-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UI9oAaTuKp9fzz5Kyr+1fydoCuQtU8V5je1N5+EXlcYkiPP7D63cvlhK/3GBfYZH G6AXYx4rnMOzVCDls7HIJg== 0000950134-06-000152.txt : 20060105 0000950134-06-000152.hdr.sgml : 20060105 20060105172508 ACCESSION NUMBER: 0000950134-06-000152 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051031 FILED AS OF DATE: 20060105 DATE AS OF CHANGE: 20060105 EFFECTIVENESS DATE: 20060105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RUSSELL FRANK INVESTMENT CO CENTRAL INDEX KEY: 0000351601 IRS NUMBER: 911151059 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03153 FILM NUMBER: 06513915 BUSINESS ADDRESS: STREET 1: 909 A ST STREET 2: 11TH FLOOR CITY: TACOMA STATE: WA ZIP: 98402 BUSINESS PHONE: 800-787-7354 MAIL ADDRESS: STREET 1: 909 A ST STREET 2: 11TH FLOOR CITY: TACOMA STATE: WA ZIP: 98402 N-CSR 1 f42506nvcsr.txt FORM N-CSR OMB APPROVAL ------------------ OMB Number: 3235-0570 Expires: September 30, 2007 Estimated average burden hours per response: 19.4 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-03153 FRANK RUSSELL INVESTMENT COMPANY (Exact name of registrant as specified in charter) 909 A STREET, TACOMA WASHINGTON 98402 (Address of principal executive offices) (Zip code) GREGORY J. LYONS, ASSISTANT SECRETARY FRANK RUSSELL INVESTMENT COMPANY 909 A STREET TACOMA, WASHINGTON 98402 253-439-2406 (Name and address of agent for service) Registrant's telephone number, including area code: 253-572-9500 Date of fiscal year end: OCTOBER 31 Date of reporting period: November 1, 2004 to October 31, 2005 ITEM 1. REPORTS TO STOCKHOLDERS MONEY MARKET FUNDS 2005 Annual Report CLASS A AND S SHARES: MONEY MARKET FUND CLASS S SHARES: US GOVERNMENT MONEY MARKET FUND TAX FREE MONEY MARKET FUND OCTOBER 31, 2005 (RUSSELL LOGO) Frank Russell Investment Company Frank Russell Investment Company is a series investment company with 34 different investment portfolios referred to as Funds. These financial statements report on three of these Funds. Frank Russell Investment Management Company Responsible for overall management and administration of the Funds. [Blank Page] Frank Russell Investment Company Money Market Funds Annual Report October 31, 2005 Table of Contents
Page To Our Clients....................................................... 3 Money Market Fund.................................................... 4 US Government Money Market Fund...................................... 9 Tax Free Money Market Fund........................................... 11 Notes to Schedules of Investments.................................... 19 Statement of Assets and Liabilities.................................. 20 Statement of Operations.............................................. 21 Statement of Changes in Net Assets................................... 22 Financial Highlights................................................. 24 Notes to Financial Statements........................................ 26 Report of Independent Registered Public Accounting Firm.............. 31 Tax Information...................................................... 32 Shareholder Requests for Additional Information...................... 33 Disclosure of Information about Fund Directors....................... 34 Manager, Money Managers and Service Providers........................ 39
Frank Russell Investment Company - Money Market Funds Copyright (c) Frank Russell Company 2005. All rights reserved. The Russell logo is a trademark and service mark of Frank Russell Company. Frank Russell Company and Standard & Poor's Corporation are the owners of the trademarks, service marks, and copyrights related to their respective indexes. Indexes are unmanaged and cannot be invested in directly. 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. 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 Fund Distributors, Inc., is the distributor of Frank Russell Investment Company. TO OUR CLIENTS Thank you for selecting Russell to help provide for your financial security. As you read Frank Russell Investment Company's 2005 Annual Report, we ask that you take this opportunity to review the value Russell's investment approach provides. Today, as well as tomorrow, our approach remains consistent. We continue to maintain our long-term focus, strategic diversification, active management, and goal-oriented planning. In 2006, and beyond, our commitment to you remains the same. Our mutual funds offer the Russell approach to investors of all types. Our purpose is to be one of the reasons that you and your family view the future with confidence. Thank you for your continued support and for choosing Russell, GLOBAL LEADERS IN MULTI-MANAGER INVESTING. Regards, (/s/ GREG STARK) Greg Stark Chief Executive Officer, Chairman and President. To Our Clients 3 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS A PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,016.40 $ 1,023.95 Expenses Paid During Period* $ 1.27 $ 1.28
* 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 184/365 (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.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,016.70 $ 1,024.45 Expenses Paid During Period* $ 0.76 $ 0.77
* Expenses are equal to the Fund's annualized expense ratio of 0.15% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (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 Money Market Fund FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL DATE AMOUNT ($) RATE OF VALUE OR SHARES % MATURITY# $ - -------------------------------------------------------------------------------------------------------------------------- CORPORATE BONDS AND NOTES - 32.0% Allstate Financial Global Funding 17,900 6.150 02/01/06 17,996 Allstate Financial Global Funding (E) 10,000 4.015 12/20/05 10,002 Bank of the West (E) 50,000 3.737 08/08/06 50,010 Bank One NA Illinois (E) 14,500 4.260 01/13/06 14,504 Citigroup Global Markets (E) 10,750 4.416 01/27/06 10,756 Citigroup Global Markets (E) 50,000 3.884 03/16/06 50,010 Deutsche Bank AG (NY) (E) 13,000 4.204 04/24/06 13,003 Goldman Sachs Group, Inc. (E) 50,000 4.120 03/21/06 50,043 Goldman Sachs Group, LP (E) 15,000 4.070 12/15/05 14,999 HSBC Finance Corp. 28,110 6.500 01/24/06 28,288 HSBC Finance Corp. 6,460 3.375 02/21/06 6,452 HSBC Finance Corp. 6,812 7.200 07/15/06 6,952 HSBC Finance Corp. (E) 70,000 3.974 06/22/06 70,037 HSBC Finance Corp. (E) 10,200 4.266 10/27/06 10,206 Merrill Lynch & Co., Inc. 1,425 6.150 01/26/06 1,433 Merrill Lynch & Co., Inc. (E) 15,000 4.439 04/18/06 15,022 Merrill Lynch & Co., Inc. (E) 12,027 4.220 05/22/06 12,055 Merrill Lynch & Co., Inc. (E) 21,500 4.101 05/26/06 21,538 Metropolitan Life Global Funding (E) 10,000 3.930 05/22/06 10,006 Metropolitan Life Insurance Co. (E) 75,000 4.220 10/13/06 75,000 Morgan Stanley 3,971 6.300 01/15/06 3,992 Morgan Stanley 7,000 6.100 04/15/06 7,068 Morgan Stanley (E) 49,225 4.250 03/27/06 49,286 Morgan Stanley (E) 60,000 4.000 04/03/06 60,000 Morgan Stanley (E) 20,000 4.000 05/03/06 20,000 New York Life Insurance Co. (E)(A) 50,000 3.890 11/18/05 50,000 New York Life Insurance Co. (E)(A) 35,000 3.862 05/17/06 35,000 Presbyterian Homes & Services Series B2, weekly demand (E) 17,024 4.050 12/01/28 17,024 Principal Life Global Funding I (E) 50,000 4.020 02/24/06 50,034 Principal Life Income Funding (E) 50,000 3.740 05/10/06 50,002 Protective Life Insurance Co. (E)(A) 50,000 3.973 08/23/06 50,000 Protective Life US Funding 40,720 5.875 08/15/06 41,245 Tango Finance Corp. (E) 15,000 4.140 01/17/06 15,000 The Travelers Insurance Co. (E)(A) 75,000 4.144 11/10/05 75,000 ------------ TOTAL CORPORATE BONDS AND NOTES (amortized cost $1,011,963) 1,011,963 ------------ MUNICIPAL BONDS - 0.9% Illinois Health Facilities Authority Revenue, weekly demand (E)(n) 27,300 4.080 01/01/28 27,300 ------------ TOTAL MUNICIPAL BONDS (amortized cost $27,300) 27,300 ------------ REGISTERED INVESTMENT COMPANY FUNDS - 0.0% Merrill Lynch Premier Institutional Fund 361,495 361 ------------ TOTAL REGISTERED INVESTMENT COMPANY FUNDS (cost $361) 361 ------------ LEGAL NOTES - 2.9% Bear Stearns Master Note, daily demand (E) 90,000 90,000 ------------ TOTAL LEGAL NOTES (cost $90,000) 90,000 ------------
Money Market Fund 5 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL DATE AMOUNT ($) RATE OF VALUE OR SHARES % MATURITY# $ - -------------------------------------------------------------------------------------------------------------------------- DOMESTIC CERTIFICATES OF DEPOSIT - 2.6% Bank of the West 50,000 3.890 11/14/05 50,000 Wilmington Trust Co. 31,000 3.600 11/01/05 31,000 ------------ TOTAL DOMESTIC CERTIFICATES OF DEPOSIT (amortized cost $81,000) 81,000 ------------ DOMESTIC COMMERCIAL PAPER - 51.4% Barclays US Funding Corp. 19,000 3.800 11/01/05 19,000 BTM Capital Corp. 20,000 3.760 11/01/05 20,000 BTM Capital Corp. 25,000 3.930 12/01/05 24,918 BTM Capital Corp. 50,000 3.970 12/06/05 49,807 BTM Capital Corp. 50,000 4.090 01/06/06 49,625 BTM Capital Corp. 10,000 4.130 01/13/06 9,916 Central American Bank for Economic Integration 6,145 3.450 11/14/05 6,137 Co-Op Association of Tractor Dealers - Series B 67,100 4.090 11/01/05 67,100 Co-Op Association of Tractor Dealers - Series B 15,300 3.390 11/04/05 15,296 Co-Op Association of Tractor Dealers - Series B 10,100 3.870 11/07/05 10,093 Co-Op Association of Tractor Dealers - Series B 6,100 3.550 11/29/05 6,083 Co-Op Association of Tractor Dealers - Series B 5,700 3.600 12/16/05 5,674 Co-Op Association of Tractor Dealers - Series B 5,100 3.910 01/20/06 5,056 Co-Op Association of Tractor Dealers - Series B 23,400 3.850 01/27/06 23,182 Co-Op Association of Tractor Dealers - Series B 11,100 4.150 03/29/06 10,911 Cullinan Finance Corp. 25,963 4.050 12/01/05 25,875 Dealers Capital Access Trust 10,100 3.720 11/02/05 10,099 Dealers Capital Access Trust 13,600 3.720 11/04/05 13,596 Dealers Capital Access Trust 11,000 3.830 12/02/05 10,964 Dealers Capital Access Trust 5,100 3.720 12/19/05 5,075 Dealers Capital Access Trust 16,300 3.650 12/22/05 16,216 Dealers Capital Access Trust 7,500 4.040 01/13/06 7,439 Dealers Capital Access Trust 5,600 4.040 01/20/06 5,550 Fairway Finance 25,263 3.880 11/07/05 25,247 Giro Balanced Funding Corp. 50,000 3.900 11/08/05 49,962 Giro Balanced Funding Corp. 35,000 3.930 11/14/05 34,950 Giro Balanced Funding Corp. 50,000 4.050 11/28/05 49,848 Gotham Funding Corp. 63,000 3.660 11/01/05 63,000 Gotham Funding Corp. 30,923 4.040 11/22/05 30,850 Gotham Funding Corp. 7,591 4.060 11/28/05 7,568 Gotham Funding Corp. 35,000 4.140 01/17/06 34,690 Ivory Funding Corp. 12,233 3.510 11/21/05 12,209 Ivory Funding Corp. 30,309 4.060 01/09/06 30,073 Ivory Funding Corp. 22,932 4.160 01/17/06 22,728 Ivory Funding Corp. 26,038 4.190 01/31/06 25,762 Liquid Funding, Ltd. 50,000 4.070 11/01/05 50,000 Liquid Funding, Ltd. 75,000 4.020 11/21/05 74,833 Lockhart Funding LLC 20,000 4.000 11/16/05 19,967 Lockhart Funding LLC 50,000 4.125 01/05/06 49,628 Lockhart Funding LLC 10,000 4.140 01/05/06 9,925 Lockhart Funding LLC 50,000 4.070 01/09/06 49,610 Lockhart Funding LLC 30,000 4.080 01/11/06 29,759 Long Lane Master Trust IV 75,519 3.860 11/07/05 75,470 Long Lane Master Trust IV 16,025 4.000 11/21/05 15,989 Long Lane Master Trust IV 30,000 3.750 01/12/06 29,775
6 Money Market Fund FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL DATE AMOUNT ($) RATE OF VALUE OR SHARES % MATURITY# $ - -------------------------------------------------------------------------------------------------------------------------- Louis Dreyfus Corp. 9,000 3.890 11/14/05 8,987 Louis Dreyfus Corp. 35,000 4.030 11/29/05 34,890 Moat Funding LLC 50,000 3.900 11/09/05 49,957 North America Timber Co. California LLC 75,000 4.130 01/12/06 74,381 Park Avenue Receivables Corp. 10,000 3.950 11/07/05 9,993 Park Avenue Receivables Corp. 30,000 4.070 11/07/05 29,980 Rabobank USA Financial Corp. 5,400 3.750 11/08/05 5,396 Societe Generale N.A. 33,100 3.800 11/01/05 33,100 Tango Finance Corp. 23,645 4.050 11/10/05 23,621 Tango Finance Corp. 10,051 3.870 11/14/05 10,037 Tango Finance Corp. 9,250 4.020 01/19/06 9,168 Tango Finance Corp. 50,000 4.150 01/24/06 49,516 Three Pillars Funding Corp. 37,031 4.050 11/28/05 36,919 Three Pillars Funding Corp. 10,023 3.950 12/12/05 9,978 Three Pillars Funding Corp. 9,733 4.100 12/22/05 9,676 Three Pillars Funding Corp. 1,517 4.060 01/17/06 1,504 Three Rivers Funding Corp. 18,069 4.030 11/22/05 18,026 ------------ TOTAL DOMESTIC COMMERCIAL PAPER (amortized cost $1,624,584) 1,624,584 ------------ EURODOLLAR CERTIFICATES OF DEPOSIT - 1.0% Societe Generale (Cayman) 32,392 4.063 11/01/05 32,391 ------------ TOTAL EURODOLLAR CERTIFICATES OF DEPOSIT (amortized cost $32,391) 32,391 ------------ UNITED STATES GOVERNMENT AGENCIES - 0.2% AID to INH Portugal Guaranteed Note, weekly demand (LIBOR Floater) (E)(B) 7,813 4.591 12/01/17 7,897 ------------ TOTAL UNITED STATES GOVERNMENT AGENCIES (amortized cost $7,897) 7,897 ------------ YANKEE CERTIFICATES OF DEPOSIT - 9.2% Credit Suisse First Boston NY Branch 100,000 2.750 11/14/05 99,960 Credit Suisse First Boston NY Branch 50,000 3.890 11/14/05 50,000 Deutsche Bank AG (NY) 60,000 4.400 09/29/06 60,000 Deutsche Bank AG (NY) 60,000 4.540 10/16/06 60,000 Wilmington Trust Co. 20,000 3.780 11/18/05 20,000 ------------ TOTAL YANKEE CERTIFICATES OF DEPOSIT (amortized cost $289,960) 289,960 ------------ TOTAL INVESTMENTS - 100.2% (cost $3,165,456) (+) 3,165,456 OTHER ASSETS AND LIABILITIES, NET - (0.2%) (5,454) ------------ NET ASSETS - 100.0% 3,160,002 ============
See accompanying notes which are an integral part of the financial statements. Money Market Fund 7 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUND PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- Corporate Bonds & Notes 32.0 Municipal Bonds 0.9 Registered Investment Company Funds --* Legal Notes 2.9 Domestic Certificates of Deposit 2.6 Domestic Commercial Paper 51.4 Eurodollar Certificates of Deposit 1.0 United States Government Agencies 0.2 Yankee Certificates of Deposit 9.2 --------------- Total Investments 100.2 Other Assets and Liabilities, Net (0.2) --------------- 100.0 ===============
* Less than .05% of net assets. See accompanying notes which are an integral part of the financial statements. 8 Money Market Fund FRANK RUSSELL INVESTMENT COMPANY US GOVERNMENT MONEY MARKET FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,014.00 $ 1,022.03 Expenses Paid During Period* $ 3.20 $ 3.21
* 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 184/365 (to reflect the one-half year period). US Government Money Market Fund 9 FRANK RUSSELL INVESTMENT COMPANY US GOVERNMENT MONEY MARKET FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL DATE AMOUNT ($) RATE OF VALUE OR SHARES % MATURITY# $ - -------------------------------------------------------------------------------------------------------------------------- UNITED STATES GOVERNMENT AGENCIES - 20.5% Federal Farm Credit Bank Note (E) 1,350 3.930 06/20/06 1,350 Federal Home Loan Bank (E) 600 3.750 06/02/06 600 Federal Home Loan Mortgage Corp. 100 3.702 11/07/05 100 Federal National Mortgage Association 5,000 2.900 02/24/06 4,987 ------------ TOTAL INVESTMENTS - 20.5% (amortized cost $7,037) 7,037 ------------ REPURCHASE AGREEMENTS - 79.7% Agreement with Barclays and The Bank of New York (Tri-party) of $27,352 dated October 31, 2005 at 3.970% to be repurchased at $27,355 on November 1, 2005, collateralized by: $28,385 par US Government Agency Note, valued at $27,900 27,352 ------------ TOTAL REPURCHASE AGREEMENTS (identified cost $27,352) 27,352 ------------ TOTAL INVESTMENTS AND REPURCHASE AGREEMENTS - 100.2% (cost $34,389) (+) 34,389 OTHER ASSETS AND LIABILITIES, NET - (0.2%) (82) ------------ NET ASSETS - 100.0% 34,307 ============
- -------------------------------------------------------------------------------- PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- United States Government Agencies 20.5 Repurchase Agreements 79.7 --------------- Total Investments and Repurchase Agreements 100.2 Other Assets and Liabilities, Net (0.2) --------------- 100.0 ===============
See accompanying notes which are an integral part of the financial statements. 10 US Government Money Market Fund FRANK RUSSELL INVESTMENT COMPANY TAX FREE MONEY MARKET FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,010.50 $ 1,022.63 Expenses Paid During Period* $ 2.58 $ 2.60
* Expenses are equal to the Fund's annualized expense ratio of 0.51% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Tax Free Money Market Fund 11 FRANK RUSSELL INVESTMENT COMPANY TAX FREE MONEY MARKET FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL DATE AMOUNT ($) RATE OF VALUE OR SHARES % MATURITY# $ - -------------------------------------------------------------------------------------------------------------------------- SHORT-TERM TAX-EXEMPT OBLIGATIONS - 99.7% Alabama - 2.5% Lauderdale County Public Park Recreation Board Revenue Bonds, weekly demand (E)(u) 600 2.700 12/01/20 600 Spring Hill College Educational Building Authority Revenue Bonds, weekly demand (E)(u) 1,000 2.700 09/01/24 1,000 ------------ 1,600 ------------ Arizona - 0.5% Maricopa County Industrial Development Authority Revenue Bonds, weekly demand (E) 305 2.700 04/15/30 305 ------------ California - 1.5% GAF Tax Exempt Bond Grantor Trust, monthly demand (E)(u) 1,000 3.000 10/01/12 1,000 ------------ Colorado - 3.1% Colorado Health Facilities Authority Revenue Bonds, weekly demand (E)(u) 500 2.850 10/01/30 500 Colorado Housing & Finance Authority Revenue Bonds, weekly demand (E) 500 2.710 02/15/28 500 Superior Metropolitan District No. 1 Revenue Bonds, annual demand (E)(u) 1,000 2.300 12/01/20 1,000 ------------ 2,000 ------------ Delaware - 3.2% Delaware State Economic Development Authority Revenue Bonds, weekly demand (E)(u) 300 2.720 05/01/15 300 Delaware State Economic Development Authority Revenue Bonds, weekly demand (E)(u) 815 2.680 12/01/15 815 Delaware State Economic Development Authority Revenue Bonds, weekly demand (E)(u) 450 2.850 12/01/15 450 New Castle County Delaware Revenue Bonds, weekly demand (E)(u) 500 2.730 08/01/31 500 ------------ 2,065 ------------ District of Columbia - 0.9% District of Columbia Revenue Bonds, weekly demand (E)(u) 600 2.800 12/01/23 600 ------------ Florida - 1.4% Florida Housing Finance Agency Revenue Bonds, weekly demand (E) 600 2.710 12/01/29 600 Fort Pierce Florida Revenue Bonds, weekly demand (E)(u) 300 2.700 10/01/17 300 ------------ 900 ------------ Georgia - 0.6% Gwinnett County Development Authority Revenue Bond, weekly demand (E)(u) 65 2.700 03/01/17 65 Gwinnett County Development Authority Revenue Bond, weekly demand (E)(u) 200 2.700 03/01/21 200 Gwinnett County Hospital Authority Revenue Bonds, weekly demand (E)(u) 100 2.700 07/01/32 100 ------------ 365 ------------
12 Tax Free Money Market Fund FRANK RUSSELL INVESTMENT COMPANY TAX FREE MONEY MARKET FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL DATE AMOUNT ($) RATE OF VALUE OR SHARES % MATURITY# $ - -------------------------------------------------------------------------------------------------------------------------- Illinois - 9.1% Belleville Illinois Revenue Bonds, weekly demand (E)(u) 500 2.720 12/01/08 500 Illinois Educational Facilities Authority Revenue Bonds, weekly demand (E)(u) 100 2.750 11/01/25 100 Illinois Educational Facilities Authority Revenue Bonds, weekly demand (E)(u) 1,000 2.750 11/01/32 1,000 Illinois Finance Authority Revenue Bonds, weekly demand (E)(u) 845 2.700 02/01/19 845 Illinois Finance Authority Revenue Bonds, weekly demand (E)(u) 800 2.830 04/01/21 800 Illinois Finance Authority Revenue Bonds, weekly demand (E)(u) 600 2.830 08/01/26 600 Oakbrook Terrace Illinois Revenue Bonds, weekly demand (E)(u) 2,100 2.850 12/01/25 2,100 ------------ 5,945 ------------ Indiana - 3.8% Indiana Development Finance Authority Revenue Bonds, weekly demand (E)(u) 5 2.780 09/01/26 5 Indiana Health Facility Financing Authority Revenue Bonds, weekly demand (E)(u) 1,455 2.780 10/01/32 1,455 Northwest Allen County Schools General Obligation Unlimited (E) 1,000 3.500 12/30/05 1,001 ------------ 2,461 ------------ Iowa - 3.0% Iowa Finance Authority Revenue Bonds, weekly demand (E)(u) 100 2.780 07/01/26 100 Iowa Finance Authority Revenue Bonds, weekly demand (E)(u) 550 2.780 06/01/28 550 Iowa Finance Authority Revenue Bonds, weekly demand (E)(u) 230 2.780 11/01/32 230 Iowa Finance Authority Revenue Bonds, weekly demand (E)(u) 250 2.780 06/01/33 250 Iowa Higher Education Loan Authority Revenue Bonds, weekly demand (E) 200 2.780 03/01/30 200 Iowa Higher Education Loan Authority Revenue Bonds, weekly demand (E) 600 2.780 10/01/33 600 ------------ 1,930 ------------ Kansas - 2.7% City of Salina Kansas Revenue Bonds, weekly demand (E)(u) 1,350 2.900 12/01/14 1,350 Kansas Development Finance Authority Revenue Bonds, weekly demand (E)(u) 150 2.780 05/15/26 150 Prairie Village Kansas Revenue Bonds, weekly demand (E) 250 2.710 11/01/30 250 ------------ 1,750 ------------ Kentucky - 3.2% County of Jefferson Kentucky Revenue Bonds, weekly demand (E)(u) 1,700 2.720 10/01/19 1,700 Lexington-Fayette Urban County Government Revenue Bonds, annual demand (E)(u) 380 2.750 04/01/15 380 ------------ 2,080 ------------ Maryland - 1.0% County of Montgomery Maryland, monthly demand (E) 641 2.800 04/01/14 641 ------------ Michigan - 7.2% Eaton Intermediate School District Notes (E) 1,950 3.500 04/03/06 1,953 Lansing Economic Development Corp. Revenue Bonds, semi-annual demand (E)(u) 1,450 3.150 05/01/15 1,450 Leelanau County Economic Development Corp., semi-annual demand (E) 140 3.000 06/15/06 140
Tax Free Money Market Fund 13 FRANK RUSSELL INVESTMENT COMPANY TAX FREE MONEY MARKET FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL DATE AMOUNT ($) RATE OF VALUE OR SHARES % MATURITY# $ - -------------------------------------------------------------------------------------------------------------------------- Northville Township Economic Development Corp. Revenue Bonds, weekly demand (E)(u) 500 2.610 05/01/14 500 Oakland County Economic Development Corp. Revenue Bonds, semi-annual demand (E)(u) 685 3.250 08/01/15 685 ------------ 4,728 ------------ Minnesota - 3.8% Arden Hills Minnesota Revenue Bonds, weekly demand (E)(u) 428 2.780 09/01/29 428 City of Minneapolis Minnesota Revenue Bonds, weekly demand (E)(u) 500 2.830 05/01/26 500 Mankato Minnesota Revenue Bonds, weekly demand (E)(u) 200 2.780 11/01/15 200 St. Paul Housing & Redevelopment Authority Revenue Bonds, weekly demand (E)(u) 200 2.780 05/01/22 200 St. Paul Housing & Redevelopment Authority Revenue Bonds, weekly demand (E)(u) 1,155 2.850 08/01/25 1,155 ------------ 2,483 ------------ Missouri - 3.8% Clayton Industrial Development Authority Revenue Bonds, weekly demand (E)(u) 1,000 2.850 01/01/09 1,000 Missouri Public Utilities Commission Revenue Notes (E) 1,000 4.000 09/15/06 1,008 Missouri State Health & Educational Facilities Authority Revenue Bonds, weekly demand (E) 195 2.780 10/01/24 195 Missouri State Health & Educational Facilities Authority Revenue Bonds, weekly demand (E)(u) 100 2.780 08/15/28 100 Missouri State Health & Educational Facilities Authority Revenue Bonds, weekly demand (E)(u) 200 2.780 10/01/31 200 ------------ 2,503 ------------ Montana - 1.1% Montana Health Facilities Authority Revenue Bonds, weekly demand (E)(u) 700 2.700 12/01/15 700 ------------ Multi-State and Other - 0.8% Greystone Revenue Bond Certificate Trust Series 1998-1 Class SR, weekly demand (E)(e) 500 2.830 05/01/28 500 ------------ New Jersey - 4.4% Dumont New Jersey Notes (E) 2,075 3.625 04/06/06 2,080 New Jersey Economic Development Authority Revenue Bonds, weekly demand (E)(u) 800 2.830 08/01/14 800 ------------ 2,880 ------------ New York - 4.8% Albany Industrial Development Agency Revenue Bonds, weekly demand (E) 380 2.800 07/01/32 380 Herkimer County Industrial Development Agency Revenue Bonds, weekly demand (E)(u) 1,240 2.770 12/01/14 1,240 Marlboro Central School District General Obligation Unlimited Notes (E) 1,200 3.750 04/13/06 1,204 New York City Municipal Water Finance Authority Revenue Bonds, weekly demand (E) 300 2.720 06/15/36 300 ------------ 3,124 ------------
14 Tax Free Money Market Fund FRANK RUSSELL INVESTMENT COMPANY TAX FREE MONEY MARKET FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL DATE AMOUNT ($) RATE OF VALUE OR SHARES % MATURITY# $ - -------------------------------------------------------------------------------------------------------------------------- North Carolina - 0.1% North Carolina Medical Care Commission Revenue Bonds, weekly demand (E)(u) 50 2.750 11/15/09 50 ------------ Ohio - 9.3% American Municipal Power-Ohio, Inc. Revenue Notes (E) 580 2.850 03/31/06 580 American Municipal Power-Ohio, Inc. General Obligation, Ltd. Notes (E) 1,100 3.200 10/05/06 1,100 Clermont County Ohio Revenue Bonds, semi-annual demand (E)(u) 1,400 2.900 05/01/12 1,400 Stark County Ohio Revenue Bonds, semi-annual demand (E)(u) 1,370 3.050 09/01/15 1,370 Stark County Ohio Revenue Bonds, weekly demand (E)(u) 1,595 3.050 09/15/16 1,595 ------------ 6,045 ------------ Oklahoma - 1.5% Tulsa County Industrial Authority Revenue Bonds, annual demand (E) 1,000 2.950 05/15/17 1,000 ------------ Pennsylvania - 0.9% City of Philadelphia Pennsylvania Revenue Bonds, weekly demand (E)(u) 100 2.690 06/15/23 100 Pennsylvania Higher Educational Facilities Authority Revenue Bonds, annual demand (E)(u) 500 1.950 11/01/31 500 ------------ 600 ------------ Rhode Island - 1.6% Rhode Island Economic Development Corp. Revenue Bonds, weekly demand (E)(u) 1,065 2.740 07/01/23 1,065 ------------ South Carolina - 1.5% Three Rivers Solid Waste Authority Revenue Notes, weekly demand (E) 1,000 3.875 06/01/06 1,005 ------------ Tennessee - 6.7% Franklin County Health & Educational Facilities Board Revenue Bonds, semi-annual demand (E) 1,175 2.650 09/01/10 1,175 Knox County Health Educational & Housing Facilities Board Revenue Bonds, weekly demand (E)(u) 320 2.700 03/01/19 320 Knox County Industrial Development Board Revenue Bonds, weekly demand (E)(u) 1,800 3.500 12/01/14 1,800 Wilson County Industrial Development Board, weekly demand 1,100 2.720 07/01/26 1,100 ------------ 4,395 ------------ Texas - 0.7% Gulf Coast Waste Disposal Authority Revenue Bonds, weekly demand (E)(u) 490 2.720 12/01/08 490 ------------ Vermont - 2.7% Vermont Educational & Health Buildings Financing Agency Revenue Bonds, weekly demand (E)(u) 1,340 2.830 06/01/22 1,340 Vermont Educational & Health Buildings Financing Agency Revenue Bonds, weekly demand (E)(u) 390 2.830 06/01/27 390 ------------ 1,730 ------------
Tax Free Money Market Fund 15 FRANK RUSSELL INVESTMENT COMPANY TAX FREE MONEY MARKET FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL DATE AMOUNT ($) RATE OF VALUE OR SHARES % MATURITY# $ - -------------------------------------------------------------------------------------------------------------------------- Virginia - 1.8% Harrisonburg Redevelopment & Housing Authority Revenue Bonds, weekly demand (E) 700 2.730 02/01/07 700 Virginia Public Building Authority Revenue Bonds, weekly demand (E)(u) 500 2.730 08/01/19 500 ------------ 1,200 ------------ Washington - 5.7% ABN AMRO Munitops Certificate Trust Revenue Bonds, weekly demand (E)(u) 2,000 2.760 03/01/13 2,000 Washington Economic Development Finance Authority Revenue Bonds, weekly demand (E)(u) 400 2.730 09/01/18 400 Washington State Housing Finance Commission Revenue Bonds, weekly demand (u) 100 2.800 08/01/19 100 Washington State Housing Finance Commission Revenue Bonds, weekly demand (u) 1,230 2.750 08/01/24 1,230 ------------ 3,730 ------------ West Virginia - 1.5% Marshall County West Virginia Revenue Bonds, weekly demand (E) 1,000 2.850 03/01/26 1,000 ------------ Wisconsin - 3.3% Milwaukee Redevelopment Authority Revenue Bonds, weekly demand (E)(u) 500 2.830 07/01/21 500 Wisconsin State Health & Educational Facilities Authority Revenue Bonds, weekly demand (u) 200 2.730 11/01/17 200 Wisconsin State Health & Educational Facilities Authority Revenue Bonds, weekly demand (u) 1,235 2.730 08/15/30 1,235 Wisconsin State Health & Educational Facilities Authority Revenue Bonds, weekly demand (u) 200 2.780 12/01/32 200 ------------ 2,135 ------------ TOTAL SHORT-TERM TAX-EXEMPT OBLIGATIONS (cost $65,005) 65,005 ------------ TOTAL INVESTMENTS - 99.7% (identified cost $65,005) (+) 65,005 OTHER ASSETS AND LIABILITIES, NET - 0.3% 215 ------------ NET ASSETS - 100% 65,220 ============
See accompanying notes which are an integral part of the financial statements. 16 Tax Free Money Market Fund FRANK RUSSELL INVESTMENT COMPANY TAX FREE MONEY MARKET FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005
- ---------------------------------------------------------------------------- QUALITY RATINGS AS A % OF VALUE (Unaudited) P-1/A-1; MIG1/SP-1/F1 or equivalent 100% === ECONOMIC SECTOR EMPHASIS AS A % OF VALUE (Unaudited) Industrial Revenue Bond 21% Non-Profit 21 Nursing Home 10 Cashflow Note 9 Education (colleges and universities) 7 Hospital 6 Bond Anticipation Note 5 Miscellaneous Revenue 5 Multi-Family Housing Bond 5 Airport Revenue 2 Asset Backed 2 School District 2 Water and Sewer 2 Annual Appropriation 1 Local General Obligation 1 Single-Family Housing Bond 1 --- 100% ===
See accompanying notes which are an integral part of the financial statements. Tax Free Money Market Fund 17 FRANK RUSSELL INVESTMENT COMPANY TAX FREE MONEY MARKET FUND PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- Alabama 2.5 Arizona 0.5 California 1.5 Colorado 3.1 Delaware 3.2 District of Columbia 0.9 Florida 1.4 Georgia 0.6 Illinois 9.1 Indiana 3.8 Iowa 3.0 Kansas 2.7 Kentucky 3.2 Maryland 1.0 Michigan 7.2 Minnesota 3.8 Missouri 3.8 Montana 1.1 Multi-State and Other 0.8 New Jersey 4.4 New York 4.8 North Carolina 0.1 Ohio 9.3 Oklahoma 1.5 Pennsylvania 0.9 Rhode Island 1.6 South Carolina 1.5 Tennessee 6.7 Texas 0.7 Vermont 2.7 Virginia 1.8 Washington 5.7 West Virginia 1.5 Wisconsin 3.3 --------------- Total Investments 99.7 Other Assets and Liabilities, Net 0.3 --------------- 100.0 ===============
See accompanying notes which are an integral part of the financial statements. 18 Tax Free Money Market Fund FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS NOTES TO SCHEDULES OF INVESTMENTS -- OCTOBER 31, 2005 - -------------------------------------------------------------------------------- FOOTNOTES: (E) Adjustable or floating rate security. Rate shown reflects rate in effect at period end. (u) Bond is insured by a guarantor. (B) Illiquid security. (ae) Pre-refunded: These bonds are collateralized by US Treasury securities, which are held in escrow by a trustee and used to pay principal and interest in the tax-exempt issue and to retire the bonds in full at the earliest refunding date. The rate noted is for descriptive purposes; effective yield may vary. (+) The identified cost for Federal income tax purpose is the same as shown above. (n) Taxable security. (e) Multi-State bond issue including Arkansas, Florida, Georgia, Kansas, Kentucky, Tennessee, and Virginia. # All securities with a maturity date greater than thirteen months have a demand feature or an optional or mandatory put, or are pre-refunded, resulting in an effective maturity of thirteen months or less. Additionally, all daily and weekly demand securities are backed by direct payment of letters of credit. (A) Illiquid and restricted security. ABBREVIATIONS: LIBOR - London Interbank Offered Rate A-1 - A short-term obligation rated A-1 is rated in the highest category by Standard & Poor's for commercial paper obligations. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus (+) sign. This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong. F-1 - Highest credit quality. Indicates the strongest capacity for timely payment of financial commitments; (may have an added "+" to denote any exceptionally strong credit feature.) MIG1 - This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the markets for refinancing. P-1 - The highest tax-exempt rating given by Moody's Investor Services to commercial paper with a "superior capacity for repayment." SP-1 - The highest short-term municipal note credit rating given by Standard & Poor's Corporation to notes with a "very strong or strong capacity to pay principal and interest." Notes to Schedules of Investments 19 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS STATEMENT OF ASSETS AND LIABILITIES -- OCTOBER 31, 2005
MONEY MARKET US GOVERNMENT TAX FREE AMOUNTS IN THOUSANDS FUND MONEY MARKET FUND MONEY MARKET FUND - --------------------------------------------------------------------------------------------------------------------------------- ASSETS Investments at amortized cost which approximates value $ 3,165,456 $ 7,037 $ 65,005 Repurchase agreements at cost which approximates value -- 27,352 -- Receivables: Interest 10,198 35 379 Fund shares sold 727 4 -- Prepaid expenses 19 -- -- ------------------- ------------------- -------------------- Total assets 3,176,400 34,428 65,384 ------------------- ------------------- -------------------- LIABILITIES Payables: Investments purchased 6,015 -- -- Accrued fees to affiliates 286 10 21 Other accrued expenses 142 23 14 Dividends 9,955 88 129 ------------------- ------------------- -------------------- Total liabilities 16,398 121 164 ------------------- ------------------- -------------------- NET ASSETS $ 3,160,002 $ 34,307 $ 65,220 =================== =================== ==================== Net Assets Consist of: Undistributed (overdistributed) net investment income $ 25 $ 13 $ -- Accumulated net realized gain (loss) (172) (74) (132) Shares of beneficial interest 31,601 344 653 Additional paid-in capital 3,128,548 34,024 64,699 ------------------- ------------------- -------------------- NET ASSETS $ 3,160,002 $ 34,307 $ 65,220 =================== =================== ==================== NET ASSET VALUE, per share: Net asset value per share: Class A* $ 1.00 $ -- $ -- Class A - Net assets $ 14,409,567 $ -- $ -- Class A - Shares outstanding ($.01 par value) 14,409,567 -- -- Net asset value per share: Class S* $ 1.00 $ 1.00 $ 1.00 Class S - Net assets $ 3,145,592,005 $ 34,306,575 $ 65,220,173 Class S - Shares outstanding ($.01 par value) 3,145,731,364 34,377,638 65,346,672 - ---------------------------------------------------------------------------------------------------------------------------------
* 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. 20 Statement of Assets and Liabilities FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS STATEMENT OF OPERATIONS -- FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005
MONEY MARKET US GOVERNMENT TAX FREE AMOUNTS IN THOUSANDS FUND MONEY MARKET FUND MONEY MARKET FUND - --------------------------------------------------------------------------------------------------------------------------------- INVESTMENT INCOME Dividends $ 25 $ -- $ -- Interest 88,185 1,193 2,355 ------------------- ------------------- -------------------- Total investment income 88,210 1,193 2,355 ------------------- ------------------- -------------------- Expenses Advisory fees 5,920 86 218 Administrative fees 1,480 22 55 Custodian fees 592 35 57 Distribution fees - Class A 10 -- -- Transfer agent fees 241 48 47 Professional fees 134 20 25 Registration fees 156 20 43 Trustees' fees 69 1 3 Printing fees 124 6 6 Miscellaneous 42 2 3 ------------------- ------------------- -------------------- Expenses before reductions 8,768 240 457 Expense reductions (4,446) (2) (5) ------------------- ------------------- -------------------- Net expenses 4,322 238 452 ------------------- ------------------- -------------------- Net investment income (loss) 83,888 955 1,903 ------------------- ------------------- -------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on investments (3) (23) -- ------------------- ------------------- -------------------- NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 83,885 $ 932 $ 1,903 =================== =================== ====================
See accompanying notes which are an integral part of the financial statements. Statement of Operations 21 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS STATEMENT OF CHANGES IN NET ASSETS -- FOR THE FISCAL YEARS ENDED OCTOBER 31,
MONEY MARKET FUND ------------------------------------------- AMOUNTS IN THOUSANDS 2005 2004 - --------------------------------------------------------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS OPERATIONS Net investment income (loss) $ 83,888 $ 32,881 Net realized gain (loss) (3) 33 ------------------- -------------------- Net increase (decrease) in net assets from operations 83,885 32,914 ------------------- -------------------- DISTRIBUTIONS From net investment income Class A (292) (26) Class S (83,253) (33,031) ------------------- -------------------- Net decrease in net assets from distributions (83,545) (33,057) ------------------- -------------------- SHARE TRANSACTIONS Net increase (decrease) in net assets from share transactions 196,981 598,520 ------------------- -------------------- TOTAL NET INCREASE (DECREASE) IN NET ASSETS 197,321 598,377 NET ASSETS Beginning of period 2,962,681 2,364,304 ------------------- -------------------- End of period $ 3,160,002 $ 2,962,681 =================== ==================== Undistributed (overdistributed) net investment income included in net assets $ 25 $ (343)
See accompanying notes which are an integral part of the financial statements. 22 Statement of Changes in Net Assets
US GOVERNMENT TAX FREE MONEY MARKET FUND MONEY MARKET FUND ------------------------------ ------------------------------------------ 2005 2004 2005 2004 - -------------------------------------------------------------------------------- $ 955 $ 465 $ 1,903 $ 1,147 (23) (5) -- (4) ------- ------------------- ------------------- ------------------- 932 460 1,903 1,143 ------- ------------------- ------------------- ------------------- -- -- -- -- (955) (465) (1,889) (1,161) ------- ------------------- ------------------- ------------------- (955) (465) (1,889) (1,161) ------- ------------------- ------------------- ------------------- (20,293) (7,591) (75,566) 3,112 ------- ------------------- ------------------- ------------------- (20,316) (7,596) (75,552) 3,094 54,623 62,219 140,772 137,678 ------- ------------------- ------------------- ------------------- $34,307 $ 54,623 $ 65,220 $ 140,772 ======= =================== =================== =================== $ 13 $ -- $ -- $ (14)
See accompanying notes which are an integral part of the financial statements. Statement of Changes in Net Assets 23 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED For the Share Outstanding Throughout Each Period
$ $ $ $ $ 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 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 October 31, 2005 1.0000 .0280 -- .0280 (.0280) October 31, 2004 1.0000 .0117 -- .0117 (.0117) October 31, 2003 1.0000 .0121 -- .0121 (.0121) October 31, 2002 1.0000 .0185 -- .0185 (.0185) October 31, 2001 1.0000 .0483 -- .0483 (.0483) - --------------------------------------------------------------------------------------------------------------------------------- US GOVERNMENT MONEY MARKET FUND Class S October 31, 2005 1.0000 .0234 (.0005) .0229 (.0229) October 31, 2004 1.0000 .0081 -- .0081 (.0081) October 31, 2003 1.0000 .0085 -- .0085 (.0085) October 31, 2002 1.0000 .0173 -- .0173 (.0173) October 31, 2001 1.0000 .0446 -- .0446 (.0446) - --------------------------------------------------------------------------------------------------------------------------------- TAX FREE MONEY MARKET FUND Class S October 31, 2005 1.0000 .0179 -- .0179 (.0179) October 31, 2004 1.0000 .0085 -- .0085 (.0085) October 31, 2003 1.0000 .0094 -- .0094 (.0094) October 31, 2002 1.0000 .0152 -- .0152 (.0152) October 31, 2001 1.0000 .0317 -- .0317 (.0317) - ---------------------------------------------------------------------------------------------------------------------------------
(1) For the period April 21, 2003 (commencement of operations) to October 31, 2003. (a) Average month-end shares were used for this calculation. (b) Periods less than one year are not annualized. (c) The ratios for periods less than one year are annualized. (d) May reflect amounts waived and/or reimbursed by Frank Russell Investment Management Company as the investment adviser and transfer agent. See accompanying notes which are an integral part of the financial statements. 24 Financial Highlights
% $ $ 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) - ------------------------------------------------------------------------------------------------- (.0271) 1.0000 2.74 14,410 .25 (.0108) 1.0000 1.08 3,989 .25 (.0051) 1.0000 .59 682 .26 - ------------------------------------------------------------------------------------------------- (.0280) 1.0000 2.82 3,145,592 .15 (.0117) 1.0000 1.17 2,958,692 .15 (.0121) 1.0000 1.28 2,363,623 .16 (.0185) 1.0000 1.87 1,904,819 .14 (.0483) 1.0000 4.94 1,886,741 .14 - ------------------------------------------------------------------------------------------------- (.0229) 1.0000 2.31 34,307 .55 (.0081) 1.0000 .82 54,623 .47 (.0085) 1.0000 .86 62,219 .41 (.0173) 1.0000 1.74 93,182 .25 (.0446) 1.0000 4.55 108,884 .37 - ------------------------------------------------------------------------------------------------- (.0179) 1.0000 1.80 65,220 .41 (.0085) 1.0000 .85 140,772 .36 (.0094) 1.0000 .94 137,678 .32 (.0152) 1.0000 1.53 174,623 .25 (.0317) 1.0000 3.22 180,699 .30 - ------------------------------------------------------------------------------------------------- % % RATIO OF EXPENSES RATIO OF NET TO AVERAGE INVESTMENT INCOME NET ASSETS, TO AVERAGE GROSS(C) NET ASSETS(C)(D) - ------------------------------------------ .40 2.91 .40 1.18 5.24 .96 - ------------------------------------------- .30 2.83 .30 1.16 .31 1.21 .29 1.84 .29 4.78 - ------------------------------------------- .56 2.22 .47 .81 .48 .87 .45 1.73 .63 4.43 - ------------------------------------------- .42 1.74 .37 .84 .36 .95 .35 1.52 .40 3.17 - -------------------------------------------
See accompanying notes which are an integral part of the financial statements. Financial Highlights 25 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS -- OCTOBER 31, 2005 - -------------------------------------------------------------------------------- 1. ORGANIZATION Frank Russell Investment Company (the "Investment Company" or "FRIC") is a series investment company with 34 different investment portfolios referred to as Funds. These financial statements report on three of these Funds. The Investment Company is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. It is organized and operates as a Massachusetts business trust under an amended and restated master trust agreement dated August 19, 2002. The Investment Company's master trust agreement permits the Board of Trustees (the "Board") to issue an unlimited number of shares of beneficial interest at a $.01 par value per share. 2. SIGNIFICANT ACCOUNTING POLICIES The Funds' financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") which require the use of management estimates and assumptions at the date of the financial statements. Actual results could differ from those estimates. The following is a summary of the significant accounting policies consistently followed by each Fund in the preparation of its financial statements. Security Valuation The Funds' portfolio investments are valued using the amortized cost method. Under this method, a portfolio instrument is initially valued at cost and thereafter a constant accretion/amortization to maturity of any discount or premium is assumed. While amortized cost provides certainty in valuation, it may result in periods when the value of an instrument is higher or lower than the price a Fund would receive if it sold the instrument. Investments in other mutual funds are valued at their net asset value per share, calculated at 4 p.m. Eastern time or as of the close of the NYSE, whichever is earlier. Investment Transactions Securities transactions are recorded on a trade date basis, which in most instances is the same as the settlement date. Realized gains and losses from securities transactions, if any, are recorded on the basis of specific identified cost. Investment Income Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Federal Income Taxes Since the Investment Company is a Massachusetts business trust, each Fund is a separate corporate taxpayer and determines its net investment income and capital gains (or losses) and the amounts to be distributed to each Fund's shareholders without regard to the income and capital gains (or losses) of the other Funds. It is each Fund's intention to qualify as a regulated investment company and distribute all of its taxable income and capital gains. Therefore, no federal income provision was required for the Funds. Dividends and Distributions to Shareholders The Money Market, US Government Money Market and Tax Free Money Market Funds declare and record dividends daily and pay them monthly. Capital gain distributions are generally declared and paid annually. An additional distribution may be paid by the Funds to avoid imposition of federal income and excise tax on any remaining undistributed capital gains and net investment income. The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax regulations which may differ from GAAP. As a result, net investment income and net realized gain (or loss) on investment for a reporting period may differ significantly from distributions during such period. The differences between tax regulations and GAAP primarily relate to investments in certain securities sold at a loss and capital loss carryforwards. Accordingly, a Fund may periodically make reclassifications among certain of its capital accounts without impacting its net asset value. 26 Notes to Financial Statements FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS, CONTINUED -- OCTOBER 31, 2005 - -------------------------------------------------------------------------------- Expenses The Funds will pay their own expenses other than those expressly assumed by Frank Russell Investment Management Company ("FRIMCo" or "Adviser"). Most expenses can be directly attributed to the individual Funds. Expenses which cannot be directly attributed to a specific Fund are allocated among all Funds principally based on their relative net assets. Class Allocation The Money Market Fund offers the following classes of shares: Class A and Class S. All share classes have identical voting, dividend, liquidation and other rights and the same terms and conditions. The separate classes of shares differ principally in the distribution fees. Shareholders of each class bear certain expenses that pertain to that particular class. Realized and unrealized gains (losses), net investment income, and expenses with the exception of class level expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Repurchase Agreements The Funds may engage in repurchase agreements with several financial institutions whereby a Fund, through its custodian, receives delivery of underlying securities as collateral. Each Fund's money manager will monitor repurchase agreements daily to determine that the market value (including accrued interest) of the underlying securities at Fed wire closing time remains at least equal to 102% of the repurchase price. The money manager will notify the seller to immediately increase the collateral on the repurchase agreement to 102% of the repurchase price if collateral value falls below 102%. If the seller defaults and the fair value of the collateral declines, realization of the collateral by the Fund may be delayed or limited. Guarantees In the normal course of business the Funds enter into contracts that contain a variety of representations which provide general indemnifications. The Funds' maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, the Funds expect the risk of loss to be remote. 3. RELATED PARTIES Adviser and Administrator FRIMCo advises and administers all of the Funds which comprise the Investment Company. FRIMCo is a wholly-owned subsidiary of Frank Russell Company (a subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell Company provides money manager evaluation to FRIMCo. The Investment Company Funds are permitted to invest their cash reserves (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses) in the Investment Company's Money Market Fund, US Government Money Market Fund, and Tax Free Money Market Fund. As of October 31, 2005, $1,776,206,111, $3,801,000, and $8,987,848, respectively, represents investment by other Investment Company Funds not presented herein and investment by the Russell Investment Funds. The Russell Investment Funds employs the same investment adviser as FRIC. In addition, a portion of the collateral received from the Investment Company's securities lending program in the amount of $800,000 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 $6,224,230 and $1,556,057 respectively, for the period ended October 31, 2005.
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
The Adviser has contractually agreed to waive 0.15% of its 0.25% combined advisory and administrative fees, at least until February 28, 2006, for the Money Market Fund. The amount of such waiver for the period ended October 31, 2005 was $4,439,826. The adviser does not have the ability to recover amounts waived for the period ended October 31, 2005 or previous periods. Notes to Financial Statements 27 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS, CONTINUED -- OCTOBER 31, 2005 - -------------------------------------------------------------------------------- For the period ended October 31, 2005, the Adviser paid the following amounts to certain Funds with respect to referral fees received: Money Market $ 3,884 US Government Money Market 1,787 Tax Free Money Market 1,165
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 October 31, 2005, the Funds' custodian fees were reduced by the following amounts under these arrangements: Money Market $ 1,911 US Government Money Market 175 Tax Free Money Market 3,373
Transfer Agent FRIMCo serves as Transfer and Dividend Disbursing Agent for the Investment Company. For this service, FRIMCo is paid a fee for transfer agency and dividend disbursing services provided to the Funds. FRIMCo retains a portion of this fee for its services provided to the Funds and pays the balance to unaffiliated agents who assist in providing these services. Total fees for the Funds reported herein for the period ended October 31, 2005 were $336,059. Distributor The Investment Company has a Distribution Plan pursuant to Rule 12b-1 (the "Plan") under the 1940 Act. Under this Plan, the Investment Company is authorized to make payments to Russell Fund Distributors, Inc. (the "Distributor") a wholly-owned subsidiary of FRIMCo, or any Selling Agents, as defined in the Plan, for sales support services provided, and related expenses incurred which are primarily intended to result in the sale of the Class A shares subject to the Distribution Plan. The 12b-1 distribution payments shall not exceed 0.15% of the average daily net assets of a Fund's Class A shares on an annual basis. Accrued Fees to Affiliates Accrued fees payable to affiliates as of October 31, 2005 were as follows:
US GOVERNMENT TAX FREE MONEY MARKET MONEY MARKET MONEY MARKET ------------------------------------------------------------------------------------------------------ Advisory fees $ 132,960 $ 5,777 $ 11,880 Administration fees 133,177 1,444 2,967 Distribution fees 1,219 -- -- Transfer agent fees 13,838 2,418 5,748 Trustee fees 4,893 107 297 ------------------- ------------------- ------------------- $ 286,087 $ 9,746 $ 20,892 =================== =================== ===================
Board of Trustees The Russell Fund Complex consists of Frank Russell Investment Company, which has 34 Funds, and Russell Investment Funds ("RIF"), which has five Funds. Each of the Trustees is a Trustee for both FRIC and RIF. During the period, the Russell Fund Complex paid each of its independent Trustees a retainer of $52,000 per year, $5,000 for each regular quarterly meeting attended in person, $2,000 for each special meeting attended in person, and $2,000 for each Audit Committee meeting or Nominating and Governance Committee meeting or any other committee meeting established and approved by the Board that is attended in person. Each Trustee receives a $500 fee for attending the meetings (quarterly, special, committee) by phone instead of receiving the full fee had the member attended in person. Trustees' out of pocket expenses are also paid by the Russell Fund Complex. During the period, the Audit Committee Chair was paid a fee of $12,000 per year and the Nominating and Governance Committee chair was paid a fee of $6,000 per year. Prior to June 1, 2005, the Lead Trustee received 28 Notes to Financial Statements FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS, CONTINUED -- OCTOBER 31, 2005 - -------------------------------------------------------------------------------- compensation of $10,000 annually. Effective June 1, 2005, the position of Lead Trustee was eliminated and a new chairperson of the Board was elected with additional annual compensation of $52,000. 4. FEDERAL INCOME TAXES At October 31, 2005, certain Funds had net tax basis capital loss carryforwards which may be applied against any realized net taxable gains in each succeeding year or until their respective expiration dates, whichever occurs first. Available capital loss carryforwards and expiration dates are as follows:
10/31/06 10/31/07 10/31/08 ------------------------------------------------------------------------------ Money Market $ -- $ -- $ 90,626 US Government Money Market 762 1,782 8,484 Tax Free Money Market -- -- 68,310
10/31/09 10/31/10 10/31/11 10/31/12 10/31/13 TOTALS ------------------------------------------------------------------------------------------------------------------------ Money Market $ 35,378 $ -- $ 43,223 $ -- $ 3,147 $ 172,374 US Government Money Market 15,034 2,688 17,267 4,791 22,845 $ 73,653 Tax Free Money Market 59,628 19 -- 4,408 -- $ 132,365
5. FUND SHARE TRANSACTIONS (amounts in thousands) Share transactions for the periods ended October 31, 2005 and October 31, 2004 were as follows:
CLASS A CLASS S ON A CONSTANT DOLLAR BASIS ON A CONSTANT DOLLAR BASIS ------------------------------------- ------------------------------------- 2005 2004 2005 2004 ----------------- ----------------- ----------------- ----------------- Money Market Proceeds from shares sold $ 26,116 $ 8,470 $ 20,243,631 $ 16,907,677 Proceeds from reinvestment of distributions 230 20 9,854 4,172 Payments for shares redeemed (15,925) (5,186) (20,066,925) (16,316,633) ----------------- ----------------- ----------------- ----------------- Total net increase (decrease) $ 10,421 $ 3,304 $ 186,560 $ 595,216 ================= ================= ================= ================= US Government Money Market Proceeds from shares sold $ -- $ -- $ 89,516 $ 92,918 Proceeds from reinvestment of distributions -- -- 761 340 Payments for shares redeemed -- -- (110,570) (100,849) ----------------- ----------------- ----------------- ----------------- -- Total net increase (decrease) $ -- $ -- $ (20,293) $ (7,591) ================= ================= ================= ================= Tax Free Money Market Proceeds from shares sold $ -- $ -- $ 336,138 $ 327,582 Proceeds from reinvestment of distributions -- -- 1,190 827 Payments for shares redeemed -- -- (412,894) (325,297) ----------------- ----------------- ----------------- ----------------- -- Total net increase (decrease) $ -- $ -- $ (75,566) $ 3,112 ================= ================= ================= =================
6. LINE OF CREDIT The Investment Company has a $75 million revolving credit facility for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. The Investment Company is charged an annual commitment fee of .125% on the average daily unused amount of the aggregate commitment, which is allocated among each of the Investment Company's Funds. Interest is calculated at the Federal Fund Rate plus .50% annually. The Funds may borrow up to a maximum of 33.33% of the value of their net assets under the agreement. The agreement will Notes to Financial Statements 29 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS NOTES TO FINANCIAL STATEMENTS, CONTINUED -- OCTOBER 31, 2005 - -------------------------------------------------------------------------------- expire December 21, 2005 and is expected to be renewed at that time. The Funds did not have any drawdowns for the period ended October 31, 2005. 7. RECORD OWNERSHIP As of October 31, 2005, the following table includes shareholders of record with greater than 10% of the total outstanding shares of each respective Fund:
FUNDS # OF SHAREHOLDERS % -------------------------------------------------------------------------------- Money Market 1 25.3 US Government Money Market 2 46.2 Tax Free Money Market 3 53.1
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. A Fund may invest a portion of its net assets not to exceed 15% in securities that are illiquid. Illiquid securities are securities that may not be readily marketable, and that cannot be sold within seven days in the ordinary course of business at the approximate amount at which the Fund has valued the securities. Restricted securities are generally considered to be illiquid. The following table lists restricted securities held by a Fund that are illiquid. The following table does not include (1) securities deemed liquid by FRIMCo or a money manager pursuant to Board approved policies and procedures or (2) illiquid securities that are not restricted securities as designated on the Fund's Schedule of Investments.
PRINCIPAL COST MARKET VALUE FUND - % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000) SECURITIES DATE OR SHARES $ $ $ --------------------------------------------------------------------------------------------------------------------------- Money Market Fund - 6.6% New York Life Insurance Co. 11/19/04 35,000,000 100.00 35,000 35,000 New York Life Insurance Co. 05/19/04 50,000,000 100.00 50,000 50,000 Protective Life Insurance Co. 12/06/04 50,000,000 100.00 50,000 50,000 The Travelers Insurance Co. 11/22/04 75,000,000 100.00 75,000 75,000 -------------- 210,000 ==============
Illiquid securities may be priced by the Funds using fair value procedures approved by the Board of Trustees. 30 Notes to Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Trustees and Shareholders of Frank Russell Investment Company: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Money Market Fund, US Government Money Market Fund, and Tax Free Money Market Fund (three of the portfolios constituting Frank Russell Investment Company, hereafter collectively referred to as the "Funds") at October 31, 2005, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. LOGO Seattle, Washington December 20, 2005 Report of Independent Registered Public Accounting Firm 31 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS TAX INFORMATION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- Of the dividend paid by the Tax Free Money Market Fund from the net investment income for the taxable year ended October 31, 2005, 100% were exempt interest dividends which are tax exempt for purposes of regular federal income tax, and for purposes of the federal alternative minimum tax. Please consult a tax adviser for any questions about federal or state income tax laws. 32 Tax Information FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- As a courtesy to our Fund shareholders, a complete unaudited schedule of investments is made available generally no later than 60 days after the end of the first and third quarters of each fiscal year. These reports are available (i) free of charge, upon request, by calling the Fund at (800) 787-7354, (ii) at www.russell.com, (iii) on the Securities and Exchange Commission's website at www.sec.gov, and (iv) at the Securities and Exchange Commission's public reference room. The Board has delegated to FRIMCo, as FRIC's investment adviser, the primary responsibility for monitoring, evaluating and voting proxies solicited by or with respect to issuers of securities in which assets of the Funds may be invested. FRIMCo has established a proxy voting committee ("Committee") and has adopted written proxy voting policies and procedures ("P&P") and proxy voting guidelines ("Guidelines"). The Funds maintain a Portfolio Holdings Disclosure Policy that governs the timing and circumstances of disclosure to shareholders and third parties of information regarding the portfolio investments held by a Fund. A description of the P&P, Guidelines and Portfolio Holdings Disclosure Policy are contained in the Funds' Statement of Additional Information ("SAI"). The SAI is available (i) free of charge, upon request, by calling the Fund at (800) 787-7354, (ii) at www.russell.com, and (iii) on the Securities and Exchange Commission's website at www.sec.gov. Shareholder Requests for Additional Information 33 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- The following tables provide information for each officer and trustee of the Russell Fund Complex. The Russell Fund Complex consists of Frank Russell Investment Company ("FRIC"), which has 34 funds, and Russell Investment Funds ("RIF"), which has five funds. Each of the trustees is a trustee of both FRIC and RIF. The first table provides information for trustees who are interested trustees. The second table provides information for the independent trustees. The third table provides information for the trustees emeritus. The fourth table provides information for the officers.
- ---------------------------------------------------------------------------------------------------------------------------- No. of Portfolios in Russell Position(s) Held Fund Name, with Fund and Term Principal Occupation(s) Complex Other Age, Length of of During the Overseen Directorships Held Address Time Served Office Past 5 Years by Trustee by Trustee - ---------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEES - ---------------------------------------------------------------------------------------------------------------------------- *Lynn L. Anderson, Trustee since Appointed until - Vice Chairman, FRC 39 - Trustee, The Born April 22, 1987 successor is - Trustee, FRIC and RIF SSgA Funds 1939 duly elected - Until 2005, Chairman of the (investment and qualified Board, FRIC and RIF company) 909 A Street - CEO, Russell Fund Tacoma, Washington Distributors, Inc. 98402-1616 (broker-dealer "RFD")) - President and Chairman of the Board, SSgA Funds (investment company) - Chairman of the Board, FRTC - Until July 2004, Director, Frank Russell Investments (Ireland) Limited (Irish limited company) and Frank Russell Investments (Cayman) Ltd. (manager of variable capital investment companies) - Until October 2002, President and CEO, FRIC and RIF - Until January 2005, Chairman of the Board, RFD and FRIMCo - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- *Michael J.A. Trustee since Appointed until - Chairman of the Board, FRC 39 - None Phillips, 2002 successor is - 1990-2003, President, FRC Born January 20, duly elected - 1993-2003, CEO, FRC 1948 and qualified. - Trustee, FRIC and RIF - Director, FRTC; Frank 909 A Street Russell Investments (Suisse) Tacoma, Washington S.A. (global investment 98402-1616 services); Frank Russell Company Limited (consultant to institutional investors in Europe and the UK) - Chairman of the Board and President, Russell 20-20 Association; and Frank Russell Investments (Delaware), Inc. (general partner in various limited partnerships ("FRIDI")) - ----------------------------------------------------------------------------------------------------------------------------
* Each of Messrs. Anderson and Phillips is also an officer and/or director of one or more an affiliates of FRIC and RIF and is therefore an interested trustee. 34 Disclosure of Information about Fund Directors FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- OCTOBER 31, 2005 (UNAUDITED) - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------- No. of Portfolios in Russell Position(s) Held Fund Name, with Fund and Term Principal Occupation(s) Complex Other Age, Length of of During the Overseen Directorships Held Address Time Served Office Past 5 Years by Trustee by Trustee - ---------------------------------------------------------------------------------------------------------------------------- INDEPENDENT TRUSTEES - ---------------------------------------------------------------------------------------------------------------------------- Paul E. Anderson, Trustee since Appointed until - President, Anderson 39 None Born October 15, 1984 successor is Management Group LLC 1931 duly elected (private investments and qualified consulting) 909 A Street - February 2002 to June 2005, Tacoma, Washington Lead Trustee, FRIC and RIF 98402-1616 - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee WM Group Born January 22, 2000 successor is Blake, P.S. (accounting of Funds 1954 duly elected services) (investment Chairperson and qualified - Director and Chairman of the company); 909 A Street since 2005 Audit Committee, Avista - Director, Avista Tacoma, Washington Annual Corp. Corp 98402-1616 - Trustee and Chairman of the Operations and Distribution Committee, WM Group of Funds - February 2002 to June 2005, Chairman of the Audit Committee, FRIC and RIF - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 - Director, Born June 6, 1946 2003 successor is Vice President and Chief Gold Banc duly elected Financial Officer, Waddell & Corporation, 909 A Street Chairman of and qualified Reed Financial, Inc. Inc. Tacoma, Washington Audit Committee - 2003, Retired 98402-1616 since 2005 Appointed until - 2001-2003, Vice President successor is and Chief Financial Officer, duly elected Janus Capital Group Inc. and qualified - 1979-2001, Audit and Accounting Partner, PricewaterhouseCoopers LLP - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Jonathan Fine, Trustee since Appointed until - President and Chief 39 None Born July 8, 1954 2004 successor is Executive Officer, United duly elected Way of King County, WA 909 A Street and qualified Tacoma, Washington 98402-1616 - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Lee C. Gingrich, Trustee since Appointed until - Retired since 1995 39 None Born October 6, 1984 successor is 1930 duly elected Chairman of the and qualified 909 A Street Nominating and Tacoma, Washington Governance Appointed until 98402-1616 Committee since successor is 2005 duly elected and qualified - ----------------------------------------------------------------------------------------------------------------------------
Disclosure of Information about Fund Directors 35 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- OCTOBER 31, 2005 (UNAUDITED) - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------- 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 39 None Tennison, Jr., 2000 successor is Investment Company and Born December 21, duly elected several additional 1955 and qualified subsidiary companies, including Simpson Timber 909 A Street Company, Simpson Paper Tacoma, Washington Company and Simpson Tacoma 98402-1616 Kraft Company - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Jack Thompson, Trustee since Appointed until - September 2003 to present, 39 Director, Sparx Born March 21, 1949 2005 successor is Independent Board Chair and Japan Fund duly elected Chairman of the Audit 909 A Street and qualified Committee, Sparx Japan Fund Tacoma, Washington - February 1999 to May 2003, 98402-1616 President, Chief Executive Officer and Director, Berger Financial Group, LLC - May 1999 to May 2003, President and Trustee, Berger Funds - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None Born October 2, 2002 successor is - 1987 to 2002, Director, 1943 duly elected Smith Barney Fundamental and qualified Value Fund 909 A Street Tacoma, Washington 98402-1616 - ----------------------------------------------------------------------------------------------------------------------------
36 Disclosure of Information about Fund Directors FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- OCTOBER 31, 2005 (UNAUDITED) - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------- No. of Portfolios in Russell Position(s) Held Fund Name, with Fund and Term Principal Occupation(s) Complex Other Age, Length of of During the Overseen Directorships Held Address Time Served Office Past 5 Years by Trustee by Trustee - ---------------------------------------------------------------------------------------------------------------------------- TRUSTEES EMERITUS - ---------------------------------------------------------------------------------------------------------------------------- *George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 39 None Jr., and Chairman resignation or Russell Company (investment Born July 3, 1932 Emeritus since removal consultant to institutional 1999 investors ("FRC")); and 909 A Street FRIMCo Tacoma, Washington - Chairman Emeritus, FRIC and 98402-1616 RIF; Frank Russell Securities, Inc. (broker-dealer and investment adviser ("FRS")); Russell 20-20 Association (non-profit corporation); and Frank Russell Trust Company (non-depository trust company ("FRTC")) - Chairman, Sunshine Management Services, LLC (investment adviser) - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 39 None Born December 1, since 2003 - Trustee of FRIC and RIF 1919 until 2002 909 A Street Tacoma, Washington 98402-1616 - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 39 None Born June 8, 1925 since 2004 - Trustee of FRIC and RIF until 2004 909 A Street Tacoma, Washington 98402-1616 - ---------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 39 None Born May 5, 1926 since 2004 - Trustee of FRIC and RIF until 2004 909 A Street Tacoma, Washington 98402-1616 - ----------------------------------------------------------------------------------------------------------------------------
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and RIF. Disclosure of Information about Fund Directors 37 FRANK RUSSELL INVESTMENT COMPANY MONEY MARKET FUNDS DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- OCTOBER 31, 2005 (UNAUDITED) - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- 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 successor - Chief Compliance Officer, FRIC Born December 16, 1966 Officer since is chosen and - Chief Compliance Officer, RIF 2005 qualified by - Chief Compliance Officer, FRIMCo 909 A Street Trustees - April 2002-May 2005, Manager, Global Regulatory Tacoma, Washington 98402-1616 Policy - 1998-2002, Compliance Supervisor, Russell Investment Group - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Greg J. Stark, President and Until successor - President and CEO, FRIC and RIF Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, FRIMCo Officer since qualified by - Chairman of the Board and President, RFD and Russell 909 A Street 2004 Trustees Insurance Agency, Inc. (insurance agency ("RIA")) Tacoma, Washington 98402-1616 - Until 2004, Managing Director of Individual Investor Services, FRC - 2000 to 2004, Managing Director, Sales and Client Service, FRIMCo - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Mark E. Swanson, Treasurer and Until successor - Treasurer and Chief Accounting Officer, FRIC and RIF Born November 26, 1963 Chief Accounting is chosen and - Director, Funds Administration, FRIMCo, FRTC and RFD Officer since qualified by - Treasurer and Principal Accounting Officer, SSgA 909 A Street 1998 Trustees Funds Tacoma, Washington 98402-1616 - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Thomas F. Hanly, Chief Investment Until removed - Chief Investment Officer, FRIC, RIF, FRC, FRTC Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, FRIMCo and RFD 2004 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and 909 A Street RIF Tacoma, Washington 98402-1616 - -------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------- Karl J. Ege, Secretary and Until removed - General Counsel and Managing Director of Law and Born October 8, 1941 General Counsel by Trustees Government Affairs, Secretary, FRC since 1994 909 A Street Tacoma, Washington 98402-1616 - --------------------------------------------------------------------------------------------------------------------------
38 Disclosure of Information about Fund Directors MONEY MARKET FUNDS FRANK RUSSELL INVESTMENT COMPANY 909 A Street, Tacoma, Washington 98402 (800) 787-7354 - -------------------------------------------------------------------------------- TRUSTEES Lynn L. Anderson Paul E. Anderson Kristianne Blake Daniel P. Connealy Jonathan Fine Lee C. Gingrich Michael J.A. Phillips Raymond P. Tennison, Jr. Jack R. Thompson Julie W. Weston TRUSTEES EMERITUS George F. Russell, Jr. Paul Anton, PhD William E. Baxter Eleanor W. Palmer OFFICERS Gregory J. Stark, President and Chief Executive Officer Cheryl Wichers, Chief Compliance Officer (effective May 17, 2005) Thomas F. Hanly, Chief Investment Officer Mark E. Swanson, Treasurer and Chief Accounting Officer Karl J. Ege, Secretary ADVISER, ADMINISTRATOR, TRANSFER AND DIVIDEND DISBURSING AGENT Frank Russell Investment Management Company 909 A Street Tacoma, WA 98402 CUSTODIAN State Street Bank and Trust Company Allan Forbes Building 150 Newport Avenue AFB35 North Quincy, MA 02171 OFFICE OF SHAREHOLDER INQUIRIES 909 A Street Tacoma, WA 98402 (800) 787-7354 LEGAL COUNSEL Stradley, Ronon, Stevens & Young, LLP 2600 One Commerce Square Philadelphia, PA 19103-7098 DISTRIBUTOR Russell Fund Distributors, Inc. 909 A Street Tacoma, WA 98402 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP 1420 5th Avenue Suite 1900 Seattle, WA 98101 MONEY MANAGERS AS OF OCTOBER 31, 2005 Money Market Fund Frank Russell Investment Management Company, Tacoma, WA US Government Money Market Fund Frank Russell Investment Management Company, Tacoma, WA Tax Free Money Market Fund Neuberger Berman Management, Inc., New York, NY This report is prepared from the books and records of the Funds and is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless accompanied or preceded by an effective Prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of Frank Russell Investment Company. Such offering is made only by Prospectus, which includes details as to offering price and other material information. Manager, Money Managers and Service Providers 39 (This page intentionally left blank) (RUSSELL LOGO) Frank Russell Investment Company 909 A Street Tacoma, Washington 98402 800-787-7354 Fax: 253-591-3495 www.russell.com 36-08-083 (1 10/05) RUSSELL FUNDS 2005 Annual Report CLASS C, E, AND S SHARES DIVERSIFIED EQUITY FUND SPECIAL GROWTH FUND QUANTITATIVE EQUITY FUND INTERNATIONAL SECURITIES FUND EMERGING MARKETS FUND REAL ESTATE SECURITIES FUND SHORT DURATION BOND FUND (formerly Short Term Bond Fund) DIVERSIFIED BOND FUND MULITSTRATEGY BOND FUND TAX EXEMPT BOND FUND TAX-MANAGED LARGE CAP FUND TAX-MANAGED MID & SMALL CAP FUND CLASS C, E, I, AND S SHARES: SELECT GROWTH FUND SELECT VALUE FUND OCTOBER 31, 2005 (RUSSELL LOGO) Frank Russell Investment Company Frank Russell Investment Company is a series investment company with 34 different investment portfolios referred to as Funds. These financial statements report on fourteen of these Funds. Frank Russell Investment Management Company Responsible for overall management and administration of the Funds. [Blank Page] Frank Russell Investment Company Russell Funds Annual Report October 31, 2005 Table of Contents
Page To Our Clients....................................................... 3 Market Summary....................................................... 4 Diversified Equity Fund.............................................. 10 Special Growth Fund.................................................. 20 Quantitative Equity Fund............................................. 36 International Securities Fund........................................ 46 Emerging Markets Fund................................................ 66 Real Estate Securities Fund.......................................... 80 Short Duration Bond Fund............................................. 88 Diversified Bond Fund................................................ 108 Multistrategy Bond Fund.............................................. 134 Tax Exempt Bond Fund................................................. 166 Tax-Managed Large Cap Fund........................................... 182 Tax-Managed Mid & Small Cap Fund..................................... 192 Select Growth Fund................................................... 204 Select Value Fund.................................................... 214 Notes to Schedules of Investments.................................... 223 Statement of Assets and Liabilities.................................. 224 Statement of Operations.............................................. 232 Statement of Changes in Net Assets................................... 236 Financial Highlights................................................. 240 Notes to Financial Highlights........................................ 254 Notes to Financial Statements........................................ 255 Report of Independent Registered Public Accounting Firm.............. 284 Tax Information...................................................... 285 Basis for Approval of Investment Advisory Contracts.................. 286 Shareholder Requests for Additional Information...................... 289 Disclosure of Information about Fund Directors....................... 290 Manager, Money Managers and Service Providers........................ 295
Copyright (c) Frank Russell Company 2005. All rights reserved. The Russell logo is a trademark and service mark of Frank Russell Company. Frank Russell Company and Standard & Poor's Corporation are the owners of the trademarks, service marks, and copyrights related to their respective indexes. Indexes are unmanaged and cannot be invested in directly. 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. 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 Fund Distributors, Inc., is the distributor of Frank Russell Investment Company. TO OUR CLIENTS Thank you for selecting Russell to help provide for your financial security. As you read Frank Russell Investment Company's 2005 Annual Report, we ask that you take this opportunity to review the value Russell's investment approach provides. Today, as well as tomorrow, our approach remains consistent. We continue to maintain our long-term focus, strategic diversification, active management, and goal-oriented planning. In 2006, and beyond, our commitment to you remains the same. Our mutual funds offer the Russell approach to investors of all types. Our purpose is to be one of the reasons that you and your family view the future with confidence. Thank you for your continued support and for choosing Russell, GLOBAL LEADERS IN MULTI-MANAGER INVESTING. Regards, /s/ GREG STARK Greg Stark Chief Executive Officer, Chairman and President. To Our Clients 3 FRANK RUSSELL INVESTMENT COMPANY MARKET SUMMARY AS OF OCTOBER 31, 2005 (UNAUDITED) U.S. EQUITY MARKETS Though the 2004 presidential election provided a boost to the markets at the start of the fiscal year, stocks made little headway in the first half of the fiscal year as concerns of high oil prices and rising interest rates offset generally strong economic and corporate earnings data. But despite even higher energy costs, rising inflationary pressures, further interest rate hikes by the Federal Reserve, the economic disruptions of hurricanes Rita and Katrina and a sharp fall-off in consumer confidence, stocks were surprisingly resilient in the second half of the fiscal year. For the fiscal year ending October 31, 2005, the Russell 3000(R) Index gained 10.55%. Sector leadership in the first half of the fiscal year was dominated by energy and utilities. As in the previous year, energy stocks dominated the market due to strong global demand for energy. Towards the end of the fiscal year, hurricanes Katrina and Rita provided another boost to energy sectors as damage to the natural gas and petroleum refining and distribution infrastructure caused further spikes in energy prices. Despite a subsequent decline in oil prices and a sharp sell-off in energy stocks in October, the integrated oil and other energy sectors strongly led the U.S. equity market in the fiscal year. Other sectors also performed well in the second half, including technology and healthcare. As a result, the market environment for active management improved in the second half of the fiscal year as the rally in equities broadened beyond the energy and utilities sectors. While lagging far behind energy stocks, consumer staples stocks also outperformed in the fiscal year due to their defensive, stable growth qualities. Biotechnology and non-pharmaceutical healthcare stocks also fared well. In contrast, materials and consumer discretionary stocks lost favor with investors. Though the housing market remained strong, providing support for consumer spending, real estate prices appeared to ease towards the end of the fiscal year as higher energy and mortgage financing costs weakened consumer confidence. Retail and housing-related stocks fell to end the fiscal year among the worst performers. Despite rebounding in the second half of the year, technology stocks also lagged in the fiscal year as rising competitive pressures and generally lackluster earnings outlooks held back large capitalization technology stocks. Small capitalization companies outperformed large capitalization companies, as measured by the 12.08% return of the Russell 2000(R) Index versus 10.47% for the Russell 1000(R) Index for the fiscal year ended October 31, 2005. Though their lead narrowed over the 12 months, small capitalization companies have outperformed large capitalization companies for the last seven years. Small capitalization companies continued to benefit from narrow credit spreads (which allow companies to borrow money at more favorable rates). They also benefited from strong performance of stocks in the energy, healthcare and utilities sectors and the improving performance of technology-related companies. Companies of higher financial quality continued to underperform the broader market as represented by the Russell 3000(R) Index, while higher beta and lower dividend yield companies on the whole outperformed the broader market. Style continued to play an important role in equity returns. Value stocks outperformed growth stocks, though 4 Market Summary FRANK RUSSELL INVESTMENT COMPANY the margin of outperformance was smaller than in recent years. The Russell 1000(R) Value Index returned 11.86% for the fiscal year, compared with 8.81% for the Russell 1000(R) Growth Index. Investors' continued preference for energy-related and utility stocks over technology stocks, strongly favored value stocks in the first half of the fiscal year. But growth stocks performed better in the second half of the fiscal year due to rebounds by technology and biotechnology and health care service-related stocks. The fiscal year ending October 31, 2005 was relatively difficult for active managers given the outstanding performance of the energy sectors, which many active managers were underweight. The Lipper Large-Cap Core Funds Average trailed the Russell 1000(R) Index by 2.14% while the Lipper Large Cap Value Funds Average underperformed the Russell 1000(R) Value Index by 2.18%. Active management fared better in the growth segment where the Lipper Large Cap Growth Funds Average beat the Russell 1000(R) Growth Index by 1.28%. The environment for active small capitalization investing was also more favorable: the Lipper Small-Cap Core Funds Average beat the Russell 2000(R) Index by 1.16%. Note: Lipper returns are net of fees while the index returns are gross of fees. U.S. REAL ESTATE MARKETS The public real estate investment trust (REIT) market continued to deliver strong performance as the NAREIT Equity REIT Index returned 17.92% in the fiscal year ending October 31, 2005. Though interest rates rose during the fiscal year, they remained low relative to historical levels. The REIT market was further supported by improving property market supply and demand fundamentals and an active mergers and acquisitions environment. Elevated volatility continued to dominate the REIT market. Because yield-oriented investors are a major constituent in the REIT market, the market was highly sensitive to changes in long-term interest rates and shifts in sentiment regarding the direction of rates. During the fiscal year, the spread of average REIT dividend yields to 10-year Treasury yields was compressed, making REITs vulnerable to pricing adjustments based on changes in the outlook for interest rates. Improvements in real estate fundamentals resulted in higher average occupancy rates and rents which contributed to solid growth in REIT earnings and positive performance for most sectors. The strongest performing sectors were self storage and apartments. The self storage sector was attractive due to relative valuations and earnings growth. Apartments benefited from expectations that higher mortgage interest rates would dampen purchases of entry-level single-family homes and boost demand for apartments. Other sectors that outperformed the benchmark included office, regional malls and diversified. The weakest performing sectors included manufactured homes, health care, shopping centers, industrial and mixed industrial/office. Investors favored larger capitalization REITs during the fiscal year. The NAREIT Real Estate 50, a benchmark of larger and more frequently traded REITs, returned 19.79%. These companies benefited from their better liquidity, more favorable balance sheets and stronger earnings growth prospects. NON-U.S. EQUITY MARKETS Non-U.S. stocks gained 18.59% as measured by the MSCI EAFE Index for the fiscal year ended October 31, 2005. The performance of non-U.S. stocks was even more impressive given that the strong U.S. dollar muted returns for U.S. investors. The MSCI EAFE Index rose 25.64% as measured in local currencies over the 12-month period. Non-U.S. stocks benefited from steady global growth and improved corporate earnings; however, regional returns showed considerable variation. While the U.S. economy continued to set the tempo for global markets, Market Summary 5 FRANK RUSSELL INVESTMENT COMPANY China's economic growth also had a strong influence, particularly in the Pacific Basin. Japan achieved the strongest returns of the major countries, with the MSCI Japan Index up 22.29% in the fiscal year. Japan's improving economy, increased corporate and consumer spending and demand from China boosted stocks. In addition, investors believed that Prime Minister Koizumi's landslide victory in the September 2005 election increased the likelihood of structural reform intended to accelerate economic growth. The Japanese market was led by strong gains in the financial sector. Japanese banks were expected to further benefit from the improving domestic economy. Japanese materials and energy sectors also performed well in the period. Europe lagged Asia, though the MSCI Europe Index achieved a still impressive 16.84% return over the fiscal year. Smaller markets, such as Norway and Austria, fared best, helped by very strong gains from their energy stocks. Despite good results from energy, materials and financials stocks, the Euro zone's (European Union countries that have adopted the Euro as common currency) larger markets of Germany and France delivered below average returns, held back by poorly performing technology and telecommunications stocks. Elsewhere, the U.K. also lagged the European region with a gain of 14.22% (MSCI UK). The U.K. underperformed due to weakness among its financials and telecommunication stocks. While the Euro zone showed small signs of economic improvement over the fiscal year, the U.K. economy slowed down, causing the Bank of England to cut interest rates towards the end of the period. Markets not represented in the MSCI EAFE Index, but commonly included in non-US stock portfolios, offered significant opportunities for gains during the period. Canadian stocks rose 24.13% (MSCI Canada). Developing markets provided additional opportunity as the MSCI Emerging Markets Index rose 34.34%. These markets benefited from heavy weightings in energy and materials stocks. With market participants focused on rising energy costs and China's strong economic growth, the performance of economic sectors was aligned with these themes. Across the non-U.S. markets, industrial cyclicals were the top performers. The materials sector, led by metals and mining stocks, was the strongest sector, up 29.12% (MSCI EAFE Materials). The energy sector followed with a 25.46% (MSCI EAFE Energy) gain and the industrial sector also fared well, up 25.09% (MSCI EAFE Industrials). In contrast, technology and telecommunications were the worst performing sectors over the period, with gains of only 3.45% (MSCI EAFE Information Technology) and 5.48% (MSCI EAFE Telecommunications Services), respectively. The diverse pressures on these underperforming sectors included increased competition, falling prices, restructuring charges and rising inventories. Sharply higher energy costs also cut into profit margins as the fiscal year progressed. With the value segment of the MSCI EAFE index more weighted towards industrial cyclicals and financials, the environment was slightly more favorable for value-oriented investors; however, the margin of outperformance was relatively small. The MSCI EAFE Value Index rose 19.16%, compared with 18.03% for the MSCI EAFE Growth Index. Investors continued to favor smaller capitalization stocks over their larger capitalization peers with the MSCI EAFE Small Cap Index up 37.29% in the period. Despite their traditional bias towards smaller capitalization stocks, as well as the tendency to hold emerging markets and Canadian stocks, actively-managed international funds found the past fiscal year a challenging period. The average fund, as measured by the Lipper International Funds Average, lagged the MSCI EAFE Index over the period by 0.81%. EMERGING MARKETS Emerging Markets was the best-performing asset class in the fiscal year with the MSCI Emerging Markets Index up a strong 34.34%. The devastating tsunami that affected much of South Asia in late December 2004 6 Market Summary FRANK RUSSELL INVESTMENT COMPANY had little impact on the markets of the region, with the exception of Sri Lanka, whose market lost 10% of its value in the last week of December. China's move to revalue its currency (allowing it to rise 2.11% against the US dollar), also had a limited effect on the currencies and markets in the region. Widespread declines in stock prices in March and October across the emerging markets, caused by rising U.S. interest rates and a slowdown in Chinese growth, also proved to be short-lived. Overall, these markets benefited from strong demand for energy and other raw materials, healthier local economies, corporate earnings gains, improving governance and attractive valuations relative to other asset classes. Given the substantial gains relative to the U.S. and non-U.S. developed markets in the fiscal year, the valuation discount of emerging markets narrowed. Regionally, Latin America was the top performer, returning 61.55% (MSCI EM Latin America). EMEA (Europe, Middle East and Africa) also outperformed, returning 39.27% (MSCI EM Europe, Middle East & Africa). In contrast, Asia lagged, returning 23.63% (MSCI EM Asia). Top country performers were some of the smaller markets such as Egypt, Jordan, Columbia and Pakistan which generated gains between 73% (MSCI EM Pakistan) and 159% (MSCI EM Egypt). Despite allegations of government corruption in the second quarter that caused a decline in the market, Brazil was the best performing large country; however, its 76% (MSCI EM Brazil) gain was aided by a 27% rise in its currency. Venezuela was the only country to lose ground in the fiscal year, falling by 34.08% (MSCI EM Venezuela). In terms of sectors, energy, up 53.99% (MSCI EM Energy), was the best performer driven by the strong oil prices over the period. In contrast, technology was the worst performing sector. All other sectors performed more in line with the benchmark. On balance, country selection was the key to outperformance in the fiscal year. U.S. FIXED INCOME MARKETS Interest rates, particularly in shorter-term maturities, took their cue from Federal Reserve policy. The Federal Reserve raised its target for the fed funds rate (the interest rate at which depository institutions lend money at the Federal Reserve to other depository institutions overnight) from 1.75% in the fall of 2004 to 3.75% by the end of October 2005. The Fed's eight interest rate hikes in the fiscal year represented an attempt to move back to a more neutral monetary policy to counter rising inflationary pressures as the fiscal year progressed. Although shorter maturity interest rates tended to move up in a straight line, intermediate and long term rates were volatile as investors grappled with slowing economic growth, moderate employment growth, rising commodity prices and natural disasters. Worries about inflation caused bond markets to gyrate up and down, with the ten-year note moving from a high of over 4.6% in March to a low of under 3.9% in June. For the fiscal year, ten-year rates rose, starting at 4.0% and moving up to end the period at 4.55%. With interest rates rising, investment grade bonds were little changed. For example, the Lehman Brothers US Aggregate Bond Index, a broad measure of US investment grade fixed income securities, returned just 1.13% for the fiscal year ending October 31, 2005. Among sectors, the riskier areas continued to post strong performance. As in the two prior years, high yield and emerging market debt bonds outperformed other bond sectors. High yield bonds continued to benefit from low default levels, healthy economic growth and low interest rates. Emerging market debt performed well due to commodity price increases and better fiscal and monetary governance among a number of developing countries. The high yield bond sector, as represented by the Lehman Brothers US Corporate High Yield Index, returned 4.08% over the year compared to 0.88% for the Lehman US Treasury Index. Investment grade corporate bonds also benefited from the same factors that drove the high yield market. For the fiscal year, the Lehman US Credit Index returned 0.65%. Despite increased regulatory scrutiny of the mortgage market, mortgage securities also continued to do well, slightly outperforming equivalent duration Treasuries. Market Summary 7 FRANK RUSSELL INVESTMENT COMPANY The Lehman MBS Fixed Rate Index returned 1.75%. As the fiscal year ended, the yield spreads between corporates and mortgages relative to Treasuries continued to be narrow, reflecting a healthy economy where corporations remained conservative in their use of debt. The narrow spread also reflected a large market demand for yield, as coupons across the globe remained very low. 8 Market Summary (This page intentionally left blank) FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- (GRAPHIC)
DIVERSIFIED EQUITY - CLASS S RUSSELL 1000(R) ** ---------------------------- ------------------ * 10000.00 10000.00 1996 12282.00 12292.00 1997 16372.00 16206.00 1998 18978.00 19401.00 1999 23380.00 24364.00 2000 24200.00 26571.00 2001 17568.00 19652.00 2002 15104.00 16783.00 2003 18139.00 20528.00 2004 19521.00 22443.00 2005 22001.00 24793.00
Diversified Equity Fund - Class S - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 12.71% 5 Years (1.89)%sec. 10 Years 8.20%sec.
Diversified Equity Fund - Class E ++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 12.46% 5 Years (2.13)%sec. 10 Years 7.93%sec.
Diversified Equity Fund - Class C ++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 11.60% 5 Years (2.86)%sec. 10 Years 7.39%sec.
Russell 1000(R) Index** - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 10.47% 5 Years (1.38)%sec. 10 Years 9.50%sec.
10 Diversified Equity Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide long term capital growth. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005? For the fiscal year ended October 31, 2005, the Diversified Equity Fund Class S, Class E and Class C Shares gained 12.71%, 12.46% and 11.60%, respectively. This compared to the Russell 1000(R) Index, which gained 10.47% during the same period. The Fund's performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind. For the year ended October 31, 2005, the Lipper(R) Large-Cap Core Funds Average returned 8.33%. This result serves as a peer comparison and is expressed net of operating expenses. HOW DID THE MARKET CONDITIONS DESCRIBED IN THE MARKET SUMMARY REPORT AFFECT THE FUND'S PERFORMANCE? During the past 12 months, the Fund benefited from the rising stock market due to its fully invested stance, favorable stock selection and its allocation to the energy sector. Since energy stocks have dominated market returns, exposure to this group was an important contributor to the Fund's performance. In addition, the market favored companies with above-average forecasted growth and lower dividend yields, and the Fund was positioned to benefit from these trends. The Fund also overcame a challenging active management environment to post favorable peer-relative returns. A key contributor to the Fund's outperformance relative to peers included full participation in the energy stock rally, as many of the Fund's peers were underweight this sector. Strong stock selection across almost every other sector contributed to the Fund's favorable performance versus its peers. WHAT WERE THE PRIMARY CONTRIBUTORS AND DETRACTORS TO THE FUND'S PERFORMANCE DURING THE LAST 12 MONTHS? There were a number of contributing factors to the Fund's outperformance relative to its benchmark and peers. First, the Fund was fully invested in equities in a positive stock market. Second, stock selection was favorable across most economic sectors. Third, several overweighted positions had significant returns including Google, Genentech, ConocoPhillips, Altria and Boeing. Fourth, the Fund benefited from holding stocks that export to developing countries (e.g., Proctor & Gamble, Caterpillar, and PepsiCo). Fifth, the Fund was modestly overweighted in the energy sector. Finally, most of the Fund's money managers such as Institutional Capital Corporation, Suffolk Capital Management, LLC, Marsico Capital Management, LLC and Turner Investment Partners, Inc. substantially outperformed their respective benchmarks. Detractors to performance in the fiscal year were the Fund's overweight in consumer discretionary stocks and its modestly above-market beta. HOW DID THE INVESTMENT STRATEGIES AND TECHNIQUES EMPLOYED BY THE FUND AND ITS MONEY MANAGERS AFFECT ITS PERFORMANCE? The market environment for the 12 months was favorable for strategies emphasized by the Fund. The Fund's growth money managers that focused on companies with above-average growth rates posted strong returns, as the market favored dynamic industries such as biotechnology over slower growing industries such as pharmaceuticals. Outperforming money managers within this group of money managers included Turner and Marsico. Turner's stock selection was positive across most sectors but was particularly strong in the health care, consumer staples and financial services sectors. Marsico also delivered good results in the health care and financial services sectors, but added additional value through its positioning in the technology sector. Marsico's large overweight to Google was one of the strongest contributors to performance. The Fund's value money managers, on average, fully participated in the energy stock rally and emphasized companies with stable earnings in a decelerating profit growth environment. In this group of money managers, Institutional Capital had strong energy and consumer staples stock selection. The market-oriented money managers benefited from owning companies with positive earnings surprises and rising earnings estimates. Suffolk's health care stock selection was strong, but this manager also added value through good stock selection in the materials and processing and consumer discretionary sectors, two of the fiscal year's worst-performing sectors. Overall, the Fund's performance was helped by the market's preference for companies with above-average forecasted growth. After five years of underperformance in the U.S. market, growth companies are selling at historically low valuation premiums. The Fund's money managers responded by emphasizing growth companies to a greater degree and this strategy was rewarded in the period. DESCRIBE ANY CHANGES TO THE FUND'S STRUCTURE OR THE MONEY MANAGER LINE-UP. In July 2005, Jacobs Levy Equity Management, Inc. was terminated. At the same time, a "select holdings" strategy was implemented. Pursuant to this strategy, FRIMCo analyzes the stocks purchased for the Fund by each of the Fund's money managers to identify particular stocks that are concurrently overweighted by the money managers. Based on rankings from a proprietary model, FRIMCo purchases additional shares of certain stocks for the Fund. The Fund continues to pursue a strategy of increasing stock specific risk and these changes were consistent with this strategy. Diversified Equity Fund 11 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- Money Managers as of Styles October 31, 2005 Alliance Capital Management L.P., through its Bernstein Investment Research & Management Unit Value Ark Asset Management Co., Inc. Growth Institutional Capital Corporation Value Marsico Capital Management, LLC Growth MFS Institutional Advisors, Inc. Value Montag & Caldwell, Inc. Growth Schneider Capital Management Corporation Value Suffolk Capital Management, LLC Market-Oriented Turner Investment Partners, Inc. Growth
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Frank Russell Investment Management Company (FRIMCo), or any other person in FRIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and FRIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Frank Russell Investment Company (FRIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any FRIC Fund. -------------------- * Diversified Equity Fund Class S assumes initial investment on November 1, 1995. ** Russell 1000(R) Index includes the 1,000 largest companies in the Russell 3000(R) Index. The Russell 1000(R) Index represents the universe of stocks from which most active money managers typically select. The Russell 1000(R) Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex-dividend dates. ++ Diversified Equity Fund Class S performance has been linked with Class E to provide historical perspective. For the period May 27, 1997 (commencement of sale) to May 15, 1998, Class E paid shareholder service and Rule 12b-1 distribution fees. From May 16, 1998 through the current period, Class E paid only shareholder service fees. Total return would have been lower had these fees been in effect during prior reporting periods. ++++ Diversified Equity Fund Class S and Class E performance has been linked with Class C to provide historical perspective. From January 27, 1999 (commencement of sale) through the current period, Class C paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. sec. Annualized. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 12 Diversified Equity Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS C PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,070.10 $ 1,015.17 Expenses Paid During Period* $ 10.38 $ 10.11
* Expenses are equal to the Fund's annualized expense ratio of 1.99% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS E PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,074.10 $ 1,018.95 Expenses Paid During Period* $ 6.48 $ 6.31
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,075.20 $ 1,020.21 Expenses Paid During Period* $ 5.18 $ 5.04
* Expenses are equal to the Fund's annualized expense ratio of 0.99% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Diversified Equity Fund 13 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- COMMON STOCKS - 92.8% Auto and Transportation - 3.4% American Axle & Manufacturing Holdings, Inc. (N) 25,700 560 Autoliv, Inc. 17,700 760 BorgWarner, Inc. 16,100 934 Burlington Northern Santa Fe Corp. 230,606 14,311 CH Robinson Worldwide, Inc. (N) 82,840 2,921 Cooper Tire & Rubber Co. (N) 26,000 355 CSX Corp. 508,500 23,294 Dana Corp. (N) 67,800 509 FedEx Corp. 127,906 11,758 General Motors Corp. (N) 51,400 1,408 Honda Motor Co., Ltd. - ADR 169,075 4,702 Lear Corp. (N) 27,100 826 Magna International, Inc. Class A 5,600 391 Navistar International Corp. (AE) 190,600 5,245 Norfolk Southern Corp. 287,600 11,562 Southwest Airlines Co. 102,200 1,636 Swift Transportation Co., Inc. (AE) 59,050 1,078 Union Pacific Corp. 28,962 2,004 United Parcel Service, Inc. Class B 93,500 6,820 Visteon Corp. 316,450 2,636 ------------ 93,710 ------------ Consumer Discretionary - 14.6% Accenture, Ltd. Class A 309,220 8,136 AnnTaylor Stores Corp. (AE)(N) 142,500 3,458 Apollo Group, Inc. Class A (AE) 62,300 3,926 aQuantive, Inc. (AE)(N) 59,900 1,297 Bed Bath & Beyond, Inc. (AE) 132,400 5,365 Best Buy Co., Inc. 137,070 6,067 Carnival Corp. 254,450 12,639 Cendant Corp. 544,650 9,488 Chico's FAS, Inc. (AE) 72,670 2,873 Circuit City Stores, Inc. 34,950 622 Coach, Inc. (AE) 101,070 3,252 Convergys Corp. (AE) 19,400 315 Costco Wholesale Corp. 58,800 2,844 Eastman Kodak Co. (N) 45,900 1,005 eBay, Inc. (AE) 369,500 14,632 Electronic Arts, Inc. (AE) 154,910 8,811 Estee Lauder Cos., Inc. (The) Class A 116,700 3,871 Fisher Scientific International, Inc. (AE) 70,000 3,955 Foot Locker, Inc. 42,000 816 Four Seasons Hotels, Inc. (N) 55,788 2,992 GameStop Corp. Class A (AE) 6,550 232 Gannett Co., Inc. 8,700 545 Gap, Inc. (The) 278,050 4,805 Google, Inc. Class A (AE) 110,537 41,135 GTECH Holdings Corp. 28,300 901 Harman International Industries, Inc. 4,168 416
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Harrah's Entertainment, Inc. 81,000 4,899 Hewitt Associates, Inc. Class A (AE)(N) 194,300 5,186 Hilton Hotels Corp. 48,050 935 Home Depot, Inc. 209,183 8,585 Interpublic Group of Cos., Inc. (AE) 67,000 692 JC Penney Co., Inc. 226,200 11,581 Jones Apparel Group, Inc. 35,100 958 Kimberly-Clark Corp. 104,930 5,964 Kohl's Corp. (AE) 374,000 18,001 Liberty Global, Inc. Series A (AE) 109,747 2,718 Liberty Global, Inc. Series C (AE) 116,547 2,764 Liberty Media Corp. Series A (AE) 674,250 5,374 Limited Brands, Inc. 45,400 908 Liz Claiborne, Inc. 5,500 194 Lowe's Cos., Inc. 226,305 13,753 Mattel, Inc. 26,000 384 McDonald's Corp. 974,200 30,785 MGM Mirage (AE)(N) 210,337 7,860 Newell Rubbermaid, Inc. 114,350 2,629 Nike, Inc. Class B 65,800 5,530 Nordstrom, Inc. 113,140 3,920 Office Depot, Inc. (AE) 133,600 3,678 Omnicom Group 73,200 6,073 Royal Caribbean Cruises, Ltd. (N) 145,100 6,013 RR Donnelley & Sons Co. (N) 238,650 8,358 Scientific Games Corp. Class A (AE)(N) 84,490 2,531 Sears Holdings Corp. (AE)(N) 51,200 6,157 Sirius Satellite Radio, Inc. (AE)(N) 476,900 2,976 Starbucks Corp. (AE) 242,784 6,866 Starwood Hotels & Resorts Worldwide, Inc. (o) 162,850 9,515 Target Corp. 217,304 12,098 Tech Data Corp. (AE)(N) 16,800 582 Tiffany & Co. 51,000 2,009 Time Warner, Inc. 653,150 11,646 VF Corp. 17,200 899 Viacom, Inc. Class B 242,000 7,495 Wal-Mart Stores, Inc. 301,600 14,269 Walt Disney Co. 41,540 1,012 Wynn Resorts, Ltd. (AE)(N) 54,973 2,566 XM Satellite Radio Holdings, Inc. Class A (AE)(N) 40,500 1,168 Yahoo!, Inc. (AE) 285,510 10,555 Yum! Brands, Inc. 111,226 5,658 ------------ 400,142 ------------
14 Diversified Equity Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Consumer Staples - 7.7% Altria Group, Inc. 649,260 48,727 Cadbury Schweppes PLC - ADR 134,600 5,342 Coca-Cola Co. (The) 207,220 8,865 Colgate-Palmolive Co. 167,800 8,887 CVS Corp. 439,511 10,728 Dean Foods Co. (AE) 39,150 1,415 Diageo PLC - ADR (N) 55,360 3,290 Kellogg Co. 179,830 7,943 Kroger Co. (The) (AE) 83,600 1,664 Molson Coors Brewing Co. Class B 14,700 907 PepsiCo, Inc. 639,000 37,752 Procter & Gamble Co. 1,028,428 57,582 Reynolds American, Inc. (N) 18,200 1,547 Safeway, Inc. 24,600 572 Sara Lee Corp. 52,550 938 Unilever NV 6,300 443 UST, Inc. 24,700 1,022 Walgreen Co. 108,564 4,932 Whole Foods Market, Inc. 37,630 5,424 WM Wrigley Jr Co. 36,960 2,569 ------------ 210,549 ------------ Financial Services - 17.6% ACE, Ltd. 8,000 417 Allstate Corp. (The) 161,770 8,540 American Express Co. 370,920 18,461 American International Group, Inc. 277,185 17,962 Annaly Mortgage Management, Inc. (o) 98,000 1,125 AON Corp. (N) 383,100 12,968 Astoria Financial Corp. 28,350 792 Automatic Data Processing, Inc. 59,600 2,781 Bank of America Corp. 1,183,530 51,768 Bank of New York Co., Inc. (The) 431,800 13,511 BB&T Corp. 18,500 783 Capital One Financial Corp. 36,400 2,779 Chicago Mercantile Exchange (N) 27,030 9,870 Chubb Corp. 83,200 7,735 Citigroup, Inc. 926,343 42,408 Comerica, Inc. 23,100 1,335 Commerce Bancorp, Inc. (N) 64,000 1,950 Countrywide Financial Corp. 207,834 6,603 Deluxe Corp. (N) 22,000 733 Equity Residential (o) 13,300 522 Fannie Mae (N) 386,280 18,356 Franklin Resources, Inc. 24,800 2,191 Freddie Mac 56,250 3,451 Genworth Financial, Inc. Class A 164,450 5,211 Global Payments, Inc. (N) 65,200 2,794 Goldman Sachs Group, Inc. 228,620 28,891 Hartford Financial Services Group, Inc. 248,720 19,835 Host Marriott Corp. (o) 42,950 721
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Hudson City Bancorp, Inc. 76,050 900 Huntington Bancshares, Inc. 44,600 1,037 Investors Financial Services Corp. (N) 37,200 1,420 iShares Russell 1000 Value Index Fund 32,950 2,202 JPMorgan Chase & Co. 1,077,573 39,461 KeyCorp 48,100 1,551 Lehman Brothers Holdings, Inc. 134,077 16,045 Lincoln National Corp. 209,680 10,612 Loews Corp. 32,400 3,012 MBIA, Inc. 9,800 571 MBNA Corp. 32,100 821 Merrill Lynch & Co., Inc. 75,500 4,888 Metlife, Inc. 260,080 12,850 MGIC Investment Corp. 14,400 853 Morgan Stanley 132,640 7,217 National City Corp. 59,740 1,925 North Fork Bancorporation, Inc. 231,550 5,867 PartnerRe, Ltd. 8,300 529 Paychex, Inc. 159,700 6,190 PMI Group, Inc. (The) 11,450 457 PNC Financial Services Group, Inc. 128,870 7,824 Progressive Corp. (The) 26,135 3,027 Prudential Financial, Inc. 25,300 1,842 RenaissanceRe Holdings, Ltd. 51,275 1,941 SLM Corp. 155,498 8,635 Sovereign Bancorp, Inc. 21,650 467 St. Paul Travelers Cos., Inc. (The) 402,270 18,114 SunTrust Banks, Inc. 126,610 9,177 T Rowe Price Group, Inc. 55,530 3,638 Trizec Properties, Inc. (o) 135,050 3,005 UBS AG 51,839 4,441 UCBH Holdings, Inc. (N) 54,694 952 UnumProvident Corp. (N) 69,200 1,404 US Bancorp 12,756 377 Wachovia Corp. 81,400 4,112 Waddell & Reed Financial, Inc. Class A (N) 23,450 450 Washington Mutual, Inc. 95,080 3,765 Wells Fargo & Co. 74,950 4,512 XL Capital, Ltd. Class A 8,300 532 ------------ 481,116 ------------ Health Care - 14.1% Abbott Laboratories 515,730 22,202 AmerisourceBergen Corp. 59,150 4,511 Amgen, Inc. (AE) 520,666 39,446 Amylin Pharmaceuticals, Inc. (AE)(N) 44,244 1,487
Diversified Equity Fund 15 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Cardinal Health, Inc. 88,200 5,513 Caremark Rx, Inc. (AE) 261,040 13,678 DaVita, Inc. (AE) 46,600 2,292 Eli Lilly & Co. 391,400 19,488 Genentech, Inc. (AE) 509,641 46,173 Genzyme Corp. (AE) 33,483 2,421 Gilead Sciences, Inc. (AE) 139,310 6,582 HCA, Inc. 13,300 641 Human Genome Sciences, Inc. (AE)(N) 470,900 3,932 Johnson & Johnson 864,948 54,163 Kinetic Concepts, Inc. (AE) 44,800 1,608 McKesson Corp. 68,300 3,103 Medco Health Solutions, Inc. (AE) 21,300 1,203 Medimmune, Inc. (AE) 50,600 1,770 Medtronic, Inc. 504,673 28,595 Merck & Co., Inc. 305,360 8,617 Novartis AG - ADR (N) 164,700 8,864 Omnicare, Inc. (N) 42,000 2,272 Panacos Pharmaceuticals, Inc. (AE)(N) 125,000 988 Pfizer, Inc. 520,600 11,318 Protein Design Labs, Inc. (AE)(N) 118,500 3,320 Quest Diagnostics, Inc. 64,682 3,021 Sanofi-Aventis - ADR 210,358 8,440 Sepracor, Inc. (AE)(N) 46,020 2,589 St. Jude Medical, Inc. (AE) 179,570 8,632 Stryker Corp. 207,400 8,518 Triad Hospitals, Inc. (AE) 88,950 3,659 UnitedHealth Group, Inc. 550,341 31,859 Valeant Pharmaceuticals International (N) 54,700 939 WellPoint, Inc. (AE) 115,300 8,611 Wyeth 196,010 8,734 Zimmer Holdings, Inc. (AE) 106,159 6,770 ------------ 385,959 ------------ Integrated Oils - 5.2% Amerada Hess Corp. 43,020 5,382 BP PLC - ADR 86,120 5,718 Chevron Corp. 240,577 13,730 ConocoPhillips 521,832 34,118 Exxon Mobil Corp. 586,230 32,911 Marathon Oil Corp. 262,919 15,817 Occidental Petroleum Corp. 294,900 23,262 Suncor Energy, Inc. 108,600 5,824 Total SA - ADR (N) 45,090 5,682 ------------ 142,444 ------------ Materials and Processing - 2.8% Air Products & Chemicals, Inc. 85,960 4,920 Archer-Daniels-Midland Co. 128,335 3,128 Ashland, Inc. 11,200 599 Bayer AG - ADR 54,670 1,902 Bemis Co. 11,000 291
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Bowater, Inc. 3,850 102 Bunge, Ltd. (N) 12,800 665 Cemex SA de CV - ADR 57,010 2,968 Ceradyne, Inc. (AE)(N) 32,500 1,274 Cia Vale do Rio Doce - ADR 56,700 2,343 Corn Products International, Inc. 196,850 4,687 Cytec Industries, Inc. 1,650 68 Dow Chemical Co. (The) 137,390 6,301 EI Du Pont de Nemours & Co. 17,985 750 Hercules, Inc. (AE) 26,800 299 Hughes Supply, Inc. 77,800 2,602 International Paper Co. (N) 263,730 7,696 Lubrizol Corp. 22,100 919 Lyondell Chemical Co. 38,700 1,037 Martin Marietta Materials, Inc. 5,300 418 Masco Corp. 141,820 4,042 Monsanto Co. 30,900 1,947 Mosaic Co. (The) (AE) 349,450 4,613 Nucor Corp. 44,190 2,645 Pactiv Corp. (AE) 78,200 1,541 PPG Industries, Inc. (N) 96,740 5,801 Praxair, Inc. 33,580 1,659 Smurfit-Stone Container Corp. (AE) 87,200 921 Sonoco Products Co. (N) 25,900 733 St. Joe Co. (The) 42,376 2,795 Syngenta AG - ADR 248,440 5,339 United States Steel Corp. 24,500 895 ------------ 75,900 ------------ Miscellaneous - 3.2% 3M Co. 75,600 5,744 ABB, Ltd. - ADR (AE) 104,450 814 Eaton Corp. 19,700 1,159 General Electric Co. 1,730,301 58,674 Honeywell International, Inc. 164,900 5,640 ITT Industries, Inc. 25,840 2,625 SPX Corp. (N) 15,500 667 Textron, Inc. 62,200 4,481 Tyco International, Ltd. 264,650 6,984 ------------ 86,788 ------------ Other Energy - 3.2% Anadarko Petroleum Corp. 4,200 381 Apache Corp. 87,400 5,579 Baker Hughes, Inc. 78,600 4,320 Burlington Resources, Inc. 6,900 498 Devon Energy Corp. 81,840 4,941
16 Diversified Equity Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Diamond Offshore Drilling, Inc. (N) 16,850 951 El Paso Corp. 107,200 1,271 ENSCO International, Inc. 24,200 1,103 EOG Resources, Inc. 40,800 2,765 GlobalSantaFe Corp. 15,500 691 Halliburton Co. 476,698 28,173 National-Oilwell Varco, Inc. (AE) 40,990 2,561 Newfield Exploration Co. (AE)(N) 79,100 3,586 Noble Corp. 10,300 663 NRG Energy, Inc. (AE) 35,650 1,533 Peabody Energy Corp. 45,330 3,543 Pride International, Inc. (AE) 16,200 455 Reliant Energy, Inc. (AE) 736,500 9,354 Schlumberger, Ltd. 157,800 14,323 Williams Cos., Inc. 126,350 2,818 ------------ 89,509 ------------ Producer Durables - 5.2% Agilent Technologies, Inc. (AE) 94,800 3,035 Applied Materials, Inc. 578,340 9,473 Boeing Co. 342,300 22,126 Caterpillar, Inc. 304,543 16,016 Cooper Industries, Ltd. Class A 76,900 5,452 Crown Castle International Corp. (AE) 34,300 841 Deere & Co. 178,500 10,831 Goodrich Corp. 65,420 2,360 Herman Miller, Inc. 57,100 1,565 Hubbell, Inc. Class B 11,000 530 Illinois Tool Works, Inc. (N) 116,130 9,843 Ingersoll-Rand Co. Class A 16,000 605 Joy Global, Inc. 68,350 3,135 KB Home (N) 42,758 2,794 Lennar Corp. Class A (N) 72,069 4,006 Lockheed Martin Corp. 225,520 13,658 MDC Holdings, Inc. (N) 35,373 2,427 Northrop Grumman Corp. 189,940 10,190 Pitney Bowes, Inc. 12,000 505 Pulte Homes, Inc. 8,400 317 Teradyne, Inc. (AE)(N) 268,630 3,637 Thermo Electron Corp. (AE) 189,900 5,733 Toll Brothers, Inc. (AE)(N) 35,148 1,297 United Technologies Corp. 173,600 8,902 WW Grainger, Inc. 47,550 3,185 ------------ 142,463 ------------ Technology - 11.6% ADC Telecommunications, Inc. (AE)(N) 44,457 776 Advanced Micro Devices, Inc. (AE)(N) 113,380 2,633 Agere Systems, Inc. (AE) 39,200 408 Apple Computer, Inc. (AE) 195,002 11,230 Arrow Electronics, Inc. (AE) 12,500 369 ATI Technologies, Inc. (AE)(N) 127,600 1,844 AU Optronics Corp. - ADR 296,933 3,786
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Avnet, Inc. (AE) 192,800 4,444 BearingPoint, Inc. (AE) 416,150 2,921 Broadcom Corp. Class A (AE) 134,910 5,728 Celestica, Inc. (AE) 145,850 1,394 Cisco Systems, Inc. (AE) 212,000 3,699 Computer Associates International, Inc. 622 17 Comverse Technology, Inc. (AE) 96,500 2,422 Corning, Inc. (AE) 227,380 4,568 Electronic Data Systems Corp. 40,500 944 EMC Corp. (AE) 330,610 4,615 Flextronics International, Ltd. (AE) 45,600 424 General Dynamics Corp. 45,421 5,283 Hewlett-Packard Co. 701,130 19,660 Ingram Micro, Inc. Class A (AE) 16,200 293 Intel Corp. 22,300 524 International Business Machines Corp. 264,700 21,674 International Rectifier Corp. (AE) 56,450 1,670 JDS Uniphase Corp. (AE) 928,430 1,950 Juniper Networks, Inc. (AE) 756,300 17,645 L-3 Communications Holdings, Inc. 31,000 2,412 Lucent Technologies, Inc. (AE)(N) 1,055,760 3,009 M-Systems Flash Disk Pioneers Ltd. (AE)(N) 42,900 1,360 Marvell Technology Group, Ltd. (AE) 95,110 4,414 Maxim Integrated Products, Inc. (N) 409,600 14,205 Microsoft Corp. 2,135,538 54,883 Motorola, Inc. 1,050,118 23,271 National Semiconductor Corp. 192,600 4,359 Network Appliance, Inc. (AE) 84,500 2,312 Nvidia Corp. (AE) 99,200 3,328 Oracle Corp. (AE) 1,082,160 13,722 Palm, Inc. (AE)(N) 48,400 1,243 Qualcomm, Inc. 815,854 32,438 Rockwell Automation, Inc. 105,500 5,607 SanDisk Corp. (AE) 131,010 7,715 Sanmina-SCI Corp. (AE) 784,650 2,864 Seagate Technology, Inc. (AE) 9,200 -- Silicon Image, Inc. (AE)(N) 182,900 1,679 Solectron Corp. (AE) 119,500 422 Sony Corp. - ADR 55,800 1,830 Sun Microsystems, Inc. (AE) 628,000 2,512 Tellabs, Inc. (AE) 49,500 473 Texas Instruments, Inc. 390,780 11,157 Unisys Corp. (AE) 40,700 208 Vishay Intertechnology, Inc. (AE) 102,600 1,164 ------------ 317,508 ------------
Diversified Equity Fund 17 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Utilities - 4.2% Alltel Corp. 4,800 297 America Movil SA de CV Series L 82,230 2,159 American Electric Power Co., Inc. 12,500 475 BellSouth Corp. 483,450 12,579 Comcast Corp. Class A (AE) 286,573 7,975 Constellation Energy Group, Inc. 18,800 1,030 Dominion Resources, Inc. 176,530 13,430 DTE Energy Co. 14,700 635 Entergy Corp. 126,900 8,974 Exelon Corp. 24,000 1,249 Kinder Morgan, Inc. 27,810 2,528 Northeast Utilities 44,100 802 Pepco Holdings, Inc. 9,800 211 Progress Energy, Inc. 5,500 -- Progress Energy, Inc. (N) 22,000 959 Puget Energy, Inc. (N) 7,000 150 SBC Communications, Inc. 97,047 2,315 Sprint Nextel Corp. 1,628,760 37,966 Telephone & Data Systems, Inc. 16,500 624 Telephone & Data Systems, Inc. Special Shares 53,550 1,936 TXU Corp. 81,950 8,256 Verizon Communications, Inc. 316,110 9,961 Wisconsin Energy Corp. 10,200 386 ------------ 114,897 ------------ TOTAL COMMON STOCKS (cost $2,252,931) 2,540,985 ------------ LONG-TERM INVESTMENTS - 0.0% Corporate Bonds and Notes - 0.0% AMR Corp. 4.250% due 09/23/23 823 744 ------------ TOTAL LONG-TERM INVESTMENTS (cost $695) 744 ------------
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 7.1% Frank Russell Investment Company Money Market Fund 182,418,926 182,419 United States Treasury Bills (c)(z)(sec.) 3.373% due 12/08/05 11,000 10,962 3.398% due 12/08/05 1,000 997 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $194,378) 194,378 ------------ OTHER SECURITIES - 4.5% Frank Russell Investment Company Money Market Fund (X) 40,111,676 40,112 State Street Securities Lending Quality Trust (X) 82,185,034 82,185 ------------ TOTAL OTHER SECURITIES (cost $122,297) 122,297 ------------ TOTAL INVESTMENTS - 104.4% (identified cost $2,570,301) 2,858,404 OTHER ASSETS AND LIABILITIES, NET - (4.4%) (121,385) ------------ NET ASSETS - 100.0% 2,737,019 ============
See accompanying notes which are an integral part of the financial statements. 18 Diversified Equity Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
UNREALIZED NOTIONAL APPRECIATION FUTURES CONTRACTS AMOUNT (DEPRECIATION) (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Long Positions Russell 1000 Index expiration date 12/05 (43) 14,144 (338) Russell 1000 Mini Index (CME) expiration date 12/05 (110) 7,235 29 S&P 500 E-Mini Index (CME) expiration date 12/05 (868) 52,505 (1,313) S&P 500 Index (CME) expiration date 12/05 (256) 77,427 (578) S&P Midcap 400 Index (CME) expiration date 12/05 (111) 39,017 (1,039) --------------- Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (3,239) ===============
- -------------------------------------------------------------------------------- PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- Auto and Transportation 3.4 Consumer Discretionary 14.6 Consumer Staples 7.7 Financial Services 17.6 Health Care 14.1 Integrated Oils 5.2 Materials and Processing 2.8 Miscellaneous 3.2 Other Energy 3.2 Producer Durables 5.2 Technology 11.6 Utilities 4.2 Long-Term Investments --* Short-Term Investments 7.1 Other Securities 4.5 --------------- Total Investments 104.4 Other Assets and Liabilities, Net (4.4) --------------- 100.0 =============== Futures Contracts (0.1)
* Less than .05% of net assets. See accompanying notes which are an integral part of the financial statements. Diversified Equity Fund 19 FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- (GRAPHIC)
SPECIAL GROWTH - CLASS S RUSSELL 2500(TM) ** ------------------------ ------------------- * 10000.00 10000.00 1996 12092.00 11879.00 1997 15891.00 15338.00 1998 14488.00 14157.00 1999 17121.00 16705.00 2000 21640.00 20593.00 2001 18384.00 18088.00 2002 16627.00 16435.00 2003 23545.00 23287.00 2004 25579.00 26161.00 2005 28635.00 30059.00
Special Growth Fund - Class S - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 11.95% 5 Years 5.76%S 10 Years 11.09%S
Special Growth Fund - Class E ++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 11.65% 5 Years 5.49%S 10 Years 10.78%S
Special Growth Fund - Class C ++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 10.82% 5 Years 4.71%S 10 Years 10.22%S
Russell 2500(TM) Index** - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 14.90% 5 Years 7.86%S 10 Years 11.63%S
20 Special Growth Fund FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide long term capital growth. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005? For the fiscal year ended October 31, 2005, the Special Growth Fund Class S, Class E and Class C Shares gained 11.95%, 11.65% and 10.82%, respectively. This compared to the Russell 2500(TM) Index, which gained 14.90% during the same period. The Fund's performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind. For the year ending October 31, 2005, the Lipper(R) Mid-Cap Core Funds Average returned 14.82%, while the Lipper(R) Small-Cap Core Funds Average rose 13.24%. These results serve as peer comparisons and are expressed net of operating expenses. HOW DID THE MARKET CONDITIONS DESCRIBED IN THE MARKET SUMMARY REPORT AFFECT THE FUND'S PERFORMANCE? For the most part, market conditions did not materially affect the Fund's performance over the fiscal year. The Fund's underperformance was driven by poor stock selection from most of the Fund's money managers; in particular, Gould Investment Partners, LLC underperformed by a substantial margin over the 12 months. WHAT WERE THE PRIMARY CONTRIBUTORS AND DETRACTORS TO THE FUND'S PERFORMANCE DURING THE LAST 12 MONTHS? Poor stock selection in four sectors--technology, consumer discretionary, producer durables and healthcare--was the predominant driver of the Fund's underperformance results. In terms of money managers, Gould significantly underperformed the benchmark and was the largest detractor to the Fund's performance in the period. HOW DID THE INVESTMENT STRATEGIES AND TECHNIQUES EMPLOYED BY THE FUND AND ITS MONEY MANAGERS AFFECT ITS PERFORMANCE? The Fund has nine money managers: four growth, two market-oriented and three value. Three of the four growth money managers underperformed the benchmark. As noted, Gould underperformed by a substantial margin while CapitalWorks Investment Partners, LLC and Roxbury Capital Management, Inc., had relatively modest shortfalls. Gould's performance was disappointing, but not beyond what might be reasonably expected given the aggressive nature of this money manager's investment approach. In contrast, TimesSquare Capital Management, Inc., the money manager with the largest allocation within the growth segment, solidly outperformed the benchmark. Moreover, the continued preference for value stocks over growth for much of the period led to a difficult environment for an aggressive growth manager. In the value segment, all three money managers underperformed, with David J. Greene & Company, LLC, and Delphi Management, Inc., the largest detractors from performance: Jacobs Levy Equity Management, Inc., with the largest allocation in the value segment, had a relatively modest shortfall from the benchmark. David J. Greene's substantial overweight in technology detracted from performance. Delphi underperformed due to weak stock selection in the financial services and consumer discretionary sectors. In particular, Delphi was negatively impacted by holding some Bermuda-based reinsurers in the aftermath of Hurricane Katrina. In the market-oriented segment, Goldman Sachs Asset Management, L.P., underperformed modestly, while Nicholas-Applegate Capital Management, LLC, strongly outperformed the benchmark. Goldman Sachs' stock selection was weak in the technology, other energy and autos and transportation sectors. In contrast, Nicholas-Applegate, also a quantitative manager, outperformed due in part to its energy overweight. Strong stock selection in eight of the 12 economic sectors also boosted its results. DESCRIBE ANY CHANGES TO THE FUND'S STRUCTURE OR THE MONEY MANAGER LINE-UP. FRIMCo introduced a modest growth tilt in December 2004 by reallocating approximately 4% of the Fund's assets from value to growth managers. The net impact of this decision has been negligible to date, as the combined growth manager results have been similar to the combined value manager returns in the period. Nicholas-Applegate was hired in December 2004 and funded through reducing the Fund's allocation to Goldman Sachs. This change added value, as Nicholas-Applegate substantially outperformed Goldman Sachs in the period from December 2004 through the fiscal year-end. Roxbury Capital Management, Inc. was removed from the Fund in May 2005 and replaced by Tygh Capital Management, Inc. Special Growth Fund 21 FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- Money Managers as of Styles October 31, 2005 CapitalWorks Investment Partners, LLC Growth David J. Greene & Company, LLC Value Delphi Management, Inc. Value Goldman Sachs Asset Management, L.P. Market-Oriented Gould Investment Partners, LLC Growth Jacobs Levy Equity Management, Inc. Value Nicholas-Applegate Capital Management, LLC Market-Oriented TimesSquare Capital Management, Inc. Growth Tygh Capital Management, Inc. Growth
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Frank Russell Investment Management Company (FRIMCo), or any other person in FRIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and FRIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Frank Russell Investment Company (FRIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any FRIC Fund. -------------------- * Special Growth Fund Class S assumes initial investment on November 1, 1995. ** Russell 2500(TM) Index is composed of the bottom 500 stocks in the Russell 1000(R) Index and all the stocks in the Russell 2000(R) Index. The Russell 2500(TM) Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex-dividend dates. ++ Special Growth Fund Class S performance has been linked with Class E to provide historical perspective. For the period November 4, 1996 (commencement of sale) to May 15, 1998, Class E paid shareholder service and Rule 12b-1 distribution fees. From May 16, 1998 through the current period, Class E paid only shareholder service fees. Total return would have been lower had these fees been in effect during prior reporting periods. ++++ Special Growth Fund Class S and Class E performance has been linked with Class C to provide historical perspective. From January 27, 1999 (commencement of sale) through the current period, Class C paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. sec. Annualized. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 22 Special Growth Fund FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS C PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,102.00 $ 1,013.66 Expenses Paid During Period* $ 12.13 $ 11.62
* Expenses are equal to the Fund's annualized expense ratio of 2.29% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS E PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,106.10 $ 1,017.39 Expenses Paid During Period* $ 8.23 $ 7.88
* Expenses are equal to the Fund's annualized expense ratio of 1.55% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,107.50 $ 1,018.70 Expenses Paid During Period* $ 6.85 $ 6.56
* Expenses are equal to the Fund's annualized expense ratio of 1.29% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Special Growth Fund 23 FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- COMMON STOCKS - 95.1% Auto and Transportation - 3.6% Airtran Holdings, Inc. (AE) 46,473 695 Alaska Air Group, Inc. (AE) 3,800 120 Alexander & Baldwin, Inc. 2,900 142 American Commercial Lines, Inc. (AE) 2,801 79 AMR Corp. (AE) 34,300 463 Arkansas Best Corp. (N) 28,500 1,105 ArvinMeritor, Inc. 101,700 1,630 Autoliv, Inc. 81,510 3,502 CNF, Inc. 10,700 602 DryShips, Inc. (N) 58,400 879 Expeditors International Washington, Inc. 14,663 889 Frontier Airlines, Inc. (AE)(N) 18,600 176 General Maritime Corp. (N) 28,200 1,050 Gol Linhas Aereas Inteligentes SA - ADR (N) 29,300 1,015 Grupo TMM SA Series A (AE) 75,900 285 IMPCO Technologies, Inc. (AE)(N) 21,700 113 Kansas City Southern (AE)(N) 35,000 775 Laidlaw International, Inc. 106,250 2,416 Landstar System, Inc. 21,979 847 Marten Transport, Ltd. (AE) 7,400 196 Mesa Air Group, Inc. (AE)(N) 53,000 598 Navistar International Corp. (AE) 31,200 859 Noble International, Ltd. (N) 2,000 47 Offshore Logistics, Inc. (AE) 29,500 1,003 OMI Corp. (N) 64,000 1,157 Pacer International, Inc. (N) 41,500 1,073 Polaris Industries, Inc. (N) 9,220 416 Republic Airways Holdings, Inc. (AE) 29,800 465 SCS Transportation, Inc. (AE) 8,600 172 Skywest, Inc. (N) 31,100 911 Stolt-Nielsen SA - ADR 10,400 373 Teekay Shipping Corp. (N) 26,300 1,037 Tenneco Automotive, Inc. (AE) 41,201 681 TRW Automotive Holdings Corp. (AE) 82,800 2,240 US Xpress Enterprises, Inc. Class A (AE)(N) 19,800 241 UTI Worldwide, Inc. (N) 32,987 2,822 Visteon Corp. (N) 93,800 781 Wabtec Corp. 48,208 1,311 World Air Holdings, Inc. (AE) 34,100 358 ------------ 33,524 ------------ Consumer Discretionary - 19.0% ABM Industries, Inc. 15,200 301 Activision, Inc. (AE) 172,267 2,717 Adesa, Inc. 60,800 1,301 Administaff, Inc. (N) 29,250 1,238 Advance Auto Parts, Inc. (AE) 49,500 1,856 Advisory Board Co. (The) (AE) 38,276 1,847
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- AFC Enterprises (N) 26,400 306 Alberto-Culver Co. 32,500 1,411 Alderwoods Group, Inc. (AE) 17,600 277 Alliance Gaming Corp. (AE)(N) 69,400 750 American Greetings Corp. Class A 55,970 1,413 AMN Healthcare Services, Inc. (AE)(N) 116,200 1,917 Arbitron, Inc. 32,680 1,223 Asbury Automotive Group, Inc. (AE)(N) 19,400 328 Banta Corp. 21,500 1,082 BJ's Restaurants, Inc. (AE)(N) 30,000 651 Borders Group, Inc. 15,200 298 Brightpoint, Inc. (AE)(N) 87,150 1,882 Brink's Co. (The) 35,500 1,394 Brown Shoe Co., Inc. 2,800 91 Burlington Coat Factory Warehouse Corp. 13,600 524 Catalina Marketing Corp. (N) 7,900 206 Cato Corp. (The) Class A 19,050 381 Central European Distribution Corp. (AE)(N) 67,900 2,703 Central Garden and Pet Co. (AE)(N) 30,500 1,308 Charlotte Russe Holding, Inc. (AE) 6,500 115 Charming Shoppes, Inc. (AE) 97,100 1,087 Cheesecake Factory, Inc. (The) (AE) 22,223 763 Chemed Corp. 53,628 2,578 Children's Place Retail Stores, Inc. (The) (AE)(N) 26,129 1,122 Choice Hotels International, Inc. 42,380 1,402 ChoicePoint, Inc. (AE) 34,733 1,468 Circuit City Stores, Inc. 193,742 3,447 Claire's Stores, Inc. 65,000 1,693 CNET Networks, Inc. (AE) 96,600 1,313 CNS, Inc. 54,300 1,416 Cogent, Inc. (AE)(N) 41,300 1,096 Coldwater Creek, Inc. (AE) 4,950 134 Convergys Corp. (AE) 72,400 1,176 Corinthian Colleges, Inc. (AE)(N) 21,900 272 Corporate Executive Board Co. 44,600 3,686 Cosi, Inc. (AE)(N) 113,900 997 CoStar Group, Inc. (AE)(N) 22,100 1,060 Courier Corp. (N) 2,000 65 Cross Country Healthcare, Inc. (AE)(N) 73,300 1,332 CSS Industries, Inc. (N) 400 14 Dillard's, Inc. Class A 54,350 1,126 Dolby Laboratories, Inc. Class A (AE) 47,000 757 Dollar Thrifty Automotive Group (AE)(N) 6,950 262 Domino's Pizza, Inc. (N) 52,900 1,265
24 Special Growth Fund FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- DreamWorks Animation SKG, Inc. Class A (AE) 32,780 840 Dress Barn, Inc. (AE)(N) 9,600 255 EarthLink, Inc. (AE)(N) 63,500 699 Eastern Co. (The) 40,025 861 Education Management Corp. (AE) 144,474 4,456 Emdeon Corp. (AE) 67,700 623 Entercom Communications Corp. (AE) 51,100 1,475 Ethan Allen Interiors, Inc. (N) 33,500 1,133 Ezcorp, Inc. Class A (AE) 16,000 235 Famous Dave's of America, Inc. (AE) 49,200 589 Federated Department Stores, Inc. 14,600 896 Forrester Research, Inc. (AE) 8,700 168 FTI (AE) 20,800 569 Furniture Brands International, Inc. (N) 66,700 1,211 Genesco, Inc. (AE)(N) 6,500 239 Getty Images, Inc. (AE)(N) 41,790 3,469 Gevity HR, Inc. (N) 45,400 1,169 Gildan Activewear, Inc. (AE) 26,000 907 Guess?, Inc. (AE)(N) 61,700 1,673 Gymboree Corp. (AE)(N) 107,200 1,897 Handleman Co. (N) 27,280 325 Hasbro, Inc. 84,800 1,598 Hearst-Argyle Television, Inc. (N) 99,440 2,383 Heidrick & Struggles International, Inc. (AE)(N) 20,700 668 Helen of Troy, Ltd. (AE)(N) 51,630 927 Hewitt Associates, Inc. Class A (AE)(N) 24,131 644 Hot Topic, Inc. (AE) 43,035 641 Hudson Highland Group, Inc. (AE)(N) 42,600 1,019 Insight Enterprises, Inc. (AE) 40,322 827 International Speedway Corp. Class A 11,200 579 ITT Educational Services, Inc. (AE) 7,500 415 Jack in the Box, Inc. (AE) 62,000 1,841 Jarden Corp. (AE)(N) 10,600 358 Jo-Ann Stores, Inc. (AE) 34,700 507 John Wiley & Sons, Inc. Class A 4,550 178 Jones Apparel Group, Inc. 29,700 810 Korn/Ferry International (AE) 18,446 318 La-Z-Boy, Inc. (N) 93,400 1,106 Labor Ready, Inc. (AE)(N) 32,550 760 Lamar Advertising Co. Class A (AE) 68,300 3,048 Leapfrog Enterprises, Inc. (AE)(N) 44,100 661 Lee Enterprises, Inc. 29,000 1,137 LIFE TIME Fitness, Inc. (AE)(N) 85,400 3,172 Lifeline Systems, Inc. (AE) 38,500 1,270 Lifetime Brands, Inc. (N) 4,400 103 Lightbridge, Inc. (AE) 66,100 535 Lin TV Corp. Class A (AE)(N) 58,310 748 Linens 'N Things, Inc. (AE)(N) 31,600 794 Lithia Motors, Inc. Class A (N) 21,670 590 Liz Claiborne, Inc. 52,900 1,862 Lone Star Steakhouse & Saloon, Inc. 5,100 132
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Luby's, Inc. (AE)(N) 19,200 242 MarineMax, Inc. (AE)(N) 17,700 437 Marvel Entertainment, Inc. (AE)(N) 48,100 847 MAXIMUS, Inc. (N) 11,200 406 McClatchy Co. Class A 17,875 1,120 Men's Wearhouse, Inc. (The) (AE) 62,500 1,544 Meredith Corp. 39,600 1,976 Mohawk Industries, Inc. (AE) 16,500 1,288 Monster Worldwide, Inc. (AE) 49,600 1,627 Movado Group, Inc. (N) 5,400 95 MPS Group, Inc. (AE) 168,469 2,097 Netease.com, Inc. - ADR (AE)(N) 9,700 740 Netratings, Inc. (AE)(N) 9,500 141 Oakley, Inc. (N) 44,900 665 Orient-Express Hotels, Ltd. Class A 66,512 1,876 Pacific Sunwear of California, Inc. (AE) 71,500 1,789 Pantry, Inc. (The) (AE) 3,250 126 Papa John's International, Inc. (AE)(N) 24,600 1,277 Payless Shoesource, Inc. (AE) 70,400 1,293 Pegasus Solutions, Inc. (AE) 52,700 447 PF Chang's China Bistro, Inc. (AE) 16,968 776 PHH Corp. (AE) 52,800 1,485 Phillips-Van Heusen Corp. 28,200 802 Pier 1 Imports, Inc. (N) 69,500 717 Pixar (AE) 13,332 676 Playtex Products, Inc. (AE) 61,300 821 Polo Ralph Lauren Corp. 38,700 1,904 Pre-Paid Legal Services, Inc. (N) 21,860 936 Providence Service Corp. (AE)(N) 61,700 1,905 Radio One, Inc. Class D (AE)(N) 42,000 496 RadioShack Corp. 32,500 718 Reebok International, Ltd. 23,000 1,312 Rent-Way, Inc. (AE)(N) 14,100 87 Resources Connection, Inc. (AE)(N) 83,645 2,388 Rocky Shoes & Boots, Inc. (AE)(N) 4,100 101 RR Donnelley & Sons Co. 32,091 1,124 Ryan's Restaurant Group, Inc. (AE)(N) 129,108 1,376 Saks, Inc. (AE) 28,300 514 Scholastic Corp. (AE) 14,400 469 Scientific Games Corp. Class A (AE) 59,200 1,774 SCP Pool Corp. 112,000 4,029 Select Comfort Corp. (AE) 33,000 723 Service Corp. International (N) 118,800 994 ServiceMaster Co. (The) 54,800 689 Shuffle Master, Inc. (AE)(N) 5,200 132 Sirva, Inc. (AE)(N) 11,900 84 Skechers USA, Inc. Class A (AE)(N) 11,600 147 Sonic Automotive, Inc. 38,200 845 Sourcecorp, Inc. (AE) 4,849 110
Special Growth Fund 25 FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Stage Stores, Inc. 53,821 1,492 Stanley Furniture Co., Inc. (N) 8,900 190 Stanley Works (The) 29,400 1,409 Steven Madden, Ltd. (AE) 41,600 1,067 Stewart Enterprises, Inc. Class A (AE)(N) 5,300 27 Strayer Education, Inc. 11,613 1,039 Stride Rite Corp. (The) 19,100 249 Tech Data Corp. (AE) 28,500 987 TeleTech Holdings, Inc. (AE)(N) 29,350 306 Tempur-Pedic International, Inc. (AE)(N) 28,000 310 Texas Roadhouse, Inc. Class A (AE)(N) 49,700 782 Trans World Entertainment, Corp. (AE) 16,600 106 True Religion Apparel, Inc. (AE) 41,200 515 Tupperware Corp. 19,500 447 United Auto Group, Inc. (N) 3,300 111 Urban Outfitters, Inc. (AE) 35,200 997 USANA Health Sciences, Inc. (AE)(N) 49,340 2,172 Valassis Communications, Inc. (AE) 15,300 478 Volcom, Inc. 13,700 419 Washington Post, Inc. (The) Class B 1,230 916 WD-40 Co. (N) 6,600 182 WebSideStory, Inc. (AE)(N) 67,700 1,177 WESCO International, Inc. (AE) 28,800 1,145 West Corp. (AE) 57,200 2,257 Wet Seal, Inc. (The) Class A (AE)(N) 59,600 308 Wilsons The Leather Experts, Inc. (AE)(N) 10,000 50 Wolverine World Wide, Inc. 30,700 643 ------------ 178,319 ------------ Consumer Staples - 1.1% Boston Beer Co., Inc. Class A (AE)(N) 5,800 148 Chiquita Brands International, Inc. 11,250 311 Coca-Cola Bottling Co. Consolidated 20,077 916 Constellation Brands, Inc. Class A (AE) 50,600 1,191 Flowers Foods, Inc. 7,100 208 Longs Drug Stores Corp. (N) 31,760 1,325 Molson Coors Brewing Co. Class B (N) 45,700 2,820 Pathmark Stores, Inc. (AE) 46,200 450 Pilgrim's Pride Corp. 24,000 756 Seaboard Corp. (N) 400 568 Spartan Stores, Inc. (AE)(N) 13,500 134 Tootsie Roll Industries, Inc. 8,003 242 Weis Markets, Inc. (N) 34,100 1,301 ------------ 10,370 ------------ Financial Services - 18.1% 21st Century Insurance Group 1,600 25 ACE Cash Express, Inc. (AE)(N) 9,700 199 Advent Software, Inc. (AE) 82,600 2,537 Affiliated Managers Group, Inc. (AE) 20,525 1,575
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Alfa Corp. (N) 6,200 104 Alliance Data Systems Corp. (AE) 147,645 5,250 Allmerica Financial Corp. 38,810 1,479 AMB Property Corp. (o) 35,000 1,546 American Home Mortgage Investment Corp. (o) 37,350 1,010 AmeriCredit Corp. (AE) 66,110 1,478 AmerUs Group Co. (N) 13,970 826 Annaly Mortgage Management, Inc. (o) 42,500 488 Anthracite Capital, Inc. (o)(N) 24,052 252 Apartment Investment & Management Co. Class A (o) 5,000 192 Apollo Investment Corp. 27,100 506 Arden Realty, Inc. (o) 23,200 1,047 Aspen Insurance Holdings, Ltd. 78,500 1,899 Associated Banc-Corp 42,531 1,327 Axis Capital Holdings, Ltd. 30,900 801 Bank of Hawaii Corp. 38,030 1,954 Bear Stearns Cos., Inc. (The) 8,600 910 Bimini Mortgage Management, Inc. Class A (o)(N) 5,800 57 BISYS Group, Inc. (The) (AE) 149,200 1,892 BOK Financial Corp. 6,379 281 Camden Property Trust (o) 35,100 1,978 CapitalSource, Inc. (AE)(N) 134,800 2,966 CarrAmerica Realty Corp. (o) 16,900 556 Cathay General Bancorp (N) 11,000 429 CB Richard Ellis Group, Inc. Class A (AE) 47,800 2,335 CBL & Associates Properties, Inc. (o) 40,330 1,506 Central Pacific Financial Corp. (N) 4,420 160 Checkfree Corp. (AE) 78,750 3,347 CIT Group, Inc. 20,000 915 City National Corp. 27,000 1,981 CNA Surety Corp. (AE)(N) 59,700 838 Colonial BancGroup, Inc. (The) 116,500 2,837 Commerce Group, Inc. 7,900 449 Commercial Net Lease Realty (o)(N) 50,760 984 Community Bank System, Inc. (N) 40,200 955 CompuCredit Corp. (AE)(N) 13,300 583 Conseco, Inc. (AE)(N) 33,000 670 Correctional Properties Trust (o) 3,100 87 Corus Bankshares, Inc. (N) 5,600 307 Cousins Properties, Inc. (o) 23,400 691 Crescent Real Estate Equities Co. (o)(N) 10,100 201 CVB Financial Corp. 10,400 205 Cybersource Corp. (AE)(N) 97,800 655 Downey Financial Corp. (N) 11,750 716
26 Special Growth Fund FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Duke Realty Corp. (o) 78,300 2,670 eFunds Corp. (AE) 23,039 475 Entertainment Properties Trust (o) 10,500 421 Equifax, Inc. 26,900 927 Equity One, Inc. (o) 17,300 406 Fair Isaac Corp. (N) 24,300 1,015 Federal Realty Investors Trust (o) 24,700 1,498 FelCor Lodging Trust, Inc. (AE)(o)(N) 23,400 349 Fidelity Bankshares, Inc. 8,000 226 Fidelity National Financial, Inc. 25,600 959 First American Corp. 47,200 2,068 First Financial Bankshares, Inc. (N) 2,600 94 First Niagara Financial Group, Inc. (N) 55,400 816 FirstFed Financial Corp. (AE)(N) 14,930 799 FPIC Insurance Group, Inc. (AE) 13,500 508 Fremont General Corp. (N) 42,060 912 Fulton Financial Corp. (N) 24,200 407 GATX Corp. (N) 67,100 2,508 GFI Group, Inc. (AE)(N) 34,900 1,569 Glacier Bancorp, Inc. (N) 3,900 115 Global Payments, Inc. 117,718 5,044 Greater Bay Bancorp 9,800 246 Hanmi Financial Corp. (N) 26,500 485 Harleysville Group, Inc. (N) 1,400 34 HCC Insurance Holdings, Inc. 37,100 1,113 Health Care Property Investors, Inc. (o) 38,740 986 Health Care REIT, Inc. (o)(N) 31,500 1,110 HealthExtras, Inc. (AE)(N) 108,700 2,288 Heritage Property Investment Trust (o)(N) 16,800 548 Highland Hospitality Corp. (o) 10,800 113 Highwoods Properties, Inc. (o) 34,700 979 Horace Mann Educators Corp. 10,000 194 Hospitality Properties Trust (o) 19,900 790 HRPT Properties Trust (o) 215,600 2,352 Infinity Property & Casualty Corp. 18,200 677 Innkeepers USA Trust (o) 30,700 479 Investment Technology Group, Inc. (AE) 101,100 3,287 Investors Financial Services Corp. (N) 61,100 2,333 IPC Holdings, Ltd. (N) 25,200 663 iStar Financial, Inc. (o) 23,400 863 Jack Henry & Associates, Inc. 89,800 1,615 Jefferies Group, Inc. 34,300 1,456 John H Harland Co. (N) 11,900 495 Jones Lang LaSalle, Inc. 23,300 1,172 Knight Capital Group, Inc. Class A (AE)(N) 146,500 1,402 La Quinta Corp. (AE)(o) 184,103 1,537 LandAmerica Financial Group, Inc. (N) 48,565 3,067 Lexington Corporate Properties Trust (o)(N) 30,100 656
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- LTC Properties, Inc. (o) 7,300 150 Macerich Co. (The) (o) 14,200 913 Mack-Cali Realty Corp. (o) 36,800 1,569 Markel Corp. (AE) 7,000 2,226 MeriStar Hospitality Corp. (AE)(o)(N) 69,900 606 Mid-America Apartment Communities, Inc. (o) 9,300 434 MoneyGram International, Inc. 36,700 892 Montpelier Re Holdings, Ltd. (N) 34,500 693 Nasdaq Stock Market, Inc. (AE) 23,300 720 National Penn Bancshares, Inc. (N) 6,006 118 Nationwide Financial Services, Inc. Class A 27,300 1,103 New Century Financial Corp. (o)(N) 18,000 556 North Fork Bancorporation, Inc. 37,000 938 OceanFirst Financial Corp. (N) 4,200 95 Ohio Casualty Corp. 21,400 584 Old Republic International Corp. 48,200 1,249 Omega Healthcare Investors, Inc. (o)(N) 27,000 332 Pan Pacific Retail Properties, Inc. (o) 1,500 95 PFF Bancorp, Inc. (N) 10,790 324 Phoenix Cos., Inc. (The) 58,900 763 Piper Jaffray Cos., Inc. (AE) 15,800 543 Portfolio Recovery Associates, Inc. (AE)(N) 48,530 1,888 Post Properties, Inc. (o) 15,300 624 Primus Guaranty, Ltd. (AE)(N) 62,000 546 ProAssurance Corp. (AE) 26,741 1,251 Protective Life Corp. 33,700 1,477 Provident Bankshares Corp. (N) 7,276 254 Provident Financial Holdings (AE) 33,531 887 Provident Financial Services, Inc. (N) 24,600 433 PS Business Parks, Inc. (o) 6,900 321 R&G Financial Corp. Class B (N) 35,200 345 Radian Group, Inc. 22,700 1,183 Raymond James Financial, Inc. 34,200 1,164 Redwood Trust, Inc. (o)(N) 19,000 884 RenaissanceRe Holdings, Ltd. (N) 22,800 863 Republic Bancorp, Inc. Class A (N) 49,346 1,012 Rewards Network, Inc. (AE)(N) 5,900 32 RLI Corp. 9,900 532 Ryder System, Inc. 77,900 3,090 Safety Insurance Group, Inc. (N) 8,900 335 Senior Housing Properties Trust (o) 57,670 1,021 Southwest Bancorp, Inc. 45,529 1,066 Sovereign Bancorp, Inc. (N) 43,000 927 Sovran Self Storage, Inc. (o)(N) 25,000 1,163
Special Growth Fund 27 FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Stancorp Financial Group, Inc. 31,610 2,911 State Auto Financial Corp. 8,000 263 Sterling Bancshares, Inc. 16,900 250 Sterling Financial Corp. (N) 1,400 29 Stewart Information Services Corp. (N) 32,450 1,653 Strategic Hotel Capital, Inc. (o) 17,000 289 Sunstone Hotel Investors, Inc. (o) 72,000 1,613 SVB Financial Group (AE) 26,100 1,297 TCF Financial Corp. (N) 22,100 599 TD Banknorth, Inc. (N) 33,248 957 Thornburg Mortgage, Inc. (o)(N) 36,000 913 TierOne Corp. 16,600 469 Trizec Properties, Inc. (o) 60,300 1,342 UCBH Holdings, Inc. (N) 40,700 708 UICI 16,700 603 UMB Financial Corp. (N) 1,450 97 United Bankshares, Inc. (N) 9,900 361 United Fire & Casualty Co. 4,100 185 United Rentals, Inc. (AE)(N) 49,400 967 Universal Health Realty Income Trust (o)(N) 4,200 137 W Holding Co., Inc. (N) 76,860 593 Webster Financial Corp. 21,300 983 Whitney Holding Corp. 17,000 459 WR Berkley Corp. 69,935 3,056 Wright Express Corp. (AE)(N) 61,800 1,334 Zenith National Insurance Corp. (N) 44,220 1,991 Zions Bancorporation 13,000 955 ------------ 169,927 ------------ Health Care - 12.6% Accelrys, Inc. (AE)(N) 84,878 555 Albany Molecular Research, Inc. (AE) 43,100 578 Alexion Pharmaceuticals, Inc. (AE)(N) 17,000 466 Alkermes, Inc. (AE)(N) 70,900 1,155 Allied Healthcare International, Inc. (AE) 65,700 400 Allion Healthcare, Inc. (AE)(N) 30,500 487 Allscripts Healthcare Solutions, Inc. (AE) 47,475 760 Alpharma, Inc. Class A 26,900 670 American Dental Partners, Inc. (AE) 20,400 432 Anadys Pharmaceuticals, Inc. (AE) 60,800 602 Applera Corp. - Celera Genomics Group (AE) 149,100 1,771 Arena Pharmaceuticals, Inc. (AE)(N) 45,000 468 Arqule, Inc. (AE)(N) 10,300 74 Arthrocare Corp. (AE)(N) 63,912 2,347 Barr Pharmaceuticals, Inc. (AE) 17,900 1,028 Bausch & Lomb, Inc. 21,100 1,565 Bio-Rad Laboratories, Inc. Class A (AE) 36,800 2,153 BioMarin Pharmaceuticals, Inc. (AE)(N) 20,300 170 Cephalon, Inc. (AE)(N) 28,800 1,313
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Community Health Systems, Inc. (AE) 96,996 3,599 Cooper Cos., Inc. 11,708 806 Critical Therapeutics, Inc. (AE)(N) 30,300 208 Cytyc Corp. (AE) 123,500 3,131 Dade Behring Holdings, Inc. 30,700 1,105 DaVita, Inc. (AE) 148,686 7,312 Digene Corp. (AE)(N) 34,000 1,027 Edwards Lifesciences Corp. (AE) 55,850 2,311 Flamel Technologies SA - ADR (AE)(N) 22,800 406 Foxhollow Technologies, Inc. (AE)(N) 73,000 3,308 Gene Logic, Inc. (AE)(N) 14,600 55 Genesis HealthCare Corp. (AE) 38,450 1,560 Gentiva Health Services, Inc. (AE) 9,800 144 Greatbatch, Inc. (AE)(N) 4,750 124 Haemonetics Corp. (AE) 23,000 1,114 Health Net, Inc. (AE) 52,400 2,454 HealthTronics, Inc. (AE) 45,900 417 Henry Schein, Inc. (AE) 26,118 1,035 Hologic, Inc. (AE) 58,200 3,228 ICU Medical, Inc. (AE) 12,400 433 Illumina, Inc. (AE)(N) 59,400 925 Immucor, Inc. (AE) 42,390 1,099 Invitrogen Corp. (AE) 21,400 1,361 IRIS International, Inc. (AE) 56,700 1,330 Kendle International, Inc. (AE) 29,500 710 Kindred Healthcare, Inc. (AE)(N) 21,950 615 Kinetic Concepts, Inc. (AE) 7,050 253 Kos Pharmaceuticals, Inc. (AE) 20,351 1,221 Kyphon, Inc. (AE)(N) 18,300 734 LCA-Vision, Inc. (N) 6,800 286 LifePoint Hospitals, Inc. (AE) 9,300 364 Lincare Holdings, Inc. (AE) 114,295 4,669 Magellan Health Services, Inc. (AE) 111,200 3,306 Matria Healthcare, Inc. (AE)(N) 60,150 2,017 Maxygen, Inc. (AE)(N) 7,600 67 Medcath Corp. (AE)(N) 9,700 178 Medicis Pharmaceutical Corp. Class A 31,586 932 Medimmune, Inc. (AE) 71,700 2,508 Mentor Corp. (N) 30,440 1,370 Merit Medical Systems, Inc. (AE)(N) 41,200 491 Myogen, Inc. (AE)(N) 56,800 1,139 Myriad Genetics, Inc. (AE)(N) 32,700 634 Nabi Biopharmaceuticals (AE)(N) 69,343 891 Natus Medical, Inc. (AE) 57,100 936 Neurocrine Biosciences, Inc. (AE)(N) 47,431 2,505 Nuvelo, Inc. (AE)(N) 18,800 158 Odyssey HealthCare, Inc. (AE) 26,500 458 OraSure Technologies, Inc. (AE) 74,200 817 Orthofix International NV (AE) 10,300 388
28 Special Growth Fund FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Panacos Pharmaceuticals, Inc. (AE) 48,800 385 Parexel International Corp. (AE)(N) 26,800 586 Pediatrix Medical Group, Inc. (AE) 25,400 1,957 Pharmaceutical Product Development, Inc. (AE) 12,000 690 Pharmacopeia Drug Discovery, Inc. (AE) 46,950 176 Phase Forward, Inc. (AE) 71,700 783 PolyMedica Corp. (N) 39,025 1,288 PRA International (AE)(N) 2,300 61 Radiation Therapy Services, Inc. (AE) 15,500 466 Res-Care, Inc. (AE)(N) 11,200 181 Resmed, Inc. (AE)(N) 57,254 2,183 Respironics, Inc. (AE) 79,430 2,849 SFBC International, Inc. (AE) 25,683 1,095 Sierra Health Services, Inc. (AE) 7,000 525 SonoSite, Inc. (AE)(N) 26,400 776 Stericycle, Inc. (AE) 69,900 4,023 Steris Corp. 12,700 290 Sunrise Senior Living, Inc. (AE)(N) 11,600 375 Sybron Dental Specialties, Inc. (AE) 31,766 1,363 Symbion, Inc. (AE)(N) 1,200 27 Symmetry Medical, Inc. (AE) 59,073 1,308 Syneron Medical, Ltd. (AE)(N) 39,500 1,420 Techne Corp. (AE) 17,900 971 Theravance, Inc. (AE) 47,900 1,038 Thoratec Corp. (AE) 42,000 831 United Surgical Partners International, Inc. (AE) 48,541 1,740 United Therapeutics Corp. (AE)(N) 9,810 725 Varian Medical Systems, Inc. (AE) 41,356 1,884 VCA Antech, Inc. (AE) 74,300 1,917 Ventana Medical Systems, Inc. (AE)(N) 5,130 197 ViaCell, Inc. (AE)(N) 5,000 25 Viasys Healthcare, Inc. (AE) 19,700 471 ViroPharma, Inc. (AE) 23,300 446 Watson Pharmaceuticals, Inc. (AE) 59,800 2,067 ------------ 118,252 ------------ Integrated Oils - 0.1% Giant Industries, Inc. (AE) 8,400 480 ------------ Materials and Processing - 6.7% Agrium, Inc. 62,700 1,330 Airgas, Inc. 44,494 1,258 Albany International Corp. Class A 10,500 406 AM Castle & Co. (AE) 79,600 1,586 Apogee Enterprises, Inc. 7,900 129 Aptargroup, Inc. 15,400 788 Ashland, Inc. 8,200 439 Ball Corp. 32,500 1,280 Bluegreen Corp. (AE) 7,600 115 Builders FirstSource, Inc. (AE)(N) 29,100 569 Building Materials Holding Corp. (N) 13,200 1,122
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Calgon Carbon Corp. (N) 14,420 79 Cambrex Corp. 36,800 702 Cameco Corp. (AE) 12,106 579 Celanese Corp. (N) 55,700 983 CF Industries Holdings, Inc. (N) 16,600 229 Chaparral Steel Co. (AE)(N) 18,070 451 Chemtura Corp. 73,700 789 Chicago Bridge & Iron Co. NV 23,560 525 Comfort Systems USA, Inc. (AE)(N) 25,610 218 Commercial Metals Co. 44,900 1,427 Constar International, Inc. (AE)(N) 48,500 97 Crown Holdings, Inc. (AE) 95,300 1,546 Cytec Industries, Inc. 60,400 2,495 Eagle Materials, Inc. (N) 6,600 703 ElkCorp 27,351 865 EMCOR Group, Inc. (AE) 27,000 1,647 Energizer Holdings, Inc. (AE) 21,130 1,067 Engelhard Corp. 55,400 1,507 Exide Technologies (AE)(N) 67,400 286 Florida Rock Industries, Inc. 4,900 279 FMC Corp. (AE) 13,000 708 Gold Kist, Inc. (AE)(N) 22,700 390 Granite Construction, Inc. 10,000 341 Harsco Corp. 25,800 1,658 HB Fuller Co. 5,900 177 Hercules, Inc. (AE) 130,600 1,455 Insituform Technologies, Inc. Class A (AE)(N) 38,700 695 Jacuzzi Brands, Inc. (AE)(N) 100,800 744 Lafarge North America, Inc. 49,400 2,989 Lennox International, Inc. 10,600 296 Louisiana-Pacific Corp. 16,450 410 Martin Marietta Materials, Inc. 44,900 3,543 Mosaic Co. (The) (AE)(N) 37,500 495 Mueller Industries, Inc. 19,600 540 NewMarket Corp. (AE)(N) 4,500 84 Nova Chemicals Corp. (N) 24,000 859 NS Group, Inc. (AE) 25,350 877 Octel Corp. (N) 4,500 67 Olympic Steel, Inc. (AE)(N) 49,915 888 OM Group, Inc. (AE) 32,000 511 Oregon Steel Mills, Inc. (AE) 53,538 1,359 Pactiv Corp. (AE) 45,200 890 PolyOne Corp. (AE)(N) 48,100 278 Precision Castparts Corp. 18,200 862 Quanex Corp. (N) 48,050 2,783 Quanta Services, Inc. (AE)(N) 181,200 2,082 Regeneron Pharmaceuticals, Inc. (AE) 20,200 253 Reliance Steel & Aluminum Co. (N) 17,700 1,009
Special Growth Fund 29 FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Schnitzer Steel Industries, Inc. Class A (N) 38,500 1,228 Silgan Holdings, Inc. 18,900 608 Steel Dynamics, Inc. (N) 26,400 818 Stillwater Mining Co. (AE)(N) 11,100 112 Terra Industries, Inc. (AE)(N) 101,450 620 Texas Industries, Inc. 17,850 885 Trammell Crow Co. (AE) 8,400 215 UAP Holding Corp. 39,400 753 Unifi, Inc. (AE) 44,500 130 Universal Forest Products, Inc. (N) 2,900 160 URS Corp. (AE) 22,114 894 USEC, Inc. (N) 73,620 736 USG Corp. (AE)(N) 8,990 531 Vertex Pharmaceuticals, Inc. (AE)(N) 54,800 1,247 Washington Group International, Inc. (AE) 19,818 985 Wheeling-Pittsburgh Corp. (AE)(N) 13,600 175 ------------ 62,836 ------------ Miscellaneous - 1.2% Brunswick Corp. 32,000 1,220 Hillenbrand Industries, Inc. 16,000 737 Johnson Controls, Inc. 16,500 1,123 McDermott International, Inc. (AE) 31,477 1,144 SPX Corp. 12,900 555 Teleflex, Inc. 19,100 1,264 Trinity Industries, Inc. (N) 51,600 1,963 Walter Industries, Inc. 28,887 1,319 Wesco Financial Corp. 4,203 1,458 ------------ 10,783 ------------ Other Energy - 8.4% Alliance Resource Partners, LP 14,600 617 Alpha Natural Resources, Inc. (AE) 27,300 648 Arch Coal, Inc. 19,857 1,530 Atlas Pipeline Partners, LP (N) 18,500 869 Atwood Oceanics, Inc. (AE) 6,378 449 Berry Petroleum Co. Class A (N) 1,800 108 Cabot Oil & Gas Corp. 17,900 820 Cal Dive International, Inc. (AE)(N) 50,500 3,108 Callon Petroleum Co. (AE) 35,400 648 Consol Energy, Inc. 20,700 1,261 Cooper Cameron Corp. (AE) 18,700 1,379 Core Laboratories NV (AE) 43,530 1,402 Dawson Geophysical Co. (AE)(N) 35,311 954 Denbury Resources, Inc. (AE) 70,000 3,054 Diamond Offshore Drilling, Inc. 20,076 1,134 Dril-Quip, Inc. (AE)(N) 4,700 192 Dynegy, Inc. Class A (AE) 91,600 407 Enbridge Energy Partners, LP (N) 22,000 1,111 ENSCO International, Inc. 36,200 1,650 Foundation Coal Holdings, Inc. 23,700 889 Frontier Oil Corp. 41,900 1,545
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Global Industries, Ltd. (AE) 25,500 324 Grant Prideco, Inc. (AE) 95,993 3,733 Helmerich & Payne, Inc. 33,400 1,850 Holly Corp. 17,300 996 Hornbeck Offshore Services, Inc. (AE)(N) 11,200 361 Houston Exploration Co. (AE) 31,400 1,619 Input/Output, Inc. (AE)(N) 59,800 459 Lufkin Industries, Inc. (N) 100 5 Nabors Industries, Ltd. (AE) 12,743 875 National-Oilwell Varco, Inc. (AE) 49,663 3,102 NRG Energy, Inc. (AE) 35,970 1,547 Ormat Technologies, Inc. (N) 15,200 310 Patterson-UTI Energy, Inc. 46,300 1,580 Pogo Producing Co. 16,400 828 Precision Drilling Corp. (AE) 27,889 1,283 Pride International, Inc. (AE) 55,400 1,555 Quicksilver Resources, Inc. (AE)(N) 32,800 1,270 Range Resources Corp. 76,268 2,722 Smith International, Inc. 34,000 1,102 Swift Energy Co. (AE) 42,100 1,838 Talisman Energy, Inc. 28,655 1,269 TEPPCO Partners, LP (N) 31,000 1,212 Tesoro Corp. 19,300 1,180 Tetra Technologies, Inc. (AE) 37,438 1,047 Todco Class A 208,779 9,343 Unit Corp. (AE) 59,532 3,119 Universal Compression Holdings, Inc. (AE) 48,730 1,737 Valero, LP 16,300 953 Veritas DGC, Inc. (AE)(N) 41,847 1,348 Vintage Petroleum, Inc. 54,516 2,829 W-H Energy Services, Inc. (AE) 38,800 1,176 Whiting Petroleum Corp. (AE)(N) 21,700 880 XTO Energy, Inc. 43,409 1,887 ------------ 79,114 ------------ Producer Durables - 6.3% American Tower Corp. Class A (AE) 183,230 4,370 Ametek, Inc. 29,500 1,202 AO Smith Corp. (N) 4,550 147 Applied Industrial Technologies, Inc. 2,650 87 Arris Group, Inc. (AE) 171,500 1,418 Asyst Technologies, Inc. (AE) 38,400 166 ATMI, Inc. (AE)(N) 39,900 1,090 Audiovox Corp. Class A (AE)(N) 8,300 118 Axcelis Technologies, Inc. (AE) 215,000 935 BE Aerospace, Inc. (AE) 26,600 482 Briggs & Stratton Corp. 26,000 832
30 Special Growth Fund FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Bucyrus International, Inc. Class A 24,514 1,019 C&D Technologies, Inc. 2,200 20 Cascade Corp. (N) 33,600 1,636 CNH Global NV 35,900 670 Cognex Corp. 41,300 1,180 Columbus McKinnon Corp. (AE) 18,700 427 Credence Systems Corp. (AE) 89,008 685 Crown Castle International Corp. (AE) 68,500 1,680 Cymer, Inc. (AE) 47,100 1,641 Dionex Corp. (AE)(N) 18,000 872 Dominion Homes, Inc. (AE)(N) 3,700 45 DR Horton, Inc. 31,366 963 Ducommun, Inc. (AE)(N) 56,900 1,135 Encore Wire Corp. (AE) 5,100 110 Entegris, Inc. (AE) 148,127 1,446 ESCO Technologies, Inc. (AE) 5,000 216 Esterline Technologies Corp. (AE) 2,650 100 Flowserve Corp. (AE) 15,800 553 Gehl Co. (AE)(N) 10,900 250 Genlyte Group, Inc. (AE) 19,400 989 Graco, Inc. 27,500 942 HNI Corp. 4,600 225 IDEX Corp. 15,694 628 Itron, Inc. (AE) 21,000 913 JLG Industries, Inc. (N) 44,650 1,713 Joy Global, Inc. 38,948 1,787 KB Home 11,000 719 Kennametal, Inc. 22,603 1,155 Kimball International, Inc. Class B (N) 6,380 70 Lennar Corp. Class A 19,350 1,076 Levitt Corp. Class A (N) 15,200 299 LTX Corp. (AE)(N) 19,000 65 Manitowoc Co. 11,400 607 MDC Holdings, Inc. 18,355 1,259 Meritage Homes Corp. (AE) 29,315 1,825 Middleby Corp. (AE)(N) 17,900 1,298 Milacron, Inc. (AE)(N) 127,629 163 Orbital Sciences Corp. (AE)(N) 39,700 462 Orleans Homebuilders, Inc. (N) 5,700 114 Pall Corp. 66,600 1,742 Roper Industries, Inc. 57,958 2,185 Standard-Pacific Corp. 35,800 1,381 Steelcase, Inc. Class A (N) 21,700 311 Technical Olympic USA, Inc. (AE)(N) 47,750 1,009 Tecumseh Products Co. Class A (N) 35,100 707 Teledyne Technologies, Inc. (AE) 29,700 1,047 Tennant Co. 5,610 244 Teradyne, Inc. (AE) 83,300 1,128 Thermo Electron Corp. (AE) 69,700 2,104 Thomas & Betts Corp. (AE) 13,700 533 Toll Brothers, Inc. (AE) 22,700 838 Ultratech, Inc. (AE)(N) 9,400 130 Varian Semiconductor Equipment Associates, Inc. (AE) 56,100 2,122
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- WCI Communities, Inc. (AE)(N) 46,700 1,168 William Lyon Homes, Inc. (AE)(N) 4,900 582 ------------ 59,035 ------------ Technology - 14.5% ADTRAN, Inc. 26,642 806 Agile Software Corp. (AE)(N) 268,100 1,904 Akamai Technologies, Inc. (AE) 108,200 1,876 Alliance Semiconductor Corp. (AE)(N) 61,300 161 American Reprographics Co. (AE)(N) 45,700 770 Amkor Technology, Inc. (AE) 41,100 217 Amphenol Corp. Class A 34,595 1,383 Anixter International, Inc. 10,410 386 Ansoft Corp. (AE) 7,500 240 Ansys, Inc. (AE) 2,800 104 Anteon International Corp. (AE) 26,200 1,184 Applera Corp. - Applied Biosystems Group 45,800 1,112 ASE Test, Ltd. (AE) 67,800 374 AsiaInfo Holdings, Inc. (AE)(N) 22,800 88 Atmel Corp. (AE) 83,500 205 Autodesk, Inc. 28,400 1,282 Avid Technology, Inc. (AE) 37,100 1,826 Avnet, Inc. (AE) 72,300 1,667 AVX Corp. (N) 76,000 941 BearingPoint, Inc. (AE)(N) 152,800 1,073 Bottomline Technologies, Inc. (AE) 44,200 559 Cadence Design Systems, Inc. (AE) 149,300 2,386 Carrier Access Corp. (AE) 15,500 67 Ciena Corp. (AE) 579,308 1,373 Cirrus Logic, Inc. (AE)(N) 28,100 184 Coherent, Inc. (AE) 14,320 424 Compuware Corp. (AE) 111,800 904 Comtech Telecommunications Corp. (AE)(N) 9,600 368 Comverse Technology, Inc. (AE) 53,800 1,350 Conexant Systems, Inc. (AE) 43,800 85 Digitas, Inc. (AE) 84,000 907 Electronics for Imaging, Inc. (AE) 152,726 3,835 EMS Technologies, Inc. (AE) 800 13 Emulex Corp. (AE) 77,300 1,431 Equinix, Inc. (AE)(N) 28,400 1,048 ESS Technology, Inc. (AE)(N) 15,200 44 F5 Networks, Inc. (AE) 22,211 1,156 Fairchild Semiconductor International, Inc. (AE) 128,200 1,974 Filenet Corp. (AE)(N) 18,400 518 Flir Systems, Inc. (AE) 23,712 497 Formfactor, Inc. (AE) 18,335 451
Special Growth Fund 31 FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Foundry Networks, Inc. (AE)(N) 45,800 546 Genesis Microchip, Inc. (AE)(N) 42,600 820 GTSI Corp. (AE)(N) 70,000 570 Harris Corp. 57,100 2,347 Ikanos Communications, Inc. (AE) 30,100 474 InFocus Corp. (AE)(N) 72,300 231 Informatica Corp. (AE) 272,100 3,238 Ingram Micro, Inc. Class A (AE) 102,850 1,862 Integrated Device Technology, Inc. (AE) 60,700 600 Integrated Silicon Solutions, Inc. (AE)(N) 168,800 1,303 Intergraph Corp. (AE)(N) 14,680 710 Intermagnetics General Corp. (AE) 44,332 1,270 Intersil Corp. Class A 114,333 2,602 Interwoven, Inc. (AE) 19,400 182 j2 Global Communications, Inc. (AE)(N) 103,550 4,578 JDA Software Group, Inc. (AE) 21,500 348 Keane, Inc. (AE)(N) 29,700 336 Kemet Corp. (AE)(N) 26,400 183 Keynote Systems, Inc. (AE) 51,700 674 Komag, Inc. (AE)(N) 5,200 139 Kopin Corp. (AE) 52,249 295 Lattice Semiconductor Corp. (AE) 7,300 32 Lawson Software, Inc. (AE)(N) 200,800 1,538 Leadis Technology, Inc. (AE)(N) 2,900 15 LSI Logic Corp. (AE) 410,900 3,332 M-Systems Flash Disk Pioneers Ltd. (AE)(N) 92,800 2,941 Macromedia, Inc. (AE) 11,700 514 Matrixone, Inc. (AE) 264,400 1,333 Maxtor Corp. (AE)(N) 651,500 2,280 McAfee, Inc. (AE) 28,500 856 MEMC Electronic Materials, Inc. (AE) 74,500 1,337 Merix Corp. (AE)(N) 8,000 43 Methode Electronics, Inc. 6,090 62 Microchip Technology, Inc. 18,800 567 Micros Systems, Inc. (AE) 26,200 1,203 Microsemi Corp. (AE) 119,600 2,771 Nam Tai Electronics, Inc. 19,300 437 NAVTEQ Corp. (AE) 18,100 708 Ness Technologies, Inc. (AE)(N) 15,700 143 NETGEAR, Inc. (AE)(N) 14,400 282 Netlogic Microsystems, Inc. (AE)(N) 105,100 2,056 Network Engines, Inc. (AE) 33,835 44 Novell, Inc. (AE)(N) 58,800 448 Nuance Communications, Inc. (AE)(N) 138,100 710 Nvidia Corp. (AE) 53,300 1,788 O2Micro International, Ltd. (AE) 57,676 756 Openwave Systems, Inc. (AE)(N) 94,500 1,689 Parametric Technology Corp. (AE) 168,105 1,094 PerkinElmer, Inc. 53,500 1,181 Perot Systems Corp. Class A (AE) 5,600 78 PMC - Sierra, Inc. (AE) 181,300 1,287
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Quantum Corp. (AE)(N) 305,300 922 Quest Software, Inc. (AE) 65,500 911 Rackable Systems, Inc. (AE) 105,000 1,460 RADWARE, Ltd. (AE) 16,500 304 Redback Networks, Inc. (AE)(N) 183,140 1,925 Reynolds & Reynolds Co. (The) Class A 24,900 661 RF Micro Devices, Inc. (AE)(N) 103,700 543 Rockwell Automation, Inc. 15,896 845 RSA Security, Inc. (AE) 68,400 780 Safeguard Scientifics, Inc. (AE)(N) 39,900 60 SafeNet, Inc. (AE)(N) 17,100 567 Salesforce.com, Inc. (AE) 15,300 382 Sapient Corp. (AE)(N) 52,300 271 Satyam Computer Services, Ltd. - ADR 40,100 1,371 Seachange International, Inc. (AE)(N) 42,800 268 Semtech Corp. (AE) 56,800 857 Serena Software, Inc. (AE)(N) 40,300 882 Silicon Storage Technology, Inc. (AE) 52,500 265 SiRF Technology Holdings, Inc. (AE) 15,100 389 Solectron Corp. (AE) 329,100 1,162 SonicWALL, Inc. (AE)(N) 61,700 429 SPSS, Inc. (AE) 5,900 135 Standard Microsystems Corp. (AE) 1,942 55 SYKES Enterprises, Inc. (AE)(N) 58,500 845 Symbol Technologies, Inc. 99 1 Tekelec (AE)(N) 48,100 660 Tellabs, Inc. (AE) 155,730 1,489 Tessera Technologies, Inc. (AE) 44,964 1,254 TIBCO Software, Inc. (AE) 233,400 1,772 Transaction Systems Architects, Inc. Class A (AE) 49,775 1,344 Trident Microsystems, Inc. (AE)(N) 68,700 2,079 Triquint Semiconductor, Inc. (AE) 92,700 389 Trizetto Group, Inc. (The) (AE) 45,500 645 TTM Technologies, Inc. (AE) 1,000 8 Ulticom, Inc. (AE)(N) 2,800 29 Ultimate Software Group, Inc. (AE)(N) 74,700 1,269 Unisys Corp. (AE) 156,400 799 UNOVA, Inc. (AE) 48,325 1,498 Utstarcom, Inc. (AE)(N) 36,800 203 Vasco Data Security International (AE)(N) 22,500 240 VeriFone Holdings, Inc. (AE) 85,000 1,972 Verint Systems, Inc. (AE)(N) 23,000 881 Verity, Inc. (AE) 67,600 673 Viasat, Inc. (AE) 53,200 1,319 WatchGuard Technologies, Inc. (AE) 40,000 139
32 Special Growth Fund FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Wavecom SA - ADR (AE) 27,000 384 Websense, Inc. (AE)(N) 23,010 1,359 Western Digital Corp. (AE)(N) 239,400 2,897 Wind River Systems, Inc. (AE)(N) 153,469 2,010 Witness Systems, Inc. (AE) 60,900 1,194 Zoran Corp. (AE)(N) 104,900 1,540 ------------ 136,342 ------------ Utilities - 3.5% AGL Resources, Inc. 6,400 225 Alamosa Holdings, Inc. (AE)(N) 150,000 2,220 Allete, Inc. 32,200 1,417 Alliant Energy Corp. 51,800 1,370 Avista Corp. 34,090 597 Cablevision Systems Corp. Class A (AE) 46,600 1,156 Cascade Natural Gas Corp. 25,900 534 Centerpoint Energy, Inc. (N) 48,800 646 CenturyTel, Inc. 20,650 676 CMS Energy Corp. (AE) 67,700 1,009 Commonwealth Telephone Enterprises, Inc. 33,030 1,185 Energen Corp. 38,400 1,444 IDACORP., Inc. 20,000 577 IDT Corp. Class B (AE)(N) 1,000 12 Laclede Group, Inc. (The) (N) 4,400 132 Leap Wireless International, Inc. (AE) 26,543 876 MDU Resources Group, Inc. 42,200 1,391 National Fuel Gas Co. 28,500 859 NeuStar, Inc. Class A (AE) 19,200 588 NII Holdings, Inc. (AE) 8,505 705 Northeast Utilities 129,610 2,358 Northwest Natural Gas Co. (N) 4,500 156 NorthWestern Corp. (N) 7,350 219 NSTAR 43,700 1,189 OGE Energy Corp. 35,500 914 Oneok, Inc. 15,200 437 Pepco Holdings, Inc. 66,500 1,429 Pinnacle West Capital Corp. 37,200 1,553 PNM Resources, Inc. 24,100 611 RCN Corp. (AE)(N) 15,000 305 Sierra Pacific Resources (AE)(N) 79,120 1,025 South Jersey Industries, Inc. 7,600 212 Talk America Holdings, Inc. (AE)(N) 27,200 262 UbiquiTel, Inc. (AE) 172,300 1,489 UGI Corp. 55,550 1,311 US Cellular Corp. (AE) 13,570 692
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Westar Energy, Inc. 34,400 760 WPS Resources Corp. 8,500 464 ------------ 33,005 ------------ TOTAL COMMON STOCKS (cost $759,849) 891,987 ------------ WARRANTS & RIGHTS - 0.0% Washington Mutual, Inc. (AE) 2050 Warrants 211 27 ------------ TOTAL WARRANTS & RIGHTS (cost $45) 27 ------------ SHORT-TERM INVESTMENTS - 4.6% Frank Russell Investment Company Money Market Fund 39,871,445 39,871 United States Treasury Bills (c)(z)(sec.) 3.373% due 12/08/05 3,500 3,488 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $43,359) 43,359 ------------ OTHER SECURITIES - 19.3% Frank Russell Investment Company Money Market Fund (X) 59,426,864 59,427 State Street Securities Lending Quality Trust (X) 121,760,030 121,760 ------------ TOTAL OTHER SECURITIES (cost $181,187) 181,187 ------------ TOTAL INVESTMENTS - 119.0% (identified cost $984,440) 1,116,560 OTHER ASSETS AND LIABILITIES, NET - (19.0%) (178,560) ------------ NET ASSETS - 100.0% 938,000 ============
See accompanying notes which are an integral part of the financial statements. Special Growth Fund 33 FRANK RUSSELL INVESTMENT COMPANY SPECIAL GROWTH FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 (UNAUDITED) Amounts in thousands
UNREALIZED NOTIONAL APPRECIATION FUTURES CONTRACTS AMOUNT (DEPRECIATION) (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Long Positions Russell 2000 Index (CME) expiration date 12/05 (78) 25,319 (1,192) Russell 2000 Mini Index (CME) expiration date 12/05 (240) 15,581 (316) S&P 500 E-Mini Index (CME) expiration date 12/05 (15) 907 8 S&P 500 Index (CME) expiration date 12/05 (2) 605 14 --------------- Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (1,486) ===============
- -------------------------------------------------------------------------------- PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- Auto and Transportation 3.6 Consumer Discretionary 19.0 Consumer Staples 1.1 Financial Services 18.1 Health Care 12.6 Integrated Oils 0.1 Materials and Processing 6.7 Miscellaneous 1.2 Other Energy 8.4 Producer Durables 6.3 Technology 14.5 Utilities 3.5 Warrants & Rights --* Short-Term Investments 4.6 Other Securities 19.3 --------------- Total Investments 119.0 Other Assets and Liabilities, Net (19.0) --------------- 100.0 =============== Futures Contracts (0.2)
* Less than .05% of net assets. See accompanying notes which are an integral part of the financial statements. 34 Special Growth Fund (This page intentionally left blank) FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- (GRAPHIC)
QUANTITATIVE EQUITY - CLASS S RUSSELL 1000(R) ** ----------------------------- ------------------ * 10000.00 10000.00 1996 12275.00 12292.00 1997 16275.00 16206.00 1998 19047.00 19401.00 1999 24077.00 24364.00 2000 26260.00 26571.00 2001 19929.00 19652.00 2002 16752.00 16783.00 2003 20367.00 20528.00 2004 22062.00 22443.00 2005 24266.00 24793.00
Quantitative Equity Fund - Class S - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 9.99% 5 Years (1.57)%S 10 Years 9.27%S
Quantitative Equity Fund - Class E ++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 9.72% 5 Years (1.81)%S 10 Years 8.93%S
Quantitative Equity Fund - Class C ++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 8.92% 5 Years (2.55)%S 10 Years 8.43%S
Russell 1000(R) Index** - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 10.47% 5 Years (1.38)%S 10 Years 9.50%S
36 Quantitative Equity Fund FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide long term capital growth. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005? For the fiscal year ended October 31, 2005, the Quantitative Equity Fund Class S, Class E and Class C Shares gained 9.99%, 9.72% and 8.92%, respectively. This compared to the Russell 1000(R) Index, which gained 10.47% during the same period. The Fund's performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind. For the year ended October 31, 2005, the Lipper(R) Large-Cap Core Funds Average returned 8.33%. This result serves as a peer comparison and is expressed net of operating expenses. HOW DID THE MARKET CONDITIONS DESCRIBED IN THE MARKET SUMMARY REPORT AFFECT THE FUND'S PERFORMANCE? The primary performance drivers were the Fund's fully invested position and exposure to companies with factor exposures, or characteristics, that the Fund's money managers believed to be predictive of positive long-term excess returns. The key factors that were positively rewarded by the market were positive price momentum and positive earnings surprises and revisions. These are two of the primary long term factors on which the Fund's money managers selected stocks. The third primary stock selection factor is lower valuation, which was rewarded to a lesser extent during the twelve months. Energy stocks significantly outperformed during the fiscal year. The Fund had a greater-than-benchmark weight in the integrated oil sector but was slightly underweight in the extremely strong other energy sector, particularly the oil well equipment and service sub-sector. Although the Fund did well in most sectors, an underweight in consumer staples and overweight in technology detracted from performance. WHAT WERE THE PRIMARY CONTRIBUTORS AND DETRACTORS TO THE FUND'S PERFORMANCE DURING THE LAST 12 MONTHS? A key detractor to performance was an underweight in consumer staples and weak stock selection within that sector, particularly in tobacco stocks. An underweight in Altria was one of the key detractors from performance. In addition, a modest overweight in technology also offset some of the Fund's money managers' positive achievements in the fiscal year. Exposure to stocks with positive price momentum and positive earnings surprise and revisions were significant positive contributors to the Fund's performance. The Fund also was characterized by a lower dividend yield stance, another positive contributor. Dividend yield was not rewarded during the period due to steadily rising interest rates. The Fund was also rewarded for its modest value bias. Security selection was the primary positive contributor to the Fund's performance, with selection positive in eight out of 11 economic sectors. The largest positive contributors to performance came from overweighting the integrated oil sector coupled with strong stock selection in that sector and underweighting the weak materials and processing sector together with strong stock selection within that sector. HOW DID THE INVESTMENT STRATEGIES AND TECHNIQUES EMPLOYED BY THE FUND AND ITS MONEY MANAGERS AFFECT ITS PERFORMANCE? The Fund's money managers emphasized those factors they believed would be rewarded with long-term positive excess returns. These included positive price momentum and positive earnings surprises and revisions. A slightly lower valuation stance than the benchmark as well as a lower dividend yield were modest positive contributors to the Fund's performance. The broadly diversified nature of the Fund and money manager assignments resulted in a slightly greater than benchmark exposure to energy stocks, though the stronger other energy sector was underweight. DESCRIBE ANY CHANGES TO THE FUND'S STRUCTURE OR THE MONEY MANAGER LINE-UP. Barclays Global Investors was terminated in December 2004 and replaced with Goldman Sachs Asset Management, L.P. In August 2005, a "select holdings" strategy was implemented. Pursuant to this strategy, FRIMCo analyzes the stocks purchased for the Fund by each of the Fund's money managers to identify particular stocks that are concurrently overweighted by the money managers. Based on rankings from a proprietary model, FRIMCo purchases additional shares of certain stocks for the Fund. The Fund continues to pursue a strategy of increasing stock specific risk and these changes were consistent with this strategy. All other managers were equally weighted in the Fund. Quantitative Equity Fund 37 FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- Money Managers as of Styles October 31, 2005 Aronson + Johnson + Ortiz, L.P. Market-Oriented Franklin Portfolio Associates, LLC Market-Oriented Goldman Sachs Asset Management, L.P. Market-Oriented Jacobs Levy Equity Management, Inc. Market-Oriented
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Frank Russell Investment Management Company (FRIMCo), or any other person in FRIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and FRIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Frank Russell Investment Company (FRIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any FRIC Fund. -------------------- * Quantitative Equity Fund Class S assumes initial investment on November 1, 1995. ** Russell 1000(R) Index includes the 1,000 largest companies in the Russell 3000(R) Index. The Russell 1000(R) Index represents the universe of stocks from which most active money managers typically select. The Russell 1000(R) Index return reflects adjustments for income dividends and capital gains distributions reinvested as of the ex-dividend dates. ++ Quantitative Equity Fund Class S performance has been linked with Class E to provide historical perspective. For the period, November 4, 1996 (commencement of sale) through May 15, 1998, Class E paid shareholder service and Rule 12b-1 distribution fees. From May 16, 1998 through the current period, Class E paid only shareholder service fees. Total return would have been lower had these fees been in effect during prior reporting periods. ++++ Quantitative Equity Fund Class S and Class E performance has been linked with Class C to provide historical perspective. From January 27, 1999 (commencement of sale) through the current period, Class C paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. SEC. Annualized. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 38 Quantitative Equity Fund FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS C PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,060.40 $ 1,015.17 Expenses Paid During Period* $ 10.33 $ 10.11
* Expenses are equal to the Fund's annualized expense ratio of 1.99% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS E PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,064.50 $ 1,018.95 Expenses Paid During Period* $ 6.45 $ 6.31
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,065.60 $ 1,020.21 Expenses Paid During Period* $ 5.15 $ 5.04
* Expenses are equal to the Fund's annualized expense ratio of 0.99% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Quantitative Equity Fund 39 FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- COMMON STOCKS - 94.8% Auto and Transportation - 2.9% Burlington Northern Santa Fe Corp. 177,400 11,009 CNF, Inc. 41,100 2,313 Continental Airlines, Inc. Class B (AE)(N) 32,000 414 CSX Corp. 443,400 20,312 FedEx Corp. 96,800 8,899 Ford Motor Co. (N) 988,300 8,223 Goodyear Tire & Rubber Co. (The) (AE)(N) 196,100 3,067 Harley-Davidson, Inc. 33,800 1,674 JB Hunt Transport Services, Inc. (N) 162,400 3,152 Landstar System, Inc. (N) 33,900 1,306 Navistar International Corp. (AE)(N) 37,400 1,029 Norfolk Southern Corp. 136,100 5,471 Oshkosh Truck Corp. 20,100 876 Paccar, Inc. 114,114 7,990 Polaris Industries, Inc. 15,100 681 Southwest Airlines Co. 240,200 3,846 Swift Transportation Co., Inc. (AE) 32,900 600 United Parcel Service, Inc. Class B 9,800 715 US Airways Group, Inc. (AE) 10,500 259 ------------ 81,836 ------------ Consumer Discretionary - 11.9% Abercrombie & Fitch Co. Class A 20,400 1,061 Activision, Inc. (AE) 74,666 1,178 American Eagle Outfitters, Inc. 182,100 4,288 American Greetings Corp. Class A 93,900 2,371 Arbitron, Inc. (N) 13,600 509 Autonation, Inc. (AE) 123,400 2,453 Autozone, Inc. (AE) 8,000 647 Black & Decker Corp. 71,600 5,881 Bright Horizons Family Solutions, Inc. (AE)(N) 10,500 420 Brinker International, Inc. 49,900 1,902 Career Education Corp. (AE)(N) 59,900 2,132 Cendant Corp. 965,900 16,826 Circuit City Stores, Inc. 359,440 6,394 Coach, Inc. (AE) 747,000 24,038 Convergys Corp. (AE) 42,100 684 Costco Wholesale Corp. 74,200 3,588 Darden Restaurants, Inc. 120,400 3,903 Dillard's, Inc. Class A 252,300 5,225 EarthLink, Inc. (AE)(N) 11,800 130 EchoStar Communications Corp. (N) 83,300 2,238 Emdeon Corp. (AE) 183,000 1,684 Federated Department Stores, Inc. 5,000 307 Gannett Co., Inc. 29,600 1,855 Gemstar-TV Guide International, Inc. (AE) 84,700 220 Google, Inc. Class A (AE) 27,100 10,085
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Harman International Industries, Inc. 14,300 1,428 Hilton Hotels Corp. 4,900 95 Home Depot, Inc. 645,871 26,507 InterActiveCorp (AE) 48,100 1,231 JC Penney Co., Inc. 37,300 1,910 Kimberly-Clark Corp. (N) 198,200 11,266 Liberty Media Corp. Class A (AE) 1,744,500 13,904 Marriott International, Inc. Class A 244,700 14,589 McGraw-Hill Cos., Inc. (The) 271,300 13,277 Men's Wearhouse, Inc. (The) (AE) 32,300 798 MGM Mirage (AE) 45,200 1,689 News Corp. Class A 865,400 12,332 Nike, Inc. Class B 122,700 10,313 Nordstrom, Inc. 463,600 16,064 O'Reilly Automotive, Inc. (AE)(N) 29,500 832 Office Depot, Inc. (AE) 58,500 1,611 Omnicom Group 30,200 2,505 PHH Corp. (AE)(N) 3,400 96 Phillips-Van Heusen Corp. (N) 9,500 270 Quiksilver, Inc. (AE)(N) 73,400 846 Republic Services, Inc. 33,900 1,198 Robert Half International, Inc. 31,800 1,173 RR Donnelley & Sons Co. 84,100 2,945 SCP Pool Corp. (N) 14,600 525 ServiceMaster Co. (The) (N) 25,000 315 Staples, Inc. 515,500 11,717 Starbucks Corp. (AE) 104,000 2,941 Target Corp. 281,200 15,660 Time Warner, Inc. 1,110,600 19,802 Toro Co. (N) 26,300 960 Viacom, Inc. Class B 462,722 14,331 Wal-Mart Stores, Inc. 55,616 2,631 Walt Disney Co. 662,500 16,145 Yahoo!, Inc. (AE) 111,300 4,115 Yum! Brands, Inc. 206,800 10,520 ------------ 336,560 ------------ Consumer Staples - 5.7% Altria Group, Inc. 357,391 26,822 Clorox Co. 63,100 3,415 Coca-Cola Co. (The) 375,600 16,068 Coca-Cola Enterprises, Inc. 82,800 1,565 Colgate-Palmolive Co. 151,900 8,045 CVS Corp. 156,200 3,813 General Mills, Inc. (N) 172,500 8,325 Hershey Foods Corp. 23,100 1,313 Kellogg Co. 16,600 733 Kraft Foods, Inc. Class A 45,200 1,279
40 Quantitative Equity Fund FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Kroger Co. (The) (AE) 479,349 9,539 Pepsi Bottling Group, Inc. 117,400 3,338 PepsiCo, Inc. 622,100 36,754 Pilgrim's Pride Corp. 111,400 3,507 Procter & Gamble Co. 224,303 12,559 Reynolds American, Inc. 79,900 6,791 Safeway, Inc. 88,100 2,049 Supervalu, Inc. 58,800 1,848 Tyson Foods, Inc. Class A 331,300 5,897 UST, Inc. 26,800 1,109 Walgreen Co. 166,000 7,541 ------------ 162,310 ------------ Financial Services - 21.7% Allmerica Financial Corp. (N) 18,600 709 Allstate Corp. (The) 103,400 5,458 American Express Co. 469,400 23,362 American Financial Group, Inc. 67,000 2,290 American International Group, Inc. 138,830 8,996 AmeriCredit Corp. (AE) 99,300 2,219 Ameriprise Financial, Inc. 65,220 2,427 Ameritrade Holding Corp. (AE)(N) 114,100 2,400 AmerUs Group Co. 37,200 2,199 Annaly Mortgage Management, Inc. (o) 86,400 992 AON Corp. 52,000 1,760 Automatic Data Processing, Inc. 129,600 6,047 Bank of America Corp. 1,371,845 60,004 Bank of Hawaii Corp. 67,300 3,458 BB&T Corp. 202,900 8,591 Bear Stearns Cos., Inc. (The) 57,400 6,073 CB Richard Ellis Group, Inc. Class A (AE) 13,600 664 CBL & Associates Properties, Inc. (o) 36,300 1,356 Charles Schwab Corp. (The) 327,500 4,978 Checkfree Corp. (AE) 64,000 2,720 Chubb Corp. 56,200 5,225 Cigna Corp. 131,400 15,225 Cincinnati Financial Corp. 67,387 2,867 CIT Group, Inc. 92,100 4,212 Citigroup, Inc. 618,500 28,315 CNA Financial Corp. (AE)(N) 20,900 643 Comerica, Inc. 82,593 4,772 Countrywide Financial Corp. 107,800 3,425 Developers Diversified Realty Corp. (o) 24,900 1,088 Dun & Bradstreet Corp. (AE) 22,900 1,450 East-West Bancorp, Inc. 1,300 50 Eaton Vance Corp. 17,300 431 Equity Office Properties Trust (o) 269,200 8,291 Equity Residential (o) 42,300 1,660 Fannie Mae 91,900 4,367 Fidelity National Financial, Inc. 31,762 1,190
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Fidelity National Title Group, Inc. Class A 5,558 121 First American Corp. (N) 119,100 5,219 Fiserv, Inc. (AE) 289,500 12,645 Franklin Resources, Inc. 110,200 9,738 Genworth Financial, Inc. Class A 160,100 5,074 Golden West Financial Corp. 42,800 2,514 Goldman Sachs Group, Inc. 85,600 10,817 H&R Block, Inc. 85,700 2,130 Hartford Financial Services Group, Inc. 8,500 678 Host Marriott Corp. (o) 11,200 188 Hudson City Bancorp, Inc. (N) 307,200 3,637 IndyMac Bancorp, Inc. (N) 16,000 597 iStar Financial, Inc. (o) 13,300 490 JPMorgan Chase & Co. 743,796 27,238 KeyCorp 156,400 5,042 Kimco Realty Corp. (o) 35,200 1,043 La Quinta Corp. (AE)(o) 2,700 23 Lehman Brothers Holdings, Inc. 190,100 22,749 Lincoln National Corp. 79,300 4,013 Loews Corp. 77,500 7,206 Mack-Cali Realty Corp. (o) 21,900 934 MBIA, Inc. 118,100 6,878 MBNA Corp. 96,362 2,464 Merrill Lynch & Co., Inc. 493,600 31,956 Metlife, Inc. 511,300 25,263 Moody's Corp. 163,800 8,724 Morgan Stanley 224,100 12,193 National City Corp. 573,700 18,490 Nationwide Financial Services, Inc. Class A 12,100 489 New Century Financial Corp. (o) 35,300 1,090 North Fork Bancorporation, Inc. 63,300 1,604 Old Republic International Corp. 80,700 2,091 Paychex, Inc. 170,800 6,620 People's Bank (N) 8,900 287 Plum Creek Timber Co., Inc. (o) 15,800 615 Principal Financial Group, Inc. 207,600 10,303 Progressive Corp. (The) 57,200 6,624 ProLogis (o) 95,900 4,124 Protective Life Corp. 19,200 842 Prudential Financial, Inc. 21,500 1,565 Radian Group, Inc. 26,700 1,391 Regions Financial Corp. 28,313 922 Safeco Corp. 62,400 3,476 SLM Corp. 22,000 1,222 St. Paul Travelers Cos., Inc. (The) 106,800 4,809 Stancorp Financial Group, Inc. 9,500 875 SunTrust Banks, Inc. 99,312 7,198
Quantitative Equity Fund 41 FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- UnionBanCal Corp. 146,900 10,060 United Rentals, Inc. (AE) 38,300 750 US Bancorp 325,318 9,623 Vornado Realty Trust (o) 20,600 1,669 Wachovia Corp. 461,100 23,295 Washington Mutual, Inc. 839,400 33,240 Wells Fargo & Co. 338,000 20,348 WR Berkley Corp. 15,150 662 ------------ 613,772 ------------ Health Care - 13.7% Abbott Laboratories 290,382 12,501 Abgenix, Inc. (AE) 5,500 57 Aetna, Inc. 246,334 21,815 Allergan, Inc. 139,200 12,431 American Medical Systems Holdings, Inc. (AE) 22,851 374 AmerisourceBergen Corp. 166,600 12,707 Amgen, Inc. (AE) 570,700 43,236 Barr Pharmaceuticals, Inc. (AE) 28,000 1,609 Baxter International, Inc. 80,700 3,085 Becton Dickinson & Co. 209,900 10,652 Bio-Rad Laboratories, Inc. Class A (AE)(N) 6,100 357 Bristol-Myers Squibb Co. 285,600 6,046 Cardinal Health, Inc. 195,900 12,246 Caremark Rx, Inc. (AE) 181,100 9,490 Community Health Systems, Inc. (AE) 25,700 954 Coventry Health Care, Inc. (AE) 85,725 4,628 CR Bard, Inc. 90,600 5,652 Dade Behring Holdings, Inc. 51,300 1,847 Edwards Lifesciences Corp. (AE) 82,900 3,430 Express Scripts, Inc. (AE) 37,700 2,843 Genentech, Inc. (AE) 69,500 6,297 Genzyme Corp. (AE) 47,200 3,413 Gilead Sciences, Inc. (AE) 249,500 11,789 Guidant Corp. 18,000 1,134 HCA, Inc. 61,300 2,954 Health Net, Inc. (AE) 42,000 1,967 Humana, Inc. (AE) 126,800 5,629 Johnson & Johnson 1,074,200 67,266 Lincare Holdings, Inc. (AE) 4,700 192 McKesson Corp. 121,020 5,498 Medarex, Inc. (AE)(N) 32,500 284 Medco Health Solutions, Inc. (AE) 49,700 2,808 Medtronic, Inc. 146,500 8,301 Merck & Co., Inc. 634,200 17,897 Pfizer, Inc. 2,159,887 46,956 Respironics, Inc. (AE) 15,600 560 St. Jude Medical, Inc. (AE) 157,000 7,547 UnitedHealth Group, Inc. 178,600 10,339 Universal Health Services, Inc. Class B (N) 83,400 3,931
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Varian Medical Systems, Inc. (AE) 74,000 3,371 WellPoint, Inc. (AE) 85,800 6,407 Wyeth 175,900 7,838 Zimmer Holdings, Inc. (AE) 1,000 64 ------------ 388,402 ------------ Integrated Oils - 5.9% Chevron Corp. 705,300 40,252 ConocoPhillips 711,448 46,514 Exxon Mobil Corp. 1,339,708 75,211 Marathon Oil Corp. 39,600 2,382 Occidental Petroleum Corp. 48,500 3,826 ------------ 168,185 ------------ Materials and Processing - 3.0% AK Steel Holding Corp. (AE) 8,400 59 Allegheny Technologies, Inc. (N) 22,100 635 Archer-Daniels-Midland Co. 341,851 8,331 Ashland, Inc. 72,700 3,890 Avery Dennison Corp. 19,600 1,110 Celanese Corp. (N) 8,000 141 Dow Chemical Co. (The) 146,000 6,696 Energizer Holdings, Inc. (AE) 81,300 4,105 Florida Rock Industries, Inc. (N) 32,600 1,855 Freeport-McMoRan Copper & Gold, Inc. Class B (N) 211,500 10,452 Georgia-Pacific Corp. 140,500 4,570 Gold Kist, Inc. (AE)(N) 1,032 18 Granite Construction, Inc. 20,300 692 Lafarge North America, Inc. 11,400 690 Lennox International, Inc. 3,700 103 Monsanto Co. 119,900 7,555 Newmont Mining Corp. 13,400 571 Nucor Corp. (N) 329,275 19,707 Phelps Dodge Corp. 65,800 7,927 Rohm & Haas Co. 71,000 3,091 Southern Copper Corp. (N) 15,200 838 USG Corp. (AE) 16,600 981 ------------ 84,017 ------------ Miscellaneous - 1.9% 3M Co. 33,900 2,576 General Electric Co. 1,483,400 50,302 ITT Industries, Inc. 23,700 2,408 ------------ 55,286 ------------
42 Quantitative Equity Fund FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Other Energy - 3.3% Anadarko Petroleum Corp. 140,400 12,736 Apache Corp. 146,300 9,338 BJ Services Co. 58,400 2,029 Burlington Resources, Inc. 131,600 9,504 Devon Energy Corp. 255,800 15,445 Diamond Offshore Drilling, Inc. (N) 29,700 1,677 EOG Resources, Inc. 80,300 5,443 Houston Exploration Co. (AE)(N) 20,200 1,041 Newfield Exploration Co. (AE) 52,100 2,362 Smith International, Inc. 46,800 1,516 Sunoco, Inc. 257,200 19,161 Todco Class A 31,900 1,428 Valero Energy Corp. 110,200 11,598 ------------ 93,278 ------------ Producer Durables - 5.7% Agilent Technologies, Inc. (AE) 143,200 4,584 Ametek, Inc. 30,700 1,250 Boeing Co. 274,300 17,731 Caterpillar, Inc. 151,600 7,973 Danaher Corp. 86,400 4,502 DR Horton, Inc. 666,651 20,460 Emerson Electric Co. 13,000 904 Herman Miller, Inc. 17,400 477 Illinois Tool Works, Inc. 18,300 1,551 Joy Global, Inc. 28,000 1,284 KB Home 57,000 3,725 KLA-Tencor Corp. 191,800 8,878 Lennar Corp. Class A (N) 128,800 7,159 Lockheed Martin Corp. 422,900 25,611 MDC Holdings, Inc. 15,700 1,077 Meritage Homes Corp. (AE)(N) 6,800 423 Northrop Grumman Corp. 490,096 26,294 NVR, Inc. (AE) 900 617 Pulte Homes, Inc. 99,800 3,772 Standard-Pacific Corp. (N) 45,600 1,759 Technical Olympic USA, Inc. (AE)(N) 12,200 258 Teradyne, Inc. (AE)(N) 96,700 1,309 Thermo Electron Corp. (AE) 38,600 1,165 Toll Brothers, Inc. (AE)(N) 179,500 6,625 United Technologies Corp. 238,500 12,230 WCI Communities, Inc. (AE)(N) 8,300 208 ------------ 161,826 ------------ Technology - 13.6% 3Com Corp. (AE) 9,300 36 Acxiom Corp. 32,500 694 Adobe Systems, Inc. 49,500 1,596 Advanced Micro Devices, Inc. (AE)(N) 84,200 1,955 Akamai Technologies, Inc. (AE)(N) 57,400 995 Amphenol Corp. Class A 37,200 1,487 Apple Computer, Inc. (AE) 512,700 29,526
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Applera Corp. - Applied Biosystems Group 19,500 473 Applied Micro Circuits Corp. (AE) 134,900 329 Arrow Electronics, Inc. (AE) 21,200 626 Atmel Corp. (AE) 135,900 334 Autodesk, Inc. 267,500 12,072 BEA Systems, Inc. (AE)(N) 28,000 247 BMC Software, Inc. (AE) 36,000 705 Cadence Design Systems, Inc. (AE) 85,600 1,368 Ciena Corp. (AE) 166,100 394 Cisco Systems, Inc. (AE) 684,900 11,951 Citrix Systems, Inc. (AE) 29,400 811 Computer Associates International, Inc. 2,041 57 Computer Sciences Corp. (AE) 278,800 14,288 Comverse Technology, Inc. (AE) 73,800 1,852 Corning, Inc. (AE) 273,700 5,499 Dell, Inc. (AE) 19,500 622 Electronic Data Systems Corp. 112,900 2,632 Electronics for Imaging, Inc. (AE)(N) 10,900 274 EMC Corp. (AE) 1,170,600 16,342 F5 Networks, Inc. (AE)(N) 7,500 390 General Dynamics Corp. 83,800 9,746 Harris Corp. 165,300 6,794 Hewlett-Packard Co. 1,289,800 36,166 Ingram Micro, Inc. Class A (AE) 236,700 4,284 Intel Corp. 2,639,800 62,035 International Business Machines Corp. 232,200 19,013 Jabil Circuit, Inc. (AE) 127,700 3,812 LSI Logic Corp. (AE)(N) 50,300 408 McAfee, Inc. (AE) 142,200 4,270 Micron Technology, Inc. (AE) 334,100 4,340 Microsoft Corp. 1,335,502 34,322 Motorola, Inc. 641,600 14,218 National Semiconductor Corp. 7,600 172 NCR Corp. (AE) 129,300 3,907 Oracle Corp. (AE) 1,529,300 19,391 Parametric Technology Corp. (AE) 92,000 599 PMC - Sierra, Inc. (AE)(N) 47,900 340 Qualcomm, Inc. 158,200 6,290 Raytheon Co. 132,100 4,881 Rockwell Automation, Inc. 48,800 2,594 Sanmina-SCI Corp. (AE) 196,100 716 Scientific-Atlanta, Inc. 23,000 815 Seagate Technology, Inc. (AE) 67,668 -- Solectron Corp. (AE) 202,200 714 Sun Microsystems, Inc. (AE) 536,400 2,146 Symantec Corp. (AE) 59,500 1,419
Quantitative Equity Fund 43 FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Tellabs, Inc. (AE) 166,700 1,594 Texas Instruments, Inc. 865,600 24,713 TIBCO Software, Inc. (AE) 43,600 331 Western Digital Corp. (AE)(N) 526,000 6,365 ------------ 383,950 ------------ Utilities - 5.5% Ameren Corp. 69,900 3,677 American Electric Power Co., Inc. 20,100 763 AT&T Corp. 113,600 2,247 BellSouth Corp. 321,200 8,358 CenturyTel, Inc. 216,800 7,096 Citizens Communications Co. (N) 68,300 836 CMS Energy Corp. (AE) 146,700 2,187 Comcast Corp. Class A (AE) 412,700 11,485 Comcast Corp. Special Class A (AE) 80,600 2,209 Consolidated Edison, Inc. (N) 50,200 2,284 Constellation Energy Group, Inc. 92,000 5,042 DTE Energy Co. 45,700 1,974 Duke Energy Corp. 194,500 5,150 Edison International 577,441 25,269 Entergy Corp. 11,200 792 FirstEnergy Corp. 28,100 1,335 Nextel Partners, Inc. Class A (AE)(N) 241,600 6,076 PG&E Corp. 221,300 8,051 SBC Communications, Inc. 404,200 9,640 Sempra Energy 103,100 4,567 Sierra Pacific Resources (AE) 158,600 2,054 Sprint Nextel Corp. 148,600 3,464 Telephone & Data Systems, Inc. (N) 28,200 1,067 TXU Corp. 230,100 23,183 Verizon Communications, Inc. 532,376 16,774 ------------ 155,580 ------------ TOTAL COMMON STOCKS (cost $2,380,382) 2,685,002 ------------ SHORT-TERM INVESTMENTS - 5.0% Frank Russell Investment Company Money Market Fund 133,933,000 133,933 United States Treasury Bills (c)(z)(sec.) 3.373% due 12/08/05 8,000 7,973 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $141,906) 141,906 ------------
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- OTHER SECURITIES - 2.6% Frank Russell Investment Company Money Market Fund (X) 24,431,167 24,431 State Street Securities Lending Quality Trust (X) 50,057,152 50,057 ------------ TOTAL OTHER SECURITIES (cost $74,488) 74,488 ------------ TOTAL INVESTMENTS - 102.4% (identified cost $2,596,776) 2,901,396 OTHER ASSETS AND LIABILITIES, NET - (2.4%) (68,716) ------------ NET ASSETS - 100.0% 2,832,680 ============
See accompanying notes which are an integral part of the financial statements. 44 Quantitative Equity Fund FRANK RUSSELL INVESTMENT COMPANY QUANTITATIVE EQUITY FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
UNREALIZED NOTIONAL APPRECIATION FUTURES CONTRACTS AMOUNT (DEPRECIATION) (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Long Positions Russell 1000 Index expiration date 12/05 (37) 12,170 (291) Russell 1000 Mini Index (CME) expiration date 12/05 (10) 658 (21) S&P 500 E-Mini Index (CME) expiration date 12/05 (176) 10,646 (266) S&P 500 Index (CME) expiration date 12/05 (248) 75,008 (512) S&P Midcap 400 E-Mini Index (CME) expiration date 12/05 (240) 16,872 (2) S&P Midcap 400 Index (CME) expiration date 12/05 (70) 24,605 (655) --------------- Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (1,747) ===============
- -------------------------------------------------------------------------------- PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- Auto and Transportation 2.9 Consumer Discretionary 11.9 Consumer Staples 5.7 Financial Services 21.7 Health Care 13.7 Integrated Oils 5.9 Materials and Processing 3.0 Miscellaneous 1.9 Other Energy 3.3 Producer Durables 5.7 Technology 13.6 Utilities 5.5 Short-Term Investments 5.0 Other Securities 2.6 --------------- Total Investments 102.4 Other Assets and Liabilities, Net (2.4) --------------- 100.0 =============== Futures Contracts (0.1)
See accompanying notes which are an integral part of the financial statements. Quantitative Equity Fund 45 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- (Graph)
INTERNATIONAL SECURITIES - CLASS S MSCI EAFE ** ---------------------------------- ------------ * 10000.00 10000.00 1996 11049.00 11080.00 1997 11566.00 11625.00 1998 11981.00 12782.00 1999 14558.00 15769.00 2000 14760.00 15349.00 2001 11142.00 11561.00 2002 9731.00 10066.00 2003 12436.00 12841.00 2004 14300.00 15316.00 2005 16713.00 18163.00
International Securities Fund - Class S - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 16.88% 5 Years 2.52%S 10 Years 5.27%S
International Securities Fund - Class E ++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 16.56% 5 Years 2.26%S 10 Years 4.98%S
International Securities Fund - Class C ++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 15.72% 5 Years 1.49%S 10 Years 4.44%S
MSCI EAFE Index** - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 18.59% 5 Years 3.42%S 10 Years 6.15%S
46 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide long term capital growth. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005? For the fiscal year ended October 31, 2005, the International Securities Fund Class S, Class E and Class C Shares gained 16.88%, 16.56% and 15.72%, respectively. This compared to the MSCI EAFE(R) Index, which gained 18.59% during the same period. The Fund's performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind. For the year ending October 31, 2005, the Lipper(R) International Funds Average returned 17.78%. This result serves as a peer comparison and is expressed net of operating expenses. HOW DID THE MARKET CONDITIONS DESCRIBED IN THE MARKET SUMMARY REPORT AFFECT THE FUND'S PERFORMANCE? Given some of the uncertainties in the market during the period, the Fund was positioned relatively conservatively with a slight tilt towards growth sectors. The Fund had a modest overweight to the consumer discretionary and information technology sectors and underweight to industrials. Due to the stronger performance of the cyclical sectors, the Fund's underweight in industrials, combined with an underweight and some weak stock selection in materials, detracted from the performance. An overweight in the lagging information technology sector also contributed negatively to the Fund's performance. In terms of country positions, the Fund was penalized for an underweight to Australia and an overweight to Taiwanese technology companies. Overall, however, exposure to Canadian and emerging markets stocks proved to be beneficial, given their generally strong gains over the period. WHAT WERE THE PRIMARY CONTRIBUTORS AND DETRACTORS TO THE FUND'S PERFORMANCE DURING THE LAST 12 MONTHS? The Fund lagged the MSCI EAFE(R) Index over the 12 months. Much of the shortfall was attributable to the first six months of the fiscal year, when the Fund's performance suffered from overweights to price and earnings momentum strategies and an overweight to stocks with high long-term earnings forecasts. From a sector perspective, the Fund's underweight in the industrials sector and overweights in information technology and consumer discretionary stocks were significant detractors from performance. From a country perspective, an underweight to Australia had the biggest negative impact to Fund performance. In the aggregate, the Fund's money managers viewed Australia's market valuation as less attractive given its strong performance in recent periods. Stock selection overall was effective in most areas, but was more than offset by these negative contributors to Fund performance. HOW DID THE INVESTMENT STRATEGIES AND TECHNIQUES EMPLOYED BY THE FUND AND ITS MONEY MANAGERS AFFECT ITS PERFORMANCE? The market slightly favored value-oriented money managers in the period. However, the Fund's best performing money manager was Axiom International Investors LLC, an aggressive growth manager. Axiom outperformed the benchmark by a substantial margin on strong stock selection and exposure to smaller capitalization stocks. Alliance Capital Management, L.P., through its Bernstein Investment Research & Management Unit, was the strongest performer among the value money managers and delivered a solid excess return for the period. AllianceBernstein did well through strong stock selection, particularly in Japan, with holdings such as Sumitomo Heavy Industries, Sumitomo Metal Industries and Kobe Steel. AllianceBernstein's stock selection in Germany was also strong, helped by positions in Heidelberg Cement and Continental. Oechsle International Advisors, LLC, a momentum-driven growth manager, struggled over the first half of the fiscal year in the very reactive, rotational market and detracted significantly from the Fund's performance. DESCRIBE ANY CHANGES TO THE FUND'S STRUCTURE OR THE MONEY MANAGER LINE-UP. To improve the structure of the Fund's growth segment, Oechsle and Capital International, Inc., were terminated in April 2005. Wellington Management Company, LLP and MFS Institutional Advisors, Inc., were hired to provide consistent growth strategies intended to complement the processes of the remaining growth managers. These changes moderated the Fund's momentum exposure and increased exposure to high quality defensive growth stocks. International Securities Fund 47 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- Money Managers as of Styles October 31, 2005 Alliance Capital Management, L.P., through its Bernstein Investment Research and Management Unit Value AQR Capital Management, LLC Market-Oriented Axiom International Investors, LLC Growth Fidelity Management & Research Company Market-Oriented Marvin & Palmer Associates, Inc. Growth MFS Institutional Advisors, Inc. Growth Mondrian Investment Partners Limited Value The Boston Company Asset Management, LLC Value Wellington Management Company, LLP Growth
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Frank Russell Investment Management Company (FRIMCo), or any other person in FRIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and FRIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Frank Russell Investment Company (FRIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any FRIC Fund. -------------------- * International Securities Fund Class S assumes initial investment on November 1, 1995. ** Morgan Stanley Capital International Europe, Australia, Far East (MSCI EAFE) Index is an index composed of an arithmetic, market value-weighted average of the performance of approximately 1,600 securities listed on the stock exchange of the countries of Europe, Australia, and the Far East. The index is calculated on a total-return basis, which includes reinvestment of gross dividends before deduction of withholding taxes. ++ International Securities Fund Class S performance has been linked with Class E to provide historical perspective. For the period November 4, 1996 (commencement of sale) to May 15, 1998, Class E paid shareholder service and Rule 12b-1 distribution fees. From May 16, 1998 through the current period, Class E paid only shareholder service fees. Total return would have been lower had these fees been in effect during prior reporting periods. ++++ International Securities Fund Class S and Class E performance has been linked with Class C to provide historical perspective. From January 27, 1999 (commencement of sale) through the current period, Class C paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. sec. Annualized. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 48 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS C PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,085.50 $ 1,013.86 Expenses Paid During Period* $ 11.83 $ 11.42
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS E PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,089.50 $ 1,017.64 Expenses Paid During Period* $ 7.90 $ 7.63
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,091.00 $ 1,018.90 Expenses Paid During Period* $ 6.59 $ 6.36
* 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 184/365 (to reflect the one-half year period). International Securities Fund 49 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- COMMON STOCKS - 90.9% Australia - 3.7% ABC Learning Centres, Ltd. (N) 92,243 450 Amcor, Ltd. 1,213,456 6,088 AMP Ltd. 252,400 1,380 Australia & New Zealand Banking Group, Ltd. 145,787 2,574 Australian Gas Light Co., Ltd. 34,500 391 AXA Asia Pacific Holdings, Ltd. 60,300 215 BHP Billiton, Ltd. 529,687 8,220 BlueScope Steel, Ltd. 216,300 1,374 Boral, Ltd. 29,100 165 Bradken, Ltd. 74,031 208 Brambles Industries, Ltd. (N) 29,700 188 Caltex Australia, Ltd. 28,600 436 CFS Gandel Retail Trust 155,100 217 Challenger Financial Services Group, Ltd. 21,500 59 Coles Myer, Ltd. 579,686 4,355 Commonwealth Bank of Australia 42,000 1,223 Commonwealth Property Office Fund 84,700 77 Computershare, Ltd. 232,700 1,143 ConnectEast Group 304,061 165 CSR, Ltd. 142,500 312 David Jones, Ltd. (N) 117,000 199 DB RREEF Trust (o) 176,042 176 DCA Group, Ltd. (N) 82,200 238 Downer EDI, Ltd. 108,413 494 Foster's Group, Ltd. 1,943,049 8,441 GPT Group 127,200 366 Gunns, Ltd. (N) 149,200 311 Iluka Resources, Ltd. 27,900 162 Insurance Australia Group, Ltd. 86,800 337 Lend Lease Corp., Ltd. 16,300 167 Lion Nathan, Ltd. (N) 27,700 164 Macquarie Airports 702,700 1,583 Macquarie Bank, Ltd. (N) 153,420 7,454 Macquarie Goodman Group 13,530 41 Macquarie Infrastructure Group 363,800 936 Mayne Group, Ltd. (N) 29,700 116 National Australia Bank, Ltd. (N) 579,264 14,331 Oil Search, Ltd. (N) 218,500 539 OneSteel, Ltd. (N) 114,100 302 Origin Energy, Ltd. 55,000 276 PaperlinX, Ltd. (N) 95,700 221 Publishing & Broadcasting, Ltd. (N) 34,940 423 Qantas Airways, Ltd. 67,400 173 QBE Insurance Group, Ltd. (N) 436,317 5,828 Ramsay Health Care, Ltd. 35,500 235 Rinker Group, Ltd. 275,320 3,123 Rio Tinto, Ltd. (N) 15,700 663 Santos, Ltd. 40,100 329 Seek, Ltd. (N) 46,900 100 Sons of Gwalia, Ltd. (AE)(N)(B) 34,800 --
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Stockland (N) 45,700 209 Suncorp-Metway, Ltd. 44,300 640 TABCORP Holdings, Ltd. 15,800 189 Telstra Corp., Ltd. (N) 1,971,366 6,201 Transurban Group 154,300 740 United Group, Ltd. 46,100 364 Wesfarmers, Ltd. (N) 17,182 460 Westfield Group (N) 116,176 1,446 Westpac Banking Corp. 52,000 809 Woodside Petroleum, Ltd. 79,700 1,883 Woolworths, Ltd. (N) 120,662 1,475 ------------ 91,384 ------------ Austria - 0.4% Erste Bank der Oesterreichischen Sparkassen AG 158,348 8,233 OMV AG 35,900 1,937 Raiffeisen International Bank Holding AG (AE)(N) 7,300 460 ------------ 10,630 ------------ Belgium - 0.9% Belgacom SA 22,600 758 Delhaize Group (N) 56,700 3,289 Dexia 19,700 425 Electrabel (N) 10,087 4,991 Fortis (N) 327,875 9,336 Groupe Bruxelles Lambert SA 5,400 493 KBC Groep NV (N) 24,500 1,996 Mobistar SA (N) 3,300 267 Solvay SA Class A 2,000 233 Umicore 3,600 360 ------------ 22,148 ------------ Brazil - 0.3% Cia Vale do Rio Doce - ADR 95,650 3,953 Petroleo Brasileiro SA - ADR 32,160 2,055 Telecomunicacoes Brasileiras SA - ADR (N) 49,800 1,660 ------------ 7,668 ------------ Canada - 1.8% Bank of Montreal 3 -- Bank of Nova Scotia 31,137 1,133 Cameco Corp. (N) 26,900 1,286 Canadian National Railway Co. 66,360 4,810 Canadian Natural Resources, Ltd. 109,800 4,489 Canadian Pacific Railway, Ltd. 61,600 2,532 EnCana Corp. 144,080 6,587
50 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Inco, Ltd. (AE) 30,500 1,227 Manulife Financial Corp. 22,300 1,160 Nexen, Inc. 26,000 1,070 Petro-Canada 143,800 5,011 Research In Motion, Ltd. (AE) 61,600 3,788 Rogers Communications, Inc. Class B 36,700 1,448 SNC-Lavalin Group, Inc. 40,500 2,555 Talisman Energy, Inc. 86,300 3,822 Teck Cominco, Ltd. Class B (N) 51,200 2,157 Toronto-Dominion Bank 30,400 1,434 ------------ 44,509 ------------ China - 0.0% China Construction Bank Class H (AE) 671,000 205 China Telecom Corp., Ltd. Class H 1,168,000 381 Foxconn International Holdings, Ltd. (AE)(N) 255,000 274 ------------ 860 ------------ Denmark - 0.3% AP Moller - Maersk A/S Class B 269 2,433 D/S Torm A/S (N) 2,400 127 Danske Bank A/S 90,131 2,826 East Asiatic Co., Ltd. A/S (N) 4,275 323 GN Store Nord A/S 66,300 798 Novo-Nordisk A/S Series B 4,350 224 Novozymes A/S 3,500 183 TDC A/S 7,700 431 ------------ 7,345 ------------ Finland - 1.0% Fortum OYJ 188,257 3,333 Kesko OYJ Class B 10,700 294 M-real OYJ Class S (N) 373,900 1,779 Neste Oil OYJ (AE) 72,488 2,248 Nokia OYJ 420,750 7,060 Nokia OYJ - ADR 50,090 843 Nokian Renkaat OYJ 9,450 147 Pohjola Group OYJ Class D (N) 16,800 270 Rautaruukki OYJ 13,600 278 Sampo OYJ 149,800 2,297 UPM-Kymmene OYJ 303,249 5,856 Wartsila OYJ Class S 28,500 791 YIT-Yhtyma OYJ 3,300 127 ------------ 25,323 ------------ France - 9.8% Air Liquide SA (N) 40,545 7,373 Altran Technologies SA (AE) 180,729 2,113 Areva SA 100 45 Assurances Generales de France (N) 39,500 3,761 Axa SA (N) 449,063 13,005 BNP Paribas (N) 185,243 14,044
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Business Objects SA (AE) 41,683 1,428 Cap Gemini SA (AE) 33,800 1,242 Carrefour SA (N) 105,870 4,705 Christian Dior SA 22,100 1,773 Cie de Saint-Gobain (N) 129,817 7,111 Cie Generale d'Optique Essilor International SA (N) 62,553 5,148 CNP Assurances (N) 18,100 1,259 Credit Agricole SA (N) 355,396 10,416 Dassault Systemes SA (AE)(N) 104,328 5,380 France Telecom SA (N) 176,160 4,579 Gaz de France 1,800 55 Groupe Danone (N) 41,259 4,190 Lafarge SA (N) 11,771 968 Lagardere SCA (N) 13,200 907 LVMH Moet Hennessy Louis Vuitton SA (N) 142,446 11,534 Natexis Banques Populaires 900 135 Pernod-Ricard (N) 8,280 1,447 Peugeot SA (N) 50,072 3,040 Pinault-Printemps-Redoute 12,519 1,315 Publicis Groupe (N) 136,260 4,508 Renault SA (N) 52,300 4,526 Sanofi-Aventis (N) 173,531 13,895 Sanofi-Aventis 3,305 264 Schneider Electric SA (N) 96,269 7,905 Societe BIC SA (N) 7,900 449 Societe Generale (N) 132,089 15,081 Societe Television Francaise 1 (N) 40,584 1,041 Sodexho Alliance SA (N) 33,000 1,284 Suez SA (N) 78,600 2,128 Technip SA (N) 64,700 3,523 Thomson (N) 173,940 3,279 Total SA (N) 152,197 38,325 Total SA - ADR (N) 27,636 3,483 Unibail (N) 23,208 3,065 Valeo SA (N) 78,752 2,950 Vallourec SA (N) 1,600 719 Veolia Environnement (N) 297,289 12,395 Vinci SA (N) 57,900 4,522 Vivendi Universal SA (N) 337,379 10,601 ------------ 240,916 ------------ Germany - 5.7% Adidas-Salomon AG 24,550 4,117 Allianz AG 69,366 9,797 AMB Generali Holding AG 6,000 541 Bayer AG (N) 170,116 5,907 Bayerische Hypo- und Vereinsbank AG (AE) 339,308 9,455
International Securities Fund 51 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Bilfinger Berger AG (N) 23,900 1,034 Celesio AG 17,100 1,478 Continental AG 84,500 6,459 DaimlerChrysler AG 13,600 681 Deutsche Bank AG 39,481 3,698 Deutsche Boerse AG (N) 53,661 5,049 Deutsche Lufthansa AG (N) 164,684 2,202 Deutsche Post AG 188,331 4,198 Deutsche Telekom AG (N) 319,160 5,642 E.ON AG 215,144 19,496 Fresenius Medical Care AG (N) 10,500 945 Hannover Rueckversicherung AG (N) 57,900 2,095 Heidelberger Druckmaschinen 40,097 1,273 Hochtief AG 22,800 921 Hypo Real Estate Holding AG 4,000 193 Infineon Technologies AG (AE)(N) 207,000 1,935 KarstadtQuelle AG (N) 6,756 80 Lanxess AG (AE) 8,630 250 MAN AG 87,400 4,058 Medion AG (N) 29,900 415 Merck KGaA 125,753 10,404 Metro AG (N) 11,100 505 MLP AG (N) 2,400 46 Muenchener Rueckversicherungs-Gesellschaft AG 76,099 8,939 RWE AG 147,022 9,390 Salzgitter AG 31,400 1,374 SAP AG 26,300 4,496 Schering AG 69,813 4,313 Siemens AG 47,467 3,530 Suedzucker AG (N) 3,100 65 ThyssenKrupp AG (N) 24,300 493 TUI AG (N) 63,200 1,228 Volkswagen AG (N) 63,457 3,457 ------------ 140,159 ------------ Greece - 0.3% EFG Eurobank Ergasias SA 85,200 2,560 National Bank of Greece SA 34,900 1,364 OPAP SA 76,380 2,205 Public Power Corp. 28,580 607 ------------ 6,736 ------------ Hong Kong - 1.9% AAC Acoustic Technology Holdings, Inc. (AE) 56,000 29 Bank of East Asia, Ltd. 956,238 2,792 BOC Hong Kong Holdings, Ltd. (N) 177,000 330 Cheung Kong Holdings, Ltd. 546,800 5,708 China Mobile Hong Kong, Ltd. 401,500 1,797 Citic Pacific, Ltd. 306,600 796 CLP Holdings, Ltd. 75,000 430 CNOOC, Ltd. 7,142,000 4,638 Esprit Holdings, Ltd. 552,500 3,923
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Hang Seng Bank, Ltd. (N) 10,300 134 HongKong Electric Holdings (N) 874,000 4,132 Hopewell Holdings 122,000 298 Hutchison Telecommunications International, Ltd. (AE) 3,077,000 3,859 Hutchison Whampoa, Ltd. (N) 313,000 2,971 Jardine Matheson Holdings, Ltd. 161,300 2,553 Kerry Properties, Ltd. (N) 94,500 236 Kingboard Chemical Holdings, Ltd. 49,500 105 Li & Fung, Ltd. 310,000 663 Melco International Development, Inc. 947,000 912 New World Development, Ltd. 196,000 244 Noble Group, Ltd. (N) 142,000 129 Orient Overseas International, Ltd. (N) 69,000 221 Shangri-La Asia, Ltd. (N) 220,000 309 Sino Land Co. (N) 1,368,000 1,521 Sun Hung Kai Properties, Ltd. 25,000 237 Swire Pacific, Ltd. 138,300 1,241 Techtronic Industries Co. (N) 144,500 357 Television Broadcasts, Ltd. 95,000 528 Wharf Holdings, Ltd. (N) 1,391,862 4,751 Wing Hang Bank, Ltd. 71,000 509 78,000 531 ------------ 46,884 ------------ Hungary - 0.3% Mol Magyar Olaj- es Gazipari Rt. 9,000 839 OTP Bank Rt - GDR 42,365 3,049 OTP Bank Rt. 85,600 3,092 ------------ 6,980 ------------ Indonesia - 0.1% Bank Central Asia Tbk PT 4,246,000 1,355 Telekomunikasi Indonesia Tbk PT 1,834,500 919 Telekomunikasi Indonesia Tbk PT - ADR(N) 6,742 137 ------------ 2,411 ------------ Ireland - 0.6% Allied Irish Banks PLC 67,300 1,409 Anglo Irish Bank Corp. PLC 62,100 845 Bank of Ireland PLC 285,558 4,348 CRH PLC 102,840 2,572 Depfa Bank PLC 303,347 4,726 Ryanair Holdings PLC - ADR (AE)(N) 40,906 2,028 ------------ 15,928 ------------
52 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Israel - 0.3% Check Point Software Technologies (AE) 125,910 2,815 Teva Pharmaceutical Industries, Ltd. - ADR (N) 104,200 3,972 ------------ 6,787 ------------ Italy - 2.7% Autostrade SpA (N) 105,552 2,414 Banca Intesa SpA (N) 2,417,490 11,289 Banca Popolare di Milano SCRL 14,900 142 Banco Popolare di Verona e Novara SCRL (N) 161,776 2,985 Benetton Group SpA (N) 116,611 1,233 Capitalia SpA (N) 142,900 746 CIR-Compagnie Industriali Riunite SpA 82,800 234 Enel SpA 118,200 954 Eni SpA (N) 818,946 21,904 ERG SpA 30,500 769 Fastweb (AE)(N) 37,769 1,719 Finmeccanica SpA (AE)(N) 50,700 922 Fondiaria-Sai SpA 60,900 1,684 Hera SpA (N) 84,800 217 Italcementi SpA (N) 64,000 1,049 Lottomatica SpA (N) 32,500 1,180 Mediaset SpA (N) 62,000 681 Milano Assicurazioni SpA 123,400 772 Parmalat Finanziaria SpA (AE)(N) 42,200 -- Recordati SpA 91,300 668 Saipem SpA (N) 181,200 2,598 Seat Pagine Gialle SpA (AE) 2,851,500 1,324 Snam Rete Gas SpA (N) 170,800 938 Telecom Italia SpA (N) 464,900 1,345 Telecom Italia SpA 594,092 1,436 UniCredito Italiano SpA (N) 1,484,210 8,288 ------------ 67,491 ------------ Japan - 21.9% 77 Bank, Ltd. (The) 324,400 2,593 Access Co., Ltd. (AE) 15 293 Acom Co., Ltd. 1,760 115 Aeon Co., Ltd. 235,800 4,913 Aida Engineering, Ltd. (N) 52,000 359 Aiful Corp. 16,350 1,222 Aioi Insurance Co., Ltd. 72,000 510 Aisin Seiki Co., Ltd. 43,500 1,312 All Nippon Airways Co., Ltd. 27,000 88 Alps Electric Co., Ltd. (N) 81,300 1,291 Arrk Corp. 15,400 850 Aruze Corp. 18,000 325 Asahi Glass Co., Ltd. (N) 687,000 7,449 Asahi Kasei Corp. 85,000 456 Astellas Pharma, Inc. 100,800 3,604
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Autobacs Seven Co., Ltd. (N) 2,700 110 Bandai Visual Co., Ltd. 131 437 Bank of Kyoto, Ltd. (The) (N) 12,000 132 Bank of Yokohama, Ltd. (The) 25,000 203 Benesse Corp. 3,800 134 Bridgestone Corp. 220,000 4,503 BSL Corp. (N) 123,000 261 Canon Sales Co., Inc. 10,000 218 Canon, Inc. 478,900 25,343 Chiba Bank, Ltd. (The) 36,000 322 Chiyoda Corp. (N) 113,000 1,946 Chubu Electric Power Co., Inc. (N) 32,800 814 Chugai Pharmaceutical Co., Ltd. 293,000 6,437 Circle K Sunkus Co., Ltd. 30,100 689 Citizen Watch Co., Ltd. 35,500 270 COMSYS Holdings Corp. 21,000 238 Cosmo Oil Co., Ltd. (N) 39,000 189 Credit Saison Co., Ltd. (N) 26,500 1,204 Cyber Communications, Inc. (AE) 149 378 Dai Nippon Printing Co., Ltd. 46,000 751 Daihatsu Motor Co., Ltd. (N) 20,000 191 Daiichi Sankyo Co., Ltd. (AE) 27,121 492 Daikin Industries, Ltd. 30,700 799 Daimaru, Inc. 27,000 331 Dainippon Screen Manufacturing Co., Ltd. (N) 67,000 413 Daiwa House Industry Co., Ltd. 24,000 322 Daiwa Securities Group, Inc. 193,000 1,594 Denki Kagaku Kogyo Kabushiki Kaisha 41,000 150 Denso Corp. 9,700 277 Dentsu, Inc. (N) 673 1,826 Don Quijote Co., Ltd. (N) 11,600 838 East Japan Railway Co. 813 4,846 Eisai Co., Ltd. (N) 163,200 6,408 Exedy Corp. 26,800 626 Fanuc, Ltd. 86,100 6,805 Frontier Real Estate Investment Corp. (o) 60 374 Fuji Heavy Industries, Ltd. (N) 408,800 2,048 Fuji Photo Film Co., Ltd. 100,900 3,222 Fujitsu, Ltd. 252,000 1,670 Funai Electric Co., Ltd. 25,900 2,115 Glory, Ltd. 11,500 225 Hirose Electric Co., Ltd. (N) 3,500 401 Hitachi Chemical Co., Ltd. (N) 18,600 401 Hitachi Koki Co., Ltd. 58,000 788 Hitachi Kokusai Electric, Inc. 47,000 464 Hitachi, Ltd. 885,000 5,442
International Securities Fund 53 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Hokkaido Electric Power Co., Inc. 7,100 147 Hokuhoku Financial Group, Inc. (N) 287,000 1,195 Honda Motor Co., Ltd. 144,200 8,009 Hoya Corp. (N) 16,700 587 Hoya Corp. (AE) 75,000 2,596 Ibiden Co., Ltd. (N) 134,900 5,492 Isuzu Motors, Ltd. (N) 43,000 169 Itochu Corp. 673,000 4,625 Itochu-Shokuhin Co., Ltd. (N) 7,200 244 Japan Asia Investment Co., Ltd. 80,000 449 Japan Logistics Fund, Inc. (AE)(o) 83 515 Japan Tobacco, Inc. 1,082 17,127 JFE Holdings, Inc. (N) 171,000 5,290 JGC Corp. (N) 30,000 493 Joyo Bank, Ltd. (The) 27,000 181 JS Group Corp. (N) 108,600 1,843 JSR Corp. (N) 148,600 3,499 Kadokawa Holdings, Inc. (N) 22,300 802 Kaken Pharmaceutical Co., Ltd. (N) 21,000 149 Kamigumi Co., Ltd. 66,000 545 Kaneka Corp. 187,000 2,311 Kansai Electric Power Co., Inc. (The) 39,200 862 Kansai Paint Co., Ltd. 73,000 438 Kao Corp. 103,700 2,476 Kawasaki Heavy Industries, Ltd. (N) 114,000 299 Kawasaki Kisen Kaisha, Ltd. (N) 36,000 226 KDDI Corp. 1,872 10,685 Keihin Corp. (N) 7,000 157 Keyence Corp. 18,300 4,232 Kirin Beverage Corp. (N) 10,600 222 Kirin Brewery Co., Ltd. 24,000 266 Kobe Steel, Ltd. (N) 757,000 2,230 Koei Co., Ltd. (N) 20,100 606 Koito Manufacturing Co., Ltd. 30,000 402 Komatsu, Ltd. 830,000 11,175 Kose Corp. (N) 14,100 509 Koyo Seiko Co., Ltd. (N) 103,000 1,659 Kubota Corp. 113,000 822 Kuraray Co., Ltd. (N) 197,200 1,872 Kyocera Corp. 19,100 1,238 Kyowa Hakko Kogyo Co., Ltd. 79,000 611 Kyushu Electric Power Co., Inc. 18,600 399 Kyushu-Shinwa Holdings, Inc. (AE) 200,000 550 Leopalace21 Corp. (N) 22,500 582 Livedoor Co., Ltd. (AE)(N) 189,420 694 Mabuchi Motor Co., Ltd. (N) 55,400 2,696 Makita Corp. (N) 29,000 673 Mars Engineering Corp. 9,200 282 Marubeni Corp. 652,000 3,050 Matsumotokiyoshi Co., Ltd. (N) 16,100 487 Matsushita Electric Industrial Co., Ltd. 622,000 11,417 Matsushita Electric Works, Ltd. (N) 38,000 356 Mazda Motor Corp. 78,000 370 Meiji Dairies Corp. (N) 27,000 145
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Meitec Corp. 6,800 220 Millea Holdings, Inc. 247 4,492 Minebea Co., Ltd. (N) 428,000 1,671 Mitsubishi Chemical Holdings Corp. (AE) 77,500 482 Mitsubishi Corp. 103,900 2,035 Mitsubishi Electric Corp. (N) 146,000 878 Mitsubishi Estate Co., Ltd. (N) 38,000 565 Mitsubishi Gas Chemical Co., Inc. 48,000 326 Mitsubishi Rayon Co., Ltd. (N) 196,000 910 Mitsubishi Tokyo Financial Group, Inc. 1,203 15,169 Mitsui & Co., Ltd. (N) 186,000 2,280 Mitsui Chemicals, Inc. (N) 230,000 1,376 Mitsui Fudosan Co., Ltd. (N) 403,000 6,645 Mitsui OSK Lines, Ltd. (N) 252,000 1,780 Mitsui Sumitomo Insurance Co., Ltd. 267,000 3,447 Mitsui Trust Holdings, Inc. (N) 33,000 399 Mizuho Financial Group, Inc. 1,078 7,241 Mori Seiki Co., Ltd. 31,400 415 Murata Manufacturing Co., Ltd. 20,200 1,014 Netprice, Ltd. (AE) 86 317 Nidec Copal Corp. (N) 9,500 103 Nidec Corp. (N) 5,400 316 Nidec Corp. (AE) 5,400 299 Nikko Cordial Corp. 117,500 1,437 Nintendo Co., Ltd. 31,600 3,547 Nippon Electric Glass Co., Ltd. (N) 445,000 8,515 Nippon Express Co., Ltd. 845,400 4,642 Nippon Light Metal Co., Ltd. (N) 85,000 225 Nippon Meat Packers, Inc. 74,000 820 Nippon Mining Holdings, Inc. 313,500 2,307 Nippon Oil Corp. 231,000 1,961 Nippon Paper Group, Inc. 310 1,059 Nippon Shokubai Co., Ltd. 29,000 315 Nippon Steel Corp. (N) 450,000 1,604 Nippon Telegraph & Telephone Corp. 435 2,073 Nippon Yusen KK (N) 277,000 1,677 Nishi-Nippon City Bank, Ltd. (The) (N) 181,000 1,064 Nissan Motor Co., Ltd. (N) 565,500 5,910 Nissha Printing Co., Ltd. (N) 17,000 341 Nisshin Seifun Group, Inc. 4,400 45 Nisshin Steel Co., Ltd. (N) 120,000 380 Nitto Denko Corp. 86,400 5,231 NOK Corp. (N) 22,900 692 Nomura Holdings, Inc. 65,400 1,007 NSK, Ltd. 38,000 222 NTT DoCoMo, Inc. 1,502 2,600
54 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- NTT Urban Development Corp. (N) 102 600 Obayashi Corp. 33,000 242 Obic Co., Ltd. 4,600 751 OJI Paper Co., Ltd. 118,000 600 OMC Card, Inc. (N) 21,000 355 Omron Corp. 48,200 1,137 ORIX Corp. (N) 102,500 19,215 Osaka Gas Co., Ltd. 81,000 296 Parco Co., Ltd. 48,000 465 Promise Co., Ltd. 550 35 Rakuten, Inc. (N) 627 407 Renown D'urban Holdings, Inc. (AE) 8,900 92 Resona Holdings, Inc. (AE) 211 615 Ricoh Co., Ltd. 337,200 5,342 Rinnai Corp. (N) 90,500 2,156 Rohm Co., Ltd. 44,100 3,575 Sanken Electric Co., Ltd. (N) 38,000 440 Sankyo Co., Ltd. 6,600 350 Sanyo Shinpan Finance Co., Ltd. 21,800 1,582 Sapporo Hokuyo Holdings, Inc. 12 125 SBI Holdings, Inc. (N) 1,383 692 Sega Sammy Holdings, Inc. (N) 142,500 5,138 Sekisui Chemical Co., Ltd. (N) 157,000 991 Sekisui House, Ltd. (N) 220,700 2,746 Seven & I Holdings Co., Ltd. (AE) 116,900 3,816 SFCG Co., Ltd. (N) 1,190 286 Shimadzu Corp. 20,000 142 Shin-Etsu Chemical Co., Ltd. 98,900 4,760 Shinsei Bank, Ltd. 587,000 3,422 Shionogi & Co., Ltd. 68,000 827 Shizuoka Bank, Ltd. (The) (N) 100,000 1,056 Showa Shell Sekiyu KK (N) 19,900 247 Skylark Co., Ltd. (N) 132,800 2,193 SMBC Friend Securities Co., Ltd. 26,000 157 SMC Corp. 4,000 534 Softbank Corp. (N) 63,800 3,628 Sohgo Security Services Co., Ltd. (N) 51,190 843 Sompo Japan Insurance, Inc. 147,000 2,211 Sony Corp. (N) 23,200 757 Stanley Electric Co., Ltd. (N) 48,600 750 Sumisho Lease Co., Ltd. 25,300 1,205 Sumitomo Bakelite Co., Ltd. (N) 190,700 1,264 Sumitomo Chemical Co., Ltd. (N) 299,700 1,769 Sumitomo Corp. 12,000 135 Sumitomo Electric Industries, Ltd. 84,000 1,108 Sumitomo Forestry Co., Ltd. 69,000 639 Sumitomo Heavy Industries, Ltd. 559,000 3,904 Sumitomo Metal Industries, Ltd. 891,000 3,091 Sumitomo Mitsui Financial Group, Inc. (N) 2,455 22,862 Sumitomo Osaka Cement Co., Ltd. 45,000 127 Sumitomo Rubber Industries, Inc. 50,000 617 Sumitomo Trust & Banking Co., Ltd. (The) 68,000 578 Sumitomo Warehouse Co., Ltd. (The) 40,000 309
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- T&D Holdings, Inc. 30,800 1,952 Taiheiyo Cement Corp. (N) 98,000 355 Take And Give Needs Co., Ltd. (AE)(N) 725 1,015 Takeda Pharmaceutical Co., Ltd. 259,500 14,269 Takefuji Corp. 59,300 4,167 Tanabe Seiyaku Co., Ltd. 42,000 405 TDK Corp. (N) 14,600 989 Teijin, Ltd. 72,000 431 Telewave, Inc. 101 591 Terumo Corp. (N) 48,000 1,456 Toagosei Co., Ltd. (N) 48,000 245 Tobu Railway Co., Ltd. (N) 48,000 206 Toda Corp. 49,000 285 Tohoku Electric Power Co., Inc. (N) 32,300 659 Tokai Rika Co., Ltd. 2,700 62 Tokuyama Corp. (N) 78,000 772 Tokyo Electric Power Co., Inc. (The) 125,400 3,117 Tokyo Gas Co., Ltd. (N) 1,206,000 4,751 Toppan Printing Co., Ltd. (N) 31,000 300 Toray Industries, Inc. 547,000 3,035 Toshiba Corp. (N) 164,000 763 Toyo Seikan Kaisha, Ltd. 17,000 240 Toyobo Co., Ltd. 45,000 114 Toyoda Gosei Co., Ltd. (N) 97,300 1,823 Toyota Motor Corp. 772,200 35,850 Toyota Tsusho Corp. 13,000 289 USS Co., Ltd. 6,740 462 Valor Co., Ltd. 9,600 290 West Japan Railway Co. 632 2,247 Xebio Co., Ltd. (N) 10,000 430 Yahoo! Japan Corp. (N) 606 642 Yahoo! Japan Corp. (AE) 536 576 Yamada Denki Co., Ltd. (N) 66,100 5,844 Yamaha Motor Co., Ltd. 27,500 592 Yamato Transport Co., Ltd. 399,000 6,585 Yokogawa Electric Corp. (N) 34,600 509 ------------ 539,539 ------------ Luxembourg - 0.5% Arcelor (N) 125,340 2,976 Arcelor 60,000 1,416 SES Global 377,988 5,973 Tenaris SA - ADR (N) 14,100 1,549 ------------ 11,914 ------------
International Securities Fund 55 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Mexico - 0.8% America Movil SA de CV Series L 98,500 2,586 Cemex SA de CV 195,000 1,014 Coca-Cola Femsa SA de CV - ADR (N) 72,000 1,851 Fomento Economico Mexicano SA de CV - ADR 20,400 1,387 Grupo Televisa SA - ADR (N) 149,250 10,910 Telefonos de Mexico SA de CV Series L (N) 106,300 2,145 ------------ 19,893 ------------ Netherlands - 3.4% ABN AMRO Holding NV (N) 215,790 5,101 Aegon NV (N) 269,646 4,058 Buhrmann NV (N) 118,700 1,312 CSM NV Class A 9,200 235 Euronext NV 33,100 1,406 European Aeronautic Defense and Space Co. (N) 192,393 6,661 Heineken Holding NV (N) 2,035 60 Heineken NV 111,060 3,517 Hunter Douglas NV 1,300 62 ING Groep NV 598,861 17,271 Koninklijke Ahold NV (AE) 97,600 681 Koninklijke DSM NV 31,500 1,131 Koninklijke Philips Electronics NV 436,202 11,405 OCE NV 11,200 160 Reed Elsevier NV 531,062 7,153 Rodamco Europe NV 16,700 1,329 Royal Dutch Shell PLC Class A (N) 147,700 4,578 Royal KPN NV 168,700 1,600 Royal Numico NV (AE) 181,030 7,328 TomTom NV (AE) 31,597 1,217 Unilever NV 14,700 1,035 VNU NV (N) 131,980 4,196 Wolters Kluwer NV 145,420 2,697 ------------ 84,193 ------------ New Zealand - 0.2% Telecom Corp. of New Zealand, Ltd. (N) 1,263,834 5,171 ------------ Norway - 0.7% Aker Kvaerner ASA (AE)(N) 38,600 1,986 DNB NOR ASA 411,563 4,209 Norsk Hydro ASA (N) 17,400 1,726 Petroleum Geo-Services ASA (AE)(N) 46,500 1,176 Statoil ASA 286,900 6,370 Stolt Offshore SA (AE)(N) 105,900 1,097 Yara International ASA (N) 57,000 938 ------------ 17,502 ------------
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Poland - 0.0% Powszechna Kasa Oszczednosci Bank Polski SA 127,398 1,070 ------------ Portugal - 0.1% Energias de Portugal SA 808,060 2,286 ------------ Singapore - 1.0% CapitaCommercial Trust (N)(o) 207,000 193 CapitaLand, Ltd. (N) 342,000 644 DBS Group Holdings, Ltd. 398,340 3,605 Flextronics International, Ltd. (AE) 130,600 1,213 Fraser and Neave, Ltd. 19,000 189 Jardine Cycle & Carriage, Ltd. 40,000 249 Keppel Corp., Ltd. (N) 502,000 3,447 MobileOne, Ltd. 56,000 66 NatSteel, Ltd. 50,000 63 Neptune Orient Lines, Ltd. 139,000 250 Oversea-Chinese Banking Corp. 792,800 2,954 Parkway Holdings, Ltd. 286,000 335 SembCorp Industries, Ltd. 149,120 238 SembCorp Marine, Ltd. 27,000 44 Singapore Airlines, Ltd. 24,000 159 Singapore Petroleum Co., Ltd. (N) 46,000 131 Singapore Technologies Engineering, Ltd. 188,000 283 Singapore Telecommunications, Ltd. 5,114,430 7,050 United Overseas Bank, Ltd. 276,900 2,262 United Overseas Land, Ltd. (N) 85,300 118 Venture Corp., Ltd. 52,000 385 ------------ 23,878 ------------ South Africa - 0.2% Nedbank Group, Ltd. 135,854 1,731 Sasol, Ltd. 76,300 2,435 ------------ 4,166 ------------ South Korea - 0.9% Daewoo Securities Co., Ltd. (AE)(N) 102,170 1,113 Hana Bank 34,480 1,253 Hynix Semiconductor, Inc. (AE)(N) 79,300 1,473 Hynix Semiconductor, Inc. - GDR (AE) 19,600 361 Korea Electric Power Corp. - ADR (N) 94,740 1,547 KT Corp. - ADR (N) 80,900 1,744
56 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Samsung Electronics Co., Ltd. 22,866 12,191 SK Telecom Co., Ltd. - ADR 99,790 2,017 ------------ 21,699 ------------ Spain - 3.5% Acerinox SA (N) 31,000 406 Actividades de Construccion y Servicios SA 87,893 2,512 Altadis SA 190,504 8,083 Antena 3 de Television SA (N) 33,700 655 Banco Bilbao Vizcaya Argentaria SA (N) 558,328 9,838 Banco de Sabadell SA (N) 154,660 4,084 Banco Popular Espanol SA (N) 93,700 1,138 Banco Santander Central Hispano SA (N) 522,301 6,661 Cia de Distribucion Integral Logista SA (N) 2,400 127 Corp Mapfre SA (N) 105,810 1,853 Ebro Puleva SA (N) 62,400 1,040 Endesa SA (N) 254,505 6,330 Fomento de Construcciones y Contratas SA 5,600 307 Gestevision Telecinco SA 52,200 1,158 Iberdrola SA 350,099 9,370 Iberia Lineas Aereas de Espana (N) 137,100 343 Indra Sistemas SA 82,600 1,693 Repsol YPF SA (N) 171,800 5,121 Repsol YPF SA - ADR (N) 102,316 3,050 Sociedad General de Aguas de Barcelona SA Class A 2,400 55 Telefonica SA 1,263,356 20,154 Union Fenosa SA (N) 84,200 2,788 ------------ 86,766 ------------ Sweden - 2.2% Atlas Copco AB Class A (N) 281,130 5,134 Billerud AB (N) 13,900 159 Electrolux AB (N) 8,300 193 Elekta AB Class B 18,900 288 Fabege AB 3,600 61 Hennes & Mauritz AB Series B (N) 193,921 6,294 Lundin Petroleum AB (AE)(N) 21,800 221 Nordea Bank AB 119,000 1,166 OMX AB (AE) 6,400 78 Sandvik AB 204,510 9,833 Securitas AB Series B (N) 27,200 413 Skandia Forsakrings AB (N) 503,970 2,512 Skandinaviska Enskilda Banken AB Class A (N) 37,200 694 Skanska AB Class B (N) 29,500 413 Ssab Svenskt Stal AB 5,600 167 Svenska Cellulosa AB Series B 94,210 3,176 Svenska Handelsbanken Series A (N) 100,949 2,301
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Swedish Match AB (N) 9,800 112 Tele2 AB Class B (N) 16,800 159 Telefonaktiebolaget LM Ericsson Series B 5,925,322 19,440 TeliaSonera AB (N) 78,500 383 Volvo AB Series A 6,000 238 Volvo AB Series B 4,400 181 ------------ 53,616 ------------ Switzerland - 6.5% ABB, Ltd. (AE) 523,806 4,043 Ciba Specialty Chemicals AG 67,951 3,903 Clariant AG 109,040 1,455 Compagnie Financiere Richemont AG Class A 95,266 3,625 Credit Suisse Group (N) 425,308 18,814 Georg Fischer AG (AE) 1,251 387 Givaudan 1,560 1,006 Julius Baer Holding AG Class B 21,647 1,678 Kuehne & Nagel International AG 10,122 2,369 Lonza Group AG (N) 15,053 867 Micronas Semiconductor Holding AG (AE) 25,200 854 Nestle SA (N) 90,670 26,988 Nobel Biocare Holding AG 3,700 853 Novartis AG 292,811 15,751 PubliGroupe SA 241 69 Roche Holding AG 238,764 35,671 Sulzer AG (AE) 1,994 959 Swatch Group AG Class B (N) 300 42 Swatch Group AG (AE) 61,926 1,760 Swiss Reinsurance 54,710 3,694 Swisscom AG 3,615 1,190 Syngenta AG (AE) 14,460 1,550 Synthes, Inc. 34,862 3,690 UBS AG (N) 276,374 23,460 Xstrata PLC (N) 189,346 4,334 Zurich Financial Services AG 2,829 483 ------------ 159,495 ------------ Taiwan - 0.1% Taiwan Semiconductor Manufacturing Co., Ltd. - ADR 168,200 1,359 United Microelectronics Corp. - ADR (N) 580,458 1,695 ------------ 3,054 ------------
International Securities Fund 57 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Thailand - 0.1% Bangkok Bank PCL 619,000 1,566 ------------ Turkey - 0.0% Turkiye Garanti Bankasi AS (AE) 130,300 388 ------------ United Kingdom - 18.5% 3i Group PLC 315,555 4,234 Alliance & Leicester PLC 18,300 270 Alliance Unichem PLC 66,000 901 Anglo American PLC 260,275 7,689 Arriva PLC 7,500 77 Associated British Foods PLC 115,400 1,616 AstraZeneca PLC 287,049 12,882 Aviva PLC 722,651 8,533 AWG PLC 4,000 68 BAA PLC 233,425 2,535 BAE Systems PLC 1,780,066 10,408 Barclays PLC 1,188,198 11,772 Barratt Developments PLC 48,800 653 BG Group PLC 1,897,599 16,651 BHP Billiton PLC 346,900 5,111 BOC Group PLC 204,433 4,028 Boots Group PLC 818,623 8,919 BP PLC 3,075,734 34,041 BPB PLC (AE) 21,000 272 Bradford & Bingley PLC 69,200 426 Brambles Industries PLC 827,796 4,781 British Airways PLC (AE) 187,100 1,000 British American Tobacco PLC 232,000 5,106 British Land Co. PLC 223,900 3,528 BT Group PLC 1,836,971 6,934 Burren Energy PLC 98,600 1,396 Cable & Wireless PLC 402,500 822 Capita Group PLC 142,300 982 Carnival PLC 45,442 2,305 Carphone Warehouse Group PLC 1,073,423 3,725 Centrica PLC 771,110 3,257 Compass Group PLC 46,200 155 Corus Group PLC 1,195,466 1,011 Diageo PLC 527,844 7,802 easyJet PLC (AE) 73,500 387 EMI Group PLC 1,278,099 4,837 Friends Provident PLC 713,080 2,225 George Wimpey PLC 293,800 2,126 GKN PLC 1,201,109 5,916 GlaxoSmithKline PLC 1,235,763 32,149 Hanson PLC 43,500 441 HBOS PLC 965,279 14,251 Hilton Group PLC 1,102,061 6,614 HMV Group PLC 106,700 355 HSBC Holdings PLC 778,829 12,256 HSBC Holdings PLC (N) 8,277 130 Imperial Chemical Industries PLC 237,000 1,206
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Imperial Tobacco Group PLC 111,000 3,183 Inchcape PLC 29,500 1,075 Intercontinental Hotels Group PLC 179,436 2,241 International Power PLC 184,400 757 ITV PLC 60,000 110 J Sainsbury PLC 1,143,592 5,648 Kesa Electricals PLC 28,328 120 Land Securities Group PLC 13,800 339 Legal & General Group PLC 117,100 222 Lloyds TSB Group PLC 1,270,237 10,414 Man Group PLC 3,100 84 Marks & Spencer Group PLC 419,479 3,099 Meggitt PLC 88,000 471 Mitchells & Butlers PLC 369,864 2,375 Next PLC 138,830 3,276 Northern Foods PLC 66,700 178 Old Mutual PLC 778,300 1,815 Persimmon PLC 107,000 1,633 Pilkington PLC 157,000 426 Prudential PLC 231,622 1,944 Punch Taverns PLC 159,540 2,063 Reckitt Benckiser PLC 552,346 16,691 Reed Elsevier PLC 25,300 231 Reuters Group PLC 546,300 3,472 Rexam PLC (N) 142,241 1,212 Rio Tinto PLC 418,223 15,975 Rolls-Royce Group PLC 4,589,200 870 Royal & Sun Alliance Insurance Group PLC 1,166,414 1,988 Royal Bank of Scotland Group PLC 485,470 13,441 Royal Dutch Shell PLC Class B 311,252 10,154 Royal Dutch Shell PLC Class A (N) 460,841 14,211 SABMiller PLC 82,400 1,554 Scottish & Southern Energy PLC 203,800 3,536 Scottish Power PLC 34,700 340 Shire Pharmaceuticals PLC 54,300 642 Smith & Nephew PLC 362,258 3,065 Smiths Group PLC 127,600 2,060 Somerfield PLC 175,000 603 Sportingbet PLC (N) 153,300 799 Standard Chartered PLC 493,848 10,369 Tate & Lyle PLC (N) 332,500 2,727 Taylor Woodrow PLC 247,397 1,371 Tesco PLC 1,503,900 8,006 Trinity Mirror PLC 86,300 908 Unilever PLC 952,219 9,654 United Utilities PLC 56,400 622 Vodafone Group PLC 9,890,422 25,957 Whitbread PLC 81,334 1,352 William Hill PLC 551,334 5,213
58 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- WPP Group PLC 51,500 507 Yell Group PLC 269,288 2,108 ------------ 457,894 ------------ United States - 0.2% Transocean, Inc. (AE) 47,900 2,754 Weatherford International, Ltd. (AE) 21,800 1,364 ------------ 4,118 ------------ TOTAL COMMON STOCKS (cost $1,873,360) 2,242,367 ------------ PREFERRED STOCKS - 0.2% Brazil - 0.1% Banco Itau Holding Financeira SA (AE) 78,000 1,868 ------------ Germany - 0.1% Fresenius AG (N) 27,900 3,919 ------------ Italy - 0.0% Unipol SpA (N) 193,900 404 ------------ TOTAL PREFERRED STOCKS (cost $4,179) 6,191 ------------ NOTIONAL AMOUNT $ ------------ OPTIONS PURCHASED - 0.0% (Number of Contracts) Belgium - 0.0% Bel 20 Index Nov 2005 3,033.10 (EUR) Call (9) 356 54 ------------ Switzerland - 0.0% Swiss Market Index Dec 2005 6,913.06 (CHF) Put (31) 1,662 120 ------------ TOTAL OPTIONS PURCHASED (cost $174) 174 ------------ PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- WARRANTS & RIGHTS - 0.1% Luxembourg - 0.1% Bharti Televentures (AE) 2009 Warrants 142 1,108 Satyam Computer Services, Ltd. (AE) 2007 Warrants 106 1,406 ------------ TOTAL WARRANTS & RIGHTS (cost $1,647) 2,514 ------------ SHORT-TERM INVESTMENTS - 8.3% United States - 8.3% Frank Russell Investment Company Money Market Fund 186,783,000 186,783 United States Treasury Bills (z)(sec.) 3.373% due 12/08/05 (c) 10,000 9,966 3.520% due 01/05/06 7,000 6,939 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $203,705) 203,688 ------------ OTHER SECURITIES - 22.0% Frank Russell Investment Company Money Market Fund (X) 177,753,314 177,753 State Street Securities Lending Quality Trust (X) 364,199,745 364,200 ------------ TOTAL OTHER SECURITIES (cost $541,953) 541,953 ------------ TOTAL INVESTMENTS - 121.5% (identified cost $2,625,018) 2,996,887 OTHER ASSETS AND LIABILITIES, NET - (21.5%) (529,330) ------------ NET ASSETS - 100.0% 2,467,557 ============
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 59 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
UNREALIZED NOTIONAL APPRECIATION FUTURES CONTRACTS AMOUNT (DEPRECIATION) (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Long Positions AEX Index (Netherlands) expiration date 11/05 (210) 19,808 115 CAC-40 Index (France) expiration date 11/05 (296) 15,740 38 expiration date 12/05 (227) 12,065 (129) DAX Index (Germany) expiration date 12/05 (176) 25,966 (150) EUR STOXX 50 Index (EMU) expiration date 12/05 (1,005) 39,904 (505) FTSE-100 Index (UK) expiration date 12/05 (473) 44,567 (489) Hang Seng Index (Hong Kong) expiration date 11/05 (41) 3,804 (9) OMX Stockholm 30 Index (Sweden) expiration date 11/05 (942) 10,448 109 SPI 200 Index (Australia) expiration date 12/05 (120) 9,992 (85) TOPIX Index (Japan) expiration date 12/05 (453) 56,428 4,721 Short Positions FTSE-100 Index (UK) expiration date 12/05 (217) 20,446 198 Hang Seng Index (Hong Kong) expiration date 11/05 (33) 3,061 8 IBEX Plus Index (Spain) expiration date 11/05 (64) 8,027 58 MIB-30 (Italy) expiration date 12/05 (38) 7,457 339 SPI 200 Index (Australia) expiration date 12/05 (176) 14,655 152 --------------- Total Unrealized Appreciation (Depreciation) on Open Futures Contracts 4,371 ===============
NOTIONAL MARKET OPTIONS WRITTEN AMOUNT VALUE (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Switzerland Swiss Market Index Dec 2005 6,913.06 (CHF) Call (31) 1,662 (152) Belgium Bel 20 Index Futures Nov 2005 3,303.10 (EUR) Put (9) 356 (58) --------------- Total Liability for Options Written (premiums received $174) (210) ===============
See accompanying notes which are an integral part of the financial statements. 60 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
FOREIGN CURRENCY EXCHANGE CONTRACTS UNREALIZED APPRECIATION AMOUNT AMOUNT SETTLEMENT (DEPRECIATION) SOLD BOUGHT DATE $ - ------------------- -------------------- ----------- -------------- USD 95 AUD 126 11/01/05 (1) USD 372 AUD 500 12/21/05 1 USD 374 AUD 500 12/21/05 (1) USD 382 AUD 500 12/21/05 (9) USD 524 AUD 700 12/21/05 (1) USD 1,948 AUD 2,549 12/21/05 (46) USD 1,949 AUD 2,549 12/21/05 (46) USD 5,843 AUD 7,648 12/21/05 (135) USD 6,813 AUD 8,923 12/21/05 (154) USD 6,815 AUD 8,923 12/21/05 (156) USD 8,760 AUD 11,472 12/21/05 (199) USD 8,905 AUD 11,600 12/21/05 (249) USD 10,663 AUD 13,958 12/21/05 (246) USD 141 CHF 180 11/01/05 (2) USD 1,057 CHF 1,355 11/02/05 (6) USD 975 CHF 1,257 11/03/05 -- USD 97 CHF 123 12/21/05 (2) USD 294 CHF 374 12/21/05 (2) USD 2,055 CHF 2,604 12/21/05 (25) USD 23 DKK 140 12/02/05 -- USD 276 DKK 1,690 12/02/05 (4) USD 15 DKK 89 12/21/05 -- USD 70 DKK 432 12/21/05 (1) USD 577 DKK 3,524 12/21/05 (9) USD 68 EUR 57 11/01/05 -- USD 810 EUR 668 11/01/05 (10) USD 14 EUR 12 11/02/05 -- USD 968 EUR 803 11/02/05 (6) USD 222 EUR 185 11/03/05 -- USD 401 EUR 330 12/02/05 (5) USD 3,917 EUR 3,220 12/02/05 (52) USD 603 EUR 500 12/21/05 (2) USD 1,216 EUR 1,000 12/21/05 (14) USD 1,830 EUR 1,500 12/21/05 (28) USD 2,394 EUR 2,000 12/21/05 10 USD 4,210 EUR 3,500 12/21/05 (3) USD 4,810 EUR 4,000 12/21/05 (3) USD 6,042 EUR 5,000 12/21/05 (33) USD 69,686 EUR 56,500 12/21/05 (1,784) USD 1,090 GBP 611 11/01/05 (8) USD 1,146 GBP 642 11/01/05 (9) USD 138 GBP 78 11/02/05 (1) USD 904 GBP 510 11/02/05 (2) USD 161 GBP 90 12/02/05 (1) USD 1,196 GBP 670 12/02/05 (10)
FOREIGN CURRENCY EXCHANGE CONTRACTS UNREALIZED APPRECIATION AMOUNT AMOUNT SETTLEMENT (DEPRECIATION) SOLD BOUGHT DATE $ - ------------------- -------------------- ----------- -------------- USD 541 GBP 300 12/21/05 (10) USD 879 GBP 500 12/21/05 5 USD 1,747 GBP 1,000 12/21/05 23 USD 1,759 GBP 1,000 12/21/05 10 USD 1,759 GBP 1,000 12/21/05 10 USD 2,677 GBP 1,500 12/21/05 (23) USD 27,419 GBP 15,214 12/21/05 (503) USD 41,150 GBP 22,600 12/21/05 (1,167) USD 8 HKD 61 11/01/05 -- USD 60 HKD 469 12/21/05 -- USD 944 HKD 7,328 12/21/05 1 USD 3 JPY 373 11/01/05 -- USD 4 JPY 440 11/01/05 -- USD 14 JPY 1,661 11/01/05 -- USD 14 JPY 1,663 11/01/05 -- USD 77 JPY 8,830 11/01/05 (1) USD 89 JPY 10,198 11/01/05 (1) USD 98 JPY 11,266 11/01/05 (1) USD 564 JPY 65,048 11/01/05 (5) USD 4 JPY 431 11/02/05 -- USD 33 JPY 3,782 11/02/05 -- USD 68 JPY 7,785 11/02/05 (1) USD 83 JPY 9,565 11/02/05 (1) USD 122 JPY 14,077 11/02/05 (1) USD 232 JPY 26,924 11/02/05 -- USD 4 JPY 430 11/04/05 -- USD 7 JPY 766 11/04/05 -- USD 42 JPY 4,862 11/04/05 -- USD 176 JPY 20,420 11/04/05 -- USD 405 JPY 47,071 11/04/05 -- USD 838 JPY 97,384 11/04/05 (2) USD 442 JPY 50,000 12/21/05 (10) USD 442 JPY 50,000 12/21/05 (10) USD 711 JPY 78,343 12/21/05 (34) USD 870 JPY 100,000 12/21/05 (6) USD 873 JPY 100,000 12/21/05 (8) USD 892 JPY 100,000 12/21/05 (28) USD 1,781 JPY 200,000 12/21/05 (53) USD 2,262 JPY 255,704 12/21/05 (52) USD 2,629 JPY 300,000 12/21/05 (36) USD 5,241 JPY 600,000 12/21/05 (56) USD 8,375 JPY 945,878 12/21/05 (201) USD 37,049 JPY 4,050,000 12/21/05 (2,046) USD 64 NOK 410 12/02/05 (1) USD 533 NOK 3,420 12/02/05 (7)
See accompanying notes which are an integral part of the financial statements. International Securities Fund 61 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
FOREIGN CURRENCY EXCHANGE CONTRACTS UNREALIZED APPRECIATION AMOUNT AMOUNT SETTLEMENT (DEPRECIATION) SOLD BOUGHT DATE $ - ------------------- -------------------- ----------- -------------- USD 29,754 NOK 190,056 12/21/05 (473) USD 6,913 NZD 9,928 12/21/05 3 USD 68 SGD 113 12/21/05 (1) USD 758 SGD 1,276 12/21/05 (3) USD 821 SGD 1,382 12/21/05 (3) USD 1,303 SGD 2,194 12/21/05 (5) USD 2,273 SGD 3,828 12/21/05 (8) USD 2,273 SGD 3,828 12/21/05 (8) USD 2,815 SGD 4,719 12/21/05 (23) USD 2,815 SGD 4,719 12/21/05 (23) USD 2,816 SGD 4,719 12/21/05 (24) USD 2,830 SGD 4,745 12/21/05 (23) AUD 576 USD 430 11/04/05 -- AUD 417 USD 314 12/21/05 2 AUD 500 USD 384 12/21/05 11 AUD 1,000 USD 750 12/21/05 4 AUD 1,273 USD 963 12/21/05 13 AUD 1,273 USD 963 12/21/05 13 AUD 1,527 USD 1,155 12/21/05 15 AUD 18,891 USD 14,432 12/21/05 333 CAD 267 USD 227 11/01/05 2 CAD 1,070 USD 914 11/01/05 8 CAD 141 USD 119 11/03/05 -- CHF 410 USD 322 11/01/05 4 CHF 990 USD 770 12/02/05 -- CHF 1,180 USD 910 12/02/05 (8) CHF 1,773 USD 1,388 12/21/05 7 DKK 1,620 USD 259 12/02/05 (1) DKK 1,690 USD 273 12/02/05 2 DKK 8 USD 1 12/21/05 -- EUR 639 USD 775 11/01/05 9 EUR 668 USD 810 11/01/05 10 EUR 106 USD 128 11/02/05 1 EUR 275 USD 330 11/02/05 1 EUR 2,820 USD 3,368 12/02/05 (18) EUR 3,220 USD 3,888 12/02/05 22 EUR 944 USD 1,157 12/21/05 22 EUR 1,361 USD 1,648 12/21/05 13 EUR 1,500 USD 1,842 12/21/05 39 EUR 2,538 USD 3,071 12/21/05 21 EUR 9,000 USD 10,825 12/21/05 9 EUR 31,981 USD 39,023 12/21/05 588 GBP 39 USD 69 11/03/05 -- GBP 121 USD 215 11/03/05 -- GBP 717 USD 1,269 11/03/05 --
FOREIGN CURRENCY EXCHANGE CONTRACTS UNREALIZED APPRECIATION AMOUNT AMOUNT SETTLEMENT (DEPRECIATION) SOLD BOUGHT DATE $ - ------------------- -------------------- ----------- -------------- GBP 670 USD 1,186 12/02/05 -- GBP 790 USD 1,385 12/02/05 (13) GBP 500 USD 905 12/21/05 20 GBP 1,804 USD 3,197 12/21/05 6 GBP 2,039 USD 3,611 12/21/05 3 GBP 2,486 USD 4,403 12/21/05 4 GBP 3,819 USD 6,890 12/21/05 133 GBP 3,823 USD 6,772 12/21/05 8 GBP 3,840 USD 6,926 12/21/05 131 GBP 4,000 USD 6,975 12/21/05 (101) GBP 6,620 USD 11,948 12/21/05 237 GBP 7,129 USD 12,869 12/21/05 257 GBP 10,005 USD 17,764 01/31/06 66 HKD 453 USD 58 11/01/05 -- HKD 791 USD 102 11/01/05 -- HKD 231 USD 30 11/02/05 -- HKD 897 USD 116 11/02/05 -- HKD 89 USD 11 12/21/05 -- HKD 1,055 USD 136 12/21/05 -- HUF 50,614 USD 243 11/04/05 1 IDR 870,787 USD 85 11/10/05 (1) JPY 2,238 USD 19 11/01/05 -- JPY 2,995 USD 26 11/01/05 -- JPY 5,921 USD 51 11/01/05 1 JPY 19,450 USD 169 11/01/05 2 JPY 2,619 USD 23 11/02/05 -- JPY 7,743 USD 67 11/02/05 1 JPY 43,648 USD 377 11/02/05 3 JPY 731 USD 6 11/04/05 -- JPY 2,782 USD 24 11/04/05 -- JPY 2,995 USD 26 11/04/05 -- JPY 3,816 USD 33 11/04/05 -- JPY 419,740 USD 3,697 12/02/05 79 JPY 100,000 USD 908 12/21/05 44 JPY 246,230 USD 2,138 12/21/05 10 JPY 508,832 USD 4,588 12/21/05 190 JPY 800,000 USD 7,033 12/21/05 119 JPY 1,017,663 USD 9,175 12/21/05 378 JPY 1,474,409 USD 13,300 12/21/05 558 NOK 3,083 USD 476 11/02/05 2 NOK 3,410 USD 517 12/02/05 (8) NOK 3,420 USD 527 12/02/05 1 NOK 12,733 USD 2,000 12/21/05 38 NOK 19,687 USD 3,092 12/21/05 59 NOK 21,132 USD 3,241 12/21/05 (15)
See accompanying notes which are an integral part of the financial statements. 62 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
FOREIGN CURRENCY EXCHANGE CONTRACTS UNREALIZED APPRECIATION AMOUNT AMOUNT SETTLEMENT (DEPRECIATION) SOLD BOUGHT DATE $ - ------------------- -------------------- ----------- -------------- NOK 21,646 USD 3,399 12/21/05 64 NOK 35,704 USD 5,476 12/21/05 (25) NZD 3,070 USD 2,118 12/21/05 (21) NZD 6,858 USD 4,739 12/21/05 (38) SEK 3,714 USD 473 11/01/05 6 SEK 1,316 USD 167 11/02/05 1 SEK 715 USD 90 11/03/05 -- SEK 3,967 USD 498 11/03/05 -- SEK 1,570 USD 203 12/02/05 5 SEK 2,920 USD 375 12/02/05 7 SEK 198 USD 25 12/21/05 -- SEK 884 USD 116 12/21/05 5 SEK 2,026 USD 264 12/21/05 9 SEK 53,618 USD 7,015 12/21/05 257 SGD 100 USD 59 12/21/05 -- TRY 120 USD 88 11/02/05 -- -------------- Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts (4,455) ==============
See accompanying notes which are an integral part of the financial statements. International Securities Fund 63 FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
INDEX SWAP CONTRACTS - --------------------------------------------------------------------------------------------------------------------------- UNREALIZED APPRECIATION FUND RECEIVES COUNTER NOTIONAL FUND PAYS TERMINATION (DEPRECIATION) UNDERLYING SECURITY PARTY AMOUNT FLOATING RATE DATE $ - ------------------------------ ---------------- --------- ----------------------- -------------- ---------------- MSCI Austria 1 Month EUR LIBOR Local Net Total Return Index Merrill Lynch EUR 990 plus 0.40% 01/23/06 14 MSCI Austria 1 Month EUR LIBOR Local Net Total Return Index Merrill Lynch EUR 933 plus 0.40% 01/26/06 13 MSCI Belgium 1 Month EUR LIBOR Local Net Total Return Index Merrill Lynch EUR 956 minus 0.40% 01/18/06 (13) MSCI Denmark 1 Month DKK CIBOR Local Net Total Return Index Merrill Lynch DKK 8,014 plus 0.40% 01/23/06 24 MSCI Norway 1 Month NOK NIBOR Local Net Total Return Index Merrill Lynch NOK 64,729 plus 0.40% 01/23/06 460 ---------------- Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts (a) 498 ================
INDUSTRY DIVERSIFICATION % OF MARKET NET VALUE (UNAUDITED) ASSETS $ - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Auto and Transportation 5.7 141,981 Consumer Discretionary 8.0 205,736 Consumer Staples 6.9 169,887 Financial Services 23.4 556,608 Health Care 7.4 187,066 Integrated Oils 7.2 171,891 Materials and Processing 9.2 237,428 Miscellaneous 1.0 22,143 Other Energy 1.8 46,543 Producer Durables 6.1 155,875 Technology 4.7 108,881 Utilities 9.5 238,328 Preferred Stock 0.2 6,191 Options Purchased -- 174 Warrants & Rights 0.1 2,514 Short-Term Investments 8.3 203,688 Other Securities 22.0 541,953 ------------ ------------ Total Investments 121.5 2,996,887 Other Assets and Liabilities, Net (21.5) (529,330) ------------ ------------ Net Assets 100.0 2,467,557 ============ ============
GEOGRAPHIC DIVERSIFICATION % OF MARKET NET VALUE (UNAUDITED) ASSETS $ - ----------------------------------------------------------------------------- Africa 0.2 4,166 Asia 8.1 196,907 Europe 39.1 967,897 Japan 21.9 539,539 Latin America 1.2 29,429 Middle East 0.3 6,787 Other Regions 10.2 252,315 United Kingdom 18.5 457,894 Other Securities 22.0 541,953 ------------ ------------ Total Investments 121.5 2,996,887 Other Assets and Liabilities, Net (21.5) (529,330) ------------ ------------ Net Assets 100.0 2,467,557 ============ ============
See accompanying notes which are an integral part of the financial statements. 64 International Securities Fund FRANK RUSSELL INVESTMENT COMPANY INTERNATIONAL SECURITIES FUND PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS Australia 3.7 Austria 0.4 Belgium 0.9 Brazil 0.3 Canada 1.8 China --* Denmark 0.3 Finland 1.0 France 9.8 Germany 5.7 Greece 0.3 Hong Kong 1.9 Hungary 0.3 Indonesia 0.1 Ireland 0.6 Israel 0.3 Italy 2.7 Japan 21.9 Luxembourg 0.5 Mexico 0.8 Netherlands 3.4 New Zealand 0.2 Norway 0.7 Poland --* Portugal 0.1 Singapore 1.0 South Africa 0.2 South Korea 0.9 Spain 3.5 Sweden 2.2 Switzerland 6.5 Taiwan 0.1 Thailand 0.1 Turkey --* United Kingdom 18.5 United States 0.2 Preferred Stocks 0.2 Options Purchased --* Warrants & Rights 0.1 Short-Term Investments 8.3 Other Securities 22.0 --------------- Total Investments 121.5 Other Assets and Liabilities, Net (21.5) --------------- 100.0 =============== Futures Contracts 0.2 Options Written (--*) Foreign Currency Exchange Contracts (0.2) Index Swap Contracts --*
* Less than .05% of net assets. See accompanying notes which are an integral part of the financial statements. International Securities Fund 65 FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- (GRAPHIC)
EMERGING MARKETS - CLASS S MSCI EMF ** -------------------------- ----------- * 10000 10000 1996 11081 10648 1997 11045 9745 1998 7761 6725 1999 9339 9727 2000 8743 8870 2001 6654 6789 2002 7048 7362 2003 10449 10951 2004 12667 13076 2005 17144 17566
Emerging Markets Fund - Class S - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 35.27% 5 Years 14.42%S 10 Years 5.54%S
Emerging Markets Fund - Class E ++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 34.94% 5 Years 14.20%S 10 Years 5.39%S
Emerging Markets Fund - Class C ++++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 33.98% 5 Years 13.40%S 10 Years 4.88%S
MSCI Emerging Markets Free Index** - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 34.34% 5 Years 14.64%S 10 Years 5.80%S
66 Emerging Markets Fund FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide long term capital growth. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005? For the fiscal year ended October 31, 2005, the Emerging Markets Fund Class S, Class E and Class C Shares gained 35.27%, 34.94% and 33.98%, respectively. This compared to the MSCI Emerging Markets Index(SM), which gained 34.34% during the same period. The Fund's performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind. For the year ending October 31, 2005, the Lipper(R) Emerging Markets Funds Average returned 32.17%. This result serves as a peer comparison and is expressed net of operating expenses. HOW DID THE MARKET CONDITIONS DESCRIBED IN THE MARKET SUMMARY REPORT AFFECT THE FUND'S PERFORMANCE? The strength of energy stocks over the period did not have a significant effect on Fund performance given the Fund's neutral position relative to the benchmark; however; stock selection within the energy sector was positive. Exposure to other cyclical stocks also benefited the Fund, as did an underweight in information technology stocks. An overweight position to Egypt was also a positive contributor to the Fund's performance. WHAT WERE THE PRIMARY CONTRIBUTORS AND DETRACTORS TO THE FUND'S PERFORMANCE DURING THE LAST 12 MONTHS? The Fund's outperformance relative to the benchmark was a result of both strong country allocation and stock selection. All but one of the Fund's money managers were underweight Taiwan. This weighting, together with strong stock selection in Mexico, were the two biggest positive contributors to the Fund's performance in the period. Wells Capital Management Incorporated and Genesis Asset Managers, LLP had strong stock selection in Mexico. Egypt, a beneficiary of improving fundamentals and good economic data, was another source of excess returns. T. Rowe Price International, Inc. and Genesis added value to the Fund by being overweight to Egypt. HOW DID THE INVESTMENT STRATEGIES AND TECHNIQUES EMPLOYED BY THE FUND AND ITS MONEY MANAGERS AFFECT ITS PERFORMANCE? The Fund's money managers tended to outperform in months of strong gains for the emerging markets and generally kept pace with the index in weaker periods. These results were aided by strong sell disciplines and portfolio repositioning by the Fund's money managers, which allowed money managers to lock in gains. Over the first few months of the fiscal year, value stocks outperformed, providing a favorable environment for value manager Alliance Capital Management, L.P. Alliance's strong performance in the early part of the fiscal year was largely due to stock selection in Korea, Mexico, India and South Africa. Country allocation decisions also added to Alliance's performance, particularly through underweighting Taiwan. As the year progressed, growth and quality-oriented strategies gained favor in the market. In this environment, growth manager T. Rowe Price delivered good results. Its overweight position in Egypt, the top-performing country in the index, was the largest positive contributor to performance. T. Rowe Price also added value through strong stock selection in India and Turkey. Market-oriented manager Arrowstreet Capital, L.P. also outperformed, helped by the momentum factors in its model. Focus on improving momentum led Arrowstreet to overweight Pakistan and Brazil and underweight Taiwan, and these actions contributed positively to the Fund's performance in the fiscal year. The Fund's policy of being fully invested helped it keep pace with a strong performing market. DESCRIBE ANY CHANGES TO THE FUND'S STRUCTURE OR THE MONEY MANAGER LINE-UP. There were no changes to the Fund's structure or money manager line-up during the year. Emerging Markets Fund 67 FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- Money Managers as of Styles October 31, 2005 Alliance Capital Management, L.P., through its Bernstein Investment Research & Management Unit Value Arrowstreet Capital, L.P. Market-Oriented Genesis Asset Managers, LLP Market-Oriented T. Rowe Price International, Inc. Growth Wells Capital Management Incorporated Market-Oriented
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Frank Russell Investment Management Company (FRIMCo), or any other person in FRIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and FRIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Frank Russell Investment Company (FRIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any FRIC Fund. -------------------- * Emerging Markets Fund Class S assumes initial investment on November 1, 1995. ** The Morgan Stanley Capital International Emerging Markets Free Index is a market capitalization-weighted Index of over 850 stocks traded in 22 world markets. ++++ Emerging Markets Fund Class S performance has been linked with Class E to provide historical perspective. For the period September 22, 1998 (commencement of sale) through the current period, Class E paid shareholder service fees. Total return would have been lower had these fees been in effect during prior reporting periods. ++++++Emerging Markets Fund Class S and Class E performance has been linked with Class C to provide historical perspective. From January 27, 1999 (commencement of sale) through the current period, Class C paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. sec. Annualized. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 68 Emerging Markets Fund FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS C PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,176.10 $ 1,011.34 Expenses Paid During Period* $ 15.08 $ 13.94
* Expenses are equal to the Fund's annualized expense ratio of 2.75% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS E PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,180.20 $ 1,015.07 Expenses Paid During Period* $ 11.05 $ 10.21
* Expenses are equal to the Fund's annualized expense ratio of 2.01% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,181.60 $ 1,016.38 Expenses Paid During Period* $ 9.62 $ 8.89
* Expenses are equal to the Fund's annualized expense ratio of 1.75% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Emerging Markets Fund 69 FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- COMMON STOCKS - 87.5% Argentina - 0.1% Acindar Industria Argentina de Aceros SA (AE) 155,000 261 Central Costanera SA Class T (AE) 233,100 325 IRSA Inversiones y Representaciones SA (AE) 6 -- IRSA Inversiones y Representaciones SA - GDR (AE)(N) 15,500 179 ------------ 765 ------------ Bermuda - 0.1% Credicorp, Ltd. (N) 21,200 558 ------------ Brazil - 7.1% Banco do Brasil SA 36,400 669 Brasil Telecom Participacoes SA - ADR (N) 61,000 2,538 Braskem SA - ADR (AE) 42,079 715 Cia Brasileira de Distribuicao Grupo Pao de Acucar - ADR (N) 39,800 1,097 Cia de Bebidas das Americas - ADR (N) 30,000 1,065 Cia de Bebidas das Americas - ADR 4,820 135 Cia de Saneamento Basico do Estado de Sao Paulo 27,260,000 1,742 Cia Siderurgica Nacional SA 180,333 3,464 Cia Vale do Rio Doce 43,700 1,808 Cia Vale do Rio Doce - ADR 244,400 9,264 EDP - Energias do Brasil SA (AE) 62,000 617 Empresa Brasileira de Aeronautica SA - ADR 22,000 854 Gerdau SA - ADR (N) 277,100 3,760 Gol Linhas Aereas Inteligentes SA - ADR (N) 13,300 461 Natura Cosmeticos SA 119,563 4,732 Petroleo Brasileiro SA 280,156 4,435 Petroleo Brasileiro SA - ADR 220,900 13,509 Tele Centro Oeste Celular Participacoes SA 1,064 9 Tele Centro Oeste Celular Participacoes SA - ADR (N) 58,600 530 Tele Norte Leste Participacoes SA 51,606 1,235 Tele Norte Leste Participacoes SA - ADR (N) 178,400 3,158 Unibanco - Uniao de Bancos Brasileiros SA - GDR 77,000 4,027 ------------ 59,824 ------------
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Chile - 0.2% Banco de Credito e Inversiones 11,200 282 Coca-Cola Embonor SA - ADR (AE)(A) 107,000 845 Embotelladora Andina SA Class B 58,700 819 ------------ 1,946 ------------ China - 4.3% Bank of Communications Co., Ltd. Class H (AE) 9,129,534 3,748 China Petroleum & Chemical Corp. Class H 14,665,254 5,891 China Shenhua Energy Co., Ltd. Class H (AE) 4,925,700 5,411 China Telecom Corp., Ltd. Class H 1,648,000 537 Datang International Power Generation Co., Ltd. Class H 804,000 571 Huadian Power International Co. Class H 226,000 57 Jiangsu Express Class H 1,579,400 835 Maanshan Iron & Steel Class H 910,000 274 PetroChina Co., Ltd. Class H 15,331,176 11,732 PetroChina Co., Ltd. - ADR (N) 20,040 1,538 Ping An Insurance Group Co. of China, Ltd. Class H 1,044,500 1,674 Semiconductor Manufacturing International Corp. (AE) 2,698,400 360 Sinopec Shanghai Petrochemical Co., Ltd. Class H 3,189,000 970 Sinopec Yizheng Chemical Fibre Co., Ltd. Class H 628,000 95 Travelsky Technology, Ltd. Class H 200,000 173 Yanzhou Coal Mining Co., Ltd. Class H 2,704,000 1,737 Zijin Mining Group Co., Ltd. Class H 580,000 183 ZTE Corp. Class H 190,600 564 ------------ 36,350 ------------ Colombia - 0.4% BanColombia SA 145,000 790 BanColombia SA - ADR (N) 87,600 2,076 Inversiones Nacionales de Chocolates SA 54,121 220 ------------ 3,086 ------------ Croatia - 0.1% Pliva DD - GDR 94,900 1,257 ------------
70 Emerging Markets Fund FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Ecuador - 0.3% Holcim Ecuador SA - GDR (A) 72,000 2,419 Holcim Ecuador SA - ADR (A) 10,500 347 ------------ 2,766 ------------ Egypt - 2.3% Commercial International Bank 192,393 1,850 Commercial International Bank - GDR 15,600 147 Egyptian Co. for Mobile Services 151,932 5,017 Orascom Construction Industries 246,364 8,342 Orascom Telecom Holding SAE 16,570 1,649 Orascom Telecom Holding SAE - GDR (N) 2,062 101 Vodafone Egypt Telecommunications SAE 131,295 2,077 ------------ 19,183 ------------ Hong Kong - 2.4% Beijing Enterprises Holdings, Ltd. 150,000 230 Brilliance China Automotive Holdings, Ltd. 770,000 102 China Insurance International Holdings Co., Ltd. 1,350,000 488 China Mobile Hong Kong, Ltd. 1,459,500 6,531 China Mobile Hong Kong, Ltd. - ADR (N) 31,400 705 China Netcom Group Corp. Hong Kong, Ltd. 969,000 1,532 China Overseas Land & Investment, Ltd. 8,846,800 2,717 China Resources Power Holdings Co. 2,636,000 1,585 China Unicom, Ltd. 724,000 556 Citic Pacific, Ltd. 145,000 377 CNOOC, Ltd. 931,500 605 Kingboard Chemical Holdings, Ltd. 126,000 268 Luen Thai Holdings, Ltd. 924,000 245 Silver Grant International 48,000 12 Solomon Systemtech International, Ltd. 2,231,000 822 Techtronic Industries Co. 1,243,800 3,069 Tom Group, Ltd. (AE) 1,326,000 239 ------------ 20,083 ------------ Hungary - 2.3% Magyar Telekom Rt. 534,545 2,538 Mol Magyar Olaj- es Gazipari Rt. 71,971 6,712
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Mol Magyar Olaj- es Gazipari Rt. - GDR 28,400 2,620 OTP Bank Rt. 216,662 7,826 ------------ 19,696 ------------ India - 4.2% Allahabad Bank 243,535 427 Andhra Bank 429,000 828 Arvind Mills, Ltd. 250,100 588 Ballarpur Industries, Ltd. 115,100 264 Bank of Baroda 220,000 1,071 Bank of India 44,300 105 Bharti Televentures (AE) 193,000 1,383 Chennai Petroleum Corp., Ltd. 151,660 805 GAIL India, Ltd. - GDR (N) 59,000 1,829 Genesis Indian Investment Co. (AE) 670,419 16,807 I-Flex Solutions, Ltd. 41,900 829 Indian Overseas Bank 165,900 335 Infosys Technologies, Ltd. 27,000 1,514 National Thermal Power Corp., Ltd. 592,100 1,278 Oriental Bank of Commerce 111,000 594 Petronet LNG, Ltd. (AE) 804,000 1,036 PTC India, Ltd. 276,519 284 State Bank of India, Ltd. - GDR 72,210 3,116 Suzlon Energy, Ltd. (AE) 40,065 639 Union Bank Of India 118,000 297 Videsh Sanchar Nigam, Ltd. 258,600 1,669 ------------ 35,698 ------------ Indonesia - 3.1% Aneka Tambang Tbk PT 4,667,646 1,190 Astra Agro Lestari Tbk PT 244,789 130 Astra International Tbk PT 4,153,777 3,821 Bank Central Asia Tbk PT 5,909,181 1,885 Bank Danamon Indonesia Tbk PT 1,754,700 681 Bank Mandiri Persero Tbk PT 31,287,503 4,088 Bank Rakyat Indonesia 28,587,272 6,932 Bumi Resources Tbk PT 11,399,809 878 Indonesian Satellite Corp. Tbk PT 1,273,500 613 Ramayana Lestari Sentosa Tbk PT 6,547,500 466 Telekomunikasi Indonesia Tbk PT 11,316,700 5,668 ------------ 26,352 ------------ Israel - 1.7% Bank Hapoalim, Ltd. 974,800 3,732 Bank Leumi Le-Israel BM 1,280,902 4,181 Check Point Software Technologies (AE) 94,600 2,115 Discount Investment Corp. 19,366 430 IDB Development Corp., Ltd. 11,903 337
Emerging Markets Fund 71 FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Israel Chemicals, Ltd. 98,129 372 Lipman Electronic Engineering, Ltd. 30,000 667 Orbotech, Ltd. (AE) 30,200 656 Teva Pharmaceutical Industries, Ltd. - ADR (N) 52,800 2,013 ------------ 14,503 ------------ Luxembourg - 0.8% Quilmes Industrial SA - ADR (N)(A) 5,027 157 Tenaris SA 1 -- Tenaris SA - ADR 59,668 6,554 ------------ 6,711 ------------ Malaysia - 1.2% AirAsia BHD (AE) 425,900 180 Astro All Asia Networks PLC 890,700 1,298 CIMB BHD 665,666 1,085 Hong Leong Bank BHD 177,700 247 IJM Corp. BHD 357,200 454 IOI Corp. BHD 457,200 1,585 Magnum Corp. BHD 2,334,500 1,218 Malakoff BHD 500,600 1,041 Malaysia International Shipping Corp. BHD 293,400 738 MK Land Holdings BHD 1,015,200 199 OYL Industries BHD 1,317,800 1,062 PLUS Expressways BHD 765,000 620 Proton Holdings BHD 24,000 49 TAN Chong Motor Holdings BHD 908,000 378 Tenaga Nasional BHD 39,100 104 ------------ 10,258 ------------ Mexico - 6.7% Alfa SA de CV Class A 427,900 2,484 America Movil SA de CV Series L 379,400 9,959 Cemex SA de CV (AE) 2,471,054 12,844 Cemex SA de CV - ADR 57,000 2,968 Fomento Economico Mexicano SA de CV - ADR (AE) 85,824 5,835 Grupo Aeroportuario del Sureste SA de CV - ADR 14,900 484 Grupo Financiero Banorte SA de CV Class O 435,300 3,711 Grupo Mexico SA de CV Series B 690,686 1,332 Grupo Modelo SA 1,046,700 3,213 Grupo Televisa SA - ADR 58,873 4,304 Organizacion Soriana SA de CV Class B (AE) 174,100 681 Telefonos de Mexico SA de CV Series L 238,700 4,817
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Urbi Desarrollos Urbanos SA de CV (AE) 176,300 1,112 Wal-Mart de Mexico SA de CV Series V 649,959 3,164 ------------ 56,908 ------------ Pakistan - 1.1% Engro Chemical Pakistan, Ltd. 1,047,300 2,733 Fauji Fertilizer Co., Ltd. 1,423,020 3,224 ICI Pakistan, Ltd. 265,200 507 Pakistan Petroleum, Ltd. 72,500 241 Pakistan Telecommunication Co., Ltd. 2,781,923 2,664 ------------ 9,369 ------------ Philippines - 0.4% Globe Telecom, Inc. 47,200 605 Philippine Long Distance Telephone 86,000 2,613 ------------ 3,218 ------------ Russia - 4.7% LUKOIL - ADR (N) 451,602 24,838 Mobile Telesystems - ADR 144,000 5,327 NovaTek OAO - GDR (AE)(A) 105,700 2,326 OAO Gazprom - ADR 47,400 2,801 Promstroibank State Petersburg (AE) 696,000 773 Pyaterochka Holding NV - GDR (AE)(N) 86,600 1,697 RBC Information Systems (AE) 111,100 603 Sberbank RF 1,350 1,200 Tatneft - ADR (N) 4,300 273 ------------ 39,838 ------------ South Africa - 10.2% ABSA Group, Ltd. 273,675 3,629 Aeci, Ltd. 98,900 724 African Bank Investments, Ltd. 288,600 861 Alexander Forbes, Ltd. 323,600 684 AngloGold Ashanti, Ltd. 15,500 609 AngloGold Ashanti, Ltd. - ADR (N) 32,434 1,268 Aveng, Ltd. 424,706 1,067 Barloworld, Ltd. 228,960 3,585 Bidvest Group, Ltd. 62,437 837 City Lodge Hotels, Ltd. 10,927 60 Consol, Ltd. 460,900 745 Edgars Consolidated Stores, Ltd. 717,880 3,191 FirstRand, Ltd. 1,224,306 2,881 Foschini, Ltd. 119,945 764 Impala Platinum Holdings, Ltd. 45,544 4,971 Imperial Holdings, Ltd. (AE) 184,276 3,431 Investec, Ltd. 30,000 1,078
72 Emerging Markets Fund FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- JD Group, Ltd. 222,741 2,382 Kumba Resources, Ltd. 128,400 1,898 Massmart Holdings, Ltd. 91,300 705 Medi-Clinic Corp., Ltd. 175,000 509 MTN Group, Ltd. 850,800 6,337 Murray & Roberts Holdings, Ltd. 305,000 877 Nampak, Ltd. 128,696 298 Naspers, Ltd. Class N 364,308 5,256 Network Healthcare Holdings, Ltd. (AE) 1,165,000 1,120 Pick'n Pay Stores, Ltd. 187,300 765 Reunert, Ltd. 35,300 243 Sanlam, Ltd. 2,404,140 4,426 Sasol, Ltd. 386,454 12,335 Standard Bank Group, Ltd. 1,058,408 10,911 Sun International, Ltd. 72,337 819 Telkom SA, Ltd. 89,579 1,692 Tiger Brands, Ltd. 103,718 2,072 Truworths International, Ltd. 702,900 1,990 VenFin, Ltd. 249,100 1,356 ------------ 86,376 ------------ South Korea - 16.5% Amorepacific Corp. 6,670 1,988 Cheil Communications, Inc. 3,320 612 Daelim Industrial Co. 45,680 2,669 Daewoo Engineering & Construction Co., Ltd. 4,190 42 Dongkuk Steel Mill Co., Ltd. 19,810 359 GS Engineering & Construction Corp. 16,880 724 Hankook Tire Co., Ltd. 205,597 2,470 Hanwha Chemical Corp. 186,210 1,986 Honam Petrochemical Corp. 26,400 1,286 Hyosung Corp. 23,210 271 Hyundai Development Co. 40,520 1,480 Hyundai Heavy Industries 8,920 583 Hyundai Mobis 70,300 5,612 Hyundai Motor Co. 107,710 7,945 Industrial Bank of Korea (N) 202,000 2,414 INI Steel Co. 28,720 640 KCC Corp. 9,814 1,891 Kookmin Bank 193,306 11,091 Kookmin Bank - ADR 4,200 245 Korea Electric Power Corp. 217,510 7,095 Korea Electric Power Corp. - ADR (N) 90,360 1,476 Korean Air Lines Co., Ltd. 21,720 407 KT Corp. 58,300 2,345 KT&G Corp. 63,600 2,604 KT&G Corp. - GDR (A) 53,100 1,099 LG Chem, Ltd. 18,780 829 LG Electronics, Inc. 40,620 2,656
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- LG Petrochemical Co., Ltd. (AE) 7,520 198 LG.Philips LCD Co., Ltd. (AE) 7,580 284 LG.Philips LCD Co., Ltd. - ADR (AE)(N) 26,200 498 Lotte Chilsung Beverage Co., Ltd. 1,050 931 NCSoft Corp. (AE) 9,054 849 Poongsan Corp. 56,600 652 POSCO 58,975 12,022 POSCO - ADR 13,600 698 S-Oil Corp. 46,780 3,497 S1 Corp. 16,230 705 Samsung Corp. 37,080 611 Samsung Electronics - GDR 4,560 1,218 Samsung Electronics Co., Ltd. 48,619 25,922 Samsung Electronics Co., Ltd. - GDR (N)(A) 10,059 2,055 Samsung Fine Chemicals Co., Ltd. 13,910 340 Samsung Fire & Marine Insurance Co., Ltd. 31,450 2,999 Samsung Heavy Industries Co., Ltd. (AE) 18,560 237 Samsung Securities Co., Ltd. 97,560 3,733 Shinhan Financial Group Co., Ltd. 339,060 11,368 Shinsegae Co., Ltd. 4,300 1,544 SK Corp. 33,710 1,733 SK Telecom Co., Ltd. 12,820 2,310 SK Telecom Co., Ltd. - ADR (AE)(N) 14,700 297 Tae Young Corp. (A) 11,339 435 Woori Finance Holdings Co., Ltd. 130,740 2,024 ------------ 139,979 ------------ Taiwan - 8.4% Acer, Inc. 1,412,500 2,878 Advantech Co., Ltd. 672,921 1,485 Asustek Computer, Inc. 1,277,000 3,361 AU Optronics Corp. 1,493,000 1,898 AU Optronics Corp. - ADR 27,800 354 Basso Industry Corp. 255,816 595 Cathay Financial Holding Co., Ltd. 2,303,200 4,056 China Steel Corp. 1,945,807 1,538 China Steel Corp. - GDR 62,591 1,005 Chunghwa Telecom Co., Ltd. 1,065,000 1,805 Chunghwa Telecom Co., Ltd. - ADR 147,700 2,558 CMC Magnetics Corp. (AE) 5,893,000 1,859 Compal Electronics, Inc. 4,275,923 3,811 Compal Electronics, Inc. - GDR (N) 216,133 973 Delta Electronics, Inc. 492,000 831 E.Sun Financial Holding Co., Ltd. 1,542,990 928 Elitegroup Computer Systems (AE) 525,000 324 Evergreen Marine Corp. 418,000 259 Far Eastern Textile Co., Ltd. 1,136,637 664
Emerging Markets Fund 73 FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Far EasTone Telecommunications Co., Ltd. 1,324,000 1,542 Far EasTone Telecommunications Co., Ltd. - GDR (A) 11,000 192 Faraday Technology Corp. 297,185 447 Gigabyte Technology Co., Ltd. 1,088,718 905 HON HAI Precision Industry 1,722,423 7,473 Lite-On Technology Corp. 39,900 44 MediaTek, Inc. 38,200 331 Phoenixtec Power Co., Ltd. 565,629 505 Quanta Computer, Inc. 1,120,250 1,554 Realtek Semiconductor Corp. 12,550 13 Ritek Corp. (AE) 5,371,161 1,612 Taiwan Mobile Co., Ltd. 3,098,520 2,589 Taiwan Semiconductor Manufacturing Co., Ltd. 10,441,749 16,332 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR 347,464 2,808 U-Ming Marine Transport Corp. 911,000 901 Vanguard International Semiconductor Corp. 1,726,518 1,135 Via Technologies, Inc. (AE) 570,693 299 Wintek Corp. 423,000 585 Zyxel Communications Corp. 469,680 845 ------------ 71,294 ------------ Thailand - 2.4% Advanced Info Service PCL 76,400 187 Airports of Thailand PCL 1,156,600 1,432 Bank of Ayudhya PCL 6,588,900 2,003 Charoen Pokphand Foods PCL 444,400 57 CP Seven Eleven PCL 5,188,300 763 Glow Energy PCL 942,500 502 Kasikornbank PCL 671,400 996 Kiatnakin Finance PCL 309,500 213 Land and Houses PCL (N) 2,842,700 554 National Petrochemical PCL 517,000 1,585 PTT Exploration & Production PCL 751,700 7,742 PTT PCL 453,100 2,444 Ratchaburi Electricity Generating Holding PCL 522,100 493 Regional Container Lines PCL 500,000 402 Siam City Bank PCL 1,778,400 1,033 Siam City Cement PCL 37,100 264 ------------ 20,670 ------------ Turkey - 3.8% Akbank TAS 659,787 4,104 Akcansa Cimento AS 65,996 310
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Anadolu Efes Biracilik Ve Malt Sanayii AS 135,230 3,303 Arcelik 87,000 519 Cimsa Cimento Sanayi VE Tica 263,875 1,533 Denizbank AS (AE) 354,206 1,983 Eregli Demir ve Celik Fabrikalari TAS 583,121 3,156 Finansbank (AE) 331,533 1,008 Ford Otomotiv Sanayi AS 320,400 2,290 Hurriyet Gazetecilik AS 420,200 1,182 Migros Turk TAS 219,555 1,919 Trakya Cam Sanayi AS 241,747 855 Tupras Turkiye Petrol Rafine 227,407 3,889 Turkcell Iletisim Hizmet AS 226,187 1,189 Turkcell Iletisim Hizmet AS - ADR 8,900 117 Turkiye Garanti Bankasi AS (AE) 617,600 1,837 Turkiye Is Bankasi 373,580 2,590 ------------ 31,784 ------------ United Kingdom - 2.3% Anglo American PLC 261,953 7,643 Genesis Smaller Companies (AE) 254,984 10,607 Old Mutual PLC 2,300 5 SABMiller PLC 76,800 1,443 ------------ 19,698 ------------ United States - 0.1% Investcom LLC - GDR (AE) 68,400 924 ------------ Venezuela - 0.2% Cia Anonima Nacional Telefonos de Venezuela - CANTV - ADR 126,182 1,628 Siderurgica Venezolana Sivensa SACA (AE) 1,306,495 19 ------------ 1,647 ------------ Zimbabwe - 0.1% Delta Corp., Ltd. (A) 1,134,586 389 OK Zimbabwe (A) 6,402,949 41 ------------ 430 ------------ TOTAL COMMON STOCKS (cost $542,767) 741,171 ------------ PREFERRED STOCKS - 6.8% Brazil - 5.8% Banco Bradesco SA 93,283 4,801 Banco Itau Holding Financeira SA (AE) 123,110 2,947 Brasil Telecom Participacoes SA 56,200,000 458 Braskem SA 258,400 2,226
74 Emerging Markets Fund FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Caemi Mineracao e Metalurgica SA 706,000 1,122 Centrais Eletricas Brasileiras SA 65,823,500 1,137 Cia de Tecidos do Norte de Minas - Coteminas 5,276,440 539 Cia Siderurgica de Tubarao 56,800,000 3,481 Cia Vale do Rio Doce 165,600 6,096 Empresa Brasileira de Aeronautica SA 39,700 383 Gerdau SA 11,200 152 Klabin SA 441,000 842 Perdigao SA 21,700 588 Petroleo Brasileiro SA 943,372 13,494 Sadia SA 28,000 69 Suzano Bahia Sul Papel e Celulose SA 230,000 1,328 Tele Centro Oeste Celular Participacoes SA 56,932 506 Usinas Siderurgicas de Minas Gerais SA 305,200 6,166 Votorantim Celulose e Papel SA 177,327 2,126 Weg SA 136,900 446 ------------ 48,907 ------------ Colombia - 0.0% BanColombia SA 7,200 41 ------------ South Korea - 1.0% Hyundai Motor Co. 41,560 2,112 Samsung Electronics Co., Ltd. 15,079 6,186 ------------ 8,298 ------------ TOTAL PREFERRED STOCKS (cost $34,464) 57,246 ------------ WARRANTS & RIGHTS - 0.0% Malaysia - 0.0% IJM Corp. (AE) 2010 Warrants 71 8 ------------ TOTAL WARRANTS & RIGHTS (cost $1) 8 ------------ NOTIONAL MARKET AMOUNT VALUE $ $ - ----------------------------------------------------------------------------- OPTIONS PURCHASED - 0.3% (Number of Contracts) Brazil - 0.0% Bovespa Index Futures Dec 2005 31,365.00 (BRL) Call (150) 6,268 60 ------------ South Korea - 0.3% Kospi 200 Index Dec 2005 124.82 (KRW) Call (136) 8,130 2,194 ------------ TOTAL OPTIONS PURCHASED (cost $2,185) 2,254 ------------ PRINCIPAL AMOUNT ($) OR SHARES ------------ SHORT-TERM INVESTMENTS - 4.2% United States - 4.2% Frank Russell Investment Company Money Market Fund 31,505,000 31,505 United States Treasury Bills (c)(z)(sec.) 3.363% due 12/08/05 4,500 4,485 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $35,990) 35,990 ------------ OTHER SECURITIES - 1.8% Frank Russell Investment Company Money Market Fund (X) 4,959,363 4,960 State Street Securities Lending Quality Trust (X) 10,161,266 10,161 ------------ TOTAL OTHER SECURITIES (cost $15,121) 15,121 ------------ TOTAL INVESTMENTS - 100.6% (identified cost $630,528) 851,790 OTHER ASSETS AND LIABILITIES, NET - (0.6%) (4,888) ------------ NET ASSETS - 100.0% 846,902 ============
A portion of the portfolio has been fair valued as of period end. See accompanying notes which are an integral part of the financial statements. Emerging Markets Fund 75 FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
UNREALIZED NOTIONAL APPRECIATION FUTURES CONTRACTS AMOUNT (DEPRECIATION) (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Long Positions Hang Seng Index (Hong Kong) expiration date 11/05 (56) 5,195 (8) JSE-40 Index (South Africa) expiration date 12/05 (320) 7,162 222 MSCI Singapore Index expiration date 11/05 (380) 9,147 87 --------------- Total Unrealized Appreciation (Depreciation) on Open Futures Contracts 301 ===============
NOTIONAL MARKET OPTIONS WRITTEN AMOUNT VALUE (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Brazil Bovespa Index Futures Dec 2005 31,365.00 (BRL) Put (150) 6,268 (210) South Korea Kospi 200 Index Futures Dec 2005 124.82 (KRW) Put (136) 8,130 (652) --------------- Total Liability for Options Written (premiums received $724) (862) ===============
See accompanying notes which are an integral part of the financial statements. 76 Emerging Markets Fund FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
FOREIGN CURRENCY EXCHANGE CONTRACTS UNREALIZED APPRECIATION AMOUNT AMOUNT SETTLEMENT (DEPRECIATION) SOLD BOUGHT DATE $ - ------------------- -------------------- ----------- -------------- USD 39 BRL 88 11/01/05 -- USD 49 BRL 111 11/01/05 -- USD 63 BRL 144 11/01/05 1 USD 13 BRL 30 11/03/05 -- USD 66 BRL 148 11/03/05 -- USD 417 BRL 1,000 12/21/05 19 USD 995 BRL 2,400 12/21/05 51 USD 2,528 BRL 6,100 12/21/05 133 USD 3,523 BRL 8,500 12/21/05 184 USD 18 HKD 140 11/01/05 -- USD 142 HKD 1,102 11/01/05 -- USD 86 HKD 669 11/02/05 -- USD 107 HKD 827 11/02/05 -- USD 54 HKD 417 11/03/05 -- USD 107 HUF 22,391 11/02/05 -- USD 18 IDR 177,246 11/09/05 -- USD 4,683 KRW 4,800,000 12/21/05 (83) USD 8,198 KRW 8,400,000 12/21/05 (148) USD 12 MYR 45 11/02/05 -- USD 4 MYR 16 11/07/05 -- USD 5 THB 219 11/01/05 -- USD 3 THB 143 11/02/05 -- USD 20 ZAR 135 11/01/05 -- USD 97 ZAR 652 11/02/05 -- USD 10 ZAR 68 11/03/05 -- USD 24 ZAR 160 11/04/05 -- USD 302 ZAR 2,000 12/21/05 (5) USD 8,411 ZAR 54,000 12/21/05 (397) BRL 1,000 USD 421 12/21/05 (15) BRL 2,000 USD 826 12/21/05 (46) HKD 276 USD 36 11/01/05 -- HKD 6,292 USD 811 11/01/05 -- IDR 100,519 USD 10 11/01/05 -- IDR 133,661 USD 13 11/09/05 -- ILS 814 USD 175 11/01/05 -- KRW 1,000,000 USD 975 12/21/05 17 KRW 1,000,000 USD 977 12/21/05 18 KRW 1,200,000 USD 1,169 12/21/05 19 MXN 595 USD 55 11/01/05 -- MYR 1 USD -- 11/02/05 -- MYR 104 USD 27 11/02/05 -- MYR 157 USD 42 11/02/05 -- MYR 75 USD 20 11/07/05 -- MYR 215 USD 57 11/07/05 -- THB 1,410 USD 35 11/01/05 --
FOREIGN CURRENCY EXCHANGE CONTRACTS UNREALIZED APPRECIATION AMOUNT AMOUNT SETTLEMENT (DEPRECIATION) SOLD BOUGHT DATE $ - ------------------- -------------------- ----------- -------------- THB 751 USD 18 11/02/05 -- THB 3,303 USD 81 11/02/05 -- ZAR 2,391 USD 357 11/01/05 -- ZAR 3,565 USD 532 11/01/05 -- ZAR 7,765 USD 1,171 11/01/05 13 ZAR 409 USD 61 11/02/05 -- ZAR 2,065 USD 307 11/02/05 (1) ZAR 6,063 USD 901 11/02/05 (3) ZAR 1,148 USD 171 11/03/05 (1) ZAR 2,316 USD 344 11/03/05 (1) ZAR 466 USD 69 11/04/05 -- ZAR 955 USD 142 11/04/05 -- ZAR 12,260 USD 1,818 11/04/05 (9) ZAR 198 USD 29 11/07/05 -- ZAR 445 USD 66 11/07/05 -- ZAR 2,000 USD 303 12/21/05 6 ZAR 2,000 USD 312 12/21/05 15 ZAR 4,000 USD 620 12/21/05 26 -------------- Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts (207) ==============
See accompanying notes which are an integral part of the financial statements. Emerging Markets Fund 77 FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
INDUSTRY DIVERSIFICATION % OF MARKET NET VALUE (UNAUDITED) ASSETS $ - ----------------------------------------------------------------------------- Auto and Transportation 3.4 27,042 Consumer Discretionary 4.4 36,620 Consumer Staples 4.1 35,436 Financial Services 20.2 174,493 Health Care 0.5 4,899 Integrated Oils 11.8 100,062 Materials and Processing 17.4 150,758 Miscellaneous 1.5 12,689 Other Energy 3.7 31,424 Producer Durables 1.7 13,111 Technology 11.3 95,061 Utilities 14.3 116,822 Options Purchased 0.3 2,254 Warrants and Rights -- 8 Short-Term Investments 4.2 35,990 Other Securities 1.8 15,121 ------------ ------------ Total Investments 100.6 851,790 Other Assets and Liabilities, Net (0.6) (4,888) ------------ ------------ Net Assets 100.0 846,902 ============ ============
GEOGRAPHIC DIVERSIFICATION % OF MARKET NET VALUE (UNAUDITED) ASSETS $ - ----------------------------------------------------------------------------- Africa 10.3 86,806 Asia 45.3 383,771 Europe 11.7 99,286 Latin America 20.9 176,508 Middle East 4.0 33,686 Other Regions 4.3 36,914 United Kingdom 2.3 19,698 Other Securities 1.8 15,121 ------------ ------------ Total Investments 100.6 851,790 Other Assets and Liabilities, Net (0.6) (4,888) ------------ ------------ Net Assets 100.0 846,902 ============ ============
See accompanying notes which are an integral part of the financial statements. 78 Emerging Markets Fund FRANK RUSSELL INVESTMENT COMPANY EMERGING MARKETS FUND PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- Argentina 0.1 Bermuda 0.1 Brazil 7.1 Chile 0.2 China 4.3 Columbia 0.4 Croatia 0.1 Ecuador 0.3 Egypt 2.3 Hong Kong 2.4 Hungary 2.3 India 4.2 Indonesia 3.1 Israel 1.7 Luxembourg 0.8 Malaysia 1.2 Mexico 6.7 Pakistan 1.1 Philippines 0.4 Russia 4.7 South Africa 10.2 South Korea 16.5 Taiwan 8.4 Thailand 2.4 Turkey 3.8 United Kingdom 2.3 United States 0.1 Venezuela 0.2 Zimbabwe 0.1 Preferred Stock 6.8 Warrants & Rights --* Options Purchased 0.3 Short-Term Investments 4.2 Other Securities 1.8 --------------- Total Investments 100.6 Other Assets and Liabilities Net (0.6) --------------- 100.0 =============== Futures Contracts --* Options Written (0.1) Foreign Currency Exchange Contracts (--*)
* Less than .05% of net assets. See accompanying notes which are an integral part of the financial statements. Emerging Markets Fund 79 FRANK RUSSELL INVESTMENT COMPANY REAL ESTATE SECURITIES FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- (GRAPHIC)
REAL ESTATE SECURITIES - CLASS S NAREIT EQUITY REIT ** -------------------------------- --------------------- * 10000.00 10000.00 1996 12515.00 12471.00 1997 16478.00 16554.00 1998 14547.00 14438.00 1999 13907.00 13422.00 2000 17384.00 15877.00 2001 19032.00 18148.00 2002 19897.00 19302.00 2003 26778.00 25851.00 2004 35427.00 33592.00 2005 41928.00 39620.00
Real Estate Securities Fund - Class S - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 18.35% 5 Years 19.25%S 10 Years 15.41%S
Real Estate Securities Fund - Class E ++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 18.09% 5 Years 18.96%S 10 Years 15.08%S
Real Estate Securities Fund - Class C ++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 17.22% 5 Years 18.09%S 10 Years 14.51%S
NAREIT Equity REIT Index** - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 17.92% 5 Years 20.07%S 10 Years 14.76%S
80 Real Estate Securities Fund FRANK RUSSELL INVESTMENT COMPANY REAL ESTATE SECURITIES FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide current income and long term capital growth. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005? For the fiscal year ended October 31, 2005, the Real Estate Securities Fund Class S, Class E and Class C Shares gained 18.35%, 18.09% and 17.22%, respectively. This compared to the NAREIT Equity REIT Index, which gained 17.92% during the same period. The Fund's performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind. For the year ending October 31, 2005, the Lipper(R) Real Estate Funds Average returned 17.49%. This result serves as a peer comparison and is expressed net of operating expenses. HOW DID THE MARKET CONDITIONS DESCRIBED IN THE MARKET SUMMARY REPORT AFFECT THE FUND'S PERFORMANCE? The money managers positioned the Fund to capitalize on the strengthening economy and improving real estate market fundamentals. The largest overweight positions were in the lodging and regional malls sectors, which posted strong earnings growth during the fiscal year. The money managers maintained smaller overweights in the industrial, apartments and office sectors in view of the slower expected growth in these sectors. Sector positioning was a positive contributor to the Fund's performance during the fiscal year. The Fund maintained a primary focus on larger capitalization and more liquid real estate investment trusts (REITs) during the fiscal year. As this segment of the market outperformed the broader REIT market, the Fund benefited from this trend. WHAT WERE THE PRIMARY CONTRIBUTORS AND DETRACTORS TO THE FUND'S PERFORMANCE DURING THE LAST 12 MONTHS? Both stock and property sector selection contributed positively to performance. Stock selection had the largest impact on performance and was strongest in the office, shopping centers, apartments, diversified and health care sectors. The Fund benefited from overweight positions in the apartments, regional malls and office sectors. Underweight positions in the free standing retail, health care and mixed industrial/office sectors contributed positively to performance. The Fund's overweight position in the industrial sector and underweight positions in the self storage and specialty sectors detracted from performance. HOW DID THE INVESTMENT STRATEGIES AND TECHNIQUES EMPLOYED BY THE FUND AND ITS MONEY MANAGERS AFFECT ITS PERFORMANCE? AEW Management and Advisors, L.P. pursues a value-oriented style that focuses on identifying companies that it believes are mispriced relative to underlying real estate net asset values. AEW's portfolio tends to track relatively closely to the benchmark sector weights. AEW outperformed the benchmark during the fiscal year, primarily due to stock selection in the office, apartments and shopping centers sectors. Sector selection was also positive, as overweight positions in the apartments and regional malls sectors and underweight positions in the free standing retail, health care and office sectors boosted performance. These positive contributors to performance were partially offset by an overweight position in the mixed industrial/office sector which detracted from performance. INVESCO Institutional (N.A.), Inc., maintains a broadly diversified portfolio with exposure to all major property sectors. Its investment style incorporates fundamental property market research and bottom-up quantitative securities analysis. INVESCO outperformed the benchmark during the fiscal year due to positive stock and sector selection. Stock selection was strongest in the office, regional malls, shopping centers and diversified sectors. Sector selection added value through an overweight in the regional malls sector and underweight positions in the health care, free standing retail and mixed industrial/office sectors. These gains were partially offset by underweight positions in the specialty and self storage sectors. RREEF America, LLC.'s style emphasizes a top-down approach to property sector weights, based on an assessment of property market fundamentals. RREEF outperformed the benchmark primarily due to positive stock selection in the shopping centers, office, diversified and health care sectors. Sector selection was mixed and provided a small positive contribution to performance. An overweight position in the apartments sector and underweight positions in the free standing retail and mixed industrial/office sectors boosted returns, but this was partially offset by underweight positions in the self storage and specialty sectors. Heitman Real Estate Securities, LLC follows a bottom-up investment approach, selecting a smaller number of stocks than the Fund's other money managers. Heitman focuses on companies that it believes have attractive valuations relative to growth prospects. Heitman outperformed the benchmark for the portion of the fiscal year it was in the Fund due to strong stock selection in the office sector. DESCRIBE ANY CHANGES TO THE FUND'S STRUCTURE OR THE MONEY MANAGER LINE-UP. Heitman was added to the Fund's money manager line-up in January 2005. Heitman is expected to be complementary to the other money managers in the Fund due to its growth-oriented style and more concentrated portfolio. Real Estate Securities Fund 81 FRANK RUSSELL INVESTMENT COMPANY REAL ESTATE SECURITIES FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- Money Managers as of Styles October 31, 2005 AEW Management and Advisors, L.P. Value Heitman Real Estate Securities, LLC Growth INVESCO Institutional (N.A.), Inc., through INVESCO Real Estate Division Market-Oriented RREEF America, LLC Market-Oriented
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Frank Russell Investment Management Company (FRIMCo), or any other person in FRIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and FRIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Frank Russell Investment Company (FRIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any FRIC Fund. -------------------- * Real Estate Securities Fund Class S assumes initial investment on November 1, 1995. ** National Association of Real Estate Investment Trusts (NAREIT) Equity REIT Index is an index composed of all the data based on the last closing price of the month for all tax-qualified REITs listed on the New York Stock Exchange, American Stock Exchange, and the NASDAQ National Market System. The data is market value-weighted. The total-return calculation is based upon whether it is 1-month, 3-months or 12-months. Only those REITs listed for the entire period are used in the total return calculation. ++ Real Estate Securities Fund Class S performance has been linked with Class E to provide historical perspective. For the period, November 4, 1996 (commencement of sale) through May 15, 1998, Class E paid shareholder service and Rule 12b-1 distribution fees. From May 16, 1998 through the current period, Class E paid only shareholder service fees. Total return would have been lower had these fees been in effect during prior reporting periods. ++++ Real Estate Securities Fund Class S and Class E performance has been linked with Class C to provide historical perspective. From January 27, 1999 (commencement of sale) through the current period, Class C paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. sec. Annualized. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 82 Real Estate Securities Fund FRANK RUSSELL INVESTMENT COMPANY REAL ESTATE SECURITIES FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS C PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,091.20 $ 1,014.62 Expenses Paid During Period* $ 11.07 $ 10.66
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS E PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,095.20 $ 1,018.40 Expenses Paid During Period* $ 7.13 $ 6.87
* Expenses are equal to the Fund's annualized expense ratio of 1.35% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,096.60 $ 1,019.66 Expenses Paid During Period* $ 5.81 $ 5.60
* Expenses are equal to the Fund's annualized expense ratio of 1.10% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Real Estate Securities Fund 83 FRANK RUSSELL INVESTMENT COMPANY REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- COMMON STOCKS - 96.6% Apartments - 17.5% Apartment Investment & Management Co. Class A (o)(N) 585,775 22,494 Archstone-Smith Trust (o) 1,247,505 50,611 AvalonBay Communities, Inc. (o) 811,600 70,001 BRE Properties Class A (o)(N) 85,800 3,785 Camden Property Trust (o)(N) 620,999 34,993 Equity Residential (o) 1,403,500 55,087 Essex Property Trust, Inc. (o)(N) 240,000 21,571 GMH Communities Trust (o) 524,600 7,853 Post Properties, Inc. (o) 32,800 1,338 United Dominion Realty Trust, Inc. (o) 220,000 4,869 ------------ 272,602 ------------ Diversified - 5.5% Colonial Properties Trust (o)(N) 114,600 5,009 iStar Financial, Inc. (o) 111,000 4,093 Spirit Finance Corp. (o)(N) 793,200 8,900 Vornado Realty Trust (o) 834,172 67,568 ------------ 85,570 ------------ Free Standing Retail - 0.1% Realty Income Corp. (o)(N) 96,500 2,149 ------------ Health Care - 3.4% Healthcare Realty Trust, Inc. (o)(N) 178,000 6,736 LTC Properties, Inc. (o)(N) 56,500 1,158 National Health Investors, Inc. (o)(N) 117,250 3,148 Omega Healthcare Investors, Inc. (o)(N) 270,000 3,318 Ventas, Inc. (o) 1,269,250 38,877 ------------ 53,237 ------------ Industrial - 7.4% AMB Property Corp. (o)(N) 330,100 14,584 Centerpoint Properties Trust (o)(N) 331,100 15,085 First Potomac Realty Trust (o)(N) 211,100 5,349 ProLogis (o) 1,878,972 80,796 ------------ 115,814 ------------ Lodging/Resorts - 9.0% Hilton Hotels Corp. 1,089,900 21,198 Hospitality Properties Trust (o)(N) 67,000 2,660 Host Marriott Corp. (o) 2,548,700 42,793 Innkeepers USA Trust (o) 109,300 1,705 La Quinta Corp. (AE)(o)(N) 64,900 542 LaSalle Hotel Properties (o)(N) 342,320 12,115 Starwood Hotels & Resorts Worldwide, Inc. (o) 980,383 57,284 Strategic Hotel Capital, Inc. (o) 68,000 1,155 ------------ 139,452 ------------
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Manufactured Homes - 0.8% Equity Lifestyle Properties, Inc. (o)(N) 261,900 11,086 Sun Communities, Inc. (o) 38,000 1,159 ------------ 12,245 ------------ Mixed Industrial/Office - 3.1% Digital Realty Trust, Inc. (o) 282,100 5,411 Duke Realty Corp. (o) 528,700 18,029 Liberty Property Trust (o) 502,600 20,953 PS Business Parks, Inc. (o)(N) 90,000 4,188 ------------ 48,581 ------------ Office - 18.5% Alexandria Real Estate Equities, Inc. (o)(N) 162,700 13,154 American Financial Realty Trust (o)(N) 230,700 2,840 Arden Realty, Inc. (o)(N) 468,900 21,166 BioMed Realty Trust, Inc. (o)(N) 472,750 11,824 Boston Properties, Inc. (o) 1,026,100 71,027 Brandywine Realty Trust (o)(N) 569,500 15,604 Brookfield Properties Co. 962,300 28,195 CarrAmerica Realty Corp. (o)(N) 241,100 7,940 Corporate Office Properties Trust (o)(N) 337,800 11,742 Equity Office Properties Trust (o) 252,100 7,765 Highwoods Properties, Inc. (o)(N) 240,000 6,770 Kilroy Realty Corp. (o)(N) 158,700 8,911 Mack-Cali Realty Corp. (o) 211,100 9,003 Maguire Properties, Inc. (o)(N) 110,600 3,318 Prentiss Properties Trust (o)(N) 309,000 12,193 Reckson Associates Realty Corp. (o) 513,700 18,031 SL Green Realty Corp. (o) 211,200 14,368 Trizec Properties, Inc. (o)(N) 1,062,200 23,634 ------------ 287,485 ------------ Regional Malls - 16.6% CBL & Associates Properties, Inc. (o)(N) 174,600 6,521 General Growth Properties, Inc. (o)(N) 1,477,900 62,781 Macerich Co. (The) (o)(N) 612,200 39,346 Mills Corp. (The) (o)(N) 409,388 21,902 Pennsylvania Real Estate Investment Trust (o) 90,671 3,491
84 Real Estate Securities Fund FRANK RUSSELL INVESTMENT COMPANY REAL ESTATE SECURITIES FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Simon Property Group, Inc. (o) 1,593,800 114,148 Taubman Centers, Inc. (o) 313,000 10,320 ------------ 258,509 ------------ Self Storage - 4.1% Extra Space Storage, Inc. (o)(N) 82,300 1,202 Public Storage, Inc. (o)(N) 638,800 42,289 Shurgard Storage Centers, Inc. Class A (o) 80,000 4,514 U-Store-It Trust (o)(N) 721,500 15,050 ------------ 63,055 ------------ Shopping Centers - 10.0% Acadia Realty Trust (o) 62,500 1,188 Developers Diversified Realty Corp. (o)(N) 771,600 33,704 Equity One, Inc. (o)(N) 224,700 5,269 Federal Realty Investors Trust (o) 474,400 28,772 Inland Real Estate Corp. (o)(N) 351,500 5,009 Kimco Realty Corp. (o) 315,000 9,330 Kite Realty Group Trust (o)(N) 197,800 2,923 New Plan Excel Realty Trust (o)(N) 88,800 2,042 Pan Pacific Retail Properties, Inc. (o) 419,213 26,620 Ramco-Gershenson Properties Trust (o)(N) 86,800 2,408 Regency Centers Corp. (o) 610,300 33,975 Weingarten Realty Investors (o) 112,600 4,004 ------------ 155,244 ------------ Specialty - 0.6% Capital Automotive REIT (o)(N) 59,400 2,294 Plum Creek Timber Co., Inc. (o)(N) 200,000 7,780 ------------ 10,074 ------------ TOTAL COMMON STOCKS (cost $1,065,848) 1,504,017 ------------ SHORT-TERM INVESTMENTS - 2.9% Frank Russell Investment Company Money Market Fund 45,777,000 45,777 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $45,777) 45,777 ------------
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- OTHER SECURITIES - 7.9% Frank Russell Investment Company Money Market Fund (X) 40,143,053 40,143 State Street Securities Lending Quality Trust (X) 82,249,322 82,249 ------------ TOTAL OTHER SECURITIES (cost $122,392) 122,392 ------------ TOTAL INVESTMENTS - 107.4% (identified cost $1,234,017) 1,672,186 OTHER ASSETS AND LIABILITIES, NET - (7.4%) (115,905) ------------ NET ASSETS - 100.0% 1,556,281 ============
See accompanying notes which are an integral part of the financial statements. Real Estate Securities Fund 85 FRANK RUSSELL INVESTMENT COMPANY REAL ESTATE SECURITIES FUND PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- Apartments 17.5 Diversified 5.5 Free Standing Retail 0.1 Health Care 3.4 Industrial 7.4 Lodging/Resorts 9.0 Manufactured Homes 0.8 Mixed Industrial/Office 3.1 Office 18.5 Regional Malls 16.6 Self Storage 4.1 Shopping Center 10.0 Specialty 0.6 Short-Term Investments 2.9 Other Securities 7.9 --------------- Total Investments 107.4 Other Assets and Liabilities, Net (7.4) --------------- 100.0 ===============
See accompanying notes which are an integral part of the financial statements. 86 Real Estate Securities Fund (This page intentionally left blank) FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- (GRAPHIC)
MERRILL LYNCH 1-2.99 YEARS SHORT DURATION BOND - CLASS S TREASURY** ----------------------------- -------------------------- * 10000 10000 1996 10561 10591 1997 11204 11278 1998 11941 12146 1999 12282 12510 2000 13028 13270 2001 14430 14707 2002 15124 15427 2003 15569 15737 2004 15878 16009 2005 15959 16116
Short Duration Bond Fund - Class S - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 0.51% 5 Years 4.14%S 10 Years 4.79%S
Short Duration Bond Fund - Class E ++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 0.25% 5 Years 3.89%S 10 Years 4.61%S
Short Duration Bond Fund - Class C ++++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year (0.50)% 5 Years 3.13%S 10 Years 4.09%S
Merrill Lynch 1-2.99 Years Treasury Index** - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 0.67% 5 Years 3.96%S 10 Years 4.89%S
88 Short Duration Bond Fund FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide current income and preservation of capital with a focus on short duration securities. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005? For the fiscal year ended October 31, 2005, the Short Duration Bond Fund Class S, Class E and Class C Shares returned 0.51%, 0.25% and (0.50)% respectively. This compared to the Merrill Lynch U.S. Treasuries 1-3 Year Index, which gained 0.67% during the same period. The Fund's performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind. For the year ended October 31, 2005, the Lipper(R) Short Investment Grade Debt Funds Average returned 0.96%. This return serves as a peer comparison and is expressed net of operating expenses. HOW DID THE MARKET CONDITIONS DESCRIBED IN THE MARKET SUMMARY REPORT AFFECT THE FUND'S PERFORMANCE? Short-term interest rates increased over the 12 months ending October 31, 2005. Therefore, the Fund's money managers who favored shorter-than-index duration positions should have performed better. However, given spikes in interest rate volatility throughout the year, money managers that responded more tactically by changing their duration stance relatively quickly performed better. Duration is a measure of a bond price's sensitivity to a change in interest rates. Fund performance was helped by tactical duration decisions and yield curve positioning. Despite the increase in short-term interest rates, shorter maturity non-Treasury sectors achieved strong benchmark relative performance. The Fund benefited from having an overweight position in non-Treasury sectors, such as corporate and mortgage-backed securities, as well as high yield corporate bonds and emerging market debt securities. WHAT WERE THE PRIMARY CONTRIBUTORS AND DETRACTORS TO THE FUND'S PERFORMANCE DURING THE LAST 12 MONTHS? The Fund derived much of its performance by maintaining overweighted positions in the riskier sectors of the fixed income markets relative to the all-Treasury benchmark. These sectors included investment grade corporate, mortgage- and asset-backed securities, high yield and emerging market debt. The allocation to these non-Treasury sectors benefited the Fund by providing a larger-than-benchmark yield and higher-than-benchmark total return. In addition, the Fund's money managers added value through positive security selection and sector allocation decisions. Finally, duration and yield curve positioning also benefited the Fund. In contrast, investments in government securities such as Treasury Inflation Protected Securities (TIPS) detracted from performance during the fiscal year. The Fund's performance shortfall relative to benchmark was due to the impact of Fund operating expenses. HOW DID THE INVESTMENT STRATEGIES AND TECHNIQUES EMPLOYED BY THE FUND AND ITS MONEY MANAGERS AFFECT ITS PERFORMANCE? The Fund entered the fiscal year positioned to take advantage of the anticipated continued strong performance in the non-Treasury sectors such as investment grade and emerging market debt; however, the Fund was also positioned to reflect a more cautious view on the direction of interest rates. As the fiscal year progressed, shorter duration non-Treasury sectors continued to perform well, leading to less attractive valuations in those sectors. In response, the Fund's money managers reduced risk by reducing exposure to non-investment grade sectors and focusing on higher quality securities. While the Fund's money managers took profits in the non-Treasury sectors, the Fund maintained a near benchmark duration stance throughout most of the fiscal year although duration positioning did vary as the Fund's money managers made tactical investment decisions. The key investment strategies of sector rotation, issue selection, and duration and yield curve management all helped performance. Sector rotation strategies drove the Fund's money managers to overweight non-benchmark sectors, which tended to outperform the all-Treasury security benchmark. The money managers also added value through security selection. Finally, in order to take advantage of interest rates changes, some money managers took either longer or shorter duration positions at various times resulting in positive performance. Short Duration Bond Fund 89 FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- DESCRIBE ANY CHANGES TO THE FUND'S STRUCTURE OR THE MONEY MANAGER LINE-UP. There were no changes to Fund's structure or the money manager line-up in the fiscal year. Money Managers as of Styles October 31, 2005 Merganser Capital Management, L.P. Sector Rotation Pacific Investment Management Company, LLC Sector Rotation STW Fixed Income Management Ltd. Sector Rotation
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Frank Russell Investment Management Company (FRIMCo), or any other person in FRIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and FRIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Frank Russell Investment Company (FRIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any FRIC Fund. -------------------- * Short Duration Bond Fund Class S assumes initial investment on November 1, 1995. ** Merrill Lynch 1-2.99 Years Treasury Index is an index composed of approximately 160 issues in the form of publicly placed, coupon-bearing US Treasury debt. Issues must carry a term to maturity of at least one year, and par amounts outstanding must be no less than $10 million at the start and at the close of the performance measurement periods. ++++ Short Duration Bond Fund Class S performance has been linked with Class E to provide historical perspective. From February 18, 1999 (commencement of sale) through the current period, Class E paid shareholder service fees. Total return would have been lower had these fees been in effect during prior reporting periods. ++++++Short Duration Bond Fund Class S and Class E performance has been linked with Class C to provide historical perspective. From March 3, 1999 (commencement of sale) through the current period, Class C paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. sec. Annualized. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 90 Short Duration Bond Fund FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS C PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,000.20 $ 1,016.84 Expenses Paid During Period* $ 8.37 $ 8.44
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS E PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,004.00 $ 1,020.62 Expenses Paid During Period* $ 4.60 $ 4.63
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,005.20 $ 1,021.88 Expenses Paid During Period* $ 3.34 $ 3.36
* 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 184/365 (to reflect the one-half year period). Short Duration Bond Fund 91 FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- LONG-TERM INVESTMENTS - 78.6% Asset-Backed Securities - 24.4% AAA Trust (p) Series 2005-2 Class A1 4.151% due 11/26/35 1,306 1,305 Aegis Asset Backed Securities Trust (E) Series 2005-1 Class 1A1 4.158% due 03/25/35 253 253 Alter Moneta Receivables LLC (A) Series 2003-1 Class NOTE 2.563% due 03/15/11 718 713 AmeriCredit Automobile Receivables Trust Series 2005-AX Class A3 3.630% due 01/06/10 2,000 1,970 Asset Backed Securities Corp. Home Equity (E) Series 2002-HE1 Class M1 5.070% due 03/15/32 1,400 1,434 Banc of America Securities Auto Trust Series 2005-WF1 Class A4 4.080% due 04/18/10 3,000 2,945 Bank One Issuance Trust Series 2004-A1 Class A1 3.450% due 10/17/11 8,185 7,849 Series 2004-B2 Class B2 4.370% due 04/15/12 1,500 1,467 Bay View Auto Trust Series 2003-LJ1 Class A3 2.430% due 07/25/08 83 83 Bear Stearns Asset Backed Securities, Inc. (E) Series 2004-BO1 Class 1A1 4.238% due 09/25/34 472 472 BMW Vehicle Owner Trust Series 2004-A Class A4 3.320% due 02/25/09 4,200 4,112 California Infrastructure PG&E-1 Series 1997-1 Class A7 6.420% due 09/25/08 940 949 Series 1997-1 Class A8 6.480% due 12/26/09 3,000 3,085 California Infrastructure SCE-1 Series 1997-1 Class A7 6.420% due 12/26/09 7,450 7,653 California Infrastructure SDG&E-1 Series 1997-1 Class A6 6.310% due 09/25/08 273 275 Capital Auto Receivables Asset Trust Series 2004-1 Class A3 2.000% due 11/15/07 777 767
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2004-2 Class A2 3.350% due 02/15/08 3,000 2,954 Capital One Auto Finance Trust Series 2001-B Class A4 4.880% due 09/15/08 759 759 Series 2005-BSS Class A3 4.080% due 11/15/09 2,000 1,973 Capital One Master Trust Series 2002-4A Class A 4.900% due 03/15/10 1,000 1,002 Capital One Prime Auto Receivables Trust Series 2004-3 Class A4 3.690% due 06/15/10 1,000 974 Series 2004-3 Class B 3.860% due 08/15/11 1,500 1,462 Carmax Auto Owner Trust Series 2004-2 Class A4 3.460% due 09/15/11 2,500 2,423 Series 2005-2 Class A4 4.340% due 09/15/10 2,000 1,966 Carrington Mortgage Loan Trust (E) Series 2005-NC3 Class A1A 4.118% due 06/25/35 335 335 Series 2005-OPT Class A1A 4.128% due 05/25/35 613 613 Centex Home Equity Series 2003-C Class AF4 4.960% due 04/25/32 1,750 1,742 Chase Credit Card Master Trust (E) Series 2001-1 Class A 4.110% due 06/16/08 1,800 1,801 Series 2004-2 Class A 4.010% due 09/15/09 2,500 2,501 Chase Issuance Trust Series 2004-A9 Class A9 3.220% due 06/15/10 3,000 2,915 Chase Manhattan Auto Owner Trust Series 2002-B Class A4 4.210% due 01/15/09 4,411 4,409 Series 2004-A Class A4 2.830% due 09/15/10 1,800 1,740 Series 2005-A Class A4 3.980% due 04/15/11 1,000 976 Series 2005-A Class CTFS 4.040% due 04/15/11 1,000 984
92 Short Duration Bond Fund FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Chemical Master Credit Card Trust 1 Series 1996-2 Class A 5.980% due 09/15/08 6,000 6,018 CIT Equipment Collateral Series 2003-VT1 Class A3B 1.630% due 04/20/07 138 136 Series 2004-VT1 Class A3 2.200% due 03/20/08 1,123 1,106 Series 2005-VT1 Class A3 4.120% due 08/20/08 1,150 1,139 CIT Marine Trust Series 1999-A Class A4 6.250% due 11/15/19 843 848 CIT RV Trust Series 1998-A Class A5 6.120% due 11/15/13 699 704 Citibank Credit Card Issuance Trust Series 2003-A3 Class A3 3.100% due 03/10/10 1,000 962 Series 2003-A5 Class A5 2.500% due 04/07/08 1,700 1,685 Series 2004-A1 Class A1 2.550% due 01/20/09 6,975 6,788 Series 2004-A4 Class A4 3.200% due 08/24/09 3,425 3,331 Citigroup Mortgage Loan Trust, Inc. (E) Series 2005-HE3 Class A2A 4.148% due 09/25/35 1,345 1,345 CNH Equipment Trust Series 2003-A Class A3B 1.890% due 07/16/07 240 239 CNH Wholesale Master Note Trust (E) Series 2005-1 Class A 4.080% due 06/15/11 1,500 1,500 Community Program Loan Trust Series 1987-A Class A4 4.500% due 10/01/18 2,419 2,380 Connecticut RRB Special Purpose Trust CL&P Series 2001-1 Class A5 6.210% due 12/30/11 1,000 1,049 Countrywide Asset-Backed Certificates Series 2001-BC3 Class A (E) 4.278% due 12/25/31 273 273 Series 2004-7 Class AF2 3.324% due 12/25/23 1,000 997 Series 2005-4 Class 3AV1 (E) 4.118% due 10/25/35 2,184 2,184 Series 2005-5 Class 2A1 (E) 4.118% due 10/25/35 668 668 Series 2005-9 Class 2A1 (E) 3.938% due 08/25/35 1,074 1,074
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Daimler Chrysler Auto Trust Series 2005-A Class A3 3.490% due 12/08/08 2,330 2,297 Series 2005-A Class A4 3.740% due 02/08/10 8,100 7,925 Dillard Credit Card Master Trust Series 2002-2 Class A 3.800% due 09/15/10 3,650 3,623 Discover Card Master Trust I Series 1996-3 Class A 6.050% due 08/18/08 2,225 2,235 Series 2002-2 Class B 5.450% due 10/15/09 1,000 1,009 E-Trade RV and Marine Trust Series 2004-1 Class A3 3.620% due 10/08/18 1,300 1,245 Equifirst Mortgage Loan Trust (E) Series 2005-1 Class A1 4.098% due 04/25/35 1,929 1,929 Federal Farm Credit Bank 12.250% due 02/01/07 2,446 2,544 Fifth Third Auto Trust Series 2004-A Class A3 3.190% due 02/20/08 2,000 1,978 Finance America Mortgage Loan Trust (E) Series 2004-1 Class 2A1 4.208% due 06/25/34 367 367 First National Master Note Trust (E) Series 2003-1 Class A 4.070% due 08/15/08 1,000 1,000 First NLC Trust (E) Series 2005-2 Class AV1 4.148% due 09/25/35 757 757 Fleet Credit Card Master Trust II Series 2001-B Class A 5.600% due 12/15/08 3,000 3,017 Series 2001-B Class B 5.900% due 12/15/08 1,100 1,108 Ford Credit Auto Owner Trust Series 2005-A Class A3 3.480% due 11/15/08 8,225 8,114 Series 2005-B Class A4 4.380% due 01/15/10 500 495 Series 2005-B Class B 4.640% due 04/15/10 1,250 1,236 Series 2005-C Class B 4.520% due 09/15/10 1,000 982
Short Duration Bond Fund 93 FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Franklin Auto Trust Series 2003-1 Class A4 2.270% due 05/20/11 1,027 1,003 Fremont Home Loan Trust (E) Series 2004-4 Class 2A1 4.198% due 03/25/35 282 282 GE Commercial Equipment Financing LLC (E) Series 2004-1 Class B 4.200% due 12/20/15 606 606 GE Corporate Aircraft Financing LLC (E)(A) Series 2004-1A Class B 4.888% due 01/25/18 702 702 GE Dealer Floorplan Master Note Trust (E) Series 2004-2 Class B 4.290% due 07/20/09 1,000 1,002 GMAC Mortgage Corp. Loan Trust Series 2004-GH1 Class A2 4.390% due 12/25/25 1,500 1,487 GS Auto Loan Trust Series 2004-1 Class A3 2.130% due 11/15/07 1,573 1,557 Series 2005-1 Class A4 4.560% due 11/15/13 1,300 1,286 GSAMP Trust (E) Series 2004-NC2 Class A2A 4.218% due 10/01/34 154 154 Series 2004-SEA Class A2A 4.328% due 03/25/34 941 941 Honda Auto Receivables Owner Trust Series 2003-2 Class A4 2.160% due 10/21/08 5,505 5,369 Series 2003-3 Class A4 2.770% due 11/21/08 2,000 1,954 Series 2003-4 Class A4 2.790% due 03/16/09 1,000 976 Series 2003-5 Class A3 2.300% due 10/18/07 726 718 Series 2003-5 Class A4 2.960% due 04/20/09 2,135 2,079 Series 2004-3 Class A4 3.280% due 02/18/10 2,000 1,925 Household Automotive Trust Series 2005-3 Class A2 4.700% due 01/17/09 2,600 2,600 Household Mortgage Loan Trust (E) Series 2003-HC1 Class A 4.350% due 02/20/33 520 521 Household Private Label Credit Card Master Note Trust I (E) Series 2002-2 Class A 4.140% due 01/18/11 1,000 1,001
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Hyundai Auto Receivables Trust Series 2002-A Class A3 (A) 2.800% due 02/15/07 99 99 Series 2004-A Class A3 2.970% due 05/15/09 1,000 980 Series-A Class A3 3.980% due 11/16/09 1,500 1,478 Illinois Power Special Purpose Trust Series 1998-1 Class A6 5.540% due 06/25/09 3,829 3,857 IXIS Real Estate Capital Trust (E) Series 2005-HE2 Class A1 4.118% due 09/25/35 764 764 Long Beach Auto Receivables Trust Series 2005-B Class A3 4.406% due 05/15/10 1,500 1,486 Marlin Leasing Receivables LLC (A) Series 2005-1A Class A3 4.630% due 11/17/08 1,650 1,640 MBNA Credit Card Master Note Trust Series 2001-A1 Class A1 5.750% due 10/15/08 1,000 1,006 Series 2003-A6 Class A6 2.750% due 10/15/10 1,430 1,361 Series 2004-A4 Class A4 2.700% due 09/15/09 11,005 10,690 Series 2005-A7 Class A7 4.300% due 02/15/11 1,500 1,480 Merrill Auto Trust Securitization Series 2005-1 Class A3 4.100% due 08/25/09 3,000 2,965 Morgan Stanley Dean Witter Capital I (E) Series 2002-HE1 Class A2 4.368% due 07/25/32 3 3 National City Auto Receivables Trust Series 2002-A Class A4 4.830% due 08/15/09 865 866 Series 2004-A Class A3 2.110% due 07/15/08 1,334 1,318 National City Bank 2.700% due 08/24/09 1,818 1,726 Navistar Financial Corp. Owner Trust Series 2002-A Class A4 4.760% due 04/15/09 524 524
94 Short Duration Bond Fund FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Nelnet Education Loan Funding, Inc. Series 2001-A Class A1 5.760% due 07/01/12 2,267 2,306 Nelnet Student Loan Trust (E) Series 2002-2 Class A3 4.061% due 09/25/13 366 366 Nissan Auto Lease Trust Series 2005-A Class A3 4.700% due 10/15/08 3,000 2,996 Nissan Auto Receivables Owner Trust Series 2005-A Class A3 3.540% due 10/15/08 1,650 1,625 Series 2005-B Class A3 3.990% due 07/15/09 1,600 1,581 Nordstrom Private Label Credit Card Master Note Trust (A) Series 2001-1A Class A 4.820% due 04/15/10 3,500 3,503 Onyx Acceptance Grantor Trust Series 2005-A Class A4 3.910% due 09/15/11 2,000 1,955 Option One Mortgage Loan Trust (E) Series 2005-1 Class A2 4.168% due 02/25/35 735 735 PBG Equipment Trust (A) Series 1998-1A Class A 6.270% due 01/20/12 790 790 Peco Energy Transition Trust Series 1999-A Class A6 6.050% due 03/01/09 1,996 2,018 PG&E Energy Recovery Funding LLC Series 2005-1 Class A2 3.870% due 06/25/11 2,905 2,855 PNC Student Loan Trust I Series 1997-2 Class A7 6.728% due 01/25/07 682 688 Popular ABS Mortgage Pass-Through Trust Series 2004-5 Class AF2 3.735% due 12/25/34 965 951 Series 2005-3 Class AF3 4.437% due 07/25/35 2,000 1,969 Provident Auto Lease ABS Trust (A) Series 1999-1 Class A2 7.025% due 01/14/12 21 21 Providian Gateway Master Trust (A) Series 2004-FA Class A 3.650% due 11/15/11 1,200 1,172 PSE&G Transition Funding LLC Series 2001-1 Class A3 5.980% due 06/15/08 1,831 1,841
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Public Service New Hampshire Funding LLC Series 2001-1 Class A2 5.730% due 11/01/10 1,263 1,276 Railcar Leasing LLC (A) Series 1997-1 Class A2 7.125% due 01/15/13 1,000 1,060 Regions Auto Receivables Trust Series 2003-2 Class A3 2.310% due 01/15/08 875 869 Residential Asset Mortgage Products, Inc. (E) Series 2004-RS1 Class AII1 4.168% due 06/25/27 1,576 1,577 Series 2004-RS2 Class AIIB 4.288% due 02/25/34 1,542 1,544 Series 2004-RS8 Class AII1 4.178% due 05/25/26 809 809 Sears Credit Account Master Trust Series 1999-3 Class A 6.450% due 11/17/09 121 121 Series 2002-5 Class A (E) 4.350% due 11/17/09 3,500 3,500 SLM Student Loan Trust (A) Series 2003-4 Class A5B 3.390% due 03/15/33 3,000 2,898 Specialty Underwriting & Residential Finance (E) Series 2004-BC4 Class A2A 4.188% due 10/25/35 1,094 1,094 Susquehanna Auto Lease Trust (A) Series 2003-1 Class A3 2.460% due 01/14/07 519 514 Series 2005-1 Class A3 4.430% due 06/16/08 4,000 3,978 Series 2005-1 Class B 4.710% due 07/14/08 1,700 1,688 Toyota Auto Receivables Owner Trust Series 2003-B Class A4 2.790% due 01/15/10 4,670 4,581 Toyota Motor Credit Corp. 2.750% due 08/06/09 2,909 2,788 Triad Auto Receivables Owner Trust Series 2002-A Class A4 3.240% due 08/12/09 1,504 1,490 Series 2003-B Class A3 2.480% due 03/12/08 595 592 Series 2004-A Class A3 1.900% due 07/14/08 1,000 990
Short Duration Bond Fund 95 FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- USAA Auto Owner Trust Series 2004-2 Class A3 3.030% due 06/16/08 4,425 4,376 Series 2004-2 Class A4 3.580% due 02/15/11 1,700 1,665 Series 2005-2 Class A4 4.170% due 02/15/11 4,000 3,922 Wachovia Auto Owner Trust Series 2004-A Class A3 3.190% due 06/20/08 2,000 1,980 Series 2004-A Class A4 3.660% due 07/20/10 10,500 10,280 Series 2004-B Class A3 2.910% due 04/20/09 5,000 4,916 Wells Fargo Financial Auto Owner Trust Series 2004-A Class A4 2.670% due 08/16/10 2,000 1,946 Wells Fargo Home Equity Trust (E) Series 2004-2 Class A31 4.198% due 06/25/19 4 4 West Penn Funding LLC Transition Bonds Series 1999-A Class A3 6.810% due 09/25/08 780 786 WFS Financial Owner Trust Series 2002-3 Class A4 3.500% due 02/20/10 1,407 1,397 Series 2004-1 Class A3 2.190% due 06/20/08 1,500 1,490 Whole Auto Loan Trust Series 2003-1 Class A3B 1.990% due 05/15/07 1,001 995 Series 2003-1 Class B 2.240% due 03/15/10 433 426 World Omni Auto Receivables Trust (E) Series 2005-B Class A4 4.020% due 09/20/12 2,000 2,000 ------------ 296,478 ------------ Corporate Bonds and Notes - 17.4% ABN Amro Bank NV 7.125% due 06/18/07 1,700 1,760 Allstate Financial Global Funding (A) 2.500% due 06/20/08 4,080 3,838 Altria Group, Inc. 7.650% due 07/01/08 1,500 1,595 American Express Centurion Bank Series BKNT 4.375% due 07/30/09 3,440 3,370
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- American General Finance Corp. (E) Series MTNG 4.000% due 03/23/07 200 200 Associates Corp. of North America 6.250% due 11/01/08 1,900 1,973 8.550% due 07/15/09 750 840 Bank of America Corp. 6.375% due 02/15/08 3,000 3,095 Bank of Montreal 7.800% due 04/01/07 3,000 3,119 Bank One Corp. 2.625% due 06/30/08 3,050 2,881 BankAmerica Corp. 6.250% due 04/01/08 2,000 2,059 7.125% due 03/01/09 1,500 1,597 BB&T Corp. (E) Series BKNT 3.831% due 06/04/07 3,500 3,502 BellSouth Corp. 4.200% due 09/15/09 6,980 6,770 Boeing Co. 8.100% due 11/15/06 2,375 2,453 British Aerospace Finance, Inc. (p) 7.000% due 07/01/07 900 925 CIT Group, Inc. 7.375% due 04/02/07 6,800 7,032 4.120% due 09/20/07 (N)(E) 3,800 3,811 Citigroup Global Markets Holdings, Inc. (E) Series MTNM 3.816% due 03/07/08 1,600 1,599 Citigroup, Inc. (E) 3.821% due 06/04/07 1,000 1,000 Consolidated Edison Co. of New York Series B 7.150% due 12/01/09 1,000 1,080 CSX Corp. 6.250% due 10/15/08 2,000 2,066 Deutsche Bank Financial, Inc. 7.500% due 04/25/09 2,000 2,159 Dominion Resources, Inc. Series G 3.660% due 11/15/06 1,800 1,778 Entergy Mississippi, Inc. 4.350% due 04/01/08 500 490 Fifth Third Bancorp Series BKNT 3.375% due 08/15/08 2,000 1,923 Fifth Third Bank Series BKNT 4.200% due 02/23/10 2,000 1,945
96 Short Duration Bond Fund FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- FleetBoston Financial Corp. 6.375% due 05/15/08 4,185 4,324 Ford Motor Credit Co. 6.500% due 01/25/07 1,500 1,482 4.870% due 03/21/07 (E) 2,800 2,726 7.260% due 11/02/07 (E) 200 199 GATX Rail Corp. 6.750% due 05/01/09 2,500 2,594 General Electric Capital Corp. 4.281% due 10/21/10 (E) 2,000 1,999 Series MTNA 4.625% due 09/15/09 6,460 6,388 General Mills, Inc. 5.125% due 02/15/07 3,000 3,004 General Motors Acceptance Corp. (E) 5.050% due 01/16/07 200 197 Goldman Sachs Group, Inc. 4.202% due 10/05/07 (E) 2,000 2,004 4.500% due 10/07/11 (E) 3,000 3,013 Series MTNB (E) 4.524% due 07/23/09 2,000 2,011 Harrah's Operating Co., Inc. 7.500% due 01/15/09 1,500 1,595 Household Finance Corp. (E) 3.900% due 02/28/07 3,200 3,201 HSBC Finance Corp. 6.500% due 11/15/08 10,130 10,554 International Lease Finance Corp. 5.625% due 06/01/07 (N) 1,600 1,616 4.750% due 07/01/09 2,250 2,210 Series MTNP 3.125% due 05/03/07 2,200 2,143 John Hancock Global Funding II 6.000% due 12/28/06 2,450 2,479 Lehman Brothers Holdings, Inc. 7.875% due 08/15/10 1,000 1,114 Lehman Brothers, Inc. 6.625% due 02/15/08 1,500 1,556 Medco Health Solutions, Inc. 7.250% due 08/15/13 1,750 1,895 Merrill Lynch & Co., Inc. 4.831% due 10/27/08 3,925 3,909 Metropolitan Life Global Funding I (A) 4.250% due 07/30/09 4,000 3,909 MGM Mirage 9.750% due 06/01/07 1,200 1,260 Morgan Stanley 4.341% due 07/27/07 (E) 3,000 3,005 3.875% due 01/15/09 2,000 1,930 National City Bank Series BKNT 4.250% due 01/29/10 1,375 1,338
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- National Rural Utilities Cooperative Finance Corp. Series MTNC 6.500% due 03/01/07 2,200 2,248 New York Life Global Funding (E)(A) 3.901% due 02/26/07 2,500 2,501 Nisource Finance Corp. 3.200% due 11/01/06 2,795 2,749 3.628% due 11/01/06 1,300 1,283 Northern States Power-Minnesota 6.875% due 08/01/09 3,000 3,179 Pepco Holdings, Inc. 5.500% due 08/15/07 400 403 Principal Life Global Funding I (A) 5.125% due 06/28/07 2,000 2,002 2.800% due 06/26/08 5,600 5,321 Principal Life Income Funding Trusts 3.200% due 04/01/09 1,500 1,426 Prudential Financial, Inc. 4.104% due 11/15/06 500 495 Residential Capital Corp. (A) 6.375% due 06/30/10 2,000 2,031 SBC Communications Capital Corp. Series MTND 6.680% due 11/28/07 1,075 1,105 SLM Corp. 3.625% due 03/17/08 7,200 7,009 Texas Eastern Transmission, LP 5.250% due 07/15/07 2,900 2,913 Textron, Inc. 6.375% due 11/15/08 2,500 2,601 TIAA Global Markets (A) 5.000% due 03/01/07 3,625 3,632 Unilever Capital Corp. 7.125% due 11/01/10 1,000 1,094 US Bancorp Series MTNN 5.100% due 07/15/07 1,650 1,658 US Bank NA Series BKNT 4.125% due 03/17/08 1,600 1,577 US Central Credit Union 2.750% due 05/30/08 1,880 1,788 USAA Capital Corp. (A) Series MTNB 4.640% due 12/15/09 595 587
Short Duration Bond Fund 97 FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Virginia Electric and Power Co. Series A 5.375% due 02/01/07 675 679 Wachovia Bank NA Series BKNT 4.375% due 08/15/08 2,250 2,224 Wachovia Corp. 5.625% due 12/15/08 (N) 8,200 8,393 Series* (E) 4.121% due 07/20/07 3,500 3,504 Wells Fargo (N) 4.125% due 03/10/08 820 809 Wells Fargo & Co. 6.250% due 04/15/08 8,337 8,608 ------------ 210,334 ------------ International Debt - 2.1% Brazilian Government International Bond 9.760% due 06/29/09 (E) 1,150 1,340 8.000% due 01/15/18 2,000 2,066 British Telecommunications PLC 7.000% due 05/23/07 1,700 1,748 Eli Lilly Services, Inc. (E)(p) 3.907% due 09/12/08 4,000 3,999 HBOS Treasury Services PLC (A) 4.203% due 01/12/07 (E) 900 901 3.500% due 11/30/07 2,000 1,949 3.750% due 09/30/08 1,000 971 HSBC Bank PLC 6.950% due 03/15/11 1,000 1,108 Inter-American Development Bank 12.250% due 12/15/08 1,250 1,517 Interstar Millennium Trust (E) Series 2004-2G Class A 4.057% due 03/14/36 1,900 1,900 Mexico Government International Bond 4.625% due 10/08/08 3,250 3,211 National Westminster Bank PLC 7.375% due 10/01/09 1,000 1,086 Panama Government International Bond 8.250% due 04/22/08 1,200 1,274 Peru Government International Bond 9.125% due 01/15/08 900 972 Province of Ontario 5.500% due 10/01/08 1,500 1,536 ------------ 25,578 ------------
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Mortgage-Backed Securities - 20.7% American Home Mortgage Investment Trust (E) Series 2004-3 Class 5A 4.290% due 10/25/34 2,599 2,544 Series 2004-4 Class 4A 4.390% due 02/25/45 904 885 Banc of America Commercial Mortgage, Inc. Series 2004-2 Class A1 2.764% due 11/10/38 2,346 2,255 Banc of America Funding Corp. (E) Series 2005-D Class A1 4.117% due 05/25/35 10,426 10,269 Banc of America Mortgage Securities Series 2004-2 Class 2A1 5.250% due 03/25/34 1,385 1,382 Bank of America Mortgage Securities Series 2002-K Class 2A1 (E) 5.487% due 10/20/32 55 55 Series 2004-2 Class 5A1 6.500% due 10/25/31 399 406 Bear Stearns Adjustable Rate Mortgage Trust Series 2002-9 Class 2A 5.279% due 10/25/32 18 18 Series 2003-1 Class 5A1 5.448% due 04/25/33 547 533 Series 2003-8 Class 2A1 (E) 4.830% due 01/25/34 583 578 Bear Stearns Alt-A Trust Series 2005-4 Class 23A1 5.431% due 05/25/35 1,663 1,670 Bear Stearns Asset Backed Securities, Inc. Series 2003-AC3 Class A1 4.000% due 07/25/33 617 607 Bear Stearns Commercial Mortgage Securities Series 1998-C1 Class A1 6.340% due 06/16/30 415 420 Series 1999-C1 Class A2 6.020% due 02/14/31 2,000 2,054 Series 2001-TOP Class A1 5.060% due 11/15/16 781 782 Series 2003-PWR Class A1 3.432% due 05/11/39 758 732 Series 2003-T10 Class A1 4.000% due 03/13/40 1,490 1,434 Series 2003-T12 Class A1 2.960% due 08/13/39 1,480 1,421
98 Short Duration Bond Fund FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Commercial Mortgage Pass Through Certificates Series 2004-LB2 Class A2 3.600% due 03/10/39 1,000 958 Countrywide Alternative Loan Trust Series 2003-6T2 Class A1 6.500% due 06/25/33 295 296 Series 2003-J2 Class A1 6.000% due 10/25/33 691 691 Credit Suisse First Boston Mortgage (E)(p) Series 2002-P3 Class A 1.691% due 08/25/33 332 333 Credit Suisse First Boston Mortgage Securities Corp. Series 2002-AR2 Class 2A2 5.641% due 10/25/32 41 41 Series 2003-C4 Class A2 3.908% due 08/15/36 1,000 974 Series 2003-CK2 Class A1 3.006% due 03/15/36 906 878 Series 2004-C1 Class A1 2.254% due 01/15/37 1,878 1,821 Series 2005-C5 Class A1 5.046% due 08/15/38 3,750 3,759 Fannie Mae 30 year TBA (I) 4.660% 4,000 4,007 6.000% due 2008 103 104 5.500% due 2009 2,315 2,333 6.000% due 2010 217 222 6.500% due 2010 172 178 6.000% due 2011 224 229 6.500% due 2011 145 150 4.500% due 2013 2,998 2,929 5.000% due 2013 3,048 3,026 5.500% due 2013 405 408 6.000% due 2013 480 491 6.000% due 2014 2,354 2,410 5.500% due 2016 1,415 1,424 5.000% due 2017 106 105 5.500% due 2017 2,059 2,074 6.000% due 2017 217 224 4.500% due 2018 143 139 5.000% due 2018 4,775 4,712 4.500% due 2019 347 336 5.000% due 2019 554 547 4.500% due 2020 462 447 5.000% due 2020 388 383 5.500% due 2022 1,435 1,427 5.500% due 2033 92 91 6.000% due 2033 35 36 5.500% due 2034 16,932 16,725 4.690% due 2035 (E) 667 659
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 4.900% due 2035 (E) 35,038 34,784 5.500% due 2035 22,952 22,651 4.115% due 2041 (E) 1,249 1,264 4.065% due 2042 (E) 1,187 1,197 Series 1994-1 Class K 6.500% due 06/25/13 99 99 Series 2003-129 Class PQ 4.500% due 07/25/33 566 564 Series 2003-24 Class PU 3.500% due 11/25/15 331 321 Series 2003-27 Class TJ 4.000% due 10/25/16 557 555 Series 2003-46 Class PQ 3.000% due 06/25/19 3,500 3,442 Series 2003-62 Class OD 3.500% due 04/25/26 1,250 1,192 Series 2003-63 Class GU 4.000% due 07/25/33 2,673 2,624 Series 2003-67 Class TA 3.000% due 08/25/17 4,005 3,750 Series 2003-75 Class NB 3.250% due 08/25/18 714 684 Series 2003-92 Class BR 5.000% due 04/25/14 709 708 Series 2004-17 Class HA 3.000% due 01/25/19 2,294 2,119 Series 2004-21 Class QA 4.000% due 11/25/17 2,887 2,863 Fannie Mae Grantor Trust (E) Series 2002-T10 Class A1 4.158% due 06/25/32 5,732 5,726 Series 2005-T2 Class 1A1 3.712% due 11/28/35 314 313 Series 2005-T4 Class A1A 4.088% due 09/25/35 2,067 2,067 Fannie Mae-Aces Series 1998-M1 Class A2 6.250% due 01/25/08 1,497 1,525 Federal Home Loan Bank System Series 2004-900 Class 1 3.920% due 09/25/09 1,738 1,684 Series 2005-058 Class H 4.750% due 10/25/10 4,133 4,109 Federal Home Loan Mortgage Corp. Structured Pass Through Securities Series 2003-H00 Class A2 1.876% due 03/15/08 216 214
Short Duration Bond Fund 99 FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Freddie Mac 5.500% due 2008 127 128 6.500% due 2008 123 128 6.000% due 2009 101 103 6.500% due 2009 419 430 8.000% due 2010 48 49 6.000% due 2013 151 154 5.500% due 2014 624 629 6.000% due 2014 156 160 6.000% due 2016 677 692 5.500% due 2017 1,029 1,036 5.000% due 2018 634 626 6.000% due 2028 140 142 5.500% due 2029 967 957 6.000% due 2029 286 290 6.000% due 2031 391 395 Series 1993-164 Class PD 4.500% due 09/15/08 148 147 Series 2003-255 Class PB 5.500% due 08/15/30 102 101 Series 2003-258 Class NS 3.250% due 09/15/15 1,572 1,517 Series 2003-258 Class QK 4.000% due 04/15/22 527 526 Series 2003-261 Class JA 3.760% due 03/15/29 1,403 1,349 Series 2003-262 Class KP 2.870% due 12/15/16 3,324 3,126 Series 2003-263 Class NK 4.000% due 02/15/15 804 801 Series 2003-263 Class YH 3.500% due 08/15/22 1,250 1,240 Series 2003-268 Class MX 4.000% due 07/15/16 2,495 2,422 Series 2003-271 Class OJ 3.500% due 03/15/11 1,810 1,800 Series 2004-276 Class EA 4.500% due 04/15/13 1,660 1,652 Series 2004-278 Class HE 4.000% due 09/15/17 3,868 3,729 Series 2004-285 Class BA 4.500% due 02/15/20 1,654 1,627 Series 2005-305 Class AP 5.500% due 01/15/27 3,000 3,026 Freddie Mac Gold 4.000% due 2007 1,044 1,025 4.000% due 2008 883 864 4.500% due 2008 982 978 5.500% due 2009 294 297 6.000% due 2009 85 87 6.000% due 2010 171 174 6.000% due 2011 578 590 6.000% due 2032 503 509 6.000% due 2033 855 865
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- GE Capital Commercial Mortgage Corp. Series 2001-3 Class A1 5.560% due 06/10/38 1,602 1,621 Series 2004-C3 Class A1 3.752% due 07/10/39 2,945 2,873 Series 2005-C1 Class A1 4.012% due 06/10/48 1,767 1,736 Ginnie Mae I 7.000% due 2007 4 4 6.000% due 2008 98 100 9.500% due 2017 1 1 Ginnie Mae II (E) 3.750% due 2027 154 157 4.000% due 2032 311 311 Government National Mortgage Association Series 2004-78 Class A 3.590% due 11/16/17 2,802 2,718 GSR Mortgage Loan Trust Series 2004-7 Class 1A1 3.412% due 06/25/34 2,137 2,091 Impac CMB Trust (E) Series 2004-2 Class A2 4.288% due 04/25/34 562 561 JP Morgan Chase Commercial Mortgage Securities Corp. Series 2002-C2 Class A1 4.326% due 12/12/34 788 770 Series 2005-LDP Class A1 4.655% due 08/15/42 1,856 1,844 4.613% due 10/15/42 2,721 2,698 Series 2005-LDP Class A2 4.790% due 10/15/42 2,150 2,116 LB-UBS Commercial Mortgage Trust Series 2003-C1 Class A1 2.720% due 03/15/27 1,366 1,321 Series 2003-C3 Class A1 2.599% due 05/15/27 1,895 1,820 Lehman Large Loan Series 1997-LLI Class A2 6.840% due 10/12/34 70 71 Mellon Residential Funding Corp. (E) Series 2000-TBC Class A1 4.210% due 06/15/30 1,543 1,539 Morgan Stanley Capital I Series 2003-T11 Class A1 3.260% due 06/13/41 1,523 1,478
100 Short Duration Bond Fund FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2004-T13 Class A1 2.850% due 09/13/45 776 747 Series 2005-HQ6 Class A1 4.646% due 08/13/42 2,055 2,039 Morgan Stanley Dean Witter Capital I Series 2001-TOP Class A1 5.020% due 10/15/35 274 274 Series 2002-HQ Class A2 6.090% due 04/15/34 354 361 Prime Mortgage Trust (E) Series 2004-CL1 Class 1A2 4.438% due 02/25/34 278 278 Series 2004-CL1 Class 2A2 4.438% due 02/25/19 70 70 SACO I, Inc. (E)(p) Series 2004-2 Class A2 4.228% due 07/25/19 469 469 Salomon Brothers Mortgage Securities VII Series 2003-UP2 Class A1 4.000% due 12/25/18 1,255 1,204 Structured Asset Mortgage Investments, Inc. (E) Series 2002-AR3 Class A1 4.327% due 09/19/32 125 125 Structured Asset Securities Corp. (E) Series 2001-21A Class 1A1 6.250% due 01/25/32 130 132 Vendee Mortgage Trust Series 2001-3 Class J 6.500% due 05/15/08 437 444 Wachovia Bank Commercial Mortgage Trust Series 2002-C2 Class A2 4.043% due 11/15/34 2,020 1,961 Series 2003-C4 Class A1 3.003% due 04/15/35 1,562 1,514 Washington Mutual Series 2002-AR1 Class A6 4.816% due 10/25/32 729 725 Series 2002-AR9 Class 1A (E) 4.265% due 08/25/42 1,474 1,469 Washington Mutual MSC Mortgage Pass-Through CTFS (E) Series 2002-AR2 Class 2A1 6.060% due 07/25/32 18 18 Washington Mutual, Inc. (E) Series 2002-AR6 Class A 4.419% due 06/25/42 669 673 Series 2005-AR1 Class A1A1 4.328% due 10/25/45 500 500 ------------ 251,271 ------------
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Non-US Bonds - 0.1% Landwirtschaftliche Rentenbank 0.650% due 09/30/08 JPY 60,000 519 ------------ United States Government Agencies - 0.3% Federal Home Loan Bank System 5.925% due 04/09/08 1,600 1,645 Zero coupon due 04/27/10 749 671 Freddie Mac 5.810% due 04/04/08 1,000 1,026 ------------ 3,342 ------------ United States Government Treasuries - 13.6% United States Treasury Notes 3.125% due 05/15/07 48,040 47,145 3.625% due 06/30/07 96,635 95,438 2.750% due 08/15/07 8,000 7,776 3.375% due 12/15/08 15,500 15,025 ------------ 165,384 ------------ TOTAL LONG-TERM INVESTMENTS (cost $966,737) 952,906 ------------ PREFERRED STOCKS - 0.2% Financial Services - 0.2% DG Funding Trust (A) 219 2,346 ------------ TOTAL PREFERRED STOCKS (cost $2,306) 2,346 ------------
Short Duration Bond Fund 101 FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
NOTIONAL MARKET AMOUNT VALUE $ $ - ----------------------------------------------------------------------------- OPTIONS PURCHASED - 0.0% (Number of Contracts) Swaption USD Three Month LIBOR (Fund Pays)/USD 4.500% (Fund Receives) Apr 2006 0.00 Call (1) 5,000 6 Swaption USD Three Month LIBOR (Fund Pays)/USD 4.250% (Fund Receives) Oct 2006 0.00 Call (3) 13,000 19 Swaption USD Three Month LIBOR (Fund Pays)/ USD 4.500% (Fund Receives) Oct 2006 0.00 Call (3) 29,600 76 ------------ TOTAL OPTIONS PURCHASED (cost $198) 101 ------------ PRINCIPAL AMOUNT ($) OR SHARES ------------ SHORT-TERM INVESTMENTS - 24.4% American Electric Power Co., Inc. Series A 6.125% due 05/15/06 5,790 5,827 Associates Corp. of North America Series MTNH 7.250% due 05/08/06 2,000 2,027 7.240% due 05/17/06 1,000 1,014 BankAmerica Corp. 6.200% due 02/15/06 750 754 Barclays US Funding, LLC (z) 3.655% due 11/28/05 (c) 10,700 10,671 4.190% due 02/27/06 1,400 1,380 BNP Paribas (z) 4.155% due 02/27/06 7,000 6,899 Brazilian Government International Bond (E) 5.188% due 04/15/06 416 416 British Sky Broadcasting PLC 7.300% due 10/15/06 2,000 2,044 Burlington Northern Santa Fe Corp. 6.375% due 12/15/05 1,535 1,538 Capital Auto Receivables Asset Trust Series 2002-3 Class A3 3.580% due 10/16/06 1,705 1,703
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- CBA (Delaware) Finance Discount Notes (z) 4.120% due 01/25/06 12,100 10,788 4.140% due 01/30/06 12,100 1,187 Citigroup, Inc. 6.750% due 12/01/05 (N) 6,500 6,512 5.750% due 05/10/06 1,370 1,378 ConAgra Foods, Inc. 6.000% due 09/15/06 1,300 1,312 Continental Cablevision, Inc. 8.300% due 05/15/06 400 407 COX Communications, Inc. 7.750% due 08/15/06 2,900 2,961 DaimlerChrysler NA Holding Corp. 6.400% due 05/15/06 1,200 1,210 4.430% due 05/24/06 (E) 2,800 2,807 Danske Corp. Discount Notes (c)(z) 3.605% due 11/04/05 1,700 1,699 3.625% due 11/07/05 4,000 3,998 3.680% due 11/14/05 6,200 6,192 Devon Energy Corp. 2.750% due 08/01/06 4,954 4,872 DNB Nor Bank ASA (c)(z) 3.590% due 11/21/05 10,700 10,679 3.595% due 11/21/05 1,200 1,198 Fannie Mae (E) 3.799% due 09/22/06 1,600 1,599 France Telecom SA 7.200% due 03/01/06 1,200 1,210 Frank Russell Investment Company Money Market Fund 59,953,334 59,953 Freddie Mac Discount Notes (c)(z) 3.359% due 11/29/05 500 498 General Electric Capital Corp. (z) 4.120% due 01/24/06 11,000 10,887 4.130% due 01/25/06 1,100 1,089 General Motors Acceptance Corp. 5.070% due 04/13/06 (E) 2,300 2,290 4.677% due 05/18/06 (E) 400 398 6.125% due 09/15/06 300 299 Government Trust Certificate 8.500% due 04/01/06 228 233 GTE Corp. 6.360% due 04/15/06 5,000 5,035 HBOS Treasury Service PLC (z) 4.190% due 02/27/06 3,500 3,450 Heller Financial, Inc. 6.375% due 03/15/06 1,000 1,007 Historic TW, Inc. 8.110% due 08/15/06 2,000 2,048
102 Short Duration Bond Fund FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- HSBC Bank PLC 7.625% due 06/15/06 4,500 4,578 Hydro Quebec Series MTNB 6.520% due 02/23/06 1,000 1,007 KFW International Finance Series DTC 5.250% due 06/28/06 2,000 2,007 Kroger Co. (The) 8.150% due 07/15/06 3,885 3,967 Nordea Bank Finland PLC 6.500% due 01/15/06 3,000 3,014 Nordea North America, Inc. (c)(z) 3.680% due 11/14/05 10,900 10,886 Northrop Grumman Corp. 7.000% due 03/01/06 2,000 2,017 Pepco Holdings, Inc. 3.750% due 02/15/06 3,654 3,644 Progress Energy, Inc. 6.750% due 03/01/06 4,000 4,025 Rabobank USA Financial Corp. (c)(z) 3.620% due 11/28/05 700 698 3.860% due 12/23/05 11,000 10,939 Safeway, Inc. 6.150% due 03/01/06 4,000 4,010 Societe Generale NA 3.960% due 01/27/06 (z) 1,000 987 4.145% due 02/01/06 1,100 1,088 SouthTrust Bank (E) Series BKNT 3.807% due 12/14/05 3,000 2,999 Sprint Capital Corp. 7.125% due 01/30/06 1,000 1,006 4.780% due 08/17/06 3,000 2,999 Svenska Handelsbanken (z) 4.065% due 01/20/06 11,000 10,884 Swedbank Forenings (c)(z) 3.910% due 12/22/05 6,100 6,066 Swiss Bank Corp. 7.250% due 09/01/06 1,500 1,527 TCI Communications, Inc. 6.875% due 02/15/06 2,109 2,120 Time Warner, Inc. 6.125% due 04/15/06 1,900 1,911 Tyco International Group SA 6.375% due 02/15/06 4,000 4,020
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- UBS Financial Del, LLC (z) 3.690% due 12/07/05 (c) 1,800 1,793 3.945% due 01/26/06 9,900 9,768 4.155% due 02/28/06 400 394 Union Bank Switzerland 7.250% due 07/15/06 1,000 1,016 United States Treasury Bills (c)(z)(sec.) 3.363% due 12/08/05 150 149 3.430% due 12/15/05 1,070 1,066 3.452% due 12/15/05 500 498 3.495% due 12/15/05 60 60 US Bank NA (E) Series BKNT 3.761% due 12/05/05 1,500 1,500 USX Corp. 6.650% due 02/01/06 600 603 Virginia Electric and Power Co. Series A 5.750% due 03/31/06 3,785 3,801 Washington Mutual Financial Corp. 7.250% due 06/15/06 3,005 3,053 Wells Fargo & Co. 3.960% due 09/15/06 (E) 3,000 3,003 Series MTNH 6.750% due 10/01/06 1,930 1,962 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $297,028) 296,534 ------------ OTHER SECURITIES - 0.3% Frank Russell Investment Company Money Market Fund (X) 1,368,117 1,368 State Street Securities Lending Quality Trust (X) 2,803,143 2,803 ------------ TOTAL OTHER SECURITIES (cost $4,171) 4,171 ------------ TOTAL INVESTMENTS - 103.5% (identified cost $1,270,440) 1,256,058 OTHER ASSETS AND LIABILITIES, NET - (3.5%) (42,478) ------------ NET ASSETS - 100.0% 1,213,580 ============
See accompanying notes which are an integral part of the financial statements. Short Duration Bond Fund 103 FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
UNREALIZED NOTIONAL APPRECIATION FUTURES CONTRACTS AMOUNT (DEPRECIATION) (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Long Positions Eurodollar Futures expiration date 03/06 (100) 23,816 (206) expiration date 06/06 (431) 102,551 (449) expiration date 09/06 (49) 11,656 (68) expiration date 12/06 (186) 44,249 (22) expiration date 03/07 (350) 83,287 (82) expiration date 06/07 (173) 41,163 (59) expiration date 09/07 (26) 6,185 (12) United States Treasury 2 Year Notes expiration date 12/05 (133) 27,292 (167) --------------- Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (1,065) ===============
NOTIONAL MARKET OPTIONS WRITTEN AMOUNT VALUE (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Eurodollar Futures Dec 2006 95.00 Put (12) 2,850 (8) Dec 2006 95.25 Put (140) 33,338 (130) Swaption USD Three Month LIBOR (Fund Pays)/ USD 4.300% (Fund Receives) Oct 2006 0.00 Call (1) 3,000 (12) Swaption USD Three Month LIBOR (Fund Pays)/ USD 4.310% (Fund Receives) Oct 2006 0.00 Call (2) 3,000 (12) Swaption USD Three Month LIBOR (Fund Pays)/ USD 4.540% (Fund Receives) Apr 2006 0.00 Call (1) 2,000 (6) Oct 2006 0.00 Call (2) 7,700 (51) Swaption USD Three Month LIBOR (Fund Pays)/ USD 4.560% (Fund Receives) Oct 2006 0.00 Call (1) 6,000 (43) Swaption GBP Six Month LIBOR (Fund Pays)/ USD 4.500% (Fund Receives) Dec 2006 0.00 Put (1) 3,009 (3) --------------- Total Liability for Options Written (premiums received $322) (265) ===============
See accompanying notes which are an integral part of the financial statements. 104 Short Duration Bond Fund FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
FOREIGN CURRENCY EXCHANGE CONTRACTS UNREALIZED APPRECIATION AMOUNT AMOUNT SETTLEMENT (DEPRECIATION) SOLD BOUGHT DATE $ - ------------------- -------------------- ----------- -------------- USD 986 EUR 827 11/08/05 5 EUR 18 USD 22 11/08/05 -- EUR 809 USD 974 11/08/05 4 JPY 61,632 USD 542 12/01/05 11 -------------- Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts 20 ==============
INTEREST RATE SWAP CONTRACTS - ------------------------------------------------------------------------------------------------------------------------ MARKET COUNTER NOTIONAL TERMINATION VALUE PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $ - ----------------------- -------------- ---------------- -------------------- ---------------- ---------------- Barclays GBP 2,800 5.000% Six Month LIBOR 06/15/07 17 Consumer Price Index BNP Paribas EUR 1,200 2.090% (France) 10/15/10 -- Lehman Brothers GBP 1,500 4.500% Six Month LIBOR 09/20/09 (11) Merrill Lynch GBP 1,600 4.500% Six Month LIBOR 09/20/09 (11) UBS USD 36,800 4.000% Three Month LIBOR 12/15/07 (576) ---------------- Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($125) (581) ================
See accompanying notes which are an integral part of the financial statements. Short Duration Bond Fund 105 FRANK RUSSELL INVESTMENT COMPANY SHORT DURATION BOND FUND PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- Asset-Backed Securities 24.4 Corporate Bonds and Notes 17.4 International Debt 2.1 Mortgage-Backed Securities 20.7 Non-US Bonds 0.1 United States Government Agencies 0.3 United States Government Treasuries 13.6 Preferred Stock 0.2 Options Purchased --* Short-Term Investments 24.4 Other Securities 0.3 --------------- Total Investments 103.5 Other Assets and Liabilities, Net (3.5) --------------- 100.0 =============== Futures Contracts (0.1) Options Written (--*) Foreign Currency Exchange Contracts --* Interest Rate Swap Contracts (--*)
* Less than .05% of net assets. See accompanying notes which are an integral part of the financial statements. 106 Short Duration Bond Fund (This page intentionally left blank) FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- (GRAPHIC)
DIVERSIFIED BOND - CLASS S LEHMAN BROTHERS AGGREGATE ** -------------------------- ---------------------------- * 10000.00 10000.00 1996 10557.00 10585.00 1997 11450.00 11526.00 1998 12433.00 12602.00 1999 12433.00 12669.00 2000 13303.00 13594.00 2001 15180.00 15573.00 2002 15966.00 16490.00 2003 16706.00 17299.00 2004 17577.00 18256.00 2005 17672.00 18463.00
Diversified Bond Fund - Class S - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 0.54% 5 Years 5.84%S 10 Years 5.86%S
Diversified Bond Fund - Class E ++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 0.32% 5 Years 5.59%S 10 Years 5.56%S
Diversified Bond Fund - Class C ++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year (0.39)% 5 Years 4.80%S 10 Years 5.02%S
Lehman Brothers Aggregate Bond Index** - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 1.13% 5 Years 6.31%S 10 Years 6.32%S
108 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide current income and the preservation of capital. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005? For the fiscal year ended October 31, 2005, the Diversified Bond Fund Class S, Class E and Class C Shares returned 0.54%, 0.32% and (0.39)% respectively. This compared to the Lehman Brothers Aggregate Bond Index, which gained 1.13% during the same period. The Fund's performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind. For the year ended October 31, 2005, the Lipper(R) Intermediate Investment Grade Debt Funds Average returned 0.81%. This return serves as a peer comparison and is expressed net of operating expenses. HOW DID THE MARKET CONDITIONS DESCRIBED IN THE MARKET SUMMARY REPORT AFFECT THE FUND'S PERFORMANCE? Rising interest rates hurt nominal returns over the fiscal year with the broad bond market benchmark, the Lehman Brothers Aggregate Bond Index, posting just a 1.13% return. While the Fund's money managers started out the period believing that interest rates would rise, higher energy prices and the potential for an economic slowdown led the Fund's money managers to forecast that rates would fall near the end of the fiscal year. However, interest rates rose near the end of the period and the money managers' forecasting detracted from performance. The credit downgrade in the bond rating of auto manufacturers in the spring and early summer had a very modest impact, as the Fund's money managers held diversified positions within the auto sector. WHAT WERE THE PRIMARY CONTRIBUTORS AND DETRACTORS TO THE FUND'S PERFORMANCE DURING THE LAST 12 MONTHS? Interest rate forecasting by the Fund's money managers late in the fiscal year detracted from performance. The Fund's money managers were not rewarded for their forecasts of slower growth, as the Federal Reserve surprised many market participants by continuing to raise interest rates after Hurricanes Katrina and Rita. Offsetting the negative impact of the incorrect interest rate forecasting by the Fund's money managers, positive contributions to Fund performance came from overweights in the investment grade corporate sector early in the fiscal year and profit taking, as prices of investment grade corporate bonds rose relative to Treasury securities. The Fund's money managers also added value through security selection in the mortgage sector. Finally, non-dollar bonds also contributed positively to performance, particularly in early 2005, when rates fell further in Europe than in the U.S. HOW DID THE INVESTMENT STRATEGIES AND TECHNIQUES EMPLOYED BY THE FUND AND ITS MONEY MANAGERS AFFECT ITS PERFORMANCE? Pacific Investment Management Company, LLC (PIMCO) did well over the year, capitalizing on its forecast that European interest rates would fall further than U.S. rates in the spring. PIMCO also added value by underweighting investment grade corporate bonds (corporates) and through security selection in the mortgage sector. Bear Stearns Asset Management, Inc. did well early in the fiscal year by overweighting corporates and strong security selection within that sector. As corporate bond prices rose, Bear Stearns took profits and brought its allocation to corporates down to a more benchmark-neutral weight. Interest rate forecasting also led to suboptimal yield curve strategies for most of the money managers in the period. Western Asset Management Company's yield curve positioning had the largest negative impact to performance. This negative was partially offset by Western's overweight to, and security selection in, the corporate sector. DESCRIBE ANY CHANGES TO THE FUND'S STRUCTURE OR THE MONEY MANAGER LINE-UP. In January, Western was added as a money manager for the Fund. The weighting to Lehman Brothers Asset Management, LLC was decreased to allow for the addition of Western to the Fund's line-up. This action resulted in a slightly higher allocation to investment grade corporate bonds and generally wider deviations from the benchmark with respect to interest rate strategies, as Lehman manages portfolios in a fairly risk managed manner. Diversified Bond Fund 109 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- Money Managers as of Styles October 31, 2005 Bear Stearns Asset Management, Inc. Sector Rotation Lehman Brothers Asset Management, LLC Enhanced Core Pacific Investment Management Company, LLC Fully Discretionary Western Asset Management Company Fully Discretionary
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Frank Russell Investment Management Company (FRIMCo), or any other person in FRIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and FRIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Frank Russell Investment Company (FRIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any FRIC Fund. -------------------- * Diversified Bond Fund Class S assumes initial investment on November 1, 1995. ** Lehman Brothers Aggregate Bond Index is composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indexes are rebalanced monthly by market capitalization. ++ Diversified Bond Fund Class S performance has been linked with Class E to provide historical perspective. For the period November 4, 1996 (commencement of sale) to May 15, 1998, Class E paid shareholder service and Rule 12b-1 distribution fees. From May 16, 1998 through the current period, Class E paid only shareholder service fees. Total return would have been lower had these fees been in effect during prior reporting periods. ++++ Diversified Bond Fund Class S and Class E performance has been linked with Class C to provide historical perspective. From January 27, 1999 (commencement of sale) through the current period, Class C paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. sec. Annualized. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 110 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS C PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 994.00 $ 1,016.84 Expenses Paid During Period* $ 8.34 $ 8.44
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS E PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 997.80 $ 1,020.62 Expenses Paid During Period* $ 4.58 $ 4.63
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS S PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 998.50 $ 1,021.88 Expenses Paid During Period* $ 3.32 $ 3.36
* 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 184/365 (to reflect the one-half year period). Diversified Bond Fund 111 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- LONG-TERM INVESTMENTS - 96.3% Asset-Backed Securities - 6.5% AAA Trust (p) Series 2005-2 Class A1 4.151% due 11/26/35 1,368 1,368 Aames Mortgage Investment Trust (E) Series 2005-2 Class 1A1 4.118% due 07/25/35 53 53 ABSC NIMs Trust (A) Series 2004-HE5 Class A1 5.000% due 08/27/34 60 60 Series 2005-HE6 Class A1 5.050% due 08/27/35 498 497 ACE Securities Corp. (E) Series 2004-OP1 Class M2 5.088% due 04/25/34 650 659 Ameriquest Mortgage Securities, Inc. (E) Series 2002-D Class M1 6.538% due 02/25/33 205 207 Argent Securities, Inc. (E) Series 2004-W3 Class A2 4.258% due 02/25/34 146 146 Asset Backed Funding Corp. NIM Trust (A) Series 2005-WF1 Class N1 4.750% due 03/26/35 440 440 Bayview Financial Acquisition Trust (E) Series 2004-C Class A1 4.490% due 05/28/44 1,274 1,276 Burlington Northern Santa Fe Corp. 4.967% due 04/01/23 320 314 Carrington Mortgage Loan Trust (E) Series 2005-NC3 Class A1A 4.118% due 06/25/35 251 251 Chase Funding Mortgage Loan Asset-Backed Certificates (E) Series 2002-2 Class 2A1 4.288% due 05/25/32 241 241 Chase Issuance Trust (E) Series 2005-A3 Class A 3.990% due 10/17/11 4,035 4,036 Countrywide Asset-Backed Certificates Series 2001-BC3 Class A 4.278% due 12/25/31 146 146 Series 2003-BC2 Class 2A1 (E) 4.338% due 06/25/33 45 45 Series 2003-BC4 Class 2A2 (E) 4.358% due 09/25/33 108 109 Series 2004-13 Class AF2 3.683% due 08/25/24 1,085 1,068 Series 2004-14N Class N (A) 5.000% due 06/25/36 186 185
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2004-7 Class AF2 3.324% due 12/25/23 620 618 Series 2004-BC1 Class M1 (E) 4.538% due 02/25/34 235 235 Series 2004-S1 Class A1 4.258% due 12/25/18 1,636 1,636 Series 2005-11 Class AF1 (E) 4.218% due 02/25/36 2,266 2,266 Series 2005-2N Class N (A) 4.500% due 08/25/36 382 378 Series 2005-5N Class N (A) 5.000% due 07/25/36 361 358 Series 2005-SD2 Class A1A (A)(E) 4.198% due 08/25/35 1,786 1,786 Countrywide Home Equity Loan Trust (E) Series 2005-G Class 2A 4.123% due 12/15/35 2,400 2,400 Credit-Based Asset Servicing and Securitization Series 2004-CB6 Class AF1 4.228% due 07/25/35 290 290 Daimler Chrysler Auto Trust Series 2005-A Class A3 3.490% due 12/08/08 1,460 1,439 Discover Card Master Trust I Series 2005-1 Class A 3.980% due 09/16/10 3,870 3,861 Distribution Financial Services Floorplan Master Trust Series 2003-2 Class A 4.070% due 04/15/08 1,790 1,791 Equifirst Mortgage Loan Trust Series 2004-1 Class 2A1 4.138% due 01/25/34 315 315 Series 2005-1 Class A1 (E) 4.098% due 04/25/35 900 900 Equifirst Mortgage Loan Trust NIMs Notes (A) Series 2005-1 Class N1 4.458% due 04/25/35 1,263 1,261 Fannie Mae Grantor Trust Series 2002-T13 Class A1 4.138% due 08/25/32 38 38 Series 2002-T5 Class A1 4.158% due 05/25/32 273 274 Series 2002-T7 Class A1 4.148% due 07/25/32 109 109 Series 2003-T3 Class 1A 4.158% due 06/25/33 192 192
112 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2003-T4 Class 1A 4.148% due 09/26/33 720 720 Series 2005-T3 Class A1A (E) 4.078% due 07/25/35 5,687 5,688 Fannie Mae Whole Loan Series 2002-W2 Class AV1 4.298% due 06/25/32 251 251 Series 2003-W16 Class AV1 4.188% due 11/25/33 302 302 Series 2003-W5 Class A 4.148% due 04/25/33 584 586 Series 2003-W9 Class A 4.158% due 06/25/33 881 881 First Franklin Mortgage Loan Asset Backed Certificates (E) Series 2004-FF1 Class A2 4.438% due 12/25/32 2,400 2,407 Series 2004-FFH Class 2A1 4.418% due 10/25/34 1,323 1,328 First Franklin NIMs Trust (A) Series 2004-FFH Class N2 7.385% due 03/25/34 150 150 Series 2005-FF1 Class N1 4.213% due 01/25/35 845 841 Ford Credit Auto Owner Trust Series 2005-A Class A3 3.480% due 11/15/08 630 622 Ford Credit Floorplan Master Owner Trust Series 2001-2 Class A 4.110% due 07/15/08 1,400 1,401 Series 2004-1 Class A 4.010% due 07/15/09 2,275 2,276 Fremont Home Loan Trust (E) Series 2005-A Class 2A1 4.148% due 01/25/35 51 51 Fremont NIMs Trust (A) Series 2005-A Class NOTE 3.750% due 01/25/35 657 653 Series 2004-B Class NOTE 4.703% due 05/25/34 2 2 Series 2005-C Class NOTE 5.584% due 07/25/35 219 218 GE Dealer Floorplan Master Note Trust (E) Series 2004-2 Class A 4.080% due 07/20/09 1,240 1,241 Series 2005-1 Class A 4.040% due 04/20/10 1,800 1,801 GMAC Mortgage Corp. Loan Trust Series 1999-1 Class A 4.270% due 06/18/27 383 384 Series 2004-HE5 Class A1 (E) 4.178% due 09/25/34 678 678
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2004-HE5 Class A3 3.970% due 09/25/34 725 713 Government National Mortgage Association Series 1998-23 Class ZA 6.500% due 09/20/28 3,515 3,553 Greenpoint Mortgage Funding Trust (E) Series 2005-HE4 Class 2A1C 4.148% due 07/25/30 1,875 1,875 GSAMP Trust Series 2003-AHL Class A2A 4.238% due 10/25/33 138 138 Series 2004-NC1 Class A3 (E) 4.428% due 03/25/34 425 426 Series 2004-NC2 Class A2A 4.218% due 10/01/34 97 97 Home Equity Asset Trust (E) Series 2004-3 Class M3 5.488% due 08/25/34 455 462 Household Mortgage Loan Trust Series 2002-HC1 Class A 4.300% due 05/20/32 52 52 IndyMac Residential Asset Backed Trust (E) Series 2005-A Class AII1 4.148% due 03/25/35 848 848 JP Morgan Mortgage Acquisition Corp. (E) Series 2005-FLD Class A1 4.158% due 08/25/27 1,875 1,875 Lehman XS Trust (E) Series 2005-1 Class 2A2 4.660% due 05/25/08 589 597 Long Beach Asset Holdings Corp. (A) Series 2005-1 Class N1 4.115% due 02/25/35 543 540 Long Beach Mortgage Loan Trust (E) Series 2003-2 Class M2 5.938% due 06/25/33 670 678 Series 2005-WL1 Class 2A1 4.148% due 06/25/35 1,477 1,477 Mastr Asset Backed Securities Trust Series 2004-OPT Class A3 4.298% due 02/25/34 287 288 Merrill Auto Trust Securitization (E) Series 2005-1 Class A2B 4.048% due 04/25/08 1,845 1,845
Diversified Bond Fund 113 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Merrill Lynch Mortgage Investors, Inc. Series 2004-WMC Class A2 4.338% due 10/25/34 175 175 Morgan Stanley ABS Capital I Series 2003-NC5 Class A2 4.318% due 04/25/33 26 26 Morgan Stanley Dean Witter Capital I Series 2003-NC4 Class A2 4.408% due 04/25/33 32 32 MSDWCC Heloc Trust Series 2005-1 Class A 4.228% due 07/25/17 242 242 Navistar Financial Corp. Owner Trust Series 2003-B Class A3 4.170% due 04/15/08 680 680 Nissan Master Owner Trust Receivables (E) Series 2005-A Class A 4.000% due 07/15/10 1,700 1,700 Novastar Home Equity Loan Series 2004-4 Class A2A 4.228% due 03/25/35 304 304 Series 2005-1 Class A2A (E) 4.158% due 06/25/35 1,335 1,335 Novastar NIMs Trust (A) Series 2004-N2 Class NOTE 4.458% due 06/26/34 106 105 Option One Mortgage Loan Trust Series 2001-4 Class A 4.638% due 01/25/32 180 180 Series 2002-2 Class A 4.308% due 06/25/32 137 137 Series 2003-1 Class A2 4.458% due 02/25/33 221 221 Series 2003-2 Class A2 4.338% due 04/25/33 102 102 Series 2003-2 Class M2 (E) 5.738% due 04/25/33 540 546 Series 2003-3 Class M3 (E) 6.038% due 06/25/33 345 350 Series 2003-4 Class M2 (E) 5.688% due 07/25/33 295 299 Option One Mortgage Securities Corp. NIMs Trust (A) Series 2003-6A Class NOTE 4.271% due 10/26/10 26 26 Park Place Securities NIMs Trust (A) Series 2004-MCW Class A 4.458% due 09/25/34 94 93 Series 2005-WCW Class A 5.500% due 07/25/35 614 610 Park Place Securities, Inc. Series 2005-WCH Class A3A 4.158% due 01/25/36 212 212
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Popular ABS Mortgage Pass-Through Trust Series 2005-1 Class AF2 3.914% due 05/25/35 200 197 Ramp NIMs Trust (A) Series 2005-NM2 Class NOTE 5.193% due 04/25/35 376 375 Renaissance Home Equity Loan Trust (E) Series 2005-3 Class AF1 4.188% due 11/25/35 2,235 2,235 Renaissance NIMs Trust (A) Series 2004-B Class NOTE 5.193% due 08/26/34 78 78 Series 2004-D Class NOTE 4.459% due 02/25/35 301 301 Residential Asset Mortgage Products, Inc. Series 2002-RS5 Class AII 4.408% due 09/25/32 203 203 Series 2003-RS1 Class AII 4.428% due 02/25/33 284 285 Series 2003-RS2 Class AII 4.378% due 03/25/33 260 261 Series 2003-RS3 Class AII 4.398% due 04/25/33 165 165 Series 2004-RS6 Class AI1 4.188% due 08/25/22 16 16 Series 2004-RS8 Class AI1 4.218% due 12/25/23 289 289 Series 2004-RS8 Class AI2 3.810% due 01/25/26 375 373 Series 2004-RS8 Class AII1 4.178% due 05/25/26 404 404 Residential Asset Securities Corp. Series 2001-KS1 Class AII 4.273% due 03/25/32 140 140 Series 2001-KS3 Class AII (E) 4.268% due 09/25/31 185 185 Series 2002-KS3 Class A1B 4.288% due 05/25/32 239 239 Series 2003-KS1 Class M2 (E) 5.788% due 01/25/33 455 458 Series 2004-KS8 Class AI2 3.340% due 10/25/24 915 904 Residential Funding Mortgage Securities II (E) Series 2005-HI2 Class A1 4.178% due 05/25/35 2,845 2,846
114 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Residential Funding Mortgage Securities II, Inc. (E) Series 2005-HS1 Class AI1 4.158% due 09/25/35 2,231 2,229 Saxon Asset Securities Trust Series 2003-1 Class AV1 4.348% due 06/25/33 26 26 Series 2004-1 Class A 4.308% due 03/25/35 579 579 Sears Credit Account Master Trust Series 2002-5 Class A 4.350% due 11/17/09 1,700 1,700 Securitized Asset Backed Receivables LLC Trust Series 2004-OP1 Class A2 4.288% due 02/25/34 308 308 Series 2005-FR4 Class A3 (E) 4.238% due 01/25/36 1,165 1,164 Sharps SP I LLC Net Interest Margin Trust (A) Series 2004-FM1 Class N 6.160% due 09/25/33 15 15 Small Business Administration Series 2000-P10 Class 1 7.449% due 08/01/10 74 79 Soundview Assets 4.703% due 06/25/35 802 802 Specialty Underwriting & Residential Finance Series 2003-BC1 Class A 4.378% due 01/25/34 68 68 Series 2004-BC2 Class A2 4.308% due 05/25/35 507 507 Structured Asset Investment Loan Trust (E) Series 2003-BC8 Class M3 6.138% due 08/25/33 520 528 Series 2004-7 Class A1 4.293% due 08/25/34 2,013 2,018 Structured Asset Securities Corp. Series 2002-HF1 Class A 4.328% due 01/25/33 13 13 Series 2003-BC1 Class A 4.538% due 05/25/32 166 166 Series 2004-19X Class A2 4.370% due 10/25/34 900 892 Series 2005-5N Class A1 (E) 1.000% due 11/25/35 2,300 2,300 Tenaska Alabama II Partners, LP (A) 6.125% due 03/30/23 259 260 Textron Financial Floorplan Master Note Trust (A)(E) Series 2005-1A Class A 4.061% due 05/13/10 2,140 2,141
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Toyota Auto Receivables Owner Trust Series 2002-C Class A4 4.020% due 05/15/09 839 839 Volkswagen Credit Auto Master Trust (E) Series 2005-1 Class A 4.020% due 07/20/10 1,870 1,870 Wachovia Asset Securitization, Inc. Series 2003-HE3 Class A 4.288% due 11/25/33 347 347 Wachovia Mortgage Loan Trust LLC (E) Series 2005-WMC Class A1 4.148% due 10/25/35 2,248 2,248 Wells Fargo Home Equity Trust Series 2004-2 Class A31 4.198% due 06/25/19 2 2 Whole Auto Loan Trust Series 2004-1 Class A4 3.260% due 03/15/11 1,370 1,332 ------------ 108,955 ------------ Corporate Bonds and Notes - 14.6% Allstate Life Global Funding Trusts 3.850% due 01/25/08 1,645 1,609 Altria Group, Inc. 7.000% due 11/04/13 730 791 Amerada Hess Corp. 7.300% due 08/15/31 955 1,078 American Electric Power Co., Inc. Series C 5.375% due 03/15/10 85 86 American General Finance Corp. Series MTNG (E) 4.000% due 03/23/07 100 100 Series MTNI 4.100% due 06/27/08 (E) 1,600 1,601 4.875% due 07/15/12 1,305 1,270 American International Group, Inc. (A) 4.700% due 10/01/10 (N) 500 491 5.050% due 10/01/15 600 586 American RE Corp. Series B 7.450% due 12/15/26 540 588 Anheuser-Busch Cos., Inc. 4.950% due 01/15/14 675 672
Diversified Bond Fund 115 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- ASIF Global Financing (p) 4.900% due 01/17/13 120 118 BAE Systems Holdings, Inc. (A) 6.400% due 12/15/11 1,270 1,336 Bank of America Corp. 7.800% due 02/15/10 120 132 4.500% due 08/01/10 530 518 4.375% due 12/01/10 2,035 1,975 Banque Paribas 6.875% due 03/01/09 440 465 Bear Stearns Cos., Inc. (The) 2.875% due 07/02/08 1,105 1,049 5.300% due 10/30/15 1,065 1,050 BellSouth Corp. 4.200% due 09/15/09 140 136 6.550% due 06/15/34 (N) 55 57 Berkshire Hathaway Finance Corp. 4.125% due 01/15/10 1,910 1,854 Boeing Capital Corp. (N) 6.100% due 03/01/11 165 173 Burlington Northern Santa Fe Corp. 6.875% due 12/01/27 55 62 Campbell Soup Co. 5.875% due 10/01/08 160 164 Carolina Power & Light Co. 6.500% due 07/15/12 15 16 5.150% due 04/01/15 765 751 Caterpillar Financial Services Corp. 4.875% due 06/15/07 445 446 CenterPoint Energy Houston Electric LLC Series J2 5.700% due 03/15/13 210 215 CenterPoint Energy Resources Corp. Series B 7.875% due 04/01/13 575 649 Cingular Wireless Services, Inc. 7.875% due 03/01/11 1,270 1,422 8.750% due 03/01/31 2,170 2,830 CIT Group, Inc. 3.990% due 02/15/07 (E) 2,000 2,004 5.750% due 09/25/07 155 157 4.750% due 08/15/08 1,040 1,035 6.875% due 11/01/09 100 107 Citicorp 7.250% due 10/15/11 370 412 Citigroup Global Markets Holdings, Inc. (E) Series MTNM 3.816% due 03/07/08 1,300 1,299 Citigroup, Inc. 3.500% due 02/01/08 1,900 1,847 4.125% due 02/22/10 970 937 4.625% due 08/03/10 390 383 5.000% due 09/15/14 8,190 8,020
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Clear Channel Communications, Inc. 4.250% due 05/15/09 150 143 5.750% due 01/15/13 (N) 125 121 Clorox Co. 4.200% due 01/15/10 250 243 5.000% due 01/15/15 155 152 Columbus Southern Power Co. Series A 5.500% due 03/01/13 100 101 Comcast Cable Communications 6.750% due 01/30/11 1,750 1,848 Comcast Cable Communications Holdings, Inc. 8.375% due 03/15/13 2,950 3,398 Comcast Corp. 6.500% due 01/15/15 985 1,032 ConocoPhillips Holding Co. 6.950% due 04/15/29 920 1,090 Consolidated Natural Gas Co. 6.850% due 04/15/11 510 549 Constellation Energy Group, Inc. 6.125% due 09/01/09 235 242 Countrywide Home Loans, Inc. Series MTNK 5.500% due 02/01/07 110 111 COX Communications, Inc. 3.875% due 10/01/08 300 289 6.750% due 03/15/11 4,735 4,970 Credit Suisse First Boston USA, Inc. 4.625% due 01/15/08 130 129 3.875% due 01/15/09 575 556 6.500% due 01/15/12 55 59 5.500% due 08/15/13 115 117 5.125% due 08/15/15 2,415 2,353 DaimlerChrysler NA Holding Corp. 4.750% due 01/15/08 300 297 4.050% due 06/04/08 890 864 Detroit Edison Co. 6.125% due 10/01/10 220 229 6.350% due 10/15/32 95 99 Devon Energy Corp. 7.950% due 04/15/32 540 674 Devon Financing Corp. ULC 6.875% due 09/30/11 200 217 Dominion Resources, Inc. 4.750% due 12/15/10 110 107 5.700% due 09/17/12 405 412
116 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series B 6.250% due 06/30/12 80 84 Series C 5.150% due 07/15/15 1,040 997 Dresdner Funding Trust I (A) 8.151% due 06/30/31 510 605 Duke Energy Corp. 6.250% due 01/15/12 170 178 5.625% due 11/30/12 390 397 Duke Energy Field Services LLC 5.750% due 11/15/06 60 61 6.875% due 02/01/11 40 43 Eastman Kodak Co. 7.250% due 11/15/13 40 37 Eli Lilly & Co. 6.770% due 01/01/36 565 664 EOP Operating, LP 4.650% due 10/01/10 1,655 1,610 Exelon Corp. 4.900% due 06/15/15 1,080 1,014 5.625% due 06/15/35 310 281 FedEx Corp. 7.600% due 07/01/97 155 181 Financing Corp. Principal Only STRIP Series 10P Zero coupon due 11/30/17 1,165 637 Series 15P Zero coupon due 03/07/19 165 84 FirstEnergy Corp. Series B 6.450% due 11/15/11 2,170 2,283 Series C 7.375% due 11/15/31 2,010 2,289 FleetBoston Financial Corp. 4.875% due 12/01/06 645 645 Ford Motor Co. 7.450% due 07/16/31 360 265 Ford Motor Credit Co. 4.740% due 11/16/06 900 888 4.870% due 03/21/07 (E) 1,800 1,752 4.950% due 01/15/08 410 385 7.375% due 10/28/09 3,210 3,063 7.875% due 06/15/10 635 611 7.375% due 02/01/11 315 296 General Electric Capital Corp. 3.888% due 03/09/07 2,200 2,202 4.125% due 03/04/08 870 856 3.250% due 06/15/09 1,155 1,090 4.875% due 10/21/10 1,540 1,530 4.250% due 06/15/12 1,125 1,068 4.875% due 03/04/15 1,040 1,018
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series MTNA 4.250% due 01/15/08 740 731 6.000% due 06/15/12 915 962 5.450% due 01/15/13 1,715 1,746 General Electric Co. 5.000% due 02/01/13 375 372 General Motors Acceptance Corp. 6.125% due 02/01/07 250 248 6.150% due 04/05/07 170 168 6.125% due 08/28/07 970 955 5.625% due 05/15/09 1,765 1,669 7.750% due 01/19/10 300 302 General Motors Corp. 8.375% due 07/15/33 120 89 Glencore Funding LLC (A) 6.000% due 04/15/14 610 562 Golden West Financial Corp. (N) 4.125% due 08/15/07 220 218 Goldman Sachs Group, Inc. 6.875% due 01/15/11 770 827 4.750% due 07/15/13 1,245 1,194 5.125% due 01/15/15 195 190 6.345% due 02/15/34 1,395 1,399 Series MTNB (E) 4.120% due 03/30/07 2,000 2,001 Goldman Sachs Group, LP 4.500% due 06/15/10 1,365 1,329 Harrah's Operating Co., Inc. (A) 5.625% due 06/01/15 3,695 3,546 Historic TW, Inc. 9.125% due 01/15/13 510 609 8.050% due 01/15/16 485 558 6.950% due 01/15/28 1,210 1,268 HJ Heinz Co. 6.375% due 07/15/28 50 53 HJ Heinz Finance Co. 6.000% due 03/15/12 40 42 6.750% due 03/15/32 115 127 Household Finance Corp. 3.900% due 02/09/07 (E)(N) 2,000 2,004 4.750% due 05/15/09 6,340 6,270 4.125% due 11/16/09 3,200 3,091 6.750% due 05/15/11 1,520 1,634 7.000% due 05/15/12 1,985 2,167 6.375% due 11/27/12 475 503 International Lease Finance Corp. 6.375% due 03/15/09 1,580 1,641 3.500% due 04/01/09 610 578 4.750% due 07/01/09 1,370 1,346 Series MTNQ 4.625% due 06/02/08 1,210 1,196
Diversified Bond Fund 117 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- International Paper Co. 5.500% due 01/15/14 510 494 ITT Industries, Inc. 7.400% due 11/15/25 240 280 John Deere Capital Corp. Series MTND 4.400% due 07/15/09 2,035 2,001 JP Morgan & Co., Inc. Series MTNA 6.000% due 01/15/09 310 319 JP Morgan Chase Capital XV 5.875% due 03/15/35 3,350 3,175 JPMorgan Chase & Co. 5.125% due 09/15/14 735 719 5.150% due 10/01/15 785 765 Kellogg Co. Series B 6.600% due 04/01/11 1,090 1,168 Kraft Foods, Inc. 4.000% due 10/01/08 1,575 1,535 5.625% due 11/01/11 1,570 1,605 Kroger Co. (The) 7.500% due 04/01/31 70 74 Lehman Brothers Holdings, Inc. 4.000% due 01/22/08 490 481 6.625% due 01/18/12 495 532 Lennar Corp. (A) 5.600% due 05/31/15 1,805 1,729 Lockheed Martin Corp. 8.500% due 12/01/29 410 552 M&I Marshall & Ilsley Bank Series BKNT 4.400% due 03/15/10 1,370 1,339 Manufacturers & Traders Trust Co. 8.000% due 10/01/10 145 164 May Department Stores Co. (The) 4.800% due 07/15/09 90 89 5.750% due 07/15/14 240 240 Merrill Lynch & Co., Inc. Series MTNB 3.125% due 07/15/08 1,490 1,423 Series MTNC (E) 3.970% due 03/12/07 340 339 Metlife, Inc. 5.700% due 06/15/35 1,565 1,511 Metropolitan Life Global Funding I (p)(E) 3.944% due 03/16/07 2,000 2,001 Miller Brewing Co. (A) 5.500% due 08/15/13 330 333 Monumental Global Funding, Ltd. (A) 4.625% due 03/15/10 190 188 Morgan Stanley 4.263% due 01/12/07 (E) 2,000 2,002 3.625% due 04/01/08 795 772
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 3.875% due 01/15/09 730 705 6.750% due 04/15/11 515 552 4.750% due 04/01/14 280 264 Series MTNF 4.284% due 01/18/08 1,400 1,401 Natexis Ambs Co. LLC (A) 8.440% due 12/29/49 270 292 National City Bank 4.500% due 03/15/10 2,240 2,195 National Rural Utilities Cooperative Finance Corp. 5.750% due 08/28/09 2,270 2,326 News America Holdings 7.750% due 12/01/45 45 51 7.900% due 12/01/95 230 259 8.250% due 10/17/96 75 88 News America, Inc. 6.750% due 01/09/38 45 47 Series WI 6.200% due 12/15/34 4,260 4,105 Nisource Finance Corp. 7.875% due 11/15/10 355 395 Norfolk Southern Corp. 6.200% due 04/15/09 845 878 7.050% due 05/01/37 420 490 7.900% due 05/15/97 190 235 Northern States Power Co. Series B 8.000% due 08/28/12 860 999 Occidental Petroleum Corp. 9.250% due 08/01/19 185 248 Ohio Power Co. Series F 5.500% due 02/15/13 35 35 Pacific Gas & Electric Co. 3.600% due 03/01/09 125 120 4.200% due 03/01/11 310 295 6.050% due 03/01/34 650 653 Pacificorp 4.300% due 09/15/08 615 604 Pemex Project Funding Master Trust 7.375% due 12/15/14 1,600 1,749 Progress Energy, Inc. 5.850% due 10/30/08 850 865 7.100% due 03/01/11 355 380 7.750% due 03/01/31 170 195 7.000% due 10/30/31 90 95 Prologis (A) 5.625% due 11/15/15 1,725 1,720
118 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Rabobank Capital Funding II (A) (f) 5.260% due 12/31/49 30 30 Rabobank Capital Funding Trust (A)(f) 5.254% due 12/29/49 60 58 Raytheon Co. 6.750% due 08/15/07 439 452 RBS Capital Trust I(f) 5.512% due 09/29/49 690 678 Regions Financial Corp. 4.500% due 08/08/08 1,625 1,605 Residential Capital Corp. (A) 6.375% due 06/30/10 685 696 Safeway, Inc. 7.250% due 02/01/31 45 46 SBC Communications, Inc. 4.125% due 09/15/09 2,230 2,147 5.100% due 09/15/14 280 270 6.450% due 06/15/34 10 10 Simon Property Group, LP 4.600% due 06/15/10 1,800 1,758 4.875% due 08/15/10 1,100 1,084 5.100% due 06/15/15 990 952 SLM Corp. Series MTNA 4.000% due 01/15/09 2,670 2,591 Sovereign Bank 5.125% due 03/15/13 445 436 Sprint Capital Corp. 6.000% due 01/15/07 1,225 1,241 6.125% due 11/15/08 1,395 1,437 7.625% due 01/30/11 3,145 3,461 8.375% due 03/15/12 615 710 6.875% due 11/15/28 425 453 8.750% due 03/15/32 2,435 3,150 Suntrust Bank 5.000% due 09/01/15 3,180 3,104 Tele-Communications-TCI Group 9.800% due 02/01/12 330 399 7.875% due 08/01/13 1,145 1,290 Time Warner Entertainment Co., LP Series* 8.375% due 03/15/23 540 635 8.375% due 07/15/33 1,350 1,630 Time Warner, Inc. 6.750% due 04/15/11 1,200 1,268 6.875% due 05/01/12 610 653 7.700% due 05/01/32 535 609 Travelers Property Casualty Corp. 5.000% due 03/15/13 160 155 TXU Corp. Series R 6.550% due 11/15/34 610 542 TXU Electric Delivery Co. 6.375% due 05/01/12 1,090 1,143 6.375% due 01/15/15 180 189
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- TXU Energy Co. LLC 7.000% due 03/15/13 545 568 Unilever Capital Corp. 5.900% due 11/15/32 325 335 United Technologies Corp. 5.400% due 05/01/35 80 78 Univision Communications, Inc. 3.500% due 10/15/07 780 755 US Bancorp Series MTNN 3.125% due 03/15/08 1,380 1,328 US Bank NA 5.700% due 12/15/08 70 72 Valero Energy Corp. 7.500% due 04/15/32 770 908 Verizon Global Funding Corp. 7.250% due 12/01/10 1,850 2,006 7.375% due 09/01/12 670 743 5.850% due 09/15/35 3,285 3,072 Verizon Maryland, Inc. Series A 6.125% due 03/01/12 1,335 1,358 Verizon Wireless Capital LLC 5.375% due 12/15/06 555 558 Viacom, Inc. 6.625% due 05/15/11 905 942 Virginia Electric and Power Co. Series A 5.375% due 02/01/07 1,725 1,735 Wachovia Bank NA Series BKNT 5.800% due 12/01/08 340 349 Wachovia Corp. 5.250% due 08/01/14 4,200 4,188 6.550% due 10/15/35 275 302 Wal-Mart Stores, Inc. 4.750% due 08/15/10 1,435 1,421 4.500% due 07/01/15 1,905 1,811 Waste Management, Inc. 6.375% due 11/15/12 445 471 Wells Fargo & Co. 4.200% due 01/15/10 455 442 4.625% due 08/09/10 545 537 4.950% due 10/16/13 240 237 4.750% due 02/09/15 3,230 3,117 Weyerhaeuser Co. 6.125% due 03/15/07 249 253 6.750% due 03/15/12 960 1,017
Diversified Bond Fund 119 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Wyeth 6.950% due 03/15/11 1,595 1,719 5.500% due 03/15/13 85 86 5.500% due 02/01/14 85 86 XTO Energy, Inc. 6.250% due 04/15/13 450 472 Yum! Brands, Inc. 8.875% due 04/15/11 165 192 Zurich Capital Trust I (A) 8.376% due 06/01/37 1,250 1,352 ------------ 245,065 ------------ International Debt - 2.8% Abbey National PLC (f) (Step Up, 7.570%, 06/15/08) 6.700% due 06/29/49 550 571 Aiful Corp. (A) 5.000% due 08/10/10 300 295 Alcan, Inc. 5.750% due 06/01/35 990 931 Anadarko Finance Co. Series B 7.500% due 05/01/31 400 481 Apache Finance Canada Corp. 4.375% due 05/15/15 615 587 AXA SA 8.600% due 12/15/30 1,555 2,023 British Telecommunications PLC 8.875% due 12/15/30 335 438 ChevronTexaco Capital Co. 3.500% due 09/17/07 590 578 Chile Government International Bond 5.625% due 07/23/07 675 683 China Development Bank 5.000% due 10/15/15 100 97 Conoco Funding Co. 6.350% due 10/15/11 1,030 1,102 Credit-Based Asset Servicing and Securitization CBO, Ltd. (A)(E) Series 2004-9A Class A1 4.470% due 04/08/39 2,235 2,235 Crest, Ltd. (A) Series 2003-2A Class C2 5.709% due 12/28/38 1,655 1,639 Deutsche Telekom International Finance BV 8.500% due 06/15/10 465 519 5.250% due 07/22/13 190 188 8.750% due 06/15/30 180 223 Diageo Finance BV 3.000% due 12/15/06 705 691 EnCana Corp. 6.500% due 08/15/34 95 104
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Equifirst Mortgage Loan Trust NIMs Notes (A) Series 2004-2 Class N1 3.967% due 10/25/34 384 384 Export-Import Bank of China (p)(N) 4.875% due 07/21/15 580 554 Export-Import Bank of Korea(A) 4.125% due 02/10/09 290 281 First Franklin NIMs Trust (A) Series 2004-FF5 Class N1 4.212% due 04/25/34 7 7 France Telecom SA 7.750% due 03/01/11 325 362 G-Force CDO, Ltd. (A) Series 2003-1A Class CFX 5.700% due 12/25/38 750 741 HBOS PLC (p)(f) 5.920% due 09/29/49 100 98 Intelsat, Ltd. 6.500% due 11/01/13 375 276 Korea Development Bank 4.250% due 11/13/07 820 809 Korea Electric Power Corp. (A) 5.125% due 04/23/34 145 142 Mexico Government International Bond 8.375% due 01/14/11 725 825 6.375% due 01/16/13 600 628 8.300% due 08/15/31 635 778 7.500% due 04/08/33 2,356 2,670 Mizuho Financial Group Cayman, Ltd. (A) 5.790% due 04/15/14 445 456 Newcastle CDO I, Ltd. (A) Series 2004-4A Class 3FX 5.110% due 03/24/39 870 826 Petroleum Export, Ltd. (p) 5.265% due 06/15/11 100 99 Province of Quebec 5.000% due 07/17/09 40 40 Province of Quebec Canada 6.125% due 01/22/11 1,390 1,469 Ras Laffan Liquefied Natural Gas Co., Ltd. II (A) 5.298% due 09/30/20 165 161 Ras Laffan LNG III (p) 5.838% due 09/30/27 300 294 Resona Bank, Ltd. (p)(f) 5.850% due 09/29/49 575 555
120 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Resona Preferred Global Securities Cayman, Ltd. (A)(E)(f) 7.191% due 12/29/49 375 382 Russia Government International Bond 5.000% due 03/31/30 2,950 3,279 5.000% due 03/31/30 (A) 440 488 Santander Financial Issuances 6.375% due 02/15/11 120 127 Sanwa Finance Aruba AEC 8.350% due 07/15/09 285 315 Scottish Power PLC 5.375% due 03/15/15 935 919 Systems 2001 AT LLC (A) 7.156% due 12/15/11 220 230 Teck Cominco, Ltd. 6.125% due 10/01/35 965 906 Telecom Italia Capital SA 4.000% due 01/15/10 1,885 1,792 4.950% due 09/30/14 745 707 5.250% due 10/01/15 7,095 6,830 Telefonica Europe BV 7.750% due 09/15/10 1,035 1,141 Telefonos de Mexico SA de CV 4.500% due 11/19/08 495 484 TELUS Corp. 8.000% due 06/01/11 1,080 1,214 Tengizchevroil Finance Co. (A) 6.124% due 11/15/14 325 326 Tyco International Group SA 6.375% due 10/15/11 445 467 6.000% due 11/15/13 905 939 UFJ Finance Aruba AEC 6.750% due 07/15/13 60 65 Vodafone Group PLC 7.750% due 02/15/10 350 385 Wells Fargo Home Equity Trust (A) Series 2004-2N Class N1 4.450% due 10/26/34 106 106 ------------ 46,942 ------------ Mortgage-Backed Securities - 46.4% American Home Mortgage Investment Trust (E) Series 2004-4 Class 4A 4.390% due 02/25/45 739 724 Series 2005-2 Class 5A2 4.188% due 09/25/35 1,845 1,844 Series 2005-3 Class 3A2 4.218% due 09/25/35 2,222 2,222 Series 2005-4 Class 1A1 4.328% due 11/25/45 2,399 2,399 Arcap Reit, Inc. (A) Series 2004-RR3 Class B 5.040% due 09/21/45 460 441
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Banc of America Commercial Mortgage, Inc. Series 2004-3 Class A3 4.875% due 06/10/39 1,000 991 Series 2004-4 Class A3 4.128% due 07/10/42 685 664 Series 2005-3 Class A4 4.668% due 07/10/43 1,600 1,526 Banc of America Funding Corp. (E) Series 2005-D Class A1 4.117% due 05/25/35 652 642 Bank of America Alternative Loan Trust (E) Series 2003-10 Class 2A2 4.488% due 12/25/33 759 760 Bank of America Mortgage Securities Series 2004-1 Class 5A1 6.500% due 09/25/33 53 54 Bear Stearns Adjustable Rate Mortgage Trust Series 2002-11 Class 1A1 5.628% due 02/25/33 46 46 Series 2002-11 Class 1A2 5.352% due 02/25/33 83 83 Series 2003-1 Class 6A1 5.070% due 04/25/33 176 172 Series 2004-3 Class 4A 4.913% due 07/25/34 1,525 1,480 Bear Stearns Alt-A Trust Series 2005-4 Class 23A1 5.431% due 05/25/35 1,226 1,231 Bear Stearns Commercial Mortgage Securities Series 2005-PWR Class A1 4.386% due 02/11/41 1,063 1,052 Chaseflex Trust Series 2005-2 Class 4A2 5.500% due 05/25/20 1,518 1,520 Commercial Mortgage Acceptance Corp. Series 1998-C2 Class A3 6.040% due 09/15/30 4,770 4,891 Countrywide Alternative Loan Trust (E) Series 2005-56 Class 3A1 4.365% due 11/25/35 1,977 1,977 Series 2005-56 Class 4A1 4.348% due 11/25/35 2,393 2,393
Diversified Bond Fund 121 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2005-59 Class 1A1 4.330% due 10/25/35 2,698 2,702 Series 2005-J12 Class 2A1 4.330% due 08/25/35 2,440 2,440 Countrywide Asset-Backed Certificates (E) Series 2005-IM1 Class A1 4.168% due 07/25/35 1,862 1,861 Countrywide Home Loan Mortgage Pass Through Trust (E) Series 2003-42 Class 2A1 3.960% due 10/25/33 39 39 Series 2005-3 Class 1A2 4.328% due 04/25/35 255 255 Series 2005-9 Class M6 5.188% due 05/25/35 309 303 Series 2005-R3 Class AF (A) 4.438% due 09/25/35 2,351 2,351 Credit Suisse First Boston Mortgage Securities Corp. Series 2003-C5 Class A1 3.093% due 12/15/36 2,255 2,181 Series 2004-C1 Class A3 4.321% due 01/15/37 845 811 Series 2005-C4 Class A3 5.120% due 08/15/38 1,210 1,202 Series 2005-C5 Class A3 5.100% due 08/15/38 1,610 1,591 DLJ Commercial Mortgage Corp. Series 1998-CF1 Class A1B 6.410% due 02/18/31 799 819 Downey Savings & Loan Association Mortgage Loan Trust (E) Series 2004-AR3 Class 1A1B 5.206% due 07/19/44 609 617 Fannie Mae 15 Year TBA (I) 4.000% 6,285 5,955 4.500% 11,875 11,482 5.000% 10,950 10,799 5.500% 1,255 1,263 30 Year TBA (I) 4.500% 2,495 2,330 5.000% 40,005 38,492 5.500% 58,585 57,779 6.000% 16,015 16,150 6.500% 11,340 11,638 7.000% due 2007 6 6 7.200% due 2007 681 697 7.000% due 2008 19 19 7.000% due 2009 35 36 8.000% due 2010 3 3 7.000% due 2011 15 16 8.000% due 2011 4 4 7.000% due 2012 4 4
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 6.500% due 2013 38 39 5.500% due 2014 39 40 6.500% due 2015 28 28 7.000% due 2015 16 17 5.500% due 2016 8 8 6.000% due 2016 843 863 6.500% due 2016 161 167 9.000% due 2016 3 3 5.000% due 2017 2,044 2,018 5.500% due 2017 1,262 1,272 6.000% due 2017 2,505 2,563 6.500% due 2017 611 631 8.000% due 2017 55 59 8.500% due 2017 7 7 4.500% due 2018 12,630 12,239 5.000% due 2018 11,668 11,518 5.500% due 2018 908 915 6.000% due 2018 282 288 6.500% due 2018 423 438 4.500% due 2019 719 696 5.000% due 2019 7,378 7,282 6.500% due 2019 183 189 4.500% due 2020 224 217 5.000% due 2020 5,092 5,025 6.500% due 2020 68 70 8.000% due 2020 6 7 6.500% due 2022 106 110 8.000% due 2024 127 135 7.000% due 2025 8 8 8.500% due 2025 4 5 7.000% due 2026 6 6 6.500% due 2028 535 550 7.000% due 2028 465 487 6.500% due 2029 1,703 1,757 6.500% due 2030 201 207 8.000% due 2030 243 259 6.500% due 2031 1,004 1,033 6.000% due 2032 1,724 1,741 6.500% due 2032 1,520 1,561 7.000% due 2032 1,161 1,213 4.500% due 2033 1,747 1,637 5.000% due 2033 10,991 10,613 5.500% due 2033 31,948 31,570 6.000% due 2033 2,281 2,305 6.500% due 2033 301 309 7.000% due 2033 508 532 4.500% due 2034 1,082 1,012 5.000% due 2034 13,802 13,326 5.500% due 2034 38,825 38,344
122 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 6.000% due 2034 14,119 14,247 6.500% due 2034 3,245 3,332 0.410% due 2035 (E) 500 516 0.424% due 2035 (E) 500 516 0.802% due 2035 (E) 400 413 1.146% due 2035 (E) 400 413 4.500% due 2035 4,528 4,233 5.000% due 2035 39,835 38,351 5.500% due 2035 94,342 93,115 6.000% due 2035 9,461 9,544 6.500% due 2035 3,441 3,533 Series 1992-10 Class ZD 8.000% due 11/25/21 887 911 Series 1993-134 Class H 6.500% due 08/25/08 1,045 1,064 Series 1993-208 Class SA Interest Only STRIP 0.450% due 02/25/23 335 1 Series 1997-81 Class PC 5.000% due 04/18/27 9 9 Series 2004-27 Class JC 5.000% due 05/25/34 43 43 Fannie Mae Grantor Trust Series 2001-T6 Class B 6.088% due 05/25/11 1,150 1,212 Series 2005-T2 Class 1A1 (E) 3.712% due 11/28/35 251 251 Fannie Mae Whole Loan Series 2003-W1 Class 1A1 6.500% due 12/25/42 110 112 Federal Home Loan Mortgage Corp. Structured Pass Through Securities Series 2004-H01 Class A1 2.614% due 07/15/11 849 842 Freddie Mac 15 Year TBA (I) 5.000% 5,100 5,030 30 Year TBA (I) 5.000% 30,640 29,472 5.500% 25,525 25,190 6.000% 5,530 5,584 7.000% due 2008 26 27 8.000% due 2008 3 3 8.500% due 2008 2 2 8.000% due 2010 1 2 6.000% due 2011 170 175 8.000% due 2011 21 22 8.000% due 2012 12 13 7.000% due 2014 69 72 12.000% due 2014 15 16 6.000% due 2016 12 12 9.000% due 2016 55 58 6.000% due 2017 443 452 8.000% due 2017 28 29 4.500% due 2018 2,053 1,989
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 5.000% due 2018 589 581 4.500% due 2019 768 744 5.500% due 2019 2,042 2,056 5.500% due 2020 324 326 9.000% due 2024 5 6 6.500% due 2025 9 9 8.500% due 2025 33 36 9.000% due 2025 9 10 9.000% due 2026 1 2 6.500% due 2029 230 237 5.638% due 2030 7 7 6.500% due 2031 2,251 2,314 6.000% due 2032 271 274 7.000% due 2032 454 472 5.000% due 2033 709 684 5.500% due 2033 386 382 6.000% due 2033 178 180 6.500% due 2033 805 826 4.500% due 2034 209 196 6.000% due 2034 3,687 3,725 6.500% due 2034 14 14 Series 1991-105 Class G 7.000% due 03/15/21 63 63 Series 2003-263 Class YH 3.500% due 08/15/22 1,500 1,488 Series 2005-292 Class IG Interest Only STRIP 5.000% due 04/15/23 553 96 Freddie Mac Gold 7.000% due 2008 2 2 8.000% due 2009 10 10 7.000% due 2010 12 13 6.000% due 2011 245 249 7.000% due 2011 5 5 6.000% due 2012 7 8 4.500% due 2020 857 829 5.000% due 2020 786 776 5.500% due 2020 2,416 2,433 8.500% due 2027 136 147 5.500% due 2033 7,205 7,124 6.000% due 2033 217 219 5.000% due 2034 3,786 3,656 5.500% due 2034 4,180 4,130 6.000% due 2034 554 560 6.500% due 2034 297 305 5.000% due 2035 998 960 6.000% due 2035 388 391 G-Force LLC (A) 4.830% due 09/22/13 2,105 2,050
Diversified Bond Fund 123 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- GE Capital Commercial Mortgage Corp. Series 2005-C1 Class A1 4.012% due 06/10/48 875 860 Series 2005-C1 Class A5 4.772% due 06/10/48 500 482 Ginnie Mae I 30 Year TBA (I) 5.000% 9,860 9,617 5.500% 1,500 1,498 6.000% 12,300 12,519 8.000% due 2007 -- -- 6.500% due 2008 13 13 6.500% due 2009 186 192 7.000% due 2011 2 2 8.000% due 2016 1 1 9.500% due 2016 12 13 8.000% due 2017 5 6 10.500% due 2020 13 14 8.000% due 2022 33 36 8.500% due 2022 18 20 8.000% due 2025 54 57 9.000% due 2025 293 320 7.000% due 2029 9 9 8.000% due 2030 675 723 8.500% due 2030 8 8 7.000% due 2031 557 587 8.000% due 2031 6 6 6.000% due 2032 398 405 7.000% due 2032 36 37 8.000% due 2032 17 18 5.000% due 2033 1,445 1,412 6.000% due 2034 1,650 1,680 Ginnie Mae II 4.125% due 2023 380 383 4.375% due 2023 316 317 4.375% due 2024 225 225 4.500% due 2035 1,085 1,021 GMAC Commercial Mortgage Securities, Inc. Series 2005-C1 Class A2 4.471% due 05/10/43 605 590 Government National Mortgage Association Series 2002-61 Class BA 4.648% due 03/16/26 679 672 Greenwich Capital Commercial Funding Corp. Series 2004-GG1 Class A7 5.317% due 06/10/36 785 786 Series 2005-GG3 Class A1 3.919% due 08/10/42 1,131 1,111 Series 2005-GG5 Class A41 5.243% due 04/10/37 525 528
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- GS Mortgage Securities Corp. II Series 1998-C1 Class A2 6.620% due 10/18/30 1,575 1,629 Series 2005-GG4 Class AABA 4.680% due 07/10/39 800 775 GSAMP Mortgage Loan Trust (A)(E) Series 2004-4 Class 1AF 4.438% due 06/25/34 2,119 2,126 Harborview Mortgage Loan Trust (E) Series 2004-4 Class 3A 2.975% due 06/19/34 3,886 3,806 Impac CMB Trust (E) Series 2004-3 Class 1A 4.288% due 06/25/34 389 389 Impac Secured Assets CMN Owner Trust (E) Series 2004-3 Class 1A1 4.238% due 11/25/34 123 123 IndyMac Index Mortgage Loan Trust Series 2005-AR2 Class 4A1 5.509% due 11/25/35 2,247 2,251 IndyMac Loan Trust Series 2003-L1 Class A1 (A) 4.418% due 11/25/08 102 102 Series 2004-L1 Class A1 (A) 4.318% due 07/25/09 669 669 Series 2005-L1 Class A (E) 4.238% due 06/25/10 2,163 2,166 Series 2005-L2 Class A1 (E) 4.258% due 01/25/11 4,507 4,512 JP Morgan Chase Commercial Mortgage Securities Corp. Series 2003-CB7 Class A3 4.449% due 01/12/38 1,250 1,210 Series 2004-C3 Class A4 4.657% due 01/15/42 1,410 1,365 Series 2004-LN2 Class A1 4.475% due 07/15/41 890 864 Series 2005-CB1 Class A1 4.520% due 08/12/37 1,622 1,607 Series 2005-CB1 Class A4 4.895% due 09/12/37 80 78 Series 2005-FL1 Class A1 (A)(E) 4.080% due 02/15/19 2,685 2,673 Series 2005-LDP Class A1 4.116% due 03/15/46 816 803 Series 2005-LDP Class A3 4.959% due 08/15/42 915 899 Series 2005-LDP Class A4 4.918% due 10/15/42 2,945 2,859
124 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- JP Morgan Mortgage Trust Series 2005-A2 Class 3A1 4.920% due 04/25/35 1,966 1,952 Series 2005-A3 Class 6A1 4.926% due 06/25/35 3,015 2,986 Series 2005-A4 Class 1A1 5.415% due 07/25/35 1,092 1,083 Series 2005-A4 Class 3A1 5.190% due 07/25/35 1,673 1,658 Series 2005-A6 Class 2A2 4.987% due 08/25/35 1,951 1,939 Series 2005-ALT Class 3A1 5.500% due 10/25/35 2,083 2,079 Series 2005-S2 Class 2A15 6.000% due 09/25/35 2,765 2,767 LB-UBS Commercial Mortgage Trust Series 2001-C3 Class A1 6.058% due 06/15/20 409 418 Series 2003-C3 Class A1 2.599% due 05/15/27 822 790 Series 2004-C2 Class A1 2.946% due 03/15/29 1,958 1,863 Series 2004-C4 Class A3 4.985% due 06/15/29 1,455 1,457 Series 2005-C3 Class A5 4.739% due 07/15/30 480 461 Series 2005-C3 Class AAB 4.664% due 07/15/30 600 580 Mach One Trust Commercial Mortgage-Backed (A) Series 2004-1A Class A3 5.220% due 05/28/40 1,480 1,462 Mastr Reperforming Loan Trust (A) Series 2005-1 Class 1A1 6.000% due 08/25/34 1,046 1,053 Merrill Lynch Mortgage Investors, Inc. Series 2005-A7 Class 2A1 5.406% due 09/25/35 2,029 2,012 Merrill Lynch Mortgage Trust Series 2004-MKB Class A2 4.353% due 02/12/42 880 860 Series 2005-MKB Class A1 4.446% due 09/12/42 1,438 1,421 Series 2005-MKB Class A4 5.204% due 09/12/42 725 720 Morgan Stanley Capital I Series 2004-HQ3 Class A1 3.100% due 01/13/41 1,422 1,371 Series 2004-RR2 Class A2 (A) 5.450% due 10/28/33 1,475 1,476 Series 2005-HQ5 Class A4 5.168% due 01/14/42 1,150 1,140 Series 2005-HQ6 Class A4A 4.989% due 08/13/42 1,120 1,094
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2005-IQ9 Class A1 3.990% due 07/15/56 892 876 Series 2005-T17 Class A5 4.780% due 12/13/41 285 275 Morgan Stanley Dean Witter Capital I Series 2001-TOP Class A3 6.200% due 07/15/33 790 812 Mortgage Capital Funding, Inc. Series 1998-MC2 Class A2 6.423% due 06/18/30 1,481 1,523 Nationslink Funding Corp. Series 1999-SL Class A4 6.654% due 11/10/30 244 245 Nomura Asset Securities Corp. Series 1998-D6 Class A1B 6.590% due 03/15/30 980 1,016 Novastar NIMs Trust (A) Series 2005-N1 Class NOTE 4.777% due 10/26/35 383 382 Prime Mortgage Trust Series 2004-CL1 Class 1A2 4.438% due 02/25/34 139 139 Series 2004-CL1 Class 2A2 4.438% due 02/25/19 35 35 Residential Accredit Loans, Inc. Series 2005-QA8 Class NB3 5.527% due 07/25/35 854 852 Series 2005-QO3 Class A1 (E) 4.470% due 10/25/45 2,400 2,404 Residential Asset Securitization Trust (E) Series 2003-A15 Class 1A2 4.488% due 02/25/34 1,357 1,360 Residential Funding Mortgage Sec I (E) Series 2003-S5 Class 1A2 4.488% due 11/25/18 659 662 SACO I, Inc. (p) Series 2004-2 Class A2 4.228% due 07/25/19 234 234 Small Business Administration Series 1999-P10 Class 1 7.540% due 08/10/09 691 733 Series 2000-10B Class 1 7.452% due 09/01/10 1,917 2,038 Small Business Administration Participation Certificates Series 2005-20G Class 1 4.750% due 07/01/25 3,000 2,929
Diversified Bond Fund 125 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Structured Adjustable Rate Mortgage Loan Trust (E) Series 2005-19X Class 1A1 4.358% due 10/25/35 2,243 2,245 Structured Asset Securities Corp. Series 2004-21X Class 1A3 4.440% due 12/25/34 1,515 1,484 Thornburg Mortgage Securities Trust (E) Series 2005-3 Class 3A1 4.298% due 10/25/35 2,388 2,334 Wachovia Bank Commercial Mortgage Trust Series 2003-C9 Class A1 3.291% due 12/15/35 1,838 1,778 Series 2005-C16 Class A2 4.380% due 10/15/41 1,510 1,471 Series 2005-C17 Class A1 4.430% due 03/15/42 3,713 3,675 Washington Mutual, Inc. Series 2004-AR1 Class A1B1 4.165% due 11/25/34 913 913 Series 2005-AR1 Class 1A1 4.845% due 10/25/35 907 900 Series 2005-AR1 Class 2A1 (E) 5.073% due 09/25/35 1,713 1,693 Series 2005-AR1 Class A1A1 (E) 4.328% due 10/25/45 2,800 2,800 Series 2005-AR1 Class A1A2 (E) 4.446% due 11/25/45 2,400 2,400 Series 2005-AR6 Class B3 (E) 4.698% due 04/25/45 590 589 Wells Fargo Mortgage Backed Securities Trust (E) Series 2005-AR1 Class 7A1 5.264% due 10/25/35 1,632 1,607 ------------ 775,797 ------------ Municipal Bonds - 0.4% Badger TOB Asset Securitization Corp. Revenue Bonds, semi-annual demand 6.375% due 06/01/32 700 744 City of New York New York General Obligation Unlimited, semi-annual demand 5.000% due 03/01/30 200 203 Golden State Tobacco Securitization Corp. Revenue Bonds, semi-annual demand 5.000% due 06/01/21 620 628 Liberty Development Corp. Revenue Bonds, semi-annual demand 5.250% due 10/01/35 280 306
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- New York City Municipal Water Finance Authority Revenue Bonds, semi-annual demand 5.000% due 06/15/34 100 102 State of Texas General Obligation Unlimited, semi-annual demand 4.750% due 04/01/35 400 401 Tobacco Settlement Financing Corp. Revenue Bonds, semi-annual demand 5.500% due 06/01/26 1,500 1,542 University of Illinois Revenue Bonds, semi-annual demand (u) 5.000% due 04/01/29 2,800 2,885 University of Texas Revenue Bonds, semi-annual demand 5.000% due 08/15/33 100 103 ------------ 6,914 ------------ Non-US Bonds - 0.3% Canadian Government Bond 3.000% due 12/01/36 CAD 104 115 France Government Bond OAT 3.000% due 07/25/09 EUR 2,261 2,931 General Motors Corp. 8.375% due 07/05/33 EUR 90 79 Poland Government Bond 6.000% due 05/24/09 PLN 2,840 883 Queensland Treasury Corp. 6.000% due 06/14/11 AUD 1,370 1,047 ------------ 5,055 ------------ United States Government Agencies - 5.7% Fannie Mae 3.550% due 01/12/07 5,625 5,557 3.375% due 05/15/07 4,375 4,295 6.625% due 10/15/07 2,430 2,518 2.500% due 06/15/08 6,075 5,748 4.500% due 10/15/08 7,160 7,119 3.250% due 02/15/09 780 747 4.250% due 05/15/09 6,135 6,050 3.875% due 02/15/10 1,630 1,577 4.750% due 04/19/10 3,845 3,799 4.125% due 05/15/10 10 10 4.375% due 03/15/13 1,125 1,090 Zero coupon due 07/05/14 2,570 1,676 5.250% due 03/24/15 730 720 5.000% due 04/26/17 1,755 1,685
126 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 6.625% due 11/15/30 2,450 2,947 6.210% due 08/06/38 240 278 Federal Home Loan Bank System 4.875% due 05/15/07 2,680 2,690 4.125% due 10/19/07 5,465 5,411 3.250% due 12/17/07 5,975 5,805 5.250% due 06/18/14 345 353 5.125% due 08/15/19 420 417 Financing Corp. Principal Only STRIP Zero coupon due 05/11/16 185 109 Zero coupon due 06/06/16 545 319 Zero coupon due 12/27/16 645 366 Zero coupon due 10/06/17 1,055 581 Zero coupon due 11/30/17 1,155 631 Zero coupon due 05/11/18 90 48 Zero coupon due 08/03/18 1,080 569 Zero coupon due 11/02/18 1,105 574 Zero coupon due 12/06/18 155 80 Zero coupon due 04/05/19 875 444 Zero coupon due 09/26/19 950 469 Freddie Mac 3.750% due 11/15/06 2,845 2,821 4.375% due 11/16/07 2,275 2,265 4.250% due 07/15/09 4,900 5,004 6.625% due 09/15/09 4,595 4,894 4.000% due 12/15/09 1,645 1,600 4.500% due 11/15/11 1,095 1,070 5.750% due 01/15/12 5,095 5,331 5.125% due 07/15/12 2,610 2,649 4.875% due 11/15/13 310 309 5.050% due 01/26/15 1,485 1,468 4.750% due 11/17/15 2,180 2,144 6.750% due 09/15/29 1,035 1,256 ------------ 95,493 ------------ United States Government Treasuries - 19.6% United States Treasury Inflation Indexed Bonds 0.875% due 04/15/10 3,680 3,536 2.000% due 07/15/14 8,506 8,528 1.625% due 01/15/15 154 150 1.875% due 07/15/15 4,260 4,217 2.375% due 01/15/25 5,469 5,691 3.625% due 04/15/28 (N) 121 154 3.875% due 04/15/29 334 445 United States Treasury Notes 2.875% due 11/30/06 16,210 15,954 3.000% due 12/31/06 5,760 5,669 3.750% due 03/31/07 600 595 3.125% due 05/15/07 20,285 19,907 4.375% due 05/15/07 4,930 4,929 6.625% due 05/15/07 7,995 8,266 3.625% due 06/30/07 (N) 13,555 13,387
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 6.125% due 08/15/07 250 257 3.000% due 02/15/08 6,530 6,332 3.375% due 02/15/08 300 293 3.750% due 05/15/08 12,180 11,987 3.125% due 09/15/08 11,215 10,827 3.375% due 12/15/08 15,450 14,976 3.250% due 01/15/09 1,560 1,505 4.000% due 06/15/09 385 379 3.625% due 07/15/09 4,985 4,846 3.375% due 09/15/09 4,880 4,696 3.500% due 12/15/09 2,370 2,285 3.625% due 01/15/10 4,950 4,791 4.000% due 03/15/10 3,535 3,470 4.000% due 04/15/10 4,650 4,561 3.875% due 05/15/10 (N) 14,870 14,506 3.625% due 06/15/10 1,210 1,168 3.875% due 09/15/10 4,675 4,553 4.250% due 10/15/10 1,570 1,556 5.000% due 02/15/11 1,550 1,588 5.000% due 08/15/11 7,365 7,556 4.875% due 02/15/12 6,690 6,823 3.875% due 02/15/13 4,270 4,099 4.250% due 08/15/13 1,375 1,348 12.000% due 08/15/13 420 503 4.250% due 11/15/13 2,505 2,453 4.750% due 05/15/14 13,919 14,093 13.250% due 05/15/14 680 874 12.500% due 08/15/14 1,235 1,578 4.250% due 11/15/14 485 473 4.250% due 08/15/15 1,500 1,464 9.250% due 02/15/16 2,715 3,728 7.250% due 05/15/16 2,740 3,325 7.500% due 11/15/16 1,000 1,241 8.750% due 05/15/17 2,560 3,476 8.875% due 08/15/17 1,475 2,027 8.125% due 08/15/19 3,655 4,881 7.875% due 02/15/21 (N) 700 931 8.125% due 08/15/21 8,360 11,393 7.125% due 02/15/23 13,160 16,673 6.250% due 08/15/23 (N) 600 700 6.875% due 08/15/25 1,365 1,716 6.000% due 02/15/26 11,910 13,692 6.125% due 11/15/27 2,960 3,478 6.125% due 08/15/29 9,830 11,652 6.250% due 05/15/30 4,420 5,341 5.375% due 02/15/31 12,860 14,026
Diversified Bond Fund 127 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- United States Treasury Principal Only STRIP Zero coupon due 11/15/21 3,640 1,669 ------------ 327,217 ------------ TOTAL LONG-TERM INVESTMENTS (cost $1,630,501) 1,611,438 ------------ PREFERRED STOCKS - 0.1% Auto and Transportation - 0.0% General Motors Corp. 23,425 387 ------------ Financial Services - 0.1% DG Funding Trust (A) 103 1,104 Fannie Mae 7,800 427 ------------ 1,531 ------------ TOTAL PREFERRED STOCKS (cost $1,902) 1,918 ------------ NOTIONAL AMOUNT ($) ------------ OPTIONS PURCHASED - 0.0% (Number of Contracts) Euribor Futures Dec 2005 93.25 (EUR) Put (15) 4,191 -- ------------ TOTAL OPTIONS PURCHASED (cost $0) -- ------------ PRINCIPAL AMOUNT ($) OR SHARES ------------ SHORT-TERM INVESTMENTS - 18.6% Abbey National NA LLC (c)(z) 3.610% due 11/07/05 2,400 2,399 ASIF Global Financing (E)(p) 3.991% due 05/30/06 2,000 2,002 Bank of Ireland Governor & Co. (c)(z) 3.640% due 11/08/05 2,400 2,398 Barclays US Funding, LLC (c)(z) 3.655% due 11/28/05 3,700 3,690 BNP Paribas (c)(z) 3.770% due 12/19/05 4,500 4,477 Capital Auto Receivables Asset Trust (A)(E) Series 2005-1 Class A1 3.980% due 06/15/06 7 7 Countrywide Home Loans, Inc. Series MTNJ 5.500% due 08/01/06 1,600 1,609
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- DaimlerChrysler NA Holding Corp. (E) 4.430% due 05/24/06 400 401 Danske Corp. (z) 4.030% due 02/06/06 3,400 3,352 Danske Corp. Discount Note (c)(z) 3.900% due 12/27/05 5,200 5,168 Dexia Delaware (c)(z) 3.610% due 11/01/05 1,900 1,900 3.655% due 11/08/05 2,400 2,398 DNB Nor Bank ASA (c)(z) 3.525% due 11/07/05 1,800 1,799 Duke Capital Corp. 4.302% due 05/18/06 170 170 Fannie Mae 9.500% due 12/01/05 -- -- 6.000% due 12/15/05 2,100 2,104 9.500% due 01/01/06 -- -- 5.500% due 02/15/06 2,200 2,207 3.799% due 09/22/06 (E)(N) 1,200 1,199 Federal Home Loan Bank System 2.500% due 12/15/05 2,300 2,295 Federal National Mortgage Association Discount Note (c)(z)(sec.) Zero coupon due 12/05/05 290 289 3.530% due 12/05/05 75 75 3.590% due 12/05/05 25 25 3.640% due 12/05/05 25 25 3.700% due 12/05/05 25 25 Ford Motor Credit Co. 6.875% due 02/01/06 800 800 France Telecom SA 7.200% due 03/01/06 800 807 Frank Russell Investment Company Money Market Fund 192,551,032 192,551 Freddie Mac Discount Note (c)(z) 3.359% due 11/29/05 500 498 General Electric Capital Corp. Discount Notes (c)(z) 3.700% due 11/15/05 2,300 2,297 3.910% due 12/27/05 1,800 1,789 General Motors Acceptance Corp. (E) 4.677% due 05/18/06 600 596 Goldman Sachs Group, Inc. Series MTNB 4.129% due 08/01/06 3,000 3,002 HBOS Treasury Services, PLC (c)(z) 3.645% due 11/07/05 2,400 2,399 3.750% due 12/01/05 7,300 7,277
128 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Merrill Lynch & Co., Inc. (E) 4.386% due 10/27/06 2,000 2,003 Nordea North America, Inc. (c)(z) 3.625% due 11/08/05 2,400 2,398 Rabobank USA Financial Corp. (c)(z) 3.610% due 11/09/05 2,400 2,398 3.620% due 11/28/05 3,400 3,391 Skandin Ens Banken AG (z) 4.070% due 01/19/06 600 594 Skandinaviska Enskilda Banken (c)(z) 3.850% due 12/22/05 4,400 4,376 Societe Generale (c)(z) 3.760% due 12/02/05 3,200 3,190 3.780% due 12/23/05 3,500 3,481 Spintab Swedish Mortgage (c)(z) 3.690% due 11/18/05 8,500 8,485 Swedbank Forenings (c)(z) 3.910% due 12/22/05 1,300 1,293 Treasury Bank NA (E) Series CD 3.853% due 11/23/05 2,200 2,199 UBS Financial Del, LLC (z) 3.635% due 11/07/05 (c) 2,400 2,399 3.590% due 11/21/05 (c) 400 399 3.780% due 12/22/05 (c) 300 298 3.945% due 01/26/06 8,200 8,090 United States Treasury Bills (z)(sec.) 3.500% due 12/01/05 (c) 830 828 3.363% due 12/08/05 (c) 500 498 3.459% due 12/15/05 (c)(N) 150 149 3.670% due 03/16/06 100 98 United States Treasury Notes 2.500% due 10/31/06 12,795 12,565 US Bank NA Series BKNT 5.625% due 11/30/05 500 502 ------------ TOTAL SHORT-TERM INVESTMENTS (cost $311,891) 311,664 ------------
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- OTHER SECURITIES - 5.6% Frank Russell Investment Company Money Market Fund (X) 30,371,668 30,371 State Street Securities Lending Quality Trust (X) 62,228,679 62,229 ------------ TOTAL OTHER SECURITIES (cost $92,600) 92,600 ------------ TOTAL INVESTMENTS - 120.6% (identified cost $2,036,894) 2,017,620 OTHER ASSETS AND LIABILITIES, NET - (20.6%) (344,321) ------------ NET ASSETS - 100.0% 1,673,299 ============
See accompanying notes which are an integral part of the financial statements. Diversified Bond Fund 129 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
UNREALIZED NOTIONAL APPRECIATION FUTURES CONTRACTS AMOUNT (DEPRECIATION) (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Long Positions 10 Year Interest Rate Swap Futures expiration date 12/05 (39) 4,175 (101) Eurodollar Futures expiration date 03/06 (225) 53,587 (216) expiration date 06/06 (198) 47,112 (205) expiration date 09/06 (102) 24,265 (58) expiration date 12/06 (145) 34,496 (66) expiration date 03/07 (149) 35,456 (41) expiration date 06/07 (90) 21,414 (33) expiration date 09/07 (31) 7,375 (15) United States Treasury Bonds expiration date 12/05 (88) 9,853 (370) United States Treasury 2 Year Notes expiration date 12/05 (160) 32,833 (193) United States Treasury 5 Year Notes expiration date 12/05 (1,201) 127,175 (2,499) United States Treasury 10 Year Notes expiration date 12/05 (112) 12,147 (174) Short Positions United States Treasury Bonds expiration date 12/05 (161) 18,027 718 United States Treasury 5 Year Notes expiration date 12/05 (50) 5,295 79 United States Treasury 10 Year Notes expiration date 12/05 (202) 21,908 554 --------------- Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (2,620) ===============
NOTIONAL MARKET OPTIONS WRITTEN AMOUNT VALUE (NUMBER OF CONTRACTS) $ $ - ------------------------------------------------------------------------------------ Eurodollar Futures Dec 2006 95.00 (EUR) Put (10) 2,375 (7) Dec 2006 95.25 (EUR) Put (123) 29,289 (114) United States Treasury Notes 5 Year Futures Nov 2005 108.00 Call (20) 2,160 -- Nov 2005 108.50 Call (5) 543 -- Nov 2005 109.00 Call (43) 4,687 (1) Nov 2005 106.00 Put (20) 2,120 (8) Nov 2005 107.00 Put (20) 2,140 (23) United States Treasury Notes 10 Year Futures Nov 2005 113.00 Call (21) 2,373 -- Nov 2005 114.00 Call (25) 2,850 -- Nov 2005 108.00 Put (12) 1,296 (4) Nov 2005 109.00 Put (53) 5,777 (43) Nov 2005 111.00 Put (25) 2,775 (63) --------------- Total Liability for Options Written (premiums received $169) (263) ===============
See accompanying notes which are an integral part of the financial statements. 130 Diversified Bond Fund FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands
FOREIGN CURRENCY EXCHANGE CONTRACTS UNREALIZED APPRECIATION AMOUNT AMOUNT SETTLEMENT (DEPRECIATION) SOLD BOUGHT DATE $ - ------------------- -------------------- ----------- -------------- USD 1,052 AUD 1,401 11/08/05 (4) USD 3,824 EUR 3,206 11/08/05 20 USD 6,070 EUR 5,071 11/08/05 10 USD 7,901 EUR 6,465 11/08/05 (150) USD 1,164 EUR 930 12/16/05 (47) USD 1,236 EUR 1,020 12/16/05 (11) USD 1,305 EUR 1,070 12/16/05 (19) USD 3,381 EUR 2,795 02/08/06 (12) USD 4,221 JPY 479,863 12/01/05 (84) USD 928 PLN 3,025 11/08/05 (13) AUD 1,401 USD 1,057 11/08/05 9 AUD 1,401 USD 1,048 02/08/06 4 CAD 100 USD 85 11/21/05 -- EUR 2,795 USD 3,363 11/08/05 12 EUR 3,119 USD 3,756 11/08/05 17 EUR 3,670 USD 4,437 11/08/05 37 EUR 5,071 USD 6,133 11/08/05 52 EUR 5,071 USD 6,102 02/08/06 (10) PLN 3,025 USD 884 11/08/05 (31) PLN 3,025 USD 927 02/08/06 13 -------------- Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts (207) ==============
INTEREST RATE SWAP CONTRACTS - ---------------------------------------------------------------------------------------------------------------------- MARKET COUNTER NOTIONAL TERMINATION VALUE PARTY AMOUNT FUND RECEIVES FUND PAYS DATE $ - ----------------------- -------------- -------------- -------------------- ---------------- ---------------- Barclays GBP 7,700 5.000% Six Month LIBOR 06/15/07 47 Barclays USD 2,100 4.000% Three Month LIBOR 12/15/07 (33) Barclays USD 8,500 4.000% Three Month LIBOR 12/15/10 (344) Consumer Price Index BNP Paribas EUR 1,300 2.090% (France) 10/15/10 -- Goldman USD 200 4.000% Three Month LIBOR 12/10/10 (8) Goldman USD 200 5.000% Three Month LIBOR 12/15/15 (1) Lehman GBP 4,200 4.500% Six Month LIBOR 09/20/09 (30) Lehman USD 8,200 4.000% Three Month LIBOR 12/15/10 (332) Merrill Lynch USD 6,200 4.000% Three Month LIBOR 12/15/07 (98) Merrill Lynch GBP 10,500 4.500% Six Month LIBOR 09/20/09 (75) Morgan Stanley USD 1,300 4.000% Three Month LIBOR 12/15/10 (53) ---------------- Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($487) (927) ================
See accompanying notes which are an integral part of the financial statements. Diversified Bond Fund 131 FRANK RUSSELL INVESTMENT COMPANY DIVERSIFIED BOND FUND PRESENTATION OF PORTFOLIO HOLDINGS -- OCTOBER 31, 2005 (UNAUDITED)
% OF NET CATEGORIES ASSETS - ----------------------------------------------------------------- Asset-Backed Securities 6.5 Corporate Bonds and Notes 14.6 International Debt 2.8 Mortgage-Backed Securities 46.4 Municipal Bonds 0.4 Non-US Bonds 0.3 United States Government Agencies 5.7 United States Government Treasuries 19.6 Preferred Stocks 0.1 Options Purchased --* Short-Term Investments 18.6 Other Securities 5.6 --------------- Total Investments 120.6 Other Assets and Liabilities, Net (20.6) --------------- 100.0 =============== Futures Contracts (0.2) Options Written (--*) Foreign Currency Exchange Contracts (--*) Interest Rate Swap Contracts (0.1)
* Less than .05% of net assets. See accompanying notes which are an integral part of the financial statements. 132 Diversified Bond Fund (This page intentionally left blank) FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- (GRAPHIC)
MULTISTRATEGY BOND - CLASS S LEHMAN BROTHERS AGGREGATE ** ---------------------------- ---------------------------- * 10000.00 10000.00 1996 10710.00 10585.00 1997 11686.00 11526.00 1998 12456.00 12602.00 1999 12622.00 12669.00 2000 13388.00 13594.00 2001 15085.00 15573.00 2002 15646.00 16490.00 2003 16975.00 17299.00 2004 17940.00 18256.00 2005 18183.00 18463.00
Multistrategy Bond Fund - Class S - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 1.35% 5 Years 6.31%S 10 Years 6.16%S
Multistrategy Bond Fund - Class E ++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 1.10% 5 Years 6.03%S 10 Years 5.96%S
Multistrategy Bond Fund - Class C ++++ - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 0.35% 5 Years 5.26%S 10 Years 5.44%S
Lehman Brothers Aggregate Bond Index** - ----------------------------------------------------------
PERIODS ENDED TOTAL 10/31/05 RETURN - ------------------------- ------------------------- 1 Year 1.13% 5 Years 6.31%S 10 Years 6.32%S
134 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- WHAT IS THE FUND'S INVESTMENT OBJECTIVE? The Fund seeks to provide current income, and as a secondary objective, capital appreciation. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005? For the fiscal year ended October 31, 2005, the Multistrategy Bond Fund Class S, Class E and Class C Shares gained 1.35%, 1.10% and 0.35%, respectively. This compared to the Lehman Brothers Aggregate Bond Index, which gained 1.13% during the same period. The Fund's performance includes operating expenses, whereas Index returns are unmanaged and do not include expenses of any kind. For the year ended October 31, 2005, the Lipper(R) BBB Rated Fixed Income Funds Average returned 1.22%. For the same period, the Lipper(R) Intermediate Investment Grade Debt Funds Average returned 0.81%. These returns serve as peer comparisons and are expressed net of operating expenses. HOW DID THE MARKET CONDITIONS DESCRIBED IN THE MARKET SUMMARY REPORT AFFECT THE FUND'S PERFORMANCE? Rising interest rates negatively impacted nominal returns, but helped the Fund's money managers to achieve excess returns relative to benchmark. The money managers positioned their portfolios to be underweight in short and intermediate maturity bonds, which contributed positively to Fund performance. Rising interest rates during the fiscal year pushed the yields of short and intermediate maturity bonds higher than the yields of longer-term maturity bonds. Yields for longer-term maturity bonds were held lower in part by strong demand for U.S. Treasury securities by Asian central banks. Given the inverse relationship between yields and prices, short and intermediate maturity bonds had lower returns than longer-term maturity bonds during the fiscal year. The credit downgrade in the bond ratings of auto manufacturers in the spring and early summer had a minimal impact on the Fund, as the Fund's money managers added value through security selection. Small exposures to emerging market and high yield sectors also contributed positively to Fund performance. WHAT WERE THE PRIMARY CONTRIBUTORS AND DETRACTORS TO THE FUND'S PERFORMANCE DURING THE LAST 12 MONTHS? The primary contributors to excess returns included the Fund's short duration positioning on the expectation that interest rates would rise and bond prices fall. In addition, the Fund's money managers held small exposures to the high yield and emerging market debt sectors, two sectors that outperformed during the fiscal year. A smaller exposure to investment grade corporates also helped Fund performance in the second half of the fiscal year, as credit downgrades within the auto sector impacted sentiment and pricing for the entire investment grade corporate sector. Non-dollar bonds were an additional source of value, primarily in the spring when interest rates fell by a greater amount in Europe than in the U.S. Finally, the Fund's positioning in mortgages also contributed positively to Fund performance. Specifically, the Fund was underweight in mortgages in the summer, when prices of the bonds declined relative to equivalent Treasuries. HOW DID THE INVESTMENT STRATEGIES AND TECHNIQUES EMPLOYED BY THE FUND AND ITS MONEY MANAGERS AFFECT ITS PERFORMANCE? Delaware Management Company continued to provide the best returns over the fiscal year. Delaware was rewarded for its view that high yield and emerging market debt would continue to do well. Delaware maintained a significant weight to those non-benchmark sectors. In addition, Delaware added value through security selection within those sectors. Morgan Stanley Investment Management, Inc. outperformed through its duration strategies. Having forecasted that interest rates would rise two years ago, Morgan Stanley was rewarded for maintaining its conviction and short duration position. Pacific Investment Management Company, LLC (PIMCO) contributed positively to Fund performance with its tactical allocations to non-dollar bonds and its correct forecast that European interest rates would fall further than U.S. rates in the spring. PIMCO also added value through select positions in emerging market debt. Finally, Bear Stearns Asset Management, Inc. also outperformed relative to benchmark, though it lagged behind the Fund's other money managers. Bear Stearns was negatively impacted by selling high yield and emerging market debt early in the year and purchasing relatively safer securities. DESCRIBE ANY CHANGES TO THE FUND'S STRUCTURE OR THE MONEY MANAGER LINE-UP. There were no changes in the Fund's structure or money manager line-up for the fiscal year ending October 31, 2005. Multistrategy Bond Fund 135 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND PORTFOLIO MANAGEMENT DISCUSSION -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- Money Managers as of Styles October 31, 2005 Bear Stearns Asset Management, Inc. Sector Rotation Delaware Management Company (a series of Delaware Management Business Trust) Sector Rotation Morgan Stanley Investment Management, Inc. Fully Discretionary Pacific Investment Management Company, LLC Fully Discretionary
The views expressed in this report reflect those of the portfolio managers only through the end of the period covered by the report. These views do not necessarily represent the views of Frank Russell Investment Management Company (FRIMCo), or any other person in FRIMCo or any other affiliated organization. These views are subject to change at any time based upon market conditions or other events, and FRIMCo disclaims any responsibility to update the views contained herein. These views should not be relied on as investment advice and, because investment decisions for a Frank Russell Investment Company (FRIC) Fund are based on numerous factors, should not be relied on as an indication of investment decisions of any FRIC Fund. -------------------- * Multistrategy Bond Fund Class S assumes initial investment on November 1, 1995. ** Lehman Brothers Aggregate Bond Index is composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indexes are rebalanced monthly by market capitalization. ++ Multistrategy Bond Fund Class S performance has been linked with Class E to provide historical perspective. For the period September 11, 1998 (commencement of sale) through the current period, Class E paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. ++++ Multistrategy Bond Fund Class S and Class E performance has been linked with Class C to provide historical perspective. From January 27, 1999 (commencement of sale) through the current period, Class C paid shareholder service and Rule 12b-1 distribution fees. Total return would have been lower had these fees been in effect during prior reporting periods. sec. Annualized. Performance is historical and assumes reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than when purchased. Past performance is not indicative of future results. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 136 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SHAREHOLDER EXPENSE EXAMPLE -- OCTOBER 31, 2005 (UNAUDITED) - -------------------------------------------------------------------------------- FUND EXPENSES THE FOLLOWING DISCLOSURE PROVIDES IMPORTANT INFORMATION REGARDING EACH FUND'S EXPENSE EXAMPLE, WHICH APPEARS ON EACH FUND'S INDIVIDUAL PAGE IN THIS ANNUAL REPORT. PLEASE REFER TO THIS INFORMATION WHEN REVIEWING THE EXPENSE EXAMPLE FOR A FUND. EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory and administrative fees; distribution and/or service (12b-1) fees; and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from May 1, 2005 to October 31, 2005. ACTUAL EXPENSES The information in the table under the heading "Actual Performance" provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The information in the table under the heading "Hypothetical Performance (5% return before expenses)" provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading "Hypothetical Performance (5% return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS C PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 997.10 $ 1,015.73 Expenses Paid During Period* $ 9.46 $ 9.55
* Expenses are equal to the Fund's annualized expense ratio of 1.88% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN CLASS E PERFORMANCE BEFORE EXPENSES) - ------- -------------- ---------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,000.80 $ 1,019.51 Expenses Paid During Period* $ 5.70 $ 5.75
* 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 184/365 (to reflect the one-half year period).
HYPOTHETICAL PERFORMANCE ACTUAL (5% RETURN BEFORE CLASS S PERFORMANCE EXPENSES) - ------- -------------- ----------------- Beginning Account Value May 1, 2005 $ 1,000.00 $ 1,000.00 Ending Account Value October 31, 2005 $ 1,002.00 $ 1,020.77 Expenses Paid During Period* $ 4.44 $ 4.48
* Expenses are equal to the Fund's annualized expense ratio of 0.88% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Multistrategy Bond Fund 137 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- LONG-TERM INVESTMENTS - 86.8% Asset-Backed Securities - 6.9% AAA Trust (p) Series 2005-2 Class A1 4.151% due 11/26/35 1,566 1,566 Aames Mortgage Investment Trust Series 2005-2 Class 1A1 4.118% due 07/25/35 106 106 ABSC NIMs Trust (A) Series 2004-HE1 Class A 7.000% due 01/17/34 26 26 ACE Securities Corp. Series 2004-OP1 Class M2 5.088% due 04/25/34 1,580 1,603 Aegis Asset Backed Securities Trust (E) Series 2005-4 Class 1A1 4.148% due 10/25/35 2,106 2,106 Alliance Capital Funding LLC (A) Series 1998-1 Class A3 5.840% due 02/15/10 53 52 American Airlines, Inc. 6.817% due 05/23/11 380 341 American Express Credit Account Master Trust Series 2002-1 Class A 4.080% due 09/15/09 1,600 1,602 Series 2002-2 Class A 4.080% due 11/16/09 2,175 2,179 Series 2002-3 Class A (E) 4.080% due 12/15/09 3,500 3,506 Ameriquest Mortgage Securities, Inc. Series 2002-D Class M1 6.538% due 02/25/33 450 454 Series 2005-R4 Class A2B (E) 4.178% due 07/25/35 1,625 1,625 Argent Securities, Inc. Series 2004-W3 Class A2 4.258% due 02/25/34 316 316 Asset Backed Funding Certificates Series 2004-OPT Class A2 (E) 4.228% due 06/25/25 361 361 Series 2005-WF1 Class A2A 4.118% due 01/25/35 823 823 BA Master Credit Card Trust Series 1999-C Class A 4.220% due 08/15/08 2,000 2,004 Barclays Bank PLC 6.278% due 12/15/34 420 400 Bear Stearns Asset Backed Securities, Inc. (E) Series 2004-BO1 Class 1A1 4.238% due 09/25/34 1,128 1,128
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2005-HE8 Class A1 4.158% due 08/25/35 1,241 1,241 Burlington Northern and Santa Fe Railway Co. 4.575% due 01/15/21 210 202 Capital Auto Receivables Asset Trust Series 2003-2 Class A3A 1.440% due 02/15/07 204 203 Series 2003-3 Class A3B (E) 4.050% due 01/15/08 1,000 1,001 Series 2004-2 Class A2 3.350% due 02/15/08 900 886 Capital One Auto Finance Trust Series 2005-C Class A3 4.610% due 07/15/10 1,140 1,137 Carrington Mortgage Loan Trust Series 2005-NC3 Class A1A 4.118% due 06/25/35 1,486 1,486 Series 2005-NC4 Class A1 (E) 4.188% due 09/25/35 1,784 1,784 Series 2005-OPT Class A1A 4.128% due 05/25/35 712 713 Cendant Timeshare Receivables Funding LLC (A) Series 2004-1A Class A1 3.670% due 05/20/16 258 251 Chancellor/Triton CBO, Ltd. (A) Series 1998-1A Class A1 6.710% due 08/05/10 248 250 Citibank Credit Card Issuance Trust Series 2000-A3 Class A3 6.875% due 11/16/09 900 937 Series 2005-A7 Class A7 4.750% due 10/22/12 1,100 1,094 Citifinancial Mortgage Securities, Inc. Series 2003-3 Class AF2 3.082% due 08/25/33 260 258 Series 2003-4 Class AF3 3.221% due 10/25/33 370 366 Conseco Finance (E) Series 2000-C Class A 4.340% due 12/15/29 445 445 Countrywide Asset-Backed Certificates Series 2004-10 Class AF2 3.323% due 05/25/22 920 915 Series 2004-13 Class AF2 3.683% due 08/25/24 695 684
138 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2004-1NI Class NOTE (A) 6.000% due 05/25/34 47 47 Series 2004-7 Class AF2 3.324% due 12/25/23 1,310 1,305 Series 2004-9 Class AF2 3.337% due 09/25/23 625 621 Series 2004-BC1 Class M1 4.538% due 02/25/34 545 546 Series 2004-S1 Class A2 3.872% due 03/25/20 745 731 Series 2005-12 Class 2A2 4.898% due 06/25/32 1,420 1,411 Series 2005-3 Class AF1A 4.158% due 08/25/35 525 525 Credit-Based Asset Servicing and Securitization Series 2005-CB4 Class AV1 4.138% due 08/25/35 1,600 1,600 Series 2005-CB5 Class AV1 (E) 4.148% due 08/25/35 2,028 2,028 Entergy Gulf States, Inc. 4.270% due 12/01/09 335 329 Equifirst Mortgage Loan Trust Series 2005-1 Class A1 4.098% due 04/25/35 1,157 1,157 FHA 221D4 7.430% due 07/02/22 96 97 First Franklin Mortgage Loan Asset Backed Certificates Series 2005-FF7 Class A2 4.138% due 07/25/35 1,673 1,673 GE Capital Credit Card Master Note Trust (E) Series 2004-1 Class A (N) 4.020% due 06/15/10 800 801 Series 2004-2 Class A 4.010% due 09/15/10 1,950 1,952 GE Dealer Floorplan Master Note Trust (E) Series 2004-1 Class A 4.050% due 07/20/08 1,050 1,050 GMAC Mortgage Corp. Loan Trust Series 2004-HE4 Class A1 (E) 4.148% due 03/25/35 1,300 1,301 Series 2004-HE5 Class A3 3.970% due 09/25/34 1,570 1,543 Golden Tree High Yield Opportunities, LP Series 2000-1 Class C1 9.404% due 10/31/07 1,100 1,115 GSAA Trust (A) Series 2004-4N Class NOTE 6.250% due 05/25/34 252 252
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- GSAMP Trust Series 2004-NC1 Class A3 4.428% due 03/25/34 980 982 Series 2005-AHL Class A1 4.128% due 04/25/35 720 720 Series 2005-HE4 Class A2A (E) 4.158% due 07/25/45 2,331 2,331 Harley-Davidson Motorcycle Trust Series 2004-2 Class A1 2.180% due 01/15/09 619 613 HFC Home Equity Loan Asset Backed Certificates Series 2003-1 Class A 4.350% due 10/20/32 480 481 Home Equity Asset Trust Series 2004-3 Class M3 5.488% due 08/25/34 1,060 1,076 Honda Auto Receivables Owner Trust Series 2004-2 Class A2 2.520% due 02/15/07 499 497 IXIS Real Estate Capital Trust Series 2005-HE2 Class A1 4.118% due 09/25/35 1,018 1,018 Lehman XS Trust Series 2005-1 Class 2A2 4.660% due 05/25/08 1,326 1,343 Long Beach Mortgage Loan Trust Series 2003-2 Class M2 5.938% due 06/25/33 1,555 1,574 Series 2005-1 Class 2A1 4.178% due 02/25/35 764 764 Series 2005-2 Class 2A1 4.118% due 04/25/35 1,037 1,038 Mastr Asset Backed Securities Trust Series 2005-OPT Class A3 4.128% due 03/25/35 819 819 MBNA Credit Card Master Note Trust Series 2002-A10 Class A10 4.110% due 02/16/10 1,700 1,704 Series 2005-A3 Class A3 4.100% due 10/15/12 685 664 MBNA Master Credit Card Trust USA Series 2000-D Class A (E) 4.170% due 09/15/09 2,425 2,432 Series 2000-E Class A 7.800% due 10/15/12 600 673 Merrill Auto Trust Securitization (E) Series 2005-1 Class A2B 4.048% due 04/25/08 3,200 3,200
Multistrategy Bond Fund 139 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Merrill Lynch Mortgage Investors, Inc.(A) Series 2003-WM1 Class N1 7.000% due 11/25/33 20 20 Series 2004-HE2 Class A2A (E) 4.238% due 08/25/35 260 260 Series 2004-WMC Class A2B1 (E) 4.218% due 07/25/35 70 70 Series 2005-SL1 Class A (E) 4.238% due 06/25/35 1,022 1,022 Series 2005-WMC Class A2A 4.138% due 09/25/35 375 375 Mid-State Trust Series 2003-11 Class A1 4.864% due 07/15/38 172 161 Series 2004-1 Class A 6.005% due 08/15/37 232 237 New Century Home Equity Loan Trust Series 2004-4 Class A3 4.178% due 02/25/35 521 521 Series 2004-A Class AII1 (E) 4.218% due 08/25/34 135 135 Novastar Home Equity Loan Series 2004-4 Class A2B 4.378% due 03/25/35 1,020 1,022 Series 2005-1 Class A2A 4.158% due 06/25/35 1,551 1,552 Option One Mortgage Loan Trust Series 2003-2 Class M2 5.738% due 04/25/33 1,250 1,264 Series 2003-3 Class M3 6.038% due 06/25/33 775 785 Series 2003-4 Class M2 5.688% due 07/25/33 730 739 Series 2005-4 Class A3 (E) 4.140% due 11/25/35 1,605 1,605 Ownit Mortgage Loan Asset Backed Certificates Series 2005-2 Class A2A 4.148% due 03/25/36 880 880 Park Place Securities, Inc. Series 2005-WHQ Class A2A 4.118% due 06/25/35 1,339 1,338 Popular ABS Mortgage Pass-Through Trust Series 2005-1 Class AF2 3.914% due 05/25/35 445 438 Power Contract Financing LLC (A) 6.256% due 02/01/10 450 457 Premium Asset Trust (A) 4.169% due 02/02/07 780 780 Quest Trust (E)(A) Series 2005-X2 Class A1 4.118% due 10/25/35 1,045 1,045
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Renaissance Home Equity Loan Trust Series 2004-4 Class AF2 3.856% due 02/25/35 765 754 Series 2005-2 Class AF2 4.361% due 08/25/35 1,385 1,366 Residential Asset Mortgage Products, Inc. Series 2004-RS1 Class AI2 3.620% due 07/25/26 670 664 Series 2004-RS1 Class AII2 4.268% due 12/25/34 725 726 Series 2004-RS8 Class AI2 3.810% due 01/25/26 780 776 Series 2004-RS8 Class AII1 (E) 4.178% due 05/25/26 831 831 Series 2004-RZ2 Class AI3 4.300% due 01/25/31 480 475 Series 2005-RS1 Class AII1 4.148% due 01/25/35 682 682 Residential Asset Securities Corp. Series 2001-KS3 Class AII 4.268% due 09/25/31 429 429 Series 2003-KS1 Class M2 5.788% due 01/25/33 1,035 1,042 Series 2004-KS8 Class AI2 3.340% due 10/25/24 1,915 1,891 Series 2004-KS9 Class AI1 (E) 4.208% due 07/25/21 149 149 Sankaty Market Value CDO (A) Series 2001-3 Class B1 7.379% due 04/30/09 480 487 Saxon Asset Securities Trust Series 2005-1 Class A2A 4.148% due 05/25/35 533 533 Series 2005-1 Class A2B 4.258% due 05/25/35 905 906 Series 2005-2 Class A2A 4.128% due 09/25/35 1,687 1,687 Sears Credit Account Master Trust (E) Series 2002-5 Class A 4.350% due 11/17/09 3,600 3,600 Sharps SP I LLC 6.850% due 03/01/23 59 59 7.000% due 01/25/34 157 157 Sharps SP I LLC Net Interest Margin Trust (A) Series 2004-HE1 Class N 6.900% due 11/25/33 20 20
140 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- SLM Student Loan Trust (E) Series 2004-1 Class A1 4.240% due 01/26/15 294 295 Series 2004-6 Class A2 4.240% due 01/25/13 261 262 Series 2004-9 Class A2 4.220% due 10/25/12 1,174 1,172 Small Business Administration Series 2000-P10 Class 1 7.449% due 08/01/10 148 158 Small Business Administration Participation Certificates 7.500% due 04/01/17 2,006 2,115 Specialty Underwriting & Residential Finance Series 2005-BC2 Class A2A 4.138% due 12/25/35 910 910 Structured Asset Investment Loan Trust Series 2003-BC8 Class M3 6.138% due 08/25/33 1,200 1,219 Series 2005-2 Class A2 4.158% due 03/25/35 696 696 Series 2005-5 Class A6 4.128% due 06/25/35 1,190 1,190 Series 2005-HE1 Class A1 4.138% due 07/25/35 2,130 2,129 Structured Asset Securities Corp. Series 2001-SB1 Class A2 3.375% due 08/25/31 585 534 Series 2004-19X Class A2 4.370% due 10/25/34 2,125 2,106 Series 2005-GEL Class A (E) 4.388% due 12/25/34 2,149 2,149 Series 2005-WMC Class A1 4.118% due 01/25/35 1,080 1,080 Tenaska Alabama II Partners, LP (A) 6.125% due 03/30/23 480 482 Terwin Mortgage Trust Series 2004-22S Class A 4.428% due 11/25/35 750 751 Series 2005-8HE Class A1 (E)(A) 4.158% due 07/25/35 1,470 1,470 TXU Electric Delivery Transition Bond Co. Series 2004-1 Class A2 4.810% due 11/17/14 300 296 United Airlines, Inc. (o) 7.730% due 07/01/10 510 492 USAA Auto Owner Trust Series 2004-2 Class A2 2.410% due 02/15/07 123 123 Wachovia Auto Owner Trust Series 2004-B Class A2 2.400% due 05/21/07 377 375
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Wells Fargo Home Equity Trust Series 2004-2 Class A31 4.198% due 06/25/19 4 4 World Financial Properties (A) 6.910% due 09/01/13 675 710 6.950% due 09/01/13 199 209 World Omni Auto Receivables Trust Series 2004-A Class A2 2.580% due 07/12/07 335 334 ------------ 129,265 ------------ Corporate Bonds and Notes - 13.2% Abitibi-Consolidated Finance, LP 7.875% due 08/01/09 870 847 AIG SunAmerica Global Financing VI (A) 6.300% due 05/10/11 1,230 1,302 Albertson's, Inc. 8.000% due 05/01/31 945 865 Amerada Hess Corp. 6.650% due 08/15/11 410 436 7.300% due 08/15/31 525 593 American Electric Power Co., Inc. Series C 5.375% due 03/15/10 100 101 American General Finance Corp. Series MTNG 4.000% due 03/23/07 300 300 Series MTNH 4.625% due 09/01/10 45 44 Series MTNI 4.625% due 05/15/09 220 217 American International Group, Inc.(A) 4.700% due 10/01/10 (N) 1,100 1,080 5.050% due 10/01/15 1,100 1,075 5.050% due 10/01/15 300 293 American RE Corp. Series B 7.450% due 12/15/26 1,155 1,258 AmerisourceBergen Corp. (A) 5.625% due 09/15/12 1,245 1,198 Arizona Public Service Co. 6.750% due 11/15/06 180 183 5.800% due 06/30/14 365 373 5.500% due 09/01/35 625 577 AT&T Corp. 9.050% due 11/15/11 85 94 9.750% due 11/15/31 580 706
Multistrategy Bond Fund 141 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Atmos Energy Corp. 4.525% due 10/15/07 575 575 Autonation, Inc. 9.000% due 08/01/08 275 297 Avista Capital Trust III 6.500% due 04/01/34 980 981 Avista Corp. 7.750% due 01/01/07 55 57 9.750% due 06/01/08 610 669 Axa Financial, Inc. 6.500% due 04/01/08 215 223 BAE Systems Holdings, Inc. (A) 6.400% due 12/15/11 2,930 3,083 Bank of America Corp. 7.800% due 02/15/10 460 508 BellSouth Corp. 4.200% due 09/15/09 710 689 6.550% due 06/15/34 135 139 6.000% due 11/15/34 (N) 125 120 Boeing Capital Corp. (N) 6.100% due 03/01/11 315 331 Bowater, Inc. 9.000% due 08/01/09 685 695 Burlington Northern Santa Fe Corp. 6.875% due 12/01/27 55 62 6.750% due 03/15/29 110 123 Campbell Soup Co. (N) 5.875% due 10/01/08 430 441 Carolina Power & Light Co. 6.500% due 07/15/12 50 53 Caterpillar Financial Services Corp. Series MTNF 3.890% due 08/20/07 (E) 470 471 3.625% due 11/15/07 160 156 CC Funding Trust I 6.900% due 02/16/07 380 389 CenterPoint Energy Houston Electric LLC Series J2 5.700% due 03/15/13 470 480 CenterPoint Energy Resources Corp. Series B 7.875% due 04/01/13 1,360 1,536 Centex Corp. 4.500% due 08/01/07 686 687 Cincinnati Gas & Electric 5.700% due 09/15/12 210 214 Cingular Wireless Services, Inc. 7.875% due 03/01/11 100 112 8.750% due 03/01/31 165 215 CIT Group, Inc. 5.750% due 09/25/07 345 350 3.650% due 11/23/07 260 254 6.875% due 11/01/09 140 149
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Citicorp Series MTNF 6.375% due 11/15/08 265 276 Citigroup Global Markets Holdings, Inc. Series MTNM 3.816% due 03/07/08 1,800 1,799 Citigroup, Inc. 4.200% due 12/20/07 3,600 3,555 3.500% due 02/01/08 3,110 3,023 4.625% due 08/03/10 1,080 1,062 6.000% due 02/21/12 305 320 5.625% due 08/27/12 705 724 4.700% due 05/29/15 815 781 5.875% due 02/22/33 1,445 1,440 Citizens Communications Co. 9.250% due 05/15/11 675 731 Clear Channel Communications, Inc. 5.750% due 01/15/13 275 266 Clorox Co. 3.982% due 12/14/07 595 596 4.200% due 01/15/10 525 511 5.000% due 01/15/15 340 334 Columbus Southern Power Co. Series A 5.500% due 03/01/13 315 318 Comcast Cable Communications 8.375% due 05/01/07 705 739 6.750% due 01/30/11 1,020 1,077 Comcast Corp. 7.625% due 02/15/08 100 105 Consolidated Natural Gas Co. 5.000% due 12/01/14 395 382 Series C 6.250% due 11/01/11 155 163 Consumers Energy Co. Series F 4.000% due 05/15/10 175 166 Series H 4.800% due 02/17/09 325 321 Continental Airlines, Inc. Series 01-1 6.503% due 06/15/11 550 525 Corrections Corp. of America 7.500% due 05/01/11 235 243 Countrywide Home Loans, Inc. 3.250% due 05/21/08 645 618
142 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series MTNK 5.500% due 02/01/07 135 136 COX Communications, Inc. 4.625% due 01/15/10 870 840 Credit Suisse First Boston USA, Inc. 4.625% due 01/15/08 200 199 6.500% due 01/15/12 215 230 5.500% due 08/15/13 230 233 CSC Holdings, Inc. 10.500% due 05/15/16 (N) 350 375 Series B 8.125% due 07/15/09 315 322 DaimlerChrysler NA Holding Corp. 8.500% due 01/18/31 165 194 Series MTND 4.132% due 11/17/06 2,800 2,802 Series MTNE (E) 4.780% due 10/31/08 850 850 Darden Restaurants, Inc. 6.000% due 08/15/35 190 175 Detroit Edison Co. 6.125% due 10/01/10 305 318 6.350% due 10/15/32 275 288 Developers Diversified Realty Corp. 4.625% due 08/01/10 776 750 5.375% due 10/15/12 370 363 Devon Financing Corp. ULC 6.875% due 09/30/11 420 455 Dominion Resources, Inc. Series A 7.195% due 09/15/14 641 706 Series B 4.300% due 09/28/07 (E) 895 895 6.250% due 06/30/12 120 125 DPL, Inc. 6.875% due 09/01/11 680 721 DR Horton, Inc. 5.625% due 01/15/16 935 871 Dresdner Funding Trust I (A) 8.151% due 06/30/31 1,145 1,359 Duke Energy Field Services LLC 5.750% due 11/15/06 80 81 6.875% due 02/01/11 60 64 E*Trade Financial Corp. 8.000% due 06/15/11 350 355 8.000% due 06/15/11 (A) 970 985 Echostar DBS Corp. 6.375% due 10/01/11 595 579 6.625% due 10/01/14 95 92 El Paso Corp. 6.950% due 12/15/07 2,600 2,616 El Paso Natural Gas Co. Series A 7.625% due 08/01/10 225 236
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Eli Lilly & Co. 6.770% due 01/01/36 1,170 1,375 Entergy Gulf States, Inc. 3.600% due 06/01/08 120 115 Enterprise Products Operating, LP 4.000% due 10/15/07 700 685 4.625% due 10/15/09 780 757 EOP Operating, LP 4.750% due 03/15/14 70 66 7.500% due 04/19/29 297 334 Erac USA Finance Co. (A) 7.350% due 06/15/08 730 769 Exelon Corp. 6.750% due 05/01/11 215 227 Farmers Exchange Capital (A) 7.050% due 07/15/28 2,140 2,163 Farmers Insurance Exchange (A) 6.000% due 08/01/14 570 569 8.625% due 05/01/24 1,140 1,347 FedEx Corp. 2.650% due 04/01/07 220 213 7.600% due 07/01/97 225 263 Financing Corp. Principal Only STRIP Series 10P Zero coupon due 11/30/17 2,700 1,475 Series 15P Zero coupon due 03/07/19 390 199 Series 2P Zero coupon due 11/30/17 1,180 645 FirstEnergy Corp. Series B 6.450% due 11/15/11 2,540 2,672 Series C 7.375% due 11/15/31 345 393 Ford Motor Co. 7.450% due 07/16/31 3,165 2,326 7.700% due 05/15/97 1,075 723 Ford Motor Credit Co. 4.050% due 03/13/07 2,250 2,106 4.830% due 09/28/07 1,400 1,340 6.625% due 06/16/08 780 748 5.625% due 10/01/08 481 449 5.700% due 01/15/10 551 496 7.875% due 06/15/10 300 289 7.375% due 02/01/11 1,605 1,507 7.000% due 10/01/13 505 462 FPL Group Capital, Inc. 4.086% due 02/16/07 486 482
Multistrategy Bond Fund 143 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- General Electric Capital Corp. 3.836% due 01/15/08 700 700 4.125% due 03/04/08 1,995 1,964 4.875% due 10/21/10 3,430 3,408 Series MTNA 4.250% due 12/01/10 180 175 5.875% due 02/15/12 120 125 4.750% due 09/15/14 (N) 80 78 6.750% due 03/15/32 465 532 General Motors Acceptance Corp. 5.050% due 01/16/07 1,500 1,479 5.100% due 07/16/07 791 773 6.875% due 09/15/11 420 407 6.750% due 12/01/14 1,300 1,243 8.000% due 11/01/31 1,285 1,327 General Motors Corp. 8.375% due 07/15/33 2,140 1,586 Georgia-Pacific Corp. 8.125% due 05/15/11 1,000 1,085 8.875% due 05/15/31 985 1,120 Glencore Funding LLC (A) 6.000% due 04/15/14 1,370 1,262 Glencore Nickel Ltd. (O) 9.000% due 12/01/14 305 -- Golden West Financial Corp. 4.125% due 08/15/07 360 356 Goldman Sachs Group, Inc. 6.875% due 01/15/11 1,730 1,859 6.600% due 01/15/12 150 160 5.250% due 10/15/13 425 420 6.345% due 02/15/34 955 958 Hartford Financial Services Group, Inc. 7.900% due 06/15/10 80 89 HCA, Inc. 5.500% due 12/01/09 1,000 974 7.875% due 02/01/11 50 53 6.950% due 05/01/12 395 402 7.500% due 12/15/23 400 392 Health Net, Inc. 9.875% due 04/15/11 655 760 Hertz Corp. 7.400% due 03/01/11 135 135 7.625% due 06/01/12 390 390 Historic TW, Inc. 8.180% due 08/15/07 1,553 1,635 9.125% due 01/15/13 835 997 8.050% due 01/15/16 1,490 1,716 HJ Heinz Finance Co. 6.000% due 03/15/12 320 332 6.750% due 03/15/32 250 275 Household Finance Corp. 4.125% due 12/15/08 175 171 5.875% due 02/01/09 660 676 4.750% due 05/15/09 1,570 1,553
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 4.125% due 11/16/09 270 261 8.000% due 07/15/10 165 184 6.375% due 11/27/12 1,120 1,185 HSBC Finance Corp. 4.000% due 09/15/08 (E) 700 700 4.625% due 09/15/10 600 586 Hyatt Equities LLC (A) 6.875% due 06/15/07 435 442 ICI Wilmington, Inc. 4.375% due 12/01/08 210 205 IKON Office Solutions, Inc. (A) 7.750% due 09/15/15 360 341 International Lease Finance Corp. 6.375% due 03/15/09 350 363 International Paper Co. 5.500% due 01/15/14 905 877 Interpublic Group of Cos., Inc. 5.400% due 11/15/09 285 265 ITT Industries, Inc. 7.400% due 11/15/25 455 531 JC Penney Co., Inc. 7.375% due 08/15/08 460 482 7.400% due 04/01/37 380 400 John Hancock Financial Services, Inc. 5.625% due 12/01/08 120 122 John Hancock Global Funding II (A) 7.900% due 07/02/10 440 494 Jones Apparel Group, Inc. 4.250% due 11/15/09 446 419 JP Morgan & Co., Inc. Series MTNA 6.000% due 01/15/09 495 509 JPMorgan Chase & Co. 5.350% due 03/01/07 160 161 6.000% due 02/15/09 170 175 7.000% due 11/15/09 65 70 6.750% due 02/01/11 235 251 6.625% due 03/15/12 95 102 5.150% due 10/01/15 775 755 Kellogg Co. Series B 6.600% due 04/01/11 2,535 2,716 KeySpan Corp. 7.625% due 11/15/10 525 584 Knight Ridder, Inc. 5.750% due 09/01/17 535 510
144 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Kraft Foods, Inc. 5.250% due 06/01/07 170 171 4.125% due 11/12/09 2,227 2,151 5.625% due 11/01/11 2,935 3,000 6.500% due 11/01/31 (N) 170 183 Kroger Co. (The) 7.250% due 06/01/09 270 285 8.000% due 09/15/29 210 233 7.500% due 04/01/31 255 269 Lear Corp. Series B 8.110% due 05/15/09 290 273 Lehman Brothers Holdings, Inc. 6.625% due 01/18/12 1,155 1,241 Levi Strauss & Co. 12.250% due 12/15/12 540 593 Liberty Media Corp. 5.700% due 05/15/13 975 880 Limited Brands 6.950% due 03/01/33 315 298 Lockheed Martin Corp. 8.500% due 12/01/29 255 343 Lodgenet Entertainment Corp. 9.500% due 06/15/13 450 487 Lubrizol Corp. 4.625% due 10/01/09 581 566 M&I Marshall & Ilsley Bank Series BKNT 3.800% due 02/08/08 755 738 Manufacturers & Traders Trust Co. 8.000% due 10/01/10 220 250 Marsh & McLennan Cos., Inc. 5.375% due 03/15/07 1,130 1,133 4.270% due 07/13/07 580 577 5.150% due 09/15/10 775 762 5.375% due 07/15/14 550 527 5.750% due 09/15/15 430 418 5.875% due 08/01/33 (N) 340 304 May Department Stores Co. (The) 4.800% due 07/15/09 195 192 5.750% due 07/15/14 515 515 MBNA America Bank NA 7.125% due 11/15/12 85 94 MBNA Corp. 4.163% due 05/05/08 585 590 6.125% due 03/01/13 405 426 MCI, Inc. 6.908% due 05/01/07 1,440 1,454 7.688% due 05/01/09 465 482 Medco Health Solutions, Inc. 7.250% due 08/15/13 1,277 1,383 Metlife, Inc. 5.000% due 06/15/15 520 505 5.700% due 06/15/35 130 126
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- MGM Mirage 9.750% due 06/01/07 845 887 Midamerican Funding LLC 6.750% due 03/01/11 540 577 Miller Brewing Co. (A) 4.250% due 08/15/08 445 436 5.500% due 08/15/13 705 711 Mohawk Industries, Inc. Series D 7.200% due 04/15/12 220 241 Monumental Global Funding, Ltd. (A) 4.625% due 03/15/10 320 317 Morgan Stanley 5.050% due 01/21/11 455 451 6.750% due 04/15/11 1,160 1,244 4.750% due 04/01/14 875 825 5.375% due 10/15/15 935 923 Motorola, Inc. 4.608% due 11/16/07 1,378 1,371 Natexis Ambs Co. LLC (f)(A) 8.440% due 12/29/49 430 465 National Rural Utilities Cooperative Finance Corp. 5.750% due 08/28/09 200 205 Nationwide Financial Services 6.250% due 11/15/11 395 418 Nationwide Mutual Insurance Co. 7.875% due 04/01/33 (A) 867 1,030 Neiman-Marcus Group, Inc. (N)(A) 10.375% due 10/15/15 705 680 News America Holdings 7.750% due 12/01/45 290 327 7.900% due 12/01/95 410 461 8.250% due 10/17/96 135 159 News America, Inc. 7.125% due 04/08/28 75 79 6.750% due 01/09/38 65 68 Nextel Communications, Inc. Series E 6.875% due 10/31/13 955 999 Nisource Finance Corp. 4.393% due 11/23/09 370 371 7.875% due 11/15/10 735 817 Norfolk Southern Corp. 7.350% due 05/15/07 320 331 7.050% due 05/01/37 280 327 7.900% due 05/15/97 930 1,153 North Front Pass-Through Trust (A) 5.810% due 12/15/24 1,700 1,682
Multistrategy Bond Fund 145 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Northrop Grumman Corp. 4.079% due 11/16/06 155 154 Occidental Petroleum Corp. 9.250% due 08/01/19 285 382 Ohio Power Co. Series F 5.500% due 02/15/13 55 56 Pacific Gas & Electric Co. 3.600% due 03/01/09 325 311 4.200% due 03/01/11 795 757 6.050% due 03/01/34 565 568 Panhandle Eastern Pipe Line Series B 2.750% due 03/15/07 125 121 Pemex Project Funding Master Trust 7.375% due 12/15/14 385 421 8.625% due 02/01/22 1,165 1,392 6.625% due 06/15/35 (A) 205 197 Pepco Holdings, Inc. 5.500% due 08/15/07 970 978 Platinum Underwriters Finance, Inc. Series B 7.500% due 06/01/17 445 445 Popular North America Capital Trust I 6.564% due 09/15/34 807 808 Progress Energy, Inc. 7.100% due 03/01/11 720 770 6.850% due 04/15/12 90 96 7.000% due 10/30/31 620 657 Prudential Holdings LLC (A) Series FSA 7.245% due 12/18/23 155 182 PSEG Energy Holdings LLC 7.750% due 04/16/07 1,645 1,670 8.625% due 02/15/08 230 239 Quest Diagnostics, Inc. (A) 5.125% due 11/01/10 370 369 Qwest Capital Funding, Inc. 7.000% due 08/03/09 65 64 6.500% due 11/15/18 30 25 Qwest Corp. 7.875% due 09/01/11 995 1,042 7.625% due 06/15/15 (p) 1,000 1,025 Qwest Services Corp. 13.500% due 12/15/10 925 1,057 Rabobank Capital Funding II (f)(A) 5.260% due 12/31/49 815 807 Raytheon Co. 8.300% due 03/01/10 125 140 RBS Capital Trust I (f) 5.512% due 09/29/49 1,550 1,524 Reckson Operating Partnership, LP 5.150% due 01/15/11 310 304
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Residential Capital Corp. 6.375% due 06/30/10 (A) 1,150 1,168 6.875% due 06/30/15 1,220 1,285 Safeway, Inc. (N) 5.800% due 08/15/12 110 110 7.250% due 02/01/31 265 272 SBC Communications, Inc. 4.125% due 09/15/09 610 587 5.100% due 09/15/14 635 613 6.450% due 06/15/34 40 41 6.150% due 09/15/34 1,177 1,150 SCANA Corp. 4.020% due 03/01/08 881 881 Sealed Air Corp. (A) 5.625% due 07/15/13 630 615 Sempra Energy 4.621% due 05/17/07 1,347 1,340 4.290% due 05/21/08 831 833 SESI LLC 8.875% due 05/15/11 365 382 SLM Corp. 4.000% due 01/15/10 540 520 Smurfit-Stone Container Enterprises, Inc. 9.250% due 02/01/08 280 285 9.750% due 02/01/11 1,190 1,190 Solar Capital Corp. (A) 9.125% due 08/15/13 660 670 Southern California Edison Co. 3.925% due 12/13/07 921 921 7.625% due 01/15/10 260 283 6.000% due 01/15/34 531 546 Southern Peru Copper Corp. (A) 7.500% due 07/27/35 1,355 1,297 Sprint Capital Corp. 6.375% due 05/01/09 265 275 8.375% due 03/15/12 2,020 2,331 6.875% due 11/15/28 775 826 8.750% due 03/15/32 1,633 2,112 St. Paul Travelers Cos., Inc. (The) 5.010% due 08/16/07 1,400 1,396 Starwood Hotels & Resorts Worldwide, Inc. 7.375% due 05/01/07 65 67 TCI Communications, Inc. 7.875% due 02/15/26 145 165 TECO Energy, Inc. (N) 7.200% due 05/01/11 490 512
146 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Tele-Communications-TCI Group 9.800% due 02/01/12 990 1,198 7.875% due 08/01/13 2,130 2,400 Temple-Inland, Inc. 5.003% due 05/17/07 761 757 Tenaska Alabama Partners, LP (A) 7.000% due 06/30/21 324 329 Tenet Healthcare Corp. (N) 7.375% due 02/01/13 115 102 Tesoro Corp. 8.000% due 04/15/08 725 754 Texas Eastern Transmission, LP 7.000% due 07/15/32 180 205 Texas Genco LLC (A) 6.875% due 12/15/14 1,320 1,412 Time Warner Entertainment Co., LP Series* 8.375% due 03/15/23 426 501 Time Warner Telecom LLC 9.750% due 07/15/08 635 645 Time Warner, Inc. 6.750% due 04/15/11 2,435 2,572 Travelers Property Casualty Corp. (N) 5.000% due 03/15/13 250 242 Trimas Corp. 9.875% due 06/15/12 390 316 Twin Reefs Pass-Through Trust (f)(A) 4.935% due 12/10/49 900 898 TXU Corp. Series O 4.800% due 11/15/09 755 715 Series P 5.550% due 11/15/14 1,805 1,659 TXU Energy Co. LLC 7.000% due 03/15/13 436 454 Tyson Foods, Inc. 8.250% due 10/01/11 280 316 Union Pacific Corp. 6.625% due 02/01/08 265 274 6.650% due 01/15/11 145 154 6.125% due 01/15/12 800 839 Series MTNE 6.790% due 11/09/07 110 114 Union Planters Corp. 7.750% due 03/01/11 265 297 Valero Logistics Operations, LP 6.050% due 03/15/13 1,067 1,097 Verizon 6.500% due 09/15/11 70 72 Verizon Global Funding Corp. 7.250% due 12/01/10 4,125 4,474 4.900% due 09/15/15 (N) 145 138 5.850% due 09/15/35 1,150 1,076
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Visteon Corp. 8.250% due 08/01/10 1,625 1,501 7.000% due 03/10/14 695 591 Washington Mutual, Inc. 8.250% due 04/01/10 560 624 WellPoint, Inc. 3.750% due 12/14/07 735 718 4.250% due 12/15/09 532 516 Wells Fargo & Co. 4.625% due 08/09/10 1,455 1,434 4.950% due 10/16/13 390 385 Williams Gas Pipelines (A) 7.375% due 11/15/06 630 645 Willis Group NA 5.125% due 07/15/10 580 574 5.625% due 07/15/15 735 721 Wisconsin Electric Power 3.500% due 12/01/07 145 141 Wyeth 5.500% due 03/15/13 255 257 5.500% due 02/01/14 105 106 Xlliac Global Funding (A) 4.800% due 08/10/10 730 718 Yum! Brands, Inc. 8.875% due 04/15/11 625 728 Zurich Capital Trust I (A) 8.376% due 06/01/37 1,195 1,293 ------------ 247,543 ------------ International Debt - 4.9% Abbey National PLC (N)(f) (Step Up, 7.570%, 06/15/08) 6.700% due 06/29/49 775 804 Abitibi-Consolidated, Inc. 6.950% due 12/15/06 (N) 438 443 8.550% due 08/01/10 (N) 320 313 8.850% due 08/01/30 935 781 Amvescap PLC 4.500% due 12/15/09 1,137 1,110 Arlington Street CDO, Ltd. (A) Series 2000-1A Class A2 7.660% due 06/10/12 1,772 1,808 AXA SA 8.600% due 12/15/30 255 332 Banco Santander Chile (A) 4.148% due 12/09/09 635 633
Multistrategy Bond Fund 147 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Batterson Park CBO I, Ltd. Series 1998-1A Class A4 6.130% due 01/02/11 22 22 Biovail Corp. 7.875% due 04/01/10 515 531 Bowater Canada Finance 7.950% due 11/15/11 790 754 Brascan Corp. 7.125% due 06/15/12 390 428 Brazilian Government International Bond 9.760% due 06/29/09 1,100 1,281 9.250% due 10/22/10 295 324 11.000% due 01/11/12 (N) 820 976 10.500% due 07/14/14 35 41 8.000% due 01/15/18 3,900 4,029 8.875% due 10/14/19 100 105 8.875% due 04/15/24 1,935 2,005 British Telecommunications PLC 8.375% due 12/15/10 585 667 8.875% due 12/15/30 580 758 Canadian Oil Sands, Ltd. (A) 4.800% due 08/10/09 481 473 Catalyst Paper Corp. Series D 8.625% due 06/15/11 665 642 Chile Government International Bond 5.500% due 01/15/13 3,500 3,583 China Development Bank 5.000% due 10/15/15 200 194 Conoco Funding Co. 6.350% due 10/15/11 2,325 2,487 Corp Nacional del Cobre de Chile (A) 5.625% due 09/21/35 695 660 Deutsche Telekom International Finance BV 8.500% due 06/15/10 70 78 8.750% due 06/15/30 875 1,085 Donohue Forest Products 7.625% due 05/15/07 665 682 El Salvador Government International Bond 7.650% due 06/15/35 780 772 EnCana Corp. 6.500% due 08/15/34 195 214 Export-Import Bank of China (p) 4.875% due 07/21/15 1,090 1,041 4.875% due 07/21/15 200 191 Export-Import Bank of Korea 4.250% due 11/27/07 90 89 4.125% due 02/10/09 (A) 540 524 FBG Finance, Ltd. (A) 5.125% due 06/15/15 505 488
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- France Telecom SA 7.750% due 03/01/11 715 796 8.500% due 03/01/31 465 608 Hanarotelecom, Inc. (A) 7.000% due 02/01/12 970 944 HBOS PLC (f)(p) 5.920% due 09/29/49 1,000 985 5.920% due 09/29/49 200 197 Intelsat, Ltd. 6.500% due 11/01/13 1,040 764 Ispat Inland ULC 9.750% due 04/01/14 1,894 2,140 Juniper CBO, Ltd. (A) Series 1999-1A Class A1 6.830% due 04/15/11 461 466 Korea Development Bank 4.250% due 11/13/07 140 138 Korea Electric Power Corp. (A) 5.125% due 04/23/34 285 279 LG Electronics, Inc. (A) 5.000% due 06/17/10 270 263 Mantis Reef, Ltd. (A) 4.692% due 11/14/08 585 573 Mexico Government International Bond 8.375% due 01/14/11 700 796 6.375% due 01/16/13 260 272 8.125% due 12/30/19 2,400 2,870 8.000% due 09/24/22 400 476 8.300% due 08/15/31 (N) 555 680 Mizuho Financial Group Cayman, Ltd. 5.790% due 04/15/14 (A) 1,375 1,410 Series REGS 5.790% due 04/15/14 185 188 NAK Naftogaz Ukrainy 8.125% due 09/30/09 1,300 1,355 Nationwide Building Society (A) 4.250% due 02/01/10 670 650 Nexen, Inc. 5.875% due 03/10/35 461 439 Nippon Life Insurance (A) 4.875% due 08/09/10 935 916 Oil Insurance, Ltd. (A) 5.150% due 08/15/33 1,633 1,610 Panama Government International Bond 8.875% due 09/30/27 300 349 Petroleum Export, Ltd. (p) 5.265% due 06/15/11 200 197
148 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Petroleum Geo-Services ASA 8.000% due 11/05/06 225 227 Platinum Underwriters Holdings, Ltd. (A) 6.371% due 11/16/07 405 407 Poland Government International Bond (Step Up, 5.000%, 04/27/06) 4.750% due 10/27/24 750 729 Province of Quebec 5.000% due 07/17/09 265 267 Province of Quebec Canada 6.125% due 01/22/11 3,040 3,213 Ras Laffan Liquefied Natural Gas Co., Ltd. (A) 8.294% due 03/15/14 290 334 Ras Laffan Liquefied Natural Gas Co., Ltd. II (A) 5.298% due 09/30/20 885 865 Ras Laffan LNG III (p) 5.838% due 09/30/27 1,310 1,282 Resona Bank, Ltd. (f)(p) 5.850% due 09/29/49 2,105 2,031 5.850% due 09/29/49 300 290 Resona Preferred Global Securities Cayman, Ltd. (A) 7.191% due 12/29/49 1,165 1,187 Royal Bank of Scotland Group PLC (f) Series 1 9.118% due 03/31/49 2,350 2,701 Russia Government International Bond 5.000% due 03/31/30 (A) 1,960 2,176 5.000% due 03/31/30 3,000 3,335 Salomon Brothers AG for OAO Siberian Oil Co. Series REGS 10.750% due 01/15/09 1,790 2,011 Salomon Brothers AG for Tyumen Oil Co. Series REGS 11.000% due 11/06/07 960 1,049 Santander Financial Issuances 6.375% due 02/15/11 540 572 Sanwa Finance Aruba AEC (N) 8.350% due 07/15/09 495 547 Sappi Papier Holding AG (A) 6.750% due 06/15/12 240 238 Secunda International, Ltd. 12.150% due 09/01/12 660 686 Shaw Communications, Inc. 8.250% due 04/11/10 670 722 South Street CBO, Ltd. Series 1999-1A Class A1 7.160% due 07/01/11 512 517 SovRisc (A) 4.625% due 10/31/08 850 847
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Stora Enso OYJ 7.375% due 05/15/11 255 274 Systems 2001 AT LLC (A) 7.156% due 12/15/11 321 336 6.664% due 09/15/13 395 419 Telecom Italia Capital SA 4.000% due 01/15/10 5,626 5,348 5.250% due 10/01/15 680 655 Telefonos de Mexico SA de CV 4.500% due 11/19/08 1,238 1,211 TELUS Corp. 8.000% due 06/01/11 2,410 2,710 Tengizchevroil Finance Co. (A) 6.124% due 11/15/14 810 812 UFJ Finance Aruba AEC 6.750% due 07/15/13 220 238 Venezuela Government International Bond 9.375% due 01/13/34 795 925 WPP Finance UK Corp. 5.875% due 06/15/14 350 357 ------------ 91,227 ------------ Mortgage-Backed Securities - 39.7% American Home Mortgage Investment Trust Series 2004-1 Class 1A (E) 4.388% due 04/25/44 1,593 1,594 Series 2004-4 Class 4A (E) 4.390% due 02/25/45 1,232 1,207 Banc of America Commercial Mortgage, Inc. 4.877% due 11/10/42 1,275 1,262 Series 2004-3 Class A3 4.875% due 06/10/39 2,170 2,151 Series 2004-4 Class A3 4.128% due 07/10/42 1,475 1,429 Series 2004-5 Class A3 4.561% due 11/10/41 550 532 Series 2005-5 Class A4 5.115% due 10/10/45 1,605 1,579 Banc of America Funding Corp. Series 2004-3 Class 2A2 5.000% due 09/25/19 743 737 Series 2005-D Class A1 4.117% due 05/25/35 1,118 1,101
Multistrategy Bond Fund 149 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2005-F Class 1A2 (E) 4.350% due 09/20/35 889 889 Banc of America Mortgage Securities Series 2005-9 Class 2A1 4.750% due 10/25/20 1,451 1,416 Series 2005-E Class 2A1 4.990% due 06/25/35 710 702 Series 2005-F Class 2A3 4.736% due 07/25/35 1,397 1,376 Series 2005-I Class 2A1 (E) 4.894% due 10/25/35 1,731 1,712 Bank of America Alternative Loan Trust 6.000% due 12/25/34 555 561 Series 2003-10 Class 2A1 6.000% due 12/25/33 729 732 Series 2003-10 Class 2A2 (E) 4.488% due 12/25/33 1,698 1,703 Series 2004-10 Class 1CB1 6.000% due 11/25/34 490 495 Series 2004-2 Class 1A1 6.000% due 03/25/34 496 498 Series 2005-3 Class 2A1 5.500% due 04/25/20 727 729 Series 2005-5 Class 2CB1 6.000% due 06/25/35 918 925 Series 2005-6 Class 7A1 5.500% due 07/25/20 962 963 Series 2005-9 Class 5A1 5.500% due 10/25/20 1,100 1,097 Bank of America Mortgage Securities Series 2003-D Class 1A2 (E) 3.428% due 05/25/33 20 20 Series 2003-I Class 2A4 (E) 3.828% due 10/25/33 760 754 Series 2004-1 Class 5A1 6.500% due 09/25/33 133 134 Series 2004-A Class 1A1 (E) 3.477% due 02/25/34 300 298 Series 2004-E Class 1A1 (E) 3.523% due 06/25/34 669 659 Series 2005-A Class 2A1 4.470% due 02/25/35 574 564 Series 2005-B Class 2A1 4.402% due 03/25/35 1,095 1,073 Bear Stearns Adjustable Rate Mortgage Trust Series 2003-8 Class 4A1 4.699% due 01/25/34 787 765 Series 2005-10 Class A1 (E) 4.750% due 10/25/35 6,350 6,332 Series 2005-7 Class 1A2 (E) 4.750% due 08/25/35 502 491
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Bear Stearns Alt-A Trust Series 2005-4 Class 23A1 5.431% due 05/25/35 2,101 2,110 Bear Stearns Commercial Mortgage Securities Series 2004-ESA Class E (A) 5.064% due 05/14/16 825 825 Series 2005-T20 Class A4A 5.303% due 10/12/42 720 713 Citigroup Commercial Mortgage Trust (A) Series 2004-FL1 Class A1 4.100% due 07/15/18 454 454 Citigroup/Deutsche Bank Commercial Mortgage Trust Series 2005-CD1 Class A4 5.225% due 09/15/20 1,660 1,661 Series 2005-CD1 Class AJ 5.225% due 09/15/20 395 392 Commercial Mortgage Pass Through Certificates (A) Series 2001-J1A Class A2 6.457% due 02/14/34 718 751 Countrywide Alternative Loan Trust Series 2004-28C Class 6A1 6.000% due 01/25/35 813 819 Series 2004-J7 Class 1A2 4.673% due 08/25/34 710 707 Series 2005-59 Class 1A2B (E) 4.101% due 11/20/35 1,698 1,697 Series 2005-63 Class 3A1 5.915% due 11/25/35 1,600 1,618 Countrywide Home Loan Mortgage Pass Through Trust Series 2005-9 Class M6 5.188% due 05/25/35 719 705 Credit Suisse First Boston Mortgage Securities Corp. Series 2003-29 Class 5A1 7.000% due 12/25/33 304 311 Series 2004-1 Class 3A1 7.000% due 02/25/34 109 111 Series 2004-C1 Class A3 4.321% due 01/15/37 1,895 1,819 Crown Castle Towers LLC (A) 5.074% due 06/15/35 460 448 Deutsche ALT-A Securities, Inc. Alternate Loan Trust Series 2003-3 Class 2A3 4.500% due 10/25/33 157 157
150 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Deutsche Mortgage Securities, Inc. Series 2004-4 Class 1A2 4.010% due 04/25/34 23 23 DLJ Commercial Mortgage Corp. Series 1998-CF1 Class A1B 6.410% due 02/18/31 1,767 1,811 Downey Savings & Loan Association Mortgage Loan Trust Series 2004-AR3 Class 1A1B 5.206% due 07/19/44 1,322 1,340 Fannie Mae 15 Year TBA (I) 4.500% 32,570 31,484 5.000% 27,150 26,774 5.500% 1,165 1,173 30 Year TBA (I) 4.500% 5,720 5,343 5.000% 47,445 45,651 5.500% 38,240 37,714 6.000% 10,005 10,186 6.500% 920 944 7.000% 43,800 45,785 5.500% due 2016 128 130 6.000% due 2016 1,485 1,519 11.000% due 2016 143 159 5.000% due 2017 967 955 5.500% due 2017 608 610 6.000% due 2017 989 1,012 6.500% due 2017 468 483 5.000% due 2018 18,409 18,172 5.000% due 2019 3,774 3,724 4.500% due 2020 935 904 5.000% due 2020 10,298 10,164 5.500% due 2020 789 795 7.500% due 2024 19 20 5.500% due 2025 1,299 1,290 5.258% due 2026 392 401 7.000% due 2026 46 48 9.000% due 2026 71 77 7.500% due 2027 18 19 6.500% due 2028 4 4 5.500% due 2029 2,142 2,118 7.500% due 2029 136 146 7.500% due 2030 636 669 8.000% due 2030 595 634 8.500% due 2030 1,290 1,402 9.500% due 2030 140 155 7.000% due 2031 401 419 7.500% due 2031 712 753 8.000% due 2031 1,007 1,074 8.500% due 2031 816 887 6.000% due 2032 3,867 3,906 6.500% due 2032 1,387 1,428 7.000% due 2032 1,861 1,943 7.500% due 2032 476 503
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 8.000% due 2032 6 6 8.500% due 2032 92 100 5.000% due 2033 4,942 4,781 5.500% due 2033 4,015 3,968 6.000% due 2033 37 37 6.500% due 2033 771 792 5.000% due 2034 3,072 2,973 5.500% due 2034 52,077 51,434 6.000% due 2034 3,147 3,175 6.500% due 2034 198 207 7.500% due 2034 536 566 4.210% due 2035 (E) 5,287 5,214 4.665% due 2035 (E) 4,572 4,546 4.841% due 2035 (E) 5,389 5,329 5.000% due 2035 20,218 19,465 5.500% due 2035 86,156 85,032 6.000% due 2035 8,873 8,952 6.500% due 2035 4,764 4,890 7.000% due 2035 640 670 4.265% due 2040 1,061 1,074 Series 1992-10 Class ZD 8.000% due 11/25/21 866 876 Series 1996-46 Class ZA 7.500% due 11/25/26 353 373 Series 1997-281 Class 2 Interest Only STRIP 9.000% due 11/01/26 66 17 Series 1997-68 Class SC Interest Only STRIP 4.500% due 05/18/27 170 17 Series 2000-306 Class IO Interest Only STRIP 8.000% due 05/01/30 75 18 Series 2001-317 Class 2 Interest Only STRIP 8.000% due 08/01/31 156 34 Series 2001-4 Class SA Interest Only STRIP 3.580% due 02/17/31 308 18 Series 2002-320 Class 2 Interest Only STRIP 7.000% due 03/01/32 47 11 Series 2002-50 Class SC Interest Only STRIP 4.063% due 12/25/29 68 2 Series 2003-122 Class AJ 4.500% due 02/25/28 574 563
Multistrategy Bond Fund 151 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2003-16 Class NI Interest Only STRIP 5.000% due 02/25/15 943 53 Series 2003-25 Class IK Interest Only STRIP 7.000% due 04/25/33 543 115 Series 2003-32 Class UI Interest Only STRIP 6.000% due 05/25/33 558 125 Series 2003-33 Class IA Interest Only STRIP 6.500% due 05/25/33 2,781 602 Series 2003-35 Class IU Interest Only STRIP 6.000% due 05/25/33 645 143 Series 2003-35 Class UI Interest Only STRIP 6.500% due 05/25/33 673 151 Series 2003-64 Class JI Interest Only STRIP 6.000% due 07/25/33 642 143 Series 2003-82 Class WI Interest Only STRIP 6.000% due 08/25/32 122 14 Series 2004-27 Class JC 5.000% due 05/25/34 92 90 Fannie Mae Grantor Trust Series 1999-T2 Class A1 7.500% due 01/19/39 58 60 Series 2001-T8 Class A2 9.500% due 07/25/41 329 358 Series 2004-T4 Class A2 3.930% due 02/25/20 573 571 Series 2004-T4 Class A3 4.420% due 08/25/24 610 605 Series 2005-T2 Class 1A1 3.712% due 11/28/35 376 376 Fannie Mae Whole Loan Series 2003-W14 Class 1A5 4.710% due 09/25/43 39 39 Series 2003-W17 Class 1A6 5.310% due 08/25/33 5,400 5,261 Series 2003-W18 Class 1A5 4.610% due 08/25/43 590 584 Series 2004-W11 Class 1A2 6.500% due 05/25/44 912 934 Series 2004-W9 Class 2A1 6.500% due 02/25/44 478 490 Federal Home Loan Mortgage Corp. Structured Pass Through Securities Series 2003-58 Class 1A2 3.108% due 05/25/35 179 177 Series 2003-58 Class 2A 6.500% due 09/25/43 437 447
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2004-H01 Class A1 2.614% due 07/15/11 1,768 1,752 Federal National Mortgage Association Series 2003-82 Class IA Interest Only STRIP 6.000% due 08/25/32 747 116 First Horizon Alternative Mortgage Securities Series 2004-FA1 Class 1A1 6.250% due 10/25/34 1,469 1,488 First Horizon Asset Securities, Inc. Series 2003-5 Class 1A17 8.000% due 07/25/33 159 167 Series 2004-AR5 Class 4A1 (E) 5.698% due 10/25/34 543 533 Series 2004-AR7 Class 1A1 (E) 4.473% due 02/25/35 691 692 First Union-Lehman Brothers-Bank of America Series 1998-C2 Class A2 6.560% due 11/18/35 18 19 Freddie Mac 15 Year TBA (I) 5.000% 2,475 2,441 30 Year TBA (I) 5.000% 18,360 17,660 5.500% 21,025 20,749 6.000% 1,950 1,969 12.000% due 2013 15 16 12.000% due 2014 19 21 11.000% due 2015 20 21 6.000% due 2016 182 186 10.000% due 2016 58 64 12.000% due 2016 8 8 5.000% due 2018 320 316 5.500% due 2019 2,011 2,023 11.000% due 2020 274 295 10.500% due 2021 44 49 5.500% due 2024 2,923 2,905 8.500% due 2025 55 60 7.500% due 2029 127 134 5.638% due 2030 13 13 6.500% due 2030 8 8 7.500% due 2030 395 417 8.000% due 2030 81 87 8.000% due 2030 108 113 8.500% due 2030 388 421 7.000% due 2031 438 458 7.500% due 2031 324 342 8.000% due 2031 423 451
152 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- 7.500% due 2032 203 214 5.000% due 2033 1,347 1,301 6.500% due 2033 482 494 3.733% due 2034 (E) 522 524 4.911% due 2034 (E) 4,093 4,045 6.000% due 2034 1,366 1,380 4.820% due 2035 (E) 3,600 3,576 4.876% due 2035 (E) 5,500 5,438 Series 1991-103 Class Z 9.000% due 02/15/21 90 90 Series 1994-173 Class Z 7.000% due 05/15/24 457 478 Series 1999-212 Class SG Interest Only STRIP 3.000% due 06/17/27 2,692 128 Series 2000-224 Class SC Interest Only STRIP 3.530% due 08/15/30 105 4 Series 2000-226 Class F 4.420% due 11/15/30 149 150 Series 2001-232 Class ZQ 6.500% due 06/15/31 1,752 1,831 Series 2002-246 Class SJ Interest Only STRIP 4.030% due 03/15/32 390 33 Series 2003-255 Class QX 4.750% due 06/15/27 640 637 Series 2003-256 Class IM Interest Only STRIP 5.000% due 09/15/14 1,081 64 Series 2003-259 Class IQ Interest Only STRIP 5.000% due 06/15/17 1,918 259 Series 2003-261 Class DI Interest Only STRIP 5.500% due 05/15/27 1,581 70 Series 2003-263 Class YH 3.500% due 08/15/22 3,310 3,283 Series 2003-264 Class IM Interest Only STRIP 7.000% due 07/15/33 628 146 Series 2003-266 Class MA 4.500% due 10/15/31 1,057 1,040 Series 2004-287 Class GC 5.000% due 11/15/29 520 508 Series 2004-288 Class OE 5.000% due 01/15/30 835 823 Series 2004-289 Class PC 5.000% due 07/15/30 1,060 1,036 Series 2004-290 Class LC 5.500% due 12/15/17 770 777 Series 2005-291 Class KP 5.000% due 11/15/29 1,155 1,130
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2005-292 Class IG Interest Only STRIP 5.000% due 04/15/23 1,279 221 Series 2005-293 Class PC 5.000% due 09/15/30 1,035 1,010 Series 2005-302 Class MB 5.000% due 12/15/28 640 631 Series 2005-303 Class AQ 4.500% due 10/15/22 5,509 5,476 Series 2005-R00 Class AE 4.375% due 04/15/15 973 951 Freddie Mac Gold 15 Year TBA (I) 5.500% 2,275 2,289 5.500% due 2009 21 22 5.500% due 2014 1,670 1,683 5.500% due 2018 3,869 3,895 5.500% due 2019 2,512 2,528 5.500% due 2020 5,086 5,119 7.000% due 2027 320 335 8.500% due 2027 282 307 7.500% due 2028 75 80 7.000% due 2031 223 232 8.000% due 2031 14 15 7.000% due 2032 402 420 5.000% due 2033 1,014 989 7.000% due 2033 108 113 7.500% due 2033 162 172 Series 1998-191 Class IO Interest Only STRIP 8.000% due 01/01/28 54 12 Series 1998-194 Class IO Interest Only STRIP 6.500% due 04/01/28 322 68 Series 2001-212 Class IO Interest Only STRIP 6.000% due 05/01/31 511 115 Series 2001-215 Class IO Interest Only STRIP 8.000% due 06/01/31 254 58 GE Capital Commercial Mortgage Corp. Series 2002-1A Class A3 6.269% due 12/10/35 710 749 Series 2005-C2 Class A2 4.706% due 05/10/43 1,365 1,343 Series 2005-C3 Class A3FX 4.863% due 07/10/45 20 20
Multistrategy Bond Fund 153 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Ginnie Mae I 30 Year TBA (I) 6.500% 855 887 11.000% due 2010 48 53 11.500% due 2010 9 9 11.000% due 2013 13 14 10.500% due 2015 58 65 11.000% due 2015 10 11 10.500% due 2016 113 126 10.500% due 2021 88 101 10.000% due 2022 94 104 9.500% due 2023 386 426 10.000% due 2025 115 128 7.500% due 2031 93 98 Ginnie Mae II 3.750% due 2023 30 31 4.125% due 2023 49 49 4.375% due 2023 163 163 3.750% due 2024 212 215 4.125% due 2024 222 224 3.750% due 2025 14 14 4.125% due 2025 20 20 4.375% due 2025 463 466 4.125% due 2026 105 106 8.500% due 2026 78 84 3.750% due 2027 252 256 4.375% due 2027 171 172 4.125% due 2029 731 737 Global Signal Trust (A) Series 2004-2A Class A 4.232% due 12/15/14 655 632 GMAC Commercial Mortgage Securities, Inc. Series 1998-C2 Class A2 6.420% due 05/15/35 763 787 Government National Mortgage Association Series 1999-27 Class SE Interest Only STRIP 4.630% due 08/16/29 164 15 Series 1999-44 Class SA Interest Only STRIP 4.580% due 12/16/29 292 25 Series 2001-46 Class SA Interest Only STRIP 3.610% due 09/16/31 72 4 Series 2002-62 Class B 4.763% due 01/16/25 325 322 Series 2003-5 Class B 4.486% due 10/16/25 795 776 Greenwich Capital Commercial Funding Corp. Series 2004-GG1 Class A7 5.317% due 06/10/36 1,575 1,578
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2005-GG5 Class A41 5.243% due 04/10/37 2,155 2,166 Series 2005-GG5 Class A5 5.224% due 04/10/37 705 709 GSMPS Mortgage Loan Trust (A) Series 1998-3 Class A 7.750% due 09/19/27 213 224 Series 1999-3 Class A 8.000% due 08/19/29 397 420 Series 2005-RP1 Class 1A3 8.000% due 01/25/35 633 672 Series 2005-RP1 Class 1A4 8.500% due 01/25/35 377 408 GSR Mortgage Loan Trust Series 2004-7 Class 1A1 3.412% due 06/25/34 2,137 2,091 Series 2005-AR6 Class 2A1 (E) 4.541% due 09/25/35 5,293 5,199 Harborview Mortgage Loan Trust (E) Series 2005-10 Class 2A1B 4.377% due 11/19/35 1,497 1,500 Series 2005-5 Class 2A1B 4.287% due 07/19/45 1,060 1,060 Impac CMB Trust Series 2004-3 Class 1A 4.288% due 06/25/34 887 888 Impac Secured Assets CMN Owner Trust Series 2004-3 Class 1A1 4.238% due 11/25/34 285 285 Indymac Index Mortgage Loan Trust 5.910% due 02/15/35 1,170 1,182 IndyMac Index Mortgage Loan Trust Series 2004-AR4 Class 1A 4.669% due 08/25/34 1,451 1,449 Series 2005-AR2 Class 1A21 5.910% due 12/25/35 1,170 1,182 JP Morgan Chase Commercial Mortgage Securities Corp. Series 2002-C1 Class A3 5.376% due 07/12/37 1,155 1,167 Series 2003-C1 Class A2 4.985% due 01/12/37 1,301 1,284 Series 2004-FL1 Class A1 (E)(A) 4.140% due 04/16/19 1,029 1,029 Series 2004-LN2 Class A1 4.475% due 07/15/41 1,880 1,825
154 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2005-CB1 Class A4 5.335% due 08/12/37 1,670 1,670 JP Morgan Mortgage Trust Series 2005-A6 Class 1A2 5.158% due 09/25/35 1,470 1,449 LB-UBS Commercial Mortgage Trust Series 2004-C4 Class A3 4.985% due 06/15/29 3,135 3,140 Series 2005-C5 Class A2 4.885% due 09/15/30 1,315 1,303 Mastr Alternative Loans Trust Series 2003-9 Class 1A1 5.500% due 12/25/18 535 536 Series 2003-6 Class 3A1 8.000% due 09/25/33 196 200 Series 2005-3 Class 7A1 6.000% due 04/25/35 998 1,005 Mastr Reperforming Loan Trust (A) Series 2005-2 Class 1A4 8.000% due 05/25/35 1,412 1,499 Series 2005-1 Class 1A5 8.000% due 08/25/34 895 949 Mastr Specialized Loan Trust (A) 5.150% due 07/25/35 792 784 Mellon Residential Funding Corp. Series 2000-TBC Class A1 4.210% due 06/15/30 1,413 1,409 Merrill Lynch Mortgage Investors, Inc. (E) Series 2005-A6 Class 2A1 4.158% due 08/25/35 2,049 2,049 Merrill Lynch Mortgage Trust 4.351% due 11/15/10 180 178 4.330% due 11/25/10 185 183 Series 2002-MW1 Class J (A) 5.695% due 07/12/34 365 348 Series 2004-BPC Class A3 4.467% due 10/12/41 365 351 Series 2004-MKB Class A2 4.353% due 02/12/42 1,835 1,794 Series 2005-CIP Class A2 4.960% due 07/12/38 1,615 1,602 Series 2005-CIP Class B 5.101% due 07/12/38 400 393 Morgan Stanley Capital I Series 2005-HQ6 Class A2A 4.882% due 08/13/42 595 587 Nationslink Funding Corp. Series 1999-SL Class A4 6.654% due 11/10/30 244 245 Nomura Asset Acceptance Corp. Series 2004-AP2 Class A2 4.099% due 07/25/34 284 284 Series 2005-WF1 Class 2A2 4.786% due 03/25/35 1,285 1,266
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Prime Mortgage Trust Series 2004-2 Class A2 4.750% due 11/25/19 1,188 1,171 Series 2004-CL1 Class 1A1 6.000% due 02/25/34 337 336 Series 2004-CL1 Class 1A2 4.438% due 02/25/34 243 243 Series 2004-CL1 Class 2A2 4.438% due 02/25/19 70 70 Residential Accredit Loans, Inc. Series 2005-QA8 Class NB3 5.527% due 07/25/35 1,924 1,921 Residential Asset Mortgage Products, Inc. Series 2004-SL1 Class A3 7.000% due 11/25/31 375 384 Series 2004-SL4 Class A3 6.500% due 07/25/32 588 598 Series 2005-SL1 Class A2 6.000% due 05/25/32 959 976 Residential Asset Securitization Trust (E) Series 2003-A15 Class 1A2 4.488% due 02/25/34 3,045 3,051 Residential Funding Mortgage Sec I (E) Series 2003-S5 Class 1A2 4.488% due 11/25/18 1,475 1,482 SACO I, Inc. (E)(p) Series 2004-2 Class A2 4.228% due 07/25/19 469 469 Small Business Administration Participation Certificates 5.520% due 06/01/24 380 388 Structured Adjustable Rate Mortgage Loan Trust Series 2004-18 Class 5A 5.500% due 12/25/34 552 550 Structured Asset Securities Corp. Series 2002-22H Class 1A 6.994% due 11/25/32 140 142 Series 2004-12H Class 1A 6.000% due 05/25/34 586 586 Series 2004-21X Class 1A3 4.440% due 12/25/34 3,410 3,340
Multistrategy Bond Fund 155 FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Thornburg Mortgage Securities Trust (E) Series 2004-2 Class A2 4.188% due 06/25/44 167 167 Series 2005-3 Class 1A1 4.268% due 10/25/35 1,395 1,396 Wachovia Bank Commercial Mortgage Trust Series 2005-C16 Class A2 4.380% due 10/15/41 3,330 3,243 Washington Mutual Alternative Mortgage Pass-Through Certs Series 2005-9 Class 3CB 5.500% due 10/25/20 790 797 Washington Mutual (E) Series 2002-AR9 Class 1A 4.265% due 08/25/42 1,287 1,282 Series 2005-AR1 Class A1B1 4.421% due 12/25/45 1,600 1,600 Washington Mutual, Inc. Series 2003-AR4 Class A7 (E) 3.950% due 05/25/33 150 147 Series 2003-AR9 Class 1A7 4.056% due 09/25/33 980 962 Series 2004-AR1 Class A2C 4.135% due 07/25/44 291 291 Series 2004-AR1 Class A3 4.135% due 10/25/44 703 708 Series 2004-CB3 Class 4A 6.000% due 10/25/19 936 950 Series 2005-AR1 Class 1A1 4.845% due 10/25/35 2,121 2,105 Series 2005-AR1 Class 1B14 4.421% due 12/25/45 1,600 1,600 Series 2005-AR1 Class A1A1 (E) 4.328% due 10/25/45 700 700 Series 2005-AR1 Class A1B1 (E) 4.328% due 08/25/45 1,266 1,266 4.298% due 10/25/45 2,125 2,125 Series 2005-AR3 Class A1 4.651% due 03/25/35 908 893 Series 2005-AR6 Class B3 4.698% due 04/25/45 1,370 1,369 Washington Mutual, Inc.l Series 2004-CB3 Class 1A 6.000% due 10/25/34 411 414 Wells Fargo Mortgage Backed Securities Trust Series 2004-DD Class 2A3 4.528% due 01/25/35 840 825 Series 2004-I Class 1A1 3.385% due 07/25/34 1,126 1,123 Series 2004-T Class A1 3.453% due 09/25/34 1,042 1,035
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- Series 2005-AR1 Class 2A1 4.947% due 10/25/35 654 650 ------------ 745,330 ------------ Municipal Bonds - 1.0% California State University Revenue Bonds, weekly demand 5.000% due 11/01/30 435 449 City of Forsyth Montana Revenue Bonds, annual demand 5.200% due 05/01/33 220 228 City of New York New York General Obligation Unlimited, weekly demand 5.000% due 03/01/30 300 305 Colorado Department of Transportation Revenue Bonds (u) 5.000% due 12/15/13 1,570 1,694 County of Clark Nevada General Obligation Limited, weekly demand (u) 5.000% due 06/01/32 100 102 Golden State Tobacco Securitization Corp. Revenue Bonds, weekly demand 5.625% due 06/01/38 415 463 Liberty Development Corp. Revenue Bonds 5.250% due 10/01/35 200 219 Massachusetts School Building Authority Revenue Bonds, weekly demand 5.000% due 08/15/30 955 986 New Jersey Economic Development Authority Revenue Bonds, weekly demand 5.750% due 06/15/34 745 779 New York State Environmental Facilities Corp. Revenue Bonds, weekly demand 5.000% due 06/15/33 300 309 New York State Urban Development Corp. Revenue Bonds, weekly demand 5.250% due 03/15/34 540 572 Sales Tax Asset Receivables Corp. Revenue Bonds, weekly demand (u) 5.250% due 10/15/27 690 738
156 Multistrategy Bond Fund FRANK RUSSELL INVESTMENT COMPANY MULTISTRATEGY BOND FUND SCHEDULE OF INVESTMENTS, CONTINUED -- OCTOBER 31, 2005 Amounts in thousands (except share amounts)
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- State of California General Obligation Unlimited 5.250% due 07/01/13 590 646 5.000% due 02/01/33 370 377 State of Illinois General Obligation Unlimited 5.100% due 06/01/33 480 460 State of Oregon General Obligation Unlimited 5.892% due 06/01/27 555 588 State of Texas General Obligation Unlimited, weekly demand 4.750% due 04/01/35 700 702 Tobacco Settlement Financing Corp. Revenue Bonds, weekly demand 5.750% due 06/01/32 2,575 2,671 University of Illinois Revenue Bonds, weekly demand 5.000% due 04/01/29 4,700 4,842 West Virginia Economic Development Authority Revenue Bonds 5.370% due 07/01/20 (u) 200 201 6.070% due 07/01/26 655 681 ------------ 18,012 ------------ Non-US Bonds - 1.1% Brazilian Government International Bond(N) 12.500% due 01/05/16 BRL 1,445 1,355 Canada Housing Trust No. 1 3.750% due 03/15/10 CAD 1,713 1,440 Canadian Government Bond 3.000% due 12/01/36 CAD 209 231 Deutsche Bundesrepublik 5.000% due 07/04/11 EUR 1,465 1,932 General Motors Corp. 7.250% due 07/03/13 EUR 310 288 Poland Government Bond 5.750% due 03/24/10 PLN 4,437 1,368 6.250% due 10/24/15 PLN 6,431 2,085 Province of Ontario 4.500% due 03/08/15 CAD 850 727 Province of Quebec Canada 5.000% due 12/01/15 CAD 1,234 1,085 Russia Paris Club Participant (A) 1.975% due 08/20/20 JPY 56,548 487 Sweden Government Bond 4.000% due 12/01/09 SEK 6,855 900 4.500% due 08/12/15 SEK 3,480 480 5.000% due 12/01/20 SEK 2,005 298
PRINCIPAL MARKET AMOUNT ($) VALUE OR SHARES $ - ----------------------------------------------------------------------------- United Kingdom Gilt 5.750% due 12/07/09 GBP 2,800 5,218 8.000% due 09/27/13 GBP 830 1,826 8.000% due 06/07/21 GBP 723 1,806 ------------ 21,526 ------------ Registered Investment Company Funds - 0.0% Pacific Investment Management Co. Series High Yield Portfolio Institutional 20,319 167 ------------ United States Government Agencies - 1.2% Fannie Mae 3.875% due 02/15/10 3,405 3,294 4.375% due 03/15/13 1,270 1,230 Zero coupon due 10/09/19 455 212 Financing Corp. Principal Only STRIP Zero coupon due 05/11/16 400 235 Zero coupon due 06/06/16 1,185 694 Zero coupon due 12/27/16 1,410 801 Zero coupon due 10/06/17 2,385 1,315 Zero coupon due 11/30/17 2,600 1,421 Zero coupon due 08/03/18 2,355 1,240 Zero coupon due 11/02/18 2,485 1,291 Zero coupon due 12/06/18 385 199 Zero coupon due 04/05/19 1,445 732 Zero coupon due 09/26/19 1,810 893 Freddie Mac 4.000% due 08/17/07 (N) 2,510 2,484 2.750% due 03/15/08 1,060 1,016 4.000% due 12/15/09 3,445 3,351 5.125% due 11/07/13 1,700 1,700 Residual Funding Principal Only STRIP Zero coupon due 10/15/20 400 189 ------------ 22,297 ------------ United States Government Treasuries - 18.8% United States Treasury Bonds Principal Only STRIP Zero coupon due 02/15/25 (N) 7,750 3,035 Zero coupon due 02/15/27 7,750 2,777 United States Treasury Inflation Indexed Bonds 0.875% due 04/15/10 1,135 1,091 3.000% due 07/15/12 (N) 4,134 4,420 2.000% due 07/15/14 (N) 20,934 20,989 1.875% due 07/15/15 1,373 1,359 2.375% due 01/15/25 (N) 2,813 2,927 3.625% due 04/15/28 364 463