUR 472 06/06/06 15
USD 3,552 EUR 2,870 06/23/06 81
USD 10,101 EUR 8,450 06/23/06 598
USD 286 GBP 160 05/03/06 6
USD 2,962 GBP 1,688 05/03/06 117
USD 6 GBP 3 05/08/06 --
USD 338 GBP 190 05/08/06 9
USD 453 GBP 258 05/08/06 18
USD 457 GBP 258 05/08/06 14
USD 566 GBP 322 05/08/06 21
USD 573 GBP 322 05/08/06 14
USD 1,108 GBP 628 05/08/06 38
USD 3,331 GBP 1,848 06/15/06 41
USD 592 ISK 39,650 05/08/06 (58)
USD 900 JPY 103,431 05/01/06 9
USD 37 JPY 4,260 05/08/06 1
USD 117 JPY 13,774 05/08/06 4
USD 511 JPY 59,695 05/08/06 14
USD 520 JPY 59,695 05/08/06 5
USD 539 JPY 63,673 05/08/06 21
USD 562 JPY 66,100 05/08/06 19
USD 582 JPY 68,220 05/08/06 18
USD 692 JPY 80,925 05/08/06 19
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 1,086 JPY 126,222 05/08/06 24
USD 1,111 JPY 129,422 05/08/06 27
USD 1,122 JPY 131,226 05/08/06 32
USD 1,124 JPY 131,226 05/08/06 30
USD 1,158 JPY 134,795 05/08/06 28
USD 1,169 JPY 137,065 05/08/06 36
USD 1,998 JPY 230,214 05/08/06 26
USD 2,054 JPY 241,430 05/08/06 69
USD 119 JPY 13,971 05/15/06 4
USD 166 JPY 19,476 05/15/06 5
USD 167 JPY 19,557 05/15/06 5
USD 282 JPY 33,074 05/15/06 9
USD 292 JPY 34,218 05/15/06 9
USD 900 JPY 105,056 05/15/06 25
USD 950 JPY 111,150 05/15/06 29
USD 1,000 JPY 114,000 05/15/06 4
USD 1,798 JPY 206,000 05/15/06 16
USD 2,853 JPY 332,809 05/15/06 77
USD 5,567 JPY 653,089 05/15/06 186
USD 402 JPY 46,000 05/23/06 4
USD 740 JPY 86,601 05/23/06 23
USD 911 JPY 103,431 05/23/06 --
USD 7,543 JPY 864,000 06/06/06 87
USD 3,133 JPY 348,220 09/20/06 (13)
USD 3,358 JPY 379,640 09/20/06 43
USD 3,421 JPY 393,590 09/20/06 106
USD 6,696 JPY 746,930 09/20/06 (3)
USD 1,105 SEK 8,527 05/08/06 55
AUD 568 USD 422 05/08/06 (10)
AUD 589 USD 421 05/08/06 (27)
AUD 597 USD 445 05/08/06 (9)
AUD 629 USD 460 05/08/06 (18)
AUD 2,395 USD 1,789 05/08/06 (30)
CAD 87 USD 77 05/03/06 --
CAD 347 USD 298 05/08/06 (13)
CAD 499 USD 435 05/08/06 (12)
CAD 1,684 USD 1,472 05/08/06 (35)
EUR 5 USD 6 05/08/06 --
EUR 5 USD 7 05/08/06 --
EUR 367 USD 451 05/08/06 (13)
EUR 369 USD 453 05/08/06 (13)
EUR 478 USD 592 05/08/06 (11)
EUR 498 USD 592 05/08/06 (37)
EUR 564 USD 692 05/08/06 (19)
EUR 906 USD 1,098 05/08/06 (46)
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 133
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 906 USD 1,086 05/08/06 (58)
EUR 1,673 USD 2,053 05/08/06 (60)
EUR 1,680 USD 1,998 05/08/06 (123)
EUR 3,200 USD 4,047 05/25/06 2
EUR 6,177 USD 7,473 06/06/06 (341)
EUR 810 USD 978 06/23/06 (48)
EUR 1,040 USD 1,262 06/23/06 (54)
EUR 1,280 USD 1,570 06/23/06 (50)
EUR 2,760 USD 3,440 06/23/06 (55)
EUR 271 USD 327 06/27/06 (17)
EUR 1,129 USD 1,383 06/30/06 (47)
GBP 1,848 USD 3,329 05/03/06 (41)
GBP 190 USD 331 05/08/06 (16)
GBP 258 USD 457 05/08/06 (14)
GBP 258 USD 453 05/08/06 (18)
GBP 322 USD 574 05/08/06 (14)
GBP 322 USD 566 05/08/06 (21)
GBP 644 USD 1,124 05/08/06 (51)
GBP 1,107 USD 1,950 05/08/06 (69)
ISK 39,650 USD 595 05/08/06 61
JPY 103,431 USD 908 05/01/06 --
JPY 1,357 USD 12 05/08/06 --
JPY 57,252 USD 489 05/08/06 (14)
JPY 59,695 USD 520 05/08/06 (5)
JPY 59,695 USD 522 05/08/06 (3)
JPY 62,693 USD 538 05/08/06 (13)
JPY 63,673 USD 541 05/08/06 (19)
JPY 65,142 USD 566 05/08/06 (7)
JPY 66,084 USD 562 05/08/06 (20)
JPY 67,398 USD 577 05/08/06 (16)
JPY 68,533 USD 587 05/08/06 (15)
JPY 128,969 USD 1,107 05/08/06 (28)
JPY 137,065 USD 1,171 05/08/06 (34)
JPY 227,466 USD 1,936 05/08/06 (65)
JPY 66,000 USD 564 06/06/06 (18)
JPY 393,590 USD 3,507 09/20/06 (20)
JPY 727,860 USD 6,374 09/20/06 (147)
NZD 862 USD 557 05/08/06 7
PLN 1,608 USD 510 05/08/06 (15)
SEK 3,893 USD 504 05/08/06 (25)
SEK 8,527 USD 1,105 05/08/06 (55)
SEK 8,527 USD 1,080 05/08/06 (80)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 481
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
134 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INDEX SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NOTIONAL APPRECIATION
FUND RECEIVES COUNTER AMOUNT FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY $ FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
Lehman Brothers 3 Month USD LIBOR
CMBS Index - AAA Goldman Sachs 6,170 plus 0.070% 05/01/06 (114)
1 Month USD LIBOR
Lehman Brothers High Yield Bear Stearns 5,640 minus 0.200% 07/01/06 5
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts (109)
================
</Table>
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- --------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ------------------ -------------------- ---------------- ----------------
Bank of America USD 2,500 5.000% Three Month LIBOR 06/21/36 (257)
Barclays Bank PLC GBP 15,400 5.000% Six Month LIBOR 06/15/07 46
Barclays Bank PLC USD 18,100 5.000% Three Month LIBOR 06/21/08 (106)
Consumer Price Index
Barclays Bank PLC EUR 2,800 2.103% (France) 10/15/10 --
Deutsche Bank USD 2,700 5.000% Three Month LIBOR 06/21/36 (278)
Goldman Sachs USD 2,600 5.000% Three Month LIBOR 06/21/16 (114)
Lehman Brothers GBP 8,400 4.500% Six Month LIBOR 09/20/09 (176)
Lehman Brothers USD 8,100 5.000% Three Month LIBOR 06/21/11 (145)
Lehman Brothers USD 1,100 5.000% Three Month LIBOR 06/21/16 (48)
Lehman Brothers USD 1,000 5.000% Three Month LIBOR 12/15/35 (61)
Merrill Lynch GBP 19,300 4.500% Six Month LIBOR 09/20/09 (406)
Merrill Lynch GBP 300 4.000% Six Month LIBOR 12/15/35 8
----------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($43) (1,537)
================
</Table>
<Table>
<Caption>
CREDIT DEFAULT SWAP CONTRACTS
- ----------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
REFERENCE COUNTER AMOUNT FUND RECEIVES TERMINATION VALUE
ENTITY PARTY $ FIXED RATE DATE $
- ------------------------------ ---------------- --------- ---------------- ---------------- ----------------
Brazilian Government
International Bond Morgan Stanley 500 1.660% 03/20/13 1
Dow Jones CDX High Volatility
4 Index UBS 13,000 0.900% 06/20/10 28
Dow Jones CDX High Volatility
5 Index Goldman 3,100 0.850% 12/20/10 20
Ford Motor Credit Co. UBS 700 4.750% 12/20/06 10
Mexico Government
International Bond JP Morgan 2,400 0.920% 03/20/16 (3)
Russian Government
International Bond JP Morgan 300 0.780% 03/20/16 1
Russian Government
International Bond JP Morgan 300 0.800% 03/20/16 1
----------------
Total Market Value of Open Credit Default Swap Contracts Premiums Paid (Received) - ($163) 58
================
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 135
FRANK RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Asset-Backed Securities 6.7
Corporate Bonds and Notes 14.5
International Debt 4.6
Loan Agreements 0.3
Mortgage-Backed Securities 43.1
Municipal Bonds 0.6
Non-US Bonds 0.9
Registered Investment Company Funds --*
United States Government Agencies 1.1
United States Government Treasuries 12.0
Common Stocks 0.1
Preferred Stocks 0.2
Warrants & Rights --*
Options Purchased 0.1
Short-Term Investments 32.2
Other Securities 13.9
---------------
Total Investments 130.3
Other Assets and Liabilities, Net (30.3)
---------------
100.0
===============
Futures Contracts (0.3)
Options Written (0.1)
Foreign Currency Exchange Contracts --*
Index Swap Contracts (--)*
Interest Rate Swap Contracts (0.1)
Credit Default Swap Contracts --*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
136 Multistrategy Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,006.30 $ 1,017.11
Expenses Paid During
Period* $ 7.71 $ 7.75
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.55%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,010.10 $ 1,020.83
Expenses Paid During
Period* $ 3.99 $ 4.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.80%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,011.30 $ 1,022.07
Expenses Paid During
Period* $ 2.74 $ 2.76
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.55%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
Tax Exempt Bond Fund 137
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS 97.2%
Alabama - 1.2%
City of Tuscaloosa Alabama General Obligation Unlimited 340 5.000 02/15/07 343
County of Baldwin Alabama General Obligation Unlimited (u) 1,570 5.000 01/01/22 1,636
County of Jefferson Alabama General Obligation Unlimited (u) 500 5.000 04/01/10 523
Courtland Industrial Development Board Revenue Bonds, weekly
demand 250 5.000 11/01/13 254
Mobile County Board of School Commissioners General
Obligation Unlimited (u) 375 5.000 03/01/12 396
------------
3,152
------------
Alaska - 0.2%
City of Anchorage Alaska General Obligation Unlimited,
weekly demand (u)(ae) 500 5.750 12/01/16 543
------------
Arizona - 3.0%
Arizona State Transportation Board Revenue Bonds, weekly
demand 500 5.250 07/01/12 533
Arizona State Transportation Board Revenue Bonds 1,500 5.000 07/01/14 1,600
Maricopa County Pollution Control Corp. Revenue Bonds,
annual demand 1,000 2.900 06/01/35 966
Maricopa County Pollution Control Corp. Revenue Bonds,
annual demand (E) 1,000 4.000 01/01/38 990
Mesa Arizona General Obligation Unlimited, weekly demand
(u)(ae) 1,000 5.000 07/01/17 1,040
Phoenix Civic Improvement Corp. Revenue Bonds (u) 250 5.500 07/01/07 255
Phoenix Civic Improvement Corp. Revenue Bonds, weekly demand
(u) 1,325 5.000 07/01/35 1,364
Salt River Project Agricultural Improvement & Power District
Revenue Bonds, weekly demand 1,350 5.000 01/01/25 1,395
------------
8,143
------------
California - 9.9%
Abag Finance Authority for Nonprofit Corps. Certificate of
Participation, weekly demand 600 5.700 08/15/14 621
Bay Area Toll Authority Revenue Bonds, weekly demand 530 5.000 04/01/31 548
California Health Facilities Financing Authority Revenue
Bonds, annual demand (E) 500 4.950 07/01/26 515
California Health Facilities Financing Authority Revenue
Bonds, weekly demand 1,000 5.000 07/01/36 1,013
California State Department of Water Resources Revenue Bonds 250 5.500 05/01/10 265
California State Department of Water Resources Revenue Bonds
(u) 500 5.250 05/01/11 533
California State Department of Water Resources Revenue Bonds
(u) 1,000 5.250 05/01/12 1,073
California State Public Works Board Revenue Bonds 630 5.000 06/01/10 656
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E)(u) 610 4.100 04/01/28 611
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 1,000 5.200 12/01/29 1,033
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 1,250 2.300 04/01/33 1,232
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 1,100 2.625 04/01/34 1,076
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 500 3.450 04/01/35 483
</Table>
138 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
California Statewide Communities Development Authority
Revenue Bonds, annual demand (E) 900 4.350 11/01/36 905
Golden State Tobacco Securitization Corp. Revenue Bonds,
weekly demand 405 5.500 06/01/18 413
Golden State Tobacco Securitization Corp. Revenue Bonds,
weekly demand (u) 500 5.000 06/01/20 513
Golden State Tobacco Securitization Corp. Revenue Bonds,
weekly demand 675 5.000 06/01/21 679
Golden State Tobacco Securitization Corp. Revenue Bonds,
weekly demand (u) 750 4.600 06/01/23 592
Kings River Conservation District Certificate of
Participation 850 5.000 05/01/15 873
Southern California Public Power Authority Revenue Bonds (u) 405 5.375 01/01/12 437
State of California General Obligation Unlimited 1,000 6.600 02/01/10 1,094
State of California General Obligation Unlimited 1,000 5.000 10/01/11 1,053
State of California General Obligation Unlimited 2,050 5.000 02/01/12 2,156
State of California General Obligation Unlimited 1,000 5.250 07/01/12 1,073
State of California General Obligation Unlimited, weekly
demand 500 5.250 02/01/14 534
State of California General Obligation Unlimited, weekly
demand (u) 1,500 5.000 02/01/26 1,536
State of California General Obligation Unlimited, weekly
demand (u) 1,500 5.250 02/01/30 1,569
State of California General Obligation Unlimited, weekly
demand 1,250 5.000 02/01/33 1,270
University of California Revenue Bonds (u) 1,500 5.000 05/15/13 1,603
University of California Revenue Bonds, weekly demand (u) 1,000 5.000 05/15/33 1,025
------------
26,984
------------
Colorado - 2.1%
Broomfield Colorado Revenue Bonds, weekly demand (u) 1,250 5.500 12/01/22 1,349
City of Aspen Colorado Revenue Bonds, weekly demand (u) 700 5.250 11/01/24 749
City of Aspen Colorado Revenue Bonds, weekly demand (u) 600 5.250 11/01/25 639
Colorado Department of Transportation Revenue Bonds (u) 265 6.000 06/15/08 277
Colorado Health Facilities Authority Revenue Bonds, weekly
demand 1,000 5.250 06/01/23 1,034
Colorado Housing & Finance Authority Revenue Bonds, weekly
demand 65 7.250 04/01/10 66
Colorado Housing & Finance Authority Revenue Bonds,
semiannual demand 70 6.300 08/01/12 71
Colorado Housing & Finance Authority Revenue Bonds (E) 60 6.300 08/01/16 62
Colorado Housing & Finance Authority Revenue Bonds, weekly
demand 35 6.700 10/01/16 35
Denver Convention Center Hotel Authority Revenue Bonds,
weekly demand (u) 1,000 5.000 12/01/30 1,031
Jefferson County School District R-001 General Obligation
Unlimited (u) 500 5.000 12/15/14 533
------------
5,846
------------
Delaware - 0.3%
Delaware State Economic Development Authority Revenue Bonds 435 6.500 01/01/08 448
Delaware State Economic Development Authority Revenue Bonds,
annual demand (E)(u) 250 4.900 05/01/26 258
------------
706
------------
District of Columbia - 0.4%
District of Columbia General Obligation Unlimited (u) 1,000 5.500 06/01/09 1,050
------------
Florida - 5.3%
City of Tallahassee Florida Revenue Bonds (u) 500 5.000 10/01/11 529
County of Hillsborough Florida Revenue Bonds, semiannual
demand 80 6.200 12/01/08 82
</Table>
Tax Exempt Bond Fund 139
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
County of Miami-Dade Florida Revenue Bonds (u) 1,000 5.000 06/01/14 1,057
Escambia County Health Facilities Authority Revenue Bonds 1,000 5.000 11/15/06 1,007
Florida State Board of Education General Obligation
Unlimited 1,500 5.000 01/01/09 1,549
Florida State Division of Bond Finance Revenue Bonds (u) 500 5.750 07/01/06 502
Florida State Division of Bond Finance Revenue Bonds, weekly
demand (u) 1,600 5.250 07/01/13 1,680
Florida Water Pollution Control Financing Corp. Revenue
Bonds, weekly demand 500 5.500 01/15/12 538
Highlands County Health Facilities Authority Revenue Bonds,
annual demand (E) 1,500 5.000 11/15/29 1,546
Hillsborough County Educational Facilities Authority Revenue
Revenue Bonds, semiannual demand (u) 870 5.750 04/01/18 915
Miami-Dade County Educational Facilities Authority Revenue
Bonds, weekly demand (u) 1,500 5.000 04/01/17 1,577
North Miami Florida Revenue Bonds (u) 1,325 5.000 04/01/10 1,383
Orlando Utilities Commission Revenue Bonds 1,000 5.900 10/01/08 1,051
Orlando Utilities Commission Revenue Bonds, weekly demand 1,000 5.250 10/01/20 1,060
------------
14,476
------------
Georgia - 2.0%
County of Fulton Georgia Revenue Bonds, weekly demand (u) 1,500 5.250 01/01/35 1,578
Dalton Georgia Revenue Bonds (u) 500 5.750 01/01/09 525
Georgia Municipal Electric Authority Revenue Bonds (u) 850 6.250 01/01/17 994
Georgia State Road & Tollway Authority Revenue Bonds 590 5.250 03/01/11 629
State of Georgia General Obligation Unlimited 1,000 5.750 08/01/08 1,046
State of Georgia General Obligation Unlimited 600 6.500 12/01/09 657
------------
5,429
------------
Hawaii - 0.9%
Kauai County Hawaii General Obligation Unlimited, weekly
demand (u)(ae) 375 6.250 08/01/19 412
State of Hawaii General Obligation Unlimited (u) 1,000 5.750 01/01/10 1,067
State of Hawaii General Obligation Unlimited (u) 1,000 5.000 03/01/12 1,057
------------
2,536
------------
Idaho - 0.5%
Boise State University Revenue Bonds, semiannual demand (u) 1,250 5.375 04/01/22 1,330
------------
Illinois - 4.3%
Chicago Metropolitan Water Reclamation District-Greater
Chicago General Obligation Unlimited 2,000 6.500 12/01/07 2,083
City of Chicago Illinois General Obligation Unlimited,
weekly demand (u) 750 6.000 01/01/11 813
City of Chicago Illinois Tax Allocation (u) 700 Zero coupon 12/01/07 659
Cook County Community Consolidated School District No.
15-Palatine General Obligation, Ltd. (u) 2,235 Zero coupon 12/01/13 1,619
County of Cook Illinois General Obligation Unlimited, weekly
demand (u) 2,160 5.375 11/15/21 2,322
Illinois Finance Authority Revenue Bonds (u) 400 Zero coupon 01/01/10 345
Illinois Finance Authority Revenue Bonds 670 5.500 10/01/12 721
Illinois Finance Authority Revenue Bonds 750 5.000 06/01/14 772
Illinois Finance Authority Revenue Bonds, weekly demand (ae) 420 7.375 07/01/21 431
Illinois Finance Authority Revenue Bonds, weekly demand 575 5.000 04/01/36 577
</Table>
140 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Illinois Health Facilities Authority Revenue Bonds 470 6.000 05/15/10 488
Illinois Housing Development Authority Revenue Bonds (E) 500 2.790 08/01/17 498
Lake County Community Unit School District No. 116-Round
Lake General Obligation Unlimited (u) 400 7.600 02/01/14 493
------------
11,821
------------
Indiana - 3.1%
City of Indianapolis Indiana Revenue Bonds (u) 450 5.000 10/01/06 452
Columbus Multi School Building Corp. Indiana Revenue Bonds
(u) 450 5.000 01/10/10 469
Franklin Township School Building Corp./Marion County
Indiana Revenue Bonds 500 5.750 07/15/06 502
Indiana Bond Bank Revenue Bonds (u) 315 5.750 08/01/13 331
Indiana Health Facility Financing Authority Revenue Bonds 1,000 5.500 11/15/10 1,066
Indiana Health Facility Financing Authority Revenue Bonds 1,000 5.000 11/01/11 1,047
Indiana Health Facility Financing Authority Revenue Bonds,
annual demand (E)(ae) 1,220 5.000 11/01/26 1,239
Indiana State Finance Authority Revenue Bonds 925 5.000 07/01/11 974
Indiana State Finance Authority Revenue Bonds 1,500 5.250 02/01/18 1,630
Indiana University Revenue Bonds, weekly demand 500 5.750 08/01/10 535
Lawrenceburg Indiana Revenue Bonds, annual demand (E) 225 2.625 10/01/19 224
------------
8,469
------------
Iowa - 0.5%
Iowa Finance Authority Revenue Bonds 290 6.000 07/01/10 310
Tobacco Settlement Authority of Iowa Revenue Bonds, weekly
demand (ae) 1,000 5.600 06/01/35 1,087
------------
1,397
------------
Kansas - 1.5%
Butler & Sedgwick Counties Unified School District No. 385
Andover General Obligation Unlimited (u) 500 5.000 09/01/09 520
City of Burlington Kansas Revenue Bonds, annual demand
(E)(u) 750 2.650 06/01/31 749
Kansas Development Finance Authority Revenue Bonds (u) 150 5.000 08/01/10 158
Kansas Development Finance Authority Revenue Bonds (u) 1,000 5.000 08/01/13 1,061
Kansas Development Finance Authority Revenue Bonds, weekly
demand (u) 1,250 5.000 11/01/25 1,303
Wyandotte County-Kansas City Unified Government Revenue
Bonds, semiannual demand 305 4.750 12/01/16 309
------------
4,100
------------
Louisiana - 1.1%
Caddo Parish Parishwide School District General Obligation
Unlimited, weekly demand (u) 1,090 5.250 03/01/13 1,167
Louisiana Energy & Power Authority Revenue Bonds (u) 200 5.500 01/01/08 206
Morehouse Parish Louisiana Revenue Bonds 1,500 5.250 11/15/13 1,548
------------
2,921
------------
Maine - 0.2%
Bucksport Maine Revenue Bonds 500 4.000 03/01/14 466
------------
</Table>
Tax Exempt Bond Fund 141
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Maryland - 1.6%
City of Baltimore Maryland Revenue Bonds, weekly demand (u) 1,500 5.250 09/01/39 1,578
State of Maryland General Obligation Unlimited 2,500 5.250 03/01/13 2,707
------------
4,285
------------
Massachusetts - 3.0%
Commonwealth of Massachusetts General Obligation Limited,
weekly demand (ae) 1,000 5.750 10/01/19 1,081
Commonwealth of Massachusetts General Obligation Unlimited 1,000 5.500 10/01/16 1,102
Commonwealth of Massachusetts General Obligation, Ltd.,
weekly demand (ae) 430 6.000 02/01/11 466
Commonwealth of Massachusetts General Obligation, Ltd. 1,000 5.500 11/01/15 1,099
Commonwealth of Massachusetts General Obligation, Ltd.,
weekly demand (u)(ae) 1,000 5.250 01/01/22 1,070
Massachusetts Development Finance Agency Revenue Bonds 145 5.125 12/01/11 146
Massachusetts Development Finance Agency Revenue Bonds 50 5.150 10/01/14 51
Massachusetts Development Finance Agency Revenue Bonds,
weekly demand (E)(u) 1,800 3.770 10/01/42 1,800
Massachusetts Health & Educational Facilities Authority
Revenue Bonds 65 5.000 07/01/07 65
Massachusetts School Building Authority Revenue Bonds (u) 750 5.000 08/15/13 799
Massachusetts State Port Authority Revenue Bonds 200 6.000 07/01/06 201
Massachusetts State Port Authority Revenue Bonds 125 5.250 07/01/07 127
Massachusetts State Port Authority Revenue Bonds 150 5.750 07/01/10 161
------------
8,168
------------
Michigan - 0.9%
Bishop International Airport Authority Revenue Bonds (u) 750 5.000 12/01/10 768
Kent Hospital Finance Authority Revenue Bonds 250 5.250 01/15/07 252
Manistee Area Public Schools General Obligation Unlimited
(u) 235 6.000 05/01/08 245
Michigan Municipal Bond Authority Revenue Bonds, weekly
demand (ae) 500 5.750 10/01/11 546
Michigan State Hospital Finance Authority Revenue Bonds (u) 250 5.000 05/15/07 253
Michigan State Housing Development Authority Revenue Bonds
(u) 500 4.150 10/01/13 504
------------
2,568
------------
Minnesota - 1.5%
City of Maple Grove Minnesota Revenue Bonds, weekly demand 1,800 5.000 09/01/29 1,820
City of State Cloud Minnesota Revenue Bonds (u) 340 5.500 05/01/06 340
Minnesota State Municipal Power Agency Revenue Bonds, weekly
demand 1,000 5.000 10/01/30 1,018
State of Minnesota General Obligation Unlimited, semiannual
demand 1,000 5.000 06/01/13 1,028
------------
4,206
------------
Missouri - 0.7%
Joplin Industrial Development Authority Revenue Bonds 270 5.500 02/15/13 284
Missouri Development Finance Board Revenue Bonds 1,150 5.000 03/01/28 1,158
Missouri Housing Development Commission Revenue Bonds 165 4.350 12/01/07 165
Southeast Missouri State University Revenue Bonds (u) 250 5.625 04/01/10 267
------------
1,874
------------
</Table>
142 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Montana - 0.6%
City of Forsyth Montana Revenue Bonds, annual demand (E) 1,450 5.200 05/01/33 1,487
------------
Nevada - 0.7%
Clark County School District General Obligation Limited,
weekly demand (u)(ae) 330 5.250 06/15/10 345
Las Vegas Valley Water District General Obligation, Ltd. 1,000 5.000 06/01/08 1,026
Truckee Meadows Water Authority Revenue Bonds (u) 500 5.500 07/01/11 539
------------
1,910
------------
New Hampshire - 0.1%
New Hampshire Health & Education Facilities Authority
Revenue Bonds 325 4.600 10/01/07 326
------------
New Jersey - 3.4%
New Jersey Economic Development Authority Revenue Bonds 1,000 5.000 09/01/12 1,056
New Jersey Economic Development Authority Revenue Bonds 1,000 5.250 03/01/14 1,069
New Jersey Economic Development Authority Revenue Bonds 1,020 5.375 06/15/15 1,074
New Jersey Health Care Facilities Financing Authority
Revenue Bonds, weekly demand 500 5.250 07/01/25 521
New Jersey State Educational Facilities Authority Revenue
Bonds 1,000 5.750 09/01/10 1,074
New Jersey State Housing & Mortgage Finance Agency Revenue
Bonds (u) 885 4.300 11/01/07 890
New Jersey State Transit Corp. Certificate of Participation
(u) 1,000 5.500 09/15/07 1,024
New Jersey State Turnpike Authority Revenue Bonds (u) 500 5.500 01/01/09 523
New Jersey Transportation Trust Fund Authority Revenue Bonds 500 6.000 06/15/07 513
Tobacco Settlement Financing Corp. Revenue Bonds 1,000 5.500 06/01/11 1,047
Tobacco Settlement Financing Corp. Revenue Bonds, weekly
demand 490 4.375 06/01/19 489
------------
9,280
------------
New Mexico - 0.9%
Farmington New Mexico Revenue Bonds, annual demand (E)(u) 2,500 3.550 04/01/29 2,452
------------
New York - 12.8%
Battery Park City Authority Revenue Bonds, weekly demand 1,500 5.250 11/01/22 1,601
City of New York New York General Obligation Unlimited 500 5.500 08/01/09 525
City of New York New York General Obligation Unlimited 1,000 5.250 08/01/10 1,052
City of New York New York General Obligation Unlimited 1,500 5.000 08/01/11 1,575
City of New York New York General Obligation Unlimited,
weekly demand 125 5.750 08/01/11 135
City of New York New York General Obligation Unlimited 850 5.000 03/01/12 892
City of New York New York General Obligation Unlimited 750 5.000 11/01/12 788
City of New York New York General Obligation Unlimited,
weekly demand 235 5.250 11/01/12 250
City of New York New York General Obligation Unlimited 470 5.000 08/01/13 495
City of New York New York General Obligation Unlimited 1,000 5.000 08/01/14 1,055
City of New York New York General Obligation Unlimited,
weekly demand 1,500 5.000 08/01/21 1,548
Long Island Power Authority Revenue Bonds, weekly demand (u) 1,250 5.000 12/01/23 1,305
Long Island Power Authority Revenue Bonds, weekly demand 330 5.000 12/01/35 337
Metropolitan Transportation Authority Revenue Bonds, weekly
demand (u) 1,000 5.000 11/15/30 1,025
New York City Municipal Water Finance Authority Revenue
Bonds 1,500 5.250 06/15/12 1,610
</Table>
Tax Exempt Bond Fund 143
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
New York City Municipal Water Finance Authority Revenue
Bonds, weekly demand (u) 1,000 5.000 06/15/23 1,041
New York City Municipal Water Finance Authority Revenue
Bonds, weekly demand 1,250 5.000 06/15/36 1,288
New York City Transitional Finance Authority Revenue Bonds 1,000 5.500 02/01/09 1,047
New York Mortgage Agency Revenue Bonds, weekly demand 465 5.150 04/01/17 476
New York State Dormitory Authority Revenue Bonds (u) 1,035 7.000 07/01/09 1,088
New York State Dormitory Authority Revenue Bonds, annual
demand (u) 960 5.000 02/15/13 1,017
New York State Dormitory Authority Revenue Bonds, annual
demand (E) 2,000 5.250 11/15/23 2,125
New York State Dormitory Authority Revenue Bonds, weekly
demand (E)(u) 650 5.250 11/15/29 691
New York State Dormitory Authority Revenue Bonds 1,300 5.000 03/15/31 1,346
New York State Environmental Facilities Corp. Revenue Bonds
(u) 1,000 6.000 06/15/12 1,116
New York State Environmental Facilities Corp. Revenue Bonds,
weekly demand 1,500 5.000 06/15/34 1,550
New York State Urban Development Corp. Revenue Bonds, annual
demand 500 5.250 01/01/21 517
Sales Tax Asset Receivables Corp. Revenue Bonds, weekly
demand (u) 2,500 5.000 10/15/29 2,594
Suffolk County Judicial Facilities Agency Revenue Bonds (u) 500 5.500 04/15/09 524
Tobacco Settlement Financing Authority Revenue Bonds, weekly
demand 880 5.500 06/01/10 881
TSASC, Inc. Revenue Bonds 1,000 5.600 07/15/13 1,038
TSASC, Inc. Revenue Bonds, weekly demand 1,250 4.750 06/01/22 1,238
United Nations Development Corp. Revenue Bonds, weekly
demand 1,000 5.000 07/01/11 1,020
------------
34,790
------------
North Carolina - 2.7%
North Carolina Eastern Municipal Power Agency Revenue Bonds 250 5.500 01/01/10 262
North Carolina Municipal Power Agency No. 1 Catawba Revenue
Bonds, semiannual demand (u) 1,500 6.000 01/01/12 1,661
North Carolina Municipal Power Agency No. 1 Catawba Revenue
Bonds 200 5.500 01/01/13 213
University of North Carolina at Chapel Hill Revenue Bonds,
weekly demand (E) 2,500 3.790 02/15/31 2,500
University of North Carolina Revenue Bonds, weekly demand 2,500 5.000 12/01/34 2,591
------------
7,227
------------
Ohio - 1.1%
Columbus Ohio General Obligation, Ltd. 585 5.250 01/01/11 624
Jackson Local School District Stark & Summit Counties
General Obligation Unlimited (u) 500 Zero coupon 12/01/07 471
Ohio State Building Authority Revenue Bonds 575 5.750 04/01/08 596
Ohio State Higher Educational Facility Commission Revenue
Bonds 1,000 5.000 12/01/09 1,036
University of Cincinnati Revenue Bonds (u) 300 5.500 06/01/08 311
------------
3,038
------------
Oklahoma - 0.1%
Oklahoma Development Finance Authority Revenue Bonds 275 5.000 10/01/13 281
Oklahoma Housing Finance Agency Revenue Bonds, weekly demand 70 7.600 09/01/15 72
------------
353
------------
</Table>
144 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Oregon - 1.5%
Clackamas County School District No. 62C Oregon City General
Obligation Unlimited, weekly demand (ae) 435 6.000 06/15/11 472
Oregon State Department of Administrative Services Revenue
Bonds (u) 1,000 5.000 09/01/08 1,029
Oregon State Department of Administrative Services Revenue
Bonds, weekly demand (u) 750 5.250 04/01/10 788
Oregon State Department of Transportation Revenue Bonds 1,000 5.000 11/15/13 1,066
State of Oregon General Obligation, Ltd., weekly demand 745 5.700 10/01/32 758
------------
4,113
------------
Pennsylvania - 4.3%
Allegheny County Higher Education Building Authority Revenue
Bonds, weekly demand (E) 850 2.740 12/01/33 850
Allegheny County Port Authority Revenue Bonds, weekly demand
(u) 250 5.500 03/01/17 267
Berks County Vocational Technical School Authority Revenue
Bonds (u) 1,260 5.000 06/01/15 1,342
Chester County Industrial Development Authority Revenue
Bonds, weekly demand (E)(u) 1,000 3.780 07/01/31 1,000
City of Philadelphia Pennsylvania Revenue Bonds (u) 500 5.500 07/01/07 509
Commonwealth of Pennsylvania General Obligation Unlimited
(u) 1,300 5.375 07/01/17 1,431
County of Allegheny Pennsylvania General Obligation
Unlimited (u) 1,000 5.000 10/01/15 1,062
Erie County Industrial Development Authority Revenue Bonds 180 5.300 04/01/12 186
Lancaster Higher Education Authority Revenue Bonds, weekly
demand 1,705 5.000 04/15/25 1,759
Montgomery County Higher Education & Health Authority
Revenue Bonds, weekly demand 1,000 5.125 06/01/32 1,015
Norwin School District General Obligation Unlimited, weekly
demand (u)(ae) 250 6.000 04/01/20 269
Philadelphia Authority for Industrial Development Revenue
Bonds, weekly demand (E)(u) 1,500 3.780 03/01/27 1,500
Sayre Health Care Facilities Authority Revenue Bonds, weekly
demand 625 5.300 12/01/12 645
------------
11,835
------------
Puerto Rico - 5.4%
Commonwealth of Puerto Rico General Obligation Unlimited,
weekly demand (u) 1,000 5.250 07/01/27 1,058
Puerto Rico Convention Center Authority Revenue Bonds,
weekly demand (u) 1,250 5.000 07/01/31 1,298
Puerto Rico Electric Power Authority Revenue Bonds 500 5.000 07/01/08 511
Puerto Rico Electric Power Authority Revenue Bonds 1,000 5.000 07/01/13 1,063
Puerto Rico Electric Power Authority Revenue Bonds (u) 500 5.500 07/01/17 551
Puerto Rico Highway & Transportation Authority Revenue Bonds 2,000 5.000 07/01/13 2,092
Puerto Rico Highway & Transportation Authority Revenue
Bonds, weekly demand 1,000 5.000 07/01/30 1,012
Puerto Rico Public Buildings Authority Revenue Bonds, annual
demand (E) 1,500 4.500 07/01/22 1,508
Puerto Rico Public Buildings Authority Revenue Bonds, weekly
demand 2,000 5.500 07/01/23 2,124
Puerto Rico Public Finance Corp. Revenue Bonds, annual
demand (E)(u) 3,250 5.750 08/01/27 3,486
------------
14,703
------------
Rhode Island - 0.4%
Rhode Island Economic Development Corp. Revenue Bonds (u) 1,000 5.000 06/15/12 1,062
------------
</Table>
Tax Exempt Bond Fund 145
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
South Carolina - 2.0%
Greenville County School District Revenue Bonds 1,000 5.000 12/01/11 1,048
Richland-Lexington Airport District Revenue Bonds (u) 500 5.000 01/01/09 516
440 5.000 01/01/10 457
South Carolina State Public Service Authority Revenue Bonds,
weekly demand (u) 375 5.500 01/01/11 401
South Carolina Transportation Infrastructure Bank Revenue
Bonds, weekly demand (u) 2,500 5.250 10/01/31 2,612
Spartanburg County South Carolina Revenue Bonds (u) 500 6.000 04/15/07 510
------------
5,544
------------
South Dakota - 0.5%
South Dakota State Building Authority Revenue Bonds (u) 1,330 5.000 09/01/12 1,411
------------
Tennessee - 1.1%
Chattanooga Health Educational & Housing Facility Board
Revenue Bonds, weekly demand 1,000 5.000 10/01/25 979
Metropolitan Government Nashville & Davidson County Health &
Educational Facility Board Revenue Bonds 920 5.000 11/01/06 926
Metropolitan Government Nashville & Davidson County
Tennessee Revenue Bonds (u) 180 5.250 01/01/13 194
Tennessee Housing Development Agency Revenue Bonds, weekly
demand 950 5.375 01/01/18 983
------------
3,082
------------
Texas - 9.6%
Alvin Independent School District General Obligation
Unlimited 515 6.750 08/15/09 563
Alvin Independent School District General Obligation
Unlimited 545 6.750 08/15/10 608
Boerne Independent School District General Obligation
Unlimited, weekly demand 1,380 5.250 02/01/27 1,452
Boerne Independent School District General Obligation
Unlimited, weekly demand 1,500 5.250 02/01/29 1,575
Brazos River Harbor Navigation District Revenue Bonds,
annual demand (E) 220 4.750 05/15/33 222
City of Houston Texas Revenue Bonds (u) 515 5.250 05/15/14 555
City of San Antonio Texas Revenue Bonds 1,000 5.250 02/01/13 1,073
County of Harris Texas General Obligation, Ltd. 1,435 5.250 08/15/09 1,500
County of Harris Texas Revenue Bonds, annual demand (E)(u) 1,500 5.000 08/15/21 1,555
County of Travis Texas General Obligation, Ltd. 1,000 5.250 03/01/10 1,052
Dallas Independent School District General Obligation
Unlimited 2,100 5.000 02/15/14 2,222
Lower Colorado River Authority Revenue Bonds, weekly demand
(u) 1,500 5.875 05/15/17 1,597
North Texas Tollway Authority Revenue Bonds, annual demand
(E)(u)(ae) 15 5.000 01/01/18 15
North Texas Tollway Authority Revenue Bonds, annual demand
(E)(u) 985 5.000 01/01/18 1,009
Port of Corpus Christi Authority of Nueces County Texas
Revenue Bonds, weekly demand 385 5.350 11/01/10 391
Round Rock Independent School District General Obligation
Unlimited 1,000 6.500 08/01/10 1,105
Round Rock Independent School District General Obligation
Unlimited, weekly demand 750 6.500 08/01/11 832
Round Rock Independent School District General Obligation
Unlimited 430 5.375 08/01/12 463
Sabine River Authority Revenue Bonds (E) 1,500 5.200 05/01/28 1,521
Texas A & M University Revenue Bonds 1,000 5.000 07/01/08 1,026
</Table>
146 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Texas State Transportation Commission Revenue Bonds, weekly
demand 1,415 5.000 04/01/25 1,470
Texas Water Development Board Revenue Bonds, weekly demand 500 5.250 07/15/17 505
Tyler Independent School District General Obligation
Unlimited 1,350 5.000 02/15/10 1,403
University of Houston Revenue Bonds, weekly demand (u) 2,000 5.500 02/15/30 2,126
Waco Health Facilities Development Corp. Revenue Bonds 250 5.200 11/15/06 252
------------
26,092
------------
Utah - 0.7%
County of Utah Revenue Bonds, annual demand 200 5.050 11/01/17 210
Intermountain Power Agency Revenue Bonds (u) 1,400 6.500 07/01/10 1,549
------------
1,759
------------
Virgin Islands - 1.0%
Virgin Islands Public Finance Authority Revenue Bonds 200 5.000 10/01/13 208
Virgin Islands Public Finance Authority Revenue Bonds,
weekly demand 2,500 5.500 10/01/14 2,593
------------
2,801
------------
Virginia - 0.5%
Virginia Commonwealth Transportation Board Revenue Bonds,
weekly demand 360 5.375 05/15/12 386
Virginia Housing Development Authority Revenue Bonds, weekly
demand (u) 400 5.375 07/01/36 417
Virginia Public Building Authority Revenue Bonds 500 5.750 08/01/07 513
------------
1,316
------------
Washington - 2.2%
Energy Northwest Revenue Bonds 1,000 5.000 07/01/11 1,053
King County School District No. 405 Bellevue General
Obligation Unlimited (u) 2,000 5.000 12/01/14 2,123
Kitsap County Washington General Obligation, Ltd., weekly
demand (u) 775 5.750 07/01/14 836
Tobacco Settlement Authority of Washington Revenue Bonds,
weekly demand 875 6.500 06/01/26 952
Washington Public Power Supply System Revenue Bonds 1,000 7.000 07/01/08 1,066
------------
6,030
------------
Wisconsin - 1.4%
City of Madison Wisconsin Revenue Bonds, annual demand 280 4.875 10/01/27 290
Oconto Falls Public School District General Obligation
Unlimited, weekly demand (u)(ae) 750 5.750 03/01/13 816
State of Wisconsin General Obligation Unlimited 625 5.125 11/01/11 664
Wisconsin Health & Educational Facilities Authority Revenue
Bonds 70 5.000 07/01/06 70
Wisconsin Health & Educational Facilities Authority Revenue
Bonds (u) 1,425 5.000 12/01/10 1,491
Wisconsin Health & Educational Facilities Authority Revenue
Bonds 210 5.250 05/01/12 217
Wisconsin Health & Educational Facilities Authority Revenue
Bonds 220 5.250 05/01/13 226
Wisconsin Housing & Economic Development Authority Revenue
Bonds, weekly demand 50 6.850 11/01/12 51
------------
3,825
------------
TOTAL MUNICIPAL BONDS (cost $265,803) 264,906
------------
</Table>
Tax Exempt Bond Fund 147
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.6%
Frank Russell Investment Company Tax Free Money Market Fund 7,006,000 7,006
------------
TOTAL SHORT-TERM INVESTMENTS (cost $7,006) 7,006
------------
TOTAL INVESTMENTS - 99.8% (identified cost $272,809) 271,912
OTHER ASSETS AND LIABILITIES, NET - 0.2% 647
------------
NET ASSETS - 100% 272,559
============
</Table>
See accompanying notes which are an integral part of the financial statements.
148 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
%
QUALITY RATINGS AS A % OF VALUE
AAA 16
AA 20
A 51
BBB 12
Other 1
---
100
===
ECONOMIC SECTOR EMPHASIS AS A % OF VALUE
General Obligation 27
Other Revenue 15
Education Revenue 12
Utility Revenue 12
Industrial Revenue 10
Healthcare Revenue 10
Pollution Control Revenue 5
Leasing Revenue 3
Cash Equivalents 3
Housing Revenue 3
---
100
===
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 149
FRANK RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Alabama 1.2
Alaska 0.2
Arizona 3.0
California 9.9
Colorado 2.1
Delaware 0.3
District of Columbia 0.4
Florida 5.3
Georgia 2.0
Hawaii 0.9
Idaho 0.5
Illinois 4.3
Indiana 3.1
Iowa 0.5
Kansas 1.5
Louisiana 1.1
Maine 0.2
Maryland 1.6
Massachusetts 3.0
Michigan 0.9
Minnesota 1.5
Missouri 0.7
Montana 0.6
Nevada 0.7
New Hampshire 0.1
New Jersey 3.4
New Mexico 0.9
New York 12.8
North Carolina 2.7
Ohio 1.1
Oklahoma 0.1
Oregon 1.5
Pennsylvania 4.3
Puerto Rico 5.4
Rhode Island 0.4
South Carolina 2.0
South Dakota 0.5
Tennessee 1.1
Texas 9.6
Utah 0.7
Virgin Islands 1.0
Virginia 0.5
Washington 2.2
Wisconsin 1.4
Short-Term Investments 2.6
---------------
Total Investments 99.8
Other Assets and Liabilities, Net 0.2
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
150 Tax Exempt Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,071.30 $ 1,015.32
Expenses Paid During
Period* $ 9.81 $ 9.54
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.91%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,075.40 $ 1,019.04
Expenses Paid During
Period* $ 5.97 $ 5.81
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.16%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,076.80 $ 1,020.28
Expenses Paid During
Period* $ 4.69 $ 4.56
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.91%
(representing the six month period annualized), 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 151
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.8%
Auto and Transportation - 1.4%
Burlington Northern Santa Fe Corp. 11,520 916
CSX Corp. 8,200 562
FedEx Corp. 7,000 806
Harley-Davidson, Inc. 3,100 158
Norfolk Southern Corp. 22,300 1,204
Ship Finance International, Ltd. (N) 41,300 703
Toyota Motor Corp. - ADR 6,370 746
United Parcel Service, Inc. Class B 18,000 1,459
------------
6,554
------------
Consumer Discretionary - 15.4%
Abercrombie & Fitch Co. Class A 10,700 650
Apollo Group, Inc. Class A (AE) 60,600 3,311
Avon Products, Inc. 40,500 1,321
Bed Bath & Beyond, Inc. (AE) 42,700 1,638
Best Buy Co., Inc. 14,460 819
Carnival Corp. 9,000 421
CBS Corp. Class B 28,150 717
Cintas Corp. 35,000 1,469
Coach, Inc. (AE) 30,950 1,022
Costco Wholesale Corp. 27,500 1,497
eBay, Inc. (AE) 196,470 6,761
Electronic Arts, Inc. (AE) 3,400 193
EW Scripps Co. Class A 8,200 378
Gannett Co., Inc. 52,000 2,860
Google, Inc. Class A (AE) 21,380 8,936
Hilton Hotels Corp. 6,600 178
Home Depot, Inc. 93,500 3,733
International Game Technology 18,160 689
Iron Mountain, Inc. (AE) 22,900 895
JC Penney Co., Inc. 5,000 327
Jones Apparel Group, Inc. 18,900 649
Kohl's Corp. (AE) 6,000 335
Las Vegas Sands Corp. (AE) 13,740 891
Limited Brands, Inc. 28,608 734
Lowe's Cos., Inc. 69,600 4,388
McDonald's Corp. 21,200 733
News Corp. Class A 140,300 2,408
Nike, Inc. Class B 32,300 2,643
RR Donnelley & Sons Co. 13,000 438
Scientific Games Corp. Class A (AE) 26,080 993
Staples, Inc. 28,700 758
Starbucks Corp. (AE) 197,140 7,347
Starwood Hotels & Resorts Worldwide, Inc. (o) 12,650 726
Target Corp. 22,900 1,216
Time Warner, Inc. 9,175 160
Viacom, Inc. Class B (AE) 35,550 1,416
Wal-Mart Stores, Inc. 81,700 3,679
Walt Disney Co. 25,600 716
Wendy's International, Inc. 1,900 117
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Yahoo!, Inc. (AE) 84,100 2,757
Yum! Brands, Inc. 8,000 413
------------
71,332
------------
Consumer Staples - 6.6%
Altria Group, Inc. 68,900 5,041
Anheuser-Busch Cos., Inc. 8,700 388
Coca-Cola Co. (The) 85,500 3,587
CVS Corp. 35,400 1,052
Diageo PLC - ADR (N) 31,000 2,054
PepsiCo, Inc. 89,080 5,188
Procter & Gamble Co. 135,185 7,869
Supervalu, Inc. 14,400 418
Sysco Corp. 11,000 329
Unilever NV 21,800 1,569
Walgreen Co. 55,400 2,323
Whole Foods Market, Inc. 14,820 910
------------
30,728
------------
Financial Services - 19.2%
Aflac, Inc. 34,000 1,616
Allstate Corp. (The) 50,500 2,853
Ambac Financial Group, Inc. 23,800 1,960
American Express Co. 41,590 2,238
American International Group, Inc. 50,120 3,270
Assurant, Inc. 6,900 332
Automatic Data Processing, Inc. 33,100 1,459
Bank of America Corp. 186,367 9,303
Bank of New York Co., Inc. (The) 35,800 1,258
Capital One Financial Corp. 9,354 810
Charles Schwab Corp. (The) (AE) 47,090 843
Chicago Mercantile Exchange Holdings, Inc. 9,540 4,369
Cigna Corp. 8,900 952
CIT Group, Inc. 19,000 1,026
Citigroup, Inc. 203,800 10,180
City National Corp. 500 37
Compass Bancshares, Inc. 6,000 330
Countrywide Financial Corp. 44,700 1,818
E*Trade Financial Corp. (AE) 18,600 463
First Data Corp. 4,700 224
Freddie Mac 20,200 1,233
Genworth Financial, Inc. Class A 13,700 455
Goldman Sachs Group, Inc. 13,300 2,132
H&R Block, Inc. 19,900 454
Hartford Financial Services Group, Inc. 10,100 929
</Table>
152 Tax-Managed Large Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Host Hotels & Resorts, Inc. (AE)(o) 19,333 406
IntercontinentalExchange, Inc. (AE)(N) 17,100 1,219
JPMorgan Chase & Co. 40,504 1,838
Lincoln National Corp. (N) 8,300 482
MBIA, Inc. 12,900 769
Mellon Financial Corp. 14,300 538
Merrill Lynch & Co., Inc. 16,200 1,235
Metlife, Inc. 24,100 1,256
Moody's Corp. 44,200 2,741
Morgan Stanley 76,300 4,906
North Fork Bancorporation, Inc. 48,800 1,470
Nuveen Investments, Inc. Class A (N) 24,700 1,189
Paychex, Inc. 36,200 1,462
Piper Jaffray Cos., Inc. (AE)(N) 700 49
ProLogis (o) 7,200 362
Regions Financial Corp. 22,359 816
St. Paul Travelers Cos., Inc. (The) 7,600 335
State Street Corp. 23,700 1,548
SunTrust Banks, Inc. 3,900 302
Synovus Financial Corp. 40,400 1,131
Torchmark Corp. 7,900 475
US Bancorp 169,500 5,329
Wachovia Corp. 50,000 2,993
Washington Mutual, Inc. 19,300 870
Wells Fargo & Co. 56,100 3,854
WR Berkley Corp. 6,300 236
XL Capital, Ltd. Class A 9,500 626
------------
88,981
------------
Health Care - 14.2%
Abbott Laboratories 50,200 2,146
Abraxis BioScience, Inc. (AE)(N) 31,000 968
Aetna, Inc. 40,800 1,571
Allergan, Inc. 28,100 2,886
Amgen, Inc. (AE) 36,783 2,490
Barr Pharmaceuticals, Inc. (AE) 6,900 418
Baxter International, Inc. 9,800 370
Biomet, Inc. 41,900 1,558
Boston Scientific Corp. (AE) 36,286 843
Caremark Rx, Inc. 19,130 871
Cerner Corp. (AE) 18,880 749
Charles River Laboratories International, Inc.
(AE) 1,400 66
Eli Lilly & Co. 26,400 1,397
Express Scripts, Inc. (AE) 9,920 775
Forest Laboratories, Inc. (AE) 12,100 489
Genentech, Inc. (AE) 69,080 5,506
Genzyme Corp. (AE) 55,300 3,382
Gilead Sciences, Inc. (AE) 32,860 1,889
HCA, Inc. 6,000 263
Intuitive Surgical, Inc. (AE) 10,000 1,270
Johnson & Johnson 123,700 7,250
Medco Health Solutions, Inc. (AE) 1,100 59
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Medtronic, Inc. 62,800 3,148
Omnicare, Inc. 17,880 1,014
Patterson Cos., Inc. (AE)(N) 27,600 899
Pfizer, Inc. 245,350 6,215
Schering-Plough Corp. 4,300 83
Sepracor, Inc. (AE)(N) 16,400 732
Shire PLC - ADR 18,260 865
St. Jude Medical, Inc. (AE) 2,600 103
Stryker Corp. 40,800 1,785
Teva Pharmaceutical Industries, Ltd. - ADR (N) 94,000 3,807
UnitedHealth Group, Inc. 1,400 70
Varian Medical Systems, Inc. (AE) 29,600 1,550
WellPoint, Inc. (AE) 31,990 2,271
Wyeth 94,700 4,609
Zimmer Holdings, Inc. (AE) 19,400 1,220
------------
65,587
------------
Integrated Oils - 5.5%
BP PLC - ADR 35,930 2,649
Chevron Corp. 121,867 7,436
ConocoPhillips 67,400 4,509
Exxon Mobil Corp. 168,486 10,628
Occidental Petroleum Corp. 2,500 257
------------
25,479
------------
Materials and Processing - 2.7%
Air Products & Chemicals, Inc. 10,400 713
Alcoa, Inc. 14,900 503
Archer-Daniels-Midland Co. 24,900 905
Cemex SA de CV - ADR 15,640 1,056
Dow Chemical Co. (The) 38,200 1,551
Eastman Chemical Co. 6,900 375
International Paper Co. 22,400 814
Masco Corp. 12,100 386
Monsanto Co. 7,300 609
Olin Corp. (N) 40,900 840
Praxair, Inc. 14,600 820
Sigma-Aldrich Corp. 28,500 1,955
Temple-Inland, Inc. 11,600 539
United States Steel Corp. 21,500 1,473
------------
12,539
------------
Miscellaneous - 4.8%
3M Co. 20,800 1,777
Eaton Corp. 2,800 215
Fortune Brands, Inc. 2,000 160
General Electric Co. 379,020 13,110
</Table>
Tax-Managed Large Cap Fund 153
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Honeywell International, Inc. 13,500 574
Johnson Controls, Inc. 16,100 1,313
Textron, Inc. 21,670 1,949
Tyco International, Ltd. 110,100 2,901
------------
21,999
------------
Other Energy - 3.0%
Anadarko Petroleum Corp. 20,000 2,096
Apache Corp. 31,600 2,245
BJ Services Co. 4,600 175
Devon Energy Corp. 11,900 715
Dynegy, Inc. Class A (AE)(N) 700 4
Halliburton Co. 11,100 867
Hugoton Royalty Trust 1,619 45
Kerr-McGee Corp. 6,600 659
Peabody Energy Corp. 14,690 938
Pride International, Inc. (AE) 100 4
Schlumberger, Ltd. 31,800 2,199
Valero Energy Corp. 9,300 602
Weatherford International, Ltd. (AE) 10,900 577
Williams Cos., Inc. 76,000 1,667
XTO Energy, Inc. 27,160 1,150
------------
13,943
------------
Producer Durables - 4.6%
ACCO Brands Corp. (AE)(N) 470 10
American Tower Corp. Class A (AE) 14,600 499
Applied Materials, Inc. 64,310 1,154
Boeing Co. 20,510 1,712
Caterpillar, Inc. 13,760 1,042
Centex Corp. 1,400 78
Deere & Co. 3,100 272
Diebold, Inc. (N) 32,300 1,374
DR Horton, Inc. 2,800 84
Emerson Electric Co. 7,700 654
Hubbell, Inc. Class B 15,700 811
Illinois Tool Works, Inc. 12,300 1,263
Ingersoll-Rand Co., Ltd. Class A 20,400 893
KB Home 1,800 111
Koninklijke Philips Electronics NV 50,300 1,734
Lennar Corp. Class A 6,900 379
Lockheed Martin Corp. 29,000 2,201
Northrop Grumman Corp. 37,200 2,489
Pitney Bowes, Inc. 19,200 804
Pulte Homes, Inc. 400 15
Teradyne, Inc. (AE) 200 3
United Technologies Corp. 59,500 3,737
------------
21,319
------------
Technology - 10.9%
Affiliated Computer Services, Inc. Class A (AE) 6,700 374
Akamai Technologies, Inc. (AE) 22,420 755
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Altera Corp. (AE) 50,100 1,094
Analog Devices, Inc. 9,600 364
Apple Computer, Inc. (AE) 49,020 3,450
Broadcom Corp. Class A (AE) 28,785 1,183
Cisco Systems, Inc. (AE) 113,400 2,376
Computer Sciences Corp. (AE) 12,200 714
Corning, Inc. (AE) 108,610 3,001
Dell, Inc. (AE) 39,600 1,038
EMC Corp. (AE) 34,900 471
F5 Networks, Inc. (AE) 6,750 395
Hewlett-Packard Co. 71,290 2,315
Intel Corp. 165,300 3,303
International Business Machines Corp. 58,400 4,809
Intersil Corp. Class A 1,700 50
JDS Uniphase Corp. (AE) 115,980 405
Juniper Networks, Inc. (AE) 10,000 185
Linear Technology Corp. 63,900 2,268
Marvell Technology Group, Ltd. (AE) 24,700 1,410
Maxim Integrated Products, Inc. 2,700 95
Microsoft Corp. 266,300 6,431
Motorola, Inc. 43,600 931
NCR Corp. (AE) 22,300 879
Oracle Corp. (AE) 71,600 1,045
Qualcomm, Inc. 122,180 6,273
Raytheon Co. 11,500 509
Red Hat, Inc. (AE)(N) 89,850 2,641
Salesforce.com, Inc. (AE) 14,130 495
Seagate Technology, Inc. (AE) 26,700 --
Texas Instruments, Inc. 22,800 791
Xilinx, Inc. 22,000 609
------------
50,659
------------
Utilities - 5.5%
America Movil SA de CV Series L 17,668 652
AT&T, Inc. 179,119 4,695
BellSouth Corp. 8,900 301
Comcast Corp. (AE) Class A 10,100 313
Comcast Corp. (AE) Special Class A 39,600 1,221
Consolidated Edison, Inc. (N) 200 9
Constellation Energy Group, Inc. 5,400 297
Dominion Resources, Inc. 400 30
DPL, Inc. (N) 32,500 883
Duke Energy Corp. 26,652 776
Edison International 24,600 994
Entergy Corp. 25,200 1,762
Exelon Corp. 33,100 1,787
FirstEnergy Corp. 900 46
</Table>
154 Tax-Managed Large Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
NII Holdings, Inc. (AE) 14,800 886
Northeast Utilities 14,800 298
PanAmSat Holding Corp. (N) 13,600 338
PG&E Corp. (N) 46,600 1,857
Pinnacle West Capital Corp. 18,800 754
PPL Corp. 46,000 1,336
Southern Co. (The) 34,500 1,112
Sprint Nextel Corp. 25,056 621
TXU Corp. 4,400 218
Verizon Communications, Inc. 114,480 3,781
Xcel Energy, Inc. (N) 15,100 284
------------
25,251
------------
TOTAL COMMON STOCKS
(cost $323,116) 434,371
------------
SHORT-TERM INVESTMENTS - 6.7%
Frank Russell Investment Company Money Market
Fund 29,716,000 29,716
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 1,500 1,492
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $31,208) 31,208
------------
OTHER SECURITIES - 4.9%
Frank Russell Investment Company Money Market
Fund (X) 5,964,486 5,964
State Street Securities Lending Quality Trust
(X) 16,802,711 16,803
------------
TOTAL OTHER SECURITIES
(cost $22,767) 22,767
------------
TOTAL INVESTMENTS - 105.4%
(identified cost $377,091) 488,346
OTHER ASSETS AND LIABILITIES,
NET - (5.4%) (25,212)
------------
NET ASSETS - 100.0% 463,134
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
S&P 500 E-Mini Index (CME)
expiration date 06/06 (110) 7,237 117
S&P 500 Index (CME)
expiration date 06/06 (69) 22,699 335
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts 452
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Large Cap Fund 155
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 1.4
Consumer Discretionary 15.4
Consumer Staples 6.6
Financial Services 19.2
Health Care 14.2
Integrated Oils 5.5
Materials and Processing 2.7
Miscellaneous 4.8
Other Energy 3.0
Producer Durables 4.6
Technology 10.9
Utilities 5.5
Short-Term Investments 6.7
Other Securities 4.9
---------------
Total Investments 105.4
Other Assets and Liabilities, Net (5.4)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
156 Tax-Managed Large Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,163.10 $ 1,013.64
Expenses Paid During
Period* $ 12.07 $ 11.23
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,167.40 $ 1,017.36
Expenses Paid During
Period* $ 8.06 $ 7.50
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.50%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,168.70 $ 1,018.60
Expenses Paid During
Period* $ 6.72 $ 6.26
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.25%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
Tax-Managed Mid & Small Cap Fund 157
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.8%
Auto and Transportation - 4.0%
AAR Corp. (AE) 19,175 512
Alexander & Baldwin, Inc. 6,320 315
American Commercial Lines, Inc. (AE) 8,345 450
American Railcar Industries, Inc. 9,426 337
AMR Corp. (AE) 9,300 229
ArvinMeritor, Inc. 8,240 137
Aviall, Inc. (AE) 19,981 753
CH Robinson Worldwide, Inc. 11,780 522
Con-way, Inc. 3,310 184
Fleetwood Enterprises, Inc. (AE)(N) 37,242 350
Forward Air Corp. 23,375 939
Genesee & Wyoming, Inc. Class A (AE) 5,331 175
Gentex Corp. 6,600 97
Keystone Automotive Industries, Inc. (AE)(N) 17,562 725
Modine Manufacturing Co. (AE) 2,700 78
Overseas Shipholding Group, Inc. 5,400 264
RailAmerica, Inc. (AE) 9,000 103
Skywest, Inc. 5,380 127
Strattec Security Corp. (AE) 2,790 106
Superior Industries International 5,400 102
Visteon Corp. (AE) 59,735 351
Wabtec Corp. 25,179 920
Winnebago Industries, Inc. 14,481 426
------------
8,202
------------
Consumer Discretionary - 18.6%
Aaron Rents, Inc. 11,869 319
Advisory Board Co. (The) (AE) 6,307 354
Advo, Inc. (N) 23,132 656
Aeropostale, Inc. (AE) 9,690 298
Alderwoods Group, Inc. (AE) 4,200 80
America's Car-Mart, Inc. (AE) 2,397 49
AMN Healthcare Services, Inc. (AE) 7,590 146
AnnTaylor Stores Corp. (AE) 4,200 157
Applebees International, Inc. 9,585 222
aQuantive, Inc. (AE)(N) 33,800 847
Arbitron, Inc. (N) 14,048 501
Big 5 Sporting Goods Corp. 30,460 564
Bright Horizons Family Solutions, Inc. (AE) 7,800 310
Brightpoint, Inc. (AE)(N) 12,060 404
California Pizza Kitchen, Inc. (AE)(N) 16,252 514
Casual Male Retail Group, Inc. (AE)(N) 61,256 577
CDI Corp. 5,480 155
Central European Distribution Corp. (AE) 7,875 323
Chemed Corp. (N) 5,740 313
Chico's FAS, Inc. (AE) 9,670 358
ChoicePoint, Inc. (AE) 19,314 850
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Copart, Inc. (AE) 14,512 390
Corinthian Colleges, Inc. (AE) 43,542 648
Corrections Corp. of America (AE) 3,435 154
Cost Plus, Inc. (AE)(N) 31,824 560
Cox Radio, Inc. Class A (AE) 16,110 208
Crown Media Holdings, Inc. Class A (AE) 6,625 26
DeVry, Inc. (AE)(N) 21,606 559
DiamondCluster International, Inc. (AE)(N) 64,376 666
Discovery Holding Co. Class A (AE) 3,900 58
EarthLink, Inc. (AE) 14,560 132
Expedia, Inc. (AE) 3,950 74
Fossil, Inc. (AE) 29,336 477
FTI Consulting, Inc. (AE) 41,274 1,186
GameStop Corp. Class A (AE) 10,130 478
Global Imaging Systems, Inc. (AE) 11,425 427
Greenfield Online, Inc. (AE) 29,790 178
Harman International Industries, Inc. 3,200 282
Harrah's Entertainment, Inc. 1,149 94
Haverty Furniture Cos., Inc. 4,200 63
Hot Topic, Inc. (AE) 40,900 607
Hudson Highland Group, Inc. (AE) 5,270 106
Insight Enterprises, Inc. (AE) 17,300 342
InterActiveCorp (AE) 3,950 114
International Speedway Corp. Class A 3,730 183
Ipass, Inc. (AE)(N) 77,255 643
Jarden Corp. (AE)(N) 18,715 636
Jos A Bank Clothiers, Inc. (AE) 1,759 74
Kellwood Co. 6,060 194
Kelly Services, Inc. Class A 5,540 153
Krispy Kreme Doughnuts, Inc. (AE) 20,600 176
Lamar Advertising Co. Class A (AE) 4,000 220
Landry's Restaurants, Inc. 6,600 234
Liberty Global, Inc.
Series A (AE) 1,530 32
Lodgenet Entertainment Corp. (AE) 2,500 48
Matthews International Corp. Class A 6,060 211
MAXIMUS, Inc. 3,632 127
Men's Wearhouse, Inc. (The) 4,230 150
MGM Mirage 2,000 90
Michaels Stores, Inc. 3,900 148
Monster Worldwide, Inc. (AE) 7,050 405
MPS Group, Inc. (AE) 38,040 607
MSC Industrial Direct Co., Inc. Class A 8,069 418
Navigant Consulting, Inc. (AE) 7,230 152
New York & Co., Inc. (AE) 43,780 682
</Table>
158 Tax-Managed Mid & Small Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
NTL, Inc. 2,000 55
Nutri System, Inc. (AE)(N) 6,900 468
O'Charleys, Inc. (AE) 17,091 290
Oxford Industries, Inc. 8,000 350
Petco Animal Supplies, Inc. (AE) 59,352 1,300
PF Chang's China Bistro, Inc. (AE) 23,325 994
Playboy Enterprises, Inc. Class B (AE)(N) 41,908 553
Polo Ralph Lauren Corp. 13,230 803
RC2 Corp. (AE) 15,642 618
Reader's Digest Association, Inc. (The) (N) 36,453 502
Red Robin Gourmet Burgers, Inc. (AE) 4,800 216
Rent-A-Center, Inc. (AE) 8,697 240
Revlon, Inc. Class A (AE) 31,424 102
Saks, Inc. 5,400 109
School Specialty, Inc. (AE)(N) 18,539 674
Scientific Games Corp. Class A (AE)(N) 13,380 510
Service Corp. International 20,980 169
Sharper Image Corp. (AE) 8,900 134
Shuffle Master, Inc. (AE) 37,383 1,381
Sirva, Inc. (AE) 18,230 172
Sourcecorp, Inc. (AE) 6,110 151
Startek, Inc. 8,500 194
Station Casinos, Inc. 10,600 817
Strayer Education, Inc. 13,731 1,428
Sturm Ruger & Co., Inc. (N) 31,620 222
Tetra Tech, Inc. (AE) 3,737 73
Toro Co. 4,270 211
Tractor Supply Co. (AE) 7,042 456
United Online, Inc. 10,126 130
USANA Health Sciences, Inc. (AE) 2,896 106
ValueClick, Inc. (AE) 74,883 1,262
Ventiv Health, Inc. (AE) 5,220 157
Warnaco Group, Inc. (The) (AE) 14,200 316
Watson Wyatt Worldwide, Inc. 5,111 168
WESCO International, Inc. (AE) 16,720 1,254
Williams-Sonoma, Inc. 8,510 356
------------
38,350
------------
Consumer Staples - 2.0%
Coca-Cola Bottling Co. Consolidated 1,870 90
Del Monte Foods Co. (N) 53,998 630
Hain Celestial Group, Inc. (AE) 6,774 182
Hansen Natural Corp. (AE)(N) 1,880 243
Lance, Inc. (N) 28,962 739
Loews Corp. 1,700 87
Longs Drug Stores Corp. 2,500 119
Performance Food Group Co. (AE) 7,464 229
Ralcorp Holdings, Inc. (AE) 3,900 146
Rite Aid Corp. (AE) 37,050 167
Ruddick Corp. 6,990 162
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SunOpta, Inc. (AE) 71,860 732
Tiens Biotech Group USA, Inc. (AE) 32,760 192
Tootsie Roll Industries, Inc. 5,340 156
Tyson Foods, Inc. Class A 3,723 54
Weis Markets, Inc. 3,320 138
------------
4,066
------------
Financial Services - 17.6%
Advanta Corp. Class B 19,775 755
Affiliated Managers Group, Inc. (AE)(N) 8,612 872
Alabama National Bancorporation 6,100 420
Alexandria Real Estate Equities, Inc. (o) 3,825 347
Alfa Corp. 6,100 103
American Financial Realty Trust (o) 20,327 231
AmerUs Group Co. 6,600 387
Arch Capital Group, Ltd. (AE) 9,650 586
Aspen Insurance Holdings, Ltd. 21,400 521
Bank of the Ozarks, Inc. 7,400 252
BioMed Realty Trust, Inc. (o) 11,275 312
BISYS Group, Inc. (The) (AE) 31,707 505
Blackrock, Inc. Class A 1,400 212
Capital One Financial Corp. 1,966 170
Capital Trust, Inc. Class A (o) 2,485 77
CarrAmerica Realty Corp. (o) 4,300 193
CB Richard Ellis Group, Inc. Class A (AE) 4,810 423
Cedar Shopping Centers, Inc. (o)(N) 43,247 638
Central Pacific Financial Corp. 9,475 359
Chemical Financial Corp. 4,430 129
CIT Group, Inc. 6,400 346
Colonial BancGroup, Inc. (The) 13,490 350
Commercial Capital Bancorp, Inc. 21,450 336
Crescent Real Estate Equities Co. (o) 8,013 160
Cullen/Frost Bankers, Inc. 8,625 499
Delphi Financial Group Class A 4,830 253
Digital Insight Corp. (AE) 35,582 1,227
Doral Financial Corp. 15,650 124
Dun & Bradstreet Corp. (AE) 3,010 232
Eurobancshares, Inc. (AE) 10,590 113
Euronet Worldwide, Inc. (AE) 16,910 604
Factset Research Systems, Inc. 10,268 453
Federal Realty Investors Trust (o) 3,200 218
FelCor Lodging Trust, Inc. (o) 6,585 143
Fidelity National Financial, Inc. 7,154 300
Fidelity National Title Group, Inc. Class A 1,251 27
First Commonwealth Financial Corp. 11,190 150
</Table>
Tax-Managed Mid & Small Cap Fund 159
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
First Financial Corp. 4,970 153
First Industrial Realty Trust, Inc. (o)(N) 11,675 458
First Marblehead Corp. (The) (N) 8,693 418
First Midwest Bancorp, Inc. 13,603 490
First Potomac Realty Trust (o) 12,525 346
GATX Corp. 26,892 1,259
General Growth Properties, Inc. (o) 10,200 479
Glacier Bancorp, Inc. 5,828 177
Hanover Insurance Group, Inc. (The) 14,497 767
HCC Insurance Holdings, Inc. 10,215 342
HDFC Bank, Ltd. - ADR (N) 5,860 345
Healthcare Realty Trust, Inc. (o) 4,830 183
Home Properties, Inc. (o) 10,975 549
Host Hotels & Resorts, Inc. (AE)(o) 6,300 132
IndyMac Bancorp, Inc. 4,290 207
Integra Bank Corp. 6,470 144
Investment Technology Group,
Inc. (AE) 16,801 890
Investors Financial Services Corp. 5,160 247
Investors Real Estate Trust (o) 8,500 81
Kronos, Inc. (AE) 29,944 1,367
LandAmerica Financial Group, Inc. 1,592 110
Legg Mason, Inc. 2,900 344
Leucadia National Corp. 5,205 316
Mercury General Corp. 2,770 148
Mid-America Apartment Communities, Inc. (o) 11,775 624
Mills Corp. (The) (o) 4,164 133
Nasdaq Stock Market, Inc. (The) (AE) 9,770 366
National Penn Bancshares, Inc. 7,159 141
Nationwide Health Properties, Inc. (o) 7,270 156
NCO Group, Inc. (AE) 5,570 120
Nuveen Investments, Inc. Class A 1,400 67
Old Republic International Corp. 14,527 323
Omega Financial Corp. 6,460 208
Phoenix Cos., Inc. (The) 6,100 93
Placer Sierra Bancshares 16,350 434
PMI Group, Inc. (The) 4,480 207
Popular, Inc. 13,900 287
Post Properties, Inc. (o) 8,105 354
Provident Bankshares Corp. 4,496 156
Radian Group, Inc. 3,802 239
Raymond James Financial, Inc. 7,488 227
Reckson Associates Realty Corp. (o) 7,875 320
Reinsurance Group of America, Inc. 3,550 171
RLI Corp. 9,300 461
SEI Investments Co. 5,660 243
Selective Insurance Group, Inc. 2,700 150
Shurgard Storage Centers, Inc. Class A (o) 3,400 214
Signature Bank (AE) 15,925 563
Sky Financial Group, Inc. 11,230 290
Sovereign Bancorp, Inc. 11,394 253
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
State Auto Financial Corp. 1,610 57
Sterling Financial Corp. 17,295 556
TD Ameritrade Holding Corp. 13,900 258
TD Banknorth, Inc. 4,931 146
Texas Capital Bancshares, Inc. (AE) 49,805 1,149
Triad Guaranty, Inc. (AE) 11,550 630
UnionBanCal Corp. 3,300 231
United Bankshares, Inc. 13,300 485
Valley National Bancorp 9,430 246
Vornado Realty Trust (o) 5,300 507
Waddell & Reed Financial, Inc. Class A 24,950 587
Washington Real Estate Investment Trust (o) 6,930 258
Westamerica Bancorporation 6,550 335
Wintrust Financial Corp. 21,873 1,132
WR Berkley Corp. 2,719 102
------------
36,458
------------
Health Care - 10.5%
Advanced Medical Optics, Inc. (AE) 1,167 54
Affymetrix, Inc. (AE) 23,732 680
Align Technology, Inc. (AE) 21,950 193
Amedisys, Inc. (AE) 3,500 116
Arrow International, Inc. 4,880 152
Bio-Reference Labs, Inc. (AE) 3,740 71
Celgene Corp. (AE) 16,800 708
Cerner Corp. (AE)(N) 6,420 255
Charles River Laboratories International, Inc.
(AE) 4,618 218
Chattem, Inc. (AE) 13,175 475
Cooper Cos., Inc. (The) 4,149 227
Coventry Health Care, Inc. (AE) 8,550 425
CV Therapeutics, Inc. (AE) 1,814 36
Cytyc Corp. (AE) 12,551 324
Datascope Corp. 4,090 158
DaVita, Inc. (AE) 10,160 572
Durect Corp. (AE) 69,949 340
Emdeon Corp. (AE) 17,940 205
Endo Pharmaceuticals Holdings, Inc. (AE) 29,710 934
Enzon Pharmaceuticals, Inc. (AE) 15,400 131
Fisher Scientific International, Inc. (AE) 4,200 296
Genentech, Inc. (AE) 5,100 406
Gentiva Health Services, Inc. (AE) 60,888 1,031
Henry Schein, Inc. (AE) 32,811 1,530
Hooper Holmes, Inc. 33,920 100
</Table>
160 Tax-Managed Mid & Small Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Idexx Laboratories, Inc. (AE) 5,378 447
ImClone Systems, Inc. (AE) 4,530 164
Invitrogen Corp. (AE) 20,191 1,333
KV Pharmaceutical Co. Class A (AE)(N) 32,144 694
LifePoint Hospitals, Inc. (AE) 18,253 579
Ligand Pharmaceuticals, Inc. Class B (AE) 13,900 170
Lincare Holdings, Inc. (AE) 5,190 205
Millennium Pharmaceuticals, Inc. (AE) 9,600 87
Myogen, Inc. (AE)(N) 9,680 320
New River Pharmaceuticals, Inc. (AE)(N) 9,900 337
Omnicare, Inc. 9,980 566
Omnicell, Inc. (AE) 4,970 66
OSI Pharmaceuticals, Inc. (AE) 2,694 72
Par Pharmaceutical Cos., Inc. (AE)(N) 21,139 544
PolyMedica Corp. (N) 16,822 695
PSS World Medical, Inc. (AE) 45,660 824
Psychiatric Solutions, Inc. (AE)(N) 8,940 296
Quality Systems, Inc. 12,000 403
Resmed, Inc. (AE) 7,610 328
Serologicals Corp. (AE)(N) 19,899 619
Stericycle, Inc. (AE) 13,423 884
Sunrise Senior Living, Inc. (AE)(N) 12,891 480
Techne Corp. (AE) 2,200 125
Teva Pharmaceutical Industries,
Ltd. - ADR 2,418 98
United Therapeutics Corp. (AE)(N) 5,270 314
UnitedHealth Group, Inc. 1,650 82
US Physical Therapy, Inc. (AE)(N) 25,744 402
Varian Medical Systems, Inc. (AE) 3,900 204
WellCare Health Plans, Inc. (AE) 3,900 163
West Pharmaceutical Services, Inc. (N) 8,160 291
Zoll Medical Corp. (AE) 5,380 143
Zymogenetics, Inc. (AE) 3,462 71
------------
21,643
------------
Integrated Oils - 0.1%
Murphy Oil Corp. 4,600 231
------------
Materials and Processing - 7.5%
Acuity Brands, Inc. 17,148 708
Airgas, Inc. 13,240 536
Allegheny Technologies, Inc. 9,180 636
Apogee Enterprises, Inc. 37,650 611
Arch Chemicals, Inc. 5,050 149
Armor Holdings, Inc. (AE) 6,530 399
Ashland, Inc. 3,650 240
Brush Engineered Materials, Inc. (AE) 16,339 381
Buckeye Technologies, Inc. (AE) 12,300 99
Commercial Metals Co. 10,736 584
Compx International, Inc. 6,900 111
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Crown Holdings, Inc. (AE) 20,525 329
Cytec Industries, Inc. 6,110 369
Dycom Industries, Inc. (AE) 2,500 55
EMCOR Group, Inc. (AE) 5,250 263
FMC Corp. 3,580 227
Gold Kist, Inc. (AE)(N) 19,938 267
Goodman Global, Inc. (AE) 10,535 209
GrafTech International, Ltd. (AE) 26,820 181
Graphic Packaging Corp. (AE) 32,500 86
Griffon Corp. (AE) 24,075 642
Hercules, Inc. (AE) 43,575 619
Jacobs Engineering Group, Inc. (AE) 17,642 1,459
Lennox International, Inc. 3,600 117
Martin Marietta Materials, Inc. 3,390 360
PAN American Silver Corp. (AE)(N) 7,970 198
Precision Castparts Corp. 5,000 315
RBC Bearings, Inc. (AE) 23,760 563
Rogers Corp. (AE) 13,075 807
Royal Gold, Inc. 2,800 96
RPM International, Inc. 9,501 175
Sonoco Products Co. 6,500 204
Southern Copper Corp. 4,000 396
Spartech Corp. 26,798 633
Standard Register Co. (The) 20,000 273
Steel Dynamics, Inc. 6,625 414
Texas Industries, Inc. 7,000 397
Universal Forest Products, Inc. 3,500 262
URS Corp. (AE) 760 33
USG Corp. (AE) 5,492 587
Washington Group International, Inc. 1,346 75
Wausau Paper Corp. (AE) 11,530 166
Worthington Industries, Inc. 17,633 348
------------
15,579
------------
Miscellaneous - 0.8%
Carlisle Cos., Inc. 2,661 225
Foster Wheeler, Ltd. (AE) 15,625 696
Lancaster Colony Corp. 4,690 192
Walter Industries, Inc. 7,353 488
------------
1,601
------------
Other Energy - 7.7%
Arch Coal, Inc. 3,900 370
CARBO Ceramics, Inc. 2,550 148
Consol Energy, Inc. 11,390 970
Cooper Cameron Corp. (AE) 23,117 1,161
Dynegy, Inc. Class A (AE) 81,425 405
Encore Acquisition Co. (AE) 18,964 581
</Table>
Tax-Managed Mid & Small Cap Fund 161
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Forest Oil Corp. (AE) 16,059 587
Global Industries, Ltd. (AE) 33,410 530
Global Power Equipment Group, Inc. (AE) 14,380 62
Grant Prideco, Inc. (AE) 20,741 1,062
Grey Wolf, Inc. (AE) 21,050 164
Hanover Compressor Co. (AE)(N) 38,231 771
Helix Energy Solutions Group, Inc. (AE) 20,210 785
Houston Exploration Co. (AE) 4,950 277
Hugoton Royalty Trust 432 12
International Coal Group, Inc. (AE) 53,825 554
James River Coal Co. (AE)(N) 8,386 295
Matrix Service Co. (AE)(N) 54,218 619
National-Oilwell Varco, Inc. (AE) 3,098 214
Oil States International, Inc. (AE) 4,340 175
Patterson-UTI Energy, Inc. 7,930 257
Peabody Energy Corp. 13,600 868
Plains Exploration & Production Co. (AE) 9,447 348
Range Resources Corp. (N) 17,535 465
SEACOR Holdings, Inc. (AE) 7,400 655
Southwestern Energy Co. (AE) 16,670 600
Superior Energy Services, Inc. (AE)(N) 16,380 527
Tesoro Corp. 9,590 671
W-H Energy Services, Inc. (AE) 12,375 622
Western Refining, Inc. 14,105 285
Whiting Petroleum Corp. (AE) 13,774 582
XTO Energy, Inc. 7,253 307
------------
15,929
------------
Producer Durables - 10.3%
American Tower Corp. Class A (AE) 3,600 123
Ametek, Inc. 8,472 417
Andrew Corp. (AE) 65,637 694
Applied Industrial Technologies, Inc. 5,707 237
Applied Signal Technology, Inc. (N) 18,710 336
ASV, Inc. (AE) 13,590 340
BE Aerospace, Inc. (AE) 55,133 1,435
Bucyrus International, Inc. Class A 8,090 420
C&D Technologies, Inc. (N) 77,285 623
Champion Enterprises, Inc. (AE) 43,893 670
Cognex Corp. 17,339 462
Crane Co. 28,558 1,207
Crown Castle International Corp. (AE) 19,400 653
Cymer, Inc. (AE) 11,220 580
Dionex Corp. (AE) 5,400 325
Donaldson Co., Inc. 32,144 1,068
EnPro Industries, Inc. (AE) 17,650 651
Entegris, Inc. (AE) 11,100 113
Esterline Technologies Corp. (AE) 16,827 746
Federal Signal Corp. 36,766 689
General Cable Corp. (AE)(N) 30,370 959
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
IDEX Corp. 13,278 675
Joy Global, Inc. 11,910 782
Kadant, Inc. (AE) 15,175 358
Kennametal, Inc. 10,315 638
Knoll, Inc. 13,125 285
Lam Research Corp. (AE) 5,650 276
Lennar Corp. Class A 6,700 368
Lincoln Electric Holdings, Inc. 4,950 271
Littelfuse, Inc. (AE) 20,165 651
Manitowoc Co., Inc. (The) 9,740 483
Mastec, Inc. (AE) 40,024 494
MDC Holdings, Inc. 4,267 247
Modtech Holdings, Inc. (AE)(N) 18,684 186
Orbital Sciences Corp. (AE) 11,051 173
Pentair, Inc. 8,540 327
Photon Dynamics, Inc. (AE) 21,338 406
Power-One, Inc. (AE) 22,100 156
Technical Olympic USA, Inc. (AE) 12,686 266
Tecumseh Products Co. Class A 6,150 141
Terex Corp. (AE) 7,060 611
Varian Semiconductor Equipment Associates, Inc.
(AE) 15,784 517
WCI Communities, Inc. (AE) 5,113 131
------------
21,190
------------
Technology - 12.9%
3Com Corp. (AE) 17,700 95
Actel Corp. (AE) 8,300 133
Agere Systems, Inc. (AE) 14,226 224
Agile Software Corp. (AE) 136,554 952
Anixter International, Inc. 18,430 937
Ansys, Inc. (AE) 8,300 469
Avid Technology, Inc. (AE)(N) 11,976 462
Avnet, Inc. (AE) 7,710 202
Avocent Corp. (AE) 29,333 790
BEA Systems, Inc. (AE) 18,550 246
Benchmark Electronics, Inc. (AE) 27,562 752
Black Box Corp. 3,611 169
Broadwing Corp. (AE) 29,840 414
Cognizant Technology Solutions Corp. Class A
(AE) 3,000 191
CSG Systems International, Inc. (AE) 6,273 159
Cypress Semiconductor Corp. (AE) 4,700 81
Ditech Communications Corp. (AE) 17,100 161
Emulex Corp. (AE) 8,198 149
Excel Technology, Inc. (AE) 4,000 118
F5 Networks, Inc. (AE) 5,840 342
Fairchild Semiconductor International, Inc. (AE) 34,025 703
</Table>
162 Tax-Managed Mid & Small Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Filenet Corp. (AE) 12,998 362
Formfactor, Inc. (AE) 2,374 99
Harris Corp. 5,320 248
Hutchinson Technology, Inc. (AE) 17,425 414
Hyperion Solutions Corp. (AE) 14,088 431
Informatica Corp. (AE) 60,679 933
Integrated Device Technology, Inc. (AE) 38,188 581
Intermec, Inc. (AE) 17,117 453
Internet Security Systems, Inc. (AE) 33,025 741
Intersil Corp. Class A 5,200 154
IXYS Corp. (AE) 43,472 440
JDS Uniphase Corp. (AE) 165,400 577
Juniper Networks, Inc. (AE) 15,300 283
Kemet Corp. (AE) 17,800 192
Lattice Semiconductor Corp. (AE) 19,700 131
Leadis Technology, Inc. (AE) 19,570 121
Lions Gate Entertainment Corp. (AE) 83,650 817
Macrovision Corp. (AE) 59,355 1,359
Mantech International Corp. Class A (AE) 26,244 867
McAfee, Inc. (AE) 3,400 89
Microchip Technology, Inc. 13,250 494
Microsemi Corp. (AE) 11,300 309
NAVTEQ Corp. (AE) 10,135 421
NetIQ Corp. (AE) 11,225 135
ON Semiconductor Corp. (AE) 9,500 68
Openwave Systems, Inc. (AE)(N) 17,990 335
Parametric Technology Corp. (AE) 48,485 724
Perot Systems Corp. Class A (AE) 28,975 437
Red Hat, Inc. (AE)(N) 13,080 384
Redback Networks, Inc. (AE) 32,402 726
RSA Security, Inc. (AE) 13,875 291
SanDisk Corp. (AE) 3,510 224
Semtech Corp. (AE) 7,780 146
Silicon Laboratories, Inc. (AE) 7,550 352
SiRF Technology Holdings, Inc. (AE)(N) 10,240 350
SRA International, Inc. Class A (AE) 5,060 162
SSA Global Technologies, Inc. (AE) 34,475 534
Sybase, Inc. (AE) 22,430 488
Sycamore Networks, Inc. (AE) 15,200 71
Syntel, Inc. 6,241 134
Trident Microsystems, Inc. (AE)(N) 23,700 630
Utstarcom, Inc. (AE) 15,000 104
Varian, Inc. (AE) 17,793 770
Vignette Corp. (AE) 8,677 138
Western Digital Corp. (AE) 7,930 167
Zebra Technologies Corp. Class A (AE) 27,846 1,105
------------
26,740
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Utilities - 3.8%
Alaska Communications Systems Group, Inc. (N) 66,900 844
Alltel Corp. 754 48
Aquila, Inc. (AE) 82,150 356
Cablevision Systems Corp. Class A 4,300 87
Cascade Natural Gas Corp. 5,400 111
Central Vermont Public Service Corp. 6,600 132
Empire District Electric Co. (The) 6,820 155
Great Plains Energy, Inc. 6,060 171
Level 3 Communications, Inc. (AE) 56,010 302
Middlesex Water Co. 6,210 116
NeuStar, Inc. Class A (AE) 47,548 1,669
New Jersey Resources Corp. 4,580 203
NII Holdings, Inc. (AE) 4,250 255
NorthWestern Corp. 10,575 371
NSTAR 6,996 193
Otter Tail Corp. 4,870 145
PNM Resources, Inc. 17,350 439
Premiere Global Services, Inc. (AE) 5,268 41
Questar Corp. 2,450 196
SCANA Corp. 8,400 329
Southwest Gas Corp. 7,455 207
Telephone & Data Systems, Inc. 7,210 281
Western Gas Resources, Inc. 13,672 711
Wisconsin Energy Corp. 10,660 416
------------
7,778
------------
TOTAL COMMON STOCKS
(cost $148,682) 197,767
------------
SHORT-TERM INVESTMENTS - 4.3%
Frank Russell Investment Company Money Market
Fund 7,978,000 7,978
United States Treasury Bills(c)(z)(sec.)
4.589% due 06/15/06 800 796
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $8,774) 8,774
------------
</Table>
Tax-Managed Mid & Small Cap Fund 163
FRANK RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 30.1%
Frank Russell Investment Company Money Market
Fund (X) 16,300,297 16,300
State Street Securities Lending Quality Trust
(X) 45,919,997 45,920
------------
TOTAL OTHER SECURITIES
(cost $62,220) 62,220
------------
TOTAL INVESTMENTS - 130.2%
(identified cost $219,676) 268,761
OTHER ASSETS AND LIABILITIES,
NET - (30.2%) (62,361)
------------
NET ASSETS - 100.0% 206,400
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 2000 Mini Index (CME)
expiration date 06/06 (100) 7,688 314
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts 314
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
164 Tax-Managed Mid & Small Cap Fund
FRANK RUSSELL INVESTMENT COMPANY
TAX MANAGED MID & SMALL CAP FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 4.0
Consumer Discretionary 18.6
Consumer Staples 2.0
Financial Services 17.6
Health Care 10.5
Integrated Oils 0.1
Materials and Processing 7.5
Miscellaneous 0.8
Other Energy 7.7
Producer Durables 10.3
Technology 12.9
Utilities 3.8
Short-Term Investments 4.3
Other Securities 30.1
---------------
Total Investments 130.2
Other Assets and Liabilities, Net (30.2)
---------------
100.0
===============
Futures Contracts 0.2
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Mid & Small Cap Fund 165
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,077.90 $ 1,013.84
Expenses Paid During
Period* $ 11.39 $ 11.03
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.21%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,083.80 $ 1,018.15
Expenses Paid During
Period* $ 6.92 $ 6.71
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.34%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,084.70 $ 1,020.08
Expenses Paid During
Period* $ 4.91 $ 4.76
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.95%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
166 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,083.90 $ 1,019.19
Expenses Paid During
Period* $ 5.84 $ 5.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.13%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
Select Growth Fund 167
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.2%
Auto and Transportation - 3.0%
Burlington Northern Santa Fe Corp. 7,720 615
CH Robinson Worldwide, Inc. 12,960 575
Expeditors International Washington, Inc. 12,000 1,027
FedEx Corp. 6,500 748
Freightcar America, Inc. (N) 3,000 201
Norfolk Southern Corp. 10,700 578
Swift Transportation Co., Inc. (AE) 11,400 341
Union Pacific Corp. 7,800 711
United Parcel Service, Inc. Class B 14,500 1,176
------------
5,972
------------
Consumer Discretionary - 19.0%
24/7 Real Media, Inc. (AE) 21,300 216
Activision, Inc. (AE) 49,100 697
Alloy, Inc. (AE)(N) 4,650 58
AMN Healthcare Services, Inc. (AE)(N) 14,300 275
Apollo Group, Inc. Class A (AE) 17,000 929
Best Buy Co., Inc. 9,480 537
BJ's Restaurants, Inc. (AE)(N) 2,400 63
Blockbuster, Inc. Class A (N) 78,500 369
Boyd Gaming Corp. (N) 6,800 339
Buca, Inc. (AE)(N) 19,900 113
Callaway Golf Co. 14,000 224
Casual Male Retail Group, Inc. (AE) 15,600 147
Charlotte Russe Holding, Inc. (AE) 8,800 190
Chemed Corp. 1,800 98
Christopher & Banks Corp. 8,900 235
Coach, Inc. (AE) 26,710 882
Crown Media Holdings, Inc. Class A (AE)(N) 12,100 47
Deckers Outdoor Corp. (AE) 5,100 218
dELiA*s, Inc. (AE)(N) 9,300 99
Design Within Reach, Inc. (AE)(N) 14,900 89
DiamondCluster International, Inc. (AE) 10,800 112
Dick's Sporting Goods, Inc. (AE)(N) 9,500 400
eBay, Inc. (AE) 57,570 1,981
Electronic Arts, Inc. (AE) 34,900 1,982
Emerson Radio Corp. (AE) 19,800 67
Ezcorp, Inc. Class A (AE) 3,800 120
Google, Inc. Class A (AE) 11,783 4,925
Gray Television, Inc. 12,400 94
Home Depot, Inc. 35,500 1,417
Iconix Brand Group, Inc. (AE)(N) 7,082 122
International Game Technology 53,870 2,043
Kohl's Corp. (AE) 27,100 1,513
Las Vegas Sands Corp. (AE) 10,400 674
LIFE TIME Fitness, Inc. (AE)(N) 2,800 128
MGM Mirage 23,000 1,033
Monster Worldwide, Inc. (AE) 3,900 224
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MPS Group, Inc. (AE) 17,800 284
Multimedia Games, Inc. (AE)(N) 11,100 153
Nutri System, Inc. (AE)(N) 10,100 685
Office Depot, Inc. (AE) 18,100 734
OfficeMax, Inc. 11,400 441
Omnicom Group, Inc. 6,100 549
On Assignment, Inc. (AE) 9,200 120
Sears Holdings Corp. (AE) 9,000 1,293
Sharper Image Corp. (AE)(N) 7,600 114
Sportsman's Guide, Inc. (The) (AE) 4,700 124
Stamps.com, Inc. (AE)(N) 4,700 133
Staples, Inc. 48,000 1,268
Starbucks Corp. (AE) 36,526 1,361
Starwood Hotels & Resorts Worldwide, Inc. (o) 38,060 2,184
Steven Madden, Ltd. 5,100 272
Topps Co., Inc. (The) (N) 14,900 131
Tweeter Home Entertainment Group, Inc. (AE) 10,400 89
Urban Outfitters, Inc. (AE) 42,700 991
Valuevision Media, Inc. Class A (AE)(N) 9,700 121
Ventiv Health, Inc. (AE) 6,600 198
Wal-Mart Stores, Inc. 40,800 1,837
WebSideStory, Inc. (AE)(N) 6,500 112
Weight Watchers International, Inc. 12,000 592
XM Satellite Radio Holdings, Inc. Class A (AE) 53,000 1,072
------------
37,518
------------
Consumer Staples - 7.4%
Altria Group, Inc. 10,400 761
Coca-Cola Co. (The) 21,800 915
Colgate-Palmolive Co. 12,800 757
CVS Corp. 42,300 1,257
PepsiCo, Inc. 64,005 3,728
Procter & Gamble Co. 88,102 5,128
Walgreen Co. 28,000 1,174
Whole Foods Market, Inc. 13,450 825
Wild Oats Markets, Inc. (AE)(N) 10,200 175
------------
14,720
------------
Financial Services - 7.3%
Advent Software, Inc. (AE) 9,200 324
American Express Co. 49,954 2,688
American International Group, Inc. 14,890 972
Charles Schwab Corp. (The) (AE) 49,690 889
</Table>
168 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Chicago Mercantile Exchange Holdings, Inc. 4,020 1,841
Commerce Bancorp, Inc. 21,200 855
Cybersource Corp. (AE)(N) 29,296 274
ECC Capital Corp. (o)(N) 31,200 49
First Data Corp. 41,300 1,970
HealthExtras, Inc. (AE)(N) 5,800 169
Heartland Payment Systems, Inc. (AE)(N) 4,000 105
Hypercom Corp. (AE) 16,700 152
MCF Corp. (AE) 19,600 25
Merrill Lynch & Co., Inc. 17,520 1,336
Moody's Corp. 15,000 930
Paychex, Inc. 24,000 969
Pico Holdings, Inc. (AE)(N) 3,800 124
Rewards Network, Inc. (AE)(N) 12,000 98
UBS AG 5,360 626
------------
14,396
------------
Health Care - 16.4%
Abbott Laboratories 16,400 701
Albany Molecular Research, Inc. (AE) 7,900 79
Allergan, Inc. 21,420 2,200
Amgen, Inc. (AE) 22,900 1,550
Amylin Pharmaceuticals, Inc. (AE)(N) 11,400 496
Analogic Corp. 2,900 183
Bruker BioSciences Corp. (AE) 20,400 119
Cardinal Health, Inc. 18,800 1,266
Caremark Rx, Inc. 37,325 1,700
Celgene Corp. (AE)(N) 25,820 1,089
Cytyc Corp. (AE) 4,600 119
DaVita, Inc. (AE) 12,200 686
Dendreon Corp. (AE)(N) 11,900 48
DexCom, Inc. (AE)(N) 3,200 81
Digene Corp. (AE) 5,300 219
Eli Lilly & Co. 13,900 736
ev3, Inc. (AE)(N) 7,300 115
Express Scripts, Inc. (AE) 15,040 1,175
Genentech, Inc. (AE) 36,295 2,893
Gilead Sciences, Inc. (AE) 27,965 1,608
Greatbatch, Inc. (AE) 2,900 71
GTx, Inc. (AE)(N) 9,100 86
Human Genome Sciences, Inc. (AE)(N) 30,700 350
ICU Medical, Inc. (AE)(N) 3,400 140
Illumina, Inc. (AE)(N) 5,300 168
Intralase Corp. (AE)(N) 5,100 110
Kinetic Concepts, Inc. (AE) 11,800 515
Lifecell Corp. (AE)(N) 10,600 287
Medco Health Solutions, Inc. (AE) 18,800 1,001
Medimmune, Inc. (AE) 13,300 419
Natus Medical, Inc. (AE) 7,300 146
Neose Technologies, Inc. (AE) 16,300 42
Omnicare, Inc. (N) 23,200 1,316
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Omnicell, Inc. (AE)(N) 14,800 197
Oxigene, Inc. (AE)(N) 10,400 45
Panacos Pharmaceuticals, Inc. (AE)(N) 54,400 380
PDL BioPharma, Inc. (AE) 7,800 224
Pfizer, Inc. 72,450 1,835
Phase Forward, Inc. (AE)(N) 11,500 158
Rita Medical Systems, Inc. (AE)(N) 19,500 80
SonoSite, Inc. (AE)(N) 4,100 155
Tercica, Inc. (AE)(N) 17,800 113
UnitedHealth Group, Inc. 37,100 1,845
Varian Medical Systems, Inc. (AE) 6,900 361
WellPoint, Inc. (AE) 25,330 1,798
Wyeth 53,540 2,606
Zimmer Holdings, Inc. (AE) 15,000 944
------------
32,455
------------
Materials and Processing - 2.6%
Archer-Daniels-Midland Co. 36,125 1,313
Cemex SA de CV - ADR 9,180 620
Corn Products International, Inc. 4,300 120
Harsco Corp. 3,100 258
Insituform Technologies, Inc. Class A (AE) 9,800 250
Monsanto Co. 17,000 1,418
Praxair, Inc. 19,000 1,067
Unifi, Inc. (AE) 27,100 91
------------
5,137
------------
Miscellaneous - 3.1%
3M Co. 9,300 795
Foster Wheeler, Ltd. (AE) 2,700 120
General Electric Co. 104,378 3,610
Textron, Inc. 14,530 1,307
Trinity Industries, Inc. 4,000 254
------------
6,086
------------
Other Energy - 2.0%
Baker Hughes, Inc. 13,400 1,083
ENSCO International, Inc. 3,300 176
FMC Technologies, Inc. (AE) 4,000 218
Foundation Coal Holdings, Inc. (N) 3,000 152
Halliburton Co. 8,680 678
Hercules Offshore, Inc. (AE) 3,400 139
National-Oilwell Varco, Inc. (AE) 1,400 97
Newfield Exploration Co. (AE) 20,800 928
Petroquest Energy, Inc. (AE)(N) 11,300 134
</Table>
Select Growth Fund 169
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TGC Industries, Inc. (AE) 11,200 159
Todco Class A 4,600 211
------------
3,975
------------
Producer Durables - 5.6%
Agilent Technologies, Inc. (AE) 19,000 730
American Tower Corp. Class A (AE) 3,000 102
Andrew Corp. (AE) 34,900 369
Applied Materials, Inc. 184,447 3,311
Boeing Co. 31,535 2,632
BTU International, Inc. (AE) 7,000 141
Caterpillar, Inc. 8,200 621
Entegris, Inc. (AE)(N) 16,427 167
ESCO Technologies, Inc. (AE)(N) 11,400 578
General Cable Corp. (AE) 6,500 205
Intevac, Inc. (AE) 6,922 194
Itron, Inc. (AE) 4,100 275
Polycom, Inc. (AE) 7,300 161
Radyne Corp. (AE)(N) 11,300 173
Regal-Beloit Corp. (N) 7,800 364
SBA Communications Corp. Class A (AE) 4,500 113
Sonic Solutions, Inc. (AE)(N) 9,600 170
Tektronix, Inc. 6,100 215
Teradyne, Inc. (AE)(N) 31,000 523
Viisage Technology, Inc. (AE)(N) 5,100 86
------------
11,130
------------
Technology - 25.6%
Actuate Corp. (AE) 16,200 68
Advanced Micro Devices, Inc. (AE) 33,770 1,092
Agile Software Corp. (AE)(N) 30,900 215
Akamai Technologies, Inc. (AE) 20,700 697
American Science & Engineering, Inc. (AE)(N) 2,100 180
Amkor Technology, Inc. (AE)(N) 30,600 370
Apple Computer, Inc. (AE) 38,154 2,690
Applied Micro Circuits Corp. (AE) 34,300 126
Art Technology Group, Inc. (AE) 46,100 131
Aspen Technology, Inc. (AE)(N) 18,400 237
Authentidate Holding Corp. (AE)(N) 13,900 43
Avid Technology, Inc. (AE)(N) 3,400 131
BEA Systems, Inc. (AE) 16,300 216
Broadcom Corp. Class A (AE) 50,955 2,095
Cadence Design Systems, Inc. (AE) 18,000 341
Captaris, Inc. (AE) 15,100 61
Centillium Communications, Inc. (AE) 26,526 99
Checkpoint Systems, Inc. (AE) 4,600 121
Cisco Systems, Inc. (AE) 105,600 2,212
Corning, Inc. (AE) 77,025 2,128
Daktronics, Inc. (N) 7,000 275
Equinix, Inc. (AE)(N) 5,200 343
Formfactor, Inc. (AE) 8,900 371
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Gartner, Inc. Class A (AE)(N) 22,500 315
Harris Corp. 5,000 233
Hewlett-Packard Co. 50,770 1,648
Ibasis, Inc. (AE)(N) 19,800 53
Informatica Corp. (AE)(N) 8,200 126
Integrated Device Technology, Inc. (AE) 13,000 198
Intermagnetics General Corp. (AE)(N) 4,350 94
Intersil Corp. Class A 12,000 355
Intuit, Inc. (AE) 19,000 1,029
JDS Uniphase Corp. (AE) 132,500 462
Juniper Networks, Inc. (AE) 42,800 791
Lawson Software, Inc. (AE)(N) 28,400 218
LCC International, Inc. Class A (AE) 28,500 103
Marvell Technology Group, Ltd. (AE) 21,660 1,237
Maxim Integrated Products, Inc. 15,400 543
Merix Corp. (AE) 10,900 126
Micron Technology, Inc. (AE) 122,360 2,076
Microsoft Corp. 174,400 4,212
MIPS Technologies, Inc. (AE) 20,700 153
MRO Software, Inc. (AE) 7,400 141
MRV Communications, Inc. (AE)(N) 31,400 120
Napster, Inc. (AE)(N) 23,400 108
National Semiconductor Corp. 54,200 1,625
NAVTEQ Corp. (AE) 17,000 706
NMS Communications Corp. (AE) 24,000 103
Nuance Communications, Inc. (AE)(N) 17,200 221
PMC - Sierra, Inc. (AE) 15,300 190
Qualcomm, Inc. 137,480 7,058
Rackable Systems, Inc. (AE) 5,200 267
Redback Networks, Inc. (AE) 17,020 381
Rockwell Automation, Inc. 16,030 1,161
RSA Security, Inc. (AE) 13,200 276
Saba Software, Inc. (AE) 18,325 107
Safeguard Scientifics, Inc. (AE)(N) 35,500 92
SanDisk Corp. (AE) 40,100 2,560
Seachange International, Inc. (AE)(N) 18,400 124
Seagate Technology (N) 35,000 930
Semtech Corp. (AE) 12,400 232
Silicon Image, Inc. (AE)(N) 48,000 490
Silicon Laboratories, Inc. (AE) 3,200 149
Sony Corp. - ADR 17,140 839
Stratex Networks, Inc. (AE) 27,443 173
SYKES Enterprises, Inc. (AE) 10,500 170
Texas Instruments, Inc. 58,300 2,024
Transaction Systems Architects, Inc. Class A
(AE) 5,000 200
Transwitch Corp. (AE) 49,800 106
</Table>
170 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ultimate Software Group, Inc. (AE)(N) 5,900 151
Viasat, Inc. (AE) 5,300 160
Vishay Intertechnology, Inc. (AE) 27,000 422
Volterra Semiconductor Corp. (AE)(N) 6,300 103
WatchGuard Technologies, Inc. (AE) 22,000 114
Xilinx, Inc. 28,900 800
------------
50,517
------------
Utilities - 1.2%
America Movil SA de CV Series L 23,394 863
MDU Communications International, Inc. (AE)(N) 29,200 31
NeuStar, Inc. Class A (AE)(N) 4,200 147
NII Holdings, Inc. (AE)(N) 7,120 427
Sprint Nextel Corp. 40,000 992
------------
2,460
------------
TOTAL COMMON STOCKS
(cost $158,499) 184,366
------------
SHORT-TERM INVESTMENTS - 6.5%
Frank Russell Investment Company Money Market
Fund 12,024,000 12,024
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 800 796
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $12,820) 12,820
------------
OTHER SECURITIES - 10.1%
Frank Russell Investment Company Money Market
Fund (X) 5,202,675 5,203
State Street Securities Lending Quality Trust
(X) 14,655,594 14,656
------------
TOTAL OTHER SECURITIES
(cost $19,859) 19,859
------------
TOTAL INVESTMENTS - 109.8%
(identified cost $191,178) 217,045
OTHER ASSETS AND LIABILITIES,
NET - (9.8%) (19,453)
------------
NET ASSETS - 100.0% 197,592
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Nasdaq 100 Index (CME)
expiration date 06/06 (24) 4,106 39
Russell 1000 Growth Index
expiration date 06/06 (11) 2,916 40
S&P 500 E-Mini Index (CME)
expiration date 06/06 (30) 1,974 48
S&P 500 Index (CME)
expiration date 06/06 (11) 3,619 4
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts 131
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Growth Fund 171
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Auto and Transportation 3.0
Consumer Discretionary 19.0
Consumer Staples 7.4
Financial Services 7.3
Health Care 16.4
Materials and Processing 2.6
Miscellaneous 3.1
Other Energy 2.0
Producer Durables 5.6
Technology 25.6
Utilities 1.2
Short-Term Investments 6.5
Other Securities 10.1
---------------
Total Investments 109.8
Other Assets and Liabilities, Net (9.8)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
172 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,118.30 $ 1,014.33
Expenses Paid During
Period* $ 11.08 $ 10.54
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.11%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,124.50 $ 1,018.55
Expenses Paid During
Period* $ 6.64 $ 6.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.26%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,126.00 $ 1,020.13
Expenses Paid During
Period* $ 4.96 $ 4.71
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.94%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
Select Value Fund 173
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,124.30 $ 1,019.34
Expenses Paid During
Period* $ 5.79 $ 5.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.10%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
174 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.5%
Auto and Transportation - 1.8%
Aviall, Inc. (AE) 14,462 545
Burlington Northern Santa Fe Corp. 15,420 1,226
Con-way, Inc. 2,720 152
CSX Corp. 8,900 610
Fleetwood Enterprises, Inc. (AE)(N) 26,880 253
Keystone Automotive Industries, Inc. (AE)(N) 12,675 523
Norfolk Southern Corp. 5,750 310
Polaris Industries, Inc. (N) 12,500 599
United Parcel Service, Inc. Class B 10,800 876
US Airways Group, Inc. (AE) 21,900 947
Visteon Corp. (AE) 43,110 253
Wabtec Corp. 18,140 663
------------
6,957
------------
Consumer Discretionary - 11.3%
Abercrombie & Fitch Co. Class A 7,300 443
Accenture, Ltd. Class A 67,060 1,949
Advo, Inc. 12,672 359
American Eagle Outfitters, Inc. 15,900 515
Arbitron, Inc. (N) 10,137 361
Bed Bath & Beyond, Inc. (AE) 13,900 533
Boyd Gaming Corp. (N) 30,500 1,520
California Pizza Kitchen, Inc. (AE)(N) 11,710 370
Casual Male Retail Group, Inc. (AE)(N) 49,136 463
CBS Corp. Class B 16,277 415
Copart, Inc. (AE) 10,486 282
Corinthian Colleges, Inc. (AE)(N) 31,412 468
Cost Plus, Inc. (AE)(N) 22,967 404
DeVry, Inc. (AE)(N) 15,593 403
DiamondCluster International, Inc. (AE) 46,448 480
Family Dollar Stores, Inc. 35,400 885
Federated Department Stores, Inc. 15,100 1,176
Gap, Inc. (The) 103,190 1,867
Harman International Industries, Inc. 8,900 783
Harrah's Entertainment, Inc. 30,400 2,482
Hasbro, Inc. (N) 70,280 1,385
Home Depot, Inc. 28,900 1,154
International Flavors & Fragrances, Inc. 17,800 629
Ipass, Inc. (AE)(N) 30,149 251
Jarden Corp. (AE)(N) 13,503 459
JC Penney Co., Inc. 56,500 3,698
Kimberly-Clark Corp. 19,920 1,166
Las Vegas Sands Corp. (AE) 26,300 1,705
Limited Brands, Inc. 27,000 692
McDonald's Corp. 93,600 3,236
MGM Mirage 55,300 2,483
Newell Rubbermaid, Inc. 22,000 603
Nike, Inc. Class B 8,500 696
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
O'Charleys, Inc. (AE)(N) 12,335 209
OfficeMax, Inc. 16,400 635
Playboy Enterprises, Inc. Class B (AE)(N) 27,579 364
Reader's Digest Association, Inc. (The) (N) 26,290 362
Reed Elsevier PLC - ADR (N) 12,040 479
RR Donnelley & Sons Co. 27,000 910
Sabre Holdings Corp. Class A 20,400 471
School Specialty, Inc. (AE)(N) 10,605 386
ServiceMaster Co. (The) 45,000 542
Sturm Ruger & Co., Inc. (N) 22,820 160
Time Warner, Inc. 59,100 1,028
Tribune Co. (N) 12,150 350
VF Corp. 7,200 441
Viacom, Inc. Class B (AE) 16,277 648
Walt Disney Co. 70,860 1,981
Waste Management, Inc. 22,700 850
------------
44,131
------------
Consumer Staples - 4.2%
Altria Group, Inc. 69,990 5,121
Colgate-Palmolive Co. 16,300 964
ConAgra Foods, Inc. 27,300 619
Del Monte Foods Co. (N) 38,961 454
Diageo PLC - ADR (N) 12,760 845
Hershey Co. (The) 10,600 565
HJ Heinz Co. 30,900 1,283
Kellogg Co. 28,020 1,298
Lance, Inc. 21,056 537
Molson Coors Brewing Co. Class B (N) 13,200 975
Nestle SA - ADR 7,070 538
PepsiCo, Inc. 7,180 418
Procter & Gamble Co. 18,200 1,059
Sara Lee Corp. 26,870 480
UST, Inc. 21,800 958
------------
16,114
------------
Financial Services - 25.0%
AG Edwards, Inc. 16,300 861
Allstate Corp. (The) 52,190 2,948
American Express Co. 16,810 905
American International Group, Inc. 66,400 4,333
AmeriCredit Corp. (AE) 30,600 927
Ameriprise Financial, Inc. 2,016 99
AmSouth Bancorporation 28,200 816
Assurant, Inc. 34,300 1,652
</Table>
Select Value Fund 175
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America Corp. 236,105 11,786
Bank of New York Co., Inc. (The) 7,900 278
Bear Stearns Cos., Inc. (The) 18,400 2,622
BISYS Group, Inc. (The) (AE) 22,787 363
Cedar Shopping Centers, Inc. (o)(N) 12,519 185
Chubb Corp. 11,720 604
Cigna Corp. 13,000 1,391
Citigroup, Inc. 176,820 8,832
Countrywide Financial Corp. 43,100 1,752
Dow Jones & Co., Inc. (N) 22,300 824
E*Trade Financial Corp. (AE) 51,800 1,289
Fannie Mae 24,670 1,248
First Data Corp. 53,513 2,552
First Industrial Realty Trust, Inc. (o)(N) 8,687 341
First Marblehead Corp. (The) (N) 6,289 303
Franklin Resources, Inc. 4,530 422
Freddie Mac 38,650 2,360
GATX Corp. (N) 10,495 491
Genworth Financial, Inc. Class A 9,900 329
Goldman Sachs Group, Inc. 18,930 3,034
Hanover Insurance Group, Inc. (The) 10,458 553
Hartford Financial Services Group, Inc. 24,490 2,251
Host Hotels & Resorts, Inc. (AE)(o) 34,800 732
Huntington Bancshares, Inc. 49,600 1,198
Jones Lang LaSalle, Inc. 9,800 831
JPMorgan Chase & Co. 102,000 4,629
Kronos, Inc. (AE) 7,339 335
Lehman Brothers Holdings, Inc. 14,390 2,175
Lincoln National Corp. (N) 17,900 1,040
Loews Corp. 12,200 1,295
Mellon Financial Corp. 23,280 876
Merrill Lynch & Co., Inc. 72,800 5,552
Metlife, Inc. 46,870 2,442
Morgan Stanley 15,000 965
New York Community Bancorp, Inc. 27,500 473
PNC Financial Services Group, Inc. 18,500 1,322
Prudential Financial, Inc. 16,500 1,289
South Financial Group, Inc. (The) (N) 29,600 803
St. Paul Travelers Cos., Inc. (The) 28,600 1,259
SunTrust Banks, Inc. 40,940 3,166
UBS AG 33,890 3,960
US Bancorp 96,500 3,034
Washington Mutual, Inc. 28,700 1,293
Wells Fargo & Co. 5,670 389
Westamerica Bancorporation 4,719 241
Zions Bancorporation 20,700 1,719
------------
97,369
------------
Health Care - 10.1%
Abbott Laboratories 33,420 1,428
AmerisourceBergen Corp. 9,900 427
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Amgen, Inc. (AE) 54,100 3,663
Baxter International, Inc. 32,520 1,226
Biogen Idec, Inc. (AE) 74,715 3,351
Boston Scientific Corp. (AE) 111,000 2,580
Eli Lilly & Co. 30,230 1,600
Forest Laboratories, Inc. (AE) 27,400 1,106
Gentiva Health Services, Inc. (AE) 18,648 316
Genzyme Corp. (AE) 31,300 1,914
Johnson & Johnson 50,790 2,977
KV Pharmaceutical Co. Class A (AE)(N) 23,222 501
LifePoint Hospitals, Inc. (AE) 13,173 418
Medco Health Solutions, Inc. (AE) 11,500 612
Medtronic, Inc. 19,400 972
Merck & Co., Inc. 66,580 2,292
Par Pharmaceutical Cos., Inc. (AE)(N) 15,237 392
Pfizer, Inc. 156,500 3,964
PolyMedica Corp. (N) 12,132 501
PSS World Medical, Inc. (AE) 32,953 595
Quest Diagnostics, Inc. 8,500 474
Serologicals Corp. (AE)(N) 14,357 447
Sunrise Senior Living, Inc. (AE)(N) 9,299 346
UnitedHealth Group, Inc. 53,400 2,656
US Physical Therapy, Inc. (AE)(N) 18,559 290
WellPoint, Inc. (AE) 42,700 3,032
Wyeth 23,160 1,127
------------
39,207
------------
Integrated Oils - 5.1%
Amerada Hess Corp. 6,500 931
Chevron Corp. 83,282 5,082
ConocoPhillips 53,900 3,606
Exxon Mobil Corp. 126,140 7,957
Marathon Oil Corp. 7,600 603
Total SA - ADR (N) 11,450 1,580
------------
19,759
------------
Materials and Processing - 8.4%
Acuity Brands, Inc. 12,364 510
Air Products & Chemicals, Inc. 10,650 730
Airgas, Inc. 35,853 1,450
Alcoa, Inc. 32,900 1,111
American Standard Cos., Inc. 49,900 2,172
Archer-Daniels-Midland Co. 58,640 2,131
Ashland, Inc. 6,300 415
Avery Dennison Corp. (N) 12,400 775
Bemis Co. 22,400 705
</Table>
176 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
BHP Billiton, Ltd. - ADR (N) 28,500 1,298
Bowater, Inc. (N) 35,130 958
Brush Engineered Materials, Inc. (AE) 11,792 275
Carpenter Technology Corp. 7,500 892
Chemtura Corp. 42,100 514
Commercial Metals Co. 7,746 421
Dow Chemical Co. (The) 43,800 1,779
EI Du Pont de Nemours & Co. 57,750 2,547
Gold Kist, Inc. (AE)(N) 14,389 193
International Paper Co. 53,070 1,929
Lyondell Chemical Co. 28,300 682
Masco Corp. 60,690 1,936
MeadWestvaco Corp. 30,000 855
Nalco Holding Co. (AE) 11,050 208
Packaging Corp. of America 36,900 829
Phelps Dodge Corp. 8,000 690
PPG Industries, Inc. 20,340 1,365
Praxair, Inc. 10,130 569
Rohm & Haas Co. 14,200 719
RPM International, Inc. (N) 24,400 449
Sherwin-Williams Co. (The) 5,910 301
Smurfit-Stone Container Corp. (AE)(N) 16,670 216
Sonoco Products Co. 21,900 686
Spartech Corp. 14,375 340
Syngenta AG - ADR (N) 31,960 888
Temple-Inland, Inc. 9,900 460
Valspar Corp. 21,500 608
Worthington Industries, Inc. 12,726 251
------------
32,857
------------
Miscellaneous - 3.6%
3M Co. 19,400 1,657
Fortune Brands, Inc. 17,200 1,381
General Electric Co. 66,600 2,304
Hillenbrand Industries, Inc. 10,500 539
Honeywell International, Inc. 45,500 1,934
Johnson Controls, Inc. 25,000 2,039
Textron, Inc. 31,200 2,806
Trinity Industries, Inc. (N) 15,800 1,003
Tyco International, Ltd. 7,570 200
------------
13,863
------------
Other Energy - 4.1%
Apache Corp. 6,300 448
Chesapeake Energy Corp. (N) 111,300 3,526
Devon Energy Corp. 40,850 2,455
Diamond Offshore Drilling, Inc. (N) 11,900 1,080
Encore Acquisition Co. (AE) 13,687 419
EOG Resources, Inc. 25,960 1,823
Global Industries, Ltd. (AE) 24,105 383
Hanover Compressor Co. (AE)(N) 28,389 572
James River Coal Co. (AE)(N) 6,052 213
Matrix Service Co. (AE)(N) 39,132 447
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Noble Corp. 4,430 350
Transocean, Inc. (AE) 26,300 2,132
Valero Energy Corp. 28,100 1,819
Whiting Petroleum Corp. (AE) 9,941 420
------------
16,087
------------
Producer Durables - 8.2%
Agilent Technologies, Inc. (AE) 74,100 2,847
American Power Conversion Corp. 56,500 1,257
Ametek, Inc. 6,112 301
Applied Signal Technology, Inc. (N) 13,501 242
BE Aerospace, Inc. (AE) 25,837 673
Boeing Co. 31,200 2,604
C&D Technologies, Inc. (N) 55,778 450
Champion Enterprises, Inc. (AE) 31,670 483
Cognex Corp. 12,504 333
Cooper Industries, Ltd. Class A 9,470 866
Crane Co. 12,192 515
Deere & Co. 24,820 2,179
Diebold, Inc. 15,500 659
Esterline Technologies Corp. (AE) 12,178 540
Federal Signal Corp. 26,535 497
General Cable Corp. (AE)(N) 21,912 692
Hubbell, Inc. Class B 13,600 702
IDEX Corp. 9,499 483
Illinois Tool Works, Inc. 6,360 653
Lennar Corp. Class A 28,800 1,582
Lockheed Martin Corp. 37,750 2,865
Modtech Holdings, Inc. (AE)(N) 13,485 134
Northrop Grumman Corp. 32,420 2,169
Teradyne, Inc. (AE) 30,900 521
Terex Corp. (AE) 17,900 1,549
United Technologies Corp. 47,110 2,959
Varian Semiconductor Equipment Associates, Inc.
(AE) 11,371 372
WW Grainger, Inc. 6,640 511
Xerox Corp. (AE) 174,300 2,447
------------
32,085
------------
Technology - 4.4%
Analog Devices, Inc. 22,500 853
Avid Technology, Inc. (AE)(N) 8,634 333
Avnet, Inc. (AE) 21,600 565
Broadcom Corp. Class A (AE) 13,800 567
Cisco Systems, Inc. (AE) 21,440 449
Corning, Inc. (AE) 53,500 1,478
Dell, Inc. (AE) 17,800 466
</Table>
Select Value Fund 177
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Filenet Corp. (AE)(N) 9,373 261
Freescale Semiconductor, Inc. Class A (AE) 38,800 1,227
General Dynamics Corp. 25,400 1,667
Hewlett-Packard Co. 111,600 3,624
Integrated Device Technology, Inc. (AE) 15,509 236
Intel Corp. 21,500 429
International Business Machines Corp. 8,400 692
Internet Security Systems, Inc. (AE) 12,240 275
IXYS Corp. (AE) 31,362 317
Linear Technology Corp. 17,500 621
Mantech International Corp. Class A (AE) 15,853 524
Motorola, Inc. 32,600 696
National Semiconductor Corp. 23,300 698
Oracle Corp. (AE) 40,840 596
Seagate Technology, Inc. (AE) 1,900 --
Sybase, Inc. (AE) 16,169 352
Symantec Corp. (AE) 14,100 231
------------
17,157
------------
Utilities - 8.3%
Alaska Communications Systems Group, Inc. (N) 19,377 244
Alltel Corp. 53,000 3,412
Ameren Corp. 5,600 282
America Movil SA de CV - ADR
Series L 60,900 2,248
AT&T, Inc. 65,300 1,711
BellSouth Corp. 24,400 824
China Mobile Hong Kong,
Ltd. - ADR (N) 53,400 1,541
Citizens Communications Co. 63,600 845
Consolidated Edison, Inc. 6,600 285
Dominion Resources, Inc. 42,650 3,193
Entergy Corp. 11,090 776
Exelon Corp. 22,020 1,189
FPL Group, Inc. 67,310 2,665
NiSource, Inc. 28,800 608
Northeast Utilities 55,500 1,118
NSTAR 19,900 550
PPL Corp. 38,080 1,106
Progress Energy, Inc. 1,300 --
Public Service Enterprise Group, Inc. 6,350 398
SCANA Corp. 7,200 282
Sprint Nextel Corp. 133,840 3,319
TXU Corp. 8,820 438
Valor Communications Group, Inc. 38,600 504
Verizon Communications, Inc. 76,840 2,538
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Vodafone Group PLC - ADR 89,053 2,111
------------
32,187
------------
TOTAL COMMON STOCKS
(cost $305,665) 367,773
------------
SHORT-TERM INVESTMENTS - 5.9%
Frank Russell Investment Company
Money Market Fund 22,169,000 22,169
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 1,000 994
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $23,163) 23,163
------------
OTHER SECURITIES - 8.1%
Frank Russell Investment Company
Money Market Fund (X) 8,303,792 8,304
State Street Securities Lending Quality Trust
(X) 23,392,833 23,393
------------
TOTAL OTHER SECURITIES
(cost $31,697) 31,697
------------
TOTAL INVESTMENTS - 108.5%
(identified cost $360,525) 422,633
OTHER ASSETS AND LIABILITIES,
NET - (8.5%) (33,034)
------------
NET ASSETS - 100.0% 389,599
============
</Table>
See accompanying notes which are an integral part of the financial statements.
178 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Value Index
expiration date 06/06 (29) 10,754 415
S&P 500 E-Mini Index (CME)
expiration date 06/06 (65) 4,277 77
S&P 500 Index (CME)
expiration date 06/06 (23) 7,566 57
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 549
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 1.8
Consumer Discretionary 11.3
Consumer Staples 4.2
Financial Services 25.0
Health Care 10.1
Integrated Oils 5.1
Materials and Processing 8.4
Miscellaneous 3.6
Other Energy 4.1
Producer Durables 8.2
Technology 4.4
Utilities 8.3
Short-Term Investments 5.9
Other Securities 8.1
---------------
Total Investments 108.5
Other Assets and Liabilities, Net (8.5)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Value Fund 179
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(AE) Nonincome-producing security.
(I) Forward commitment.
(E) Adjustable or floating rate security. Rate shown reflects rate in effect
at period end.
(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.
(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.
(A) Illiquid and restricted security.
(a) Currency balances were held in connection with futures contracts purchased
(sold), options written, or swaps entered into by the Fund. See Note 2.
ABBREVIATIONS:
ADR - American Depositary Receipt
ADS - American Depositary Share
CIBOR - Copenhagen Interbank Offered Rate
CME - Chicago Mercantile Exchange
CMO - Collateralized Mortgage Obligation
CVO - Contingent Value Obligation
FDIC - Federal Deposit Insurance Company
GDR - Global Depositary Receipt
GDS - Global Depositary Share
LIBOR - London Interbank Offered Rate
NIBOR - Norwegian Interbank Offered Rate
PIK - Payment in Kind
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 ISK - Iceland krona 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 - Vietnamese dong
GBP - British pound sterling PEN - Peruvian nouveau sol ZAR - South African rand
</Table>
180 Notes to Schedules of Investments
(This page intentionally left blank)
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 3,077,097 $ 1,148,431
- ---------------------------------------------------------------------------------------------------------------------
Investments, at market*** 3,546,863 1,325,233
Cash 264 --
Cash(Restricted) -- --
Foreign currency holdings* -- --
Unrealized appreciation on foreign currency exchange contracts -- --
Receivables:
Dividends and interest 2,879 480
Dividends from affiliated money market funds 685 398
Investments sold 44,351 61,256
Fund shares sold 9,229 2,951
Foreign taxes recoverable -- --
Miscellaneous receivables -- --
From Adviser -- --
Daily variation margin on futures contracts 382 753
Prepaid expenses 40 32
Unrealized appreciation on index swap contracts -- --
Interest rate swap contracts, at market value***** -- --
Credit default swap contracts, at market value**** -- --
------------------- --------------------
Total assets 3,604,693 1,391,103
------------------- --------------------
LIABILITIES
Payables:
Due to Custodian -- --
Investments purchased 40,774 96,546
Fund shares redeemed 1,848 742
Accrued fees to affiliates 2,667 1,118
Other accrued expenses 122 96
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 207,586 179,124
Unrealized depreciation on index swap contracts -- --
Interest rate swap contracts, at market value***** -- --
Credit default swap contracts, at market value**** -- --
------------------- --------------------
Total liabilities 252,997 277,626
------------------- --------------------
NET ASSETS $ 3,351,696 $ 1,113,477
=================== ====================
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 1,195 $ (59)
Accumulated net realized gain (loss) 82,876 128,657
Unrealized appreciation (depreciation) on:
Investments (International Securities Fund and Emerging Markets
Fund -- net of deferred tax liability for foreign capital gains
taxes) 469,766 176,802
Futures contracts 3,456 2,621
Options written -- --
Credit default swap contracts -- --
Index swap contracts -- --
Interest rate swap contracts -- --
Foreign currency-related transactions -- --
Shares of beneficial interest 702 197
Additional paid-in capital 2,793,701 805,259
------------------- --------------------
NET ASSETS $ 3,351,696 $ 1,113,477
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
182 Statement of Assets and Liabilities
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES EMERGING MARKETS REAL ESTATE SHORT DURATION
FUND FUND FUND SECURITIES FUND BOND FUND
- ------------------------------------------------------------------------------------------------------------
$ 3,094,759 $ 3,432,681 $ 729,344 $ 1,252,841 $ 1,144,681
- ------------------------------------------------------------------------------------------------------------
3,516,306 4,211,922 1,174,995 1,839,442 1,129,203
-- 682 -- -- 108
-- -- -- -- --
-- 14,005 7,333 -- 13
-- 20,040 1,626 -- --
3,116 9,640 3,228 570 7,695
563 824 204 194 176
54,392 16,687 7,033 18,698 53,999
10,635 5,017 2,024 3,381 1,019
-- 373 -- -- --
-- -- -- -- --
-- -- -- -- --
356 -- -- -- 197
35 63 25 35 5
-- 15 -- -- --
-- -- -- -- 55
-- -- -- -- --
-------------- -------------- -------------- -------------- --------------
3,585,403 4,279,268 1,196,468 1,862,320 1,192,470
-------------- -------------- -------------- -------------- --------------
-- -- 472 -- --
70,030 15,924 7,017 14,217 61,868
1,928 2,429 981 1,476 1,192
2,742 2,956 1,351 1,561 583
134 326 239 119 109
-- 1,804 105 -- --
-- 22 1,813 -- --
-- 14,287 209 -- 63
-- 561 1,015 -- 598
70,790 1,066,840 32,075 97,933 5,036
-- 11 -- -- --
-- -- -- -- 281
-- -- -- -- --
-------------- -------------- -------------- -------------- --------------
145,624 1,105,160 45,277 115,306 69,730
-------------- -------------- -------------- -------------- --------------
$ 3,439,779 $ 3,174,108 $ 1,151,191 $ 1,747,014 $ 1,122,740
============== ============== ============== ============== ==============
$ 732 $ 9,856 $ (12,025) $ (1,155) $ 3,773
134,079 153,880 84,744 96,943 (12,733)
421,547 779,219 443,838 586,601 (15,478)
2,242 5,651 1,536 -- (2,223)
-- (26) (35) -- 75
-- -- -- -- --
-- 4 -- -- --
-- -- -- -- (271)
-- 6,323 1,492 -- (62)
858 410 508 358 604
2,880,321 2,218,791 631,133 1,064,267 1,149,055
-------------- -------------- -------------- -------------- --------------
$ 3,439,779 $ 3,174,108 $ 1,151,191 $ 1,747,014 $ 1,122,740
============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 183
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share:
Net asset value per share: Class C****** $ 46.22 $ 51.25
Class C -- Net assets $ 146,857,949 $ 68,992,230
Class C -- Shares outstanding ($.01 par value) 3,177,591 1,346,166
Net asset value per share: Class E****** $ 47.83 $ 54.95
Class E -- Net assets $ 62,994,152 $ 24,723,996
Class E -- Shares outstanding ($.01 par value) 1,317,063 449,902
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****** $ 47.83 $ 57.09
Class S -- Net assets $ 3,141,844,380 $ 1,019,760,488
Class S -- Shares outstanding ($.01 par value) 65,683,354 17,862,025
- ---------------------------------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings - cost $ -- $ --
** Premiums received on options written $ -- $ --
*** Securities on loan included in investments $ 200,784 $ 175,245
**** Credit default swap contracts - premiums paid (received) $ -- $ --
***** 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.
184 Statement of Assets and Liabilities
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES EMERGING MARKETS REAL ESTATE SHORT DURATION
FUND FUND FUND SECURITIES FUND BOND FUND
- ------------------------------------------------------------------------------------------------------------
$ 38.94 $ 74.19 $ 22.03 $ 47.69 $ 18.54
$ 148,364,995 $ 155,465,664 $ 50,692,859 $ 94,908,637 $ 23,961,732
3,809,995 2,095,379 2,300,646 1,989,911 1,292,171
$ 40.02 $ 76.85 $ 22.70 $ 48.40 $ 18.61
$ 66,014,132 $ 65,466,120 $ 28,861,603 $ 47,508,219 $ 25,514,125
1,649,556 851,824 1,271,475 981,630 1,371,162
$ -- $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ --
-- -- -- -- --
$ 40.13 $ 77.63 $ 22.68 $ 48.88 $ 18.58
$3,225,399,672 $2,953,175,725 $1,071,636,138 $1,604,597,271 $1,073,264,518
80,364,926 38,040,125 47,243,989 32,829,147 57,759,952
- ------------------------------------------------------------------------------------------------------------
$ -- $ 13,707 $ 7,307 $ -- $ 12
$ -- $ 535 $ 980 $ -- $ 673
$ 68,597 $ 1,009,927 $ 28,810 $ 95,684 $ 4,927
$ -- $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ 45
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 185
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED BOND MULTISTRATEGY BOND
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 2,636,559 $ 2,975,432
- ---------------------------------------------------------------------------------------------------------------------
Investments, at market*** 2,603,378 2,952,370
Cash -- 433
Cash (Restricted) -- 100
Foreign currency holdings* 556 222
Unrealized appreciation on foreign currency exchange contracts 1,327 2,542
Receivables:
Dividends and interest 13,104 15,331
Dividends from affiliated money market funds 607 1,085
Investments sold 84,119 49,238
Fund shares sold 4,049 7,122
Foreign taxes recoverable -- --
Miscellaneous receivables -- --
From Adviser -- --
Daily variation margin on futures contracts 404 657
Prepaid expenses 50 51
Unrealized appreciation on index swap contracts -- 5
Interest rate swap contracts, at market value***** 29 54
Credit default swap contracts, at market value**** -- 61
------------------- --------------------
Total assets 2,707,623 3,029,271
------------------- --------------------
LIABILITIES
Payables:
Due to Custodian 1,601 --
Investments purchased 392,891 440,289
Fund shares redeemed 1,324 1,286
Accrued fees to affiliates 943 1,542
Other accrued expenses 119 127
Daily variation margin on futures contracts -- 53
Deferred tax liability -- --
Unrealized depreciation on foreign currency exchange contracts 998 2,061
Options written, at market value** 782 1,381
Payable upon return of securities loaned 419,192 314,990
Unrealized depreciation on index swap contracts -- 114
Interest rate swap contracts, at market value***** 731 1,591
Credit default swap contracts, at market value**** -- 3
------------------- --------------------
Total liabilities 818,581 763,437
------------------- --------------------
NET ASSETS $ 1,889,042 $ 2,265,834
=================== ====================
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 7,690 $ 9,139
Accumulated net realized gain (loss) (21,906) (15,820)
Unrealized appreciation (depreciation) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of deferred tax liability for foreign capital gains
taxes) (33,181) (23,062)
Futures contracts (2,322) (5,632)
Options written (275) (1)
Credit default swap contracts -- 221
Index swap contracts -- (109)
Interest rate swap contracts (702) (1,494)
Foreign currency-related transactions 309 213
Shares of beneficial interest 824 2,227
Additional paid-in capital 1,938,605 2,300,152
------------------- --------------------
NET ASSETS $ 1,889,042 $ 2,265,834
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
186 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
- ---------------------------------------------------------------------------------------------
$ 272,809 $ 377,091 $ 219,676 $ 191,178 $ 360,525
- ---------------------------------------------------------------------------------------------
271,912 488,346 268,761 217,045 422,633
-- -- -- 133 --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
3,559 469 73 59 384
13 99 34 43 86
-- 350 1,175 3,333 1,588
2,946 521 269 552 731
-- -- -- -- --
-- -- -- -- --
-- -- 8 80 --
-- 19 59 -- 68
24 5 17 4 11
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-------------- -------------- -------------- -------------- --------------
278,454 489,809 270,396 221,249 425,501
-------------- -------------- -------------- -------------- --------------
-- -- -- -- --
5,273 3,441 1,450 3,496 3,365
474 93 73 54 461
111 340 212 165 321
37 34 41 36 58
-- -- -- 47 --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- 22,767 62,220 19,859 31,697
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-------------- -------------- -------------- -------------- --------------
5,895 26,675 63,996 23,657 35,902
-------------- -------------- -------------- -------------- --------------
$ 272,559 $ 463,134 $ 206,400 $ 197,592 $ 389,599
============== ============== ============== ============== ==============
$ 800 $ 1,112 $ (76) $ (21) $ 168
(1,289) (90,225) (2,991) (10,727) 5,308
(897) 111,255 49,085 25,867 62,108
-- 452 314 131 549
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
128 239 144 232 322
273,817 440,301 159,924 182,110 321,144
-------------- -------------- -------------- -------------- --------------
$ 272,559 $ 463,134 $ 206,400 $ 197,592 $ 389,599
============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 187
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED BOND MULTISTRATEGY BOND
FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share:
Net asset value per share: Class C****** $ 23.42 $ 10.15
Class C -- Net assets $ 54,454,050 $ 76,473,672
Class C -- Shares outstanding ($.01 par value) 2,324,997 7,531,208
Net asset value per share: Class E****** $ 23.49 $ 10.16
Class E -- Net assets $ 51,672,202 $ 45,072,490
Class E -- Shares outstanding ($.01 par value) 2,199,409 4,434,365
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****** $ 22.91 $ 10.17
Class S -- Net assets $ 1,782,915,941 $ 2,144,287,715
Class S -- Shares outstanding ($.01 par value) 77,836,376 210,770,382
- ---------------------------------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings - cost $ 541 $ 216
** Premiums received on options written $ 507 $ 1,380
*** Securities on loan included in investments $ 410,612 $ 308,758
**** Credit default swap contracts - premiums paid (received) $ -- $ (163)
***** Interest rate swap contracts - premiums paid (received) $ -- $ (43)
****** 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.
188 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
- ---------------------------------------------------------------------------------------------
$ 21.31 $ 18.94 $ 13.48 $ 8.03 $ 11.90
$ 10,975,869 $ 18,620,440 $ 11,560,215 $ 10,164,436 $ 24,821,576
515,101 983,036 857,365 1,266,042 2,085,202
$ 21.38 $ 19.35 $ 14.16 $ 8.41 $ 12.11
$ 9,868,975 $ 10,857,293 $ 2,178,576 $ 4,687,840 $ 10,241,136
461,704 561,215 153,853 557,733 845,919
$ -- $ -- -- $ 8.58 $ 12.14
$ -- $ -- $ -- $ 110,776,776 $ 121,298,694
-- -- -- 12,905,556 9,993,516
$ 21.35 $ 19.41 $ 14.34 $ 8.53 $ 12.11
$ 251,714,199 $ 433,655,819 $ 192,661,493 $ 71,963,360 $ 233,237,166
11,790,599 22,340,668 13,434,294 8,438,724 19,255,731
- ---------------------------------------------------------------------------------------------
$ -- $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ --
$ -- $ 22,169 $ 60,591 $ 19,317 $ 31,129
$ -- $ -- $ -- $ -- $ --
$ -- $ -- $ -- $ -- $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 189
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 21,947 $ 4,865
Dividends from affiliated money market funds 3,713 1,244
Interest 222 67
Securities lending income 183 303
Less foreign taxes withheld -- --
------------------- --------------------
Total investment income 26,065 6,479
------------------- --------------------
EXPENSES
Advisory fees 11,041 4,596
Administrative fees 764 255
Custodian fees 378 231
Distribution fees - Class C 516 235
Transfer agent fees 2,289 988
Transfer agent fees - Class C -- --
Transfer agent fees - Class E -- --
Transfer agent fees - Class I -- --
Transfer agent fees - Class S -- --
Professional fees 64 35
Registration fees 69 40
Shareholder servicing fees - Class C 172 78
Shareholder servicing fees - Class E 73 29
Trustees' fees 35 12
Printing fees 40 31
Miscellaneous 23 9
------------------- --------------------
Expenses before reductions 15,464 6,539
Expense reductions (3) (2)
------------------- --------------------
Net expenses 15,461 6,537
------------------- --------------------
Net investment income (loss) 10,604 (58)
------------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of deferred tax liability for foreign capital gains
taxes) 103,224 127,850
Futures contracts 7,307 4,503
Options written -- --
Credit default swap contracts -- --
Index swap contracts -- --
Interest rate swap contracts -- --
Foreign currency-related transactions -- (1)
------------------- --------------------
Net realized gain (loss) 110,531 132,352
------------------- --------------------
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) 181,663 44,682
Futures contracts 6,695 4,107
Options written -- --
Credit default swap contracts -- --
Index swap contracts -- --
Interest rate swap contracts -- --
Foreign currency-related transactions -- --
------------------- --------------------
Net change in unrealized appreciation (depreciation) 188,358 48,789
------------------- --------------------
Net realized and unrealized gain (loss) 298,889 181,141
------------------- --------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 309,493 $ 181,083
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
190 Statement of Operations
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES EMERGING MARKETS REAL ESTATE SHORT DURATION
FUND FUND FUND SECURITIES FUND BOND FUND
- ----------------------------------------------------------------------------------------------------------------------------
$ 27,469 $ 37,399 $ 13,389 $ 19,188 $ 104
2,876 4,124 966 1,258 965
146 343 93 -- 23,499
57 906 37 93 8
-- (2,140) (1,073) -- --
------------------- ------------------- ------------------- ------------------- --------------------
30,548 40,632 13,412 20,539 24,576
------------------- ------------------- ------------------- ------------------- --------------------
11,384 12,514 5,742 6,625 2,634
793 703 251 414 294
358 1,324 1,027 201 188
524 510 158 335 101
2,358 2,107 1,160 1,529 636
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
59 78 53 44 39
70 62 34 51 51
175 170 53 112 34
75 71 30 55 31
36 32 11 20 16
51 45 20 35 20
25 21 14 13 12
------------------- ------------------- ------------------- ------------------- --------------------
15,908 17,637 8,553 9,434 4,056
(4) (2) (4) (3) (15)
------------------- ------------------- ------------------- ------------------- --------------------
15,904 17,635 8,549 9,431 4,041
------------------- ------------------- ------------------- ------------------- --------------------
14,644 22,997 4,863 11,108 20,535
------------------- ------------------- ------------------- ------------------- --------------------
143,848 143,210 77,545 90,749 (2,581)
8,530 30,840 5,267 -- (565)
-- (209) 3,560 -- 43
-- -- -- -- --
-- 4,253 -- -- --
-- -- -- -- (466)
-- (9,460) 1,036 -- 17
------------------- ------------------- ------------------- ------------------- --------------------
152,378 168,634 87,408 90,749 (3,552)
------------------- ------------------- ------------------- ------------------- --------------------
116,927 407,350 223,452 148,432 (1,096)
3,989 1,280 1,235 -- (1,158)
-- 10 103 -- 18
-- -- -- -- --
-- (494) -- -- --
-- -- -- -- 185
-- 10,882 1,738 -- (82)
------------------- ------------------- ------------------- ------------------- --------------------
120,916 419,028 226,528 148,432 (2,133)
------------------- ------------------- ------------------- ------------------- --------------------
273,294 587,662 313,936 239,181 (5,685)
------------------- ------------------- ------------------- ------------------- --------------------
$ 287,938 $ 610,659 $ 318,799 $ 250,289 $ 14,850
=================== =================== =================== =================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 191
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF OPERATIONS, CONTINUED -- FOR THE PERIOD ENDED APRIL 30, 2006
(UNAUDITED)
<Table>
<Caption>
DIVERSIFIED BOND MULTISTRATEGY BOND
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 71 $ 218
Dividends from affiliated money market funds 3,431 5,491
Interest 39,547 45,705
Securities lending income 114 297
Less foreign taxes withheld -- --
------------------- --------------------
Total investment income 43,163 51,711
------------------- --------------------
EXPENSES
Advisory fees 3,551 6,165
Administrative fees 444 514
Custodian fees 354 471
Distribution fees - Class C 203 274
Transfer agent fees 991 1,563
Transfer agent fees - Class C -- --
Transfer agent fees - Class E -- --
Transfer agent fees - Class I -- --
Transfer agent fees - Class S -- --
Professional fees 49 45
Registration fees 51 63
Shareholder servicing fees - Class C 68 91
Shareholder servicing fees - Class E 62 51
Trustees' fees 21 23
Printing fees 32 33
Miscellaneous 15 16
------------------- --------------------
Expenses before reductions 5,841 9,309
Expense reductions (22) (71)
------------------- --------------------
Net expenses 5,819 9,238
------------------- --------------------
Net investment income (loss) 37,344 42,473
------------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of deferred tax liability for foreign capital gains
taxes) (13,496) (11,402)
Futures contracts (4,093) (3,136)
Options written 165 335
Credit default swap contracts -- 69
Index swap contracts -- 10
Interest rate swap contracts (297) (693)
Foreign currency-related transactions (460) (610)
------------------- --------------------
Net realized gain (loss) (18,181) (15,427)
------------------- --------------------
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) (13,907) (12,879)
Futures contracts 298 (2,869)
Options written (181) (65)
Credit default swap contracts -- 207
Index swap contracts -- (49)
Interest rate swap contracts (262) (573)
Foreign currency-related transactions 516 390
------------------- --------------------
Net change in unrealized appreciation (depreciation) (13,536) (15,838)
------------------- --------------------
Net realized and unrealized gain (loss) (31,717) (31,265)
------------------- --------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 5,627 $ 11,208
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
192 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
- --------------------------------------------------------------------------------------------
$ -- $ 3,736 $ 815 $ 684 $ 3,544
110 488 256 217 415
5,283 28 16 17 20
-- 12 69 17 28
-- -- -- -- --
------------- ----------- ----------- ------------- ------------
5,393 4,264 1,156 935 4,007
------------- ----------- ----------- ------------- ------------
386 1,548 923 738 1,294
64 111 47 46 92
63 90 82 84 103
40 67 39 34 87
128 209 164 -- --
-- -- -- 12 31
-- -- -- 3 7
-- -- -- 71 56
-- -- -- 57 270
22 21 19 19 28
33 26 20 28 31
13 22 13 11 29
11 12 2 6 12
3 5 2 2 4
4 7 3 4 6
3 5 3 3 4
------------- ----------- ----------- ------------- ------------
770 2,123 1,317 1,118 2,054
(1) -- (85) (119) --
------------- ----------- ----------- ------------- ------------
769 2,123 1,232 999 2,054
------------- ----------- ----------- ------------- ------------
4,624 2,141 (76) (64) 1,953
------------- ----------- ----------- ------------- ------------
(250) 8,172 6,113 7,240 17,827
-- 782 964 324 890
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
------------- ----------- ----------- ------------- ------------
(250) 8,954 7,077 7,564 18,717
------------- ----------- ----------- ------------- ------------
(1,609) 20,219 21,294 7,062 21,874
-- 645 718 213 902
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
-- -- -- -- --
------------- ----------- ----------- ------------- ------------
(1,609) 20,864 22,012 7,275 22,776
------------- ----------- ----------- ------------- ------------
(1,859) 29,818 29,089 14,839 41,493
------------- ----------- ----------- ------------- ------------
$ 2,765 $ 31,959 $ 29,013 $ 14,775 $ 43,446
============= =========== =========== ============= ============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 193
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, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005 (UNAUDITED) 2005
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 10,604 $ 17,486 $ (58) $ (2,731)
Net realized gain (loss) 110,531 182,930 132,352 95,718
Net change in unrealized appreciation
(depreciation) 188,358 75,393 48,789 4,456
---------------- ---------------- ---------------- -----------------
Net increase (decrease) in net assets from
operations 309,493 275,809 181,083 97,443
---------------- ---------------- ---------------- -----------------
DISTRIBUTIONS
From net investment income
Class C (102) (101) -- --
Class E (137) (257) -- --
Class I -- -- -- --
Class S (9,757) (17,162) -- (1)
From net realized gain
Class C (3,691) -- (5,980) (6,286)
Class E (1,492) -- (2,068) (4,121)
Class I -- -- -- --
Class S (71,829) -- (82,803) (86,902)
---------------- ---------------- ---------------- -----------------
Net decrease in net assets from distributions (87,008) (17,520) (90,851) (97,310)
---------------- ---------------- ---------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from
share transactions 392,192 395,071 85,245 151,068
---------------- ---------------- ---------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 614,677 653,360 175,477 151,201
NET ASSETS
Beginning of period 2,737,019 2,083,659 938,000 786,799
---------------- ---------------- ---------------- -----------------
End of period $ 3,351,696 $ 2,737,019 $ 1,113,477 $ 938,000
================ ================ ================ =================
Undistributed (overdistributed) net
investment income included in net
assets $ 1,195 $ 587 $ (59) $ (1)
</Table>
See accompanying notes which are an integral part of the financial statements.
194 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, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005 (UNAUDITED) 2005
- ----------------------------------------------------------------------------------------------------
$ 14,644 $ 22,664 $ 22,997 $ 29,580 $ 4,863 $ 9,257
152,378 154,488 168,634 177,312 87,408 102,118
120,916 50,953 419,028 118,238 226,528 102,396
------------- ------------- ------------- ------------- ------------- -------------
287,938 228,105 610,659 325,130 318,799 213,771
------------- ------------- ------------- ------------- ------------- -------------
(120) (209) (516) (820) (580) (83)
(222) (360) (539) (605) (442) (194)
-- -- -- -- -- --
(14,284) (22,089) (29,811) (29,701) (20,081) (9,858)
(5,834) -- (4,377) -- (887) --
(2,398) -- (1,760) -- (487) --
-- -- -- -- -- --
(115,840) -- (80,360) -- (20,087) --
------------- ------------- ------------- ------------- ------------- -------------
(138,698) (22,658) (117,363) (31,126) (42,564) (10,135)
------------- ------------- ------------- ------------- ------------- -------------
457,859 423,493 213,255 380,785 28,054 59,004
------------- ------------- ------------- ------------- ------------- -------------
607,099 628,940 706,551 674,789 304,289 262,640
2,832,680 2,203,740 2,467,557 1,792,768 846,902 584,262
------------- ------------- ------------- ------------- ------------- -------------
$ 3,439,779 $ 2,832,680 $ 3,174,108 $ 2,467,557 $ 1,151,191 $ 846,902
============= ============= ============= ============= ============= =============
$ 732 $ 714 $ 9,856 $ 17,725 $ (12,025) $ 4,215
<Caption>
REAL ESTATE SHORT DURATION
SECURITIES FUND BOND FUND
------------------------------ ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
- ---
$ 11,108 $ 27,104 $ 20,535 $ 31,923
90,749 149,115 (3,552) (8,752)
148,432 62,485 (2,133) (17,447)
------------- ------------- ------------- -------------
250,289 238,704 14,850 5,724
------------- ------------- ------------- -------------
(467) (700) (330) (523)
(331) (596) (410) (558)
-- -- -- --
(12,839) (25,047) (19,357) (29,494)
(8,834) (5,310) -- (24)
(4,267) (2,607) -- (16)
-- -- -- --
(150,805) (98,198) -- (767)
------------- ------------- ------------- -------------
(177,543) (132,458) (20,097) (31,382)
------------- ------------- ------------- -------------
117,987 187,997 (85,593) 42,298
------------- ------------- ------------- -------------
190,733 294,243 (90,840) 16,640
1,556,281 1,262,038 1,213,580 1,196,940
------------- ------------- ------------- -------------
$ 1,747,014 $ 1,556,281 $ 1,122,740 $ 1,213,580
============= ============= ============= =============
$ (1,155) $ 1,374 $ 3,773 $ 3,335
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 195
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
<Table>
<Caption>
DIVERSIFIED BOND MULTISTRATEGY BOND
FUND FUND
------------------------------------ -------------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005 (UNAUDITED) 2005
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 37,344 $ 50,386 $ 42,473 $ 53,955
Net realized gain (loss) (18,181) (1,129) (15,427) 7,154
Net change in unrealized appreciation
(depreciation) (13,536) (42,853) (15,838) (42,091)
---------------- ---------------- ---------------- -----------------
Net increase (decrease) in net assets from
operations 5,627 6,404 11,208 19,018
---------------- ---------------- ---------------- -----------------
DISTRIBUTIONS
From net investment income
Class C (817) (1,088) (1,095) (1,363)
Class E (937) (1,375) (767) (1,025)
Class I -- -- -- --
Class S (34,163) (45,399) (38,512) (48,760)
From net realized gain
Class C -- (234) (167) (700)
Class E -- (231) (93) (404)
Class I -- -- -- --
Class S -- (6,573) (4,348) (16,986)
---------------- ---------------- ---------------- -----------------
Net decrease in net assets from distributions (35,917) (54,900) (44,982) (69,238)
---------------- ---------------- ---------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from
share transactions 246,033 399,525 420,346 559,768
---------------- ---------------- ---------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 215,743 351,029 386,572 509,548
NET ASSETS
Beginning of period 1,673,299 1,322,270 1,879,262 1,369,714
---------------- ---------------- ---------------- -----------------
End of period $ 1,889,042 $ 1,673,299 $ 2,265,834 $ 1,879,262
================ ================ ================ =================
Undistributed (overdistributed) net
investment income included in net
assets $ 7,690 $ 6,263 $ 9,139 $ 7,040
</Table>
See accompanying notes which are an integral part of the financial statements.
196 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, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005 (UNAUDITED) 2005
- ----------------------------------------------------------------------------------------------------
$ 4,624 $ 7,550 $ 2,141 $ 4,263 $ (76) $ (171)
(250) 277 8,954 11,253 7,077 7,898
(1,609) (6,794) 20,864 13,679 22,012 12,588
------------- ------------- ------------- ------------- ------------- -------------
2,765 1,033 31,959 29,195 29,013 20,315
------------- ------------- ------------- ------------- ------------- -------------
(137) (248) -- (14) -- --
(151) (221) (51) (55) -- --
-- -- -- -- -- --
(4,215) (6,802) (3,088) (3,707) -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
-- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
(4,503) (7,271) (3,139) (3,776) -- --
------------- ------------- ------------- ------------- ------------- -------------
26,628 51,222 22,059 24,900 9,833 16,873
------------- ------------- ------------- ------------- ------------- -------------
24,890 44,984 50,879 50,319 38,846 37,188
247,669 202,685 412,255 361,936 167,554 130,366
------------- ------------- ------------- ------------- ------------- -------------
$ 272,559 $ 247,669 $ 463,134 $ 412,255 $ 206,400 $ 167,554
============= ============= ============= ============= ============= =============
$ 800 $ 679 $ 1,112 $ 2,110 $ (76) $ --
<Caption>
SELECT GROWTH SELECT VALUE
FUND FUND
------------------------------ ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005
- ---
$ (64) $ 43 $ 1,953 $ 3,268
7,564 7,903 18,717 25,574
7,275 6,530 22,776 9,493
------------- ------------- ------------- -------------
14,775 14,476 43,446 38,335
------------- ------------- ------------- -------------
-- -- (25) (18)
-- -- (38) (72)
-- -- (768) (1,393)
-- -- (1,028) (1,866)
-- -- (1,231) (14)
-- -- (494) (8)
-- -- (7,528) (83)
-- -- (11,306) (145)
------------- ------------- ------------- -------------
-- -- (22,418) (3,599)
------------- ------------- ------------- -------------
977 44,098 4,263 27,540
------------- ------------- ------------- -------------
15,752 58,574 25,291 62,276
181,840 123,266 364,308 302,032
------------- ------------- ------------- -------------
$ 197,592 $ 181,840 $ 389,599 $ 364,308
============= ============= ============= =============
$ (21) $ 43 $ 168 $ 74
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 197
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 FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
DIVERSIFIED EQUITY FUND
Class C
April 30, 2006* 43.08 (.06) 4.47 4.41
October 31, 2005 38.64 (.10) 4.58 4.48
October 31, 2004 36.27 (.17) 2.54 2.37
October 31, 2003 30.52 (.13) 5.88 5.75
October 31, 2002 35.83 (.18) (5.13) (5.31)
October 31, 2001 50.12 (.24) (13.82) (14.06)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 44.46 .12 4.60 4.72
October 31, 2005 39.75 .23 4.70 4.93
October 31, 2004 37.12 .12 2.61 2.73
October 31, 2003 31.10 .12 6.00 6.12
October 31, 2002 36.35 .08 (5.23) (5.15)
October 31, 2001 50.55 .07 (13.96) (13.89)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 44.45 .17 4.61 4.78
October 31, 2005 39.74 .33 4.71 5.04
October 31, 2004 37.13 .22 2.60 2.82
October 31, 2003 31.09 .20 6.01 6.21
October 31, 2002 36.35 .16 (5.23) (5.07)
October 31, 2001 50.55 .18 (13.97) (13.79)
- --------------------------------------------------------------------------------------------------------------
SPECIAL GROWTH FUND
Class C
April 30, 2006* 47.85 (.23) 8.69 8.46
October 31, 2005 49.16 (.59) 5.78 5.19
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)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 50.79 (.05) 9.27 9.22
October 31, 2005 51.47 (.26) 6.08 5.82
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)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 52.52 .02 9.61 9.63
October 31, 2005 52.89 (.12) 6.25 6.13
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)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- -----------------------------------------------------------------------------------------
DIVERSIFIED EQUITY FUND
Class C
April 30, 2006* (.03) (1.24) --
October 31, 2005 (.04) -- --
October 31, 2004 -- -- --
October 31, 2003 --(d) -- --
October 31, 2002 -- -- --
October 31, 2001 -- (.23) --
- -----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.11) (1.24) --
October 31, 2005 (.22) -- --
October 31, 2004 (.10) -- --
October 31, 2003 (.10) -- --
October 31, 2002 (.09) -- (.01)
October 31, 2001 (.08) (.23) --
- -----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.16) (1.24) --
October 31, 2005 (.33) -- --
October 31, 2004 (.21) -- --
October 31, 2003 (.17) -- --
October 31, 2002 (.16) -- (.03)
October 31, 2001 (.18) (.23) --
- -----------------------------------------------------------------------------------------
SPECIAL GROWTH FUND
Class C
April 30, 2006* -- (5.06) --
October 31, 2005 -- (6.50) --
October 31, 2004 -- (1.32) --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 -- (6.13) --
- -----------------------------------------------------------------------------------------
Class E
April 30, 2006* -- (5.06) --
October 31, 2005 -- (6.50) --
October 31, 2004 -- (1.32) --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (.03) (6.13) --
- -----------------------------------------------------------------------------------------
Class S
April 30, 2006* -- (5.06) --
October 31, 2005 -- (6.50) --
October 31, 2004 -- (1.32) --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (.06) (6.13) --
- -----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
198 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, (%) NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(1.27) 46.22 10.40 146,858
(.04) 43.08 11.60 126,123
-- 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
- -----------------------------------------------------------------------------
(1.35) 47.83 10.79 62,994
(.22) 44.46 12.46 53,227
(.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
- -----------------------------------------------------------------------------
(1.40) 47.83 10.94 3,141,844
(.33) 44.45 12.71 2,557,669
(.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
- -----------------------------------------------------------------------------
(5.06) 51.25 18.97 68,992
(6.50) 47.85 10.82 56,084
(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
- -----------------------------------------------------------------------------
(5.06) 54.95 19.40 24,724
(6.50) 50.79 11.65 21,436
(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
- -----------------------------------------------------------------------------
(5.06) 57.09 19.55 1,019,761
(6.50) 52.52 11.95 860,480
(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
- -----------------------------------------------------------------------------
<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)
- ---------------------------------------------------------------------------------
1.97 1.97 (.25) 47.76
1.98 1.98 (.24) 110.70
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
- ---------------------------------------------------------------------------------
1.22 1.22 .50 47.76
1.23 1.23 .53 110.70
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
- ---------------------------------------------------------------------------------
.97 .97 .75 47.76
.98 .98 .77 110.70
.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
- ---------------------------------------------------------------------------------
2.21 2.21 (.95) 83.66
2.28 2.29 (1.24) 153.63
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
- ---------------------------------------------------------------------------------
1.46 1.46 (.19) 83.66
1.54 1.54 (.50) 153.63
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
- ---------------------------------------------------------------------------------
1.21 1.21 .06 83.66
1.27 1.29 (.23) 153.63
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
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 199
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 FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
QUANTITATIVE EQUITY FUND
Class C
April 30, 2006* 37.22 --(d) 3.41 3.41
October 31, 2005 34.24 (.02) 3.07 3.05
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)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 38.18 .14 3.51 3.65
October 31, 2005 35.04 .26 3.14 3.40
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)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 38.28 .19 3.52 3.71
October 31, 2005 35.13 .35 3.15 3.50
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)
- --------------------------------------------------------------------------------------------------------------
INTERNATIONAL SECURITIES FUND
Class C
April 30, 2006* 62.35 .24 14.11 14.35
October 31, 2005 54.38 .25 8.24 8.49
October 31, 2004 48.46 --(d) 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)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 64.66 .51 14.62 15.13
October 31, 2005 56.28 .69 8.55 9.24
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)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 65.35 .60 14.76 15.36
October 31, 2005 56.84 .88 8.62 9.50
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)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- -----------------------------------------------------------------------------------------
QUANTITATIVE EQUITY FUND
Class C
April 30, 2006* (.03) (1.66) --
October 31, 2005 (.07) -- --
October 31, 2004 -- -- --
October 31, 2003 (.01) -- --
October 31, 2002 -- -- --
October 31, 2001 -- (1.32) --
- -----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.15) (1.66) --
October 31, 2005 (.26) -- --
October 31, 2004 (.14) -- --
October 31, 2003 (.11) -- --
October 31, 2002 (.13) -- (.01)
October 31, 2001 (.07) (1.32) --
- -----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.20) (1.66) --
October 31, 2005 (.35) -- --
October 31, 2004 (.22) -- --
October 31, 2003 (.18) -- --
October 31, 2002 (.20) -- (.02)
October 31, 2001 (.16) (1.32) --
- -----------------------------------------------------------------------------------------
INTERNATIONAL SECURITIES FUND
Class C
April 30, 2006* (.26) (2.25) --
October 31, 2005 (.52) -- --
October 31, 2004 (.73) -- --
October 31, 2003 (.21) -- --
October 31, 2002 -- -- --
October 31, 2001 -- (2.80) --
- -----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.69) (2.25) --
October 31, 2005 (.86) -- --
October 31, 2004 (.96) -- --
October 31, 2003 (.41) -- --
October 31, 2002 -- -- --
October 31, 2001 -- (2.80) --
- -----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.83) (2.25) --
October 31, 2005 (.99) -- --
October 31, 2004 (1.05) -- --
October 31, 2003 (.51) -- --
October 31, 2002 -- -- --
October 31, 2001 (.01) (2.80) --
- -----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
200 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, (%) NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(1.69) 38.94 9.37 148,365
(.07) 37.22 8.92 128,236
-- 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
- -----------------------------------------------------------------------------
(1.81) 40.02 9.77 66,014
(.26) 38.18 9.72 53,725
(.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
- -----------------------------------------------------------------------------
(1.86) 40.13 9.90 3,225,400
(.35) 38.28 9.99 2,650,719
(.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
- -----------------------------------------------------------------------------
(2.51) 74.19 23.62 155,466
(.52) 62.35 15.72 118,556
(.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
- -----------------------------------------------------------------------------
(2.94) 76.85 24.10 65,466
(.86) 64.66 16.56 49,490
(.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
- -----------------------------------------------------------------------------
(3.08) 77.63 24.24 2,953,176
(.99) 65.35 16.88 2,299,511
(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
- -----------------------------------------------------------------------------
<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)
- ---------------------------------------------------------------------------------
1.97 1.97 (.01) 47.85
1.98 1.98 (.07) 108.48
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
- ---------------------------------------------------------------------------------
1.22 1.22 .73 47.85
1.23 1.23 .70 108.48
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
- ---------------------------------------------------------------------------------
.97 .97 .98 47.85
.98 .98 .94 108.48
.99 .99 .65 91.31
1.02 1.02 .69 108.71
1.02 1.02 .48 71.10
.98 .98 .43 85.00
- ---------------------------------------------------------------------------------
2.21 2.21 .71 32.85
2.24 2.25 .42 79.49
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
- ---------------------------------------------------------------------------------
1.46 1.46 1.46 32.85
1.49 1.50 1.12 79.49
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
- ---------------------------------------------------------------------------------
1.21 1.21 1.70 32.85
1.23 1.25 1.41 79.49
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
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 201
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 FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
EMERGING MARKETS FUND
Class C
April 30, 2006* 16.73 --(d) 6.01 6.01
October 31, 2005 12.52 .04 4.22 4.26
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)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 17.25 .08 6.19 6.27
October 31, 2005 12.93 .16 4.34 4.50
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)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 17.25 .10 6.19 6.29
October 31, 2005 12.94 .20 4.34 4.54
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)
- --------------------------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class C
April 30, 2006* 46.08 .12 6.70 6.82
October 31, 2005 43.10 .42 6.66 7.08
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
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 46.62 .22 6.88 7.10
October 31, 2005 43.55 .76 6.74 7.50
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
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 47.03 .33 6.90 7.23
October 31, 2005 43.90 .88 6.79 7.67
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
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
EMERGING MARKETS FUND
Class C
April 30, 2006* (.28) (.43) --
October 31, 2005 (.05) -- --
October 31, 2004 (.24) -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.39) (.43) --
October 31, 2005 (.18) -- --
October 31, 2004 (.29) -- --
October 31, 2003 (.01) -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.43) (.43) --
October 31, 2005 (.23) -- --
October 31, 2004 (.31) -- --
October 31, 2003 (.04) -- --
October 31, 2002 (.02) -- --
October 31, 2001 -- -- --
- ----------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class C
April 30, 2006* (.23) (4.98) --
October 31, 2005 (.43) (3.67) --
October 31, 2004 (1.21) (.01) --
October 31, 2003 (1.11) (.11) --
October 31, 2002 (1.51) -- --
October 31, 2001 (1.14) -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.34) (4.98) --
October 31, 2005 (.76) (3.67) --
October 31, 2004 (1.47) (.01) --
October 31, 2003 (1.31) (.11) --
October 31, 2002 (1.68) -- --
October 31, 2001 (1.34) -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.40) (4.98) --
October 31, 2005 (.87) (3.67) --
October 31, 2004 (1.56) (.01) --
October 31, 2003 (1.36) (.11) --
October 31, 2002 (1.77) -- --
October 31, 2001 (1.40) -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
202 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, (%) NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.71) 22.03 36.98 50,693
(.05) 16.73 33.98 33,961
(.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
- -----------------------------------------------------------------------------
(.82) 22.70 37.46 28,862
(.18) 17.25 34.94 18,855
(.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
- -----------------------------------------------------------------------------
(.86) 22.68 37.64 1,071,636
(.23) 17.25 35.27 794,086
(.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
- -----------------------------------------------------------------------------
(5.21) 47.69 15.87 94,909
(4.10) 46.08 17.22 81,876
(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
- -----------------------------------------------------------------------------
(5.32) 48.40 16.32 47,508
(4.43) 46.62 18.09 40,296
(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
- -----------------------------------------------------------------------------
(5.38) 48.88 16.47 1,604,597
(4.54) 47.03 18.35 1,434,109
(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
- -----------------------------------------------------------------------------
<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)
- ---------------------------------------------------------------------------------
2.67 2.67 .04 29.25
2.74 2.76 .29 71.86
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
- ---------------------------------------------------------------------------------
1.92 1.92 .80 29.25
1.99 2.01 1.02 71.86
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
- ---------------------------------------------------------------------------------
1.66 1.66 1.02 29.25
1.73 1.76 1.30 71.86
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
- ---------------------------------------------------------------------------------
2.08 2.08 .50 27.73
2.10 2.10 .95 63.95
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
- ---------------------------------------------------------------------------------
1.33 1.33 .95 27.73
1.35 1.35 1.71 63.95
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
- ---------------------------------------------------------------------------------
1.08 1.08 1.40 27.73
1.10 1.10 1.95 63.95
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
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 203
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 FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
SHORT DURATION BOND FUND
Class C
April 30, 2006* 18.63 .23 (.09) .14
October 31, 2005 19.04 .31 (.40) (.09)
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
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 18.70 .30 (.09) .21
October 31, 2005 19.10 .46 (.41) .05
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
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 18.67 .33 (.09) .24
October 31, 2005 19.07 .51 (.41) .10
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
- --------------------------------------------------------------------------------------------------------------
DIVERSIFIED BOND FUND
Class C
April 30, 2006* 23.80 .38 (.40) (.02)
October 31, 2005 24.54 .58 (.67) (.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
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 23.87 .47 (.40) .07
October 31, 2005 24.62 .76 (.68) .08
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
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 23.28 .49 (.39) .10
October 31, 2005 24.04 .80 (.67) .13
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
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- -----------------------------------------------------------------------------------------
SHORT DURATION BOND FUND
Class C
April 30, 2006* (.23) -- --
October 31, 2005 (.31) (.01) --
October 31, 2004 (.15) -- --
October 31, 2003 (.34) -- --
October 31, 2002 (.72) -- --
October 31, 2001 (.96) -- --
- -----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.30) -- --
October 31, 2005 (.44) (.01) --
October 31, 2004 (.31) -- --
October 31, 2003 (.47) -- --
October 31, 2002 (.81) -- --
October 31, 2001 (1.09) -- --
- -----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.33) -- --
October 31, 2005 (.49) (.01) --
October 31, 2004 (.35) -- --
October 31, 2003 (.51) -- --
October 31, 2002 (.86) -- --
October 31, 2001 (1.13) -- --
- -----------------------------------------------------------------------------------------
DIVERSIFIED BOND FUND
Class C
April 30, 2006* (.36) -- --
October 31, 2005 (.53) (.12) --
October 31, 2004 (.41) (.53) --
October 31, 2003 (.49) (.56) --
October 31, 2002 (.78) -- --
October 31, 2001 (1.09) -- --
- -----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.45) -- --
October 31, 2005 (.71) (.12) --
October 31, 2004 (.59) (.53) --
October 31, 2003 (.66) (.56) --
October 31, 2002 (.96) -- --
October 31, 2001 (1.27) -- --
- -----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.47) -- --
October 31, 2005 (.77) (.12) --
October 31, 2004 (.65) (.53) --
October 31, 2003 (.72) (.56) --
October 31, 2002 (1.02) -- --
October 31, 2001 (1.32) -- --
- -----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
204 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, (%) NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.23) 18.54 .75 23,962
(.32) 18.63 (.50) 30,290
(.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
- -----------------------------------------------------------------------------
(.30) 18.61 1.15 25,514
(.45) 18.70 .25 24,851
(.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
- -----------------------------------------------------------------------------
(.33) 18.58 1.28 1,073,264
(.50) 18.67 .51 1,158,439
(.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
- -----------------------------------------------------------------------------
(.36) 23.42 (.10) 54,454
(.65) 23.80 (.39) 53,204
(.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
- -----------------------------------------------------------------------------
(.45) 23.49 .27 51,672
(.83) 23.87 .32 49,514
(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
- -----------------------------------------------------------------------------
(.47) 22.91 .44 1,782,916
(.89) 23.28 .54 1,570,581
(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
- -----------------------------------------------------------------------------
<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)
- ---------------------------------------------------------------------------------
1.66 1.66 2.53 35.75
1.65 1.66 1.65 202.53
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
- ---------------------------------------------------------------------------------
.91 .92 3.29 35.75
.90 .91 2.43 202.53
.88 .91 1.76 131.57
.80 .97 2.52 187.92
.77 .96 4.04 163.86
.77 .91 5.48 260.94
- ---------------------------------------------------------------------------------
.66 .66 3.54 35.75
.65 .66 2.67 202.53
.63 .66 2.01 131.57
.56 .72 2.70 187.92
.52 .71 4.26 163.86
.52 .67 5.76 260.94
- ---------------------------------------------------------------------------------
1.62 1.62 3.24 66.85
1.65 1.66 2.38 225.67
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
- ---------------------------------------------------------------------------------
.87 .87 3.99 66.85
.90 .91 3.12 225.67
.91 .91 2.46 140.92
.94 .94 2.70 147.44
.91 .91 3.85 156.21
.89 .89 5.22 155.87
- ---------------------------------------------------------------------------------
.62 .62 4.24 66.85
.65 .66 3.38 225.67
.66 .66 2.71 140.92
.69 .69 2.95 147.44
.66 .66 4.11 156.21
.64 .65 5.60 155.87
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 205
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 FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
MULTISTRATEGY BOND FUND
Class C
April 30, 2006* 10.31 .16 (.14) .02
October 31, 2005 10.63 .24 (.20) .04
October 31, 2004 10.54 .17 .31 .48
October 31, 2003 10.03 .23 .50 .73
October 31, 2002 10.20 .30 (.04) .26
October 31, 2001 9.60 .46 .62 1.08
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 10.32 .20 (.14) .06
October 31, 2005 10.64 .32 (.20) .12
October 31, 2004 10.55 .24 .32 .56
October 31, 2003 10.03 .31 .50 .81
October 31, 2002 10.21 .38 (.06) .32
October 31, 2001 9.61 .53 .62 1.15
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 10.33 .21 (.14) .07
October 31, 2005 10.65 .35 (.21) .14
October 31, 2004 10.56 .27 .31 .58
October 31, 2003 10.04 .34 .50 .84
October 31, 2002 10.22 .40 (.05) .35
October 31, 2001 9.61 .56 .63 1.19
- --------------------------------------------------------------------------------------------------------------
TAX EXEMPT BOND FUND
Class C
April 30, 2006* 21.45 .28 (.14) .14
October 31, 2005 22.03 .51 (.61) (.10)
October 31, 2004 21.99 .53 .04 .57
October 31, 2003 21.94 .58 .07 .65
October 31, 2002 21.76 .60 .22 .82
October 31, 2001 20.83 .68 .95 1.63
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 21.52 .36 (.14) .22
October 31, 2005 22.10 .67 (.60) .07
October 31, 2004 22.06 .69 .04 .73
October 31, 2003 21.99 .75 .06 .81
October 31, 2002 21.81 .78 .18 .96
October 31, 2001 20.87 .84 .95 1.79
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 21.49 .39 (.15) .24
October 31, 2005 22.07 .72 (.60) .12
October 31, 2004 22.03 .75 .03 .78
October 31, 2003 21.96 .80 .07 .87
October 31, 2002 21.79 .83 .18 1.01
October 31, 2001 20.84 .89 .96 1.85
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
MULTISTRATEGY BOND FUND
Class C
April 30, 2006* (.16) (.02) --
October 31, 2005 (.23) (.13) --
October 31, 2004 (.24) (.15) --
October 31, 2003 (.22) -- --
October 31, 2002 (.43) -- --
October 31, 2001 (.48) -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.20) (.02) --
October 31, 2005 (.31) (.13) --
October 31, 2004 (.32) (.15) --
October 31, 2003 (.29) -- --
October 31, 2002 (.50) -- --
October 31, 2001 (.55) -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.21) (.02) --
October 31, 2005 (.33) (.13) --
October 31, 2004 (.34) (.15) --
October 31, 2003 (.32) -- --
October 31, 2002 (.53) -- --
October 31, 2001 (.58) -- --
- ----------------------------------------------------------------------------------------
TAX EXEMPT BOND FUND
Class C
April 30, 2006* (.28) -- --
October 31, 2005 (.48) -- --
October 31, 2004 (.53) -- --
October 31, 2003 (.60) -- --
October 31, 2002 (.64) -- --
October 31, 2001 (.70) -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.36) -- --
October 31, 2005 (.65) -- --
October 31, 2004 (.69) -- --
October 31, 2003 (.74) -- --
October 31, 2002 (.78) -- --
October 31, 2001 (.85) -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.38) -- --
October 31, 2005 (.70) -- --
October 31, 2004 (.74) -- --
October 31, 2003 (.80) -- --
October 31, 2002 (.84) -- --
October 31, 2001 (.90) -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
206 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, (%) NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.18) 10.15 .17 76,474
(.36) 10.31 .35 69,427
(.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
- -----------------------------------------------------------------------------
(.22) 10.16 .55 45,072
(.44) 10.32 1.10 38,311
(.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
- -----------------------------------------------------------------------------
(.23) 10.17 .67 2,144,288
(.46) 10.33 1.35 1,771,524
(.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
- -----------------------------------------------------------------------------
(.28) 21.31 .63 10,976
(.48) 21.45 (.46) 10,493
(.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
- -----------------------------------------------------------------------------
(.36) 21.38 1.01 9,869
(.65) 21.52 .31 8,572
(.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
- -----------------------------------------------------------------------------
(.38) 21.35 1.13 251,714
(.70) 21.49 .55 228,604
(.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
- -----------------------------------------------------------------------------
<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)
- ---------------------------------------------------------------------------------
1.86 1.86 3.17 87.95
1.87 1.87 2.31 196.81
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
- ---------------------------------------------------------------------------------
1.11 1.12 3.92 87.95
1.12 1.12 3.06 196.81
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
- ---------------------------------------------------------------------------------
.86 .87 4.17 87.95
.87 .87 3.32 196.81
.89 .89 2.58 221.31
.94 .94 3.22 281.71
.92 .92 4.06 252.09
.89 .89 5.66 176.44
- ---------------------------------------------------------------------------------
1.55 1.55 2.64 29.67
1.53 1.53 2.31 43.13
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
- ---------------------------------------------------------------------------------
.80 .80 3.40 29.67
.78 .78 3.07 43.13
.78 .78 3.14 36.68
.81 .81 3.37 37.46
.83 .83 3.57 39.83
.78 .78 3.93 31.16
- ---------------------------------------------------------------------------------
.55 .55 3.64 29.67
.53 .53 3.31 43.13
.53 .53 3.39 36.68
.56 .56 3.62 37.46
.57 .57 3.84 39.83
.53 .53 4.21 31.16
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 207
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 FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
TAX-MANAGED LARGE CAP FUND
Class C
April 30, 2006* 17.68 --(d) 1.26 1.26
October 31, 2005 16.55 .01 1.14 1.15
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)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 18.09 .07 1.29 1.36
October 31, 2005 16.93 .15 1.15 1.30
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 (1) 20.10 .03 (4.25) (4.22)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 18.16 .10 1.29 1.39
October 31, 2005 16.99 .20 1.15 1.35
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)
- --------------------------------------------------------------------------------------------------------------
TAX-MANAGED MID & SMALL CAP FUND
Class C
April 30, 2006* 11.59 (.06) 1.95 1.89
October 31, 2005 10.17 (.12) 1.54 1.42
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 (.08) (3.11) (3.19)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 12.13 (.02) 2.05 2.03
October 31, 2005 10.56 (.04) 1.61 1.57
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 (1) 10.00 (.01) (1.99) (2.00)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 12.27 --(d) 2.07 2.07
October 31, 2005 10.65 (.01) 1.63 1.62
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)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
TAX-MANAGED LARGE CAP FUND
Class C
April 30, 2006* -- -- --
October 31, 2005 (.02) -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.10) -- --
October 31, 2005 (.14) -- --
October 31, 2004 (.06) -- --
October 31, 2003 (.09) -- --
October 31, 2002 (.05) -- --
October 31, 2001 (1) (.10) -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.14) -- --
October 31, 2005 (.18) -- --
October 31, 2004 (.08) -- --
October 31, 2003 (.11) -- --
October 31, 2002 (.08) -- --
October 31, 2001 (.10) -- --
- ----------------------------------------------------------------------------------------
TAX-MANAGED MID & SMALL CAP FUND
Class C
April 30, 2006* -- -- --
October 31, 2005 -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 -- -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2006* -- -- --
October 31, 2005 -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (1) -- -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2006* -- -- --
October 31, 2005 -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 (.01) -- --
October 31, 2001 -- -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
208 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, (%) NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
-- 18.94 7.13 18,621
(.02) 17.68 6.94 16,955
-- 16.55 10.19 13,304
-- 15.02 19.11 10,022
-- 12.61 (19.17) 7,740
-- 15.60 (24.57) 7,611
- -----------------------------------------------------------------------------
(.10) 19.35 7.54 10,857
(.14) 18.09 7.72 8,695
(.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
- -----------------------------------------------------------------------------
(.14) 19.41 7.68 433,656
(.18) 18.16 7.98 386,605
(.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
- -----------------------------------------------------------------------------
-- 13.48 16.31 11,560
-- 11.59 13.96 9,295
-- 10.17 9.00 6,041
-- 9.33 31.04 5,025
-- 7.12 (9.65) 3,450
-- 7.88 (28.88) 2,688
- -----------------------------------------------------------------------------
-- 14.16 16.74 2,179
-- 12.13 14.87 1,663
-- 10.56 9.77 1,279
-- 9.62 32.14 850
-- 7.28 (9.00) 885
-- 8.00 (20.00) 837
- -----------------------------------------------------------------------------
-- 14.34 16.87 192,661
-- 12.27 15.21 156,596
-- 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
- -----------------------------------------------------------------------------
<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)
- ---------------------------------------------------------------------------------
1.91 1.91 .02 17.74
1.91 1.91 .08 42.92
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
- ---------------------------------------------------------------------------------
1.16 1.17 .76 17.74
1.16 1.16 .84 42.92
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
- ---------------------------------------------------------------------------------
.91 .91 1.01 17.74
.90 .91 1.12 42.92
.92 .92 .62 32.15
.94 .94 .71 127.47
.91 .91 .58 65.39
.88 .88 .45 52.57
- ---------------------------------------------------------------------------------
2.25 2.34 (1.02) 26.72
2.24 2.37 (1.06) 57.90
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
- ---------------------------------------------------------------------------------
1.50 1.59 (.28) 26.72
1.48 1.62 (.32) 57.90
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
- ---------------------------------------------------------------------------------
1.25 1.34 (.02) 26.72
1.22 1.38 (.06) 57.90
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
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 209
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 FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
SELECT GROWTH FUND
Class C
April 30, 2006* 7.45 (.05) .63 .58
October 31, 2005 6.85 (.08) .68 .60
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 (2) 10.00 (.08) (3.27) (3.35)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 7.76 (.01) .66 .65
October 31, 2005 7.08 (.01) .69 .68
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 (2) 10.00 (.02) (3.30) (3.32)
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006* 7.91 --(d) .67 .67
October 31, 2005 7.19 .01 .71 .72
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 (2) 10.00 --(d) (3.29) (3.29)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 7.87 --(d) .66 .66
October 31, 2005 7.15 --(d) .72 .72
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 (2) 10.00 --(d) (3.29) (3.29)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- -----------------------------------------------------------------------------------------
SELECT GROWTH FUND
Class C
April 30, 2006* --(d) -- --
October 31, 2005 -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (2) -- -- --
- -----------------------------------------------------------------------------------------
Class E
April 30, 2006* --(d) -- --
October 31, 2005 -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (2) -- -- --
- -----------------------------------------------------------------------------------------
Class I
April 30, 2006* --(d) -- --
October 31, 2005 -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (2) -- -- --
- -----------------------------------------------------------------------------------------
Class S
April 30, 2006* --(d) -- --
October 31, 2005 -- -- --
October 31, 2004 -- -- --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
October 31, 2001 (2) -- -- --
- -----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
210 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, (%) NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
-- 8.03 7.79 10,164
-- 7.45 8.76 8,149
-- 6.85 (.15) 5,942
-- 6.85 31.17 3,265
-- 5.23 (21.35) 1,341
-- 6.65 (33.50) 1,017
- -----------------------------------------------------------------------------
-- 8.41 8.38 4,688
-- 7.76 9.60 4,255
-- 7.08 .71 5,749
-- 7.03 32.39 4,865
-- 5.31 (20.51) 2,814
-- 6.68 (33.20) 2,714
- -----------------------------------------------------------------------------
-- 8.58 8.47 110,777
-- 7.91 10.17 112,112
-- 7.19 1.13 60,006
-- 7.10 32.71 32,003
-- 5.35 (20.27) 18,150
-- 6.71 (32.90) 21,044
- -----------------------------------------------------------------------------
-- 8.53 8.39 71,963
-- 7.87 10.07 57,324
-- 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)
- ---------------------------------------------------------------------------------
2.21 2.26 (1.20) 66.32
2.23 2.32 (1.15) 127.68
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
- ---------------------------------------------------------------------------------
1.34 1.39 (.33) 66.32
1.28 1.40 (.15) 127.68
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
- ---------------------------------------------------------------------------------
.95 1.13 .07 66.32
.92 1.08 .12 127.68
.95 1.20 (.23) 134.00
.93 1.58 (.31) 149.76
.89 1.65 (.31) 212.37
.89 1.75 (.03) 169.36
- ---------------------------------------------------------------------------------
1.13 1.18 (.12) 66.32
1.06 1.18 .04 127.68
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 211
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 FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
SELECT VALUE FUND
Class C
April 30, 2006* 11.27 --(d) 1.29 1.29
October 31, 2005 10.15 (.02) 1.16 1.14
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 (2) 10.00 --(d) (1.48) (1.48)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006* 11.43 .05 1.32 1.37
October 31, 2005 10.28 .09 1.16 1.25
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 (2) 10.00 .05 (1.48) (1.43)
- --------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006* 11.46 .07 1.32 1.39
October 31, 2005 10.30 .13 1.17 1.30
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 (2) 10.00 .09 (1.48) (1.39)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006* 11.44 .06 1.31 1.37
October 31, 2005 10.29 .11 1.16 1.27
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 (2) 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, 2006* (.02) (.64) --
October 31, 2005 (.01) (.01) --
October 31, 2004 (.01) -- --
October 31, 2003 (.01) -- --
October 31, 2002 (.01) -- --
October 31, 2001 (2) (.01) -- --
- ----------------------------------------------------------------------------------------
Class E
April 30, 2006* (.05) (.64) --
October 31, 2005 (.09) (.01) --
October 31, 2004 (.05) -- --
October 31, 2003 (.05) -- --
October 31, 2002 (.06) -- --
October 31, 2001 (2) (.04) -- --
- ----------------------------------------------------------------------------------------
Class I
April 30, 2006* (.07) (.64) --
October 31, 2005 (.13) (.01) --
October 31, 2004 (.09) -- --
October 31, 2003 (.08) -- --
October 31, 2002 (.09) -- --
October 31, 2001 (2) (.07) -- --
- ----------------------------------------------------------------------------------------
Class S
April 30, 2006* (.06) (.64) --
October 31, 2005 (.11) (.01) --
October 31, 2004 (.08) -- --
October 31, 2003 (.07) -- --
October 31, 2002 (.08) -- --
October 31, 2001 (2) (.07) -- --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
212 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, (%) NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.66) 11.90 11.83 24,822
(.02) 11.27 11.23 21,228
(.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
- -----------------------------------------------------------------------------
(.69) 12.11 12.45 10,241
(.10) 11.43 12.14 8,770
(.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
- -----------------------------------------------------------------------------
(.71) 12.14 12.60 121,299
(.14) 11.46 12.63 135,759
(.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
- -----------------------------------------------------------------------------
(.70) 12.11 12.43 233,237
(.12) 11.44 12.36 198,551
(.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)
- ---------------------------------------------------------------------------------
2.11 2.12 .05 46.68
2.18 2.20 (.18) 84.74
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
- ---------------------------------------------------------------------------------
1.26 1.26 .91 46.68
1.25 1.30 .78 84.74
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
- ---------------------------------------------------------------------------------
.94 .94 1.26 46.68
.86 .91 1.14 84.74
.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
- ---------------------------------------------------------------------------------
1.10 1.10 1.06 46.68
1.07 1.10 .95 84.74
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 213
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2006 (Unaudited).
(1) For the period December 6, 2000 (commencement of sale) to October 31,
2001.
(2) 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 FRIMCo as the investment
advisor and transfer agent.
See accompanying notes which are an integral part of the financial statements.
214 Notes to Financial Highlights
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company" or "FRIC") 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 (the "Board") to issue an
unlimited number of shares of beneficial interest at a $.01 par value per
share.
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment
Management Company.
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 at the time 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 last sale price;
- 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, 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.
- 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 of 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 Fund's 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 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.
Notes to Financial Statements 215
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 of the US securities
market (defined in the Fair Value Procedures as the movement by any two of
four major US Indexes greater than a certain percentage) or other significant
event; foreign market holidays if on a daily basis, Fund exposure exceeds 20%
in aggregate (all closed markets combined); a company development; a natural
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, if any, 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 and capital gain distributions, if any, are recorded on
the ex-dividend date. Income distributions are generally declared and paid
according to the following schedule:
<Table>
<Caption>
DECLARED PAYABLE FUNDS
------------------------------------------------------------------------------------------------------------------------
Monthly Early in the following month Tax-Exempt Bond, Diversified Bond and Multistrategy Bond
Funds
Quarterly April, July, October and December Diversified Equity, Quantitative Equity, Real Estate
Securities, Short Duration Bond and Select Value Funds
Annually Mid-December Special Growth, International Securities, Emerging Markets,
Tax-Managed Large Cap, Tax-Managed Mid & Small Cap and
Select Growth Funds
</Table>
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.
216 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Expenses
The Funds will pay their own expenses other than those expressly assumed by
Frank Russell Investment Management Company ("FRIMCo" or "Adviser"). 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 the unrealized appreciation on foreign securities for potential
capital gains and repatriation taxes at April 30, 2006. 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 $ 22,098 $ 24,294
Emerging Markets 1,813,192 519,400
</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 and risks that
assist the Funds in meeting their investment strategies.
Notes to Financial Statements 217
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (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, 2006 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 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.
Loan Agreements
The Multistrategy Bond Fund may invest in direct debt instruments which are
interests in amounts owed by corporate, governmental, or other borrowers to
lenders or lending syndicates. A Fund's investments in loans may be in the
form of participations in loans or assignments of all or a portion of loans
from third parties. A loan is often administered by a bank or other financial
institution (the "lender") that acts as agent for all holders. The agent
administers the terms of the loan, as specified in the loan agreement. When
investing in a loan participation, a Fund has the right to receive payments
of principal, interest and any fees to which it is entitled only from the
lender selling the loan agreement and only upon receipt by the lender of
payments from the borrower. A Fund generally has no right to enforce
compliance with the terms of the loan agreement with the borrower. As a
result, a Fund may be subject to the credit risk of both the borrower and the
lender that is selling the loan agreement. When a Fund purchases assignments
from lenders it acquires direct rights against the borrower on the loan. At
the period ended April 30, 2006, there were no unfunded loan commitments in
the Multistrategy Bond Fund.
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
218 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (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.
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 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. As of April 30, 2006 the Multistrategy Bond Fund had cash
collateral balances of $101,023 in connection with futures contracts
purchased (sold).
Swap Agreements
The Funds may enter into several different types of agreements including
interest rate, index, credit default and currency swaps.
The Funds may enter into index 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.
The Short Duration Bond, Diversified Bond, Multistrategy Bond and
International Securities Funds may enter into swap agreements, on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or its liabilities, and will usually enter into 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 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).
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 an issuer will default on
their obligation by failing to pay
Notes to Financial Statements 219
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 its portfolio or to
protect against any increase in the price of securities it anticipates
purchasing at a later date. The net amount of the excess, if any, of the
Fund's obligations over its 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 Fund's custodian. To
the extent that the Fund enters into swaps on other than a net basis, the
amount maintained in a segregated account will be the full amount of the
Fund's 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.
Investments in Emerging Markets
Investing in emerging markets may involve special risks and considerations
for the Emerging Markets Fund and International Securities 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, 2006, 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 $ 1,684,684,064 $ 1,365,226,137
Special Growth 809,039,929 834,291,389
Quantitative Equity 1,796,864,193 1,442,548,175
International Securities 971,442,424 849,883,913
Emerging Markets 276,411,601 47,287,406
Real Estate Securities 449,623,873 473,458,002
Short Duration Bond 217,612,212 328,019,837
Diversified Bond 590,757,783 383,398,832
</Table>
<Table>
- ---------------------------------------------------------------
<Caption>
FUNDS PURCHASES SALES
Multistrategy Bond $ 857,539,631 $ 550,149,012
Tax Exempt Bond 103,934,901 72,169,405
Tax-Managed Large Cap 87,265,269 74,383,189
Tax-Managed Mid & Small
Cap 61,604,012 47,287,406
Select Growth 115,551,305 116,383,127
Select Value 162,981,703 172,488,163
</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 $ 107,637,766 $ 112,843,960
Diversified Bond 759,123,515 753,970,514
Multistrategy Bond 1,000,152,921 1,031,492,397
</Table>
220 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Written Options Contracts
Transactions in written options contracts for the period ended April 30, 2006
for the following Funds were as follows:
<Table>
<Caption>
INTERNATIONAL SECURITIES FUND EMERGING MARKETS FUND
------------------------------------------ ------------------------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2005 40 $ 173,744 286 $ 723,862
Opened 421 1,888,501 1,547 2,816,683
Closed (331) (1,527,350) (1,087) (2,560,738)
Expired -- -- -- --
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2006 130 $ 534,895 746 $ 979,807
=================== =================== =================== ===================
</Table>
<Table>
<Caption>
SHORT DURATION BOND FUND DIVERSIFIED BOND FUND
------------------------------------------ ------------------------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2005 160 $ 321,656 377 $ 169,060
Opened 257 393,965 997 508,845
Closed (1) (25,650) (66) (26,311)
Expired (2) (17,155) (470) (145,046)
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2006 414 $ 672,816 838 $ 506,548
=================== =================== =================== ===================
</Table>
<Table>
<Caption>
MULTISTRATEGY BOND FUND
------------------------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------------------------------
Outstanding October 31, 2005 535 $ 563,340
Opened 1,699 1,159,123
Closed (2) (55,288)
Expired (962) (287,615)
------------------- -------------------
Outstanding April 30, 2006 1,270 $ 1,379,560
=================== ===================
</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. 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 is invested by the securities
lending agent, State Street Bank and Trust Company ("State Street") in
short-term instruments, money market mutual funds and other short-term
investments that 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 a lending 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
Notes to Financial Statements 221
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
deemed to be of good financial standing. As of April 30, 2006, 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
---------------------------------------------------------------------------------------------
Special Growth $ 293,668 Pool of US Government securities
International Securities 348,265 Pool of US Government securities
</Table>
4. RELATED PARTIES
Adviser 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 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
also may invest a portion of the collateral received from the Investment
Company's securities lending program, in the Investment Company's Money
Market and Tax Free Money Market Funds (two of the Funds of the Investment
Company not presented herein). As of April 30, 2006, $1,273,743,733 of the
Money Market Fund's net assets and $7,005,848 of the Tax Free Money Market
Fund's net assets represents investments by the Funds presented herein and
$467,460,370 of the Money Market Funds' net assets 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, are payable
monthly and total $69,138,913 and $4,792,513 respectively, for the period
ended April 30, 2006.
<Table>
<Caption>
ANNUAL RATE
-------------------------------
FUNDS ADVISER ADMINISTRATOR
- --------------------------------------------------------------
Special Growth .90% .05%
Emerging Markets 1.15 .05
Real Estate Securities .80 .05
Short Duration Bond .45 .05
Diversified Bond .40 .05
Multistrategy Bond .60 .05
</Table>
<Table>
- --------------------------------------------------------------
<Caption>
ANNUAL RATE
-------------------------------
FUNDS ADVISER ADMINISTRATOR
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 Diversified Equity Fund, the Quantitative Equity Fund and the
International Securities Fund, the advisory fee is based on the asset levels
of the Funds. The advisory fee rates for these Funds are as follows:
<Table>
<Caption>
DIVERSIFIED EQUITY QUANTITATIVE EQUITY
ANNUAL RATE ANNUAL RATE
------------------------------- -------------------------------
AVERAGE DAILY NET ASSETS ADVISORY ADMINISTRATOR ADVISORY ADMINISTRATOR
-----------------------------------------------------------------------------------------------------
First $2 Billion .73% .05% .73% .05%
Next $3 Billion .72 .05 .72 .05
Over $5 Billion .70 .05 .70 .05
<Caption>
INTERNATIONAL SECURITIES
ANNUAL RATE
-------------------------------
AVERAGE DAILY NET ASSETS ADVISORY ADMINISTRATOR
----------------------------------
First $2 Billion .90% .05%
Next $3 Billion .89 .05
Over $5 Billion .87 .05
</Table>
For the Tax-Managed Mid & Small Cap Fund, FRIMCo has contractually agreed to
waive, at least until February 28, 2007, 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, 2006 was $84,736.
There were no reimbursements for the period ended April 30, 2006.
For the Select Growth Fund, FRIMCo has contractually agreed to waive, at
least until February 28, 2007, 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%,
222 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
respectively. The total amount of the waiver for the period ended April 30,
2006 was $47,099. There were no contractual reimbursements for the period
ended April 30, 2006.
For the Select Value Fund, FRIMCo has contractually agreed to waive, at least
until February 28, 2007, 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, 2006.
The Adviser does not have the ability to recover amounts waived or reimbursed
from previous periods.
Special Service Charge
Special servicing agreements were entered into in February 1999 by the
Adviser and were approved annually by the Funds' Board of Trustees. The
special servicing agreements were 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
"Underlying Funds," in which the Fund of Funds invest, which includes the
Diversified Equity Fund, Special Growth Fund, Quantitative Equity Fund,
International Securities Fund, Emerging Markets Fund, Real Estate Securities
Fund, Short Duration Bond Fund, Diversified Bond Fund, Multistrategy Bond
Fund, Tax-Managed Large Cap Fund and Tax-Managed Small Cap Fund. In
accordance with the special servicing agreements, certain expenses from the
operation of the Fund of Funds were borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Fund of
Funds. No Underlying Funds were charged expenses that exceeded the estimated
savings to each respective Underlying Fund. These estimated savings appeared
in the form of reduced transfer agent costs resulting from the elimination of
separate shareholder accounts which were 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 acted as omnibus
accounts combining thousands of individual shareholder accounts into a single
account. This benefited the Underlying Funds, by reducing the number of
shareholder accounts that needed to be maintained, and by the omnibus
accounts' netting out the trades of individual shareholders to a point where
the Fund of Funds only executed one trade each day with each Underlying Fund.
In the event that the financial benefits to the Underlying Funds did not
exceed aggregate expenses of any Fund of Fund, the Adviser reimbursed the
respective Underlying Funds. The Adviser did not have the ability to recover
amounts reimbursed from previous periods. This arrangement was discontinued
on June 30, 2005.
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, 2006, the
Fund's custodian fees were reduced by the following amounts under these
arrangements:
<Table>
<Caption>
AMOUNT
FUNDS PAID
- ---------------------------------------------------
Diversified Equity $ 3,081
Special Growth 2,377
Quantitative Equity 4,170
International Securities 2,303
Emerging Markets 4,320
Real Estate Securities 3,322
Short Duration Bond 14,882
</Table>
<Table>
- ---------------------------------------------------
<Caption>
AMOUNT
FUNDS PAID
Diversified Bond $ 21,760
Multistrategy Bond 70,925
Tax Exempt Bond 1,146
Tax-Managed Large Cap 257
Tax-Managed Mid & Small Cap 368
Select Growth 222
Select Value 190
</Table>
Transfer agent
FRIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, FRIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. FRIMCo retains a portion
of this fee for its services provided to the Fund and pays the balance to
unaffiliated agents who assist in providing these services. Total fees for
the Funds presented herein for the six months ended April 30, 2006 were
$14,629,552.
Notes to Financial Statements 223
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
In addition, FRIMCo has contractually agreed to waive, at least until
February 28, 2007, a portion of its transfer agency fees for certain Funds.
The total transfer agent fee waivers for the period ended April 30, 2006 were
as follows:
<Table>
<Caption>
TA FEE
FUND WAIVER AMOUNT
-------------------------------------------------------
Select Growth $ 71,257
</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 unaffiliated correspondent brokers. FRS is
a registered broker and investment adviser and an affiliate of FRIMCo. Trades
placed through FRS and its correspondents are used (i) to obtain research
services for FRIMCo to assist it in its capacity as a manager of managers,
(ii) to generate commission rebates to the Funds on whose behalf the trades
were made, (iii) to manage trading associated with changes in managers,
rebalancing across existing managers, cash flows and other portfolio
transitions or (iv) to execute portfolio securities transactions selected by
money managers. Effective January 1, 2006, the Funds began transitioning
trades used to obtain research services and to generate commission rebates
from FRS and LJR (as defined and described more fully below). During the
transition, some of these trades may continue to be executed through FRS. 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 and its correspondents or other brokers only to the
extent that the Funds will receive competitive execution, price and
commissions. In addition, FRIMCo recommends targets for the amount of trading
that money managers allocate through FRS based upon asset class, investment
style and other factors. Research services provided to FRIMCo by FRS or other
brokers include performance measurement statistics, fund analytics systems
and market monitoring systems. Research services will generally be obtained
from unaffiliated third parties at market rates. Research provided to FRIMCo
may benefit the particular Funds generating the trading activity and may also
benefit other Funds within the Investment Company and other funds and clients
managed or advised by FRIMCo or its affiliates. Similarly, the Funds may
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.
Effective January 1, 2006, the Funds began effecting transactions though
Lynch, Jones & Ryan, Inc. ("LJR") and its global network of correspondent
brokers. LJR is a registered broker and is not an affiliate of the Funds or
FRIMCo. Trades placed through LJR and its correspondents are used (i) to
obtain research services for FRIMCo to assist it in its capacity as a manager
of managers and (ii) to generate commission rebates to the Funds on whose
behalf the trades were made. 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 LJR and its
correspondents or other brokers only to the extent that the Funds will
receive competitive execution, price and commissions. In addition, FRIMCo
recommends targets for the amount of trading that money managers allocate
through LJR based upon asset class, investment style and other factors.
Research services provided to FRIMCo by LJR or other brokers include
performance measurement statistics, fund analytics systems and market
monitoring systems. Research services will be generally obtained
224 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
from unaffiliated third parties at market rates. Research provided to FRIMCo
may benefit the particular Funds generating the trading activity and may also
benefit other Funds within the Investment Company and other funds and clients
managed or advised by FRIMCo or its affiliates. Similarly, the Funds may
benefit from research provided with respect to trading by those other funds
and clients.
FRS, LJR or other brokers also may rebate to the Funds a portion of
commissions earned on certain trading by the Funds through FRS, LJR and their
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, as determined annually in the Soft
Dollar Committee budgeting process.
Amounts retained by FRS for the period ended April 30, 2006 were as follows:
<Table>
<Caption>
FUNDS AMOUNT
- ------------------------------------------------
Diversified Equity $ 20,215
Special Growth 5,950
Quantitative Equity 2,017
International Securities 4,441
Emerging Markets 3,174
</Table>
<Table>
- ------------------------------------------------
<Caption>
FUNDS AMOUNT
Real Estate Securities $ 1,587
Tax-Managed Mid & Small Cap 377
Select Growth 944
Select Value 2,601
</Table>
Additionally, the Funds paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Adviser.
Accrued fees payable to affiliates as April 30, 2006 were as follows:
<Table>
<Caption>
DIVERSIFIED SPECIAL QUANTITATIVE INTERNATIONAL EMERGING REAL ESTATE
EQUITY GROWTH EQUITY SECURITIES MARKETS SECURITIES
-------------------------------------------------------------------------------------------------------------------------------
Advisory fees $ 1,986,767 $ 814,950 $ 2,043,955 $ 2,291,419 $ 1,059,493 $ 1,141,785
Administration fees 135,387 45,275 139,248 126,859 46,067 71,361
Distribution fees 87,732 41,365 88,904 91,362 29,759 57,168
Shareholder servicing fees 41,748 18,662 42,791 43,183 15,515 28,563
Transfer agent fees 406,160 194,682 417,742 380,575 198,086 256,902
Trustee fees 8,779 3,363 9,319 22,745 1,914 4,906
-------------- -------------- -------------- -------------- -------------- --------------
$ 2,666,573 $ 1,118,297 $ 2,741,959 $ 2,956,143 $ 1,350,834 $ 1,560,685
============== ============== ============== ============== ============== ==============
<Caption>
SHORT DURATION
BOND
------------------------------------------
Advisory fees $ 414,605
Administration fees 46,067
Distribution fees 14,774
Shareholder servicing fees 10,075
Transfer agent fees 92,134
Trustee fees 5,786
--------------
$ 583,441
==============
</Table>
<Table>
<Caption>
DIVERSIFIED MULTISTRATEGY TAX EXEMPT TAX MANAGED TAX MANAGED
BOND BOND BOND LARGE CAP MID & SMALL CAP SELECT GROWTH
--------------------------------------------------------------------------------------------------------------------------------
Advisory fees $ 614,290 $ 1,099,592 $ 66,121 $ 264,528 $ 169,706 $ 126,089
Administration fees 76,786 91,633 11,008 18,893 4,441 7,739
Distribution fees 32,702 45,750 6,553 11,124 6,838 5,832
Shareholder servicing fees 21,207 24,243 4,152 5,875 2,708 2,865
Transfer agent fees 191,966 274,898 22,042 37,787 27,860 22,201
Trustee fees 6,118 6,025 700 1,417 578 543
-------------- -------------- -------------- -------------- -------------- --------------
$ 943,069 $ 1,542,141 $ 110,576 $ 339,624 $ 212,131 $ 165,269
============== ============== ============== ============== ============== ==============
<Caption>
SELECT VALUE
------------------------------------------
Advisory fees $ 226,408
Administration fees 15,745
Distribution fees 14,448
Shareholder servicing fees 6,808
Transfer agent fees 56,866
Trustee fees 1,198
--------------
$ 321,473
==============
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company, 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 independent Trustees a retainer of
$52,000 per year, $6,500 ($5,000 prior to January 1, 2006) 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, Nominating
and Governance Committee meeting or Investment 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 Audit Committee
Notes to Financial Statements 225
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Chair was paid a fee of $12,000 per year and the Nominating and Governance
Committee chair and Investment Committee chair were each paid a fee of $6,000
per year. The chairperson of the Board receives an additional $52,000 per
year.
5. FEDERAL INCOME TAXES
At October 31, 2005, 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
----------------------------------------------------------------------------------------------------------------
Short Duration Bond $ -- $ -- $ -- $ --
Diversified Bond -- -- -- --
Tax Exempt Bond -- 682,095 -- --
Tax-Managed Large Cap -- -- 39,369,989 59,069,223
Tax-Managed Mid & Small Cap -- -- -- 10,128,842
Select Growth -- -- 2,811,082 14,206,106
Select Value 8,697,269 451,724 2,362,680 362,611
</Table>
<Table>
<Caption>
FUNDS 10/31/11 10/31/12 10/31/13 TOTALS
----------------------------------------------------------------------------------------------------------------
Short Duration Bond $ -- $ -- $ 10,278,948 $ 10,278,948
Diversified Bond -- -- 4,976,789 4,976,789
Tax Exempt Bond -- 357,343 -- 1,039,438
Tax-Managed Large Cap -- -- -- 98,439,212
Tax-Managed Mid & Small Cap -- -- -- 10,128,842
Select Growth 263,497 -- -- 17,280,685
Select Value -- -- -- 11,874,284
</Table>
Select Value Fund had a capital loss carryforward of $11,874,284 that it
acquired from the Equity Income Fund and Equity III Fund of which $8,697,269,
$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, 2006, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
<Caption>
DIVERSIFIED SPECIAL QUANTITATIVE INTERNATIONAL
EQUITY GROWTH EQUITY SECURITIES
------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 3,105,190,235 $ 1,152,880,280 $ 3,109,993,727 $ 3,457,282,636
================ ================ ================ ================
Unrealized Appreciation $ 487,407,209 $ 188,758,655 $ 444,864,868 $ 770,451,664
Unrealized Depreciation (45,734,679) (16,405,928) (38,552,556) (15,811,838)
---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 441,672,530 $ 172,352,727 $ 406,312,312 $ 754,639,826
================ ================ ================ ================
</Table>
<Table>
<Caption>
EMERGING REAL ESTATE SHORT DURATION DIVERSIFIED MULTISTRATEGY
MARKETS SECURITIES BOND BOND BOND
------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 750,147,440 $ 1,245,695,240 $ 1,141,779,485 $ 2,638,985,383 $ 2,978,682,352
================ ================ ================ ================ ================
Unrealized Appreciation $ 432,195,470 $ 598,355,461 $ 673,045 $ 3,664,254 $ 9,933,281
Unrealized Depreciation (7,347,856) (4,608,564) (16,162,602) (39,272,013) (36,245,382)
---------------- ---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 424,847,614 $ 593,746,897 $ (15,489,557) $ (35,607,759) $ (26,312,101)
================ ================ ================ ================ ================
</Table>
226 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
TAX-MANAGED
TAX EXEMPT TAX-MANAGED MID & SMALL SELECT SELECT
BOND LARGE CAP CAP GROWTH VALUE
------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 272,815,634 $ 378,057,238 $ 219,996,981 $ 192,375,494 $ 362,074,629
================ ================ ================ ================ ================
Unrealized Appreciation $ 2,058,304 $ 115,397,625 $ 51,815,622 $ 28,386,681 $ 64,678,467
Unrealized Depreciation (2,962,323) (5,108,430) (3,052,015) (3,717,662) (4,120,244)
---------------- ---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ (904,019) $ 110,289,195 $ 48,763,607 $ 24,669,019 $ 60,558,223
================ ================ ================ ================ ================
</Table>
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2006 and October 31, 2005
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
DIVERSIFIED EQUITY ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 387 913 $ 17,356 $ 38,059
Proceeds from reinvestment of
distributions 83 2 3,657 97
Payments for shares redeemed (220) (437) (9,931) (18,261)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 250 478 11,082 19,895
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 227 342 10,528 14,843
Proceeds from reinvestment of
distributions 36 6 1,628 257
Payments for shares redeemed (143) (294) (6,638) (12,728)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 120 54 5,518 2,372
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 9,085 13,816 421,110 596,026
Proceeds from reinvestment of
distributions 1,755 292 79,470 12,661
Payments for shares redeemed (2,693) (5,474) (124,988) (235,883)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 8,147 8,634 375,592 372,804
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 8,517 9,166 $ 392,192 $ 395,071
================= ================= ================= =================
</Table>
Notes to Financial Statements 227
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
SPECIAL GROWTH ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 153 316 $ 7,480 $ 15,054
Proceeds from reinvestment of
distributions 126 130 5,785 6,105
Payments for shares redeemed (105) (228) (5,171) (10,882)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 174 218 8,094 10,277
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 58 208 3,022 10,673
Proceeds from reinvestment of
distributions 42 83 2,068 4,119
Payments for shares redeemed (72) (491) (3,768) (25,280)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 28 (200) 1,322 (10,488)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 1,893 4,539 102,706 232,791
Proceeds from reinvestment of
distributions 1,570 1,596 79,639 81,481
Payments for shares redeemed (1,985) (3,134) (106,516) (162,993)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,478 3,001 75,829 151,279
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,680 3,019 $ 85,245 $ 151,068
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
QUANTITATIVE EQUITY ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 463 1,084 $ 17,710 $ 39,574
Proceeds from reinvestment of
distributions 154 5 5,745 199
Payments for shares redeemed (252) (506) (9,678) (18,512)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 365 583 13,777 21,261
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 264 330 10,387 12,388
Proceeds from reinvestment of
distributions 68 10 2,608 359
Payments for shares redeemed (89) (321) (3,522) (12,054)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 243 19 9,473 693
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 11,094 17,055 436,583 640,244
Proceeds from reinvestment of
distributions 3,274 424 125,905 16,035
Payments for shares redeemed (3,249) (6,785) (127,879) (254,740)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 11,119 10,694 434,609 401,539
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 11,727 11,296 $ 457,859 $ 423,493
================= ================= ================= =================
</Table>
228 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
INTERNATIONAL SECURITIES ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 265 656 $ 17,940 $ 38,805
Proceeds from reinvestment of
distributions 73 14 4,728 784
Payments for shares redeemed (145) (251) (9,922) (14,956)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 193 419 12,746 24,633
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 139 229 9,737 14,246
Proceeds from reinvestment of
distributions 34 10 2,297 605
Payments for shares redeemed (86) (160) (6,097) (9,930)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 87 79 5,937 4,921
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 4,032 8,450 284,259 520,578
Proceeds from reinvestment of
distributions 1,599 478 107,525 28,531
Payments for shares redeemed (2,781) (3,183) (197,212) (197,878)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,850 5,745 194,572 351,231
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 3,130 6,243 $ 213,255 $ 380,785
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
EMERGING MARKETS ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 395 720 $ 7,754 $ 10,819
Proceeds from reinvestment of
distributions 79 6 1,405 79
Payments for shares redeemed (203) (330) (3,997) (4,983)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 271 396 5,162 5,915
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 290 368 5,852 5,846
Proceeds from reinvestment of
distributions 50 13 907 190
Payments for shares redeemed (162) (384) (3,251) (6,138)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 178 (3) 3,508 (102)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 5,795 9,775 115,529 151,220
Proceeds from reinvestment of
distributions 2,101 633 38,232 9,268
Payments for shares redeemed (6,678) (6,854) (134,377) (107,297)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,218 3,554 19,384 53,191
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,667 3,947 $ 28,054 $ 59,004
================= ================= ================= =================
</Table>
Notes to Financial Statements 229
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
REAL ESTATE SECURITIES ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 196 529 $ 9,124 $ 23,052
Proceeds from reinvestment of
distributions 205 135 8,970 5,811
Payments for shares redeemed (188) (304) (8,752) (13,369)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 213 360 9,342 15,494
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 144 398 6,826 17,861
Proceeds from reinvestment of
distributions 103 73 4,592 3,199
Payments for shares redeemed (129) (283) (6,206) (12,674)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 118 188 5,212 8,386
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 3,677 8,037 174,717 355,555
Proceeds from reinvestment of
distributions 3,452 1,955 155,037 85,775
Payments for shares redeemed (4,793) (6,187) (226,321) (277,213)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,336 3,805 103,433 164,117
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,667 4,353 $ 117,987 $ 187,997
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
SHORT DURATION BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 130 617 $ 2,422 $ 11,614
Proceeds from reinvestment of
distributions 16 27 302 502
Payments for shares redeemed (480) (1,036) (8,938) (19,514)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (334) (392) (6,214) (7,398)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 169 320 3,169 6,052
Proceeds from reinvestment of
distributions 20 27 377 521
Payments for shares redeemed (147) (232) (2,756) (4,389)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 42 115 790 2,184
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 6,138 16,712 114,703 315,510
Proceeds from reinvestment of
distributions 980 1,504 18,206 28,236
Payments for shares redeemed (11,399) (15,698) (213,078) (296,234)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (4,281) 2,518 (80,169) 47,512
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (4,573) 2,241 $ (85,593) $ 42,298
================= ================= ================= =================
</Table>
230 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
DIVERSIFIED BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 352 735 $ 8,364 $ 17,801
Proceeds from reinvestment of
distributions 32 52 766 1,257
Payments for shares redeemed (296) (424) (7,004) (10,266)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 88 363 2,126 8,792
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 325 713 7,737 17,317
Proceeds from reinvestment of
distributions 39 66 933 1,598
Payments for shares redeemed (240) (481) (5,703) (11,706)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 124 298 2,967 7,209
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 13,164 20,002 305,710 474,388
Proceeds from reinvestment of
distributions 1,411 1,927 32,659 45,639
Payments for shares redeemed (4,191) (5,758) (97,429) (136,503)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 10,384 16,171 240,940 383,524
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 10,596 16,832 $ 246,033 $ 399,525
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
MULTISTRATEGY BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 1,425 2,641 $ 14,635 $ 27,699
Proceeds from reinvestment of
distributions 118 191 1,215 1,997
Payments for shares redeemed (743) (1,140) (7,623) (11,937)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 800 1,692 8,227 17,759
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 855 1,080 8,783 11,328
Proceeds from reinvestment of
distributions 84 136 859 1,427
Payments for shares redeemed (215) (477) (2,206) (4,997)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 724 739 7,436 7,758
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 42,926 57,162 441,724 600,754
Proceeds from reinvestment of
distributions 4,028 5,721 41,363 59,962
Payments for shares redeemed (7,621) (12,051) (78,404) (126,465)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 39,333 50,832 404,683 534,251
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 40,857 53,263 $ 420,346 $ 559,768
================= ================= ================= =================
</Table>
Notes to Financial Statements 231
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
TAX EXEMPT BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 56 173 $ 1,192 $ 3,770
Proceeds from reinvestment of
distributions 5 8 109 188
Payments for shares redeemed (35) (174) (745) (3,785)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 26 7 556 173
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 87 161 1,879 3,512
Proceeds from reinvestment of
distributions 7 10 150 220
Payments for shares redeemed (30) (66) (669) (1,446)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 64 105 1,360 2,286
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,868 4,673 61,558 101,967
Proceeds from reinvestment of
distributions 166 254 3,558 5,537
Payments for shares redeemed (1,881) (2,697) (40,404) (58,741)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,153 2,230 24,712 48,763
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,243 2,342 $ 26,628 $ 51,222
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
TAX-MANAGED LARGE CAP ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 102 393 $ 1,893 $ 6,872
Proceeds from reinvestment of
distributions -- 1 -- 14
Payments for shares redeemed (78) (239) (1,434) (4,179)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 24 155 459 2,707
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 95 186 1,826 3,292
Proceeds from reinvestment of
distributions 3 3 51 55
Payments for shares redeemed (18) (62) (343) (1,104)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 80 127 1,534 2,243
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,233 4,824 42,622 86,084
Proceeds from reinvestment of
distributions 152 193 2,903 3,437
Payments for shares redeemed (1,331) (3,897) (25,459) (69,571)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,054 1,120 20,066 19,950
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,158 1,402 $ 22,059 $ 24,900
================= ================= ================= =================
</Table>
232 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
TAX-MANAGED MID & SMALL CAP ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 114 394 $ 1,467 $ 4,384
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (59) (186) (756) (2,063)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 55 208 711 2,321
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 24 62 321 711
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (7) (46) (97) (541)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 17 16 224 170
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 1,562 3,311 20,877 38,832
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (890) (2,100) (11,979) (24,450)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 672 1,211 8,898 14,382
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 744 1,435 $ 9,833 $ 16,873
================= ================= ================= =================
</Table>
Notes to Financial Statements 233
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
SELECT GROWTH ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 274 527 $ 2,173 $ 3,803
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (102) (300) (808) (2,175)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 172 227 1,365 1,628
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 39 110 318 810
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (29) (375) (239) (2,825)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 10 (265) 79 (2,015)
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 2,457 7,135 20,808 54,091
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (3,724) (1,314) (31,036) (9,983)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (1,267) 5,821 (10,228) 44,108
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,443 3,690 20,516 27,958
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (1,291) (3,612) (10,755) (27,581)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,152 78 9,761 377
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 67 5,861 $ 977 $ 44,098
================= ================= ================= =================
</Table>
234 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
SELECT VALUE ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 220 599 $ 2,526 $ 6,615
Proceeds from reinvestment of
distributions 108 3 1,204 31
Payments for shares redeemed (127) (375) (1,470) (4,176)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 201 227 2,260 2,470
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 84 195 979 2,201
Proceeds from reinvestment of
distributions 47 7 532 79
Payments for shares redeemed (52) (326) (603) (3,702)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 79 (124) 908 (1,422)
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 1,109 3,950 12,952 44,387
Proceeds from reinvestment of
distributions 701 123 7,939 1,384
Payments for shares redeemed (3,661) (2,165) (41,806) (24,171)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (1,851) 1,908 (20,915) 21,600
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 3,077 5,202 35,952 58,346
Proceeds from reinvestment of
distributions 1,037 168 11,718 1,875
Payments for shares redeemed (2,216) (4,888) (25,660) (55,329)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,898 482 22,010 4,892
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 327 2,493 $ 4,263 $ 27,540
================= ================= ================= =================
</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
Investment Company is 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 Investment Company's 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 20, 2006 and may be renewed at that time. The Funds did
not have any drawdowns for the period ended April 30, 2006.
Notes to Financial Statements 235
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
8. RECORD OWNERSHIP
As of April 30, 2006, the following table includes shareholders of record
with greater than 10% of the total outstanding shares of each respective
Fund:
<Table>
<Caption>
# OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Diversified Equity 3 51.3
Special Growth 3 41.4
Quantitative Equity 3 49.9
International Securities 3 49.4
Emerging Markets 3 48.1
Real Estate Securities 2 31.2
Short Duration Bond 3 66.0
Diversified Bond 2 58.6
Multistrategy Bond 2 62.4
Tax Exempt Bond 2 58.9
Tax-Managed Large Cap 1 53.6
Tax-Managed Mid & Small Cap 1 60.4
Select Growth 1 34.3
Select Value 1 30.5
</Table>
9. RESTRICTED SECURITIES
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.
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. Restricted securities are generally considered to be illiquid.
The following table lists restricted securities held by a Fund that are
illiquid. The following table does not include (1) securities deemed liquid
by FRIMCo or a money manager pursuant to Board approved policies and
procedures or (2) illiquid securities that are not restricted securities as
designated on the Fund's Schedule of Investments.
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND - % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
-----------------------------------------------------------------------------------------------------------------------------
International Securities Fund -
0.1%
Lotte Shopping Co. 01/27/06 103,600 20.84 2,159 2,164
==============
Emerging Markets Fund - 0.1%
Holcim Ecuador SA 07/24/96 10,500 12.67 133 383
Lotte Shopping Co. 01/27/06 63,719 21.08 1,343 1,331
--------------
1,714
==============
Short Duration Bond Fund - 0.2%
DG Funding Trust 11/04/03 219 10,537.12 2,308 2,326
==============
</Table>
236 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND - % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
-----------------------------------------------------------------------------------------------------------------------------
Diversified Bond Fund - 0.2%
Aiful Corp. 08/03/05 300,000 99.72 299 289
ASIF Global Financing 05/18/05 120,000 99.83 120 115
DG Funding Trust 11/04/03 103 10,537.13 1,085 1,093
Mastr Reperforming Loan Trust 03/09/05 917,373 102.34 939 911
Pemex Project Funding Master Trust 01/26/06 390,000 99.64 389 369
Rabobank Capital Funding II 05/23/05 30,000 101.80 31 28
Resona Preferred Global Securities
Cayman, Ltd. 07/20/05 375,000 100.89 378 386
Shinsei Finance Cayman, Ltd. 02/16/06 660,000 99.85 659 641
--------------
3,832
==============
Multistrategy Bond Fund - 0.4%
DG Funding Trust 11/04/03 191 10,537.13 2,013 2,030
GT Group Telecom, Inc. 01/27/00 676 48.53 33 --
Pemex Project Funding Master Trust 01/26/06 1,130,000 99.22 1,121 1,068
Rabobank Capital Funding II 11/14/03 995,000 100.75 1,002 944
Resona Preferred Global Securities
Cayman, Ltd. 07/25/03 3,175,000 104.15 3,307 3,264
Russia Paris Club Participant 04/06/04 54,945,920 0.82 448 483
Shinsei Finance Cayman, Ltd. 02/16/06 860,000 100.48 864 835
--------------
8,624
==============
</Table>
Illiquid securities and restricted securities may be priced by the Funds
using fair value procedures approved by the Board of Trustees.
10. DIVIDENDS
On May 1, 2006, the Funds declared the following dividends from net
investment income payable on May 4, 2006 to shareholders on record May 2,
2006.
<Table>
<Caption>
NET INVESTMENT
FUNDS INCOME
----------------------------------------------------------
Diversified Bond - Class C $ 0.0582
Diversified Bond - Class E 0.0711
Diversified Bond - Class S 0.0754
Multistrategy Bond - Class C 0.0250
Multistrategy Bond - Class E 0.0305
Multistrategy Bond - Class S 0.0324
Tax Exempt Bond - Class C 0.0415
Tax Exempt Bond - Class E 0.0532
Tax Exempt Bond - Class S 0.0571
</Table>
Notes to Financial Statements 237
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
(the "FRIMCo Agreement") and the portfolio management contract with each Money
Manager of the Funds (collectively, the "portfolio management contracts") at a
meeting held on April 18, 2006. During the course of a year, the Trustees
receive 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 Independent Trustees,
with the advice and assistance of independent counsel, also requested and the
Board 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 Independent Trustees; (2) information (the
"Third-Party Information") received from an independent, nationally recognized
provider of investment company information comparing the performance of each of
the Funds and their respective 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 (3) an analysis of the Third-Party Information prepared by FRIMCo
(the "FRIMCo Analysis" and, with the other information requested by the
Independent Trustees or provided by FRIMCo in connection with the Board's
consideration of the portfolio management contracts, the "Agreement Renewal
Information") addressing, among other things, performance and expense
differentials between certain Funds and their respective Comparable Funds. The
Independent Trustees also received a memorandum from independent counsel
discussing the legal standards for their consideration of the proposed
continuances.
On April 17, 2006, the Independent Trustees met in person to review the
Agreement Renewal Information in a private session with independent counsel at
which no representatives of FRIMCo or management were present. At the April 18
meeting of the Board of Trustees, the Board, including the Independent Trustees,
reviewed the proposed continuance of the FRIMCo Agreement and the portfolio
management contracts with management and independent counsel to the Independent
Trustees. Following this review, but prior to voting, the Independent Trustees
again met in a private session with their independent counsel to evaluate
additional information and analysis received from FRIMCo and management at the
Board meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, 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. FRIMCo has engaged multiple
Money Managers for all Funds.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the FRIMCo Agreement for determining, implementing and maintaining the
investment program for each Fund. Assets of each Fund have been allocated among
the multiple Money Managers selected by FRIMCo, subject to Board approval, for
that Fund. FRIMCo manages directly a portion of certain Fund's assets as
described below and otherwise exercises investment discretion over the portion
of each Fund's assets that FRIMCo determines not to allocate to the money
managers and for each Fund's cash reserves by selecting the individual portfolio
securities for those portions of assets. FRIMCo may also directly manage
portions of a Fund during transitions between 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 to each Money
Manager; supervising compliance by each Money Manager with each Fund's
investment objective 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
238 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
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 and other public
disclosures 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.
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 strategy of each such Fund selected by
shareholders in purchasing their shares.
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 in evaluating renewal of the FRIMCo Agreement,
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 expenses incurred by the Fund; and
5. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from each Fund.
At the April 18 Board meeting, FRIMCo and management reviewed the reasonableness
of the Funds' investment advisory fees. In discussing whether the Funds'
performance supported these fees, FRIMCo noted differences between the
investment strategies of certain Funds and their respective Comparable Funds in
pursuing their investment objectives, including strategies which seek to achieve
a lower tracking error (i.e. the difference, whether positive or negative,
between the return of a fund and its benchmark) and resulting lower return
volatility than Comparable Funds. According to FRIMCo, these strategies may be
expected to result, and for certain Funds during the periods covered by the
Third-Party Information did result, in lower relative performance than that of
some of their respective Comparable Funds. FRIMCo stated that the strategies
pursued by the Funds are intended to result in less volatile, more moderate
returns relative to each Fund's performance benchmark rather than more volatile,
more extreme returns that its Comparable Funds may experience over time.
On the basis of the Agreement Renewal Information, including the FRIMCo
Analysis, and other information previously received by the Board from FRIMCo
during the course of the year or presented at the Board meeting by FRIMCo, the
Board, in respect of each Fund, found the advisory fee charged by FRIMCo to be
reasonable in light of the nature, scope and quality of the services provided to
the Funds, after giving effect to waivers and/or reimbursements and considering
differences in the composition and investment strategies of their respective
Comparable Funds. The Board also determined that the relative expense ratio of
each Fund was comparable to those of its Comparable Funds; FRIMCo's methodology
of allocating expenses of operating funds in the complex was reasonable; and
FRIMCo's profitability with respect to each Fund was not excessive in light of
the nature, scope and quality of the services provided by FRIMCo.
The Board concluded that the performance of the Funds supported continuation of
the FRIMCo Agreement, again based upon the Agreement Renewal Information,
including the FRIMCo Analysis, and other information previously received by the
Board from FRIMCo during the course of the year or presented at the Board
meeting by FRIMCo. In evaluating performance, the Board considered each Fund's
absolute performance and its performance relative to appropriate benchmarks and
indices and its Comparable Funds. In evaluating the Funds' performance, the
Board also considered FRIMCo's investment strategy of managing the Funds in a
risk aware manner.
Basis for Approval of Investment Advisory Contracts 239
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
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 February 28, 2006 that the investment advisory fees
for each Fund, with the implementation of new breakpoints for the Multistrategy
Bond Fund proposed by FRIMCo at that meeting, 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 the
Funds. 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.
In voting to approve the continuation of the FRIMCo Agreement on its current
terms and conditions for each Fund, the Board, after considering the foregoing
and other relevant factors, determined that continuation of the FRIMCo Agreement
was in the best interests of the Funds and their respective shareholders.
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 FRIMCo or Russell Fund Distributors, Inc., the Funds' underwriter; 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 has advised the Board that it does not regard Money Manager
profitability as relevant to its evaluation of the portfolio management
contracts 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 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
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 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 best interests of the Fund and its shareholders.
During 2005 and 2006, the Trustees received proposals from FRIMCo to manage
directly approximately up to 10% of the assets of the Diversified Equity Fund,
the Quantitative Equity Fund and the International Securities Fund (each a
"Participating Fund") utilizing a "select holdings strategy" pursuant to the
terms of the FRIMCo Agreement, the actual allocation to be determined by each
Participating Fund's FRIMCo portfolio manager. Under this strategy, FRIMCo
analyzes the holdings of a Participating Fund's Money Managers to identify
particular stocks that are concurrently overweighted by 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 of
a Participating Fund. Implementation of this strategy includes periodic
rebalancing of the Participating Fund's holdings. In connection with FRIMCo's
proposals, the Trustees received and considered information from FRIMCo
regarding the potential enhancements to the Participating Fund's performance
based upon FRIMCo's 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.
FRIMCo has advised the Board that the select holdings strategy has been
implemented for the Diversified Equity and Quantitative Equity Funds, although a
reasonable period of time is needed to evaluate fairly its impact on those
Participating Funds' performance, and is expected to be implemented
240 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
in the International Securities Fund in the second quarter of 2006. Based upon
the information received from FRIMCo during 2005 and 2006 in connection with its
select holdings strategy proposals, the Agreement Renewal Information and
additional discussion at the April 18 meeting concerning the select holdings
strategy, the Board in the case of the Participating Funds concluded that the
investment advisory fees paid to FRIMCo by each such Fund under the FRIMCo
Agreement in connection with the select holdings strategy continue to be
reasonable in light of the nature and anticipated quality of the investment
advisory services to be rendered by FRIMCo.
In their deliberations, the Trustees did not identify any particular information
as to the FRIMCo Agreement 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.
Basis for Approval of Investment Advisory Contracts 241
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
As a courtesy to our Fund shareholders, a complete unaudited schedule of
investments is made available generally no later than 60 days after the end of
the first and third quarters of each fiscal year. These reports are available
(i) free of 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.
The Board has delegated to FRIMCo, as FRIC's investment adviser, the primary
responsibility for monitoring, evaluating and voting proxies solicited by or
with respect to issuers of securities in which assets of the Funds may be
invested. FRIMCo has established a proxy voting committee ("Committee") and has
adopted written proxy voting policies and procedures ("P&P") and proxy voting
guidelines ("Guidelines"). The Funds maintain a Portfolio Holdings Disclosure
Policy that governs the timing and circumstances of disclosure to shareholders
and third parties of information regarding the portfolio investments held by a
Fund. A description of the P&P, Guidelines and Portfolio Holdings Disclosure
Policy are contained in the Funds' Statement of Additional Information ("SAI").
The SAI is available (i) free of charge, upon request, by calling the Fund at
(800) 787-7354, (ii) at www.russell.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
242 Shareholder Requests for Additional Information
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2006 (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
- ----------------------------------------------------------------------------------------------------------------------------
*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"))
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
**Thaddas L. Trustee since Appointed until - Senior Vice President, Larco 39 None
Alston, 2006 successor is Investments, Ltd.
Born April 7, duly elected
1945 and qualified
909 A Street
Tacoma,
Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - President, Anderson 39 None
Born October 15, 1984 successor is Management Group LLC
1931 duly elected (private investments
Chairman of the and qualified consulting)
909 A Street Nominating and - February 2002 to June 2005,
Tacoma, Washington Governance Appointed until Lead Trustee, FRIC and RIF
98402-1616 Committee since successor is
2006 duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Phillips is also an officer and/or director of one or more affiliates of
FRIC and RIF and is therefore an interested trustee.
** Mr. Alston was elected to the Board of Trustees effective May 1, 2006.
Disclosure of Information about Fund Directors 243
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
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
Chairperson and qualified - Director and Chairman of the company);
909 A Street since 2005 Audit Committee, Avista - Director, Avista
Tacoma, Washington Annual Corp. Corp
98402-1616 - Trustee and Chairman of the
Operations and Distribution
Committee, WM Group of Funds
- February 2002 to June 2005,
Chairman of the Audit
Committee, FRIC and RIF
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 None
Born June 6, 1946 2003 successor is Vice President and Chief
duly elected Financial Officer, Waddell &
909 A Street Chairman of and qualified Reed Financial, Inc.
Tacoma, Washington Audit Committee - 2003, Retired
98402-1616 since 2005 Appointed until - 2001-2003, Vice President
successor is and Chief Financial Officer,
duly elected Janus Capital Group Inc.
and qualified - 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
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 39 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected 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
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack Thompson, Trustee since Appointed until - September 2003 to present, 39 - Director, Sparx
Born March 21, 1949 2005 successor is Independent Board Chair and Japan Fund
duly elected Chairman of the Audit
909 A Street and qualified Committee, Sparx Japan Fund
Tacoma, Washington - May 1999 to May 2003,
98402-1616 President, Chief Executive
Officer and Director, Berger
Financial Group, LLC
- May 1999 to May 2003,
President and Trustee,
Berger Funds
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Mr. Michael Phillips is the Chairman of the Board of Frank Russell Company which
controls FRIMCo, the investment adviser of the Funds. He is also an Interested
Trustee of the Funds. On May 26, 2005, Mr. Phillips became a director of Simpson
Investment Company, a privately held Company. Mr. Raymond P. Tennison, Jr., an
Independent Trustee of the Funds is the President of Simpson Investment Company.
244 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 2002, Director,
1943 duly elected Smith Barney Fundamental
Chairperson of and qualified Value Fund
909 A Street the Investment
Tacoma, Washington Committee since Appointed until
98402-1616 2006 successor is
duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
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 adviser ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
Disclosure of Information about Fund Directors 245
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 39 None
Born October 6, since 2006 - Trustee of FRIC and RIF
1930 until 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
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>
246 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, with Fund and Terms 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 Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2002, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Until successor - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, FRIMCo
Officer since qualified by - Chairman of the Board, President and CEO, RFD
909 A Street 2004 Trustees - Chairman of the Board and President, Russell
Tacoma, Washington Insurance Agency, Inc. (insurance agency ("RIA"))
98402-1616 - Until 2004, Managing Director of Individual Investor
Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, FRIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, FRIMCo, FRTC and RFD
909 A Street 1998 Trustees - Treasurer and Principal Accounting Officer, SSgA
Tacoma, Washington Funds
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 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary since Until successor - General Counsel and Managing Director of Law and
Born October 8, 1941 1994 is chosen and Government Affairs, Secretary, FRC
qualified by
909 A Street Trustees
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 247
RUSSELL FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, Ph.D.
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
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 JUNE 1, 2006
Diversified Equity Fund
AllianceBernstein L.P., New York, NY
Ark Asset Management Co., Inc., New York, NY
Institutional Capital Corporation, Chicago, IL
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
PanAgora Asset Management, Inc., Boston, MA
Tygh Capital Management, Inc., Portland, OR
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
AllianceBernstein L.P., New York, NY
AQR Capital Management, LLC, Greenwich, CT
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
AllianceBernstein L.P., New York, NY
Arrowstreet Capital, Limited Partnership, Cambridge, MA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
Harding Loevner Management, L.P., Boston, MA
T. Rowe Price International, Inc., Baltimore, MD
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
248 Manager, Money Managers and Service Providers
RUSSELL FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
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
Western Asset Management Company Limited, London, England
Multistrategy Bond Fund
Bear Stearns Asset Management Inc., New York, NY
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Goldman Sachs Asset Management, L.P., New York, NY
Morgan Stanley Investment Management Inc., West Conshohocken, PA
Pacific Investment Management Company LLC, Newport Beach, CA
Tax Exempt Bond Fund
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Standish Mellon Asset Management Company LLC, Boston, MA
Tax-Managed Large Cap Fund
J.P. Morgan Investment Management Inc., New York, NY
Nicholas Applegate Capital Management LLC, San Diego, CA
Palisades Investment Partners, LLC, Santa Monica, CA
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
Transamerica Investment Management, LLC, Dayton, OH
Select Growth Fund
Ark Asset Management Co., Inc., New York, NY
CapitalWorks Investment Partners, LLC, San Diego, CA
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Fuller & Thaler Asset Management, Inc., San Mateo, CA
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 249
(This page intentionally left blank)
RUSSELL RUNDS
2006 SEMIANNUAL REPORT
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com
On or about July 1, 2006, Frank Russell Investment Company expects to change its
name to Russell Investment Company, and Frank Russell Investment Management
Company expects to change its name to Russell Investment Management Company.
36-08-067 (1 04/06)
INSTITUTIONAL FUNDS
2006 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
CLASS C, E, I, AND S SHARES:
SELECT GROWTH FUND
SELECT VALUE FUND
APRIL 30, 2006
(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.
* On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment Management
Company.
[Blank Page]
Frank Russell Investment Company
Institutional Funds
Semiannual Report
April 30, 2006 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Equity I Fund........................................................ 3
Equity II Fund....................................................... 10
Equity Q Fund........................................................ 23
International Fund................................................... 30
Fixed Income I Fund.................................................. 47
Fixed Income III Fund................................................ 72
Emerging Markets Fund................................................ 105
Real Estate Securities Fund.......................................... 117
Short Duration Bond Fund............................................. 121
Select Growth Fund................................................... 136
Select Value Fund.................................................... 143
Notes to Schedules of Investments.................................... 150
Statement of Assets and Liabilities.................................. 152
Statement of Operations.............................................. 156
Statement of Changes in Net Assets................................... 158
Financial Highlights................................................. 162
Notes to Financial Highlights........................................ 174
Notes to Financial Statements........................................ 175
Basis for Approval of Investment Advisory Contracts.................. 195
Shareholder Requests for Additional Information...................... 199
Disclosure of Information about Fund Directors....................... 200
Manager, Money Managers and Service Providers........................ 205
</Table>
Frank Russell Investment Company - Institutional Funds.
Copyright (c) Russell Investment Group 2006. All rights reserved.
Russell Investment Group is a Washington, USA corporation, which operates
through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual
Life Insurance Company.
FUND OBJECTIVES, RISKS, CHARGES AND EXPENSES SHOULD BE CAREFULLY CONSIDERED
BEFORE INVESTING. A PROSPECTUS CONTAINING THIS AND OTHER IMPORTANT INFORMATION
MUST PRECEDE OR ACCOMPANY THIS MATERIAL. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING.
SECURITIES DISTRIBUTED THROUGH RUSSELL FUND DISTRIBUTORS, INC. MEMBER NASD, PART
OF RUSSELL INVESTMENT GROUP.
Effective July 1, 2006 Frank Russell Investment Company ("FRIC") will change its
name to Russell Investment Company. FRIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Frank Russell Investment Management Company
("FRIMCo"). Effective July 1, 2006 FRIMCo will change its name to Russell
Investment Management Company.
Russell Investment Group and Standard & Poor's Corporation are the owners of the
trademarks, service marks, and copyrights related to their respective indexes.
Index performance is not indicative of the performance of any specific
investment. Indexes are not managed and may not be invested in directly.
Performance quoted represents past performance and does not guarantee future
results. The investment return and principal value of an investment will
fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance
data quoted. Current to the most recent month-end performance data may be
obtained by visiting www.russell.com/us/fundperformance.
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,109.20 $ 1,020.18
Expenses Paid During
Period* $ 4.86 $ 4.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.93%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,110.50 $ 1,021.32
Expenses Paid During
Period* $ 3.66 $ 3.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.70%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,110.90 $ 1,021.62
Expenses Paid During
Period* $ 3.35 $ 3.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.64%
(representing the six month period annualized), 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, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.6%
Auto and Transportation - 4.4%
American Axle & Manufacturing Holdings, Inc. (N) 14,200 250
Autoliv, Inc. 8,800 487
BorgWarner, Inc. 7,000 425
Burlington Northern Santa Fe Corp. 157,621 12,536
CH Robinson Worldwide, Inc. 22,000 976
Cooper Tire & Rubber Co. (N) 19,600 249
CSX Corp. 210,450 14,414
FedEx Corp. 70,247 8,087
Ford Motor Co. (N) 17,400 121
General Motors Corp. (N) 18,500 423
Honda Motor Co., Ltd. - ADR 66,900 2,370
Lear Corp. (N) 18,600 438
Magna International, Inc. Class A (N) 2,800 220
Navistar International Corp. (AE) 119,650 3,156
Norfolk Southern Corp. 101,900 5,503
Southwest Airlines Co. 47,700 774
Swift Transportation Co., Inc. (AE)(N) 42,200 1,264
Toyota Motor Corp. - ADR 10,316 1,208
Union Pacific Corp. 57,636 5,257
United Parcel Service, Inc. Class B 62,600 5,075
Visteon Corp. (AE)(N) 229,800 1,351
------------
64,584
------------
Consumer Discretionary - 13.8%
Accenture, Ltd. Class A 95,050 2,763
Activision, Inc. (AE) 127,450 1,809
Advance Auto Parts, Inc. 34,500 1,388
Bed Bath & Beyond, Inc. (AE) 37,900 1,453
Best Buy Co., Inc. 24,490 1,388
Blockbuster, Inc. Class A (N) 145,400 683
Boyd Gaming Corp. (N) 12,600 628
Carnival Corp. 142,650 6,679
CBS Corp. Class B 95,420 2,430
Coach, Inc. (AE) 169,002 5,580
Convergys Corp. (AE) 14,550 283
Costco Wholesale Corp. 29,000 1,579
Dick's Sporting Goods, Inc. (AE)(N) 17,600 742
eBay, Inc. (AE) 92,280 3,175
Electronic Arts, Inc. (AE) 64,700 3,675
Estee Lauder Cos., Inc. (The) Class A (N) 64,100 2,379
Four Seasons Hotels, Inc. (N) 52,879 2,857
GameStop Corp. Class A (AE)(N) 77,610 3,663
Gannett Co., Inc. 9,900 545
Gap, Inc. (The) 96,040 1,737
Google, Inc. Class A (AE) 43,017 17,979
GTECH Holdings Corp. 14,550 497
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hewitt Associates, Inc. Class A (AE)(N) 110,300 3,198
Hilton Hotels Corp. 138,750 3,738
Home Depot, Inc. 347,550 13,878
International Game Technology 63,200 2,397
Interpublic Group of Cos., Inc. (AE)(N) 40,900 392
Jones Apparel Group, Inc. 15,700 539
Kimberly-Clark Corp. 16,050 939
Kohl's Corp. (AE) 197,200 11,012
Las Vegas Sands Corp. (AE) 63,423 4,110
Liberty Global, Inc. (AE)
Series A 57,551 1,192
Liberty Global, Inc. (AE)
Series C 60,701 1,212
Liberty Media Corp. Class A (AE) 460,250 3,843
Limited Brands, Inc. 21,650 555
Lowe's Cos., Inc. 72,983 4,602
Mattel, Inc. 37,500 607
McDonald's Corp. 451,850 15,620
MGM Mirage (N) 70,583 3,169
Monster Worldwide, Inc. (AE) 21,550 1,237
Newell Rubbermaid, Inc. 164,600 4,513
Nike, Inc. Class B 78,500 6,424
Nutri System, Inc. (AE)(N) 18,700 1,269
Office Depot, Inc. (AE) 59,000 2,394
OfficeMax, Inc. 21,200 820
Omnicom Group, Inc. (N) 49,500 4,456
Quiksilver, Inc. (AE)(N) 159,900 2,186
RadioShack Corp. 11,300 192
Scientific Games Corp. Class A (AE)(N) 56,790 2,163
Sears Holdings Corp. (AE) 32,950 4,735
Starbucks Corp. (AE) 100,180 3,734
Starwood Hotels & Resorts Worldwide, Inc. (o) 78,070 4,480
Station Casinos, Inc. 8 1
Target Corp. 44,655 2,371
Tech Data Corp. (AE) 10,600 389
Time Warner, Inc. 240,600 4,186
Urban Outfitters, Inc. (AE) 79,000 1,833
VF Corp. 9,600 587
Viacom, Inc. Class B (AE) 61,220 2,438
Wal-Mart Stores, Inc. 196,200 8,835
Walt Disney Co. 132,500 3,705
Wynn Resorts, Ltd. (AE)(N) 15,145 1,153
XM Satellite Radio Holdings, Inc. Class A
(AE)(N) 31,500 637
Yum! Brands, Inc. 54,775 2,831
------------
202,484
------------
</Table>
4 Equity I Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Consumer Staples - 6.0%
Altria Group, Inc. 295,730 21,636
Clorox Co. 5,100 327
Coca-Cola Co. (The) 66,400 2,786
Colgate-Palmolive Co. 102,000 6,030
ConAgra Foods, Inc. (N) 11,300 256
CVS Corp. 78,400 2,330
Dean Foods Co. (AE) 33,500 1,327
Diageo PLC - ADR (N) 55,140 3,653
General Mills, Inc. 3,700 183
Kellogg Co. 63,310 2,932
Kroger Co. (The) 35,400 717
PepsiCo, Inc. 298,570 17,389
Procter & Gamble Co. 379,908 22,114
Reynolds American, Inc. (N) 7,400 811
Safeway, Inc. 27,200 684
Sara Lee Corp. 40,100 717
Supervalu, Inc. 3,800 110
Tyson Foods, Inc. Class A 17,050 249
UST, Inc. (N) 11,200 492
Walgreen Co. 39,110 1,640
Whole Foods Market, Inc. 35,720 2,193
------------
88,576
------------
Financial Services - 20.2%
ACE, Ltd. 5,300 294
Allstate Corp. (The) 113,660 6,421
American Express Co. 194,600 10,471
American International Group, Inc. 292,700 19,099
AmSouth Bancorporation 27,200 787
Annaly Mortgage Management, Inc. (o)(N) 205,550 2,769
AON Corp. 122,400 5,130
Astoria Financial Corp. 8,400 263
Bank of America Corp. 598,021 29,853
BB&T Corp. 12,800 550
Capital One Financial Corp. 72,800 6,307
CB Richard Ellis Group, Inc. Class A (AE) 22,800 2,004
Charles Schwab Corp. (The) (AE) 113,980 2,040
Chicago Mercantile Exchange Holdings, Inc. 12,399 5,679
Chubb Corp. 72,000 3,711
Cigna Corp. 15,660 1,676
Citigroup, Inc. 436,356 21,796
Comerica, Inc. 13,200 751
Commerce Bancorp, Inc. (N) 39,100 1,577
Countrywide Financial Corp. 259,050 10,533
Deluxe Corp. (N) 8,650 206
Fannie Mae 249,080 12,603
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
First Data Corp. 30,200 1,440
First Horizon National Corp. (N) 14,300 607
Freddie Mac 33,200 2,027
Genworth Financial, Inc. Class A 299,066 9,929
Global Payments, Inc. 30,920 1,467
Golden West Financial Corp. 3,350 241
Goldman Sachs Group, Inc. 119,280 19,119
Hartford Financial Services Group, Inc. 120,530 11,080
Host Hotels & Resorts, Inc. (AE)(o) 50,152 1,054
Hudson City Bancorp, Inc. 45,550 611
Huntington Bancshares, Inc. (N) 12,900 312
iShares Russell 1000 Value Index Fund 3,450 258
JPMorgan Chase & Co. 530,700 24,083
KeyCorp 26,500 1,013
Lehman Brothers Holdings, Inc. 60,775 9,186
Lincoln National Corp. (N) 13,100 761
Loews Corp. 9,050 961
MBIA, Inc. 11,100 662
Merrill Lynch & Co., Inc. 74,940 5,715
Metlife, Inc. 125,540 6,541
MGIC Investment Corp. 9,200 650
Morgan Stanley 48,700 3,131
Nasdaq Stock Market, Inc. (The) (AE)(N) 44,650 1,671
National City Corp. 32,510 1,200
North Fork Bancorporation, Inc. 144,400 4,351
PartnerRe, Ltd. (N) 5,300 331
Paychex, Inc. 95,000 3,837
PMI Group, Inc. (The) (N) 9,100 420
PNC Financial Services Group, Inc. 51,370 3,671
Progressive Corp. (The) 12,064 1,309
RenaissanceRe Holdings, Ltd. 29,025 1,220
SLM Corp. 52,847 2,795
Sovereign Bancorp, Inc. (N) 12,000 266
St. Paul Travelers Cos., Inc. (The) 191,114 8,415
SunTrust Banks, Inc. 51,930 4,016
Torchmark Corp. 3,400 204
Trizec Properties, Inc. (o) 73,450 1,838
UBS AG 77,794 9,090
UnumProvident Corp. (N) 58,750 1,193
US Bancorp 7,974 251
Wachovia Corp. 38,100 2,280
Waddell & Reed Financial, Inc. Class A (N) 9,200 216
Washington Mutual, Inc. (N) 43,935 1,980
Wells Fargo & Co. 9,200 632
XL Capital, Ltd. Class A 4,750 313
------------
296,867
------------
</Table>
Equity I Fund 5
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Health Care - 12.3%
Abbott Laboratories 155,900 6,663
Allergan, Inc. 15,150 1,556
AmerisourceBergen Corp. 71,000 3,064
Amgen, Inc. (AE) 145,000 9,816
Amylin Pharmaceuticals, Inc. (AE)(N) 66,399 2,892
AstraZeneca PLC - ADR 83,700 4,614
Baxter International, Inc. 209,000 7,879
Biomet, Inc. 36,420 1,354
Boston Scientific Corp. (AE) 1,100 26
Cardinal Health, Inc. 68,500 4,613
Caremark Rx, Inc. 127,370 5,802
Celgene Corp. (AE) 44,300 1,868
Cerner Corp. (AE)(N) 44,180 1,752
Charles River Laboratories International, Inc.
(AE) 29,500 1,394
Conor Medsystems, Inc. (AE)(N) 20,200 545
Coventry Health Care, Inc. (AE) 49,900 2,479
DaVita, Inc. (AE) 46,100 2,594
Eli Lilly & Co. 129,900 6,874
Express Scripts, Inc. (AE) 18,000 1,406
Fisher Scientific International, Inc. (AE) 33,200 2,342
Genentech, Inc. (AE) 212,352 16,927
Genzyme Corp. (AE) 16,501 1,009
Gilead Sciences, Inc. (AE) 66,270 3,811
Human Genome Sciences, Inc. (AE)(N) 237,700 2,712
Intuitive Surgical, Inc. (AE) 15,420 1,958
Johnson & Johnson 171,350 10,043
Kinetic Concepts, Inc. (AE) 21,800 952
McKesson Corp. 13,900 675
Medco Health Solutions, Inc. (AE) 34,900 1,858
Medimmune, Inc. (AE) 24,600 774
Medtronic, Inc. 169,268 8,484
Merck & Co., Inc. 181,370 6,243
Novartis AG - ADR 79,950 4,598
Omnicare, Inc. (N) 65,220 3,699
Panacos Pharmaceuticals, Inc. (AE)(N) 86,600 605
PDL BioPharma, Inc. (AE)(N) 67,570 1,945
Pfizer, Inc. 349,700 8,858
Quest Diagnostics, Inc. (N) 71,507 3,985
Stryker Corp. 97,400 4,261
Tenet Healthcare Corp. (AE) 28,200 235
Triad Hospitals, Inc. (AE) 49,600 2,043
UnitedHealth Group, Inc. 292,635 14,556
Varian Medical Systems, Inc. (AE) 12,700 665
WellPoint, Inc. (AE) 46,300 3,287
Wyeth 165,080 8,034
------------
181,750
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Integrated Oils - 4.1%
Amerada Hess Corp. 46,630 6,681
Chevron Corp. 75,151 4,586
ConocoPhillips 147,860 9,892
Exxon Mobil Corp. 311,110 19,625
Marathon Oil Corp. 108,153 8,583
Occidental Petroleum Corp. 62,900 6,462
Suncor Energy, Inc. 25,500 2,186
Total SA - ADR (N) 21,240 2,931
------------
60,946
------------
Materials and Processing - 3.3%
Air Products & Chemicals, Inc. 31,033 2,126
Allegheny Technologies, Inc. 20,300 1,408
American Standard Cos., Inc. 16,150 703
Archer-Daniels-Midland Co. 99,817 3,627
Bunge, Ltd. (N) 5,000 267
Cemex SA de CV - ADR 22,780 1,538
Chemtura Corp. 10,900 133
Corn Products International, Inc. (N) 104,250 2,919
Cytec Industries, Inc. (N) 14,850 898
Dow Chemical Co. (The) 44,580 1,810
EI Du Pont de Nemours & Co. 15,400 679
Hercules, Inc. (AE) 7,500 107
International Paper Co. 204,980 7,451
Lubrizol Corp. 8,950 390
Lyondell Chemical Co. 31,825 767
Masco Corp. 121,990 3,892
Monsanto Co. 42,071 3,509
Mosaic Co. (The) (AE)(N) 129,000 1,935
Pactiv Corp. (AE) 39,300 957
PPG Industries, Inc. 50,240 3,372
Smurfit-Stone Container Corp. (AE) 39,000 505
Sonoco Products Co. 6,300 197
St. Joe Co. (The) (N) 19,434 1,091
Syngenta AG - ADR (N) 117,303 3,259
Temple-Inland, Inc. 39,500 1,834
United States Steel Corp. 39,250 2,689
------------
48,063
------------
Miscellaneous - 3.5%
3M Co. 82,300 7,031
Eaton Corp. 1,900 146
General Electric Co. 850,940 29,434
Honeywell International, Inc. 181,000 7,692
Johnson Controls, Inc. 4,700 383
SPX Corp. 8,950 490
Textron, Inc. 32,800 2,950
Tyco International, Ltd. 137,900 3,634
------------
51,760
------------
</Table>
6 Equity I Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Other Energy - 3.8%
Apache Corp. 43,800 3,112
Baker Hughes, Inc. 65,100 5,262
Devon Energy Corp. 42,510 2,555
Diamond Offshore Drilling, Inc. (N) 5,600 508
GlobalSantaFe Corp. 4,600 282
Halliburton Co. 267,159 20,878
National-Oilwell Varco, Inc. (AE) 19,500 1,345
Newfield Exploration Co. (AE) 38,400 1,713
Noble Corp. 4,450 351
Peabody Energy Corp. 71,784 4,584
Pride International, Inc. (AE) 11,900 415
Reliant Energy, Inc. (AE)(N) 589,850 6,695
Rowan Cos., Inc. 4,000 177
Schlumberger, Ltd. 118,160 8,170
Transocean, Inc. (AE) 4,400 357
------------
56,404
------------
Producer Durables - 6.3%
Agilent Technologies, Inc. (AE) 42,107 1,618
Alcatel SA - ADR (AE)(N) 219,700 3,168
American Tower Corp. Class A (AE) 14,400 492
Andrew Corp. (AE) 64,600 683
Applied Materials, Inc. 366,160 6,572
Boeing Co. 192,780 16,087
Bombardier, Inc. Class B (AE) 446,050 1,715
Caterpillar, Inc. 176,859 13,395
Crown Castle International Corp. (AE) 64,600 2,174
Deere & Co. 73,183 6,424
Emerson Electric Co. 37,200 3,160
ESCO Technologies, Inc. (AE)(N) 18,800 953
Goodrich Corp. 40,150 1,787
Illinois Tool Works, Inc. 17,680 1,816
Ingersoll-Rand Co., Ltd. Class A 6,200 271
Itron, Inc. (AE) 7,600 510
Joy Global, Inc. 38,180 2,508
KB Home 30,220 1,861
Lennar Corp. Class A 30,236 1,661
Lockheed Martin Corp. 119,036 9,035
Northrop Grumman Corp. 101,160 6,768
Pitney Bowes, Inc. 3,500 146
Regal-Beloit Corp. (N) 14,400 672
Teradyne, Inc. (AE)(N) 57,400 968
Thermo Electron Corp. (AE) 42,300 1,630
Toll Brothers, Inc. (AE) 15,993 514
United Technologies Corp. 66,913 4,203
WW Grainger, Inc. 22,410 1,724
------------
92,515
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Technology - 12.9%
ADC Telecommunications, Inc. (AE)(N) 19,121 428
Advanced Micro Devices, Inc. (AE) 93,110 3,012
Agere Systems, Inc. (AE) 26,200 412
Akamai Technologies, Inc. (AE)(N) 72,410 2,440
Altera Corp. (AE) 148,300 3,239
Amkor Technology, Inc. (AE)(N) 56,700 686
Apple Computer, Inc. (AE) 84,660 5,959
Arrow Electronics, Inc. (AE) 16,500 597
AU Optronics Corp. - ADR (N) 177,512 2,917
Avnet, Inc. (AE) 38,950 1,019
BearingPoint, Inc. (AE)(N) 240,300 2,230
Broadcom Corp. Class A (AE) 99,455 4,089
Celestica, Inc. (AE)(N) 128,450 1,446
Cisco Systems, Inc. (AE) 443,899 9,300
Corning, Inc. (AE) 144,960 4,005
Dell, Inc. (AE) 95,800 2,510
Electronic Data Systems Corp. 27,000 731
EMC Corp. (AE) 22,100 299
F5 Networks, Inc. (AE) 19,610 1,148
Flextronics International, Ltd. (AE) 20,450 232
Formfactor, Inc. (AE) 16,500 688
General Dynamics Corp. 73,818 4,844
Hewlett-Packard Co. 562,487 18,264
Intel Corp. 88,260 1,763
International Business Machines Corp. 101,800 8,382
International Rectifier Corp. (AE) 56,350 2,547
Intersil Corp. Class A 22,300 660
JDS Uniphase Corp. (AE)(N) 1,385,220 4,834
Juniper Networks, Inc. (AE) 79,200 1,464
L-3 Communications Holdings, Inc. 37,200 3,039
Marvell Technology Group, Ltd. (AE) 32,030 1,829
Maxim Integrated Products, Inc. 221,700 7,817
Micron Technology, Inc. (AE) 202,820 3,442
Microsoft Corp. 803,363 19,401
Motorola, Inc. 335,440 7,162
National Semiconductor Corp. 100,300 3,007
Oracle Corp. (AE) 125,860 1,836
Qualcomm, Inc. 465,354 23,891
Red Hat, Inc. (AE)(N) 50,900 1,496
Research In Motion, Ltd. (AE) 45,500 3,487
Rockwell Automation, Inc. 28,310 2,051
Salesforce.com, Inc. (AE)(N) 41,910 1,469
SanDisk Corp. (AE) 39,100 2,496
Sanmina-SCI Corp. (AE) 19,900 103
Seagate Technology (N) 117,100 3,110
Seagate Technology, Inc. (AE) 9,400 --
Silicon Image, Inc. (AE)(N) 89,000 908
Silicon Laboratories, Inc. (AE) 19,300 900
Solectron Corp. (AE) 97,600 390
Sony Corp. - ADR 45,540 2,229
</Table>
Equity I Fund 7
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Tellabs, Inc. (AE) 23,300 369
Texas Instruments, Inc. 187,447 6,506
Unisys Corp. (AE) 17,700 111
Vishay Intertechnology, Inc. (AE) 49,900 779
Xilinx, Inc. 53,400 1,478
------------
189,451
------------
Utilities - 4.0%
America Movil SA de CV - ADR
Series L 92,934 3,430
American Electric Power Co., Inc. 4,600 154
AT&T, Inc. 86,000 2,254
BellSouth Corp. 192,450 6,501
CMS Energy Corp. (AE) 37,600 501
Comcast Corp. Class A (AE) 120,193 3,720
Constellation Energy Group, Inc. 4,200 231
Dominion Resources, Inc. 146,750 10,987
DTE Energy Co. 4,700 192
Entergy Corp. 67,750 4,739
NII Holdings, Inc. (AE)(N) 28,700 1,719
Pinnacle West Capital Corp. 12,400 497
Progress Energy, Inc. 6,300 134
Sprint Nextel Corp. 507,310 12,581
Telephone & Data Systems, Inc. 28,650 1,080
TXU Corp. 87,030 4,319
Verizon Communications, Inc. 158,829 5,246
Wisconsin Energy Corp. 13,300 519
Xcel Energy, Inc. (N) 6,400 121
------------
58,925
------------
TOTAL COMMON STOCKS
(cost $1,186,552) 1,392,325
------------
PREFERRED STOCKS - 0.1%
Auto and Transportation - 0.1%
General Motors Corp. (N) 65,800 1,198
------------
TOTAL PREFERRED STOCKS
(cost $1,138) 1,198
------------
LONG-TERM INVESTMENTS - 0.1%
Corporate Bonds and Notes - 0.1%
AMR Corp. (N)
4.250% due 09/23/23 765 1,194
------------
TOTAL LONG-TERM INVESTMENTS
(cost $902) 1,194
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.9%
Frank Russell Investment Company
Money Market Fund 66,715,285 66,715
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 5,000 4,972
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $71,687) 71,687
------------
OTHER SECURITIES - 6.6%
Frank Russell Investment Company
Money Market Fund (X) 25,289,657 25,290
State Street Securities Lending Quality Trust
(X) 71,244,159 71,244
------------
TOTAL OTHER SECURITIES
(cost $96,534) 96,534
------------
TOTAL INVESTMENTS - 106.3%
(identified cost $1,356,813) 1,562,938
OTHER ASSETS AND LIABILITIES,
NET - (6.3%) (92,434)
------------
NET ASSETS - 100.0% 1,470,504
============
</Table>
See accompanying notes which are an integral part of the financial statements.
8 Equity I Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/06 (16) 5,738 130
Russell 1000 Mini Index (CME)
expiration date 06/06 (40) 2,869 26
S&P 500 E-Mini Index (CME)
expiration date 06/06 (224) 14,738 260
S&P 500 Index (CME)
expiration date 06/06 (82) 26,976 207
S&P Midcap 400 E-Mini Index (CME)
expiration date 06/06 (270) 21,778 960
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,583
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 4.4
Consumer Discretionary 13.8
Consumer Staples 6.0
Financial Services 20.2
Health Care 12.3
Integrated Oils 4.1
Materials and Processing 3.3
Miscellaneous 3.5
Other Energy 3.8
Producer Durables 6.3
Technology 12.9
Utilities 4.0
Preferred Stocks 0.1
Long-Term Investments 0.1
Short-Term Investments 4.9
Other Securities 6.6
---------------
Total Investments 106.3
Other Assets and Liabilities, Net (6.3)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
Equity I Fund 9
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,199.80 $ 1,019.24
Expenses Paid During
Period* $ 6.11 $ 5.61
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.12%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,201.40 $ 1,020.23
Expenses Paid During
Period* $ 5.02 $ 4.61
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.92%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,202.00 $ 1,020.68
Expenses Paid During
Period* $ 4.53 $ 4.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.83%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
10 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.5%
Auto and Transportation - 3.7%
AAR Corp. (AE)(N) 61,684 1,646
Aftermarket Technology Corp. (AE) 6,101 155
Airtran Holdings, Inc. (AE) 90,431 1,264
AMR Corp. (AE) 3,250 80
Arkansas Best Corp. 5,065 219
ArvinMeritor, Inc. 64,200 1,068
Bristow Group, Inc. (AE)(N) 20,000 718
Continental Airlines, Inc. Class B (AE) 13,550 353
Cooper Tire & Rubber Co. (N) 10,700 136
Dana Corp. (AE)(N) 106,000 207
DryShips, Inc. (N) 45,000 427
EGL, Inc. (AE) 13,100 612
Expeditors International Washington, Inc. 12,288 1,052
Freightcar America, Inc. 10,800 722
Frozen Food Express Industries (AE)(N) 45,326 463
General Maritime Corp. (N) 33,130 1,101
Grupo TMM SA
Series A (AE) 43,000 215
Hayes Lemmerz International, Inc. (AE)(N) 14,900 50
Hub Group, Inc. Class A (AE) 29,489 1,447
Kansas City Southern (AE)(N) 19,600 476
Laidlaw International, Inc. 52,550 1,301
Martin Midstream Partners, LP (N) 25,757 797
Navistar International Corp. (AE) 47,200 1,245
Noble International, Ltd. (N) 3,500 56
OMI Corp. (N) 51,800 999
Overseas Shipholding Group, Inc. 2,300 112
Pacer International, Inc. 14,200 487
PAM Transportation Services (AE) 1,000 27
SCS Transportation, Inc. (AE) 20,775 546
Skywest, Inc. 11,000 259
Stolt-Nielsen SA - ADR 6,038 171
Swift Transportation Co., Inc. (AE)(N) 19,700 590
Teekay Shipping Corp. (N) 22,000 846
Tenneco, Inc. (AE) 9,531 231
Thor Industries, Inc. 4,439 226
TRW Automotive Holdings Corp. (AE) 39,331 872
US Xpress Enterprises, Inc. Class A (AE)(N) 7,800 153
UTI Worldwide, Inc. 66,313 2,068
Visteon Corp. (AE)(N) 94,300 554
Wabtec Corp. 49,081 1,793
------------
25,744
------------
Consumer Discretionary - 16.8%
1-800-FLOWERS.COM, Inc. Class A (AE)(N) 14,600 105
24/7 Real Media, Inc. (AE)(N) 84,300 853
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Abercrombie & Fitch Co. Class A 22,365 1,358
ABM Industries, Inc. 15,900 273
Adesa, Inc. 47,000 1,199
Administaff, Inc. (N) 19,150 1,106
Advisory Board Co. (The) (AE) 29,941 1,680
Alberto-Culver Co. 3,200 144
American Greetings Corp. Class A (N) 47,682 1,071
American Woodmark Corp. 3,368 119
Ameristar Casinos, Inc. (N) 4,500 111
AMN Healthcare Services, Inc. (AE) 80,650 1,550
Applebees International, Inc. 5,200 121
Arbitron, Inc. (N) 23,280 830
Asbury Automotive Group, Inc. (AE) 15,500 299
Bally Technologies, Inc. (AE)(N) 29,400 526
Banta Corp. 15,600 789
Big Lots, Inc. (AE) 30,942 451
BJ's Restaurants, Inc. (AE)(N) 14,600 384
Blair Corp. 800 33
Bob Evans Farms, Inc. 11,788 340
Bon-Ton Stores, Inc. (The) 8,010 229
Borders Group, Inc. 15,900 375
Boyd Gaming Corp. 22,700 1,131
Brightpoint, Inc. (AE) 123,725 4,142
Brinker International, Inc. 5,900 231
Brown Shoe Co., Inc. 5,800 221
Buffalo Wild Wings, Inc. (AE) 18,600 803
Callaway Golf Co. 96,143 1,536
Carter's, Inc. (AE) 21,400 1,442
Catalina Marketing Corp. (N) 18,400 436
Cato Corp. (The) Class A 22,050 499
Charlotte Russe Holding, Inc. (AE)(N) 4,700 102
Cheesecake Factory, Inc. (The) (AE) 46,108 1,455
Chemed Corp. (N) 61,665 3,359
Choice Hotels International, Inc. (N) 22,500 1,204
Christopher & Banks Corp. 59,802 1,580
Circuit City Stores, Inc. 76,829 2,209
Claire's Stores, Inc. 25,277 890
Convergys Corp. (AE) 68,500 1,334
Corinthian Colleges, Inc. (AE) 43,800 652
Corporate Executive Board Co. 4,650 498
Cosi, Inc. (AE)(N) 37,900 356
Cox Radio, Inc. Class A (AE) 5,500 71
Crocs, Inc. (AE)(N) 65,500 1,958
Dillard's, Inc. Class A (N) 15,110 394
Dollar Thrifty Automotive Group (AE) 5,500 268
Dollar Tree Stores, Inc. (AE) 6,050 158
Domino's Pizza, Inc. 12,150 320
</Table>
Equity II Fund 11
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
DreamWorks Animation SKG, Inc. Class A (AE) 55,051 1,492
Dress Barn, Inc. (AE)(N) 56,600 1,432
DSW, Inc. Class A (AE) 7,932 248
EarthLink, Inc. (AE) 66,200 602
Entercom Communications Corp. 4,950 131
Ethan Allen Interiors, Inc. (N) 22,300 1,001
Ezcorp, Inc. Class A (AE) 6,043 189
Federated Department Stores, Inc. 11,000 856
Foot Locker, Inc. 30,000 695
Forrester Research, Inc. (AE) 1,695 41
Furniture Brands International, Inc. (N) 23,400 538
Geo Group, Inc. (The) (AE)(N) 2,600 93
Getty Images, Inc. (AE) 14,534 930
Gildan Activewear, Inc. (AE) 7,805 372
Group 1 Automotive, Inc. 10,092 550
Guess?, Inc. (AE)(N) 5,200 206
Gymboree Corp. (AE) 8,338 253
Harris Interactive, Inc. (AE) 12,900 62
Hartmarx Corp. (AE)(N) 11,500 99
Hasbro, Inc. 59,900 1,181
Hearst-Argyle Television, Inc. (N) 69,630 1,603
Heidrick & Struggles International, Inc. (AE) 16,900 611
Helen of Troy, Ltd. (AE)(N) 36,500 754
Iconix Brand Group, Inc. (AE)(N) 40,269 693
IKON Office Solutions, Inc. 10,100 133
Inter Parfums, Inc. 3,717 70
Internap Network Services Corp. (AE) 76,300 100
International Speedway Corp. Class A 14,400 708
Interstate Hotels & Resorts, Inc. (AE) 7,600 42
Intrawest Corp. 34,945 1,255
Jack in the Box, Inc. (AE) 33,387 1,396
Jo-Ann Stores, Inc. (AE)(N) 36,700 450
John Wiley & Sons, Inc. Class A 3,400 125
Jones Apparel Group, Inc. 19,500 670
Kellwood Co. (N) 11,200 359
Kelly Services, Inc. Class A 3,900 108
Korn/Ferry International (AE) 70,222 1,475
La-Z-Boy, Inc. 18,331 283
Labor Ready, Inc. (AE)(N) 23,150 612
Leapfrog Enterprises, Inc. (AE)(N) 44,400 466
Lee Enterprises, Inc. (N) 20,000 616
Libbey, Inc. 7,300 95
LIFE TIME Fitness, Inc. (AE) 55,338 2,534
Lifetime Brands, Inc. (N) 200 6
Lightbridge, Inc. (AE) 7,868 100
Lin TV Corp. Class A (AE)(N) 45,500 402
Lithia Motors, Inc. Class A (N) 7,200 244
Liz Claiborne, Inc. 28,250 1,103
Luby's, Inc. (AE)(N) 24,150 286
Manpower, Inc. 42,713 2,783
MAXIMUS, Inc. 11,100 387
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
McClatchy Co. Class A (N) 14,000 633
McCormick & Schmick's Seafood Restaurants, Inc.
(AE) 1,663 41
Media General, Inc. Class A 900 37
Monarch Casino & Resort, Inc. (AE) 6,023 192
Monster Worldwide, Inc. (AE) 34,056 1,955
MPS Group, Inc. (AE) 244,664 3,902
Multimedia Games, Inc. (AE) 11,450 158
NetFlix, Inc. (AE)(N) 41,500 1,230
O'Reilly Automotive, Inc. (AE) 43,087 1,460
OfficeMax, Inc. 6,900 267
Orient-Express Hotels, Ltd. Class A 81,884 3,357
Pacific Sunwear of California, Inc. (AE) 33,000 769
Pantry, Inc. (The) (AE) 4,439 294
Papa John's International, Inc. (AE)(N) 25,036 837
Payless Shoesource, Inc. (AE)(N) 48,100 1,107
Pegasus Solutions, Inc. (AE) 15,000 142
Penn National Gaming, Inc. (AE) 74,405 3,030
Perficient, Inc. (AE)(N) 13,700 167
PHH Corp. (AE) 32,600 909
Phillips-Van Heusen Corp. 41,600 1,676
Pier 1 Imports, Inc. (N) 62,600 756
Pre-Paid Legal Services, Inc. (N) 11,320 383
ProQuest Co. (AE)(N) 25,000 393
Providence Service Corp. (The) (AE)(N) 30,000 940
Quiksilver, Inc. (AE) 43,000 588
RadioShack Corp. 42,700 726
Regal Entertainment Group Class A 57,391 1,206
RR Donnelley & Sons Co. 5,400 182
Ryan's Restaurant Group, Inc. (AE)(N) 49,000 656
Scholastic Corp. (AE)(N) 16,800 446
Select Comfort Corp. (AE)(N) 47,424 1,895
Service Corp. International 7,400 60
ServiceMaster Co. (The) 59,000 710
Shoe Carnival, Inc. (AE) 2,193 61
Six Flags, Inc. (AE)(N) 50,000 460
Skechers USA, Inc. Class A (AE) 12,400 339
Sonic Automotive, Inc. (N) 10,250 277
Spherion Corp. (AE) 9,500 101
Stage Stores, Inc. (AE)(N) 35,440 1,108
Standard Parking Corp. (AE) 879 23
Stanley Furniture Co., Inc. 4,167 113
Stanley Works (The) 44,320 2,316
Startek, Inc. 2,000 46
Steven Madden, Ltd. 5,089 275
Stride Rite Corp. 12,000 168
Tech Data Corp. (AE) 24,170 888
TeleTech Holdings, Inc. (AE)(N) 22,330 287
</Table>
12 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Tetra Tech, Inc. (AE) 39,812 774
Tiffany & Co. 18,100 632
Tweeter Home Entertainment Group, Inc. (AE)(N) 24,100 206
United Online, Inc. (N) 26,663 345
United Stationers, Inc. (AE) 7,335 395
Vail Resorts, Inc. (AE) 6,597 248
Valassis Communications, Inc. (AE) 18,500 541
Viad Corp. 7,200 237
Warnaco Group, Inc. (The) (AE) 12,916 288
Washington Post Co. (The) Class B 975 747
Watson Wyatt Worldwide, Inc. (N) 3,500 115
WebSideStory, Inc. (AE)(N) 36,950 635
WESCO International, Inc. (AE) 30,200 2,265
Wet Seal, Inc. (The) Class A (AE)(N) 37,100 213
Zumiez, Inc. (AE)(N) 10,000 325
------------
118,167
------------
Consumer Staples - 0.9%
Casey's General Stores, Inc. 5,714 121
Chiquita Brands International, Inc. (N) 9,900 160
Coca-Cola Bottling Co. Consolidated 18,711 902
Del Monte Foods Co. 9,900 115
Flowers Foods, Inc. (N) 2,300 65
J&J Snack Foods Corp. 4,700 161
Longs Drug Stores Corp. 19,483 924
Molson Coors Brewing Co. Class B 14,700 1,086
Pathmark Stores, Inc. (AE) 23,600 244
PepsiAmericas, Inc. 26,800 633
Performance Food Group Co. (AE)(N) 26,700 820
Pilgrim's Pride Corp. (N) 11,790 308
Premium Standard Farms, Inc. (N) 9,926 164
Seaboard Corp. (N) 300 463
Smart & Final, Inc. (AE) 5,177 87
Spartan Stores, Inc. 13,184 182
Weis Markets, Inc. 3,600 149
Wild Oats Markets, Inc. (AE)(N) 3,600 62
------------
6,646
------------
Financial Services - 16.1%
21st Century Holding Co. 1,100 20
21st Century Insurance Group (N) 3,200 51
Accredited Home Lenders Holding Co. (AE) 4,989 287
Advent Software, Inc. (AE) 52,200 1,837
Affiliated Managers Group, Inc. (AE) 24,268 2,458
Affordable Residential Communities 14,500 133
AG Edwards, Inc. 24,100 1,273
Alfa Corp. (N) 6,200 104
Alliance Data Systems Corp. (AE) 101,376 5,576
AllianceBernstein Holding, LP 3,850 248
AMB Property Corp. (o) 26,500 1,325
American Capital Strategies, Ltd. 34,600 1,205
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
American Financial Group, Inc. 10,900 483
American Home Mortgage Investment Corp. (o) 5,349 186
AmeriCredit Corp. (AE) 36,280 1,099
Apollo Investment Corp. 21,500 402
Argonaut Group, Inc. (AE) 5,200 182
Ashford Hospitality Trust, Inc. (o)(N) 50,800 591
Aspen Insurance Holdings, Ltd. 32,000 779
Assurant, Inc. 33,637 1,620
Axis Capital Holdings, Ltd. 30,000 895
Bank of Hawaii Corp. 19,930 1,082
Banner Corp. 3,000 112
Bear Stearns Cos., Inc. (The) 6,900 983
BISYS Group, Inc. (The) (AE) 52,955 844
BOK Financial Corp. 5,420 264
Calamos Asset Management, Inc. Class A 51,063 1,980
Camden Property Trust (o) 3,900 268
Capital Trust, Inc. Class A (o)(N) 3,300 103
Cash America International, Inc. (AE) 9,455 313
CBL & Associates Properties, Inc. (o) 39,830 1,593
Central Pacific Financial Corp. 5,299 201
Checkfree Corp. (AE) 36,100 1,945
Chemical Financial Corp. (N) 3,990 116
Chittenden Corp. 14,600 402
CIT Group, Inc. 13,100 708
City National Corp. 22,400 1,634
CNA Surety Corp. (AE) 54,600 982
Colonial BancGroup, Inc. (The) 73,500 1,906
Colonial Properties Trust (o) 4,439 219
Commerce Bancshares, Inc. 6,400 334
Commerce Group, Inc. 2,800 162
Commercial Net Lease Realty (o) 46,770 985
Community Bank System, Inc. (N) 5,700 117
CompuCredit Corp. (AE)(N) 9,300 372
Conseco, Inc. (AE) 7,200 182
Corus Bankshares, Inc. (N) 9,811 656
Cousins Properties, Inc. (o)(N) 26,200 824
Crescent Real Estate Equities Co. (o)(N) 47,100 942
Cybersource Corp. (AE)(N) 78,802 736
Delphi Financial Group Class A 35,657 1,868
Digital Insight Corp. (AE) 25,400 876
Doral Financial Corp. (N) 80,800 639
Dun & Bradstreet Corp. (AE) 5,008 386
EMC Insurance Group, Inc. 1,000 29
Entertainment Properties Trust (o) 8,900 367
Equity One, Inc. (o)(N) 17,300 398
</Table>
Equity II Fund 13
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Euronet Worldwide, Inc. (AE)(N) 10,000 357
Fair Isaac Corp. 3,100 115
Federal Realty Investors Trust (o) 15,300 1,044
FelCor Lodging Trust, Inc. (o) 38,182 827
First American Corp. 62,300 2,654
First Cash Financial Services, Inc. (AE) 11,627 245
First Community Bancorp, Inc. 10,200 592
First Midwest Bancorp, Inc. 6,700 241
First Place Financial Corp. 1,059 24
First Regional Bancorp (AE) 600 55
First Republic Bank (N) 7,400 322
FirstFed Financial Corp. (AE)(N) 5,777 364
FPIC Insurance Group, Inc. (AE) 1,306 52
Fremont General Corp. (N) 48,420 1,077
Fulton Financial Corp. (N) 19,700 324
GATX Corp. (N) 14,000 655
Global Payments, Inc. 20,900 991
Gramercy Capital Corp. 1,046 26
Greenhill & Co., Inc. (N) 6,693 474
Hanmi Financial Corp. (N) 30,780 599
Hanover Insurance Group, Inc. (The) 23,100 1,222
Harbor Florida Bancshares, Inc. (N) 1,600 60
Harleysville Group, Inc. 3,041 91
Healthcare Realty Trust, Inc. (o) 20,551 778
HealthExtras, Inc. (AE)(N) 55,100 1,601
Heartland Payment Systems, Inc. (AE)(N) 23,600 619
Heritage Commerce Corp. 1,100 26
HomeBanc Corp. (o)(N) 15,800 130
Horace Mann Educators Corp. 18,200 317
Hospitality Properties Trust (o) 13,900 599
HRPT Properties Trust (o) 147,270 1,617
Indus International, Inc. (AE) 14,123 47
Infinity Property & Casualty Corp. 18,000 807
infoUSA, Inc. 4,682 53
Inland Real Estate Corp. (o)(N) 4,100 60
Innkeepers USA Trust (o) 39,000 625
Intervest Bancshares Corp. (AE) 1,645 66
Investment Technology Group, Inc. (AE) 45,220 2,396
IPC Holdings, Ltd. (N) 23,500 627
iStar Financial, Inc. (o) 20,000 765
Janus Capital Group, Inc. 3,200 62
Jones Lang LaSalle, Inc. 11,697 992
Knight Capital Group, Inc. Class A (AE)(N) 92,417 1,551
Kronos, Inc. (AE) 16,549 755
LandAmerica Financial Group, Inc. (N) 38,461 2,668
Liberty Property Trust (o) 6,000 268
LTC Properties, Inc. (o) 2,413 54
Mack-Cali Realty Corp. (o) 22,400 1,013
MB Financial, Inc. (N) 4,300 152
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mercantile Bank Corp. 400 16
Mid-America Apartment Communities, Inc. (o) 11,300 599
MoneyGram International, Inc. 18,600 631
Morningstar, Inc. (AE)(N) 16,200 689
Nara Bancorp, Inc. 36,332 683
Nasdaq Stock Market, Inc. (The) (AE) 8,700 326
National Penn Bancshares, Inc. (N) 6,233 123
Nationwide Financial Services, Inc. Class A 13,800 606
New Century Financial Corp. (o)(N) 22,200 1,137
New Plan Excel Realty Trust (o)(N) 22,300 550
North Fork Bancorporation, Inc. 26,400 795
NorthStar Realty Finance Corp. (o) 11,487 129
Ohio Casualty Corp. 21,200 629
optionsXpress Holdings, Inc. (N) 4,700 148
Pan Pacific Retail Properties, Inc. (o) 7,600 506
Pegasystems, Inc. (AE) 801 6
PFF Bancorp, Inc. 6,575 225
Philadelphia Consolidated Holding Co. (AE) 16,000 530
Piper Jaffray Cos., Inc. (AE) 3,993 285
PMI Group, Inc. (The) 13,000 600
Portfolio Recovery Associates, Inc. (AE)(N) 1,440 74
ProAssurance Corp. (AE) 50,026 2,520
Protective Life Corp. 9,200 464
Provident Financial Holdings, Inc. 11,317 325
Provident Financial Services, Inc. 4,500 82
PS Business Parks, Inc. (o) 11,449 595
R&G Financial Corp. Class B (N) 12,500 130
Radian Group, Inc. 26,500 1,662
Raymond James Financial, Inc. 25,650 779
Regency Centers Corp. (o) 9,100 574
Reinsurance Group of America, Inc. 20,100 967
RenaissanceRe Holdings, Ltd. 18,000 757
Republic Bancorp, Inc. Class A (N) 29,426 610
Ryder System, Inc. 42,300 2,206
Safety Insurance Group, Inc. (N) 11,409 528
Senior Housing Properties Trust (o) 35,730 614
Southwest Bancorp, Inc. 31,500 708
Sovereign Bancorp, Inc. (N) 33,500 743
Sovran Self Storage, Inc. (o) 14,800 727
Stancorp Financial Group, Inc. 25,400 1,253
State Auto Financial Corp. 6,700 236
Sterling Bancorp (N) 4,305 90
Sterling Bancshares, Inc. 20,100 333
Sterling Financial Corp. (N) 4,500 94
</Table>
14 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Stewart Information Services Corp. (N) 23,650 1,022
Sunstone Hotel Investors, Inc. (o)(N) 47,900 1,377
SVB Financial Group (AE)(N) 11,910 605
SWS Group, Inc. 4,143 114
Taubman Centers, Inc. (o) 5,042 208
TCF Financial Corp. 15,900 427
TD Banknorth, Inc. 25,500 757
TierOne Corp. 1,459 49
Umpqua Holdings Corp. (N) 13,300 351
United Community Banks, Inc. (N) 1,700 50
United Fire & Casualty Co. (N) 5,837 175
United Rentals, Inc. (AE)(N) 31,700 1,131
Webster Financial Corp. 15,100 709
Whitney Holding Corp. 11,850 421
WR Berkley Corp. 29,157 1,091
Zenith National Insurance Corp. (N) 13,922 614
Zions Bancorporation 8,000 664
------------
113,390
------------
Health Care - 8.0%
Abaxis, Inc. (AE)(N) 33,700 880
Accelrys, Inc. (AE) 67,800 477
Affymetrix, Inc. (AE) 46,674 1,337
Air Methods Corp. (AE) 2,792 76
Albany Molecular Research, Inc. (AE) 4,878 49
Alkermes, Inc. (AE)(N) 30,400 653
Allscripts Healthcare Solutions, Inc. (AE) 80,683 1,374
Alpharma, Inc. Class A (N) 37,100 974
Amylin Pharmaceuticals, Inc. (AE)(N) 10,600 462
Analogic Corp. 27,900 1,760
Andrx Corp. (AE) 12,318 286
Applera Corp. - Celera Genomics Group (AE) 49,000 587
Arena Pharmaceuticals, Inc. (AE) 15,303 217
Arthrocare Corp. (AE)(N) 27,608 1,251
Brookdale Senior Living, Inc. 5,399 205
Bruker BioSciences Corp. (AE) 4,880 29
Cell Genesys, Inc. (AE)(N) 5,000 34
Cephalon, Inc. (AE)(N) 3,800 249
Community Health Systems, Inc. (AE) 76,529 2,773
Computer Programs & Systems, Inc. 1,637 77
Cooper Cos., Inc. (The) 11,800 647
Cytyc Corp. (AE) 27,700 716
Datascope Corp. 638 24
DaVita, Inc. (AE) 60,886 3,425
DexCom, Inc. (AE)(N) 19,100 481
Digene Corp. (AE)(N) 33,604 1,387
Discovery Laboratories, Inc. (AE) 22,100 64
Endo Pharmaceuticals Holdings, Inc. (AE) 26,600 837
ev3, Inc. (AE)(N) 42,050 660
Exelixis, Inc. (AE) 7,700 83
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Flamel Technologies SA - ADR (AE)(N) 8,200 166
Gene Logic, Inc. (AE) 17,211 50
Genesis HealthCare Corp. (AE) 3,500 165
Greatbatch, Inc. (AE)(N) 9,150 224
Haemonetics Corp. (AE) 9,200 501
Health Net, Inc. (AE) 18,050 735
Healthways, Inc. (AE) 25,114 1,232
Henry Schein, Inc. (AE) 53,173 2,479
Illumina, Inc. (AE)(N) 31,800 1,006
Immucor, Inc. (AE) 15,745 457
Inspire Pharmaceuticals, Inc. (AE)(N) 9,200 47
Intralase Corp. (AE)(N) 98,473 2,115
Invitrogen Corp. (AE) 15,200 1,003
Kendle International, Inc. (AE)(N) 13,400 503
King Pharmaceuticals, Inc. (AE) 49,500 861
Kos Pharmaceuticals, Inc. (AE) 6,756 327
Kyphon, Inc. (AE) 7,100 300
Lifecell Corp. (AE)(N) 60,850 1,645
Lincare Holdings, Inc. (AE) 2,050 81
Magellan Health Services, Inc. (AE) 19,600 797
Maxygen, Inc. (AE)(N) 8,300 69
Medical Action Industries, Inc. (AE) 1,513 36
Medical Properties Trust, Inc. 4,036 43
Mentor Corp. (N) 54,071 2,343
Millennium Pharmaceuticals, Inc. (AE) 14,500 132
Molecular Devices Corp. (AE)(N) 8,084 263
Molina Healthcare, Inc. (AE) 7,686 251
Myriad Genetics, Inc. (AE)(N) 22,000 564
National Medical Health Card Systems, Inc. (AE) 601 14
Natus Medical, Inc. (AE) 3,771 75
Neurometrix, Inc. (AE) 6,115 236
Odyssey HealthCare, Inc. (AE) 15,600 271
Palomar Medical Technologies, Inc. (AE) 6,787 285
Panacos Pharmaceuticals, Inc. (AE) 43,750 306
Parexel International Corp. (AE) 20,300 600
PDL BioPharma, Inc. (AE) 50,750 1,461
Pediatrix Medical Group, Inc. (AE) 3,094 156
Perrigo Co. 7,900 126
Pharmacopeia Drug Discovery, Inc. (AE) 33,500 207
Pharmacyclics, Inc. (AE)(N) 10,100 49
Pharmion Corp. (AE) 8,132 156
Phase Forward, Inc. (AE) 65,300 895
PSS World Medical, Inc. (AE) 11,277 204
Quality Systems, Inc. 30,018 1,007
Regeneron Pharmaceuticals, Inc. (AE) 17,000 247
</Table>
Equity II Fund 15
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Res-Care, Inc. (AE) 1,400 29
Resmed, Inc. (AE)(N) 40,756 1,759
Schick Technologies, Inc. (AE) 5,738 217
Sciclone Pharmaceuticals, Inc. (AE)(N) 16,500 49
Sierra Health Services, Inc. (AE) 8,800 345
SonoSite, Inc. (AE)(N) 24,300 917
Steris Corp. 4,200 97
Sunrise Senior Living, Inc. (AE)(N) 14,500 539
SurModics, Inc. (AE)(N) 1,900 68
Tenet Healthcare Corp. (AE) 30,400 253
Thoratec Corp. (AE)(N) 24,222 436
United Surgical Partners International, Inc.
(AE) 48,046 1,586
Universal Health Services, Inc. Class B 7,700 391
Varian Medical Systems, Inc. (AE) 19,728 1,033
Vertex Pharmaceuticals, Inc. (AE) 3,750 136
Viasys Healthcare, Inc. (AE) 15,000 436
Vital Images, Inc. (AE) 3,011 102
Watson Pharmaceuticals, Inc. (AE) 11,700 333
WellCare Health Plans, Inc. (AE)(N) 11,500 482
Zoll Medical Corp. (AE) 21,576 572
------------
56,544
------------
Integrated Oils - 0.1%
Giant Industries, Inc. (AE) 3,870 280
KCS Energy, Inc. (AE)(N) 5,800 170
------------
450
------------
Materials and Processing - 7.9%
Acuity Brands, Inc. 8,927 370
AEP Industries, Inc. (AE) 1,199 43
Airgas, Inc. 68,104 2,755
Albany International Corp. Class A 5,200 203
Aleris International, Inc. (AE) 32,654 1,510
AM Castle & Co. (N) 30,370 1,096
Andersons, Inc. (The) (N) 500 52
Ball Corp. 22,500 900
Barnes Group, Inc. (N) 3,300 149
BlueLinx Holdings, Inc. 6,300 95
Builders FirstSource, Inc. (AE) 3,155 68
Building Material Holding Corp. (N) 6,400 214
Cambrex Corp. 29,400 596
Cameco Corp. 33,266 1,352
Caraustar Industries, Inc. (AE) 29,589 293
Celanese Corp. 40,600 891
Century Aluminum Co. (AE) 52,194 2,485
CF Industries Holdings, Inc. 26,100 452
Chaparral Steel Co. (AE) 4,700 297
Chemtura Corp. 8,200 100
Chicago Bridge & Iron Co. NV 46,222 1,108
Comfort Systems USA, Inc. 24,410 373
Commercial Metals Co. 5,832 316
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Constar International, Inc. (AE)(N) 31,900 103
Corn Products International, Inc. (N) 25,500 714
Crown Holdings, Inc. (AE) 16,300 261
Cytec Industries, Inc. (N) 31,600 1,911
Eagle Materials, Inc. 5,700 378
Eastman Chemical Co. 5,850 318
EMCOR Group, Inc. (AE) 35,300 1,771
Encore Wire Corp. (AE)(N) 18,212 764
Energizer Holdings, Inc. (AE) 13,690 700
EnerSys (AE)(N) 4,600 65
Ennis, Inc. (N) 16,700 329
FMC Corp. 15,300 972
Georgia Gulf Corp. (N) 22,200 658
Granite Construction, Inc. 22,291 1,032
Greif, Inc. Class A 3,200 207
Harsco Corp. 23,900 1,992
HB Fuller Co. 28,260 1,478
Hercules, Inc. (AE) 119,500 1,698
Infrasource Services, Inc. (AE)(N) 4,800 91
Insituform Technologies, Inc. Class A (AE)(N) 55,350 1,410
Insteel Industries, Inc. 8,000 299
Integra LifeSciences Holdings Corp. (AE) 6,187 260
Jacobs Engineering Group, Inc. (AE) 13,400 1,108
Kaydon Corp. 7,850 337
Lamson & Sessions Co. (The) (AE)(N) 24,050 605
Lennox International, Inc. 24,531 802
Lubrizol Corp. 5,200 227
Martin Marietta Materials, Inc. 12,500 1,327
Material Sciences Corp. (AE) 1,600 17
Metal Management, Inc. 33,145 1,076
Mueller Industries, Inc. 25,389 961
Myers Industries, Inc. 12,093 214
NCI Building Systems, Inc. (AE) 4,173 273
NewMarket Corp. (N) 5,200 264
Novamerican Steel, Inc. (AE) 6,910 297
NS Group, Inc. (AE) 28,283 1,415
Olin Corp. 12,774 263
Owens-Illinois, Inc. (AE) 43,000 786
Pactiv Corp. (AE) 16,300 397
Perini Corp. (AE) 2,900 87
Pioneer Cos., Inc. (AE) 1,525 49
PolyOne Corp. (AE) 90,197 801
Pope & Talbot, Inc. (N) 5,400 44
Precision Castparts Corp. 5,800 365
Quanex Corp. 6,263 268
Reliance Steel & Aluminum Co. 18,800 1,672
</Table>
16 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Rock-Tenn Co. Class A 8,200 130
RPM International, Inc. 7,300 134
Ryerson, Inc. (AE)(N) 4,400 129
Schulman A, Inc. 15,600 373
Scotts Miracle-Gro Co. (The) Class A 22,700 1,005
Silgan Holdings, Inc. 12,600 489
Spartech Corp. 23,000 544
Standard Register Co. (The) 1,670 23
Steel Dynamics, Inc. 2,700 169
Steel Technologies, Inc. 6,205 143
Symyx Technologies, Inc. (AE) 14,200 414
Terra Industries, Inc. (AE)(N) 34,850 288
Timken Co. 19,500 681
Trammell Crow Co. (AE) 8,000 311
UAP Holding Corp. 10,779 225
Universal Forest Products, Inc. (N) 1,900 142
URS Corp. (AE) 7,797 336
Valmont Industries, Inc. 9,850 529
Valspar Corp. 7,200 204
Washington Group International, Inc. 31,407 1,747
WD-40 Co. (N) 4,400 138
Westlake Chemical Corp. 17,500 531
------------
55,469
------------
Miscellaneous - 1.6%
Brunswick Corp. 7,500 294
Foster Wheeler, Ltd. (AE) 16,000 713
Hillenbrand Industries, Inc. 11,400 586
Johnson Controls, Inc. 11,200 913
McDermott International, Inc. (AE) 50,869 3,093
SPX Corp. 22,900 1,254
Teleflex, Inc. 6,500 424
Trinity Industries, Inc. (N) 22,100 1,403
Walter Industries, Inc. 23,399 1,552
Wesco Financial Corp. 2,700 1,057
------------
11,289
------------
Other Energy - 7.8%
Alliance Resource Partners, LP 2,800 119
Alon USA Energy, Inc. 6,437 173
Atwood Oceanics, Inc. (AE) 28,464 1,519
Basic Energy Services, Inc. (AE) 42,300 1,410
Bronco Drilling Co., Inc. (AE)(N) 28,900 781
Cabot Oil & Gas Corp. 3,700 182
Comstock Resources, Inc. (AE) 21,500 668
Cooper Cameron Corp. (AE) 43,518 2,186
Core Laboratories NV (AE) 33,305 2,040
Denbury Resources, Inc. (AE) 29,300 955
Diamond Offshore Drilling, Inc. 14,692 1,334
Dresser-Rand Group, Inc. (AE) 2,000 50
Dril-Quip, Inc. (AE) 5,400 389
Dynegy, Inc. Class A (AE) 27,100 135
Enbridge Energy Partners, LP (N) 17,500 774
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ENSCO International, Inc. 19,600 1,048
Equitable Resources, Inc. 10,000 355
FMC Technologies, Inc. (AE) 29,761 1,624
Foundation Coal Holdings, Inc. (N) 32,400 1,643
Frontier Oil Corp. 12,000 726
Global Industries, Ltd. (AE) 42,500 675
Grey Wolf, Inc. (AE) 35,059 275
Helix Energy Solutions Group, Inc. (AE)(N) 58,700 2,279
Helmerich & Payne, Inc. 42,700 3,106
Hercules Offshore, Inc. (AE) 20,600 842
Hornbeck Offshore Services, Inc. (AE)(N) 3,100 111
Hugoton Royalty Trust 1 --
Input/Output, Inc. (AE)(N) 38,000 383
Meridian Resource Corp. (AE)(N) 62,300 242
National-Oilwell Varco, Inc. (AE) 36,202 2,497
Oil States International, Inc. (AE) 14,300 577
Ormat Technologies, Inc. (N) 7,000 239
Penn Virginia Corp. 11,493 829
Pioneer Drilling Co. (AE) 38,500 624
Pogo Producing Co. 5,600 278
Pride International, Inc. (AE) 18,550 647
Rowan Cos., Inc. 3,650 162
RPC, Inc. (N) 17,600 487
SEACOR Holdings, Inc. (AE)(N) 13,600 1,203
St. Mary Land & Exploration Co. (N) 13,783 583
Swift Energy Co. (AE) 21,410 907
Talisman Energy, Inc. 17,000 960
TC Pipelines, LP 5,916 199
TEPPCO Partners, LP (N) 21,700 826
Tetra Technologies, Inc. (AE) 51,754 2,546
Todco Class A 27,300 1,252
Trico Marine Services, Inc. (AE)(N) 43,700 1,460
Unit Corp. (AE) 48,400 2,795
Veritas DGC, Inc. (AE)(N) 63,165 3,028
W&T Offshore, Inc. (N) 17,550 749
W-H Energy Services, Inc. (AE) 45,100 2,266
Weatherford International, Ltd. (AE) 31,262 1,655
Whiting Petroleum Corp. (AE) 22,500 951
XTO Energy, Inc. 22,997 974
------------
54,718
------------
Producer Durables - 7.6%
Advanced Energy Industries, Inc. (AE) 15,616 247
AGCO Corp. (AE) 12,406 296
American Tower Corp. Class A (AE) 17,900 611
Andrew Corp. (AE) 73,968 783
</Table>
Equity II Fund 17
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
AO Smith Corp. (N) 16,510 782
Applied Industrial Technologies, Inc. 2,100 87
Arris Group, Inc. (AE) 66,400 787
ASML Holding NV (AE) 91,724 1,940
Asyst Technologies, Inc. (AE)(N) 38,200 388
Axcelis Technologies, Inc. (AE) 62,200 366
BE Aerospace, Inc. (AE) 71,727 1,867
Briggs & Stratton Corp. 17,900 604
Brooks Automation, Inc. (AE) 58,504 791
Bucyrus International, Inc. Class A 39,820 2,067
CalAmp Corp. (AE) 6,439 87
Cascade Corp. (N) 20,400 847
CNH Global NV 12,680 339
Columbus McKinnon Corp. (AE) 25,509 683
Crane Co. 15,600 659
Credence Systems Corp. (AE)(N) 30,600 217
Crown Castle International Corp. (AE) 10,150 342
Cymer, Inc. (AE) 14,350 742
Desarrolladora Homex SA de CV - ADR (AE) 38,975 1,493
DR Horton, Inc. 20,501 615
Electro Scientific Industries, Inc. (AE) 6,050 121
EnPro Industries, Inc. (AE)(N) 4,300 159
Entegris, Inc. (AE) 94,701 964
ESCO Technologies, Inc. (AE) 29,398 1,489
Flowserve Corp. (AE) 8,900 512
Franklin Electric Co., Inc. 3,097 181
General Cable Corp. (AE) 5,400 170
Genlyte Group, Inc. (AE) 15,425 1,061
GP Strategies Corp. (AE) 800 6
Itron, Inc. (AE) 22,958 1,540
JLG Industries, Inc. 42,200 1,210
Joy Global, Inc. 33,993 2,233
KB Home 3,400 209
Kennametal, Inc. 17,713 1,096
Kimball International, Inc. Class B (N) 9,202 140
Kulicke & Soffa Industries, Inc. (AE)(N) 17,500 159
Lennar Corp. Class A 13,500 742
Lindsay Manufacturing Co. 9,716 253
LTX Corp. (AE)(N) 26,300 149
Manitowoc Co., Inc. (The) 12,007 596
Mastec, Inc. (AE)(N) 17,900 221
Mattson Technology, Inc. (AE) 23,432 269
Meritage Homes Corp. (AE) 11,100 728
Mettler Toledo International, Inc. (AE) 51,160 3,315
Milacron, Inc. (AE)(N) 100,558 142
MKS Instruments, Inc. (AE) 10,737 254
Molex, Inc. 18,800 698
Monaco Coach Corp. 11,200 156
Nordson Corp. 5,338 284
Novellus Systems, Inc. (AE) 2,800 69
Orbital Sciences Corp. (AE) 39,170 613
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Orleans Homebuilders, Inc. (N) 1,200 25
Pall Corp. 38,900 1,174
Photon Dynamics, Inc. (AE) 4,900 93
Plantronics, Inc. 58,072 2,178
Polycom, Inc. (AE) 54,638 1,201
Regal-Beloit Corp. 5,688 267
Robbins & Myers, Inc. 20,700 503
Rofin-Sinar Technologies, Inc. (AE) 3,228 182
SBA Communications Corp. Class A (AE) 26,900 676
Steelcase, Inc. Class A (N) 27,600 517
Technical Olympic USA, Inc. (AE)(N) 32,500 682
Tecumseh Products Co. Class A (N) 28,300 649
Tektronix, Inc. 36,400 1,286
Teledyne Technologies, Inc. (AE) 13,900 506
Tennant Co. 4,560 232
Thermo Electron Corp. (AE) 13,600 524
Toll Brothers, Inc. (AE) 18,500 595
Tollgrade Communications, Inc. (AE) 2,265 26
Twin Disc, Inc. 1,400 46
Ultratech, Inc. (AE)(N) 19,300 379
United Industrial Corp. 1,400 92
Varian Semiconductor Equipment Associates, Inc.
(AE) 52,684 1,725
Vicor Corp. 8,400 179
Viisage Technology, Inc. (AE)(N) 30,200 506
Xyratex, Ltd. (AE)(N) 46,241 1,383
Zygo Corp. (AE) 9,773 178
------------
53,183
------------
Technology - 19.9%
Acxiom Corp. 14,072 367
Adaptec, Inc. (AE) 135,500 749
ADC Telecommunications, Inc. (AE) 64,534 1,445
Advanced Digital Information Corp. (AE) 80,900 687
Agile Software Corp. (AE)(N) 173,950 1,212
Akamai Technologies, Inc. (AE) 98,878 3,331
Alliance Semiconductor Corp. (AE)(N) 48,500 131
Altera Corp. (AE) 99,038 2,163
American Reprographics Co. (AE) 4,300 153
American Software, Inc. Class A 4,453 33
Amkor Technology, Inc. (AE)(N) 36,200 438
Amphenol Corp. Class A 69,365 4,009
Anaren, Inc. (AE) 2,565 53
Ansoft Corp. (AE) 4,578 201
Ansys, Inc. (AE) 900 51
</Table>
18 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Applera Corp. - Applied Biosystems Group 43,000 1,240
Applied Micro Circuits Corp. (AE) 302,950 1,112
Ariba, Inc. (AE)(N) 68,000 628
Arrow Electronics, Inc. (AE) 8,950 324
ASE Test, Ltd. (AE)(N) 84,893 968
Aspen Technology, Inc. (AE)(N) 32,100 413
Atmel Corp. (AE) 18,791 99
Avanex Corp. (AE)(N) 103,400 237
Avid Technology, Inc. (AE)(N) 20,000 771
Avnet, Inc. (AE) 43,400 1,136
Avocent Corp. (AE) 6,650 179
AVX Corp. 4,800 85
BEA Systems, Inc. (AE) 189,250 2,508
BearingPoint, Inc. (AE)(N) 67,300 625
Benchmark Electronics, Inc. (AE) 14,000 382
Blackbaud, Inc. 11,819 248
BMC Software, Inc. (AE) 17,700 381
Brocade Communications Systems, Inc. (AE) 173,650 1,070
Cadence Design Systems, Inc. (AE) 190,950 3,615
Cbeyond Communications, Inc. (AE)(N) 6,500 128
Checkpoint Systems, Inc. (AE) 29,946 791
Ciena Corp. (AE)(N) 592,158 2,422
Cirrus Logic, Inc. (AE)(N) 15,700 148
Citrix Systems, Inc. (AE) 31,700 1,266
Coherent, Inc. (AE)(N) 10,983 409
CommScope, Inc. (AE) 14,733 484
Compuware Corp. (AE) 33,242 255
Comverse Technology, Inc. (AE) 61,121 1,384
Conexant Systems, Inc. (AE)(N) 315,000 1,115
CSG Systems International, Inc. (AE) 10,427 264
Cubic Corp. (N) 14,121 325
Daktronics, Inc. (N) 39,900 1,565
Digitas, Inc. (AE) 20,510 289
Ditech Communications Corp. (AE)(N) 11,900 112
Electronics for Imaging, Inc. (AE) 114,840 3,154
Emulex Corp. (AE) 15,854 296
Equinix, Inc. (AE)(N) 43,946 2,896
ESS Technology, Inc. (AE)(N) 20,700 66
F5 Networks, Inc. (AE) 25,500 1,493
Fairchild Semiconductor International, Inc. (AE) 39,400 814
Finisar Corp. (AE)(N) 125,400 589
Flir Systems, Inc. (AE)(N) 12,400 303
Formfactor, Inc. (AE)(N) 89,967 3,751
Foundry Networks, Inc. (AE) 19,500 277
Freescale Semiconductor, Inc. Class A (AE) 12,900 408
Gartner, Inc. Class A (AE)(N) 126,600 1,775
Harris Corp. 56,450 2,629
Hittite Microwave Corp. (AE) 51,800 2,016
Hyperion Solutions Corp. (AE) 56,520 1,731
Ikanos Communications, Inc. (AE)(N) 25,400 470
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Imation Corp. 12,400 521
Infocrossing, Inc. (AE) 6,500 81
InFocus Corp. (AE)(N) 54,200 264
Informatica Corp. (AE)(N) 46,150 709
Ingram Micro, Inc. Class A (AE) 36,200 666
Integrated Device Technology, Inc. (AE) 73,250 1,115
Integrated Silicon Solution, Inc. (AE)(N) 73,000 483
Intergraph Corp. (AE) 29,173 1,284
Intermagnetics General Corp. (AE)(N) 111,264 2,417
Internet Security Systems, Inc. (AE) 11,524 259
Intersil Corp. Class A 20,900 619
Interwoven, Inc. (AE) 10,700 109
JDA Software Group, Inc. (AE)(N) 31,337 428
JDS Uniphase Corp. (AE) 235,000 820
Juniper Networks, Inc. (AE) 74,656 1,380
Keynote Systems, Inc. (AE)(N) 39,200 432
Komag, Inc. (AE)(N) 12,834 544
Lawson Software, Inc. (AE)(N) 239,391 1,838
Logility, Inc. (AE) 616 6
LSI Logic Corp. (AE) 154,400 1,644
Maxtor Corp. (AE)(N) 145,100 1,405
MEMC Electronic Materials, Inc. (AE) 26,700 1,084
Mentor Graphics Corp. (AE) 198,842 2,611
Merge Technologies, Inc. (AE) 8,500 107
Microsemi Corp. (AE) 17,700 484
MicroStrategy, Inc. Class A (AE) 2,644 252
MRO Software, Inc. (AE) 7,200 137
Napster, Inc. (AE)(N) 10,200 47
NAVTEQ Corp. (AE) 22,045 915
Netlogic Microsystems, Inc. (AE)(N) 38,700 1,558
Nuance Communications, Inc. (AE)(N) 97,300 1,248
Nvidia Corp. (AE) 58,400 1,706
Openwave Systems, Inc. (AE) 68,686 1,278
Opnet Technologies, Inc. (AE) 1,898 24
Optical Communication Products, Inc. (AE)(N) 8,300 20
Orckit Communications, Ltd. (AE)(N) 20,200 326
Park Electrochemical Corp. (N) 49,600 1,536
PerkinElmer, Inc. 8,650 185
Plexus Corp. (AE) 17,500 762
PMC - Sierra, Inc. (AE) 86,150 1,071
Portalplayer, Inc. (AE) 20,756 230
PowerDsine, Ltd. (AE)(N) 27,000 225
Quantum Corp. (AE)(N) 291,800 998
Rackable Systems, Inc. (AE) 5,300 272
Radisys Corp. (AE) 4,014 85
</Table>
Equity II Fund 19
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
RADVision, Ltd. (AE) 50,500 881
RADWARE, Ltd. (AE)(N) 11,000 174
RealNetworks, Inc. (AE)(N) 46,000 461
Red Hat, Inc. (AE) 19,850 583
Redback Networks, Inc. (AE)(N) 115,660 2,591
Reynolds & Reynolds Co. (The) Class A 5,750 171
Rockwell Automation, Inc. 39,668 2,874
RSA Security, Inc. (AE) 106,100 2,222
Seachange International, Inc. (AE)(N) 61,700 415
Semtech Corp. (AE) 70,200 1,316
Sigma Designs, Inc. (AE)(N) 35,100 487
Silicon Laboratories, Inc. (AE) 16,700 778
Silicon Storage Technology, Inc. (AE)(N) 59,000 270
Skyworks Solutions, Inc. (AE)(N) 134,800 964
Solectron Corp. (AE) 223,500 894
SPSS, Inc. (AE) 8,355 291
Stellent, Inc. 5,000 64
Sunpower Corp. Class A (AE)(N) 10,000 384
SupportSoft, Inc. (AE)(N) 19,300 88
Sycamore Networks, Inc. (AE) 256,750 1,207
SYKES Enterprises, Inc. (AE) 10,380 169
Synopsys, Inc. (AE) 71,300 1,557
Talx Corp. 5,400 140
Tekelec (AE) 45,300 647
Tellabs, Inc. (AE) 11,300 179
Tessera Technologies, Inc. (AE) 92,360 2,962
TIBCO Software, Inc. (AE) 110,250 950
Transaction Systems Architects, Inc. Class A
(AE) 94,003 3,755
Trident Microsystems, Inc. (AE)(N) 32,200 857
Triquint Semiconductor, Inc. (AE) 39,843 216
Trizetto Group, Inc. (The) (AE)(N) 4,100 64
Tyler Technologies, Inc. (AE) 17,900 197
Ultimate Software Group, Inc. (AE)(N) 40,703 1,041
Unisys Corp. (AE) 253,600 1,583
Utstarcom, Inc. (AE)(N) 68,900 479
VeriFone Holdings, Inc. (AE) 55,500 1,718
Viasat, Inc. (AE) 31,500 949
Vignette Corp. (AE) 20,542 327
Vocus, Inc. (AE)(N) 71,900 1,097
Volterra Semiconductor Corp. (AE)(N) 37,700 619
WatchGuard Technologies, Inc. (AE) 26,400 137
Wavecom SA - ADR (AE)(N) 16,300 202
webMethods, Inc. (AE) 27,143 255
Websense, Inc. (AE) 27,080 673
Western Digital Corp. (AE) 102,400 2,155
Wind River Systems, Inc. (AE) 6,788 77
Woodhead Industries, Inc. 1,235 20
Zhone Technologies, Inc. (AE)(N) 24,997 61
Zoran Corp. (AE) 25,750 707
------------
139,762
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Utilities - 3.1%
Allete, Inc. 22,300 1,043
Alliant Energy Corp. 32,200 1,029
Avista Corp. (N) 14,910 313
Black Hills Corp. 7,505 272
Cablevision Systems Corp. Class A 13,850 281
Centerpoint Energy, Inc. (N) 32,200 387
CenturyTel, Inc. 48,400 1,825
Cleco Corp. 7,400 166
CMS Energy Corp. (AE) 39,500 526
Dobson Communications Corp. Class A (AE) 141,048 1,269
Energen Corp. 20,800 734
Laclede Group, Inc. (The) (N) 5,400 184
Leap Wireless International, Inc. (AE) 36,540 1,679
NeuStar, Inc. Class A (AE)(N) 61,041 2,143
New Jersey Resources Corp. (N) 10,100 447
Nicor, Inc. (N) 3,300 131
NII Holdings, Inc. (AE) 25,130 1,505
NorthWestern Corp. 7,600 267
OGE Energy Corp. 39,000 1,176
Pepco Holdings, Inc. 67,300 1,553
Pike Electric Corp. (AE) 8,300 159
Pinnacle West Capital Corp. 23,400 938
Premiere Global Services, Inc. (AE) 48,662 380
RCN Corp. (AE)(N) 2,800 75
Sierra Pacific Resources (AE) 34,710 490
Southern Union Co. 30,900 801
Talk America Holdings, Inc. (AE)(N) 32,300 294
TECO Energy, Inc. 18,300 292
Telephone & Data Systems, Inc. 1,800 71
UGI Corp. 33,300 746
US Cellular Corp. (AE)(N) 8,030 501
Westar Energy, Inc. 10,390 218
------------
21,895
------------
TOTAL COMMON STOCKS
(cost $536,881) 657,257
------------
WARRANTS & RIGHTS - 0.0%
Washington Mutual, Inc. (AE)
2050 Warrants 112 19
------------
TOTAL WARRANTS & RIGHTS
(cost $18) 19
------------
</Table>
20 Equity II Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 7.9%
Frank Russell Investment Company
Money Market Fund 52,891,002 52,891
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 2,500 2,486
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $55,377) 55,377
------------
OTHER SECURITIES - 16.9%
Frank Russell Investment Company
Money Market Fund (X) 31,014,724 31,015
State Street Securities Lending Quality Trust
(X) 87,372,397 87,372
------------
TOTAL OTHER SECURITIES
(cost $118,387) 118,387
------------
TOTAL INVESTMENTS - 118.3%
(identified cost $710,663) 831,040
OTHER ASSETS AND LIABILITIES,
NET - (18.3%) (128,677)
------------
NET ASSETS - 100.0% 702,363
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- -------------------------------------------------------------------------------
Long Positions
Russell 2000 Mini Index (CME)
expiration date 06/06 (606) 46,589 1,747
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,747
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Equity II Fund 21
FRANK RUSSELL INVESTMENT COMPANY
EQUITY II FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Auto and Transportation 3.7
Consumer Discretionary 16.8
Consumer Staples 0.9
Financial Services 16.1
Health Care 8.0
Integrated Oils 0.1
Materials and Processing 7.9
Miscellaneous 1.6
Other Energy 7.8
Producer Durables 7.6
Technology 19.9
Utilities 3.1
Warrants & Rights --*
Short-Term Investments 7.9
Other Securities 16.9
---------------
Total Investments 118.3
Other Assets and Liabilities, Net (18.3)
---------------
100.0
===============
Futures Contracts 0.2
</Table>
* Less than .05% of net assets.
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, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,101.70 $ 1,020.18
Expenses Paid During
Period* $ 4.85 $ 4.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.93%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,103.30 $ 1,021.37
Expenses Paid During
Period* $ 3.60 $ 3.46
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.69%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,103.60 $ 1,021.67
Expenses Paid During
Period* $ 3.29 $ 3.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.63%
(representing the six month period annualized), 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, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 96.6%
Auto and Transportation - 2.8%
Burlington Northern Santa Fe Corp. 153,000 12,168
CSX Corp. 60,100 4,116
FedEx Corp. 55,800 6,424
Ford Motor Co. (N) 353,100 2,454
Harley-Davidson, Inc. (N) 56,200 2,857
JB Hunt Transport Services, Inc. (N) 53,600 1,277
Landstar System, Inc. 5,800 247
Norfolk Southern Corp. 92,200 4,979
Oshkosh Truck Corp. 10,600 649
Paccar, Inc. 56,712 4,079
Southwest Airlines Co. 204,200 3,312
Swift Transportation Co., Inc. (AE)(N) 29,800 893
TRW Automotive Holdings Corp. (AE) 9,600 213
Union Pacific Corp. 2,000 182
United Parcel Service, Inc. Class B 3,500 284
------------
44,134
------------
Consumer Discretionary - 12.9%
Abercrombie & Fitch Co. Class A 12,800 777
Accenture, Ltd. Class A 99,200 2,884
Advance Auto Parts, Inc. 25,500 1,026
Alberto-Culver Co. 22,200 998
American Greetings Corp. Class A 49,300 1,110
Ameristar Casinos, Inc. (N) 3,900 96
Aramark Corp. Class B (N) 20,200 568
Autonation, Inc. (AE) 112,300 2,529
Bebe Stores, Inc. (N) 2,600 46
Best Buy Co., Inc. 54,000 3,060
Black & Decker Corp. 45,600 4,269
Boyd Gaming Corp. (N) 6,400 319
Brinker International, Inc. 39,100 1,531
Career Education Corp. (AE) 29,800 1,099
CBS Corp. Class B 172,078 4,383
Cendant Corp. 113,000 1,970
Circuit City Stores, Inc. 140,489 4,039
Claire's Stores, Inc. 39,900 1,405
Clear Channel Communications, Inc. 50,800 1,449
Coach, Inc. (AE) 414,800 13,697
Convergys Corp. (AE) 33,300 648
Corporate Executive Board Co. 5,300 568
Costco Wholesale Corp. 34,100 1,856
Darden Restaurants, Inc. 98,300 3,893
Dillard's, Inc. Class A 123,100 3,210
DIRECTV Group, Inc. (The) (AE) 16,800 287
DreamWorks Animation SKG, Inc. Class A (AE) 3,100 84
Dress Barn, Inc. (AE)(N) 29,400 744
Electronic Arts, Inc. (AE) 36,000 2,045
Estee Lauder Cos., Inc. (The) Class A (N) 71,400 2,650
Gannett Co., Inc. 6,200 341
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Gemstar-TV Guide International, Inc. (AE)(N) 44,800 148
Google, Inc. Class A (AE) 25,740 10,758
Guess?, Inc. (AE)(N) 800 32
Harrah's Entertainment, Inc. 25,700 2,098
Hasbro, Inc. 48,000 946
Hilton Hotels Corp. 37,300 1,005
Home Depot, Inc. 311,090 12,422
International Game Technology 41,500 1,574
Jackson Hewitt Tax Service, Inc. (N) 4,100 123
JC Penney Co., Inc. 55,500 3,633
Kimberly-Clark Corp. 69,335 4,058
Liberty Global, Inc.
Series A (AE) 9,100 188
Liberty Media Corp. Class A (AE) 618,800 5,167
Limited Brands, Inc. 13,000 333
Lowe's Cos., Inc. 112,900 7,118
Manpower, Inc. 31,000 2,020
Marriott International, Inc. Class A 60,900 4,450
McDonald's Corp. 107,000 3,699
McGraw-Hill Cos., Inc. (The) 144,300 8,032
Men's Wearhouse, Inc. (The) (N) 17,100 606
MGM Mirage 17,300 777
Mohawk Industries, Inc. (AE) 10,000 801
News Corp. Class A 407,400 6,991
Nike, Inc. Class B 40,600 3,323
NTL, Inc. 4,715 130
Office Depot, Inc. (AE) 92,500 3,754
Omnicom Group, Inc. 14,100 1,269
PHH Corp. (AE)(N) 10,200 284
Phillips-Van Heusen Corp. (N) 6,000 241
Republic Services, Inc. 25,800 1,135
Robert Half International, Inc. 15,800 668
SCP Pool Corp. (N) 8,350 390
Six Flags, Inc. (AE)(N) 6,200 57
Staples, Inc. 108,350 2,862
Starbucks Corp. (AE) 159,600 5,948
Target Corp. 227,300 12,070
Time Warner, Inc. 669,400 11,648
Tribune Co. 15,800 456
Univision Communications, Inc. Class A (AE)(N) 61,900 2,209
Vail Resorts, Inc. (AE)(N) 700 26
Viacom, Inc. Class B (AE) 34,928 1,391
Walt Disney Co. 185,100 5,175
Waste Management, Inc. 39,700 1,487
Weight Watchers International, Inc. 13,100 646
</Table>
24 Equity Q Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Whirlpool Corp. 38,900 3,491
Yahoo!, Inc. (AE) 59,400 1,947
Yum! Brands, Inc. 95,400 4,930
------------
206,097
------------
Consumer Staples - 5.3%
Albertson's, Inc. 26,500 671
Altria Group, Inc. 65,900 4,821
Clorox Co. 8,300 533
Coca-Cola Co. (The) 144,800 6,076
Coca-Cola Enterprises, Inc. 34,700 678
Colgate-Palmolive Co. 84,200 4,978
CVS Corp. 86,800 2,580
Dean Foods Co. (AE) 11,800 467
General Mills, Inc. 152,700 7,534
Hormel Foods Corp. 23,800 799
Kellogg Co. 1,700 79
Kroger Co. (The) 240,535 4,873
Loews Corp. 7,900 405
Pepsi Bottling Group, Inc. 82,600 2,651
PepsiCo, Inc. 388,600 22,632
Pilgrim's Pride Corp. 14,300 374
Procter & Gamble Co. 239,450 13,938
Reynolds American, Inc. (N) 31,500 3,454
Safeway, Inc. 60,200 1,513
Supervalu, Inc. 38,400 1,114
Sysco Corp. 22,100 661
Tyson Foods, Inc. Class A 191,400 2,794
Walgreen Co. 13,800 579
Whole Foods Market, Inc. 15,500 951
------------
85,155
------------
Financial Services - 21.2%
Aflac, Inc. 500 24
Alliance Data Systems Corp. (AE) 500 27
Allstate Corp. (The) 112,900 6,378
Ambac Financial Group, Inc. 12,600 1,038
American Express Co. 79,700 4,289
American International Group, Inc. 121,100 7,902
AmeriCredit Corp. (AE) 46,700 1,414
Ameriprise Financial, Inc. 36,020 1,766
AmerUs Group Co. 5,500 323
AON Corp. 39,300 1,647
Archstone-Smith Trust (o) 13,700 670
Automatic Data Processing, Inc. 69,200 3,050
Bank of America Corp. 827,255 41,297
Bank of Hawaii Corp. 37,400 2,031
Bank of New York Co., Inc. (The) 11,000 387
Bear Stearns Cos., Inc. (The) 7,200 1,026
Brown & Brown, Inc. 13,000 406
CapitalSource, Inc. (N) 15,800 371
CBL & Associates Properties, Inc. (o)(N) 22,900 916
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Charles Schwab Corp. (The) (AE) 90,900 1,627
Checkfree Corp. (AE) 6,400 345
Chubb Corp. 78,700 4,056
Cigna Corp. 22,500 2,407
Cincinnati Financial Corp. 35,422 1,510
CIT Group, Inc. 123,300 6,659
Citigroup, Inc. 417,102 20,834
Comerica, Inc. 51,900 2,952
Developers Diversified Realty Corp. (o) 6,900 367
E*Trade Financial Corp. (AE) 19,600 488
Fidelity National Financial, Inc. 120,722 5,068
Fidelity National Information Services, Inc. 9,800 372
First American Corp. 70,200 2,991
First Data Corp. 10,800 515
Fiserv, Inc. (AE) 144,000 6,491
Franklin Resources, Inc. 52,500 4,889
Genworth Financial, Inc. Class A 84,300 2,799
Global Payments, Inc. 900 43
Golden West Financial Corp. 14,200 1,021
Goldman Sachs Group, Inc. 37,500 6,011
Greenhill & Co., Inc. (N) 600 43
Health Care Property Investors, Inc. (o)(N) 11,000 302
Hospitality Properties Trust (o) 7,400 319
Host Hotels & Resorts, Inc. (AE)(o) 29,900 628
Hudson City Bancorp, Inc. 191,800 2,572
IndyMac Bancorp, Inc. (N) 17,300 836
JPMorgan Chase & Co. 360,000 16,337
KeyCorp 127,300 4,865
Kimco Realty Corp. (o) 33,200 1,233
LandAmerica Financial Group, Inc. (N) 8,000 555
Lehman Brothers Holdings, Inc. 85,600 12,938
Leucadia National Corp. 13,200 802
Loews Corp. 129,200 13,715
Markel Corp. (AE)(N) 600 210
Marsh & McLennan Cos., Inc. 46,600 1,429
MBIA, Inc. 57,200 3,411
Merrill Lynch & Co., Inc. 220,100 16,785
Metlife, Inc. 320,400 16,693
Moody's Corp. 62,700 3,888
Morgan Stanley 183,900 11,825
National City Corp. 58,100 2,144
Nationwide Financial Services, Inc. Class A 10,300 452
Old Republic International Corp. 85,350 1,899
</Table>
Equity Q Fund 25
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Paychex, Inc. 9,900 400
Philadelphia Consolidated Holding Co. (AE) 9,200 305
PNC Financial Services Group, Inc. 46,300 3,309
Principal Financial Group, Inc. (N) 278,800 14,305
ProLogis (o) 70,500 3,540
Protective Life Corp. 3,300 166
Prudential Financial, Inc. 53,200 4,156
Public Storage, Inc. (o) 7,600 584
Radian Group, Inc. 17,300 1,085
Rayonier, Inc. (o) 16,800 691
Regions Financial Corp. 9,590 350
Safeco Corp. 56,400 2,927
Simon Property Group, Inc. (o) 26,200 2,145
Sotheby's Holdings Class A (AE)(N) 8,400 252
Stancorp Financial Group, Inc. 10,000 493
SunTrust Banks, Inc. 52,693 4,075
Synovus Financial Corp. 21,000 588
TD Ameritrade Holding Corp. 228,600 4,243
UnionBanCal Corp. 82,900 5,810
United Rentals, Inc. (AE) 39,200 1,398
US Bancorp 272,500 8,567
Wachovia Corp. 60,900 3,645
Washington Mutual, Inc. (N) 76,400 3,443
Wells Fargo & Co. 132,200 9,081
WR Berkley Corp. 52,350 1,959
Zions Bancorporation 6,200 515
------------
338,320
------------
Health Care - 13.6%
Abbott Laboratories 189,100 8,082
Aetna, Inc. 142,600 5,490
Allergan, Inc. 35,500 3,647
Alpharma, Inc. Class A 1,000 26
AmerisourceBergen Corp. 319,600 13,791
Amgen, Inc. (AE) 282,100 19,098
Becton Dickinson & Co. 234,100 14,758
Biogen Idec, Inc. (AE) 39,600 1,776
Boston Scientific Corp. (AE) -- --
Cardinal Health, Inc. 154,700 10,419
Caremark Rx, Inc. 189,400 8,627
Celgene Corp. (AE) 30,800 1,299
Coventry Health Care, Inc. (AE) 16,100 800
Dade Behring Holdings, Inc. 38,100 1,486
Endo Pharmaceuticals Holdings, Inc. (AE) 55,100 1,733
Express Scripts, Inc. (AE) 52,400 4,095
Forest Laboratories, Inc. (AE) 32,800 1,324
Genentech, Inc. (AE) 111,700 8,904
Gilead Sciences, Inc. (AE) 87,700 5,043
Hospira, Inc. (AE) 10,800 416
Humana, Inc. (AE) 50,000 2,259
Johnson & Johnson 469,100 27,494
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kinetic Concepts, Inc. (AE) 12,400 541
King Pharmaceuticals, Inc. (AE) 118,300 2,057
McKesson Corp. 300,300 14,592
Medco Health Solutions, Inc. (AE) 38,100 2,028
Medtronic, Inc. 78,800 3,949
Merck & Co., Inc. 271,300 9,338
Mylan Laboratories, Inc. 17,800 389
New River Pharmaceuticals, Inc. (AE)(N) 4,800 163
Pfizer, Inc. 1,171,300 29,669
Pharmaceutical Product Development, Inc. 17,700 635
Psychiatric Solutions, Inc. (AE) 2,700 89
Schering-Plough Corp. 148,500 2,869
Sierra Health Services, Inc. (AE) 8,500 333
St. Jude Medical, Inc. (AE) 31,100 1,228
Stryker Corp. 4,900 214
Tenet Healthcare Corp. (AE) 81,800 681
UnitedHealth Group, Inc. 80,400 3,999
Wyeth 62,900 3,061
------------
216,402
------------
Integrated Oils - 5.4%
Chevron Corp. 62,100 3,789
ConocoPhillips 395,268 26,444
Exxon Mobil Corp. 776,222 48,964
Marathon Oil Corp. 79,800 6,333
Occidental Petroleum Corp. 3,400 349
------------
85,879
------------
Materials and Processing - 4.4%
Alcoa, Inc. 116,000 3,919
Archer-Daniels-Midland Co. 113,300 4,117
Ashland, Inc. 17,800 1,172
Avery Dennison Corp. 28,500 1,781
Celanese Corp. 1,700 37
Coeur d'Alene Mines Corp. (AE)(N) 14,800 103
Dow Chemical Co. (The) 59,500 2,416
Energizer Holdings, Inc. (AE) 40,800 2,087
Florida Rock Industries, Inc. 14,800 923
Freeport-McMoRan Copper & Gold, Inc. Class B 273,900 17,689
Granite Construction, Inc. 8,400 389
Louisiana-Pacific Corp. 31,100 858
Martin Marietta Materials, Inc. 13,800 1,465
Monsanto Co. 48,100 4,012
Mueller Industries, Inc. (N) 1,700 64
Newmont Mining Corp. 5,800 339
</Table>
26 Equity Q Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Nucor Corp. 150,200 16,345
Owens-Illinois, Inc. (AE) 27,300 499
Pactiv Corp. (AE) 3,400 83
Precision Castparts Corp. 6,000 378
Quanta Services, Inc. (AE)(N) 6,000 97
Rohm & Haas Co. 73,300 3,709
Scotts Miracle-Gro Co. (The) Class A 9,500 421
Shaw Group, Inc. (The) (AE)(N) 5,500 168
Sherwin-Williams Co. (The) 32,000 1,630
Southern Copper Corp. (N) 14,300 1,416
Steel Dynamics, Inc. 6,000 375
Vulcan Materials Co. 52,300 4,443
------------
70,935
------------
Miscellaneous - 3.0%
3M Co. 49,600 4,237
General Electric Co. 1,208,540 41,804
ITT Industries, Inc. 8,800 495
SPX Corp. 23,000 1,259
------------
47,795
------------
Other Energy - 3.3%
Anadarko Petroleum Corp. 75,300 7,893
Apache Corp. 40,200 2,856
Cooper Cameron Corp. (AE) 28,800 1,447
Denbury Resources, Inc. (AE) 10,900 355
Devon Energy Corp. 132,400 7,959
ENSCO International, Inc. 18,100 968
EOG Resources, Inc. 55,600 3,905
Foundation Coal Holdings, Inc. (N) 15,400 781
Helix Energy Solutions Group, Inc. (AE)(N) 13,600 528
Hugoton Royalty Trust 530 15
Patterson-UTI Energy, Inc. 76,700 2,482
Pogo Producing Co. 8,000 398
Range Resources Corp. (N) 25,300 671
RPC, Inc. (N) 10,600 293
Schlumberger, Ltd. 43,600 3,014
SEACOR Holdings, Inc. (AE)(N) 3,900 345
Southwestern Energy Co. (AE) 23,800 857
Sunoco, Inc. 165,700 13,428
Ultra Petroleum Corp. (AE) 45,800 2,929
Unit Corp. (AE) 8,600 497
XTO Energy, Inc. 8,900 377
------------
51,998
------------
Producer Durables - 6.3%
Agilent Technologies, Inc. (AE) 53,165 2,043
Andrew Corp. (AE) 29,000 307
Applied Materials, Inc. 190,700 3,423
Boeing Co. 206,600 17,241
Brooks Automation, Inc. (AE)(N) 10,600 143
Caterpillar, Inc. 118,100 8,945
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Cummins, Inc. (N) 5,200 543
Danaher Corp. 21,100 1,355
DR Horton, Inc. 173,466 5,207
Emerson Electric Co. 75,600 6,422
Genlyte Group, Inc. (AE)(N) 5,400 372
Illinois Tool Works, Inc. 28,100 2,886
Joy Global, Inc. 34,800 2,286
KB Home 6,200 382
Lam Research Corp. (AE) 22,800 1,114
Lennar Corp. Class A 49,400 2,714
Lockheed Martin Corp. 265,400 20,144
Manitowoc Co., Inc. (The) 3,400 169
Mettler Toledo International, Inc. (AE) 3,000 194
Molex, Inc. 6,600 245
Northrop Grumman Corp. 249,500 16,692
Pulte Homes, Inc. 10,100 377
Steelcase, Inc. Class A (N) 8,300 155
Technical Olympic USA, Inc. (AE)(N) 300 6
Toll Brothers, Inc. (AE) 6,900 222
United Technologies Corp. 102,000 6,407
Waters Corp. (AE) 7,700 349
------------
100,343
------------
Technology - 13.2%
Acxiom Corp. 15,100 391
Advanced Micro Devices, Inc. (AE) 127,500 4,125
Agere Systems, Inc. (AE) 22,500 354
Amkor Technology, Inc. (AE)(N) 33,900 410
Apple Computer, Inc. (AE) 114,820 8,082
Applied Micro Circuits Corp. (AE) 90,700 333
Arrow Electronics, Inc. (AE) 51,400 1,861
Atmel Corp. (AE)(N) 103,300 541
Avnet, Inc. (AE) 13,100 343
AVX Corp. (N) 7,800 139
Broadcom Corp. Class A (AE) 36,300 1,492
Cadence Design Systems, Inc. (AE) 43,100 816
Ciena Corp. (AE)(N) 42,300 173
Cisco Systems, Inc. (AE) 823,200 17,246
Citrix Systems, Inc. (AE) 15,300 611
Computer Sciences Corp. (AE) 111,500 6,528
Conexant Systems, Inc. (AE)(N) 34,300 121
Corning, Inc. (AE) 38,000 1,050
Electronic Data Systems Corp. 77,800 2,107
EMC Corp. (AE) 504,900 6,821
F5 Networks, Inc. (AE) 25,700 1,505
Finisar Corp. (AE)(N) 36,800 173
Freescale Semiconductor, Inc. 94,400 2,990
General Dynamics Corp. 69,200 4,541
</Table>
Equity Q Fund 27
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Harris Corp. 27,800 1,295
Hewlett-Packard Co. 681,600 22,132
Ingram Micro, Inc. Class A (AE)(N) 48,900 899
Intel Corp. 241,000 4,815
Intermagnetics General Corp. (AE)(N) 6,800 148
International Business Machines Corp. 201,500 16,591
Intuit, Inc. (AE) 73,700 3,992
Jabil Circuit, Inc. (AE) 189,200 7,377
L-3 Communications Holdings, Inc. 15,100 1,234
LSI Logic Corp. (AE)(N) 54,400 579
Microchip Technology, Inc. 28,800 1,073
Micron Technology, Inc. (AE) 122,900 2,086
Microsoft Corp. 870,852 21,031
Motorola, Inc. 317,200 6,772
National Semiconductor Corp. 142,900 4,284
Novell, Inc. (AE) 192,000 1,578
Nvidia Corp. (AE) 156,200 4,564
Oracle Corp. (AE) 145,600 2,124
Qualcomm, Inc. 156,000 8,009
Raytheon Co. 65,500 2,900
Red Hat, Inc. (AE)(N) 62,300 1,831
Rockwell Automation, Inc. 22,200 1,609
Seagate Technology, Inc. (AE) 57,274 --
Silicon Laboratories, Inc. (AE) 3,200 149
Sun Microsystems, Inc. (AE) 291,500 1,457
Sycamore Networks, Inc. (AE)(N) 74,200 349
Synopsys, Inc. (AE) 54,200 1,183
Tellabs, Inc. (AE) 80,500 1,276
Texas Instruments, Inc. 592,300 20,559
Trident Microsystems, Inc. (AE)(N) 7,700 205
Unisys Corp. (AE) 63,000 393
Websense, Inc. (AE) 5,400 134
Western Digital Corp. (AE) 216,500 4,555
Xilinx, Inc. 30,700 849
------------
210,785
------------
Utilities - 5.2%
Allete, Inc. (N) 1,400 65
American Electric Power Co., Inc. 44,300 1,482
AT&T, Inc. 212,044 5,558
BellSouth Corp. 67,100 2,267
CenturyTel, Inc. 115,000 4,336
Comcast Corp. Class A (AE) 36,600 1,133
Consolidated Edison, Inc. (N) 24,700 1,065
Constellation Energy Group, Inc. 45,000 2,471
DTE Energy Co. 16,700 681
Duke Energy Corp. 154,500 4,499
Edison International 321,500 12,992
Entergy Corp. 30,600 2,140
FirstEnergy Corp. 16,200 822
FPL Group, Inc. 4,600 182
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
KeySpan Corp. 43,100 1,740
Leap Wireless International, Inc. (AE)(N) 6,700 308
Nextel Partners, Inc. Class A (AE)(N) 118,100 3,347
Oneok, Inc. 2,300 76
PG&E Corp. 141,100 5,621
Sempra Energy 10,600 488
Sprint Nextel Corp. 74,800 1,855
Telephone & Data Systems, Inc. 14,000 549
TXU Corp. 264,700 13,137
Verizon Communications, Inc. 513,500 16,961
------------
83,775
------------
TOTAL COMMON STOCKS
(cost $1,310,061) 1,541,618
------------
SHORT-TERM INVESTMENTS - 3.5%
Frank Russell Investment Company Money Market
Fund 52,556,000 52,556
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 3,000 2,983
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $55,539) 55,539
------------
OTHER SECURITIES - 2.5%
Frank Russell Investment Company
Money Market Fund (X) 10,402,607 10,403
State Street Securities Lending
Quality Trust (X) 29,305,458 29,305
------------
TOTAL OTHER SECURITIES
(cost $39,708) 39,708
------------
TOTAL INVESTMENTS - 102.6%
(identified cost $1,405,308) 1,636,865
OTHER ASSETS AND LIABILITIES,
NET - (2.6%) (42,115)
------------
NET ASSETS - 100.0% 1,594,750
============
</Table>
See accompanying notes which are an integral part of the financial statements.
28 Equity Q Fund
FRANK RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/06 (20) 7,173 163
Russell 1000 Mini Index (CME)
expiration date 06/06 (8) 574 10
S&P 500 E-Mini Index (CME)
expiration date 06/06 (70) 4,606 74
S&P 500 Index (CME)
expiration date 06/06 (67) 22,041 164
S&P Midcap 400 E-Mini Index (CME)
expiration date 06/06 (255) 20,568 639
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,050
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 2.8
Consumer Discretionary 12.9
Consumer Staples 5.3
Financial Services 21.2
Health Care 13.6
Integrated Oils 5.4
Materials and Processing 4.4
Miscellaneous 3.0
Other Energy 3.3
Producer Durables 6.3
Technology 13.2
Utilities 5.2
Short-Term Investments 3.5
Other Securities 2.5
---------------
Total Investments 102.6
Other Assets and Liabilities, Net (2.6)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
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, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,244.60 $ 1,018.99
Expenses Paid During
Period* $ 6.51 $ 5.86
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.17%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,246.30 $ 1,020.28
Expenses Paid During
Period* $ 5.07 $ 4.56
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.91%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,246.50 $ 1,020.53
Expenses Paid During
Period* $ 4.79 $ 4.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.86%
(representing the six month period annualized), 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, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 91.8%
Australia - 3.3%
Amcor, Ltd. (N) 745,738 4,096
AMP Ltd. 137,500 941
Australia & New Zealand Banking Group, Ltd. 84,472 1,794
Australian Gas Light Co., Ltd. 12,000 177
Australian Stock Exchange, Ltd. (N) 14,800 369
Australian Wealth Management, Ltd. (AE) 26,500 50
AXA Asia Pacific Holdings, Ltd. (N) 45,500 218
Babcock & Brown, Ltd. 6,800 95
BHP Billiton, Ltd. 341,962 7,612
Billabong International, Ltd. (N) 20,000 234
BlueScope Steel, Ltd. (N) 20,500 120
Boral, Ltd. 10,000 72
Bradken, Ltd. 31,401 134
Burns Philp & Co., Ltd. (AE) 258,307 190
Caltex Australia, Ltd. 16,400 251
Centro Properties Group 23,800 118
CFS Gandel Retail Trust 53,000 74
Challenger Financial Services Group, Ltd. 22,200 60
Coca-Cola Amatil, Ltd. 20,140 111
Coles Myer, Ltd. 357,034 2,905
Commonwealth Bank of Australia 27,500 982
Computershare, Ltd. 130,500 781
ConnectEast Group 231,793 202
CSL, Ltd. 1,700 74
CSR, Ltd. 102,600 316
David Jones, Ltd. (N) 80,100 163
DB RREEF Trust (o) 47,660 53
Downer EDI, Ltd. 65,648 433
Dyno Nobel, Ltd. (AE) 43 86
Foster's Group, Ltd. 1,118,285 4,996
Futuris Corp., Ltd. (N) 38,100 65
GPT Group 47,700 152
Gunns, Ltd. (N) 12,900 31
Iluka Resources, Ltd. (N) 23,100 129
Insurance Australia Group, Ltd. (N) 128,320 551
Leighton Holdings, Ltd. 14,800 188
Lend Lease Corp., Ltd. 10,200 111
Lion Nathan, Ltd. 19,200 121
Macquarie Airports 426,800 1,064
Macquarie Bank, Ltd. (N) 26,190 1,421
Macquarie Infrastructure Group 60,100 163
McGuigan Simeon Wines, Ltd. 50,774 122
Mirvac Group 9,000 29
National Australia Bank, Ltd. 373,104 10,661
Oil Search, Ltd. (N) 92,400 302
OneSteel, Ltd. 90,200 272
Origin Energy, Ltd. 14,500 78
Pacific Brands, Ltd. 75,400 130
Patrick Corp., Ltd. 8,300 54
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Promina Group, Ltd. 291,600 1,256
Publishing & Broadcasting, Ltd. (N) 20,030 283
Qantas Airways, Ltd. 26,300 69
QBE Insurance Group, Ltd. (N) 242,993 4,132
Ramsay Health Care, Ltd. (N) 29,515 238
Rinker Group, Ltd. 70,760 1,140
Rio Tinto, Ltd. (N) 10,500 627
Santos, Ltd. 28,500 256
Select Managed Funds, Ltd. 3,100 20
Sons of Gwalia, Ltd. (AE)(N) 22,400 --
Stockland (N) 32,500 170
Suncorp-Metway, Ltd. 18,600 287
Symbion Health, Ltd. 132,034 343
TABCORP Holdings, Ltd. (N) 96,360 1,120
Telstra Corp., Ltd. (N) 1,147,738 3,436
Transurban Group (N) 88,700 445
United Group, Ltd. (N) 32,400 325
Wesfarmers, Ltd. (N) 74,684 2,054
Westfield Group (N) 28,136 362
Westpac Banking Corp. 41,900 799
Woodside Petroleum, Ltd. 6,700 238
Woolworths, Ltd. 88,803 1,259
------------
62,210
------------
Austria - 0.5%
Erste Bank der Oesterreichischen Sparkassen AG
(N) 50,755 3,080
Erste Bank der Oesterreichischen Sparkassen AG
(AE) 18,895 1,134
OMV AG 33,500 2,329
Voestalpine AG 16,300 2,380
------------
8,923
------------
Belgium - 0.9%
Delhaize Group (N) 18,200 1,311
Dexia (N) 16,900 446
Fortis 197,076 7,394
InBev NV (N) 1,200 60
KBC Groep NV (N) 67,055 7,779
Mobistar SA (N) 1,400 112
Solvay SA Class A (N) 2,000 234
Umicore 1,900 303
------------
17,639
------------
Brazil - 0.2%
Banco Itau Holding Financeira SA - ADR 18,800 598
Cia Vale do Rio Doce Class A 21,150 1,090
</Table>
International Fund 31
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Petroleo Brasileiro SA - ADR 18,540 1,832
Telecomunicacoes Brasileiras SA - ADR 6,930 255
Unibanco - Uniao de Bancos Brasileiros SA 39,600 625
------------
4,400
------------
Canada - 1.5%
Bank of Nova Scotia 8 --
Cameco Corp. 30,800 1,252
Canadian National Railway Co. 38,040 1,708
Canadian Natural Resources, Ltd. 70,000 4,207
Canadian Pacific Railway, Ltd. 24,800 1,318
Celestica, Inc. (AE) 108,700 1,222
EnCana Corp. (N) 11,200 560
Husky Energy, Inc. (N) 21,200 1,248
Inco, Ltd. (N) 44,200 2,496
Nexen, Inc. 26,300 1,537
Petro-Canada 37,700 1,855
SNC-Lavalin Group, Inc. 69,900 2,032
Suncor Energy, Inc. 37,900 3,245
Talisman Energy, Inc. 15,300 864
Teck Cominco, Ltd. Class B 48,100 3,316
TELUS Corp. (N) 16,400 678
Toronto-Dominion Bank (N) 28,800 1,609
------------
29,147
------------
China - 0.1%
China Construction Bank Class H (N)(p)(AE) 374,000 161
China Life Insurance Co., Ltd. Class H (N)(AE) 1,418,000 1,911
China Telecom Corp., Ltd. Class H 338,000 118
Foxconn International Holdings, Ltd. (AE) 147,000 317
------------
2,507
------------
Denmark - 0.1%
Danske Bank A/S 57,725 2,297
East Asiatic Co., Ltd. A/S (N) 375 16
Novo-Nordisk A/S Series B 5,750 373
Topdanmark A/S (AE)(N) 1,900 249
------------
2,935
------------
Finland - 1.2%
Fortum OYJ (N) 102,571 2,591
Kesko OYJ Class B 3,900 135
M-real OYJ Class S 136,950 892
Metso OYJ (N) 44,300 1,760
Neste Oil OYJ (N) 20,217 705
Nokia OYJ 160,500 3,655
Nokia OYJ - ADR 205,953 4,667
Orion OYJ Class B (N) 1,200 28
Rautaruukki OYJ 6,650 233
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sampo OYJ (N) 157,600 3,253
Stora Enso OYJ Class R 3,300 52
UPM-Kymmene OYJ (N) 200,951 4,715
------------
22,686
------------
France - 10.6%
Air France-KLM (N) 33,400 777
Air Liquide SA (N) 27,046 5,852
Alstom RGPT (AE) 52,500 4,756
Altran Technologies SA (AE)(N) 104,864 1,520
Assurances Generales de France (N) 25,300 3,198
Axa SA (N) 328,211 12,045
BNP Paribas (N) 113,911 10,764
BNP Paribas (AE) 3,155 288
Cap Gemini SA (N)(AE) 20,400 1,092
Carrefour SA (N) 63,330 3,674
Christian Dior SA (N) 19,100 2,025
Cie de Saint-Gobain (N) 75,389 5,654
Cie Generale d'Optique Essilor International SA
(N) 20,737 2,080
CNP Assurances (N) 7,500 811
Credit Agricole SA (N) 221,054 8,908
Dassault Systemes SA (N) 12,751 692
Electricite de France (AE) 13,900 813
France Telecom SA (N) 146,510 3,421
Groupe Danone (N) 41,163 5,136
Lafarge SA (N) 20,133 2,477
Legrand SA (AE) 25,790 755
LVMH Moet Hennessy Louis Vuitton SA (N) 84,402 8,886
Natexis Banques Populaires 1,500 407
Pernod-Ricard SA (N) 16,800 3,258
Peugeot SA (N) 60,883 4,002
Renault SA (N) 47,800 5,548
Sanofi-Aventis (N) 162,192 15,295
Sanofi-Aventis Class S 2,746 259
Schneider Electric SA (N) 59,827 6,774
Societe BIC SA (N) 7,700 541
Societe Generale (N) 96,132 14,687
Societe Television Francaise 1 (N) 26,777 888
Sodexho Alliance SA (N) 27,200 1,309
Suez SA (N) 75,452 2,969
Suez SA (N) 27,332 --
Technip SA (N) 21,800 1,377
Thomson (N) 83,590 1,730
Total SA (N) 106,603 29,480
Total SA - ADR 10,726 1,480
Unibail (N) 13,249 2,308
</Table>
32 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Valeo SA (N) 44,397 1,902
Vallourec SA (N) 6,754 8,776
Veolia Environnement (N) 221,220 13,218
------------
201,832
------------
Germany - 6.2%
Aareal Bank AG (AE) 11,249 531
Adidas-Salomon AG (N) 2,400 507
Allianz AG (N) 25,370 4,247
Altana AG (N) 9,600 616
Bayer AG (N) 181,153 8,367
Bayerische Motoren Werke AG 22,000 1,197
Bilfinger Berger AG 13,300 847
Celanese AG 1,200 103
Celesio AG (N) 10,000 941
Commerzbank AG (N) 164,553 6,820
Continental AG (N) 58,900 7,013
DaimlerChrysler AG (N) 14,900 817
Deutsche Bank AG 34,451 4,230
Deutsche Boerse AG (N) 37,797 5,466
Deutsche Lufthansa AG (N) 130,792 2,412
Deutsche Post AG 127,730 3,405
Deutsche Telekom AG (N) 184,790 3,338
E.ON AG (N) 125,932 15,336
Hannover Rueckversicherung AG (N) 58,940 2,185
Hochtief AG 10,100 691
Hypo Real Estate Holding AG 27,625 1,932
Infineon Technologies AG (AE) 174,360 2,132
MAN AG (N) 63,400 4,806
Medion AG (N) 23,550 345
Merck KGaA 26,500 2,808
Metro AG (N) 24,950 1,413
MLP AG 2,400 59
Muenchener Rueckversicherungs AG (N) 28,073 3,978
RWE AG (N) 98,129 8,508
Salzgitter AG 15,200 1,206
SAP AG (N) 37,137 8,115
Schering AG (N) 30,677 3,294
Siemens AG 65,379 6,186
Suedzucker AG (N) 12,200 334
ThyssenKrupp AG 11,600 382
TUI AG (N) 49,200 1,048
Volkswagen AG (N) 38,078 2,941
Wacker Chemie AG (AE) 4,650 610
------------
119,166
------------
Greece - 0.4%
EFG Eurobank Ergasias SA 46,300 1,845
National Bank of Greece SA 25,600 1,271
OPAP SA 88,887 3,286
Public Power Corp. 49,430 1,266
------------
7,668
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hong Kong - 1.7%
Bank of East Asia, Ltd. (N) 470,792 1,967
BOC Hong Kong Holdings, Ltd. 73,500 152
Cheung Kong Holdings, Ltd. 60,200 678
China Mobile Hong Kong, Ltd. 253,000 1,472
China Netcom Group Corp. Hong Kong, Ltd. (N) 117,000 214
Citic Pacific, Ltd. 138,100 497
CLP Holdings, Ltd. 54,000 315
CNOOC, Ltd. (N) 3,079,000 2,482
Esprit Holdings, Ltd. 294,000 2,347
Hang Lung Properties, Ltd. 52,000 105
Henderson Land Development Co., Ltd. (N) 10,000 59
Hong Kong Exchanges and Clearing, Ltd. (N) 342,000 2,459
HongKong Electric Holdings 692,500 3,412
Hopewell Holdings (N) 79,000 230
Hutchison Telecommunications International, Ltd.
(AE) 1,390,000 2,447
Hutchison Whampoa, Ltd. 85,000 834
Hysan Development Co., Ltd. (N) 3,000 9
Jardine Matheson Holdings, Ltd. 100,100 1,812
Kerry Properties, Ltd. (N) 17,500 62
Li & Fung, Ltd. 786,000 1,865
Link REIT (The) (AE)(o) 560,500 1,236
Melco International Development 90,000 203
New World Development, Ltd. 71,000 127
Noble Group, Ltd. (N) 84,000 70
Orient Overseas International, Ltd. (N) 45,900 173
Shangri-La Asia, Ltd. 82,000 145
Shun TAK Holdings, Ltd. (N) 1,014,000 1,288
Sino Land Co. (N) 801,500 1,334
Sun Hung Kai Properties, Ltd. 24,000 274
Swire Pacific, Ltd. 80,400 822
Television Broadcasts, Ltd. 44,000 275
Wharf Holdings, Ltd. 724,537 2,906
Yue Yuen Industrial Holdings (N) 28,000 82
------------
32,353
------------
Hungary - 0.1%
OTP Bank Rt. 54,400 2,110
------------
</Table>
International Fund 33
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Indonesia - 0.2%
Bank Central Asia Tbk PT 2,911,500 1,450
Telekomunikasi Indonesia Tbk PT 1,532,800 1,317
Telekomunikasi Indonesia Tbk PT - ADR 5,423 187
------------
2,954
------------
Ireland - 0.5%
Allied Irish Banks PLC 58,900 1,421
Bank of Ireland 159,784 3,002
CRH PLC 95,839 3,520
Depfa Bank PLC 50,250 943
Irish Life & Permanent PLC 18,100 460
Kerry Group PLC Class A 2,370 59
Ryanair Holdings PLC - ADR (AE) 23,513 1,107
------------
10,512
------------
Israel - 0.1%
Teva Pharmaceutical Industries, Ltd. - ADR 28,900 1,170
------------
Italy - 3.2%
Assicurazioni Generali SpA (N) 79,760 2,990
Banca Intesa SpA (N) 1,247,228 7,411
Banco Popolare di Verona e Novara Scrl (N) 124,678 3,509
Benetton Group SpA (N) 13,800 210
Buzzi Unicem SpA (N) 5,100 131
Enel SpA (N) 318,350 2,754
Eni SpA (N) 434,774 13,285
ERG SpA (N) 2,600 77
Fastweb (N) 24,415 1,227
Fiat SpA (N)(AE) 69,400 978
Fondiaria-Sai SpA (N) 33,700 1,330
Italcementi SpA (N) 65,800 1,733
Lottomatica SpA (N) 18,100 835
Mediaset SpA (N) 98,870 1,251
Milano Assicurazioni SpA (N) 138,400 1,067
Parmalat Finanziaria SpA (AE)(N) 46,200 --
Recordati SpA 61,300 475
Saipem SpA (N) 99,500 2,497
Seat Pagine Gialle SpA (N)(AE) 579,400 276
Snam Rete Gas SpA (N) 111,500 500
Telecom Italia SpA (N) 637,271 1,686
UniCredito Italiano SpA (N) 2,029,632 15,294
Unipol SpA (N) 336,090 1,127
------------
60,643
------------
Japan - 21.3%
77 Bank, Ltd. (The) 172,500 1,357
Access Co., Ltd. (AE)(N) 35 314
Aderans Co., Ltd. 4,300 128
Advantest Corp. (N) 6,600 760
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Aeon Co., Ltd. 126,100 3,140
Aida Engineering, Ltd. 39,000 287
Aiful Corp. 40,003 2,389
Aioi Insurance Co., Ltd. 38,000 275
Aisin Seiki Co., Ltd. 25,900 974
Ajinomoto Co., Inc. 67,000 834
Alpen Co., Ltd. (N)(AE) 5,600 228
Alps Electric Co., Ltd. (N) 9,900 174
Arrk Corp. (N) 22,800 819
Aruze Corp. 9,900 242
Asahi Breweries, Ltd. 9,700 139
Asahi Glass Co., Ltd. (N) 335,000 4,731
Asahi Kasei Corp. 60,000 444
Astellas Pharma, Inc. 53,100 2,215
Avex Group Holdings, Inc. 4,000 119
Bandai Visual Co., Ltd. 94 380
Bank of Kyoto, Ltd. (The) (N) 23,000 266
Bridgestone Corp. 146,000 3,558
BSL Corp. (N) 55,000 96
Canon Marketing Japan, Inc. 8,000 181
Canon, Inc. 281,397 21,525
Chiyoda Corp. (N) 43,000 967
Citizen Watch Co., Ltd. (N) 20,000 195
CMK Corp. 5,400 97
Cosmo Oil Co., Ltd. (N) 56,000 322
Credit Saison Co., Ltd. 37,000 1,940
Cyber Communications, Inc. (N) 67 217
Dai Nippon Printing Co., Ltd. 34,000 609
Daiei, Inc. (The) (AE)(N) 16,500 493
Daiichi Sankyo Co., Ltd. 36,700 946
Daikin Industries, Ltd. 17,200 600
Daimaru, Inc. (N) 13,000 189
Daiwa House Industry Co., Ltd. 34,000 580
Daiwa Securities Group, Inc. (N) 305,000 4,230
Denki Kagaku Kogyo Kabushiki Kaisha 46,000 211
Denso Corp. 22,100 868
Dentsu, Inc. (N) 975 3,391
East Japan Railway Co. 472 3,685
EDION Corp. (N) 45,000 1,089
Eighteenth Bank, Ltd. (The) 23,000 139
Eisai Co., Ltd. 69,500 3,180
Exedy Corp. 12,800 402
Fanuc, Ltd. 18,000 1,703
FCC Co., Ltd. 15,700 348
Frontier Real Estate Investment Corp. (o) 41 302
</Table>
34 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fuji Photo Film Co., Ltd. 95,500 3,246
Fujikura, Ltd. 25,000 289
Fujitsu, Ltd. (N) 146,000 1,217
Funai Electric Co., Ltd. (N) 15,970 1,651
Glory, Ltd. 9,700 196
Hino Motors, Ltd. (N) 241,900 1,474
Hiroshima Bank, Ltd. (The) 46,000 294
Hitachi High-Technologies Corp. 7,900 244
Hitachi Koki Co., Ltd. (N) 38,000 672
Hitachi Kokusai Electric, Inc. (N) 11,000 135
Hitachi, Ltd. (N) 575,000 4,277
Hokuhoku Financial Group, Inc. (N) 54,000 220
Honda Motor Co., Ltd. 40,500 2,877
Hoya Corp. 37,700 1,526
Index Corp. 356 478
Itochu Corp. 502,000 4,559
Itochu-Shokuhin Co., Ltd. 9,500 405
Iyo Bank, Ltd. (The) 15,000 157
Japan Asia Investment Co., Ltd. 46,000 356
Japan Logistics Fund, Inc. (o) 55 425
Japan Tobacco, Inc. (N) 1,875 7,542
JFE Holdings, Inc. (N) 135,500 5,260
JS Group Corp. 62,300 1,387
JSR Corp. 121,900 3,758
JTEKT Corp. (N) 81,000 1,746
Kadokawa Holdings, Inc. 12,400 416
Kamigumi Co., Ltd. 37,000 295
Kaneka Corp. (N) 113,000 1,274
Kansai Electric Power Co., Inc. (The) 25,600 599
Kansai Paint Co., Ltd. (N) 57,000 563
Kanto Tsukuba Bank, Ltd. (The) (AE) 8,800 144
Kao Corp. 207,700 5,582
Kawasaki Kisen Kaisha, Ltd. (N) 62,000 390
KDDI Corp. 1,205 7,429
Keihin Corp. 6,300 188
Keyence Corp. 1,900 499
Kirin Beverage Corp. 8,300 221
Kirin Brewery Co., Ltd. (N) 14,000 208
Kobayashi Pharmaceutical Co., Ltd. (N) 7,700 273
Kobe Steel, Ltd. 619,000 2,104
Koei Co., Ltd. (N) 22,410 419
Koito Manufacturing Co., Ltd. (N) 24,000 346
Komatsu, Ltd. 396,000 8,468
Kose Corp. (N) 7,810 285
Kubota Corp. 75,000 848
Kuraray Co., Ltd. (N) 99,800 1,231
Kurita Water Industries, Ltd. (N) 15,600 318
Kyocera Corp. 17,300 1,615
Kyowa Hakko Kogyo Co., Ltd. 59,000 411
Kyushu Electric Power Co., Inc. 10,800 252
Kyushu-Shinwa Holdings, Inc. (AE) 23,000 49
Leopalace21 Corp. 11,300 441
Mabuchi Motor Co., Ltd. (N) 24,000 1,353
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Makita Corp. (N) 14,000 416
Marubeni Corp. 72,000 415
Marui Co., Ltd. (N) 27,700 535
Matsumotokiyoshi Co., Ltd. (N) 39,900 1,163
Matsushita Electric Industrial Co., Ltd. 171,200 4,135
Matsushita Electric Works, Ltd. 20,000 243
Mazda Motor Corp. (N) 61,000 399
Millea Holdings, Inc. 162 3,230
Minebea Co., Ltd. (N) 79,800 517
Mitsubishi Chemical Holdings Corp. 5,500 35
Mitsubishi Corp. 101,300 2,451
Mitsubishi Electric Corp. (N) 71,000 618
Mitsubishi Estate Co., Ltd. (N) 36,000 787
Mitsubishi Gas Chemical Co., Inc. 72,000 957
Mitsubishi Logistics Corp. (N) 17,000 259
Mitsubishi Rayon Co., Ltd. (N) 223,000 2,054
Mitsubishi UFJ Financial Group, Inc. 926 14,557
Mitsui & Co., Ltd. (N) 223,000 3,370
Mitsui Chemicals, Inc. (N) 358,000 2,591
Mitsui Fudosan Co., Ltd. 244,000 5,464
Mitsui OSK Lines, Ltd. (N) 267,000 1,911
Mitsui Sumitomo Insurance Co., Ltd. 152,000 2,049
Mitsui Trust Holdings, Inc. 30,000 414
Mizuho Financial Group, Inc. 642 5,475
Mori Seiki Co., Ltd. (N) 11,900 256
Murata Manufacturing Co., Ltd. 13,200 961
Nabtesco Corp. (N) 15,000 190
Nafco Co., Ltd. 8,400 330
NEC Corp. (N) 58,000 406
Netprice, Ltd. (AE)(N) 73 244
Nidec Corp. (N) 6,400 493
Nikko Cordial Corp. (N) 141,500 2,290
Nintendo Co., Ltd. 34,000 5,076
Nippon Electric Glass Co., Ltd. (N) 164,300 3,708
Nippon Express Co., Ltd. (N) 584,000 3,082
Nippon Mining Holdings, Inc. 241,500 2,233
Nippon Oil Corp. 143,000 1,132
Nippon Paper Group, Inc. (N) 206 881
Nippon Steel Corp. 232,000 856
Nippon Telegraph & Telephone Corp. 343 1,536
Nippon Yusen KK (N) 95,000 582
Nissan Chemical Industries, Ltd. 16,000 271
Nissan Motor Co., Ltd. (N) 462,400 6,079
Nissha Printing Co., Ltd. 9,000 364
Nitto Denko Corp. (N) 37,500 3,145
NOK Corp. (N) 12,900 392
Nomura Holdings, Inc. 96,700 2,187
</Table>
International Fund 35
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
NSK, Ltd. 15,000 136
NTN Corp. (N) 24,000 198
NTT Urban Development Corp. (N) 73 599
Obic Co., Ltd. 2,250 461
OJI Paper Co., Ltd. (N) 73,000 436
Oki Electric Industry Co., Ltd. (N) 421,000 1,301
Okuma Holdings, Inc. (N) 7,000 95
Omron Corp. 76,000 2,123
ORIX Corp. (N) 56,070 16,841
Osaka Gas Co., Ltd. 78,000 292
Parco Co., Ltd. 25,800 296
Rakuten, Inc. (N) 5,090 4,113
Rengo Co., Ltd. (N) 34,000 268
Resona Holdings, Inc. (N) 157 535
Ricoh Co., Ltd. (N) 269,500 5,349
Rinnai Corp. (N) 40,870 1,127
Rohm Co., Ltd. (N) 24,600 2,618
Sanyo Shinpan Finance Co., Ltd. 13,150 777
SBI Holdings, Inc. 1,035 527
Sega Sammy Holdings, Inc. 42,000 1,675
Sekisui Chemical Co., Ltd. (N) 227,900 1,969
Sekisui House, Ltd. 123,300 1,909
Seven & I Holdings Co., Ltd. 14,100 546
SFCG Co., Ltd. 3,559 815
Sharp Corp. 182,100 3,197
Shin-Etsu Chemical Co., Ltd. 62,600 3,618
Shinko Electric Industries Co., Ltd. 13,800 378
Shinsei Bank, Ltd. 936,100 6,552
Shionogi & Co., Ltd. 17,000 287
Skylark Co., Ltd. (N) 73,900 1,350
Softbank Corp. (N) 6,400 165
Sohgo Security Services Co., Ltd. 25,088 410
Sompo Japan Insurance, Inc. 118,000 1,710
Sony Corp. (N) 17,600 884
Stanley Electric Co., Ltd. (N) 27,300 635
Sumisho Lease Co., Ltd. 5,700 327
Sumitomo Chemical Co., Ltd. 49,000 429
Sumitomo Electric Industries, Ltd. (N) 46,800 743
Sumitomo Forestry Co., Ltd. 31,000 316
Sumitomo Heavy Industries, Ltd. 377,000 3,973
Sumitomo Metal Industries, Ltd. 719,000 3,031
Sumitomo Mitsui Financial Group, Inc. (N) 1,329 14,590
Sumitomo Realty & Development Co., Ltd. (N) 97,000 2,573
Sumitomo Trust & Banking Co., Ltd. (The) 89,000 947
Sumitomo Warehouse Co., Ltd. (The) (N) 40,000 311
T&D Holdings, Inc. 12,450 955
Take And Give Needs Co., Ltd. (N) 464 705
Takeda Pharmaceutical Co., Ltd. 144,700 8,845
Takefuji Corp. (N) 38,110 2,477
Tanabe Seiyaku Co., Ltd. 16,000 189
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TDK Corp. 20,300 1,699
Teijin, Ltd. (N) 154,000 1,056
Telewave, Inc. (N) 93 270
Terumo Corp. 14,800 530
Toagosei Co., Ltd. (N) 41,000 175
Toho Titanium Co., Ltd. 1,100 82
Tohoku Electric Power Co., Inc. 12,700 293
Tokai Carbon Co., Ltd. (N) 70,000 436
Tokuyama Corp. 65,600 1,083
Tokyo Electric Power Co., Inc. (The) 88,200 2,266
Tokyo Electron, Ltd. 38,100 2,744
Tokyo Gas Co., Ltd. (N) 710,000 3,436
Toppan Printing Co., Ltd. 33,000 441
Toshiba Corp. (N) 219,000 1,394
Toshiba Machine Co., Ltd. (N) 15,000 179
Tosoh Corp. 59,000 289
Toyobo Co., Ltd. 45,000 141
Toyoda Gosei Co., Ltd. 36,200 998
Toyota Motor Corp. 522,400 30,555
Trend Micro, Inc. (N) 12,000 465
Ube Industries, Ltd. (N) 50,000 167
UFJ NICOS Co., Ltd. (N) 9,000 80
Ulvac, Inc. 2,400 104
UNY Co., Ltd. 26,000 465
Valor Co., Ltd. 15,000 306
West Japan Railway Co. 439 1,951
Xebio Co., Ltd. 8,550 291
Yahoo! Japan Corp. 1,104 644
Yamada Denki Co., Ltd. 37,100 4,043
Yamaha Motor Co., Ltd. 18,400 507
Yokogawa Electric Corp. (N) 19,100 303
Yokohama Rubber Co., Ltd. (The) (N) 44,000 231
------------
405,856
------------
Luxembourg - 0.5%
Arcelor (N) 41,599 1,711
Arcelor 1,500 62
SES Global SA (N) 206,014 3,376
Tenaris SA - ADR 104,500 4,796
------------
9,945
------------
Mexico - 0.9%
America Movil SA de CV Series L 147,100 5,429
Cemex SA de CV 108,000 730
Coca-Cola Femsa SA de CV - ADR 32,800 1,056
Fomento Economico Mexicano SA de CV - ADR 17,600 1,635
</Table>
36 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Grupo Televisa SA - ADR 338,770 7,182
Telefonos de Mexico SA de CV
Series L 41,780 919
------------
16,951
------------
Netherlands - 4.1%
ABN AMRO Holding NV (N) 185,825 5,554
Aegon NV (N) 176,275 3,218
ASML Holding NV (AE) 126,298 2,677
Buhrmann NV (N) 59,500 1,154
CSM Class A 4,700 143
Euronext NV (N) 57,648 5,153
European Aeronautic Defense and Space Co. NV (N) 101,000 3,986
Hagemeyer NV (AE)(N) 34,400 187
Heineken Holding NV 1,700 61
Heineken NV (N) 83,762 3,393
Hunter Douglas NV 1,800 127
ING Groep NV (N) 391,673 15,941
Koninklijke Philips Electronics NV 4,580 158
Koninklijke Philips Electronics NV (N) 267,164 9,218
OCE NV (N) 18,200 303
Randstad Holdings NV 34,100 2,267
Reed Elsevier NV (N) 268,874 3,986
Rodamco Europe NV 9,100 979
Royal Dutch Shell PLC Class A 159,040 5,441
Royal KPN NV 70,400 827
Royal Numico NV (AE) 85,000 3,852
SBM Offshore NV 15,900 1,706
Unilever NV (N) 30,500 2,203
USG People NV 9,300 801
Vedior NV 68,300 1,592
VNU NV 78,520 2,695
Wolters Kluwer NV 12,396 323
------------
77,945
------------
New Zealand - 0.1%
Telecom Corp. of New Zealand, Ltd. (N) 768,437 2,812
------------
Norway - 0.9%
Acergy SA (AE)(N) 77,100 1,257
Aker Kvaerner ASA (N) 43,200 4,204
DNB NOR ASA (N) 134,363 1,863
Norsk Hydro ASA (N) 3,100 477
PAN Fish ASA (AE) 1,425,000 1,447
Statoil ASA (N) 214,350 7,058
Yara International ASA (N) 31,600 509
------------
16,815
------------
Poland - 0.1%
Powszechna Kasa Oszczednosci Bank Polski SA 85,972 1,081
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Singapore - 1.1%
CapitaLand, Ltd. 140,000 434
City Developments, Ltd. 41,000 262
CSE Global, Ltd. 107,000 70
DBS Group Holdings, Ltd. (N) 365,240 4,112
Flextronics International, Ltd. (AE)(N) 106,600 1,211
Fraser and Neave, Ltd. 18,000 252
Jardine Cycle & Carriage, Ltd. 32,000 227
Keppel Corp., Ltd. (N) 295,000 2,855
NatSteel, Ltd. 52,400 47
Oversea-Chinese Banking Corp. 592,800 2,550
Parkway Holdings, Ltd. 182,000 300
SembCorp Industries, Ltd. 95,580 218
Singapore Airlines, Ltd. 17,000 153
Singapore Petroleum Co., Ltd. (N) 38,000 138
Singapore Post, Ltd. 316,000 226
Singapore Technologies Engineering, Ltd. 104,000 205
Singapore Telecommunications, Ltd. 3,302,720 5,724
United Overseas Bank, Ltd. 247,100 2,548
United Overseas Land, Ltd. 30,900 60
United Test and Assembly Center, Ltd. (AE) 427,000 278
------------
21,870
------------
South Africa - 0.1%
Nedbank Group, Ltd. 49,659 1,037
------------
South Korea - 1.2%
Daewoo Securities Co., Ltd. (N) 55,140 1,000
Hana Financial Group, Inc. 22,624 1,111
Kookmin Bank 13,410 1,201
Korea Electric Power Corp. - ADR (N) 40,010 912
KT Corp. - ADR (N) 48,000 1,117
Lotte Shopping Co. - GDR (AE)(p) 58,871 1,230
NHN Corp. (AE) 8,724 3,098
Samsung Electronics Co., Ltd. (N) 16,159 11,033
SK Telecom Co., Ltd. - ADR 56,890 1,519
------------
22,221
------------
Spain - 2.8%
Actividades de Construccion y Servicios SA 49,892 2,072
Altadis SA 91,321 4,334
Antena 3 de Television SA (N) 23,400 616
Banco Bilbao Vizcaya Argentaria SA (N) 295,865 6,536
</Table>
International Fund 37
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Banco Santander Central Hispano SA (N) 426,209 6,608
Cia de Distribucion Integral Logista SA 10,800 640
Corp Mapfre SA 105,180 2,224
Ebro Puleva SA (N) 29,900 592
Endesa SA (N) 95,600 3,175
Fomento de Construcciones y Contratas SA (N) 6,500 527
Gamesa Corp. Tecnologica SA (N) 25,000 544
Gas Natural SDG SA (N) 21,350 651
Gestevision Telecinco SA (N) 51,500 1,316
Iberdrola SA 221,286 7,208
Indra Sistemas SA 58,900 1,213
Repsol YPF SA (N) 132,500 3,958
Repsol YPF SA - ADR (N) 60,383 1,803
Sociedad General de Aguas de Barcelona SA Class
A 2,400 67
Telefonica SA 577,210 9,248
Union Fenosa SA 6,442 249
------------
53,581
------------
Sweden - 1.8%
Alfa Laval AB 2,000 65
Atlas Copco AB Class A (N) 244,540 7,227
Billerud AB (N) 6,000 104
Electrolux AB (N) 11,200 336
Elekta AB Class B (N) 6,300 104
Fabege AB (N) 1,800 35
Hennes & Mauritz AB Series B (N) 50,744 1,927
Lundin Petroleum AB (AE)(N) 16,200 223
Nordea Bank AB 82,000 1,056
OMX AB (N) 9,800 188
Sandvik AB (N) 44,660 2,907
Securitas AB Series B (N) 82,673 1,724
Skandinaviska Enskilda Banken AB Class A (N) 24,200 610
Skanska AB Class B (N) 8,200 142
Ssab Svenskt Stal AB (N)(AE) 11,200 635
Svenska Cellulosa AB Series B (N) 28,840 1,307
Svenska Handelsbanken Series A (N) 114,050 3,278
Swedish Match AB (N) 4,100 62
Telefonaktiebolaget LM Ericsson
Series B (N) 3,380,977 12,037
TeliaSonera AB (N) 47,000 292
Volvo AB Class A (N) 3,600 178
Volvo AB Class B (N) 100 5
------------
34,442
------------
Switzerland - 6.7%
ABB, Ltd. (N)(AE) 763,979 10,903
Ciba Specialty Chemicals AG (N) 39,280 2,410
Clariant AG (N) 60,760 946
Compagnie Financiere Richemont AG Class A 88,977 4,610
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Credit Suisse Group (N) 214,417 13,468
Georg Fischer AG 316 154
Givaudan (N) 559 469
Julius Baer Holding AG Class B (N) 51,137 4,903
Kuehne & Nagel International AG (N) 1,614 585
Logitech International SA (AE) 69,558 2,888
Nestle SA (N) 44,276 13,504
Novartis AG 176,551 10,129
Pargesa Holding SA Class B 6,653 676
Rieter Holding AG 100 44
Roche Holding AG (N) 127,477 19,602
Sulzer AG (AE) 1,569 1,323
Swatch Group AG (N) 63,376 2,325
Swiss Life Holding (N) 589 136
Swiss Reinsurance (N) 69,730 5,088
Swiss Reinsurance (AE) 69,730 --
Syngenta AG 22,510 3,140
Synthes, Inc. 24,644 3,060
UBS AG (N) 168,215 19,938
Xstrata PLC (N) 135,661 4,908
Zurich Financial Services AG 7,302 1,777
------------
126,986
------------
Taiwan - 0.2%
HON HAI Precision Industry Co. Ltd. 209,000 1,418
Taiwan Semiconductor Manufacturing Co., Ltd. -
ADR 40,300 423
United Microelectronics Corp. - ADR 370,908 1,398
------------
3,239
------------
Thailand - 0.1%
Bangkok Bank PCL 388,480 1,232
------------
United Kingdom - 18.9%
3i Group PLC 166,185 2,703
Amvescap PLC 182,700 1,997
Anglo American PLC 131,035 5,579
Antofagasta PLC 20,000 859
ARM Holdings PLC 944,587 2,343
Associated British Foods PLC 17,300 240
AstraZeneca PLC 275,511 15,223
Aviva PLC 478,334 6,987
BAA PLC 14,900 230
BAE Systems PLC 1,095,600 8,341
Barclays PLC 804,817 10,053
Barratt Developments PLC 44,600 807
BG Group PLC 1,065,692 14,322
</Table>
38 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
BHP Billiton PLC 318,921 6,566
BOC Group PLC 131,086 3,724
Boots Group PLC (N) 331,535 4,238
BP PLC 1,899,726 23,436
Bradford & Bingley PLC 84,100 742
Brambles Industries PLC 554,359 4,584
British Airways PLC (AE) 127,200 780
British American Tobacco PLC 337,000 8,616
British Land Co. PLC 130,600 2,991
BT Group PLC 632,789 2,530
Capita Group PLC 131,400 1,116
Carphone Warehouse Group PLC 615,784 3,770
Centrica PLC 615,923 3,355
Charter PLC (AE) 15,500 226
Compass Group PLC 158,274 683
Cookson Group PLC 56,500 547
Corus Group PLC 351,100 541
Diageo PLC 312,892 5,164
DSG International PLC 8,700 29
EMI Group PLC 659,325 3,391
Friends Provident PLC 509,550 1,828
George Wimpey PLC 219,900 2,099
GKN PLC 649,616 3,714
GlaxoSmithKline PLC 799,508 22,686
Hammerson PLC 1,300 28
Hanson PLC 146,500 1,957
Hays PLC 510,300 1,573
HBOS PLC 666,103 11,691
HMV Group PLC 184,800 602
HSBC Holdings PLC 483,365 8,352
Imperial Tobacco Group PLC 43,100 1,339
Inchcape PLC 2,800 139
Intercontinental Hotels Group PLC 83,020 1,464
International Power PLC 178,200 968
ITV PLC 42,000 88
J Sainsbury PLC 720,184 4,390
Ladbrokes PLC 301,579 2,307
Land Securities Group PLC 12,500 423
Legal & General Group PLC 278,300 703
Liberty International PLC 4,800 100
Lloyds TSB Group PLC 891,836 8,676
London Stock Exchange PLC (AE) 236,000 5,324
Man Group PLC 86,952 4,007
Marks & Spencer Group PLC 232,000 2,477
Michael Page International PLC 127,600 891
Mitchells & Butlers PLC 187,000 1,679
Next PLC 92,063 2,706
Old Mutual PLC 738,212 2,588
PartyGaming PLC 163,200 449
Pearson PLC 232,273 3,219
Persimmon PLC 84,200 2,011
Prudential PLC 130,671 1,533
Punch Taverns PLC 85,020 1,358
Reckitt Benckiser PLC 325,103 11,851
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Reed Elsevier PLC 165,840 1,648
Reuters Group PLC 253,500 1,798
RHM PLC 51,200 253
Rio Tinto PLC 96,600 5,313
Rolls-Royce Group PLC (AE) 11,085,920 22
Rolls-Royce Group PLC (AE) 226,358 1,967
Royal & Sun Alliance Insurance Group PLC 898,827 2,262
Royal Bank of Scotland Group PLC 455,514 14,877
Royal Dutch Shell PLC Class A 296,334 10,161
Royal Dutch Shell PLC Class B 145,740 5,212
SABMiller PLC 14,300 302
Scottish & Southern Energy PLC 117,000 2,400
Smith & Nephew PLC 240,084 1,985
Smiths Group PLC 230,120 4,278
Sportingbet PLC 188,400 1,453
Standard Chartered PLC 242,126 6,429
Tate & Lyle PLC 185,100 1,873
Taylor Woodrow PLC 193,800 1,354
Tesco PLC 819,310 4,773
Travis Perkins PLC 10,540 302
Trinity Mirror PLC 109,130 1,093
Unilever PLC 785,984 8,349
Vodafone Group PLC 5,822,406 13,750
Whitbread PLC 72,000 1,471
William Hill PLC 364,814 4,221
WPP Group PLC 119,500 1,475
Yell Group PLC 78,074 733
------------
361,687
------------
United States - 0.2%
Schlumberger, Ltd. 12,500 864
Transocean, Inc. (AE) 22,200 1,800
Weatherford International, Ltd. (AE) 17,000 900
------------
3,564
------------
TOTAL COMMON STOCKS
(cost $1,278,617) 1,750,119
------------
</Table>
International Fund 39
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 0.5%
Brazil - 0.1%
Banco Itau Holding Financeira SA 48,700 1,536
------------
Germany - 0.4%
Fresenius AG 16,366 2,832
Porsche AG 2,075 2,069
ProSiebenSat.1 Media AG (N) 90,200 2,499
------------
7,400
------------
TOTAL PREFERRED STOCKS
(cost $6,767) 8,936
------------
WARRANTS & RIGHTS - 0.0%
Hong Kong - 0.0%
Hutchison Whampoa Rights (AE) 85,004 --
------------
Luxembourg - 0.0%
Bharti Televentures, Ltd. (AE)
2009 Warrants 41 377
------------
Sweden - 0.0%
Ssab Svenskt Stal AB Rights (AE)
Series A 5,600 2
Series B 5,600 3
------------
5
------------
TOTAL WARRANTS & RIGHTS
(cost $192) 382
------------
</Table>
<Table>
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
$ $
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Belgium - 0.0%
Bel 20 Index
Apr 2006 3,977.11 (EUR) Call (12) 602 76
------------
Switzerland - 0.0%
Swiss Market Index
Jun 2006 7,983.03 (CHF) Call (63) 4,055 279
Jun 2006 8,016.00 (CHF) Call (12) 776 50
------------
329
------------
TOTAL OPTIONS PURCHASED
(cost $361) 405
------------
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 7.1%
United States - 7.1%
Frank Russell Investment Company
Money Market Fund 123,747,001 123,747
United States Treasury Bills (c)(z)(sec.)
4.594% due 06/15/06 7,000 6,961
4.591% due 06/22/06 5,000 4,967
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $135,675) 135,675
------------
OTHER SECURITIES - 32.9%
Frank Russell Investment Company
Money Market Fund (X) 164,625,993 164,626
State Street Securities
Lending Quality Trust (X) 463,772,227 463,772
------------
TOTAL OTHER SECURITIES
(cost $628,398) 628,398
------------
TOTAL INVESTMENTS - 132.3%
(identified cost $2,050,010) 2,523,915
OTHER ASSETS AND LIABILITIES,
NET - (32.3%) (615,688)
------------
NET ASSETS - 100.0% 1,908,227
============
</Table>
See accompanying notes which are an integral part of the financial statements.
40 International Fund
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
AEX Index (Netherlands)
expiration date 05/06 (98) 11,520 123
CAC-40 Index (France)
expiration date 05/06 (222) 14,343 61
expiration date 06/06 (121) 7,750 35
DAX Index (Germany)
expiration date 06/06 (69) 13,097 542
EUR STOXX 50 Index (EMU) expiration date 06/06
(584) 27,866 98
FTSE-100 Index (UK)
expiration date 06/06 (315) 34,491 449
Hang Seng Index (Hong Kong)
expiration date 05/06 (24) 2,558 9
OMX Stockholm 30 Index (Sweden)
expiration date 05/06 (430) 6,032 (91)
SPI 200 Index (Australia)
expiration date 06/06 (70) 6,975 330
TOPIX Index (Japan)
expiration date 06/06 (371) 56,023 3,001
Short Positions
DAX Index (Germany)
expiration date 06/06 (19) 3,606 22
Hang Seng Index (Hong Kong)
expiration date 05/06 (22) 2,345 12
IBEX Plus Index (Spain)
expiration date 05/06 (58) 8,646 (228)
MIB-30 (Italy)
expiration date 06/06 (41) 9,652 47
MSCI Singapore Index
expiration date 05/06 (9) 350 (2)
SPI 200 Index (Australia)
expiration date 06/06 (97) 9,665 (508)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 3,900
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Belgium
Bel 20 Index
Apr 2006 3,977.11 (EUR) Put (12) 602 (76)
Switzerland
Swiss Market Index
Jun 2006 7,983.03 (CHF) Put (63) 4,055 (254)
Jun 2006 8,016.00 (CHF) Put (12) 776 (48)
---------------
Total Liability for Options Written
(premiums received $361) (378)
===============
</Table>
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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 16 AUD 21 05/01/06 --
USD 57 AUD 76 05/01/06 1
USD 213 AUD 284 05/01/06 3
USD 16 AUD 21 05/02/06 --
USD 107 AUD 141 05/02/06 1
USD 18 AUD 23 05/03/06 --
USD 20 AUD 26 05/03/06 --
USD 141 AUD 200 06/21/06 10
USD 372 AUD 500 06/21/06 8
USD 657 AUD 885 06/21/06 15
USD 1,313 AUD 1,770 06/21/06 30
USD 1,314 AUD 1,770 06/21/06 30
USD 1,970 AUD 2,655 06/21/06 45
USD 1,971 AUD 2,655 06/21/06 44
USD 2,605 AUD 3,509 06/21/06 58
USD 6,736 AUD 9,200 06/21/06 247
USD 518 CHF 660 05/02/06 14
USD 59 CHF 75 05/03/06 1
USD 66 CHF 82 05/04/06 --
USD 249 CHF 314 06/21/06 6
USD 4,215 CHF 5,312 06/21/06 92
USD 8,430 CHF 10,624 06/21/06 185
USD 27,139 CHF 35,357 06/21/06 1,533
USD 2 DKK 13 06/21/06 --
USD 634 DKK 3,943 06/21/06 35
USD 151 EUR 121 05/02/06 2
USD 219 EUR 176 05/02/06 3
USD 232 EUR 185 05/02/06 1
USD 421 EUR 338 05/02/06 5
USD 998 EUR 796 05/02/06 6
USD 1,269 EUR 1,022 05/02/06 20
USD 106 EUR 85 05/03/06 1
USD 1,200 EUR 1,000 06/21/06 66
USD 1,216 EUR 1,000 06/21/06 50
USD 1,235 EUR 1,000 06/21/06 31
USD 1,238 EUR 1,000 06/21/06 28
USD 2,304 EUR 1,900 06/21/06 102
USD 2,392 EUR 2,000 06/21/06 140
USD 3,642 EUR 3,000 06/21/06 156
USD 5,436 EUR 4,400 06/21/06 134
USD 16,307 EUR 13,199 06/21/06 404
USD 20,095 EUR 16,266 06/21/06 497
USD 55,753 EUR 46,500 06/21/06 3,116
USD 1,375 GBP 770 05/02/06 29
USD 413 GBP 229 05/03/06 4
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 574 GBP 318 05/03/06 7
USD 34 GBP 19 05/04/06 --
USD 361 GBP 198 05/04/06 --
USD 525 GBP 300 06/21/06 22
USD 632 GBP 360 06/21/06 25
USD 892 GBP 500 06/21/06 21
USD 1,779 GBP 1,000 06/21/06 46
USD 2,198 GBP 1,232 06/21/06 50
USD 3,094 GBP 1,734 06/21/06 70
USD 3,109 GBP 1,773 06/21/06 126
USD 3,110 GBP 1,773 06/21/06 126
USD 31,301 GBP 18,000 06/21/06 1,547
USD 108 HKD 841 06/21/06 --
USD 367 HKD 2,842 06/21/06 --
USD 22 JPY 2,481 05/01/06 --
USD 639 JPY 73,372 05/01/06 6
USD 37 JPY 4,247 05/02/06 --
USD 78 JPY 8,908 05/02/06 --
USD 132 JPY 14,968 05/08/06 1
USD 854 JPY 100,000 06/21/06 31
USD 856 JPY 100,000 06/21/06 29
USD 861 JPY 100,000 06/21/06 24
USD 863 JPY 100,000 06/21/06 22
USD 870 JPY 100,000 06/21/06 14
USD 871 JPY 100,000 06/21/06 14
USD 1,703 JPY 200,000 06/21/06 67
USD 5,336 JPY 627,436 06/21/06 216
USD 34,387 JPY 4,000,000 06/21/06 1,010
USD 398 NOK 2,543 06/21/06 16
USD 1,652 NOK 10,547 06/21/06 65
USD 2,477 NOK 15,820 06/21/06 98
USD 13,008 NOK 82,117 06/21/06 359
USD 18,317 NOK 115,667 06/21/06 511
USD 140 SEK 1,049 05/02/06 3
USD 376 SEK 2,813 05/02/06 6
USD 65 SEK 478 05/04/06 --
USD 2,322 SEK 17,530 06/21/06 71
USD 3,480 SEK 26,295 06/21/06 109
USD 3,482 SEK 26,295 06/21/06 107
USD 10,185 SEK 76,894 06/21/06 311
USD 54 SGD 85 05/02/06 --
USD 888 SGD 1,417 06/21/06 10
USD 13,174 SGD 21,358 06/21/06 368
USD 25 THB 959 05/02/06 --
AUD 20 USD 15 05/01/06 --
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
AUD 13 USD 10 05/02/06 --
AUD 36 USD 27 05/02/06 --
AUD 7 USD 5 05/03/06 --
AUD 23 USD 18 05/03/06 --
AUD 28 USD 21 05/03/06 --
AUD 500 USD 369 06/21/06 (11)
AUD 1,000 USD 732 06/21/06 (27)
AUD 1,775 USD 1,288 06/21/06 (59)
AUD 12,634 USD 9,235 06/21/06 (355)
CHF 7 USD 5 05/02/06 --
CHF 19 USD 15 05/02/06 --
CHF 21 USD 17 05/03/06 --
CHF 489 USD 389 05/03/06 (6)
CHF 6,932 USD 5,438 06/21/06 (183)
CHF 20,800 USD 16,315 06/21/06 (553)
CHF 25,766 USD 20,209 06/21/06 (686)
DKK 1,603 USD 264 06/21/06 (8)
EUR 21 USD 26 05/02/06 --
EUR 383 USD 476 05/02/06 (7)
EUR 17 USD 22 05/03/06 --
EUR 18 USD 22 05/03/06 --
EUR 82 USD 103 05/03/06 (1)
EUR 127 USD 159 05/03/06 (1)
EUR 361 USD 452 05/03/06 (3)
EUR 567 USD 711 05/03/06 (5)
EUR 5 USD 6 05/04/06 --
EUR 132 USD 167 05/04/06 --
EUR 366 USD 462 05/04/06 1
EUR 300 USD 367 06/21/06 (13)
EUR 781 USD 968 06/21/06 (20)
EUR 800 USD 1,006 06/21/06 (7)
EUR 1,000 USD 1,226 06/21/06 (40)
EUR 1,000 USD 1,209 06/21/06 (57)
EUR 1,000 USD 1,267 06/21/06 1
EUR 1,000 USD 1,200 06/21/06 (66)
EUR 1,500 USD 1,874 06/21/06 (25)
EUR 1,500 USD 1,873 06/21/06 (26)
EUR 2,600 USD 3,147 06/21/06 (145)
EUR 2,626 USD 3,256 06/21/06 (69)
EUR 2,626 USD 3,256 06/21/06 (68)
EUR 5,000 USD 5,998 06/21/06 (332)
EUR 10,503 USD 13,025 06/21/06 (271)
EUR 14,879 USD 18,450 06/21/06 (386)
EUR 29,800 USD 35,740 06/21/06 (1,987)
GBP 40 USD 71 05/02/06 (2)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
GBP 146 USD 260 05/02/06 (6)
GBP 171 USD 309 05/02/06 (3)
GBP 264 USD 471 05/02/06 (10)
GBP 700 USD 1,223 06/21/06 (55)
GBP 1,000 USD 1,826 06/21/06 1
GBP 1,000 USD 1,804 06/21/06 (21)
GBP 2,000 USD 3,477 06/21/06 (173)
GBP 9,362 USD 16,180 06/21/06 (904)
GBP 5,842 USD 10,445 07/31/06 (223)
HKD 164 USD 21 05/02/06 --
HKD 111 USD 14 05/03/06 --
HKD 54 USD 7 06/21/06 --
IDR 257,255 USD 29 05/01/06 --
IDR 40,726 USD 5 05/02/06 --
IDR 151,540 USD 17 05/02/06 --
IDR 135,606 USD 15 05/03/06 --
JPY 855 USD 7 05/01/06 --
JPY 995 USD 9 05/01/06 --
JPY 5,452 USD 47 05/01/06 (1)
JPY 19,000 USD 165 05/01/06 (2)
JPY 56,650 USD 492 05/01/06 (6)
JPY 795 USD 7 05/02/06 --
JPY 1,891 USD 17 05/02/06 --
JPY 3,945 USD 35 05/02/06 --
JPY 10,000 USD 88 05/02/06 --
JPY 61,915 USD 543 05/02/06 (1)
JPY 842 USD 7 05/08/06 --
JPY 100,000 USD 859 06/21/06 (26)
JPY 100,000 USD 861 06/21/06 (24)
JPY 100,000 USD 862 06/21/06 (23)
JPY 100,000 USD 862 06/21/06 (23)
JPY 100,000 USD 862 06/21/06 (23)
JPY 173,258 USD 1,493 06/21/06 (40)
JPY 175,926 USD 1,510 06/21/06 (46)
JPY 200,000 USD 1,769 06/21/06 (1)
JPY 200,000 USD 1,756 06/21/06 (14)
JPY 245,126 USD 2,113 06/21/06 (56)
JPY 351,852 USD 3,020 06/21/06 (94)
JPY 351,852 USD 3,020 06/21/06 (93)
JPY 351,852 USD 3,021 06/21/06 (93)
JPY 400,000 USD 3,440 06/21/06 (100)
JPY 527,778 USD 4,530 06/21/06 (141)
JPY 679,561 USD 5,831 06/21/06 (183)
JPY 866,290 USD 7,467 06/21/06 (200)
JPY 1,039,548 USD 8,959 06/21/06 (240)
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
PLN 200 USD 64 05/02/06 (1)
PLN 93 USD 30 05/04/06 --
SEK 4,806 USD 641 06/21/06 (15)
SEK 32,336 USD 4,316 06/21/06 (98)
SEK 42,856 USD 5,480 06/21/06 (370)
SEK 53,894 USD 7,195 06/21/06 (161)
SGD 841 USD 524 06/21/06 (9)
SGD 841 USD 524 06/21/06 (9)
SGD 1,681 USD 1,048 06/21/06 (18)
SGD 1,681 USD 1,048 06/21/06 (18)
SGD 1,681 USD 1,048 06/21/06 (18)
SGD 1,681 USD 1,048 06/21/06 (18)
SGD 2,187 USD 1,348 06/21/06 (39)
SGD 4,444 USD 2,771 06/21/06 (47)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 3,599
==============
</Table>
<Table>
<Caption>
INDEX SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------
UNREALIZED
APPRECIATION
FUND RECEIVES COUNTER NOTIONAL FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY AMOUNT FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
MSCI Austria
Local Net Total Return 1 Month EUR LIBOR
Index Merrill Lynch EUR 1,579 plus 0.15% 12/27/06 (7)
MSCI Norway I
Local Net Total Return 1 Month NOK NIBOR
Index Merrill Lynch NOK 19,701 plus 0.15% 12/27/06 10
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swaps 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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 5.6 107,116
Consumer Discretionary 8.5 162,728
Consumer Staples 6.2 118,522
Financial Services 25.6 487,317
Health Care 6.3 120,791
Integrated Oils 6.6 126,622
Materials and Processing 10.9 207,262
Miscellaneous 1.0 18,939
Other Energy 1.4 26,006
Producer Durables 8.0 152,672
Technology 3.9 72,875
Utilities 8.3 158,204
Warrants & Rights -- 382
Options Purchased -- 406
Short-Term Investments 7.1 135,675
Other Securities 32.9 628,398
--------------- ---------------
Total Investments 132.3 2,523,915
Other Assets and Liabilities, Net (32.3) (615,688)
--------------- ---------------
Net Assets 100.0 1,908,227
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 0.1 1,037
Asia 8.0 151,398
Europe 41.0 783,097
Japan 21.3 405,856
Latin America 1.2 22,887
Middle East 0.1 1,170
Other 8.8 168,386
United Kingdom 18.9 361,686
Other Securities 32.9 628,398
--------------- ---------------
Total Investments 132.3 2,523,915
Other Assets and Liabilities, Net (32.3) (615,688)
--------------- ---------------
Net Assets 100.0 1,908,227
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
International Fund 45
FRANK RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Australia 3.3
Austria 0.5
Belgium 0.9
Brazil 0.2
Canada 1.5
China 0.1
Denmark 0.1
Finland 1.2
France 10.6
Germany 6.2
Greece 0.4
Hong Kong 1.7
Hungary 0.1
Indonesia 0.2
Ireland 0.5
Israel 0.1
Italy 3.2
Japan 21.3
Luxembourg 0.5
Mexico 0.9
Netherlands 4.1
New Zealand 0.1
Norway 0.9
Poland 0.1
Singapore 1.1
South Africa 0.1
South Korea 1.2
Spain 2.8
Sweden 1.8
Switzerland 6.7
Taiwan 0.2
Thailand 0.1
United Kingdom 18.9
United States 0.2
Preferred Stocks 0.5
Warrants & Rights --*
Options Purchased --*
Short-Term Investments 7.1
Other Securities 32.9
---------------
Total Investments 132.3
Other Assets and Liabilities, Net (32.3)
---------------
100.0
===============
Futures Contracts 0.2
Options Written (--)*
Foreign Currency Exchange Contracts 0.2
Index Swap Contracts --*
</Table>
* Less than 0.5% of net assets.
See accompanying notes which are an integral part of the financial statements.
46 International Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,004.40 $ 1,021.62
Expenses Paid During
Period* $ 3.18 $ 3.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.64%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,005.40 $ 1,022.81
Expenses Paid During
Period* $ 1.99 $ 2.01
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.40%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,005.60 $ 1,023.01
Expenses Paid During
Period* $ 1.79 $ 1.81
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.36%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
Fixed Income I Fund 47
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 98.3%
Asset-Backed Securities - 7.4%
AAA Trust (p)
Series 2005-2 Class A1
5.059% due 11/26/35 202 203
Aames Mortgage Investment
Trust (E)(p)
Series 2005-3 Class A1
5.109% due 08/25/35 1,237 1,237
ABSC NIMs Trust (p)
Series 2005-HE6 Class A1
5.050% due 08/27/35 240 237
Accredited Mortgage Loan Trust (E)
Series 2004-2 Class A2
5.259% due 07/25/34 144 145
ACE Securities Corp. (E)
Series 2001-HE1 Class A
5.663% due 11/20/31 462 462
Series 2005-SD3 Class A
5.359% due 08/25/45 879 879
American Express Credit Account Master Trust
(E)(p)
Series 2006-A Class A
4.891% due 08/15/11 1,680 1,679
Ameriquest Mortgage Securities, Inc. (E)
Series 2002-D Class M1
7.459% due 02/25/33 155 156
Series 2004-R10 Class A5
5.349% due 11/25/34 207 207
Argent Securities, Inc. (E)
Series 2004-W3 Class A2
5.179% due 02/25/34 6 6
Asset Backed Funding Corp.
NIMs Trust (p)
Series 2005-WF1 Class N1
4.750% due 03/26/35 216 214
Asset Backed Securities Corp.
Home Equity (E)
Series 2006-HE2 Class A1A
5.059% due 03/25/36 2,535 2,536
Bank One Issuance Trust (E)
Series 2003-A1 Class A1
5.021% due 09/15/10 1,600 1,602
Bayview Financial Acquisition Trust
Series 2006-A Class 1A3
5.865% due 02/28/41 325 317
Burlington Northern Santa Fe Corp.
4.967% due 04/01/23 223 211
Carrington Mortgage Loan Trust (E)
Series 2005-NC3 Class A1A
5.039% due 06/25/35 75 75
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Chase Funding Mortgage Loan Asset-Backed
Certificates (E)
Series 2002-2 Class 2A1
5.209% due 05/25/32 285 286
Chase Issuance Trust (E)
Series 2005-A3 Class A
4.921% due 10/17/11 3,095 3,096
Countrywide Asset-Backed Certificates
Series 2001-BC3 Class A (E)
5.439% due 12/25/31 93 93
Series 2003-BC2 Class 2A1 (E)
5.259% due 06/25/33 3 3
Series 2003-BC4 Class 2A2 (E)
5.279% due 09/25/33 53 53
Series 2004-13 Class AF2
3.683% due 08/25/24 860 856
Series 2004-14N Class N (p)
5.000% due 06/25/36 77 77
Series 2004-BC1 Class M1 (E)
5.459% due 02/25/34 190 191
Series 2004-S1 Class A1 (E)
5.179% due 12/25/18 524 524
Series 2005-17 Class 1AF1 (E)
5.159% due 12/25/36 581 581
Series 2005-17 Class 4AV1 (E)
5.069% due 12/25/36 1,555 1,555
Series 2005-2N Class N (p)
4.500% due 08/25/36 169 166
Series 2005-5N Class N (p)
5.000% due 07/25/36 163 153
Series 2005-AB3 Class 2A1 (E)
5.079% due 02/25/36 1,308 1,308
Series 2005-SD2 Class A1A (E)(p)
5.119% due 08/25/35 589 589
Countrywide Home Equity Loan Trust (E)
Series 2005-A Class 2A
5.141% due 04/15/35 264 264
Series 2005-G Class 2A
5.131% due 12/15/35 1,274 1,274
Credit-Based Asset Servicing and Securitization
(E)
Series 2005-CB5 Class AV2
5.219% due 08/25/35 360 361
Daimler Chrysler Master Owner Trust (E)
Series 2005-A Class A
4.951% due 04/15/10 6,720 6,721
</Table>
48 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Discover Card Master Trust I (E)
Series 2005-1 Class A
4.911% due 09/16/10 3,075 3,076
Equifirst Mortgage Loan Trust (E)
Series 2004-3 Class A2
5.289% due 12/25/34 2,450 2,454
Series 2005-1 Class A1
5.019% due 04/25/35 242 242
Equifirst Mortgage Loan Trust
NIMs Notes (p)
Series 2005-1 Class N1
4.458% due 04/25/35 533 531
Fannie Mae Grantor Trust (E)
Series 2002-T13 Class A1
5.059% due 08/25/32 7 7
Series 2002-T5 Class A1
5.079% due 05/25/32 520 520
Series 2005-T3 Class A1A
4.999% due 07/25/35 1,737 1,737
Fannie Mae Whole Loan (E)
Series 2002-W2 Class AV1
5.219% due 06/25/32 214 214
Series 2003-W16 Class AV1
5.109% due 11/25/33 222 222
FHA Proj Citi 68 NP
7.430% due 06/27/21 256 257
First Franklin Mortgage Loan Asset Backed
Certificates (E)
Series 2004-FF1 Class A2
5.359% due 12/25/32 1,235 1,238
Series 2004-FFH Class 2A1
5.339% due 10/25/34 781 784
Series 2006-FF3 Class A2A
5.039% due 02/25/36 1,243 1,243
Ford Credit Floorplan Master Owner Trust
Series 2001-2 Class A (E)
5.041% due 07/15/08 1,115 1,115
Series 2004-1 Class A (E)
4.941% due 07/15/09 1,770 1,768
Fremont NIMs Trust
3.750% due 01/25/35 (p) 251 249
Series 2005-C Class NOTE (p)
5.584% due 07/25/35 101 101
GE Dealer Floorplan Master Note Trust (E)
Series 2004-2 Class A
5.003% due 07/20/09 955 956
Series 2005-1 Class A
4.963% due 04/20/10 1,425 1,425
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 590 581
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Greenpoint Mortgage Funding Trust (E)
Series 2005-HE4 Class 2A1C
5.069% due 07/25/30 668 668
GSAA Home Equity Trust
Series 2006-4 Class 1A2
5.989% due 03/25/36 531 529
GSAA Trust (E)
Series 2006-2 Class 2A3
5.229% due 12/25/35 570 571
GSAMP Trust (E)
Series 2003-AHL Class A2A
5.159% due 10/25/33 10 10
Series 2003-HE2 Class M1
5.609% due 08/25/33 300 301
Series 2004-NC1 Class A3
5.349% due 03/25/34 235 236
Series 2004-SEA Class A1A
5.149% due 10/25/33 124 124
Harborview Mortgage Loan Trust
Series 2006-3 Class 1A1A
6.494% due 04/25/36 7,030 7,116
Home Equity Asset Trust (E)
Series 2003-5 Class M1
5.659% due 12/25/33 345 347
Series 2005-2 Class 2A2
5.159% due 07/25/35 290 290
Home Equity Mortgage Trust (E)
Series 2005-4 Class A2A
5.069% due 01/25/36 735 735
HSI Asset Securitization Corp. Trust (E)
Series 2005-I1 Class 2A1
5.079% due 11/25/35 1,540 1,541
IndyMac Home Equity Loan Asset-Backed Trust (E)
Series 2006-1 Class A1
5.089% due 05/25/36 1,415 1,415
IndyMac Residential Asset Backed Trust (E)
Series 2005-A Class AII1
5.069% due 03/25/35 55 55
JP Morgan Mortgage Acquisition Corp. (E)
Series 2005-FLD Class A1
5.079% due 08/25/27 945 945
</Table>
Fixed Income I Fund 49
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lehman XS Trust (E)
Series 2005-1 Class 2A1
4.660% due 07/25/35 1,095 1,079
Series 2005-1 Class 2A2
4.660% due 05/25/08 371 372
Long Beach Asset Holdings Corp. (p)
Series 2005-1 Class N1
4.115% due 02/25/35 116 116
Long Beach Mortgage Loan Trust (E)
Series 2005-WL1 Class 2A1
4.928% due 06/25/35 387 388
Mastr Asset Backed Securities Trust (E)
Series 2003-WMC Class M2
6.609% due 08/25/33 250 251
Series 2004-OPT Class A3
5.219% due 02/25/34 113 113
MBNA Credit Card Master Note Trust (E)
Series 2001-A3 Class A3
5.178% due 12/15/08 3,230 3,231
Merrill Auto Trust Securitization (E)
Series 2005-1 Class A2B
4.969% due 04/25/08 911 911
Morgan Stanley ABS Capital I (E)
Series 2003-NC8 Class M3
7.059% due 09/25/33 335 339
Navistar Financial Corp. Owner Trust (E)
Series 2003-B Class A3
5.101% due 04/15/08 449 449
New Century Home Equity Loan Trust (E)
Series 2004-4 Class M2
5.489% due 02/25/35 370 372
Series 2005-B Class A2A
5.079% due 10/25/35 1,245 1,245
Nissan Master Owner Trust Receivables (E)
Series 2005-A Class A
4.931% due 07/15/10 1,305 1,305
Novastar Home Equity Loan (E)
Series 2005-1 Class A2A
5.079% due 06/25/35 372 372
Option One Mortgage Loan Trust (E)
Series 2001-4 Class A
5.559% due 01/25/32 179 179
Series 2002-2 Class A
5.499% due 06/25/32 179 179
Series 2003-1 Class A2
5.379% due 02/25/33 206 206
Series 2003-2 Class A2
5.259% due 04/25/33 82 83
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-2 Class M2
6.659% due 04/25/33 435 438
Series 2003-3 Class M3
6.959% due 06/25/33 260 262
Series 2003-4 Class M2
6.609% due 07/25/33 235 237
Option One Mortgage Securities Corp. NIMs Trust
(E)(p)
Series 2006-1A Class NOTE
5.059% due 12/25/10 2,271 2,271
Origen Manufactured Housing
Series 2005-B Class A4
5.910% due 01/15/37 100 97
Park Place Securities, Inc. (E)
Series 2004-WWF Class A1D
5.419% due 02/25/35 1,163 1,166
Series 2005-WCW Class M1
5.409% due 09/25/35 370 371
Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF2
3.914% due 05/25/35 160 158
Series 2005-6 Class A3
5.680% due 01/25/36 390 387
Ramp NIMs Trust (p)
Series 2005-NM2 Class NOTE
5.193% due 04/25/35 162 162
Renaissance Home Equity Loan Trust
Series 2005-3 Class AF1 (E)
5.109% due 11/25/35 1,208 1,208
Series 2005-3 Class AV1 (E)
5.099% due 11/25/35 1,284 1,284
Series 2005-4 Class N (p)
7.142% due 02/25/36 428 427
Series 2006-1 Class AF6
5.746% due 05/25/36 305 302
Renaissance NIMs Trust (p)
Series 2004-D Class NOTE
4.459% due 02/25/35 81 81
Residential Asset Mortgage Products, Inc.
Series 2002-RS5 Class AII (E)
5.329% due 09/25/32 224 224
Series 2003-RS1 Class AI6A
5.980% due 12/25/33 345 346
Series 2003-RS1 Class AII (E)
5.349% due 02/25/33 241 242
Series 2003-RS2 Class AII (E)
5.299% due 03/25/33 237 237
</Table>
50 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-RS3 Class AII (E)
5.319% due 04/25/33 169 169
Series 2004-RS2 Class AIIB (E)
5.209% due 02/25/34 255 256
Series 2004-RS8 Class AI2
3.810% due 01/25/26 74 73
Residential Asset Securities Corp.
Series 2001-KS1 Class AII (E)
5.194% due 03/25/32 134 134
Series 2001-KS3 Class AII (E)
5.189% due 09/25/31 113 113
Series 2002-KS3 Class A1B (E)
5.209% due 05/25/32 224 224
Series 2003-KS1 Class M2 (E)
6.709% due 01/25/33 133 134
Series 2003-KS2 Class MI1
4.800% due 04/25/33 755 732
Series 2003-KS4 Class AIIB (E)
5.249% due 06/25/33 265 266
Series 2004-KS8 Class AI2
3.340% due 10/25/24 784 779
Residential Funding Mortgage Securities II (E)
Series 2005-HI2 Class A1
5.099% due 05/25/35 1,204 1,204
Series 2005-HS1 Class AI1
5.079% due 09/25/35 1,294 1,291
Saxon Asset Securities Trust (E)
Series 2004-1 Class A
5.229% due 03/25/35 292 292
Securitized Asset Backed Receivables LLC Trust
(E)
Series 2004-OP1 Class A2
5.209% due 02/25/34 83 83
Series 2005-FR4 Class A3
5.159% due 01/25/36 590 590
SLM Student Loan Trust (E)
Series 2004-1 Class A1
5.140% due 01/26/15 1,667 1,668
Series 2006-1 Class A1
5.080% due 01/25/12 2,131 2,131
Small Business Administration
Series 2000-P10 Class 1
7.449% due 08/01/10 102 107
Soundview NIMs Trust
4.703% due 06/25/35 272 271
Specialty Underwriting & Residential Finance (E)
Series 2003-BC1 Class A
5.299% due 01/25/34 15 15
Series 2004-BC2 Class A2
5.229% due 05/25/35 299 300
Series 2006-AB1 Class A2
4.958% due 12/25/36 850 850
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Structured Asset Investment Loan Trust (E)
Series 2003-BC1 Class 3A5
5.439% due 10/25/33 67 67
Series 2004-7 Class A1
5.214% due 08/25/34 1,002 1,005
Series 2005-3 Class M2
5.399% due 04/25/35 210 211
Structured Asset Securities Corp.
Series 2002-AL1 Class A3
3.450% due 02/25/32 245 221
Series 2003-BC1 Class A (E)
5.459% due 05/25/32 87 88
Series 2004-19X Class A2
4.370% due 10/25/34 765 758
Tenaska Alabama II Partners, LP (p)
6.125% due 03/30/23 228 223
Textron Financial Floorplan Master Note Trust
(E)(p)
Series 2005-1A Class A
5.030% due 05/13/10 1,640 1,644
Volkswagen Credit Auto Master Trust (E)
Series 2005-1 Class A
4.943% due 07/20/10 1,485 1,485
Wachovia Asset Securitization, Inc. (E)
Series 2003-HE3 Class A
5.209% due 11/25/33 289 290
Wachovia Mortgage Loan Trust LLC (E)
Series 2005-WMC Class A1
5.069% due 10/25/35 953 953
------------
101,637
------------
Corporate Bonds and Notes - 13.8%
Alabama Power Co.
Series X
3.125% due 05/01/08 320 307
Allstate Life Global Funding Trusts
3.850% due 01/25/08 1,355 1,321
Altria Group, Inc.
7.000% due 11/04/13 710 753
Amerada Hess Corp.
7.300% due 08/15/31 750 815
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 35 35
</Table>
Fixed Income I Fund 51
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
American General Finance Corp.
Series MTNI
5.090% due 06/27/08 (E) 1,300 1,302
4.875% due 07/15/12 1,400 1,331
American International Group, Inc. (p)
4.700% due 10/01/10 445 431
5.050% due 10/01/15 440 414
American RE Corp. (N)
Series B
7.450% due 12/15/26 435 463
Ameriprise Financial, Inc.
5.650% due 11/15/15 835 812
Anheuser-Busch Cos., Inc.
4.950% due 01/15/14 395 376
ASIF Global Financing (p)
4.900% due 01/17/13 340 326
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 935 957
Bank of America Corp.
5.875% due 02/15/09 180 183
4.500% due 08/01/10 430 415
4.375% due 12/01/10 (N) 1,520 1,452
Bear Stearns Cos., Inc. (The)
3.250% due 03/25/09 (N) 1,010 954
5.300% due 10/30/15 945 903
BellSouth Corp.
4.750% due 11/15/12 20 19
6.550% due 06/15/34 90 89
Boeing Capital Corp. (N)
6.100% due 03/01/11 150 154
Boston Scientific Corp. (N)
6.250% due 11/15/15 340 336
Burlington Northern Santa Fe Corp.
6.875% due 12/01/27 80 85
Campbell Soup Co.
5.875% due 10/01/08 165 167
Carolina Power & Light Co. (N)
5.150% due 04/01/15 840 796
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 195 193
CenterPoint Energy Resources Corp.
Series B
7.875% due 04/01/13 440 486
Cingular Wireless Services, Inc.
7.875% due 03/01/11 (N) 1,125 1,231
8.750% due 03/01/31 1,900 2,388
Cisco Systems, Inc. (N)
5.500% due 02/22/16 2,995 2,920
CIT Group, Inc.
5.750% due 09/25/07 120 121
6.875% due 11/01/09 80 83
5.400% due 03/07/13 1,395 1,358
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Citicorp
7.250% due 10/15/11 455 489
Citigroup, Inc.
3.500% due 02/01/08 985 956
5.000% due 12/26/08 (E) 700 700
4.125% due 02/22/10 630 602
6.500% due 01/18/11 300 312
5.000% due 09/15/14 5,475 5,185
Clear Channel Communications, Inc.
4.250% due 05/15/09 100 96
6.250% due 03/15/11 620 618
5.750% due 01/15/13 100 95
Clorox Co.
4.200% due 01/15/10 165 157
5.000% due 01/15/15 125 117
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 105 103
Comcast Cable Communications
6.875% due 06/15/09 480 497
Comcast Cable Communications Holdings, Inc.
8.375% due 03/15/13 2,425 2,715
Comcast Corp.
6.500% due 01/15/15 1,305 1,329
5.900% due 03/15/16 65 64
6.500% due 11/15/35 (N) 945 905
6.450% due 03/15/37 155 148
ConocoPhillips Holding Co.
6.950% due 04/15/29 1,155 1,274
Consolidated Edison Co. of New York (N)
5.375% due 12/15/15 545 529
Consolidated Natural Gas Co.
6.850% due 04/15/11 385 403
Constellation Energy Group, Inc.
6.125% due 09/01/09 635 645
COX Communications, Inc.
3.875% due 10/01/08 240 231
6.750% due 03/15/11 3,980 4,104
Credit Suisse First Boston USA, Inc.
3.875% due 01/15/09 625 602
4.875% due 08/15/10 120 117
6.500% due 01/15/12 20 21
5.500% due 08/15/13 95 93
5.125% due 08/15/15 2,060 1,945
</Table>
52 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Credit Suisse USA, Inc.
5.250% due 03/02/11 310 306
DaimlerChrysler NA Holding Corp.
4.050% due 06/04/08 165 160
5.875% due 03/15/11 300 299
8.500% due 01/18/31 (N) 975 1,130
Detroit Edison Co.
6.125% due 10/01/10 120 122
6.350% due 10/15/32 105 104
Devon Energy Corp.
7.950% due 04/15/32 770 918
Dominion Resources, Inc.
4.750% due 12/15/10 90 86
5.700% due 09/17/12 390 384
Series B
6.250% due 06/30/12 90 91
Series C
5.150% due 07/15/15 950 883
DR Horton, Inc.
6.500% due 04/15/16 660 650
Dresdner Funding Trust I (p)
8.151% due 06/30/31 410 468
DTE Energy Co.
7.050% due 06/01/11 1,400 1,474
Duke Energy Corp.
6.250% due 01/15/12 150 153
5.625% due 11/30/12 595 591
Duke Energy Field Services LLC
6.875% due 02/01/11 35 37
Eastman Kodak Co. (N)
7.250% due 11/15/13 30 29
Electronic Data Systems Corp.
7.125% due 10/15/09 460 481
Eli Lilly & Co.
6.770% due 01/01/36 485 522
Enterprise Products Operating, LP
Series B
6.650% due 10/15/34 585 568
Erac USA Finance Co. (p)
5.900% due 11/15/15 1,145 1,119
Exelon Corp.
4.900% due 06/15/15 1,065 979
5.625% due 06/15/35 520 462
FedEx Corp.
7.600% due 07/01/97 135 148
Financing Corp.
Series 10P
Zero coupon due 11/30/17 940 500
Series 2P
Zero coupon due 11/30/17 100 53
Series 6P
Zero coupon due 08/03/18 510 260
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
FirstEnergy Corp.
Series B (N)
6.450% due 11/15/11 2,385 2,459
Series C
7.375% due 11/15/31 1,125 1,222
Ford Motor Co. (N)
7.450% due 07/16/31 290 212
Ford Motor Credit Co.
4.950% due 01/15/08 320 297
7.375% due 10/28/09 2,430 2,245
General Electric Capital Corp.
3.250% due 06/15/09 1,065 1,002
4.875% due 10/21/10 1,455 1,421
5.500% due 04/28/11 140 140
4.250% due 06/15/12 860 802
4.875% due 03/04/15 (N) 805 759
Series MTNA (N)
4.250% due 01/15/08 220 216
4.125% due 09/01/09 780 752
6.000% due 06/15/12 745 762
5.450% due 01/15/13 1,530 1,518
General Electric Co.
5.000% due 02/01/13 260 251
General Motors Acceptance Corp.
6.125% due 08/28/07 (N) 760 739
5.625% due 05/15/09 1,375 1,288
7.750% due 01/19/10 230 226
General Motors Corp. (N)
8.375% due 07/15/33 90 67
Glencore Funding LLC (p)
6.000% due 04/15/14 485 457
Golden West Financial Corp.
4.125% due 08/15/07 270 266
Goldman Sachs Group, Inc.
5.000% due 01/15/11 150 146
6.875% due 01/15/11 625 657
4.750% due 07/15/13 (N) 1,055 991
5.350% due 01/15/16 1,195 1,142
Series MTNB (E)
5.226% due 07/29/08 1,500 1,502
Goldman Sachs Group, LP
4.500% due 06/15/10 1,055 1,016
Harrah's Operating Co., Inc.
5.625% due 06/01/15 1,865 1,770
Historic TW, Inc.
9.125% due 01/15/13 180 207
8.050% due 01/15/16 460 508
6.950% due 01/15/28 415 414
6.625% due 05/15/29 275 266
</Table>
Fixed Income I Fund 53
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
HJ Heinz Finance Co.
6.750% due 03/15/32 145 140
Home Depot, Inc.
5.400% due 03/01/16 2,390 2,328
Household Finance Corp.
5.000% due 06/30/15 35 33
HSBC Finance Corp.
4.750% due 05/15/09 4,580 4,490
4.125% due 11/16/09 (N) 2,870 2,748
6.750% due 05/15/11 1,280 1,342
7.000% due 05/15/12 1,485 1,580
6.375% due 11/27/12 410 424
International Business Machines Corp.
7.125% due 12/01/96 430 466
International Lease Finance Corp.
6.375% due 03/15/09 (N) 1,495 1,530
3.500% due 04/01/09 (N) 570 540
4.750% due 07/01/09 (N) 1,435 1,401
Series MTNQ (N)
4.625% due 06/02/08 910 896
International Paper Co.
6.750% due 09/01/11 175 183
5.500% due 01/15/14 285 273
ITT Industries, Inc.
7.400% due 11/15/25 195 216
John Deere Capital Corp.
4.875% due 03/16/09 1,315 1,297
Johnson Controls, Inc.
5.250% due 01/15/11 135 132
5.500% due 01/15/16 (N) 1,145 1,096
JP Morgan Chase Capital XV (N)
5.875% due 03/15/35 2,040 1,851
JPMorgan Chase & Co.
5.125% due 09/15/14 1,520 1,446
5.150% due 10/01/15 770 728
Kaupthing Bank Hf (p)
5.790% due 04/12/11 750 750
Kellogg Co.
Series B
6.600% due 04/01/11 815 850
Kraft Foods, Inc.
4.000% due 10/01/08 (N) 1,180 1,141
5.625% due 11/01/11 1,240 1,236
Kroger Co. (The)
7.500% due 04/01/31 65 70
Lehman Brothers Holdings, Inc.
4.000% due 01/22/08 390 381
5.000% due 01/14/11 455 445
5.500% due 04/04/16 195 188
Lennar Corp. (N)
Series B
5.600% due 05/31/15 1,135 1,067
Manufacturers & Traders Trust Co.
5.585% due 12/28/20 180 174
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Marshall & Ilsley Corp.
5.350% due 04/01/11 1,345 1,331
May Department Stores Co. (The)
4.800% due 07/15/09 80 78
5.750% due 07/15/14 185 182
Merrill Lynch & Co., Inc.
Series MTNB
3.125% due 07/15/08 1,125 1,075
Series MTNC
4.250% due 02/08/10 1,155 1,107
Metlife, Inc.
5.700% due 06/15/35 1,215 1,104
Midamerican Energy Holdings Co. (N)(p)
6.125% due 04/01/36 4,255 4,059
Miller Brewing Co. (p)
5.500% due 08/15/13 275 269
Monumental Global Funding II (p)
4.625% due 03/15/10 200 194
Morgan Stanley
3.625% due 04/01/08 630 611
3.875% due 01/15/09 (N) 840 808
6.750% due 04/15/11 440 461
4.750% due 04/01/14 250 231
Series GMTN (E)
4.830% due 02/09/09 100 100
Series MTNF (E)
5.193% due 01/18/08 1,100 1,102
Natexis Ambs Co. LLC (f)(p)
8.440% due 12/29/49 300 317
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 2,005 2,023
News America Holdings, Inc.
7.750% due 12/01/45 35 37
7.900% due 12/01/95 250 261
8.250% due 10/17/96 50 53
News America, Inc.
6.400% due 12/15/35 (p) 1,205 1,139
Series WI (N)
6.200% due 12/15/34 1,080 999
Nisource Finance Corp.
7.875% due 11/15/10 295 319
Nissan Motor Acceptance Corp. (p)
5.625% due 03/14/11 1,800 1,784
</Table>
54 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Norfolk Southern Corp.
6.200% due 04/15/09 645 658
7.050% due 05/01/37 195 213
7.900% due 05/15/97 135 157
6.000% due 03/15/2105 410 363
Northern States Power Co.
Series B
8.000% due 08/28/12 780 875
Occidental Petroleum Corp.
9.250% due 08/01/19 150 193
Ohio Power Co.
Series F
5.500% due 02/15/13 45 44
Pacific Gas & Electric Co.
3.600% due 03/01/09 75 71
4.200% due 03/01/11 640 603
6.050% due 03/01/34 495 474
Pemex Project Funding Master Trust
7.375% due 12/15/14 (N) 600 636
5.750% due 12/15/15 (p) 200 190
8.625% due 02/01/22 100 116
Progress Energy, Inc.
5.850% due 10/30/08 (N) 760 766
7.100% due 03/01/11 175 185
7.750% due 03/01/31 95 108
7.000% due 10/30/31 155 162
Prologis (p)
5.625% due 11/15/15 1,535 1,482
Rabobank Capital Funding II (f)(p)
5.260% due 12/31/49 20 19
Rabobank Capital Funding Trust III (f)(p)
5.254% due 12/29/49 40 37
Raytheon Co.
6.750% due 08/15/07 420 426
RBS Capital Trust III (f)
5.512% due 09/29/49 515 490
Regions Financial Corp.
4.500% due 08/08/08 1,220 1,197
Residential Capital Corp.
6.000% due 02/22/11 690 676
Safeway, Inc. (N)
7.250% due 02/01/31 45 47
SBC Communications, Inc.
4.125% due 09/15/09 1,715 1,640
5.300% due 11/15/10 2,730 2,696
5.100% due 09/15/14 325 306
6.450% due 06/15/34 5 5
6.150% due 09/15/34 215 203
Simon Property Group, LP
4.600% due 06/15/10 1,445 1,392
4.875% due 08/15/10 (N) 1,100 1,069
5.750% due 12/01/15 (p) 2,765 2,708
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SLM Corp.
Series MTNA
4.000% due 01/15/09 2,220 2,134
Sovereign Bank
5.125% due 03/15/13 400 381
Sprint Capital Corp.
7.625% due 01/30/11 2,665 2,876
6.875% due 11/15/28 420 433
8.750% due 03/15/32 1,130 1,402
State Street Bank & Trust Co.
Series BKNT
5.300% due 01/15/16 250 240
Suntrust Bank
5.000% due 09/01/15 1,900 1,787
Tele-Communications-TCI Group
9.800% due 02/01/12 385 451
7.875% due 08/01/13 790 864
Time Warner Entertainment Co., LP
Series *
8.375% due 07/15/33 155 177
Time Warner, Inc.
6.875% due 05/01/12 485 506
7.700% due 05/01/32 420 459
TXU Corp.
Series R
6.550% due 11/15/34 475 427
TXU Electric Delivery Co.
6.375% due 05/01/12 25 26
6.375% due 01/15/15 140 142
TXU Energy Co. LLC
7.000% due 03/15/13 465 482
Tyson Foods, Inc.
8.250% due 10/01/11 230 244
6.600% due 04/01/16 115 113
Unilever Capital Corp.
5.900% due 11/15/32 315 300
Union Pacific Corp.
3.625% due 06/01/10 450 417
United Technologies Corp.
5.400% due 05/01/35 70 64
UnitedHealth Group, Inc.
5.375% due 03/15/16 305 293
US Bancorp
5.300% due 04/28/09 1,450 1,447
US Bank NA
5.700% due 12/15/08 70 71
</Table>
Fixed Income I Fund 55
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
USB Capital IX (f)
6.189% due 03/29/49 100 99
Verizon Communications, Inc.
5.350% due 02/15/11 775 763
5.550% due 02/15/16 545 520
Verizon Global Funding Corp.
7.250% due 12/01/10 730 774
7.375% due 09/01/12 275 296
5.850% due 09/15/35 1,825 1,626
Verizon Maryland, Inc. (N)
Series A
6.125% due 03/01/12 985 982
Verizon Virginia, Inc.
Series A
4.625% due 03/15/13 885 799
Viacom, Inc. (p)
5.750% due 04/30/11 170 169
Wachovia Bank NA (N)
Series BKNT
5.800% due 12/01/08 280 284
Wachovia Capital Trust III (f)
5.800% due 08/29/49 440 431
Wachovia Corp. (N)
5.250% due 08/01/14 1,925 1,844
Waste Management, Inc.
6.375% due 11/15/12 555 571
WellPoint, Inc.
5.850% due 01/15/36 100 92
Wells Fargo & Co.
4.200% due 01/15/10 360 345
4.625% due 08/09/10 415 402
4.950% due 10/16/13 215 205
Weyerhaeuser Co.
6.750% due 03/15/12 1,675 1,734
Wyeth
6.950% due 03/15/11 1,215 1,281
5.500% due 03/15/13 100 98
5.500% due 02/01/14 55 54
XTO Energy, Inc.
6.250% due 04/15/13 450 460
Zurich Capital Trust I (p)
8.376% due 06/01/37 1,365 1,457
------------
190,040
------------
International Debt - 3.1%
Abbey National PLC (f)
(Step Up, 7.570%, 06/15/08)
6.700% due 06/29/49 720 734
Aiful Corp. (p)
5.000% due 08/10/10 300 289
Anadarko Finance Co.
Series B
7.500% due 05/01/31 515 582
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Apache Finance Canada Corp.
4.375% due 05/15/15 490 444
AXA SA
8.600% due 12/15/30 1,245 1,538
Banque Centrale de Tunisie
8.250% due 09/19/27 550 638
Banque Paribas
6.875% due 03/01/09 350 362
BNP Paribas (f)(p)
5.186% due 06/29/49 800 739
British Telecommunications PLC
8.875% due 12/15/30 145 183
ChevronTexaco Capital Co.
3.500% due 09/17/07 470 459
China Development Bank
5.000% due 10/15/15 100 93
Conoco Funding Co.
6.350% due 10/15/11 885 918
Crest, Ltd. (p)
Series 2003-2A Class C2
5.709% due 12/28/38 1,710 1,648
Deutsche Telekom International Finance BV
8.000% due 06/15/10 (E) 545 592
5.250% due 07/22/13 (N) 40 38
5.750% due 03/23/16 225 217
8.250% due 06/15/30 (E) 155 184
Diageo Capital PLC
3.500% due 11/19/07 645 627
Egypt Government AID Bonds
4.450% due 09/15/15 660 617
EnCana Corp.
6.500% due 08/15/34 95 96
Equifirst Mortgage Loan Trust NIMs Notes (p)
Series 2004-2 Class N1
3.967% due 10/25/34 45 45
Export-Import Bank of China (p)
4.875% due 07/21/15 465 433
Export-Import Bank of Korea (p)
4.125% due 02/10/09 255 246
First Franklin NIMs Trust (p)
Series 2005-FF1 Class N1
4.213% due 01/25/35 318 317
HBOS PLC (f)(p)
5.920% due 09/29/49 100 95
HSBC Holdings PLC
6.500% due 05/02/36 290 292
</Table>
56 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ispat Inland ULC
9.750% due 04/01/14 445 501
Kinder Morgan Finance Co. ULC
5.350% due 01/05/11 (N) 985 968
5.700% due 01/05/16 970 934
Klio Funding, Ltd. (E)(p)
Series 2004-1A Class A1
5.260% due 04/23/39 1,515 1,529
Korea Development Bank
4.250% due 11/13/07 710 698
Korea Electric Power Corp. (p)
5.125% due 04/23/34 125 120
Mexico Government International Bond
5.625% due 01/15/17 (N) 80 77
8.125% due 12/30/19 900 1,039
8.300% due 08/15/31 750 891
7.500% due 04/08/33 1,775 1,938
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 315 312
MUFG Capital Finance 1, Ltd. (f)
6.346% due 04/25/49 200 196
Newcastle CDO, Ltd. (p)
Series 2004-4A Class 3FX
5.110% due 03/24/39 845 780
Petroleum Export, Ltd. (p)
5.265% due 06/15/11 98 96
Province of Quebec Canada
6.125% due 01/22/11 1,175 1,209
Ras Laffan Liquefied Natural Gas Co., Ltd. II
(p)
5.298% due 09/30/20 125 118
Ras Laffan LNG III (p)
5.838% due 09/30/27 250 231
Resona Bank, Ltd. (f)(p)
5.850% due 09/29/49 375 358
Resona Preferred Global Securities Cayman, Ltd.
(E)(f)(N)(p)
7.191% due 12/29/49 300 308
Royal Bank of Scotland Group PLC (f)
Series 1
9.118% due 03/31/49 200 223
Royal KPN NV
8.000% due 10/01/10 1,045 1,121
Russia Government International Bond
5.000% due 03/31/30 1,150 1,246
5.000% due 03/31/30 (p) 350 380
Santander Financial Issuances
6.375% due 02/15/11 120 123
Sanwa Finance Aruba AEC
8.350% due 07/15/09 460 497
Shinsei Finance Cayman, Ltd. (f)(p)
6.418% due 01/29/49 400 388
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sumitomo Mitsui Banking Corp. (E)(f)(p)
5.625% due 07/29/49 145 139
Systems 2001 AT LLC (p)
7.156% due 12/15/11 302 311
Teck Cominco, Ltd. (N)
6.125% due 10/01/35 765 705
Telecom Italia Capital SA
4.000% due 01/15/10 830 782
5.250% due 10/01/15 (N) 5,670 5,241
Telefonica Europe BV
7.750% due 09/15/10 2,045 2,196
Telefonos de Mexico SA de CV (N)
4.500% due 11/19/08 515 501
TELUS Corp.
7.500% due 06/01/07 820 837
8.000% due 06/01/11 690 757
Tyco International Group SA
6.750% due 02/15/11 560 583
6.375% due 10/15/11 355 365
6.000% due 11/15/13 720 718
7.000% due 06/15/28 30 31
6.875% due 01/15/29 90 93
Vale Overseas, Ltd.
6.250% due 01/11/16 260 255
Vodafone Group PLC
7.750% due 02/15/10 375 401
Wells Fargo Home Equity Trust (p)
Series 2004-2N Class N1
4.450% due 10/26/34 4 4
Woori Bank (p)
6.125% due 05/03/16 190 190
------------
42,816
------------
Mortgage-Backed Securities - 52.6%
Adjustable Rate Mortgage Trust
Series 2004-5 Class 4A1
5.353% due 04/25/35 1,808 1,778
Series 2005-3 Class 8A2 (E)
5.199% due 07/25/35 723 724
Series 2005-8 Class 4A11 (E)
5.443% due 11/25/35 2,350 2,310
American Home Mortgage Investment Trust (E)
Series 2004-4 Class 4A
4.390% due 02/25/45 406 394
</Table>
Fixed Income I Fund 57
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-2 Class 5A2
5.109% due 09/25/35 1,040 1,040
Series 2005-3 Class 3A2
5.139% due 09/25/35 917 918
Series 2005-4 Class 1A1
5.249% due 11/25/45 1,584 1,588
Arcap Reit, Inc. (p)
Series 2004-RR3 Class B
5.040% due 09/21/45 420 396
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 885 868
Series 2004-4 Class A3
4.128% due 07/10/42 580 559
Series 2005-3 Class A4
4.668% due 07/10/43 1,200 1,113
Series 2005-5 Class A4
5.115% due 10/10/45 1,625 1,553
Series 2005-6 Class A1
5.001% due 09/10/47 1,889 1,871
Series 2005-6 Class A2
5.165% due 09/10/47 1,275 1,260
Series 2005-6 Class A4
5.354% due 09/10/47 1,120 1,082
Series 2006-1 Class A4
5.372% due 09/10/45 305 297
Banc of America Funding Corp.
Series 2005-5 Class 1A11
5.500% due 09/25/35 966 929
Series 2005-D Class A1 (E)
4.115% due 05/25/35 522 505
Series 2006-3 Class 5A8
5.500% due 03/25/36 820 790
Series 2006-A Class 3A2
5.944% due 02/20/36 4,618 4,641
Series 2006-A Class 4A1 (E)
5.576% due 02/20/36 917 909
Series 2006-B Class 7A1 (E)
5.906% due 03/20/36 973 974
Banc of America Large Loan (E)(p)
Series 2004-BBA Class A1
5.021% due 06/15/18 2,192 2,192
Banc of America Mortgage Securities
Series 2004-1 Class 5A1
6.500% due 09/25/33 44 43
Series 2004-11 Class 2A1
5.750% due 01/25/35 777 759
Series 2004-2 Class 5A1
6.500% due 10/25/31 153 154
Series 2005-L Class 3A1 (E)
5.457% due 01/25/36 454 449
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America Alternative Loan Trust (E)
Series 2003-10 Class 2A2
5.409% due 12/25/33 498 501
Series 2003-2 Class CB2
5.459% due 04/25/33 226 227
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.415% due 05/25/35 816 817
Bear Stearns Commercial Mortgage Securities
Series 2005-PWR Class A1
4.386% due 02/11/41 494 487
Chase Mortgage Finance Corp. (E)
Series 2005-A1 Class 2A2
5.252% due 12/25/35 2,005 1,986
Citigroup Mortgage Loan Trust, Inc.
Series 2005-11 Class A2A (E)
4.700% due 12/25/35 192 190
Series 2006-WF1 Class A2F
5.657% due 03/25/36 565 552
Commercial Mortgage Acceptance Corp.
Series 1998-C2 Class A3
6.040% due 09/15/30 3,715 3,760
Countrywide Alternative Loan Trust
Series 2004-2CB Class 1A4 (E)
5.359% due 03/25/34 975 978
Series 2005-56 Class 4A1 (E)
5.269% due 11/25/35 1,767 1,772
Series 2005-59 Class 1A1 (E)
5.253% due 10/25/35 1,960 1,972
Series 2005-J12 Class 2A1 (E)
5.229% due 08/25/35 1,597 1,600
Series 2005-J13 Class 2A3
5.500% due 11/25/35 306 297
Countrywide Asset-Backed Certificates (E)
Series 2005-IM1 Class A1
5.089% due 07/25/35 776 776
Series 2005-IM2 Class A3
4.851% due 01/25/36 2,535 2,539
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2004-16 Class 1A1 (E)
5.359% due 09/25/34 942 946
Series 2004-7 Class 5A2 (E)
5.229% due 05/25/34 208 207
</Table>
58 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-3 Class 1A2 (E)
5.249% due 04/25/35 139 139
Series 2005-HYB Class 3A2 (E)
5.250% due 11/20/25 190 187
Series 2005-R3 Class AF (E)(p)
5.359% due 09/25/35 1,476 1,482
Series 2006-HYB Class 2A1A
5.804% due 05/20/36 1,000 1,000
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2003-C5 Class A1
3.093% due 12/15/36 1,540 1,488
Series 2005-C4 Class A3
5.120% due 08/15/38 5,050 4,923
Series 2005-C6 Class A1
4.938% due 12/15/40 1,252 1,240
Series 2005-C6 Class A4
5.230% due 12/15/40 1,265 1,218
Credit Suisse Mortgage Capital Certificates
Series 2006-C1 Class A1
4.367% due 02/15/39 431 421
Series 2006-C1 Class AAB
5.681% due 02/15/39 1,815 1,804
Series 2006-TFL Class A1 (E)(p)
5.021% due 03/15/08 1,975 1,975
Credit Suisse/Morgan Stanley Commercial Mortgage
Certificates (p)
Series 2006-HC1 Class A1
5.022 % due 05/15/23 1,445 1,445
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2005-AR1 Class 2A3
5.031% due 08/25/35 840 828
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 610 618
Downey Savings & Loan Association Mortgage Loan
Trust
Series 2004-AR3 Class 1A1B (E)
6.092% due 07/19/44 359 363
Series 2005-AR6 Class 2A1A (E)
5.200% due 10/19/45 1,631 1,638
Fannie Mae
15 Year TBA (I)
4.000% 5,285 4,920
4.500% 4,295 4,088
5.000% 7,775 7,568
5.500% 61,025 59,303
6.000% 1,000 1,011
30 Year TBA (I)
4.500% 1,780 1,629
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.000% 50,290 47,542
6.000% 29,850 29,707
6.500% 10,520 10,698
7.000% due 2011 10 10
8.000% due 2011 5 5
5.500% due 2013 15 15
6.500% due 2013 56 58
6.500% due 2015 34 35
7.000% due 2015 11 12
6.000% due 2016 291 296
6.500% due 2016 41 42
5.000% due 2017 276 269
5.500% due 2017 22 22
6.000% due 2017 3,986 4,037
6.500% due 2017 402 412
7.500% due 2017 1 1
9.000% due 2017 2 2
4.500% due 2018 9,851 9,403
5.000% due 2018 3,636 3,548
5.500% due 2018 447 445
6.000% due 2018 255 258
6.500% due 2018 410 422
8.500% due 2018 1 1
4.500% due 2019 1,401 1,336
5.000% due 2019 9,129 8,900
6.500% due 2019 212 218
4.500% due 2020 3,681 3,510
5.000% due 2020 10,962 10,680
6.500% due 2020 80 82
8.000% due 2024 157 166
8.500% due 2024 28 29
9.000% due 2024 8 8
7.000% due 2025 34 35
8.000% due 2025 4 5
8.500% due 2025 27 28
7.000% due 2026 32 32
9.000% due 2026 6 7
7.000% due 2027 10 10
9.000% due 2027 2 3
6.500% due 2028 621 633
6.500% due 2029 1,290 1,319
7.000% due 2029 193 199
6.500% due 2030 12 12
8.000% due 2030 201 214
6.500% due 2031 207 212
8.000% due 2031 194 207
5.500% due 2032 83 81
6.000% due 2032 1,872 1,869
</Table>
Fixed Income I Fund 59
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.500% due 2032 1,392 1,417
7.000% due 2032 1,009 1,038
8.000% due 2032 6 8
3.908% due 2033 (E) 743 725
4.500% due 2033 1,118 1,027
4.666% due 2033 (E) 437 433
5.000% due 2033 8,557 8,124
5.500% due 2033 20,660 20,121
6.000% due 2033 950 948
6.500% due 2033 1,296 1,321
4.500% due 2034 1,419 1,302
5.000% due 2034 13,683 12,984
5.500% due 2034 37,721 36,706
6.000% due 2034 10,149 10,114
6.500% due 2034 748 764
4.500% due 2035 4,273 3,914
4.564% due 2035 (E) 1,209 1,196
5.000% due 2035 7,238 6,852
5.500% due 2035 60,584 58,887
5.769% due 2035 (E) 691 707
5.779% due 2035 (E) 975 998
5.782% due 2035 (E) 1,636 1,674
6.000% due 2035 4,589 4,573
6.000% due 2036 198 197
Series 1992-158 Class ZZ
7.750% due 08/25/22 324 341
Series 1993-134 Class H
6.500% due 08/25/08 1,367 1,376
Series 2003-32 Class FH (E)
5.359% due 11/25/22 320 322
Series 2003-78 Class FI (E)
5.359% due 01/25/33 708 712
Series 2004-21 Class FL (E)
5.309% due 11/25/32 388 389
Series 2005-120 Class UF (E)
5.309% due 03/25/35 830 831
Series 2005-65 Class FP (E)
5.209% due 08/25/35 609 608
Series 2006-5 Class 3A2 (E)
4.685% due 05/25/35 100 97
Fannie Mae Grantor Trust
Series 2001-T6 Class B
6.088% due 05/25/11 1,810 1,862
Series 2005-T2 Class 1A1 (E)
4.667% due 11/28/35 70 70
Fannie Mae Whole Loan (E)
Series 2004-W2 Class 5AF
5.309% due 03/25/44 769 770
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2004-H01 Class A1
2.614% due 07/15/11 219 217
Series 2005-63 Class 1A1 (E)
4.951% due 02/25/45 156 157
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
First Horizon Asset Securities, Inc. (E)
Series 2005-AR5 Class 3A1
5.523% due 10/25/35 246 244
Freddie Mac
30 Year TBA (I)
5.000% 17,135 16,305
5.500% 15,210 14,773
6.000% 10,030 9,996
12.000% due 2014 26 28
9.000% due 2016 88 94
5.732% due 2027 (E) 55 56
5.801% due 2030 (E) 9 9
4.630% due 2034 (E) 523 521
Series 1993-160 Class I
Interest Only STRIP
6.500% due 11/15/08 134 7
Series 1998-210 Class ZM
6.000% due 12/15/28 790 787
Series 2000-226 Class F (E)
5.351% due 11/15/30 15 15
Series 2003-262 Class AB
2.900% due 11/15/14 816 784
Series 2003-263 Class YH
3.500% due 08/15/22 602 598
Series 2003-269 Class FE (E)
5.501% due 12/15/28 710 718
Series 2004-277 Class UF (E)
5.201% due 06/15/33 938 940
Series 2004-281 Class DF (E)
5.351% due 06/15/23 273 275
Series 2005-292 Class IG
Interest Only STRIP
5.000% due 04/15/23 408 75
Series 2005-294 Class FA (E)
5.071% due 03/15/20 536 536
Series 2005-305 Class JF (E)
5.201% due 10/15/35 612 612
Series 2006-R00 Class AK
5.750% due 12/15/18 700 697
Freddie Mac Gold
7.000% due 2008 13 13
8.000% due 2009 8 8
6.000% due 2010 49 50
</Table>
60 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.000% due 2010 95 98
8.000% due 2010 22 23
6.000% due 2011 205 206
7.000% due 2011 11 11
6.000% due 2012 4 4
6.000% due 2013 34 34
6.000% due 2016 483 489
6.000% due 2017 434 438
4.500% due 2018 1,177 1,123
5.000% due 2018 793 773
4.500% due 2019 1091 1,039
5.500% due 2019 977 968
5.500% due 2020 2,448 2,429
6.500% due 2025 20 21
8.000% due 2025 34 37
9.000% due 2026 1 2
6.500% due 2027 3 3
8.500% due 2027 79 85
6.500% due 2028 251 255
6.500% due 2029 436 444
6.500% due 2031 770 786
6.000% due 2031 17 17
5.500% due 2032 3,724 3,631
6.500% due 2032 734 748
7.000% due 2032 370 380
7.500% due 2032 112 116
5.000% due 2033 609 578
5.500% due 2033 6,496 6,327
6.000% due 2033 638 636
4.500% due 2034 158 145
5.000% due 2034 2,659 2,523
5.500% due 2034 3,069 2,986
6.000% due 2034 973 971
6.500% due 2034 67 68
5.000% due 2035 8,088 7,651
5.500% due 2035 2,258 2,197
5.000% due 2036 6,563 6,207
GE Capital Commercial Mortgage Corp.
Series 2005-C1 Class A1
4.012% due 06/10/48 616 603
Series 2005-C1 Class A5
4.772% due 06/10/48 400 375
Series 2006-C1 Class A4
5.519% due 03/10/44 905 883
Ginnie Mae I
30 Year TBA (I)
5.000% 2,940 2,817
5.500% 4,815 4,726
6.000% 2,100 2,108
6.500% due 2008 6 6
6.500% due 2009 41 41
6.500% due 2010 8 8
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.000% due 2011 15 16
9.500% due 2016 4 5
8.000% due 2017 11 12
10.500% due 2020 47 52
8.000% due 2022 26 27
8.500% due 2022 1 1
8.500% due 2024 13 14
8.000% due 2025 35 38
8.000% due 2026 155 166
8.000% due 2029 62 67
8.500% due 2029 50 54
8.000% due 2030 61 66
8.500% due 2030 16 18
7.000% due 2031 295 306
7.000% due 2032 128 133
5.000% due 2033 3,619 3,471
7.000% due 2033 18 19
5.000% due 2035 1,558 1,495
6.000% due 2035 5,064 5,086
Ginnie Mae II
5.125% due 2027 (E) 64 64
4.375% due 2030 (E) 45 45
4.500% due 2030 (E) 273 274
7.500% due 2032 26 27
4.500% due 2035 790 726
GMAC Commercial Mortgage Securities, Inc.
Series 2005-C1 Class A2
4.471% due 05/10/43 465 450
GMAC Mortgage Corp. Loan Trust
Series 2005-AR5 Class 5A1 (E)
5.340% due 09/19/35 1,453 1,436
Series 2005-AR6 Class 3A1
5.299% due 11/19/35 788 776
Series 2006-AR1 Class 1A1 (E)
5.661% due 04/19/36 2,029 1,989
Government National Mortgage Association
Series 2002-61 Class BA
4.648% due 03/16/26 745 731
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 570 556
Series 2005-GG3 Class A1
3.919% due 08/10/42 802 784
Series 2005-GG5 Class A41
5.243% due 04/10/37 695 680
</Table>
Fixed Income I Fund 61
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GS Mortgage Securities Corp. II
Series 1998-C1 Class A2
6.620% due 10/18/30 1,334 1,361
Series 2005-GG4 Class AABA
4.680% due 07/10/39 600 571
Series 2006-GG6 Class A4
5.553% due 04/10/38 305 301
GSAMP Mortgage Loan Trust (E)(p)
Series 2004-4 Class 1AF
5.359% due 06/25/34 1,403 1,410
Harborview Mortgage Loan Trust
Series 2004-4 Class 3A (E)
2.975% due 06/19/34 2,258 2,212
Series 2005-14 Class 3A1A
5.225% due 12/19/35 235 232
Series 2006-2 Class 1A
5.451% due 04/25/36 600 599
Impac CMB Trust (E)
Series 2004-2 Class A2
5.209% due 04/25/34 149 149
Series 2004-3 Class 1A
5.209% due 06/25/34 196 196
Impac Secured Assets CMN Owner Trust (E)
Series 2004-3 Class 1A1
5.159% due 11/25/34 28 28
Series 2005-2 Class A1
5.279% due 05/25/36 1,631 1,635
IndyMac Index Mortgage Loan Trust
Series 2005-AR1 Class A1
5.552% due 10/25/35 2,011 1,998
Series 2005-AR1 Class A2
5.099% due 09/25/35 386 371
Series 2005-AR2 Class 4A1
5.467% due 11/25/35 1,527 1,508
Series 2006-AR3 Class 2A1A
6.447% due 03/25/36 9,079 9,156
IndyMac Loan Trust (E)
Series 2004-L1 Class A1 (p)
5.239% due 07/25/09 437 439
Series 2005-L1 Class A
5.159% due 06/25/10 1,276 1,278
Series 2005-L2 Class A1
5.179% due 01/25/11 1,562 1,566
JP Morgan Alternative Loan Trust
Series 2006-A2 Class 3A1
5.952% due 05/25/36 3,190 3,202
Series 2006-A2 Class 5A1
6.360% due 05/25/36 1,800 1,814
Series 2006-S1 Class 1A19
6.500% due 03/25/36 1,335 1,337
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2003-CB7 Class A3
4.449% due 01/12/38 940 901
Series 2004-LN2 Class A1
4.475% due 07/15/41 706 679
Series 2005-CB1 Class A1
4.520% due 08/12/37 1,134 1,116
Series 2005-CB1 Class A2
5.247% due 01/12/43 2,550 2,525
Series 2005-CB1 Class A4
4.895% due 09/12/37 80 75
5.472% due 01/12/43 200 194
Series 2005-FL1 Class A1 (E)(p)
5.011% due 02/15/19 1,681 1,681
Series 2005-LDP Class A1
5.035% due 12/15/44 3,315 3,289
4.116% due 03/15/46 584 572
Series 2005-LDP Class A3
4.959% due 08/15/42 690 665
5.375% due 12/15/44 2,845 2,786
Series 2005-LDP Class A4
4.918% due 10/15/42 400 377
5.346% due 12/15/44 1,315 1,271
Series 2006-CB1 Class A3A (p)
5.491% due 12/12/44 1,370 1,359
Series 2006-CB1 Class A4
5.481% due 12/12/44 460 451
Series 2006-CB1 Class ASB
5.506% due 12/12/44 365 362
Series 2006-FL1 Class A1A (E)(p)
4.991% due 02/15/20 2,628 2,628
Series 2006-LDP Class A4
5.475% due 04/15/43 1,825 1,785
JP Morgan Mortgage Trust
Series 2005-A1 Class 1A1
5.240% due 02/25/35 1,001 972
Series 2005-A2 Class 3A1
4.912% due 04/25/35 1,347 1,331
Series 2005-A3 Class 2A1
5.174% due 06/25/35 1,380 1,326
Series 2005-A3 Class 6A1
4.912% due 06/25/35 1,890 1,859
Series 2005-A4 Class 1A1
5.410% due 07/25/35 795 780
Series 2005-A6 Class 2A2
4.980% due 08/25/35 1,290 1,274
Series 2005-ALT Class 3A1
5.500% due 10/25/35 31 30
Series 2006-A2 Class 1A1
5.477% due 04/25/36 1,947 1,933
</Table>
62 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust
Series 2001-C3 Class A1
6.058% due 06/15/20 500 505
Series 2003-C3 Class A1
2.599% due 05/15/27 579 557
Series 2004-C2 Class A1
2.946% due 03/15/29 1,478 1,404
Series 2004-C4 Class A3
5.155% due 06/15/29 1,180 1,165
Series 2005-C3 Class A5
4.739% due 07/15/30 340 317
Series 2005-C3 Class AAB
4.664% due 07/15/30 400 380
Lehman Mortgage Trust
Series 2005-3 Class 1A3
5.500% due 01/25/36 1,155 1,145
Lehman XS Trust (E)
Series 2005-5N Class A1
5.259% due 11/25/35 1,467 1,456
Series 2005-7N Class 1A1B
5.259% due 12/25/35 863 866
Mach One Trust Commercial Mortgage-Backed (p)
Series 2004-1A Class A3
5.220% due 05/28/40 1,350 1,305
Mastr Adjustable Rate Mortgages Trust
Series 2006-2 Class 3A1
4.852% due 01/25/36 1,000 980
Mastr Alternative Loans Trust
Series 2003-4 Class B1
5.655% due 06/25/33 356 350
Mastr Asset Securitization Trust
Series 2003-11 Class 6A8 (E)
5.459% due 12/25/33 793 795
Series 2005-2 Class 1A1
5.250% due 11/25/35 1,300 1,267
Mastr Reperforming Loan Trust (p)
Series 2005-1 Class 1A1
6.000% due 08/25/34 764 759
Merrill Lynch Mortgage Investors, Inc.
Series 2005-A7 Class 2A1
5.400% due 09/25/35 1,481 1,453
Merrill Lynch Mortgage Trust
Series 2004-MKB Class A2
4.353% due 02/12/42 820 796
Series 2005-LC1 Class A1
5.017% due 01/12/44 1,200 1,190
Series 2005-LC1 Class A2
5.202% due 01/12/44 1,790 1,770
Series 2005-MKB Class A1
4.446% due 09/12/42 1,010 990
Series 2005-MKB Class A4
5.204% due 09/12/42 555 535
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MLCC Mortgage Investors, Inc. (E)
Series 2004-HB1 Class A2
5.110% due 04/25/29 217 217
Morgan Stanley Capital I
Series 2004-HQ3 Class A1
3.100% due 01/13/41 1,043 1,004
Series 2004-RR2 Class A2 (p)
5.450% due 10/28/33 1,370 1,340
Series 2005-HQ5 Class A4
5.168% due 01/14/42 880 847
Series 2005-HQ6 Class A4A
4.989% due 08/13/42 530 503
Series 2005-IQ1 Class AAB
5.178% due 09/15/42 750 732
Series 2005-IQ9 Class A1
3.990% due 07/15/56 645 630
Series 2005-T17 Class A5
4.780% due 12/13/41 250 234
Series 2006-HQ8 Class A4
5.561% due 03/12/44 810 796
Morgan Stanley Dean Witter Capital I
Series 2001-TOP Class A3
6.200% due 07/15/33 757 768
Morgan Stanley Mortgage Loan Trust
Series 2006-3AR Class 2A3
5.917% due 03/25/36 581 582
Mortgage Capital Funding, Inc.
Series 1998-MC2 Class A2
6.423% due 06/18/30 1,784 1,812
Nomura Asset Acceptance Corp. (E)
Series 2005-AP1 Class 2A1
5.109% due 02/25/35 88 88
Nomura Asset Securities Corp.
Series 1998-D6 Class A1B
6.590% due 03/15/30 785 802
Novastar NIMs Trust (p)
Series 2005-N1 Class NOTE
4.777% due 10/26/35 153 153
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
5.359% due 02/25/34 118 119
Series 2004-CL1 Class 2A2
5.359% due 02/25/19 29 29
Residential Accredit Loans, Inc.
Series 2004-QS5 Class A6 (E)
5.559% due 04/25/34 152 152
</Table>
Fixed Income I Fund 63
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-QS8 Class A4 (E)
5.359% due 06/25/34 740 743
Series 2005-QA1 Class A41
5.733% due 09/25/35 903 899
Series 2005-QA8 Class NB3
5.517% due 07/25/35 540 538
Series 2005-QO3 Class A1 (E)
5.359% due 10/25/45 1,706 1,711
Series 2006-QA1 Class A21
6.009% due 01/25/36 2,907 2,917
Residential Asset Securitization Trust (E)
Series 2003-A15 Class 1A2
5.409% due 02/25/34 849 852
Residential Funding Mortgage Securities I (E)
Series 2003-S14 Class A5
5.359% due 07/25/18 1,001 1,005
Series 2003-S5 Class 1A2
5.409% due 11/25/18 423 426
Salomon Brothers Mortgage
Securities VII
Series 2003-UP2 Class A1
4.000% due 12/25/18 511 479
Sequoia Mortgage Trust (E)
Series 2004-3 Class A
5.306% due 05/20/34 1,437 1,438
Small Business Administration
Series 1999-P10 Class 1
7.540% due 08/10/09 282 295
Small Business Administration Participation
Certificates
Series 2003-20I Class 1
5.130% due 09/01/23 85 82
Structured Adjustable Rate Mortgage Loan Trust
(E)
Series 2005-19X Class 1A1
5.279% due 10/25/35 1,447 1,454
Structured Asset Securities Corp.
Series 2004-21X Class 1A3
4.440% due 12/25/34 1,230 1,208
Thornburg Mortgage Securities Trust (E)
Series 2006-1 Class A3
5.129% due 01/25/36 2,662 2,657
Wachovia Bank Commercial Mortgage Trust
Series 2003-C9 Class A1
3.291% due 12/15/35 1,214 1,171
Series 2005-C16 Class A2
4.380% due 10/15/41 1,195 1,155
Series 2005-C17 Class A1
4.430% due 03/15/42 2,606 2,562
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-C22 Class A3
5.461% due 12/15/44 1,865 1,833
Washington Mutual, Inc.
Series 2003-S9 Class A2 (E)
5.509% due 10/25/33 745 749
Series 2004-AR1 Class A1B1 (E)
5.165% due 11/25/34 416 417
Series 2005-AR1 Class 1A1
4.843% due 10/25/35 645 636
Series 2005-AR1 Class 3A1 (E)
5.501% due 08/25/35 1,012 1,012
Series 2005-AR1 Class A1A1 (E)
5.249% due 10/25/45 1,842 1,853
Series 2005-AR1 Class A1A2 (E)
5.239% due 11/25/45 1,633 1,638
5.249% due 12/25/45 866 869
Series 2005-AR1 Class A1C1 (E)
5.149% due 12/25/45 769 769
Series 2005-AR6 Class B3 (E)
5.619% due 04/25/45 475 473
Wells Fargo Mortgage Backed Securities Trust
Series 2005-AR1 Class 7A1 (E)
5.261% due 10/25/35 1,188 1,153
Series 2006-2 Class 2A3
5.500% due 03/25/36 955 939
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 786 771
------------
722,630
------------
Municipal Bonds - 0.3%
City of Chicago Illinois General Obligation
Unlimited, weekly demand (u)
4.750% due 01/01/38 2,600 2,587
Golden State Tobacco Securitization Corp.
Revenue Bonds, weekly demand
6.250% due 06/01/33 650 706
State of Texas General Obligation Unlimited,
weekly demand
4.750% due 04/01/35 300 300
Tobacco Settlement Authority of Iowa
6.500% due 06/01/23 100 98
</Table>
64 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Tobacco Settlement Financing Corp. Revenue
Bonds, weekly demand
6.125% due 06/01/24 150 162
6.750% due 06/01/39 700 780
------------
4,633
------------
Non-US Bonds - 0.2%
Canadian Government Bond
4.000% due 12/01/31 CAD 390 512
General Motors Corp.
8.375% due 07/05/33 EUR 70 65
Poland Government Bond
6.000% due 05/24/09 PLN 2,400 812
Quebec Residual
Zero coupon due 12/01/36 CAD 830 153
Queensland Treasury Corp.
6.000% due 06/14/11 AUD 1,070 820
------------
2,362
------------
United States Government Agencies - 4.9%
Fannie Mae
3.375% due 05/15/07 3,480 3,417
6.625% due 10/15/07 (N) 1,595 1,627
2.500% due 06/15/08 (N) 4,620 4,378
4.875% due 04/15/09 (N) 8,150 8,089
3.875% due 02/15/10 1,495 1,427
4.750% due 04/19/10 2,950 2,886
4.125% due 05/15/10 (N) 565 542
4.250% due 08/15/10 (N) 3,950 3,800
4.375% due 09/15/12 740 704
4.375% due 03/15/13 (N) 1,025 970
5.250% due 03/24/15 495 482
5.000% due 03/15/16 530 514
5.000% due 04/26/17 945 887
6.625% due 11/15/30 (N) 425 485
6.210% due 08/06/38 420 457
Zero coupon due 07/05/14 2,280 1,474
Federal Home Loan Bank System
4.625% due 11/21/08 (N) 5,835 5,760
5.000% due 12/21/15 1,500 1,454
5.125% due 08/15/19 330 316
Financing Corp.
Principal Only STRIP
Zero coupon due 05/11/16 140 81
Zero coupon due 06/06/16 410 236
Zero coupon due 12/27/16 490 272
Zero coupon due 10/06/17 800 430
Zero coupon due 11/30/17 1,170 623
Zero coupon due 02/08/18 110 58
Zero coupon due 04/06/18 565 294
Zero coupon due 08/03/18 1,085 553
Zero coupon due 11/02/18 835 419
Zero coupon due 12/06/18 420 210
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Zero coupon due 12/27/18 1,135 565
Zero coupon due 04/05/19 1,200 587
Zero coupon due 09/26/19 1,355 645
Freddie Mac
5.125% due 04/18/08 (N) 985 985
4.875% due 02/17/09 (N) 2,135 2,120
6.625% due 09/15/09 (N) 2,985 3,117
4.000% due 12/15/09 (N) 3,215 3,090
4.750% due 01/18/11 1,170 1,145
4.500% due 11/15/11 870 837
5.750% due 01/15/12 2,415 2,467
5.125% due 07/15/12 (N) 1,170 1,158
4.500% due 01/15/13 (N) 2,055 1,961
4.875% due 11/15/13 (N) 695 676
5.050% due 01/26/15 (N) 1,155 1,125
5.250% due 04/18/16 (N) 1,715 1,694
6.750% due 09/15/29 310 356
5.625% due 11/23/35 520 487
Tennessee Valley Authority
6.150% due 01/15/38 1,560 1,683
------------
67,543
------------
United States Government Treasuries - 16.0%
United States Treasury Inflation Indexed Bonds
0.875% due 04/15/10 1,678 1,596
3.375% due 01/15/12 (N) 1,891 2,007
2.000% due 07/15/14 (N) 5,913 5,763
1.625% due 01/15/15 (N) 52 49
1.875% due 07/15/15 (N) 2,411 2,314
2.375% due 01/15/25 (N) 5,123 5,061
2.000% due 01/15/26 (N) 631 586
3.625% due 04/15/28 (N) 737 887
3.875% due 04/15/29 (N) 266 334
United States Treasury Notes
4.375% due 05/15/07 (N) 3,630 3,610
6.625% due 05/15/07 (N) 515 524
3.250% due 08/15/07 (N) 4,830 4,731
6.125% due 08/15/07 (N) 1,900 1,928
4.250% due 10/31/07 (N) 6,150 6,093
3.750% due 05/15/08 (N) 10,600 10,371
3.250% due 01/15/09 (N) 8,655 8,301
3.625% due 07/15/09 (N) 3,985 3,837
3.625% due 01/15/10 (N) 3,370 3,225
3.500% due 02/15/10 (N) 9,540 9,081
4.000% due 03/15/10 (N) 14,405 13,951
3.625% due 06/15/10 (N) 150 143
4.125% due 08/15/10 (N) 455 441
</Table>
Fixed Income I Fund 65
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
3.875% due 09/15/10 (N) 3,930 3,771
4.250% due 10/15/10 (N) 140 136
4.375% due 12/15/10 (N) 18,755 18,335
5.000% due 02/15/11 (N) 550 552
4.500% due 02/28/11 (N) 230 226
13.875% due 05/15/11 (N) 3,365 3,376
5.000% due 08/15/11 (N) 4,145 4,161
14.000% due 11/15/11 (N) 1,590 1,667
4.875% due 02/15/12 (N) 575 573
4.375% due 08/15/12 (N) 5,565 5,388
4.000% due 11/15/12 (N) 1,875 1,773
10.375% due 11/15/12 (N) 2,840 3,067
4.250% due 08/15/13 (N) 3,820 3,644
4.250% due 11/15/13 (N) 1,205 1,147
4.750% due 05/15/14 (N) 4,020 3,945
4.250% due 11/15/14 (N) 5,735 5,421
4.125% due 05/15/15 2,215 2,067
4.250% due 08/15/15 (N) 3,855 3,625
4.500% due 11/15/15 (N) 120 115
9.250% due 02/15/16 1,565 2,060
7.500% due 11/15/16 (N) 3,210 3,821
8.750% due 05/15/17 (N) 1,885 2,448
8.875% due 08/15/17 (N) 485 637
8.125% due 08/15/19 (N) 6,185 7,867
8.125% due 08/15/21 (N) 8,020 10,381
7.125% due 02/15/23 (N) 9,605 11,525
6.875% due 08/15/25 (N) 2,365 2,807
6.000% due 02/15/26 (N) 7,525 8,151
6.125% due 08/15/29 (N) 12,545 13,914
6.250% due 05/15/30 (N) 1,060 1,198
5.375% due 02/15/31 (N) 4,125 4,187
4.500% due 02/15/36 (N) 864 776
United States Treasury Bond (N)
Principal Only STRIP
Zero coupon due 11/15/21 4,835 2,113
------------
219,707
------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,376,960) 1,351,368
------------
PREFERRED STOCKS - 0.1%
Auto & Transportation - 0.0%
General Motors Corp. (N) 16,500 274
Financial Services - 0.1%
DG Funding Trust (p) 94 999
------------
TOTAL PREFERRED STOCKS
(cost $1,291) 1,273
------------
<Caption>
NOTIONAL
AMOUNT
($)
------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Eurodollar Futures
Sep 2006 94.75 (EUR) Call (9) 2,132 3
Sep 2006 95.00 (EUR) Call (15) 3,325 1
Sep 2006 92.50 (EUR) Put (74) 17,113 --
Dec 2006 91.75 (EUR) Put (4) 918 --
Dec 2006 92.00 (EUR) Put (291) 66,930 2
Dec 2006 92.50 (EUR) Put (318) 73,538 2
Dec 2006 92.75 (EUR) Put (56) 12,985 --
------------
TOTAL OPTIONS PURCHASED
(cost $25) 8
------------
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
SHORT-TERM INVESTMENTS - 17.1%
American General Finance Corp. (E)
Series MTNG
4.980% due 03/23/07 100 100
ASB Bank Ltd. (c)(z)
1.730% due 05/10/06 6,700 6,692
Barclays Bank PLC (z)
4.485% due 01/29/07 2,500 2,506
Barclays US Funding, LLC (c)(z)
4.675% due 05/22/06 1,700 1,695
BNP Paribas Financial, Inc. (z)
5.000% due 08/28/06 7,300 7,178
Canada Government (z)
4.780% due 09/20/06 250 245
Citigroup, Inc.
5.750% due 05/10/06 790 790
</Table>
66 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Countrywide Home Loans, Inc.
Series MTNJ
5.500% due 08/01/06 1,300 1,301
Series MTNK
5.500% due 02/01/07 100 100
DaimlerChrysler NA Holding Corp. (E)
5.100% due 03/07/07 2,200 2,201
Danske Corp. (z)
4.660% due 05/22/06 (c) 5,000 4,986
4.980% due 07/26/06 500 494
Dexia Del LLC (z)
4.840% due 06/27/06 (c) 2,900 2,878
4.980% due 07/25/06 5,200 5,138
DNB NOR Bank ASA (c)(z)
4.650% due 06/08/06 4,600 4,577
Duke Capital LLC
4.302% due 05/18/06 165 165
Duke Energy Field Services LLC
5.750% due 11/15/06 50 50
Fannie Mae
4.810% due 09/22/06 (E)(N) 900 900
3.550% due 01/12/07 4,260 4,212
Fannie Mae Discount Notes (c)(z)(sec.)
Zero coupon due 05/15/06 425 424
France Treasury Bills BTF
Zero coupon due 05/04/06 EUR 1,300 1,640
Frank Russell Investment Company Money Market
Fund 92,580,000 92,580
Freddie Mac Discount Notes (z)
4.625% due 08/01/06 7,300 7,208
General Electric Capital Corp. (z)
4.790% due 06/12/06 5,200 5,171
4.870% due 06/29/06 2,500 2,480
General Motors Acceptance Corp.
5.645% due 05/18/06 (E) 400 400
6.125% due 09/15/06 (N) 1,000 992
6.125% due 02/01/07 (N) 200 197
6.150% due 04/05/07 140 137
German Treasury Bills
Zero coupon due 07/12/06 EUR 700 879
Zero coupon due 09/13/06 EUR 1,000 1,249
Goldman Sachs Group, Inc. (E)
Series MTNB
4.866% due 08/01/06 1,100 1,100
HBOS Treasury Service PLC (c)(z)
4.610% due 05/09/06 1,800 1,798
4.660% due 05/17/06 2,300 2,295
Merrill Lynch & Co., Inc. (E)
Series MTNC
4.400% due 03/12/07 270 268
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Nordea North America, Inc. (c)(z)
4.600% due 05/08/06 4,300 4,296
Rabobank USA Financial Corp. (c)(z)
4.820% due 05/01/06 7,300 7,300
Skandinaviska Enskilda Banken (c)(z)
4.780% due 06/09/06 7,000 6,964
4.830% due 06/22/06 800 794
Societe Generale NA (z)
4.985% due 08/22/06 2,900 2,854
4.990% due 08/22/06 5,200 5,117
Sprint Capital Corp.
6.000% due 01/15/07 975 979
Svenska Handelsbanken (z)
4.890% due 07/06/06 7,300 7,233
Total Fina Elf (c)(z)
4.830% due 05/01/06 700 700
UBS Financial Del, LLC (z)
4.660% due 05/22/06 (c) 400 399
4.640% due 06/06/06 (c) 1,100 1,094
4.930% due 07/10/06 2,800 2,773
4.990% due 08/22/06 3,700 3,641
United States Treasury Bills (z)(sec.)
4.626% due 06/01/06 (c) 670 667
4.594% due 06/15/06 (c) 300 298
4.610% due 06/15/06 (c) 1,070 1,064
4.646% due 06/15/06 (c) 30 30
4.661% due 06/15/06 (c) 90 89
4.671% due 06/15/06 (c) 60 60
4.759% due 08/31/06 75 74
United States Treasury Notes (N)
2.500% due 10/31/06 7,420 7,331
2.875% due 11/30/06 8,170 8,073
3.750% due 03/31/07 500 495
Westpac Banking Corp. (c)(z)
4.700% due 05/23/06 700 698
Westpactrust Securities, Ltd. (c)(z)
4.660% due 05/22/06 7,100 7,082
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $235,191) 235,131
------------
</Table>
Fixed Income I Fund 67
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 21.9%
Frank Russell Investment Company Money Market
Fund (x) 78,685,456 78,685
State Street Securities Lending Quality Trust
(x) 221,666,874 221,667
------------
TOTAL OTHER SECURITIES
(cost $300,352) 300,352
------------
TOTAL INVESTMENTS - 137.4%
(identified cost $1,913,819) 1,888,132
OTHER ASSETS AND LIABILITIES,
NET - (37.4%) (514,248)
------------
NET ASSETS - 100.0% 1,373,884
============
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Eurodollar Futures (CME)
expiration date 09/06 (88) 20,847 (24)
expiration date 12/06 (395) 93,571 (335)
expiration date 03/07 (376) 89,103 (379)
expiration date 06/07 (230) 54,516 (208)
expiration date 09/07 (253) 59,970 (175)
expiration date 12/07 (121) 28,679 (78)
expiration date 03/08 (31) 7,346 (4)
United States Treasury 2 Year Notes
expiration date 06/06 (142) 28,930 (44)
United States Treasury 5 Year Notes
expiration date 06/06 (461) 48,016 (251)
United States Treasury 10 Year Notes
expiration date 06/06 (208) 21,960 (115)
United States Treasury Bonds
expiration date 06/06 (58) 6,197 (200)
Short Positions
United States Treasury 10 Year Notes
expiration date 06/06 (113) 11,930 127
United States Treasury Bonds
expiration date 06/06 (65) 6,945 236
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (1,450)
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Eurodollar Futures
Sept 2006 95.25 Call (14) 3,334 --
Sept 2006 95.50 Call (9) 2,149 --
Sept 2006 95.00 Put (17) 4,038 (12)
Sept 2006 95.25 Put (37) 8,811 (46)
Sept 2006 95.50 Put (9) 2,149 (17)
Dec 2006 95.00 Put (26) 6,175 (21)
Dec 2006 95.25 Put (235) 55,959 (309)
Dec 2006 95.50 Put (33) 7,879 (62)
Mar 2007 94.75 Put (9) 2,132 (5)
Mar 2007 95.25 Put (10) 2,381 (13)
United States Treasury Notes
10 Year Futures
May 2006 106.00 Call (24) 2,544 (7)
May 2006 109.00 Call (40) 4,360 (1)
Aug 2006 107.00 Call (10) 1,070 (4)
May 2006 105.00 Put (90) 9,450 (23)
May 2006 108.00 Put (19) 2,052 (46)
---------------
Total Liability for Options Written
(premiums received $362) (566)
===============
</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, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 810 AUD 1,089 05/10/06 17
USD 452 CAD 519 05/10/06 12
USD 934 CAD 1,063 05/10/06 17
USD 458 CAD 519 08/08/06 7
USD 258 CNY 1,996 03/19/07 --
USD 522 EUR 420 05/03/06 8
USD 1,610 EUR 1,308 05/10/06 41
USD 2,346 EUR 1,902 05/10/06 56
USD 3,514 EUR 2,896 05/10/06 142
USD 7,179 EUR 5,959 05/10/06 345
USD 200 EUR 162 05/25/06 5
USD 1,027 EUR 830 06/23/06 24
USD 3,060 EUR 2,560 06/23/06 181
USD 214 GBP 120 05/03/06 5
USD 1,353 GBP 771 05/03/06 53
USD 1,606 GBP 891 06/15/06 20
USD 134 JPY 15,300 05/01/06 1
USD 48 JPY 5,634 05/15/06 2
USD 64 JPY 7,509 05/15/06 2
USD 67 JPY 7,887 05/15/06 2
USD 109 JPY 12,784 05/15/06 4
USD 113 JPY 13,188 05/15/06 3
USD 347 JPY 40,490 05/15/06 10
USD 366 JPY 42,822 05/15/06 11
USD 1,317 JPY 153,672 05/15/06 35
USD 1,352 JPY 155,000 05/15/06 13
USD 2,522 JPY 295,919 05/15/06 83
USD 299 JPY 34,948 05/23/06 9
USD 930 JPY 103,390 09/20/06 (4)
USD 1,019 JPY 117,260 09/20/06 31
USD 1,028 JPY 116,190 09/20/06 13
USD 1,989 JPY 221,870 09/20/06 (1)
USD 822 PLN 2,556 05/10/06 11
AUD 1,089 USD 796 05/10/06 (31)
AUD 1,089 USD 809 08/08/06 (17)
CAD 519 USD 457 05/10/06 (7)
CAD 1,063 USD 927 05/10/06 (24)
CAD 1,063 USD 936 08/08/06 (17)
EUR 1,902 USD 2,292 05/10/06 (110)
EUR 4,204 USD 5,066 05/10/06 (242)
EUR 5,959 USD 7,342 05/10/06 (183)
EUR 280 USD 338 06/23/06 (17)
EUR 290 USD 356 06/23/06 (11)
EUR 380 USD 461 06/23/06 (20)
EUR 820 USD 1,022 06/23/06 (16)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 1,185 USD 1,452 06/30/06 (49)
GBP 891 USD 1,605 05/03/06 (20)
JPY 15,300 USD 134 05/01/06 --
JPY 15,300 USD 134 05/23/06 (1)
JPY 117,260 USD 1,045 09/20/06 (6)
JPY 219,580 USD 1,923 09/20/06 (44)
PLN 2,556 USD 815 05/10/06 (18)
PLN 2,556 USD 824 08/08/06 (11)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 314
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
70 Fixed Income I Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ------------- -------------------- ---------------- ----------------
Bank of America USD 600 5.000% Three Month LIBOR 06/21/36 (62)
Barclays Bank PLC GBP 6,200 5.000% Six Month LIBOR 06/15/07 18
Barclays Bank PLC USD 10,700 5.000% Three Month LIBOR 06/21/08 (63)
BNP Paribas EUR 1,200 2.090% Consumer Price Index 10/15/10 --
(France)
Deutsche Bank AG USD 400 5.000% Three Month LIBOR 06/21/36 (41)
Goldman Sachs USD 500 5.000% Three Month LIBOR 06/21/16 (22)
Lehman Brothers GBP 3,300 4.500% Six Month LIBOR 09/20/09 (69)
Lehman Brothers USD 500 5.000% Three Month LIBOR 12/15/35 (31)
Merrill Lynch GBP 5,700 4.500% Six Month LIBOR 09/20/09 (119)
Merrill Lynch GBP 200 4.000% Six Month LIBOR 12/15/35 6
----------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - $16 (383)
================
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Asset-Backed Securities 7.4
Corporate Bonds and Notes 13.8
International Debt 3.1
Mortgage-Backed Securities 52.6
Municipal Bonds 0.3
Non-US Bonds 0.2
United States Government Agencies 4.9
United States Government Treasuries 16.0
Preferred Stocks 0.1
Options Purchased --*
Short-Term Investments 17.1
Other Securities 21.9
---------------
Total Investments 137.4
Other Assets and Liabilities, Net (37.4)
---------------
100.0
===============
Futures Contracts (0.1)
Options Written (--)*
Foreign Currency Exchange Contracts --*
Interest Rate Swap Contracts (--)*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 71
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,006.20 $ 1,020.18
Expenses Paid During
Period* $ 4.63 $ 4.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.93%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,007.20 $ 1,021.27
Expenses Paid During
Period* $ 3.53 $ 3.56
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.71%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,007.80 $ 1,021.67
Expenses Paid During
Period* $ 3.14 $ 3.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.63%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the period
since inception).
72 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 84.1%
Asset-Backed Securities - 6.4%
AAA Trust (p)
Series 2005-2 Class A1
5.059% due 11/26/35 186 186
ABSC NIMs Trust (p)
Series 2004-HE1 Class A
7.000% due 01/17/34 4 4
Accredited Mortgage Loan Trust (E)
Series 2004-2 Class A2
5.259% due 07/25/34 154 155
ACE Securities Corp. (E)
Series 2004-IN1 Class A1
5.279% due 05/25/34 484 486
Series 2005-SD3 Class A
5.359% due 08/25/45 940 941
Aegis Asset Backed Securities Trust (E)
Series 2005-4 Class 1A1
5.069% due 10/25/35 462 462
Alliance Capital Funding LLC (p)
Series 1998-1 Class A3
5.840% due 02/15/10 11 11
American Airlines, Inc.
6.817% due 05/23/11 125 123
American Express Credit Account Master Trust
Series 2002-1 Class A
5.011% due 09/15/09 500 500
Series 2002-2 Class A (E)
5.011% due 11/16/09 675 676
Series 2002-3 Class A
5.011% due 12/15/09 1,075 1,076
Ameriquest Mortgage Securities, Inc. (E)
Series 2002-D Class M1
7.459% due 02/25/33 145 146
Series 2004-R10 Class A5
5.349% due 11/25/34 212 213
Series 2004-R8 Class A5
5.329% due 09/25/34 706 708
Series 2006-R1 Class A2C
5.149% due 03/25/36 260 260
Argent Securities, Inc. (E)
Series 2004-W3 Class A2
5.179% due 02/25/34 6 6
Asset Backed Funding Certificates (E)
Series 2005-WF1 Class A2A
5.039% due 01/25/35 79 79
Asset Backed Securities Corp. Home Equity (E)
Series 2005-HE3 Class A4
5.159% due 04/25/35 1,000 1,000
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
BA Master Credit Card Trust (E)
Series 1999-C Class A
5.151% due 08/15/08 825 825
Bayview Financial Acquisition Trust
Series 2006-A Class 1A3
5.865% due 02/28/41 340 332
Bear Stearns Asset Backed Securities, Inc.
Series 2004-BO1 Class 1A1
5.159% due 09/25/34 255 255
Series 2005-AQ1 Class 2A1 (E)
5.179% due 03/25/35 554 554
Series 2005-HE1 Class A1 (E)
5.079% due 11/25/35 480 480
Series 2005-HE8 Class A1 (E)
5.079% due 08/25/35 265 265
Burlington Northern and Santa Fe Railway Co.
4.575% due 01/15/21 66 62
Capital Auto Receivables Asset Trust
Series 2003-3 Class A3B
4.981% due 01/15/08 280 280
Series 2004-2 Class A2
3.350% due 02/15/08 300 297
Carrington Mortgage Loan Trust (E)
Series 2005-NC1 Class A1A
5.089% due 01/25/35 53 53
Series 2005-NC3 Class A1A
5.039% due 06/25/35 224 224
Series 2005-NC4 Class A1
5.109% due 09/25/35 375 375
Chancellor/Triton CBO, Ltd. (p)
Series 1998-1A Class A1
6.710% due 08/05/10 61 59
Citibank Credit Card Issuance Trust
Series 2000-A3 Class A3
6.875% due 11/16/09 200 205
Citifinancial Mortgage Securities, Inc.
Series 2003-3 Class AF2
3.082% due 08/25/33 24 24
Series 2003-4 Class AF3
3.221% due 10/25/33 64 64
Countrywide Asset-Backed Certificates
Series 2004-13 Class AF2
3.683% due 08/25/24 235 234
Series 2004-BC1 Class M1 (E)
5.459% due 02/25/34 175 176
</Table>
Fixed Income III Fund 73
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-S1 Class A2
3.872% due 03/25/20 245 241
Series 2005-12 Class 2A2
4.898% due 06/25/32 455 450
Series 2005-16 Class 2AF1 (E)
5.109% due 05/25/36 866 866
Series 2005-17 Class 1AF1 (E)
5.159% due 12/25/36 1,513 1,513
Series 2005-7 Class AF2
4.367% due 11/25/35 430 422
Series 2006-3 Class 2A2 (E)
5.139% due 02/25/36 510 510
Series 2006-S2 Class A2
5.627% due 07/15/27 385 385
Credit-Based Asset Servicing and Securitization
Series 2005-CB4 Class AV1 (E)
5.059% due 08/25/35 363 363
Series 2005-CB5 Class AV1 (E)
5.069% due 08/25/35 420 420
Series 2005-CB8 Class AF1B
5.451% due 12/25/35 337 335
Entergy Gulf States, Inc.
5.220% due 12/01/09 100 99
Equifirst Mortgage Loan Trust (E)
Series 2005-1 Class A1
5.019% due 04/25/35 124 124
Fannie Mae Grantor Trust
Series 2003-T4 Class 2A5
4.907% due 09/26/33 228 225
First Franklin Mortgage Loan Asset Backed
Certificates (E)
Series 2005-FF7 Class A2
5.059% due 07/25/35 426 427
Fremont Home Loan Trust
Series 2005-E Class 2A1
5.049% due 01/25/36 392 392
GE Capital Credit Card Master Note Trust
Series 2004-1 Class A
4.951% due 06/15/10 300 300
Series 2004-2 Class A
4.941% due 09/15/10 600 600
GE Dealer Floorplan Master Note Trust
Series 2004-1 Class A
4.973% due 07/20/08 350 350
Series 2004-2 Class A
5.003% due 07/20/09 625 625
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 530 522
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GSAA Home Equity Trust
Series 2006-4 Class 1A2
5.989% due 03/25/36 556 553
GSAA Trust
Series 2004-4N Class NOTE
6.250% due 05/25/34 15 15
Series 2006-2 Class 2A3 (E)
5.229% due 12/25/35 595 596
GSAMP Trust
Series 2003-HE2 Class M1
5.609% due 08/25/33 305 306
Series 2004-NC1 Class A3 (E)
5.349% due 03/25/34 218 218
Series 2004-SEA Class A2A (E)
5.249% due 03/25/34 235 235
Series 2005-AHL Class A1 (E)
5.049% due 04/25/35 61 61
Series 2005-HE4 Class A2A (E)
5.079% due 07/25/45 457 457
Series 2005-S2 Class A
5.129% due 11/25/34 282 282
Series 2006-S3 Class A1
6.085% due 05/25/36 540 540
Harley-Davidson Motorcycle Trust
Series 2004-2 Class A1
2.180% due 01/15/09 114 113
Home Equity Asset Trust (E)
Series 2003-5 Class M1
5.659% due 12/25/33 460 462
Series 2005-2 Class 2A2
5.159% due 07/25/35 305 305
Lehman XS Trust (E)
Series 2005-1 Class 2A2
4.660% due 05/25/08 342 343
Long Beach Mortgage Loan Trust (E)
Series 2005-2 Class 2A1
4.898% due 04/25/35 65 65
Mastr Asset Backed Securities Trust
Series 2003-WMC Class M2
6.609% due 08/25/33 271 272
Series 2005-OPT Class A3 (E)
5.049% due 03/25/35 106 106
MBNA Credit Card Master Note Trust
Series 2002-A10 Class A10
5.041% due 02/16/10 550 551
MBNA Master Credit Card Trust USA
Series 2000-E Class A
7.800% due 10/15/12 705 772
</Table>
74 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc.
Series 2005-NCB Class A1A
5.451% due 07/25/36 168 167
Series 2005-SL1 Class A (E)
5.159% due 06/25/35 169 169
Series 2005-WMC Class A2A
5.059% due 09/25/35 5 5
Series 2006-AR1 Class A2C (E)
5.149% due 03/25/37 500 500
Mid-State Trust
Series 2003-11 Class A1
4.864% due 07/15/38 58 54
Series 2004-1 Class A
6.005% due 08/15/37 59 59
Series 2005-1 Class A
5.745% due 01/15/40 83 81
Morgan Stanley ABS Capital I
Series 2003-NC8 Class M3
7.059% due 09/25/33 360 365
New Century Home Equity Loan Trust
Series 2004-3 Class A6
5.489% due 11/25/34 600 602
Series 2004-4 Class M2
5.489% due 02/25/35 380 382
Novastar Home Equity Loan (E)
Series 2005-1 Class A2A
5.079% due 06/25/35 296 296
Option One Mortgage Loan Trust (E)
Series 2003-2 Class M2
6.659% due 04/25/33 400 403
Series 2003-3 Class M3
6.959% due 06/25/33 240 242
Series 2003-4 Class M2
6.609% due 07/25/33 215 217
Series 2005-4 Class A3
5.219% due 11/25/35 510 511
Ownit Mortgage Loan Asset Backed Certificates
Series 2005-2 Class A2A (E)
5.069% due 03/25/36 116 116
Series 2006-2 Class A2B
5.633% due 01/25/37 150 150
Park Place Securities, Inc.
Series 2004-WWF Class A1D
5.419% due 02/25/35 1,240 1,243
Series 2005-WCW Class M1
5.409% due 09/25/35 375 376
Series 2005-WHQ Class A2A (E)
5.039% due 06/25/35 127 127
Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF2
3.914% due 05/25/35 145 143
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-6 Class A3
5.680% due 01/25/36 415 412
Power Contract Financing LLC
6.256% due 02/01/10 165 166
RAAC Series (E)
Series 2006-SP1 Class A1
5.059% due 09/25/45 523 523
Renaissance Home Equity Loan Trust
Series 2004-4 Class AF2
3.856% due 02/25/35 237 235
Series 2005-2 Class AF2
4.361% due 08/25/35 315 310
Series 2005-4 Class A2
5.399% due 02/25/36 185 184
Series 2005-4 Class A3
5.565% due 02/25/36 115 114
Series 2006-1 Class AF6
5.746% due 05/25/36 320 317
Residential Asset Mortgage Products, Inc.
Series 2003-RS1 Class AI6A
5.980% due 12/25/33 365 367
Series 2004-RS1 Class AI2
3.620% due 07/25/26 147 146
Series 2004-RS8 Class AI2
3.810% due 01/25/26 54 54
Series 2004-RZ2 Class AI3
4.300% due 01/25/31 155 153
Series 2005-RS1 Class AII1
5.069% due 01/25/35 85 85
Residential Asset Securities Corp.
Series 2001-KS3 Class AII (E)
5.189% due 09/25/31 104 104
Series 2003-KS1 Class M2 (E)
6.709% due 01/25/33 71 72
Series 2003-KS2 Class MI1
4.800% due 04/25/33 795 771
Series 2003-KS4 Class AIIB
5.249% due 06/25/33 283 283
Series 2004-KS8 Class AI2
3.340% due 10/25/24 574 570
Series 2006-KS3 Class AI3 (E)
4.992% due 04/25/36 365 365
Saxon Asset Securities Trust
Series 2005-1 Class A2A
5.069% due 05/25/35 9 9
</Table>
Fixed Income III Fund 75
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-2 Class A2A (E)
5.049% due 09/25/35 235 235
Securitized Asset Backed Receivables LLC Trust
(E)
Series 2006-WM1 Class A2A
5.029% due 12/25/35 538 538
Sharp SP I LLC Net Interest Margin Trust
Series 2004-HE1 Class N
6.900% due 11/25/33 2 2
Sharps SP I , LLC
6.850% due 03/01/23 1 1
7.000% due 01/25/34 28 28
SLM Student Loan Trust
Series 2004-9 Class A2
5.120% due 10/25/12 104 103
Small Business Administration
Series 2000-P10 Class 1
7.449% due 08/01/10 85 89
Small Business Administration Participation
Certificates
7.500% due 04/01/17 1,794 1,872
Specialty Underwriting & Residential Finance (E)
Series 2005-BC2 Class A2A
5.059% due 12/25/35 149 149
Structured Asset Investment Loan Trust (E)
Series 2003-BC1 Class 3A
5.299% due 11/25/33 90 90
Series 2003-BC1 Class 3A5
5.439% due 10/25/33 71 71
Series 2005-2 Class A2
5.079% due 03/25/35 67 67
Series 2005-3 Class M2
5.399% due 04/25/35 210 211
Series 2005-5 Class A6
5.049% due 06/25/35 137 137
Structured Asset Securities Corp.
Series 2001-SB1 Class A2
3.375% due 08/25/31 177 159
Series 2004-16X Class A2
4.910% due 08/25/34 321 320
Series 2004-19X Class A2
4.370% due 10/25/34 600 595
Series 2005-GEL Class A (E)
5.309% due 12/25/34 489 489
Series 2005-S2 Class A2 (E)
5.159% due 06/25/35 775 775
Series 2005-WMC Class A1 (E)
5.039% due 01/25/35 111 111
Tenaska Alabama II Partners, LP
6.125% due 03/30/23 153 150
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Tenaska Alabama Partners, LP (p)
7.000% due 06/30/21 103 102
Terwin Mortgage Trust (E)
Series 2004-22S Class A
5.349% due 11/25/35 69 69
Series 2005-8HE Class A1 (p)
5.079% due 07/25/35 229 229
TXU Electric Delivery Transition Bond Co.
Series 2004-1 Class A2
4.810% due 11/17/14 100 97
World Financial Properties
6.910% due 09/01/13 (p) 159 167
6.950% due 09/01/13 190 199
------------
45,720
------------
Corporate Bonds and Notes - 14.3%
Abitibi-Consolidated Finance, LP
7.875% due 08/01/09 320 322
AIG SunAmerica Global Financing VI (p)
6.300% due 05/10/11 375 387
Amerada Hess Corp.
6.650% due 08/15/11 255 266
7.300% due 08/15/31 190 206
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 40 40
American Express Credit Corp. (E)
5.083% due 03/02/09 600 600
American General Finance Corp.
Series MTNH
4.625% due 09/01/10 20 19
Series MTNI
4.625% due 05/15/09 70 69
American International Group, Inc. (p)
4.700% due 10/01/10 505 489
5.050% due 10/01/15 510 480
American RE Corp.
Series B
7.450% due 12/15/26 475 505
AmerisourceBergen Corp. (p)
5.625% due 09/15/12 455 444
Arizona Public Service Co.
5.800% due 06/30/14 180 175
AT&T Corp.
9.050% due 11/15/11 298 321
9.750% due 11/15/31 225 267
</Table>
76 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Atmos Energy Corp.
5.443% due 10/15/07 220 220
Avista Capital Trust III
6.500% due 04/01/34 350 346
Avista Corp.
9.750% due 06/01/08 220 236
Axa Financial, Inc.
6.500% due 04/01/08 105 107
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 1,185 1,213
Ball Corp.
6.625% due 03/15/18 155 151
Bank of America Corp.
5.875% due 02/15/09 70 71
7.800% due 02/15/10 65 70
4.250% due 10/01/10 45 43
Barclays Bank PLC
6.278% due 12/15/34 70 64
BellSouth Corp.
4.200% due 09/15/09 150 144
6.550% due 06/15/34 110 109
Boeing Capital Corp. (N)
6.100% due 03/01/11 130 133
Boston Scientific Corp. (N)
6.250% due 11/15/15 365 361
Bowater, Inc.
9.000% due 08/01/09 225 234
Burlington Northern Santa Fe Corp.
6.750% due 07/15/11 70 74
6.875% due 12/01/27 60 64
Campbell Soup Co.
5.875% due 10/01/08 115 116
Carolina Power & Light Co.
6.500% due 07/15/12 45 46
Caterpillar Financial Services Corp.
Series MTNF
4.840% due 08/20/07 155 155
3.625% due 11/15/07 60 58
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 135 133
CenterPoint Energy Resources Corp.
Series B
7.875% due 04/01/13 560 618
Centex Corp.
4.930% due 08/01/07 245 245
Chemtura Corp.
6.875% due 06/01/16 105 105
Cincinnati Gas & Electric
5.700% due 09/15/12 125 124
Cingular Wireless Services, Inc.
8.750% due 03/01/31 130 163
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CIT Group, Inc.
5.750% due 09/25/07 90 90
3.650% due 11/23/07 90 88
6.875% due 11/01/09 55 57
4.125% due 11/03/09 70 67
Citicorp
Series MTNF
6.375% due 11/15/08 205 210
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
4.890% due 03/07/08 700 700
Citigroup, Inc.
3.500% due 02/01/08 830 806
6.500% due 01/18/11 425 442
4.700% due 05/29/15 345 319
5.875% due 02/22/33 580 546
Citizens Communications Co.
9.250% due 05/15/11 190 209
Clear Channel Communications, Inc.
6.250% due 03/15/11 735 733
5.750% due 01/15/13 90 85
Clorox Co.
5.025% due 12/14/07 (E) 225 225
4.200% due 01/15/10 155 148
5.000% due 01/15/15 115 108
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 80 78
Comcast Cable Communications
8.375% due 05/01/07 40 41
6.750% due 01/30/11 140 146
Comcast Corp.
5.900% due 03/15/16 170 167
6.500% due 11/15/35 180 172
6.450% due 03/15/37 130 124
ConAgra Foods, Inc.
7.000% due 10/01/28 95 96
8.250% due 09/15/30 75 86
Consolidated Natural Gas Co.
5.000% due 12/01/14 120 111
Series C
6.250% due 11/01/11 80 82
Consumers Energy Co.
Series F
4.000% due 05/15/10 50 47
Series H
4.800% due 02/17/09 115 113
</Table>
Fixed Income III Fund 77
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Continental Airlines, Inc. (N)
Series 01-1
6.503% due 06/15/11 175 176
Cooper Industries, Inc.
5.250% due 11/15/12 165 161
Corrections Corp. of America
7.500% due 05/01/11 155 157
Countrywide Home Loans, Inc.
3.250% due 05/21/08 255 244
COX Communications, Inc.
4.625% due 01/15/10 185 178
Credit Suisse First Boston USA, Inc.
4.875% due 08/15/10 130 127
6.500% due 01/15/12 70 73
5.500% due 08/15/13 55 54
Credit Suisse USA, Inc.
5.250% due 03/02/11 330 325
CSC Holdings, Inc.
10.500% due 05/15/16 115 121
Series B
8.125% due 07/15/09 (N) 85 88
8.125% due 08/15/09 75 78
DaimlerChrysler NA Holding Corp.
5.330% due 03/13/09 (E) 750 750
8.500% due 01/18/31 (N) 100 116
Detroit Edison Co.
6.125% due 10/01/10 145 148
6.350% due 10/15/32 130 128
Developers Diversified Realty Corp.
4.625% due 08/01/10 255 244
5.250% due 04/15/11 40 39
5.375% due 10/15/12 110 106
Dominion Resources, Inc.
5.687% due 05/15/08 225 225
Series B
6.250% due 06/30/12 60 61
DPL, Inc.
6.875% due 09/01/11 216 226
DR Horton, Inc.
5.250% due 02/15/15 310 282
Dresdner Funding Trust I (p)
8.151% due 06/30/31 470 537
Drummond Co., Inc. (p)
7.375% due 02/15/16 1,310 1,290
Duke Energy Field Services LLC
6.875% due 02/01/11 20 21
E*Trade Financial Corp.
8.000% due 06/15/11 480 496
Echostar DBS Corp.
6.375% due 10/01/11 195 190
6.625% due 10/01/14 95 92
El Paso Corp.
9.625% due 05/15/12 300 331
8.050% due 10/15/30 500 507
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
El Paso Natural Gas Co.
Series A
7.625% due 08/01/10 230 238
Eli Lilly & Co.
6.770% due 01/01/36 370 399
Entergy Gulf States, Inc.
3.600% due 06/01/08 80 77
5.610% due 12/08/08 195 195
Enterprise Products Operating, LP
4.000% due 10/15/07 255 249
4.625% due 10/15/09 310 299
EOP Operating, LP
4.750% due 03/15/14 20 18
7.500% due 04/19/29 95 100
Erac USA Finance Co.
7.350% due 06/15/08 (p) 300 311
5.300% due 11/15/08 100 99
Farmers Exchange Capital (p)
7.050% due 07/15/28 870 845
Farmers Insurance Exchange
6.000% due 08/01/14 225 219
8.625% due 05/01/24 (p) 310 353
FedEx Corp.
7.600% due 07/01/97 135 148
Financing Corp.
Principal Only STRIP
Series 10P
Zero coupon due 11/30/17 840 447
Series 15P
Zero coupon due 03/07/19 90 44
Series 2P
Zero coupon due 11/30/17 105 56
Series 6P
Zero coupon due 08/03/18 530 270
FirstEnergy Corp.
Series B
6.450% due 11/15/11 910 938
Series C
7.375% due 11/15/31 140 152
Ford Motor Co. (N)
7.450% due 07/16/31 595 434
Ford Motor Credit Co.
5.700% due 01/15/10 190 167
9.473% due 04/15/12 (E) 420 420
General Electric Capital Corp.
4.875% due 10/21/10 1,530 1,495
5.500% due 04/28/11 200 200
5.223% due 01/08/16 100 100
</Table>
78 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series MTNA
4.250% due 12/01/10 55 52
5.875% due 02/15/12 95 97
4.750% due 09/15/14 45 42
6.750% due 03/15/32 150 162
General Motors Acceptance Corp.
6.875% due 09/15/11 1,645 1,541
6.750% due 12/01/14 260 237
8.000% due 11/01/31 (N) 1,360 1,290
General Motors Corp. (N)
8.375% due 07/15/33 900 670
Georgia-Pacific Corp.
8.875% due 05/15/31 517 542
Glencore Funding LLC (p)
6.000% due 04/15/14 495 467
Glencore Nickel Ltd.
9.000% due 12/01/14 235 --
Golden West Financial Corp.
4.125% due 08/15/07 160 157
Goldman Sachs Group, Inc.
6.875% due 01/15/11 635 668
5.250% due 10/15/13 185 179
5.350% due 01/15/16 1,425 1,362
6.345% due 02/15/34 440 422
Series MTNB (E)
5.420% due 07/23/09 500 503
Halliburton Co.
5.500% due 10/15/10 115 115
Hartford Financial Services Group, Inc.
7.900% due 06/15/10 35 38
HCA, Inc.
5.500% due 12/01/09 375 365
7.500% due 12/15/23 200 193
Health Net, Inc.
9.875% due 04/15/11 265 299
Hertz Corp.
8.875% due 01/01/14 265 282
Historic TW, Inc.
8.180% due 08/15/07 525 543
9.125% due 01/15/13 630 725
8.050% due 01/15/16 580 641
6.625% due 05/15/29 60 58
HJ Heinz Co.
6.428% due 12/01/08 100 102
HJ Heinz Finance Co.
6.000% due 03/15/12 50 50
6.750% due 03/15/32 105 101
Home Depot, Inc.
5.400% due 03/01/16 510 497
Household Finance Corp.
5.000% due 06/30/15 265 247
HRPT Properties Trust
5.750% due 02/15/14 215 208
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
HSBC Finance Capital Trust IX
5.911% due 11/30/35 300 290
HSBC Finance Corp.
5.040% due 09/15/08 (E) 1,700 1,703
5.875% due 02/01/09 260 263
4.125% due 11/16/09 105 101
8.000% due 07/15/10 45 49
6.375% due 10/15/11 130 134
6.375% due 11/27/12 440 455
Huntsman International LLC
Series*
10.125% due 07/01/09 225 229
Hyatt Equities LLC (p)
6.875% due 06/15/07 140 142
ICI Wilmington, Inc.
4.375% due 12/01/08 65 63
Innophos Investments Holdings, Inc. (E)
12.749% due 02/15/15 465 477
Insight Midwest, LP
10.500% due 11/01/10 110 116
International Business Machines Corp.
7.125% due 12/01/96 470 510
International Lease Finance Corp.
3.750% due 08/01/07 35 34
6.375% due 03/15/09 155 159
International Paper Co.
6.750% due 09/01/11 210 219
5.500% due 01/15/14 280 269
Interpublic Group of Cos., Inc.
5.400% due 11/15/09 135 123
ITT Industries, Inc.
7.400% due 11/15/25 135 149
JC Penney Co., Inc.
7.375% due 08/15/08 165 171
7.650% due 08/15/16 115 125
7.400% due 04/01/37 75 80
John Hancock Global Funding II (p)
7.900% due 07/02/10 200 219
Johnson Controls, Inc.
5.250% due 01/15/11 135 132
5.500% due 01/15/16 275 263
JP Morgan Chase Bank NA
6.000% due 08/16/10 (E) 223 198
6.000% due 08/16/10 276 244
</Table>
Fixed Income III Fund 79
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
JPMorgan Chase & Co.
6.000% due 02/15/09 35 35
7.000% due 11/15/09 10 10
6.750% due 02/01/11 90 94
5.150% due 10/01/15 475 449
Kellogg Co.
Series B
6.600% due 04/01/11 905 944
Kraft Foods, Inc.
5.250% due 06/01/07 75 75
4.125% due 11/12/09 565 539
5.625% due 11/01/11 1,125 1,121
6.500% due 11/01/31 55 56
Kroger Co. (The)
7.250% due 06/01/09 175 183
8.000% due 09/15/29 75 83
LaBranche & Co., Inc.
9.500% due 05/15/09 255 273
Lehman Brothers Holdings, Inc.
5.000% due 01/14/11 485 474
5.500% due 04/04/16 220 213
Limited Brands, Inc. (N)
6.950% due 03/01/33 105 100
Lodgenet Entertainment Corp.
9.500% due 06/15/13 220 237
Lubrizol Corp.
4.625% due 10/01/09 220 213
M&I Marshall & Ilsley Bank
Series BKNT
3.800% due 02/08/08 245 239
Manufacturers & Traders Trust Co.
5.585% due 12/28/20 129 125
Marsh & McLennan Cos., Inc.
5.190% due 07/13/07 (E) 250 250
5.150% due 09/15/10 290 281
5.375% due 07/15/14 150 141
5.875% due 08/01/33 185 159
May Department Stores Co. (The)
4.800% due 07/15/09 135 132
5.750% due 07/15/14 170 167
MBNA Corp. (E)
5.140% due 05/05/08 255 257
MCI, Inc.
6.908% due 05/01/07 590 593
Medco Health Solutions, Inc.
7.250% due 08/15/13 435 464
Merrill Lynch & Co., Inc.
Series MTNC
4.250% due 02/08/10 1,260 1,207
Metlife, Inc.
5.000% due 06/15/15 185 173
5.700% due 06/15/35 40 36
MGM Mirage
9.750% due 06/01/07 250 259
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Midamerican Funding LLC
6.750% due 03/01/11 240 250
Miller Brewing Co.
4.250% due 08/15/08 145 141
5.500% due 08/15/13 290 283
Mohawk Industries, Inc.
6.125% due 01/15/16 120 118
Series D
7.200% due 04/15/12 110 114
Monumental Global Funding II (p)
4.625% due 03/15/10 135 131
Morgan Stanley
6.750% due 04/15/11 525 550
5.375% due 10/15/15 585 559
Series GMTN (E)
4.830% due 02/09/09 1,000 1,001
Motorola, Inc.
4.608% due 11/16/07 455 450
Natexis Ambs Co. LLC (f)
8.440% due 12/29/49 185 195
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 85 86
Nationwide Financial Services
6.250% due 11/15/11 265 271
Nationwide Mutual Insurance Co.
7.875% due 04/01/33 290 322
Neiman-Marcus Group, Inc. (N)(p)
10.375% due 10/15/15 210 225
News America Holdings, Inc.
9.250% due 02/01/13 25 29
7.750% due 12/01/45 195 209
7.900% due 12/01/95 120 125
8.250% due 10/17/96 45 48
News America, Inc.
7.125% due 04/08/28 30 30
6.400% due 12/15/35 155 146
Nextel Communications, Inc.
Series E
6.875% due 10/31/13 310 318
Nisource Finance Corp.
5.344% due 11/23/09 120 120
7.875% due 11/15/10 310 335
Norfolk Southern Corp.
7.350% due 05/15/07 100 102
7.050% due 05/01/37 115 126
</Table>
80 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.900% due 05/15/97 285 332
6.000% due 03/15/2105 240 213
North Front Pass-Through Trust
5.810% due 12/15/24 500 479
NRG Energy, Inc.
7.375% due 02/01/16 480 484
Occidental Petroleum Corp.
9.250% due 08/01/19 135 174
Ohio Power Co.
Series F
5.500% due 02/15/13 25 24
Oneok, Inc.
5.510% due 02/16/08 260 260
Oracle Corp. and Ozark Holding, Inc.
5.280% due 01/13/09 500 499
Pacific Gas & Electric Co.
3.600% due 03/01/09 210 200
4.200% due 03/01/11 275 259
6.050% due 03/01/34 295 282
Pemex Project Funding Master Trust
6.625% due 06/15/35 380 359
6.625% due 06/15/35 (N) 70 66
Pepco Holdings, Inc.
5.500% due 08/15/07 385 385
5.445% due 06/01/10 (E) 270 271
Pilgrim's Pride Corp.
9.625% due 09/15/11 55 57
Platinum Underwriters Finance, Inc.
Series B
7.500% due 06/01/17 170 166
Plum Creek Timberlands, LP
5.875% due 11/15/15 200 194
Popular North America Capital Trust I
6.564% due 09/15/34 320 302
Popular North America, Inc. (E)
5.410% due 04/06/09 225 225
Progress Energy, Inc.
7.100% due 03/01/11 315 333
7.000% due 10/30/31 210 220
PSEG Energy Holdings LLC
8.625% due 02/15/08 105 109
Qwest Corp.
7.875% due 09/01/11 445 467
7.625% due 06/15/15 300 312
Rabobank Capital Funding II (f)
5.260% due 12/31/49 280 266
RBS Capital Trust I (f)
5.512% due 09/29/49 565 537
Reckson Operating Partnership, LP
5.150% due 01/15/11 95 92
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Residential Capital Corp.
6.125% due 11/21/08 275 274
6.898% due 04/17/09 (E)(p) 415 415
6.375% due 06/30/10 582 580
6.000% due 02/22/11 615 602
6.500% due 04/17/13 345 344
6.875% due 06/30/15 1,015 1,029
RJ Reynolds Tobacco Holdings, Inc.
6.500% due 06/01/07 145 145
Safeway, Inc.
5.315% due 03/27/09 (E) 380 380
5.800% due 08/15/12 70 69
7.250% due 02/01/31 15 16
SBC Communications, Inc.
5.100% due 09/15/14 110 104
6.450% due 06/15/34 5 5
6.150% due 09/15/34 365 344
SCANA Corp. (E)(N)
4.970% due 03/01/08 355 355
Sealed Air Corp.
5.625% due 07/15/13 250 243
Sempra Energy
4.621% due 05/17/07 255 253
5.240% due 05/21/08 290 290
SESI LLC
8.875% due 05/15/11 115 120
Simmons Co. (N)
10.000% due 12/15/14 135 93
Six Flags, Inc.
9.625% due 06/01/14 430 435
SLM Corp.
4.000% due 01/15/10 175 166
Series MTNA (E)
5.240% due 07/27/09 2,000 2,002
Smurfit-Stone Container Enterprises, Inc. (N)
9.250% due 02/01/08 105 108
Southern California Edison Co.
7.625% due 01/15/10 90 96
6.000% due 01/15/34 190 183
Southern Copper Corp.
7.500% due 07/27/35 345 335
Sprint Capital Corp.
7.625% due 01/30/11 350 378
8.375% due 03/15/12 50 56
6.875% due 11/15/28 285 294
8.750% due 03/15/32 595 738
St. Paul Travelers Cos., Inc. (The)
5.010% due 08/16/07 460 457
</Table>
Fixed Income III Fund 81
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. (o)
7.375% due 05/01/07 20 20
Suncom Wireless, Inc.
8.500% due 06/01/13 235 224
Sungard Data Systems, Inc. (p)
9.125% due 08/15/13 235 251
TCI Communications, Inc.
7.875% due 02/15/26 80 86
TECO Energy, Inc.
7.200% due 05/01/11 235 244
Tele-Communications-TCI Group
9.800% due 02/01/12 300 351
7.875% due 08/01/13 995 1,089
Texas Eastern Transmission, LP
7.000% due 07/15/32 95 101
Time Warner Entertainment Co., LP
Series *
8.375% due 03/15/23 145 163
Tronox Worldwide LLC (p)
9.500% due 12/01/12 480 504
Twin Reefs Pass-Through Trust (f)
5.849% due 12/10/49 300 300
Tyson Foods, Inc.
8.250% due 10/01/11 250 266
6.600% due 04/01/16 120 118
Union Pacific Corp.
5.750% due 10/15/07 45 45
6.625% due 02/01/08 90 92
3.625% due 06/01/10 180 167
6.650% due 01/15/11 45 47
6.125% due 01/15/12 195 198
Series MTNE
6.790% due 11/09/07 35 36
Union Planters Corp.
7.750% due 03/01/11 125 136
UnitedHealth Group, Inc.
5.375% due 03/15/16 555 533
5.800% due 03/15/36 185 170
US Oncology, Inc.
9.000% due 08/15/12 160 170
US Unwired, Inc.
Series B
10.000% due 06/15/12 140 157
USB Capital IX (f)
6.189% due 03/29/49 410 405
Valero Logistics Operations, LP
6.050% due 03/15/13 390 390
Vanguard Health Holding Co. II LLC
9.000% due 10/01/14 205 212
Verizon
6.500% due 09/15/11 40 41
Verizon Communications, Inc.
5.550% due 02/15/16 740 706
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Verizon Global Funding Corp.
7.250% due 12/01/10 760 805
5.850% due 09/15/35 515 459
Viacom, Inc. (p)
5.750% due 04/30/11 335 333
6.875% due 04/30/36 90 89
Visteon Corp. (N)
8.250% due 08/01/10 720 646
7.000% due 03/10/14 20 16
Wachovia Capital Trust III (f)
5.800% due 08/29/49 1,705 1,672
Washington Mutual, Inc.
8.250% due 04/01/10 250 271
WellPoint, Inc.
3.750% due 12/14/07 90 88
4.250% due 12/15/09 190 182
5.850% due 01/15/36 300 276
Wells Fargo & Co.
4.625% due 08/09/10 585 566
4.950% due 10/16/13 155 147
Weyerhaeuser Co.
7.125% due 07/15/23 295 299
Willis North America, Inc.
5.125% due 07/15/10 255 249
5.625% due 07/15/15 250 239
Wisconsin Electric Power
3.500% due 12/01/07 65 63
Wyeth
5.500% due 03/15/13 150 148
5.500% due 02/01/14 395 386
Xlliac Global Funding (p)
4.800% due 08/10/10 240 232
Yum! Brands, Inc.
8.875% due 04/15/11 80 90
ZFS Finance USA Trust I (p)
6.450% due 12/15/65 1,000 942
Zurich Capital Trust I
8.376% due 06/01/37 420 448
------------
101,915
------------
International Debt - 4.9%
Abbey National PLC (f)
(Step Up, 7.570%, 06/15/08)
6.700% due 06/29/49 275 280
Abitibi-Consolidated, Inc. (N)
8.850% due 08/01/30 365 336
</Table>
82 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Amvescap PLC
4.500% due 12/15/09 395 380
Arlington Street CDO, Ltd. (p)
Series 2000-1A Class A2
7.660% due 06/10/12 871 877
AXA SA
8.600% due 12/15/30 85 105
Banco Santander Chile
5.220% due 12/09/09 195 195
Batterson Park CBO I, Ltd.
Series 1998-1A Class A4
6.130% due 01/02/11 5 5
Biovail Corp.
7.875% due 04/01/10 410 414
BNP Paribas (f)(p)
5.186% due 06/29/49 600 554
Bowater Canada Finance
7.950% due 11/15/11 365 366
Brascan Corp.
7.125% due 06/15/12 190 200
Brazilian Government International Bond
8.875% due 04/15/24 1,225 1,400
British Telecommunications PLC
8.375% due 12/15/10 185 206
8.875% due 12/15/30 270 341
Canadian Oil Sands, Ltd.
4.800% due 08/10/09 140 136
Catalyst Paper Corp.
Series D
8.625% due 06/15/11 245 246
China Development Bank
5.000% due 10/15/15 100 93
Colombia Government International Bond
8.125% due 05/21/24 250 278
Conoco Funding Co.
6.350% due 10/15/11 955 991
Deutsche Telekom International Finance BV (E)
8.250% due 06/15/30 370 439
Donohue Forest Products
7.625% due 05/15/07 200 202
Egypt Government AID Bonds
4.450% due 09/15/15 695 649
EnCana Corp.
6.500% due 08/15/34 110 112
Export-Import Bank of China (p)
4.875% due 07/21/15 495 461
Export-Import Bank of Korea
4.250% due 11/27/07 80 79
4.125% due 02/10/09 (p) 160 154
5.125% due 02/14/11 225 220
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
FBG Finance, Ltd. (p)
5.125% due 06/15/15 190 175
France Telecom SA
8.500% due 03/01/31 190 234
Galaxy Entertainment Finance Co., Ltd.
9.655% due 12/15/10 120 125
9.875% due 12/15/12 310 321
Gaz Capital for Gazprom
8.625% due 04/28/34 155 188
Hanarotelecom, Inc.
7.000% due 02/01/12 400 392
HBOS PLC (f)(p)
5.920% due 09/29/49 300 285
HSBC Holdings PLC
6.500% due 05/02/36 310 312
ICICI Bank, Ltd.
5.750% due 11/16/10 335 330
Ispat Inland ULC
9.750% due 04/01/14 549 618
Juniper CBO, Ltd.
Series 1999-1A Class A1
6.830% due 04/15/11 48 49
Kerzner International, Ltd.
6.750% due 10/01/15 250 259
Kinder Morgan Finance Co. ULC
5.350% due 01/05/11 145 142
Korea Development Bank
4.250% due 11/13/07 45 44
Korea Electric Power Corp.
5.125% due 04/23/34 85 81
LG Electronics, Inc. (p)
5.000% due 06/17/10 130 125
Mantis Reef, Ltd.
4.692% due 11/14/08 200 194
Mexico Government International Bond
8.300% due 08/15/31 590 701
Mizuho Financial Group Cayman, Ltd.
5.790% due 04/15/14 430 425
MUFG Capital Finance 1, Ltd. (f)
6.346% due 04/25/49 180 176
Nationwide Building Society (p)
4.250% due 02/01/10 255 244
Nexen, Inc.
5.875% due 03/10/35 165 150
</Table>
Fixed Income III Fund 83
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Nippon Life Insurance (p)
4.875% due 08/09/10 295 285
Oil Insurance, Ltd.
5.150% due 08/15/33 520 511
Petrobras International Finance Co.
8.375% due 12/10/18 530 594
Petroleum Export, Ltd. (p)
5.265% due 06/15/11 98 96
Philippine Government International Bond
7.750% due 01/14/31 430 433
Platinum Underwriters Holdings, Ltd.
Series B
6.371% due 11/16/07 135 134
Province of Quebec Canada
5.000% due 07/17/09 25 25
6.125% due 01/22/11 1,145 1,179
Ras Laffan Liquefied Natural Gas Co., Ltd. II
(p)
5.298% due 09/30/20 370 348
Ras Laffan LNG III (p)
5.838% due 09/30/27 410 379
Resona Bank, Ltd. (f)(p)
5.850% due 09/29/49 930 888
Resona Preferred Global Securities Cayman, Ltd.
(E)(f)(p)
7.191% due 12/29/49 1,010 1,038
Royal Bank of Scotland Group PLC (f)
Series 1
9.118% due 03/31/49 600 669
Royal KPN NV
8.000% due 10/01/10 520 558
Russia Government International Bond
5.000% due 03/31/30 755 819
Salomon Brothers AG for OAO Siberian Oil Co.
Series REGS
10.750% due 01/15/09 720 801
Salomon Brothers AG for Tyumen Oil Co.
Series REGS
11.000% due 11/06/07 370 396
Santander Financial Issuances
6.375% due 02/15/11 180 185
Santander US (E)(p)
4.940% due 09/21/07 900 900
Sanwa Finance Aruba AEC
8.350% due 07/15/09 355 383
Sappi Papier Holding AG
6.750% due 06/15/12 65 62
Secunda International, Ltd. (E)
13.068% due 09/01/12 220 232
Shinsei Finance Cayman, Ltd. (f)(p)
6.418% due 01/29/49 375 364
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
South Street CBO, Ltd.
Series 1999-1A Class A1
7.160% due 07/01/11 64 64
Stora Enso Oyj (p)
7.250% due 04/15/36 245 246
Sumitomo Mitsui Banking Corp. (E)(f)(p)
5.625% due 07/29/49 160 153
Systems 2001 AT LLC
7.156% due 12/15/11 155 160
6.664% due 09/15/13 127 132
Talisman Energy, Inc.
5.125% due 05/15/15 140 132
Telecom Italia Capital SA
4.000% due 01/15/10 1,540 1,450
5.250% due 10/01/15 860 795
Telefonica Europe BV
7.750% due 09/15/10 1,265 1,358
Telefonos de Mexico SA de CV
4.500% due 11/19/08 445 433
TELUS Corp.
8.000% due 06/01/11 795 873
Terra LNR (p)
5.031% due 10/15/07 400 400
Tyco International Group SA
6.750% due 02/15/11 580 603
UFJ Finance Aruba AEC
6.750% due 07/15/13 120 126
UnumProvident Finance Co. PLC (p)
6.850% due 11/15/15 205 204
Vale Overseas, Ltd.
6.250% due 01/11/16 430 423
Venezuela Government International Bond
6.000% due 12/09/20 380 347
Woori Bank (p)
6.125% due 05/03/16 415 415
WPP Finance UK Corp.
5.875% due 06/15/14 115 112
------------
34,994
------------
Loan Agreements - 0.3%
Avis Budget Holdings, Term Loan
6.350% due 06/30/12 160 160
AWAS, Second Lien Term Loan
11.000% due 03/21/13 200 200
</Table>
84 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Georgia Pacific Corp., First Lien Term Loan
6.880% due 12/20/12 286 286
6.979% due 12/20/12 14 15
Georgia Pacific Corp., Second Lien Term Loan
7.880% due 12/23/13 100 102
7.920% due 12/23/13 67 68
7.958% due 12/23/13 67 68
8.029% due 12/23/13 67 68
Healthsouth Corp., Term Loan B
9.580% due 03/10/07 200 199
8.150% due 03/10/13 800 799
United Air Lines, Inc., Term Loan B
8.625% due 02/01/12 50 50
United Air Lines, Inc., Term Loan
8.750% due 02/01/12 350 352
------------
2,367
------------
Mortgage-Backed Securities - 44.1%
Adjustable Rate Mortgage Trust (E)
Series 2005-3 Class 8A2
5.199% due 07/25/35 770 771
American Home Mortgage Investment Trust (E)
Series 2004-1 Class 1A
5.309% due 04/25/44 309 310
Series 2004-2 Class 4A2
3.635% due 02/25/44 18 18
Series 2004-4 Class 4A
4.390% due 02/25/45 338 328
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 710 697
Series 2004-4 Class A3
4.128% due 07/10/42 455 438
Series 2005-2 Class A5
4.857% due 07/10/43 105 99
Series 2006-1 Class A4
5.372% due 09/10/45 320 311
Series 2006-1 Class AJ
5.460% due 09/10/45 195 190
Banc of America Funding Corp.
Series 2005-5 Class 1A11
5.500% due 09/25/35 1,018 979
Series 2005-D Class A1 (E)
4.115% due 05/25/35 348 337
Series 2005-F Class 1A2 (E)
5.273% due 09/20/35 289 291
Series 2006-3 Class 5A8
5.500% due 03/25/36 930 896
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-A Class 3A2
5.944% due 02/20/36 461 464
Series 2006-A Class 4A1 (E)
5.576% due 02/20/36 936 928
Banc of America Mortgage Securities
Series 2003-D Class 1A2 (E)
5.499% due 05/25/33 6 6
Series 2003-I Class 2A4 (E)
3.828% due 10/25/33 182 180
Series 2004-1 Class 5A1
6.500% due 09/25/33 22 22
Series 2004-11 Class 2A1
5.750% due 01/25/35 832 812
Series 2005-9 Class 2A1
4.750% due 10/25/20 434 418
Series 2005-L Class 3A1 (E)
5.457% due 01/25/36 464 459
Bank of America Alternative Loan Trust
6.000% due 12/25/34 159 157
Series 2003-10 Class 2A1
6.000% due 12/25/33 225 223
Series 2003-10 Class 2A2 (E)
5.409% due 12/25/33 514 518
Series 2003-2 Class CB2 (E)
5.459% due 04/25/33 240 241
Series 2004-10 Class 1CB1
6.000% due 11/25/34 137 135
Series 2004-2 Class 1A1
6.000% due 03/25/34 127 126
Series 2005-3 Class 2A1
5.500% due 04/25/20 219 216
Series 2005-5 Class 2CB1
6.000% due 06/25/35 295 292
Series 2005-6 Class 7A1
5.500% due 07/25/20 242 239
Series 2005-9 Class 5A1
5.500% due 10/25/20 413 408
Bear Stearns Adjustable Rate Mortgage Trust (E)
Series 2005-10 Class A1
4.750% due 10/25/35 1,597 1,573
Series 2005-7 Class 1A2
4.750% due 08/25/35 151 146
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.415% due 05/25/35 594 594
Series 2006-3 Class 33A1
6.207% due 05/25/36 590 595
</Table>
Fixed Income III Fund 85
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bear Stearns Asset Backed Securities, Inc.
Series 2005-AC8 Class A5
5.500% due 11/25/35 460 455
Bear Stearns Commercial Mortgage Securities (p)
Series 2004-ESA Class E
5.064% due 05/14/16 265 263
Chase Mortgage Finance Corp.
Series 2003-S8 Class A2
5.000% due 09/25/18 697 674
Citigroup Mortgage Loan Trust, Inc.
Series 2005-11 Class A2A (E)
4.700% due 12/25/35 96 95
Series 2006-WF1 Class A2F
5.657% due 03/25/36 610 596
Citigroup/Deutsche Bank Commercial Mortgage
Trust
Series 2005-CD1 Class AJ
5.400% due 09/15/20 125 120
Commercial Mortgage Pass Through Certificates
(p)
Series 2001-J1A Class A2
6.457% due 02/14/34 225 233
Countrywide Alternative Loan Trust
Series 2004-28C Class 6A1
6.000% due 01/25/35 283 280
Series 2004-2CB Class 1A4 (E)
5.359% due 03/25/34 1,004 1,007
Series 2004-J7 Class 1A2
4.673% due 08/25/34 175 174
Series 2005-51 Class 2A2A (E)
5.213% due 10/25/35 540 542
Series 2005-59 Class 1A2B (E)
5.183% due 11/20/35 530 532
Series 2005-63 Class 3A1
5.904% due 11/25/35 490 491
Series 2005-81 Class X1
Interest Only STRIP
6.483% due 02/25/37 2,600 145
Series 2005-J13 Class 2A3
5.500% due 11/25/35 330 321
Series 2006-2CB Class A3
5.500% due 03/25/36 361 359
Series 2006-OA1 Class 2X
Interest Only STRIP
1.043% due 03/20/46 3,900 202
Series 2006-OA2 Class A2A (E)
5.073% due 05/20/46 548 548
Series 2006-OA6 Class 1A3 (E)
5.279% due 04/25/36 550 550
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2004-16 Class 1A1 (E)
5.359% due 09/25/34 971 975
Series 2005-11 Class 5A1 (E)
5.259% due 03/25/35 156 156
Series 2005-HYB Class 3A2 (E)
5.250% due 11/20/25 190 187
Series 2006-1 Class A2
6.000% due 03/25/36 375 368
Series 2006-HYB Class 2A1A
5.804% due 05/20/36 255 255
Series 2006-HYB Class 3A1A
6.143% due 05/20/36 535 539
Credit Suisse First Boston Mortgage Securities
Corp.
5.121% due 11/15/19 (E)(p) 661 661
Series 2001-SPG Class A2 (p)
6.515% due 08/13/18 100 105
Series 2003-29 Class 5A1
7.000% due 12/25/33 69 70
Series 2004-1 Class 3A1
7.000% due 02/25/34 27 28
Series 2004-C1 Class A3
4.321% due 01/15/37 615 585
Crown Castle Towers LLC (p)
5.074% due 06/15/35 150 144
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2003-3 Class 2A3
4.500% due 10/25/33 18 18
Series 2005-AR1 Class 2A3
5.031% due 08/25/35 905 893
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 547 554
Series 1999-CG1 Class S
Interest Only STRIP
1.033% due 03/10/32 6,323 148
Downey Savings & Loan Association Mortgage Loan
Trust
Series 2004-AR3 Class 1A1B (E)
6.092% due 07/19/44 313 317
Series 2006-AR1 Class 2A1A (E)
4.828% due 04/19/36 896 896
Fannie Mae
15 Year TBA (I)
4.500% 1,835 1,747
5.000% 8,095 7,880
5.500% 1,510 1,498
</Table>
86 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
30 Year TBA (I)
4.500% 1,635 1,497
5.000% 15,840 14,979
5.500% 36,535 35,473
6.000% 13,765 13,700
6.500% 2,870 2,918
7.000% 3,765 3,870
7.500% 200 208
6.000% due 2016 33 33
5.000% due 2017 13 12
5.500% due 2017 50 50
6.000% due 2017 67 68
6.500% due 2017 132 135
4.500% due 2018 710 677
5.000% due 2018 1,637 1,596
10.000% due 2018 46 50
4.500% due 2020 472 450
5.000% due 2020 3,139 3,058
5.500% due 2020 204 202
10.000% due 2024 46 50
5.500% due 2025 464 454
5.702% due 2025 (E) 36 37
5.791% due 2026 (E) 244 250
7.500% due 2027 9 10
7.000% due 2028 31 32
5.500% due 2029 647 631
6.500% due 2029 3 3
7.000% due 2029 123 126
7.500% due 2029 105 110
8.000% due 2029 9 9
8.500% due 2029 3 3
7.000% due 2030 8 8
7.500% due 2030 79 82
8.500% due 2030 342 367
9.500% due 2030 98 107
7.000% due 2031 590 609
7.500% due 2031 258 267
8.000% due 2031 359 382
8.500% due 2031 314 340
6.000% due 2032 1,088 1,086
6.500% due 2032 3 4
7.000% due 2032 687 707
7.500% due 2032 268 280
8.000% due 2032 39 41
3.908% due 2033 (E) 801 781
4.666% due 2033 (E) 470 465
4.687% due 2033 (E) 903 895
5.000% due 2033 1,324 1,260
5.500% due 2033 2,784 2,711
6.000% due 2033 355 354
7.000% due 2033 1,442 1,483
5.000% due 2034 1,579 1,500
5.500% due 2034 16,018 15,594
6.000% due 2034 719 717
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.000% due 2034 457 470
7.500% due 2034 173 180
4.488% due 2035 (E) 1,617 1,597
4.836% due 2035 (E) 1,628 1,596
5.000% due 2035 1,184 1,123
5.500% due 2035 40,035 38,902
6.000% due 2035 1,555 1,549
7.000% due 2035 8,487 8,728
7.500% due 2035 931 970
5.000% due 2036 548 522
6.000% due 2036 207 206
Series 1992-10 Class ZD
8.000% due 11/25/21 629 641
Series 1996-46 Class ZA
7.500% due 11/25/26 94 100
Series 1997-281 Class 2
Interest Only STRIP
9.000% due 11/01/26 46 12
Series 2000-306 Class IO
Interest Only STRIP
8.000% due 05/01/30 48 12
Series 2001-317 Class 2
Interest Only STRIP
8.000% due 08/01/31 51 12
Series 2002-320 Class 2
Interest Only STRIP
7.000% due 03/01/32 24 6
Series 2002-50 Class SC (E)
Interest Only STRIP
3.141% due 12/25/29 23 1
Series 2003-122 Class AJ
4.500% due 02/25/28 163 158
Series 2003-16 Class NI
Interest Only STRIP
5.000% due 02/25/15 281 13
Series 2003-25 Class IK
Interest Only STRIP
7.000% due 04/25/33 114 27
Series 2003-32 Class FH
5.359% due 11/25/22 763 768
Series 2003-32 Class UI
Interest Only STRIP
6.000% due 05/25/33 153 38
Series 2003-33 Class IA
Interest Only STRIP
6.500% due 05/25/33 938 158
</Table>
Fixed Income III Fund 87
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-35 Class IU
Interest Only STRIP
6.000% due 05/25/33 196 48
Series 2003-35 Class UI
Interest Only STRIP
6.500% due 05/25/33 192 48
Series 2003-64 Class JI
Interest Only STRIP
6.000% due 07/25/33 176 44
Series 2003-78 Class FI
5.359% due 01/25/33 756 761
Series 2003-82 Class IA
Interest Only STRIP
6.000% due 08/25/32 174 29
Series 2003-82 Class WI
Interest Only STRIP
6.000% due 08/25/32 36 5
Series 2004-21 Class FL
5.309% due 11/25/32 402 403
Series 2005-110 Class MB
5.500% due 09/25/35 625 620
Series 2005-120 Class UF
5.309% due 03/25/35 1,091 1,093
Series 2005-65 Class FP
5.209% due 08/25/35 629 628
Series 2006-28 Class 1P
Interest Only STRIP
1.521% due 03/25/36 4,545 124
Series 2006-5 Class 3A2
4.685% due 05/25/35 100 97
Fannie Mae Grantor Trust
Series 2001-T8 Class A2
9.500% due 07/25/41 86 93
Series 2005-T2 Class 1A1 (E)
4.667% due 11/28/35 46 46
Fannie Mae Whole Loan
Series 2003-W17 Class 1A6
5.310% due 08/25/33 1,700 1,633
Series 2004-W11 Class 1A2
6.500% due 05/25/44 243 247
Series 2004-W9 Class 2A1
6.500% due 02/25/44 129 131
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2003-58 Class 1A2
3.108% due 05/25/35 4 4
Series 2003-58 Class 2A
6.500% due 09/25/43 122 124
Series 2004-H01 Class A1
2.614% due 07/15/11 157 155
Series 2005-63 Class 1A1
4.951% due 02/25/45 78 78
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
First Horizon Alternative Mortgage Securities
Series 2004-FA1 Class 1A1
6.250% due 10/25/34 382 382
First Horizon Asset Securities, Inc.
Series 2003-5 Class 1A17
8.000% due 07/25/33 57 60
Series 2004-AR5 Class 4A1
5.673% due 10/25/34 147 145
Series 2004-AR7 Class 1A1 (E)
4.467% due 02/25/35 293 292
Series 2005-AR5 Class 3A1
5.523% due 10/25/35 246 244
First Union-Lehman Brothers-Bank of America
Series 1998-C2 Class A2
6.560% due 11/18/35 30 31
Freddie Mac
15 Year TBA (I)
5.500% 3,675 3,642
30 Year TBA (I)
5.000% 8,665 8,191
5.500% 5,780 5,614
6.000% 440 438
8.500% due 2017 64 68
10.500% due 2017 25 28
10.000% due 2020 66 71
5.732% due 2027 (E) 58 60
5.951% due 2028 (E) 46 47
6.025% due 2028 (E) 42 43
5.801% due 2030 (E) 9 9
3.914% due 2034 138 137
4.630% due 2034 (E) 564 562
4.910% due 2034 (E) 1,204 1,184
Series 1991-103 Class Z
9.000% due 02/15/21 79 79
Series 1994-173 Class Z
7.000% due 05/15/24 130 136
Series 1998-191 Class IO
Interest Only STRIP
8.000% due 01/01/28 38 9
Series 1998-194 Class IO
Interest Only STRIP
6.500% due 04/01/28 124 29
Series 1999-212 Class SG (E)
Interest Only STRIP
2.063% due 06/17/27 559 20
</Table>
88 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2001-212 Class IO
Interest Only STRIP
6.000% due 05/01/31 97 23
Series 2001-215 Class IO
Interest Only STRIP
8.000% due 06/01/31 72 18
Series 2001-232 Class ZQ
6.500% due 06/15/31 588 611
Series 2003-259 Class IQ
Interest Only STRIP
5.000% due 06/15/17 347 43
Series 2003-261 Class DI
Interest Only STRIP
5.500% due 05/15/27 161 6
Series 2003-261 Class UI
Interest Only STRIP
6.500% due 05/15/33 129 30
Series 2003-262 Class AB
2.900% due 11/15/14 882 847
Series 2003-263 Class YH
3.500% due 08/15/22 539 535
Series 2003-264 Class IM
Interest Only STRIP
7.000% due 07/15/33 166 40
Series 2003-266 Class MA
4.500% due 10/15/31 307 300
Series 2003-269 Class FE
5.501% due 12/15/28 735 742
Series 2004-276 Class IP
Interest Only STRIP
5.500% due 07/15/23 822 53
Series 2004-277 Class UF
5.201% due 06/15/33 998 1,001
Series 2004-281 Class DF
5.351% due 06/15/23 284 286
Series 2004-287 Class GC
5.000% due 11/15/29 170 164
Series 2004-289 Class PC
5.000% due 07/15/30 340 328
Series 2005-291 Class KP
5.000% due 11/15/29 215 208
Series 2005-292 Class IG
Interest Only STRIP
5.000% due 04/15/23 374 69
Series 2005-294 Class FA
5.071% due 03/15/20 555 555
Series 2005-302 Class MB
5.000% due 12/15/28 200 195
Series 2005-305 Class JF
5.201% due 10/15/35 631 631
Series 2005-306 Class PC
5.000% due 02/15/29 620 603
Series 2006-R00 Class AK
5.750% due 12/15/18 760 757
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Freddie Mac Gold
6.000% due 2016 59 60
5.000% due 2018 112 109
5.500% due 2020 2,137 2,120
5.500% due 2024 297 291
8.500% due 2027 140 151
7.000% due 2030 110 113
7.500% due 2030 236 246
8.000% due 2030 80 85
7.000% due 2031 208 212
7.500% due 2031 19 20
8.000% due 2031 20 22
5.000% due 2033 721 687
6.500% due 2033 66 67
7.000% due 2033 46 47
7.500% due 2032 128 133
GE Capital Commercial Mortgage Corp.
Series 2002-1A Class A3
6.269% due 12/10/35 305 316
Series 2002-3A Class A1
4.229% due 12/10/37 1,405 1,365
Series 2005-C2 Class A2
4.706% due 05/10/43 30 29
Series 2005-C3 Class A3FX
4.863% due 07/10/45 10 10
Series 2006-C1 Class A4
5.519% due 03/10/44 980 956
Ginnie Mae I
30 Year TBA (I)
5.500% 1,100 1,080
10.500% due 2016 24 27
11.000% due 2020 63 69
10.000% due 2022 53 58
7.500% due 2024 25 27
7.500% due 2032 34 36
Ginnie Mae II (E)
4.750% due 2023 26 26
5.125% due 2023 69 69
4.750% due 2024 188 189
5.125% due 2024 195 197
4.375% due 2025 243 243
4.750% due 2025 6 6
5.125% due 2026 91 91
4.375% due 2027 158 159
4.750% due 2027 124 124
</Table>
Fixed Income III Fund 89
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.125% due 2027 11 11
4.375% due 2028 5 5
4.375% due 2030 299 300
Global Signal Trust
Series 2004-2A Class A
4.232% due 12/15/14 225 217
Series 2006-1 Class B (p)
5.588% due 02/15/36 125 124
Series 2006-1 Class C (p)
5.707% due 02/15/36 190 188
GMAC Mortgage Corp. Loan Trust
Series 2005-AR2 Class 4A (E)
5.195% due 05/25/35 386 373
Series 2005-AR6 Class 3A1
5.299% due 11/19/35 788 776
Government National Mortgage Association (E)
Series 1999-27 Class SE
Interest Only STRIP
3.690% due 08/16/29 185 13
Series 1999-44 Class SA
Interest Only STRIP
3.640% due 12/16/29 199 18
Series 2000-29 Class S
Interest Only STRIP
3.578% due 09/20/30 55 3
Series 2002-27 Class SA
Interest Only STRIP
3.090% due 05/16/32 80 5
Greenpoint Mortgage Funding Trust
Series 2005-AR3 Class X1
Interest Only STRIP
1.764% due 08/25/45 3,016 99
Series 2005-AR4 Class X4
Interest Only STRIP
1.802% due 10/25/45 3,745 121
Series 2006-AR2 Class 3A2 (E)
5.279% due 08/25/35 876 877
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 435 425
Series 2005-GG5 Class A41
5.243% due 04/10/37 1,040 1,018
GS Mortgage Securities Corp. II
Series 2006-GG6 Class A4
5.553% due 04/10/38 320 316
Series 2006-GG6 Class AJ
5.782% due 04/10/38 240 237
GSMPS Mortgage Loan Trust
Series 1998-3 Class A (p)
7.750% due 09/19/27 62 64
Series 1999-3 Class A
8.000% due 08/19/29 104 109
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-RP1 Class 1A3 (p)
8.000% due 01/25/35 330 346
Series 2005-RP1 Class 1A4 (p)
8.500% due 01/25/35 187 199
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.404% due 06/25/34 569 558
Series 2005-AR6 Class 2A1 (E)
4.540% due 09/25/35 1,619 1,582
Harborview Mortgage Loan Trust
Series 2005-10 Class 2A1B (E)
5.290% due 11/19/35 483 487
Series 2005-14 Class 3A1A
5.225% due 12/19/35 249 247
Series 2005-16 Class 3A1B (E)
5.250% due 01/19/36 620 621
Series 2005-16 Class X1
Interest Only STRIP
1.683% due 01/19/36 2,458 88
Series 2005-16 Class X3
Interest Only STRIP
1.373% due 01/19/36 6,468 228
Series 2005-2 Class X
Interest Only STRIP
1.098% due 05/19/35 4,962 130
Series 2005-3 Class X2
Interest Only STRIP
0.792% due 06/19/35 4,532 119
Series 2005-5 Class 2A1B (E)
5.200% due 07/19/45 311 312
Series 2006-1 Class PO1
Zero coupon due 03/19/37 -- --
Series 2006-1 Class X1
Interest Only STRIP
1.321% due 03/19/37 3,550 184
Impac CMB Trust (E)
Series 2004-3 Class 1A
5.209% due 06/25/34 188 188
Impac Secured Assets CMN Owner Trust (E)
Series 2004-3 Class 1A1
5.159% due 11/25/34 26 26
IndyMac Index Mortgage Loan Trust
Series 2004-AR4 Class 1A
4.583% due 08/25/34 360 358
</Table>
90 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-AR1 Class AX2
Interest Only STRIP
0.807% due 07/25/35 3,317 120
Series 2005-AR2 Class 1A21
5.900% due 12/25/35 358 359
Series 2006-AR6 Class 2A1B (E)
5.220% due 06/25/47 875 875
Series 2006-AR7 Class 5A1
6.166% due 05/25/36 380 381
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C1 Class A3
5.376% due 07/12/37 250 248
Series 2003-C1 Class A2
4.985% due 01/12/37 390 377
Series 2004-FL1 Class A1
5.071% due 04/16/19 127 127
Series 2004-LN2 Class A1
4.475% due 07/15/41 575 553
Series 2005-CB1 Class A4
5.335% due 08/12/37 495 481
Series 2005-LDP Class A4
5.346% due 12/15/44 625 604
Series 2005-LDP Class AJ
4.842% due 07/15/42 230 214
Series 2006-CB1 Class A4
5.481% due 12/12/44 480 471
Series 2006-CB1 Class AJ
5.679% due 12/12/44 95 93
Series 2006-LDP Class D
5.776% due 04/15/43 95 93
JP Morgan Mortgage Trust
Series 2005-A2 Class 2A1
4.711% due 04/25/35 195 196
Series 2005-A6 Class 1A2
5.153% due 09/25/35 475 460
LB-UBS Commercial Mortgage Trust
Series 2004-C4 Class A3
5.155% due 06/15/29 1,055 1,041
Series 2005-C5 Class A2
4.885% due 09/15/30 475 466
Series 2006-C1 Class A2
5.084% due 02/15/31 15 15
Series 2006-C3 Class AJ
5.720% due 03/15/39 35 35
Lehman Mortgage Trust
Series 2005-2 Class 2A3
5.500% due 12/25/35 393 392
Series 2005-3 Class 1A3
5.500% due 01/25/36 1,215 1,205
Luminent Mortgage Trust
Series 2006-1 Class A1
5.199% due 04/25/36 620 621
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mastr Alternative Loans Trust
Series 2003-4 Class B1
5.655% due 06/25/33 373 367
Series 2003-6 Class 3A1
8.000% due 09/25/33 43 43
Series 2003-9 Class 1A1
5.500% due 12/25/18 175 173
Series 2005-3 Class 7A1
6.000% due 04/25/35 293 290
Mastr Asset Securitization Trust
Series 2003-11 Class 6A8 (E)
5.459% due 12/25/33 833 835
Series 2005-2 Class 1A1
5.250% due 11/25/35 1,386 1,351
Mastr Reperforming Loan Trust
Series 2005-1 Class 1A5 (p)
8.000% due 08/25/34 256 268
Series 2005-2 Class 1A4 (p)
8.000% due 05/25/35 339 341
Mastr Specialized Loan Trust (p)
5.150% due 07/25/35 215 210
Mellon Residential Funding Corp.
Series 2000-TBC Class A1
5.141% due 06/15/30 407 417
Merrill Lynch Mortgage Investors, Inc. (E)
Series 2005-A6 Class 2A1
5.079% due 08/25/35 485 485
Merrill Lynch Mortgage Trust
4.350% due 11/15/10 (p) 105 103
4.330% due 11/25/10 (p) 105 103
Series 2002-MW1 Class J
5.695% due 07/12/34 185 174
Series 2004-BPC Class A3
4.467% due 10/12/41 140 133
Series 2004-MKB Class A2
4.353% due 02/12/42 615 597
Series 2005-CIP Class B
5.274% due 07/12/38 150 144
MLCC Mortgage Investors, Inc.
Series 2004-HB1 Class A2 (E)
5.110% due 04/25/29 227 228
Series 2005-1 Class 1A
4.738% due 04/25/35 258 259
Morgan Stanley Capital I
Series 1999-FNV Class G (p)
6.120% due 03/15/31 130 131
</Table>
Fixed Income III Fund 91
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-HQ6 Class A2A
4.882% due 08/13/42 240 235
Series 2005-IQ1 Class AAB
5.178% due 09/15/42 810 791
Series 2006-HQ8 Class A4
5.561% due 03/12/44 875 859
Morgan Stanley Mortgage Loan Trust
Series 2006-2 Class 6A
6.500% due 02/25/36 232 234
Nomura Asset Acceptance Corp.
Series 2005-AP1 Class 2A1
5.109% due 02/25/35 93 93
Series 2005-WF1 Class 2A2
4.786% due 03/25/35 415 407
Prime Mortgage Trust
Series 2004-CL1 Class 1A1
6.000% due 02/25/34 89 87
Series 2004-CL1 Class 1A2
5.359% due 02/25/34 59 59
Series 2004-CL1 Class 2A2
5.359% due 02/25/19 29 29
Residential Accredit Loans, Inc.
Series 2004-QS5 Class A6 (E)
5.559% due 04/25/34 159 159
Series 2004-QS8 Class A4
5.359% due 06/25/34 761 764
Series 2005-QA1 Class A41
5.733% due 09/25/35 922 918
Series 2005-QA8 Class NB3
5.517% due 07/25/35 500 498
Series 2006-QO1 Class 1A1
5.219% due 02/25/46 370 369
Series 2006-QO1 Class 2A1
5.229% due 02/25/46 324 325
Residential Asset Mortgage Products, Inc.
Series 2004-SL1 Class A3
7.000% due 11/25/31 90 91
Series 2004-SL4 Class A3
6.500% due 07/25/32 169 172
Series 2005-SL1 Class A2
6.000% due 05/25/32 253 255
Residential Asset Securitization Trust (E)
Series 2003-A15 Class 1A2
5.409% due 02/25/34 876 879
Residential Funding Mortgage Securities I
Series 2003-S14 Class A5
5.359% due 07/25/18 836 840
Series 2003-S5 Class 1A2 (E)
5.409% due 11/25/18 436 439
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sequoia Mortgage Trust
Series 2004-3 Class A
5.306% due 05/20/34 1,532 1,532
Small Business Administration Participation
Certificates
Series 2005-20G Class 1
4.750% due 07/01/25 1,571 1,479
Structured Adjustable Rate Mortgage Loan Trust
Series 2004-18 Class 5A
5.500% due 12/25/34 181 177
Structured Asset Mortgage Investments, Inc. (E)
Series 2006-AR2 Class A2
5.269% due 02/25/36 612 614
Series 2006-AR3 Class 11A2
5.270% due 04/25/36 1,050 1,050
Series 2006-AR3 Class 3A1
5.180% due 02/25/36 580 580
Structured Asset Securities Corp.
Series 2002-22H Class 1A
6.983% due 11/25/32 38 39
Series 2004-12H Class 1A
6.000% due 05/25/34 167 164
Series 2004-21X Class 1A3
4.440% due 12/25/34 1,105 1,085
Thornburg Mortgage Securities Trust (E)
Series 2005-3 Class 1A1
5.189% due 10/25/35 384 384
Wachovia Bank Commercial Mortgage Trust
Series 2005-C16 Class A2
4.380% due 10/15/41 1,095 1,058
Series 2006-C23 Class AJ
5.515% due 01/15/45 55 54
Washington Mutual Alternative Mortgage
Pass-Through Certificates
Series 2006-2 Class 2CB
6.500% due 03/25/36 336 337
Series 2006-AR2 Class A1A (E)
4.951% due 04/25/46 697 697
Washington Mutual, Inc.
Series 2003-AR4 Class A7
3.950% due 05/25/33 45 43
Series 2003-AR9 Class 1A7
4.052% due 09/25/33 195 190
Series 2003-S9 Class A2 (E)
5.509% due 10/25/33 782 786
</Table>
92 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-AR1 Class A2C
5.135% due 07/25/44 180 181
Series 2004-AR1 Class A3
5.135% due 10/25/44 137 138
Series 2004-AR1 Class X
Interest Only STRIP
0.609% due 07/25/44 4,197 79
0.634% due 10/25/44 6,715 118
Series 2004-AR8 Class X
Interest Only STRIP
0.381% due 06/25/44 2,500 45
Series 2004-CB3 Class 1A
6.000% due 10/25/34 100 98
Series 2004-CB3 Class 4A
6.000% due 10/25/19 263 266
Series 2005-AR1 Class 1A1
4.843% due 10/25/35 631 622
Series 2005-AR1 Class A1A1 (E)
5.249% due 10/25/45 184 185
Series 2005-AR1 Class A1B1 (E)
5.249% due 08/25/45 360 361
5.219% due 10/25/45 618 619
5.209% due 11/25/45 494 495
5.209% due 12/25/45 472 472
Series 2005-AR1 Class A1C1 (E)
5.149% due 12/25/45 819 819
Series 2005-AR6 Class B3 (E)
5.619% due 04/25/45 425 423
Series 2005-AR8 Class 2AB3 (E)
5.319% due 07/25/45 464 467
Series 2006-AR4 Class 1A1B (E)
4.828% due 05/25/46 750 749
Wells Fargo Mortgage Backed Securities Trust
Series 2004-I Class 1A1
3.387% due 07/25/34 300 302
Series 2004-T Class A1 (E)
3.452% due 09/25/34 293 293
Series 2005-12 Class 1A7
5.500% due 11/25/35 525 501
Series 2005-17 Class 1A1
5.500% due 01/25/36 511 489
Series 2005-17 Class 1A2
5.500% due 01/25/36 407 390
Series 2005-AR1 Class 2A1
4.946% due 10/25/35 251 249
Series 2006-1 Class A3
5.000% due 03/25/21 384 371
Series 2006-2 Class 2A3
5.500% due 03/25/36 999 983
Series 2006-2 Class 3A1
5.750% due 03/25/36 549 537
Series 2006-4 Class 1A8
5.750% due 04/25/36 315 312
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 687 675
Series 2006-AR4 Class 1A1 (E)
5.870% due 04/25/36 682 680
Series 2006-AR4 Class 2A1 (E)
5.798% due 04/25/36 1,020 1,010
Series 2006-AR5 Class 2A1 (E)
5.552% due 04/25/36 410 408
------------
313,125
------------
Municipal Bonds - 0.8%
Badger TOB Asset Securitization Corp. Revenue
Bonds, weekly demand
6.375% due 06/01/32 800 856
California State University Revenue Bonds,
weekly demand (u)
5.000% due 11/01/30 140 145
City of Chicago Illinois General Obligation
Unlimited, weekly demand (u)
4.750% due 01/01/38 2,200 2,189
City of Colorado Springs Colorado Revenue Bonds,
weekly demand
5.000% due 11/15/33 200 205
Golden State Tobacco Securitization Corp.
Revenue Bonds, weekly demand
6.250% due 06/01/33 435 473
New Jersey Economic Development Authority
Revenue Bonds, weekly demand
5.750% due 06/15/34 235 248
New York State Urban Development Corp. Revenue
Bonds, weekly demand
5.250% due 03/15/34 180 191
State of California General Obligation
Unlimited, weekly demand
5.000% due 02/01/33 75 76
5.000% due 02/01/33 25 25
State of Illinois General Obligation Unlimited
5.100% due 06/01/33 150 135
State of Oregon General Obligation Unlimited
5.892% due 06/01/27 175 174
</Table>
Fixed Income III Fund 93
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
State of Texas General Obligation Unlimited,
weekly demand
4.750% due 04/01/35 250 250
Tobacco Settlement Authority of Iowa
6.500% due 06/01/23 100 98
West Virginia Economic Development Authority
Revenue Bonds
5.370% due 07/01/20 65 62
6.070% due 07/01/26 200 195
------------
5,322
------------
Non-US Bonds - 1.0%
Brazilian Government International Bond
12.500% due 01/05/16 BRL 573 273
Bundesrepublik Deutschland
5.000% due 07/04/11 EUR 431 575
General Motors Corp. (p)
7.250% due 07/03/13 EUR 100 97
International Bank for Reconstruction &
Development
Zero coupon due 08/20/07 NZD 303 177
KBC Bank Funding Trust I
6.875% due 06/30/49 EUR 600 816
Mexican Bonos
10.000% due 12/05/24 MXN 3,010 301
Poland Government Bond
6.250% due 10/24/15 PLN 376 132
Province of Ontario
4.500% due 03/08/15 CAD 285 251
Province of Quebec Canada
5.000% due 12/01/15 CAD 490 442
Quebec Residual
Zero coupon due 12/01/36 CAD 880 162
Queensland Treasury Corp.
6.000% due 10/14/15 AUD 912 702
Russia Paris Club Participant (A)
2.375% due 08/20/20 JPY 16,852 148
Sweden Government Bond
4.000% due 12/01/09 SEK 2,260 313
4.500% due 08/12/15 SEK 1,090 155
5.000% due 12/01/20 SEK 655 99
United Kingdom Gilt
5.750% due 12/07/09 GBP 900 1,699
8.000% due 09/27/13 GBP 334 736
------------
7,078
------------
Registered Investment Company Funds - 0.0%
Pacific Investment Management Co.
Series High Yield Portfolio Institutional 6,770 56
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Government Agencies - 1.1%
Fannie Mae
3.875% due 02/15/10 1,075 1,026
4.375% due 03/15/13 435 412
Principal Only STRIP
Zero coupon due 10/09/19 695 314
Financing Corp.
Principal Only STRIP
Zero coupon due 05/11/16 130 75
Zero coupon due 06/06/16 380 218
Zero coupon due 12/27/16 450 250
Zero coupon due 10/06/17 735 395
Zero coupon due 11/30/17 1,115 593
Zero coupon due 02/08/18 115 60
Zero coupon due 04/06/18 585 304
Zero coupon due 08/03/18 1,030 525
Zero coupon due 11/02/18 770 387
Zero coupon due 12/06/18 445 222
Zero coupon due 12/27/18 1,195 594
Zero coupon due 04/05/19 475 233
Zero coupon due 09/26/19 1,170 557
Freddie Mac
4.375% due 11/16/07 340 336
2.750% due 03/15/08 (N) 280 268
4.750% due 01/18/11 840 822
4.750% due 01/19/16 325 309
------------
7,900
------------
United States Government Treasuries - 11.2%
United States Treasury Coupon (N)
Principal Only STRIP
Zero coupon due 11/15/13 1,100 754
United States Treasury Inflation Indexed Bonds
3.875% due 01/15/09 1,054 1,106
2.375% due 04/15/11 1,572 1,581
3.375% due 01/15/12 2,042 2,167
3.000% due 07/15/12 1,017 1,060
2.000% due 07/15/14 6,946 6,770
1.875% due 07/15/15 (N) 123 118
2.000% due 01/15/16 (N) 20 19
2.375% due 01/15/25 738 729
2.000% due 01/15/26 (N) 501 465
3.625% due 04/15/28 (N) 491 591
</Table>
94 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Treasury Notes
3.125% due 05/15/07 3,900 3,829
4.375% due 05/15/07 3,595 3,576
4.375% due 12/31/07 (N) 1,940 1,924
3.375% due 02/15/08 (N) 3,000 2,923
4.875% due 04/30/08 405 405
4.375% due 12/15/10 (N) 17,295 16,908
5.000% due 02/15/11 590 593
4.500% due 02/28/11 (N) 160 157
5.000% due 08/15/11 350 351
3.875% due 02/15/13 2,475 2,317
4.250% due 08/15/15 (N) 310 291
4.500% due 02/15/16 (N) 1,750 1,674
8.125% due 08/15/19 4,950 6,296
6.250% due 08/15/23 (N) 230 254
7.625% due 02/15/25 1,450 1,845
6.000% due 02/15/26 8,450 9,153
6.375% due 08/15/27 (N) 745 845
6.125% due 08/15/29 4,810 5,335
5.375% due 02/15/31 585 594
4.500% due 02/15/36 (N)(u) 4,335 3,896
Principal Only STRIP
Zero coupon due 02/15/27 (N) 2,450 814
------------
79,340
------------
TOTAL LONG-TERM INVESTMENTS
(cost $605,452) 597,817
------------
COMMON STOCKS - 0.1%
Financial Services - 0.1%
Emerging Market Local Currency (AE) 94,204 1,074
------------
TOTAL COMMON STOCKS
(cost $1,057) 1,074
------------
PREFERRED STOCKS - 0.2%
Financial Services - 0.1%
DG Funding Trust (p) 59 626
------------
Producer Durables - 0.0%
Nexen, Inc. 4,055 102
------------
Utilities - 0.1%
Rural Cellular Corp. (AE) 560 644
------------
TOTAL PREFERRED STOCKS
(cost $1,373) 1,372
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
WARRANTS & RIGHTS - 0.0%
Consumer Discretionary - 0.0%
Travelcenters of America, Inc. (AE)
2009 Warrants 20 --
------------
Materials and Processing - 0.0%
Solutia, Inc. (AE)
2009 Warrants 450 --
------------
Miscellaneous - 0.0%
Mexico Government International Bond Value
Recovery Rights (AE)
Series E 1,300,000 34
Series D 1,996,000 13
------------
47
------------
Utilities - 0.0%
GT Group Telecom, Inc. (AE)(p)
2010 Warrants 450 --
------------
TOTAL WARRANTS & RIGHTS
(cost $83) 47
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
($)
------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Cross Currency Options
(Fund Pays/Fund Receives)
USD/JPY May 2006 115.00 Put (3) 1,100 20
Eurodollar Futures
Sept 2006 92.50 Put (5) 1,156 --
Sept 2006 94.00 Put (141) 33,135 1
Dec 2006 91.75 Put (49) 11,239 --
Dec 2006 92.00 Put (95) 21,850 1
Dec 2006 92.25 Put (117) 26,893 1
Dec 2006 92.50 Put (91) 21,044 1
Dec 2006 92.75 Put (43) 9,971 --
Mar 2007 92.00 Put (40) 9,200 --
Mar 2007 92.25 Put (40) 9,225 --
</Table>
Fixed Income III Fund 95
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
($) $
- -----------------------------------------------------------------------------
Swaptions
(Fund Pays/Fund Receives)
USD Three Month LIBOR/ USD 4.250%
Oct 2006 0.00 Call (2) 5,000 --
USD Three Month LIBOR/ USD 4.500%
Oct 2006 0.00 Call (3) 12,900 1
USD Three Month LIBOR/ USD 4.750%
Aug 2006 0.00 Call (1) 2,000 --
USD Three Month LIBOR/ USD 4.800%
Dec 2006 0.00 Call (1) 6,000 4
USD Three Month LIBOR/ USD 5.000%
Mar 2007 0.00 Call (2) 9,000 22
------------
TOTAL OPTIONS PURCHASED
(cost $177) 51
------------
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
SHORT-TERM INVESTMENTS - 31.0%
Abitibi-Consolidated, Inc.
6.950% due 12/15/06 138 139
American General Finance Corp. (E)
Series MTNG
4.980% due 03/23/07 100 100
Arizona Public Service Co.
6.750% due 11/15/06 60 60
ASB Bank Ltd. (c)(z)
1.730% due 05/10/06 5,300 5,294
Bank of Ireland Governor & Co. (c)(z)
4.610% due 05/08/06 1,400 1,399
Barclays Bank PLC (z)
4.485% due 01/29/07 2,000 2,005
BNP Paribas Financial, Inc. (z)
4.930% due 07/13/06 2,600 2,574
5.000% due 08/28/06 3,300 3,245
Caremark Rx, Inc.
7.375% due 10/01/06 535 539
CBA (DE) Finance Discount
Note (z)(c)
4.810% due 06/20/06 1,000 993
CC Funding Trust I
6.900% due 02/16/07 230 232
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Countrywide Home Loans, Inc.
Series MTNK
5.500% due 02/01/07 70 70
CSX Corp.
4.990% due 08/03/06 93 93
DaimlerChrysler NA Holding Corp.
Series MTND
5.100% due 11/17/06 900 901
Danske Corp. (z)
4.740% due 06/08/06 (c) 1,200 1,194
4.955% due 07/20/06 4,500 4,450
4.980% due 07/26/06 800 790
Dexia Del LLC (z)
4.980% due 07/25/06 5,900 5,830
DNB NOR Bank ASA (z)
4.710% due 06/01/06 (c) 1,500 1,494
4.990% due 08/18/06 4,700 4,628
Duke Capital LLC
4.302% due 05/18/06 95 95
Duke Energy Field Services LLC
5.750% due 11/15/06 40 40
Fannie Mae (E)(N)
4.810% due 09/22/06 600 600
Fannie Mae Discount Notes (z)
Zero coupon due 06/30/06 1,285 1,275
Federal National Mortgage Association Discount
Notes (c)(z)(N)
4.735% due 06/21/06 3,900 3,874
4.678% due 06/28/06 5,700 5,655
FedEx Corp.
2.650% due 04/01/07 70 68
Ford Motor Credit Co.
5.700% due 11/16/06 400 398
5.880% due 03/21/07 (E) 900 886
FPL Group Capital, Inc.
4.086% due 02/16/07 160 158
France Treasury Bills BTF
2.440% due 05/04/06 EUR 250 315
Zero coupon due 07/13/06 700 878
Frank Russell Investment Company Money Market
Fund 78,778,000 78,778
Freddie Mac Discount Notes (c)(z)
4.354% due 05/16/06 2,100 2,096
Zero coupon due 06/12/06 5,020 4,993
Zero coupon due 06/26/06 4,800 4,766
Zero coupon due 06/28/06 3,080 3,056
Zero coupon due 06/30/06 1,120 1,111
General Electric Capital Corp. (c)(z)
4.790% due 06/12/06 5,700 5,668
General Motors Acceptance Corp. (E)
5.968% due 01/16/07 200 197
</Table>
96 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
German Treasury Bills
Zero coupon due 07/12/06 EUR 400 502
Zero coupon due 09/13/06 EUR 1,000 1,249
Zero coupon due 10/18/06 EUR 700 871
GTE Hawaiian Telephone Co.
Series B
7.375% due 09/01/06 65 65
HBOS Treasury Service PLC (z)
4.610% due 05/09/06 (c) 2,200 2,198
4.745% due 06/08/06 (c) 3,800 3,781
4.985% due 07/28/06 500 494
ING US Funding, LLC (z)
4.805% due 06/19/06 (c) 5,700 5,663
JPMorgan Chase & Co.
5.350% due 03/01/07 75 75
Kerr-McGee Corp.
5.875% due 09/15/06 20 20
Liberty Media Corp.
6.410% due 09/17/06 372 373
Marsh & McLennan Cos., Inc.
5.375% due 03/15/07 415 414
Monongahela Power Co.
5.000% due 10/01/06 210 209
Netherlands Government Bond
5.750% due 02/15/07 EUR 145 187
Nordea North America, Inc. (c)(z)
4.600% due 05/08/06 2,400 2,398
Northrop Grumman Corp.
4.079% due 11/16/06 50 50
Panhandle Eastern Pipe Line
Series B
2.750% due 03/15/07 45 44
Premium Asset Trust
5.103% due 02/02/07 245 245
Rabobank USA Financial Corp. (c)(z)
4.820% due 05/01/06 5,900 5,900
RC Trust 1 Equity Preferred
7.000% due 05/15/06 420 210
Skandinaviska Enskilda Banken (c)(z)
4.780% due 06/09/06 5,500 5,472
4.830% due 06/22/06 800 794
Societe Generale NA (z)
4.760% due 06/12/06 (c) 4,400 4,376
4.940% due 07/11/06 1,900 1,881
Spintab Swedmortgage AB (c)(z)
4.760% due 06/20/06 3,100 3,087
Sprint Capital Corp.
4.780% due 08/17/06 205 205
Svenska Handelsbanken (z)
4.890% due 07/06/06 700 694
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Total Fina Elf (c)(z)
4.830% due 05/01/06 1,400 1,400
TXU Corp.
Series J
6.375% due 06/15/06 40 40
UBS Financial Del, LLC (c)(z)
4.820% due 05/01/06 1,300 1,300
4.640% due 06/06/06 5,300 5,275
United States Treasury Bills (z)
4.507% due 06/01/06 (c)(sec.) 250 249
4.500% due 06/15/06 (c)(N)(sec.) 1,085 1,079
4.505% due 06/15/06 (c)(sec.) 40 40
4.535% due 06/15/06 (c)(sec.) 20 20
4.545% due 06/15/06 (c) 20 20
4.550% due 06/15/06 (c) 45 45
4.565% due 06/15/06 (c)(sec.) 40 40
4.566% due 06/15/06 (c) 30 30
4.581% due 06/15/06 (c) 70 70
4.410% due 07/13/06 (sec.) 200 198
4.760% due 08/31/06 (sec.) 75 74
United States Treasury Inflation Indexed Bonds
(sec.)
3.375% due 01/15/07 1,003 1,015
United States Treasury Notes
4.625% due 05/15/06 1,820 1,820
7.000% due 07/15/06 170 171
3.500% due 11/15/06 7,850 7,789
3.750% due 03/31/07 (N) 1,270 1,256
Westpac Banking Corp. (c)(z)
4.715% due 05/30/06 1,000 996
Westpactrust Securities, Ltd. (z)
4.960% due 07/20/06 5,100 5,043
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $220,344) 220,364
------------
</Table>
Fixed Income III Fund 97
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 14.6%
Frank Russell Investment Company Money Market
Fund (X) 27,150,250 27,150
State Street Securities Lending Quality Trust
(X) 76,485,686 76,486
------------
TOTAL OTHER SECURITIES
(cost $103,636) 103,636
------------
TOTAL INVESTMENTS - 130.0%
(identified cost $932,122) 924,361
OTHER ASSETS AND LIABILITIES,
NET - (30.0%) (213,515)
------------
NET ASSETS - 100.0% 710,846
============
</Table>
See accompanying notes which are an integral part of the financial statements.
98 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Eurodollar Futures (CME)
expiration date 09/06 (35) 8,292 3
expiration date 12/06 (170) 40,271 (143)
expiration date 03/07 (216) 51,187 (234)
expiration date 06/07 (187) 44,324 (168)
expiration date 09/07 (156) 36,978 (130)
expiration date 12/07 (120) 28,442 (89)
expiration date 03/08 (36) 8,531 (5)
United States Treasury Bonds
expiration date 06/06 (55) 5,876 (296)
United States Treasury
2 Year Notes
expiration date 06/06 (135) 27,504 (59)
United States Treasury
5 Year Notes
expiration date 06/06 (73) 7,603 (52)
United States Treasury
10 Year Notes
expiration date 06/06 (400) 42,231 (700)
Short Positions
Germany, Federal Republic
10 Year Bonds
expiration date 06/06 (1) 146 6
United States Treasury
2 Year Notes
expiration date 06/06 (13) 2,649 2
United States Treasury
5 Year Notes
expiration date 06/06 (41) 4,270 43
United States Treasury
10 Year Notes
expiration date 06/06 (87) 9,185 107
United States Treasury Bonds
expiration date 06/06 (1) 107 6
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (a) (1,709)
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Cross Currency Options
(Fund Pays/Fund Receives)
USD/JPY May 2006 112.00 Put (3) 1,100 (6)
USD/JPY May 2006 116.00 Put (1) 400 (10)
USD/JPY Jul 2006 116.00 Put (1) 100 (1)
Eurodollar Futures
Sept 2006 95.50 Call (7) 1,671 --
Sept 2006 95.00 Put (6) 1,425 (4)
Sept 2006 95.25 Put (29) 6,906 (36)
Sept 2006 95.50 Put (7) 1,671 (13)
Dec 2006 95.00 Put (21) 4,988 (17)
Dec 2006 95.25 Put (193) 45,958 (253)
Dec 2006 95.50 Put (15) 3,581 (28)
Mar 2007 94.75 Put (7) 1,658 (4)
Mar 2007 95.25 Put (8) 1,905 (11)
Swaptions
(Fund Pays/Fund Receives)
GBP 4.500%/GBP Six Month LIBOR
Dec 2006 0.00 Put (1) 6,018 (30)
USD Three Month LIBOR/ USD 4.780%
Aug 2006 0.00 Call (1) 1,000 --
USD Three Month LIBOR/ USD 4.300%
Oct 2006 0.00 Call (1) 1,000 --
USD Three Month LIBOR/ USD 4.310%
Oct 2006 0.00 Call (1) 1,000 --
USD Three Month LIBOR/ USD 4.540%
Oct 2006 0.00 Call (2) 2,700 --
USD Three Month LIBOR/ USD 4.560%
Oct 2006 0.00 Call (1) 3,000 (1)
USD Three Month LIBOR/ USD 4.850%
Dec 2006 0.00 Call (1) 3,000 (5)
USD Three Month LIBOR/ USD 5.040%
Mar 2007 0.00 Call (2) 4,000 (20)
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 99
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
United States Treasury Notes
10 Year Futures
May 2006 106.00 Call (20) 2,120 (6)
May 2006 108.00 Call (3) 324 --
May 2006 109.00 Call (26) 2,834 --
May 2006 105.00 Put (66) 6,930 (17)
---------------
Total Liability for Options Written
(premiums received $456) (462)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
100 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 131 AUD 181 05/08/06 6
USD 138 AUD 191 05/08/06 7
USD 140 AUD 190 05/08/06 4
USD 166 AUD 222 05/08/06 3
USD 140 CAD 163 05/08/06 5
USD 210 CNY 1,625 03/19/07 --
USD 873 EUR 696 05/02/06 6
USD 249 EUR 200 05/03/06 4
USD 2 EUR 1 05/08/06 --
USD 142 EUR 115 05/08/06 3
USD 144 EUR 117 05/08/06 4
USD 145 EUR 118 05/08/06 4
USD 176 EUR 146 05/08/06 8
USD 187 EUR 152 05/08/06 4
USD 190 EUR 152 05/08/06 1
USD 325 EUR 273 05/08/06 19
USD 333 EUR 275 05/08/06 14
USD 523 EUR 435 05/08/06 26
USD 661 EUR 539 05/08/06 19
USD 985 EUR 797 05/25/06 23
USD 194 EUR 157 06/06/06 5
USD 1,188 EUR 960 06/23/06 27
USD 3,263 EUR 2,730 06/23/06 193
USD 107 GBP 60 05/03/06 2
USD 932 GBP 531 05/03/06 37
USD 2 GBP 1 05/08/06 --
USD 109 GBP 61 05/08/06 3
USD 144 GBP 82 05/08/06 6
USD 145 GBP 82 05/08/06 3
USD 164 GBP 94 05/08/06 6
USD 166 GBP 94 05/08/06 3
USD 333 GBP 189 05/08/06 11
USD 1,065 GBP 591 06/15/06 13
USD 176 ISK 11,762 05/08/06 (17)
USD 300 JPY 34,477 05/01/06 3
USD 11 JPY 1,290 05/08/06 --
USD 37 JPY 4,400 05/08/06 1
USD 163 JPY 19,039 05/08/06 5
USD 163 JPY 19,200 05/08/06 6
USD 166 JPY 19,039 05/08/06 2
USD 172 JPY 20,307 05/08/06 7
USD 177 JPY 20,779 05/08/06 6
USD 210 JPY 24,553 05/08/06 6
USD 326 JPY 38,104 05/08/06 9
USD 326 JPY 38,104 05/08/06 9
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 327 JPY 38,034 05/08/06 7
USD 335 JPY 38,983 05/08/06 8
USD 339 JPY 39,800 05/08/06 11
USD 353 JPY 41,056 05/08/06 8
USD 644 JPY 74,134 05/08/06 8
USD 662 JPY 77,780 05/08/06 22
USD 37 JPY 4,389 05/15/06 1
USD 52 JPY 6,101 05/15/06 2
USD 52 JPY 6,144 05/15/06 2
USD 89 JPY 10,438 05/15/06 3
USD 92 JPY 10,749 05/15/06 3
USD 200 JPY 22,800 05/15/06 1
USD 283 JPY 33,001 05/15/06 8
USD 298 JPY 34,866 05/15/06 9
USD 637 JPY 73,000 05/15/06 6
USD 880 JPY 102,627 05/15/06 24
USD 1,782 JPY 208,999 05/15/06 58
USD 100 JPY 11,500 05/23/06 1
USD 232 JPY 27,180 05/23/06 6
USD 304 JPY 34,477 05/23/06 --
USD 2,488 JPY 285,000 06/06/06 29
USD 954 JPY 109,200 09/20/06 24
USD 1,064 JPY 120,310 09/20/06 14
USD 1,101 JPY 126,660 09/20/06 34
USD 2,155 JPY 240,380 09/20/06 (1)
USD 333 SEK 2,570 05/08/06 17
AUD 181 USD 134 05/08/06 (3)
AUD 190 USD 142 05/08/06 (3)
AUD 191 USD 140 05/08/06 (5)
AUD 212 USD 152 05/08/06 (10)
AUD 736 USD 550 05/08/06 (9)
CAD 153 USD 132 05/08/06 (6)
CAD 159 USD 139 05/08/06 (4)
CAD 487 USD 426 05/08/06 (10)
EUR 1 USD 2 05/08/06 --
EUR 2 USD 2 05/08/06 --
EUR 117 USD 143 05/08/06 (4)
EUR 118 USD 145 05/08/06 (4)
EUR 148 USD 176 05/08/06 (11)
EUR 152 USD 188 05/08/06 (4)
EUR 171 USD 210 05/08/06 (6)
EUR 273 USD 331 05/08/06 (14)
EUR 273 USD 327 05/08/06 (17)
EUR 539 USD 661 05/08/06 (19)
EUR 541 USD 644 05/08/06 (39)
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 101
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 691 USD 860 05/25/06 (14)
EUR 696 USD 873 05/25/06 (6)
EUR 1,000 USD 1,265 05/25/06 1
EUR 2,034 USD 2,461 06/06/06 (112)
EUR 240 USD 290 06/23/06 (14)
EUR 400 USD 486 06/23/06 (21)
EUR 410 USD 503 06/23/06 (16)
EUR 890 USD 1,109 06/23/06 (18)
EUR 88 USD 106 06/27/06 (5)
EUR 1,066 USD 1,306 06/30/06 (44)
GBP 591 USD 1,065 05/03/06 (13)
GBP 61 USD 107 05/08/06 (5)
GBP 82 USD 145 05/08/06 (4)
GBP 82 USD 144 05/08/06 (6)
GBP 94 USD 167 05/08/06 (4)
GBP 94 USD 164 05/08/06 (7)
GBP 187 USD 326 05/08/06 (15)
GBP 357 USD 629 05/08/06 (22)
ISK 11,762 USD 176 05/08/06 18
JPY 34,477 USD 303 05/01/06 --
JPY 394 USD 3 05/08/06 --
JPY 18,088 USD 155 05/08/06 (4)
JPY 18,204 USD 156 05/08/06 (4)
JPY 18,916 USD 164 05/08/06 (2)
JPY 19,039 USD 166 05/08/06 (2)
JPY 19,039 USD 167 05/08/06 (1)
JPY 19,189 USD 163 05/08/06 (6)
JPY 19,900 USD 171 05/08/06 (4)
JPY 20,307 USD 173 05/08/06 (6)
JPY 20,528 USD 176 05/08/06 (5)
JPY 38,846 USD 333 05/08/06 (8)
JPY 39,800 USD 340 05/08/06 (10)
JPY 73,322 USD 624 05/08/06 (21)
JPY 22,000 USD 188 06/06/06 (6)
JPY 126,660 USD 1,128 09/20/06 (6)
JPY 229,510 USD 2,010 09/20/06 (46)
NZD 275 USD 178 05/08/06 2
PLN 509 USD 161 05/08/06 (5)
SEK 1,109 USD 144 05/08/06 (7)
SEK 2,570 USD 325 05/08/06 (24)
SEK 2,570 USD 333 05/08/06 (17)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 154
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
102 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INDEX SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NOTIONAL APPRECIATION
FUND RECEIVES COUNTER AMOUNT FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY $ FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
Lehman Brothers 3 Month USD LIBOR
CMBS Index - AAA Goldman Sachs 1,950 plus 0.070% 05/01/06 (36)
1 Month USD LIBOR
Lehman Brothers High Yield Bear Stearns 1,770 minus 0.200% 07/01/06 2
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts (34)
================
</Table>
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- ------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ---------------- -------------------- ---------------- ----------------
Bank of America USD 300 5.000% Three Month LIBOR 06/21/36 (31)
Bank of America USD 500 5.000% Three Month LIBOR 06/21/36 (52)
Barclays Bank PLC GBP 7,600 5.000% Six Month LIBOR 06/15/07 23
Barclays Bank PLC USD 8,000 5.000% Three Month LIBOR 06/21/08 (47)
Barclays Bank PLC USD 700 5.000% Three Month LIBOR 06/21/08 (4)
Barclays Bank PLC USD 600 5.000% Three Month LIBOR 06/21/11 (11)
Consumer Price Index
BNP Paribas EUR 900 2.090% (France) 10/15/10 --
Deutsche Bank USD 1,000 5.000% Three Month LIBOR 06/21/36 (103)
Goldman Sachs USD 400 5.000% Three Month LIBOR 06/21/16 (18)
Lehman Brothers GBP 4,100 4.500% Six Month LIBOR 09/20/09 (86)
Lehman Brothers USD 300 5.000% Three Month LIBOR 12/15/35 (18)
Merrill Lynch GBP 5,600 4.500% Six Month LIBOR 09/20/09 (117)
Merrill Lynch GBP 100 4.000% Six Month LIBOR 12/15/35 3
----------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - $23 (461)
================
</Table>
<Table>
<Caption>
CREDIT DEFAULT SWAP CONTRACTS
- -------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
REFERENCE COUNTER AMOUNT FUND RECEIVES TERMINATION VALUE
ENTITY PARTY $ FIXED RATE DATE $
- ------------------------------ ---------------- --------- ----------------- -------------- --------------
Brazilian Government
International Bond Lehman Brothers 1,400 1.980% 03/20/16 1
Dow Jones CDX High Volatility
5 Index Goldman Sachs 1,000 0.850% 12/20/10 8
Dow Jones CDX High Volatility
4 Index UBS 5,000 0.900% 06/20/10 5
Mexico Government
International Bond JP Morgan 200 0.920% 03/20/16 --
--------------
Total Market Value of Open Credit Default Swap Contracts Premiums Paid (Received) - ($63) 14
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 103
FRANK RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
Asset-Backed Securities 6.4
Corporate Bonds and Notes 14.3
International Debt 4.9
Loan Agreements 0.3
Mortgage-Backed Securities 44.1
Municipal Bonds 0.8
Non-US Bonds 1.0
Registered Investment Company Funds --*
United States Government Agencies 1.1
United States Government Treasuries 11.2
Common Stocks 0.1
Preferred Stocks 0.2
Warrants & Rights --*
Options Purchased --*
Short Term Investments 31.0
Other Securities 14.6
---------------
Total Investments 130.0
Other Assets and Liabilities, Net (30.0)
---------------
100.0
===============
Futures Contracts (0.2)
Options Written (--)*
Foreign Currency Exchange Contracts --*
Index Swap Contracts (--)*
Interest Rate Swap Contracts (0.1)
Credit Default Swaps --*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
104 Fixed Income III Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,369.80 $ 1,011.55
Expenses Paid During
Period* $ 15.69 $ 13.32
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.67%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,375.50 $ 1,015.27
Expenses Paid During
Period* $ 11.31 $ 9.59
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.92%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,377.20 $ 1,016.56
Expenses Paid During
Period* $ 9.78 $ 8.30
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.66%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
Emerging Markets Fund 105
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 87.5%
Argentina - 0.0%
Endesa Costanera SA Class T 145,200 150
------------
Bermuda - 0.1%
Credicorp, Ltd. (N) 56,500 1,531
------------
Brazil - 8.7%
Arcelor Brasil SA 139,702 2,577
Banco do Brasil SA 36,400 1,058
Banco Itau Holding Financeira SA - ADR 32,600 1,037
Brasil Telecom Participacoes SA - ADR 55,400 2,263
Centrais Eletricas Brasileiras SA 27,605,400 792
Cia Brasileira de Distribuicao Grupo Pao de
Acucar - ADR (N) 39,800 1,566
Cia de Bebidas das Americas - ADR (N) 26,500 1,227
Cia de Saneamento Basico do Estado de Sao Paulo 29,770,000 2,910
Cia Siderurgica Nacional SA 114,033 4,005
Cia Vale do Rio Doce 37,700 1,933
Cia Vale do Rio Doce - ADR 176,100 7,833
Cia Vale do Rio Doce Class A 64,400 3,318
Cosan SA Industria e Comercio (AE) 130,500 10,042
EDP - Energias do Brasil SA 78,300 1,163
Gerdau SA - ADR (N) 342,300 5,922
Gol Linhas Aereas Inteligentes SA - ADR (N) 14,200 526
Natura Cosmeticos SA 863,015 11,041
Perdigao SA 72,900 719
Petroleo Brasileiro SA 236,956 5,792
Petroleo Brasileiro SA - ADR 192,675 18,282
Tele Norte Leste Participacoes SA 43,706 1,780
Tele Norte Leste Participacoes SA - ADR 194,500 3,536
Unibanco - Uniao de Bancos Brasileiros SA 41,700 658
Unibanco - Uniao de Bancos Brasileiros SA - GDR 134,000 10,633
------------
100,613
------------
Chile - 0.2%
Banco de Credito e Inversiones 39,900 1,101
Coca-Cola Embonor SA - ADR 97,500 864
Embotelladora Andina SA Class B 53,300 791
------------
2,756
------------
China - 4.5%
Air China, Ltd. Class H (AE) 384,000 160
Angang New Steel Co., Ltd. Class H (AE) 290,000 252
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Anhui Co.nch Cement Co., Ltd. Class H (AE) 252,000 436
Bank of Communications Co., Ltd. Class H (AE)(p) 4,834,534 2,946
China Petroleum & Chemical Corp. Class H 7,387,254 4,693
China Petroleum & Chemical Corp. Class R (N) 17,900 1,151
China Shenhua Energy Co., Ltd. Class H 3,243,000 5,877
China Telecom Corp., Ltd. Class H 4,675,000 1,628
Jiangsu Express Class H 2,603,600 1,553
Jiangxi Copper Co., Ltd. Class H 1,665,000 1,750
Maanshan Iron & Steel Class H 92,000 33
PetroChina Co., Ltd. - ADR (N) 19,220 2,160
PetroChina Co., Ltd. Class H 20,884,176 23,030
Shenzhen Expressway Co., Ltd. Class H 270,000 130
Sinopec Shanghai Petrochemical Co., Ltd. Class H 2,519,000 1,495
Sinopec Yizheng Chemical Fibre Co., Ltd. Class H 628,000 188
Travelsky Technology, Ltd. Class H 200,000 237
Wumart Stores, Inc. Class H 47,000 155
Yanzhou Coal Mining Co., Ltd. Class H 3,174,000 2,702
ZTE Corp. Class H 190,600 651
------------
51,227
------------
Colombia - 0.5%
BanColombia SA 336,431 2,775
BanColombia SA - ADR (N) 90,100 3,118
------------
5,893
------------
Czech Republic - 0.0%
Philip Morris CR 177 110
------------
Ecuador - 0.3%
Holcim Ecuador SA - GDR (A) 10,500 383
Holcim Ecuador SA - GDR (A) 72,000 2,938
------------
3,321
------------
Egypt - 1.5%
Commercial International Bank 104,893 1,294
Commercial International Bank - GDR 13,800 180
Egyptian Co. for Mobile Services 124,182 3,431
</Table>
106 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Orascom Construction Industries 199,951 8,242
Orascom Telecom Holding SAE 56,240 2,967
Vodafone Egypt Telecommunications SAE 77,675 1,161
------------
17,275
------------
Hong Kong - 1.8%
Beijing Enterprises Holdings, Ltd. 308,000 675
China Insurance International Holdings Co., Ltd. 1,680,000 910
China Mobile Hong Kong, Ltd. 458,500 2,667
China Mobile Hong Kong, Ltd. - ADR (N) 10,228 295
China Netcom Group Corp. Hong Kong, Ltd. 1,116,500 2,038
China Overseas Land & Investment, Ltd. 9,508,800 6,071
China Resources Power Holdings Co. 2,396,000 1,792
China Unicom, Ltd. 114,000 97
CNOOC, Ltd. 777,000 626
Hutchison Telecommunications International, Ltd.
(AE) 689,000 1,213
Kingboard Chemical Holdings, Ltd. 215,500 568
Luen Thai Holdings, Ltd. 1,471,000 432
Solomon Systemtech International, Ltd. 2,489,800 1,108
Techtronic Industries Co. 1,148,400 1,926
Tencent Holdings, Ltd. (AE) 409,000 828
------------
21,246
------------
Hungary - 1.2%
Magyar Telekom Telecommunications PLC 520,276 2,380
Mol Magyar Olaj-es Gazipari Rt. 56,500 6,725
Mol Magyar Olaj-es Gazipari Rt. - GDR 25,900 3,043
OTP Bank Rt. 48,100 1,866
------------
14,014
------------
India - 6.4%
Allahabad Bank 243,535 413
Andhra Bank 429,000 750
Arvind Mills, Ltd. 250,100 507
Associated Cement Co., Ltd. 101,300 2,151
Bajaj Auto, Ltd. 60,950 3,993
Bajaj Hindustham, Ltd. 687,750 7,909
Bank of Baroda 220,000 1,082
Bank of India 30,000 81
Bharti Tele Ventures, Ltd. (AE) 398,700 3,603
Chennai Petroleum Corp., Ltd. 194,660 1,045
Financial Technologies India, Ltd. 19,600 805
GAIL India, Ltd. 186,767 1,206
GAIL India, Ltd. - GDR 53,800 2,179
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Gateway Distriparks, Ltd. 118,467 640
Genesis Indian Investment Co. (AE) 612,819 20,480
Gujarat Ambuja Cements, Ltd. 592,221 1,533
Hawaiindustriesustan Zinc, Ltd. 330,340 7,194
HDFC Bank, Ltd. - ADR 34,500 2,029
I-Flex Solutions, Ltd. 34,900 921
IL&FS Investsmart, Ltd. (AE) 116,978 520
Indian Overseas Bank 250,000 547
Oriental Bank of Commerce 111,000 570
Petronet LNG, Ltd. (AE) 804,000 1,052
State Bank of India, Ltd. - GDR 72,210 3,679
Sun TV, Ltd. (AE) 53,291 1,512
Suzlon Energy, Ltd. 40,065 1,124
Tata Steel, Ltd. 333,370 4,708
Union Bank Of India 118,000 306
Videsh Sanchar Nigam, Ltd. 126,293 1,169
------------
73,708
------------
Indonesia - 2.8%
Aneka Tambang Tbk PT 3,141,646 2,056
Astra Agro Lestari Tbk PT 244,789 184
Bank Central Asia Tbk PT 725,681 362
Bank Danamon Indonesia Tbk PT 1,605,200 941
Bank Mandiri Persero Tbk PT 18,026,503 3,940
Bank Rakyat Indonesia 20,562,272 10,825
PT Astra International Tbk 2,744,277 3,733
Ramayana Lestari Sentosa Tbk PT 5,957,500 617
Telekomunikasi Indonesia Tbk PT 10,622,700 9,129
------------
31,787
------------
Israel - 1.6%
Bank Hapoalim BM 974,800 4,912
Bank Leumi Le-Israel BM 1,186,500 4,647
Check Point Software Technologies (AE) 200,200 3,874
Discount Investment Corp. 19,366 476
IDB Development Corp., Ltd. 11,903 388
Israel Chemicals, Ltd. 98,129 268
Tadiran Communications, Ltd. 13,949 480
Teva Pharmaceutical Industries, Ltd. - ADR 75,000 3,038
------------
18,083
------------
</Table>
Emerging Markets Fund 107
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lebanon - 0.0%
Solidere - GDR (AE) 4,200 94
------------
Luxembourg - 0.4%
Quilmes Industrial SA - ADR (N) 1,027 46
Tenaris SA 1 --
Tenaris SA - ADR 96,565 4,432
------------
4,478
------------
Malaysia - 0.9%
AirAsia BHD (AE) 2,106,100 1,017
Astro All Asia Networks PLC 890,700 1,125
Bumiputra-Commerce Holdings BHD Class D 2,106,842 3,662
IOI Corp. BHD 416,200 1,630
Magnum Corp. BHD 2,122,400 1,159
MK Land Holdings BHD 1,015,200 228
OYL Industries BHD 848,500 1,114
Proton Holdings BHD 24,000 40
TAN Chong Motor Holdings BHD 908,000 398
------------
10,373
------------
Mexico - 4.7%
Alfa SA de CV Class A (N) 521,200 2,622
America Movil SA de CV - ADR
Series L 192,500 7,105
Cemex SA de CV 2,025,054 13,686
Cemex SA de CV - ADR 15,000 1,013
Corp Moctezuma SA de CV 314,600 654
Fomento Economico Mexicano SA de CV - ADR 44,924 4,172
Grupo Aeroportuario del Pacifico SA de CV - ADR 20,000 666
Grupo Aeroportuario del Sureste SA de CV - ADR
(AE)(N) 14,900 578
Grupo Financiero Banorte SA de CV Class O 977,200 2,552
Grupo Mexico SA de CV Series B 21,400 75
Grupo Modelo SA 300,000 1,143
Grupo Televisa SA - ADR 175,092 3,712
Industrias Penoles SA de CV 437,053 3,946
Organizacion Soriana SA de CV Class B (AE)(N) 174,100 785
Telefonos de Mexico SA de CV - ADR
Series L 70,000 1,539
Urbi Desarrollos Urbanos SA de CV (AE)(N) 207,200 1,695
Wal-Mart de Mexico SA de CV
Series V 2,684,118 7,651
------------
53,594
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pakistan - 0.9%
Engro Chemical Pakistan, Ltd. 1,047,300 3,395
Fauji Fertilizer Co., Ltd. 1,565,322 3,389
ICI Pakistan, Ltd. 265,200 631
Pakistan Petroleum, Ltd. 72,500 332
Pakistan Telecommunication Co., Ltd. 3,025,423 2,735
------------
10,482
------------
Philippines - 0.4%
Globe Telecom, Inc. 79,190 1,377
Philippine Long Distance Telephone Co. 79,800 3,152
------------
4,529
------------
Poland - 0.1%
Polski Koncern Naftowy Orlen (N) 36,658 764
------------
Russia - 6.7%
Baltika Brewery 37,747 1,472
LUKOIL - ADR 448,376 40,623
MMC Norilsk Nickel - ADR (N) 69,751 9,207
Mobile TeleSystems - ADR 159,400 5,206
NovaTek OAO - GDR (p) 105,700 3,863
OAO Gazprom - ADR (N) 130,070 5,905
Promstroibank State Petersburg (AE) 696,000 870
Pyaterochka Holding NV - GDR (AE) 49,700 947
RBC Information Systems (AE) 113,259 1,053
Sberbank RF 1,050 1,901
Seventh Continent 20,500 517
Surgutneftegaz - ADR 40,500 3,523
Tatneft - ADR (N) 12,532 1,495
Unified Energy System - GDR 801 62
------------
76,644
------------
South Africa - 10.2%
ABSA Group, Ltd. 259,975 5,132
African Bank Investments, Ltd. 183,140 1,023
Alexander Forbes, Ltd. 323,600 834
Anglo Platinum, Ltd. 7,511 726
AngloGold Ashanti, Ltd. 15,500 840
AngloGold Ashanti, Ltd. - ADR (N) 28,134 1,538
Aveng, Ltd. 571,300 2,258
Barloworld, Ltd. 193,615 4,251
Consol, Ltd. 460,900 1,115
DataTec, Ltd. (AE) 14,300 64
Edgars Consolidated Stores, Ltd. 497,100 3,142
FirstRand, Ltd. 776,114 2,556
Foschini, Ltd. 145,186 1,471
Gold Fields, Ltd. 224,320 5,643
Impala Platinum Holdings, Ltd. 24,454 4,637
</Table>
108 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Imperial Holdings, Ltd. 158,144 4,393
Investec, Ltd. 20,500 1,168
JD Group, Ltd. 173,241 2,679
Massmart Holdings, Ltd. 91,300 893
Medi-Clinic Corp., Ltd. 167,563 591
MTN Group, Ltd. 766,400 7,648
Murray & Roberts Holdings, Ltd. 607,630 2,749
Naspers, Ltd. Class N 320,308 7,032
Network Healthcare Holdings, Ltd. 1,165,000 1,976
Pick'n Pay Stores, Ltd. 187,300 991
Reunert, Ltd. 35,300 440
Sanlam, Ltd. 2,521,443 6,513
Sasol, Ltd. (N) 563,592 23,715
Sasol, Ltd. - ADR 12,900 534
Standard Bank Group, Ltd. 778,619 11,111
Telkom SA, Ltd. 77,579 1,848
Tiger Brands, Ltd. 117,618 3,277
Truworths International, Ltd. 951,428 4,589
------------
117,377
------------
South Korea - 15.7%
Amorepacific Corp. 6,470 2,377
CJ Home Shopping 12,170 1,394
Daelim Industrial Co. 19,620 1,498
Daewoo Engineering & Construction Co., Ltd. 9,050 156
GS Engineering & Construction Corp. 16,880 1,224
Hanjin Heavy Industries & Construction Co., Ltd. 35,560 1,108
Hanjin Shipping Co., Ltd. (N) 67,460 1,860
Hankook Tire Co., Ltd. 186,497 2,808
Hanwha Chem Corp. (N) 157,670 1,881
Honam Petrochemical Corp. 26,400 1,679
Hyosung Corp. (AE)(N) 56,900 1,204
Hyundai Development Co. 31,020 1,799
Hyundai Heavy Industries (N) 9,280 889
Hyundai Mipo Dockyard 9,800 918
Hyundai Mobis 72,100 6,368
Hyundai Motor Co. (N) 60,280 5,298
Hyundai Steel Co. 28,720 1,110
Industrial Bank of Korea (N) 245,000 4,935
KCC Corp. 11,184 2,532
Kookmin Bank 178,606 16,001
Kookmin Bank - ADR 4,200 374
Korea Electric Power Corp. 298,210 13,247
Korea Electric Power Corp. - ADR 91,320 2,082
KT Corp. 80,670 3,626
KT Corp. - ADR 17,100 398
KT Freetel Co., Ltd. 29,700 987
KT&G Corp. 54,950 3,076
KT&G Corp. - GDR (p) 40,500 1,134
LG Electronics, Inc. 19,100 1,582
LG Household & Health Care, Ltd. 19,100 1,525
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LG International Corp. 3,160 89
LG Petrochemical Co., Ltd. 7,520 165
LG.Philips LCD Co., Ltd. (AE) 25,120 1,057
LG.Philips LCD Co., Ltd. - ADR (AE)(N) 26,200 552
Lotte Shopping Co. - GDR (AE)(p) 63,719 1,331
Lotte Shopping Co., Ltd. 3,532 1,475
LS Cable, Ltd. 6,300 261
NCSoft Corp. (AE) 12,484 1,046
NHN Corp. (AE) 2,224 790
Orion Corp. 2,442 640
Poongsan Corp. (N) 56,600 1,290
POSCO 44,335 12,362
S1 Corp. 16,230 724
Samsung Corp. 59,940 1,868
Samsung Electro-Mechanics Co., Ltd. (AE)(N) 14,790 561
Samsung Electronics Co., Ltd. (p) 4,560 1,555
Samsung Electronics Co., Ltd. 46,909 32,029
Samsung Electronics Co., Ltd. - GDR (p) 12,194 3,434
Samsung Fine Chemicals Co., Ltd. 13,910 428
Samsung Fire & Marine Insurance Co., Ltd. 16,250 2,334
Samsung Securities Co., Ltd. (N) 74,800 4,695
Shinhan Financial Group Co., Ltd. (N) 263,770 13,144
Shinsegae Co., Ltd. 4,300 2,102
SK Corp. 21,760 1,601
SK Telecom Co., Ltd. 11,520 2,705
SK Telecom Co., Ltd. - ADR 134,486 3,591
Tae Young Corp. (N) 11,339 950
Woori Finance Holdings Co., Ltd. 130,740 2,952
------------
180,801
------------
Taiwan - 10.1%
Accton Technology Corp. (AE) 924,000 557
Acer, Inc. 1,319,500 2,556
Advantech Co., Ltd. 672,921 1,845
Asia Cement Corp. 1,283,000 1,003
AU Optronics Corp. 776,000 1,272
AU Optronics Corp. - ADR (N) 65,800 1,081
Basso Industry Corp. 255,816 459
Cathay Financial Holding Co., Ltd. (AE) 1,376,000 3,084
Cathay Financial Holding Co., Ltd. - GDR 61,277 1,380
Chang Hwa Commercial Bank 2,120,000 1,372
China Steel Corp. 4,336,807 4,234
China Steel Corp. - GDR 93,236 1,827
</Table>
Emerging Markets Fund 109
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Chinatrust Financial Holding Co. 265,000 218
Chunghwa Picture Tubes, Ltd. 1,884,000 561
Chunghwa Telecom Co., Ltd. 402,000 772
Chunghwa Telecom Co., Ltd. - ADR 100,200 2,064
CMC Magnetics Corp. (AE) 5,893,000 1,884
Compal Electronics, Inc. 2,308,924 2,540
Compal Electronics, Inc. - GDR 183,673 1,025
Delta Electronics, Inc. 806,000 2,511
Elitegroup Computer Systems (AE) 307,000 212
Far Eastern Textile Co., Ltd. 1,136,637 1,044
Far EasTone Telecommunications Co., Ltd. 1,324,000 1,647
Far EasTone Telecommunications Co., Ltd. - GDR
(p) 11,000 205
Faraday Technology Corp. 297,185 531
First Financial Holding Co., Ltd. 2,874,000 2,283
Formosa Chemicals & Fibre Corp. 336,000 546
Formosa Plastics Corp. 33,000 53
Foxconn Technology Co., Ltd. 207,000 1,554
Gigabyte Technology Co., Ltd. 1,088,718 860
High Tech Computer Corp. 211,000 6,745
Himax Technologies, Inc. - ADR (AE)(N) 113,500 1,010
HON HAI Precision Industry Co. Ltd. 2,077,424 14,096
Hua Nan Financial Holdings Co., Ltd. 483,000 374
Lite-On Technology Corp. 39,900 63
Macronix International Co., Ltd. (AE) 1,796,086 444
MediaTek, Inc. 255,200 2,979
Mega Financial Holding Co., Ltd. 6,456,000 5,038
Mitac International 1,449,000 1,680
Nan Ya Plastics Corp. 557,000 814
Phoenixtec Power Co., Ltd. 565,629 594
Quanta Computer, Inc. 1,120,250 1,977
Ritek Corp. (AE) 5,371,161 1,678
Siliconware Precision Industries Co. 1,224,000 1,776
Systex Corp. (AE) 194,000 58
Taishin Financial Holdings Co., Ltd. 856,000 563
Taiwan Cement Corp. 663,000 520
Taiwan Fertilizer Co., Ltd. 734,000 1,353
Taiwan Mobile Co., Ltd. 2,509,520 2,525
Taiwan Semiconductor Manufacturing Co., Ltd. 9,018,554 19,249
Taiwan Semiconductor Manufacturing Co., Ltd. -
ADR 206,963 2,169
U-Ming Marine Transport Corp. 870,000 991
Uni-President Enterprises Corp. 1,929,000 1,454
United Microelectronics Corp. 3,405,000 2,369
Vanguard International Semiconductor Corp. 1,946,518 1,452
Via Technologies, Inc. (AE) 570,693 570
Wintek Corp. 725,000 982
Yieh Phui Enterprise 2,005,000 896
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Zyxel Communications Corp. 469,680 873
------------
116,472
------------
Thailand - 1.5%
Airports of Thailand PCL 1,052,600 1,641
Bank of Ayudhya PCL 6,588,900 3,371
Charoen Pokphand Foods PCL 3,577,100 524
CP Seven Eleven PCL 5,188,300 1,051
Glow Energy PCL 942,500 816
Kasikornbank PCL 828,600 1,457
Land and Houses PCL 159,300 36
PTT Chemical PCL 943,579 2,175
PTT Exploration & Production PCL 533,500 1,791
PTT PCL 509,000 3,499
Regional Container Lines PCL 500,000 274
Siam City Bank PCL 411,000 260
Siam City Cement PCL 35,600 256
------------
17,151
------------
Turkey - 3.9%
Akbank TAS 831,927 6,920
Akcansa Cimento AS 75,895 580
Anadolu Efes Biracilik Ve Malt Sanayii AS 125,630 4,203
Arcelik 127,100 1,076
Cimsa Cimento Sanayi VE Tica 263,875 2,314
Denizbank AS (AE) 232,106 2,053
Eregli Demir ve Celik Fabrikalari TAS 646,715 3,863
Finansbank AS (AE) 331,533 1,730
Ford Otomotiv Sanayi AS 143,300 1,430
Hurriyet Gazetecilik AS 420,200 1,541
Migros Turk TAS 200,455 2,789
Trakya Cam Sanayi AS 241,747 1,078
Tupras Turkiye Petrol Rafine 273,707 5,795
Turkcell Iletisim Hizmet AS 226,187 1,437
Turkcell Iletisim Hizmet AS - ADR 8,900 152
Turkiye Garanti Bankasi AS 688,800 2,839
Turkiye Is Bankasi 373,580 3,136
Turkiye Vakiflar Bankasi Tao (AE) 184,100 1,162
Yapi ve Kredi Bankasi (AE) 375,377 880
------------
44,978
------------
United Kingdom - 2.2%
Anglo American PLC 190,753 8,217
Genesis Smaller Companies (AE) 266,584 15,585
Old Mutual PLC 2,300 8
SABMiller PLC 54,300 1,155
------------
24,965
------------
</Table>
110 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States - 0.1%
Mechel OAO - ADR 41,100 1,114
Polyus Gold Co. (AE) 2,900 69
------------
1,183
------------
Venezuela - 0.1%
Cia Anonima Nacional Telefonos de Venezuela -
CANTV - ADR (N) 24,542 500
Siderurgica Venezolana Sivensa SACA (AE) 1,306,495 60
------------
560
------------
Zimbabwe - 0.0%
Delta Corp., Ltd. 1,138,003 407
OK Zimbabwe 6,402,949 142
------------
549
------------
TOTAL COMMON STOCKS
(cost $601,010) 1,006,708
------------
PREFERRED STOCKS - 6.5%
Brazil - 5.6%
Banco Bradesco SA 188,466 7,188
Banco Itau Holding Financeira SA 123,110 3,881
Braskem SA 212,335 1,496
Caemi Mineracao e Metalurgica SA 489,000 900
Centrais Eletricas Brasileiras SA 86,816,496 2,280
Cia Brasileira de Distribuicao Grupo Pao de
Acucar 16,750,000 648
Cia de Tecidos do Norte de Minas - Coteminas 7,256,440 713
Cia Vale do Rio Doce 180,500 8,000
Gerdau SA 9,600 166
Klabin SA 441,000 1,130
Petroleo Brasileiro SA 898,772 19,909
Suzano Bahia Sul Papel e Celulose SA 230,000 1,628
Tam SA 54,900 1,418
Usinas Siderurgicas de Minas Gerais SA 360,400 13,729
Votorantim Celulose e Papel SA 22,706 367
Weg SA 171,200 697
------------
64,150
------------
Colombia - 0.0%
BanColombia SA 7,200 61
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
South Korea - 0.9%
Hyundai Motor Co. 41,560 2,459
Samsung Electronics Co., Ltd. 15,792 8,555
------------
11,014
------------
TOTAL PREFERRED STOCKS
(cost $37,032) 75,225
------------
WARRANTS & RIGHTS - 0.0%
Pakistan - 0.0%
Engro Chemical Pakistan Rights (AE) 105 20
------------
TOTAL WARRANTS & RIGHTS
(cost $0) 20
------------
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.5%
(Number of Contracts)
Brazil - 0.0%
Bovespa Index Futures
Jun 2006 38,926.14 (BRL)
Call (315) 5,875 335
Jun 2006 39,290.00 (BRL)
Call (255) 4,801 227
------------
562
------------
South Korea - 0.5%
Kospi 200 Index Futures
Jun 2006 137.60 (KRW) Call (50) 3,647 1,507
Jun 2006 138.20 (KRW) Call (126) 9,231 3,757
------------
5,264
------------
TOTAL OPTIONS PURCHASED
(cost $4,086) 5,826
------------
</Table>
Emerging Markets Fund 111
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.8%
United States - 4.8%
Frank Russell Investment Company Money Market
Fund 50,567,000 50,567
United States Treasury Bills (c)(z)(sec.)
4.594% due 06/15/06 4,600 4,574
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $55,141) 55,141
------------
OTHER SECURITIES - 2.8%
Frank Russell Investment Company Money Market
Fund (X) 8,403,018 8,403
State Street Securities Lending Quality Trust
(X) 23,672,364 23,672
------------
TOTAL OTHER SECURITIES
(cost $32,075) 32,075
------------
TOTAL INVESTMENTS - 102.1%
(identified cost $729,344) 1,174,995
OTHER ASSETS AND LIABILITIES,
NET - (2.1%) (23,804)
------------
NET ASSETS - 100.0% 1,151,191
============
</Table>
See accompanying notes which are an integral part of the financial statements.
112 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Hang Seng Index (Hong Kong)
expiration date 05/06 (86) 91,667 23
JSE-40 Index (South Africa)
expiration date 06/06 (375) 11,899 1,237
MSCI Taiwan Index
expiration date 05/06 (515) 15,661 276
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,536
===============
</Table>
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Brazil
Bovespa Index Futures
Jun 2006 38,926.14 (BRL) Put (315) 5,875 (45)
Jun 2006 39,290.00 (BRL) Put (255) 4,801 (37)
South Korea
Kospi 200 Index Futures
Jun 2006 137.60 (KRW) Put (50) 3,647 (265)
Jun 2006 138.20 (KRW) Put (126) 9,231 (668)
---------------
Total Liability for Options Written
(premiums received $980) (1,015)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 113
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 34 BRL 72 05/02/06 --
USD 461 BRL 969 05/02/06 3
USD 150 BRL 313 05/03/06 --
USD 1,076 BRL 2,400 06/21/06 56
USD 1,807 BRL 4,000 06/21/06 80
USD 2,242 BRL 5,000 06/21/06 117
USD 4,721 BRL 10,500 06/21/06 232
USD 14 HKD 105 05/02/06 --
USD 126 HKD 979 05/02/06 --
USD 306 KRW 300,000 06/21/06 12
USD 919 KRW 900,000 06/21/06 36
USD 1,060 KRW 1,000,000 06/21/06 2
USD 1,063 KRW 1,000,000 06/21/06 (1)
USD 1,939 KRW 1,900,000 06/21/06 79
USD 2,545 KRW 2,500,000 06/21/06 109
USD 8,618 KRW 8,400,000 06/21/06 302
USD 215 MXN 2,388 05/02/06 1
USD 20 THB 756 05/03/06 --
USD -- ZAR 1 05/05/06 --
USD 157 ZAR 1,000 06/21/06 9
USD 2,063 ZAR 13,000 06/21/06 93
USD 8,956 ZAR 57,000 06/21/06 495
BRL 86 USD 41 05/02/06 --
BRL 61 USD 29 05/03/06 --
BRL 900 USD 403 06/21/06 (22)
BRL 1,000 USD 454 06/21/06 (17)
BRL 2,000 USD 913 06/21/06 (31)
HKD 2,503 USD 323 05/02/06 --
IDR 761,426 USD 86 05/01/06 (1)
IDR 2,359,955 USD 267 05/01/06 (2)
IDR 2,364,624 USD 267 05/01/06 (2)
IDR 3,628,649 USD 410 05/01/06 (3)
IDR 43,260 USD 5 05/02/06 --
IDR 820,495 USD 93 05/02/06 --
KRW 1,000,000 USD 1,047 06/21/06 (15)
KRW 2,000,000 USD 2,098 06/21/06 (26)
KRW 2,000,000 USD 2,094 06/21/06 (30)
MXN 157 USD 14 05/02/06 --
MYR 70 USD 19 05/03/06 --
THB 240 USD 6 05/02/06 --
THB 517 USD 14 05/02/06 --
THB 719 USD 19 05/02/06 --
THB 1,089 USD 29 05/02/06 --
ZAR 200 USD 33 05/02/06 --
ZAR 355 USD 57 05/02/06 (2)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
ZAR 154 USD 26 05/03/06 --
ZAR 276 USD 45 05/04/06 (1)
ZAR 5,000 USD 811 06/21/06 (18)
ZAR 6,000 USD 986 06/21/06 (8)
ZAR 7,000 USD 1,131 06/21/06 (30)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 1,417
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
114 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 3.0 34,372
Consumer Discretionary 5.2 59,626
Consumer Staples 5.3 61,297
Financial Services 20.2 232,655
Health Care 0.5 5,605
Integrated Oils 13.8 158,506
Materials and Processing 18.8 216,466
Miscellaneous 1.1 12,348
Other Energy 2.6 29,969
Producer Durables 1.2 13,356
Technology 11.6 133,714
Utilities 10.7 124,019
Warrants & Rights -- 20
Options Purchased 0.5 5,826
Short-Term Investments 4.8 55,141
Other Securities 2.8 32,075
--------------- ---------------
Total Investments 102.1 1,174,995
Other Assets and Liabilities, Net (2.1) (23,804)
--------------- ---------------
Net Assets 100.0 1,151,191
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 10.2 117,926
Asia 46.4 534,074
Europe 12.2 140,988
Latin America 20.3 233,191
Middle East 3.1 35,452
Other Regions 4.9 56,324
United Kingdom 2.2 24,965
Other Securities 2.8 32,075
--------------- ---------------
Total Investments 102.1 1,174,995
Other Assets and Liabilities, Net (2.1) (23,804)
--------------- ---------------
Net Assets 100.0 1,151,191
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 115
FRANK RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Argentina --*
Bermuda 0.1
Brazil 8.7
Chile 0.2
China 4.5
Columbia 0.5
Czech Republic --*
Ecuador 0.3
Egypt 1.5
Hong Kong 1.8
Hungary 1.2
India 6.4
Indonesia 2.8
Israel 1.6
Lebanon --*
Luxembourg 0.4
Malaysia 0.9
Mexico 4.7
Pakistan 0.9
Philippines 0.4
Poland 0.1
Russia 6.7
South Africa 10.2
South Korea 15.7
Taiwan 10.1
Thailand 1.5
Turkey 3.9
United Kingdom 2.2
United States 0.1
Venezuela 0.1
Zimbabwe --*
Preferred Stock 6.5
Warrants & Rights --*
Options Purchased 0.5
Short-Term Investments 4.8
Other Securities 2.8
---------------
Total Investments 102.1
Other Assets and Liabilities Net (2.1)
---------------
100.0
===============
Futures Contracts 0.1
Options Written (0.1)
Foreign Currency Exchange Contracts 0.1
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
116 Emerging Markets Fund
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,158.70 $ 1,014.48
Expenses Paid During
Period* $ 11.13 $ 10.39
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.08%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,163.20 $ 1,018.20
Expenses Paid During
Period* $ 7.13 $ 6.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.33%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,164.70 $ 1,019.44
Expenses Paid During
Period* $ 5.80 $ 5.41
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.08%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
Real Estate Securities Fund 117
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 97.7%
Apartments - 18.5%
Apartment Investment & Management Co. Class A
(o) 408,375 18,250
Archstone-Smith Trust (o) 1,506,429 73,634
AvalonBay Communities, Inc. (o) 762,700 82,143
BRE Properties, Inc. Class A (o) 84,800 4,569
Camden Property Trust (o)(N) 458,800 31,533
Equity Residential (o) 1,369,300 61,441
Essex Property Trust, Inc. (o) 236,900 25,846
GMH Communities Trust (o) 583,100 7,172
Home Properties, Inc. (o) 53,900 2,696
Mid-America Apartment Communities, Inc. (o) 49,100 2,602
United Dominion Realty Trust, Inc. (o)(N) 473,000 12,861
------------
322,747
------------
Diversified - 6.6%
Colonial Properties Trust (o) 131,200 6,460
iStar Financial, Inc. (o)(N) 125,700 4,809
Spirit Finance Corp. (o)(N) 934,600 10,841
Vornado Realty Trust (o)(N) 970,372 92,807
------------
114,917
------------
Free Standing Retail - 0.1%
Realty Income Corp. (o)(N) 96,500 2,188
------------
Health Care - 3.1%
Health Care REIT, Inc. (o)(N) 118,243 4,115
Healthcare Realty Trust, Inc. (o)(N) 186,200 7,051
LTC Properties, Inc. (o) 65,300 1,433
Nationwide Health Properties, Inc. (o)(N) 376,900 8,111
Omega Healthcare Investors,
Inc. (o)(N) 309,000 3,952
Ventas, Inc. (o) 931,450 30,430
------------
55,092
------------
Industrial - 6.7%
AMB Property Corp. (o)(N) 608,100 30,399
First Potomac Realty Trust (o)(N) 80,100 2,210
ProLogis (o)(N) 1,669,200 83,827
------------
116,436
------------
Lodging/Resorts - 10.1%
DiamondRock Hospitality Co. (o)(N) 104,200 1,491
FelCor Lodging Trust, Inc. (o) 369,100 7,991
Hilton Hotels Corp. 964,700 25,989
Hospitality Properties Trust (o) 67,000 2,888
Host Hotels & Resorts, Inc. (AE)(o) 3,639,275 76,497
LaSalle Hotel Properties (o)(N) 343,920 15,040
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. (o) 783,583 44,962
Strategic Hotels & Resorts, Inc. (AE)(o)(N) 95,000 2,155
------------
177,013
------------
Manufactured Homes - 0.5%
Equity Lifestyle Properties, Inc. (o) 187,800 8,261
------------
Mixed Industrial/Office - 2.4%
Duke Realty Corp. (o) 162,600 5,756
Liberty Property Trust (o) 586,775 26,229
PS Business Parks, Inc. (o)(N) 196,200 10,192
------------
42,177
------------
Office - 19.1%
Alexandria Real Estate Equities,
Inc. (o) 100,700 9,123
American Financial Realty
Trust (o)(N) 224,500 2,555
BioMed Realty Trust, Inc. (o)(N) 547,220 15,147
Boston Properties, Inc. (o)(N) 906,200 79,990
Brandywine Realty Trust (o)(N) 577,521 16,350
Brookfield Properties Corp. 1,075,700 34,530
CarrAmerica Realty Corp. (o) 240,600 10,769
Columbia Equity Trust, Inc. (o) 268,515 4,353
Corporate Office Properties
Trust (o)(N) 295,500 12,263
Equity Office Properties Trust (o) 702,700 22,697
Highwoods Properties, Inc. (o)(N) 270,000 8,516
Kilroy Realty Corp. (o) 235,400 16,789
Mack-Cali Realty Corp. (o)(N) 317,500 14,357
Reckson Associates Realty Corp. (o) 615,400 25,035
SL Green Realty Corp. (o) 302,200 29,918
Trizec Properties, Inc. (o)(N) 1,221,600 30,564
------------
332,956
------------
Regional Malls - 14.6%
CBL & Associates Properties,
Inc. (o)(N) 173,300 6,930
General Growth Properties, Inc. (o) 983,000 46,152
Macerich Co. (The) (o) 708,300 51,862
Simon Property Group, Inc. (o) 1,581,400 129,485
Taubman Centers, Inc. (o)(N) 484,256 19,922
------------
254,351
------------
</Table>
118 Real Estate Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Self Storage - 4.3%
Extra Space Storage, Inc. (o)(N) 331,400 5,210
Public Storage, Inc. (o)(N) 704,200 54,139
Shurgard Storage Centers, Inc. Class A (o) 90,600 5,706
U-Store-It Trust (o)(N) 590,100 10,787
------------
75,842
------------
Shopping Centers - 10.1%
Acadia Realty Trust (o) 304,100 6,864
Developers Diversified Realty Corp. (o) 802,400 42,688
Equity One, Inc. (o)(N) 167,600 3,852
Federal Realty Investors Trust (o) 481,700 32,866
Inland Real Estate Corp. (o)(N) 108,400 1,573
Kimco Realty Corp. (o)(N) 487,900 18,116
Kite Realty Group Trust (o) 197,800 3,020
Pan Pacific Retail Properties, Inc. (o) 187,400 12,488
Regency Centers Corp. (o) 877,100 55,336
------------
176,803
------------
Specialty - 1.6%
Digital Realty Trust, Inc. (o)(N) 543,530 15,328
Plum Creek Timber Co., Inc. (o)(N) 354,600 12,872
------------
28,200
------------
TOTAL COMMON STOCKS
(cost $1,120,382) 1,706,983
------------
SHORT-TERM INVESTMENTS - 2.0%
Frank Russell Investment Company Money Market
Fund 34,526,000 34,526
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $34,526) 34,526
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 5.6%
Frank Russell Investment Company Money Market
Fund (X) 25,656,215 25,656
State Street Securities Lending Quality Trust
(X) 72,276,799 72,277
------------
TOTAL OTHER SECURITIES
(cost $97,933) 97,933
------------
TOTAL INVESTMENTS - 105.3%
(identified cost $1,252,841) 1,839,442
OTHER ASSETS AND LIABILITIES,
NET - (5.3%) (92,428)
------------
NET ASSETS - 100.0% 1,747,014
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 119
FRANK RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Apartments 18.5
Diversified 6.6
Free Standing Retail 0.1
Health Care 3.1
Industrial 6.7
Lodging/Resorts 10.1
Manufactured Homes 0.5
Mixed Industrial/Office 2.4
Office 19.1
Regional Malls 14.6
Self Storage 4.3
Shopping Center 10.1
Specialty 1.6
Short-Term Investments 2.0
Other Securities 5.6
---------------
Total Investments 105.3
Other Assets and Liabilities, Net (5.3)
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
120 Real Estate Securities Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,007.50 $ 1,016.56
Expenses Paid During
Period* $ 8.26 $ 8.30
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.66%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,011.50 $ 1,020.28
Expenses Paid During
Period* $ 4.54 $ 4.56
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.91%
(representing the six month period annualized), 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,012.80 $ 1,021.52
Expenses Paid During
Period* $ 3.29 $ 3.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.66%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
Short Duration Bond Fund 121
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 76.7%
Asset-Backed Securities - 18.5%
AAA Trust (p)
Series 2005-2 Class A1
5.059% due 11/26/35 327 328
AmeriCredit Automobile Receivables Trust
Series 2005-AX Class A3
3.630% due 01/06/10 2,000 1,980
Asset Backed Securities Corp. Home Equity (E)
Series 2002-HE1 Class M1
6.001% due 03/15/32 1,396 1,396
Banc of America Securities Auto Trust
Series 2005-WF1 Class A4
4.080% due 04/18/10 3,000 2,929
Bank One Issuance Trust
Series 2004-B2 Class B2
4.370% due 04/15/12 1,500 1,454
Bear Stearns Asset Backed Securities, Inc. (E)
Series 2004-BO1 Class 1A1
5.159% due 09/25/34 327 328
BMW Vehicle Owner Trust
Series 2004-A Class A4
3.320% due 02/25/09 4,200 4,112
Brazos Higher Education Authority
Series 2005-A Class A5
4.910% due 12/01/40 3,250 3,216
California Infrastructure PG&E-1
Series 1997-1 Class A7
6.420% due 09/25/08 388 389
Series 1997-1 Class A8
6.480% due 12/26/09 3,000 3,043
California Infrastructure SCE-1
Series 1997-1 Class A7
6.420% due 12/26/09 7,450 7,552
California Infrastructure SDG&E-1
Series 1997-1 Class A6
6.310% due 09/25/08 129 129
Capital Auto Receivables Asset Trust
Series 2004-1 Class A3
2.000% due 11/15/07 427 422
Series 2004-2 Class A2
3.350% due 02/15/08 3,000 2,969
Series 2006-1 Class A3
5.030% due 10/15/09 2,225 2,215
Capital One Auto Finance Trust
Series 2005-BSS Class A3
4.080% due 11/15/09 2,000 1,969
Capital One Master Trust
Series 2002-4A Class A
4.900% due 03/15/10 1,000 996
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Capital One Prime Auto Receivables Trust
Series 2004-3 Class A4
3.690% due 06/15/10 1,000 969
Series 2004-3 Class B
3.860% due 08/15/11 1,500 1,459
Carmax Auto Owner Trust
Series 2004-2 Class A4
3.460% due 09/15/11 2,500 2,420
Series 2005-2 Class A4
4.340% due 09/15/10 2,000 1,950
Carrington Mortgage Loan Trust (E)
Series 2005-NC3 Class A1A
5.039% due 06/25/35 150 150
Series 2005-OPT Class A1A
5.049% due 05/25/35 123 123
Centex Home Equity
Series 2003-C Class AF4
4.960% due 04/25/32 1,261 1,252
Chase Manhattan Auto Owner Trust
Series 2004-A Class A4 (N)
2.830% due 09/15/10 1,800 1,745
Series 2005-A Class A4
3.980% due 04/15/11 1,000 967
Series 2005-A Class CTFS
4.040% due 04/15/11 1,000 979
CIT Equipment Collateral
Series 2004-VT1 Class A3
2.200% due 03/20/08 608 600
Series 2005-VT1 Class A3
4.120% due 08/20/08 1,150 1,138
CIT Marine Trust
Series 1999-A Class A4
6.250% due 11/15/19 712 714
CIT RV Trust
Series 1998-A Class A5
6.120% due 11/15/13 472 472
Citibank Credit Card Issuance Trust
Series 2003-A3 Class A3
3.100% due 03/10/10 1,000 962
Citigroup Mortgage Loan Trust, Inc. (E)
Series 2005-HE3 Class A2A
5.069% due 09/25/35 679 680
CNH Wholesale Master Note Trust (E)
Series 2005-1 Class A
5.011% due 06/15/11 1,500 1,499
</Table>
122 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Community Program Loan Trust
Series 1987-A Class A4
4.500% due 10/01/18 2,106 2,055
Countrywide Asset-Backed Certificates (E)
Series 2001-BC3 Class A
5.439% due 12/25/31 199 199
Series 2005-4 Class 3AV1
5.039% due 10/25/35 990 990
Series 2005-5 Class 2A1
5.039% due 10/25/35 303 303
Series 2005-9 Class 2A1
5.059% due 08/25/35 738 738
Daimler Chrysler Auto Trust
Series 2005-A Class A3
3.490% due 12/08/08 2,330 2,303
Series 2005-A Class A4
3.740% due 02/08/10 8,100 7,903
Dillard Credit Card Master Trust
Series 2002-2 Class A
3.800% due 09/15/10 3,650 3,633
Discover Card Master Trust I
Series 2002-2 Class A
5.150% due 10/15/09 2,500 2,498
Series 2002-2 Class B
5.450% due 10/15/09 1,000 1,001
E-Trade RV and Marine Trust
Series 2004-1 Class A3
3.620% due 10/08/18 1,300 1,233
Equifirst Mortgage Loan Trust (E)
Series 2005-1 Class A1
5.019% due 04/25/35 676 676
Fifth Third Auto Trust
Series 2004-A Class A3
3.190% due 02/20/08 1,417 1,407
First NLC Trust (E)
Series 2005-2 Class AV1
5.069% due 09/25/35 405 405
Fleet Credit Card Master Trust II
Series 2001-B Class B
5.900% due 12/15/08 1,100 1,101
Ford Credit Auto Owner Trust
Series 2005-A Class A3
3.480% due 11/15/08 8,225 8,135
Series 2005-B Class A4
4.380% due 01/15/10 1,500 1,476
Series 2005-B Class B
4.640% due 04/15/10 1,250 1,228
Series 2005-C Class B
4.520% due 09/15/10 1,000 975
Series 2006-A Class A3
5.050% due 03/15/10 535 533
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Franklin Auto Trust
Series 2003-1 Class A4
2.270% due 05/20/11 738 720
GE Commercial Equipment Financing LLC (E)
Series 2004-1 Class B
5.123% due 12/20/15 475 475
GE Corporate Aircraft Financing LLC (E)(p)
Series 2004-1A Class B
5.809% due 01/25/18 530 530
GE Dealer Floorplan Master Note Trust (E)
Series 2004-2 Class B
5.213% due 07/20/09 1,000 1,002
GMAC Mortgage Corp. Loan Trust
Series 2004-GH1 Class A2
4.390% due 12/25/25 1,500 1,484
GS Auto Loan Trust
Series 2004-1 Class A3
2.130% due 11/15/07 743 737
Series 2005-1 Class A4
4.560% due 11/15/13 1,300 1,273
GSAMP Trust (E)
Series 2004-SEA Class A2A
5.249% due 03/25/34 704 704
Hertz Vehicle Financing LLC (p)
Series 2005-2A Class A2
4.930% due 02/25/10 2,500 2,472
Honda Auto Receivables Owner Trust
Series 2003-2 Class A4
2.160% due 10/21/08 3,036 2,995
Series 2003-3 Class A4
2.770% due 11/21/08 1,939 1,904
Series 2003-4 Class A4
2.790% due 03/16/09 1,000 982
Series 2003-5 Class A3
2.300% due 10/18/07 334 332
Series 2003-5 Class A4
2.960% due 04/20/09 2,135 2,085
Series 2004-3 Class A4
3.280% due 02/18/10 2,000 1,931
Household Automotive Trust
Series 2005-3 Class A2
4.700% due 01/17/09 2,600 2,595
Household Private Label Credit Card Master Note
Trust I
Series 2002-1 Class A
5.500% due 01/18/11 3,750 3,761
</Table>
Short Duration Bond Fund 123
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hyundai Auto Receivables Trust
Series 2004-A Class A3
2.970% due 05/15/09 977 963
Series-A Class A3
3.980% due 11/16/09 1,500 1,471
Illinois Power Special Purpose Trust
Series 1998-1 Class A6
5.540% due 06/25/09 2,662 2,667
IXIS Real Estate Capital Trust (E)
Series 2005-HE2 Class A1
5.039% due 09/25/35 68 68
Long Beach Auto Receivables Trust
Series 2005-B Class A3
4.406% due 05/15/10 1,500 1,481
Marlin Leasing Receivables LLC (p)
Series 2005-1A Class A3
4.630% due 11/17/08 1,650 1,631
MBNA Credit Card Master Note Trust
Series 2005-A7 Class A7
4.300% due 02/15/11 1,500 1,471
Merrill Auto Trust Securitization
Series 2005-1 Class A3
4.100% due 08/25/09 3,000 2,957
Morgan Stanley Dean Witter Capital I (E)
Series 2002-HE1 Class A2
5.289% due 07/25/32 3 3
National City Auto Receivables Trust
Series 2002-A Class A4
4.830% due 08/15/09 485 485
Series 2004-A Class A3
2.110% due 07/15/08 746 738
Nelnet Education Loan Funding, Inc.
Series 2001-A Class A1
5.760% due 07/01/12 1,917 1,932
Nissan Auto Lease Trust
Series 2005-A Class A3
4.700% due 10/15/08 3,000 2,980
Nissan Auto Receivables Owner Trust
Series 2005-A Class A3
3.540% due 10/15/08 1,650 1,629
Series 2005-B Class A3
3.990% due 07/15/09 1,600 1,578
Nordstrom Private Label Credit Card Master Note
Trust (p)
Series 2001-1A Class A
4.820% due 04/15/10 3,500 3,495
Onyx Acceptance Grantor Trust
Series 2005-A Class A4
3.910% due 09/15/11 2,000 1,947
PBG Equipment Trust (p)
Series 1998-1A Class A
6.270% due 01/20/12 575 576
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Peco Energy Transition Trust
Series 1999-A Class A6
6.050% due 03/01/09 1,410 1,416
PG&E Energy Recovery Funding LLC
Series 2005-1 Class A2
3.870% due 06/25/11 2,905 2,839
Series 2005-2 Class A1
4.850% due 06/25/11 1,325 1,317
Popular ABS Mortgage Pass-Through Trust
Series 2004-5 Class AF2
3.735% due 12/25/34 965 955
Series 2005-3 Class AF3
4.437% due 07/25/35 2,000 1,961
Providian Gateway Master Trust (p)
Series 2004-FA Class A
3.650% due 11/15/11 1,200 1,171
PSE&G Transition Funding LLC
Series 2001-1 Class A3
5.980% due 06/15/08 564 564
Public Service New Hampshire Funding LLC
Series 2001-1 Class A2
5.730% due 11/01/10 1,083 1,090
Railcar Leasing LLC (p)
Series 1997-1 Class A2
7.125% due 01/15/13 1,000 1,039
Regions Auto Receivables Trust
Series 2003-2 Class A3
2.310% due 01/15/08 277 276
Residential Asset Mortgage Products, Inc. (E)
Series 2004-RS1 Class AII1
5.089% due 06/25/27 477 477
Series 2004-RS2 Class AIIB
5.209% due 02/25/34 543 544
SLM Student Loan Trust (p)
Series 2003-4 Class A5B
3.390% due 03/15/33 3,000 2,896
Specialty Underwriting & Residential Finance (E)
Series 2004-BC4 Class A2A
5.109% due 10/25/35 214 214
Susquehanna Auto Lease Trust (p)
Series 2005-1 Class A3
4.430% due 06/16/08 4,000 3,953
Series 2005-1 Class B
4.710% due 07/14/08 1,700 1,678
</Table>
124 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Toyota Auto Receivables Owner Trust
Series 2003-B Class A4
2.790% due 01/15/10 4,670 4,614
Toyota Motor Credit Corp.
2.750% due 08/06/09 2,545 2,441
Triad Auto Receivables Owner Trust
Series 2002-A Class A4
3.240% due 08/12/09 991 982
Series 2003-B Class A3
2.480% due 03/12/08 145 145
Series 2004-A Class A3
1.900% due 07/14/08 393 392
Series 2006-A Class A3
4.770% due 01/12/11 2,000 1,981
USAA Auto Owner Trust
Series 2004-2 Class A3
3.030% due 06/16/08 3,096 3,070
Series 2004-2 Class A4
3.580% due 02/15/11 1,700 1,664
Series 2005-2 Class A4
4.170% due 02/15/11 4,000 3,888
Wachovia Auto Owner Trust
Series 2004-A Class A3
3.190% due 06/20/08 1,399 1,387
Series 2004-A Class A4
3.660% due 07/20/10 7,500 7,329
Series 2004-B Class A3
2.910% due 04/20/09 4,259 4,204
Wells Fargo Financial Auto Owner Trust
Series 2004-A Class A4
2.670% due 08/16/10 2,000 1,953
West Penn Funding LLC Transition Bonds
Series 1999-A Class A3
6.810% due 09/25/08 306 306
WFS Financial Owner Trust
Series 2002-3 Class A4
3.500% due 02/20/10 925 918
Series 2004-1 Class A3 (N)
2.190% due 06/20/08 500 498
Whole Auto Loan Trust
Series 2003-1 Class A3B
1.990% due 05/15/07 223 222
Series 2003-1 Class B
2.240% due 03/15/10 297 294
World Omni Auto Receivables Trust
Series 2006-A Class A2
5.050% due 10/15/08 3,000 2,997
------------
208,027
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Corporate Bonds and Notes - 16.9%
ABN Amro Bank NV (N)
7.125% due 06/18/07 1,700 1,732
Allstate Financial Global Funding (p)
2.500% due 06/20/08 4,080 3,850
Altria Group, Inc. (N)
7.650% due 07/01/08 1,500 1,563
American Express Centurion Bank
Series BKNT
4.375% due 07/30/09 3,440 3,343
Ameritech Capital Funding
6.250% due 05/18/09 2,000 2,023
Associates Corp. of North America
6.250% due 11/01/08 1,900 1,941
8.550% due 07/15/09 750 815
Bank of America Corp.
6.375% due 02/15/08 3,000 3,052
Bank One Corp.
2.625% due 06/30/08 5,675 5,363
BankAmerica Corp.
6.250% due 04/01/08 2,000 2,031
7.125% due 03/01/09 1,500 1,566
BellSouth Corp.
4.200% due 09/15/09 5,330 5,117
British Aerospace Finance, Inc. (p)
7.000% due 07/01/07 900 913
Capital One Financial Corp.
7.125% due 08/01/08 1,450 1,495
CIT Group, Inc.
5.160% due 09/20/07 (E) 3,800 3,809
5.000% due 11/24/08 7,050 6,986
4.250% due 02/01/10 2,325 2,224
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
4.890% due 03/07/08 1,600 1,600
Citigroup, Inc.
4.900% due 06/04/07 (E) 1,000 1,000
6.200% due 03/15/09 5,700 5,828
Consolidated Edison Co. of New York
Series B
7.150% due 12/01/09 1,000 1,055
Credit Suisse USA, Inc. (E)
5.000% due 12/09/08 3,500 3,503
CSX Corp.
6.250% due 10/15/08 2,000 2,036
Deutsche Bank Financial, Inc.
7.500% due 04/25/09 2,000 2,112
Entergy Mississippi, Inc.
4.350% due 04/01/08 500 488
</Table>
Short Duration Bond Fund 125
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
FleetBoston Financial Corp.
6.375% due 05/15/08 4,185 4,266
Ford Motor Credit Co. (E)(N)
7.680% due 11/02/07 200 196
GATX Rail Corp.
6.750% due 05/01/09 2,500 2,549
General Electric Capital Corp.
5.175% due 10/21/10 (E) 2,000 2,001
Series MTNA (N)
4.625% due 09/15/09 6,460 6,315
Goldman Sachs Group, Inc.
5.125% due 10/05/07 (E) 2,000 2,003
5.414% due 10/07/11 (E) 3,000 3,020
Series MTNB (E)
5.420% due 07/23/09 2,000 2,013
Harrah's Operating Co., Inc.
7.500% due 01/15/09 1,500 1,566
HSBC Finance Corp.
6.500% due 11/15/08 10,130 10,404
International Lease Finance Corp.
5.625% due 06/01/07 1,600 1,604
6.375% due 03/15/09 1,500 1,535
4.750% due 07/01/09 2,250 2,197
Series MTNP
3.125% due 05/03/07 2,200 2,150
Lehman Brothers Holdings, Inc.
7.875% due 08/15/10 1,000 1,087
Series MTNG
3.950% due 11/10/09 1,000 950
Lehman Brothers, Inc.
6.625% due 02/15/08 1,500 1,529
Medco Health Solutions, Inc.
7.250% due 08/15/13 1,750 1,866
Merrill Lynch & Co., Inc.
4.831% due 10/27/08 3,925 3,884
Metropolitan Life Global Funding I (p)
4.250% due 07/30/09 4,000 3,899
MGM Mirage
9.750% due 06/01/07 1,200 1,245
Morgan Stanley
5.235% due 07/27/07 (E) 3,000 3,003
3.875% due 01/15/09 2,000 1,923
National City Bank
Series BKNT
4.250% due 01/29/10 1,375 1,319
Northern States Power Co.
6.875% due 08/01/09 3,000 3,114
Ohio Edison Co.
4.000% due 05/01/08 1,100 1,068
Pepco Holdings, Inc.
5.500% due 08/15/07 400 400
Principal Life Global Funding I (p)
5.125% due 06/28/07 2,000 1,983
2.800% due 06/26/08 5,600 5,316
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Residential Capital Corp.
6.125% due 11/21/08 2,000 1,991
6.375% due 06/30/10 2,000 1,992
SLM Corp.
3.625% due 03/17/08 7,200 6,968
Sprint Capital Corp.
6.375% due 05/01/09 3,775 3,863
Texas Eastern Transmission, LP
5.250% due 07/15/07 2,900 2,889
Textron, Inc.
6.375% due 11/15/08 2,500 2,547
US Bancorp
Series MTNN
5.100% due 07/15/07 1,650 1,642
US Bank NA
Series BKNT
4.125% due 03/17/08 1,600 1,567
Wachovia Bank NA
Series BKNT
4.375% due 08/15/08 2,250 2,205
Wachovia Corp.
5.625% due 12/15/08 (N) 8,200 8,256
Series * (E)
5.040% due 07/20/07 3,500 3,504
Wells Fargo & Co.
4.125% due 03/10/08 820 803
6.250% due 04/15/08 8,337 8,477
5.000% due 03/23/10 (E) 3,000 2,999
------------
189,553
------------
International Debt - 3.2%
Brazilian Government International Bond (E)
10.710% due 06/29/09 850 987
British Telecommunications PLC
7.000% due 05/23/07 1,700 1,725
Eksportfinans A/S
4.750% due 12/15/08 7,800 7,715
Eli Lilly Services, Inc. (E)(p)
4.940% due 09/12/08 4,000 4,003
European Investment Bank
3.875% due 08/15/08 7,450 7,250
HBOS Treasury Services PLC (p)
3.500% due 11/30/07 2,000 1,948
3.750% due 09/30/08 1,000 964
Interstar Millennium Trust (E)
Series 2004-2G Class A
5.100% due 03/14/36 1,675 1,679
</Table>
126 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Network Rail MTN Finance PLC
2.625% due 03/26/08 9,270 8,846
Royal Bank of Scotland PLC (E)(p)
5.125% due 07/21/08 900 900
------------
36,017
------------
Mortgage-Backed Securities - 23.0%
American Home Mortgage Investment Trust (E)
Series 2004-3 Class 5A
4.290% due 10/25/34 2,155 2,107
Series 2004-4 Class 4A
4.390% due 02/25/45 744 722
Banc of America Commercial Mortgage, Inc.
Series 2004-2 Class A1
2.764% due 11/10/38 1,816 1,748
Banc of America Funding Corp.
Series 2005-D Class A1 (E)
4.115% due 05/25/35 9,576 9,267
Series 2006-2 Class 2A18
5.750% due 03/25/36 3,584 3,554
Banc of America Mortgage Securities
Series 2002-K Class 2A1 (E)
5.447% due 10/20/32 48 48
Series 2004-2 Class 2A1
5.250% due 03/25/34 1,193 1,180
Series 2004-2 Class 5A1
6.500% due 10/25/31 331 333
Bear Stearns Adjustable Rate Mortgage Trust
Series 2003-1 Class 5A1
5.450% due 04/25/33 512 505
Series 2003-8 Class 2A1 (E)
4.810% due 01/25/34 503 496
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.415% due 05/25/35 1,410 1,411
Bear Stearns Asset Backed Securities, Inc.
Series 2003-AC3 Class A1
4.000% due 07/25/33 505 493
Bear Stearns Commercial Mortgage Securities
Series 1998-C1 Class A1
6.340% due 06/16/30 333 336
Series 1999-C1 Class A2
6.020% due 02/14/31 2,000 2,027
Series 2001-TOP Class A1
5.060% due 11/15/16 485 481
Series 2003-PWR Class A1
3.432% due 05/11/39 694 666
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-T10 Class A1
4.000% due 03/13/40 1,436 1,374
Series 2003-T12 Class A1
2.960% due 08/13/39 1,333 1,280
Commercial Mortgage Pass Through Certificates
Series 2004-LB2 Class A2
3.600% due 03/10/39 1,000 957
Countrywide Alternative Loan Trust
Series 2003-6T2 Class A1
6.500% due 06/25/33 200 201
Series 2003-J2 Class A1
6.000% due 10/25/33 588 566
Series 2004-12C Class 1A1
5.000% due 07/25/19 2,942 2,842
Series 2005-34C Class 1A6
5.500% due 09/25/35 3,728 3,690
Series 2005-73C Class 1A8
5.500% due 01/25/36 3,870 3,818
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2005-HYB Class 5A1
5.250% due 02/20/36 1,330 1,315
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2002-AR2 Class 2A2
5.696% due 10/25/32 24 23
Series 2002-P3 Class A (E)(p)
5.509% due 08/25/33 218 219
Series 2003-C4 Class A2
3.908% due 08/15/36 1,000 969
Series 2003-CK2 Class A1
3.006% due 03/15/36 810 785
Series 2004-C1 Class A1
2.254% due 01/15/37 1,347 1,313
Series 2005-C5 Class A1
5.046% due 08/15/38 3,573 3,542
Fannie Mae
30 Year TBA (I)
5.000% 3,000 2,913
6.000% due 2008 78 78
5.500% due 2009 1,839 1,832
6.000% due 2010 169 170
6.500% due 2010 142 144
6.000% due 2011 188 190
6.500% due 2011 116 117
4.500% due 2013 2,656 2,579
5.000% due 2013 2,686 2,648
5.500% due 2013 348 347
</Table>
Short Duration Bond Fund 127
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.000% due 2013 409 414
6.000% due 2014 2,048 2,074
5.500% due 2016 1,222 1,214
5.000% due 2017 98 95
5.500% due 2017 1,897 1,886
6.000% due 2017 194 196
4.500% due 2018 132 126
5.000% due 2018 4,291 4,186
4.500% due 2019 325 309
5.000% due 2019 507 494
4.500% due 2020 414 395
5.000% due 2020 354 345
5.500% due 2022 1,362 1,337
5.500% due 2033 82 79
6.000% due 2033 31 31
5.500% due 2034 15,580 15,169
4.663% due 2035 (E) 3,888 3,791
4.676% due 2035 (E) 609 598
4.898% due 2035 (E) 34,324 33,697
5.500% due 2035 21,307 20,700
5.001% due 2041 (E) 1,117 1,128
4.951% due 2042 (E) 915 919
Series 2003-129 Class PQ
4.500% due 07/25/33 396 393
Series 2003-24 Class PU
3.500% due 11/25/15 286 273
Series 2003-27 Class TJ
4.000% due 10/25/16 34 34
Series 2003-46 Class PQ
3.000% due 06/25/19 3,500 3,455
Series 2003-62 Class OD
3.500% due 04/25/26 1,250 1,186
Series 2003-63 Class GU
4.000% due 07/25/33 2,159 2,115
Series 2003-67 Class TA
3.000% due 08/25/17 3,617 3,346
Series 2003-75 Class NB
3.250% due 08/25/18 635 602
Series 2004-17 Class HA
3.000% due 01/25/19 2,109 1,916
Series 2004-21 Class QA
4.000% due 11/25/17 2,158 2,137
Fannie Mae Grantor Trust (E)
Series 2002-T10 Class A1
5.199% due 06/25/32 5,437 5,437
Series 2005-T2 Class 1A1
4.667% due 11/28/35 116 116
Series 2005-T4 Class A1A
5.009% due 09/25/35 994 994
Fannie Mae-Aces
Series 1998-M1 Class A2
6.250% due 01/25/08 1,201 1,209
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Federal Home Loan Bank System
Series 2005-058 Class H
4.750% due 10/25/10 3,726 3,640
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2003-H00 Class A2
1.876% due 03/15/08 1 1
Series 2005-63 Class 1A1 (E)
4.951% due 02/25/45 1,615 1,628
Freddie Mac
8.000% due 2010 27 27
4.917% due 2035 (E) 933 917
Series 1993-164 Class PD
4.500% due 09/15/08 90 89
Series 2003-255 Class PB
5.500% due 08/15/30 59 58
Series 2003-258 Class NS
3.250% due 09/15/15 1,386 1,326
Series 2003-261 Class JA
3.760% due 03/15/29 1,316 1,248
Series 2003-262 Class KP
2.870% due 12/15/16 3,011 2,810
Series 2003-263 Class CD
4.000% due 10/15/26 1,500 1,436
Series 2003-263 Class NK
4.000% due 02/15/15 96 96
Series 2003-263 Class YH
3.500% due 08/15/22 633 628
Series 2003-268 Class MX
4.000% due 07/15/16 2,273 2,188
Series 2003-271 Class OJ
3.500% due 03/15/11 950 945
Series 2004-276 Class EA
4.500% due 04/15/13 1,374 1,359
Series 2004-276 Class NL
3.250% due 03/15/14 3,913 3,730
Series 2004-278 Class HE
4.000% due 09/15/17 3,591 3,422
Series 2004-282 Class EA
4.500% due 11/15/15 3,271 3,211
Series 2004-285 Class BA
4.500% due 02/15/20 1,502 1,464
Series 2005-305 Class AP
5.500% due 01/15/27 2,760 2,765
Freddie Mac Gold
4.000% due 2007 915 892
4.000% due 2008 753 731
4.500% due 2008 849 838
</Table>
128 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.500% due 2008 96 95
6.500% due 2008 91 92
5.500% due 2009 221 219
6.000% due 2009 142 143
6.500% due 2009 320 323
6.000% due 2010 129 129
6.000% due 2011 480 484
6.000% due 2013 130 131
5.500% due 2014 555 550
6.000% due 2014 135 136
6.000% due 2016 581 586
5.500% due 2017 934 927
5.000% due 2018 584 569
6.000% due 2028 131 131
5.500% due 2029 897 875
6.000% due 2029 263 264
6.000% due 2031 351 351
6.000% due 2032 444 443
6.000% due 2033 756 756
GE Capital Commercial Mortgage Corp.
Series 2001-3 Class A1
5.560% due 06/10/38 1,429 1,433
Series 2004-C3 Class A1
3.752% due 07/10/39 2,671 2,595
Series 2005-C1 Class A1
4.012% due 06/10/48 1,601 1,565
Ginnie Mae I
7.000% due 2007 3 3
6.000% due 2008 75 76
9.500% due 2017 1 1
Ginnie Mae II (E)
4.750% due 2027 128 129
4.000% due 2032 262 261
Government National Mortgage Association
Series 2004-78 Class A
3.590% due 11/16/17 2,695 2,599
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.404% due 06/25/34 1,878 1,841
Impac CMB Trust (E)
Series 2004-2 Class A2
5.209% due 04/25/34 323 323
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C2 Class A1
4.326% due 12/12/34 757 734
Series 2005-LDP Class A1
4.655% due 08/15/42 1,719 1,694
4.613% due 10/15/42 2,506 2,465
Series 2005-LDP Class A2
4.790% due 10/15/42 2,150 2,093
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LB-UBS Commercial Mortgage Trust
Series 2003-C1 Class A1
2.720% due 03/15/27 1,203 1,164
Series 2003-C3 Class A1
2.599% due 05/15/27 1,748 1,680
Lehman Large Loan
Series 1997-LLI Class A2
6.840% due 10/12/34 30 31
Mellon Residential Funding Corp. (E)
Series 2000-TBC Class A1
5.141% due 06/15/30 1,332 1,364
Morgan Stanley Capital I
Series 2003-T11 Class A1
3.260% due 06/13/41 1,387 1,344
Series 2004-T13 Class A1
2.850% due 09/13/45 702 674
Series 2005-HQ6 Class A1
4.646% due 08/13/42 1,912 1,880
Morgan Stanley Dean Witter Capital I
Series 2001-TOP Class A1
5.020% due 10/15/35 207 207
Series 2002-HQ Class A2
6.090% due 04/15/34 167 168
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
5.359% due 02/25/34 236 237
Series 2004-CL1 Class 2A2
5.359% due 02/25/19 58 58
Residential Accredit Loans, Inc.
Series 2003-QS1 Class A1
5.000% due 09/25/18 3,759 3,641
Salomon Brothers Mortgage Securities VII
Series 2003-UP2 Class A1
4.000% due 12/25/18 1,081 1,014
Structured Asset Mortgage Investments, Inc. (E)
Series 2002-AR3 Class A1
5.240% due 09/19/32 88 88
Structured Asset Securities Corp. (E)
Series 2001-21A Class 1A1
6.250% due 01/25/32 103 103
Vendee Mortgage Trust
Series 2001-3 Class J
6.500% due 05/15/08 355 358
Wachovia Bank Commercial Mortgage Trust
Series 2002-C2 Class A2
4.043% due 11/15/34 1,868 1,803
</Table>
Short Duration Bond Fund 129
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-C4 Class A1
3.003% due 04/15/35 1,409 1,364
Washington Mutual, Inc.
Series 2002-AR1 Class A6
4.816% due 10/25/32 599 595
Series 2002-AR6 Class A (E)
5.288% due 06/25/42 500 501
Series 2002-AR9 Class 1A (E)
5.151% due 08/25/42 1,097 1,098
Series 2004-AR1 Class A2A (E)
5.245% due 11/25/34 2,357 2,366
Series 2005-AR1 Class A1A1 (E)
5.249% due 10/25/45 461 463
Wells Fargo Mortgage Backed Securities Trust
Series 2005-9 Class 1A1
4.750% due 10/25/35 2,844 2,763
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 1,277 1,253
------------
258,364
------------
Non-US Bonds - 0.1%
Landwirtschaftliche Rentenbank
0.650% due 09/30/08 JPY 60,000 525
------------
United States Government Agencies - 0.4%
Federal Home Loan Bank System
5.925% due 04/09/08 1,600 1,623
Series 2004-900 Class 1
3.920% due 09/25/09 1,586 1,522
Zero coupon due 04/27/10 749 681
Freddie Mac
5.810% due 04/04/08 1,000 1,012
------------
4,838
------------
United States Government Treasuries - 14.6%
United States Treasury Notes
3.125% due 05/15/07 18,590 18,252
3.625% due 06/30/07 86,215 84,949
2.625% due 05/15/08 22,175 21,217
3.375% due 12/15/08 3,450 3,324
3.375% due 10/15/09 37,850 36,032
------------
163,774
------------
TOTAL LONG-TERM INVESTMENTS
(cost $875,780) 861,098
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 0.2%
Financial Services - 0.2%
DG Funding Trust (p) 219 2,326
------------
TOTAL PREFERRED STOCKS
(cost $2,307) 2,326
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Eurodollar Futures
Jun 2006 93.50 Put (94) 21,973 1
Sep 2006 92.75 Put (591) 137,038 3
Dec 2006 92.25 Put (250) 57,656 2
Dec 2006 92.50 Put (100) 23,125 1
Dec 2006 92.75 Put (72) 16,695 --
Mar 2007 92.00 Put (292) 67,160 2
Swaptions
(Fund Pays/Fund Receives)
USD Three Month LIBOR/
USD 4.750%
Aug 2006 0.00 Call (1) 5,000 --
USD Three Month LIBOR/
USD 4.250%
Oct 2006 0.00 Call (3) 13,000 --
USD Three Month LIBOR/
USD 4.500%
Oct 2006 0.00 Call (3) 29,600 1
USD Three Month LIBOR/
USD 4.800%
Dec 2006 0.00 Call (1) 12,000 8
USD Three Month LIBOR/
USD 5.000%
Mar 2007 0.00 Call (2) 17,000 42
------------
TOTAL OPTIONS PURCHASED
(cost $354) 60
------------
</Table>
130 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 23.2%
American Electric Power Co., Inc.
Series A
6.125% due 05/15/06 5,790 5,792
American General Finance Corp. (E)
Series MTNG
4.980% due 03/23/07 200 200
ANZ, Inc. Discount Notes (c)(z)
4.645% due 05/16/06 11,600 11,578
Aristar, Inc.
7.250% due 06/15/06 3,005 3,012
Associates Corp. of North America
Series MTNH
7.250% due 05/08/06 2,000 2,001
7.240% due 05/17/06 1,000 1,001
Bank of Montreal
7.800% due 04/01/07 2,500 2,552
Barclays Bank PLC (z)
4.485% due 01/29/07 2,700 2,707
Barclays US Funding, LLC (z)
4.890% due 07/05/06 8,500 8,424
BNP Paribas Financial, Inc. (z)
5.000% due 08/28/06 6,800 6,686
Boeing Co.
8.100% due 11/15/06 2,375 2,409
British Sky Broadcasting PLC
7.300% due 10/15/06 2,000 2,015
CIT Equipment Collateral
Series 2003-VT1 Class A3B
1.630% due 04/20/07 32 32
Continental Cablevision, Inc.
8.300% due 05/15/06 400 401
COX Communications, Inc.
7.750% due 08/15/06 2,900 2,916
DaimlerChrysler NA Holding Corp.
6.400% due 05/15/06 1,200 1,200
5.380% due 05/24/06 (E) 2,800 2,800
Devon Energy Corp.
2.750% due 08/01/06 4,954 4,920
Dexia Del LLC (c)(z)
4.840% due 06/27/06 10,300 10,221
DNB NOR Bank ASA (c)(z)
4.840% due 06/12/06 2,700 2,685
Dominion Resources, Inc.
Series G
3.660% due 11/15/06 1,800 1,783
Fannie Mae (E)
4.810% due 09/22/06 1,600 1,599
Federal Farm Credit Bank
12.250% due 02/01/07 1,678 1,735
Federal Home Loan Bank Discount Notes (z)
4.885% due 07/26/06 13,600 13,432
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ford Motor Credit Co.
6.500% due 01/25/07 1,500 1,491
7.750% due 02/15/07 200 198
5.880% due 03/21/07 (E) 2,800 2,758
France Treasury Bills BTF
2.440% due 05/04/06 1,300 1,640
Frank Russell Investment Company Money Market
Fund 32,594,334 32,594
Freddie Mac Discount Notes (z)
4.625% due 08/01/06 10,300 10,170
General Electric Capital Corp. (z)
4.790% due 06/12/06 (c) 10,300 10,242
4.870% due 06/29/06 1,000 992
General Motors Acceptance Corp.
5.645% due 05/18/06 (E) 400 400
6.125% due 09/15/06 (N) 300 298
5.968% due 01/16/07 (E) 200 197
HBOS Treasury Services PLC (E)(p)
5.125% due 01/12/07 900 901
Historic TW, Inc.
8.110% due 08/15/06 2,000 2,014
HSBC Bank PLC
7.625% due 06/15/06 4,500 4,512
HSBC Finance Corp. (E)
4.850% due 02/28/07 3,200 3,201
ING US Funding, LLC (z)
4.930% due 06/21/06 (c) 10,300 10,228
4.960% due 06/26/06 400 397
John Hancock Global Funding II
6.000% due 12/28/06 2,450 2,457
Kroger Co. (The)
8.150% due 07/15/06 3,885 3,905
National Rural Utilities Cooperative Finance
Corp.
Series MTNC
6.500% due 03/01/07 2,200 2,220
New York Life Global Funding (E)(p)
4.860% due 02/26/07 2,500 2,501
Nisource Finance Corp.
3.200% due 11/01/06 2,795 2,765
NiSource, Inc.
3.628% due 11/01/06 1,300 1,288
Nordea North America, Inc. (c)(z)
4.605% due 05/09/06 11,100 11,089
PNC Student Loan Trust I
Series 1997-2 Class A7
6.728% due 01/25/07 205 205
</Table>
Short Duration Bond Fund 131
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Prudential Financial, Inc.
4.104% due 11/15/06 500 497
Rabobank USA Financial Corp. (c)(z)
4.820% due 05/01/06 4,000 4,000
Societe Generale NA (z)
4.985% due 08/22/06 4,100 4,035
4.990% due 08/22/06 6,900 6,790
Spintab Swedmortgage AB (z)
4.990% due 07/25/06 1,700 1,680
Sprint Capital Corp.
4.780% due 08/17/06 3,000 2,995
Susquehanna Auto Lease Trust (p)
Series 2003-1 Class A3
2.460% due 01/14/07 274 274
Swedbank (c)(z)
4.605% due 05/09/06 9,700 9,690
Swiss Bank Corp.
7.250% due 09/01/06 1,500 1,508
TIAA Global Markets (p)
5.000% due 03/01/07 3,625 3,610
UBS Financial Del, LLC (c)(z)
4.600% due 05/09/06 9,700 9,691
4.930% due 06/07/06 1,700 1,691
Union Bank Switzerland
7.250% due 07/15/06 1,000 1,004
United States Treasury Bills (z)
4.593% due 06/15/06 (c)(sec.) 50 50
4.615% due 06/15/06 (c)(sec.) 3,005 2,988
4.642% due 06/15/06 (c) 500 497
4.652% due 06/15/06 (c) 20 20
4.671% due 06/15/06 (c) 60 60
4.767% due 09/14/06 2,000 1,965
United States Treasury Notes (z)
3.000% due 12/31/06 5,000 4,934
Wells Fargo & Co.
Series MTNH
6.750% due 10/01/06 1,930 1,940
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $261,204) 260,683
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 0.5%
Frank Russell Investment Company
Money Market Fund (X) 1,319,406 1,319
State Street Securities Lending Quality Trust
(X) 3,716,934 3,717
------------
TOTAL OTHER SECURITIES
(cost $5,036) 5,036
------------
TOTAL INVESTMENTS - 100.6%
(identified cost $1,144,681) 1,129,203
OTHER ASSETS AND LIABILITIES,
NET - (0.6%) (6,463)
------------
NET ASSETS - 100.0% 1,122,740
============
</Table>
See accompanying notes which are an integral part of the financial statements.
132 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Eurodollar Futures (CME)
expiration date 12/06 (625) 148,055 (595)
expiration date 03/07 (788) 186,736 (856)
expiration date 06/07 (511) 121,120 (561)
expiration date 09/07 (364) 86,282 (385)
expiration date 12/07 (330) 78,214 (344)
United States Treasury 2 Year Notes
expiration date 06/06 (79) 16,095 (31)
Short Positions
Eurodollar Futures (CME)
expiration date 03/08 (47) 11,138 29
expiration date 06/08 (47) 11,134 31
expiration date 09/08 (47) 11,131 32
expiration date 12/08 (47) 11,125 34
United States Treasury 5 Year Notes
expiration date 06/06 (292) 30,414 253
United States Treasury 10 Year Notes
expiration date 06/06 (82) 8,657 170
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (2,223)
===============
</Table>
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Eurodollar Futures
Dec 2006 95.00 Put (12) 2,850 (10)
Dec 2006 95.25 Put (338) 80,486 (444)
Dec 2006 95.50 Put (40) 9,550 (75)
Mar 2007 94.75 Put (13) 3,079 (8)
Swaptions
(Fund Pays/Fund Receives)
GBP 4.500%/GBP Six Month LIBOR
Dec 2006 0.00 Put (1) 3,100 (15)
USD Three Month LIBOR/
USD 4.300%
Oct 2006 0.00 Call (1) 3,000 --
USD Three Month LIBOR/
USD 4.310%
Oct 2006 0.00 Call (2) 3,000 --
USD Three Month LIBOR/
USD 4.540%
Oct 2006 0.00 Call (2) 7,700 (1)
</Table>
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
USD Three Month LIBOR/
USD 4.560%
Oct 2006 0.00 Call (1) 6,000 (1)
USD Three Month LIBOR/
USD 4.780%
Aug 2006 0.00 Call (1) 2,000 --
USD Three Month LIBOR/
USD 4.850%
Dec 2006 0.00 Call (1) 5,000 (9)
USD Three Month LIBOR/
USD 5.040%
Mar 2007 0.00 Call (2) 7,000 (35)
---------------
Total Liability for Options Written
(premiums received $673) (598)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund 133
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 1,292 USD 1,583 06/30/06 (54)
JPY 31,325 USD 267 05/15/06 (9)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts (63)
==============
</Table>
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- --------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ------------------ -------------------- ---------------- ----------------
Barclays Bank PLC GBP 2,800 5.000% Six Month LIBOR 06/15/07 8
Consumer Price Index
BNP Paribas EUR 1,200 2.090% (France) 10/15/10 --
Goldman Sachs USD 2,600 5.000% Three Month LIBOR 06/21/11 47
Lehman Brothers GBP 1,500 4.500% Six Month LIBOR 09/20/09 (31)
Merrill Lynch GBP 1,600 4.500% Six Month LIBOR 09/20/09 (34)
UBS USD 36,800 5.000% Three Month LIBOR 06/21/08 (216)
----------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - $45 (226)
================
</Table>
See accompanying notes which are an integral part of the financial statements.
134 Short Duration Bond Fund
FRANK RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Asset-Backed Securities 18.5
Corporate Bonds and Notes 16.9
International Debt 3.2
Mortgage-Backed Securities 23.0
Non-US Bonds 0.1
United States Government Agencies 0.4
United States Government Treasuries 14.6
Preferred Stocks 0.2
Options Purchased --*
Short Term Investments 23.2
Other Securities 0.5
---------------
Total Investments 100.6
Other Assets and Liabilities, Net (0.6)
---------------
100.0
===============
Futures Contracts (0.2)
Options Written (0.1)
Foreign Currency Exchange Contracts (--)*
Interest Rate Swap Contracts (--)*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund 135
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,077.90 $ 1,013.84
Expenses Paid During
Period* $ 11.39 $ 11.03
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.21%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,083.80 $ 1,018.15
Expenses Paid During
Period* $ 6.92 $ 6.71
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.34%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,084.70 $ 1,020.08
Expenses Paid During
Period* $ 4.91 $ 4.76
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.95%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
136 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,083.90 $ 1,019.19
Expenses Paid During
Period* $ 5.84 $ 5.66
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.13%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
Select Growth Fund 137
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.2%
Auto and Transportation - 3.0%
Burlington Northern Santa Fe Corp. 7,720 615
CH Robinson Worldwide, Inc. 12,960 575
Expeditors International Washington, Inc. 12,000 1,027
FedEx Corp. 6,500 748
Freightcar America, Inc. (N) 3,000 201
Norfolk Southern Corp. 10,700 578
Swift Transportation Co., Inc. (AE) 11,400 341
Union Pacific Corp. 7,800 711
United Parcel Service, Inc. Class B 14,500 1,176
------------
5,972
------------
Consumer Discretionary - 19.0%
24/7 Real Media, Inc. (AE) 21,300 216
Activision, Inc. (AE) 49,100 697
Alloy, Inc. (AE)(N) 4,650 58
AMN Healthcare Services, Inc. (AE)(N) 14,300 275
Apollo Group, Inc. Class A (AE) 17,000 929
Best Buy Co., Inc. 9,480 537
BJ's Restaurants, Inc. (AE)(N) 2,400 63
Blockbuster, Inc. Class A (N) 78,500 369
Boyd Gaming Corp. (N) 6,800 339
Buca, Inc. (AE)(N) 19,900 113
Callaway Golf Co. 14,000 224
Casual Male Retail Group, Inc. (AE) 15,600 147
Charlotte Russe Holding, Inc. (AE) 8,800 190
Chemed Corp. 1,800 98
Christopher & Banks Corp. 8,900 235
Coach, Inc. (AE) 26,710 882
Crown Media Holdings, Inc. Class A (AE)(N) 12,100 47
Deckers Outdoor Corp. (AE) 5,100 218
dELiA*s, Inc. (AE)(N) 9,300 99
Design Within Reach, Inc. (AE)(N) 14,900 89
DiamondCluster International, Inc. (AE) 10,800 112
Dick's Sporting Goods, Inc. (AE)(N) 9,500 400
eBay, Inc. (AE) 57,570 1,981
Electronic Arts, Inc. (AE) 34,900 1,982
Emerson Radio Corp. (AE) 19,800 67
Ezcorp, Inc. Class A (AE) 3,800 120
Google, Inc. Class A (AE) 11,783 4,925
Gray Television, Inc. 12,400 94
Home Depot, Inc. 35,500 1,417
Iconix Brand Group, Inc. (AE)(N) 7,082 122
International Game Technology 53,870 2,043
Kohl's Corp. (AE) 27,100 1,513
Las Vegas Sands Corp. (AE) 10,400 674
LIFE TIME Fitness, Inc. (AE)(N) 2,800 128
MGM Mirage 23,000 1,033
Monster Worldwide, Inc. (AE) 3,900 224
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MPS Group, Inc. (AE) 17,800 284
Multimedia Games, Inc. (AE)(N) 11,100 153
Nutri System, Inc. (AE)(N) 10,100 685
Office Depot, Inc. (AE) 18,100 734
OfficeMax, Inc. 11,400 441
Omnicom Group, Inc. 6,100 549
On Assignment, Inc. (AE) 9,200 120
Sears Holdings Corp. (AE) 9,000 1,293
Sharper Image Corp. (AE)(N) 7,600 114
Sportsman's Guide, Inc. (The) (AE) 4,700 124
Stamps.com, Inc. (AE)(N) 4,700 133
Staples, Inc. 48,000 1,268
Starbucks Corp. (AE) 36,526 1,361
Starwood Hotels & Resorts Worldwide, Inc. (o) 38,060 2,184
Steven Madden, Ltd. 5,100 272
Topps Co., Inc. (The) (N) 14,900 131
Tweeter Home Entertainment Group, Inc. (AE) 10,400 89
Urban Outfitters, Inc. (AE) 42,700 991
Valuevision Media, Inc. Class A (AE)(N) 9,700 121
Ventiv Health, Inc. (AE) 6,600 198
Wal-Mart Stores, Inc. 40,800 1,837
WebSideStory, Inc. (AE)(N) 6,500 112
Weight Watchers International, Inc. 12,000 592
XM Satellite Radio Holdings, Inc. Class A (AE) 53,000 1,072
------------
37,518
------------
Consumer Staples - 7.4%
Altria Group, Inc. 10,400 761
Coca-Cola Co. (The) 21,800 915
Colgate-Palmolive Co. 12,800 757
CVS Corp. 42,300 1,257
PepsiCo, Inc. 64,005 3,728
Procter & Gamble Co. 88,102 5,128
Walgreen Co. 28,000 1,174
Whole Foods Market, Inc. 13,450 825
Wild Oats Markets, Inc. (AE)(N) 10,200 175
------------
14,720
------------
Financial Services - 7.3%
Advent Software, Inc. (AE) 9,200 324
American Express Co. 49,954 2,688
American International Group, Inc. 14,890 972
Charles Schwab Corp. (The) (AE) 49,690 889
</Table>
138 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Chicago Mercantile Exchange Holdings, Inc. 4,020 1,841
Commerce Bancorp, Inc. 21,200 855
Cybersource Corp. (AE)(N) 29,296 274
ECC Capital Corp. (o)(N) 31,200 49
First Data Corp. 41,300 1,970
HealthExtras, Inc. (AE)(N) 5,800 169
Heartland Payment Systems, Inc. (AE)(N) 4,000 105
Hypercom Corp. (AE) 16,700 152
MCF Corp. (AE) 19,600 25
Merrill Lynch & Co., Inc. 17,520 1,336
Moody's Corp. 15,000 930
Paychex, Inc. 24,000 969
Pico Holdings, Inc. (AE)(N) 3,800 124
Rewards Network, Inc. (AE)(N) 12,000 98
UBS AG 5,360 626
------------
14,396
------------
Health Care - 16.4%
Abbott Laboratories 16,400 701
Albany Molecular Research, Inc. (AE) 7,900 79
Allergan, Inc. 21,420 2,200
Amgen, Inc. (AE) 22,900 1,550
Amylin Pharmaceuticals, Inc. (AE)(N) 11,400 496
Analogic Corp. 2,900 183
Bruker BioSciences Corp. (AE) 20,400 119
Cardinal Health, Inc. 18,800 1,266
Caremark Rx, Inc. 37,325 1,700
Celgene Corp. (AE)(N) 25,820 1,089
Cytyc Corp. (AE) 4,600 119
DaVita, Inc. (AE) 12,200 686
Dendreon Corp. (AE)(N) 11,900 48
DexCom, Inc. (AE)(N) 3,200 81
Digene Corp. (AE) 5,300 219
Eli Lilly & Co. 13,900 736
ev3, Inc. (AE)(N) 7,300 115
Express Scripts, Inc. (AE) 15,040 1,175
Genentech, Inc. (AE) 36,295 2,893
Gilead Sciences, Inc. (AE) 27,965 1,608
Greatbatch, Inc. (AE) 2,900 71
GTx, Inc. (AE)(N) 9,100 86
Human Genome Sciences, Inc. (AE)(N) 30,700 350
ICU Medical, Inc. (AE)(N) 3,400 140
Illumina, Inc. (AE)(N) 5,300 168
Intralase Corp. (AE)(N) 5,100 110
Kinetic Concepts, Inc. (AE) 11,800 515
Lifecell Corp. (AE)(N) 10,600 287
Medco Health Solutions, Inc. (AE) 18,800 1,001
Medimmune, Inc. (AE) 13,300 419
Natus Medical, Inc. (AE) 7,300 146
Neose Technologies, Inc. (AE) 16,300 42
Omnicare, Inc. (N) 23,200 1,316
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Omnicell, Inc. (AE)(N) 14,800 197
Oxigene, Inc. (AE)(N) 10,400 45
Panacos Pharmaceuticals, Inc. (AE)(N) 54,400 380
PDL BioPharma, Inc. (AE) 7,800 224
Pfizer, Inc. 72,450 1,835
Phase Forward, Inc. (AE)(N) 11,500 158
Rita Medical Systems, Inc. (AE)(N) 19,500 80
SonoSite, Inc. (AE)(N) 4,100 155
Tercica, Inc. (AE)(N) 17,800 113
UnitedHealth Group, Inc. 37,100 1,845
Varian Medical Systems, Inc. (AE) 6,900 361
WellPoint, Inc. (AE) 25,330 1,798
Wyeth 53,540 2,606
Zimmer Holdings, Inc. (AE) 15,000 944
------------
32,455
------------
Materials and Processing - 2.6%
Archer-Daniels-Midland Co. 36,125 1,313
Cemex SA de CV - ADR 9,180 620
Corn Products International, Inc. 4,300 120
Harsco Corp. 3,100 258
Insituform Technologies, Inc. Class A (AE) 9,800 250
Monsanto Co. 17,000 1,418
Praxair, Inc. 19,000 1,067
Unifi, Inc. (AE) 27,100 91
------------
5,137
------------
Miscellaneous - 3.1%
3M Co. 9,300 795
Foster Wheeler, Ltd. (AE) 2,700 120
General Electric Co. 104,378 3,610
Textron, Inc. 14,530 1,307
Trinity Industries, Inc. 4,000 254
------------
6,086
------------
Other Energy - 2.0%
Baker Hughes, Inc. 13,400 1,083
ENSCO International, Inc. 3,300 176
FMC Technologies, Inc. (AE) 4,000 218
Foundation Coal Holdings, Inc. (N) 3,000 152
Halliburton Co. 8,680 678
Hercules Offshore, Inc. (AE) 3,400 139
National-Oilwell Varco, Inc. (AE) 1,400 97
Newfield Exploration Co. (AE) 20,800 928
Petroquest Energy, Inc. (AE)(N) 11,300 134
</Table>
Select Growth Fund 139
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TGC Industries, Inc. (AE) 11,200 159
Todco Class A 4,600 211
------------
3,975
------------
Producer Durables - 5.6%
Agilent Technologies, Inc. (AE) 19,000 730
American Tower Corp. Class A (AE) 3,000 102
Andrew Corp. (AE) 34,900 369
Applied Materials, Inc. 184,447 3,311
Boeing Co. 31,535 2,632
BTU International, Inc. (AE) 7,000 141
Caterpillar, Inc. 8,200 621
Entegris, Inc. (AE)(N) 16,427 167
ESCO Technologies, Inc. (AE)(N) 11,400 578
General Cable Corp. (AE) 6,500 205
Intevac, Inc. (AE) 6,922 194
Itron, Inc. (AE) 4,100 275
Polycom, Inc. (AE) 7,300 161
Radyne Corp. (AE)(N) 11,300 173
Regal-Beloit Corp. (N) 7,800 364
SBA Communications Corp. Class A (AE) 4,500 113
Sonic Solutions, Inc. (AE)(N) 9,600 170
Tektronix, Inc. 6,100 215
Teradyne, Inc. (AE)(N) 31,000 523
Viisage Technology, Inc. (AE)(N) 5,100 86
------------
11,130
------------
Technology - 25.6%
Actuate Corp. (AE) 16,200 68
Advanced Micro Devices, Inc. (AE) 33,770 1,092
Agile Software Corp. (AE)(N) 30,900 215
Akamai Technologies, Inc. (AE) 20,700 697
American Science & Engineering, Inc. (AE)(N) 2,100 180
Amkor Technology, Inc. (AE)(N) 30,600 370
Apple Computer, Inc. (AE) 38,154 2,690
Applied Micro Circuits Corp. (AE) 34,300 126
Art Technology Group, Inc. (AE) 46,100 131
Aspen Technology, Inc. (AE)(N) 18,400 237
Authentidate Holding Corp. (AE)(N) 13,900 43
Avid Technology, Inc. (AE)(N) 3,400 131
BEA Systems, Inc. (AE) 16,300 216
Broadcom Corp. Class A (AE) 50,955 2,095
Cadence Design Systems, Inc. (AE) 18,000 341
Captaris, Inc. (AE) 15,100 61
Centillium Communications, Inc. (AE) 26,526 99
Checkpoint Systems, Inc. (AE) 4,600 121
Cisco Systems, Inc. (AE) 105,600 2,212
Corning, Inc. (AE) 77,025 2,128
Daktronics, Inc. (N) 7,000 275
Equinix, Inc. (AE)(N) 5,200 343
Formfactor, Inc. (AE) 8,900 371
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Gartner, Inc. Class A (AE)(N) 22,500 315
Harris Corp. 5,000 233
Hewlett-Packard Co. 50,770 1,648
Ibasis, Inc. (AE)(N) 19,800 53
Informatica Corp. (AE)(N) 8,200 126
Integrated Device Technology, Inc. (AE) 13,000 198
Intermagnetics General Corp. (AE)(N) 4,350 94
Intersil Corp. Class A 12,000 355
Intuit, Inc. (AE) 19,000 1,029
JDS Uniphase Corp. (AE) 132,500 462
Juniper Networks, Inc. (AE) 42,800 791
Lawson Software, Inc. (AE)(N) 28,400 218
LCC International, Inc. Class A (AE) 28,500 103
Marvell Technology Group, Ltd. (AE) 21,660 1,237
Maxim Integrated Products, Inc. 15,400 543
Merix Corp. (AE) 10,900 126
Micron Technology, Inc. (AE) 122,360 2,076
Microsoft Corp. 174,400 4,212
MIPS Technologies, Inc. (AE) 20,700 153
MRO Software, Inc. (AE) 7,400 141
MRV Communications, Inc. (AE)(N) 31,400 120
Napster, Inc. (AE)(N) 23,400 108
National Semiconductor Corp. 54,200 1,625
NAVTEQ Corp. (AE) 17,000 706
NMS Communications Corp. (AE) 24,000 103
Nuance Communications, Inc. (AE)(N) 17,200 221
PMC - Sierra, Inc. (AE) 15,300 190
Qualcomm, Inc. 137,480 7,058
Rackable Systems, Inc. (AE) 5,200 267
Redback Networks, Inc. (AE) 17,020 381
Rockwell Automation, Inc. 16,030 1,161
RSA Security, Inc. (AE) 13,200 276
Saba Software, Inc. (AE) 18,325 107
Safeguard Scientifics, Inc. (AE)(N) 35,500 92
SanDisk Corp. (AE) 40,100 2,560
Seachange International, Inc. (AE)(N) 18,400 124
Seagate Technology (N) 35,000 930
Semtech Corp. (AE) 12,400 232
Silicon Image, Inc. (AE)(N) 48,000 490
Silicon Laboratories, Inc. (AE) 3,200 149
Sony Corp. - ADR 17,140 839
Stratex Networks, Inc. (AE) 27,443 173
SYKES Enterprises, Inc. (AE) 10,500 170
Texas Instruments, Inc. 58,300 2,024
Transaction Systems Architects, Inc. Class A
(AE) 5,000 200
Transwitch Corp. (AE) 49,800 106
</Table>
140 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ultimate Software Group, Inc. (AE)(N) 5,900 151
Viasat, Inc. (AE) 5,300 160
Vishay Intertechnology, Inc. (AE) 27,000 422
Volterra Semiconductor Corp. (AE)(N) 6,300 103
WatchGuard Technologies, Inc. (AE) 22,000 114
Xilinx, Inc. 28,900 800
------------
50,517
------------
Utilities - 1.2%
America Movil SA de CV Series L 23,394 863
MDU Communications International, Inc. (AE)(N) 29,200 31
NeuStar, Inc. Class A (AE)(N) 4,200 147
NII Holdings, Inc. (AE)(N) 7,120 427
Sprint Nextel Corp. 40,000 992
------------
2,460
------------
TOTAL COMMON STOCKS
(cost $158,499) 184,366
------------
SHORT-TERM INVESTMENTS - 6.5%
Frank Russell Investment Company Money Market
Fund 12,024,000 12,024
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 800 796
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $12,820) 12,820
------------
OTHER SECURITIES - 10.1%
Frank Russell Investment Company Money Market
Fund (X) 5,202,675 5,203
State Street Securities Lending Quality Trust
(X) 14,655,594 14,656
------------
TOTAL OTHER SECURITIES
(cost $19,859) 19,859
------------
TOTAL INVESTMENTS - 109.8%
(identified cost $191,178) 217,045
OTHER ASSETS AND LIABILITIES,
NET - (9.8%) (19,453)
------------
NET ASSETS - 100.0% 197,592
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Nasdaq 100 Index (CME)
expiration date 06/06 (24) 4,106 39
Russell 1000 Growth Index
expiration date 06/06 (11) 2,916 40
S&P 500 E-Mini Index (CME)
expiration date 06/06 (30) 1,974 48
S&P 500 Index (CME)
expiration date 06/06 (11) 3,619 4
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts 131
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Growth Fund 141
FRANK RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Auto and Transportation 3.0
Consumer Discretionary 19.0
Consumer Staples 7.4
Financial Services 7.3
Health Care 16.4
Materials and Processing 2.6
Miscellaneous 3.1
Other Energy 2.0
Producer Durables 5.6
Technology 25.6
Utilities 1.2
Short-Term Investments 6.5
Other Securities 10.1
---------------
Total Investments 109.8
Other Assets and Liabilities, Net (9.8)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
142 Select Growth Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2006 (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, 2005 to April 30, 2006.
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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,118.30 $ 1,014.33
Expenses Paid During
Period* $ 11.08 $ 10.54
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.11%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,124.50 $ 1,018.55
Expenses Paid During
Period* $ 6.64 $ 6.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.26%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects 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, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,126.00 $ 1,020.13
Expenses Paid During
Period* $ 4.96 $ 4.71
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.94%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
Select Value Fund 143
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2005 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2006 $ 1,124.30 $ 1,019.34
Expenses Paid During
Period* $ 5.79 $ 5.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.10%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
144 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.5%
Auto and Transportation - 1.8%
Aviall, Inc. (AE) 14,462 545
Burlington Northern Santa Fe Corp. 15,420 1,226
Con-way, Inc. 2,720 152
CSX Corp. 8,900 610
Fleetwood Enterprises, Inc. (AE)(N) 26,880 253
Keystone Automotive Industries, Inc. (AE)(N) 12,675 523
Norfolk Southern Corp. 5,750 310
Polaris Industries, Inc. (N) 12,500 599
United Parcel Service, Inc. Class B 10,800 876
US Airways Group, Inc. (AE) 21,900 947
Visteon Corp. (AE) 43,110 253
Wabtec Corp. 18,140 663
------------
6,957
------------
Consumer Discretionary - 11.3%
Abercrombie & Fitch Co. Class A 7,300 443
Accenture, Ltd. Class A 67,060 1,949
Advo, Inc. 12,672 359
American Eagle Outfitters, Inc. 15,900 515
Arbitron, Inc. (N) 10,137 361
Bed Bath & Beyond, Inc. (AE) 13,900 533
Boyd Gaming Corp. (N) 30,500 1,520
California Pizza Kitchen, Inc. (AE)(N) 11,710 370
Casual Male Retail Group, Inc. (AE)(N) 49,136 463
CBS Corp. Class B 16,277 415
Copart, Inc. (AE) 10,486 282
Corinthian Colleges, Inc. (AE)(N) 31,412 468
Cost Plus, Inc. (AE)(N) 22,967 404
DeVry, Inc. (AE)(N) 15,593 403
DiamondCluster International, Inc. (AE) 46,448 480
Family Dollar Stores, Inc. 35,400 885
Federated Department Stores, Inc. 15,100 1,176
Gap, Inc. (The) 103,190 1,867
Harman International Industries, Inc. 8,900 783
Harrah's Entertainment, Inc. 30,400 2,482
Hasbro, Inc. (N) 70,280 1,385
Home Depot, Inc. 28,900 1,154
International Flavors & Fragrances, Inc. 17,800 629
Ipass, Inc. (AE)(N) 30,149 251
Jarden Corp. (AE)(N) 13,503 459
JC Penney Co., Inc. 56,500 3,698
Kimberly-Clark Corp. 19,920 1,166
Las Vegas Sands Corp. (AE) 26,300 1,705
Limited Brands, Inc. 27,000 692
McDonald's Corp. 93,600 3,236
MGM Mirage 55,300 2,483
Newell Rubbermaid, Inc. 22,000 603
Nike, Inc. Class B 8,500 696
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
O'Charleys, Inc. (AE)(N) 12,335 209
OfficeMax, Inc. 16,400 635
Playboy Enterprises, Inc. Class B (AE)(N) 27,579 364
Reader's Digest Association, Inc. (The) (N) 26,290 362
Reed Elsevier PLC - ADR (N) 12,040 479
RR Donnelley & Sons Co. 27,000 910
Sabre Holdings Corp. Class A 20,400 471
School Specialty, Inc. (AE)(N) 10,605 386
ServiceMaster Co. (The) 45,000 542
Sturm Ruger & Co., Inc. (N) 22,820 160
Time Warner, Inc. 59,100 1,028
Tribune Co. (N) 12,150 350
VF Corp. 7,200 441
Viacom, Inc. Class B (AE) 16,277 648
Walt Disney Co. 70,860 1,981
Waste Management, Inc. 22,700 850
------------
44,131
------------
Consumer Staples - 4.2%
Altria Group, Inc. 69,990 5,121
Colgate-Palmolive Co. 16,300 964
ConAgra Foods, Inc. 27,300 619
Del Monte Foods Co. (N) 38,961 454
Diageo PLC - ADR (N) 12,760 845
Hershey Co. (The) 10,600 565
HJ Heinz Co. 30,900 1,283
Kellogg Co. 28,020 1,298
Lance, Inc. 21,056 537
Molson Coors Brewing Co. Class B (N) 13,200 975
Nestle SA - ADR 7,070 538
PepsiCo, Inc. 7,180 418
Procter & Gamble Co. 18,200 1,059
Sara Lee Corp. 26,870 480
UST, Inc. 21,800 958
------------
16,114
------------
Financial Services - 25.0%
AG Edwards, Inc. 16,300 861
Allstate Corp. (The) 52,190 2,948
American Express Co. 16,810 905
American International Group, Inc. 66,400 4,333
AmeriCredit Corp. (AE) 30,600 927
Ameriprise Financial, Inc. 2,016 99
AmSouth Bancorporation 28,200 816
Assurant, Inc. 34,300 1,652
</Table>
Select Value Fund 145
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America Corp. 236,105 11,786
Bank of New York Co., Inc. (The) 7,900 278
Bear Stearns Cos., Inc. (The) 18,400 2,622
BISYS Group, Inc. (The) (AE) 22,787 363
Cedar Shopping Centers, Inc. (o)(N) 12,519 185
Chubb Corp. 11,720 604
Cigna Corp. 13,000 1,391
Citigroup, Inc. 176,820 8,832
Countrywide Financial Corp. 43,100 1,752
Dow Jones & Co., Inc. (N) 22,300 824
E*Trade Financial Corp. (AE) 51,800 1,289
Fannie Mae 24,670 1,248
First Data Corp. 53,513 2,552
First Industrial Realty Trust, Inc. (o)(N) 8,687 341
First Marblehead Corp. (The) (N) 6,289 303
Franklin Resources, Inc. 4,530 422
Freddie Mac 38,650 2,360
GATX Corp. (N) 10,495 491
Genworth Financial, Inc. Class A 9,900 329
Goldman Sachs Group, Inc. 18,930 3,034
Hanover Insurance Group, Inc. (The) 10,458 553
Hartford Financial Services Group, Inc. 24,490 2,251
Host Hotels & Resorts, Inc. (AE)(o) 34,800 732
Huntington Bancshares, Inc. 49,600 1,198
Jones Lang LaSalle, Inc. 9,800 831
JPMorgan Chase & Co. 102,000 4,629
Kronos, Inc. (AE) 7,339 335
Lehman Brothers Holdings, Inc. 14,390 2,175
Lincoln National Corp. (N) 17,900 1,040
Loews Corp. 12,200 1,295
Mellon Financial Corp. 23,280 876
Merrill Lynch & Co., Inc. 72,800 5,552
Metlife, Inc. 46,870 2,442
Morgan Stanley 15,000 965
New York Community Bancorp, Inc. 27,500 473
PNC Financial Services Group, Inc. 18,500 1,322
Prudential Financial, Inc. 16,500 1,289
South Financial Group, Inc. (The) (N) 29,600 803
St. Paul Travelers Cos., Inc. (The) 28,600 1,259
SunTrust Banks, Inc. 40,940 3,166
UBS AG 33,890 3,960
US Bancorp 96,500 3,034
Washington Mutual, Inc. 28,700 1,293
Wells Fargo & Co. 5,670 389
Westamerica Bancorporation 4,719 241
Zions Bancorporation 20,700 1,719
------------
97,369
------------
Health Care - 10.1%
Abbott Laboratories 33,420 1,428
AmerisourceBergen Corp. 9,900 427
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Amgen, Inc. (AE) 54,100 3,663
Baxter International, Inc. 32,520 1,226
Biogen Idec, Inc. (AE) 74,715 3,351
Boston Scientific Corp. (AE) 111,000 2,580
Eli Lilly & Co. 30,230 1,600
Forest Laboratories, Inc. (AE) 27,400 1,106
Gentiva Health Services, Inc. (AE) 18,648 316
Genzyme Corp. (AE) 31,300 1,914
Johnson & Johnson 50,790 2,977
KV Pharmaceutical Co. Class A (AE)(N) 23,222 501
LifePoint Hospitals, Inc. (AE) 13,173 418
Medco Health Solutions, Inc. (AE) 11,500 612
Medtronic, Inc. 19,400 972
Merck & Co., Inc. 66,580 2,292
Par Pharmaceutical Cos., Inc. (AE)(N) 15,237 392
Pfizer, Inc. 156,500 3,964
PolyMedica Corp. (N) 12,132 501
PSS World Medical, Inc. (AE) 32,953 595
Quest Diagnostics, Inc. 8,500 474
Serologicals Corp. (AE)(N) 14,357 447
Sunrise Senior Living, Inc. (AE)(N) 9,299 346
UnitedHealth Group, Inc. 53,400 2,656
US Physical Therapy, Inc. (AE)(N) 18,559 290
WellPoint, Inc. (AE) 42,700 3,032
Wyeth 23,160 1,127
------------
39,207
------------
Integrated Oils - 5.1%
Amerada Hess Corp. 6,500 931
Chevron Corp. 83,282 5,082
ConocoPhillips 53,900 3,606
Exxon Mobil Corp. 126,140 7,957
Marathon Oil Corp. 7,600 603
Total SA - ADR (N) 11,450 1,580
------------
19,759
------------
Materials and Processing - 8.4%
Acuity Brands, Inc. 12,364 510
Air Products & Chemicals, Inc. 10,650 730
Airgas, Inc. 35,853 1,450
Alcoa, Inc. 32,900 1,111
American Standard Cos., Inc. 49,900 2,172
Archer-Daniels-Midland Co. 58,640 2,131
Ashland, Inc. 6,300 415
Avery Dennison Corp. (N) 12,400 775
Bemis Co. 22,400 705
</Table>
146 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
BHP Billiton, Ltd. - ADR (N) 28,500 1,298
Bowater, Inc. (N) 35,130 958
Brush Engineered Materials, Inc. (AE) 11,792 275
Carpenter Technology Corp. 7,500 892
Chemtura Corp. 42,100 514
Commercial Metals Co. 7,746 421
Dow Chemical Co. (The) 43,800 1,779
EI Du Pont de Nemours & Co. 57,750 2,547
Gold Kist, Inc. (AE)(N) 14,389 193
International Paper Co. 53,070 1,929
Lyondell Chemical Co. 28,300 682
Masco Corp. 60,690 1,936
MeadWestvaco Corp. 30,000 855
Nalco Holding Co. (AE) 11,050 208
Packaging Corp. of America 36,900 829
Phelps Dodge Corp. 8,000 690
PPG Industries, Inc. 20,340 1,365
Praxair, Inc. 10,130 569
Rohm & Haas Co. 14,200 719
RPM International, Inc. (N) 24,400 449
Sherwin-Williams Co. (The) 5,910 301
Smurfit-Stone Container Corp. (AE)(N) 16,670 216
Sonoco Products Co. 21,900 686
Spartech Corp. 14,375 340
Syngenta AG - ADR (N) 31,960 888
Temple-Inland, Inc. 9,900 460
Valspar Corp. 21,500 608
Worthington Industries, Inc. 12,726 251
------------
32,857
------------
Miscellaneous - 3.6%
3M Co. 19,400 1,657
Fortune Brands, Inc. 17,200 1,381
General Electric Co. 66,600 2,304
Hillenbrand Industries, Inc. 10,500 539
Honeywell International, Inc. 45,500 1,934
Johnson Controls, Inc. 25,000 2,039
Textron, Inc. 31,200 2,806
Trinity Industries, Inc. (N) 15,800 1,003
Tyco International, Ltd. 7,570 200
------------
13,863
------------
Other Energy - 4.1%
Apache Corp. 6,300 448
Chesapeake Energy Corp. (N) 111,300 3,526
Devon Energy Corp. 40,850 2,455
Diamond Offshore Drilling, Inc. (N) 11,900 1,080
Encore Acquisition Co. (AE) 13,687 419
EOG Resources, Inc. 25,960 1,823
Global Industries, Ltd. (AE) 24,105 383
Hanover Compressor Co. (AE)(N) 28,389 572
James River Coal Co. (AE)(N) 6,052 213
Matrix Service Co. (AE)(N) 39,132 447
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Noble Corp. 4,430 350
Transocean, Inc. (AE) 26,300 2,132
Valero Energy Corp. 28,100 1,819
Whiting Petroleum Corp. (AE) 9,941 420
------------
16,087
------------
Producer Durables - 8.2%
Agilent Technologies, Inc. (AE) 74,100 2,847
American Power Conversion Corp. 56,500 1,257
Ametek, Inc. 6,112 301
Applied Signal Technology, Inc. (N) 13,501 242
BE Aerospace, Inc. (AE) 25,837 673
Boeing Co. 31,200 2,604
C&D Technologies, Inc. (N) 55,778 450
Champion Enterprises, Inc. (AE) 31,670 483
Cognex Corp. 12,504 333
Cooper Industries, Ltd. Class A 9,470 866
Crane Co. 12,192 515
Deere & Co. 24,820 2,179
Diebold, Inc. 15,500 659
Esterline Technologies Corp. (AE) 12,178 540
Federal Signal Corp. 26,535 497
General Cable Corp. (AE)(N) 21,912 692
Hubbell, Inc. Class B 13,600 702
IDEX Corp. 9,499 483
Illinois Tool Works, Inc. 6,360 653
Lennar Corp. Class A 28,800 1,582
Lockheed Martin Corp. 37,750 2,865
Modtech Holdings, Inc. (AE)(N) 13,485 134
Northrop Grumman Corp. 32,420 2,169
Teradyne, Inc. (AE) 30,900 521
Terex Corp. (AE) 17,900 1,549
United Technologies Corp. 47,110 2,959
Varian Semiconductor Equipment Associates, Inc.
(AE) 11,371 372
WW Grainger, Inc. 6,640 511
Xerox Corp. (AE) 174,300 2,447
------------
32,085
------------
Technology - 4.4%
Analog Devices, Inc. 22,500 853
Avid Technology, Inc. (AE)(N) 8,634 333
Avnet, Inc. (AE) 21,600 565
Broadcom Corp. Class A (AE) 13,800 567
Cisco Systems, Inc. (AE) 21,440 449
Corning, Inc. (AE) 53,500 1,478
Dell, Inc. (AE) 17,800 466
</Table>
Select Value Fund 147
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Filenet Corp. (AE)(N) 9,373 261
Freescale Semiconductor, Inc. Class A (AE) 38,800 1,227
General Dynamics Corp. 25,400 1,667
Hewlett-Packard Co. 111,600 3,624
Integrated Device Technology, Inc. (AE) 15,509 236
Intel Corp. 21,500 429
International Business Machines Corp. 8,400 692
Internet Security Systems, Inc. (AE) 12,240 275
IXYS Corp. (AE) 31,362 317
Linear Technology Corp. 17,500 621
Mantech International Corp. Class A (AE) 15,853 524
Motorola, Inc. 32,600 696
National Semiconductor Corp. 23,300 698
Oracle Corp. (AE) 40,840 596
Seagate Technology, Inc. (AE) 1,900 --
Sybase, Inc. (AE) 16,169 352
Symantec Corp. (AE) 14,100 231
------------
17,157
------------
Utilities - 8.3%
Alaska Communications Systems Group, Inc. (N) 19,377 244
Alltel Corp. 53,000 3,412
Ameren Corp. 5,600 282
America Movil SA de CV - ADR
Series L 60,900 2,248
AT&T, Inc. 65,300 1,711
BellSouth Corp. 24,400 824
China Mobile Hong Kong,
Ltd. - ADR (N) 53,400 1,541
Citizens Communications Co. 63,600 845
Consolidated Edison, Inc. 6,600 285
Dominion Resources, Inc. 42,650 3,193
Entergy Corp. 11,090 776
Exelon Corp. 22,020 1,189
FPL Group, Inc. 67,310 2,665
NiSource, Inc. 28,800 608
Northeast Utilities 55,500 1,118
NSTAR 19,900 550
PPL Corp. 38,080 1,106
Progress Energy, Inc. 1,300 --
Public Service Enterprise Group, Inc. 6,350 398
SCANA Corp. 7,200 282
Sprint Nextel Corp. 133,840 3,319
TXU Corp. 8,820 438
Valor Communications Group, Inc. 38,600 504
Verizon Communications, Inc. 76,840 2,538
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Vodafone Group PLC - ADR 89,053 2,111
------------
32,187
------------
TOTAL COMMON STOCKS
(cost $305,665) 367,773
------------
SHORT-TERM INVESTMENTS - 5.9%
Frank Russell Investment Company
Money Market Fund 22,169,000 22,169
United States Treasury Bills (c)(z)(sec.)
4.589% due 06/15/06 1,000 994
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $23,163) 23,163
------------
OTHER SECURITIES - 8.1%
Frank Russell Investment Company
Money Market Fund (X) 8,303,792 8,304
State Street Securities Lending Quality Trust
(X) 23,392,833 23,393
------------
TOTAL OTHER SECURITIES
(cost $31,697) 31,697
------------
TOTAL INVESTMENTS - 108.5%
(identified cost $360,525) 422,633
OTHER ASSETS AND LIABILITIES,
NET - (8.5%) (33,034)
------------
NET ASSETS - 100.0% 389,599
============
</Table>
See accompanying notes which are an integral part of the financial statements.
148 Select Value Fund
FRANK RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Value Index
expiration date 06/06 (29) 10,754 415
S&P 500 E-Mini Index (CME)
expiration date 06/06 (65) 4,277 77
S&P 500 Index (CME)
expiration date 06/06 (23) 7,566 57
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 549
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 1.8
Consumer Discretionary 11.3
Consumer Staples 4.2
Financial Services 25.0
Health Care 10.1
Integrated Oils 5.1
Materials and Processing 8.4
Miscellaneous 3.6
Other Energy 4.1
Producer Durables 8.2
Technology 4.4
Utilities 8.3
Short-Term Investments 5.9
Other Securities 8.1
---------------
Total Investments 108.5
Other Assets and Liabilities, Net (8.5)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Value Fund 149
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(AE) Nonincome-producing security.
(I) Forward commitment.
(E) Adjustable or floating rate security. Rate shown reflects rate in effect
at period end.
(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.
(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.
(A) Illiquid and restricted security.
(a) Currency balances were held in connection with futures contracts purchased
(sold), options written, or swaps entered into by the Fund. See Note 2.
ABBREVIATIONS:
ADR - American Depositary Receipt
ADS - American Depositary Share
CIBOR - Copenhagen Interbank Offered Rate
CME - Chicago Mercantile Exchange
CMO - Collateralized Mortgage Obligation
CVO - Contingent Value Obligation
GDR - Global Depositary Receipt
GDS - Global Depositary Share
FDIC - Federal Deposit Insurance Company
LIBOR - London Interbank Offered Rate
NIBOR - Norwegian Interbank Offered Rate
PIK - Payment in Kind
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 ISK - Iceland krona 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 - Vietnamese dong
GBP - British pound sterling PEN - Peruvian nouveau sol ZAR - South African rand
</Table>
150 Notes to Schedules of Investments
(This page intentionally left blank)
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
EQUITY I EQUITY II EQUITY Q INTERNATIONAL
AMOUNTS IN THOUSANDS FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 1,356,813 $ 710,663 $ 1,405,308 $ 2,050,010
- ---------------------------------------------------------------------------------------------------------------------------------
Investments, at market*** 1,562,938 831,040 1,636,865 2,523,915
Cash 360 -- -- 422
Cash (restricted) -- -- -- --
Foreign currency holdings* -- -- -- 9,476
Unrealized appreciation on foreign currency exchange
contracts -- -- -- 12,664
Receivables:
Dividends and interest 1,270 308 1,456 5,850
Dividends from affiliated money market funds 307 214 200 484
Investments sold 17,572 46,722 27,547 8,485
Fund shares sold 2,827 569 2,749 3,483
Foreign taxes recoverable -- -- -- 164
From Advisor -- -- -- --
Daily variation margin on futures contracts 161 394 146 --
Prepaid expenses 45 20 30 44
Unrealized appreciation on index swap contracts -- -- -- 10
Interest rate swap contracts, at market value***** -- -- -- --
Credit default swap contracts, at market value**** -- -- -- --
-------------- -------------- -------------- ---------------
Total assets 1,585,480 879,267 1,668,993 2,564,997
-------------- -------------- -------------- ---------------
LIABILITIES
Payables:
Due to Custodian -- -- -- --
Investments purchased 14,688 56,683 32,228 12,634
Fund shares redeemed 2,897 1,256 1,358 3,712
Accrued fees to affiliates 768 478 845 1,193
Other accrued expenses 89 100 104 264
Daily variation margin on futures contracts -- -- -- 1,107
Deferred tax liability -- -- -- 12
Unrealized depreciation on foreign currency exchange
contracts -- -- -- 9,065
Options written, at market value** -- -- -- 378
Payable upon return of securities loaned 96,534 118,387 39,708 628,398
Unrealized depreciation on index swap contracts -- -- -- 7
Interest rate swap contracts, at market value***** -- -- -- --
Credit default swap contracts, at market value**** -- -- -- --
-------------- -------------- -------------- ---------------
Total liabilities 114,976 176,904 74,243 656,770
-------------- -------------- -------------- ---------------
NET ASSETS $ 1,470,504 $ 702,363 $ 1,594,750 $ 1,908,227
============== ============== ============== ===============
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 994 $ (49) $ 804 $ 4,461
Accumulated net realized gain (loss) 36,411 101,842 76,970 192,044
Unrealized appreciation (depreciation) on:
Investments (Emerging Markets Fund -- net of
foreign capital gains taxes) 206,125 120,377 231,557 473,893
Futures contracts 1,583 1,747 1,050 3,900
Options written -- -- -- (17)
Credit default swap contracts -- -- -- --
Index swap contracts -- -- -- 3
Interest rate swap contracts -- -- -- --
Foreign currency-related transactions -- -- -- 3,885
Shares of beneficial interest 450 201 423 385
Additional paid-in capital 1,224,941 478,245 1,283,946 1,229,673
-------------- -------------- -------------- ---------------
NET ASSETS $ 1,470,504 $ 702,363 $ 1,594,750 $ 1,908,227
============== ============== ============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
152 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
- -----------------------------------------------------------------------------------------------------------------------------------
$ 1,913,819 $ 932,122 $ 729,344 $ 1,252,841 $ 1,144,681 $ 191,178 $ 360,525
- -----------------------------------------------------------------------------------------------------------------------------------
1,888,132 924,361 1,174,995 1,839,442 1,129,203 217,045 422,633
1,566 61 -- -- 108 133 --
-- 102 -- -- -- -- --
97 106 7,333 -- 13 -- --
1,163 850 1,626 -- -- -- --
9,850 4,913 3,228 570 7,695 59 384
390 324 204 194 176 43 86
43,006 17,581 7,033 18,698 53,999 3,333 1,588
4,839 2,638 2,024 3,381 1,019 552 731
-- -- -- -- -- -- --
-- -- -- -- -- 80 --
258 183 25 -- 197 -- 68
25 21 -- 35 5 4 11
-- 2 -- -- -- -- --
24 26 -- -- 55 -- --
-- 14 -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- -------------- --------------
1,949,350 951,182 1,196,468 1,862,320 1,192,470 221,249 425,501
-------------- -------------- -------------- -------------- -------------- -------------- --------------
-- -- 472 -- -- -- --
271,940 131,156 7,017 14,217 61,868 3,496 3,365
875 3,432 981 1,476 1,192 54 461
359 353 1,351 1,561 583 165 321
118 77 239 119 109 36 58
-- 1 105 -- -- 47 --
-- -- 1,813 -- -- -- --
849 696 209 -- 63 -- --
566 462 1,015 -- 598 -- --
300,352 103,636 32,075 97,933 5,036 19,859 31,697
-- 36 -- -- -- -- --
407 487 -- -- 281 -- --
-- -- -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- -------------- --------------
575,466 240,336 45,277 115,306 69,730 23,657 35,902
-------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 1,373,884 $ 710,846 $ 1,151,191 $ 1,747,014 $ 1,122,740 $ 197,592 $ 389,599
============== ============== ============== ============== ============== ============== ==============
$ 4,699 $ 2,886 $ (12,025) $ (1,155) $ 3,773 $ (21) $ 168
(15,519) (4,513) 84,744 96,943 (12,733) (10,727) 5,308
(25,687) (7,761) 443,838 586,601 (15,478) 25,867 62,108
(1,450) (1,709) 1,536 -- (2,223) 131 549
(204) (6) (35) -- 75 -- --
-- 77 -- -- -- -- --
-- (34) -- -- -- -- --
(399) (484) -- -- (271) -- --
288 55 1,492 -- (62) -- --
673 693 508 358 604 232 322
1,411,483 721,642 631,133 1,064,267 1,149,055 182,110 321,144
-------------- -------------- -------------- -------------- -------------- -------------- --------------
$ 1,373,884 $ 710,846 $ 1,151,191 $ 1,747,014 $ 1,122,740 $ 197,592 $ 389,599
============== ============== ============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 153
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
EQUITY I EQUITY II EQUITY Q INTERNATIONAL
FUND FUND FUND 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****** $ 32.71 $ 34.76 $ 37.68 $ 49.56
Class E -- Net assets $ 41,123,192 $ 40,484,730 $ 52,257,049 $ 50,480,158
Class E -- Shares outstanding ($.01 par value) 1,257,308 1,164,542 1,386,788 1,018,513
Net asset value per share: Class I****** $ 32.69 $ 34.88 $ 37.69 $ 49.54
Class I -- Net assets $ 985,790,667 $ 526,256,819 $ 1,139,253,786 $ 1,401,565,390
Class I -- Shares outstanding ($.01 par value) 30,158,251 15,089,664 30,227,846 28,291,137
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****** $ 32.67 $ 34.87 $ 37.69 $ 49.53
Class Y -- Net assets $ 443,590,191 $ 135,621,137 $ 403,238,711 $ 456,181,614
Class Y -- Shares outstanding ($.01 par value) 13,576,439 3,889,717 10,698,871 9,209,778
- ---------------------------------------------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings - cost $ -- $ -- $ -- $ 9,304
** Premiums received on options written $ -- $ -- $ -- $ 361
*** Securities on loan included in investments $ 93,230 $ 115,548 $ 38,587 $ 594,462
**** Credit default swap contracts - premiums paid
(received) $ -- $ -- $ -- $ --
***** 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.
154 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
- -----------------------------------------------------------------------------------------------------------------------------------
$ -- $ -- $ 22.03 $ 47.69 $ 18.54 $ 8.03 $ 11.90
$ -- $ -- $ 50,692,859 $ 94,908,637 $ 23,961,732 $ 10,164,436 $ 24,821,576
-- -- 2,300,646 1,989,911 1,292,171 1,266,042 2,085,202
$ 20.42 $ 10.27 $ 22.70 $ 48.40 $ 18.61 $ 8.41 $ 12.11
$ 31,254,594 $ 10,034,060 $ 28,861,603 $ 47,508,219 $ 25,513,125 $ 4,687,840 $ 10,241,136
1,530,771 976,570 1,271,475 981,630 1,371,162 557,733 845,919
$ 20.41 $ 10.26 $ -- $ -- $ -- $ 8.58 $ 12.14
$ 784,726,665 $ 657,060,843 $ -- $ -- $ -- $ 110,776,776 $ 121,298,694
38,445,534 64,055,915 -- -- -- 12,905,556 9,993,516
$ -- $ -- $ 22.68 $ 48.88 $ 18.58 $ 8.53 $ 12.11
$ -- $ -- $1,071,636,138 $1,604,597,271 $1,073,264,518 $ 71,963,360 $ 233,237,166
-- -- 47,243,989 32,829,147 57,759,952 8,438,724 19,255,731
$ 20.42 $ 10.26 $ -- $ -- $ -- $ -- $ --
$ 557,902,795 $ 43,751,028 $ -- $ -- $ -- $ -- $ --
27,321,304 4,264,125 -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
$ 94 $ 104 $ 7,307 $ -- $ 12 $ -- $ --
$ 362 $ 456 $ 980 $ -- $ 673 $ -- $ --
$ 294,108 $ 101,587 $ 28,810 $ 95,684 $ 4,927 $ 19,317 $ 31,129
$ -- $ (63) $ -- $ -- $ -- $ -- $ --
$ 16 $ 23 $ -- $ -- $ 45 $ -- $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 155
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2006 (UNAUDITED)
<Table>
<Caption>
EQUITY I EQUITY II EQUITY Q INTERNATIONAL
AMOUNTS IN THOUSANDS FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 9,659 $ 3,140 $ 13,239 $ 22,709
Dividends from affiliated money
market funds 1,588 837 778 2,672
Interest 123 43 64 249
Securities lending income 70 202 25 569
Less foreign taxes withheld -- -- -- (1,317)
-------------- -------------- -------------- -----------------
Total investment income 11,440 4,222 14,106 24,882
-------------- -------------- -------------- -----------------
EXPENSES
Advisory fees 3,666 2,334 4,115 6,361
Administrative fees 333 167 374 454
Custodian fees 227 226 216 1,040
Distribution fees - Class C -- -- -- --
Transfer agent fees -- -- -- --
Transfer agent fees - Class C -- -- -- --
Transfer agent fees - Class E 10 8 13 12
Transfer agent fees - Class I 315 237 326 263
Transfer agent fees - Class S -- -- -- --
Transfer agent fees - Class Y 8 3 8 12
Professional fees 44 33 47 70
Registration fees 57 35 44 40
Shareholder servicing fees - Class
C -- -- -- --
Shareholder servicing fees - Class
E 50 47 62 57
Trustees' fees 15 9 19 23
Printing fees 17 19 27 28
Miscellaneous 10 9 14 16
-------------- -------------- -------------- -----------------
Expenses before reductions 4,752 3,127 5,265 8,376
Expense reductions (135) (68) (151) (183)
-------------- -------------- -------------- -----------------
Net expenses 4,617 3,059 5,114 8,193
-------------- -------------- -------------- -----------------
Net investment income (loss) 6,823 1,163 8,992 16,689
-------------- -------------- -------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (Emerging Markets Fund
- net of foreign capital gains
taxes) 44,469 102,000 85,573 189,546
Futures contracts 3,711 4,388 2,505 18,391
Options written -- -- -- (137)
Credit default swap contracts -- -- -- --
Index swap contracts -- -- -- 2,787
Interest rate swap contracts -- -- -- --
Foreign currency-related
transactions -- (1) -- (5,061)
-------------- -------------- -------------- -----------------
Net realized gain (loss) 48,180 106,387 88,078 205,526
-------------- -------------- -------------- -----------------
Net change in unrealized appreciation
(depreciation) on:
Investments (Emerging Markets Fund
- net of deferred tax liability
for foreign capital gains
taxes) 80,817 12,491 46,841 176,236
Futures contracts 2,254 2,563 1,188 1,153
Options written -- -- -- 5
Credit default swap contracts -- -- -- --
Index swap contracts -- -- -- (327)
Interest rate swap contracts -- -- -- --
Foreign currency-related
transactions -- -- -- 6,926
-------------- -------------- -------------- -----------------
Net change in unrealized appreciation
(depreciation) 83,071 15,054 48,029 183,993
-------------- -------------- -------------- -----------------
Net realized and unrealized gain (loss) 131,251 121,441 136,107 389,519
-------------- -------------- -------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 138,074 $ 122,604 $ 145,099 $ 406,208
============== ============== ============== =================
</Table>
See accompanying notes which are an integral part of the financial statements.
156 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
- ----------------------------------------------------------------------------------------------------------------------------
$ 52 $ 77 $ 13,389 $ 19,188 $ 104 $ 684 $ 3,544
2,306 1,673 966 1,258 965 217 415
28,857 14,702 93 -- 23,499 17 20
80 98 37 93 8 17 28
-- -- (1,073) -- -- -- --
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
31,295 16,550 13,412 20,539 24,576 935 4,007
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
1,591 1,640 5,742 6,625 2,634 738 1,294
318 164 251 414 294 46 92
320 258 1,027 201 188 84 103
-- -- 158 335 101 34 87
-- -- 1,160 1,529 636 -- --
-- -- -- -- -- 12 31
6 2 -- -- -- 3 7
193 238 -- -- -- 71 56
-- -- -- -- -- 57 270
10 1 -- -- -- -- --
52 27 53 44 39 19 28
55 42 34 51 51 28 31
-- -- 53 112 34 11 29
38 12 30 55 31 6 12
15 8 11 20 16 2 4
22 9 20 35 20 4 6
12 6 14 13 12 3 4
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
2,632 2,407 8,553 9,434 4,056 1,118 2,054
(142) (86) (4) (3) (15) (119) --
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
2,490 2,321 8,549 9,431 4,041 999 2,054
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
28,805 14,229 4,863 11,108 20,535 (64) 1,953
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
(9,484) (3,153) 77,545 90,749 (2,581) 7,240 17,827
(2,251) (853) 5,267 -- (565) 324 890
103 92 3,560 -- 43 -- --
-- 21 -- -- -- -- --
-- 3 -- -- -- -- --
-- (111) -- -- (466) -- --
(370) (188) 1,036 -- 17 -- --
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
(12,002) (4,189) 87,408 90,749 (3,552) 7,564 18,717
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
(10,973) (4,817) 223,452 148,432 (1,096) 7,062 21,874
(132) (945) 1,235 -- (1,158) 213 902
(136) (21) 103 -- 18 -- --
-- 72 -- -- -- -- --
-- (14) -- -- -- -- --
(229) (282) -- -- 185 -- --
420 135 1,738 -- (82) -- --
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
(11,050) (5,872) 226,528 148,432 (2,133) 7,275 22,776
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
(23,052) (10,061) 313,936 239,181 (5,685) 14,839 41,493
------------- -------------- ---------------- ---------------- --------------- ---------- ------------
5,753
$ $ 4,168 $ 318,799 $ 250,289 $ 14,850 $ 14,775 $ 43,446
============= ============== ================ ================ =============== ========== ============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 157
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
EQUITY I EQUITY II
FUND FUND
------------------------------------ -------------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005 (UNAUDITED) 2005
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 6,823 $ 10,607 $ 1,163 $ 944
Net realized gain (loss) 48,180 76,037 106,387 160,177
Net change in unrealized appreciation
(depreciation) 83,071 29,516 15,054 (50,968)
---------------- ---------------- ---------------- -----------------
Net increase (decrease) in net assets from
operations 138,074 116,160 122,604 110,153
---------------- ---------------- ---------------- -----------------
DISTRIBUTIONS
From net investment income
Class C -- -- -- --
Class E (148) (293) -- (114)
Class I (4,335) (8,027) (979) (2,033)
Class S -- -- -- --
Class Y (1,948) (2,220) (358) (635)
From net realized gain
Class C -- -- -- --
Class E (1,542) -- (8,757) (10,499)
Class I (34,548) -- (120,739) (87,641)
Class S -- -- -- --
Class Y (13,972) -- (28,930) (20,999)
---------------- ---------------- ---------------- -----------------
Net decrease in net assets from distributions (56,493) (10,540) (159,763) (121,921)
---------------- ---------------- ---------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from
share transactions 184,791 263,392 95,332 (258,684)
---------------- ---------------- ---------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 266,372 369,012 58,173 (270,452)
NET ASSETS
Beginning of period 1,204,132 835,120 644,190 914,642
---------------- ---------------- ---------------- -----------------
End of period $ 1,470,504 $ 1,204,132 $ 702,363 $ 644,190
================ ================ ================ =================
Undistributed (overdistributed) net
investment income included in net
assets $ 994 $ 603 $ (49) $ 125
</Table>
See accompanying notes which are an integral part of the financial statements.
158 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, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005 (UNAUDITED) 2005
- ----------------------------------------------------------------------------------------------------
$ 8,992 $ 18,044 $ 16,689 $ 28,592 $ 28,805 $ 43,832
88,078 121,712 205,526 151,503 (12,002) (1,233)
48,029 919 183,993 76,185 (11,050) (32,571)
------------- ------------- ------------- ------------- ------------- -------------
145,099 140,675 406,208 256,280 5,753 10,028
------------- ------------- ------------- ------------- ------------- -------------
-- -- -- -- -- --
(240) (492) (687) (681) (625) (1,004)
(6,431) (13,322) (21,365) (20,055) (17,036) (28,735)
-- -- -- -- -- --
(2,307) (4,330) (12,155) (10,709) (10,385) (12,901)
-- -- -- -- -- --
(1,147) -- -- -- -- (691)
(25,033) -- -- -- -- (18,576)
-- -- -- -- -- --
(8,385) -- -- -- -- (7,263)
------------- ------------- ------------- ------------- ------------- -------------
(43,543) (18,144) (34,207) (31,445) (28,046) (69,170)
------------- ------------- ------------- ------------- ------------- -------------
99,532 (132,081) (220,243) 88,868 178,855 211,492
------------- ------------- ------------- ------------- ------------- -------------
201,088 (9,550) 151,758 313,703 156,562 152,350
1,393,662 1,403,212 1,756,469 1,442,766 1,217,322 1,064,972
------------- ------------- ------------- ------------- ------------- -------------
$ 1,594,750 $ 1,393,662 $ 1,908,227 $ 1,756,469 $ 1,373,884 $ 1,217,322
============= ============= ============= ============= ============= =============
$ 804 $ 790 $ 4,461 $ 21,985 $ 4,699 $ 3,940
<Caption>
FIXED INCOME III
FUND
------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005
- ---
$ 14,229 $ 18,995
(4,189) 2,429
(5,872) (13,873)
------------- -------------
4,168 7,551
------------- -------------
-- --
(189) (255)
(12,660) (16,744)
-- --
(931) (720)
-- --
(27) (62)
(1,689) (3,882)
-- --
(129) --
------------- -------------
(15,625) (21,663)
------------- -------------
111,880 155,080
------------- -------------
100,423 140,968
610,423 469,455
------------- -------------
$ 710,846 $ 610,423
============= =============
$ 2,886 $ 2,438
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 159
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
<Table>
<Caption>
EMERGING MARKETS REAL ESTATE SECURITIES
FUND FUND
------------------------------------ -------------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED
APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005 (UNAUDITED) 2005
- ---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 4,863 $ 9,257 $ 11,108 $ 27,104
Net realized gain (loss) 87,408 102,118 90,749 149,115
Net change in unrealized appreciation
(depreciation) 226,528 102,396 148,432 62,485
---------------- ---------------- ---------------- -----------------
Net increase (decrease) in net assets from
operations 318,799 213,771 250,289 238,704
---------------- ---------------- ---------------- -----------------
DISTRIBUTIONS
From net investment income
Class C (580) (83) (467) (700)
Class E (442) (194) (331) (596)
Class I -- -- -- --
Class S (20,081) (9,858) (12,839) (25,047)
Class Y -- -- -- --
From net realized gain
Class C (887) -- (8,834) (5,310)
Class E (487) -- (4,267) (2,607)
Class I -- -- -- --
Class S (20,087) -- (150,805) (98,198)
Class Y -- -- -- --
---------------- ---------------- ---------------- -----------------
Net decrease in net assets from distributions (42,564) (10,135) (177,543) (132,458)
---------------- ---------------- ---------------- -----------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from
share transactions 28,054 59,004 117,987 187,997
---------------- ---------------- ---------------- -----------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 304,289 262,640 190,733 294,243
NET ASSETS
Beginning of period 846,902 584,262 1,556,281 1,262,038
---------------- ---------------- ---------------- -----------------
End of period $ 1,151,191 $ 846,902 $ 1,747,014 $ 1,556,281
================ ================ ================ =================
Undistributed (overdistributed) net
investment income included in net
assets $ (12,025) $ 4,215 $ (1,155) $ 1,374
</Table>
See accompanying notes which are an integral part of the financial statements.
160 Statement of Changes in Net Assets
<Table>
<Caption>
SHORT DURATION BOND SELECT GROWTH SELECT VALUE
FUND FUND FUND
------------------------------ ------------------------------ ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31, APRIL 30, 2006 OCTOBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005 (UNAUDITED) 2005
- ----------------------------------------------------------------------------------------------------
$ 20,535 $ 31,923 $ (64) $ 43 $ 1,953 $ 3,268
(3,552) (8,752) 7,564 7,903 18,717 25,574
(2,133) (17,447) 7,275 6,530 22,776 9,493
------------- ------------- ------------- ------------- ------------- -------------
14,850 5,724 14,775 14,476 43,446 38,335
------------- ------------- ------------- ------------- ------------- -------------
(330) (523) -- -- (25) (18)
(410) (558) -- -- (38) (72)
-- -- -- -- (768) (1,393)
(19,357) (29,494) -- -- (1,028) (1,866)
-- -- -- -- -- --
-- (24) -- -- (1,231) (14)
-- (16) -- -- (494) (8)
-- -- -- -- (7,528) (83)
-- (767) -- -- (11,306) (145)
-- -- -- -- -- --
------------- ------------- ------------- ------------- ------------- -------------
(20,097) (31,382) -- -- (22,418) (3,599)
------------- ------------- ------------- ------------- ------------- -------------
(85,593) 42,298 977 44,098 4,263 27,540
------------- ------------- ------------- ------------- ------------- -------------
(90,840) 16,640 15,752 58,574 25,291 62,276
1,213,580 1,196,940 181,840 123,266 364,308 302,032
------------- ------------- ------------- ------------- ------------- -------------
$ 1,122,740 $ 1,213,580 $ 197,592 $ 181,840 $ 389,599 $ 364,308
============= ============= ============= ============= ============= =============
$ 3,773 $ 3,335 $ (21) $ 43 $ 168 $ 74
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 161
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 INCOME DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY I FUND
Class E
April 30, 2006 * 30.81 .12 3.17 3.29 (.12)
October 31, 2005 27.56 .25 3.24 3.49 (.24)
October 31, 2004 25.75 .16 1.82 1.98 (.17)
October 31, 2003 21.46 .15 4.28 4.43 (.14)
October 31, 2002 25.25 .12 (3.69) (3.57) (.16)
October 31, 2001 35.21 .15 (9.62) (9.47) (.13)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006 * 30.79 .16 3.16 3.32 (.15)
October 31, 2005 27.54 .32 3.24 3.56 (.31)
October 31, 2004 25.72 .23 1.82 2.05 (.23)
October 31, 2003 21.44 .21 4.26 4.47 (.19)
October 31, 2002 25.23 .19 (3.70) (3.51) (.20)
October 31, 2001 35.21 .22 (9.63) (9.41) (.21)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2006 * 30.77 .17 3.17 3.34 (.17)
October 31, 2005 27.53 .31 3.26 3.57 (.33)
October 31, 2004 25.72 .25 1.81 2.06 (.25)
October 31, 2003 21.43 .23 4.27 4.50 (.21)
October 31, 2002 25.24 .20 (3.71) (3.51) (.22)
October 31, 2001 35.21 .23 (9.61) (9.38) (.23)
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY II FUND
Class E
April 30, 2006 * 38.43 .02 6.36 6.38 --
October 31, 2005 39.28 (.04) 4.44 4.40 (.06)
October 31, 2004 36.12 .04 3.12 3.16 --
October 31, 2003 25.54 .01 10.65 10.66 (.08)
October 31, 2002 28.24 .02 (2.65) (2.63) (.07)
October 31, 2001 38.33 .12 (5.36) (5.24) (.07)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006 * 38.57 .06 6.39 6.45 (.09)
October 31, 2005 39.39 .04 4.45 4.49 (.12)
October 31, 2004 36.19 .10 3.15 3.25 (.05)
October 31, 2003 25.59 .06 10.66 10.72 (.12)
October 31, 2002 28.29 .08 (2.65) (2.57) (.13)
October 31, 2001 38.35 .18 (5.37) (5.19) (.09)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2006 * 38.58 .07 6.39 6.46 (.12)
October 31, 2005 39.41 .07 4.45 4.52 (.16)
October 31, 2004 36.22 .14 3.14 3.28 (.09)
October 31, 2003 25.61 .10 10.67 10.77 (.16)
October 31, 2002 28.32 .12 (2.65) (2.53) (.18)
October 31, 2001 38.35 .20 (5.35) (5.15) (.10)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- --------------------------------------------------------------------
EQUITY I FUND
Class E
April 30, 2006 * (1.27) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- (.06)
October 31, 2001 (.36) --
- --------------------------------------------------------------------
Class I
April 30, 2006 * (1.27) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- (.08)
October 31, 2001 (.36) --
- --------------------------------------------------------------------
Class Y
April 30, 2006 * (1.27) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- (.08)
October 31, 2001 (.36) --
- --------------------------------------------------------------------
EQUITY II FUND
Class E
April 30, 2006 * (10.05) --
October 31, 2005 (5.19) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (4.78) --
- --------------------------------------------------------------------
Class I
April 30, 2006 * (10.05) --
October 31, 2005 (5.19) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (4.78) --
- --------------------------------------------------------------------
Class Y
April 30, 2006 * (10.05) --
October 31, 2005 (5.19) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (4.78) --
- --------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
162 Financial Highlights
<Table>
<Caption>
% %
$ $ RATIO OF EXPENSES RATIO OF EXPENSES
$ NET ASSET VALUE % NET ASSETS TO AVERAGE TO AVERAGE
TOTAL END OF TOTAL END OF PERIOD NET ASSETS NET ASSETS
DISTRIBUTIONS PERIOD RETURN(B) (000) NET(C)(E) GROSS(C)
- ---------------------------------------------------------------------------------------------------------------------
(1.39) 32.71 10.92 41,123 .93 .95
(.24) 30.81 12.70 37,666 .92 .96
(.17) 27.56 7.69 33,143 .94 .96
(.14) 25.75 20.79 32,632 .99 .99
(.22) 21.46 (14.26) 19,476 .98 .98
(.49) 25.25 (27.13) 30,646 .92 .92
- ---------------------------------------------------------------------------------------------------------------------
(1.42) 32.69 11.05 985,791 .70 .72
(.31) 30.79 12.97 825,172 .69 .73
(.23) 27.54 7.99 697,537 .71 .72
(.19) 25.72 21.02 580,055 .75 .75
(.28) 21.44 (14.04) 588,901 .74 .74
(.57) 25.23 (26.98) 813,827 .71 .71
- ---------------------------------------------------------------------------------------------------------------------
(1.44) 32.67 11.09 443,590 .64 .66
(.33) 30.77 13.00 341,294 .65 .67
(.25) 27.53 8.07 104,440 .63 .65
(.21) 25.72 21.09 89,546 .66 .66
(.30) 21.43 (13.96) 57,147 .64 .64
(.59) 25.24 (26.93) 146,156 .62 .62
- ---------------------------------------------------------------------------------------------------------------------
(10.05) 34.76 19.98 40,485 1.12 1.14
(5.25) 38.43 11.53 34,849 1.08 1.11
-- 39.28 8.72 80,542 1.09 1.09
(.08) 36.12 41.88 46,901 1.12 1.12
(.07) 25.54 (9.37) 25,874 1.12 1.12
(4.85) 28.24 (14.86) 29,647 1.08 1.09
- ---------------------------------------------------------------------------------------------------------------------
(10.14) 34.88 20.14 526,257 .92 .94
(5.31) 38.57 11.77 496,716 .87 .91
(.05) 39.39 8.98 674,280 .90 .90
(.12) 36.19 42.08 606,333 .94 .94
(.13) 25.59 (9.17) 464,113 .92 .92
(4.87) 28.29 (14.69) 584,718 .90 .90
- ---------------------------------------------------------------------------------------------------------------------
(10.17) 34.87 20.20 135,621 .83 .85
(5.35) 38.58 11.85 112,625 .81 .83
(.09) 39.41 9.05 159,820 .79 .79
(.16) 36.22 42.34 190,066 .81 .81
(.18) 25.61 (9.07) 147,610 .79 .79
(4.88) 28.32 (14.59) 126,876 .78 .79
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
%
RATIO OF NET
INVESTMENT INCOME %
TO AVERAGE PORTFOLIO
NET ASSETS(C)(E) TURNOVER RATE(B)
- -----------------------------------------
.79 48.68
.83 109.71
.61 129.94
.68 115.73
.49 130.46
.51 144.94
- -----------------------------------------
1.01 48.68
1.06 109.71
.84 129.94
.92 115.73
.74 130.46
.72 144.94
- -----------------------------------------
1.07 48.68
1.03 109.71
.92 129.94
1.00 115.73
.85 130.46
.81 144.94
- -----------------------------------------
.14 82.78
(.09) 156.39
.09 125.94
.04 132.27
.07 126.57
.37 134.79
- -----------------------------------------
.35 82.78
.12 156.39
.27 125.94
.22 132.27
.27 126.57
.55 134.79
- -----------------------------------------
.43 82.78
.18 156.39
.37 125.94
.36 132.27
.41 126.57
.65 134.79
- -----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 163
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 INCOME DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY Q FUND
Class E
April 30, 2006 * 35.20 .17 3.36 3.53 (.18)
October 31, 2005 32.32 .35 2.88 3.23 (.35)
October 31, 2004 30.10 .23 2.24 2.47 (.25)
October 31, 2003 24.90 .22 5.18 5.40 (.20)
October 31, 2002 29.75 .17 (4.81) (4.64) (.21)
October 31, 2001 40.70 .20 (9.75) (9.55) (.17)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006 * 35.20 .22 3.36 3.58 (.22)
October 31, 2005 32.32 .44 2.88 3.32 (.44)
October 31, 2004 30.10 .30 2.24 2.54 (.32)
October 31, 2003 24.89 .27 5.19 5.46 (.25)
October 31, 2002 29.75 .24 (4.82) (4.58) (.28)
October 31, 2001 40.69 .26 (9.72) (9.46) (.25)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2006 * 35.20 .23 3.36 3.59 (.23)
October 31, 2005 32.32 .45 2.88 3.33 (.45)
October 31, 2004 30.09 .32 2.25 2.57 (.34)
October 31, 2003 24.89 .30 5.17 5.47 (.27)
October 31, 2002 29.75 .27 (4.82) (4.55) (.31)
October 31, 2001 40.69 .28 (9.71) (9.43) (.28)
- ----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL FUND
Class E
April 30, 2006 * 40.45 .37 9.42 9.79 (.68)
October 31, 2005 35.15 .57 5.41 5.98 (.68)
October 31, 2004 31.22 .38 4.29 4.67 (.74)
October 31, 2003 24.71 .30 6.59 6.89 (.38)
October 31, 2002 28.34 .16 (3.75) (3.59) (.04)
October 31, 2001 39.51 .28 (9.53) (9.25) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006 * 40.47 .43 9.42 9.85 (.78)
October 31, 2005 35.16 .68 5.39 6.07 (.76)
October 31, 2004 31.20 .46 4.29 4.75 (.79)
October 31, 2003 24.74 .36 6.53 6.89 (.43)
October 31, 2002 28.38 .26 (3.78) (3.52) (.12)
October 31, 2001 39.60 .34 (9.52) (9.18) (.12)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2006 * 40.47 .37 9.48 9.85 (.79)
October 31, 2005 35.17 .68 5.40 6.08 (.78)
October 31, 2004 31.21 .45 4.33 4.78 (.82)
October 31, 2003 24.75 .38 6.54 6.92 (.46)
October 31, 2002 28.42 .32 (3.83) (3.51) (.16)
October 31, 2001 39.62 .46 (9.60) (9.14) (.14)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- --------------------------------------------------------------------
EQUITY Q FUND
Class E
April 30, 2006 * (.87) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1.23) --
- --------------------------------------------------------------------
Class I
April 30, 2006 * (.87) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1.23) --
- --------------------------------------------------------------------
Class Y
April 30, 2006 * (.87) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1.23) --
- --------------------------------------------------------------------
INTERNATIONAL FUND
Class E
April 30, 2006 * -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1.92) --
- --------------------------------------------------------------------
Class I
April 30, 2006 * -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1.92) --
- --------------------------------------------------------------------
Class Y
April 30, 2006 * -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1.92) --
- --------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
164 Financial Highlights
<Table>
<Caption>
% %
$ $ RATIO OF EXPENSES RATIO OF EXPENSES
$ NET ASSET VALUE, % NET ASSETS TO AVERAGE TO AVERAGE
TOTAL END OF TOTAL END OF PERIOD NET ASSETS NET ASSETS
DISTRIBUTIONS PERIOD RETURN(B) (000) NET(C)(E) GROSS(C)
- ---------------------------------------------------------------------------------------------------------------------
(1.05) 37.68 10.17 52,257 .93 .95
(.35) 35.20 10.03 46,352 .91 .93
(.25) 32.32 8.22 47,570 .92 .93
(.20) 30.10 21.76 40,924 .94 .94
(.21) 24.90 (15.70) 17,503 .94 .94
(1.40) 29.75 (23.98) 21,979 .89 .89
- ---------------------------------------------------------------------------------------------------------------------
(1.09) 37.69 10.33 1,139,254 .69 .71
(.44) 35.20 10.30 1,009,002 .66 .69
(.32) 32.32 8.46 1,018,806 .69 .69
(.25) 30.10 22.04 822,548 .72 .72
(.28) 24.89 (15.50) 854,495 .70 .70
(1.48) 29.75 (23.82) 983,176 .70 .70
- ---------------------------------------------------------------------------------------------------------------------
(1.10) 37.69 10.36 403,239 .63 .65
(.45) 35.20 10.34 338,308 .63 .65
(.34) 32.32 8.58 336,836 .61 .61
(.27) 30.09 22.13 674,326 .63 .63
(.31) 24.89 (15.41) 514,589 .60 .60
(1.51) 29.75 (23.74) 456,512 .61 .61
- ---------------------------------------------------------------------------------------------------------------------
(.68) 49.56 24.46 50,480 1.17 1.19
(.68) 40.45 17.19 41,415 1.15 1.18
(.74) 35.15 15.20 35,442 1.19 1.20
(.38) 31.22 28.33 24,163 1.26 1.26
(.04) 24.71 (12.68) 11,965 1.31 1.32
(1.92) 28.34 (24.54) 19,449 1.26 1.26
- ---------------------------------------------------------------------------------------------------------------------
(.78) 49.54 24.63 1,401,565 .91 .93
(.76) 40.47 17.48 1,127,303 .90 .93
(.79) 35.16 15.47 915,469 .95 .96
(.43) 31.20 28.37 597,650 1.06 1.06
(.12) 24.74 (12.46) 527,791 1.07 1.07
(2.04) 28.38 (24.37) 658,920 1.06 1.06
- ---------------------------------------------------------------------------------------------------------------------
(.79) 49.53 24.65 456,182 .86 .88
(.78) 40.47 17.53 587,751 .86 .89
(.82) 35.17 15.54 491,855 .87 .88
(.46) 31.21 28.51 567,878 .96 .96
(.16) 24.75 (12.42) 395,955 .97 .97
(2.06) 28.42 (24.26) 386,538 .96 .96
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
%
RATIO OF NET
INVESTMENT INCOME %
TO AVERAGE PORTFOLIO
NET ASSETS(C)(E) TURNOVER RATE(B)
- -----------------------------------------
.96 49.45
1.01 117.34
.71 102.51
.80 114.72
.58 71.16
.58 79.24
- -----------------------------------------
1.20 49.45
1.26 117.34
.94 102.51
1.02 114.72
.82 71.16
.77 79.24
- -----------------------------------------
1.25 49.45
1.30 117.34
1.05 102.51
1.10 114.72
.93 71.16
.86 79.24
- -----------------------------------------
1.66 37.03
1.49 80.36
1.13 81.19
1.14 79.40
.57 87.84
.82 111.84
- -----------------------------------------
1.93 37.03
1.76 80.36
1.36 81.19
1.38 79.40
.92 87.84
1.00 111.84
- -----------------------------------------
1.63 37.03
1.76 80.36
1.35 81.19
1.45 79.40
1.12 87.84
1.40 111.84
- -----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 165
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 INCOME DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME I FUND
Class E
April 30, 2006 * 20.75 .70 (.61) .09 (.42)
October 31, 2005 21.88 .74 (.61) .13 (.73)
October 31, 2004 22.12 .63 .48 1.11 (.69)
October 31, 2003 22.15 .72 .36 1.08 (.67)
October 31, 2002 22.32 .90 .17 1.07 (.97)
October 31, 2001 20.79 1.19 1.58 2.77 (1.24)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006 * 20.75 .30 (.19) .11 (.45)
October 31, 2005 21.87 .80 (.61) .19 (.78)
October 31, 2004 22.11 .68 .49 1.17 (.75)
October 31, 2003 22.15 .78 .35 1.13 (.73)
October 31, 2002 22.32 .96 .17 1.13 (1.03)
October 31, 2001 20.79 1.24 1.58 2.82 (1.29)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2006 * 20.76 2.75 (2.63) .12 (.46)
October 31, 2005 21.88 .80 (.61) .19 (.78)
October 31, 2004 22.12 .70 .48 1.18 (.76)
October 31, 2003 22.16 .79 .36 1.15 (.75)
October 31, 2002 22.32 .98 .18 1.16 (1.05)
October 31, 2001 20.79 1.23 1.61 2.84 (1.31)
- ----------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME III FUND
Class E
April 30, 2006 * 10.44 .21 (.14) .07 (.21)
October 31, 2005 10.70 .35 (.21) .14 (.32)
October 31, 2004 10.67 .28 .31 .59 (.38)
October 31, 2003 10.11 .38 .52 .90 (.34)
October 31, 2002 10.37 .40 (.05) .35 (.61)
October 31, 2001 9.77 .57 .61 1.18 (.58)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006 * 10.43 .22 (.14) .08 (.22)
October 31, 2005 10.69 .38 (.22) .16 (.34)
October 31, 2004 10.65 .30 .32 .62 (.40)
October 31, 2003 10.09 .40 .52 .92 (.36)
October 31, 2002 10.36 .42 (.06) .36 (.63)
October 31, 2001 9.76 .59 .63 1.22 (.62)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2006 * 10.43 .25 (.17) .08 (.22)
October 31, 2005 (2) 10.74 .14 (.26) (.12) (.19)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- --------------------------------------------------------------------
FIXED INCOME I FUND
Class E
April 30, 2006 * -- --
October 31, 2005 (.53) --
October 31, 2004 (.66) --
October 31, 2003 (.44) --
October 31, 2002 (.27) --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class I
April 30, 2006 * -- --
October 31, 2005 (.53) --
October 31, 2004 (.66) --
October 31, 2003 (.44) --
October 31, 2002 (.27) --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class Y
April 30, 2006 * -- --
October 31, 2005 (.53) --
October 31, 2004 (.66) --
October 31, 2003 (.44) --
October 31, 2002 (.27) --
October 31, 2001 -- --
- --------------------------------------------------------------------
FIXED INCOME III FUND
Class E
April 30, 2006 * (.03) --
October 31, 2005 (.08) --
October 31, 2004 (.18) --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class I
April 30, 2006 * (.03) --
October 31, 2005 (.08) --
October 31, 2004 (.18) --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class Y
April 30, 2006 * (.03) --
October 31, 2005 (2) -- --
- --------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
166 Financial Highlights
<Table>
<Caption>
% %
$ $ RATIO OF EXPENSES RATIO OF EXPENSES
$ NET ASSET VALUE % NET ASSETS TO AVERAGE TO AVERAGE
TOTAL END OF TOTAL END OF PERIOD NET ASSETS NET ASSETS
DISTRIBUTIONS PERIOD RETURN(B) (000) NET(C)(E) GROSS(C)
- ---------------------------------------------------------------------------------------------------------------------
(.42) 20.42 .44 31,255 .64 .67
(1.26) 20.75 .60 29,632 .65 .68
(1.35) 21.88 5.22 27,515 .65 .66
(1.11) 22.12 5.01 27,009 .67 .67
(1.24) 22.15 5.10 27,576 .64 .66
(1.24) 22.32 13.72 35,123 .61 .61
- ---------------------------------------------------------------------------------------------------------------------
(.45) 20.41 .54 784,726 .40 .42
(1.31) 20.75 .88 788,808 .38 .40
(1.41) 21.87 5.52 752,229 .39 .40
(1.17) 22.11 5.26 639,846 .41 .41
(1.30) 22.15 5.38 713,210 .38 .38
(1.29) 22.32 13.98 827,324 .39 .39
- ---------------------------------------------------------------------------------------------------------------------
(.46) 20.42 .56 557,903 .36 .38
(1.31) 20.76 .91 398,882 .35 .37
(1.42) 21.88 5.58 285,228 .33 .34
(1.19) 22.12 5.33 399,601 .35 .35
(1.32) 22.16 5.50 506,495 .31 .31
(1.31) 22.32 14.07 520,186 .32 .32
- ---------------------------------------------------------------------------------------------------------------------
(.24) 10.27 .62 10,034 .93 .96
(.40) 10.44 1.37 9,268 .93 .95
(.56) 10.70 5.65 7,489 .96 .96
(.34) 10.67 9.05 6,481 1.00 1.00
(.61) 10.11 3.61 5,912 .97 .98
(.58) 10.37 12.47 6,037 .93 .94
- ---------------------------------------------------------------------------------------------------------------------
(.25) 10.26 .72 657,061 .71 .74
(.42) 10.43 1.65 560,896 .69 .71
(.58) 10.69 5.99 461,966 .72 .72
(.36) 10.65 9.27 297,726 .78 .78
(.63) 10.09 3.84 306,550 .76 .76
(.62) 10.36 12.76 408,341 .72 .72
- ---------------------------------------------------------------------------------------------------------------------
(.25) 10.26 .78 43,751 .63 .66
(.19) 10.43 (1.15) 40,259 .64 .67
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
%
RATIO OF NET
INVESTMENT INCOME %
TO AVERAGE PORTFOLIO
NET ASSETS(C)(E) TURNOVER RATE(B)
- -----------------------------------------
4.27 54.03
3.49 201.90
2.88 153.79
3.25 184.29
4.17 165.28
5.51 188.97
- -----------------------------------------
4.51 54.03
3.76 201.90
3.15 153.79
3.50 184.29
4.42 165.28
5.75 188.97
- -----------------------------------------
4.58 54.03
3.81 201.90
3.18 153.79
3.53 184.29
4.45 165.28
5.62 188.97
- -----------------------------------------
4.11 81.71
3.32 197.66
2.64 195.68
3.61 266.11
4.00 231.09
5.66 165.41
- -----------------------------------------
4.34 81.71
3.55 197.66
2.85 195.68
3.83 266.11
4.22 231.09
5.87 165.41
- -----------------------------------------
4.40 81.71
3.74 197.66
- -----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 167
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 INCOME DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS FUND
Class C
April 30, 2006 * 16.73 --(d) 6.01 6.01 (.28)
October 31, 2005 12.52 .04 4.22 4.26 (.05)
October 31, 2004 10.68 --(d) 2.08 2.08 (.24)
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) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006 * 17.25 .08 6.19 6.27 (.39)
October 31, 2005 12.93 .16 4.34 4.50 (.18)
October 31, 2004 10.98 .09 2.15 2.24 (.29)
October 31, 2003 7.41 .09 3.49 3.58 (.01)
October 31, 2002 7.01 (.02) .42 .40 --
October 31, 2001 9.24 .02 (2.25) (2.23) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006 * 17.25 .10 6.19 6.29 (.43)
October 31, 2005 12.94 .20 4.34 4.54 (.23)
October 31, 2004 10.98 .12 2.15 2.27 (.31)
October 31, 2003 7.43 .11 3.48 3.59 (.04)
October 31, 2002 7.05 --(d) .40 .40 (.02)
October 31, 2001 9.25 .04 (2.24) (2.20) --
- ----------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class C
April 30, 2006 * 46.08 .12 6.70 6.82 (.23)
October 31, 2005 43.10 .42 6.66 7.08 (.43)
October 31, 2004 33.94 .46 9.92 10.38 (1.21)
October 31, 2003 26.52 1.11 7.53 8.64 (1.11)
October 31, 2002 26.97 1.07 (.01) 1.06 (1.51)
October 31, 2001 25.93 1.16 1.02 2.18 (1.14)
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006 * 46.62 .22 6.88 7.10 (.34)
October 31, 2005 43.55 .76 6.74 7.50 (.76)
October 31, 2004 34.24 .75 10.04 10.79 (1.47)
October 31, 2003 26.72 1.34 7.60 8.94 (1.31)
October 31, 2002 27.14 1.32 (.06) 1.26 (1.68)
October 31, 2001 26.07 1.38 1.03 2.41 (1.34)
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006 * 47.03 .33 6.90 7.23 (.40)
October 31, 2005 43.90 .88 6.79 7.67 (.87)
October 31, 2004 34.51 .87 10.09 10.96 (1.56)
October 31, 2003 26.89 1.42 7.67 9.09 (1.36)
October 31, 2002 27.31 1.41 (.06) 1.35 (1.77)
October 31, 2001 26.22 1.46 1.03 2.49 (1.40)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- --------------------------------------------------------------------
EMERGING MARKETS FUND
Class C
April 30, 2006 * (.43) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class E
April 30, 2006 * (.43) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class S
April 30, 2006 * (.43) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class C
April 30, 2006 * (4.98) --
October 31, 2005 (3.67) --
October 31, 2004 (.01) --
October 31, 2003 (.11) --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class E
April 30, 2006 * (4.98) --
October 31, 2005 (3.67) --
October 31, 2004 (.01) --
October 31, 2003 (.11) --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class S
April 30, 2006 * (4.98) --
October 31, 2005 (3.67) --
October 31, 2004 (.01) --
October 31, 2003 (.11) --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
168 Financial Highlights
<Table>
<Caption>
% %
$ $ RATIO OF EXPENSES RATIO OF EXPENSES
$ NET ASSET VALUE, % NET ASSETS TO AVERAGE TO AVERAGE
TOTAL END OF TOTAL END OF PERIOD NET ASSETS NET ASSETS
DISTRIBUTIONS PERIOD RETURN(B) (000) NET(C)(E) GROSS(C)
- ---------------------------------------------------------------------------------------------------------------------
(.71) 22.03 36.98 50,693 2.67 2.67
(.05) 16.73 33.98 33,961 2.74 2.76
(.24) 12.52 20.04 20,467 2.83 2.87
-- 10.68 47.58 12,306 3.09 3.09
-- 7.22 4.94 5,194 3.12 3.12
-- 6.89 (24.70) 2,377 3.08 3.09
- ---------------------------------------------------------------------------------------------------------------------
(.82) 22.70 37.55 28,862 1.92 1.92
(.18) 17.25 34.94 18,855 1.99 2.01
(.29) 12.93 20.88 14,169 2.07 2.12
(.01) 10.98 48.39 9,598 2.36 2.37
-- 7.41 5.71 6,478 2.38 2.38
-- 7.01 (24.13) 6,959 2.33 2.33
- ---------------------------------------------------------------------------------------------------------------------
(.86) 22.68 37.72 1,071,636 1.66 1.66
(.23) 17.25 35.27 794,086 1.73 1.76
(.31) 12.94 21.22 549,626 1.83 1.87
(.04) 10.98 48.27 386,560 2.11 2.11
(.02) 7.43 5.91 263,563 2.14 2.14
-- 7.05 (23.89) 273,486 2.09 2.09
- ---------------------------------------------------------------------------------------------------------------------
(5.21) 47.69 15.87 94,909 2.08 2.08
(4.10) 46.08 17.22 81,876 2.10 2.10
(1.22) 43.10 30.97 61,089 2.12 2.12
(1.22) 33.94 33.23 32,784 2.20 2.30
(1.51) 26.52 3.56 15,712 2.19 2.59
(1.14) 26.97 8.41 5,718 2.17 2.17
- ---------------------------------------------------------------------------------------------------------------------
(5.32) 48.40 16.32 47,508 1.33 1.33
(4.43) 46.62 18.09 40,296 1.35 1.35
(1.48) 43.55 32.00 29,436 1.37 1.37
(1.42) 34.24 34.21 16,651 1.43 1.62
(1.68) 26.72 4.27 10,661 1.46 1.82
(1.34) 27.14 9.23 11,415 1.42 1.42
- ---------------------------------------------------------------------------------------------------------------------
(5.38) 48.88 16.47 1,604,597 1.08 1.08
(4.54) 47.03 18.35 1,434,109 1.10 1.10
(1.57) 43.90 32.30 1,171,513 1.11 1.11
(1.47) 34.51 34.58 830,448 1.18 1.18
(1.77) 26.89 4.55 598,133 1.19 1.19
(1.40) 27.31 9.48 607,280 1.17 1.18
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
%
RATIO OF NET
INVESTMENT INCOME %
TO AVERAGE PORTFOLIO
NET ASSETS(C)(E) TURNOVER RATE(B)
- -----------------------------------------
.04 29.25
.29 71.86
.02 82.02
.19 95.13
(1.08) 90.21
(.55) 83.74
- -----------------------------------------
.80 29.25
1.02 71.86
.75 82.02
1.02 95.13
(.29) 90.21
.21 83.74
- -----------------------------------------
1.02 29.25
1.30 71.86
1.00 82.02
1.30 95.13
(.02) 90.21
.44 83.74
- -----------------------------------------
.50 27.73
.95 63.95
1.20 38.04
3.67 46.09
3.74 67.70
4.20 44.50
- -----------------------------------------
.95 27.73
1.71 63.95
1.95 38.04
4.46 46.09
4.54 67.70
4.96 44.50
- -----------------------------------------
1.40 27.73
1.95 63.95
2.23 38.04
4.66 46.09
4.82 67.70
5.19 44.50
- -----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 169
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 INCOME DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
SHORT DURATION BOND FUND
Class C
April 30, 2006 * 18.63 .23 (.09) .14 (.23)
October 31, 2005 19.04 .31 (.40) (.09) (.31)
October 31, 2004 19.01 .19 (.01) .18 (.15)
October 31, 2003 18.98 .31 .06 .37 (.34)
October 31, 2002 19.01 .56 .13 .69 (.72)
October 31, 2001 18.23 .85 .89 1.74 (.96)
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006 * 18.70 .30 (.09) .21 (.30)
October 31, 2005 19.10 .46 (.41) .05 (.44)
October 31, 2004 19.08 .34 (.01) .33 (.31)
October 31, 2003 19.04 .48 .03 .51 (.47)
October 31, 2002 19.02 .77 .06 .83 (.81)
October 31, 2001 18.24 1.02 .85 1.87 (1.09)
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006 * 18.67 .33 (.09) .24 (.33)
October 31, 2005 19.07 .51 (.41) .10 (.49)
October 31, 2004 19.05 .38 (.01) .37 (.35)
October 31, 2003 19.01 .52 .03 .55 (.51)
October 31, 2002 18.99 .80 .08 .88 (.86)
October 31, 2001 18.22 1.07 .83 1.90 (1.13)
- ----------------------------------------------------------------------------------------------------------------------------------
SELECT GROWTH FUND
Class C
April 30, 2006 * 7.45 (.05) .63 .58 --
October 31, 2005 6.85 (.08) .68 .60 --
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 (1) 10.00 (.08) (3.27) (3.35) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006 * 7.76 (.01) .66 .65 --
October 31, 2005 7.08 (.01) .69 .68 --
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 (1) 10.00 (.02) (3.30) (3.32) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006 * 7.91 --(d) .67 .67 --
October 31, 2005 7.19 .01 .71 .72 --
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 (1) 10.00 --(d) (3.29) (3.29) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006 * 7.87 --(d) .66 .66 --
October 31, 2005 7.15 --(d) .72 .72 --
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 (1) 10.00 --(d) (3.29) (3.29) --
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- --------------------------------------------------------------------
SHORT DURATION BOND FUND
Class C
April 30, 2006 * -- --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class E
April 30, 2006 * -- --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
Class S
April 30, 2006 * -- --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 -- --
- --------------------------------------------------------------------
SELECT GROWTH FUND
Class C
April 30, 2006 * -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1) -- --
- --------------------------------------------------------------------
Class E
April 30, 2006 * -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1) -- --
- --------------------------------------------------------------------
Class I
April 30, 2006 * -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1) -- --
- --------------------------------------------------------------------
Class S
April 30, 2006 * -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1) -- --
- --------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
170 Financial Highlights
<Table>
<Caption>
% %
$ $ RATIO OF EXPENSES RATIO OF EXPENSES
$ NET ASSET VALUE, % NET ASSETS TO AVERAGE TO AVERAGE
TOTAL END OF TOTAL END OF PERIOD NET ASSETS NET ASSETS
DISTRIBUTIONS PERIOD RETURN(B) (000) NET(C)(E) GROSS(C)
- ---------------------------------------------------------------------------------------------------------------------
(.23) 18.54 .75 23,962 1.66 1.66
(.32) 18.63 (.50) 30,290 1.65 1.66
(.15) 19.04 .97 38,427 1.63 1.66
(.34) 19.01 1.97 41,644 1.56 1.72
(.72) 18.98 3.73 16,294 1.52 1.70
(.96) 19.01 9.77 1,709 1.52 1.66
- ---------------------------------------------------------------------------------------------------------------------
(.30) 18.61 1.15 25,514 .91 .92
(.45) 18.70 .25 24,851 .90 .91
(.31) 19.10 1.74 23,181 .88 .91
(.47) 19.08 2.70 20,274 .80 .97
(.81) 19.04 4.53 17,516 .77 .96
(1.09) 19.02 10.54 17,685 .77 .91
- ---------------------------------------------------------------------------------------------------------------------
(.33) 18.58 1.28 1,073,264 .66 .66
(.50) 18.67 .51 1,158,439 .65 .66
(.35) 19.07 1.98 1,135,332 .63 .66
(.51) 19.05 2.95 958,064 .56 .72
(.86) 19.01 4.81 599,795 .52 .71
(1.13) 18.99 10.76 401,137 .52 .67
- ---------------------------------------------------------------------------------------------------------------------
-- 8.03 7.79 10,164 2.21 2.26
-- 7.45 8.76 8,149 2.23 2.32
-- 6.85 (.15) 5,942 2.25 2.50
-- 6.85 31.17 3,265 2.20 2.74
-- 5.23 (21.35) 1,341 2.11 2.82
-- 6.65 (33.50) 1,017 2.17 2.97
- ---------------------------------------------------------------------------------------------------------------------
-- 8.41 8.38 4,688 1.34 1.39
-- 7.76 9.60 4,255 1.28 1.40
-- 7.08 .71 5,749 1.36 1.54
-- 7.03 32.39 4,865 1.26 1.79
-- 5.31 (20.51) 2,814 1.16 1.87
-- 6.68 (33.20) 2,714 1.29 2.05
- ---------------------------------------------------------------------------------------------------------------------
-- 8.58 8.47 110,777 .95 1.13
-- 7.91 10.17 112,112 .92 1.08
-- 7.19 1.13 60,006 .95 1.20
-- 7.10 32.71 32,003 .93 1.58
-- 5.35 (20.27) 18,150 .89 1.65
-- 6.71 (32.90) 21,044 .89 1.75
- ---------------------------------------------------------------------------------------------------------------------
-- 8.53 8.39 71,963 1.13 1.18
-- 7.87 10.07 57,324 1.06 1.18
-- 7.15 .99 51,569 1.09 1.27
-- 7.08 32.58 42,421 1.03 1.56
-- 5.34 (20.42) 24,389 .97 1.68
-- 6.71 (32.90) 24,072 .94 1.74
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
%
RATIO OF NET
INVESTMENT INCOME %
TO AVERAGE PORTFOLIO
NET ASSETS(C)(E) TURNOVER RATE(B)
- -----------------------------------------
2.53 35.75
1.65 202.53
1.00 131.57
1.63 187.92
3.08 163.86
4.72 260.94
- -----------------------------------------
3.29 35.75
2.43 202.53
1.76 131.57
2.52 187.92
4.04 163.86
5.48 260.94
- -----------------------------------------
3.54 35.75
2.67 202.53
2.01 131.57
2.70 187.92
4.26 163.86
5.76 260.94
- -----------------------------------------
(1.20) 66.32
(1.15) 127.68
(1.53) 134.00
(1.57) 149.76
(1.53) 212.37
(1.32) 169.36
- -----------------------------------------
(.33) 66.32
(.15) 127.68
(.65) 134.00
(.62) 149.76
(.58) 212.37
(.45) 169.36
- -----------------------------------------
.07 66.32
.12 127.68
(.23) 134.00
(.31) 149.76
(.31) 212.37
(.03) 169.36
- -----------------------------------------
(.12) 66.32
.04 127.68
(.38) 134.00
(.40) 149.76
(.39) 212.37
(.09) 169.36
- -----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 171
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 INCOME DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
SELECT VALUE FUND
Class C
April 30, 2006 * 11.27 --(d) 1.29 1.29 (.02)
October 31, 2005 10.15 (.02) 1.16 1.14 (.01)
October 31, 2004 8.97 (.03) 1.22 1.19 (.01)
October 31, 2003 7.41 (.01) 1.58 1.57 (.01)
October 31, 2002 8.51 (.02) (1.07) (1.09) (.01)
October 31, 2001 (1) 10.00 --(d) (1.48) (1.48) (.01)
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2006 * 11.43 .05 1.32 1.37 (.05)
October 31, 2005 10.28 .09 1.16 1.25 (.09)
October 31, 2004 9.05 .05 1.23 1.28 (.05)
October 31, 2003 7.46 .06 1.58 1.64 (.05)
October 31, 2002 8.53 .06 (1.07) (1.01) (.06)
October 31, 2001 (1) 10.00 .05 (1.48) (1.43) (.04)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2006 * 11.46 .07 1.32 1.39 (.07)
October 31, 2005 10.30 .13 1.17 1.30 (.13)
October 31, 2004 9.07 .10 1.22 1.32 (.09)
October 31, 2003 7.46 .08 1.61 1.69 (.08)
October 31, 2002 8.54 .08 (1.07) (.99) (.09)
October 31, 2001 (1) 10.00 .09 (1.48) (1.39) (.07)
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2006 * 11.44 .06 1.31 1.37 (.06)
October 31, 2005 10.29 .11 1.16 1.27 (.11)
October 31, 2004 9.05 .08 1.24 1.32 (.08)
October 31, 2003 7.45 .07 1.60 1.67 (.07)
October 31, 2002 8.53 .07 (1.07) (1.00) (.08)
October 31, 2001 (1) 10.00 .08 (1.48) (1.40) (.07)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- --------------------------------------------------------------------
SELECT VALUE FUND
Class C
April 30, 2006 * (.64) --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1) -- --
- --------------------------------------------------------------------
Class E
April 30, 2006 * (.64) --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1) -- --
- --------------------------------------------------------------------
Class I
April 30, 2006 * (.64) --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1) -- --
- --------------------------------------------------------------------
Class S
April 30, 2006 * (.64) --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
October 31, 2001 (1) -- --
- --------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
172 Financial Highlights
<Table>
<Caption>
% %
$ $ RATIO OF EXPENSES RATIO OF EXPENSES
$ NET ASSET VALUE, % NET ASSETS TO AVERAGE TO AVERAGE
TOTAL END OF TOTAL END OF PERIOD NET ASSETS NET ASSETS
DISTRIBUTIONS PERIOD RETURN(B) (000) NET(C)(E) GROSS(C)
- ---------------------------------------------------------------------------------------------------------------------
(.66) 11.90 11.83 24,822 2.11 2.12
(.02) 11.27 11.23 21,228 2.18 2.20
(.01) 10.15 13.24 16,834 2.25 2.32
(.01) 8.97 21.19 9,972 2.15 2.42
(.01) 7.41 (12.82) 2,061 2.00 2.40
(.01) 8.51 (14.76) 1,844 2.00 2.64
- ---------------------------------------------------------------------------------------------------------------------
(.69) 12.11 12.45 10,241 1.26 1.26
(.10) 11.43 12.14 8,770 1.25 1.30
(.05) 10.28 14.31 9,167 1.39 1.39
(.05) 9.05 22.01 7,778 1.21 1.48
(.06) 7.46 (11.86) 3,314 1.04 1.43
(.04) 8.53 (14.33) 3,155 1.25 1.85
- ---------------------------------------------------------------------------------------------------------------------
(.71) 12.14 12.60 121,299 .94 .94
(.14) 11.46 12.63 135,759 .86 .91
(.09) 10.30 14.77 102,396 .95 .95
(.08) 9.07 22.60 74,600 .90 1.23
(.09) 7.46 (11.72) 35,169 .79 1.22
(.07) 8.54 (13.92) 28,983 .79 1.48
- ---------------------------------------------------------------------------------------------------------------------
(.70) 12.11 12.43 233,237 1.10 1.10
(.12) 11.44 12.36 198,550 1.07 1.10
(.08) 10.29 14.61 173,635 1.10 1.10
(.07) 9.05 22.53 128,383 1.01 1.28
(.08) 7.45 (11.78) 31,806 .87 1.27
(.07) 8.53 (14.04) 31,288 .86 1.50
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
%
RATIO OF NET
INVESTMENT INCOME %
TO AVERAGE PORTFOLIO
NET ASSETS(C)(E) TURNOVER RATE(B)
- -----------------------------------------
.05 46.68
(.18) 84.74
(.31) 96.07
(.12) 105.71
(.27) 92.95
-- 71.75
- -----------------------------------------
.91 46.68
.78 84.74
.55 96.07
.77 105.71
.70 92.95
.76 71.75
- -----------------------------------------
1.26 46.68
1.14 84.74
1.00 96.07
1.12 105.71
.95 92.95
1.25 71.75
- -----------------------------------------
1.06 46.68
.95 84.74
.84 96.07
1.03 105.71
.86 92.95
1.18 71.75
- -----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 173
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2006 (Unaudited).
(1) For the period January 31, 2001 (commencement of operations) to October
31, 2001.
(2) For the period June 23, 2005 (commencement of operations) to October 31,
2005.
(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 FRIMCo as the investment
adviser and transfer agent.
See accompanying notes which are an integral part of the financial statements.
174 Notes to Financial Highlights
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Frank Russell Investment Company (the "Investment Company" or "FRIC") 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 (the "Board") to issue an
unlimited number of shares of beneficial interest at a $.01 par value per
share.
On or about July 1, 2006, Frank Russell Investment Company expects to change
its name to Russell Investment Company, and Frank Russell Investment
Management Company expects to change its name to Russell Investment
Management Company.
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 at the time 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 last sale price;
- 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, 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.
- 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 of 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 Fund's 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 be
calculated using normal pricing methods. 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.
Notes to Financial Statements 175
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 of the US securities
market (defined in the Fair Value Procedures as the movement by any two of
four major US Indexes greater than a certain percentage) or other significant
event; foreign market holidays if on a daily basis, Fund exposure exceeds 20%
in aggregate (all closed markets combined); a company development; a natural
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, if any, 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 and capital gain distributions, if any, are recorded on
the ex-dividend date. Income distributions are generally declared and paid
according to the following schedule:
<Table>
<Caption>
DECLARED PAYABLE FUNDS
--------------------------------------------------------------------------------------
Quarterly April, July, October and December Equity I,
Equity Q,
Real Estate Securities,
Short Duration Bond,
Fixed Income I,
Fixed Income III and
Select Value Funds
Annually Mid-December International,
Emerging Markets,
Equity II and
Select Growth Funds
</Table>
176 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
Expenses
The Funds will pay their own expenses other than those expressly assumed by
Frank Russell Investment Management Company ("FRIMCo" or "Adviser"). 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 International 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 the
unrealized appreciation on foreign securities for potential capital gains and
repatriation taxes at April 30, 2006. The accrual for capital gains and
repatriation taxes is included in net unrealized appreciation (depreciation)
on investments in the Statement of Asset and
Notes to Financial Statements 177
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 $ 12,126 $ 13,363
Emerging Markets 1,813,192 519,400
</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 and risks that
assist the Funds in meeting their investment strategies.
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, 2006, 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 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.
Loan Agreements
The Fixed Income III Fund may invest in direct debt instruments which are
interests in amounts owed by corporate, governmental, or other borrowers to
lenders or lending syndicates. A Fund's investments in loans may be in the
form of participations in loans or assignments of all or a portion of loans
from third parties. A loan is often administered by a bank or other financial
institution (the "lender") that acts as agent for all holders. The agent
administers the terms of the loan, as specified in the loan agreement. When
investing in a loan participation, a Fund has the right to receive payments
of principal, interest and any fees to which it is entitled only from the
lender selling the loan agreement and only upon receipt by the lender
178 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
of payments from the borrower. A Fund generally has no right to enforce
compliance with the terms of the loan agreement with the borrower. As a
result, a Fund may be subject to the credit risk of both the borrower and the
lender that is selling the loan agreement. When a Fund purchases assignments
from lenders it acquires direct rights against the borrower on the loan. At
the period ended April 30, 2006, there were no unfunded loan commitments in
the Fixed Income III Fund.
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 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. As of April 30, 2006 the Fixed Income III Fund had cash
collateral balances of $102,239 in connection with futures contracts
purchased (sold).
Swap Agreements
The Funds may enter into several different types of agreements including
interest rate, index, credit default and currency swaps.
The Funds may enter into index 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
Notes to Financial Statements 179
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
(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.
The Short Duration Bond, Fixed Income I, Fixed Income III and International
Funds may enter into swap agreements, on either an asset-based or
liability-based basis, depending on whether it is hedging its assets or its
liabilities, and will usually enter into 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 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).
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 an 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 its portfolio or to
protect against any increase in the price of securities it anticipates
purchasing at a later date. The net amount of the excess, if any, of the
Fund's obligations over its 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 Fund's custodian. To
the extent that the Fund enters into swaps on other than a net basis, the
amount maintained in a segregated account will be the full amount of the
Fund's 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.
Investments in Emerging Markets
Investing in emerging markets may involve special risks and considerations
for the Emerging Markets Fund and International 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, 2006, 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 $ 748,793,231 $ 610,983,760
Equity II 520,967,980 589,129,927
Equity Q 767,953,201 722,381,527
International 620,184,889 854,227,560
Fixed Income I 308,756,807 172,998,029
Fixed Income III 251,946,210 175,595,763
</Table>
<Table>
- ----------------------------------------------------------------
<Caption>
FUNDS PURCHASES SALES
Emerging Markets $ 276,411,601 $ 293,574,360
Real Estate
Securities 449,623,873 473,458,002
Short Duration Bond 217,612,212 328,019,837
Select Growth 115,551,305 116,383,127
Select Value 162,981,703 172,488,163
</Table>
180 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 $ 526,079,949 $ 510,831,726
Fixed Income III 284,955,383 296,319,967
Short Duration Bond 107,637,766 112,843,960
</Table>
Written Options Contracts
Transactions in written options contracts for the period ended April 30, 2006
for the following Funds were as follows:
<Table>
<Caption>
INTERNATIONAL FUND FIXED INCOME I FUND
------------------------------------------ ------------------------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2005 21 $ 81,235 272 $ 121,622
Opened 256 1,123,036 652 348,014
Closed (190) (843,637) (49) (19,536)
Expired -- -- (293) (87,984)
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2006 87 $ 360,634 582 $ 362,116
=================== =================== =================== ===================
</Table>
<Table>
<Caption>
FIXED INCOME III FUND EMERGING MARKETS FUND
------------------------------------------ ------------------------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2005 182 $ 174,564 286 $ 723,862
Opened 517 372,580 1,547 2,816,683
Closed (1) (12,825) (1,087) (2,560,738)
Expired (275) (78,689) -- --
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2006 423 $ 455,630 746 $ 979,807
=================== =================== =================== ===================
</Table>
<Table>
<Caption>
SHORT DURATION BOND FUND
------------------------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------------------------------------------------------------------------
Outstanding October 31, 2005 160 $ 321,656
Opened 257 393,965
Closed (1) (25,650)
Expired (2) (17,155)
------------------- -------------------
Outstanding April 30, 2006 414 $ 672,816
=================== ===================
</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. 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 is invested by the securities
lending agent, State Street Bank and Trust Company ("State Street") in
short-term instruments, money market mutual funds and other short-term
investments that 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 a lending 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
Notes to Financial Statements 181
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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, 2006, the non-cash collateral received for the securities on
loan in the following funds was:
<Table>
<Caption>
NON-CASH
COLLATERAL NON-CASH
FUNDS VALUE COLLATERAL HOLDING
----------------------------------------------------------------------------------------------
Pool of US Government
Equity II $ 86,989 securities
Pool of US Government
International 76,911 securities
</Table>
4. RELATED PARTIES
Adviser 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 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
also may invest a portion of the collateral received from the Investment
Company's securities lending program in the Investment Company's Money Market
Fund (one of the Funds of the Investment Company not presented herein). As of
April 30, 2006, $619,147,704 of the Money Market Fund's net assets represents
investment by the Funds presented herein, and $1,122,056,399 represents
investment 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 $36,739,636 and
$2,909,274 respectively, for the period ended April 30, 2006.
<Table>
<Caption>
ANNUAL RATE
FUNDS ADVISER 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 ADVISER 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, 2006 was $724,293.
For the Select Growth Fund, FRIMCo has contractually agreed to waive, at
least until February 28, 2007, 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,
2006 was $47,099. There were no contractual reimbursements for the period
ended April 30, 2006.
For the Select Value Fund, FRIMCo has contractually agreed to waive, at least
until February 28, 2007, 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
182 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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, 2006.
The Adviser does not have the ability to recover amounts waived or reimbursed
from previous periods.
Special Service Charge
Special servicing agreements was entered into in February 1999 by the Adviser
and were approved annually by the Funds' Board of Trustees. The special
servicing agreements were 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
"Underlying Funds," in which the Fund of Funds invest, which includes the
Diversified Equity Fund, Special Growth Fund, Quantitative Equity Fund,
International Securities Fund, Emerging Markets Fund, Real Estate Securities
Fund, Short Duration Bond Fund, Diversified Bond Fund, Multistrategy Bond
Fund, Tax-Managed Large Cap Fund and Tax-Managed Mid & Small Cap Fund. In
accordance with the special servicing agreements, certain expenses from the
operation of the Fund of Funds were borne by the Underlying Funds based on
each Underlying Fund's proportionate share of assets owned by the Fund of
Funds. No Underlying Funds were charged expenses that exceeded the estimated
savings to each respective Underlying Fund. These estimated savings appeared
in the form of reduced transfer agent costs resulting from the elimination of
separate shareholder accounts which were 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 acted as omnibus
accounts combining thousands of individual shareholder accounts into a single
account. This benefited the Underlying Funds, by reducing the number of
shareholder accounts that needed to be maintained, and by the omnibus
accounts' netting out the trades of individual shareholders to a point where
the Fund of Funds only executed one trade each day with each Underlying Fund.
In the event that the financial benefits to the Underlying Funds did not
exceed aggregate expenses of any Fund of Fund, the Adviser reimbursed the
respective Underlying Funds. The Adviser did not have the ability to recover
amounts reimbursed from previous periods. This arrangement was discontinued
on June 30, 2005.
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, 2006, the
Fund's custodian fees were reduced by the following amounts under these
arrangements:
<Table>
<Caption>
AMOUNT
FUNDS PAID
- ---------------------------------------------------------
Equity I $ 2,055
Equity II 1,435
Equity Q 1,568
International 1,358
Fixed Income I 14,601
Fixed Income III 20,450
</Table>
<Table>
- ---------------------------------------------------------
<Caption>
AMOUNT
FUNDS PAID
Emerging Markets $ 4,320
Real Estate Securities 3,322
Short Duration Bond 14,882
Select Growth 222
Select Value 190
</Table>
Transfer Agent
FRIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, FRIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. FRIMCo retains a portion
of this fee for its services provided to the Fund and pays the balance to
unaffiliated agents who assist in providing these services. Total fees for
the Funds presented herein for the six months ended April 30, 2006 were
$5,496,849.
In addition, FRIMCo has contractually agreed to waive, at least until
February 28, 2007, a portion of its transfer agency fees for certain Funds.
The total transfer agent fee waivers for the period ended April 30, 2006 were
as follows:
<Table>
<Caption>
TA FEE
FUND WAIVER AMOUNT
-------------------------------------------------------
Select Growth $ 71,257
</Table>
Notes to Financial Statements 183
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 unaffiliated correspondent brokers. FRS is
a registered broker and investment adviser and an affiliate of FRIMCo. Trades
placed through FRS and its correspondents are used (i) to obtain research
services for FRIMCo to assist it in its capacity as a manager of managers,
(ii) to generate commission rebates to the Funds on whose behalf the trades
were made, (iii) to manage trading associated with changes in managers,
rebalancing across existing managers, cash flows and other portfolio
transitions or (iv) to execute portfolio securities transactions selected by
money managers. Effective January 1, 2006, the Funds began transitioning
trades used to obtain research services and to generate commission rebates
from FRS and LJR (as defined and described more fully below). During the
transition, some of these trades may continue to be executed through FRS. 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 and its correspondents or other brokers only to the
extent that the Funds will receive competitive execution, price and
commissions. In addition, FRIMCo recommends targets for the amount of trading
that money managers allocate through FRS based upon asset class, investment
style and other factors. Research services provided to FRIMCo by FRS or other
brokers include performance measurement statistics, fund analytics systems
and market monitoring systems. Research services will generally be obtained
from unaffiliated third parties at market rates. Research provided to FRIMCo
may benefit the particular Funds generating the trading activity and may also
benefit other Funds within the Investment Company and other funds and clients
managed or advised by FRIMCo or its affiliates. Similarly, the Funds may
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.
Effective January 1, 2006, the Funds began effecting transactions though
Lynch, Jones & Ryan, Inc. ("LJR") and its global network of correspondent
brokers. LJR is a registered broker and is not an affiliate of the Funds or
FRIMCo. Trades placed through LJR and its correspondents are used (i) to
obtain research services for FRIMCo to assist it in its capacity as a manager
of managers and (ii) to generate commission rebates to the Funds on whose
behalf the trades were made. 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 LJR and its
correspondents or other brokers only to the extent that the Funds will
receive competitive execution, price and commissions. In addition, FRIMCo
recommends targets for the amount of trading that money managers allocate
through LJR based upon asset class, investment style and other factors.
Research services provided to FRIMCo by LJR or other brokers include
performance measurement statistics, fund analytics systems and market
monitoring systems. Research services will be generally obtained from
unaffiliated third parties at market rates. Research provided to FRIMCo may
benefit the particular Funds generating the trading activity and may also
benefit other Funds within the Investment Company and other funds and clients
managed or advised by FRIMCo or its affiliates. Similarly, the Funds may
benefit from research provided with respect to trading by those other funds
and clients.
FRS, LJR or other brokers also may rebate to the Funds a portion of
commissions earned on certain trading by the Funds through FRS, LJR and their
correspondents in the form of commission recapture. Commission recapture is
paid solely to those
184 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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, as determined annually in the Soft Dollar Committee budgeting
process.
There was no amount retained by FRS for the period ended April 30, 2006.
Additionally, the Fund paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Adviser.
Accrued fees payable to affiliates as of April 30, 2006 were as follows:
<Table>
<Caption>
FIXED FIXED
EQUITY I EQUITY II EQUITY Q INTERNATIONAL INCOME I INCOME III
---------------------------------------------------------------------------------------------------------------------
Advisory fees $ 658,174 $ 402,856 $ 716,483 $ 1,070,630 $ 280,026 $ 290,492
Administration fees 35,900 17,263 39,068 45,861 33,570 17,429
Distribution fees -- -- -- -- -- --
Shareholder servicing
fees 8,189 7,949 10,443 11,093 6,208 2,012
Transfer agent fees 63,507 45,400 73,475 59,787 35,406 40,922
Trustee fees 2,217 4,169 5,040 5,689 3,570 2,320
----------- ----------- ----------- ----------- ----------- -----------
$ 767,987 $ 477,637 $ 844,509 $ 1,193,060 $ 358,780 $ 353,175
=========== =========== =========== =========== =========== ===========
<Caption>
EMERGING
MARKETS
--------------------------------------
Advisory fees $ 1,059,493
Administration fees 46,067
Distribution fees 29,759
Shareholder servicing
fees 15,515
Transfer agent fees 198,086
Trustee fees 1,914
-----------
$ 1,350,834
===========
</Table>
<Table>
<Caption>
SHORT
REAL ESTATE DURATION SELECT SELECT
SECURITIES BOND GROWTH VALUE
-------------------------------------------------------------------------------------
Advisory fees $ 1,141,785 $ 414,605 $ 126,089 $ 226,408
Administration fees 71,361 46,067 7,739 15,745
Distribution fees 57,168 14,774 5,832 14,448
Shareholder servicing
fees 28,563 10,075 2,865 6,808
Transfer agent fees 256,902 92,134 22,201 56,866
Trustee fees 4,906 5,786 543 1,198
----------- ----------- ----------- -----------
$ 1,560,685 $ 583,441 $ 165,269 $ 321,473
=========== =========== =========== ===========
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company, 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 independent Trustees a retainer of
$52,000 per year, $6,500 ($5,000 prior to January 1, 2006) 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, Nominating
and Governance Committee meeting or Investment 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 Audit Committee
Chair was paid a fee of $12,000 per year and the Nominating and Governance
Committee chair and Investment Committee chair were each paid a fee of $6,000
per year. The chair person of the Board receives an additional $52,000 per
year.
5. FEDERAL INCOME TAXES
At October 31, 2005, 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
----------------------------------------------------------------------------------------------------------------
International $ -- $ -- $ -- $ --
Fixed Income I -- -- -- --
Short Duration Bond -- -- -- --
Select Growth -- -- 2,811,082 14,206,106
Select Value 8,697,269 451,724 2,362,680 362,611
</Table>
Notes to Financial Statements 185
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
FUNDS 10/31/11 10/31/12 10/31/13 TOTALS
----------------------------------------------------------------------------------------------------------------
International $ 4,998,152 $ -- $ -- $ 4,998,152
Fixed Income I -- -- 3,909,179 3,909,179
Short Duration Bond -- -- 10,278,948 10,278,948
Select Growth 263,497 -- -- 17,280,685
Select Value -- -- -- 11,874,284
</Table>
Select Value Fund had a capital loss carryforward of $11,874,284 that it
acquired from the Equity Income Fund and Equity III Fund of which $8,697,269,
$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, 2006, 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 $ 1,368,477,622 $ 713,910,467 $ 1,412,051,821
=================== =================== ===================
Unrealized Appreciation $ 214,360,206 $ 127,932,378 $ 242,969,698
Unrealized Depreciation (19,899,560) (10,802,917) (18,156,852)
------------------- ------------------- -------------------
Net Unrealized Appreciation
(Depreciation) $ 194,460,646 $ 117,129,461 $ 224,812,846
=================== =================== ===================
</Table>
<Table>
<Caption>
INTERNATIONAL FIXED INCOME I FIXED INCOME III EMERGING MARKETS
----------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 2,067,835,593 $ 1,917,550,427 $ 933,163,790 $ 750,147,440
=================== =================== =================== ===================
Unrealized Appreciation $ 465,555,898 $ 3,330,944 $ 3,660,758 $ 432,195,470
Unrealized Depreciation (9,476,484) (32,749,269) (12,463,444) (7,347,856)
------------------- ------------------- ------------------- -------------------
Net Unrealized Appreciation
(Depreciation) $ 456,079,414 $ (29,418,325) $ (8,802,686) $ 424,847,614
=================== =================== =================== ===================
</Table>
<Table>
<Caption>
REAL ESTATE SECURITIES SHORT DURATION BOND SELECT GROWTH SELECT VALUE
-------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 1,245,695,240 $ 1,141,779,485 $ 192,375,494 $ 362,074,629
=================== =================== =================== ===================
Unrealized Appreciation $ 598,355,461 $ 673,045 $ 28,386,681 $ 64,678,467
Unrealized Depreciation (4,608,564) (16,162,602) (3,717,662) (4,120,244)
------------------- ------------------- ------------------- -------------------
Net Unrealized Appreciation
(Depreciation) $ 593,746,897 $ (15,489,557) $ 24,669,019 $ 60,558,223
=================== =================== =================== ===================
</Table>
186 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2006 and October 31, 2005
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
EQUITY I ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 104 221 $ 3,321 $ 6,621
Proceeds from reinvestment of
distributions 51 9 1,565 273
Payments for shares redeemed (121) (210) (3,837) (6,297)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 34 20 1,049 597
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 4,934 8,645 156,272 259,820
Proceeds from reinvestment of
distributions 1,134 245 35,122 7,308
Payments for shares redeemed (2,714) (7,415) (86,512) (222,656)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,354 1,475 104,882 44,472
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 2,620 7,895 83,425 236,439
Proceeds from reinvestment of
distributions 514 74 15,920 2,220
Payments for shares redeemed (649) (672) (20,485) (20,336)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,485 7,297 78,860 218,323
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 5,873 8,792 $ 184,791 $ 263,392
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
EQUITY II ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 115 393 $ 3,834 $ 14,775
Proceeds from reinvestment of
distributions 276 280 8,487 10,503
Payments for shares redeemed (133) (1,816) (4,729) (70,496)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 258 (1,143) 7,592 (45,218)
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 2,095 2,746 69,939 103,743
Proceeds from reinvestment of
distributions 3,732 2,231 115,212 83,814
Payments for shares redeemed (3,616) (9,217) (127,087) (354,333)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,211 (4,240) 58,064 (166,776)
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 171 279 5,696 10,549
Proceeds from reinvestment of
distributions 949 576 29,288 21,634
Payments for shares redeemed (149) (1,991) (5,308) (78,873)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 971 (1,136) 29,676 (46,690)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 3,440 (6,519) $ 95,332 $ (258,684)
================= ================= ================= =================
</Table>
Notes to Financial Statements 187
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
EQUITY Q ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 120 261 $ 4,412 $ 9,027
Proceeds from reinvestment of
distributions 36 13 1,301 465
Payments for shares redeemed (86) (429) (3,163) (14,801)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 70 (155) 2,550 (5,309)
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 3,948 7,174 145,606 247,602
Proceeds from reinvestment of
distributions 802 347 28,965 11,995
Payments for shares redeemed (3,186) (10,375) (117,299) (359,044)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,564 (2,854) 57,272 (99,447)
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 1,314 3,055 48,302 105,804
Proceeds from reinvestment of
distributions 296 123 10,691 4,261
Payments for shares redeemed (521) (3,990) (19,283) (137,390)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,089 (812) 39,710 (27,325)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,723 (3,821) $ 99,532 $ (132,081)
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
INTERNATIONAL ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 105 224 $ 4,694 $ 8,539
Proceeds from reinvestment of
distributions 15 18 659 661
Payments for shares redeemed (125) (226) (5,698) (8,801)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (5) 16 (345) 399
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 3,272 7,381 147,142 282,241
Proceeds from reinvestment of
distributions 448 492 19,185 18,116
Payments for shares redeemed (3,285) (6,054) (146,396) (232,553)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 435 1,819 19,931 67,804
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 1,602 1,984 68,132 76,142
Proceeds from reinvestment of
distributions 241 231 10,306 8,518
Payments for shares redeemed (7,157) (1,677) (318,267) (63,995)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (5,314) 538 (239,829) 20,665
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (4,884) 2,373 $ (220,243) $ 88,868
================= ================= ================= =================
</Table>
188 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
FIXED INCOME I ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 192 402 $ 3,985 $ 8,595
Proceeds from reinvestment of
distributions 28 75 580 1,577
Payments for shares redeemed (118) (307) (2,439) (6,532)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 102 170 2,126 3,640
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 5,279 10,527 109,337 223,287
Proceeds from reinvestment of
distributions 716 1,952 14,741 41,098
Payments for shares redeemed (5,567) (8,864) (115,331) (188,125)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 428 3,615 8,747 76,260
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 8,086 6,643 167,679 141,569
Proceeds from reinvestment of
distributions 505 932 10,385 19,628
Payments for shares redeemed (486) (1,398) (10,082) (29,605)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 8,105 6,177 167,982 131,592
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 8,635 9,962 $ 178,855 $ 211,492
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
FIXED INCOME III ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 144 306 $ 1,485 $ 3,272
Proceeds from reinvestment of
distributions 17 24 180 252
Payments for shares redeemed (71) (143) (739) (1,522)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 90 187 926 2,002
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 14,811 22,321 154,041 236,687
Proceeds from reinvestment of
distributions 1,278 1,827 13,203 19,196
Payments for shares redeemed (5,829) (13,578) (60,497) (144,251)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 10,260 10,570 106,747 111,632
================= ================= ================= =================
Class Y
Proceeds from shares sold 354 3,827 3,695 41,100
Proceeds from reinvestment of
distributions 103 68 1,060 720
Payments for shares redeemed (53) (35) (548) (374)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 404 3,860 4,207 41,446
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 10,754 14,617 $ 111,880 $ 155,080
================= ================= ================= =================
</Table>
Notes to Financial Statements 189
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
EMERGING MARKETS ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 395 720 $ 7,754 $ 10,819
Proceeds from reinvestment of
distributions 79 6 1,405 79
Payments for shares redeemed (203) (330) (3,997) (4,983)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 271 396 5,162 5,915
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 289 368 5,852 5,846
Proceeds from reinvestment of
distributions 50 13 907 190
Payments for shares redeemed (161) (384) (3,251) (6,138)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 178 (3) 3,508 (102)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 5,795 9,775 115,529 151,220
Proceeds from reinvestment of
distributions 2,101 632 38,232 9,268
Payments for shares redeemed (6,678) (6,853) (134,377) (107,297)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,218 3,554 19,384 53,191
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,667 3,947 $ 28,054 $ 59,004
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
REAL ESTATE SECURITIES ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 196 529 $ 9,124 $ 23,052
Proceeds from reinvestment of
distributions 205 135 8,969 5,811
Payments for shares redeemed (188) (304) (8,752) (13,369)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 213 360 9,341 15,494
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 145 398 6,826 17,861
Proceeds from reinvestment of
distributions 103 73 4,592 3,199
Payments for shares redeemed (130) (283) (6,206) (12,674)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 118 188 5,212 8,386
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 3,677 8,037 174,718 355,555
Proceeds from reinvestment of
distributions 3,452 1,955 155,037 85,775
Payments for shares redeemed (4,793) (6,187) (226,321) (277,213)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,336 3,805 103,434 164,117
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,667 4,353 $ 117,987 $ 187,997
================= ================= ================= =================
</Table>
190 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
SHORT DURATION BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 130 617 $ 2,422 $ 11,614
Proceeds from reinvestment of
distributions 16 27 302 502
Payments for shares redeemed (480) (1,036) (8,938) (19,514)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (334) (392) (6,214) (7,398)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 170 320 3,169 6,052
Proceeds from reinvestment of
distributions 20 27 377 521
Payments for shares redeemed (148) (232) (2,756) (4,389)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 42 115 790 2,184
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 6,138 16,712 114,703 315,510
Proceeds from reinvestment of
distributions 980 1,504 18,206 28,236
Payments for shares redeemed (11,399) (15,698) (213,078) (296,234)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (4,281) 2,518 (80,169) 47,512
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (4,573) 2,241 $ (85,593) $ 42,298
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
SELECT GROWTH ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 274 527 $ 2,173 $ 3,803
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (102) (300) (808) (2,175)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 172 227 1,365 1,628
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 39 110 318 810
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (29) (375) (239) (2,825)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 10 (265) 79 (2,015)
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 2,457 7,135 20,808 54,091
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (3,724) (1,314) (31,035) (9,983)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (1,267) 5,821 (10,227) 44,108
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,443 3,690 20,515 27,958
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (1,291) (3,612) (10,755) (27,581)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,152 78 9,760 377
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 67 5,861 $ 977 $ 44,098
================= ================= ================= =================
</Table>
Notes to Financial Statements 191
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
SELECT VALUE ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 220 599 $ 2,526 $ 6,615
Proceeds from reinvestment of
distributions 108 3 1,204 31
Payments for shares redeemed (127) (375) (1,470) (4,176)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 201 227 2,260 2,470
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 84 195 979 2,201
Proceeds from reinvestment of
distributions 47 7 532 79
Payments for shares redeemed (52) (326) (603) (3,702)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 79 (124) 908 (1,422)
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 1,109 3,950 12,952 44,387
Proceeds from reinvestment of
distributions 701 123 7,939 1,384
Payments for shares redeemed (3,661) (2,165) (41,806) (24,171)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (1,851) 1,908 (20,915) 21,600
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 3,077 5,202 35,953 58,345
Proceeds from reinvestment of
distributions 1,037 168 11,717 1,876
Payments for shares redeemed (2,216) (4,888) (25,660) (55,329)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,898 482 22,010 4,892
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 327 2,493 $ 4,263 $ 27,540
================= ================= ================= =================
</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
Investment Company is 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 Investment Company's 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 20, 2006 and may be renewed at that time. The Funds did
not have any drawdowns for the period ended April 30, 2006.
192 Notes to Financial Statements
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
8. RECORD OWNERSHIP
As of April 30, 2006, the following table includes shareholders of record
with greater than 10% of the total outstanding shares of each respective
Fund:
<Table>
<Caption>
FUNDS # OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Equity I 1 32.4
Equity II 1 33.8
Equity Q 1 35.3
International 1 36.5
Fixed Income I 1 17.9
Fixed Income III 1 46.7
Emerging Markets 3 48.1
Real Estate Securities 2 31.2
Short Duration Bond 3 66.0
Select Growth 1 34.3
Select Value 1 30.5
</Table>
9. RESTRICTED SECURITIES
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.
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. Restricted securities are generally considered to be illiquid.
The following table lists restricted securities held by a Fund that are
illiquid. The following table does not include (1) securities deemed liquid
by FRIMCo or a money manager pursuant to Board approved policies and
procedures or (2) illiquid securities that are not restricted securities as
designated on the Fund's Schedule of Investments.
<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 - 0.3%
Aames Mortgage Investment Trust 09/08/05 1,236,991 99.98 1,237 1,237
Aiful Corp. 08/03/05 300,000 98.67 296 289
ASIF Global Financing 05/18/05 340,000 97.91 333 329
DG Funding Trust 11/04/03 94 10,537.14 990 999
Mastr Reperforming Loan Trust 03/09/05 764,477 102.34 782 759
Rabobank Capital Funding II 05/23/05 20,000 101.80 20 19
Resona Preferred Global Securities
Cayman, Ltd. 07/20/05 300,000 100.90 303 308
Shinsei Finance Cayman, Ltd. 02/16/06 400,000 100.00 400 388
--------------
4,328
==============
</Table>
Notes to Financial Statements 193
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND - % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
-----------------------------------------------------------------------------------------------------------------------------
Fixed Income III Fund - 0.4%
DG Funding Trust 11/04/03 59 10,537.12 622 627
GT Group Telecom, Inc. 01/27/00 450 49.90 22 --
Pemex Project Funding Master Trust 01/26/06 380,000 99.17 377 359
Rabobank Capital Funding II 11/14/03 280,000 101.17 283 266
Resona Preferred Global Securities
Cayman, Ltd. 07/25/05 1,010,000 104.13 1,052 1,038
Russia Paris Club Participant 04/06/04 16,851,870 0.82 138 148
Shinsei Finance Cayman, Ltd. 02/16/06 375,000 100.08 375 364
--------------
2,802
==============
International Fund - 0.1%
Lotte Shopping Co. 01/27/06 58,871 20.82 1,225 1,230
==============
Emerging Markets Fund - 0.1%
Holcim Ecuador SA 07/24/96 10,500 12.67 133 383
Lotte Shopping Co. 01/27/06 63,719 21.08 1,343 1,331
--------------
1,714
==============
Short Duration Bond Fund - 0.2%
DG Funding Trust 11/04/03 219 10,537.12 2,308 2,326
==============
</Table>
Illiquid securities and restricted securities may be priced by the Funds
using fair value procedures approved by the Board of Trustees.
194 Notes to Financial Statements
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
(the "FRIMCo Agreement") and the portfolio management contract with each Money
Manager of the Funds (collectively, the "portfolio management contracts") at a
meeting held on April 18, 2006. During the course of a year, the Trustees
receive 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 Independent Trustees,
with the advice and assistance of independent counsel, also requested and the
Board 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 Independent Trustees; (2) information (the
"Third-Party Information") received from an independent, nationally recognized
provider of investment company information comparing the performance of each of
the Funds and their respective 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 (3) an analysis of the Third-Party Information prepared by FRIMCo
(the "FRIMCo Analysis" and, with the other information requested by the
Independent Trustees or provided by FRIMCo in connection with the Board's
consideration of the portfolio management contracts, the "Agreement Renewal
Information") addressing, among other things, performance and expense
differentials between certain Funds and their respective Comparable Funds. The
Independent Trustees also received a memorandum from independent counsel
discussing the legal standards for their consideration of the proposed
continuances.
On April 17, 2006, the Independent Trustees met in person to review the
Agreement Renewal Information in a private session with independent counsel at
which no representatives of FRIMCo or management were present. At the April 18
meeting of the Board of Trustees, the Board, including the Independent Trustees,
reviewed the proposed continuance of the FRIMCo Agreement and the portfolio
management contracts with management and independent counsel to the Independent
Trustees. Following this review, but prior to voting, the Independent Trustees
again met in a private session with their independent counsel to evaluate
additional information and analysis received from FRIMCo and management at the
Board meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, 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. FRIMCo has engaged multiple
Money Managers for all Funds.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the FRIMCo Agreement for determining, implementing and maintaining the
investment program for each Fund. Assets of each Fund have been allocated among
the multiple Money Managers selected by FRIMCo, subject to Board approval, for
that Fund. FRIMCo manages directly a portion of certain Fund's assets as
described below and otherwise exercises investment discretion over the portion
of each Fund's assets that FRIMCo determines not to allocate to the money
managers and for each Fund's cash reserves by selecting the individual portfolio
securities for those portions of assets. FRIMCo may also directly manage
portions of a Fund during transitions between 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 to each Money
Manager; supervising compliance by each Money Manager with each Fund's
investment objective 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
Basis for Approval of Investment Advisory Contracts 195
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
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 and other public
disclosures 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.
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 strategy of each such Fund selected by
shareholders in purchasing their shares.
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 in evaluating renewal of the FRIMCo Agreement,
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 expenses incurred by the Fund; and
5. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from each Fund.
At the April 18 Board meeting, FRIMCo and management reviewed the reasonableness
of the Funds' investment advisory fees. In discussing whether the Funds'
performance supported these fees, FRIMCo noted differences between the
investment strategies of certain Funds and their respective Comparable Funds in
pursuing their investment objectives, including strategies which seek to achieve
a lower tracking error (i.e. the difference, whether positive or negative,
between the return of a fund and its benchmark) and resulting lower return
volatility than Comparable Funds. According to FRIMCo, these strategies may be
expected to result, and for certain Funds during the periods covered by the
Third-Party Information did result, in lower relative performance than that of
some of their respective Comparable Funds. FRIMCo stated that the strategies
pursued by the Funds are intended to result in less volatile, more moderate
returns relative to each Fund's performance benchmark rather than more volatile,
more extreme returns that its Comparable Funds may experience over time.
On the basis of the Agreement Renewal Information, including the FRIMCo
Analysis, and other information previously received by the Board from FRIMCo
during the course of the year or presented at the Board meeting by FRIMCo, the
Board, in respect of each Fund, found the advisory fee charged by FRIMCo to be
reasonable in light of the nature, scope and quality of the services provided to
the Funds, after giving effect to waivers and/or reimbursements and considering
differences in the composition and investment strategies of their respective
Comparable Funds. The Board also determined that the relative expense ratio of
each Fund was comparable to those of its Comparable Funds; FRIMCo's methodology
of allocating expenses of operating funds in the complex was reasonable; and
FRIMCo's profitability with respect to each Fund was not excessive in light of
the nature, scope and quality of the services provided by FRIMCo.
The Board concluded that the performance of the Funds supported continuation of
the FRIMCo Agreement, again based upon the Agreement Renewal Information,
including the FRIMCo Analysis, and other information previously received by the
Board from FRIMCo during the course of the year or presented at the Board
meeting by FRIMCo. In evaluating performance, the Board considered each Fund's
absolute performance and its performance relative to appropriate benchmarks and
indices and its Comparable Funds. In evaluating the Funds' performance, the
Board also considered FRIMCo's investment strategy of managing the Funds in a
risk aware manner.
196 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
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 February 28, 2006 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 the Funds. 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.
In voting to approve the continuation of the FRIMCo Agreement on its current
terms and conditions for each Fund, the Board, after considering the foregoing
and other relevant factors, determined that continuation of the FRIMCo Agreement
was in the best interests of the Funds and their respective shareholders.
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 FRIMCo or Russell Fund Distributors, Inc., the Funds' underwriter; 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 has advised the Board that it does not regard Money Manager
profitability as relevant to its evaluation of the portfolio management
contracts 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 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
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 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 best interests of the Fund and its shareholders.
During 2005 and 2006, the Trustees received proposals from FRIMCo to manage
directly approximately up to 10% of the assets of the Equity I Fund, the Equity
Q Fund and the International Fund (each a "Participating Fund") utilizing a
"select holdings strategy" pursuant to the terms of the FRIMCo Agreement, the
actual allocation to be determined by each Participating Fund's FRIMCo portfolio
manager. Under this strategy, FRIMCo analyzes the holdings of a Participating
Fund's Money Managers to identify particular stocks that are concurrently
overweighted by 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 of a Participating Fund. Implementation of
this strategy includes periodic rebalancing of the Participating Fund's
holdings. In connection with FRIMCo's proposals, the Trustees received and
considered information from FRIMCo regarding the potential enhancements to the
Participating Fund's performance based upon FRIMCo's 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. FRIMCo has advised the Board that the select
holdings strategy has been implemented for the Equity I and Equity Q Funds,
although a reasonable period of time is needed to evaluate fairly its impact on
those Participating Funds' performance, and is expected to be implemented in the
International Fund in the second quarter of 2006. Based upon the information
received from FRIMCo during 2005 and 2006 in connection with its select holdings
strategy
Basis for Approval of Investment Advisory Contracts 197
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
proposals, the Agreement Renewal Information and additional discussion at the
April 18 meeting concerning the select holdings strategy, the Board in the case
of the Participating Funds concluded that the investment advisory fees paid to
FRIMCo by each such Fund under the FRIMCo Agreement in connection with the
select holdings strategy continue to be reasonable in light of the nature and
anticipated quality of the investment advisory services to be rendered by
FRIMCo.
In their deliberations, the Trustees did not identify any particular information
as to the FRIMCo Agreement 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.
198 Basis for Approval of Investment Advisory Contracts
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
As a courtesy to our Fund shareholders, a complete unaudited schedule of
investments is made available generally no later than 60 days after the end of
the first and third quarters of each fiscal year. These reports are available
(i) free of 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.
The Board has delegated to FRIMCo, as FRIC's investment adviser, the primary
responsibility for monitoring, evaluating and voting proxies solicited by or
with respect to issuers of securities in which assets of the Funds may be
invested. FRIMCo has established a proxy voting committee ("Committee") and has
adopted written proxy voting policies and procedures ("P&P") and proxy voting
guidelines ("Guidelines"). The Funds maintain a Portfolio Holdings Disclosure
Policy that governs the timing and circumstances of disclosure to shareholders
and third parties of information regarding the portfolio investments held by a
Fund. A description of the P&P, Guidelines and Portfolio Holdings Disclosure
Policy are contained in the Funds' Statement of Additional Information ("SAI").
The SAI is available (i) free of charge, upon request, by calling the Fund at
(800) 787-7354, (ii) at www.russell.com, and (iii) on the Securities and
Exchange Commission's website at www.sec.gov.
Shareholder Requests for Additional Information 199
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2006 (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
- ----------------------------------------------------------------------------------------------------------------------------
*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"))
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
**Thaddas L. Alston Trustee since Appointed until - Senior Vice President, Larco 39 None
Born April 7, 2006 successor is Investments, Ltd.
1945 duly elected
and qualified
909 A Street
Tacoma,
Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - President, Anderson 39 None
Born October 15, 1984 successor is Management Group LLC
1931 duly elected (private investments
Chairman of the and qualified consulting)
909 A Street Nominating and - February 2002 to June 2005,
Tacoma, Washington Governance Appointed until Lead Trustee, FRIC and RIF
98402-1616 Committee since successor is
2006 duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Phillips is also an officer and/or director of one or more affiliates of
FRIC and RIF and is therefore an interested trustee.
** Mr. Alston was elected to the Board of Trustees effective May 1, 2006.
200 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee, WM
Born January 22, 2000 successor is Blake, P.S. (accounting Group of Funds
1954 duly elected services) (investment
Chairperson and qualified - Director and Chairman of the company);
909 A Street since 2005 Audit Committee, Avista - Director,
Tacoma, Washington Annual Corp. Avista Corp
98402-1616 - Trustee and Chairman of the
Operations and Distribution
Committee, WM Group of Funds
- February 2002 to June 2005,
Chairman of the Audit
Committee, FRIC and RIF
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 None
Born June 6, 1946 2003 successor is Vice President and Chief
duly elected Financial Officer, Waddell &
909 A Street Chairman of and qualified Reed Financial, Inc.
Tacoma, Washington Audit Committee - 2003, Retired
98402-1616 since 2005 Appointed until - 2001-2003, Vice President
successor is and Chief Financial Officer,
duly elected Janus Capital Group Inc.
and qualified - 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
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 39 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected 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
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack Thompson, Trustee since Appointed until - September 2003 to present, 39 - Director, Sparx
Born March 21, 1949 2005 successor is Independent Board Chair and Japan Fund
duly elected Chairman of the Audit
909 A Street and qualified Committee, Sparx Japan Fund
Tacoma, Washington - May 1999 to May 2003,
98402-1616 President, Chief Executive
Officer and Director, Berger
Financial Group, LLC
- May 1999 to May 2003,
President and Trustee,
Berger Funds
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Mr. Michael Phillips is the Chairman of the Board of Frank Russell Company which
controls FRIMCo, the investment adviser of the Funds. He is also an Interested
Trustee of the Funds. On May 26, 2005, Mr. Phillips became a director of Simpson
Investment Company, a privately held company. Mr. Raymond P. Tennison, Jr., an
Independent Trustee of the Funds is the President of Simpson Investment Company.
Disclosure of Information about Fund Directors 201
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 2002, Director,
1943 duly elected Smith Barney Fundamental
Chairperson of and qualified Value Fund
909 A Street the Investment
Tacoma, Washington Committee since Appointed until
98402-1616 2006 successor is
duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
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
1999 to institutional investors
909 A Street ("FRC"));
Tacoma, Washington and FRIMCo
98402-1616 - Chairman Emeritus, FRIC and
RIF; Frank Russell
Securities, Inc.
(broker-dealer and
investment adviser ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
202 Disclosure of Information about Fund Directors
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 39 None
Born October 6, since 2006 - Trustee of FRIC and RIF
1930 until 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
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>
Disclosure of Information about Fund Directors 203
FRANK RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2006
(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 Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2002, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Until successor - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, FRIMCo
Officer since qualified by - Chairman of the Board, President and CEO, RFD
909 A Street 2004 Trustees - Chairman of the Board and President, Russell
Tacoma, Washington Insurance Agency, Inc. (insurance agency ("RIA"))
98402-1616 - Until 2004, Managing Director of Individual Investor
Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, FRIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, FRIMCo, FRTC and RFD
909 A Street 1998 Trustees - Treasurer and Principal Accounting Officer, SSgA
Tacoma, Washington Funds
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 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary since Until successor - General Counsel and Managing Director of Law and
Born October 8, 1941 1994 is chosen and Government Affairs, Secretary, FRC
qualified by
909 A Street Trustees
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
204 Disclosure of Information about Fund Directors
INSTITUTIONAL FUNDS
FRANK RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, Ph.D.
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
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 JUNE 1, 2006
Equity I Fund
AllianceBernstein L.P., New York, NY
Ark Asset Management Co., Inc., New York, NY
Institutional Capital Corporation, Chicago, IL
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
PanAgora Asset Management, Inc., Boston, MA
Tygh Capital Management, Inc., Portland, OR
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
AllianceBernstein L.P., New York, NY
AQR Capital Management, LLC, Greenwich, CT
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
AllianceBernstein L.P., New York, NY
Arrowstreet Capital, Limited Partnership, Cambridge, MA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
Harding Loevner Management, L.P., Boston, MA
T. Rowe Price International, Inc., Baltimore, MD
Manager, Money Managers and Service Providers 205
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
Western Asset Management Company Limited,
London, England
Fixed Income III Fund
Bear Stearns Asset Management Inc., New York, NY
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Goldman Sachs Asset Management, L.P., New York, NY
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
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Fuller & Thaler Asset Management, Inc., San Mateo, CA
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.
206 Manager, Money Managers and Service Providers
(This page intentionally left blank)
INSTITUTIONAL FUNDS
2006 SEMIANNUAL REPORT
(FRANK RUSSELL LOGO)
Frank Russell Investment Company
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com
On or about July 1, 2006, Frank Russell Investment Company expects to change its
name to Russell Investment Company, and Frank Russell Investment Management
Company expects to change its name to Russell Investment Management Company.
36-08-068 (1 04/06)
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. [NOT APPLICABLE]
ITEM 6. [SCHEDULES OF INVESTMENTS ARE INCLUDED AS PART OF THE REPORT TO
STOCKHOLDERS FILED UNDER ITEM 1 OF THIS FORM]
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 control
over financial reporting that occurred during the period covered by
this report that has materially affected or is likely to materially
affect Registrant's internal control over financial reporting.
ITEM 12. EXHIBIT LIST
(a) Certification for principal executive officer of Registrant as
required by Rule 30a-2(a) under the Act and certification for principal
financial officer of Registrant as required by Rule 30a-2(a) 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
President, Principal Executive Officer and Chief Executive Officer
Date: June 21, 2006
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
President, Principal Executive Officer and Chief Executive Officer
Date: June 21, 2006
By: /s/ Mark E. Swanson
----------------------------------------------------------------------------
Mark E. Swanson
Principal Financial Officer, Principal Accounting Officer and Treasurer
Date: June 21, 2006