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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
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
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, 2006 to April 30, 2007
This Amendment to Form N-CSR is being filed solely to include some new Funds and
Classes that were inadvertently omitted from the Series and Classes Summary in
the submission header. The N-CSR was originally filed on Thursday June 28, 2007
(Accession number 0000950134-07-014357) These Funds and Classes were:
Series ID: S000015554
Series Name: Global Equity Fund
Class ID: C000042374 Class Name: Class S
Class ID: C000042372 Class Name: Class C
Class ID: C000042373 Class Name: Class E
Class ID: C000042371 Class Name: Class A
Series ID: S000001595
Series Name: Tax-Managed Global Equity Fund
Class ID: C000004320 Class Name: Class E
Series ID: S000001568
Series Name: Diversified Equity Fund
Class ID: C000043463 Class Name: Class A
Series ID: S000001569
Series Name: Emerging Markets Fund
Class ID: C000043464 Class Name: Class A
Series ID: S000001579
Series Name: Real Estate Securities Fund
Class ID: C000043465 Class Name: Class A
Series ID: S000001590
Series Name: Special Growth Fund
Class ID: C000043466 Class Name: Class A
Series ID: S000001597
Series Name: International Securities Fund
Class ID: C000043467 Class Name: Class A
Series ID: S000001598
Series Name: Multistrategy Bond Fund
Class ID: C000043468 Class Name: Class A
Series ID: S000001600
Series Name: Quantitative Equity Fund
Class ID: C000043469 Class Name: Class A
Series ID: S000001601
Series Name: Short Duration Bond Fund
Class ID: C000043470 Class Name: Class A
MONEY MARKET FUNDS
2007 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, 2007
(RUSSELL LOGO)
Russell Investment Company
Russell Investment Company is a series investment company with 35 different
investment portfolios referred to as Funds. These financial statements report on
three of these Funds.
Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Russell Investment Company
Money Market Funds
Semiannual Report
April 30, 2007 (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
Statements 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>
Russell Investment Company - Money Market Funds.
Copyright (c) Russell Investment Group 2007. 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 changed its name to
Russell Investment Company ("RIC"). RIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Russell Investment Management Company
("RIMCo"). Effective July 1, 2006 RIMCo changed its name from Frank 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.
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,025.80 $ 1,023.60
Expenses Paid During
Period* $ 1.21 $ 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,026.30 $ 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
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES - 37.7%
Barclays Bank PLC 75,000 5.385 05/06/08 75,000
Bear Stearns Cos., Inc. (The) (E) 100,000 5.423 01/03/50 100,000
BNP Paribas (E) 60,000 5.330 05/18/07 60,000
BNP Paribas (E) 39,000 5.330 08/17/07 39,000
Caterpillar Financial Services Corp. (E) 25,000 5.430 08/20/07 25,008
Goldman Sachs Group, Inc. (E) 75,000 5.460 05/11/07 75,003
Goldman Sachs Group, Inc. (E) 45,840 5.474 07/02/07 45,853
Goldman Sachs Group, Inc. (E) 15,000 5.445 09/14/07 15,000
HSBC Bank USA (E) 20,000 5.420 09/21/07 20,008
HSBC Finance Corp. (E) 57,150 5.505 07/27/07 57,173
HSBC Finance Corp. (E) 100,000 5.390 10/04/07 100,032
Lehman Brothers Holdings, Inc. (E) 110,000 5.330 06/26/07 110,000
Lehman Brothers Holdings, Inc. (E) 19,000 5.380 04/02/08 19,008
Merrill Lynch & Co., Inc. (E) 18,000 5.325 05/29/07 18,000
Merrill Lynch & Co., Inc. (E) 40,000 5.385 06/15/07 40,003
Merrill Lynch & Co., Inc. (E) 36,000 5.470 08/27/07 36,014
Merrill Lynch & Co., Inc. (E) 36,000 5.485 10/19/07 36,026
Merrill Lynch & Co., Inc. (E) 55,000 5.300 04/18/08 55,000
Metropolitan Life Insurance Co. (E) 100,000 5.426 10/15/07 100,000
Metropolitan Life Insurance Co. (E) 75,000 5.430 11/12/07 75,000
Metropolitan Life Global Funding (E)(A) 72,628 5.420 10/05/07 72,657
Morgan Stanley (E) 62,935 5.480 07/27/07 62,958
Morgan Stanley (E) 93,361 5.484 01/18/08 93,461
Morgan Stanley (E) 90,000 5.390 02/01/08 90,000
Morgan Stanley (E) 25,000 5.380 03/07/08 25,016
New York Life Capital Corp. (E) 90,000 5.440 05/16/07 90,000
New York Life Capital Corp. (E) 50,000 5.440 11/16/07 50,000
Principal Life Income Funding (E) 30,800 5.310 11/15/07 30,796
Protective Life Insurance Co. (E) 50,000 5.510 02/23/08 50,000
Protective Life Secured Trust (E) 55,000 5.436 01/14/08 55,040
Royal Bank of Scotland PLC (E) 13,700 5.350 12/21/07 13,703
Societe Generale (NY) (E) 50,000 5.458 06/04/07 50,000
Tango Finance Corp. (E) 50,000 5.340 05/15/07 50,000
Tango Finance Corp. (E) 60,000 5.300 09/10/07 59,998
Wachovia Corp. (E) 5,500 5.410 07/20/07 5,501
Wachovia Corp. (E) 12,880 5.435 07/20/07 12,884
Westpac Banking Corp. (E) 100,000 5.420 05/25/07 100,006
------------
TOTAL CORPORATE BONDS AND NOTES (amortized cost $2,013,148) 2,013,148
------------
REGISTERED INVESTMENT COMPANY FUNDS - 0.0%
Merrill Lynch Premier Institutional Fund 361,495 361
Reserve Primary Fund Class Institutional 43 --
------------
TOTAL REGISTERED INVESTMENT COMPANY FUNDS (amortized cost
$361) 361
------------
DOMESTIC COMMERCIAL PAPER - 46.2%
BTM Capital Corp. 30,000 5.280 05/15/07 29,938
BTM Capital Corp. 3,000 5.280 05/17/07 2,993
BTM Capital Corp. 9,000 5.280 05/22/07 8,972
BTM Capital Corp. 30,000 5.280 06/11/07 29,820
</Table>
4 Money Market Fund
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
BTM Capital Corp. 40,000 5.290 06/25/07 39,678
BTM Capital Corp. 35,000 5.290 06/27/07 34,708
Central American Bank for Economic Integration 20,000 5.255 05/29/07 19,918
Central American Bank for Economic Integration 20,000 5.255 06/01/07 19,909
Citigroup Funding, Inc. 55,000 5.300 05/01/07 55,000
Citigroup Funding, Inc. 110,000 5.230 05/10/07 109,855
Citigroup Funding, Inc. 50,000 5.290 05/21/07 49,853
Co-Op Association of Tractor Dealers - Series B 10,000 5.260 05/15/07 9,980
Co-Op Association of Tractor Dealers - Series B 7,997 5.280 05/22/07 7,972
Co-Op Association of Tractor Dealers - Series B 1,020 5.270 06/08/07 1,014
Co-Op Association of Tractor Dealers - Series B 1,572 5.290 06/11/07 1,563
Co-Op Association of Tractor Dealers - Series B 10,736 5.280 06/18/07 10,660
Co-Op Association of Tractor Dealers - Series B 10,000 5.270 06/20/07 9,927
Co-Op Association of Tractor Dealers - Series B 2,042 5.250 06/22/07 2,027
Co-Op Association of Tractor Dealers - Series B 27,508 5.280 06/26/07 27,282
Co-Op Association of Tractor Dealers - Series B 15,033 5.280 07/02/07 14,896
Co-Op Association of Tractor Dealers - Series B 12,014 5.270 07/12/07 11,887
Co-Op Association of Tractor Dealers - Series B 12,500 5.250 07/17/07 12,360
Co-Op Association of Tractor Dealers - Series B 8,138 5.280 07/18/07 8,045
Co-Op Association of Tractor Dealers - Series B 8,118 5.260 08/02/07 8,008
Co-Op Association of Tractor Dealers - Series B 6,495 5.250 08/14/07 6,396
Co-Op Association of Tractor Dealers - Series B 3,091 5.180 09/24/07 3,026
Dealers Capital Access Trust 10,450 5.280 05/04/07 10,445
Dealers Capital Access Trust 5,068 5.300 05/08/07 5,063
Dealers Capital Access Trust 18,000 5.260 05/11/07 17,974
Dealers Capital Access Trust 9,895 5.260 05/18/07 9,870
Dealers Capital Access Trust 26,000 5.260 05/25/07 25,909
Dealers Capital Access Trust 12,053 5.290 05/25/07 12,010
Dealers Capital Access Trust 13,000 5.260 06/08/07 12,928
Dealers Capital Access Trust 9,500 5.280 06/22/07 9,428
Dealers Capital Access Trust 14,000 5.270 06/29/07 13,879
Falcon Asset Securitization Co. LLC 76,201 5.270 05/03/07 76,179
Falcon Asset Securitization Co. LLC 75,000 5.280 05/24/07 74,747
General Electric Capital Corp. 100,000 5.220 05/01/07 100,000
Giro Balanced Funding Corp. 100,918 5.290 05/14/07 100,725
Giro Balanced Funding Corp. 40,000 5.310 05/14/07 39,923
Giro Balanced Funding Corp. 50,000 5.320 05/21/07 49,853
Giro Balanced Funding Corp. (E) 30,000 5.325 06/15/07 30,000
Giro Balanced Funding Corp. (E) 36,000 5.330 07/25/07 36,000
Gotham Funding Corp. 9,200 5.290 05/21/07 9,173
HSBC Bank USA 100,000 5.260 06/29/07 99,138
Ivory Funding Corp. 12,057 5.260 05/17/07 12,029
Ivory Funding Corp. 77,039 5.250 06/15/07 76,533
JPMorgan Chase & Co. 100,000 5.234 05/01/07 100,000
Liquid Funding, Ltd. 50,000 5.290 05/07/07 49,956
Liquid Funding, Ltd. 20,000 5.290 05/09/07 19,976
Liquid Funding, Ltd. 30,000 5.290 05/17/07 29,929
Liquid Funding, Ltd. 100,000 5.320 05/24/07 99,662
Lockhart Funding LLC 35,000 5.280 05/03/07 34,990
Lockhart Funding LLC 103,336 5.260 05/14/07 103,140
Lockhart Funding LLC 26,351 5.250 05/18/07 26,286
Lockhart Funding LLC 23,870 5.250 05/31/07 23,766
</Table>
Money Market Fund 5
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Lockhart Funding LLC 10,000 5.260 07/16/07 9,889
Lockhart Funding LLC 46,445 5.260 07/19/07 45,909
Lockhart Funding LLC 6,500 5.240 08/13/07 6,402
Long Lane Master Trust IV 26,164 5.290 05/10/07 26,129
Long Lane Master Trust IV 30,000 5.290 05/21/07 29,912
Long Lane Master Trust IV 40,179 5.320 05/30/07 40,008
Louis Dreyfus Corp. 9,000 5.300 05/22/07 8,972
NATC California LLC 50,000 5.250 07/13/07 49,468
Park Avenue Receivables Corp. 20,683 5.285 05/01/07 20,683
Park Avenue Receivables Corp. 80,000 5.290 05/11/07 79,882
Tango Finance Corp. 91,700 5.265 06/26/07 90,949
Victory Receivables Corp. 38,860 5.290 05/01/07 38,860
Victory Receivables Corp. 26,294 5.300 05/15/07 26,240
Westpac Banking Corp. 150,000 5.165 05/01/07 150,000
------------
TOTAL DOMESTIC COMMERCIAL PAPER (amortized cost $2,468,501) 2,468,501
------------
EURODOLLAR CERTIFICATES OF DEPOSIT - 6.3%
Calyon New York 170,000 5.310 05/01/07 170,000
Societe Generale (Cayman) 167,925 5.313 05/01/07 167,925
------------
TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (amortized cost
$337,925) 337,925
------------
UNITED STATES GOVERNMENT AGENCIES - 0.1%
AID to INH Portugal Guaranteed Note, weekly demand (LIBOR
Floater) (E)(SS) 6,875 5.553 12/01/17 6,937
------------
TOTAL UNITED STATES GOVERNMENT AGENCIES (amortized cost
$6,937) 6,937
------------
YANKEE CERTIFICATES OF DEPOSIT - 9.7%
BNP Paribas (E) 17,900 5.290 10/03/07 17,898
Barclays Bank PLC (NY) 50,000 5.320 01/16/08 50,000
Calyon New York 50,000 5.650 07/23/07 50,000
Calyon New York (E) 20,000 5.330 08/10/07 20,001
Calyon New York (E) 15,000 5.280 09/13/07 14,998
Citizens Bank NA 100,000 5.320 06/18/07 100,000
Citizens Bank of Pennsylvania 94,000 5.310 06/06/07 94,000
Deutsche Bank AG (NY) 94,000 5.270 04/10/08 94,000
HSBC Bank USA (E) 30,000 5.355 07/27/07 30,002
Royal Bank of Canada (NY) 50,000 5.420 06/04/07 50,000
------------
TOTAL YANKEE CERTIFICATES OF DEPOSIT (amortized cost
$520,899) 520,899
------------
TOTAL INVESTMENTS - 100.0% (amortized cost $5,347,771) (+) 5,347,771
OTHER ASSETS AND LIABILITIES, NET - 0.0% (1,022)
------------
NET ASSETS - 100.0% 5,346,749
============
</Table>
See accompanying notes which are an integral part of the financial statements.
6 Money Market Fund
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Corporate Bonds & Notes 37.7
Registered Investment Company Funds --*
Domestic Commercial Paper 46.2
Eurodollar Certificates of Deposit 6.3
United States Government Agencies 0.1
Yankee Certificates of Deposit 9.7
---------------
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
RUSSELL INVESTMENT COMPANY
US GOVERNMENT MONEY MARKET FUND(#)
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,023.50 $ 1,021.72
Expenses Paid During
Period* $ 3.11 $ 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).
# At a meeting held on May 22, 2007, the Board of Trustees of Russell Investment
Company, upon the recommendation of Russell Investment Management Company
("RIMCo"), approved, subject to shareholder approval, the liquidation of the
US Government Money Market Fund pursuant to a Plan of Liquidation.
Effective upon the close of business on May 31, 2007, the US Government Money
Market Fund was closed to new shareholders. Shareholders of the Fund may
exchange their shares for shares of the same class of another Russell Fund or
redeem their shares prior to the liquidation date.
8 US Government Money Market Fund
RUSSELL INVESTMENT COMPANY
US GOVERNMENT MONEY MARKET FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCIES - 3.6%
Federal Home Loan Mortgage Corp. 1,000 3.000 05/29/07 998
------------
TOTAL INVESTMENTS - 3.6% (amortized cost $998) 998
------------
REPURCHASE AGREEMENTS - 96.7%
Agreement with Lehman Brothers, Inc. and JP Morgan Chase &
Co. (Tri-party) of $26,985 dated April 30, 2007 at 5.130%
to be repurchased at $26,989 on May 1, 2007,
collateralized by: $56,080 par US Government Agency Note,
valued at $28,964 26,985
------------
TOTAL REPURCHASE AGREEMENTS (identified cost $26,985) 26,985
------------
TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS - 100.3%
(cost $27,983) (+) 27,983
OTHER ASSETS AND LIABILITIES, NET - (0.3%) (93)
------------
NET ASSETS - 100.0% 27,890
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
United States Government Agencies 3.6
Repurchase Agreements 96.7
---------------
Total Investments and Repurchase Agreements 100.3
Other Assets and Liabilities, Net (0.3)
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
US Government Money Market Fund 9
RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND(#)
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,015.80 $ 1,022.22
Expenses Paid During
Period* $ 2.60 $ 2.61
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.52%
(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).
# At a meeting held on May 22, 2007, the Board of Trustees of Russell Investment
Company, upon the recommendation of Russell Investment Management Company
("RIMCo"), approved, subject to shareholder approval, the liquidation of the
Tax Free Money Market Fund pursuant to a Plan of Liquidation.
Effective upon the close of business on May 31, 2007, the Tax Free Money
Market Fund was closed to new shareholders. Shareholders of the Fund may
exchange their shares for shares of the same class of another Russell Fund or
redeem their shares prior to the liquidation date.
10 Tax Free Money Market Fund
RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
SHORT-TERM TAX-EXEMPT OBLIGATIONS - 99.5%
Arkansas - 1.0%
ABN AMRO Munitops Certificate Trust Revenue Bonds, weekly
demand (E)(u) 500 3.990 03/01/14 500
------------
Colorado - 1.8%
Colorado Health Facilities Authority Revenue Bonds, weekly
demand (E)(u) 500 4.070 10/01/30 500
County of Boulder Colorado Revenue Bonds, annual demand
(E)(u) 435 3.700 12/01/08 435
------------
935
------------
Delaware - 1.8%
Delaware State Economic Development Authority Revenue Bonds,
weekly demand (E)(u) 450 4.100 12/01/15 450
New Castle County Delaware Revenue Bonds, weekly demand
(E)(u) 495 3.990 08/01/31 495
------------
945
------------
Georgia - 0.5%
Gwinnett County Development Authority Revenue Bonds, weekly
demand (E)(u) 65 3.960 03/01/17 65
Smyrna Housing Authority Revenue Bonds, weekly demand (E) 200 3.950 06/01/25 200
------------
265
------------
Illinois - 10.0%
Illinois Educational Facilities Authority Revenue Bonds,
weekly demand (E)(u) 100 3.950 11/01/25 100
Illinois Educational Facilities Authority Revenue Bonds,
weekly demand (E)(u) 800 3.950 06/01/29 800
Illinois Finance Authority Revenue Bonds, weekly demand
(E)(u) 845 3.960 02/01/19 845
Illinois Finance Authority Revenue Bonds, weekly demand
(E)(u) 700 4.040 04/01/21 700
Illinois Finance Authority Revenue Bonds, weekly demand
(E)(u) 600 3.960 02/01/35 600
Oakbrook Terrace Illinois Revenue Bonds, weekly demand
(E)(u) 2,100 3.750 12/01/25 2,100
------------
5,145
------------
Iowa - 5.0%
Iowa Finance Authority Revenue Bonds, weekly demand (E)(u) 2,200 4.110 11/01/32 2,200
Iowa Higher Education Loan Authority Revenue Bonds, weekly
demand (E)(u) 250 4.110 03/01/30 250
Iowa Higher Education Loan Authority Revenue Bonds, weekly
demand (E)(u) 100 4.110 10/01/33 100
------------
2,550
------------
Kansas - 2.1%
Lenexa Kansas Revenue Bonds, weekly demand (E) 1,080 3.970 02/01/23 1,080
------------
</Table>
Tax Free Money Market Fund 11
RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Kentucky - 4.4%
Berea Kentucky Revenue Bonds, weekly demand (E) 1,300 4.150 06/01/32 1,300
County of Jefferson Kentucky Revenue Bonds, weekly demand
(E)(u) 960 3.980 10/01/19 960
------------
2,260
------------
Maryland - 1.2%
County of Montgomery Maryland, monthly demand (E) 641 3.800 04/01/14 641
------------
Massachusetts - 3.2%
Mashpee Water District Notes 350 4.500 08/16/07 351
Massachusetts Development Finance Agency Revenue Bonds,
weekly demand (E)(u) 610 3.980 03/01/32 610
Massachusetts Development Finance Agency Revenue Bonds,
weekly demand (E) 100 3.970 07/01/35 100
Massachusetts Development Finance Agency Revenue Bonds,
weekly demand (E)(u) 500 3.980 08/01/36 500
Massachusetts Housing Finance Agency Revenue Bonds, weekly
demand (E) 100 3.950 06/01/34 100
------------
1,661
------------
Michigan - 4.8%
Lansing Economic Development Corp. Revenue Bonds, semiannual
demand (E)(u) 1,320 4.000 05/01/15 1,320
Northville Township Economic Development Corp. Revenue
Bonds, weekly demand (E)(u) 500 3.830 05/01/14 500
Oakland County Economic Development Corp. Revenue Bonds,
semiannual demand (E)(u) 640 4.050 08/01/15 640
------------
2,460
------------
Minnesota - 3.5%
Arden Hills Minnesota Revenue Bonds, weekly demand (E)(u) 100 4.110 09/01/29 100
City of Minneapolis Minnesota Revenue Bonds, weekly demand
(E)(u) 200 4.160 05/01/26 200
Mankato Minnesota Revenue Bonds, weekly demand (E)(u) 140 4.060 11/01/15 140
St. Paul Housing & Redevelopment Authority Revenue Bonds,
weekly demand (E)(u) 200 4.110 05/01/22 200
St. Paul Housing & Redevelopment Authority Revenue Bonds,
weekly demand (E)(u) 1,155 4.100 08/01/25 1,155
------------
1,795
------------
Missouri - 0.4%
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E)(u) 100 4.110 08/01/31 100
Missouri State Health & Educational Facilities Authority
Revenue Bonds, weekly demand (E)(u) 100 4.110 10/01/31 100
------------
200
------------
</Table>
12 Tax Free Money Market Fund
RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Montana - 0.2%
Helena Montana Revenue Bonds, weekly demand (E)(u) 100 4.110 10/01/32 100
------------
New Jersey - 1.4%
New Jersey Economic Development Authority Revenue Bonds,
weekly demand (E)(u) 720 4.070 08/01/14 720
------------
New York - 0.3%
Nassau County Industrial Development Agency Revenue Bonds,
weekly demand (E)(u) 150 3.940 12/01/36 150
------------
North Carolina - 4.4%
North Carolina Capital Facilities Finance Agency Revenue
Bonds, weekly demand (E)(u) 2,250 3.950 12/01/28 2,250
------------
Ohio - 18.6%
American Municipal Power-Ohio, Inc. 315 4.000 07/12/07 315
American Municipal Power-Ohio, Inc. 950 3.750 10/04/07 950
American Municipal Power-Ohio, Inc. Notes 550 3.900 05/15/07 550
American Municipal Power-Ohio, Inc. Revenue Notes 750 3.750 03/13/08 750
City of Fairborn Ohio General Obligation Limited Notes 835 4.250 11/01/07 837
County of Clermont Ohio Revenue Bonds, semiannual demand
(E)(u) 1,180 3.900 05/01/12 1,180
County of Greene Ohio General Obligation Limited Notes 475 4.500 08/14/07 476
Indian Lake Local School District General Obligation
Unlimited Notes 875 4.700 05/24/07 876
Kirtland Ohio General Obligation Unlimited Notes 510 4.150 07/25/07 510
New Albany Community Authority Revenue Bonds, weekly demand
(E)(u) 100 3.990 02/01/25 100
Stark County Ohio Revenue Bonds, weekly demand (E)(u) 1,495 4.000 09/15/16 1,495
Wapakonetka Ohio General Obligation Bonds 725 4.000 11/14/07 726
Warrensville Heights Ohio Notes 820 3.950 09/20/07 821
------------
9,586
------------
Oregon - 0.4%
County of Multnomah Oregon Revenue Bonds, weekly demand
(E)(u) 200 4.110 12/01/29 200
------------
Pennsylvania - 8.5%
City of Philadelphia Pennsylvania Revenue Bonds, weekly
demand (E)(u) 100 3.960 06/15/23 100
Lampeter Strasburg School District General Obligation
Unlimited, weekly demand (E)(u) 1,500 3.950 06/01/19 1,500
Lancaster County Hospital Authority Revenue Bonds, weekly
demand (E)(u) 1,000 3.940 12/01/32 1,000
Sayre Health Care Facilities Authority Revenue Bonds, weekly
demand (E)(u) 1,800 3.930 12/01/15 1,800
------------
4,400
------------
Puerto Rico - 1.9%
Puerto Rico Aqueduct & Sewer Authority Revenue Bonds, weekly
demand (E) 1,000 3.980 12/27/08 1,000
------------
</Table>
Tax Free Money Market Fund 13
RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Rhode Island - 2.1%
Rhode Island Economic Development Corp. Revenue Bonds,
weekly demand (E)(u) 1,065 3.980 07/01/23 1,065
------------
South Carolina - 0.4%
Greenville County School District Revenue Bonds, weekly
demand (E)(ae) 200 3.970 12/01/28 200
------------
Tennessee - 7.5%
City of Memphis Tennessee General Obligation Unlimited,
weekly demand (E)(u) 320 3.980 11/01/14 320
Knox County Industrial Development Board Revenue Bonds,
weekly demand (E)(u) 1,400 3.850 12/01/14 1,400
Tennessee Energy Acquisition Corp. Revenue Bonds, weekly
demand (E) 1,040 3.980 09/01/26 1,040
Wilson County Industrial Development Board, weekly demand
(E) 1,100 4.010 07/01/26 1,100
------------
3,860
------------
Texas - 5.0%
Frenship Independent School District General Obligation
Unlimited, weekly demand (E) 1,595 4.000 02/15/26 1,595
Harris County Health Facilities Development Corp. Revenue
Bonds, weekly demand (E) 1,000 3.980 07/01/10 1,000
------------
2,595
------------
Utah - 1.7%
County of Salt Lake Utah Revenue Bonds 900 4.100 02/01/08 900
------------
Vermont - 0.8%
Vermont Educational & Health Buildings Financing Agency
Revenue Bonds, weekly demand (E)(u) 390 3.960 06/01/27 390
------------
Virginia - 1.0%
Virginia Public Building Authority Revenue Bonds, weekly
demand (E)(u) 500 3.970 08/01/19 500
------------
Washington - 2.5%
Washington State Housing Finance Commission Revenue Bonds,
weekly demand (E)(u) 1,100 3.970 08/01/24 1,100
Washington State Housing Finance Commission Revenue Bonds,
weekly demand (E)(u) 200 4.110 06/01/32 200
------------
1,300
------------
West Virginia - 1.9%
Marshall County West Virginia Revenue Bonds, weekly demand
(E) 1,000 3.980 03/01/26 1,000
------------
</Table>
14 Tax Free Money Market Fund
RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY# $
- --------------------------------------------------------------------------------------------------------------------------
Wisconsin - 1.2%
Milwaukee Redevelopment Authority Revenue Bonds, weekly
demand (E)(u) 500 4.160 07/01/21 500
Wisconsin Health & Educational Facilities Authority Revenue
Bonds, weekly demand (E)(u) 100 3.920 11/01/25 100
------------
600
------------
TOTAL SHORT-TERM TAX EXEMPT OBLIGATIONS - 99.5% (amortized
cost $51,253) (+) 51,253
------------
TOTAL INVESTMENTS - 99.5% (amortized cost $51,253) (+) 51,253
OTHER ASSETS AND LIABILITIES, NET - 0.5% 258
------------
NET ASSETS - 100% 51,511
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax Free Money Market Fund 15
RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
%
QUALITY RATINGS AS A % OF VALUE
P-1/A-1; MIG1/SP-1/F-1 or equivalent 100
===
ECONOMIC SECTOR EMPHASIS AS A % OF VALUE
Non-Profit 18
Bond Anticipation Note 13
Education (colleges and universities) 13
Nursing Home 11
Corporate 8
Commercial Real Estate 8
School District 6
Multi-Family Housing Bond 5
Hospital 4
Miscellaneous Revenue 3
Water & Sewer 2
Airport Revenue 2
Escrowed To Maturity 2
Industrial Revenue Bond 1
Food Products 1
Annual Appropriation 1
Cash Flow Note 1
General Obligation 1
---
100
===
</Table>
See accompanying notes which are an integral part of the financial statements.
16 Tax Free Money Market Fund
RUSSELL INVESTMENT COMPANY
TAX FREE MONEY MARKET FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Arkansas 1.0
Colorado 1.8
Delaware 1.8
Georgia 0.5
Illinois 10.0
Iowa 5.0
Kansas 2.1
Kentucky 4.4
Maryland 1.2
Massachusetts 3.2
Michigan 4.8
Minnesota 3.5
Missouri 0.4
Montana 0.2
New Jersey 1.4
New York 0.3
North Carolina 4.4
Ohio 18.6
Oregon 0.4
Pennsylvania 8.5
Puerto Rico 1.9
Rhode Island 2.1
South Carolina 0.4
Tennessee 7.5
Texas 5.0
Utah 1.7
Vermont 0.8
Virginia 1.0
Washington 2.5
West Virginia 1.9
Wisconsin 1.2
---------------
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.
Tax Free Money Market Fund 17
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2007 (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.
# 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
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2007 (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 $ 5,347,771 $ 998 $ 51,253
Repurchase agreements at cost which approximates value -- 26,985 --
Cash -- -- 18
Receivables:
Interest 23,124 17 415
Investments sold 50,675 -- --
Prepaid expenses 129 13 7
------------------- ------------------- --------------------
Total assets 5,421,699 28,013 51,693
------------------- ------------------- --------------------
LIABILITIES
Payables:
Due to custodian 974 -- --
Investments purchased 50,000 -- --
Accrued fees to affiliates 514 10 22
Other accrued expenses 62 12 17
Dividends 23,400 101 143
------------------- ------------------- --------------------
Total liabilities 74,950 123 182
------------------- ------------------- --------------------
NET ASSETS $ 5,346,749 $ 27,890 $ 51,511
=================== =================== ====================
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 25 $ 13 $ --
Accumulated net realized gain (loss) (187) -- --
Shares of beneficial interest 53,469 279 515
Additional paid-in capital 5,293,442 27,598 50,996
------------------- ------------------- --------------------
NET ASSETS $ 5,346,749 $ 27,890 $ 51,511
=================== =================== ====================
NET ASSET VALUE, per share:
Net asset value per share: Class A* $ 1.00 $ -- $ --
Class A - Net assets $ 139,767,211 $ -- $ --
Class A - Shares outstanding ($.01 par value) 139,768,967 -- --
Net asset value per share: Class S* $ 1.00 $ 1.00 $ 1.00
Class S - Net assets $ 5,206,982,062 $ 27,890,408 $ 51,511,486
Class S - Shares outstanding ($.01 par value) 5,207,133,897 27,887,819 51,505,604
- ---------------------------------------------------------------------------------------------------------------------------------
</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
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
MONEY MARKET US GOVERNMENT TAX FREE
AMOUNTS IN THOUSANDS FUND MONEY MARKET FUND MONEY MARKET FUND
- ---------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 136,074 $ 674 $ 1,185
------------------- ------------------- --------------------
EXPENSES
Advisory fees 5,054 25 64
Administrative fees 1,264 6 16
Custodian fees 380 9 11
Distribution fees - Class A 55 -- --
Transfer agent fees 257 19 49
Professional fees 44 9 9
Registration fees 178 9 17
Trustees' fees 49 -- 1
Printing fees 64 1 1
Miscellaneous 27 1 1
------------------- ------------------- --------------------
Expenses before reductions 7,372 79 169
Expense reductions (3,790) -- (3)
------------------- ------------------- --------------------
Net expenses 3,582 79 166
------------------- ------------------- --------------------
Net investment income (loss) 132,492 595 1,019
------------------- ------------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments (3) -- --
------------------- ------------------- --------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 132,489 $ 595 $ 1,019
=================== =================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
20 Statement of Operations
(This page intentionally left blank)
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
MONEY MARKET
FUND
-------------------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2006
- -----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS
Net investment income
(loss) $ 132,492 $ 176,171
Net realized gain (loss) (3) (12)
------------------- --------------------
Net increase (decrease) in net
assets from operations 132,489 176,159
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A (2,810) (1,756)
Class S (129,682) (174,415)
------------------- --------------------
Net decrease in net assets
from distributions (132,492) (176,171)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease)
in net assets from
share transactions 1,104,670 1,082,092
------------------- --------------------
TOTAL NET INCREASE (DECREASE)
IN NET ASSETS 1,104,667 1,082,080
NET ASSETS
Beginning of period 4,242,082 3,160,002
------------------- --------------------
End of period $ 5,346,749 $ 4,242,082
=================== ====================
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 Statements 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, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31,
(UNAUDITED) 2006 (UNAUDITED) 2006
- -------------------------------------------------------------------------------------------------------
$ 595 $ 1,216 $ 1,019 $ 1,755
-- 74 -- 132
------------------------------ ------------------- ------------------- -------------------
595 1,290 1,019 1,887
------------------------------ ------------------- ------------------- -------------------
-- -- -- --
(595) (1,216) (1,019) (1,755)
------------------------------ ------------------- ------------------- -------------------
(595) (1,216) (1,019) (1,755)
------------------------------ ------------------- ------------------- -------------------
2,941 (9,432) (8,184) (5,657)
------------------------------ ------------------- ------------------- -------------------
2,941 (9,358) (8,184) (5,525)
24,949 34,307 59,695 65,220
------------------------------ ------------------- ------------------- -------------------
$ 27,890 $ 24,949 $ 51,511 $ 59,695
============================== =================== =================== ===================
13 13 -- --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets 23
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, 2007 * 1.0000 .0255 -- .0255 (.0255)
October 31, 2006 1.0000 .0464 -- .0464 (.0464)
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, 2007 * 1.0000 .0260 -- .0260 (.0260)
October 31, 2006 1.0000 .0474 -- .0474 (.0474)
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)
- ---------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT MONEY MARKET FUND
Class S
April 30, 2007 * 1.0000 .0233 -- .0233 (.0233)
October 31, 2006 1.0000 .0400 .0025 .0425 (.0425)
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)
- ---------------------------------------------------------------------------------------------------------------------------------
TAX FREE MONEY MARKET FUND
Class S
April 30, 2007 * 1.0000 .0157 -- .0157 (.0157)
October 31, 2006 1.0000 .0270 .0022 .0292 (.0292)
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)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
* For the six months ended April 30, 2007 (Unaudited).
(1) For the period April 21, 2003 (commencement of operations) to October 31,
2003.
(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) May reflect amounts waived and/or reimbursed by RIMCo as the investment
adviser and transfer agent, and for certain funds, custody credit
arrangements.
(e) In fiscal 2006, the Fund's total return included a capital contribution by
the Adviser.
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)
- -------------------------------------------------------------------------------------------------
(.0255) 1.0000 2.58 139,767 .24
(.0464) 1.0000 4.74 76,031 .25
(.0271) 1.0000 2.74 14,410 .25
(.0108) 1.0000 1.08 3,989 .25
(.0051) 1.0000 .59 682 .26
- -------------------------------------------------------------------------------------------------
(.0260) 1.0000 2.63 5,206,982 .14
(.0474) 1.0000 4.84 4,166,051 .15
(.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
- -------------------------------------------------------------------------------------------------
(.0233) 1.0000 2.35 27,890 .62
(.0425) 1.0000 4.34(e) 24,949 .56
(.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
- -------------------------------------------------------------------------------------------------
(.0157) 1.0000 1.58 51,511 .52
(.0292) 1.0000 2.96(e) 59,695 .47
(.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
- -------------------------------------------------------------------------------------------------
<Caption>
% %
RATIO OF EXPENSES RATIO OF NET
TO AVERAGE INVESTMENT INCOME
NET ASSETS, TO AVERAGE
GROSS(C) NET ASSETS(C)(D)
- ---
.39 5.15
.40 4.82
.40 2.91
.40 1.18
5.24 .96
- ---
.29 5.25
.30 4.78
.30 2.83
.30 1.16
.31 1.21
.29 1.84
- ---
.62 4.70
.56 4.18
.56 2.22
.47 .81
.48 .87
.45 1.73
- ---
.52 3.17
.48 2.90
.42 1.74
.37 .84
.36 .95
.35 1.52
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 25
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Russell Investment Company (the "Investment Company" or "RIC") is a series
investment company with 35 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 July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company and Frank Russell Investment Management Company changed
its name to Russell Investment Management Company ("RIMCo").
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
(other than repurchase agreements which are valued at specific identified
cost). 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 New York
Stock Exchange, 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.
In July 2006, Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement 109 (FIN 48) was issued and is effective for fiscal years beginning
after December 15, 2006. FIN 48 sets forth a threshold for financial
statement recognition, measurement and disclosure of a tax position taken or
expected to be taken on a tax return. Management is currently evaluating the
impact, if any, the adoption of FIN 48 will have on the Fund's net assets and
results of operations.
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
26 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
Expenses
The Funds will pay their own expenses other than those expressly assumed by
RIMCo. 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, RIMCo 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
"Restricted 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.
Notes to Financial Statements 27
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Custodian
The Funds have entered into arrangements with their Custodian whereby custody
credits realized as a result of uninvested cash balances were used to reduce
a portion of the Funds' expenses. During the period ended April 30, 2007, the
Funds' custodian fees were reduced by the following amounts under these
arrangements which are included in expense reductions on the Statement of
Operations:
<Table>
Money Market $ 511
Tax Free Money Market 2,551
</Table>
3. RELATED PARTIES
Adviser and Administrator
RIMCo advises and administers all of the Funds which comprise the Investment
Company. RIMCo 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 RIMCo.
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, 2007,
$2,904,925,108, $1,000,000, and $7,521,848, respectively, represents
investment by other Investment Company Funds not presented herein and
investment by the Russell Investment Funds in the Funds. The Russell
Investment Funds employ the same investment adviser as RIC. In addition, a
portion of the collateral 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 $5,142,864 and $1,285,716 respectively, for the period
ended April 30, 2007.
<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 29, 2008, for the
Money Market Fund. The amount of such waiver for the period ended April 30,
2007 was $3,789,934. The adviser does not have the ability to recover amounts
waived for the period ended April 30, 2007 or previous periods.
Transfer Agent
RIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, RIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Funds. RIMCo 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, 2007 were $325,294.
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 RIMCo, 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 the Money
Market Fund's Class A shares on an annual basis.
28 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Accrued Fees to Affiliates
Accrued fees payable to affiliates for the period ended April 30, 2007 were
as follows:
<Table>
<Caption>
US GOVERNMENT TAX FREE
MONEY MARKET MONEY MARKET MONEY MARKET
---------------------------------------------------------------------------------------------
Advisory fees $ 223,523 $ 4,976 $ 8,962
Administration fees 223,739 1,244 2,241
Distribution fees 11,003 -- --
Transfer agent fees 44,149 3,745 10,568
Trustee fees 11,458 161 235
---------------- ---------------- ----------------
$ 513,872 $ 10,126 $ 22,006
================ ================ ================
</Table>
Board of Trustees
The Russell Fund Complex consists of Russell Investment Company, which has 35
Funds, and Russell Investment Funds ("RIF"), which has nine Funds. Each of
the Trustees is a Trustee for both RIC 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, 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. The Audit Committee Chair and Investment
Committee Chair are each paid a fee of $12,000 per year and the Nominating
and Governance Committee chair are each paid a fee of $6,000 per year. The
chair person of the Board receives additional annual compensation of $52,000.
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, 2006, available capital loss carryforwards and expiration dates are as
follows:
<Table>
<Caption>
FUNDS 10/31/07 10/31/08 10/31/09
---------------------------------------------------------------------------------
Money Market $ -- $ 90,626 $ 35,378
</Table>
<Table>
<Caption>
FUNDS 10/31/10 10/31/11 10/31/12 10/31/13 10/31/14 TOTALS
------------------------------------------------------------------------------------------------------------------------------
Money Market $ -- $ 43,223 $ -- $ 3,147 $ 11,753 $ 184,127
</Table>
Notes to Financial Statements 29
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
5. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2007 and October 31, 2006
were as follows:
<Table>
<Caption>
CLASS A CLASS S
ON A CONSTANT DOLLAR BASIS ON A CONSTANT DOLLAR BASIS
------------------------------------- -------------------------------------
2007 2006 2007 2006
----------------- ----------------- ----------------- -----------------
Money Market
Proceeds from shares sold $ 141,795 $ 109,252 $ 19,953,921 $ 21,923,421
Proceeds from reinvestment of
distributions 2,438 1,430 26,076 27,585
Payments for shares redeemed (80,497) (49,059) (18,939,063) (20,930,537)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) $ 63,736 $ 61,623 $ 1,040,934 $ 1,020,469
================= ================= ================= =================
US Government Money Market
Proceeds from shares sold $ -- $ -- $ 39,144 $ 80,635
Proceeds from reinvestment of
distributions -- -- 491 1,046
Payments for shares redeemed -- -- (36,694) (91,113)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) $ -- $ -- $ 2,941 $ (9,432)
================= ================= ================= =================
Tax Free Money Market
Proceeds from shares sold $ -- $ -- $ 197,696 $ 338,333
Proceeds from reinvestment of
distributions -- -- 597 1,077
Payments for shares redeemed -- -- (206,477) (345,067)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) $ -- $ -- $ (8,184) $ (5,657)
================= ================= ================= =================
</Table>
6. INTERFUND LENDING PROGRAM
The Investment Company Funds have been granted permission from the Securities
and Exchange Commission to participate in a joint lending and borrowing
facility (the "Credit Facility"). Portfolios of the Funds may borrow money
from the RIC Money Market Fund for temporary purposes. All such borrowing and
lending will be subject to a participating fund's fundamental investment
limitations. The RIC Money Market Fund will lend through the program only
when the returns are higher than those available from an investment in
repurchase agreements or short-term reserves. The Investment Company Funds
will borrow through the program only when the costs are equal to or lower
than the cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be called
on one business day's notice. A participating fund may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to the RIC Money Market Fund could result in a lost
investment opportunity of additional borrowing costs.
7. RECORD OWNERSHIP
As of April 30, 2007, 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 18.7
US Government Money Market 3 51.6
Tax Free Money Market 3 47.9
</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
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (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 RIMCo 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 - 0.0%
Metropolitan Life Global Funding 10/27/06 72,628,000 100.00 72,657 72,657
==============
</Table>
Illiquid securities may be priced by the Funds using fair value procedures
approved by the Board of Trustees.
9. SUBSEQUENT EVENTS
At a meeting held on May 22, 2007, the Board of Trustees of Russell Investment
Company, upon the recommendation of the Russell Investment Management Company
("RIMCo"), approved, subject to shareholder approval, the liquidation of the US
Government Money Market and Tax Free Money Market Funds pursuant to a Plan of
Liquidation.
Effective upon the close of business on May 31, 2007, the US Government Money
Market and Tax Free Money Market Funds were closed to new shareholders.
Shareholders of the Funds may exchange their shares for shares of the same class
of another Russell Fund or redeem their shares prior to the liquidation date.
Notes to Financial Statements 31
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 RIMCo
(the "RIMCo Agreement") and the portfolio management contract with the Money
Manager of the Tax Free Money Market Fund (the "portfolio management contract")
at a meeting held on April 24, 2007. 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 RIMCo. In preparation for the annual review, the Independent Trustees,
with the advice and assistance of their independent counsel, also requested and
the Board considered (1) information and reports prepared by RIMCo relating to
the services provided by RIMCo (and its affiliates) to the Funds; (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 RIMCo believed by the provider to be generally comparable in investment
objectives and size to the Funds; and (3) RIMCo's response to questions from the
Board concerning the Third-Party Information addressing, among other things, any
performance and expense differentials between certain Funds and their respective
Comparable Funds. The foregoing information requested by the Trustees or
provided by RIMCo is collectively called the "Agreement Renewal Information."
The Independent Trustees also received a memorandum from their independent
counsel discussing the legal standards for their consideration of the proposed
continuances.
On April 23, 2007, the Independent Trustees met to review the Agreement Renewal
Information in a private session with their independent counsel at which no
representatives of RIMCo or management were present. At the April 24 meeting of
the Board of Trustees, the Board, including the Independent Trustees, reviewed
the proposed continuance of the RIMCo Agreement and the portfolio management
contracts with management and independent counsel to the Independent Trustees.
Presentations made by RIMCo to the Board as part of this review encompassed the
Funds and all other RIMCo-managed funds for which the Board has supervisory
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 analyses received from RIMCo and management
at the Board meeting. The discussion below reflects all of these reviews.
The Funds may, and the Tax Free Money Market Fund does, employ a
manager-of-managers method of investment. In evaluating the portfolio management
contract for the Tax Free Money Market Fund, 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. RIMCo exercises
investment discretion over Fund assets that RIMCo determines not to allocate to
the Money Managers by selecting securities for those portions of assets. RIMCo
may also directly manage portions of a Fund during transitions between Money
Managers. RIMCo has engaged a Money Manager for the Tax Free Money Market Fund.
RIMCo currently manages the Money Market and US Government Money Market Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible
under the RIMCo Agreement for determining, implementing and maintaining the
investment program for each Fund.
RIMCo is responsible for selecting, subject to Board approval, one or more 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 RIMCo (each, a "segment") in accordance with the Fund's
applicable investment objective, policies and restrictions, any constraints
placed by RIMCo upon its selection of portfolio securities and the Money
Manager's specified role in the Fund. RIMCo is responsible for communicating
performance expectations to 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 the portfolio management contract
should be renewed, modified or terminated. In addition to its annual
recommendation as to the renewal, modification or termination of a portfolio
management contract, RIMCo is responsible for recommending to the Board the
restructuring of Fund segments, if there is more than one Money Manager, and
additions of new Money Managers or replacements of existing Money Managers at
any time when, based on RIMCo's research and ongoing review and analysis, such
actions are appropriate. RIMCo may assign specific investment constraints from
time to time for the Money Manager of the Tax Free Money Market Fund intended to
capitalize on the strengths of that Money Manager or, if there are multiple
Money Managers, to coordinate the investment activities of Money Managers for
the Fund in a complementary manner. Therefore, if there are multiple Money
Managers, RIMCo's selection of Money Managers is made not only on the basis of
performance considerations but anticipated
32 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
compatibility with other Money Managers in the same Fund. In light of the
foregoing, the overall performance of the Fund over appropriate periods
reflects, in great part, the performance of RIMCo in designing the Fund's
investment program, structuring the Fund if there are multiple Money Managers,
selecting an effective Money Manager for the Tax Free Money Market Fund or if
there are multiple Money Managers, an effective Money Manager with a particular
investment style or sub-style that is complementary to the styles of the Money
Managers of other Fund segments, and if there are Money Managers of other Fund
segments, allocating assets among the Money Managers in a manner designed to
achieve the objectives of the Fund. The Board considered that the prospectus for
the Tax Free Money Market Fund and other public disclosures emphasize to
investors RIMCo's role as the principal investment manager for the Fund, rather
than the investment selection role of the Fund's Money Managers, and describes
the manner in which the Fund operates so that investors may take that
information into account when deciding to purchase shares of the Fund.
The Board also considered the special expertise of RIMCo 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 RIMCo on comparable terms
given the need to continue 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 Funds the Trustees considered, with
respect to the Fund, various specific factors in evaluating renewal of the RIMCo
Agreement, including the following:
1. The nature, scope and quality of the services provided to the Fund by RIMCo;
2. The advisory fee paid by the Fund to RIMCo 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 RIMCo as to other fees and benefits received by RIMCo
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 RIMCo as to expenses incurred by the Fund; and
5. Information provided by RIMCo as to the profits that RIMCo derives from its
mutual fund operations generally and from the Fund.
At the April 24 Board meeting, RIMCo and management discussed the reasonableness
of the Funds' investment advisory fees.
On the basis of the Agreement Renewal Information and other information
previously received by the Board from RIMCo during the course of the year or
presented at the April 24 Board meeting by RIMCo, the Board, in respect of each
Fund, found, after giving effect to any applicable waivers and/or reimbursements
(1) the advisory fee charged by RIMCo to be reasonable in light of the nature,
scope and quality of the services provided to the Funds; (2) the relative
expense ratio of each Fund was comparable to those of its Comparable Funds; (3)
RIMCo's methodology of allocating expenses of operating funds in the complex was
reasonable; and (4) RIMCo's profitability with respect to each Fund was not
excessive in light of the nature, scope and quality of the services provided by
RIMCo. The Board also concluded that the performance of each of the Funds
supported continuation of the RIMCo Agreement. In evaluating performance, the
Board considered each Fund's absolute performance and its performance relative
to appropriate benchmarks and indices and its Comparable Funds.
At the April 24 Board meeting, 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. It
concluded that the investment advisory fees for each Fund appropriately reflect
any economies of scale based upon information provided by RIMCo, including, in
the case of the Tax Free Money Market Fund, information as to the variability of
Money Manager investment advisory fees and other factors associated with the
manager-of-managers structure employed by that Fund.
After considering the foregoing and other relevant factors, the Board concluded
that continuation of the RIMCo Agreement on its current terms and conditions
would be in the best interests of the Funds and their respective shareholders
and voted to approve the continuation of the agreement.
Basis for Approval of Investment Advisory Contracts 33
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
At the April 24 Board meeting, with respect to the evaluation of the terms of
the portfolio management contract with the Money Manager of the Tax Free Money
Market Fund, the Board received and considered information from RIMCo reporting
for the Money Manager, among other things, the Money Manager's performance over
various periods; RIMCo's assessment of the performance of the Money Manager; any
significant business relationships between the Money Manager and RIMCo or
Russell Fund Distributors, Inc., the Fund's underwriter; and RIMCo'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. RIMCo
recommended that the Money Manager be retained at its current fee rate. RIMCo
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 RIMCo; RIMCo is aware of the fees
charged by Money Managers to other clients; and RIMCo 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
RIMCo's explanation in light of the Board's findings as to the reasonableness of
the aggregate investment advisory fees paid by each Fund and the fact that the
Money Manager's fee is paid by RIMCo.
Based substantially upon RIMCo's recommendations together with the information
received from RIMCo in support of its recommendations at the April 24 meeting,
the Board concluded that the fees paid to the Money Manager of the Tax Free
Money Market Fund are 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 Fund would be in the best interests of
the Fund and its shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the RIMCo Agreement or, other than RIMCo's recommendation, the portfolio
management agreement with the Money Manager of 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
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 RIMCo, as RIC'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. RIMCo 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.
To reduce expenses, we may mail only one copy of the Funds' prospectus and each
annual and semi-annual report to those addresses shared by two or more accounts.
If you wish to receive individual copies of these documents, please call us at
(800) 787-7354 or contact your financial institution and we will begin sending
you individual copies thirty days after receiving your request.
Some Financial Intermediaries may offer electronic delivery of the Fund's
prospectus and annual and semiannual reports. Please contact your Financial
Intermediary for further details.
Shareholder Requests for Additional Information 35
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Russell Investment
Company ("RIC"), which has 35 funds, and Russell Investment Funds ("RIF"), which
has nine funds. Each of the trustees is a trustee of both RIC 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
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Thaddas L. Alston, Trustee since Appointed until - Senior Vice President, Larco 44 None
Born April 7, 1945 2006 successor is Investments, Ltd.
duly elected
909 A Street and qualified
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 44 - Director, Avista
Born January 22, 2000 successor is Blake, P.S. (accounting Corp;
1954 duly elected services) - Trustee,
Chairperson and qualified - Director and Chairman of the Principal
909 A Street since 2005 Audit Committee, Avista Investors Fund
Tacoma, Washington Annual Corp. (investment
98402-1616 - Trustee and Chairman of the company);
Operations and Distribution - Trustee,
Committee, WM Group of Principal
Funds, 1999-2006 Variable
- February 2002 to June 2005, Contracts Fund
Chairman of the Audit (investment
Committee, RIC and RIF company)
- Regent, University of
Washington
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 44 None
Born June 6, 1946 2003 successor is Vice President and Chief
Chairman of duly elected Financial Officer, Waddell &
909 A Street Audit Committee and qualified Reed Financial, Inc.
Tacoma, Washington since 2005 - 2003, Retired
98402-1616 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
36 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 44 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected several additional
1955 Chairman of the and qualified. subsidiary companies,
Nominating and including Simpson Timber
909 A Street Governance Appointed until Company, Simpson Paper
Tacoma, Washington Committee since successor is Company and Simpson Tacoma
98402-1616 2007 duly elected Kraft Company
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack R. Thompson, Trustee since Appointed until - September 2003 to present, 44 - 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 37
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 44 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 RIMCo
Tacoma, Washington - Chairman Emeritus, RIC and
98402-1616 RIF; Russell Implementation
Services Inc. (broker-dealer
and investment adviser
("RIS")); Russell 20-20
Association (non-profit
corporation); and Russell
Trust Company (non-
depository trust company
("RTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee Emeritus Five year term - President, Anderson 44 None
Born October 15, since 2007 Management Group LLC
1931 (private investments
consulting)
909 A Street - February 2002 to June 2005,
Tacoma, Washington Lead Trustee, RIC and RIF
98402-1616 - Trustee of RIC and RIF Until
2006
- Chairman of the Nominating
and Governance Committee
2006
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 44 None
Born December 1, since 2003 - Trustee of RIC and RIF Until
1919 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 44 None
Born June 8, 1925 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 44 None
Born October 6, since 2006 - Trustee of RIC and RIF Until
1930 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of RIC and
RIF.
38 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 44 None
Born May 5, 1926 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 39
RUSSELL INVESTMENT COMPANY
MONEY MARKET FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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, RIC
Born December 16, 1966 Officer since by Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, RIMCo
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, RIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, RIMCo
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, RIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, RIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, RIMCo, RTC 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, RIC, RIF, FRC, RTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, RIMCo and RFD
2004 - 1999 to 2003, Chief Financial Officer, FRC, RIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Gregory J. Lyons, Secretary since Until successor - Associate General Counsel and Assistant Secretary FRC
Born August 24, 1960 2007 is chosen and and RIA
qualified by - Director and Secretary, RIMCo and RFD
909 A Street Trustees - Secretary and Chief Legal Counsel, RIC and RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
40 Disclosure of Information about Fund Directors
MONEY MARKET FUNDS
RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul E. Anderson
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
Gregory J. Lyons, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Josiah Quincy Building
200 Newport Avenue
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF APRIL 30, 2007*
Money Market Fund
Russell Investment Management Company, Tacoma, WA
US Government Money Market Fund
Russell Investment Management Company, Tacoma, WA
Tax Free Money Market Fund
Neuberger Berman Management Inc., New York, NY
* A complete list of current money managers can also be found at
www.Russell.com.
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 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
(RUSSELL LOGO)
Russell Investment Company
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com
On July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company, and Frank Russell Investment Management Company changed its
name to Russell Investment Management Company.
RUSSELL FUNDS
2007 Semiannual Report
CLASS A AND B SHARES:
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
APRIL 30, 2007
(RUSSELL LOGO)
Russell Investment Company
Russell Investment Company is a series investment company with 35 different
investment portfolios referred to as Funds. These financial statements report on
one of these Funds.
Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Russell Investment Company
Russell Multi-Manager Principal Protected Fund
Semiannual Report
April 30, 2007 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Shareholder Expense Example.......................................... 3
Schedule of Investments.............................................. 4
Notes to Schedule of Investments..................................... 8
Statement of Assets and Liabilities.................................. 9
Statement of Operations.............................................. 10
Statements of Changes in Net Assets.................................. 11
Financial Highlights - Class A....................................... 12
Financial Highlights - Class B....................................... 13
Notes to Financial Statements........................................ 14
Investment Objective and Investment Strategy during the Guarantee
Period............................................................. 22
Basis for Approval of Investment Advisory Contracts.................. 23
Shareholder Requests for Additional Information...................... 26
Disclosure of Information about Fund Directors....................... 27
Manager, Money Managers and Service Providers........................ 32
</Table>
Russell Investment Company - Russell Multi-Manager Principal Protected Fund.
Copyright (c) Russell Investment Group 2007. 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 changed its name to
Russell Investment Company ("RIC"). RIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Russell Investment Management Company
("RIMCo"). Effective July 1, 2006 RIMCo changed its name from Frank 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.
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,031.30 $ 1,014.38
Expenses Paid During
Period* $ 10.58 $ 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). 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 B PERFORMANCE BEFORE EXPENSES)
- ----------------------------------------------------------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,027.20 $ 1,010.66
Expenses Paid During
Period* $ 14.33 $ 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). 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
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 42.8%
Auto and Transportation - 1.7%
AMR Corp. (AE) 1,300 34
Autoliv, Inc. 400 23
FedEx Corp. 1,300 137
General Motors Corp. 4,300 135
Goodyear Tire & Rubber Co. (The) (AE) 1,800 60
TRW Automotive Holdings Corp. (AE) 600 22
Union Pacific Corp. 1,700 194
US Airways Group, Inc. (AE) 800 30
------------
635
------------
Consumer Discretionary - 7.1%
Alberto-Culver Co. Class B 1,800 44
AutoNation, Inc. (AE) 1,300 27
Avon Products, Inc. 1,500 60
Barnes & Noble, Inc. 600 24
Brink's Co. (The) 400 25
Brinker International, Inc. 1,200 37
Burger King Holdings, Inc. 700 16
CEC Entertainment, Inc. (AE) 500 21
Columbia Sportswear Co. 500 31
Costco Wholesale Corp. 2,500 134
Darden Restaurants, Inc. 1,800 75
DIRECTV Group, Inc. (The) (AE) 3,000 72
DreamWorks Animation SKG, Inc. Class A (AE) 500 15
eBay, Inc. (AE) 4,800 163
Family Dollar Stores, Inc. 1,700 54
Gannett Co., Inc. 300 17
Google, Inc. Class A (AE) 400 189
Hasbro, Inc. 2,000 63
International Game Technology 1,500 57
Jack in the Box, Inc. (AE) 500 33
Jarden Corp. (AE) 500 21
Kimberly-Clark Corp. 500 36
Liz Claiborne, Inc. 800 36
Manpower, Inc. 600 48
Marriott International, Inc. Class A 2,900 131
Mattel, Inc. 1,800 51
McDonald's Corp. 4,649 224
Office Depot, Inc. (AE) 2,200 74
PF Chang's China Bistro, Inc. (AE) 500 19
Rent-A-Center, Inc. Class A (AE) 600 17
Staples, Inc. 4,800 119
Timberland Co. Class A (AE) 500 13
Time Warner, Inc. 10,200 210
TJX Cos., Inc. 4,800 134
Toro Co. 400 20
United Auto Group, Inc. 600 12
United Stationers, Inc. (AE) 100 6
VeriSign, Inc. (AE) 1,100 30
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Wal-Mart Stores, Inc. 3,300 158
Whirlpool Corp. 600 64
Yum! Brands, Inc. 1,800 111
------------
2,691
------------
Consumer Staples - 1.7%
Colgate-Palmolive Co. 2,400 162
General Mills, Inc. 1,900 114
Hormel Foods Corp. 500 19
Kraft Foods, Inc. Class A 1,400 47
Kroger Co. (The) 4,800 142
Loews Corp. - Carolina Group 1,200 92
McCormick & Co., Inc. 800 30
Pepsi Bottling Group, Inc. 1,100 36
------------
642
------------
Financial Services - 9.0%
Allstate Corp. (The) 2,400 149
American International Group, Inc. 3,400 238
Ameriprise Financial, Inc. 1,200 71
Apartment Investment & Management Co. Class A
(o) 900 50
Automatic Data Processing, Inc. 1,900 85
Camden Property Trust (o) 500 35
CB Richard Ellis Group, Inc. Class A (AE) 1,300 44
Chubb Corp. 300 16
Citigroup, Inc. 8,700 466
Federated Investors, Inc. Class B 700 27
Fiserv, Inc. (AE) 600 32
Genworth Financial, Inc. Class A 3,500 128
Global Payments, Inc. 1,600 61
Goldman Sachs Group, Inc. (The) 1,100 240
Hartford Financial Services Group, Inc. 1,600 162
Hospitality Properties Trust (o) 900 41
Lehman Brothers Holdings, Inc. 700 53
Merrill Lynch & Co., Inc. 2,700 244
MetLife, Inc. 3,100 204
Moody's Corp. 1,000 66
Morgan Stanley 3,300 277
Northern Trust Corp. 1,400 88
Odyssey Re Holdings Corp. 500 21
Philadelphia Consolidated Holding Co. (AE) 200 9
Progressive Corp. (The) 900 21
Regions Financial Corp. 1,817 64
</Table>
4 Schedule of Investments
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
State Street Corp. 1,800 124
Travelers Cos., Inc. (The) 2,300 124
Ventas, Inc. (o) 600 25
Wells Fargo & Co. 3,500 125
Western Union Co. (The) 2,500 53
Wilmington Trust Corp. 500 20
WR Berkley Corp. 1,200 39
------------
3,402
------------
Health Care - 6.4%
Aetna, Inc. 1,400 66
AMERIGROUP Corp. (AE) 500 14
Amgen, Inc. (AE) 3,100 199
Baxter International, Inc. 1,500 85
Becton Dickinson & Co. 2,600 205
Biogen Idec, Inc. (AE) 1,900 90
Cardinal Health, Inc. 1,400 98
Express Scripts, Inc. Class A (AE) 500 48
Health Net, Inc. (AE) 1,000 54
Humana, Inc. (AE) 600 38
Johnson & Johnson 5,200 334
King Pharmaceuticals, Inc. (AE) 2,500 51
LifePoint Hospitals, Inc. (AE) 700 26
McKesson Corp. 1,000 59
Merck & Co., Inc. 3,400 175
Mylan Laboratories, Inc. 2,100 46
Pfizer, Inc. 12,000 317
Schering-Plough Corp. 6,500 206
Universal Health Services, Inc. Class B 700 42
Watson Pharmaceuticals, Inc. (AE) 700 19
WellCare Health Plans, Inc. (AE) 500 40
WellPoint, Inc. (AE) 2,400 189
------------
2,401
------------
Integrated Oils - 2.8%
Chevron Corp. 4,100 319
ConocoPhillips 700 49
Exxon Mobil Corp. 7,700 611
Marathon Oil Corp. 700 71
------------
1,050
------------
Materials and Processing - 2.3%
Acuity Brands, Inc. 500 29
Albemarle Corp. 1,000 42
American Standard Cos., Inc. 2,300 127
Avery Dennison Corp. 500 31
Cabot Corp. 300 14
Crown Holdings, Inc. (AE) 1,300 31
Eastman Chemical Co. 800 54
FMC Corp. 500 38
Hercules, Inc. (AE) 1,100 21
Huntsman Corp. 900 18
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Jacobs Engineering Group, Inc. (AE) 1,000 50
Lyondell Chemical Co. 800 25
Masco Corp. 2,100 57
Packaging Corp. of America 1,000 25
PPG Industries, Inc. 1,300 96
Rohm & Haas Co. 1,800 92
RPM International, Inc. 700 15
Sonoco Products Co. 300 13
Timken Co. 1,200 40
URS Corp. (AE) 500 22
Valspar Corp. 300 8
------------
848
------------
Miscellaneous - 1.1%
Brunswick Corp. 1,200 39
Eaton Corp. 300 27
General Electric Co. 2,700 100
Honeywell International, Inc. 3,200 173
ITT Corp. 1,400 89
------------
428
------------
Other Energy - 1.4%
Alon USA Energy, Inc. 500 19
Complete Production Services, Inc. (AE) 500 12
Frontier Oil Corp. 1,300 46
Global Industries, Ltd. (AE) 1,500 31
Helmerich & Payne, Inc. 1,400 45
Newfield Exploration Co. (AE) 1,500 66
Superior Energy Services, Inc. (AE) 800 29
Valero Energy Corp. 3,100 218
XTO Energy, Inc. 1,000 54
------------
520
------------
Producer Durables - 3.4%
Applied Materials, Inc. 5,900 113
Boeing Co. 2,200 205
Caterpillar, Inc. 2,100 153
Emerson Electric Co. 3,600 169
Gardner Denver, Inc. (AE) 1,000 38
Genlyte Group, Inc. (AE) 500 39
KB Home 800 35
Lockheed Martin Corp. 700 67
Manitowoc Co., Inc. (The) 1,500 102
Mettler Toledo International, Inc. (AE) 500 49
Molex, Inc. 1,100 33
Parker Hannifin Corp. 800 74
</Table>
Schedule of Investments 5
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Standard-Pacific Corp. 1,000 21
Teradyne, Inc. (AE) 1,900 33
United Technologies Corp. 1,700 114
Waters Corp. (AE) 500 30
------------
1,275
------------
Technology - 4.2%
Amphenol Corp. Class A 1,200 42
Anixter International, Inc. (AE) 600 43
Arrow Electronics, Inc. (AE) 1,300 51
Atmel Corp. (AE) 1,000 5
Avaya, Inc. (AE) 1,800 23
AVX Corp. 500 8
BMC Software, Inc. (AE) 1,900 62
Cadence Design Systems, Inc. (AE) 2,600 58
Computer Sciences Corp. (AE) 1,300 72
CSG Systems International, Inc. (AE) 500 13
Electronic Data Systems Corp. 1,600 47
Fairchild Semiconductor International, Inc.
Class A (AE) 600 11
Hewlett-Packard Co. 6,700 282
Ingram Micro, Inc. Class A (AE) 1,000 20
International Business Machines Corp. 3,200 327
McAfee, Inc. (AE) 700 23
Microsoft Corp. 500 15
Oracle Corp. (AE) 9,100 171
PerkinElmer, Inc. 900 22
Raytheon Co. 1,600 86
Sanmina-SCI Corp. (AE) 1,000 4
Synopsys, Inc. (AE) 2,000 55
Tellabs, Inc. (AE) 4,800 51
Unisys Corp. (AE) 1,700 13
Western Digital Corp. (AE) 3,300 58
------------
1,562
------------
Utilities - 1.7%
AES Corp. (The) (AE) 4,700 103
AT&T, Inc. 1,192 46
Constellation Energy Group, Inc. 800 71
Edison International 2,000 105
Embarq Corp. 800 48
Verizon Communications, Inc. 6,800 260
Windstream Corp. (AE) 1,000 15
------------
648
------------
TOTAL COMMON STOCKS
(cost $14,433) 16,102
------------
SHORT-TERM INVESTMENTS - 57.4%
Russell Investment Company
Money Market Fund 299,000 299
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Russell Investment Company
US Government Money Market Fund 1,000,000 1,000
United States Treasury
Principal Only STRIP
Zero coupon due 02/15/08 21,020 20,216
United States Treasury Bills (c)(z)(sec.)
5.045% due 06/14/07 100 99
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $21,698) 21,614
------------
TOTAL INVESTMENTS - 100.2%
(identified cost $36,131) 37,716
OTHER ASSETS AND LIABILITIES,
NET - (0.2%) (75)
------------
NET ASSETS - 100.0% 37,641
============
</Table>
See accompanying notes which are an integral part of the financial statements.
6 Schedule of Investments
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
S&P 500 E-Mini Index (CME)
expiration date 06/07 (10) 744 (1)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (1)
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 1.7
Consumer Discretionary 7.1
Consumer Staples 1.7
Financial Services 9.0
Health Care 6.4
Integrated Oils 2.8
Materials and Processing 2.3
Miscellaneous 1.1
Other Energy 1.4
Producer Durables 3.4
Technology 4.2
Utilities 1.7
Short-Term Investments 57.4
---------------
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.
Schedule of Investments 7
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (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
8 Notes to Schedule of Investments
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
ASSETS
Investments at market (identified cost $36,131)..................................... $ 37,716
Receivables:
Dividends and interest........................................................... 10
Dividends from affiliated money market funds..................................... 7
Investments sold................................................................. 593
From Adviser..................................................................... 4
Prepaid expenses.................................................................... 20
----------------------
Total assets........................................................................ 38,350
----------------------
LIABILITIES
Payables:
Investments purchased................................. $ 552
Fund shares redeemed.................................. 9
Accrued fees to affiliates............................ 69
Other accrued expenses................................ 73
Daily variation margin on futures contracts........... 6
--------------------
Total liabilities................................................................... 709
----------------------
NET ASSETS.......................................................................... $ 37,641
======================
Net Assets Consist of:
Undistributed (overdistributed) net investment income............................... $ 106
Accumulated net realized gain (loss)................................................ 1,037
Unrealized appreciation (depreciation) on:
Investments................................................................... 1,585
Futures contracts............................................................. (1)
Shares of beneficial interest....................................................... 36
Additional paid-in capital.......................................................... 34,878
----------------------
NET ASSETS.......................................................................... $ 37,641
======================
NET ASSET VALUE, per share:
Class A ($1,418,146 divided by 134,241 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 10.56
======================
Class B ($36,222,920 divided by 3,513,911 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 10.31
======================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 9
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME
Dividends........................................................................ $ 133
Dividends from affiliated money market funds..................................... 54
Interest......................................................................... 498
----------------------
Total investment income............................................................. 685
EXPENSES
Advisory fees............................................ $ 177
Administrative fees...................................... 10
Custodian fees........................................... 46
Distribution fees - Class B.............................. 145
Transfer agent fees...................................... 50
Professional fees........................................ 25
Registration fees........................................ 14
Shareholder servicing fees - Class A..................... 2
Shareholder servicing fees - Class B..................... 48
Trustees' fees........................................... 1
Insurance policy fees.................................... 151
Printing fees............................................ 2
Miscellaneous............................................ 7
--------------------
Expenses before reductions............................... 678
Expense reductions....................................... (111)
--------------------
Net expenses........................................................................ 567
----------------------
Net investment income (loss)........................................................ 118
----------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments.............................................. 1,118
Futures contracts........................................ (26) 1,092
--------------------
Net change in unrealized appreciation (depreciation) on:
Investments.............................................. (129)
Futures contracts........................................ (23) (152)
-------------------- ----------------------
Net realized and unrealized gain (loss)............................................. 940
----------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............................... $ 1,058
======================
</Table>
See accompanying notes which are an integral part of the financial statements.
10 Statement of Operations
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2006
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss)............................. $ 118 $ 211
Net realized gain (loss)................................. 1,092 1,035
Net change in unrealized appreciation (depreciation)..... (152) 954
-------------------- ----------------------
Net increase (decrease) in net assets from operations....... 1,058 2,200
-------------------- ----------------------
DISTRIBUTIONS
From net investment income
Class A............................................... (20) --
Class B............................................... (203) --
From net realized gain
Class A............................................... (36) (60)
Class B............................................... (988) (1,794)
-------------------- ----------------------
Net decrease in net assets from distributions............... (1,247) (1,854)
-------------------- ----------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions........................................... (5,466) (15,459)
-------------------- ----------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS................. (5,655) (15,113)
NET ASSETS
Beginning of period...................................... 43,296 58,409
-------------------- ----------------------
End of period (including undistributed net investment
income of $106 and $211, respectively)................. $ 37,641 $ 43,296
==================== ======================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets 11
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,
------------------------------------------------------------
2007* 2006 2005 2004 2003**
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 10.64 $ 10.43 $ 10.48 $ 10.31 $ 10.00
------------ ------------ ------------ ------------ ------------
INCOME FROM OPERATIONS
Net investment income (loss) (a)............. .11 .12 .05 .02 .02
Net realized and unrealized gain (loss)...... .20 .43 (.02) .25 .29
------------ ------------ ------------ ------------ ------------
Total income (loss) from operations....... .31 .55 .03 .27 .31
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
From net investment income (b)............... (.14) -- -- -- --
From net realized gain....................... (.25) (.34) (.08) (.10) --
------------ ------------ ------------ ------------ ------------
Total distributions....................... (.39) (.34) (.08) (.10) --
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD.................. $ 10.56 $ 10.64 $ 10.43 $ 10.48 $ 10.31
============ ============ ============ ============ ============
TOTAL RETURN (%) (c)(d)......................... 3.13 5.35 .31 2.61 3.17
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)..... 1,418 1,548 1,883 2,567 3,521
Ratios to average net assets (%) (e):
Operating expenses, net (f)............... 2.10 2.10 2.09 2.10 2.02
Operating expenses, gross................. 2.66 2.60 2.36 2.34 2.24
Net investment income (loss) (e)(f)....... 1.32 1.14 .46 .19 .27
Portfolio turnover rate (%) (c).............. 65.38 74.03 78.54 81.15 38.14
</Table>
* For the six months ended April 30, 2007 (Unaudited).
** For the period January 21, 2003 (commencement of operations) to October
31, 2003.
(a) Average month-end shares outstanding 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 RIMCo as the investment
adviser and transfer agent, and custody credit arrangements.
See accompanying notes which are an integral part of the financial statements.
12 Financial Highlights - Class A
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,
------------------------------------------------------------
2007* 2006 2005 2004 2003**
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD............ $ 10.35 $ 10.22 $ 10.35 $ 10.26 $ 10.00
------------ ------------ ------------ ------------ ------------
INCOME FROM OPERATIONS
Net investment income (loss) (a)............. .03 .04 (.03) (.06) (.04)
Net realized and unrealized gain (loss)...... .24 .43 (.02) .25 .30
------------ ------------ ------------ ------------ ------------
Total income (loss) from operations....... .27 .47 (.05) .19 .26
------------ ------------ ------------ ------------ ------------
DISTRIBUTIONS
From net investment income (b)............... (.06) -- -- -- --
From net realized gain....................... (.25) (.34) (.08) (.10) --
------------ ------------ ------------ ------------ ------------
Total distributions....................... (.31) (.34) (.08) (.10) --
------------ ------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD.................. $ 10.31 $ 10.35 $ 10.22 $ 10.35 $ 10.26
============ ============ ============ ============ ============
TOTAL RETURN (%) (c)(d)......................... 2.62 4.65 (.47) 1.83 2.60
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in thousands)..... 36,223 41,748 56,526 73,969 86,075
Ratios to average net assets (%) (e):
Operating expenses, net (f)............... 2.85 2.85 2.84 2.85 2.79
Operating expenses, gross................. 3.40 3.35 3.11 3.09 3.01
Net investment income (loss) (e)(f)....... .56 .40 (.29) (.56) (.49)
Portfolio turnover rate (%) (c).............. 65.38 74.03 78.54 81.15 38.14
</Table>
* For the six months ended April 30, 2007 (Unaudited)
** For the period January 21, 2003 (commencement of operations) to October
31, 2003.
(a) Average month-end shares outstanding 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 RIMCo as the investment
adviser and transfer agent, and custody credit arrangements.
See accompanying notes which are an integral part of the financial statements.
Financial Highlights - Class B 13
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Russell Investment Company (the "Investment Company" or "RIC") is a series
investment company with 35 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 July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company and Frank Russell Investment Management Company changed
its name to Russell Investment Management Company ("RIMCo").
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,
2007, 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.
14 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (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 New York
Stock Exchange, 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 Fund's obligation (or rights)
under swap contracts which will generally be equal to the net amounts to be
paid or received under the contracts based upon the relative values of the
positions held by each party to the contracts.
If market quotations are not readily available for a security or if
subsequent events suggest that a market quotation is not reliable, the Fund
will use the security's fair value, as determined in accordance with the Fair
Value Procedures. This generally means that equity securities and fixed
income securities listed and traded principally on any national securities
exchange are valued on the basis of the last sale price or, lacking any
sales, at the closing bid price, on the primary exchange 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 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 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; a company development; a natural disaster; or an armed
conflict.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of
SFAS 157 will have on the Fund's financial statement disclosure.
Notes to Financial Statements 15
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 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.
In July 2006, Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes--an interpretation of FASB
Statement 109 (FIN 48) was issued and is effective for fiscal years beginning
after December 15, 2006. FIN 48 sets forth a threshold for financial
statement recognition, measurement and disclosure of a tax position taken or
expected to be taken on a tax return. Management is currently evaluating the
impact, if any, the adoption of FIN 48 will have on the Fund's net assets and
results of operations.
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
RIMCo. 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,
16 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
forwards, structured notes and stripped securities. These instruments offer
unique characteristics and risks that assist the Fund in meeting its
investment strategies.
The Fund typically uses derivatives in two ways: hedging and return
enhancement. The Fund may use a hedging strategy for its cash reserves to
achieve a strategy of being fully invested by exposing those reserves to the
performance of appropriate markets by purchasing equity or fixed income
securities, as appropriate, and/or derivatives. Hedging is also used by the
Fund to limit or control risks, such as adverse movements in exchange rates
and interest rates. Return enhancement can be accomplished through the use of
derivatives in a Fund. By purchasing certain instruments, the Fund may more
effectively achieve the desired portfolio characteristics that assist the
Fund in meeting its investment objectives. Depending on how the derivatives
are structured and utilized, the risks associated with them may vary widely.
These risks are generally categorized as market risk, liquidity risk and
counterparty or credit risk.
Options
The Fund may purchase and sell (write) call and put options on securities and
securities indices, provided such options are traded on a national securities
exchange or in an over-the-counter market.
When the Fund writes a covered call or a put option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets
and Liabilities as an asset and as an equivalent liability. The amount of the
liability is subsequently marked-to-market to reflect the current market
value of the option written. The Fund receives a premium on the sale of a
call option but gives up the opportunity to profit from any increase in stock
value above the exercise price of the option, and when the Fund writes a put
option it is exposed to a decline in the price of the underlying security.
If an option which the Fund has written either expires on its stipulated
expiration date or the Fund enters into a closing purchase transaction, the
Fund realizes a gain (or loss, if the cost of a closing purchase transaction
exceeds the premium received when the option was sold) without regard to any
unrealized gain or loss on the underlying security, and the liability related
to such option is extinguished. If a call option which the Fund has written
is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by the
premium originally received. When a put option which a Fund has written is
exercised, the amount of the premium originally received will reduce the cost
of the security which a Fund purchases upon exercise of the option. Realized
gains (losses) on purchased options are included in net realized gain (loss)
from investments.
The Fund's use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement of Assets and
Liabilities. The face or contract amounts of these instruments reflect the
extent of the Fund's exposure to market risk. The risks may be caused by an
imperfect correlation between movements in the price of the 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 Fund is 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 deprecia-
Notes to Financial Statements 17
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
tion 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 the Fund engages in an interest rate swap, it exchanges its
obligations to pay or rights to receive payments for the obligations or
rights to receive payments of another party (i.e., an exchange of floating
rate payments for fixed rate payments).
The Fund expects to enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of their portfolios or
to protect against any increase in the price of securities they anticipate
purchasing at a later date. The net amount of the excess, if any, of the
Fund's obligations over their entitlements with respect to each interest rate
swap will be accrued on a daily basis and an amount of cash or liquid
high-grade debt securities having an aggregate net asset value at least equal
to the accrued excess will be maintained in a segregated account by the
Fund's custodian. To the extent that the Fund enters into interest rate 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.
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, 2007, purchases and sales of investment
securities (excluding US Government and Agency obligations, short-term
investments, options, futures and repurchase agreements) were $18,910,768 and
$23,020,261, respectively. Purchases and sales of US Government and Agency
obligations (excluding short-term instruments, options, futures and
repurchase agreements) were $5,275,638 and $8,270,787, 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
Advisor and Administrator
RIMCo advises and administers all of the Funds which comprise the Investment
Company. RIMCo 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 RIMCo.
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, 2007, $299,000 of
the RIC Money Market Fund's net assets represents investments by this Fund
and $2,803,112,107 represents the investment by other RIC Funds not presented
herein. As of April 30, 2007, $1,000,000 of the RIC US Government Money
Market Fund's net assets represents investment by this Fund.
18 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The advisory and administrative fees are based upon the average daily net
assets of the Fund and the rate specified in the table below. The advisory
and administrative fees are payable monthly and total $176,711 and $10,040,
respectively, for the period ended April 30, 2007.
<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
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, 2007 was $111,040.
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, 2007,
October 31, 2006, and October 31, 2005, the Adviser has not recouped waivers
of $111,040, $249,134 and $174,205, 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, 2007, the
Fund's custodian fees were reduced $234 under these arrangements which are
included in expense reductions on the Statement of Operations.
Transfer Agent
RIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, RIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. RIMCo 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 presented herein for the period ended April 30, 2007 were $50,202.
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 RIMCo, 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
this 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.
Notes to Financial Statements 19
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Accrued fees payable to affiliates for the period ended April 30, 2007 were
as follows:
<Table>
<Caption>
RUSSELL MULTI-MANAGER
PRINCIPAL PROTECTED
------------------------------------------------------------
Advisory fees $ 28,760
Administration fees 1,600
Distribution fees 22,487
Shareholder servicing fees 7,696
Transfer agent fees 7,927
Trustee fees 295
-------------------
$ 68,765
===================
</Table>
Brokerage Commissions
The Funds will effect transactions through Russell Implementation Services,
Inc. ("RIS") and its global network of unaffiliated correspondent brokers.
RIS is a registered broker and investment adviser and an affiliate of RIMCo.
Trades placed through RIS and its correspondents are made (i) to manage
trading associated with changes in managers, rebalancing across existing
managers, cash flows and other portfolio transitions, or (ii) to execute
portfolio securities transactions selected by money managers or (iii) to
execute portfolio securities transactions for the portion of each Fund's
assets that RIMCo determines not to allocate to money managers, including
assets allocated to the "select holdings" strategy, and for each Fund's cash
reserves.
The Funds effect certain 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 RIMCo. Trades placed through
LJR and its correspondents are used (i) to obtain research services for RIMCo
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 RIMCo or to generate
commission rebates to the Funds, the Funds' money managers are requested to
and RIMCo 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, RIMCo 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 RIMCo 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 RIMCo
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 RIMCo or its affiliates. Similarly, the Funds may
benefit from research provided with respect to trading by those other funds
and clients.
LJR may also rebate to the Funds a portion of commissions earned on certain
trading by the Funds through 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 RIMCo's research budget has
been met, as determined annually in the Soft Dollar Committee budgeting
process.
There was no amount retained by Russell Implementation Services, Inc. for the
period ended April 30, 2007.
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 Russell Investment Company, which has 35
Funds, and Russell Investment Funds ("RIF"), which has nine Funds. Each of
the Trustees is a Trustee for both RIC 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, 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. The Audit Committee Chair and
20 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Investment Committee Chair are each paid a fee of $12,000 per year and the
Nominating and Governance Committee chair are each paid a fee of $6,000 per
year. The chair person of the Board receives additional annual compensation
of $52,000.
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 April 30,
2007, the Funds had no capital loss carryforwards.
At April 30, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
Cost of Investments $ 36,152,064
================
Unrealized Appreciation $ 1,820,065
Unrealized Depreciation (256,612)
----------------
Net Unrealized Appreciation
(Depreciation) $ 1,563,453
================
</Table>
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2007 and October 31, 2006
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
RUSSELL MULTI-MANAGER 2007 2006 2007 2006
PRINCIPAL PROTECTED FUND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold -- -- $ -- $ --
Proceeds from reinvestment of
distributions 5 6 56 57
Payments for shares redeemed (17) (41) (174) (419)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (12) (35) (118) (362)
----------------- ----------------- ----------------- -----------------
Class B
Proceeds from shares sold -- -- -- --
Proceeds from reinvestment of
distributions 110 168 1,118 1,691
Payments for shares redeemed (632) (1,663) (6,466) (16,788)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (522) (1,495) (5,348) (15,097)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (534) (1,530) $ (5,466) $ (15,459)
================= ================= ================= =================
</Table>
7. INTERFUND LENDING PROGRAM
The Investment Company Fund has been granted permission from the Securities
and Exchange Commission to participate in a joint lending and borrowing
facility (the "Credit Facility"). Portfolios of the Investment Company may
borrow money from the RIC Money Market Fund for temporary purposes. All such
borrowing and lending will be subject to the Fund's fundamental investment
limitations. The RIC Money Market Fund will lend through the program only
when the returns are higher than those available from an investment in
repurchase agreements or short-term reserves. The Investment Company Fund
will borrow through the program only when the costs are equal to or lower
than the cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be called
on one business day's notice. The Fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed. Any delay
in repayment to the RIC Money Market Fund could result in a lost investment
opportunity of additional borrowing costs. The Fund did not borrow through
the program for the period ended April 30, 2007.
8. RECORD OWNERSHIP
As of April 30, 2007, the Fund had no shareholders of record with greater
than 10% of the total outstanding shares.
Notes to Financial Statements 21
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, RIMCo, 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 RIMCo. 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
RIMCo. 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.
22 Investment Objective and Investment Strategy during the Guarantee Period
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 RIMCo
(the "RIMCo Agreement") and the portfolio management contract with each Money
Manager of the Fund (collectively, the "portfolio management contracts") at a
meeting held on April 24, 2007. 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 RIMCo. In preparation for the annual review, the Independent Trustees, with
the advice and assistance of their independent counsel, also requested and the
Board considered (1) information and reports prepared by RIMCo relating to the
services provided by RIMCo (and its affiliates) to the Fund; (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 RIMCo believed by the provider to
be generally comparable in investment objectives and size to the Fund; and (3)
RIMCo's response to questions from the Board concerning the Third-Party
Information addressing, among other things, performance and expense
differentials between the Fund and its Comparable Funds. The foregoing
information requested by the Trustees or provided by RIMCo is collectively
called the "Agreement Renewal Information." The Independent Trustees also
received a memorandum from their independent counsel discussing the legal
standards for their consideration of the proposed continuances.
On April 23, 2007, the Independent Trustees met to review the Agreement Renewal
Information in a private session with their independent counsel at which no
representatives of RIMCo or management were present. At the April 24 meeting of
the Board of Trustees, the Board, including the Independent Trustees, reviewed
the proposed continuance of the RIMCo Agreement and the portfolio management
contracts with management and independent counsel to the Independent Trustees.
Presentation made by RIMCo to the Board as part of this review encompassed the
Fund and all other RIMCo-managed funds for which the Board has supervisory
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 analyses received from RIMCo 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. RIMCo has engaged multiple
Money Managers for the Fund.
The Board considered that RIMCo (rather than any Money Manager) is responsible
under the RIMCo Agreement for determining, implementing and maintaining the
investment program for the Fund consistent with the contractual restraints
imposed upon the Fund by its financial guarantee insurance agreement. Assets of
the Fund have been allocated among the multiple Money Managers selected by
RIMCo, subject to Board approval. RIMCo directly manages the investment of the
Fund's cash reserves. RIMCo also may manage directly any portion of the Fund's
assets that RIMCo determines not to allocate to the Money Managers and portions
of the Fund during transitions between Money Managers. Assets are managed
directly by RIMCo in accordance with the RIMCo Agreement.
RIMCo is responsible for selecting, subject to Board approval, Money Managers
for the Fund and for actively managing allocations and reallocations of its
assets among the Money Managers consistent with the contractual restraints
imposed upon the Fund by its financial guarantee insurance agreement. RIMCo's
goal is to construct and manage diversified portfolios in a risk aware manner.
Each Money Manager for the Fund in effect performs the function of an individual
portfolio manager who is responsible for selecting portfolio securities for the
portion of the Fund assigned to it by RIMCo (each, a "segment") in accordance
with the Fund's applicable investment objective, policies and restrictions, any
constraints placed by RIMCo upon their selection of portfolio securities and the
Money Manager's specified role in the Fund. RIMCo is responsible for
communicating performance expectations to each Money Manager; supervising
compliance by each Money Manager with the Fund's investment objective and
policies; authorizing Money Managers to engage in certain investment strategies
for the Fund; and recommending annually to the Board whether portfolio
management contracts should be renewed, modified or terminated. In addition to
its annual recommendation as to the renewal, modification or termination of
portfolio management contracts, RIMCo is responsible for recommending to the
Board the restructuring of Fund segments and additions of new Money Managers or
replacements of existing Money Managers at any time when, based on RIMCo's
research and ongoing review and analysis, such actions are appropriate. RIMCo
may assign specific investment constraints from time to time for each Money
Manager intended to capitalize on the strengths of that Money Manager or to
coordinate the investment activities of Money Managers for the Fund in a
complementary manner. Therefore, RIMCo's selection
Basis for Approval of Investment Advisory Contracts 23
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
of Money Managers is made not only on the basis of performance considerations
but anticipated compatibility with other Money Managers in the same Fund. In
light of the foregoing, the overall performance of the Fund over appropriate
periods reflects, in great part, the performance of RIMCo in designing the
Fund's investment program, structuring the Fund, selecting an effective Money
Manager with a particular investment style or sub-style for a segment that is
complementary to the styles of the Money Managers of other Fund segments, and
allocating assets among the Money Managers in a manner designed to achieve the
objectives of the Fund.
The Board also considered that the prospectus for the Fund and other public
disclosures emphasize to investors RIMCo's role as the principal investment
manager for the Fund, rather than the investment selection role of the Fund's
Money Managers, and describe the manner in which the Fund operates so that
investors may take that information into account when deciding to purchase
shares of the Fund.
The Board also considered the special expertise of RIMCo with respect to the
manager-of-managers structure of the Fund and the likelihood that, at the
current expense ratio of the Fund, there would be no acceptable alternative
investment managers to replace RIMCo on comparable terms given the need to
continue 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 RIMCo Agreement, including
the following:
1. The nature, scope and quality of the services provided to the Fund by RIMCo;
2. The advisory fee paid by the Fund to RIMCo and the fact that it encompasses
all investment advisory fees paid by the Fund, including the fees for any
Money Managers of the Fund;
3. Information provided by RIMCo as to other fees and benefits received by RIMCo
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 RIMCo as to expenses incurred by the Fund; and
5. Information provided by RIMCo as to the profits that RIMCo derives from its
mutual fund operations generally and from the Fund.
At the April 24 Board meeting, RIMCo and management discussed the reasonableness
of the Fund's investment advisory fees. On the basis of the Agreement Renewal
Information and other information previously received by the Board from RIMCo
during the course of the year or presented at the April 24 Board meeting by
RIMCo, the Board, in respect of the Fund, found, after giving effect to any
applicable waivers and/or reimbursements and considering differences in the
composition and investment strategies of its Comparable Funds (1) the advisory
fee charged by RIMCo to be reasonable in light of the nature, scope and quality
of the services provided to the Fund; (2) the relative expense ratio of the Fund
was comparable to those of its Comparable Funds; (3) RIMCo's methodology of
allocating expenses of operating funds in the complex was reasonable; and (4)
RIMCo's profitability with respect to the Fund was not excessive in light of the
nature, scope and quality of the services provided by RIMCo. The Board also
concluded that the performance of the Fund, in light of its particular
circumstances, supported continuation of the RIMCo Agreement. 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
environments at the time of the Fund's "inception." The Fund's allocation to
equities is not determined by RIMCo but rather is prescribed contractually by
the terms of the Fund's financial guarantee insurance agreement.
At the April 24 Board meeting, the Board considered for the Fund whether
economies of scale have been realized and whether the fees for the Fund
appropriately reflect or should be revised to reflect any such economies. The
Board noted that Fund assets have been declining rather than increasing. The
Trustees considered that fees payable to RIMCo by institutional clients with
investment objectives similar to those of funds under its supervision are lower,
and may, in some cases, be substantially lower, than the rates paid by such
funds. The Trustees reviewed with RIMCo the differences in the scope of services
it provides to institutional clients and the funds under its supervision. In
response to the Trustees' inquiries, RIMCo noted, among other things, that
institutional clients have fewer administrative needs than the Fund and the
other funds supervised by the Board. It was further noted by RIMCo that since
the funds supervised by the Board must constantly issue and redeem its shares,
it is more difficult to manage than
24 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
institutional accounts, where assets are relatively stable. Accordingly, the
Trustees did not regard these fee differences as relevant to their
deliberations.
After considering the foregoing and other relevant factors, the Board concluded
that continuation of the RIMCo Agreement on its current terms and conditions
would be in the best interests of the Fund and its shareholders and voted to
approve the continuation of the agreement.
At the April 24 Board meeting, with respect to the evaluation of the terms of
portfolio management contracts with Money Managers, the Board received and
considered information from RIMCo reporting for each Money Manager, among other
things, the Money Manager's performance over various periods; RIMCo's assessment
of the performance of each Money Manager; any significant business relationships
between the Money Manager and RIMCo or Russell Fund Distributors, Inc., the
Fund's underwriter; and RIMCo'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. RIMCo recommended that each Money Manager be
retained at its current fee rate. RIMCo 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 RIMCo; RIMCo is aware of the fees charged by Money Managers to other
clients; and RIMCo 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 RIMCo's explanation in light of the Board's
findings as to the reasonableness of the aggregate investment advisory fees paid
by the Fund and the fact that the Money Manager's fee is paid by RIMCo.
Based substantially upon RIMCo's recommendations together with the information
received from RIMCo in support of its recommendations at the April 24 meeting,
the Board concluded that the fees paid to the Money Managers of the Fund are
reasonable in light of the quality of the investment advisory services provided
and that continuation of the portfolio management agreement with the Money
Managers of the Fund would be in the best interests of the Fund and its
shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the RIMCo Agreement or, other than RIMCo'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.
Basis for Approval of Investment Advisory Contracts 25
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 RIMCo, as RIC'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 Fund may be
invested. RIMCo has established a proxy voting committee ("Committee") and has
adopted written proxy voting policies and procedures ("P&P") and proxy voting
guidelines ("Guidelines"). The Fund maintains 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 Fund's 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.
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.
To reduce expenses, we may mail only one copy of the Fund's prospectus and each
annual and semi-annual report to those addresses shared by two or more accounts.
If you wish to receive individual copies of these documents, please call us at
(800) 787-7354 or contact your financial institution and we will begin sending
you individual copies thirty days after receiving your request.
Some Financial Intermediaries may offer electronic delivery of the Fund's
prospectus and annual and semiannual reports. Please contact your Financial
Intermediary for further details.
26 Shareholder Requests for Additional Information
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2007
(UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Russell Investment
Company ("RIC"), which has 35 funds, and Russell Investment Funds ("RIF"), which
has nine funds. Each of the trustees is a trustee of both RIC 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
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Thaddas L. Alston, Trustee since Appointed until - Senior Vice President, Larco 44 None
Born April 7, 1945 2006 successor is Investments, Ltd.
duly elected
909 A Street and qualified
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 44 - Director, Avista
Born January 22, 2000 successor is Blake, P.S. (accounting Corp;
1954 duly elected services) - Trustee,
Chairperson and qualified - Director and Chairman of the Principal
909 A Street since 2005 Audit Committee, Avista Investors Fund
Tacoma, Washington Annual Corp. (investment
98402-1616 - Trustee and Chairman of the company);
Operations and Distribution - Trustee,
Committee, WM Group of Principal
Funds, 1999-2006 Variable
- February 2002 to June 2005, Contracts Fund
Chairman of the Audit (investment
Committee, RIC and RIF company)
- Regent, University of
Washington
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 44 None
Born June 6, 1946 2003 successor is Vice President and Chief
Chairman of duly elected Financial Officer, Waddell &
909 A Street Audit Committee and qualified Reed Financial, Inc.
Tacoma, Washington since 2005 - 2003, Retired
98402-1616 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 27
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Jonathan Fine, Trustee since Appointed until - President and Chief 44 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 44 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected several additional
1955 Chairman of the and qualified. subsidiary companies,
Nominating and including Simpson Timber
909 A Street Governance Appointed until Company, Simpson Paper
Tacoma, Washington Committee since successor is Company and Simpson Tacoma
98402-1616 2007 duly elected Kraft Company
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack R. Thompson, Trustee since Appointed until - September 2003 to present, 44 - 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
28 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 44 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 RIMCo
Tacoma, Washington - Chairman Emeritus, RIC and
98402-1616 RIF; Russell Implementation
Services Inc. (broker-dealer
and investment adviser
("RIS")); Russell 20-20
Association (non-profit
corporation); and Russell
Trust Company (non-
depository trust company
("RTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee Emeritus Five year term - President, Anderson 44 None
Born October 15, since 2007 Management Group LLC
1931 (private investments
consulting)
909 A Street - February 2002 to June 2005,
Tacoma, Washington Lead Trustee, RIC and RIF
98402-1616 - Trustee of RIC and RIF Until
2006
- Chairman of the Nominating
and Governance Committee
2006
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 44 None
Born December 1, since 2003 - Trustee of RIC and RIF Until
1919 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 44 None
Born June 8, 1925 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 44 None
Born October 6, since 2006 - Trustee of RIC and RIF Until
1930 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of RIC and
RIF.
Disclosure of Information about Fund Directors 29
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 44 None
Born May 5, 1926 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
30 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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, RIC
Born December 16, 1966 Officer since by Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, RIMCo
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, RIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, RIMCo
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, RIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, RIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, RIMCo, RTC 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, RIC, RIF, FRC, RTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, RIMCo and RFD
2004 - 1999 to 2003, Chief Financial Officer, FRC, RIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Gregory J. Lyons, Secretary since Until successor - Associate General Counsel and Assistant Secretary FRC
Born August 24, 1960 2007 is chosen and and RIA
qualified by - Director and Secretary, RIMCo and RFD
909 A Street Trustees - Secretary and Chief Legal Counsel, RIC and RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 31
RUSSELL MULTI-MANAGER PRINCIPAL PROTECTED FUND
RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul E. Anderson
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
Gregory J. Lyons, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Josiah Quincy Building
200 Newport Avenue
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF APRIL 30, 2007*
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Lehman Brothers Asset Management, Chicago, IL
* A complete list of current money mangers can also be found at
www.Russell.com.
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 Russell Investment Company.
Such offering is made only by Prospectus, which includes details as to offering
price and other material information.
32 Manager, Money Managers and Service Providers
(RUSSELL LOGO)
Russell Investment Company
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com
On July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company, and Frank Russell Investment Management Company changed its
name to Russell Investment Management Company.
36-08-095 (1 04/07)
LIFEPOINTS(R) FUNDS
2007 Semiannual Report
CLASS A, C, E, R1, R2, R3, AND S SHARES:
EQUITY GROWTH STRATEGY FUND (formerly Equity Aggressive Strategy Fund)
GROWTH STRATEGY FUND (formerly Aggressive 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, 2007
(RUSSELL LOGO)
Russell Investment Company
Russell Investment Company is a series investment company with 35 different
investment portfolios referred to as Funds. These financial statements report on
nine of these Funds.
Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Russell Investment Company
LifePoints(R) Funds
Semiannual Report
April 30, 2007 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Equity Growth Strategy Fund.......................................... 3
Growth 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
Statements 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>
Russell Investment Company - LifePoints Funds.
Copyright (c) Russell Investment Group 2007. 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 changed its name to
Russell Investment Company ("RIC"). RIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Russell Investment Management Company
("RIMCo"). Effective July 1, 2006 RIMCo changed its name from Frank 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.
RUSSELL INVESTMENT COMPANY
EQUITY GROWTH STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,100.70 $ 1,023.55
Expenses Paid During
Period* $ 1.30 $ 1.25
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,095.90 $ 1,019.84
Expenses Paid During
Period* $ 5.20 $ 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 E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,100.70 $ 1,023.55
Expenses Paid During
Period* $ 1.30 $ 1.25
</Table>
* 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.
Equity Growth Strategy Fund 3
RUSSELL INVESTMENT COMPANY
EQUITY GROWTH STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R1 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,101.50 $ 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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,100.40 $ 1,023.55
Expenses Paid During
Period* $ 1.30 $ 1.25
</Table>
* 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 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,099.50 $ 1,022.32
Expenses Paid During
Period* $ 2.60 $ 2.51
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,101.50 $ 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.
4 Equity Growth Strategy Fund
RUSSELL INVESTMENT COMPANY
EQUITY GROWTH STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Other Russell Investment Company Series Mutual
Funds - Class S Shares
Domestic Equities - 64.8%
Diversified Equity Fund 10,146,050 516,941
Quantitative Equity Fund 11,643,373 497,405
Real Estate Securities Fund 2,477,899 138,886
Special Growth Fund 2,606,591 139,036
------------
1,292,268
------------
International Equities - 35.0%
Emerging Markets Fund 4,503,447 100,337
Global Equity Fund 13,282,616 139,202
International Securities Fund 5,642,550 457,836
------------
697,375
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $1,585,713) 1,989,643
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 3,233
------------
NET ASSETS - 100.0% 1,992,876
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Domestic Equities 64.8
International Equities 35.0
---------------
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.
Equity Growth Strategy Fund 5
RUSSELL INVESTMENT COMPANY
GROWTH STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,084.30 $ 1,023.55
Expenses Paid During
Period* $ 1.29 $ 1.25
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,080.10 $ 1,019.84
Expenses Paid During
Period* $ 5.16 $ 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 E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,084.20 $ 1,023.55
Expenses Paid During
Period* $ 1.29 $ 1.25
</Table>
* 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.
6 Growth Strategy Fund
RUSSELL INVESTMENT COMPANY
GROWTH STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R1 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,085.90 $ 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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,084.90 $ 1,023.55
Expenses Paid During
Period* $ 1.29 $ 1.25
</Table>
* 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 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,082.70 $ 1,022.32
Expenses Paid During
Period* $ 2.58 $ 2.51
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,085.90 $ 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.
Growth Strategy Fund 7
RUSSELL INVESTMENT COMPANY
GROWTH STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.9%
Other Russell Investment Company Series Mutual
Funds -Class S Shares
Bonds - 20.1%
Multistrategy Bond Fund 76,654,255 797,204
------------
Domestic Equities - 52.7%
Diversified Equity Fund 16,293,049 830,131
Quantitative Equity Fund 18,532,400 791,704
Real Estate Securities Fund 4,195,391 235,152
Special Growth Fund 4,425,090 236,034
------------
2,093,021
------------
International Equities - 27.1%
Emerging Markets Fund 7,286,647 162,347
Global Equity Fund 22,626,860 237,129
International Securities Fund 8,328,821 675,801
------------
1,075,277
------------
TOTAL INVESTMENTS - 99.9%
(identified cost $3,301,149) 3,965,502
OTHER ASSETS AND LIABILITIES,
NET - 0.1% 5,053
------------
NET ASSETS - 100.0% 3,970,555
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 20.1
Domestic Equities 52.7
International Equities 27.1
---------------
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.
8 Growth Strategy Fund
RUSSELL INVESTMENT COMPANY
BALANCED STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,070.10 $ 1,023.55
Expenses Paid During
Period* $ 1.28 $ 1.25
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,065.80 $ 1,019.84
Expenses Paid During
Period* $ 5.12 $ 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 E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,070.00 $ 1,023.55
Expenses Paid During
Period* $ 1.28 $ 1.25
</Table>
* 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
RUSSELL INVESTMENT COMPANY
BALANCED STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R1 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,071.00 $ 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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,070.20 $ 1,023.55
Expenses Paid During
Period* $ 1.28 $ 1.25
</Table>
* 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 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,069.50 $ 1,022.32
Expenses Paid During
Period* $ 2.57 $ 2.51
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,071.00 $ 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.
10 Balanced Strategy Fund
RUSSELL INVESTMENT COMPANY
BALANCED STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.9%
Other Russell Investment Company Series Mutual
Funds - Class S Shares
Bonds - 39.8%
Multistrategy Bond Fund 212,781,702 2,212,930
------------
Domestic Equities - 38.8%
Diversified Equity Fund 16,346,781 832,868
Quantitative Equity Fund 19,454,701 831,105
Real Estate Securities Fund 4,866,890 272,789
Special Growth Fund 4,122,834 219,912
------------
2,156,674
------------
International Equities - 21.3%
Emerging Markets Fund 7,718,547 171,969
Global Equity Fund 21,227,304 222,462
International Securities Fund 9,707,220 787,644
------------
1,182,075
------------
TOTAL INVESTMENTS - 99.9%
(identified cost $4,725,827) 5,551,679
OTHER ASSETS AND LIABILITIES,
NET - 0.1% 7,212
------------
NET ASSETS - 100.0% 5,558,891
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 39.8
Domestic Equities 38.8
International Equities 21.3
---------------
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.
Balanced Strategy Fund 11
RUSSELL INVESTMENT COMPANY
MODERATE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,053.10 $ 1,023.55
Expenses Paid During
Period* $ 1.27 $ 1.25
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,049.50 $ 1,019.84
Expenses Paid During
Period* $ 5.08 $ 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 E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,053.10 $ 1,023.55
Expenses Paid During
Period* $ 1.27 $ 1.25
</Table>
* 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
RUSSELL INVESTMENT COMPANY
MODERATE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R1 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,055.10 $ 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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,052.40 $ 1,023.55
Expenses Paid During
Period* $ 1.27 $ 1.25
</Table>
* 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 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,051.60 $ 1,022.32
Expenses Paid During
Period* $ 2.54 $ 2.51
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,054.20 $ 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.
Moderate Strategy Fund 13
RUSSELL INVESTMENT COMPANY
MODERATE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.9%
Other Russell Investment Company Series Mutual
Funds - Class S Shares
Bonds - 60.0%
Multistrategy Bond Fund 69,006,745 717,670
------------
Domestic Equities - 25.9%
Diversified Equity Fund 2,345,721 119,515
Quantitative Equity Fund 2,797,723 119,519
Real Estate Securities Fund 631,529 35,397
Special Growth Fund 668,262 35,645
------------
310,076
------------
International Equities - 14.0%
Emerging Markets Fund 1,063,335 23,691
Global Equity Fund 3,417,835 35,819
International Securities Fund 1,322,642 107,319
------------
166,829
------------
TOTAL INVESTMENTS - 99.9%
(identified cost $1,060,406) 1,194,575
OTHER ASSETS AND LIABILITIES,
NET - 0.1% 1,375
------------
NET ASSETS - 100.0% 1,195,950
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 60.0
Domestic Equities 25.9
International Equities 14.0
---------------
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.
14 Moderate Strategy Fund
RUSSELL INVESTMENT COMPANY
CONSERVATIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,034.20 $ 1,023.55
Expenses Paid During
Period* $ 1.26 $ 1.25
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,031.50 $ 1,019.84
Expenses Paid During
Period* $ 5.04 $ 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 E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,035.00 $ 1,023.55
Expenses Paid During
Period* $ 1.26 $ 1.25
</Table>
* 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
RUSSELL INVESTMENT COMPANY
CONSERVATIVE STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R1 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
December 29, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,023.70 $ 1,016.85
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 123/365 (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 R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,034.10 $ 1,023.55
Expenses Paid During
Period* $ 1.26 $ 1.25
</Table>
* 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 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,033.60 $ 1,022.32
Expenses Paid During
Period* $ 2.52 $ 2.51
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,036.20 $ 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.
16 Conservative Strategy Fund
RUSSELL INVESTMENT COMPANY
CONSERVATIVE STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 100.0%
Other Russell Investment Company Series Mutual
Funds - Class S Shares
Bonds - 80.2%
Multistrategy Bond Fund 27,444,318 285,421
Short Duration Bond Fund 5,078,662 94,971
------------
380,392
------------
Domestic Equities - 13.8%
Diversified Equity Fund 552,650 28,157
Quantitative Equity Fund 550,811 23,531
Real Estate Securities Fund 249,618 13,991
------------
65,679
------------
International Equities - 6.0%
Global Equity Fund 896,707 9,397
International Securities Fund 232,471 18,863
------------
28,260
------------
TOTAL INVESTMENTS - 100.0%
(identified cost $439,530) 474,331
OTHER ASSETS AND LIABILITIES,
NET - 0.0% 156
------------
NET ASSETS - 100.0% 474,487
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 80.2
Domestic Equities 13.8
International Equities 6.0
---------------
Total Investments 100.0
Other Assets and Liabilities, Net 0.0
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Conservative Strategy Fund 17
RUSSELL INVESTMENT COMPANY
2010 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,052.50 $ 1,023.55
Expenses Paid During
Period* $ 1.27 $ 1.25
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,052.50 $ 1,023.55
Expenses Paid During
Period* $ 1.27 $ 1.25
</Table>
* 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 R1 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,053.70 $ 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.
18 2010 Strategy Fund
RUSSELL INVESTMENT COMPANY
2010 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 10, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,051.20 $ 1,022.43
Expenses Paid During
Period* $ 1.16 $ 1.14
</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 172/365 (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 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,051.50 $ 1,022.32
Expenses Paid During
Period* $ 2.54 $ 2.51
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,052.70 $ 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.
2010 Strategy Fund 19
RUSSELL INVESTMENT COMPANY
2010 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 100.0%
Other Russell Investment Company Series Mutual
Funds - Class S Shares
Bonds - 62.3%
Multistrategy Bond Fund 1,196,670 12,445
Short Duration Bond Fund 22,144 414
------------
12,859
------------
Domestic Equities - 24.6%
Diversified Equity Fund 38,409 1,957
Quantitative Equity Fund 45,917 1,962
Real Estate Securities Fund 10,910 611
Special Growth Fund 10,327 551
------------
5,081
------------
International Equities - 13.1%
Emerging Markets Fund 16,518 368
Global Equity Fund 56,763 595
International Securities Fund 21,554 1,749
------------
2,712
------------
TOTAL INVESTMENTS - 100.0%
(identified cost $19,968) 20,652
OTHER ASSETS AND LIABILITIES,
NET - 0.0% (5)
------------
NET ASSETS - 100.0% 20,647
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 62.3
Domestic Equities 24.6
International Equities 13.1
---------------
Total Investments 100.0
Other Assets and Liabilities, Net 0.0
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
20 2010 Strategy Fund
RUSSELL INVESTMENT COMPANY
2020 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,072.90 $ 1,023.55
Expenses Paid During
Period* $ 1.28 $ 1.25
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,072.40 $ 1,023.55
Expenses Paid During
Period* $ 1.28 $ 1.25
</Table>
* 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 R1 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,074.40 $ 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.
2020 Strategy Fund 21
RUSSELL INVESTMENT COMPANY
2020 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,073.40 $ 1,023.55
Expenses Paid During
Period* $ 1.29 $ 1.25
</Table>
* 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 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,071.60 $ 1,022.32
Expenses Paid During
Period* $ 2.57 $ 2.51
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,074.40 $ 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.
22 2020 Strategy Fund
RUSSELL INVESTMENT COMPANY
2020 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.9%
Other Russell Investment Company Series Mutual
Funds - Class S Shares
Bonds - 39.2%
Multistrategy Bond Fund 2,277,201 23,683
------------
Domestic Equities - 39.5%
Diversified Equity Fund 180,209 9,182
Quantitative Equity Fund 215,144 9,191
Real Estate Securities Fund 53,942 3,023
Special Growth Fund 46,120 2,460
------------
23,856
------------
International Equities - 21.2%
Emerging Markets Fund 82,098 1,829
Global Equity Fund 235,245 2,465
International Securities Fund 105,074 8,526
------------
12,820
------------
TOTAL INVESTMENTS - 99.9%
(identified cost $57,839) 60,359
OTHER ASSETS AND LIABILITIES,
NET - 0.1% 50
------------
NET ASSETS - 100.0% 60,409
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 39.2
Domestic Equities 39.5
International Equities 21.2
---------------
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.
2020 Strategy Fund 23
RUSSELL INVESTMENT COMPANY
2030 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,095.90 $ 1,023.55
Expenses Paid During
Period* $ 1.30 $ 1.25
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,096.00 $ 1,023.55
Expenses Paid During
Period* $ 1.30 $ 1.25
</Table>
* 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 R1 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,097.20 $ 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.
24 2030 Strategy Fund
RUSSELL INVESTMENT COMPANY
2030 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,096.30 $ 1,023.55
Expenses Paid During
Period* $ 1.30 $ 1.25
</Table>
* 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 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,094.10 $ 1,022.32
Expenses Paid During
Period* $ 2.60 $ 2.51
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,096.30 $ 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.
2030 Strategy Fund 25
RUSSELL INVESTMENT COMPANY
2030 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Other Russell Investment Company Series Mutual
Funds - Class S Shares
Bonds - 6.0%
Multistrategy Bond Fund 241,531 2,512
------------
Domestic Equities - 61.2%
Diversified Equity Fund 194,976 9,934
Quantitative Equity Fund 232,765 9,944
Real Estate Securities Fund 49,371 2,767
Special Growth Fund 51,911 2,769
------------
25,414
------------
International Equities - 32.6%
Emerging Markets Fund 87,233 1,944
Global Equity Fund 264,736 2,774
International Securities Fund 108,423 8,797
------------
13,515
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $38,991) 41,441
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 72
------------
NET ASSETS - 100.0% 41,513
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Bonds 6.0
Domestic Equities 61.2
International Equities 32.6
---------------
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.
26 2030 Strategy Fund
RUSSELL INVESTMENT COMPANY
2040 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,100.00 $ 1,023.55
Expenses Paid During
Period* $ 1.30 $ 1.25
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,101.00 $ 1,023.55
Expenses Paid During
Period* $ 1.30 $ 1.25
</Table>
* 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 R1 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,101.20 $ 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.
2040 Strategy Fund 27
RUSSELL INVESTMENT COMPANY
2040 STRATEGY FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS R2 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,100.70 $ 1,023.55
Expenses Paid During
Period* $ 1.30 $ 1.25
</Table>
* 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 PERFORMANCE BEFORE EXPENSES)
- -------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,099.00 $ 1,022.32
Expenses Paid During
Period* $ 2.60 $ 2.51
</Table>
* 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,101.20 $ 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.
28 2040 Strategy Fund
RUSSELL INVESTMENT COMPANY
2040 STRATEGY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 99.8%
Other Russell Investment Company Series Mutual
Funds - Class S Shares
Domestic Equities - 64.8%
Diversified Equity Fund 131,873 6,719
Quantitative Equity Fund 157,671 6,736
Real Estate Securities Fund 32,701 1,833
Special Growth Fund 34,479 1,839
------------
17,127
------------
International Equities - 35.0%
Emerging Markets Fund 58,938 1,313
Global Equity Fund 176,188 1,846
International Securities Fund 74,989 6,085
------------
9,244
------------
TOTAL INVESTMENTS - 99.8%
(identified cost $24,417) 26,371
OTHER ASSETS AND LIABILITIES,
NET - 0.2% 45
------------
NET ASSETS - 100.0% 26,416
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Domestic Equities 64.8
International Equities 35.0
---------------
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.
2040 Strategy Fund 29
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
EQUITY GROWTH GROWTH STRATEGY BALANCED STRATEGY MODERATE STRATEGY
AMOUNTS IN THOUSANDS STRATEGY FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 1,585,713 $ 3,301,149 $ 4,725,827 $ 1,060,406
- -------------------------------------------------------------------------------------------------------------------------------
Investments, at market 1,989,643 3,965,502 5,551,679 1,194,575
Receivables:
Investments sold -- -- -- 4,074
Fund shares sold 10,155 14,869 21,133 3,601
From Adviser 111 251 389 90
Prepaid expenses 122 213 243 63
------------------- ------------------- ------------------- --------------------
Total assets 2,000,031 3,980,835 5,573,444 1,202,403
------------------- ------------------- ------------------- --------------------
LIABILITIES
Payables:
Investments purchased 2,684 1,504 2,977 --
Fund shares redeemed 3,570 7,053 9,132 5,902
Accrued fees to affiliates 865 1,683 2,396 513
Other accrued expenses 36 40 48 38
------------------- ------------------- ------------------- --------------------
Total liabilities 7,155 10,280 14,553 6,453
------------------- ------------------- ------------------- --------------------
NET ASSETS $ 1,992,876 $ 3,970,555 $ 5,558,891 $ 1,195,950
=================== =================== =================== ====================
Net Assets Consist of:
Undistributed (overdistributed)
net investment income $ (841) $ (1,568) $ (2,303) $ (504)
Accumulated net realized gain
(loss) 23,668 105,564 92,327 14,106
Unrealized appreciation
(depreciation) on investments 403,930 664,353 825,852 134,169
Shares of beneficial interest 1,549 3,076 4,455 1,021
Additional paid-in capital 1,564,570 3,199,130 4,638,560 1,047,158
------------------- ------------------- ------------------- --------------------
NET ASSETS $ 1,992,876 $ 3,970,555 $ 5,558,891 $ 1,195,950
=================== =================== =================== ====================
</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
- -------------------------------------------------------------------------------------------------
$ 439,530 $ 19,968 $ 57,839 $ 38,991 $ 24,417
- -------------------------------------------------------------------------------------------------
474,331 20,652 60,359 41,441 26,371
19 -- -- -- 5
1,252 44 225 162 63
55 17 14 13 12
32 5 8 8 8
-------------- -------------- -------------- -------------- --------------
475,689 20,718 60,606 41,624 26,459
-------------- -------------- -------------- -------------- --------------
-- 10 99 70 --
964 31 63 10 13
202 6 16 11 8
36 24 19 20 22
-------------- -------------- -------------- -------------- --------------
1,202 71 197 111 43
-------------- -------------- -------------- -------------- --------------
$ 474,487 $ 20,647 $ 60,409 $ 41,513 $ 26,416
============== ============== ============== ============== ==============
$ (201) $ (5) $ (7) $ (10) $ (10)
1,073 217 760 905 671
34,801 684 2,520 2,450 1,954
435 19 51 34 21
438,379 19,732 57,085 38,134 23,780
-------------- -------------- -------------- -------------- --------------
$ 474,487 $ 20,647 $ 60,409 $ 41,513 $ 26,416
============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 31
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
EQUITY GROWTH GROWTH 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* $ 13.15 $ 12.91 $ 12.48 $ 11.71
Maximum offering price per
share (Net asset value plus
sales charge of 5.75%):
Class A $ 13.95 $ 13.70 $ 13.24 $ 12.42
Class A -- Net assets $ 314,204,640 $ 896,291,405 $ 1,205,850,718 $ 187,322,137
Class A -- Shares
outstanding ($.01 par
value) 23,899,702 69,422,428 96,644,554 16,002,018
Net asset value per share:
Class C* $ 12.53 $ 12.82 $ 12.41 $ 11.65
Class C -- Net assets $ 563,021,189 $ 1,045,985,300 $ 1,576,867,410 $ 276,982,135
Class C -- Shares
outstanding ($.01 par
value) 44,941,980 81,589,726 127,097,342 23,774,445
Net asset value per share:
Class E* $ 12.92 $ 12.93 $ 12.50 $ 11.71
Class E -- Net assets $ 295,008,330 $ 595,460,028 $ 712,099,781 $ 205,278,100
Class E -- Shares
outstanding ($.01 par
value) 22,825,233 46,060,398 56,958,618 17,523,498
Net asset value per share:
Class R1* $ 13.09 $ 13.00 $ 12.56 $ 11.75
Class R1 -- Net assets $ 3,628,131 $ 8,167,873 $ 15,473,011 $ 710,306
Class R1 -- Shares
outstanding ($.01 par
value) 277,081 628,467 1,231,959 60,444
Net asset value per share:
Class R2* $ 12.93 $ 12.94 $ 12.50 $ 11.71
Class R2 -- Net assets $ 22,678,036 $ 14,871,029 $ 20,766,398 $ 3,401,808
Class R2 -- Shares
outstanding ($.01 par
value) 1,753,456 1,149,608 1,661,877 290,555
Net asset value per share:
Class R3* $ 12.91 $ 12.95 $ 12.50 $ 11.74
Class R3 -- Net assets $ 510,132,521 $ 929,927,535 $ 1,259,231,517 $ 386,188,194
Class R3 -- Shares
outstanding ($.01 par
value) 39,525,803 71,803,409 100,719,500 32,883,412
Net asset value per share:
Class S* $ 13.10 $ 13.00 $ 12.56 $ 11.75
Class S -- Net assets $ 284,202,938 $ 479,851,549 $ 768,602,240 $ 136,067,389
Class S -- Shares
outstanding ($.01 par
value) 21,699,891 36,924,327 61,192,739 11,582,610
- ---------------------------------------------------------------------------------------------------------------------------
* 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.
32 Statement of Assets and Liabilities
<Table>
<Caption>
CONSERVATIVE STRATEGY 2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------
$ 10.89 $ 11.08 $ 11.81 $ 12.26 $ 12.44
$ 11.55 $ 11.76 $ 12.53 $ 13.01 $ 13.20
$ 50,550,475 $ 1,569,475 $ 1,727,298 $ 3,284,467 $ 1,831,090
4,643,218 141,595 146,207 267,870 147,216
$ 10.84 $ -- $ -- $ -- $ --
$ 90,046,995 $ -- $ -- $ -- $ --
8,305,400 -- -- -- --
$ 10.91 $ 11.10 $ 11.81 $ 12.27 $ 12.45
$ 84,787,899 $ 4,201,042 $ 6,738,018 $ 8,858,248 $ 5,499,650
7,769,390 378,551 570,301 722,014 441,787
$ 10.94 $ 11.10 $ 11.82 $ 12.27 $ 12.46
$ 940,851 $ 1,331,502 $ 10,989,139 $ 1,819,446 $ 926,783
85,993 119,915 929,739 148,258 74,397
$ 10.91 $ 11.10 $ 11.81 $ 12.26 $ 12.45
$ 2,759,819 $ 410,393 $ 3,106,966 $ 2,333,828 $ 1,419,514
253,019 36,983 263,098 190,398 114,007
$ 10.94 $ 11.09 $ 11.79 $ 12.26 $ 12.43
$ 194,969,236 $ 8,848,106 $ 27,072,417 $ 17,920,104 $ 13,370,497
17,817,399 798,036 2,296,204 1,461,789 1,075,345
$ 10.95 $ 11.11 $ 11.81 $ 12.27 $ 12.46
$ 50,431,699 $ 4,286,745 $ 10,775,152 $ 7,297,085 $ 3,368,398
4,606,845 385,975 912,085 594,753 270,385
- -------------------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 33
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
EQUITY GROWTH GROWTH STRATEGY BALANCED STRATEGY MODERATE STRATEGY
AMOUNTS IN THOUSANDS STRATEGY FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income distributions from
Underlying Funds $ 44,290 $ 87,969 $ 126,798 $ 26,556
---------------- ---------------- ---------------- -----------------
EXPENSES
Advisory fees 1,763 3,599 5,118 1,133
Administrative fees 441 900 1,279 283
Custodian fees 25 26 29 25
Distribution fees - Class A 321 974 1,359 215
Distribution fees - Class C 1,855 3,523 5,393 979
Distribution fees - Class R3 580 1,081 1,472 467
Transfer agent fees 1,325 2,703 3,843 567
Professional fees 29 40 51 26
Registration fees 83 117 143 59
Shareholder servicing fees -
Class C 618 1,175 1,798 326
Shareholder servicing fees -
Class E 337 687 826 240
Shareholder servicing fees -
Class R2 26 16 22 3
Shareholder servicing fees -
Class R3 580 1,081 1,472 467
Trustees' fees 18 37 54 12
Printing fees 25 54 78 23
Miscellaneous 22 25 34 13
---------------- ---------------- ---------------- -----------------
Expenses before reductions 8,048 16,038 22,971 4,838
Expense reductions (3,721) (7,501) (10,629) (2,134)
---------------- ---------------- ---------------- -----------------
Net expenses 4,327 8,537 12,342 2,704
---------------- ---------------- ---------------- -----------------
Net investment income (loss) 39,963 79,432 114,456 23,852
---------------- ---------------- ---------------- -----------------
NET REALIZED AND UNREALIZED GAIN
(LOSS)
Net realized gain (loss) on:
Investments (3,825) (3,102) 622 3,111
Capital gain distributions
from Underlying Funds 83,128 138,489 153,473 22,127
---------------- ---------------- ---------------- -----------------
Net realized gain (loss) 79,303 135,387 154,095 25,238
Net change in unrealized
appreciation (depreciation) on
investments 48,299 75,911 76,930 9,027
---------------- ---------------- ---------------- -----------------
Net realized and unrealized gain
(loss) 127,602 211,298 231,025 34,265
---------------- ---------------- ---------------- -----------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 167,565 $ 290,730 $ 345,481 $ 58,117
================ ================ ================ =================
</Table>
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
- -------------------------------------------------------------------------------------------------------
$ 9,835 $ 315 $ 833 $ 629 $ 424
----------------- -------------- -------------- -------------- -----------------
453 15 43 29 20
113 4 11 7 5
24 22 22 22 21
61 2 2 4 3
310 -- -- -- --
235 8 23 15 10
227 6 11 7 10
22 18 19 19 19
43 33 34 35 33
103 -- -- -- --
103 4 6 8 6
3 -- 2 2 2
236 7 23 16 11
5 -- -- -- --
8 -- -- -- --
7 1 2 3 3
----------------- -------------- -------------- -------------- -----------------
1,953 120 198 167 143
(902) (99) (142) (122) (111)
----------------- -------------- -------------- -------------- -----------------
1,051 21 56 45 32
----------------- -------------- -------------- -------------- -----------------
8,784 294 777 584 392
----------------- -------------- -------------- -------------- -----------------
(350) 6 (88) (178) (89)
3,958 224 915 1,098 783
----------------- -------------- -------------- -------------- -----------------
3,608 230 827 920 694
3,029 282 1,365 1,163 830
----------------- -------------- -------------- -------------- -----------------
6,637 512 2,192 2,083 1,524
----------------- -------------- -------------- -------------- -----------------
$ 15,421 $ 806 $ 2,969 $ 2,667 $ 1,916
================= ============== ============== ============== =================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 35
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
EQUITY GROWTH
STRATEGY FUND
-------------------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2006
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 39,963 $ 8,323
Net realized gain (loss) 79,303 42,188
Net change in unrealized appreciation (depreciation) 48,299 171,928
------------------- --------------------
Net increase (decrease) in net assets from operations 167,565 222,439
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A (5,814) (1,113)
Class C (10,667) (1,649)
Class E (6,724) (1,894)
Class R1 (39) (2)
Class R2 (477) (58)
Class R3 (10,707) (2,476)
Class S (6,376) (1,825)
From net realized gain
Class A (5,675) (773)
Class C (12,082) (2,330)
Class E (6,640) (1,512)
Class R1 (33) --
Class R2 (490) --
Class R3 (11,067) (2,450)
Class S (5,974) (1,036)
------------------- --------------------
Net decrease in net assets from distributions (82,765) (17,118)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions 334,898 354,934
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 419,698 560,255
NET ASSETS
Beginning of period 1,573,178 1,012,923
------------------- --------------------
End of period $ 1,992,876 $ 1,573,178
=================== ====================
Undistributed (overdistributed) net investment income included
in net assets $ (841) $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
36 Statements of Changes in Net Assets
<Table>
<Caption>
GROWTH 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, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31,
(UNAUDITED) 2006 (UNAUDITED) 2006 (UNAUDITED) 2006
- ----------------------------------------------------------------------------------------------------
$ 79,432 $ 36,594 $ 114,456 $ 80,801 $ 23,852 $ 23,836
135,387 79,360 154,095 99,514 25,238 17,468
75,911 301,064 76,930 346,794 9,027 54,674
------------- ------------- ------------- ------------- ------------- -------------
290,730 417,018 345,481 527,109 58,117 95,978
------------- ------------- ------------- ------------- ------------- -------------
(18,144) (8,063) (26,026) (17,803) (3,921) (3,921)
(18,824) (6,285) (29,232) (17,561) (4,965) (4,188)
(13,142) (7,199) (15,813) (12,392) (4,338) (4,539)
(147) (11) (288) (36) (5) --
(281) (94) (422) (184) (52) (36)
(19,378) (9,686) (26,752) (19,967) (7,932) (8,115)
(11,084) (6,661) (18,226) (14,926) (3,143) (3,498)
(16,479) (2,041) (20,715) (3,917) (2,586) (841)
(20,338) (3,154) (27,473) (6,200) (3,931) (1,227)
(12,077) (2,130) (12,667) (3,141) (2,864) (1,074)
(122) -- (213) -- -- --
(263) -- (343) -- (31) --
(18,821) (3,285) (22,633) (5,589) (5,554) (2,049)
(9,702) (1,639) (13,918) (3,226) (2,000) (751)
------------- ------------- ------------- ------------- ------------- -------------
(158,802) (50,248) (214,721) (104,942) (41,322) (30,239)
------------- ------------- ------------- ------------- ------------- -------------
541,445 672,683 647,378 883,432 86,240 135,316
------------- ------------- ------------- ------------- ------------- -------------
673,373 1,039,453 778,138 1,305,599 103,035 201,055
3,297,182 2,257,729 4,780,753 3,475,154 1,092,915 891,860
------------- ------------- ------------- ------------- ------------- -------------
$ 3,970,555 $ 3,297,182 $ 5,558,891 $ 4,780,753 $ 1,195,950 $ 1,092,915
============= ============= ============= ============= ============= =============
$ (1,568) $ -- $ (2,303) $ -- $ (504) $ --
<Caption>
CONSERVATIVE STRATEGY
FUND
------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
(UNAUDITED) 2006
- ---
$ 8,784 $ 12,967
3,608 10,779
3,029 6,676
------------- -------------
15,421 30,422
------------- -------------
(1,031) (1,367)
(1,457) (2,049)
(1,736) (3,057)
(8) --
(41) (47)
(3,662) (5,092)
(1,050) (1,544)
(1,062) (249)
(1,774) (548)
(1,797) (1,124)
-- --
(36) --
(4,073) (1,006)
(996) (278)
------------- -------------
(18,723) (16,361)
------------- -------------
34,894 (90,628)
------------- -------------
31,592 (76,567)
442,895 519,462
------------- -------------
$ 474,487 $ 442,895
============= =============
$ (201) $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets 37
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<Table>
<Caption>
2010 STRATEGY
FUND
-------------------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2006
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 294 $ 158
Net realized gain (loss) 230 128
Net change in unrealized appreciation (depreciation) 282 395
------------------- --------------------
Net increase (decrease) in net assets from operations 806 681
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A (39) (35)
Class E (49) (32)
Class R1 (26) (2)
Class R2 (3) --
Class R3 (105) (55)
Class S (77) (35)
From net realized gain
Class A (21) --
Class E (20) --
Class R1 (13) --
Class R2 -- --
Class R3 (48) --
Class S (37) --
------------------- --------------------
Net decrease in net assets from distributions (438) (159)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions 11,533 3,423
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 11,901 3,945
NET ASSETS
Beginning of period 8,746 4,801
------------------- --------------------
End of period $ 20,647 $ 8,746
=================== ====================
Undistributed (overdistributed) net investment income included
in net assets $ (5) $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
38 Statements 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, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31,
(UNAUDITED) 2006 (UNAUDITED) 2006 (UNAUDITED) 2006
- ---------------------------------------------------------------------------------------------------------
$ 777 $ 216 $ 584 $ 167 $ 392 $ 133
827 54 920 126 694 153
1,365 1,112 1,163 1,241 830 1,064
------------- ------------- ------------- ------------- ------------- -------------
2,969 1,382 2,667 1,534 1,916 1,350
------------- ------------- ------------- ------------- ------------- -------------
(22) (31) (73) (40) (49) (26)
(64) (30) (134) (32) (98) (27)
(207) (7) (19) (3) (9) (1)
(22) (3) (19) (2) (31) (10)
(288) (91) (234) (63) (156) (44)
(181) (59) (116) (32) (58) (30)
(4) -- (17) -- (21) --
(8) (1) (30) -- (42) --
(33) -- (4) -- (3) --
(2) -- (4) -- (14) --
(42) -- (56) -- (70) --
(27) -- (25) -- (22) --
------------- ------------- ------------- ------------- ------------- -------------
(900) (222) (731) (172) (573) (138)
------------- ------------- ------------- ------------- ------------- -------------
37,406 15,187 20,365 13,348 11,570 7,532
------------- ------------- ------------- ------------- ------------- -------------
39,475 16,347 22,301 14,710 12,913 8,744
20,934 4,587 19,212 4,502 13,503 4,759
------------- ------------- ------------- ------------- ------------- -------------
$ 60,409 $ 20,934 $ 41,513 $ 19,212 $ 26,416 $ 13,503
============= ============= ============= ============= ============= =============
$ (7) $ -- $ (10) $ 1 $ (10) $ (1)
</Table>
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets 39
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 GROWTH STRATEGY FUND
Class A
April 30, 2007 * 12.55 .24 1.00 1.24
October 31, 2006 10.63 .10 2.00 2.10
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, 2007 * 12.00 .18 .95 1.13
October 31, 2006 10.20 .01 1.93 1.94
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)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 12.35 .26 .95 1.21
October 31, 2006 10.46 .11 1.96 2.07
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)
- -----------------------------------------------------------------------------------------------------------------
Class R1
April 30, 2007 * 12.51 .15 1.08 1.23
October 31, 2006 (11) 11.57 .04 .95 .99
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2007 * 12.35 .26 .94 1.20
October 31, 2006 (8) 11.60 .03 .76 .79
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2007 * 12.33 .23 .97 1.20
October 31, 2006 10.46 .08 1.95 2.03
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)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 12.51 .28 .96 1.24
October 31, 2006 10.59 .14 1.99 2.13
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)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS
FROM NET FROM NET
INVESTMENT INCOME REALIZED GAIN
- ----------------------------------------
EQUITY GROWTH STRATEGY FUND
Class A
April 30, 2007 * (.32) (.32)
October 31, 2006 (.10) (.08)
October 31, 2005 (.11) --
October 31, 2004 (.09) --
October 31, 2003 (2) (.03) --
- ----------------------------------------
Class C
April 30, 2007 * (.28) (.32)
October 31, 2006 (.06) (.08)
October 31, 2005 (.07) --
October 31, 2004 (.06) --
October 31, 2003 (.01) --
October 31, 2002 (.01) (.14)
- ----------------------------------------
Class E
April 30, 2007 * (.32) (.32)
October 31, 2006 (.10) (.08)
October 31, 2005 (.11) --
October 31, 2004 (.09) --
October 31, 2003 (.04) --
October 31, 2002 (.03) (.14)
- ----------------------------------------
Class R1
April 30, 2007 * (.33) (.32)
October 31, 2006 (11) (.05) --
- ----------------------------------------
Class R2
April 30, 2007 * (.30) (.32)
October 31, 2006 (8) (.04) --
- ----------------------------------------
Class R3 (9)
April 30, 2007 * (.30) (.32)
October 31, 2006 (.08) (.08)
October 31, 2005 (.09) --
October 31, 2004 (.08) --
October 31, 2003 (.03) --
October 31, 2002 (.02) (.14)
- ----------------------------------------
Class S
April 30, 2007 * (.33) (.32)
October 31, 2006 (.13) (.08)
October 31, 2005 (.13) --
October 31, 2004 (.10) --
October 31, 2003 (.06) --
October 31, 2002 (.04) (.14)
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
40 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(C)(E) (000)
- -----------------------------------------------------------------------------
(.64) 13.15 10.07 314,205
(.18) 12.55 19.99 211,813
(.11) 10.63 14.09 94,182
(.09) 9.42 11.92 43,148
(.03) 8.50 33.75 7,399
- -----------------------------------------------------------------------------
(.60) 12.53 9.59 563,021
(.14) 12.00 19.16 438,483
(.07) 10.20 13.29 284,152
(.06) 9.07 10.94 192,211
(.01) 8.23 24.91 99,808
(.15) 6.60 (12.73) 45,267
- -----------------------------------------------------------------------------
(.64) 12.92 10.07 295,008
(.18) 12.35 20.02 241,818
(.11) 10.46 14.08 192,258
(.09) 9.27 11.83 152,589
(.04) 8.37 25.89 155,984
(.17) 6.69 (12.05) 111,765
- -----------------------------------------------------------------------------
(.65) 13.09 10.15 3,628
(.05) 12.51 8.32 1,391
- -----------------------------------------------------------------------------
(.62) 12.93 10.04 22,678
(.04) 12.35 6.82 19,094
- -----------------------------------------------------------------------------
(.62) 12.91 9.95 510,133
(.16) 12.33 19.61 432,147
(.09) 10.46 13.88 308,388
(.08) 9.27 11.59 225,187
(.03) 8.38 25.60 128,624
(.16) 6.70 (12.34) 36,092
- -----------------------------------------------------------------------------
(.65) 13.10 10.15 284,203
(.21) 12.51 20.34 228,432
(.13) 10.59 14.47 133,943
(.10) 9.37 12.09 111,266
(.06) 8.45 26.26 89,455
(.18) 6.75 (11.95) 58,236
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(D)(F)(G) GROSS(D) NET ASSETS(C)(G) TURNOVER RATE(C)
- ---
.25 .67 2.34 16.88
.25 .68 .85 3.27
.25 .66 .95 3.44
.25 .65 .69 12.46
.25 1.19 .30 17.81
- ---
1.00 1.42 1.88 16.88
1.00 1.43 .07 3.27
1.00 1.41 .31 3.44
1.00 1.40 .13 12.46
1.00 1.43 (.19) 17.81
1.00 1.42 (.32) 29.86
- ---
.25 .67 2.47 16.88
.25 .68 .99 3.27
.25 .66 1.13 3.44
.25 .65 .89 12.46
.25 .68 .59 17.81
.25 .67 .44 29.86
- ---
-- .43 1.52 16.88
-- .44 .28 3.27
- ---
.25 .67 2.45 16.88
.25 .69 .26 3.27
- ---
.50 .92 2.27 16.88
.50 .93 .68 3.27
.50 .91 .85 3.44
.50 .90 .64 12.46
.50 .93 .24 17.81
.50 .92 .20 29.86
- ---
-- .42 2.59 16.88
-- .43 1.17 3.27
-- .41 1.42 3.44
-- .40 1.21 12.46
-- .43 .90 17.81
-- .42 .72 29.86
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 41
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
- -----------------------------------------------------------------------------------------------------------------
GROWTH STRATEGY FUND
Class A
April 30, 2007 * 12.47 .23 .80 1.03
October 31, 2006 10.90 .17 1.65 1.82
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, 2007 * 12.39 .19 .79 .98
October 31, 2006 10.84 .09 1.62 1.71
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)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 12.49 .24 .79 1.03
October 31, 2006 10.91 .19 1.64 1.83
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)
- -----------------------------------------------------------------------------------------------------------------
Class R1
April 30, 2007 * 12.55 .09 .97 1.06
October 31, 2006 (11) 11.76 .08 .84 .92
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2007 * 12.48 .22 .82 1.04
October 31, 2006 (8) 11.86 .09 .64 .73
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2007 * 12.51 .23 .79 1.02
October 31, 2006 10.93 .15 1.65 1.80
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)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 12.55 .26 .80 1.06
October 31, 2006 10.97 .22 1.64 1.86
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)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS
FROM NET FROM NET
INVESTMENT INCOME REALIZED GAIN
- ----------------------------------------
GROWTH STRATEGY FUND
Class A
April 30, 2007 * (.30) (.29)
October 31, 2006 (.19) (.06)
October 31, 2005 (.18) --
October 31, 2004 (.15) --
October 31, 2003 (4) (.06) --
- ----------------------------------------
Class C
April 30, 2007 * (.26) (.29)
October 31, 2006 (.10) (.06)
October 31, 2005 (.10) --
October 31, 2004 (.10) --
October 31, 2003 (.03) --
October 31, 2002 (.05) (.17)
- ----------------------------------------
Class E
April 30, 2007 * (.30) (.29)
October 31, 2006 (.19) (.06)
October 31, 2005 (.18) --
October 31, 2004 (.14) --
October 31, 2003 (.09) --
October 31, 2002 (.11) (.17)
- ----------------------------------------
Class R1
April 30, 2007 * (.32) (.29)
October 31, 2006 (11) (.13) --
- ----------------------------------------
Class R2
April 30, 2007 * (.29) (.29)
October 31, 2006 (8) (.11) --
- ----------------------------------------
Class R3 (9)
April 30, 2007 * (.29) (.29)
October 31, 2006 (.16) (.06)
October 31, 2005 (.15) --
October 31, 2004 (.13) --
October 31, 2003 (.07) --
October 31, 2002 (.10) (.17)
- ----------------------------------------
Class S
April 30, 2007 * (.32) (.29)
October 31, 2006 (.22) (.06)
October 31, 2005 (.21) --
October 31, 2004 (.16) --
October 31, 2003 (.11) --
October 31, 2002 (.13) (.17)
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
42 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(C)(E) (000)
- -----------------------------------------------------------------------------
(.59) 12.91 8.43 896,291
(.25) 12.47 16.87 680,892
(.18) 10.90 11.44 365,024
(.15) 9.95 10.76 154,884
(.06) 9.12 27.35 27,700
- -----------------------------------------------------------------------------
(.55) 12.82 8.01 1,045,985
(.16) 12.39 15.95 856,552
(.10) 10.84 10.70 572,129
(.10) 9.89 9.90 381,245
(.03) 9.09 21.89 219,946
(.22) 7.49 (9.20) 102,324
- -----------------------------------------------------------------------------
(.59) 12.93 8.42 595,460
(.25) 12.49 16.93 503,741
(.18) 10.91 11.40 394,842
(.14) 9.96 10.72 307,304
(.09) 9.13 22.90 233,112
(.28) 7.51 (8.64) 152,805
- -----------------------------------------------------------------------------
(.61) 13.00 8.59 8,168
(.13) 12.55 7.41 1,857
- -----------------------------------------------------------------------------
(.58) 12.94 8.49 14,871
(.11) 12.48 6.23 10,647
- -----------------------------------------------------------------------------
(.58) 12.95 8.27 929,928
(.22) 12.51 16.62 822,822
(.15) 10.93 11.22 616,939
(.13) 9.97 10.41 452,502
(.07) 9.15 22.44 232,636
(.27) 7.54 (8.78) 58,031
- -----------------------------------------------------------------------------
(.61) 13.00 8.59 479,852
(.28) 12.55 17.12 420,671
(.21) 10.97 11.83 308,795
(.16) 10.00 10.99 247,011
(.11) 9.16 23.10 159,869
(.30) 7.54 (8.37) 108,267
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(D)(F)(G) GROSS(D) NET ASSETS(C)(G) TURNOVER RATE(C)
- ---
.25 .67 2.25 13.13
.25 .67 1.49 2.14
.25 .64 1.43 .72
.25 .63 1.11 2.22
.25 .74 .51 15.15
- ---
1.00 1.42 1.89 13.13
1.00 1.42 .77 2.14
1.00 1.39 .82 .72
1.00 1.38 .67 2.22
1.00 1.41 .24 15.15
1.00 1.39 .51 11.73
- ---
.25 .67 2.34 13.13
.25 .67 1.58 2.14
.25 .64 1.63 .72
.25 .63 1.54 2.22
.25 .66 1.02 15.15
.25 .64 1.29 11.73
- ---
-- .42 1.15 13.13
-- .43 .62 2.14
- ---
.25 .67 2.18 13.13
.25 .68 .71 2.14
- ---
.50 .92 2.21 13.13
.50 .92 1.32 2.14
.50 .89 1.35 .72
.50 .88 1.14 2.22
.50 .91 .66 15.15
.50 .89 .92 11.73
- ---
-- .42 2.48 13.13
-- .42 1.83 2.14
-- .39 1.88 .72
-- .38 1.70 2.22
-- .41 1.30 15.15
-- .39 1.51 11.73
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 43
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, 2007 * 12.18 .23 .37 .60
October 31, 2006 10.99 .25 1.27 1.52
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, 2007 * 12.12 .19 .38 .57
October 31, 2006 10.93 .17 1.27 1.44
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)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 12.20 .24 .36 .60
October 31, 2006 11.00 .26 1.27 1.53
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)
- -----------------------------------------------------------------------------------------------------------------
Class R1
April 30, 2007 * 12.26 .23 .37 .60
October 31, 2006 (12) 11.62 .10 .73 .83
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2007 * 12.19 .24 .37 .61
October 31, 2006 (10) 11.76 .12 .49 .61
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2007 * 12.20 .22 .37 .59
October 31, 2006 11.01 .23 1.26 1.49
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)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 12.26 .26 .34 .60
October 31, 2006 11.05 .29 1.28 1.57
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)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS
FROM NET FROM NET
INVESTMENT INCOME REALIZED GAIN
- ----------------------------------------
BALANCED STRATEGY FUND
Class A
April 30, 2007 * (.06) (.24)
October 31, 2006 (.26) (.07)
October 31, 2005 (.22) (.03)
October 31, 2004 (.21) --
October 31, 2003 (2) (.09) --
- ----------------------------------------
Class C
April 30, 2007 * (.04) (.24)
October 31, 2006 (.18) (.07)
October 31, 2005 (.15) (.03)
October 31, 2004 (.16) --
October 31, 2003 (.12) --
October 31, 2002 (.13) (.11)
- ----------------------------------------
Class E
April 30, 2007 * (.06) (.24)
October 31, 2006 (.26) (.07)
October 31, 2005 (.22) (.03)
October 31, 2004 (.21) --
October 31, 2003 (.18) --
October 31, 2002 (.19) (.11)
- ----------------------------------------
Class R1
April 30, 2007 * (.06) (.24)
October 31, 2006 (12) (.19) --
- ----------------------------------------
Class R2
April 30, 2007 * (.06) (.24)
October 31, 2006 (10) (.18) --
- ----------------------------------------
Class R3 (9)
April 30, 2007 * (.05) (.24)
October 31, 2006 (.23) (.07)
October 31, 2005 (.20) (.03)
October 31, 2004 (.19) --
October 31, 2003 (.16) --
October 31, 2002 (.18) (.11)
- ----------------------------------------
Class S
April 30, 2007 * (.06) (.24)
October 31, 2006 (.29) (.07)
October 31, 2005 (.25) (.03)
October 31, 2004 (.23) --
October 31, 2003 (.20) --
October 31, 2002 (.22) (.11)
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
44 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(C)(E) (000)
- -----------------------------------------------------------------------------
(.30) 12.48 7.01 1,205,851
(.33) 12.18 14.03 996,628
(.25) 10.99 8.91 593,609
(.21) 10.33 9.49 281,685
(.09) 9.64 18.80 60,696
- -----------------------------------------------------------------------------
(.28) 12.41 6.58 1,576,867
(.25) 12.12 13.29 1,328,971
(.18) 10.93 7.96 964,203
(.16) 10.29 8.82 653,463
(.12) 9.61 17.02 396,344
(.24) 8.33 (5.42) 186,825
- -----------------------------------------------------------------------------
(.30) 12.50 7.00 712,100
(.33) 12.20 14.09 615,865
(.25) 11.00 8.77 506,587
(.21) 10.35 9.54 416,942
(.18) 9.65 18.00 414,051
(.30) 8.35 (4.73) 269,458
- -----------------------------------------------------------------------------
(.30) 12.56 7.10 15,473
(.19) 12.26 6.60 4,295
- -----------------------------------------------------------------------------
(.30) 12.50 7.02 20,766
(.18) 12.19 5.26 15,035
- -----------------------------------------------------------------------------
(.29) 12.50 6.95 1,259,232
(.30) 12.20 13.72 1,129,000
(.23) 11.01 8.61 892,607
(.19) 10.35 9.25 676,342
(.16) 9.66 17.76 396,545
(.29) 8.36 (5.01) 121,077
- -----------------------------------------------------------------------------
(.30) 12.56 7.10 768,602
(.36) 12.26 14.40 690,959
(.28) 11.05 9.10 518,148
(.23) 10.39 9.82 426,147
(.20) 9.68 18.22 278,123
(.33) 8.38 (4.47) 155,977
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(D)(F)(G) GROSS(D) NET ASSETS(C)(G) TURNOVER RATE(C)
- ---
.25 .67 2.33 28.90
.25 .67 2.15 2.80
.25 .62 1.88 .55
.25 .59 1.63 6.42
.25 .66 .74 18.55
- ---
1.00 1.42 1.93 28.90
1.00 1.42 1.43 2.80
1.00 1.37 1.22 .55
1.00 1.34 1.23 6.42
1.00 1.36 1.05 18.55
1.00 1.34 1.38 12.18
- ---
.25 .67 2.34 28.90
.25 .67 2.23 2.80
.25 .62 2.03 .55
.25 .59 2.25 6.42
.25 .61 1.88 18.55
.25 .59 2.17 12.18
- ---
-- .42 1.46 28.90
-- .43 .80 2.80
- ---
.25 .67 2.34 28.90
.25 .68 1.14 2.80
- ---
.50 .92 2.23 28.90
.50 .92 1.97 2.80
.50 .87 1.75 .55
.50 .84 1.70 6.42
.50 .86 1.38 18.55
.50 .84 1.75 12.18
- ---
-- .42 2.50 28.90
-- .42 2.46 2.80
-- .37 2.28 .55
-- .34 2.23 6.42
-- .36 2.12 18.55
-- .34 2.40 12.18
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 45
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, 2007 * 11.54 .21 .40 .61
October 31, 2006 10.81 .29 .81 1.10
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, 2007 * 11.49 .17 .39 .56
October 31, 2006 10.77 .21 .80 1.01
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)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 11.55 .21 .39 .60
October 31, 2006 10.82 .29 .81 1.10
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)
- -----------------------------------------------------------------------------------------------------------------
Class R1
April 30, 2007 * 11.58 .09 .53 .62
October 31, 2006 (15) 11.47 .11 .09 .20
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2007 * 11.54 .19 .41 .60
October 31, 2006 (8) 11.25 .25 .27 .52
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2007 * 11.58 .20 .39 .59
October 31, 2006 10.84 .27 .81 1.08
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)
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 11.58 .23 .39 .62
October 31, 2006 10.84 .32 .82 1.14
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)
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS
FROM NET FROM NET
INVESTMENT INCOME REALIZED GAIN
- ----------------------------------------
MODERATE STRATEGY FUND
Class A
April 30, 2007 * (.26) (.18)
October 31, 2006 (.30) (.07)
October 31, 2005 (.23) (.03)
October 31, 2004 (.19) (.02)
October 31, 2003 (3) (.12) --
- ----------------------------------------
Class C
April 30, 2007 * (.22) (.18)
October 31, 2006 (.22) (.07)
October 31, 2005 (.15) (.03)
October 31, 2004 (.14) (.02)
October 31, 2003 (.17) --
October 31, 2002 (.20) (.05)
- ----------------------------------------
Class E
April 30, 2007 * (.26) (.18)
October 31, 2006 (.30) (.07)
October 31, 2005 (.23) (.03)
October 31, 2004 (.19) (.02)
October 31, 2003 (.23) --
October 31, 2002 (.27) (.05)
- ----------------------------------------
Class R1
April 30, 2007 * (.27) (.18)
October 31, 2006 (15) (.09) --
- ----------------------------------------
Class R2
April 30, 2007 * (.25) (.18)
October 31, 2006 (8) (.23) --
- ----------------------------------------
Class R3 (9)
April 30, 2007 * (.25) (.18)
October 31, 2006 (.27) (.07)
October 31, 2005 (.20) (.03)
October 31, 2004 (.17) (.02)
October 31, 2003 (.21) --
October 31, 2002 (.25) (.05)
- ----------------------------------------
Class S
April 30, 2007 * (.27) (.18)
October 31, 2006 (.33) (.07)
October 31, 2005 (.25) (.03)
October 31, 2004 (.21) (.02)
October 31, 2003 (.25) --
October 31, 2002 (.29) (.05)
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
46 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(C)(E) (000)
- -----------------------------------------------------------------------------
(.44) 11.71 5.31 187,322
(.37) 11.54 10.34 165,654
(.26) 10.81 5.44 121,343
(.21) 10.50 6.87 55,049
(.12) 10.03 12.56 18,820
- -----------------------------------------------------------------------------
(.40) 11.65 4.95 276,982
(.29) 11.49 9.51 252,478
(.18) 10.77 4.78 183,445
(.16) 10.45 6.00 146,515
(.17) 10.01 11.36 96,231
(.25) 9.15 (2.00) 39,694
- -----------------------------------------------------------------------------
(.44) 11.71 5.31 205,278
(.37) 11.55 10.32 181,883
(.26) 10.82 5.52 164,151
(.21) 10.50 6.85 132,822
(.23) 10.03 12.19 99,926
(.32) 9.16 (1.22) 66,462
- -----------------------------------------------------------------------------
(.45) 11.75 5.51 710
(.09) 11.58 .96 215
- -----------------------------------------------------------------------------
(.43) 11.71 5.24 3,402
(.23) 11.54 4.68 1,654
- -----------------------------------------------------------------------------
(.43) 11.74 5.16 386,188
(.34) 11.58 10.13 364,759
(.23) 10.84 5.25 309,824
(.19) 10.52 6.55 254,060
(.21) 10.06 11.94 154,267
(.30) 9.19 (1.58) 38,170
- -----------------------------------------------------------------------------
(.45) 11.75 5.42 136,068
(.40) 11.58 10.67 126,487
(.28) 10.84 5.76 113,097
(.23) 10.52 7.03 106,031
(.25) 10.05 12.55 73,980
(.34) 9.17 (1.08) 45,579
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(D)(F)(G) GROSS(D) NET ASSETS(C)(G) TURNOVER RATE(C)
- ---
.25 .63 2.20 72.43
.25 .63 2.63 5.71
.25 .61 2.03 4.54
.25 .63 1.71 3.99
.25 .77 .84 11.08
- ---
1.00 1.38 1.82 72.43
1.00 1.38 1.88 5.71
1.00 1.36 1.31 4.54
1.00 1.37 .48 3.99
1.00 1.42 1.29 11.08
1.00 1.46 2.05 15.16
- ---
.25 .63 2.20 72.43
.25 .63 2.64 5.71
.25 .61 2.07 4.54
.25 .62 1.85 3.99
.25 .67 2.22 11.08
.25 .71 2.84 15.16
- ---
-- .39 1.06 72.43
-- .20 .89 5.71
- ---
.25 .63 1.94 72.43
.25 .64 2.01 5.71
- ---
.50 .88 2.08 72.43
.50 .88 2.39 5.71
.50 .86 1.81 4.54
.50 .87 1.55 3.99
.50 .92 1.62 11.08
.50 .96 2.51 15.16
- ---
-- .38 2.36 72.43
-- .38 2.89 5.71
-- .36 2.33 4.54
-- .37 2.04 3.99
-- .42 2.44 11.08
-- .46 2.97 15.16
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 47
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, 2007 * 10.98 .18 .20 .38
October 31, 2006 10.66 .34 .40 .74
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, 2007 * 10.93 .14 .20 .34
October 31, 2006 10.62 .25 .39 .64
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
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 11.00 .18 .20 .38
October 31, 2006 10.68 .30 .43 .73
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
- -----------------------------------------------------------------------------------------------------------------
Class R1
April 30, 2007 (17) 10.77 .08 .18 .26
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2007 * 10.99 .16 .22 .38
October 31, 2006 (8) 10.86 .33 .09 .42
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2007 * 11.03 .17 .19 .36
October 31, 2006 10.71 .31 .40 .71
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
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 11.03 .19 .21 .40
October 31, 2006 10.72 .36 .39 .75
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
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS
FROM NET FROM NET
INVESTMENT INCOME REALIZED GAIN
- ----------------------------------------
CONSERVATIVE STRATEGY FUND
Class A
April 30, 2007 * (.23) (.24)
October 31, 2006 (.35) (.07)
October 31, 2005 (.24) (.04)
October 31, 2004 (.21) (.04)
October 31, 2003 (1) (.11) --
- ----------------------------------------
Class C
April 30, 2007 * (.19) (.24)
October 31, 2006 (.26) (.07)
October 31, 2005 (.16) (.04)
October 31, 2004 (.13) (.04)
October 31, 2003 (.16) --
October 31, 2002 (.29) (.01)
- ----------------------------------------
Class E
April 30, 2007 * (.23) (.24)
October 31, 2006 (.34) (.07)
October 31, 2005 (.24) (.04)
October 31, 2004 (.20) (.04)
October 31, 2003 (.23) --
October 31, 2002 (.36) (.01)
- ----------------------------------------
Class R1
April 30, 2007 (17) (.09) --
- ----------------------------------------
Class R2
April 30, 2007 * (.22) (.24)
October 31, 2006 (8) (.29) --
- ----------------------------------------
Class R3 (9)
April 30, 2007 * (.21) (.24)
October 31, 2006 (.32) (.07)
October 31, 2005 (.21) (.04)
October 31, 2004 (.18) (.04)
October 31, 2003 (.21) --
October 31, 2002 (.34) (.01)
- ----------------------------------------
Class S
April 30, 2007 * (.24) (.24)
October 31, 2006 (.37) (.07)
October 31, 2005 (.26) (.04)
October 31, 2004 (.23) (.04)
October 31, 2003 (.25) --
October 31, 2002 (.38) (.01)
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
48 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(C)(E) (000)
- -----------------------------------------------------------------------------
(.47) 10.89 3.42 50,550
(.42) 10.98 7.04 46,364
(.28) 10.66 2.74 40,225
(.25) 10.65 4.62 20,709
(.11) 10.42 6.01 5,526
- -----------------------------------------------------------------------------
(.43) 10.84 3.15 90,047
(.33) 10.93 6.16 80,692
(.20) 10.62 1.99 88,226
(.17) 10.61 3.87 75,976
(.16) 10.38 6.51 54,674
(.30) 9.90 1.01 24,739
- -----------------------------------------------------------------------------
(.47) 10.91 3.50 84,788
(.41) 11.00 6.96 80,224
(.28) 10.68 2.81 183,219
(.24) 10.66 4.57 187,993
(.23) 10.43 7.33 199,230
(.37) 9.94 1.79 35,385
- -----------------------------------------------------------------------------
(.09) 10.94 2.37 941
- -----------------------------------------------------------------------------
(.46) 10.91 3.41 2,760
(.29) 10.99 3.95 1,466
- -----------------------------------------------------------------------------
(.45) 10.94 3.36 194,969
(.39) 11.03 6.74 187,837
(.25) 10.71 2.55 163,499
(.22) 10.69 4.23 146,230
(.21) 10.47 7.17 92,430
(.35) 9.97 1.52 25,145
- -----------------------------------------------------------------------------
(.48) 10.95 3.62 50,432
(.44) 11.03 7.16 46,312
(.30) 10.72 3.06 44,293
(.27) 10.70 4.82 42,949
(.25) 10.47 7.63 36,380
(.39) 9.97 2.02 24,953
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(D)(F)(G) GROSS(D) NET ASSETS(C)(G) TURNOVER RATE(C)
- ---
.25 .65 2.05 70.51
.25 .65 3.14 16.00
.25 .62 2.26 9.45
.25 .66 1.89 6.18
.25 .97 .97 30.98
- ---
1.00 1.40 1.66 70.51
1.00 1.40 2.34 16.00
1.00 1.37 1.47 9.45
1.00 1.38 1.15 6.18
1.00 1.43 1.21 30.98
1.00 1.59 2.78 35.08
- ---
.25 .65 2.03 70.51
.25 .65 2.90 16.00
.25 .62 2.20 9.45
.25 .63 1.95 6.18
.25 .68 1.86 30.98
.25 .84 3.54 35.08
- ---
-- .41 .96 70.51
- ---
.25 .65 1.85 70.51
.25 .67 2.72 16.00
- ---
.50 .90 1.91 70.51
.50 .90 2.85 16.00
.50 .87 1.97 9.45
.50 .88 1.65 6.18
.50 .93 1.57 30.98
.50 1.09 3.33 35.08
- ---
-- .40 2.12 70.51
-- .40 3.36 16.00
-- .37 2.46 9.45
-- .38 2.17 6.18
-- .43 2.27 30.98
-- .59 3.79 35.08
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 49
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, 2007 * 10.88 .10 .46 .56
October 31, 2006 10.06 .27 .83 1.10
October 31, 2005 (6) 10.21 .04 (.11) (.07)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 10.90 .05 .51 .56
October 31, 2006 10.07 .27 .83 1.10
October 31, 2005 (5) 10.00 .12 .07 .19
- -----------------------------------------------------------------------------------------------------------------
Class R1
April 30, 2007 * 10.90 .09 .48 .57
October 31, 2006 (13) 10.45 .13 .53 .66
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2007 (16) 10.91 (.01) .57 .56
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2007 * 10.89 .04 .51 .55
October 31, 2006 10.07 .23 .84 1.07
October 31, 2005 (5) 10.00 .10 .08 .18
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 10.91 .11 .46 .57
October 31, 2006 10.08 .29 .84 1.13
October 31, 2005 (5) 10.00 .15 .07 .22
- -----------------------------------------------------------------------------------------------------------------
2020 STRATEGY FUND
Class A
April 30, 2007 * 11.24 .16 .65 .81
October 31, 2006 10.14 .23 1.11 1.34
October 31, 2005 (6) 10.29 .03 (.11) (.08)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 11.25 .12 .68 .80
October 31, 2006 10.14 .22 1.13 1.35
October 31, 2005 (5) 10.00 .11 .14 .25
- -----------------------------------------------------------------------------------------------------------------
Class R1
April 30, 2007 * 11.25 .04 .79 .83
October 31, 2006 (13) 10.62 .09 .70 .79
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2007 * 11.24 .10 .72 .82
October 31, 2006 (14) 10.82 .02 .50 .52
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2007 * 11.23 .14 .66 .80
October 31, 2006 10.13 .18 1.14 1.32
October 31, 2005 (5) 10.00 .08 .14 .22
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 11.24 .21 .62 .83
October 31, 2006 10.14 .22 1.14 1.36
October 31, 2005 (5) 10.00 .13 .14 .27
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS
FROM NET FROM NET
INVESTMENT INCOME REALIZED GAIN
- ----------------------------------------
2010 STRATEGY FUND
Class A
April 30, 2007 * (.23) (.13)
October 31, 2006 (.28) --
October 31, 2005 (6) (.08) --
- ----------------------------------------
Class E
April 30, 2007 * (.23) (.13)
October 31, 2006 (.27) --
October 31, 2005 (5) (.12) --
- ----------------------------------------
Class R1
April 30, 2007 * (.24) (.13)
October 31, 2006 (13) (.21) --
- ----------------------------------------
Class R2
April 30, 2007 (16) (.24) (.13)
- ----------------------------------------
Class R3 (9)
April 30, 2007 * (.22) (.13)
October 31, 2006 (.25) --
October 31, 2005 (5) (.11) --
- ----------------------------------------
Class S
April 30, 2007 * (.24) (.13)
October 31, 2006 (.30) --
October 31, 2005 (5) (.14) --
- ----------------------------------------
2020 STRATEGY FUND
Class A
April 30, 2007 * (.21) (.03)
October 31, 2006 (.24) --
October 31, 2005 (6) (.07) --
- ----------------------------------------
Class E
April 30, 2007 * (.21) (.03)
October 31, 2006 (.24) --
October 31, 2005 (5) (.11) --
- ----------------------------------------
Class R1
April 30, 2007 * (.23) (.03)
October 31, 2006 (13) (.16) --
- ----------------------------------------
Class R2
April 30, 2007 * (.22) (.03)
October 31, 2006 (14) (.10) --
- ----------------------------------------
Class R3 (9)
April 30, 2007 * (.21) (.03)
October 31, 2006 (.22) --
October 31, 2005 (5) (.09) --
- ----------------------------------------
Class S
April 30, 2007 * (.23) (.03)
October 31, 2006 (.26) --
October 31, 2005 (5) (.13) --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
50 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(C)(E) (000)
- -----------------------------------------------------------------------------
(.36) 11.08 5.25 1,569
(.28) 10.88 11.02 1,723
(.08) 10.06 (1.01) 990
- -----------------------------------------------------------------------------
(.36) 11.10 5.25 4,201
(.27) 10.90 11.08 1,485
(.12) 10.07 1.96 1,020
- -----------------------------------------------------------------------------
(.37) 11.10 5.37 1,332
(.21) 10.90 5.69 150
- -----------------------------------------------------------------------------
(.37) 11.10 5.12 410
- -----------------------------------------------------------------------------
(.35) 11.09 5.15 8,848
(.25) 10.89 10.73 4,028
(.11) 10.07 1.79 1,768
- -----------------------------------------------------------------------------
(.37) 11.11 5.27 4,287
(.30) 10.91 11.35 1,360
(.14) 10.08 2.25 1,023
- -----------------------------------------------------------------------------
(.24) 11.81 7.29 1,727
(.24) 11.24 13.33 2,165
(.07) 10.14 (1.02) 990
- -----------------------------------------------------------------------------
(.24) 11.81 7.24 6,738
(.24) 11.25 13.42 2,118
(.11) 10.14 2.52 1,025
- -----------------------------------------------------------------------------
(.26) 11.82 7.44 10,989
(.16) 11.25 6.98 702
- -----------------------------------------------------------------------------
(.25) 11.81 7.34 3,107
(.10) 11.24 4.34 641
- -----------------------------------------------------------------------------
(.24) 11.79 7.16 27,073
(.22) 11.23 13.14 9,355
(.09) 10.13 2.23 1,545
- -----------------------------------------------------------------------------
(.26) 11.81 7.44 10,775
(.26) 11.24 13.59 5,953
(.13) 10.14 2.71 1,027
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(D)(F)(G) GROSS(D) NET ASSETS(C)(G) TURNOVER RATE(C)
- ---
.25 1.59 2.20 94.76
.25 3.41 2.53 70.61
.25 4.84 .37 .99
- ---
.25 1.54 1.76 94.76
.25 2.90 2.54 70.61
.25 5.32 1.25 .99
- ---
-- 1.32 2.11 94.76
-- 3.35 1.11 70.61
- ---
.25 1.47 1.08 94.76
- ---
.50 1.80 1.66 94.76
.50 3.15 2.27 70.61
.50 5.56 1.06 .99
- ---
-- 1.31 2.33 94.76
-- 2.69 2.73 70.61
-- 5.07 1.45 .99
- ---
.25 .95 2.17 43.38
.25 2.38 2.12 46.56
.25 4.74 .30 6.98
- ---
.25 .91 1.70 43.38
.25 1.95 2.12 46.56
.25 5.13 1.11 6.98
- ---
-- .64 .98 43.38
-- 1.77 .80 46.56
- ---
.25 .90 1.45 43.38
.25 1.62 .27 46.56
- ---
.50 1.16 1.82 43.38
.50 2.12 1.70 46.56
.50 5.38 .89 6.98
- ---
-- .68 2.48 43.38
-- 1.63 2.15 46.56
-- 4.88 1.31 6.98
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 51
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, 2007 * 11.53 .19 .90 1.09
October 31, 2006 10.19 .21 1.34 1.55
October 31, 2005 (6) 10.33 .03 (.11) (.08)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 11.54 .13 .96 1.09
October 31, 2006 10.20 .18 1.37 1.55
October 31, 2005 (5) 10.00 .10 .19 .29
- -----------------------------------------------------------------------------------------------------------------
Class R1
April 30, 2007 * 11.54 .12 .98 1.10
October 31, 2006 (13) 10.75 .07 .86 .93
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2007 * 11.53 .08 1.01 1.09
October 31, 2006 (14) 10.98 .02 .62 .64
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2007 * 11.54 .11 .96 1.07
October 31, 2006 10.19 .16 1.38 1.54
October 31, 2005 (5) 10.00 .07 .20 .27
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 11.55 .19 .90 1.09
October 31, 2006 10.20 .23 1.35 1.58
October 31, 2005 (5) 10.00 .12 .19 .31
- -----------------------------------------------------------------------------------------------------------------
2040 STRATEGY FUND
Class A
April 30, 2007 * 11.71 .16 1.00 1.16
October 31, 2006 10.23 .19 1.48 1.67
October 31, 2005 (6) 10.36 .02 (.12) (.10)
- -----------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 11.72 .12 1.04 1.16
October 31, 2006 10.24 .17 1.50 1.67
October 31, 2005 (5) 10.00 .08 .24 .32
- -----------------------------------------------------------------------------------------------------------------
Class R1
April 30, 2007 * 11.73 .04 1.13 1.17
October 31, 2006 (13) 10.89 .06 .90 .96
- -----------------------------------------------------------------------------------------------------------------
Class R2
April 30, 2007 * 11.71 .16 1.00 1.16
October 31, 2006 (7) 11.14 .09 .59 .68
- -----------------------------------------------------------------------------------------------------------------
Class R3 (9)
April 30, 2007 * 11.71 .07 1.07 1.14
October 31, 2006 10.24 .14 1.50 1.64
October 31, 2005 (5) 10.00 .06 .24 .30
- -----------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 11.73 .14 1.03 1.17
October 31, 2006 10.24 .22 1.49 1.71
October 31, 2005 (5) 10.00 .10 .24 .34
- -----------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS
FROM NET FROM NET
INVESTMENT INCOME REALIZED GAIN
- ----------------------------------------
2030 STRATEGY FUND
Class A
April 30, 2007 * (.29) (.07)
October 31, 2006 (.21) --
October 31, 2005 (6) (.06) --
- ----------------------------------------
Class E
April 30, 2007 * (.29) (.07)
October 31, 2006 (.21) --
October 31, 2005 (5) (.09) --
- ----------------------------------------
Class R1
April 30, 2007 * (.30) (.07)
October 31, 2006 (13) (.14) --
- ----------------------------------------
Class R2
April 30, 2007 * (.29) (.07)
October 31, 2006 (14) (.09) --
- ----------------------------------------
Class R3 (9)
April 30, 2007 * (.28) (.07)
October 31, 2006 (.19) --
October 31, 2005 (5) (.08) --
- ----------------------------------------
Class S
April 30, 2007 * (.30) (.07)
October 31, 2006 (.23) --
October 31, 2005 (5) (.11) --
- ----------------------------------------
2040 STRATEGY FUND
Class A
April 30, 2007 * (.30) (.13)
October 31, 2006 (.19) --
October 31, 2005 (6) (.03) --
- ----------------------------------------
Class E
April 30, 2007 * (.30) (.13)
October 31, 2006 (.19) --
October 31, 2005 (5) (.08) --
- ----------------------------------------
Class R1
April 30, 2007 * (.31) (.13)
October 31, 2006 (13) (.12) --
- ----------------------------------------
Class R2
April 30, 2007 * (.29) (.13)
October 31, 2006 (7) (.11) --
- ----------------------------------------
Class R3 (9)
April 30, 2007 * (.29) (.13)
October 31, 2006 (.17) --
October 31, 2005 (5) (.06) --
- ----------------------------------------
Class S
April 30, 2007 * (.31) (.13)
October 31, 2006 (.22) --
October 31, 2005 (5) (.10) --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
52 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(C)(E) (000)
- -----------------------------------------------------------------------------
(.36) 12.26 9.59 3,285
(.21) 11.53 15.38 2,854
(.06) 10.19 (1.01) 990
- -----------------------------------------------------------------------------
(.36) 12.27 9.60 8,858
(.21) 11.54 15.35 4,616
(.09) 10.20 2.96 1,029
- -----------------------------------------------------------------------------
(.37) 12.27 9.72 1,819
(.14) 11.54 8.22 347
- -----------------------------------------------------------------------------
(.36) 12.26 9.63 2,334
(.09) 11.53 5.40 633
- -----------------------------------------------------------------------------
(.35) 12.26 9.41 17,920
(.19) 11.54 15.22 8,249
(.08) 10.19 2.69 1,452
- -----------------------------------------------------------------------------
(.37) 12.27 9.63 7,297
(.23) 11.55 15.70 2,513
(.11) 10.20 3.15 1,031
- -----------------------------------------------------------------------------
(.43) 12.44 10.00 1,831
(.19) 11.71 16.49 1,886
(.03) 10.23 (.95) 991
- -----------------------------------------------------------------------------
(.43) 12.45 10.10 5,500
(.19) 11.72 16.48 3,096
(.08) 10.24 3.20 1,032
- -----------------------------------------------------------------------------
(.44) 12.46 10.12 927
(.12) 11.73 8.47 93
- -----------------------------------------------------------------------------
(.42) 12.45 10.07 1,420
(.11) 11.71 6.11 1,256
- -----------------------------------------------------------------------------
(.42) 12.43 9.90 13,370
(.17) 11.71 16.11 5,506
(.06) 10.24 3.03 1,701
- -----------------------------------------------------------------------------
(.44) 12.46 10.12 3,368
(.22) 11.73 16.84 1,666
(.10) 10.24 3.39 1,035
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS, NET ASSETS, TO AVERAGE PORTFOLIO
NET(D)(F)(G) GROSS(D) NET ASSETS(C)(G) TURNOVER RATE(C)
- ---
.25 1.10 2.43 19.50
.25 2.38 1.93 104.15
.25 4.86 .25 1.11
- ---
.25 1.08 1.93 19.50
.25 2.15 1.72 104.15
.25 5.37 .95 1.11
- ---
-- .83 1.90 19.50
-- 2.07 .65 104.15
- ---
.25 1.07 1.49 19.50
.25 1.79 .18 104.15
- ---
.50 1.33 1.80 19.50
.50 2.33 1.42 104.15
.50 5.62 .75 1.11
- ---
-- .84 2.44 19.50
-- 1.85 2.13 104.15
-- 5.12 1.16 1.11
- ---
.25 1.36 2.42 17.58
.25 2.64 1.72 88.23
.25 4.81 .21 2.39
- ---
.25 1.37 2.10 17.58
.25 2.30 1.55 88.23
.25 5.26 .78 2.39
- ---
-- 1.13 1.43 17.58
-- 2.27 .56 88.23
- ---
.25 1.37 2.42 17.58
.25 2.16 .86 88.23
- ---
.50 1.62 1.67 17.58
.50 2.48 1.25 88.23
.50 5.52 .59 2.39
- ---
-- 1.13 2.35 17.58
-- 1.97 2.00 88.23
-- 5.02 .99 2.39
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 53
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2007 (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 October 31,
2006.
(8) For the period March 29, 2006 (commencement of operations) to October 31,
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 October 31,
2006.
(11) For the period May 19, 2006 (commencement of operations) to October 31,
2006.
(12) For the period June 6, 2006 (commencement of operations) to October 31,
2006.
(13) For the period June 7, 2006 (commencement of operations) to October 31,
2006.
(14) For the period September 8, 2006 (commencement of operations) to October
31, 2006.
(15) For the period October 3, 2006 (commencement of operations) to October 31,
2006.
(16) For the period November 9, 2006 (commencement of operations) to April 30,
2007.
(17) For the period December 28, 2006 (commencement of operations) to April 30,
2007.
(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 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) Excludes the effects of sales charges. If sales charges were included, the
total return would be lower.
(f) The calculation includes only those expenses charged directly to the Funds
and does not include expenses charged to the Underlying Funds in which the
Funds invest.
(g) May reflect amounts waived and/or reimbursed by RIMCo as the investment
adviser and transfer agent.
See accompanying notes which are an integral part of the financial statements.
54 Notes to Financial Highlights
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Russell Investment Company (the "Investment Company" or "RIC") is a series
investment company with 35 different investment portfolios referred to as
Funds. These financial statements report on nine of these Funds (the
"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 July 1, 2006, the Aggressive Strategy Fund changed its name to the Growth
Strategy Fund and the Equity Aggressive Strategy Fund changed its name to the
Equity Growth Strategy Fund.
On July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company and Frank Russell Investment Management Company changed
its name to Russell Investment Management Company ("RIMCo").
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"). RIMCo, the Funds' investment adviser, may modify
the target asset allocation for any Fund and/or the Underlying Funds in which
the Funds invest. From time to time, each Fund may adjust its investments
within set limits based on RIMCo's outlook for the economy, financial markets
generally and relative market valuation of the asset classes represented by
each Underlying Fund. Additionally, each Fund may deviate from set limits
when, in RIMCo's opinion, it is necessary to do so to pursue the Fund's
investment objective. In the future, the Funds may also invest in other funds
which are not currently Underlying Funds.
<Table>
<Caption>
ASSET ALLOCATION TARGETS AS OF APRIL 30, 2007
-------------------------------------------------------------------------------------------------
EQUITY GROWTH GROWTH BALANCED MODERATE CONSERVATIVE
ASSET CLASS/UNDERLYING FUNDS STRATEGY FUND STRATEGY FUND STRATEGY FUND STRATEGY FUND STRATEGY FUND
- ---------------------------------------------------------------------------------------------------------------------------------
Equities
US Equities
Diversified Equity
Fund 26% 21% 15% 10% 6%
Special Growth Fund 7 6 4 3 --
Quantitative Equity
Fund 25 20 15 10 5
Real Estate
Securities Fund 7 6 5 3 3
International Equities
International
Securities Fund 23 17 14 9 4
Emerging Markets Fund 5 4 3 2 --
Global Equity 7 6 4 3 2
Bonds
Short Duration Bond
Fund -- -- -- -- 20
Multistrategy Bond
Fund -- 20 40 60 60
--- --- --- --- ---
100 100 100 100 100
</Table>
Notes to Financial Statements 55
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (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, RIMCo 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, RIMCo expects to modify the target asset
allocation for the Funds and/or the Underlying Funds in which a Fund invests.
In addition, the Funds may in the future invest in other funds which are not
currently Underlying Funds.
<Table>
<Caption>
ASSET ALLOCATION TARGETS AS OF APRIL 30, 2007
-----------------------------------------------------------------------------
2010 2020 2030 2040
ASSET CLASS/UNDERLYING FUNDS STRATEGY FUND STRATEGY FUND STRATEGY FUND STRATEGY FUND
- -----------------------------------------------------------------------------------------------------------------------------
Equities
US Equities
Diversified Equity Fund 10% 15% 24% 26%
Special Growth Fund 2 4 7 7
Quantitative Equity Fund 10 15 24 25
Real Estate Securities Fund 3 5 7 7
International Equities
International Securities Fund 8 14 20 23
Emerging Markets Fund 2 4 5 5
Global Equity 3 4 7 7
Bonds
Short Duration Bond Fund 2 -- -- --
Multistrategy Bond Fund 60 39 6 --
--- --- --- ---
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.
Global Equity Fund
Seeks to provide long term capital growth.
56 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (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 as a secondary objective, 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 RIMCo.
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 New York
Stock Exchange, whichever is earlier.
- 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.
- Equity securities traded on a national securities foreign exchange or an
over the counter market 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 normal pricing methods. Fair value pricing
could also cause discrepancies between the
Notes to Financial Statements 57
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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 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.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of
SFAS 157 will have on the Funds financial statement disclosure.
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 tax provision was required for the Funds.
In July 2006, Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes--an interpretation of FASB
Statement 109 (FIN 48) was issued and is effective for fiscal years beginning
after December 15, 2006. FIN 48 sets forth a threshold for financial
statement recognition, measurement and disclosure of a tax position taken or
expected to be taken on a tax return. Management is currently evaluating the
impact, if any, the adoption of FIN 48 will have on the Fund's net assets and
results of operations.
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.
58 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from GAAP. As a result, net investment income and net realized
gain (or loss) from investment transactions for a reporting period may differ
significantly from distributions during such period. The differences between
tax regulations and GAAP relate primarily to investments in the Underlying
Funds sold at a loss, wash sale deferrals, capital loss carryforwards.
Accordingly, the Funds may periodically make reclassifications among certain
of their capital accounts without impacting their net asset value.
Expenses
Expenses included in the accompanying financial statements reflect the
expenses of each Fund and do not include those expenses incurred by the
Underlying Funds. Because the Underlying Funds have varied expense and fee
levels and the Funds may own different proportions of the Underlying Funds at
different times, the amount of the fees and expenses incurred indirectly by
the Funds will vary.
Class Allocation
The Funds presented herein offer the following classes of shares: Class A,
Class C, Class 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 period ended April 30, 2007, purchases and sales of the Underlying
Funds were as follows:
<Table>
<Caption>
FUNDS PURCHASES SALES
- ---------------------------------------------------------------
Equity Growth Strategy $ 688,248,197 $ 299,089,706
Growth Strategy 1,076,478,714 475,465,040
Balanced Strategy 2,187,863,362 1,489,428,909
Moderate Strategy 918,682,823 828,049,993
Conservative Strategy 351,029,005 322,678,388
</Table>
<Table>
- ---------------------------------------------------------------
<Caption>
FUNDS PURCHASES SALES
2010 Strategy $ 26,031,861 $ 14,380,435
2020 Strategy 56,706,973 18,548,041
2030 Strategy 27,014,704 5,735,026
2040 Strategy 15,607,629 3,475,930
</Table>
4. RELATED PARTIES
Adviser and Administrator
RIMCo advises and administers all of the Funds which comprise the Investment
Company. RIMCo 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 RIMCo.
The Funds are charged an advisory fee equal to 0.20% and an administrative
fee equal to 0.05% of average daily net assets. The Adviser has contractually
agreed to waive the advisory fee for all Funds at least through February 29,
2008. The adviser does not have the ability to recover amounts waived for the
period ended April 30, 2007 or previous periods.
Notes to Financial Statements 59
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
For the period ended April 30, 2007, the advisory fee waived by RIMCo as
Adviser amounted to:
<Table>
<Caption>
FUNDS AMOUNT
- -------------------------------------------------------
Equity Growth Strategy $ 1,762,777
Growth Strategy 3,598,551
Balanced Strategy 5,117,722
Moderate Strategy 1,133,387
Conservative Strategy 453,242
</Table>
<Table>
- -------------------------------------------------------
<Caption>
FUNDS AMOUNT
2010 Strategy $ 15,217
2020 Strategy 43,144
2030 Strategy 29,113
2040 Strategy 19,700
</Table>
Transfer Agent
RIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, RIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. RIMCo 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, 2007 were
$8,699,349.
RIMCo, 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 period ended April 30, 2007, the direct operating expenses reimbursed
by RIMCo as transfer agent and waived transfer agency fees amounted to:
<Table>
<Caption>
FUNDS AMOUNT
- -------------------------------------------------------
Equity Growth Strategy $ 1,958,130
Growth Strategy 3,902,037
Balanced Strategy 5,511,230
Moderate Strategy 1,000,286
Conservative Strategy 449,289
</Table>
<Table>
- -------------------------------------------------------
<Caption>
FUNDS AMOUNT
2010 Strategy Fund $ 84,074
2020 Strategy Fund 99,512
2030 Strategy Fund 92,560
2040 Strategy Fund 90,699
</Table>
Distributor and Shareholder Servicing
Pursuant to the Distribution Agreement with the Investment Company, Russell
Fund Distributors, Inc. ("Distributor"), a wholly-owned subsidiary of RIMCo,
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.
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 Class A, Class C and Class R3 Shares of the
Funds may not exceed 7.25%, 6.25% and 6.25%, respectively, of total gross
sales, subject to certain exclusions. These limitations are imposed at the
class level on each class of 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.
60 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
For the period ended April 30, 2007, the Distributor retained the following
amounts in sales charges:
<Table>
<Caption>
CONTINGENT DEFERRED SALES CHARGES CLASS A
-------------------------------------------------------
Equity Growth Strategy $ 216
Growth Strategy 906
Balanced Strategy 27,807
Moderate Strategy 5,100
Conservative Strategy 355
</Table>
For the period ended April 30, 2007, 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 Growth Strategy $ 2,051,368 $ 425,544
Growth Strategy 4,525,022 945,607
Balanced Strategy 4,026,771 889,008
Moderate Strategy 381,912 98,703
Conservative Strategy 98,079 22,094
2010 Strategy 11,264 2,414
2020 Strategy 14,384 3,056
2030 Strategy 21,789 4,363
2040 Strategy 8,323 1,413
</Table>
Accrued fees payable to affiliates for the period ended April 30, 2007 were
as follows:
<Table>
<Caption>
EQUITY GROWTH GROWTH STRATEGY BALANCED STRATEGY MODERATE STRATEGY
STRATEGY FUND FUND FUND FUND
-----------------------------------------------------------------------------------------------------------------
Administration fees $ 80,431 $ 160,537 $ 224,723 $ 48,737
Distribution fees 501,803 993,237 1,439,981 283,324
Shareholder servicing
fees 278,724 519,115 714,664 176,537
Trustee fees 4,462 10,464 16,495 4,299
------------------- ------------------- ------------------- -------------------
$ 865,419 $ 1,683,353 $ 2,395,863 $ 512,898
=================== =================== =================== ===================
<Caption>
CONSERVATIVE
STRATEGY FUND
---------------------
Administration fees $ 19,434
Distribution fees 104,328
Shareholder servicing
fees 75,317
Trustee fees 2,445
-------------------
$ 201,525
===================
</Table>
<Table>
<Caption>
2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND FUND
-----------------------------------------------------------------------------------------------------------------
Administration fees $ 848 $ 2,456 $ 1,629 $ 1,062
Distribution fees 2,152 5,794 4,102 3,041
Shareholder servicing
fees 2,711 7,474 5,740 4,023
Trustee fees
------------------- ------------------- ------------------- -------------------
$ 5,711 $ 15,724 $ 11,471 $ 8,127
=================== =================== =================== ===================
<Caption>
---------------------
Administration fees
Distribution fees
Shareholder servicing
fees
Trustee fees
</Table>
Board of Trustees
The Russell Fund Complex consists of Russell Investment Company, which has 35
Funds, and Russell Investment Funds ("RIF"), which has nine Funds. Each of
the Trustees is a Trustee for both RIC 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, 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
Notes to Financial Statements 61
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
person. Trustees' out of pocket expenses are also paid by the Russell Fund
Complex. The Audit Committee Chair and Investment Committee Chair are each
paid a fee of $12,000 per year and the Nominating and Governance Committee
chair are each paid a fee of $6,000 per year. The chair person of the Board
receives additional annual compensation of $52,000.
Transactions With Affiliated Companies
An affiliated company is a company in which a Fund has ownership of at least
5% of the voting securities. Transactions during the period ended April 30,
2007 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 Growth Strategy
Diversified Equity Fund $ 137,277,258 $ 89,530,204 $ 6,736,859 $ 16,623,902
Special Growth Fund 57,912,215 8,933,987 3,340,273 9,334,976
Quantitative Equity Fund 144,819,759 105,934,587 6,680,864 19,916,091
International Securities Fund 129,155,444 57,947,800 20,049,561 21,837,958
Emerging Markets Fund 29,657,341 11,258,628 4,260,165 8,205,250
Global Equity Fund 141,833,152 8,933,987 -- --
Real Estate Securities Fund 47,593,028 16,550,513 3,221,883 7,209,807
------------------- ------------------- ------------------- -------------------
$ 688,248,197 $ 299,089,706 $ 44,289,605 $ 83,127,984
=================== =================== =================== ===================
Growth Strategy
Diversified Equity Fund $ 152,883,900 $ 106,403,655 $ 11,037,705 $ 27,274,140
Special Growth Fund 88,147,145 11,622,370 5,774,266 16,137,195
Quantitative Equity Fund 166,387,287 140,682,257 10,929,945 32,677,951
International Securities Fund 139,848,092 105,720,550 32,861,802 35,793,034
Emerging Markets Fund 37,336,662 13,299,101 7,120,928 13,715,195
Global Equity Fund 237,635,167 11,362,193 -- --
Real Estate Securities Fund 59,678,252 23,927,589 5,692,570 12,891,184
Multistrategy Bond Fund 194,562,209 62,447,325 14,551,993 --
------------------- ------------------- ------------------- -------------------
$ 1,076,478,714 $ 475,465,040 $ 87,969,209 $ 138,488,699
=================== =================== =================== ===================
Balanced Strategy
Diversified Equity Fund $ 113,562,855 $ 69,916,155 $ 11,060,605 $ 27,309,816
Special Growth Fund 45,102,630 9,198,604 6,665,010 18,626,535
Quantitative Equity Fund 125,442,851 68,522,368 11,023,817 32,711,117
International Securities Fund 140,102,800 132,472,433 39,952,658 43,516,386
Emerging Markets Fund 35,045,713 13,195,013 7,877,651 15,172,675
Global Equity Fund 220,664,834 8,441,887 -- --
Real Estate Securities Fund 52,134,161 26,610,192 6,992,821 16,135,807
Multistrategy Bond Fund 1,341,839,998 89,573,837 25,338,715 --
------------------- ------------------- ------------------- -------------------
$ 2,073,895,842 $ 417,930,489 $ 108,911,277 $ 153,472,336
=================== =================== =================== ===================
Moderate Strategy
Multistrategy Bond Fund $ 741,885,864 $ 24,999,768 $ 3,031,542 $ --
------------------- ------------------- ------------------- -------------------
$ 741,885,864 $ 24,999,768 $ 3,031,542 $ --
=================== =================== =================== ===================
Conservative Strategy
Short Duration Bond Fund $ 20,018,561 $ 182,372,113 $ 4,934,212 $ --
------------------- ------------------- ------------------- -------------------
$ 20,018,561 $ 182,372,113 $ 4,934,212 $ --
=================== =================== =================== ===================
</Table>
For the period ended April 30, 2007, 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 any Underlying Fund.
62 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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, 2006, the Funds had no capital loss carryforwards.
For the period ended April 30, 2007, 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 GROWTH GROWTH STRATEGY BALANCED STRATEGY MODERATE STRATEGY
STRATEGY FUND FUND FUND FUND
------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 1,645,971,378 $ 3,334,776,508 $ 4,790,724,228 $ 1,071,085,487
================ ================ ================ ================
Unrealized Appreciation $ 343,671,635 $ 630,725,213 $ 760,955,092 $ 123,489,424
Unrealized Depreciation -- -- -- --
---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 343,671,635 $ 630,725,213 $ 760,955,092 $ 123,489,424
================ ================ ================ ================
<Caption>
CONSERVATIVE
STRATEGY FUND
--------------------------------
Cost of Investments $ 442,047,477
================
Unrealized Appreciation $ 32,283,896
Unrealized Depreciation --
----------------
Net Unrealized Appreciation
(Depreciation) $ 32,283,896
================
</Table>
<Table>
<Caption>
2010 STRATEGY 2020 STRATEGY 2030 STRATEGY 2040 STRATEGY
FUND FUND FUND FUND
----------------------------------------------------------------------------------------------------------
Cost of Investments $ 20,001,001 $ 58,073,730 $ 39,185,426 $ 24,533,754
================ ================ ================ ================
Unrealized Appreciation $ 651,112 $ 2,285,515 $ 2,255,876 $ 1,837,058
Unrealized Depreciation -- -- -- --
---------------- ---------------- ---------------- ----------------
Net Unrealized
Appreciation
(Depreciation) $ 651,112 $ 2,285,515 $ 2,255,876 $ 1,837,058
================ ================ ================ ================
</Table>
Notes to Financial Statements 63
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the period ended April 30, 2007 and the year ended
October 31, 2006 were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
EQUITY GROWTH STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 7,555 9,416 $ 96,075 $ 110,447
Proceeds from reinvestment of
distributions 892 160 11,106 1,819
Payments for shares redeemed (1,419) (1,562) (18,014) (18,295)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 7,028 8,014 89,167 93,971
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 9,418 13,818 114,378 154,921
Proceeds from reinvestment of
distributions 1,878 364 22,287 3,907
Payments for shares redeemed (2,905) (5,484) (35,196) (61,228)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 8,391 8,698 101,469 97,600
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 5,053 6,110 63,296 70,060
Proceeds from reinvestment of
distributions 1,083 305 13,264 3,384
Payments for shares redeemed (2,889) (5,212) (36,016) (59,036)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,247 1,203 40,544 14,408
----------------- ----------------- ----------------- -----------------
Class R1
Proceeds from shares sold 285 112 3,571 1,284
Proceeds from reinvestment of
distributions 6 -- 73 2
Payments for shares redeemed (125) (1) (1,606) (9)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 166 111(4) 2,038 1,277(4)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 228 1,662 2,836 19,455
Proceeds from reinvestment of
distributions 79 5 967 58
Payments for shares redeemed (100) (120) (1,255) (1,424)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 207 1,547(2) 2,548 18,089(2)
----------------- ----------------- ----------------- -----------------
Class R3
Proceeds from shares sold 5,771 9,161 72,174 105,456
Proceeds from reinvestment of
distributions 1,781 446 21,774 4,926
Payments for shares redeemed (3,060) (4,066) (38,162) (46,661)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 4,492 5,541 55,786 63,721
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 5,306 9,138 67,319 106,965
Proceeds from reinvestment of
distributions 930 237 11,545 2,688
Payments for shares redeemed (2,800) (3,758) (35,518) (43,785)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,436 5,617 43,346 65,868
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 26,967 30,731 $ 334,898 $ 354,934
================= ================= ================= =================
</Table>
64 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
GROWTH STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 14,693 24,393 $ 185,157 $ 286,986
Proceeds from reinvestment of
distributions 2,758 857 34,111 9,986
Payments for shares redeemed (2,620) (4,141) (32,997) (48,906)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 14,831 21,109 186,271 248,066
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 15,102 25,134 188,982 293,331
Proceeds from reinvestment of
distributions 3,136 813 38,491 9,301
Payments for shares redeemed (5,781) (9,615) (72,401) (112,051)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 12,457 16,332 155,072 190,581
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 7,592 11,277 95,731 132,319
Proceeds from reinvestment of
distributions 2,032 800 25,146 9,290
Payments for shares redeemed (3,901) (7,916) (48,976) (92,603)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,723 4,161 71,901 49,006
----------------- ----------------- ----------------- -----------------
Class R1
Proceeds from shares sold 570 147 7,271 1,694
Proceeds from reinvestment of
distributions 21 1 269 11
Payments for shares redeemed (112) -- (1,397) (1)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 479 148(4) 6,143 1,704(4)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 289 960 3,611 11,471
Proceeds from reinvestment of
distributions 44 8 544 94
Payments for shares redeemed (36) (115) (445) (1,382)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 297 853(2) 3,710 10,183(2)
----------------- ----------------- ----------------- -----------------
Class R3
Proceeds from shares sold 6,579 12,397 83,221 146,016
Proceeds from reinvestment of
distributions 3,080 1,116 38,199 12,971
Payments for shares redeemed (3,634) (4,163) (45,899) (48,966)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 6,025 9,350 75,521 110,021
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 7,185 13,215 91,106 155,660
Proceeds from reinvestment of
distributions 1,511 638 18,797 7,464
Payments for shares redeemed (5,291) (8,492) (67,076) (100,002)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,405 5,361 42,827 63,122
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 43,217 57,314 $ 541,445 $ 672,683
================= ================= ================= =================
</Table>
Notes to Financial Statements 65
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
BALANCED STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 17,559 33,691 $ 215,111 $ 390,271
Proceeds from reinvestment of
distributions 3,782 1,831 45,609 21,147
Payments for shares redeemed (6,510) (7,740) (79,409) (89,667)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 14,831 27,782 181,311 321,751
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 22,278 38,041 271,354 438,872
Proceeds from reinvestment of
distributions 4,605 2,024 55,211 23,154
Payments for shares redeemed (9,467) (18,581) (115,334) (213,793)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 17,416 21,484 211,231 248,233
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 9,018 13,696 110,705 159,160
Proceeds from reinvestment of
distributions 2,343 1,334 28,311 15,399
Payments for shares redeemed (4,865) (10,601) (59,560) (122,935)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 6,496 4,429 79,456 51,624
----------------- ----------------- ----------------- -----------------
Class R1
Proceeds from shares sold 884 358 11,036 4,173
Proceeds from reinvestment of
distributions 41 3 502 36
Payments for shares redeemed (44) (11) (537) (122)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 881 350(5) 11,001 4,087(5)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 540 1,315 6,612 15,201
Proceeds from reinvestment of
distributions 63 16 765 183
Payments for shares redeemed (175) (97) (2,130) (1,144)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 428 1,234(3) 5,247 14,240(3)
----------------- ----------------- ----------------- -----------------
Class R3
Proceeds from shares sold 9,352 15,268 114,896 177,564
Proceeds from reinvestment of
distributions 4,089 2,214 49,385 25,556
Payments for shares redeemed (5,225) (6,079) (64,081) (70,592)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 8,216 11,403 100,200 132,528
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 10,918 21,018 134,546 245,739
Proceeds from reinvestment of
distributions 2,377 1,383 28,843 16,059
Payments for shares redeemed (8,466) (12,921) (104,457) (150,829)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 4,829 9,480 58,932 110,969
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 53,097 76,162 $ 647,378 $ 883,432
================= ================= ================= =================
</Table>
66 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
MODERATE STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 2,576 4,731 $ 29,842 $ 52,681
Proceeds from reinvestment of
distributions 539 399 6,158 4,444
Payments for shares redeemed (1,462) (2,005) (16,864) (22,390)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,653 3,125 19,136 34,735
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 3,703 8,818 42,620 97,636
Proceeds from reinvestment of
distributions 753 468 8,576 5,190
Payments for shares redeemed (2,653) (4,352) (30,503) (48,365)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,803 4,934 20,693 54,461
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 3,274 5,555 37,962 61,913
Proceeds from reinvestment of
distributions 628 502 7,182 5,591
Payments for shares redeemed (2,123) (5,488) (24,554) (61,186)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,779 569 20,590 6,318
----------------- ----------------- ----------------- -----------------
Class R1
Proceeds from shares sold 70 -- 798 --
Proceeds from reinvestment of
distributions -- -- 5 --
Payments for shares redeemed (10) -- (111) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 60 --(A)(8) 692 --(A)(8)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 159 237 1,832 2,672
Proceeds from reinvestment of
distributions 7 3 83 36
Payments for shares redeemed (20) (97) (224) (1,090)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 146 143(2) 1,691 1,618(2)
----------------- ----------------- ----------------- -----------------
Class R3
Proceeds from shares sold 3,000 5,196 34,754 58,041
Proceeds from reinvestment of
distributions 1,176 910 13,486 10,164
Payments for shares redeemed (2,790) (3,181) (32,453) (35,510)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,386 2,925 15,787 32,695
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,866 4,025 33,293 45,044
Proceeds from reinvestment of
distributions 403 343 4,618 3,830
Payments for shares redeemed (2,606) (3,877) (30,260) (43,385)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 663 491 7,651 5,489
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 7,490 12,187 $ 86,240 $ 135,316
================= ================= ================= =================
</Table>
Notes to Financial Statements 67
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
-------------------------------------- --------------------------------------
2007 2006 2007 2006
CONSERVATIVE STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 936 1,659 $ 10,198 $ 17,916
Proceeds from reinvestment of
distributions 168 133 1,803 1,428
Payments for shares redeemed (685) (1,340) (7,423) (14,432)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 419 452 4,578 4,912
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 1,955 2,198 21,159 23,592
Proceeds from reinvestment of
distributions 294 235 3,149 2,515
Payments for shares redeemed (1,324) (3,357) (14,335) (36,070)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 925 (924) 9,973 (9,963)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 1,711 2,461 18,697 26,529
Proceeds from reinvestment of
distributions 324 386 3,489 4,155
Payments for shares redeemed (1,559) (12,708) (16,961) (137,627)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 476 (9,861) 5,225 (106,943)
----------------- ----------------- ----------------- -----------------
Class R1
Proceeds from shares sold 101 -- 1,094 --
Proceeds from reinvestment of
distributions 1 -- 8 --
Payments for shares redeemed (16) -- (173) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 86(10) -- 929(10) --
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 127 226 1,373 2,454
Proceeds from reinvestment of
distributions 7 4 77 47
Payments for shares redeemed (15) (97) (159) (1,045)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 119 133(2) 1,291 1,456(2)
----------------- ----------------- ----------------- -----------------
Class R3
Proceeds from shares sold 1,782 3,663 19,479 39,750
Proceeds from reinvestment of
distributions 716 564 7,735 6,096
Payments for shares redeemed (1,712) (2,456) (18,713) (26,603)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 786 1,771 8,501 19,243
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 1,390 1,869 15,129 20,258
Proceeds from reinvestment of
distributions 176 157 1,906 1,697
Payments for shares redeemed (1,157) (1,962) (12,638) (21,288)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 409 64 4,397 667
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 3,220 (8,365) $ 34,894 $ (90,628)
================= ================= ================= =================
</Table>
68 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
2010 STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 25 57 $ 275 $ 592
Proceeds from reinvestment of
distributions 5 3 59 35
Payments for shares redeemed (47) -- (523) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (17) 60 (189) 627
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 286 143 3,119 1,502
Proceeds from reinvestment of
distributions 6 3 69 32
Payments for shares redeemed (50) (111) (554) (1,178)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 242 35 2,634 356
----------------- ----------------- ----------------- -----------------
Class R1
Proceeds from shares sold 111 16 1,214 165
Proceeds from reinvestment of
distributions 4 -- 40 2
Payments for shares redeemed (9) (2) (95) (24)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 106 14(6) 1,159 143(6)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 38 -- 415 --
Proceeds from reinvestment of
distributions -- -- 3 --
Payments for shares redeemed (1) -- (14) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 37(9) -- 404(9) --
----------------- ----------------- ----------------- -----------------
Class R3
Proceeds from shares sold 657 334 7,161 3,539
Proceeds from reinvestment of
distributions 14 5 154 55
Payments for shares redeemed (243) (145) (2,659) (1,527)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 428 194 4,656 2,067
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 258 125 2,831 1,314
Proceeds from reinvestment of
distributions 10 3 114 35
Payments for shares redeemed (7) (105) (76) (1,119)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 261 23 2,869 230
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,057 326 $ 11,533 $ 3,423
================= ================= ================= =================
</Table>
Notes to Financial Statements 69
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
2020 STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 80 93 $ 933 $ 988
Proceeds from reinvestment of
distributions 2 3 25 32
Payments for shares redeemed (129) -- (1,476) (5)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (47) 96 (518) 1,015
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 412 199 4,724 2,124
Proceeds from reinvestment of
distributions 6 3 72 31
Payments for shares redeemed (37) (114) (426) (1,189)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 381 88 4,370 966
----------------- ----------------- ----------------- -----------------
Class R1
Proceeds from shares sold 971 62 11,231 660
Proceeds from reinvestment of
distributions 21 1 240 7
Payments for shares redeemed (124) -- (1,432) (3)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 868 63(6) 10,039 664(6)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 205 57 2,361 623
Proceeds from reinvestment of
distributions 2 -- 24 3
Payments for shares redeemed (1) -- (15) (1)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 206 57(7) 2,370 625(7)
----------------- ----------------- ----------------- -----------------
Class R3
Proceeds from shares sold 1,940 734 22,282 7,879
Proceeds from reinvestment of
distributions 29 9 330 92
Payments for shares redeemed (506) (62) (5,837) (670)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,463 681 16,775 7,301
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 443 540 5,081 5,803
Proceeds from reinvestment of
distributions 18 6 208 60
Payments for shares redeemed (78) (117) (919) (1,247)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 383 429 4,370 4,616
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 3,254 1,414 $ 37,406 $ 15,187
================= ================= ================= =================
</Table>
70 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
2030 STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 51 246 $ 617 $ 2,643
Proceeds from reinvestment of
distributions 7 4 85 38
Payments for shares redeemed (38) (99) (455) (1,081)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 20 151 247 1,600
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 352 418 4,148 4,593
Proceeds from reinvestment of
distributions 14 3 164 32
Payments for shares redeemed (44) (122) (526) (1,343)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 322 299 3,786 3,282
----------------- ----------------- ----------------- -----------------
Class R1
Proceeds from shares sold 118 30 1,396 323
Proceeds from reinvestment of
distributions 2 -- 23 3
Payments for shares redeemed (1) -- (16) (3)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 119(6) 30 1,403 323(6)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 136 55 1,600 610
Proceeds from reinvestment of
distributions 2 -- 23 2
Payments for shares redeemed (2) -- (24) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 136(7) 55 1,599 612(7)
----------------- ----------------- ----------------- -----------------
Class R3
Proceeds from shares sold 881 729 10,471 7,944
Proceeds from reinvestment of
distributions 25 6 290 63
Payments for shares redeemed (159) (162) (1,893) (1,754)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 747 573 8,868 6,253
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 380 252 4,497 2,780
Proceeds from reinvestment of
distributions 12 3 140 32
Payments for shares redeemed (15) (139) (175) (1,534)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 377 116 4,462 1,278
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,721 1,224 $ 20,365 $ 13,348
================= ================= ================= =================
</Table>
Notes to Financial Statements 71
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
2040 STRATEGY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 15 63 $ 184 $ 674
Proceeds from reinvestment of
distributions 6 2 68 25
Payments for shares redeemed (35) (1) (435) (14)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (14) 64 (183) 685
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 195 282 2,322 3,104
Proceeds from reinvestment of
distributions 12 2 141 27
Payments for shares redeemed (29) (121) (350) (1,308)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 178 163 2,113 1,823
----------------- ----------------- ----------------- -----------------
Class R1
Proceeds from shares sold 74 8 891 86
Proceeds from reinvestment of
distributions 1 -- 12 1
Payments for shares redeemed (9) -- (105) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 66 8(6) 798 87(6)
----------------- ----------------- ----------------- -----------------
Class R2
Proceeds from shares sold 5 106 59 1,188
Proceeds from reinvestment of
distributions 4 1 45 10
Payments for shares redeemed (2) -- (25) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 7 107(1) 79 1,198(1)
----------------- ----------------- ----------------- -----------------
Class R3
Proceeds from shares sold 704 444 8,414 4,863
Proceeds from reinvestment of
distributions 19 4 227 44
Payments for shares redeemed (118) (144) (1,421) (1,584)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 605 304 7,220 3,323
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 148 162 1,775 1,824
Proceeds from reinvestment of
distributions 7 3 80 30
Payments for shares redeemed (26) (124) (312) (1,438)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 129 41 1,543 416
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 971 687 $ 11,570 $ 7,532
================= ================= ================= =================
</Table>
(A) Amounts are less than $500 or 500 shares.
(1) For the period March 17, 2006 (commencement of operations) to October
31, 2006.
(2) For the period March 29, 2006 (commencement of operations) to October
31, 2006.
(3) For the period April 3, 2006 (commencement of operations) to October
31, 2006.
(4) For the period May 19, 2006 (commencement of operations) to October
31, 2006.
(5) For the period June 6, 2006 (commencement of operations) to October
31, 2006.
(6) For the period June 7, 2006 (commencement of operations) to October
31, 2006.
(7) For the period September 8, 2006 (commencement of operations) to
October 31, 2006.
(8) For the period October 3, 2006 (commencement of operations) to
October 31, 2006.
(9) For the period November 9, 2006 (commencement of operations) to April
30, 2007.
(10) For the period December 28, 2006 (commencement of operations) to
April 30, 2007.
72 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
8. INTERFUND LENDING PROGRAM
The Investment Company Funds have been granted permission from the Securities
and Exchange Commission to participate in a joint lending and borrowing
facility (the "Credit Facility"). Portfolios of the Funds may borrow money
from the RIC Money Market Fund for Temporary purposes. All such borrowing and
lending will be subject to a participating fund's fundamental investment
limitations. The RIC Money Market Fund will lend through the program only
when the returns are higher than those available from an investment in
repurchase agreements or short-term reserves. The Investment Company Funds
will borrow through the program only when the costs are equal to or lower
than the cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be called
on one business day's notice. A participating fund may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to the RIC Money Market Fund could result in a lost
investment opportunity of additional borrowing costs. The funds did not
participate in the credit facility for the period ended April 30, 2007.
9. RECORD OWNERSHIP
As of April 30, 2007, 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 Growth Strategy 2 27.5
Growth Strategy 1 16.4
Balanced Strategy 1 15.4
Moderate Strategy 1 23.2
Conservative Strategy 1 29.4
2010 Strategy 3 51.1*
2020 Strategy 4 58.8*
2030 Strategy 3 53.7*
2040 Strategy 3 53.1*
</Table>
* Northwestern Mutual Life Insurance Company separate accounts were a
shareholder in the fund.
Notes to Financial Statements 73
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 RIMCo
(the "RIMCo 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 24, 2007. 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' and Underlying
Funds' shares, and the management of the Funds and the Underlying Funds by
RIMCo. In preparation for the annual review, the Independent Trustees, with the
advice and assistance of their independent counsel, also requested and the Board
considered (1) information and reports prepared by RIMCo relating to the
services provided by RIMCo (and its affiliates) to the Funds and the Underlying
Funds; (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 RIMCo believed by the provider to be
generally comparable in investment objectives and size to the Funds and the
Underlying Funds; and (3) RIMCo's response to questions from the Board
concerning the Third-Party Information addressing, among other things,
performance and expense differentials between certain Funds and Underlying Funds
and their respective Comparable Funds. The foregoing information requested by
the Trustees or provided by RIMCo is collectively called the "Agreement Renewal
Information." The Independent Trustees also received a memorandum from their
independent counsel discussing the legal standards for their consideration of
the proposed continuances.
On April 23, 2007, the Independent Trustees met to review the Agreement Renewal
Information in a private session with their independent counsel at which no
representatives of RIMCo or management were present. At the April 24 meeting of
the Board of Trustees, the Board, including the Independent Trustees, reviewed
the proposed continuance of the RIMCo Agreement and the portfolio management
contracts with management and independent counsel to the Independent Trustees.
Presentations made by RIMCo to the Board as part of this review encompassed the
Funds and all other RIMCo-managed funds for which the Board has supervisory
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 analyses received from RIMCo 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. RIMCo has engaged
multiple Money Managers for all Underlying Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible
under the RIMCo Agreement for allocating assets of each Fund among its
Underlying Funds and for determining, implementing and maintaining the
investment program for each Underlying Fund. The assets of each Fund are
invested in different combinations of the Underlying Funds pursuant to target
asset allocations set by RIMCo. RIMCo may modify the target asset allocation for
any Fund and/or the Underlying Funds in which the Funds invest. Assets of each
Underlying Fund generally have been allocated among the multiple Money Managers
selected by RIMCo, subject to Board approval, for that Underlying Fund. RIMCo
manages directly a portion of certain Underlying Funds' assets employing a
"select holdings strategy," as described below, and directly manages the
investment of each Underlying Fund's cash reserves. RIMCo also may manage
directly any portion of each Underlying Fund's assets that RIMCo determines not
to allocate to the Money Managers and portions of an Underlying Fund during
transitions between Money Managers. In all cases, assets are managed directly by
RIMCo in accordance with the RIMCo Agreement.
RIMCo is responsible for selecting, subject to Board approval, Money Managers
for each Underlying Fund and for actively managing allocations and reallocations
of its assets among the Money Managers. RIMCo's goal is to construct and manage
diversified portfolios in a risk aware manner. 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 RIMCo (each, a "segment") in accordance
with the Fund's applicable investment objective, policies and restrictions, any
constraints placed by RIMCo upon their selection of portfolio securities and the
Money Manager's specified role in an Underlying Fund. RIMCo 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
74 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
LIFEPOINTS FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
of portfolio management contracts, RIMCo 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
RIMCo's research and ongoing review and analysis, such actions are appropriate.
RIMCo may assign specific investment constraints from time to time for each
Money Manager intended to capitalize on the strengths of that Money Manager or
to coordinate the investment activities of Money Managers for an Underlying Fund
in a complementary manner. Therefore, the performance of individual Money
Managers for an Underlying Fund may reflect the roles assigned to them by RIMCo
in the Underlying Funds' investment activities and any constraints placed by
RIMCo 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 RIMCo in designing the Underlying
Fund's investment program, structuring an Underlying Fund, selecting an
effective Money Manager with a particular investment style or sub-style for a
segment that is complementary to the styles of the Money Managers of other
Underlying Fund segments, and allocating assets among the Money Managers in a
manner designed to achieve the objectives of the Underlying Fund. The Board
considered that the prospectuses for the Funds and the Underlying Funds and
other public disclosures emphasize to investors RIMCo'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 or Underlying Funds operate so that investors may take that
information into account when deciding to purchase shares of any Fund.
The Board also considered the special expertise of RIMCo with respect to the
manager-of-managers structure of the Underlying Funds and the likelihood that,
at the current expense ratio of each such Underlying Fund, there would be no
acceptable alternative investment managers to replace RIMCo on comparable terms
given the need to continue 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
RIMCo Agreement, including the following:
1. The nature, scope and quality of the services provided to the Fund and the
Underlying Fund by RIMCo;
2. The advisory fee paid by the Fund or the Underlying Fund to RIMCo 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 RIMCo as to other fees and benefits received by RIMCo
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 RIMCo as to expenses incurred by the Fund or the
Underlying Fund; and
5. Information provided by RIMCo as to the profits that RIMCo derives from its
mutual fund operations generally and from the Fund or Underlying Fund.
As noted above, RIMCo pursuant to the terms of the RIMCo Agreement directly
manages a portion--up to 10%--of the assets of each of the Diversified Equity
Fund, the Quantitative Equity Fund and the International Securities Fund (each a
"Participating Underlying Fund") utilizing a select holdings strategy, the
actual allocation being determined by each Participating Underlying Fund's RIMCo
portfolio manager. The select holdings strategy utilized by RIMCo in managing
such assets for a Participating Underlying Fund is designed to increase the
Participating Underlying Fund's exposure to stocks that are viewed as attractive
by multiple Money Managers of that Participating Underlying Fund. The Board
reviewed the results of the select holdings strategy in respect of each
Participating Underlying Fund since implementation taking into account that the
strategy has been utilized for a limited period of time. The Trustees considered
that RIMCo 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 RIMCo generally and from the
Participating Underlying Fund consequently may increase incrementally. The
Board, however, also considered RIMCo'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 carrying out the select holdings strategy; the limited amount of assets
that are managed directly by RIMCo pursuant to the select holdings strategy; and
the fact that the aggregate investment advisory fees paid by the Participating
Underlying Fund are not increased as a result of the select holdings strategy.
At the April 24 Board meeting, RIMCo and management discussed the reasonableness
of the Funds' and the Underlying Funds' investment advisory fees. In discussing
whether the Funds' and the Underlying Funds' performance supported these fees,
RIMCo noted differences between the investment strategies of certain Underlying
Funds and their respective Comparable Funds in
Basis for Approval of Investment Advisory Contracts 75
RUSSELL INVESTMENT COMPANY
LIFEPOINTS FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
pursuing their investment objectives, including Fund 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 RIMCo, 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 performance of the
Funds than that of some of their respective Comparable Funds. Among other
things, RIMCo stated that the strategies pursued by the Underlying 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. RIMCo stated that certain
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, other Funds had lower performance than that of some of their
Comparable Funds during the periods covered by the Third-Party Information.
On the basis of the Agreement Renewal Information and other information
previously received by the Board from RIMCo during the course of the year or
presented at the April 24 Board meeting by RIMCo, the Board, in respect of each
Fund and Underlying Fund, found, after giving effect to waivers and/or
reimbursements and considering differences in the composition and investment
strategies of their respective Comparable Funds (1) the advisory fee charged by
RIMCo to be reasonable in light of the nature, scope and quality of the services
provided to the Funds or Underlying Funds; (2) the relative expense ratio of
each Fund and Underlying Fund was comparable to those of its Comparable Funds;
(3) RIMCo's methodology of allocating expenses of operating funds in the complex
was reasonable; and (4) RIMCo'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 RIMCo. The Board also concluded that the performance of
each of the Funds and Underlying Funds supported continuation of the RIMCo
Agreement. 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. The Board also
considered RIMCo's investment strategy of managing the Underlying Funds in a
risk aware manner.
At the April 24 Board meeting, 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. The Board determined that the investment advisory fees for
each Fund or Underlying Fund appropriately reflect any economies of scale
realized by that fund, based upon such factors as the 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 RIMCo by institutional clients with investment
objectives similar to those of the Funds and other RIC funds under the Board's
supervision, including the Underlying Funds are lower, and may, in some cases,
be substantially lower, than the rates paid by RIC funds supervised by the
Board, including the Funds. The Trustees reviewed with RIMCo the differences in
the scope of services it provides to institutional clients and the funds under
its supervision, including the Underlying Funds. In response to the Trustees'
inquiries, RIMCo noted, among other things, that institutional clients have
fewer administrative needs than the Funds. It was further noted by RIMCo 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.
After considering the foregoing and other relevant factors, the Board concluded
that continuation of the RIMCo Agreement on its current terms and conditions
would be in the best interests of the Funds and the Underlying Funds and their
respective shareholders and voted to approve the continuation of the agreement.
At the April 24 Board meeting, 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 RIMCo reporting for each Money
Manager, among other things, the Money Manager's performance over various
periods; RIMCo's assessment of the performance of each Money Manager; any
significant business relationships between the Money Manager and RIMCo or
Russell Fund Distributors, Inc., the Funds' and Underlying Funds' underwriter;
and RIMCo'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. RIMCo recommended that each Money Manager be retained at its current
fee rate. RIMCo 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 RIMCo; RIMCo is
aware of the fees charged by Money Managers to other clients; and RIMCo 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 RIMCo's explanation in light of the Board's findings as to the
reasonableness of the aggregate investment advisory fees paid by each Fund and
Underlying Fund and the fact that each Money Manager's fee is paid by RIMCo.
76 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
LIFEPOINTS FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
Based substantially upon RIMCo's recommendations together with the information
received from RIMCo in support of its recommendations at the April 24 meeting,
the Board concluded that the fees paid to the Money Managers of each Underlying
Fund are 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 would be in the best interests of the Fund
and its shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the RIMCo Agreement or, other than RIMCo's recommendation, the portfolio
management agreement with any Money Manager for 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
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 RIMCo, as RIC'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. RIMCo 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.
To reduce expenses, we may mail only one copy of the Funds' prospectus and each
annual and semi-annual report to those addresses shared by two or more accounts.
If you wish to receive individual copies of these documents, please call us at
(800) 787-7354 or contact your financial institution and we will begin sending
you individual copies thirty days after receiving your request.
Some Financial Intermediaries may offer electronic delivery of the Fund's
prospectus and annual and semiannual reports. Please contact your Financial
Intermediary for further details.
78 Shareholder Requests for Additional Information
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Russell Investment
Company ("RIC"), which has 35 funds, and Russell Investment Funds ("RIF"), which
has nine funds. Each of the trustees is a trustee of both RIC 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
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Thaddas L. Alston Trustee since Appointed until - Senior Vice President, Larco 44 None
Born April 7, 1945 2006 successor is Investments, Ltd.
duly elected
909 A Street and qualified
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 44 - Director, Avista
Born January 22, 2000 successor is Blake, P.S. (accounting Corp;
1954 duly elected services) - Trustee,
Chairperson and qualified - Director and Chairman of the Principal
909 A Street since 2005 Audit Committee, Avista Investors Fund
Tacoma, Washington Annual Corp. (investment
98402-1616 - Trustee and Chairman of the company);
Operations and Distribution - Trustee,
Committee, WM Group of Principal
Funds, 1999-2006 Variable
- February 2002 to June 2005, Contracts Fund
Chairman of the Audit (investment
Committee, RIC and RIF company)
- Regent, University of
Washington
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy Trustee since Appointed until - June 2004 to present, Senior 44 None
Born June 6, 1946 2003 successor is Vice President and Chief
Chairman of duly elected Financial Officer, Waddell &
909 A Street Audit Committee and qualified Reed Financial, Inc.
Tacoma, Washington since 2005 - 2003, Retired
98402-1616 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 79
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 44 None
Tennison, Jr. 2000 successor is Investment Company and
Born December 21, duly elected several additional
1955 Chairman of the and qualified subsidiary companies,
Nominating and including Simpson Timber
909 A Street Governance Appointed until Company, Simpson Paper
Tacoma, Washington Committee since successor is Company and Simpson Tacoma
98402-1616 2007 duly elected Kraft Company
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack R. Thompson, Trustee since Appointed until - September 2003 to present, 44 - 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
80 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 44 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 RIMCo
Tacoma, Washington - Chairman Emeritus, RIC and
98402-1616 RIF; Russell Implementation
Services Inc. (broker-dealer
and investment adviser
("RIS")); Russell 20-20
Association (non-profit
corporation); and Russell
Trust Company (non-
depository trust company
("RTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee Emeritus Five year term - President, Anderson 44 None
Born October 15, since 2007 Management Group LLC
1931 (private investments
consulting)
909 A Street - February 2002 to June 2005,
Tacoma, Washington Lead Trustee, RIC and RIF
98402-1616 - Trustee of RIC and RIF Until
2006
- Chairman of the Nominating
and Governance Committee
2006
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 44 None
Born December 1, since 2003 - Trustee of RIC and
1919
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 44 None
Born June 8, 1925 since 2004 - Trustee of RIC 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 RIC and
RIF.
Disclosure of Information about Fund Directors 81
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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 44 None
Born October 6, since 2006 - Trustee of RIC and RIF Until
1930 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 44 None
Born May 5, 1926 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
82 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
LIFEPOINTS(R) FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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, RIC
Born December 16, 1966 Officer since by Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, RIMCo
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, RIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, RIMCo
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, RIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, RIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, RIMCo, RTC 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, RIC, RIF, FRC, RTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, RIMCo and RFD
2004 - 1999 to 2003, Chief Financial Officer, FRC, RIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Gregory J. Lyons, Secretary since Until successor - Associate General Counsel and Assistant Secretary FRC
Born August 24, 1960 2007 is chosen and and RIA
qualified by - Director and Secretary, RIMCo and RFD
909 A Street Trustees - Secretary and Chief Legal Counsel, RIC and RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 83
LIFEPOINTS(R) FUNDS
RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul E. Anderson
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
Gregory J. Lyons, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Josiah Quincy Building
200 Newport Avenue
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS OF UNDERLYING FUNDS AS OF APRIL 30, 2007*
Diversified Equity Fund
AllianceBernstein L.P., New York, NY
Columbus Circle Investors, Stamford, CT
Institutional Capital LLC, 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
Berkeley Capital Management LLC, San Francisco, CA
ClariVest Asset Management LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
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
Global Equity Fund
Altrinsic Glbal Advisors, LLC, Stamford, CT
ClariVest Asset Management, LLC, San Diego, CA
T. Rowe Price International, Inc., Baltimore, MD
* A complete list of current money managers of the Underlying Funds can also be
found at www.Russell.com
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 Russell Investment
Company. Such offering is made only by Prospectus, which includes details as
to offering price and other material information.
84 Manager, Money Managers and Service Providers
LIFEPOINTS(R) FUNDS
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
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
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
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., Somerville, NJ
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 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
(RUSSELL LOGO)
Russell Investment Company
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com
On July 1, 2006, Frank Russell Investment Company
changed its name to Russell Investment Company, and
Frank Russell Investment Management Company changed
its name to Russell Investment Management Company. 36-08-071 (1 04/07)
TAX-MANAGED GLOBAL EQUITY FUND
2007 Semiannual Report
CLASS C AND S SHARES:
TAX-MANAGED GLOBAL EQUITY FUND
APRIL 30, 2007
(RUSSELL LOGO)
Russell Investment Company
Russell Investment Company is a series investment company with 35 different
investment portfolios referred to as Funds. These financial statements report on
one of these Funds.
Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Russell Investment Company
Tax-Managed Global Equity Fund
Semiannual Report
April 30, 2007 (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
Statements 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.................. 16
Shareholder Requests for Additional Information...................... 20
Disclosure of Information about Fund Directors....................... 21
Manager, Money Managers and Service Providers........................ 26
</Table>
Russell Investment Company - Tax-Managed Global Equity Fund.
Copyright (c) Russell Investment Group 2007. 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 changed its name to
Russell Investment Company ("RIC"). RIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Russell Investment Management Company
("RIMCo"). Effective July 1, 2006 RIMCo changed its name from Frank 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.
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,094.60 $ 1,019.84
Expenses Paid During
Period* $ 5.19 $ 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,100.40 $ 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
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
INVESTMENTS - 100.0%
Other Russell Investment Company Series Mutual
Funds - Class S Shares
Domestic Equities - 75.0%
Quantitative Equity Fund 211,115 9,019
Tax-Managed Large Cap Fund 2,077,539 45,061
Tax-Managed Mid & Small Cap Fund 878,967 13,422
------------
67,502
------------
International Equities - 25.0%
Emerging Markets Fund 202,274 4,507
International Securities Fund 222,147 18,025
------------
22,532
------------
TOTAL INVESTMENTS - 100.0%
(identified cost $60,358) 90,034
OTHER ASSETS AND LIABILITIES, NET - 0.0% (13)
------------
NET ASSETS - 100.0% 90,021
============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Domestic Equities 75.0
International Equities 25.0
---------------
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
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
ASSETS
Investments at market (identified cost $60,358)..................................... $ 90,034
Receivables:
Investments sold................................................................. 61
Fund shares sold................................................................. 102
From Adviser..................................................................... 13
Prepaid expenses................................................................. 18
--------------------
Total assets........................................................................ 90,228
--------------------
LIABILITIES
Payables:
Fund shares redeemed.................................. $ 158
Accrued fees to affiliates............................ 22
Other accrued expenses................................ 27
--------------------
Total liabilities................................................................... 207
--------------------
NET ASSETS.......................................................................... $ 90,021
====================
Net Assets Consist of:
Undistributed (overdistributed) net investment income............................... $ 55
Accumulated net realized gain (loss)................................................ (15,140)
Unrealized appreciation (depreciation) on investments............................... 29,676
Shares of beneficial interest....................................................... 75
Additional paid-in capital.......................................................... 75,355
--------------------
NET ASSETS.......................................................................... $ 90,021
====================
NET ASSET VALUE, offering and redemption price per share:
Class C ($23,007,877 divided by 1,951,999 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 11.79
====================
Class S ($67,012,928 divided by 5,535,021 shares of $.01 par value shares of
beneficial interest outstanding)............................................... $ 12.11
====================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 5
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME
Income distributions from Underlying Funds....................................... $ 1,388
EXPENSES
Advisory fees............................................ $ 82
Administrative fees...................................... 21
Custodian fees........................................... 12
Distribution fees - Class C.............................. 79
Transfer agent fees...................................... 62
Professional fees........................................ 17
Registration fees........................................ 23
Shareholder servicing fees - Class C..................... 26
Trustees' fees........................................... 1
Printing fees............................................ 1
Miscellaneous............................................ 3
--------------------
Expenses before reductions............................... 327
Expense reductions....................................... (220)
--------------------
Net expenses........................................................................ 107
----------------------
Net investment income (loss)........................................................ 1,281
----------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments...................................................................... (9)
Capital gain distributions from Underlying Funds................................. 1,714
Net realized gain (loss)............................................................ 1,705
----------------------
Net change in unrealized appreciation (depreciation) on investments................. 4,830
----------------------
Net realized and unrealized gain (loss)............................................. 6,535
----------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS............................... $ 7,816
======================
</Table>
See accompanying notes which are an integral part of the financial statements.
6 Statement of Operations
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2006
- --------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss)............................. $ 1,281 $ 337
Net realized gain (loss)................................. 1,705 1,046
Net change in unrealized appreciation (depreciation)..... 4,830 8,596
-------------------- ----------------------
Net increase (decrease) in net assets from operations....... 7,816 9,979
-------------------- ----------------------
DISTRIBUTIONS
From net investment income
Class C............................................... (207) --
Class S............................................... (1,042) (350)
-------------------- ----------------------
Net decrease in net assets from distributions............... (1,249) (350)
-------------------- ----------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions........................................... 8,996 7,432
-------------------- ----------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS................. 15,563 17,061
NET ASSETS
Beginning of period...................................... 74,458 57,397
-------------------- ----------------------
End of period (including undistributed net investment
income of $55 and $23, respectively)................... $ 90,021 $ 74,458
==================== ======================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets 7
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS C
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
FOR THE FISCAL YEARS ENDED OCTOBER 31,
------------------------------------------------------------------------------
2007* 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 10.87 $ 9.39 $ 8.44 $ 7.61 $ 6.15 $ 7.29
------------ ------------ ------------ ------------ ------------ --------------
INCOME FROM OPERATIONS
Net investment income (loss)
(a)(b)..................... .07 (.03) --(g) (.02) (.02) (.05)
Net realized and unrealized
gain
(loss)..................... .96 1.51 .95 .86 1.48 (1.03)
------------ ------------ ------------ ------------ ------------ --------------
Total from investment
operations.............. 1.03 1.48 .95 .84 1.46 (1.08)
------------ ------------ ------------ ------------ ------------ --------------
DISTRIBUTIONS
From net investment income.... (.11) -- -- (.01) -- --
From net realized gain........ -- -- -- -- -- (.06)
------------ ------------ ------------ ------------ ------------ --------------
Total distributions........ (.11) -- -- (.01) -- (.06)
------------ ------------ ------------ ------------ ------------ --------------
NET ASSET VALUE, END OF PERIOD... $ 11.79 $ 10.87 $ 9.39 $ 8.44 $ 7.61 $ 6.15
============ ============ ============ ============ ============ ==============
TOTAL RETURN (%) (c)............. 9.55 15.76 11.26 10.99 23.74 (14.94)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in
thousands)................. 23,008 19,439 14,801 12,766 11,523 10,130
Ratios to average net assets
(%):
Operating expenses, net
(d)(e)(f)............... 1.00 1.00 1.00 1.00 1.00 1.00
Operating expenses, gross
(d)..................... 1.54 1.58 1.55 1.58 1.72 1.64
Net investment income
(loss) (d)(f)........... 1.10 (.27) (.03) (.19) (.25) (.68)
Portfolio turnover rate (%)
(c)........................ 7.21 9.32 12.46 21.28 59.50 52.55
</Table>
* For the six months ended April 30, 2007 (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 only those expenses charged directly to the Fund
and does not include expenses charged to the Underlying Funds in which the
Fund invests.
(f) May reflect amounts waived and/or reimbursed by RIMCo as the investment
adviser and transfer agent.
(g) Less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
8 Financial Highlights - Class C
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS - CLASS S
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
FOR THE FISCAL YEARS ENDED OCTOBER 31,
--------------------------------------------------------------------------
2007* 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 11.20 $ 9.65 $ 8.67 $ 7.80 $ 6.27 $ 7.38
------------ ------------ ------------ ------------ ------------ --------------
INCOME FROM OPERATIONS
Net investment income (loss)
(a)(b)......................... .13 .08 .09 .07 .05 .03
Net realized and unrealized gain
(loss)......................... .99 1.55 .97 .87 1.52 (1.06)
------------ ------------ ------------ ------------ ------------ --------------
Total from investment
operations.................. 1.12 1.63 1.06 .94 1.57 (1.03)
------------ ------------ ------------ ------------ ------------ --------------
DISTRIBUTIONS
From net investment income........ (.21) (.08) (.08) (.07) (.04) (.02)
From net realized gain............ -- -- -- -- -- (.06)
------------ ------------ ------------ ------------ ------------ --------------
Total distributions............ (.21) (.08) (.08) (.07) (.04) (.08)
------------ ------------ ------------ ------------ ------------ --------------
NET ASSET VALUE, END OF PERIOD....... $ 12.11 $ 11.20 $ 9.65 $ 8.67 $ 7.80 $ 6.27
============ ============ ============ ============ ============ ==============
TOTAL RETURN (%) (c)................. 10.13 16.95 12.31 12.14 25.09 (14.10)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (in
thousands)..................... 67,013 55,019 42,596 34,708 32,861 29,968
Ratios to average net assets (%):
Operating expenses, net
(d)(e)(f)................... -- -- -- -- -- --
Operating expenses, gross
(d)......................... .54 .58 .55 .58 .72 .64
Net investment income (loss)
(d)(f)...................... 1.60 .79 .95 .87 .77 .39
Portfolio turnover rate (%) (c)... 7.21 9.32 12.46 21.28 59.50 52.55
</Table>
* For the six months ended April 30, 2007 (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 Fund and
does not include expenses charged to the Underlying Funds in which the
Fund invests.
(f) May reflect amounts waived and/or reimbursed by RIMCo as the investment
adviser and transfer agent.
See accompanying notes which are an integral part of the financial statements.
Financial Highlights - Class S 9
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Russell Investment Company (the "Investment Company" or "RIC") is a series
investment company with 35 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 July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company and Frank Russell Investment Management Company changed
its name to Russell Investment Management Company ("RIMCo").
Russell Investment Management Company ("RIMCo"), the Fund's investment
adviser, may modify the target asset allocation for the Fund and/or the
Underlying Funds in which the Fund invests. From time to time, the Fund may
adjust its investments within set limits based on RIMCo'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 RIMCo's opinion, it is necessary to do so to
pursue the Fund's investment objective. In the future, the Fund may also
invest in other funds which are not currently Underlying Funds.
<Table>
<Caption>
ASSET ALLOCATION
ASSET CLASS/UNDERLYING FUNDS TARGETS
- ------------------------------------------------------------
Equities
US Equities
Tax-Managed Large Cap Fund 50%
Tax-Managed Mid & Small Cap Fund 15
Quantitative Equity Fund 10
International Equities
International Securities Fund 20
Emerging Markets Fund 5
---
100
</Table>
Investment Objectives of the Underlying Funds:
Tax-Managed Large Cap Fund
Seeks to provide long term capital growth on an after-tax basis.
Tax-Managed Mid & Small Cap Fund
Seeks to provide long term capital growth on an after-tax basis.
Quantitative Equity Fund
Seeks to provide long term capital growth.
International Securities Fund
Seeks to provide long term capital growth.
Emerging Markets Fund
Seeks to provide long term capital growth.
10 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 fund
administration of the Securities Valuation Procedures to RIMCo.
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 New York
Stock Exchange, whichever is earlier.
- The value of swap agreements is equal to the Fund's obligation (or rights)
under swap contracts which will generally be equal to the net amounts to be
paid or received under the contracts based upon the relative values of the
positions held by each party to the contracts.
- Equity securities traded on a national securities foreign exchange or an
over the counter market 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 normal pricing methods. 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.
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
Notes to Financial Statements 11
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 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.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of
SFAS 157 will have on the Fund's financial statement disclosure.
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.
In July 2006, Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes--an interpretation of FASB
Statement 109 (FIN 48) was issued and is effective for fiscal years beginning
after December 15, 2006. FIN 48 sets forth a threshold for financial
statement recognition, measurement and disclosure of a tax position taken or
expected to be taken on a tax return. Management is currently evaluating the
impact, if any, the adoption of FIN 48 will have on the Fund's net assets and
results of operations.
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.
12 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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, 2007, the Fund had purchases and sales of
the Underlying Funds of $16,672,719 and $5,926,775, respectively.
4. RELATED PARTIES
Adviser and Administrator
RIMCo advises and administers all of the Funds which comprise the Investment
Company. RIMCo is a wholly-owned subsidiary of Frank Russell Company (a
subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell
Company provides money manager research services to RIMCo.
The Fund is charged an advisory fee equal to 0.20% of average daily net
assets. The Adviser has contractually agreed to waive the advisory fee at
least through February 29, 2008. The amount of the waiver for the period
ended April 30, 2007 was $82,082. The Adviser does not have the ability to
recover amounts waived from the period ended April 30, 2007, or previous
periods.
Transfer Agent
RIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, RIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. RIMCo 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, 2007 were $61,695.
RIMCo, as transfer agent, 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 period ended April 30, 2007, the amount waived and reimbursed by
RIMCo as transfer agent amounted to $138,093.
Distributor and Shareholder Servicing
Pursuant to the Distribution Agreement with the Investment Company, Russell
Fund Distributors, Inc. ("Distributor"), a wholly-owned subsidiary of RIMCo,
serves as distributor for all Investment Company portfolio shares, including
Class C and Class S shares of the Fund.
The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the
"Plan") under the 1940 Act. Under this Plan, the Investment Company is
authorized to make payments to the Distributor or any Selling Agents, as
defined in the Plan, for sales
Notes to Financial Statements 13
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
support services provided, and related expenses incurred which are primarily
intended to result in the sale of Class C shares subject to the Distribution
Plan. The 12b-1 distribution payments shall not exceed 0.75% of the average
daily net assets of the Fund's Class C shares on an annual basis.
In addition, the Investment Company has adopted a Shareholder Services Plan
(the "Services Plan") under which the Fund may make payments to the
Distributor or any Servicing Agent for any activities or expenses primarily
intended to assist, support or service the Servicing Agents' clients who
beneficially own Class C shares of the Fund. The shareholder servicing
payments shall not exceed 0.25% of the average daily net assets of a Fund's
Class C shares on an annual basis.
Accrued fees payable to affiliates for the period ended April 30, 2007 were
as follows:
<Table>
<Caption>
TAX-MANAGED
GLOBAL EQUITY
-------------------------------------------------------
Administration fees $ 3,666
Distribution fees 13,905
Shareholder servicing fees 4,635
Trustee fees 276
----------------
$ 22,482
================
</Table>
Board of Trustees
The Russell Fund Complex consists of Russell Investment Company, which has 35
Funds, and Russell Investment Funds ("RIF"), which has nine Funds. Each of
the Trustees is a Trustee for both RIC 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, 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. The Audit Committee Chair and Investment
Committee Chair are each paid a fee of $12,000 per year and the Nominating
and Governance Committee chair are each paid a fee of $6,000 per year. The
chair person of the Board receives additional annual compensation of $52,000.
Transactions With Affiliated Companies
An affiliated company is a company in which a Fund has ownership of at least
5% of the voting securities. Transactions during the period ended April 30,
2007 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 Mid & Small Cap Fund $ 2,198,943 $ 911,044 $ -- $ 161,700
Tax-Managed Large Cap Fund 7,158,452 2,177,322 301,556 --
---------------- ---------------- ---------------- ----------------
$ 9,357,395 $ 3,088,366 $ 301,556 $ 161,700
================ ================ ================ ================
</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, 2006, available capital carryforwards and expiration dates are as
follows:
Capital Loss Carryforwards
<Table>
<Caption>
FUND 10/31/10 10/31/11 TOTAL
---------------------------------------------------------------------------------------------
Tax Managed Global Equity $ 719,263 $ 3,565,354 $ 4,284,617
</Table>
14 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
At April 30, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
Cost of Investments $ 72,996,326
================
Unrealized Appreciation $ 17,037,883
Unrealized Depreciation --
----------------
Net Unrealized Appreciation
(Depreciation) $ 17,037,883
================
</Table>
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the period ended April 30, 2007 and the fiscal year
ended October 31, 2006 were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
TAX-MANAGED GLOBAL EQUITY ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 254 481 $ 2,865 $ 4,918
Proceeds from reinvestment of
distributions 18 -- 202 --
Payments for shares redeemed (109) (268) (1,234) (2,728)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 163 213 1,833 2,190
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 1,205 996 13,873 10,417
Proceeds from reinvestment of
distributions 86 33 982 332
Payments for shares redeemed (668) (529) (7,692) (5,507)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 623 500 7,163 5,242
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 786 713 $ 8,996 $ 7,432
================= ================= ================= =================
</Table>
7. INTERFUND LENDING PROGRAM
The Investment Company Fund has been granted permission from the Securities
and Exchange Commission to participate in a joint lending and borrowing
facility (the "Credit Facility"). Portfolios of the Investment Company may
borrow money from the RIC Money Market Fund for temporary purposes. All such
borrowing and lending will be subject to the Fund's fundamental investment
limitations. The RIC Money Market Fund will lend through the program only
when the returns are higher than those available from an investment in
repurchase agreements or short-term reserves. The Investment Company Fund
will borrow through the program only when the costs are equal to or lower
than the cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be called
on one business day's notice. The Fund may have to borrow from a bank at a
higher interest rate if an interfund loan is called or not renewed. Any delay
in repayment to the RIC Money Market Fund could result in a lost investment
opportunity of additional borrowing costs. The Fund did not borrow from the
program for the period ended April 30, 2007.
8. RECORD OWNERSHIP
As of April 30, 2007, the Fund had one shareholder of record with greater
than 10% of the total outstanding shares of the Fund in the amount of 16.2%.
Notes to Financial Statements 15
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 RIMCo
(the "RIMCo 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 24, 2007. 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 and Underlying
Funds' shares, and the management of the Fund and the Underlying Funds by RIMCo.
In preparation for the annual review, the Independent Trustees, with the advice
and assistance of their independent counsel, also requested and the Board
considered (1) information and reports prepared by RIMCo relating to the
services provided by RIMCo (and its affiliates) to the Fund and the Underlying
Funds; (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 RIMCo believed by the provider to be
generally comparable in investment objectives and size to the Fund and the
Underlying Funds; and (3) RIMCo's response to questions from the Board
concerning the Third-Party Information addressing, among other things,
performance and expense differentials between certain RIC funds and Underlying
Funds and their respective Comparable Funds. The foregoing information requested
by the Trustees or provided by RIMCo is collectively called the "Agreement
Renewal Information." The Independent Trustees also received a memorandum from
their independent counsel discussing the legal standards for their consideration
of the proposed continuances.
On April 23, 2007, the Independent Trustees met to review the Agreement Renewal
Information in a private session with their independent counsel at which no
representatives of RIMCo or management were present. At the April 24 meeting of
the Board of Trustees, the Board, including the Independent Trustees, reviewed
the proposed continuance of the RIMCo Agreement and the portfolio management
contracts with management and independent counsel to the Independent Trustees.
Presentations made by RIMCo to the Board as part of this review encompassed the
Fund and all other RIMCo-managed funds for which the Board has supervisory
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 analyses received from RIMCo 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. RIMCo has engaged
multiple Money Managers for all Underlying Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible
under the RIMCo Agreement for allocating assets of the Fund among its Underlying
Funds and for determining, implementing and maintaining the investment program
for each Underlying Fund. The assets of the Fund are invested in different
combinations of the Underlying Funds pursuant to target asset allocations set by
RIMCo. RIMCo may modify the target asset allocation for the Fund and/or the
Underlying Funds in which the Fund invests. Assets of each Underlying Fund
generally have been allocated among the multiple Money Managers selected by
RIMCo, subject to Board approval, for that Underlying Fund. RIMCo manages
directly a portion of certain Underlying Funds' assets employing a "select
holdings strategy," as described below, and directly manages the investment of
each Underlying Fund's cash reserves. RIMCo also may manage directly any portion
of each Underlying Fund's assets that RIMCo determines not to allocate to the
Money Managers and portions of an Underlying Fund during transitions between
Money Managers. In all cases, assets are managed directly by RIMCo in accordance
with the RIMCo Agreement.
RIMCo is responsible for selecting, subject to Board approval, Money Managers
for each Underlying Fund and for actively managing allocations and reallocations
of its assets among the Money Managers. RIMCo's goal is to construct and manage
diversified portfolios in a risk aware manner. 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 RIMCo (each, a "segment") in accordance
with the Fund's applicable investment objective, policies and restrictions, any
constraints placed by RIMCo upon their selection of portfolio securities and the
Money Manager's specified role in an Underlying Fund. RIMCo 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
16 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
of portfolio management contracts, RIMCo 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
RIMCo's research and ongoing review and analysis, such actions are appropriate.
RIMCo may assign specific investment constraints from time to time for each
Money Manager intended to capitalize on the strengths of that Money Manager or
to coordinate the investment activities of Money Managers for an Underlying Fund
in a complementary manner. Therefore, the performance of individual Money
Managers for an Underlying Fund may reflect the roles assigned to them by RIMCo
in the Underlying Funds' investment activities and any constraints placed by
RIMCo 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 RIMCo in designing the Underlying
Fund's investment program, structuring an Underlying Fund, selecting an
effective Money Manager with a particular investment style or sub-style for a
segment that is complementary to the styles of the Money Managers of other
Underlying Fund segments, and allocating assets among the Money Managers in a
manner designed to achieve the objectives of the Underlying Fund. The Board
considered that the prospectuses for the Fund and the Underlying Funds and other
public disclosures emphasize to investors RIMCo'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 or Underlying Funds operate so that investors may take that
information into account when deciding to purchase shares of the Fund.
The Board also considered the special expertise of RIMCo with respect to the
manager-of-managers structure of the Underlying Funds and the likelihood that,
at the current expense ratio of each such Underlying Fund, there would be no
acceptable alternative investment managers to replace RIMCo on comparable terms
given the need to continue the manager-of-managers strategy of each such
Underlying Fund selected by shareholders in purchasing their shares of the 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 the
Fund and each Underlying Fund, various specific factors in evaluating renewal of
the RIMCo Agreement, including the following:
1. The nature, scope and quality of the services provided to the Fund or
Underlying Fund by RIMCo;
2. The advisory fee paid by the Fund or Underlying Fund to RIMCo 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 RIMCo as to other fees and benefits received by RIMCo
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 RIMCo as to expenses incurred by the Fund or
Underlying Fund; and
5. Information provided by RIMCo as to the profits that RIMCo derives from its
mutual fund operations generally and from the Fund or Underlying Fund.
As noted above, RIMCo, pursuant to the terms of the RIMCo Agreement directly
manages a portion -- up to 10%--of the assets of each of the Quantitative Equity
Fund and the International Securities Fund (each a "Participating Underlying
Fund") utilizing a select holdings strategy, the actual allocation being
determined by each Participating Underlying Fund's RIMCo portfolio manager. The
select holdings strategy utilized by RIMCo in managing such assets for a
Participating Underlying Fund is designed to increase the Participating
Underlying Fund's exposure to stocks that are viewed as attractive by multiple
Money Managers of that Participating Underlying Fund. The Board reviewed the
results of the select holdings strategy in respect of each Participating
Underlying Fund since implementation taking into account that the strategy has
been utilized for a limited period of time. With respect to each Participating
Underlying Fund, the Trustees considered that RIMCo 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 RIMCo
generally and from the Participating Underlying Fund consequently may increase
incrementally. The Board, however, also considered RIMCo'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 carrying out the select holdings strategy; the limited
amount of assets that are managed directly by RIMCo pursuant to the select
holdings strategy; and the fact that the aggregate investment advisory fees paid
by the Participating Underlying Fund are not increased as a result of the select
holdings strategy.
At the April 24 Board meeting, RIMCo and management discussed the reasonableness
of the Fund's and the Underlying Funds' investment advisory fees. In discussing
whether the Fund's and the Underlying Funds' performance supported these fees,
RIMCo
Basis for Approval of Investment Advisory Contracts 17
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
noted differences between the investment strategies of certain Underlying Funds
and their respective Comparable Funds in pursuing their investment objectives,
including Fund 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 RIMCo, 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 performance of the Fund than that of some of its respective
Comparable Funds. According to RIMCo, the strategies pursued by the Underlying
Funds, among other things, are intended to result in less volatile, more
moderate returns relative to the Fund's performance benchmark rather than more
volatile, more extreme returns that its Comparable Funds may experience over
time. RIMCo stated that the Fund has a lower allocation to non-US equity
Underlying Funds and a higher allocation to US equity Underlying Funds than some
of its respective Comparable Funds, and as a result, the Fund had lower
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 and other information
previously received by the Board from RIMCo during the course of the year or
presented at the April 24 Board meeting by RIMCo, the Board, in respect of the
Fund and Underlying Fund, found, after giving effect to waivers and/or
reimbursements and considering differences in the composition and investment
strategies of their respective Comparable Funds (1) the advisory fee charged by
RIMCo to be reasonable in light of the nature, scope and quality of the services
provided to the Fund or Underlying Funds; (2) the relative expense ratio of the
Fund and each Underlying Fund was comparable to those of its Comparable Funds;
(3) RIMCo's methodology of allocating expenses of operating funds in the complex
was reasonable; and (4) RIMCo'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 RIMCo. The Board also concluded that the performance of
the Fund and the Underlying Funds supported continuation of the RIMCo Agreement.
In evaluating performance, the Board considered the Fund's and each Underlying
Fund's absolute performance and its performance relative to appropriate
benchmarks and indices and its Comparable Funds. The Board also considered
RIMCo's investment strategy of managing the Underlying Funds in a risk aware
manner.
At the April 24 Board meeting, the Board considered for the Fund and each
Underlying Fund whether economies of scale have been realized and whether the
fees for the Fund or Underlying Fund appropriately reflect or should be revised
to reflect any such economies. The Board determined that the investment advisory
fees for the Fund or Underlying Fund appropriately reflect any economies of
scale realized by such fund, based upon such factors as the 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 RIMCo by institutional clients with investment
objectives similar to those of the Fund and other RIC funds under the Board's
supervision, including the Underlying Funds are lower, and may, in some cases,
be substantially lower, than the rates paid by RIC funds supervised by the
Board, including the Fund. The Trustees reviewed with RIMCo the differences in
the scope of services it provides to institutional clients and the funds under
its supervision, including the Underlying Funds. In response to the Trustees'
inquiries, RIMCo noted, among other things, that institutional clients have
fewer administrative needs than the Fund. It was further noted by RIMCo that
since the Fund must constantly issue and redeem its shares, it is more difficult
to manage than institutional accounts, where assets are relatively stable.
Accordingly, the Trustees did not regard these fee differences as relevant to
their deliberations.
After considering the foregoing and other relevant factors, the Board concluded
that continuation of the RIMCo Agreement on its current terms and conditions
would be in the best interests of the Fund and the Underlying Funds and their
respective shareholders and voted to approve the continuation of the agreement.
At the April 24 Board meeting, 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 RIMCo reporting for each Money
Manager, among other things, the Money Manager's performance over various
periods; RIMCo's assessment of the performance of each Money Manager; any
significant business relationships between the Money Manager and RIMCo or
Russell Fund Distributors, Inc., the Fund's and Underlying Funds' underwriter;
and RIMCo'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. RIMCo recommended that each Money Manager be retained at its current
fee rate. RIMCo 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 RIMCo; RIMCo is
aware of the fees charged by Money Managers to other clients; and RIMCo 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 RIMCo's explanation in light of the Board's
18 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
findings as to the reasonableness of the aggregate investment advisory fees paid
by the Fund and each Underlying Fund and the fact that each Money Manager's fee
is paid by RIMCo.
Based substantially upon RIMCo's recommendations together with the information
received from RIMCo in support of its recommendations at the April 24 meeting,
the Board concluded that the fees paid to the Money Managers of each Underlying
Fund are 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 would be in the best interests of the Fund
and its shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the RIMCo Agreement or, other than RIMCo's recommendation, the portfolio
management agreement with any Money Manager for 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 Underlying Fund.
Basis for Approval of Investment Advisory Contracts 19
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 RIMCo, as RIC'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. RIMCo 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.
To reduce expenses, we may mail only one copy of the Fund's prospectus and each
annual and semi-annual report to those addresses shared by two or more accounts.
If you wish to receive individual copies of these documents, please call us at
(800) 787-7354 or contact your financial institution and we will begin sending
you individual copies thirty days after receiving your request.
Some Financial Intermediaries may offer electronic delivery of the Fund's
prospectus and annual and semiannual reports. Please contact your Financial
Intermediary for further details.
20 Shareholder Requests for Additional Information
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Russell Investment
Company ("RIC"), which has 35 funds, and Russell Investment Funds ("RIF"), which
has nine funds. Each of the trustees is a trustee of both RIC 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
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Thaddas L. Alston Trustee since Appointed until - Senior Vice President, Larco 44 None
Born April 7, 1945 2006 successor is Investments, Ltd.
duly elected
909 A Street and qualified
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 44 - Director, Avista
Born January 22, 2000 successor is Blake, P.S. (accounting Corp;
1954 duly elected services) - Trustee,
Chairperson and qualified - Director and Chairman of the Principal
909 A Street since 2005 Audit Committee, Avista Investors Fund
Tacoma, Washington Annual Corp. (investment
98402-1616 - Trustee and Chairman of the company);
Operations and Distribution - Trustee,
Committee, WM Group of Principal
Funds, 1999-2006 Variable
- February 2002 to June 2005, Contracts Fund
Chairman of the Audit (investment
Committee, RIC and RIF company)
- Regent, University of
Washington
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 44 None
Born June 6, 1946 2003 successor is Vice President and Chief
Chairman of duly elected Financial Officer, Waddell &
909 A Street Audit Committee and qualified Reed Financial, Inc.
Tacoma, Washington since 2005 - 2003, Retired
98402-1616 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 21
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 44 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected several additional
1955 Chairman of the and qualified. subsidiary companies,
Nominating and including Simpson Timber
909 A Street Governance Appointed until Company, Simpson Paper
Tacoma, Washington Committee since successor is Company and Simpson Tacoma
98402-1616 2007 duly elected Kraft Company
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack R. Thompson, Trustee since Appointed until - September 2003 to present, 44 - 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
22 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 44 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 RIMCo
Tacoma, Washington - Chairman Emeritus, RIC and
98402-1616 RIF; Russell Implementation
Services Inc. (broker-dealer
and investment adviser
("RIS")); Russell 20-20
Association (non-profit
corporation); and Russell
Trust Company (non-
depository trust company
("RTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee Emeritus Five year term - President, Anderson 44 None
Born October 15, since 2007 Management Group LLC
1931 (private investments
consulting)
909 A Street - February 2002 to June 2005,
Tacoma, Washington Lead Trustee, RIC and RIF
98402-1616 - Trustee of RIC and RIF Until
2006
- Chairman of the Nominating
and Governance Committee
2006
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 44 None
Born December 1, since 2003 - Trustee of RIC and RIF Until
1919 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 44 None
Born June 8, 1925 since 2004 - Trustee of RIC 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 RIC and
RIF.
Disclosure of Information about Fund Directors 23
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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 44 None
Born October 6, since 2006 - Trustee of RIC and RIF Until
1930 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 44 None
Born May 5, 1926 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
24 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
TAX-MANAGED GLOBAL EQUITY FUND
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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, RIC
Born December 16, 1966 Officer since by Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, RIMCo
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, RIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, RIMCo
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, RIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, RIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, RIMCo, RTC 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, RIC, RIF, FRC, RTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, RIMCo and RFD
2004 - 1999 to 2003, Chief Financial Officer, FRC, RIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Gregory J. Lyons, Secretary since Until successor - Associate General Counsel and Assistant Secretary FRC
Born August 24, 1960 2007 is chosen and and RIA
qualified by - Director and Secretary, RIMCo and RFD
909 A Street Trustees - Secretary and Chief Legal Counsel, RIC and RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 25
TAX-MANAGED GLOBAL EQUITY FUND
RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul E. Anderson
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
Gregory J. Lyons, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Josiah Quincy Building
200 Newport Avenue
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS OF UNDERLYING FUNDS AS OF APRIL 30, 2007*
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
Marsico Capital Management, LLC, Denver, CO
MFS Institutional Advisors, Inc., Boston, MA
Mondrian Investment Partners Ltd., London, England
Nicholas-Applegate Capital Management LLC, San Diego, CA
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., Somerville, NJ
T. Rowe Price International, Inc., Baltimore, MD
Tax-Managed Large Cap Fund
Armstrong Shaw Associates Inc., New Canaan, CT
J.P. Morgan Investment Management Inc., New York, NY
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
Transamerica Investment Management, LLC, Dayton, OH
Turner Investment Partners, Inc., Berwyn, PA
* A complete list of current money managers of the Underlying Funds can also be
found at www.Russell.com.
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 Russell Investment Company.
Such offering is made only by Prospectus, which includes details as to offering
price and other material information.
26 Manager, Money Managers and Service Providers
(RUSSELL LOGO)
Russell Investment Group
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com
On July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company, and Frank Russell Investment Management Company changed its
name to Russell Investment Management Company.
36-08-092 ( 1 04/07)
RUSSELL FUNDS
2007 Semiannual Report
CLASS A, C, E, AND S SHARES:
DIVERSIFIED EQUITY FUND
SPECIAL GROWTH FUND
QUANTITATIVE EQUITY FUND
INTERNATIONAL SECURITIES FUND
GLOBAL EQUITY FUND
MULTISTRATEGY BOND FUND
CLASS C, E, AND S SHARES:
DIVERSIFIED BOND FUND
APRIL 30, 2007
(RUSSELL LOGO)
Russell Investment Company
Russell Investment Company is a series investment company with 35 different
investment portfolios referred to as Funds. These financial statements report on
seven of these Funds.
Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Russell Investment Company
Russell Funds
Semiannual Report
April 30, 2007 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Diversified Equity Fund.............................................. 3
Special Growth Fund.................................................. 11
Quantitative Equity Fund............................................. 23
International Securities Fund........................................ 33
Global Equity Fund................................................... 52
Multistrategy Bond Fund.............................................. 62
Diversified Bond Fund................................................ 113
Notes to Schedules of Investments.................................... 137
Statement of Assets and Liabilities.................................. 138
Statement of Operations.............................................. 142
Statements of Changes in Net Assets.................................. 144
Financial Highlights................................................. 146
Notes to Financial Highlights........................................ 154
Notes to Financial Statements........................................ 155
Basis for Approval of Investment Advisory Contracts.................. 176
Shareholder Requests for Additional Information...................... 179
Disclosure of Information about Fund Directors....................... 180
Manager, Money Managers and Service Providers........................ 185
</Table>
Russell Investment Company - Russell Funds.
Copyright (c) Russell Investment Group 2007. 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 changed its name to
Russell Investment Company ("RIC"). RIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Russell Investment Management Company
("RIMCo"). Effective July 1, 2006 RIMCo changed its name from Frank 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.
RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,052.50 $ 1,006.33
Expenses Paid During
Period* $ 2.08 $ 2.03
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.21%
(representing the two month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,086.40 $ 1,015.08
Expenses Paid During
Period* $ 10.14 $ 9.79
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.96%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,090.40 $ 1,018.79
Expenses Paid During
Period* $ 6.27 $ 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).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,091.90 $ 1,020.03
Expenses Paid During
Period* $ 4.98 $ 4.81
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.96%
(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
RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.2%
Auto and Transportation - 3.2%
American Axle & Manufacturing Holdings, Inc. 25,700 718
Autoliv, Inc. 22,300 1,297
BorgWarner, Inc. 16,100 1,254
Burlington Northern Santa Fe Corp. 211,551 18,519
CH Robinson Worldwide, Inc. 158,440 8,470
CSX Corp. 106,000 4,576
FedEx Corp. 155,573 16,404
General Motors Corp. (N) 33,200 1,037
Magna International, Inc. Class A 10,400 823
Navistar International Corp. (AE) 347,550 19,300
Norfolk Southern Corp. 305,900 16,286
Southwest Airlines Co. 18,900 271
TNT NV - ADR 231,179 10,435
Toyota Motor Corp. - ADR 87,411 10,614
UAL Corp. (AE)(N) 203,800 6,807
Union Pacific Corp. 94,043 10,744
US Airways Group, Inc. (AE) 118,200 4,366
Visteon Corp. (AE)(N) 377,600 3,444
------------
135,365
------------
Consumer Discretionary - 13.7%
Accenture, Ltd. Class A 234,080 9,153
Avis Budget Group, Inc. (AE) 1,050 30
Avon Products, Inc. 142,500 5,671
Black & Decker Corp. 11,100 1,007
Carnival Corp. 61,200 2,992
CBS Corp. Class B 94,950 3,017
Coach, Inc. (AE) 153,640 7,502
Costco Wholesale Corp. 193,100 10,344
eBay, Inc. (AE) 593,300 20,137
Electronic Arts, Inc. (AE) 156,800 7,904
Family Dollar Stores, Inc. 13,000 414
Federated Department Stores, Inc. (N) 635,212 27,898
Focus Media Holding, Ltd. - ADR (AE)(N) 114,200 4,225
GameStop Corp. Class A (AE) 109,500 3,632
Gannett Co., Inc. 38,700 2,208
Gap, Inc. (The) 73,000 1,310
Google, Inc. Class A (AE) 147,953 69,742
Guess?, Inc. 242,600 9,558
Harman International Industries, Inc. 36,600 4,461
Hewitt Associates, Inc. Class A (AE) 239,500 7,125
Hilton Hotels Corp. 178,500 6,069
Intercontinental Hotels Group PLC - ADR (N) 314,300 7,597
International Game Technology 134,360 5,124
Interpublic Group of Cos., Inc. (AE)(N) 67,000 850
JC Penney Co., Inc. 129,000 10,203
Jones Apparel Group, Inc. 35,100 1,172
Kimberly-Clark Corp. 17,100 1,217
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kohl's Corp. (AE)(N) 177,200 13,120
Las Vegas Sands Corp. (AE)(N) 409,099 34,851
Liberty Global, Inc.
Series C (AE) 50,040 1,672
Liberty Media Holding Corp.
Series A (AE) 55,560 6,277
Limited Brands, Inc. 15,200 419
Liz Claiborne, Inc. 33,200 1,485
Lowe's Cos., Inc. (N) 298,308 9,116
Mattel, Inc. 79,600 2,253
McDonald's Corp. 1,146,830 55,369
McGraw-Hill Cos., Inc. (The) 128,700 8,434
MGM Mirage (AE)(N) 210,197 14,136
Monster Worldwide, Inc. (AE) 108,300 4,554
Newell Rubbermaid, Inc. 235,800 7,232
News Corp. Class A 240,470 5,384
Nike, Inc. Class B (N) 645,300 34,756
Office Depot, Inc. (AE) 39,300 1,321
Polo Ralph Lauren Corp. Class A 139,200 12,822
Quiksilver, Inc. (AE)(N) 39,800 529
RadioShack Corp. 62,000 1,802
Royal Caribbean Cruises, Ltd. (N) 175,000 7,275
Saks, Inc. (N) 333,800 6,990
Starbucks Corp. (AE) 850,759 26,391
Starwood Hotels & Resorts Worldwide, Inc. 127,800 8,565
Station Casinos, Inc. 28,345 2,466
Target Corp. 375,983 22,322
Time Warner, Inc. 155,950 3,217
Tribune Co. 50,600 1,660
Under Armour, Inc. Class B (AE)(N) 70,400 3,555
VeriSign, Inc. (AE) 143,900 3,936
VF Corp. 22,100 1,941
Viacom, Inc. Class A (AE) 161,410 6,658
Wal-Mart Stores, Inc. 18,300 877
Walt Disney Co. (The) 332,040 11,615
Wendy's International, Inc. (N) 36,300 1,368
Wynn Resorts, Ltd. (N) 54,973 5,619
XM Satellite Radio Holdings, Inc. Class A
(AE)(N) 592,400 6,931
Yahoo!, Inc. (AE) 373,743 10,480
Yum! Brands, Inc. 111,226 6,880
------------
584,840
------------
Consumer Staples - 7.2%
Altria Group, Inc. 420,070 28,951
Coca-Cola Co. (The) 1,218,500 63,594
Coca-Cola Enterprises, Inc. 76,900 1,687
</Table>
4 Diversified Equity Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Colgate-Palmolive Co. 132,900 9,003
ConAgra Foods, Inc. 27,100 666
Diageo PLC - ADR 132,420 11,176
General Mills, Inc. 159,500 9,554
Heineken NV - ADR 234,829 6,235
HJ Heinz Co. 36,400 1,715
Kellogg Co. 26,700 1,413
Kraft Foods, Inc. Class A 587,359 19,659
Kroger Co. (The) 83,600 2,467
Molson Coors Brewing Co. Class B 17,800 1,678
PepsiCo, Inc. 496,040 32,783
Procter & Gamble Co. 1,235,442 79,451
Safeway, Inc. 306,200 11,115
Sara Lee Corp. 85,300 1,400
Smithfield Foods, Inc. (AE)(N) 18,400 563
Tyson Foods, Inc. Class A 145,100 3,041
UST, Inc. 24,700 1,400
Walgreen Co. 275,500 12,094
WM Wrigley Jr Co. (N) 93,500 5,505
------------
305,150
------------
Financial Services - 20.5%
ACE, Ltd. 13,300 791
Alliance Data Systems Corp. (AE) 129,900 8,269
Allstate Corp. (The) 295,160 18,394
AMBAC Financial Group, Inc. 21,000 1,928
American Express Co. 250,000 15,168
American International Group, Inc. 873,705 61,081
Annaly Capital Management, Inc. (o) 746,850 11,882
AON Corp. 13,600 527
Astoria Financial Corp. 28,350 753
Bank of America Corp. 832,868 42,393
Bank of New York Co., Inc. (The) 186,890 7,565
BB&T Corp. 25,500 1,061
Capital One Financial Corp. 161,994 12,030
CB Richard Ellis Group, Inc. Class A (AE) 180,778 6,119
Charles Schwab Corp. (The) 406,710 7,776
Chicago Mercantile Exchange Holdings, Inc. Class
A (N) 13,150 6,795
Chubb Corp. 232,700 12,526
Citigroup, Inc. 1,132,348 60,717
Comerica, Inc. 32,900 2,037
Countrywide Financial Corp. 596,000 22,100
Fannie Mae 704,800 41,527
Fidelity National Financial, Inc. Class A (N) 78,791 2,008
Fidelity National Information Services, Inc. 109,200 5,518
First American Corp. 172,250 8,871
Freddie Mac 204,900 13,273
Genworth Financial, Inc. Class A 805,000 29,374
Goldman Sachs Group, Inc. (The) 351,622 76,868
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 184,480 18,669
Hudson City Bancorp, Inc. 98,550 1,313
IndyMac Bancorp, Inc. (N) 123,375 3,731
IntercontinentalExchange, Inc. New (AE) 47,180 5,992
iShares Russell 1000 Value Index Fund 139,150 11,992
JPMorgan Chase & Co. 977,423 50,924
KeyCorp 56,300 2,009
Lehman Brothers Holdings, Inc. 239,384 18,021
Mastercard, Inc. Class A (N) 107,983 12,060
MBIA, Inc. (N) 24,800 1,725
Merrill Lynch & Co., Inc. 126,100 11,378
MetLife, Inc. 390,030 25,625
MGIC Investment Corp. (N) 24,600 1,516
Moody's Corp. 63,406 4,192
Morgan Stanley 594,900 49,978
National City Corp. 85,090 3,110
Old Republic International Corp. 62,800 1,336
PartnerRe, Ltd. 8,300 598
Paychex, Inc. 342,700 12,714
PMI Group, Inc. (The) 49,500 2,399
PNC Financial Services Group, Inc. 94,610 7,011
Radian Group, Inc. 17,550 1,020
RenaissanceRe Holdings, Ltd. 77,275 4,184
State Street Corp. (N) 124,500 8,574
SunTrust Banks, Inc. 115,380 9,740
Travelers Cos., Inc. (The) 353,270 19,112
UBS AG 494,110 32,068
Unum Group (N) 78,000 1,941
US Bancorp 12,756 438
Wachovia Corp. 575,400 31,958
Waddell & Reed Financial, Inc. Class A 33,000 799
Washington Mutual, Inc. (N) 114,480 4,806
Wells Fargo & Co. 959,515 34,437
XL Capital, Ltd. Class A 8,300 647
------------
873,368
------------
Health Care - 12.3%
Abbott Laboratories 542,740 30,730
Alcon, Inc. 41,700 5,626
Allergan, Inc. 74,180 8,991
AmerisourceBergen Corp. Class A 36,100 1,805
Amylin Pharmaceuticals, Inc. (AE) 121,701 5,030
Baxter International, Inc. 363,500 20,585
BioMarin Pharmaceuticals, Inc. (AE)(N) 327,900 5,299
Boston Scientific Corp. (AE) 267,600 4,132
</Table>
Diversified Equity Fund 5
RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bristol-Myers Squibb Co. 473,600 13,668
Cardinal Health, Inc. 86,400 6,044
Celgene Corp. (AE)(N) 183,300 11,211
CVS Corp. (N) 1,292,457 46,839
Eli Lilly & Co. 179,200 10,596
Genentech, Inc. (AE) 389,010 31,117
Genzyme Corp. (AE) 86,180 5,628
Gilead Sciences, Inc. (AE) 368,590 30,121
Hospira, Inc. (AE) 218,400 8,856
Human Genome Sciences, Inc. (AE)(N) 643,600 6,931
Intuitive Surgical, Inc. (AE)(N) 79,920 10,362
Johnson & Johnson 399,580 25,661
Medco Health Solutions, Inc. (AE)(N) 71,700 5,594
Merck & Co., Inc. 608,100 31,281
Novartis AG - ADR 399,700 23,218
Omnicare, Inc. (N) 235,850 7,823
Pfizer, Inc. 491,800 13,013
Schering-Plough Corp. 208,307 6,610
Shire PLC - ADR (N) 168,370 11,767
St. Jude Medical, Inc. (AE) 107,640 4,606
Stryker Corp. (N) 218,600 14,196
Tenet Healthcare Corp. (AE)(N) 153,900 1,142
Thermo Fisher Scientific, Inc. (AE) 783,730 40,801
UnitedHealth Group, Inc. 697,133 36,990
Vertex Pharmaceuticals, Inc. (AE) 356,600 10,962
WellPoint, Inc. (AE) 88,400 6,981
Wyeth 384,930 21,364
------------
525,580
------------
Integrated Oils - 4.2%
BP PLC - ADR 12,400 835
Chevron Corp. 281,787 21,920
ConocoPhillips 240,202 16,658
Exxon Mobil Corp. 601,090 47,715
Hess Corp. 824,350 46,782
Marathon Oil Corp. 29,800 3,026
Occidental Petroleum Corp. 626,100 31,743
Total SA - ADR 115,770 8,531
------------
177,210
------------
Materials and Processing - 5.0%
Allegheny Technologies, Inc. 57,800 6,334
Arcelor Mittal Class A 20,200 1,079
Archer-Daniels-Midland Co. 248,890 9,632
Ashland, Inc. 19,400 1,163
Cameco Corp. 458,650 21,382
Carpenter Technology Corp. 22,000 2,670
Cytec Industries, Inc. 173,450 9,522
Dow Chemical Co. (The) 94,300 4,207
EI Du Pont de Nemours & Co. 380,485 18,709
Freeport-McMoRan Copper & Gold, Inc. Class B 61,958 4,161
Hercules, Inc. (AE) 35,500 669
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Imperial Chemical Industries PLC - ADR (N) 211,569 8,985
International Paper Co. 28,900 1,090
Lennar Corp. Class B (N) 13,200 528
Louisiana-Pacific Corp. 6,500 128
Lubrizol Corp. 22,100 1,325
Masco Corp. (N) 295,660 8,045
Monsanto Co. 416,064 24,544
Potash Corp. of Saskatchewan 41,400 7,432
PPG Industries, Inc. 105,830 7,787
Praxair, Inc. 220,456 14,230
Rio Tinto PLC - ADR (N) 87,100 21,252
Rohm & Haas Co. 191,600 9,804
Sherwin-Williams Co. (The) 20,900 1,333
Smurfit-Stone Container Corp. (AE) 87,200 1,051
Sonoco Products Co. 9,000 384
St. Joe Co. (The) (N) 72,641 4,114
Syngenta AG - ADR 193,920 7,699
Temple-Inland, Inc. (N) 245,800 14,561
------------
213,820
------------
Miscellaneous - 3.1%
Eaton Corp. 89,600 7,993
General Electric Co. 2,017,730 74,374
Honeywell International, Inc. 183,800 9,958
SPX Corp. 23,100 1,637
Textron, Inc. 266,800 27,126
Tyco International, Ltd. 287,600 9,384
------------
130,472
------------
Other Energy - 4.9%
Apache Corp. 112,300 8,142
Arch Coal, Inc. 282,050 10,174
Baker Hughes, Inc. 257,800 20,724
Cameron International Corp. (AE) 31,481 2,033
CARBO Ceramics, Inc. (N) 37,700 1,638
Consol Energy, Inc. 472,150 19,769
Devon Energy Corp. 338,480 24,665
Halliburton Co. 322,600 10,249
Massey Energy Co. (N) 487,300 13,123
National-Oilwell Varco, Inc. (AE) 66,000 5,600
Noble Energy, Inc. 14,700 864
NRG Energy, Inc. (AE)(N) 34,155 2,697
Reliant Energy, Inc. (AE) 1,167,050 25,990
Schlumberger, Ltd. 563,252 41,585
</Table>
6 Diversified Equity Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Valero Energy Corp. 30,000 2,107
XTO Energy, Inc. 357,400 19,396
------------
208,756
------------
Producer Durables - 5.5%
AGCO Corp. (AE) 284,100 11,856
Amazon.Com, Inc. (AE) 37,200 2,282
Applied Materials, Inc. 549,700 10,565
Boeing Co. 357,961 33,290
Bombardier, Inc. (AE) 1,252,200 5,156
Caterpillar, Inc. 126,700 9,201
Centex Corp. (N) 183,700 8,224
Crown Castle International Corp. (AE) 197,610 6,786
Deere & Co. 285,530 31,237
Emerson Electric Co. 399,900 18,791
Goodrich Corp. 77,500 4,405
Ingersoll-Rand Co., Ltd. Class A 16,000 714
KB Home (N) 23,900 1,054
KLA-Tencor Corp. (N) 155,560 8,641
Lexmark International, Inc. Class A (AE)(N) 17,400 948
Lockheed Martin Corp. 354,136 34,047
Nokia OYJ - ADR 179,000 4,520
Northrop Grumman Corp. 198,700 14,632
Pulte Homes, Inc. 243,250 6,544
Roper Industries, Inc. 98,200 5,505
United Technologies Corp. 249,900 16,776
------------
235,174
------------
Technology - 11.6%
Adobe Systems, Inc. (AE) 136,900 5,690
Akamai Technologies, Inc. (AE) 104,430 4,603
Apple, Inc. (AE) 549,510 54,841
Arrow Electronics, Inc. (AE) 44,500 1,759
AU Optronics Corp. - ADR 610,449 9,712
Avnet, Inc. (AE) 52,200 2,135
BearingPoint, Inc. (AE) 618,500 4,540
Broadcom Corp. Class A (AE) 240,940 7,843
Celestica, Inc. (AE)(N) 414,850 2,817
Ciena Corp. (AE)(N) 208,900 6,091
Cisco Systems, Inc. (AE) 2,262,917 60,510
Cognizant Technology Solutions Corp. Class A
(AE) 65,700 5,874
Dell, Inc. (AE) 761,970 19,209
Electronic Data Systems Corp. 36,100 1,056
F5 Networks, Inc. (AE) 53,140 4,080
Flextronics International, Ltd. (AE) 73,700 822
General Dynamics Corp. 163,576 12,841
Hewlett-Packard Co. 1,678,370 70,726
Intel Corp. 1,476,866 31,753
International Business Machines Corp. 23,500 2,402
International Rectifier Corp. (AE) 126,300 4,456
JDS Uniphase Corp. (AE)(N) 383,762 6,324
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Maxim Integrated Products, Inc. 286,300 9,081
MEMC Electronic Materials, Inc. (AE) 29,600 1,624
Microsoft Corp. 957,600 28,671
Motorola, Inc. 797,250 13,816
Oracle Corp. (AE) 522,160 9,817
PerkinElmer, Inc. 340,500 8,240
Qualcomm, Inc. 1,168,100 51,163
Raytheon Co. 22,600 1,210
Research In Motion, Ltd. (AE) 89,800 11,816
Salesforce.com, Inc. (AE)(N) 131,800 5,536
SanDisk Corp. (AE)(N) 76,200 3,311
Sanmina-SCI Corp. (AE) 302,700 1,044
Seagate Technology, Inc. (AE) 9,200 --
Solectron Corp. (AE) 207,700 696
Sun Microsystems, Inc. (AE) 1,167,520 6,094
Sunpower Corp. Class A (AE)(N) 79,100 4,800
Texas Instruments, Inc. 562,360 19,328
------------
496,331
------------
Utilities - 4.0%
Allegheny Energy, Inc. (AE) 18,100 968
Ameren Corp. 40,700 2,139
America Movil SAB de CV
Series L 139,779 7,342
American Electric Power Co., Inc. 44,100 2,215
AT&T, Inc. 1,107,249 42,873
China Mobile, Ltd. - ADR 141,205 6,356
Comcast Corp. Class A (AE) 1,058,917 28,231
Constellation Energy Group, Inc. 27,200 2,424
Dominion Resources, Inc. 285,500 26,037
Embarq Corp. 123,011 7,385
Entergy Corp. 7,600 860
FPL Group, Inc. (N) 113,560 7,310
NII Holdings, Inc. (AE)(N) 137,680 10,567
Progress Energy, Inc. - CVO 5,500 2
Public Service Enterprise Group, Inc. 33,600 2,905
Sprint Nextel Corp. 651,280 13,045
Time Warner Telecom, Inc. Class A (AE)(N) 165,850 3,400
Verizon Communications, Inc. 209,100 7,983
Wisconsin Energy Corp. 17,400 849
------------
172,891
------------
TOTAL COMMON STOCKS
(cost $3,382,090) 4,058,957
------------
</Table>
Diversified Equity Fund 7
RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.6%
Russell Investment Company
Money Market Fund 185,224,926 185,225
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 13,000 12,922
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $198,147) 198,147
------------
OTHER SECURITIES - 6.1%
Russell Investment Company
Money Market Fund (X) 49,894,321 49,894
State Street Securities
Lending Quality Trust (X) 209,685,265 209,685
------------
TOTAL OTHER SECURITIES
(cost $259,579) 259,579
------------
TOTAL INVESTMENTS - 105.9%
(identified cost $3,839,816) 4,516,683
OTHER ASSETS AND LIABILITIES,
NET - (5.9%) (252,422)
------------
NET ASSETS - 100.0% 4,264,261
============
</Table>
See accompanying notes which are an integral part of the financial statements.
8 Diversified Equity Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/07 (110) 8,923 445
Russell 1000 Mini Index (CME)
expiration date 06/07 (43) 17,441 843
S&P 500 E-Mini Index (CME)
expiration date 06/07 (694) 51,647 2,712
S&P 500 Index (CME)
expiration date 06/07 (155) 57,676 2,638
S&P Midcap 400 E-Mini Index (CME)
expiration date 06/07 (670) 58,840 2,437
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 9,075
===============
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
CAD 8 USD 6 04/30/07 --
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts --
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Diversified Equity Fund 9
RUSSELL INVESTMENT COMPANY
DIVERSIFIED EQUITY FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 3.2
Consumer Discretionary 13.7
Consumer Staples 7.2
Financial Services 20.5
Health Care 12.3
Integrated Oils 4.2
Materials and Processing 5.0
Miscellaneous 3.1
Other Energy 4.9
Producer Durables 5.5
Technology 11.6
Utilities 4.0
Short-Term Investments 4.6
Other Securities 6.1
---------------
Total Investments 105.9
Other Assets and Liabilities, Net (5.9)
---------------
100.0
===============
Futures Contracts 0.2
</Table>
See accompanying notes which are an integral part of the financial statements.
10 Diversified Equity Fund
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,036.20 $ 1,005.87
Expenses Paid During
Period* $ 2.54 $ 2.50
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.49%
(representing the two month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,083.90 $ 1,013.69
Expenses Paid During
Period* $ 11.57 $ 11.18
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.24%
(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).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,088.10 $ 1,017.41
Expenses Paid During
Period* $ 7.71 $ 7.45
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.49%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,089.20 $ 1,018.65
Expenses Paid During
Period* $ 6.42 $ 6.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.24%
(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).
Special Growth Fund 11
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.3%
Auto and Transportation - 3.0%
AAR Corp. (AE) 36,000 1,099
Accuride Corp. (AE) 5,575 82
Aftermarket Technology Corp. (AE) 9,900 274
Alaska Air Group, Inc. (AE) 43,300 1,282
American Commercial Lines, Inc. (AE) 30,628 903
Arctic Cat, Inc. 13,000 231
Arkansas Best Corp. 39,100 1,541
ArvinMeritor, Inc. 103,480 2,137
Atlas Air Worldwide Holdings, Inc. (AE) 9,800 564
Autoliv, Inc. 12,800 744
Bristow Group, Inc. (AE)(N) 34,980 1,315
Commercial Vehicle Group, Inc. (AE) 7,900 155
Continental Airlines, Inc. Class A (AE)(N) 10,437 382
Cooper Tire & Rubber Co. 30,100 582
Dana Corp. (AE)(N) 211,000 211
Danaos Corp. 16,400 472
DryShips, Inc. (N) 66,500 2,353
ExpressJet Holdings, Inc. Class A (AE)(N) 172,862 1,032
Freightcar America, Inc. (N) 3,944 196
Grupo Aeroportuario del Centro Norte Sab de CV -
ADR (AE)(N) 58,500 1,711
Grupo Aeroportuario del Sureste SAB de CV - ADR 43,900 2,116
Gulfmark Offshore, Inc. (AE)(N) 20,900 1,001
Hayes Lemmerz International, Inc. (AE)(N) 115,553 659
Horizon Lines, Inc. Class A 67,275 2,288
HUB Group, Inc. Class A (AE) 36,195 1,303
Kansas City Southern (AE)(N) 25,600 951
Kirby Corp. (AE) 59,570 2,252
Modine Manufacturing Co. 14,300 331
Monaco Coach Corp. (N) 20,703 317
Navistar International Corp. (AE) 29,200 1,621
OMI Corp. (N) 56,500 1,642
PAM Transportation Services (AE) 5,900 112
Saia, Inc. (AE)(N) 25,723 721
Skywest, Inc. (N) 44,758 1,218
Standard Motor Products, Inc. 29,800 546
Teekay Shipping Corp. (N) 26,800 1,599
TRW Automotive Holdings Corp. (AE) 50,200 1,860
US Xpress Enterprises, Inc. Class A (AE) 26,600 381
UTI Worldwide, Inc. 123,420 2,897
Wabtec Corp. 9,646 358
YRC Worldwide, Inc. (AE)(N) 42,500 1,691
------------
43,130
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Consumer Discretionary - 18.3%
Abercrombie & Fitch Co. Class A 23,500 1,919
ABM Industries, Inc. 87,993 2,476
Activision, Inc. (AE) 289,402 5,788
Advance Auto Parts, Inc. 17,700 729
Advisory Board Co. (The) (AE) 63,779 3,028
Aeropostale, Inc. (AE) 121,365 4,994
AFC Enterprises (AE) 22,000 418
Alberto-Culver Co. Class B 103,000 2,502
Alloy, Inc. (AE) 13,011 161
American Eagle Outfitters, Inc. 50,000 1,473
American Greetings Corp. Class A 34,640 882
American Woodmark Corp. 29,398 1,015
aQuantive, Inc. (AE) 118,062 3,614
Asbury Automotive Group, Inc. 66,937 1,926
AutoNation, Inc. (AE) 124,200 2,539
Bare Escentuals, Inc. (AE) 93,023 3,761
Barnes & Noble, Inc. 33,200 1,312
Big 5 Sporting Goods Corp. 5,300 136
Big Lots, Inc. (AE) 136,930 4,409
BigBand Networks, Inc. (AE) 77,200 1,580
Black & Decker Corp. 7,900 717
Blockbuster, Inc. Class A (AE) 187,375 1,162
Blyth, Inc. 6,501 170
Bob Evans Farms, Inc. 28,996 1,064
Books-A-Million, Inc. Class A 9,431 157
Bowne & Co., Inc. 19,100 319
Bright Horizons Family Solutions, Inc. (AE)(N) 32,400 1,251
Brown Shoe Co., Inc. 54,586 1,473
Buckle, Inc. (The) 17,800 634
Buffalo Wild Wings, Inc. (AE)(N) 29,000 1,893
CBRL Group, Inc. (N) 26,087 1,163
CEC Entertainment, Inc. (AE) 32,600 1,358
Central Parking Corp. (N) 17,706 396
Cenveo, Inc. (AE) 14,500 372
Charlotte Russe Holding, Inc. (AE) 2,026 55
Chemed Corp. 36,439 1,833
Cherokee, Inc. (N) 4,200 193
Children's Place Retail Stores, Inc. (The) (AE) 26,755 1,415
Chipotle Mexican Grill, Inc. Class A (AE)(N) 42,700 2,785
Churchill Downs, Inc. (N) 3,962 185
CMGI, Inc. (AE)(N) 425,467 893
Coinstar, Inc. (AE)(N) 27,815 865
</Table>
12 Special Growth Fund
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Columbia Sportswear Co. (N) 28,400 1,778
Consolidated Graphics, Inc. (AE) 5,300 399
Convergys Corp. (AE) 207,200 5,234
Core-Mark Holding Co., Inc. (AE)(N) 4,300 152
Corinthian Colleges, Inc. (AE)(N) 67,100 928
CROCS, Inc. (AE)(N) 111,500 6,231
CSS Industries, Inc. (N) 1,900 76
Denny's Corp. (AE)(N) 109,965 516
DeVry, Inc. (N) 79,600 2,626
Dick's Sporting Goods, Inc. (AE)(N) 51,900 2,911
Dillard's, Inc. Class A 63,800 2,209
Dolby Laboratories, Inc. Class A (AE) 174,100 6,167
Dollar Tree Stores, Inc. (AE) 42,100 1,655
DreamWorks Animation SKG, Inc. Class A (AE)(N) 45,600 1,335
Dress Barn, Inc. (AE)(N) 32,916 655
DSW, Inc. Class A (AE)(N) 24,674 956
Earthlink, Inc. (AE) 83,400 639
Elizabeth Arden, Inc. (AE) 26,200 590
Ethan Allen Interiors, Inc. (N) 46,970 1,658
Ezcorp, Inc. Class A (AE)(N) 57,099 865
Federated Department Stores, Inc. (N) 28,740 1,262
Focus Media Holding, Ltd. - ADR (AE)(N) 20,400 755
Foot Locker, Inc. 98,800 2,350
Forrester Research, Inc. (AE) 18,396 474
FTD Group, Inc. 46,800 835
GameStop Corp. Class A (AE) 139,518 4,628
Great Wolf Resorts, Inc. (AE)(N) 18,800 239
Greenfield Online, Inc. (AE) 12,851 210
Group 1 Automotive, Inc. (N) 600 25
Guess?, Inc. (N) 39,700 1,564
Gymboree Corp. (AE)(N) 29,309 1,119
Hanesbrands, Inc. (AE) 49,700 1,322
Hasbro, Inc. (N) 98,400 3,110
Helen of Troy, Ltd. (AE)(N) 83,830 1,903
Home Inns & Hotels Management, Inc. - ADR (AE) 23,000 788
Home Solutions of America, Inc. (AE)(N) 208,807 990
Hooker Furniture Corp. (N) 9,452 208
ICF International, Inc. (AE) 15,700 336
Iconix Brand Group, Inc. (AE)(N) 226,438 4,558
IKON Office Solutions, Inc. 18,100 271
Insight Enterprises, Inc. (AE) 1,000 20
International Speedway Corp. Class A 10,200 504
ITT Educational Services, Inc. (AE) 14,000 1,361
J Crew Group, Inc. (AE)(N) 93,000 3,766
Jack in the Box, Inc. (AE) 13,100 873
Jakks Pacific, Inc. (AE) 34,900 839
Jarden Corp. (AE)(N) 41,100 1,732
Jo-Ann Stores, Inc. (AE)(N) 20,302 608
Jones Apparel Group, Inc. (N) 112,000 3,740
JOS A Bank Clothiers, Inc. (AE)(N) 44,430 1,717
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Journal Communications, Inc. Class A (AE) 11,978 162
Journal Register Co. (N) 59,700 350
K2, Inc. (AE)(N) 8,447 127
Kellwood Co. (N) 800 23
Kenneth Cole Productions, Inc. Class A (N) 11,000 278
Knology, Inc. (AE)(N) 9,729 178
Korn/Ferry International (AE)(N) 72,900 1,718
Leapfrog Enterprises, Inc. Class A (AE)(N) 58,300 639
Lee Enterprises, Inc. 140,100 3,668
Life Time Fitness, Inc. (AE)(N) 69,400 3,567
Lin TV Corp. Class A (AE) 6,330 101
Lithia Motors, Inc. Class A (N) 17,700 477
Liz Claiborne, Inc. (N) 98,800 4,418
LKQ Corp. (AE) 131,990 2,980
Lodgenet Entertainment Corp. (AE) 9,716 331
Luby's, Inc. (AE) 2,500 25
Maidenform Brands, Inc. (AE) 16,200 330
McClatchy Co. Class A (N) 5,200 150
McCormick & Schmick's Seafood Restaurants, Inc.
(AE) 30,400 814
Men's Wearhouse, Inc. (The) 37,400 1,618
Meredith Corp. 41,000 2,375
MIVA, Inc. (AE)(N) 26,913 116
Morton's Restaurant Group, Inc. (AE) 6,300 106
Mothers Work, Inc. (AE)(N) 5,676 199
Movado Group, Inc. 8,900 293
Movie Gallery, Inc. (AE)(N) 103,438 378
MPS Group, Inc. (AE) 151,641 2,076
MSC Industrial Direct Co., Inc. Class A 81,296 3,962
Nu Skin Enterprises, Inc. Class A 30,400 527
O'Charleys, Inc. (AE) 70,800 1,495
O'Reilly Automotive, Inc. (AE) 106,771 3,801
OfficeMax, Inc. 43,200 2,126
On Assignment, Inc. (AE) 86,700 969
Orient-Express Hotels, Ltd. Class A 52,720 2,776
Oxford Industries, Inc. 10,700 497
Pacific Sunwear of California, Inc. (AE) 82,500 1,727
Panera Bread Co. Class A (AE) 47,937 2,670
Payless Shoesource, Inc. (AE) 40,204 1,282
PC Connection, Inc. (AE)(N) 11,849 152
Perry Ellis International, Inc. (AE)(N) 60,317 2,003
Phillips-Van Heusen Corp. 94,745 5,296
Pier 1 Imports, Inc. (N) 88,700 670
PRG-Schultz International, Inc. (AE)(N) 36,649 483
</Table>
Special Growth Fund 13
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Priceline.com, Inc. (AE)(N) 75,200 4,184
Quiksilver, Inc. (AE)(N) 97,000 1,290
RadioShack Corp. (N) 13,900 404
Rare Hospitality International, Inc. (AE) 93,045 2,709
Rent-A-Center, Inc. Class A (AE)(N) 72,900 2,030
Republic Services, Inc. Class A 168,430 4,704
Resources Connection, Inc. (AE) 78,641 2,373
Retail Ventures, Inc. (AE)(N) 15,419 314
Rush Enterprises, Inc. Class A (AE)(N) 8,500 177
Scholastic Corp. (AE) 66,100 2,040
Sealy Corp. (N) 13,800 235
Service Corp. International 137,700 1,673
Shanda Interactive Entertainment, Ltd. - ADR
(AE) 53,500 1,340
Shoe Carnival, Inc. (AE)(N) 18,280 575
Sinclair Broadcast Group, Inc. Class A (N) 64,711 1,057
Skechers USA, Inc. Class A (AE) 8,300 261
Sonic Automotive, Inc. Class A (N) 33,000 943
Sonic Corp. (AE) 159,214 3,573
Spherion Corp. (AE) 31,400 268
Stage Stores, Inc. 61,411 1,354
Stanley Furniture Co., Inc. (N) 7,849 170
Stanley Works (The) (N) 30,500 1,778
Steak N Shake Co. (The) (AE)(N) 3,500 57
Stein Mart, Inc. 9,800 160
Sturm Ruger & Co., Inc. (AE)(N) 73,649 951
Take-Two Interactive Software, Inc. (AE)(N) 57,300 1,098
Tech Data Corp. (AE) 8,400 299
TeleTech Holdings, Inc. (AE) 33,800 1,275
Tempur-Pedic International, Inc. (N) 28,200 732
Timberland Co. Class A (AE) 5,500 142
Tractor Supply Co. (AE) 44,422 2,298
Triarc Cos., Inc. Class A 5,169 84
Tupperware Corp. 17,995 506
Unifirst Corp. 4,800 202
United Auto Group, Inc. 42,700 866
United Online, Inc. (N) 79,100 1,141
Urban Outfitters, Inc. (AE)(N) 99,600 2,566
Viad Corp. 23,200 947
VistaPrint, Ltd. (AE)(N) 74,700 2,792
Warnaco Group, Inc. (The) (AE) 32,700 925
Warner Music Group Corp. (N) 74,200 1,276
Washington Post Co. (The) Class B 2,405 1,789
West Marine, Inc. (AE)(N) 24,725 363
WMS Industries, Inc. (AE)(N) 37,300 1,487
Wynn Resorts, Ltd. 36,461 3,727
Zumiez, Inc. (AE)(N) 57,700 2,277
------------
264,047
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Consumer Staples - 1.9%
Alliance One International, Inc. (AE) 404,853 3,972
Boston Beer Co., Inc. Class A (AE)(N) 8,000 258
Coca-Cola Bottling Co. Consolidated (N) 17,028 940
Constellation Brands, Inc. Class A (AE) 22,700 509
Del Monte Foods Co. 97,600 1,132
Hormel Foods Corp. 14,300 545
Imperial Sugar Co. (N) 19,700 586
JM Smucker Co. (The) 18,300 1,021
Loews Corp. - Carolina Group 39,000 2,985
McCormick & Co., Inc. 49,000 1,819
Molson Coors Brewing Co. Class B 33,300 3,139
Nash Finch Co. (N) 22,031 859
NBTY, Inc. (AE) 22,799 1,126
PepsiAmericas, Inc. 26,000 628
Performance Food Group Co. (AE) 1,400 44
Premium Standard Farms, Inc. (N) 45,796 993
Reddy Ice Holdings, Inc. (N) 24,829 727
Schweitzer-Mauduit International, Inc. 13,331 366
SUPERVALU, Inc. 92,800 4,259
Universal Corp. (N) 21,813 1,367
------------
27,275
------------
Financial Services - 15.6%
Advent Software, Inc. (AE) 111,600 3,745
Affiliated Managers Group, Inc. (AE) 53,582 6,303
AG Edwards, Inc. 16,533 1,198
Alliance Data Systems Corp. (AE) 80,192 5,105
AMB Property Corp. (o) 34,300 2,089
Amerisafe, Inc. (AE) 34,123 687
Annaly Capital Management, Inc. (o) 60,800 967
Anthracite Capital, Inc. (o) 10,733 124
Apartment Investment & Management Co. Class A
(o) 47,900 2,649
Apollo Investment Corp. 90,500 1,988
Arbor Realty Trust, Inc. (o) 9,700 299
Arch Capital Group, Ltd. (AE) 16,000 1,165
Ares Capital Corp. 102,300 1,837
Argonaut Group, Inc. (AE) 8,585 289
Ashford Hospitality Trust, Inc. (o) 271,610 3,259
Aspen Insurance Holdings, Ltd. 47,900 1,270
Asset Acceptance Capital Corp. (AE) 3,700 68
Assurant, Inc. 74,117 4,264
</Table>
14 Special Growth Fund
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Authorize.Net Holdings, Inc. (AE) 14,900 263
Axis Capital Holdings, Ltd. 45,800 1,699
Bancfirst Corp. 4,100 176
Bank of Hawaii Corp. 31,100 1,645
BankUnited Financial Corp. Class A (N) 63,196 1,368
Banner Corp. 6,394 239
Bear Stearns Cos., Inc. (The) 10,100 1,573
BioMed Realty Trust, Inc. (o) 30,000 861
BOK Financial Corp. (N) 5,556 285
Broadridge Financial Solutions, Inc. (AE) 42,200 846
Calamos Asset Management, Inc. Class A 8,800 206
Camden Property Trust (o) 25,500 1,776
CapitalSource, Inc. (o)(N) 9,900 255
Cash America International, Inc. (N) 31,743 1,370
Central Pacific Financial Corp. (N) 16,703 574
CIT Group, Inc. 21,500 1,282
City Bank (N) 12,550 392
City Holding Co. (N) 4,674 177
CNA Surety Corp. (AE) 79,700 1,645
Cohen & Steers, Inc. (N) 4,300 221
Colonial BancGroup, Inc. (The) (N) 125,900 3,029
Colonial Properties Trust (o) 26,700 1,325
Commerce Group, Inc. (N) 24,600 802
Community Bancorp (AE)(N) 30,122 925
Corus Bankshares, Inc. (N) 101,439 1,705
Deerfield Triarc Capital Corp. (o) 118,800 1,923
Deluxe Corp. 83,371 3,156
DiamondRock Hospitality Co. (o) 79,600 1,456
Downey Financial Corp. (N) 18,433 1,234
Duke Realty Corp. (o)(N) 34,970 1,508
EastGroup Properties, Inc. (o)(N) 8,000 401
Education Realty Trust, Inc. (o)(N) 20,200 288
EMC Insurance Group, Inc. 3,400 85
Entertainment Properties Trust (o) 13,054 789
Essex Property Trust, Inc. (o)(N) 16,900 2,178
Euronet Worldwide, Inc. (AE) 116,810 3,253
Extra Space Storage, Inc. (o) 22,700 425
Factset Research Systems, Inc. 19,600 1,206
FBL Financial Group, Inc. Class A 1,300 50
Federal Realty Investors Trust (o) 11,100 1,001
FelCor Lodging Trust, Inc. (o) 82,100 2,096
Feldman Mall Properties, Inc. (o) 117,200 1,351
Fidelity National Financial, Inc. Class A (N) 46,535 1,186
First American Corp. 123,100 6,340
First Cash Financial Services, Inc. (AE) 42,400 974
First Industrial Realty Trust, Inc. (o) 21,800 955
First Mutual Bancshares, Inc. 62,976 1,392
First Place Financial Corp. (N) 5,163 103
First Regional Bancorp (AE)(N) 52,689 1,317
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
FirstFed Financial Corp. (AE)(N) 46,538 2,861
Fulton Financial Corp. (N) 39,510 582
GFI Group, Inc. (AE)(N) 64,000 4,432
Global Payments, Inc. 57,525 2,185
Gramercy Capital Corp. (o)(N) 9,068 294
Hanmi Financial Corp. (N) 70,234 1,153
HCC Insurance Holdings, Inc. 53,700 1,646
Health Care Property Investors, Inc. (o) 27,000 956
Health Care REIT, Inc. (o) 34,300 1,552
Hersha Hospitality Trust (o)(N) 16,800 200
Highland Hospitality Corp. (o) 96,500 1,838
Hospitality Properties Trust (o) 98,400 4,480
HRPT Properties Trust (o)(N) 139,000 1,701
IBERIABANK Corp. (N) 5,520 290
Integra Bank Corp. 2,800 64
International Securities Exchange Holdings, Inc.
Class A (N) 65,100 4,342
Intervest Bancshares Corp. Class A (AE)(N) 14,259 363
Investment Technology Group, Inc. (AE) 49,486 1,873
Investors Real Estate Trust (o) 2,500 26
IPC Holdings, Ltd. (N) 94,200 2,824
iStar Financial, Inc. (o) 82,400 3,949
ITLA Capital Corp. (N) 400 20
JER Investors Trust, Inc. (o) 47,800 842
John H Harland Co. (N) 5,816 306
Jones Lang LaSalle, Inc. 6,762 727
KKR Financial Corp. (o) 60,400 1,613
Knight Capital Group, Inc. Class A (AE)(N) 94,200 1,526
Kohlberg Capital Corp. (N) 91,375 1,639
LaSalle Hotel Properties (o) 28,500 1,323
Liberty Property Trust (o) 37,500 1,815
LTC Properties, Inc. (o)(N) 21,911 549
Luminent Mortgage Capital, Inc. (o)(N) 60,100 496
Macatawa Bank Corp. (N) 6,100 99
Markel Corp. (AE) 3,000 1,377
MCG Capital Corp. 57,000 1,004
Mercantile Bank Corp. (N) 3,885 105
Mid-America Apartment Communities, Inc. (o) 22,300 1,203
Nara Bancorp, Inc. (N) 28,222 466
National Retail Properties, Inc. (o)(N) 126,112 3,020
Nationwide Financial Services, Inc. (N) 30,600 1,748
Navigators Group, Inc. (AE) 12,988 664
</Table>
Special Growth Fund 15
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Nelnet, Inc. Class A (N) 10,200 274
Newcastle Investment Corp. (o)(N) 77,827 2,273
NorthStar Realty Finance Corp. (o)(N) 288,338 4,267
Ocwen Financial Corp. (AE)(N) 39,495 563
Odyssey Re Holdings Corp. (N) 28,900 1,211
Old Republic International Corp. 60,250 1,282
Oriental Financial Group 13,036 151
Pacific Capital Bancorp (N) 21,978 592
Pennsylvania Real Estate Investment Trust (o) 29,100 1,352
Philadelphia Consolidated Holding Co. (AE) 28,200 1,224
Pico Holdings, Inc. (AE)(N) 10,100 451
PMI Group, Inc. (The) 29,300 1,420
Potlatch Corp. (o)(N) 23,325 1,012
Preferred Bank 13,150 481
Protective Life Corp. 39,100 1,834
PS Business Parks, Inc. (o)(N) 10,155 700
Radian Group, Inc. 22,500 1,307
RAIT Financial Trust (o)(N) 88,500 2,491
Raymond James Financial, Inc. 136,200 4,179
Realty Income Corp. (o) 77,828 2,171
Redwood Trust, Inc. (o) 16,409 824
Reinsurance Group of America, Inc. 27,300 1,701
RenaissanceRe Holdings, Ltd. (N) 29,000 1,570
RLI Corp. 11,200 624
Ryder System, Inc. (N) 55,600 2,927
S1 Corp. (AE) 91,291 593
Safety Insurance Group, Inc. (N) 32,463 1,300
SeaBright Insurance Holdings, Inc. (AE)(N) 21,380 397
SEI Investments Co. 28,900 1,764
Southwest Bancorp, Inc. 47,936 1,174
Sovran Self Storage, Inc. (o) 28,000 1,547
Stancorp Financial Group, Inc. 42,600 2,028
Sterling Bancshares, Inc. (N) 36,950 422
Sunstone Hotel Investors, Inc. (o) 62,480 1,782
Susquehanna Bancshares, Inc. (N) 16,100 359
SWS Group, Inc. (N) 44,961 1,169
Taubman Centers, Inc. (o) 12,200 684
Taylor Capital Group, Inc. 12,081 359
Thornburg Mortgage, Inc. (o)(N) 75,300 2,093
TierOne Corp. 19,781 480
Transatlantic Holdings, Inc. 3,000 208
Triad Guaranty, Inc. (AE)(N) 27,056 1,196
U-Store-It Trust (o) 83,100 1,530
United America Indemnity, Ltd. Class A (AE) 11,400 285
United Fire & Casualty Co. (N) 13,100 481
United Rentals, Inc. (AE)(N) 50,000 1,675
Unitrin, Inc. (N) 20,300 957
Universal Health Realty Income Trust (o) 1,100 39
Ventas, Inc. (o) 56,800 2,395
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Webster Financial Corp. 14,300 636
Weingarten Realty Investors (o)(N) 6,100 292
Whitney Holding Corp. 32,049 986
Wilmington Trust Corp. (N) 18,800 761
WR Berkley Corp. 40,000 1,300
WSFS Financial Corp. 500 32
Zenith National Insurance Corp. (N) 56,296 2,604
Zions Bancorporation 20,000 1,636
------------
224,810
------------
Health Care - 10.1%
Accelrys, Inc. (AE)(N) 103,200 673
Advanced Medical Optics, Inc. (AE)(N) 31,000 1,253
Albany Molecular Research, Inc. (AE) 13,998 135
Allscripts Healthcare Solutions, Inc. (AE) 112,645 2,979
American Medical Systems Holdings, Inc. (AE) 240,383 4,262
American Oriental Bioengineering, Inc. (AE) 45,600 454
AMERIGROUP Corp. (AE)(N) 60,569 1,704
Amsurg Corp. Class A (AE) 10,215 235
Analogic Corp. 6,400 392
Applera Corp. - Celera Group (AE) 205,800 2,881
Apria Healthcare Group, Inc. (AE) 43,063 1,367
Arthrocare Corp. (AE) 116,584 4,810
Beckman Coulter, Inc. 20,100 1,263
Bio-Rad Laboratories, Inc. Class A (AE) 11,700 828
Bradley Pharmaceuticals, Inc. (AE)(N) 13,902 273
Cerner Corp. (AE)(N) 119,000 6,336
Charles River Laboratories International, Inc.
(AE)(N) 40,500 1,918
Community Health Systems, Inc. (AE) 101,614 3,739
Conmed Corp. (AE) 65,355 1,982
Cooper Cos., Inc. (The) (N) 106,819 5,458
Corvel Corp. (AE) 13,140 357
Covance, Inc. (AE) 30,200 1,827
Cutera, Inc. (AE)(N) 37,700 1,104
DaVita, Inc. (AE)(N) 69,526 3,797
Discovery Laboratories, Inc. (AE)(N) 63,000 187
Emergency Medical Services Corp. Class A (AE) 41,278 1,382
ev3, Inc. (AE)(N) 54,300 969
Greatbatch, Inc. (AE)(N) 4,044 117
Haemonetics Corp. (AE) 51,362 2,457
Health Net, Inc. (AE) 29,300 1,584
Healthcare Services Group (N) 127,400 3,567
</Table>
16 Special Growth Fund
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
HealthExtras, Inc. (AE)(N) 212,200 6,568
Healthspring, Inc. (AE) 146,315 3,441
Healthways, Inc. (AE)(N) 73,951 3,137
Henry Schein, Inc. (AE) 22,600 1,178
Hologic, Inc. (AE)(N) 174,558 10,046
Icon PLC - ADR (AE) 16,900 793
Illumina, Inc. (AE) 71,044 2,318
Immucor, Inc. (AE) 11,100 362
Immunomedics, Inc. (AE)(N) 92,784 488
IMS Health, Inc. 100,481 2,947
Invacare Corp. 31,100 580
Inverness Medical Innovations, Inc. (AE) 43,600 1,746
Kindred Healthcare, Inc. (AE) 27,200 950
King Pharmaceuticals, Inc. (AE) 142,300 2,910
Kyphon, Inc. (AE) 47,449 2,212
LHC Group, Inc. (AE)(N) 93,049 2,382
LifePoint Hospitals, Inc. (AE) 51,600 1,884
Medcath Corp. (AE)(N) 52,417 1,558
Medical Action Industries, Inc. (AE) 20,300 462
Medtox Scientific, Inc. (AE) 8,169 197
Mentor Corp. (N) 23,701 922
Molina Healthcare, Inc. (AE)(N) 18,400 556
Myriad Genetics, Inc. (AE)(N) 39,200 1,433
Nabi Biopharmaceuticals (AE)(N) 44,900 234
Neurocrine Biosciences, Inc. (AE)(N) 26,200 334
Noven Pharmaceuticals, Inc. (AE)(N) 19,851 465
NuVasive, Inc. (AE)(N) 58,300 1,502
Pharmaceutical Product
Development, Inc. 56,837 2,050
Pharmacopeia Drug Discovery, Inc. (AE)(N) 54,750 320
PharmaNet Development Group, Inc. (AE)(N) 26,350 719
Phase Forward, Inc. (AE) 65,100 1,034
PolyMedica Corp. (N) 24,300 983
PSS World Medical, Inc. (AE)(N) 230,583 4,635
Psychiatric Solutions, Inc. (AE) 110,730 3,883
Quality Systems, Inc. (AE) 63,964 2,589
RehabCare Group, Inc. (AE) 5,500 90
Sciele Pharma, Inc. (AE)(N) 43,221 1,068
Sierra Health Services, Inc. (AE) 95,193 3,943
Stericycle, Inc. (AE)(N) 38,400 3,346
STERIS Corp. 42,900 1,097
Techne Corp. (AE) 65,142 3,841
Universal Health Services, Inc. Class B 37,200 2,259
Viropharma, Inc. (AE) 15,000 226
WellCare Health Plans, Inc. (AE)(N) 17,140 1,381
West Pharmaceutical Services, Inc. (N) 17,343 863
Zoll Medical Corp. (AE) 4,464 108
------------
146,330
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Materials and Processing - 10.6%
Acuity Brands, Inc. 22,633 1,338
Airgas, Inc. 106,464 4,743
Albemarle Corp. 78,100 3,315
AM Castle & Co. (N) 55,785 1,891
Apogee Enterprises, Inc. 17,700 426
Ashland, Inc. 23,700 1,421
Bluegreen Corp. (AE) 2,800 31
BlueLinx Holdings, Inc. 9,700 111
Brookfield Homes Corp. (N) 24,000 815
Buckeye Technologies, Inc. (AE) 188,749 2,391
Cambrex Corp. 60,300 1,463
Carpenter Technology Corp. 36,693 4,453
Celanese Corp. Class A 141,000 4,677
Ceradyne, Inc. (AE) 13,900 818
CF Industries Holdings, Inc. 32,300 1,282
Chaparral Steel Co. 32,900 2,319
Chesapeake Corp. (N) 21,000 310
Chicago Bridge & Iron Co. NV 104,275 3,611
Cleveland-Cliffs, Inc. (N) 16,553 1,147
Comfort Systems USA, Inc. 51,500 643
Commercial Metals Co. 74,800 2,508
Constar International, Inc. (AE)(N) 46,300 409
Corn Products International, Inc. 82,300 3,277
Crown Holdings, Inc. (AE) 92,900 2,245
Cytec Industries, Inc. 44,300 2,432
Eastman Chemical Co. (N) 45,000 3,046
EMCOR Group, Inc. (AE)(N) 46,768 2,932
Energizer Holdings, Inc. (AE) 18,900 1,837
Energy Conversion Devices, Inc. (AE) 85,587 3,031
Ennis, Inc. (N) 83,900 2,051
FMC Corp. 26,500 2,039
Gerdau Ameristeel Corp. 146,000 1,796
Goodman Global, Inc. (AE) 18,800 351
GrafTech International, Ltd. (AE) 117,713 1,175
Granite Construction, Inc. 50,903 3,066
Greif, Inc. Class A (N) 31,200 1,735
Harsco Corp. 48,200 2,458
Haynes International, Inc. (AE) 8,700 678
Hercules, Inc. (AE) 160,000 3,014
Huntsman Corp. 51,900 1,017
Infrasource Services, Inc. (AE)(N) 41,153 1,374
Innospec, Inc. (N) 18,547 996
Jacobs Engineering Group, Inc. (AE) 87,600 4,418
KBR, Inc. (AE) 30,300 626
Lamson & Sessions Co. (The) (AE)(N) 57,000 1,441
</Table>
Special Growth Fund 17
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Landec Corp. (AE) 53,538 680
Layne Christensen Co. (AE) 28,100 1,064
Lennox International, Inc. 51,600 1,745
Lubrizol Corp. 21,000 1,259
Lydall, Inc. (AE) 16,643 242
Mercer International, Inc. (AE) 72,400 888
Myers Industries, Inc. 32,197 723
Neenah Paper, Inc. (N) 7,548 288
Northwest Pipe Co. (AE) 3,100 111
Novagold Resources, Inc. (AE) 83,500 1,186
Novelis, Inc. 39,106 1,744
Olin Corp. (N) 79,400 1,361
Olympic Steel, Inc. (N) 8,800 293
OM Group, Inc. (AE) 52,792 2,773
Perini Corp. (AE) 28,897 1,231
Pioneer Cos., Inc. Class W (AE)(N) 17,579 512
PolyOne Corp. (AE) 49,200 323
Quanex Corp. (N) 22,300 960
Quanta Services, Inc. (AE) 142,241 3,910
Resource Capital Corp. (o)(N) 12,800 209
Rock-Tenn Co. Class A (N) 150,498 5,758
RPM International, Inc. (N) 174,371 3,709
SAIC, Inc. (AE)(N) 118,800 2,173
Schnitzer Steel Industries, Inc. Class A 13,200 685
Sigma-Aldrich Corp. 40,300 1,696
Smurfit-Stone Container Corp. (AE) 189,700 2,286
Sonoco Products Co. 64,300 2,742
Spartech Corp. 79,954 2,243
Standard Register Co. (The) (N) 19,155 239
Steel Dynamics, Inc. 40,300 1,786
Superior Essex, Inc. (AE)(N) 24,280 867
Symyx Technologies, Inc. (AE) 26,600 306
Temple-Inland, Inc. 11,400 675
Terra Industries, Inc. (AE)(N) 150,400 2,653
Texas Industries, Inc. (N) 24,500 1,866
Timken Co. 66,300 2,187
Tredegar Corp. (N) 47,638 1,113
Universal Forest Products, Inc. (N) 8,800 409
URS Corp. (AE) 40,500 1,770
USEC, Inc. (AE) 60,364 1,217
Valspar Corp. 33,800 914
Washington Group International, Inc. (AE) 92,284 6,176
Westlake Chemical Corp. (N) 45,500 1,328
------------
153,457
------------
Miscellaneous - 1.6%
Brunswick Corp. 84,000 2,752
Foster Wheeler, Ltd. (AE) 80,778 5,560
GP Strategies Corp. (AE) 10,608 102
Hillenbrand Industries, Inc. 17,900 1,095
Johnson Controls, Inc. 18,000 1,842
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
McDermott International, Inc. (AE) 128,146 6,876
SPX Corp. (N) 34,000 2,410
Teleflex, Inc. 16,700 1,199
Wesco Financial Corp. 4,643 2,066
------------
23,902
------------
Other Energy - 5.6%
Alon USA Energy, Inc. 35,000 1,309
Atlas Pipeline Partners, LP 34,375 1,717
Atwood Oceanics, Inc. (AE) 18,300 1,151
Bronco Drilling Co., Inc. (AE)(N) 85,000 1,537
Cameron International Corp. (AE) 48,977 3,162
Complete Production Services, Inc. (AE) 31,300 753
Comstock Resources, Inc. (AE) 48,100 1,364
Core Laboratories NV (AE)(N) 64,057 5,824
Diamond Offshore Drilling, Inc. 35,708 3,057
Dresser-Rand Group, Inc. (AE)(N) 31,100 992
Dril-Quip, Inc. (AE) 42,812 2,162
Enbridge Energy Partners, LP Class A (N) 29,000 1,734
ENSCO International, Inc. (N) 34,900 1,968
Foundation Coal Holdings, Inc. (N) 45,800 1,804
Frontier Oil Corp. 40,500 1,431
Global Industries, Ltd. (AE)(N) 82,500 1,713
Goodrich Petroleum Corp. (AE) 67,223 2,362
Grant Prideco, Inc. (AE) 88,622 4,568
Grey Wolf, Inc. (AE)(N) 114,204 818
Gulf Island Fabrication, Inc. (N) 2,900 87
Hercules Offshore, Inc. (AE)(N) 54,800 1,722
Holly Corp. 48,900 3,110
Input/Output, Inc. (AE)(N) 102,800 1,438
Meridian Resource Corp. (AE)(N) 98,675 258
National-Oilwell Varco, Inc. (AE) 28,295 2,401
Oceaneering International, Inc. (AE) 64,900 3,085
Oil States International, Inc. (AE) 15,100 512
Ormat Technologies, Inc. (N) 30,400 1,109
Parker Drilling Co. (AE)(N) 71,100 772
Penn Virginia Corp. (N) 11,940 956
Pioneer Drilling Co. (AE)(N) 70,600 968
Range Resources Corp. 31,300 1,144
Rowan Cos., Inc. (N) 39,500 1,447
SEACOR Holdings, Inc. (AE) 12,500 1,191
Superior Offshore International, Inc. (AE) 65,600 1,198
Talisman Energy, Inc. 79,965 1,519
TEPPCO Partners, LP (N) 38,000 1,731
Tesoro Corp. (N) 55,800 6,763
Tetra Technologies, Inc. (AE) 55,113 1,460
</Table>
18 Special Growth Fund
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Union Drilling, Inc. (AE)(N) 14,300 221
Unit Corp. (AE) 25,000 1,429
VeraSun Energy Corp. (AE) 109,489 2,182
Western Refining, Inc. (N) 23,800 943
Whiting Petroleum Corp. (AE)(N) 39,500 1,739
XTO Energy, Inc. 36,609 1,987
------------
80,798
------------
Producer Durables - 6.9%
AGCO Corp. (AE) 37,267 1,555
Altra Holdings, Inc. (AE)(N) 98,826 1,661
AO Smith Corp. (N) 9,700 370
Applied Industrial Technologies, Inc. 17,900 481
Arris Group, Inc. (AE)(N) 45,436 673
ASML Holding NV Class G (AE) 122,517 3,339
Asyst Technologies, Inc. (AE) 8,300 59
Audiovox Corp. Class A (AE) 5,225 75
Axcelis Technologies, Inc. (AE) 98,400 753
Baldor Electric Co. 76,300 3,005
Belden CDT, Inc. 20,217 1,130
C-COR, Inc. (AE) 181,960 2,242
Chart Industries, Inc. (AE) 5,100 96
Cognex Corp. (N) 17,300 373
Crane Co. (N) 33,000 1,403
Credence Systems Corp. (AE)(N) 407,847 1,513
Crown Castle International Corp. (AE)(N) 35,200 1,209
CTS Corp. (N) 45,043 589
Diebold, Inc. 11,300 539
DR Horton, Inc. (N) 182,911 4,057
Ducommun, Inc. (AE) 64,000 1,825
Entegris, Inc. (AE)(N) 224,927 2,636
ESCO Technologies, Inc. (AE) 65,907 3,003
FEI Co. (AE)(N) 52,300 1,946
Flowserve Corp. 17,800 1,086
Gardner Denver, Inc. (AE) 33,200 1,255
Garmin, Ltd. 58,457 3,402
Goodrich Corp. 47,956 2,726
Herman Miller, Inc. 27,400 943
Hubbell, Inc. Class B (N) 33,000 1,706
Intevac, Inc. (AE) 49,100 1,194
Kennametal, Inc. 48,564 3,427
Kimball International, Inc. Class B (N) 28,012 504
Knoll, Inc. 19,587 455
L-1 Identity Solutions, Inc. (AE)(N) 233,900 4,495
Lam Research Corp. (AE) 66,721 3,588
Littelfuse, Inc. (AE) 3,122 125
LTX Corp. (AE)(N) 153,760 916
M/I Homes, Inc. (N) 900 27
MasTec, Inc. (AE)(N) 25,600 294
Mettler Toledo International, Inc. (AE) 34,236 3,342
Milacron, Inc. (AE)(N) 166,129 116
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mueller Water Products, Inc. Class A 152,004 2,178
NACCO Industries, Inc. Class A (N) 2,503 399
Orbital Sciences Corp. (AE)(N) 66,029 1,378
Pall Corp. (N) 42,600 1,787
Photon Dynamics, Inc. (AE) 42,109 506
Polycom, Inc. (AE) 111,030 3,697
Regal-Beloit Corp. (N) 20,400 941
Robbins & Myers, Inc. 41,216 1,584
SBA Communications Corp. Class A (AE)(N) 103,500 3,045
Steelcase, Inc. Class A (N) 43,800 855
Symmetricom, Inc. (AE)(N) 16,384 134
Tecumseh Products Co. Class A (AE)(N) 58,100 590
Teledyne Technologies, Inc. (AE) 30,300 1,336
Tennant Co. 16,200 519
Teradyne, Inc. (AE) 34,200 597
Tessco Technologies, Inc. (AE) 6,888 196
Thomas & Betts Corp. (AE) 6,600 360
Toll Brothers, Inc. (AE)(N) 71,500 2,129
Ultra Clean Holdings (AE)(N) 97,200 1,423
Ultratech, Inc. (AE)(N) 75,100 1,040
Varian Semiconductor Equipment Associates, Inc.
(AE) 89,500 5,939
Verigy, Ltd. (AE) 179,280 4,530
WW Grainger, Inc. 12,300 1,025
------------
100,321
------------
Technology - 16.2%
3Com Corp. (AE) 79,200 319
Actel Corp. (AE) 5,700 83
ActivIdentity Corp. (AE) 4,800 24
Acxiom Corp. 36,221 819
Agilysys, Inc. 19,200 404
Alliance Semiconductor Corp. (AE) 75,400 338
Amdocs, Ltd. (AE) 56,200 2,065
American Reprographics Co. (AE) 126,064 4,185
American Software, Inc. Class A 13,294 117
AMIS Holdings, Inc. (AE) 72,489 841
Amkor Technology, Inc. (AE) 116,517 1,630
Amphenol Corp. Class A 215,744 7,575
Anixter International, Inc. (AE) 19,200 1,375
Ansoft Corp. (AE) 34,736 1,122
Ansys, Inc. (AE) 173,162 8,866
Applied Micro Circuits Corp. (AE)(N) 586,900 1,649
Ariba, Inc. (AE)(N) 69,700 615
ARM Holdings PLC - ADR 135,500 1,081
Arrow Electronics, Inc. (AE) 125,900 4,976
ASE Test, Ltd. (AE)(N) 71,400 916
</Table>
Special Growth Fund 19
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
AsiaInfo Holdings, Inc. (AE)(N) 53,981 415
Aspen Technology, Inc. (AE) 85,800 1,165
Avanex Corp. (AE)(N) 160,500 283
Avaya, Inc. (AE) 12,300 159
Avnet, Inc. (AE) 76,200 3,117
AVX Corp. 15,100 251
BearingPoint, Inc. (AE) 149,900 1,100
Benchmark Electronics, Inc. (AE) 59,202 1,254
Blackbaud, Inc. (N) 57,998 1,281
Blackboard, Inc. (AE) 118,300 4,059
Brocade Communications Systems, Inc. (AE)(N) 579,187 5,659
Captaris, Inc. (AE) 84,074 508
Cbeyond, Inc. (AE)(N) 57,800 2,010
Ciber, Inc. (AE) 1,300 11
Ciena Corp. (AE) 60,070 1,752
Citrix Systems, Inc. (AE) 46,200 1,506
Cognizant Technology Solutions Corp. Class A
(AE) 13,600 1,216
CommScope, Inc. (AE) 84,116 3,924
COMSYS IT Partners, Inc. (AE) 24,098 548
Comverse Technology, Inc. (AE)(N) 74,000 1,678
Cray, Inc. (AE)(N) 25,449 317
CSG Systems International, Inc. (AE)(N) 97,487 2,611
Cubic Corp. (N) 31,800 640
Daktronics, Inc. (N) 56,200 1,280
DealerTrack Holdings, Inc. (AE) 182,700 6,029
Digimarc Corp. (AE) 17,277 167
Digital River, Inc. (AE)(N) 52,500 3,073
EMS Technologies, Inc. (AE)(N) 17,984 338
EPIQ Systems, Inc. (AE) 6,522 154
Equinix, Inc. (AE)(N) 95,100 7,938
Excel Technology, Inc. (AE) 6,500 171
Extreme Networks (AE)(N) 186,395 762
Flir Systems, Inc. (AE)(N) 79,000 3,199
Foundry Networks, Inc. (AE) 64,300 972
Gartner, Inc. (AE)(N) 270,600 6,827
Gateway, Inc. (AE)(N) 442,500 969
Genesis Microchip, Inc. (AE)(N) 51,876 445
Gerber Scientific, Inc. (AE)(N) 12,400 124
Ikanos Communications, Inc. (AE) 64,300 497
Ingram Micro, Inc. Class A (AE) 113,800 2,233
Integrated Device Technology, Inc. (AE) 103,000 1,543
Integrated Silicon Solutions, Inc. (AE)(N) 13,500 76
International Rectifier Corp. (AE)(N) 34,100 1,203
Interwoven, Inc. (AE) 203,079 3,101
Ixia (AE) 3,100 27
IXYS Corp. (AE) 10,300 94
JDS Uniphase Corp. (AE)(N) 97,875 1,613
Keynote Systems, Inc. (AE)(N) 65,300 888
Komag, Inc. (AE)(N) 45,000 1,238
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lattice Semiconductor Corp. (AE) 49,939 273
Leadis Technology, Inc. (AE) 4,700 16
Lions Gate Entertainment Corp. (AE) 125,900 1,439
Magma Design Automation, Inc. (AE)(N) 34,887 479
Manhattan Associates, Inc. (AE) 39,709 1,148
McAfee, Inc. (AE) 22,800 741
Mentor Graphics Corp. (AE)(N) 202,083 3,270
Mercury Computer Systems, Inc. (AE)(N) 26,200 356
Merix Corp. (AE)(N) 35,389 264
Methode Electronics, Inc. 58,351 880
Microchip Technology, Inc. 123,644 4,988
Micros Systems, Inc. (AE) 78,632 4,309
MicroStrategy, Inc. Class A (AE)(N) 8,487 966
Ness Technologies, Inc. (AE) 21,000 280
Newport Corp. (AE)(N) 16,800 264
Novell, Inc. (AE)(N) 196,800 1,437
Nuance Communications, Inc. (AE)(N) 264,600 4,078
Opnet Technologies, Inc. (AE) 1,900 21
Orckit Communications, Ltd. (AE)(N) 53,200 559
Parametric Technology Corp. (AE) 194,451 3,455
Pegasystems, Inc. (N) 10,169 97
Perot Systems Corp. Class A (AE)(N) 45,358 812
PMC - Sierra, Inc. (AE)(N) 285,300 2,205
QLogic Corp. (AE) 91,800 1,641
Quantum Corp. (AE)(N) 416,700 1,146
Rackable Systems, Inc. (AE)(N) 43,800 515
RADVision, Ltd. (AE) 90,600 2,003
RADWARE, Ltd. (AE)(N) 33,900 439
RealNetworks, Inc. (AE)(N) 125,700 949
Riverbed Technology, Inc. (AE)(N) 43,500 1,388
Salesforce.com, Inc. (AE)(N) 33,400 1,403
Sanmina-SCI Corp. (AE)(N) 113,358 391
Seachange International, Inc. (AE)(N) 97,100 835
Seagate Technology (N) 115,545 2,559
Sigma Designs, Inc. (AE)(N) 110,600 2,591
Silicon Storage Technology, Inc. (AE)(N) 364,028 1,500
Skyworks Solutions, Inc. (AE)(N) 326,500 2,250
Smith Micro Software, Inc. (AE)(N) 95,200 1,513
Solectron Corp. (AE) 421,400 1,412
SonicWALL, Inc. (AE) 86,400 705
Standard Microsystems Corp. (AE)(N) 30,700 984
Sunpower Corp. Class A (AE)(N) 43,200 2,621
Sybase, Inc. (AE)(N) 50,037 1,210
Sycamore Networks, Inc. (AE) 161,400 592
Syniverse Holdings, Inc. (AE) 17,000 175
</Table>
20 Special Growth Fund
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SYNNEX Corp. (AE)(N) 26,400 516
Synopsys, Inc. (AE) 194,500 5,380
Tekelec (AE)(N) 183,600 2,633
Tellabs, Inc. (AE) 18,400 195
Tessera Technologies, Inc. (AE) 183,185 7,839
TIBCO Software, Inc. (AE) 261,900 2,389
Transaction Systems Architects, Inc. (AE) 66,400 2,107
Trident Microsystems, Inc. (AE) 19,800 420
TriQuint Semiconductor, Inc. (AE)(N) 255,500 1,321
Trizetto Group, Inc. (The) (AE)(N) 99,000 1,929
Tyler Technologies, Inc. (AE)(N) 32,343 387
Ultimate Software Group, Inc. (AE)(N) 130,300 3,596
Unisys Corp. (AE) 233,100 1,828
Utstarcom, Inc. (AE)(N) 141,900 1,013
Varian, Inc. (AE) 23,000 1,333
VeriFone Holdings, Inc. (AE)(N) 148,100 5,226
Verint Systems, Inc. (AE) 112,106 3,223
Vignette Corp. (AE)(N) 68,329 1,265
Vocus, Inc. (AE)(N) 130,700 2,939
Wavecom Sa - ADR (AE)(N) 38,600 1,073
Westell Technologies, Inc. Class A (AE) 36,300 96
Western Digital Corp. (AE) 100,300 1,773
Zebra Technologies Corp. Class A (AE) 75,424 3,001
Zoran Corp. (AE) 82,000 1,629
------------
233,695
------------
Utilities - 3.5%
AGL Resources, Inc. 6,400 279
Allete, Inc. 13,900 673
Alliant Energy Corp. 60,100 2,632
Atmos Energy Corp. 83,181 2,638
Black Hills Corp. 30,002 1,194
Centerpoint Energy, Inc. (N) 259,600 4,888
Cincinnati Bell, Inc. (AE) 188,225 954
CMS Energy Corp. (N) 79,900 1,480
CT Communications, Inc. (N) 29,263 714
El Paso Electric Co. (AE) 14,037 371
Integrys Energy Group, Inc. (N) 18,400 1,032
Leap Wireless International, Inc. (AE) 50,500 3,855
MDU Resources Group, Inc. (N) 90,400 2,739
NII Holdings, Inc. (AE) 46,126 3,540
Northeast Utilities 99,000 3,185
NSTAR 27,100 973
NTELOS Holdings Corp. 4,800 97
OGE Energy Corp. 40,700 1,565
Pepco Holdings, Inc. 122,700 3,622
Pinnacle West Capital Corp. 37,200 1,796
PNM Resources, Inc. 27,600 898
RCN Corp. (AE)(N) 14,004 378
Rural Cellular Corp. Class A (AE) 11,031 274
Sierra Pacific Resources (AE) 121,800 2,224
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Southern Union Co. 51,400 1,566
Southwest Gas Corp. 18,109 686
Suburban Propane Partners, LP 12,100 593
TECO Energy, Inc. 98,700 1,772
UGI Corp. 97,200 2,757
USA Mobility, Inc. (N) 10,200 218
Westar Energy, Inc. (N) 47,617 1,296
------------
50,889
------------
TOTAL COMMON STOCKS
(cost $1,167,995) 1,348,654
------------
WARRANTS & RIGHTS - 0.0%
Financial Services - 0.0%
Washington Mutual, Inc. 2050
Warrants (AE) 226,300 75
------------
TOTAL WARRANTS & RIGHTS
(cost $47) 75
------------
SHORT-TERM INVESTMENTS - 7.3%
Russell Investment Company
Money Market Fund 99,884,444 99,884
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 5,000 4,970
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $104,854) 104,854
------------
OTHER SECURITIES - 27.3%
Russell Investment Company
Money Market Fund (X) 75,715,600 75,716
State Street Securities
Lending Quality Trust (X) 318,201,455 318,201
------------
TOTAL OTHER SECURITIES
(cost $393,917) 393,917
------------
TOTAL INVESTMENTS - 127.9%
(identified cost $1,666,813) 1,847,500
OTHER ASSETS AND LIABILITIES,
NET - (27.9%) (403,501)
------------
NET ASSETS - 100.0% 1,443,999
============
</Table>
Special Growth Fund 21
RUSSELL INVESTMENT COMPANY
SPECIAL GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 06/07 (1,157) 94,747 1,834
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts 1,834
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
- -------------------------------------------------------------
Auto and Transportation 3.0
Consumer Discretionary 18.3
Consumer Staples 1.9
Financial Services 15.6
Health Care 10.1
Materials and Processing 10.6
Miscellaneous 1.6
Other Energy 5.6
Producer Durables 6.9
Technology 16.2
Utilities 3.5
Warrants & Rights --*
Short-Term Investments 7.3
Other Securities 27.3
---------------
Total Investments 127.9
Other Assets and Liabilities, Net (27.9)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
22 Special Growth Fund
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,047.80 $ 1,006.20
Expenses Paid During
Period* $ 2.21 $ 2.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.29%
(representing the two month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,070.80 $ 1,014.73
Expenses Paid During
Period* $ 10.42 $ 10.14
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.03%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,074.80 $ 1,018.45
Expenses Paid During
Period* $ 6.58 $ 6.41
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.28%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,076.20 $ 1,019.69
Expenses Paid During
Period* $ 5.30 $ 5.16
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.03%
(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
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 107.4%
Auto and Transportation - 2.3%
Alaska Air Group, Inc. (AE) 11,600 343
AMR Corp. (AE) 38,100 994
ArvinMeritor, Inc. 1,300 27
Burlington Northern Santa Fe Corp. (U) 20,000 1,751
Continental Airlines, Inc. Class B (AE)(N) 101,800 3,722
CSX Corp. 241,884 10,442
FedEx Corp. (U) 80,700 8,509
Ford Motor Co. (AE) 488,600 3,928
General Motors Corp. 180,400 5,634
Goodyear Tire & Rubber Co. (The) (AE) 53,800 1,789
Harley-Davidson, Inc. 157,300 9,960
JB Hunt Transport Services, Inc. 24,070 651
Norfolk Southern Corp. 185,900 9,897
Overseas Shipholding Group, Inc. 71,069 5,032
Paccar, Inc. 271,850 22,830
TRW Automotive Holdings Corp. (AE) 23,900 886
UAL Corp. (AE) 21,100 705
Union Pacific Corp. (U) 105,100 12,008
US Airways Group, Inc. (AE) 14,000 517
YRC Worldwide, Inc. (AE) 24,470 974
------------
100,599
------------
Consumer Discretionary - 15.6%
Abercrombie & Fitch Co. Class A 16,700 1,364
ABM Industries, Inc. 7,200 203
Accenture, Ltd. Class A 239,610 9,369
Aeropostale, Inc. (AE) 52,200 2,148
Alberto-Culver Co. Class B 145,300 3,529
Allied Waste Industries, Inc. (AE) 212,600 2,842
American Eagle Outfitters, Inc. 502,215 14,800
American Greetings Corp. Class A 151,020 3,843
AnnTaylor Stores Corp. (AE) 93,900 3,613
AutoNation, Inc. (AE) 477,239 9,755
Avis Budget Group, Inc. (AE) 57,720 1,624
Avon Products, Inc. 149,380 5,945
Barnes & Noble, Inc. 42,900 1,696
Best Buy Co., Inc. (U) 57,000 2,659
Big Lots, Inc. (AE) 141,570 4,559
BJ's Wholesale Club, Inc. (AE) 20,700 715
Brinker International, Inc. 142,250 4,424
Burger King Holdings, Inc. 26,100 613
Carnival Corp. 20,500 1,002
CBS Corp. Class B 536,409 17,042
CEC Entertainment, Inc. (AE) 13,100 546
Coach, Inc. (AE) 220,290 10,757
Convergys Corp. (AE) 50,100 1,266
Darden Restaurants, Inc. 281,800 11,689
Dillard's, Inc. Class A 193,430 6,699
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
DIRECTV Group, Inc. (The) (AE)(N)(U) 1,619,220 38,602
Dollar Tree Stores, Inc. (AE) 36,700 1,443
DreamWorks Animation SKG, Inc. Class A (AE) 22,100 647
eBay, Inc. (AE) 230,400 7,820
EchoStar Communications Corp. Class A (AE) 192,500 8,957
Estee Lauder Cos., Inc. (The) Class A 178,300 9,168
Expedia, Inc. (AE) 103,430 2,443
Family Dollar Stores, Inc. 146,200 4,655
Federated Department Stores, Inc. 232,400 10,207
Foot Locker, Inc. 103,600 2,465
Gannett Co., Inc. 111,800 6,379
Gemstar-TV Guide International, Inc. (AE) 1,159 5
Google, Inc. Class A (AE)(U) 33,000 15,556
Guess?, Inc. 26,400 1,040
Hanesbrands, Inc. (AE) 25,100 667
Hasbro, Inc. 111,700 3,531
InterActiveCorp (AE) 366,140 13,957
ITT Educational Services, Inc. (AE) 25,690 2,497
Jack in the Box, Inc. (AE) 11,200 746
Jarden Corp. (AE) 38,100 1,606
JC Penney Co., Inc. 175,000 13,841
Jones Apparel Group, Inc. 40,230 1,343
Kohl's Corp. (AE) 289,400 21,427
Limited Brands, Inc. 73,900 2,037
Liz Claiborne, Inc. 61,800 2,764
Lowe's Cos., Inc. 138,700 4,239
Manpower, Inc. 457,509 36,715
Marriott International, Inc. Class A 453,590 20,507
Mattel, Inc. 525,600 14,874
McDonald's Corp. (U) 660,821 31,904
McGraw-Hill Cos., Inc. (The) (N)(U) 603,745 39,563
Men's Wearhouse, Inc. (The) 28,400 1,229
MPS Group, Inc. (AE) 22,800 312
News Corp. Class A 1,020,600 22,851
News Corp. Class B 7,390 177
Nike, Inc. Class B 86,800 4,675
Nordstrom, Inc. 168,600 9,260
Office Depot, Inc. (AE) 163,800 5,507
OfficeMax, Inc. 12,310 606
Payless Shoesource, Inc. (AE) 43,200 1,378
Polo Ralph Lauren Corp. Class A 89,300 8,225
RadioShack Corp. 68,210 1,983
Rent-A-Center, Inc. (AE) 32,500 905
Ross Stores, Inc. 15,500 514
</Table>
24 Quantitative Equity Fund
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Saks, Inc. 8,870 186
Scholastic Corp. (AE) 19,000 587
Sears Holdings Corp. (AE) 11,800 2,253
Staples, Inc. 258,550 6,412
Target Corp. 97,700 5,800
Timberland Co. Class A (AE) 9,800 253
Time Warner, Inc. (N)(U) 2,814,470 58,063
TJX Cos., Inc. 650,500 18,142
United Stationers, Inc. (AE) 1,178 70
VeriSign, Inc. (AE) 75,500 2,065
Viacom, Inc. Class A (AE)(U) 9,700 400
Wal-Mart Stores, Inc. (U) 337,150 16,156
Walt Disney Co. (The) 786,030 27,495
Waste Management, Inc. 286,700 10,725
WESCO International, Inc. (AE) 18,000 1,137
Whirlpool Corp. 47,100 4,994
Wolverine World Wide, Inc. 1,700 49
Wynn Resorts, Ltd. (N) 43,800 4,477
Yahoo!, Inc. (AE) 16,940 475
Yum! Brands, Inc. 152,200 9,415
------------
671,083
------------
Consumer Staples - 7.5%
Altria Group, Inc. 30,000 2,068
Coca-Cola Co. (The) 609,140 31,791
Colgate-Palmolive Co. 147,130 9,967
ConAgra Foods, Inc. 334,900 8,232
Constellation Brands, Inc. Class A (AE) 131,600 2,949
Del Monte Foods Co. 8,700 101
General Mills, Inc. 736,300 44,104
Hormel Foods Corp. 16,600 632
JM Smucker Co. (The) 15,700 876
Kraft Foods, Inc. Class A (U) 90,100 3,016
Kroger Co. (The) 1,825,979 53,885
Loews Corp. - Carolina Group 64,700 4,952
McCormick & Co., Inc. 107,000 3,972
Molson Coors Brewing Co. Class B 54,330 5,122
Pepsi Bottling Group, Inc. 66,200 2,172
PepsiCo, Inc. 437,800 28,934
Procter & Gamble Co. (U) 539,983 34,726
Reynolds American, Inc. (N) 64,500 4,145
Safeway, Inc. 470,060 17,063
SUPERVALU, Inc. 169,900 7,798
SYSCO Corp. 499,800 16,363
Tyson Foods, Inc. Class A 468,080 9,811
UST, Inc. 162,820 9,229
Walgreen Co. 490,600 21,537
------------
323,445
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Financial Services - 23.6%
Aflac, Inc. 17,700 909
Alliance Data Systems Corp. (AE) 59,300 3,775
Allstate Corp. (The) (U) 377,600 23,532
AMBAC Financial Group, Inc. 79,934 7,338
American International Group, Inc. (U) 240,430 16,808
AmeriCredit Corp. (AE)(N) 152,540 3,849
Ameriprise Financial, Inc. 243,740 14,495
Automatic Data Processing, Inc. (U) 188,700 8,446
Axis Capital Holdings, Ltd. 10,100 375
Bank of America Corp. (U) 1,812,822 92,273
Bear Stearns Cos., Inc. (The) 49,800 7,754
BlackRock, Inc. Class A 9,000 1,347
Boston Properties, Inc. (o) 72,530 8,527
Camden Property Trust (o) 15,000 1,045
CapitalSource, Inc. (o) 105,100 2,708
CB Richard Ellis Group, Inc. Class A (AE) 49,500 1,676
Chubb Corp. 254,300 13,689
Cigna Corp. 102,070 15,881
Cincinnati Financial Corp. 73,927 3,344
CIT Group, Inc. 174,000 10,379
Citigroup, Inc. (U) 1,212,100 64,993
Comerica, Inc. 119,800 7,417
Commerce Group, Inc. 700 23
Countrywide Financial Corp. 950,988 35,263
DiamondRock Hospitality Co. (o) 16,700 305
Duke Realty Corp. (o) 33,400 1,440
Factset Research Systems, Inc. 12,200 750
First American Corp. 39,100 2,014
First Marblehead Corp. (The) (N) 281,600 10,208
FirstFed Financial Corp. (AE) 1,700 105
Fiserv, Inc. (AE) 282,300 15,010
Franklin Resources, Inc. 87,810 11,530
Genworth Financial, Inc. Class A 193,960 7,078
Global Payments, Inc. 80,500 3,057
Goldman Sachs Group, Inc. (The) (U) 286,800 62,697
Hartford Financial Services Group, Inc. (U) 41,000 4,149
HCC Insurance Holdings, Inc. 146,600 4,495
Health Care Property Investors, Inc. (o) 95,810 3,391
Health Care REIT, Inc. (o) 22,200 1,004
Hospitality Properties Trust (o) 253,105 11,524
Host Hotels & Resorts, Inc. (o) 294,000 7,538
HRPT Properties Trust (o) 186,960 2,288
Hudson City Bancorp, Inc. 126,270 1,682
IndyMac Bancorp, Inc. (N) 36,400 1,101
Investment Technology Group, Inc. (AE) 29,900 1,131
</Table>
Quantitative Equity Fund 25
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
iStar Financial, Inc. (o) 9,410 451
JPMorgan Chase & Co. (U) 1,412,976 73,616
KeyCorp 183,500 6,547
Kimco Realty Corp. (o) 41,900 2,014
Lehman Brothers Holdings, Inc. (U) 588,600 44,310
Liberty Property Trust (o) 11,700 566
Loews Corp. (U) 310,610 14,698
MBIA, Inc. 127,203 8,848
Mellon Financial Corp. 76,100 3,267
Merrill Lynch & Co., Inc. 596,180 53,793
MetLife, Inc. (U) 128,300 8,429
MoneyGram International, Inc. 32,662 929
Moody's Corp. 125,800 8,318
Morgan Stanley (U) 697,340 58,584
National City Corp. (N) 359,000 13,121
National Retail Properties, Inc. (o) 10,200 244
Nationwide Financial Services, Inc. 39,300 2,245
Nationwide Health Properties, Inc. (o) 38,600 1,238
Nelnet, Inc. Class A 10,500 282
Northern Trust Corp. 65,200 4,104
Odyssey Re Holdings Corp. 14,700 616
Old Republic International Corp. 82,800 1,761
Philadelphia Consolidated Holding Co. (AE) 13,500 586
PMI Group, Inc. (The) 119,680 5,801
PNC Financial Services Group, Inc. (U) 92,900 6,884
Principal Financial Group, Inc. 114,200 7,251
Progressive Corp. (The) 372,600 8,596
ProLogis (o) 5,841 378
Prudential Financial, Inc. (U) 100,500 9,548
Radian Group, Inc. 3,950 230
Raymond James Financial, Inc. 62,400 1,914
Redwood Trust, Inc. (o) 3,400 171
Regions Financial Corp. 551,173 19,341
Ryder System, Inc. 64,280 3,384
Safeco Corp. (N) 177,280 11,832
Simon Property Group, Inc. (o) 24,940 2,875
Stancorp Financial Group, Inc. 18,200 866
State Street Corp. (U) 112,100 7,720
Synovus Financial Corp. 20,800 656
TCF Financial Corp. 43,700 1,183
Travelers Cos., Inc. (The) (U) 387,495 20,963
US Bancorp 366,040 12,573
Ventas, Inc. (o) 9,100 384
Wachovia Corp. (U) 113,100 6,282
Washington Mutual, Inc. (N) 385,000 16,162
Wells Fargo & Co. (U) 1,448,450 51,985
Western Union Co. (The) 109,400 2,303
Wilmington Trust Corp. 14,500 587
WR Berkley Corp. 213,675 6,942
Zenith National Insurance Corp. 12,100 560
------------
1,014,281
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Health Care - 13.5%
Abbott Laboratories (U) 130,200 7,372
Aetna, Inc. (U) 400,500 18,775
Alcon, Inc. 11,401 1,538
AMERIGROUP Corp. (AE) 16,900 475
AmerisourceBergen Corp. Class A (U) 847,290 42,356
Amgen, Inc. (AE)(U) 683,320 43,828
Apria Healthcare Group, Inc. (AE) 57,830 1,836
Beckman Coulter, Inc. 34,000 2,136
Becton Dickinson & Co. 69,800 5,493
Biogen Idec, Inc. (AE) 147,400 6,959
Boston Scientific Corp. (AE)(U) 276,400 4,268
Cardinal Health, Inc. (U) 276,300 19,327
Celgene Corp. (AE) 141,040 8,626
CR Bard, Inc. 28,940 2,406
CVS Corp. 49,039 1,777
Dade Behring Holdings, Inc. 51,300 2,519
Dentsply International, Inc. 71,400 2,385
Edwards Lifesciences Corp. (AE) 33,818 1,657
Eli Lilly & Co. 73,900 4,370
Emdeon Corp. (AE)(N) 161,750 2,611
Express Scripts, Inc. Class A (AE) 38,600 3,688
Forest Laboratories, Inc. (AE) 308,960 16,440
Genzyme Corp. (AE) 11,430 746
Gilead Sciences, Inc. (AE) 275,400 22,506
Health Net, Inc. (AE) 119,300 6,449
Healthspring, Inc. (AE) 22,500 529
Humana, Inc. (AE) 170,960 10,812
Idexx Laboratories, Inc. (AE) 8,200 739
IMS Health, Inc. 87,600 2,569
Johnson & Johnson (U) 1,387,550 89,108
King Pharmaceuticals, Inc. (AE) 147,000 3,006
Laboratory Corp. of America Holdings (AE) 32,400 2,558
LifePoint Hospitals, Inc. (AE) 35,300 1,289
McKesson Corp. 215,900 12,701
Medco Health Solutions, Inc. (AE) 206,390 16,103
Medtronic, Inc. 114,600 6,066
Merck & Co., Inc. (U) 558,360 28,722
Millennium Pharmaceuticals, Inc. (AE)(N) 364,490 4,039
Mylan Laboratories, Inc. 113,200 2,482
Pfizer, Inc. (U) 3,814,580 100,934
Quest Diagnostics, Inc. 249,400 12,193
Schering-Plough Corp. (U) 595,700 18,902
Stryker Corp. (U) 29,000 1,883
UnitedHealth Group, Inc. 87,800 4,659
</Table>
26 Quantitative Equity Fund
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Universal Health Services, Inc. Class B 14,100 856
Watson Pharmaceuticals, Inc. (AE) 52,200 1,425
WellCare Health Plans, Inc. (AE) 30,850 2,486
WellPoint, Inc. (AE)(U) 283,300 22,372
Zimmer Holdings, Inc. (AE) 57,510 5,204
------------
582,180
------------
Integrated Oils - 6.0%
Chevron Corp. (U) 616,010 47,919
ConocoPhillips (U) 427,810 29,669
Exxon Mobil Corp. (U) 2,023,718 160,643
Marathon Oil Corp. 208,430 21,166
------------
259,397
------------
Materials and Processing - 5.3%
Acuity Brands, Inc. 25,800 1,525
Albemarle Corp. 57,400 2,437
Alcoa, Inc. 370,200 13,138
American Standard Cos., Inc. 125,033 6,884
Archer-Daniels-Midland Co. (U) 199,200 7,709
Ashland, Inc. 131,400 7,877
Avery Dennison Corp. 60,500 3,763
Bemis Co., Inc. 52,000 1,727
Cabot Corp. 21,300 965
Celanese Corp. Class A 82,150 2,725
Crown Holdings, Inc. (AE) 52,920 1,279
Cytec Industries, Inc. 10,100 555
Domtar Corp. (AE) 73,600 718
Dow Chemical Co. (The) (U) 324,100 14,458
Eastman Chemical Co. 51,900 3,514
EI Du Pont de Nemours & Co. (U) 213,290 10,488
Energizer Holdings, Inc. (AE) 99,520 9,671
Fluor Corp. 56,800 5,431
FMC Corp. 16,000 1,231
Freeport-McMoRan Copper & Gold, Inc. Class B 196,000 13,163
Greif, Inc. Class A 19,000 1,056
Hercules, Inc. (AE) 84,400 1,590
Huntsman Corp. 62,200 1,219
International Paper Co. 101,800 3,840
Jacobs Engineering Group, Inc. (AE) 75,600 3,813
Lyondell Chemical Co. 159,230 4,955
Monsanto Co. 3,400 201
Newmont Mining Corp. 5,960 249
Nucor Corp. (N) 529,164 33,581
Olin Corp. 33,500 574
Packaging Corp. of America 46,377 1,148
Pactiv Corp. (AE) 149,900 5,184
PPG Industries, Inc. 70,800 5,210
Quanex Corp. 21,500 925
Rock-Tenn Co. Class A 13,600 520
Rohm & Haas Co. 307,900 15,755
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
RPM International, Inc. 31,100 662
Sherwin-Williams Co. (The) 146,500 9,342
Smurfit-Stone Container Corp. (AE) 104,900 1,264
Southern Copper Corp. 113,200 9,090
Steel Dynamics, Inc. 203,100 8,999
Timken Co. 42,100 1,389
URS Corp. (AE) 29,200 1,276
Vulcan Materials Co. 60,300 7,457
Weyerhaeuser Co. 6,880 545
------------
229,102
------------
Miscellaneous - 3.1%
Brunswick Corp. 70,100 2,296
Eaton Corp. 136,000 12,133
General Electric Co. (U) 1,675,520 61,760
Honeywell International, Inc. (U) 406,100 22,003
ITT Corp. 83,300 5,315
Johnson Controls, Inc. 84,100 8,606
SPX Corp. 74,820 5,303
Textron, Inc. 78,200 7,951
Tyco International, Ltd. 284,900 9,296
------------
134,663
------------
Other Energy - 4.1%
Alon USA Energy, Inc. 27,800 1,040
Apache Corp. 133,900 9,708
BJ Services Co. 180,100 5,162
Cameron International Corp. (AE) 48,300 3,119
Chesapeake Energy Corp. (N) 183,300 6,186
Complete Production Services, Inc. (AE) 19,300 465
Devon Energy Corp. 305,990 22,297
Dynegy, Inc. Class A (AE) 4,230 40
Frontier Oil Corp. 96,200 3,399
Global Industries, Ltd. (AE) 64,900 1,347
Grey Wolf, Inc. (AE) 52,800 378
Holly Corp. 62,200 3,956
Newfield Exploration Co. (AE) 130,400 5,705
NRG Energy, Inc. (AE)(N) 36,900 2,914
Oceaneering International, Inc. (AE) 69,100 3,285
Oil States International, Inc. (AE) 48,400 1,642
Plains Exploration & Production Co. (AE) 30,100 1,414
Rowan Cos., Inc. 59,200 2,169
SEACOR Holdings, Inc. (AE) 52,600 5,012
St. Mary Land & Exploration Co. 30,500 1,117
Sunoco, Inc. 209,200 15,801
</Table>
Quantitative Equity Fund 27
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Superior Energy Services, Inc. (AE) 63,600 2,311
Tesoro Corp. 194,670 23,594
Todco Class A (AE) 2,800 127
Unit Corp. (AE) 30,800 1,760
Valero Energy Corp. (U) 298,400 20,957
Western Refining, Inc. 1,300 51
XTO Energy, Inc. 540,400 29,327
------------
174,283
------------
Producer Durables - 7.0%
AGCO Corp. (AE) 195,260 8,148
Applied Materials, Inc. (U) 864,700 16,620
Boeing Co. (U) 301,950 28,081
Caterpillar, Inc. 317,400 23,050
Crane Co. 23,700 1,008
Danaher Corp. 88,500 6,300
Deere & Co. 44,720 4,892
Gardner Denver, Inc. (AE) 45,400 1,716
Genlyte Group, Inc. (AE) 17,600 1,373
Goodrich Corp. 57,897 3,291
KB Home 100 4
Lam Research Corp. (AE) 204,700 11,009
Lexmark International, Inc. Class A (AE) 184,970 10,081
Lockheed Martin Corp. (U) 612,160 58,853
Manitowoc Co., Inc. (The) 60,600 4,135
Mettler Toledo International, Inc. (AE) 19,600 1,913
Molex, Inc. 122,600 3,663
Northrop Grumman Corp. (N) 616,075 45,368
Novellus Systems, Inc. (AE)(N) 143,410 4,642
NVR, Inc. (AE) 2,300 1,895
Parker Hannifin Corp. 141,900 13,075
Polycom, Inc. (AE) 185,090 6,164
Standard-Pacific Corp. 82,700 1,724
Steelcase, Inc. Class A 37,200 726
Teradyne, Inc. (AE) 105,400 1,839
Terex Corp. (AE) 23,180 1,805
Thomas & Betts Corp. (AE) 27,200 1,482
United Technologies Corp. 235,450 15,806
Waters Corp. (AE) 98,450 5,851
Xerox Corp. (AE) 924,073 17,095
------------
301,609
------------
Technology - 12.7%
3Com Corp. (AE) 132,600 534
Amphenol Corp. Class A 66,600 2,338
Analog Devices, Inc. 35,500 1,371
Anixter International, Inc. (AE) 28,000 2,005
Apple, Inc. (AE) 147,200 14,691
Applera Corp. - Applied Biosystems Group 162,189 5,067
Applied Micro Circuits Corp. (AE) 229,500 645
Arrow Electronics, Inc. (AE) 66,200 2,616
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Atmel Corp. (AE) 1,921,740 10,224
Avaya, Inc. (AE) 132,800 1,716
Avnet, Inc. (AE) 110,590 4,523
AVX Corp. 75,700 1,260
BEA Systems, Inc. (AE) 302,600 3,568
BMC Software, Inc. (AE) 156,900 5,079
Brocade Communications Systems, Inc. (AE) 13,700 134
Cadence Design Systems, Inc. (AE) 121,830 2,705
Cisco Systems, Inc. (AE) 2,804,770 75,000
Computer Sciences Corp. (AE) 257,229 14,286
CSG Systems International, Inc. (AE) 22,600 605
DRS Technologies, Inc. 16,800 845
Electronic Data Systems Corp. 241,100 7,050
EMC Corp. (AE) 590,500 8,964
F5 Networks, Inc. (AE) 33,400 2,564
Harris Corp. 19,100 981
Hewlett-Packard Co. (U) 1,563,540 65,888
Ingram Micro, Inc. Class A (AE) 180,300 3,537
Integrated Device Technology, Inc. (AE) 184,400 2,762
Intel Corp. 28,890 621
International Business Machines Corp. (U) 501,360 51,244
International Rectifier Corp. (AE) 31,500 1,111
Intuit, Inc. (AE) 423,319 12,043
Jabil Circuit, Inc. 87,400 2,036
Juniper Networks, Inc. (AE) 226,700 5,069
McAfee, Inc. (AE) 80,400 2,612
MEMC Electronic Materials, Inc. (AE) 92,490 5,076
Mentor Graphics Corp. (AE) 103,370 1,672
Microsoft Corp. (U) 2,594,640 77,683
National Instruments Corp. 38,700 1,078
National Semiconductor Corp. 96,400 2,535
Network Appliance, Inc. (AE) 73,600 2,739
Oracle Corp. (AE) 1,725,200 32,434
QLogic Corp. (AE) 95,900 1,715
Qualcomm, Inc. 83,300 3,648
Raytheon Co. (U) 641,490 34,345
RealNetworks, Inc. (AE) 95,600 722
Sanmina-SCI Corp. (AE) 36,700 127
Seagate Technology, Inc. (AE) 67,668 --
Solectron Corp. (AE) 204,100 684
Sun Microsystems, Inc. (AE) 1,543,590 8,057
Symantec Corp. (AE) 423,230 7,449
Synopsys, Inc. (AE) 305,951 8,463
Tellabs, Inc. (AE) 176,000 1,869
</Table>
28 Quantitative Equity Fund
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Texas Instruments, Inc. (U) 712,380 24,484
Unisys Corp. (AE) 175,400 1,375
Utstarcom, Inc. (AE) 195,880 1,399
Western Digital Corp. (AE) 200,100 3,538
Xilinx, Inc. 316,200 9,322
------------
546,108
------------
Utilities - 6.7%
AES Corp. (The) (AE) 122,600 2,696
AGL Resources, Inc. (U) 13,700 597
Allegheny Energy, Inc. (AE) 38,300 2,048
Alltel Corp. 150,680 9,446
Ameren Corp. 174,100 9,152
American Electric Power Co., Inc. 25,500 1,281
AT&T, Inc. (U) 1,437,899 55,675
Atmos Energy Corp. 5,400 171
Cablevision Systems Corp. Class A (AE) 118,600 3,888
CenturyTel, Inc. 191,120 8,801
Comcast Corp. Class A (AE) 528,600 14,092
Constellation Energy Group, Inc. 154,700 13,787
Duke Energy Corp. 803,240 16,482
Edison International 284,541 14,896
Embarq Corp. 68,900 4,137
Energy East Corp. (N) 46,900 1,136
Entergy Corp. 38,240 4,326
FirstEnergy Corp. 174,040 11,911
KeySpan Corp. 89,800 3,719
Oneok, Inc. 159,010 7,698
PG&E Corp. 783,710 39,656
Public Service Enterprise Group, Inc. 32,400 2,801
Qwest Communications International, Inc. (AE)(N) 640,500 5,688
Sprint Nextel Corp. 653,470 13,089
Telephone & Data Systems, Inc. 28,500 1,623
TXU Corp. 221,749 14,542
UGI Corp. 23,700 672
Verizon Communications, Inc. (U) 633,186 24,175
------------
288,185
------------
TOTAL COMMON STOCKS
(cost $3,950,638) 4,624,935
------------
SHORT-TERM INVESTMENTS - 3.5%
Russell Investment Company Money
Market Fund 142,082,000 142,082
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 10,000 9,940
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $152,022) 152,022
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 1.5%
Russell Investment Company
Money Market Fund (X) 12,281,002 12,281
State Street Securities
Lending Quality Trust (X) 51,611,989 51,612
------------
TOTAL OTHER SECURITIES
(cost $63,893) 63,893
------------
TOTAL INVESTMENTS - 112.4%
(identified cost $4,166,553) 4,840,850
------------
SECURITIES SOLD SHORT - (10.7%)
Auto and Transportation - (0.4%)
AAR Corp. (AE) (14,000) (428)
Ford Motor Co. (AE) (872,400) (7,014)
JetBlue Airways Corp. (AE) (80,200) (795)
Oshkosh Truck Corp. (61,700) (3,451)
Southwest Airlines Co. (325,000) (4,664)
Visteon Corp. (AE) (56,400) (514)
------------
(16,866)
------------
Consumer Discretionary - (2.0%)
American Greetings Corp. Class A (33,000) (840)
Bed Bath & Beyond, Inc. (AE) (175,400) (7,146)
CBS Corp. Class B (148,680) (4,724)
Chico's FAS, Inc. (AE) (140,300) (3,698)
Coldwater Creek, Inc. (AE) (38,800) (803)
Discovery Holding Co. Class A (AE) (257,470) (5,600)
Electronic Arts, Inc. (AE) (165,800) (8,358)
Fastenal Co. (117,900) (4,848)
Google, Inc. Class A (AE) (9,700) (4,572)
Hearst-Argyle Television, Inc. (17,500) (466)
Las Vegas Sands Corp. (AE) (102,900) (8,766)
Limited Brands, Inc. (319,300) (8,803)
Regal Entertainment Group Class A (131,394) (2,858)
Scientific Games Corp. (AE) (44,600) (1,485)
Service Corp. International (146,600) (1,781)
Starbucks Corp. (AE) (283,000) (8,779)
Triarc Cos., Inc. Class A (5,500) (90)
Under Armour, Inc. Class A (AE) (6,700) (338)
</Table>
Quantitative Equity Fund 29
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Walt Disney Co. (The) (106,900) (3,739)
Williams-Sonoma, Inc. (58,000) (2,043)
Wynn Resorts, Ltd. (21,000) (2,146)
XM Satellite Radio Holdings, Inc. Class A (AE) (60,000) (702)
Yahoo!, Inc. (AE) (184,800) (5,182)
------------
(87,767)
------------
Consumer Staples - (0.6%)
Hansen Natural Corp. (AE) (33,600) (1,283)
Hershey Co. (The) (141,900) (7,799)
Kraft Foods, Inc. Class A (289,000) (9,673)
Reynolds American, Inc. (34,900) (2,243)
Rite Aid Corp. (AE) (98,800) (606)
Tyson Foods, Inc. Class A (180,900) (3,792)
------------
(25,396)
------------
Financial Services - (1.1%)
Capitol Federal Financial (12,428) (480)
Charles Schwab Corp. (The) (374,000) (7,151)
Chicago Mercantile Exchange Holdings, Inc. Class
A (800) (413)
Cincinnati Financial Corp. (28,800) (1,303)
First Niagara Financial Group, Inc. (14,300) (195)
GATX Corp. (28,900) (1,416)
LandAmerica Financial Group, Inc. Class A (42,600) (3,423)
M&T Bank Corp. (77,500) (8,629)
MBIA, Inc. (190,200) (13,230)
MetLife, Inc. (84,800) (5,571)
New York Community Bancorp, Inc. (96,000) (1,676)
PMI Group, Inc. (The) (58,700) (2,845)
Sotheby's Holdings Class A (22,700) (1,172)
TD Ameritrade Holding Corp. (AE) (110,700) (1,888)
Unum Group (1,600) (40)
------------
(49,432)
------------
Health Care - (1.4%)
Abbott Laboratories (174,100) (9,858)
Abraxis BioScience, Inc. (AE) (39,800) (1,095)
Affymetrix, Inc. (AE) (50,300) (1,321)
Alexion Pharmaceuticals, Inc. (AE) (21,800) (913)
Allscripts Healthcare Solutions, Inc. (AE) (17,300) (458)
Bausch & Lomb, Inc. (37,100) (2,183)
BioMarin Pharmaceuticals, Inc. (AE) (34,900) (564)
Bristol-Myers Squibb Co. (336,900) (9,723)
Brookdale Senior Living, Inc. (30,700) (1,394)
Celgene Corp. (AE) (69,300) (4,238)
Cerner Corp. (AE) (51,500) (2,742)
Chattem, Inc. (AE) (11,700) (669)
Cubist Pharmaceuticals, Inc. (AE) (21,000) (450)
Healthways, Inc. (AE) (11,300) (479)
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hologic, Inc. (AE) (8,500) (489)
ImClone Systems, Inc. (AE) (33,800) (1,416)
Intuitive Surgical, Inc. (AE) (12,800) (1,660)
Inverness Medical Innovations, Inc. (AE) (16,700) (669)
Medarex, Inc. (AE) (34,700) (475)
Myriad Genetics, Inc. (AE) (22,900) (837)
PDL BioPharma, Inc. (AE) (65,100) (1,644)
Quest Diagnostics, Inc. (242,800) (11,870)
Sunrise Senior Living, Inc. (AE) (13,200) (505)
Techne Corp. (AE) (8,900) (525)
Tenet Healthcare Corp. (AE) (254,000) (1,885)
United Therapeutics Corp. (AE) (18,000) (1,006)
------------
(59,068)
------------
Integrated Oils - (0.0%)
Delta Petroleum Corp. (AE) (50,900) (1,104)
------------
Materials and Processing - (0.9%)
EI Du Pont de Nemours & Co. (187,000) (9,195)
Hexcel Corp. (AE) (41,200) (894)
Louisiana-Pacific Corp. (81,900) (1,614)
Mosaic Co. (The) (AE) (371,100) (10,948)
Quanta Services, Inc. (AE) (54,000) (1,485)
Shaw Group, Inc. (The) (AE) (58,600) (1,900)
UAP Holding Corp. (50,700) (1,403)
Weyerhaeuser Co. (109,700) (8,690)
Worthington Industries, Inc. (58,600) (1,304)
------------
(37,433)
------------
Miscellaneous - (0.5%)
Berkshire Hathaway, Inc. Class A (AE) (41) (4,477)
Fortune Brands, Inc. (105,200) (8,427)
ITT Corp. (135,400) (8,640)
------------
(21,544)
------------
Other Energy - (1.7%)
Arch Coal, Inc. (111,900) (4,036)
Baker Hughes, Inc. (122,400) (9,840)
Cabot Oil & Gas Corp. (15,500) (564)
CNX Gas Corp. (AE) (9,800) (275)
Consol Energy, Inc. (63,600) (2,663)
Crosstex Energy, Inc. (58,800) (1,767)
Diamond Offshore Drilling, Inc. (97,800) (8,372)
EOG Resources, Inc. (112,200) (8,240)
Equitable Resources, Inc. (95,700) (4,977)
EXCO Resources, Inc. (AE) (100,400) (1,686)
</Table>
30 Quantitative Equity Fund
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Halliburton Co. (113,800) (3,615)
Massey Energy Co. (73,700) (1,985)
Peabody Energy Corp. (208,400) (9,999)
PetroHawk Energy Corp. (AE) (46,700) (675)
Pogo Producing Co. (77,600) (3,745)
Quicksilver Resources, Inc. (AE) (19,600) (820)
Range Resources Corp. (71,300) (2,606)
Reliant Energy, Inc. (AE) (127,800) (2,846)
Southwestern Energy Co. (AE) (68,100) (2,860)
Whiting Petroleum Corp. (AE) (13,600) (599)
------------
(72,170)
------------
Producer Durables - (0.5%)
ACCO Brands Corp. (AE) (27,900) (664)
Amazon.Com, Inc. (AE) (138,900) (8,519)
Briggs & Stratton Corp. (45,200) (1,341)
Bucyrus International, Inc. Class A (16,100) (1,010)
Danaher Corp. (95,200) (6,777)
ESCO Technologies, Inc. (AE) (13,600) (619)
Interdigital Communications Corp. (AE) (11,000) (362)
MDC Holdings, Inc. (14,000) (718)
SBA Communications Corp. Class A (AE) (28,700) (844)
------------
(20,854)
------------
Technology - (0.9%)
Advanced Micro Devices, Inc. (AE) (75,200) (1,039)
Autodesk, Inc. (AE) (62,000) (2,559)
Broadcom Corp. Class A (AE) (114,400) (3,724)
Corning, Inc. (AE) (358,100) (8,494)
Equinix, Inc. (AE) (2,500) (209)
General Dynamics Corp. (111,200) (8,729)
Microsemi Corp. (AE) (29,400) (679)
Motorola, Inc. (212,200) (3,677)
NAVTEQ Corp. (AE) (30,800) (1,089)
Palm, Inc. (AE) (17,100) (289)
Rambus, Inc. (AE) (32,900) (652)
Salesforce.com, Inc. (AE) (23,900) (1,004)
SanDisk Corp. (AE) (151,600) (6,587)
Spansion, Inc. Class A (AE) (86,200) (846)
Trident Microsystems, Inc. (AE) (13,900) (295)
------------
(39,872)
------------
Utilities - (0.7%)
Avista Corp. (24,800) (585)
DPL, Inc. (22,887) (718)
Hawaiian Electric Industries, Inc. (40,200) (1,058)
Level 3 Communications, Inc. (AE) (447,400) (2,488)
National Fuel Gas Co. (75,100) (3,530)
Progress Energy, Inc. (165,400) (8,361)
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Telephone & Data Systems, Inc. (54,700) (3,115)
Xcel Energy, Inc. (334,800) (8,065)
------------
(27,920)
------------
TOTAL SECURITIES SOLD SHORT
(proceeds $439,820) (459,426)
------------
OTHER ASSETS AND LIABILITIES,
NET - (1.7%) (73,663)
------------
NET ASSETS - 100.0% 4,307,761
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Quantitative Equity Fund 31
RUSSELL INVESTMENT COMPANY
QUANTITATIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/07 (37) 15,007 726
Russell 1000 Mini Index (CME)
expiration date 06/07 (60) 4,867 240
S&P 500 E-Mini Index (CME)
expiration date 06/07 (112) 8,335 350
S&P 500 Index (CME)
expiration date 06/07 (155) 57,676 2,145
S&P Midcap 400 E-Mini Index (CME)
expiration date 06/07 (576) 50,584 1,967
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 5,428
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 2.3
Consumer Discretionary 15.6
Consumer Staples 7.5
Financial Services 23.6
Health Care 13.5
Integrated Oils 6.0
Materials and Processing 5.3
Miscellaneous 3.1
Other Energy 4.1
Producer Durables 7.0
Technology 12.7
Utilities 6.7
Short-Term Investments 3.5
Other Securities 1.5
---------------
Total Investments 112.4
Securities Sold Short (10.7)
Other Assets and Liabilities, Net (1.7)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
32 Quantitative Equity Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,064.20 $ 1,005.95
Expenses Paid During
Period* $ 2.48 $ 2.41
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.44%
(representing the two month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,136.30 $ 1,013.93
Expenses Paid During
Period* $ 11.60 $ 10.94
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.19%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,140.40 $ 1,017.65
Expenses Paid During
Period* $ 7.64 $ 7.20
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.44%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,141.90 $ 1,018.89
Expenses Paid During
Period* $ 6.32 $ 5.96
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.19%
(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 33
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 91.2%
Australia - 4.3%
AGL Energy, Ltd. (N) 16,606 211
Alinta, Ltd. (N) 10,196 126
Amcor, Ltd. (N) 1,618,531 9,962
AMP, Ltd. 325,578 2,887
Ansell, Ltd. 35,203 324
APN News & Media, Ltd. (N) 5,630 28
Aristocrat Leisure, Ltd. (N) 159,295 2,181
Australia & New Zealand Banking Group, Ltd. 80,334 2,039
AXA Asia Pacific Holdings, Ltd. 64,562 394
BHP Billiton, Ltd. 223,918 5,469
Brambles, Ltd. (AE) 190,958 2,083
Caltex Australia, Ltd. (N) 37,185 745
Centro Properties Group 35,162 271
CFS Gandel Retail Trust 12,126 23
Coles Group, Ltd. (N) 326,777 4,662
Commonwealth Bank of Australia 44,737 1,952
CSL, Ltd. 144,910 10,438
David Jones, Ltd. (N) 104,535 428
DB RREEF Trust (N)(o) 96,287 143
Foster's Group, Ltd. 2,150,399 11,340
GPT Group 70,782 289
Harvey Norman Holdings, Ltd. (N) 56,679 240
Incitec Pivot, Ltd. (N) 57,406 2,303
Insurance Australia Group, Ltd. (N) 314,046 1,558
Investa Property Group (N) 56,496 125
Leighton Holdings, Ltd. 11,946 341
Lend Lease Corp., Ltd. 4,550 75
Macquarie Airports Management, LTD (N) 984,955 3,240
Macquarie Bank, Ltd. (N) 175,214 12,502
Macquarie Goodman Group (N) 53,724 315
Macquarie Infrastructure Group 1,829,256 5,728
Macquarie Office Trust 16,086 21
Minara Resources, Ltd. (N) 11,847 72
Mirvac Group 20,535 89
Multiplex Group 3,433 13
National Australia Bank, Ltd. (N) 1,055,206 37,515
OneSteel, Ltd. (N) 110,559 523
Origin Energy, Ltd. 112,538 846
Oxiana, Ltd. (N) 419,000 1,045
Pacific Brands, Ltd. 246,414 658
Qantas Airways, Ltd. 175,585 774
QBE Insurance Group, Ltd. (N) 353,382 8,970
Rinker Group, Ltd. 28,170 435
Rio Tinto, Ltd. (N) 2,358 161
Sons of Gwalia, Ltd. (AE)(N)(B) 34,800 --
Stockland (N) 52,119 371
Suncorp-Metway, Ltd. 134,553 2,384
Symbion Health, Ltd. (N) 14,993 51
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TABCORP Holdings, Ltd. (N) 231,811 3,470
Tattersall's, Ltd. (N) 97,033 413
Telstra Corp., Ltd. (N) 4,186,675 16,164
Telstra Corp., Ltd. 21,721 57
Toll Holdings, Ltd. (N) 1,156 21
Transurban Group 210,644 1,404
Wesfarmers, Ltd. (N) 163,803 5,300
Westfield Group 46,857 812
Westpac Banking Corp. 69,713 1,559
Woolworths, Ltd. 7,383 173
Zinifex, Ltd. (N) 317,761 4,307
------------
170,030
------------
Austria - 0.6%
Erste Bank der Oesterreichischen Sparkassen AG
(N) 238,042 19,091
Immofinanz Immobilien Anlagen AG (AE) 111,900 1,818
Voestalpine AG 49,200 3,312
------------
24,221
------------
Belgium - 0.7%
Belgacom SA (N) 24,618 1,083
Fortis (N) 309,167 13,849
Fortis 230,119 10,307
InBev NV (N) 35,072 2,731
KBC Groep NV (N) 3,400 449
Omega Pharma SA 2,589 209
------------
28,628
------------
Bermuda - 0.7%
Aquarius Platinum, Ltd. 68,894 2,048
Credicorp, Ltd. 45,100 2,353
Esprit Holdings, Ltd. 541,500 6,553
Great Eagle Holdings, Ltd. 18,000 66
Guoco Group, Ltd. 10,000 145
Hongkong Land Holdings, Ltd. 28,000 130
Jardine Matheson Holdings, Ltd. 169,700 3,941
Johnson Electric Holdings, Ltd. (N) 1,620,500 981
Li & Fung, Ltd. 1,266,800 3,900
Nine Dragons Paper Holdings, Ltd. (N) 653,000 1,315
Orient Overseas International, Ltd. 36,000 303
</Table>
34 International Securities Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pacific Basin Shipping, Ltd. 2,650,000 2,645
People's Food Holdings, Ltd. 89,000 115
Shangri-La Asia, Ltd. 1,556,000 3,798
Vostok Nafta Investment, Ltd. (AE) 14,475 896
------------
29,189
------------
Brazil - 0.7%
All America Latina Logistica SA 192,300 2,246
Banco do Brasil SA 26,800 918
Cia Vale do Rio Doce - ADR (N) 192,700 7,825
Gafisa SA 161,519 2,276
Gerdau SA - ADR (N) 97,200 1,947
JHSF Participacoes SA (AE) 265,800 1,086
Petroleo Brasileiro SA - ADR 13,870 1,404
Tele Norte Leste Participacoes SA - ADR (N) 117,690 1,927
Unibanco - Uniao de Bancos Brasileiros SA - GDR
(AE) 98,165 9,528
------------
29,157
------------
Canada - 2.0%
Agrium, Inc. 45,700 1,771
AUR Resources, Inc. 107,000 2,351
Cameco Corp. 51,700 2,410
Canadian Imperial Bank of Commerce 60,900 5,361
Canadian National Railway Co. 165,908 8,335
EnCana Corp. (N) 60,600 3,172
Gerdau Ameristeel Corp. 211,000 2,586
HudBay Minerals, Inc. (AE) 61,600 1,157
ING Canada, Inc. 38,067 1,672
Inmet Mining Corp. 21,500 1,308
Methanex Corp. 68,818 1,640
Nexen, Inc. 43,608 2,595
Potash Corp. of Saskatchewan 23,900 4,291
Research In Motion, Ltd. (AE) 81,200 10,684
Rogers Communications, Inc. Class B 383,800 14,714
Shoppers Drug Mart Corp. 86,721 3,953
SNC-Lavalin Group, Inc. 40,700 1,166
Suncor Energy, Inc. 48,000 3,851
Teck Cominco, Ltd.Class B 78,300 5,946
------------
78,963
------------
Cayman Islands - 0.4%
Ctrip.com International, Ltd. - ADR (N) 62,300 4,418
Foxconn International Holdings, Ltd. (AE)(N) 447,500 1,338
Melco PBL Entertainment Macau, Ltd. - ADR
(AE)(N) 337,728 5,883
Suntech Power Holdings Co., Ltd. - ADR (AE)(N) 113,500 4,118
------------
15,757
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
China - 0.4%
Bank of Communications Co., Ltd. Class H 177,700 187
China Citic Bank (AE)(p) 110,000 92
China Coal Energy Co. (AE) 2,086,000 2,040
China Communications Construction Co., Ltd.
Class H (AE) 1,828,000 2,362
China Construction Bank Corp. Class H (N)(p) 1,534,000 931
China Merchants Bank Co., Ltd. (AE)(N) 1,003,000 2,441
China Petroleum & Chemical Corp. Class H 2,274,000 1,986
Industrial & Commercial Bank of China (AE)(N) 6,629,000 3,615
Yanzhou Coal Mining Co., Ltd. Class H 906,000 935
------------
14,589
------------
Czech Republic - 0.1%
Komercni Banka AS 15,143 2,837
------------
Denmark - 0.7%
Carlsberg A/S Class B 122,400 13,703
FLSmidth & Co. A/S (N) 80,300 6,024
Novo-Nordisk A/S Class B 10,600 1,036
Sydbank A/S 11,300 633
Topdanmark A/S (AE) 5,380 1,054
Vestas Wind Systems A/S (AE) 100,400 6,484
------------
28,934
------------
Egypt - 0.1%
Orascom Construction Industries - GDR 20,994 2,450
------------
Finland - 1.2%
Cargotec Corp. Class B (N) 5,259 326
Kesko OYJ Class B 17,232 1,191
M-real OYJ Class B (N) 18,400 126
</Table>
International Securities Fund 35
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Nokia OYJ (N) 871,163 22,023
Nokia OYJ - ADR (N) 29,290 740
Orion OYJ Class B (N) 19,203 457
Outokumpu OYJ 21,696 718
Outotec Oyj 65,755 2,836
Rautaruukki OYJ (N) 31,636 1,703
UPM-Kymmene OYJ (N) 425,626 10,483
Wartsila Oyj Class B 35,100 2,338
YIT OYJ (N) 66,300 2,344
------------
45,285
------------
France - 12.4%
Accor SA (N) 241,552 22,696
Air France-KLM 81,068 4,136
Air Liquide SA (N) 51,646 12,802
Alstom RGPT (AE)(N) 107,895 16,002
Arkema (AE)(N) 18,482 1,104
AXA SA (N) 519,245 23,734
BNP Paribas (N) 252,816 29,259
Bouygues SA 1,307 104
Carrefour SA (N) 142,455 10,916
Casino Guichard Perrachon SA (N) 6,497 696
Cie de Saint-Gobain (N) 179,675 19,112
Cie Generale d'Optique Essilor International SA
(N) 26,136 3,144
CNP Assurances (N) 18,076 2,303
Compagnie Generale de Geophysique-Veritas
(AE)(N) 15,120 3,147
Compagnie Generale des Etablissements Michelin
Class B (N) 31,600 4,011
Credit Agricole SA (N) 743,646 31,203
Electricite de France (N) 26,447 2,292
France Telecom SA (N) 695,404 20,272
Gaz de France SA (N) 87,220 4,081
JC Decaux SA (N) 166,645 5,174
Klepierre 2,789 534
L'Oreal SA (N) 32,890 3,942
Lafarge SA (N) 2,076 336
Lagardere SCA (N) 87,260 6,844
Legrand SA 140,800 4,789
LVMH Moet Hennessy Louis Vuitton SA (N) 111,115 12,938
Neopost SA 16,183 2,343
Nexans SA (N) 5,192 762
NicOx SA (AE) 34,166 908
Pernod-Ricard SA (N) 43,152 9,167
Peugeot SA (N) 24,010 1,947
PPR SA (N) 22,278 3,862
Renault SA (N) 189,465 24,580
Rhodia SA (AE)(N) 503,731 2,050
Sanofi-Aventis (N) 347,967 31,953
Schneider Electric SA (N) 101,469 14,294
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Societe Generale (N) 185,460 39,254
Sodexho Alliance SA (N) 22,466 1,779
Suez SA (N) 65,858 3,736
Suez SA (AE) 40,348 1
Thomson (AE)(N) 134,030 2,589
Total SA (N) 726,169 53,614
Total SA - ADR 78,872 5,812
UBISOFT Entertainment (AE) 8,056 400
Unibail (N) 3,110 858
Valeo SA (N) 39,811 2,275
Vallourec SA 14,708 4,018
Veolia Environnement (N) 347,611 28,703
Vivendi Universal SA (N) 168,368 6,940
------------
487,416
------------
Germany - 8.3%
Adidas AG (N) 54,660 3,263
Allianz SE (N) 72,802 16,515
BASF AG (N) 108,991 12,934
Bayer AG (N) 510,178 34,961
Bayerische Motoren Werke AG (N) 120,860 7,463
Bilfinger Berger AG 24,300 2,282
Commerzbank AG (N) 42,400 2,122
Continental AG (N) 195,654 27,290
DaimlerChrysler AG (N) 63,361 5,161
Deutsche Bank AG (N) 44,808 6,904
Deutsche Boerse AG (N) 37,394 8,803
Deutsche Lufthansa AG (N) 191,600 5,757
Deutsche Post AG 172,271 5,947
Deutsche Telekom AG (N) 934,533 17,032
Deutz AG (AE)(N) 21,259 339
E.ON AG (N) 272,297 40,987
Epcos AG 40,373 864
Fresenius Medical Care AG & Co. KGaA (N) 53,245 8,020
Hannover Rueckversicherung AG (N) 23,810 1,208
Heidelberger Druckmaschinen AG (N) 21,950 1,037
Hochtief AG 20,403 2,142
Hugo Boss AG 6,035 402
Hypo Real Estate Holding AG (N)(o) 10,853 726
Infineon Technologies AG (AE) 351,551 5,482
IVG Immobilien AG (N) 85,111 3,830
KarstadtQuelle AG (AE)(N) 284,842 11,006
Lanxess AG (AE) 40,479 2,198
Linde AG (N) 22,398 2,511
MTU Aero Engines Holding AG 24,736 1,436
Muenchener Rueckversicherungs AG (N) 78,983 14,034
RWE AG (N) 197,952 20,928
</Table>
36 International Securities Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Salzgitter AG (N) 58,448 9,678
Siemens AG 113,058 13,653
Solarworld AG (N) 27,813 2,353
Stada Arzneimittel AG (N) 42,086 2,769
ThyssenKrupp AG 4,943 266
TUI AG (N) 86,600 2,383
United Internet AG (N) 138,450 2,546
Volkswagen AG (N) 61,091 9,276
Wacker Chemie AG (AE)(N) 51,908 9,467
------------
325,975
------------
Greece - 0.4%
Alpha Bank AE 7,700 234
National Bank of Greece SA 151,464 8,448
Piraeus Bank SA 75,425 2,723
Public Power Corp. SA 218,580 5,717
------------
17,122
------------
Hong Kong - 1.3%
Bank of East Asia, Ltd. 104,600 641
BOC Hong Kong Holdings, Ltd. 995,500 2,440
Cathay Pacific Airways, Ltd. 79,000 204
Cheung Kong Holdings, Ltd. 39,000 504
China Insurance International Holdings Co., Ltd.
(AE) 110,000 137
China Merchants Holdings International Co., Ltd. 926,000 4,107
China Mobile, Ltd. 1,356,000 12,248
China Netcom Group Corp. Hong Kong, Ltd. 643,500 1,586
China Resources Enterprise 316,000 1,061
China Unicom, Ltd. 100,000 145
CLP Holdings, Ltd. 39,500 289
CNOOC, Ltd. (N) 4,751,700 4,080
Hang Lung Group, Ltd. 93,000 357
Henderson Land Development Co., Ltd. 61,000 365
Hong Kong Exchanges and Clearing, Ltd. 34,000 324
HongKong Electric Holdings 1,427,000 7,145
Hopewell Holdings (N) 70,000 308
Hutchison Whampoa, Ltd. 299,700 2,883
Link REIT (The) (o) 55,000 125
Melco International Development (N) 1,029,000 1,993
New World Development, Ltd. 85,000 200
Shun Tak Holdings, Ltd. (N) 2,773,800 3,853
Sino Land Co. (N) 624,351 1,307
Sun Hung Kai Properties, Ltd. 28,000 328
Swire Pacific, Ltd. 44,500 508
Television Broadcasts, Ltd. 12,000 79
Wharf Holdings, Ltd. (N) 1,448,862 5,338
Wheelock & Co., Ltd. (N) 47,000 109
------------
52,664
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hungary - 0.0%
MOL Hungarian Oil and Gas PLC 9,700 1,182
------------
India - 0.2%
ICICI Bank, Ltd. - ADR (N) 83,969 3,436
Infosys Technologies, Ltd. - ADR (N) 42,000 2,199
State Bank of India, Ltd. - GDR 24,500 1,669
------------
7,304
------------
Indonesia - 0.1%
Bank Central Asia Tbk PT 3,485,500 2,017
Telekomunikasi Indonesia Tbk PT 2,213,000 2,550
------------
4,567
------------
Ireland - 0.5%
Anglo Irish Bank Corp. PLC 65,300 1,471
Bank of Ireland PLC 53,528 1,147
Elan Corp. PLC - ADR (AE)(N) 399,300 5,542
Kingspan Group PLC 165,111 4,613
Ryanair Holdings PLC - ADR (AE)(N) 138,112 6,446
------------
19,219
------------
Israel - 0.1%
Teva Pharmaceutical Industries, Ltd. - ADR 71,970 2,757
------------
Italy - 3.6%
Assicurazioni Generali SpA (N) 49,750 2,288
Banco Popolare di Verona e Novara SCRL (N) 73,519 2,451
Benetton Group SpA (N) 24,071 413
Buzzi Unicem SpA (N) 173,337 5,528
Enel SpA 138,736 1,579
ENI SpA 778,221 25,824
Esprinet SpA 22,319 472
Fiat SpA (AE)(N) 156,922 4,618
Fondiaria-Sai SpA (N) 110,499 5,848
Fondiaria-Sai SpA 9,900 403
Indesit Co. SpA 15,685 366
Intesa Sanpaolo SpA (N) 4,361,117 36,481
Italcementi SpA (N) 246,810 7,872
Mediaset SpA (N) 344,780 3,896
Milano Assicurazioni SpA (N) 147,611 1,446
Parmalat Finanziaria (AE)(B) 42,200 --
</Table>
International Securities Fund 37
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Saras SpA (AE)(N) 354,400 2,206
Snam Rete Gas SpA (N) 209,412 1,335
Telecom Italia SpA (N) 328,576 803
UniCredito Italiano SpA (N) 3,265,794 33,475
Unione di Banche Italiane SCPA (AE) 6,266 190
Unipol SpA (N) 678,170 2,693
------------
140,187
------------
Japan - 16.3%
77 Bank, Ltd. (The) (N) 292,400 1,916
Aderans Co., Ltd. (N) 5,000 111
Advantest Corp. (N) 64,700 2,873
Aeon Co., Ltd. (N) 259,400 4,749
Aeon Credit Service Co., Ltd. (N) 164,500 2,738
Aioi Insurance Co., Ltd. 33,000 224
Alps Electric Co., Ltd. (N) 95,500 986
Amada Co., Ltd. 54,000 602
Asahi Breweries, Ltd. 54,600 888
Asahi Glass Co., Ltd. (N) 388,000 5,218
Asahi Kasei Corp. (N) 118,000 828
Astellas Pharma, Inc. 177,200 7,733
Bank of Nagoya, Ltd. (The) 29,000 197
Bosch Corp. (N) 84,000 404
Bridgestone Corp. 170,500 3,434
Brother Industries, Ltd. 56,000 762
Calsonic Kansei Corp. (N) 65,000 291
Canon Marketing Japan, Inc. 9,500 185
Canon, Inc. 759,612 42,470
Chiba Bank, Ltd. (The) 32,000 265
Chugai Pharmaceutical Co., Ltd. (N) 424,100 10,815
Credit Saison Co., Ltd. 82,900 2,359
Dai Nippon Printing Co., Ltd. (N) 34,000 542
Daihatsu Motor Co., Ltd. (N) 29,000 243
Daiichi Sankyo Co., Ltd. 27,400 817
Daikin Industries, Ltd. (N) 119,300 4,033
Dainippon Ink And Chemicals, Inc. 503,000 1,889
Daiwa House Industry Co., Ltd. 21,000 329
Daiwa Securities Group, Inc. 103,000 1,146
Denki Kagaku Kogyo Kabushiki Kaisha 113,000 491
Denso Corp. 19,600 693
Dentsu, Inc. (N) 1,495 4,250
East Japan Railway Co. 806 6,532
EDION Corp. (N) 113,300 1,569
Eisai Co., Ltd. 9,100 432
Fanuc, Ltd. 78,700 7,701
Fuji Electric Holdings Co., Ltd. 33,000 154
Fuji Fire & Marine Insurance Co., Ltd. (The) 97,000 398
Fuji Heavy Industries, Ltd. 107,000 528
FUJIFILM Holdings Corp. 66,100 2,711
Fujikura, Ltd. 18,000 115
Fujitsu, Ltd. (N) 154,000 967
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Funai Electric Co., Ltd. (N) 8,900 705
Hachijuni Bank, Ltd. (The) (N) 11,000 77
Hakuhodo DY Holdings, Inc. (N) 3,060 207
Hankyu Department Stores (N) 18,000 159
Higo Bank, Ltd. (The) 9,000 63
Hino Motors, Ltd. (N) 531,000 2,926
Hirose Electric Co., Ltd. (N) 19,300 2,348
Hitachi, Ltd. (N) 103,000 782
Honda Motor Co., Ltd. 200,400 6,897
Hyakugo Bank, Ltd. (The) 12,000 80
Hyakujushi Bank, Ltd. (The) 9,000 52
Ibiden Co., Ltd. (N) 86,700 4,925
Inpex Holdings, Inc. 12 101
Isuzu Motors, Ltd. (N) 660,000 3,471
Itochu Corp. 170,000 1,671
Izumi Co., Ltd. (N) 26,600 461
Japan Steel Works, Ltd. (The) (N) 448,000 5,252
Japan Tobacco, Inc. 2,460 12,009
JFE Holdings, Inc. (N) 147,700 8,021
JGC Corp. (N) 38,000 583
JS Group Corp. (N) 85,900 1,940
Kagoshima Bank, Ltd. (The) 11,000 81
Kansai Electric Power Co., Inc. (The) 56,700 1,582
Kao Corp. (N) 1,048,500 28,790
Kawasaki Kisen Kaisha, Ltd. (N) 68,000 735
KDDI Corp. 1,470 11,540
Keiyo Bank, Ltd. (The) 27,000 155
Kobe Steel, Ltd. 206,000 727
Komatsu, Ltd. 255,900 6,070
Komori Corp. 9,000 208
Konica Minolta Holdings, Inc. 16,500 226
Kubota Corp. 91,000 858
Kuraray Co., Ltd. 137,700 1,531
Kyocera Corp. (N) 11,300 1,098
Kyushu Electric Power Co., Inc. 109,900 3,092
Lawson, Inc. (N) 44,900 1,655
Leopalace21 Corp. 4,100 135
Lintec Corp. (N) 4,300 90
Makita Corp. (N) 17,100 653
Marubeni Corp. 876,000 5,233
Matsumotokiyoshi Co., Ltd. (N) 71,144 1,671
Matsushita Electric Industrial Co., Ltd. 89,000 1,721
Matsushita Electric Works, Ltd. 67,000 755
Mazda Motor Corp. 157,000 787
Meiji Dairies Corp. (N) 30,000 240
Millea Holdings, Inc. 283,600 10,501
Mitsubishi Chemical Holdings Corp. (N) 131,000 1,054
</Table>
38 International Securities Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mitsubishi Corp. 389,800 8,317
Mitsubishi Electric Corp. 347,000 3,364
Mitsubishi Estate Co., Ltd. 43,000 1,331
Mitsubishi Heavy Industries, Ltd. 532,000 3,275
Mitsubishi UFJ Financial Group, Inc. 756 7,904
Mitsui & Co., Ltd. 293,000 5,224
Mitsui Chemicals, Inc. (N) 487,000 4,008
Mitsui Engineering & Shipbuilding Co., Ltd. 529,000 2,365
Mitsui Fudosan Co., Ltd. 35,000 1,022
Mitsui OSK Lines, Ltd. 502,000 6,320
Mitsui Sumitomo Insurance Co., Ltd. 17,000 211
Mitsui Trust Holdings, Inc. 661,700 5,992
Mitsumi Electric Co., Ltd. (N) 62,800 2,092
Mizuho Financial Group, Inc. 866 5,218
Mochida Pharmaceutical Co., Ltd. (N) 9,000 94
Mori Seiki Co., Ltd. (N) 16,600 437
Nabtesco Corp. (N) 11,000 149
Nichirei Corp. 139,000 829
Nihon Unisys, Ltd. 10,500 133
Nikon Corp. (N) 168,400 3,862
Nintendo Co., Ltd. (N) 46,000 14,311
Nippon Electric Glass Co., Ltd. (N) 228,000 3,908
Nippon Express Co., Ltd. (N) 784,600 4,862
Nippon Mining Holdings, Inc. 245,500 1,973
Nippon Oil Corp. 112,000 860
Nippon Paint Co., Ltd. 50,000 293
Nippon Paper Group, Inc. 659 2,231
Nippon Steel Corp. (N) 213,000 1,362
Nippon Telegraph & Telephone Corp. 1,283 6,385
Nippon Yusen KK (N) 444,000 3,826
Nissan Motor Co., Ltd. (N) 927,200 9,355
Nisshin Seifun Group, Inc. (N) 39,500 426
NOK Corp. (N) 150,100 2,790
Nomura Holdings, Inc. 1,157,100 22,285
Nomura Research Institute, Ltd. 9,500 253
Noritsu Koki Co., Ltd. 2,700 47
NTN Corp. (N) 34,000 283
NTT Data Corp. (N) 44 216
NTT DoCoMo, Inc. 408 696
NTT Urban Development Corp. (N) 900 2,125
Oki Electric Industry Co., Ltd. (AE)(N) 422,000 728
Omron Corp. 149,200 3,995
ORIX Corp. (N) 39,590 10,546
Pacific Metals Co., Ltd. (N) 16,000 250
Rakuten, Inc. (N) 8,232 3,321
Rengo Co., Ltd. (N) 129,000 692
Resona Holdings, Inc. (N) 223 503
Ricoh Co., Ltd. 886,100 19,433
Rohm Co., Ltd. 58,300 5,248
Sankyo Co., Ltd. (N) 9,300 408
Santen Pharmaceutical Co., Ltd. (N) 11,400 312
Sapporo Hokuyo Holdings, Inc. 60 579
Secom Co., Ltd. 8,000 362
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Seiko Epson Corp. (N) 122,200 3,703
Seino Holdings Corp. (N) 23,000 215
Sekisui Chemical Co., Ltd. 400,200 3,107
Sekisui House, Ltd. 279,800 4,136
Seven & I Holdings Co., Ltd. 5,700 164
SFCG Co., Ltd. (N) 6,382 1,122
Sharp Corp. 276,000 5,052
Shiga Bank, Ltd. (The) 16,000 113
Shimano, Inc. 4,800 158
Shin-Etsu Chemical Co., Ltd. 43,800 2,834
Shinsei Bank, Ltd. 1,060,300 4,559
Shizuoka Bank, Ltd. (The) (N) 255,000 2,687
Sohgo Security Services Co., Ltd. 21,800 420
Sompo Japan Insurance, Inc. 55,000 673
Sony Corp. 95,600 5,092
Sumco Corp. (N) 144,200 6,273
Sumitomo Chemical Co., Ltd. 47,000 310
Sumitomo Corp. 17,800 303
Sumitomo Heavy Industries, Ltd. 34,000 351
Sumitomo Metal Industries, Ltd. 158,000 801
Sumitomo Mitsui Financial Group, Inc. (N) 2,522 22,067
Sumitomo Realty & Development Co., Ltd. (N) 174,000 6,415
Sumitomo Trust & Banking Co., Ltd. (The) 104,000 1,015
Suzuken Co., Ltd. (N) 6,600 232
Suzuki Motor Corp. (N) 34,300 977
Taiheiyo Cement Corp. (N) 391,000 1,669
Takeda Pharmaceutical Co., Ltd. 218,100 14,138
Takefuji Corp. (N) 1,750 59
Teijin, Ltd. 378,600 1,954
Terumo Corp. 71,100 2,875
THK Co., Ltd. (N) 70,500 1,723
Tobu Railway Co., Ltd. (N) 39,000 178
Toho Co., Ltd./Tokyo (N) 7,500 147
Toho Titanium Co., Ltd. (N) 22,800 1,086
Tokai Rubber Industries, Inc. (N) 15,500 299
Tokuyama Corp. (N) 197,000 2,962
Tokyo Electric Power Co., Inc. (The) (N) 202,500 6,715
Tokyo Electron, Ltd. (N) 3,900 270
Tokyo Gas Co., Ltd. 584,000 2,925
Tokyo Style Co., Ltd. 16,000 190
Tokyu Corp. 45,000 326
Tokyu Land Corp. (N) 289,000 3,274
Toppan Forms Co., Ltd. 11,800 148
Toppan Printing Co., Ltd. (N) 15,000 152
</Table>
International Securities Fund 39
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Toshiba Corp. (N) 754,000 5,625
Toyo Seikan Kaisha, Ltd. (N) 7,300 145
Toyobo Co., Ltd. 52,000 157
Toyota Auto Body Co., Ltd. 4,800 86
Toyota Motor Corp. (N) 1,019,000 62,081
West Japan Railway Co. 1,032 4,670
Yamada Denki Co., Ltd. (N) 76,660 7,064
Yamato Kogyo Co., Ltd. 9,300 304
------------
640,518
------------
Luxembourg - 0.2%
Evraz Group SA - GDR 64,525 2,274
Millicom International Cellular SA (AE)(N) 58,200 4,729
SES Global SA (N) 68,900 1,347
------------
8,350
------------
Mexico - 0.9%
America Movil SAB de CV
Series L 368,333 19,348
Cemex SAB de CV - ADR (AE) 112,672 3,662
Coca-Cola Femsa SAB de CV - ADR (N) 43,260 1,682
Fomento Economico Mexicano SAB de CV - ADR 38,628 4,160
Grupo Televisa SA - ADR 246,690 6,920
------------
35,772
------------
Netherlands - 3.0%
ABN AMRO Holding NV (N) 177,997 8,680
Aegon NV (N) 156,689 3,218
Arcelor Mittal (N) 101,046 5,396
Arcelor Mittal 35,133 1,868
ASML Holding NV (AE) 248,214 6,698
Corporate Express (AE)(N) 118,800 1,596
CSM (N) 8,762 336
European Aeronautic Defense and Space Co. NV (N) 134,510 4,309
Heineken Holding NV 5,246 243
Hunter Douglas NV 4,822 434
ING Groep NV (N) 802,855 36,446
Koninklijke Ahold NV (AE) 195,558 2,484
Koninklijke BAM Groep NV 94,581 2,502
Koninklijke Philips Electronics NV 108,660 4,453
OCE NV 26,168 493
Reed Elsevier NV (N) 535,972 10,056
Rodamco Europe NV (N) 4,700 693
Royal KPN NV 88,647 1,501
Royal Numico NV (N) 105,944 5,851
SBM Offshore NV (N) 66,105 2,359
Stork NV 6,356 334
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TNT NV (N) 127,440 5,741
Unilever NV 337,950 10,284
Vedior NV (N) 64,160 1,701
------------
117,676
------------
Netherlands Antilles - 0.3%
Schlumberger, Ltd. (N) 139,394 10,291
------------
New Zealand - 0.1%
Telecom Corp. of New Zealand, Ltd. (N) 1,564,539 5,563
------------
Norway - 0.3%
Aker Kvaerner ASA (N) 84,100 1,985
Renewable Energy Corp. AS New (AE) 233,500 6,714
Yara International ASA 81,600 2,377
------------
11,076
------------
Russia - 0.1%
OAO Gazprom - ADR 13,800 541
Vimpel-Communications - ADR (AE)(N) 23,400 2,264
------------
2,805
------------
Singapore - 0.9%
Ascendas Real Estate Investment Trust (AE)(o)(N) 11,000 19
CapitaCommercial Trust (AE)(o) 15,000 28
CapitaLand, Ltd. (N) 1,500,000 8,274
CapitaMall Trust (AE)(o) 16,000 41
City Developments, Ltd. (N) 295,000 3,088
DBS Group Holdings, Ltd. (N) 494,640 6,856
Flextronics International, Ltd. (AE)(N) 130,600 1,456
Fraser and Neave, Ltd. 100,000 352
Jardine Cycle & Carriage, Ltd. (N) 16,000 139
Keppel Corp., Ltd. (AE) 26,000 363
NatSteel, Ltd. 48,000 49
Neptune Orient Lines, Ltd. 76,000 178
Oversea-Chinese Banking Corp. 847,800 4,973
Pacific Century Regional Developments, Ltd. (AE) 386,000 100
SembCorp Industries, Ltd. (N) 69,120 220
Singapore Airlines, Ltd. 42,000 500
Singapore Telecommunications, Ltd. 2,437,310 5,276
STATS ChipPAC, Ltd. (AE) 69,000 83
</Table>
40 International Securities Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Suntec Real Estate Investment Trust (AE)(o) 9,000 12
United Overseas Bank, Ltd. (N) 178,500 2,493
Wing Tai Holdings, Ltd. 73,000 160
------------
34,660
------------
South Africa - 0.2%
MTN Group, Ltd. 182,000 2,655
Nedbank Group, Ltd. 95,266 2,033
Sanlam, Ltd. 335,000 1,127
Standard Bank Group, Ltd. 36,800 575
------------
6,390
------------
South Korea - 0.9%
Honam Petrochemical Corp. 9,400 779
Hynix Semiconductor, Inc. (AE) 63,450 2,172
Hyundai Mobis 13,890 1,111
Industrial Bank of Korea (N) 58,000 1,157
Kookmin Bank 9,300 834
Korea Electric Power Corp. - ADR 73,410 1,518
KT Corp. - ADR 84,310 1,910
LG Electronics, Inc. 94,510 6,313
POSCO 6,440 2,705
Samsung Electronics Co., Ltd. 19,138 11,719
Samsung Heavy Industries Co., Ltd. 77,660 2,542
Shinhan Financial Group Co., Ltd. 31,600 1,779
SK Telecom Co., Ltd. - ADR (N) 84,260 2,092
------------
36,631
------------
Spain - 2.0%
Abengoa SA (N) 17,313 690
Antena 3 de Television SA (AE) 4,791 103
Avanzit SA (AE) 112,522 1,094
Banco Bilbao Vizcaya Argentaria SA (N) 220,702 5,257
Banco Santander Central Hispano SA (N) 886,662 15,806
Endesa SA 25,913 1,419
Gamesa Corp. Tecnologica SA (N) 98,590 3,376
Gestevision Telecinco SA (AE)(N) 52,525 1,581
Grifols SA (AE) 25,879 448
Iberdrola SA (N) 221,264 10,936
Iberdrola SA 7,144 354
Iberia Lineas Aereas de Espana (N) 409,724 2,095
Mapfre SA (N) 339,111 1,760
Repsol YPF SA (N) 265,868 8,725
Repsol YPF SA - ADR 22,626 744
Sol Melia SA 89,200 2,177
Telefonica SA (N) 911,707 20,337
Union Fenosa SA 21,562 1,175
------------
78,077
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sweden - 1.4%
Alfa Laval AB (N) 75,550 4,599
Assa Abloy AB Class B (N) 179,000 4,005
Electrolux AB 176,800 4,589
JM AB (N) 49,200 1,685
JM AB (AE) 53,200 --
Nordea Bank AB (N) 189,000 3,267
Sandvik AB (N) 263,200 5,014
Scania AB Class B (AE)(N) 28,900 2,754
Skandinaviska Enskilda Banken AB Class A (N) 28,400 1,038
SKF AB Class B (AE)(N) 90,200 1,967
Ssab Svenskt Stal AB (N)
Class A 228,800 8,061
Class B 16,500 544
Svenska Cellulosa AB
Series B Class B (N) 73,830 3,798
Swedbank AB (N) 63,900 2,455
Swedish Match AB (AE) 26,200 484
Telefonaktiebolaget LM Ericsson - ADR 63,340 2,418
Telefonaktiebolaget LM Ericsson
Series B Class B (N) 1,340,210 5,109
TeliaSonera AB (N) 96,500 781
Volvo AB (AE)
Class B 154,750 3,005
Class D 30,950 115
------------
55,688
------------
Switzerland - 7.6%
ABB, Ltd. (N) 522,726 10,448
Actelion, Ltd. (AE) 35,468 8,416
Ciba Specialty Chemicals AG 69,981 4,601
Clariant AG (AE) 87,480 1,439
Compagnie Financiere Richemont SA Class A (N) 75,840 4,572
Credit Suisse Group (N) 203,586 15,998
Geberit AG (AE) 1,007 1,785
Givaudan SA (N) 5,310 4,965
Helvetia Holding AG 969 410
Holcim, Ltd. 89,128 9,531
Julius Baer Holding AG (N) 278,198 19,381
Kudelski SA (AE)(N) 12,314 472
Lonza Group AG 81,782 7,958
Nestle SA (N) 143,579 56,883
</Table>
International Securities Fund 41
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Nobel Biocare Holding AG (N) 9,550 3,447
Novartis AG 282,282 16,433
Roche Holding AG 238,436 44,979
Sulzer AG 1,308 1,721
Swatch Group AG (N) 121,215 7,039
Swiss Reinsurance (N) 294,417 27,758
Swisscom AG (N) 3,686 1,298
Syngenta AG (AE) 53,787 10,699
UBS AG 529,063 34,290
Zurich Financial Services AG (N) 10,522 3,046
------------
297,569
------------
Taiwan - 0.4%
AU Optronics Corp. 3,391,000 5,383
China Steel Corp. 820,000 926
HON HAI Precision Industry Co., Ltd. 249,400 1,643
Siliconware Precision Industries Co. 918,000 1,744
Taiwan Semiconductor Manufacturing Co., Ltd. 585,000 1,194
United Microelectronics Corp. 1,801,000 1,037
United Microelectronics Corp. - ADR (N) 636,433 2,088
------------
14,015
------------
Thailand - 0.1%
Bangkok Bank PCL 584,780 1,887
------------
Turkey - 0.0%
Turkcell Iletisim Hizmet AS 1 --
------------
United Kingdom - 17.6%
3i Group PLC 4,428 102
Alliance Boots PLC 345,505 7,716
Amvescap PLC 662,958 7,770
Anglo American PLC 41,619 2,203
ARM Holdings PLC 1,558,062 4,147
AstraZeneca PLC 177,650 9,668
Aviva PLC 852,721 13,379
BAE Systems PLC 1,490,431 13,527
Barclays PLC 1,432,700 20,633
Berkeley Group Holdings PLC (AE) 45,893 1,576
BG Group PLC 1,033,594 14,917
BHP Billiton PLC 454,681 10,140
BP PLC 2,726,316 30,632
British Airways PLC (AE) 167,917 1,689
British American Tobacco PLC 41,750 1,288
British Energy Group PLC (AE) 293,503 3,024
British Land Co. PLC (o) 63,672 1,860
British Sky Broadcasting Group PLC 530,147 6,071
BT Group PLC 1,423,957 8,991
Burberry Group PLC 177,916 2,442
Centrica PLC 666,361 5,134
Charter PLC (AE) 81,048 1,654
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Compass Group PLC 676,901 4,898
Daily Mail & General Trust Class A 44,517 741
Davis Service Group PLC 20,748 262
De La Rue PLC 20,285 287
Debenhams PLC 685,090 1,964
Diageo PLC 666,452 14,055
Drax Group PLC (AE) 1 --
easyJet PLC (AE) 243,940 3,426
Enterprise Inns PLC 61,023 778
Experian Group, Ltd. 164,678 1,862
Fiberweb PLC 41,775 156
Firstgroup PLC 29,494 387
Friends Provident PLC 944,540 3,559
Galiform PLC (AE) 40,329 131
George Wimpey PLC 178,800 2,073
GKN PLC 758,174 5,828
GlaxoSmithKline PLC 1,807,285 52,291
Great Portland Estates PLC (o) 721 10
Hammerson PLC (o) 1,544 47
HBOS PLC 1,373,044 29,471
HMV Group PLC 3,737 8
Home Retail Group 123,682 1,126
HSBC Holdings PLC 1,040,200 19,211
Imperial Chemical Industries PLC 179,867 1,907
Inchcape PLC 109,767 1,237
International Power PLC 916,712 8,009
Invensys PLC (AE) 227,858 1,499
Investec PLC 782 11
ITV PLC 31,298 74
J Sainsbury PLC 257,753 2,935
Kazakhmys PLC 2,078 47
Kelda Group PLC 85,000 1,573
Kesa Electricals PLC 798,217 5,350
Ladbrokes PLC 670,114 5,442
Land Securities Group PLC (o) 19,148 746
Legal & General Group PLC 882,783 2,706
Lloyds TSB Group PLC 1,219,480 14,062
London Stock Exchange Group PLC 2,745 69
Man Group PLC 1,463,812 16,376
Marks & Spencer Group PLC 32,112 474
Marston's PLC 295,200 2,523
Michael Page International PLC 243,393 2,787
Next PLC 130,393 6,076
Northern Rock PLC 253,876 5,432
Old Mutual PLC 1,109,310 3,938
Pearson PLC 152,003 2,599
Premier Farnell PLC 13,121 57
Premier Foods PLC 1,187 7
</Table>
42 International Securities Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Reckitt Benckiser PLC 561,013 30,742
Reed Elsevier PLC 319,004 4,042
Rentokil Initial PLC 1,322,270 4,551
Resolution PLC 3,779 49
Rexam PLC 162,260 1,698
Rio Tinto PLC 182,417 11,121
Rolls-Royce Group PLC (AE) 404,337 3,864
Royal & Sun Alliance Insurance Group PLC 1,233,488 4,082
Royal Bank of Scotland Group PLC 944,596 36,148
Royal Dutch Shell PLC Class A (N) 663,468 23,205
Royal Dutch Shell PLC Class A 372,533 12,981
Royal Dutch Shell PLC Class B 192,180 6,810
SABMiller PLC 182,839 4,321
Schroders PLC 89,900 2,291
Scottish & Newcastle PLC 8,881 109
Scottish & Southern Energy PLC 19,537 584
Smith & Nephew PLC 494,550 6,185
Smiths Group PLC 454,070 9,813
Stagecoach Group PLC 177,154 655
Standard Life PLC (N) 29,221 188
Taylor Woodrow PLC 247,397 2,383
Tesco PLC 5,065,581 46,550
Trinity Mirror PLC 407,606 4,338
Unilever PLC 858,629 26,873
Vodafone Group PLC 7,564,315 21,533
William Hill PLC 715,384 8,511
WPP Group PLC 612,170 9,065
Xstrata PLC 208,243 10,917
------------
690,679
------------
United States - 0.1%
Mettler Toledo International, Inc. (AE) 21,900 2,138
Synthes, Inc. 20,469 2,679
------------
4,817
------------
TOTAL COMMON STOCKS
(cost $2,795,477) 3,580,897
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 0.3%
Brazil - 0.2%
Banco Itau Holding Financeira SA 96,300 3,708
Petroleo Brasileiro SA 44,300 986
Usinas Siderurgicas de Minas Gerais SA 41,200 1,957
------------
6,651
------------
Germany - 0.1%
Henkel KGaA (N) 8,490 1,337
Hugo Boss AG (N) 30,175 1,865
Volkswagen AG (N) 7,811 793
------------
3,995
------------
South Korea - 0.0%
Hyundai Motor Co. 21,000 683
Samsung Electronics Co., Ltd. 1,600 753
------------
1,436
------------
Untied Kingdom - 0.0%
Rolls-Royce Group PLC (AE)(N) 31,761,687 65
------------
TOTAL PREFERRED STOCKS
(cost $10,212) 12,147
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Belgium - 0.0%
Bel 20 Index Futures
May 2007 4,510.30 (EUR)
Call (40) 2,462 319
------------
Hong Kong - 0.0%
Hang Seng Index
May 2007 20,473.83 (HKD)
Call (101) 13,218 323
------------
Switzerland - 0.0%
Swiss Market Index
June 2007 9,467.82 (CHF)
Call (199) 15,600 824
------------
TOTAL OPTIONS PURCHASED
(cost $1,420) 1,466
------------
</Table>
International Securities Fund 43
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
WARRANTS & RIGHTS - 0.2%
Netherlands Antilles - 0.1%
Reliance Communications, Ltd. 2011 Warrants
(AE)(N) 260,167 3,024
------------
United Kingdom - 0.0%
Infosys Technologies, Ltd.
2010 Warrants (AE) 31,600 1,574
2017 Warrants (AE) 3,300 164
------------
1,738
------------
United States - 0.1%
Bharti Airtel, Ltd. 2012 Warrants (AE) 131,300 2,588
------------
TOTAL WARRANTS & RIGHTS
(cost $6,167) 7,350
------------
SHORT-TERM INVESTMENTS - 7.1%
United States - 7.1%
Russell Investment Company
Money Market Fund 265,613,000 265,613
United States Treasury Bills (c)(z)(sec.)
5.046% due 06/14/07 15,000 14,910
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $280,523) 280,523
------------
OTHER SECURITIES - 33.2%
Russell Investment Company
Money Market Fund (X) 250,326,189 250,326
State Street Securities Lending
Quality Trust (X) 1,052,017,785 1,052,018
------------
TOTAL OTHER SECURITIES
(cost $1,302,344) 1,302,344
------------
TOTAL INVESTMENTS - 132.0%
(identified cost $4,396,143) 5,184,727
OTHER ASSETS AND LIABILITIES,
NET - (32.0%) (1,256,567)
------------
NET ASSETS - 100.0% 3,928,160
============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
44 International Securities Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
AEX Index (Netherlands)
expiration date 05/07 (171) 24,751 218
CAC-40 Index (France)
expiration date 05/07 (430) 34,767 592
DAX Index (Germany)
expiration date 06/07 (275) 69,915 6,570
EUR STOXX 50 Index (EMU)
expiration date 06/07 (996) 59,007 5,006
FTSE-100 Index (UK)
expiration date 06/07 (470) 60,790 2,111
Hang Seng Index (Hong Kong)
expiration date 05/07 (44) 5,652 (91)
MSCI Singapore Index
expiration date 05/07 (9) 487 (3)
SPI 200 Index (Australia)
expiration date 06/07 (124) 15,931 523
TOPIX Index (Japan)
expiration date 06/07 (590) 83,930 (8)
Short Positions
CAC-40 Index (France)
expiration date 05/07 (150) 12,128 (346)
FTSE-100 Index (UK)
expiration date 06/07 (244) 31,559 (1,297)
Hang Seng Index (Hong Kong)
expiration date 05/07 (12) 1,541 20
IBEX Plus Index (Spain)
expiration date 05/07 (33) 6,434 97
MIB-30 (Italy)
expiration date 06/07 (71) 20,888 (1,657)
OMX Index (Sweden)
expiration date 05/07 (10) 190 (2)
SPI 200 Index (Australia)
expiration date 06/07 (200) 25,695 (1,167)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 10,566
===============
<Caption>
OPTIONS WRITTEN NOTIONAL MARKET
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Belgium
Bel 20 Index Futures
May 2007 4,510.30 (EUR) Put (40) 2,462 (273)
Hong Kong
Hang Seng Index
May 2007 20,473.83 (HKD) Put (101) 13,218 (323)
Switzerland
Swiss Market Index
June 2007 9,467.82 (CHF) Put (199) 15,600 (824)
---------------
Total Liability for Options Written
(premiums received $1,420) (1,420)
===============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 45
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 292 AUD 353 05/01/07 1
USD 234 AUD 300 06/20/07 15
USD 299 AUD 375 06/20/07 12
USD 324 AUD 420 06/20/07 25
USD 334 AUD 400 06/20/07 (2)
USD 399 AUD 500 06/20/07 16
USD 406 AUD 500 06/20/07 9
USD 788 AUD 1,000 06/20/07 42
USD 794 AUD 1,000 06/20/07 35
USD 1,157 AUD 1,500 06/20/07 87
USD 1,165 AUD 1,466 06/20/07 51
USD 1,582 AUD 2,000 06/20/07 77
USD 2,483 AUD 3,115 06/20/07 100
USD 3,265 AUD 4,099 06/20/07 135
USD 4,008 AUD 5,200 06/20/07 305
USD 4,749 AUD 6,000 06/20/07 227
USD 4,972 AUD 6,080 06/20/07 70
USD 5,562 AUD 6,800 06/20/07 78
USD 6,766 AUD 8,488 06/20/07 274
USD 10,422 AUD 13,088 06/20/07 433
USD 10,967 AUD 13,754 06/20/07 441
USD 14,660 AUD 19,000 06/20/07 1,099
USD 137 CAD 152 05/02/07 1
USD 93 CAD 103 05/03/07 --
USD 151 CHF 182 05/02/07 --
USD 496 CHF 598 05/02/07 --
USD 1,229 CHF 1,484 05/02/07 --
USD 2,610 CHF 3,139 05/02/07 (11)
USD 215 CHF 260 05/03/07 --
USD 1,558 CHF 1,876 06/20/07 2
USD 3,923 CHF 4,720 06/20/07 2
USD 10,650 CHF 12,819 06/20/07 10
USD 15,932 CHF 19,171 06/20/07 11
USD 55,026 CHF 66,250 06/20/07 67
USD 92,349 CHF 111,104 06/20/07 45
USD 161 DKK 881 05/01/07 --
USD 14 DKK 78 06/20/07 --
USD 168 DKK 937 06/20/07 5
USD 693 DKK 3,868 06/20/07 18
USD 1 EUR 1 05/02/07 --
USD 15 EUR 11 05/02/07 --
USD 236 EUR 173 05/02/07 1
USD 661 EUR 485 05/02/07 --
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 838 EUR 616 05/02/07 3
USD 1,969 EUR 1,446 05/02/07 5
USD 5,339 EUR 3,924 05/02/07 16
USD 136 EUR 100 06/20/07 1
USD 1,315 EUR 1,000 06/20/07 53
USD 1,363 EUR 1,000 06/20/07 4
USD 2,051 EUR 1,500 06/20/07 --
USD 2,735 EUR 2,000 06/20/07 --
USD 3,486 EUR 2,612 06/20/07 85
USD 3,945 EUR 3,000 06/20/07 157
USD 4,384 EUR 3,286 06/20/07 109
USD 4,672 EUR 3,500 06/20/07 113
USD 5,315 EUR 4,000 06/20/07 154
USD 6,682 EUR 5,000 06/20/07 154
USD 6,802 EUR 5,000 06/20/07 35
USD 7,406 EUR 5,551 06/20/07 184
USD 10,602 EUR 8,000 06/20/07 337
USD 14,637 EUR 11,000 06/20/07 404
USD 14,914 EUR 11,179 06/20/07 372
USD 17,138 EUR 12,846 06/20/07 427
USD 19,352 EUR 14,443 06/20/07 397
USD 21,413 EUR 16,300 06/20/07 874
USD 27,377 EUR 20,518 06/20/07 678
USD 41,050 EUR 31,000 06/20/07 1,338
USD 54,158 EUR 41,200 06/20/07 2,177
USD 98,170 EUR 74,700 06/20/07 3,971
USD 220 GBP 110 05/01/07 1
USD 1,462 GBP 734 05/01/07 6
USD 140 GBP 70 05/02/07 --
USD 165 GBP 83 05/02/07 --
USD 179 GBP 89 05/03/07 --
USD 1,815 GBP 919 06/20/07 22
USD 1,815 GBP 919 06/20/07 22
USD 1,926 GBP 1,000 06/20/07 73
USD 1,943 GBP 1,000 06/20/07 56
USD 1,976 GBP 1,000 06/20/07 23
USD 2,518 GBP 1,300 06/20/07 81
USD 2,697 GBP 1,400 06/20/07 102
USD 3,628 GBP 1,838 06/20/07 46
USD 3,882 GBP 2,000 06/20/07 116
USD 4,010 GBP 2,000 06/20/07 (12)
USD 4,812 GBP 2,500 06/20/07 185
USD 4,814 GBP 2,500 06/20/07 183
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
46 International Securities Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 5,248 GBP 2,699 06/20/07 147
USD 7,776 GBP 4,000 06/20/07 220
USD 7,862 GBP 4,000 06/20/07 134
USD 12,341 GBP 6,245 06/20/07 144
USD 14,271 GBP 7,339 06/20/07 401
USD 20,246 GBP 10,409 06/20/07 563
USD 21,590 GBP 11,000 06/20/07 400
USD 23,959 GBP 12,128 06/20/07 286
USD 32,904 GBP 16,919 06/20/07 918
USD 36,681 GBP 18,855 06/20/07 1,011
USD 74,508 GBP 38,700 06/20/07 2,857
USD 96 HKD 751 05/02/07 --
USD 7 HKD 54 06/20/07 --
USD 62 HKD 484 06/20/07 --
USD 166 HKD 1,295 06/20/07 --
USD 193 HKD 1,501 06/20/07 (1)
USD 355 HKD 2,766 06/20/07 (1)
USD 1,244 HKD 9,689 06/20/07 (3)
USD 272 JPY 32,547 05/01/07 --
USD 415 JPY 49,267 05/01/07 (3)
USD 578 JPY 69,049 05/01/07 --
USD 825 JPY 98,433 05/02/07 (1)
USD 463 JPY 55,049 05/07/07 (2)
USD 224 JPY 26,023 06/20/07 (4)
USD 951 JPY 110,694 06/20/07 (19)
USD 1,262 JPY 150,000 06/20/07 1
USD 1,303 JPY 150,000 06/20/07 (40)
USD 1,695 JPY 200,000 06/20/07 (10)
USD 1,700 JPY 200,000 06/20/07 (15)
USD 2,582 JPY 300,000 06/20/07 (55)
USD 2,583 JPY 300,000 06/20/07 (55)
USD 2,601 JPY 300,000 06/20/07 (73)
USD 2,609 JPY 300,000 06/20/07 (81)
USD 2,612 JPY 300,000 06/20/07 (84)
USD 3,482 JPY 400,000 06/20/07 (111)
USD 4,212 JPY 500,000 06/20/07 --
USD 7,697 JPY 900,000 06/20/07 (114)
USD 14,411 JPY 1,674,514 06/20/07 (303)
USD 14,777 JPY 1,700,000 06/20/07 (454)
USD 19,357 JPY 2,300,000 06/20/07 21
USD 24,510 JPY 2,851,937 06/20/07 (481)
USD 50,657 JPY 5,886,882 06/20/07 (1,059)
USD 56,490 JPY 6,500,000 06/20/07 (1,726)
USD 662 NOK 3,946 05/03/07 1
USD 856 NOK 5,082 05/04/07 (2)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 112 SEK 752 05/02/07 --
USD 401 SEK 2,686 05/03/07 --
USD 85 SEK 570 05/04/07 --
USD 548 SEK 3,814 06/20/07 23
USD 1,852 SEK 12,854 06/20/07 72
USD 1,884 SEK 12,642 06/20/07 8
USD 2,437 SEK 16,958 06/20/07 101
USD 4,169 SEK 28,019 06/20/07 25
USD 5,283 SEK 36,782 06/20/07 222
USD 5,568 SEK 38,563 06/20/07 203
USD 7,588 SEK 52,490 06/20/07 269
USD 11,802 SEK 82,102 06/20/07 487
USD 12,986 SEK 89,981 06/20/07 482
USD 13,003 SEK 89,981 06/20/07 464
USD 13,325 SEK 89,715 06/20/07 102
USD 22,231 SEK 149,526 06/20/07 147
USD 23,083 SEK 160,767 06/20/07 977
USD 188 SGD 285 06/20/07 --
USD 5,863 SGD 8,895 06/20/07 14
USD 6,241 SGD 9,463 06/20/07 11
USD 10,627 SGD 16,116 06/20/07 21
USD 20,073 SGD 30,450 06/20/07 45
USD 22,207 SGD 33,689 06/20/07 50
AUD 100 USD 82 06/20/07 (1)
AUD 500 USD 412 06/20/07 (3)
AUD 600 USD 499 06/20/07 1
AUD 700 USD 544 06/20/07 (36)
AUD 1,000 USD 771 06/20/07 (58)
AUD 1,400 USD 1,080 06/20/07 (82)
AUD 2,000 USD 1,541 06/20/07 (118)
AUD 2,908 USD 2,426 06/20/07 14
AUD 4,047 USD 3,225 06/20/07 (131)
AUD 4,082 USD 3,404 06/20/07 18
AUD 5,202 USD 4,146 06/20/07 (169)
AUD 5,817 USD 4,855 06/20/07 30
AUD 5,817 USD 4,850 06/20/07 26
AUD 9,116 USD 7,264 06/20/07 (297)
AUD 13,087 USD 10,916 06/20/07 60
AUD 14,000 USD 10,996 06/20/07 (616)
AUD 25,155 USD 20,046 06/20/07 (819)
CAD 25 USD 22 05/01/07 --
CAD 169 USD 150 05/01/07 (2)
CAD 283 USD 255 05/02/07 --
CAD 325 USD 293 05/03/07 --
CHF 1,484 USD 1,234 06/20/07 --
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 47
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
CHF 2,102 USD 1,732 06/20/07 (16)
CHF 12,734 USD 10,583 06/20/07 (6)
CHF 20,033 USD 16,718 06/20/07 58
CHF 31,459 USD 26,247 06/20/07 86
CHF 36,915 USD 30,679 06/20/07 (19)
CHF 64,627 USD 53,688 06/20/07 (56)
DKK 15 USD 3 06/20/07 --
DKK 881 USD 161 06/20/07 (1)
DKK 1,606 USD 288 06/20/07 (7)
DKK 3,045 USD 545 06/20/07 (13)
DKK 3,158 USD 565 06/20/07 (14)
EUR 301 USD 401 03/26/07 (11)
EUR 186 USD 254 05/02/07 --
EUR 323 USD 438 05/02/07 (3)
EUR 986 USD 1,347 05/02/07 2
EUR 341 USD 465 05/03/07 (1)
EUR 655 USD 893 05/03/07 (1)
EUR 967 USD 1,318 05/03/07 (2)
EUR 184 USD 251 05/04/07 --
EUR 1,000 USD 1,316 06/20/07 (52)
EUR 1,000 USD 1,326 06/20/07 (41)
EUR 1,000 USD 1,358 06/20/07 (9)
EUR 1,231 USD 1,642 06/20/07 (41)
EUR 1,500 USD 2,019 06/20/07 (32)
EUR 1,900 USD 2,499 06/20/07 (99)
EUR 2,000 USD 2,646 06/20/07 (89)
EUR 2,000 USD 2,730 06/20/07 (4)
EUR 2,500 USD 3,291 06/20/07 (127)
EUR 3,000 USD 3,944 06/20/07 (158)
EUR 3,000 USD 3,949 06/20/07 (153)
EUR 4,000 USD 5,265 06/20/07 (205)
EUR 4,000 USD 5,265 06/20/07 (204)
EUR 5,158 USD 7,031 06/20/07 (21)
EUR 6,000 USD 7,889 06/20/07 (315)
EUR 6,850 USD 9,139 06/20/07 (227)
EUR 21,000 USD 27,607 06/20/07 (1,108)
EUR 23,616 USD 31,520 06/20/07 (772)
EUR 38,737 USD 51,676 06/20/07 (1,290)
EUR 65,000 USD 86,398 06/20/07 (2,480)
GBP 35 USD 70 05/01/07 (1)
GBP 100 USD 198 05/01/07 (2)
GBP 110 USD 220 05/01/07 --
GBP 158 USD 316 05/01/07 --
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
GBP 154 USD 308 05/02/07 (1)
GBP 155 USD 309 05/02/07 (1)
GBP 687 USD 1,371 05/02/07 (3)
GBP 300 USD 601 06/20/07 2
GBP 400 USD 796 06/20/07 (4)
GBP 800 USD 1,545 06/20/07 (54)
GBP 1,000 USD 1,926 06/20/07 (73)
GBP 1,000 USD 1,931 06/20/07 (68)
GBP 1,300 USD 2,566 06/20/07 (33)
GBP 1,500 USD 2,891 06/20/07 (108)
GBP 1,500 USD 2,891 06/20/07 (108)
GBP 2,000 USD 3,849 06/20/07 (149)
GBP 2,000 USD 3,852 06/20/07 (146)
GBP 3,400 USD 6,549 06/20/07 (248)
GBP 4,300 USD 8,283 06/20/07 (313)
GBP 6,129 USD 11,923 06/20/07 (329)
GBP 9,326 USD 18,134 06/20/07 (510)
GBP 12,626 USD 24,550 06/20/07 (691)
GBP 23,000 USD 45,153 06/20/07 (826)
GBP 30,495 USD 59,311 06/20/07 (1,651)
GBP 31,923 USD 62,067 06/20/07 (1,750)
GBP 16,975 USD 33,916 07/31/07 (5)
HKD 201 USD 26 05/02/07 --
HKD 135 USD 17 05/03/07 --
HKD 868 USD 111 05/03/07 --
HKD 10,073 USD 1,293 06/20/07 3
JPY 166,570 USD 1,404 05/01/07 10
JPY 83,132 USD 695 05/02/07 --
JPY 90,796 USD 762 05/02/07 2
JPY 13,861 USD 116 05/07/07 --
JPY 211,015 USD 1,768 05/07/07 2
JPY 100,000 USD 872 06/20/07 29
JPY 130,531 USD 1,123 06/20/07 23
JPY 150,000 USD 1,262 06/20/07 (1)
JPY 200,000 USD 1,696 06/20/07 11
JPY 200,000 USD 1,721 06/20/07 36
JPY 200,000 USD 1,738 06/20/07 53
JPY 200,000 USD 1,742 06/20/07 57
JPY 200,000 USD 1,742 06/20/07 57
JPY 243,240 USD 2,072 06/20/07 22
JPY 300,000 USD 2,536 06/20/07 9
JPY 350,000 USD 3,000 06/20/07 52
JPY 539,879 USD 4,637 06/20/07 88
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
48 International Securities Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
JPY 600,000 USD 5,215 06/20/07 160
JPY 2,130,603 USD 18,316 06/20/07 365
JPY 2,326,770 USD 20,013 06/20/07 409
JPY 3,059,617 USD 26,282 06/20/07 504
JPY 5,000,000 USD 42,823 06/20/07 696
JPY 10,760,224 USD 91,488 06/20/07 830
SEK 12,642 USD 1,879 05/02/07 (8)
SEK 6,853 USD 985 06/20/07 (40)
SEK 11,705 USD 1,683 06/20/07 (69)
SEK 52,787 USD 7,591 06/20/07 (309)
SEK 78,957 USD 11,355 06/20/07 (461)
SEK 147,929 USD 21,272 06/20/07 (868)
SGD 521 USD 344 05/03/07 1
SGD -- USD -- 05/04/07 --
SGD 2,792 USD 1,852 06/20/07 7
SGD 3,170 USD 2,091 06/20/07 (3)
SGD 4,187 USD 2,777 06/20/07 11
SGD 5,583 USD 3,703 06/20/07 14
SGD 5,583 USD 3,703 06/20/07 14
SGD 8,854 USD 5,835 06/20/07 (14)
SGD 9,937 USD 6,590 06/20/07 25
SGD 10,473 USD 6,907 06/20/07 (12)
SGD 11,263 USD 7,415 06/20/07 (26)
SGD 14,025 USD 9,248 06/20/07 (18)
SGD 23,030 USD 15,187 06/20/07 (29)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 7,709
==============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 49
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 Belgium
Local Net Total Return 1 Month EUR LIBOR
Index Merrill Lynch EUR 5,845 plus 0.15% 06/20/07 92
MSCI Belgium
Local Net Total Return 1 Month EUR LIBOR
Index Merrill Lynch EUR 901 plus 0.15% 06/20/07 15
MSCI Belgium
Local Net Total Return 1 Month EUR LIBOR
Index Merrill Lynch EUR 578 plus 0.15% 09/19/07 9
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swaps 116
================
</Table>
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Auto and Transportation 7.1 277,200
Consumer Discretionary 8.3 325,637
Consumer Staples 7.6 297,514
Financial Services 24.0 943,057
Health Care 6.3 248,370
Integrated Oils 5.0 193,697
Materials and Processing 11.8 462,958
Miscellaneous 0.8 33,132
Other Energy 1.0 33,685
Producer Durables 7.4 287,368
Technology 2.9 105,309
Utilities 9.3 385,117
Options Purchased -- 1,466
Warrants & Rights 0.2 7,350
Short-Term Investments 7.1 280,523
Other Securities 33.2 1,302,344
------------ ------------
Total Investments 132.0 5,184,727
Other Assets and Liabilities, Net (32.0) (1,256,567)
------------ ------------
Net Assets 100.0 3,928,160
============ ============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Africa 0.2 6,390
Asia 8.8 343,346
Europe 43.2 1,696,288
Japan 16.3 640,518
Latin America 2.9 116,526
Middle East 0.1 5,207
Netherlands Antilles 0.3 13,315
Other Regions 9.4 368,311
United Kingdom 17.6 692,482
Other Securities 33.2 1,302,344
------------ ------------
Total Investments 132.0 5,184,727
Other Assets and Liabilities, Net (32.0) (1,256,567)
------------ ------------
Net Assets 100.0 3,928,160
============ ============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
50 International Securities Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL SECURITIES FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Australia 4.3
Austria 0.6
Belgium 0.7
Bermuda 0.7
Brazil 0.7
Canada 2.0
Cayman Island 0.4
China 0.4
Czech Republic 0.1
Denmark 0.7
Egypt 0.1
Finland 1.2
France 12.4
Germany 8.3
Greece 0.4
Hong Kong 1.3
Hungary --*
India 0.2
Indonesia 0.1
Ireland 0.5
Israel 0.1
Italy 3.6
Japan 16.3
Luxembourg 0.2
Mexico 0.9
Netherlands 3.0
Netherlands Antilles 0.3
New Zealand 0.1
Norway 0.3
Russia 0.1
Singapore 0.9
South Africa 0.2
South Korea 0.9
Spain 2.0
Sweden 1.4
Switzerland 7.6
Taiwan 0.4
Thailand 0.1
Turkey --*
United Kingdom 17.6
</Table>
<Table>
- -----------------------------------------------------------------
- -----------------------------------------------------------------
<Caption>
% OF
NET
CATEGORIES ASSETS
United States 0.1
Preferred Stocks 0.3
Options Purchased --*
Warrants & Rights 0.2
Short-Term Investments 7.1
Other Securities 33.2
---------------
Total Investments 132.0
Other Assets and Liabilities, Net (32.0)
---------------
100.0
===============
Futures Contracts 0.2
Foreign Currency Exchange Contracts 0.2
Options Written --*
Index Swaps --*
</Table>
* Less than .05% of net assets.
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
International Securities Fund 51
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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 March 1, 2007 to April 30, 2007.
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
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,047.00 $ 1,005.85
Expenses Paid During
Period* $ 2.57 $ 2.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.50%
(representing the two month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES
- ------- -------------- ---------------
Beginning Account Value
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,046.00 $ 1,004.60
Expenses Paid During
Period* $ 3.85 $ 3.77
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.28%
(representing the two month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
>PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,047.00 $ 1,005.85
Expenses Paid During
Period* $ 2.57 $ 2.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.51%
(representing the two month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,048.00 $ 1,006.27
Expenses Paid During
Period* $ 2.14 $ 2.10
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.25%
(representing the two month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
52 Global Equity Fund
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 91.3%
Australia - 0.3%
Centennial Coal Co., Ltd. (N) 208,892 502
Commonwealth Bank of Australia 12,544 547
Kagara Zinc, Ltd. 272,119 1,392
------------
2,441
------------
Austria - 0.6%
Erste Bank der Oesterreichischen Sparkassen AG 64,600 5,181
------------
Belgium - 0.8%
Fortis 11,500 515
Mobistar SA (AE) 35,600 3,075
UCB SA (N) 60,200 3,579
------------
7,169
------------
Bermuda - 3.1%
Axis Capital Holdings, Ltd. 115,200 4,274
Everest Re Group, Ltd. 29,922 3,011
GOME Electrical Appliances Holdings, Ltd. 1,404,000 2,165
Guoco Group, Ltd. 41,555 600
Marvell Technology Group, Ltd. (AE)(N) 228,300 3,682
Pacific Basin Shipping, Ltd. 1,984,529 1,981
RenaissanceRe Holdings, Ltd. (N) 29,300 1,587
Tyco International, Ltd. (N) 333,039 10,867
------------
28,167
------------
Brazil - 2.1%
Banco Itau Holding Financeira SA - ADR 93,800 3,619
Cia Vale do Rio Doce - ADR 252,700 8,640
Petroleo Brasileiro SA - ADR 32,200 2,873
Submarino SA 101,600 3,627
------------
18,759
------------
Canada - 2.4%
AUR Resources, Inc. 62,800 1,380
Breakwater Resources, Ltd. (AE) 509,400 964
Canadian Imperial Bank of Commerce/Canada 37,700 3,319
Cott Corp. (AE) 27,600 446
Finning International, Inc. 11,900 590
First Quantum Minerals, Ltd. 9,400 649
Power Corp. of Canada 103,400 3,517
Quebecor World, Inc. (AE) 57,200 775
Rogers Communications, Inc. Class B 37,600 1,441
Sherritt International Corp. 39,800 531
Sun Life Financial, Inc. 109,700 5,199
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Teck Cominco, Ltd. Class B 11,500 871
Yellow Pages Income Fund 150,800 1,910
------------
21,592
------------
Cayman Islands - 1.7%
ACE, Ltd. 94,100 5,595
Foxconn International Holdings, Ltd. (AE) 178,000 532
GlobalSantaFe Corp. (N) 46,100 2,947
Hutchison Telecommunications International, Ltd.
(AE) 38,000 78
Noble Corp. (N) 28,400 2,392
Tencent Holdings, Ltd. 931,000 3,180
XL Capital, Ltd. Class A (N) 8,400 655
------------
15,379
------------
China - 0.2%
China Shenhua Energy Co., Ltd. 864,500 2,144
------------
Denmark - 0.4%
Bavarian Nordic A/S (AE) 7,500 756
Danske Bank A/S 66,400 3,098
------------
3,854
------------
Egypt - 0.7%
Egyptian Co. for Mobile Services 63,791 1,784
Orascom Telecom Holding SAE 318,000 4,377
------------
6,161
------------
Finland - 0.4%
Nokia OYJ 160,400 4,055
------------
France - 5.4%
Accor SA 30,400 2,856
Alcatel-Lucent - ADR 249,650 3,308
AXA SA (N) 69,200 3,163
BNP Paribas (N) 7,326 848
Carrefour SA (N) 22,988 1,762
Credit Agricole SA 17,000 713
IMS-International Metal Service 9,487 392
Metaleurop SA (AE) 28,200 527
Pernod-Ricard SA (N) 13,850 2,942
Sanofi-Aventis (N) 28,501 2,617
Schneider Electric SA (N) 51,600 7,269
Societe Generale (N) 32,700 6,921
SOITEC (AE) 126,700 2,964
</Table>
Global Equity Fund 53
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Total SA (N) 112,242 8,287
Vivendi Universal SA (N) 116,954 4,821
------------
49,390
------------
Germany - 2.5%
Allianz SE 49,536 11,237
Deutsche Beteiligungs AG 17,769 631
Deutsche Telekom AG (N) 132,171 2,409
Metro AG 63,072 4,873
Salzgitter AG 7,323 1,213
Siemens AG 18,786 2,269
------------
22,632
------------
Greece - 0.7%
Aluminium of Greece S.A.I.C. 24,022 487
National Bank of Greece SA 107,900 6,018
------------
6,505
------------
Hong Kong - 0.3%
Cheung Kong Holdings, Ltd. 115,157 1,489
Hang Lung Group, Ltd. 367,069 1,409
------------
2,898
------------
Ireland - 0.6%
Anglo Irish Bank Corp. PLC 200,000 4,498
C&C Group PLC 34,524 577
------------
5,075
------------
Italy - 2.9%
Alleanza Assicurazioni SpA (N) 219,613 3,082
Banco Popolare di Verona e Novara SCRL (N) 94,000 3,134
EEMS Italia SpA New (AE) 68,323 581
Enel SpA 271,773 3,093
ENI SpA 103,209 3,425
Indesit Co. SpA 54,360 1,268
Intesa Sanpaolo SpA 403,900 3,251
Mediaset SpA 400,200 4,522
Telecom Italia SpA (N) 1,518,799 3,712
------------
26,068
------------
Japan - 8.7%
A&D Co., Ltd. (N) 25,000 475
Bosch Corp. 94,000 452
Daiwa House Industry Co., Ltd. 101,000 1,585
Daiwa Securities Group, Inc. 173,800 1,933
Eizo Nanao Corp. 16,800 574
FCC Co., Ltd. 24,100 484
Fuji Television Network, Inc. 1,517 3,555
FUJIFILM Holdings Corp. 24,100 988
Itochu Corp. 449,000 4,414
JFE Holdings, Inc. 27,100 1,472
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Joyo Bank, Ltd. (The) 326,000 1,999
Jupiter Telecommunications Co. (AE) 2,500 2,074
Marubeni Corp. 84,000 502
MID Reit, Inc. Class A New (o) 323 1,793
Mitsubishi Estate Co., Ltd. 197,000 6,099
Mitsui & Co., Ltd. 282,000 5,028
New City Residence Investment Corp. Class A (o) 267 1,510
Nintendo Co., Ltd. 6,300 1,960
Nippon Commercial Investment Corp. New (o) 337 1,701
Nippon Electric Glass Co., Ltd. 78,500 1,345
Nippon Residential Investment Corp. Class A (o) 271 1,730
Nipponkoa Insurance Co., Ltd. 502,000 4,187
Nipro Corp. 52,000 1,001
Nissin Kogyo Co., Ltd. 20,900 555
Ricoh Co., Ltd. 21,000 461
Sawai Pharmaceutical Co., Ltd. (N) 13,600 562
Seven & I Holdings Co., Ltd. 168,800 4,864
Sumitomo Corp. 180,300 3,066
Sumitomo Forestry Co., Ltd. 154,000 1,591
Sumitomo Metal Industries, Ltd. 262,000 1,328
Sumitomo Trust & Banking Co., Ltd. (The) 466,000 4,550
Taiyo Yuden Co., Ltd. (N) 73,000 1,603
Takata Corp. New (N) 23,100 844
Take And Give Needs Co., Ltd. 1,935 1,313
Toho Pharmaceutical Co., Ltd. 28,200 473
Tokyo Electric Power Co., Inc. (The) 67,000 2,222
Toyota Motor Corp. 96,300 5,867
West Japan Railway Co. 600 2,715
Yamaha Motor Co., Ltd. 14,700 388
------------
79,263
------------
Mexico - 1.9%
America Movil SAB de CV
Series L 230,600 12,113
Grupo Financiero Banorte SAB de CV Class O 1,123,000 4,877
------------
16,990
------------
Netherlands - 2.0%
Corporate Express (AE) 251,890 3,385
Heineken NV 69,321 3,702
ING Groep NV (N) 122,544 5,563
Koninklijke Philips Electronics NV 68,682 2,809
</Table>
54 Global Equity Fund
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Royal KPN NV 119,233 2,020
USG People NV 14,674 666
------------
18,145
------------
Netherlands Antilles - 0.6%
Schlumberger, Ltd. (N) 71,900 5,308
------------
Norway - 0.8%
Statoil ASA (N) 110,700 3,109
Telenor ASA (N) 233,400 4,370
------------
7,479
------------
Oman - 0.1%
Bank Muscat SAOG - GDR 110,125 1,364
------------
Singapore - 0.2%
DBS Group Holdings, Ltd. 96,000 1,331
MMI Holdings, Ltd. 608,000 639
------------
1,970
------------
South Korea - 0.5%
Kookmin Bank - ADR 37,867 3,401
Samsung Electronics Co., Ltd. 1,887 1,156
------------
4,557
------------
Spain - 1.4%
Telefonica SA 564,173 12,584
------------
Sweden - 1.4%
JM AB 38,000 651
Modern Times Group AB Class B 74,600 4,357
Nordea Bank AB 172,521 2,982
Peab AB 21,000 667
Telefonaktiebolaget LM Ericsson
Series B Class B (N) 1,160,205 4,423
------------
13,080
------------
Switzerland - 5.5%
Clariant AG 167,601 2,758
Credit Suisse Group 23,029 1,810
EMS-Chemie Holding AG (AE) 4,191 558
Galenica AG 1,669 584
Nestle SA (N) 16,471 6,525
Novartis AG 119,546 6,959
Roche Holding AG 19,400 3,660
Swiss Life Holding (AE) 16,600 4,270
Swiss Reinsurance 58,819 5,546
Swisscom AG (N) 11,509 4,052
Temenos Group AG (AE) 26,000 599
UBS AG 120,600 7,816
Zurich Financial Services AG 15,909 4,606
------------
49,743
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Taiwan - 0.3%
United Microelectronics Corp. - ADR (N) 702,653 2,305
------------
Thailand - 0.2%
Bangkok Bank PCL 476,300 1,537
------------
United Kingdom - 8.0%
Amdocs, Ltd. (AE) 82,200 3,021
AstraZeneca PLC 16,738 911
BP PLC - ADR 56,116 3,778
British Energy Group PLC (AE) 78,315 807
Cadbury Schweppes PLC 431,242 5,689
Diageo PLC 292,805 6,175
GlaxoSmithKline PLC 216,276 6,258
HBOS PLC 198,806 4,267
Kingfisher PLC 1,143,962 6,182
Marston's PLC 67,012 573
Royal Bank of Scotland Group PLC 242,317 9,273
Scottish & Southern Energy PLC 79,962 2,389
UTI Worldwide, Inc. 108,100 2,537
Venture Production PLC (AE) 113,031 1,547
Vodafone Group PLC 564,776 1,608
Vodafone Group PLC - ADR (N) 197,743 5,681
WM Morrison Supermarkets PLC 515,060 3,143
WPP Group PLC 412,648 6,110
Xstrata PLC 42,887 2,248
------------
72,197
------------
United States - 34.6%
Advance Auto Parts, Inc. 77,700 3,201
Aetna, Inc. 139,700 6,549
Alliance One International, Inc. (AE) 78,400 769
Alon USA Energy, Inc. 26,700 999
Altria Group, Inc. 29,981 2,066
AMBAC Financial Group, Inc. 68,110 6,253
American Exploration Co. (AE)(N) 119,369 2,507
American International Group, Inc. 13,000 909
American Tower Corp. Class A (AE) 323,800 12,304
Anheuser-Busch Cos., Inc. 45,000 2,214
Anixter International, Inc. (AE) 13,600 974
Apache Corp. 58,994 4,277
AT&T, Inc. 192,600 7,458
Bank of America Corp. 106,900 5,441
Bear Stearns Cos., Inc. (The) 14,600 2,273
BMC Software, Inc. (AE) 16,800 544
Boston Scientific Corp. (AE) 196,542 3,035
</Table>
Global Equity Fund 55
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Cameron International Corp. (AE) 68,700 4,436
Caterpillar, Inc. (N) 46,300 3,362
Celgene Corp. (AE)(N) 24,100 1,474
Cisco Systems, Inc. (AE)(N) 157,533 4,212
Citigroup, Inc. 8,400 450
Cognizant Technology Solutions Corp. Class A
(AE)(N) 10,500 939
ConAgra Foods, Inc. 22,000 541
ConocoPhillips 8,600 596
Constellation Energy Group, Inc. 8,400 749
Cooper Cos., Inc. (The) 32,500 1,661
Costco Wholesale Corp. (N) 34,690 1,858
Danaher Corp. 42,700 3,040
Deere & Co. 7,300 799
DR Horton, Inc. (N) 290,200 6,437
EI Du Pont de Nemours & Co. 30,942 1,521
Electronic Arts, Inc. (AE)(N) 62,900 3,171
ENSCO International, Inc. 20,900 1,178
Genentech, Inc. (AE) 78,800 6,303
General Electric Co. 93,186 3,435
General Motors Corp. (N) 59,800 1,868
Gilead Sciences, Inc. (AE)(N) 40,800 3,334
Goldman Sachs Group, Inc. (The) (N) 57,000 12,461
Google, Inc. Class A (AE)(N) 16,100 7,589
Grant Prideco, Inc. (AE) 85,000 4,381
Health Net, Inc. (AE) 57,600 3,114
Healthspring, Inc. New (AE) 62,700 1,475
Hewlett-Packard Co. 130,700 5,508
Hovnanian Enterprises, Inc. Class A (AE)(N) 121,700 2,920
Humana, Inc. (AE) 20,900 1,322
ImClone Systems, Inc. (AE)(N) 153,630 6,436
InterActiveCorp (AE)(N) 75,291 2,870
International Business Machines Corp. 63,800 6,521
International Paper Co. (N) 58,986 2,225
Jarden Corp. (AE) 24,500 1,032
Johnson & Johnson 10,500 674
Johnson Controls, Inc. (N) 28,200 2,886
JPMorgan Chase & Co. (N) 185,027 9,640
Juniper Networks, Inc. (AE)(N) 280,000 6,261
Kohl's Corp. (AE)(N) 8,400 622
Kraft Foods, Inc. Class A 20,747 694
Lam Research Corp. (AE) 10,400 559
Lehman Brothers Holdings, Inc. 25,600 1,927
LHC Group, Inc. (AE)(N) 81,300 2,081
Liberty Media Holding Corp.
Series A (AE)(N) 48,918 5,526
Lincare Holdings, Inc. (AE) 48,100 1,897
Lockheed Martin Corp. 46,100 4,432
Massey Energy Co. (N) 49,620 1,336
MEMC Electronic Materials, Inc. (AE) 8,300 456
Merck & Co., Inc. 19,000 977
Merrill Lynch & Co., Inc. 10,500 947
Microsoft Corp. 187,832 5,624
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Molson Coors Brewing Co. Class B (N) 63,441 5,981
Morgan Stanley 52,300 4,394
Noble Energy, Inc. 28,041 1,649
Nordstrom, Inc. (N) 13,600 747
OfficeMax, Inc. (N) 67,524 3,324
Omnicare, Inc. (N) 69,500 2,305
Oracle Corp. (AE) 324,686 6,104
Pfizer, Inc. 14,600 386
Principal Financial Group, Inc. 86,800 5,511
Procter & Gamble Co. 6,200 399
Protective Life Corp. (N) 67,782 3,179
Prudential Financial, Inc. (N) 33,400 3,173
Red Hat, Inc. (AE)(N) 74,000 1,564
Safety Insurance Group, Inc. (N) 10,500 421
Schering-Plough Corp. (N) 149,400 4,740
Smith International, Inc. (N) 117,400 6,156
Southwest Airlines Co. (N) 195,300 2,803
Sprint Nextel Corp. 377,313 7,558
Stillwater Mining Co. (AE)(N) 186,669 2,875
SYNNEX Corp. (AE)(N) 37,400 731
Target Corp. 8,400 499
Tempur-Pedic International, Inc. (N) 54,670 1,420
Thermo Fisher Scientific, Inc. (AE) 10,400 541
Tidewater, Inc. (N) 9,300 588
Torchmark Corp. 60,576 4,137
Travelers Cos., Inc. (The) 7,300 395
UnitedHealth Group, Inc. (N) 93,200 4,945
US BioEnergy Corp. New (AE) 34,000 500
Valero Energy Corp. 8,400 590
Vertex Pharmaceuticals, Inc. (AE)(N) 54,600 1,678
WellPoint, Inc. (AE) 36,600 2,890
WR Berkley Corp. 26,200 851
Wyeth 103,021 5,718
Wyndham Worldwide Corp. (AE)(N) 65,059 2,251
Wynn Resorts, Ltd. (N) 29,600 3,025
XM Satellite Radio Holdings, Inc. Class A (AE) 255,900 2,994
------------
314,552
------------
TOTAL COMMON STOCKS
(cost $791,038) 828,544
------------
</Table>
56 Global Equity Fund
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 0.3%
Germany - 0.3%
Henkel KGaA (N) 18,314 2,884
------------
TOTAL PREFERRED STOCKS
(cost $2,564) 2,884
------------
SHORT-TERM INVESTMENTS - 7.2%
United States - 7.2%
Russell Investment Company
Money Market Fund 58,609,000 58,609
United States Treasury Bills (c)(z)(sec.)
5.050% due 06/14/07 7,000 6,958
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $65,567) 65,567
------------
OTHER SECURITIES - 22.1%
Russell Investment Company
Money Market Fund (X) 38,496,901 38,497
State Street Securities
Lending Quality Trust (X) 161,786,607 161,787
------------
TOTAL OTHER SECURITIES
(cost $200,284) 200,284
------------
TOTAL INVESTMENTS - 120.9%
(identified cost $1,059,453) 1,097,279
OTHER ASSETS AND LIABILITIES,
NET - (20.9%) (189,423)
------------
NET ASSETS - 100.0% 907,856
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
EUR STOXX 50 Index (EMU)
expiration date 06/07 (260) 15,403 766
FTSE 100 Index (United Kingdom)
expiration date 06/07 (60) 7,760 203
Hang Seng Index (Hong Kong)
expiration date 05/07 (5) 642 (10)
S&P 500 E-Mini
expiration date 06/07 (230) 17,117 741
S&P 500 Index
expiration date 06/07 (47) 17,489 323
TSE 60 Index (Canada)
expiration date 06/07 (19) 2,639 26
SPI 200 Index (Australia)
expiration date 06/07 (16) 2,056 47
TOPIX Index (Japan)
expiration date 06/07 (50) 7,113 (72)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 2,024
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Global Equity Fund 57
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 80 AUD 100 06/20/07 3
USD 80 AUD 100 06/20/07 3
USD 81 AUD 100 06/20/07 3
USD 165 AUD 200 06/20/07 2
USD 209 AUD 250 06/20/07 (1)
USD 402 AUD 500 06/20/07 14
USD 416 AUD 500 06/20/07 --
USD 772 AUD 1,000 06/20/07 60
USD 775 AUD 1,000 06/20/07 57
USD 1,235 AUD 1,600 06/20/07 95
USD 1,544 AUD 2,000 06/20/07 119
USD 3,927 AUD 5,000 06/20/07 230
USD 87 CAD 100 06/20/07 4
USD 89 CAD 100 06/20/07 2
USD 130 CAD 150 06/20/07 6
USD 173 CAD 200 06/20/07 8
USD 176 CAD 200 06/20/07 5
USD 265 CAD 300 06/20/07 7
USD 266 CAD 300 06/20/07 5
USD 266 CAD 300 06/20/07 5
USD 432 CAD 500 06/20/07 21
USD 852 CAD 1,000 06/20/07 53
USD 1,277 CAD 1,500 06/20/07 80
USD 1,703 CAD 2,000 06/20/07 107
USD 1,703 CAD 2,000 06/20/07 107
USD 5,148 CAD 6,000 06/20/07 281
USD 842 EUR 618 05/02/07 2
USD 401 EUR 300 06/20/07 9
USD 544 EUR 400 06/20/07 4
USD 668 EUR 500 06/20/07 16
USD 668 EUR 500 06/20/07 16
USD 672 EUR 500 06/20/07 13
USD 679 EUR 500 06/20/07 5
USD 680 EUR 500 06/20/07 5
USD 680 EUR 500 06/20/07 4
USD 684 EUR 500 06/20/07 --
USD 1,077 EUR 800 06/20/07 18
USD 1,641 EUR 1,200 06/20/07 2
USD 3,600 EUR 2,700 06/20/07 96
USD 5,265 EUR 4,000 06/20/07 210
USD 5,280 EUR 4,000 06/20/07 195
USD 10,531 EUR 8,000 06/20/07 419
USD 11,848 EUR 9,000 06/20/07 471
USD 33,230 EUR 25,000 06/20/07 988
USD 196 GBP 100 06/20/07 4
USD 295 GBP 150 06/20/07 5
USD 395 GBP 200 06/20/07 5
USD 401 GBP 200 06/20/07 (1)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 491 GBP 250 06/20/07 9
USD 600 GBP 300 06/20/07 --
USD 600 GBP 300 06/20/07 --
USD 776 GBP 400 06/20/07 23
USD 792 GBP 400 06/20/07 8
USD 802 GBP 400 06/20/07 (3)
USD 1,569 GBP 800 06/20/07 31
USD 1,926 GBP 1,000 06/20/07 73
USD 3,859 GBP 2,000 06/20/07 140
USD 5,782 GBP 3,000 06/20/07 216
USD 5,782 GBP 3,000 06/20/07 216
USD 16,687 GBP 8,500 06/20/07 308
USD 434 HKD 3,396 05/02/07 --
USD 387 JPY 46,197 05/02/07 --
USD 171 JPY 20,000 06/20/07 (3)
USD 345 JPY 40,000 06/20/07 (8)
USD 421 JPY 50,000 06/20/07 1
USD 423 JPY 50,000 06/20/07 (1)
USD 430 JPY 50,000 06/20/07 (9)
USD 432 JPY 50,000 06/20/07 (10)
USD 847 JPY 100,000 06/20/07 (4)
USD 849 JPY 100,000 06/20/07 (6)
USD 868 JPY 100,000 06/20/07 (26)
USD 1,095 JPY 130,000 06/20/07 1
USD 1,713 JPY 200,000 06/20/07 (27)
USD 2,608 JPY 300,000 06/20/07 (80)
USD 2,615 JPY 300,000 06/20/07 (87)
USD 5,226 JPY 600,000 06/20/07 (169)
USD 6,968 JPY 800,000 06/20/07 (225)
USD 17,986 JPY 2,100,000 06/20/07 (286)
AUD 693 USD 572 05/01/07 (4)
AUD 50 USD 40 06/20/07 (2)
AUD 300 USD 249 06/20/07 --
AUD 500 USD 403 06/20/07 (12)
AUD 1,000 USD 805 06/20/07 (27)
AUD 2,300 USD 1,800 06/20/07 (113)
AUD 5,800 USD 4,527 06/20/07 (295)
CAD 21 USD 19 05/01/07 --
CAD 500 USD 434 06/20/07 (18)
CAD 600 USD 529 06/20/07 (14)
CAD 1,200 USD 1,038 06/20/07 (48)
CAD 3,000 USD 2,566 06/20/07 (148)
CAD 6,600 USD 5,638 06/20/07 (334)
CHF 127 USD 105 05/02/07 --
EUR 34 USD 47 05/02/07 --
EUR 212 USD 289 05/02/07 (1)
EUR 279 USD 380 05/02/07 (1)
EUR 100 USD 133 06/20/07 (3)
</Table>
See accompanying notes which are an integral part of the financial statements.
58 Global Equity Fund
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 200 USD 268 06/20/07 (6)
EUR 1,200 USD 1,628 06/20/07 (15)
EUR 2,000 USD 2,672 06/20/07 (66)
EUR 5,000 USD 6,688 06/20/07 (156)
EUR 13,000 USD 17,191 06/20/07 (603)
EUR 25,200 USD 33,366 06/20/07 (1,127)
GBP 517 USD 1,034 05/01/07 1
GBP 200 USD 389 06/20/07 (11)
GBP 700 USD 1,370 06/20/07 (29)
GBP 700 USD 1,390 06/20/07 (10)
GBP 1,700 USD 3,334 06/20/07 (65)
GBP 4,200 USD 8,213 06/20/07 (185)
GBP 9,400 USD 18,130 06/20/07 (665)
JPY 64,006 USD 539 05/01/07 3
JPY 69,428 USD 584 05/01/07 3
JPY 151,839 USD 1,278 05/01/07 7
JPY 150,000 USD 1,281 06/20/07 17
JPY 200,000 USD 1,692 06/20/07 7
JPY 400,000 USD 3,425 06/20/07 54
JPY 1,100,000 USD 9,486 06/20/07 215
JPY 2,200,000 USD 19,135 06/20/07 592
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 785
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Global Equity Fund 59
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 2.3 21,082
Consumer Discretionary 11.6 105,228
Consumer Staples 5.7 51,955
Financial Services 24.9 226,212
Health Care 10.2 92,646
Integrated Oils 2.4 22,068
Materials and Processing 4.6 42,179
Miscellaneous 2.0 17,719
Other Energy 4.5 39,842
Producer Durables 6.9 62,611
Technology 7.0 63,732
Utilities 9.5 86,154
Short-Term Investments 7.2 65,567
Other Securities 22.1 200,284
--------------- ---------------
Total Investments 120.9 1,097,279
Other Assets and Liabilities, Net (20.9) (189,423)
--------------- ---------------
Net Assets 100.0 907,856
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Asia 2.0 17,852
Europe 25.8 233,844
Japan 8.7 79,263
Latin America 8.7 79,295
Middle East 0.8 7,525
Netherlands Antilles 0.6 5,308
Other Regions 44.2 401,711
United Kingdom 8.0 72,197
Other Securities 22.1 200,284
--------------- ---------------
Total Investments 120.9 1,097,279
Other Assets and Liabilities, Net (20.9) (189,423)
--------------- ---------------
Net Assets 100.0 907,856
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
60 Global Equity Fund
RUSSELL INVESTMENT COMPANY
GLOBAL EQUITY FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Australia 0.3
Austria 0.6
Belgium 0.8
Bermuda 3.1
Brazil 2.1
Canada 2.4
Cayman Islands 1.7
China 0.2
Denmark 0.4
Egypt 0.7
Finland 0.4
France 5.4
Germany 2.5
Greece 0.7
Hong Kong 0.3
Ireland 0.6
Italy 2.9
Japan 8.7
Mexico 1.9
Netherlands 2.0
Netherlands Antilles 0.6
Norway 0.8
Oman 0.1
Singapore 0.2
South Korea 0.5
Spain 1.4
Sweden 1.4
Switzerland 5.5
Taiwan 0.3
Thailand 0.2
United Kingdom 8.0
United States 34.6
Preferred Stocks 0.3
Short-Term Investments 7.2
Other Securities 22.1
---------------
Total Investments 120.9
Other Assets and Liabilities Net (20.9)
---------------
100.0
===============
Futures Contracts 0.1
Foreign Currency Exchange Contracts 0.2
</Table>
See accompanying notes which are an integral part of the financial statements.
Global Equity Fund 61
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,005.20 $ 1,006.58
Expenses Paid During
Period* $ 1.78 $ 1.78
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.06%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,019.70 $ 1,015.87
Expenses Paid During
Period* $ 9.01 $ 9.00
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.80%
(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 E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,023.50 $ 1,019.54
Expenses Paid During
Period* $ 5.32 $ 5.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.06%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,024.70 $ 1,020.78
Expenses Paid During
Period* $ 4.07 $ 4.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.81%
(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).
62 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 82.8%
Asset-Backed Securities - 6.2%
Accredited Mortgage Loan Trust
Series 2004-2 Class A2
5.620% due 07/25/34 283 283
ACE Securities Corp.
Series 2003-OP1 Class M2 (E)
6.820% due 12/25/33 605 608
Series 2004-IN1 Class A1
5.640% due 05/25/34 424 425
Series 2005-SD3 Class A
5.720% due 08/25/45 2,742 2,741
Series 2006-ASP Class A2A (E)
5.400% due 10/25/36 620 620
Series 2006-HE2 Class A2A
5.380% due 05/25/36 1,106 1,106
Aegis Asset Backed Securities Trust
Series 2003-3 Class M2
6.970% due 01/25/34 1,255 1,262
American Airlines, Inc.
6.817% due 11/23/12 530 539
6.977% due 05/23/21 208 207
American Express Credit Account Master Trust
Series 2002-3 Class A
5.430% due 12/15/09 5,500 5,500
Series 2004-C Class C (p)
5.820% due 02/15/12 3,171 3,178
Series 2007-3 Class A
5.320% due 10/15/12 3,550 3,550
Ameriquest Mortgage Securities, Inc.
Series 2002-D Class M1 (E)
7.557% due 02/25/33 655 656
Series 2004-R8 Class A5
5.690% due 09/25/34 906 907
Series 2004-R10 Class A5
5.710% due 11/25/34 154 154
Series 2006-R1 Class A2C
5.510% due 08/01/16 820 820
Argent Securities, Inc.
Series 2005-W5 Class A2A (E)
5.400% due 01/25/36 567 567
Series 2006-M2 Class A2A
5.370% due 09/25/36 392 392
Bank One Issuance Trust
Series 2003-A3 Class A3
5.430% due 12/15/10 3,800 3,804
Series 2004-A4 Class A4 (E)
5.360% due 02/16/10 3,500 3,500
Bayview Financial Acquisition Trust
Series 2004-C Class A1
5.740% due 05/28/44 721 722
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-A Class 1A3
5.865% due 02/28/41 1,540 1,542
Bear Stearns Asset Backed Securities Trust
Series 2004-BO1 Class 1A1 (E)
5.520% due 09/25/34 326 326
Series 2005-AQ1 Class 2A1
5.540% due 03/25/35 559 559
Series 2005-HE8 Class A1 (E)
5.440% due 08/25/35 178 178
Bear Stearns Structured Products, Inc. (p)
Series 2007-N2 Class 12C
6.500% due 02/27/37 28,100 1,216
Series 2007-N2 Class 13C
6.500% due 07/27/36 33,800 1,339
Series 2007-N2 Class 14C
6.500% due 08/27/36 46,600 1,758
Burlington Northern Santa Fe Corp. Pass-Through
Certificate
4.967% due 04/01/23 245 236
Capital Auto Receivables Asset Trust (E)
Series 2006-2 Class A3B
5.380% due 05/15/11 3,375 3,375
Series 2007-1 Class A3B
5.330% due 11/15/11 4,200 4,203
Carrington Mortgage Loan Trust (E)
Series 2005-NC4 Class A1
5.470% due 09/25/35 268 268
Cendant Timeshare Receivables Funding LLC
Series 2004-1A Class A1
3.670% due 05/20/16 126 123
Centex Home Equity
Series 2002-D Class AF4
4.710% due 11/25/28 152 151
Series 2005-D Class AF1
1.000% due 10/25/35 27 27
Series 2005-D Class AF4
5.270% due 10/25/35 1,000 994
Chase Credit Card Master Trust
Series 2003-6 Class A
5.430% due 02/15/11 1,300 1,302
Chase Issuance Trust
Series 2006-A3 Class A3
5.310% due 07/15/11 1,100 1,100
</Table>
Multistrategy Bond Fund 63
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust
Series 2000-A3 Class A3
6.875% due 11/16/09 900 908
Series 2001-A1 Class A1
5.530% due 02/07/10 4,025 4,031
Series 2007-A1 Class A1 (E)
5.340% due 03/22/12 4,350 4,349
Citifinancial Mortgage Securities, Inc.
Series 2003-4 Class AF3
3.221% due 10/25/33 13 13
Citigroup Mortgage Loan Trust, Inc.
Series 2006-NC1 Class A2A (E)
5.390% due 08/25/36 1,171 1,171
Series 2006-WFH Class A1
5.360% due 08/25/36 706 706
Series 2007-OPX Class A1A (E)
5.400% due 01/25/37 2,427 2,428
Countrywide Alternative Loan Trust (A)
Principal Only STRIP
Zero coupon due 05/25/47 63,675 3,273
Countrywide Asset-Backed Certificates
Series 2004-13 Class AF3
3.989% due 02/25/31 250 248
Series 2004-AB2 Class M3 (E)
5.920% due 05/25/36 1,165 1,163
Series 2004-BC1 Class M1 (E)
5.820% due 02/25/34 708 708
Series 2005-4 Class AF3
4.456% due 10/25/35 1,950 1,932
Series 2005-7 Class AF3
4.454% due 11/25/35 410 405
Series 2005-11 Class AF1
5.500% due 02/25/36 641 641
Series 2005-16 Class 2AF1
5.470% due 05/25/36 1,095 1,095
Series 2005-17 Class 1AF1
5.520% due 12/25/36 758 758
Series 2005-AB3 Class 2A1 (E)
5.470% due 02/25/36 419 419
Series 2006-1 Class AF3
5.348% due 07/25/36 1,760 1,754
Series 2006-3 Class 2A2
5.500% due 02/25/36 1,790 1,791
Series 2006-11 Class 1AF3
6.050% due 09/25/46 2,085 2,102
Series 2006-11 Class 1AF4
6.300% due 09/25/46 1,935 1,963
Series 2006-13 Class 1AF3
5.944% due 01/25/37 3,050 3,068
Series 2006-13 Class 3AV1
5.370% due 01/25/37 1,232 1,232
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-15 Class A1
5.430% due 10/25/46 877 877
Series 2006-15 Class A3
5.689% due 10/25/46 1,350 1,350
Series 2006-16 Class 2A1
5.370% due 12/25/46 378 378
Series 2006-19 Class 2A1
5.380% due 03/25/37 1,096 1,096
Series 2006-22 Class 2A1
5.370% due 05/25/37 661 661
Series 2006-23 Class 2A1
5.370% due 11/25/37 631 631
Series 2006-S3 Class A2
6.085% due 06/25/21 2,100 2,119
Series 2006-S6 Class A2
5.519% due 03/25/34 4,895 4,889
Series 2006-S7 Class A3
5.712% due 04/25/35 5,515 5,513
Series 2006-S9 Class A3
5.728% due 08/25/36 1,330 1,322
Series 2007-4 Class A2
5.530% due 03/25/37 3,032 3,022
Countrywide Home Equity Loan Trust (E)
Series 2006-H Class 2A1B
5.470% due 11/15/36 5,015 5,005
Series 2007-B Class A
5.500% due 02/15/37 10,000 10,002
Credit-Based Asset Servicing and Securitization
LLC
Series 2004-CB7 Class AF5
4.585% due 10/25/34 770 742
Series 2005-CB4 Class AV1 (E)
5.420% due 08/25/35 249 248
Series 2005-CB5 Class AV1 (E)
5.430% due 08/25/35 127 127
Series 2005-CB7 Class AF1
5.208% due 11/25/35 74 73
Series 2006-CB5 Class A1 (E)
5.380% due 06/25/36 1,210 1,210
Series 2006-SL1 Class A2 (E)(p)
5.556% due 09/25/36 2,020 2,019
Series 2007-CB1 Class AF2
5.721% due 01/25/37 1,460 1,463
</Table>
64 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2005-AGE Class A2
4.640% due 02/25/32 1,000 988
Daimler Chrysler Auto Trust
Series 2006-C Class A2
5.250% due 05/08/09 1,200 1,200
Dunkin Securitization (E)
Series 2006-1 Class A2
5.779% due 06/20/31 1,525 1,552
Entergy Gulf States, Inc. (E)
5.769% due 12/01/09 335 335
Fannie Mae Grantor Trust
Series 2003-T4 Class 2A5
4.907% due 09/26/33 1,471 1,463
First Franklin Mortgage Loan Asset Backed
Certificates
Series 2004-FF1 Class A2
5.720% due 12/25/32 345 345
Series 2005-FF7 Class A2 (E)
5.420% due 07/25/35 288 288
Series 2006-FF1 Class A2 (E)
5.370% due 07/25/36 1,456 1,456
Series 2006-FF1 Class A3
5.370% due 11/25/36 1,233 1,233
Series 2006-FF2 Class A2
5.390% due 02/25/36 1,147 1,148
Series 2007-FF1 Class A2A
5.360% due 01/25/38 2,586 2,586
Series 2007-FF2 Class A2A (E)
5.363% due 03/25/37 2,893 2,891
Fremont Home Loan Trust
Series 2006-3 Class 2A1 (E)
5.390% due 02/25/37 1,261 1,260
Series 2006-A Class 2A1
5.370% due 05/25/36 438 438
Series 2006-E Class 2A1 (E)
5.380% due 01/25/37 624 624
GE Capital Credit Card Master Note Trust (E)
Series 2004-1 Class A
5.370% due 06/15/10 1,500 1,500
Series 2004-2 Class A
5.360% due 09/15/10 1,950 1,950
GE Dealer Floorplan Master Note Trust
Series 2004-2 Class A
5.400% due 07/20/09 1,900 1,900
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 1,251 1,239
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Government National Mortgage Association
Series 1998-23 Class ZA
6.500% due 09/20/28 2,389 2,465
GS Mortgage Securities Corp. (p)
Series 2007-NIM Class N1
6.250% due 01/25/37 1,829 1,823
GSAA Home Equity Trust
Series 2006-4 Class 1A2
5.961% due 03/25/36 2,066 2,078
GSAA Trust
Series 2006-2 Class 2A3
5.590% due 12/25/35 2,675 2,680
GSAMP Trust
Series 2003-HE2 Class M1
5.970% due 08/25/33 1,395 1,398
Series 2006-FM2 Class A2A
5.390% due 09/25/36 727 727
Series 2006-HE4 Class A2A (E)
5.390% due 06/25/36 1,434 1,434
Series 2006-S3 Class A1
6.085% due 05/25/36 3,036 3,017
Series 2007-FM1 Class A2A (E)
5.390% due 12/25/36 3,964 3,963
Series 2007-HE2 Class A2A (E)
5.400% due 03/25/47 4,725 4,723
Heritage Property Investment Trust
5.125% due 04/15/14 1,000 969
Home Equity Asset Trust
Series 2005-2 Class 2A2
5.520% due 07/25/35 384 384
HSI Asset Securitization Corp. Trust (E)
Series 2006-HE2 Class 2A1
5.370% due 12/25/36 1,149 1,149
Indymac Residential Asset Backed Trust
Series 2006-H2 Class A (E)
5.470% due 06/28/36 2,385 2,384
Series 2007-A Class 2A1
5.450% due 04/25/37 3,891 3,891
JP Morgan Mortgage Acquisition Corp. (E)
Series 2006-WMC Class A2
5.370% due 08/25/36 401 401
Lehman XS Trust
Series 2005-1 Class 2A2 (E)
4.660% due 07/25/35 1,107 1,123
Series 2006-11 Class 1A1
5.400% due 06/25/46 3,279 3,280
</Table>
Multistrategy Bond Fund 65
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-16N Class A1A (E)
5.400% due 11/25/46 1,874 1,874
Series 2006-9 Class A1A
5.390% due 05/25/46 398 398
Series 2007-4N Class 3A2A (E)
5.680% due 04/25/37 8,000 8,000
Long Beach Mortgage Loan Trust
Series 2004-4 Class 1A1
5.600% due 10/25/34 208 208
Series 2006-9 Class 2A1
5.380% due 10/25/36 5,035 5,035
Mastr Asset Backed Securities Trust
Series 2003-WMC Class M2
6.970% due 08/25/33 439 440
MBNA Credit Card Master Trust (E)
Series 2002-A9 Class A9
5.446% due 12/15/09 3,600 3,601
MBNA Credit Card Trust (E)
Series 2002-A10 Class A10
5.460% due 02/16/10 2,175 2,176
MBNA Master Credit Card Trust
Series 2000-E Class A
7.800% due 10/15/12 600 649
Merrill Lynch Mortgage Investors, Inc.
Series 2005-NCB Class A1A
5.451% due 07/25/36 65 65
Series 2006-AR1 Class A2C
5.480% due 03/25/37 2,775 2,773
Series 2006-RM3 Class A2A
5.350% due 06/25/37 760 760
Mid-State Trust
Series 2003-11 Class A1
4.864% due 07/15/38 143 137
Series 2004-1 Class A
6.005% due 08/15/37 187 191
Series 2005-1 Class A
5.745% due 01/15/40 182 178
Series 2006-1 Class A (p)
5.787% due 10/15/40 769 768
Morgan Stanley ABS Capital I
Series 2003-NC8 Class M3
7.420% due 09/25/33 377 379
Series 2006-HE7 Class A2A
5.370% due 09/25/36 4,973 4,971
Series 2006-NC5 Class A2A
5.360% due 10/25/36 421 421
Morgan Stanley IXIS Real Estate Capital Trust
Series 2006-2 Class A1
5.370% due 11/25/36 746 745
Morgan Stanley Mortgage Loan Trust
Series 2006-12X Class A1
5.440% due 10/25/36 892 892
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-12X Class A6A
5.726% due 10/25/36 1,035 1,037
Mortgage Equity Conversion Asset Trust (E)
Series 2007-FF2 Class A
5.370% due 02/25/42 1,900 1,900
Nationstar Home Equity Loan Trust (E)
Series 2006-B Class AV1
5.380% due 09/25/36 1,618 1,618
Nelnet Student Loan Trust (E)
Series 2006-3 Class A1
5.338% due 09/25/12 695 695
New Century Home Equity Loan Trust
Series 2004-4 Class M2
5.850% due 02/25/35 1,720 1,717
Newcastle Mortgage Securities Trust (E)
Series 2006-1 Class A1
5.390% due 03/25/36 739 739
Northwest Airlines, Inc.
7.041% due 04/01/22 440 440
NWA Trust (o)
Series 1995-2 Class A
9.250% due 06/21/14 1,396 1,466
Option One Mortgage Loan Trust
Series 2003-2 Class M2 (E)
7.020% due 04/25/33 440 443
Series 2003-3 Class M3 (E)
7.320% due 06/25/33 206 207
Series 2003-4 Class M2 (E)
6.970% due 07/25/33 215 217
Series 2005-4 Class A3 (E)
5.580% due 11/25/35 1,605 1,607
Series 2006-1 Class 2A1
5.390% due 01/25/36 2,607 2,607
Series 2007-1 Class 2A1
5.370% due 01/25/37 2,432 2,432
Series 2007-5 Class 2A1 (E)
5.440% due 05/25/37 4,200 4,200
Park Place Securities, Inc.
Series 2004-MCW Class A1 (E)
5.632% due 10/25/34 1,703 1,704
Series 2004-WWF Class A1D
5.780% due 02/25/35 420 420
Series 2005-WCW Class M1
5.770% due 09/25/35 1,705 1,704
</Table>
66 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Popular ABS Mortgage Pass-Through Trust
Series 2005-6 Class A3
5.680% due 01/25/36 1,855 1,859
Power Contract Financing LLC (p)
6.256% due 02/01/10 408 412
RAAC Series
Series 2006-SP1 Class A1
5.420% due 09/25/45 742 742
Renaissance Home Equity Loan Trust
Series 2005-1 Class M1
5.357% due 05/25/35 880 866
Series 2005-2 Class AF4
4.934% due 08/25/35 610 601
Series 2005-4 Class A2
5.399% due 02/25/36 575 573
Series 2005-4 Class A3
5.565% due 02/25/36 360 359
Series 2006-1 Class AF6
5.746% due 05/25/36 1,445 1,437
Series 2007-1 Class AF2
5.512% due 04/25/37 5,245 5,226
Residential Asset Mortgage Products, Inc.
Series 2003-RS1 Class AI6A
5.980% due 12/25/33 1,640 1,650
Series 2006-RZ3 Class A1 (E)
5.390% due 08/25/36 1,972 1,972
Series 2007-RZ1 Class A1 (E)
5.390% due 02/25/37 3,948 3,949
Residential Asset Securities Corp.
Series 2001-KS3 Class AII (E)
5.780% due 09/25/31 232 232
Series 2003-KS1 Class M2 (E)
7.945% due 01/25/33 237 212
Series 2003-KS2 Class MI1
4.800% due 04/25/33 3,395 3,336
Series 2003-KS2 Class MI3
6.100% due 04/25/33 2,015 1,983
Series 2003-KS5 Class AI4
3.230% due 12/25/30 102 100
Series 2006-KS3 Class AI3
5.490% due 04/25/36 875 875
Series 2006-KS6 Class A1
5.360% due 08/25/36 458 458
Series 2006-KS9 Class AI1
5.420% due 11/25/36 1,052 1,052
Series 2007-KS3 Class AI1
5.430% due 02/25/30 3,725 3,725
Residential Funding Mortgage Securities II, Inc.
Series 2006-HSA Class AI2
5.500% due 03/25/36 2,055 2,049
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Saxon Asset Securities Trust (E)
Series 2006-3 Class A1
5.380% due 11/25/36 1,174 1,173
SBI Heloc Trust (E)
Series 2006-1A Class 1A2A
5.490% due 08/25/36 581 581
Securitized Asset Backed Receivables LLC Trust
Series 2006-WM1 Class A2A
5.380% due 12/25/35 633 633
Series 2006-WM4 Class A2A (E)
5.400% due 11/25/36 2,202 2,201
Series 2007-BR1 Class A2A (E)
5.440% due 02/25/37 4,227 4,227
Series 2007-HE1 Class A2A
5.380% due 12/25/36 3,261 3,262
Sharps SP I, LLC
7.000% due 01/25/34 38 27
SLM Student Loan Trust
Series 2006-3 Class A2 (E)
5.360% due 01/25/16 845 845
Series 2006-9 Class A1 (E)
5.330% due 10/25/12 8,350 8,349
Series 2006-10 Class A1
5.330% due 07/25/13 4,298 4,298
Series 2007-1 Class A1
5.330% due 04/25/12 4,994 4,998
Series 2007-3 Class A1 (E)
5.320% due 10/27/14 6,834 6,834
Small Business Administration
Series 2000-P10 Class 1
7.449% due 08/01/10 57 58
Small Business Administration Participation
Certificates
7.500% due 04/01/17 1,176 1,228
Soundview Home Equity Loan Trust
Series 2006-EQ1 Class A1 (E)
5.370% due 10/25/36 565 565
Series 2006-EQ2 Class A1 (E)
5.400% due 01/25/37 5,761 5,760
Series 2006-WF1 Class A2
5.645% due 10/25/36 3,105 3,097
Series 2007-WMC Class 3A1 (E)
5.430% due 02/25/37 3,975 3,974
</Table>
Multistrategy Bond Fund 67
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Structured Asset Investment Loan Trust
Series 2004-7 Class A1
5.575% due 08/25/34 117 117
Series 2005-3 Class M2 (E)
5.760% due 04/25/35 675 673
Structured Asset Mortgage Investments, Inc. (E)
Series 2006-AR7 Class A2A
5.550% due 08/25/36 2,115 2,121
Structured Asset Securities Corp.
Series 2001-SB1 Class A2
3.375% due 08/25/31 453 409
Series 2004-16X Class A2
4.910% due 08/25/34 269 268
Series 2004-19X Class A2
4.370% due 10/25/34 2,124 2,105
Series 2005-4XS Class 1A2B
4.670% due 03/25/35 723 716
Series 2005-GEL Class A (E)
5.670% due 12/25/34 616 616
Series 2005-S2 Class A2
5.520% due 06/25/35 459 459
Series 2006-BC3 Class A2 (E)
5.370% due 10/25/36 2,720 2,721
TXU Electric Delivery Transition Bond Co.
Series 2004-1 Class A2
4.810% due 11/17/14 300 299
VTB Capital SA (E)
6.150% due 12/07/09 2,795 2,798
Washington Mutual Asset-Backed Certificates
Series 2007-HE2 Class 2A1
5.430% due 04/25/37 4,550 4,550
Washington Mutual Alternative Mortgage
Pass-Through Certificates (E)
Series 2006-AR6 Class 1A
5.510% due 07/25/46 1,149 1,151
Wells Fargo Home Equity Trust (E)
Series 2005-4 Class AI1
5.440% due 12/25/35 2,162 2,161
Series 2006-3 Class A1
5.370% due 01/25/37 628 628
World Financial Properties (p)
6.910% due 09/01/13 574 602
6.950% due 09/01/13 169 178
--------------
359,592
--------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Certificates of Deposit - 1.3%
Abbey National Treasury Services PLC
5.270% due 07/02/08 3,400 3,399
Bank of Ireland
5.400% due 01/15/10 11,200 11,197
BNP Paribas
5.293% due 07/03/08 11,200 11,193
Calyon NY
5.330% due 01/16/09 1,300 1,300
Calyon NY
Series YCD
5.340% due 01/16/09 2,100 2,100
Dexia Credit SA
5.270% due 09/29/08 11,300 11,293
Fortis Bank
5.300% due 09/30/08 4,800 4,799
Fortis Bank SA - NY
Series YCD
5.265% due 06/30/08 2,700 2,704
Nordea Bank Finland PLC
5.307% due 04/09/09 6,200 6,197
Royal Bank of Canada
5.420% due 06/30/08 4,600 4,602
Societe Generale
5.271% due 06/30/08 6,900 6,897
Unicredito Italiano NY
Series YCD
5.350% due 05/06/08 6,300 6,300
5.360% due 05/29/08 1,700 1,701
Unicredito Italiano SpA
5.350% due 05/29/08 1,100 1,103
--------------
74,785
--------------
Corporate Bonds and Notes - 14.4%
Abbott Laboratories
5.600% due 05/15/11 1,750 1,785
5.875% due 05/15/16 900 932
Ace Capital Trust II
9.700% due 04/01/30 1,050 1,406
AIG SunAmerica Global Financing VI
6.300% due 05/10/11 1,490 1,554
Alamosa Delaware, Inc.
8.500% due 01/31/12 800 844
Alcoa, Inc.
5.950% due 02/01/37 1,340 1,331
Alion Science and Technology Corp.
10.250% due 02/01/15 975 1,026
</Table>
68 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Allied Waste North America, Inc.
Series B
7.125% due 05/15/16 500 513
Altria Group, Inc.
7.750% due 01/15/27 200 239
American Casino & Entertainment Properties LLC
7.850% due 02/01/12 1,040 1,089
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 100 101
American Express Bank (E)
Series BKNT
5.330% due 10/16/08 3,000 2,999
American Express Centurion Bank (E)
Series BKNT
5.320% due 05/07/08 800 800
American Express Co.
6.800% due 09/01/66 1,730 1,848
American Express Credit Corp.
5.380% due 03/02/09 1,800 1,802
5.380% due 11/09/09 (E) 900 900
American General Finance Corp.
4.875% due 05/15/10 1,300 1,297
Series MTNH
4.625% due 09/01/10 45 44
Series MTNI
4.625% due 05/15/09 220 218
American Honda Finance Corp.
5.410% due 02/09/10 1,600 1,599
American International Group, Inc.
5.370% due 06/16/09 (E)(p) 700 700
4.700% due 10/01/10 1,730 1,712
5.375% due 10/18/11 1,780 1,802
5.050% due 10/01/15 (N) 1,775 1,744
6.250% due 03/15/87 4,050 4,031
Americo Life, Inc. (p)
7.875% due 05/01/13 250 257
Ameriprise Financial, Inc.
7.518% due 06/01/66 5,925 6,431
AmerisourceBergen Corp.
Series WI
5.625% due 09/15/12 2,920 2,918
AMFM, Inc.
8.000% due 11/01/08 950 984
Amkor Technology, Inc.
7.750% due 05/15/13 1,245 1,233
9.250% due 06/01/16 (N) 3,015 3,196
Anadarko Petroleum Corp.
5.950% due 09/15/16 4,715 4,752
6.450% due 09/15/36 460 461
ANZ Capital Trust
4.484% due 12/31/49 1,400 1,370
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Apache Corp.
5.250% due 04/15/13 1,570 1,572
Aramark Corp.
8.500% due 02/01/15 850 889
8.860% due 02/01/15 (E) 740 760
Arizona Public Service Co.
5.800% due 06/30/14 3,965 4,004
6.250% due 08/01/16 850 878
ArvinMeritor, Inc. (N)
8.750% due 03/01/12 1,095 1,133
AT&T Corp.
7.300% due 11/15/11 3,765 4,091
8.000% due 11/15/31 4,215 5,281
AT&T Mobility LLC
6.500% due 12/15/11 2,110 2,228
AT&T, Inc.
5.450% due 05/15/08 3,300 3,302
5.570% due 11/14/08 (E) 3,400 3,410
5.100% due 09/15/14 425 417
Avista Capital Trust III
6.500% due 04/01/34 1,426 1,423
Avista Corp.
9.750% due 06/01/08 1,045 1,086
BAC Capital Trust XI
6.625% due 05/23/36 935 1,002
BAC Capital Trust XIV
5.630% due 12/31/49 2,420 2,429
BAE Systems Holdings, Inc. (f)(p)
6.400% due 12/15/11 4,260 4,458
Bank of America Corp.
5.875% due 02/15/09 95 96
5.375% due 06/19/09 (E) 9,200 9,208
5.420% due 03/15/17 480 478
Bank of America NA
Series BKNT
5.361% due 12/18/08 (E) 1,900 1,900
6.000% due 10/15/36 500 508
Bank of America North America
Series BKNT
5.360% due 02/27/09 400 399
Bank of New York Co., Inc. (The)
5.125% due 11/01/11 2,085 2,087
Bear Stearns Cos., Inc. (The)
5.450% due 08/21/09 (E) 1,200 1,201
</Table>
Multistrategy Bond Fund 69
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series MTNB
5.660% due 01/30/09 (N) 1,000 1,004
5.454% due 03/30/09 (N) 900 901
BellSouth Corp.
5.460% due 08/15/08 (E) 1,300 1,301
4.200% due 09/15/09 2,685 2,631
4.240% due 04/26/21 (A) 1,800 1,783
6.550% due 06/15/34 260 271
Bellsouth Telecommunications, Inc.
7.000% due 12/01/95 1,580 1,642
BNP Paribas Capital Trust (p)
9.003% due 12/29/49 2,600 2,896
Boardwalk Pipelines, LP
5.875% due 11/15/16 2,825 2,834
Boeing Capital Corp., Ltd.
6.100% due 03/01/11 500 520
Boston Scientific Corp.
6.400% due 06/15/16 4,720 4,710
Bowater, Inc. (N)
9.000% due 08/01/09 2,280 2,397
Burlington Northern Santa Fe Corp.
6.750% due 07/15/11 110 116
5.650% due 05/01/17 1,050 1,055
6.875% due 12/01/27 100 107
6.750% due 03/15/29 110 117
California Steel Industries, Inc.
6.125% due 03/15/14 1,530 1,459
Campbell Soup Co.
5.875% due 10/01/08 130 131
Carolina Power & Light Co.
6.500% due 07/15/12 60 64
Caterpillar Financial Services Corp. (N)
5.420% due 05/18/09 1,600 1,601
Caterpillar, Inc.
6.050% due 08/15/36 2,515 2,585
Catlin Insurance Co., Ltd. (f)(A)
7.249% due 12/31/49 1,695 1,709
CCH I Holdings LLC (N)
13.500% due 01/15/14 1,840 1,872
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 470 475
CenterPoint Energy Resources Corp.
6.250% due 02/01/37 170 171
Series B
7.875% due 04/01/13 2,105 2,351
Chubb Corp.
6.375% due 03/29/67 2,000 2,024
Cingular Wireless Services, Inc.
7.875% due 03/01/11 825 904
8.750% due 03/01/31 2,850 3,729
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
CIT Group Holdings, Inc. (E)(N)
5.510% due 01/30/09 800 799
CIT Group, Inc.
5.515% due 12/19/08 (E) 1,800 1,800
5.480% due 08/17/09 (E) 6,300 6,281
6.875% due 11/01/09 220 228
4.125% due 11/03/09 265 258
Citicorp
Series MTNF
6.375% due 11/15/08 265 270
Citigroup Funding, Inc.
Zero coupon due 07/17/08 385 471
5.343% due 12/08/08 400 399
5.320% due 04/23/09 3,600 3,599
Citigroup Global Markets Holdings, Inc.
Series MTNA
5.461% due 03/17/09 300 300
Citigroup, Inc.
5.406% due 12/26/08 (E) 4,000 4,001
5.400% due 01/30/09 (E) 500 500
5.393% due 12/28/09 (E) 1,600 1,599
4.125% due 02/22/10 720 704
6.500% due 01/18/11 2,615 2,739
4.700% due 05/29/15 180 173
6.125% due 08/25/36 3,655 3,769
Citizens Communications Co. (N)
9.250% due 05/15/11 970 1,080
Clorox Co. (N)
4.200% due 01/15/10 725 709
CNA Financial Corp.
6.500% due 08/15/16 850 882
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 360 362
Comcast Cable Communications Holdings, Inc.
9.455% due 11/15/22 1,575 2,077
Comcast Cable Communications LLC
6.875% due 06/15/09 525 543
6.750% due 01/30/11 425 448
Comcast Cable Holdings LLC
9.800% due 02/01/12 1,310 1,553
7.875% due 08/01/13 3,545 3,977
Comcast Corp.
5.660% due 07/14/09 (E) 2,465 2,469
5.900% due 03/15/16 670 683
</Table>
70 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
5.875% due 02/15/18 200 202
6.500% due 11/15/35 1,740 1,771
6.450% due 03/15/37 (N) 1,500 1,517
Commonwealth Edison Co.
6.950% due 07/15/18 300 302
5.900% due 03/15/36 (N) 400 381
Series 105
5.400% due 12/15/11 625 617
ConAgra Foods, Inc.
7.000% due 10/01/28 855 922
8.250% due 09/15/30 275 337
Consolidated Natural Gas Co.
6.850% due 04/15/11 2,005 2,118
Series C
6.250% due 11/01/11 155 161
Constellation Brands, Inc.
Series B
8.125% due 01/15/12 1,450 1,504
Consumers Energy Co.
Series F
4.000% due 05/15/10 775 747
Series H
4.800% due 02/17/09 325 322
Continental Airlines, Inc.
Series 01-1
6.503% due 06/15/11 550 566
Series A
5.983% due 04/19/22 1,545 1,551
Cooper Industries, Inc.
Series WI
5.250% due 11/15/12 500 500
Corrections Corp. of America
7.500% due 05/01/11 1,545 1,603
Costco Wholesale Corp.
5.500% due 03/15/17 4,025 4,045
Countrywide Home Loans, Inc.
3.250% due 05/21/08 680 665
COX Communications, Inc.
4.625% due 01/15/10 3,595 3,545
5.875% due 12/01/16 (p) 725 731
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2005-CN2 Class A1S
5.540% due 11/15/19 721 721
Credit Suisse First Boston USA, Inc.
4.875% due 08/15/10 335 334
6.500% due 01/15/12 260 275
5.500% due 08/15/13 (N) 325 330
Credit Suisse USA, Inc. (N)
5.250% due 03/02/11 1,030 1,037
CSC Holdings, Inc.
Series WI
6.750% due 04/15/12 500 499
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
CVS Caremark Corp.
5.750% due 08/15/11 905 922
CVS Lease Pass Through (p)
6.036% due 12/10/28 1,902 1,907
DaimlerChrysler NA Holding Corp.
5.690% due 03/13/09 (E) 1,700 1,703
5.770% due 03/13/09 2,900 2,909
5.810% due 08/03/09 4,740 4,764
6.500% due 11/15/13 1,725 1,816
8.500% due 01/18/31 (N) 620 781
DCP Midstream, LP
6.875% due 02/01/11 90 95
Delhaize America, Inc.
9.000% due 04/15/31 435 530
Detroit Edison Co. (The)
6.125% due 10/01/10 1,010 1,041
6.350% due 10/15/32 350 371
Developers Diversified Realty Corp.
5.000% due 05/03/10 (N) 400 397
4.625% due 08/01/10 776 762
5.250% due 04/15/11 50 50
5.375% due 10/15/12 2,470 2,470
Dex Media East Finance Co.
12.125% due 11/15/12 220 240
Dominion Resources, Inc.
Series 06-B
6.300% due 09/30/66 2,580 2,638
Series A
5.687% due 05/15/08 1,675 1,679
5.200% due 01/15/16 2,175 2,120
Series B
6.250% due 06/30/12 (N) 460 483
Dow Chemical Co. (The)
6.000% due 10/01/12 680 701
DPL, Inc.
6.875% due 09/01/11 1,555 1,647
E*Trade Financial Corp.
8.000% due 06/15/11 3,210 3,375
Echostar DBS Corp.
6.375% due 10/01/11 1,395 1,409
6.625% due 10/01/14 280 284
Eli Lilly & Co.
6.770% due 01/01/36 2,065 2,350
Embarq Corp.
7.995% due 06/01/36 200 212
Energy Partners, Ltd. (A)
9.750% due 04/15/14 1,195 1,216
</Table>
Multistrategy Bond Fund 71
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Energy Transfer Partners, LP
5.950% due 02/01/15 2,175 2,212
Entergy Gulf States, Inc.
3.600% due 06/01/08 235 230
6.100% due 12/08/08 570 571
Enterprise Products Operating, LP
4.950% due 06/01/10 825 819
8.375% due 08/01/66 4,885 5,409
Series B
4.625% due 10/15/09 2,080 2,054
5.750% due 03/01/35 (N) 675 631
Erac USA Finance Co.
7.350% due 06/15/08 (p) 3,120 3,171
5.300% due 11/15/08 350 349
Farmers Exchange Capital (p)
7.050% due 07/15/28 2,760 2,849
Farmers Insurance Exchange (p)
6.000% due 08/01/14 570 566
8.625% due 05/01/24 1,830 2,185
Federated Retail Holdings, Inc.
5.350% due 03/15/12 1,555 1,554
6.375% due 03/15/37 2,500 2,469
FedEx Corp.
5.500% due 08/15/09 620 625
7.600% due 07/01/97 585 686
First Union Institutional Capital II
7.850% due 01/01/27 1,680 1,748
FirstEnergy Corp.
Series B
6.450% due 11/15/11 3,450 3,618
Series C
7.375% due 11/15/31 2,730 3,134
Ford Motor Co.
7.450% due 07/16/31 2,685 2,125
7.700% due 05/15/97 (N) 585 440
Ford Motor Credit Co.
9.875% due 08/10/11 9,925 10,569
7.250% due 10/25/11 600 588
8.110% due 01/13/12 (E) 2,075 2,047
8.000% due 12/15/16 1,525 1,491
Series WI
9.750% due 09/15/10 2,710 2,868
FPL Group Capital, Inc. (N)
5.625% due 09/01/11 1,880 1,914
Freeport-McMoRan Copper & Gold, Inc.
8.375% due 04/01/17 4,700 5,141
Freescale Semiconductor, Inc. (N)(p)
10.125% due 12/15/16 1,895 1,914
General Electric Capital Corp.
5.400% due 01/05/09 (E) 800 800
3.250% due 06/15/09 600 579
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
5.430% due 01/20/10 5,200 5,208
5.500% due 04/28/11 1,295 1,314
5.560% due 01/08/16 1,100 1,101
Series GMTN (E)
5.370% due 03/12/10 1,900 1,900
Series MTN (E)
5.390% due 10/26/09 2,400 2,400
Series MTNA
5.460% due 07/28/08 2,000 2,003
4.250% due 12/01/10 (N) 180 176
5.875% due 02/15/12 320 330
5.450% due 01/15/13 3,490 3,535
4.750% due 09/15/14 (N) 80 78
General Mills, Inc.
5.490% due 01/22/10 1,100 1,100
General Motors Corp. (N)
8.375% due 07/15/33 3,520 3,181
Georgia-Pacific Corp.
8.125% due 05/15/11 1,000 1,055
9.500% due 12/01/11 1,195 1,320
8.875% due 05/15/31 (N) 2,127 2,265
Glencore Nickel, Ltd. (ffl)
9.000% due 12/01/14 305 --
GMAC LLC
6.875% due 09/15/11 9,886 9,919
6.000% due 12/15/11 200 195
8.000% due 11/01/31 6,115 6,563
Goldman Sachs Group, Inc.
4.750% due 07/15/13 1,275 1,235
Goldman Sachs Group, Inc. (The)
5.406% due 12/23/08 800 800
5.400% due 03/30/09 (E) 2,800 2,800
5.456% due 06/23/09 (E) 4,000 4,003
5.440% due 11/16/09 (E) 600 600
6.875% due 01/15/11 4,275 4,524
5.350% due 01/15/16 4,250 4,195
5.625% due 01/15/17 1,100 1,095
6.345% due 02/15/34 (N) 1,470 1,486
Series MTNB
5.455% due 12/22/08 1,800 1,802
5.690% due 07/23/09 1,500 1,508
Goldman Sachs Group, LP
4.500% due 06/15/10 1,040 1,024
GSAMP Trust (E)
Series 2006-HE8 Class A2A
5.390% due 01/25/37 1,714 1,714
</Table>
72 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Harrah's Operating Co., Inc.
5.500% due 07/01/10 525 516
6.500% due 06/01/16 2,660 2,374
Hawaiian Telcom Communications, Inc. (N)
Series B
12.500% due 05/01/15 600 675
HCA, Inc.
9.125% due 11/15/14 (p) 885 956
6.500% due 02/15/16 (N) 1,355 1,181
Health Care Property Investors, Inc. (N)
5.950% due 09/15/11 1,750 1,782
Healthsouth Corp. (p)
10.750% due 06/15/16 2,880 3,139
Hertz Corp.
8.875% due 01/01/14 1,885 2,031
Hewlett-Packard Co. (E)
5.485% due 05/22/09 580 580
Historic TW, Inc.
8.050% due 01/15/16 1,690 1,934
6.625% due 05/15/29 75 76
HJ Heinz Co.
6.428% due 12/01/08 200 203
HJ Heinz Finance Co. (N)
6.000% due 03/15/12 240 246
Home Depot, Inc.
5.490% due 12/16/09 (E) 360 360
5.875% due 12/16/36 1,435 1,391
Hospira, Inc.
5.830% due 03/30/10 1,580 1,585
Hospitality Properties Trust (A)
5.625% due 03/15/17 5,775 5,694
HRPT Properties Trust
5.750% due 02/15/14 1,860 1,873
HSBC Bank USA NA
Series BKNT
5.493% due 06/10/09 500 501
HSBC Finance Corp.
5.490% due 09/15/08 (E) 4,500 4,508
4.125% due 12/15/08 175 172
5.875% due 02/01/09 660 668
5.420% due 10/21/09 (E) 1,500 1,499
4.125% due 11/16/09 1,270 1,241
5.610% due 05/10/10 1,300 1,305
8.000% due 07/15/10 165 179
6.750% due 05/15/11 900 949
6.375% due 10/15/11 465 485
6.375% due 11/27/12 1,770 1,859
5.000% due 06/30/15 1,330 1,287
HSBC Financial Capital Trust IX
5.911% due 11/30/35 600 602
ICI Wilmington, Inc.
4.375% due 12/01/08 210 207
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Idearc, Inc. (p)
8.000% due 11/15/16 500 521
Innophos Investments Holdings, Inc.
13.380% due 02/15/15 654 674
International Business Machines Corp.
7.125% due 12/01/96 2,160 2,477
International Lease Finance Corp.
3.500% due 04/01/09 550 534
5.750% due 06/15/11 890 913
5.625% due 09/20/13 (N) 2,710 2,760
International Steel Group, Inc. (N)
6.500% due 04/15/14 2,465 2,577
Interpublic Group of Cos., Inc.
6.250% due 11/15/14 380 357
iStar Financial, Inc. (N)
Series B
5.125% due 04/01/11 1,100 1,091
ITT Corp.
7.400% due 11/15/25 345 397
JC Penney Co., Inc. (N)
7.375% due 08/15/08 1,470 1,500
JC Penney Corp., Inc.
8.125% due 04/01/27 (N) 710 730
6.375% due 10/15/36 1,085 1,081
Jersey Central Power & Light Co.
5.625% due 05/01/16 975 982
John Deere Capital Corp.
5.410% due 07/15/08 800 800
John Hancock Financial Services, Inc.
5.625% due 12/01/08 120 121
John Hancock Global Funding II
7.900% due 07/02/10 440 476
JP Morgan Chase Bank
Series EMTN
6.000% due 05/22/45 BRL 10,586 8,563
JP Morgan Chase Capital XVIII
Series R
6.950% due 08/01/66 2,530 2,708
JP Morgan Chase Capital XX
Series T
6.550% due 09/29/36 200 204
JPMorgan Chase & Co.
6.000% due 02/15/09 170 172
7.000% due 11/15/09 415 433
</Table>
Multistrategy Bond Fund 73
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
6.750% due 02/01/11 175 184
5.600% due 06/01/11 675 688
Series 1
5.370% due 06/26/09 700 701
JPMorgan Chase Bank NA
Series BKNT
5.875% due 06/13/16 1,905 1,971
JPMorgan Chase Capital XXII
Series V
6.450% due 02/02/37 6,500 6,576
KAR Holdings, Inc. (A)
10.000% due 05/01/15 1,525 1,580
KBC Bank Funding Trust III (f)(p)
9.860% due 11/29/49 760 840
Kellogg Co.
Series B
6.600% due 04/01/11 3,915 4,111
Kerr-McGee Corp.
6.950% due 07/01/24 2,005 2,138
KeySpan Corp.
7.625% due 11/15/10 525 565
Kinder Morgan Finance Co. ULC
Series WI
5.350% due 01/05/11 1,485 1,474
5.700% due 01/05/16 1,285 1,231
Kraft Foods, Inc.
4.125% due 11/12/09 1,072 1,045
5.625% due 11/01/11 4,675 4,735
6.500% due 11/01/31 390 401
Kroger Co. (The)
7.250% due 06/01/09 270 280
8.000% due 09/15/29 165 184
7.500% due 04/01/31 (N) 55 60
LaBranche & Co., Inc.
9.500% due 05/15/09 2,750 2,881
11.000% due 05/15/12 1,775 1,935
Lear Corp.
Series B
8.750% due 12/01/16 805 784
Lehman Brothers Holdings, Inc.
5.450% due 10/22/08 1,800 1,802
5.370% due 11/24/08 1,400 1,400
5.450% due 04/03/09 (E) 5,500 5,502
5.460% due 08/21/09 (E) 800 800
5.580% due 07/18/11 (E) 600 601
5.250% due 02/06/12 1,790 1,796
5.500% due 04/04/16 960 961
Series MTN (E)
5.460% due 11/16/09 600 600
Level 3 Communications, Inc.
6.000% due 09/15/09 1,230 1,216
Level 3 Financing, Inc.
12.250% due 03/15/13 595 695
9.250% due 11/01/14 (A) 1,000 1,039
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Liberty Mutual Group, Inc. (p)
7.000% due 03/15/37 (N) 2,450 2,462
7.800% due 03/07/87 8,430 8,474
Lubrizol Corp.
4.625% due 10/01/09 1,701 1,677
MacDermid, Inc. (p)
9.500% due 04/15/17 1,840 1,909
Mandalay Resort Group
9.500% due 08/01/08 465 485
6.500% due 07/31/09 (N) 500 507
Manufacturers & Traders Trust Co.
5.585% due 12/28/20 411 408
Marsh & McLennan Cos., Inc. (N)
5.150% due 09/15/10 2,715 2,690
Max USA Holdings, Ltd.
7.200% due 04/14/17 1,915 1,924
May Department Stores Co. (The) (N)
6.700% due 07/15/34 1,245 1,248
MBNA Corp. (E)
Series MTNF
5.790% due 05/05/08 780 783
Medco Health Solutions, Inc.
7.250% due 08/15/13 3,057 3,308
Merrill Lynch & Co., Inc.
5.461% due 06/16/08 6,800 6,806
5.428% due 12/04/09 1,000 1,000
5.560% due 07/25/11 (E) 1,100 1,102
6.220% due 09/15/26 (N) 980 998
Series MTN (E)
5.450% due 08/14/09 700 700
Series MTNC
4.250% due 02/08/10 4,900 4,784
MetLife, Inc.
5.000% due 06/15/15 1,045 1,019
6.400% due 12/15/36 3,600 3,593
Midamerican Energy Holdings Co.
Series WI
6.125% due 04/01/36 4,575 4,650
Midamerican Funding LLC
6.750% due 03/01/11 1,820 1,925
Miller Brewing Co. (p)
4.250% due 08/15/08 585 577
5.500% due 08/15/13 1,305 1,310
Mohawk Industries, Inc.
Series D
7.200% due 04/15/12 400 424
Monumental Global Funding II (p)
4.625% due 03/15/10 475 469
</Table>
74 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Morgan Stanley
5.375% due 10/15/15 1,300 1,284
Series GMTN
5.470% due 02/09/09 3,100 3,104
Series MTn
5.450% due 01/15/10 2,300 2,299
Natexis Ambs Co. LLC (f)(p)
8.440% due 12/29/49 650 673
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 2,150 2,185
5.450% due 04/10/17 1,180 1,183
Nationwide Financial Services
6.250% due 11/15/11 395 411
Nationwide Mutual Insurance Co. (p)
7.875% due 04/01/33 867 1,036
NCO Group, Inc. (p)
10.230% due 11/15/13 1,390 1,390
Neiman-Marcus Group, Inc. (N)
Series WI
10.375% due 10/15/15 295 332
Nelnet, Inc.
7.400% due 09/29/36 600 621
Nevada Power Co.
Series L
5.875% due 01/15/15 550 554
News America Holdings, Inc.
7.750% due 12/01/45 (N) 535 609
7.900% due 12/01/95 595 685
8.250% due 10/17/96 195 234
Nextel Communications, Inc.
Series E
6.875% due 10/31/13 2,265 2,328
Nisource Finance Corp.
5.930% due 11/23/09 (E) 370 370
7.875% due 11/15/10 1,510 1,638
Norfolk Southern Corp.
7.050% due 05/01/37 530 583
6.000% due 03/15/49 950 847
7.900% due 05/15/97 4,755 5,579
North Front Pass-Through Trust (p)
5.810% due 12/15/24 4,535 4,488
Ohio Power Co.
Series F
5.500% due 02/15/13 (N) 55 55
Series K
6.000% due 06/01/16 560 580
ONEOK Partners, LP
6.650% due 10/01/36 2,175 2,263
Pacific Gas & Electric Co.
3.600% due 03/01/09 155 151
4.200% due 03/01/11 1,815 1,761
6.050% due 03/01/34 (N) 470 480
5.800% due 03/01/37 5,425 5,346
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
PartnerRe Finance II
6.440% due 12/01/66 150 151
Peabody Energy Corp. (N)
7.875% due 11/01/26 500 536
Pemex Project Funding Master Trust
7.375% due 12/15/14 1,600 1,789
5.750% due 12/15/15 800 812
Series WI
6.625% due 06/15/35 (N) 855 906
Pepco Holdings, Inc.
5.994% due 06/01/10 3,315 3,316
Phoenix Life Insurance Co. (p)
7.150% due 12/15/34 1,450 1,545
Pilgrim's Pride Corp.
9.625% due 09/15/11 180 188
7.625% due 05/01/15 1,000 1,013
Plains All American Pipeline, LP/ PAA Finance
Corp.
Series WI
6.700% due 05/15/36 1,265 1,313
Platinum Underwriters Finance, Inc.
Series B
7.500% due 06/01/17 520 551
Popular North America Capital Trust I
6.564% due 09/15/34 647 623
Popular North America, Inc.
Series MTNE
3.875% due 10/01/08 1,600 1,567
Procter & Gamble Co.
5.550% due 03/05/37 310 306
Progress Energy, Inc.
7.100% due 03/01/11 469 501
5.625% due 01/15/16 510 515
7.750% due 03/01/31 135 163
7.000% due 10/30/31 760 850
Qwest Corp.
7.875% due 09/01/11 4,170 4,441
7.625% due 06/15/15 1,000 1,069
Rabobank Capital Funding II (f)(p)
5.260% due 12/31/49 3,095 3,015
RBS Capital Trust III (f)
5.512% due 09/29/49 2,190 2,158
Realogy Corp. (N)(A)(p)
12.375% due 04/15/15 3,300 3,300
</Table>
Multistrategy Bond Fund 75
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Reckson Operating Partnership, LP
7.750% due 03/15/09 175 182
5.150% due 01/15/11 457 451
Reinsurance Group of America, Inc.
6.750% due 12/15/65 325 326
Reliant Energy, Inc.
6.750% due 12/15/14 2,450 2,566
Rental Services Corp.
9.500% due 12/01/14 1,840 1,955
Residential Capital LLC
5.850% due 06/09/08 (N) 3,380 3,356
6.125% due 11/21/08 1,775 1,774
7.190% due 04/17/09 3,025 3,011
6.375% due 06/30/10 4,302 4,314
6.000% due 02/22/11 4,190 4,142
5.125% due 05/17/12 1,865 2,470
6.500% due 04/17/13 6,430 6,427
Series WI
6.875% due 06/30/15 (N) 4,645 4,704
RH Donnelley, Inc.
10.875% due 12/15/12 1,690 1,829
Safeco Capital Trust I
8.072% due 07/15/37 1,150 1,199
Safeway, Inc.
5.800% due 08/15/12 60 61
7.250% due 02/01/31 (N) 155 165
Sara Lee Corp. (N)
6.125% due 11/01/32 640 595
SB Treasury Co. LLC (A)
9.400% due 12/29/49 2,028 2,117
SBC Communications, Inc. (N)
6.150% due 09/15/34 1,245 1,251
Sempra Energy
5.830% due 05/21/08 2,321 2,321
Simon Property Group, LP
5.600% due 09/01/11 1,000 1,016
Skandinaviska Enskilda
Banken AB NY
Series YCD
5.350% due 02/13/09 1,700 1,700
SLM Corp.
4.000% due 01/15/10 (N) 710 677
Series MTNA
5.570% due 07/25/08 6,200 6,168
4.000% due 01/15/09 (N) 500 486
5.500% due 07/27/09 600 590
4.500% due 07/26/10 1,400 1,335
Societe Generale
5.269% due 06/30/08 1,800 1,800
Southern California Edison Co.
5.460% due 02/02/09 600 601
7.625% due 01/15/10 (N) 600 638
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Sprint Capital Corp.
7.625% due 01/30/11 4,465 4,791
6.875% due 11/15/28 400 397
8.750% due 03/15/32 2,750 3,245
State Street Bank & Trust Co.
Series BKNT
5.300% due 01/15/16 200 199
Steel Dynamics, Inc. (p)
6.750% due 04/01/15 2,075 2,080
Stingray Pass-Through Trust (p)
5.902% due 01/12/15 3,100 3,044
Structured Asset Mortgage
Investments II
Series 2006-AR5 Class 1A2
5.580% due 05/25/36 1,008 1,011
Suncom Wireless, Inc.
8.500% due 06/01/13 2,735 2,855
Sungard Data Systems, Inc.
10.250% due 08/15/15 1,966 2,163
Swiss Re Capital I, LP (f)(N)(p)
6.854% due 05/29/49 2,250 2,349
Symetra Financial Corp. (p)
6.125% due 04/01/16 900 914
TECO Energy, Inc.
7.200% due 05/01/11 1,665 1,773
Texas Eastern Transmission, LP
7.000% due 07/15/32 280 315
Time Warner Cable, Inc. (A)
5.400% due 07/02/12 4,980 4,994
5.850% due 05/01/17 2,205 2,218
6.550% due 05/01/37 5,450 5,512
Time Warner Entertainment Co., LP
Series *
8.375% due 03/15/23 1,006 1,198
Time Warner, Inc.
5.590% due 11/13/09 (E) 2,365 2,369
5.500% due 11/15/11 1,850 1,865
Trump Entertainment Resorts, Inc. (N)
8.500% due 06/01/15 2,820 2,838
Twin Reefs Pass-Through Trust (E)(f)(p)
6.320% due 12/10/49 1,000 1,003
TXU Electric Delivery Co.
7.000% due 09/01/22 420 454
TXU Energy Co. LLC
7.000% due 03/15/13 475 495
</Table>
76 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 144a
5.850% due 09/16/08 4,000 4,000
Unilever Capital Corp.
5.900% due 11/15/32 260 255
Union Pacific Corp.
3.625% due 06/01/10 590 562
6.125% due 01/15/12 800 826
Union Planters Corp.
7.750% due 03/01/11 265 288
UnitedHealth Group, Inc.
5.250% due 03/15/11 810 813
Unum Group
5.859% due 05/15/09 740 746
US Bank NA
5.700% due 12/15/08 55 56
US Oncology, Inc.
9.000% due 08/15/12 1,215 1,294
USB Capital IX (N)(f)
6.189% due 04/15/49 2,115 2,172
USB Realty Corp. (f)(p)
6.091% due 12/22/49 3,600 3,636
Valero Logistics Operations, LP
6.050% due 03/15/13 2,517 2,570
Verizon Communications, Inc.
5.399% due 04/03/09 4,800 4,800
5.850% due 09/15/35 (N) 1,895 1,820
Verizon Global Funding Corp.
7.250% due 12/01/10 800 854
Verizon, Inc.
6.500% due 09/15/11 70 73
Viacom, Inc.
5.711% due 06/16/09 (E) 1,470 1,474
5.750% due 04/30/11 1,855 1,880
6.875% due 04/30/36 2,750 2,785
Visteon Corp. (N)
8.250% due 08/01/10 1,700 1,734
Wachovia Bank NA
Series BKNT
5.356% due 06/27/08 (E) 800 800
5.420% due 05/25/10 3,800 3,807
Series DPNT
5.390% due 03/23/09 (E) 1,500 1,500
Wachovia Capital Trust III
5.800% due 03/15/42 (f) 7,065 7,170
Wachovia Corp.
5.410% due 10/28/08 (N) 3,000 3,003
5.496% due 10/15/11 1,800 1,802
Wal-Mart Stores, Inc.
5.255% due 06/16/08 1,900 1,898
Washington Mutual Preferred
Funding II (f)(p)
6.665% due 12/31/49 (N) 600 598
Washington Mutual, Inc.
8.250% due 04/01/10 755 815
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
WellPoint, Inc.
4.250% due 12/15/09 1,142 1,119
5.850% due 01/15/36 2,450 2,367
Wells Fargo & Co.
5.455% due 09/15/09 2,900 2,905
4.950% due 10/16/13 585 577
Wells Fargo Bank NA
5.750% due 05/16/16 1,000 1,031
Westpac Banking Corp.
Series DPNT
5.280% due 06/06/08 1,300 1,300
Willis North America, Inc.
5.125% due 07/15/10 1,490 1,464
Wimar Opco LLC/Wimar Opco Finance Corp. (p)
9.625% due 12/15/14 1,545 1,568
Windstream Corp.
Series WI
8.125% due 08/01/13 1,395 1,514
8.625% due 08/01/16 375 412
Wyeth
6.950% due 03/15/11 5,090 5,414
5.500% due 02/01/14 2,105 2,129
5.950% due 04/01/37 3,155 3,155
Xcel Energy, Inc.
6.500% due 07/01/36 840 884
Xlliac Global Funding
4.800% due 08/10/10 730 721
Yum! Brands, Inc.
8.875% due 04/15/11 350 393
ZFS Finance USA Trust II (N)
6.450% due 12/15/35 2,505 2,534
Zurich Capital Trust I (p)
8.376% due 06/01/37 1,830 1,911
--------------
841,723
--------------
International Debt - 5.2%
Abbey National PLC (f)
6.700% due 06/29/49 1,220 1,238
Abu Dhabi National Energy Co. (p)
5.875% due 10/27/16 1,945 1,965
6.500% due 10/27/36 5,010 5,087
Aiful Corp. (N)
5.000% due 08/10/10 200 197
</Table>
Multistrategy Bond Fund 77
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Altos Hornos de Mexico
SA de CV (o)(N)
Series A
11.375% due 04/30/49 3,155 2,366
America Movil SAB de CV
5.500% due 03/01/14 500 499
Amvescap PLC
4.500% due 12/15/09 2,987 2,935
5.625% due 04/17/12 2,780 2,796
ANZ National International, Ltd. (E)(p)
5.400% due 08/07/09 2,800 2,798
Arlington Street CDO, Ltd. (p)
Series 2000-1A Class A2
7.660% due 06/10/12 1,680 1,661
Aspen Insurance Holdings, Ltd.
6.000% due 08/15/14 200 200
AXA SA
8.600% due 12/15/30 355 457
6.379% due 12/14/49 (f)(p) 400 391
6.463% due 12/31/49 (f)(p) 400 388
Banco Mercantil del Norte SA (f)(p)
6.862% due 10/13/21 2,455 2,520
Barclays Bank PLC (f)(p)
7.375% due 06/29/49 1,910 2,076
Brascan Corp.
7.125% due 06/15/12 675 723
British Telecommunications PLC
8.625% due 12/15/10 180 201
9.125% due 12/15/30 2,510 3,500
Brookfield Asset Management, Inc.
5.800% due 04/25/17 1,300 1,302
C10 Capital SPV, Ltd. (f)(p)
6.722% due 12/01/49 1,500 1,507
Canadian Natural Resources, Ltd.
5.700% due 05/15/17 1,725 1,730
5.850% due 02/01/35 (N) 75 71
6.500% due 02/15/37 1,790 1,842
6.250% due 03/15/38 2,500 2,482
Canadian Oil Sands, Ltd. (p)
4.800% due 08/10/09 981 968
Catalyst Paper Corp.
Series D
8.625% due 06/15/11 3,810 3,862
China Development Bank
5.000% due 10/15/15 300 296
CIT Group Funding Co. of Canada (N)
5.600% due 11/02/11 820 826
Citigroup Global Markets Deutschland AG for OAO
Gazprom
10.500% due 10/21/09 1,300 1,453
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Conoco Funding Co.
6.350% due 10/15/11 3,405 3,579
Corp. Nacional del Cobre de Chile
6.150% due 10/24/36 100 104
Cosan Finance, Ltd. (p)
7.000% due 02/01/17 2,035 2,015
Deutsche ALT-A Securities NIM Trust (p)
Series 2007-AHM Class N1
6.750% due 02/25/47 1,471 1,470
Deutsche Telekom International Finance BV
5.546% due 03/23/09 2,200 2,204
8.000% due 06/15/10 550 595
5.375% due 03/23/11 (N) 475 478
8.250% due 06/15/30 1,100 1,381
DNB Nor Bank ASA (E)(p)
5.430% due 10/13/09 7,100 7,099
Egypt Government AID Bonds
4.450% due 09/15/15 2,950 2,854
Endurance Specialty Holdings, Ltd. (N)
6.150% due 10/15/15 500 500
Export-Import Bank of China (p)
4.875% due 07/21/15 1,725 1,686
Export-Import Bank of Korea
4.125% due 02/10/09 (p) 170 167
5.125% due 02/14/11 970 969
Falconbridge, Ltd.
7.250% due 07/15/12 275 301
6.000% due 10/15/15 1,870 1,935
FBG Finance, Ltd. (p)
5.125% due 06/15/15 585 562
Federative Republic of Brazil
6.000% due 01/17/17 2,185 2,227
FMG Finance Pty, Ltd. (N)(p)
10.625% due 09/01/16 5,915 6,921
France Telecom SA
8.500% due 03/01/31 1,295 1,706
Galaxy Entertainment Finance Co., Ltd. (N)
9.875% due 12/15/12 2,755 3,017
Gaz Capital for Gazprom (A)
6.212% due 11/22/16 2,155 2,177
Gazinvest Luxembourg SA for Gazprombank
7.250% due 10/30/08 2,300 2,348
</Table>
78 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Harborview NIM Corp. (p)
Series 2006-8A Class N1
6.409% due 07/21/36 1,142 1,132
Series 2006-9A Class N1
6.409% due 11/19/36 1,554 1,551
Series 2007-14 Class N1
6.409% due 12/19/36 1,260 1,256
Series 2007-1A Class N1
6.409% due 03/19/37 1,243 1,234
HBOS PLC (f)(p)
5.920% due 09/29/49 1,200 1,181
HBOS Treasury Services PLC (E)(p)
Series MTN
5.400% due 07/17/09 2,900 2,903
HSBC Holdings PLC
6.500% due 05/02/36 1,010 1,082
Inco, Ltd.
5.700% due 10/15/15 1,050 1,046
Indonesia Government International Bond (A)
6.625% due 02/17/37 2,275 2,252
Intelsat Bermuda, Ltd.
Series WI
11.250% due 06/15/16 2,230 2,545
Ispat Inland ULC
9.750% due 04/01/14 2,885 3,213
Korea Development Bank
5.490% due 04/03/10 8,900 8,899
Korea Electric Power Corp. (p)
5.125% due 04/23/34 400 397
LG Electronics, Inc. (p)
5.000% due 06/17/10 390 385
Mantis Reef, Ltd. (p)
4.692% due 11/14/08 585 580
Mexico Government International Bond (N)
Series MTNA
6.750% due 09/27/34 1,675 1,868
Mizuho Financial Group Cayman, Ltd.
5.790% due 04/15/14 (p) 1,150 1,174
Series REGS
5.790% due 04/15/14 185 187
Montpelier Re Holdings, Ltd.
6.125% due 08/15/13 2,165 2,139
MUFG Capital Finance 1, Ltd. (f)
6.346% due 07/29/49 6,415 6,552
Nationwide Building Society (p)
4.250% due 02/01/10 1,535 1,499
Nippon Life Insurance (p)
4.875% due 08/09/10 2,535 2,498
Norske Skogindustrier ASA (p)
7.125% due 10/15/33 2,765 2,533
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Orascom Telecom Finance SCA (N)(p)
7.875% due 02/08/14 1,700 1,679
Peru Enhanced Pass-Through Finance, Ltd.
Zero coupon due 05/31/18 1,200 822
Zero coupon due 05/31/25 (p) 2,371 966
Petroleum Export, Ltd. (p)
5.265% due 06/15/11 172 168
Poland Government International Bond
Series RSTA
4.750% due 10/27/24 750 732
Province of Quebec Canada
5.000% due 07/17/09 30 30
Series PJ
6.125% due 01/22/11 4,080 4,245
Ras Laffan Liquefied Natural Gas Co., Ltd. II
(p)
5.298% due 09/30/20 2,000 1,929
Ras Laffan Liquefied Natural Gas Co., Ltd. III
(p)
5.832% due 09/30/16 2,280 2,303
5.838% due 09/30/27 6,220 5,964
Reliance Industries, Ltd. (p)
10.250% due 01/15/97 750 1,101
Resona Bank, Ltd. (f)(p)
5.850% due 09/29/49 5,635 5,608
Resona Preferred Global Securities Cayman, Ltd.
(f)(p)
7.191% due 12/29/49 9,800 10,359
Rogers Wireless, Inc.
6.375% due 03/01/14 4,365 4,507
Royal Bank of Scotland Group PLC
Series 1 (f)
9.118% due 03/31/49 4,025 4,443
Royal Bank of Scotland PLC
5.410% due 07/21/08 800 801
5.760% due 07/06/12 7,600 7,604
Russia Government International Bond (p)
5.000% due 03/31/30 2,985 3,392
Series REGS
5.000% due 03/31/30 1,140 1,296
Salomon Brothers AG for OAO Siberian Oil Co.
Series REGS
10.750% due 01/15/09 3,125 3,379
</Table>
Multistrategy Bond Fund 79
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Santander Financial Issuances
6.375% due 02/15/11 335 349
Santander US Debt SA Unipersonal
5.410% due 09/19/08 4,300 4,310
5.408% due 11/20/09 2,800 2,808
Sanwa Finance Aruba AEC (N)
8.350% due 07/15/09 1,510 1,607
Sappi Papier Holding AG (p)
6.750% due 06/15/12 1,055 1,060
7.500% due 06/15/32 3,165 3,000
Seagate Technology HDD Holdings
6.800% due 10/01/16 1,990 1,973
Secunda International, Ltd. (E)
13.360% due 09/01/12 660 685
Security Capital Assurance, Ltd. (f)(A)
6.880% due 12/31/49 1,830 1,863
Shimao Property Holdings, Ltd. (p)
8.000% due 12/01/16 940 974
Shinsei Finance II (f)(N)(p)
7.160% due 07/25/49 1,170 1,212
Siemens Financieringsmaatschappij NV (p)
5.410% due 08/14/09 (E) 1,500 1,500
6.125% due 08/17/26 3,195 3,261
SMFG Preferred Capital, Ltd. (f)(p)
6.078% due 01/29/49 1,000 1,003
Stora Enso OYJ
7.250% due 04/15/36 1,595 1,637
Sumitomo Mitsui Banking Corp.
5.625% due 07/29/49 655 646
Systems 2001 AT LLC (p)
7.156% due 12/15/11 378 392
6.664% due 09/15/13 373 393
Telecom Italia Capital SA
4.000% due 01/15/10 3,976 3,856
4.875% due 10/01/10 950 938
5.970% due 07/18/11 (E) 4,755 4,792
5.250% due 10/01/15 1,260 1,211
6.000% due 09/30/34 1,050 979
7.200% due 07/18/36 2,680 2,867
Telefonica Emisiones SAU
5.665% due 06/19/09 (E) 2,695 2,705
5.984% due 06/20/11 1,330 1,366
6.421% due 06/20/16 960 1,005
7.045% due 06/20/36 1,335 1,432
Telefonica Europe BV
7.750% due 09/15/10 1,930 2,079
8.250% due 09/15/30 (N) 1,400 1,682
Telefonos de Mexico SA de CV
4.500% due 11/19/08 3,658 3,617
TELUS Corp.
8.000% due 06/01/11 2,905 3,174
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
TNK-BP Finance SA (N)(p)
6.125% due 03/20/12 400 399
6.625% due 03/20/17 2,665 2,663
Transocean, Inc. (E)
5.566% due 09/05/08 2,000 2,001
Tyco International Group SA
6.750% due 02/15/11 2,260 2,404
UFJ Finance Aruba AEC
6.750% due 07/15/13 220 237
Unicredit Luxembourg Finance SA (E)(p)
5.410% due 10/24/08 5,345 5,346
Vale Overseas, Ltd.
6.250% due 01/11/16 460 471
6.250% due 01/23/17 3,435 3,523
6.875% due 11/21/36 (N) 2,215 2,349
Vedanta Resources PLC (p)
6.625% due 02/22/10 1,190 1,196
Venezuela Government International Bond (N)
9.375% due 01/13/34 885 1,109
Vodafone Group PLC
5.750% due 03/15/16 725 733
6.150% due 02/27/37 1,750 1,725
VTB Capital SA (p)
5.960% due 08/01/08 3,300 3,303
Westfield Capital Corp., Ltd./WT Finance Aust
Pty Ltd/WEA Finance LLC (p)
5.125% due 11/15/14 700 687
Westfield Group (p)
5.400% due 10/01/12 827 833
Woori Bank (p)
6.208% due 05/02/37 2,565 2,559
XL Capital, Ltd. (f)
Series E
6.500% due 12/31/49 5,305 5,236
Xstrata Finance Canada, Ltd. (p)
5.500% due 11/16/11 485 488
5.800% due 11/15/16 480 483
Xstrata Finance Dubai, Ltd. (E)(p)
5.710% due 11/13/09 885 886
--------------
303,073
--------------
Loan Agreements - 0.6%
ALLTEL Holding Corp., Term Loan
6.850% due 07/17/13 2,035 2,043
Avis Budget Holdings, Term Loan
6.610% due 04/19/12 487 487
</Table>
80 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
AWAS, Second Lien Term Loan
11.375% due 03/21/13 613 621
Coffeyville Resources, LLC
8.349% due 12/28/13 599 602
Ford Motor Co.
8.360% due 12/15/13 6,489 6,521
General Motors Corp.
7.725% due 11/01/13 1,900 1,914
7.725% due 11/29/13 1,100 1,108
Georgia-Pacific Corp., Term Loan B
7.340% due 12/01/12 2,607 2,620
7.090% due 12/20/12 1,397 1,404
HCA, Inc. Term Loan B
7.600% due 12/30/13 3,192 3,192
Healthsouth Corp., Term Loan B
7.820% due 03/10/13 393 395
7.850% due 03/10/13 3,488 3,510
Hexion Specialty Chemicals
7.875% due 05/05/13 498 502
Idearc, Inc., Term Loan B
7.350% due 11/17/14 898 903
Landsource Communities Development LLC
8.070% due 02/19/13 698 705
Lyondell Chemical Co., Term Loan
7.110% due 08/16/13 2,296 2,304
Talecris Biotherapeutics, Inc., Second Lien Term
Loan
11.860% due 12/06/14 800 824
Travelport Holdings, Ltd.
12.350% due 03/01/13 3,110 3,114
United Airlines, Inc.
7.375% due 02/01/14 1,000 999
Visteon Corp., Term Loan B
8.380% due 06/13/13 1,900 1,914
--------------
35,682
--------------
Mortgage-Backed Securities - 37.9%
Adjustable Rate Mortgage Trust
Series 2005-3 Class 8A2
5.560% due 07/25/35 2,035 2,040
American Home Mortgage Assets (E)
Series 2006-2 Class 2A2
5.550% due 09/25/46 2,409 2,416
Series 2006-4 Class 1A11
5.510% due 08/30/36 3,091 3,094
Series 2007-1 Class A1
5.710% due 02/25/47 4,960 4,956
Series 2007-2 Class A1
5.445% due 03/25/47 4,500 4,494
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
American Home Mortgage Investment Trust
Series 2004-1 Class 1A (E)
5.670% due 04/25/44 337 338
Series 2004-4 Class 4A (E)
4.390% due 02/25/45 1,194 1,180
Series 2005-2 Class 5A2
5.470% due 09/25/35 365 365
Series 2005-3 Class 3A2
5.500% due 09/25/35 389 389
Series 2005-4 Class 1A1
5.610% due 11/25/45 1,566 1,571
Series 2006-3 Class 12A1 (E)
5.510% due 12/25/46 6,632 6,638
Series 2007-1 Class GA1C (E)
5.510% due 04/25/37 6,300 6,298
Asset Backed Funding Certificates
Series 2006-OPT Class A3A
5.380% due 11/25/36 807 807
Banc of America Alternative Loan Trust
Series 2005-1 Class 2A1
5.500% due 02/25/20 3,449 3,464
Series 2006-6 Class CB6
6.000% due 07/25/46 2,247 2,257
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 3,140 3,116
Series 2004-4 Class A3
4.128% due 07/10/42 2,160 2,112
Series 2005-2 Class A4
4.783% due 07/10/43 3,125 3,070
Series 2005-3 Class A2
4.501% due 07/10/43 1,720 1,688
Series 2005-5 Class A4
5.115% due 10/10/45 6,255 6,161
Series 2005-6 Class A4
5.181% due 09/10/47 14,500 14,436
Series 2006-1 Class A4
5.372% due 09/10/45 2,520 2,523
Series 2006-3 Class A4
5.889% due 07/10/44 3,385 3,506
Series 2006-4 Class A4
5.669% due 07/10/46 9,430 9,595
Series 2007-1 Class A4
5.451% due 01/15/49 1,200 1,211
Banc of America Funding Corp.
Series 2005-5 Class 1A11
5.500% due 09/25/35 1,010 990
</Table>
Multistrategy Bond Fund 81
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2005-8 Class 1A1
5.500% due 01/25/36 1,203 1,180
Series 2005-D Class A1 (E)
4.113% due 05/25/35 1,440 1,417
Series 2005-F Class 1A2 (E)
5.670% due 09/20/35 451 453
Series 2006-3 Class 5A8
5.500% due 03/25/36 3,710 3,713
Series 2006-A Class 3A2
5.899% due 02/20/36 1,605 1,619
Series 2006-A Class 4A1
5.580% due 02/20/36 4,111 4,124
Series 2006-H Class 4A4
6.210% due 09/20/46 1,592 1,607
Banc of America Mortgage Securities, Inc.
Series 2003-9 Class 1A12 (E)
5.770% due 12/25/33 4,992 5,011
Series 2003-D Class 1A2 (E)
6.850% due 05/25/33 4 4
Series 2004-1 Class 5A1
6.500% due 09/25/33 87 88
Series 2004-11 Class 2A1
5.750% due 01/25/35 3,243 3,206
Series 2004-D Class 1A1 (E)
3.512% due 05/25/34 670 673
Series 2005-9 Class 2A1
4.750% due 10/25/20 1,198 1,181
Series 2005-I Class 2A2
4.871% due 10/25/35 4,103 4,063
Series 2005-L Class 3A1
5.459% due 01/25/36 1,899 1,896
Series 2006-2 Class A15
6.000% due 07/25/36 3,357 3,390
Bank of America Alternative Loan Trust
Series 2003-10 Class 2A1
6.000% due 12/25/33 582 584
Series 2003-10 Class 2A2 (E)
5.770% due 12/25/33 1,931 1,941
Series 2003-2 Class CB2
5.820% due 04/25/33 819 823
Series 2004-2 Class 1A1
6.000% due 03/25/34 399 401
Series 2004-10 Class 1CB1
6.000% due 11/25/34 382 385
Series 2004-11 Class 1CB1
6.000% due 12/25/34 440 444
Series 2005-3 Class 2A1
5.500% due 04/25/20 573 571
Series 2005-5 Class 2CB1
6.000% due 06/25/35 699 701
Series 2005-6 Class 7A1
5.500% due 07/25/20 759 757
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2005-9 Class 5A1
5.500% due 10/25/20 897 893
Series 2006-5 Class CB17
6.000% due 06/25/36 2,532 2,563
Bayview Financial Acquisition Trust (E)
Series 2006-C Class 2A1
5.430% due 11/28/36 1,423 1,423
Bear Stearns Adjustable Rate Mortgage Trust
Series 2002-11 Class 1A2
5.336% due 02/25/33 49 49
Series 2003-1 Class 6A1
5.056% due 04/25/33 142 143
Series 2003-8 Class 4A1
4.623% due 01/25/34 532 534
Series 2005-10 Class A1 (E)
4.750% due 10/25/35 3,776 3,738
Series 2007-1 Class 3A2
5.801% due 02/25/47 3,541 3,554
Series 2007-3 Class 1A1
5.500% due 05/25/47 7,250 7,257
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.383% due 05/25/35 2,183 2,184
Series 2005-8 Class 11A1
5.590% due 10/25/35 3,873 3,880
Series 2006-3 Class 33A1
6.174% due 05/25/36 1,777 1,802
Series 2006-3 Class 34A1
6.161% due 05/25/36 1,662 1,685
Bear Stearns Asset Backed Securities Trust
Series 2005-AC8 Class A5
5.500% due 11/25/35 1,046 1,043
Bear Stearns Commercial Mortgage Securities
Series 2004-ESA Class E (p)
5.064% due 05/14/16 825 824
Series 2005-PW1 Class A4
5.405% due 12/11/40 3,500 3,517
Bear Stearns Mortgage Funding Trust (E)
Series 2006-AR1 Class 1A2
5.570% due 07/25/36 2,032 2,029
Series 2006-AR2 Class 1A1
5.520% due 09/25/36 9,601 9,564
</Table>
82 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-AR2 Class 2A1
5.550% due 10/25/36 2,405 2,396
Series 2006-AR3 Class 1A1
5.550% due 03/25/36 2,208 2,198
Series 2006-AR4 Class A1
5.530% due 04/25/36 2,766 2,754
Series 2006-AR5 Class 1A1
5.480% due 12/25/36 9,828 9,777
Series 2007-AR2 Class A1
5.490% due 03/25/37 2,750 2,744
Series 2007-AR3 Class 1A1
5.450% due 08/25/36 4,150 4,138
Bear Stearns Structured Products, Inc. (p)
Series 2007-N3 Class 10C
Interest Only STRIP
Zero coupon due 04/27/37 81,725 3,184
Carrington Mortgage Loan Trust (E)
Series 2007-FRE Class A1
5.400% due 02/25/37 4,100 4,099
Chase Mortgage Finance Corp.
Series 2003-S8 Class A1
4.500% due 09/25/18 1,890 1,817
Series 2003-S8 Class A2
5.000% due 09/25/18 1,846 1,832
Series 2006-S4 Class A3
6.000% due 12/25/36 2,900 2,929
Series 2006-S4 Class A4
6.000% due 12/25/36 1,525 1,535
Series 2007-A1 Class 1A3
4.370% due 02/25/37 2,959 2,932
Series 2007-A1 Class 4A1
Zero coupon due 02/25/37 1,000 991
Citigroup Mortgage Loan Trust, Inc.
Series 2005-11 Class A2A
4.700% due 12/25/35 345 341
Series 2006-WF1 Class A2F
5.657% due 03/01/36 1,925 1,922
Series 2006-WFH Class A2
5.420% due 11/25/36 6,300 6,296
Series 2007-AR1 Class A1 (E)
5.400% due 01/25/37 1,478 1,479
Citigroup/Deutsche Bank Commercial Mortgage
Trust
Series 2005-CD1 Class A4
5.226% due 07/15/44 4,000 3,997
Series 2006-CD3 Class A5
5.617% due 10/15/48 2,605 2,647
Citimortgage Alternative Loan Trust
Series 2006-A3 Class 1A5
6.000% due 07/25/36 1,975 1,988
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Commercial Mortgage Pass Through Certificates
Series 2001-J1A Class A2 (p)
6.457% due 02/16/34 679 703
Series 2006-C7 Class A2
5.690% due 06/10/46 825 838
Countrywide Alternative Loan Trust
Series 2004-28C Class 6A1
6.000% due 01/25/35 610 612
Series 2004-2CB Class 1A4
5.720% due 03/25/34 996 1,000
Series 2004-J7 Class 1A2
4.673% due 08/25/34 247 244
Series 2004-J8 Class 1A1
7.000% due 09/25/34 612 628
Series 2005-38 Class A3
5.670% due 09/25/35 2,001 2,009
Series 2005-51 Class 1A1
5.640% due 11/20/35 2,409 2,414
Series 2005-56 Class 2A2 (E)
7.050% due 11/25/35 1,482 1,505
Series 2005-56 Class 3A1
5.610% due 11/25/35 776 777
Series 2005-56 Class 4A1
5.630% due 11/25/35 1,573 1,577
Series 2005-58 Class A2 (E)
5.710% due 12/20/35 1,538 1,544
Series 2005-59 Class 1A1
5.650% due 11/20/35 3,571 3,583
Series 2005-59 Class 1A2B (E)
5.610% due 11/20/35 760 761
Series 2005-62 Class 1A1
5.620% due 12/25/35 2,357 2,374
Series 2005-63 Class 3A1
5.894% due 11/25/35 1,282 1,289
Series 2005-76 Class 2A2 (E)
6.683% due 02/25/36 1,807 1,826
Series 2005-81 Class X1
Interest Only STRIP
2.371% due 02/25/37 6,631 350
Series 2005-85C Class 2A2
5.500% due 02/25/36 107 107
Series 2005-J8 Class 1A3
5.500% due 07/25/35 2,401 2,401
Series 2005-J13 Class 2A3
5.500% due 11/25/35 1,229 1,229
Series 2006-2CB Class A3
5.500% due 03/25/36 963 960
Series 2006-43C Class 1A7
6.000% due 02/25/37 4,140 4,177
</Table>
Multistrategy Bond Fund 83
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-9T1 Class A7
6.000% due 05/25/36 1,323 1,336
Series 2006-J2 Class A3
6.000% due 04/25/36 1,950 1,971
Series 2006-OA1 Class 1XP
Interest Only STRIP
18.200% due 10/25/36 20,952 1,026
Series 2006-OA1 Class 2X
Interest Only STRIP
1.790% due 03/20/46 9,051 405
Series 2006-OA1 Class 4A1 (E)
5.510% due 08/25/46 3,720 3,718
Series 2006-OA1 Class A1 (E)
5.500% due 02/20/47 7,690 7,675
Series 2006-OA1 Class A1A (E)
5.370% due 09/25/46 1,137 1,137
Series 2006-OA1 Class XBJ
Interest Only STRIP
2.098% due 08/25/46 6,429 251
Series 2006-OA2 Class A1 (E)
5.480% due 02/25/47 3,757 3,748
Series 2006-OA2 Class CP (p)
Interest Only STRIP
2.080% due 09/25/35 23,919 1,224
Series 2006-OA2 Class X
Interest Only STRIP
1.275% due 03/20/47 19,422 1,062
Series 2006-OA6 Class 1A3
5.590% due 04/25/36 1,444 1,449
Series 2007-OA3 Class 1A1
5.460% due 04/25/47 5,136 5,128
Series 2007-OA4 Class A1
5.480% due 05/25/47 5,525 5,530
Countrywide Home Equity Loan Trust (E)
Series 2007-C Class A
5.470% due 06/15/34 10,000 9,989
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2003-56 Class 3A5
4.150% due 12/25/33 834 828
Series 2004-16 Class 1A1
5.720% due 09/25/34 2,579 2,588
Series 2005-3 Class 1A3 (E)
5.560% due 04/25/35 270 270
Series 2005-23 Class A1
5.500% due 11/25/35 3,194 3,133
Series 2005-29 Class A1
5.750% due 12/25/35 1,813 1,806
Series 2005-HYB Class 3A2A
5.250% due 02/20/36 406 404
Series 2006-1 Class A2
6.000% due 03/25/36 1,015 1,015
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-1 Class A3
6.000% due 03/25/36 358 356
Series 2006-HYB Class 3A1A
6.104% due 05/20/36 1,689 1,739
Series 2006-OA5 Class 2A1 (E)
5.520% due 04/25/46 4,229 4,225
Series 2007-HY1 Class 1A2
5.736% due 04/25/37 1,209 1,210
Credit Suisse First Boston Mortgage Securities
Corp.
Series 1998-C2 Class A2
6.300% due 11/15/30 1,129 1,141
Series 2001-CKN Class A4
5.435% due 09/15/34 8,000 8,061
Series 2001-SPG Class A2
6.515% due 08/13/18 800 840
Series 2003-29 Class 5A1
7.000% due 12/25/33 130 133
Series 2004-1 Class 3A1
7.000% due 02/25/34 57 58
Series 2004-C1 Class A3
4.321% due 01/15/37 2,780 2,711
Credit Suisse Mortgage Capital Certificates
Series 2006-C1 Class AAB
5.555% due 02/15/39 1,480 1,502
Series 2006-C4 Class A3
5.467% due 09/15/39 3,350 3,366
Crown Castle Towers LLC (p)
Series 2005-1A Class C
5.074% due 06/15/35 591 588
Series 2006-1A Class B
5.362% due 11/15/36 995 996
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2005-AR1 Class 2A3
5.012% due 08/25/35 3,735 3,808
Series 2007-OA1 Class A1 (E)
5.470% due 02/25/47 4,069 4,059
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 1,900 1,906
Series 1999-CG1 Class S
Interest Only STRIP
0.813% due 03/10/32 18,229 299
Downey Savings & Loan Association Mortgage Loan
Trust
Series 2004-AR3 Class 1A1B (E)
7.240% due 07/19/44 745 754
</Table>
84 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-AR1 Class 2A1A
5.823% due 04/19/47 1,998 2,005
Series 2006-AR2 Class 2A1A (E)
5.520% due 11/19/37 2,383 2,388
Fannie Mae
7.000% due 2009 38 38
8.000% due 2010 -- --
5.363% due 2012 (E) 2,158 2,173
6.500% due 2015 18 18
5.500% due 2016 90 90
6.000% due 2016 960 976
11.000% due 2016 93 103
5.000% due 2017 739 729
5.500% due 2017 473 475
6.000% due 2017 584 592
6.500% due 2017 747 766
8.000% due 2017 38 39
4.000% due 2018 5,375 5,104
4.500% due 2018 22,699 22,038
5.000% due 2018 16,372 16,182
6.500% due 2018 295 303
4.500% due 2019 2,252 2,187
5.000% due 2019 5,519 5,448
6.500% due 2019 138 142
4.500% due 2020 2,507 2,435
5.000% due 2020 6,770 6,681
5.500% due 2020 483 484
6.500% due 2020 54 56
8.000% due 2020 6 6
5.000% due 2021 6,510 6,420
6.500% due 2022 78 81
6.500% due 2024 1,833 1,881
7.500% due 2024 10 11
8.000% due 2024 87 93
6.500% due 2025 1,086 1,115
7.000% due 2025 3 3
6.954% due 2026 (E) 255 259
7.000% due 2026 251 262
9.000% due 2026 42 45
7.000% due 2027 8 8
7.500% due 2027 8 8
6.500% due 2028 374 384
7.000% due 2028 511 534
5.500% due 2029 1,720 1,710
6.500% due 2029 834 859
7.000% due 2029 2,229 2,331
7.500% due 2029 52 55
6.500% due 2030 192 199
7.000% due 2030 908 948
7.500% due 2030 396 415
8.000% due 2030 530 559
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
8.500% due 2030 723 780
9.500% due 2030 94 103
6.500% due 2031 725 748
7.000% due 2031 1,791 1,871
7.500% due 2031 499 525
8.000% due 2031 697 737
8.500% due 2031 407 439
6.000% due 2032 4,359 4,422
6.500% due 2032 2,132 2,198
7.000% due 2032 6,114 6,376
7.500% due 2032 305 320
8.000% due 2032 3 3
8.500% due 2032 58 62
3.907% due 2033 (E) 2,499 2,491
4.678% due 2033 (E) 1,477 1,488
5.000% due 2033 4,933 4,785
5.500% due 2033 13,120 13,008
6.000% due 2033 959 971
6.500% due 2033 1,310 1,348
7.000% due 2033 687 716
5.000% due 2034 10,863 10,526
5.500% due 2034 59,145 58,627
6.000% due 2034 2,815 2,843
6.500% due 2034 1,803 1,850
7.000% due 2034 382 397
7.500% due 2034 200 209
4.151% due 2035 (E) 4,232 4,218
4.833% due 2035 (E) 4,314 4,315
4.551% due 2035 (E) 2,648 2,648
5.000% due 2035 7,588 7,340
5.500% due 2035 123,524 122,344
6.000% due 2035 3,275 3,304
6.500% due 2035 128 132
7.000% due 2035 1,055 1,089
7.500% due 2035 1,994 2,080
5.000% due 2036 32,144 31,101
5.500% due 2036 10,270 10,160
6.000% due 2036 8,601 8,656
6.500% due 2036 1,345 1,374
7.000% due 2036 985 1,017
7.500% due 2036 10,328 10,725
5.253% due 2037 (E) 3,775 3,789
5.534% due 2037 (E) 4,125 4,134
6.029% due 2037 (E) 4,000 4,022
6.283% due 2040 (E) 621 635
Series 1992-10 Class ZD
8.000% due 11/25/21 721 724
Series 1993-134 Class H
6.500% due 08/25/08 240 241
Series 1996-46 Class ZA
7.500% due 11/25/26 250 259
</Table>
Multistrategy Bond Fund 85
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 1997-281 Class 2
Interest Only STRIP
9.000% due 11/01/26 44 11
Series 1997-68 Class SC
Interest Only STRIP
3.156% due 05/18/27 113 11
Series 1999-56 Class Z
7.000% due 12/18/29 1,238 1,299
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 97 21
Series 2001-4 Class SA
Interest Only STRIP
2.230% due 02/17/31 226 16
Series 2002-320 Class 2
Interest Only STRIP
7.000% due 03/01/32 31 7
Series 2002-50 Class SC
Interest Only STRIP
2.780% due 12/25/29 7 --
Series 2003-122 Class AJ
4.500% due 02/25/28 410 402
Series 2003-16 Class NI
Interest Only STRIP
5.000% due 02/25/15 382 11
Series 2003-25 Class IK
Interest Only STRIP
7.000% due 04/25/33 353 81
Series 2003-32 Class FH
5.720% due 11/25/22 3,013 3,022
Series 2003-32 Class UI
Interest Only STRIP
6.000% due 05/25/33 453 100
Series 2003-33 Class IA
Interest Only STRIP
6.500% due 05/25/33 1,999 449
Series 2003-337 Class 1
Principal Only STRIP
Zero coupon due 07/01/33 3,076 2,288
Series 2003-343 Class 6
Interest Only STRIP
5.000% due 10/01/33 2,985 623
Series 2003-345 Class 18
Interest Only STRIP
4.500% due 12/01/18 9,910 1,412
Series 2003-345 Class 19
Interest Only STRIP
4.500% due 01/01/19 11,046 1,568
Series 2003-35 Class IU
Interest Only STRIP
6.000% due 05/25/33 480 106
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2003-35 Class UI
Interest Only STRIP
6.500% due 05/25/33 479 110
Series 2003-64 Class JI
Interest Only STRIP
6.000% due 07/25/33 487 112
Series 2003-78 Class FI
5.720% due 01/25/33 2,866 2,887
Series 2003-82 Class IA
Interest Only STRIP
6.000% due 08/25/32 429 54
Series 2003-82 Class WI
Interest Only STRIP
6.000% due 08/25/32 71 9
Series 2004-21 Class FL
5.670% due 11/25/32 1,449 1,456
Series 2005-110 Class MB
5.500% due 09/25/35 1,875 1,891
Series 2005-65 Class FP
5.570% due 08/25/35 622 622
Series 2005-69 Class IO
Interest Only STRIP
Zero coupon due 08/25/35 52 7
Series 2006-369 Class 8
Interest Only STRIP
5.500% due 04/01/36 2,613 610
Series 2006-371 Class 2
Interest Only STRIP
6.500% due 07/01/36 165 32
Series 2006-373 Class 1
Principal Only STRIP
Zero coupon due 07/01/36 3,182 2,420
15 Year TBA (I)
4.500% 12,630 12,223
5.000% 21,420 21,112
5.500% 23,455 23,484
6.000% 39,910 40,546
30 Year TBA (I)
4.500% 5,815 5,462
5.000% 119,555 115,483
5.500% 144,890 143,260
6.000% 145,340 146,423
6.500% 31,040 31,690
7.000% 35,165 36,300
Fannie Mae Grantor Trust
Series 1999-T2 Class A1
7.500% due 01/19/39 39 40
</Table>
86 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2001-T8 Class A2
9.500% due 07/25/41 211 228
Fannie Mae REMIC
Series 1993-41 Class ZQ
7.000% due 12/25/23 2,216 2,319
Series 1993-42 Class ZQ
6.750% due 04/25/23 1,529 1,559
Series 2005-36 Class AI
Interest Only STRIP
5.500% due 10/25/26 2,810 204
Series 2006-90 Class Z
6.000% due 09/25/36 604 602
Series 2006-118 Class A1
5.380% due 12/25/36 576 575
Series 2006-118 Class A2 (E)
5.380% due 12/25/36 1,579 1,578
Series 2006-48 Class LG
Principal Only STRIP
Zero coupon due 06/25/36 790 582
Series 2006-5 Class 3A2
4.673% due 05/25/35 500 497
Fannie Mae Whole Loan
Series 2003-W17 Class 1A6
5.310% due 08/25/33 5,400 5,365
Series 2004-W9 Class 2A1
6.500% due 02/25/44 320 328
Series 2004-W11 Class 1A2
6.500% due 05/25/44 576 591
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2003-58 Class 2A
6.500% due 09/25/43 306 313
Series 2005-63 Class 1A1
6.133% due 02/25/45 201 202
FHA PJ Reilly 67 NCP
7.430% due 07/01/24 63 63
First Horizon Alternative Mortgage Securities
Series 2004-AA3 Class A1 (E)
5.300% due 09/25/34 453 452
Series 2005-AA2 Class 1A1
5.065% due 03/25/35 410 411
Series 2005-AA5 Class 1A1
5.310% due 07/25/35 473 472
Series 2006-AA5 Class A2 (E)
6.626% due 09/25/36 1,853 1,901
Series 2006-FA3 Class A6
6.000% due 07/25/36 2,135 2,159
First Horizon Asset Securities, Inc.
Series 2003-5 Class 1A17
8.000% due 07/25/33 130 138
Series 2004-AR5 Class 4A1 (E)
5.682% due 10/25/34 420 420
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2005-AR5 Class 3A1
5.540% due 10/25/35 889 893
First Union-Lehman Brothers-Bank of America
Series 1998-C2 Class A2
6.560% due 11/18/35 14 14
Freddie Mac
12.000% due 2013 12 12
12.000% due 2014 15 17
11.000% due 2015 12 14
10.000% due 2016 53 58
12.000% due 2016 -- --
4.500% due 2018 2,435 2,364
5.000% due 2018 4,017 3,973
4.000% due 2019 12,590 11,916
4.500% due 2019 330 321
5.000% due 2019 5,897 5,826
4.500% due 2020 2,486 2,412
5.000% due 2020 15,056 14,857
11.000% due 2020 55 62
5.000% due 2021 1,618 1,599
4.613% due 2034 (E) 1,485 1,500
4.911% due 2034 (E) 2,768 2,762
5.748% due 2034 (E) 220 224
4.815% due 2035 (E) 2,680 2,674
4.859% due 2035 (E) 4,543 4,542
6.000% due 2035 1,802 1,810
5.891% due 2036 (E) 1,641 1,660
5.952% due 2036 (E) 3,100 3,135
5.971% due 2036 (E) 1,555 1,577
5.636% due 2037 (E) 3,860 3,887
5.758% due 2037 (E) 5,875 6,024
Series 1991-103 Class Z
9.000% due 02/15/21 56 56
Series 1994-173 Class Z
7.000% due 05/15/24 330 346
Series 1999-212 Class SG (E)
Interest Only STRIP
1.625% due 06/17/27 1,726 116
Interest Only STRIP
Series 2000-224 Class SC
Interest Only STRIP
2.180% due 08/15/30 71 4
Series 2000-226 Class F
5.770% due 11/15/30 91 92
</Table>
Multistrategy Bond Fund 87
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2001-229 Class KF (E)
5.570% due 07/25/22 1,302 1,287
Series 2001-232 Class ZQ
6.500% due 06/15/31 1,523 1,592
Series 2002-246 Class SJ
Interest Only STRIP
2.680% due 03/15/32 252 21
Series 2003-256 Class IM
Interest Only STRIP
5.000% due 09/15/14 495 16
Series 2003-259 Class IQ
Interest Only STRIP
5.000% due 06/15/17 1,385 161
Series 2003-262 Class AB
2.900% due 11/15/14 2,588 2,517
Series 2003-264 Class IM
Interest Only STRIP
7.000% due 07/15/33 433 103
Series 2003-266 Class MA
4.500% due 10/15/31 796 782
Series 2004-276 Class IP
Interest Only STRIP
5.500% due 07/15/23 1,501 58
Series 2004-277 Class UF
5.620% due 06/15/33 3,596 3,607
Series 2004-281 Class DF
5.770% due 06/15/23 742 749
Series 2004-287 Class GC
5.000% due 11/15/29 520 514
Series 2004-289 Class PC
5.000% due 07/15/30 1,060 1,047
Series 2005-291 Class KP
5.000% due 11/15/29 1,155 1,142
Series 2005-292 Class IG
Interest Only STRIP
5.000% due 04/15/23 1,339 198
Series 2005-292 Class NA
5.000% due 12/15/20 1,018 1,015
Series 2005-294 Class FA
5.490% due 03/15/20 1,451 1,452
Series 2005-302 Class MB
5.000% due 12/15/28 640 635
Series 2005-303 Class AQ
4.500% due 10/15/22 3,076 3,054
Series 2005-305 Class JF
5.620% due 10/15/35 714 715
Series 2005-306 Class PC
5.000% due 02/15/29 1,795 1,781
Series 2006-313 Class FP (E)
Zero coupon due 04/15/36 992 1,019
30 Year TBA (I)
5.000% 18,830 18,196
5.500% 18,550 18,341
6.000% 6,510 6,563
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Freddie Mac Gold
6.000% due 2016 122 123
5.000% due 2018 679 671
5.500% due 2020 7,436 7,460
8.000% due 2020 129 136
10.500% due 2021 32 35
6.500% due 2025 5 5
8.500% due 2025 33 35
7.000% due 2027 238 248
8.500% due 2027 187 201
7.500% due 2028 144 152
6.500% due 2029 163 168
6.500% due 2030 8 8
7.243% due 2030 (E) 8 8
7.500% due 2030 240 251
8.000% due 2030 58 61
8.500% due 2030 208 224
6.500% due 2031 1,467 1,512
7.000% due 2031 480 499
7.500% due 2031 155 162
8.000% due 2031 280 294
6.000% due 2032 138 140
7.000% due 2032 264 275
7.500% due 2032 138 145
5.000% due 2033 1,888 1,837
5.500% due 2033 5,275 5,230
6.000% due 2033 301 306
6.500% due 2033 459 473
7.000% due 2033 652 678
7.500% due 2033 114 120
5.500% due 2034 1,798 1,781
6.000% due 2034 1,003 1,015
5.000% due 2035 870 842
Series 1998-191 Class IO
Interest Only STRIP
8.000% due 01/01/28 37 9
Series 1998-194 Class IO
Interest Only STRIP
6.500% due 04/01/28 237 56
Series 2001-212 Class IO
Interest Only STRIP
6.000% due 05/01/31 361 78
Series 2001-215 Class IO
Interest Only STRIP
8.000% due 06/01/31 165 39
</Table>
88 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Freddie Mac Reference REMIC
Series 2006-R00 Class AK
5.750% due 12/15/18 2,594 2,608
Series 2006-R00 Class FK (E)
5.720% due 07/15/23 5,681 5,716
Freddie Mac REMICS
Series 2003-256 Class FJ (E)
5.720% due 02/15/33 1,934 1,954
Series 2003-258 Class IG
Interest Only STRIP
4.500% due 10/15/16 973 96
Series 2003-269 Class FE
5.920% due 12/15/28 3,137 3,171
Series 2003-269 Class QG
4.500% due 01/15/29 3,145 3,067
Series 2004-277 Class KE
3.500% due 12/15/17 499 497
Series 2005-299 Class KF (E)
5.720% due 06/15/35 686 686
Series 2005-300 Class ED
5.000% due 07/15/25 1,655 1,590
Series 2005-301 Class IM
Interest Only STRIP
5.500% due 01/15/31 2,385 294
Series 2006-313 Class X
Zero coupon due 04/15/36 180 181
Series 2006-314 Class LF
5.620% due 05/15/36 600 603
Series 2006-316 Class X
Zero coupon due 06/15/36 453 425
Series 2006-323 Class PA
6.000% due 03/15/26 3,105 3,148
Freddie Mac Strips
Series 2007-245 Class IO
Interest Only STRIP
5.000% due 03/01/37 5,080 1,308
Series 2007-245 Class PO
Principal Only STRIP
Zero coupon due 11/15/36 5,090 3,619
GE Capital Commercial Mortgage Corp.
Series 2002-1A Class A3
6.269% due 12/10/35 745 777
Series 2002-3A Class A1
4.229% due 12/10/37 3,734 3,661
Series 2006-C1 Class A4
5.518% due 03/10/44 1,010 1,013
Ginnie Mae I
11.000% due 2010 16 18
11.000% due 2013 9 10
10.500% due 2015 44 48
11.000% due 2015 3 3
10.500% due 2016 70 78
8.000% due 2017 -- --
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
10.500% due 2021 62 71
8.000% due 2022 24 25
10.000% due 2022 66 74
9.500% due 2023 262 285
8.000% due 2025 18 20
10.000% due 2025 77 86
8.000% due 2030 315 337
7.500% due 2031 53 55
8.000% due 2031 2 2
8.000% due 2032 16 17
7.000% due 2034 1,366 1,444
30 Year TBA (I)
5.500% 20,925 20,807
6.000% 4,830 4,895
Ginnie Mae II
5.125% 2023 157 159
5.375% 2023 281 284
5.750% 2023 20 20
6.125% 2023 154 156
5.375% 2024 48 48
5.750% 2024 140 141
6.125% 2024 156 158
5.375% 2025 292 295
5.750% 2025 9 9
6.125% 2025 13 13
6.125% 2026 67 67
8.500% 2026 43 46
5.375% 2027 108 109
5.750% 2027 168 170
6.125% 2029 394 399
Global Signal Trust
Series 2004-2A Class A
4.232% due 12/15/14 1,070 1,042
Series 2006-1 Class B (p)
5.588% due 02/15/36 750 756
Series 2006-1 Class C (p)
5.707% due 02/15/36 635 641
GMAC Commercial Mortgage Securities, Inc.
Series 1999-C2 Class A2
6.945% due 09/15/33 2,727 2,800
GMAC Mortgage Corp. Loan Trust
Series 2005-AR2 Class 4A (E)
5.191% due 05/25/35 1,364 1,352
Series 2005-AR6 Class 3A1
5.298% due 11/19/35 3,061 3,054
</Table>
Multistrategy Bond Fund 89
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-HE3 Class A2
5.799% due 10/25/36 1,720 1,721
Government National Mortgage Association
Series 1999-27 Class SE (E)
Interest Only STRIP
3.280% due 08/16/29 107 9
Series 1999-40 Class FE (E)
5.870% due 11/16/29 1,035 1,045
Series 1999-44 Class SA (E)
Interest Only STRIP
3.230% due 12/16/29 204 18
Series 2001-46 Class SA (E)
Interest Only STRIP
2.260% due 09/16/31 39 2
Series 2003-5 Class B
4.486% due 10/16/25 795 783
Greenpoint Mortgage Funding Trust
Series 2005-AR3 Class X1
Interest Only STRIP
1.273% due 08/25/45 5,719 174
Series 2005-AR4 Class X4
Interest Only STRIP
2.300% due 10/25/45 7,291 241
Series 2006-AR2 Class 3A2 (E)
5.640% due 03/25/36 1,741 1,743
Series 2006-AR5 Class A1A
5.400% due 10/25/46 2,695 2,696
Series 2006-AR6 Class A1A (E)
5.400% due 10/25/46 1,046 1,046
Series 2006-AR8 Class 1A1A
5.400% due 01/25/47 896 896
Series 2007-AR1 Class 2A1A
5.520% due 03/25/47 5,975 5,988
Series 2007-AR2 Class 1A4A
5.490% due 04/25/47 5,525 5,525
Greenwich Capital Commercial Funding Corp.
Series 2003-C2 Class A2
4.022% due 01/05/36 2,630 2,573
Series 2004-GG1 Class A7
5.317% due 06/10/36 4,950 4,966
Series 2005-GG5 Class A41
5.243% due 04/10/37 2,680 2,680
Series 2006-RR1 Class A1
5.964% due 03/18/49 2,185 2,129
Series 2007-GG9 Class A4
5.444% due 03/10/39 13,890 13,951
GS Mortgage Securities Corp.
Series 2006-OA1 Class A
Interest Only STRIP
3.527% due 08/25/35 4,750 184
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
GS Mortgage Securities Corp. II
Series 2006-FL8 Class A1 (E)
5.420% due 06/06/20 627 627
Series 2006-GG6 Class A4
5.553% due 04/10/38 1,660 1,682
Series 2006-GG8 Class A4
5.560% due 11/10/39 11,460 11,611
Series 2006-GG8 Class AAB
5.535% due 11/10/39 2,250 2,279
Series 2006-RR2 Class A1 (p)
5.639% due 01/07/36 925 941
Series 2006-RR3 Class A1S (p)
5.466% due 03/18/49 6,315 6,374
GSMPS Mortgage Loan Trust (p)
Series 1998-3 Class A
7.750% due 09/19/27 143 150
Series 1999-3 Class A
8.000% due 08/19/29 267 282
Series 2005-RP1 Class 1A3
8.000% due 01/25/35 787 836
Series 2005-RP1 Class 1A4
8.500% due 01/25/35 885 947
Series 2006-RP1 Class 1A3
8.000% due 01/25/36 498 511
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.402% due 06/25/34 1,310 1,318
Series 2005-AR6 Class 2A1 (E)
4.539% due 09/25/35 4,350 4,304
Series 2006-1F Class 5A2
6.000% due 02/25/36 584 580
Series 2006-OA1 Class 2A1 (E)
5.510% due 08/25/46 2,327 2,329
Harborview Mortgage Loan Trust
Series 2005-2 Class 2A1A (E)
5.540% due 05/19/35 198 198
Series 2005-2 Class X
Interest Only STRIP
2.276% due 05/19/35 8,056 216
Series 2005-3 Class X2
Interest Only STRIP
1.976% due 06/19/35 7,907 179
Series 2005-5 Class 2A1B (E)
5.610% due 07/19/45 515 516
Series 2005-10 Class 2A1A (E)
5.630% due 11/19/35 2,629 2,637
</Table>
90 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2005-10 Class 2A1B (E)
5.700% due 11/19/35 876 880
Series 2005-14 Class 3A1A
5.313% due 12/19/35 908 909
Series 2005-15 Class 2A11
5.590% due 10/20/45 2,178 2,184
Series 2005-16 Class 3A1A (E)
5.570% due 01/19/36 2,677 2,682
Series 2005-16 Class 3A1B
5.660% due 01/19/36 1,130 1,132
Series 2005-16 Class X1
Interest Only STRIP
2.850% due 01/19/36 4,694 144
Series 2005-16 Class X3
Interest Only STRIP
2.610% due 01/19/36 11,653 331
Series 2006-1 Class 2A1A (E)
5.560% due 03/19/37 1,451 1,454
Series 2006-1 Class PO1
Principal Only STRIP
Zero coupon due 03/19/37 4 3
Series 2006-1 Class X1
Interest Only STRIP
2.635% due 03/19/37 8,727 384
Series 2006-5 Class PO2
Principal Only STRIP
Zero coupon due 07/19/47 -- --
Series 2006-5 Class X2
Interest Only STRIP
2.193% due 07/19/47 12,898 512
Series 2006-7 Class 2A1B (E)
5.570% due 08/19/46 1,908 1,912
Series 2006-9 Class 2A1A (E)
5.530% due 11/19/36 2,483 2,480
Series 2006-10 Class 2A1A (E)
5.500% due 11/19/36 2,862 2,850
Series 2006-10 Class 2A1B
5.560% due 11/19/36 3,339 3,327
Series 2006-12 Class 2A2A (E)
5.510% due 01/19/38 17,841 17,855
Series 2006-14 Class 2A1A (E)
5.470% due 03/19/38 5,922 5,925
Series 2006-14 Class 2A1B (E)
5.520% due 03/19/38 1,958 1,960
Series 2007-1 Class 2A1A (E)
5.450% due 03/19/37 1,857 1,856
Impac CMB Trust
Series 2004-3 Class 1A
5.570% due 06/25/34 372 372
Impac Secured Assets CMN Owner Trust
Series 2005-2 Class A1
5.640% due 03/25/36 1,722 1,727
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-4 Class A2A
5.400% due 01/25/37 752 752
Indymac Index Mortgage Loan Trust
Series 2005-AR1 Class AX2
Interest Only STRIP
1.390% due 07/25/35 6,433 204
Series 2005-AR2 Class 1A21
5.863% due 12/25/35 938 945
Series 2005-AR3 Class 1A1
5.175% due 01/25/36 2,030 2,058
Series 2006-AR1 Class 1A1A
5.410% due 11/25/46 696 698
Series 2006-AR2 Class A2 (E)
5.400% due 11/25/36 1,812 1,812
Series 2006-AR6 Class 2A1B
5.570% due 06/25/47 2,223 2,231
Series 2006-FLX Class A1 (E)
5.530% due 11/25/36 1,610 1,604
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C1 Class A3
5.376% due 07/12/37 1,180 1,188
Series 2002-C2 Class A2
5.050% due 12/12/34 12,000 11,879
Series 2003-C1 Class A2
4.985% due 01/12/37 1,618 1,600
Series 2004-LN2 Class A1
4.475% due 07/15/41 4,095 4,004
Series 2005-LDP Class A3A1
4.871% due 10/15/42 3,620 3,569
Series 2005-LDP Class A4
4.918% due 10/15/42 1,345 1,307
5.345% due 12/15/44 3,120 3,111
Series 2006-CB1 Class A4
5.814% due 06/12/43 3,775 3,891
5.429% due 12/12/43 1,405 1,413
5.817% due 05/12/45 3,435 3,474
Series 2006-LDP Class A3
5.336% due 05/15/47 1,730 1,718
Series 2006-LDP Class A3B
5.447% due 05/15/45 3,080 3,104
Series 2006-LDP Class A4
6.066% due 04/15/45 1,955 2,033
5.561% due 05/15/45 3,005 3,002
Series 2006-LDP Class AJ
5.876% due 04/15/45 1,110 1,145
</Table>
Multistrategy Bond Fund 91
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-RR1 Class A1
5.455% due 10/18/52 7,350 7,082
Series 2007-CB1 Class A4
5.440% due 06/12/47 3,975 4,007
Series 2007-LDP Class A3
5.393% due 01/15/49 1,630 1,631
JP Morgan Mortgage Trust
Series 2005-A1 Class 4A1 (E)
4.776% due 02/25/35 1,701 1,670
Series 2005-A4 Class 1A1
5.405% due 07/25/35 855 852
Series 2005-A6 Class 1A2
5.146% due 09/25/35 1,470 1,485
Series 2007-A1 Class 1A1 (E)
4.202% due 07/25/35 990 976
Series 2007-A1 Class 2A2
4.767% due 07/25/35 985 979
Series 2007-A1 Class 4A2
4.071% due 07/25/35 994 977
Series 2007-A1 Class 5A2
4.771% due 07/25/35 981 974
LB-UBS Commercial Mortgage Trust
Series 2002-C1 Class A4
6.462% due 03/15/31 65 68
Series 2003-C3 Class A1
2.599% due 05/15/27 490 480
Series 2004-C4 Class A3
5.153% due 06/15/29 4,310 4,325
Series 2006-C1 Class A4
5.156% due 02/15/31 4,000 3,944
Series 2006-C4 Class A4
5.899% due 06/15/38 1,605 1,672
Lehman Brothers Floating Rate Commercial
Mortgage Trust (p)
Series 2006-LLF Class A1
5.400% due 09/15/21 344 344
Series 2006-LLF Class A2
5.440% due 09/15/21 1,766 1,765
Lehman Mortgage Trust
Series 2005-2 Class 2A3
5.500% due 12/25/35 958 959
Series 2005-3 Class 1A3
5.500% due 01/25/36 5,113 5,131
Lehman XS Trust
Series 2005-5N Class 1A1
5.620% due 11/25/35 1,210 1,213
Series 2005-5N Class 3A1A (E)
5.620% due 11/25/35 2,535 2,536
Series 2005-9N Class 1A1 (E)
5.590% due 02/25/36 766 768
Series 2006-16N Class A4A (E)
5.510% due 11/25/46 3,995 3,993
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Luminent Mortgage Trust
Series 2006-1 Class A1
5.560% due 04/25/36 2,076 2,080
Series 2006-3 Class 11A2
5.570% due 09/25/35 1,225 1,229
Series 2006-6 Class A1 (E)
5.600% due 10/25/46 1,706 1,709
Master Adjustable Rate Mortgages Trust
Series 2005-7 Class 2A2
5.369% due 09/25/35 2,699 2,711
Series 2006-2 Class 4A1
4.991% due 02/25/36 5,618 5,580
Mastr Adjustable Rate Mortgages Trust
Series 2005-6 Class 7A1
5.375% due 06/25/35 527 525
Series 2006-2 Class 3A1
4.849% due 01/25/36 813 805
Series 2006-OA2 Class 4A1A (E)
5.830% due 12/25/46 2,881 2,881
Mastr Alternative Loans Trust
Series 2003-4 Class B1
5.668% due 06/25/33 1,524 1,556
Series 2003-6 Class 3A1
8.000% due 09/25/33 110 113
Series 2003-9 Class 1A1
5.500% due 12/25/18 403 401
Series 2004-10 Class 5A6
5.750% due 09/25/34 1,810 1,807
Series 2005-3 Class 7A1
6.000% due 04/25/35 747 751
Mastr Asset Securitization Trust
Series 2003-11 Class 6A8
5.820% due 12/25/33 3,531 3,550
Series 2003-7 Class 4A35 (E)
5.720% due 09/25/33 2,968 2,972
Series 2004-4 Class 2A2 (E)
5.770% due 04/25/34 754 754
Series 2005-2 Class 1A1
5.250% due 11/25/35 1,381 1,366
Mastr Reperforming Loan Trust (p)
Series 2005-1 Class 1A5
8.000% due 08/25/34 651 690
Series 2005-2 Class 1A4
8.000% due 05/25/35 959 984
Mastr Specialized Loan Trust (p)
Series 2005-2 Class A2
5.006% due 07/25/35 449 435
</Table>
92 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Mellon Residential Funding Corp. (E)
Series 2000-TBC Class A1
5.800% due 06/15/30 950 951
Merrill Lynch Floating Trust
Series 2006-1 Class A1
5.390% due 06/15/22 3,825 3,825
Merrill Lynch Mortgage Investors, Inc.
Series 2005-A6 Class 2A1 (E)
5.440% due 08/25/35 489 490
Series 2005-A8 Class A1B1
5.250% due 08/25/36 2,638 2,622
Merrill Lynch Mortgage Trust
Series 2002-MW1 Class J (p)
5.695% due 07/12/34 365 361
Series 2004-MKB Class A2
4.353% due 02/12/42 2,865 2,817
Series 2005-CIP Class A2
4.960% due 07/12/38 225 224
Series 2005-GGP Class E (p)
4.330% due 11/15/10 185 184
Series 2005-GGP Class F (p)
4.351% due 11/15/10 180 179
Merrill Lynch/Countrywide
Commercial Mortgage Trust
Series 2007-5 Class A4
5.378% due 08/12/48 4,005 4,010
MLCC Mortgage Investors, Inc.
Series 2004-HB1 Class A2
5.771% due 04/25/29 370 370
Morgan Stanley Capital I
Series 1999-FNV Class G
6.120% due 03/15/31 400 403
Series 2005-IQ1 Class AAB
5.178% due 09/15/42 3,305 3,295
Series 2006-HQ8 Class A4
5.388% due 03/12/44 2,035 2,052
Series 2006-HQ9 Class A4
5.731% due 07/20/44 2,124 2,174
Morgan Stanley Dean Witter Capital I
Series 2001-TOP Class A3
6.200% due 07/15/33 243 243
Series 2001-TOP Class E
7.313% due 02/15/33 180 191
Morgan Stanley Mortgage Loan Trust
Series 2006-11 Class 1A6
6.231% due 08/25/36 2,510 2,574
Series 2006-2 Class 6A
6.500% due 02/25/36 662 673
Nomura Asset Acceptance Corp.
Series 2005-WF1 Class 2A2
4.786% due 03/25/35 1,285 1,269
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-AF1 Class 1A2
6.159% due 05/25/36 1,525 1,545
Nomura Asset Securities Corp.
Series 1998-D6 Class A1B
6.590% due 03/15/30 747 752
Prime Mortgage Trust
Series 2004-CL1 Class 1A1
6.000% due 02/25/34 388 390
Series 2004-CL1 Class 1A2 (E)
5.720% due 02/25/34 166 167
Series 2004-CL1 Class 2A2 (E)
5.720% due 02/25/19 44 44
Residential Accredit Loans, Inc.
Series 2004-QS5 Class A6
5.920% due 04/25/34 405 407
Series 2004-QS8 Class A4
5.720% due 06/25/34 2,797 2,810
Series 2005-QA1 Class A41
5.690% due 09/25/35 1,509 1,511
Series 2005-QA8 Class NB3
5.499% due 07/25/35 1,888 1,900
Series 2005-QO4 Class 2A1
5.600% due 12/25/45 3,143 3,149
Series 2006-QH1 Class A1 (E)
5.510% due 12/25/36 2,138 2,139
Series 2006-QO1 Class 1A1
5.580% due 02/25/46 653 653
Series 2006-QO1 Class 2A1
5.590% due 02/25/46 706 707
Series 2006-QO6 Class A2 (E)
5.550% due 06/25/46 2,421 2,417
Series 2006-QS6 Class 1A13
6.000% due 06/25/36 4,760 4,791
Series 2007-QH1 Class A1
5.480% due 02/25/37 2,110 2,106
Series 2007-QH2 Class A1 (E)
5.460% due 02/25/37 4,000 4,000
Series 2007-QO3 Class A1 (E)
5.480% due 02/25/47 7,200 7,119
Series 2007-QO3 Class SB (p)
Principal Only STRIP
Zero coupon due 02/25/47 24,750 1,423
Residential Asset Mortgage Products, Inc.
Series 2004-SL1 Class A3
7.000% due 11/25/31 158 160
Series 2004-SL4 Class A3
6.500% due 07/25/32 415 423
</Table>
Multistrategy Bond Fund 93
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2005-SL1 Class A2
6.000% due 05/25/32 575 582
Residential Asset Securities Corp.
Series 2003-KS4 Class AIIB
5.610% due 06/25/33 404 405
Residential Asset Securitization Trust
Series 2003-A15 Class 1A2
5.770% due 02/25/34 3,275 3,285
Residential Funding Mortgage Securities I
Series 2003-S5 Class 1A2 (E)
5.770% due 11/25/18 1,111 1,117
Series 2003-S14 Class A5
5.720% due 07/25/18 2,297 2,306
Series 2003-S20 Class 1A7 (E)
5.820% due 12/25/33 270 271
Series 2006-SA3 Class 3A1
6.058% due 09/25/36 1,404 1,421
Series 2006-SA4 Class 2A1
6.164% due 10/25/36 3,264 3,317
SBA CMBS Trust (A)
Series 2006-1A Class B
5.451% due 11/15/36 2,060 2,070
Sequoia Mortgage Trust
Series 2004-3 Class A
5.670% due 04/20/34 3,487 3,488
Small Business Administration
Series 1999-P10 Class 1
7.540% due 08/10/09 412 425
Series 2000-10B Class 1
7.452% due 09/01/10 347 362
Small Business Administration Participation
Certificates
Series 2004-20F Class 1
5.520% due 06/01/24 335 341
Series 2005-20G Class 1
4.750% due 07/01/25 2,764 2,697
Structured Adjustable Rate Mortgage Loan Trust
Series 2004-18 Class 5A
5.500% due 12/25/34 462 461
Series 2005-19X Class 1A1
5.640% due 10/25/35 1,154 1,158
Series 2005-22 Class 4A2
5.379% due 12/25/35 133 132
Series 2006-1 Class 2A3
5.623% due 02/25/36 1,650 1,653
Series 2006-5 Class 5A4
5.575% due 06/25/36 319 318
Structured Asset Mortgage Investments, Inc.
Series 2006-AR1 Class 3A1
5.550% due 02/25/36 858 859
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-AR3 Class 11A2
5.590% due 04/25/36 2,361 2,361
Series 2006-AR3 Class 3A1
5.510% due 02/25/36 999 1,000
Series 2006-AR6 Class 1A3
5.510% due 07/25/36 2,386 2,390
Series 2006-AR8 Class A1A (E)
5.520% due 10/25/36 8,538 8,505
Structured Asset Securities Corp.
Series 2002-22H Class 1A
6.954% due 11/25/32 96 98
Series 2004-12H Class 1A
6.000% due 05/25/34 398 399
Series 2004-21X Class 1A3
4.440% due 12/25/34 4,630 4,579
Series 2005-6 Class B2
5.344% due 05/25/35 282 268
Thornburg Mortgage Securities Trust (E)
Series 2003-2 Class A1
5.660% due 04/25/43 1,714 1,715
Series 2006-5 Class A1
5.440% due 08/25/36 5,287 5,278
Series 2006-6 Class A1
5.430% due 12/25/36 2,065 2,064
Tobacco Settlement Authority of Iowa
6.500% due 06/01/23 395 395
Wachovia Bank Commercial Mortgage Trust
Series 2005-C16 Class A2
4.380% due 10/15/41 4,840 4,745
Series 2005-C21 Class A4
5.196% due 10/15/44 4,000 3,988
Series 2006-C28 Class A2
5.500% due 10/15/48 1,510 1,524
Series 2006-WL7 Class A1 (E)(p)
5.410% due 09/15/21 7,904 7,904
Series 2006-WL7 Class A2 (E)(p)
5.440% due 09/15/21 1,875 1,875
Washington Mutual Alternative Mortgage
Pass-Through Certificates
Series 2005-4 Class CB11
5.500% due 06/25/35 980 964
Series 2005-9 Class 3CB
5.500% due 10/25/20 660 660
</Table>
94 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2006-2 Class 2CB
6.500% due 03/25/36 895 910
Series 2006-5 Class 2CB3
6.000% due 07/25/36 1,400 1,418
Series 2006-AR2 Class A1A
5.823% due 04/25/46 1,717 1,725
Series 2006-AR5 Class 3A (E)
5.920% due 07/25/46 1,029 1,035
Series 2006-AR7 Class A1A (E)
5.900% due 09/25/46 1,672 1,681
Series 2006-AR8 Class 2A (E)
5.830% due 10/25/46 3,621 3,640
Series 2006-AR9 Class 2A (E)
5.820% due 11/25/46 3,863 3,863
Series 2007-OA2 Class 2A (E)
5.633% due 01/25/47 1,853 1,851
Washington Mutual Mortgage
Pass-Through Certificates
Series 2002-AR9 Class 1A
6.380% due 08/25/42 530 531
Series 2003-S9 Class A2
5.870% due 10/25/33 3,057 3,072
Series 2003-S10 Class A2
5.000% due 10/25/18 644 638
Series 2004-AR1 Class A2C (E)
5.635% due 07/25/44 2 2
Series 2004-AR1 Class A3 (E)
5.635% due 10/25/44 8 8
Series 2004-AR1 Class X
Interest Only STRIP
0.547% due 07/25/44 7,660 133
0.376% due 10/25/44 10,395 182
Series 2004-AR8 Class X
Interest Only STRIP
0.548% due 06/25/44 4,365 78
Series 2004-CB3 Class 1A
6.000% due 10/25/34 333 334
Series 2004-CB3 Class 4A
6.000% due 10/25/19 719 727
Series 2005-AR1 Class 1A1
4.838% due 10/25/35 2,489 2,458
Series 2005-AR1 Class A1A
5.640% due 08/25/45 1,880 1,885
Series 2005-AR1 Class A1A1
5.610% due 10/25/45 5,180 5,186
5.580% due 11/25/45 (E) 1,920 1,926
Series 2005-AR1 Class A1A2
5.610% due 12/25/45 947 951
Series 2005-AR1 Class A1B1
5.610% due 08/25/45 278 278
5.580% due 10/25/45 628 629
5.570% due 11/25/45 657 659
5.570% due 12/25/45 1,021 1,022
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2005-AR1 Class A1B3 (E)
5.670% due 12/25/45 1,396 1,400
Series 2005-AR6 Class B3 (E)
5.980% due 04/25/45 1,837 1,836
Series 2005-AR8 Class 2A1A (E)
5.610% due 07/25/45 1,086 1,088
Series 2005-AR8 Class 2AB3
5.680% due 07/25/45 819 821
Series 2006-AR1 Class 1A (E)
5.860% due 10/25/46 2,713 2,727
5.800% due 12/25/46 1,770 1,776
5.670% due 01/25/47 940 939
Series 2006-AR1 Class 1A4
5.664% due 11/25/36 7,841 7,887
Series 2006-AR1 Class 2A
5.890% due 09/25/46 784 785
Series 2006-AR1 Class 3A1A (E)
5.900% due 09/25/46 945 950
Series 2006-AR4 Class 1A1B
5.823% due 05/25/46 1,626 1,632
Series 2006-AR7 Class 1A (E)
5.963% due 07/25/46 736 739
Series 2006-AR8 Class 1A5
5.917% due 08/25/46 278 282
Series 2006-AR8 Class 2A3 (E)
6.151% due 08/25/46 188 191
Series 2007-HY3 Class 4A1
5.357% due 03/25/37 8,799 8,767
Series 2007-HY3 Class 4B1
5.358% due 03/25/37 1,475 1,458
Series 2007-OA2 Class 1A (E)
5.680% due 03/25/47 1,922 1,920
Washington Mutual, Inc.
Series 2005-AR1 Class A1A2
5.600% due 11/25/45 1,536 1,542
5.610% due 12/25/45 1,643 1,648
Series 2006-AR1 Class 1A1
5.967% due 09/25/36 1,468 1,486
Wells Fargo Mortgage Backed Securities Trust
Series 2004-T Class A1 (E)
4.420% due 09/25/34 521 525
Series 2005-12 Class 1A7
5.500% due 11/25/35 1,559 1,521
Series 2005-14 Class 2A1
5.500% due 12/25/35 2,514 2,466
</Table>
Multistrategy Bond Fund 95
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 2005-17 Class 1A1
5.500% due 01/25/36 2,091 2,048
Series 2005-17 Class 1A2
5.500% due 01/25/36 1,215 1,186
Series 2005-18 Class 1A1
5.500% due 01/25/36 7,816 7,657
Series 2006-1 Class A3
5.000% due 03/25/21 1,427 1,398
Series 2006-2 Class 2A3
5.500% due 03/25/36 3,831 3,832
Series 2006-2 Class 3A1
5.750% due 03/25/36 9,517 9,482
Series 2006-4 Class 1A8
5.750% due 04/25/36 902 913
Series 2006-4 Class 2A3
5.750% due 04/25/36 667 661
Series 2006-7 Class 2A1
6.000% due 06/25/36 471 471
Series 2006-AR1 Class 1A2 (E)
6.035% due 09/25/36 833 841
Series 2006-AR1 Class 2A2
5.737% due 11/25/36 1,020 1,023
Series 2006-AR1 Class 2A4 (E)
6.119% due 10/25/36 1,206 1,222
Series 2006-AR1 Class 5A1 (E)
5.604% due 07/25/36 1,345 1,347
Series 2006-AR1 Class A1
5.730% due 12/25/36 4,603 4,615
Series 2006-AR1 Class A7
5.534% due 08/25/36 1,613 1,606
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 2,788 2,767
Series 2006-AR4 Class 1A1
5.830% due 04/25/36 1,961 1,964
Series 2006-AR4 Class 2A1
5.704% due 04/25/36 3,056 3,075
Series 2006-AR5 Class 2A1
5.532% due 04/25/36 480 482
Series 2006-AR6 Class 7A1 (E)
5.111% due 03/25/36 8,046 7,956
Zuni Mortgage Loan Trust (E)
Series 2006-OA1 Class A1
5.450% due 08/25/36 3,508 3,505
--------------
2,214,791
--------------
Municipal Bonds - 0.2%
Badger TOB Asset Securitization Corp. Revenue
Bonds weekly demand
6.375% due 06/01/32 700 761
California State University Revenue Bonds weekly
demand (u)
5.000% due 11/01/30 435 460
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
New Jersey Economic Development Authority
Revenue Bonds weekly demand
5.750% due 06/15/34 745 804
New York City Municipal Water Finance Authority
Revenue Bonds weekly demand
4.750% due 06/15/38 1,700 1,742
New York State Urban Development Corp. Revenue
Bonds weekly demand (u)
5.250% due 03/15/34 540 582
State of California General Obligation Unlimited
weekly demand
5.000% due 02/01/33 370 388
State of Illinois General Obligation Unlimited
5.100% due 06/01/33 480 460
State of Oregon General Obligation Unlimited
5.892% due 06/01/27 555 578
State of Texas General Obligation Unlimited
weekly demand
4.750% due 04/01/35 450 458
Tobacco Settlement Financing Corp. Revenue Bonds
weekly demand
5.500% due 06/01/26 1,500 1,594
West Virginia Economic Development Authority
Revenue Bonds (u)
5.370% due 07/01/20 200 200
--------------
8,027
--------------
Non-US Bonds - 1.1%
Argentina Government International Bond
5.830% due 12/31/33 ARS 4,660 2,273
Barclays Bank PLC
Series BRL$
4.861% due 05/19/15 BRL 25,000 19,568
Bombardier, Inc. (A)
7.250% due 11/15/16 EUR 375 541
Colombia Government International Bond
12.000% due 10/22/15 COP 10,945,000 5,980
</Table>
96 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Federative Republic of Brazil
12.500% due 01/05/22 BRL 7,656 5,263
10.250% due 01/10/28 BRL 4,530 2,440
Mexican Bonos
9.500% due 12/18/14 MXN 11,335 1,141
Series M 10
8.000% due 12/17/15 MXN 23,413 2,174
Series M 20
10.000% due 12/05/24 MXN 8,890 985
Norway Government Bond
6.500% due 05/15/13 NOK 42,227 7,697
Province of Quebec Canada
5.000% due 12/01/15 CAD 4,929 4,616
Quebec Residual
Zero coupon due 12/01/36 CAD 3,760 849
Queensland Treasury Corp.
Series 15G
6.000% due 10/14/15 AUD 3,372 2,778
TELUS Corp.
4.950% due 03/15/17 CAD 1,095 910
United Kingdom Gilt
5.750% due 12/07/09 GBP 1,600 3,221
8.000% due 09/27/13 GBP 2,545 5,859
--------------
66,295
--------------
United States Government Agencies - 2.0%
Fannie Mae
2.500% due 06/15/08 3,460 3,365
4.150% due 09/10/09 12,000 11,823
7.250% due 01/15/10 3,025 3,210
3.875% due 02/15/10 5,035 4,918
4.750% due 04/20/10 7,620 7,609
4.375% due 06/21/10 8,000 7,903
5.050% due 02/07/11 6,600 6,654
Zero coupon due 10/09/19 2,155 1,092
Federal Home Loan Bank
4.800% due 05/02/08 18,000 17,955
Series 577
4.500% due 09/26/08 16,900 16,797
Federal Home Loan Bank System
5.375% due 08/19/11 (N) 1,240 1,267
5.310% due 12/28/12 5,500 5,622
Series VX10
4.200% due 05/07/10 9,000 8,832
Financing Corp.
Principal Only STRIP
Series 1
Zero coupon due 05/11/16 400 257
Series 2P
Zero coupon due 11/30/17 330 195
Series 3P
Zero coupon due 11/30/17 885 522
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series 5P
Zero coupon due 02/08/18 490 286
Series 6P
Zero coupon due 08/03/18 2,355 1,337
Series 8P
Zero coupon due 08/03/18 4,660 2,646
Series 9P
Zero coupon due 10/06/17 2,315 1,377
Series 10P
Zero coupon due 11/30/17 3,865 2,280
Series 12P
Zero coupon due 12/06/18 1,770 985
Series 13
Zero coupon due 12/27/16 2,055 1,274
Series 13P
Zero coupon due 12/27/18 5,420 3,007
Series 15P
Zero coupon due 03/07/19 525 288
Series 16P
Zero coupon due 04/05/19 2,320 1,267
Series 19
Zero coupon due 06/06/16 1,185 757
Series A-P
Zero coupon due 10/06/17 345 205
Series B-P
Zero coupon due 04/06/18 785 454
Series C-P
Zero coupon due 11/30/17 1,820 1,074
Series D-P
Zero coupon due 09/26/19 1,340 713
Series E-P
Zero coupon due 11/02/18 855 479
Freddie Mac
4.750% due 01/19/16 155 153
--------------
116,603
--------------
United States Government Treasuries - 13.9%
United States Treasury Principal
Zero coupon due 05/15/30 10,000 3,271
United States Treasury Inflation Indexed Bonds
2.375% due 04/15/11 4,797 4,863
3.375% due 01/15/12 6,972 7,400
3.000% due 07/15/12 6,810 7,145
2.000% due 01/15/14 7,736 7,670
2.000% due 07/15/14 9,655 9,574
1.875% due 07/15/15 6,412 6,275
</Table>
Multistrategy Bond Fund 97
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
2.000% due 01/15/16 -- --
2.500% due 07/15/16 2,609 2,679
2.375% due 01/15/17 13,585 13,797
2.375% due 01/15/25 5,397 5,425
2.000% due 01/15/26 9,857 9,358
2.375% due 01/15/27 5,837 5,880
3.625% due 04/15/28 754 916
United States Treasury Note
4.875% due 01/31/09 95,000 95,304
United States Treasury Notes
3.000% due 02/15/08 130 128
3.375% due 02/15/08 300 296
4.875% due 10/31/08 18,500 18,529
4.750% due 12/31/08 41,725 41,754
4.500% due 03/31/09 32,790 32,716
3.875% due 05/15/09 390 385
4.000% due 06/15/09 1,720 1,700
4.875% due 08/15/09 50,000 50,322
3.375% due 10/15/09 8,805 8,566
3.625% due 01/15/10 9,205 8,991
4.750% due 02/15/10 12,000 12,067
4.000% due 03/15/10 11,715 11,551
4.000% due 04/15/10 150 148
3.625% due 06/15/10 2,860 2,787
4.125% due 08/15/10 1,050 1,038
3.875% due 09/15/10 5,255 5,153
4.375% due 12/15/10 37,345 37,190
4.500% due 02/28/11 590 590
4.875% due 04/30/11 23,725 24,036
4.625% due 08/31/11 8,355 8,394
4.500% due 09/30/11 100,000 99,941
4.625% due 10/31/11 50 50
4.750% due 01/31/12 380 384
4.500% due 03/31/12 11,125 11,116
4.000% due 11/15/12 4,230 4,127
3.875% due 02/15/13 7,100 6,871
4.250% due 08/15/13 4,365 4,301
12.000% due 08/15/13 315 343
Principal Only STRIP
Zero coupon due 11/15/13 1,855 1,380
4.250% due 11/15/13 16,625 16,349
4.750% due 05/15/14 7,035 7,111
13.250% due 05/15/14 510 595
12.500% due 08/15/14 605 709
4.250% due 11/15/14 2,655 2,599
4.125% due 05/15/15 7,050 6,826
4.250% due 08/15/15 18,305 17,853
5.125% due 05/15/16 90 93
4.875% due 08/15/16 590 601
4.625% due 11/15/16 80 80
4.625% due 02/15/17 70 70
8.750% due 05/15/17 1,870 2,475
8.125% due 08/15/19 19,045 24,928
8.125% due 08/15/21 14,495 19,359
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Principal Only STRIP
Zero coupon due 11/15/21 20,475 10,029
7.125% due 02/15/23 10,875 13,552
7.625% due 02/15/25 2,500 3,308
6.000% due 02/15/26 46,280 52,546
6.375% due 08/15/27 7,675 9,128
6.125% due 08/15/29 15,055 17,580
5.375% due 02/15/31 2,660 2,849
4.500% due 02/15/36 26,400 25,035
4.750% due 02/15/37 1,190 1,177
--------------
809,263
--------------
TOTAL LONG-TERM INVESTMENTS
(cost $4,813,968) 4,829,834
--------------
COMMON STOCKS - 0.3%
Financial Services - 0.3%
Emerging Market Local Currency Fund (AE) 1,167,031 13,818
Pacific Investment Management Co. Series High
Yield Portfolio Institutional 111,053 963
--------------
TOTAL COMMON STOCKS
(cost $14,492) 14,781
--------------
PREFERRED STOCKS - 0.1%
Financial Services - 0.1%
DG Funding Trust (f)(A) 361 3,817
Harborview NIM Corp. (AE)(p) 16,979 1,085
--------------
4,902
--------------
Producer Durables - 0.0%
Nexen, Inc. 12,590 321
--------------
TOTAL PREFERRED STOCKS
(cost $5,229) 5,223
--------------
WARRANTS & RIGHTS - 0.0%
Materials and Processing - 0.0%
Solutia, Inc.
2009 Warrants (AE)(p) 1 --
--------------
Miscellaneous - 0.0%
Mexico Government International Bond Value
Recovery Rights (AE)
</Table>
98 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
Series E 3,950 28
--------------
TOTAL WARRANTS & RIGHTS
(cost $84) 28
--------------
<Caption>
NOTIONAL
AMOUNT
$
--------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Eurodollar Futures
Jun 2007 91.25 Put (959) 218,772 6
Jun 2007 94.25 Put (978) 230,441 6
Jun 2007 94.50 Put (130) 30,712 1
Sep 2007 90.50 Put (160) 36,200 1
Sep 2007 90.75 Put (311) 70,558 2
Sep 2007 91.00 Put (85) 19,338 --
Sep 2007 91.25 Put (284) 64,788 2
Sep 2007 94.75 Put (960) 227,400 180
Dec 2007 91.25 Put (608) 138,700 4
Dec 2007 94.50 Put (96) 22,680 5
Dec 2007 94.75 Put (2,322) 550,024 450
Mar 2008 91.75 Put (1,500) 344,063 9
Mar 2008 92.25 Put (2,723) 627,992 17
Mar 2008 93.00 Put (436) 101,370 3
Jun 2008 92.75 Put (472) 109,445 3
Forward Volatility Agreements
(Fund Pays/Fund Receives)
USD/JPY 1 Year
Mar 2010 103.8 Call (1) 1,000 6
JPY/USD 1 Year
Mar 2010 103.8 Put (1) 1,000 6
Swaptions
(Fund Pays/Fund Receives)
EUR Six Month LIBOR/
EUR 3.960%
Jul 2007 0.00 Call (3) 40,939 --
EUR Six Month LIBOR/
EUR 4.100%
Jul 2007 0.00 Call (1) 15,011 --
GBP Six Month LIBOR/
GBP 5.080%
Jun 2007 0.00 Call (2) 7,599 --
USD Three Month LIBOR/
USD 4.850%
Jul 2007 0.00 Call (1) 30,000 1
USD Three Month LIBOR/
USD 4.900%
Jul 2007 0.00 Call (1) 37,000 101
USD Three Month LIBOR/
USD 5.250%
</Table>
<Table>
- --------------------------------------------------------------------------------
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
$ $
--------------
Jul 2007 0.00 Call (1) 72,000 64
USD Three Month LIBOR/
USD 5.370%
Jul 2007 0.00 Call (1) 20,200 161
USD Three Month LIBOR/
USD 5.500%
Jun 2007 0.00 Call (1) 26,000 266
USD Three Month LIBOR/
USD 4.700%
Aug 2007 0.00 Call (1) 18,000 81
USD Three Month LIBOR/
USD 4.800%
Aug 2007 0.00 Call (1) 16,000 65
USD Three Month LIBOR/
USD 4.900%
Aug 2007 0.00 Call (2) 39,000 111
USD Three Month LIBOR/
USD 5.000%
Aug 2007 0.00 Call (1) 47,000 99
USD Three Month LIBOR/
USD 4.900%
Oct 2007 0.00 Call (1) 21,000 71
USD Three Month LIBOR/
USD 4.750%
Feb 2008 0.00 Call (1) 32,000 63
USD Three Month LIBOR/
USD 5.000%
Feb 2008 0.00 Call (1) 47,700 152
USD Three Month LIBOR/
USD 4.750%
Mar 2008 0.00 Call (2) 116,400 602
USD Three Month LIBOR/
USD 4.750%
Sep 2008 0.00 Call (1) 5,000 33
--------------
TOTAL OPTIONS PURCHASED
(cost $3,675) 2,571
--------------
SHORT-TERM INVESTMENTS - 27.4%
Abbey National NA LLC (c)(z)
5.230% due 05/21/07 8,600 8,573
ANZ National International, Ltd.
5.225% due 07/06/07 30,900 30,487
AT&T Wireless Services, Inc. (c)
7.500% due 05/01/07 6,425 6,425
</Table>
Multistrategy Bond Fund 99
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
AT&T, Inc. (p)
4.214% due 06/05/07 1,100 1,099
AXA Financial, Inc.
6.500% due 04/01/08 325 328
Bank of Ireland Governor & Co. (c)(z)
5.240% due 05/01/07 13,600 13,600
5.235% due 05/08/07 8,600 8,590
5.230% due 07/10/07 2,200 2,171
Barclays Bank PLC
5.281% due 03/17/08 9,400 9,404
BNP Paribas Financial, Inc.
5.185% due 07/06/07 22,700 22,308
Capital Auto Receivables Asset Trust
Series 2003-3 Class A3B
5.400% due 01/15/08 62 62
Series 2004-2 Class A2
3.350% due 02/15/08 107 107
Caterpillar Financial Services Corp.
Series MTNF
5.430% due 08/20/07 470 470
3.625% due 11/15/07 160 159
CBA (DE) Finance Discount Notes
5.230% due 07/10/07 32,400 31,972
CIT Group, Inc.
5.750% due 09/25/07 125 125
3.650% due 11/23/07 260 257
Citigroup Funding, Inc.
Zero coupon due 11/15/07 3,010 3,167
Citigroup Global Markets Deutschland for Tyumen
Oil Co.
Series REGS
11.000% due 11/06/07 2,890 2,961
Citigroup Global Markets
Holdings, Inc.
Series MTNM
5.390% due 03/07/08 3,100 3,102
Citigroup, Inc.
4.200% due 12/20/07 3,600 3,574
3.500% due 02/01/08 4,645 4,585
Clorox Co.
5.485% due 12/14/07 705 705
Comcast Cable Communications LLC
8.375% due 05/01/07 110 110
Comcast LCI Holdings
7.625% due 02/15/08 100 102
Daimlerchrysler NA Holding Corp. (c)(z)
5.345% due 06/22/07 2,000 1,984
DaimlerChrysler NA Holding Corp.
4.750% due 01/15/08 300 299
Series MTND
5.820% due 09/10/07 4,200 4,205
</Table>
<Table>
- --------------------------------------------------------------------------------
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
Delphi Corp., Term Loan C
8.125% due 12/31/07 400 401
Donohue Forest Products
7.625% due 05/15/07 665 665
Dresdner Bank AG (p)
Zero coupon due 01/24/08 2,235 2,146
El Paso Corp. (N)
6.950% due 12/15/07 2,600 2,618
Enterprise Products Operating, LP
Series B
4.000% due 10/15/07 860 854
Fannie Mae
4.200% due 03/24/08 11,000 10,902
3.500% due 03/28/08 1,925 1,897
Federal Home Loan Bank System
Series IY08
3.400% due 03/18/08 6,000 5,912
Ford Motor Credit Co. (N)
6.193% due 09/28/07 1,400 1,400
France Treasury Bills BTF
Zero coupon due 05/03/07 1,600 2,183
Zero coupon due 07/05/07 500 678
Freddie Mac
3.450% due 03/12/08 6,000 5,914
Series *
2.750% due 03/15/08 1,060 1,038
General Electric Capital Corp.
Series MTNA (N)
5.445% due 01/15/08 700 701
Golden West Financial Corp.
4.125% due 08/15/07 175 174
Greater Bay Bancorp
Series B
5.250% due 03/31/08 900 898
Harrah's Operating Co., Inc.
7.125% due 06/01/07 1,895 1,897
HSBC Finance Corp.
5.400% due 10/04/07 2,200 2,201
Hyatt Equities LLC (p)
6.875% due 06/15/07 435 435
International Lease Finance Corp.
3.750% due 08/01/07 115 115
IXIS Corp.
5.230% due 06/08/07 30,900 30,729
JP Morgan Chase Bank/London
Series EMtN
Zero coupon due 04/24/08 30,770 5,016
</Table>
100 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
M&I Marshall & Ilsley Bank
Series BKNT
3.800% due 02/08/08 755 746
Mandalay Resort Group
Series B
10.250% due 08/01/07 2,830 2,858
MGM Mirage
9.750% due 06/01/07 2,020 2,028
Mirage Resorts, Inc.
6.750% due 08/01/07 600 601
Morgan Stanley
Series MTNF
5.485% due 01/18/08 1,400 1,401
Motorola, Inc.
4.608% due 11/16/07 793 789
Norfolk Southern Corp.
7.350% due 05/15/07 320 320
Oneok, Inc.
5.510% due 02/16/08 1,835 1,838
Pepco Holdings, Inc.
5.500% due 08/15/07 1,070 1,070
Plantinum Underwriters Financial, Inc.
Series B
6.371% due 11/16/07 405 403
Popular North America, Inc.
4.250% due 04/01/08 370 365
PSEG Energy Holdings LLC
8.625% due 02/15/08 94 96
Reynolds American, Inc.
Series *
6.500% due 06/01/07 450 450
Royal Bank of Scotland (z)
5.265% due 03/26/08 1,000 1,000
Russell Investment Company
Money Market Fund 1,179,699,000 1,179,699
Sempra Energy
4.621% due 05/17/07 335 335
Skandinaviska Enskilda Banken
5.270% due 07/06/07 2,400 2,400
5.340% due 07/06/07 3,000 2,999
Societe Generale NA
5.220% due 05/10/07 10,800 10,786
5.220% due 06/19/07 (c)(z) 14,500 14,397
Starwood Hotels & Resorts Worldwide, Inc. (c)
7.375% due 05/01/07 65 65
Starbound Reinsurance, Ltd.
7.370% due 03/31/08 11,000 11,000
Starbound Reinsurance, Ltd.,
Term Loan B
6.870% due 03/31/08 4,000 4,000
</Table>
<Table>
- --------------------------------------------------------------------------------
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
TELUS Corp.
7.500% due 06/01/07 2,790 2,794
Total SA
5.290% due 05/01/07 1,600 1,600
Travelers Cos., Inc. (The)
5.010% due 08/16/07 2,220 2,217
UBS Financial Del LLC
5.225% due 06/01/07 1,700 1,691
UBS Financial Del LLC
5.215% due 07/08/07 4,900 4,873
UBS Financial Del LLC
5.230% due 07/12/07 2,200 2,171
UBS Financial Del LLC
5.200% due 0802/07 27,200 26,721
Union Pacific Corp.
6.625% due 02/01/08 265 267
Series MTNE
6.790% due 11/09/07 110 111
United States Treasury Bills
4.997% due 05/17/07 (c)(z)(sec.) 60 60
5.011% due 05/17/07 (c)(z)(sec.) 55 55
5.050% due 05/17/07 (c)(z)(sec.) 70 70
5.056% due 05/17/07 (c)(z)(sec.) 30 30
5.079% due 05/17/07 (c)(z)(sec.) 110 110
5.085% due 05/17/07 (c)(sec.) 255 254
5.117% due 05/17/07 (c)(z)(sec.) 85 85
5.145% due 05/17/07 (c)(sec.) 1,465 1,462
5.039% due 05/31/07 (c)(sec.) 250 249
5.109% due 05/31/07 (c)(sec.) 2,650 2,639
5.176% due 05/31/07 (c)(sec.) 1,760 1,753
4.864% due 06/14/07 (c)(z)(sec.) 50 50
4.941% due 06/14/07 (c)(sec.) 500 496
4.943% due 06/14/07 (c) 500 496
4.950% due 06/14/07 (c)(sec.) 150 149
4.966% due 06/14/07 (c) 250 249
5.009% due 06/14/07 (c)(z)(sec.) 80 80
5.016% due 06/14/07 (c)(sec.) 500 497
5.028% due 06/14/07 (c)(sec.) 500 497
5.077% due 06/14/07 (c)(sec.) 250 248
5.088% due 06/14/07 (c)(sec.) 2,915 2,896
5.093% due 06/14/07 (c)(sec.) 2,730 2,714
5.062% due 07/12/07 (sec.) 350 347
5.110% due 07/12/07 (sec.) 650 644
United States Treasury Notes
3.125% due 05/15/07 23,055 23,037
6.625% due 05/15/07 1,920 1,921
4.625% due 02/29/08 6,000 5,982
</Table>
Multistrategy Bond Fund 101
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- --------------------------------------------------------------------------------
WellPoint, Inc.
3.750% due 12/14/07 270 267
Westpactrust Securities NZ Ltd.
5.230% due 07/20/07 34,300 33,861
Wisconsin Electric Power Co.
3.500% due 12/01/07 145 143
--------------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,603,368) 1,603,137
--------------
OTHER SECURITIES - 17.2%
Russell Investment Money Market Fund (X) 193,509,087 193,509
State Street Securities
Lending Quality Trust (X) 813,238,926 813,239
--------------
TOTAL OTHER SECURITIES
(cost $1,006,748) 1,006,748
--------------
TOTAL INVESTMENTS - 127.8%
(identified cost $7,447,564) 7,462,322
OTHER ASSETS AND LIABILITIES,
NET - (27.8%) (1,621,860)
--------------
NET ASSETS - 100.0% 5,840,462
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
102 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Euribor Futures
expiration date 12/07 (63) 20,564 (52)
expiration date 03/08 (15) 4,896 (16)
expiration date 06/08 (97) 31,678 (70)
expiration date 09/08 (11) 3,595 (7)
expiration date 12/08 (11) 3,596 (6)
Euro-Bund Futures
expiration date 06/07 (287) 44,711 (316)
Euro Yen Futures
expiration date 12/07 (96) 19,905 16
Eurodollar Futures (CME)
expiration date 06/07 (828) 195,977 (178)
expiration date 09/07 (210) 49,770 (105)
expiration date 12/07 (1,768) 419,856 (843)
expiration date 03/08 (3,304) 786,228 (365)
expiration date 06/08 (2,892) 689,164 341
expiration date 09/08 (1,096) 261,328 392
expiration date 12/08 (1,208) 288,048 488
expiration date 03/09 (29) 6,914 2
Germany 5 Year Bond (Germany)
expiration date 06/07 (55) 8,089 5
Germany 10 Year Bond (Germany)
expiration date 06/07 (34) 5,296 (52)
Japanese 10 Year Bond (Japan)
expiration date 06/07 (146) 164,148 913
LIBOR Futures
expiration date 09/07 (52) 12,230 (69)
expiration date 12/07 (99) 23,286 (120)
expiration date 03/08 (15) 3,530 (24)
expiration date 06/08 (53) 12,481 (20)
expiration date 09/08 (17) 4,005 (26)
United States Treasury Bonds
expiration date 06/07 (1,587) 177,347 (16)
United States Treasury
2 Year Notes
expiration date 06/07 (1,647) 337,172 (330)
United States Treasury
5 Year Notes
expiration date 06/07 (5,260) 556,656 581
</Table>
<Table>
- ------------------------------------------------------------------------------------
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
United States Treasury
10 Year Notes
expiration date 06/07 (3,530) 382,398 529
expiration date 09/07 (99) 10,732 43
Short Positions
Euro-Bobl Futures (Germany)
expiration date 06/07 (818) 120,311 881
Euro-Schatz Bond Futures
expiration date 06/07 (65) 9,149 42
Eurodollar Futures (CME)
expiration date 12/07 (71) 16,861 19
Long Gilt Bond (UK)
expiration date 06/07 (47) 10,073 146
United States Treasury Bonds
expiration date 06/07 (1,243) 138,905 (423)
United States Treasury
2 Year Notes
expiration date 06/07 (219) 44,833 27
United States Treasury
10 Year Notes
expiration date 06/07 (2,425) 262,696 19
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,406
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 103
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Swaptions
(Fund Pays/Fund Receives)
EUR 4.100%/EUR Six Month LIBOR
Jul 2007 0.00 Call (3) 16,376 (60)
EUR 4.230%/EUR Six Month LIBOR
Jul 2007 0.00 Call (1) 6,823 (2)
GBP 4.850%/GBP Six Month LIBOR
Jun 2007 0.00 Call (2) 2,200 --
USD 4.900%/USD Three Month LIBOR
March 2008 0.00 Call (2) 38,600 (410)
USD 5.600%/USD Three Month LIBOR
Jun 2007 0.00 Call (1) 11,000 (300)
USD 4.950%/USD Three Month LIBOR
Jul 2007 0.00 Call (1) 6,700 (36)
USD 5.000%/USD Three Month LIBOR
Jul 2007 0.00 Call (1) 16,000 (87)
USD 5.370%/USD Three Month LIBOR
Jul 2007 0.00 Call (1) 32,000 (570)
USD 5.500%/USD Three Month LIBOR
Jul 2007 0.00 Call (1) 6,600 (174)
USD 4.850%/USD Three Month LIBOR
Aug 2007 0.00 Call (1) 3,000 (10)
USD 4.900%/USD Three Month LIBOR
Aug 2007 0.00 Call (3) 21,000 (96)
USD 5.000%/USD Three Month LIBOR
Aug 2007 0.00 Call (1) 3,000 (19)
USD 4.900%/USD Three Month LIBOR
Feb 2008 0.00 Call (1) 7,000 (66)
USD 5.100%/USD Three Month LIBOR
Feb 2008 0.00 Call (1) 21,000 (292)
USD 4.950%/USD Three Month LIBOR
March 2008 0.00 Call (1) 12,000 (138)
</Table>
<Table>
- ------------------------------------------------------------------------------------
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
USD 4.950%/USD Three Month LIBOR
Sep 2008 0.00 Call (1) 2,000 (27)
USD 5.010%/USD Three Month LIBOR
Oct 2007 0.00 Call (1) 9,000 (86)
United States Treasury Bonds
May 2007 113.00 Call (344) 38,872 (69)
May 2007 109.00 Put (229) 24,961 (11)
Aug 2007 109.00 Put (682) 74,338 (320)
United States Treasury Notes
2 Year Futures
May 2007 102.50 Call (525) 107,625 (82)
United States Treasury Notes
5 Year Futures
May 2007 106.00 Call (1,265) 134,090 (296)
United States Treasury Notes
10 Year Futures
May 2007 108.00 Call (26) 2,808 (16)
May 2007 105.00 Put (73) 7,665 (1)
May 2007 107.00 Put (659) 70,513 (62)
---------------
Total Liability for Options Written
(premiums received $3,504) (3,230)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
104 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------ ------------------- ---------- --------------
USD 611 AUD 735 05/03/07 --
USD 501 AUD 603 05/17/07 (1)
USD 822 AUD 982 05/17/07 (7)
USD 7,089 AUD 8,735 06/20/07 157
USD 7,492 AUD 8,997 06/20/07 (29)
USD 13,232 AUD 16,925 06/20/07 807
USD 14,182 AUD 17,584 06/20/07 404
USD 867 BRL 1,848 05/03/07 42
USD 909 BRL 1,848 05/03/07 1
USD 646 BRL 1,320 06/04/07 1
USD 1,571 BRL 3,203 06/04/07 (3)
USD 897 BRL 1,848 08/02/07 --
USD 7,083 CAD 8,303 06/20/07 409
USD 22,442 CAD 25,635 06/20/07 691
USD 9,610 CHF 11,495 06/20/07 (51)
USD 14,168 CHF 17,049 06/20/07 10
USD 21,266 CHF 25,729 06/20/07 130
USD 27,849 CHF 33,323 06/20/07 (138)
USD 203 CNY 1,544 06/19/07 (1)
USD 775 CNY 5,904 06/19/07 (4)
USD 2,073 EUR 1,516 05/24/07 (2)
USD 243 EUR 185 06/08/07 9
USD 348 EUR 255 06/08/07 1
USD 1,750 EUR 1,327 06/08/07 64
USD 2,143 EUR 1,570 06/08/07 3
USD 2,169 EUR 1,610 06/08/07 32
USD 2,300 EUR 1,750 06/08/07 91
USD 2,505 EUR 1,839 06/08/07 9
USD 2,632 EUR 1,940 06/08/07 19
USD 3,539 EUR 2,630 06/08/07 56
USD 4,828 EUR 3,640 06/15/07 148
USD 6,804 EUR 5,097 06/20/07 166
USD 14,446 EUR 10,806 06/20/07 330
USD 21,266 EUR 15,874 06/20/07 440
USD 2,584 GBP 1,300 06/08/07 15
USD 7,091 GBP 3,611 06/20/07 127
USD 7,481 GBP 3,782 06/20/07 80
USD 14,983 GBP 7,488 06/20/07 (14)
USD 22,906 GBP 11,909 06/20/07 900
USD 22,906 GBP 11,909 06/20/07 900
USD 775 INR 32,227 06/20/07 (1)
USD 6,000 JPY 693,000 06/06/07 (171)
USD 613 JPY 70,617 06/08/07 (19)
USD 859 JPY 98,883 06/08/07 (27)
USD 1,095 JPY 125,382 06/08/07 (40)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------ ------------------- ---------- --------------
USD 1,249 JPY 147,665 06/08/07 (7)
USD 1,258 JPY 146,833 06/08/07 (22)
USD 1,679 JPY 193,641 06/08/07 (50)
USD 1,921 JPY 221,960 06/08/07 (54)
USD 2,460 JPY 283,385 06/08/07 (75)
USD 2,527 JPY 295,515 06/08/07 (41)
USD 3,170 JPY 368,570 06/08/07 (69)
USD 3,442 JPY 396,390 06/08/07 (107)
USD 3,833 JPY 452,210 06/08/07 (28)
USD 3,928 JPY 465,711 06/08/07 (10)
USD 4,119 JPY 487,241 06/08/07 (19)
USD 4,761 JPY 551,430 06/08/07 (122)
USD 1,020 JPY 120,000 06/15/07 (10)
USD 2,086 JPY 243,920 06/15/07 (32)
USD 6,454 JPY 750,000 06/15/07 (139)
USD 7,492 JPY 875,646 06/20/07 (114)
USD 14,166 JPY 1,643,936 06/20/07 (315)
USD 14,168 JPY 1,642,353 06/20/07 (331)
USD 1,188 NOK 7,367 06/08/07 52
USD 1,537 NOK 9,355 06/08/07 38
USD 2,063 NOK 12,571 06/08/07 52
USD 6,417 NOK 39,138 06/20/07 171
USD 7,091 NOK 43,099 06/20/07 164
USD 11,949 NOK 72,684 06/20/07 285
USD 12,143 NOK 74,548 06/20/07 405
USD 16,355 NOK 100,353 06/20/07 536
USD 635 NZD 862 06/08/07 1
USD 7,083 NZD 10,162 06/20/07 419
USD 14,182 NZD 19,863 06/20/07 480
USD 6,626 SEK 46,527 06/20/07 337
USD 7,492 SEK 50,668 06/20/07 91
USD 33 SGD 49 08/07/07 --
USD -- TWD 5 05/02/07 --
USD -- TWD 9 05/02/07 --
USD 82 TWD 2,707 05/02/07 (1)
USD 85 TWD 2,814 05/02/07 (1)
USD 85 TWD 2,820 05/02/07 (1)
USD 87 TWD 2,872 05/02/07 (1)
USD 252 TWD 8,370 05/02/07 --
AUD 1,535 USD 1,185 06/08/07 (89)
AUD 2,007 USD 1,559 06/08/07 (107)
AUD 8,884 USD 7,083 06/20/07 (286)
BRL 1,848 USD 909 05/03/07 (1)
BRL 1,848 USD 909 05/03/07 --
BRL 12,259 USD 5,665 05/07/07 (364)
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 105
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------ ------------------- ---------- --------------
BRL 2,167 USD 1,061 06/29/07 3
BRL 38,530 USD 18,427 06/29/07 (388)
CAD 1,911 USD 1,631 06/08/07 (93)
CAD 2,691 USD 2,350 06/08/07 (77)
CAD 3,859 USD 3,295 06/20/07 (187)
CAD 15,622 USD 13,365 06/20/07 (731)
CAD 19,518 USD 16,660 06/20/07 (952)
CHF 9,067 USD 7,481 06/20/07 (59)
CHF 14,242 USD 11,878 06/20/07 35
CHF 14,242 USD 11,894 06/20/07 51
CHF 17,108 USD 14,182 06/20/07 (45)
CHF 28,484 USD 23,373 06/20/07 (315)
EUR 1,515 USD 2,070 05/03/07 2
EUR 1,839 USD 2,500 05/24/07 (12)
EUR 4,936 USD 6,530 06/06/07 (216)
EUR 475 USD 629 06/08/07 (20)
EUR 687 USD 920 06/08/07 (18)
EUR 860 USD 1,153 06/08/07 (23)
EUR 1,057 USD 1,398 06/08/07 (47)
EUR 1,875 USD 2,568 06/08/07 5
EUR 1,905 USD 2,526 06/08/07 (78)
EUR 1,965 USD 2,598 06/08/07 (88)
EUR 3,640 USD 4,851 06/15/07 (125)
EUR 5,398 USD 7,173 06/20/07 (208)
EUR 5,501 USD 7,492 06/20/07 (30)
EUR 15,805 USD 21,161 06/20/07 (450)
EUR 21,910 USD 29,967 06/20/07 8
GBP 286 USD 560 05/16/07 (11)
GBP 1,250 USD 2,500 06/08/07 --
GBP 1,272 USD 2,472 06/08/07 (71)
GBP 1,684 USD 3,329 06/08/07 (37)
GBP 824 USD 1,604 06/20/07 (44)
GBP 2,818 USD 5,479 06/20/07 (154)
GBP 7,237 USD 14,168 06/20/07 (299)
GBP 10,774 USD 21,266 06/20/07 (272)
JPY 64,900 USD 553 05/15/07 8
JPY 126,039 USD 1,047 05/15/07 (10)
JPY 46,564 USD 394 05/31/07 3
JPY 112,805 USD 971 06/08/07 22
JPY 135,900 USD 1,181 06/08/07 38
JPY 146,698 USD 1,257 06/08/07 23
JPY 192,729 USD 1,679 06/08/07 58
JPY 201,808 USD 1,725 06/08/07 27
JPY 266,143 USD 2,284 06/08/07 45
JPY 303,026 USD 2,564 06/08/07 15
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------ ------------------- ---------- --------------
JPY 303,712 USD 2,584 06/08/07 29
JPY 311,107 USD 2,645 06/08/07 27
JPY 334,495 USD 2,912 06/08/07 98
JPY 349,498 USD 3,025 06/08/07 84
JPY 169,380 USD 1,466 06/15/07 40
JPY 882,430 USD 7,492 06/20/07 57
JPY 1,506,877 USD 12,881 06/20/07 185
JPY 1,812,215 USD 15,485 06/20/07 217
JPY 2,428,979 USD 21,153 06/20/07 688
NOK 5,475 USD 882 06/08/07 (39)
NOK 8,039 USD 1,310 06/08/07 (43)
NOK 11,986 USD 1,992 06/08/07 (25)
NOK 36,910 USD 6,136 06/08/07 (76)
NOK 43,206 USD 7,083 06/20/07 (190)
NOK 43,235 USD 7,089 06/20/07 (188)
NOK 43,488 USD 7,084 06/20/07 (236)
NZD 862 USD 590 06/08/07 (47)
NZD 10,123 USD 7,084 06/20/07 (388)
NZD 19,896 USD 13,704 06/20/07 (983)
SEK 49,506 USD 7,089 06/20/07 (320)
TWD 5 USD -- 05/02/07 --
TWD 9 USD -- 05/02/07 --
TWD 9 USD -- 05/02/07 --
TWD 9 USD -- 05/02/07 --
TWD 2,707 USD 81 05/02/07 --
TWD 2,814 USD 85 05/02/07 --
TWD 2,864 USD 86 05/02/07 --
TWD 11,181 USD 338 05/02/07 2
------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 344
======
</Table>
See accompanying notes which are an integral part of the financial statements.
106 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 LIBOR
CMBS AAA 10 Year Index Goldman Sachs 8,185 plus 0.050% 05/01/07 53
Goldman Sachs Turkish Overnight Index
Total Return Citibank 14,958 Tuibon plus 0.750% 07/17/08 354
JP Morgan CMBS AAA 10 Year Index
CMBS AAA 10 Year Index JP Morgan 4,500 minus 0.025% 05/31/07 (2)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 5,000 minus 0.075% 04/30/07 (2)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 5,000 minus 0.025% 07/16/07 (2)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 3,500 minus 0.050% 06/29/07 (1)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 4,000 minus 0.025% 09/28/07 (1)
Bank of America
CMBS AAA 10 Year Index Bank of America 10,000 CMBS AAA 10 Year Index 05/31/07 (3)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 5,000 plus 0.050% 05/31/07 (1)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 5,000 minus 0.050% 07/31/07 (2)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 4,000 minus 0.075% 06/15/07 (2)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 7,000 plus 0.100% 08/31/07 3
Deutsche Bank
Bank Of America Commercial CMBS AAA 10 Year Index
MBS Spread to Swaps AAA Deutsche Bank 8,500 plus 0.100% 08/31/07 4
JP Morgan CMBS AAA 10 Year Index
CMBS AAA 10 Year Index JP Morgan 7,000 plus 0.125% 08/31/07 3
Turkish Overnight Index
Turkey Government Bond Deutsche Bank 10,145 Tuibon plus 0.500% 11/27/08 13
Turkish Overnight Index
Salomon Smith
Turkey Government Bond Barney 5,441 Tuibon plus 0.700% 11/27/08 (4)
Goldman Sachs Turkish Overnight Index
Total Return Citibank 13,838 Tuibon plus 0.700% 01/20/11 305
-----------
Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts 715
===========
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 107
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 26,800 5.000% Three Month LIBOR 06/20/09 (18)
Bank of America USD 35,900 4.000% Three Month LIBOR 06/21/10 (1)
Bank of America USD 37,500 5.470% Three Month LIBOR 06/14/11 601
Bank of America USD 118,700 Three Month LIBOR 5.000% 06/20/12 (133)
Bank of America USD 26,400 Three Month LIBOR 5.000% 06/20/12 (29)
Bank of America USD 40,300 Three Month LIBOR 5.000% 06/20/12 (45)
Bank of America USD 49,300 5.000% Three Month LIBOR 06/20/12 55
Bank of America USD 80,900 Three Month LIBOR 5.100% 06/20/14 (205)
Bank of America USD 13,200 5.550% Three Month LIBOR 06/14/16 402
Bank of America JPY 3,480,000 1.750% Six Month LIBOR 06/20/17 (163)
Bank of America USD 7,000 5.630% Three Month LIBOR 06/16/36 446
Bank of America USD 6,900 5.000% Three Month LIBOR 06/20/37 (389)
Barclays Bank PLC JPY 260,000 1.000% Six Month LIBOR 03/18/09 (3)
Barclays Bank PLC GBP 3,700 6.000% Six Month LIBOR 03/20/09 13
Barclays Bank PLC EUR 24,150 4.250% Six Month LIBOR 06/20/09 (73)
Barclays Bank PLC USD 18,100 5.000% Three Month LIBOR 06/20/09 (12)
Barclays Bank PLC BRL 5,600 11.360% Brazil Interbank 01/04/10 28
Deposit Rate
Barclays Bank PLC EUR 2,800 2.103% Consumer Price Index 10/15/10 175
(France)
Barclays Bank PLC EUR 1,270 4.250% Six Month LIBOR 06/20/12 (7)
Barclays Bank PLC EUR 22,000 4.250% Six Month LIBOR 07/20/16 195
Barclays Bank PLC SEK 260,000 Three Month LIBOR 4.250% 06/20/17 988
Barclays Bank PLC GBP 600 Six Month LIBOR 4.000% 12/15/36 160
Barclays Bank PLC GBP 11,350 Six Month LIBOR 4.500% 06/22/37 1,248
Bear Stearns USD 16,300 Three Month LIBOR 5.000% 06/20/12 (18)
BNP Paribas EUR 23,230 4.250% Six Month LIBOR 06/22/09 (71)
Citibank PLN 28,000 4.670% Six Month LIBOR 01/16/09 (64)
Citibank EUR 6,910 4.250% Six Month LIBOR 06/20/09 (21)
Citibank JPY 1,475,000 Six Month LIBOR 1.500% 06/20/12 (65)
Citibank JPY 2,100,000 1.500% Six Month LIBOR 06/20/14 (89)
Citibank JPY 4,188,000 Six Month LIBOR 1.500% 06/20/14 178
Citibank JPY 5,579,000 Six Month LIBOR 1.500% 06/20/14 237
Citibank MXN 2,300 8.170% Mexico Interbank 28 11/04/16 4
Day Deposit Rate
Citibank JPY 1,193,000 1.750% Six Month LIBOR 06/20/17 72
Citibank USD 7,400 5.000% Three Month LIBOR 06/20/37 (417)
Credit Suisse First Boston USD 12,800 5.000% Three Month LIBOR 06/20/09 (9)
Credit Suisse First Boston EUR 50,740 4.250% Six Month LIBOR 06/22/09 (154)
Credit Suisse First Boston EUR 41,440 4.250% Six Month LIBOR 06/20/17 (754)
Credit Suisse First Boston EUR 19,710 Six Month LIBOR 4.250% 06/20/17 359
Credit Suisse First Boston SEK 137,000 Three Month LIBOR 4.250% 06/20/17 520
Credit Suisse First Boston USD 7,400 5.000% Three Month LIBOR 06/20/37 (417)
Credit Suisse First Boston EUR 12,030 4.250% Six Month LIBOR 06/22/37 (748)
Credit Suisse First Boston GBP 5,620 Six Month LIBOR 4.500% 06/22/37 617
Deutsche Bank JPY 620,000 1.000% Six Month LIBOR 09/18/08 1
Deutsche Bank USD 47,100 5.000% Three Month LIBOR 12/19/08 14
Deutsche Bank USD 216,100 5.000% Three Month LIBOR 06/20/09 (147)
Deutsche Bank EUR 142,390 4.360% Six Month LIBOR 10/16/09 (43)
Deutsche Bank EUR 28,470 4.363% Six Month LIBOR 10/16/09 (6)
</Table>
See accompanying notes which are an integral part of the financial statements.
108 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- -------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- ---------------------------- ------------------- ------------------- -------------------- ----------- ---------
Deutsche Bank EUR 56,950 4.395% Six Month LIBOR 10/16/09 33
Deutsche Bank EUR 56,940 4.401% Six Month LIBOR 10/16/09 41
Deutsche Bank EUR 6,200 Six Month LIBOR 4.000% 12/15/11 117
Deutsche Bank CAD 3,670 4.318% Three Month LIBOR 04/04/12 (7)
Deutsche Bank CAD 3,670 4.328% Three Month LIBOR 04/05/12 (18)
Deutsche Bank NZD 5,900 Three Month LIBOR 7.598% 04/10/12 --
Deutsche Bank NZD 5,900 Three Month LIBOR 7.598% 04/11/12 37
Deutsche Bank AUD 77,500 6.250% Six Month LIBOR 06/20/12 (534)
Deutsche Bank AUD 21,540 Six Month LIBOR 6.250% 06/20/12 70
Deutsche Bank EUR 14,190 Six Month LIBOR 6.250% 06/20/12 --
Deutsche Bank USD 81,290 Three Month LIBOR 5.000% 06/20/12 (90)
Deutsche Bank USD 71,000 Three Month LIBOR 5.000% 06/20/12 (79)
Deutsche Bank USD 9,500 Three Month LIBOR 5.000% 06/20/12 (11)
Deutsche Bank USD 21,810 5.000% Three Month LIBOR 06/20/12 25
Deutsche Bank USD 46,700 5.000% Three Month LIBOR 06/20/12 52
Deutsche Bank USD 127,900 5.000% Three Month LIBOR 06/20/12 142
Deutsche Bank USD 124,500 5.000% Three Month LIBOR 06/20/12 138
Deutsche Bank USD 95,900 Three Month LIBOR 5.000% 06/20/12 251
Deutsche Bank JPY 7,014,000 Six Month LIBOR 1.500% 06/20/14 (298)
Deutsche Bank JPY 2,100,000 1.500% Six Month LIBOR 06/20/14 (89)
Deutsche Bank USD 13,900 Three Month LIBOR 5.100% 06/20/14 (35)
Deutsche Bank USD 420,400 5.100% Three Month LIBOR 06/20/14 1,067
Deutsche Bank EUR 38,380 Six Month LIBOR 4.440% 10/16/14 (212)
Deutsche Bank EUR 38,380 Six Month LIBOR 4.435% 10/16/14 (178)
Deutsche Bank EUR 95,960 Six Month LIBOR 4.380% 10/16/14 (42)
Deutsche Bank EUR 19,190 Six Month LIBOR 4.380% 10/16/14 (12)
Deutsche Bank JPY 213,000 2.000% Six Month LIBOR 12/20/16 57
Deutsche Bank SEK 383,000 Three Month LIBOR 4.250% 06/20/17 1,456
Deutsche Bank USD 14,900 Three Month LIBOR 5.000% 06/20/17 188
Deutsche Bank JPY 300,000 2.500% Six Month LIBOR 12/20/26 107
Deutsche Bank EUR 4,280 4.573% Six Month LIBOR 10/16/37 34
Deutsche Bank EUR 21,410 4.568% Six Month LIBOR 10/16/37 152
Deutsche Bank EUR 8,560 4.631% Six Month LIBOR 10/16/37 178
Deutsche Bank EUR 8,560 4.641% Six Month LIBOR 10/16/37 196
Goldman Sachs EUR 800 4.000% Six Month LIBOR 03/20/09 (4)
Goldman Sachs GBP 400 5.000% Six Month LIBOR 06/15/09 (12)
Goldman Sachs BRL 1,400 11.470% Brazil Interbank 01/04/10 9
Deposit Rate
Goldman Sachs EUR 800 1.960% Consumer Price Index 03/30/12 1
(France)
Goldman Sachs MXN 15,700 7.780% Mexico Interbank 28 04/03/12 (7)
Day Deposit Rate
Goldman Sachs JPY 1,070,000 1.500% Six Month LIBOR 06/20/12 47
Goldman Sachs JPY 339,000 2.000% Six Month LIBOR 12/20/16 78
Goldman Sachs USD 310 5.000% Three Month LIBOR 06/20/37 (17)
HSBC GBP 7,200 4.500% Six Month LIBOR 12/20/07 (166)
HSBC GBP 200 Six Month LIBOR 4.000% 12/15/36 61
JP Morgan EUR 2,500 1.948% Consumer Price Index 03/15/12 5
(France)
JP Morgan MXN 167,940 7.670% One Month LIBOR 04/19/12 (114)
JP Morgan USD 9,500 Three Month LIBOR 5.000% 06/20/12 (65)
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 109
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- -------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- ---------------------------- ------------------- ------------------- -------------------- ----------- ---------
JP Morgan JPY 19,157,500 Six Month LIBOR 1.500% 06/20/14 813
JP Morgan USD 28,200 Three Month LIBOR 5.100% 06/20/14 (71)
Lehman Brothers USD 3,900 5.000% Three Month LIBOR 06/20/09 (3)
Lehman Brothers GBP 12,600 4.500% Six Month LIBOR 09/20/09 (606)
Lehman Brothers JPY 1,000,000 Six Month LIBOR 1.500% 06/20/14 42
Lehman Brothers GBP 810 5.250% Six Month LIBOR 06/20/17 (67)
Lehman Brothers USD 20 5.000% Three Month LIBOR 06/20/37 (1)
Merrill Lynch EUR 20,840 4.250% Six Month LIBOR 06/22/09 (64)
Merrill Lynch GBP 29,800 4.500% Six Month LIBOR 09/20/09 (1,433)
Merrill Lynch BRL 3,700 11.430% Brazil Interbank 01/04/10 22
Deposit Rate
Merrill Lynch BRL 1,200 12.948% Brazil Interbank 01/04/10 23
Deposit Rate
Merrill Lynch JPY 10,623,000 Six Month LIBOR 1.500% 06/20/12 (468)
Merrill Lynch GBP 300 Six Month LIBOR 4.000% 12/15/35 19
Merrill Lynch GBP 2,940 Six Month LIBOR 4.500% 06/22/37 323
Morgan Stanley USD 26,900 5.000% Three Month LIBOR 06/20/09 (18)
Morgan Stanley USD 5,100 Three Month LIBOR 5.000% 06/20/17 65
Morgan Stanley EUR 4,700 6.000% Six Month LIBOR 06/18/34 816
Royal Bank of Scotland USD 94,700 5.000% Three Month LIBOR 12/19/08 29
Royal Bank of Scotland GBP 500 6.000% Six Month LIBOR 03/20/09 2
Royal Bank of Scotland USD 36,900 5.000% Three Month LIBOR 06/20/09 (25)
Royal Bank of Scotland EUR 900 1.960% Consumer Price Index 03/28/12 --
(France)
Royal Bank of Scotland JPY 187,000 2.000% Six Month LIBOR 12/20/16 44
Royal Bank of Scotland CAD 1,600 4.500% Three Month LIBOR 06/15/27 (54)
Royal Bank of Scotland GBP 1,600 Six Month LIBOR 4.000% 12/15/36 442
Royal Bank of Scotland USD 13,000 5.000% Three Month LIBOR 06/20/37 (733)
UBS USD 13,100 5.000% Three Month LIBOR 06/20/09 (9)
---------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - $8,736 3,852
=========
</Table>
See accompanying notes which are an integral part of the financial statements.
110 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
CREDIT DEFAULT SWAP CONTRACTS
- --------------------------------------------------------------------------------------------------------------
NOTIONAL FUND MARKET
REFERENCE COUNTER AMOUNT (PAYS)/RECEIVES TERMINATION VALUE
ENTITY PARTY $ FIXED RATE DATE $
- ------------------------------ ---------------- --------- ---------------- ------------ ------------
Anadarko Petroleum Corp. Goldman Sachs 500 0.150% 03/20/08 --
Brazilian Government
International Bond Lehman Brothers 5,200 1.120% 11/20/11 121
Brazilian Government
International Bond Morgan Stanley 500 1.660% 03/20/13 22
Brazilian Government Salomon Smith
International Bond Barney 4,500 (1.500%) 08/22/11 (2)
Core Investment Grade Bond Bank of America 119,900 (0.350%) 06/20/12 (94)
Core Investment Grade Bond Bank of America 17,000 (0.650%) 12/20/16 (12)
Core Investment Grade Bond JP Morgan 46,700 (0.400%) 12/20/11 71
Core Investment Grade Bond JP Morgan 65,000 0.350% 06/20/12 (47)
Core Investment Grade Bond JP Morgan 23,000 (0.650%) 12/20/16 (18)
Dow Jones CDX High Volatility
Index Bank of America 2,000 (0.650%) 12/20/16 (1)
Dow Jones CDX High Volatility
Index BNP Paribas 7,200 (0.650%) 12/20/16 (5)
Dow Jones CDX High Volatility
Index Goldman Sachs 9,000 (0.650%) 12/20/16 (15)
Dow Jones CDX High Volatility
Index Lehman Brothers 9,755 (2.750%) 06/20/12 21
Dow Jones CDX High Volatility
Index UBS 13,000 0.900% 06/20/10 158
First Data Corp. Lehman Brothers 1,740 (2.550%) 06/20/12 (13)
Ford Motor Credit Co. Lehman Brothers 5,930 1.200% 03/20/08 7
Ford Motor Credit Co. Merrill Lynch 500 1.700% 06/20/07 2
Gaz Capital for Gazprom JP Morgan 4,400 0.415% 11/20/07 12
Indonesia Government
International Bond Lehman Brothers 400 0.400% 12/20/08 --
Indonesia Government Royal Bank of
International Bond Scotland 1,000 (0.390%) 12/20/08 --
Mexico Government
International Bond JP Morgan 2,400 0.920% 03/20/16 77
Panama Government
International Bond JP Morgan 300 1.250% 01/20/17 3
Russia Government
International Bond Deutsche Bank AG 3,000 0.240% 12/20/07 1
Russia Government
International Bond Deutsche Bank AG 1,000 0.260% 12/20/07 1
Russia Government
International Bond JP Morgan 300 0.800% 03/20/16 4
Russia Government
International Bond Morgan Stanley 200 0.460% 06/20/07 --
Russia Government
International Bond Morgan Stanley 300 0.780% 06/20/16 4
SLM Corp. Lehman Brothers 2,015 0.740% 06/20/12 (86)
Softbank Corp. Deutsche Bank AG 45,000 2.300% 09/20/07 4
Temple Inland, Inc. Lehman Brothers 2,430 (0.740%) 03/20/12 (14)
Ukraine SP Dub HSBC 4,500 0.730% 04/20/09 149
------------
Total Market Value of Open Credit Default Swap Contracts Premiums Paid (Received) - ($512) 350
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Multistrategy Bond Fund 111
RUSSELL INVESTMENT COMPANY
MULTISTRATEGY BOND FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Asset-Backed Securities 6.2
Certificates of Deposit 1.3
Corporate Bonds and Notes 14.4
International Debt 5.2
Loan Agreements 0.6
Mortgage-Backed Securities 37.9
Municipal Bonds 0.2
Non-US Bonds 1.1
United States Government Agencies 2.0
United States Government Treasuries 13.9
Common Stocks 0.3
Preferred Stocks 0.1
Warrants & Rights --*
Options Purchased --*
Short-Term Investments 27.4
Other Securities 17.2
---------------
Total Investments 127.8
Other Assets and Liabilities, Net (27.8)
---------------
100.0
===============
Futures Contracts --*
Options Written (--)*
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.
112 Multistrategy Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,017.80 $ 1,016.56
Expenses Paid During
Period* $ 8.31 $ 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). 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,021.30 $ 1,020.33
Expenses Paid During
Period* $ 4.51 $ 4.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.90%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,022.10 $ 1,021.72
Expenses Paid During
Period* $ 3.11 $ 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). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
Diversified Bond Fund 113
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 102.1%
Asset-Backed Securities - 9.6%
ABSC NIMs Trust (p)
Series 2005-HE6 Class A1
5.050% due 08/27/35 14 14
Accredited Mortgage Loan Trust (E)
Series 2004-2 Class A2
5.620% due 07/25/34 127 128
ACE Securities Corp. (E)
Series 2003-OP1 Class M2
6.820% due 12/25/33 60 60
Series 2006-FM1 Class A2A
5.360% due 07/25/36 63 63
Air 2 US (A)
8.027% due 10/01/19 455 479
American Express Credit Account Master Trust (E)
Series 2003-1 Class A
5.430% due 09/15/10 800 801
Series 2004-C Class C (p)
5.820% due 02/15/12 258 259
Series 2005-3 Class A
5.320% due 01/18/11 600 599
Ameriquest Mortgage Securities, Inc. (E)
Series 2004-R4 Class A1A (p)
5.650% due 06/25/34 107 107
Series 2004-R10 Class A5
5.710% due 11/25/34 67 67
Asset Backed Funding Certificates (E)
Series 2006-HE1 Class A2A
5.380% due 01/25/37 652 652
Asset Backed Securities Corp. Home Equity (E)
Series 2006-HE3 Class A3
5.380% due 03/25/36 64 64
Bank One Issuance Trust (E)
Series 2002-A5 Class A5
5.440% due 06/15/10 800 801
Series 2004-A4 Class A4
5.360% due 02/16/10 200 200
Bayview Financial Acquisition Trust (E)
Series 2003-G Class A1
5.920% due 01/28/39 600 600
Bear Stearns Asset Backed Securities Trust (E)
Series 2003-1 Class A1
5.820% due 11/25/42 194 194
Series 2003-SD1 Class A
5.770% due 12/25/33 156 156
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-2 Class A3
5.720% due 04/25/35 94 94
Series 2006-SD2 Class A2
5.520% due 06/25/36 587 587
BNC Mortgage Loan Trust (E)
Series 2007-2 Class A2
5.420% due 05/25/37 300 300
Burlington Northern Santa Fe Corp. Pass-Through
Certificate
4.967% due 04/01/23 57 54
Business Loan Express (E)(A)
Series 2003-2A Class A
6.120% due 01/25/32 509 517
Capital One Master Trust (E)
Series 2001-1 Class A
5.520% due 12/15/10 600 601
Carrington Mortgage Loan Trust (E)
Series 2005-NC2 Class A2
5.560% due 05/25/35 162 162
Series 2005-NC5 Class A2
5.640% due 10/25/35 593 594
Cendant Mortgage Corp. (E)(A)
Series 2003-A Class A3
5.870% due 07/25/43 220 221
Chase Credit Card Master Trust (E)
Series 2002-7 Class A
5.440% due 02/15/10 800 801
Series 2003-2 Class A
5.430% due 07/15/10 900 901
Citigroup Mortgage Loan Trust, Inc. (E)
Series 2007-AMC Class A2A
5.430% due 03/25/37 800 800
Countrywide Asset-Backed Certificates
Series 2001-BC3 Class A (E)
5.800% due 12/25/31 67 67
Series 2004-13 Class AF3
3.989% due 02/25/31 140 139
Series 2004-AB2 Class M3 (E)
5.920% due 05/25/36 70 70
Series 2005-17 Class 4AV1 (E)
5.430% due 05/25/36 390 390
Series 2006-3 Class 3A1 (E)
5.440% due 06/25/36 544 544
Series 2007-7 Class 2A1 (E)
5.400% due 02/25/37 300 300
Countrywide Home Equity Loan Trust (E)
Series 2005-A Class 2A
5.560% due 04/15/35 193 193
</Table>
114 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-G Class 2A
5.550% due 12/15/35 953 953
Credit-Based Asset Servicing and Securitization
(E)
Series 2005-CB5 Class AV2
5.580% due 08/25/35 520 521
Credit-Based Asset Servicing and Securitization
LLC (E)
Series 2006-CB3 Class AV1
5.380% due 03/25/36 746 746
CVS Caremark Corp. (p)
5.789% due 01/10/26 83 81
Equifirst Mortgage Loan Trust (E)
Series 2004-3 Class A2
5.650% due 12/25/34 299 299
Fannie Mae Grantor Trust (E)
Series 2002-T5 Class A1
5.560% due 05/25/32 273 273
Series 2003-T4 Class 1A
5.430% due 09/26/33 296 296
Fannie Mae Whole Loan (E)
Series 2003-W5 Class A
5.540% due 04/25/33 289 289
Series 2003-W9 Class A
5.440% due 06/25/33 416 413
First Franklin Mortgage Loan Asset Backed
Certificates (E)
Series 2004-FFH Class 2A1
5.700% due 10/25/34 169 169
Series 2005-FF1 Class A2A
5.410% due 11/25/36 164 164
Series 2006-FF3 Class A2A
5.400% due 02/25/36 815 815
Series 2006-FF5 Class 2A1
5.370% due 04/25/36 1,014 1,014
Fremont NIMs Trust (p)
Series 2005-C Class NOTE
5.584% due 07/25/35 49 31
GE-WMC Mortgage Securities LLC (E)
Series 2006-1 Class A2A
5.360% due 08/25/36 391 391
GMAC Mortgage Corp. Loan Trust (E)
Series 2006-HE4 Class A1
5.390% due 12/25/36 600 599
GSAA Home Equity Trust (E)
Series 2006-4 Class 1A2
5.961% due 03/25/36 126 127
Home Equity Asset Trust (E)
Series 2005-2 Class 2A2
5.520% due 07/25/35 164 165
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
JP Morgan Mortgage Acquisition Corp. (E)
Series 2005-FLD Class A1
5.440% due 07/25/35 218 218
Series 2006-CH2 Class AV2
5.370% due 10/25/36 687 686
Lehman XS Trust (E)
Series 2005-1 Class 2A1
4.660% due 07/25/35 223 221
Long Beach Mortgage Loan Trust (E)
Series 2004-4 Class 1A1
5.600% due 10/25/34 115 116
Series 2006-1 Class 2A1
5.400% due 02/25/36 176 176
Master Asset Backed Securities Trust (E)
Series 2005-NC1 Class A1
5.610% due 12/25/34 392 392
MBNA Credit Card Master Note Trust
Series 2002-A9 Class A9 (E)
5.446% due 12/15/09 200 200
Series 2005-A1 Class A1
4.200% due 09/15/10 800 793
Morgan Stanley Mortgage Loan Trust
Series 2006-12X Class A1 (E)
5.440% due 10/25/36 568 568
Series 2006-12X Class A6A
5.726% due 10/25/36 580 581
MSDWCC Heloc Trust (E)
Series 2005-1 Class A
5.510% due 07/25/17 99 99
Nationstar Home Equity Loan Trust (E)
Series 2007-B Class 2AV1
5.456% due 05/25/37 800 800
Option One Mortgage Loan Trust (E)
Series 2003-3 Class M3
7.320% due 06/25/33 95 95
Series 2003-4 Class M2
6.970% due 07/25/33 87 88
Series 2006-1 Class 2A1
5.390% due 01/25/36 220 220
Option One Mortgage Securities Corp. NIMs Trust
(E)(p)
Series 2006-1A
5.420% due 12/25/10 1,444 1,444
</Table>
Diversified Bond Fund 115
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Origen Manufactured Housing (E)
Series 2006-A Class A1
5.470% due 11/15/18 603 602
Renaissance Home Equity Loan Trust
Series 2003-3 Class A (E)
5.820% due 12/25/33 481 484
Series 2005-2 Class AF4
4.934% due 08/25/35 340 335
Series 2005-4 Class N (p)(E)
7.142% due 02/25/36 36 35
Residential Asset Mortgage Products, Inc. (E)
Series 2003-RS2 Class AII
5.660% due 03/25/33 82 83
Series 2003-RS3 Class AII
5.680% due 04/25/33 58 58
Series 2005-EFC Class A1
5.430% due 07/25/35 26 26
Residential Asset Securities Corp.
Series 2001-KS1 Class AI6
6.349% due 03/25/32 568 566
Series 2001-KS1 Class AII (E)
5.790% due 03/25/32 59 59
Series 2001-KS3 Class AII (E)
5.780% due 09/25/31 14 14
Series 2003-KS2 Class MI1
4.800% due 04/25/33 200 197
Residential Funding Mortgage Securities II, Inc.
(E)
Series 2005-HS1 Class AI1
5.440% due 09/25/35 854 852
SACO I, Inc. (E)
Series 2005-WM3 Class A1
5.580% due 09/25/35 176 176
Series 2006-1 Class A
5.490% due 09/25/35 569 569
Saxon Asset Securities Trust (E)
Series 2004-1 Class A
5.590% due 03/25/35 29 29
Series 2006-1 Class A2A
5.380% due 03/25/36 2,492 2,491
Securitized Asset Backed Receivables LLC Trust
(E)
Series 2005-FR4 Class A3
5.520% due 01/25/36 298 298
Security National Mortgage Loan Trust (E)(A)
Series 2006-3A Class A1
5.600% due 10/25/09 523 524
Sierra Receivables Funding Co. (E)(A)
Series 2006-1A Class A2
5.470% due 05/20/18 367 367
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SLM Student Loan Trust
Series 2003-11 Class A7 (p)
3.800% due 12/15/38 700 683
Series 2006-6 Class A1 (E)
5.350% due 10/25/18 234 234
Series 2006-9 Class A1 (E)
5.330% due 10/25/12 311 311
Series 2007-1 Class A1 (E)
5.330% due 04/25/12 339 339
Small Business Administration (E)
Series 2000-P10 Class 1
7.449% due 08/01/10 29 29
Small Business Administration Pools (E)
8.080% due 09/25/18 286 302
Soundview Home Equity Loan Trust
Series 2006-WF1 Class A2
5.645% due 10/25/36 235 234
Specialty Underwriting & Residential Finance (E)
Series 2003-BC1 Class A
5.660% due 01/25/34 11 11
Structured Asset Investment Loan Trust (E)
Series 2005-2 Class A3
5.570% due 03/25/35 98 98
Series 2005-3 Class M2
5.760% due 04/25/35 290 289
Structured Asset Securities Corp.
Series 2002-AL1 Class A3
3.450% due 02/25/32 296 277
Series 2002-HF1 Class A (E)
5.610% due 01/25/33 13 13
Series 2004-19X Class A2
4.370% due 10/25/34 138 137
Series 2005-WF3 Class A1 (E)
5.420% due 07/25/35 222 222
Wachovia Asset Securitization, Inc. (E)
Series 2003-HE3 Class A
5.570% due 11/25/33 160 160
Wells Fargo Home Equity Trust (E)
Series 2007-1 Class A1
5.420% due 03/25/37 795 796
------------
38,522
------------
</Table>
116 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Certificates of Deposit - 0.5%
Dexia Credit SA
5.270% due 09/29/08 800 799
Fortis Bank
5.300% due 09/30/08 100 100
Fortis Bank SA - NY (E)
Series YCD
5.265% due 06/30/08 600 601
Nordea Bank Finland PLC (E)
5.307% due 04/09/09 400 400
------------
1,900
------------
Corporate Bonds and Notes - 17.4%
Abbott Laboratories
5.600% due 05/15/11 105 107
5.875% due 05/15/16 80 83
Alamosa Delaware, Inc.
8.500% due 01/31/12 45 47
Alcoa, Inc.
5.720% due 02/23/19 (A) 155 155
5.900% due 02/01/27 365 363
Altria Group, Inc.
7.000% due 11/04/13 100 109
American Electric Power Co., Inc. (N)
Series C
5.375% due 03/15/10 85 86
American General Finance Corp. (E)
Series MTNI
5.478% due 06/27/08 600 601
American Honda Finance Corp. (E)(p)
5.400% due 03/09/09 400 401
American International Group, Inc.
4.700% due 10/01/10 125 124
5.375% due 10/18/11 (N) 130 132
5.050% due 10/01/15 155 152
6.250% due 03/15/87 700 697
Anadarko Petroleum Corp.
5.755% due 09/15/09 (E) 130 130
5.950% due 09/15/16 880 887
6.450% due 09/15/36 220 221
Apache Corp.
6.000% due 01/15/37 150 151
AT&T Mobility LLC
6.500% due 12/15/11 155 164
AT&T, Inc.
5.570% due 11/14/08 (E) 500 501
5.460% due 02/05/10 (E) 2,000 2,002
5.100% due 09/15/14 125 123
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 255 267
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America Corp.
5.875% due 02/15/09 (N) 25 25
5.370% due 11/06/09 (E)(N) 300 300
4.375% due 12/01/10 435 426
5.375% due 08/15/11 (N) 180 182
5.420% due 03/15/17 (p) 20 20
Bank of America NA
Series BKNT
6.000% due 10/15/36 925 939
Bank of New York Co., Inc. (The)
5.125% due 11/01/11 155 155
Bear Stearns Cos., Inc. (The)
5.350% due 02/01/12 580 583
BellSouth Corp.
4.750% due 11/15/12 30 29
6.550% due 06/15/34 (N) 85 89
Bellsouth Telecommunications, Inc.
7.000% due 12/01/95 165 171
Boeing Capital Corp., Ltd.
6.100% due 03/01/11 30 31
Boston Scientific Corp.
6.400% due 06/15/16 150 150
Burlington Northern Santa Fe Corp.
5.650% due 05/01/17 40 40
6.875% due 12/01/27 10 11
Campbell Soup Co.
5.875% due 10/01/08 30 30
Cardinal Health, Inc.
5.850% due 12/15/17 130 130
Carolina Power & Light Co.
6.500% due 07/15/12 5 5
Caterpillar Financial Services Corp. (E)(N)
5.420% due 05/18/09 900 901
CenterPoint Energy Houston Electric LLC (N)
Series J2
5.700% due 03/15/13 210 212
Cingular Wireless Services, Inc.
7.875% due 03/01/11 980 1,073
8.750% due 03/01/31 495 648
CIT Group, Inc.
5.450% due 06/08/09 (E)(N) 100 100
6.875% due 11/01/09 20 21
4.125% due 11/03/09 10 10
Citicorp
7.250% due 10/15/11 160 173
</Table>
Diversified Bond Fund 117
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Citigroup Funding, Inc. (E)
5.320% due 04/23/09 800 800
Citigroup, Inc.
5.393% due 12/28/09 (E) 100 100
4.125% due 02/22/10 350 342
5.100% due 09/29/11 200 200
5.000% due 09/15/14 995 974
6.125% due 08/25/36 400 412
Clear Channel Communications, Inc.
4.250% due 05/15/09 150 146
Clorox Co. (N)
4.200% due 01/15/10 50 49
Comcast Cable Communications LLC
6.875% due 06/15/09 140 145
Comcast Cable Holdings LLC (N)
9.800% due 02/01/12 400 474
Comcast Corp.
6.500% due 01/15/15 235 249
6.500% due 01/15/17 100 106
6.500% due 11/15/35 230 234
Consolidated Natural Gas Co. (N)
6.850% due 04/15/11 120 127
Constellation Energy Group, Inc.
4.550% due 06/15/15 180 168
Continental Airlines, Inc.
Series A
5.983% due 04/19/22 820 823
Costco Wholesale Corp.
5.500% due 03/15/17 770 774
Countrywide Financial Corp. (N)
6.250% due 05/15/16 155 157
COX Communications, Inc.
3.875% due 10/01/08 60 59
6.750% due 03/15/11 830 873
5.875% due 12/01/16 (p) 100 101
Credit Suisse First Boston USA, Inc.
3.875% due 01/15/09 170 167
4.875% due 08/15/10 155 154
6.500% due 01/15/12 10 11
5.500% due 08/15/13 (N) 20 20
Credit Suisse USA, Inc. (E)(N)
5.560% due 08/15/10 800 803
CRH America, Inc.
6.000% due 09/30/16 375 383
CVS Caremark Corp.
5.750% due 08/15/11 70 71
CVS Lease Pass Through (p)
6.036% due 12/10/28 99 100
DaimlerChrysler NA Holding Corp.
5.690% due 03/13/09 (E) 500 501
5.875% due 03/15/11 (N) 150 153
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.500% due 11/15/13 120 126
8.500% due 01/18/31 280 353
DCP Midstream, LP
6.875% due 02/01/11 10 11
Detroit Edison Co. (The)
6.125% due 10/01/10 65 67
6.350% due 10/15/32 20 21
Dominion Resources, Inc.
5.700% due 09/17/12 (N) 125 128
Series A
5.200% due 01/15/16 125 122
Series B
6.250% due 06/30/12 25 26
Series C
5.150% due 07/15/15 270 265
Dow Chemical Co. (The)
6.000% due 10/01/12 45 46
DPL, Inc.
6.875% due 09/01/11 115 122
DTE Energy Co.
7.050% due 06/01/11 385 410
Duke Energy Corp. (N)
5.625% due 11/30/12 120 123
Duke Realty, LP
5.950% due 02/15/17 220 226
Eastman Kodak Co.
7.250% due 11/15/13 40 40
Electronic Data Systems Corp.
7.125% due 10/15/09 200 208
Eli Lilly & Co. (N)
6.770% due 01/01/36 125 142
Erac USA Finance Co. (p)
5.900% due 11/15/15 345 346
Exelon Corp.
4.900% due 06/15/15 745 708
5.625% due 06/15/35 (N) 160 150
FedEx Corp.
5.500% due 08/15/09 420 423
7.600% due 07/01/97 35 41
FirstEnergy Corp.
Series B
6.450% due 11/15/11 700 734
Series C
7.375% due 11/15/31 195 224
Ford Motor Co. (N)
7.450% due 07/16/31 120 95
</Table>
118 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ford Motor Credit Co.
7.375% due 10/28/09 810 811
General Electric Capital Corp.
3.250% due 06/15/09 300 290
5.430% due 01/20/10 (E) 800 801
5.500% due 04/28/11 410 416
Series GMTN (E)
5.370% due 03/12/10 400 400
Series MTNA
4.125% due 09/01/09 400 393
6.000% due 06/15/12 490 509
5.450% due 01/15/13 380 385
General Motors Corp.
8.375% due 07/05/33 90 116
GMAC LLC
5.625% due 05/15/09 875 863
Goldman Sachs Group, Inc.
5.300% due 02/14/12 875 878
4.750% due 07/15/13 275 266
Goldman Sachs Group, Inc. (The)
5.400% due 03/30/09 (E) 1,000 1,000
6.875% due 01/15/11 170 180
5.350% due 01/15/16 285 281
5.625% due 01/15/17 80 80
Goldman Sachs Group, LP
4.500% due 06/15/10 320 315
Hartford Financial Services Group, Inc.
5.550% due 08/16/08 220 221
5.250% due 10/15/11 190 191
HBOS Treasury Services PLC (A)
5.250% due 02/21/17 130 131
Hess Corp. (N)
7.300% due 08/15/31 150 168
Historic TW, Inc.
8.050% due 01/15/16 105 120
6.625% due 05/15/29 20 20
HJ Heinz Co. (p)
6.428% due 12/01/08 100 102
HJ Heinz Finance Co. (N)
6.000% due 03/15/12 10 10
Home Depot, Inc.
5.875% due 12/16/36 465 451
HSBC Finance Corp.
4.750% due 05/15/09 900 894
4.125% due 11/16/09 910 889
5.640% due 11/16/09 (E)(N) 300 301
5.435% due 03/12/10 (E) 500 500
5.610% due 05/10/10 (E)(N) 100 100
6.750% due 05/15/11 165 174
6.375% due 11/27/12 100 105
5.000% due 06/30/15 75 73
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
International Business Machines Corp.
7.125% due 12/01/96 125 143
International Lease Finance Corp.
3.500% due 04/01/09 195 189
4.750% due 07/01/09 395 393
5.750% due 06/15/11 35 36
5.625% due 09/20/13 500 509
International Steel Group, Inc. (N)
6.500% due 04/15/14 120 125
ITT Corp.
7.400% due 11/15/25 20 23
Jersey Central Power & Light Co.
5.625% due 05/01/16 60 60
John Deere Capital Corp.
4.875% due 03/16/09 190 189
JP Morgan Chase Capital XV
5.875% due 03/15/35 605 587
JP Morgan Chase Capital XX (N)
Series T
6.550% due 09/29/36 100 102
JPMorgan Chase & Co.
5.600% due 06/01/11 50 51
5.125% due 09/15/14 125 124
5.150% due 10/01/15 30 29
JPMorgan Chase Bank NA
Series BKNT
5.875% due 06/13/16 130 134
Kellogg Co. (N)
Series B
6.600% due 04/01/11 275 289
Kerr-McGee Corp.
6.950% due 07/01/24 130 139
Kinder Morgan Energy Partners, LP
5.000% due 12/15/13 85 83
6.000% due 02/01/17 (N) 80 81
Kraft Foods, Inc.
5.625% due 11/01/11 345 349
Kroger Co. (The) (N)
7.500% due 04/01/31 15 16
Lehman Brothers Holdings, Inc. (N)
5.250% due 02/06/12 340 341
5.500% due 04/04/16 80 80
Liberty Property, LP
5.500% due 12/15/16 180 179
Marshall & Ilsley Corp.
5.350% due 04/01/11 395 398
</Table>
Diversified Bond Fund 119
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Merrill Lynch & Co., Inc.
6.220% due 09/15/26 530 540
Series MTNC
4.250% due 02/08/10 360 351
MetLife, Inc.
5.700% due 06/15/35 230 223
6.400% due 12/15/36 210 210
Midamerican Energy Co.
5.800% due 10/15/36 270 268
Midamerican Energy Holdings Co.
Series WI
6.125% due 04/01/36 655 666
Miller Brewing Co. (p)
5.500% due 08/15/13 90 90
Monumental Global Funding II (p)
4.625% due 03/15/10 35 35
Morgan Stanley
3.875% due 01/15/09 250 245
5.600% due 01/22/09 (E) 400 400
5.625% due 01/09/12 260 264
5.375% due 10/15/15 80 79
Series MTn (E)
5.450% due 01/15/10 300 300
Motorola, Inc.
5.220% due 10/01/97 200 151
Natexis Ambs Co. LLC (f)(p)
8.440% due 12/29/49 50 52
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 505 513
News America Holdings, Inc.
7.750% due 12/01/45 (N) 35 40
7.900% due 12/01/95 45 52
8.250% due 10/17/96 15 18
News America, Inc. (A)
6.150% due 03/01/37 835 818
Nisource Finance Corp.
7.875% due 11/15/10 100 108
Norfolk Southern Corp.
6.200% due 04/15/09 195 198
7.050% due 05/01/37 60 66
6.000% due 03/15/49 565 504
Northern States Power Co.
Series B
8.000% due 08/28/12 340 384
Ohio Power Co. (E)
5.530% due 04/05/10 400 400
ONEOK Partners, LP
6.650% due 10/01/36 150 156
Owens Corning, Inc. (p)
6.500% due 12/01/16 180 183
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pacific Gas & Electric Co.
3.600% due 03/01/09 40 39
4.200% due 03/01/11 (N) 75 73
6.050% due 03/01/34 105 107
5.800% due 03/01/37 30 30
Pemex Project Funding Master Trust (N)
Series WI
6.625% due 06/15/35 90 95
Progress Energy, Inc.
7.100% due 03/01/11 43 46
7.750% due 03/01/31 35 42
7.000% due 10/30/31 25 28
ProLogis
5.625% due 11/15/15 425 429
Prudential Financial, Inc.
5.100% due 12/14/11 305 305
RBS Capital Trust III (f)
5.512% due 09/29/49 160 158
Regions Financial Corp.
4.500% due 08/08/08 350 346
Residential Capital LLC
6.000% due 02/22/11 625 618
RR Donnelley & Sons Co.
6.125% due 01/15/17 265 264
Safeway, Inc. (N)
7.250% due 02/01/31 10 11
Sigma Finance, Inc. (E)(A)
8.500% due 08/11/16 970 970
Simon Property Group, LP
5.750% due 12/01/15 535 545
6.100% due 05/01/16 255 266
5.250% due 12/01/16 735 720
Southern Natural Gas Co. (A)
5.900% due 04/01/17 30 30
Sprint Capital Corp.
8.375% due 03/15/12 120 134
6.875% due 11/15/28 75 74
8.750% due 03/15/32 20 24
Sprint Nextel Corp.
6.000% due 12/01/16 620 608
State Street Bank & Trust Co.
Series BKNT
5.300% due 01/15/16 50 50
SunTrust Capital VIII
6.100% due 12/15/36 160 152
</Table>
120 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Time Warner Cable, Inc. (A)
5.400% due 07/02/12 120 120
5.850% due 05/01/17 1,330 1,338
Time Warner, Inc.
5.590% due 11/13/09 (E) 2,000 2,003
6.875% due 05/01/12 100 106
5.875% due 11/15/16 235 237
7.700% due 05/01/32 55 63
TXU Corp.
Series P
5.550% due 11/15/14 50 45
Series Q
6.500% due 11/15/24 50 43
Series R
6.550% due 11/15/34 210 181
TXU Electric Delivery Co. (E)(p)
5.725% due 09/16/08 300 300
Unilever Capital Corp. (N)
5.900% due 11/15/32 65 64
Union Pacific Corp.
3.625% due 06/01/10 120 114
UnitedHealth Group, Inc.
5.250% due 03/15/11 60 60
US Bancorp
5.300% due 04/28/09 430 433
US Bank NA
5.700% due 12/15/08 15 15
USB Capital IX (f)(N)
6.189% due 04/15/49 100 103
Verizon Communications, Inc.
5.399% due 04/03/09 (E) 400 400
5.350% due 02/15/11 245 247
5.850% due 09/15/35 115 110
Verizon Global Funding Corp. (N)
7.375% due 09/01/12 70 77
Verizon Virginia, Inc.
Series A
4.625% due 03/15/13 240 229
Viacom, Inc.
5.750% due 04/30/11 100 101
Wachovia Bank NA (E)
Series BKNT
5.320% due 10/03/08 700 700
Wachovia Capital Trust III (f)
5.800% due 03/15/42 110 112
Wachovia Corp.
5.410% due 12/01/09 (E) 100 100
5.700% due 08/01/13 595 610
5.250% due 08/01/14 285 283
Walt Disney Co. (The) (E)
5.440% due 09/10/09 400 401
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
WellPoint, Inc.
5.850% due 01/15/36 35 34
Wells Fargo & Co.
5.300% due 08/26/11 250 252
4.950% due 10/16/13 (N) 45 44
Wells Fargo Bank NA
5.750% due 05/16/16 80 82
Wells Fargo Capital X
5.950% due 12/15/36 100 98
Weyerhaeuser Co.
6.750% due 03/15/12 100 105
Wyeth
6.950% due 03/15/11 550 585
5.500% due 03/15/13 50 51
5.950% due 04/01/37 180 180
XTO Energy, Inc.
7.500% due 04/15/12 110 120
Zurich Capital Trust I (p)
8.376% due 06/01/37 115 120
------------
69,617
------------
International Debt - 3.9%
Abbey National PLC (f)
6.700% due 06/29/49 105 106
Aiful Corp. (A)
5.000% due 08/10/10 100 99
AXA SA
8.600% due 12/15/30 25 32
Banco Mercantil del Norte SA (A)
6.862% due 10/13/21 155 159
British Telecommunications PLC
9.125% due 12/15/30 40 56
Canadian Natural Resources, Ltd.
6.500% due 02/15/37 75 77
CIT Group Funding Co. of Canada (N)
5.600% due 11/02/11 60 60
Citigroup Global Markets Deutschland AG for OAO
Gazprom
10.500% due 10/21/09 200 224
Conoco Funding Co.
6.350% due 10/15/11 255 268
Crest, Ltd. (p)
Series 2003-2A Class C2
5.709% due 12/28/38 450 447
Depfa ACS Bank (A)
5.125% due 03/16/37 100 96
</Table>
Diversified Bond Fund 121
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Deutsche Telekom International Finance BV
5.546% due 03/23/09 (E) 800 802
8.000% due 06/15/10 160 173
5.750% due 03/23/16 (N) 80 80
8.250% due 06/15/30 50 63
Egypt Government AID Bonds
4.450% due 09/15/15 175 169
Eksportfinans ASA
5.500% due 05/25/16 120 124
Export-Import Bank of China (p)
4.875% due 07/21/15 205 200
Export-Import Bank of Korea (p)
4.125% due 02/10/09 90 88
Falconbridge, Ltd.
6.000% due 10/15/15 140 145
Gaz Capital for Gazprom (A)
6.212% due 11/22/16 395 399
6.510% due 03/07/22 160 165
Glitnir Banki HF (A)(E)
6.693% due 06/15/16 250 262
Harborview NIM Corp. (p)
Series 2006-9A Class N1
6.409% due 11/19/36 95 95
HBOS PLC (f)(p)
5.920% due 09/29/49 100 98
HSBC Holdings PLC
6.500% due 05/02/36 340 364
Ispat Inland ULC
9.750% due 04/01/14 185 206
Kaupthing Bank Hf (p)
6.050% due 04/12/11 (E) 270 272
5.750% due 10/04/11 (A) 110 112
7.125% due 05/19/16 (A) 230 249
Klio Funding, Ltd. (E)(p)
Series 2004-1A Class A1
5.910% due 04/23/39 2,180 2,191
Korea Development Bank (E)
5.490% due 04/03/10 700 700
Korea Electric Power Corp. (p)
5.125% due 04/23/34 30 30
Mexico Government International Bond (N)
Series MTNA
6.750% due 09/27/34 287 320
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 85 87
Newcastle CDO, Ltd. (p)
Series 2004-4A Class 3FX
5.110% due 03/24/39 230 218
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Petrobras International Finance Co.
6.125% due 10/06/16 120 123
Petroleum Export, Ltd. (p)
5.265% due 06/15/11 86 84
Province of Quebec Canada
5.000% due 07/17/09 10 10
Series PJ
6.125% due 01/22/11 245 255
Ras Laffan Liquefied Natural Gas Co., Ltd. II
(p)
5.298% due 09/30/20 115 111
Resona Bank, Ltd. (f)(p)
5.850% due 09/29/49 75 75
Resona Preferred Global Securities Cayman, Ltd.
(f)(A)
7.191% due 12/29/49 125 132
Rogers Cable, Inc.
6.750% due 03/15/15 355 374
Rogers Wireless, Inc.
6.375% due 03/01/14 220 227
Royal KPN NV
8.000% due 10/01/10 130 141
Russia Government International Bond
5.000% due 03/31/30 (p) 1 1
Series REGS
5.000% due 03/31/30 30 34
Santander Financial Issuances
6.375% due 02/15/11 25 26
Shinsei Finance Cayman, Ltd. (f)(A)
6.418% due 01/29/49 150 152
Siemens Financieringsmaatschappij NV (p)
6.125% due 08/17/26 565 577
SMFG Preferred Capital, Ltd. (f)(A)
6.078% due 01/29/49 150 150
Sumitomo Mitsui Banking Corp. (f)(p)
5.625% due 07/29/49 40 39
Systems 2001 AT LLC (p)
7.156% due 12/15/11 32 33
Talisman Energy, Inc.
6.250% due 02/01/38 670 645
Telecom Italia Capital SA
5.250% due 10/01/15 175 168
Telefonica Emisiones SAU
7.045% due 06/20/36 30 32
</Table>
122 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Telefonica Europe BV (N)
7.750% due 09/15/10 325 350
Telefonos de Mexico SA de CV
4.500% due 11/19/08 195 193
TELUS Corp.
8.000% due 06/01/11 230 251
TNK-BP Finance SA (A)
7.500% due 07/18/16 140 148
Tyco International Group SA
6.750% due 02/15/11 170 181
6.000% due 11/15/13 115 121
7.000% due 06/15/28 40 48
6.875% due 01/15/29 120 142
UFJ Finance Aruba AEC (N)
6.750% due 07/15/13 60 65
Vale Overseas, Ltd.
6.250% due 01/11/16 115 118
6.250% due 01/23/17 235 241
6.875% due 11/21/36 146 155
Vodafone Group PLC (N)
5.750% due 03/15/16 50 51
WEA Finance LLC/WCI Finance LLC (p)
5.700% due 10/01/16 675 683
Xstrata Finance Canada, Ltd. (p)
5.500% due 11/16/11 35 35
5.800% due 11/15/16 35 35
------------
15,442
------------
Mortgage-Backed Securities - 54.5%
American Home Mortgage Investment Trust (E)
Series 2005-2 Class 5A2
5.470% due 09/25/35 634 634
Arcap Reit, Inc. (p)
Series 2004-RR3 Class B
5.040% due 09/21/45 95 91
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 200 199
Series 2005-2 Class A4
4.783% due 07/10/43 235 231
Series 2005-6 Class A2
5.165% due 09/10/47 375 375
Series 2006-1 Class A4
5.372% due 09/10/45 420 420
Series 2006-3 Class A4
5.889% due 07/10/44 300 311
Series 2006-4 Class A4
5.669% due 07/10/46 430 438
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2007-1 Class A3
5.449% due 01/15/49 395 399
Series 2007-1 Class A4
5.451% due 01/15/49 325 328
Banc of America Funding Corp.
Series 2005-5 Class 1A11
5.500% due 09/25/35 241 236
Series 2006-3 Class 5A8
5.500% due 03/25/36 220 220
Series 2006-A Class 3A2
5.899% due 02/20/36 1,028 1,036
Series 2006-A Class 4A1 (E)
5.580% due 02/20/36 303 304
Banc of America Mortgage Securities, Inc.
Series 2004-1 Class 5A1
6.500% due 09/25/33 35 35
Series 2004-11 Class 2A1
5.750% due 01/25/35 198 196
Series 2005-L Class 3A1 (E)
5.459% due 01/25/36 119 119
Series 2006-2 Class A15
6.000% due 07/25/36 244 246
Bank of America Alternative Loan Trust
Series 2006-5 Class CB17
6.000% due 06/25/36 185 188
Bear Stearns Adjustable Rate Mortgage Trust
Series 2002-11 Class 1A1
5.624% due 02/25/33 37 37
Series 2004-4 Class A4
3.517% due 06/25/34 125 123
Bear Stearns Alt-A Trust
Series 2006-4 Class 32A1
6.479% due 07/25/36 1,687 1,724
Bear Stearns Commercial Mortgage Securities
Series 2005-PWR Class A1
4.386% due 02/11/41 80 79
Series 2006-PW1 Class A1
5.044% due 12/01/38 697 694
Chase Mortgage Finance Corp.
Series 2003-S8 Class A1
4.500% due 09/25/18 129 124
Series 2005-A1 Class 2A2 (E)
5.244% due 12/25/35 2,317 2,298
Series 2006-A1 Class 1A1 (E)
6.057% due 09/25/36 433 434
</Table>
Diversified Bond Fund 123
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-S4 Class A3
6.000% due 12/25/36 220 222
Series 2006-S4 Class A4
6.000% due 12/25/36 115 116
Series 2007-A1 Class 5A1
4.172% due 02/25/37 1,153 1,134
Citigroup Mortgage Loan Trust, Inc.
Series 2005-11 Class A2A (E)
4.700% due 12/25/35 259 256
Series 2006-WF1 Class A2F
5.657% due 03/01/36 780 779
Citigroup/Deutsche Bank Commercial Mortgage
Trust
Series 2006-CD3 Class A5
5.617% due 10/15/48 145 147
Citimortgage Alternative Loan Trust
Series 2006-A3 Class 1A5
6.000% due 07/25/36 135 136
Commercial Mortgage Acceptance Corp.
Series 1998-C2 Class A3
6.040% due 09/15/30 1,010 1,013
Countrywide Alternative Loan Trust
Series 2005-J8 Class 1A3
5.500% due 07/25/35 173 173
Series 2006-9T1 Class A7
6.000% due 05/25/36 90 91
Series 2005-J13 Class 2A3
5.500% due 11/25/35 70 70
Series 2006-43C Class 1A7
6.000% due 02/25/37 278 281
Series 2006-J2 Class A3
6.000% due 04/25/36 137 139
Series 2007-OA6 Class A1B (E)
5.520% due 06/25/37 800 800
Series 2007-OA7 Class A1A (E)
5.500% due 05/25/47 800 799
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2005-3 Class 1A2 (E)
5.610% due 04/25/35 120 120
Series 2006-OA4 Class A1 (E)
5.843% due 04/25/46 536 536
Series 2007-HY1 Class 1A2
5.736% due 04/25/37 119 119
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2004-C1 Class A3
4.321% due 01/15/37 211 206
Series 2005-C4 Class A3
5.120% due 08/15/38 400 398
Series 2005-C6 Class A1
4.938% due 12/15/40 303 302
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-C6 Class A4
5.230% due 12/15/40 385 382
Credit Suisse Mortgage Capital Certificates
Series 2006-C1 Class A1
4.367% due 07/15/10 99 97
Series 2006-C1 Class AAB
5.555% due 02/15/39 275 279
Series 2006-C2 Class A1
5.250% due 03/15/39 230 231
Series 2006-C2 Class A2
5.659% due 03/15/39 250 256
Series 2006-C4 Class A1
4.771% due 09/15/39 650 643
Series 2006-C4 Class A3
5.467% due 09/15/39 360 362
Series 2007-C1 Class A3
5.383% due 02/15/40 1,800 1,796
Series 2007-C2 Class A3
5.542% due 01/15/49 215 216
Credit Suisse First Boston Mortgage Securities
Corp. (E)(A)
Series 2005-CN2 Class A1
5.620% due 11/15/19 358 358
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2005-AR1 Class 2A3
5.012% due 08/25/35 220 224
Downey Savings & Loan Association Mortgage Loan
Trust (E)
Series 2004-AR3 Class 1A1B
7.240% due 07/19/44 50 51
Fannie Mae
7.000% due 2008 4 4
7.000% due 2009 15 15
7.000% due 2011 8 8
8.000% due 2011 1 2
5.363% due 2012 (E) 160 161
7.000% due 2012 3 3
6.500% due 2013 23 23
5.500% due 2014 27 27
7.000% due 2015 10 10
5.500% due 2016 6 6
6.000% due 2016 61 62
6.500% due 2016 104 107
</Table>
124 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
9.000% due 2016 2 2
5.500% due 2017 217 219
6.000% due 2017 93 94
8.500% due 2017 5 5
4.500% due 2018 776 754
5.000% due 2018 1,260 1,245
5.500% due 2018 246 247
6.500% due 2018 11 12
4.500% due 2019 1,093 1,060
5.000% due 2019 5,131 5,070
4.000% due 2020 1,055 997
4.500% due 2020 1,930 1,871
5.000% due 2020 1,226 1,210
6.000% due 2021 763 775
4.500% due 2022 1 1
8.500% due 2025 4 4
6.500% due 2028 21 22
6.500% due 2029 479 495
6.500% due 2032 361 373
7.000% due 2032 408 425
3.907% due 2033 (E) 150 149
4.500% due 2033 651 614
4.678% due 2033 (E) 88 88
5.000% due 2033 1,203 1,165
5.500% due 2033 7,584 7,518
6.000% due 2033 437 442
6.500% due 2033 18 19
7.000% due 2033 240 250
4.500% due 2034 469 441
5.000% due 2034 3,546 3,434
5.500% due 2034 2,739 2,713
6.000% due 2034 1,954 1,976
6.500% due 2034 267 274
4.375% due 2035 (E) 516 516
4.500% due 2035 427 402
4.853% due 2035 (E) 151 150
5.000% due 2035 2,134 2,066
5.500% due 2035 970 962
6.000% due 2035 1,793 1,812
6.911% due 2035 (E) 372 386
6.912% due 2035 (E) 316 328
6.914% due 2035 (E) 387 402
6.916% due 2035 (E) 388 402
6.919% due 2035 (E) 300 311
4.338% due 2036 (E) 503 502
4.780% due 2036 (E) 254 254
5.000% due 2036 960 928
5.500% due 2036 304 301
6.000% due 2036 3,898 3,928
6.500% due 2036 2,850 2,911
7.000% due 2036 123 127
5.000% due 2037 86 83
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.183% due 2044 (E) 277 281
Series 1993-134 Class H
6.500% due 08/25/08 239 240
Series 1999-56 Class Z
7.000% due 12/18/29 89 93
Series 2003-337 Class 1
Principal Only STRIP
Zero coupon due 07/01/33 230 171
Series 2003-343 Class 6
Interest Only STRIP
5.000% due 10/01/33 224 47
Series 2003-345 Class 18
Interest Only STRIP
4.500% due 12/01/18 633 90
Series 2003-345 Class 19
Interest Only STRIP
4.500% due 01/01/19 706 100
Series 2006-369 Class 8
Interest Only STRIP
5.500% due 04/01/36 192 45
Series 2006-371 Class 2
Interest Only STRIP
6.500% due 07/01/36 10 2
Series 2006-373 Class 1
Principal Only STRIP
Zero coupon due 07/01/36 188 143
15 Year TBA (I)
4.500% 540 523
5.000% 3,390 3,341
5.500% 3,840 3,845
30 Year TBA (I)
4.500% 645 606
5.000% 30,235 29,202
5.500% 11,000 10,877
6.000% 7,035 7,087
6.500% 2,750 2,808
Fannie Mae REMICS
Series 2003-37 Class HY
5.000% due 12/25/16 749 744
Series 2006-48 Class LG
Principal Only STRIP
Zero coupon due 06/25/36 80 59
Fannie Mae Whole Loan
Series 2003-W1 Class 1A1
6.500% due 12/25/42 69 71
</Table>
Diversified Bond Fund 125
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-W12 Class 2A5
4.500% due 06/25/43 631 626
First Horizon Alternative Mortgage Securities
Series 2004-AA3 Class A1 (E)
5.300% due 09/25/34 234 234
Series 2006-AA5 Class A2 (E)
6.626% due 09/25/36 121 125
Series 2006-AA7 Class A1 (E)
6.600% due 01/25/37 793 813
Series 2006-FA3 Class A6
6.000% due 07/25/36 125 126
First Horizon Asset Securities, Inc. (E)
Series 2005-AR5 Class 3A1
5.540% due 10/25/35 54 54
Freddie Mac
4.500% due 2013 (N) 715 702
9.000% due 2016 37 41
5.000% due 2019 205 203
4.500% due 2021 52 51
5.500% due 2033 293 290
4.613% due 2034 (E) 88 89
5.000% due 2035 223 216
6.000% due 2035 134 135
5.000% due 2036 1,161 1,123
5.119% due 2036 (E) 612 610
5.891% due 2036 (E) 90 91
5.952% due 2036 (E) 216 219
5.971% due 2036 (E) 110 112
5.918% due 2037 (E) 600 606
5.920% due 2037 (E) 359 362
Series 1991-105 Class G
7.000% due 03/15/21 41 41
Series 2003-262 Class AB
2.900% due 11/15/14 136 132
Series 2004-281 Class DF (E)
5.770% due 06/15/23 328 331
Series 2005-292 Class IG
Interest Only STRIP
5.000% due 04/15/23 81 12
Series 2005-294 Class FA (E)
5.490% due 03/15/20 631 632
30 Year TBA (I)
5.000% 3,145 3,039
5.500% 4,910 4,855
6.000% 4,350 4,385
Freddie Mac Gold
7.000% due 2008 9 9
8.000% due 2009 5 5
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
7.000% due 2010 6 7
8.000% due 2010 1 1
7.000% due 2011 4 4
8.000% due 2011 12 12
8.000% due 2012 5 5
7.000% due 2014 59 61
12.000% due 2014 10 10
6.000% due 2016 9 9
6.000% due 2017 225 229
8.000% due 2017 15 16
4.500% due 2018 613 596
5.000% due 2018 13 13
5.500% due 2019 243 244
5.500% due 2020 689 691
9.000% due 2024 5 6
8.500% due 2025 20 21
9.000% due 2025 8 9
9.000% due 2026 1 1
8.500% due 2027 91 98
7.243% due 2030 (E) 4 4
5.500% due 2032 1,298 1,287
6.000% due 2032 63 64
7.000% due 2032 247 257
5.000% due 2033 574 556
5.500% due 2033 1,435 1,421
6.500% due 2033 272 279
4.500% due 2034 193 182
5.000% due 2034 1,507 1,460
5.500% due 2034 849 841
6.000% due 2034 142 144
6.500% due 2034 197 202
5.000% due 2036 1,221 1,182
Freddie Mac Reference REMICS
Series 2006-R00 Class AK
5.750% due 12/15/18 155 156
Freddie Mac REMICS
Series 2003-258 Class IG
Interest Only STRIP
4.500% due 10/15/16 501 49
Series 2004-277 Class KE
3.500% due 12/15/17 79 78
Series 2005-295 Class NA
4.250% due 09/15/24 545 538
Series 2005-299 Class KF (E)
5.720% due 06/15/35 374 374
Series 2005-301 Class IM
Interest Only STRIP
5.500% due 01/15/31 146 18
</Table>
126 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-323 Class PA
6.000% due 03/15/26 235 238
Freddie Mac Strips
Series 2007-245 Class IO
Interest Only STRIP
5.000% due 03/01/37 310 80
Series 2007-245 Class PO
5.119% due 11/15/36 310 220
GE Capital Commercial Mortgage Corp.
Series 2005-C1 Class A1
4.012% due 06/10/48 107 105
Series 2005-C1 Class A5
4.772% due 06/10/48 130 126
Series 2006-C1 Class A4
5.518% due 03/10/44 240 241
GE Capital Commercial Mortgage Corp.
Series 2007-C1 Class A4
5.489% due 02/10/17 200 201
Ginnie Mae I
6.500% due 2008 3 3
6.500% due 2009 87 87
7.000% due 2011 1 1
9.500% due 2016 1 1
10.500% due 2020 4 4
8.500% due 2022 9 10
8.000% due 2025 7 8
9.000% due 2025 207 223
7.000% due 2029 6 7
8.000% due 2030 34 36
8.500% due 2030 6 6
7.000% due 2031 204 213
7.000% due 2032 11 11
30 Year TBA (I)
5.500% 1,405 1,397
6.000% 2,100 2,128
6.500% 1,500 1,540
Ginnie Mae II
4.500% due 04/20/35 140 131
GMAC Commercial Mortgage Securities, Inc.
Series 2001-C1 Class A2
6.465% due 04/15/34 160 166
Series 2005-C1 Class A2
4.471% due 05/10/43 130 128
GMAC Mortgage Corp. Loan Trust
Series 2005-AR6 Class 3A1
5.298% due 11/19/35 190 190
Series 2006-AR1 Class 1A1 (E)
5.614% due 03/19/36 406 408
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Government National Mortgage Association (E)
Series 1999-40 Class FE
5.870% due 11/16/29 592 597
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 365 366
Series 2005-GG3 Class A1
3.919% due 08/10/42 159 156
Series 2006-RR1 Class A1 (p)
5.964% due 03/18/49 165 161
Series 2007-GG9 Class A4
5.444% due 03/10/39 715 718
GS Mortgage Securities Corp. II
Series 1998-C1 Class A2
6.620% due 10/18/30 157 158
Series 2006-FL8 Class A1 (p)(E)
5.420% due 06/06/20 349 349
Series 2006-GG6 Class A4
5.553% due 04/10/38 420 426
Harborview Mortgage Loan Trust
Series 2004-4 Class 3A (E)
2.975% due 06/19/34 501 500
Series 2005-14 Class 3A1A
5.313% due 12/19/35 53 53
Series 2006-2 Class 1A
5.438% due 02/25/36 711 730
Series 2006-3 Class 1A1A (E)
6.416% due 06/19/36 1,253 1,280
HSI Asset Securitization Corp. Trust (E)
Series 2005-I1 Class 2A1
5.440% due 11/25/35 43 43
Impac CMB Trust (E)
Series 2004-3 Class 1A
5.570% due 06/25/34 23 23
Indymac Index Mortgage Loan Trust
Series 2006-AR3 Class 2A1A
6.405% due 03/25/36 2,191 2,233
Indymac Loan Trust (E)
Series 2004-L1 Class A1 (p)
5.600% due 07/25/09 203 204
Series 2005-L1 Class A
5.520% due 06/25/10 996 998
JP Morgan Alternative Loan Trust
Series 2006-A2 Class 3A1
5.954% due 05/25/36 822 835
Series 2006-A4 Class A4 (E)
5.390% due 08/25/36 85 85
</Table>
Diversified Bond Fund 127
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2003-CB7 Class A3
4.449% due 01/12/38 265 259
Series 2005-CB1 Class A1
4.520% due 08/12/37 246 244
Series 2005-CB1 Class A2
5.247% due 01/12/43 255 256
Series 2005-CB1 Class A4
4.895% due 09/12/37 80 78
Series 2005-FL1 Class A1 (p)(E)
5.430% due 02/15/19 985 985
Series 2005-LDP Class A1
5.035% due 12/15/44 895 891
4.116% due 03/15/46 106 105
Series 2005-LDP Class A3
4.959% due 08/15/42 195 192
5.209% due 12/15/44 920 921
Series 2005-LDP Class A3A1
4.871% due 10/15/42 530 523
Series 2005-LDP Class A4
4.918% due 10/15/42 290 282
Series 2006-CB1 Class A1
5.279% due 12/12/43 197 198
Series 2006-CB1 Class A3A (p)
5.491% due 12/12/44 395 399
Series 2006-CB1 Class A4
5.429% due 12/12/43 375 377
5.481% due 12/12/44 630 634
5.817% due 05/12/45 485 490
Series 2006-CB1 Class ASB
5.506% due 12/12/44 105 106
Series 2006-LDP Class A1S
5.179% due 05/15/47 1,568 1,570
Series 2006-LDP Class A3
5.336% due 05/15/47 115 114
Series 2006-LDP Class A3B
5.447% due 05/15/45 195 197
Series 2006-LDP Class A4
6.066% due 04/15/45 145 151
5.561% due 05/15/45 225 225
Series 2007-CB1 Class A4
5.440% due 06/12/47 950 958
Series 2007-LDP Class A2S
5.294% due 05/15/49 380 380
Series 2007-LDP Class A3
5.393% due 01/15/49 495 495
JP Morgan Mortgage Trust
Series 2005-A2 Class 3A1
4.906% due 04/25/35 293 290
Series 2005-A3 Class 6A1
4.906% due 06/25/35 436 432
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-A6 Class 2A2
4.977% due 08/25/35 304 302
Series 2006-A2 Class 1A1
5.465% due 04/25/36 468 466
Series 2007-A1 Class 3A2 (E)
5.012% due 07/25/35 1,461 1,454
Series 2007-A1 Class 6A1
4.781% due 07/25/35 166 164
LB-UBS Commercial Mortgage Trust
Series 2003-C3 Class A1
2.599% due 05/15/27 94 92
Series 2004-C2 Class A1
2.946% due 03/15/29 304 294
Series 2004-C4 Class A3
5.153% due 06/15/29 280 281
Series 2005-C3 Class A5
4.739% due 07/15/30 480 462
Series 2005-C3 Class AAB
4.664% due 07/15/30 600 585
Series 2006-C4 Class A4
5.899% due 06/15/38 85 89
Lehman Mortgage Trust
Series 2005-3 Class 1A3
5.500% due 01/25/36 296 298
Mach One Trust Commercial Mortgage-Backed (p)
Series 2004-1A Class A3
5.220% due 05/28/40 315 307
Master Adjustable Rate Mortgages Trust (E)
Series 2006-OA2 Class 1A1
5.733% due 12/25/46 566 566
Mastr Adjustable Rate Mortgages Trust
Series 2006-2 Class 3A1
4.849% due 01/25/36 395 392
Mastr Alternative Loans Trust
Series 2003-4 Class B1
5.668% due 06/25/33 92 94
Series 2004-10 Class 5A6
5.750% due 09/25/34 135 135
Mastr Asset Securitization Trust
Series 2004-4 Class 2A2 (E)
5.770% due 04/25/34 422 423
</Table>
128 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-2 Class 1A1
5.250% due 11/25/35 332 328
Merrill Lynch Mortgage Investors, Inc.
Series 2006-A1 Class 1A1
5.882% due 03/25/36 1,552 1,561
Merrill Lynch Mortgage Trust
Series 2005-LC1 Class A1
5.017% due 01/12/44 304 303
Series 2005-LC1 Class A2
5.202% due 01/12/44 380 380
Series 2005-MKB Class A1
4.446% due 09/12/42 201 198
Merrill Lynch/Countrywide Commercial Mortgage
Trust
Series 2006-3 Class A2
5.291% due 07/12/46 420 421
Series 2006-4 Class A1
3.642% due 12/12/49 301 290
Series 2007-5 Class A4
5.378% due 08/12/48 900 901
MLCC Mortgage Investors, Inc. (E)
Series 2004-HB1 Class A2
5.771% due 04/25/29 159 159
Morgan Stanley Capital I
Series 2004-HQ3 Class A1
3.100% due 01/13/41 79 78
Series 2004-RR2 Class A2 (p)
5.450% due 10/28/33 335 328
Series 2005-HQ5 Class A4
5.168% due 01/14/42 245 243
Series 2005-IQ1 Class AAB
5.178% due 09/15/42 190 189
Series 2005-IQ9 Class A1
3.990% due 07/15/56 119 117
Series 2005-T17 Class A5
4.780% due 12/13/41 60 58
Series 2006-HQ8 Class A4
5.388% due 03/12/44 215 217
Series 2006-HQ9 Class A4
5.731% due 07/20/44 160 164
Series 2007-HQ1 Class A4
5.447% due 02/20/44 325 328
Morgan Stanley Mortgage Loan Trust
Series 2006-3AR Class 2A3
5.869% due 03/25/36 727 736
Mortgage Capital Funding, Inc.
Series 1998-MC2 Class A2
6.423% due 06/18/30 189 190
Novastar NIM Trust (p)
4.777% due 10/26/35 1 1
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
5.720% due 02/25/34 94 94
Series 2004-CL1 Class 2A2
5.720% due 02/25/19 21 21
Residential Accredit Loans, Inc.
Series 2004-QS5 Class A6 (E)
5.920% due 04/25/34 169 170
Series 2005-QA1 Class A41
5.690% due 09/25/35 203 203
Series 2005-QA8 Class NB3
5.499% due 07/25/35 120 121
Series 2006-QA1 Class A21
5.986% due 01/25/36 696 704
Series 2006-QS6 Class 1A13
6.000% due 06/25/36 350 352
Residential Asset Securities Corp. (E)
Series 2003-KS4 Class AIIB
5.610% due 06/25/33 173 173
Residential Funding Mortgage Securities I
Series 2003-S5 Class 1A2 (E)
5.770% due 11/25/18 511 514
Series 2003-S20 Class 1A7 (E)
5.820% due 12/25/33 151 152
Series 2006-SA4 Class 2A1
6.164% due 10/25/36 196 199
Structured Asset Securities Corp.
Series 2004-21X Class 1A3
4.440% due 12/25/34 295 292
Thornburg Mortgage Securities Trust (E)
Series 2006-1 Class A3
5.490% due 01/25/36 550 550
Wachovia Bank Commercial Mortgage Trust
Series 2005-C17 Class A1
4.430% due 03/15/42 523 516
Series 2005-C22 Class A3
5.461% due 12/15/44 570 573
Series 2007-C30 Class A5
5.342% due 12/15/43 905 901
Washington Mutual Alternative Mortgage
Pass-Through Certificates
Series 2005-4 Class CB11
5.500% due 06/25/35 75 74
Series 2007-OA2 Class 2A (E)
5.633% due 01/25/47 556 555
</Table>
Diversified Bond Fund 129
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Washington Mutual Mortgage Pass-Through
Certificates
Series 2005-AR1 Class 1A1
4.838% due 10/25/35 208 206
Series 2005-AR1 Class A1A1 (E)
5.610% due 10/25/45 210 210
Series 2005-AR6 Class B3 (E)
5.980% due 04/25/45 101 101
Series 2007-HY3 Class 4B1
5.358% due 03/25/37 95 94
Washington Mutual, Inc.
Series 2002-AR1 Class 1A (E)
6.183% due 11/25/42 189 189
Series 2004-AR1 Class A1B1 (E)
5.664% due 11/25/34 35 35
Series 2006-AR1 Class 1A1
5.967% due 09/25/36 568 575
Series 2006-AR1 Class 1A1A (E)
5.953% due 01/25/46 528 532
Wells Fargo Mortgage Backed Securities Trust
Series 2006-2 Class 2A3
5.500% due 03/25/36 231 231
------------
218,690
------------
Municipal Bonds - 0.1%
Golden State Tobacco Securitization Corp.
Revenue Bonds, weekly demand
5.000% due 06/01/21 495 496
------------
Non-US Bonds - 0.2%
Bundesrepublik Deutschland
Series 04
3.750% due 01/04/15 EUR 250 332
Canadian Government Bond
4.000% due 12/01/31 CAD 48 63
Poland Government Bond
Series 1013
5.000% due 10/24/13 PLN 670 238
Quebec Residual
Zero coupon due 12/01/36 CAD 230 52
------------
685
------------
United States Government Agencies - 4.5%
Fannie Mae
2.500% due 06/15/08 810 788
7.250% due 01/15/10 (N) 940 998
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
4.750% due 04/19/10 (N) 815 812
4.125% due 05/15/10 140 137
7.125% due 06/15/10 (N) 200 213
4.250% due 08/15/10 (N) 1,480 1,456
5.125% due 04/15/11 (N) 1,215 1,228
5.000% due 02/16/12 (N) 325 327
Zero coupon due 07/05/14 545 385
5.250% due 03/24/15 155 154
5.000% due 02/13/17 (N) 35 35
5.000% due 04/26/17 (N) 370 362
6.625% due 11/15/30 (N) 65 77
Federal Farm Credit Bank
5.125% due 08/25/16 215 218
Federal Home Loan Bank System
5.400% due 01/02/09 640 640
5.000% due 09/18/09 (N) 655 658
4.375% due 03/17/10 (N) 1,855 1,836
5.375% due 08/19/11 65 66
5.625% due 06/11/21 (N) 420 440
5.500% due 07/15/36 (N) 150 156
Series VB15
5.000% due 12/21/15 300 300
Financing Corp.
Principal Only STRIP
Series 1
Zero coupon due 05/11/16 185 119
Series 1P
Zero coupon due 05/11/18 90 52
Series 2P
Zero coupon due 11/30/17 140 83
Series 3P
Zero coupon due 11/30/17 395 233
Series 5P
Zero coupon due 02/08/18 30 17
Series 12P
Zero coupon due 12/06/18 765 426
Series 15P
Zero coupon due 03/07/19 30 16
Series 19
Zero coupon due 06/06/16 545 348
Series C-P
Zero coupon due 11/30/17 275 162
Series E-P
Zero coupon due 11/02/18 1,105 619
Freddie Mac
4.875% due 02/09/10 (N) 1,175 1,177
5.750% due 01/15/12 (N) 305 317
</Table>
130 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.125% due 07/15/12 (N) 890 902
4.875% due 11/15/13 (N) 360 360
5.050% due 01/26/15 315 318
5.000% due 04/18/17 (N) 320 320
6.750% due 03/15/31 (N) 30 36
5.625% due 11/23/35 (N) 720 709
Tennessee Valley Authority
6.150% due 01/15/38 440 500
------------
18,000
------------
United States Government Treasuries - 11.4%
United States Treasury Inflation Indexed Bonds
2.375% due 04/15/11 (N) 1,199 1,216
3.375% due 01/15/12 (N) 166 176
2.000% due 07/15/14 (N) 637 632
1.875% due 07/15/15 (N) 1,245 1,218
2.375% due 01/15/25 (N) 1,241 1,248
2.000% due 01/15/26 (N) 31 29
2.375% due 01/15/27 (N) 192 193
3.875% due 04/15/29 (N) 124 157
United States Treasury Notes
4.750% due 12/31/08 (N) 190 190
3.875% due 05/15/09 (N) 190 187
3.375% due 10/15/09 (N) 1,695 1,649
3.625% due 01/15/10 (N) 1,850 1,807
4.750% due 02/15/10 (N) 240 241
4.000% due 03/15/10 (N) 3,105 3,061
4.000% due 04/15/10 (N) 80 79
3.875% due 09/15/10 (N) 645 633
4.375% due 12/15/10 (N) 175 174
4.875% due 04/30/11 (N) 1,900 1,925
4.625% due 08/31/11 (N) 3,095 3,109
4.625% due 12/31/11 (N) 700 703
4.750% due 01/31/12 (N) 520 525
4.000% due 11/15/12 (N) 820 800
4.250% due 08/15/13 (N) 745 734
4.250% due 11/15/13 (N) 3,725 3,663
4.750% due 05/15/14 (N) 1,155 1,167
12.500% due 08/15/14 155 182
4.125% due 05/15/15 (N) 1,730 1,675
4.250% due 08/15/15 (N) 320 312
5.125% due 05/15/16 (N) 1,120 1,161
4.625% due 02/15/17 (N) 240 240
8.125% due 08/15/19 (N) 1,130 1,479
8.125% due 08/15/21 (N) 1,900 2,538
Zero coupon due 11/15/21 (N) 770 377
7.125% due 02/15/23 (N) 2,950 3,676
6.000% due 02/15/26 (N) 2,915 3,310
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
6.125% due 08/15/29 (N) 445 520
5.375% due 02/15/31 (N) 1,150 1,232
4.500% due 02/15/36 (N) 2,735 2,594
4.750% due 02/15/37 (N) 1,100 1,088
------------
45,900
------------
TOTAL LONG-TERM INVESTMENTS
(cost $409,919) 409,252
------------
PREFERRED STOCKS - 0.7%
Auto and Transportation - 0.1%
General Motors Corp. (AE)(N) 18,625 391
------------
Financial Services - 0.6%
DG Funding Trust (E)(A) 240 2,538
------------
TOTAL PREFERRED STOCKS
(cost $2,878) 2,929
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Eurodollar Futures
Mar 2008 92.25 Put (521) 120,156 2
Mar 2008 92.75 Put (80) 18,550 1
Jun 2008 92.75 Put (113) 26,202 1
------------
TOTAL OPTIONS PURCHASED
(cost $7) 4
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 15.3%
AT&T Wireless Services, Inc.
7.500% due 05/01/07 705 705
Bank of America Corp. (c)(z)
5.215% due 06/08/07 2,100 2,088
Barclays US Funding Corp. (c)(z)
5.215% due 06/07/07 3,000 2,984
Capital One Auto Finance Trust
Series 2006-C Class A1
5.340% due 12/14/07 181 181
</Table>
Diversified Bond Fund 131
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ChevronTexaco Capital Co.
3.500% due 09/17/07 590 586
CIT Group, Inc.
5.750% due 09/25/07 30 30
Citigroup, Inc.
3.500% due 02/01/08 365 360
DaimlerChrysler NA Holding Corp. (E)
Series MTND
5.820% due 09/10/07 400 401
Fannie Mae Discount Notes (c)(z)(sec.)
Zero coupon due 06/25/07 580 576
Golden West Financial Corp.
4.125% due 08/15/07 45 45
Harrah's Operating Co., Inc.
7.125% due 06/01/07 200 200
HBOS Treasury Services, PLC (c)(z)
5.215% due 06/11/07 2,600 2,585
Royal Bank of Scotland (z)
5.265% due 03/26/08 800 800
Russell Investment Company
Money Market Fund 32,389,032 32,389
San Paolo IMI US Financial Co. (c)(z)
5.220% due 06/27/07 2,300 2,281
Santander Central Hispano Financial (c)(z)
5.215% due 06/12/07 2,500 2,485
Skandinaviska Enskilda Banken (z)
5.185% due 07/09/07 2,300 2,257
SLM Corp. (E)(N)
Series MTNA
5.440% due 01/25/08 800 798
Societe Generale (c)(z)
5.258% due 06/11/07 700 700
Societe Generale NA (c)(z)
5.220% due 06/19/07 2,000 1,986
Starbound Reinsurance, Ltd.,
Term Loan B
6.870% due 03/31/08 2,000 2,000
TELUS Corp.
7.500% due 06/01/07 205 205
UBS Financial Del LLC (z)
5.185% due 07/07/07 1,800 1,768
5.145% due 08/01/07 900 900
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Treasury Bills (c)(z)(sec.)
5.124% due 05/17/07 350 349
5.145% due 05/17/07 830 828
5.030% due 05/31/07 515 513
5.046% due 06/14/07 500 497
United States Treasury Notes (N)
4.375% due 05/15/07 60 60
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $59,590) 61,557
------------
OTHER SECURITIES - 16.7%
Russell Investment Company
Money Market Fund (X) 12,899,041 12,899
State Street Securities Lending
Quality Trust (X) 54,209,351 54,209
------------
TOTAL OTHER SECURITIES
(cost $67,108) 67,108
------------
TOTAL INVESTMENTS - 134.8%
(identified cost $539,502) 540,850
OTHER ASSETS AND LIABILITIES,
NET - (34.8%) (139,750)
------------
NET ASSETS - 100.0% 401,100
============
</Table>
See accompanying notes which are an integral part of the financial statements.
132 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Euribor Futures
expiration date 06/08 (12) 3,919 (12)
expiration date 09/08 (9) 2,941 (6)
expiration date 12/08 (9) 2,942 (5)
Eurodollar Futures (CME)
expiration date 09/07 (28) 6,636 (5)
expiration date 03/08 (41) 9,756 18
expiration date 06/08 (204) 48,613 165
expiration date 09/08 (242) 57,702 214
expiration date 12/08 (303) 72,250 260
EuroYen Futures
expiration date 12/07 (4) 829 1
LIBOR Futures
expiration date 06/07 (7) 1,648 (3)
expiration date 03/08 (1) 235 --
expiration date 06/08 (6) 1,413 --
expiration date 09/08 (11) 2,591 (16)
United States Treasury Bonds
expiration date 06/07 (14) 1,565 3
United States Treasury
2 Year Notes
expiration date 06/07 (39) 7,984 8
United States Treasury
5 Year Notes
expiration date 06/07 (164) 17,356 26
United States Treasury
10 Year Notes
expiration date 06/07 (47) 5,091 9
Short Positions
United States Treasury Bonds
expiration date 06/07 (51) 5,699 12
United States Treasury
2 Year Notes
expiration date 06/07 (50) 10,236 10
United States Treasury
10 Year Notes
expiration date 06/07 (45) 4,875 1
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 680
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Eurodollar Futures
Jun 2007 94.75 Call (5) 1,184 --
Sep 2007 95.25 Call (5) 1,191 (1)
Jun 2007 94.75 Put (5) 1,184 (1)
United States Treasury Bonds
May 2007 111.00 Call (19) 2,109 (21)
May 2007 113.00 Call (21) 2,373 (4)
May 2007 115.00 Call (28) 3,220 (1)
May 2007 109.00 Put (55) 5,995 (3)
Aug 2007 109.00 Put (39) 4,251 (18)
United States Treasury Notes 2 Year Futures
May 2007 102.50 Call (32) 6,560 (5)
5 Year Futures
May 2007 106.00 Call (82) 8,692 (19)
10 Year Futures
May 2007 108.00 Call (22) 2,376 (14)
May 2007 105.00 Put (13) 1,365 --
May 2007 106.00 Put (19) 2,014 --
May 2007 107.00 Put (44) 4,708 (4)
May 2007 108.00 Put (9) 972 (3)
---------------
Total Liability for Options Written
(premiums received $118) (94)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 133
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 118 AUD 142 05/17/07 --
USD 924 CAD 1,068 05/09/07 39
USD 70 CNY 534 06/19/07 --
USD 40 EUR 30 05/09/07 --
USD 292 EUR 215 05/09/07 1
USD 1,195 EUR 898 05/09/07 30
USD 3,169 EUR 2,430 05/09/07 148
USD 568 EUR 418 05/24/07 3
USD 313 EUR 240 06/15/07 15
USD 2,822 JPY 338,388 05/09/07 13
USD 119 JPY 13,890 05/15/07 (2)
USD 553 JPY 64,900 05/15/07 (8)
USD 42 JPY 5,000 06/15/07 --
USD 133 JPY 15,610 06/15/07 (2)
USD 413 JPY 48,000 06/15/07 (9)
USD 657 JPY 77,112 08/08/07 (4)
USD 1,081 PLN 3,025 05/09/07 9
USD 846 PLN 2,338 08/08/07 (1)
USD 1 SGD 2 08/07/07 --
USD 1 TWD 41 05/02/07 --
USD 6 TWD 190 05/02/07 --
USD 6 TWD 197 05/02/07 --
USD 6 TWD 198 05/02/07 --
USD 6 TWD 201 05/02/07 --
USD 19 TWD 629 05/02/07 --
CAD 1,068 USD 906 05/09/07 (57)
EUR 408 USD 554 05/09/07 (3)
EUR 1,112 USD 1,446 05/09/07 (73)
EUR 2,052 USD 2,700 05/09/07 (101)
EUR 240 USD 320 06/15/07 (8)
EUR 215 USD 293 08/08/07 (2)
JPY 77,112 USD 650 05/09/07 4
JPY 261,276 USD 2,260 05/09/07 71
JPY 78,293 USD 667 05/15/07 10
JPY 80,069 USD 665 05/15/07 (6)
JPY 10,850 USD 94 06/15/07 2
PLN 3,025 USD 1,018 05/09/07 (72)
PLN 3,025 USD 1,083 08/08/07 (10)
TWD 41 USD 1 05/02/07 --
TWD 190 USD 6 05/02/07 --
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
TWD 197 USD 6 05/02/07 --
TWD 201 USD 6 05/02/07 --
TWD 827 USD 25 05/02/07 --
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts (13)
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
134 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAPS CONTRACTS
- --------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- ----------------------- -------------- ------------------ -------------------- ---------------- ----------------
Bank of America USD 1,500 5.000% Three Month LIBOR 06/20/09 (1)
Consumer Price Index
BNP Paribas EUR 1,300 2.090% (France) 10/15/10 3
Credit Suisse First
Boston USD 5,900 5.000% Three Month LIBOR 06/20/09 (4)
Deutsche Bank AG GBP 200 6.000% Six Month LIBOR 12/20/08 1
Deutsche Bank AG JPY 260,000 1.000% Six Month LIBOR 09/18/08 --
Deutsche Bank AG USD 11,200 5.000% Three Month LIBOR 12/19/08 3
Deutsche Bank AG USD 1,100 Three Month LIBOR 5.000% 06/20/17 14
Deutsche Bank AG USD 1,400 5.000% Three Month LIBOR 06/20/37 (79)
Deutsche Bank AG USD 4,400 5.000% Three Month LIBOR 06/20/09 (3)
Goldman Sachs EUR 500 4.000% Six Month LIBOR 03/20/09 (2)
Goldman Sachs GBP 100 5.000% Six Month LIBOR 06/15/09 (3)
Consumer Price Index
JP Morgan EUR 100 1.948% (France) 03/15/12 --
Lehman Brothers USD 1,100 5.000% Three Month LIBOR 06/20/37 (62)
Merrill Lynch GBP 200 Six Month LIBOR 4.000% 12/15/35 13
Morgan Stanley JPY 20,000 2.000% Six Month LIBOR 12/20/16 4
Morgan Stanley JPY 60,000 2.500% Six Month LIBOR 12/20/26 21
Morgan Stanley USD 100 Three Month LIBOR 5.000% 06/20/17 1
Royal Bank of Canada CAD 100 4.500% Three Month LIBOR 06/15/27 (3)
Royal Bank of Scotland USD 5,600 5.000% Three Month LIBOR 06/20/09 (4)
UBS JPY 30,000 2.000% Six Month LIBOR 12/20/16 7
----------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($60) (94)
================
</Table>
<Table>
<Caption>
CREDIT DEFAULT SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------------
FUND MARKET
REFERENCE COUNTER AMOUNT (PAYS)/ RECEIVES TERMINATION VALUE
ENTITY PARTY $ FIXED RATE DATE $
- ------------------------------------------ --------------- ------------ ---------------- ------------ ------------
American International Group JP Morgan USD 2,200 0.050% 12/20/07 --
Anadarko Petroleum Goldman USD 300 0.150% 03/20/08 --
Dow Jones CDX High Volatility 7 Index Bank of America USD 800 (0.650%) 12/20/16 --
Russian Federation Merrill Lynch USD 2,000 0.305% 12/20/08 3
Temple-Inland, Inc. Lehman Brothers USD 160 (0.740%) 03/20/17 (1)
------------
Total Market Value of Open Credit Swap Contracts Premiums Paid (Received) - ($4) 2
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Diversified Bond Fund 135
RUSSELL INVESTMENT COMPANY
DIVERSIFIED BOND FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Asset-Backed Securities 9.6
Certificates of Deposit 0.5
Corporate Bonds and Notes 17.4
International Debt 3.9
Mortgage-Backed Securities 54.5
Municipal Bonds 0.1
Non-US Bonds 0.2
United States Government Agencies 4.5
United States Government Treasuries 11.4
Preferred Stocks 0.7
Options Purchased --*
Short-Term Investments 15.3
Other Securities 16.7
---------------
Total Investments 134.8
Other Assets and Liabilities, Net (34.8)
---------------
100.0
===============
Futures Contracts 0.2
Options Written (--)*
Foreign Currency Exchange Contracts (--)*
Interest Rate Swap Contracts (--)*
Credit Default Swap Contracts --*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
136 Diversified Bond Fund
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(AE) Non-income producing
(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.
(U) All or a portion of the shares of this security are held as collateral in
connection with securities sold short.
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 IEP - Irish pundt RUB - Russian ruble
CHF - Swiss franc ILS - Israeli shekel SEK - Swedish krona
CLP - Chilean peso INR - Indian rupee SGD - Singapore dollar
CNY - Chinese renminbi yuan JPY - Japanese yen SKK - Slovakian koruna
COP - Colombian peso KES - Kenyan schilling THB - Thai baht
CRC - Costa Rica colon KRW - South Korean won TRY - Turkish lira
CZK - Czech koruna MXN - Mexican peso TWD - Taiwanese dollar
DKK - Danish krone MYR - Malaysian ringgit USD - United States dollar
EGP - Egyptian pound NOK - Norwegian krone VEB - Venezuelan bolivar
EUR - Euro NZD - New Zealand dollar VND - Vietnam dong
GBP - British pound sterling PEN - Peruvian nouveau sol ZAR - South African rand
</Table>
Notes to Schedules of Investments 137
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 3,839,816 $ 1,666,813
- ---------------------------------------------------------------------------------------------------------------------
Investments, at market*** 4,516,683 1,847,500
Cash -- 11
Cash (Restricted) -- --
Foreign currency holdings* 7 --
Unrealized appreciation on foreign currency exchange contracts -- --
Receivables:
Dividends and interest 2,863 543
Dividends from affiliated money market funds 1,126 404
Investments sold 53,269 28,525
Fund shares sold 7,732 3,749
Foreign taxes recoverable -- --
Miscellaneous receivables -- --
From Adviser -- --
Daily variation margin on futures contracts -- --
Prepaid expenses 116 74
Unrealized appreciation on index swap contracts -- --
Interest rate swap contracts, at market value***** -- --
Credit default swap contracts, at market value**** -- --
------------------- --------------------
Total assets 4,581,796 1,880,806
------------------- --------------------
LIABILITIES
Payables:
Due to Custodian 1,774 --
Investments purchased 46,985 37,729
Fund shares redeemed 3,598 1,694
Accrued fees to affiliates 3,385 1,488
Other accrued expenses 99 71
Dividends for securities sold short -- --
Daily variation margin on futures contracts 2,115 1,908
Deferred tax liability -- --
Unrealized depreciation on foreign currency exchange contracts -- --
Options written, at market value** -- --
Securities sold short, at market value****** -- --
Payable upon return of securities loaned 259,579 393,917
Unrealized depreciation on index swap contracts -- --
Interest rate swap contracts, at market value***** -- --
Credit default swaps, at market value**** -- --
------------------- --------------------
Total liabilities 317,535 436,807
------------------- --------------------
NET ASSETS $ 4,264,261 $ 1,443,999
=================== ====================
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 1,024 $ 565
Accumulated net realized gain (loss) 130,901 63,846
Unrealized appreciation (depreciation) on:
Investments (International Securities Fund - net of deferred tax
liability for foreign capital gains taxes) 676,867 180,687
Futures contracts 9,075 1,834
Options written -- --
Credit default swaps -- --
Index swap contracts -- --
Interest rate swap contracts -- --
Securities sold short -- --
Foreign currency-related transactions -- --
Shares of beneficial interest 838 273
Additional paid-in capital 3,445,556 1,196,794
------------------- --------------------
NET ASSETS $ 4,264,261 $ 1,443,999
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
138 Statement of Assets and Liabilities
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES GLOBAL EQUITY MULTISTRATEGY BOND DIVERSIFIED BOND
FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------
$ 4,166,553 $ 4,396,143 $ 1,059,453 $ 7,447,564 $ 539,502
- ---------------------------------------------------------------------------------------------------------------
4,840,850 5,184,727 1,097,279 7,462,322 540,850
-- 904 -- 16,571 305
-- 11,213 -- 106 --
-- 13,108 1,994 6,212 1,496
-- 31,272 5,689 10,843 345
3,233 12,877 1,438 44,927 1,612
665 1,075 245 5,281 289
27,111 44,967 14,014 432,099 36,168
6,931 6,582 8,118 10,936 1,491
-- 999 220 -- --
-- -- -- -- --
-- -- -- -- 29
-- 884 56 4,306 172
108 81 156 152 63
-- 116 -- 735 --
-- -- -- 13,495 67
-- -- -- 668 3
-------------- -------------- -------------- -------------- --------------
4,878,898 5,308,805 1,129,209 8,008,653 582,890
-------------- -------------- -------------- -------------- --------------
-- -- -- -- --
38,758 46,341 14,944 1,127,476 111,508
3,880 3,126 73 6,205 1,956
3,418 3,691 779 4,011 447
188 155 73 41 155
36 -- -- -- --
1,538 -- 293 -- 2
-- 5 3 -- --
-- 23,563 4,904 10,499 358
-- 1,420 -- 3,230 94
459,426 -- -- -- --
63,893 1,302,344 200,284 1,006,748 67,108
-- -- -- 20 --
-- -- -- 9,643 161
-- -- -- 318 1
-------------- -------------- -------------- -------------- --------------
571,137 1,380,645 221,353 2,168,191 181,790
-------------- -------------- -------------- -------------- --------------
$ 4,307,761 $ 3,928,160 $ 907,856 $ 5,840,462 $ 401,100
============== ============== ============== ============== ==============
$ (553) $ (2,546) $ 3,059 $ 26,211 $ 2,192
150,202 339,910 1,171 (13,422) (12,609)
674,297 788,579 37,826 14,758 1,348
5,428 10,566 2,024 1,406 680
-- -- -- 274 24
-- -- -- 862 6
-- 116 -- 715 --
-- -- -- (4,884) (34)
(19,606) -- -- -- --
-- 7,825 777 527 1
1,010 485 867 5,615 172
3,496,983 2,783,225 862,132 5,808,400 409,320
-------------- -------------- -------------- -------------- --------------
$ 4,307,761 $ 3,928,160 $ 907,856 $ 5,840,462 $ 401,100
============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 139
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share:
Net asset value per share: Class A******* $ 50.93 $ 50.91
Maximum offering price per share (Net asset value plus sales charge
of 5.75%********): Class A $ 54.04 $ 54.02
Class A -- Net assets $ 3,050,228 $ 1,836,624
Class A -- Shares outstanding ($.01 par value) 59,896 36,077
Net asset value per share: Class C******* $ 49.03 $ 46.58
Class C -- Net assets $ 164,872,741 $ 71,501,616
Class C -- Shares outstanding ($.01 par value) 3,362,578 1,535,186
Net asset value per share: Class E******* $ 50.94 $ 50.92
Class E -- Net assets $ 74,915,936 $ 29,115,232
Class E -- Shares outstanding ($.01 par value) 1,470,562 571,837
Net asset value per share: Class S******* $ 50.95 $ 53.34
Class S -- Net assets $ 4,021,422,047 $ 1,341,545,632
Class S -- Shares outstanding ($.01 par value) 78,922,295 25,149,740
- ---------------------------------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings - cost $ 6 $ --
** Premiums received on options written $ -- $ --
*** Securities on loan included in investments $ 306,237 $ 383,080
**** Credit default swap contracts - premiums paid (received) $ -- $ --
***** Interest rate swap contracts - premiums paid (received) $ -- $ --
****** Proceeds on securities sold short $ -- $ --
******* Net asset value per share equals class level net assets
divided by
class level shares of beneficial interest outstanding.
******** Multistrategy Bond Fund's maximum sale charge is 3.75%
</Table>
See accompanying notes which are an integral part of the financial statements.
140 Statement of Assets and Liabilities
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES GLOBAL EQUITY MULTISTRATEGY BOND DIVERSIFIED BOND
FUND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------
$ 42.56 $ 80.19 $ 10.47 $ 10.39 $ --
$ 45.16 $ 85.08 $ 11.11 $ 10.79 $ --
$ 2,902,288 $ 2,820,887 $ 1,477,592 $ 3,056,988 $ --
68,185 35,179 141,157 294,160 --
$ 41.32 $ 77.09 $ 10.45 $ 10.38 $ 23.76
$ 166,899,297 $ 176,309,162 $ 5,949,950 $ 109,132,711 $ 50,688,006
4,039,159 2,287,122 569,105 10,516,839 2,133,157
$ 42.58 $ 80.21 $ 10.46 $ 10.39 $ 23.84
$ 77,316,529 $ 83,242,178 $ 13,635,430 $ 112,800,912 $ 17,791,865
1,815,692 1,037,759 1,303,036 10,857,115 746,295
$ 42.72 $ 81.15 $ 10.48 $ 10.40 $ 23.19
$4,060,642,387 $3,665,788,171 $ 886,793,230 $5,615,471,445 $ 332,619,750
95,057,516 45,171,653 84,655,458 539,861,057 14,344,093
- ---------------------------------------------------------------------------------------------------------------
$ -- $ 13,064 $ 2,005 $ 6,068 $ 1,486
$ -- $ 1,420 $ -- $ 3,504 $ 118
$ 64,649 $ 1,255,995 $ 195,904 $ 988,857 $ 65,863
$ -- $ -- $ -- $ (512) $ (4)
$ -- $ -- $ -- $ 8,736 $ (60)
$ 439,820 $ -- $ -- $ -- $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 141
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH
AMOUNTS IN THOUSANDS FUND FUND
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 29,727 $ 5,861
Dividends from affiliated money market funds 8,019 2,450
Interest 344 102
Securities lending income 372 560
Less foreign taxes withheld -- --
------------------- --------------------
Total investment income 38,462 8,973
------------------- --------------------
EXPENSES
Advisory fees 14,619 5,805
Administrative fees 1,008 323
Custodian fees 437 271
Distribution fees - Class A 1 1
Distribution fees - Class C 595 260
Transfer agent fees 3,023 1,496
Professional fees 63 38
Registration fees 97 49
Shareholder servicing fees - Class C 198 87
Shareholder servicing fees - Class E 89 34
Trustees' fees 42 13
Printing fees 75 32
Offering fees -- --
Dividends from securities sold short -- --
Interest expense from securities sold short -- --
Miscellaneous 26 9
------------------- --------------------
Expenses before reductions 20,273 8,418
Expense reductions (24) (11)
------------------- --------------------
Net expenses 20,249 8,407
------------------- --------------------
Net investment income (loss) 18,213 566
------------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (International Securities Fund - net of deferred tax
liability for foreign capital gains taxes) 168,469 70,027
Futures contracts 13,590 8,245
Options written -- --
Credit default swaps -- --
Index swap contracts -- --
Interest rate swap contracts -- --
Securities sold short -- --
Foreign currency-related transactions -- --
------------------- --------------------
Net realized gain (loss) 182,059 78,272
------------------- --------------------
Net change in unrealized appreciation (depreciation) on:
Investments (International Securities Fund - net of deferred tax
liability for foreign capital gains taxes) 151,023 36,213
Futures contracts (120) (3,267)
Options written -- --
Credit default swaps -- --
Index swap contracts -- --
Interest rate swap contracts -- --
Securities sold short -- --
Foreign currency-related transactions -- --
------------------- --------------------
Net change in unrealized appreciation (depreciation) 150,903 32,946
------------------- --------------------
Net realized and unrealized gain (loss) 332,962 111,218
------------------- --------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 351,175 $ 111,784
=================== ====================
</Table>
* For the period ended March 1, 2007 (commencement of operations) to April 30,
2007 (Unaudited).
See accompanying notes which are an integral part of the financial statements.
142 Statement of Operations
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES GLOBAL EQUITY* MULTISTRATEGY BOND DIVERSIFIED BOND
FUND FUND FUND FUND FUND
- ------------------------------------------------------------------------------------------------------------
$ 36,206 $ 39,412 $ 4,072 $ 220 $ 106
4,807 7,243 830 18,233 5,118
240 361 251 80,866 37,407
54 1,088 -- 217 155
-- (3,115) (393) -- --
--------------- --------------- --------------- --------------- ---------------
41,307 44,989 4,760 99,536 42,786
--------------- --------------- --------------- --------------- ---------------
14,937 16,758 1,280 10,981 3,279
1,030 936 67 917 410
428 1,513 101 520 429
1 1 -- 1 --
605 626 4 341 225
3,090 2,806 168 2,754 902
62 77 19 44 50
99 91 30 93 68
202 209 1 114 75
93 98 5 87 57
43 37 4 29 23
63 59 7 46 36
-- -- 12 -- --
1,040 -- -- -- --
498 -- -- -- --
26 26 3 18 15
--------------- --------------- --------------- --------------- ---------------
22,217 23,237 1,701 15,945 5,569
(15) (43) -- (604) (162)
--------------- --------------- --------------- --------------- ---------------
22,202 23,194 1,701 15,341 5,407
--------------- --------------- --------------- --------------- ---------------
19,105 21,795 3,059 84,195 37,379
--------------- --------------- --------------- --------------- ---------------
191,251 339,783 837 8,565 11,414
4,490 13,124 842 (414) 131
-- (1,838) -- 722 41
-- -- -- (341) (10)
-- 475 -- 388 --
-- -- -- 1,193 720
(14,283) -- -- -- --
-- 6,558 (508) (4,467) (426)
--------------- --------------- --------------- --------------- ---------------
181,458 358,102 1,171 5,646 11,870
--------------- --------------- --------------- --------------- ---------------
108,794 97,334 37,826 (2,248) (4,926)
720 6,621 2,024 247 207
-- 30 -- 959 82
-- -- -- 442 5
-- 185 -- 968 --
-- -- -- (6,735) 120
(11,320) -- -- -- --
-- 8,843 777 1,423 249
--------------- --------------- --------------- --------------- ---------------
98,194 113,013 40,627 (4,944) (4,263)
--------------- --------------- --------------- --------------- ---------------
279,652 471,115 41,798 702 7,607
--------------- --------------- --------------- --------------- ---------------
$ 298,757 $ 492,910 $ 44,857 $ 84,897 $ 44,986
=============== =============== =============== =============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 143
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
STATEMENTS 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, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2006 (UNAUDITED) 2006
- ------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 18,213 $ 22,740 $ 566 $ (400)
Net realized gain (loss) 182,059 149,814 78,272 148,189
Net change in unrealized appreciation (depreciation) 150,903 250,175 32,946 18,941
----------- ----------- ----------- -----------
Net increase (decrease) in net assets from operations 351,175 422,729 111,784 166,730
----------- ----------- ----------- -----------
DISTRIBUTIONS
From net investment income
Class A (3) -- -- --
Class C (120) (102) -- --
Class E (248) (298) -- --
Class S (17,929) (21,815) -- (1)
From net realized gain
Class C (7,141) (3,691) (9,911) (5,980)
Class E (3,124) (1,492) (3,495) (2,068)
Class S (163,053) (71,829) (144,994) (82,803)
----------- ----------- ----------- -----------
Net decrease in net assets from distributions (191,618) (99,227) (158,400) (90,852)
----------- ----------- ----------- -----------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions 323,800 720,383 302,209 174,528
----------- ----------- ----------- -----------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 483,357 1,043,885 255,593 250,406
NET ASSETS
Beginning of period 3,780,904 2,737,019 1,188,406 938,000
----------- ----------- ----------- -----------
End of period $ 4,264,261 $ 3,780,904 $ 1,443,999 $ 1,188,406
=========== =========== =========== ===========
Undistributed (overdistributed) net investment income
included in net assets $ 1,024 $ 1,111 $ 565 $ (1)
</Table>
* For the period March 1, 2007 (commencement of operations) to April 30,
2007.
See accompanying notes which are an integral part of the financial statements.
144 Statements of Changes in Net Assets
<Table>
<Caption>
QUANTITATIVE EQUITY INTERNATIONAL SECURITIES GLOBAL EQUITY MULTISTRATEGY BOND
FUND FUND FUND FUND
------------------------------ ------------------------------ -------------- ------------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS* SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
APRIL 30, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31, APRIL 30, 2007 APRIL 30, 2007 OCTOBER 31,
(UNAUDITED) 2006 (UNAUDITED) 2006 (UNAUDITED) (UNAUDITED) 2006
- ---------------------------------------------------------------------------------------------------------------------
$ 19,105 $ 30,289 $ 21,795 $ 54,402 $ 3,059 $ 84,195 $ 97,625
181,458 190,010 358,102 317,456 1,171 5,646 (21,495)
98,194 259,052 113,013 321,930 40,627 (4,944) 32,628
------------- ------------- ------------- ------------- ------------- ------------- -------------
298,757 479,351 492,910 693,788 44,857 84,897 108,758
------------- ------------- ------------- ------------- ------------- ------------- -------------
(4) -- -- -- -- (8) --
(165) (120) (2,240) (516) -- (1,408) (2,433)
(305) (436) (1,534) (539) -- (1,267) (1,753)
(20,721) (28,910) (74,906) (29,811) -- (65,585) (87,675)
(8,239) (5,834) (14,325) (4,377) -- -- (167)
(3,730) (2,398) (6,515) (1,760) -- -- (93)
(190,999) (115,840) (286,980) (80,360) -- -- (4,348)
------------- ------------- ------------- ------------- ------------- ------------- -------------
(224,163) (153,538) (386,500) (117,363) -- (68,268) (96,469)
------------- ------------- ------------- ------------- ------------- ------------- -------------
328,249 746,425 310,284 467,484 862,999 3,212,068 720,214
------------- ------------- ------------- ------------- ------------- ------------- -------------
402,843 1,072,238 416,694 1,043,909 907,856 3,228,697 732,503
3,904,918 2,832,680 3,511,466 2,467,557 -- 2,611,765 1,879,262
------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 4,307,761 $ 3,904,918 $ 3,928,160 $ 3,511,466 $ 907,856 $ 5,840,462 $ 2,611,765
============= ============= ============= ============= ============= ============= =============
$ (553) $ 1,537 $ (2,546) $ 54,339 $ 3,059 $ 26,211 $ 10,284
<Caption>
DIVERSIFIED BOND
FUND
------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
(UNAUDITED) 2006
- ---
$ 37,379 $ 83,251
11,870 (20,962)
(4,263) 28,923
------------- -------------
44,986 91,212
------------- -------------
-- --
(1,405) (1,783)
(1,134) (2,059)
(41,758) (76,351)
-- --
-- --
-- --
------------- -------------
(44,297) (80,193)
------------- -------------
(1,739,420) 455,513
------------- -------------
(1,738,731) 466,532
2,139,831 1,673,299
------------- -------------
$ 401,100 $ 2,139,831
============= =============
$ 2,192 $ 9,110
</Table>
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets 145
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$
$ $ $ TOTAL INCOME
NET ASSET VALUE, NET NET REALIZED (LOSS) FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
DIVERSIFIED EQUITY FUND
Class A
April 30, 2007 (1) 48.45 .02 2.53 2.55
- --------------------------------------------------------------------------------------------------------------
Class C
April 30, 2007* 47.30 (.01) 3.98 3.97
October 31, 2006 43.08 (.11) 5.60 5.49
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)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007* 49.01 .17 4.13 4.30
October 31, 2006 44.46 .23 5.79 6.02
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)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007* 49.02 .23 4.13 4.36
October 31, 2006 44.45 .35 5.79 6.14
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)
- --------------------------------------------------------------------------------------------------------------
SPECIAL GROWTH FUND
Class A
April 30, 2007 (1) 49.13 (.01) 1.79 1.78
- --------------------------------------------------------------------------------------------------------------
Class C
April 30, 2007* 50.08 (.20) 4.05 3.85
October 31, 2006 47.85 (.47) 7.76 7.29
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)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007* 53.90 (.03) 4.40 4.37
October 31, 2006 50.79 (.11) 8.28 8.17
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)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007* 56.07 .04 4.58 4.62
October 31, 2006 52.52 .02 8.59 8.61
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)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------
DIVERSIFIED EQUITY FUND
Class A
April 30, 2007 (1) (.07) -- --
- ----------------------------------------
Class C
April 30, 2007* (.04) (2.20) --
October 31, 2006 (.03) (1.24) --
October 31, 2005 (.04) -- --
October 31, 2004 -- -- --
October 31, 2003 --(d) -- --
October 31, 2002 -- -- --
- ----------------------------------------
Class E
April 30, 2007* (.17) (2.20) --
October 31, 2006 (.23) (1.24) --
October 31, 2005 (.22) -- --
October 31, 2004 (.10) -- --
October 31, 2003 (.10) -- --
October 31, 2002 (.09) -- (.01)
- ----------------------------------------
Class S
April 30, 2007* (.23) (2.20) --
October 31, 2006 (.33) (1.24) --
October 31, 2005 (.33) -- --
October 31, 2004 (.21) -- --
October 31, 2003 (.17) -- --
October 31, 2002 (.16) -- (.03)
- ----------------------------------------
SPECIAL GROWTH FUND
Class A
April 30, 2007 (1) -- -- --
- ----------------------------------------
Class C
April 30, 2007* -- (7.35) --
October 31, 2006 -- (5.06) --
October 31, 2005 -- (6.50) --
October 31, 2004 -- (1.32) --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
- ----------------------------------------
Class E
April 30, 2007* -- (7.35) --
October 31, 2006 -- (5.06) --
October 31, 2005 -- (6.50) --
October 31, 2004 -- (1.32) --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
- ----------------------------------------
Class S
April 30, 2007* -- (7.35) --
October 31, 2006 --(d) (5.06) --
October 31, 2005 -- (6.50) --
October 31, 2004 -- (1.32) --
October 31, 2003 -- -- --
October 31, 2002 -- -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
146 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------
(.07) 50.93 5.25(f) 3,050
- -----------------------------------------------------------------------
(2.24) 49.03 8.64 164,873
(1.27) 47.30 12.98 151,890
(.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
- -----------------------------------------------------------------------
(2.37) 50.94 9.04 74,916
(1.47) 49.01 13.80 69,011
(.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
- -----------------------------------------------------------------------
(2.43) 50.95 9.19 4,021,422
(1.57) 49.02 14.12 3,560,003
(.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
- -----------------------------------------------------------------------
-- 50.91 3.62(f) 1,837
- -----------------------------------------------------------------------
(7.35) 46.58 8.39 71,501
(5.06) 50.08 16.26 67,164
(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
- -----------------------------------------------------------------------
(7.35) 50.92 8.81 29,115
(5.06) 53.90 17.12 25,435
(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
- -----------------------------------------------------------------------
(7.35) 53.34 8.92 1,341,546
(5.06) 56.07 17.42 1,095,807
(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
- -----------------------------------------------------------------------
<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)
- ---
1.21 1.22 .37 59.23
- ---
1.96 1.96 (.05) 59.23
1.97 1.97 (.25) 96.67
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
- ---
1.21 1.21 .70 59.23
1.22 1.22 .50 96.67
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
- ---
.96 .96 .95 59.23
.97 .97 .75 96.67
.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
- ---
1.49 1.50 (.14) 74.47
- ---
2.24 2.25 (.85) 74.47
2.23 2.23 (.98) 154.79
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
- ---
1.49 1.50 (.10) 74.47
1.48 1.48 (.22) 154.79
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
- ---
1.24 1.25 .15 74.47
1.23 1.23 .03 154.79
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
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 147
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$
$ $ $ TOTAL INCOME
NET ASSET VALUE, NET NET REALIZED (LOSS) FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
QUANTITATIVE EQUITY FUND
Class A
April 30, 2007 (1) 40.69 .01 1.93 1.94
- --------------------------------------------------------------------------------------------------------------
Class C
April 30, 2007* 40.71 (.01) 2.79 2.78
October 31, 2006 37.22 (.02) 5.20 5.18
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)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007* 41.86 .15 2.87 3.02
October 31, 2006 38.18 .27 5.34 5.61
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)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007* 41.99 .20 2.88 3.08
October 31, 2006 38.28 .38 5.36 5.74
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)
- --------------------------------------------------------------------------------------------------------------
INTERNATIONAL SECURITIES FUND
Class A
April 30, 2007 (1) 75.34 .33 4.52 4.85
- --------------------------------------------------------------------------------------------------------------
Class C
April 30, 2007* 75.34 .07 9.55 9.62
October 31, 2006 62.35 .61 14.89 15.50
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)
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007* 78.34 .37 9.91 10.28
October 31, 2006 64.66 1.17 15.45 16.62
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)
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007* 79.23 .47 10.04 10.51
October 31, 2006 65.35 1.35 15.61 16.96
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)
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------
QUANTITATIVE EQUITY FUND
Class A
April 30, 2007 (1) (.07) -- --
- ----------------------------------------
Class C
April 30, 2007* (.05) (2.12) --
October 31, 2006 (.03) (1.66) --
October 31, 2005 (.07) -- --
October 31, 2004 -- -- --
October 31, 2003 (.01) -- --
October 31, 2002 -- -- --
- ----------------------------------------
Class E
April 30, 2007* (.18) (2.12) --
October 31, 2006 (.27) (1.66) --
October 31, 2005 (.26) -- --
October 31, 2004 (.14) -- --
October 31, 2003 (.11) -- --
October 31, 2002 (.13) -- (.01)
- ----------------------------------------
Class S
April 30, 2007* (.23) (2.12) --
October 31, 2006 (.37) (1.66) --
October 31, 2005 (.35) -- --
October 31, 2004 (.22) -- --
October 31, 2003 (.18) -- --
October 31, 2002 (.20) -- (.02)
- ----------------------------------------
INTERNATIONAL SECURITIES FUND
Class A
April 30, 2007 (1) -- -- --
- ----------------------------------------
Class C
April 30, 2007* (1.06) (6.81) --
October 31, 2006 (.26) (2.25) --
October 31, 2005 (.52) -- --
October 31, 2004 (.73) -- --
October 31, 2003 (.21) -- --
October 31, 2002 -- -- --
- ----------------------------------------
Class E
April 30, 2007* (1.60) (6.81) --
October 31, 2006 (.69) (2.25) --
October 31, 2005 (.86) -- --
October 31, 2004 (.96) -- --
October 31, 2003 (.41) -- --
October 31, 2002 -- -- --
- ----------------------------------------
Class S
April 30, 2007* (1.78) (6.81) --
October 31, 2006 (.83) (2.25) --
October 31, 2005 (.99) -- --
October 31, 2004 (1.05) -- --
October 31, 2003 (.51) -- --
October 31, 2002 -- -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
148 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------
(.07) 42.56 4.78(f) 2,902
- -----------------------------------------------------------------------
(2.17) 41.32 7.08 166,899
(1.69) 40.71 14.34 155,978
(.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
- -----------------------------------------------------------------------
(2.30) 42.58 7.48 77,317
(1.93) 41.86 15.18 73,033
(.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
- -----------------------------------------------------------------------
(2.35) 42.72 7.62 4,060,643
(2.03) 41.99 15.49 3,675,907
(.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) 1,070,873
- -----------------------------------------------------------------------
-- 80.19 6.42(f) 2,821
- -----------------------------------------------------------------------
(7.87) 77.09 13.63 176,309
(2.51) 75.34 25.54 156,760
(.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
- -----------------------------------------------------------------------
(8.41) 80.21 14.04 83,242
(2.94) 78.34 26.50 73,044
(.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
- -----------------------------------------------------------------------
(8.59) 81.15 14.19 3,665,788
(3.08) 79.23 26.80 3,281,662
(.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
- -----------------------------------------------------------------------
<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)
- ---
1.29(j) 1.29 .26 49.44
- ---
2.03(k) 2.03 .04 49.44
1.98(g) 1.98 (.05) 104.52
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
- ---
1.28(l) 1.28 .80 49.44
1.23(h) 1.23 .70 104.52
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
- ---
1.03(m) 1.03 1.05 49.44
.98(i) .98 .95 104.52
.98 .98 .94 108.48
.99 .99 .65 91.31
1.02 1.02 .69 108.71
1.02 1.02 .48 71.10
- ---
1.44 1.45 3.06 61.15
- ---
2.19 2.19 .23 61.15
2.21 2.21 .87 76.65
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
- ---
1.44 1.44 .97 61.15
1.45 1.46 1.61 76.65
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
- ---
1.19 1.19 1.21 61.15
1.20 1.21 1.85 76.65
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
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 149
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$
$ $ $ TOTAL INCOME
NET ASSET VALUE, NET NET REALIZED (LOSS) FROM
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY FUND (1)
Class A
April 30, 2007 10.00 .03 .44 .47
- --------------------------------------------------------------------------------------------------------------
Class C
April 30, 2007 10.00 .02 .43 .45
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 10.00 .03 .43 .46
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 10.00 .04 .44 .48
- --------------------------------------------------------------------------------------------------------------
MULTISTRATEGY BOND FUND
Class A
April 30, 2007 (1) 10.38 .06 (.01) .05
- --------------------------------------------------------------------------------------------------------------
Class C
April 30, 2007* 10.34 .17 .03 .20
October 31, 2006 10.31 .35 .03 .38
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
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007* 10.35 .22 .02 .24
October 31, 2006 10.32 .43 .03 .46
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
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007* 10.36 .24 .01 .25
October 31, 2006 10.33 .45 .03 .48
October 31, 2005 10.85 .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
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------
GLOBAL EQUITY FUND (1)
Class A
April 30, 2007 -- -- --
- ----------------------------------------
Class C
April 30, 2007 -- -- --
- ----------------------------------------
Class E
April 30, 2007 -- -- --
- ----------------------------------------
Class S
April 30, 2007 -- -- --
- ----------------------------------------
MULTISTRATEGY BOND FUND
Class A
April 30, 2007 (1) (.04) -- --
- ----------------------------------------
Class C
April 30, 2007* (.16) -- --
October 31, 2006 (.33) (.02) --
October 31, 2005 (.23) (.13) --
October 31, 2004 (.24) (.15) --
October 31, 2003 (.22) -- --
October 31, 2002 (.43) -- --
- ----------------------------------------
Class E
April 30, 2007* (.20) -- --
October 31, 2006 (.41) (.02) --
October 31, 2005 (.31) (.13) --
October 31, 2004 (.32) (.15) --
October 31, 2003 (.29) -- --
October 31, 2002 (.50) -- --
- ----------------------------------------
Class S
April 30, 2007* (.21) -- --
October 31, 2006 (.43) (.02) --
October 31, 2005 (.33) (.13) --
October 31, 2004 (.34) (.15) --
October 31, 2003 (.32) -- --
October 31, 2002 (.53) -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
150 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------
-- 10.47 4.70(f) 1,478
- -----------------------------------------------------------------------
-- 10.45 4.60 5,950
- -----------------------------------------------------------------------
-- 10.46 4.70 13,635
- -----------------------------------------------------------------------
-- 10.48 4.80 886,793
- -----------------------------------------------------------------------
(.04) 10.39 .52(f) 3,057
- -----------------------------------------------------------------------
(.16) 10.38 1.97 109,133
(.35) 10.34 3.80 83,363
(.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
- -----------------------------------------------------------------------
(.20) 10.39 2.35 112,801
(.43) 10.35 4.57 51,698
(.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
- -----------------------------------------------------------------------
(.21) 10.40 2.47 5,615,471
(.45) 10.36 4.82 2,476,704
(.46) 10.33 1.35 1,771,524
(.49) 10.65 5.68 1,284,520
(.32) 10.56 8.49 866,596
(.53) 10.04 3.72 595,577
- -----------------------------------------------------------------------
<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)
- ---
1.50 1.50 2.02 7.21
- ---
2.25 2.25 1.53 7.21
- ---
1.50 1.50 2.03 7.21
- ---
1.25 1.25 2.28 7.21
- ---
1.06 1.10 4.84 387.65
- ---
1.80 1.84 3.41 387.65
1.84 1.86 3.39 261.90
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
- ---
1.06 1.09 4.30 387.65
1.09 1.11 4.16 261.90
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
- ---
.81 .84 4.53 387.65
.84 .86 4.41 261.90
.87 .87 3.32 196.81
.89 .89 2.58 221.31
.94 .94 3.22 281.71
.92 .92 4.06 252.09
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 151
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL INCOME
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
DIVERSIFIED BOND FUND
Class C
April 30, 2007* 23.90 .45 (.03) .42
October 31, 2006 23.80 .81 .05 .86
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
- --------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007* 23.98 .54 (.04) .50
October 31, 2006 23.87 .99 .06 1.05
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
- --------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007* 23.36 .51 -- .51
October 31, 2006 23.28 1.03 .05 1.08
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
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------
DIVERSIFIED BOND FUND
Class C
April 30, 2007* (.56) -- --
October 31, 2006 (.76) -- --
October 31, 2005 (.53) (.12) --
October 31, 2004 (.41) (.53) --
October 31, 2003 (.49) (.56) --
October 31, 2002 (.78) -- --
- ----------------------------------------
Class E
April 30, 2007* (.64) -- --
October 31, 2006 (.94) -- --
October 31, 2005 (.71) (.12) --
October 31, 2004 (.59) (.53) --
October 31, 2003 (.66) (.56) --
October 31, 2002 (.96) -- --
- ----------------------------------------
Class S
April 30, 2007* (.68) -- --
October 31, 2006 (1.00) -- --
October 31, 2005 (.77) (.12) --
October 31, 2004 (.65) (.53) --
October 31, 2003 (.72) (.56) --
October 31, 2002 (1.02) -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
152 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------
(.56) 23.76 1.78 50,688
(.76) 23.90 3.72 60,670
(.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
- -----------------------------------------------------------------------
(.64) 23.84 2.13 17,792
(.94) 23.98 4.52 55,949
(.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
- -----------------------------------------------------------------------
(.68) 23.19 2.21 332,620
(1.00) 23.36 4.77 2,023,212
(.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
- -----------------------------------------------------------------------
<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 1.73 3.75 78.82
1.62 1.63 3.43 105.80
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
- ---
.90 .93 4.56 78.82
.87 .88 4.19 105.80
.90 .91 3.12 225.67
.91 .91 2.46 140.92
.94 .94 2.70 147.44
.91 .91 3.85 156.21
- ---
.62 .63 4.62 78.82
.62 .63 4.45 105.80
.65 .66 3.38 225.67
.66 .66 2.71 140.92
.69 .69 2.95 147.44
.66 .66 4.11 156.21
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 153
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2007 (Unaudited).
(1) For the period March 1, 2007 (commencement of operations) to April 30, 2007
(Unaudited).
(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 RIMCo as the investment
adviser and transfer agent, and for certain funds, custody credit
arrangements.
(f) Total return for A shares does not reflect a front-end sales charge.
(g) The annualized net expense ratio is 1.97% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(h) The annualized net expense ratio is 1.22% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(i) The annualized net expense ratio is .96% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(j) The annualized net expense ratio is 1.20% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(k) The annualized net expense ratio is 1.96% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(l) The annualized net expense ratio is 1.21% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(m) The annualized net expense ratio is 0.96% not including the dividends from
securities sold short as contractually agreed by the Adviser.
See accompanying notes which are an integral part of the financial statements.
154 Notes to Financial Highlights
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Russell Investment Company (the "Investment Company" or "RIC") is a series
investment company with 35 different investment portfolios referred to as
Funds. These financial statements report on seven 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 July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company and Frank Russell Investment Management Company changed
its name to Russell Investment Management Company ("RIMCo").
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 RIMCo.
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 New York
Stock Exchange, 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 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
Notes to Financial Statements 155
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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. RIC
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. RIC 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. RIC 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.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of
SFAS 157 will have on the Funds financial statement disclosure.
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.
In July 2006, Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes--an interpretation of FASB
Statement 109 (FIN 48) was issued and is effective for fiscal years beginning
after December 15, 2006. FIN 48 sets forth a threshold for financial
statement recognition, measurement and disclosure of a tax position taken or
expected to be taken on a tax return. Management is currently evaluating the
impact, if any, the adoption of FIN 48 will have on the Fund's net assets and
results of operations.
156 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 Multistrategy Bond and
Diversified Bond Funds
Quarterly April, July, October and December Diversified Equity and
Quantitative Equity Funds
Annually Mid-December Special Growth,
International Securities and
Global Equity 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.
Expenses
The Funds will pay their own expenses other than those expressly assumed by
Russell Investment Management Company ("RIMCo" 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 A,
Class C, Class E, and Class S. All share classes have identical voting,
dividend, liquidation and other rights and the same terms and conditions. The
separate classes of shares differ principally in the applicable 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.
Notes to Financial Statements 157
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Capital Gains Taxes
The International Securities and Global Equity Funds 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, 2007. 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 Statement of
Operations for the Funds.
<Table>
<Caption>
DEFERRED TAX CAPITAL GAINS
FUNDS LIABILITY TAXES
--------------------------------------------------------------------------------
International Securities $ 4,539 $ (16,203)
Global Equity 2,508 2,508
</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 Securities and Global Equity Funds may enter into forward
foreign currency overlays on liquidity reserve balances. Additionally, from
time to time the International Securities, Global Equity, Multistrategy Bond
and Diversified 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, 2007 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.
158 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Loan Agreements
The Diversified Bond Fund and 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, 2007, there were no
unfunded loan commitments in the Diversified Bond Fund or 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 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, 2007, the International Securities Fund and the
MultiStrategy Bond Fund had cash collateral balances of $11,213,036 and
$106,020 respectively in connection with futures contracts purchased (sold).
Notes to Financial Statements 159
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 Diversified Bond, Multistrategy Bond, Global Equity 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 party's 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.
Short Sales
The Quantitative Equity Fund may enter into short sale transactions. In a
short sale, the seller sells a security that it does not own, typically a
security borrowed from a broker or dealer. Because the seller remains liable
to return the underlying security that it borrowed from the broker or dealer,
the seller must purchase the security prior to the date on which delivery to
the broker or dealer is required. The Fund will incur a loss as a result of
the short sale if the price of the security increases between the date of the
short sale and the date on which the fund replaces the borrowed security. The
Fund will realize a gain if the security declines in price between those
dates. The making of short sales exposes the Fund to the risk of liability
for the market value of the security that is sold (the amount of which
liability increases as the market value of the underlying security
increases), in addition to the costs associated with establishing,
maintaining and closing out the short position.
Although the Fund's potential for gain as a result of a short sale is limited
to the price at which it sold the security short less the cost of borrowing
the security, its potential for loss is theoretically unlimited because there
is no limit to the cost of replacing the borrowed security. When the Fund
makes a short sale, the Fund may use all or a portion of the cash proceeds of
short sales to purchase additional securities or for any other permissible
Fund purpose. To the extent necessary to meet collateral
160 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
requirements, the Fund is required to pledge assets in a segregated account
maintained by the Fund's custodian for the benefit of the broker. The Fund
also may use securities it owns to meet any such collateral obligations. a
Fund replaces a borrowed security in connection with a short sale, the Fund
will: (a) maintain daily a segregated account, containing cash, cash
equivalents, or liquid marketable securities, at such a level that the amount
deposited in the segregated account plus the amount deposited with the broker
as collateral will equal the current requirement under Regulation T
promulgated by the Board of Governors of the Federal Reserve System under the
authority of section 7 and 8 of the Securities Exchange Act of 1934, as
amended; or (b) otherwise cover its short position in accordance with
positions taken by the staff of the SEC (e.g., taking an offsetting long
position in the security sold short.) As of April 30, 2007, $570,070,627 was
held as collateral.
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.
Mortgage-Related and Other Asset-Backed Securities
The Multistrategy Bond and Diversified Bond Funds may invest in mortgage or
other asset-backed securities. Theses securities include mortgage
pass-through securities, collateralized mortgage obligations ("CMOs"),
commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals,
stripped mortgage backed securities ("SMBSs") and other securities that
directly or indirectly represent a participation in, or are secured by a
payable from, mortgage loans on real property. The value of some mortgage or
asset-backed securities may be particularly sensitive to changes in
prevailing interest rates. Early repayment of principal on some
mortgage-related securities may expose a Fund to a lower rate of return upon
reinvestment of principal. The value of these securities may fluctuate in
response to the market's perception of the creditworthiness of the issuers.
Additionally, although mortgages and mortgage-related securities are
generally supported by some form of government or private guarantee and/or
insurance, there is no assurance that private guarantors or insurers will
meet their obligations.
One type of SMBS has one class receiving all of the interest from the
mortgage assets (the interest-only, or "IO" class), while the other class
will receive all of the principal (the principal-only, or "PO" class).
Payments received for the IOs are included in interest income on the
Statement of Operations. Because principal will not be received at the
maturity of an IO, adjustments are made to the book value of the security on
a daily basis until maturity. These adjustments are included in interest
income on the Statement of Operations. Payments received for POs are treated
as reductions to the cost and par value of the securities.
Inflation-Indexed Bonds
The Multistrategy Bond and Diversified Bond Funds may invest in
inflation-indexed bonds. Inflation-indexed bonds are fixed-income securities
whose principal value is periodically adjusted to the rate of inflation. The
interest rate on these bonds is generally fixed at issuance at a rate lower
than typical bonds. Over the life of an inflation-indexed bond, however,
interest will be paid based on a principal value, which is adjusted for
inflation. Any increase in the principal amount of an inflation-indexed bond
will be included as interest income in the Statement of Operations, even
though investors do not receive their principal until maturity.
Notes to Financial Statements 161
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT TRANSACTIONS
Securities
During the period ended April 30, 2007, 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 $ 2,415,938,920 $ 2,216,240,637
Special Growth 1,037,081,642 893,345,519
Quantitative Equity 2,651,305,196 2,531,620,086
International
Securities 2,102,557,208 2,189,786,166
</Table>
<Table>
- ----------------------------------------------------------------
<Caption>
FUNDS PURCHASES SALES
Global Equity $ 850,987,666 $ 58,221,659
Multistrategy Bond 12,435,074,078 10,541,210,740
Diversified Bond 1,603,376,057 2,231,847,651
</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
--------------------------------------------------------------------------------
Multistrategy Bond $ 1,903,097,815 $ 1,422,989,561
Diversified Bond 542,888,445 1,210,786,307
</Table>
Written Options Contracts
Transactions in written options contracts for the period ended April 30, 2007
for the following Funds were as follows:
<Table>
<Caption>
INTERNATIONAL SECURITIES FUND MULTISTRATEGY BOND FUND
------------------------------------------ ------------------------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2006 416 $ 1,886,640 1,169 $ 1,995,299
Opened 1,930 8,950,110 9,671 3,660,077
Closed (2,006) (9,416,336) (6,209) (1,787,396)
Expired -- -- (805) (363,610)
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2007 340 $ 1,420,414 3,826 $ 3,504,370
=================== =================== =================== ===================
</Table>
<Table>
<Caption>
DIVERSIFIED BOND FUND
------------------------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-----------------------------------------------------------------------------------
Outstanding October 31, 2006 717 $ 208,329
Opened 3,545 745,783
Closed (3,580) (721,840)
Expired (284) (114,602)
------------------- -------------------
Outstanding April 30, 2007 398 $ 117,670
=================== ===================
</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
162 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Street and are recorded as securities lending income for the Fund. All
collateral received will be in an amount at least equal to 102% (for loans of
US securities) or 105% (for non-US securities) of the market value of the
loaned securities at the inception of each loan. The market value of the
loaned securities is determined at the close of business of the Funds and any
additional required collateral is delivered to the Fund the next day. Should
the borrower of the securities fail financially, there is a risk of delay in
recovery of the securities or loss of rights in the collateral. Consequently,
loans are made only to borrowers which are deemed to be of good financial
standing.
As of April 30, 2007, the non-cash collateral received for the securities on
loan in the following funds was:
<Table>
<Caption>
FUNDS NON-CASH COLLATERAL VALUE NON-CASH COLLATERAL HOLDING
------------------------------------------------------------------------------------------------
Diversified Equity $ 59,903,147 Pool of US Government Securities
Special Growth 6,267,296 Pool of US Government Securities
Quantitative Equity 3,446,252 Pool of US Government Securities
International Securities 16,634,242 Pool of US Government Securities
Global Equity 3,940,886 Pool of US Government Securities
Multistrategy Bond 1,924,770 Pool of US Government Securities
</Table>
Custodian
The Funds have entered into arrangements with their Custodian whereby custody
credits realized as a result of uninvested cash balances were used to reduce
a portion of the Fund's expenses. During the period ended April 30, 2007, the
Fund's custodian fees were reduced by the following amounts under these
arrangements which are included in expense reductions on the Statement of
Operations:
Custody Credits
<Table>
<Caption>
AMOUNT
FUNDS PAID
---------------------------------------------------
Diversified Equity $ 24,156
Special Growth 10,819
Quantitative Equity 15,063
International Securities 43,458
Multistrategy Bond 118,427
Diversified Bond 109,756
</Table>
4. RELATED PARTIES
Adviser and Administrator
RIMCo advises and administers all of the Funds which comprise the Investment
Company. RIMCo 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 RIMCo.
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, 2007, $1,963,501,403 of the
Money Market Fund's net assets represents investments by the Funds presented
herein and $941,423,704 of the Money Market Funds' net assets represents the
investments of other RIC Funds not presented herein.
The advisory and administrative fees are based upon the average daily net
assets of each Fund at the rates specified in the tables below, are payable
monthly and total $67,659,407 and $4,690,885 respectively, for the period
ended April 30, 2007.
<Table>
<Caption>
ANNUAL RATE
-------------------------------
FUNDS ADVISER ADMINISTRATOR
----------------------------------------------------------------------
Special Growth .90% .05%
Global Equity .95 .05
Diversified Bond .40 .05
</Table>
Notes to Financial Statements 163
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
For the Diversified Equity Fund, the Quantitative Equity Fund, the
International Securities Fund, and Multistrategy Bond Fund, the advisory fee
is based on the asset levels of the Funds. The advisory and administrative
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
</Table>
<Table>
<Caption>
INTERNATIONAL SECURITIES MULTISTRATEGY BOND
ANNUAL RATE ANNUAL RATE
------------------------------- -------------------------------
AVERAGE DAILY NET ASSETS ADVISORY ADMINISTRATOR ADVISORY ADMINISTRATOR
--------------------------------------------------------------------------------------------------------
First $2 Billion .90% .05% .60% .05%
Next $3 Billion .89 .05 .59 .05
Over $5 Billion .87 .05 .57 .05
</Table>
For the Multistrategy Bond Fund, there was a voluntary waiver of 0.03%
applicable to the period ended April 30, 2007, totaling $485,624.
For the Diversified Bond Fund, RIMCo has contractually agreed to waive, at
least until February 29, 2008, up to the full amount of its 0.45% combined
advisory and administrative fees and to reimburse the Fund for other direct
Fund-level expenses to the extent that direct Fund-level expenses exceed
0.75% of the average daily net assets of that Fund for the period from March
1, 2007 to February 29, 2008. This waiver may not be terminated during the
relevant period except at the Board's discretion. Direct Fund-level expenses
for the Diversified Bond Fund do not include 12b-1 fees , shareholder
services fees or the expenses of other investment companies in which the Fund
invests which are borne indirectly by the Fund. The total amount of the
waiver for the period ended April 30, 2007 was $52,539. There were no
reimbursements for the period ended April 30, 2007.
The Adviser does not have the ability to recover amounts waived or reimbursed
from previous periods.
Transfer Agent
RIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, RIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. RIMCo 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, 2007 were
$14,239,459.
Distributor and Shareholder Servicing
Pursuant to the Distribution Agreement with the Investment Company, Russell
Fund Distributors, Inc. ("Distributor"), a wholly-owned subsidiary of RIMCo,
serves as distributor for all Investment Company portfolio shares, including
Class A, Class C, Class E and Class S 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 Russell Fund Distributors, Inc. (the
"Distributor"), a wholly-owned subsidiary of RIMCo, 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 A
and Class C 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 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 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 aggregate initial sales charges, deferred sales charges and
asset-based sales charges on Class A and Class C Shares of the Funds may not
exceed 7.25% and
164 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6.25%, respectively, of total gross sales, subject to certain exclusions.
These limitations are imposed at the class level on each class of shares of
each Fund rather than on a per shareholder basis. Therefore, long-term
shareholders of the Class A and Class C Shares may pay more than the economic
equivalent of the maximum sales charges permitted by the NASD.
For the period ended April 30, 2007, 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
--------------------------------------------------------------------------
Diversified Equity $ 23,394 $ 5,727
Special Growth 8,929 1,995
Quantitative Equity 22,719 5,716
International Securities 21,203 5,147
Global Equity 5,797 1,120
Multistrategy Bond 12,673 3,277
</Table>
Brokerage Commissions
The Funds will effect transactions through Russell Implementation Services,
Inc. ("RIS") and its global network of unaffiliated correspondent brokers.
RIS is a registered broker and investment adviser and an affiliate of RIMCo.
Trades placed through RIS and its correspondents are made (i) to manage
trading associated with changes in managers, rebalancing across existing
managers, cash flows and other portfolio transitions, (ii) to execute
portfolio securities transactions selected by money managers or (iii) to
execute portfolio securities transactions for the portion of each Fund's
assets that RIMCo determines not to allocate to money managers, including
assets allocated to the "select holdings" strategy, and for each Fund's cash
reserves.
The Funds effect certain 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 RIMCo. Trades placed through
LJR and its correspondents are used (i) to obtain research services for RIMCo
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 RIMCo or to generate
commission rebates to the Funds, the Funds' money managers are requested to
and RIMCo 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, RIMCo 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 RIMCo 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 RIMCo
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 RIMCo or its affiliates. Similarly, the Funds may
benefit from research provided with respect to trading by those other funds
and clients.
LJR may also rebate to the Funds a portion of commissions earned on certain
trading by the Funds through 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 RIMCo's research budget has
been met, as determined annually in the Soft Dollar Committee budgeting
process.
Additionally, the Funds paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to the Adviser.
Notes to Financial Statements 165
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Accrued fees payable to affiliates as April 30, 2007 were as follows:
<Table>
<Caption>
DIVERSIFIED SPECIAL QUANTITATIVE INTERNATIONAL GLOBAL MULTISTRATEGY
EQUITY GROWTH EQUITY SECURITIES EQUITY BOND
-------------------------------------------------------------------------------------------------------------------
Advisory fees $2,537,751 $1,060,836 $2,561,023 $2,885,730 $ 684,675 $2,760,001
Administration fees 172,646 58,935 174,216 159,527 36,036 234,000
Distribution fees 100,715 44,211 101,977 108,261 2,921 62,881
Shareholder servicing
fees 48,337 20,513 49,251 52,720 3,781 43,660
Transfer agent fees 513,668 299,369 518,734 475,187 49,645 907,428
Trustee fees 12,247 4,096 12,785 9,318 2,237 2,819
---------- ---------- ---------- ---------- ---------- ----------
$3,385,364 $1,487,960 $3,417,986 $3,690,742 $ 779,294 $4,010,789
========== ========== ========== ========== ========== ==========
<Caption>
DIVERSIFIED
BOND
------------------------
Advisory fees $ 157,468
Administration fees 19,683
Distribution fees 33,799
Shareholder servicing
fees 14,854
Transfer agent fees 210,504
Trustee fees 11,059
----------
$ 447,368
==========
</Table>
Board of Trustees
The Russell Fund Complex consists of Russell Investment Company, which has 35
Funds, and Russell Investment Funds ("RIF"), which has nine Funds. Each of
the Trustees is a Trustee for both RIC 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, 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. The Audit Committee Chair and Investment
Committee Chair are each paid a fee of $12,000 per year and the Nominating
and Governance Committee chair are each paid a fee of $6,000 per year. The
chair person of the Board receives additional annual compensation of $52,000.
5. FEDERAL INCOME TAXES
At October 31, 2006, 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 10/31/13 10/31/14 TOTALS
---------------------------------------------------------------------------------------------
Multistrategy Bond $ -- $ 14,540,672 $ 14,540,672
Diversified Bond 4,923,732 16,820,169 21,743,901
</Table>
At April 30, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
<Caption>
DIVERSIFIED EQUITY SPECIAL GROWTH QUANTITATIVE EQUITY
----------------------------------------------------------------------------------------------------------------
Cost of Investments $ 3,871,228,591 $ 1,673,405,315 $ 4,187,661,908
================ ================ ================
Unrealized Appreciation $ 673,473,029 $ 198,375,971 $ 709,619,283
Unrealized Depreciation (28,018,328) (24,281,306) (56,430,966)
---------------- ---------------- ----------------
Net Unrealized Appreciation (Depreciation) $ 645,454,701 $ 174,094,665 $ 653,188,317
================ ================ ================
</Table>
<Table>
<Caption>
INTERNATIONAL
SECURITIES GLOBAL EQUITY MULTISTRATEGY BOND DIVERSIFIED BOND
------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 4,434,641,555 $ 1,059,657,671 $ 7,450,759,358 $ 539,783,259
================ ================ ================ ================
Unrealized Appreciation $ 778,508,670 $ 48,539,400 $ 91,677,675 $ 2,557,978
Unrealized Depreciation (28,423,503) (10,918,088) (80,114,599) (1,491,378)
---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation (Depreciation) $ 750,085,167 $ 37,621,312 $ 11,563,076 $ 1,066,600
================ ================ ================ ================
</Table>
166 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2007 and October 31, 2006
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
DIVERSIFIED EQUITY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 69 -- 3,431 --
Proceeds from reinvestment of
distributions -- -- 3 --
Payments for shares redeemed (10) -- (486) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 59 -- 2,948 --
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 345 653 $ 16,450 $ 29,359
Proceeds from reinvestment of
distributions 150 83 6,962 3,657
Payments for shares redeemed (344) (453) (16,348) (20,433)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 151 283 7,064 12,583
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 174 403 8,601 18,678
Proceeds from reinvestment of
distributions 70 39 3,369 1,788
Payments for shares redeemed (182) (232) (8,839) (10,766)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 62 210 3,131 9,700
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 12,682 18,131 622,891 842,087
Proceeds from reinvestment of
distributions 3,661 2,004 176,827 91,133
Payments for shares redeemed (10,041) (5,050) (489,061) (253,120)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 6,302 15,085 310,657 698,100
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 6,574 15,578 $ 323,800 $ 720,383
================= ================= ================= =================
</Table>
Notes to Financial Statements 167
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
SPECIAL GROWTH ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 40 -- 1,964 --
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (3) -- (176) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 37 -- 1,788 --
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 139 270 $ 6,451 $ 13,121
Proceeds from reinvestment of
distributions 215 127 9,576 5,785
Payments for shares redeemed (160) (228) (7,386) (11,060)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 194 169 8,641 7,846
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 79 121 3,939 6,297
Proceeds from reinvestment of
distributions 72 42 3,492 2,068
Payments for shares redeemed (51) (114) (2,536) (5,898)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 100 49 4,895 2,467
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 5,013 4,747 260,272 253,937
Proceeds from reinvestment of
distributions 2,759 1,570 139,972 79,639
Payments for shares redeemed (2,165) (3,158) (113,359) (169,361)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,607 3,159 286,885 164,215
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 5,938 3,377 $ 302,209 $ 174,528
================= ================= ================= =================
</Table>
168 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
QUANTITATIVE EQUITY ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 80 -- 3,328 --
Proceeds from reinvestment of
distributions -- -- 4 --
Payments for shares redeemed (12) -- (524) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 68 -- 2,808 --
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 406 773 $ 16,407 $ 29,611
Proceeds from reinvestment of
distributions 204 154 8,042 5,745
Payments for shares redeemed (403) (540) (16,232) (20,768)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 207 387 8,217 14,588
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 213 450 8,832 17,705
Proceeds from reinvestment of
distributions 99 73 4,017 2,821
Payments for shares redeemed (241) (186) (9,862) (7,324)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 71 337 2,987 13,202
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 15,888 20,967 659,070 827,015
Proceeds from reinvestment of
distributions 5,057 3,628 205,882 139,968
Payments for shares redeemed (13,437) (6,291) (550,715) (248,348)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 7,508 18,304 314,237 718,635
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 7,854 19,028 $ 328,249 $ 746,425
================= ================= ================= =================
</Table>
Notes to Financial Statements 169
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
INTERNATIONAL SECURITIES ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 40 -- 3,095 --
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (5) -- (387) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 35 -- 2,708 --
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 227 432 $ 16,870 $ 29,899
Proceeds from reinvestment of
distributions 222 73 15,825 4,728
Payments for shares redeemed (243) (326) (18,054) (22,969)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 206 179 14,641 11,658
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 195 288 15,036 20,770
Proceeds from reinvestment of
distributions 109 34 8,037 2,297
Payments for shares redeemed (199) (155) (15,023) (11,177)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 105 167 8,050 11,890
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 6,607 9,112 510,236 662,381
Proceeds from reinvestment of
distributions 4,727 1,599 353,027 107,525
Payments for shares redeemed (7,581) (4,482) (578,378) (325,970)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,753 6,229 284,885 443,936
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 4,099 6,575 $ 310,284 $ 467,484
================= ================= ================= =================
</Table>
170 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
----------------- -----------------
2007 2007
GLOBAL EQUITY ----------------- -----------------
Class A
Proceeds from shares sold 153 1,545
Proceeds from reinvestment of distributions -- --
Payments for shares redeemed (12) (122)
----------------- -----------------
Net increase (decrease) 141 1,423
----------------- -----------------
Class C
Proceeds from shares sold 673 $ 6,843
Proceeds from reinvestment of distributions -- --
Payments for shares redeemed (104) (1,093)
----------------- -----------------
Net increase (decrease) 569 5,750
----------------- -----------------
Class E
Proceeds from shares sold 1,421 13,964
Proceeds from reinvestment of distributions -- --
Payments for shares redeemed (118) (1,235)
----------------- -----------------
Net increase (decrease) 1,303 12,729
----------------- -----------------
Class S
Proceeds from shares sold 88,132 877,960
Proceeds from reinvestment of distributions -- --
Payments for shares redeemed (3,476) (34,863)
----------------- -----------------
Net increase (decrease) 84,656 843,097
Total increase (decrease) 86,669 $ 862,999
================= =================
</Table>
Notes to Financial Statements 171
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
MULTISTRATEGY BOND ----------------- ----------------- ----------------- -----------------
Class A
Proceeds from shares sold 332 -- 3,439 --
Proceeds from reinvestment of
distributions 1 -- 8 --
Payments for shares redeemed (38) -- (399) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 295 -- 3,048 --
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 3,185 2,562 $ 32,915 $ 26,226
Proceeds from reinvestment of
distributions 129 244 1,332 2,488
Payments for shares redeemed (860) (1,475) (8,887) (15,077)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,454 1,331 25,360 13,637
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 6,217 1,533 64,497 15,701
Proceeds from reinvestment of
distributions 122 181 1,258 1,843
Payments for shares redeemed (476) (430) (4,927) (4,406)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 5,863 1,284 60,828 13,138
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 326,838 75,561 3,392,913 775,132
Proceeds from reinvestment of
distributions 6,154 8,695 63,591 88,843
Payments for shares redeemed (32,171) (16,654) (333,672) (170,536)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 300,821 67,602 3,122,832 693,439
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 309,433 70,217 $ 3,212,068 $ 720,214
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
DIVERSIFIED BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 277 756 $ 6,596 $ 17,854
Proceeds from reinvestment of
distributions 55 71 1,306 1,674
Payments for shares redeemed (737) (524) (17,537) (12,366)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (405) 303 (9,635) 7,162
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 293 633 6,996 14,981
Proceeds from reinvestment of
distributions 47 87 1,127 2,050
Payments for shares redeemed (1,927) (460) (46,313) (10,929)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (1,587) 260 (38,190) 6,102
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 11,175 23,509 260,037 543,516
Proceeds from reinvestment of
distributions 1,700 3,175 39,561 73,071
Payments for shares redeemed (85,125) (7,541) (1,991,193) (174,338)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (72,250) 19,143 (1,691,595) 442,249
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (74,242) 19,706 $ (1,739,420) $ 455,513
================= ================= ================= =================
</Table>
172 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
7. INTERFUND LENDING PROGRAM
The Investment Company Funds have been granted permission from the Securities
and Exchange Commission to participate in a joint lending and borrowing
facility (the "Credit Facility"). Portfolios of the Funds may borrow money
from the RIC Money Market Fund for temporary purposes. All such borrowing and
lending will be subject to a participating Fund's fundamental investment
limitations. The RIC Money Market Fund will lend through the program only
when the returns are higher than those available from an investment in
repurchase agreements or short-term reserves. The Investment Company Funds
will borrow through the program only when the costs are equal to or lower
than the cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be called
on one business day's notice. A participating fund may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to the RIC Money Market Fund could result in a lost
investment opportunity or additional borrowing costs.
8. RECORD OWNERSHIP
As of April 30, 2007, 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 51.1
Special Growth 3 42.0
Quantitative Equity 3 49.2
International Securities 3 48.9
Global Equity 3 66.0
Diversified Bond 1 24.1
Multistrategy Bond 3 63.9
</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.
Notes to Financial Statements 173
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The following table lists restricted securities held by a Fund that are
illiquid. The following table does not include (1) securities deemed liquid
by RIMCo 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 $ $ $
-----------------------------------------------------------------------------------------------------------------------------
Multistrategy Bond Fund - 0.1%
BellSouth Corp. 04/18/07 1,800,000 98.93 1,781 1,783
Bombardier, Inc. 11/10/06 EUR 375,000 128.47 482 541
Countrywide Alternative Loan Trust 03/12/07 63,675,000 5.15 3,279 3,273
Catlin Insurance Co., Ltd. 02/27/07 1,695,000 100.46 1,705 1,709
DG Funding Trust 11/04/03 361 10,584.58 3,821 3,817
Energy Partners, Ltd. 04/18/07 1,195,000 101.34 1,211 1,216
Gaz Capital for Gazprom 11/17/07 2,155,000 100.08 2,157 2,177
Hospitality Properties Trust 03/07/07 5,775,000 99.63 5,753 5,694
Indonesia Government International
Bond 04/20/07 2,275,000 99.27 2,258 2,252
KAR Holdings, Inc. 04/13/07 1,525,000 101.55 1,549 1,580
Level 3 Financing, Inc. 04/26/07 1,000,000 104.50 1,045 1,039
Realogy Corp. 04/12/07 3,300,000 99.56 3,285 3,300
SB Treasury Co. LLC 06/01/06 2,028,000 106.81 2,166 2,117
SBA CMBS Trust 04/25/07 2,060,000 100.31 2,066 2,070
Security Capital Assurance, Ltd. 04/24/07 1,830,000 102.14 1,869 1,863
Time Warner Cable, Inc. 04/04/07 4,980,000 99.82 4,971 4,994
Time Warner Cable, Inc. 04/04/07 2,205,000 99.77 2,200 2,218
Time Warner Cable, Inc. 04/04/07 5,450,000 100.46 5,480 5,512
--------------
47,155
==============
Diversified Bond Fund - 7.4%
Aiful Corp. 08/03/05 100,000 99.73 100 99
Air 2 US 01/10/07 455,157 104.90 477 479
Alcoa, Inc. 03/05/07 155,000 101.14 157 155
Banco Mercantil del Norte SA 01/23/07 155,000 101.42 157 159
Business Loan Express 03/08/07 509,298 100.03 509 517
Cendant Mortgage Corp. 03/08/07 220,160 100.08 220 221
CS First Boston Mortgage Securities
Corp. 03/28/07 357,811 100.02 358 358
DG Funding Trust 11/04/03 240 10,594.65 2,543 2,538
Depfa ACS Bank 03/08/07 100,000 98.39 98 96
Gaz Capital for Gazprom 03/01/07 395,000 99.75 394 399
Gaz Capital for Gazprom 03/01/07 160,000 100.00 160 165
Glitnir Banki HF 06/12/06 250,000 99.90 250 262
HBOS Treasury Services PLC 02/06/07 130,000 99.93 130 131
Kaupthing Bank Hf 09/28/07 110,000 99.51 109 112
Kaupthing Bank Hf 05/12/06 230,000 99.51 229 249
News America, Inc. 03/28/07 835,000 100.87 842 818
Resona Preferred Global Securities
Cayman, Ltd. 07/20/05 125,000 100.10 125 132
SMFG Preferred Capital USD 1, Ltd. 12/13/06 150,000 100.00 150 150
Security National Mortgage Loan
Trust 03/08/07 523,391 100.06 524 524
Shinsei Finance Cayman, Ltd. 03/10/06 150,000 99.11 149 152
Sierra Receivables Funding Co. 03/08/07 367,468 99.83 367 367
Sigma Finance, Inc. 07/26/06 970,000 100.00 970 970
Southern Natural Gas Co. 03/30/07 30,000 100.05 30 30
Time Warner Cable, Inc. 04/04/07 120,000 99.82 120 120
Time Warner Cable, Inc. 04/04/07 1,330,000 99.77 1,327 1,338
TNK-BP Finance SA 07/13/06 140,000 99.65 140 148
--------------
10,689
==============
</Table>
174 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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, 2007, the Board of Trustees of Russell Investment Company declared
the following dividends from net investment income payable on May 7, 2007 to
shareholders on record May 2, 2007.
<Table>
<Caption>
NET INVESTMENT SHORT-TERM LONG-TERM
FUNDS INCOME CAPITAL GAINS CAPITAL GAINS
------------------------------------------------------------------------------------------------------
Multistrategy Bond - Class S $ 0.0431 $ -- $ --
Multistrategy Bond - Class E 0.0409 -- --
Multistrategy Bond - Class C 0.0345 -- --
Multistrategy Bond - Class A 0.0411 -- --
Diversified Bond - Class S 0.1046 -- --
Diversified Bond - Class E 0.0997 -- --
Diversified Bond - Class C 0.0836 -- --
</Table>
11. SUBSEQUENT EVENT
At a meeting held on May 22, 2007, the Board of Trustees of Russell
Investment Company, upon the recommendation of Russell Investment Management
Company, approved, subject to shareholder approval, an Agreement and Plan of
Reorganization to reorganize the Diversified Bond Fund into the Fixed Income
I Fund.
It is expected that effective at the close of business on July 9, 2007, the
Diversified Bond Fund will be closed to new shareholders.
Notes to Financial Statements 175
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 RIMCo
(the "RIMCo Agreement") and the portfolio management contract with each Money
Manager of the Funds (collectively, the "portfolio management contracts") at a
meeting held on April 24, 2007. 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 RIMCo. In preparation for the annual review, the Independent Trustees,
with the advice and assistance of their independent counsel, also requested and
the Board considered (1) information and reports prepared by RIMCo relating to
the services provided by RIMCo (and its affiliates) to the Funds; (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 RIMCo believed by the provider to be generally comparable in investment
objectives and size to the Funds; and (3) RIMCo's response to questions from the
Board concerning the Third-Party Information addressing, among other things,
performance and expense differentials between certain Funds and their respective
Comparable Funds. The foregoing information requested by the Trustees or
provided by RIMCo is collectively called the "Agreement Renewal Information."
The Independent Trustees also received a memorandum from their independent
counsel discussing the legal standards for their consideration of the proposed
continuances.
On April 23, 2007, the Independent Trustees met to review the Agreement Renewal
Information in a private session with their independent counsel at which no
representatives of RIMCo or management were present. At the April 24 meeting of
the Board of Trustees, the Board, including the Independent Trustees, reviewed
the proposed continuance of the RIMCo Agreement and the portfolio management
contracts with management and independent counsel to the Independent Trustees.
Presentations made by RIMCo to the Board as part of this review encompassed the
Funds and all other RIMCo-managed funds for which the Board has supervisory
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 analyses received from RIMCo 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. RIMCo has engaged multiple
Money Managers for all Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible
under the RIMCo Agreement for determining, implementing and maintaining the
investment program for each Fund. Assets of each Fund generally have been
allocated among the multiple Money Managers selected by RIMCo, subject to Board
approval, for that Fund. RIMCo manages directly a portion of certain Funds'
assets employing a "select holdings strategy," as described below, and directly
manages the investment of each Fund's cash reserves. RIMCo also may manage
directly any portion of each Fund's assets that RIMCo determines not to allocate
to the Money Managers and portions of a Fund during transitions between Money
Managers. In all cases, assets are managed directly by RIMCo in accordance with
the RIMCo Agreement.
RIMCo is responsible for selecting, subject to Board approval, Money Managers
for each Fund and for actively managing allocations and reallocations of assets
among the Money Managers. RIMCo's goal is to construct and manage diversified
portfolios in a risk aware manner. 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
RIMCo (each, a "segment") in accordance with the Fund's applicable investment
objective, policies and restrictions, any constraints placed by RIMCo upon their
selection of portfolio securities and the Money Manager's specified role in a
Fund. RIMCo 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, RIMCo 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 RIMCo's research and ongoing review and analysis, such
actions are appropriate. RIMCo may assign specific investment constraints from
time to time for each Money Manager intended to capitalize on the strengths of
that Money Manager or to coordinate the investment activities of Money Managers
for the Fund in a complementary
176 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
manner. Therefore, RIMCo's selection of Money Managers is made not only on the
basis of performance considerations but anticipated compatibility with other
Money Manager in the same Fund. In light of the foregoing, the overall
performance of each Fund over appropriate periods reflects, in great part, the
performance of RIMCo in designing the Fund's investment program, structuring the
Fund, selecting an effective Money Manager with a particular investment style or
sub-style for a segment that is complementary to the styles of the Money
Managers of other Fund segments, and allocating assets among the Money Managers
in a manner designed to achieve the objectives of the Fund.
The Board considered that the prospectuses for the Funds and other public
disclosures emphasize to investors RIMCo'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 that information into account when deciding to purchase
shares of any such Fund.
The Board also considered the special expertise of RIMCo 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 RIMCo on comparable terms given the
need to continue 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 RIMCo Agreement, including
the following:
1. The nature, scope and quality of the services provided to the Fund by RIMCo;
2. The advisory fee paid by the Fund to RIMCo 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 RIMCo as to other fees and benefits received by RIMCo
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 RIMCo as to expenses incurred by the Fund; and
5. Information provided by RIMCo as to the profits that RIMCo derives from its
mutual fund operations generally and from the Fund.
As noted above, RIMCo pursuant to the terms of the RIMCo Agreement directly
manages a portion--up to 10%--of the assets of each of the Diversified Equity
Fund, the Quantitative Equity Fund and the International Securities Fund (each a
"Participating Fund") utilizing a select holdings strategy, the actual
allocation being determined by each Participating Fund's RIMCo portfolio
manager. The select holdings strategy utilized by RIMCo in managing such assets
for a Participating Fund is designed to increase the Participating Fund's
exposure to stocks that are viewed as attractive by multiple Money Managers of
that Participating Fund. The Board reviewed the results of the select holdings
strategy in respect of each Participating Fund since implementation taking into
account that the strategy has been utilized for a limited period of time. The
Trustees considered that RIMCo 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 RIMCo generally and from
the Participating Fund consequently may increase incrementally. The Board,
however, also considered RIMCo'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 carrying
out the select holdings strategy; the limited amount of assets that are managed
directly by RIMCo pursuant to the select holdings strategy; and the fact that
the aggregate investment advisory fees paid by the Participating Fund are not
increased as a result of the select holdings strategy.
At the April 24 Board meeting, RIMCo and management discussed the reasonableness
of the Funds' investment advisory fees. In discussing whether the Funds'
performance supported these fees, RIMCo noted differences between the investment
strategies of certain Funds and their respective Comparable Funds in pursuing
their investment objectives, including Fund 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 RIMCo, these strategies may be
expected to result, and for certain Funds during the periods covered by the
Third-Party Information did result, in lower performance than that of some of
their respective Comparable Funds. RIMCo stated that the strategies pursued by
the Funds are intended to result in less
Basis for Approval of Investment Advisory Contracts 177
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
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.
At the April 24 Board meeting, RIMCo and management discussed their intent to
recommend to the Board the merger of the Diversified Bond Fund into the Fixed
Income I Fund at the upcoming regularly scheduled May Board meeting.
On the basis of the Agreement Renewal Information and other information
previously received by the Board from RIMCo during the course of the year or
presented at the April 24 Board meeting by RIMCo, the Board, in respect of each
Fund, found, after giving effect to any applicable waivers and/or reimbursements
(1) the advisory fee charged by RIMCo to be reasonable in light of the nature,
scope and quality of the services provided to the Funds; (2) the relative
expense ratio of the Fund was comparable to those of its Comparable Funds; (3)
RIMCo's methodology of allocating expenses of operating funds in the complex was
reasonable; and (4) RIMCo's profitability with respect to the Fund was not
excessive in light of the nature, scope and quality of the services provided by
RIMCo. The Board also concluded that the performance of each of the Funds
supported continuation of the RIMCo Agreement. 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 also
considered RIMCo's investment strategy of managing the Funds in a risk aware
manner.
At the April 24 Board meeting, 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. The
Board determined that the investment advisory fees for each Fund appropriately
reflect any economies of scale realized by that Fund, based upon such factors as
the 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 RIMCo by institutional clients with
investment objectives similar to those of the Funds and other RIC funds under
the Board's supervision are lower, and may, in some cases, be substantially
lower, than the rates paid by RIC funds supervised by the Board, including the
Funds. The Trustees reviewed with RIMCo the differences in the scope of services
it provides to institutional clients and the Funds. In response to the Trustees'
inquiries, RIMCo noted, among other things, that institutional clients have
fewer administrative needs than the Funds. It was further noted by RIMCo 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.
After considering the foregoing and other relevant factors, the Board concluded
that continuation of the RIMCo Agreement on its current terms and conditions
would be in the best interests of the Funds and their respective shareholders
and voted to approve the continuation of the agreement.
At the April 24 Board meeting, with respect to the evaluation of the terms of
portfolio management contracts with Money Managers, the Board received and
considered information from RIMCo reporting for each Money Manager, among other
things, the Money Manager's performance over various periods; RIMCo's assessment
of the performance of each Money Manager; any significant business relationships
between the Money Manager and RIMCo or Russell Fund Distributors, Inc., the
Funds' underwriter; and RIMCo'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. RIMCo recommended that each Money Manager be
retained at its current fee rate. RIMCo 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 RIMCo; RIMCo is aware of the fees charged by Money Managers to other
clients; and RIMCo 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 RIMCo's explanation in light of the Board's
findings as to the reasonableness of the aggregate investment advisory fees paid
by each Fund and the fact that each Money Manager's fee is paid by RIMCo.
Based substantially upon RIMCo's recommendations together with the information
received from RIMCo in support of its recommendations at the April 24 meeting,
the Board concluded that the fees paid to the Money Managers of each Fund are
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 would be in the best interests of the Fund and its
shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the RIMCo Agreement or, other than RIMCo'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.
178 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 RIMCo, as RIC'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. RIMCo 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.
To reduce expenses, we may mail only one copy of the Funds' prospectus and each
annual and semi-annual report to those addresses shared by two or more accounts.
If you wish to receive individual copies of these documents, please call us at
(800) 787-7354 or contact your financial institution and we will begin sending
you individual copies thirty days after receiving your request.
Some Financial Intermediaries may offer electronic delivery of the Fund's
prospectus and annual and semiannual reports. Please contact your Financial
Intermediary for further details.
Shareholder Requests for Additional Information 179
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Russell Investment
Company ("RIC"), which has 35 funds, and Russell Investment Funds ("RIF"), which
has nine funds. Each of the trustees is a trustee of both RIC 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 independent trustees. 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
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Thaddas L. Alston, Trustee since Appointed until - Senior Vice President, Larco 44 None
Born April 7, 1945 2006 successor is Investments, Ltd.
duly elected
909 A Street and qualified
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 44 - Director, Avista
Born January 22, 2000 successor is Blake, P.S. (accounting Corp;
1954 duly elected services) - Trustee,
Chairperson and qualified - Director and Chairman of the Principal
909 A Street since 2005 Audit Committee, Avista Investors Fund
Tacoma, Washington Annual Corp. (investment
98402-1616 - Trustee and Chairman of the company);
Operations and Distribution - Trustee,
Committee, WM Group of Principal
Funds, 1999-2006 Variable
- February 2002 to June 2005, Contracts Fund
Chairman of the Audit (investment
Committee, RIC and RIF company)
- Regent, University of
Washington
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 44 None
Born June 6, 1946 2003 successor is Vice President and Chief
Chairman of duly elected Financial Officer, Waddell &
909 A Street Audit Committee and qualified Reed Financial, Inc.
Tacoma, Washington since 2005 - 2003, Retired
98402-1616 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
180 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 44 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected several additional
1955 Chairman of the and qualified. subsidiary companies,
Nominating and including Simpson Timber
909 A Street Governance Appointed until Company, Simpson Paper
Tacoma, Washington Committee since successor is Company and Simpson Tacoma
98402-1616 2007 duly elected Kraft Company
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack R. Thompson, Trustee since Appointed until - September 2003 to present, 44 - 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 181
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 44 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 RIMCo
Tacoma, Washington - Chairman Emeritus, RIC and
98402-1616 RIF; Russell Implementation
Services Inc. (broker-dealer
and investment adviser
("RIS")); Russell 20-20
Association (non-profit
corporation); and Russell
Trust Company (non-
depository trust company
("RTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee Emeritus Five year term - President, Anderson 44 None
Born October 15, since 2007 Management Group LLC
1931 (private investments
consulting)
909 A Street - February 2002 to June 2005,
Tacoma, Washington Lead Trustee, RIC and RIF
98402-1616 - Trustee of RIC and RIF Until
2006
- Chairman of the Nominating
and Governance Committee
2006
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 44 None
Born December 1, since 2003 - Trustee of RIC and RIF Until
1919 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 44 None
Born June 8, 1925 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 44 None
Born October 6, since 2006 - Trustee of RIC and RIF Until
1930 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of RIC and
RIF.
182 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 44 None
Born May 5, 1926 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 183
RUSSELL INVESTMENT COMPANY
RUSSELL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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, RIC
Born December 16, 1966 Officer since by Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, RIMCo
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, RIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, RIMCo
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, RIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, RIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, RIMCo, RTC 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, RIC, RIF, FRC, RTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, RIMCo and RFD
2004 - 1999 to 2003, Chief Financial Officer, FRC, RIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Gregory J. Lyons, Secretary since Until successor - Associate General Counsel and Assistant Secretary FRC
Born August 24, 1960 2007 is chosen and and RIA
qualified by - Director and Secretary, RIMCo and RFD
909 A Street Trustees - Secretary and Chief Legal Counsel, RIC and RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
184 Disclosure of Information about Fund Directors
RUSSELL FUNDS
RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul E. Anderson
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
Gregory J. Lyons, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Josiah Quincy Building
200 Newport Avenue
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF APRIL 30, 2007*
Diversified Equity Fund
AllianceBernstein L.P., New York, NY
Columbus Circle Investors, Stamford, CT
Institutional Capital LLC, 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
Berkeley Capital Management LLC, San Francisco, CA
ClariVest Asset Management LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
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
Marsico Capital Management, LLC, Denver, CO
MFS Institutional Advisors, Inc., Boston, MA
Mondrian Investment Partners Ltd., London, England
Nicholas-Applegate Capital Management LLC, San Diego, CA
The Boston Company Asset Management, LLC, Boston, MA
Wellington Management Company, LLP, Boston, MA
Global Equity Fund
Altrinsic Glbal Advisors, LLC, Stamford, CT
ClariVest Asset Management, LLC, San Diego, CA
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 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 185
RUSSELL FUNDS
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
* A complete list of current money managers can also be found at
www.Russell.com.
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 Russell Investment Company.
Such offering is made only by Prospectus, which includes details as to offering
price and other material information.
186 Manager, Money Managers and Service Providers
(RUSSELL LOGO)
RUSSELL INVESTMENT COMPANY
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com
On July 1, 2006, Frank Russell Investment Company
changed its name to Russell Investment Company, and
Frank Russell Investment Management Company changed
its name to Russell Investment Management Company. 36-08-067 (1 04/07)
INSTITUTIONAL FUNDS
2007 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
APRIL 30, 2007
(RUSSELL LOGO)
Russell Investment Company
Russell Investment Company is a series investment company with 35 different
investment portfolios referred to as Funds. These financial statements report on
six of these Funds.
Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Russell Investment Company
Institutional Funds
Semiannual Report
April 30, 2007 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Equity I Fund........................................................ 3
Equity II Fund....................................................... 10
Equity Q Fund........................................................ 22
International Fund................................................... 32
Fixed Income I Fund.................................................. 50
Fixed Income III Fund................................................ 78
Notes to Schedules of Investments.................................... 125
Statement of Assets and Liabilities.................................. 128
Statement of Operations.............................................. 132
Statements of Changes in Net Assets.................................. 134
Financial Highlights................................................. 136
Notes to Financial Highlights........................................ 142
Notes to Financial Statements........................................ 143
Basis for Approval of Investment Advisory Contracts.................. 160
Shareholder Requests for Additional Information...................... 163
Disclosure of Information about Fund Directors....................... 164
Manager, Money Managers and Service Providers........................ 169
</Table>
Russell Investment Company - Institutional Funds.
Copyright (c) Russell Investment Group 2007. 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 changed its name to
Russell Investment Company ("RIC"). RIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Russell Investment Management Company
("RIMCo"). Effective July 1, 2006 RIMCo changed its name from Frank 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.
RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,090.90 $ 1,020.18
Expenses Paid During
Period* $ 4.82 $ 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). 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,092.20 $ 1,021.37
Expenses Paid During
Period* $ 3.58 $ 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). 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 Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,092.30 $ 1,021.67
Expenses Paid During
Period* $ 3.27 $ 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). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
Equity I Fund 3
RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.3%
Auto and Transportation - 3.3%
American Axle & Manufacturing Holdings, Inc. 14,200 397
Autoliv, Inc. 8,800 512
BorgWarner, Inc. 7,000 545
Burlington Northern Santa Fe Corp. 94,717 8,291
CH Robinson Worldwide, Inc. 69,950 3,739
CSX Corp. 46,100 1,990
DaimlerChrysler AG 3,300 266
FedEx Corp. 77,287 8,149
Ford Motor Co. (AE) 28,400 228
General Motors Corp. (N) 18,500 578
Magna International, Inc. Class A 2,800 222
Navistar International Corp. (AE) 151,200 8,396
Norfolk Southern Corp. 125,150 6,663
Southwest Airlines Co. 8,200 118
TNT NV - ADR 94,700 4,275
Toyota Motor Corp. - ADR 29,293 3,557
UAL Corp. (AE)(N) 76,400 2,552
Union Pacific Corp. 38,942 4,449
US Airways Group, Inc. (AE)(N) 52,200 1,928
Visteon Corp. (AE)(N) 167,500 1,528
------------
58,383
------------
Consumer Discretionary - 13.5%
Accenture, Ltd. Class A 107,470 4,202
Avon Products, Inc. 53,600 2,133
Black & Decker Corp. 4,800 435
Carnival Corp. 26,350 1,288
CBS Corp. Class B 43,200 1,372
Coach, Inc. (AE) 67,870 3,314
Costco Wholesale Corp. 84,900 4,548
eBay, Inc. (AE) 230,700 7,830
Electronic Arts, Inc. (AE) 68,900 3,473
Family Dollar Stores, Inc. 8,400 267
Federated Department Stores, Inc. (N) 272,771 11,980
Focus Media Holding, Ltd. - ADR (AE)(N) 50,500 1,869
GameStop Corp. Class A (AE) 44,150 1,464
Gannett Co., Inc. 16,800 959
Gap, Inc. (The) 31,600 567
Google, Inc. Class A (AE) 61,035 28,771
Guess?, Inc. 97,300 3,834
Harman International Industries, Inc. 16,140 1,967
Hewitt Associates, Inc. Class A (AE) 76,200 2,267
Hilton Hotels Corp. 66,700 2,268
Intercontinental Hotels Group PLC - ADR (N) 128,400 3,103
International Game Technology 59,320 2,262
Interpublic Group of Cos., Inc. (AE)(N) 40,900 519
JC Penney Co., Inc. 48,800 3,860
Jones Apparel Group, Inc. 15,700 524
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kimberly-Clark Corp. 6,350 452
Kohl's Corp. (AE) 71,100 5,264
Las Vegas Sands Corp. (AE)(N) 161,820 13,785
Liberty Global, Inc.
Series C (AE) 19,586 654
Liberty Media Holding Corp.
Series A (AE) 24,182 2,732
Limited Brands, Inc. 5,450 150
Liz Claiborne, Inc. 14,500 648
Lowe's Cos., Inc. (N) 127,575 3,899
Mattel, Inc. 37,500 1,061
McDonald's Corp. (N) 453,367 21,889
McGraw-Hill Cos., Inc. (The) 56,600 3,709
MGM Mirage (AE)(N) 79,325 5,335
Monster Worldwide, Inc. (AE) 47,800 2,010
Newell Rubbermaid, Inc. 88,700 2,720
News Corp. Class A 106,140 2,377
Nike, Inc. Class B (N) 270,080 14,547
Office Depot, Inc. (AE) 15,800 531
Polo Ralph Lauren Corp. Class A 56,200 5,177
Quiksilver, Inc. (AE)(N) 29,800 396
RadioShack Corp. (N) 26,800 779
Royal Caribbean Cruises, Ltd. (N) 79,200 3,292
Saks, Inc. (N) 132,900 2,783
Starbucks Corp. (AE) 351,284 10,897
Starwood Hotels & Resorts Worldwide, Inc. (o) 51,500 3,452
Station Casinos, Inc. 12,623 1,098
Target Corp. 158,483 9,409
Time Warner, Inc. 72,800 1,502
Tribune Co. 22,100 725
Under Armour, Inc. Class B (AE)(N) 31,100 1,571
VeriSign, Inc. (AE) 63,500 1,737
VF Corp. 9,300 817
Viacom, Inc. Class A (AE) 72,710 2,999
Wal-Mart Stores, Inc. 6,500 312
Walt Disney Co. (The) 125,400 4,387
Wendy's International, Inc. (N) 15,800 596
Wynn Resorts, Ltd. (N) 15,145 1,548
XM Satellite Radio Holdings, Inc. Class A
(AE)(N) 257,550 3,013
Yahoo!, Inc. (AE) 144,047 4,039
Yum! Brands, Inc. 54,775 3,388
------------
240,756
------------
Consumer Staples - 7.1%
Altria Group, Inc. 187,580 12,928
Coca-Cola Co. (The) 483,800 25,249
</Table>
4 Equity I Fund
RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Coca-Cola Enterprises, Inc. 34,900 766
Colgate-Palmolive Co. 56,400 3,820
ConAgra Foods, Inc. 11,300 278
Diageo PLC - ADR 59,960 5,061
General Mills, Inc. 59,400 3,558
Heineken NV - ADR 73,888 1,962
HJ Heinz Co. 13,500 636
Kellogg Co. 11,800 624
Kraft Foods, Inc. Class A 240,286 8,042
Kroger Co. (The) 35,400 1,045
PepsiCo, Inc. 211,070 13,950
Procter & Gamble Co. 523,326 33,655
Safeway, Inc. 120,300 4,367
Sara Lee Corp. 40,100 658
Smithfield Foods, Inc. (AE)(N) 8,000 244
Tyson Foods, Inc. Class A 63,500 1,331
UST, Inc. 11,200 635
Walgreen Co. 121,200 5,321
WM Wrigley Jr Co. (N) 35,200 2,073
------------
126,203
------------
Financial Services - 20.8%
ACE, Ltd. 5,300 315
Alliance Data Systems Corp. (AE) 47,400 3,017
Allstate Corp. (The) 132,890 8,282
AMBAC Financial Group, Inc. 9,300 854
American Express Co. 109,900 6,668
American International Group, Inc. 363,400 25,405
Annaly Capital Management, Inc. (o) 325,700 5,182
AON Corp. 5,450 211
Astoria Financial Corp. 8,400 223
Bank of America Corp. 370,152 18,841
Bank of New York Co., Inc. (The) 84,620 3,425
BB&T Corp. 12,800 533
Capital One Financial Corp. (N) 62,771 4,661
CB Richard Ellis Group, Inc. Class A (AE) 80,105 2,712
Charles Schwab Corp. (The) 179,880 3,439
Chicago Mercantile Exchange Holdings, Inc. Class
A 5,810 3,002
Chubb Corp. 93,000 5,006
Citigroup, Inc. 487,334 26,131
Comerica, Inc. 13,200 817
Countrywide Financial Corp. 263,600 9,774
Fannie Mae 304,340 17,932
Fidelity National Financial, Inc. Class A 34,641 883
Fidelity National Information Services, Inc. 41,600 2,102
Fifth Third Bancorp (N) 4,800 195
First American Corp. 74,650 3,844
Freddie Mac 87,650 5,678
Genworth Financial, Inc. Class A 342,220 12,488
Goldman Sachs Group, Inc. (The) 147,412 32,226
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 74,630 7,553
Hudson City Bancorp, Inc. 42,800 570
IndyMac Bancorp, Inc. (N) 54,150 1,637
IntercontinentalExchange, Inc. (AE)(N) 20,840 2,647
iShares Russell 1000 Value Index Fund 57,950 4,994
JPMorgan Chase & Co. 400,150 20,848
KeyCorp 26,500 946
Lehman Brothers Holdings, Inc. 108,214 8,146
Lincoln National Corp. 5,200 370
Mastercard, Inc. Class A (N) 45,396 5,070
MBIA, Inc. (N) 11,100 772
Merrill Lynch & Co., Inc. 55,600 5,017
MetLife, Inc. 175,460 11,528
MGIC Investment Corp. (N) 9,200 567
Moody's Corp. 25,689 1,699
Morgan Stanley 234,150 19,671
National City Corp. (N) 37,010 1,353
Old Republic International Corp. 28,600 608
PartnerRe, Ltd. 5,300 382
Paychex, Inc. 150,700 5,591
PMI Group, Inc. (The) 19,700 955
PNC Financial Services Group, Inc. 42,840 3,174
Radian Group, Inc. 7,700 447
RenaissanceRe Holdings, Ltd. (N) 33,575 1,818
State Street Corp. 46,800 3,223
SunTrust Banks, Inc. 48,640 4,106
Torchmark Corp. 3,400 232
Travelers Cos., Inc. (The) 149,314 8,078
UBS AG 221,165 14,354
Unum Group (N) 33,800 841
US Bancorp 7,974 274
Wachovia Corp. 227,500 12,635
Waddell & Reed Financial, Inc. Class A 16,000 388
Washington Mutual, Inc. (N) 50,985 2,140
Wells Fargo & Co. 408,485 14,661
XL Capital, Ltd. Class A 4,750 370
------------
371,511
------------
Health Care - 12.2%
Abbott Laboratories 227,270 12,868
Alcon, Inc. 15,800 2,132
Allergan, Inc. 32,690 3,962
AmerisourceBergen Corp. Class A 3,500 175
Amylin Pharmaceuticals, Inc. (AE) 50,053 2,069
Baxter International, Inc. 147,500 8,353
</Table>
Equity I Fund 5
RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
BioMarin Pharmaceuticals, Inc. (AE)(N) 118,800 1,920
Boston Scientific Corp. (AE) 116,450 1,798
Bristol-Myers Squibb Co. 193,100 5,573
Cardinal Health, Inc. 32,500 2,273
Celgene Corp. (AE)(N) 75,400 4,611
CVS Corp. (N) 527,880 19,130
Eli Lilly & Co. 75,008 4,435
Genentech, Inc. (AE) 175,181 14,013
Genzyme Corp. (AE) 38,688 2,527
Gilead Sciences, Inc. (AE) 150,050 12,262
Hospira, Inc. (AE) 88,850 3,603
Human Genome Sciences, Inc. (AE)(N) 234,500 2,526
Intuitive Surgical, Inc. (AE)(N) 32,020 4,152
Johnson & Johnson 168,960 10,851
Medco Health Solutions, Inc. (AE) 27,000 2,107
Merck & Co., Inc. 257,910 13,267
Novartis AG - ADR 165,350 9,605
Omnicare, Inc. (N) 102,000 3,383
Pfizer, Inc. 214,900 5,686
Schering-Plough Corp. 77,853 2,470
Shire PLC - ADR (N) 68,900 4,815
St. Jude Medical, Inc. (AE) 47,540 2,034
Stryker Corp. 96,200 6,247
Tenet Healthcare Corp. (AE)(N) 67,200 499
Thermo Fisher Scientific, Inc. (AE) 318,020 16,556
UnitedHealth Group, Inc. 309,715 16,433
Vertex Pharmaceuticals, Inc. (AE)(N) 135,600 4,168
WellPoint, Inc. (AE) 40,050 3,163
Wyeth 158,860 8,817
------------
218,483
------------
Integrated Oils - 4.2%
BP PLC - ADR 5,400 364
Chevron Corp. 125,151 9,736
ConocoPhillips 110,720 7,678
Exxon Mobil Corp. 258,420 20,513
Hess Corp. 340,990 19,351
Marathon Oil Corp. 12,100 1,229
Occidental Petroleum Corp. 249,950 12,672
Total SA - ADR 51,620 3,804
------------
75,347
------------
Materials and Processing - 5.0%
Air Products & Chemicals, Inc. 3,743 286
Allegheny Technologies, Inc. 21,400 2,345
Arcelor Mittal Class A 8,800 470
Archer-Daniels-Midland Co. 110,249 4,267
Ashland, Inc. 8,500 510
Cameco Corp. 190,250 8,869
Carpenter Technology Corp. 10,300 1,250
Crown Holdings, Inc. (AE) 9,700 234
Cytec Industries, Inc. 67,800 3,722
Dow Chemical Co. (The) 41,900 1,869
EI Du Pont de Nemours & Co. 158,550 7,796
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Freeport-McMoRan Copper & Gold, Inc. Class B 26,424 1,775
Hercules, Inc. (AE) 15,500 292
Imperial Chemical Industries PLC - ADR (N) 86,700 3,682
International Paper Co. 9,000 340
Lennar Corp. Class B (N) 6,400 256
Louisiana-Pacific Corp. 2,850 56
Lubrizol Corp. 12,050 722
Masco Corp. 133,870 3,643
Monsanto Co. 180,214 10,631
Potash Corp. of Saskatchewan 15,700 2,818
PPG Industries, Inc. 47,630 3,505
Praxair, Inc. 99,488 6,422
Rio Tinto PLC - ADR (N) 34,600 8,442
Rohm & Haas Co. 72,200 3,695
Sherwin-Williams Co. (The) 9,100 580
Smurfit-Stone Container Corp. (AE) 39,000 470
Sonoco Products Co. 6,300 269
St. Joe Co. (The) (N) 30,940 1,752
Syngenta AG - ADR 87,803 3,486
Temple-Inland, Inc. 100,350 5,945
------------
90,399
------------
Miscellaneous - 3.1%
Eaton Corp. 40,200 3,586
General Electric Co. 873,740 32,206
Honeywell International, Inc. 70,100 3,798
SPX Corp. (N) 8,950 634
Textron, Inc. 106,000 10,777
Tyco International, Ltd. 125,300 4,089
------------
55,090
------------
Other Energy - 4.9%
Apache Corp. 42,500 3,081
Arch Coal, Inc. 126,050 4,547
Baker Hughes, Inc. 105,100 8,449
Cameron International Corp. (AE) 14,003 904
CARBO Ceramics, Inc. (N) 15,000 652
Consol Energy, Inc. 202,700 8,487
Devon Energy Corp. 143,310 10,443
Dynegy, Inc. Class A (AE) 847 8
Halliburton Co. 141,900 4,508
Massey Energy Co. (N) 211,700 5,701
National-Oilwell Varco, Inc. (AE) 24,800 2,104
Noble Energy, Inc. 5,900 347
NRG Energy, Inc. (AE)(N) 15,330 1,210
Reliant Energy, Inc. (AE) 463,000 10,311
Schlumberger, Ltd. 238,129 17,581
</Table>
6 Equity I Fund
RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Valero Energy Corp. 11,300 794
XTO Energy, Inc. 149,750 8,127
------------
87,254
------------
Producer Durables - 5.6%
AGCO Corp. (AE) 123,450 5,152
Amazon.Com, Inc. (AE) 15,200 932
Applied Materials, Inc. 208,300 4,004
Boeing Co. 148,002 13,764
Bombardier, Inc. (AE) 534,050 2,199
Caterpillar, Inc. 60,500 4,393
Centex Corp. 79,550 3,561
Crown Castle International Corp. (AE) 87,250 2,996
Deere & Co. 118,270 12,939
Emerson Electric Co. 167,500 7,871
Goodrich Corp. 33,950 1,930
Ingersoll-Rand Co., Ltd. Class A 8,800 393
KB Home (N) 10,400 459
KLA-Tencor Corp. 68,710 3,817
Lexmark International, Inc. Class A (AE)(N) 8,000 436
Lockheed Martin Corp. 159,845 15,367
Nokia OYJ - ADR 79,000 1,995
Northrop Grumman Corp. 89,970 6,625
Pitney Bowes, Inc. 3,500 168
Pulte Homes, Inc. 105,950 2,850
Roper Industries, Inc. 43,400 2,433
United Technologies Corp. 102,060 6,851
------------
101,135
------------
Technology - 11.5%
Adobe Systems, Inc. (AE) 52,000 2,161
Akamai Technologies, Inc. (AE) 46,010 2,028
Apple, Inc. (AE) 224,030 22,358
Arrow Electronics, Inc. (AE) 16,500 652
AU Optronics Corp. - ADR 265,746 4,228
Avnet, Inc. (AE) 20,400 834
BearingPoint, Inc. (AE) 269,100 1,975
Broadcom Corp. Class A (AE) 106,510 3,467
Celestica, Inc. (AE)(N) 179,450 1,219
Ciena Corp. (AE)(N) 79,000 2,304
Cisco Systems, Inc. (AE) 904,019 24,174
Cognizant Technology Solutions Corp. Class A
(AE) 24,700 2,208
Dell, Inc. (AE) 335,350 8,454
Electronic Data Systems Corp. 17,000 497
F5 Networks, Inc. (AE) 23,470 1,802
Flextronics International, Ltd. (AE) 20,450 228
General Dynamics Corp. 73,818 5,795
Hewlett-Packard Co. 690,727 29,107
Intel Corp. 632,449 13,598
International Business Machines Corp. 10,800 1,104
International Rectifier Corp. (AE) 54,950 1,939
JDS Uniphase Corp. (AE)(N) 152,962 2,521
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Maxim Integrated Products, Inc. 107,800 3,419
MEMC Electronic Materials, Inc. (AE) 12,100 664
Microsoft Corp. 365,300 10,937
Motorola, Inc. 330,550 5,729
Oracle Corp. (AE) 256,240 4,817
PerkinElmer, Inc. 130,300 3,153
Qualcomm, Inc. 484,000 21,199
Raytheon Co. 10,100 541
Research In Motion, Ltd. (AE) 39,500 5,197
Salesforce.com, Inc. (AE)(N) 58,150 2,442
SanDisk Corp. (AE) 33,700 1,464
Sanmina-SCI Corp. (AE) 132,400 457
Seagate Technology, Inc. (AE) 9,400 --
Solectron Corp. (AE)(N) 97,600 327
Sun Microsystems, Inc. (AE) 515,630 2,692
Sunpower Corp. Class A (AE)(N) 34,900 2,118
Texas Instruments, Inc. 236,870 8,141
------------
205,950
------------
Utilities - 4.1%
Allegheny Energy, Inc. (AE) 7,900 422
Ameren Corp. 10,800 568
America Movil SAB de CV
Series L 53,814 2,827
American Electric Power Co., Inc. 26,200 1,316
AT&T, Inc. 455,137 17,623
China Mobile, Ltd. - ADR 63,578 2,862
Comcast Corp. Class A (AE)(N) 437,727 11,670
Constellation Energy Group, Inc. 11,800 1,051
Dominion Resources, Inc. 119,890 10,934
Embarq Corp. 55,698 3,344
Entergy Corp. 3,600 407
FPL Group, Inc. (N) 51,420 3,310
NII Holdings, Inc. (AE) 59,050 4,532
Progress Energy, Inc. - CVO 3,200 1
Public Service Enterprise Group, Inc. 15,200 1,314
Sprint Nextel Corp. 285,860 5,726
Time Warner Telecom, Inc. Class A (AE)(N) 73,250 1,502
Verizon Communications, Inc. 89,079 3,401
Wisconsin Energy Corp. 10,600 517
------------
73,327
------------
TOTAL COMMON STOCKS
(cost $1,409,389) 1,703,838
------------
</Table>
Equity I Fund 7
RUSSELL INVESTMENT COMPANY
EQUITY I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.5%
Russell Investment Company
Money Market Fund 75,065,285 75,065
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 6,000 5,964
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $81,029) 81,029
------------
OTHER SECURITIES - 6.6%
Russell Investment Company
Money Market Fund (X) 22,845,122 22,845
State Street Securities
Lending Quality Trust (X) 96,008,630 96,009
------------
TOTAL OTHER SECURITIES
(cost $118,854) 118,854
------------
TOTAL INVESTMENTS - 106.4%
(identified cost $1,609,272) 1,903,721
OTHER ASSETS AND LIABILITIES,
NET - (6.4%) (114,797)
------------
NET ASSETS - 100.0% 1,788,924
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/07 (16) 6,490 314
Russell 1000 Mini Index (CME)
expiration date 06/07 (40) 3,245 155
S&P 500 E-Mini Index (CME)
expiration date 06/07 (142) 10,568 491
S&P 500 Index (CME)
expiration date 06/07 (83) 30,884 1,220
S&P Midcap 400 E-Mini Index (CME)
expiration date 06/07 (318) 27,927 1,073
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts 3,253
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
8 Equity I Fund
RUSSELL INVESTMENT COMPANY
EQUITY I FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Auto and Transportation 3.3
Consumer Discretionary 13.5
Consumer Staples 7.1
Financial Services 20.8
Health Care 12.2
Integrated Oils 4.2
Materials and Processing 5.0
Miscellaneous 3.1
Other Energy 4.9
Producer Durables 5.6
Technology 11.5
Utilities 4.1
Short-Term Investments 4.5
Other Securities 6.6
---------------
Total Investments 106.4
Other Assets and Liabilities, Net (6.4)
---------------
100.0
===============
Futures Contracts 0.2
</Table>
See accompanying notes which are an integral part of the financial statements.
Equity I Fund 9
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,092.00 $ 1,019.19
Expenses Paid During
Period* $ 5.86 $ 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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,093.00 $ 1,020.18
Expenses Paid During
Period* $ 4.83 $ 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). 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 Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,093.60 $ 1,020.68
Expenses Paid During
Period* $ 4.31 $ 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). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
10 Equity II Fund
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 96.7%
Auto and Transportation - 3.6%
AAR Corp. (AE) 16,000 489
Accuride Corp. (AE) 2,390 35
Aftermarket Technology Corp. (AE) 4,700 130
Alaska Air Group, Inc. (AE) 10,200 302
American Commercial Lines, Inc. (AE) 13,910 410
Arctic Cat, Inc. 9,100 162
ArvinMeritor, Inc. 57,003 1,177
Atlas Air Worldwide Holdings, Inc. (AE) 1,100 63
Autoliv, Inc. 9,200 535
Bristow Group, Inc. (AE)(N) 18,375 691
Commercial Vehicle Group, Inc. (AE) 3,200 63
Continental Airlines, Inc. Class A (AE)(N) 4,454 163
Cooper Tire & Rubber Co. 13,600 263
Dana Corp. (AE)(N) 98,600 99
Danaos Corp. (N) 7,700 222
DryShips, Inc. (N) 33,428 1,183
ExpressJet Holdings, Inc. Class A (AE)(N) 74,111 442
Freightcar America, Inc. (N) 1,932 96
Frozen Food Express Industries (N) 59,058 487
Grupo Aeroportuario del Centro Norte Sab de CV -
ADR (AE) 27,500 804
Grupo Aeroportuario del Sureste SAB de CV - ADR 20,600 993
Gulfmark Offshore, Inc. (AE)(N) 11,121 533
Hayes Lemmerz International, Inc. (AE)(N) 49,541 282
Horizon Lines, Inc. Class A 32,143 1,093
HUB Group, Inc. Class A (AE) 15,440 556
Kansas City Southern (AE)(N) 12,000 446
Kirby Corp. (AE) 27,144 1,026
Modine Manufacturing Co. (N) 7,500 173
Monaco Coach Corp. (N) 8,876 136
Navistar International Corp. (AE) 13,600 755
OMI Corp. (N) 27,730 806
PAM Transportation Services (AE) 4,800 92
Saia, Inc. (AE) 10,738 301
Skywest, Inc. 19,189 522
Standard Motor Products, Inc. 13,072 240
StealthGas, Inc. 51,084 812
Teekay Shipping Corp. (N) 13,500 805
Tidewater, Inc. (N) 14,900 942
TRW Automotive Holdings Corp. (AE) 30,600 1,134
US Xpress Enterprises, Inc. Class A (AE) 17,000 243
UTI Worldwide, Inc. 53,424 1,254
Vitran Corp., Inc. Class A (AE) 38,400 769
Wabtec Corp. 4,441 165
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
YRC Worldwide, Inc. (AE)(N) 17,500 696
------------
22,590
------------
Consumer Discretionary - 18.7%
ABM Industries, Inc. 38,131 1,073
Activision, Inc. (AE) 129,991 2,600
Advance Auto Parts, Inc. 8,300 342
Advisory Board Co. (The) (AE) 27,982 1,329
Aeropostale, Inc. (AE) 53,474 2,200
AFC Enterprises (AE)(N) 12,600 240
Alberto-Culver Co. Class B 37,100 901
Alloy, Inc. (AE) 5,710 71
American Eagle Outfitters, Inc. 23,750 700
American Greetings Corp. Class A 14,417 367
American Woodmark Corp. 12,580 434
aQuantive, Inc. (AE) 51,361 1,572
Asbury Automotive Group, Inc. 27,707 797
AutoNation, Inc. (AE) 29,900 611
Bare Escentuals, Inc. (AE) 41,986 1,697
Barnes & Noble, Inc. 14,700 581
Big Lots, Inc. (AE) 62,307 2,006
BigBand Networks, Inc. (AE) 34,200 700
Black & Decker Corp. 3,500 317
Blockbuster, Inc. Class A (AE) 80,333 498
Blyth, Inc. (N) 2,787 73
Bob Evans Farms, Inc. 12,100 444
Books-A-Million, Inc. Class A 4,293 72
Bowne & Co., Inc. 10,500 175
Bright Horizons Family Solutions, Inc. (AE)(N) 15,200 587
Brown Shoe Co., Inc. 24,522 662
Buckle, Inc. (The) 8,550 305
Buffalo Wild Wings, Inc. (AE)(N) 12,800 836
CBRL Group, Inc. (N) 11,184 499
CCA Industries, Inc. (AE)(N) 28,838 285
CEC Entertainment, Inc. (AE) 10,100 421
Central Parking Corp. (N) 7,578 170
Cenveo, Inc. (AE) 6,900 177
Charlotte Russe Holding, Inc. (AE) 997 27
Chemed Corp. 16,626 836
Children's Place Retail Stores, Inc. (The) (AE) 11,639 615
Chipotle Mexican Grill, Inc. Class A (AE)(N) 18,900 1,233
Churchill Downs, Inc. 1,900 89
Citadel Broadcasting Corp. (N) 10,200 94
CMGI, Inc. (AE)(N) 181,649 381
Coinstar, Inc. (AE)(N) 11,673 363
Columbia Sportswear Co. (N) 3,200 200
Convergys Corp. (AE) 95,800 2,420
</Table>
Equity II Fund 11
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Core-Mark Holding Co., Inc. (AE)(N) 2,300 81
Corinthian Colleges, Inc. (AE)(N) 31,400 434
CROCS, Inc. (AE)(N) 49,500 2,766
CSS Industries, Inc. (N) 1,100 44
Denny's Corp. (AE)(N) 47,145 221
DeVry, Inc. (N) 37,400 1,234
Dick's Sporting Goods, Inc. (AE)(N) 23,100 1,296
Dillard's, Inc. Class A 30,500 1,056
Dolby Laboratories, Inc. Class A (AE) 78,800 2,791
Dollar Tree Stores, Inc. (AE) 20,200 794
DreamWorks Animation SKG, Inc. Class A (AE)(N) 26,100 764
Dress Barn, Inc. (AE)(N) 13,741 274
DSW, Inc. Class A (AE)(N) 10,295 399
Earthlink, Inc. (AE) 38,900 298
Elizabeth Arden, Inc. (AE)(N) 15,700 353
Ethan Allen Interiors, Inc. (N) 20,789 734
Ezcorp, Inc. Class A (AE) 24,378 369
Federated Department Stores, Inc. (N) 13,513 593
Focus Media Holding, Ltd. - ADR (AE)(N) 9,100 337
Foot Locker, Inc. 80,563 1,917
Forrester Research, Inc. (AE) 7,990 206
FTD Group, Inc. 26,400 471
GameStop Corp. Class A (AE) 60,570 2,009
Great Wolf Resorts, Inc. (AE)(N) 10,800 137
Greenfield Online, Inc. (AE) 5,696 93
Group 1 Automotive, Inc. (N) 1,000 41
Guess?, Inc. 17,600 693
Gymboree Corp. (AE)(N) 12,231 467
Hanesbrands, Inc. (AE) 21,700 577
Hasbro, Inc. (N) 42,600 1,347
Helen of Troy, Ltd. (AE)(N) 42,100 956
Home Inns & Hotels Management, Inc. - ADR (AE) 10,900 374
Home Solutions of America, Inc. (AE)(N) 108,000 512
Hooker Furniture Corp. (N) 4,052 89
ICF International, Inc. (AE) 7,400 159
Iconix Brand Group, Inc. (AE)(N) 103,069 2,075
IKON Office Solutions, Inc. 8,800 132
International Speedway Corp. Class A 5,200 257
ITT Educational Services, Inc. (AE) 6,600 642
J Crew Group, Inc. (AE)(N) 41,300 1,672
Jakks Pacific, Inc. (AE) 18,100 435
Jarden Corp. (AE)(N) 19,400 817
Jo-Ann Stores, Inc. (AE)(N) 8,704 261
Jones Apparel Group, Inc. (N) 56,016 1,870
JOS A Bank Clothiers, Inc. (AE)(N) 21,400 827
Journal Communications, Inc. Class A (AE) 5,135 70
Journal Register Co. (N) 31,600 185
K2, Inc. (AE)(N) 3,622 55
Kellwood Co. (N) 800 23
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kenneth Cole Productions, Inc. Class A 3,400 86
Knology, Inc. (AE)(N) 4,414 81
Korn/Ferry International (AE)(N) 32,400 764
Leapfrog Enterprises, Inc. Class A (AE)(N) 26,400 289
Lee Enterprises, Inc. (N) 63,075 1,651
Life Time Fitness, Inc. (AE)(N) 31,800 1,634
Lin TV Corp. Class A (AE) 2,714 43
Lithia Motors, Inc. Class A (N) 9,100 245
Liz Claiborne, Inc. (N) 47,600 2,129
LKQ Corp. (AE) 57,807 1,305
Lodgenet Entertainment Corp. (AE)(N) 4,166 142
Maidenform Brands, Inc. (AE) 7,300 149
McClatchy Co. Class A (N) 3,800 110
McCormick & Schmick's Seafood Restaurants, Inc.
(AE) 14,800 396
Men's Wearhouse, Inc. (The) 16,600 718
Meredith Corp. 18,800 1,089
MIVA, Inc. (AE)(N) 11,538 50
Morton's Restaurant Group, Inc. (AE) 3,500 59
Mothers Work, Inc. (AE)(N) 2,779 97
Movado Group, Inc. 4,300 142
Movie Gallery, Inc. (AE)(N) 45,663 167
MPS Group, Inc. (AE) 66,402 909
MSC Industrial Direct Co., Inc. Class A 35,357 1,723
Nu Skin Enterprises, Inc. Class A 13,300 230
O'Charleys, Inc. (AE) 32,992 696
O'Reilly Automotive, Inc. (AE) 47,373 1,686
OfficeMax, Inc. 20,700 1,019
On Assignment, Inc. (AE) 40,700 455
Orient-Express Hotels, Ltd. Class A 23,596 1,242
Oxford Industries, Inc. 5,500 255
Pacific Sunwear of California, Inc. (AE) 36,422 762
Panera Bread Co. Class A (AE) 21,561 1,201
Payless Shoesource, Inc. (AE)(N) 17,151 547
PC Connection, Inc. (AE)(N) 5,080 65
Perry Ellis International, Inc. (AE)(N) 27,402 910
Phillips-Van Heusen Corp. 35,599 1,990
Pier 1 Imports, Inc. (N) 41,000 310
PRG-Schultz International, Inc. (AE)(N) 15,711 207
Priceline.com, Inc. (AE)(N) 33,400 1,858
Quiksilver, Inc. (AE)(N) 50,800 676
RadioShack Corp. (N) 6,500 189
Rare Hospitality International, Inc. (AE) 40,522 1,180
Rent-A-Center, Inc. Class A (AE)(N) 35,300 983
</Table>
12 Equity II Fund
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Republic Services, Inc. Class A 76,157 2,127
Resources Connection, Inc. (AE) 34,212 1,032
Retail Ventures, Inc. (AE)(N) 7,099 145
Rush Enterprises, Inc. Class A (AE)(N) 6,800 141
Scholastic Corp. (AE) 31,200 963
Service Corp. International 65,500 796
Shanda Interactive Entertainment, Ltd. - ADR
(AE) 23,800 596
Shoe Carnival, Inc. (AE) 7,837 246
Sinclair Broadcast Group, Inc. Class A (N) 27,743 453
Skechers USA, Inc. Class A (AE) 4,000 126
Sonic Automotive, Inc. Class A (N) 18,300 523
Sonic Corp. (AE) 69,264 1,554
Spherion Corp. (AE) 15,000 128
Stage Stores, Inc. 24,559 541
Stanley Furniture Co., Inc. (N) 3,683 80
Steak N Shake Co. (The) (AE)(N) 1,900 31
Stein Mart, Inc. 2,800 46
Sturm Ruger & Co., Inc. (AE)(N) 33,824 437
Take-Two Interactive Software, Inc. (AE)(N) 26,900 516
TeleTech Holdings, Inc. (AE) 16,000 604
Tempur-Pedic International, Inc. (N) 12,500 325
Timberland Co. Class A (AE) 2,500 64
Tractor Supply Co. (AE) 19,345 1,001
Triarc Cos., Inc. Class A 2,466 40
Tupperware Corp. 7,715 217
Unifirst Corp. 2,900 122
United Online, Inc. (N) 40,600 586
Urban Outfitters, Inc. (AE)(N) 46,800 1,206
Viad Corp. 12,800 523
VistaPrint, Ltd. (AE)(N) 33,100 1,237
Warnaco Group, Inc. (The) (AE) 15,600 441
Warner Music Group Corp. (N) 34,400 592
Washington Post Co. (The) Class B 1,050 781
West Marine, Inc. (AE)(N) 10,570 155
WMS Industries, Inc. (AE)(N) 17,500 698
Wynn Resorts, Ltd. 16,158 1,651
Zumiez, Inc. (AE)(N) 25,600 1,010
------------
116,380
------------
Consumer Staples - 2.1%
Alliance One International, Inc. (AE) 186,970 1,834
Boston Beer Co., Inc. Class A (AE)(N) 4,600 148
Coca-Cola Bottling Co. Consolidated 8,320 459
Constellation Brands, Inc. Class A (AE)(N) 10,700 240
Del Monte Foods Co. 52,000 603
Imperial Sugar Co. (N) 14,500 432
JM Smucker Co. (The) 8,800 491
Loews Corp. - Carolina Group 18,600 1,424
McCormick & Co., Inc. 26,300 976
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Molson Coors Brewing Co. Class B (N) 19,800 1,867
Nash Finch Co. (N) 9,445 368
NBTY, Inc. (AE) 9,775 483
PepsiAmericas, Inc. 16,300 394
Premium Standard Farms, Inc. (N) 19,218 417
Reddy Ice Holdings, Inc. (N) 10,419 305
Ruddick Corp. (N) 4,800 144
Schweitzer-Mauduit International, Inc. 6,133 168
SUPERVALU, Inc. 42,900 1,969
Universal Corp. (N) 9,314 584
------------
13,306
------------
Financial Services - 16.2%
Advent Software, Inc. (AE) 52,400 1,759
Affiliated Managers Group, Inc. (AE) 23,366 2,749
AG Edwards, Inc. 7,934 575
Alliance Data Systems Corp. (AE) 35,098 2,234
AMB Property Corp. (o) 17,900 1,090
Amerisafe, Inc. (AE) 14,319 288
Annaly Capital Management, Inc. (o) 28,600 455
Anthracite Capital, Inc. (o) 5,807 67
Apartment Investment & Management Co. Class A
(o) 24,700 1,366
Apollo Investment Corp. 43,200 949
Arbor Realty Trust, Inc. (o) 5,200 160
Arch Capital Group, Ltd. (AE) 7,700 561
Ares Capital Corp. 41,000 736
Argonaut Group, Inc. (AE) 9,175 308
Ashford Hospitality Trust, Inc. (o) 121,301 1,456
Aspen Insurance Holdings, Ltd. 29,401 779
Asset Acceptance Capital Corp. (AE) 2,500 46
Assurant, Inc. 32,266 1,856
Axis Capital Holdings, Ltd. 21,672 804
Bancfirst Corp. 2,500 107
BankUnited Financial Corp. Class A (N) 24,391 528
Banner Corp. 3,983 149
Bear Stearns Cos., Inc. (The) 5,250 817
BioMed Realty Trust, Inc. (o) 3,200 92
BOK Financial Corp. (N) 4,720 242
Broadridge Financial Solutions, Inc. (AE) 19,600 393
Calamos Asset Management, Inc. Class A 4,100 96
Camden Property Trust (o) 12,300 857
CapitalSource, Inc. (o) 3,200 83
Cash America International, Inc. (N) 13,594 587
CBL & Associates Properties, Inc. (o) 7,900 359
Central Pacific Financial Corp. (N) 7,162 246
</Table>
Equity II Fund 13
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CIT Group, Inc. 10,200 608
City Bank (N) 4,975 155
City Holding Co. (N) 2,201 84
CNA Surety Corp. (AE) 34,270 707
Cohen & Steers, Inc. (N) 1,800 92
Colonial BancGroup, Inc. (The) (N) 59,225 1,425
Colonial Properties Trust (o) 2,600 129
Commerce Bancshares, Inc. (N) 6,720 318
Commerce Group, Inc. (N) 15,000 489
Community Bancorp (AE)(N) 13,597 418
Corus Bankshares, Inc. (N) 44,040 740
Deerfield Triarc Capital Corp. (o) 57,600 933
Deluxe Corp. 37,621 1,424
DiamondRock Hospitality Co. (o) 36,100 660
Downey Financial Corp. (N) 7,902 529
EastGroup Properties, Inc. (o)(N) 5,300 266
Education Realty Trust, Inc. (o)(N) 7,900 113
EMC Insurance Group, Inc. (N) 1,600 40
Entertainment Properties Trust (o) 5,449 329
Essex Property Trust, Inc. (o) 6,000 773
Euronet Worldwide, Inc. (AE) 50,830 1,416
Extra Space Storage, Inc. (o)(N) 12,100 226
Factset Research Systems, Inc. 9,600 591
FBL Financial Group, Inc. Class A 1,800 70
FelCor Lodging Trust, Inc. (o) 40,800 1,042
Feldman Mall Properties, Inc. (o) 55,300 638
First American Corp. 55,819 2,875
First Cash Financial Services, Inc. (AE) 19,900 457
First Industrial Realty Trust, Inc. (o) 9,400 412
First Mutual Bancshares, Inc. 31,310 692
First Place Financial Corp. 2,280 46
First Regional Bancorp (AE)(N) 21,813 545
FirstFed Financial Corp. (AE)(N) 19,598 1,205
Fulton Financial Corp. (N) 22,284 328
GFI Group, Inc. (AE)(N) 29,300 2,029
Global Payments, Inc. 25,030 951
Gramercy Capital Corp. (o)(N) 5,049 164
Hanmi Financial Corp. (N) 45,450 746
Hanover Insurance Group, Inc. (The) 500 23
HCC Insurance Holdings, Inc. 32,300 990
Health Care Property Investors, Inc. (o) 12,800 453
Hersha Hospitality Trust (o)(N) 9,600 114
Highland Hospitality Corp. (o)(N) 44,500 848
Hospitality Properties Trust (o) 45,600 2,076
HRPT Properties Trust (o)(N) 85,300 1,044
IBERIABANK Corp. (N) 2,723 143
Integra Bank Corp. 2,900 66
International Securities Exchange Holdings, Inc.
Class A (N) 28,900 1,927
Intervest Bancshares Corp. Class A (AE)(N) 7,234 184
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Investment Technology Group, Inc. (AE) 21,470 812
Investors Real Estate Trust (o) 7,900 83
IPC Holdings, Ltd. (N) 43,491 1,304
iStar Financial, Inc. (o) 38,300 1,835
ITLA Capital Corp. (N) 500 26
JER Investors Trust, Inc. (o) 22,800 402
John H Harland Co. 2,679 141
Jones Lang LaSalle, Inc. 2,869 308
KKR Financial Corp. (o) 28,900 772
Knight Capital Group, Inc. Class A (AE)(N) 42,127 683
Kohlberg Capital Corp. (N) 42,000 754
LaSalle Hotel Properties (o) 13,900 645
Liberty Property Trust (o) 22,400 1,084
LTC Properties, Inc. (o) 9,145 229
Luminent Mortgage Capital, Inc. (o)(N) 25,200 208
Macatawa Bank Corp. (N) 3,500 57
Markel Corp. (AE) 800 367
MCG Capital Corp. 27,300 481
Mercantile Bank Corp. 2,310 62
Municipal Mortgage & Equity LLC (N) 1,060 29
Nara Bancorp, Inc. 11,475 190
National Retail Properties, Inc. (o)(N) 68,722 1,646
Nationwide Financial Services, Inc. (N) 13,800 788
Navigators Group, Inc. (AE) 5,821 297
Nelnet, Inc.
Class A (N) 7,800 210
Newcastle Investment Corp. (o)(N) 36,129 1,055
NorthStar Realty Finance Corp. (o)(N) 110,244 1,632
Ocwen Financial Corp. (AE)(N) 17,448 249
Odyssey Re Holdings Corp. (N) 15,300 641
Oriental Financial Group 6,416 74
Pacific Capital Bancorp (N) 10,064 271
Pennsylvania Real Estate Investment Trust (o) 15,200 706
Philadelphia Consolidated Holding Co. (AE) 11,500 499
Pico Holdings, Inc. (AE)(N) 4,700 210
PMI Group, Inc. (The) 13,909 674
Potlatch Corp. (o)(N) 11,263 489
Preferred Bank (N) 6,450 236
Protective Life Corp. 20,600 966
PS Business Parks, Inc. (o)(N) 11,983 826
Radian Group, Inc. 10,500 610
RAIT Financial Trust (o)(N) 42,600 1,199
Raymond James Financial, Inc. 73,550 2,257
Realty Income Corp. (o) 11,630 325
</Table>
14 Equity II Fund
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Redwood Trust, Inc. (o) 7,232 363
Reinsurance Group of America, Inc. (N) 25,500 1,589
RenaissanceRe Holdings, Ltd. (N) 15,000 812
Ryder System, Inc. (N) 30,800 1,621
S1 Corp. (AE) 42,200 274
Safety Insurance Group, Inc. (N) 17,805 713
SeaBright Insurance Holdings, Inc. (AE) 11,478 213
SEI Investments Co. 13,700 836
Senior Housing Properties Trust (o) 20,500 468
Southwest Bancorp, Inc. (N) 24,061 590
Sovran Self Storage, Inc. (o) 11,600 641
Stancorp Financial Group, Inc. 25,400 1,209
Sterling Bancshares, Inc. (N) 26,250 300
Sterling Financial Corp. (N) 4,500 75
Sunstone Hotel Investors, Inc. (o) 28,298 807
Susquehanna Bancshares, Inc. (N) 9,900 221
SWS Group, Inc. (N) 19,276 501
Taylor Capital Group, Inc. (N) 6,133 182
Thornburg Mortgage, Inc. (o) 8,500 236
TierOne Corp. 9,034 219
Transatlantic Holdings, Inc. 1,600 111
Triad Guaranty, Inc. (AE)(N) 11,599 513
U-Store-It Trust (o)(N) 36,000 663
United America Indemnity, Ltd. Class A (AE) 5,500 137
United Fire & Casualty Co. (N) 5,800 213
Unitrin, Inc. (N) 7,400 349
Universal Health Realty Income Trust (o) 700 25
Ventas, Inc. (o) 25,400 1,071
Webster Financial Corp. 6,900 307
Whitney Holding Corp. 14,950 460
Wilmington Trust Corp. 9,900 401
WR Berkley Corp. 19,000 617
WSFS Financial Corp. 100 6
Zenith National Insurance Corp. (N) 27,204 1,258
Zions Bancorporation 9,000 736
------------
100,396
------------
Health Care - 10.6%
Accelrys, Inc. (AE) 53,600 349
Advanced Medical Optics, Inc. (AE)(N) 14,700 594
Albany Molecular Research, Inc. (AE) 6,002 58
Allscripts Healthcare Solutions, Inc. (AE) 49,108 1,299
American Medical Systems Holdings, Inc. (AE) 104,648 1,855
American Oriental Bioengineering, Inc. (AE) 21,800 217
AMERIGROUP Corp. (AE) 26,135 735
Amsurg Corp. Class A (AE) 4,379 101
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Analogic Corp. 3,000 184
Applera Corp. - Celera Group (AE) 99,200 1,389
Apria Healthcare Group, Inc. (AE) 18,409 584
Arthrocare Corp. (AE) 50,669 2,091
Beckman Coulter, Inc. 8,800 553
Bio-Rad Laboratories, Inc. Class A (AE) 7,100 502
Bradley Pharmaceuticals, Inc. (AE)(N) 5,960 117
Cerner Corp. (AE)(N) 53,900 2,870
Charles River Laboratories International, Inc.
(AE)(N) 19,000 900
Community Health Systems, Inc. (AE) 45,626 1,679
Conmed Corp. (AE) 16,658 505
Cooper Cos., Inc. (The) (N) 48,225 2,464
Corvel Corp. (AE) 6,745 183
Covance, Inc. (AE) 14,200 859
Cutera, Inc. (AE)(N) 17,700 518
DaVita, Inc. (AE) 31,667 1,729
Discovery Laboratories, Inc. (AE)(N) 29,500 88
Emergency Medical Services Corp. Class A (AE) 19,363 648
ev3, Inc. (AE)(N) 24,100 430
Greatbatch, Inc. (AE)(N) 1,734 50
Haemonetics Corp. (AE) 22,437 1,073
Health Net, Inc. (AE) 13,000 703
Healthcare Services Group (N) 58,400 1,635
HealthExtras, Inc. (AE)(N) 96,400 2,984
Healthspring, Inc. (AE) 66,414 1,562
Healthways, Inc. (AE)(N) 32,978 1,399
Henry Schein, Inc. (AE) 10,600 553
Hologic, Inc. (AE)(N) 76,552 4,406
Icon PLC - ADR (AE) 7,300 343
Illumina, Inc. (AE) 33,117 1,081
Immucor, Inc. (AE) 5,300 173
Immunomedics, Inc. (AE)(N) 39,777 209
IMS Health, Inc. 43,771 1,284
Invacare Corp. 14,400 268
Inverness Medical Innovations, Inc. (AE)(N) 20,500 821
Kindred Healthcare, Inc. (AE) 6,900 241
King Pharmaceuticals, Inc. (AE)(N) 64,000 1,309
Kyphon, Inc. (AE) 20,642 962
LHC Group, Inc. (AE)(N) 43,109 1,104
LifePoint Hospitals, Inc. (AE) 7,600 278
Medcath Corp. (AE)(N) 23,041 685
Medical Action Industries, Inc. (AE) 9,700 221
Medtox Scientific, Inc. (AE) 3,502 84
Mentor Corp. (N) 9,946 387
Molina Healthcare, Inc. (AE)(N) 8,400 254
</Table>
Equity II Fund 15
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Myriad Genetics, Inc. (AE)(N) 18,400 673
Nabi Biopharmaceuticals (AE)(N) 23,700 123
Neurocrine Biosciences, Inc. (AE)(N) 12,200 155
Noven Pharmaceuticals, Inc. (AE)(N) 8,621 202
NuVasive, Inc. (AE)(N) 27,400 706
Pharmaceutical Product Development, Inc. 24,726 892
Pharmacopeia Drug Discovery, Inc. (AE)(N) 26,100 153
PharmaNet Development Group, Inc. (AE)(N) 10,998 300
Phase Forward, Inc. (AE) 30,600 486
PolyMedica Corp. (N) 11,400 461
PSS World Medical, Inc. (AE)(N) 101,056 2,031
Psychiatric Solutions, Inc. (AE) 48,230 1,691
Quality Systems, Inc. (AE) 27,690 1,121
RehabCare Group, Inc. (AE) 3,800 62
Sciele Pharma, Inc. (AE)(N) 18,530 458
Sierra Health Services, Inc. (AE) 41,267 1,709
Stericycle, Inc. (AE)(N) 17,000 1,481
STERIS Corp. 30,500 780
Techne Corp. (AE) 28,375 1,673
Universal Health Services, Inc. Class B 19,100 1,160
Viropharma, Inc. (AE) 42,900 647
WellCare Health Plans, Inc. (AE)(N) 7,348 592
West Pharmaceutical Services, Inc. (N) 7,239 360
Zoll Medical Corp. (AE) 1,914 46
------------
65,532
------------
Materials and Processing - 10.6%
Acuity Brands, Inc. 9,901 585
Airgas, Inc. 46,315 2,063
Albemarle Corp. 36,400 1,545
AM Castle & Co. (N) 24,087 817
Apogee Enterprises, Inc. 7,400 178
Ashland, Inc. 3,100 186
Bluegreen Corp. (AE) 1,700 19
BlueLinx Holdings, Inc. (N) 5,000 57
Brookfield Homes Corp. (N) 5,300 180
Buckeye Technologies, Inc. (AE) 89,145 1,129
Cambrex Corp. 28,100 682
Carpenter Technology Corp. 15,954 1,936
Celanese Corp. Class A 65,500 2,173
Ceradyne, Inc. (AE) 6,700 394
CF Industries Holdings, Inc. 15,400 611
Chaparral Steel Co. 12,500 881
Chesapeake Corp. (N) 8,800 130
Chicago Bridge & Iron Co. NV 45,133 1,563
Cleveland-Cliffs, Inc. (N) 7,132 494
Comfort Systems USA, Inc. 28,700 358
Commercial Metals Co. 40,100 1,345
Constar International, Inc. (AE) 17,400 154
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Corn Products International, Inc. 16,000 637
Crown Holdings, Inc. (AE) 44,000 1,063
Cytec Industries, Inc. 20,853 1,145
Eastman Chemical Co. (N) 23,800 1,611
EMCOR Group, Inc. (AE) 24,990 1,567
Energy Conversion Devices, Inc. (AE) 37,268 1,320
Ennis, Inc. 40,700 995
FMC Corp. 15,300 1,177
Goodman Global, Inc. (AE) 8,800 164
GrafTech International, Ltd. (AE) 50,257 502
Granite Construction, Inc. 21,873 1,318
Greif, Inc. Class A (N) 12,400 689
Harsco Corp. 22,600 1,153
Haynes International, Inc. (AE) 4,100 320
Hercules, Inc. (AE) 73,000 1,375
Huntsman Corp. 24,600 482
Infrasource Services, Inc. (AE) 17,607 588
Innospec, Inc. (N) 8,364 449
Jacobs Engineering Group, Inc. (AE) 40,700 2,052
KBR, Inc. (AE) 14,100 291
Lamson & Sessions Co. (The) (AE)(N) 29,235 739
Landec Corp. (AE) 25,554 325
Layne Christensen Co. (AE) 13,400 507
Lennox International, Inc. 22,600 764
Lubrizol Corp. 10,200 611
Lydall, Inc. (AE) 7,376 107
Mercer International, Inc. (AE) 34,500 423
Myers Industries, Inc. 13,437 302
Neenah Paper, Inc. (N) 3,236 124
Northwest Pipe Co. (AE) 1,400 50
Novagold Resources, Inc. (AE) 41,069 583
Novelis, Inc. 17,270 770
Olin Corp. (N) 40,700 698
Olympic Steel, Inc. (N) 2,800 93
OM Group, Inc. (AE) 23,302 1,224
Perini Corp. (AE) 15,473 659
Pioneer Cos., Inc. Class W (AE)(N) 7,619 222
PolyOne Corp. (AE) 31,500 207
Quanex Corp. (N) 17,000 732
Quanta Services, Inc. (AE) 62,068 1,706
Resource Capital Corp. (o)(N) 6,700 109
Rock-Tenn Co. Class A 63,010 2,411
RPM International, Inc. 85,025 1,808
SAIC, Inc. (AE)(N) 55,800 1,021
Schnitzer Steel Industries, Inc. Class A 6,300 327
Sigma-Aldrich Corp. 19,100 804
Smurfit-Stone Container Corp. (AE) 68,100 821
Sonoco Products Co. 30,000 1,279
</Table>
16 Equity II Fund
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Spartech Corp. 38,968 1,093
Standard Register Co. (The) (N) 15,256 190
Superior Essex, Inc. (AE)(N) 14,400 514
Symyx Technologies, Inc. (AE) 12,400 143
Temple-Inland, Inc. 5,400 320
Terra Industries, Inc. (AE)(N) 66,700 1,177
Texas Industries, Inc. (N) 6,500 495
Timken Co. 31,513 1,039
Tredegar Corp. (N) 20,424 477
URS Corp. (AE) 17,200 752
USEC, Inc. (AE) 27,802 561
Valspar Corp. 15,900 430
Washington Group International, Inc. (AE) 40,272 2,695
Wausau Paper Corp. 6,800 92
------------
65,782
------------
Miscellaneous - 1.5%
Brunswick Corp. 36,900 1,209
Foster Wheeler, Ltd. (AE)(N) 36,750 2,530
GP Strategies Corp. (AE) 3,585 34
Johnson Controls, Inc. 7,800 798
McDermott International, Inc. (AE) 55,822 2,995
SPX Corp. (N) 4,200 298
Teleflex, Inc. 7,100 510
Wesco Financial Corp. 2,207 982
------------
9,356
------------
Other Energy - 5.5%
Alon USA Energy, Inc. 17,300 647
Atwood Oceanics, Inc. (AE) 8,100 509
Cameron International Corp. (AE) 22,231 1,435
Complete Production Services, Inc. (AE) 13,900 335
Comstock Resources, Inc. (AE) 23,354 662
Core Laboratories NV (AE)(N) 28,083 2,553
Diamond Offshore Drilling, Inc. 15,534 1,330
Dresser-Rand Group, Inc. (AE) 14,500 463
Dril-Quip, Inc. (AE) 18,643 941
Enbridge Energy Partners, LP Class A (N) 16,078 962
ENSCO International, Inc. (N) 16,400 925
Foundation Coal Holdings, Inc. (N) 21,500 847
Frontier Oil Corp. 17,800 629
Global Industries, Ltd. (AE) 38,400 797
Goodrich Petroleum Corp. (AE) 30,122 1,058
Grant Prideco, Inc. (AE) 38,972 2,009
Grey Wolf, Inc. (AE)(N) 47,669 341
Gulf Island Fabrication, Inc. 1,300 39
Hercules Offshore, Inc. (AE)(N) 25,700 808
Holly Corp. 21,700 1,380
Input/Output, Inc. (AE)(N) 48,000 672
Meridian Resource Corp. (AE) 42,306 110
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
National-Oilwell Varco, Inc. (AE) 12,309 1,044
Oceaneering International, Inc. (AE) 28,800 1,369
Ormat Technologies, Inc. (N) 14,100 514
Penn Virginia Corp. (N) 4,983 399
Pioneer Drilling Co. (AE)(N) 37,624 516
Range Resources Corp. (N) 13,900 508
SEACOR Holdings, Inc. (AE) 4,900 467
Superior Offshore International, Inc. (AE) 29,100 532
Talisman Energy, Inc. 43,557 828
TEPPCO Partners, LP (N) 19,737 899
Tesoro Corp. 25,400 3,078
Tetra Technologies, Inc. (AE) 23,976 635
Union Drilling, Inc. (AE)(N) 7,500 116
Unit Corp. (AE) 13,525 773
VeraSun Energy Corp. (AE) 47,710 951
Western Refining, Inc. (N) 10,400 412
Whiting Petroleum Corp. (AE)(N) 19,000 836
XTO Energy, Inc. 17,997 977
------------
34,306
------------
Producer Durables - 7.0%
AGCO Corp. (AE) 15,978 667
AO Smith Corp. (N) 4,900 187
Applied Industrial Technologies, Inc. 8,600 231
Arris Group, Inc. (AE)(N) 21,534 319
ASML Holding NV Class G (AE) 53,354 1,454
Asyst Technologies, Inc. (AE) 3,700 26
Audiovox Corp. Class A (AE) 2,572 37
Axcelis Technologies, Inc. (AE) 59,300 454
Baldor Electric Co. 35,800 1,410
Belden CDT, Inc. 8,667 484
C-COR, Inc. (AE) 87,976 1,084
Chart Industries, Inc. (AE) 2,400 45
Cognex Corp. (N) 8,000 172
Crane Co. (N) 15,400 655
Credence Systems Corp. (AE)(N) 178,348 662
Crown Castle International Corp. (AE) 16,500 567
CTS Corp. (N) 20,766 272
Diebold, Inc. 5,400 257
DR Horton, Inc. (N) 77,642 1,722
Entegris, Inc. (AE)(N) 105,631 1,238
ESCO Technologies, Inc. (AE) 29,144 1,328
FEI Co. (AE)(N) 23,200 863
Flowserve Corp. 8,400 512
Gardner Denver, Inc. (AE) 15,900 601
Garmin, Ltd. 25,460 1,482
Goodrich Corp. 20,428 1,161
</Table>
Equity II Fund 17
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Herman Miller, Inc. 12,200 420
Hubbell, Inc. Class B 15,500 801
Intevac, Inc. (AE) 24,000 583
Kennametal, Inc. 21,070 1,487
Kimball International, Inc. Class B 11,693 210
Knoll, Inc. 8,397 195
L-1 Identity Solutions, Inc. Class 1 (AE)(N) 107,200 2,060
Lam Research Corp. (AE) 29,003 1,560
Littelfuse, Inc. (AE) 1,338 54
LTX Corp. (AE)(N) 65,921 393
M/I Homes, Inc. (N) 700 21
MasTec, Inc. (AE)(N) 8,900 102
Mettler Toledo International, Inc. (AE) 14,897 1,454
Milacron, Inc. (AE)(N) 91,158 64
Mueller Water Products, Inc. Class A 66,354 951
NACCO Industries, Inc. Class A (N) 1,073 171
Orbital Sciences Corp. (AE)(N) 28,273 590
Pall Corp. (N) 19,800 831
Photon Dynamics, Inc. (AE) 18,053 217
Polycom, Inc. (AE) 48,645 1,620
Robbins & Myers, Inc. 17,312 665
SBA Communications Corp. Class A (AE) 48,600 1,430
Steelcase, Inc. Class A (N) 27,600 539
Symmetricom, Inc. (AE)(N) 7,694 63
Tecumseh Products Co. Class A (AE)(N) 27,200 276
Teledyne Technologies, Inc. (AE) 14,200 626
Tennant Co. 8,900 285
Teradyne, Inc. (AE) 18,700 326
Tessco Technologies, Inc. (AE) 2,952 84
Thomas & Betts Corp. (AE) 3,200 174
Toll Brothers, Inc. (AE)(N) 36,997 1,102
Ultra Clean Holdings (AE)(N) 42,600 624
Ultratech, Inc. (AE)(N) 39,500 547
Varian Semiconductor Equipment Associates, Inc.
(AE)(N) 39,700 2,634
Verigy, Ltd. (AE) 78,266 1,978
WW Grainger, Inc. 5,900 492
------------
43,519
------------
Technology - 17.0%
3Com Corp. (AE) 12,500 50
ActivIdentity Corp. (AE) 2,500 12
Acxiom Corp. 15,113 342
Agilysys, Inc. 10,000 210
Alliance Semiconductor Corp. (AE) 37,700 169
Amdocs, Ltd. (AE) 26,400 970
American Reprographics Co. (AE) 54,863 1,821
American Software, Inc. Class A 5,242 46
AMIS Holdings, Inc. (AE) 30,172 350
Amkor Technology, Inc. (AE) 53,286 746
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Amphenol Corp. Class A 92,952 3,264
Anixter International, Inc. (AE) 9,800 702
Ansoft Corp. (AE) 14,893 481
Ansys, Inc. (AE) 75,325 3,857
Applied Micro Circuits Corp. (AE)(N) 282,900 795
Ariba, Inc. (AE)(N) 52,700 465
ARM Holdings PLC - ADR 63,500 507
Arrow Electronics, Inc. (AE) 57,800 2,284
ASE Test, Ltd. (AE) 35,495 455
AsiaInfo Holdings, Inc. (AE)(N) 23,143 178
Aspen Technology, Inc. (AE) 40,300 547
Avanex Corp. (AE)(N) 80,800 142
Avaya, Inc. (AE) 5,500 71
Avnet, Inc. (AE) 33,900 1,387
AVX Corp. 10,400 173
BearingPoint, Inc. (AE) 67,200 493
Benchmark Electronics, Inc. (AE) 25,755 546
Blackbaud, Inc. (N) 15,716 347
Blackboard, Inc. (AE) 53,300 1,829
Brocade Communications Systems, Inc. (AE)(N) 264,258 2,582
Captaris, Inc. (AE) 36,911 223
Cbeyond, Inc. (AE)(N) 25,700 894
Ciena Corp. (AE) 26,200 764
Citrix Systems, Inc. (AE)(N) 21,700 707
Cognizant Technology Solutions Corp. Class A
(AE) 6,000 536
CommScope, Inc. (AE) 37,470 1,748
COMSYS IT Partners, Inc. (AE) 10,331 235
Comverse Technology, Inc. (AE)(N) 34,200 776
Cray, Inc. (AE)(N) 11,722 146
CSG Systems International, Inc. (AE)(N) 29,528 791
Cubic Corp. 14,800 298
Daktronics, Inc. (N) 26,400 601
DealerTrack Holdings, Inc. (AE) 83,300 2,749
Digimarc Corp. (AE) 7,407 72
Digital River, Inc. (AE)(N) 24,700 1,446
EMS Technologies, Inc. (AE) 7,393 139
EPIQ Systems, Inc. (AE) 2,796 66
Equinix, Inc. (AE)(N) 43,400 3,623
Excel Technology, Inc. (AE) 3,800 100
Extreme Networks (AE)(N) 77,801 318
Flir Systems, Inc. (AE)(N) 35,600 1,441
Foundry Networks, Inc. (AE) 30,000 454
Gartner, Inc. (AE)(N) 127,100 3,207
Gateway, Inc. (AE)(N) 193,700 424
Genesis Microchip, Inc. (AE)(N) 22,241 191
Gerber Scientific, Inc. (AE)(N) 6,100 61
</Table>
18 Equity II Fund
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ikanos Communications, Inc. (AE) 30,000 232
Ingram Micro, Inc. Class A (AE) 54,700 1,073
Integrated Device Technology, Inc. (AE) 48,400 725
Integrated Silicon Solutions, Inc. (AE)(N) 6,862 39
International Rectifier Corp. (AE)(N) 16,000 565
Interwoven, Inc. (AE) 80,459 1,229
Ixia (AE) 1,000 9
IXYS Corp. (AE) 4,500 41
JDS Uniphase Corp. (AE)(N) 45,950 757
Keynote Systems, Inc. (AE) 30,500 415
Komag, Inc. (AE)(N) 21,500 591
Leadis Technology, Inc. (AE)(N) 2,600 9
Lions Gate Entertainment Corp. (AE) 55,900 639
Magma Design Automation, Inc. (AE)(N) 16,212 223
Manhattan Associates, Inc. (AE) 16,662 482
McAfee, Inc. (AE) 10,000 325
Mentor Graphics Corp. (AE)(N) 88,083 1,425
Mercury Computer Systems, Inc. (AE)(N) 14,600 198
Merix Corp. (AE)(N) 15,172 113
Methode Electronics, Inc. 25,017 377
Microchip Technology, Inc. 53,925 2,175
Micros Systems, Inc. (AE) 34,227 1,876
MicroStrategy, Inc. Class A (AE)(N) 3,642 414
Ness Technologies, Inc. (AE) 10,000 133
Newport Corp. (AE)(N) 7,600 119
Novell, Inc. (AE) 92,400 675
Nuance Communications, Inc. (AE)(N) 124,300 1,915
Orckit Communications, Ltd. (AE)(N) 24,400 256
Parametric Technology Corp. (AE) 84,591 1,503
Pegasystems, Inc. (N) 5,502 52
Perot Systems Corp. Class A (AE) 19,446 348
PMC - Sierra, Inc. (AE)(N) 134,000 1,036
QLogic Corp. (AE) 43,100 771
Quantum Corp. (AE)(N) 157,800 434
Rackable Systems, Inc. (AE)(N) 22,800 268
RADVision, Ltd. (AE) 40,200 889
RADWARE, Ltd. (AE)(N) 15,900 206
RealNetworks, Inc. (AE)(N) 66,500 502
Riverbed Technology, Inc. (AE)(N) 19,300 616
Salesforce.com, Inc. (AE)(N) 15,700 659
Sanmina-SCI Corp. (AE) 11,200 39
Seachange International, Inc. (AE) 51,400 442
Seagate Technology (N) 49,085 1,087
Sigma Designs, Inc. (AE)(N) 49,000 1,148
Silicon Storage Technology, Inc. (AE) 157,373 648
Skyworks Solutions, Inc. (AE)(N) 152,700 1,052
Smith Micro Software, Inc. (AE)(N) 42,300 672
Solectron Corp. (AE) 159,400 534
SonicWALL, Inc. (AE) 47,500 388
Standard Microsystems Corp. (AE) 14,400 462
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sunpower Corp. Class A (AE)(N) 19,200 1,165
Sybase, Inc. (AE) 20,996 508
Sycamore Networks, Inc. (AE) 98,200 360
Syniverse Holdings, Inc. (AE)(N) 7,900 81
SYNNEX Corp. (AE) 14,800 289
Synopsys, Inc. (AE) 90,300 2,498
Tekelec (AE)(N) 80,500 1,154
Tellabs, Inc. (AE) 8,000 85
Tessera Technologies, Inc. (AE) 79,692 3,410
TIBCO Software, Inc. (AE) 123,000 1,122
Transaction Systems Architects, Inc. (AE) 31,200 990
Trident Microsystems, Inc. (AE) 9,500 202
TriQuint Semiconductor, Inc. (AE)(N) 135,200 699
Trizetto Group, Inc. (The) (AE)(N) 46,500 906
TTM Technologies, Inc. (AE)(N) 60,033 551
Tyler Technologies, Inc. (AE)(N) 13,989 167
Ultimate Software Group, Inc. (AE)(N) 61,200 1,689
Unisys Corp. (AE) 98,900 775
Utstarcom, Inc. (AE)(N) 64,700 462
Varian, Inc. (AE) 10,800 626
VeriFone Holdings, Inc. (AE)(N) 67,000 2,364
Verint Systems, Inc. (AE) 52,979 1,523
Vignette Corp. (AE)(N) 24,552 455
Vocus, Inc. (AE)(N) 58,100 1,307
Wavecom SA - ADR (AE)(N) 18,000 501
Westell Technologies, Inc. Class A (AE) 20,000 53
Western Digital Corp. (AE) 46,000 813
Zebra Technologies Corp. Class A (AE) 32,806 1,305
Zoran Corp. (AE) 38,300 761
------------
105,438
------------
Utilities - 3.9%
AGL Resources, Inc. 18,400 801
Allete, Inc. 6,600 319
Alliant Energy Corp. 45,200 1,980
Atmos Energy Corp. 39,410 1,250
Black Hills Corp. 12,862 512
Centerpoint Energy, Inc. (N) 114,700 2,160
Cincinnati Bell, Inc. (AE) 78,559 398
CMS Energy Corp. (N) 37,400 693
CT Communications, Inc. (N) 12,546 306
El Paso Electric Co. (AE) 6,221 164
Integrys Energy Group, Inc. (N) 8,700 488
Leap Wireless International, Inc. Class W (AE) 23,700 1,809
MDU Resources Group, Inc. 29,100 882
</Table>
Equity II Fund 19
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
NII Holdings, Inc. (AE) 20,033 1,537
Northeast Utilities 47,300 1,522
NTELOS Holdings Corp. 2,100 42
OGE Energy Corp. 19,500 750
Pepco Holdings, Inc. 50,200 1,482
Pinnacle West Capital Corp. 6,200 299
PNM Resources, Inc. 13,200 430
Puget Energy, Inc. 4,400 114
RCN Corp. (AE)(N) 6,004 162
Rural Cellular Corp. Class A (AE) 4,729 117
Sierra Pacific Resources (AE) 58,100 1,061
Southern Union Co. 24,000 731
Southwest Gas Corp. 8,305 315
Suburban Propane Partners, LP 5,700 279
TECO Energy, Inc. 61,400 1,102
UGI Corp. 56,000 1,588
USA Mobility, Inc. (N) 4,993 107
Westar Energy, Inc. (N) 20,376 555
------------
23,955
------------
TOTAL COMMON STOCKS
(cost $512,589) 600,560
------------
WARRANTS & RIGHTS - 0.0%
Financial Services - 0.0%
Washington Mutual, Inc.
2050 Warrants (AE) 87,100 29
------------
TOTAL WARRANTS & RIGHTS
(cost $13) 29
------------
SHORT-TERM INVESTMENTS - 4.2%
Russell Investment Company
Money Market Fund 24,907,001 24,907
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 1,400 1,392
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $26,299) 26,299
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 29.3%
Russell Investment Company
Money Market Fund (X) 35,021,088 35,021
State Street Securities Lending
Quality Trust (X) 147,179,197 147,179
------------
TOTAL OTHER SECURITIES
(cost $182,200) 182,200
------------
TOTAL INVESTMENTS - 130.2%
(identified cost $721,101) 809,088
OTHER ASSETS AND LIABILITIES,
NET - (30.2%) (187,430)
------------
NET ASSETS - 100.0% 621,658
============
</Table>
See accompanying notes which are an integral part of the financial statements.
20 Equity II Fund
RUSSELL INVESTMENT COMPANY
EQUITY II FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 06/07 (255) 20,882 90
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 90
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 3.6
Consumer Discretionary 18.7
Consumer Staples 2.1
Financial Services 16.2
Health Care 10.6
Materials and Processing 10.6
Miscellaneous 1.5
Other Energy 5.5
Producer Durables 7.0
Technology 17.0
Utilities 3.9
Warrants & Rights --*
Short-Term Investments 4.2
Other Securities 29.3
---------------
Total Investments 130.2
Other Assets and Liabilities, Net (30.2)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
Equity II Fund 21
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,076.70 $ 1,019.79
Expenses Paid During
Period* $ 5.20 $ 5.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.01%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,078.10 $ 1,021.03
Expenses Paid During
Period* $ 3.92 $ 3.81
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.76%
(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 Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,078.30 $ 1,021.27
Expenses Paid During
Period* $ 3.66 $ 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). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
22 Equity Q Fund
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 108.8%
Auto and Transportation - 3.3%
Alaska Air Group, Inc. (AE) 4,800 142
AMR Corp. (AE) 15,700 410
ArvinMeritor, Inc. 1,000 21
Burlington Northern Santa Fe
Corp. (U) 22,800 1,996
Continental Airlines, Inc. Class B (AE)(N) 42,300 1,546
CSX Corp. 265,267 11,452
FedEx Corp. (U) 32,000 3,374
Ford Motor Co. (AE) 200,600 1,613
General Motors Corp. 74,000 2,311
Goodyear Tire & Rubber Co. (The) (AE) 22,100 735
Harley-Davidson, Inc. 65,200 4,128
JB Hunt Transport Services, Inc. 9,900 268
Norfolk Southern Corp. 44,200 2,353
Overseas Shipholding Group, Inc. 29,301 2,074
Paccar, Inc. 233,050 19,572
TRW Automotive Holdings Corp. (AE) 9,600 356
UAL Corp. (AE) 8,600 287
Union Pacific Corp. (U) 48,500 5,541
US Airways Group, Inc. (AE) 4,900 181
YRC Worldwide, Inc. (AE) 1,700 68
------------
58,428
------------
Consumer Discretionary - 16.0%
Abercrombie & Fitch Co. Class A 6,800 555
ABM Industries, Inc. 3,000 84
Accenture, Ltd. Class A 98,700 3,859
Aeropostale, Inc. (AE) 23,900 984
Alberto-Culver Co. Class B 60,000 1,457
Allied Waste Industries, Inc. (AE) 88,900 1,189
American Eagle Outfitters, Inc. 211,250 6,226
American Greetings Corp. Class A 62,200 1,583
AnnTaylor Stores Corp. (AE) 38,100 1,466
AutoNation, Inc. (AE) 196,099 4,008
Avis Budget Group, Inc. (AE) 23,800 670
Avon Products, Inc. 61,900 2,464
Barnes & Noble, Inc. 15,300 605
Best Buy Co., Inc. (U) 30,700 1,432
Big Lots, Inc. (AE) 58,300 1,877
BJ's Wholesale Club, Inc. (AE) 8,400 290
Brinker International, Inc. 66,000 2,053
Burger King Holdings, Inc. 10,600 249
Carnival Corp. 8,400 411
CBS Corp. Class B 221,750 7,045
CEC Entertainment, Inc. (AE) 6,800 283
ChoicePoint, Inc. (AE) 5,200 197
Circuit City Stores, Inc. 27,300 476
Coach, Inc. (AE) 82,700 4,038
Convergys Corp. (AE) 24,200 611
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Darden Restaurants, Inc. 115,600 4,795
Dillard's, Inc. Class A 79,700 2,760
DIRECTV Group, Inc. (The) (AE)(U) 387,000 9,226
Dolby Laboratories, Inc. Class A (AE) 3,500 124
Dollar Tree Stores, Inc. (AE) 21,200 834
DreamWorks Animation SKG, Inc. Class A (AE) 9,500 278
eBay, Inc. (AE)(U) 146,300 4,965
EchoStar Communications Corp. Class A (AE) 79,800 3,713
Estee Lauder Cos., Inc. (The) Class A 59,800 3,075
Expedia, Inc. (AE) 42,700 1,009
Family Dollar Stores, Inc. 57,500 1,831
Federated Department Stores, Inc. 96,400 4,234
Foot Locker, Inc. 56,600 1,347
Gannett Co., Inc. 45,500 2,596
Gemstar-TV Guide International, Inc. (AE) 1,386 6
Google, Inc. Class A (AE)(U) 14,140 6,665
Guess?, Inc. 12,200 481
Hanesbrands, Inc. (AE) 10,300 274
Hasbro, Inc. 36,800 1,163
InterActiveCorp (AE)(N) 156,250 5,956
ITT Educational Services, Inc. (AE) 10,520 1,023
Jack in the Box, Inc. (AE) 4,700 313
Jarden Corp. (AE) 16,000 674
JC Penney Co., Inc. 65,900 5,212
Jones Apparel Group, Inc. 16,600 554
Kimberly-Clark Corp. 28,135 2,002
Kohl's Corp. (AE) 123,700 9,159
Limited Brands, Inc. 34,200 943
Liz Claiborne, Inc. 24,100 1,078
Lowe's Cos., Inc. 57,500 1,757
Manpower, Inc. 103,111 8,275
Marriott International, Inc. Class A 338,350 15,297
Mattel, Inc. 232,500 6,580
McDonald's Corp. (U) 428,449 20,686
McGraw-Hill Cos., Inc. (The) 104,500 6,848
Men's Wearhouse, Inc. (The) 17,100 740
MPS Group, Inc. (AE) 9,300 127
News Corp.
Class A 421,000 9,426
Class B 3,100 74
Nike, Inc. Class B 45,400 2,445
Nordstrom, Inc. 69,900 3,839
Office Depot, Inc. (AE) 68,800 2,313
OfficeMax, Inc. 13,300 655
Payless Shoesource, Inc. (AE) 17,800 568
</Table>
Equity Q Fund 23
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Phillips-Van Heusen Corp. 6,000 335
Polo Ralph Lauren Corp. Class A 37,000 3,408
RadioShack Corp. 28,100 817
Rent-A-Center, Inc. (AE) 11,600 323
Ross Stores, Inc. 2,400 80
Saks, Inc. 3,700 77
Scholastic Corp. (AE) 8,000 247
Sears Holdings Corp. (AE) 4,900 935
Staples, Inc. 88,150 2,186
Target Corp. 40,000 2,375
Timberland Co. Class A (AE) 3,700 96
Time Warner, Inc. (U) 1,149,900 23,722
TJX Cos., Inc. 504,400 14,068
United Stationers, Inc. (AE) 2,700 161
VeriSign, Inc. (AE) 30,700 840
Viacom, Inc. Class A (AE)(U) 7,900 326
Wal-Mart Stores, Inc. (U) 138,500 6,637
Walt Disney Co. (The) 324,900 11,365
Warnaco Group, Inc. (The) (AE) 10,900 308
Waste Management, Inc. 118,900 4,448
WESCO International, Inc. (AE) 7,300 461
Whirlpool Corp. 19,700 2,089
Wolverine World Wide, Inc. 400 11
Wynn Resorts, Ltd. (N) 17,800 1,819
Yahoo!, Inc. (AE) 7,000 196
Yum! Brands, Inc. 71,800 4,442
------------
281,804
------------
Consumer Staples - 7.4%
Altria Group, Inc. 12,380 853
Coca-Cola Co. (The) 209,900 10,955
Colgate-Palmolive Co. 56,350 3,817
ConAgra Foods, Inc. 138,500 3,404
Constellation Brands, Inc. Class A (AE) 45,700 1,024
Del Monte Foods Co. 3,700 43
General Mills, Inc. 306,300 18,347
Hormel Foods Corp. 7,100 270
JM Smucker Co. (The) 6,700 374
Kraft Foods, Inc. Class A (U) 37,700 1,262
Kroger Co. (The) 784,835 23,161
Loews Corp. - Carolina Group (U) 26,500 2,028
McCormick & Co., Inc. 45,100 1,674
Molson Coors Brewing Co. Class B 22,380 2,110
Pepsi Bottling Group, Inc. 28,100 922
PepsiCo, Inc. 183,500 12,128
Procter & Gamble Co. (U) 209,550 13,476
Reynolds American, Inc. (N) 26,700 1,716
Safeway, Inc. 223,700 8,120
SUPERVALU, Inc. 69,400 3,186
SYSCO Corp. 153,000 5,009
Tyson Foods, Inc. Class A 192,800 4,041
UST, Inc. 67,050 3,800
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Walgreen Co. 190,000 8,341
------------
130,061
------------
Financial Services - 23.5%
Aflac, Inc. 7,500 385
Alliance Data Systems Corp. (AE) 24,900 1,585
Allstate Corp. (The) (U) 156,100 9,728
AMBAC Financial Group, Inc. 33,200 3,048
American International Group,
Inc. (U) 99,100 6,928
AmeriCredit Corp. (AE)(N) 63,400 1,600
Ameriprise Financial, Inc. 100,870 5,999
Automatic Data Processing, Inc. (U) 95,200 4,261
Axis Capital Holdings, Ltd. 4,200 156
Bank of America Corp. (U) 728,155 37,063
Bear Stearns Cos., Inc. (The) 20,000 3,114
BlackRock, Inc. Class A 3,660 548
Boston Properties, Inc. (o) 29,900 3,515
Camden Property Trust (o) 12,700 884
CapitalSource, Inc. (o) 45,600 1,175
CB Richard Ellis Group, Inc. Class A (AE) 20,700 701
Chubb Corp. 106,000 5,706
Cigna Corp. 42,220 6,569
Cincinnati Financial Corp. 30,932 1,399
CIT Group, Inc. 74,000 4,414
Citigroup, Inc. (U) 466,002 24,987
Comerica, Inc. 49,400 3,058
Countrywide Financial Corp. 201,650 7,477
DiamondRock Hospitality Co. (o) 7,000 128
Duke Realty Corp. (o) 14,300 616
Dun & Bradstreet Corp. 6,900 623
E*Trade Financial Corp. (AE) 21,000 464
First American Corp. 18,700 963
First Marblehead Corp. (The) (N) 118,450 4,294
Fiserv, Inc. (AE) 125,100 6,651
Franklin Resources, Inc. 36,470 4,789
Genworth Financial, Inc. Class A 79,600 2,905
Global Payments, Inc. 38,300 1,455
Goldman Sachs Group, Inc. (The) (U) 124,000 27,108
Hartford Financial Services Group, Inc. (U) 21,400 2,166
HCC Insurance Holdings, Inc. (N) 60,500 1,855
Health Care Property Investors, Inc. (o) 28,700 1,016
Hospitality Properties Trust (o) 105,000 4,781
Host Hotels & Resorts, Inc. (o) 122,300 3,136
HRPT Properties Trust (o) 76,600 938
Hudson City Bancorp, Inc. 52,000 693
</Table>
24 Equity Q Fund
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
IndyMac Bancorp, Inc. (N) 15,400 466
Investment Technology Group, Inc. (AE) 15,300 579
iStar Financial, Inc. (o) 3,850 184
JPMorgan Chase & Co. (U) 591,650 30,825
KeyCorp 40,300 1,438
Kimco Realty Corp. (o) 17,300 832
Lehman Brothers Holdings, Inc. (U) 241,900 18,210
Liberty Property Trust (o) 1,400 68
Loews Corp. 127,500 6,033
MBIA, Inc. 52,400 3,645
Mellon Financial Corp. 14,000 601
Merrill Lynch & Co., Inc. 250,960 22,644
MetLife, Inc. (U) 54,800 3,600
Moody's Corp. 53,600 3,544
Morgan Stanley (U) 298,820 25,104
National City Corp. (N) 149,300 5,457
National Retail Properties, Inc. (o) 4,200 101
Nationwide Financial Services, Inc. 16,000 914
Nelnet, Inc. Class A 3,800 102
Northern Trust Corp. 28,000 1,763
Odyssey Re Holdings Corp. 8,000 335
Old Republic International Corp. 34,525 734
Philadelphia Consolidated Holding Co. (AE) 7,400 321
PMI Group, Inc. (The) 49,300 2,390
PNC Financial Services Group, Inc. (U) 46,300 3,431
Principal Financial Group, Inc. 65,700 4,171
Progressive Corp. (The) 168,200 3,880
ProLogis (o) 2,400 155
Prudential Financial, Inc. (U) 22,200 2,109
Radian Group, Inc. 1,599 93
Raymond James Financial, Inc. 26,800 822
Redwood Trust, Inc. (o) 1,400 70
Regions Financial Corp. 193,090 6,775
Ryder System, Inc. 23,050 1,213
Safeco Corp. (N) 72,650 4,849
Simon Property Group, Inc. (o) 10,330 1,191
State Street Corp. (U) 25,000 1,722
SunTrust Banks, Inc. 29,600 2,499
Synovus Financial Corp. 21,000 663
TCF Financial Corp. 15,800 428
Travelers Cos., Inc. (The) (U) 160,300 8,672
US Bancorp 210,400 7,227
Ventas, Inc. (o) 17,600 742
Wachovia Corp. (U) 58,700 3,260
Washington Mutual, Inc. 160,400 6,734
Weingarten Realty Investors (o) 2,800 134
Wells Fargo & Co. (U) 574,400 20,615
Western Union Co. (The) 45,800 964
Wilmington Trust Corp. 6,100 247
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
WR Berkley Corp. 84,500 2,745
Zenith National Insurance Corp. 8,000 370
------------
414,552
------------
Health Care - 13.3%
Abbott Laboratories (U) 94,900 5,373
Aetna, Inc. (U) 166,200 7,791
Alcon, Inc. 4,684 632
AMERIGROUP Corp. (AE) 6,400 180
AmerisourceBergen Corp. Class A 354,600 17,726
Amgen, Inc. (AE)(U) 279,600 17,934
Apria Healthcare Group, Inc. (AE) 23,800 755
Beckman Coulter, Inc. 14,400 904
Becton Dickinson & Co. 31,400 2,471
Biogen Idec, Inc. (AE) 59,300 2,800
Boston Scientific Corp. (AE)(U) 115,500 1,783
Cardinal Health, Inc. (U) 114,100 7,981
Celgene Corp. (AE) 58,450 3,575
CR Bard, Inc. 11,880 988
CVS Corp. 20,155 730
Dade Behring Holdings, Inc. 20,800 1,022
Dentsply International, Inc. 28,000 935
Edwards Lifesciences Corp. (AE) 2,500 123
Eli Lilly & Co. 33,900 2,005
Emdeon Corp. (AE)(N) 68,400 1,104
Express Scripts, Inc. Class A (AE) 16,600 1,586
Forest Laboratories, Inc. (AE) 126,600 6,736
Genzyme Corp. (AE) 4,700 307
Gilead Sciences, Inc. (AE) 114,300 9,341
Health Management Associates, Inc. Class A 26,000 278
Health Net, Inc. (AE) 50,100 2,708
Healthspring, Inc. (AE) 9,700 228
Humana, Inc. (AE) 71,000 4,490
Idexx Laboratories, Inc. (AE) 5,700 514
IMS Health, Inc. 36,500 1,071
Johnson & Johnson (U) 460,600 29,580
King Pharmaceuticals, Inc. (AE) 47,600 973
Laboratory Corp. of America Holdings (AE) 13,200 1,042
LifePoint Hospitals, Inc. (AE) 13,800 504
McKesson Corp. 91,700 5,395
Medco Health Solutions, Inc. (AE) 85,300 6,655
Medtronic, Inc. 47,600 2,519
Merck & Co., Inc. (U) 230,350 11,849
Millennium Pharmaceuticals, Inc. (AE)(N) 152,600 1,691
Mylan Laboratories, Inc. 64,100 1,406
Pfizer, Inc. (U) 1,509,300 39,936
Quest Diagnostics, Inc. 103,700 5,070
Schering-Plough Corp. (U) 243,200 7,717
</Table>
Equity Q Fund 25
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Stryker Corp. (U) 11,800 766
UnitedHealth Group, Inc. 36,500 1,937
Watson Pharmaceuticals, Inc. (AE) 21,800 595
WellCare Health Plans, Inc. (AE) 12,600 1,015
WellPoint, Inc. (AE)(U) 114,400 9,034
Wyeth (U) 6,500 361
Zimmer Holdings, Inc. (AE)(U) 21,580 1,953
------------
234,069
------------
Integrated Oils - 6.7%
Chevron Corp. (U) 261,700 20,358
ConocoPhillips (U) 185,274 12,849
Exxon Mobil Corp. (U) 847,032 67,237
Marathon Oil Corp. 163,370 16,590
------------
117,034
------------
Materials and Processing - 5.0%
Acuity Brands, Inc. 6,900 408
Albemarle Corp. 27,800 1,180
Alcoa, Inc. 163,800 5,813
American Standard Cos., Inc. 51,300 2,825
Archer-Daniels-Midland Co. (U) 69,500 2,690
Ashland, Inc. 54,100 3,243
Avery Dennison Corp. 28,100 1,748
Bemis Co., Inc. 21,600 718
Cabot Corp. 8,800 399
Celanese Corp. Class A 34,500 1,144
Crown Holdings, Inc. (AE) 21,800 527
Cytec Industries, Inc. 4,300 236
Domtar Corp. (AE) 30,300 295
Dow Chemical Co. (The) (U) 153,700 6,857
Eastman Chemical Co. 18,800 1,273
EI Du Pont de Nemours & Co. (U) 90,600 4,455
Energizer Holdings, Inc. (AE) 41,000 3,984
Fluor Corp. 17,300 1,654
FMC Corp. 6,700 515
Freeport-McMoRan Copper & Gold, Inc. Class B 81,500 5,474
Greif, Inc. Class A 7,000 389
Hercules, Inc. (AE) 29,200 550
Huntsman Corp. 13,800 270
International Paper Co. 43,300 1,633
Jacobs Engineering Group, Inc. (AE) 32,600 1,644
Lyondell Chemical Co. 57,800 1,799
Masco Corp. 8,100 220
Monsanto Co. 1,400 83
Newmont Mining Corp. 2,400 100
Nucor Corp. 119,252 7,568
Olin Corp. 2,000 34
Packaging Corp. of America 20,200 500
Pactiv Corp. (AE) 62,200 2,151
PPG Industries, Inc. 30,400 2,237
Quanex Corp. 7,800 336
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Rock-Tenn Co. Class A 5,500 210
Rohm & Haas Co. 122,500 6,268
RPM International, Inc. 13,000 277
Sherwin-Williams Co. (The) 61,400 3,915
Smurfit-Stone Container Corp. (AE) 43,800 528
Sonoco Products Co. 10,900 465
Southern Copper Corp. 46,900 3,766
Steel Dynamics, Inc. (N) 84,300 3,735
Timken Co. 17,300 571
United States Steel Corp. 4,700 477
URS Corp. (AE) 11,900 520
Vulcan Materials Co. 19,100 2,362
Weyerhaeuser Co. 2,880 228
------------
88,274
------------
Miscellaneous - 2.9%
Brunswick Corp. 33,900 1,111
Eaton Corp. 50,600 4,514
General Electric Co. (U) 670,640 24,720
Honeywell International, Inc. 91,800 4,974
ITT Corp. 32,400 2,067
Johnson Controls, Inc. 36,200 3,704
SPX Corp. 30,800 2,183
Textron, Inc. 33,000 3,355
Trinity Industries, Inc. 20,100 933
Tyco International, Ltd. 117,300 3,827
------------
51,388
------------
Other Energy - 4.1%
Alon USA Energy, Inc. 12,100 452
Apache Corp. 59,400 4,306
BJ Services Co. 80,200 2,298
Cameron International Corp. (AE) 21,200 1,369
Chesapeake Energy Corp. (N) 76,200 2,572
Complete Production Services, Inc. (AE) 7,700 185
Devon Energy Corp. 122,050 8,894
Dynegy, Inc. Class A (AE) 5,054 48
Frontier Oil Corp. 38,600 1,364
Global Industries, Ltd. (AE) 39,600 822
Grey Wolf, Inc. (AE) 21,500 154
Helix Energy Solutions Group, Inc. (AE) 21,200 811
Helmerich & Payne, Inc. 9,900 320
Holly Corp. 27,100 1,724
Newfield Exploration Co. (AE) 56,900 2,489
NRG Energy, Inc. (AE)(N) 15,300 1,208
</Table>
26 Equity Q Fund
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Oceaneering International, Inc. (AE) 30,100 1,431
Oil States International, Inc. (AE) 19,900 675
Plains Exploration & Production Co. (AE) 12,400 583
Rowan Cos., Inc. 19,500 714
SEACOR Holdings, Inc. (AE) 21,650 2,063
St. Mary Land & Exploration Co. 14,600 535
Sunoco, Inc. 87,200 6,586
Superior Energy Services, Inc. (AE) 29,000 1,054
Tesoro Corp. 79,620 9,650
Todco Class A (AE) 1,200 54
Valero Energy Corp. (U) 108,000 7,585
Western Refining, Inc. 600 24
XTO Energy, Inc. 215,600 11,701
------------
71,671
------------
Producer Durables - 7.1%
AGCO Corp. (AE) 80,500 3,359
Applied Materials, Inc. (U) 343,400 6,600
Boeing Co. (U) 116,870 10,869
Caterpillar, Inc. 128,800 9,353
Crane Co. 6,700 285
Danaher Corp. 36,000 2,563
Deere & Co. 18,450 2,018
Emerson Electric Co. 36,600 1,720
Gardner Denver, Inc. (AE) 16,600 628
Genlyte Group, Inc. (AE) 5,400 421
Goodrich Corp. 17,700 1,006
KB Home 4,800 212
Lam Research Corp. (AE) 84,900 4,566
Lexmark International, Inc. Class A (AE)(N) 74,400 4,055
Lockheed Martin Corp. (U) 254,900 24,506
Manitowoc Co., Inc. (The) 27,200 1,856
Mettler Toledo International, Inc. (AE) 8,900 869
Molex, Inc. 50,000 1,494
Northrop Grumman Corp. 256,051 18,856
Novellus Systems, Inc. (AE)(N) 59,100 1,913
NVR, Inc. (AE) 1,500 1,236
Parker Hannifin Corp. 55,300 5,095
Polycom, Inc. (AE) 76,200 2,537
Standard-Pacific Corp. 34,700 724
Steelcase, Inc. Class A 16,200 316
Teradyne, Inc. (AE) 44,200 771
Terex Corp. (AE) 9,600 747
Thomas & Betts Corp. (AE) 11,400 621
United Technologies Corp. 102,200 6,861
Waters Corp. (AE) 35,350 2,101
Xerox Corp. (AE) 382,800 7,082
------------
125,240
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Technology - 12.7%
3Com Corp. (AE) 54,000 218
Amphenol Corp. Class A 30,600 1,074
Analog Devices, Inc. 14,600 564
Anixter International, Inc. (AE) 11,800 845
Apple, Inc. (AE) 60,800 6,068
Applera Corp. - Applied Biosystems Group 67,000 2,093
Applied Micro Circuits Corp. (AE) 93,400 262
Arrow Electronics, Inc. (AE) 25,400 1,004
Atmel Corp. (AE) 794,500 4,227
Avaya, Inc. (AE) 54,000 698
Avnet, Inc. (AE) 65,700 2,687
AVX Corp. 31,500 524
BEA Systems, Inc. (AE) 124,600 1,469
BMC Software, Inc. (AE) 59,000 1,910
Brocade Communications Systems, Inc. (AE) 10,000 98
Cadence Design Systems, Inc. (AE) 50,000 1,110
Cisco Systems, Inc. (AE) 1,197,800 32,029
Computer Sciences Corp. (AE) 106,801 5,932
CSG Systems International, Inc. (AE) 7,700 206
DRS Technologies, Inc. 7,000 352
Electronic Data Systems Corp. 49,500 1,447
EMC Corp. (AE) 218,400 3,315
F5 Networks, Inc. (AE) 14,200 1,090
Harris Corp. 7,900 406
Hewlett-Packard Co. (U) 667,000 28,107
Ingram Micro, Inc. Class A (AE) 75,400 1,479
Integrated Device Technology, Inc. (AE) 100,100 1,500
Intel Corp. 11,900 256
International Business Machines
Corp. (U) 208,050 21,265
International Rectifier Corp. (AE) 10,500 370
Intuit, Inc. (AE) 172,599 4,910
Jabil Circuit, Inc. 50,800 1,184
Juniper Networks, Inc. (AE) 98,700 2,207
McAfee, Inc. (AE) 33,700 1,095
MEMC Electronic Materials, Inc. (AE) 38,100 2,091
Mentor Graphics Corp. (AE) 42,600 689
Microsoft Corp. (U) 1,032,800 30,922
National Instruments Corp. 16,400 457
National Semiconductor Corp. 39,200 1,031
Network Appliance, Inc. (AE) 31,200 1,161
Oracle Corp. (AE) 743,400 13,976
QLogic Corp. (AE) 40,200 719
Qualcomm, Inc. 36,700 1,607
Raytheon Co. (U) 231,200 12,378
RealNetworks, Inc. (AE) 38,800 293
Sanmina-SCI Corp. (AE) 8,900 31
</Table>
Equity Q Fund 27
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Seagate Technology, Inc. (AE) 57,274 --
Solectron Corp. (AE) 83,400 279
Sun Microsystems, Inc. (AE) 597,100 3,117
Symantec Corp. (AE) 174,300 3,068
Synopsys, Inc. (AE) 131,501 3,637
Tellabs, Inc. (AE) 76,800 816
Texas Instruments, Inc. 259,900 8,933
Unisys Corp. (AE) 72,000 565
Utstarcom, Inc. (AE) 88,100 629
Western Digital Corp. (AE) 94,300 1,667
Xilinx, Inc. (N) 131,100 3,865
------------
223,932
------------
Utilities - 6.8%
AES Corp. (The) (AE) 51,000 1,122
AGL Resources, Inc. (N) 5,700 248
Allegheny Energy, Inc. (AE) 3,700 198
Alltel Corp. 62,100 3,893
Ameren Corp. 73,900 3,885
AT&T, Inc. (U) 725,670 28,098
Atmos Energy Corp. 1,500 48
Cablevision Systems Corp. Class A (AE) 51,500 1,688
CenturyTel, Inc. 78,700 3,624
Comcast Corp. Class A (AE) 239,350 6,381
Constellation Energy Group, Inc. 62,000 5,525
Duke Energy Corp. 331,600 6,804
Edison International 113,800 5,957
Embarq Corp. 28,200 1,693
Energy East Corp. 19,900 482
Entergy Corp. 15,800 1,788
FirstEnergy Corp. 72,150 4,938
KeySpan Corp. 43,100 1,785
Oneok, Inc. 65,650 3,178
PG&E Corp. 176,349 8,923
Qwest Communications International, Inc. (AE)(N) 264,500 2,349
Sprint Nextel Corp. 202,000 4,046
Telephone & Data Systems, Inc. 11,900 678
TXU Corp. 208,199 13,654
UGI Corp. 10,100 286
Verizon Communications, Inc. (U) 202,500 7,732
------------
119,003
------------
TOTAL COMMON STOCKS
(cost $1,604,015) 1,915,456
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.8%
Russell Investment Company
Money Market Fund 47,073,900 47,074
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 3,000 2,982
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $50,056) 50,056
------------
OTHER SECURITIES - 1.3%
Russell Investment Company
Money Market Fund (X) 4,508,859 4,509
State Street Securities
Lending Quality Trust (X) 18,948,877 18,949
------------
TOTAL OTHER SECURITIES
(cost $23,458) 23,458
------------
TOTAL INVESTMENTS - 112.9%
(identified cost $1,677,529) 1,988,970
SECURITIES SOLD SHORT - (11.1%)
Auto and Transportation - (0.4%)
AAR Corp. (AE) (5,900) (180)
Ford Motor Co. (AE) (361,700) (2,908)
JetBlue Airways Corp. (AE) (37,800) (375)
Oshkosh Truck Corp. (26,700) (1,494)
Southwest Airlines Co. (134,300) (1,927)
Visteon Corp. (AE) (25,700) (234)
------------
(7,118)
------------
Consumer Discretionary - (2.1%)
American Greetings Corp. Class A (15,200) (387)
Bed Bath & Beyond, Inc. (AE) (50,400) (2,053)
Big Lots, Inc. (AE) (5,100) (164)
CBS Corp. Class B (61,000) (1,938)
Chico's FAS, Inc. (AE) (34,200) (902)
Coldwater Creek, Inc. (AE) (16,200) (335)
Discovery Holding Co. Class A (AE) (104,700) (2,277)
Electronic Arts, Inc. (AE) (68,800) (3,468)
Fastenal Co. (36,000) (1,480)
Google, Inc. Class A (AE) (3,800) (1,791)
Hearst-Argyle Television, Inc. (7,200) (192)
Las Vegas Sands Corp. (AE) (42,700) (3,638)
Limited Brands, Inc. (132,400) (3,650)
MGM Mirage (AE) (22,300) (1,500)
Regal Entertainment Group Class A (53,600) (1,166)
Scientific Games Corp. (AE) (17,700) (589)
Service Corp. International (59,800) (727)
Starbucks Corp. (AE) (115,500) (3,583)
Tractor Supply Co. (AE) (3,100) (160)
</Table>
28 Equity Q Fund
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Triarc Cos., Inc. Class A (14,500) (236)
Under Armour, Inc. Class A (AE) (2,800) (142)
Urban Outfitters, Inc. (AE) (9,200) (237)
Walt Disney Co. (The) (44,300) (1,550)
Williams-Sonoma, Inc. (23,400) (824)
Wynn Resorts, Ltd. (8,600) (879)
XM Satellite Radio Holdings, Inc. Class A (AE) (24,300) (284)
Yahoo!, Inc. (AE) (119,800) (3,359)
------------
(37,511)
------------
Consumer Staples - (0.7%)
Hansen Natural Corp. (AE) (14,000) (535)
Hershey Co. (The) (63,700) (3,501)
Kraft Foods, Inc. Class A (119,800) (4,010)
Reynolds American, Inc. (25,200) (1,619)
Rite Aid Corp. (AE) (18,600) (114)
Tyson Foods, Inc. Class A (73,500) (1,541)
------------
(11,320)
------------
Financial Services - (1.4%)
Bank of America Corp. (30,300) (1,542)
Capitol Federal Financial (5,000) (193)
Charles Schwab Corp. (The) (192,100) (3,673)
Chicago Mercantile Exchange Holdings, Inc. Class
A (3,300) (1,705)
Cincinnati Financial Corp. (11,800) (534)
GATX Corp. (9,600) (471)
LandAmerica Financial Group, Inc. Class A (13,700) (1,101)
M&T Bank Corp. (32,100) (3,574)
MBIA, Inc. (78,700) (5,474)
MetLife, Inc. (43,400) (2,851)
PMI Group, Inc. (The) (24,100) (1,168)
Sotheby's Holdings Class A (10,900) (563)
TD Ameritrade Holding Corp. (AE) (45,000) (767)
Unum Group (1,000) (25)
------------
(23,641)
------------
Health Care - (1.4%)
Abbott Laboratories (72,200) (4,088)
Abraxis BioScience, Inc. (AE) (16,800) (462)
Affymetrix, Inc. (AE) (20,400) (536)
Alexion Pharmaceuticals, Inc. (AE) (9,100) (381)
Allscripts Healthcare Solutions, Inc. (AE) (7,200) (190)
Bausch & Lomb, Inc. (10,700) (629)
Baxter International, Inc. (27,900) (1,580)
BioMarin Pharmaceuticals, Inc. (AE) (14,700) (237)
Bristol-Myers Squibb Co. (139,700) (4,032)
Brookdale Senior Living, Inc. (12,900) (586)
Celgene Corp. (AE) (29,000) (1,774)
Cerner Corp. (AE) (16,100) (857)
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Chattem, Inc. (AE) (4,900) (280)
Cubist Pharmaceuticals, Inc. (AE) (8,800) (189)
Healthways, Inc. (AE) (2,600) (110)
Hologic, Inc. (AE) (1,800) (104)
ImClone Systems, Inc. (AE) (14,100) (591)
Intuitive Surgical, Inc. (AE) (5,400) (700)
Inverness Medical Innovations, Inc. (AE) (7,000) (280)
Medarex, Inc. (AE) (14,500) (198)
Myriad Genetics, Inc. (AE) (9,600) (351)
PDL BioPharma, Inc. (AE) (27,200) (687)
Quest Diagnostics, Inc. (100,300) (4,904)
Sunrise Senior Living, Inc. (AE) (4,900) (188)
Techne Corp. (AE) (3,600) (212)
Tenet Healthcare Corp. (AE) (103,500) (768)
United Therapeutics Corp. (AE) (7,600) (425)
------------
(25,339)
------------
Integrated Oils - 0.0%
Delta Petroleum Corp. (AE) (21,300) (462)
------------
Materials and Processing - (0.9%)
EI Du Pont de Nemours & Co. (77,500) (3,811)
Hexcel Corp. (AE) (17,900) (388)
Louisiana-Pacific Corp. (31,900) (629)
Mosaic Co. (The) (AE) (154,300) (4,552)
Quanta Services, Inc. (AE) (22,000) (605)
Shaw Group, Inc. (The) (AE) (23,000) (746)
UAP Holding Corp. (16,200) (448)
Weyerhaeuser Co. (54,279) (4,300)
Worthington Industries, Inc. (23,600) (525)
------------
(16,004)
------------
Miscellaneous - (0.5%)
Berkshire Hathaway, Inc. Class A (AE) (17) (1,857)
Fortune Brands, Inc. (43,600) (3,492)
ITT Corp. (56,200) (3,586)
------------
(8,935)
------------
Other Energy - (1.6%)
Arch Coal, Inc. (32,000) (1,154)
Baker Hughes, Inc. (50,700) (4,076)
Cabot Oil & Gas Corp. (5,300) (193)
Consol Energy, Inc. (26,300) (1,101)
Crosstex Energy, Inc. (22,800) (685)
Diamond Offshore Drilling, Inc. (40,500) (3,467)
EOG Resources, Inc. (46,500) (3,415)
</Table>
Equity Q Fund 29
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Equitable Resources, Inc. (39,000) (2,028)
EXCO Resources, Inc. (AE) (37,300) (626)
Halliburton Co. (49,400) (1,570)
Massey Energy Co. (34,100) (918)
Peabody Energy Corp. (72,100) (3,459)
PetroHawk Energy Corp. (AE) (19,900) (288)
Pogo Producing Co. (31,900) (1,540)
Quicksilver Resources, Inc. (AE) (8,100) (339)
Range Resources Corp. (29,800) (1,089)
Reliant Energy, Inc. (AE) (52,000) (1,158)
Southwestern Energy Co. (AE) (28,500) (1,197)
Whiting Petroleum Corp. (AE) (4,100) (181)
------------
(28,484)
------------
Producer Durables - (0.6%)
ACCO Brands Corp. (AE) (11,700) (279)
Amazon.Com, Inc. (AE) (49,800) (3,054)
Briggs & Stratton Corp. (18,600) (552)
Bucyrus International, Inc. Class A (6,700) (420)
Danaher Corp. (35,400) (2,520)
ESCO Technologies, Inc. (AE) (7,100) (324)
Interdigital Communications Corp. (AE) (4,600) (151)
MDC Holdings, Inc. (5,700) (292)
Pitney Bowes, Inc. (32,100) (1,541)
SBA Communications Corp. Class A (AE) (12,000) (353)
------------
(9,486)
------------
Technology - (0.9%)
Advanced Micro Devices, Inc. (AE) (3,300) (46)
Autodesk, Inc. (AE) (25,200) (1,040)
Broadcom Corp. Class A (AE) (47,400) (1,543)
Corning, Inc. (AE) (119,100) (2,825)
Equinix, Inc. (AE) (1,100) (92)
General Dynamics Corp. (41,700) (3,274)
Microsemi Corp. (AE) (12,000) (277)
Motorola, Inc. (141,900) (2,459)
NAVTEQ Corp. (AE) (8,100) (286)
Palm, Inc. (AE) (7,100) (120)
Rambus, Inc. (AE) (13,700) (271)
Salesforce.com, Inc. (AE) (10,000) (420)
SanDisk Corp. (AE) (63,000) (2,737)
Spansion, Inc. Class A (AE) (35,400) (348)
Trident Microsystems, Inc. (AE) (5,800) (123)
------------
(15,861)
------------
Utilities - (0.6%)
Aquila, Inc. (AE) (12,900) (53)
Avista Corp. (6,100) (144)
DPL, Inc. (9,500) (298)
Hawaiian Electric Industries, Inc. (16,200) (426)
Level 3 Communications, Inc. (AE) (182,000) (1,012)
National Fuel Gas Co. (29,500) (1,387)
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Progress Energy, Inc. (68,600) (3,468)
Telephone & Data Systems, Inc. (15,500) (883)
Xcel Energy, Inc. (138,800) (3,343)
------------
(11,014)
------------
TOTAL SECURITIES SOLD SHORT
(proceeds $187,491) (195,175)
------------
OTHER ASSETS AND LIABILITIES,
NET - (1.8%) (32,115)
------------
NET ASSETS - 100.0% 1,761,680
============
</Table>
30 Equity Q Fund
RUSSELL INVESTMENT COMPANY
EQUITY Q FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 06/07 (20) 8,112 392
Russell 1000 Mini Index (CME)
expiration date 06/07 (8) 649 28
S&P 500 E-Mini Index (CME)
expiration date 06/07 (118) 8,782 293
S&P 500 Index (CME)
expiration date 06/07 (29) 10,791 112
S&P Midcap 400 E-Mini Index (CME)
expiration date 06/07 (154) 13,524 530
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,355
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 3.3
Consumer Discretionary 16.0
Consumer Staples 7.4
Financial Services 23.5
Health Care 13.3
Integrated Oils 6.7
Materials and Processing 5.0
Miscellaneous 2.9
Other Energy 4.1
Producer Durables 7.1
Technology 12.7
Utilities 6.8
Short-Term Investments 2.8
Other Securities 1.3
---------------
Total Investments 112.9
Securities Sold Short (11.1)
Other Assets and Liabilities, Net (1.8)
---------------
100.0
===============
Futures Contracts --*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
Equity Q Fund 31
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,141.00 $ 1,019.04
Expenses Paid During
Period* $ 6.16 $ 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). 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,142.20 $ 1,020.28
Expenses Paid During
Period* $ 4.83 $ 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). 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 Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,142.70 $ 1,020.53
Expenses Paid During
Period* $ 4.57 $ 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). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
32 International Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 92.6%
Australia - 4.3%
AGL Energy, Ltd. 9,617 122
Alinta, Ltd. 5,867 73
Amcor, Ltd. 852,335 5,246
AMP, Ltd. 172,000 1,525
Ansell, Ltd. 24,038 222
APN News & Media, Ltd. (N) 3,239 16
Aristocrat Leisure, Ltd. (N) 78,359 1,073
Australia & New Zealand Banking Group, Ltd. 45,479 1,154
AXA Asia Pacific Holdings, Ltd. 43,631 266
BHP Billiton, Ltd. 145,677 3,558
Brambles, Ltd. (AE)(N) 94,734 1,033
Caltex Australia, Ltd. (N) 19,938 400
Centro Properties Group 19,367 149
CFS Gandel Retail Trust 6,977 13
Coles Group, Ltd. (N) 113,652 1,621
Commonwealth Bank of Australia 26,092 1,139
CSL, Ltd. 82,865 5,969
CSR, Ltd. (N) 27,170 82
David Jones, Ltd. (N) 70,000 287
DB RREEF Trust 72,143 107
Foster's Group, Ltd. 1,147,436 6,051
Futuris Corp., Ltd. (N) 27,690 55
GPT Group 41,700 170
Harvey Norman Holdings, Ltd. (N) 27,395 116
Incitec Pivot, Ltd. 30,180 1,211
Insurance Australia Group, Ltd. (N) 159,189 790
Investa Property Group 12,801 28
Leighton Holdings, Ltd. 6,687 191
Macquarie Airports Management, Ltd. 391,339 1,288
Macquarie Bank, Ltd. 91,293 6,514
Macquarie Goodman Group (N) 31,336 184
Macquarie Infrastructure Group 952,496 2,983
Macquarie Office Trust 9,256 12
Minara Resources, Ltd. 1,812 11
Mirvac Group 10,423 45
Multiplex Group 1,975 8
National Australia Bank, Ltd. 569,141 20,234
OneSteel, Ltd. (N) 65,763 311
Origin Energy, Ltd. 60,699 456
Oxiana, Ltd. (N) 321,500 802
Pacific Brands, Ltd. 164,180 438
Qantas Airways, Ltd. 94,492 416
QBE Insurance Group, Ltd. (N) 213,431 5,418
Rinker Group, Ltd. 16,079 249
Rio Tinto, Ltd. (N) 1,243 85
Sons of Gwalia, Ltd. (AE)(N)(B) 22,400 --
Stockland (N) 22,563 161
Suncorp-Metway, Ltd. (N) 73,946 1,310
Symbion Health, Ltd. 8,627 29
TABCORP Holdings, Ltd. (N) 125,603 1,880
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Tattersall's, Ltd. (N) 36,710 156
Telstra Corp., Ltd. (N) 2,183,832 8,431
Telstra Corp., Ltd. 12,590 33
Transurban Group 103,869 692
Wesfarmers, Ltd. (N) 87,404 2,828
Westfield Group 25,953 450
Westpac Banking Corp. 39,312 879
Woolworths, Ltd. 803 19
Zinifex, Ltd. (N) 148,658 2,015
------------
91,004
------------
Austria - 0.7%
Erste Bank der Oesterreichischen Sparkassen AG
(N) 122,536 9,828
Immofinanz Immobilien Anlagen AG (AE) 85,900 1,395
OMV AG 20,000 1,266
Voestalpine AG 37,100 2,498
------------
14,987
------------
Belgium - 0.7%
Belgacom SA (N) 21,106 929
Fortis 286,795 12,846
InBev NV (N) 18,411 1,434
KBC Groep NV (N) 2,600 343
Omega Pharma SA 1,747 141
------------
15,693
------------
Bermuda - 0.8%
Aquarius Platinum, Ltd. 36,220 1,077
CNPC Hong Kong, Ltd. 90,000 39
Credicorp, Ltd. 23,700 1,237
Esprit Holdings, Ltd. 280,500 3,395
Great Eagle Holdings, Ltd. 16,000 59
Hongkong Land Holdings, Ltd. 20,000 93
Jardine Matheson Holdings, Ltd. 104,500 2,427
Johnson Electric Holdings, Ltd. (N) 871,000 527
Li & Fung, Ltd. 660,200 2,032
Nine Dragons Paper Holdings, Ltd. (N) 343,000 691
Orient Overseas International, Ltd. 16,900 142
Pacific Basin Shipping, Ltd. 1,393,000 1,390
People's Food Holdings, Ltd. 42,000 54
Shangri-La Asia, Ltd. 832,000 2,031
Vostok Nafta Investment, Ltd. (AE) 9,175 568
------------
15,762
------------
</Table>
International Fund 33
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Brazil - 0.8%
All America Latina Logistica SA 101,100 1,181
Banco do Brasil SA 14,600 500
Cia Vale do Rio Doce - ADR 110,900 4,504
Gafisa SA 82,638 1,165
Gerdau SA - ADR 56,100 1,124
JHSF Participacoes SA (AE) 138,600 566
Petroleo Brasileiro SA - ADR 7,600 769
Tele Norte Leste Participacoes SA - ADR (N) 64,750 1,060
Unibanco - Uniao de Bancos Brasileiros SA - GDR
(AE) 52,640 5,109
------------
15,978
------------
Canada - 2.0%
Agrium, Inc. 35,000 1,357
AUR Resources, Inc. 68,500 1,505
Bombardier, Inc. (AE) 109,289 450
Cameco Corp. 25,400 1,184
Canadian Imperial Bank of Commerce 38,400 3,380
Canadian National Railway Co. 87,338 4,388
EnCana Corp. (N) 32,300 1,691
Gerdau Ameristeel Corp. 100,000 1,225
HudBay Minerals, Inc. (AE) 32,300 607
Inmet Mining Corp. 11,300 687
Methanex Corp. 37,897 903
Nexen, Inc. 23,959 1,426
Potash Corp. of Saskatchewan 11,800 2,118
Research In Motion, Ltd. (AE)(N) 43,700 5,750
Rogers Communications, Inc. Class B 231,900 8,890
Shoppers Drug Mart Corp. 45,391 2,069
SNC-Lavalin Group, Inc. 20,100 576
Suncor Energy, Inc. 23,600 1,894
Teck Cominco, Ltd.Class B 30,600 2,323
------------
42,423
------------
Cayman Islands - 0.4%
Ctrip.com International, Ltd. - ADR (N) 30,500 2,163
Foxconn International Holdings, Ltd. (AE)(N) 235,200 703
Kingboard Chemical Holdings, Ltd. 11,500 53
Melco PBL Entertainment Macau, Ltd. - ADR
(AE)(N) 176,050 3,067
Suntech Power Holdings Co., Ltd. - ADR (AE)(N) 57,800 2,097
------------
8,083
------------
China - 0.4%
Bank of Communications Co., Ltd. Class H 92,800 98
China Citic Bank (AE)(p) 54,000 45
China Coal Energy Co. (AE) 1,097,000 1,073
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
China Communications Construction Co., Ltd.
Class H (AE) 960,000 1,240
China Construction Bank Corp. Class H (N)(p) 1,177,000 714
China Merchants Bank Co., Ltd. (AE)(N) 493,500 1,201
China Petroleum & Chemical Corp. Class H 1,250,000 1,092
Industrial & Commercial Bank of China (AE)(N) 3,454,000 1,884
Yanzhou Coal Mining Co., Ltd. Class H 696,000 718
------------
8,065
------------
Czech Republic - 0.1%
Komercni Banka AS 7,353 1,377
------------
Denmark - 0.5%
Carlsberg A/S Class B 16,975 1,900
FLSmidth & Co. A/S (N) 45,600 3,421
Novo-Nordisk A/S Class B 7,000 684
Sydbank A/S (N) 8,400 470
Topdanmark A/S (AE) 4,160 815
Vestas Wind Systems A/S (AE) 49,400 3,191
------------
10,481
------------
Egypt - 0.1%
Orascom Construction Industries - GDR 11,037 1,288
------------
Finland - 1.2%
Cargotec Corp. Class B (N) 2,140 133
Kesko OYJ Class B 8,616 596
M-real OYJ Class B (N) 16,110 110
Nokia OYJ (N) 455,001 11,502
Nokia OYJ - ADR (N) 14,453 365
Orion OYJ Class B (N) 11,184 266
Outokumpu OYJ 14,180 469
Outotec Oyj (N) 37,234 1,606
Rautaruukki OYJ (N) 18,515 997
UPM-Kymmene OYJ 228,346 5,624
Wartsila Oyj Class B 18,500 1,233
YIT OYJ (N) 50,900 1,799
------------
24,700
------------
</Table>
34 International Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
France - 12.3%
Accor SA (N) 132,543 12,453
Air France-KLM (N) 43,461 2,217
Air Liquide SA (N) 27,262 6,758
Alstom RGPT (AE)(N) 59,379 8,806
Arkema (AE)(N) 14,774 883
AXA SA (N) 257,937 11,790
BNP Paribas (N) 138,856 16,070
Bouygues SA 704 56
Carrefour SA (N) 66,457 5,092
Casino Guichard Perrachon SA (N) 7,139 765
Christian Dior SA 6,957 897
Cie de Saint-Gobain (N) 95,281 10,135
Cie Generale d'Optique Essilor International SA
(N) 12,859 1,547
CNP Assurances (N) 10,702 1,364
Compagnie Generale de Geophysique-Veritas
(AE)(N) 7,937 1,652
Compagnie Generale des Etablissements Michelin
Class B (N) 16,200 2,056
Credit Agricole SA (N) 395,282 16,586
Electricite de France (N) 13,787 1,195
France Telecom SA (N) 305,563 8,908
Gaz de France SA (N) 45,990 2,152
JC Decaux SA (N) 86,868 2,697
L'Oreal SA (N) 19,010 2,278
Lafarge SA (N) 1,231 199
Lagardere SCA (N) 47,890 3,756
Legrand SA (N) 73,720 2,508
LVMH Moet Hennessy Louis Vuitton SA (N) 58,694 6,834
Neopost SA 8,495 1,230
Nexans SA (N) 2,735 401
NicOx SA (AE) 20,784 552
Pernod-Ricard SA (N) 22,586 4,798
Peugeot SA (N) 13,210 1,071
PPR SA (N) 10,961 1,900
Renault SA (N) 101,758 13,202
Rhodia SA (AE) 205,646 837
Sanofi-Aventis (N) 187,229 17,193
Schneider Electric SA (N) 53,767 7,574
Societe Generale (N) 103,219 21,847
Sodexho Alliance SA (N) 12,700 1,006
Suez SA (N) 42,283 2,399
Suez SA (AE) 27,332 --
Thales SA 10,159 616
Thomson (AE)(N) 70,250 1,357
Total SA (N) 392,991 29,015
Total SA - ADR 35,752 2,635
UBISOFT Entertainment (AE) 5,054 251
Unibail (N) 1,521 420
Valeo SA (N) 21,179 1,210
Vallourec SA 7,236 1,977
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Veolia Environnement (N) 176,804 14,599
Vivendi Universal SA (N) 76,451 3,151
------------
258,895
------------
Germany - 8.3%
Adidas AG (N) 30,060 1,795
Allianz SE (N) 47,779 10,839
BASF AG (N) 48,393 5,743
Bayer AG (N) 272,480 18,672
Bayerische Motoren Werke AG (N) 64,370 3,975
Bilfinger Berger AG 18,650 1,751
Commerzbank AG (N) 32,500 1,626
Continental AG (N) 101,151 14,108
DaimlerChrysler AG (N) 48,011 3,911
Deutsche Bank AG (N) 26,894 4,144
Deutsche Boerse AG (N) 18,422 4,337
Deutsche Lufthansa AG (N) 112,300 3,374
Deutsche Post AG 94,280 3,254
Deutsche Telekom AG (N) 507,212 9,244
Deutz AG (AE) 13,337 212
E.ON AG (N) 143,610 21,616
Epcos AG 27,439 587
Fresenius Medical Care AG & Co. KGaA (N) 26,093 3,930
Hannover Rueckversicherung AG (N) 13,180 669
Heidelberger Druckmaschinen AG (N) 12,110 572
Hugo Boss AG 3,168 211
Infineon Technologies AG (AE) 179,226 2,795
IVG Immobilien AG (N) 53,555 2,410
KarstadtQuelle AG (AE)(N) 134,660 5,203
Lanxess AG (AE) 21,687 1,178
Linde AG (N) 11,675 1,309
MTU Aero Engines Holding AG 18,075 1,049
Muenchener Rueckversicherungs AG (N) 41,012 7,287
RWE AG (N) 109,247 11,550
Salzgitter AG (N) 29,155 4,828
Siemens AG 66,880 8,077
Solarworld AG (N) 14,599 1,235
Stada Arzneimittel AG 22,043 1,450
ThyssenKrupp AG 1,853 100
United Internet AG (N) 72,678 1,337
Volkswagen AG (N) 31,066 4,717
Wacker Chemie AG (AE)(N) 29,085 5,305
Wincor Nixdorf AG 914 89
------------
174,489
------------
</Table>
International Fund 35
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Greece - 0.5%
Alpha Bank AE 5,900 179
National Bank of Greece SA 91,927 5,128
Piraeus Bank SA 39,600 1,430
Public Power Corp. SA 119,420 3,123
------------
9,860
------------
Hong Kong - 1.3%
Bank of East Asia, Ltd. 58,000 355
BOC Hong Kong Holdings, Ltd. 545,500 1,337
Cheung Kong Holdings, Ltd. 23,000 297
China Insurance International Holdings Co., Ltd.
(AE) 58,000 72
China Merchants Holdings International Co., Ltd. 482,000 2,138
China Mobile, Ltd. 735,000 6,639
China Netcom Group Corp. Hong Kong, Ltd. 133,000 328
China Resources Enterprise 154,000 517
China Unicom, Ltd. 44,000 64
CLP Holdings, Ltd. 21,500 157
CNOOC, Ltd. 2,522,900 2,166
Dah Sing Financial Holdings, Ltd. 6,000 51
Hang Lung Group, Ltd. 35,000 134
Henderson Land Development Co., Ltd. 37,000 222
Hong Kong Exchanges and Clearing, Ltd. 15,000 143
HongKong Electric Holdings 779,000 3,901
Hopewell Holdings (N) 37,000 163
Hutchison Whampoa, Ltd. 164,100 1,579
Link REIT (The) (o) 38,500 88
Melco International Development 790,000 1,530
New World Development, Ltd. 59,000 139
Shun Tak Holdings, Ltd. 1,366,000 1,897
Sino Land Co. (N) 370,293 775
Sun Hung Kai Properties, Ltd. 14,000 164
Swire Pacific, Ltd. 27,500 314
Television Broadcasts, Ltd. 8,000 53
Wharf Holdings, Ltd. (N) 734,537 2,706
Wheelock & Co., Ltd. (N) 74,000 171
------------
28,100
------------
Hungary - 0.0%
MOL Hungarian Oil and Gas PLC 3,700 451
------------
India - 0.2%
ICICI Bank, Ltd. - ADR (N) 43,772 1,791
Infosys Technologies, Ltd. - ADR (N) 22,000 1,152
State Bank of India, Ltd. - GDR 15,300 1,042
------------
3,985
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Indonesia - 0.1%
Bank Central Asia Tbk PT 1,918,500 1,110
Telekomunikasi Indonesia Tbk PT 1,698,200 1,957
------------
3,067
------------
Ireland - 0.5%
Anglo Irish Bank Corp. PLC 50,100 1,128
Bank of Ireland 6,900 149
Bank of Ireland PLC 24,644 528
Elan Corp. PLC - ADR (AE)(N) 196,600 2,729
Kingspan Group PLC 86,665 2,421
Ryanair Holdings PLC - ADR (AE)(N) 68,026 3,175
------------
10,130
------------
Israel - 0.1%
Teva Pharmaceutical Industries, Ltd. - ADR 37,390 1,432
------------
Italy - 3.8%
Assicurazioni Generali SpA (N) 26,310 1,210
Banco Popolare di Verona e Novara SCRL (N) 26,835 895
Benetton Group SpA (N) 34,575 593
Buzzi Unicem SpA (N) 78,351 2,499
Enel SpA 108,319 1,233
ENI SpA (N) 431,281 14,311
Esprinet SpA 6,024 127
Fiat SpA (AE)(N) 95,800 2,819
Fondiaria-Sai SpA (N) 65,957 3,491
Indesit Co. SpA (N) 13,883 324
Intesa Sanpaolo SpA (N) 2,927,295 24,487
Italcementi SpA (N) 92,672 2,956
Mediaset SpA (N) 189,680 2,143
Milano Assicurazioni SpA 103,004 1,009
Parmalat Finanziaria SpA (AE)(B) 46,200 --
Saras SpA (AE)(N) 207,410 1,291
Snam Rete Gas SpA (N) 105,822 675
Telecom Italia SpA (N) 89,882 220
UniCredito Italiano SpA (N) 1,825,441 18,711
Unione di Banche Italiane SCPA (AE) 3,377 102
Unipol SpA (N) 373,430 1,483
------------
80,579
------------
</Table>
36 International Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Japan - 16.9%
77 Bank, Ltd. (The) (N) 151,500 993
Aderans Co., Ltd. (N) 5,100 114
Advantest Corp. (N) 33,700 1,497
Aeon Co., Ltd. (N) 142,600 2,611
Aeon Credit Service Co., Ltd. (N) 86,500 1,439
Aioi Insurance Co., Ltd. 15,000 102
Amada Co., Ltd. 31,000 346
Asahi Breweries, Ltd. 30,900 502
Asahi Glass Co., Ltd. (N) 205,000 2,757
Asahi Kasei Corp. (N) 69,000 484
Astellas Pharma, Inc. 92,100 4,019
Bank of Nagoya, Ltd. (The) 16,000 109
Bosch Corp. (N) 43,000 207
Bridgestone Corp. (N) 90,500 1,823
Brother Industries, Ltd. 31,000 422
Calsonic Kansei Corp. (N) 33,000 148
Canon Marketing Japan, Inc. 6,800 132
Canon, Inc. 404,647 22,624
Chiba Bank, Ltd. (The) 18,000 149
Chugai Pharmaceutical Co., Ltd. (N) 221,400 5,646
Credit Saison Co., Ltd. 45,600 1,297
Dai Nippon Printing Co., Ltd. (N) 22,000 351
Daihatsu Motor Co., Ltd. (N) 13,000 109
Daiichi Sankyo Co., Ltd. 15,100 450
Daikin Industries, Ltd. (N) 62,200 2,103
Daishi Bank, Ltd. (The) 10,000 42
Daiwa House Industry Co., Ltd. 11,000 173
Daiwa Securities Group, Inc. 61,000 678
Denki Kagaku Kogyo Kabushiki Kaisha 56,000 243
Denso Corp. 10,800 382
Dentsu, Inc. (N) 802 2,280
East Japan Railway Co. 290 2,350
EDION Corp. (N) 63,700 882
Eisai Co., Ltd. 5,000 238
Fanuc, Ltd. 42,100 4,120
Fuji Electric Holdings Co., Ltd. 17,000 79
Fuji Fire & Marine Insurance Co., Ltd. (The) 54,000 222
Fuji Heavy Industries, Ltd. (N) 56,000 276
FUJIFILM Holdings Corp. 35,800 1,468
Fujikura, Ltd. (N) 7,000 45
Fujitsu, Ltd. (N) 86,000 540
Funai Electric Co., Ltd. (N) 5,270 418
Hakuhodo DY Holdings, Inc. (N) 1,490 101
Hankyu Department Stores (N) 6,000 53
Hino Motors, Ltd. (N) 290,800 1,603
Hirose Electric Co., Ltd. (N) 9,600 1,168
Hitachi, Ltd. (N) 65,000 494
Honda Motor Co., Ltd. 94,600 3,256
Hyakugo Bank, Ltd. (The) 6,000 40
Hyakujushi Bank, Ltd. (The) 5,000 29
Ibiden Co., Ltd. (N) 51,600 2,931
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Isuzu Motors, Ltd. 364,000 1,914
Itochu Corp. 94,000 924
Izumi Co., Ltd. (N) 13,200 229
Japan Steel Works, Ltd. (The) (N) 235,000 2,755
Japan Tobacco, Inc. 2,730 13,327
JFE Holdings, Inc. (N) 110,300 5,990
JGC Corp. (N) 21,000 322
JS Group Corp. 44,700 1,009
Kagoshima Bank, Ltd. (The) 6,000 44
Kansai Electric Power Co., Inc. (The) 32,100 895
Kao Corp. (N) 558,100 15,325
Kawasaki Kisen Kaisha, Ltd. (N) 40,000 432
KDDI Corp. 891 6,995
Keiyo Bank, Ltd. (The) 15,000 86
Kinden Corp. 6,000 57
Kobe Steel, Ltd. 116,000 409
Komatsu, Ltd. 162,300 3,849
Komori Corp. 5,000 116
Konica Minolta Holdings, Inc. 9,500 130
Kubota Corp. (N) 53,000 500
Kuraray Co., Ltd. 82,900 922
Kyocera Corp. 6,400 622
Kyushu Electric Power Co., Inc. 60,300 1,696
Lawson, Inc. (N) 24,300 896
Leopalace21 Corp. 18,500 607
Makita Corp. (N) 8,600 328
Marubeni Corp. 468,000 2,796
Matsumotokiyoshi Co., Ltd. (N) 41,400 972
Matsushita Electric Industrial Co., Ltd. 49,000 947
Matsushita Electric Works, Ltd. 37,000 417
Mazda Motor Corp. (N) 95,000 476
Meiji Dairies Corp. (N) 16,000 128
Millea Holdings, Inc. 151,900 5,625
Mitsubishi Chemical Holdings Corp. (N) 85,500 688
Mitsubishi Corp. 225,400 4,809
Mitsubishi Electric Corp. 189,000 1,832
Mitsubishi Estate Co., Ltd. 25,000 774
Mitsubishi Heavy Industries, Ltd. 265,000 1,631
Mitsubishi UFJ Financial Group, Inc. 416 4,349
Mitsui & Co., Ltd. 160,000 2,853
Mitsui Chemicals, Inc. (N) 297,000 2,444
Mitsui Engineering & Shipbuilding Co., Ltd. 278,000 1,243
Mitsui Fudosan Co., Ltd. 19,000 555
Mitsui OSK Lines, Ltd. 260,000 3,273
Mitsui Sumitomo Insurance Co., Ltd. 5,000 62
</Table>
International Fund 37
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mitsui Trust Holdings, Inc. 343,100 3,107
Mitsumi Electric Co., Ltd. (N) 48,200 1,606
Mizuho Financial Group, Inc. 477 2,874
Mori Seiki Co., Ltd. (N) 10,000 263
Nabtesco Corp. (N) 6,000 81
Namco Bandai Holdings, Inc. (AE) 76,800 1,249
Nichirei Corp. 80,000 477
Nihon Unisys, Ltd. 5,900 75
Nikon Corp. (N) 126,300 2,897
Nintendo Co., Ltd. 28,800 8,960
Nippon Electric Glass Co., Ltd. (N) 108,000 1,851
Nippon Express Co., Ltd. (N) 436,400 2,704
Nippon Kayaku Co., Ltd. (N) 3,000 24
Nippon Mining Holdings, Inc. 197,000 1,583
Nippon Oil Corp. 64,000 491
Nippon Paint Co., Ltd. 26,000 152
Nippon Paper Group, Inc. (N) 362 1,226
Nippon Steel Corp. (N) 120,000 767
Nippon Telegraph & Telephone Corp. 713 3,548
Nippon Yusen KK (N) 281,000 2,421
Nissan Motor Co., Ltd. 433,600 4,375
Nisshin Seifun Group, Inc. (N) 17,000 183
NOK Corp. (N) 82,100 1,526
Nomura Holdings, Inc. 378,500 7,290
Nomura Research Institute, Ltd. (N) 6,000 160
Noritsu Koki Co., Ltd. 1,400 25
NTN Corp. (N) 20,000 166
NTT Data Corp. (N) 27 132
NTT DoCoMo, Inc. 201 343
NTT Urban Development Corp. (N) 691 1,632
Oki Electric Industry Co., Ltd. (AE)(N) 383,000 660
Omron Corp. 73,800 1,976
ORIX Corp. (N) 21,400 5,701
Pacific Metals Co., Ltd. (N) 8,000 125
Rakuten, Inc. (N) 4,050 1,634
Resona Holdings, Inc. (N) 133 300
Ricoh Co., Ltd. 472,300 10,358
Rohm Co., Ltd. 31,900 2,871
San-In Godo Bank, Ltd. (The) 6,000 60
Sankyo Co., Ltd. 5,600 245
Santen Pharmaceutical Co., Ltd. (N) 5,500 151
Sapporo Hokuyo Holdings, Inc. 32 309
Secom Co., Ltd. 2,100 95
Seiko Epson Corp. (N) 67,000 2,030
Seino Holdings Corp. (N) 13,000 122
Sekisui Chemical Co., Ltd. 216,900 1,684
Sekisui House, Ltd. 154,600 2,285
Seven & I Holdings Co., Ltd. (N) 2,600 75
SFCG Co., Ltd. (N) 3,589 631
Sharp Corp. 148,000 2,709
Shiga Bank, Ltd. (The) 8,000 56
Shimano, Inc. 2,700 89
Shin-Etsu Chemical Co., Ltd. 23,900 1,547
Shinsei Bank, Ltd. (N) 562,600 2,419
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Shizuoka Bank, Ltd. (The) (N) 133,000 1,402
Showa Shell Sekiyu KK (N) 5,600 67
Sohgo Security Services Co., Ltd. (N) 14,600 281
Sompo Japan Insurance, Inc. 34,000 416
Sony Corp. 48,700 2,594
Sumco Corp. (N) 97,700 4,250
Sumitomo Chemical Co., Ltd. 26,000 172
Sumitomo Corp. 10,200 173
Sumitomo Heavy Industries, Ltd. 276,000 2,846
Sumitomo Metal Industries, Ltd. 85,000 431
Sumitomo Mitsui Financial Group, Inc. (N) 1,337 11,698
Sumitomo Realty & Development Co., Ltd. (N) 88,000 3,244
Sumitomo Trust & Banking Co., Ltd. (The) 57,000 557
Suzuken Co., Ltd. 5,300 186
Suzuki Motor Corp. (N) 18,600 530
Taiheiyo Cement Corp. (N) 205,000 875
Takeda Pharmaceutical Co., Ltd. 117,800 7,636
Takefuji Corp. (N) 970 33
Teijin, Ltd. 208,400 1,075
Terumo Corp. (N) 54,500 2,204
THK Co., Ltd. (N) 38,800 948
Tobu Railway Co., Ltd. (N) 19,000 87
Toho Co., Ltd./Tokyo (N) 3,700 73
Toho Titanium Co., Ltd. (N) 12,000 572
Tokai Rubber Industries, Inc. (N) 9,600 185
Tokuyama Corp. (N) 103,000 1,549
Tokyo Electric Power Co., Inc. (The) (N) 92,500 3,068
Tokyo Electron, Ltd. 3,300 229
Tokyo Gas Co., Ltd. (N) 315,000 1,578
Tokyo Style Co., Ltd. (N) 6,000 71
Tokyu Corp. (N) 24,000 174
Tokyu Land Corp. (N) 151,000 1,711
Toppan Forms Co., Ltd. 6,600 83
Toshiba Corp. (N) 454,000 3,387
Toyo Seikan Kaisha, Ltd. (N) 4,200 84
Toyobo Co., Ltd. 57,000 172
Toyota Auto Body Co., Ltd. 3,000 54
Toyota Boshoku Corp. 1,200 27
Toyota Motor Corp. 543,900 33,136
West Japan Railway Co. 559 2,529
Yamada Denki Co., Ltd. (N) 39,880 3,675
Yamato Kogyo Co., Ltd. (N) 5,100 167
------------
355,347
------------
</Table>
38 International Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Luxembourg - 0.2%
Evraz Group SA - GDR 33,922 1,196
Millicom International Cellular SA (AE)(N) 37,800 3,071
SES Global SA 42,500 831
------------
5,098
------------
Mexico - 1.0%
America Movil SAB de CV
Series L 219,169 11,513
Cemex SAB de CV - ADR (AE) 58,738 1,909
Coca-Cola Femsa SAB de CV - ADR (N) 22,340 869
Fomento Economico Mexicano SAB de CV - ADR 20,136 2,168
Grupo Televisa SA - ADR 128,595 3,607
------------
20,066
------------
Netherlands - 3.1%
ABN AMRO Holding NV (N) 91,237 4,449
Aegon NV (N) 85,631 1,759
Akzo Nobel NV (N) 14,233 1,137
Arcelor Mittal (N) 73,746 3,928
ASML Holding NV (AE) 123,120 3,322
Corporate Express (N) 62,600 841
European Aeronautic Defense and Space Co. NV (N) 71,020 2,275
Heineken Holding NV 2,732 127
Hunter Douglas NV 3,692 333
ING Groep NV (N) 414,872 18,833
Koninklijke Ahold NV (AE) 100,723 1,279
Koninklijke BAM Groep NV (N) 49,722 1,315
Koninklijke Philips Electronics NV 58,110 2,381
OCE NV 16,417 309
Reed Elsevier NV (N) 285,990 5,366
Rodamco Europe NV (N) 2,519 371
Royal KPN NV 93,455 1,583
Royal Numico NV (N) 52,127 2,879
SBM Offshore NV (N) 34,701 1,238
TNT NV (N) 63,660 2,868
Unilever NV 159,440 4,852
Univar NV 3,261 179
Vedior NV (N) 35,700 946
Wolters Kluwer NV 56,400 1,669
------------
64,239
------------
Netherlands Antilles - 0.3%
Schlumberger, Ltd. (N) 81,410 6,010
------------
New Zealand - 0.1%
Telecom Corp. of New Zealand, Ltd. (N) 834,826 2,969
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Norway - 0.3%
Aker Kvaerner ASA (N) 64,500 1,522
Renewable Energy Corp. AS (AE) 120,750 3,472
Yara International ASA (N) 43,000 1,253
------------
6,247
------------
Russia - 0.1%
OAO Gazprom - ADR 6,800 266
Vimpel-Communications - ADR (AE)(N) 18,000 1,742
------------
2,008
------------
Singapore - 0.9%
Ascendas Real Estate Investment Trust (AE)(o)(N) 6,000 10
CapitaCommercial Trust (AE)(o) 8,000 15
CapitaLand, Ltd. 877,000 4,838
CapitaMall Trust (AE)(o) 9,000 23
City Developments, Ltd. (N) 147,000 1,539
Creative Technology, Ltd. 3,600 21
DBS Group Holdings, Ltd. (N) 315,440 4,372
Flextronics International, Ltd. (AE)(N) 97,000 1,082
Fraser and Neave, Ltd. (N) 58,000 204
Jardine Cycle & Carriage, Ltd. (N) 7,000 61
Keppel Corp., Ltd. (AE)(N) 12,000 167
NatSteel, Ltd. 46,400 47
Neptune Orient Lines, Ltd. (N) 48,000 113
Oversea-Chinese Banking Corp. 460,800 2,703
Pacific Century Regional Developments, Ltd. (AE) 199,000 52
SembCorp Industries, Ltd. (N) 41,580 133
Singapore Airlines, Ltd. 25,000 297
Singapore Telecommunications, Ltd. 1,258,500 2,724
Suntec Real Estate Investment Trust (AE)(o) 4,000 5
United Overseas Bank, Ltd. (N) 95,200 1,330
Wing Tai Holdings, Ltd. 37,000 81
------------
19,817
------------
South Africa - 0.2%
MTN Group, Ltd. 139,600 2,037
Nedbank Group, Ltd. 53,445 1,140
Sanlam, Ltd. 209,900 706
Standard Bank Group, Ltd. 19,000 297
------------
4,180
------------
</Table>
International Fund 39
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
South Korea - 1.1%
Honam Petrochemical Corp. 5,700 472
Hynix Semiconductor, Inc. (AE) 33,360 1,142
Hyundai Mobis 7,500 600
Industrial Bank of Korea (N) 34,000 678
Kookmin Bank 5,500 493
Korea Electric Power Corp. - ADR 37,410 774
KT Corp. - ADR 46,360 1,051
LG Electronics, Inc. (N) 60,900 4,068
POSCO 3,960 1,663
Samsung Electronics Co., Ltd. 12,239 7,494
Samsung Heavy Industries Co., Ltd. 40,830 1,337
Shinhan Financial Group Co., Ltd. 21,900 1,233
SK Telecom Co., Ltd. - ADR 43,630 1,083
------------
22,088
------------
Spain - 2.0%
Abengoa SA 698 28
Avanzit SA (AE) 52,036 506
Banco Bilbao Vizcaya Argentaria SA (N) 114,817 2,735
Banco Santander Central Hispano SA (N) 470,317 8,384
Endesa SA 15,487 848
Fomento de Construcciones y Contratas SA 7,222 669
Gamesa Corp. Tecnologica SA (N) 48,507 1,661
Gestevision Telecinco SA (AE)(N) 34,555 1,040
Grifols SA (AE)(N) 36,372 629
Iberdrola SA (N) 118,065 5,836
Iberdrola SA 4,034 200
Iberia Lineas Aereas de Espana 195,782 1,001
Mapfre SA (N) 175,881 913
Repsol YPF SA (N) 132,990 4,364
Repsol YPF SA - ADR (N) 20,803 684
Sol Melia SA 68,400 1,670
Telefonica SA (N) 472,164 10,532
Union Fenosa SA 9,470 516
------------
42,216
------------
Sweden - 1.4%
Alfa Laval AB (N) 46,900 2,855
Assa Abloy AB Class B (N) 94,000 2,103
D Carnegie & Co. AB (N) 16,700 330
Electrolux AB 101,200 2,627
JM AB (N) 26,600 911
JM AB (AE) 30,200 --
Kungsleden AB (N) 16,300 263
Lindex AB (N) 9,200 124
Nobia AB (N) 9,150 125
Sandvik AB (N) 129,400 2,465
Scania AB Class B (AE)(N) 17,450 1,663
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Skandinaviska Enskilda Banken AB Class A (N) 19,400 709
Ssab Svenskt Stal AB (N)
Class A 138,100 4,866
Class B 7,600 251
Svenska Cellulosa AB Class B (N) 35,440 1,823
Swedbank AB (N) 33,600 1,291
Swedish Match AB (AE) 12,800 236
Telefonaktiebolaget LM Ericsson - ADR 33,490 1,278
Telefonaktiebolaget LM Ericsson Class B (N) 707,650 2,698
TeliaSonera AB (N) 79,500 644
Volvo AB (AE)
Class A 15,500 307
Class B 85,235 1,655
Class D 20,147 74
------------
29,298
------------
Switzerland - 7.7%
ABB, Ltd. (N) 271,260 5,422
Actelion, Ltd. (AE) 21,487 5,099
Barry Callebaut AG (AE) 236 195
Ciba Specialty Chemicals AG 37,280 2,451
Clariant AG (AE) 47,120 775
Compagnie Financiere Richemont SA Class A (N) 58,190 3,508
Credit Suisse Group 126,816 9,965
Geberit AG (AE) 539 956
Givaudan SA 2,620 2,450
Holcim, Ltd. 46,461 4,968
Julius Baer Holding AG (N) 155,226 10,814
Kudelski SA (AE)(N) 10,296 394
Kuoni Reisen Holding 237 148
Lonza Group AG 42,612 4,146
Nestle SA (N) 77,586 30,738
Nobel Biocare Holding AG (N) 4,700 1,697
Novartis AG 154,487 8,993
Roche Holding AG (N) 124,231 23,435
Sulzer AG 729 959
Swatch Group AG (N) 61,080 3,547
Swiss Reinsurance (N) 159,319 15,021
Swisscom AG (N) 2,134 751
Syngenta AG (AE) 28,074 5,584
UBS AG 274,435 17,787
Zurich Financial Services AG (N) 7,494 2,170
------------
161,973
------------
</Table>
40 International Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Taiwan - 0.3%
AU Optronics Corp. 1,535,000 2,437
HON HAI Precision Industry Co., Ltd. 122,800 809
Siliconware Precision Industries Co. 519,000 986
Taiwan Semiconductor Manufacturing Co., Ltd. 369,000 753
United Microelectronics Corp. 1,087,000 626
United Microelectronics Corp. - ADR (N) 356,560 1,169
------------
6,780
------------
Thailand - 0.1%
Bangkok Bank PCL 307,280 992
PTT PCL 48,200 305
------------
1,297
------------
United Kingdom - 17.7%
3i Group PLC 2,622 60
Alliance Boots PLC 195,039 4,356
Amvescap PLC 330,938 3,879
Anglo American PLC 23,921 1,266
Antofagasta PLC 9,337 99
ARM Holdings PLC 766,484 2,040
AstraZeneca PLC 95,082 5,174
Aviva PLC 465,603 7,305
BAE Systems PLC 798,589 7,248
Barclays PLC 732,516 10,549
Berkeley Group Holdings PLC (AE) 11,939 410
BG Group PLC 580,326 8,375
BHP Billiton PLC 241,663 5,389
BP PLC 1,494,062 16,787
Bradford & Bingley PLC 597 5
British Airways PLC (AE) 94,136 947
British American Tobacco PLC 23,726 732
British Energy Group PLC (AE) 184,558 1,901
British Land Co. PLC (o) 48,886 1,428
British Sky Broadcasting Group PLC 276,354 3,165
BT Group PLC 746,736 4,715
Burberry Group PLC 93,394 1,282
Carnival PLC 558 28
Centrica PLC 390,886 3,012
Charter PLC (AE) 47,893 977
Compass Group PLC 349,557 2,529
Daily Mail & General Trust Class A 53,922 898
Davis Service Group PLC 13,200 167
De La Rue PLC 18,000 255
Debenhams PLC 376,580 1,080
Diageo PLC 348,912 7,359
Drax Group PLC (AE) 1 --
easyJet PLC (AE) 182,705 2,566
Enterprise Inns PLC 2,184 28
Experian Group, Ltd. 89,088 1,007
Fiberweb PLC 26,317 99
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Firstgroup PLC 467 6
FKI PLC 17,877 43
Friends Provident PLC 928,740 3,500
Galiform PLC (AE) 21,504 70
George Wimpey PLC 125,600 1,456
GKN PLC 384,348 2,955
GlaxoSmithKline PLC 971,772 28,117
Hammerson PLC (o) 1,395 42
HBOS PLC 722,490 15,508
Home Retail Group 199,468 1,816
HSBC Holdings PLC 554,362 10,238
Imperial Chemical Industries PLC 88,499 938
Inchcape PLC 23,030 259
International Power PLC 481,215 4,204
Invensys PLC (AE) 80,378 529
Investec PLC 442 6
ITV PLC 9,023 21
J Sainsbury PLC 138,543 1,578
Kelda Group PLC 65,200 1,207
Kesa Electricals PLC 401,475 2,691
Ladbrokes PLC 352,815 2,865
Land Securities Group PLC (o) 11,345 442
Legal & General Group PLC 465,807 1,428
Lloyds TSB Group PLC 695,364 8,019
London Stock Exchange Group PLC 1,550 39
Man Group PLC 742,981 8,312
Marks & Spencer Group PLC 16,192 239
Marston's PLC 142,400 1,217
Michael Page International PLC 119,754 1,371
Next PLC 66,676 3,107
Northern Rock PLC 132,337 2,832
Old Mutual PLC 604,190 2,145
Pearson PLC 84,119 1,438
Premier Farnell PLC 1,490 6
Premier Foods PLC 701 4
Reckitt Benckiser PLC 288,271 15,796
Reed Elsevier PLC 174,216 2,208
Rentokil Initial PLC 723,210 2,489
Resolution PLC 2,239 29
Rexam PLC 97,210 1,017
Rio Tinto PLC 106,812 6,512
Rolls-Royce Group PLC (AE) 198,990 1,901
Royal & Sun Alliance Insurance Group PLC 878,991 2,909
Royal Bank of Scotland Group PLC 508,139 19,445
Royal Dutch Shell PLC Class A (N) 353,059 12,349
Royal Dutch Shell PLC Class A 184,104 6,415
Royal Dutch Shell PLC Class B 54,694 1,938
</Table>
International Fund 41
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SABMiller PLC 101,252 2,393
Schroders PLC 69,000 1,758
Scottish & Newcastle PLC 5,127 63
Scottish & Southern Energy PLC 11,571 346
Smith & Nephew PLC 243,345 3,044
Smiths Group PLC 230,170 4,974
Stagecoach Group PLC 230,181 851
Standard Life PLC (N) 17,299 111
Taylor Woodrow PLC 81,900 789
Tesco PLC 2,695,939 24,774
Trinity Mirror PLC 162,254 1,727
Unilever PLC 461,997 14,459
Vodafone Group PLC 4,139,440 11,783
William Hill PLC 395,004 4,699
WPP Group PLC 322,380 4,774
Xstrata PLC 107,299 5,625
------------
370,943
------------
United States - 0.1%
Mettler Toledo International, Inc. (AE)(N) 16,800 1,640
Synthes, Inc. 11,341 1,484
------------
3,124
------------
TOTAL COMMON STOCKS
(cost $1,509,265) 1,944,529
------------
PREFERRED STOCKS - 0.4%
Brazil - 0.2%
Banco Itau Holding Financeira SA 74,000 2,849
Petroleo Brasileiro SA 29,000 645
Usinas Siderurgicas de Minas
Gerais SA 27,500 1,307
------------
4,801
------------
Germany - 0.1%
Henkel KGaA (N) 4,670 735
Hugo Boss AG 15,840 979
Volkswagen AG (N) 4,260 433
------------
2,147
------------
South Korea - 0.1%
Hyundai Motor Co. 11,040 359
Samsung Electronics Co., Ltd. 900 424
------------
783
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United Kingdom - 0.0%
Rolls-Royce Group PLC (AE)(N) 15,001,575 31
------------
TOTAL PREFERRED STOCKS
(cost $6,395) 7,762
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
- -----------------------------------------------------------------------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Hong Kong - 0.0%
Hang Seng Index
May 2007 20,473.83 (HKD)
Call (53) 6,936 169
------------
Switzerland - 0.0%
Swiss Market Index
Jun 2007 9,467.82 (CHF)
Call (114) 8,937 472
------------
TOTAL OPTIONS PURCHASED
(cost $642) 641
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
WARRANTS & RIGHTS - 0.3%
Netherlands Antilles - 0.1%
Reliance Communications, Ltd.
2011 Warrants (AE) 136,571 1,588
------------
United Kingdom - 0.1%
Infosys Technologies, Ltd. (AE)
2010 Warrants 24,200 1,205
2017 Warrants 2,500 124
------------
1,329
------------
United States - 0.1%
Bharti Airtel, Ltd.
2012 Warrants (AE) 100,800 1,987
------------
TOTAL WARRANTS & RIGHTS
(cost $4,146) 4,904
------------
</Table>
42 International Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 5.7%
United States - 5.7%
Russell Investment Company
Money Market Fund 112,249,001 112,249
United States Treasury Bills (c)(z)(sec.)
5.046% due 06/14/07 7,000 6,958
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $119,207) 119,207
------------
OTHER SECURITIES - 33.7%
Russell Investment Company
Money Market Fund (X) 136,031,348 136,031
State Street Securities
Lending Quality Trust (X) 571,683,682 571,684
------------
TOTAL OTHER SECURITIES
(cost $707,715) 707,715
------------
TOTAL INVESTMENTS - 132.7%
(identified cost $2,347,370) 2,784,758
OTHER ASSETS AND LIABILITIES,
NET - (32.7%) (686,535)
------------
NET ASSETS - 100.0% 2,098,223
============
</Table>
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
International Fund 43
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
AEX Index (Netherlands)
expiration date 05/07 (109) 15,777 144
CAC-40 Index (France)
expiration date 05/07 (190) 15,362 263
DAX Index (Germany)
expiration date 06/07 (131) 33,305 3,340
EUR STOXX 50 Index (EMU)
expiration date 06/07 (420) 24,882 2,251
FTSE-100 Index (UK)
expiration date 06/07 (210) 27,161 994
Hang Seng Index (Hong Kong)
expiration date 05/07 (21) 2,698 (43)
MSCI Singapore Index
expiration date 05/07 (4) 216 (1)
SPI 200 Index (Australia)
expiration date 06/07 (58) 7,451 256
TOPIX Index (Japan)
expiration date 06/07 (273) 38,835 33
Short Positions
CAC-40 Index (France)
expiration date 05/07 (102) 8,247 (246)
FTSE-100 Index (UK)
expiration date 06/07 (136) 17,590 (758)
Hang Seng Index (Hong Kong)
expiration date 05/07 (4) 514 6
IBEX Plus Index (Spain)
expiration date 05/07 (20) 3,899 38
MIB-30 (Italy)
expiration date 06/07 (37) 10,885 (901)
OMX Index (Sweden)
expiration date 05/07 (8) 152 (2)
SPI 200 Index (Australia)
expiration date 06/07 (110) 14,132 (668)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 4,706
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Switzerland
Swiss Market Index
Jun 2007 9,467.82 (CHF) Put (114) 8,937 (472)
Hong Kong
Hang Seng Index
May 2007 20,473.83 (HKD) Put (53) 6,936 (169)
---------------
Total Liability for Options Written
(premiums received $642) (641)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
44 International Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 224 AUD 270 05/01/07 1
USD 236 AUD 300 06/20/07 13
USD 292 AUD 350 06/20/07 (2)
USD 385 AUD 500 06/20/07 29
USD 401 AUD 500 06/20/07 13
USD 633 AUD 800 06/20/07 31
USD 771 AUD 1,000 06/20/07 58
USD 794 AUD 1,000 06/20/07 35
USD 2,311 AUD 3,000 06/20/07 177
USD 2,489 AUD 3,043 06/20/07 35
USD 2,784 AUD 3,403 06/20/07 39
USD 8,642 AUD 11,200 06/20/07 648
USD 104 CAD 116 05/02/07 1
USD 69 CAD 77 05/03/07 --
USD 259 CHF 313 05/01/07 --
USD 92 CHF 111 05/02/07 --
USD 223 CHF 269 05/02/07 --
USD 1,393 CHF 1,675 05/02/07 (6)
USD 163 CHF 197 05/03/07 --
USD 4,149 CHF 4,992 06/20/07 2
USD 6,029 CHF 7,257 06/20/07 6
USD 8,565 CHF 10,307 06/20/07 6
USD 27,423 CHF 33,016 06/20/07 33
USD 49,322 CHF 59,340 06/20/07 24
USD 1 DKK 5 06/20/07 --
USD 50 DKK 272 06/20/07 --
USD 73 DKK 406 06/20/07 2
USD 325 DKK 1,817 06/20/07 8
USD 1 EUR -- 05/02/07 --
USD 4 EUR 3 05/02/07 --
USD 180 EUR 133 05/02/07 --
USD 326 EUR 239 05/02/07 --
USD 441 EUR 324 05/02/07 1
USD 521 EUR 383 05/02/07 2
USD 969 EUR 712 05/02/07 3
USD 526 EUR 400 06/20/07 21
USD 1,233 EUR 924 06/20/07 30
USD 1,359 EUR 1,000 06/20/07 8
USD 1,363 EUR 1,000 06/20/07 4
USD 1,367 EUR 1,000 06/20/07 --
USD 1,709 EUR 1,300 06/20/07 69
USD 2,002 EUR 1,500 06/20/07 49
USD 2,479 EUR 1,858 06/20/07 61
USD 2,630 EUR 2,000 06/20/07 105
USD 2,658 EUR 2,000 06/20/07 77
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 2,721 EUR 2,000 06/20/07 14
USD 4,007 EUR 3,000 06/20/07 95
USD 5,346 EUR 4,000 06/20/07 124
USD 5,486 EUR 4,113 06/20/07 137
USD 5,959 EUR 4,500 06/20/07 194
USD 9,474 EUR 7,101 06/20/07 236
USD 13,834 EUR 10,325 06/20/07 284
USD 15,475 EUR 11,780 06/20/07 632
USD 22,460 EUR 16,833 06/20/07 556
USD 22,478 EUR 17,100 06/20/07 903
USD 57,824 EUR 44,000 06/20/07 2,339
USD 115 GBP 58 05/01/07 1
USD 719 GBP 361 05/01/07 3
USD 73 GBP 37 05/02/07 --
USD 79 GBP 40 05/02/07 --
USD 91 GBP 45 05/02/07 --
USD 88 GBP 44 05/03/07 --
USD 301 GBP 150 06/20/07 (1)
USD 969 GBP 500 06/20/07 31
USD 972 GBP 500 06/20/07 28
USD 1,001 GBP 507 06/20/07 12
USD 1,001 GBP 507 06/20/07 12
USD 1,945 GBP 1,000 06/20/07 54
USD 1,961 GBP 1,000 06/20/07 38
USD 2,001 GBP 1,013 06/20/07 25
USD 2,119 GBP 1,100 06/20/07 80
USD 2,552 GBP 1,300 06/20/07 47
USD 2,912 GBP 1,500 06/20/07 87
USD 4,623 GBP 2,400 06/20/07 175
USD 6,806 GBP 3,444 06/20/07 79
USD 7,103 GBP 3,690 06/20/07 273
USD 8,192 GBP 4,213 06/20/07 230
USD 12,508 GBP 6,432 06/20/07 349
USD 13,214 GBP 6,689 06/20/07 158
USD 13,388 GBP 6,883 06/20/07 372
USD 16,286 GBP 8,371 06/20/07 449
USD 41,393 GBP 21,500 06/20/07 1,587
USD 77 HKD 600 05/02/07 --
USD 8 HKD 66 06/20/07 --
USD 41 HKD 322 06/20/07 --
USD 58 HKD 454 06/20/07 --
USD 140 HKD 1,088 06/20/07 --
USD 229 HKD 1,786 06/20/07 (1)
USD 155 JPY 18,478 05/01/07 --
USD 221 JPY 26,276 05/01/07 (1)
</Table>
See accompanying notes which are an integral part of the financial statements.
International Fund 45
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 320 JPY 38,264 05/01/07 --
USD 24 JPY 2,890 05/02/07 --
USD 634 JPY 75,722 05/02/07 (1)
USD 354 JPY 42,079 05/07/07 (1)
USD 3,196 JPY 381,759 05/07/07 (1)
USD 151 JPY 17,619 06/20/07 (3)
USD 861 JPY 100,000 06/20/07 (18)
USD 869 JPY 100,000 06/20/07 (26)
USD 1,292 JPY 150,000 06/20/07 (28)
USD 1,685 JPY 200,000 06/20/07 --
USD 1,729 JPY 200,000 06/20/07 (44)
USD 1,739 JPY 200,000 06/20/07 (54)
USD 1,741 JPY 200,000 06/20/07 (56)
USD 2,601 JPY 300,000 06/20/07 (73)
USD 2,943 JPY 342,600 06/20/07 (57)
USD 2,946 JPY 350,000 06/20/07 3
USD 7,318 JPY 850,255 06/20/07 (154)
USD 10,866 JPY 1,250,000 06/20/07 (334)
USD 11,916 JPY 1,386,547 06/20/07 (234)
USD 27,861 JPY 3,237,722 06/20/07 (582)
USD 31,287 JPY 3,600,000 06/20/07 (956)
USD 326 NOK 1,940 05/03/07 --
USD 419 NOK 2,490 05/04/07 (1)
USD 87 SEK 582 05/02/07 --
USD 197 SEK 1,318 05/03/07 --
USD 41 SEK 272 05/04/07 --
USD 856 SEK 5,745 06/20/07 4
USD 971 SEK 6,742 06/20/07 38
USD 2,301 SEK 15,468 06/20/07 14
USD 2,920 SEK 20,225 06/20/07 107
USD 3,979 SEK 27,529 06/20/07 141
USD 6,810 SEK 47,191 06/20/07 252
USD 6,820 SEK 47,191 06/20/07 243
USD 7,356 SEK 49,528 06/20/07 56
USD 12,273 SEK 82,546 06/20/07 81
USD 249 SGD 378 06/20/07 --
USD 2,177 SGD 3,303 06/20/07 5
USD 2,819 SGD 4,275 06/20/07 5
USD 5,555 SGD 8,424 06/20/07 11
USD 8,946 SGD 13,572 06/20/07 20
USD 13,722 SGD 20,816 06/20/07 31
AUD 200 USD 162 06/20/07 (4)
AUD 500 USD 391 06/20/07 (24)
AUD 500 USD 393 06/20/07 (22)
AUD 500 USD 416 06/20/07 1
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
AUD 500 USD 416 06/20/07 2
AUD 600 USD 463 06/20/07 (35)
AUD 900 USD 694 06/20/07 (53)
AUD 1,400 USD 1,080 06/20/07 (82)
AUD 1,462 USD 1,220 06/20/07 7
AUD 2,052 USD 1,711 06/20/07 9
AUD 2,400 USD 1,868 06/20/07 (122)
AUD 2,900 USD 2,235 06/20/07 (170)
AUD 2,924 USD 2,440 06/20/07 15
AUD 2,924 USD 2,438 06/20/07 13
AUD 6,579 USD 5,487 06/20/07 30
CAD 19 USD 17 05/01/07 --
CAD 83 USD 74 05/01/07 (1)
CAD 139 USD 125 05/02/07 --
CAD 163 USD 147 05/03/07 --
CHF 269 USD 224 06/20/07 --
CHF 3,976 USD 3,277 06/20/07 (30)
CHF 8,247 USD 6,854 06/20/07 (4)
CHF 11,322 USD 9,448 06/20/07 33
CHF 16,943 USD 14,081 06/20/07 (9)
CHF 17,779 USD 14,834 06/20/07 49
CHF 33,936 USD 28,192 06/20/07 (29)
DKK 272 USD 50 05/01/07 --
DKK 91 USD 17 06/20/07 --
DKK 1,973 USD 353 06/20/07 (9)
DKK 2,428 USD 435 06/20/07 (11)
EUR 99 USD 135 05/02/07 --
EUR 170 USD 230 05/02/07 (2)
EUR 486 USD 664 05/02/07 1
EUR 175 USD 238 05/03/07 --
EUR 480 USD 654 05/03/07 (1)
EUR 498 USD 680 05/03/07 (1)
EUR 143 USD 195 05/04/07 --
EUR 464 USD 633 06/20/07 (2)
EUR 500 USD 669 06/20/07 (15)
EUR 500 USD 670 06/20/07 (14)
EUR 500 USD 684 06/20/07 --
EUR 500 USD 684 06/20/07 1
EUR 600 USD 814 06/20/07 (6)
EUR 781 USD 1,041 06/20/07 (26)
EUR 1,000 USD 1,324 06/20/07 (43)
EUR 1,000 USD 1,338 06/20/07 (30)
EUR 1,000 USD 1,341 06/20/07 (26)
EUR 1,000 USD 1,358 06/20/07 (9)
EUR 1,000 USD 1,365 06/20/07 (2)
</Table>
See accompanying notes which are an integral part of the financial statements.
46 International Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 1,000 USD 1,366 06/20/07 (1)
EUR 1,000 USD 1,366 06/20/07 (1)
EUR 1,500 USD 2,051 06/20/07 --
EUR 2,000 USD 2,646 06/20/07 (89)
EUR 2,000 USD 2,728 06/20/07 (7)
EUR 3,000 USD 3,987 06/20/07 (115)
EUR 4,000 USD 5,263 06/20/07 (207)
EUR 4,500 USD 5,917 06/20/07 (236)
EUR 7,000 USD 9,204 06/20/07 (368)
EUR 8,107 USD 10,816 06/20/07 (269)
EUR 10,000 USD 13,166 06/20/07 (507)
EUR 14,140 USD 18,873 06/20/07 (462)
EUR 15,300 USD 20,113 06/20/07 (807)
EUR 18,126 USD 24,180 06/20/07 (604)
GBP 18 USD 35 05/01/07 --
GBP 54 USD 107 05/01/07 (1)
GBP 60 USD 119 05/01/07 (1)
GBP 125 USD 249 05/01/07 --
GBP 81 USD 163 05/02/07 --
GBP 119 USD 237 05/02/07 --
GBP 338 USD 675 05/02/07 (1)
GBP 500 USD 963 06/20/07 (36)
GBP 500 USD 965 06/20/07 (34)
GBP 500 USD 966 06/20/07 (34)
GBP 500 USD 984 06/20/07 (15)
GBP 500 USD 989 06/20/07 (10)
GBP 500 USD 1,001 06/20/07 1
GBP 500 USD 1,003 06/20/07 3
GBP 600 USD 1,155 06/20/07 (44)
GBP 600 USD 1,194 06/20/07 (6)
GBP 1,000 USD 1,926 06/20/07 (73)
GBP 1,000 USD 1,963 06/20/07 (36)
GBP 2,000 USD 3,852 06/20/07 (146)
GBP 3,255 USD 6,332 06/20/07 (174)
GBP 4,000 USD 7,704 06/20/07 (293)
GBP 4,100 USD 7,917 06/20/07 (279)
GBP 4,186 USD 8,139 06/20/07 (229)
GBP 4,900 USD 9,438 06/20/07 (357)
GBP 6,045 USD 11,754 06/20/07 (331)
GBP 15,663 USD 30,463 06/20/07 (848)
GBP 16,078 USD 31,259 06/20/07 (881)
GBP 8,941 USD 17,863 07/31/07 (3)
HKD 90 USD 11 05/02/07 --
HKD 67 USD 9 05/03/07 --
HKD 658 USD 84 05/03/07 --
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
HKD 782 USD 100 06/20/07 --
JPY 1,741 USD 15 05/01/07 --
JPY 86,782 USD 732 05/01/07 5
JPY 38,341 USD 321 05/02/07 --
JPY 47,002 USD 394 05/02/07 1
JPY 2,295 USD 61 05/07/07 42
JPY 104,397 USD 874 05/07/07 1
JPY 50,000 USD 424 06/20/07 3
JPY 91,987 USD 791 06/20/07 16
JPY 100,000 USD 845 06/20/07 3
JPY 100,000 USD 850 06/20/07 7
JPY 100,000 USD 856 06/20/07 13
JPY 100,000 USD 865 06/20/07 22
JPY 120,000 USD 1,011 06/20/07 --
JPY 132,251 USD 1,126 06/20/07 12
JPY 150,000 USD 1,262 06/20/07 (1)
JPY 150,000 USD 1,262 06/20/07 (1)
JPY 150,000 USD 1,290 06/20/07 27
JPY 200,000 USD 1,713 06/20/07 27
JPY 200,000 USD 1,741 06/20/07 56
JPY 310,000 USD 2,695 06/20/07 83
JPY 351,852 USD 3,022 06/20/07 58
JPY 450,000 USD 3,910 06/20/07 118
JPY 478,496 USD 4,116 06/20/07 84
JPY 650,000 USD 5,649 06/20/07 172
JPY 900,000 USD 7,703 06/20/07 120
JPY 1,865,659 USD 16,038 06/20/07 319
JPY 1,959,907 USD 16,836 06/20/07 323
JPY 5,842,160 USD 49,672 06/20/07 451
SEK 5,745 USD 854 05/02/07 (4)
SGD 402 USD 265 05/03/07 1
SGD -- USD -- 05/04/07 --
SGD 1,571 USD 1,042 06/20/07 4
SGD 2,357 USD 1,563 06/20/07 6
SGD 3,142 USD 2,084 06/20/07 8
SGD 3,142 USD 2,084 06/20/07 8
SGD 4,570 USD 3,014 06/20/07 (5)
SGD 5,157 USD 3,395 06/20/07 (12)
SGD 5,593 USD 3,709 06/20/07 14
SGD 6,077 USD 4,005 06/20/07 (10)
SGD 6,994 USD 4,612 06/20/07 (9)
SGD 12,163 USD 8,021 06/20/07 (15)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 3,397
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
International Fund 47
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 Belgium II 1 Month EUR LIBOR
Local Net Total Return
Index Merrill Lynch EUR 3,307 plus 0.15% 06/20/07 53
MSCI Belgium III 1 Month EUR LIBOR
Local Net Total Return
Index Merrill Lynch EUR 399 plus 0.15% 06/22/07 6
MSCI Belgium IV 1 Month EUR LIBOR
Local Net Total Return
Index Merrill Lynch EUR 323 plus 0.15% 09/19/07 5
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swaps 64
================
</Table>
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 7.0 147,943
Consumer Discretionary 8.5 178,341
Consumer Staples 7.6 158,732
Financial Services 24.4 513,107
Health Care 6.4 133,572
Integrated Oils 4.9 104,135
Materials and Processing 11.9 249,589
Miscellaneous 0.9 18,212
Other Energy 0.9 19,276
Producer Durables 7.7 161,071
Technology 2.8 58,343
Utilities 10.0 209,970
Options Purchased -- 641
Warrants & Rights 0.3 4,904
Short-Term Investments 5.7 119,207
Other Securities 33.7 707,715
--------------- ---------------
Total Investments 132.7 2,784,758
Other Assets and Liabilities, Net (32.7) (686,535)
--------------- ---------------
Net Assets 100.0 2,098,223
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 0.2 4,180
Asia 8.9 188,124
Europe 43.9 922,938
Japan 16.9 355,347
Latin America 3.2 64,690
Middle East 0.2 2,720
Other Regions 7.9 166,741
United Kingdom 17.8 372,303
Other Securities 33.7 707,715
--------------- ---------------
Total Investments 132.7 2,784,758
Other Assets and Liabilities, Net (32.7) (686,535)
--------------- ---------------
Net Assets 100.0 2,098,223
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
48 International Fund
RUSSELL INVESTMENT COMPANY
INTERNATIONAL FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
Australia 4.3
Austria 0.7
Belgium 0.7
Bermuda 0.8
Brazil 0.8
Canada 2.0
Cayman Islands 0.4
China 0.4
Czech Republic 0.1
Denmark 0.5
Egypt 0.1
Finland 1.2
France 12.3
Germany 8.3
Greece 0.5
Hong Kong 1.3
Hungary --*
India 0.2
Indonesia 0.1
Ireland 0.5
Israel 0.1
Italy 3.8
Japan 16.9
Luxembourg 0.2
Mexico 1.0
Netherlands 3.1
Netherlands Antilles 0.3
New Zealand 0.1
Norway 0.3
Russia 0.1
Singapore 0.9
South Africa 0.2
South Korea 1.1
Spain 2.0
Sweden 1.4
Switzerland 7.7
Taiwan 0.3
Thailand 0.1
United Kingdom 17.7
United States 0.1
Preferred Stocks 0.4
Options Purchased --*
Warrants & Rights 0.3
</Table>
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
Short-Term Investments 5.7
Other Securities 33.7
---------------
Total Investments 132.7
Other Assets and Liabilities, Net (32.7)
---------------
100.0
===============
Futures Contracts 0.2
Options Written (--)*
Foreign Currency Exchange Contracts 0.2
Index Swap Contracts --*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
International Fund 49
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,024.80 $ 1,021.62
Expenses Paid During
Period* $ 3.21 $ 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). 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,025.60 $ 1,022.86
Expenses Paid During
Period* $ 1.96 $ 1.96
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.39%
(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 Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,025.80 $ 1,023.06
Expenses Paid During
Period* $ 1.76 $ 1.76
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.35%
(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.
50 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 101.0%
Asset-Backed Securities - 5.7%
Aames Mortgage Investment Trust (E)(A)
Series 2005-3 Class A1
5.470% due 08/25/35 703 702
ABSC NIMs Trust (p)
Series 2005-HE6 Class A1
5.050% due 08/27/35 50 50
Accredited Mortgage Loan Trust (E)
Series 2004-2 Class A2
5.620% due 07/25/34 83 83
ACE Securities Corp. (E)
Series 2003-OP1 Class M2
6.820% due 12/25/33 135 136
Series 2005-SD3 Class A
5.720% due 08/25/45 538 538
Series 2006-FM1 Class A2A
5.360% due 07/25/36 758 757
Series 2006-FM1 Class A2B
5.410% due 07/25/36 1,825 1,823
Aegis Asset Backed Securities Trust (E)
Series 2003-3 Class M2
6.970% due 01/25/34 350 352
Air 2 US (A)
8.027% due 10/01/19 455 479
American Express Credit Account Master Trust
(E)(p)
Series 2006-A Class A
5.310% due 08/15/11 1,680 1,679
Ameriquest Mortgage Securities, Inc. (E)
Series 2002-D Class M1
7.557% due 02/25/33 155 155
Series 2004-R10 Class A5
5.710% due 11/25/34 35 35
Asset Backed Funding Certificates (E)
Series 2006-OPT Class A3A
5.380% due 10/25/36 634 634
Asset Backed Securities Corp. Home Equity (E)
Series 2006-HE2 Class A1A
5.570% due 03/25/36 1,630 1,630
Bank One Issuance Trust (E)
Series 2003-A1 Class A1
5.440% due 09/15/10 1,100 1,101
Bayview Financial Acquisition Trust
Series 2006-A Class 1A3
5.865% due 02/28/41 325 325
Burlington Northern Santa Fe Corp. Pass-Through
Certificate
4.967% due 04/01/23 201 193
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Carrington Mortgage Loan Trust (E)
Series 2006-NC3 Class A3
5.470% due 08/25/36 2,105 2,101
Citigroup Mortgage Loan Trust, Inc. (E)(A)
Series 2006-SHL Class A1
5.520% due 11/25/45 1,646 1,645
Countrywide Asset-Backed Certificates
Series 2001-BC3 Class A (E)
5.800% due 12/25/31 59 59
Series 2004-13 Class AF3
3.989% due 02/25/31 100 100
Series 2004-AB2 Class M3 (E)
5.920% due 05/25/36 240 240
Series 2004-BC1 Class M1 (E)
5.820% due 02/25/34 172 172
Series 2005-17 Class 1AF1 (E)
5.520% due 12/25/36 214 214
Series 2005-17 Class 4AV1 (E)
5.430% due 05/25/36 188 188
Series 2005-AB3 Class 2A1 (E)
5.470% due 02/25/36 323 323
Series 2006-11 Class 1AF4
6.300% due 09/25/46 505 512
Series 2006-BC1 Class 1A (E)
5.520% due 04/25/36 2,788 2,784
Series 2006-BC4 Class 2A2 (E)
5.480% due 07/25/36 2,220 2,216
Countrywide Home Equity Loan Trust (E)
Series 2005-A Class 2A
5.560% due 04/15/35 133 134
Series 2005-G Class 2A
5.550% due 12/15/35 675 675
Series 2006-E Class 2A
5.460% due 07/15/36 1,466 1,466
Credit-Based Asset Servicing and Securitization
(E)
Series 2005-CB5 Class AV2
5.580% due 08/25/35 360 361
Credit-Based Asset Servicing and Securitization
LLC
Series 2004-CB7 Class AF5
4.585% due 10/25/34 550 530
Series 2006-CB6 Class A21 (E)
5.360% due 07/25/36 1,628 1,627
</Table>
Fixed Income I Fund 51
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CVS Caremark Corp. (A)
5.789% due 01/10/26 193 189
5.880% due 01/10/28 13 13
Equifirst Mortgage Loan Trust (E)
Series 2004-3 Class A2
5.650% due 12/25/34 123 123
Fannie Mae Grantor Trust (E)
Series 2002-T5 Class A1
5.560% due 05/25/32 520 520
First Franklin Mortgage Loan Asset Backed
Certificates (E)
Series 2004-FF1 Class A2
5.720% due 12/25/32 207 207
Series 2004-FFH Class 2A1
5.700% due 10/25/34 114 114
Series 2006-FF3 Class A2A
5.400% due 02/25/36 522 522
Ford Credit Floorplan Master Owner Trust (E)
Series 2004-1 Class A
5.360% due 07/15/09 1,770 1,770
Fremont Home Loan Trust (E)
Series 2004-4 Class 1A1
5.700% due 03/25/35 334 334
Series 2006-3 Class 2A1
5.390% due 02/25/37 286 286
Fremont NIMs Trust (p)
Series 2005-C Class NOTE
5.584% due 07/25/35 33 21
GE Dealer Floorplan Master Note Trust (E)
Series 2004-2 Class A
5.400% due 07/20/09 955 955
Series 2005-1 Class A
5.360% due 04/20/10 1,425 1,425
Series 2006-3 Class A
5.330% due 07/20/11 1,980 1,980
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 282 279
GSAA Home Equity Trust
Series 2006-4 Class 1A2
5.961% due 03/25/36 448 451
GSAA Trust (E)
Series 2006-2 Class 2A3
5.590% due 12/25/35 570 571
GSAMP Trust (E)
Series 2003-HE2 Class M1
5.970% due 08/25/33 300 301
HFC Home Equity Loan Asset Backed Certificates
(E)
Series 2006-2 Class A1
5.470% due 03/20/36 2,006 2,003
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Home Equity Asset Trust (E)
Series 2005-2 Class 2A2
5.520% due 07/25/35 94 94
HSI Asset Securitization Corp. Trust (E)
Series 2006-HE2 Class 2A1
5.370% due 12/25/36 265 265
Indymac Seconds Asset Backed Trust (E)
Series 2006-1 Class A1
5.420% due 05/25/36 869 869
JP Morgan Mortgage Acquisition Corp. (E)
Series 2005-FLD Class A1
5.440% due 07/25/35 40 40
Series 2006-WMC Class A2
5.370% due 08/25/36 262 262
Lehman XS Trust (E)
Series 2005-1 Class 2A1
4.660% due 07/25/35 731 725
Series 2005-1 Class 2A2
4.660% due 07/25/35 248 251
Series 2006-16N Class A1A
5.400% due 11/25/46 748 748
Series 2006-17 Class WF11
5.440% due 11/25/36 841 841
Long Beach Mortgage Loan Trust (E)
Series 2004-4 Class 1A1
5.600% due 10/25/34 80 80
Series 2006-9 Class 2A1
5.380% due 10/25/36 3,037 3,037
Master Asset Backed Securities Trust (E)
Series 2005-NC1 Class A1
5.610% due 12/25/34 567 567
Mastr Asset Backed Securities Trust (E)
Series 2003-WMC Class M2
6.970% due 08/25/33 84 84
Morgan Stanley ABS Capital I (E)
Series 2003-NC8 Class M3
7.420% due 09/25/33 76 76
Series 2006-HE7 Class A2A
5.370% due 09/25/36 2,014 2,013
Series 2007-HE5 Class A2A
5.466% due 03/25/37 2,215 2,215
</Table>
52 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Morgan Stanley Mortgage Loan Trust
Series 2006-12X Class A6A
5.726% due 10/25/36 415 416
New Century Home Equity Loan Trust (E)
Series 2004-4 Class M2
5.850% due 02/25/35 370 369
Series 2005-B Class A2A
5.440% due 10/25/35 31 31
Nissan Master Owner Trust Receivables (E)
Series 2005-A Class A
5.350% due 07/15/10 1,305 1,305
Option One Mortgage Loan Trust (E)
Series 2003-2 Class M2
7.020% due 04/25/33 105 106
Series 2003-3 Class M3
7.320% due 06/25/33 69 70
Series 2003-4 Class M2
6.970% due 07/25/33 67 68
Series 2007-4 Class 2A1
5.410% due 04/25/37 3,445 3,445
Option One Mortgage Securities Corp. NIMs Trust
(E)(p)
Series 2006-1A
5.420% due 12/25/10 1,006 1,006
Origen Manufactured Housing
Series 2005-B Class A4
5.910% due 01/15/37 100 99
Ownit Mortgage Loan Asset Backed Certificates
(E)
Series 2006-6 Class A2C
5.480% due 09/25/37 2,390 2,386
Park Place Securities, Inc. (E)
Series 2004-WWF Class A1D
5.780% due 02/25/35 303 303
Series 2005-WCW Class M1
5.770% due 09/25/35 370 370
Popular ABS Mortgage Pass-Through Trust
Series 2005-6 Class A3
5.680% due 01/25/36 390 391
RAAC Series (E)(A)
Series 2006-RP2 Class A
5.570% due 02/25/37 1,044 1,043
Renaissance Home Equity Loan Trust
Series 2005-1 Class M1
5.357% due 05/25/35 225 222
Series 2005-2 Class AF4
4.934% due 08/25/35 245 241
Series 2005-3 Class AV1 (E)
5.460% due 10/25/35 290 290
Series 2005-4 Class N (p)
7.142% due 02/25/36 125 122
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-1 Class AF6
5.746% due 05/25/36 305 303
Residential Asset Mortgage Products, Inc.
Series 2003-RS1 Class AI6A
5.980% due 12/25/33 345 347
Series 2003-RS2 Class AII (E)
5.660% due 03/25/33 109 109
Series 2003-RS3 Class AII (E)
5.680% due 04/25/33 74 74
Residential Asset Securities Corp.
Series 2001-KS1 Class AII (E)
5.790% due 03/25/32 73 73
Series 2001-KS3 Class AII (E)
5.780% due 09/25/31 60 60
Series 2003-KS1 Class M2 (E)
7.945% due 01/25/33 54 48
Series 2003-KS2 Class MI1
4.800% due 04/25/33 755 742
Series 2003-KS2 Class MI3
6.100% due 04/25/33 435 428
Series 2006-KS6 Class A1 (E)
5.360% due 08/25/36 327 327
Residential Funding Mortgage Securities II, Inc.
(E)
Series 2005-HS1 Class AI1
5.440% due 09/25/35 631 630
Saxon Asset Securities Trust (E)
Series 2004-1 Class A
5.590% due 03/25/35 28 28
Securitized Asset Backed Receivables LLC Trust
(E)
Series 2005-FR4 Class A3
5.520% due 01/25/36 224 224
SLM Student Loan Trust (E)
Series 2006-9 Class A1
5.330% due 10/25/12 845 845
Small Business Administration
Series 2000-P10 Class 1
7.449% due 08/01/10 57 58
Soundview Home Equity Loan Trust
Series 2006-WF1 Class A2
5.645% due 10/25/36 825 823
Specialty Underwriting & Residential Finance (E)
Series 2003-BC1 Class A
5.660% due 01/25/34 15 15
</Table>
Fixed Income I Fund 53
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-AB1 Class A2
5.460% due 12/25/36 850 849
Structured Asset Investment Loan Trust (E)
Series 2004-7 Class A1
5.575% due 08/25/34 59 59
Series 2005-3 Class M2
5.760% due 04/25/35 210 209
Structured Asset Securities Corp.
Series 2002-AL1 Class A3
3.450% due 02/25/32 211 198
Series 2004-19X Class A2
4.370% due 10/25/34 511 506
Series 2005-WF1 Class A2 (E)
5.520% due 02/25/35 660 661
Series 2006-BC3 Class A2 (E)
5.370% due 10/25/36 644 644
Textron Financial Floorplan Master Note Trust
(E)(p)
Series 2005-1A Class A
5.440% due 05/13/10 1,640 1,642
Truman Capital Mortgage Loan Trust (E)(A)
Series 2006-1 Class A
5.580% due 03/25/36 1,651 1,651
Volkswagen Credit Auto Master Trust (E)
Series 2005-1 Class A
5.340% due 07/20/10 1,485 1,485
Wachovia Asset Securitization, Inc. (E)
Series 2003-HE3 Class A
5.570% due 11/25/33 160 160
Wells Fargo Home Equity Trust (E)(p)
Series 2005-4 Class AI1
5.440% due 12/25/35 564 564
------------
76,295
------------
Certificates of Deposit - 0.9%
Abbey National Treasury Services PLC
5.270% due 07/02/08 1,300 1,299
BNP Paribas
5.293% due 07/03/08 400 400
Calyon NY
5.330% due 01/16/09 800 800
Fortis Bank
5.300% due 09/30/08 1,700 1,700
Nordea Bank Finland PLC
5.307% due 04/09/09 1,500 1,499
Royal Bank of Canada
5.420% due 06/30/08 1,100 1,101
Societe Generale
5.271% due 06/30/08 2,700 2,699
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Unicredito Italiano SpA
5.350% due 05/29/08 3,200 3,209
------------
12,707
------------
Corporate Bonds and Notes - 15.4%
Abbott Laboratories
5.600% due 05/15/11 310 316
5.875% due 05/15/16 280 290
Alamosa Delaware, Inc.
8.500% due 01/31/12 180 190
Alcoa, Inc.
5.720% due 02/23/19 (A) 515 514
5.900% due 02/01/27 1,205 1,197
Altria Group, Inc.
7.000% due 11/04/13 510 554
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 35 35
American Express Bank (E)
Series BKNT
5.330% due 10/16/08 800 800
American General Finance Corp. (E)
Series MTNI
5.478% due 06/27/08 1,300 1,301
American International Group, Inc.
4.700% due 10/01/10 445 440
5.375% due 10/18/11 480 486
5.050% due 10/01/15 (N) 350 344
6.250% due 03/15/87 1,000 995
Anadarko Petroleum Corp.
5.755% due 09/15/09 (E) 480 481
5.950% due 09/15/16 2,890 2,912
6.450% due 09/15/36 520 521
Apache Corp.
6.000% due 01/15/37 420 423
ASIF Global Financing XIX (A)
4.900% due 01/17/13 50 49
AT&T Mobility LLC
6.500% due 12/15/11 520 549
AT&T, Inc.
5.100% due 09/15/14 325 319
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 955 999
Bank of America Corp.
5.875% due 02/15/09 180 183
5.375% due 06/19/09 (E) 2,700 2,702
4.375% due 12/01/10 1,370 1,342
5.375% due 08/15/11 (N) 460 465
</Table>
54 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of America NA
Series BKNT
5.361% due 12/18/08 (E) 1,300 1,300
6.000% due 10/15/36 2,240 2,274
Bank of New York Co., Inc. (The)
5.125% due 11/01/11 540 541
Banque Paribas
6.875% due 03/01/09 350 361
Bear Stearns Cos., Inc. (The)
5.450% due 08/21/09 (E) 800 800
5.350% due 02/01/12 1,955 1,964
BellSouth Corp.
4.750% due 11/15/12 20 20
6.550% due 06/15/34 (N) 90 94
Bellsouth Telecommunications, Inc.
7.000% due 12/01/95 520 540
Boeing Capital Corp., Ltd.
6.100% due 03/01/11 150 156
Boston Scientific Corp.
6.400% due 06/15/16 600 599
Burlington Northern Santa Fe Corp.
5.650% due 05/01/17 45 45
6.875% due 12/01/27 80 86
Campbell Soup Co.
5.875% due 10/01/08 165 166
Cardinal Health, Inc.
5.850% due 12/15/17 430 430
Caterpillar Financial Services Corp. (E)
5.400% due 10/09/09 2,100 2,100
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 195 197
CenterPoint Energy Resources Corp.
Series B
7.875% due 04/01/13 440 491
Cingular Wireless Services, Inc.
7.875% due 03/01/11 3,205 3,511
8.750% due 03/01/31 1,635 2,139
CIT Group Holdings, Inc. (E)(N)
5.510% due 01/30/09 2,400 2,397
CIT Group, Inc.
6.875% due 11/01/09 80 83
Citicorp
7.250% due 10/15/11 455 492
Citigroup Funding, Inc. (E)
5.343% due 12/08/08 400 399
Citigroup, Inc.
5.406% due 12/26/08 (E) 700 700
5.400% due 01/30/09 (E) 2,000 2,000
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.393% due 12/28/09 (E) 800 800
4.125% due 02/22/10 630 616
6.500% due 01/18/11 300 314
5.000% due 09/15/14 3,290 3,219
6.125% due 08/25/36 100 103
Clear Channel Communications, Inc.
4.250% due 05/15/09 100 97
6.250% due 03/15/11 290 288
Clorox Co. (N)
4.200% due 01/15/10 165 161
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 85 86
Comcast Cable Communications LLC
6.875% due 06/15/09 535 553
Comcast Cable Holdings LLC
9.800% due 02/01/12 (N) 315 374
7.875% due 08/01/13 790 886
Comcast Corp.
6.500% due 01/15/15 855 905
5.900% due 03/15/16 65 66
6.500% due 01/15/17 450 478
6.500% due 11/15/35 775 789
ConocoPhillips Holding Co.
6.950% due 04/15/29 875 999
Consolidated Natural Gas Co.
6.850% due 04/15/11 425 449
Constellation Energy Group, Inc. (N)
4.550% due 06/15/15 565 528
Continental Airlines, Inc.
Series A
5.983% due 04/19/22 2,175 2,183
Costco Wholesale Corp.
5.500% due 03/15/17 2,570 2,583
Countrywide Financial Corp. (N)
6.250% due 05/15/16 520 525
COX Communications, Inc.
3.875% due 10/01/08 240 236
6.750% due 03/15/11 2,710 2,852
5.875% due 12/01/16 (p) 100 101
Credit Suisse First Boston USA, Inc.
3.875% due 01/15/09 235 231
4.875% due 08/15/10 120 120
6.500% due 01/15/12 20 21
5.500% due 08/15/13 (N) 95 96
Credit Suisse USA, Inc. (N)
5.250% due 03/02/11 310 312
CRH America, Inc.
6.000% due 09/30/16 1,170 1,196
CVS Caremark Corp.
5.750% due 08/15/11 250 255
</Table>
Fixed Income I Fund 55
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CVS Lease Pass Through (A)
6.036% due 12/10/28 216 216
DaimlerChrysler NA Holding Corp.
4.050% due 06/04/08 165 163
5.690% due 03/13/09 (E) 1,600 1,603
5.770% due 03/13/09 (E) 1,100 1,103
5.875% due 03/15/11 300 306
6.500% due 11/15/13 365 384
8.500% due 01/18/31 900 1,134
DCP Midstream, LP
6.875% due 02/01/11 35 37
Detroit Edison Co. (The)
6.125% due 10/01/10 120 124
6.350% due 10/15/32 105 111
Dominion Resources, Inc.
4.750% due 12/15/10 90 89
5.700% due 09/17/12 390 400
Series A
5.200% due 01/15/16 555 541
Series C
5.150% due 07/15/15 740 726
Dow Chemical Co. (The)
6.000% due 10/01/12 160 165
DPL, Inc.
6.875% due 09/01/11 430 456
DTE Energy Co.
7.050% due 06/01/11 1,225 1,304
Duke Energy Corp.
6.250% due 01/15/12 150 157
5.625% due 11/30/12 185 190
Duke Realty, LP
5.950% due 02/15/17 740 759
Eastman Kodak Co.
7.250% due 11/15/13 30 30
Electronic Data Systems Corp.
7.125% due 10/15/09 460 479
Eli Lilly & Co.
6.770% due 01/01/36 435 495
Erac USA Finance Co. (p)
5.900% due 11/15/15 945 947
Exelon Corp.
4.900% due 06/15/15 2,340 2,222
5.625% due 06/15/35 520 489
FedEx Corp.
5.500% due 08/15/09 1,290 1,300
7.600% due 07/01/97 135 158
FirstEnergy Corp.
Series B
6.450% due 11/15/11 2,045 2,145
Series C
7.375% due 11/15/31 920 1,056
Ford Motor Co. (N)
7.450% due 07/16/31 290 229
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ford Motor Credit Co.
7.375% due 10/28/09 2,430 2,432
General Electric Capital Corp.
3.250% due 06/15/09 1,065 1,028
5.430% due 01/20/10 (E) 600 601
5.500% due 04/28/11 130 132
5.430% due 08/15/11 (E) 1,500 1,498
Series MTN (E)
5.390% due 10/26/09 2,700 2,700
Series MTNA
4.125% due 09/01/09 780 766
6.000% due 06/15/12 1,180 1,226
5.450% due 01/15/13 (N) 2,540 2,573
General Motors Corp.
8.375% due 07/05/33 70 90
GMAC LLC
5.625% due 05/15/09 1,375 1,356
7.750% due 01/19/10 230 236
Goldman Sachs Group, Inc.
5.300% due 02/14/12 2,765 2,773
4.750% due 07/15/13 925 896
Goldman Sachs Group, Inc. (The)
5.406% due 12/23/08 (E) 100 100
5.400% due 03/30/09 (E) 600 600
5.456% due 06/23/09 (E) 500 500
5.000% due 01/15/11 (N) 150 149
6.875% due 01/15/11 1,020 1,079
5.350% due 01/15/16 870 859
5.625% due 01/15/17 260 259
Series MTNB (E)
5.460% due 07/29/08 2,000 2,002
Goldman Sachs Group, LP
4.500% due 06/15/10 1,055 1,038
Hartford Financial Services Group, Inc.
5.550% due 08/16/08 785 788
5.250% due 10/15/11 630 633
HBOS Treasury Services PLC (A)
5.250% due 02/21/17 100 101
Hess Corp.
7.875% due 10/01/29 60 70
7.300% due 08/15/31 515 576
Historic TW, Inc.
8.050% due 01/15/16 460 527
Home Depot, Inc.
5.875% due 12/16/36 1,545 1,498
HSBC Bank USA NA (E)
Series BKNT
5.493% due 06/10/09 800 802
</Table>
56 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
HSBC Finance Corp.
5.488% due 12/05/08 (E) 500 501
4.750% due 05/15/09 3,445 3,420
5.420% due 10/21/09 (E) 400 400
4.125% due 11/16/09 2,520 2,462
5.435% due 03/12/10 (E) 700 700
6.750% due 05/15/11 465 490
6.375% due 11/27/12 410 431
5.000% due 06/30/15 250 242
ILFC E-Capital Trust II (N)(A)
6.250% due 12/21/65 290 297
International Business Machines Corp.
7.125% due 12/01/96 445 510
International Lease Finance Corp.
3.500% due 04/01/09 215 209
4.750% due 07/01/09 1,435 1,428
5.750% due 06/15/11 230 236
5.625% due 09/20/13 1,845 1,879
International Steel Group, Inc. (N)
6.500% due 04/15/14 440 460
ITT Corp.
7.400% due 11/15/25 65 75
JC Penney Corp., Inc.
6.375% due 10/15/36 -- --
Jersey Central Power & Light Co.
5.625% due 05/01/16 200 201
John Deere Capital Corp.
4.875% due 03/16/09 635 632
JP Morgan Chase Capital XV
5.875% due 03/15/35 1,935 1,878
JP Morgan Chase Capital XX (N)
Series T
6.550% due 09/29/36 100 102
JPMorgan Chase & Co.
5.600% due 06/01/11 190 194
5.125% due 09/15/14 1,260 1,246
5.150% due 10/01/15 260 256
JPMorgan Chase Bank NA
Series BKNT
5.875% due 06/13/16 405 419
Kellogg Co.
Series B
6.600% due 04/01/11 950 998
Kerr-McGee Corp.
6.950% due 07/01/24 290 309
Kinder Morgan Energy Partners, LP
7.125% due 03/15/12 185 199
5.000% due 12/15/13 115 112
6.000% due 02/01/17 40 41
Kraft Foods, Inc.
5.625% due 11/01/11 1,155 1,170
Kroger Co. (The) (N)
7.500% due 04/01/31 65 70
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.
5.445% due 01/23/09 (E) 1,200 1,201
5.450% due 04/03/09 (E) 1,000 1,000
5.460% due 08/21/09 (E) 400 400
5.250% due 02/06/12 (N) 610 612
5.500% due 04/04/16 (N) 220 220
Liberty Property, LP
5.500% due 12/15/16 580 577
Manufacturers & Traders Trust Co.
5.585% due 12/28/20 180 178
Marshall & Ilsley Corp.
5.350% due 04/01/11 1,345 1,356
Merrill Lynch & Co., Inc.
5.560% due 07/25/11 (E) 700 701
6.220% due 09/15/26 1,885 1,919
Series MTNB
3.125% due 07/15/08 1,125 1,096
Series MTNC
5.430% due 06/16/08 (E) 1,900 1,902
4.250% due 02/08/10 1,170 1,142
MetLife, Inc.
5.700% due 06/15/35 730 708
6.400% due 12/15/36 410 409
Midamerican Energy Co.
5.800% due 10/15/36 915 907
Midamerican Energy Holdings Co.
Series WI
6.125% due 04/01/36 2,315 2,353
Miller Brewing Co. (p)
5.500% due 08/15/13 300 301
Monumental Global Funding II (p)
4.625% due 03/15/10 200 198
Morgan Stanley
3.875% due 01/15/09 840 824
5.625% due 01/09/12 370 376
4.750% due 04/01/14 (N) 250 239
5.375% due 10/15/15 265 262
5.810% due 10/18/16 (E) 140 140
Series GMTN (E)
5.470% due 02/09/09 100 100
Series MTn (E)
5.450% due 01/15/10 600 600
Motorola, Inc.
5.220% due 10/01/97 780 588
Natexis Ambs Co. LLC (f)(p)
8.440% due 12/29/49 300 310
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 2,005 2,037
</Table>
Fixed Income I Fund 57
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
News America Holdings, Inc.
7.900% due 12/01/95 250 288
8.250% due 10/17/96 50 60
News America, Inc.
6.200% due 12/15/34 35 34
6.150% due 03/01/37 (A) 2,785 2,727
Nisource Finance Corp.
7.875% due 11/15/10 365 396
Norfolk Southern Corp.
6.200% due 04/15/09 645 655
7.050% due 05/01/37 195 215
6.000% due 03/15/49 410 366
7.900% due 05/15/97 605 710
Northern States Power Co.
Series B
8.000% due 08/28/12 1,110 1,255
Ohio Power Co. (N)
Series F
5.500% due 02/15/13 45 45
ONEOK Partners, LP
6.650% due 10/01/36 515 536
Owens Corning, Inc. (p)
6.500% due 12/01/16 725 739
Pacific Gas & Electric Co.
3.600% due 03/01/09 75 73
4.200% due 03/01/11 180 175
6.050% due 03/01/34 425 434
5.800% due 03/01/37 80 79
Pemex Project Funding Master Trust
7.375% due 12/15/14 (N) 600 671
5.750% due 12/15/15 200 203
8.625% due 02/01/22 100 126
Progress Energy, Inc.
7.750% due 03/01/31 95 115
7.000% due 10/30/31 185 207
ProLogis
5.625% due 11/15/15 1,340 1,354
Prudential Financial, Inc.
5.100% due 12/14/11 965 964
Rabobank Capital Funding II (f)(A)
5.260% due 12/31/49 20 20
Rabobank Capital Funding Trust (f)(A)
5.254% due 12/29/49 40 39
RBS Capital Trust III (f)
5.512% due 09/29/49 515 507
Regions Financial Corp.
4.500% due 08/08/08 1,220 1,206
Residential Capital LLC
6.125% due 11/21/08 290 290
6.000% due 02/22/11 1,155 1,142
RR Donnelley & Sons Co.
6.125% due 01/15/17 910 906
Safeway, Inc. (N)
7.250% due 02/01/31 45 48
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SBC Communications, Inc. (N)
6.150% due 09/15/34 215 216
Sigma Finance, Inc. (E)(A)
8.500% due 08/11/16 690 690
Simon Property Group, LP
5.750% due 12/01/15 1,680 1,711
6.100% due 05/01/16 755 787
5.250% due 12/01/16 2,395 2,347
SLM Corp.
Series MTNA
4.000% due 01/15/09 1,155 1,123
Southern Natural Gas Co. (A)
5.900% due 04/01/17 60 60
Sprint Capital Corp.
8.375% due 03/15/12 360 401
6.875% due 11/15/28 245 243
8.750% due 03/15/32 80 94
Sprint Nextel Corp.
6.000% due 12/01/16 2,015 1,978
State Street Bank & Trust Co.
Series BKNT
5.300% due 01/15/16 135 134
State Street Capital Trust IV (E)
6.355% due 06/15/37 100 100
SunTrust Capital VIII
6.100% due 12/15/36 500 475
Time Warner Cable, Inc. (A)
5.400% due 07/02/12 265 266
5.850% due 05/01/17 4,380 4,406
Time Warner Entertainment Co., LP
Series *
8.375% due 07/15/33 105 128
Time Warner, Inc.
6.875% due 05/01/12 485 516
5.875% due 11/15/16 690 695
7.700% due 05/01/32 100 114
TXU Corp.
Series P
5.550% due 11/15/14 110 99
Series Q
6.500% due 11/15/24 40 35
Series R
6.550% due 11/15/34 465 400
Unilever Capital Corp. (N)
5.900% due 11/15/32 315 309
Union Pacific Corp.
3.625% due 06/01/10 450 429
</Table>
58 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United Technologies Corp.
5.400% due 05/01/35 70 67
UnitedHealth Group, Inc.
5.250% due 03/15/11 220 221
US Bancorp
5.300% due 04/28/09 1,450 1,460
US Bank NA
5.700% due 12/15/08 70 71
USB Capital IX (f)(N)
6.189% due 04/15/49 100 103
Verizon Communications, Inc.
5.350% due 02/15/11 775 780
5.850% due 09/15/35 410 394
Verizon Global Funding Corp. (N)
7.375% due 09/01/12 275 302
Verizon Virginia, Inc. (N)
Series A
4.625% due 03/15/13 885 843
Viacom, Inc.
5.750% due 04/30/11 100 101
Wachovia Bank NA
Series BKNT
5.320% due 10/03/08 (E) 2,300 2,300
5.800% due 12/01/08 280 283
Wachovia Capital Trust III (f)
5.800% due 03/15/42 250 254
Wachovia Corp.
5.700% due 08/01/13 2,140 2,195
5.250% due 08/01/14 355 353
5.625% due 10/15/16 (N) 400 403
Waste Management, Inc.
6.375% due 11/15/12 555 583
WellPoint, Inc.
5.850% due 01/15/36 120 116
Wells Fargo & Co.
5.300% due 08/26/11 20 20
4.950% due 10/16/13 (N) 175 173
Wells Fargo Bank NA
5.750% due 05/16/16 220 227
Wells Fargo Capital X
5.950% due 12/15/36 100 98
Weyerhaeuser Co.
6.750% due 03/15/12 395 416
Wyeth
6.950% due 03/15/11 1,985 2,111
5.500% due 03/15/13 60 61
5.500% due 02/01/14 55 56
5.950% due 04/01/37 635 635
XTO Energy, Inc.
7.500% due 04/15/12 40 44
Zurich Capital Trust I (p)
8.376% due 06/01/37 530 553
------------
207,907
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
International Debt - 3.9%
Aiful Corp. (A)
5.000% due 08/10/10 300 296
Anadarko Finance Co.
Series B
7.500% due 05/01/31 545 609
AXA SA
8.600% due 12/15/30 100 129
Banco Mercantil del Norte SA (A)
6.862% due 10/13/21 500 513
Banque Centrale de Tunisie
8.250% due 09/19/27 550 670
BNP Paribas (f)(p)
5.186% due 06/29/49 800 771
British Telecommunications PLC
9.125% due 12/15/30 145 202
Canadian Natural Resources, Ltd.
5.700% due 05/15/17 100 100
6.500% due 02/15/37 255 262
China Development Bank
5.000% due 10/15/15 100 99
CIT Group Funding Co. of Canada (N)
5.600% due 11/02/11 220 222
Citigroup Global Markets Deutschland AG for OAO
Gazprom
10.500% due 10/21/09 500 559
Conoco Funding Co.
6.350% due 10/15/11 815 857
Corp. Nacional del Cobre de Chile (p)
6.150% due 10/24/36 100 104
Crest, Ltd. (p)
Series 2003-2A Class C2
5.709% due 12/28/38 1,710 1,701
Depfa ACS Bank (A)
5.125% due 03/16/37 300 287
Deutsche Telekom International Finance BV
5.546% due 03/23/09 (E) 900 902
8.000% due 06/15/10 545 590
5.750% due 03/23/16 (N) 300 301
8.250% due 06/15/30 155 195
Egypt Government AID Bonds
4.450% due 09/15/15 660 638
Eksportfinans ASA
5.500% due 05/25/16 450 466
Export-Import Bank of China (p)
4.875% due 07/21/15 465 454
</Table>
Fixed Income I Fund 59
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Export-Import Bank of Korea (p)
4.125% due 02/10/09 255 250
Falconbridge, Ltd.
6.000% due 10/15/15 495 512
Gaz Capital for Gazprom (A)
6.212% due 11/22/16 1,420 1,434
6.510% due 03/07/22 260 267
Glitnir Banki HF (A)
6.330% due 07/28/11 270 280
6.693% due 06/15/16 450 471
Harborview NIM Corp. (p)
Series 2006-9A Class N1
6.409% due 11/19/36 244 244
HBOS PLC (f)(p)
5.920% due 09/29/49 100 98
HSBC Holdings PLC
6.500% due 05/02/36 345 370
Ispat Inland ULC
9.750% due 04/01/14 610 679
Kaupthing Bank Hf
6.050% due 04/12/11 (E) 750 756
5.750% due 10/04/11 (A) 100 101
7.125% due 05/19/16 (A) 1,250 1,353
Klio Funding, Ltd. (E)(p)
Series 2004-1A Class A1
5.910% due 04/23/39 1,515 1,522
Korea Electric Power Corp. (p)
5.125% due 04/23/34 125 124
Mexico Government International Bond
5.625% due 01/15/17 16 16
Series MTNA (N)
6.750% due 09/27/34 1,204 1,342
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 315 322
MUFG Capital Finance 1, Ltd. (f)
6.346% due 07/29/49 200 204
National Australia Bank, Ltd. (E)(p)
5.380% due 09/11/09 500 500
Newcastle CDO, Ltd. (p)
Series 2004-4A Class 3FX
5.110% due 03/24/39 845 800
Petrobras International Finance Co.
6.125% due 10/06/16 390 399
Petroleum Export, Ltd. (p)
5.265% due 06/15/11 86 84
Province of Quebec Canada
Series PJ
6.125% due 01/22/11 815 848
Ras Laffan Liquefied Natural Gas Co., Ltd. II
(p)
5.298% due 09/30/20 435 420
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ras Laffan Liquefied Natural Gas Co., Ltd. III
(p)
5.838% due 09/30/27 250 240
Resona Bank, Ltd. (f)(p)
5.850% due 09/29/49 375 373
Resona Preferred Global Securities Cayman, Ltd.
(f)(A)
7.191% due 12/29/49 300 317
Rogers Cable, Inc.
6.750% due 03/15/15 1,150 1,210
Rogers Wireless, Inc.
6.375% due 03/01/14 875 903
Royal Bank of Scotland Group PLC (f)
Series 1
9.118% due 03/31/49 200 221
Royal Bank of Scotland PLC (E)
5.760% due 07/06/12 2,400 2,401
Royal KPN NV
8.000% due 10/01/10 550 598
Russia Government International Bond
5.000% due 03/31/30 (p) 488 554
Series REGS
5.000% due 03/31/30 280 318
Santander Financial Issuances
6.375% due 02/15/11 120 125
Santander US Debt SA Unipersonal (E)(p)
5.358% due 11/20/08 1,200 1,202
Sanwa Finance Aruba AEC
8.350% due 07/15/09 460 490
Shinsei Finance Cayman, Ltd. (f)(A)
6.418% due 01/29/49 400 405
Siemens Financieringsmaatschappij NV (p)
5.500% due 02/16/12 1,400 1,417
6.125% due 08/17/26 1,950 1,990
SMFG Preferred Capital, Ltd. (f)(A)
6.078% due 01/29/49 970 973
Sumitomo Mitsui Banking Corp. (f)(p)
5.625% due 07/29/49 145 143
Systems 2001 AT LLC (p)
7.156% due 12/15/11 250 259
Talisman Energy, Inc.
6.250% due 02/01/38 2,200 2,117
Telecom Italia Capital SA
5.250% due 10/01/15 505 485
</Table>
60 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Telefonica Emisiones SAU
5.665% due 06/19/09 (E) 800 803
7.045% due 06/20/36 90 97
Telefonica Europe BV
7.750% due 09/15/10 1,235 1,330
Telefonos de Mexico SA de CV
4.500% due 11/19/08 515 509
TELUS Corp.
8.000% due 06/01/11 755 825
TNK-BP Finance SA (A)
Series 144a
7.500% due 07/18/16 400 424
Transocean, Inc. (E)
5.566% due 09/05/08 500 500
Tyco International Group SA
6.750% due 02/15/11 600 638
6.375% due 10/15/11 355 375
6.000% due 11/15/13 720 757
7.000% due 06/15/28 30 36
6.875% due 01/15/29 90 107
Vale Overseas, Ltd.
6.250% due 01/11/16 95 97
6.250% due 01/23/17 (N) 1,065 1,092
6.875% due 11/21/36 (N) 576 611
Vodafone Group PLC (N)
5.750% due 03/15/16 175 177
WEA Finance LLC/WCI Finance LLC (p)
5.700% due 10/01/16 2,210 2,236
Xstrata Finance Canada, Ltd. (p)
5.500% due 11/16/11 130 131
5.800% due 11/15/16 130 131
------------
51,940
------------
Loan Agreements - 0.3%
Starbound Reinsurance, Ltd.,
Term Loan B
6.870% due 03/31/08 4,000 4,000
------------
Mortgage-Backed Securities - 57.8%
Adjustable Rate Mortgage Trust (E)
Series 2005-3 Class 8A2
5.560% due 07/25/35 386 387
American Home Mortgage Investment Trust (E)
Series 2004-4 Class 4A
4.390% due 02/25/45 299 295
Series 2005-2 Class 5A2
5.470% due 09/25/35 433 433
Series 2005-3 Class 3A2
5.500% due 09/25/35 235 235
Series 2005-4 Class 1A1
5.610% due 11/25/45 1,060 1,063
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Arcap Reit, Inc. (p)
Series 2004-RR3 Class B
5.040% due 09/21/45 420 404
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 885 878
Series 2004-4 Class A3
4.128% due 07/10/42 580 567
Series 2005-2 Class A4
4.783% due 07/10/43 865 850
Series 2005-3 Class A2
4.501% due 07/10/43 445 437
Series 2005-3 Class A4
4.668% due 07/10/43 1,200 1,150
Series 2005-6 Class A1
5.001% due 09/10/47 1,632 1,626
Series 2005-6 Class A2
5.165% due 09/10/47 1,275 1,275
Series 2006-1 Class A4
5.372% due 09/10/45 305 305
Series 2006-3 Class A4
5.889% due 07/10/44 1,030 1,067
Series 2006-4 Class A4
5.669% due 07/10/46 1,350 1,374
Series 2007-1 Class A3
5.449% due 01/15/49 1,235 1,248
Series 2007-1 Class A4
5.451% due 01/15/49 1,010 1,019
Banc of America Funding Corp.
Series 2005-5 Class 1A11
5.500% due 09/25/35 898 880
Series 2005-D Class A1 (E)
4.113% due 05/25/35 455 448
Series 2006-3 Class 5A8
5.500% due 03/25/36 820 821
Series 2006-A Class 3A2
5.899% due 02/20/36 3,720 3,752
Series 2006-A Class 4A1 (E)
5.580% due 02/20/36 879 882
Series 2006-G Class 2A1 (E)
5.540% due 07/20/36 1,106 1,108
Series 2006-G Class 2A2 (E)
5.400% due 07/20/36 948 946
Banc of America Mortgage Securities, Inc.
Series 2003-9 Class 1A12 (E)
5.770% due 12/25/33 1,054 1,058
</Table>
Fixed Income I Fund 61
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2004-1 Class 5A1
6.500% due 09/25/33 35 35
Series 2004-2 Class 5A1
6.500% due 10/25/31 116 117
Series 2004-11 Class 2A1
5.750% due 01/25/35 704 696
Series 2005-L Class 3A1 (E)
5.459% due 01/25/36 437 436
Series 2006-2 Class A15
6.000% due 07/25/36 876 884
Bank of America Alternative Loan Trust
Series 2003-2 Class CB2 (E)
5.820% due 04/25/33 171 172
Series 2003-10 Class 2A2 (E)
5.770% due 12/25/33 418 420
Series 2006-5 Class CB17
6.000% due 06/25/36 704 713
Bear Stearns Adjustable Rate Mortgage Trust
Series 2004-4 Class A4
3.517% due 06/25/34 380 374
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.383% due 05/25/35 618 618
Series 2006-4 Class 32A1
6.479% due 07/25/36 3,307 3,381
Bear Stearns Commercial Mortgage Securities
Series 2005-PWR Class A1
4.386% due 02/11/41 353 350
Series 2006-PW1 Class A1
5.044% due 12/01/38 2,271 2,262
Chase Mortgage Finance Corp.
Series 2003-S8 Class A1
4.500% due 09/25/18 444 427
Series 2005-A1 Class 2A2 (E)
5.244% due 12/25/35 1,609 1,596
Series 2006-A1 Class 1A1 (E)
6.057% due 09/25/36 1,376 1,379
Series 2006-S4 Class A3
6.000% due 12/25/36 770 778
Series 2006-S4 Class A4
6.000% due 12/25/36 405 408
Series 2007-A1 Class 5A1
4.172% due 02/25/37 3,729 3,665
Citigroup Mortgage Loan Trust, Inc.
Series 2004-HYB Class A2 (E)
6.274% due 02/25/34 77 78
Series 2005-11 Class A2A (E)
4.700% due 12/25/35 172 171
Series 2006-WF1 Class A2F
5.657% due 03/01/36 565 564
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-WFH Class A1 (E)
5.370% due 10/25/36 1,829 1,829
Citigroup/Deutsche Bank Commercial Mortgage
Trust
Series 2006-CD3 Class A5
5.617% due 10/15/48 540 549
Citimortgage Alternative Loan Trust
Series 2006-A3 Class 1A5
6.000% due 07/25/36 463 467
Commercial Mortgage Acceptance Corp.
Series 1998-C2 Class A3
6.040% due 09/15/30 3,715 3,727
Countrywide Alternative Loan Trust
Series 2004-2CB Class 1A4 (E)
5.720% due 03/25/34 682 684
Series 2005-56 Class 4A1 (E)
5.630% due 11/25/35 1,129 1,132
Series 2005-59 Class 1A1 (E)
5.650% due 11/20/35 1,373 1,378
Series 2005-J8 Class 1A3
5.500% due 07/25/35 659 659
Series 2005-J12 Class 2A1 (E)
5.590% due 11/25/35 1,212 1,214
Series 2005-J13 Class 2A3
5.500% due 11/25/35 272 272
Series 2006-9T1 Class A7
6.000% due 05/25/36 355 359
Series 2006-J2 Class A3
6.000% due 04/25/36 528 534
Countrywide Asset-Backed Certificates (E)
Series 2005-IM2 Class A3
5.590% due 01/25/36 2,535 2,536
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2004-7 Class 5A2 (E)
5.590% due 05/25/34 69 69
Series 2004-16 Class 1A1 (E)
5.720% due 09/25/34 514 516
Series 2005-3 Class 1A2 (E)
5.610% due 04/25/35 80 80
Series 2005-HYB Class 3A2A (E)
5.250% due 02/20/36 162 161
Series 2005-R3 Class AF (E)(A)
5.720% due 09/25/35 1,167 1,174
Series 2006-HYB Class 2A1A
5.741% due 05/20/36 823 833
</Table>
62 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2007-HY1 Class 1A2
5.736% due 04/25/37 268 268
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2005-C4 Class A3
5.120% due 08/15/38 5,050 5,022
Series 2005-C6 Class A1
4.938% due 12/15/40 1,056 1,050
Series 2005-C6 Class A4
5.230% due 12/15/40 1,265 1,255
Credit Suisse Morgan Stanley Commercial Mortgage
Trust (E)(p)
Series 2006-HC1 Class A1
5.510% due 05/15/23 1,445 1,445
Credit Suisse Mortgage Capital Certificates
Series 2006-C1 Class A1
4.367% due 07/15/10 358 352
Series 2006-C1 Class AAB
5.555% due 02/15/39 945 959
Series 2006-C2 Class A1
5.250% due 03/15/39 813 814
Series 2006-C2 Class A2
5.659% due 03/15/39 870 889
Series 2006-C4 Class A1
4.771% due 09/15/39 2,241 2,218
Series 2006-C4 Class A3
5.467% due 09/15/39 455 457
Series 2006-TF2 Class SVA1 (E)(p)
5.550% due 10/15/21 2,575 2,577
Series 2006-TFL Class A1 (E)(p)
5.440% due 04/15/21 1,309 1,310
Series 2007-C1 Class A3
5.383% due 02/15/40 2,510 2,505
Series 2007-C2 Class A2
5.478% due 01/15/49 990 995
Series 2007-C2 Class A3
5.542% due 01/15/49 725 729
CS First Boston Mortgage Securities Corp.
Series 1998-C2 Class A2
6.300% due 11/15/30 277 280
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2005-AR1 Class 2A3
5.012% due 08/25/35 840 856
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 472 474
Downey Savings & Loan Association Mortgage Loan
Trust
Series 2004-AR3 Class 1A1B (E)
7.240% due 07/19/44 201 203
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-AR6 Class 2A1A (E)
5.610% due 10/19/45 1,155 1,160
Fannie Mae
7.000% due 2011 6 6
8.000% due 2011 3 3
5.363% due 2012 593 597
5.500% due 2013 11 11
6.500% due 2013 39 40
6.500% due 2015 25 26
7.000% due 2015 8 8
6.000% due 2016 106 108
6.500% due 2016 32 33
5.000% due 2017 232 229
5.500% due 2017 18 18
6.000% due 2017 1,283 1,305
6.500% due 2017 315 323
7.500% due 2017 1 1
4.500% due 2018 3,757 3,646
5.000% due 2018 3,042 3,009
5.500% due 2018 559 562
6.500% due 2018 325 333
4.500% due 2019 1,225 1,188
5.000% due 2019 10,235 10,105
6.500% due 2019 175 181
4.000% due 2020 2,814 2,658
4.500% due 2020 6,667 6,463
5.000% due 2020 14,413 14,222
6.500% due 2020 70 72
4.000% due 2021 755 713
5.000% due 2021 947 933
6.000% due 2021 3,242 3,295
8.000% due 2024 125 133
8.500% due 2024 25 27
9.000% due 2024 4 4
7.000% due 2025 24 24
8.000% due 2025 1 1
8.500% due 2025 24 24
7.000% due 2026 29 29
9.000% due 2026 5 6
7.000% due 2027 10 10
9.000% due 2027 1 1
6.500% due 2028 523 540
6.500% due 2029 1,110 1,147
7.000% due 2029 153 160
6.500% due 2030 9 10
8.000% due 2030 156 166
6.500% due 2031 160 165
</Table>
Fixed Income I Fund 63
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
8.000% due 2031 144 152
5.500% due 2032 72 72
6.000% due 2032 1,504 1,527
6.500% due 2032 1,860 1,917
7.000% due 2032 677 701
8.000% due 2032 6 7
3.907% due 2033 (E) 540 539
4.500% due 2033 1,024 965
4.678% due 2033 (E) 325 327
5.000% due 2033 7,461 7,226
5.500% due 2033 19,383 19,225
6.000% due 2033 812 821
6.500% due 2033 975 1,004
4.500% due 2034 1,314 1,235
5.000% due 2034 11,424 11,061
5.500% due 2034 32,880 32,588
6.000% due 2034 8,857 8,950
6.500% due 2034 876 900
4.375% due 2035 (E) 1,662 1,661
4.500% due 2035 3,032 2,852
4.538% due 2035 (E) 829 830
4.853% due 2035 (E) 501 498
5.000% due 2035 9,300 8,995
5.500% due 2035 53,143 52,639
6.000% due 2035 6,066 6,129
7.015% due 2035 (E) 554 574
7.021% due 2035 (E) 772 801
7.038% due 2035 (E) 1,216 1,261
4.338% due 2036 (E) 1,617 1,615
4.780% due 2036 (E) 816 815
5.000% due 2036 13,802 13,348
5.500% due 2036 960 950
6.000% due 2036 5,841 5,882
6.500% due 2036 6,382 6,516
7.000% due 2036 85 88
6.500% due 2037 2,053 2,098
Series 1992-158 Class ZZ
7.750% due 08/25/22 257 272
Series 1993-134 Class H
6.500% due 08/25/08 599 600
Series 1999-56 Class Z
7.000% due 12/18/29 342 359
Series 2003-32 Class FH (E)
5.720% due 11/25/22 270 270
Series 2003-78 Class FI (E)
5.720% due 01/25/33 601 605
Series 2003-337 Class 1
Principal Only STRIP
Zero coupon due 07/01/33 838 623
Series 2003-343 Class 6
Interest Only STRIP
5.000% due 10/01/33 826 172
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2003-345 Class 18
Interest Only STRIP
4.500% due 12/01/18 2,017 287
Series 2003-345 Class 19
Interest Only STRIP
4.500% due 01/01/19 2,248 319
Series 2004-21 Class FL (E)
5.670% due 11/25/32 306 307
Series 2005-65 Class FP (E)
5.570% due 08/25/35 437 438
Series 2006-369 Class 8
Interest Only STRIP
5.500% due 04/01/36 609 142
Series 2006-371 Class 2
Interest Only STRIP
6.500% due 07/01/36 34 7
Series 2006-373 Class 1
Principal Only STRIP
Zero coupon due 07/01/36 596 453
15 Year TBA (I)
4.500% 2,415 2,337
5.000% 9,580 9,442
5.500% 7,790 7,800
6.000% 300 305
30 Year TBA (I)
4.500% 1,780 1,672
5.000% 42,360 40,910
5.500% 22,635 22,380
6.000% 30,265 30,491
6.500% 13,365 13,644
Fannie Mae Grantor Trust
Series 2001-T6 Class B
6.088% due 05/25/11 1,810 1,885
Fannie Mae REMICS
Series 2006-5 Class 3A2 (E)
4.673% due 05/25/35 100 99
Series 2006-48 Class LG
Principal Only STRIP
Zero coupon due 06/25/36 167 124
Fannie Mae Whole Loan (E)
Series 2004-W2 Class 5AF
5.670% due 03/25/44 562 562
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities (E)
Series 2005-63 Class 1A1
6.133% due 02/25/45 96 96
</Table>
64 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
FHA Project Citi 68 NP
7.430% due 06/27/21 245 248
First Horizon Alternative Mortgage Securities
Series 2004-AA3 Class A1 (E)
5.300% due 09/25/34 156 155
Series 2006-AA5 Class A2 (E)
6.626% due 09/25/36 483 496
Series 2006-AA7 Class A1 (E)
6.600% due 01/25/37 2,543 2,607
Series 2006-FA3 Class A6
6.000% due 07/25/36 480 485
First Horizon Asset Securities, Inc. (E)
Series 2005-AR5 Class 3A1
5.540% due 10/25/35 196 197
Freddie Mac
5.000% due 01/16/09 3,485 3,490
4.500% due 2013 (N) 3,670 3,603
9.000% due 2016 44 47
5.000% due 2018 309 306
5.000% due 2019 591 583
4.500% due 2020 854 827
7.078% due 2027 (E) 33 34
5.500% due 2032 424 421
5.500% due 2033 105 104
4.613% due 2034 (E) 311 314
5.000% due 2035 2,450 2,371
6.000% due 2035 418 420
5.000% due 2036 2,733 2,644
5.119% due 2036 (E) 1,653 1,647
5.891% due 2036 (E) 309 313
5.952% due 2036 (E) 715 723
5.971% due 2036 (E) 370 375
6.125% due 2036 (E) 1,003 1,020
5.920% due 2037 (E) 1,164 1,176
Series 1993-160 Class I
Interest Only STRIP
6.500% due 11/15/08 60 2
Series 1998-210 Class ZM
6.000% due 12/15/28 672 681
Series 2000-226 Class F (E)
5.770% due 11/15/30 12 12
Series 2001-229 Class KF (E)
5.570% due 07/25/22 409 404
Series 2003-262 Class AB
2.900% due 11/15/14 580 565
Series 2004-277 Class UF (E)
5.620% due 06/15/33 740 742
Series 2004-281 Class DF (E)
5.770% due 06/15/23 228 231
Series 2005-292 Class IG
Interest Only STRIP
5.000% due 04/15/23 344 51
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-294 Class FA (E)
5.490% due 03/15/20 446 447
Series 2005-305 Class JF (E)
5.620% due 10/15/35 493 494
15 Year TBA (I)
5.000% 2,500 2,464
30 Year TBA (I)
5.000% 11,475 11,088
5.500% 15,995 15,815
6.000% 17,200 17,340
Freddie Mac Gold
7.000% due 2008 5 5
8.000% due 2009 5 5
6.000% due 2010 38 38
7.000% due 2010 58 60
8.000% due 2010 15 16
6.000% due 2011 134 135
7.000% due 2011 7 8
6.000% due 2012 3 3
6.000% due 2013 27 27
12.000% due 2014 19 21
6.000% due 2016 363 370
9.000% due 2016 20 21
6.000% due 2017 362 369
4.500% due 2018 992 963
5.000% due 2018 701 693
4.500% due 2019 938 911
5.500% due 2019 778 780
5.500% due 2020 2,029 2,035
6.500% due 2025 17 17
8.000% due 2025 31 32
9.000% due 2026 1 1
6.500% due 2027 2 2
8.500% due 2027 61 65
6.500% due 2028 188 194
6.500% due 2029 354 364
7.243% due 2030 (E) 6 6
6.000% due 2031 15 15
6.500% due 2031 595 614
5.500% due 2032 2,852 2,828
6.500% due 2032 599 618
7.000% due 2032 267 277
7.500% due 2032 77 81
5.000% due 2033 534 518
5.500% due 2033 5,556 5,506
6.000% due 2033 546 552
4.500% due 2034 147 139
5.000% due 2034 2,391 2,317
</Table>
Fixed Income I Fund 65
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.500% due 2034 2,680 2,656
6.000% due 2034 816 825
6.500% due 2034 52 53
5.000% due 2035 4,905 4,746
5.500% due 2035 1,964 1,946
5.000% due 2036 487 471
Freddie Mac Reference REMICS
Series 2006-R00 Class AK
5.750% due 12/15/18 565 568
Series 2006-R00 Class FK (E)
5.720% due 07/15/23 458 460
Freddie Mac REMICS
Series 2003-258 Class IG
Interest Only STRIP
4.500% due 10/15/16 320 32
Series 2003-269 Class FE (E)
5.920% due 12/15/28 685 692
Series 2004-277 Class KE
3.500% due 12/15/17 215 214
Series 2005-299 Class KF (E)
5.720% due 06/15/35 231 231
Series 2005-301 Class IM
Interest Only STRIP
5.500% due 01/15/31 486 60
Series 2006-323 Class PA
6.000% due 03/15/26 825 836
Freddie Mac Strips
Series 2007-245 Class IO
Interest Only STRIP
5.000% due 03/01/37 1,035 267
Series 2007-245 Class PO
Principal Only STRIP
5.119% due 11/15/36 1,035 736
GE Capital Commercial Mortgage Corp.
Series 2005-C1 Class A1
4.012% due 06/10/48 393 386
Series 2005-C1 Class A5
4.772% due 06/10/48 400 387
Series 2006-C1 Class A4
5.518% due 03/10/44 905 908
GE Capital Commercial Mortgage Corp.
Series 2007-C1 Class A4
5.489% due 02/10/17 500 503
Ginnie Mae I
6.500% due 2008 2 2
6.500% due 2009 17 17
6.500% due 2010 4 4
7.000% due 2011 12 13
9.500% due 2016 1 1
8.000% due 2017 10 11
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
10.500% due 2020 9 10
8.000% due 2022 21 22
8.500% due 2022 1 1
8.500% due 2024 11 12
8.000% due 2025 13 13
8.000% due 2026 89 95
8.000% due 2029 56 60
8.500% due 2029 21 22
8.000% due 2030 58 62
8.500% due 2030 15 16
7.000% due 2031 233 245
7.000% due 2032 104 109
5.000% due 2033 2,963 2,886
7.000% due 2033 17 18
5.000% due 2035 482 470
6.000% due 2035 4,422 4,483
30 Year TBA (I)
5.500% 4,960 4,932
6.500% 2,700 2,773
Ginnie Mae II
6.125% due 2027 (E) 48 48
5.000% due 2030 (E) 168 171
5.375% due 2030 (E) 31 31
7.500% due 2032 16 16
4.500% due 2035 717 676
GMAC Commercial Mortgage Securities, Inc.
Series 2001-C1 Class A2
6.465% due 04/15/34 510 530
Series 2005-C1 Class A2
4.471% due 05/10/43 465 457
GMAC Mortgage Corp. Loan Trust
Series 2005-AR6 Class 3A1
5.298% due 11/19/35 705 704
Series 2006-AR1 Class 1A1 (E)
5.614% due 03/19/36 1,638 1,646
Government National Mortgage Association (E)
Series 1999-40 Class FE
5.870% due 11/16/29 392 395
Greenpoint Mortgage Funding Trust (E)
Series 2006-AR5 Class A1A
5.400% due 10/25/46 1,833 1,833
</Table>
66 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 1,380 1,384
Series 2005-GG3 Class A1
3.919% due 08/10/42 583 574
Series 2005-GG5 Class A41
5.243% due 04/10/37 695 695
Series 2006-RR1 Class A1 (p)
5.964% due 03/18/49 580 565
Series 2007-GG9 Class A4
5.444% due 03/10/39 460 462
GS Mortgage Securities Corp. II
Series 1998-C1 Class A2
6.620% due 10/18/30 1,070 1,079
Series 2005-GG4 Class AABA
4.680% due 07/10/39 600 584
Series 2006-FL8 Class A1 (E)(p)
5.420% due 06/06/20 1,443 1,443
Series 2006-GG6 Class A4
5.553% due 04/10/38 305 309
Series 2006-GG8 Class AAB
5.535% due 11/10/39 575 582
GSMPS Mortgage Loan Trust (E)(p)
Series 2004-4 Class 1AF
5.720% due 06/25/34 1,080 1,086
Harborview Mortgage Loan Trust
Series 2004-4 Class 3A (E)
2.975% due 06/19/34 1,056 1,054
Series 2005-14 Class 3A1A
5.313% due 12/19/35 200 201
Series 2006-14 Class 2A1A (E)
5.470% due 03/19/38 3,113 3,114
Series 2006-2 Class 1A
5.438% due 02/25/36 474 487
Series 2006-3 Class 1A1A (E)
6.416% due 06/19/36 5,291 5,403
HSI Asset Securitization Corp. Trust (E)
Series 2005-I1 Class 2A1
5.440% due 11/25/35 816 816
Impac CMB Trust (E)
Series 2004-2 Class A2
5.820% due 04/25/34 67 67
Series 2004-3 Class 1A
5.570% due 06/25/34 79 79
Series 2004-5 Class 1A1
5.680% due 10/25/34 369 370
Impac Secured Assets CMN Owner Trust (E)
Series 2005-2 Class A1
5.640% due 03/25/36 1,133 1,137
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Indymac Index Mortgage Loan Trust
Series 2005-AR1 Class A2
5.099% due 09/25/35 316 308
Series 2006-AR2 Class A2 (E)
5.400% due 11/25/36 162 162
Series 2006-AR3 Class 2A1A
6.405% due 03/25/36 6,754 6,885
Indymac Loan Trust (E)
Series 2004-L1 Class A1 (p)
5.600% due 07/25/09 158 158
Series 2005-L1 Class A
5.520% due 06/25/10 720 721
Series 2005-L2 Class A1
5.540% due 01/25/11 983 985
JP Morgan Alternative Loan Trust
Series 2006-A2 Class 3A1
5.954% due 05/25/36 2,804 2,845
Series 2006-A3 Class 1A2 (E)
5.390% due 07/25/36 962 960
Series 2006-A4 Class A4 (E)
5.390% due 08/25/36 785 785
Series 2006-A6 Class 1A2 (E)
5.390% due 11/25/36 1,225 1,224
Series 2006-S4 Class A1B (E)
5.400% due 12/25/36 2,246 2,247
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2003-CB7 Class A3
4.449% due 01/12/38 940 918
Series 2004-LN2 Class A1
4.475% due 07/15/41 670 655
Series 2005-CB1 Class A1
4.520% due 08/12/37 894 883
Series 2005-CB1 Class A2
5.247% due 01/12/43 975 977
Series 2005-CB1 Class A4
4.895% due 09/12/37 80 78
5.472% due 01/12/43 200 200
Series 2005-FL1 Class A1 (E)(p)
5.430% due 02/15/19 756 756
Series 2005-LDP Class A1
5.035% due 12/15/44 3,129 3,115
4.116% due 03/15/46 431 424
Series 2005-LDP Class A3
4.959% due 08/15/42 690 680
5.209% due 12/15/44 2,845 2,848
</Table>
Fixed Income I Fund 67
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-LDP Class A3A1
4.871% due 10/15/42 1,775 1,750
Series 2005-LDP Class A4
4.918% due 10/15/42 400 389
5.345% due 12/15/44 645 643
Series 2006-CB1 Class A1
5.279% due 12/12/43 647 651
Series 2006-CB1 Class A3A (p)
5.491% due 12/12/44 1,370 1,385
Series 2006-CB1 Class A4
5.429% due 12/12/43 1,180 1,187
5.481% due 12/12/44 460 463
5.817% due 05/12/45 1,685 1,704
Series 2006-CB1 Class ASB
5.506% due 12/12/44 365 368
Series 2006-FL1 Class A1A (E)(p)
5.410% due 02/15/20 1,084 1,084
Series 2006-LDP Class A1S
5.179% due 05/15/47 4,588 4,594
Series 2006-LDP Class A3
5.336% due 05/15/47 370 368
Series 2006-LDP Class A3B
5.447% due 05/15/45 625 630
Series 2006-LDP Class A4
6.066% due 04/15/45 2,790 2,902
5.561% due 05/15/45 830 829
Series 2007-CB1 Class A4
5.440% due 06/12/47 3,250 3,277
Series 2007-LDP Class A2S
5.294% due 05/15/49 1,220 1,222
Series 2007-LDP Class A3
5.393% due 01/15/49 1,690 1,692
JP Morgan Mortgage Trust
Series 2005-A2 Class 3A1
4.906% due 04/25/35 1,082 1,071
Series 2005-A3 Class 6A1
4.906% due 06/25/35 1,436 1,424
Series 2005-A6 Class 2A2
4.977% due 08/25/35 1,045 1,037
Series 2006-A2 Class 1A1
5.465% due 04/25/36 1,553 1,547
Series 2007-A1 Class 3A2 (E)
5.012% due 07/25/35 4,498 4,478
Series 2007-A1 Class 6A1
4.781% due 07/25/35 1,957 1,932
LB-UBS Commercial Mortgage Trust
Series 2001-C3 Class A1
6.058% due 06/15/20 223 226
Series 2003-C3 Class A1
2.599% due 05/15/27 455 446
Series 2004-C2 Class A1
2.946% due 03/15/29 1,181 1,142
Series 2004-C4 Class A3
5.153% due 06/15/29 1,180 1,184
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-C3 Class A5
4.739% due 07/15/30 340 327
Series 2005-C3 Class AAB
4.664% due 07/15/30 400 390
Series 2006-C4 Class A4
5.899% due 06/15/38 315 328
Lehman Brothers Floating Rate Commercial
Mortgage Trust (E)(p)
Series 2006-LLF Class A1
5.400% due 09/15/21 229 229
Lehman Mortgage Trust
Series 2005-3 Class 1A3
5.500% due 01/25/36 1,123 1,127
Lehman XS Trust (E)
Series 2005-5N Class 1A1
5.620% due 11/25/35 836 839
Series 2005-7N Class 1A1B
5.620% due 12/25/35 591 593
Mach One Trust Commercial Mortgage-Backed (p)
Series 2004-1A Class A3
5.220% due 05/28/40 1,350 1,316
Mastr Adjustable Rate Mortgages Trust
Series 2006-2 Class 3A1
4.849% due 01/25/36 916 907
Mastr Alternative Loans Trust
Series 2003-4 Class B1
5.668% due 06/25/33 340 348
Series 2004-10 Class 5A6
5.750% due 09/25/34 505 504
Mastr Asset Securitization Trust
Series 2003-7 Class 4A35 (E)
5.720% due 09/25/33 750 751
Series 2003-11 Class 6A8 (E)
5.820% due 12/25/33 740 743
Series 2004-4 Class 2A2 (E)
5.770% due 04/25/34 303 303
Series 2005-2 Class 1A1
5.250% due 11/25/35 1,161 1,149
Mastr Reperforming Loan Trust (A)
Series 2005-1 Class 1A1
6.000% due 08/25/34 603 606
Merrill Lynch Mortgage Investors, Inc.
Series 2006-A1 Class 1A1
5.882% due 03/25/36 4,933 4,963
</Table>
68 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Merrill Lynch Mortgage Trust
Series 2004-MKB Class A2
4.353% due 02/12/42 820 806
Series 2005-LC1 Class A1
5.017% due 01/12/44 1,047 1,043
Series 2005-LC1 Class A2
5.202% due 01/12/44 1,265 1,266
Series 2005-MKB Class A1
4.446% due 09/12/42 811 801
Series 2006-C1 Class A4
5.660% due 05/12/39 660 677
Merrill Lynch/Countrywide Commercial Mortgage
Trust
Series 2006-3 Class A2
5.291% due 07/12/46 1,400 1,403
Series 2006-4 Class A1
3.642% due 12/12/49 1,020 985
Series 2007-5 Class A4
5.378% due 08/12/48 2,935 2,939
MLCC Mortgage Investors, Inc. (E)
Series 2004-HB1 Class A2
5.771% due 04/25/29 96 96
Morgan Stanley Capital I
Series 2004-HQ3 Class A1
3.100% due 01/13/41 290 285
Series 2004-RR2 Class A2 (p)
5.450% due 10/28/33 1,370 1,340
Series 2005-HQ5 Class A4
5.168% due 01/14/42 880 871
Series 2005-HQ6 Class A4A
4.989% due 08/13/42 530 518
Series 2005-IQ1 Class AAB
5.178% due 09/15/42 750 748
Series 2005-IQ9 Class A1
3.990% due 07/15/56 493 484
Series 2005-T17 Class A5
4.780% due 12/13/41 250 242
Series 2006-HQ8 Class A4
5.388% due 03/12/44 810 817
Series 2006-HQ9 Class A4
5.731% due 07/20/44 585 599
Series 2006-XLF Class A1 (E)(p)
5.410% due 07/15/19 139 139
Series 2007-HQ1 Class A4
5.447% due 02/20/44 1,010 1,020
Morgan Stanley Dean Witter Capital I
Series 2001-TOP Class A3
6.200% due 07/15/33 252 252
Morgan Stanley Mortgage Loan Trust
Series 2006-3AR Class 2A3
5.869% due 03/25/36 485 491
Series 2006-11 Class 1A6
6.231% due 08/25/36 650 667
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Novastar Mortgage-Backed Notes (E)
Series 2006-MTA Class 2A1A
5.510% due 09/25/46 1,087 1,089
Novastar NIM Trust (p)
4.777% due 10/26/35 5 5
Prime Mortgage Trust
Series 2004-CL1 Class 1A2 (E)
5.720% due 02/25/34 94 94
Series 2004-CL1 Class 2A2 (E)
5.720% due 02/25/19 21 21
Series 2006-DR1 Class 2A1 (A)
5.500% due 05/25/35 2,485 2,475
Series 2006-DR1 Class 2A2 (A)
6.000% due 11/25/36 2,198 2,201
Residential Accredit Loans, Inc.
Series 2004-QS5 Class A6 (E)
5.920% due 04/25/34 120 120
Series 2004-QS8 Class A4 (E)
5.720% due 06/25/34 588 591
Series 2005-QA1 Class A41
5.690% due 09/25/35 728 729
Series 2005-QA8 Class NB3
5.499% due 07/25/35 455 458
Series 2005-QO3 Class A1 (E)
5.720% due 10/25/45 1,118 1,121
Series 2006-QA1 Class A21
5.986% due 01/25/36 2,339 2,365
Series 2006-QO7 Class 3A2 (E)
5.525% due 09/25/46 1,340 1,333
Series 2006-QS6 Class 1A13
6.000% due 06/25/36 1,325 1,334
Residential Asset Securities Corp. (E)
Series 2003-KS4 Class AIIB
5.610% due 06/25/33 122 122
Residential Asset Securitization Trust (E)
Series 2003-A15 Class 1A2
5.770% due 02/25/34 706 708
Residential Funding Mortgage Securities I
Series 2003-S5 Class 1A2 (E)
5.770% due 11/25/18 358 360
Series 2003-S14 Class A5 (E)
5.720% due 07/25/18 876 880
Series 2003-S20 Class 1A7 (E)
5.820% due 12/25/33 228 229
</Table>
Fixed Income I Fund 69
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-SA4 Class 2A1
6.164% due 10/25/36 613 623
Salomon Brothers Mortgage Securities VII, Inc.
Series 2003-UP2 Class A1
4.000% due 12/25/18 369 354
Sequoia Mortgage Trust (E)
Series 2004-3 Class A
5.670% due 04/20/34 672 672
Small Business Administration
Series 1999-P10 Class 1
7.540% due 08/10/09 247 255
Small Business Administration Participation
Certificates
Series 2003-20I Class 1
5.130% due 09/01/23 77 77
Structured Adjustable Rate Mortgage Loan Trust
(E)
Series 2005-19X Class 1A1
5.640% due 10/25/35 819 822
Structured Asset Securities Corp.
Series 2004-21X Class 1A3
4.440% due 12/25/34 1,230 1,216
Thornburg Mortgage Securities Trust (E)
Series 2003-2 Class A1
5.660% due 04/25/43 234 234
Series 2006-1 Class A3
5.490% due 01/25/36 2,477 2,474
Series 2006-3 Class A3
5.430% due 06/25/36 1,820 1,817
Series 2006-6 Class A1
5.430% due 12/25/36 549 549
Tobacco Settlement Authority of Iowa
6.500% due 06/01/23 100 100
Wachovia Bank Commercial Mortgage Trust
Series 2003-C9 Class A1
3.291% due 12/15/35 735 719
Series 2005-C16 Class A2
4.380% due 10/15/41 1,195 1,172
Series 2005-C17 Class A1
4.430% due 03/15/42 2,068 2,042
Series 2005-C22 Class A3
5.461% due 12/15/44 1,865 1,874
Series 2007-C30 Class A5
5.342% due 12/15/43 2,965 2,953
Washington Mutual Alternative Mortgage
Pass-Through Certificates
Series 2005-4 Class CB11
5.500% due 06/25/35 275 271
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Washington Mutual Mortgage Pass-Through
Certificates
Series 2003-S9 Class A2 (E)
5.870% due 10/25/33 631 634
Series 2005-AR1 Class 1A1
4.838% due 10/25/35 548 541
Series 2005-AR1 Class A1A1 (E)
5.610% due 10/25/45 1,048 1,049
Series 2005-AR6 Class B3 (E)
5.980% due 04/25/45 450 450
Series 2007-HY3 Class 4B1
5.358% due 03/25/37 315 311
Washington Mutual Pass-Through Certificates (E)
Series 2005-AR1 Class A1A2
5.610% due 12/25/45 538 540
Washington Mutual, Inc.
Series 2004-AR1 Class A1B1 (E)
5.664% due 11/25/34 3 3
Series 2005-AR1 Class A1A2 (E)
5.600% due 11/25/45 1,033 1,036
Series 2006-AR1 Class 1A1
5.967% due 09/25/36 1,836 1,858
Wells Fargo Mortgage Backed Securities Trust
Series 2006-2 Class 2A3
5.500% due 03/25/36 851 852
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 697 692
Series 2006-AR8 Class 2A3
5.240% due 04/25/36 159 158
Zuni Mortgage Loan Trust (E)
Series 2006-OA1 Class A1
5.450% due 08/25/36 1,374 1,373
------------
777,035
------------
Municipal Bonds - 0.0%
State of Texas General Obligation Unlimited,
weekly demand
4.750% due 04/01/35 300 305
------------
Non-US Bonds - 0.2%
Bundesrepublik Deutschland
Series 04
3.750% due 01/04/15 EUR 790 1,050
Canadian Government Bond
4.000% due 12/01/31 CAD 121 157
</Table>
70 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Poland Government Bond
Series 1013
5.000% due 10/24/13 PLN 2,540 905
Quebec Residual
Zero coupon due 12/01/36 CAD 830 187
------------
2,299
------------
United States Government Agencies - 4.5%
Fannie Mae
2.500% due 06/15/08 (N) 3,065 2,981
7.250% due 01/15/10 (N) 600 637
3.875% due 02/15/10 (N) 1,495 1,460
4.750% due 04/19/10 2,950 2,939
4.125% due 05/15/10 (N) 410 402
7.125% due 06/15/10 (N) 700 747
4.250% due 08/15/10 (N) 6,515 6,409
6.000% due 05/15/11 (N) 1,040 1,084
5.000% due 02/16/12 (N) 840 846
4.375% due 09/15/12 (N) 470 460
4.375% due 03/15/13 (N) 140 137
Zero coupon due 07/05/14 2,280 1,610
5.250% due 03/24/15 495 492
5.000% due 02/13/17 (N) 345 345
5.000% due 04/26/17 (N) 945 925
6.625% due 11/15/30 (N) 170 201
6.210% due 08/06/38 420 482
Federal Farm Credit Bank
5.125% due 08/25/16 740 750
Federal Home Loan Bank System
5.400% due 01/02/09 430 430
5.000% due 02/20/09 (N) 4,820 4,829
5.000% due 09/18/09 (N) 6,700 6,730
4.375% due 03/17/10 (N) 790 782
5.375% due 08/19/11 (N) 490 500
4.875% due 11/18/11 (N) 700 702
5.375% due 05/15/19 315 321
5.125% due 08/15/19 (N) 330 331
5.625% due 06/11/21 (N) 790 827
5.500% due 07/15/36 (N) 310 322
Series 567 (N)
4.375% due 09/17/10 350 346
Series VB15 (N)
5.000% due 12/21/15 1,265 1,266
Financing Corp.
Principal Only STRIP
Zero coupon due 09/26/19 1,355 721
Series 1
Zero coupon due 05/11/16 140 90
Series 2P
Zero coupon due 11/30/17 100 59
Series 3P
Zero coupon due 11/30/17 300 177
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 5P
Zero coupon due 02/08/18 110 64
Series 6P
Zero coupon due 08/03/18 510 290
Series 8P
Zero coupon due 08/03/18 1,085 616
Series 9P
Zero coupon due 10/06/17 540 321
Series 10P
Zero coupon due 11/30/17 940 555
Series 12P
Zero coupon due 12/06/18 420 234
Series 13
Zero coupon due 12/27/16 490 304
Series 13P
Zero coupon due 12/27/18 1,135 630
Series 16P
Zero coupon due 04/05/19 1,200 655
Series 19
Zero coupon due 06/06/16 410 262
Series A-P
Zero coupon due 10/06/17 260 155
Series B-P
Zero coupon due 04/06/18 565 327
Series C-P
Zero coupon due 11/30/17 870 513
Series E-P
Zero coupon due 11/02/18 835 467
Freddie Mac (N)
6.625% due 09/15/09 490 509
4.875% due 02/09/10 2,940 2,945
6.875% due 09/15/10 670 713
6.000% due 06/15/11 650 678
5.750% due 01/15/12 2,265 2,351
5.125% due 07/15/12 985 999
4.875% due 11/15/13 1,880 1,879
5.050% due 01/26/15 1,155 1,164
5.000% due 04/18/17 440 440
5.625% due 11/23/35 520 512
Tennessee Valley Authority
6.150% due 01/15/38 1,430 1,626
------------
60,549
------------
United States Government Treasuries - 12.3%
United States Treasury Inflation Indexed Bonds
(N)
0.875% due 04/15/10 11 10
2.375% due 04/15/11 1,763 1,787
</Table>
Fixed Income I Fund 71
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
3.375% due 01/15/12 1,501 1,593
2.000% due 07/15/14 1,759 1,745
1.625% due 01/15/15 53 51
1.875% due 07/15/15 2,469 2,416
2.500% due 07/15/16 2,106 2,162
2.375% due 01/15/25 4,501 4,525
2.000% due 01/15/26 984 934
2.375% due 01/15/27 393 396
3.625% due 04/15/28 503 612
3.875% due 04/15/29 1,733 2,195
United States Treasury Notes (N)
3.750% due 05/15/08 6,000 5,930
3.250% due 01/15/09 1,135 1,109
4.000% due 06/15/09 335 331
3.375% due 10/15/09 9,040 8,794
3.625% due 01/15/10 935 913
3.500% due 02/15/10 7,440 7,239
4.750% due 02/15/10 1,080 1,086
4.000% due 03/15/10 8,935 8,810
3.625% due 06/15/10 1,925 1,876
4.125% due 08/15/10 455 450
3.875% due 09/15/10 4,195 4,114
4.375% due 12/15/10 3,545 3,530
4.875% due 04/30/11 13,965 14,148
4.625% due 08/31/11 1,805 1,813
4.750% due 01/31/12 400 404
4.000% due 11/15/12 2,900 2,829
10.375% due 11/15/12 2,090 2,149
4.250% due 08/15/13 2,515 2,478
4.250% due 11/15/13 8,865 8,718
4.000% due 02/15/14 210 203
4.750% due 05/15/14 5,075 5,130
4.250% due 11/15/14 2,515 2,462
4.125% due 05/15/15 3,670 3,553
4.250% due 08/15/15 1,155 1,126
5.125% due 05/15/16 6,270 6,499
4.625% due 02/15/17 20 20
8.750% due 05/15/17 1,885 2,495
8.125% due 08/15/19 4,330 5,668
8.125% due 08/15/21 8,500 11,352
Principal Only
Zero coupon due 11/15/21 4,835 2,368
7.125% due 02/15/23 8,050 10,032
6.000% due 02/15/26 7,620 8,652
6.125% due 08/15/29 2,015 2,353
5.375% due 02/15/31 4,390 4,702
4.500% due 02/15/36 1,389 1,317
4.750% due 02/15/37 2,990 2,958
------------
166,037
------------
TOTAL LONG-TERM INVESTMENTS
(cost $1,357,962) 1,359,074
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PREFERRED STOCKS - 0.2%
Auto and Transportation - 0.1%
General Motors Corp. (AE) 13,100 275
------------
Financial Services - 0.1%
DG Funding Trust (E)(f)(A) 152 1,608
------------
TOTAL PREFERRED STOCKS
(cost $1,842) 1,883
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.0%
(Number of Contracts)
Eurodollar Futures - 0.0%
Jun 2007 91.25 Put (140) 31,938 1
Jun 2007 91.75 Put (190) 43,581 1
Sep 2007 90.75 Put (227) 51,501 1
Dec 2007 91.25 Put (156) 35,588 1
Dec 2007 91.50 Put (3) 686 --
Mar 2008 91.75 Put (630) 144,506 4
Mar 2008 92.75 Put (109) 25,274 1
------------
TOTAL OPTIONS PURCHASED
(cost $14) 9
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
SHORT-TERM INVESTMENTS - 12.0%
Abbey National NA LLC
5.230% due 05/21/07 5,400 5,376
Allstate Life Global Funding Trusts
3.850% due 01/25/08 1,355 1,340
AT&T Wireless Services, Inc.
7.500% due 05/01/07 2,605 2,605
AT&T, Inc. (p)
4.214% due 06/05/07 800 799
Bank of Ireland Governor & Co.
5.230% due 07/10/07 7,400 7,302
Barclays Bank PLC
5.281% due 03/17/08 2,300 2,301
</Table>
72 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ChevronTexaco Capital Co.
3.500% due 09/17/07 470 467
CIT Group, Inc.
5.750% due 09/25/07 120 120
Citigroup, Inc.
3.500% due 02/01/08 985 972
Fannie Mae
3.500% due 03/28/08 1,790 1,764
Fannie Mae Discount Notes (sec.)
Zero coupon due 06/25/07 430 427
Ford Motor Credit Co.
4.950% due 01/15/08 320 316
France Treasury Bills BTF
Zero coupon due 07/05/07 EUR 1,300 1,762
General Electric Capital Corp.
Series MTNA
4.250% due 01/15/08 220 218
GMAC LLC (N)
6.125% due 08/28/07 760 759
Golden West Financial Corp.
4.125% due 08/15/07 270 269
Harrah's Operating Co., Inc.
7.125% due 06/01/07 755 756
HBOS Treasury Services PLC
5.225% due 06/29/07 8,000 7,931
Morgan Stanley
5.380% due 03/07/08 (E) 500 500
3.625% due 04/01/08 100 99
Series MTNF (E)
5.485% due 01/18/08 1,100 1,101
Russell Investment Company
Money Market Fund 89,256,183 89,256
Skandinaviska Enskilda Banken
5.270% due 07/06/07 1,800 1,800
5.185% due 07/09/07 6,300 6,191
Societe Generale NA
5.220% due 06/19/07 5,300 5,293
TELUS Corp.
7.500% due 06/01/07 770 771
UBS Financial Del LLC
5.230% due 07/12/07 7,900 7,895
United States Treasury Bills (z)(sec.)(c)
5.140% due 05/17/07 505 504
5.046% due 06/14/07 300 298
5.088% due 06/14/07 1,365 1,357
United States Treasury Notes (N)
4.375% due 05/15/07 3,630 3,629
6.625% due 05/15/07 515 515
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
4.250% due 10/31/07 6,150 6,130
3.000% due 11/15/07 800 792
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $161,640) 161,615
------------
OTHER SECURITIES - 18.1%
Russell Investment Money Market Fund (X) 46,767,621 46,768
State Street Securities
Lending Quality Trust (X) 196,545,033 196,545
------------
TOTAL OTHER SECURITIES
(cost $243,313) 243,313
------------
TOTAL INVESTMENTS - 131.3%
(identified cost $1,764,771) 1,765,894
OTHER ASSETS AND LIABILITIES,
NET - (31.3%) (420,702)
------------
NET ASSETS - 100.0% 1,345,192
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 73
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Euribor Futures
expiration date 12/07 (42) 13,709 (33)
expiration date 03/08 (3) 979 (3)
expiration date 06/08 (2) 653 (2)
expiration date 09/08 (3) 980 (2)
expiration date 12/08 (3) 981 (2)
Euro-Bobl 5 Year Bond
expiration date 06/07 (13) 1,912 1
Euro Yen Futures
expiration date 12/07 (25) 5,184 6
Eurodollar Futures (CME)
expiration date 06/07 (21) 4,970 (17)
expiration date 09/07 (132) 31,284 (60)
expiration date 12/07 (542) 128,711 (215)
expiration date 03/08 (865) 205,838 (17)
expiration date 06/08 (602) 143,457 107
expiration date 09/08 (82) 19,552 76
expiration date 12/08 (125) 29,806 109
expiration date 03/09 (1) 238 --
LIBOR Futures
expiration date 06/07 (23) 5,415 29
expiration date 09/07 (7) 1,646 (12)
expiration date 12/07 (27) 6,351 (44)
expiration date 03/08 (8) 1,883 (11)
expiration date 06/08 (15) 3,532 (7)
expiration date 09/08 (7) 1,649 (10)
United States Treasury Bonds
expiration date 06/07 (38) 4,247 9
United States Treasury 2 Year Notes
expiration date 06/07 (114) 23,338 35
United States Treasury 5 Year Notes
expiration date 06/07 (509) 53,867 260
United States Treasury 10 Year Notes
expiration date 06/07 (53) 5,741 16
Short Positions
United States Treasury Bonds
expiration date 06/07 (23) 2,570 3
United States Treasury 2 Year Notes
expiration date 06/07 (27) 5,527 7
United States Treasury 10 Year Notes
expiration date 06/07 (313) 33,907 (49)
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures Contracts 174
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Eurodollar Futures
Jun 2007 94.75 Call (15) 3,553 (1)
Sep 2007 95.25 Call (14) 3,334 (1)
Jun 2007 94.75 Put (15) 3,553 (4)
United States Treasury Bonds
May 2007 108.00 Call (9) 972 (6)
May 2007 111.00 Call (12) 1,332 (14)
May 2007 113.00 Call (130) 972 (26)
May 2007 115.00 Call (18) 2,070 --
May 2007 109.00 Put (92) 10,028 (4)
Aug 2007 109.00 Put (135) 14,715 (63)
United States Treasury Notes
2 Year Futures
May 2007 102.50 Call (100) 20,500 (16)
5 Year Futures
May 2007 106.00 Call (296) 31,376 (69)
10 Year Futures
May 2007 105.00 Put (18) 1,890 --
May 2007 106.00 Put (12) 1,272 --
May 2007 107.00 Put (142) 15,194 (13)
May 2007 108.00 Put (29) 3,132 (9)
---------------
Total Liability for Options Written
(premiums received $304) (226)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
74 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 384 AUD 462 05/17/07 (1)
USD 302 CAD 356 05/09/07 19
USD 506 CAD 594 05/09/07 30
USD 949 CAD 1,063 05/09/07 8
USD 319 CAD 356 08/08/07 3
USD 531 CAD 594 08/08/07 6
USD 262 CNY 1,996 06/19/07 (2)
USD 28 EUR 21 05/03/07 --
USD 1,075 EUR 791 05/09/07 6
USD 2,152 EUR 1,650 05/09/07 98
USD 1,061 EUR 800 06/15/07 33
USD 2,061 JPY 247,044 05/09/07 10
USD 204 JPY 24,000 06/15/07 (2)
USD 424 JPY 49,610 06/15/07 (6)
USD 1,334 JPY 155,000 06/15/07 (29)
USD 2,106 JPY 247,044 08/08/07 (12)
USD 914 PLN 2,556 05/09/07 8
USD 17 SGD 25 08/07/07 --
USD 2 TWD 68 05/02/07 --
USD 3 TWD 110 05/02/07 --
USD 22 TWD 743 05/02/07 --
USD 23 TWD 772 05/02/07 --
USD 23 TWD 774 05/02/07 --
USD 24 TWD 788 05/02/07 --
USD 61 TWD 2,016 05/02/07 (1)
CAD 356 USD 318 05/09/07 (3)
CAD 594 USD 530 05/09/07 (6)
CAD 1,063 USD 901 05/09/07 (54)
CAD 1,063 USD 952 08/08/07 (9)
EUR 21 USD 28 05/09/07 --
EUR 791 USD 1,029 05/09/07 (52)
EUR 1,629 USD 2,213 05/09/07 (11)
EUR 21 USD 29 05/24/07 --
EUR 1,574 USD 2,140 05/24/07 (10)
EUR 800 USD 1,066 06/15/07 (27)
EUR 791 USD 1,078 08/08/07 (6)
JPY 247,044 USD 2,082 05/09/07 12
JPY 53,173 USD 442 05/15/07 (4)
JPY 36,830 USD 319 06/15/07 9
PLN 2,556 USD 860 05/09/07 (62)
PLN 2,556 USD 916 08/08/07 (9)
TWD 68 USD 2 05/02/07 --
TWD 110 USD 3 05/02/07 --
TWD 110 USD 3 05/02/07 --
TWD 110 USD 3 05/02/07 --
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
TWD 678 USD 20 05/02/07 --
TWD 743 USD 22 05/02/07 --
TWD 772 USD 23 05/02/07 --
TWD 2,679 USD 81 05/02/07 1
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts (63)
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income I Fund 75
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 7,600 5.000% Three Month LIBOR 06/20/09 (5)
Bank of America USD 1,400 5.000% Three Month LIBOR 06/20/37 (79)
Barclays Bank PLC GBP 400 6.000% Six Month LIBOR 03/20/09 1
Barclays Bank PLC USD 10,700 5.000% Three Month LIBOR 06/20/09 (7)
Six Month
Barclays Bank PLC GBP 100 LIBOR 4.000% 12/15/36 24
BNP Paribas EUR 1,200 2.090% Consumer Price Index 10/15/10 73
(France)
Citibank MXN 1,000 8.170% Mexico Interbank 28 Day 11/04/16 2
Deposit Rate
Citibank JPY 37,000 2.000% Six Month LIBOR 12/20/16 8
Citibank USD 1,400 5.000% Three Month LIBOR 06/20/37 (79)
Credit Suisse First Boston GBP 200 5.000% Six Month LIBOR 06/15/09 (6)
Credit Suisse First Boston USD 5,100 5.000% Three Month LIBOR 06/20/09 (3)
Credit Suisse First Boston USD 1,400 5.000% Three Month LIBOR 06/20/37 (79)
Deutsche Bank AG JPY 240,000 1.000% Six Month LIBOR 09/18/08 --
Deutsche Bank AG USD 18,200 5.000% Three Month LIBOR 12/19/08 6
Deutsche Bank AG GBP 100 6.000% Six Month LIBOR 12/20/08 --
Deutsche Bank AG JPY 20,000 1.000% Six Month LIBOR 03/18/09 --
Deutsche Bank AG USD 43,800 5.000% Three Month LIBOR 06/20/09 (30)
Six Month
Deutsche Bank AG EUR 1,500 LIBOR 4.000% 12/15/11 28
Deutsche Bank AG JPY 258,000 2.000% Six Month LIBOR 12/20/16 61
Deutsche Bank AG USD 3,400 5.000% Three Month LIBOR 06/20/17 43
Deutsche Bank AG JPY 100,000 2.500% Six Month LIBOR 12/20/26 40
Deutsche Bank AG USD 700 5.000% Three Month LIBOR 06/20/37 (39)
Goldman Sachs EUR 300 4.000% Six Month LIBOR 03/20/09 (1)
Goldman Sachs GBP 100 5.000% Six Month LIBOR 06/15/09 (3)
Goldman Sachs JPY 110,000 1.500% Six Month LIBOR 06/20/12 5
Goldman Sachs JPY 76,000 2.000% Six Month LIBOR 12/20/16 18
Goldman Sachs USD 220 5.000% Three Month LIBOR 06/20/37 (12)
Six Month
JP Morgan GBP 500 LIBOR 4.000% 12/15/36 138
JP Morgan USD 2,100 5.000% Three Month LIBOR 06/20/37 (121)
Lehman Brothers GBP 3,300 4.500% Six Month LIBOR 09/20/09 (159)
Lehman Brothers USD 610 5.000% Three Month LIBOR 06/20/37 (34)
Merrill Lynch GBP 5,700 4.500% Six Month LIBOR 09/20/09 (274)
Six Month
Merrill Lynch GBP 200 LIBOR 4.000% 12/15/35 13
Morgan Stanley USD 6,400 5.000% Three Month LIBOR 06/20/09 (4)
Morgan Stanley JPY 60,000 1.500% Six Month LIBOR 06/20/12 3
Morgan Stanley JPY 10,000 2.000% Six Month LIBOR 12/20/16 2
Three Month
Morgan Stanley USD 1,200 LIBOR 5.000% 06/20/17 15
Morgan Stanley JPY 40,000 2.500% Six Month LIBOR 12/20/26 17
Morgan Stanley EUR 1,300 6.000% Six Month LIBOR 06/18/34 226
Royal Bank of Scotland USD 18,200 5.000% Three Month LIBOR 12/19/08 6
Royal Bank of Scotland USD 5,300 5.000% Three Month LIBOR 06/20/09 (4)
Royal Bank of Scotland CAD 100 4.500% Three Month LIBOR 06/15/27 (3)
UBS JPY 110,000 1.000% Six Month LIBOR 03/18/09 (1)
UBS JPY 20,000 2.000% Six Month LIBOR 12/20/16 4
--------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - $75 (210)
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
76 Fixed Income I Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME I FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
CREDIT DEFAULT SWAP CONTRACTS
- -----------------------------------------------------------------------------------------------------------------
NOTIONAL FUND MARKET
REFERENCE COUNTER AMOUNT (PAYS)/RECEIVES TERMINATION VALUE
ENTITY PARTY $ FIXED RATE DATE $
- ------------------------------ ---------------- --------- --------------- -------------- --------------
Anadarko Petroleum Goldman USD 200 0.150% 03/20/08 --
Dow Jones CDX High Volatility
7 Index Bank of America USD 1,000 (0.650%) 12/20/16 (1)
Dow Jones CDX High Volatility
7 Index Goldman USD 4,000 (0.650%) 12/20/16 (3)
Russian Federation Deutsche Bank USD 2,000 0.260% 12/20/07 2
Russian Federation JP Morgan USD 100 0.460% 06/20/07 --
Russian Federation Merrill Lynch USD 1,000 0.305% 12/20/08 2
Temple-Inland, Inc. Lehman Brothers USD 500 (0.740%) 03/20/17 (3)
--------------
Total Market Value of Open Credit Default Contracts Premiums Paid (Received) - ($22) (3)
==============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- ----------------------------------------------------------
Asset-Backed Securities 5.7
Certificate of Deposits 0.9
Corporate Bonds and Notes 15.4
International Debt 3.9
Loan Agreements 0.3
Mortgage-Backed Securities 57.8
Municipal Bonds --*
Non-US Bonds 0.2
United States Government Agencies 4.5
United States Government Treasuries 12.3
Preferred Stocks 0.2
Options Purchased --*
Short-Term Investments 12.0
Other Securities 18.1
------------
Total Investments 131.3
Other Assets and Liabilities, Net (31.3)
------------
100.0
============
Futures Contracts --*
Options Written (--)*
Foreign Currency Exchange Contracts (--)*
Interest Rate Swap Contracts (--)*
Credit Default 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 77
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,025.90 $ 1,020.28
Expenses Paid During
Period* $ 4.57 $ 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). 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,027.20 $ 1,021.52
Expenses Paid During
Period* $ 3.32 $ 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). 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 Y PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
April 30, 2007 $ 1,027.40 $ 1,021.77
Expenses Paid During
Period* $ 3.07 $ 3.06
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.61%
(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.
78 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 82.7%
Asset-Backed Securities - 6.7%
Accredited Mortgage Loan Trust
Series 2004-2 Class A2
5.620% due 07/25/34 88 89
ACE Securities Corp.
Series 2003-OP1 Class M2 (E)
6.820% due 12/25/33 130 131
Series 2004-IN1 Class A1
5.640% due 05/25/34 120 120
Series 2005-SD3 Class A
5.720% due 08/25/45 600 600
Series 2006-ASP Class A2A (E)
5.400% due 10/25/36 323 323
Aegis Asset Backed Securities Trust (E)
Series 2003-3 Class M2
6.970% due 01/25/34 265 266
American Airlines, Inc.
6.817% due 11/23/12 125 127
6.977% due 05/23/21 58 58
American Express Credit Account Master Trust (E)
Series 2002-3 Class A
5.430% due 12/15/09 1,075 1,075
Series 2004-C Class C (p)
5.820% due 02/15/12 627 628
Series 2007-3 Class A
5.320% due 10/15/12 600 600
Ameriquest Mortgage Securities, Inc.
Series 2002-D Class M1 (E)
7.557% due 02/25/33 145 145
Series 2004-R4 Class A1A (E)(p)
5.650% due 06/25/34 102 102
Series 2004-R8 Class A5
5.690% due 09/25/34 119 119
Series 2004-R10 Class A5
5.710% due 11/25/34 36 36
Series 2006-R1 Class A2C
5.510% due 08/01/16 260 260
Argent Securities, Inc. (E)
Series 2005-W5 Class A2A
5.400% due 01/25/36 267 267
Asset Backed Securities Corp. Home Equity
Series 2005-HE3 Class A4
5.520% due 04/25/35 230 230
Asset Backed Securities Corp. Home Equity Loan
Trust (E)
Series 2004-HE6 Class A1
5.595% due 09/25/34 203 203
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Bank One Issuance Trust (E)
Series 2004-A4 Class A4
5.360% due 02/16/10 700 700
Bayview Financial Acquisition Trust
Series 2006-A Class 1A3
5.865% due 02/28/41 340 340
Bear Stearns Asset Backed Securities Trust
Series 2004-BO1 Class 1A1 (E)
5.520% due 09/25/34 106 106
Series 2005-AQ1 Class 2A1
5.540% due 03/25/35 167 167
Series 2005-HE1 Class A1 (E)
5.440% due 11/25/35 164 164
Series 2005-HE8 Class A1 (E)
5.440% due 08/25/35 55 55
Bear Stearns Structured Products, Inc. (p)
Series 2007-N2 Class 12C
6.500% due 02/27/37 9,300 402
Series 2007-N2 Class 13C
6.500% due 07/27/36 11,100 440
Series 2007-N2 Class 14C
6.500% due 08/27/36 15,000 566
BNC Mortgage Loan Trust (E)
Series 2007-2 Class A2
5.420% due 05/25/37 1,000 1,000
Capital Auto Receivables Asset Trust (E)
Series 2006-2 Class A3B
5.380% due 05/15/11 1,025 1,025
Series 2007-1 Class A3B
5.330% due 11/15/11 800 801
Carrington Mortgage Loan Trust (E)
Series 2005-NC4 Class A1
5.470% due 09/25/35 73 73
Series 2006-OPT Class A1
5.385% due 02/25/36 141 141
Chase Manhattan Auto Owner Trust
Series 2006-B Class A2
5.280% due 10/15/09 996 996
CIT Equipment Collateral
Series 2006-VT2 Class A3
5.070% due 02/20/10 340 340
</Table>
Fixed Income III Fund 79
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust
Series 2000-A3 Class A3
6.875% due 11/16/09 200 202
Series 2007-A1 Class A1 (E)
5.340% due 03/22/12 725 725
Citifinancial Mortgage Securities, Inc.
Series 2003-4 Class AF3
3.221% due 10/25/33 4 4
Citigroup Mortgage Loan Trust, Inc. (E)
Series 2006-NC1 Class A2A
5.390% due 08/25/36 357 357
Series 2007-OPX Class A1A
5.400% due 01/25/37 2,284 2,285
Countrywide Alternative Loan Trust (p)
Principal Only STRIP
Zero coupon due 05/25/47 3,900 201
Countrywide Asset-Backed Certificates
Series 2004-13 Class AF3
3.989% due 02/25/31 85 85
Series 2004-AB2 Class M3 (E)
5.920% due 05/25/36 230 230
Series 2004-BC1 Class M1 (E)
5.820% due 02/25/34 159 159
Series 2004-S1 Class A2
3.872% due 03/25/20 95 94
Series 2005-16 Class 2AF1
5.470% due 05/25/36 362 362
Series 2006-3 Class 2A2
5.500% due 02/25/36 510 510
Series 2006-11 Class 1AF4
6.300% due 09/25/46 405 411
Series 2006-13 Class 1AF3
5.944% due 01/25/37 985 991
Series 2006-15 Class A3
5.689% due 10/25/46 260 260
Series 2006-17 Class 2A1 (E)
5.370% due 03/25/47 403 405
Series 2006-S2 Class A2
5.627% due 07/25/27 385 383
Series 2006-S3 Class A2
6.085% due 06/25/21 760 767
Series 2006-S6 Class A2
5.519% due 03/25/34 480 479
Series 2006-S7 Class A3
5.712% due 04/25/35 1,780 1,779
Series 2006-S9 Class A3
5.728% due 08/25/36 665 661
Series 2007-4 Class A2
5.530% due 03/25/37 540 538
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2007-7 Class 2A1 (E)
5.400% due 02/25/37 1,100 1,100
Countrywide Home Equity Loan Trust (E)
Series 2006-H Class 2A1B
5.470% due 11/15/36 1,672 1,668
Series 2007-B Class A
5.500% due 02/15/37 2,000 2,000
Credit-Based Asset Servicing and Securitization
LLC
Series 2005-CB4 Class AV1 (E)
5.420% due 08/25/35 79 79
Series 2005-CB5 Class AV1 (E)
5.430% due 08/25/35 20 20
Series 2006-CB5 Class A1 (E)
5.380% due 06/25/36 417 417
Series 2006-SL1 Class A2 (p)
5.556% due 09/25/36 1,610 1,609
Series 2007-CB1 Class AF2
5.721% due 01/25/37 335 336
Dunkin Securitization (p)
Series 2006-1 Class A2
5.779% due 06/20/31 490 499
Entergy Gulf States, Inc. (E)
5.769% due 12/01/09 100 100
Fannie Mae Grantor Trust
Series 2003-T4 Class 2A5
4.907% due 09/26/33 223 222
First Franklin Mortgage Loan Asset Backed
Certificates (E)
Series 2005-FF7 Class A2
5.420% due 07/25/35 248 248
Series 2006-FF1 Class A2
5.370% due 07/25/36 465 465
Series 2007-FF2 Class A2A
5.363% due 03/25/37 627 626
Fremont Home Loan Trust (E)
Series 2006-3 Class 2A1
5.390% due 02/25/37 242 242
Series 2006-E Class 2A1
5.380% due 01/25/37 350 350
GE Capital Credit Card Master Note Trust (E)
Series 2004-1 Class A
5.370% due 06/15/10 300 300
Series 2004-2 Class A
5.360% due 09/15/10 600 600
</Table>
80 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
GE Dealer Floorplan Master Note Trust
Series 2004-2 Class A
5.400% due 07/20/09 625 625
GMAC Mortgage Corp. Loan Trust
Series 2004-HE5 Class A3
3.970% due 09/25/34 253 251
GS Mortgage Securities Corp. (p)
Series 2007-NIM Class N1
6.250% due 01/25/37 337 336
GSAA Home Equity Trust
Series 2006-4 Class 1A2
5.961% due 03/25/36 478 481
GSAA Trust
Series 2006-2 Class 2A3
5.590% due 12/25/35 595 596
GSAMP Trust
Series 2003-HE2 Class M1
5.970% due 08/25/33 305 306
Series 2004-SEA Class A2A (E)
5.610% due 03/25/34 141 142
Series 2006-HE4 Class A2A (E)
5.390% due 06/25/36 435 435
Series 2006-S3 Class A1
6.085% due 05/25/36 111 111
Series 2007-FM1 Class A2A (E)
5.390% due 12/25/36 811 811
Series 2007-HE2 Class A2A (E)
5.400% due 03/25/47 911 911
Heritage Property Investment Trust
5.125% due 04/15/14 300 291
Home Equity Asset Trust
Series 2005-2 Class 2A2
5.520% due 07/25/35 98 99
HSI Asset Securitization Corp. Trust (E)
Series 2006-HE2 Class 2A1
5.370% due 12/25/36 277 277
Indymac Residential Asset Backed Trust (E)
Series 2006-H2 Class A
5.470% due 06/28/36 795 795
JP Morgan Mortgage Acquisition Corp. (E)
Series 2006-WMC Class A2
5.370% due 08/25/36 602 602
Lehman XS Trust (E)
Series 2005-1 Class 2A2
4.660% due 07/25/35 228 232
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2006-16N Class A1A
5.400% due 11/25/46 596 596
Series 2007-4N Class 3A2A
5.680% due 04/25/37 1,000 1,000
Long Beach Mortgage Loan Trust (E)
Series 2004-4 Class 1A1
5.600% due 10/25/34 66 66
Series 2006-1 Class 2A1
5.400% due 02/25/36 1,691 1,691
Mastr Asset Backed Securities Trust
Series 2003-WMC Class M2
6.970% due 08/25/33 99 99
MBNA Credit Card Master Note Trust (E)
Series 2002-A9 Class A9
5.446% due 12/15/09 700 700
MBNA Credit Card Trust (E)
Series 2002-A10 Class A10
5.460% due 02/16/10 550 550
MBNA Master Credit Card Trust
Series 2000-E Class A
7.800% due 10/15/12 705 762
Merrill Lynch Mortgage Investors, Inc.
Series 2005-NCB Class A1A
5.451% due 07/25/36 22 22
Series 2006-AR1 Class A2C
5.480% due 03/25/37 500 500
Mid-State Trust
Series 2003-11 Class A1
4.864% due 07/15/38 52 50
Series 2004-1 Class A
6.005% due 08/15/37 52 53
Series 2005-1 Class A
5.745% due 01/15/40 70 68
Series 2006-1 Class A (p)
5.787% due 10/15/40 258 257
Morgan Stanley ABS Capital I
Series 2003-NC8 Class M3
7.420% due 09/25/33 82 82
Morgan Stanley Mortgage Loan Trust
Series 2006-12X Class A6A
5.726% due 10/25/36 350 351
</Table>
Fixed Income III Fund 81
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Mortgage Equity Conversion Asset Trust (E)(p)
Series 2007-FF2 Class A
5.370% due 02/25/42 625 625
Nationstar Home Equity Loan Trust (E)
Series 2006-B Class AV1
5.380% due 09/25/36 553 553
Nelnet Student Loan Trust (E)
Series 2006-3 Class A1
5.338% due 09/25/12 298 298
New Century Home Equity Loan Trust
Series 2004-4 Class M2
5.850% due 02/25/35 380 379
Newcastle Mortgage Securities Trust (E)
Series 2006-1 Class A1
5.390% due 03/25/36 381 381
Northwest Airlines, Inc. (o)
7.041% due 04/01/22 99 99
NWA Trust (o)
Series 1995-2 Class A
9.250% due 06/21/14 441 463
Option One Mortgage Loan Trust (E)
Series 2003-2 Class M2
7.020% due 04/25/33 97 97
Series 2003-3 Class M3
7.320% due 06/25/33 64 64
Series 2003-4 Class M2
6.970% due 07/25/33 62 62
Series 2005-4 Class A3
5.580% due 11/25/35 510 511
Series 2007-5 Class 2A1
5.440% due 05/25/37 850 850
Park Place Securities, Inc.
Series 2004-MCW Class A1 (E)
5.632% due 10/25/34 946 946
Series 2005-WCW Class M1
5.770% due 09/25/35 375 375
Popular ABS Mortgage Pass-Through Trust
Series 2005-6 Class A3
5.680% due 01/25/36 415 416
Power Contract Financing LLC (p)
6.256% due 02/01/10 108 109
RAAC Series
Series 2006-SP1 Class A1
5.420% due 09/25/45 225 225
Renaissance Home Equity Loan Trust
Series 2005-1 Class M1
5.357% due 05/25/35 190 187
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2005-2 Class AF4
4.934% due 08/25/35 205 202
Series 2005-4 Class A2
5.399% due 02/25/36 185 184
Series 2005-4 Class A3
5.565% due 02/25/36 115 115
Series 2006-1 Class AF6
5.746% due 05/25/36 320 318
Series 2007-1 Class AF2
5.512% due 04/25/37 575 573
Residential Asset Mortgage Products, Inc.
Series 2003-RS1 Class AI6A
5.980% due 12/25/33 365 367
Series 2006-RZ3 Class A1 (E)
5.390% due 08/25/36 584 584
Series 2006-RZ4 Class A1A (E)
5.430% due 10/25/36 521 521
Series 2007-RZ1 Class A1 (E)
5.390% due 02/25/37 642 642
Residential Asset Securities Corp.
Series 2001-KS3 Class AII (E)
5.780% due 09/25/31 55 55
Series 2003-KS1 Class M2 (E)
7.945% due 01/25/33 29 26
Series 2003-KS2 Class MI1
4.800% due 04/25/33 795 781
Series 2003-KS2 Class MI3
6.100% due 04/25/33 440 433
Saxon Asset Securities Trust (E)
Series 2006-3 Class A1
5.380% due 11/25/36 235 235
SBI Heloc Trust (E)(p)
Series 2006-1A Class 1A2A
5.490% due 08/25/36 332 332
Securitized Asset Backed Receivables LLC Trust
Series 2006-WM1 Class A2A
5.380% due 12/25/35 209 209
Series 2006-WM4 Class A2A (E)
5.400% due 11/25/36 719 718
Series 2007-BR1 Class A2A (E)
5.440% due 02/25/37 826 826
Sharps SP I, LLC
7.000% due 01/25/34 31 21
</Table>
82 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
SLM Student Loan Trust (E)
Series 2006-3 Class A2
5.360% due 01/25/16 384 384
Series 2006-9 Class A1
5.330% due 10/25/12 889 889
Series 2007-3 Class A1
5.320% due 10/27/14 3,575 3,575
Small Business Administration
Series 2000-P10 Class 1
7.449% due 08/01/10 48 49
Small Business Administration Participation
Certificates
7.500% due 04/01/17 1,176 1,228
Soundview Home Equity Loan Trust
Series 2006-EQ1 Class A1 (E)
5.370% due 10/25/36 353 353
Series 2006-EQ2 Class A1 (E)
5.400% due 01/25/37 2,525 2,524
Series 2006-WF1 Class A2
5.645% due 10/25/36 695 693
Series 2007-WMC Class 3A1 (E)
5.430% due 02/25/37 700 700
Structured Asset Investment Loan Trust
Series 2003-BC1 Class 3A (E)
5.660% due 11/25/33 12 12
Series 2005-3 Class M2
5.760% due 04/25/35 210 209
Structured Asset Mortgage Investments, Inc. (E)
Series 2006-AR7 Class A2A
5.550% due 08/25/36 535 536
Structured Asset Securities Corp.
Series 2001-SB1 Class A2
3.375% due 08/25/31 151 136
Series 2004-16X Class A2
4.910% due 08/25/34 93 92
Series 2004-19X Class A2
4.370% due 10/25/34 400 397
Series 2005-GEL Class A (E)
5.670% due 12/25/34 185 185
Series 2005-S2 Class A2
5.520% due 06/25/35 214 214
Series 2006-BC3 Class A2 (E)
5.370% due 10/25/36 1,484 1,484
TXU Electric Delivery Transition Bond Co.
Series 2004-1 Class A2
4.810% due 11/17/14 100 100
VTB Capital SA (E)
6.150% due 12/07/09 765 766
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Washington Mutual Alternative
Mortgage Pass-Through
Certificates (E)
Series 2006-AR6 Class 1A
5.510% due 07/25/46 304 304
Wells Fargo Home Equity Trust (E)
Series 2005-4 Class AI1 (p)
5.440% due 12/25/35 449 449
Series 2006-3 Class A1
5.370% due 01/25/37 359 359
World Financial Properties (p)
6.910% due 09/01/13 142 149
6.950% due 09/01/13 169 178
------------
79,359
------------
Certificates of Deposit - 1.0%
Bank of Ireland
5.400% due 01/15/10 2,200 2,199
BNP Paribas
5.262% due 05/28/08 300 300
5.270% due 09/23/08 1,400 1,399
Calyon NY
5.330% due 01/16/09 700 700
Dexia Credit SA
5.270% due 09/29/08 2,300 2,299
Fortis Bank
5.265% due 06/30/08 900 899
5.300% due 09/30/08 600 600
Nordea Bank Finland PLC
5.307% due 05/28/08 300 300
5.297% due 04/09/09 900 900
Royal Bank of Canada
5.420% due 06/30/08 900 900
Unicredito Italiano NY (E)
Series YCD
5.350% due 05/06/08 1,100 1,100
5.360% due 05/29/08 500 500
------------
12,096
------------
Corporate Bonds and Notes - 14.7%
Abbott Laboratories
5.600% due 05/15/11 405 413
5.875% due 05/15/16 200 207
Ace Capital Trust II (N)
9.700% due 04/01/30 375 502
AIG Matched Funding Corp. (E)(p)
5.361% due 06/16/08 400 401
</Table>
Fixed Income III Fund 83
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
AIG SunAmerica Global Financing VI (p)
6.300% due 05/10/11 375 391
Alamosa Delaware, Inc.
8.500% due 01/31/12 195 206
Alcoa, Inc.
5.950% due 02/01/37 290 288
Alion Science and Technology Corp. (p)
10.250% due 02/01/15 305 321
Allied Waste North America, Inc.
Series B
7.125% due 05/15/16 160 164
Altria Group, Inc. (N)
7.750% due 01/15/27 50 60
American Casino & Entertainment Properties LLC
7.850% due 02/01/12 280 293
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 40 40
American Express Bank (E)
Series BKNT
5.330% due 10/16/08 600 600
American Express Centurion Bank (E)
Series BKNT
5.320% due 05/07/08 400 400
American Express Co.
6.800% due 09/01/66 320 342
American Express Credit Corp.
5.380% due 03/02/09 600 601
5.380% due 11/09/09 (E) 200 200
American General Finance Corp.
4.875% due 05/15/10 425 424
Series MTNH
4.625% due 09/01/10 20 20
Series MTNI
4.625% due 05/15/09 70 69
American International Group, Inc.
5.370% due 06/16/09 (E)(p) 300 300
4.700% due 10/01/10 440 435
5.375% due 10/18/11 405 410
5.050% due 10/01/15 (N) 415 408
6.250% due 03/15/87 700 697
Americo Life, Inc. (p)
7.875% due 05/01/13 100 103
Ameriprise Financial, Inc. (N)
7.518% due 06/01/66 1,140 1,237
AmerisourceBergen Corp.
5.875% due 09/15/15 15 15
Series WI
5.625% due 09/15/12 525 525
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
AMFM, Inc.
8.000% due 11/01/08 225 233
Amkor Technology, Inc.
7.750% due 05/15/13 275 272
9.250% due 06/01/16 600 636
Anadarko Petroleum Corp.
5.950% due 09/15/16 955 962
ANZ Capital Trust (f)(p)
4.484% due 12/31/49 450 440
Apache Corp.
5.250% due 04/15/13 305 305
Aramark Corp. (p)
8.500% due 02/01/15 120 126
8.860% due 02/01/15 (E) 125 128
Arizona Public Service Co.
5.800% due 06/30/14 400 404
6.250% due 08/01/16 500 517
ArvinMeritor, Inc. (N)
8.750% due 03/01/12 175 181
AT&T Corp.
7.300% due 11/15/11 518 563
8.000% due 11/15/31 665 833
AT&T Mobility LLC
6.500% due 12/15/11 480 507
AT&T, Inc.
5.570% due 11/14/08 (E) 1,000 1,003
5.460% due 02/05/10 (E) 200 200
5.100% due 09/15/14 110 108
Avista Capital Trust III
6.500% due 04/01/34 350 349
Avista Corp.
9.750% due 06/01/08 220 229
BAC Capital Trust XI
6.625% due 05/23/36 155 166
BAC Capital Trust XIV (f)
5.630% due 12/31/49 470 472
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 1,025 1,073
Bank of America Corp.
5.875% due 02/15/09 70 71
5.375% due 06/19/09 (E) 1,800 1,802
5.370% due 11/06/09 (E)(N) 200 200
4.250% due 10/01/10 45 44
Bank of America NA (E)
Series BKNT
5.361% due 12/18/08 300 300
Bank of New York Co., Inc. (The)
5.125% due 11/01/11 445 446
</Table>
84 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Bear Stearns Cos., Inc. (The) (E)
5.450% due 08/21/09 600 600
BellSouth Corp.
5.460% due 08/15/08 (E) 600 600
4.200% due 09/15/09 320 314
6.550% due 06/15/34 (N) 85 89
Bellsouth Telecommunications, Inc.
7.000% due 12/01/95 495 514
BNP Paribas Capital Trust (f)(A)
9.003% due 12/29/49 850 947
Boardwalk Pipelines, LP
5.875% due 11/15/16 425 426
Boeing Capital Corp., Ltd.
6.100% due 03/01/11 120 125
Boston Scientific Corp.
6.400% due 06/15/16 1,005 1,003
Bowater, Inc. (N)
9.000% due 08/01/09 430 452
Burlington Northern Santa Fe Corp.
6.750% due 07/15/11 20 21
5.650% due 05/01/17 210 211
6.875% due 12/01/27 60 64
California Steel Industries, Inc.
6.125% due 03/15/14 335 320
Carolina Power & Light Co.
6.500% due 07/15/12 45 48
Caterpillar, Inc.
6.050% due 08/15/36 345 355
Catlin Insurance Co., Ltd. (f)(A)
7.249% due 12/31/49 530 534
CCH I Holdings LLC (N)
13.500% due 01/15/14 359 365
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 135 136
CenterPoint Energy Resources Corp.
6.250% due 02/01/37 55 55
Series B
7.875% due 04/01/13 445 497
Chubb Corp.
6.375% due 03/29/67 450 455
Cingular Wireless Services, Inc.
7.875% due 03/01/11 275 301
8.750% due 03/01/31 180 236
CIT Group Holdings, Inc. (E)(N)
5.510% due 01/30/09 400 400
CIT Group, Inc.
5.510% due 08/15/08 (E) 300 300
5.515% due 12/19/08 (E) 100 100
5.450% due 06/08/09 (E) 100 100
5.480% due 08/17/09 (E) 700 698
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
6.875% due 11/01/09 55 57
4.125% due 11/03/09 70 68
Citigroup Funding, Inc.
Zero coupon due 07/17/08 125 153
5.343% due 12/08/08 (E) 100 100
Citigroup, Inc.
5.406% due 12/26/08 (E) 600 600
5.400% due 01/30/09 (E) 1,100 1,100
5.393% due 12/28/09 (E) 700 700
6.500% due 01/18/11 480 503
4.700% due 05/29/15 170 163
6.125% due 08/25/36 780 804
Citizens Communications Co.
9.250% due 05/15/11 190 212
Clorox Co. (N)
4.200% due 01/15/10 155 152
CNA Financial Corp.
6.500% due 08/15/16 275 285
Columbus Southern Power Co.
Series C
5.500% due 03/01/13 75 76
Comcast Cable Communications Holdings, Inc.
9.455% due 11/15/22 250 330
Comcast Cable Communications LLC
6.750% due 01/30/11 140 147
Comcast Cable Holdings LLC
9.800% due 02/01/12 (N) 350 415
7.875% due 08/01/13 695 780
Comcast Corp.
5.660% due 07/14/09 (E) 765 766
5.900% due 03/15/16 185 189
5.875% due 02/15/18 100 101
6.500% due 11/15/35 295 300
6.450% due 03/15/37 350 354
Commonwealth Edison Co.
6.950% due 07/15/18 (N) 100 101
Series 105
5.400% due 12/15/11 225 222
ConAgra Foods, Inc.
7.000% due 10/01/28 135 146
8.250% due 09/15/30 75 92
Consolidated Natural Gas Co.
6.850% due 04/15/11 360 380
</Table>
Fixed Income III Fund 85
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series C
6.250% due 11/01/11 80 83
Constellation Brands, Inc. (N)
Series B
8.125% due 01/15/12 125 130
Consumers Energy Co.
Series F
4.000% due 05/15/10 50 48
Series H (N)
4.800% due 02/17/09 115 114
Continental Airlines, Inc.
Series 01-1
6.503% due 06/15/11 175 180
Series A
5.983% due 04/19/22 310 311
Cooper Industries, Inc.
Series WI
5.250% due 11/15/12 165 165
Corrections Corp. of America
7.500% due 05/01/11 365 379
Costco Wholesale Corp.
5.500% due 03/15/17 610 613
Countrywide Home Loans, Inc.
3.250% due 05/21/08 215 210
COX Communications, Inc.
4.625% due 01/15/10 970 957
5.875% due 12/01/16 (p) 275 277
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2005-CN2 Class A1S
5.540% due 11/15/19 210 210
Credit Suisse First Boston USA, Inc.
4.875% due 08/15/10 130 130
6.500% due 01/15/12 70 74
5.500% due 08/15/13 (N) 55 56
Credit Suisse USA, Inc.
5.250% due 03/02/11 210 211
CSC Holdings, Inc.
Series WI
6.750% due 04/15/12 160 160
CVS Caremark Corp.
5.750% due 08/15/11 205 209
CVS Lease Pass Through (p)
6.036% due 12/10/28 417 418
DaimlerChrysler NA Holding Corp.
5.690% due 03/13/09 (E) 200 200
5.770% due 03/13/09 500 502
5.810% due 08/03/09 (E) 1,050 1,055
6.500% due 11/15/13 350 368
8.500% due 01/18/31 100 126
DCP Midstream, LP (N)
6.875% due 02/01/11 20 21
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Delhaize America, Inc.
9.000% due 04/15/31 135 164
Detroit Edison Co. (The)
6.125% due 10/01/10 95 98
6.350% due 10/15/32 130 138
Developers Diversified Realty Corp.
4.625% due 08/01/10 255 250
5.250% due 04/15/11 60 60
5.375% due 10/15/12 125 125
Dex Media East Finance Co.
12.125% due 11/15/12 70 76
Dominion Resources, Inc.
Series 06-B (N)
6.300% due 09/30/66 450 460
Series A
5.687% due 05/15/08 275 276
5.200% due 01/15/16 520 507
Series B (N)
6.250% due 06/30/12 60 63
Dow Chemical Co. (The)
6.000% due 10/01/12 150 155
DPL, Inc.
6.875% due 09/01/11 361 382
E*Trade Financial Corp.
8.000% due 06/15/11 620 652
Echostar DBS Corp.
6.375% due 10/01/11 270 273
6.625% due 10/01/14 95 96
El Paso Corp.
8.050% due 10/15/30 400 458
Series *
9.625% due 05/15/12 300 348
Eli Lilly & Co. (N)
6.770% due 01/01/36 445 507
Embarq Corp.
7.995% due 06/01/36 75 79
Energy Partners, Ltd. (A)
9.750% due 04/15/14 245 249
Energy Transfer Partners, LP
5.950% due 02/01/15 375 381
Entergy Gulf States, Inc.
3.600% due 06/01/08 80 78
6.100% due 12/08/08 195 195
Enterprise Products Operating, LP
4.950% due 06/01/10 275 273
8.375% due 08/01/66 910 1,008
Series B
4.625% due 10/15/09 410 405
</Table>
86 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Erac USA Finance Co.
7.350% due 06/15/08 (p) 390 396
5.300% due 11/15/08 100 100
Farmers Exchange Capital (p)
7.050% due 07/15/28 1,070 1,104
Farmers Insurance Exchange (p)
6.000% due 08/01/14 225 223
Federated Retail Holdings, Inc.
5.350% due 03/15/12 290 290
FedEx Corp.
5.500% due 08/15/09 45 45
7.600% due 07/01/97 135 158
First Union Institutional Capital II
7.850% due 01/01/27 540 562
FirstEnergy Corp.
Series B
6.450% due 11/15/11 670 703
Series C
7.375% due 11/15/31 275 316
Ford Motor Co. (N)
7.450% due 07/16/31 520 411
7.700% due 05/15/97 205 154
Ford Motor Credit Co.
9.875% due 08/10/11 1,785 1,901
7.250% due 10/25/11 195 191
8.110% due 01/13/12 (E) 315 311
8.000% due 12/15/16 230 225
Series WI
9.750% due 09/15/10 655 693
FPL Group Capital, Inc. (N)
5.625% due 09/01/11 415 422
Freeport-McMoRan Copper & Gold, Inc.
8.375% due 04/01/17 880 962
Freescale Semiconductor, Inc. (N)(p)
10.125% due 12/15/16 385 389
General Electric Capital Corp.
5.400% due 01/05/09 (E) 500 500
5.430% due 01/20/10 (E) 1,100 1,102
5.500% due 04/28/11 400 406
5.560% due 01/08/16 100 100
Series GMTN (E)
5.370% due 03/12/10 200 200
Series MTN (E)
5.390% due 10/26/09 1,400 1,400
Series MTNA
4.250% due 12/01/10 (N) 55 54
5.875% due 02/15/12 60 62
5.450% due 01/15/13 755 765
General Electric Co.
5.000% due 02/01/13 45 45
General Motors Corp. (N)
8.375% due 07/15/33 620 560
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Georgia-Pacific Corp.
9.500% due 12/01/11 275 304
8.875% due 05/15/31 603 642
Glencore Nickel, Ltd. (o)
9.000% due 12/01/14 235 --
GMAC LLC
6.875% due 09/15/11 1,995 2,002
6.000% due 12/15/11 100 97
8.000% due 11/01/31 1,235 1,326
Goldman Sachs Group, Inc. (The)
5.400% due 03/30/09 (E) 400 400
5.456% due 06/23/09 (E) 900 901
5.440% due 11/16/09 (E) 200 200
6.875% due 01/15/11 935 989
5.350% due 01/15/16 935 923
5.625% due 01/15/17 245 244
6.345% due 02/15/34 315 318
Series MTNB
5.460% due 07/29/08 (E) 100 100
5.450% due 11/10/08 (E) 400 400
5.690% due 07/23/09 700 704
GSAMP Trust (E)
Series 2006-HE8 Class A2A
5.390% due 01/25/37 594 594
Halliburton Co.
5.500% due 10/15/10 125 127
Harrah's Operating Co., Inc.
5.500% due 07/01/10 200 196
6.500% due 06/01/16 (N) 520 464
Hawaiian Telcom Communications, Inc. (N)
Series B
12.500% due 05/01/15 125 141
HCA, Inc.
9.125% due 11/15/14 (p) 185 200
6.500% due 02/15/16 (N) 295 257
Health Care Property Investors, Inc. (N)
5.950% due 09/15/11 575 585
Healthsouth Corp. (p)
10.750% due 06/15/16 555 605
Hertz Corp.
8.875% due 01/01/14 285 307
Hewlett-Packard Co. (E)
5.485% due 05/22/09 175 175
Historic TW, Inc.
8.050% due 01/15/16 420 481
</Table>
Fixed Income III Fund 87
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
HJ Heinz Co.
6.428% due 12/01/08 100 102
HJ Heinz Finance Co. (N)
6.000% due 03/15/12 50 51
Home Depot, Inc.
5.490% due 12/16/09 (E) 95 95
5.875% due 12/16/36 (N) 275 267
Hospira, Inc. (E)
5.830% due 03/30/10 260 261
HRPT Properties Trust
5.750% due 02/15/14 330 332
HSBC Finance Corp.
5.490% due 09/15/08 (E) 1,900 1,903
5.488% due 12/05/08 (E) 100 100
5.875% due 02/01/09 (N) 210 212
5.420% due 10/21/09 (E) 300 300
4.125% due 11/16/09 105 103
8.000% due 07/15/10 45 49
6.375% due 10/15/11 205 214
6.375% due 11/27/12 410 431
5.000% due 06/30/15 300 290
ICI Wilmington, Inc.
4.375% due 12/01/08 65 64
Idearc, Inc. (p)
8.000% due 11/15/16 250 261
Innophos Investments Holdings, Inc.
13.380% due 02/15/15 209 215
International Business Machines Corp.
7.125% due 12/01/96 425 487
International Lease Finance Corp.
5.750% due 06/15/11 185 190
5.625% due 09/20/13 190 193
International Steel Group, Inc. (N)
6.500% due 04/15/14 435 455
Interpublic Group of Cos., Inc.
6.250% due 11/15/14 135 127
iPCS, Inc. (E)(A)
7.480% due 05/01/13 85 85
iStar Financial, Inc. (N)
Series B
5.125% due 04/01/11 350 347
ITT Corp.
7.400% due 11/15/25 70 81
JC Penney Co., Inc.
7.375% due 08/15/08 240 245
JC Penney Corp., Inc.
8.125% due 04/01/27 (N) 250 257
6.375% due 10/15/36 220 219
Jersey Central Power & Light Co.
5.625% due 05/01/16 190 191
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
JP Morgan Chase Bank
Series EMTN
6.000% due 05/22/45 3,445 2,787
JP Morgan Chase Capital XVIII
Series R
6.950% due 08/01/66 485 519
JP Morgan Chase Capital XX
Series T
6.550% due 09/29/36 100 102
JPMorgan Chase & Co.
6.000% due 02/15/09 35 35
7.000% due 11/15/09 125 131
6.750% due 02/01/11 70 74
5.600% due 06/01/11 150 153
JPMorgan Chase Bank NA
Series BKNT
5.875% due 06/13/16 430 445
KAR Holdings, Inc. (A)
10.000% due 05/01/15 295 306
KBC Bank Funding Trust II (f)
6.880% due 06/30/49 600 855
KBC Bank Funding Trust III (f)(p)
9.860% due 11/29/49 165 182
Kellogg Co.
Series B
6.600% due 04/01/11 870 914
Kerr-McGee Corp.
6.950% due 07/01/24 450 480
Kinder Morgan Finance Co. ULC
Series WI
5.350% due 01/05/11 235 233
5.700% due 01/05/16 190 182
Kraft Foods, Inc.
4.125% due 11/12/09 265 258
5.625% due 11/01/11 1,070 1,084
6.500% due 11/01/31 (N) 65 67
Kroger Co. (The)
7.250% due 06/01/09 175 182
8.000% due 09/15/29 55 61
LaBranche & Co., Inc.
9.500% due 05/15/09 580 608
11.000% due 05/15/12 360 392
Lear Corp.
Series B
8.750% due 12/01/16 140 136
Lehman Brothers Holdings, Inc.
5.450% due 04/03/09 (E) 800 800
5.460% due 08/21/09 (E) 300 300
</Table>
88 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
5.580% due 07/18/11 (E)(N) 300 300
5.250% due 02/06/12 200 201
5.500% due 04/04/16 220 220
Series MTN (E)
5.460% due 11/16/09 300 300
Series MTNG (E)
5.624% due 11/10/09 300 301
Level 3 Communications, Inc.
6.000% due 09/15/09 140 138
Level 3 Financing, Inc.
12.250% due 03/15/13 200 234
9.250% due 11/01/14 (A) 220 229
Liberty Mutual Group, Inc. (p)
7.000% due 03/15/37 (N) 470 472
7.800% due 03/07/87 1,625 1,633
Lubrizol Corp.
4.625% due 10/01/09 300 296
MacDermid, Inc. (p)
9.500% due 04/15/17 355 368
Mandalay Resort Group (N)
6.500% due 07/31/09 160 162
Manufacturers & Traders Trust Co.
5.585% due 12/28/20 129 128
Marsh & McLennan Cos., Inc. (N)
5.150% due 09/15/10 430 426
Max USA Holdings, Ltd. (A)
7.200% due 04/14/17 370 372
May Department Stores Co.
(The) (N)
6.700% due 07/15/34 250 251
MBNA Corp. (E)
Series MTNF
5.790% due 05/05/08 255 256
Medco Health Solutions, Inc.
7.250% due 08/15/13 615 666
Merrill Lynch & Co., Inc.
5.560% due 07/25/11 (E) 500 501
6.220% due 09/15/26 255 260
Series MTN (E)
5.450% due 08/14/09 400 400
Series MTNC
5.430% due 06/16/08 (E) 1,100 1,101
4.250% due 02/08/10 1,110 1,084
MetLife, Inc.
5.000% due 06/15/15 190 185
6.400% due 12/15/36 800 798
Midamerican Energy Holdings Co.
Series WI
6.125% due 04/01/36 775 788
Midamerican Funding LLC
6.750% due 03/01/11 350 370
Miller Brewing Co. (p)
4.250% due 08/15/08 175 173
5.500% due 08/15/13 285 286
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Mohawk Industries, Inc.
Series D
7.200% due 04/15/12 140 148
Monumental Global Funding II (p)
4.625% due 03/15/10 135 133
Morgan Stanley
5.360% due 11/21/08 (E) 500 500
5.375% due 10/15/15 265 262
Series GMTN
5.470% due 02/09/09 1,400 1,402
Series MTN (E)
5.450% due 01/15/10 300 300
Natexis Ambs Co. LLC (f)(p)
8.440% due 12/29/49 185 191
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 (N) 85 86
5.450% due 04/10/17 240 241
Nationwide Financial Services
6.250% due 11/15/11 265 276
Nationwide Mutual Insurance Co. (p)
7.875% due 04/01/33 310 371
NCO Group, Inc. (E)(p)
10.230% due 11/15/13 295 295
Neiman-Marcus Group, Inc. (N)
Series WI
10.375% due 10/15/15 95 107
Nelnet, Inc.
7.400% due 09/29/36 225 233
Nevada Power Co.
Series L
5.875% due 01/15/15 175 176
News America Holdings, Inc.
9.250% due 02/01/13 25 30
7.750% due 12/01/45 (N) 130 148
7.900% due 12/01/95 120 138
8.250% due 10/17/96 45 54
Nextel Communications, Inc.
Series E
6.875% due 10/31/13 410 421
Nisource Finance Corp.
5.930% due 11/23/09 (E) 120 120
7.875% due 11/15/10 345 374
Norfolk Southern Corp.
7.050% due 05/01/37 115 126
6.000% due 03/15/49 315 281
7.900% due 05/15/97 800 939
</Table>
Fixed Income III Fund 89
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
North Front Pass-Through Trust (p)
5.810% due 12/15/24 1,000 990
Ohio Power Co.
Series F (N)
5.500% due 02/15/13 25 25
Series K (N)
6.000% due 06/01/16 170 176
ONEOK Partners, LP
6.650% due 10/01/36 175 182
Oracle Corp. and Ozark Holding, Inc. (E)
Series WI
5.603% due 01/13/09 500 500
Pacific Gas & Electric Co.
4.200% due 03/01/11 275 267
6.050% due 03/01/34 115 118
PartnerRe Finance II (N)
6.440% due 12/01/66 75 75
Peabody Energy Corp. (N)
7.875% due 11/01/26 200 214
Pemex Project Funding Master Trust
Series WI
6.625% due 06/15/35 175 185
Pepco Holdings, Inc.
5.994% due 06/01/10 365 365
Phoenix Life Insurance Co. (p)
7.150% due 12/15/34 275 293
Pilgrim's Pride Corp.
9.625% due 09/15/11 55 57
7.625% due 05/01/15 135 137
Plains All American Pipeline, LP/ PAA Finance
Corp.
Series WI
6.700% due 05/15/36 230 239
Platinum Underwriters Finance, Inc.
Series B
7.500% due 06/01/17 170 180
Popular North America Capital Trust I
6.564% due 09/15/34 210 202
Popular North America, Inc.
Series MTNE
3.875% due 10/01/08 500 490
Procter & Gamble Co.
5.550% due 03/05/37 60 59
Progress Energy, Inc.
7.100% due 03/01/11 92 98
5.625% due 01/15/16 90 91
7.000% due 10/30/31 205 229
Qwest Corp.
7.875% due 09/01/11 815 868
7.625% due 06/15/15 300 321
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Rabobank Capital Funding II (f)(p)
5.260% due 12/31/49 365 356
RBS Capital Trust I (f)
4.709% due 12/29/49 30 29
RBS Capital Trust III (f)
5.512% due 09/29/49 500 493
Realogy Corp. (N)(p)
12.375% due 04/15/15 640 640
Reckson Operating Partnership, LP
7.750% due 03/15/09 75 78
5.150% due 01/15/11 135 133
Reinsurance Group of America, Inc.
6.750% due 12/15/65 100 100
Reliant Energy, Inc.
6.750% due 12/15/14 470 492
Rental Services Corp. (p)
9.500% due 12/01/14 385 409
Residential Capital LLC
5.850% due 06/09/08 (E)(N) 405 402
6.125% due 11/21/08 370 370
7.190% due 04/17/09 535 533
6.375% due 06/30/10 1,167 1,170
6.000% due 02/22/11 860 850
5.125% due 05/17/12 375 497
6.500% due 04/17/13 820 820
Series WI
6.875% due 06/30/15 940 952
RH Donnelley, Inc.
10.875% due 12/15/12 555 601
Safeco Capital Trust I
8.072% due 07/15/37 275 287
Safeway, Inc.
5.800% due 08/15/12 65 66
7.250% due 02/01/31 (N) 15 16
Sara Lee Corp. (N)
6.125% due 11/01/32 210 195
SB Treasury Co. LLC (f)(A)
9.400% due 12/29/49 650 678
SBC Communications, Inc. (N)
6.150% due 09/15/34 305 306
Sempra Energy (E)
5.830% due 05/21/08 380 380
Simon Property Group, LP
5.600% due 09/01/11 300 305
SLM Corp.
4.000% due 01/15/10 (N) 175 167
</Table>
90 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series MTNA
5.500% due 07/27/09 2,000 1,965
4.500% due 07/26/10 270 258
Southern California Edison Co.
7.625% due 01/15/10 110 117
Sprint Capital Corp.
7.625% due 01/30/11 1,180 1,266
6.875% due 11/15/28 70 69
8.750% due 03/15/32 565 667
Steel Dynamics, Inc. (p)
6.750% due 04/01/15 425 426
Stingray Pass-Through Trust (p)
5.902% due 01/12/15 700 687
Suncom Wireless, Inc.
8.500% due 06/01/13 515 538
Sungard Data Systems, Inc.
10.250% due 08/15/15 336 370
Swiss Re Capital I, LP (f)(N)(p)
6.854% due 05/29/49 400 418
Symetra Financial Corp. (p)
6.125% due 04/01/16 300 305
TECO Energy, Inc.
7.200% due 05/01/11 295 314
Texas Eastern Transmission, LP
7.000% due 07/15/32 95 107
Time Warner Cable, Inc. (A)
5.400% due 07/02/12 1,040 1,043
5.850% due 05/01/17 425 428
6.550% due 05/01/37 850 860
Time Warner Entertainment Co., LP
Series *
8.375% due 03/15/23 315 375
Time Warner, Inc.
5.590% due 11/13/09 (E) 2,590 2,595
5.500% due 11/15/11 395 398
Trump Entertainment Resorts, Inc. (N)
8.500% due 06/01/15 550 553
Twin Reefs Pass-Through Trust (E)(f)(p)
6.320% due 12/10/49 400 401
TXU Electric Delivery Co.
5.725% due 09/16/08 (E)(p) 800 800
7.000% due 09/01/22 85 92
TXU Energy Co. LLC
7.000% due 03/15/13 120 125
Union Pacific Corp.
3.625% due 06/01/10 120 114
6.125% due 01/15/12 195 201
Union Planters Corp.
7.750% due 03/01/11 125 136
UnitedHealth Group, Inc.
5.250% due 03/15/11 185 186
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Unum Group
5.859% due 05/15/09 240 242
US Oncology, Inc.
9.000% due 08/15/12 295 314
USB Capital IX
6.189% due 04/15/49 410 421
USB Realty Corp. (f)(p)
6.091% due 12/22/49 700 707
Valero Logistics Operations, LP
6.050% due 03/15/13 560 572
Verizon Communications, Inc.
5.850% due 09/15/35 425 408
Verizon Global Funding Corp.
7.250% due 12/01/10 300 320
Verizon, Inc.
6.500% due 09/15/11 40 42
Viacom, Inc.
5.711% due 06/16/09 (E) 330 331
5.750% due 04/30/11 455 461
6.875% due 04/30/36 515 522
Visteon Corp.
8.250% due 08/01/10 325 331
Wachovia Bank NA (E)
Series BKNT
5.356% due 06/27/08 400 400
5.320% due 10/03/08 700 700
Series DPNT
5.390% due 03/23/09 700 700
Wachovia Capital Trust III
5.800% due 03/15/42 1,395 1,416
Wachovia Corp. (N)
5.410% due 12/01/09 (E) 400 400
5.625% due 10/15/16 100 101
Wal-Mart Stores, Inc. (E)
5.255% due 06/16/08 1,000 999
Washington Mutual Preferred Funding II (f)(N)(p)
6.665% due 12/31/49 300 299
Washington Mutual, Inc.
8.250% due 04/01/10 250 270
WellPoint, Inc.
4.250% due 12/15/09 266 261
5.850% due 01/15/36 490 473
Wells Fargo & Co. (N)
4.950% due 10/16/13 155 153
Wells Fargo Bank NA
5.750% due 05/16/16 190 196
</Table>
Fixed Income III Fund 91
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Westpac Banking Corp. (E)
Series DPNT
5.280% due 06/06/08 300 300
Willis North America, Inc. (N)
5.125% due 07/15/10 270 265
Wimar Opco LLC/Wimar Opco Finance Corp. (p)
9.625% due 12/15/14 345 350
Windstream Corp.
Series WI
8.125% due 08/01/13 240 260
8.625% due 08/01/16 125 137
Wyeth
6.950% due 03/15/11 925 984
5.500% due 02/01/14 400 404
5.950% due 04/01/37 640 640
Xcel Energy, Inc.
6.500% due 07/01/36 150 158
Xlliac Global Funding
4.800% due 08/10/10 240 237
Yum! Brands, Inc.
8.875% due 04/15/11 110 123
Zurich Capital Trust I (p)
8.376% due 06/01/37 420 439
------------
174,099
------------
International Debt - 5.2%
Abbey National PLC (f)
6.700% due 06/29/49 275 279
Abu Dhabi National Energy Co. (p)
5.875% due 10/27/16 390 394
6.500% due 10/27/36 980 995
Altos Hornos de Mexico SA de CV (o)(N)
Series A
11.375% due 04/30/49 605 454
America Movil SAB de CV (N)
5.500% due 03/01/14 200 200
Amvescap PLC
4.500% due 12/15/09 485 477
5.625% due 04/17/12 535 538
ANZ National International, Ltd. (E)(p)
5.400% due 08/07/09 1,300 1,299
Arlington Street CDO, Ltd. (p)
Series 2000-1A Class A2
7.660% due 06/10/12 840 830
Aspen Insurance Holdings, Ltd.
6.000% due 08/15/14 75 75
AXA SA
8.600% due 12/15/30 85 109
6.379% due 12/14/49 (f)(p) 125 122
6.463% due 12/31/49 (f)(p) 125 121
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Banco Mercantil del Norte SA (p)
6.862% due 10/13/21 475 488
Barclays Bank PLC (f)(p)
7.375% due 06/29/49 320 348
BNP Paribas (f)(p)
5.186% due 06/29/49 600 578
Brascan Corp.
7.125% due 06/15/12 225 241
British Telecommunications PLC
8.625% due 12/15/10 65 72
9.125% due 12/15/30 590 823
Brookfield Asset Management, Inc.
5.800% due 04/25/17 170 170
C10 Capital SPV, Ltd. (f)(p)
6.722% due 12/01/49 300 301
Canadian Natural Resources, Ltd.
5.700% due 05/15/17 325 326
5.850% due 02/01/35 (N) 25 24
6.500% due 02/15/37 (N) 440 453
6.250% due 03/15/38 430 427
Canadian Oil Sands, Ltd. (p)
4.800% due 08/10/09 150 148
Catalyst Paper Corp.
Series D
8.625% due 06/15/11 1,290 1,308
China Development Bank
5.000% due 10/15/15 100 99
CIT Group Funding Co. of Canada (N)
5.600% due 11/02/11 185 186
Citigroup Global Markets Deutschland AG for OAO
Gazprom
10.500% due 10/21/09 100 112
Conoco Funding Co.
6.350% due 10/15/11 765 804
Cosan Finance, Ltd. (p)
7.000% due 02/01/17 490 485
Deutsche ALT-A Securities NIM Trust (p)
Series 2007-AHM Class N1
6.750% due 02/25/47 314 313
Deutsche Telekom International Finance BV
5.375% due 03/23/11 (N) 125 126
8.250% due 06/15/30 325 408
</Table>
92 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
DNB Nor Bank ASA (E)(p)
5.430% due 10/13/09 2,400 2,400
Egypt Government AID Bonds
4.450% due 09/15/15 695 672
Endurance Specialty Holdings, Ltd. (N)
6.150% due 10/15/15 175 175
Export-Import Bank of China (p)
4.875% due 07/21/15 495 484
Export-Import Bank of Korea
4.125% due 02/10/09 (p) 160 157
5.125% due 02/14/11 225 225
Falconbridge, Ltd.
7.250% due 07/15/12 75 82
6.000% due 10/15/15 420 435
FBG Finance, Ltd. (p)
5.125% due 06/15/15 190 183
FMG Finance Pty, Ltd. (p)
10.625% due 09/01/16 1,210 1,416
France Telecom SA
8.500% due 03/01/31 240 316
Galaxy Entertainment Finance Co., Ltd.
9.875% due 12/15/12 540 591
Gaz Capital for Gazprom (A)
6.212% due 11/22/16 300 303
Gazinvest Luxembourg SA for Gazprombank
7.250% due 10/30/08 470 480
Harborview NIM Corp. (p)
Series 2006-8A Class N1
6.409% due 07/21/36 190 189
Series 2006-9A Class N1
6.409% due 11/19/36 286 286
Series 2007-1A Class N1
6.409% due 03/19/37 218 217
Series 2007-14 Class N1
6.409% due 12/19/36 227 226
HBOS PLC (f)(p)
5.920% due 09/29/49 300 295
HBOS Treasury Services PLC (E)(p)
Series MTN
5.400% due 07/17/09 600 601
HSBC Holdings PLC
6.500% due 05/02/36 315 337
Inco, Ltd.
5.700% due 10/15/15 375 374
Indonesia Government International Bond (A)
6.625% due 02/17/37 465 460
Intelsat Bermuda, Ltd.
Series WI
11.250% due 06/15/16 420 479
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Ispat Inland ULC
9.750% due 04/01/14 664 739
Korea Electric Power Corp. (p)
5.125% due 04/23/34 85 84
LG Electronics, Inc. (p)
5.000% due 06/17/10 130 128
Mantis Reef, Ltd. (p)
4.692% due 11/14/08 200 198
Mexico Government International Bond (N)
Series MTNA
6.750% due 09/27/34 370 413
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 280 286
Montpelier Re Holdings, Ltd.
6.125% due 08/15/13 405 400
MUFG Capital Finance 1, Ltd. (f)
6.346% due 07/29/49 605 618
National Australia Bank, Ltd. (E)(p)
5.380% due 09/11/09 400 400
Nationwide Building Society (p)
4.250% due 02/01/10 305 298
Nippon Life Insurance (p)
4.875% due 08/09/10 295 291
Norske Skogindustrier ASA (p)
7.125% due 10/15/33 555 508
Orascom Telecom Finance SCA (N)(p)
7.875% due 02/08/14 290 286
Peru Enhanced Pass-Through Finance, Ltd. (p)
Zero coupon due 05/31/25 785 320
Petroleum Export, Ltd. (p)
5.265% due 06/15/11 86 84
Province of Quebec Canada
Series PJ
6.125% due 01/22/11 960 999
Ras Laffan Liquefied Natural Gas Co., Ltd. II
(p)
5.298% due 09/30/20 615 593
Ras Laffan Liquefied Natural Gas Co., Ltd. III
(p)
5.832% due 09/30/16 380 384
5.838% due 09/30/27 1,160 1,112
Reliance Industries, Ltd. (p)
10.250% due 01/15/97 250 367
</Table>
Fixed Income III Fund 93
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Resona Bank, Ltd. (f)(p)
5.850% due 09/29/49 1,150 1,144
Resona Preferred Global Securities Cayman, Ltd.
(f)(p)
7.191% due 12/29/49 1,930 2,040
Rogers Wireless, Inc.
6.375% due 03/01/14 855 883
Royal Bank of Scotland Group PLC (f)
Series 1
9.118% due 03/31/49 1,350 1,490
Royal Bank of Scotland PLC (E)
5.760% due 07/06/12 1,300 1,301
Russia Government International Bond (p)
5.000% due 03/31/30 761 865
Salomon Brothers AG for OAO Siberian Oil Co.
Series REGS
10.750% due 01/15/09 605 654
Santander Financial Issuances
6.375% due 02/15/11 180 187
Sanwa Finance Aruba AEC
8.350% due 07/15/09 355 378
Sappi Papier Holding AG (p)
6.750% due 06/15/12 375 377
7.500% due 06/15/32 560 531
Seagate Technology HDD Holdings
6.800% due 10/01/16 395 392
Secunda International, Ltd. (E)
13.360% due 09/01/12 220 228
Security Capital Assurance, Ltd. (f)(A)
6.880% due 12/31/49 290 295
Shimao Property Holdings, Ltd. (p)
8.000% due 12/01/16 285 295
Shinsei Finance II (f)(N)(p)
7.160% due 07/25/49 275 285
Siemens Financieringsmaatschappij NV (p)
5.410% due 08/14/09 (E) 500 500
6.125% due 08/17/26 385 393
SMFG Preferred Capital, Ltd. (f)(p)
6.078% due 01/29/49 200 201
Stora Enso OYJ
7.250% due 04/15/36 245 251
Sumitomo Mitsui Banking Corp.
5.625% due 07/29/49 160 158
Systems 2001 AT LLC (p)
7.156% due 12/15/11 128 133
6.664% due 09/15/13 120 127
Telecom Italia Capital SA
4.000% due 01/15/10 720 698
4.875% due 10/01/10 325 321
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
5.970% due 07/18/11 (E) 1,210 1,219
5.250% due 10/01/15 250 240
7.200% due 07/18/36 520 556
Telefonica Emisiones SAU
5.665% due 06/19/09 (E) 845 848
5.984% due 06/20/11 (N) 250 257
6.421% due 06/20/16 120 126
7.045% due 06/20/36 190 204
Telefonica Europe BV
7.750% due 09/15/10 310 334
8.250% due 09/15/30 (N) 260 312
Telefonos de Mexico SA de CV
4.500% due 11/19/08 710 702
TELUS Corp.
8.000% due 06/01/11 640 699
TNK-BP Finance SA (N)(p)
6.125% due 03/20/12 100 100
6.625% due 03/20/17 455 455
Transocean, Inc. (E)
5.566% due 09/05/08 400 400
Tyco International Group SA
6.750% due 02/15/11 505 537
UFJ Finance Aruba AEC
6.750% due 07/15/13 120 129
Unicredit Luxembourg Finance SA (E)(p)
5.410% due 10/24/08 375 375
Vale Overseas, Ltd.
6.250% due 01/11/16 110 113
6.250% due 01/23/17 680 697
6.875% due 11/21/36 410 435
Vedanta Resources PLC (p)
6.625% due 02/22/10 410 412
Venezuela Government International Bond (N)
9.375% due 01/13/34 180 226
Vodafone Group PLC
5.750% due 03/15/16 (N) 165 167
6.150% due 02/27/37 200 197
VTB Capital SA (E)(p)
5.960% due 08/01/08 565 566
Westfield Capital Corp., Ltd./WT
Finance Aust Pty Ltd/WEA
Finance LLC (p)
5.125% due 11/15/14 225 221
Westfield Group (p)
5.400% due 10/01/12 276 278
</Table>
94 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Woori Bank (p)
6.208% due 05/02/37 520 519
XL Capital, Ltd. (f)
Series E
6.500% due 12/31/49 1,025 1,012
Xstrata Finance Canada, Ltd. (p)
5.500% due 11/16/11 115 116
5.800% due 11/15/16 115 116
Xstrata Finance Dubai, Ltd. (E)(p)
5.710% due 11/13/09 260 260
------------
60,979
------------
Loan Agreements - 0.9%
ALLTEL Holding Corp., Term Loan
6.850% due 07/17/13 330 331
Avis Budget Holdings, Term Loan
6.610% due 04/19/12 150 150
AWAS, Second Lien Term Loan
11.375% due 03/21/13 175 177
Coffeyville Resources, LLC
8.349% due 12/28/13 200 201
Delphi Corp., Term Loan C
8.125% due 12/31/07 100 100
Ford Motor Co.
8.360% due 12/15/13 1,097 1,103
General Motors Corp.
7.725% due 11/01/13 299 301
7.725% due 11/29/13 301 303
Georgia-Pacific Corp., Term Loan B
7.090% due 12/20/12 781 785
7.100% due 12/20/12 25 25
HCA, Inc. Term Loan B
7.600% due 12/30/13 599 598
Healthsouth Corp., Term Loan B
7.820% due 03/10/13 60 61
7.850% due 03/10/13 535 539
Hexion Specialty Chemicals
7.875% due 05/05/13 199 201
Idearc, Inc., Term Loan B
7.350% due 11/17/14 299 301
Landsource Communities Development LLC
8.070% due 02/19/13 200 201
Lyondell Chemical Co., Term Loan
6.860% due 08/16/13 299 300
Starbound Reinsurance, Ltd.
7.370% due 03/31/08 3,500 3,500
Talecris Biotherapeutics, Inc.,
Second Lien Term Loan
11.860% due 12/06/14 300 309
Travelport Holdings, Ltd.
12.350% due 03/01/13 605 606
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
United Airlines, Inc.
7.375% due 02/01/14 300 300
Visteon Corp., Term Loan B
8.380% due 06/13/13 300 302
------------
10,694
------------
Mortgage-Backed Securities - 39.0%
Adjustable Rate Mortgage Trust
Series 2005-3 Class 8A2
5.560% due 07/25/35 411 412
American Home Mortgage Assets (E)
Series 2006-2 Class 2A2
5.550% due 09/25/46 714 716
Series 2006-4 Class 1A11
5.510% due 08/30/36 927 928
Series 2007-1 Class A1
5.710% due 02/25/47 1,984 1,983
Series 2007-2 Class A1
5.445% due 03/25/47 850 849
American Home Mortgage Investment Trust (E)
Series 2004-1 Class 1A
5.670% due 04/25/44 100 100
Series 2004-4 Class 4A
4.390% due 02/25/45 249 246
Series 2006-3 Class 12A1
5.510% due 12/25/46 940 941
Series 2007-1 Class GA1C
5.510% due 04/25/37 1,250 1,250
Banc of America Alternative Loan Trust
Series 2005-1 Class 2A1
5.500% due 02/25/20 699 702
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 710 705
Series 2004-4 Class A3
4.128% due 07/10/42 455 445
Series 2005-2 Class A4
4.783% due 07/10/43 730 717
Series 2005-3 Class A2
4.501% due 07/10/43 360 353
Series 2005-5 Class A4
5.115% due 10/10/45 1,500 1,477
Series 2006-1 Class A4
5.372% due 09/10/45 500 501
</Table>
Fixed Income III Fund 95
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2006-3 Class A4
5.889% due 07/10/44 810 839
Series 2006-4 Class A4
5.669% due 07/10/46 1,820 1,852
Banc of America Funding Corp.
Series 2005-D Class A1 (E)
4.113% due 05/25/35 303 298
Series 2005-F Class 1A2 (E)
5.670% due 09/20/35 156 157
Series 2006-3 Class 5A8
5.500% due 03/25/36 930 931
Series 2006-A Class 3A2
5.899% due 02/20/36 372 375
Series 2006-A Class 4A1
5.580% due 02/20/36 898 900
Banc of America Mortgage Securities, Inc.
Series 2003-9 Class 1A12 (E)
5.770% due 12/25/33 1,165 1,169
Series 2003-D Class 1A2 (E)
6.850% due 05/25/33 2 2
Series 2004-1 Class 5A1
6.500% due 09/25/33 17 18
Series 2004-11 Class 2A1
5.750% due 01/25/35 754 745
Series 2004-D Class 1A1 (E)
3.512% due 05/25/34 224 225
Series 2005-9 Class 2A1
4.750% due 10/25/20 372 367
Series 2005-L Class 3A1
5.459% due 01/25/36 446 445
Series 2006-2 Class A15
6.000% due 07/25/36 738 746
Bank of America Alternative Loan Trust
Series 2003-2 Class CB2
5.820% due 04/25/33 182 183
Series 2003-10 Class 2A1
6.000% due 12/25/33 195 195
Series 2003-10 Class 2A2 (E)
5.770% due 12/25/33 436 438
Series 2004-2 Class 1A1
6.000% due 03/25/34 112 113
Series 2004-10 Class 1CB1
6.000% due 11/25/34 119 120
Series 2004-11 Class 1CB1
6.000% due 12/25/34 138 139
Series 2005-3 Class 2A1
5.500% due 04/25/20 188 188
Series 2005-5 Class 2CB1
6.000% due 06/25/35 249 250
Series 2005-6 Class 7A1
5.500% due 07/25/20 207 207
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2005-9 Class 5A1
5.500% due 10/25/20 355 353
Series 2006-5 Class CB17
6.000% due 06/25/36 566 573
Bayview Financial Acquisition Trust (E)
Series 2006-C Class 2A1
5.430% due 11/28/36 467 467
Bear Stearns Adjustable Rate Mortgage Trust
Series 2005-10 Class A1 (E)
4.750% due 10/25/35 1,298 1,285
Series 2007-1 Class 3A2
5.801% due 02/25/47 463 462
Series 2007-3 Class 1A1
5.500% due 05/25/47 1,335 1,336
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.383% due 05/25/35 449 450
Series 2006-3 Class 33A1
6.174% due 05/25/36 499 506
Series 2006-3 Class 34A1
6.161% due 05/25/36 199 202
Bear Stearns Asset Backed Securities Trust
Series 2005-AC8 Class A5
5.500% due 11/25/35 329 328
Bear Stearns Commercial Mortgage Securities
Series 2004-ESA Class E (p)
5.064% due 05/14/16 265 265
Series 2005-PW1 Class A4
5.405% due 12/11/40 1,500 1,507
Bear Stearns Mortgage Funding Trust (E)
Series 2006-AR1 Class 1A2
5.570% due 07/25/36 605 604
Series 2006-AR2 Class 1A1
5.520% due 09/25/36 1,554 1,548
Series 2006-AR2 Class 2A1
5.550% due 10/25/36 962 958
Series 2006-AR3 Class 1A1
5.550% due 03/25/36 661 658
Series 2006-AR4 Class A1
5.530% due 04/25/36 840 836
Series 2006-AR5 Class 1A1
5.480% due 12/25/36 1,666 1,657
Series 2007-AR2 Class A1
5.490% due 03/25/37 900 898
</Table>
96 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2007-AR3 Class 1A1
5.450% due 08/25/36 925 922
Bear Stearns Structured Products, Inc. (p)
Series 2007-N3 Class 10C
Interest Only STRIP
Zero coupon due 04/27/37 12,750 497
Carrington Mortgage Loan Trust (E)
Series 2007-FRE Class A1
5.400% due 02/25/37 800 800
Chase Mortgage Finance Corp.
Series 2003-S8 Class A1
4.500% due 09/25/18 420 404
Series 2003-S8 Class A2
5.000% due 09/25/18 614 609
Series 2006-S4 Class A3
6.000% due 12/25/36 685 692
Series 2006-S4 Class A4
6.000% due 12/25/36 360 362
Series 2007-A1 Class 1A3
4.370% due 02/25/37 986 977
Citigroup Commercial Mortgage Trust
Series 2006-C5 Class A4
5.431% due 10/15/49 445 446
Citigroup Mortgage Loan Trust, Inc.
Series 2005-11 Class A2A
4.700% due 12/25/35 86 85
Series 2006-WF1 Class A2F
5.657% due 03/01/36 610 609
Series 2007-AR1 Class A1 (E)
5.400% due 01/25/37 513 514
Citigroup/Deutsche Bank Commercial Mortgage
Trust
Series 2005-CD1 Class A4
5.226% due 07/15/44 1,500 1,499
Series 2006-CD3 Class A5
5.617% due 10/15/48 455 462
Citimortgage Alternative Loan Trust
Series 2006-A3 Class 1A5
6.000% due 07/25/36 391 393
Commercial Mortgage Pass Through Certificates
Series 2001-J1A Class A2 (p)
6.457% due 02/16/34 217 224
Series 2006-C7 Class A2
5.690% due 06/10/46 235 239
Countrywide Alternative Loan Trust
5.520% due 05/25/37 2,400 2,400
Series 2004-28C Class 6A1
6.000% due 01/25/35 241 242
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2004-J7 Class 1A2
4.673% due 08/25/34 80 79
Series 2004-J8 Class 1A1
7.000% due 09/25/34 208 213
Series 2005-51 Class 2A1 (E)
5.620% due 11/20/35 605 606
Series 2005-51 Class 2A2A (E)
5.610% due 11/20/35 235 235
Series 2005-51 Class 4A1 (E)
5.640% due 11/20/35 712 714
Series 2005-56 Class 2A2 (E)
7.050% due 11/25/35 499 507
Series 2005-58 Class A2 (E)
5.710% due 12/20/35 461 463
Series 2005-59 Class 1A2B (E)
5.610% due 11/20/35 246 246
Series 2005-63 Class 3A1
5.894% due 11/25/35 407 409
Series 2005-76 Class 2A2 (E)
6.683% due 02/25/36 591 597
Series 2005-81 Class X1
Interest Only STRIP
2.371% due 02/25/37 2,183 115
Series 2005-J8 Class 1A3
5.500% due 07/25/35 540 540
Series 2005-J13 Class 2A3
5.500% due 11/25/35 293 293
Series 2006-2CB Class A3
5.500% due 03/25/36 305 304
Series 2006-9T1 Class A7
6.000% due 05/25/36 300 303
Series 2006-43C Class 1A7
6.000% due 02/25/37 923 931
Series 2006-J2 Class A3
6.000% due 04/25/36 444 448
Series 2006-OA1 Class 1XP
Interest Only STRIP
18.200% due 10/25/36 6,290 308
Series 2006-OA1 Class 2X
Interest Only STRIP
1.790% due 03/20/46 2,991 134
Series 2006-OA1 Class 4A1 (E)
5.510% due 08/25/46 1,209 1,208
Series 2006-OA1 Class A1 (E)
5.500% due 02/20/47 1,212 1,209
</Table>
Fixed Income III Fund 97
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2006-OA1 Class A1A (E)
5.370% due 09/25/46 342 342
Series 2006-OA2 Class A1 (E)
5.480% due 02/25/47 759 757
Series 2006-OA2 Class A2A
5.470% due 05/20/46 377 378
Series 2006-OA2 Class CP (p)
Interest Only STRIP
2.080% due 09/25/35 8,400 430
Series 2006-OA2 Class X
Interest Only STRIP
1.275% due 03/20/47 6,333 346
Series 2006-OA6 Class 1A3
5.590% due 04/25/36 467 469
Series 2007-OA6 Class A1B (E)
5.520% due 06/25/37 2,400 2,400
Countrywide Home Equity Loan Trust (E)
Series 2007-C Class A
5.470% due 06/15/34 2,000 1,998
Countrywide Home Loan Mortgage Pass Through
Trust
Series 2004-16 Class 1A1
5.720% due 09/25/34 568 570
Series 2005-3 Class 1A3 (E)
5.560% due 04/25/35 127 127
Series 2005-11 Class 5A1 (E)
5.620% due 03/25/35 86 86
Series 2005-23 Class A1
5.500% due 11/25/35 1,047 1,027
Series 2005-29 Class A1
5.750% due 12/25/35 667 664
Series 2005-HYB Class 3A2A
5.250% due 02/20/36 164 163
Series 2006-1 Class A2
6.000% due 03/25/36 320 320
Series 2006-1 Class A3
6.000% due 03/25/36 117 116
Series 2006-HYB Class 3A1A
6.104% due 05/20/36 458 471
Series 2006-OA5 Class 2A1 (E)
5.520% due 04/25/46 1,269 1,268
Series 2007-HY1 Class 1A2
5.736% due 04/25/37 253 253
Credit Suisse First Boston Mortgage Securities
Corp.
Series 1998-C2 Class A2
6.300% due 11/15/30 231 233
Series 2001-SPG Class A2
6.515% due 08/13/18 185 194
Series 2003-29 Class 5A1
7.000% due 12/25/33 40 41
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2004-1 Class 3A1
7.000% due 02/25/34 18 19
Series 2004-C1 Class A3
4.321% due 01/15/37 675 658
Credit Suisse Mortgage Capital Certificates
Series 2006-C1 Class AAB
5.555% due 02/15/39 130 132
Crown Castle Towers LLC (p)
Series 2005-1A Class C
5.074% due 06/15/35 150 149
Series 2006-1A Class B
5.362% due 11/15/36 375 375
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2005-AR1 Class 2A3
5.012% due 08/25/35 905 923
Series 2007-OA1 Class A1 (E)
5.470% due 02/25/47 999 997
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 423 425
Series 1999-CG1 Class S
Interest Only STRIP
0.813% due 03/10/32 5,898 97
Downey Savings & Loan Association Mortgage Loan
Trust
Series 2004-AR3 Class 1A1B (E)
7.240% due 07/19/44 175 177
Series 2006-AR1 Class 2A1A
5.823% due 04/19/47 697 700
Series 2006-AR2 Class 2A1A (E)
5.520% due 11/19/37 713 714
Fannie Mae
5.363% due 2012 504 508
6.000% due 2016 26 26
5.000% due 2017 11 10
5.500% due 2017 44 44
6.000% due 2017 57 57
6.500% due 2017 108 111
4.000% due 2018 1,792 1,701
4.500% due 2018 5,633 5,471
5.000% due 2018 1,365 1,351
10.000% due 2018 38 42
</Table>
98 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
4.500% due 2019 498 485
4.500% due 2020 717 696
5.000% due 2020 936 923
5.500% due 2020 153 153
6.500% due 2024 1,000 1,026
10.000% due 2024 35 38
7.273% due 2025 (E) 25 25
6.954% due 2026 (E) 184 187
7.500% due 2027 9 9
7.000% due 2028 29 30
5.500% due 2029 553 549
6.500% due 2029 3 3
7.000% due 2029 91 95
7.500% due 2029 79 82
8.000% due 2029 7 7
8.500% due 2029 3 3
7.500% due 2030 71 73
8.500% due 2030 237 256
9.500% due 2030 75 82
7.000% due 2031 461 481
7.500% due 2031 197 205
8.000% due 2031 280 297
8.500% due 2031 216 232
6.000% due 2032 926 939
6.500% due 2032 3 3
7.000% due 2032 499 519
7.500% due 2032 191 199
8.000% due 2032 27 28
3.907% due 2033 582 580
4.668% due 2033 (E) 593 596
4.678% due 2033 349 352
5.000% due 2033 1,170 1,136
5.500% due 2033 2,356 2,336
6.000% due 2033 299 302
7.000% due 2033 1,099 1,144
5.000% due 2034 1,407 1,364
5.500% due 2034 13,240 13,121
6.000% due 2034 543 549
7.000% due 2034 314 328
7.500% due 2034 95 99
4.442% due 2035 (E) 1,377 1,379
4.833% due 2035 (E) 1,399 1,400
5.000% due 2035 1,540 1,491
5.127% due 2035 (E) 690 691
5.500% due 2035 13,033 12,906
6.000% due 2035 512 516
7.000% due 2035 21 22
7.500% due 2035 681 713
4.736% due 2036 (E) 771 763
5.000% due 2036 7,192 6,959
5.500% due 2036 3,359 3,323
6.000% due 2036 2,203 2,217
6.500% due 2036 284 290
7.000% due 2036 76 78
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
7.500% due 2036 2,034 2,119
6.029% due 2037 (E) 650 654
6.133% due 2043 (E) 404 411
Series 1992-10 Class ZD
8.000% due 11/25/21 356 358
Series 1996-46 Class ZA
7.500% due 11/25/26 78 80
Series 1997-281 Class 2
Interest Only STRIP
9.000% due 11/01/26 35 9
Series 1999-56 Class Z
7.000% due 12/18/29 282 296
Series 2000-306 Class IO
Interest Only STRIP
8.000% due 05/01/30 37 9
Series 2001-317 Class 2
Interest Only STRIP
8.000% due 08/01/31 38 8
Series 2002-50 Class SC (E)
Interest Only STRIP
2.780% due 12/25/29 4 --
Series 2002-320 Class 2
Interest Only STRIP
7.000% due 03/01/32 18 4
Series 2003-16 Class NI
Interest Only STRIP
5.000% due 02/25/15 150 4
Series 2003-25 Class IK
Interest Only STRIP
7.000% due 04/25/33 88 20
Series 2003-32 Class FH
5.720% due 11/25/22 653 655
Series 2003-32 Class UI
Interest Only STRIP
6.000% due 05/25/33 132 29
Series 2003-33 Class IA
Interest Only STRIP
6.500% due 05/25/33 777 175
Series 2003-35 Class IU
Interest Only STRIP
6.000% due 05/25/33 160 35
Series 2003-35 Class UI
Interest Only STRIP
6.500% due 05/25/33 157 36
Series 2003-64 Class JI
Interest Only STRIP
6.000% due 07/25/33 154 35
</Table>
Fixed Income III Fund 99
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2003-78 Class FI
5.720% due 01/25/33 649 654
Series 2003-82 Class IA
Interest Only STRIP
6.000% due 08/25/32 126 16
Series 2003-82 Class WI
Interest Only STRIP
6.000% due 08/25/32 27 3
Series 2003-122 Class AJ
4.500% due 02/25/28 131 128
Series 2003-337 Class 1
Principal Only STRIP
Zero coupon due 07/01/33 712 529
Series 2003-343 Class 6
Interest Only STRIP
5.000% due 10/01/33 696 145
Series 2003-345 Class 18
Interest Only STRIP
4.500% due 12/01/18 1,921 274
Series 2003-345 Class 19
Interest Only STRIP
4.500% due 01/01/19 2,143 304
Series 2004-21 Class FL
5.670% due 11/25/32 323 324
Series 2005-110 Class MB
5.500% due 09/25/35 625 630
Series 2006-28 Class 1P
Interest Only STRIP
1.390% due 03/25/36 3,422 88
Series 2006-369 Class 8
Interest Only STRIP
5.500% due 04/01/36 581 136
Series 2006-371 Class 2
Interest Only STRIP
6.500% due 07/01/36 32 6
Series 2006-373 Class 1
Principal Only STRIP
Zero coupon due 07/01/36 610 464
15 Year TBA (I)
4.500% 3,475 3,363
5.000% 5,975 5,889
5.500% 3,285 3,289
6.000% 8,765 8,905
30 Year TBA (I)
4.500% 1,325 1,245
5.000% 19,025 18,377
5.500% 42,400 41,923
6.000% 27,275 27,478
6.500% 7,530 7,688
7.000% 5,885 6,074
Fannie Mae Grantor Trust
Series 2001-T8 Class A2
9.500% due 07/25/41 66 71
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Fannie Mae REMICS
Series 1993-41 Class ZQ
7.000% due 12/25/23 443 464
Series 1993-42 Class ZQ
6.750% due 04/25/23 510 520
Series 2005-36 Class AI
Interest Only STRIP
5.500% due 10/25/26 921 67
Series 2006-5 Class 3A2
4.673% due 05/25/35 100 99
Series 2006-48 Class LG
Principal Only STRIP
Zero coupon due 06/25/36 159 118
Series 2006-118 Class A2 (E)
5.380% due 12/25/36 512 511
Fannie Mae Whole Loan
Series 2003-W17 Class 1A6
5.310% due 08/25/33 1,700 1,689
Series 2004-W9 Class 2A1
6.500% due 02/25/44 102 104
Series 2004-W11 Class 1A2
6.500% due 05/25/44 193 198
Federal Home Loan Mortgage Corp.
Structured Pass Through Securities
Series 2003-58 Class 2A
6.500% due 09/25/43 99 101
Series 2005-63 Class 1A1
6.133% due 02/25/45 50 51
First Horizon Alternative Mortgage Securities
Series 2004-AA3 Class A1 (E)
5.300% due 09/25/34 142 142
Series 2006-AA5 Class A2 (E)
6.626% due 09/25/36 406 417
Series 2006-FA3 Class A6
6.000% due 07/25/36 515 521
First Horizon Asset Securities, Inc.
Series 2003-5 Class 1A17
8.000% due 07/25/33 50 53
Series 2004-AR5 Class 4A1 (E)
5.682% due 10/25/34 134 133
Series 2005-AR5 Class 3A1
5.540% due 10/25/35 196 197
First Union-Lehman Brothers-Bank of America
Series 1998-C2 Class A2
6.560% due 11/18/35 25 25
</Table>
100 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Freddie Mac
8.500% due 2017 52 55
10.500% due 2017 20 22
4.500% due 2018 761 739
5.000% due 2018 783 774
4.000% due 2019 3,597 3,405
4.500% due 2019 165 161
5.000% due 2019 1,474 1,456
5.000% due 2020 1,505 1,485
10.000% due 2020 52 57
7.078% due 2027 (E) 35 36
6.749% due 2028 (E) 30 31
7.411% due 2028 (E) 29 30
4.613% due 2034 354 358
4.911% due 2034 (E) 906 904
5.748% due 2034 (E) 69 71
6.000% due 2035 398 400
5.891% due 2036 (E) 338 342
5.952% due 2036 (E) 678 686
5.971% due 2036 (E) 348 353
5.636% due 2037 (E) 619 623
5.758% due 2037 (E) 975 1,000
Series 1991-103 Class Z
9.000% due 02/15/21 56 56
Series 1994-173 Class Z
7.000% due 05/15/24 107 112
Series 1999-212 Class SG (E)
Interest Only STRIP
1.625% due 06/17/27 452 30
Series 2001-229 Class KF (E)
5.570% due 07/25/22 307 304
Series 2001-232 Class ZQ
6.500% due 06/15/31 492 515
Series 2003-259 Class IQ
Interest Only STRIP
5.000% due 06/15/17 283 33
Series 2003-261 Class UI
Interest Only STRIP
6.500% due 05/15/33 108 25
Series 2003-262 Class AB
2.900% due 11/15/14 627 610
Series 2003-264 Class IM
Interest Only STRIP
7.000% due 07/15/33 134 32
Series 2003-266 Class MA
4.500% due 10/15/31 253 248
Series 2004-276 Class IP
Interest Only STRIP
5.500% due 07/15/23 474 18
Series 2004-277 Class UF
5.620% due 06/15/33 787 789
Series 2004-281 Class DF
5.770% due 06/15/23 237 239
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2004-287 Class GC
5.000% due 11/15/29 355 351
Series 2004-289 Class PC
5.000% due 07/15/30 640 632
Series 2005-291 Class KP
5.000% due 11/15/29 215 213
Series 2005-292 Class IG
Interest Only STRIP
5.000% due 04/15/23 315 47
Series 2005-294 Class FA
5.490% due 03/15/20 462 462
Series 2005-302 Class MB
5.000% due 12/15/28 200 199
Series 2005-306 Class PC
5.000% due 02/15/29 620 615
Series 2006-313 Class FP (E)
Zero coupon due 04/15/36 397 408
30 Year TBA (I)
5.000% 4,290 4,145
5.500% 3,650 3,609
6.000% 3,825 3,856
Freddie Mac Gold
6.000% due 2016 48 49
5.000% due 2018 94 93
5.500% due 2020 1,775 1,780
8.500% due 2025 16 18
8.500% due 2027 91 97
7.000% due 2030 77 80
7.243% due 2030 (E) 6 6
7.500% due 2030 203 213
8.000% due 2030 67 71
7.500% due 2032 106 111
7.000% due 2031 177 185
7.500% due 2031 14 15
8.000% due 2031 18 19
5.000% due 2033 628 611
7.000% due 2033 36 37
Series 1998-191 Class IO
Interest Only STRIP
8.000% due 01/01/28 29 7
Series 1998-194 Class IO
Interest Only STRIP
6.500% due 04/01/28 104 25
Series 2001-212 Class IO
Interest Only STRIP
6.000% due 05/01/31 78 17
Series 2001-215 Class IO
Interest Only STRIP
8.000% due 06/01/31 55 13
</Table>
Fixed Income III Fund 101
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Freddie Mac Reference REMICS
Series 2006-R00 Class AK
5.750% due 12/15/18 613 617
Series 2006-R00 Class FK (E)
5.720% due 07/15/23 915 921
Freddie Mac REMICS
Series 2003-256 Class FJ (E)
5.720% due 02/15/33 399 403
Series 2003-258 Class IG
Interest Only STRIP
4.500% due 10/15/16 306 30
Series 2003-269 Class FE
5.920% due 12/15/28 708 716
Series 2003-269 Class QG
4.500% due 01/15/29 640 624
Series 2004-277 Class KE
3.500% due 12/15/17 47 47
Series 2005-299 Class KF (E)
5.720% due 06/15/35 220 220
Series 2005-300 Class ED
5.000% due 07/15/25 535 514
Series 2005-301 Class IM
Interest Only STRIP
5.500% due 01/15/31 484 60
Series 2006-323 Class PA
6.000% due 03/15/26 695 705
Freddie Mac Strips
Series 2007-245 Class IO
Interest Only STRIP
5.000% due 03/01/37 985 254
Series 2007-245 Class PO
Principal Only STRIP
Zero coupon due 11/15/36 985 700
GE Capital Commercial Mortgage Corp.
Series 2002-1A Class A3
6.269% due 12/10/35 305 318
Series 2002-3A Class A1
4.229% due 12/10/37 1,171 1,149
Ginnie Mae
30 Year TBA (I)
5.500% 5,055 5,027
6.000% 1,915 1,941
Ginnie Mae I
10.500% due 2016 22 25
11.000% due 2020 47 52
10.000% due 2022 44 48
7.500% due 2024 24 25
7.500% due 2032 27 29
7.000% due 2034 444 469
Ginnie Mae II (E)
5.750% due 2023 20 20
6.125% due 2023 58 58
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
5.750% due 2024 144 145
6.125% due 2024 154 156
4.750% due 2025 5 5
5.375% due 2025 187 189
6.125% due 2026 67 67
5.375% due 2027 114 115
5.750% due 2027 94 95
6.125% due 2027 8 8
5.375% due 2028 4 4
5.375% due 2030 205 208
Global Signal Trust
Series 2004-2A Class A (p)
4.232% due 12/15/14 225 219
Series 2006-1 Class B
5.588% due 02/15/36 125 126
Series 2006-1 Class C
5.707% due 02/15/36 190 192
GMAC Commercial Mortgage Securities, Inc.
Series 1999-C2 Class A2
6.945% due 09/15/33 489 502
GMAC Mortgage Corp. Loan Trust
Series 2005-AR2 Class 4A
5.191% due 05/25/35 357 354
Series 2005-AR6 Class 3A1
5.298% due 11/19/35 705 704
Series 2006-HE3 Class A2
5.799% due 10/25/36 165 165
Government National Mortgage Association (E)
Series 1999-27 Class SE
Interest Only STRIP
3.280% due 08/16/29 143 12
Series 1999-40 Class FE
5.870% due 11/16/29 331 334
Series 1999-44 Class SA
Interest Only STRIP
3.230% due 12/16/29 159 14
Series 2000-29 Class S
Interest Only STRIP
3.180% due 09/20/30 40 2
Series 2002-27 Class SA
Interest Only STRIP
2.680% due 05/16/32 60 5
Greenpoint Mortgage Funding Trust
Series 2005-AR3 Class X1
Interest Only STRIP
1.273% due 08/25/45 1,779 54
</Table>
102 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2005-AR4 Class X4
Interest Only STRIP
2.300% due 10/25/45 2,381 79
Series 2006-AR2 Class 3A2
5.640% due 03/25/36 615 616
Series 2006-AR6 Class A1A (E)
5.400% due 10/25/46 951 951
Greenwich Capital Commercial Funding Corp.
Series 2003-C2 Class A2
4.022% due 01/05/36 500 489
Series 2004-GG1 Class A7
5.317% due 06/10/36 1,115 1,119
Series 2005-GG5 Class A41
5.243% due 04/10/37 1,040 1,040
Series 2006-RR1 Class A1 (p)
5.964% due 03/18/49 490 477
Series 2007-GG9 Class A4
5.444% due 03/10/39 2,635 2,647
GS Mortgage Securities Corp. II
Series 2006-FL8 Class A1 (E)(p)
5.420% due 06/06/20 205 205
Series 2006-GG6 Class A4
5.553% due 04/10/38 285 289
Series 2006-GG8 Class A4
5.560% due 11/10/39 2,210 2,239
Series 2006-GG8 Class AAB
5.535% due 11/10/39 485 491
Series 2006-RR2 Class A1 (p)
5.639% due 01/07/36 305 310
Series 2006-RR3 Class A1S (p)
5.466% due 03/18/49 1,125 1,136
GSMPS Mortgage Loan Trust (p)
Series 1998-3 Class A
7.750% due 09/19/27 47 49
Series 1999-3 Class A
8.000% due 08/19/29 80 85
Series 2005-RP1 Class 1A3
8.000% due 01/25/35 258 274
Series 2005-RP1 Class 1A4
8.500% due 01/25/35 136 145
Series 2006-RP1 Class 1A3
8.000% due 01/25/36 164 168
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.402% due 06/25/34 354 356
Series 2005-AR6 Class 2A1 (E)
4.539% due 09/25/35 1,430 1,414
Series 2006-1F Class 5A2
6.000% due 02/25/36 190 189
Series 2006-OA1 Class 2A1 (E)
5.510% due 08/25/46 716 717
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Harborview Mortgage Loan Trust
Series 2005-2 Class 2A1A (E)
5.540% due 05/19/35 120 120
Series 2005-2 Class X
Interest Only STRIP
2.276% due 05/19/35 2,670 72
Series 2005-3 Class X2
Interest Only STRIP
1.976% due 06/19/35 2,617 59
Series 2005-5 Class 2A1B (E)
5.610% due 07/19/45 164 164
Series 2005-10 Class 2A1A (E)
5.630% due 11/19/35 584 586
Series 2005-10 Class 2A1B (E)
5.700% due 11/19/35 292 293
Series 2005-14 Class 3A1A
5.313% due 12/19/35 213 213
Series 2005-16 Class 2A1A (E)
5.560% due 01/19/36 870 872
Series 2005-16 Class 3A1A (E)
5.570% due 01/19/36 892 894
Series 2005-16 Class 3A1B
5.660% due 01/19/36 372 372
Series 2005-16 Class X1
Interest Only STRIP
2.850% due 01/19/36 1,544 47
Series 2005-16 Class X3
Interest Only STRIP
2.610% due 01/19/36 3,884 110
Series 2006-1 Class 2A1A (E)
5.560% due 03/19/37 875 876
Series 2006-1 Class PO1
Principal Only STRIP
Zero coupon due 03/19/37 1 1
Series 2006-1 Class X1
Interest Only STRIP
2.635% due 03/19/37 2,868 126
Series 2006-5 Class PO2
Principal Only STRIP
Zero coupon due 07/19/47 -- --
Series 2006-5 Class X2
Interest Only STRIP
2.193% due 07/19/47 2,581 102
Series 2006-7 Class 2A1B (E)
5.570% due 08/19/46 1,177 1,180
Series 2006-9 Class 2A1A (E)
5.530% due 11/19/36 756 755
</Table>
Fixed Income III Fund 103
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2006-10 Class 2A1A (E)
5.500% due 11/19/36 859 855
Series 2006-12 Class 2A2A (E)
5.510% due 01/19/38 929 930
Series 2006-14 Class 2A1A (E)
5.470% due 03/19/38 666 667
Series 2006-14 Class 2A1B (E)
5.520% due 03/19/38 392 392
Series 2007-1 Class 2A1A (E)
5.450% due 03/19/37 638 638
Impac CMB Trust (E)
Series 2004-3 Class 1A
5.570% due 06/25/34 75 75
Indymac Index Mortgage Loan Trust
Series 2005-AR1 Class AX2
Interest Only STRIP
1.390% due 07/25/35 2,106 67
Series 2005-AR2 Class 1A21
5.863% due 12/25/35 301 303
Series 2006-AR2 Class A2 (E)
5.400% due 11/25/36 551 551
Series 2006-AR6 Class 2A1B
5.570% due 06/25/47 741 744
Series 2006-FLX Class A1 (E)
5.530% due 11/25/36 456 454
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C1 Class A3
5.376% due 07/12/37 250 252
Series 2003-C1 Class A2
4.985% due 01/12/37 390 386
Series 2004-LN2 Class A1
4.475% due 07/15/41 768 751
Series 2005-LDP Class A3A1
4.871% due 10/15/42 505 498
Series 2005-LDP Class A4
4.918% due 10/15/42 250 243
Series 2006-CB1 Class A4
5.817% due 05/12/45 525 531
Series 2006-LDP Class A3
5.336% due 05/15/47 355 353
Series 2006-LDP Class A3B
5.447% due 05/15/45 595 600
Series 2006-LDP Class A4
6.066% due 04/15/45 440 458
5.561% due 05/15/45 700 699
Series 2006-LDP Class AJ
5.876% due 04/15/45 370 382
Series 2006-RR1 Class A1 (p)
5.455% due 10/18/52 1,190 1,147
Series 2007-CB1 Class A4
5.440% due 06/12/47 650 655
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2007-LDP Class A3
5.393% due 01/15/49 315 315
JP Morgan Mortgage Trust
Series 2005-A1 Class 4A1 (E)
4.776% due 02/25/35 563 553
Series 2005-A4 Class 1A1
5.405% due 07/25/35 297 296
Series 2005-A6 Class 1A2
5.146% due 09/25/35 475 480
Series 2007-A1 Class 2A2 (E)
4.767% due 07/25/35 975 969
LB-UBS Commercial Mortgage Trust
Series 2002-C4 Class A5
4.853% due 09/15/31 1,000 984
Series 2004-C4 Class A3
5.153% due 06/15/29 1,055 1,059
Series 2006-C1 Class A4
5.156% due 02/15/31 1,500 1,479
Series 2006-C4 Class A4
5.899% due 06/15/38 255 266
Lehman Brothers Floating Rate Commercial
Mortgage Trust (E)(p)
Series 2006-LLF Class A1
5.400% due 09/15/21 153 153
Series 2006-LLF Class A2
5.440% due 09/15/21 573 572
Lehman Mortgage Trust
Series 2005-2 Class 2A3
5.500% due 12/25/35 317 317
Series 2005-3 Class 1A3
5.500% due 01/25/36 1,182 1,186
Lehman XS Trust (E)
Series 2005-5N Class 3A1A
5.620% due 11/25/35 951 951
Series 2005-9N Class 1A1
5.590% due 02/25/36 1,149 1,152
Series 2006-16N Class A4A
5.510% due 11/25/46 1,410 1,409
Luminent Mortgage Trust
Series 2006-1 Class A1
5.560% due 04/25/36 487 488
Series 2006-6 Class A1 (E)
5.600% due 10/25/46 503 504
Mastr Adjustable Rate Mortgages Trust
Series 2006-2 Class 4A1
4.991% due 02/25/36 1,075 1,068
</Table>
104 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Mastr Adjustable Rate Mortgages Trust
Series 2005-6 Class 7A1
5.375% due 06/25/35 185 184
Series 2006-OA2 Class 4A1A (E)
5.830% due 12/25/46 951 951
Mastr Alternative Loans Trust
Series 2003-2 Class 6A1
6.000% due 03/25/33 545 547
Series 2003-4 Class B1
5.668% due 06/25/33 358 365
Series 2003-6 Class 3A1
8.000% due 09/25/33 31 32
Series 2003-9 Class 1A1
5.500% due 12/25/18 147 146
Series 2004-10 Class 5A6
5.750% due 09/25/34 410 409
Series 2005-3 Class 7A1
6.000% due 04/25/35 244 246
Mastr Asset Securitization Trust
Series 2003-7 Class 4A35 (E)
5.720% due 09/25/33 622 622
Series 2003-11 Class 6A8
5.820% due 12/25/33 782 786
Series 2004-4 Class 2A2 (E)
5.770% due 04/25/34 248 248
Mastr Reperforming Loan Trust (p)
Series 2005-1 Class 1A5
8.000% due 08/25/34 212 225
Series 2005-2 Class 1A4
8.000% due 05/25/35 259 266
Mastr Specialized Loan Trust (p)
Series 2005-2 Class A2
5.006% due 07/25/35 149 145
Mellon Residential Funding Corp. (E)
Series 2000-TBC Class A1
5.800% due 06/15/30 303 303
Merrill Lynch Mortgage Investors, Inc. (E)
Series 2005-A6 Class 2A1
5.440% due 08/25/35 133 133
Merrill Lynch Mortgage Trust
Series 2002-MW1 Class J (p)
5.695% due 07/12/34 185 183
Series 2004-MKB Class A2
4.353% due 02/12/42 615 605
Series 2005-GGP Class E (p)
4.330% due 11/15/10 105 104
Series 2005-GGP Class F (p)
4.351% due 11/15/10 105 104
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Merrill Lynch/Countrywide Commercial Mortgage
Trust
Series 2007-5 Class A4
5.378% due 08/12/48 630 631
MLCC Mortgage Investors, Inc.
Series 2004-HB1 Class A2
5.771% due 04/25/29 100 101
Morgan Stanley Capital I
Series 1999-FNV Class G
6.120% due 03/15/31 130 131
Series 2005-IQ1 Class AAB
5.178% due 09/15/42 810 808
Series 2006-HQ8 Class A4
5.388% due 03/12/44 385 388
Series 2006-HQ9 Class A4
5.731% due 07/20/44 480 491
Morgan Stanley Dean Witter Capital I (p)
Series 2001-TOP Class E
7.313% due 02/15/33 100 106
Morgan Stanley Mortgage Loan Trust
Series 2006-2 Class 6A
6.500% due 02/25/36 209 212
Series 2006-11 Class 1A6
6.231% due 08/25/36 530 544
Nomura Asset Acceptance Corp.
Series 2005-WF1 Class 2A2
4.786% due 03/25/35 415 410
Series 2006-AF1 Class 1A2
6.159% due 05/25/36 465 471
Prime Mortgage Trust
Series 2004-CL1 Class 1A1
6.000% due 02/25/34 70 71
Series 2004-CL1 Class 1A2 (E)
5.720% due 02/25/34 48 48
Series 2004-CL1 Class 2A2 (E)
5.720% due 02/25/19 22 22
Residential Accredit Loans, Inc.
Series 2004-QS5 Class A6
5.920% due 04/25/34 125 126
Series 2004-QS8 Class A4
5.720% due 06/25/34 618 620
Series 2005-QA1 Class A41
5.690% due 09/25/35 188 188
Series 2005-QA8 Class NB3
5.499% due 07/25/35 421 424
Series 2006-QH1 Class A1 (E)
5.510% due 12/25/36 688 688
</Table>
Fixed Income III Fund 105
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2006-QO1 Class 1A1
5.580% due 02/25/46 215 215
Series 2006-QO1 Class 2A1
5.590% due 02/25/46 228 228
Series 2006-QO1 Class A1 (E)
5.480% due 01/25/37 899 897
Series 2006-QO6 Class A2 (E)
5.550% due 06/25/46 738 737
Series 2006-QS6 Class 1A13
6.000% due 06/25/36 1,070 1,077
Series 2007-QH1 Class A1 (E)
5.480% due 02/25/37 844 842
Series 2007-QH2 Class A1 (E)
5.460% due 02/25/37 900 900
Series 2007-QO3 Class A1 (E)
5.480% due 02/25/47 1,150 1,137
Series 2007-QO3 Class SB (p)
Principal Only STRIP
Zero coupon due 02/25/47 4,050 233
Residential Asset Mortgage Products, Inc.
Series 2004-SL1 Class A3
7.000% due 11/25/31 48 49
Series 2004-SL4 Class A3
6.500% due 07/25/32 137 140
Series 2005-SL1 Class A2
6.000% due 05/25/32 185 187
Residential Asset Securities Corp.
Series 2003-KS4 Class AIIB
5.610% due 06/25/33 130 130
Residential Asset Securitization Trust (E)
Series 2003-A15 Class 1A2
5.770% due 02/25/34 740 742
Residential Funding Mortgage Securities I
Series 2003-S5 Class 1A2 (E)
5.770% due 11/25/18 370 372
Series 2003-S14 Class A5
5.720% due 07/25/18 732 735
Series 2003-S20 Class 1A7 (E)
5.820% due 12/25/33 200 200
Series 2006-SA3 Class 3A1
6.058% due 09/25/36 465 471
Series 2006-SA4 Class 2A1
6.164% due 10/25/36 625 636
Sequoia Mortgage Trust
Series 2004-3 Class A
5.670% due 04/20/34 717 717
Small Business Administration Participation
Certificates
Series 2005-20G Class 1
4.750% due 07/01/25 1,474 1,438
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Structured Adjustable Rate Mortgage Loan Trust
Series 2004-18 Class 5A
5.500% due 12/25/34 160 160
Series 2005-22 Class 4A2
5.379% due 12/25/35 55 54
Series 2006-5 Class 5A4
5.575% due 06/25/36 113 112
Structured Asset Mortgage Investments, Inc.
Series 2006-AR1 Class 2A1 (E)
5.550% due 02/25/36 1,523 1,527
Series 2006-AR2 Class A2
5.630% due 02/25/36 470 472
Series 2006-AR3 Class 3A1
5.510% due 02/25/36 303 303
Series 2006-AR3 Class 11A2
5.590% due 04/25/36 836 836
Series 2006-AR8 Class A1A (E)
5.520% due 10/25/36 1,765 1,758
Structured Asset Securities Corp.
Series 2002-22H Class 1A
6.954% due 11/25/32 32 32
Series 2004-12H Class 1A
6.000% due 05/25/34 130 131
Series 2004-21X Class 1A3
4.440% due 12/25/34 1,105 1,093
Series 2005-6 Class B2
5.344% due 05/25/35 97 93
Thornburg Mortgage Securities Trust (E)
Series 2003-2 Class A1
5.660% due 04/25/43 574 574
Series 2006-5 Class A1
5.440% due 08/25/36 2,203 2,199
Series 2006-6 Class A1
5.430% due 12/25/36 376 375
Tobacco Settlement Authority of Iowa
6.500% due 06/01/23 100 100
Wachovia Bank Commercial Mortgage Trust
Series 2005-C16 Class A2
4.380% due 10/15/41 1,095 1,074
Series 2005-C21 Class A4
5.196% due 10/15/44 1,500 1,495
</Table>
106 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2006-C28 Class A2
5.500% due 10/15/48 510 515
Series 2006-WL7 Class A1 (E)(p)
5.410% due 09/15/21 1,328 1,327
Series 2006-WL7 Class A2 (E)(p)
5.440% due 09/15/21 625 625
Washington Mutual Alternative Mortgage
Pass-Through Certificates
Series 2005-4 Class CB11
5.500% due 06/25/35 220 216
Series 2006-2 Class 2CB
6.500% due 03/25/36 276 280
Series 2006-5 Class 2CB3
6.000% due 07/25/36 461 467
Series 2006-AR2 Class A1A
5.823% due 04/25/46 566 568
Series 2006-AR5 Class 3A (E)
5.920% due 07/25/46 333 335
Series 2006-AR7 Class A1A (E)
5.900% due 09/25/46 822 827
Series 2006-AR8 Class 2A (E)
5.830% due 10/25/46 905 910
Series 2006-AR9 Class 2A (E)
5.820% due 11/25/46 964 964
Series 2007-OA2 Class 2A (E)
5.633% due 01/25/47 955 954
Washington Mutual Mortgage Pass-Through
Certificates
Series 2003-S9 Class A2
5.870% due 10/25/33 662 666
Series 2003-S10 Class A2
5.000% due 10/25/18 190 188
Series 2004-AR1 Class A2C (E)
5.635% due 07/25/44 2 2
Series 2004-AR1 Class A3 (E)
5.635% due 10/25/44 3 3
Series 2004-AR1 Class X
Interest Only STRIP
0.547% due 07/25/44 2,444 42
0.376% due 10/25/44 3,418 60
Series 2004-AR8 Class X
Interest Only STRIP
0.548% due 06/25/44 1,443 26
Series 2004-CB3 Class 1A
6.000% due 10/25/34 88 88
Series 2004-CB3 Class 4A
6.000% due 10/25/19 220 222
Series 2005-AR1 Class 1A1
4.838% due 10/25/35 536 529
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2005-AR1 Class A1A1
5.610% due 10/25/45 668 668
5.590% due 12/25/45 (E) 631 633
Series 2005-AR1 Class A1B1
5.610% due 08/25/45 91 91
5.580% due 10/25/45 207 207
5.570% due 11/25/45 216 216
5.570% due 12/25/45 196 197
Series 2005-AR1 Class A1B3 (E)
5.670% due 12/25/45 458 459
Series 2005-AR6 Class B3 (E)
5.980% due 04/25/45 403 403
Series 2005-AR8 Class 2A1A (E)
5.610% due 07/25/45 652 653
Series 2005-AR8 Class 2AB3
5.680% due 07/25/45 246 246
Series 2006-AR1 Class 1A (E)
5.860% due 10/25/46 894 899
5.800% due 12/25/46 864 867
Series 2006-AR1 Class 1A4
5.664% due 11/25/36 600 603
Series 2006-AR1 Class 3A1A (E)
5.900% due 09/25/46 938 942
Series 2006-AR4 Class 1A1B
5.823% due 05/25/46 542 544
Series 2006-AR7 Class 1A (E)
5.963% due 07/25/46 236 237
Series 2006-AR8 Class 1A5
5.917% due 08/25/46 89 90
Series 2006-AR8 Class 2A3 (E)
6.151% due 08/25/46 59 60
Series 2007-HY3 Class 4A1
5.357% due 03/25/37 1,745 1,739
Series 2007-HY3 Class 4B1
5.358% due 03/25/37 300 296
Series 2007-OA2 Class 1A (E)
5.680% due 03/25/47 942 940
Washington Mutual, Inc.
Series 2006-AR1 Class 1A1
5.967% due 09/25/36 484 490
Wells Fargo Mortgage Backed Securities Trust
Series 2004-T Class A1 (E)
4.420% due 09/25/34 170 171
</Table>
Fixed Income III Fund 107
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 2005-12 Class 1A7
5.500% due 11/25/35 498 486
Series 2005-14 Class 2A1
5.500% due 12/25/35 970 952
Series 2005-17 Class 1A1
5.500% due 01/25/36 619 607
Series 2005-17 Class 1A2
5.500% due 01/25/36 387 377
Series 2005-18 Class 1A1
5.500% due 01/25/36 1,390 1,361
Series 2006-1 Class A3
5.000% due 03/25/21 339 333
Series 2006-2 Class 2A3
5.500% due 03/25/36 896 896
Series 2006-2 Class 3A1
5.750% due 03/25/36 521 519
Series 2006-4 Class 1A8
5.750% due 04/25/36 275 278
Series 2006-4 Class 2A3
5.750% due 04/25/36 214 212
Series 2006-AR1 Class 1A2 (E)
6.035% due 09/25/36 274 277
Series 2006-AR1 Class 2A4 (E)
6.119% due 10/25/36 386 391
Series 2006-AR1 Class 5A1 (E)
5.604% due 07/25/36 433 433
Series 2006-AR1 Class A1
5.730% due 12/25/36 238 239
Series 2006-AR1 Class A7
5.534% due 08/25/36 543 541
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 618 613
Series 2006-AR4 Class 1A1
5.830% due 04/25/36 621 621
Series 2006-AR4 Class 2A1
5.704% due 04/25/36 929 934
Series 2006-AR5 Class 2A1
5.532% due 04/25/36 372 373
Series 2006-AR6 Class 7A1 (E)
5.111% due 03/25/36 1,021 1,009
Zuni Mortgage Loan Trust (E)
Series 2006-OA1 Class A1
5.450% due 08/25/36 487 487
------------
461,076
------------
Municipal Bonds - 0.2%
Badger TOB Asset Securitization Corp. Revenue
Bonds, weekly demand
6.375% due 06/01/32 800 869
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
California State University Revenue Bonds,
weekly demand (u)
5.000% due 11/01/30 140 148
City of Colorado Springs Colorado Revenue Bonds,
weekly demand
5.000% due 11/15/33 200 209
New Jersey Economic Development Authority
Revenue Bonds, weekly demand
5.750% due 06/15/34 235 254
New York State Urban Development Corp. Revenue
Bonds, weekly demand (u)
5.250% due 03/15/34 180 194
State of California General Obligation
Unlimited, weekly demand
5.000% due 02/01/33 75 78
5.000% due 02/01/33 (ae) 25 27
State of Illinois General Obligation Unlimited
5.100% due 06/01/33 150 144
State of Oregon General Obligation Unlimited
5.892% due 06/01/27 175 182
State of Texas General Obligation Unlimited,
weekly demand
4.750% due 04/01/35 250 254
West Virginia Economic Development Authority
Revenue Bonds (u)
5.370% due 07/01/20 65 65
------------
2,424
------------
Non-US Bonds - 1.0%
Argentina Government International Bond
Series dis
5.830% due 12/31/33 ARS 1,180 576
Bombardier, Inc. (A)
7.250% due 11/15/16 EUR 125 180
Colombia Government International Bond
12.000% due 10/22/15 COP 2,123,000 1,160
Federative Republic of Brazil
6.000% due 01/17/17 BRL 395 402
12.500% due 01/05/22 BRL 1,380 853
10.250% due 01/10/28 BRL 1,595 858
</Table>
108 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Mexican Bonos
9.500% due 12/18/14 MXN 3,400 342
Series M 10
8.000% due 12/17/15 MXN 4,158 386
Series M 20
10.000% due 12/05/24 MXN 3,585 397
Norway Government Bond
6.500% due 05/15/13 NOK 8,146 1,485
Province of Quebec Canada
5.000% due 12/01/15 CAD 950 890
Quebec Residual
Zero coupon due 12/01/36 CAD 880 199
Queensland Treasury Corp.
Series 15G
6.000% due 10/14/15 AUD 631 520
TELUS Corp.
4.950% due 03/15/17 CAD 195 162
United Kingdom Gilt
5.750% due 12/07/09 GBP 900 1,812
8.000% due 09/27/13 GBP 514 1,183
------------
11,405
------------
United States Government Agencies - 2.9%
Fannie Mae
4.050% due 02/06/09 4,300 4,237
4.150% due 09/10/09 (N) 4,000 3,941
3.875% due 02/15/10 (N) 1,075 1,050
4.125% due 05/12/10 2,800 2,747
4.375% due 06/21/10 2,500 2,470
5.050% due 02/07/11 (N) 2,200 2,218
Zero coupon due 10/09/19 695 352
Federal Home Loan Bank
4.800% due 05/02/08 (N) 5,800 5,786
Series 577 (N)
4.500% due 09/26/08 5,500 5,466
Federal Home Loan Bank System
5.375% due 08/19/11 (N) 240 245
5.310% due 12/28/12 1,800 1,840
Financing Corp.
Principal Only STRIP
Series 1
Zero coupon due 05/11/16 130 83
Series 2P
Zero coupon due 11/30/17 105 62
Series 3P
Zero coupon due 11/30/17 275 162
Series 5P
Zero coupon due 02/08/18 115 67
Series 6P
Zero coupon due 08/03/18 530 301
Series 8P
Zero coupon due 08/03/18 1,030 585
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Series 9P
Zero coupon due 10/06/17 495 295
Series 10P
Zero coupon due 11/30/17 840 496
Series 12P
Zero coupon due 12/06/18 445 248
Series 13
Zero coupon due 12/27/16 450 279
Series 13P
Zero coupon due 12/27/18 1,195 663
Series 15P
Zero coupon due 03/07/19 90 49
Series 16P
Zero coupon due 04/05/19 475 259
Series 19
Zero coupon due 06/06/16 380 243
Series C-P
Zero coupon due 11/30/17 570 336
Series E-P
Zero coupon due 11/02/18 240 134
Freddie Mac
4.750% due 01/19/16 100 99
------------
34,713
------------
United States Government Treasuries - 11.1%
United States Treasury Inflation Indexed Bonds
2.375% due 04/15/11 917 930
3.375% due 01/15/12 (N) 1,679 1,782
3.000% due 07/15/12 (N) 1,674 1,756
2.000% due 01/15/14 (N) 1,718 1,703
2.000% due 07/15/14 (N) 1,614 1,600
1.875% due 07/15/15 (N) 1,569 1,535
2.500% due 07/15/16 (N) 796 817
2.375% due 01/15/17 (N) 2,401 2,439
2.375% due 01/15/25 (N) 756 760
2.000% due 01/15/26 2,025 1,922
2.375% due 01/15/27 (N) 903 910
3.625% due 04/15/28 (N) 377 459
United States Treasury Notes
4.875% due 10/31/08 (N) 7,500 7,512
4.750% due 12/31/08 (N) 5,820 5,824
4.875% due 01/31/09 (N) 1,000 1,003
4.500% due 03/31/09 (N) 7,885 7,867
4.875% due 08/15/09 (N) 4,100 4,126
4.750% due 02/15/10 (N) 3,000 3,017
4.375% due 12/15/10 12,710 12,657
4.500% due 02/28/11 660 660
</Table>
Fixed Income III Fund 109
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
5.125% due 06/30/11 (N) 350 358
4.500% due 09/30/11 (N) 600 600
4.500% due 03/31/12 (N) 590 590
4.500% due 04/30/12 1,300 1,299
3.875% due 02/15/13 (N) 2,475 2,395
Principal Only STRIP
Zero coupon due 11/15/13 555 413
4.250% due 08/15/15 3,420 3,336
4.875% due 08/15/16 (N) 25,800 26,274
4.625% due 02/15/17 (N) 4,070 4,068
8.125% due 08/15/19 (N) 4,950 6,479
Principal Only STRIP
Zero coupon due 11/15/21 (N) 745 365
7.625% due 02/15/25 (N) 1,450 1,918
6.000% due 02/15/26 (N) 8,935 10,145
6.375% due 08/15/27 (N) 745 886
6.125% due 08/15/29 (N) 4,810 5,617
4.500% due 02/15/36 4,015 3,807
United States Treasury Principal (N)
Principal Only STRIP
Zero coupon due 08/15/26 2,400 929
Zero coupon due 11/15/26 4,100 1,571
Zero coupon due 05/15/30 2,600 850
------------
131,179
------------
TOTAL LONG-TERM INVESTMENTS
(cost $972,295) 978,024
------------
COMMON STOCKS - 0.5%
Financial Services - 0.5%
Emerging Market Local Currency Fund (AE) 496,112 5,875
Pacific Investment Management Co. Series High
Yield Portfolio Institutional 25,294 220
------------
TOTAL COMMON STOCKS
(cost $5,983) 6,095
------------
PREFERRED STOCKS - 0.1%
Financial Services - 0.1%
DG Funding Trust (E)(f)(A) 118 1,249
Harborview NIM Corp. (AE)(p) 5,507 355
------------
1,604
------------
Producer Durables - 0.0%
Nexen, Inc. 4,055 102
------------
TOTAL PREFERRED STOCKS
(cost $1,706) 1,706
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
WARRANTS & RIGHTS - 0.0%
Materials and Processing - 0.0%
Solutia, Inc.
2009 Warrants (p)(AE) 450 --
------------
Miscellaneous - 0.0%
Mexico Government International Bond Value
Recovery Rights (AE) 1,300,000 9
------------
TOTAL WARRANTS & RIGHTS
(cost $40) 9
------------
</Table>
<Table>
NOTIONAL
AMOUNT
$
----------------
OPTIONS PURCHASED - 0.1%
(Number of Contracts)
Eurodollar Futures
Jun 2007 91.25 Put (368) 83,950 2
Jun 2007 94.25 Put (294) 69,274 2
Jun 2007 94.50 Put (39) 9,214 --
Sep 2007 90.50 Put (276) 62,445 2
Sep 2007 91.00 Put (15) 3,413 --
Sep 2007 91.25 Put (94) 21,444 1
Sep 2007 91.75 Put (87) 19,956 --
Sep 2007 94.75 Put (312) 73,905 58
Dec 2007 91.25 Put (152) 34,675 1
Dec 2007 94.50 Put (31) 7,324 2
Dec 2007 94.75 Put (634) 150,179 123
Mar 2008 91.75 Put (240) 55,050 1
Mar 2008 92.25 Put (91) 20,987 1
Mar 2008 92.50 Put (5) 1,156 --
Mar 2008 92.75 Put (112) 25,970 1
Jun 2008 92.75 Put (172) 39,883 1
</Table>
110 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
($) $
- ---------------------------------------------------------------------------------
Swaptions
(Fund Pays/Fund Receives)
EUR Six Month LIBOR/EUR 3.960%
Jul 2007 0.00 Call (3) 13,646 --
EUR Six Month LIBOR/EUR 4.100%
Jul 2007 0.00 Call (1) 5,459 --
GBP Six Month LIBOR/GBP 5.080%
Jun 2007 0.00 Call (2) 2,600 --
USD Three Month LIBOR/USD 5.500%
Jun 2007 0.00 Call (1) 8,000 82
USD Six Month LIBOR/USD 4.850%
Jul 2007 0.00 Call (1) 10,000 --
USD Three Month LIBOR/USD 4.900%
Jul 2007 0.00 Call (1) 13,000 35
USD Three Month LIBOR/USD 5.250%
Jul 2007 0.00 Call (1) 24,000 21
USD Three Month LIBOR/USD 5.370%
Jul 2007 0.00 Call (1) 6,600 52
USD Three Month LIBOR/USD 4.700%
Aug 2007 0.00 Call (1) 6,000 27
USD Three Month LIBOR/USD 4.800%
Aug 2007 0.00 Call (1) 5,000 20
USD Three Month LIBOR/USD 4.900%
Aug 2007 0.00 Call (2) 15,000 42
USD Three Month LIBOR/USD 5.000%
Aug 2007 0.00 Call (1) 16,000 36
USD Six Month LIBOR/USD 4.900%
Oct 2007 0.00 Call (1) 7,000 23
USD Three Month LIBOR/USD 4.750%
Feb 2008 0.00 Call (1) 5,000 10
USD Three Month LIBOR/USD 5.000%
Feb 2008 0.00 Call (1) 15,900 51
USD Three Month LIBOR/USD 4.750%
Mar 2008 0.00 Call (2) 36,000 186
</Table>
<Table>
- ---------------------------------------------------------------------------------
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
($) $
USD Three Month LIBOR/USD 4.750%
Sep 2008 0.00 Call (1) 2,000 13
------------
TOTAL OPTIONS PURCHASED
(cost $1,116) 793
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
----------------
SHORT-TERM INVESTMENTS - 26.7%
Abbey National NA LLC (c)(z)
5.230% due 05/21/07 5,800 5,783
AT&T Wireless Services, Inc. (c)(z)
7.500% due 05/01/07 1,190 1,190
AT&T, Inc. (p)
4.214% due 06/05/07 600 599
AXA Financial, Inc.
6.500% due 04/01/08 105 106
Bank of Ireland Governor & Co. (c)(z)
5.230% due 07/10/07 4,500 4,491
Barclays US Funding Corp. (c)(z)
5.215% due 06/07/07 10,700 10,656
Capital Auto Receivables Asset Trust
Series 2003-3 Class A3B (E)
5.400% due 01/15/08 17 17
Series 2004-2 Class A2
3.350% due 02/15/08 36 36
Capital One Auto Finance Trust
Series 2006-C Class A1
5.340% due 12/14/07 103 103
Caterpillar Financial Services Corp.
Series MTNF
5.430% due 08/20/07 (E) 155 155
3.625% due 11/15/07 60 59
CIT Group, Inc.
3.650% due 11/23/07 90 89
Citigroup Funding, Inc.
Zero coupon due 11/15/07 1,050 1,105
Citigroup Global Markets Deutschland for Tyumen
Oil Co.
Series REGS
11.000% due 11/06/07 610 625
</Table>
Fixed Income III Fund 111
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
5.390% due 03/07/08 700 700
Citigroup, Inc.
3.500% due 02/01/08 830 819
Clorox Co. (E)
5.485% due 12/14/07 225 225
Comcast Cable Communications LLC (c)
8.375% due 05/01/07 40 40
Daimlerchrysler NA Holding Corp. (c)(z)
5.345% due 06/22/07 1,300 1,290
Danske Corp. (c)(z)
5.250% due 05/16/07 10,700 10,677
Donohue Forest Products
7.625% due 05/15/07 200 200
Dresdner Bank AG (p)
Zero coupon due 01/24/08 760 730
Enterprise Products Operating, LP
Series B
4.000% due 10/15/07 345 343
Fannie Mae (N)
4.200% due 03/24/08 3,500 3,469
Federal Home Loan Bank System
Series IY08
3.400% due 03/18/08 2,000 1,971
FedEx Corp. (E)
5.440% due 08/08/07 400 400
France Treasury Bills BTF
Zero coupon due 07/05/07 EUR 1,000 1,355
Freddie Mac
3.450% due 03/12/08 2,000 1,971
Series * (N)
2.750% due 03/15/08 280 274
Freddie Mac Discount Notes (c)(z)
Zero coupon due 05/22/07 8,300 8,275
Greater Bay Bancorp
Series B
5.250% due 03/31/08 300 299
Harrah's Operating Co., Inc.
7.125% due 06/01/07 355 355
Hyatt Equities LLC (p)
6.875% due 06/15/07 140 140
International Lease Finance Corp.
3.750% due 08/01/07 35 35
John Deere Capital Corp. (E)
5.410% due 04/15/08 400 400
JP Morgan Chase Bank/London
Series EMTN
Zero coupon due 04/24/08 EGP 3,690 601
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
M&I Marshall & Ilsley Bank
Series BKNT
3.800% due 02/08/08 245 242
Mandalay Resort Group
Series B
10.250% due 08/01/07 945 954
MGM Mirage
9.750% due 06/01/07 660 662
Mirage Resorts, Inc.
6.750% due 08/01/07 205 205
Motorola, Inc.
4.608% due 11/16/07 165 164
Norfolk Southern Corp. (N)
7.350% due 05/15/07 100 100
Oneok, Inc.
5.510% due 02/16/08 415 416
Pepco Holdings, Inc.
5.500% due 08/15/07 405 405
Plantinum Underwriters Financial, Inc.
Series B
6.371% due 11/16/07 135 134
Pricoa Global Funding I (E)(p)
5.457% due 01/25/08 700 701
PSEG Energy Holdings LLC
8.625% due 02/15/08 43 44
Reynolds American, Inc.
Series *
6.500% due 06/01/07 145 145
Royal Bank of Scotland (z)
5.265% due 03/26/08 300 300
Russell Investment Company
Money Market Fund 221,151,000 221,151
Santander US Debt SA Universal (E)(p)
5.375% due 09/21/07 900 901
Sempra Energy
4.621% due 05/17/07 110 110
Skandinaviska Enskilda Banken (z)
5.200% due 08/20/07 6,200 6,090
5.203% due 08/21/07 1,100 1,081
</Table>
112 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
Societe Generale (c)(z)
5.257% due 06/11/07 300 300
5.258% due 06/20/07 1,800 1,802
Societe Generale NA (c)(z)
5.220% due 06/19/07 4,600 4,595
Starwood Hotels & Resorts Worldwide, Inc. (c)
7.375% due 05/01/07 20 20
TELUS Corp.
7.500% due 06/01/07 650 651
Travelers Cos., Inc. (The)
5.010% due 08/16/07 485 484
UBS Financial Del LLC (z)
5.235% due 05/01/07 (c) 6,000 6,000
5.225% due 07/19/07 1,200 1,184
Union Pacific Corp.
6.625% due 02/01/08 90 91
Series MTNE
6.790% due 11/09/07 35 35
United States Treasury Bills (z)(sec.)
5.145% due 05/17/07 (c) 480 479
5.046% due 06/14/07 (c) 500 497
5.088% due 06/14/07 (c) 1,360 1,352
5.093% due 06/14/07 (c) 220 219
5.001% due 07/12/07 50 50
5.111% due 07/12/07 200 198
United States Treasury Notes (N)
3.125% due 05/15/07 3,900 3,897
WellPoint, Inc.
3.750% due 12/14/07 90 89
Wisconsin Electric Power Co.
3.500% due 12/01/07 65 64
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $315,316) 315,395
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- ---------------------------------------------------------------------------------
OTHER SECURITIES - 15.9%
Russell Investment Company
Money Market Fund (X) 36,115,930 36,116
State Street Securities
Lending Quality Trust (X) 151,780,368 151,780
------------
TOTAL OTHER SECURITIES
(cost $187,896) 187,896
------------
TOTAL INVESTMENTS - 126.0%
(identified cost $1,484,352) 1,489,918
OTHER ASSETS AND LIABILITIES,
NET - (26.0%) (307,786)
------------
NET ASSETS - 100.0% 1,182,132
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 113
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Euribor Futures
expiration date 12/07 (22) 7,181 (19)
expiration date 03/08 (4) 1,306 (6)
expiration date 06/08 (4) 1,306 (5)
expiration date 09/08 (1) 327 (1)
expiration date 12/08 (1) 327 (1)
Euro-Bund Futures (Germany)
expiration date 06/07 (65) 10,126 (175)
Eurodollar Futures (CME)
expiration date 06/07 (105) 24,852 (19)
expiration date 12/07 (529) 125,624 (196)
expiration date 03/08 (743) 176,806 (63)
expiration date 06/08 (633) 150,844 92
expiration date 09/08 (84) 20,029 77
expiration date 12/08 (130) 30,999 112
expiration date 03/09 (4) 954 --
Euroyen Futures
expiration date 12/07 (39) 8,087 8
Germany, Federal Republic
5 Year Bonds
expiration date 06/07 (11) 1,618 1
Japanese 10 Year Bond (Japan)
expiration date 06/07 (21) 23,610 131
LIBOR Futures
expiration date 09/07 (2) 470 (4)
expiration date 12/07 (6) 1,411 (10)
expiration date 03/08 (6) 1,412 (8)
expiration date 06/08 (4) 942 (6)
expiration date 09/08 (6) 1,414 (9)
United States Treasury 2 Year Notes
expiration date 06/07 (358) 73,289 (33)
United States Treasury 5 Year Notes
expiration date 06/07 (1,214) 128,475 336
United States Treasury 10 Year Notes
expiration date 06/07 (637) 69,005 229
expiration date 09/07 (19) 2,060 8
United States Treasury Bonds
expiration date 06/07 (98) 10,952 59
Short Positions
Australian 10 Year Bond (Australia)
expiration date 06/07 (2) 1,192 3
</Table>
<Table>
- ------------------------------------------------------------------------------------
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
Euro-Bobl Futures (Germany)
expiration date 06/07 (156) 22,944 175
Eurodollar Futures (CME)
expiration date 12/07 (13) 3,087 3
Long Gilt Bond (UK)
expiration date 06/07 (8) 1,715 19
United States Treasury 2 Year Notes
expiration date 06/07 (26) 5,323 6
United States Treasury 10 Year Notes
expiration date 06/07 (533) 57,739 19
United States Treasury Bonds
expiration date 06/07 (144) 16,092 (58)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (a) 665
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
114 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Swaptions
(Fund Pays/Fund Receives)
EUR 4.100%/EUR Six Month LIBOR
Jul 2007 0.00 Put (3) 5,459 (15)
EUR 4.230%/EUR Six Month LIBOR
Jul 2007 0.00 Put (1) 2,729 (1)
GBP 4.850%/GBP Six Month LIBOR
Jun 2007 0.00 Put (2) 600 --
USD 4.900%/USD Three Month LIBOR
Feb 2008 0.00 Call (1) 1,000 (9)
USD 5.100%/USD Three Month LIBOR
Feb 2008 0.00 Call (1) 7,000 (97)
USD 4.950%/USD Three Month LIBOR
Mar 2008 0.00 Call (1) 4,000 (46)
USD 4.900%/USD Three Month LIBOR
Mar 2008 0.00 Call (2) 11,400 (121)
USD 5.600%/USD Three Month LIBOR
Jun 2007 0.00 Put (1) 3,000 (82)
USD 5.500%/USD Three Month LIBOR
Jul 2007 0.00 Put (1) 2,200 (58)
USD 5.370%/USD Three Month LIBOR
Jul 2007 0.00 Put (1) 10,000 (178)
USD 5.000%/USD Three Month LIBOR
Jul 2007 0.00 Call (1) 6,000 (33)
USD 4.950%/USD Three Month LIBOR
Jul 2007 0.00 Put (1) 2,200 (12)
USD 5.000%/USD Three Month LIBOR
Aug 2007 0.00 Call (1) 1,000 (6)
USD 4.900%/USD Three Month LIBOR
Aug 2007 0.00 Call (3) 7,000 (32)
USD 4.850%/USD Three Month LIBOR
Aug 2007 0.00 Call (1) 1,000 (3)
</Table>
<Table>
- ------------------------------------------------------------------------------------
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
USD 4.950%/USD Three Month LIBOR
Sep 2008 0.00 Call (1) 1,000 (13)
USD 5.010%/USD Three Month LIBOR
Oct 2007 0.00 Put (1) 3,000 (29)
United States Treasury Bonds
May 2007 113.00 Call (68) 7,684 (14)
May 2007 109.00 Put (65) 7,085 (3)
Aug 2007 109.00 Put (142) 15,478 (67)
United States Treasury Notes
2 Year Futures
May 2007 102.50 Call (103) 21,115 (16)
United States Treasury Notes
5 Year Futures
May 2007 106.00 Call (282) 29,892 (66)
United States Treasury Notes
10 Year Futures
May 2007 105.00 Put (15) 1,575 --
May 2007 107.00 Put (135) 14,445 (13)
---------------
Total Liability for Options Written
(premiums received $953) (914)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 115
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 290 AUD 349 05/17/07 --
USD 1,410 AUD 1,737 06/20/07 31
USD 1,510 AUD 1,813 06/20/07 (6)
USD 2,635 AUD 3,370 06/20/07 160
USD 2,821 AUD 3,498 06/20/07 80
USD 329 BRL 701 05/03/07 16
USD 345 BRL 701 05/03/07 --
USD 340 BRL 701 08/02/07 --
USD 1,284 CAD 1,505 06/20/07 74
USD 4,242 CAD 4,846 06/20/07 129
USD 1,549 CHF 1,853 06/20/07 (8)
USD 2,568 CHF 3,090 06/20/07 2
USD 4,230 CHF 5,118 06/20/07 26
USD 4,491 CHF 5,373 06/20/07 (22)
USD 213 CNY 1,625 06/19/07 (1)
USD 68 EUR 50 06/08/07 --
USD 250 EUR 190 06/08/07 9
USD 329 EUR 250 06/08/07 13
USD 411 EUR 305 06/08/07 6
USD 445 EUR 327 06/08/07 2
USD 502 EUR 370 06/08/07 4
USD 532 EUR 390 06/08/07 1
USD 686 EUR 510 06/08/07 11
USD 942 EUR 710 06/15/07 29
USD 1,233 EUR 924 06/20/07 30
USD 2,618 EUR 1,958 06/20/07 60
USD 4,230 EUR 3,158 06/20/07 87
USD 24 GBP 12 05/17/07 --
USD 507 GBP 255 06/08/07 3
USD 1,410 GBP 718 06/20/07 25
USD 1,414 GBP 715 06/20/07 15
USD 3,019 GBP 1,509 06/20/07 (3)
USD 4,585 GBP 2,384 06/20/07 179
USD 4,585 GBP 2,384 06/20/07 179
USD 157 INR 6,520 06/20/07 --
USD 1,801 JPY 208,000 06/06/07 (51)
USD 164 JPY 18,774 06/08/07 (6)
USD 197 JPY 22,742 06/08/07 (6)
USD 223 JPY 26,062 06/08/07 (4)
USD 224 JPY 25,753 06/08/07 (7)
USD 241 JPY 28,490 06/08/07 (1)
USD 263 JPY 30,382 06/08/07 (8)
USD 284 JPY 32,755 06/08/07 (9)
USD 436 JPY 50,249 06/08/07 (13)
USD 575 JPY 66,900 06/08/07 (13)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 641 JPY 75,000 06/08/07 (10)
USD 714 JPY 84,478 06/08/07 (3)
USD 714 JPY 84,478 06/08/07 (3)
USD 800 JPY 94,845 06/08/07 (2)
USD 849 JPY 100,152 06/08/07 (6)
USD 1,068 JPY 123,738 06/08/07 (27)
USD 238 JPY 28,000 06/15/07 (2)
USD 408 JPY 47,730 06/15/07 (6)
USD 1,248 JPY 145,000 06/15/07 (27)
USD 1,509 JPY 176,368 06/20/07 (23)
USD 2,568 JPY 297,682 06/20/07 (60)
USD 2,568 JPY 298,011 06/20/07 (57)
USD 375 NOK 2,285 06/08/07 10
USD 398 NOK 2,420 06/08/07 10
USD 1,242 NOK 7,575 06/20/07 33
USD 1,410 NOK 8,570 06/20/07 33
USD 1,509 NOK 8,986 06/20/07 4
USD 2,313 NOK 14,067 06/20/07 55
USD 2,350 NOK 14,428 06/20/07 78
USD 3,165 NOK 19,423 06/20/07 103
USD 203 NZD 275 06/08/07 --
USD 1,284 NZD 1,842 06/20/07 76
USD 1,410 NZD 1,975 06/20/07 48
USD 724 SEK 5,082 06/20/07 37
USD 1,509 SEK 10,205 06/20/07 18
USD 11 SGD 17 08/07/07 --
USD 1 TWD 36 05/02/07 --
USD 2 TWD 57 05/02/07 --
USD 18 TWD 601 05/02/07 --
USD 19 TWD 625 05/02/07 --
USD 19 TWD 626 05/02/07 --
USD 19 TWD 638 05/02/07 --
USD 52 TWD 1,714 05/02/07 --
AUD 181 USD 140 06/08/07 (10)
AUD 485 USD 375 06/08/07 (28)
AUD 1,610 USD 1,284 06/20/07 (52)
BRL 701 USD 345 05/03/07 --
BRL 701 USD 345 05/03/07 --
BRL 3,955 USD 1,828 05/07/07 (117)
BRL 780 USD 382 06/29/07 1
CAD 324 USD 283 06/08/07 (9)
CAD 624 USD 532 06/08/07 (30)
CAD 755 USD 645 06/20/07 (37)
CAD 3,056 USD 2,614 06/20/07 (143)
CAD 3,818 USD 3,259 06/20/07 (187)
</Table>
See accompanying notes which are an integral part of the financial statements.
116 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
CHF 1,805 USD 1,509 06/20/07 8
CHF 2,770 USD 2,310 06/20/07 7
CHF 2,770 USD 2,313 06/20/07 10
CHF 3,403 USD 2,821 06/20/07 (9)
CHF 5,540 USD 4,546 06/20/07 (61)
EUR 1,739 USD 2,364 05/24/07 (11)
EUR 126 USD 172 05/30/07 --
EUR 1,472 USD 1,947 06/06/07 (65)
EUR 16 USD 21 06/08/07 --
EUR 108 USD 143 06/08/07 (5)
EUR 150 USD 201 06/08/07 (4)
EUR 155 USD 205 06/08/07 (6)
EUR 155 USD 205 06/08/07 (7)
EUR 215 USD 283 06/08/07 (11)
EUR 334 USD 442 06/08/07 (15)
EUR 380 USD 520 06/08/07 1
EUR 710 USD 946 06/15/07 (24)
EUR 978 USD 1,300 06/20/07 (38)
EUR 1,108 USD 1,509 06/20/07 (6)
EUR 3,160 USD 4,231 06/20/07 (90)
EUR 4,416 USD 6,040 06/20/07 2
GBP 94 USD 184 05/16/07 (4)
GBP 794 USD 1,571 05/17/07 (17)
GBP 194 USD 383 06/08/07 (4)
GBP 251 USD 502 06/08/07 --
GBP 401 USD 779 06/08/07 (22)
GBP 149 USD 291 06/20/07 (8)
GBP 511 USD 993 06/20/07 (28)
GBP 1,312 USD 2,568 06/20/07 (54)
GBP 2,143 USD 4,230 06/20/07 (54)
JPY 47,345 USD 393 05/15/07 (4)
JPY 36,634 USD 310 05/31/07 2
JPY 5,256 USD 46 06/08/07 2
JPY 24,097 USD 209 06/08/07 7
JPY 29,643 USD 254 06/08/07 5
JPY 30,239 USD 263 06/08/07 9
JPY 35,821 USD 306 06/08/07 5
JPY 53,835 USD 462 06/08/07 9
JPY 58,335 USD 494 06/08/07 3
JPY 59,332 USD 504 06/08/07 5
JPY 59,574 USD 507 06/08/07 6
JPY 88,605 USD 767 06/08/07 21
JPY 32,750 USD 283 06/15/07 8
JPY 177,852 USD 1,510 06/20/07 12
JPY 299,729 USD 2,562 06/20/07 37
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
JPY 360,462 USD 3,080 06/20/07 43
JPY 491,480 USD 4,280 06/20/07 138
NOK 1,368 USD 223 06/08/07 (7)
NOK 1,781 USD 287 06/08/07 (13)
NOK 2,310 USD 384 06/08/07 (5)
NOK 5,558 USD 924 06/08/07 (11)
NOK 7,832 USD 1,284 06/20/07 (34)
NOK 7,882 USD 1,284 06/20/07 (43)
NOK 8,514 USD 1,414 06/20/07 (19)
NOK 8,599 USD 1,410 06/20/07 (37)
NZD 275 USD 188 06/08/07 (15)
NZD 1,835 USD 1,284 06/20/07 (70)
NZD 2,834 USD 1,952 06/20/07 (141)
SEK 9,847 USD 1,410 06/20/07 (64)
TWD 36 USD 1 05/02/07 --
TWD 57 USD 2 05/02/07 --
TWD 57 USD 2 05/02/07 --
TWD 57 USD 2 05/02/07 --
TWD 581 USD 17 05/02/07 --
TWD 601 USD 18 05/02/07 --
TWD 625 USD 19 05/02/07 --
TWD 2,283 USD 69 05/02/07 --
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 14
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 117
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 $
- ------------------------------ ---------------- --------- ------------------------------- ------------ --------------
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 2,000 minus 0.075% 04/30/07 (1)
Bank of America
CMBS AAA 10 Year Index Bank of America 4,000 CMBS AAA 10 Year Index 05/31/07 (1)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 1,000 plus 0.050% 05/31/07 --
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 1,300 minus 0.075% 06/15/07 (1)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 1,500 minus 0.050% 06/29/07 (1)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 1,500 minus 0.025% 07/16/07 (1)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 1,500 minus 0.050% 07/31/07 (1)
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 1,250 plus 0.100% 08/31/07 1
Bank of America CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Bank of America 1,250 minus 0.025% 09/28/07 --
Lehman Brothers 3 Month USD LIBOR
CMBS Index - AAA Goldman 2,665 plus 0.050% 05/01/07 17
Goldman Sachs
Total Return Citibank 5,277 Turkish Overnight Index Tuibon 07/17/08 140
JP Morgan CMBS AAA 10 Year Index
CMBS AAA 10 Year Index JP Morgan 1,500 minus 0.030% 05/31/07 (1)
Deutsche Bank CMBS AAA 10 Year Index
CMBS AAA 10 Year Index Deutsche Bank 1,500 plus 0.100% 08/31/07 1
Deutsche Bank Turkish Overnight Index Tuibon
Turkish Overnight Index
Tuibon Deutsche Bank 4,000 plus 0.500% 11/27/08 13
Goldman Sachs Turkish Overnight Index Tuibon
Turkish Overnight Index
Tuibon Citibank 300 plus 0.700% 01/20/11 6
JP Morgan CMBS AAA 10 Year Index
CMBS AAA 10 Year Index JP Morgan 1,750 plus 0.075% 05/31/07 1
</Table>
See accompanying notes which are an integral part of the financial statements.
118 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 $
- ------------------------------ ---------------- --------- ------------------------------- ------------ --------------
JP Morgan CMBS AAA 10 Year Index
CMBS AAA 10 Year Index JP Morgan 1,250 plus 0.125% 08/31/07 1
Salomon Smith Barney Salomon Smith Turkish Overnight Index Tuibon
Turkish Overnight Index
Tuibon Barney 2,410 plus 0.700% 11/27/08 (24)
Salomon Smith Barney Salomon Smith
Turkish Overnight Index
Tuibon Barney 2,554 Turkish Overnight Index Tuibon 11/27/08 (3)
--------------
Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts 146
==============
</Table>
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- --------------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL FUND FUND TERMINATION VALUE
PARTY AMOUNT RECEIVES PAYS DATE $
- ---------------------------- ----------------- ------------------------ -------------------- ------------ ------------
Bank of America JPY 355,000 6 Month LIBOR 1.500% 06/20/12 (16)
Bank of America JPY 658,000 1.750% 6 Month LIBOR 06/20/17 (31)
Bank of America USD 6,500 5.000% 3 Month LIBOR 06/20/09 (4)
Bank of America USD 10,700 5.000% 3 Month LIBOR 06/21/10 --
Bank of America USD 12,100 5.470% 3 Month LIBOR 06/14/11 358
Bank of America USD 8,500 3 Month LIBOR 5.000% 06/20/12 (9)
Bank of America USD 6,200 3 Month LIBOR 5.000% 06/20/12 (7)
Bank of America USD 35,200 5.000% 3 Month LIBOR 06/20/12 39
Bank of America USD 15,000 3 Month LIBOR 5.000% 06/20/12 (17)
Bank of America USD 12,400 3 Month LIBOR 5.000% 06/20/12 (14)
Bank of America USD 5,500 3 Month LIBOR 5.000% 06/20/12 (6)
Bank of America USD 4,000 3 Month LIBOR 5.100% 06/20/14 (10)
Bank of America USD 3,800 3 Month LIBOR 5.100% 06/20/14 (10)
Bank of America USD 4,000 5.550% 3 Month LIBOR 06/14/16 176
Bank of America USD 5,900 5.250% 3 Month LIBOR 06/20/22 (30)
Bank of America USD 2,500 5.630% 3 Month LIBOR 06/16/36 127
Bank of America USD 2,000 5.000% 3 Month LIBOR 06/20/37 (113)
Barclays Bank PLC EUR 7,770 4.250% 6 Month LIBOR 06/20/09 (24)
Barclays Bank PLC EUR 710 4.250% 6 Month LIBOR 06/20/12 (4)
Barclays Bank PLC EUR 7,150 4.250% 6 Month LIBOR 07/20/16 62
Barclays Bank PLC GBP 400 6.000% 6 Month LIBOR 03/20/09 1
Barclays Bank PLC GBP 890 6 Month LIBOR 4.500% 06/22/37 98
Barclays Bank PLC GBP 300 6 Month LIBOR 4.500% 06/22/37 33
Barclays Bank PLC GBP 800 6 Month LIBOR 4.500% 12/20/37 88
Barclays Bank PLC SEK 71,000 3 Month LIBOR 4.250% 06/20/17 270
Barclays Bank PLC SEK 23,000 3 Month LIBOR 4.250% 06/20/17 87
Barclays Bank PLC SEK 20,000 3 Month LIBOR 4.250% 06/20/17 76
Barclays Bank PLC USD 8,700 5.000% 3 Month LIBOR 06/20/09 (6)
Bear Stearns USD 6,200 3 Month LIBOR 5.000% 06/20/12 (7)
BNP Paribas EUR 2,430 4.250% 6 Month LIBOR 06/22/09 (7)
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 119
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- --------------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL FUND FUND TERMINATION VALUE
PARTY AMOUNT RECEIVES PAYS DATE $
- ---------------------------- ----------------- ------------------------ -------------------- ------------ ------------
BNP Paribas EUR 900 2.090% Consumer Price Index 10/15/10 55
(France)
Citibank PLN 9,000 4.670% 6 Month LIBOR 01/16/09 (9)
Citibank EUR 2,020 4.250% 6 Month LIBOR 06/20/09 (6)
Citibank JPY 440,000 6 Month LIBOR 1.500% 06/20/12 (19)
Citibank JPY 1,796,000 6 Month LIBOR 1.500% 06/20/14 76
Citibank JPY 381,000 1.500% 6 Month LIBOR 06/20/14 (16)
Citibank JPY 833,000 6 Month LIBOR 1.500% 06/20/14 35
Citibank USD 2,300 5.000% 3 Month LIBOR 06/20/37 (130)
Credit Suisse First Boston EUR 8,100 4.250% 6 Month LIBOR 06/22/09 (25)
Credit Suisse First Boston EUR 920 4.250% 6 Month LIBOR 06/20/17 (17)
Credit Suisse First Boston EUR 1,700 4.250% 6 Month LIBOR 06/20/17 (31)
Credit Suisse First Boston EUR 3,720 6 Month LIBOR 4.250% 06/20/17 68
Credit Suisse First Boston EUR 550 4.250% 6 Month LIBOR 06/22/37 (34)
Credit Suisse First Boston EUR 1,650 4.250% 6 Month LIBOR 06/22/37 (103)
Credit Suisse First Boston GBP 720 6 Month LIBOR 4.500% 06/22/37 79
Credit Suisse First Boston SEK 30,000 3 Month LIBOR 4.250% 06/20/17 114
Credit Suisse First Boston USD 4,100 5.000% 3 Month LIBOR 06/20/09 (3)
Credit Suisse First Boston USD 2,300 5.000% 3 Month LIBOR 06/20/37 (129)
Deutsche Bank AUD 8,100 6.250% 6 Month LIBOR 06/20/12 (56)
Deutsche Bank AUD 7,280 6.250% 6 Month LIBOR 06/20/12 (50)
Deutsche Bank AUD 2,000 6.250% 6 Month LIBOR 06/20/12 (14)
Deutsche Bank AUD 1,570 6 Month LIBOR 6.250% 06/20/12 15
Deutsche Bank AUD 3,200 6 Month LIBOR 6.250% 06/20/12 --
Deutsche Bank CAD 690 4.318% 3 Month LIBOR 04/04/12 (1)
Deutsche Bank CAD 690 4.328% 3 Month LIBOR 04/05/12 (3)
Deutsche Bank EUR 26,920 4.360% 6 Month LIBOR 10/16/09 (8)
Deutsche Bank EUR 10,760 4.395% 6 Month LIBOR 10/16/09 6
Deutsche Bank EUR 10,760 4.401% 6 Month LIBOR 10/16/09 8
Deutsche Bank EUR 5,380 4.363% 6 Month LIBOR 10/16/09 (1)
Deutsche Bank EUR 1,200 6 Month LIBOR 4.000% 12/15/11 23
Deutsche Bank EUR 18,140 6 Month LIBOR 4.378% 10/16/14 (8)
Deutsche Bank EUR 7,250 6 Month LIBOR 4.435% 10/16/14 (34)
Deutsche Bank EUR 7,260 6 Month LIBOR 4.440% 10/16/14 (40)
Deutsche Bank EUR 3,630 6 Month LIBOR 4.380% 10/16/14 (2)
Deutsche Bank EUR 4,050 4.568% 6 Month LIBOR 10/16/37 29
Deutsche Bank EUR 1,620 4.631% 6 Month LIBOR 10/16/37 34
Deutsche Bank EUR 1,620 4.641% 6 Month LIBOR 10/16/37 37
Deutsche Bank EUR 810 4.573% 6 Month LIBOR 10/16/37 7
Deutsche Bank GBP 100 6.000% 6 Month LIBOR 12/20/08 --
Deutsche Bank JPY 410,000 1.000% 6 Month LIBOR 09/18/08 1
Deutsche Bank JPY 30,000 1.500% 6 Month LIBOR 06/20/12 1
Deutsche Bank JPY 381,000 1.500% 6 Month LIBOR 06/20/14 (16)
Deutsche Bank JPY 388,000 6 Month LIBOR 1.500% 06/20/14 (16)
Deutsche Bank JPY 94,000 2.000% 6 Month LIBOR 12/20/16 22
Deutsche Bank NZD 1,120 3 Month LIBOR 7.598% 04/10/12 3
</Table>
See accompanying notes which are an integral part of the financial statements.
120 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- --------------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL FUND FUND TERMINATION VALUE
PARTY AMOUNT RECEIVES PAYS DATE $
- ---------------------------- ----------------- ------------------------ -------------------- ------------ ------------
Deutsche Bank NZD 1,120 3 Month LIBOR 7.598% 04/11/12 --
Deutsche Bank USD 15,400 5.000% 3 Month LIBOR 12/19/08 5
Deutsche Bank USD 49,900 5.000% 3 Month LIBOR 06/20/09 (34)
Deutsche Bank USD 20,100 5.000% 3 Month LIBOR 06/20/12 22
Deutsche Bank USD 2,700 3 Month LIBOR 5.000% 06/20/12 (3)
Deutsche Bank USD 6,200 3 Month LIBOR 5.000% 06/20/12 (7)
Deutsche Bank USD 23,200 5.000% 3 Month LIBOR 06/20/12 26
Deutsche Bank USD 4,000 3 Month LIBOR 5.000% 06/20/12 (4)
Deutsche Bank USD 6,600 5.000% 3 Month LIBOR 06/20/12 7
Deutsche Bank USD 940 5.000% 3 Month LIBOR 06/20/12 1
Deutsche Bank USD 1,970 5.000% 3 Month LIBOR 06/20/12 2
Deutsche Bank USD 3,210 6 Month LIBOR 6.250% 06/20/12 --
Deutsche Bank USD 1,960 5.000% 3 Month LIBOR 06/20/12 2
Deutsche Bank USD 12,400 3 Month LIBOR 5.000% 06/20/12 (14)
Deutsche Bank USD 21,800 3 Month LIBOR 5.000% 06/20/12 57
Deutsche Bank USD 25,500 5.100% 3 Month LIBOR 06/20/14 65
Deutsche Bank USD 3,800 3 Month LIBOR 5.100% 06/20/14 (10)
Deutsche Bank USD 27,700 5.100% 3 Month LIBOR 06/20/14 70
Deutsche Bank USD 22,600 5.100% 3 Month LIBOR 06/20/14 57
Deutsche Bank USD 2,900 3 Month LIBOR 5.000% 06/20/17 37
Goldman Sachs EUR 300 4.000% 6 Month LIBOR 03/20/09 (1)
Goldman Sachs JPY 100,000 1.500% 6 Month LIBOR 06/20/12 4
Goldman Sachs JPY 38,000 2.000% 6 Month LIBOR 12/20/16 9
HSBC GBP 600 4.500% 6 Month LIBOR 12/20/07 (13)
JP Morgan MXN 34,580 7.670% Mexico Interbank 04/17/12 (20)
28 Day Deposit Rate
JP Morgan JPY 2,145,000 6 Month LIBOR 1.500% 06/20/14 91
JP Morgan JPY 804,000 6 Month LIBOR 1.500% 06/20/14 34
JP Morgan USD 2,700 3 Month LIBOR 5.000% 06/20/12 (2)
JP Morgan USD 4,100 3 Month LIBOR 5.100% 06/20/14 (10)
JP Morgan USD 6,400 3 Month LIBOR 5.100% 06/20/14 (16)
Lehman Brothers GBP 4,100 4.500% 6 Month LIBOR 09/20/09 (196)
Lehman Brothers GBP 360 5.250% 6 Month LIBOR 06/20/17 (30)
Lehman Brothers JPY 300,000 6 Month LIBOR 1.500% 06/20/12 (13)
Lehman Brothers USD 1,100 5.000% 3 Month LIBOR 06/20/09 (1)
Merrill Lynch EUR 6,690 4.250% 6 Month LIBOR 06/22/09 (20)
Merrill Lynch GBP 5,600 4.500% 6 Month LIBOR 09/20/09 (268)
Merrill Lynch GBP 100 6 Month LIBOR 4.000% 12/15/35 6
Merrill Lynch GBP 950 6 Month LIBOR 4.500% 06/22/37 104
Merrill Lynch JPY 1,331,000 6 Month LIBOR 1.500% 06/20/12 (59)
Morgan Stanley EUR 900 6.000% 6 Month LIBOR 06/18/34 156
Morgan Stanley JPY 10,000 2.000% 6 Month LIBOR 12/20/16 2
Morgan Stanley USD 5,400 5.000% 3 Month LIBOR 06/20/09 (4)
Morgan Stanley USD 1,000 3 Month LIBOR 5.000% 06/20/17 13
Royal Bank of Scotland CAD 700 4.500% 3 Month LIBOR 06/15/27 (24)
Royal Bank of Scotland GBP 200 6 Month LIBOR 4.000% 12/15/36 55
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 121
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- --------------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL FUND FUND TERMINATION VALUE
PARTY AMOUNT RECEIVES PAYS DATE $
- ---------------------------- ----------------- ------------------------ -------------------- ------------ ------------
Royal Bank of Scotland USD 15,400 5.000% 3 Month LIBOR 12/19/08 5
Royal Bank of Scotland USD 12,700 5.000% 3 Month LIBOR 06/20/09 (9)
Royal Bank of Scotland USD 200 5.000% 3 Month LIBOR 06/20/37 (11)
UBS JPY 60,000 1.000% 6 Month LIBOR 09/18/08 --
UBS JPY 10,000 2.000% 6 Month LIBOR 12/20/16 2
UBS USD 3,900 5.000% 3 Month LIBOR 06/20/09 (3)
------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - $1,857 1,002
============
</Table>
See accompanying notes which are an integral part of the financial statements.
122 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
CREDIT DEFAULT SWAP CONTRACTS
- ----------------------------------------------------------------------------------------------------------------
FUND (PAYS)/ MARKET
REFERENCE COUNTER NOTIONAL RECEIVES TERMINATION VALUE
ENTITY PARTY AMOUNT FIXED RATE DATE $
- ------------------------------ ---------------- --------- -------------- -------------- --------------
American International Group JP Morgan USD 1,100 0.050% 12/20/07 --
Anadarko Petroleum Corp. Goldman Sachs USD 200 0.150% 03/20/08 --
Brazil Government
International Bond Citibank USD 1,500 (1.500%) 08/22/11 45
Brazil Government
International Bond Lehman Brothers USD 1,400 1.980% 03/20/16 88
Core Investment Grade Bond Bank of America USD 22,000 (0.350%) 06/20/12 (19)
Dow Jones CDX High Volatility
Index Bank of America USD 2,000 (0.650%) 12/20/16 --
Dow Jones CDX High Volatility
Index Bank of America USD 5,000 (0.650%) 12/20/16 (4)
Dow Jones CDX High Volatility
Index Deutsche Bank AG USD 2,000 1.250% 06/20/12 20
Dow Jones CDX High Volatility
Index Goldman Sachs USD 4,000 (0.650%) 12/20/16 (3)
Dow Jones CDX High Volatility
Index JP Morgan USD 3,000 (0.650%) 12/20/16 (3)
Dow Jones CDX High Volatility
Index JP Morgan USD 8,000 (0.650%) 12/20/16 (6)
Dow Jones CDX High Volatility
Index JP Morgan USD 25,600 (0.400%) 12/20/11 39
Dow Jones CDX High Volatility
Index Lehman Brothers USD 1,890 (2.750%) 06/20/12 4
Dow Jones CDX High Volatility
Index UBS USD 5,000 0.900% 06/20/10 61
First Data Corp. Lehman Brothers USD 335 (2.550%) 06/20/12 (3)
Ford Motor Corp. Capital Trust
II Lehman Brothers USD 500 1.100% 03/20/08 (2)
Ford Motor Credit Co. Lehman Brothers USD 240 2.200% 03/20/08 1
Ford Motor Credit Co. Lehman Brothers USD 475 1.200% 03/20/08 (1)
Ford Motor Credit Co. Merrill Lynch USD 200 1.700% 06/20/07 1
Gazprom JP Morgan USD 1,500 0.415% 11/20/07 4
Indonesia Government
International Bond Lehman Brothers USD 100 0.400% 12/20/08 --
Mexico Government
International Bond JP Morgan USD 200 0.920% 03/20/16 7
Russia Government
International Bond Morgan Stanley USD 100 0.460% 06/20/07 --
SLM Corp. Lehman Brothers USD 380 0.740% 06/20/12 (16)
Softbank Corp. Deutsche Bank AG JPY 16,000 2.300% 09/20/07 1
Temple-Inland, Inc. Lehman Brothers USD 500 (0.740%) 03/20/17 (3)
--------------
Total Market Value of Open Credit Default Contracts Premiums Paid (Received) - ($227) 211
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Fixed Income III Fund 123
RUSSELL INVESTMENT COMPANY
FIXED INCOME III FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- ----------------------------------------------------------
- ----------------------------------------------------------
Asset-Backed Securities 6.7
Certificates of Deposit 1.0
Corporate Bonds and Notes 14.7
International Debt 5.2
Loan Agreements 0.9
Mortgage-Backed Securities 39.0
Municipal Bonds 0.2
Non-US Bonds 1.0
United States Government Agencies 2.9
United States Government Treasuries 11.1
Common Stocks 0.5
Preferred Stocks 0.1
Warrants & Rights --*
Options Purchased 0.1
Short Term Investments 26.7
Other Securities 15.9
------------
Total Investments 126.0
Other Assets and Liabilities, Net (26.0)
------------
100.0
============
Futures Contracts 0.1
Options Written (0.1)
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.
124 Fixed Income III Fund
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(AE) Non-income producing.
(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.
(U) All or a portion of the shares of this security are held as collateral in
connection with securities sold short.
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
Notes to Schedules of Investments 125
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO SCHEDULES OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 IEP - Irish pundt RUB - Russian ruble
CHF - Swiss franc ILS - Israeli shekel SEK - Swedish krona
CLP - Chilean peso INR - Indian rupee SGD - Singapore dollar
CNY - Chinese renminbi yuan JPY - Japanese yen SKK - Slovakian koruna
COP - Colombian peso KES - Kenyan schilling THB - Thai baht
CRC - Costa Rica colon KRW - South Korean won TRY - Turkish lira
CZK - Czech koruna MXN - Mexican peso TWD - Taiwanese dollar
DKK - Danish krone MYR - Malaysian ringgit USD - United States dollar
EGP - Egyptian pound NOK - Norwegian krone VEB - Venezuelan bolivar
EUR - Euro NZD - New Zealand dollar VND - Vietnam dong
GBP - British pound sterling PEN - Peruvian nouveau sol ZAR - South African rand
</Table>
126 Notes to Schedules of Investments
(This page intentionally left blank)
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
EQUITY I
AMOUNTS IN THOUSANDS FUND
- ----------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 1,609,272
- ----------------------------------------------------------------------------------------------
Investments, at market*** 1,903,721
Cash --
Cash (restricted) --
Foreign currency holdings* 5
Unrealized appreciation on foreign currency exchange contracts --
Receivables:
Dividends and interest 1,244
Dividends from affiliated money market funds 314
Investments sold 21,443
Fund shares sold 4,380
Foreign taxes recoverable --
From Adviser --
Daily variation margin on futures contracts --
Prepaid expenses 34
Unrealized appreciation on index swap contracts --
Interest rate swap contracts, at market value***** --
Credit default swaps, at market value --
--------------------
Total assets 1,931,141
--------------------
LIABILITIES
Payables:
Due to Custodian 176
Investments purchased 16,127
Fund shares redeemed 5,049
Accrued fees to affiliates 1,052
Other accrued expenses 76
Dividends for securities sold short --
Daily variation margin on futures contracts 883
Deferred tax liability --
Unrealized depreciation on foreign currency exchange contracts --
Options written, at market value** --
Securities sold short, at market value ****** --
Payable upon return of securities loaned 118,854
Unrealized depreciation on index swap contracts --
Interest rate swap contracts, at market value***** --
Credit default swaps, at market value --
--------------------
Total liabilities 142,217
--------------------
NET ASSETS $ 1,788,924
====================
</Table>
See accompanying notes which are an integral part of the financial statements.
128 Statement of Assets and Liabilities
<Table>
<Caption>
EQUITY II EQUITY Q INTERNATIONAL FIXED INCOME I FIXED INCOME III
FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------
$ 721,101 $ 1,677,529 $ 2,347,370 $ 1,764,771 $ 1,484,352
- --------------------------------------------------------------------------------------------
809,088 1,988,970 2,784,758 1,765,894 1,489,918
-- -- 764 396 302
-- -- 5,759 -- 107
-- -- 8,203 1,291 1,147
-- -- 14,375 243 2,017
268 1,364 7,229 8,987 9,456
96 162 504 346 925
13,238 8,496 26,108 60,315 91,865
642 2,973 2,994 1,763 17,906
-- -- 536 -- --
-- -- -- -- --
-- -- 388 534 2,396
19 29 14 35 96
-- -- 64 -- 180
-- -- -- 733 2,860
-- -- -- 4 271
-------------- -------------- -------------- -------------- --------------
823,351 2,001,994 2,851,696 1,840,541 1,619,446
-------------- -------------- -------------- -------------- --------------
-- -- -- -- --
16,986 13,902 28,049 246,642 241,834
1,545 6,183 4,516 3,419 1,959
428 957 1,344 359 597
52 124 229 134 54
-- 14 -- -- --
482 501 -- -- 105
-- -- 1 -- --
-- -- 10,978 306 2,003
-- -- 641 226 914
-- 195,175 -- -- --
182,200 23,458 707,715 243,313 187,896
-- -- -- -- 34
-- -- -- 943 1,858
-- -- -- 7 60
-------------- -------------- -------------- -------------- --------------
201,693 240,314 753,473 495,349 437,314
-------------- -------------- -------------- -------------- --------------
$ 621,658 $ 1,761,680 $ 2,098,223 $ 1,345,192 $ 1,182,132
============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 129
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
EQUITY I
AMOUNTS IN THOUSANDS FUND
- ----------------------------------------------------------------------------------------------
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 977
Accumulated net realized gain (loss) 58,205
Unrealized appreciation (depreciation) on:
Investments (International Fund - net of foreign capital gains
taxes) 294,449
Futures contracts 3,253
Options written --
Credit default swaps --
Index swap contracts --
Interest rate swap contracts --
Securities sold short --
Foreign currency-related transactions --
Shares of beneficial interest 514
Additional paid-in capital 1,431,526
--------------------
NET ASSETS $ 1,788,924
====================
NET ASSET VALUE, offering and redemption price per share:
Net asset value per share: Class E******* $ 34.80
Class E -- Net assets $ 46,898,284
Class E -- Shares outstanding ($.01 par value) 1,347,661
Net asset value per share: Class I******* $ 34.78
Class I -- Net assets $ 1,254,074,663
Class I -- Shares outstanding ($.01 par value) 36,061,321
Net asset value per share: Class Y******* $ 34.77
Class Y -- Net assets $ 487,951,516
Class Y -- Shares outstanding ($.01 par value) 14,034,740
- ----------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings - cost $ 5
** Premiums received on options written $ --
*** Securities on loan included in investments $ 136,556
**** Credit default swap contracts - premiums paid (received) $ --
***** Interest rate swap contracts - premiums paid (received) $ --
****** Proceeds on securities sold short $ --
******* 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.
130 Statement of Assets and Liabilities
<Table>
<Caption>
EQUITY II EQUITY Q INTERNATIONAL FIXED INCOME I FIXED INCOME III
FUND FUND FUND FUND FUND
- -----------------------------------------------------------------------------------------------------------------------
$ 676 $ 246 $ (2,253) $ 5,411 $ 5,330
44,791 73,980 174,614 (16,412) (3,256)
87,987 311,441 437,388 1,123 5,566
90 1,355 4,706 174 665
-- -- 1 78 38
-- -- -- 19 438
-- -- 64 -- 146
-- -- -- (285) (855)
-- (7,684) -- -- --
-- -- 3,484 (40) 45
207 450 415 646 1,126
487,907 1,381,892 1,479,804 1,354,478 1,172,889
------------------- ------------------- ------------------- ------------------- --------------------
$ 621,658 $ 1,761,680 $ 2,098,223 $ 1,345,192 $ 1,182,132
=================== =================== =================== =================== ====================
$ 29.93 $ 39.16 $ 50.61 $ 20.84 $ 10.52
$ 39,677,735 $ 61,691,280 $ 58,109,583 $ 32,847,807 $ 17,753,142
1,325,576 1,575,192 1,148,087 1,576,520 1,687,846
$ 30.08 $ 39.17 $ 50.59 $ 20.83 $ 10.50
$ 480,536,506 $ 1,312,611,756 $ 1,578,225,958 $ 749,856,250 $ 1,042,353,256
15,977,528 33,509,571 31,195,319 35,999,629 99,291,163
$ 30.07 $ 39.17 $ 50.59 $ 20.84 $ 10.50
$ 101,444,189 $ 387,377,292 $ 461,887,913 $ 562,448,412 $ 122,025,198
3,374,032 9,889,372 9,129,251 26,992,577 11,618,514
- -----------------------------------------------------------------------------------------------------------------------
$ -- $ -- $ 8,185 $ 1,270 $ 1,135
$ -- $ -- $ 642 $ 304 $ 952
$ 181,979 $ 23,262 $ 680,249 $ 238,568 $ 184,239
$ -- $ -- $ -- $ (22) $ (227)
$ -- $ -- $ -- $ 75 $ 1,857
$ -- $ 187,491 $ -- $ -- $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 131
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
EQUITY I
AMOUNTS IN THOUSANDS FUND
- ----------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 13,049
Dividends from affiliated money market funds 2,406
Interest 146
Securities Lending Income 166
Less foreign taxes withheld --
--------------------
Total investment income 15,767
--------------------
EXPENSES
Advisory fees 4,713
Administrative fees 428
Custodian fees 243
Transfer agent fees - Class E 11
Transfer agent fees - Class I 385
Transfer agent fees - Class Y 11
Professional fees 46
Registration fees 62
Shareholder servicing fees - Class E 57
Trustees' fees 19
Printing fees 27
Dividends from securities sold short --
Interest expense from securities sold short --
Miscellaneous 12
--------------------
Expenses before reductions 6,014
Expense reductions (176)
--------------------
Net expenses 5,838
--------------------
Net investment income (loss) 9,929
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (International Fund - net of foreign capital gains
taxes) 71,222
Futures contracts 6,945
Options written --
Credit default swap contracts --
Index swap contracts --
Interest rate swap contracts --
Securities sold short --
Foreign currency-related transactions --
--------------------
Net realized gain (loss) 78,167
--------------------
Net change in unrealized appreciation (depreciation) on:
Investments (International Fund - net of deferred tax liability
for foreign capital gains taxes) 64,782
Futures contracts (842)
Options written --
Credit default swap contracts --
Index swap contracts --
Interest rate swap contracts --
Securities sold short --
Foreign currency-related transactions --
--------------------
Net change in unrealized appreciation (depreciation) 63,940
--------------------
Net realized and unrealized gain (loss) 142,107
--------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 152,036
====================
</Table>
See accompanying notes which are an integral part of the financial statements.
132 Statement of Operations
<Table>
<Caption>
EQUITY II EQUITY Q INTERNATIONAL FIXED INCOME I FIXED INCOME III
FUND FUND FUND FUND FUND
- --------------------------------------------------------------------------------------------
$ 2,834 $ 15,284 $ 20,912 $ 68 $ 71
597 1,056 3,135 2,496 4,524
31 73 138 33,639 22,497
302 24 510 109 55
-- -- (1,592) -- --
-------------- -------------- -------------- -------------- --------------
3,764 16,437 23,103 36,312 27,147
-------------- -------------- -------------- -------------- --------------
2,192 4,636 6,863 1,724 2,394
157 421 491 345 239
222 235 1,050 319 293
10 15 14 8 4
235 310 375 199 208
3 9 9 12 2
29 47 67 52 28
30 47 61 46 50
51 73 68 40 21
7 19 22 16 9
11 27 34 24 13
-- 500 -- -- --
-- 207 -- -- --
6 13 14 11 7
-------------- -------------- -------------- -------------- --------------
2,953 6,559 9,068 2,796 3,268
(67) (170) (201) (168) (123)
-------------- -------------- -------------- -------------- --------------
2,886 6,389 8,867 2,628 3,145
-------------- -------------- -------------- -------------- --------------
878 10,048 14,236 33,684 24,002
-------------- -------------- -------------- -------------- --------------
48,367 87,731 166,692 4,343 3,169
2,385 3,534 8,454 (1,169) 761
-- -- (869) 152 220
-- -- -- (3) (78)
-- -- 261 -- (129)
-- -- -- 397 756
-- (6,014) -- -- --
-- -- 4,278 (429) (1,014)
-------------- -------------- -------------- -------------- --------------
50,752 85,251 178,816 3,291 3,685
-------------- -------------- -------------- -------------- --------------
5,588 37,764 65,037 (1,789) (858)
(1,072) (97) 2,678 201 (163)
-- -- 16 159 257
-- -- -- 19 238
-- -- 102 -- 250
-- -- -- (257) (1,442)
-- (3,729) -- -- --
-- -- 3,164 156 329
-------------- -------------- -------------- -------------- --------------
4,516 33,938 70,997 (1,511) (1,389)
-------------- -------------- -------------- -------------- --------------
55,268 119,189 249,813 1,780 2,296
-------------- -------------- -------------- -------------- --------------
$ 56,146 $ 129,237 $ 264,049 $ 35,464 $ 26,298
============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 133
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
STATEMENTS 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, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2006 (UNAUDITED) 2006
- -------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 9,929 $ 14,550 $ 878 $ 1,794
Net realized gain (loss) 78,167 66,099 50,752 128,433
Net change in unrealized
appreciation
(depreciation) 63,940 109,125 4,516 (23,509)
------------------- ------------------- ------------------- --------------------
Net increase (decrease) in net
assets from operations 152,036 189,774 56,146 106,718
------------------- ------------------- ------------------- --------------------
DISTRIBUTIONS
From net investment income
Class E (207) (307) -- --
Class I (6,643) (9,461) (541) (979)
Class Y (3,043) (4,443) (242) (358)
From net realized gain
Class E (1,967) (1,542) (8,116) (8,757)
Class I (49,704) (34,548) (92,903) (120,739)
Class Y (22,622) (13,971) (22,679) (28,930)
------------------- ------------------- ------------------- --------------------
Net decrease in net assets from
distributions (84,186) (64,272) (124,481) (159,763)
------------------- ------------------- ------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in
net assets from share
transactions 77,064 314,376 66,656 32,192
------------------- ------------------- ------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN
NET ASSETS 144,914 439,878 (1,679) (20,853)
NET ASSETS
Beginning of period 1,644,010 1,204,132 623,337 644,190
------------------- ------------------- ------------------- --------------------
End of period $ 1,788,924 $ 1,644,010 $ 621,658 $ 623,337
=================== =================== =================== ====================
Undistributed
(overdistributed) net
investment income
included in net assets $ 977 $ 941 $ 676 $ 581
</Table>
See accompanying notes which are an integral part of the financial statements.
134 Statements 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, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31,
(UNAUDITED) 2006 (UNAUDITED) 2006 (UNAUDITED) 2006
- ------------------------------------------------------------------------------------------------------------
$ 10,048 $ 18,255 $ 14,236 $ 38,177 $ 33,684 $ 62,804
85,251 119,053 178,816 323,633 3,291 (15,439)
33,938 86,596 70,997 76,974 (1,511) 18,982
-------------- -------------- -------------- -------------- -------------- --------------
129,237 223,904 264,049 438,784 35,464 66,347
-------------- -------------- -------------- -------------- -------------- --------------
(303) (474) (1,423) (687) (755) (1,333)
(8,087) (12,725) (43,118) (21,365) (19,380) (36,219)
(2,593) (4,668) (11,524) (12,155) (13,750) (23,717)
(4,085) (1,148) (5,123) -- -- --
(86,826) (25,033) (142,647) -- -- --
(28,301) (8,385) (37,641) -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
(130,195) (52,433) (241,476) (34,207) (33,885) (61,269)
-------------- -------------- -------------- -------------- -------------- --------------
110,799 86,706 225,457 (310,853) (68,188) 189,401
-------------- -------------- -------------- -------------- -------------- --------------
109,841 258,177 248,030 93,724 (66,609) 194,479
1,651,839 1,393,662 1,850,193 1,756,469 1,411,801 1,217,322
-------------- -------------- -------------- -------------- -------------- --------------
$ 1,761,680 $ 1,651,839 $ 2,098,223 $ 1,850,193 $ 1,345,192 $ 1,411,801
============== ============== ============== ============== ============== ==============
$ 246 $ 1,181 $ (2,253) $ 39,576 $ 5,411 $ 5,612
<Caption>
FIXED INCOME III
FUND
----------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
(UNAUDITED) 2006
- ---
$ 24,002 $ 32,577
3,685 (6,743)
(1,389) 11,235
-------------- ----------------
26,298 37,069
-------------- ----------------
(373) (398)
(19,563) (28,003)
(2,534) (2,633)
-- (27)
-- (1,689)
-- (129)
-------------- ----------------
(22,470) (32,879)
-------------- ----------------
317,386 246,305
-------------- ----------------
321,214 250,495
860,918 610,423
-------------- ----------------
$ 1,182,132 $ 860,918
============== ================
$ 5,330 $ 3,798
</Table>
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets 135
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY I FUND
Class E
April 30, 2007 * 33.51 .15 2.51 2.66 (.16)
October 31, 2006 30.81 .25 3.96 4.21 (.24)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2007 * 33.49 .19 2.51 2.70 (.20)
October 31, 2006 30.79 .32 3.96 4.28 (.31)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2007 * 33.49 .20 2.50 2.70 (.21)
October 31, 2006 30.77 .34 3.98 4.32 (.33)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY II FUND
Class E
April 30, 2007 * 34.16 .01 2.77 2.78 --
October 31, 2006 38.43 .02 5.76 5.78 --
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2007 * 34.31 .04 2.78 2.82 (.04)
October 31, 2006 38.57 .09 5.79 5.88 (.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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2007 * 34.32 .06 2.77 2.83 (.07)
October 31, 2006 38.58 .12 5.79 5.91 (.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)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- ----------------------------------------
EQUITY I FUND
Class E
April 30, 2007 * (1.21) --
October 31, 2006 (1.27) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- (0.06)
- ----------------------------------------
Class I
April 30, 2007 * (1.21) --
October 31, 2006 (1.27) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- (0.08)
- ----------------------------------------
Class Y
April 30, 2007 * (1.21) --
October 31, 2006 (1.27) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- (0.08)
- ----------------------------------------
EQUITY II FUND
Class E
April 30, 2007 * (7.01) --
October 31, 2006 (10.05) --
October 31, 2005 (5.19) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class I
April 30, 2007 * (7.01) --
October 31, 2006 (10.05) --
October 31, 2005 (5.19) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class Y
April 30, 2007 * (7.01) --
October 31, 2006 (10.05) --
October 31, 2005 (5.19) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
136 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(1.37) 34.80 9.09 46,898
(1.51) 33.51 14.07 43,911
(.24) 30.81 12.70 37,666
(.17) 27.56 7.69 33,143
(.14) 25.75 20.79 32,632
(.22) 21.46 (14.26) 19,476
- -----------------------------------------------------------------------------
(1.41) 34.78 9.22 1,254,075
(1.58) 33.49 14.34 1,095,931
(.31) 30.79 12.97 825,172
(.23) 27.54 7.99 697,537
(.19) 25.72 21.02 580,055
(.28) 21.44 (14.04) 588,901
- -----------------------------------------------------------------------------
(1.42) 34.77 9.23 487,951
(1.60) 33.49 14.48 504,168
(.33) 30.77 13.00 341,294
(.25) 27.53 8.07 104,440
(.21) 25.72 21.09 89,546
(.30) 21.43 (13.96) 57,147
- -----------------------------------------------------------------------------
(7.01) 29.93 9.20 39,678
(10.05) 34.16 17.91 39,987
(5.25) 38.43 11.53 34,849
-- 39.28 8.72 80,542
(.08) 36.12 41.88 46,901
(.07) 25.54 (9.37) 25,874
- -----------------------------------------------------------------------------
(7.05) 30.08 9.30 480,536
(10.14) 34.31 18.17 471,745
(5.31) 38.57 11.77 496,716
(.05) 39.39 8.98 674,280
(.12) 36.19 42.08 606,333
(.13) 25.59 (9.17) 464,113
- -----------------------------------------------------------------------------
(7.08) 30.07 9.36 101,444
(10.17) 34.32 18.28 111,605
(5.35) 38.58 11.85 112,625
(.09) 39.41 9.05 159,820
(.16) 36.22 42.34 190,066
(.18) 25.61 (9.07) 147,610
- -----------------------------------------------------------------------------
<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)
- ---
.93 .95 .92 60.22
.93 .96 .78 98.17
.92 .96 .83 109.71
.94 .96 .61 129.94
.99 .99 .68 115.73
.98 .98 .49 130.46
- ---
.69 .71 1.15 60.22
.71 .73 1.01 98.17
.69 .73 1.06 109.71
.71 .72 .84 129.94
.75 .75 .92 115.73
.74 .74 .74 130.46
- ---
.63 .65 1.21 60.22
.64 .66 1.07 98.17
.65 .67 1.03 109.71
.63 .65 .92 129.94
.66 .66 1.00 115.73
.64 .64 .85 130.46
- ---
1.13 1.15 .08 72.31
1.11 1.14 .07 154.76
1.08 1.11 (.09) 156.39
1.09 1.09 .09 125.94
1.12 1.12 .04 132.27
1.12 1.12 .07 126.57
- ---
.93 .95 .28 72.31
.91 .94 .27 154.76
.87 .91 .12 156.39
.90 .90 .27 125.94
.94 .94 .22 132.27
.92 .92 .27 126.57
- ---
.83 .85 .37 72.31
.82 .85 .36 154.76
.81 .83 .18 156.39
.79 .79 .37 125.94
.81 .81 .36 132.27
.79 .79 .41 126.57
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 137
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
EQUITY Q FUND
Class E
April 30, 2007 * 39.35 .19 2.67 2.86 (.21)
October 31, 2006 35.20 .35 5.02 5.37 (.35)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2007 * 39.36 .24 2.67 2.91 (.26)
October 31, 2006 35.20 .44 5.03 5.47 (.44)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2007 * 39.36 .24 2.67 2.91 (.26)
October 31, 2006 35.20 .46 5.02 5.48 (.45)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL FUND
Class E
April 30, 2007 * 50.51 .29 6.28 6.57 (1.41)
October 31, 2006 40.45 .87 9.87 10.74 (.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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2007 * 50.55 .35 6.28 6.63 (1.53)
October 31, 2006 40.47 1.00 9.86 10.86 (.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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2007 * 50.56 .36 6.28 6.64 (1.55)
October 31, 2006 40.47 .92 9.96 10.88 (.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)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- ----------------------------------------
EQUITY Q FUND
Class E
April 30, 2007 * (2.84) --
October 31, 2006 (.87) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class I
April 30, 2007 * (2.84) --
October 31, 2006 (.87) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class Y
April 30, 2007 * (2.84) --
October 31, 2006 (.87) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
INTERNATIONAL FUND
Class E
April 30, 2007 * (5.06) --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class I
April 30, 2007 * (5.06) --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class Y
April 30, 2007 * (5.06) --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
138 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(3.05) 39.16 7.67 61,691
(1.22) 39.35 15.56 56,703
(.35) 35.20 10.03 46,352
(.25) 32.32 8.22 47,570
(.20) 30.10 21.76 40,924
(.21) 24.90 (15.70) 17,503
- -----------------------------------------------------------------------------
(3.10) 39.17 7.84 1,312,612
(1.31) 39.36 15.87 1,201,844
(.44) 35.20 10.30 1,009,002
(.32) 32.32 8.46 1,018,806
(.25) 30.10 22.04 822,548
(.28) 24.89 (15.50) 854,495
- -----------------------------------------------------------------------------
(3.10) 39.17 7.83 387,377
(1.32) 39.36 15.93 393,292
(.45) 35.20 10.34 338,308
(.34) 32.32 8.58 336,836
(.27) 30.09 22.13 674,326
(.31) 24.89 (15.41) 514,589
- -----------------------------------------------------------------------------
(6.47) 50.61 14.13 58,109
(.68) 50.51 26.84 51,470
(.68) 40.45 17.19 41,415
(.74) 35.15 15.20 35,442
(.38) 31.22 28.33 24,163
(.04) 24.71 (12.68) 11,965
- -----------------------------------------------------------------------------
(6.59) 50.59 14.22 1,578,226
(.78) 50.55 27.17 1,420,218
(.76) 40.47 17.48 1,127,303
(.79) 35.16 15.47 915,469
(.43) 31.20 28.37 597,650
(.12) 24.74 (12.46) 527,791
- -----------------------------------------------------------------------------
(6.61) 50.59 14.30 461,888
(.79) 50.56 27.24 378,505
(.78) 40.47 17.53 587,751
(.82) 35.17 15.54 491,855
(.46) 31.21 28.51 567,878
(.16) 24.75 (12.42) 395,955
- -----------------------------------------------------------------------------
<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)
- ---
1.01(i) 1.03 .94 47.53
.94(f) .96 .93 106.45
.91 .93 1.01 117.34
.92 .93 .71 102.51
.94 .94 .80 114.72
.94 .94 .58 71.16
- ---
.76(j) .78 1.19 47.53
.70(g) .72 1.18 106.45
.66 .69 1.26 117.34
.69 .69 .94 102.51
.72 .72 1.02 114.72
.70 .70 .82 71.16
- ---
.71(k) .73 1.24 47.53
.64(h) .67 1.23 106.45
.63 .65 1.30 117.34
.61 .61 1.05 102.51
.63 .63 1.10 114.72
.60 .60 .93 71.16
- ---
1.16 1.18 1.25 59.87
1.17 1.19 1.88 83.09
1.15 1.18 1.49 80.36
1.19 1.20 1.13 81.19
1.26 1.26 1.14 79.40
1.31 1.32 .57 87.84
- ---
.91 .93 1.49 59.87
.91 .93 2.15 83.09
.90 .93 1.76 80.36
.95 .96 1.36 81.19
1.06 1.06 1.38 79.40
1.07 1.07 .92 87.84
- ---
.86 .88 1.53 59.87
.86 .89 1.99 83.09
.86 .89 1.76 80.36
.87 .88 1.35 81.19
.96 .96 1.45 79.40
.97 .97 1.12 87.84
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 139
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL FROM DISTRIBUTIONS
BEGINNING OF INVESTMENT AND UNREALIZED INVESTMENT FROM NET
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS INVESTMENT INCOME
- ----------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME I FUND
Class E
April 30, 2007 * 20.82 .47 .04 .51 (.49)
October 31, 2006 20.75 .92 .04 .96 (.89)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2007 * 20.82 .50 .03 .53 (.52)
October 31, 2006 20.75 .97 .05 1.02 (.95)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2007 * 20.83 .50 .03 .53 (.52)
October 31, 2006 20.76 .99 .04 1.03 (.96)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
FIXED INCOME III FUND
Class E
April 30, 2007 * 10.48 .26 .01 .27 (.23)
October 31, 2006 10.44 .45 .04 .49 (.42)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2007 * 10.46 .26 .02 .28 (.24)
October 31, 2006 10.43 .47 .03 .50 (.44)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class Y
April 30, 2007 * 10.46 .71 (.43) .28 (.24)
October 31, 2006 10.43 .64 (.13) .51 (.45)
October 31, 2005 (1) 10.74 .14 (.26) (.12) (.19)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- ----------------------------------------
FIXED INCOME I FUND
Class E
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 (.53) --
October 31, 2004 (.66) --
October 31, 2003 (.44) --
October 31, 2002 (.27) --
- ----------------------------------------
Class I
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 (.53) --
October 31, 2004 (.66) --
October 31, 2003 (.44) --
October 31, 2002 (.27) --
- ----------------------------------------
Class Y
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 (.53) --
October 31, 2004 (.66) --
October 31, 2003 (.44) --
October 31, 2002 (.27) --
- ----------------------------------------
FIXED INCOME III FUND
Class E
April 30, 2007 * -- --
October 31, 2006 (.03) --
October 31, 2005 (.08) --
October 31, 2004 (.18) --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class I
April 30, 2007 * -- --
October 31, 2006 (.03) --
October 31, 2005 (.08) --
October 31, 2004 (.18) --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class Y
April 30, 2007 * -- --
October 31, 2006 (.03) --
October 31, 2005 (1) -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
140 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS,
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.49) 20.84 2.48 32,848
(.89) 20.82 4.79 31,504
(1.26) 20.75 .60 29,632
(1.35) 21.88 5.22 27,515
(1.11) 22.12 5.01 27,009
(1.24) 22.15 5.10 27,576
- -----------------------------------------------------------------------------
(.52) 20.83 2.56 749,856
(.95) 20.82 5.06 829,914
(1.31) 20.75 .88 788,808
(1.41) 21.87 5.52 752,229
(1.17) 22.11 5.26 639,846
(1.30) 22.15 5.38 713,210
- -----------------------------------------------------------------------------
(.52) 20.84 2.58 562,488
(.96) 20.83 5.11 550,383
(1.31) 20.76 .91 398,882
(1.42) 21.88 5.58 285,228
(1.19) 22.12 5.33 399,601
(1.32) 22.16 5.50 506,495
- -----------------------------------------------------------------------------
(.23) 10.52 2.59 17,753
(.45) 10.48 4.81 15,119
(.40) 10.44 1.37 9,268
(.56) 10.70 5.65 7,489
(.34) 10.67 9.05 6,481
(.61) 10.11 3.61 5,912
- -----------------------------------------------------------------------------
(.24) 10.50 2.72 1,042,353
(.47) 10.46 4.95 744,559
(.42) 10.43 1.65 560,896
(.58) 10.69 5.99 461,966
(.36) 10.65 9.27 297,726
(.63) 10.09 3.84 306,550
- -----------------------------------------------------------------------------
(.24) 10.50 2.74 122,025
(.48) 10.46 5.03 101,240
(.19) 10.43 (1.15) 40,259
- -----------------------------------------------------------------------------
<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)
- ---
.64 .67 4.62 82.60
.64 .67 4.45 125.38
.65 .68 3.49 201.90
.65 .66 2.88 153.79
.67 .67 3.25 184.29
.64 .66 4.17 165.28
- ---
.39 .42 4.86 82.60
.40 .42 4.70 125.38
.38 .40 3.76 201.90
.39 .40 3.15 153.79
.41 .41 3.50 184.29
.38 .38 4.42 165.28
- ---
.35 .37 4.91 82.60
.35 .38 4.77 125.38
.35 .37 3.81 201.90
.33 .34 3.18 153.79
.35 .35 3.53 184.29
.31 .31 4.45 165.28
- ---
.91 .93 4.75 318.84
.92 .96 4.27 270.24
.93 .95 3.32 197.66
.96 .96 2.64 195.68
1.00 1.00 3.61 266.11
.97 .98 4.00 231.09
- ---
.66 .68 5.00 318.84
.70 .73 4.51 270.24
.69 .71 3.55 197.66
.72 .72 2.85 195.68
.78 .78 3.83 266.11
.76 .76 4.22 231.09
- ---
.61 .64 5.04 318.84
.63 .67 4.60 270.24
.64 .67 3.74 197.66
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 141
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2007 (Unaudited).
(1) 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.
(e) May reflect amounts waived and/or reimbursed by RIMCo as the investment
adviser and transfer agent, and for certain funds, custody credit
arrangements.
(f) The annualized net expense ratio is .93% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(g) The annualized net expense ratio is .69% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(h) The annualized net expense ratio is .63% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(i) The annualized net expense ratio is .93% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(j) The annualized net expense ratio is .68% not including the dividends from
securities sold short as contractually agreed by the Adviser.
(k) The annualized net expense ratio is .63% not including the dividends from
securities sold short as contractually agreed by the Adviser.
See accompanying notes which are an integral part of the financial statements.
142 Notes to Financial Highlights
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Russell Investment Company (the "Investment Company" or "RIC") is a series
investment company with 35 different investment portfolios referred to as
Funds. These financial statements report on six 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 July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company and Frank Russell Investment Management Company changed
its name to Russell Investment Management Company ("RIMCo").
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 RIMCo.
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 New York
Stock Exchange, 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 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
Notes to Financial Statements 143
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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. RIC
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. RIC 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. RIC 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.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of
SFAS 157 will have on the Funds financial statement disclosure.
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.
In July 2006, Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement 109 (FIN 48) was issued and is effective for fiscal years beginning
after December 15, 2006. FIN 48 sets forth a threshold for financial
statement recognition, measurement and disclosure of a tax position taken or
expected to be taken on a tax return. Management is currently evaluating the
impact, if any, the adoption of FIN 48 will have on the Fund's net assets and
results of operations.
144 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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,
Fixed Income I and
Fixed Income III Funds
Annually Mid-December Equity II and
International Funds
</Table>
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
Russell Investment Management Company ("RIMCo" 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 E,
Class I, 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
Notes to Financial Statements 145
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 may be subject to capital gains taxes and repatriation
taxes imposed by certain countries in which it invests. The Fund has recorded
a deferred tax liability in respect of the unrealized appreciation on foreign
securities for potential capital gains and repatriation taxes at April 30,
2007. 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
Statement of Operations for the Fund.
<Table>
<Caption>
DEFERRED TAX CAPITAL GAINS
FUNDS LIABILITY TAXES
--------------------------------------------------------------------------------
International Fund $ 656 $ 9,178
</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, 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, 2007, are presented on the Schedule
of Investments for the applicable Funds.
Forward Commitments
Certain 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.
146 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Loan Agreements
The Fixed Income I Fund and 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 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, 2007, there were no
unfunded loan commitments in the Fixed Income I Fund or Fixed Income III
Fund.
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.
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
Notes to Financial Statements 147
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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, 2007, the International Fund and the Fixed
Income III Fund had cash collateral balances of $5,758,741 and $107,352
respectively 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 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 party's 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.
Short Sales
The Equity Q Fund may enter into short sale transactions. In a short sale,
the seller sells a security that it does not own, typically a security
borrowed from a broker or dealer. Because the seller remains liable to return
the underlying security that it borrowed from the broker or dealer, the
seller must purchase the security prior to the date on which delivery to the
broker or dealer is required. The Fund will incur a loss as a result of the
short sale if the price of the security increases between the date of the
short sale and the date on which the fund replaces the borrowed security. The
Fund will realize a gain if the security declines in price between those
dates. The making of short sales exposes the Fund to the risk of liability
for the market value of the security that is sold (the amount of which
liability increases as the market value of the underlying security
increases), in addition to the costs associated with establishing,
maintaining and closing out the short position.
Although the Fund's potential for gain as a result of a short sale is limited
to the price at which it sold the security short less the cost of borrowing
the security, its potential for loss is theoretically unlimited because there
is no limit to the cost of replacing
148 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
the borrowed security. When the Fund makes a short sale, the Fund may use all
or a portion of the cash proceeds of short sales to purchase additional
securities or for any other permissible Fund purpose. To the extent necessary
to meet collateral requirements, the Fund is required to pledge assets in a
segregated account maintained by the Fund's custodian for the benefit of the
broker. The Fund also may use securities it owns to meet any such collateral
obligations. Until a Fund replaces a borrowed security in connection with a
short sale, the Fund will: (a) maintain daily a segregated account,
containing cash, cash equivalents, or liquid marketable securities, at such a
level that the amount deposited in the segregated account plus the amount
deposited with the broker as collateral will equal the current requirement
under Regulation T promulgated by the Board of Governors of the Federal
Reserve System under the authority of section 7 and 8 of the Securities
Exchange Act of 1934, as amended; or (b) otherwise cover its short position
in accordance with positions taken by the staff of the SEC (e.g., taking an
offsetting long position in the security sold short). As of April 30, 2007,
$231,415,115 was held as collateral.
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.
Mortgage-Related and Other Asset-Backed Securities
The Fixed Income I and Fixed Income III Funds may invest in mortgage or other
asset-backed securities. These securities include mortgage pass-through
securities, collateralized mortgage obligations ("CMOs"), commercial
mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped
mortgage backed securities ("SMBSs") and other securities that directly or
indirectly represent a participation in, or are secured by a payable from,
mortgage loans on real property. The value of some mortgage or asset-backed
securities may be particularly sensitive to changes in prevailing interest
rates. Early repayment of principal on some mortgage-related securities may
expose a Fund to a lower rate of return upon reinvestment of principal. The
value of these securities may fluctuate in response to the market's
perception of the creditworthiness of the issuers. Additionally, although
mortgages and mortgage-related securities are generally supported by some
form of government or private guarantee and/or insurance, there is no
assurance that private guarantors or insurers will meet their obligations.
One type of SMBS has one class receiving all of the interest from the
mortgage assets (the interest-only, or "IO" class), while the other class
will receive all of the principal (the principal-only, or "PO" class).
Payments received for the IOs are included in interest income on the
Statement of Operations. Because principal will not be received at the
maturity of an IO, adjustments are made to the book value of the security on
a daily basis until maturity. These adjustments are included in interest
income on the Statement of Operations. Payments received for POs are treated
as reductions to the cost and par value of the securities.
Inflation-Indexed Bonds
The Fixed Income I and Fixed Income III Funds may invest in inflation-indexed
bonds. Inflation-indexed bonds are fixed-income securities whose principal
value is periodically adjusted to the rate of inflation. The interest rate on
these bonds is generally fixed at issuance at a rate lower than typical
bonds. Over the life of an inflation-indexed bond, however, interest will be
paid based on a principal value, which is adjusted for inflation. Any
increase in the principal amount of an inflation-indexed bond will be
included as interest income in the Statement of Operations, even though
investors do not receive their principal until maturity.
3. INVESTMENT TRANSACTIONS
Securities
During the period ended April 30, 2007, 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 $ 1,007,787,249 $ 974,280,136
Equity II 437,131,233 489,078,498
Equity Q 1,013,826,788 1,031,495,373
</Table>
<Table>
- ---------------------------------------------------------------
<Caption>
FUNDS PURCHASES SALES
International $ 1,105,253,597 $ 1,098,617,423
Fixed Income I 944,457,878 1,012,287,552
Fixed Income III 2,460,527,973 2,269,657,146
</Table>
Notes to Financial Statements 149
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (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 $ 222,132,352 $ 243,767,826
Fixed Income III 355,840,977 365,243,818
</Table>
Written Options Contracts
Transactions in written options contracts for the period ended April 30, 2007
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, 2006 214 $ 968,061 574 $ 208,180
Opened 968 4,384,535 2,984 658,702
Closed (1,015) (4,710,305) (2,138) (410,920)
Expired -- -- (383) (152,126)
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2007 167 $ 642,291 1,037 $ 303,836
=================== =================== =================== ===================
</Table>
<Table>
<Caption>
FIXED INCOME III FUND
------------------------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------------------------------
Outstanding October 31, 2006 410 $ 654,309
Opened 2,563 972,328
Closed (1,882) (548,793)
Expired (258) (124,688)
------------------- -------------------
Outstanding April 30, 2007 833 $ 953,156
=================== ===================
</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 deemed to be of good financial
standing.
150 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
As of April 30, 2007, 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
---------------------------------------------------------------------------------------------------------------------------
Equity I $ 23,736,738 Pool of US Government Securities
Equity II 8,360,002 Pool of US Government Securities
Equity Q 716,120 Pool of US Government Securities
International 6,189,368 Pool of US Government Securities
</Table>
Custodian
The Funds have entered into arrangements with their Custodian whereby custody
credits realized as a result of uninvested cash balances were used to reduce
a portion of the Fund's expenses. During the period ended April 30, 2007, the
Fund's custodian fees were reduced by the following amounts under these
arrangements which are included in expense reductions on the Statement of
Operations:
<Table>
<Caption>
AMOUNT
FUNDS PAID
--------------------------------------------------------------------------
Equity I $ 4,556
Equity II 4,366
Equity Q 1,249
International 4,882
Fixed Income I 30,036
Fixed Income III 26,615
</Table>
4. RELATED PARTIES
Adviser and Administrator
RIMCo advises and administers all of the Funds which comprise the Investment
Company. RIMCo 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 RIMCo.
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, 2007, $569,702,370 of the Money Market Fund's net assets represents
investment by the Funds presented herein, and $2,335,222,737 represents
investment of other RIC 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 $22,522,243 and
$2,080,990 respectively, for the period ended April 30, 2007.
<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>
For the Equity I, Equity II, Equity Q, International, Fixed Income I and
Fixed Income III Funds, RIMCo has contractually agreed to waive 0.02% of its
administrative fees. The total amount of the waiver for the period ended
April 30, 2007 was $832,396.
The Adviser does not have the ability to recover amounts waived or reimbursed
from previous periods.
Notes to Financial Statements 151
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Transfer Agent
RIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, RIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. RIMCo 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, 2007 were
$1,819,742.
Shareholder Servicing
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 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 E shares on an annual
basis.
Brokerage Commissions
The Funds will effect transactions through Russell Implementation Services,
Inc. ("RIS") and its global network of unaffiliated correspondent brokers.
RIS is a registered broker and investment adviser and an affiliate of RIMCo.
Trades placed through RIS and its correspondents are made (i) to manage
trading associated with changes in managers, rebalancing across existing
managers, cash flows and other portfolio transitions, (ii) to execute
portfolio securities transactions selected by money managers or (iii) to
execute portfolio securities transactions for the portion of each Fund's
assets that RIMCo determines not to allocate to money managers, including
assets allocated to the "select holdings" strategy, and for each Fund's cash
reserves.
The Funds effect certain 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 RIMCo. Trades placed through
LJR and its correspondents are used (i) to obtain research services for RIMCo
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 RIMCo or to generate
commission rebates to the Funds, the Funds' money managers are requested to
and RIMCo 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, RIMCo 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 RIMCo 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 RIMCo
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 RIMCo or its affiliates. Similarly, the Funds may
benefit from research provided with respect to trading by those other funds
and clients.
LJR may also rebate to the Funds a portion of commissions earned on certain
trading by the Funds through 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 RIMCo's research budget has
been met, as determined annually in the Soft Dollar Committee budgeting
process.
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, 2007 were as follows:
<Table>
<Caption>
FIXED FIXED
EQUITY I EQUITY II EQUITY Q INTERNATIONAL INCOME I INCOME III
---------------------------------------------------------------------------------------------------------------------------------
Advisory fees $ 799,697 $ 359,402 $ 788,073 $ 1,202,543 $ 278,241 $ 461,725
Administration fees 43,619 15,400 42,973 51,514 33,356 27,704
Distribution fees
Shareholder servicing fees 9,432 8,256 12,428 12,879 6,611 3,622
Transfer agent fees 193,166 41,925 106,334 68,532 34,913 101,868
Trustee fees 5,970 3,277 6,877 8,614 6,084 2,296
-------------- -------------- -------------- -------------- -------------- --------------
$ 1,051,884 $ 428,260 $ 956,685 $ 1,344,082 $ 359,205 $ 597,215
============== ============== ============== ============== ============== ==============
</Table>
152 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Board of Trustees
The Russell Fund Complex consists of Russell Investment Company, which has 35
Funds, and Russell Investment Funds ("RIF"), which has nine Funds. Each of
the Trustees is a Trustee for both RIC 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, 2007) 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, 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. The Audit Committee Chair and Investment
Committee Chair are each paid a fee of $12,000 per year and the Nominating
and Governance Committee chair are each paid a fee of $6,000 per year. The
chair person of the Board receives additional annual compensation of $52,000.
5. FEDERAL INCOME TAXES
At October 31, 2006, 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 10/31/13 10/31/14 TOTALS
---------------------------------------------------------------------------------------------
Fixed I $ 3,855,225 $ 14,386,926 $ 18,242,151
Fixed III -- 5,108,237 5,108,237
</Table>
At April 30, 2007, 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 $ 1,502,723,177 $ 724,070,108 $ 1,498,127,366
================ ================ ================
Unrealized Appreciation $ 294,409,517 $ 96,803,680 $ 320,437,502
Unrealized Depreciation (12,265,678) (11,785,900) (24,769,697)
---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 282,143,839 $ 85,017,780 $ 295,667,805
================ ================ ================
</Table>
<Table>
<Caption>
INTERNATIONAL FIXED INCOME I FIXED INCOME III
--------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 1,659,107,800 $ 1,766,380,518 $ 1,485,147,239
================ ================ ================
Unrealized Appreciation $ 434,045,829 $ 6,046,191 $ 20,948,540
Unrealized Depreciation (16,111,120) (6,533,209) (16,178,234)
---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 417,934,709 $ (487,018) $ 4,770,306
================ ================ ================
</Table>
Notes to Financial Statements 153
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2007 and October 31, 2006
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
EQUITY I ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 110 263 $ 3,714 $ 8,376
Proceeds from reinvestment of
distributions 61 55 1,998 1,711
Payments for shares redeemed (133) (231) (4,470) (7,368)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 38 87 1,242 2,719
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 5,359 9,825 180,355 312,192
Proceeds from reinvestment of
distributions 1,591 1,281 52,454 39,812
Payments for shares redeemed (3,614) (5,185) (121,715) (165,204)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,336 5,921 111,094 186,800
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 1,015 5,080 33,866 161,090
Proceeds from reinvestment of
distributions 711 587 23,449 18,254
Payments for shares redeemed (2,747) (1,702) (92,587) (54,487)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (1,021) 3,965 (35,272) 124,857
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,353 9,973 $ 77,064 $ 314,376
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
EQUITY II ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 139 255 $ 4,165 $ 8,418
Proceeds from reinvestment of
distributions 275 276 7,810 8,487
Payments for shares redeemed (259) (267) (7,802) (9,140)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 155 264 4,173 7,765
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 2,085 3,370 62,070 111,638
Proceeds from reinvestment of
distributions 3,156 3,732 90,141 115,212
Payments for shares redeemed (3,013) (6,231) (91,989) (212,586)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,228 871 60,222 14,264
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 624 703 17,919 23,137
Proceeds from reinvestment of
distributions 803 949 22,921 29,288
Payments for shares redeemed (1,305) (1,319) (38,579) (42,262)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 122 333 2,261 10,163
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,505 1,468 $ 66,656 $ 32,192
================= ================= ================= =================
</Table>
154 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
EQUITY Q ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 147 279 $ 5,627 $ 10,343
Proceeds from reinvestment of
distributions 110 42 4,098 1,520
Payments for shares redeemed (123) (197) (4,717) (7,316)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 134 124 5,008 4,547
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 4,898 7,699 187,025 285,272
Proceeds from reinvestment of
distributions 2,361 956 88,049 34,689
Payments for shares redeemed (4,287) (6,781) (163,989) (250,417)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 2,972 1,874 111,085 69,543
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 743 2,560 28,024 94,502
Proceeds from reinvestment of
distributions 828 359 30,894 13,053
Payments for shares redeemed (1,674) (2,536) (64,212) (94,940)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (103) 383 (5,294) 12,615
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 3,003 2,381 $ 110,799 $ 86,706
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
INTERNATIONAL ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 114 222 $ 5,531 $ 10,311
Proceeds from reinvestment of
distributions 135 15 6,282 659
Payments for shares redeemed (120) (242) (5,824) (11,388)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 129 (5) 5,989 (418)
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 4,200 6,444 202,700 299,464
Proceeds from reinvestment of
distributions 3,711 448 172,747 19,184
Payments for shares redeemed (4,809) (6,655) (233,011) (306,159)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,102 237 142,436 12,489
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 1,698 2,403 81,531 104,918
Proceeds from reinvestment of
distributions 878 241 40,861 10,306
Payments for shares redeemed (932) (9,682) (45,360) (438,148)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,644 (7,038) 77,032 (322,924)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 4,875 (6,806) $ 225,457 $ (310,853)
================= ================= ================= =================
</Table>
Notes to Financial Statements 155
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
FIXED INCOME I ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 197 357 $ 4,090 $ 7,369
Proceeds from reinvestment of
distributions 34 61 696 1,240
Payments for shares redeemed (167) (333) (3,464) (6,851)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 64 85 1,322 1,758
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 6,216 10,020 129,326 206,675
Proceeds from reinvestment of
distributions 815 1,534 16,893 31,405
Payments for shares redeemed (10,895) (9,708) (227,408) (200,070)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (3,864) 1,846 (81,189) 38,010
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 2,457 11,112 51,092 230,209
Proceeds from reinvestment of
distributions 663 1,159 13,750 23,717
Payments for shares redeemed (2,552) (5,062) (53,163) (104,293)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 568 7,209 11,679 149,633
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (3,232) 9,140 $ (68,188) $ 189,401
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
FIXED INCOME III ----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 359 762 $ 3,765 $ 7,952
Proceeds from reinvestment of
distributions 32 35 339 357
Payments for shares redeemed (147) (241) (1,534) (2,496)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 244 556 2,570 5,813
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 36,008 30,479 377,609 315,658
Proceeds from reinvestment of
distributions 1,736 2,658 18,077 27,355
Payments for shares redeemed (9,657) (15,729) (101,232) (162,997)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 28,087 17,408 294,454 180,016
----------------- ----------------- ----------------- -----------------
Class Y
Proceeds from shares sold 1,790 6,022 18,798 62,563
Proceeds from reinvestment of
distributions 243 268 2,534 2,762
Payments for shares redeemed (93) (471) (970) (4,849)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,940 5,819 20,362 60,476
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 30,271 23,783 $ 317,386 $ 246,305
================= ================= ================= =================
</Table>
7. INTERFUND LENDING PROGRAM
The Investment Company Funds have been granted permission from the Securities
and Exchange Commission to participate in a joint lending and borrowing
facility (the "Credit Facility"). Portfolios of the Funds may borrow money
from the RIC Money Market Fund for Temporary purposes. All such borrowing and
lending will be subject to a participating fund's fundamental investment
limitations. The RIC Money Market Fund will lend through the program only
when the returns are higher than those
156 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
available from an investment in repurchase agreements or short-term reserves.
The Investment Company Funds will borrow through the program only when the
costs are equal to or lower than the cost of bank loans. Interfund loans and
borrowings normally extend overnight, but can have a maximum duration of
seven days. Loans may be called on one business day's notice. A participating
fund may have to borrow from a bank at a higher interest rate if an interfund
loan is called or not renewed. Any delay in repayment to the RIC Money Market
Fund could result in a lost investment opportunity of additional borrowing
costs. As of April 30, 2007, the Funds did not participate in the Interfund
Lending Program.
8. RECORD OWNERSHIP
As of April 30, 2007, 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 30.6
Equity II 1 37.6
Equity Q 1 35.2
International 1 36.1
Fixed Income I 1 16.5
Fixed Income III 1 43.2
</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.
Notes to Financial Statements 157
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The following table lists restricted securities held by a Fund that are
illiquid. The following table does not include (1) securities deemed liquid
by RIMCo 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 - 2.2%
Aames Mortgage Investment Trust 09/08/05 702,570 99.99 702 702
Aiful Corp. 11/29/05 300,000 98.96 297 296
Air 2 US 01/10/07 455,157 105.50 480 479
Alcoa, Inc. 03/05/07 515,000 101.14 521 514
ASIF Global Financing XIX 05/18/05 50,000 99.79 50 49
Banco Mercantil del Norte SA 01/23/07 500,000 101.58 508 513
CVS/Caremark Corp. 02/01/07 192,630 97.90 189 189
CVS/Caremark Corp. 03/21/07 12,639 99.80 13 13
CVS Lease Pass Through 03/21/07 215,502 100.08 216 216
Countrywide Home Loan Mortgage Pass
Through Trust 09/21/05 1,166,676 100.00 1,167 1,174
Citigroup Mortgage Loan Trust,
Inc. 10/18/06 1,645,857 99.92 1,644 1,645
DG Funding Trust 11/04/03 152 10,575.58 1,607 1,608
Depfa ACS Bank 03/08/07 300,000 98.39 295 287
Gaz Capital for Gazprom 01/25/07 1,420,000 99.96 1,419 1,434
Gaz Capital for Gazprom 03/01/07 260,000 100.00 260 267
Glitnir Banki HF 06/12/06 450,000 99.92 450 471
Glitnir Banki HF 07/21/06 270,000 100.00 270 280
HBOS Treasury Services PLC 03/02/07 100,000 99.93 100 101
ILFC E-Capital Trust II 09/20/06 290,000 99.55 289 297
Kaupthing Bank Hf 10/03/06 100,000 99.52 100 101
Kaupthing Bank Hf 05/12/06 1,250,000 99.51 1,244 1,353
Mastr Reperforming Loan Trust 03/09/05 603,161 102.28 617 606
News America, Inc. 02/27/07 2,785,000 101.17 2,817 2,727
Prime Mortgage Trust 11/22/06 2,484,865 98.26 2,442 2,475
Prime Mortgage Trust 10/25/06 2,197,933 98.90 2,174 2,201
RAAC Series 05/08/06 1,043,611 100.00 1,044 1,043
Rabobank Capital Funding II 05/23/05 20,000 101.79 20 20
Rabobank Capital Funding Trust 05/19/05 40,000 100.77 40 39
Resona Preferred Global Securities
Cayman, Ltd. 07/20/05 300,000 100.90 303 317
SMFG Preferred Capital USD 1, Ltd. 12/13/06 970,000 100.00 300 973
Shinsei Finance Cayman, Ltd. 03/22/06 400,000 100.00 400 405
Sigma Finance, Inc. 07/26/06 690,000 100.00 690 690
Southern Natural Gas Co. 03/28/07 60,000 100.05 60 60
TNK-BP Finance SA 07/13/06 400,000 99.83 399 424
Time Warner Cable, Inc. 04/04/06 265,000 99.82 265 266
Time Warner Cable, Inc. 04/04/06 4,380,000 99.77 4,370 4,406
Truman Capital Mortgage Loan Trust 07/27/06 1,651,182 100.00 1,651 1,651
--------------
30,292
==============
</Table>
158 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (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 -- 0.7%
BNP Paribas Capital Trust 06/01/06 850,000 112.20 954 947
Bombardier, Inc. 11/10/06 EUR 125,000 128.47 161 180
Catlin Insurance Co., Ltd. 01/01/07 530,000 100.45 533 534
DG Funding Trust 11/04/03 118 10,587.51 1,249 1,249
Energy Partners, Ltd. 04/18/07 245,000 101.42 248 249
Gaz Capital for Gazprom 01/17/06 300,000 100.00 300 303
iPCS, Inc. 04/11/07 85,000 100.00 85 85
Indonesia Government International
Bond 04/24/07 465,000 99.25 462 460
KAR Holdings, Inc. 04/13/07 295,000 101.57 300 306
Level 3 Financing, Inc. 04/26/07 220,000 104.50 230 229
Max USA Holdings, Ltd. 04/11/07 370,000 99.76 369 372
SB Treasury Co. LLC 06/01/06 650,000 106.81 694 678
Security Capital Assurance, Ltd. 04/24/07 290,000 101.96 296 295
Time Warner Cable, Inc. 04/04/07 1,040,000 99.82 1,039 1,043
Time Warner Cable, Inc. 04/04/07 425,000 99.77 424 428
Time Warner Cable, Inc. 04/04/07 850,000 100.67 856 860
--------------
8,218
==============
</Table>
Illiquid securities and restricted securities may be priced by the Funds
using fair value procedures approved by the Board of Trustees.
Notes to Financial Statements 159
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 RIMCo
(the "RIMCo Agreement") and the portfolio management contract with each Money
Manager of the Funds (collectively, the "portfolio management contracts") at a
meeting held on April 24, 2007. 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 RIMCo. In preparation for the annual review, the Independent Trustees,
with the advice and assistance of their independent counsel, also requested and
the Board considered (1) information and reports prepared by RIMCo relating to
the services provided by RIMCo (and its affiliates) to the Funds; (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 RIMCo believed by the provider to be generally comparable in investment
objectives and size to the Funds; and (3) RIMCo's response to questions from the
Board concerning the Third-Party Information addressing, among other things,
performance and expense differentials between certain Funds and their respective
Comparable Funds. The foregoing information requested by the Trustees or
provided by RIMCo is collectively called the "Agreement Renewal Information."
The Independent Trustees also received a memorandum from their independent
counsel discussing the legal standards for their consideration of the proposed
continuances.
On April 23, 2007, the Independent Trustees met to review the Agreement Renewal
Information in a private session with their independent counsel at which no
representatives of RIMCo or management were present. At the April 24 meeting of
the Board of Trustees, the Board, including the Independent Trustees, reviewed
the proposed continuance of the RIMCo Agreement and the portfolio management
contracts with management and independent counsel to the Independent Trustees.
Presentations made by RIMCo to the Board as part of this review encompassed the
Funds and all other RIMCo-managed funds for which the Board has supervisory
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 analyses received from RIMCo 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. RIMCo has engaged multiple
Money Managers for all Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible
under the RIMCo Agreement for determining, implementing and maintaining the
investment program for each Fund. Assets of each Fund generally have been
allocated among the multiple Money Managers selected by RIMCo, subject to Board
approval, for that Fund. RIMCo manages directly a portion of certain Funds'
assets employing a "select holdings strategy," as described below, and directly
manages the investment of each Fund's cash reserves. RIMCo also may manage
directly any portion of each Fund's assets that RIMCo determines not to allocate
to the Money Managers and portions of a Fund during transitions between Money
Managers. In all cases, assets are managed directly by RIMCo in accordance with
the RIMCo Agreement.
RIMCo is responsible for selecting, subject to Board approval, Money Managers
for each Fund and for actively managing allocations and reallocations of assets
among the Money Managers. RIMCo's goal is to construct and manage diversified
portfolios in a risk aware manner. 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
RIMCo (each, a "segment") in accordance with the Fund's applicable investment
objective, policies and restrictions, any constraints placed by RIMCo upon their
selection of portfolio securities and the Money Manager's specified role in a
Fund. RIMCo 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, RIMCo 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 RIMCo's research and ongoing review and analysis, such
actions are appropriate. RIMCo may assign specific investment constraints from
time to time for each Money Manager intended to capitalize on the strengths of
that Money Manager or to coordinate the investment activities of Money Managers
for the Fund in a complementary
160 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
manner. Therefore, RIMCo's selection of Money Managers is made not only on the
basis of performance considerations but anticipated compatibility with other
Money Manager in the same Fund. In light of the foregoing, the overall
performance of each Fund over appropriate periods reflects, in great part, the
performance of RIMCo in designing the Fund's investment program, structuring the
Fund, selecting an effective Money Manager with a particular investment style or
sub-style for a segment that is complementary to the styles of the Money
Managers of other Fund segments, and allocating assets among the Money Managers
in a manner designed to achieve the objectives of the Fund.
The Board considered that the prospectuses for the Funds and other public
disclosures emphasize to investors RIMCo'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 that information into account when deciding to purchase
shares of any such Fund.
The Board also considered the special expertise of RIMCo 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 RIMCo on comparable terms given the
need to continue 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 RIMCo Agreement, including
the following:
1. The nature, scope and quality of the services provided to the Fund by RIMCo;
2. The advisory fee paid by the Fund to RIMCo 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 RIMCo as to other fees and benefits received by RIMCo
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 RIMCo as to expenses incurred by the Fund; and
5. Information provided by RIMCo as to the profits that RIMCo derives from its
mutual fund operations generally and from the Fund.
As noted above, RIMCo pursuant to the terms of the RIMCo Agreement directly
manages a portion--up to 10%--of the assets of each of the Equity I Fund, the
Equity Q Fund and the International Fund (each a "Participating Fund") utilizing
a select holdings strategy, the actual allocation being determined by each
Participating Fund's RIMCo portfolio manager. The select holdings strategy
utilized by RIMCo in managing such assets for a Participating Fund is designed
to increase the Participating Fund's exposure to stocks that are viewed as
attractive by multiple Money Managers of that Participating Fund. The Board
reviewed the results of the select holdings strategy in respect of each
Participating Fund since implementation taking into account that the strategy
has been utilized for a limited period of time. The Trustees considered that
RIMCo 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 RIMCo generally and from the Participating Fund
consequently may increase incrementally. The Board, however, also considered
RIMCo'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 carrying out the select
holdings strategy; the limited amount of assets that are managed directly by
RIMCo pursuant to the select holdings strategy; and the fact that the aggregate
investment advisory fees paid by the Participating Fund are not increased as a
result of the select holdings strategy.
At the April 24 Board meeting, RIMCo and management discussed the reasonableness
of the Funds' investment advisory fees. In discussing whether the Funds'
performance supported these fees, RIMCo noted differences between the investment
strategies of certain Funds and their respective Comparable Funds in pursuing
their investment objectives, including Fund 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 RIMCo, these strategies may be
expected to result, and for certain Funds during the periods covered by the
Third-Party Information did result, in lower performance than that of some of
their respective Comparable Funds. RIMCo 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.
Basis for Approval of Investment Advisory Contracts 161
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
On the basis of the Agreement Renewal Information and other information
previously received by the Board from RIMCo during the course of the year or
presented at the April 24 Board meeting by RIMCo, the Board, in respect of each
Fund, found, after giving effect to any applicable waivers and/or reimbursements
(1) the advisory fee charged by RIMCo to be reasonable in light of the nature,
scope and quality of the services provided to the Funds; (2) the relative
expense ratio of the Fund was comparable to those of its Comparable Funds; (3)
RIMCo's methodology of allocating expenses of operating funds in the complex was
reasonable; and (4) RIMCo's profitability with respect to the Fund was not
excessive in light of the nature, scope and quality of the services provided by
RIMCo. The Board also concluded that the performance of each of the Funds
supported continuation of the RIMCo Agreement. 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 also
considered RIMCo's investment strategy of managing the Funds in a risk aware
manner.
At the April 24 Board meeting, 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. The
Board determined that the investment advisory fees for each Fund appropriately
reflect any economies of scale realized by that Fund, based upon such factors as
the 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 RIMCo by institutional clients with
investment objectives similar to those of the Funds and other RIC funds under
the Board's supervision are lower, and may, in some cases, be substantially
lower, than the rates paid by RIC funds supervised by the Board, including the
Funds. The Trustees reviewed with RIMCo the differences in the scope of services
it provides to institutional clients and the Funds. In response to the Trustees'
inquiries, RIMCo noted, among other things, that institutional clients have
fewer administrative needs than the Funds. It was further noted by RIMCo 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.
After considering the foregoing and other relevant factors, the Board concluded
that continuation of the RIMCo Agreement on its current terms and conditions
would be in the best interests of the Funds and their respective shareholders
and voted to approve the continuation of the agreement.
At the April 24 Board meeting, with respect to the evaluation of the terms of
portfolio management contracts with Money Managers, the Board received and
considered information from RIMCo reporting for each Money Manager, among other
things, the Money Manager's performance over various periods; RIMCo's assessment
of the performance of each Money Manager; any significant business relationships
between the Money Manager and RIMCo or Russell Fund Distributors, Inc., the
Funds' underwriter; and RIMCo'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. RIMCo recommended that each Money Manager be
retained at its current fee rate. RIMCo 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 RIMCo; RIMCo is aware of the fees charged by Money Managers to other
clients; and RIMCo 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 RIMCo's explanation in light of the Board's
findings as to the reasonableness of the aggregate investment advisory fees paid
by each Fund and the fact that each Money Manager's fee is paid by RIMCo.
Based substantially upon RIMCo's recommendations together with the information
received from RIMCo in support of its recommendations at the April 24 meeting,
the Board concluded that the fees paid to the Money Managers of each Fund are
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 would be in the best interests of the Fund and its
shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the RIMCo Agreement or, other than RIMCo'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.
162 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 RIMCo, as RIC'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. RIMCo 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.
To reduce expenses, we may mail only one copy of the Funds' prospectus and each
annual and semi-annual report to those addresses shared by two or more accounts.
If you wish to receive individual copies of these documents, please call us at
(800) 787-7354 or contact your financial institution and we will begin sending
you individual copies thirty days after receiving your request.
Some Financial Intermediaries may offer electronic delivery of the Fund's
prospectus and annual and semiannual reports. Please contact your Financial
Intermediary for further details.
Shareholder Requests for Additional Information 163
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Russell Investment
Company ("RIC"), which has 35 funds, and Russell Investment Funds ("RIF"), which
has nine funds. Each of the trustees is a trustee of both RIC 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 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
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Thaddas L. Alston, Trustee since Appointed until - Senior Vice President, Larco 44 None
Born April 7, 1945 2006 successor is Investments, Ltd.
duly elected
909 A Street and qualified
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 44 - Director, Avista
Born January 22, 2000 successor is Blake, P.S. (accounting Corp;
1954 duly elected services) - Trustee,
Chairperson and qualified - Director and Chairman of the Principal
909 A Street since 2005 Audit Committee, Avista Investors Fund
Tacoma, Washington Annual Corp. (investment
98402-1616 - Trustee and Chairman of the company);
Operations and Distribution - Trustee,
Committee, WM Group of Principal
Funds, 1999-2006 Variable
- February 2002 to June 2005, Contracts Fund
Chairman of the Audit (investment
Committee, RIC and RIF company)
- Regent, University of
Washington
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 44 None
Born June 6, 1946 2003 successor is Vice President and Chief
Chairman of duly elected Financial Officer, Waddell &
909 A Street Audit Committee and qualified Reed Financial, Inc.
Tacoma, Washington since 2005 - 2003, Retired
98402-1616 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
164 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 44 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected several additional
1955 Chairman of the and qualified. subsidiary companies,
Nominating and including Simpson Timber
909 A Street Governance Appointed until Company, Simpson Paper
Tacoma, Washington Committee since successor is Company and Simpson Tacoma
98402-1616 2007 duly elected Kraft Company
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack R. Thompson, Trustee since Appointed until - September 2003 to present, 44 - 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 165
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 44 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 RIMCo
Tacoma, Washington - Chairman Emeritus, RIC and
98402-1616 RIF; Russell Implementation
Services Inc. (broker-dealer
and investment adviser
("RIS")); Russell 20-20
Association (non-profit
corporation); and Russell
Trust Company (non-
depository trust company
("RTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee Emeritus Five year term - President, Anderson 44 None
Born October 15, since 2007 Management Group LLC
1931 (private investments
consulting)
909 A Street - February 2002 to June 2005,
Tacoma, Washington Lead Trustee, RIC and RIF
98402-1616 - Trustee of RIC and RIF Until
2006
- Chairman of the Nominating
and Governance Committee
2006
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 44 None
Born December 1, since 2003 - Trustee of RIC and RIF Until
1919 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 44 None
Born June 8, 1925 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 44 None
Born October 6, since 2006 - Trustee of RIC and RIF Until
1930 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of RIC and
RIF.
166 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 44 None
Born May 5, 1926 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 167
RUSSELL INVESTMENT COMPANY
INSTITUTIONAL FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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, RIC
Born December 16, 1966 Officer since by Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, RIMCo
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, RIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, RIMCo
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, RIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, RIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, RIMCo, RTC 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, RIC, RIF, FRC, RTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, RIMCo and RFD
2004 - 1999 to 2003, Chief Financial Officer, FRC, RIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Gregory J. Lyons, Secretary since Until successor - Associate General Counsel and Assistant Secretary FRC
Born August 24, 1960 2007 is chosen and and RIA
qualified by - Director and Secretary, RIMCo and RFD
909 A Street Trustees - Secretary and Chief Legal Counsel, RIC and RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
168 Disclosure of Information about Fund Directors
INSTITUTIONAL FUNDS
RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul E. Anderson
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
Gregory J. Lyons, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Josiah Quincy Building
200 Newport Avenue
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF APRIL 30, 2007*
Equity I Fund
AllianceBernstein L.P., New York, NY
Columbus Circle Investors, Stamford, CT
Institutional Capital LLC, 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
Berkeley Capital Management LLC, San Francisco, CA
ClariVest Asset Management LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Delphi Management, Inc., Boston, MA
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
Marsico Capital Management, LLC, Denver, CO
MFS Institutional Advisors, Inc., Boston, MA
Mondrian Investment Partners Ltd., London, England
Nicholas-Applegate Capital Management LLC, San Diego, CA
The Boston Company Asset Management, LLC, Boston, MA
Wellington Management Company, LLP, Boston, MA
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
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 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 169
INSTITUTIONAL FUNDS
RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
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
* A complete list of current money managers can also be found at
www.Russell.com.
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 Russell Investment Company.
Such offering is made only by Prospectus, which includes details as to offering
price and other material information.
170 Manager, Money Managers and Service Providers
(RUSSELL LOGO)
Russell Investment Group
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com
On July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company, and Frank Russell Investment Management Company changed its
name to Russell Investment Management Company.
36-08-068 (1 04/07)
SPECIALTY FUNDS
2007 Semiannual Report
CLASS A, C, E, AND S SHARES:
EMERGING MARKETS FUNDS
REAL ESTATE SECURITIES FUND
SHORT DURATION BOND FUND
CLASS C, E, AND S SHARES:
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, 2007
(RUSSELL LOGO)
Russell Investment Company
Russell Investment Company is a series investment company with 35 different
investment portfolios referred to as Funds. These financial statements report on
eight of these Funds.
Russell Investment Management Company
Responsible for overall management and administration of the Funds.
[Blank Page]
Russell Investment Company
Specialty Funds
Semiannual Report
April 30, 2007 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Emerging Markets Fund................................................ 3
Real Estate Securities Fund.......................................... 16
Short Duration Bond Fund............................................. 20
Tax Exempt Bond Fund................................................. 34
Tax-Managed Large Cap Fund........................................... 48
Tax-Managed Mid & Small Cap Fund..................................... 54
Select Growth Fund................................................... 63
Select Value Fund.................................................... 70
Notes to Schedules of Investments.................................... 76
Statement of Assets and Liabilities.................................. 78
Statement of Operations.............................................. 82
Statements of Changes in Net Assets.................................. 84
Financial Highlights................................................. 88
Notes to Financial Highlights........................................ 98
Notes to Financial Statements........................................ 99
Basis for Approval of Investment Advisory Contracts.................. 118
Shareholder Requests for Additional Information...................... 121
Disclosure of Information about Fund Directors....................... 122
Manager, Money Managers and Service Providers........................ 126
</Table>
Russell Investment Company - Specialty Funds.
Copyright (c) Russell Investment Group 2007. 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 changed its name to
Russell Investment Company ("RIC"). RIC Funds are distributed by Russell Fund
Distributors, Inc., and advised by Russell Investment Management Company
("RIMCo"). Effective July 1, 2006 RIMCo changed its name from Frank 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.
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,087.80 $ 1,005.20
Expenses Paid During
Period* $ 3.30 $ 3.17
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.89%
(representing the two month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,189.70 $ 1,011.70
Expenses Paid During
Period* $ 14.33 $ 13.17
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.64%
(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 E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,194.30 $ 1,015.42
Expenses Paid During
Period* $ 10.28 $ 9.44
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.89%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,195.10 $ 1,016.66
Expenses Paid During
Period* $ 8.93 $ 8.20
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.64%
(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).
Emerging Markets Fund 3
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 89.2%
Austria - 0.1%
Raiffeisen International Bank
Holding AG 8,900 1,226
------------
Bermuda - 0.9%
Aquarius Platinum, Ltd. 42,000 1,249
Brilliance China Automotive
Holdings, Ltd. (AE) 5,874,000 1,229
Credicorp, Ltd. (N) 100,801 5,260
Shangri-La Asia, Ltd. 506,000 1,235
Sinofert Holdings, Ltd. 3,562,000 1,804
TPV Technology, Ltd. 2,252,000 1,511
Wilson Sons, Ltd. (AE) 42,644 504
------------
12,792
------------
Brazil - 8.3%
All America Latina Logistica SA 252,052 2,944
Aracruz Celulose SA - ADR 30,000 1,650
Banco do Brasil SA 273,400 9,369
Banco Itau Holding Financeira SA - ADR 161,700 6,238
Brasil Telecom Participacoes SA - ADR (N) 49,200 2,609
Centrais Eletricas Brasileiras SA (AE) 221,305,400 5,017
Cia Brasileira de Distribuicao Grupo Pao de
Acucar - ADR (AE)(N) 78,400 2,498
Cia de Bebidas das Americas - ADR 38,900 2,273
Cia de Saneamento Basico do Estado de Sao Paulo 55,530,000 7,520
Cia de Saneamento Basico do Estado de Sao Paulo
- ADR (N) 34,313 1,185
Cia Siderurgica Nacional SA 127,233 5,512
Cia Vale do Rio Doce - ADR 402,200 13,751
Cia Vale do Rio Doce - ADR (N) 253,100 10,278
Companhia de Saneamento de Minas Gerais 72,000 925
Cyrela Brazil Realty SA (AE) 168,100 1,763
EDP - Energias do Brasil SA (AE) 91,400 1,462
Empresa Brasileira de Aeronautica SA - ADR (N) 25,300 1,187
Gerdau SA 7,300 124
Gerdau SA - ADR (N) 495,500 9,925
Gol Linhas Aereas Inteligentes SA - ADR (N) 48,700 1,389
Natura Cosmeticos SA 221,100 2,602
Perdigao SA 98,509 1,482
Petroleo Brasileiro SA - ADR 121,300 11,669
Souza Cruz SA (AE) 7,500 166
Tele Norte Leste Participacoes SA - ADR (N) 263,000 4,305
Unibanco - Uniao de Bancos Brasileiros SA 343,800 3,326
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Unibanco - Uniao de Bancos Brasileiros SA - GDR
(AE) 79,400 7,707
------------
118,876
------------
Canada - 0.3%
First Quantum Minerals, Ltd. 53,900 3,721
------------
Cayman Islands - 1.2%
Agile Property Holdings, Ltd. 1,034,000 1,087
ASM Pacific Technology 332,500 2,101
Focus Media Holding, Ltd. - ADR (AE)(N) 54,000 1,998
Foxconn International Holdings, Ltd. (AE) 614,000 1,835
Global Bio-Chem Technology Group Co., Ltd. 1,646,000 701
Hutchison Telecommunications International, Ltd.
(AE) 713,000 1,470
Integra Group Holdings - GDR (AE) 71,100 1,491
Kingboard Chemical Holdings, Ltd. 422,500 1,963
Luen Thai Holdings, Ltd. 1,628,000 253
Shimao Property Holdings, Ltd. 618,500 1,306
Shui On Land, Ltd. (AE) 1,410,000 1,211
Sina Corp./China (AE)(N) 33,400 1,152
Tencent Holdings, Ltd. 245,000 837
------------
17,405
------------
Chile - 0.6%
Banco de Credito e Inversiones 46,400 1,508
Banco Santander Chile SA - ADR 72,747 3,594
Coca-Cola Embonor SA - ADR 56,110 774
Embotelladora Andina SA - ADR 62,100 1,261
Enersis SA - ADR 12,647 240
Lan Airlines SA - ADR (N) 20,800 1,521
------------
8,898
------------
China - 5.4%
Air China, Ltd. Class H 174,000 118
Angang Steel Co., Ltd. Class H 668,000 1,268
Anhui Conch Cement Co., Ltd. Class H 774,000 3,117
Bank of Communications Co., Ltd. Class H 970,000 1,021
Byd Co., Ltd. Class H 45,500 280
China Coal Energy Co. (AE) 1,010,600 988
China COSCO Holdings Co., Ltd. Class H 5,085,850 4,590
China Eastern Airlines Corp., Ltd. Class H (AE) 2,538,000 752
</Table>
4 Emerging Markets Fund
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
China International Marine Containers Co., Ltd.
Class B 570,330 1,438
China Merchants Bank Co., Ltd. (AE) 694,000 1,689
China Petroleum & Chemical Corp. - ADR (N) 46,440 4,050
China Petroleum & Chemical Corp. Class H 11,429,254 9,980
China Shenhua Energy Co., Ltd. 3,380,000 8,383
China Shipping Container Lines Co., Ltd. Class H 8,076,000 3,868
China Shipping Development Co., Ltd. Class H 1,698,000 3,183
China Southern Airlines Co., Ltd. Class H (AE) 1,786,000 788
China Telecom Corp., Ltd. Class H 13,583,000 6,427
Datang International Power Generation Co., Ltd.
Class H 2,310,000 2,636
Guangzhou R&F Properties Co., Ltd. 1,132,800 2,718
Huaneng Power International, Inc. Class H 1,312,000 1,330
Industrial & Commercial Bank of China (AE) 4,755,000 2,593
Jiangxi Copper Co., Ltd. Class H 682,000 956
Maanshan Iron & Steel Class H 2,089,600 1,431
PetroChina Co., Ltd. Class H 5,731,176 6,434
Ping An Insurance Group Co. of China, Ltd. Class
H 648,600 3,441
Shanghai Forte Land Co., Ltd. Class H 1,970,000 899
Shenzhen Expressway Co., Ltd. Class H 270,000 185
Sinopec Shanghai Petrochemical Co., Ltd. Class H 688,000 392
Sinopec Yizheng Chemical Fibre Co., Ltd. Class H
(AE) 628,000 231
Sinotrans, Ltd. Class H 379,000 149
Weiqiao Textile Co. Class H 451,500 805
Wumart Stores, Inc. Class H (AE) 703,200 618
Yanzhou Coal Mining Co., Ltd. Class H 668,400 690
ZTE Corp. Class H 132,100 615
------------
78,063
------------
Colombia - 0.3%
BanColombia SA 272,343 1,935
BanColombia SA - ADR (N) 105,500 2,960
------------
4,895
------------
Czech Republic - 0.0%
Philip Morris CR 276 134
------------
Egypt - 1.9%
Commercial International Bank 93,384 970
Egyptian Co. for Mobile Services 108,557 3,036
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Egyptian Financial Group-Hermes Holding 101,500 660
Orascom Construction Industries 186,908 10,781
Orascom Construction Industries - GDR 43,100 5,029
Orascom Telecom Holding SAE 250,515 3,448
Orascom Telecom Holding SAE - GDR 5,400 364
Orascom Telecom Holding SAE - GDR (N) 50,800 3,404
------------
27,692
------------
Hong Kong - 2.6%
Beijing Enterprises Holdings, Ltd. 926,000 2,388
China Everbright, Ltd. (AE) 380,000 483
China Insurance International Holdings Co., Ltd.
(AE) 1,116,000 1,390
China Merchants Holdings International Co., Ltd. 581,000 2,577
China Mobile, Ltd. 1,361,500 12,298
China Mobile, Ltd. - ADR (N) 77,800 3,502
China Netcom Group Corp. Hong Kong, Ltd. 1,762,000 4,344
China Resources Enterprise 786,000 2,638
China Resources Power Holdings Co. 316,000 557
Citic Pacific, Ltd. 349,000 1,314
Denway Motors, Ltd. 4,700,000 1,861
Guangdong Investment, Ltd. 610,000 327
Guangzhou Investment Co., Ltd. 4,256,000 993
Melco International Development 567,000 1,098
Shanghai Industrial Holdings, Ltd. 151,000 396
Shenzhen Investment, Ltd. 1,638,000 972
------------
37,138
------------
Hungary - 1.2%
Magyar Telekom Telecommunications PLC 576,179 3,343
MOL Hungarian Oil and Gas PLC 85,247 10,391
MOL Hungarian Oil and Gas PLC - ADR 31,000 3,844
------------
17,578
------------
India - 6.0%
Allahabad Bank 243,535 464
Ambuja Cements, Ltd. 586,000 1,678
Andhra Bank 429,000 841
Bajaj Auto, Ltd. 42,283 2,498
Bank of Baroda 220,000 1,251
</Table>
Emerging Markets Fund 5
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank of India 30,000 139
BF Utilities, Ltd. (AE) 25,735 1,158
Bharti Tele Ventures, Ltd. (AE) 483,100 9,456
Chennai Petroleum Corp., Ltd. 194,660 1,004
Container Corp. of India 53,232 2,668
Dish TV India, Ltd. (AE) 488,161 1,267
Financial Technologies India, Ltd. 33,600 1,564
GAIL India, Ltd. - GDR 63,000 2,677
Gateway Distriparks, Ltd. 124,867 526
Genesis Indian Investment Co., Ltd. (AE) 619,019 24,340
GMR Infrastructure, Ltd. (AE) 47,137 482
Great Eastern Shipping Co., Ltd. (The) 172,638 1,031
HDFC Bank, Ltd. - ADR (N) 30,500 2,215
Hindustan Petroleum Corp., Ltd. 24,261 159
Housing Development Finance Corp. 78,100 3,127
ICICI Bank, Ltd. 209,320 4,358
Indiabulls Financial Services, Ltd. 58,232 675
Indian Overseas Bank 250,000 699
Industrial Development Bank of India, Ltd. 471,000 961
Mahanagar Telephone Nigam 175,906 629
Oil & Natural Gas Corp., Ltd. 72,735 1,607
Oriental Bank of Commerce 111,000 530
Petronet LNG, Ltd. (AE) 75,439 82
Reliance Industries, Ltd. 128,902 4,833
State Bank of India, Ltd. - GDR 66,950 4,561
Sun TV Network, Ltd. 58,101 2,258
Suzlon Energy, Ltd. 107,505 3,086
Union Bank of India 118,000 303
Videocon Industries, Ltd. 133,233 1,287
Zee Entertainment Enterprises, Ltd. 266,775 1,877
------------
86,291
------------
Indonesia - 3.0%
Aneka Tambang Tbk PT 1,521,146 2,576
Astra Agro Lestari Tbk PT 301,289 518
Astra International Tbk PT 1,987,277 3,120
Bank Danamon Indonesia Tbk PT 4,326,700 3,044
Bank Mandiri Persero Tbk PT 8,304,227 2,771
Bank Rakyat Indonesia 17,570,272 10,069
Perusahaan Gas Negara PT 939,000 1,074
Ramayana Lestari Sentosa Tbk PT 5,957,500 521
Telekomunikasi Indonesia Tbk PT 13,544,200 15,604
Telekomunikasi Indonesia Tbk PT - ADR 69,100 3,174
------------
42,471
------------
Israel - 2.8%
Bank Hapoalim BM 1,412,249 7,374
Bank Leumi Le-Israel BM 1,471,969 5,555
Bezeq Israeli Telecommunication Corp., Ltd. 572,837 910
Check Point Software Technologies (AE)(N) 442,828 10,428
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Discount Investment Corp. 2,511 76
IDB Development Corp., Ltd. 12,255 451
Israel Chemicals, Ltd. 551,264 4,209
Israel Discount Bank (AE) 187,769 394
Mizrahi Tefahot Bank, Ltd. 74,094 549
Partner Communications 38,141 623
Tadiran Communications, Ltd. 13,949 720
Teva Pharmaceutical Industries, Ltd. - ADR 227,400 8,712
------------
40,001
------------
Kazakhstan - 0.2%
Halyk Savings Bank Kazakhstan - GDR (AE) 120,000 2,684
------------
Lebanon - 0.0%
Solidere - GDR 8,200 128
------------
Luxembourg - 2.4%
Evraz Group SA - GDR 27,700 970
Genesis Smaller Companies 415,184 30,396
Tenaris SA - ADR (N) 79,565 3,689
------------
35,055
------------
Malaysia - 2.2%
AirAsia BHD (AE) 2,220,300 1,248
AMMB Holdings BHD 325,500 377
Bumiputra-Commerce Holdings BHD 3,950,442 12,367
Bursa Malaysia BHD 760,200 2,546
Digi.Com BHD 195,800 1,159
DRB-Hicom BHD 184,700 107
Genting BHD 287,000 708
Golden Hope Plantations BHD 33,700 78
Hong Leong Bank BHD 168,800 314
IGB Corp. BHD 1,829,900 1,513
IOI Corp. BHD 474,400 3,470
KLCC Property Holdings BHD 256,000 285
Kuala Lumpur Kepong BHD 51,400 195
Malaysia International Shipping Corp. BHD 43,700 123
Malaysian Bulk Carriers BHD 331,700 381
Mulpha International BHD (AE) 564,900 303
Multi-Purpose Holdings BHD (AE) 518,200 372
PLUS Expressways BHD 137,100 121
PPB Group BHD 124,000 272
Proton Holdings BHD 169,800 314
Public Bank BHD 130,100 379
</Table>
6 Emerging Markets Fund
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sime Darby BHD 890,700 2,381
SP Setia BHD 221,700 531
TA Enterprise BHD 954,000 519
TAN Chong Motor Holdings BHD 233,100 87
Tenaga Nasional BHD 525,800 1,741
YTL Corp. BHD 127,300 270
------------
32,161
------------
Mexico - 6.2%
Alfa SAB de CV Class A (N) 781,800 5,829
America Movil SAB de CV (N) 2,157,400 5,669
America Movil SAB de CV
Series L 277,800 14,593
Carso Global Telecom SA de CV (AE) 24,600 112
Cemex SAB de CV (AE)(N) 4,049,356 13,166
Cemex SAB de CV - ADR (AE) 40,000 1,300
Corp. Moctezuma SAB de CV 365,800 1,069
Fomento Economico Mexicano SAB de CV - ADR 33,524 3,610
Grupo Aeroportuario del Pacifico SA de CV - ADR 28,100 1,271
Grupo Aeroportuario del Pacifico SA de CV Class
B (N) 44,600 202
Grupo Aeroportuario del Sureste SA de CV Class B 53,700 259
Grupo Aeroportuario del Sureste SAB de CV - ADR 21,700 1,046
Grupo Carso SA de CV (N) 115,000 456
Grupo Financiero Banorte SAB de CV Class O (N) 1,588,800 6,900
Grupo Mexico SAB de CV 884,400 4,723
Grupo Modelo SAB de CV 899,900 4,599
Grupo Televisa SA (N) 773,900 4,346
Grupo Televisa SA - ADR 63,692 1,786
Organizacion Soriana SAB de CV Class B 432,000 1,385
Telefonos de Mexico SA de CV (N) 490,900 840
Telefonos de Mexico SA de CV
Series L 70,000 2,390
Urbi Desarrollos Urbanos SA de CV (AE)(N) 1,629,580 6,809
Wal-Mart de Mexico SAB de CV 860,900 3,376
Wal-Mart de Mexico SAB de CV - ADR (N) 80,400 3,144
------------
88,880
------------
Netherlands - 0.7%
Pyaterochka Holding NV - GDR (AE) 236,463 7,150
Zentiva NV 30,200 2,172
------------
9,322
------------
Oman - 0.2%
Bank Muscat SAOG - GDR 196,790 2,427
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pakistan - 0.6%
Engro Chemical Pakistan, Ltd. 880,800 2,977
Fauji Fertilizer Co., Ltd. 1,804,822 3,428
ICI Pakistan, Ltd. 265,200 619
Pakistan Telecommunication Co., Ltd. 1,152,923 968
------------
7,992
------------
Philippines - 0.6%
Globe Telecom, Inc. 92,090 2,369
Manila Electric Co. Class B 58,500 88
Philippine Long Distance Telephone Co. 99,800 5,275
Philippine Long Distance Telephone Co. - ADR 15,200 812
------------
8,544
------------
Poland - 0.5%
Bank Pekao SA 28,000 2,612
KGHM Polska Miedz SA 105,849 4,004
Polski Koncern Naftowy Orlen (AE) 75,100 1,224
------------
7,840
------------
Russia - 5.4%
Kalina 15,100 566
LUKOIL - ADR (N) 292,776 22,924
LUKOIL - ADR 22,950 1,769
Magnit OAO (AE) 52,100 2,423
Magnitogorsk Iron & Steel Works - GDR (AE)(A) 87,200 1,090
Mechel - ADR (N) 20,800 679
MMC Norilsk Nickel - ADR 7,400 1,443
Mobile Telesystems - ADR 165,900 9,141
Mobile Telesystems OJSC 194,000 1,833
NovaTek OAO - GDR (A) 45,000 2,250
OAO Gazprom 300,000 2,970
OAO Gazprom - ADR (N) 66,400 2,646
OAO Gazprom - ADR 251,500 9,861
Promstroibank St. Petersburg 696,000 1,135
RBC Information Systems (AE) 135,259 1,285
Sberbank RF (AE) 2,995 11,651
Seventh Continent 69,600 1,992
Sistema-Hals - GDR (AE) 52,300 784
TMK OAO - GDR (AE) 14,100 513
TMK OAO Class T (AE) 109,400 996
------------
77,951
------------
</Table>
Emerging Markets Fund 7
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
South Africa - 7.4%
ABSA Group, Ltd. 157,375 3,227
African Bank Investments, Ltd. 284,124 1,362
Alexander Forbes, Ltd. (AE) 376,300 879
Anglo Platinum, Ltd. 7,511 1,208
AngloGold Ashanti, Ltd. 7,900 352
AngloGold Ashanti, Ltd. - ADR 27,234 1,214
Aspen Pharmacare Holdings, Ltd. (AE) 356,500 1,944
Aveng, Ltd. 952,728 6,465
Barloworld, Ltd. 163,375 4,536
Bidvest Group, Ltd. 288,600 6,008
DataTec, Ltd. 270,000 1,424
FirstRand, Ltd. 285,782 1,010
Foschini, Ltd. 261,994 2,711
Impala Platinum Holdings, Ltd. 261,566 8,408
Investec, Ltd. 179,029 2,520
Lewis Group, Ltd. 20,097 206
Massmart Holdings, Ltd. 96,500 1,337
Metropolitan Holdings, Ltd. 414,744 984
Mittal Steel South Africa, Ltd. 35,835 645
Murray & Roberts Holdings, Ltd. 12,010 103
Naspers, Ltd. Class N 135,800 3,428
Network Healthcare Holdings, Ltd. (AE) 1,253,000 2,625
Pick'n Pay Stores, Ltd. 173,454 863
Pretoria Portland Cement Co., Ltd. 39,100 2,667
Reunert, Ltd. 167,959 1,903
Sanlam, Ltd. 2,986,494 10,044
Sasol, Ltd. 306,800 10,530
Standard Bank Group, Ltd. 1,214,951 18,981
Steinhoff International Holdings, Ltd. 849,700 2,997
Tiger Brands, Ltd. 104,784 2,924
Truworths International, Ltd. 433,764 2,400
------------
105,905
------------
South Korea - 12.8%
Amorepacific Corp. 4,724 3,047
Asiana Airlines 39,020 315
CJ Home Shopping 6,922 494
Daelim Industrial Co. 12,780 1,496
Daewoo Engineering & Construction Co., Ltd. 11,820 295
Daewoo Shipbuilding & Marine Engineering Co.,
Ltd. 88,150 3,564
Daum Communications Corp. (AE)(N) 13,918 1,030
Dongbu Insurance Co., Ltd. (AE) 45,090 1,314
GS Engineering & Construction Corp. 32,324 3,207
GS Holdings Corp. 33,750 1,529
Hanjin Shipping Co., Ltd. 65,300 2,851
Hankook Tire Co., Ltd. 202,023 3,697
Hanwha Chem Corp. 259,120 4,350
Honam Petrochemical Corp. (N) 57,405 4,758
Hynix Semiconductor, Inc. (AE)(N) 165,100 5,651
Hyosung Corp. 61,700 2,550
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hyundai Development Co. 41,600 2,391
Hyundai Heavy Industries 903 229
Hyundai Mipo Dockyard 9,434 1,902
Hyundai Mobis 34,350 2,748
Hyundai Motor Co. (N) 65,470 4,147
Hyundai Steel Co. (N) 89,920 3,713
Industrial Bank of Korea (N) 237,400 4,735
KCC Corp. (N) 13,278 5,451
Kookmin Bank 181,842 16,314
Kookmin Bank - ADR 34,800 3,126
Korea Electric Power Corp. 200,570 8,118
Korea Electric Power Corp. - ADR 3,900 81
Korea Investment Holdings Co., Ltd. 34,550 2,039
Korean Air Lines Co., Ltd. 31,869 1,500
KT Corp. 80,670 3,622
KT Corp. - ADR 17,100 387
LG Corp. 37,900 1,385
LG Household & Health Care, Ltd. (N) 20,418 2,707
LG Petrochemical Co., Ltd. 74,880 2,516
LIG Non-Life Insurance Co., Ltd. (AE)(N) 35,500 593
Lotte Shopping Co., Ltd. 4,692 1,759
LS Cable, Ltd. 6,300 343
Orion Corp. 4,165 1,134
Poongsan Corp. 56,600 1,510
POSCO 26,146 10,980
Samsung Corp. 89,580 3,770
Samsung Electronics Co., Ltd. 16,296 9,979
Samsung Electronics Co., Ltd. - GDR (A) 20,255 6,190
Samsung Electronics Co., Ltd. - GDR 15,859 3,739
Samsung Fire & Marine Insurance Co., Ltd. 38,850 6,890
Samsung Securities Co., Ltd. (AE)(N) 103,100 6,028
Shinhan Financial Group Co., Ltd. 135,330 7,617
Shinsegae Co., Ltd. 8,231 5,589
SK Corp. 27,579 2,999
SK Telecom Co., Ltd. 13,620 2,865
SK Telecom Co., Ltd. - ADR 14,700 365
Tae Young Corp. 11,339 1,003
Woori Finance Holdings Co., Ltd. (N) 90,310 2,243
------------
182,855
------------
Taiwan - 8.0%
Acer, Inc. 155,514 295
Advantech Co., Ltd. 1,149,948 3,376
Asia Cement Corp. 960,640 999
AU Optronics Corp. 2,746,280 4,360
</Table>
8 Emerging Markets Fund
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
AU Optronics Corp. - ADR 101,317 1,612
Benq Corp. (AE) 2,016,000 767
Cathay Financial Holding Co., Ltd. 923,245 1,869
China Steel Corp. 6,538,920 7,388
China Steel Corp. - GDR 39,673 903
Chunghwa Telecom Co., Ltd. 678,000 1,277
CMC Magnetics Corp. (AE) 6,621,000 1,986
Compal Electronics, Inc. 2,170,892 1,972
D-Link Corp. 401,600 740
Delta Electronics, Inc. 1,272,850 3,973
Evergreen Marine Corp. Taiwan, Ltd. 1,707,870 1,042
Far Eastern Textile Co., Ltd. 1,348,995 1,225
Faraday Technology Corp. 278,987 830
Formosa Chemicals & Fibre Corp. 434,000 804
Formosa Plastics Corp. 1,168,000 2,226
Foxconn Technology Co., Ltd. 278,900 2,613
Fuhwa Financial Holding Co., Ltd. (AE) 3,632,135 1,564
High Tech Computer Corp. 347,200 5,170
HON HAI Precision Industry Co., Ltd. 1,990,372 13,115
King Yuan Electronics Co., Ltd. 1,352,000 1,026
Macronix International (AE) 3,242,086 1,351
MediaTek, Inc. 559,200 6,949
Micro-Star International Co., Ltd. 884,470 648
Mitac International 807,935 854
Nan Ya Plastics Corp. 1,269,710 2,309
Oriental Union Chemical Corp. 68,000 50
Phoenixtec Power Co., Ltd. 565,629 512
Powertech Technology, Inc. 409,000 1,522
Quanta Computer, Inc. 268,710 385
Realtek Semiconductor Corp. (AE) 330,000 664
Ritek Corp. (AE) 2,653,161 642
Siliconware Precision Industries Co. 2,356,625 4,477
Systex Corp. 64,441 67
Taiwan Cement Corp. 673,357 598
Taiwan Fertilizer Co., Ltd. 63,000 115
Taiwan Mobile Co., Ltd. 2,204,520 2,286
Taiwan Semiconductor Manufacturing Co., Ltd. 8,047,986 16,428
Taiwan Semiconductor Manufacturing Co., Ltd. -
ADR (N) 68,391 721
Teco Electric and Machinery Co., Ltd. 1,415,000 728
Tripod Technology Corp. 197,000 734
U-Ming Marine Transport Corp. 715,000 1,319
Uni-President Enterprises Corp. 2,565,000 2,517
United Microelectronics Corp. 6,471,935 3,725
Vanguard International Semiconductor Corp. 1,965,947 1,640
Walsin Lihwa Corp. (AE) 235,000 120
Wintek Corp. 797,630 614
Wistron Corp. 890,000 1,322
Wistron Corp. - GDR 34,100 513
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Yang Ming Marine Transport Corp. 174,000 113
Yieh Phui Enterprise 807,430 345
------------
115,400
------------
Thailand - 1.6%
Airports of Thailand PCL 1,228,500 2,102
Bank of Ayudhya PCL 5,547,700 3,395
Charoen Pokphand Foods PCL 3,874,100 506
Electricity Generating PCL 167,100 498
Glow Energy PCL 942,500 874
Precious Shipping PCL 272,400 208
PTT Chemical PCL 1,130,432 2,633
PTT PCL 647,600 4,097
Rayong Refinery PCL 1,829,000 973
Regional Container Lines PCL 962,600 686
Siam City Bank PCL 178,400 89
Siam Commercial Bank PCL 1,875,800 3,587
Thai Airways International PCL 425,800 572
Thai Beverage PCL 16,080,300 2,846
------------
23,066
------------
Turkey - 2.9%
Akcansa Cimento AS 75,895 465
Alarko Holding AS 76,060 182
Anadolu Efes Biracilik Ve Malt Sanayii AS (N) 141,445 4,811
BIM Birlesik Magazalar AS (AE) 21,300 1,344
Cimsa Cimento Sanayi VE Tica 263,875 1,838
Dogan Sirketler Grubu Holdings AS (N) 2,122,032 3,986
Eregli Demir ve Celik Fabrikalari TAS 504,954 5,760
Ford Otomotiv Sanayi AS 158,997 1,349
Hurriyet Gazetecilik AS 461,300 1,235
Ihlas Holding AS (AE) 1,899,716 977
Migros Turk TAS (N) 230,523 2,715
Trakya Cam Sanayi AS 281,839 798
Tupras Turkiye Petrol Rafine 125,785 2,549
Turk Hava Yollari (AE)(N) 105,752 642
Turk Sise ve Cam Fabrikalari AS (AE) 44,764 170
Turkiye Garanti Bankasi AS (N) 530,400 2,559
Turkiye Is Bankasi Class C (N) 1,117,590 5,282
Ulker Gida Sanayi ve Ticaret AS 10,228 41
Vestel Elektronik Sanayi ve Ticaret AS (AE)(N) 402,003 1,011
Yapi ve Kredi Bankasi (AE) 1,458,077 3,160
------------
40,874
------------
United Kingdom - 1.8%
Anglo American PLC 263,496 13,966
Antofagasta PLC 145,300 1,544
Astro All Asia Networks PLC 106,800 157
</Table>
Emerging Markets Fund 9
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hikma Pharmaceuticals PLC 218,800 1,658
Kazakhmys PLC 55,800 1,263
SABMiller PLC 87,100 2,066
Tullow Oil PLC 632,100 4,591
------------
25,245
------------
United States - 1.1%
Central European Distribution Corp. (AE)(N) 69,100 2,056
CTC Media, Inc. (AE)(N) 54,700 1,426
NII Holdings, Inc. (AE)(N) 27,500 2,111
Southern Copper Corp. (N) 117,426 9,429
------------
15,022
------------
Venezuela - 0.0%
Siderurgica Venezolana Sivensa SACA 1,306,495 50
------------
Zimbabwe - 0.0%
Delta Corp., Ltd. (B) 1,322,627 521
------------
TOTAL COMMON STOCKS
(cost $833,090) 1,279,103
------------
PREFERRED STOCKS - 5.3%
Brazil - 4.3%
Aracruz Celulose SA 306,400 1,659
Banco Bradesco SA (AE) 149,274 3,196
Banco Itau Holding Financeira SA 130,010 5,006
Brasil Telecom Participacoes SA 114,900,000 1,238
Braskem SA 231,835 1,980
Centrais Eletricas Brasileiras SA (AE) 296,316,500 6,972
Cia Brasileira de Distribuicao Grupo Pao de
Acucar 39,980,000 1,260
Cia de Tecidos do Norte de Minas - Coteminas 7,256,440 1,190
Cia Energetica de Minas Gerais 9,750,000 344
Cia Energetica de Sao Paulo Class Preferenc (AE) 149,100,000 2,248
Cia Paranaense de Energia (AE) 126,700,000 1,621
Cia Vale do Rio Doce (AE) 13,944 483
Duratex SA (AE) 19,200 425
Gerdau SA 19,400 396
Investimentos Itau SA 244,640 1,337
Petroleo Brasileiro SA 363,300 8,085
Tam SA 58,400 1,496
Tele Norte Leste Participacoes SA 262,400 4,399
Usinas Siderurgicas de Minas Gerais SA 342,400 16,268
Votorantim Celulose e Papel SA (AE) 19,600 391
Weg SA 164,800 1,363
------------
61,357
------------
Chile - 0.1%
Embotelladora Andina SA 205,300 707
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Colombia - 0.0%
BanColombia SA 7,200 51
------------
Russia - 0.1%
Transneft OAO 950 1,757
------------
South Korea - 0.8%
Hyundai Motor Co. 14,440 470
Samsung Electronics Co., Ltd. (N) 23,778 11,185
------------
11,655
------------
TOTAL PREFERRED STOCKS
(cost $48,378) 75,527
------------
WARRANTS & RIGHTS - 0.0%
Brazil - 0.0%
Investimentos Itau SA(AE) 3 --
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
- -----------------------------------------------------------------------------
OPTIONS PURCHASED - 0.3%
(Number of Contracts)
Brazil - 0.0%
Bovespa Index Futures
Jun 2007 49,290.00 (BRL) Call (324) 7,863 129
Jun 2007 49,425.88 (BRL) Call (156) 3,796 23
------------
152
------------
South Korea - 0.3%
Kospi 200 Index Futures
Jun 2007 155.54 (KRW) Call (136) 9,231 3,975
------------
TOTAL OPTIONS PURCHASED
(cost $2,755) 4,127
------------
</Table>
10 Emerging Markets Fund
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.9%
United States - 4.9%
Russell Investment Company
Money Market Fund 68,425,000 68,425
United States Treasury Bills (c)(z)(sec.)
5.045% due 06/14/07 300 298
5.046% due 06/14/07 2,200 2,187
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $70,910) 70,910
------------
OTHER SECURITIES - 6.4%
Russell Investment Company
Money Market Fund (X) 17,747,567 17,748
State Street Securities
Lending Quality Trust (X) 74,589,909 74,590
------------
TOTAL OTHER SECURITIES
(cost $92,338) 92,338
------------
TOTAL INVESTMENTS - 106.1%
(identified cost $1,047,471) 1,522,005
OTHER ASSETS AND LIABILITIES,
NET - (6.1%) (87,823)
------------
NET ASSETS - 100.0% 1,434,182
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 11
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 05/07 (159) 13,458 (302)
JSE-40 Index (South Africa)
expiration date 06/07 (310) 11,229 783
Mexican Bolsa Index
expiration date 06/07 (100) 2,654 155
MSCI Taiwan Index
expiration date 05/07 (425) 13,286 (221)
------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 415
============
</Table>
<Table>
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- -----------------------------------------------------------------------------
Brazil - 0.1%
Bovespa Index Futures
Jun 2007 49,290 (BRL) Put (324) 7,863 (48)
Jun 2007 49,425.88 (BRL) Put (156) 3,796 (52)
South Korea - 0.3%
Kospi 200 Index Futures
Jun 2007 155.54 (KRW) Put (136) 11,362 (730)
------------
Total Liability for Options Written
(premiums received $788) (830)
============
</Table>
See accompanying notes which are an integral part of the financial statements.
12 Emerging Markets Fund
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 23 BRL 47 05/02/07 --
USD 20 BRL 41 05/03/07 --
USD 185 BRL 374 05/03/07 --
USD 473 BRL 1,000 06/20/07 18
USD 477 BRL 1,000 06/20/07 12
USD 487 BRL 1,000 06/20/07 2
USD 912 BRL 2,000 06/20/07 66
USD 930 BRL 2,000 06/20/07 47
USD 1,109 BRL 2,400 06/20/07 64
USD 1,386 BRL 3,000 06/20/07 81
USD 4,847 BRL 10,500 06/20/07 284
USD 40 GBP 20 05/01/07 --
USD 337 GBP 169 05/02/07 1
USD 38 HKD 298 05/02/07 --
USD 255 HKD 1,991 05/02/07 --
USD 539 KRW 500,000 06/20/07 (2)
USD 1,063 KRW 1,000,000 06/20/07 13
USD 1,066 KRW 1,000,000 06/20/07 9
USD 1,899 KRW 1,800,000 06/20/07 37
USD 2,950 KRW 2,800,000 06/20/07 60
USD 8,850 KRW 8,400,000 06/20/07 183
USD 56 MXN 607 05/03/07 --
USD 254 MXN 2,800 06/20/07 1
USD 901 MXN 10,000 06/20/07 9
USD 904 MXN 10,000 06/20/07 6
USD 135 MYR 461 05/03/07 --
USD 3 THB 112 05/02/07 --
USD 20 THB 700 05/03/07 --
USD 21 THB 732 05/04/07 --
USD 10 ZAR 73 05/03/07 --
USD 497 ZAR 3,470 05/03/07 (5)
USD 465 ZAR 3,228 05/04/07 (7)
USD 1 ZAR 8 05/07/07 --
USD 660 ZAR 5,000 06/20/07 45
USD 668 ZAR 5,000 06/20/07 37
USD 672 ZAR 5,000 06/20/07 33
USD 675 ZAR 5,000 06/20/07 30
USD 683 ZAR 5,000 06/20/07 21
USD 697 ZAR 5,258 06/20/07 44
USD 706 ZAR 5,000 06/20/07 (1)
USD 793 ZAR 5,600 06/20/07 (4)
USD 927 ZAR 7,000 06/20/07 60
USD 952 ZAR 7,200 06/20/07 63
USD 2,290 ZAR 17,300 06/20/07 148
USD 3,669 ZAR 27,742 06/20/07 241
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
BRL 60 USD 29 05/02/07 --
BRL 254 USD 125 05/02/07 --
BRL 57 USD 28 05/03/07 --
BRL 834 USD 410 05/03/07 (1)
BRL 2,900 USD 1,337 06/20/07 (80)
HKD 310 USD 40 05/02/07 --
HKD 855 USD 109 05/02/07 --
HKD 950 USD 121 05/02/07 --
HUF 19,775 USD 110 05/03/07 1
IDR 6,909,709 USD 759 05/01/07 (1)
KRW 100,000 USD 106 06/20/07 (2)
KRW 500,000 USD 527 06/20/07 (11)
KRW 1,300,000 USD 1,370 06/20/07 (28)
KRW 2,100,000 USD 2,216 06/20/07 (42)
MXN 2 USD -- 05/02/07 --
MXN 822 USD 75 05/02/07 --
MXN 702 USD 64 05/03/07 --
MYR 212 USD 62 05/03/07 --
THB 1,450 USD 42 05/02/07 --
ZAR 172 USD 24 05/02/07 --
ZAR 11 USD 1 05/04/07 --
ZAR 8,412 USD 1,198 05/07/07 7
ZAR 4,200 USD 556 06/20/07 (36)
ZAR 5,000 USD 662 06/20/07 (43)
ZAR 5,300 USD 702 06/20/07 (47)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts 1,313
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 13
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 4.5 65,609
Consumer Discretionary 4.2 58,236
Consumer Staples 4.7 64,646
Financial Services 23.0 333,599
Health Care 1.2 17,111
Integrated Oils 5.8 83,382
Materials and Processing 19.3 275,924
Miscellaneous 2.8 40,556
Other Energy 3.3 46,142
Producer Durables 1.5 21,969
Technology 9.6 137,260
Utilities 14.6 210,195
Warrants & Rights -- --
Options Purchased 0.3 4,127
Short-Term Investments 4.9 70,910
Other Securities 6.4 92,339
--------------- ---------------
Total Investments 106.1 1,522,005
Other Assets and Liabilities, Net (6.1) (87,823)
--------------- ---------------
Net Assets 100.0 1,434,182
=============== ===============
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 7.4 106,426
Asia 43.9 629,611
Europe 13.3 191,736
Latin America 21.9 314,063
Middle East 5.1 72,932
Other Regions 6.3 89,653
United Kingdom 1.8 25,245
Other Securities 6.4 92,339
--------------- ---------------
Total Investments 106.1 1,522,005
Other Assets and Liabilities, Net (6.1) (87,823)
--------------- ---------------
Net Assets 100.0 1,434,182
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
14 Emerging Markets Fund
RUSSELL INVESTMENT COMPANY
EMERGING MARKETS FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Austria 0.1
Bermuda 0.9
Brazil 8.3
Canada 0.3
Cayman Islands 1.2
Chile 0.6
China 5.4
Columbia 0.3
Czech Republic --*
Egypt 1.9
Hong Kong 2.6
Hungary 1.2
India 6.0
Indonesia 3.0
Israel 2.8
Kazakhstan 0.2
Lebanon --*
Luxembourg 2.4
Malaysia 2.2
Mexico 6.2
Netherlands 0.7
Oman 0.2
Pakistan 0.6
Philippines 0.6
Poland 0.5
Russia 5.4
South Africa 7.4
South Korea 12.8
Taiwan 8.0
Thailand 1.6
Turkey 2.9
United Kingdom 1.8
United States 1.1
Venezuela --*
Zimbabwe --*
Preferred Stocks 5.3
Warrants & Rights --*
Options Purchased 0.3
Short-Term Investments 4.9
Other Securities 6.4
---------------
Total Investments 106.1
Other Assets and Liabilities, Net (6.1)
---------------
100.0
===============
Futures Contracts --*
Foreign Currency Exchange Contracts 0.1
Options Written (0.1)
</Table>
* Less than .05% of net assets
See accompanying notes which are an integral part of the financial statements.
Emerging Markets Fund 15
RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 972.50 $ 1,006.15
Expenses Paid During
Period* $ 2.18 $ 2.21
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.32%
(representing the six month period annualized), multiplied by the average
account value over the period, multiplied by 61/365 (to reflect the period
since inception).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,062.90 $ 1,014.58
Expenses Paid During
Period* $ 10.54 $ 10.29
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 2.06%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,067.10 $ 1,018.25
Expenses Paid During
Period* $ 6.77 $ 6.61
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.32%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,068.20 $ 1,019.49
Expenses Paid During
Period* $ 5.49 $ 5.36
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.07%
(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).
16 Real Estate Securities Fund
RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.9%
Apartments - 15.2%
Apartment Investment & Management Co. Class A
(o)(N) 363,675 20,111
Archstone-Smith Trust (o) 1,949,734 101,601
AvalonBay Communities, Inc. (o) 532,850 65,146
Camden Property Trust (o) 446,500 31,099
Equity Residential (o)(N) 1,216,600 56,487
Essex Property Trust, Inc. (o)(N) 245,050 31,577
Home Properties, Inc. (o) 69,300 3,860
Mid-America Apartment Communities, Inc. (o) 125,900 6,792
Post Properties, Inc. (o)(N) 101,300 4,748
UDR, Inc. (o)(N) 484,900 14,566
------------
335,987
------------
Diversified - 6.0%
Colonial Properties Trust (o) 302,400 15,002
iStar Financial, Inc. (o) 129,000 6,182
Spirit Finance Corp. (o)(N) 276,200 3,974
Vornado Realty Trust (o)(N) 913,860 108,411
------------
133,569
------------
Free Standing Retail - 0.2%
Realty Income Corp. (o) 147,800 4,124
------------
Health Care - 6.1%
Cogdell Spencer, Inc. (o) 118,950 2,461
Health Care Property Investors, Inc. (o) 666,000 23,570
Health Care REIT, Inc. (o) 790,550 35,765
Healthcare Realty Trust, Inc. (o)(N) 173,800 5,920
LTC Properties, Inc. (o) 262,600 6,583
Nationwide Health Properties, Inc. (o)(N) 891,000 28,565
Omega Healthcare Investors, Inc. (o)(N) 338,700 5,690
Senior Housing Properties Trust (o) 266,300 6,080
Ventas, Inc. (o)(N) 480,200 20,245
------------
134,879
------------
Industrial - 7.5%
AMB Property Corp. (o) 826,100 50,318
DCT Industrial Trust, Inc. (o)(N) 780,000 8,759
First Potomac Realty Trust (o)(N) 164,000 4,233
ProLogis (o) 1,583,000 102,578
------------
165,888
------------
Lodging/Resorts - 9.0%
Ashford Hospitality Trust, Inc. (o) 356,200 4,274
DiamondRock Hospitality Co. (o)(N) 1,032,000 18,875
FelCor Lodging Trust, Inc. (o) 352,900 9,010
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hilton Hotels Corp. 743,300 25,272
Hospitality Properties Trust (o) 66,700 3,037
Host Hotels & Resorts, Inc. (o)(N) 3,483,264 89,311
LaSalle Hotel Properties (o)(N) 197,050 9,149
Starwood Hotels & Resorts Worldwide, Inc. (o) 613,025 41,085
------------
200,013
------------
Manufactured Homes - 0.4%
Equity Lifestyle Properties, Inc. (o)(N) 177,850 9,652
------------
Mixed Industrial/Office - 1.2%
Liberty Property Trust (o) 410,900 19,884
PS Business Parks, Inc. (o) 99,600 6,862
------------
26,746
------------
Office - 15.2%
Alexandria Real Estate Equities, Inc. (o) 223,600 23,668
American Financial Realty Trust (o)(N) 360,500 3,821
BioMed Realty Trust, Inc. (o) 488,650 14,029
Boston Properties, Inc. (o) 757,200 89,016
Brandywine Realty Trust (o)(N) 729,921 24,000
Brookfield Properties Corp. (N) 896,950 36,838
Corporate Office Properties Trust (o)(N) 126,400 5,955
Douglas Emmett, Inc. (o) 525,250 13,683
Highwoods Properties, Inc. (o) 260,000 10,603
HRPT Properties Trust (o)(N) 627,400 7,679
Kilroy Realty Corp. (o)(N) 131,000 9,947
Mack-Cali Realty Corp. (o)(N) 305,150 14,943
Parkway Properties, Inc. (o)(N) 92,100 4,881
SL Green Realty Corp. (o) 543,850 76,629
------------
335,692
------------
Regional Malls - 17.0%
CBL & Associates Properties, Inc. (o) 116,600 5,300
General Growth Properties, Inc. (o) 1,241,650 79,279
Macerich Co. (The) (o) 717,750 68,272
Simon Property Group, Inc. (o)(N) 1,675,600 193,163
Taubman Centers, Inc. (o)(N) 549,356 30,792
------------
376,806
------------
</Table>
Real Estate Securities Fund 17
RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Self Storage - 4.7%
Extra Space Storage, Inc. (o)(N) 669,700 12,530
Public Storage, Inc. (o)(N) 970,650 90,581
------------
103,111
------------
Shopping Centers - 11.2%
Cedar Shopping Centers, Inc. (o)(N) 215,000 3,434
Developers Diversified Realty Corp. (o)(N) 819,300 53,336
Federal Realty Investors Trust (o) 640,465 57,751
Kimco Realty Corp. (o)(N) 637,900 30,664
Kite Realty Group Trust (o)(N) 387,000 7,740
Regency Centers Corp. (o)(N) 945,200 77,885
Tanger Factory Outlet Centers (o)(N) 274,700 11,136
Weingarten Realty Investors (o)(N) 141,900 6,791
------------
248,737
------------
Specialty - 2.2%
Digital Realty Trust, Inc. (o)(N) 840,680 34,006
Plum Creek Timber Co., Inc. (o) 199,000 7,900
Rayonier, Inc. (o) 132,000 5,725
------------
47,631
------------
TOTAL COMMON STOCKS
(cost $1,319,155) 2,122,835
------------
SHORT-TERM INVESTMENTS - 4.2%
Russell Investment Company
Money Market Fund 91,715,000 91,715
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $91,715) 91,715
------------
OTHER SECURITIES - 8.2%
Russell Investment Company
Money Market Fund (X) 34,892,643 34,893
State Street Securities Lending Trust (X) 146,639,397 146,639
------------
TOTAL OTHER SECURITIES
(cost $181,532) 181,532
------------
TOTAL INVESTMENTS - 108.3%
(identified cost $1,592,402) 2,396,082
OTHER ASSETS AND LIABILITIES,
NET - (8.3%) (182,882)
------------
NET ASSETS - 100.0% 2,213,200
============
</Table>
See accompanying notes which are an integral part of the financial statements.
18 Real Estate Securities Fund
RUSSELL INVESTMENT COMPANY
REAL ESTATE SECURITIES FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Apartments 15.2
Diversified 6.0
Free Standing Retail 0.2
Health Care 6.1
Industrial 7.5
Lodging/Resorts 9.0
Manufactured Homes 0.4
Mixed Industrial/Office 1.2
Office 15.2
Regional Malls 17.0
Self Storage 4.7
Shopping Centers 11.2
Specialty 2.2
Short-Term Investments 4.2
Other Securities 8.2
---------------
Total Investments 108.3
Other Assets and Liabilities, Net (8.3)
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 19
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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
March 1, 2007 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,006.00 $ 1,006.84
Expenses Paid During
Period* $ 1.53 $ 1.53
</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 61/365 (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 C PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,017.80 $ 1,016.51
Expenses Paid During
Period* $ 8.36 $ 8.35
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.67%
(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). 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,021.10 $ 1,020.28
Expenses Paid During
Period* $ 4.56 $ 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). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
20 Short Duration Bond Fund
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,023.10 $ 1,021.52
Expenses Paid During
Period* $ 3.31 $ 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). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
Short Duration Bond Fund 21
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 79.0%
Asset-Backed Securities - 20.6%
AmeriCredit Automobile
Receivables Trust
Series 2005-AX Class A3
3.630% due 01/06/10 708 706
Argent Securities, Inc. (E)
Series 2006-M2 Class A2A
5.370% due 09/25/36 327 327
Asset Backed Securities Corp.
Home Equity (E)
Series 2002-HE1 Class M1
6.970% due 03/15/32 880 880
Asset Backed Securities Corp.
Home Equity Loan Trust (E)
Series 2004-HE6 Class A1
5.595% due 09/25/34 360 360
Atlantic City Electric Transition Funding LLC
Series 2003-1 Class A2
4.460% due 10/20/16 1,525 1,491
Bank One Issuance Trust
Series 2004-B2 Class B2
4.370% due 04/15/12 2,000 1,971
Bear Stearns Asset Backed
Securities Trust (E)
Series 2004-BO1 Class 1A1
5.520% due 09/25/34 119 119
BMW Vehicle Owner Trust
Series 2004-A Class A4
3.320% due 02/25/09 1,732 1,721
Cabela's Master Credit Card Trust (p)
Series 2006-3A Class A1
5.260% due 10/15/14 1,000 1,010
California Infrastructure PG&E-1 Series 1997-1
Class A8
6.480% due 12/26/09 995 1,000
California Infrastructure SCE-1 Series 1997-1
Class A7
6.420% due 12/26/09 1,252 1,256
Capital Auto Receivables Asset Trust
Series 2005-1 Class A4
4.050% due 07/15/09 1,225 1,220
Series 2006-1 Class A3
5.030% due 10/15/09 1,045 1,042
Capital One Auto Finance Trust
Series 2005-BSS Class A3
4.080% due 11/15/09 1,277 1,273
Capital One Master Trust
Series 2002-4A Class A
4.900% due 03/15/10 1,000 1,000
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Capital One Multi-Asset Execution Trust
Series 2003-A4 Class A4
3.650% due 07/15/11 1,825 1,790
Series 2005-A2 Class A2
4.050% due 02/15/11 1,215 1,202
Series 2005-A8 Class A
4.400% due 08/15/11 1,500 1,486
Capital One Prime Auto Receivables Trust
Series 2004-3 Class A4
3.690% due 06/15/10 1,000 984
Series 2004-3 Class B
3.860% due 08/15/11 1,500 1,475
Carmax Auto Owner Trust
Series 2005-2 Class A4
4.340% due 09/15/10 2,000 1,975
Centex Home Equity
Series 2003-C Class AF4
4.960% due 04/25/32 136 135
Chase Manhattan Auto Owner Trust
Series 2004-A Class A4
2.830% due 09/15/10 622 614
Series 2005-A Class CTFS
4.040% due 04/15/11 932 923
Series 2006-A Class A3
5.340% due 07/15/10 1,770 1,773
CIT Equipment Collateral
Series 2005-VT1 Class A3
4.120% due 08/20/08 483 482
Series 2006-VT1 Class A4
5.160% due 02/20/13 1,250 1,253
CIT Marine Trust
Series 1999-A Class A4
6.250% due 11/15/19 514 514
CIT Rv Trust
Series 1998-A Class A5
6.120% due 11/15/13 178 178
Citibank Credit Card Issuance Trust
Series 2003-A6 Class A6
2.900% due 05/17/10 750 732
Series 2003-A8 Class A8
3.500% due 08/16/10 2,500 2,449
Series 2004-A4 Class A4
3.200% due 08/24/09 1,740 1,729
Community Program Loan Trust
Series 1987-A Class A4
4.500% due 10/01/18 1,748 1,722
</Table>
22 Short Duration Bond Fund
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Countrywide Asset-Backed Certificates (E)
Series 2001-BC3 Class A
5.800% due 12/25/31 126 126
Series 2006-16 Class 2A1
5.370% due 12/25/46 356 356
Daimler Chrysler Auto Trust
Series 2005-A Class A4
3.740% due 02/08/10 4,285 4,233
Discover Card Master Trust I
Series 2002-2 Class B
5.450% due 10/15/09 1,000 1,000
E-Trade RV and Marine Trust
Series 2004-1 Class A3
3.620% due 10/08/18 1,300 1,262
Equity One ABS, Inc.
Series 2003-4 Class M1
5.369% due 10/25/34 1,500 1,488
Ford Credit Auto Owner Trust
Series 2005-A Class A3
3.480% due 11/15/08 1,966 1,958
Series 2005-B Class A4
4.380% due 01/15/10 700 694
Series 2005-B Class B
4.640% due 04/15/10 1,250 1,242
Series 2005-C Class B
4.520% due 09/15/10 1,000 990
Franklin Auto Trust
Series 2003-1 Class A4
2.270% due 05/20/11 343 343
Fremont Home Loan Trust (E)
Series 2006-E Class 2A1
5.380% due 01/25/37 612 612
GE Capital Credit Card Master Note Trust
Series 2005-3 Class A
4.130% due 06/15/13 1,350 1,319
Series 2006-1 Class A
5.080% due 09/15/12 1,480 1,485
GE Commercial Equipment Financing LLC (E)
Series 2004-1 Class B
5.520% due 12/20/15 468 468
GE Corporate Aircraft Financing LLC (E)(p)
Series 2004-1A Class B
6.170% due 01/25/18 268 267
GE Dealer Floorplan Master Note Trust (E)
Series 2004-2 Class B
5.610% due 07/20/09 1,000 1,000
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
GE-WMC Mortgage Securities LLC (E)
Series 2006-1 Class A2A
5.360% due 08/25/36 391 391
GMAC Mortgage Corp. Loan Trust
Series 2004-GH1 Class A2
4.390% due 12/25/25 1,207 1,195
GS Auto Loan Trust
Series 2006-1 Class A3
5.370% due 12/15/10 1,300 1,303
GSAMP Trust (E)
Series 2004-SEA Class A2A
5.610% due 03/25/34 405 405
Series 2007-FM1 Class A2A
5.390% due 12/25/36 788 788
Harley-Davidson Motorcycle Trust
Series 2003-4 Class A2
2.690% due 04/15/11 494 484
Series 2006-3 Class A3
5.240% due 01/15/12 2,285 2,288
Honda Auto Receivables Owner Trust
Series 2003-4 Class A4
2.790% due 03/16/09 420 418
Series 2003-5 Class A4
2.960% due 04/20/09 626 622
Series 2004-3 Class A4
3.280% due 02/18/10 1,685 1,656
Series 2005-2 Class A4
4.150% due 10/15/10 870 860
Series 2006-3 Class A3
5.120% due 10/15/10 590 590
Household Automotive Trust
Series 2005-3 Class A2
4.700% due 01/20/09 52 52
Hyundai Auto Receivables Trust
Series 2004-A Class A3
2.970% due 05/15/09 296 294
Series 2005-A Class A3
3.980% due 11/16/09 1,365 1,355
Illinois Power Special Purpose Trust
Series 1998-1 Class A6
5.540% due 06/25/09 -- --
Lehman XS Trust (E)
Series 2006-9 Class A1A
5.390% due 05/25/46 322 322
Long Beach Auto Receivables Trust
Series 2005-B Class A3
4.406% due 05/15/10 1,473 1,467
Long Beach Mortgage Loan Trust (E)
Series 2004-4 Class 1A1
5.600% due 10/25/34 115 115
</Table>
Short Duration Bond Fund 23
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Marlin Leasing Receivables LLC (p)
Series 2005-1A Class A3
4.630% due 11/17/08 1,650 1,643
Master Asset Backed Securities Trust (E)
Series 2006-HE5 Class A1
5.380% due 11/25/36 793 793
MBNA Credit Card Master Note Trust
Series 2005-A1 Class A1
4.200% due 09/15/10 4,205 4,167
Nelnet Education Loan Funding, Inc.
Series 2001-A Class A1
5.760% due 07/01/12 1,225 1,231
Nissan Auto Receivables Owner Trust
Series 2004-A Class A4
2.760% due 07/15/09 1,288 1,270
Series 2005-A Class A3
3.540% due 10/15/08 567 565
Series 2005-B Class A3
3.990% due 07/15/09 796 790
Nomura Home Equity Loan, Inc.
Series 2006-AF1 Class A1
6.032% due 10/25/36 1,639 1,639
Onyx Acceptance Grantor Trust
Series 2005-A Class A4
3.910% due 09/15/11 2,000 1,973
PBG Equipment Trust (p)
Series 1998-1A Class A
6.270% due 01/20/12 203 203
PG&E Energy Recovery Funding LLC
Series 2005-1 Class A2
3.870% due 06/25/11 1,227 1,210
Series 2005-2 Class A1
4.850% due 06/25/11 859 855
Providian Gateway Master Trust (p)
Series 2004-FA Class A
3.650% due 11/15/11 1,200 1,189
Public Service New Hampshire Funding LLC
Series 2001-1 Class A2
5.730% due 11/01/10 710 713
Railcar Leasing LLC (p)
Series 1997-1 Class A2
7.125% due 01/15/13 889 928
SBI Heloc Trust (E)(p)
Series 2006-1A Class 1A2A
5.490% due 08/25/36 555 555
Structured Asset Securities Corp. (E)
Series 2005-WF3 Class A1
5.420% due 07/25/35 222 222
Susquehanna Auto Lease Trust (p)
Series 2005-1 Class B
4.710% due 07/14/08 1,700 1,690
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-1 Class A3
5.210% due 03/16/09 1,000 999
Toyota Auto Receivables Owner Trust
Series 2003-B Class A4
2.790% due 01/15/10 1,000 999
Triad Auto Receivables Owner Trust
Series 2006-A Class A3
4.770% due 01/12/11 2,000 1,992
USAA Auto Owner Trust
Series 2004-2 Class A4
3.580% due 02/15/11 1,569 1,556
Series 2005-2 Class A4
4.170% due 02/15/11 1,885 1,859
Series 2006-4 Class A2
5.160% due 11/16/09 1,885 1,884
Wachovia Auto Owner Trust
Series 2004-A Class A4
3.660% due 07/20/10 2,337 2,325
Series 2004-B Class A3
2.910% due 04/20/09 504 500
Wells Fargo Financial Auto Owner Trust
Series 2004-A Class A4
2.670% due 08/16/10 1,314 1,299
World Omni Auto Receivables Trust
Series 2006-A Class A2
5.050% due 10/15/08 565 565
------------
105,854
------------
Corporate Bonds and Notes - 19.8%
Abbott Laboratories
3.500% due 02/17/09 2,000 1,947
Allstate Financial Global Funding (A)
2.500% due 06/20/08 1,920 1,862
Altria Group, Inc. (N)
7.650% due 07/01/08 1,500 1,538
American Express Centurion Bank
Series BKNT
4.375% due 07/30/09 2,500 2,471
American International Group, Inc.
4.700% due 10/01/10 1,270 1,257
Ameritech Capital Funding Corp.
6.250% due 05/18/09 2,000 2,026
ASIF Global Financing XXIII (A)
3.900% due 10/22/08 1,070 1,050
Associates Corp. of North America
6.250% due 11/01/08 599 609
8.550% due 07/15/09 750 804
</Table>
24 Short Duration Bond Fund
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bank One Corp. (N)
2.625% due 06/30/08 2,475 2,401
BankAmerica Corp.
7.125% due 03/01/09 1,500 1,552
Bear Stearns Cos., Inc. (The)
2.875% due 07/02/08 2,000 1,946
5.350% due 02/01/12 (N) 675 678
BellSouth Corp.
6.000% due 10/15/11 2,000 2,066
BNP Paribas
5.270% due 09/23/08 1,700 1,699
Capital One Financial Corp.
5.700% due 09/15/11 3,415 3,445
Caterpillar Financial Services Corp.
2.700% due 07/15/08 1,500 1,455
4.500% due 06/15/09 1,250 1,236
Series MTNF
4.500% due 09/01/08 2,000 1,980
Caterpillar, Inc.
7.250% due 09/15/09 3,150 3,300
CIT Group, Inc.
5.000% due 11/24/08 3,320 3,310
4.250% due 02/01/10 1,095 1,071
Citigroup, Inc.
6.200% due 03/15/09 2,685 2,739
Consolidated Edison Co. of New York, Inc.
Series B
7.150% due 12/01/09 2,000 2,099
Countrywide Home Loans, Inc.
4.125% due 09/15/09 1,930 1,879
Deutsche Bank Financial, Inc.
7.500% due 04/25/09 2,000 2,086
Exelon Generation Co. LLC
6.950% due 06/15/11 2,250 2,371
FleetBoston Financial Corp.
6.375% due 05/15/08 1,970 1,989
General Electric Capital Corp.
4.000% due 06/15/09 (N) 1,650 1,617
4.875% due 10/21/10 4,650 4,630
5.455% due 10/21/10 (E) 1,000 1,001
GMAC LLC
6.000% due 12/15/11 100 97
Goldman Sachs Group, Inc.
5.400% due 03/30/09 (E) 2,100 2,100
6.875% due 01/15/11 1,000 1,058
5.750% due 10/07/11 (E) 1,500 1,514
Hertz Vehicle Financing LLC (p)
Series 2005-2A Class A2
4.930% due 02/25/10 1,000 996
HSBC Finance Corp.
6.500% due 11/15/08 4,770 4,859
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Lehman Brothers Holdings, Inc.
Series MTNG
3.950% due 11/10/09 2,800 2,732
Merrill Lynch & Co., Inc.
4.831% due 10/27/08 1,500 1,492
Series MTNC
4.125% due 01/15/09 1,000 983
Metropolitan Life Global Funding I (p)
Series 144a
5.750% due 07/25/11 3,000 3,077
Morgan Stanley
3.875% due 01/15/09 2,000 1,961
National City Bank
Series BKNT
4.250% due 01/29/10 1,650 1,614
Northern States Power Co.
6.875% due 08/01/09 1,750 1,813
Ohio Edison Co.
4.000% due 05/01/08 1,750 1,729
Principal Life Global Funding I (A)
3.625% due 04/30/08 1,250 1,224
2.800% due 06/26/08 4,100 3,975
Prudential Financial, Inc.
3.750% due 05/01/08 1,475 1,451
SBC Communications, Inc.
4.125% due 09/15/09 2,510 2,455
SLM Corp.
Series MTNA
4.500% due 07/26/10 1,075 1,025
Wachovia Bank NA
Series BKNT
4.375% due 08/15/08 345 341
Wachovia Corp.
5.625% due 12/15/08 3,760 3,792
Wells Fargo & Co.
4.200% due 01/15/10 1,600 1,570
------------
101,972
------------
International Debt - 2.5%
Arran Residential Mortgages Funding PLC (E)(p)
Series 2006-1A Class A1B
5.340% due 04/12/36 549 549
Eksportfinans A/S (N)
4.750% due 12/15/08 2,000 1,998
HBOS Treasury Services PLC (p)
3.750% due 09/30/08 1,000 980
ICICI Bank, Ltd. (E)(p)
5.895% due 01/12/10 1,100 1,104
</Table>
Short Duration Bond Fund 25
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kreditanstalt fuer Wiederaufbau (N)
5.250% due 05/19/09 2,860 2,881
Svensk Exportkredit AB (N)
4.625% due 02/17/09 4,855 4,820
VTB Capital SA (E)(p)
5.955% due 08/01/08 700 701
------------
13,033
------------
Mortgage-Backed Securities - 31.9%
American Home Mortgage Investment Trust (E)
Series 2004-3 Class 5A
4.290% due 10/25/34 1,715 1,686
Series 2004-4 Class 4A
4.390% due 02/25/45 547 541
Banc of America Commercial Mortgage, Inc.
Series 2006-4 Class A2
5.522% due 09/10/11 1,200 1,215
Banc of America Funding Corp.
Series 2005-D Class A1 (E)
4.113% due 05/25/35 8,339 8,205
Series 2006-2 Class 2A18
5.750% due 03/25/36 3,149 3,168
Banc of America Mortgage Securities, Inc.
Series 2004-2 Class 2A1
5.250% due 03/25/34 964 959
Series 2004-2 Class 5A1
6.500% due 10/25/31 250 254
Bear Stearns Adjustable Rate Mortgage Trust
Series 2003-1 Class 5A1
5.448% due 04/25/33 470 469
Series 2003-8 Class 2A1 (E)
4.775% due 01/25/34 389 388
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.383% due 05/25/35 1,067 1,068
Bear Stearns Asset Backed Securities Trust
Series 2003-AC3 Class A1
4.000% due 07/25/33 401 392
Bear Stearns Commercial Mortgage Securities
Series 1998-C1 Class A1
6.340% due 06/16/30 123 123
Series 2001-TOP Class A1
5.060% due 11/15/16 343 341
Series 2003-T12 Class A1
2.960% due 08/13/39 36 36
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Bear Stearns Mortgage Funding Trust (E)
Series 2007-AR1 Class 2A1
5.390% due 02/25/37 1,365 1,364
Citigroup/Deutsche Bank Commercial Mortgage
Trust
Series 2007-CD4 Class A1
4.977% due 12/11/49 1,092 1,091
Commercial Mortgage Pass Through Certificates
Series 1999-1 Class A2
6.455% due 05/15/32 865 873
Series 2004-LB2 Class A2
3.600% due 03/10/39 1,000 974
Countrywide Alternative Loan Trust
Series 2003-6T2 Class A1
6.500% due 06/25/33 69 69
Series 2003-J2 Class A1
6.000% due 10/25/33 387 382
Series 2004-12C Class 1A1
5.000% due 07/25/19 2,384 2,345
Countrywide Home Loan Mortgage Pass Through
Trust (E)
Series 2005-HYB Class 5A1
5.250% due 02/20/36 1,059 1,056
Credit Suisse First Boston Mortgage Securities
Corp.
Series 2003-C4 Class A2
3.908% due 08/15/36 974 956
Series 2003-CK2 Class A1
3.006% due 03/15/36 582 574
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust (E)
Series 2007-AR1 Class A3B
5.390% due 01/25/47 734 734
Fannie Mae
6.000% due 2008 38 38
5.500% due 2009 1,096 1,099
6.000% due 2010 95 96
6.500% due 2010 92 94
6.000% due 2011 122 123
6.500% due 2011 68 69
5.000% due 2013 651 647
6.000% due 2013 310 316
6.000% due 2014 1,542 1,568
5.500% due 2016 980 984
5.000% due 2017 84 83
5.500% due 2017 1,526 1,530
6.000% due 2017 168 173
5.000% due 2018 3,582 3,539
</Table>
26 Short Duration Bond Fund
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
5.000% due 2019 445 439
5.000% due 2020 300 297
5.000% due 2021 951 938
5.500% due 2033 72 71
6.000% due 2033 26 26
5.500% due 2034 12,687 12,575
4.656% due 2035 (E) 473 471
4.666% due 2035 (E) 3,683 3,659
4.902% due 2035 (E) 28,871 28,834
5.500% due 2035 18,560 18,380
6.233% due 2041 (E) 834 844
6.183% due 2042 (E) 543 554
Fannie Mae REMICS
Series 2003-16 Class BH
5.000% due 03/25/17 2,162 2,149
Series 2003-24 Class PU
3.500% due 11/25/15 218 211
Series 2003-62 Class OD
3.500% due 04/25/26 1,250 1,212
Series 2003-63 Class GU
4.000% due 07/25/33 1,316 1,296
Series 2003-75 Class NB
3.250% due 08/25/18 509 490
Series 2003-129 Class PQ
4.500% due 07/25/33 96 95
Series 2004-17 Class HA
3.000% due 01/25/19 1,835 1,705
Federal Home Loan Bank System
Series 2004- Class 1
3.920% due 09/25/09 1,362 1,334
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities (E)
Series 2005-63 Class 1A1
6.183% due 02/25/45 956 958
Freddie Mac
6.000% due 2009 34 34
6.000% due 2010 64 64
8.000% due 2010 8 8
6.000% due 2011 134 136
6.000% due 2032 366 371
6.000% due 2033 640 650
4.918% due 2035 (E) 829 829
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Freddie Mac Gold
5.500% due 2008 47 47
6.500% due 2008 31 31
5.500% due 2009 118 117
6.000% due 2009 37 37
6.500% due 2009 166 168
6.000% due 2011 198 201
6.000% due 2013 97 99
5.500% due 2014 418 419
6.000% due 2014 105 107
6.000% due 2016 442 449
5.000% due 2018 493 487
6.000% due 2028 109 112
5.500% due 2029 772 768
6.000% due 2029 227 230
6.000% due 2031 298 302
Freddie Mac REMICS
Series 2003-255 Class PB
5.500% due 08/15/30 8 8
Series 2003-258 Class NS
3.250% due 09/15/15 1,032 1,001
Series 2003-261 Class JA
3.760% due 03/15/29 1,144 1,098
Series 2003-263 Class CD
4.000% due 10/15/26 1,500 1,463
Series 2003-268 Class MX
4.000% due 07/15/16 1,854 1,806
Series 2004-282 Class EA
4.500% due 11/15/15 2,440 2,412
Series 2004-285 Class BA
4.500% due 02/15/20 1,201 1,184
Series 2006-314 Class LF (E)
5.620% due 05/15/36 600 603
GE Capital Commercial Mortgage Corp.
Series 2001-3 Class A1
5.560% due 06/10/38 782 787
Series 2004-C3 Class A1
3.752% due 07/10/39 1,610 1,580
Series 2005-C1 Class A1
4.012% due 06/10/48 1,020 1,003
Ginnie Mae I
6.000% due 12/15/08 35 35
9.500% due 12/15/17 1 1
Ginnie Mae II (E)
5.750% due 07/20/27 86 87
5.000% due 02/20/32 162 164
Government National Mortgage Association
Series 2004-78 Class A
3.590% due 11/16/17 2,470 2,413
</Table>
Short Duration Bond Fund 27
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2007-4 Class A
4.206% due 06/15/29 996 974
Greenpoint Mortgage Funding Trust (E)
Series 2006-AR8 Class 1A1A
5.400% due 01/25/47 795 795
GSR Mortgage Loan Trust
Series 2004-7 Class 1A1
3.577% due 06/25/34 1,167 1,175
Harborview Mortgage Loan Trust (E)
Series 2006-12 Class 2A11
5.410% due 12/19/36 1,535 1,536
Impac CMB Trust (E)
Series 2004-2 Class A2
5.820% due 04/25/34 146 146
Indymac Index Mortgage Loan Trust (E)
Series 2006-AR1 Class 1A1A
5.410% due 11/25/46 667 669
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2002-C2 Class A1
4.326% due 12/12/34 693 679
Series 2005-LDP Class A1
4.655% due 08/15/42 1,386 1,372
4.613% due 10/15/42 1,590 1,574
LB-UBS Commercial Mortgage Trust
Series 2003-C3 Class A1
2.599% due 05/15/27 1,373 1,345
Mellon Residential Funding Corp. (E)
Series 2000-TBC Class A1
5.800% due 06/15/30 990 992
Merrill Lynch Mortgage Trust
Series 2006-C1 Class A1
5.528% due 05/12/39 2,372 2,385
Morgan Stanley Capital I
Series 2003-T11 Class A1
3.260% due 06/13/41 858 843
Series 2005-HQ6 Class A1
4.646% due 08/13/42 1,597 1,580
Morgan Stanley Dean Witter Capital I
Series 2002-HQ Class A2
6.090% due 04/15/34 94 94
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
5.720% due 02/25/34 187 188
Series 2004-CL1 Class 2A2
5.720% due 02/25/19 42 42
Salomon Brothers Mortgage Securities VII, Inc.
Series 2003-UP2 Class A1
4.000% due 12/25/18 780 749
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Structured Asset Mortgage Investments, Inc. (E)
Series 2002-AR3 Class A1
5.650% due 09/19/32 44 44
Structured Asset Securities Corp. (E)
Series 2001-21A Class 1A1
7.196% due 01/25/32 35 35
Thornburg Mortgage Securities Trust (E)
Series 2006-6 Class A1
5.430% due 12/25/36 733 732
Vendee Mortgage Trust
Series 2001-3 Class J
6.500% due 05/15/08 185 185
Wachovia Auto Owner Trust
Series 2005-B Class A4
4.840% due 04/20/11 590 588
Wachovia Bank Commercial Mortgage Trust
Series 2003-C4 Class A1
3.003% due 04/15/35 1,013 996
Washington Mutual Mortgage Pass-Through
Certificates
Series 2002-AR1 Class A6
4.816% due 10/25/32 456 455
Series 2002-AR6 Class A (E)
6.414% due 06/25/42 266 266
Series 2002-AR9 Class 1A (E)
6.414% due 08/25/42 559 561
Series 2004-AR1 Class A2A (E)
5.745% due 11/25/34 1,166 1,170
Series 2005-AR1 Class A1A1 (E)
5.610% due 10/25/45 262 262
Series 2006-AR1 Class 2A (E)
5.876% due 09/25/46 765 767
Wells Fargo Mortgage Backed Securities Trust
Series 2005-9 Class 1A1
4.750% due 10/25/35 2,484 2,451
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 1,132 1,124
------------
164,245
------------
Non-US Bonds - 0.1%
Landwirtschaftliche Rentenbank
0.650% due 09/30/08 JPY 60,000 501
------------
</Table>
28 Short Duration Bond Fund
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Government Agencies - 0.1%
Federal Home Loan Bank System
Series HK10
Zero Coupon
due 04/27/10 531 488
------------
United States Government Treasuries - 4.0%
United States Treasury Notes
4.250% due 11/15/14 21,233 20,782
------------
TOTAL LONG-TERM INVESTMENTS
(cost $409,045) 406,875
------------
PREFERRED STOCKS - 0.4%
Financial Services - 0.4%
DG Funding Trust (E)(A) 219 2,315
------------
TOTAL PREFERRED STOCKS
(cost $2,306) 2,315
------------
</Table>
<Table>
<Caption>
NOTIONAL
AMOUNT
$
------------
OPTIONS PURCHASED - 0.1%
(Number of Contracts)
Eurodollar Futures
Jun 2007 91.00 Put (201) 45,728 1
Jun 2007 91.25 Put (316) 72,088 2
Sep 2007 91.75 Put (60) 13,763 --
Dec 2007 91.25 Put (777) 177,253 5
Mar 2008 91.75 Put (450) 103,219 3
Mar 2008 92.50 Put (171) 39,544 1
Mar 2008 92.75 Put (1,009) 233,962 6
</Table>
<Table>
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
($) $
- -----------------------------------------------------------------------------
Swaptions
(Fund Pays/Fund Receives)
EUR Three Month LIBOR/EUR 3.960%
Jul 2007 0.00 Call (1) 4,094 --
GBP Three Month LIBOR/GBP 5.080%
Jun 2007 0.00 Call (2) 5,200 --
USD Three Month LIBOR/USD 4.900%
Jul 2007 0.00 Call (1) 23,000 63
USD Three Month LIBOR/USD 4.850%
Jul 2007 0.00 Call (1) 20,000 1
USD Three Month LIBOR/USD 5.250%
Jul 2007 0.00 Call (1) 18,000 16
USD Three Month LIBOR/USD 4.900%
Aug 2007 0.00 Call (2) 21,000 60
USD Three Month LIBOR/USD 5.000%
Feb 2008 0.00 Call (1) 27,800 89
USD Three Month LIBOR/USD 4.750%
Mar 2008 0.00 Call (2) 45,700 234
------------
TOTAL OPTIONS PURCHASED
(cost $745) 481
------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
SHORT-TERM INVESTMENTS - 20.1%
Abbey National NA LLC (c)(z)
5.170% due 05/11/07 2,315 2,312
ASIF Global Financing XVIII (A)
3.850% due 11/26/07 334 331
Bank of America Corp.
5.195% due 07/20/07 (z) 8,100 7,952
6.375% due 02/15/08 2,662 2,678
Bank One NA
Series BKNT
3.700% due 01/15/08 5,470 5,412
Barclays US Funding Corp. (c)(z)
5.385% due 06/04/07 4,150 4,129
BNP Paribas Financial, Inc. (c)(z)
5.218% due 05/24/07 1,000 997
Capital Auto Receivables Asset Trust
Series 2004-2 Class A2
3.350% due 02/15/08 357 357
Capital One Auto Finance Trust
Series 2006-C Class A1
5.340% due 12/14/07 181 181
</Table>
Short Duration Bond Fund 29
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CIT Equipment Collateral
Series 2004-VT1 Class A3
2.200% due 03/20/08 38 38
Citigroup, Inc. (E)
5.408% due 06/04/07 1,000 1,000
Daimlerchrysler NA Holding Corp. (c)(z)
5.345% due 06/22/07 2,700 2,679
Dexia Delaware LLC (z)
5.225% due 07/05/07 2,600 2,573
DNB Nor Bank ASA (c)(z)
5.250% due 06/05/07 1,900 1,890
Fannie Mae Discount Notes (c)(z)
5.140% due 06/06/07 100 99
Federal Home Loan Bank System
Series DE08
5.925% due 04/09/08 1,600 1,612
Federal National Mortgage Association Discount
Notes (z)
Zero Coupon
due 07/25/07 200 197
Ford Motor Credit Co. (E)(N)
8.355% due 11/02/07 200 202
France Treasury Bill BTF
Zero Coupon
due 07/05/07 EUR 900 1,220
Freddie Mac
5.810% due 04/04/08 1,000 1,006
Freddie Mac Gold
4.000% due 01/01/08 568 559
4.500% due 01/01/08 610 606
Ginnie Mae I
7.000% due 11/15/07 1 1
HBOS Treasury Services PLC
5.230% due 06/15/07 (c)(z) 825 820
3.500% due 11/30/07 (p) 1,000 990
Inter-American Development Bank
6.375% due 10/22/07 5,305 5,333
MGM Mirage
9.750% due 06/01/07 1,200 1,205
Ontario Electricity Financial Corp.
6.100% due 01/30/08 1,885 1,896
Province of New Brunswick Canada
3.500% due 10/23/07 1,726 1,713
Rabobank USA Financial Corp. (c)(z)
5.290% due 05/01/07 2,400 2,400
Royal Bank of Scotland (z)
5.265% due 03/26/08 1,700 1,699
Russell Investment Company
Money Market Fund 23,146,553 23,146
SLM Corp.
3.625% due 03/17/08 3,390 3,326
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Societe Generale NA
5.220% due 06/19/07 (c)(z) 6,500 6,355
5.190% due 07/10/07 (z) 5,495 5,422
UBS Financial Del LLC (z)
1.000% due 07/05/07 3,075 3,034
United States Treasury Bills (c)(z)(sec.)
5.046% due 06/14/07 150 150
5.094% due 06/14/07 105 104
5.088% due 06/14/07 640 636
US Bank NA (N)
Series BKNT
4.125% due 03/17/08 1,600 1,583
Wachovia Corp. (E)
Series *
5.410% due 07/20/07 1,000 1,000
Wells Fargo & Co.
4.125% due 03/10/08 820 811
6.250% due 04/15/08 3,927 3,952
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $103,908) 103,606
------------
OTHER SECURITIES - 1.4%
Russell Investment Company
Money Market Fund (X) 1,340,851 1,341
State Street Securities
Lending Quality Trust (X) 5,635,045 5,635
------------
TOTAL OTHER SECURITIES
(cost $6,976) 6,976
------------
TOTAL INVESTMENTS - 101.0%
(identified cost $522,980) 520,253
OTHER ASSETS AND LIABILITIES,
NET - (1.0%) (5,256)
------------
NET ASSETS - 100.0% 514,997
============
</Table>
See accompanying notes which are an integral part of the financial statements.
30 Short Duration Bond Fund
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Euribor Futures
expiration date 12/07 (6) 1,958 (4)
expiration date 06/08 (6) 1,959 (4)
Eurodollar Futures (CME)
expiration date 03/08 (850) 202,268 (3)
expiration date 06/08 (328) 78,162 88
expiration date 09/08 (111) 26,467 109
expiration date 12/08 (196) 46,736 175
expiration date 03/09 (3) 715 --
LIBOR Futures
expiration date 06/08 (15) 3,532 --
United States Treasury 2 Year Notes
expiration date 06/07 (11) 2,252 --
Short Positions
United States Treasury Bonds
expiration date 06/07 (248) 27,714 299
United States Treasury 2 Year Notes
expiration date 06/07 (17) 3,480 4
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 664
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Swaptions
(Fund Pays/Fund Receives)
EUR 4.100%/
EUR Six Month LIBOR
Jul 2007 0.00 Call (1) 1,365 --
GBP 4.850%/
GBP Six Month LIBOR
Jun 2007 0.00 Call (2) 1,600 --
USD 4.950%/
USD Three Month LIBOR
Jul 2007 0.00 Call (1) 4,200 (23)
USD 5.000%/
USD Three Month LIBOR
Jul 2007 0.00 Call (1) 10,000 (54)
USD 5.370%/
USD Three Month LIBOR
Jul 2007 0.00 Call (1) 8,000 (143)
USD 4.900%/
USD Three Month LIBOR
Aug 2007 0.00 Call (1) 3,000 (13)
USD 5.000%/
USD Three Month LIBOR
Aug 2007 0.00 Call (1) 1,000 (6)
USD 4.900%/
USD Three Month LIBOR
Mar 2008 0.00 Call (2) 12,100 (128)
USD 5.100%/
USD Three Month LIBOR
Feb 2008 0.00 Call (1) 12,000 (167)
USD 4.950%/
USD Three Month LIBOR
Mar 2008 0.00 Call (1) 8,000 (92)
---------------
Total Liability for Options Written
(premiums received $699) (626)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Short Duration Bond Fund 31
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 137 EUR 100 05/24/07 --
EUR 99 USD 136 05/02/07 --
EUR 1,120 USD 1,523 05/24/07 (7)
JPY 58,617 USD 487 05/15/07 (5)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts (12)
==============
</Table>
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------------
MARKET
COUNTER NOTIONAL TERMINATION VALUE
PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $
- --------------------------- ---------------- ------------- ------------------------------- -------------- ----------------
Bank of America USD 2,800 5.000% Three Month LIBOR 06/20/09 (2)
BNP Paribas EUR 1,200 2.090% Consumer Price Index (France) 10/15/10 68
Deutsche Bank GBP 600 6.000% Six Month LIBOR 12/20/08 2
Deutsche Bank USD 8,500 5.000% Three Month LIBOR 06/20/09 (6)
Three Month
Deutsche Bank USD 2,100 LIBOR 5.000% 06/20/17 27
Goldman EUR 700 4.000% Six Month LIBOR 03/20/09 (3)
Mexico Interbank 28 Day Deposit
Goldman MXN 2,300 7.780% Rate 04/03/12 (1)
JP Morgan EUR 200 1.948% Consumer Price Index (France) 03/15/12 --
Lehman Brothers GBP 1,500 4.500% Six Month LIBOR 09/20/09 (72)
Merrill Lynch BRL 700 12.948% Brazil Interbank Deposit Rate 01/04/10 30
Morgan Stanley USD 3,700 5.000% Three Month LIBOR 06/20/09 (2)
Three Month
Morgan Stanley USD 700 LIBOR 5.000% 06/20/17 9
UBS USD 42,500 5.000% Three Month LIBOR 06/20/09 (29)
----------------
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - $152 21
================
</Table>
<Table>
<Caption>
CREDIT DEFAULT SWAP CONTRACTS
- -------------------------------------------------------------------------------------------------------------------
FUND MARKET
REFERENCE COUNTER NOTIONAL (PAYS)/RECEIVES TERMINATION VALUE
ENTITY PARTY AMOUNT FIXED RATE DATE $
- ------------------------------ ---------------- --------- --------------- -------------- ----------------
Brazilian Government
International Bond Lehman Brothers USD 1,900 0.240% 11/20/07 3
Brazilian Government
International Bond Lehman Brothers USD 3,200 1.120% 11/20/11 74
Dow Jones CDX High Volatility
4 Index Bank of America USD 1,000 (0.650%) 12/20/16 (1)
Ford Motor Credit Co. Merrill Lynch USD 3,200 1.700% 06/20/07 11
Gaz Capital for Gazprom JP Morgan USD 2,700 0.415% 11/20/07 8
Gaz Capital for Gazprom Morgan Stanley USD 1,400 0.860% 11/20/11 21
Royal Bank of
Republic of Indonesia Scotland USD 1,000 0.400% 12/20/08 1
Republic of Panama Deutsche Bank USD 300 0.250% 12/20/08 --
Russia Government
International Bond Merrill Lynch USD 1,000 0.305% 12/20/08 1
SoftBank Corp. Deutsche Bank JPY 30,000 2.300% 09/20/07 2
----------------
Total Market Value of Open Credit Default Swap Contracts Premiums Paid (Received) - ($5) 120
================
</Table>
See accompanying notes which are an integral part of the financial statements.
32 Short Duration Bond Fund
RUSSELL INVESTMENT COMPANY
SHORT DURATION BOND FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Asset-Backed Securities 20.6
Corporate Bonds and Notes 19.8
International Debt 2.5
Mortgage-Backed Securities 31.9
Non-US Bonds 0.1
United States Government Agencies 0.1
United States Government Treasuries 4.0
Preferred Stocks 0.4
Options Purchased 0.1
Short Term Investments 20.1
Other Securities 1.4
---------------
Total Investments 101.0
Other Assets and Liabilities, Net (1.0)
---------------
100.0
===============
Futures Contracts 0.1
Options Written (0.1)
Foreign Currency Exchange Contracts --*
Interest Rate Swap Contracts --*
Credit Default 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 33
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,007.50 $ 1,017.16
Expenses Paid During
Period* $ 7.67 $ 7.70
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.54%
(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).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS E PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,011.30 $ 1,020.88
Expenses Paid During
Period* $ 3.94 $ 3.96
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.79%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,013.00 $ 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).
34 Tax Exempt Bond Fund
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 96.8%
Alabama - 0.4%
County of Jefferson Alabama General Obligation Unlimited (u) 500 5.000 04/01/10 518
Courtland Industrial Development Board Revenue Bonds 250 5.000 11/01/13 260
Mobile County Board of School Commissioners General
Obligation Unlimited (u)(ae) 375 5.000 03/01/12 392
------------
1,170
------------
Alaska - 0.4%
City of Anchorage Alaska General Obligation Unlimited
(u)(ae) 500 5.750 12/01/16 535
Northern TOB Securitization Corp. Revenue Bonds 950 4.625 06/01/23 944
------------
1,479
------------
Arizona - 2.0%
Arizona State Transportation Board Revenue Bonds 500 5.250 07/01/12 530
Arizona State Transportation Board Revenue Bonds 1,500 5.000 07/01/14 1,618
Maricopa County Pollution Control Corp. Revenue Bonds 1,000 2.900 06/01/35 981
Phoenix Civic Improvement Corp. Revenue Bonds (u) 250 5.500 07/01/07 250
Phoenix Civic Improvement Corp. Revenue Bonds (u) 1,325 5.000 07/01/35 1,396
Salt River Project Agricultural Improvement & Power District
Revenue Bonds 1,350 5.000 01/01/25 1,411
Town of Marana Arizona Special Assessment 485 4.600 01/01/26 478
------------
6,664
------------
California - 9.5%
Abag Finance Authority for Nonprofit Corps. Certificate Of
Participation 600 5.700 08/15/14 609
California State Department of Veterans Affairs Revenue
Bonds 750 4.600 12/01/28 752
California State Department of Water Resources Revenue Bonds 250 5.500 05/01/10 263
California State Department of Water Resources Revenue Bonds
(u) 1,000 5.250 05/01/12 1,072
California State Public Works Board Revenue Bonds 630 5.000 06/01/10 654
California Statewide Communities Development Authority
Revenue Bonds (E)(u) 610 4.100 04/01/28 617
California Statewide Communities Development Authority
Revenue Bonds (E) 1,000 5.200 12/01/29 1,026
California Statewide Communities Development Authority
Revenue Bonds (E)(ae) 1,250 2.300 04/01/33 1,250
California Statewide Communities Development Authority
Revenue Bonds (E) 1,100 2.625 04/01/34 1,086
California Statewide Communities Development Authority
Revenue Bonds 1,500 5.250 03/01/45 1,577
Golden State Tobacco Securitization Corp. Revenue Bonds (ae) 405 5.500 06/01/18 406
Golden State Tobacco Securitization Corp. Revenue Bonds (u) 500 5.000 06/01/20 517
Golden State Tobacco Securitization Corp. Revenue Bonds 555 5.000 06/01/21 556
Golden State Tobacco Securitization Corp. Revenue Bonds (u) 750 4.600 06/01/23 661
Golden State Tobacco Securitization Corp. Revenue Bonds 2,000 4.500 06/01/27 1,969
Golden State Tobacco Securitization Corp. Revenue Bonds 750 5.300 06/01/37 577
Kings River Conservation District Certificate Of
Participation 850 5.000 05/01/15 901
Los Angeles Unified School District General Obligation
Unlimited (u) 215 4.250 07/01/28 209
Roseville Westpark Community Facilities District No. 1
Special Tax 600 5.250 09/01/37 612
Sacramento County Sanitation District Revenue Bonds (E)(u) 1,500 4.121 12/01/35 1,500
Southern California Public Power Authority Revenue Bonds (u) 405 5.375 01/01/12 435
State of California General Obligation Unlimited 1,000 6.600 02/01/10 1,075
State of California General Obligation Unlimited 1,000 5.000 10/01/11 1,052
</Table>
Tax Exempt Bond Fund 35
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
State of California General Obligation Unlimited 2,050 5.000 02/01/12 2,161
State of California General Obligation Unlimited 1,000 5.250 07/01/12 1,072
State of California General Obligation Unlimited 500 5.250 02/01/14 541
State of California General Obligation Unlimited 550 5.000 08/01/14 590
State of California General Obligation Unlimited (u) 1,500 5.000 02/01/26 1,563
State of California General Obligation Unlimited (u) 1,500 5.250 02/01/30 1,584
State of California General Obligation Unlimited 1,250 5.000 02/01/33 1,299
Tobacco Securitization Authority of Southern California
Revenue Bonds 1,000 4.750 06/01/25 999
University of California Revenue Bonds (u) 1,500 5.000 05/15/13 1,606
University of California Revenue Bonds (u) 1,000 5.000 05/15/33 1,050
------------
31,841
------------
Colorado - 0.9%
Colorado Department of Transportation Revenue Bonds (u) 265 6.000 06/15/08 272
Colorado Health Facilities Authority Revenue Bonds (u)(ae) 1,000 5.500 05/15/14 1,045
Colorado Health Facilities Authority Revenue Bonds 1,000 5.250 06/01/23 1,059
Colorado Housing & Finance Authority Revenue Bonds 40 7.250 04/01/10 40
Colorado Housing & Finance Authority Revenue Bonds 45 6.300 08/01/12 46
Colorado Housing & Finance Authority Revenue Bonds (E) 45 6.300 08/01/16 46
Colorado Housing & Finance Authority Revenue Bonds 30 6.700 10/01/16 30
Jefferson County School District R-001 General Obligation
Unlimited (u) 500 5.000 12/15/14 541
------------
3,079
------------
Delaware - 0.3%
Delaware State Economic Development Authority Revenue Bonds 225 6.500 01/01/08 229
Delaware State Economic Development Authority Revenue Bonds
(E)(u) 250 4.900 05/01/26 260
University of Delaware Revenue Bonds (E) 375 4.000 11/01/26 375
------------
864
------------
District of Columbia - 0.6%
District of Columbia General Obligation Unlimited (u) 1,000 5.500 06/01/09 1,036
District of Columbia Revenue Bonds (u) 1,000 5.000 02/01/12 1,051
------------
2,087
------------
Florida - 8.6%
City of Lakeland Florida Revenue Bonds 1,500 5.000 11/15/32 1,539
City of Palm Coast Florida Revenue Bonds (u) 1,840 5.000 10/01/24 1,958
City of Pembroke Pines Florida Revenue Bonds (u) 1,000 5.000 10/01/16 1,089
City of Tallahassee Florida Revenue Bonds (u) 500 5.000 10/01/11 526
County of Hillsborough Florida Revenue Bonds 50 6.200 12/01/08 51
County of Hillsborough Florida Revenue Bonds (u) 1,000 5.500 08/01/12 1,084
County of Miami-Dade Florida Revenue Bonds (u) 1,000 5.000 06/01/14 1,069
Escambia County Health Facilities Authority Revenue Bonds 1,000 5.250 11/15/13 1,076
Florida Department of Childrens & Family Services
Certificate Of Participation (u) 1,175 5.000 10/01/15 1,265
Florida State Board of Education General Obligation
Unlimited 1,500 5.000 01/01/09 1,531
Florida State Board of Education General Obligation
Unlimited 1,000 5.000 06/01/16 1,086
Florida State Board of Education Revenue Bonds (u) 1,000 5.250 01/01/13 1,076
</Table>
36 Tax Exempt Bond Fund
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Florida State Division of Bond Finance Revenue Bonds (u) 1,600 5.250 07/01/13 1,665
Florida Water Pollution Control Financing Corp. Revenue
Bonds 500 5.500 01/15/12 534
Highlands County Health Facilities Authority Revenue Bonds 1,500 5.250 11/15/36 1,576
Hillsborough County Educational Facilities Authority Revenue
Revenue Bonds (u) 775 5.750 04/01/18 803
Jacksonville Health Facilities Authority Revenue Bonds
(E)(u) 2,000 4.010 08/15/19 2,000
Lee Memorial Health System Revenue Bonds 1,500 5.000 04/01/37 1,534
North Miami Florida Revenue Bonds (u) 1,325 5.000 04/01/10 1,371
Orlando Utilities Commission Revenue Bonds 1,000 5.900 10/01/08 1,030
Orlando Utilities Commission Revenue Bonds (ae) 630 5.250 10/01/20 675
Orlando Utilities Commission Revenue Bonds 370 5.250 10/01/20 393
Palm Beach County School Board Certificate Of Participation
(u) 1,000 5.000 08/01/14 1,071
Palm Glades Community Development District Special
Assessment 1,005 4.850 08/01/11 997
Sarasota County Public Hospital Board Revenue Bonds (E)(u) 500 4.100 07/01/37 500
Tampa-Hillsborough County Expressway Authority Revenue Bonds
(u) 1,000 5.000 07/01/14 1,076
------------
28,575
------------
Georgia - 2.4%
County of Fulton Georgia Revenue Bonds (u) 1,500 5.250 01/01/35 1,609
Dalton Georgia Revenue Bonds (u) 500 5.750 01/01/09 516
Georgia Municipal Electric Authority Revenue Bonds (u) 850 6.250 01/01/17 1,012
Georgia State Road & Tollway Authority Revenue Bonds 590 5.250 03/01/11 623
Main Street Natural Gas, Inc. Revenue Bonds 2,325 5.000 03/15/16 2,488
State of Georgia General Obligation Unlimited 1,000 5.750 08/01/08 1,025
State of Georgia General Obligation Unlimited 600 6.500 12/01/09 642
------------
7,915
------------
Hawaii - 0.9%
Hawaii Housing & Community Development Corp. Revenue Bonds 460 3.700 01/01/22 455
Kauai County Hawaii General Obligation Unlimited (u)(ae) 375 6.250 08/01/19 405
State of Hawaii General Obligation Unlimited (u) 1,000 5.750 01/01/10 1,051
State of Hawaii General Obligation Unlimited (u) 1,000 5.000 03/01/12 1,056
------------
2,967
------------
Idaho - 0.4%
Boise State University Revenue Bonds (u)(ae) 1,230 5.375 04/01/22 1,323
Boise State University Revenue Bonds (u) 20 5.375 04/01/22 21
------------
1,344
------------
Illinois - 4.1%
Chicago Metropolitan Water Reclamation District-Greater
Chicago General Obligation Unlimited 2,000 6.500 12/01/07 2,032
City of Chicago Illinois General Obligation Unlimited, (u) 750 6.000 01/01/11 800
City of Chicago Illinois Tax Allocation (u) 700 Zero coupon 12/01/07 685
Cook County Community Consolidated School District No.
15-Palatine General Obligation Limited (u) 2,235 Zero coupon 12/01/13 1,722
County of Cook Illinois General Obligation Unlimited,
(u)(ae) 2,160 5.375 11/15/21 2,294
Illinois Finance Authority Revenue Bonds (u) 400 Zero coupon 01/01/10 361
</Table>
Tax Exempt Bond Fund 37
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Illinois Finance Authority Revenue Bonds 670 5.500 10/01/12 720
Illinois Finance Authority Revenue Bonds 750 5.000 06/01/14 785
Illinois Finance Authority Revenue Bonds 1,250 5.000 05/01/30 1,272
Illinois Finance Authority Revenue Bonds 575 5.000 04/01/36 584
Illinois Health Facilities Authority Revenue Bonds 385 6.000 05/15/10 392
Illinois Housing Development Authority Revenue Bonds 500 4.850 01/01/37 506
Lake County Community Unit School District No. 116-Round
Lake General Obligation Unlimited (u) 400 7.600 02/01/14 491
State of Illinois Revenue Bonds (u) 1,000 5.000 06/15/16 1,084
------------
13,728
------------
Indiana - 1.8%
Columbus Multi School Building Corp. Indiana Revenue Bonds
(u) 450 5.000 01/10/10 465
Indiana Bond Bank Revenue Bonds (u) 315 5.750 08/01/13 327
Indiana Health Facility Financing Authority Revenue Bonds 1,000 5.500 11/15/10 1,057
Indiana Health Facility Financing Authority Revenue Bonds 1,000 5.000 11/01/11 1,047
Indiana State Finance Authority Revenue Bonds (u) 925 5.000 07/01/11 966
Indiana State Finance Authority Revenue Bonds 1,500 5.250 02/01/18 1,666
Indiana University Revenue Bonds (ae) 500 5.750 08/01/10 527
------------
6,055
------------
Iowa - 0.4%
Iowa Finance Authority Revenue Bonds 290 6.000 07/01/10 307
Tobacco Settlement Authority of Iowa Revenue Bonds (ae) 1,000 5.600 06/01/35 1,078
------------
1,385
------------
Kansas - 0.8%
Butler & Sedgwick Counties Unified School District No. 385
Andover General Obligation Unlimited (u) 500 5.000 09/01/09 514
Kansas Development Finance Authority Revenue Bonds (u) 150 5.000 08/01/10 156
Kansas Development Finance Authority Revenue Bonds (u) 1,000 5.000 08/01/13 1,071
Wyandotte County-Kansas City Unified Government Revenue
Bonds 305 4.750 12/01/16 315
Wyandotte County-Kansas City Unified Government
Transportation Development District Revenue Bonds 740 4.875 10/01/28 741
------------
2,797
------------
Kentucky - 0.6%
Louisville & Jefferson County Metropolitan Government
Revenue Bonds 1,750 5.250 10/01/36 1,831
------------
Louisiana - 0.8%
Louisiana Energy & Power Authority Revenue Bonds (u) 200 5.500 01/01/08 202
Louisiana Offshore Terminal Authority Revenue Bonds (E) 1,000 4.000 09/01/23 1,001
Morehouse Parish Louisiana Revenue Bonds 1,450 5.250 11/15/13 1,528
------------
2,731
------------
Maryland - 1.3%
Maryland Health & Higher Educational Facilities Authority
Revenue Bonds 1,000 5.400 01/01/31 1,041
</Table>
38 Tax Exempt Bond Fund
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Maryland Health & Higher Educational Facilities Authority
Revenue Bonds 500 5.000 07/01/40 509
State of Maryland General Obligation Unlimited 2,500 5.250 03/01/13 2,707
------------
4,257
------------
Massachusetts - 3.5%
Commonwealth of Massachusetts General Obligation Limited
(ae) 430 6.000 02/01/11 460
Commonwealth of Massachusetts General Obligation Limited 2,000 5.000 07/01/12 2,116
Commonwealth of Massachusetts General Obligation Limited 1,000 5.500 11/01/15 1,118
Commonwealth of Massachusetts General Obligation Limited
(ae) 1,000 5.750 10/01/19 1,066
Commonwealth of Massachusetts General Obligation Limited
(u)(ae) 1,000 5.250 01/01/22 1,078
Commonwealth of Massachusetts General Obligation Unlimited 1,000 5.500 10/01/16 1,124
Commonwealth of Massachusetts General Obligation Unlimited
(u) 750 5.250 09/01/22 849
Massachusetts Development Finance Agency Revenue Bonds 125 5.125 12/01/11 126
Massachusetts Development Finance Agency Revenue Bonds 50 5.150 10/01/14 51
Massachusetts Health & Educational Facilities Authority
Revenue Bonds 35 5.000 07/01/07 35
Massachusetts Health & Educational Facilities Authority
Revenue Bonds (u) 1,000 5.100 10/01/27 1,023
Massachusetts School Building Authority Revenue Bonds (u) 750 5.000 08/15/13 803
Massachusetts State Port Authority Revenue Bonds 125 5.250 07/01/07 125
Massachusetts State Port Authority Revenue Bonds 150 5.750 07/01/10 159
Massachusetts Water Resources Authority Revenue Bonds
(u)(ae) 1,425 5.500 08/01/20 1,538
------------
11,671
------------
Michigan - 1.6%
Bishop International Airport Authority Revenue Bonds (u) 750 5.000 12/01/10 766
Manistee Area Public Schools General Obligation Unlimited
(u) 235 6.000 05/01/08 240
Michigan Municipal Bond Authority Revenue Bonds 1,000 5.250 10/01/11 1,063
Michigan Municipal Bond Authority Revenue Bonds (ae) 500 5.750 10/01/11 537
Michigan State Hospital Finance Authority Revenue Bonds (u) 250 5.000 05/15/07 250
Michigan State Hospital Finance Authority Revenue Bonds 1,000 5.500 11/01/14 1,076
Michigan State Hospital Finance Authority Revenue Bonds
(u)(ae) 1,000 6.125 11/15/26 1,067
Michigan State Housing Development Authority Revenue Bonds
(u) 405 4.150 10/01/13 409
------------
5,408
------------
Minnesota - 0.2%
State Paul Housing & Redevelopment Authority Revenue Bonds 500 5.250 05/15/36 517
------------
Missouri - 1.2%
City of State Louis Missouri Revenue Bonds (u) 1,000 5.250 07/01/11 1,059
City of State Louis Missouri Revenue Bonds (u) 1,000 5.000 07/01/14 1,071
Joplin Missouri Industrial Development Authority Health
Revenue Bonds 270 5.500 02/15/13 288
Missouri Development Finance Board Revenue Bonds 1,150 5.000 03/01/28 1,190
Missouri Housing Development Commission Revenue Bonds 145 4.350 12/01/07 145
Southeast Missouri State University Revenue Bonds (u) 250 5.625 04/01/10 263
------------
4,016
------------
</Table>
Tax Exempt Bond Fund 39
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (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 (E) 1,450 5.200 05/01/33 1,484
Montana Facility Finance Authority Revenue Bonds 500 4.375 06/01/36 474
------------
1,958
------------
Nevada - 0.6%
Clark County School District General Obligation Limited
(u)(ae) 330 5.250 06/15/10 340
County of Clark Nevada General Obligation Limited (u) 1,000 5.000 11/01/13 1,070
Truckee Meadows Water Authority Revenue Bonds (u) 500 5.500 07/01/11 534
------------
1,944
------------
New Hampshire - 0.6%
New Hampshire Health & Education Facilities Authority
Revenue Bonds 325 4.600 10/01/07 326
New Hampshire Health & Education Facilities Authority
Revenue Bonds 1,675 5.000 07/01/32 1,703
------------
2,029
------------
New Jersey - 2.8%
New Jersey Economic Development Authority Revenue Bonds 1,000 5.000 09/01/12 1,058
New Jersey Economic Development Authority Revenue Bonds 1,000 5.250 03/01/14 1,083
New Jersey Economic Development Authority Revenue Bonds 1,020 5.375 06/15/15 1,095
New Jersey Health Care Facilities Financing Authority
Revenue Bonds 500 5.250 07/01/25 533
New Jersey State Educational Facilities Authority Revenue
Bonds 1,000 5.750 09/01/10 1,062
New Jersey State Housing & Mortgage Finance Agency Revenue
Bonds (u) 885 4.300 11/01/07 888
New Jersey State Turnpike Authority Revenue Bonds (u) 500 5.500 01/01/09 515
New Jersey Transportation Trust Fund Authority Revenue Bonds 500 6.000 06/15/07 501
Tobacco Settlement Financing Corp. Revenue Bonds 1,000 5.500 06/01/11 1,067
Tobacco Settlement Financing Corp. Revenue Bonds 415 4.375 06/01/19 416
Tobacco Settlement Financing Corp. Revenue Bonds 1,250 4.500 06/01/23 1,231
------------
9,449
------------
New York - 11.7%
Battery Park City Authority Revenue Bonds 1,500 5.250 11/01/22 1,622
City of New York New York General Obligation Unlimited 500 5.000 08/01/10 519
City of New York New York General Obligation Unlimited 1,000 5.250 08/01/10 1,045
City of New York New York General Obligation Unlimited 1,500 5.000 08/01/11 1,569
City of New York New York General Obligation Unlimited 125 5.750 08/01/11 134
City of New York New York General Obligation Unlimited 850 5.000 03/01/12 893
City of New York New York General Obligation Unlimited 750 5.000 11/01/12 793
City of New York New York General Obligation Unlimited 235 5.250 11/01/12 251
City of New York New York General Obligation Unlimited (u) 1,000 5.000 08/01/14 1,073
City of New York New York General Obligation Unlimited (u) 1,000 5.000 08/01/17 1,067
City of New York New York General Obligation Unlimited 1,500 5.000 08/01/21 1,578
City of New York New York General Obligation Unlimited 1,500 5.000 11/01/34 1,566
City of New York New York General Obligation Unlimited 1,000 5.000 03/01/35 1,045
Hudson Yards Infrastructure Corp. Revenue Bonds 1,000 5.000 02/15/47 1,048
Long Island Power Authority Revenue Bonds (u) 1,000 5.000 12/01/22 1,071
Long Island Power Authority Revenue Bonds (u) 1,250 5.000 12/01/23 1,333
Metropolitan Transportation Authority Revenue Bonds (E)(u) 1,000 4.030 11/01/26 1,000
</Table>
40 Tax Exempt Bond Fund
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Metropolitan Transportation Authority Revenue Bonds (u) 1,000 5.000 11/15/30 1,044
New York City Municipal Finance Authority Water and Sewer
Systems Revenue Bonds 1,000 5.000 06/15/36 1,055
New York City Municipal Water Finance Authority Revenue
Bonds 1,500 5.250 06/15/12 1,605
New York City Municipal Water Finance Authority Revenue
Bonds 1,000 5.000 06/15/35 1,046
New York City Transitional Finance Authority Revenue Bonds 1,000 5.500 02/01/09 1,030
New York Mortgage Agency Revenue Bonds 445 5.150 04/01/17 448
New York State Dormitory Authority Revenue Bonds (u) 815 7.000 07/01/09 843
New York State Dormitory Authority Revenue Bonds (u) 960 5.000 02/15/13 1,022
New York State Dormitory Authority Revenue Bonds (E) 2,000 5.250 11/15/23 2,126
New York State Dormitory Authority Revenue Bonds 1,300 5.000 03/15/31 1,379
New York State Dormitory Authority Revenue Bonds 1,080 4.650 07/01/39 898
New York State Environmental Facilities Corp. Revenue Bonds
(u) 1,000 6.000 06/15/12 1,108
New York State Environmental Facilities Corp. Revenue Bonds 1,500 5.000 06/15/34 1,579
Sales Tax Asset Receivables Corp. Revenue Bonds (u) 1,000 5.000 10/15/29 1,057
Suffolk County Industrial Development Agency Revenue Bonds 1,500 5.000 11/01/28 1,534
Suffolk County Judicial Facilities Agency Revenue Bonds (u) 500 5.500 04/15/09 517
Tobacco Settlement Financing Authority Revenue Bonds 35 5.500 06/01/10 35
TSASC, Inc. Revenue Bonds (ae) 1,000 5.500 07/15/13 1,022
TSASC, Inc. Revenue Bonds 1,150 4.750 06/01/22 1,150
United Nations Development Corp. Revenue Bonds 1,000 5.000 07/01/11 1,009
------------
39,114
------------
North Carolina - 1.9%
Mecklenburg County North Carolina General Obligation
Unlimited 1,000 5.000 02/01/11 1,048
North Carolina Capital Facilities Finance Agency Revenue
Bonds 275 4.250 07/01/42 258
North Carolina Eastern Municipal Power Agency Revenue Bonds 250 5.500 01/01/10 260
North Carolina Medical Care Commission Revenue Bonds 750 5.400 10/01/27 778
North Carolina Municipal Power Agency No. 1 Catawba Revenue
Bonds (u) 1,500 6.000 01/01/12 1,643
North Carolina Municipal Power Agency No. 1 Catawba Revenue
Bonds 200 5.500 01/01/13 214
State of North Carolina General Obligation Unlimited 1,000 5.000 03/01/12 1,060
University of North Carolina Revenue Bonds (ae) 1,065 5.375 12/01/14 1,133
------------
6,394
------------
North Dakota - 0.2%
County of Williams North Dakota Revenue Bonds 750 5.000 11/01/31 765
------------
Ohio - 1.4%
City of Columbus Ohio General Obligation Limited 585 5.250 01/01/11 617
Jackson Local School District Stark & Summit Counties
General Obligation Unlimited (u) 500 Zero coupon 12/01/07 489
Ohio State Building Authority Revenue Bonds 575 5.750 04/01/08 585
Ohio State Higher Educational Facility Commission Revenue
Bonds 1,000 5.000 12/01/09 1,027
State of Ohio General Obligation Unlimited 1,500 5.000 09/15/14 1,616
University of Cincinnati Revenue Bonds (u) 300 5.500 06/01/08 306
------------
4,640
------------
</Table>
Tax Exempt Bond Fund 41
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.7%
Oklahoma Development Finance Authority Revenue Bonds (ae) 1,000 5.750 08/15/13 1,053
Oklahoma Development Finance Authority Revenue Bonds 275 5.000 10/01/13 288
Oklahoma Housing Finance Agency Revenue Bonds 55 7.600 09/01/15 55
Tulsa Industrial Authority Revenue Bonds 1,000 5.000 10/01/37 1,032
------------
2,428
------------
Oregon - 0.9%
Clackamas County School Distrist No. 62C Oregon City General
Obligation Unlimited (ae) 435 6.000 06/15/11 464
Oregon State Department of Administrative Services Revenue
Bonds (u) 750 5.250 04/01/10 778
Oregon State Department of Transportation Revenue Bonds 1,000 5.000 11/15/13 1,074
State of Oregon General Obligation Limited 705 5.700 10/01/32 712
------------
3,028
------------
Pennsylvania - 4.3%
Allegheny County Port Authority Revenue Bonds (u) 250 5.500 03/01/17 267
Allentown Commercial & Industrial Development Authority
Revenue Bonds (E)(u) 200 4.000 12/01/29 200
Berks County Vocational Technical School Authority Revenue
Bonds (u) 1,260 5.000 06/01/15 1,365
City of Philadelphia Pennsylvania Revenue Bonds (u) 500 5.500 07/01/07 501
Commonwealth of Pennsylvania General Obligation Unlimited
(u) 1,300 5.375 07/01/17 1,464
County of Allegheny Pennsylvania General Obligation
Unlimited (u) 1,000 5.000 10/01/15 1,086
Cumberland County Municipal Authority Revenue Bonds 645 5.000 01/01/36 658
Erie County Industrial Development Authority Revenue Bonds 180 5.300 04/01/12 188
Lancaster Higher Education Authority Revenue Bonds 1,705 5.000 04/15/25 1,798
Montgomery County Higher Education & Health Authority
Revenue Bonds 1,000 5.125 06/01/32 1,035
Norwin School District General Obligation Unlimited (u)(ae) 250 6.000 04/01/20 265
Pennsylvania Turnpike Commission Revenue Bonds (E)(u) 1,500 3.910 10/01/22 1,500
Philadelphia Authority for Industrial Development Revenue
Bonds (E)(u) 2,000 4.000 03/01/27 2,000
Sayre Health Care Facilities Authority Revenue Bonds (ae) 555 5.300 12/01/12 575
Sayre Health Care Facilities Authority Revenue Bonds (E) 1,500 4.408 12/01/31 1,500
------------
14,402
------------
Puerto Rico - 5.5%
Commonwealth of Puerto Rico General Obligation Unlimited (u) 1,000 5.250 07/01/27 1,051
Commonwealth of Puerto Rico General Obligation Unlimited 1,000 5.250 07/01/32 1,070
Government Development Bank for Puerto Rico Revenue Bonds 3,250 5.000 12/01/09 3,340
Puerto Rico Convention Center Authority Revenue Bonds (u) 1,250 5.000 07/01/31 1,335
Puerto Rico Electric Power Authority Revenue Bonds 500 5.000 07/01/08 506
Puerto Rico Electric Power Authority Revenue Bonds (u) 500 5.500 07/01/17 567
Puerto Rico Electric Power Authority Revenue Bonds (E) 1,110 1.000 07/01/31 1,110
Puerto Rico Highway & Transportation Authority Revenue Bonds 2,000 5.000 07/01/13 2,114
Puerto Rico Public Buildings Authority Revenue Bonds (E) 1,500 4.500 07/01/22 1,501
Puerto Rico Public Buildings Authority Revenue Bonds 2,000 5.500 07/01/23 2,169
Puerto Rico Public Finance Corp. Revenue Bonds (E)(u) 3,250 5.750 08/01/27 3,474
------------
18,237
------------
</Table>
42 Tax Exempt Bond Fund
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.3%
Rhode Island Economic Development Corp. Revenue Bonds (u) 1,000 5.000 06/15/12 1,060
------------
South Carolina - 1.8%
Greenville County School District Revenue Bonds 1,000 5.000 12/01/11 1,049
Orangeburg Joint Governmental Action Authority Revenue Bonds
(u) 1,050 5.000 10/01/09 1,083
Richland-Lexington Airport District Revenue Bonds (u) 500 5.000 01/01/09 510
Richland-Lexington Airport District Revenue Bonds (u) 440 5.000 01/01/10 454
South Carolina State Public Service Authority Revenue Bonds
(u) 375 5.500 01/01/11 395
South Carolina Transportation Infrastructure Bank Revenue
Bonds (u)(ae) 2,500 5.250 10/01/31 2,660
------------
6,151
------------
South Dakota - 0.7%
South Dakota Housing Development Authority Revenue Bonds 1,000 4.800 05/01/22 1,027
South Dakota State Building Authority Revenue Bonds (u) 1,330 5.000 09/01/12 1,409
------------
2,436
------------
Tennessee - 2.2%
Clarksville Natural Gas Acquisition Corp. Revenue Bonds 1,000 5.000 12/15/14 1,066
Memphis-Shelby County Airport Authority Revenue Bonds 1,430 5.050 09/01/12 1,497
Tennessee Energy Acquisition Corp. Revenue Bonds 1,000 5.000 02/01/16 1,069
Tennessee Energy Acquisition Corp. Revenue Bonds 1,000 5.250 09/01/17 1,096
Tennessee Energy Acquisition Corp. Revenue Bonds 1,500 5.000 02/01/18 1,608
Tennessee Housing Development Agency Revenue Bonds 950 5.375 01/01/18 988
------------
7,324
------------
Texas - 10.4%
Alvin Independent School District General Obligation
Unlimited 515 6.750 08/15/09 549
Alvin Independent School District General Obligation
Unlimited 545 6.750 08/15/10 596
Boerne Independent School District General Obligation
Unlimited 1,380 5.250 02/01/27 1,466
Boerne Independent School District General Obligation
Unlimited 1,500 5.250 02/01/29 1,591
Brazos River Harbor Navigation District Revenue Bonds (E) 220 4.750 05/15/33 220
Canadian River Municipal Water Authority Revenue Bonds (u) 1,080 5.000 02/15/11 1,128
Canadian River Municipal Water Authority Revenue Bonds (u) 800 5.000 02/15/17 864
Canadian River Municipal Water Authority Revenue Bonds (u) 415 5.000 02/15/18 447
City of Dallas Texas Revenue Bonds (u) 1,000 4.875 08/15/23 1,017
City of San Antonio Texas Revenue Bonds 1,000 5.250 02/01/13 1,075
City of San Antonio Texas Revenue Bonds 1,000 5.000 02/01/14 1,075
Conroe Independent School District General Obligation
Unlimited 1,445 5.000 02/15/13 1,535
County of Harris Texas General Obligation Limited 1,435 5.250 08/15/09 1,482
County of Harris Texas Revenue Bonds (E)(u) 1,500 5.000 08/15/21 1,540
Dallas Independent School District General Obligation
Unlimited 2,100 5.000 02/15/14 2,247
El Paso County Community College District Revenue Bonds (u) 1,030 5.000 04/01/21 1,106
Midlothian Development Authority Tax Allocation (u) 500 5.000 11/15/09 512
North Texas Municipal Water District Revenue Bonds (u) 2,000 5.000 09/01/13 2,136
North Texas Tollway Authority Revenue Bonds (E)(u)(ae) 15 5.000 01/01/18 15
North Texas Tollway Authority Revenue Bonds (E)(u) 985 5.000 01/01/18 999
Port of Corpus Christi Authority of Nueces County Texas
Revenue Bonds 385 5.350 11/01/10 389
</Table>
Tax Exempt Bond Fund 43
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Round Rock Independent School District General Obligation
Unlimited 1,000 6.500 08/01/10 1,084
Round Rock Independent School District General Obligation
Unlimited (ae) 750 6.500 08/01/11 814
Round Rock Independent School District General Obligation
Unlimited 430 5.375 08/01/12 462
Sabine River Authority Revenue Bonds 1,500 5.200 05/01/28 1,518
State of Texas General Obligation Unlimited 1,500 5.000 04/01/24 1,598
Texas A & M University Revenue Bonds 1,000 5.000 07/01/08 1,015
Texas Municipal Gas Acquisition & Supply Corp. I Revenue
Bonds 1,000 5.000 12/15/13 1,061
Tyler Independent School District General Obligation
Unlimited 1,350 5.000 02/15/10 1,393
University of Houston Revenue Bonds (u)(ae) 2,000 5.500 02/15/30 2,095
University of Texas Revenue Bonds 1,500 5.000 08/15/24 1,600
------------
34,629
------------
Utah - 0.5%
County of Utah Utah Revenue Bonds 200 5.050 11/01/17 210
Intermountain Power Agency Revenue Bonds (u) 1,400 6.500 07/01/10 1,516
------------
1,726
------------
Virgin Islands - 0.8%
Virgin Islands Public Finance Authority Revenue Bonds 200 5.000 10/01/13 211
Virgin Islands Public Finance Authority Revenue Bonds 2,500 5.500 10/01/14 2,574
------------
2,785
------------
Virginia - 0.8%
Suffolk Industrial Development Authority Revenue Bonds 625 5.300 09/01/31 638
Tobacco Settlement Financing Corp. Revenue Bonds 675 5.000 06/01/47 665
Virginia Commonwealth Transportation Board Revenue Bonds 360 5.375 05/15/12 383
Virginia Housing Development Authority Revenue Bonds (u) 400 5.375 07/01/36 415
Virginia Public Building Authority Revenue Bonds 500 5.750 08/01/07 502
------------
2,603
------------
Washington - 3.6%
Energy Northwest Revenue Bonds 1,000 5.000 07/01/11 1,046
Everett Public Facilities District Revenue Bonds 2,165 5.000 12/01/26 2,274
King County Public Hospital District No. 2 General
Obligation Limited (u) 1,000 5.000 12/01/19 1,070
King County School District No. 405 Bellevue General
Obligation Unlimited (u) 1,000 5.000 12/01/14 1,078
Kitsap County Washington General Obligation Limited (u)(ae) 775 5.750 07/01/14 822
Mason County School District No. 309 Shelton General
Obligation Unlimited (u) 1,115 5.000 12/01/18 1,221
State of Washington General Obligation Unlimited 1,500 5.000 01/01/20 1,527
Tobacco Settlement Authority of Washington Revenue Bonds 860 6.500 06/01/26 942
Washington Higher Education Facilities Authority Revenue
Bonds (u) 1,000 5.000 11/01/13 1,052
Washington Public Power Supply System Revenue Bonds 1,000 7.000 07/01/08 1,037
------------
12,069
------------
</Table>
44 Tax Exempt Bond Fund
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL DATE MARKET
AMOUNT ($) RATE OF VALUE
OR SHARES % MATURITY $
- --------------------------------------------------------------------------------------------------------------------------
Wisconsin - 1.8%
City of Madison Wisconsin Revenue Bonds 280 4.875 10/01/27 290
Oconto Falls Public School District General Obligation
Unlimited (u)(ae) 750 5.750 03/01/13 804
State of Wisconsin Certificate Of Participation (u) 2,825 5.000 03/01/11 2,952
Wisconsin Housing & Economic Development Authority Revenue
Bonds 40 6.850 11/01/12 40
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds (u) 1,425 5.000 12/01/10 1,481
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds 210 5.250 05/01/12 218
Wisconsin State Health & Educational Facilities Authority
Revenue Bonds 220 5.250 05/01/13 229
------------
6,014
------------
TOTAL MUNICIPAL BONDS (cost $321,741) 323,566
------------
SHORT-TERM INVESTMENTS - 2.3%
Russell Investment Company Tax Free Money Market 7,521,848 7,522
------------
TOTAL SHORT-TERM INVESTMENTS (cost $7,522) 7,522
------------
TOTAL INVESTMENTS - 99.1% (identified cost $329,263) 331,088
OTHER ASSETS AND LIABILITIES, NET - 0.9% 3,072
------------
NET ASSETS - 100.0% 334,160
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 45
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
%
QUALITY RATINGS AS A % OF VALUE
AAA 48
AA 17
A 16
BBB 14
BB 1
Other 4
---
100
===
ECONOMIC SECTOR EMPHASIS AS A % OF VALUE
General Obligation 25
Other Revenue 15
Utility Revenue 15
Education 11
Healthcare Revenue 10
Cash Equivalents 8
Industrial Revenue 8
Leasing Revenue 3
Pollution Control Revenue 3
Housing Revenue 2
---
100
===
</Table>
See accompanying notes which are an integral part of the financial statements.
46 Tax Exempt Bond Fund
RUSSELL INVESTMENT COMPANY
TAX EXEMPT BOND FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Alabama 0.4
Alaska 0.4
Arizona 2.0
California 9.5
Colorado 0.9
Delaware 0.3
District of Columbia 0.6
Florida 8.6
Georgia 2.4
Hawaii 0.9
Idaho 0.4
Illinois 4.1
Indiana 1.8
Iowa 0.4
Kansas 0.8
Kentucky 0.6
Louisiana 0.8
Maryland 1.3
Massachusetts 3.5
Michigan 1.6
Minnesota 0.2
Missouri 1.2
Montana 0.6
Nevada 0.6
New Hampshire 0.6
New Jersey 2.8
New York 11.7
North Carolina 1.9
North Dakota 0.2
Ohio 1.4
Oklahoma 0.7
Oregon 0.9
Pennsylvania 4.3
Puerto Rico 5.5
Rhode Island 0.3
South Carolina 1.8
South Dakota 0.7
Tennessee 2.2
Texas 10.4
Utah 0.5
Virgin Islands 0.8
Virginia 0.8
Washington 3.6
Wisconsin 1.8
Short-Term Investments 2.3
---------------
Total Investments 99.1
Other Assets and Liabilities, Net 0.9
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax Exempt Bond Fund 47
RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,076.40 $ 1,015.32
Expenses Paid During
Period* $ 9.83 $ 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,080.10 $ 1,019.04
Expenses Paid During
Period* $ 5.98 $ 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,081.50 $ 1,020.28
Expenses Paid During
Period* $ 4.70 $ 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).
48 Tax-Managed Large Cap Fund
RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.3%
Auto and Transportation - 1.3%
Burlington Northern Santa Fe Corp. 4,200 368
CSX Corp. 32,500 1,403
Expeditors International Washington, Inc. 45,500 1,902
FedEx Corp. 200 21
Harley-Davidson, Inc. (N) 3,100 196
Norfolk Southern Corp. 29,700 1,581
Toyota Motor Corp. - ADR 9,970 1,211
US Airways Group, Inc. (AE)(N) 20,250 748
------------
7,430
------------
Consumer Discretionary - 15.7%
Abercrombie & Fitch Co. Class A 10,700 874
Allied Waste Industries, Inc. (AE) 176,600 2,361
Carnival Corp. 9,500 465
CBS Corp. Class B 63,750 2,025
Coach, Inc. (AE) 58,250 2,844
eBay, Inc. (AE) 26,700 906
Electronic Arts, Inc. (AE) 3,400 171
EW Scripps Co. Class A (N) 11,800 511
Federated Department Stores, Inc. (N) 6,200 272
Focus Media Holding, Ltd. - ADR (AE)(N) 31,500 1,166
Gannett Co., Inc. 2,500 143
Gemstar-TV Guide International, Inc. (AE) 1,796 8
Google, Inc. Class A (AE) 29,100 13,717
Hanesbrands, Inc. (AE) 27,000 718
Hilton Hotels Corp. 6,600 224
Home Depot, Inc. 15,000 568
InterActiveCorp (AE)(N) 25,400 968
International Game Technology 28,060 1,070
Iron Mountain, Inc. (AE)(N) 40,350 1,134
JC Penney Co., Inc. 7,200 569
Jones Apparel Group, Inc. 15,900 531
Kohl's Corp. (AE) 13,300 985
Las Vegas Sands Corp. (AE) 21,040 1,792
Lowe's Cos., Inc. 265,900 8,126
Mattel, Inc. 31,200 883
McDonald's Corp. 79,800 3,853
News Corp. Class A 106,710 2,389
Nike, Inc. Class B 25,600 1,379
Office Depot, Inc. (AE) 53,700 1,805
Polo Ralph Lauren Corp. Class A 10,260 945
RadioShack Corp. (N) 32,600 948
Staples, Inc. 33,700 836
Starbucks Corp. (AE) 241,340 7,486
Starwood Hotels & Resorts Worldwide, Inc. (o) 4,100 275
Target Corp. 22,900 1,360
Tim Hortons, Inc. (N) 2,573 81
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Time Warner, Inc. 305,175 6,296
Under Armour, Inc. Class B (AE)(N) 15,570 786
Viacom, Inc. Class A (AE) 18,450 761
Wal-Mart Stores, Inc. 68,100 3,263
Walt Disney Co. 73,600 2,575
Wyndham Worldwide Corp. (AE) 127,300 4,405
Yahoo!, Inc. (AE) 118,400 3,320
Yum! Brands, Inc. 8,000 495
------------
86,289
------------
Consumer Staples - 4.4%
Altria Group, Inc. 45,800 3,157
Anheuser-Busch Cos., Inc. 14,200 698
Coca-Cola Co. (The) 50,500 2,636
ConAgra Foods, Inc. (N) 33,300 818
General Mills, Inc. (N) 13,700 821
Kellogg Co. 3,400 180
Kraft Foods, Inc. Class A 31,694 1,061
Molson Coors Brewing Co. Class B (N) 14,300 1,348
PepsiCo, Inc. 50,080 3,310
Procter & Gamble Co. 111,625 7,179
Walgreen Co. 65,200 2,862
------------
24,070
------------
Financial Services - 20.8%
Aflac, Inc. 3,800 195
AllianceBernstein Holding, LP (N) 20,100 1,828
Allstate Corp. (The) 39,000 2,430
AMBAC Financial Group, Inc. 23,800 2,185
American Express Co. 40,590 2,463
American International Group, Inc. 94,000 6,572
Apartment Investment & Management Co. Class A
(o) 4,500 249
Assurant, Inc. 6,900 397
Bank of America Corp. 183,579 9,344
Bank of New York Co., Inc. (The) 30,400 1,231
Capital One Financial Corp. (N) 65,370 4,854
Charles Schwab Corp. (The) 131,890 2,522
Chicago Mercantile Exchange Holdings, Inc. Class
A (N) 11,940 6,170
Cigna Corp. 8,900 1,385
CIT Group, Inc. 23,500 1,402
Citigroup, Inc. 193,200 10,359
City National Corp. 500 37
Comerica, Inc. 2,500 155
Compass Bancshares, Inc. (N) 6,000 409
</Table>
Tax-Managed Large Cap Fund 49
RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Countrywide Financial Corp. 44,700 1,657
E*Trade Financial Corp. (AE) 18,600 411
First Data Corp. 90,340 2,927
Franklin Resources, Inc. 3,300 433
Genworth Financial, Inc. Class A 22,800 832
Goldman Sachs Group, Inc. 32,850 7,181
Hartford Financial Services Group, Inc. 9,800 992
Host Hotels & Resorts, Inc. (o) 19,332 496
IntercontinentalExchange, Inc. (AE) 32,900 4,178
Janus Capital Group, Inc. (N) 79,400 1,987
JPMorgan Chase & Co. 48,200 2,511
Lehman Brothers Holdings, Inc. 39,600 2,981
Lincoln National Corp. 6,600 470
MBIA, Inc. (N) 12,900 897
Merrill Lynch & Co., Inc. 52,700 4,755
MGIC Investment Corp. (N) 6,200 382
Moody's Corp. 52,000 3,438
Morgan Stanley 88,900 7,468
Piper Jaffray Cos., Inc. (AE) 700 45
Progressive Corp. (N) 38,100 879
ProLogis (o) 9,900 642
Simon Property Group, Inc. (o) 1,900 219
State Street Corp. 31,900 2,197
SunTrust Banks, Inc. 8,700 734
TCF Financial Corp. (N) 5,300 144
TD Ameritrade Holding Corp. (AE) 11,000 188
Torchmark Corp. 7,900 540
Travelers Cos., Inc. (The) 6,700 362
UBS AG 15,520 1,007
US Bancorp 77,200 2,652
Wachovia Corp. 26,200 1,455
Washington Mutual, Inc. 74,700 3,136
Wells Fargo & Co. 52,700 1,891
Western Union Co. (The) 2,440 51
WR Berkley Corp. 1,950 63
------------
114,388
------------
Health Care - 16.2%
Abbott Laboratories 71,800 4,065
Abraxis BioScience, Inc. (AE) 36,400 1,001
Aetna, Inc. 60,100 2,818
Allergan, Inc. 43,320 5,250
Amgen, Inc. (AE) 19,700 1,264
Baxter International, Inc. 26,300 1,489
Biogen Idec, Inc. (AE) 9,800 463
Biomet, Inc. (AE) 3,100 134
Boston Scientific Corp. (AE) 171,400 2,646
Celgene Corp. (AE)(N) 30,220 1,848
Cerner Corp. (AE)(N) 25,400 1,352
CVS Corp. 152,200 5,516
Eli Lilly & Co. 900 53
Forest Laboratories, Inc. (AE) 12,100 644
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Genentech, Inc. (AE) 82,880 6,630
Genzyme Corp. (AE) 65,100 4,252
Gilead Sciences, Inc. (AE) 46,760 3,821
GlaxoSmithKline PLC - ADR 12,300 711
Intuitive Surgical, Inc. (AE)(N) 25,370 3,290
Johnson & Johnson 29,300 1,882
Merck & Co., Inc. 58,600 3,014
Patterson Cos., Inc. (AE)(N) 32,500 1,172
Pfizer, Inc. 260,700 6,898
Schering-Plough Corp. 93,100 2,954
Sepracor, Inc. (AE)(N) 19,700 1,058
Shire PLC - ADR (N) 28,360 1,982
Stryker Corp. (N) 35,600 2,312
Teva Pharmaceutical Industries, Ltd. - ADR 67,800 2,597
Thermo Fisher Scientific, Inc. (AE)(N) 17,870 930
UnitedHealth Group, Inc. 63,400 3,364
Varian Medical Systems, Inc. (AE) 50,200 2,119
Watson Pharmaceuticals, Inc. (AE)(N) 42,800 1,168
WellPoint, Inc. (AE) 58,390 4,611
Wyeth 65,100 3,613
Zimmer Holdings, Inc. (AE) 22,800 2,063
------------
88,984
------------
Integrated Oils - 4.3%
BP PLC - ADR 19,100 1,286
Chevron Corp. 87,587 6,813
ConocoPhillips 79,179 5,491
Exxon Mobil Corp. 95,946 7,616
Hess Corp. 6,000 341
Marathon Oil Corp. 4,300 437
Occidental Petroleum Corp. 17,400 882
Royal Dutch Shell PLC - ADR 7,300 506
------------
23,372
------------
Materials and Processing - 2.7%
Air Products & Chemicals, Inc. 10,400 796
Alcoa, Inc. 14,900 529
Archer-Daniels-Midland Co. 35,800 1,386
Cameco Corp. 43,480 2,027
Cemex SAB de CV - ADR (AE) 78,900 2,564
Dow Chemical Co. (The) 5,100 228
Eastman Chemical Co. (N) 6,900 467
Masco Corp. 12,100 329
Monsanto Co. 33,040 1,949
Praxair, Inc. 9,500 613
Precision Castparts Corp. 8,620 897
Rohm & Haas Co. 4,800 246
</Table>
50 Tax-Managed Large Cap Fund
RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Temple-Inland, Inc. 11,600 687
United States Steel Corp. 21,500 2,183
------------
14,901
------------
Miscellaneous - 3.9%
Eaton Corp. 14,600 1,303
Fortune Brands, Inc. 2,000 160
General Electric Co. 325,120 11,984
Honeywell International, Inc. 14,600 791
Johnson Controls, Inc. 16,500 1,688
Tyco International, Ltd. 166,100 5,420
------------
21,346
------------
Other Energy - 2.8%
Anadarko Petroleum Corp. 24,100 1,124
Cameron International Corp. (AE) 26,840 1,733
Devon Energy Corp. 44,900 3,272
Dynegy, Inc. Class A (AE) 3,332 31
Halliburton Co. 16,600 527
Schlumberger, Ltd. 80,300 5,929
Valero Energy Corp. 6,600 464
Weatherford International, Ltd. (AE) 6,900 362
XTO Energy, Inc. 32,760 1,778
------------
15,220
------------
Producer Durables - 3.6%
American Tower Corp. Class A (AE) 14,600 555
Applied Materials, Inc. 99,810 1,918
Boeing Co. 27,310 2,540
Caterpillar, Inc. 3,600 261
Centex Corp. (N) 1,400 63
Crown Castle International Corp. (AE)(N) 35,810 1,230
Deere & Co. 10,320 1,129
Emerson Electric Co. 14,600 686
Ingersoll-Rand Co., Ltd. Class A 20,400 911
KB Home (N) 1,800 79
Lennar Corp. Class A (N) 1,200 51
Lockheed Martin Corp. 8,600 827
Northrop Grumman Corp. 12,000 884
Parker Hannifin Corp. (N) 8,000 737
Toll Brothers, Inc. (AE) 8,500 253
United Technologies Corp. 111,600 7,492
------------
19,616
------------
Technology - 12.9%
Akamai Technologies, Inc. (AE) 34,720 1,530
Altera Corp. 50,400 1,136
Analog Devices, Inc. 3,000 116
Apple, Inc. (AE) 80,620 8,046
Broadcom Corp. Class A (AE) 161,640 5,261
Cisco Systems, Inc. (AE) 249,430 6,670
Computer Sciences Corp. (AE) 9,000 500
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Corning, Inc. (AE) 147,110 3,489
Dell, Inc. (AE) 57,120 1,440
Electronics for Imaging, Inc. (AE)(N) 15,800 421
EMC Corp. (AE) 118,600 1,800
Hewlett-Packard Co. 60,300 2,541
Ingram Micro, Inc. Class A (AE) 41,600 816
Intel Corp. 23,300 501
International Business Machines Corp. 72,600 7,420
Intersil Corp. Class A 1,700 51
Jabil Circuit, Inc. (N) 32,600 760
Juniper Networks, Inc. (AE) 15,400 344
Linear Technology Corp. (N) 24,400 913
Microsoft Corp. 104,800 3,138
Motorola, Inc. 2,800 49
NCR Corp. (AE) 22,300 1,124
Oracle Corp. (AE) 119,500 2,247
Qualcomm, Inc. 231,500 10,140
Raytheon Co. 9,800 525
Salesforce.com, Inc. (AE)(N) 61,330 2,576
Seagate Technology, Inc. (AE) 26,700 --
Sun Microsystems, Inc. (AE) 399,450 2,085
Sybase, Inc. (AE) 25,600 619
Symantec Corp. (AE) 178,700 3,145
Texas Instruments, Inc. 36,450 1,253
Xilinx, Inc. 17,500 516
------------
71,172
------------
Utilities - 6.7%
AES Corp. (The) (AE) 8,100 178
Alltel Corp. 11,500 721
America Movil SAB de CV
Series L 79,700 4,187
American Electric Power Co., Inc. 5,400 271
AT&T, Inc. 156,606 6,064
Comcast Corp. (AE)
Class A 38,400 1,024
Special Class A 169,500 4,475
Dominion Resources, Inc. 300 27
DTE Energy Co. (N) 2,200 111
Duke Energy Corp. 9,200 189
Edison International 31,300 1,639
Embarq Corp. 17,052 1,024
Exelon Corp. 36,100 2,722
FirstEnergy Corp. 900 62
NII Holdings, Inc. (AE) 23,000 1,765
Northeast Utilities 22,200 714
PG&E Corp. (N) 46,600 2,358
Pinnacle West Capital Corp. 11,300 546
</Table>
Tax-Managed Large Cap Fund 51
RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
PPL Corp. 1,600 70
Sierra Pacific Resources (AE) 31,900 582
Spectra Energy Corp. 4,600 120
Sprint Nextel Corp. 147,756 2,960
TXU Corp. 4,400 288
Verizon Communications, Inc. 113,080 4,317
Xcel Energy, Inc. (N) 23,300 561
------------
36,975
------------
TOTAL COMMON STOCKS
(cost $382,236) 523,763
------------
SHORT-TERM INVESTMENTS - 4.7%
Russell Investment Company
Money Market Fund 24,102,000 24,102
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 1,500 1,491
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $25,593) 25,593
------------
OTHER SECURITIES - 7.0%
Russell Investment Company
Money Market Fund (X) 7,404,348 7,404
State Street Securities Lending
Quality Trust (X) 31,117,423 31,117
------------
TOTAL OTHER SECURITIES
(cost $38,521) 38,521
------------
TOTAL INVESTMENTS - 107.0%
(identified cost $446,350) 587,877
OTHER ASSETS AND LIABILITIES,
NET - (7.0%) (38,406)
------------
NET ASSETS - 100.0% 549,471
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
S&P 500 E-Mini Index (CME)
expiration date 06/07 (132) 9,823 456
S&P 500 Index (CME)
expiration date 06/07 (41) 15,256 642
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,098
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
52 Tax-Managed Large Cap Fund
RUSSELL INVESTMENT COMPANY
TAX-MANAGED LARGE CAP FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Auto and Transportation 1.3
Consumer Discretionary 15.7
Consumer Staples 4.4
Financial Services 20.8
Health Care 16.2
Integrated Oils 4.3
Materials and Processing 2.7
Miscellaneous 3.9
Other Energy 2.8
Producer Durables 3.6
Technology 12.9
Utilities 6.7
Short-Term Investments 4.7
Other Securities 7.0
---------------
Total Investments 107.0
Other Assets and Liabilities, Net (7.0)
---------------
100.0
===============
Futures Contracts --*
</Table>
* Less than .05% of net assets.
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Large Cap Fund 53
RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,090.20 $ 1,013.64
Expenses Paid During
Period* $ 11.66 $ 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,095.00 $ 1,017.36
Expenses Paid During
Period* $ 7.79 $ 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,095.70 $ 1,018.60
Expenses Paid During
Period* $ 6.50 $ 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.
54 Tax-Managed Mid & Small Cap Fund
RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 90.7%
Auto and Transportation - 4.3%
AAR Corp. (AE) 13,725 419
Alexander & Baldwin, Inc. 14,738 788
American Commercial Lines, Inc. (AE) 7,940 234
AMR Corp. (AE) 9,300 243
ArvinMeritor, Inc. 9,030 186
Bristow Group, Inc. (AE)(N) 4,230 159
Con-way, Inc. 3,820 209
Cooper Tire & Rubber Co. 22,300 431
Fleetwood Enterprises, Inc. (AE)(N) 51,457 429
General Maritime Corp. (N) 18,972 608
Genesee & Wyoming, Inc. Class A (AE)(N) 5,651 154
Gentex Corp. (N) 12,260 218
Keystone Automotive Industries, Inc. (AE) 22,440 746
Landstar System, Inc. 11,420 552
Modine Manufacturing Co. (N) 7,520 174
Old Dominion Freight Line, Inc. (AE) 13,600 402
Overseas Shipholding Group, Inc. 5,700 404
Pacer International, Inc. 5,925 151
Skywest, Inc. 6,640 181
Strattec Security Corp. (AE) 2,790 132
Tenneco, Inc. (AE) 20,150 603
UTI Worldwide, Inc. 9,975 234
Visteon Corp. (AE)(N) 70,597 644
Wabtec Corp. 41,477 1,541
Winnebago Industries, Inc. (N) 24,296 779
------------
10,621
------------
Consumer Discretionary - 19.4%
99 Cents Only Stores (AE)(N) 48,089 688
Aaron Rents, Inc. 12,529 355
Activision, Inc. (AE) 84,140 1,683
Advisory Board Co. (The) (AE) 6,307 299
Aeropostale, Inc. (AE) 10,230 421
AMN Healthcare Services, Inc. (AE) 8,010 195
AnnTaylor Stores Corp. (AE) 5,470 210
Applebees International, Inc. 10,285 280
aQuantive, Inc. (AE)(N) 83,820 2,566
Arbitron, Inc. (N) 18,527 913
Big 5 Sporting Goods Corp. 10,660 273
Bright Horizons Family Solutions, Inc. (AE) 7,800 301
Callaway Golf Co. (N) 10,970 197
Carter's, Inc. (AE) 21,546 565
Casual Male Retail Group, Inc. (AE)(N) 60,649 698
Cato Corp. (The) Class A 18,625 402
CDI Corp. 5,480 162
CEC Entertainment, Inc. (AE) 15,200 633
Central European Distribution Corp. (AE)(N) 12,472 371
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Consolidated Graphics, Inc. (AE) 3,875 292
Corinthian Colleges, Inc. (AE)(N) 50,647 700
Corrections Corp. of America (AE) 5,442 309
Cost Plus, Inc. (AE)(N) 68,879 672
CoStar Group, Inc. (AE) 11,225 548
Cox Radio, Inc. Class A (AE)(N) 48,036 678
DeVry, Inc. (N) 22,506 742
Diamond Management & Technology Consultants,
Inc. Class A 55,848 633
Discovery Holding Co. Class A (AE) 4,050 88
DreamWorks Animation SKG, Inc. Class A (AE) 6,480 190
Earthlink, Inc. (AE) 28,125 215
Ethan Allen Interiors, Inc. (N) 4,530 160
Fossil, Inc. (AE)(N) 24,186 681
FTI Consulting, Inc. (AE)(N) 19,249 708
Gemstar-TV Guide International, Inc. (AE) 265 1
Getty Images, Inc. (AE)(N) 20,105 1,045
Global Imaging Systems, Inc. (AE) 23,900 690
Greenfield Online, Inc. (AE) 29,790 487
Guess?, Inc. 14,580 574
Harman International Industries, Inc. 3,200 390
Harte-Hanks, Inc. 6,310 165
Haverty Furniture Cos., Inc. (N) 4,200 54
Hearst-Argyle Television, Inc. Class A 6,340 169
Home Solutions of America, Inc. (AE)(N) 12,420 59
Iconix Brand Group, Inc. (AE) 18,320 369
International Speedway Corp. Class A 3,790 187
inVentiv Health, Inc. (AE) 5,510 209
Ipass, Inc. (AE)(N) 28,202 151
Jackson Hewitt Tax Service, Inc. (N) 4,460 123
John Wiley & Sons, Inc. Class A 4,290 161
JOS A Bank Clothiers, Inc. (AE)(N) 4,798 185
Kellwood Co. (N) 6,400 180
Kelly Services, Inc. Class A 5,540 159
Krispy Kreme Doughnuts, Inc. (AE)(N) 20,600 200
Lamar Advertising Co. Class A 4,000 241
Landry's Restaurants, Inc. (N) 6,600 196
Lifetime Brands, Inc. 34,350 750
Lodgenet Entertainment Corp. (AE) 5,240 179
Matthews International Corp. Class A 20,450 862
MAXIMUS, Inc. 4,852 170
McClatchy Co. Class A (N) 4,270 123
Men's Wearhouse, Inc. (The) 4,480 194
Monster Worldwide, Inc. (AE) 7,790 328
MPS Group, Inc. (AE) 13,170 180
</Table>
Tax-Managed Mid & Small Cap Fund 55
RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MSC Industrial Direct Co., Inc. Class A (N) 8,519 415
Nautilus, Inc. (N) 41,894 579
Navigant Consulting, Inc. (AE)(N) 7,600 146
Net 1 UEPS Technologies, Inc. (AE)(N) 20,730 522
NetFlix, Inc. (AE)(N) 46,775 1,037
New York & Co., Inc. (AE) 9,440 132
NutriSystem, Inc. (AE)(N) 4,470 277
O'Charleys, Inc. (AE) 33,110 699
O'Reilly Automotive, Inc. (AE) 7,190 256
Oxford Industries, Inc. 10,850 504
Parlux Fragrances, Inc. (AE)(N) 22,170 101
PEP Boys-Manny Moe & Jack (N) 10,820 202
PF Chang's China Bistro, Inc. (AE)(N) 46,615 1,783
Polo Ralph Lauren Corp. Class A 6,110 563
RadioShack Corp. 10,590 308
Rare Hospitality International, Inc. (AE) 5,070 148
RC2 Corp. (AE) 14,700 586
Red Robin Gourmet Burgers, Inc. (AE) 4,800 190
Rent-A-Center, Inc. Class A (AE)(N) 9,327 260
School Specialty, Inc. (AE)(N) 18,481 610
Scientific Games Corp. (AE)(N) 40,850 1,360
Service Corp. International 22,520 274
ServiceMaster Co. (The) 17,210 265
Shuffle Master, Inc. (AE)(N) 42,128 717
Station Casinos, Inc. 4,910 427
Stein Mart, Inc. (N) 50,525 824
Strayer Education, Inc. 19,111 2,376
Sturm Ruger & Co., Inc. (AE)(N) 62,523 807
Tetra Tech, Inc. (AE) 8,797 183
Toro Co. 4,510 227
Under Armour, Inc. Class A (AE)(N) 10,750 543
United Online, Inc. (N) 11,006 159
Urban Outfitters, Inc. (AE)(N) 15,015 387
USANA Health Sciences, Inc. (AE)(N) 3,056 122
Valueclick, Inc. (AE)(N) 50,538 1,445
VistaPrint, Ltd. (AE)(N) 15,990 598
Watson Wyatt Worldwide, Inc. Class A 5,111 241
WESCO International, Inc. (AE) 8,540 539
WMS Industries, Inc. (AE)(N) 17,060 680
Zumiez, Inc. (AE) 9,730 384
------------
48,485
------------
Consumer Staples - 2.5%
Coca-Cola Bottling Co. Consolidated 1,870 103
Cott Corp. (AE)(N) 65,829 1,066
Hain Celestial Group, Inc. (AE) 7,154 215
Hansen Natural Corp. (AE)(N) 8,310 318
Lance, Inc. 28,528 631
Loews Corp. - Carolina Group 1,700 130
Longs Drug Stores Corp. 3,870 212
Medifast, Inc. (AE)(N) 13,810 101
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Performance Food Group Co. (AE) 7,464 233
Ralcorp Holdings, Inc. (AE) 4,120 271
Rite Aid Corp. (AE)(N) 39,770 244
Ruddick Corp. (N) 24,245 728
Sensient Technologies Corp. 17,475 458
SunOpta, Inc. (AE) 92,790 1,201
SUPERVALU, Inc. 370 17
Tootsie Roll Industries, Inc. (N) 5,808 168
Weis Markets, Inc. (N) 3,320 143
------------
6,239
------------
Financial Services - 16.0%
Advanta Corp. Class B 19,775 906
Affiliated Managers Group, Inc. (AE) 4,210 495
Alexander's, Inc. (AE)(o) 490 188
Alfa Corp. 7,470 134
American Campus Communities, Inc. (o) 16,375 501
Argonaut Group, Inc. (AE) 14,925 502
Bank of the Ozarks, Inc. 7,890 232
BankAtlantic Bancorp, Inc. Class A 10,920 105
BioMed Realty Trust, Inc. (o) 11,275 324
BlackRock, Inc. Class A (N) 1,400 210
Capital Southwest Corp. (N) 1,110 172
Capital Trust, Inc. Class A (o)(N) 3,115 148
Cedar Shopping Centers, Inc. (o)(N) 55,697 889
Central Pacific Financial Corp. 9,475 326
Checkfree Corp. (AE)(N) 24,165 813
Chemical Financial Corp. (N) 5,090 136
CIT Group, Inc. 6,400 382
Citizens Banking Corp. (N) 6,840 137
Crescent Real Estate Equities Co. (o) 8,463 174
Cullen/Frost Bankers, Inc. 8,625 441
Deerfield Triarc Capital Corp. (o) 9,980 162
Delphi Financial Group Class A 7,645 326
Dun & Bradstreet Corp. 2,200 199
Euronet Worldwide, Inc. (AE)(N) 84,045 2,341
Federal Realty Investors Trust (o) 3,380 305
FelCor Lodging Trust, Inc. (o) 7,505 192
Fidelity National Financial, Inc. Class A 8,746 223
Fidelity National Information Services, Inc. 3,844 194
First Citizens BancShares, Inc. Class A 810 164
First Commonwealth Financial Corp. (N) 11,810 131
First Financial Corp. (N) 5,250 150
</Table>
56 Tax-Managed Mid & Small Cap Fund
RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
First Industrial Realty Trust, Inc. (o)(N) 14,137 619
First Midwest Bancorp, Inc. 13,603 489
First Potomac Realty Trust (o)(N) 12,525 323
FNB Corp. (N) 8,820 148
Fremont General Corp. (N) 9,120 69
Fulton Financial Corp. (N) 12,030 177
GATX Corp. (N) 29,505 1,446
General Growth Properties, Inc. (o) 10,200 651
GFI Group, Inc. (AE)(N) 3,595 249
Glacier Bancorp, Inc. (N) 9,222 198
Glimcher Realty Trust (o)(N) 5,710 154
Greenhill & Co., Inc. (N) 8,980 568
Hanover Insurance Group, Inc. (The) 12,906 593
Health Care Property Investors, Inc. (o) 380 13
Health Care REIT, Inc. (o) 4,510 204
Healthcare Realty Trust, Inc. (o) 5,100 174
Hersha Hospitality Trust (o) 59,850 711
Highland Hospitality Corp. (o) 10,170 194
Home Properties, Inc. (o) 9,480 528
Hub International, Ltd. 9,250 386
IMPAC Mortgage Holdings, Inc. (o)(N) 30,290 168
IndyMac Bancorp, Inc. (N) 4,530 137
Integra Bank Corp. 6,830 155
IntercontinentalExchange, Inc. (AE) 5,970 758
International Securities Exchange Holdings, Inc.
Class A (N) 11,200 747
Investment Technology Group, Inc. (AE) 18,161 687
Investors Financial Services Corp. 5,450 337
Investors Real Estate Trust (o)(N) 13,880 146
Knight Capital Group, Inc. Class A (AE) 30,550 495
LandAmerica Financial Group, Inc. Class A (N) 2,542 204
Leucadia National Corp. 10,410 314
Mercury General Corp. 2,950 160
Mid-America Apartment Communities, Inc. (o) 14,932 806
National Penn Bancshares, Inc. (N) 8,284 154
Nationwide Health Properties, Inc. (o) 7,670 246
Nelnet, Inc. Class A 28,375 763
Nuveen Investments, Inc. Class A 4,430 236
Old Republic International Corp. 15,337 326
Omega Financial Corp. (N) 6,820 191
Phoenix Cos., Inc. (The) 10,690 159
Placer Sierra Bancshares 6,850 190
PMI Group, Inc. (The) 4,810 233
Popular, Inc. (N) 13,900 234
Post Properties, Inc. (o)(N) 8,555 401
Provident Bankshares Corp. (N) 4,746 152
Radian Group, Inc. 3,442 200
Raymond James Financial, Inc. 7,908 243
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Reinsurance Group of America, Inc. 3,610 225
RLI Corp. 9,300 518
Selective Insurance Group, Inc. 6,040 158
Signature Bank (AE) 24,750 779
Sky Financial Group, Inc. 12,060 329
SL Green Realty Corp. (o) 150 21
South Financial Group, Inc. (The) 6,740 153
Sovereign Bancorp, Inc. 11,963 290
State Auto Financial Corp. 4,480 135
Sterling Financial Corp. 17,615 519
Sun Communities, Inc. (o) 22,357 665
TD Ameritrade Holding Corp. (AE)(N) 13,900 237
Texas Capital Bancshares, Inc. (AE)(N) 72,230 1,467
UnionBanCal Corp. 3,300 203
United Bankshares, Inc. 13,300 446
United Fire & Casualty Co. 18,825 692
Valley National Bancorp (N) 10,451 265
Vornado Realty Trust (o) 5,230 620
W Holding Co., Inc. 87,341 423
Waddell & Reed Financial, Inc. Class A 34,525 836
Washington Real Estate Investment Trust (o)(N) 7,320 277
Westamerica Bancorporation (N) 12,328 577
Wintrust Financial Corp. (N) 38,538 1,656
WR Berkley Corp. 2,719 88
------------
39,917
------------
Health Care - 12.0%
Abraxis BioScience, Inc. (AE) 6,350 175
Affymetrix, Inc. (AE)(N) 32,432 852
Align Technology, Inc. (AE) 23,170 525
Amedisys, Inc. (AE) 4,667 146
Anadys Pharmaceuticals, Inc. (AE)(N) 35,850 146
Applera Corp. - Celera Group (AE) 16,560 232
Arrow International, Inc. 5,150 164
Arthrocare Corp. (AE) 8,575 354
Celgene Corp. (AE)(N) 11,230 687
Cephalon, Inc. (AE) 4,200 334
Charles River Laboratories International, Inc.
(AE) 4,618 219
Chattem, Inc. (AE)(N) 14,509 829
Cooper Cos., Inc. (The) 4,120 210
Covance, Inc. (AE) 11,890 719
Coventry Health Care, Inc. (AE) 8,550 494
Cytyc Corp. (AE) 13,141 463
Datascope Corp. 4,090 152
Diversa Corp. (AE)(N) 38,216 278
</Table>
Tax-Managed Mid & Small Cap Fund 57
RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Durect Corp. (AE)(N) 69,949 313
Emdeon Corp. (AE)(N) 17,940 290
Enzon Pharmaceuticals, Inc. (AE)(N) 18,090 153
Gen-Probe, Inc. (AE) 12,040 615
Gentiva Health Services, Inc. (AE) 41,554 778
Haemonetics Corp. (AE) 18,058 864
Henry Schein, Inc. (AE)(N) 24,261 1,265
Idexx Laboratories, Inc. (AE) 17,963 1,620
ImClone Systems, Inc. (AE)(N) 5,990 251
Intuitive Surgical, Inc. (AE)(N) 4,430 574
Invitrogen Corp. (AE) 23,451 1,535
KV Pharmaceutical Co. (AE) 29,830 776
Kyphon, Inc. (AE)(N) 11,220 523
Ligand Pharmaceuticals, Inc. Class B 13,900 95
Lincare Holdings, Inc. (AE) 4,340 171
Matria Healthcare, Inc. (AE)(N) 34,266 993
Millennium Pharmaceuticals, Inc. (AE)(N) 16,200 179
Northfield Laboratories, Inc. (AE)(N) 39,140 188
NuVasive, Inc. (AE)(N) 9,090 234
Omnicare, Inc. (N) 3,000 99
Omnicell, Inc. (AE) 7,100 163
Option Care, Inc. (N) 37,675 515
Orthofix International NV (AE) 9,600 506
OSI Pharmaceuticals, Inc. (AE)(N) 5,394 187
Par Pharmaceutical Cos., Inc. (AE) 35,815 964
Pharmaceutical Product Development, Inc. 19,830 715
PolyMedica Corp. (N) 20,767 840
PSS World Medical, Inc. (AE)(N) 20,897 420
Psychiatric Solutions, Inc. (AE) 16,050 563
Quality Systems, Inc. (AE)(N) 12,140 491
Renovis, Inc. (AE)(N) 39,050 152
Respironics, Inc. (AE) 4,830 197
Stericycle, Inc. (AE) 9,823 856
Sunrise Senior Living, Inc. (AE)(N) 19,839 760
SurModics, Inc. (AE)(N) 15,357 624
Symmetry Medical, Inc. (AE)(N) 31,250 531
Techne Corp. (AE) 3,040 179
Tenet Healthcare Corp. (AE) 31,670 235
US Physical Therapy, Inc. (AE) 30,209 441
Varian Medical Systems, Inc. (AE) 3,900 165
Vital Signs, Inc. 10,700 611
WebMD Health Corp. Class A (AE) 2,800 146
WellCare Health Plans, Inc. (AE) 4,120 332
West Pharmaceutical Services, Inc. (N) 13,860 690
Zoll Medical Corp. (AE) 10,760 260
------------
30,038
------------
Materials and Processing - 6.6%
Acuity Brands, Inc. 13,885 821
Allegheny Technologies, Inc. 4,440 487
Apogee Enterprises, Inc. 32,875 792
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Arch Chemicals, Inc. 5,330 161
Armor Holdings, Inc. (AE) 6,890 493
Beacon Roofing Supply, Inc. (AE) 7,740 122
Brush Engineered Materials, Inc. (AE) 10,098 485
Buckeye Technologies, Inc. (AE) 12,300 156
Building Materials Holding Corp. (N) 6,370 93
Clarcor, Inc. 14,850 468
Commercial Metals Co. (N) 23,364 783
Compx International, Inc. (N) 7,190 143
Cytec Industries, Inc. 6,450 354
EnerSys (AE) 9,420 153
ENGlobal Corp. (AE)(N) 70,813 456
FMC Corp. 3,780 291
GrafTech International, Ltd. (AE) 26,820 268
Graphic Packaging Corp. (AE) 31,060 159
Hercules, Inc. (AE) 18,075 341
Huntsman Corp. 9,340 183
Interface, Inc. Class A 9,910 167
Interline Brands, Inc. (AE) 6,550 143
Jacobs Engineering Group, Inc. (AE) 26,634 1,343
Lennox International, Inc. 5,780 195
LSI Industries, Inc. (N) 46,823 738
Martin Marietta Materials, Inc. 3,750 547
Metal Management, Inc. 2,850 137
Minerals Technologies, Inc. (N) 2,710 172
Modtech Holdings, Inc. (AE)(N) 53,814 151
PAN American Silver Corp. (AE)(N) 14,080 398
Precision Castparts Corp. 5,000 521
Rogers Corp. (AE)(N) 3,780 171
Royal Gold, Inc. (N) 4,580 134
RPM International, Inc. (N) 10,031 213
Sonoco Products Co. 6,860 293
Southern Copper Corp. (N) 8,000 642
Spartech Corp. 36,331 1,019
St. Joe Co. (The) (N) 4,080 231
Standard Register Co. (The) (N) 20,000 249
Texas Industries, Inc. (N) 5,075 387
Universal Forest Products, Inc. (N) 3,500 163
USG Corp. (AE)(N) 5,802 268
Washington Group International, Inc. (AE) 2,906 194
Watsco, Inc. (N) 13,400 712
Wausau Paper Corp. 11,530 155
------------
16,552
------------
</Table>
58 Tax-Managed Mid & Small Cap Fund
RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Miscellaneous - 0.5%
Carlisle Cos., Inc. 5,622 231
Foster Wheeler, Ltd. (AE) 8,095 557
Lancaster Colony Corp. 4,950 209
Walter Industries, Inc. (N) 7,763 231
------------
1,228
------------
Other Energy - 6.1%
Arch Coal, Inc. 7,800 281
Basic Energy Services, Inc. (AE)(N) 18,000 465
Cameron International Corp. (AE) 11,977 773
Encore Acquisition Co. (AE) 25,202 673
Forest Oil Corp. (AE)(N) 20,060 707
Foundation Coal Holdings, Inc. 13,867 546
Global Industries, Ltd. (AE) 36,291 753
Grant Prideco, Inc. (AE) 3,900 201
Grey Wolf, Inc. (AE)(N) 24,910 178
Hanover Compressor Co. (AE)(N) 29,385 636
Helix Energy Solutions Group, Inc. (AE)(N) 19,990 765
Hornbeck Offshore Services, Inc. (AE) 5,640 178
Houston Exploration Co. (AE)(N) 5,230 290
James River Coal Co. (AE)(N) 19,700 178
Lufkin Industries, Inc. (N) 2,630 164
Matrix Service Co. (AE) 32,740 799
Oil States International, Inc. (AE)(N) 5,840 198
Parallel Petroleum Corp. (AE)(N) 23,390 541
Parker Drilling Co. (AE) 19,020 207
Peabody Energy Corp. 13,600 653
Plains Exploration & Production Co. (AE) 9,447 444
Range Resources Corp. 19,375 708
Southwestern Energy Co. (AE) 16,670 700
Superior Energy Services, Inc. (AE) 18,100 658
Tesoro Corp. 9,620 1,166
Todco Class A (AE) 14,125 642
W-H Energy Services, Inc. (AE) 9,800 530
Whiting Petroleum Corp. (AE) 19,777 871
XTO Energy, Inc. 7,253 394
------------
15,299
------------
Producer Durables - 7.6%
ACCO Brands Corp. (AE) 32,625 776
Applied Industrial Technologies, Inc. 8,560 230
ASV, Inc. (AE) 17,065 259
BE Aerospace, Inc. (AE) 25,754 944
C&D Technologies, Inc. (N) 107,017 538
Champion Enterprises, Inc. (AE)(N) 77,135 793
Crown Castle International Corp. (AE) 15,050 517
Dionex Corp. (AE) 5,700 393
Donaldson Co., Inc. 19,084 686
EnPro Industries, Inc. (AE) 17,650 665
Entegris, Inc. (AE)(N) 15,830 186
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Federal Signal Corp. 44,610 704
General Cable Corp. (AE)(N) 33,975 1,952
IDEX Corp. 10,728 563
Kadant, Inc. (AE) 15,175 417
Kennametal, Inc. 19,535 1,378
Knoll, Inc. 40,675 944
Lam Research Corp. (AE) 3,700 199
Lennar Corp. Class A 6,700 286
Littelfuse, Inc. (AE) 5,230 210
MDC Holdings, Inc. (N) 4,507 231
Middleby Corp. (AE) 1,370 188
Mueller Water Products, Inc. Class A 12,827 184
Orbital Sciences Corp. (AE) 11,041 230
Pentair, Inc. 7,380 237
Polycom, Inc. (AE) 15,190 506
Power-One, Inc. (AE)(N) 26,480 113
Robbins & Myers, Inc. 24,518 942
Roper Industries, Inc. 6,900 387
SBA Communications Corp. Class A (AE) 16,800 494
TAL International Group, Inc. (N) 21,550 539
Terex Corp. (AE) 13,140 1,023
Varian Semiconductor Equipment Associates, Inc.
(AE)(N) 18,291 1,214
WCI Communities, Inc. (AE)(N) 7,013 153
------------
19,081
------------
Technology - 11.3%
3Com Corp. (AE)(N) 43,070 174
Actel Corp. (AE) 8,300 122
Akamai Technologies, Inc. (AE) 20,890 921
American Science & Engineering, Inc. (AE) 14,049 660
AMIS Holdings, Inc. (AE) 14,120 164
Anixter International, Inc. (AE) 11,580 829
Ansys, Inc. (AE) 8,760 449
Atheros Communications, Inc. (AE) 9,250 248
Avnet, Inc. (AE) 7,710 315
BEA Systems, Inc. (AE) 18,550 219
Benchmark Electronics, Inc. (AE) 27,562 584
Black Box Corp. 3,611 132
CACI International, Inc. Class A (AE)(N) 15,129 692
Cbeyond, Inc. (AE) 3,320 115
Cogent Communications Group, Inc. (AE) 15,620 398
Cognizant Technology Solutions Corp. Class A
(AE) 3,000 268
</Table>
Tax-Managed Mid & Small Cap Fund 59
RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CSG Systems International, Inc. (AE) 6,273 168
Diodes, Inc. (AE)(N) 13,250 489
DRS Technologies, Inc. 10,395 523
Electronics for Imaging, Inc. (AE) 37,550 1,001
Emulex Corp. (AE) 54,173 1,137
EPIQ Systems, Inc. (AE) 11,481 271
Excel Technology, Inc. (AE) 2,910 77
F5 Networks, Inc. (AE) 6,740 517
Fairchild Semiconductor International, Inc.
Class A (AE) 24,800 436
Formfactor, Inc. (AE) 4,524 187
GTSI Corp. (AE)(N) 32,515 376
Harris Corp. 3,880 199
Informatica Corp. (AE)(N) 132,824 1,955
Integrated Device Technology, Inc. (AE) 22,660 339
Intersil Corp. Class A 16,280 485
Kemet Corp. (AE) 20,130 171
Lattice Semiconductor Corp. (AE) 25,210 138
LSI Corp. (AE) 32,434 276
Macrovision Corp. (AE) 87,880 2,133
Mantech International Corp. Class A (AE) 23,845 732
McAfee, Inc. (AE) 3,400 110
Microchip Technology, Inc. 13,250 534
MicroStrategy, Inc. Class A (AE) 1,320 150
Mobility Electronics, Inc. (AE)(N) 43,930 131
NAVTEQ Corp. (AE)(N) 18,175 643
Netgear, Inc. (AE)(N) 6,050 203
ON Semiconductor Corp. (AE)(N) 23,600 253
Parametric Technology Corp. (AE) 43,460 772
Perot Systems Corp. Class A (AE)(N) 47,375 848
Progress Software Corp. (AE) 32,575 981
Salesforce.com, Inc. (AE)(N) 8,270 347
SanDisk Corp. (AE) 3,510 152
SiRF Technology Holdings, Inc. (AE)(N) 41,910 1,017
Sonus Networks, Inc. (AE)(N) 55,950 432
SRA International, Inc. Class A (AE)(N) 4,200 103
Sycamore Networks, Inc. (AE) 40,930 150
Syntel, Inc. (N) 6,241 219
Utstarcom, Inc. (AE)(N) 19,310 138
Varian, Inc. (AE) 12,634 732
Veraz Networks, Inc. (AE) 53,735 373
Vignette Corp. (AE) 8,677 161
Zebra Technologies Corp. Class A (AE)(N) 44,756 1,781
------------
28,130
------------
Utilities - 4.4%
Alaska Communications Systems Group, Inc. (N) 106,433 1,692
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Black Hills Corp. 14,450 575
Cablevision Systems Corp. Class A (AE) 4,300 141
Cascade Natural Gas Corp. 5,700 148
Central Vermont Public Service Corp. 6,600 212
Cleco Corp. 22,063 619
El Paso Electric Co. (AE) 28,555 754
Empire District Electric Co. (The) 7,200 178
Great Plains Energy, Inc. 6,400 209
Level 3 Communications, Inc. (AE)(N) 86,095 479
NeuStar, Inc. Class A (AE)(N) 75,958 2,184
New Jersey Resources Corp. 4,830 259
NII Holdings, Inc. (AE) 4,700 361
Northwest Natural Gas Co. 3,850 196
NSTAR 7,386 265
Otter Tail Corp. (N) 5,140 176
PNM Resources, Inc. 17,350 565
Puget Energy, Inc. 7,890 204
Questar Corp. (N) 2,710 263
SCANA Corp. 8,870 386
Southwest Gas Corp. (N) 7,865 298
Telephone & Data Systems, Inc. 4,490 256
Wisconsin Energy Corp. (N) 11,150 544
------------
10,964
------------
TOTAL COMMON STOCKS
(cost $174,262) 226,554
------------
SHORT-TERM INVESTMENTS - 9.2%
Russell Investment Company
Money Market Fund 21,941,000 21,941
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 1,000 994
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $22,935) 22,935
------------
</Table>
60 Tax-Managed Mid & Small Cap Fund
RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 23.3%
Russell Investment Company
Money Market Fund (X) 11,190,152 11,190
State Street Securities
Lending Quality Trust (X) 47,027,598 47,028
------------
TOTAL OTHER SECURITIES
(cost $58,218) 58,218
------------
TOTAL INVESTMENTS - 123.2%
(identified cost $255,415) 307,707
OTHER ASSETS AND LIABILITIES,
NET - (23.2%) (58,040)
------------
NET ASSETS - 100.0% 249,667
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 2000 Mini Index (CME)
expiration date 06/07 (274) 22,438 675
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 675
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Tax-Managed Mid & Small Cap Fund 61
RUSSELL INVESTMENT COMPANY
TAX-MANAGED MID & SMALL CAP FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 4.3
Consumer Discretionary 19.4
Consumer Staples 2.5
Financial Services 16.0
Health Care 12.0
Materials and Processing 6.6
Miscellaneous 0.5
Other Energy 6.1
Producer Durables 7.6
Technology 11.3
Utilities 4.4
Short-Term Investments 9.2
Other Securities 23.3
---------------
Total Investments 123.2
Other Assets and Liabilities, Net (23.2)
---------------
100.0
===============
Futures Contracts 0.3
</Table>
See accompanying notes which are an integral part of the financial statements.
62 Tax-Managed Mid & Small Cap Fund
RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,048.50 $ 1,013.84
Expenses Paid During
Period* $ 11.22 $ 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,052.10 $ 1,017.95
Expenses Paid During
Period* $ 7.02 $ 6.90
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.38%
(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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,054.50 $ 1,020.08
Expenses Paid During
Period* $ 4.84 $ 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.
Select Growth Fund 63
RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,053.70 $ 1,019.04
Expenses Paid During
Period* $ 5.91 $ 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). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
64 Select Growth Fund
RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.6%
Auto and Transportation - 4.0%
Arctic Cat, Inc. 3,700 66
CH Robinson Worldwide, Inc. 12,120 648
CSX Corp. 6,250 270
Expeditors International Washington, Inc. 32,000 1,338
FedEx Corp. 15,010 1,583
Fleetwood Enterprises, Inc. (AE)(N) 11,500 96
Fuel Systems Solutions, Inc. (AE)(N) 5,500 93
Grupo Aeroportuario del Centro Norte Sab de CV -
ADR (AE)(N) 3,600 105
Grupo Aeroportuario del Sureste SAB de CV - ADR 2,800 135
JB Hunt Transport Services, Inc. (N) 6,687 181
Keystone Automotive Industries, Inc. (AE)(N) 3,000 100
Oshkosh Truck Corp. 5,657 316
Spartan Motors, Inc. (N) 4,700 134
Union Pacific Corp. 3,600 411
United Parcel Service, Inc. Class B 28,900 2,035
------------
7,511
------------
Consumer Discretionary - 19.4%
Activision, Inc. (AE) 7,300 146
Advance Auto Parts, Inc. 6,200 255
AFC Enterprises (AE)(N) 3,900 74
Bare Escentuals, Inc. (AE) 2,500 101
Bright Horizons Family Solutions, Inc. (AE)(N) 2,000 77
Buca, Inc. (AE)(N) 15,300 76
Buffalo Wild Wings, Inc. (AE)(N) 1,500 98
Chico's FAS, Inc. (AE)(N) 7,484 197
Coach, Inc. (AE) 20,970 1,024
Costco Wholesale Corp. (N) 16,700 895
Crown Media Holdings, Inc. Class A (AE)(N) 9,200 53
Deckers Outdoor Corp. (AE)(N) 2,000 152
dELIA*s, Inc. (AE)(N) 7,800 67
Design Within Reach, Inc. (AE)(N) 11,500 71
DeVry, Inc. (N) 5,000 165
Diamond Management & Technology Consultants,
Inc. Class A (N) 8,300 94
Dolby Laboratories, Inc.
Class A (AE) 4,000 142
eBay, Inc. (AE) 99,700 3,384
Electronic Arts, Inc. (AE) 38,000 1,916
Gap, Inc. (The) (N) 16,000 287
Google, Inc. Class A (AE) 12,379 5,835
Gray Television, Inc. (N) 9,600 102
Home Inns & Hotels Management, Inc. - ADR (AE) 1,400 48
Houston Wire & Cable Co. (AE)(N) 6,000 177
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Iconix Brand Group, Inc. (AE)(N) 6,082 122
International Game Technology 66,110 2,521
ITT Educational Services, Inc. (AE) 900 88
Las Vegas Sands Corp. (AE) 10,540 898
Leapfrog Enterprises, Inc.
Class A (AE)(N) 15,300 168
Life Time Fitness, Inc. (AE)(N) 2,300 118
Local.com Corp. (AE)(N) 7,500 33
Lowe's Cos., Inc. 38,500 1,177
Maidenform Brands, Inc. (AE)(N) 4,800 98
McCormick & Schmick's Seafood Restaurants, Inc.
(AE) 1,500 40
MGM Mirage (AE) 21,000 1,412
Multimedia Games, Inc. (AE)(N) 8,600 96
News Corp. Class A 61,580 1,379
On Assignment, Inc. (AE)(N) 5,400 60
Revlon, Inc. Class A (AE)(N) 57,900 75
Sears Holdings Corp. (AE)(N) 1,900 363
Sharper Image Corp. (AE)(N) 5,800 66
Shutterfly, Inc. (AE)(N) 7,200 117
Six Flags, Inc. (AE) 17,000 101
Staples, Inc. 148,300 3,678
Starbucks Corp. (AE) 59,716 1,852
Starwood Hotels & Resorts Worldwide, Inc. (o) 10,298 690
Take-Two Interactive Software, Inc. (AE)(N) 3,600 69
Target Corp. 5,241 311
Time Warner, Inc. 19,800 409
Topps Co., Inc. (The) (N) 11,200 111
Universal Electronics, Inc. (AE)(N) 3,900 110
Urban Outfitters, Inc. (AE)(N) 30,400 783
Valuevision Media, Inc. Class A (AE) 5,600 63
Viacom, Inc. Class A (AE) 8,700 359
Wal-Mart Stores, Inc. 42,800 2,051
WebSideStory, Inc. (AE)(N) 8,300 93
Weight Watchers International, Inc. 25,000 1,200
WMS Industries, Inc. (AE)(N) 2,300 92
Yahoo!, Inc. (AE) 10,811 303
Youbet.com, Inc. (AE)(N) 21,500 59
------------
36,601
------------
Consumer Staples - 9.6%
Altria Group, Inc. 9,760 673
Coca-Cola Co. (The) 26,815 1,399
Colgate-Palmolive Co. 18,900 1,280
Green Mountain Coffee Roasters, Inc. (AE)(N) 1,600 98
</Table>
Select Growth Fund 65
RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Jones Soda Co. (AE)(N) 7,300 180
Kraft Foods, Inc. Class A 11,105 372
PepsiCo, Inc. 63,071 4,168
Procter & Gamble Co. 88,170 5,670
SYSCO Corp. 35,400 1,159
Walgreen Co. 49,000 2,151
Whole Foods Market, Inc. (N) 20,200 945
------------
18,095
------------
Financial Services - 10.5%
Advent Software, Inc. (AE) 7,000 235
American Express Co. 12,200 740
American International Group, Inc. 21,635 1,513
Automatic Data Processing, Inc. 39,700 1,777
Charles Schwab Corp. (The) 48,860 934
Chicago Mercantile Exchange Holdings, Inc. Class
A 5,080 2,625
Clayton Holdings, Inc. (AE)(N) 4,800 84
First Cash Financial Services, Inc. (AE)(N) 2,700 62
GFI Group, Inc. (AE)(N) 2,300 159
Goldman Sachs Group, Inc. (The) 6,810 1,489
IntercontinentalExchange, Inc. (AE) 16,000 2,032
Luminent Mortgage Capital, Inc. (o)(N) 8,500 70
Merrill Lynch & Co., Inc. 5,293 478
Moody's Corp. 20,000 1,322
Morgan Stanley 5,595 470
Paychex, Inc. 40,000 1,484
Pico Holdings, Inc. (AE)(N) 2,900 130
State Street Corp. (N) 31,530 2,171
UBS AG 13,120 852
Western Union Co. (The) 59,200 1,246
------------
19,873
------------
Health Care - 18.1%
Abbott Laboratories 29,272 1,657
Albany Molecular Research, Inc. (AE) 6,100 59
Allergan, Inc. 24,890 3,017
Amgen, Inc. (AE) 6,846 439
Applera Corp. - Celera Group (AE) 6,400 90
Baxter International, Inc. 41,210 2,334
Biogen Idec, Inc. (AE)(N) 9,462 447
Bruker BioSciences Corp. (AE) 14,400 166
Celgene Corp. (AE)(N) 20,283 1,240
Cerner Corp. (AE)(N) 2,500 133
Cerus Corp. (AE)(N) 10,500 78
Charles River Laboratories International, Inc.
(AE) 2,500 118
Cholestech Corp. (AE) 4,200 81
Covance, Inc. (AE)(N) 1,900 115
Cutera, Inc. (AE)(N) 2,400 70
CVS Corp. 30,060 1,089
Cynosure, Inc. Class A (AE)(N) 4,000 125
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
DaVita, Inc. (AE)(N) 2,600 142
Discovery Laboratories, Inc. (AE) 17,100 51
DOV Pharmaceutical, Inc. (AE)(N) 31,100 12
Express Scripts, Inc. Class A (AE) 3,993 382
Genentech, Inc. (AE) 31,011 2,481
Genzyme Corp. (AE) 26,100 1,705
Gilead Sciences, Inc. (AE) 29,841 2,439
GTx, Inc. (AE)(N) 4,800 94
Healthcare Services Group (N) 4,100 115
HealthExtras, Inc. (AE)(N) 5,500 170
Healthways, Inc. (AE)(N) 1,500 64
Hemispherx Biopharma, Inc. (AE)(N) 14,800 24
Henry Schein, Inc. (AE)(N) 1,400 73
Hi-Tech Pharmacal Co., Inc. (AE)(N) 4,382 58
Inverness Medical Innovations, Inc. (AE)(N) 2,600 104
Johnson & Johnson 27,200 1,747
Luminex Corp. (AE) 6,600 91
Medco Health Solutions, Inc. (AE) 6,081 474
Medtronic, Inc. 30,078 1,592
Merck & Co., Inc. 9,538 491
NuVasive, Inc. (AE)(N) 3,700 95
OXiGENE, Inc. (AE) 8,000 38
Palatin Technologies, Inc. (AE)(N) 14,600 29
Phase Forward, Inc. (AE)(N) 4,100 65
PolyMedica Corp. (N) 1,500 61
PSS World Medical, Inc. (AE)(N) 2,900 58
Questcor Pharmaceuticals, Inc. (AE)(N) 33,200 31
Sepracor, Inc. (AE)(N) 2,800 150
Sequenom, Inc. (AE)(N) 15,100 56
Sonic Innovations, Inc. (AE)(N) 15,200 149
Stryker Corp. 13,800 896
Tercica, Inc. (AE)(N) 13,700 82
Teva Pharmaceutical Industries, Ltd. - ADR 35,100 1,345
Thermo Fisher Scientific, Inc. (AE) 31,630 1,647
UnitedHealth Group, Inc. 65,380 3,469
Vion Pharmaceuticals, Inc. (AE)(N) 19,000 36
WellPoint, Inc. (AE) 3,061 242
Wyeth 3,900 216
Zimmer Holdings, Inc. (AE) 21,000 1,900
------------
34,132
------------
Materials and Processing - 3.1%
Alcoa, Inc. 6,900 245
Archer-Daniels-Midland Co. 37,629 1,456
Caraustar Industries, Inc. (AE)(N) 11,800 84
EI Du Pont de Nemours & Co. 6,198 305
</Table>
66 Select Growth Fund
RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Exide Technologies (AE)(N) 13,200 124
Fluor Corp. 1,834 176
Harsco Corp. (N) 3,000 153
Housevalues, Inc. (AE)(N) 15,600 76
Monsanto Co. 23,230 1,370
Praxair, Inc. 26,000 1,678
SAIC, Inc. (AE)(N) 7,500 137
------------
5,804
------------
Miscellaneous - 3.5%
Foster Wheeler, Ltd. (AE)(N) 8,405 578
General Electric Co. 162,928 6,006
------------
6,584
------------
Other Energy - 1.6%
Baker Hughes, Inc. 4,100 330
Cameron International Corp. (AE) 4,476 289
ENSCO International, Inc. 2,200 124
Foundation Coal Holdings, Inc. (N) 2,900 114
Hercules Offshore, Inc. (AE)(N) 3,400 107
Peabody Energy Corp. (N) 13,100 629
Petroquest Energy, Inc. (AE)(N) 8,700 99
Range Resources Corp. (N) 10,937 400
Schlumberger, Ltd. 5,194 383
XTO Energy, Inc. 11,950 648
------------
3,123
------------
Producer Durables - 3.4%
Amazon.Com, Inc. (AE) 5,150 316
American Tower Corp. Class A (AE) 26,460 1,005
Baldor Electric Co. 4,800 189
Boeing Co. 4,200 391
C-COR, Inc. (AE)(N) 8,100 100
CalAmp Corp. (AE)(N) 10,100 84
Caterpillar, Inc. 5,136 373
Credence Systems Corp. (AE)(N) 25,200 93
Crown Castle International Corp. (AE)(N) 2,200 76
Deere & Co. (N) 9,290 1,016
EFJ, Inc. (AE)(N) 12,900 75
Entegris, Inc. (AE)(N) 14,127 166
Goodrich Corp. (N) 5,600 318
KLA-Tencor Corp. 26,650 1,480
L-1 Identity Solutions, Inc. (AE)(N) 8,200 158
Polycom, Inc. (AE) 2,700 90
SBA Communications Corp. Class A (AE)(N) 6,500 191
United Technologies Corp. 5,156 346
------------
6,467
------------
Technology - 20.4%
Actuate Corp. (AE)(N) 12,400 70
Akamai Technologies, Inc. (AE) 11,200 494
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Amdocs, Ltd. (AE) 3,500 129
Apple, Inc. (AE) 23,374 2,333
Applied Micro Circuits Corp. (AE) 29,200 82
AsiaInfo Holdings, Inc. (AE)(N) 14,700 113
Aspen Technology, Inc. (AE) 5,400 73
Audible, Inc. (AE)(N) 10,000 96
Avistar Communications Corp. (AE)(N) 37,500 56
Blackboard, Inc. (AE) 1,900 65
Bottomline Technologies, Inc. (AE)(N) 8,400 104
Broadcom Corp. Class A (AE)(N) 60,272 1,962
Brocade Communications Systems, Inc. (AE)(N) 25,691 251
Captaris, Inc. (AE)(N) 11,600 70
Centillium Communications, Inc. (AE) 20,326 39
Chordiant Software, Inc. (AE)(N) 8,200 109
Cisco Systems, Inc. (AE) 127,920 3,421
Citrix Systems, Inc. (AE)(N) 2,900 95
Corning, Inc. (AE) 74,800 1,774
Daktronics, Inc. (N) 3,500 80
DealerTrack Holdings, Inc. (AE)(N) 5,400 178
Dell, Inc. (AE) 49,760 1,255
Digital River, Inc. (AE)(N) 3,300 193
Ditech Networks, Inc. (AE)(N) 10,400 91
Equinix, Inc. (AE)(N) 2,700 225
Gartner, Inc. (AE)(N) 17,000 429
Hewlett-Packard Co. 7,717 325
Integrated Device Technology, Inc. (AE) 6,500 97
International Rectifier Corp. (AE)(N) 2,100 74
Intuit, Inc. (AE) 60,000 1,707
Iomega Corp. (AE)(N) 13,300 53
JDS Uniphase Corp. (AE)(N) 13,549 223
Marvell Technology Group, Ltd. (AE) 17,245 278
Merge Technologies, Inc. (AE)(N) 14,200 71
Microsoft Corp. 109,985 3,293
Napster, Inc. (AE)(N) 17,900 73
National Semiconductor Corp. 12,701 334
Novell, Inc. (AE)(N) 12,400 91
Nuance Communications, Inc. (AE)(N) 16,600 256
PMC - Sierra, Inc. (AE)(N) 17,900 138
QLogic Corp. (AE)(N) 5,800 104
Qualcomm, Inc. 152,270 6,669
Research In Motion, Ltd. (AE) 7,400 974
Safeguard Scientifics, Inc. (AE)(N) 27,400 83
Salesforce.com, Inc. (AE)(N) 2,100 88
SanDisk Corp. (AE) 50,441 2,192
SAP AG - ADR 13,000 624
Seachange International, Inc. (AE)(N) 14,100 121
</Table>
Select Growth Fund 67
RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Seagate Technology (N) 75,000 1,661
Secure Computing Corp. (AE)(N) 12,300 100
Smith Micro Software, Inc. (AE)(N) 6,800 108
Spectrum Control, Inc. (AE) 6,900 94
Standard Microsystems Corp. (AE)(N) 1,900 61
STEC, Inc. (AE)(N) 13,400 108
Sun Microsystems, Inc. (AE) 221,100 1,154
Texas Instruments, Inc. 60,853 2,092
Transaction Systems Architects, Inc. (AE)(N) 4,200 133
Transwitch Corp. (AE) 38,200 56
Trizetto Group, Inc. (The) (AE)(N) 6,200 121
Ultimate Software Group, Inc. (AE)(N) 8,200 226
Varian, Inc. (AE) 1,400 81
VeriFone Holdings, Inc. (AE)(N) 2,900 102
Vignette Corp. (AE)(N) 6,000 111
Xilinx, Inc. 16,349 482
Zhone Technologies, Inc. (AE)(N) 48,900 69
------------
38,414
------------
Utilities - 1.0%
Leap Wireless International, Inc. (AE)(N) 3,100 237
Level 3 Communications, Inc. (AE)(N) 35,100 195
MDU Communications International, Inc. (AE) 22,300 21
MetroPCS Communications, Inc. (AE) 7,692 216
NII Holdings, Inc. (AE) 15,760 1,209
------------
1,878
------------
TOTAL COMMON STOCKS
(cost $152,094) 178,482
------------
SHORT-TERM INVESTMENTS - 5.4%
Russell Investment Company
Money Market Fund 9,161,000 9,161
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 1,000 994
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $10,155) 10,155
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
OTHER SECURITIES - 17.0%
Russell Investment Company Money Market Fund (X) 6,179,744 6,180
State Street Securities Lending Quality Trust
(X) 25,970,919 25,971
------------
TOTAL OTHER SECURITIES
(cost $32,151) 32,151
------------
TOTAL INVESTMENTS - 117.0%
(identified cost $194,400) 220,788
OTHER ASSETS AND LIABILITIES,
NET - (17.0%) (32,103)
------------
NET ASSETS - 100.0% 188,685
============
</Table>
See accompanying notes which are an integral part of the financial statements.
68 Select Growth Fund
RUSSELL INVESTMENT COMPANY
SELECT GROWTH FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Nasdaq 100 Index (CME)
expiration date 06/07 (14) 2,631 145
Russell 1000 Growth Index
expiration date 06/07 (11) 3,233 145
S&P 500 E-Mini Index (CME)
expiration date 06/07 (19) 1,414 54
S&P 500 Index (CME)
expiration date 06/07 (7) 2,605 55
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 399
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- ----------------------------------------------------------------
Auto and Transportation 4.0
Consumer Discretionary 19.4
Consumer Staples 9.6
Financial Services 10.5
Health Care 18.1
Materials and Processing 3.1
Miscellaneous 3.5
Other Energy 1.6
Producer Durables 3.4
Technology 20.4
Utilities 1.0
Short-Term Investments 5.4
Other Securities 17.0
------------
Total Investments 117.0
Other Assets and Liabilities, Net (17.0)
------------
100.0
============
Futures Contracts 0.2
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Growth Fund 69
RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SHAREHOLDER EXPENSE EXAMPLE -- APRIL 30, 2007 (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 (12b-1) and/or service 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, 2006 to April 30, 2007.
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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,099.40 $ 1,014.48
Expenses Paid During
Period* $ 10.83 $ 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, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,103.20 $ 1,018.55
Expenses Paid During
Period* $ 6.57 $ 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).
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS I PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,105.60 $ 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).
70 Select Value Fund
RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SHAREHOLDER EXPENSE EXAMPLE, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
CLASS S PERFORMANCE BEFORE EXPENSES)
- ------- -------------- ----------------
Beginning Account Value
November 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value April
30, 2007 $ 1,104.10 $ 1,019.54
Expenses Paid During
Period* $ 5.53 $ 5.31
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.06%
(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).
Select Value Fund 71
RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 93.3%
Auto and Transportation - 2.5%
AMR Corp. (AE) 24,900 649
Continental AG - ADR 17,800 2,474
Ford Motor Co. (AE)(N) 108,300 871
Polaris Industries, Inc. (N) 22,200 1,122
TNT NV - ADR 41,560 1,876
UAL Corp. (AE)(N) 100,000 3,340
United Parcel Service, Inc. Class B 22,300 1,570
------------
11,902
------------
Consumer Discretionary - 8.5%
Black & Decker Corp. 12,500 1,134
Cinemark Holdings, Inc. New (AE)(N) 47,200 892
Expedia, Inc. (AE)(N) 40,200 950
Foot Locker, Inc. 79,100 1,882
Gap, Inc. (The) 216,300 3,883
Hasbro, Inc. 10,200 322
Home Depot, Inc. 48,800 1,848
InterActiveCorp (AE)(N) 16,000 610
JC Penney Co., Inc. 11,200 886
Kimberly-Clark Corp. 32,900 2,341
Liberty Media Corp. - Interactive (AE) 60,800 1,522
Liberty Media Holding Corp.
Series A (AE)(N) 24,900 2,813
Limited Brands, Inc. 43,100 1,188
Mattel, Inc. 22,500 637
McDonald's Corp. 71,600 3,457
OfficeMax, Inc. 24,900 1,226
Phillips-Van Heusen Corp. 26,200 1,465
RadioShack Corp. 42,600 1,238
RR Donnelley & Sons Co. 31,800 1,278
Sears Holdings Corp. (AE) 7,700 1,470
Virgin Media, Inc. (N) 67,000 1,690
Wal-Mart Stores, Inc. 82,300 3,944
Walt Disney Co. (The) 36,100 1,263
Waste Management, Inc. 56,700 2,121
------------
40,060
------------
Consumer Staples - 5.9%
Altria Group, Inc. 34,700 2,392
Anheuser-Busch Cos., Inc. 37,400 1,840
Clorox Co. 34,200 2,294
Coca-Cola Co. (The) 42,300 2,208
ConAgra Foods, Inc. 37,300 917
Hershey Co. (The) (N) 38,200 2,099
HJ Heinz Co. 24,400 1,150
Kraft Foods, Inc. Class A 64,100 2,145
Molson Coors Brewing Co. Class B 16,200 1,527
PepsiCo, Inc. 26,500 1,751
Procter & Gamble Co. 65,200 4,193
Safeway, Inc. 11,200 407
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Tyson Foods, Inc. Class A 186,400 3,907
UST, Inc. 15,000 850
------------
27,680
------------
Financial Services - 27.3%
American International Group, Inc. 22,200 1,552
Ameriprise Financial, Inc. 19,300 1,148
Annaly Capital Management, Inc. (o) 83,800 1,333
AON Corp. 15,900 616
Astoria Financial Corp. 33,500 890
Automatic Data Processing, Inc. 44,000 1,969
Bank of America Corp. 164,596 8,378
Bear Stearns Cos., Inc. (The) 15,400 2,398
Cigna Corp. 16,800 2,614
Citigroup, Inc. 242,400 12,998
Colonial BancGroup, Inc. (The) 49,700 1,196
Countrywide Financial Corp. 222,400 8,247
Covanta Holding Corp. (AE) 41,200 1,011
Credit Suisse Group - ADR 32,090 2,519
Cullen/Frost Bankers, Inc. 18,000 921
E*Trade Financial Corp. (AE)(N) 123,690 2,731
Fannie Mae 94,400 5,562
Federated Investors, Inc. Class B 43,100 1,645
First Horizon National Corp. (N) 23,800 933
Freddie Mac 79,500 5,150
Genworth Financial, Inc. Class A 80,000 2,919
H&R Block, Inc. 45,500 1,029
Hartford Financial Services Group, Inc. 16,500 1,670
Health Care REIT, Inc. (o) 39,400 1,782
Jones Lang LaSalle, Inc. 7,500 806
JPMorgan Chase & Co. 179,900 9,373
Legg Mason, Inc. 18,000 1,785
Lehman Brothers Holdings, Inc. 49,700 3,741
Lincoln National Corp. 17,600 1,252
MBIA, Inc. 31,200 2,170
Mercury General Corp. (N) 22,200 1,202
Merrill Lynch & Co., Inc. 70,400 6,352
MGIC Investment Corp. (N) 40,800 2,514
Morgan Stanley 13,000 1,092
New York Community Bancorp, Inc. (N) 96,700 1,688
Northern Trust Corp. 36,100 2,273
PMI Group, Inc. (The) 23,400 1,134
Protective Life Corp. 27,200 1,276
Prudential Financial, Inc. 19,000 1,805
South Financial Group, Inc. (The) (N) 44,500 1,007
SunTrust Banks, Inc. 21,200 1,790
TCF Financial Corp. (N) 22,700 615
</Table>
72 Select Value Fund
RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Travelers Cos., Inc. (The) 33,400 1,807
UBS AG 29,400 1,908
US Bancorp 76,700 2,635
Wachovia Corp. 19,400 1,077
Washington Mutual, Inc. (N) 159,000 6,675
Wilmington Trust Corp. 40,100 1,622
------------
128,810
------------
Health Care - 8.6%
AmerisourceBergen Corp. Class A 7,100 355
Amgen, Inc. (AE) 69,400 4,451
Biogen Idec, Inc. (AE) 79,415 3,749
Bristol-Myers Squibb Co. 66,100 1,908
Eli Lilly & Co. 45,200 2,673
Genzyme Corp. (AE) 43,900 2,867
Johnson & Johnson 33,100 2,126
McKesson Corp. 22,400 1,318
Medco Health Solutions, Inc. (AE) 7,000 546
Merck & Co., Inc. 48,800 2,510
Pfizer, Inc. 156,700 4,146
Sanofi-Aventis - ADR (N) 112,200 5,146
Thermo Fisher Scientific, Inc. (AE) 23,900 1,244
UnitedHealth Group, Inc. 58,600 3,109
WellPoint, Inc. (AE) 35,600 2,811
Wyeth 26,900 1,493
------------
40,452
------------
Integrated Oils - 3.0%
Chevron Corp. 35,662 2,774
ConocoPhillips 27,300 1,893
Exxon Mobil Corp. 71,300 5,660
Marathon Oil Corp. 17,800 1,808
Occidental Petroleum Corp. 42,800 2,170
------------
14,305
------------
Materials and Processing - 6.5%
Abitibi-Consolidated, Inc. (AE) 1,055,400 2,776
American Standard Cos., Inc. 68,300 3,761
Archer-Daniels-Midland Co. 33,300 1,289
Avery Dennison Corp. 12,900 802
Celanese Corp. Class A 56,100 1,861
Chaparral Steel Co. 9,400 663
Chemtura Corp. 64,600 713
Chicago Bridge & Iron Co. NV 37,000 1,281
Freeport-McMoRan Copper & Gold, Inc. Class B 28,600 1,921
International Paper Co. 42,900 1,618
Lubrizol Corp. 20,600 1,235
Lyondell Chemical Co. (N) 18,900 588
Masco Corp. 45,600 1,241
MeadWestvaco Corp. 32,000 1,067
Packaging Corp. of America 38,100 943
PPG Industries, Inc. 15,700 1,155
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Praxair, Inc. 11,600 749
Precision Castparts Corp. 23,700 2,467
Steel Dynamics, Inc. 18,900 837
Teck Cominco, Ltd. Class B 21,400 1,627
Timken Co. 36,800 1,214
Valspar Corp. 37,800 1,022
------------
30,830
------------
Miscellaneous - 3.0%
3M Co. 23,900 1,978
Brunswick Corp. 35,200 1,153
General Electric Co. 119,900 4,420
SPX Corp. 12,500 886
Textron, Inc. 21,650 2,201
Tyco International, Ltd. 108,800 3,550
------------
14,188
------------
Other Energy - 6.6%
Anadarko Petroleum Corp. 14,900 695
Chesapeake Energy Corp. (N) 129,700 4,377
Devon Energy Corp. 37,500 2,733
Dynegy, Inc. Class A (AE) 2,043 19
EOG Resources, Inc. 27,200 1,998
Frontier Oil Corp. 25,800 911
GlobalSantaFe Corp. 31,200 1,995
Halliburton Co. 44,030 1,399
National-Oilwell Varco, Inc. (AE) 31,200 2,647
Peabody Energy Corp. 74,700 3,584
Reliant Energy, Inc. (AE)(N) 174,300 3,882
Sunoco, Inc. 18,300 1,382
Transocean, Inc. (AE) 24,100 2,077
Valero Energy Corp. 33,600 2,360
Williams Cos., Inc. 30,900 912
------------
30,971
------------
Producer Durables - 5.1%
Agilent Technologies, Inc. (AE) 95,300 3,275
Alcatel-Lucent - ADR 337,500 4,472
Boeing Co. 47,100 4,380
Cooper Industries, Ltd. Class A 27,700 1,378
Cummins, Inc. 11,500 1,060
DR Horton, Inc. (N) 98,300 2,180
Goodrich Corp. 57,300 3,257
Mettler Toledo International, Inc. (AE) 4,800 469
Pentair, Inc. 44,400 1,427
Pulte Homes, Inc. 31,300 842
</Table>
Select Value Fund 73
RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Terex Corp. (AE) 9,700 755
United Technologies Corp. 11,300 759
------------
24,254
------------
Technology - 7.6%
Analog Devices, Inc. 25,000 966
AU Optronics Corp. - ADR 180,400 2,870
BearingPoint, Inc. (AE) 372,700 2,736
Cadence Design Systems, Inc. (AE) 34,400 764
Dell, Inc. (AE) 109,700 2,766
General Dynamics Corp. 43,400 3,407
Harris Corp. 13,600 698
Hewlett-Packard Co. 156,200 6,582
Intel Corp. 169,900 3,653
International Business Machines Corp. 9,800 1,002
LSI Corp. (AE)(N) 217,800 1,851
MEMC Electronic Materials, Inc. (AE) 22,700 1,246
Micron Technology, Inc. (AE) 56,800 651
Motorola, Inc. 89,400 1,549
Sanmina-SCI Corp. (AE) 576,200 1,988
Seagate Technology, Inc. (N) 84,300 1,867
Seagate Technology, Inc. (AE) 1,900 --
Sun Microsystems, Inc. (AE) 99,500 519
Synopsys, Inc. (AE) 25,400 703
------------
35,818
------------
Utilities - 8.7%
Alltel Corp. 85,700 5,373
America Movil SAB de CV
Series L 76,800 4,034
American Electric Power Co., Inc. 49,400 2,481
Aqua America, Inc. (N) 51,800 1,145
AT&T, Inc. 100,500 3,891
China Mobile, Ltd. - ADR (N) 60,500 2,723
China Unicom, Ltd. - ADR (N) 57,500 833
Citizens Communications Co. (N) 80,800 1,258
Edison International 37,700 1,974
Mirant Corp. (AE) 91,900 4,124
NiSource, Inc. 39,700 976
Progress Energy, Inc. - CVO 1,300 --
Rogers Communications, Inc. Class B 44,700 1,706
SCANA Corp. 11,300 492
Sprint Nextel Corp. 331,400 6,638
TECO Energy, Inc. 35,800 643
Verizon Communications, Inc. 48,100 1,836
Windstream Corp. Class W (AE) 68,600 1,003
------------
41,130
------------
TOTAL COMMON STOCKS
(cost $375,629) 440,400
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 7.0%
Russell Investment Company
Money Market Fund 31,418,000 31,418
United States Treasury Bills (c)(z)(sec.)
5.041% due 06/14/07 1,500 1,491
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $32,909) 32,909
------------
OTHER SECURITIES - 7.5%
Russell Investment Company
Money Market Fund (X) 6,831,584 6,832
State Street Securities
Lending Quality Trust (X) 28,710,333 28,710
------------
TOTAL OTHER SECURITIES
(cost $35,542) 35,542
------------
TOTAL INVESTMENTS - 107.8%
(identified cost $444,080) 508,851
OTHER ASSETS AND LIABILITIES,
NET - (7.8%) (36,621)
------------
NET ASSETS - 100.0% 472,230
============
</Table>
See accompanying notes which are an integral part of the financial statements.
74 Select Value Fund
RUSSELL INVESTMENT COMPANY
SELECT VALUE FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Value Index
expiration date 06/07 (29) 12,394 536
S&P 500 E-Mini Index (CME)
expiration date 06/07 (36) 2,679 85
S&P 500 Index (CME)
expiration date 06/07 (46) 17,117 625
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,246
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -----------------------------------------------------------------
Auto and Transportation 2.5
Consumer Discretionary 8.5
Consumer Staples 5.9
Financial Services 27.3
Health Care 8.6
Integrated Oils 3.0
Materials and Processing 6.5
Miscellaneous 3.0
Other Energy 6.6
Producer Durables 5.1
Technology 7.6
Utilities 8.7
Short-Term Investments 7.0
Other Securities 7.5
---------------
Total Investments 107.8
Other Assets and Liabilities, Net (7.8)
---------------
100.0
===============
Futures Contracts 0.3
</Table>
See accompanying notes which are an integral part of the financial statements.
Select Value Fund 75
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- APRIL 30, 2007 (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>
76 Notes to Schedules of Investments
(This page intentionally left blank)
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
EMERGING MARKETS REAL ESTATE SECURITIES
AMOUNTS IN THOUSANDS FUND FUND
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 1,047,471 $ 1,592,402
- -----------------------------------------------------------------------------------------------------------------------
Investments, at market*** 1,522,005 2,396,082
Cash 178 --
Cash (Restricted) 2,600 --
Foreign currency holdings* 6,177 --
Unrealized appreciation on foreign currency exchange contracts 1,621 --
Receivables:
Dividends and interest 4,007 2,193
Dividends from affiliated money market funds 274 369
Investments sold 5,912 1,404
Fund shares sold 2,618 6,848
Foreign taxes recoverable 18 --
From Adviser -- --
Daily variation margin on futures contracts -- --
Prepaid expenses 23 43
Interest rate swap contracts, at market value***** -- --
Credit default swap contracts, at market value**** -- --
------------------- --------------------
Total assets 1,545,433 2,406,939
------------------- --------------------
LIABILITIES
Payables:
Due to Custodian -- 5
Investments purchased 11,056 6,147
Fund shares redeemed 3,369 4,006
Accrued fees to affiliates 1,686 1,997
Other accrued expenses 195 52
Daily variation margin on futures contracts 325 --
Deferred tax liability 1,144 --
Unrealized depreciation on foreign currency exchange contracts 308 --
Options written, at market value** 830 --
Payable upon return of securities loaned 92,338 181,532
Interest rate swap contracts, at market value***** -- --
Credit default swaps, at market value**** -- --
------------------- --------------------
Total liabilities 111,251 193,739
------------------- --------------------
NET ASSETS $ 1,434,182 $ 2,213,200
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
78 Statement of Assets and Liabilities
<Table>
<Caption>
SHORT DURATION TAX EXEMPT TAX-MANAGED TAX-MANAGED MID & SELECT GROWTH SELECT VALUE
BOND FUND BOND FUND LARGE CAP FUND SMALL CAP FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------
$ 522,980 $ 329,263 $ 446,350 $ 255,415 $ 194,400 $ 444,080
- ---------------------------------------------------------------------------------------------------------------
520,253 331,088 587,877 307,707 220,788 508,851
-- -- -- -- -- --
-- -- -- -- -- --
311 -- -- -- -- --
-- -- -- -- -- --
3,297 4,450 306 85 83 468
140 14 125 87 36 120
4,327 -- -- 1,931 1,568 3,606
693 2,978 1,001 1,364 518 617
-- -- -- -- -- --
-- -- -- 4 156 --
90 -- -- -- -- --
35 20 13 2 4 2
136 -- -- -- -- --
121 -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
529,403 338,550 589,322 311,180 223,153 513,664
-------------- -------------- -------------- -------------- -------------- --------------
8 2,004 -- -- -- --
4,188 1,771 53 2,497 1,161 4,397
2,097 436 608 65 814 782
289 137 402 268 184 410
94 42 38 44 47 35
-- -- 229 421 111 268
-- -- -- -- -- --
12 -- -- -- -- --
626 -- -- -- -- --
6,976 -- 38,521 58,218 32,151 35,542
115 -- -- -- -- --
1 -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
14,406 4,390 39,851 61,513 34,468 41,434
-------------- -------------- -------------- -------------- -------------- --------------
$ 514,997 $ 334,160 $ 549,471 $ 249,667 $ 188,685 $ 472,230
============== ============== ============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 79
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
<Table>
<Caption>
EMERGING MARKETS REAL ESTATE SECURITIES
AMOUNTS IN THOUSANDS FUND FUND
- -----------------------------------------------------------------------------------------------------------------------
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ (27,102) $ (2,997)
Accumulated net realized gain (loss) 80,676 138,475
Unrealized appreciation (depreciation) on:
Investments (International Securities Fund and Emerging Markets
Fund - net of deferred tax liability for foreign capital gains
taxes) 473,390 803,680
Futures contracts 415 --
Options written (43) --
Credit default swaps -- --
Interest rate swap contracts -- --
Foreign currency-related transactions 1,341 --
Shares of beneficial interest 644 396
Additional paid-in capital 904,861 1,273,646
------------------- --------------------
NET ASSETS $ 1,434,182 $ 2,213,200
=================== ====================
NET ASSET VALUE, offering and redemption price per share:
Net asset value per share: Class A****** $ 22.30 $ 55.42
Maximum offering price per share (Net asset value plus sales charge
of 5.75%*******): Class A $ 23.66 $ 58.80
Class A -- Net assets $ 1,820,991 $ 2,578,596
Class A -- Shares outstanding ($.01 par value) 81,652 46,531
Net asset value per share: Class C****** $ 21.52 $ 54.45
Class C -- Net assets $ 51,785,694 $ 115,147,430
Class C -- Shares outstanding ($.01 par value) 2,405,862 2,114,712
Net asset value per share: Class E****** $ 22.30 $ 55.43
Class E -- Net assets $ 31,492,945 $ 63,459,465
Class E -- Shares outstanding ($.01 par value) 1,412,524 1,144,756
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****** $ 22.28 $ 56.05
Class S -- Net assets $ 1,349,082,625 $ 2,032,014,827
Class S -- Shares outstanding ($.01 par value) 60,548,230 36,254,627
- -----------------------------------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings - cost $ 6,179 $ --
** Premiums received on options written $ 788 $ --
*** Securities on loan included in investments $ 95,053 $ 174,144
**** 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.
******* Short Duration Bond Fund's maximum sale charge is 3.75%.
</Table>
See accompanying notes which are an integral part of the financial statements.
80 Statement of Assets and Liabilities
<Table>
<Caption>
SHORT DURATION TAX EXEMPT TAX-MANAGED TAX-MANAGED MID & SELECT GROWTH SELECT VALUE
BOND FUND BOND FUND LARGE CAP FUND SMALL CAP FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------
$ 1,893 $ 1,028 $ 655 $ 168 $ 6 $ 304
(20,051) (1,585) (64,454) 8,920 (6,523) 37,506
(2,727) 1,825 141,527 52,292 26,388 64,771
664 -- 1,098 675 399 1,246
73 -- -- -- -- --
125 -- -- -- -- --
(131) -- -- -- -- --
(2) -- -- -- -- --
275 155 254 164 214 360
534,878 332,737 470,391 187,448 168,201 368,043
-------------- -------------- -------------- -------------- -------------- --------------
$ 514,997 $ 334,160 $ 549,471 $ 249,667 $ 188,685 $ 472,230
============== ============== ============== ============== ============== ==============
$ 18.71 $ -- $ -- $ -- $ -- $ --
$ 19.44 $ -- $ -- $ -- $ -- $ --
$ 1,369,709 $ -- $ -- $ -- $ -- $ --
73,214 -- -- -- -- --
$ 18.66 $ 21.50 $ 21.12 $ 14.20 $ 8.22 $ 12.87
$ 16,849,168 $ 12,474,005 $ 21,452,161 $ 13,575,936 $ 9,904,771 $ 27,255,910
903,053 580,073 1,015,903 956,066 1,204,369 2,117,380
$ 18.72 $ 21.57 $ 21.61 $ 15.04 $ 8.68 $ 13.12
$ 15,984,152 $ 20,083,537 $ 14,726,906 $ 3,028,730 $ 6,305,980 $ 11,608,242
853,814 930,885 681,468 201,409 726,184 884,578
$ -- $ -- $ -- $ -- $ 8.90 $ 13.16
$ -- $ -- $ -- $ -- $ 99,585,437 $ 147,194,709
-- -- -- -- 11,187,846 11,183,077
$ 18.70 $ 21.55 $ 21.69 $ 15.27 $ 8.83 $ 13.13
$ 480,794,011 $ 301,602,541 $ 513,292,096 $ 233,062,119 $ 72,888,844 $ 286,170,712
25,716,546 13,995,936 23,665,218 15,262,100 8,256,299 21,787,567
- ---------------------------------------------------------------------------------------------------------------
$ 305 $ -- $ -- $ -- $ -- $ --
$ 699 $ -- $ -- $ -- $ -- $ --
$ 6,823 $ -- $ 37,104 $ 55,792 $ 31,457 $ 39,896
$ (5) $ -- $ -- $ -- $ -- $ --
$ 152 $ -- $ -- $ -- $ -- $ --
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 81
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED APRIL 30, 2007 (UNAUDITED)
<Table>
EMERGING MARKETS REAL ESTATE
Amounts in thousands FUND SECURITIES FUND
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 14,998 $ 22,253
Dividends from affiliated money market funds 1,196 1,624
Interest 68 --
Securities lending income 288 151
Less foreign taxes withheld (1,473) --
------------------- --------------------
Total investment income 15,077 24,028
------------------- --------------------
EXPENSES
Advisory fees 7,385 8,693
Administrative fees 321 543
Custodian fees 1,167 226
Distribution fees - Class A 1 1
Distribution fees - Class C 183 433
Transfer agent fees 1,491 1,956
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 46 54
Shareholder servicing fees - Class C 61 144
Shareholder servicing fees - Class E 36 79
Trustees' fees 13 23
Printing fees 22 31
Miscellaneous 9 20
------------------- --------------------
Expenses before reductions 10,799 12,238
Expense reductions (8) (8)
------------------- --------------------
Net expenses 10,791 12,230
------------------- --------------------
Net investment income (loss) 4,286 11,798
------------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments (Emerging Markets Fund - net of deferred tax
liability for foreign capital gains taxes) 78,676 145,537
Futures contracts 4,566 --
Options written 2,047 --
Credit default swaps -- --
Interest rate swap contracts -- --
Foreign currency-related transactions 88 --
------------------- --------------------
Net realized gain (loss) 85,377 145,537
------------------- --------------------
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) 140,155 (15,117)
Futures contracts (363) --
Options written (28) --
Credit default swaps -- --
Interest rate swap contracts -- --
Foreign currency-related transactions 1,073 --
------------------- --------------------
Net change in unrealized appreciation (depreciation) 140,837 (15,117)
------------------- --------------------
Net realized and unrealized gain (loss) 226,214 130,420
------------------- --------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 230,500 $ 142,218
=================== ====================
</Table>
See accompanying notes which are an integral part of the financial statements.
82 Statement of Operations
<Table>
<Caption>
SHORT DURATION TAX EXEMPT TAX-MANAGED TAX-MANAGED MID & SELECT GROWTH SELECT VALUE
BOND FUND BOND FUND LARGE CAP FUND SMALL CAP FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------
$ 58 $ -- $ 3,425 $ 1,109 $ 796 $ 3,988
2,119 94 709 433 175 690
21,281 6,553 35 23 25 34
12 -- 19 110 33 48
-- -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ---------------- ------------
23,470 6,647 4,188 1,675 1,029 4,760
---------------- ---------------- ---------------- ---------------- ---------------- ------------
2,142 466 1,807 1,129 733 1,554
238 78 129 58 46 111
182 72 93 88 87 107
-- -- -- -- -- --
75 45 76 48 37 100
476 155 258 188 -- --
-- -- -- -- 12 33
-- -- -- -- 6 10
-- -- -- -- 39 69
-- -- -- -- 73 304
35 24 19 24 21 23
35 36 25 22 31 35
25 15 25 16 12 33
30 18 17 3 8 14
13 3 6 2 2 5
21 6 9 4 6 7
11 4 5 3 3 4
---------------- ---------------- ---------------- ---------------- ---------------- ------------
3,283 922 2,469 1,585 1,116 2,409
(22) (3) (1) (77) (92) --
---------------- ---------------- ---------------- ---------------- ---------------- ------------
3,261 919 2,468 1,508 1,024 2,409
---------------- ---------------- ---------------- ---------------- ---------------- ------------
20,209 5,728 1,720 167 5 2,351
---------------- ---------------- ---------------- ---------------- ---------------- ------------
(1,303) 92 13,342 8,729 4,567 45,669
(2,207) -- 1,140 1,657 447 1,139
(301) -- -- -- -- --
6 -- -- -- -- --
255 -- -- -- -- --
(59) -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ---------------- ------------
(3,609) 92 14,482 10,386 5,014 46,808
---------------- ---------------- ---------------- ---------------- ---------------- ------------
3,418 (1,942) 23,998 11,160 4,554 (5,204)
1,666 -- 342 (521) (25) 340
485 -- -- -- -- --
124 -- -- -- -- --
(414) -- -- -- -- --
(2) -- -- -- -- --
---------------- ---------------- ---------------- ---------------- ---------------- ------------
5,277 (1,942) 24,340 10,639 4,529 (4,864)
---------------- ---------------- ---------------- ---------------- ---------------- ------------
1,668 (1,850) 38,822 21,025 9,543 41,944
---------------- ---------------- ---------------- ---------------- ---------------- ------------
$ 21,877 $ 3,878 $ 40,542 $ 21,192 $ 9,548 $ 44,295
================ ================ ================ ================ ================ ============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 83
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
EMERGING MARKETS
FUND
-------------------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2006
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 4,286 $ 10,510
Net realized gain (loss) 85,377 160,254
Net change in unrealized appreciation (depreciation) 140,837 113,960
------------------- --------------------
Net increase (decrease) in net assets from operations 230,500 284,724
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A -- --
Class C (540) (580)
Class E (518) (442)
Class I -- --
Class S (23,139) (20,081)
From net realized gain
Class C (6,471) (887)
Class E (3,838) (487)
Class I -- --
Class S (151,400) (20,087)
------------------- --------------------
Net decrease in net assets from distributions (185,906) (42,564)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions 224,666 75,860
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 269,260 318,020
NET ASSETS
Beginning of period 1,164,922 846,902
------------------- --------------------
End of period $ 1,434,182 $ 1,164,922
=================== ====================
Undistributed (overdistributed) net investment income included
in net assets $ (27,102) $ (7,191)
</Table>
See accompanying notes which are an integral part of the financial statements.
84 Statements of Changes in Net Assets
<Table>
<Caption>
REAL ESTATE SHORT DURATION TAX EXEMPT
SECURITIES FUND BOND FUND BOND FUND
- ------------------------------------------------- ------------------------------------------ -------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS
ENDED ENDED ENDED ENDED ENDED
APRIL 30, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31, APRIL 30, 2007
(UNAUDITED) 2006 (UNAUDITED) 2006 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
$ 11,798 $ 24,653 $ 20,209 $ 42,526 $ 5,728
145,537 169,551 (3,609) (7,206) 92
(15,117) 380,628 5,277 8,551 (1,942)
------------------- ------------------- ------------------- ------------------- -------------------
142,218 574,832 21,877 43,871 3,878
------------------- ------------------- ------------------- ------------------- -------------------
(13) -- (6) -- --
(523) (699) (356) (655) (164)
(431) (630) (519) (882) (237)
-- -- -- -- --
(15,788) (24,741) (21,673) (40,141) (5,249)
(9,460) (8,834) -- -- --
(5,015) (4,267) -- -- --
-- -- -- -- --
(159,326) (150,805) -- -- --
------------------- ------------------- ------------------- ------------------- -------------------
(190,556) (189,976) (22,554) (41,678) (5,650)
------------------- ------------------- ------------------- ------------------- -------------------
188,118 132,283 (639,912) (60,187) 37,870
------------------- ------------------- ------------------- ------------------- -------------------
139,780 517,139 (640,589) (57,994) 36,098
2,073,420 1,556,281 1,155,586 1,213,580 298,062
------------------- ------------------- ------------------- ------------------- -------------------
$ 2,213,200 $ 2,073,420 $ 514,997 $ 1,155,586 $ 334,160
=================== =================== =================== =================== ===================
$ (2,997) $ 1,960 $ 1,893 $ 4,238 $ 1,028
<Caption>
TAX EXEMPT
BOND FUND
- --- --------------------
FISCAL YEAR
ENDED
OCTOBER 31,
2006
- ---
$ 9,801
(638)
3,055
--------------------
12,218
--------------------
--
(285)
(324)
--
(8,921)
--
--
--
--
--------------------
(9,530)
--------------------
47,705
--------------------
50,393
247,669
--------------------
$ 298,062
====================
$ 950
</Table>
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets 85
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS, CONTINUED
<Table>
<Caption>
TAX-MANAGED
LARGE CAP FUND
-------------------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
APRIL 30, 2007 OCTOBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2006
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 1,720 $ 3,709
Net realized gain (loss) 14,482 20,243
Net change in unrealized appreciation (depreciation) 24,340 27,442
------------------- --------------------
Net increase (decrease) in net assets from operations 40,542 51,394
------------------- --------------------
DISTRIBUTIONS
From net investment income
Class A -- --
Class C -- --
Class E (73) (51)
Class I -- --
Class S (3,672) (3,088)
From net realized gain
Class C -- --
Class E -- --
Class I -- --
Class S -- --
------------------- --------------------
Net decrease in net assets from distributions (3,745) (3,139)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share transactions 22,834 29,330
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 59,631 77,585
NET ASSETS
Beginning of period 489,840 412,255
------------------- --------------------
End of period $ 549,471 $ 489,840
=================== ====================
Undistributed (overdistributed) net investment income included
in net assets $ 655 $ 2,680
</Table>
See accompanying notes which are an integral part of the financial statements.
86 Statements of Changes in Net Assets
<Table>
<Caption>
TAX-MANAGED SELECT GROWTH SELECT VALUE
MID & SMALL CAP FUND FUND FUND
- ------------------------------------------------- ------------------------------------------ -------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS
ENDED ENDED ENDED ENDED ENDED
APRIL 30, 2007 OCTOBER 31, APRIL 30, 2007 OCTOBER 31, APRIL 30, 2007
(UNAUDITED) 2006 (UNAUDITED) 2006 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
$ 167 $ (289) $ 5 $ (147) $ 2,351
10,386 11,684 5,014 6,754 46,808
10,639 14,941 4,529 3,535 (4,864)
------------------- ------------------- ------------------- ------------------- -------------------
21,192 26,336 9,548 10,142 44,295
------------------- ------------------- ------------------- ------------------- -------------------
-- -- -- -- --
-- -- -- -- (32)
-- -- -- -- (44)
-- -- -- (44) (766)
-- -- -- -- (1,274)
(186) -- -- -- (1,561)
(36) -- -- -- (649)
-- -- -- -- (7,737)
(2,860) -- -- -- (15,104)
------------------- ------------------- ------------------- ------------------- -------------------
(3,082) -- -- (44) (27,167)
------------------- ------------------- ------------------- ------------------- -------------------
18,977 18,690 397 (13,198) 32,983
------------------- ------------------- ------------------- ------------------- -------------------
37,087 45,026 9,945 (3,100) 50,111
212,580 167,554 178,740 181,840 422,119
------------------- ------------------- ------------------- ------------------- -------------------
$ 249,667 $ 212,580 $ 188,685 $ 178,740 $ 472,230
=================== =================== =================== =================== ===================
$ 168 $ 1 $ 6 $ 1 $ 304
<Caption>
SELECT VALUE
FUND
- --- --------------------
FISCAL YEAR
ENDED
OCTOBER 31,
2006
- ---
$ 4,112
29,157
31,000
--------------------
64,269
--------------------
--
(49)
(88)
(1,579)
(2,401)
(1,230)
(494)
(7,528)
(11,306)
--------------------
(24,675)
--------------------
18,217
--------------------
57,811
364,308
--------------------
$ 422,119
====================
$ 69
</Table>
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets 87
RUSSELL INVESTMENT COMPANY
SPECIALTY 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 A
April 30, 2007 (1) 20.50 .03 1.77 1.80 --
- ----------------------------------------------------------------------------------------------------------------------------------
Class C
April 30, 2007 * 21.17 (.03) 3.67 3.64 (.25)
October 31, 2006 16.73 .01 5.14 5.15 (.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 --
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 21.89 .05 3.81 3.86 (.41)
October 31, 2006 17.25 .17 5.29 5.46 (.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 --
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 21.91 .08 3.79 3.87 (.46)
October 31, 2006 17.25 .21 5.31 5.52 (.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)
- ----------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
Class A
April 30, 2007 (1) 57.37 (.21) (1.36) (1.57) (.38)
- ----------------------------------------------------------------------------------------------------------------------------------
Class C
April 30, 2007 * 56.11 .04 3.37 3.41 (.25)
October 31, 2006 46.08 .22 15.14 15.36 (.35)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 56.95 .25 3.43 3.68 (.38)
October 31, 2006 46.62 .59 15.36 15.95 (.64)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 57.53 .33 3.46 3.79 (.45)
October 31, 2006 47.03 .73 15.51 16.24 (.76)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- ----------------------------------------
EMERGING MARKETS FUND
Class A
April 30, 2007 (1) -- --
- ----------------------------------------
Class C
April 30, 2007 * (3.04) --
October 31, 2006 (.43) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class E
April 30, 2007 * (3.04) --
October 31, 2006 (.43) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class S
April 30, 2007 * (3.04) --
October 31, 2006 (.43) --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
REAL ESTATE SECURITIES FUND
Class A
April 30, 2007 (1) -- --
- ----------------------------------------
Class C
April 30, 2007 * (4.82) --
October 31, 2006 (4.98) --
October 31, 2005 (3.67) --
October 31, 2004 (.01) --
October 31, 2003 (.11) --
October 31, 2002 -- --
- ----------------------------------------
Class E
April 30, 2007 * (4.82) --
October 31, 2006 (4.98) --
October 31, 2005 (3.67) --
October 31, 2004 (.01) --
October 31, 2003 (.11) --
October 31, 2002 -- --
- ----------------------------------------
Class S
April 30, 2007 * (4.82) --
October 31, 2006 (4.98) --
October 31, 2005 (3.67) --
October 31, 2004 (.01) --
October 31, 2003 (.11) --
October 31, 2002 -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
88 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
-- 22.30 8.78 1,821
- -----------------------------------------------------------------------------
(3.29) 21.52 18.97 51,786
(.71) 21.17 31.63 44,977
(.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
- -----------------------------------------------------------------------------
(3.45) 22.30 19.43 31,493
(.82) 21.89 32.64 27,862
(.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
- -----------------------------------------------------------------------------
(3.50) 22.28 19.51 1,349,082
(.86) 21.91 33.04 1,092,083
(.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
- -----------------------------------------------------------------------------
(.38) 55.42 (2.75) 2,579
- -----------------------------------------------------------------------------
(5.07) 54.45 6.29 115,147
(5.33) 56.11 36.63 110,287
(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
- -----------------------------------------------------------------------------
(5.20) 55.43 6.71 63,459
(5.62) 56.95 37.65 59,768
(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
- -----------------------------------------------------------------------------
(5.27) 56.05 6.82 2,032,015
(5.74) 57.53 38.04 1,903,365
(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
- -----------------------------------------------------------------------------
<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)
- ---
1.89 1.89 1.10 25.17
- ---
2.64 2.64 (.30) 25.17
2.68 2.68 .07 68.52
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
- ---
1.89 1.89 .43 25.17
1.93 1.93 .83 68.52
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
- ---
1.64 1.64 .71 25.17
1.68 1.68 1.06 68.52
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
- ---
1.32 1.32 (2.75) 28.76
- ---
2.06 2.07 .14 28.76
2.07 2.08 .45 48.64
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
- ---
1.32 1.32 .89 28.76
1.32 1.32 1.19 48.64
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
- ---
1.07 1.07 1.15 28.76
1.07 1.07 1.46 48.64
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
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 89
RUSSELL INVESTMENT COMPANY
SPECIALTY 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 A
April 30, 2007 (1) 18.71 .13 (.02) .11 (.11)
- ----------------------------------------------------------------------------------------------------------------------------------
Class C
April 30, 2007 * 18.66 .30 .03 .33 (.33)
October 31, 2006 18.63 .50 .03 .53 (.50)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 18.72 .37 .02 .39 (.40)
October 31, 2006 18.70 .65 .03 .68 (.65)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 18.70 .38 .05 .43 (.43)
October 31, 2006 18.67 .69 .03 .72 (.69)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
TAX EXEMPT BOND FUND
Class C
April 30, 2007 * 21.63 .29 (.13) .16 (.29)
October 31, 2006 21.45 .57 .17 .74 (.56)
October 31, 2005 22.03 .51 (.61) (.10) (.48)
October 31, 2004 21.99 .53 .04 .57 (.53)
October 31, 2003 21.94 .58 .07 .65 (.60)
October 31, 2002 21.76 .60 .22 .82 (.64)
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 21.70 .37 (.13) .24 (.37)
October 31, 2006 21.52 .73 .17 .90 (.72)
October 31, 2005 22.10 .67 (.60) .07 (.65)
October 31, 2004 22.06 .69 .04 .73 (.69)
October 31, 2003 21.99 .75 .06 .81 (.74)
October 31, 2002 21.81 .78 .18 .96 (.78)
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 21.67 .40 (.12) .28 (.40)
October 31, 2006 21.49 .79 .16 .95 (.77)
October 31, 2005 22.07 .72 (.60) .12 (.70)
October 31, 2004 22.03 .75 .03 .78 (.74)
October 31, 2003 21.96 .80 .07 .87 (.80)
October 31, 2002 21.79 .83 .18 1.01 (.84)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- ----------------------------------------
SHORT DURATION BOND FUND
Class A
April 30, 2007 (1) -- --
- ----------------------------------------
Class C
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class E
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class S
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
TAX EXEMPT BOND FUND
Class C
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class E
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class S
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
90 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.11) 18.71 .60 1,370
- -----------------------------------------------------------------------------
(.33) 18.66 1.78 16,849
(.50) 18.66 2.89 21,840
(.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
- -----------------------------------------------------------------------------
(.40) 18.72 2.11 15,984
(.65) 18.73 3.69 26,800
(.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
- -----------------------------------------------------------------------------
(.43) 18.70 2.31 480,794
(.69) 18.70 3.95 1,106,946
(.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
- -----------------------------------------------------------------------------
(.29) 21.50 .75 12,474
(.56) 21.63 3.50 11,819
(.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
- -----------------------------------------------------------------------------
(.37) 21.57 1.13 20,083
(.72) 21.70 4.26 11,805
(.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
- -----------------------------------------------------------------------------
(.40) 21.55 1.30 301,603
(.77) 21.67 4.53 274,438
(.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
- -----------------------------------------------------------------------------
<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)
- ---
.91 .95 4.22 78.02
- ---
1.67 1.67 3.26 78.02
1.65 1.66 2.71 111.57
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
- ---
.91 .92 4.03 78.02
.90 .91 3.49 111.57
.90 .91 2.43 202.53
.88 .91 1.76 131.57
.80 .97 2.52 187.92
.77 .96 4.04 163.86
- ---
.66 .66 4.27 78.02
.65 .65 3.73 111.57
.65 .66 2.67 202.53
.63 .66 2.01 131.57
.56 .72 2.70 187.92
.52 .71 4.26 163.86
- ---
1.54 1.54 2.73 39.65
1.56 1.56 2.66 63.34
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
- ---
.79 .80 3.51 39.65
.80 .81 3.41 63.34
.78 .78 3.07 43.13
.78 .78 3.14 36.68
.81 .81 3.37 37.46
.83 .83 3.57 39.83
- ---
.54 .54 3.74 39.65
.55 .56 3.66 63.34
.53 .53 3.31 43.13
.53 .53 3.39 36.68
.56 .56 3.62 37.46
.57 .57 3.84 39.83
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 91
RUSSELL INVESTMENT COMPANY
SPECIALTY 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
- ----------------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED LARGE CAP FUND
Class C
April 30, 2007 * 19.62 (.03) 1.53 1.50 --
October 31, 2006 17.68 (.02) 1.96 1.94 --
October 31, 2005 16.55 .01 1.14 1.15 (.02)
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) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 20.12 .05 1.56 1.61 (.12)
October 31, 2006 18.09 .11 2.02 2.13 (.10)
October 31, 2005 16.93 .15 1.15 1.30 (.14)
October 31, 2004 15.30 .06 1.63 1.69 (.06)
October 31, 2003 12.83 .06 2.50 2.56 (.09)
October 31, 2002 15.78 .05 (2.95) (2.90) (.05)
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 20.21 .07 1.57 1.64 (.16)
October 31, 2006 18.16 .17 2.02 2.19 (.14)
October 31, 2005 16.99 .20 1.15 1.35 (.18)
October 31, 2004 15.34 .10 1.63 1.73 (.08)
October 31, 2003 12.87 .10 2.48 2.58 (.11)
October 31, 2002 15.81 .09 (2.95) (2.86) (.08)
- ----------------------------------------------------------------------------------------------------------------------------------
TAX-MANAGED MID & SMALL CAP FUND
Class C
April 30, 2007 * 13.22 (.06) 1.24 1.18 --
October 31, 2006 11.59 (.14) 1.77 1.63 --
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) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 13.93 (.01) 1.32 1.31 --
October 31, 2006 12.13 (.05) 1.85 1.80 --
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) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 14.13 .01 1.33 1.34 --
October 31, 2006 12.27 (.01) 1.87 1.86 --
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) (.01)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- ----------------------------------------
TAX-MANAGED LARGE CAP FUND
Class C
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class E
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class S
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
TAX-MANAGED MID & SMALL CAP FUND
Class C
April 30, 2007 * (.20) --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class E
April 30, 2007 * (.20) --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class S
April 30, 2007 * (.20) --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
92 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
-- 21.12 7.64 21,452
-- 19.62 10.97 19,112
(.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
- -----------------------------------------------------------------------------
(.12) 21.61 8.01 14,727
(.10) 20.12 11.82 12,726
(.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
- -----------------------------------------------------------------------------
(.16) 21.69 8.15 513,292
(.14) 20.21 12.12 458,002
(.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
- -----------------------------------------------------------------------------
(.20) 14.20 9.02 13,576
-- 13.22 14.06 11,975
-- 11.59 13.96 9,295
-- 10.17 9.00 6,041
-- 9.33 31.04 5,025
-- 7.12 (9.65) 3,450
- -----------------------------------------------------------------------------
(.20) 15.04 9.50 3,029
-- 13.93 14.84 2,523
-- 12.13 14.87 1,663
-- 10.56 9.77 1,279
-- 9.62 32.14 850
-- 7.28 (9.00) 885
- -----------------------------------------------------------------------------
(.20) 15.27 9.57 233,062
-- 14.13 15.16 198,081
-- 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
- -----------------------------------------------------------------------------
<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 (.29) 28.39
1.92 1.92 (.13) 60.63
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
- ---
1.16 1.16 .46 28.39
1.17 1.17 .60 60.63
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
- ---
.91 .91 .71 28.39
.92 .92 .87 60.63
.90 .91 1.12 42.92
.92 .92 .62 32.15
.94 .94 .71 127.47
.91 .91 .58 65.39
- ---
2.25 2.32 (.80) 25.32
2.25 2.35 (1.09) 54.34
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
- ---
1.50 1.57 (.04) 25.32
1.50 1.60 (.34) 54.34
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
- ---
1.25 1.32 .20 25.32
1.25 1.35 (.09) 54.34
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
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 93
RUSSELL INVESTMENT COMPANY
SPECIALTY 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 GROWTH FUND
Class C
April 30, 2007 * 7.84 (.05) .43 .38 --
October 31, 2006 7.45 (.09) .48 .39 --
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) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 8.25 (.02) .45 .43 --
October 31, 2006 7.76 (.03) .52 .49 --
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) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2007 * 8.44 (.01) .47 .46 --
October 31, 2006 7.91 .01 .52 .53 --(d)
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) --
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 8.38 (.01) .46 .45 --
October 31, 2006 7.87 (.01) .52 .51 --
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) --
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- ----------------------------------------
SELECT GROWTH FUND
Class C
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class E
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class I
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class S
April 30, 2007 * -- --
October 31, 2006 -- --
October 31, 2005 -- --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
94 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
-- 8.22 4.85 9,905
-- 7.84 5.23 9,764
-- 7.45 8.76 8,149
-- 6.85 (.15) 5,942
-- 6.85 31.17 3,265
-- 5.23 (21.35) 1,341
- -----------------------------------------------------------------------------
-- 8.68 5.21 6,306
-- 8.25 6.31 6,590
-- 7.76 9.60 4,255
-- 7.08 .71 5,749
-- 7.03 32.39 4,865
-- 5.31 (20.51) 2,814
- -----------------------------------------------------------------------------
-- 8.90 5.45 99,585
-- 8.44 6.75 90,953
-- 7.91 10.17 112,112
-- 7.19 1.13 60,006
-- 7.10 32.71 32,003
-- 5.35 (20.27) 18,150
- -----------------------------------------------------------------------------
-- 8.83 5.37 72,889
-- 8.38 6.48 71,433
-- 7.87 10.07 57,324
-- 7.15 .99 51,569
-- 7.08 32.58 42,421
-- 5.34 (20.42) 24,389
- -----------------------------------------------------------------------------
<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 (1.09) 30.76
2.22 2.27 (1.20) 148.35
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
- ---
1.38 1.43 (.26) 30.76
1.36 1.42 (.34) 148.35
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
- ---
.95 1.10 .18 30.76
.95 1.13 .07 148.35
.92 1.08 .12 127.68
.95 1.20 (.23) 134.00
.93 1.58 (.31) 149.76
.89 1.65 (.31) 212.37
- ---
1.16 1.21 (.04) 30.76
1.15 1.21 (.13) 148.35
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
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 95
RUSSELL INVESTMENT COMPANY
SPECIALTY 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, 2007 * 12.44 --(d) 1.19 1.19 (.01)
October 31, 2006 11.27 .01 1.83 1.84 (.03)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class E
April 30, 2007 * 12.66 .06 1.20 1.26 (.05)
October 31, 2006 11.43 .11 1.87 1.98 (.11)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class I
April 30, 2007 * 12.69 .08 1.21 1.29 (.07)
October 31, 2006 11.46 .15 1.87 2.02 (.15)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
Class S
April 30, 2007 * 12.67 .07 1.20 1.27 (.06)
October 31, 2006 11.44 .13 1.87 2.00 (.13)
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)
- ----------------------------------------------------------------------------------------------------------------------------------
<Caption>
$
DISTRIBUTIONS $
FROM NET RETURN OF
REALIZED GAIN CAPITAL
- ----------------------------------------
SELECT VALUE FUND
Class C
April 30, 2007 * (.75) --
October 31, 2006 (.64) --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class E
April 30, 2007 * (.75) --
October 31, 2006 (.64) --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class I
April 30, 2007 * (.75) --
October 31, 2006 (.64) --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
Class S
April 30, 2007 * (.75) --
October 31, 2006 (.64) --
October 31, 2005 (.01) --
October 31, 2004 -- --
October 31, 2003 -- --
October 31, 2002 -- --
- ----------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
96 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, % NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.76) 12.87 9.94 27,256
(.67) 12.44 17.01 26,168
(.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
- -----------------------------------------------------------------------------
(.80) 13.12 10.32 11,608
(.75) 12.66 18.15 10,871
(.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
- -----------------------------------------------------------------------------
(.82) 13.16 10.56 147,195
(.79) 12.69 18.47 131,494
(.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
- -----------------------------------------------------------------------------
(.81) 13.13 10.41 286,171
(.77) 12.67 18.32 253,586
(.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
- -----------------------------------------------------------------------------
<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)
- ---
2.08 2.08 .06 74.84
2.11 2.11 .08 86.60
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
- ---
1.26 1.26 .88 74.84
1.27 1.27 .91 86.60
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
- ---
.93 .93 1.21 74.84
.94 .94 1.26 86.60
.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
- ---
1.06 1.06 1.09 74.84
1.09 1.10 1.09 86.60
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
- ---
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 97
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended April 30, 2007 (Unaudited).
(1) For the period March 1, 2007 (commencement of operations) to April 30,
2007 (Unaudited).
(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 RIMCo as the investment
adviser and transfer agent, and for certain funds, custody credit
arrangements.
See accompanying notes which are an integral part of the financial statements.
98 Notes to Financial Highlights
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Russell Investment Company (the "Investment Company" or "RIC") is a series
investment company with 35 different investment portfolios referred to as
Funds. These financial statements report on eight 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 July 1, 2006, Frank Russell Investment Company changed its name to Russell
Investment Company and Frank Russell Investment Management Company changed
its name to Russell Investment Management Company ("RIMCo").
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 RIMCo.
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 New York
Stock Exchange, 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 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
Notes to Financial Statements 99
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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. RIC
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. RIC 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. RIC 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.
In September 2006, Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157), was issued and is effective for fiscal years
beginning after November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. Management is currently evaluating the impact the adoption of
SFAS 157 will have on the Funds financial statement disclosure.
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.
In July 2006, Financial Accounting Standards Board Interpretation No. 48,
Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement 109 (FIN 48) was issued and is effective for fiscal years beginning
after December 15, 2006. FIN 48 sets forth a threshold for financial
statement recognition, measurement and disclosure of a tax position taken or
expected to be taken on a tax return. Management is currently evaluating the
impact, if any, the adoption of FIN 48 will have on the Fund's net assets and
results of operations.
100 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 Fund
Quarterly April, July, October and December Real Estate Securities,
Short Duration Bond and
Select Value Funds
Annually Mid-December 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.
Expenses
The Funds will pay their own expenses other than those expressly assumed by
Russell Investment Management Company ("RIMCo" 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 A,
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
Notes to Financial Statements 101
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
effects of changes in foreign exchange rates from the fluctuations arising
from changes in market prices for realized gain (or loss) on debt
obligations.
Capital Gains Taxes
The Emerging Markets Fund may be subject to capital gains taxes and
repatriation taxes imposed by certain countries in which it invests. The Fund
has recorded a deferred tax liability in respect of the unrealized
appreciation on foreign securities for potential capital gains and
repatriation taxes at April 30, 2007. 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 Fund. The
amounts related to capital gains taxes are included in net realized gain
(loss) on investments in the Statement of Operations for the Fund.
<Table>
<Caption>
DEFERRED TAX CAPITAL GAINS
FUND LIABILITY TAXES
-------------------------------------------------------------------------------
Emerging Markets $1,147,539 $22,476
</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").
From time to time the Emerging Markets and Short Duration 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, 2007 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.
102 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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, 2007, the Emerging Markets Fund had cash
collateral balance of $2,600,000 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 Fund 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 the
Fund
Notes to Financial Statements 103
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 party's 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 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.
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, 2007, the
Fund's custodian fees were reduced by the following amounts under these
arrangements which are included in expense reductions on the Statement of
Operations:
<Table>
<Caption>
AMOUNT
FUNDS PAID
-------------------------------------------------------
Emerging Markets $ 8,313
Real Estate Securities 8,017
Short Duration Bond 22,133
Tax Exempt Bond 2,548
Tax-Managed Large Cap 741
Tax-Managed Mid & Small Cap 1,221
Select Growth 178
Select Value 497
</Table>
104 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Mortgage-Related and Other Asset-Backed Securities
Certain Funds may invest in mortgage or other asset-backed securities. Theses
securities include mortgage pass-through securities, collateralized mortgage
obligations ("CMOs"), commercial mortgage-backed securities, mortgage dollar
rolls, CMO residuals, stripped mortgage backed securities ("SMBSs") and other
securities that directly or indirectly represent a participation in, or are
secured by a payable from, mortgage loans on real property. The value of some
mortgage or asset-backed securities may be particularly sensitive to changes
in prevailing interest rates. Early repayment of principal on some mortgage-
related securities may expose a Fund to a lower rate of return upon
reinvestment of principal. The value of these securities may fluctuate in
response to the market's perception of the creditworthiness of the issuers.
Additionally, although mortgages and mortgage-related securities are
generally supported by some form of government or private guarantee and/or
insurance, there is no assurance that private guarantors or insurers will
meet their obligations.
One type of SMBS has one class receiving all of the interest from the
mortgage assets (the interest-only, or "IO" class), while the other class
will receive all of the principal (the principal-only, or "PO" class).
Payments received for the IOs are included in interest income on the
Statement of Operations. Because principal will not be received at the
maturity of an IO, adjustments are made to the book value of the security on
a daily basis until maturity. These adjustments are included in interest
income on the Statement of Operations. Payments received for POs are treated
as reductions to the cost and par value of the securities.
Inflation-Indexed Bonds
Certain Funds may invest in inflation-indexed bonds. Inflation-indexed bonds
are fixed-income securities whose principal value is periodically adjusted to
the rate of inflation. The interest rate on these bonds is generally fixed at
issuance at a rate lower than typical bonds. Over the life of an
inflation-indexed bond, however, interest will be paid based on a principal
value, which is adjusted for inflation. Any increase in the principal amount
of an inflation-indexed bond will be included as interest income in the
Statement of Operations, even though investors do not receive their principal
until maturity.
3. INVESTMENT TRANSACTIONS
Securities
During the period ended April 30, 2007, 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
- -----------------------------------------------------------------
Emerging Markets $ 346,220,137 $ 310,022,784
Real Estate Securities 609,469,635 611,430,294
Short Duration Bond 314,860,776 808,280,570
Tax Exempt Bond 143,409,430 108,726,294
Tax-Managed Large Cap 159,487,929 139,098,441
</Table>
<Table>
- -----------------------------------------------------------------
<Caption>
FUNDS PURCHASES SALES
Tax-Managed Mid &
Small Cap $ 66,791,718 $ 53,864,278
Select Growth 54,028,826 55,939,913
Select Value 315,818,452 312,777,635
</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 $ 239,644,147 $ 41,799,277
</Table>
Notes to Financial Statements 105
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
Written Options Contracts
Transactions in written options contracts for the period ended April 30, 2007
for the following Funds were as follows:
<Table>
<Caption>
EMERGING MARKETS FUND SHORT DURATION BOND FUND
------------------------------------------ ------------------------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding October 31, 2006 626 $ 828,429 415 $ 773,315
Opened 1,762 1,926,852 7 528,443
Closed (1,772) (1,967,720) (356) (560,226)
Expired -- -- (54) (42,783)
------------------- ------------------- ------------------- -------------------
Outstanding April 30, 2007 616 $ 787,561 12 $ 698,749
=================== =================== =================== ===================
</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 deemed to be of good financial
standing.
As of April 30, 2007, the non-cash collateral received for the securities on
loan in the following funds was:
<Table>
<Caption>
FUNDS NON-CASH COLLATERAL VALUE NON-CASH COLLATERAL HOLDING
------------------------------------------------------------------------------------------------
Emerging Markets $ 8,380,631 Pool of US Government Securities
Tax Managed Large Cap 2,199,855 Pool of US Government Securities
Select Growth 612,990 Pool of US Government Securities
Select Value 5,981,040 Pool of US Government Securities
</Table>
4. RELATED PARTIES
Adviser and Administrator
RIMCo advises and administers all of the Funds which comprise the Investment
Company. RIMCo 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 RIMCo.
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, 2007, $269,908,334 of the
Money Market Fund's net assets and $7,521,848 of the Tax Free Money Market
Fund's net assets represents investments by the Funds presented herein and
$2,533,502,773 of the Money Market Funds' net assets represents the
investments of other RIC Funds not presented herein.
106 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 $23,909,154 and $1,523,565 respectively, for the period
ended April 30, 2007.
<Table>
<Caption>
ANNUAL RATE
-------------------------------
FUNDS ADVISER ADMINISTRATOR
----------------------------------------------------------------------
Emerging Markets 1.15% .05%
Real Estate Securities .80 .05
Short Duration Bond .45 .05
Tax-Exempt Bond .30 .05
Tax-Managed Large Cap .70 .05
Tax-Managed Mid & Small Cap .98 .05
Select Growth .80 .05
Select Value .70 .05
</Table>
For the Short Duration Bond Fund, RIMCo has contractually agreed to waive, at
least until February 29, 2008, up to the full amount of its 0.50% combined
advisory and administrative fees and to reimburse the Fund for other direct
Fund-level expenses to the extent that direct Fund-level expenses exceed
0.75% of the average daily net assets of that Fund on an annual basis. This
waiver may not be terminated during the relevant period except at the Board's
discretion. Direct Fund-level expenses for the Short Duration Bond Fund do
not include 12b-1 fees, shareholder services fees or the expenses of other
investment companies in which the Fund invests which are borne indirectly by
the Fund. There were no waivers for the period ended April 30, 2007.
For the Tax-Managed Mid & Small Cap Fund, RIMCo has contractually agreed to
waive, at least until February 29, 2008, up to the full amount of its 1.03%
combined advisory and administrative fees and to reimburse the Fund for other
direct Fund-level expenses to the extent that direct Fund-level expenses
exceed 1.25% of the average daily net assets of that Fund on an annual basis.
This waiver may not be terminated during the relevant period except at the
Board's discretion. Direct Fund-level expenses for the Tax-Managed Mid &
Small Cap Fund do not include 12b-1 fees, shareholder services fees or the
expenses of other investment companies in which the Fund invests which are
borne indirectly by the Fund. The total amount of the waiver for period ended
April 30, 2007 was $76,163.
For the Select Growth Fund, RIMCo has contractually agreed to waive, at least
until February 29, 2008, up to the full amount of its 0.85% combined advisory
and administrative fees and to reimburse the Fund for other direct Fund-level
expenses to the extent that direct Fund-level expenses exceed 0.98% of the
average daily net assets of that Fund on an annual basis. This waiver may not
be terminated during the relevant period except at the Board's discretion.
Direct Fund-level expenses for the Select Growth Fund do not include 12b-1,
shareholder services or transfer agency fees or the expenses of other
investment companies in which the Fund invests which are borne indirectly by
the Fund. The total amount of the waiver for the period ended April 30, 2007
was $45,414.
The Adviser does not have the ability to recover amounts waived or reimbursed
from previous periods.
Transfer agent
RIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, RIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Fund. RIMCo 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, 2007 were
$5,069,580.
For Class I Shares of the Select Growth Fund, RIMCo, as transfer agent to
RIC, has contractually agreed to waive, at least until February 29, 2008, its
transfer agency fees for Class I Shares to the extent that those fees for
that class exceed 0.01% of the average daily net assets of the Class I
Shares. The amount of the waiver for the period ended April 30, 2007 was
$46,842.
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 RIMCo, 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 A
and Class C shares subject to the Distribution Plan.
Notes to Financial Statements 107
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The 12b-1 distribution payments shall not exceed 0.25% or 0.75% of the
average daily net assets of a Fund's Class A or Class C shares, respectively,
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"). These limitation are 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.
The aggregate initial sales charges, deferred sales charges and asset-based
sales charges on Class A and Class C Shares of the Funds may not exceed 7.25%
and 6.25%, respectively, of total gross sales, subject to certain exclusions.
For the period ended April 30, 2007, 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
---------------------------------------------------------------------------
Diversity Equity Fund $ 23,394 $ 5,727
Special Growth Fund 8,929 1,995
Quantitative Equity Fund 22,719 5,716
International Securities Fund 21,203 5,147
Global Equity Fund 5,797 1,120
Multistrategy Bond Fund 12,673 3,277
</Table>
Brokerage Commissions
The Funds effect certain transactions through Russell Implementation
Services, Inc. ("RIS") and its global network of unaffiliated correspondent
brokers. RIS is a registered broker and investment adviser and an affiliate
of RIMCo. Trades placed through RIS and its correspondents are made (i) to
manage trading associated with changes in managers, rebalancing across
existing managers, cash flows and other portfolio transitions, (ii) to
execute portfolio securities transactions selected by money managers or (iii)
to execute portfolio securities transactions for the portion of each Fund's
assets that RIMCo determines not to allocate to money managers, including
assets allocated to the "select holdings" strategy, and for each Fund's cash
reserves.
The Funds effect certain transactions through 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 RIMCo. Trades placed through
LJR and its correspondents are used (i) to obtain research services for RIMCo
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 RIMCo or to generate
commission rebates to the Funds, the Funds' money managers are requested to
and RIMCo 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, RIMCo 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 RIMCo 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 RIMCo
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 RIMCo or its affiliates. Similarly, the Funds may
benefit from research provided with respect to trading by those other funds
and clients.
LJR may also rebate to the Funds a portion of commissions earned on certain
trading by the Funds through 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 RIMCo's research budget has
been met, as determined annually in the Soft Dollar Committee budgeting
process.
108 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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, 2007 were as follows:
<Table>
<Caption>
SHORT TAX MANAGED
EMERGING REAL ESTATE DURATION TAX EXEMPT TAX MANAGED MID & SELECT
MARKETS SECURITIES BOND BOND LARGE CAP SMALL CAP GROWTH
-------------------------------------------------------------------------------------------------------------------------
Advisory fees $ 1,351,615 $ 1,462,252 $ 195,744 $ 81,417 $ 313,053 $ 204,173 $ 121,318
Administration fees 58,768 91,391 21,749 13,558 22,359 6,200 7,441
Distribution fees 32,123 71,802 11,221 7,606 13,084 8,351 6,143
Shareholder servicing
fees 16,876 36,990 6,868 6,260 7,308 3,394 3,334
Transfer agent fees 222,594 327,981 46,643 26,834 44,506 44,667 44,412
Trustee fees 4,205 6,642 6,778 1,126 1,942 787 967
----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 1,686,181 $ 1,997,058 $ 289,003 $ 136,801 $ 402,252 $ 267,572 $ 183,615
=========== =========== =========== =========== =========== =========== ===========
<Caption>
SELECT
VALUE
------------------------
Advisory fees $ 273,358
Administration fees 19,115
Distribution fees 16,566
Shareholder servicing
fees 7,857
Transfer agent fees 91,867
Trustee fees 1,616
-----------
$ 410,379
===========
</Table>
Board of Trustees
The Russell Fund Complex consists of Russell Investment Company, which has 35
Funds, and Russell Investment Funds ("RIF"), which has nine Funds. Each of
the Trustees is a Trustee for both RIC 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, 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. The Audit Committee Chair and Investment
Committee Chair are each paid a fee of $12,000 per year and the Nominating
and Governance Committee chair are each paid a fee of $6,000 per year. The
chair person of the Board receives additional annual compensation of $52,000.
5. FEDERAL INCOME TAXES
At October 31, 2006, 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 $ -- $ -- $ -- $ --
Tax Exempt Bond -- 682,095 -- --
Tax-Managed Large Cap -- -- 18,201,536 59,069,223
Select Growth -- -- -- 9,306,293
Select Value 3,596,153 451,724 2,362,680 362,611
</Table>
<Table>
<Caption>
FUNDS 10/31/11 10/31/12 10/31/13 10/31/14
----------------------------------------------------------------------------------------------------------------
Short Duration Bond $ -- $ -- $ 10,268,501 $ 7,439,440
Tax Exempt Bond -- 357,343 -- 634,298
Tax-Managed Large Cap -- -- -- --
Select Growth 263,497 -- -- --
Select Value -- -- -- --
<Caption>
FUNDS TOTALS
-------------------------------------
Short Duration Bond $ 17,707,941
Tax Exempt Bond 1,673,736
Tax-Managed Large Cap 77,270,759
Select Growth 9,569,790
Select Value 6,773,168
</Table>
Notes to Financial Statements 109
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
At April 30, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
<Caption>
EMERGING REAL ESTATE SHORT DURATION TAX EXEMPT TAX-MANAGED
MARKETS SECURITIES BOND BOND LARGE CAP
------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 1,081,776,264 $ 1,594,464,699 $ 523,132,063 $ 329,267,347 $ 446,958,344
================ ================ ================ ================ ================
Unrealized Appreciation $ 451,379,014 $ 808,153,589 $ 1,311,390 $ 3,222,393 $ 145,295,983
Unrealized Depreciation (11,150,461) (6,536,500) (4,190,389) (1,401,493) (4,377,428)
---------------- ---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 440,228,553 $ 801,617,089 $ (2,878,999) $ 1,820,900 $ 140,918,555
================ ================ ================ ================ ================
</Table>
<Table>
<Caption>
TAX-MANAGED SELECT SELECT
MID & SMALL CAP GROWTH VALUE
-------------------------------------------------------------------------------------------
Cost of Investments $ 255,620,347 $ 163,456,472 $ 444,976,760
================ ================ ================
Unrealized Appreciation $ 57,306,830 $ 26,982,508 $ 67,103,878
Unrealized Depreciation (5,220,152) (1,802,050) (3,229,072)
---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 52,086,678 $ 25,180,458 $ 63,874,806
================ ================ ================
</Table>
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the periods ended April 30, 2007 and October 31, 2006
were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
EMERGING MARKETS ----------------- ----------------- ----------------- -----------------
Class A (a)
Proceeds from shares sold 87 -- $ 1,837 $ --
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (5) -- (121) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 82 -- 1,716 --
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 237 600 4,905 11,923
Proceeds from reinvestment of
distributions 346 79 6,707 1,405
Payments for shares redeemed (302) (585) (6,223) (11,516)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 281 94 5,389 1,812
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 239 483 5,090 9,841
Proceeds from reinvestment of
distributions 214 50 4,273 907
Payments for shares redeemed (312) (354) (6,519) (7,159)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 141 179 2,844 3,589
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 9,851 13,204 205,488 265,826
Proceeds from reinvestment of
distributions 8,412 2,101 168,078 38,232
Payments for shares redeemed (7,567) (11,478) (158,849) (233,599)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 10,696 3,827 214,717 70,459
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 11,200 4,100 $ 224,666 $ 75,860
================= ================= ================= =================
</Table>
110 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
REAL ESTATE SECURITIES ----------------- ----------------- ----------------- -----------------
Class A (a)
Proceeds from shares sold 55 -- $ 3,087 $ --
Proceeds from reinvestment of
distributions -- -- 13 --
Payments for shares redeemed (8) -- (473) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 47 -- 2,627 --
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 188 360 10,462 17,358
Proceeds from reinvestment of
distributions 180 209 9,602 9,190
Payments for shares redeemed (218) (380) (12,128) (18,551)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 150 189 7,936 7,997
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 216 334 12,213 16,642
Proceeds from reinvestment of
distributions 100 109 5,434 4,891
Payments for shares redeemed (221) (258) (12,376) (12,859)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 95 185 5,271 8,674
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 5,473 6,471 310,933 317,576
Proceeds from reinvestment of
distributions 3,047 3,663 167,480 166,170
Payments for shares redeemed (5,352) (7,539) (306,129) (368,134)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 3,168 2,595 172,284 115,612
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 3,460 2,969 $ 188,118 $ 132,283
================= ================= ================= =================
</Table>
Notes to Financial Statements 111
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
SHORT DURATION BOND ----------------- ----------------- ----------------- -----------------
Class A (a)
Proceeds from shares sold 74 -- $ 1,375 $ --
Proceeds from reinvestment of
distributions -- -- 6 --
Payments for shares redeemed (1) -- (13) --
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 73 -- 1,368 --
----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 125 287 2,332 5,330
Proceeds from reinvestment of
distributions 17 32 320 599
Payments for shares redeemed (410) (774) (7,634) (14,409)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (268) (455) (4,982) (8,480)
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 169 363 3,164 6,788
Proceeds from reinvestment of
distributions 26 44 488 821
Payments for shares redeemed (773) (306) (14,466) (5,701)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (578) 101 (10,814) 1,908
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 7,096 14,343 132,556 267,444
Proceeds from reinvestment of
distributions 1,116 2,054 20,775 38,126
Payments for shares redeemed (41,688) (19,246) (778,815) (359,185)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (33,476) (2,849) (625,484) (53,615)
----------------- ----------------- ----------------- -----------------
Total increase (decrease) (34,249) (3,203) $ (639,912) $ (60,187)
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
TAX EXEMPT BOND ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 81 126 $ 1,755 $ 2,696
Proceeds from reinvestment of
distributions 6 11 129 225
Payments for shares redeemed (54) (79) (1,154) (1,694)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 33 58 730 1,227
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 441 187 9,513 4,006
Proceeds from reinvestment of
distributions 10 15 223 324
Payments for shares redeemed (64) (56) (1,385) (1,203)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 387 146 8,351 3,127
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 3,648 5,079 78,654 108,842
Proceeds from reinvestment of
distributions 214 360 4,609 7,703
Payments for shares redeemed (2,527) (3,416) (54,474) (73,194)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,335 2,023 28,789 43,351
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,755 2,227 $ 37,870 $ 47,705
================= ================= ================= =================
</Table>
112 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
TAX-MANAGED LARGE CAP ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 95 201 $ 1,925 $ 3,747
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (53) (186) (1,075) (3,441)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 42 15 850 306
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 78 192 1,619 3,652
Proceeds from reinvestment of
distributions 4 3 73 51
Payments for shares redeemed (32) (43) (667) (823)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 50 152 1,025 2,880
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,658 4,237 55,568 80,602
Proceeds from reinvestment of
distributions 168 152 3,467 2,903
Payments for shares redeemed (1,820) (3,016) (38,076) (57,361)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,006 1,373 20,959 26,144
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,098 1,540 $ 22,834 $ 29,330
================= ================= ================= =================
</Table>
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
TAX-MANAGED MID & SMALL CAP ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 113 233 $ 1,538 $ 2,955
Proceeds from reinvestment of
distributions 13 -- 180 --
Payments for shares redeemed (77) (129) (1,057) (1,624)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 49 104 661 1,331
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 29 58 412 772
Proceeds from reinvestment of
distributions 3 -- 37 --
Payments for shares redeemed (11) (14) (157) (191)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 21 44 292 581
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 2,637 3,087 38,540 41,391
Proceeds from reinvestment of
distributions 189 -- 2,723 --
Payments for shares redeemed (1,583) (1,828) (23,239) (24,613)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,243 1,259 18,024 16,778
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 1,313 1,407 $ 18,977 $ 18,690
================= ================= ================= =================
</Table>
Notes to Financial Statements 113
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
SELECT GROWTH ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 102 403 $ 827 $ 3,166
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (143) (253) (1,163) (1,970)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (41) 150 (336) 1,196
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 63 322 531 2,672
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (135) (71) (1,151) (575)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (72) 251 (620) 2,097
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 1,710 3,901 14,955 32,598
Proceeds from reinvestment of
distributions -- 5 -- 41
Payments for shares redeemed (1,303) (7,298) (11,382) (59,655)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 407 (3,392) 3,573 (27,016)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 1,689 4,481 14,565 36,926
Proceeds from reinvestment of
distributions -- -- -- --
Payments for shares redeemed (1,960) (3,241) (16,785) (26,401)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) (271) 1,240 (2,220) 10,525
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 23 (1,751) $ 397 $ (13,198)
================= ================= ================= =================
</Table>
114 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
6. FUND SHARE TRANSACTIONS (amounts in thousands) (continued)
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2007 2006 2007 2006
SELECT VALUE ----------------- ----------------- ----------------- -----------------
Class C
Proceeds from shares sold 167 407 $ 2,077 $ 4,719
Proceeds from reinvestment of
distributions 123 110 1,496 1,226
Payments for shares redeemed (276) (298) (3,434) (3,508)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 14 219 139 2,437
----------------- ----------------- ----------------- -----------------
Class E
Proceeds from shares sold 88 219 1,123 2,586
Proceeds from reinvestment of
distributions 56 51 694 582
Payments for shares redeemed (119) (179) (1,498) (2,117)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 25 91 319 1,051
----------------- ----------------- ----------------- -----------------
Class I
Proceeds from shares sold 1,240 2,050 15,754 24,190
Proceeds from reinvestment of
distributions 656 766 8,125 8,716
Payments for shares redeemed (1,073) (4,301) (13,601) (49,514)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 823 (1,485) 10,278 (16,608)
----------------- ----------------- ----------------- -----------------
Class S
Proceeds from shares sold 3,145 5,847 39,835 69,086
Proceeds from reinvestment of
distributions 1,261 1,143 15,577 12,991
Payments for shares redeemed (2,639) (4,328) (33,165) (50,740)
----------------- ----------------- ----------------- -----------------
Net increase (decrease) 1,767 2,662 22,247 31,337
----------------- ----------------- ----------------- -----------------
Total increase (decrease) 2,629 1,487 $ 32,983 $ 18,217
================= ================= ================= =================
</Table>
(a) For the period March 1, 2007 (commencement of operations) to April 30,
2007.
7. INTERFUND LENDING PROGRAM
The Investment Company Funds have been granted permission from the Securities
and Exchange Commission to participate in a joint lending and borrowing
facility (the "Credit Facility"). Portfolios of the Funds may borrow money
from the RIC Money Market Fund for temporary purposes. All such borrowing and
lending will be subject to a participating Fund's fundamental investment
limitations. The RIC Money Market Fund will lend through the program only
when the returns are higher than those available from an investment in
repurchase agreements or short-term reserves. The Investment Company Funds
will borrow through the program only when the costs are equal to or lower
than the cost of bank loans. Interfund loans and borrowings normally extend
overnight, but can have a maximum duration of seven days. Loans may be called
on one business day's notice. A participating fund may have to borrow from a
bank at a higher interest rate if an interfund loan is called or not renewed.
Any delay in repayment to the RIC Money Market Fund could result in a lost
investment opportunity or additional borrowing costs.
For the period ended April 30, 2007, the Funds did not participate in the
interfund lending program.
Notes to Financial Statements 115
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
8. RECORD OWNERSHIP
As of April 30, 2007, the following table includes shareholders of record
with greater than 10% of the total outstanding shares of each respective
Fund:
<Table>
<Caption>
# OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Emerging Markets 3 45.6
Real Estate Securities 3 40.8
Short Duration Bond 2 43.9
Tax Exempt Bond 2 54.0
Tax-Managed Large Cap 1 52.1
Tax-Managed Mid & Small Cap 1 54.8
Select Growth 1 21.2
Select Value 1 27.2
</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 RIMCo 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 $ $ $
-----------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund - 0.7%
Magnitogorsk Iron & Steel Works 04/24/07 87,200 12.50 1,090 1,090
NovaTek OAO 07/21/05 45,000 23.31 1,049 2,250
Samsung Electronics Co., Ltd. 11/18/97 20,255 261.97 6,136 6,190
--------------
9,530
==============
Short Duration Bond Fund - 2.1%
Allstate Financial Global Funding 04/30/07 1,920,000 98.43 1,890 1,862
ASIF Global Financing XVIII 10/25/06 334,000 99.15 331 331
ASIF Global Financing XXIII 03/28/07 1,070,000 98.34 1,052 1,050
DG Funding Trust 11/04/03 219 10,537.12 2,308 2,315
Principal Life Global Funding I 10/25/06 1,250,000 98.40 1,230 1,224
Principal Life Global Funding I 02/01/07 4,100,000 97.50 3,997 3,975
--------------
10,757
==============
</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, 2007, the Board of Trustees of Russell Investment Company declared
the following dividends from net investment income payable on May 4, 2007 to
shareholders on record May 2, 2007.
116 Notes to Financial Statements
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
NET INVESTMENT
FUNDS INCOME
----------------------------------------------------------
Tax Exempt Bond - Class S $ 0.0643
Tax Exempt Bond - Class E 0.0601
Tax Exempt Bond - Class C 0.0459
</Table>
Notes to Financial Statements 117
RUSSELL INVESTMENT COMPANY
SPECIALTY 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 RIMCo
(the "RIMCo Agreement") and the portfolio management contract with each Money
Manager of the Funds (collectively, the "portfolio management contracts") at a
meeting held on April 24, 2007. 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 RIMCo. In preparation for the annual review, the Independent Trustees,
with the advice and assistance of their independent counsel, also requested and
the Board considered (1) information and reports prepared by RIMCo relating to
the services provided by RIMCo (and its affiliates) to the Funds; (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 RIMCo believed by the provider to be generally comparable in investment
objectives and size to the Funds; and (3) RIMCo's response to questions from the
Board concerning the Third-Party Information addressing, among other things,
performance and expense differentials between certain Funds and their respective
Comparable Funds. The foregoing information requested by the Trustees or
provided by RIMCo is collectively called the "Agreement Renewal Information."
The Independent Trustees also received a memorandum from their independent
counsel discussing the legal standards for their consideration of the proposed
continuances.
On April 23, 2007, the Independent Trustees met to review the Agreement Renewal
Information in a private session with their independent counsel at which no
representatives of RIMCo or management were present. At the April 24 meeting of
the Board of Trustees, the Board, including the Independent Trustees, reviewed
the proposed continuance of the RIMCo Agreement and the portfolio management
contracts with management and independent counsel to the Independent Trustees.
Presentations made by RIMCo to the Board as part of this review encompassed the
Funds and all other RIMCo-managed funds for which the Board has supervisory
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 analyses received from RIMCo 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. RIMCo has engaged multiple
Money Managers for all Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible
under the RIMCo Agreement for determining, implementing and maintaining the
investment program for each Fund. Assets of each Fund generally have been
allocated among the multiple Money Managers selected by RIMCo, subject to Board
approval, for that Fund. RIMCo directly manages the investment of each Fund's
cash reserves. RIMCo also may manage directly any portion of each Fund's assets
that RIMCo determines not to allocate to the Money Managers and portions of a
Fund during transitions between Money Managers. In all cases, assets are managed
directly by RIMCo in accordance with the RIMCo Agreement.
RIMCo is responsible for selecting, subject to Board approval, Money Managers
for each Fund and for actively managing allocations and reallocations of assets
among the Money Managers. RIMCo's goal is to construct and manage diversified
portfolios in a risk aware manner. 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
RIMCo (each, a "segment") in accordance with the Fund's applicable investment
objective, policies and restrictions, any constraints placed by RIMCo upon their
selection of portfolio securities and the Money Manager's specified role in a
Fund. RIMCo 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, RIMCo 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 RIMCo's research and ongoing review and analysis, such
actions are appropriate. RIMCo may assign specific investment constraints from
time to time for each Money Manager intended to capitalize on the strengths of
that Money Manager or to coordinate the investment activities of Money Managers
for the Fund in a complementary manner. Therefore, RIMCo's selection of Money
Managers is made not only on the basis of performance considerations but
anticipated compatibility
118 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
with other Money Manager in the same Fund. In light of the foregoing, the
overall performance of each Fund over appropriate periods reflects, in great
part, the performance of RIMCo in designing the Fund's investment program,
structuring the Fund, selecting an effective Money Manager with a particular
investment style or sub-style for a segment that is complementary to the styles
of the Money Managers of other Fund segments, and allocating assets among the
Money Managers in a manner designed to achieve the objectives of the Fund.
The Board considered that the prospectuses for the Funds and other public
disclosures emphasize to investors RIMCo'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 that information into account when deciding to purchase
shares of any such Fund.
The Board also considered the special expertise of RIMCo 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 RIMCo on comparable terms given the
need to continue 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 RIMCo Agreement, including
the following:
1. The nature, scope and quality of the services provided to the Fund by RIMCo;
2. The advisory fee paid by the Fund to RIMCo 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 RIMCo as to other fees and benefits received by RIMCo
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 RIMCo as to expenses incurred by the Fund; and
5. Information provided by RIMCo as to the profits that RIMCo derives from its
mutual fund operations generally and from the Fund.
At the April 24 Board meeting, RIMCo and management discussed the reasonableness
of the Funds' investment advisory fees. In discussing whether the Funds'
performance supported these fees, RIMCo noted differences between the investment
strategies of certain Funds and their respective Comparable Funds in pursuing
their investment objectives, including Fund 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 RIMCo, these strategies may be
expected to result, and for certain Funds during the periods covered by the
Third-Party Information did result, in lower performance than that of some of
their respective Comparable Funds. RIMCo 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 and other information
previously received by the Board from RIMCo during the course of the year or
presented at the April 24 Board meeting by RIMCo, the Board, in respect of each
Fund, found, after giving effect to any applicable waivers and/or reimbursements
(1) the advisory fee charged by RIMCo to be reasonable in light of the nature,
scope and quality of the services provided to the Funds; (2) the relative
expense ratio of the Fund was comparable to those of its Comparable Funds; (3)
RIMCo's methodology of allocating expenses of operating funds in the complex was
reasonable; and (4) RIMCo's profitability with respect to the Fund was not
excessive in light of the nature, scope and quality of the services provided by
RIMCo. The Board also concluded that the performance of each of the Funds
supported continuation of the RIMCo Agreement. 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 also
considered RIMCo's investment strategy of managing the Funds in a risk aware
manner.
At the April 24 Board meeting, 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. The
Board determined that the investment advisory fees for each Fund appropriately
reflect any economies of scale realized by that Fund, based upon such factors as
the variability of Money Manager investment advisory fees and other factors
associated with the manager-of-managers structure
Basis for Approval of Investment Advisory Contracts 119
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
employed by the Funds. The Trustees considered that fees payable to RIMCo by
institutional clients with investment objectives similar to those of the Funds
and other RIC funds under the Board's supervision are lower, and may, in some
cases, be substantially lower, than the rates paid by RIC funds supervised by
the Board, including the Funds. The Trustees reviewed with RIMCo the differences
in the scope of services it provides to institutional clients and the Funds. In
response to the Trustees' inquiries, RIMCo noted, among other things, that
institutional clients have fewer administrative needs than the Funds. It was
further noted by RIMCo 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.
After considering the foregoing and other relevant factors, the Board concluded
that continuation of the RIMCo Agreement on its current terms and conditions
would be in the best interests of the Funds and their respective shareholders
and voted to approve the continuation of the agreement.
At the April 24 Board meeting, with respect to the evaluation of the terms of
portfolio management contracts with Money Managers, the Board received and
considered information from RIMCo reporting for each Money Manager, among other
things, the Money Manager's performance over various periods; RIMCo's assessment
of the performance of each Money Manager; any significant business relationships
between the Money Manager and RIMCo or Russell Fund Distributors, Inc., the
Funds' underwriter; and RIMCo'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. RIMCo recommended that each Money Manager be
retained at its current fee rate. RIMCo 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 RIMCo; RIMCo is aware of the fees charged by Money Managers to other
clients; and RIMCo 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 RIMCo's explanation in light of the Board's
findings as to the reasonableness of the aggregate investment advisory fees paid
by each Fund and the fact that each Money Manager's fee is paid by RIMCo.
Based substantially upon RIMCo's recommendations together with the information
received from RIMCo in support of its recommendations at the April 24 meeting,
the Board concluded that the fees paid to the Money Managers of each Fund are
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 would be in the best interests of the Fund and its
shareholders.
In their deliberations, the Trustees did not identify any particular information
as to the RIMCo Agreement or, other than RIMCo'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.
120 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
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 RIMCo, as RIC'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. RIMCo 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.
To reduce expenses, we may mail only one copy of the Funds' prospectus and each
annual and semi-annual report to those addresses shared by two or more accounts.
If you wish to receive individual copies of these documents, please call us at
(800) 787-7354 or contact your financial institution and we will begin sending
you individual copies thirty days after receiving your request.
Some Financial Intermediaries may offer electronic delivery of the Fund's
prospectus and annual and semiannual reports. Please contact your Financial
Intermediary for further details.
Shareholder Requests for Additional Information 121
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- APRIL 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Russell Investment
Company ("RIC"), which has 35 funds, and Russell Investment Funds ("RIF"), which
has nine funds. Each of the trustees is a trustee of both RIC 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
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
Thaddas L. Alston Trustee since Appointed until - Senior Vice President, Larco 44 None
Born April 7, 1945 2006 successor is Investments, Ltd.
duly elected
909 A Street and qualified
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 44 - Director, Avista
Born January 22, 2000 successor is Blake, P.S. (accounting Corp;
1954 duly elected services) - Trustee,
Chairperson and qualified - Director and Chairman of the Principal
909 A Street since 2005 Audit Committee, Avista Investors Fund
Tacoma, Washington Annual Corp. (investment
98402-1616 - Trustee and Chairman of the company);
Operations and Distribution - Trustee,
Committee, WM Group of Principal
Funds, 1999-2006 Variable
- February 2002 to June 2005, Contracts Fund
Chairman of the Audit (investment
Committee, RIC and RIF company)
- Regent, University of
Washington
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy Trustee since Appointed until - June 2004 to present, Senior 44 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
122 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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)
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 44 None
Tennison, Jr. 2000 successor is Investment
Born December 21, duly elected Company and several
1955 Chairman of the and qualified. additional subsidiary
Nominating and companies, including Simpson
909 A Street Governance Appointed until Timber Company, Simpson
Tacoma, Washington Committee since successor is Paper Company and Simpson
98402-1616 2007 duly elected Tacoma Kraft Company
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack R. Thompson, Trustee since Appointed until - September 2003 to present, 44 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 44 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
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 123
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 44 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 RIMCo
Tacoma, Washington - Chairman Emeritus, RIC and
98402-1616 RIF; Russell Implementation
Services Inc. (broker-dealer
and investment adviser
("RIS")); Russell 20-20
Association (non-profit
corporation); and Russell
Trust Company (non-
depository trust company
("RTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee Emeritus Five year term - President, Anderson 44 None
Born October 15, since 2007 Management Group LLC
1931 (private investments
consulting)
909 A Street - February 2002 to June 2005,
Tacoma, Washington Lead Trustee, RIC and RIF
98402-1616 - Trustee of RIC and RIF Until
2006
- Chairman of the Nominating
and Governance Committee
2006
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 44 None
Born December 1, since 2003 - Trustee of RIC and RIF Until
1919 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 44 None
Born June 8, 1925 since 2004 - Trustee of RIC and RIF Until
2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 44 None
Born October 6, since 2006 - Trustee of RIC and RIF Until
1930 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 44 None
Born May 5, 1926 since 2004 - Trustee of RIC 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 RIC and
RIF.
124 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT COMPANY
SPECIALTY FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- APRIL 30, 2007
(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, RIC
Born December 16, 1966 Officer since by Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, RIMCo
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, RIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, RIMCo
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, RIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, RIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, RIMCo, RTC 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, RIC, RIF, FRC, RTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, RIMCo and RFD
2004 - 1999 to 2003, Chief Financial Officer, FRC, RIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Gregory J. Lyons, Secretary since Until successor - Associate General Counsel and Assistant Secretary FRC
Born August 24, 1960 2007 is chosen and and RIA
qualified by - Director and Secretary, RIMCo and RFD
909 A Street Trustees - Secretary and Chief Legal Counsel, RIC and RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 125
SPECIALTY FUNDS
RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul E. Anderson
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
Gregory J. Lyons, Secretary
ADVISOR, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT
Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Josiah Quincy Building
200 Newport Avenue
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF APRIL 30, 2007*
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., Somerville, NJ
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
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
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
Armstrong Shaw Associates Inc., New Canaan, CT
J.P. Morgan Investment Management Inc., New York, NY
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
Transamerica Investment Management, LLC, Dayton, OH
Turner Investment Partners, Inc., Berwyn, PA
Select Growth Fund
Ark Asset Management Co., Inc., New York, NY
Berkeley Capital Management LLC, San Francisco, CA
Delaware Management Company, a series of Delaware Management Business Trust,
Philadelphia, PA
Fuller & Thaler Asset Management, Inc., San Mateo, CA
Sustainable Growth Advisers, LP, Stamford, CT
Turner Investment Partners, Inc., Berwyn, PA
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 Russell Investment Company.
Such offering is made only by Prospectus, which includes details as to offering
price and other material information.
126 Manager, Money Managers and Service Providers
SPECIALTY FUNDS
RUSSELL INVESTMENT COMPANY
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
Select Value Fund
DePrince, Race & Zollo, Inc., Winter Park, FL
Iridian Asset Management LLC, Westport, CT
JS Asset Management, LLC, West Conshohocken, PA
Systematic Financial Management, L.P., Teaneck, NJ
* A complete list of current money managers can also be found at
www.Russell.com.
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 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 127
(RUSSELL LOGO)
RUSSELL INVESTMENT COMPANY
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
www.russell.com
On July 1, 2006, Frank Russell Investment Company
changed its name to Russell Investment Company, and
Frank Russell Investment Management Company changed
its name to Russell Investment Management Company. 36-08-187 (1 04/07)
ITEM 1. REPORTS TO STOCKHOLDERS
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.
RUSSELL INVESTMENT COMPANY
By: /s/ Greg J. Stark
-------------------
Greg J. Stark
President, Principal Executive Officer and Chief Executive Officer
Date: June 21, 2007
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, 2007
By: /s/ Mark E. Swanson
-------------------
Mark E. Swanson
Principal Financial Officer, Principal Accounting Officer and Treasurer
Date: June 21, 2007