Russell Investment Company 497 filing

Average annual total returns
for the periods ended December 31, 2007

1 Year

5 Years

10 Years

Russell Money Market Fund Class A*

Russell Money Market Fund Class S

497 1 d497.htm RUSSELL INVESTMENT COMPANY 497 FILING Russell Investment Company 497 filing

PROSPECTUS

Russell Funds

FEBRUARY 29, 2008, AS SUPPLEMENTED THROUGH SEPTEMBER 2, 2008


FUND	SHARE CLASS	FUND NAME PRIOR TO SEPTEMBER 2, 2008

U.S. Equity Funds

Russell U.S. Core Equity Fund	A, C, E, S	Equity I Fund

Russell U.S. Quantitative Equity Fund	A, C, E, S	Equity Q Fund

Russell U.S. Growth Fund	C, E, S	Select Growth Fund

Russell U.S. Value Fund	C, E, S	Select Value Fund

Russell U.S. Small & Mid Cap Fund	A, C, E, S	Equity II Fund

International and Global Equity Funds

Russell International Developed Markets Fund	A, C, E, S	International Fund

Russell Global Equity Fund	A, C, E, S	Global Equity Fund

Russell Emerging Markets Fund	A, C, E, S	Emerging Markets Fund

Tax-Managed Equity Funds

Russell Tax-Managed U.S. Large Cap Fund	C, E, S	Tax-Managed Large Cap Fund

Russell Tax-Managed U.S. Mid & Small Cap Fund	C, E, S	Tax-Managed Mid & Small Cap Fund

Taxable Fixed Income Funds

Russell Strategic Bond Fund	A, C, E, S	Fixed Income III Fund

Russell Investment Grade Bond Fund	C, E, S	Fixed Income I Fund

Russell Short Duration Bond Fund	A, C, E, S	Short Duration Bond Fund

Tax Exempt Fixed Income Funds

Russell Tax Exempt Bond Fund	C, E, S	Tax Exempt Bond Fund

Specialty Funds

Russell Real Estate Securities Fund	A, C, E, S	Real Estate Securities Fund

Money Market Funds

Russell Money Market Fund	A, S	Money Market Fund

As with all mutual funds, the Securities and Exchange Commission has neither determined that the information in this Prospectus is accurate or complete, nor approved or disapproved of these securities. It is a criminal offense to state otherwise.

909 A Street
Tacoma, Washington 98402

800-787-7354

Table of Contents


Risk/Return Summary		1
Investment Objective, Principal Investment Strategies and Principal Risks		1
U.S. Equity Funds
Russell U.S. Core Equity Fund		1
Russell U.S. Quantitative Equity Fund		2
Russell U.S. Growth Fund		3
Russell U.S. Value Fund		4
Russell U.S. Small & Mid Cap Fund		5
International and Global Equity Funds
Russell International Developed Markets Fund		7
Russell Global Equity Fund		8
Russell Emerging Markets Fund		10
Tax-Managed Equity Funds
Russell Tax-Managed U.S. Large Cap Fund		11
Russell Tax-Managed U.S. Mid & Small Cap Fund		13
Taxable Fixed Income Funds
Russell Strategic Bond Fund		14
Russell Investment Grade Bond Fund		15
Russell Short Duration Bond Fund		17
Tax Exempt Fixed Income Funds
Russell Tax Exempt Bond Fund		18
Specialty Funds
Russell Real Estate Securities Fund		19
Money Market Funds
Russell Money Market Fund		20
Performance		22
Fees and Expenses		38
Management of the Funds		43
The Money Managers		45
Subsequent Events		46
Investment Objective and Investment Strategies		49
U.S. Equity Funds
Russell U.S. Core Equity Fund		49
Russell U.S. Quantitative Equity Fund		51
Russell U.S. Growth Fund		53
Russell U.S. Value Fund		54
Russell U.S. Small & Mid Cap Fund		56
International and Global Equity Funds
Russell International Developed Markets Fund		57
Russell Global Equity Fund		60
Russell Emerging Markets Fund		62
Tax-Managed Equity Funds
Russell Tax-Managed U.S. Large Cap Fund		64
Russell Tax-Managed U.S. Mid & Small Cap Fund		66
Taxable Fixed Income Funds
Russell Strategic Bond Fund		68
Russell Investment Grade Bond Fund		70
Russell Short Duration Bond Fund		72
Tax Exempt Fixed Income Funds
Russell Tax Exempt Bond Fund		74
Specialty Funds
Russell Real Estate Securities Fund		75


Money Market Funds
Russell Money Market Fund		76
Risks		78
Portfolio Turnover		89
Portfolio Disclosure		89
Dividends and Distributions		90
Taxes		91
How Net Asset Value is Determined		92
Choosing A Class of Shares to Buy		93
Front-End Sales Charges		94
More About Deferred Sales Charges		97
Distribution and Shareholder Services Arrangements and Payments to Financial Intermediaries		97
How to Purchase Shares		98
Exchange Privilege		101
Right to Reject or Restrict Purchase and Exchange Orders		101
How to Redeem Shares		104
Payment of Redemption Proceeds		105
Other Information About Share Transactions		105
Financial Highlights		107
Money Manager Information		148

RISK/RETURN SUMMARY

Investment Objective, Principal Investment Strategies and Principal Risks

The following is a summary of each Fund’s principal investment strategies and principal risks. A complete discussion of each Fund’s principal investment strategies and principal risks is included later in this Prospectus.

Each of the following Funds has either a fundamental or a non-fundamental investment objective as noted below. A fundamental investment objective may only be changed with shareholder approval. A non-fundamental investment objective may be changed by the Board of Trustees (“Board”) of that Fund without shareholder approval. If a Fund’s investment objective is changed, the Prospectus will be supplemented to reflect the new investment objective. To the extent that there is a material change in a Fund’s investment objective, shareholders will be provided with reasonable notice.

RUSSELL U.S. CORE EQUITY FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by Russell Investment Management Company (“RIMCo”). The Fund uses three principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Value Style emphasizes investments in equity securities of companies that appear to a money manager to be undervalued relative to their corporate worth, based on earnings, book or asset value, revenues, cash flow or other measures.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to money managers.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund may sell securities for a variety of reasons including to realize gains, limit losses or to make funds available for other investment opportunities. The Fund may also sell a security if there is a significant change to the security’s risk/return profile or if a money manager determines that the security is no longer consistent with the investment strategies it pursues for the Fund.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell U.S. Core Equity Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in equity securities, including ADRs, using a multi-manager approach, using a quantitative investment approach, security selection and funds of funds investment risk.

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. ADRs have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Growth Style of investing generally results in the selection of stocks that do not pay significant dividends, which could otherwise cushion stock prices in a market decline. The Value Style of investing is subject to the risks that the intrinsic values of the stocks picked may never be realized by the market or the stocks may turn out not to have been undervalued. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. The use of the select holdings strategy by the Fund will amplify the Fund’s security selection risk and potential underperformance. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL U.S. QUANTITATIVE EQUITY FUND

Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Fund pursues a Market-Oriented Style of security selection. Managers select securities from the broad equity market rather than focusing on the growth or value segments of the market. As a result, the Fund holds securities representing a broad cross section of companies and industries.

The Fund employs a multi-manager approach whereby portions of the Fund are allocated to different money managers whose approaches are intended to complement one another. Each of the Fund’s money managers uses quantitative models to rank securities based upon their expected ability to outperform the total return of the benchmark assigned to them by RIMCo. Fund assets not allocated to money managers are managed by RIMCo.

underlying security that it borrowed from the broker or dealer, the Fund must purchase the security prior to the date on which delivery to the broker or dealer is required. The Fund currently does not intend to make a short sale if, after giving effect to such sale, the market value of all securities sold short exceeds 30% of the value of its total assets. The Fund may also make short sales “against the box.” In this type of short sale, at the time of the sale, the Fund owns or has the immediate and unconditional right to acquire the identical security at no additional cost.

RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to money managers.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell U.S. Quantitative Equity Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in equity securities, including ADRs and particularly in using Market-Oriented investments, using a multi-manager approach, using a quantitative investment approach, security selection, selling securities short and funds of funds investment risk.

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. ADRs have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. The use of the select holdings strategy by the Fund will amplify the Fund’s security selection risk and potential underperformance. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. Making short sales in securities that it does not own exposes the Fund to the risk that the Fund will incur a loss should the price of the security sold short increase between the date of the short sale and the date on which the Fund must return the borrowed security. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL U.S. GROWTH FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

companies represented by the Russell 1000^® Index. The Fund defines small capitalization stocks as stocks of those companies represented by the Russell 2000^® Index and micro capitalization stocks to be all stocks of those companies represented by the Russell Microcap™ Index. The Fund may also invest in securities of non-U.S. issuers, typically by purchasing American Depositary Receipts (“ADRs”).

In general, the Fund seeks to invest in stocks with above average growth rates and favorable price and earnings momentum. The Fund invests in a broad array of companies that are either currently experiencing, or are expected by the money managers to experience, attractive earnings growth and earnings momentum. The managers of the Fund attempt to identify growth opportunities. Such perceived opportunities may be based on proprietary company research conducted by the managers, broad demographic, regulatory, or political changes that the managers have identified that may spur more attractive earnings growth at select companies, proprietary screens or other means.

The Fund employs a “multi-manager” approach whereby portions of the Fund are allocated to different money managers whose approaches are intended to complement one another. Fund assets not allocated to money managers are managed by RIMCo.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell U.S. Growth Fund, like any investment, has risks. The value of the Fund fluctuates, and you could lose money. The principal risks of investing in the Fund are those associated with investing in equity securities, including ADRs and particularly higher price/earnings, higher growth stocks, investing in securities of small and micro capitalization companies, using a multi-manager approach and security selection.

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions, and/or economic conditions. ADRs have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. Growth company stocks may provide minimal dividends which could otherwise cushion stock prices in a market decline. Investments in small capitalization companies may involve greater risks because these companies generally have a limited track record, and may also have narrower markets, more limited resources and a less diversified product offering than larger, more established companies. These risks may be even more pronounced for micro capitalization companies as compared to small capitalization companies. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL U.S. VALUE FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

capitalization companies, the Fund defines large and medium capitalization stocks as stocks of those companies represented by the Russell 1000^® Index. The Fund defines small capitalization stocks as stocks of those companies represented by the Russell 2000^® Index. The Fund invests in stocks that appear to a money manager to be undervalued relative to their corporate worth, based on current or forecasted earnings, book or asset value, revenues, cash flow or other measures. The Fund may also invest in securities of non-U.S. issuers, typically by purchasing American Depositary Receipts (“ADRs”).

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell U.S. Value Fund, like any investment, has risks. The value of the Fund fluctuates, and you could lose money. The principal risks of investing in the Fund are those associated with investing in equity securities, particularly value stocks, investing in securities of small capitalization companies, investing in ADRs, using a multi-manager approach, using a quantitative investment approach and security selection.

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions, and/or economic conditions. Investments in value stocks may never have their intrinsic values realized by the market or may turn out not to have been undervalued. Investments in small capitalization companies may involve greater risks because these companies generally have a limited track record, and may also have narrower markets, more limited resources and a less diversified product offering than larger, more established companies. ADRs have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL U.S. SMALL & MID CAP FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell U.S. Small & Mid Cap Fund invests primarily in common stocks of small and medium capitalization companies, most of which are U.S. based. While market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium and small capitalization companies, the Fund defines medium and small capitalization stocks as stocks of those companies represented by the Russell 2500™ Index. The Fund’s investments may include companies that have been publicly traded for less than five years and smaller companies, including companies not listed

in the Russell 2500™ Index. The Fund may also invest in securities of non-U.S. issuers, typically by purchasing American Depositary Receipts (“ADRs”).

The Fund may invest a portion of its assets in securities of companies, known as real estate investment trusts (“REITs”), that own and/or manage properties. By investing in REITs indirectly through the Fund, a shareholder will bear expenses of the REITs in addition to expenses of the Fund. The Fund may also invest in equity securities of other types of real estate-related companies.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses three principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell U.S. Small & Mid Cap Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in equity securities, including ADRs and particularly securities of small capitalization companies, investing in REITs, using a multi-manager approach, using a quantitative investment approach, security selection and funds of funds investment risk.

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. ADRs have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. Investments in small capitalization companies may involve greater risks because these companies generally have a limited track record, and may also have narrower markets, more limited resources and a less diversified product offering than larger, more established companies. REITs may be affected by changes in the value of the underlying properties owned by the REITs and by the quality of tenants’ credit. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Growth Style of investing generally results in the selection of stocks that do not pay significant dividends, which could otherwise cushion stock prices in a market decline. The Value Style of investing is subject to the risks that the intrinsic values of the stocks picked may never be realized by the market or the stocks may turn out not to have been undervalued. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. The Fund is used as an investment for certain funds of

funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL INTERNATIONAL DEVELOPED MARKETS FUND

Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell International Developed Markets Fund invests primarily in equity securities, including common stocks and preferred stocks, issued by companies domiciled outside the U.S. and in depositary receipts, which represent ownership of securities of non-U.S. companies. The Fund’s investments span most of the developed nations of the world to maintain a high degree of diversification among countries and currencies. This Fund may be appropriate for investors who want to reduce their investment portfolio’s overall volatility by combining an investment in this Fund with investments in U.S. equity funds. The Fund may also invest a portion of its assets in equity securities of companies that are located in countries with emerging markets or that derive a majority of their revenues from operating in such countries. The Fund may at times seek to protect its investments against adverse currency exchange rate changes by purchasing forward currency contracts.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses three principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to money managers.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

those associated with investing in equity securities (common stock and preferred stock), including securities of small capitalization companies and particularly in international and emerging market securities, purchasing forward currency contracts, investing in depositary receipts, using a multi-manager approach, using a quantitative investment approach, security selection and funds of funds investment risk.

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Since the Fund invests in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. Investments in small capitalization companies may involve greater risks because these companies generally have a limited track record, and may also have narrower markets, more limited resources and a less diversified product offering than larger, more established companies. Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which have less stability than those of more developed countries. Investments in preferred stocks are subject to the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors. Forward currency contracts are subject to the risk that should forward prices increase, the Fund will suffer a loss to the extent that the price of the currency it has agreed to purchase exceeds the price of the currency that it has agreed to sell. Depositary receipts, which are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company, are subject to the risks associated with the underlying international securities. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Growth Style of investing generally results in the selection of stocks that do not pay significant dividends, which could otherwise cushion stock prices in a market decline. The Value Style of investing is subject to the risks that the intrinsic values of the stocks picked may never be realized by the market or the stocks may turn out not to have been undervalued. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. The use of the select holdings strategy by the Fund will amplify the Fund’s security selection risk and potential underperformance. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL GLOBAL EQUITY FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell Global Equity Fund invests primarily in equity securities, including common stocks and preferred stocks, of companies located in a number of countries around the world, including the U.S., and in depositary receipts, in a globally diversified manner. The Fund may also invest its assets in equity securities of companies that are located in emerging markets countries or that derive a majority of their revenues from operations in such countries.

managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Global Equity Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in equity securities (common and preferred stock), including securities of small capitalization companies and international and emerging markets securities, investing in depositary receipts, using a multi-manager approach, using a quantitative investment approach, security selection and funds of funds investment risk.

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Since the Fund invests in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. Investments in small capitalization companies may involve greater risks because these companies generally have a limited track record, and may also have narrower markets, more limited resources and a less diversified product offering than larger, more established companies. Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which have less stability than those of more developed countries. Investments in preferred stocks are subject to the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors. Depositary receipts, which are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company, are subject to the risks associated with the underlying international securities. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Growth Style of investing generally results in the selection of stocks that do not pay significant dividends, which could otherwise cushion stock prices in a market decline. The Value Style of investing is subject to the risks that the intrinsic values of the stocks picked may never be realized by the market or the stocks may turn out not to have been undervalued. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL EMERGING MARKETS FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell Emerging Markets Fund will primarily invest in equity securities, including common stock and preferred stocks, of companies that are located in countries with emerging markets or that derive a majority of their revenues from operations in such countries. These countries include every country in the world except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The Fund seeks to maintain a broadly diversified exposure to emerging market countries and ordinarily will invest in the securities of issuers in at least ten different emerging market countries.

The Fund invests in certain types of derivative instruments. The Fund may use derivatives, including country index futures and swaps or currency forwards, and swaps to manage country and currency exposure as a substitute for holding securities directly or to facilitate the implementation of its investment strategy.

Some emerging market countries do not permit foreigners to participate directly in their securities markets or otherwise present difficulties for efficient foreign investment. Therefore, when a money manager believes it is appropriate to do so, the Fund may invest in synthetic foreign equity securities, which may be referred to as international warrants, local access products, participation notes or low exercise price warrants, or may invest in equity linked notes.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles and different investment approaches. Fund assets not allocated to money managers are managed by RIMCo. The Fund focuses mainly on the investment approaches of money managers but also uses three principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Emerging Markets Fund, like any investment, has risks. An investment in the Fund has risks which may be higher than other types of investments due to the higher risks associated with emerging markets investments. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in equity securities (common stock and preferred stock), including securities of small capitalization companies and particularly in international and emerging markets securities, investing in depositary receipts, derivatives, synthetic foreign equity securities and equity linked notes, using a multi-manager approach, using a quantitative investment approach, security selection and funds of funds investment risk.

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Since the Fund invests in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. Investments in small capitalization companies may involve greater risks because these companies generally have a limited track record, and may also have narrower markets, more limited resources and a less diversified product offering than larger, more established companies. Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which have less stability than those of more developed countries. Investments in preferred stocks are subject to the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors. Depositary receipts, which are securities traded on a local stock exchange that represent securities issued by a foreign publicly-listed company, are subject to the risks associated with the underlying international securities. Price movements of derivatives may not be identical to price movements of portfolio securities or a securities index resulting in the risk that, when the Fund buys a derivative, the hedge may not be effective. Derivatives are subject to a number of risks, such as liquidity risk, market risk, credit risk and management risk. Synthetic foreign equity securities may be subject to liquidity risk, foreign risk and currency risk. Equity linked notes are generally subject to the risks associated with the securities of foreign issuers and with securities denominated in foreign currencies. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Growth Style of investing generally results in the selection of stocks that do not pay significant dividends, which could otherwise cushion stock prices in a market decline. The Value Style of investing is subject to the risks that the intrinsic values of the stocks picked may never be realized by the market or the stocks may turn out not to have been undervalued. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL TAX-MANAGED U.S. LARGE CAP FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth on an after-tax basis.

Principal Investment Strategies

The Russell Tax-Managed U.S. Large Cap Fund invests primarily in equity securities of large capitalization U.S. companies, although the Fund may invest a limited amount in non-U.S. firms from time to time. While market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium and small capitalization companies, the Fund defines large

capitalization stocks as stocks of those companies represented by the S&P 500^® Index. The Fund may also invest in securities of non-U.S. issuers, typically by purchasing American Depositary Receipts (“ADRs”).

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses three principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund seeks to realize capital growth while considering shareholder tax consequences arising from the Fund’s portfolio management activities. The Fund attempts to realize returns as capital gains and not as investment income under U.S. tax laws.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Tax-Managed U.S. Large Cap Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with tax-sensitive management, investing in equity securities, including ADRs, using a multi-manager approach, using a quantitative investment approach, security selection and funds of funds investment risk.

The Fund’s tax-managed strategy may provide a lower return before consideration of federal income tax consequences than other mutual funds that are not tax-managed, and at times, it may be impossible for the Fund to implement the tax-managed strategy. The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. ADRs have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Growth Style of investing generally results in the selection of stocks that do not pay significant dividends, which could otherwise cushion stock prices in a market decline. The Value Style of investing is subject to the risks that the intrinsic values of the stocks picked may never be realized by the market or the stocks may turn out not to have been undervalued. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s

shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL TAX-MANAGED U.S. MID & SMALL CAP FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth on an after tax basis.

Principal Investment Strategies

The Russell Tax-Managed U.S. Mid & Small Cap Fund invests primarily in equity securities of small and medium capitalization U.S. companies, although the Fund may invest a limited amount in non-U.S. firms from time to time. While market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium and small capitalization companies, the Fund defines medium and small capitalization stocks as stocks of those companies represented by the Russell Small Cap Completeness Index™. The Fund may also invest in securities of non-U.S. issuers, typically by purchasing American Depositary Receipts (“ADRs”).

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses three principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Tax-Managed U.S. Mid & Small Cap Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with tax-sensitive management, investing in equity securities, including ADRs, investing in securities of small capitalization companies, using a multi-manager approach, using a quantitative investment approach and security selection.

to the activities of the company that issued them, general market conditions and/or economic conditions. ADRs have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. Investments in small capitalization companies may involve greater risks because these companies generally have a limited track record, and may also have narrower markets, more limited resources and a less diversified product offering than larger, more established companies. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Growth Style of investing generally results in the selection of stocks that do not pay significant dividends, which could otherwise cushion stock prices in a market decline. The Value Style of investing is subject to the risks that the intrinsic values of the stocks picked may never be realized by the market or the stocks may turn out not to have been undervalued. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL STRATEGIC BOND FUND

Non-Fundamental Investment Objective

Seeks to provide current income, and as a secondary objective, capital appreciation.

Principal Investment Strategies

The Russell Strategic Bond Fund invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. The Fund holds asset-backed securities and mortgage-backed securities, including collateralized mortgage obligations and commercial mortgage-backed securities. The Fund purchases loans and other direct indebtedness, and invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds).

The Fund may invest up to 25% of its assets in debt securities that are rated below investment grade. These securities are commonly referred to as high-yield or “junk bonds.” Junk bonds, and to a lesser extent other types of bonds, may be purchased at a discount and thereby provide opportunities for capital appreciation.

A majority of the Fund’s assets are U.S. dollar denominated but the Fund also invests in non-U.S. debt securities, including emerging markets debt securities and bonds issued through the exchange of existing commercial bank loans to sovereign entities for new obligations in connection with debt restructuring, also known as Brady bonds. The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. The Fund employs multiple money managers, each with its own investment style. Fund assets not allocated to money managers are managed by RIMCo.

The Fund may also invest in derivatives as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

significant change to the security’s risk/return profile or if a money manager determines that the security is no longer consistent with the investment strategies it pursues for the Fund.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Strategic Bond Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in fixed-income securities, including non-investment grade fixed-income securities, investing in mortgage-backed securities and international securities, investing in emerging markets debt and Brady bonds, employing derivatives, investing in illiquid securities, using a multi-manager approach, security selection and funds of funds investment risk.

Prices of fixed-income securities rise and fall in response to interest rate changes. Fixed-income securities may also be downgraded in credit rating or go into default. Lower-rated debt securities, or “junk bonds,” involve higher risks, higher volatility and higher risk of default than investment grade bonds. Mortgage-backed securities could incur a prepayment of principal, which may expose the Fund to a lower rate of return upon reinvestment of principal. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. Since the Fund invests in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or outright default by the issuer. The value of Brady bonds can fluctuate significantly based on the issuer’s ability or perceived ability to make payments. Price movements of derivatives may not be identical to price movements of portfolio securities or a securities index resulting in the risk that, when the Fund buys a derivative, the hedge may not be effective. Derivatives are subject to a number of risks, such as liquidity risk, market risk, credit risk and management risk. An illiquid security is one that does not have a readily available market or that is subject to resale restrictions. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL INVESTMENT GRADE BOND FUND

Fundamental Investment Objective

Seeks to provide current income and the preservation of capital.

Principal Investment Strategies

The Russell Investment Grade Bond Fund invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. The Fund holds asset-backed securities and mortgage-backed securities, including collateralized mortgage obligations and commercial mortgage-backed securities. The Fund purchases loans and other direct indebtedness, and invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds). The Fund will invest principally in securities of “investment grade” quality at the time of purchase.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Investment Grade Bond Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in fixed-income securities, mortgage-backed securities and international securities, investing in emerging markets debt and Brady bonds, employing derivatives, investing in illiquid securities, using a multi-manager approach and security selection.

Prices of fixed-income securities rise and fall in response to interest rate changes. Fixed-income securities may also be downgraded in credit rating or go into default. Corporate debt securities have a higher risk of default than fixed income securities issued or guaranteed by the U.S. government. Mortgage-backed securities could incur a prepayment of principal, which may expose the Fund to a lower rate of return upon reinvestment of principal. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. Since the Fund invests in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or outright default by the issuer. The value of Brady bonds can fluctuate significantly based on the issuer’s ability or perceived ability to make payments. Price movements of derivatives may not be identical to price movements of portfolio securities or a securities index resulting in the risk that, when the Fund buys a derivative, the hedge may not be effective. Derivatives are subject to a number of risks, such as liquidity risk, market risk, credit risk and management risk. An illiquid security is one that does not have a readily available market or that is subject to resale restrictions. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL SHORT DURATION BOND FUND

Non-Fundamental Investment Objective

Seeks to provide current income and preservation of capital with a focus on short duration securities.

Principal Investment Strategies

The Russell Short Duration Bond Fund invests primarily in fixed-income securities. In particular, the Fund holds fixed income securities issued or guaranteed by the U.S. government and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. The Fund holds asset-backed securities and mortgage-backed securities, including collateralized mortgage obligations and commercial mortgage-backed securities. The Fund purchases loans and other direct indebtedness, and invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds).

A majority of the Fund’s assets are U.S. dollar denominated. The Fund may invest up to 15% of its assets in debt securities that are rated below investment grade. These securities are commonly referred to as high-yield or “junk bonds.”

The Fund defines short duration as a duration ranging from 0.5 to 3.0 years. The Fund has no restrictions on individual security duration.

A majority of the Fund’s assets are U.S. dollar denominated but the Fund also invests in non-U.S. debt securities, including emerging markets debt securities and bonds issued through the exchange of existing commercial bank loans to sovereign entities for new obligations in connection with debt restructuring, also known as Brady bonds. The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. The Fund employs multiple money managers, each with its own investment style. The Fund’s money managers identify sectors of the fixed-income market that they believe are undervalued and focus the Fund’s investments in those sectors. Fund assets not allocated to money managers are managed by RIMCo.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Short Duration Bond Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in fixed-income securities, including non-investment grade fixed-income securities, mortgage-backed securities and international securities, investing in emerging markets debt and Brady bonds, employing derivatives, investing in illiquid securities, using a multi-manager approach, security selection and funds of funds investment risk.

international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or outright default by the issuer. The value of Brady bonds can fluctuate significantly based on the issuer’s ability or perceived ability to make payments. Price movements of derivatives may not be identical to price movements of portfolio securities or a securities index resulting in the risk that, when the Fund buys a derivative, the hedge may not be effective. Derivatives are subject to a number of risks, such as liquidity risk, market risk, credit risk and management risk. An illiquid security is one that does not have a readily available market or that is subject to resale restrictions. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL TAX EXEMPT BOND FUND

Fundamental Investment Objective

Seeks to provide federal tax-exempt current income consistent with the preservation of capital. The Fund will invest, under normal circumstances, at least 80% of the value of its assets in investments the income from which is exempt from federal income tax.

Principal Investment Strategies

The Russell Tax Exempt Bond Fund invests primarily in investment-grade municipal debt obligations providing federal tax-exempt interest income. The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers 1-10 Year Municipal Bond Index, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration. The Fund employs multiple money managers, each with its own expertise in the municipal bond market. Fund assets not allocated to money managers are managed by RIMCo.

The Fund may invest up to 10% of its assets in municipal debt securities that are rated below investment grade. These securities are commonly referred to as high-yield or “junk bonds.”

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Tax Exempt Bond Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in fixed-income securities, including non-investment grade fixed-income municipal securities, investing in municipal obligations, investing in illiquid securities, using a multi-manager approach and security selection.

obligations are affected by economic, business or political developments and may be subject to provisions of litigation, bankruptcy and other laws affecting the rights and remedies of creditors. An illiquid security is one that does not have a readily available market or that is subject to resale restrictions. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL REAL ESTATE SECURITIES FUND

Non-Fundamental Investment Objective

Seeks to provide current income and long term capital growth.

Principal Investment Strategies

The Russell Real Estate Securities Fund seeks to achieve its objective by concentrating its investments in equity securities of real estate companies, primarily companies known as real estate investment trusts (REITs) and other real estate operating companies whose value is derived from ownership, development and management of underlying real estate properties. The Fund may also invest in equity securities of other types of real estate-related companies. The Fund primarily invests in companies which are U.S. based. The Fund also invests in non-U.S. companies.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Real Estate Securities Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in equity securities, particularly in securities of companies concentrated in the real estate market, including international securities, using a multi-manager approach, security selection, being a “non-diversified fund,” industry concentration and funds of funds investment risk.

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. Real estate securities are also subject to the risks associated with direct ownership of real estate, such as declines in the value of real estate, changes in economic and real estate market conditions, increases in property taxes or other operating expenses and changes in tax laws and interest rates. Since the Fund invests in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. As a non-diversified fund, the Fund is subject to additional risk. Changes in market value of a single investment could cause greater fluctuations in share price than would occur in a more diversified fund. Because the Fund concentrates its investments in the real estate industry it is vulnerable to the risks of that industry and is subject to greater risks and market fluctuations than a fund that invests in a broader range of industries. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such

funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL MONEY MARKET FUND

Non-Fundamental Investment Objective

Seeks to maximize current income while preserving capital and liquidity.

Principal Investment Strategies

The Russell Money Market Fund invests in a portfolio of high quality money market securities maturing within 397 days or less. However, variable rate securities issued by the U.S. government or its agencies or instrumentalities may have longer maturities. The Fund invests in securities issued by U.S. and foreign banks, commercial paper, including asset-backed commercial paper, asset-backed securities and mortgage-backed securities, and short-term debt of U.S. and foreign corporations and trusts. The Fund also invests in bank instruments including certificates of deposit, Euro dollar certificates of deposit, Euro dollar time deposits and Yankee certificates of deposit. Other types of securities the Russell Money Market Fund invests in include other money market funds and funding agreements. The dollar-weighted average maturity of the Fund’s portfolio is 90 days or less. The Russell Money Market Fund seeks to achieve its objective by active security selection consistent with its daily assessment of market and credit risks.

The Fund also invests in repurchase agreements and may invest in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee bonds). The Fund may also invest in demand notes, which are obligations with the right to a “put.” A “put” obligates the provider of the put to buy the security within a specified time and at an agreed upon price.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

The Fund seeks to maintain a net asset value of $1.00 per share.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell Money Market Fund, like any investment, has risks. The principal risks of investing in the Fund are those associated with investing in fixed-income securities, including instruments of U.S. and foreign banks and U.S. and foreign corporations, asset-backed commercial paper, asset-backed securities and mortgage-backed securities, funding agreements, repurchase agreements, demand notes, illiquid securities, security selection and the maintenance of a stable $1.00 net asset value.

Prices of fixed-income securities rise and fall in response to interest rate changes. Fixed-income securities may also be downgraded in credit rating or go into default. Non-U.S. corporations and banks issuing dollar denominated instruments in the U.S. are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks, which may increase the possibility that they may become insolvent or otherwise unable to fulfill their obligations on these instruments. Asset-backed commercial paper is subject to price and default risk. Mortgage-backed securities could incur a prepayment of principal, which may expose the Fund to a lower rate of return upon reinvestment of principal. Funding agreements, as well as all of the above-described instruments, are subject to reinvestment risk and credit risk. Repurchase agreements are subject to default risk. There may be certain restrictions in the buy back

arrangement for a demand note which may not obligate the seller to repurchase the securities. An illiquid security is one that does not have a readily available market or that is subject to resale restrictions. There is no assurance that the Fund will maintain a net asset value of $1.00 per share on a continuous basis, and it is possible to lose money by investing in the Fund.

Please refer to the “Risks” section later in this Prospectus for further details.

An investment in any Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Russell Money Market Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Russell Money Market Fund and all other Funds.

Performance

The following bar charts illustrate the risks of investing in the Funds by showing how the performance of each Fund’s Class S Shares varies from year to year over a 10-year period (or, if a Fund has not been in operation for 10 years, since the beginning of that Fund’s operations). The returns (both before and after tax) for the Class A, Class C and Class E Shares offered by this Prospectus may be lower than the returns shown in the bar chart, depending upon the fees and expenses of those Classes. The highest and lowest returns for a full quarter during the periods shown in the bar charts are set forth below the bar charts.

The tables accompanying the bar charts further illustrate the risks of investing in the Funds by showing how each Fund’s average annual returns for 1, 5 and 10 years (or, if a Fund has not been in operation for 10 years, since the beginning of operations of the Fund) compare with the returns of certain indexes that measure broad market performance. Index returns do not reflect deduction for fees, expenses or taxes. Index returns do not include fair valuation adjustments which may be included in fund returns. After-tax returns are shown only for one class. The after-tax returns for other classes will vary. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns for the Russell International Developed Markets Fund and the Russell Emerging Markets Fund reflect foreign tax credits passed by these Funds to their shareholders thereby increasing total returns after taxes on distributions and total returns after taxes on distributions and sale of Fund Shares. If a Fund has realized capital losses, the total return after taxes on distributions and sale of Fund Shares may be higher than the total return before taxes and the total return after taxes on distributions. The calculation of total return after taxes on distributions and sale of Fund Shares assumes that a shareholder has sufficient capital gains of the same character to offset any capital losses on a sale of Fund Shares and that the shareholder may therefore deduct the entire capital loss.

The Russell Global Equity Fund commenced operations on February 28, 2007. Performance history and average annual returns for the Russell Global Equity Fund will be available after the Russell Global Equity Fund has been in operation for one calendar year.

Past performance, both before-tax and after-tax, is no indication of future results.

Russell U.S. Core Equity Fund

Annual Total Returns

(for the years ended December 31)

Class S#

LOGO

Best Quarter: 22.54% (4Q/98)

Worst Quarter: (16.77)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class A*	4.07%	12.77%	4.84%

Return Before Taxes, Class C**	10.43%	14.11%	5.47%

Return Before Taxes, Class E***	10.43%	14.11%	5.47%

Return Before Taxes, Class S#	10.76%	14.39%	5.69%

Return After Taxes on Distributions, Class S#	8.73%	13.51%	4.58%

Return After Taxes on Distributions and Sale of Fund Shares, Class S#	8.57%	12.44%	4.48%

Russell 1000^® Index	5.77%	13.43%	6.20%

No Class S Shares were outstanding during the periods shown The Fund expects to first issue Class S Shares in September 2008. Returns for Class S Shares are the returns of the Fund’s Class I Shares. However, the returns for Class S Shares would be substantially similar to those of Class I Shares because they are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that Class S Shares do not have the same expenses as the Class I Shares. Class I Shares are not offered in this Prospectus.

No Class A Shares were outstanding during the periods shown. The Fund expects to first issue Class A Shares in September 2008. The returns shown for Class A Shares from January 1, 1998 to May 13, 1999 are the returns of the Fund’s Class I Shares and do not reflect deduction of the Rule 12b-1 distribution fees that apply to Class A Shares. Had it done so, the returns shown for that period would have been lower. The returns shown for Class A Shares from May 14, 1999 to December 31, 2007 are the returns of the Fund’s Class E Shares. The performance shown has been adjusted to reflect the deduction of the maximum Class A sales charge of 5.75%. Annual returns for each Class will differ only to the extent that Class A Shares do not have the same expenses as the Class I and Class E Shares. Class I Shares are not offered in this Prospectus.

No Class C Shares were outstanding during the periods shown. The Fund expects to first issue Class C Shares in September 2008. The returns shown for Class C Shares from January 1, 1998 to May 13, 1999 are the returns of the Fund’s Class I Shares and do not reflect the deduction of 12b-1 distribution and shareholder services fees that apply to Class C Shares. The returns shown for Class C Shares from May 14, 1999 to December 31, 2007 are the returns of the Fund’s Class E Shares and do not reflect deduction of the Rule 12b-1 distribution fees that apply to Class C Shares. Had they done so, the returns shown for those periods would have been lower. Annual returns for each Class will differ only to the extent that Class C Shares do not have the same expenses as the Class I and Class E Shares. Class I Shares are not offered in this Prospectus.

***

The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares prior to that date are those of the Fund’s Class I Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. Class I Shares are not offered in this Prospectus.

Russell U.S. Quantitative Equity Fund

Annual Total Returns

(for the years ended December 31)

Class S#

LOGO

Best Quarter: 23.00% (4Q/98)

Worst Quarter: (17.20)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class A*	(3.39)%	10.80%	5.06%

Return Before Taxes, Class C**	2.50%	12.12%	5.68%

Return Before Taxes, Class E***	2.50%	12.12%	5.68%

Return Before Taxes, Class S#	2.77%	12.40%	5.90%

Return After Taxes on Distributions, Class S#	0.83%	11.48%	4.50%

Return After Taxes on Distributions and Sale of Fund Shares, Class S#	3.75%	10.73%	4.59%

Russell 1000^® Index	5.77%	13.43%	6.20%

No Class S Shares were outstanding during the periods shown. The Fund expects to first issue Class S Shares in September 2008. Returns for Class S Shares are the returns of the Fund’s Class I Shares. However, the returns for Class S Shares would be substantially similar to those of Class I Shares because they are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that Class S Shares do not have the same expenses as the Class I Shares. Class I Shares are not offered in this Prospectus.

***

Russell U.S. Growth Fund

Annual Total Returns

(for the years ended December 31)

Class S

LOGO

Best Quarter: 18.36% (2Q/03)

Worst Quarter: (18.00)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	Since Inception*

Return Before Taxes, Class C	10.84%	11.57%	(1.78)%

Return Before Taxes, Class E	11.85%	12.58%	(0.91)%

Return Before Taxes, Class S	12.01%	12.85%	(0.66)%

Return After Taxes on Distributions, Class S	11.28%	12.70%	(0.75)%

Return After Taxes on Distributions and Sale of Fund Shares, Class S	8.77%	11.27%	(0.56)%

Russell 1000^® Growth Index	11.81%	12.11%	(0.73)%

Commenced operations by issuing Class C, E and S Shares on January 31, 2001.

Russell U.S. Value Fund

Annual Total Returns

(for the years ended December 31)

Class S

LOGO

Best Quarter: 16.81% (2Q/03)

Worst Quarter: (17.49)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	Since Inception*

Return Before Taxes, Class C	(3.83)%	12.40%	4.20%

Return Before Taxes, Class E	(3.01)%	13.36%	5.09%

Return Before Taxes, Class S	(2.90)%	13.61%	5.34%

Return After Taxes on Distributions, Class S	(5.93)%	12.31%	4.34%

Return After Taxes on Distributions and Sale of Fund Shares, Class S	1.00%	11.72%	4.38%

Russell 1000^® Value Index	(0.17)%	14.63%	6.76%

Commenced operations by issuing Class C, E and S Shares on January 31, 2001.

Russell U.S. Small & Mid Cap Fund

Annual Total Returns

(for the years ended December 31)

Class S#

LOGO

Best Quarter: 23.14% (2Q/03)

Worst Quarter: (21.69)% (3Q/98)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class A*	(1.46)%	15.15%	7.98%

Return Before Taxes, Class C**	4.55%	16.52%	8.62%

Return Before Taxes, Class E***	4.55%	16.52%	8.62%

Return Before Taxes, Class S#	4.77%	16.77%	8.82%

Return After Taxes on Distributions, Class S#	1.07%	13.29%	6.32%

Return After Taxes on Distributions and Sale of Fund Shares, Class S#	5.52%	13.66%	6.71%

Russell 2500^™ Index	1.38%	16.99%	9.01%

Russell 2000^® Index	(1.57)%	16.25%	7.08%

***

Russell International Developed Markets Fund

Annual Total Returns

(for the years ended December 31)

Class S#

LOGO

Best Quarter: 20.31% (2Q/03)

Worst Quarter: (20.45)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class A*	6.17%	19.89%	7.82%

Return Before Taxes, Class C**	12.64%	21.31%	8.46%

Return Before Taxes, Class E***	12.64%	21.31%	8.46%

Return Before Taxes, Class S#	12.91%	21.56%	8.67%

Return After Taxes on Distributions, Class S#	8.64%	19.79%	7.37%

Return After Taxes on Distributions and Sale of Fund Shares, Class S#	11.21%	18.60%	7.13%

MSCI EAFE^® Index (net of tax on dividends from foreign holdings)	11.17%	21.59%	8.66%

***

Russell Emerging Markets Fund

Annual Total Returns

(for the years ended December 31)

Class S

LOGO

Best Quarter: 27.94% (4Q/99)

Worst Quarter: (22.05)% (3Q/01)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class A*	29.85%	34.99%	11.50%

Return Before Taxes, Class C**	36.78%	35.68%	11.44%

Return Before Taxes, Class E***	37.77%	36.61%	12.16%

Return Before Taxes, Class S	38.10%	36.90%	12.38%

Return After Taxes on Distributions, Class S	31.99%	34.91%	11.51%

Return After Taxes on Distributions and Sale of Fund Shares, Class S	28.76%	32.93%	10.90%

MSCI Emerging Markets Index (net of tax on dividends from foreign holdings)	39.39%	37.02%	N/A

The Fund first issued Class A Shares on March 1, 2007. The returns shown for Class A Shares from January 1, 1998 to September 21, 1998 are the returns of the Fund’s Class S Shares and do not reflect deduction of the Rule 12b-1 distribution fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class A Shares from September 22, 1998 to February 28, 2007 are the returns of the Fund’s Class E Shares. The performance shown has been adjusted to reflect deduction of the maximum Class A sales charge of 5.75%.

The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares from January 1, 1998 to September 21, 1998 are the returns of the Fund’s Class S Shares, and the returns of the Fund’s Class E Shares from September 22, 1998 to January 26, 1999, and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown for those periods would have been lower.

***

The Fund first issued Class E Shares on September 22, 1998. The returns shown for Class E Shares prior to that date are those of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower.

Russell Tax-Managed U.S. Large Cap Fund

Annual Total Returns

(for the years ended December 31)

Class S

LOGO

Best Quarter: 23.71% (4Q/98)

Worst Quarter: (17.77)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class C*	6.49%	11.42%	4.58%

Return Before Taxes, Class E**	7.33%	12.27%	5.27%

Return Before Taxes, Class S	7.56%	12.55%	5.45%

Return After Taxes on Distributions, Class S	7.46%	12.42%	5.27%

Return After Taxes on Distributions and Sale of Fund Shares, Class S	5.09%	10.98%	4.68%

S&P 500^® Index	5.49%	12.83%	5.91%

The Fund first issued Class C Shares on December 1, 1999. The returns shown for Class C Shares prior to that date are the returns of the Fund’s Class S Shares and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown would have been lower.

The Fund first issued Class E Shares on December 6, 2000. The returns shown for Class E Shares prior to that date are the returns of the Fund’s Class S Shares and do not reflect deduction of the shareholder services fees that apply to Class E Shares. Had it done so, the returns shown would have been lower.

Russell Tax-Managed U.S. Mid & Small Cap Fund

Annual Total Returns

(for the years ended December 31)

Class S

LOGO

Best Quarter: 17.67% (2Q/03)

Worst Quarter: (18.32)% (3Q/01)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	Since Inception*

Return Before Taxes, Class C	4.56%	14.61%	4.44%

Return Before Taxes, Class E**	5.45%	15.50%	5.25%

Return Before Taxes, Class S	5.70%	15.80%	5.48%

Return After Taxes on Distributions, Class S	4.26%	15.44%	5.27%

Return After Taxes on Distributions and Sale of Fund Shares, Class S	5.26%	13.89%	4.75%

Russell 2500^™ Index	1.38%	16.99%	9.66%

Russell Small Cap Completeness Index™***	4.85%	17.35%	6.28%

Commenced operations by issuing Class C and S Shares on December 1, 1999.

The Fund first issued Class E Shares on December 6, 2000. The returns shown for Class E Shares prior to that date are those of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower.

***

The Russell Small Cap Completeness Index™ is made up of the companies in the Russell 3000^® Index less the companies in the S&P 500^® Index.

Russell Strategic Bond Fund

Annual Total Returns

(for the years ended December 31)

Class S#

LOGO

Best Quarter: 3.84% (3Q/01)

Worst Quarter: (1.95)% (2Q/04)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class A*	2.21%	3.99%	5.19%

Return Before Taxes, Class C**	6.15%	4.78%	5.59%

Return Before Taxes, Class E***	6.15%	4.78%	5.59%

Return Before Taxes, Class S#	6.40%	5.05%	5.80%

Return After Taxes on Distributions, Class S#	4.52%	3.44%	3.66%

Return After Taxes on Distributions and Sale of Fund Shares, Class S#	4.13%	3.38%	3.64%

Lehman Brothers Aggregate Bond Index	6.97%	4.42%	5.97%

No Class A Shares were outstanding during the periods shown. The Fund expects to first issue Class A Shares in September 2008. The returns shown for Class A Shares from January 1, 1998 to May 13, 1999 are the returns of the Fund’s Class I Shares and do not reflect deduction of the Rule 12b-1 distribution fees that apply to Class A Shares. Had it done so, the returns shown for that period would have been lower. The returns shown for Class A Shares from May 14, 1999 to December 31, 2007 are the returns of the Fund’s Class E Shares. The performance shown has been adjusted to reflect the deduction of the maximum Class A sales charge of 3.75%. Annual returns for each Class will differ only to the extent that Class A Shares do not have the same expenses as the Class I and Class E Shares. Class I Shares are not offered in this Prospectus.

***

To obtain current yield information, please call 1-800-787-7354.

Russell Investment Grade Bond Fund

Annual Total Returns

(for the years ended December 31)

Class S***

LOGO

Best Quarter: 4.49% (3Q/01)

Worst Quarter: (2.27)% (2Q/04)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class C*	5.77%	3.91%	5.45%

Return Before Taxes, Class E**	5.95%	3.94%	5.47%

Return Before Taxes, Class S***	6.17%	4.21%	5.70%

Return After Taxes on Distributions, Class S***	4.34%	2.46%	3.52%

Return After Taxes on Distributions and Sale of Fund Shares, Class S***	3.98%	2.60%	3.56%

Lehman Brothers Aggregate Bond Index	6.97%	4.42%	5.97%

The Fund first issued Class C Shares on October 22, 2007. The returns shown for Class C Shares are the returns of the Fund’s Class I Shares for the period January 1, 1998 to May 13, 1999 and do not reflect the deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. The returns shown for Class C Shares from May 14, 1999 to October 21, 2007 are the returns of the Fund’s Class E Shares and do not reflect deduction of the Rule 12b-1 distribution fees that apply to Class C Shares. Had it done so, the returns shown for those periods would have been lower. However, the returns for Class C Shares would be substantially similar to those of Class I Shares or Class E Shares because they are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that Class C Shares do not have the same expenses as the Class I Shares or Class E Shares. Class I Shares are not offered in this Prospectus.

The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares prior to that date are the returns of the Fund’s Class I Shares and do not reflect the deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower. Class I Shares are not offered in this Prospectus.

***

The Fund first issued Class S Shares on October 22, 2007. The returns shown for Class S Shares prior to that date are the returns of the Fund’s Class I Shares. However, the returns for Class S Shares would be substantially similar to those of Class I Shares because they are invested in the same portfolio of securities. Annual returns for each Class will differ only to the extent that Class S Shares do not have the same expenses as the Class I Shares. Class I Shares are not offered in this Prospectus.

To obtain current yield information, please call 1-800-787-7354.

Russell Short Duration Bond Fund

Annual Total Returns

(for the years ended December 31)

Class S

LOGO

Best Quarter: 3.16% (3Q/01)

Worst Quarter: (1.08)% (2Q/04)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class A*	1.73%	1.91%	3.96%

Return Before Taxes, Class C**	4.98%	1.94%	3.68%

Return Before Taxes, Class E***	5.78%	2.70%	4.36%

Return Before Taxes, Class S	6.06%	2.97%	4.60%

Return After Taxes on Distributions, Class S	4.53%	1.90%	2.96%

Return After Taxes on Distributions and Sale of Fund Shares, Class S	3.92%	1.91%	2.92%

Merrill Lynch 1-2.99 Years Treasury Index	7.32%	3.12%	4.75%

The Fund first issued Class A Shares on March 1, 2007. The returns shown for Class A Shares are the returns of the Fund’s Class S Shares from January 1, 1998 to February 17, 1999 and do not reflect deduction of the Rule 12b-1 distribution fees. Had it done so, the returns shown for that period would have been lower. The returns shown for Class A Shares are the returns of the Fund’s Class E Shares from February 18, 1999 to February 28, 2007. The performance shown has been adjusted to reflect deduction of the maximum Class A sales charge of 3.75%.

The Fund first issued Class C Shares on March 3, 1999. The returns shown for Class C Shares are the returns of the Fund’s Class S Shares from January 1, 1998 to February 17, 1999 and the performance of the Class E Shares from February 18, 1999 to March 2, 1999 and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown for that period would have been lower.

***

The Fund first issued Class E Shares on February 18, 1999. The returns shown for Class E Shares prior to that date are the returns of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower.

To obtain current yield information, please call 1-800-787-7354.

Russell Tax Exempt Bond Fund

Annual Total Returns

(for the years ended December 31)

Class S

LOGO

Best Quarter: 3.65% (3Q/02)

Worst Quarter: (1.96)% (2Q/04)


Average annual total returns for the periods ended December 31, 2007*	1 Year	5 Years	10 Years

Return Before Taxes, Class C**	1.70%	1.81%	3.01%

Return Before Taxes, Class E***	2.45%	2.59%	3.68%

Return Before Taxes, Class S	2.72%	2.84%	3.90%

Return After Taxes on Distributions, Class S	1.41%	1.58%	3.27%

Return After Taxes on Distributions and Sale of Fund Shares, Class S	1.76%	1.69%	3.26%

Lehman Brothers Municipal 1-10 Year Index	4.79%	3.49%	4.61%

The performance of the Russell Tax Exempt Bond Fund prior to January 1, 1999 reflects a higher advisory fee than is currently borne by the Fund.

The Fund first issued Class C Shares on March 29, 1999. The returns shown for Class C Shares prior to that date are the returns of the Fund’s Class S Shares and do not reflect deduction of the Rule 12b-1 distribution fees or shareholder services fees that apply to Class C Shares. Had it done so, the returns shown for that period would have been lower.

***

The Fund first issued Class E Shares on May 14, 1999. The returns shown for Class E Shares prior to that date are the returns of the Fund’s Class S Shares and do not reflect deduction of shareholder services fees. Had it done so, the returns shown for that period would have been lower.

To obtain current yield information, please call 1-800-787-7354.

Russell Real Estate Securities Fund

Annual Total Returns

(for the years ended December 31)

Class S

LOGO

Best Quarter: 16.88% (4Q/04)

Worst Quarter: (12.94)% (4Q/07)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class A*	(20.84)%	17.32%	10.30%

Return Before Taxes, Class C**	(16.59)%	17.84%	10.23%

Return Before Taxes, Class E***	(15.96)%	18.73%	10.96%

Return Before Taxes, Class S	(15.76)%	19.02%	11.25%

Return After Taxes on Distributions, Class S	(18.16)%	16.24%	8.77%

Return After Taxes on Distributions and Sale of Fund Shares, Class S	(8.37)%	15.72%	8.58%

FTSE NAREIT Equity REIT Index	(15.69)%	18.17%	10.48%

The Fund first issued Class A Shares on March 1, 2007. The returns shown for Class A shares prior to that date are the returns of the Fund’s Class E Shares. The returns shown for Class E Shares from January 1, 1998 to May 17, 1998 reflect the deduction of the Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees and the returns shown after that date do not reflect the deduction of Rule 12b-1 distribution fees. Had it done so, the returns shown for that period would have been lower. The performance shown has been adjusted to reflect deduction of the maximum Class A sales charge of 5.75%.

The Fund first issued Class C Shares on January 27, 1999. The returns shown for Class C Shares prior to that date are the returns of the Fund’s Class E Shares. The returns shown for Class E shares from January 1, 1998 to May 17, 1998 reflect the deduction of the Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees and the returns shown after that date do not reflect the deduction of Rule 12b-1 distribution fees. Had it done so, the returns shown for that period would have been lower.

***

The returns shown for Class E Shares from January 1, 1998 to May 17, 1998 reflect the deduction of the Rule 12b-1 distribution and shareholder services fees. Effective May 18, 1998, Class E Shares of the Fund no longer charged Rule 12b-1 distribution fees, which had reduced Class E returns prior to that date.

Russell Money Market Fund

Annual Total Returns

(for the years ended December 31)

Class S

LOGO

Best Quarter: 1.67% (3Q/00)

Worst Quarter: 0.25% (3Q/03)

The Fund first issued Class A Shares on April 21, 2003. The returns shown for Class A Shares prior to that date are the returns of the Fund’s Class S Shares and do not reflect deduction of the Rule 12b-1 distribution fees that apply to Class A Shares. Had it done so, the returns shown for that period would have been lower.

To obtain current yield information, please call 1-800-787-7354.

Fees and Expenses

The following tables describe the fees and expenses that you may pay if you buy and hold Shares of the Funds.

Shareholder Fees

(fees paid directly from your investment)


	Maximum Sales Charge (Load) Imposed on Purchases	Maximum Sales Charge (Load) Imposed on Reinvested Dividends	Maximum Deferred Sales Charge (Load)	Redemption Fees**	Exchange Fees
Class A (except Russell Strategic Bond Fund, Russell Short Duration Bond Fund and Russell Money Market Fund)	5.75%	None	1.00%*	None	None
Class A, Russell Strategic Bond Fund and Russell Short Duration Bond Fund	3.75%	None	1.00%*	None	None
Class A, Russell Money Market Fund	None	None	None	None	None
Class C, E, S (All Funds)	None	None	None	None	None

There is a 1.00% deferred sales charge on redemptions of Class A Shares (except Class A of the Russell Money Market Fund) made within 12 months of a purchase of $1 million or more on which no front-end sales charge was paid and your Financial Intermediary was paid a commission by the Funds’ Distributor.

Each Fund may charge a fee to cover the cost of sending a wire transfer for redemptions, and your bank may charge an additional fee to receive the wire. For more information, please refer to the section “Payment of Redemption Proceeds.”

Annual Fund Operating Expenses#

(expenses that are deducted from Fund assets)

(% of net assets)


	Advisory Fee		Distribution (12b-1) Fees**		Other Expenses##		Acquired Fund Fees and Expenses##		Total Annual Fund Operating Expenses##		Less Fee Waivers and Expense Reimbursements###		Net Annual Fund Operating Expenses##
Class A Shares*
Russell U.S. Core Equity	0.55	%	0.25	%	0.28	%	0.00	%	1.08	%	0.00	%	1.08	%
Russell U.S. Quantitative Equity***	0.55	%	0.25	%	0.48	%	0.00	%	1.28	%	0.00	%	1.28	%
Russell U.S. Small & Mid Cap	0.70	%	0.25	%	0.29	%	0.00	%	1.24	%	0.00	%	1.24	%
Russell International Developed Markets	0.70	%	0.25	%	0.31	%	0.01	%	1.27	%	0.00	%	1.27	%
Russell Global Equity	0.95	%	0.25	%	0.34	%	0.01	%	1.55	%	0.00	%	1.55	%
Russell Emerging Markets	1.15	%	0.25	%	0.42	%	0.01	%	1.83	%	0.00	%	1.83	%
Russell Strategic Bond	0.50	%	0.25	%	0.26	%	0.03	%	1.04	%	(0.02	)%	1.02	%
Russell Short Duration Bond	0.45	%	0.25	%	0.33	%	0.00	%	1.03	%	(0.08	)%	0.95	%
Russell Real Estate Securities	0.80	%	0.25	%	0.28	%	0.00	%	1.33	%	0.00	%	1.33	%
Russell Money Market	0.20	%	0.10	%	0.27	%	0.00	%	0.57	%	(0.16	)%	0.41	%


	Advisory Fee		Distribution (12b-1) Fees**		Other Expenses##		Acquired Fund Fees and Expenses##		Total Annual Fund Operating Expenses##		Less Fee Waivers and Expense Reimbursements###		Net Annual Fund Operating Expenses##
Class C Shares*
Russell U.S. Core Equity	0.55	%	0.75	%	0.53	%	0.00	%	1.83	%	0.00	%	1.83	%
Russell U.S. Quantitative Equity***	0.55	%	0.75	%	0.73	%	0.00	%	2.03	%	0.00	%	2.03	%
Russell U.S. Growth	0.80	%	0.75	%	0.65	%	0.00	%	2.20	%	(0.03	)%	2.17	%
Russell U.S. Value	0.70	%	0.75	%	0.58	%	0.00	%	2.03	%	0.00	%	2.03	%
Russell U.S. Small & Mid Cap	0.70	%	0.75	%	0.54	%	0.00	%	1.99	%	0.00	%	1.99	%
Russell International Developed Markets	0.70	%	0.75	%	0.56	%	0.01	%	2.02	%	0.00	%	2.02	%
Russell Global Equity	0.95	%	0.75	%	0.59	%	0.01	%	2.30	%	0.00	%	2.30	%
Russell Emerging Markets	1.15	%	0.75	%	0.67	%	0.01	%	2.58	%	0.00	%	2.58	%
Russell Tax-Managed U.S. Large Cap	0.70	%	0.75	%	0.57	%	0.00	%	2.02	%	(0.08	)%	1.94	%
Russell Tax-Managed U.S. Mid & Small Cap	0.98	%	0.75	%	0.61	%	0.00	%	2.34	%	(0.08	)%	2.26	%
Russell Strategic Bond	0.50	%	0.75	%	0.51	%	0.03	%	1.79	%	(0.02	)%	1.77	%
Russell Investment Grade Bond	0.25	%	0.75	%	0.55	%	0.00	%	1.55	%	0.00	%	1.55	%
Russell Short Duration Bond	0.45	%	0.75	%	0.58	%	0.00	%	1.78	%	(0.08	)%	1.70	%
Russell Tax Exempt Bond	0.30	%	0.75	%	0.56	%	0.00	%	1.61	%	(0.08	)%	1.53	%
Russell Real Estate Securities	0.80	%	0.75	%	0.53	%	0.00	%	2.08	%	0.00	%	2.08	%

Class E Shares*
Russell U.S. Core Equity	0.55	%	0.00	%	0.53	%	0.00	%	1.08	%	(0.13	)%	0.95	%
Russell U.S. Quantitative Equity***	0.55	%	0.00	%	0.73	%	0.00	%	1.28	%	(0.13	)%	1.15	%
Russell U.S. Growth	0.80	%	0.00	%	0.65	%	0.00	%	1.45	%	(0.03	)%	1.42	%
Russell U.S. Value	0.70	%	0.00	%	0.58	%	0.00	%	1.28	%	0.00	%	1.28	%
Russell U.S. Small & Mid Cap	0.70	%	0.00	%	0.54	%	0.00	%	1.24	%	(0.13	)%	1.11	%
Russell International Developed Markets	0.70	%	0.00	%	0.56	%	0.01	%	1.27	%	(0.13	)%	1.14	%
Russell Global Equity	0.95	%	0.00	%	0.59	%	0.01	%	1.55	%	0.00	%	1.55	%
Russell Emerging Markets	1.15	%	0.00	%	0.67	%	0.01	%	1.83	%	0.00	%	1.83	%
Russell Tax-Managed U.S. Large Cap	0.70	%	0.00	%	0.57	%	0.00	%	1.27	%	(0.08	)%	1.19	%
Russell Tax-Managed U.S. Mid & Small Cap	0.98	%	0.00	%	0.61	%	0.00	%	1.59	%	(0.08	)%	1.51	%
Russell Strategic Bond	0.50	%	0.00	%	0.51	%	0.03	%	1.04	%	(0.13	)%	0.91	%
Russell Investment Grade Bond	0.25	%	0.00	%	0.55	%	0.00	%	0.80	%	(0.13	)%	0.67	%
Russell Short Duration Bond	0.45	%	0.00	%	0.58	%	0.00	%	1.03	%	(0.08	)%	0.95	%
Russell Tax Exempt Bond	0.30	%	0.00	%	0.56	%	0.00	%	0.86	%	(0.08	)%	0.78	%
Russell Real Estate Securities	0.80	%	0.00	%	0.53	%	0.00	%	1.33	%	0.00	%	1.33	%

(continued on next page)


	Advisory Fee		Distribution (12b-1) Fees**		Other Expenses##		Acquired Fund Fees and Expenses##		Total Annual Fund Operating Expenses##		Less Fee Waivers and Expense Reimbursements		Net Annual Fund Operating Expenses##
Class S Shares*
Russell U.S. Core Equity	0.55	%	0.00	%	0.28	%	0.00	%	0.83	%	0.00	%	0.83	%
Russell U.S. Quantitative Equity***	0.55	%	0.00	%	0.48	%	0.00	%	1.03	%	0.00	%	1.03	%
Russell U.S. Growth	0.80	%	0.00	%	0.40	%	0.00	%	1.20	%	(0.03	)%	1.17	%
Russell U.S. Value	0.70	%	0.00	%	0.33	%	0.00	%	1.03	%	0.00	%	1.03	%
Russell U.S. Small & Mid Cap	0.70	%	0.00	%	0.29	%	0.00	%	0.99	%	0.00	%	0.99	%
Russell International Developed Markets	0.70	%	0.00	%	0.31	%	0.01	%	1.02	%	0.00	%	1.02	%
Russell Global Equity	0.95	%	0.00	%	0.34	%	0.01	%	1.30	%	0.00	%	1.30	%
Russell Emerging Markets	1.15	%	0.00	%	0.42	%	0.01	%	1.58	%	0.00	%	1.58	%
Russell Tax-Managed U.S. Large Cap	0.70	%	0.00	%	0.32	%	0.00	%	1.02	%	(0.08	)%	0.94	%
Russell Tax-Managed U.S. Mid & Small Cap	0.98	%	0.00	%	0.36	%	0.00	%	1.34	%	(0.08	)%	1.26	%
Russell Strategic Bond	0.50	%	0.00	%	0.26	%	0.03	%	0.79	%	(0.02	)%	0.77	%
Russell Investment Grade Bond	0.25	%	0.00	%	0.30	%	0.00	%	0.55	%	0.00	%	0.55	%
Russell Short Duration Bond	0.45	%	0.00	%	0.33	%	0.00	%	0.78	%	(0.08	)%	0.70	%
Russell Tax Exempt Bond	0.30	%	0.00	%	0.31	%	0.00	%	0.61	%	(0.08	)%	0.53	%
Russell Real Estate Securities	0.80	%	0.00	%	0.28	%	0.00	%	1.08	%	0.00	%	1.08	%
Russell Money Market	0.20	%	0.00	%	0.27	%	0.00	%	0.47	%	(0.27	)%	0.20	%

“Other Expenses” includes a shareholder services fee of 0.25% of average daily net assets for Class C and E Shares, and an administrative fee of 0.05% of average daily net assets for all Classes of Shares.

Under the distribution plan, Class A Shares of the Russell Money Market Fund pay distribution fees of up to 0.15% annually for the sale and distribution of Class A Shares. However, distribution fees are estimated to be 0.10% for the fiscal year ending October 31, 2008.

***

For the Russell U.S. Quantitative Equity Fund, a portion of “Other Expenses” is attributable to interest expense and dividend expense from short sales as follows:


	Class A Shares		Class C Shares		Class E Shares		Class S Shares
Interest Expense from Short Sales	0.06	%	0.06	%	0.06	%	0.06	%
Dividend Expense from Short Sales	0.14	%	0.14	%	0.14	%	0.14	%
Remainder of other Expenses	0.28	%	0.53	%	0.53	%	0.28	%

Total Other Expenses	0.48	%	0.73	%	0.73	%	0.48	%

If you purchase Shares through a Financial Intermediary, such as a bank or an investment adviser, you may also pay additional fees to the intermediary for services provided by the intermediary. You should contact your Financial Intermediary for information concerning what additional fees, if any, will be charged.

Pursuant to the rules of the Financial Industry Regulatory Authority (“FINRA”), the aggregate initial sales charges, deferred sales charges and asset-based sales charges on Class C, Class E and Class A Shares of the Funds may not exceed 6.25%, 6.25% and 7.25%, respectively, of total gross sales, subject to certain exclusions. These limitations are imposed at the class level on each Class of Shares of each Fund rather than on a per shareholder basis. Therefore, long-term shareholders of the Class C, Class E and Class A Shares may pay more than the economic equivalent of the maximum sales charges permitted by FINRA.

Expense Restatements. “Other Expenses,” “Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for all Funds and all Classes of Shares have been restated to reflect higher or lower expenses expected to be incurred for the fiscal year ending October 31, 2008, and for the Russell U.S. Core Equity, Russell U.S. Quantitative Equity, Russell U.S. Small & Mid Cap, Russell International Developed Markets and Russell Strategic Bond Funds, to reflect the impact of increased assets under management resulting from the reorganizations described in the section entitled “Subsequent Events” later in this Prospectus. For all Classes of Shares of the Russell U.S. Core Equity, Russell

U.S. Quantitative Equity, Russell U.S. Small & Mid Cap, Russell International Developed Markets, Russell Strategic Bond and Russell Investment Grade Bond Funds, “Other Expenses” has been restated not to reflect a 0.02% administrative fee waiver that was in effect for the fiscal year ending October 31, 2007.

Acquired Fund Fees and Expenses. In addition to the advisory and administrative fees payable by the Funds to RIMCo and Russell Fund Services Company (“RFSC”), each Fund that invests its cash reserves in the Russell Money Market Fund will bear indirectly a proportionate share of the Russell Money Market Fund’s operating expenses, which include the advisory and administrative fees that the Russell Money Market Fund pays to RIMCo and RFSC. The cash reserves for all Funds are invested in the Russell Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo and RFSC on the cash reserves invested in the Russell Money Market Fund is 0.10% (net of fee waivers and reimbursements).

“Other Expenses,” “Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for the Russell U.S. Core Equity, Russell U.S. Quantitative Equity, Russell U.S. Growth, Russell U.S. Value, Russell U.S. Small & Mid Cap, Russell Tax-Managed U.S. Large Cap, Russell Tax-Managed U.S. Mid & Small Cap, Russell Investment Grade Bond, Russell Short Duration Bond Russell Tax Exempt Bond, Russell Real Estate Securities and Russell Money Market Funds have been restated to reflect each Fund’s proportionate share of the operating expenses of any other fund, including the Russell Money Market Fund, in which the Fund invests.

“Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for the Russell International Developed Markets, Russell Global Equity, Russell Emerging Markets and Russell Strategic Bond Funds have been restated to reflect each Fund’s proportionate share of the operating expenses of any other fund, including the Russell Money Market Fund, in which the Fund invests. Each Fund’s proportionate share of the these operating expenses are reflected under “Acquired Fund Fees and Expenses.”

###

For the Russell U.S. Growth Fund, RIMCo has contractually agreed to waive, at least until February 28, 2009, up to the full amount of its 0.80% advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.98% of the average daily net assets of that Fund on an annual basis. This waiver may not be terminated during the relevant period except at the Board’s discretion. Direct Fund-level expenses for the Russell U.S. Growth Fund do not include 12b-1, shareholder services, transfer agency fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.

For the Russell Tax-Managed U.S. Mid & Small Cap Fund, RIMCo has contractually agreed to waive, at least until February 28, 2009, up to the full amount of its 0.98% advisory fees and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 1.10% of the average daily net assets of that Fund on an annual basis. This waiver may not be terminated during the relevant period except at the Board’s discretion. Direct fund-level expenses for the Russell Tax-Managed U.S. Mid & Small Cap Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.

For the Russell Short Duration Bond Fund, RIMCo has contractually agreed to waive, at least until February 28, 2009, up to the full amount of its 0.45% advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.65% of the average daily net assets of that Fund on an annual basis. This waiver may not be terminated during the relevant period except at the Board’s discretion. Direct fund-level expenses for the Russell Short Duration Bond Fund do not include 12b-1 fees, shareholder services fees, transfer agency fees or the expenses of other investment companies in which the Fund invests which are borne indirectly by the Fund.

RIMCo has contractually agreed to waive, at least until February 28, 2010, 0.15% of its 0.20% advisory fee for the Russell Money Market Fund.

In addition to the above waivers, RFSC has contractually agreed to waive, at least through February 28, 2010, a portion of its transfer agency fees as follows:


Russell U.S. Core Equity—Class E	0.13	%
Russell U.S. Quantitative Equity—Class E	0.13	%
Russell U.S. Small & Mid Cap—Class E	0.13	%
Russell International Developed Markets—Class E	0.13	%
Russell Tax-Managed U.S. Large Cap—Class C, E & S	0.08	%
Russell Tax-Managed U.S. Mid & Small Cap—Class C, E & S	0.03	%
Russell Strategic Bond—Class A, C, & S	0.02	%
Russell Strategic Bond—Class E	0.13	%
Russell Investment Grade Bond—Class E	0.13	%
Russell Short Duration Bond—Class A, C, E & S	0.08	%
Russell Tax Exempt Bond—Class C, E & S	0.08	%
Russell Money Market—Class A	0.01	%
Russell Money Market—Class S	0.12	%

These foregoing waivers may not be terminated during the relevant period except at the Board’s discretion.

Effective October 1, 2008, the Russell Strategic Bond Fund’s direct Fund-level expenses will be capped at 0.51%. As a result, effective October 1, 2008, the Total Net Annual Fund Operating Expenses for Class A, C, E and S Shares of the Russell Strategic Bond Fund will be 0.95%, 1.70%, 0.84% and 0.70%, respectively. Direct Fund-level operating expenses do not include 12b-1 fees, shareholder services fees, transfer agency fees, the expenses of other investment companies in which the Russell Strategic Bond Fund invests which are borne indirectly by the Russell Strategic Bond Fund or extraordinary expenses.

Example

This example is intended to help you compare the cost of investing in each Fund with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in a Fund for the time periods indicated and then redeem all of your Shares at the end of those periods. The example also assumes your investment has a 5% return each year and that operating expenses remain the same. The calculation of costs for the one year period takes into account the effect of any current contractual fee waivers and/or reimbursements. The calculation of costs for the three, five and ten year periods takes such fee waivers and/or reimbursements into account only for the first year of the periods.

Although your actual costs may be higher or lower, under these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
Class A Shares
Russell U.S. Core Equity	$	679	$	899	$	1,136	$	1,817
Russell U.S. Quantitative Equity		698		957		1,236		2,032
Russell U.S. Small & Mid Cap		694		946		1,217		1,989
Russell International Developed Markets		697		954		1,231		2,020
Russell Global Equity		724		1,037		1,372		2,315
Russell Emerging Markets		750		1,117		1,508		2,599
Russell Strategic Bond		475		691		925		1,596
Russell Short Duration Bond		468		682		914		1,580
Russell Real Estate Securities		703		972		1,261		2,083
Russell Money Market		42		167		302		698

Class C Shares
Russell U.S. Core Equity	$	186	$	576	$	991	$	2,148
Russell U.S. Quantitative Equity		206		636		1,093		2,358
Russell U.S. Growth		220		685		1,176		2,530
Russell U.S. Value		206		636		1,093		2,358
Russell U.S. Small & Mid Cap		202		624		1,072		2,316
Russell International Developed Markets		205		633		1,088		2,348
Russell Global Equity		233		718		1,229		2,633
Russell Emerging Markets		261		802		1,370		2,914
Russell Tax-Managed U.S. Large Cap		197		626		1,081		2,342
Russell Tax-Managed U.S. Mid & Small Cap		229		723		1,244		2,672
Russell Strategic Bond		180		562		968		2,104
Russell Investment Grade Bond		158		490		846		1,847
Russell Short Duration Bond		173		553		957		2,088
Russell Tax Exempt Bond		156		500		868		1,904
Russell Real Estate Securities		211		652		1,119		2,411

Class E Shares
Russell U.S. Core Equity	$	97	$	331	$	584	$	1,307
Russell U.S. Quantitative Equity		117		392		689		1,534
Russell U.S. Growth		145		456		790		1,733
Russell U.S. Value		130		405		701		1,544
Russell U.S. Small & Mid Cap		113		380		668		1,488
Russell International Developed Markets		116		389		684		1,522
Russell Global Equity		158		490		846		1,847
Russell Emerging Markets		186		576		991		2,148
Russell Tax-Managed U.S. Large Cap		121		394		689		1,526
Russell Tax-Managed U.S. Mid & Small Cap		154		494		858		1,883
Russell Strategic Bond		93		318		561		1,259
Russell Investment Grade Bond		68		242		431		977
Russell Short Duration Bond		97		320		561		1,253
Russell Tax Exempt Bond		80		266		468		1,054
Russell Real Estate Securities		135		421		728		1,600


	1 Year		3 Years		5 Years		10 Years
Class S Shares
Russell U.S. Core Equity	$	85	$	265	$	461	$	1,025
Russell U.S. Quantitative Equity		105		328		569		1,260
Russell U.S. Growth		119		378		657		1,452
Russell U.S. Value		105		328		569		1,260
Russell U.S. Small & Mid Cap		101		315		547		1,213
Russell International Developed Markets		104		324		563		1,247
Russell Global Equity		132		411		712		1,568
Russell Emerging Markets		161		499		861		1,879
Russell Tax-Managed U.S. Large Cap		96		317		556		1,242
Russell Tax-Managed U.S. Mid & Small Cap		128		417		727		1,606
Russell Strategic Bond		79		251		437		976
Russell Investment Grade Bond		56		176		307		689
Russell Short Duration Bond		72		242		426		959
Russell Tax Exempt Bond		54		187		332		754
Russell Real Estate Securities		110		343		595		1,317
Russell Money Market		20		123		236		566

MANAGEMENT OF THE FUNDS

The Funds’ investment adviser is RIMCo, 909 A Street, Tacoma, Washington 98402. RIMCo pioneered the “multi-style, multi-manager” investment method in mutual funds and, as of December 31, 2007, managed over $43.4 billion in 48 mutual fund portfolios. RIMCo, a wholly-owned subsidiary of Frank Russell Company (“Russell”), was established in 1982 to serve as the investment management arm of Russell. Russell is a subsidiary of The Northwestern Mutual Life Insurance Company. Founded in 1857, Northwestern Mutual is a mutual insurance company headquartered in Milwaukee, Wisconsin.

The Funds’ administrator and transfer agent is Russell Fund Services Company (“RFSC”), a wholly-owned subsidiary of RIMCo.

The Russell Investment Company (“RIC”) funds (“RIC Funds”) are offered through certain banks (including bank trust departments), registered investment advisers, broker-dealers and other financial services organizations that have been selected by the Funds’ adviser or distributor (“Financial Intermediaries”). Most RIC Funds are designed to provide a means for investors to use RIMCo’s “multi-style, multi-manager diversification” investment method and to obtain RIMCo’s and Russell’s money manager research services.

Russell was founded in 1936 and has been providing comprehensive asset management consulting services for over 30 years to institutional investors, principally large corporate employee benefit plans. Russell provides RIMCo and the RIC Funds with the money manager research services that it provides to its other clients. The Funds do not compensate Russell for these services.

Unlike most investment companies that have a single organization that acts as investment adviser, the Funds, other than the Russell Money Market Fund, divide responsibility for investment advice between RIMCo and a number of money managers. RIMCo utilizes the money manager research and other resources of Russell in providing services to the Funds. Russell’s money manager research services include evaluating and recommending to RIMCo professional investment advisory and management organizations (“money managers”) to make specific portfolio investments for each asset class, according to designated investment objectives, styles and strategies. Fund assets, other than the Russell Money Market Fund’s assets, are invested using a “multi-style, multi-manager diversification” technique.

Each Fund conducts its business through a number of service providers who act on its behalf. RIMCo, the Funds’ investment adviser, evaluates and oversees the Funds’ money managers as more fully described below. Each of the Fund’s money managers makes investment decisions for the portion of the Fund assigned to it by RIMCo. RFSC, in its capacity as the Funds’ administrator, provides or oversees the provision of all administration services for the Funds. The Funds’ custodian, State Street Bank, maintains custody of all of the Funds’ assets. RFSC, in its capacity as the Funds’ transfer agent, is responsible for maintaining the Funds’ shareholder records and carrying out shareholder transactions. When a Fund acts in one of these areas, it does so through the service provider responsible for that area.

RIMCo provides or oversees the provision of all investment advisory and portfolio management services for the Funds, including developing the investment program for each Fund. RIMCo selects, subject to the approval of the Funds’ Board, money managers for the Funds, allocates Fund assets among those money managers, oversees them and evaluates their performance results. The Funds’ money managers select the individual portfolio securities for the assets assigned to them. Except for the Russell Money Market Fund, RIMCo allocates most of each Fund’s assets to multiple money managers. RIMCo currently manages the Russell Money Market Fund. RIMCo exercises investment discretion over the portion of each Fund’s assets that RIMCo determines not to allocate to the money managers. Currently, RIMCo manages a portion of certain Funds’ assets pursuant to a “select holdings” strategy as described later in this Prospectus. RIMCo also exercises investment discretion for each Fund’s cash reserves by selecting the individual portfolio securities for those portions of assets and may also directly manage portions of a Fund during transitions between money managers.

RIMCo’s employees who manage the RIC Funds, oversee the money managers of the RIC Funds and have primary responsibility for the management of the RIC Funds (the “RIMCo Managers”) are:

•

Mark D. Amberson, Portfolio Manager since May 1991. Mr. Amberson was appointed Director of Short-Term Investments in 2001. Mr. Amberson has primary responsibility for the management of the Russell Money Market Fund.

•

Scott Crawshaw, Portfolio Manager since January 2006. From 2004 to 2006, Mr. Crawshaw was a Research Analyst with Russell Investments Limited, an affiliate of RIMCo. From 1998 to 2003, Mr. Crawshaw was a global emerging markets fund manager for ISIS Asset Management PLC. Mr. Crawshaw has primary responsibility for the management of the Russell Emerging Markets Fund.

•

Bruce A. Eidelson, Portfolio Manager since January 2002. Mr. Eidelson is Director, Real Estate Securities. Mr. Eidelson has primary responsibility for the management of the Russell Real Estate Securities Fund.

•

Tereasa Gandhi, Portfolio Manager since January 2006. Before rejoining Russell as a Senior Research Analyst in September 2003, Ms. Gandhi was a consultant on the Russell Developing Managers initiative from February 2003 to September 2003. Ms. Gandhi has primary responsibility for the management of the Russell Tax-Managed U.S. Large Cap, Russell Tax-Managed U.S. Mid & Small Cap and Russell U.S. Growth Funds.

•

Philip Hoffman, Portfolio Manager since June 2004. From 2000 to June 2004, Mr. Hoffman was a Senior Research Analyst where he headed the research of global equity managers. Mr. Hoffman has primary responsibility for the management of the Russell Global Equity Fund.

•

Dennis Jensen, Portfolio Manager since February 2004. From 1998 to 2004 Mr. Jensen was a Research Analyst. Mr. Jensen has primary responsibility for the management of the Russell U.S. Value Fund.

•

Jill F. Johnson, Portfolio Manager since May 2004. Ms. Johnson started at Russell as Senior Investment Officer in March 2000 and was promoted to Portfolio Manager in May 2004. Ms. Johnson has primary responsibility for the management of the Equity Growth Strategy, Growth Strategy, Balanced Strategy, Moderate Strategy, Conservative Strategy, Russell Tax-Managed Global Equity, 2010 Strategy, 2015 Strategy, 2020 Strategy, 2025 Strategy, 2030 Strategy, 2035 Strategy, 2040 Strategy, 2045 Strategy, 2050 Strategy and In Retirement Funds and the 2017 Retirement Distribution Fund – A Shares, 2017 Accelerated Distribution Fund – A Shares, 2027 Extended Distribution Fund – A Shares, 2017 Retirement Distribution Fund – S Shares, 2017 Accelerated Distribution Fund – S Shares and 2027 Extended Distribution Fund – S Shares.

•

James A. Jornlin, Portfolio Manager since July 1996. Mr. Jornlin has primary responsibility for the management of the Russell International Developed Markets Fund.

•

Brian C. Mock, Portfolio Manager since April 2005. From 1998 to 2005, Mr. Mock was a Senior Portfolio Trader. Mr. Mock has primary responsibility for the management of the portions of the portfolios of certain Funds allocated to the select holdings strategy which may be employed by certain Funds as described under “Investment Objective and Investment Strategies” later in this Prospectus.

•

Tom Monroe, Portfolio Manager since February 2004. Mr. Monroe was Director, Investment Technology from 2002 to 2004 for Russell. From 1999 to 2002 Mr. Monroe was Director, North America and Australasia. Mr. Monroe has primary responsibility for the management of the Russell U.S. Quantitative Equity Fund.

•

Michael R. Ruff, Portfolio Manager since November 2002. Mr. Ruff has primary responsibility for the management of the Russell Investment Grade Bond, Russell Strategic Bond, Russell Short Duration Bond and Russell Tax Exempt Bond Funds.

•

Stephen W. Skatrud, Portfolio Manager since December 2001. Mr. Skatrud has primary responsibility for the management of the Russell U.S. Core Equity Fund.

•

Christopher D. Tessin, Portfolio Manager since September 2006. From 2005 to 2006, Mr. Tessin was an Associate Portfolio Manager. From 2003 to 2005, Mr. Tessin was a Research Analyst. From January 2001 to July 2003, Mr. Tessin worked in equity research at Bear Stearns. Mr. Tessin has primary responsibility for the management of the Russell U.S. Small & Mid Cap Fund.

Please see the Funds’ Statement of Additional Information for additional information about the RIMCo Managers’ compensation, other accounts managed by the RIMCo Managers and the RIMCo Managers’ ownership of securities in the Funds.

In the last fiscal year, the aggregate annual rate of advisory fees paid to RIMCo monthly on a pro rata basis as a percentage of average daily net assets was: Russell U.S. Core Equity Fund, 0.55%; Russell U.S. Quantitative Equity Fund, 0.55%; Russell U.S. Growth Fund, 0.80%; Russell U.S. Value Fund, 0.70%; Russell U.S. Small & Mid Cap Fund, 0.70%; Russell International Developed Markets Fund, 0.70%; Russell Global Equity Fund, 0.95%; Russell Emerging Markets Fund, 1.15%; Russell Tax-Managed U.S. Large Cap Fund, 0.70%; Russell Tax-Managed U.S. Mid & Small Cap Fund, 0.98%; Russell Strategic Bond Fund, 0.50%; Russell Investment Grade Bond Fund, 0.25%; Russell Short Duration Bond Fund, 0.45%; Russell Tax Exempt Bond Fund, 0.30%; Russell Real Estate Securities Fund, 0.80%; and Russell Money Market Fund, 0.20%.

In addition to the advisory and administrative fees payable by the Funds to RIMCo and RFSC, respectively, each Fund that invests its cash reserves or collateral received in securities lending transactions in the Russell Money Market Fund pursuant to the terms and conditions of an exemptive order will bear indirectly a proportionate share of the Russell Money Market Fund’s operating expenses, which include the advisory and administrative fees that the Russell Money Market Fund pays to RIMCo and RFSC, respectively. The cash reserves and a portion of the securities lending collateral for all Funds are invested in the Russell Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo and RFSC on the cash reserves and securities lending collateral invested in the Russell Money Market Fund is 0.10% (net of fee waivers and reimbursements). These fees are included in the Acquired Fund Fees and Expenses in the Funds’ Annual Fund Operating Expenses table above.

A discussion regarding the basis for the Board’s approval of the investment advisory contract between RIMCo and the Funds is available in the Funds’ semiannual report to shareholders covering the period ended April 30, 2008.

THE MONEY MANAGERS

Each Fund (except the Russell Money Market Fund) allocates most of its assets among the money managers listed under “Money Manager Information” at the end of this Prospectus. Assets not allocated to money managers are managed by RIMCo. RIMCo, as the Funds’ adviser, may change the allocation of a Fund’s assets at any time.

Each money manager has complete discretion to select portfolio securities for its segment of a Fund’s assets. At the same time, however, each money manager must operate within each Fund’s investment objectives, restrictions and policies. Additionally, each money manager must operate within more specific parameters developed from time to time by RIMCo. RIMCo develops such parameters for each money manager based on RIMCo’s assessment of the money manager’s expertise and investment style. By assigning more specific parameters to each money manager, RIMCo attempts to capitalize on the strengths of each money manager and to combine their investment activities in a complementary fashion. Although the money managers’ activities are subject to general oversight by the Board and the Funds’ officers, neither the Board, the officers, RIMCo nor Russell evaluate the investment merits of a money manager’s individual security selections.

utilizing the money manager research provided by Russell, evaluates quantitatively and qualitatively the money managers’ investment style and process, performance record and portfolio characteristics in managing assets for specific asset classes, investment styles and strategies. Short-term investment performance, by itself, is not a controlling factor in the selection or termination of any money manager.

SUBSEQUENT EVENTS

The following information relates to the following reorganizations:


Acquired Fund		Acquiring Fund
Diversified Equity Fund	into	Russell U.S. Core Equity Fund

Quantitative Equity Fund	into	Russell U.S. Quantitative Equity Fund

Special Growth Fund	into	Russell U.S. Small & Mid Cap Fund

International Securities Fund	into	Russell International Developed Markets Fund

Multistrategy Bond Fund	into	Russell Strategic Bond Fund

At a meeting held on May 20, 2008, the Board of Trustees of RIC, upon the recommendation of RIMCo, approved a separate Agreement and Plan of Reorganization (each a “Plan”) with respect to the reorganization of each Acquired Fund into its corresponding Acquiring Fund (each a “Reorganization”). In connection with the meeting, the Board of Trustees received information from and presentations by RIMCo regarding each Reorganization. After evaluating the merits of each proposed Reorganization as explained by RIMCo, the Board of Trustees of RIC determined that each Reorganization is in the best interests of Shareholders of the Acquired Fund and the Acquiring Fund.

In connection with the Reorganizations, you should note the following:

•

Each Reorganization will be effected without a vote of the Shareholders of the Acquired or Acquiring Funds, as permitted by RIC’s Amended and Restated Master Trust Agreement.

•

Each Reorganization is expected to qualify as a tax-free transaction.

•

The value of your investment will not change as a result of the Reorganizations.

Board Considerations

In determining whether to approve each Reorganization, the Trustees considered the potential impact of the Reorganizations on each Fund’s Shareholders and a variety of related factors, including, among others, (1) the comparability of the investment objectives, policies and restrictions of the Acquiring and Acquired Funds; (2) the terms and conditions of each Plan, including provisions intended to avoid any dilution of Shareholder interests; (3) the costs associated with each Reorganization; (4) the fact that each Reorganization is intended to qualify as a tax-free Reorganization under federal tax laws; (5) the fact that the pro forma net operating expenses of each Acquiring Fund are estimated to be the same or lower than the current net operating expenses of each corresponding Acquired Fund; (6) the advisory fees of the Acquiring Funds are lower than the advisory fees of the Acquired Funds; (7) the fact that the Reorganizations will result in Shareholders experiencing total expense ratios, net of waivers, that are the same or lower than those they currently experience; (8) that the interests of the Shareholders of each of the Acquired and Acquiring Funds will not be diluted as a result of each Reorganization; and (9) possible alternatives to the Reorganizations. The Trustees also considered that each Reorganization does not require, and therefore would be effected without, a vote of Fund Shareholders.

Effects of the Reorganizations on Shareholders

Each Plan provides for the reorganization of an Acquired Fund with and into its corresponding Acquiring Fund in exchange for Shares issued by the Acquiring Fund. The value of Shares issued by the Acquiring Fund in connection with each Reorganization will be equal at the time of the Reorganization to the value of the Shares of the corresponding Acquired Fund. Pursuant to each Plan, shares issued to an Acquired Fund by the corresponding Acquiring Fund will be distributed to Shareholders of the Acquired Fund in connection with the liquidation of the Acquired Fund. As a result, each Shareholder of the Acquired Fund will cease to be a Shareholder of the Acquired Fund and will instead be the owner of that number of full and fractional Shares of the corresponding Acquiring Fund

having an aggregate value equal at the time of the Reorganization to the aggregate value of the Shares of the Acquired Fund held by that Shareholder at the effective time of the Reorganization.

Investment Objectives, Strategies and Risks

RIMCo is the investment adviser for each Acquired Fund and each Acquiring Fund. The Money Managers for each Acquiring Fund are identical to the Money Managers for the corresponding Acquired Fund.

The investment objectives of the Acquired Funds and the corresponding Acquiring Funds are identical and are as follows:


Acquired Fund	Acquiring Fund	Investment Objective
Diversified Equity Fund*	Russell U.S. Core Equity Fund*	The Fund seeks to provide long term capital growth.

Quantitative Equity Fund*	Russell U.S. Quantitative Equity Fund**	The Fund seeks to provide long term capital growth.

Special Growth Fund*	Russell U.S. Small & Mid Cap Fund*	The Fund seeks to provide long term capital growth.

International Securities Fund*	Russell International Developed Markets Fund**	The Fund seeks to provide long term capital growth.

Multistrategy Bond Fund*	Russell Strategic Bond Fund*	The Fund seeks to provide current income, and as a secondary objective, capital appreciation.

These Funds’ investment objectives are non-fundamental and may be changed by the Board of Trustees without shareholder approval.

These Funds’ investment objectives are fundamental and may not be changed by the Board of Trustees without shareholder approval.

The principal investment strategies, investment policies and principal risks of the Acquired Funds are identical to the principal investment strategies, investment policies and principal risks of the corresponding Acquiring Funds. As a result of the change in names of the Acquiring Funds, effective September 2, 2008, some of the Funds will be subject to new or different 80% investment policies. A fund with a name suggesting a focus on a particular type of investment is required to invest at least 80% of fund assets in the type of investment suggested by the fund’s name. These policies, however, will not change the management of the Acquiring Funds.

Because of the comparability of the investment objectives, principal investment strategies, investment policies and principal risks of the Acquired Funds with their corresponding Acquiring Funds, there are no material differences in the investment risks associated with an investment in an Acquired Fund and an investment in the corresponding Acquiring Fund.

Timing of Reorganizations

The Reorganizations are expected to occur on the dates set forth below. On September 2, 2008, prior to the Reorganizations, each Acquiring Fund changed its name.

Diversified Equity Fund: The Reorganization of the Diversified Equity Fund into the Russell U.S. Core Equity Fund (formerly the Equity I Fund) is expected to be completed on or about September 8, 2008 at 8:00 a.m. Eastern Time based on values as of the close of regular trading on the New York Stock Exchange on September 5, 2008, or at such earlier or subsequent date as RIC determines to be in the interest of the Funds.

Special Growth Fund: The Reorganization of the Special Growth Fund into the Russell U.S. Small & Mid Cap Fund (formerly the Equity II Fund) is expected to be completed on or about September 8, 2008 at 8:00 a.m. Eastern Time based on values as of the close of regular trading on the New York Stock Exchange on September 5, 2008, or at such earlier or subsequent date as RIC determines to be in the interest of the Funds.

International Securities Fund: The Reorganization of the International Securities Fund into the Russell International Developed Markets Fund (formerly the International Fund) is expected to be completed on or about September 8, 2008 at 8:00 a.m. Eastern Time based on values as of the close of regular trading on the New York Stock Exchange on September 5, 2008, or at such earlier or subsequent date as RIC determines to be in the interest of the Funds.

Quantitative Equity Fund: The Reorganization of the Quantitative Equity Fund into the Russell U.S. Quantitative Equity Fund (formerly the Equity Q Fund) is expected to be completed on or about September 22, 2008 at 8:00 a.m. Eastern Time based on values as of the close of regular trading on the New York Stock Exchange on September 19, 2008, or at such earlier or subsequent date as RIC determines to be in the interest of the Funds.

Multistrategy Bond Fund: The Reorganization of the Multistrategy Bond Fund into the Russell Strategic Bond Fund (formerly the Fixed Income III Fund) is expected to be completed on or about September 22, 2008 at 8:00 a.m. Eastern Time based on values as of the close of regular trading on the New York Stock Exchange on September 19, 2008, or at such earlier or subsequent date as RIC determines to be in the interest of the Funds.

The Diversified Equity, Special Growth and International Securities Funds will be closed to new and existing shareholders on September 5, 2008 and no purchases of these Funds’ shares will be allowed on or after that date.

The Quantitative Equity and Multistrategy Bond Funds will be closed to new and existing shareholders on September 19, 2008 and no purchases of these Funds’ shares will be allowed on or after that date.

Each Plan provides that (i) the Acquired Fund would transfer to its corresponding Acquiring Fund all of its assets in exchange solely for voting shares of the Acquiring Fund and the assumption by the Acquiring Fund of the Acquired Fund’s liabilities, (ii) such shares of the Acquiring Fund would be distributed to shareholders of the corresponding Acquired Fund in liquidation of the Acquired Fund and (iii) the Acquired Fund would be subsequently dissolved.

Shareholders of each Acquired Fund will receive Class A, Class C, Class E or Class S Shares of the corresponding Acquiring Fund, respectively, with an aggregate value equal at the time of the completion of the Reorganization to the aggregate value of their Acquired Fund Class A, Class C, Class E or Class S Shares, respectively.

Tax Consequences

As a condition of each Reorganization, the Acquiring Funds and the Acquired Funds will receive a tax opinion from Dechert LLP to the effect that, based on certain facts, assumptions and representations, the Reorganizations will constitute tax-free reorganizations within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Consequently, in general, no gain or loss will be recognized for federal income tax purposes by the Acquired Funds or their Shareholders. Any such opinion will not be binding on the Internal Revenue Service or any court.

INVESTMENT OBJECTIVE AND INVESTMENT STRATEGIES

Each of the following Funds has either a fundamental or a non-fundamental investment objective as noted below. A fundamental investment objective may only be changed with shareholder approval. A non-fundamental investment objective may be changed by the Board of that Fund without shareholder approval. If a Fund’s investment objective is changed, the Prospectus will be supplemented to reflect the new investment objective. To the extent that there is a material change in a Fund’s investment objective, shareholders will be provided with reasonable notice. The Board may, if it deems appropriate to do so, authorize the liquidation or merger of a Fund without shareholder approval. Unless Fund Shares are held in a tax-deferred account, a Fund liquidation may result in a taxable event for shareholders of the liquidated Fund.

RUSSELL U.S. CORE EQUITY FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell U.S. Core Equity Fund invests primarily in common stocks of medium and large capitalization U.S. companies. While market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium and small capitalization, the Fund defines large and medium capitalization stocks as stocks of those companies represented by the Russell 1000^® Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $468.5 billion to $2.5 billion. The market capitalization of these companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund may invest in companies not included within the Russell 1000^® Index.

The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in equity securities economically tied to the U.S. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

The Fund may invest in securities of non-U.S. issuers, typically by purchasing American Depositary Receipts (“ADRs”). An ADR is a stock that trades in the U.S. but represents shares in a non-U.S. company. The Fund will invest primarily in sponsored ADRs but may also invest in unsponsored ADRs. In a sponsored ADR arrangement, the foreign issuer assumes the obligation to pay some or all of the depository’s transaction fees, whereas under an unsponsored arrangement, the foreign issuer assumes no obligations and the depository’s transaction fees are paid directly by the ADR holders.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

Additionally, the Fund is diversified by equity substyle. For example, within the Growth Style, the Fund expects to employ both an Earnings Momentum substyle (concentrating on companies with more volatile and accelerating growth rates) and a Consistent Growth substyle (concentrating on companies with stable earnings growth over an economic cycle).

When determining how to allocate its assets among money managers, the Fund considers a variety of factors. These factors include a money manager’s investment style, investment approach, investment substyle and expected return potential of a money manager relative to its assigned benchmark, as well as the characteristics of the money manager’s typical investment portfolio. These characteristics include capitalization size, growth and profitability measures, valuation measures, economic sector weightings and earnings and price volatility statistics. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another.

RIMCo may assign a money manager a specific style or capitalization benchmark other than the Fund’s index. However, the Fund’s primary index remains the benchmark for the Fund and is intended to be representative of the aggregate of the money managers’ benchmark indices.

Money managers may employ a fundamental investment approach or a quantitative investment approach. A quantitative money manager selects stocks using a variety of quantitative investment models (mathematical formulas based on statistical analyses) and techniques to rank the relative attractiveness of securities versus their benchmarks and uses quantitative techniques to construct its portfolio. A money manager using a fundamental investment approach selects stocks based upon its research and analysis of a variety of factors, including, but not limited to, future earnings potential, security valuations, financial quality and business momentum.

RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to the money managers. Pursuant to this strategy, RIMCo periodically analyzes the holdings in the Fund segments assigned to money managers to identify particular stocks that have been selected by multiple money managers. RIMCo uses a proprietary model to rank these stocks. Based on this ranking, RIMCo purchases additional shares of certain stocks for the Fund. The strategy is designed to increase the Fund’s exposure to stocks that are viewed as attractive by multiple money managers.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

The Fund, like any mutual fund, maintains cash reserves, (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses). Cash reserves are invested in short-term investments, including the Russell Money Market Fund. In addition to investing in such short-term investments, the Fund may pursue its strategy to be fully invested by exposing its cash reserves to the performance of appropriate markets by purchasing equity securities and/or derivatives. This is intended to cause the Fund to perform as though its cash reserves were actually invested in those markets.

The Fund may lend its portfolio securities in an amount up to one-third of its total assets to earn income. These loans may be terminated at any time. The Fund will receive either cash or U.S. government debt obligations as collateral to secure the obligations of the borrower.

On rare occasions, the Fund may take a temporary defensive position that may be inconsistent with its long-term principal investment strategies in an attempt to respond to adverse market, economic, political or other conditions. If this occurs, the Fund may not achieve its investment objective during such times. The Fund may take a defensive position by raising cash levels and/or reducing or eliminating the strategy to expose its cash reserves to the performance of appropriate markets.

RUSSELL U.S. QUANTITATIVE EQUITY FUND

Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell U.S. Quantitative Equity Fund invests primarily in common stocks of medium and large capitalization companies which are predominantly U.S. based. While market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium and small capitalization companies, the Fund defines large and medium capitalization stocks as stocks of those companies represented by the Russell 1000^® Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $468.5 billion to $2.5 billion. The market capitalization of these companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund may invest in companies not included within the Russell 1000^® Index.

The Fund’s money managers use a variety of quantitative investment models (mathematical formulas based on statistical analyses) and techniques to rank the relative attractiveness of securities based upon expected ability to outperform the total return of the benchmark assigned to them by RIMCo. Money managers utilize certain models in their investment process based on research they conduct to identify those models which they believe are predictive of future returns. Examples of those quantitative models that may be used by some or all of the Funds’ money managers include, but are not limited to, dividend discount models, price/cash flow models, price/earnings models, earnings surprise and earnings estimate revisions models and price momentum models. Money managers rank the relative attractiveness of securities based on these models, then use quantitative portfolio construction techniques to create a portfolio they believe most likely to outperform their assigned benchmark. Each money manager performs this process independently from each other money manager.

Certain of the Fund’s money managers employ a limited long-short strategy (also referred to as a 120/20 or 130/30 strategy) pursuant to which they enter into short sales. In a limited long-short strategy, a money manager enters into short sales of securities and uses the proceeds of the short sales of securities to purchase long positions in other securities. As a result, that money manager’s portfolio will have long positions of 120% or 130% and short positions of 20% or 30%, respectively, with the money manager’s net position being 100% long. The money manager will take long positions in securities the money manager believes offer attractive return potential and sell short securities that the money manager believes will underperform. Selling a security short allows the Fund to earn a return from stocks that a money manager expects to underperform, and do underperform, as well as enabling the Fund to establish additional long positions while keeping the Fund’s net exposure to the market at a level similar to a traditional “long-only” strategy.

is obligated to replace the security borrowed by purchasing the security at its market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. The Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund must return the borrowed security. The Fund will realize a gain if the security declines in price between those dates. This result is the opposite of what one would expect from a cash purchase of a long position in a security. The Fund may also make short sales “against the box.” In this type of short sale, at the time of the sale, the Fund owns or has the immediate and unconditional right to acquire the identical security at no additional cost. The Fund currently does not intend to make a short sale if, after giving effect to such sale, the market value of all securities sold short exceeds 30% of the value of its total assets. Although short selling implies the use of leverage, the Fund maintains a special custody account that mitigates the leverage effect in that the short sales are fully collateralized.

The Fund employs a multi-manager approach whereby portions of the Fund are allocated to different money managers whose approaches are intended to complement one another. Fund assets not allocated to money managers are managed by RIMCo.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

RUSSELL U.S. GROWTH FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell U.S. Growth Fund invests primarily in large and medium capitalization stocks but may invest up to 15% of its assets in small and micro capitalization stocks. Market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium, small and micro capitalization companies. The Fund defines large and medium capitalization stocks as stocks of those companies represented by the Russell 1000^® Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $468.5 billion to $2.5 billion. The Fund defines small capitalization stocks as stocks of those companies represented by the Russell 2000^® Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $2.5 billion to $261.8 million. The Fund considers micro capitalization stocks as stocks of those companies represented by the Russell Microcap^™ Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell Indexes, the market capitalization of these companies ranged from $711.4 million to $78.6 million. The market capitalization of these large, medium, small and micro capitalization companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund may invest in companies not included within the Russell 1000^® Index, Russell 2000^® Index or Russell Microcap^™ Index.

In general, the Fund seeks to invest in stocks with above average growth rates and favorable earnings momentum. The Fund invests in a broad array of companies that are either currently experiencing, or are expected by the money managers to experience, attractive earnings growth and earnings momentum. The managers of the Fund attempt to identify growth opportunities. Such perceived opportunities may be based on proprietary company research conducted by the managers, broad demographic, regulatory, or political changes that the managers have identified that may spur more attractive earnings growth at select companies, proprietary screens or other means.

The Fund employs a “multi-manager” approach whereby portions of the Fund are allocated to different money managers whose approaches to growth stock investing are intended to complement one another. While specific stock selection criteria are unique to each manager, each manager purchases stocks of companies expected to grow at above-average rates. This approach generally results in significant investments in higher growth sectors. Fund assets not allocated to money managers are managed by RIMCo.

When determining how to allocate its assets among money managers, the Fund considers a variety of factors. These factors include a money manager’s investment approach, portfolio characteristics and performance patterns in different market environments. Portfolio characteristics include capitalization size, growth and profitability measures, valuation measures, economic sector weightings and earnings and price volatility statistics. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

RUSSELL U.S. VALUE FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell U.S. Value Fund invests primarily in large and medium capitalization value stocks but also may invest up to 15% of its assets in small capitalization stocks. While market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium and small capitalization companies, the Fund defines large and medium capitalization stocks as stocks of those companies represented by the Russell 1000^® Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $468.5 billion to $2.5 billion. The Fund defines small capitalization stocks as stocks of those companies represented by the Russell 2000^® Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $2.5 billion to $261.8 million. The market capitalization of these companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund may invest in companies not included within the Russell 1000^® Index or the Russell 2000^® Index. The Fund invests in value stocks, which are stocks that appear to a money manager to be undervalued relative to their corporate worth, based on current or forecasted earnings, book or asset value, revenues, cash flow or other measures.

The Fund employs a “multi-manager” approach whereby portions of the Fund are allocated to different money managers whose approaches to identifying undervalued securities are intended to complement one another. While specific stock selection criteria are unique to each manager, each manager purchases stocks of companies deemed to be undervalued in the market. Fund assets not allocated to money managers are managed by RIMCo.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

RUSSELL U.S. SMALL & MID CAP FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell U.S. Small & Mid Cap Fund invests primarily in common stocks of small and medium capitalization companies most of which are U.S. based. While market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium and small capitalization, the Fund defines medium and small capitalization stocks as stocks of those companies represented by the Russell 2500™ Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $6.2 billion to $261.8 million. The market capitalization of these companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund’s investments may include companies that have been publicly traded for less than five years and smaller companies, including companies not listed in the Russell 2500™ Index.

The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small and medium capitalization equity securities economically tied to the U.S. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

RUSSELL INTERNATIONAL DEVELOPED MARKETS FUND

Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

classification are applied. As such, some markets may be classified as developed by some and emerging by others and, at times, some markets may be classified as both developed and emerging. For example, some providers currently classify South Korea and Israel as both developed and emerging markets. Additionally, the categorization of a market may change over time.

As a general rule, the Fund considers the following markets to be Developed Markets: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in companies that are located in countries with developed markets or that are economically tied to such countries. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

The Fund may invest a portion of its assets in equity securities of companies that are located in countries with emerging markets or that derive a majority of their revenues from operations in such countries. These companies are referred to as “Emerging Market Companies.” For purposes of the Fund’s operations, “emerging market countries” include every country in the world except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States.

The Fund invests primarily in large and medium capitalization companies, but also invests in small capitalization companies. However, the money managers do not select stocks based on the capitalization size of a company but rather on the relative attractiveness of the investment opportunity. As of December 31, 2007, the market capitalization of companies in the Fund’s benchmark, the MSCI Europe, Australia and Far East (EAFE) Index, an index which includes large, medium and small capitalization companies, ranged from approximately $230 billion to $300 million. The Fund may invest in companies and countries not included within the MSCI Europe, Australia and Far East (EAFE) Index.

The depositary receipts that the Fund may purchase include American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts (“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR provides better access to markets and higher liquidity than the underlying security. An ADR is a stock that trades in the U.S. but represents shares in a non-U.S. company. A GDR is a stock that trades in one or more global markets but represents shares of a company domiciled in a different country. An EDR is issued in Europe typically by foreign banks and trust companies and evidence ownership of either foreign or domestic securities. The Fund will invest primarily in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs and EDRs. In a sponsored ADR, GDR, or EDR arrangement, the foreign issuer assumes the obligation to pay some or all of the depository’s transaction fees, whereas under an unsponsored arrangement, the foreign issuer assumes no obligations and the depository’s transaction fees are paid directly by the ADR/GDR/EDR holders.

The Fund may seek to protect its investments against adverse currency exchange rate changes by purchasing forward currency contracts. These contracts enable the Fund to “lock in” the U.S. dollar price of a security that it plans to buy or sell. The Fund may also engage in currency transactions for speculative purposes. Money managers may purchase or sell foreign currencies, mainly through the use of forward currency contracts, based on the money manager’s judgment regarding the direction of the market for a particular foreign currency or currencies.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

The Fund may invest in warrants and convertible securities. The Fund may invest a portion of its assets in securities of companies, known as real estate investment trusts (“REITs”), that own and/or manage properties. By investing in REITs indirectly through the Fund, a shareholder will bear expenses of the REITs in addition to expenses of the Fund. The Fund may also invest in equity securities of other types of real estate-related companies.

RUSSELL GLOBAL EQUITY FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell Global Equity Fund invests primarily in equity securities, including common stocks and preferred stocks, of companies located in a number of countries around the world, including the U.S., in a globally diversified manner. While the Fund spreads its investments across the globe, the money managers will select securities of companies which the money managers believe have favorable growth prospects and/or attractive valuations based on current and expected earnings or cash flow, not based on the country in which a company is located.

The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its net assets in equity securities. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

The Fund may invest its assets in equity securities of companies that are located in emerging markets countries or that derive a majority of their revenues from operations in such countries. These companies are referred to as “Emerging Market Companies.” For purposes of the Fund’s operations, “emerging market countries” include every country in the world except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States.

The Fund invests primarily in large and medium capitalization companies, but also invests in small capitalization companies. However, the money managers do not select stocks based on the capitalization size of a company but rather on the relative attractiveness of the investment opportunity. As of December 31, 2007, the market capitalization of companies in the Fund’s benchmark, the MSCI World Index, an index which includes large, medium and small capitalization companies, ranged from approximately $520 billion to $300 million. The Fund may invest in companies and countries not included within the MSCI World Index.

The Fund may purchase American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts (“EDRs”) where an ADR, GDR or EDR provides better access to markets and higher liquidity than the underlying security. An ADR is a stock that trades in the U.S. but represents shares in a non-U.S. company. A GDR is a stock that trades in one or more global markets but represents shares of a company domiciled in a different country. An EDR is issued in Europe typically by foreign banks and trust companies and evidence ownership of either foreign or domestic securities. The Fund will invest primarily in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs and EDRs. In a sponsored ADR, GDR, or EDR arrangement, the foreign issuer assumes the obligation to pay some or all of the depository’s transaction fees, whereas under an unsponsored arrangement, the foreign issuer assumes no obligations and the depository’s transaction fees are paid directly by the ADR/GDR/EDR holders.

The Fund may at times seek to protect its investments against adverse currency exchange rate changes by purchasing forward currency contracts. These contracts enable the Fund to “lock in” the U.S. dollar price of a security that it plans to buy or sell. The Fund may also engage in foreign currency transactions for speculative purposes. Money managers may purchase or sell foreign currencies, mainly through the use of forward currency contracts, based on the money manager’s judgment regarding the direction of the market for a particular foreign currency or currencies.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

securities markets or otherwise present difficulties for efficient foreign investment. Therefore, when a money manager believes it is appropriate to do so, the Fund may invest in synthetic foreign equity securities, which may be referred to as international warrants, local access products, participation notes or low exercise price warrants, or may invest in equity linked notes.

RUSSELL EMERGING MARKETS FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell Emerging Markets Fund will primarily invest in equity securities, including common stock and preferred stock, of companies that are located in countries with emerging markets or that derive a majority of their revenues from operations in such countries. These companies are referred to as “Emerging Market Companies.” For purposes of the Fund’s operations, “emerging market countries” include every country in the world except Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in Emerging Market Companies. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

The Fund seeks to maintain a broadly diversified exposure to emerging market countries and ordinarily will invest in the securities of issuers in at least ten different emerging market countries.

The Fund invests in large, medium and small capitalization companies. However, the money managers do not select stocks based on the capitalization size of a company but rather on the relative attractiveness of the investment opportunity. As of December 31, 2007, the market capitalization of companies in the Fund’s benchmark, the MSCI Emerging Markets Index, an index which includes large, medium and small capitalization companies, ranged from approximately $133 billion to $100 million. The Fund may invest in companies and countries not included within the MSCI Emerging Markets Index.

The Fund invests in common stocks, and to a lesser extent in preferred stocks, of Emerging Market Companies and in depositary receipts which represent ownership of securities of non-U.S. companies. The Fund’s securities are denominated primarily in foreign currencies and may be held outside the U.S. Securities held by the Fund which are denominated in U.S. dollars are still subject to currency risk.

non-U.S. company. A GDR is a stock that trades in one or more global markets but represents shares of a company domiciled in a different country. An EDR is issued in Europe typically by foreign banks and trust companies and evidence ownership of either foreign or domestic securities. The Fund will invest primarily in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs and EDRs. In a sponsored ADR, GDR, or EDR arrangement, the foreign issuer assumes the obligation to pay some or all of the depository’s transaction fees, whereas under an unsponsored arrangement, the foreign issuer assumes no obligations and the depository’s transaction fees are paid directly by the ADR/GDR/EDR holders.

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

When determining how to allocate its assets among money managers, the Fund considers a variety of factors. These factors include a money manager’s investment style, investment approach, investment substyle and expected return potential of a money manager relative to its assigned benchmark, as well as the characteristics of the money manager’s typical investment portfolio. These characteristics include country weightings, capitalization size, growth and profitability measures, valuation measures, economic sector weightings and earnings and price volatility statistics. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

The Fund may invest in pooled investment vehicles, such as other investment companies, which enjoy broader or more efficient access to shares of Emerging Market Companies in certain countries but which may involve a further layering of expenses. By investing in pooled investment vehicles indirectly through the Fund, a shareholder will bear expenses of the pooled investment vehicles in addition to expenses of the Fund.

RUSSELL TAX-MANAGED U.S. LARGE CAP FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth on an after-tax basis.

Principal Investment Strategies

The Russell Tax-Managed U.S. Large Cap Fund invests primarily in common stocks of large capitalization companies most of which are U.S. based. While market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium and small capitalization companies, the Fund defines large capitalization stocks as stocks of those companies represented by the S&P 500^® Index. On December 31, 2007, the market capitalization of the U.S. companies in the S&P 500^® Index ranged from approximately $512 billion to $708 million. The market capitalization of these companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund may invest in companies not included within the S&P 500^® Index.

The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in large capitalization companies economically tied to the U.S. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

The Fund seeks to realize capital growth while considering shareholder tax consequences arising from the Fund’s portfolio management activities. In its attention to the tax consequences of its investment decisions, the Fund differs from most equity mutual funds, which are managed to maximize pre-tax total return without regard to whether their portfolio management activities result in taxable distributions to shareholders.

The Fund is designed for long-term investors who seek to reduce the impact of taxes on their investment returns. The Fund is not designed for short-term investors or for tax-deferred investment vehicles such as IRAs and 401(k) plans.

The Fund primarily strives to realize the majority of its returns as long-term capital gains under U.S. tax laws. To do so, the Fund typically buys stocks with the intention of holding them long enough to qualify for long-term capital gains tax treatment. Stocks may, however, be sold at a point where short-term capital gains are realized if one of the Fund’s money managers believes it is most appropriate in that case to do so.

If large shareholder redemptions occur unexpectedly, the Fund could be required to sell portfolio securities resulting in its realization of net capital gains. This could temporarily reduce the Fund’s tax efficiency. Also, as the Fund matures, it may hold individual securities that have appreciated so significantly that it would be difficult for the Fund to sell them without realizing net capital gains. Transitions between money managers may also require the sale of portfolio securities resulting in the Fund realizing net capital gains.

The Fund selects and holds portfolio securities based on its assessment of their potential for long-term total returns.

When the Fund’s Shares are redeemed, the Fund could be required to sell portfolio securities resulting in its realization of net capital gains, impacting all shareholders. The Fund believes that multiple purchases and redemptions of Fund Shares by individual shareholders could adversely affect the Fund’s strategy of tax-efficiency and could reduce its ability to contain costs. The Fund further believes that short-term investments in the Fund are inconsistent with its long-term strategy. For this reason, the Fund will apply its general right to refuse any purchases by rejecting purchase orders from investors whose patterns of purchases and redemptions in the Fund are inconsistent with the Fund’s strategy.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

RUSSELL TAX-MANAGED U.S. MID & SMALL CAP FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth on an after-tax basis.

Principal Investment Strategies

The Russell Tax-Managed U.S. Mid & Small Cap Fund invests primarily in common stocks of medium and small capitalization companies most of which are U.S. based. While market capitalization changes over time and there is not one universally accepted definition of the lines between large, medium and small capitalization companies, the Fund defines medium and small capitalization stocks as stocks of those companies represented by the Russell Small Cap Completeness Index^™. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $84.0 billion to $261.8 million. The market capitalization of these companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund may invest in companies not included within the Russell Small Cap Completeness Index^™.

The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in medium and small capitalization companies economically tied to the U.S. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

The Fund may invest in securities of non-U.S. issuers, typically by purchasing American Depositary Receipts (“ADRs”). An ADR is a stock that trades in the U.S. but represents shares in a non-U.S.

company. The Fund will invest primarily in sponsored ADRs but may also invest in unsponsored ADRs. In a sponsored ADR arrangement, the foreign issuer assumes the obligation to pay some or all of the depository’s transaction fees, whereas under an unsponsored arrangement, the foreign issuer assumes no obligations and the depository’s transaction fees are paid directly by the ADR holders.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

The Fund is designed for long-term investors who seek to minimize the impact of taxes on their investment returns. The Fund is not designed for short-term investors or for tax-deferred investment vehicles such as IRAs and 401(k) plans.

significantly that it would be difficult for the Fund to sell them without realizing net capital gains. Transitions between money managers may also require the sale of portfolio securities resulting in the Fund realizing net capital gains.

The Fund selects and holds portfolio securities based on its assessment of their potential for long-term total returns.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

RUSSELL STRATEGIC BOND FUND

Non-Fundamental Investment Objective

Seeks to provide current income, and as a secondary objective, capital appreciation.

Principal Investment Strategies

The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in bonds. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

The Fund holds fixed income securities issued or guaranteed by the U.S. government (including Treasury Inflation Protected Securities and zero coupon securities) and, to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. Zero coupon securities are notes, bonds and debentures that (1) do not pay current interest and are issued at a substantial discount from par value, (2) have been stripped of their unmatured interest coupons and receipts or (3) pay no interest until a stated date one or more years into the future. The Fund holds asset-backed securities and mortgage-backed securities, including collateralized mortgage obligations and commercial mortgage-backed securities. The Fund purchases loans and other direct indebtedness, and invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds).

A majority of the Fund’s assets are U.S. dollar denominated but the Fund may invest in non-U.S. debt securities including emerging markets debt securities and bonds issued through the exchange of existing commercial bank loans to sovereign entities for new obligations in connection with debt restructuring, also known as Brady bonds.

The Fund may invest up to 25% of its assets in debt securities that are rated below investment grade as determined by one or more nationally recognized securities rating organizations or in unrated securities judged by the Fund to be of comparable quality. These securities are commonly referred to as high-yield or “junk bonds.” Junk bonds, and to a lesser extent other types of bonds, may be purchased at a discount and thereby provide opportunities for capital appreciation.

The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. For example, the money managers may identify sectors of the fixed-income market that they believe are undervalued and focus their investments in those sectors. These sectors will differ over time. To a lesser extent, the Fund may attempt to anticipate shifts in interest rates and hold securities that the Fund expects to perform well in relation to market indexes as a result of such shifts. Additionally, the Fund typically holds proportionately fewer U.S. Treasury obligations than are represented in the Lehman Brothers Aggregate Bond Index.

The Fund invests in certain types of derivative instruments. The Fund may purchase and sell futures contracts, including interest rate, foreign currency and Treasury futures, and enter into options, when issued transactions (also called forward commitments), forward foreign currency contracts, swap agreements or swaptions as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio. The Fund may buy or sell credit default swaps or other credit derivatives as an alternative to buying or selling the debt securities themselves or otherwise to increase the Fund’s total return. The Fund may invest in STRIPS (Separate Trading of Registered Interest and Principal of Securities). STRIPS are created by separating the interest and the principal components of an outstanding U.S. Treasury or agency note or bond and selling them as individual securities.

Some of the securities in which the Fund invests are supported by credit and liquidity enhancements from third parties. These enhancements may include letters of credit from foreign or domestic banks.

The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.5 years as of December 31, 2007, but may vary up to 35% from the Index’s duration. The Fund has no restrictions on individual security duration. Duration is a measure of a bond price’s sensitivity to a change in interest rates. In general, as interest rates rise, the value of the bonds held in the Fund will tend to decline, and, as interest rates fall, the value of the bonds held in the Fund will tend to rise. Bonds with longer durations tend to be more sensitive to changes in interest rates than those with shorter durations.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

magnitude of sector shifts and duration movements. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another. Fund assets not allocated to money managers are managed by RIMCo.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

The Fund, like any mutual fund, maintains cash reserves, (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses). Cash reserves are invested in short-term investments, including the Russell Money Market Fund. In addition to investing in such short-term investments, the Fund may pursue its strategy to be fully invested by purchasing fixed income securities and/or derivatives to expose the Fund’s cash reserves to changes in interest rates.

The Fund may invest in other investment companies and pooled investment vehicles. By investing in pooled investment vehicles indirectly through the Fund, a shareholder will bear expenses of the pooled investment vehicles in addition to expenses of the Fund. From time to time, the Fund may invest in municipal debt securities.

The Fund may enter into repurchase agreements. A repurchase agreement is an agreement under which the Fund acquires a fixed income security from a commercial bank, broker or dealer and simultaneously agrees to resell such security to the seller at an agreed upon price and date (normally the next business day).

RUSSELL INVESTMENT GRADE BOND FUND

Fundamental Investment Objective

Seeks to provide current income and the preservation of capital.

Principal Investment Strategies

The Russell Investment Grade Bond Fund invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest. The Fund will invest principally in securities of “investment grade” quality at the time of purchase, meaning either that a nationally recognized statistical rating organization (for example, Moody’s Investor Service, Inc., Standard & Poor’s Rating Service, or Fitch Investors Service, Inc.) has rated the securities Baa3 or BBB- (or the equivalent) or better, or a Fund’s money manager has determined the securities to be of comparable quality.

The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in investment grade bonds. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

governments, or by their respective agencies and instrumentalities. Zero coupon securities are notes, bonds and debentures that (1) do not pay current interest and are issued at a substantial discount from par value, (2) have been stripped of their unmatured interest coupons and receipts or (3) pay no interest until a stated date one or more years into the future. The Fund holds asset-backed securities and mortgage-backed securities, including collateralized mortgage obligations and commercial mortgage-backed securities. The Fund purchases loans and other direct indebtedness, and invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds).

The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. For example, the money managers may identify sectors of the fixed-income market that they believe are undervalued and focus their investments in those sectors. These sectors will differ over time. To a lesser extent, the Fund may attempt to anticipate shifts in interest rates and hold securities that the Fund expects to perform well in relation to market indexes as a result of such shifts. However, a portion of the Fund’s assets may be allocated to money managers who focus specifically on security selection rather than sector rotation and interest rate strategies.

The Fund invests in certain types of derivative instruments. The Fund may purchase and sell futures contracts, including interest rate, foreign currency and Treasury futures, and enter into options, when issued transactions (also called forward commitments), forward foreign currency contracts, swap agreements or swaptions as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio. The Fund may buy or sell credit default swaps or other credit derivatives as an alternative to buying or selling the debt securities themselves or otherwise to increase the Fund’s total return. The Fund may invest in STRIPS (Separate Trading of Registered Interest and Principal of Securities). STRIPS are created by separating the interest and the principal components of an outstanding corporate, U.S. Treasury or agency note or bond and selling them as individual securities.

The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.5 years as of December 31, 2007, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration. Duration is a measure of a bond price’s sensitivity to a change in interest rates. In general, as interest rates rise, the value of the bonds held in the Fund will tend to decline, and, as interest rates fall, the value of the bonds held in the Fund will tend to rise. Bonds with longer durations tend to be more sensitive to changes in interest rates than those with shorter durations.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

The Fund employs multiple money managers, each with its own investment style. When determining how to allocate its assets among money managers, the Fund considers a variety of factors. These factors include a money manager’s investment style, investment approach, investment substyle and expected return potential of a money manager relative to its assigned benchmark, as well as the characteristics of the money manager’s typical investment portfolio. These characteristics include portfolio biases, magnitude of sector shifts and duration movements. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another. Fund assets not allocated to money managers are managed by RIMCo.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

The Fund, like any mutual fund, maintains cash reserves, (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses). Cash reserves are invested in short-term investments, including the Russell Money Market Fund. In addition to investing in such short-term investments, the Fund may pursue its strategy to be fully invested by purchasing fixed income securities and/or derivatives to expose the Fund’s cash reserves to changes in interest rates.

RUSSELL SHORT DURATION BOND FUND

Non-Fundamental Investment Objective

Seeks to provide current income and preservation of capital with a focus on short duration securities.

Principal Investment Strategies

The Russell Short Duration Bond Fund invests primarily in bonds. Bonds are fixed-income securities representing debt obligations that require the issuer to repay the bondholders the principal amount borrowed and to generally pay interest.

The Fund holds fixed income securities issued or guaranteed by the U.S. government (including TIPS (Treasury Inflation Protected Securities) and zero coupon securities) and to a lesser extent by non-U.S. governments, or by their respective agencies and instrumentalities. Zero coupon securities are notes, bonds and debentures that (1) do not pay current interest and are issued at a substantial discount from par value, (2) have been stripped of their unmatured interest coupons and receipts or (3) pay no interest until a stated date one or more years into the future. The Fund holds asset-backed securities and mortgage-backed securities, including collateralized mortgage obligations and commercial mortgage-backed securities. The Fund purchases loans and other direct indebtedness, and invests in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds).

The Fund defines short duration as a duration ranging from 0.5 to 3.0 years. The Fund has no restrictions on individual security duration. Duration is a measure of a bond price’s sensitivity to a change in interest rates. In general, as interest rates rise, the value of the bonds held in the Fund will tend to decline, and, as interest rates fall, the value of the bonds in the Fund will tend to rise. Bonds with longer durations tend to be more sensitive to changes in interest rates than those with shorter durations.

The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. The Fund’s money managers identify sectors of the fixed-income market that they believe are undervalued and focus the Fund’s investments in those sectors. These sectors will differ over time. To a lesser extent, the Fund may attempt to anticipate shifts in interest rates and hold securities that the Fund expects to perform well in relation to market indexes as a result of such shifts. Additionally, the Fund typically holds proportionately fewer U.S. Treasury obligations than are represented in the Merrill Lynch 1-2.99 Years Treasury Index.

The Fund may invest up to 15% of its assets in debt securities that are rated below investment grade as determined by one or more nationally recognized securities rating organizations or in unrated securities judged by the Fund to be of comparable quality. These securities are commonly referred to as high-yield or “junk bonds.”

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

The Fund, like any mutual fund, maintains cash reserves, (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses). Cash reserves are invested in short-term investments, including the Russell Money Market Fund. In addition to investing in such short-term investments, the Fund may pursue its strategy to be fully invested by purchasing fixed income securities and/or derivatives to expose the Fund’s cash reserves to changes in interest rates.

RUSSELL TAX EXEMPT BOND FUND

Fundamental Investment Objective

Principal Investment Strategies

The Russell Tax Exempt Bond Fund invests primarily in investment-grade municipal debt obligations providing federal tax-exempt interest income. Specifically, these obligations are debt obligations issued by states, territories and possessions of the U.S. and the District of Columbia and their political subdivisions, agencies and instrumentalities, or multi-state agencies or authorities to obtain funds to support special government needs or special projects.

The Fund has a fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in investments the income from which is exempt from federal income tax. This fundamental policy can only be changed by a vote of the shareholders of the Fund. The 80% investment requirement applies at the time the Fund invests its assets. Currently, the Fund does not intend to invest in debt obligations the interest on which is subject to the alternative minimum tax.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

The Fund may invest up to 10% of its assets in municipal debt securities that are rated below investment grade as determined by one or more nationally recognized securities rating organizations or in unrated securities judged by the Fund to be of comparable quality. These securities are commonly referred to as high-yield or “junk bonds.”

The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Municipal 1-10 Year Index, which was 4.2 years as of December 31, 2007, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration. Duration is a measure of a bond price’s sensitivity to a change in interest rates. In general, as interest rates rise, the value of the bonds held in the Fund will tend to decline, and, as interest rates fall, the value of the bonds in the Fund will tend to rise. Bonds with longer durations tend to be more sensitive to changes in interest rates than those with shorter durations.

The Fund employs multiple money managers, each with its own expertise in the municipal bond market. These factors include a money manager’s investment style, investment approach, investment substyle and expected return potential of a money manager relative to its assigned benchmark, as well as the characteristics of the money manager’s typical investment portfolio. These characteristics include portfolio biases, magnitude of sector shifts and duration movements. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another. Fund assets not allocated to money managers are managed by RIMCo.

Non-Principal Investment Strategies

The Fund, like any mutual fund, maintains cash reserves, (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses). Cash reserves are invested in short-term investments, including the Russell Money Market Fund. Dividends from the Fund’s investments in the Russell Money Market Fund and other taxable instruments are treated as taxable income by the Fund’s shareholders.

RUSSELL REAL ESTATE SECURITIES FUND

Non-Fundamental Investment Objective

Seeks to provide current income and long term capital growth.

Principal Investment Strategies

The Russell Real Estate Securities Fund seeks to achieve its objective by concentrating its investments in equity securities of real estate companies (“real estate securities”). The Fund considers a company to be a real estate company if at least 50% of its assets, gross income or net profits are attributable to the ownership, construction, development, management or sale of residential, commercial or industrial real estate.

The Fund has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in real estate securities. The Fund will provide 60 days’ notice to its shareholders prior to a change in this policy. The 80% investment requirement applies at the time the Fund invests its assets.

The Fund invests primarily in securities of companies, known as real estate investment trusts (REITs), that own and/or manage properties. By investing in REITs indirectly through the Fund, a shareholder will bear expenses of the REITs in addition to expenses of the Fund. The Fund may also invest in equity securities of other types of real estate-related companies. The Fund primarily invests in companies which are U.S. based. The Fund also invests in non-U.S. real estate securities.

capitalization size, growth and profitability measures, valuation measures, property type and geographic weightings and earnings and price volatility statistics. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another.

The Fund is classified as a “non-diversified fund” under the Investment Company Act which means that a relatively high percentage of the Fund’s assets may be invested in a limited number of issuers. The non-diversified status provides the Fund with greater investment flexibility to respond to consolidation in the REIT industry and to take larger positions in one or more issuers in the REIT industry.

Non-Principal Investment Strategies

The Fund may also invest in non-U.S. issuers, by purchasing American Depositary Receipts (“ADRs”), Global Depositary Receipts (“GDRs”) and European Depositary Receipts (“EDRs”). The Fund may purchase depositary receipts where an ADR, GDR or EDR provides better access to markets and higher liquidity than the underlying security. An ADR is a stock that trades in the U.S. but represents shares in a non-U.S. company. A GDR is a stock that trades in one or more global markets but represents shares of a company domiciled in a different country. An EDR is issued in Europe typically by foreign banks and trust companies and evidence ownership of either foreign or domestic securities. The Fund will invest primarily in sponsored ADRs, GDRs and EDRs but may also invest in unsponsored ADRs, GDRs and EDRs. In a sponsored ADR, GDR, or EDR arrangement, the foreign issuer assumes the obligation to pay some or all of the depository’s transaction fees, whereas under an unsponsored arrangement, the foreign issuer assumes no obligations and the depository’s transaction fees are paid directly by the ADR/GDR/EDR holders.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

RUSSELL MONEY MARKET FUND

Non-Fundamental Investment Objective

Seeks to maximize current income while preserving capital and liquidity.

Principal Investment Strategies

rates are tied to appropriate money market indexes which reset frequently. The Russell Money Market Fund may also invest in various types of funding agreements. These agreements are obligations of indebtedness negotiated privately between an investor and an insurance company.

The Fund enters into repurchase agreements. A repurchase agreement is an agreement under which the Fund acquires a fixed income security and simultaneously agrees to resell such security to the seller at an agreed upon price and date (normally the next business day). The resale price reflects an agreed upon interest rate effective for the period the security is held by the Fund and is unrelated to the interest rate on the security. The securities acquired by the Fund constitute collateral for the repurchase obligation. In these transactions, the securities acquired by the Fund (including accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement and must be held by a custodian bank until repurchased. In addition, RIMCo will monitor the Fund’s repurchase agreements and will evaluate the creditworthiness of any bank, broker or dealer party to a repurchase agreement with the Fund.

The Russell Money Market Fund may invest in corporate debt securities and dollar-denominated obligations issued in the U.S. by non-U.S. banks and corporations (Yankee Bonds).

Up to 10% of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions). The Fund invests in restricted securities such as securities that are eligible for resale pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and certain commercial paper issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act, but which may be deemed liquid by RIMCo pursuant to the Fund’s policies and procedures. The dollar-weighted average maturity of the Fund’s portfolio is 90 days or less.

The Russell Money Market Fund seeks to achieve its objective by active security selection consistent with its daily assessment of market and credit risks. This approach begins with a broad review of the economic and political environment. Interest rate forecasts of the investment community and Federal Reserve policy are analyzed to develop an expectation for interest rate trends. Within this framework, the Fund identifies individual securities for investment.

The Fund seeks to maintain a net asset value of $1.00 per share.

Non-Principal Investment Strategies

The Fund may purchase investment-grade municipal debt obligations. These obligations are debt obligations issued by states, territories and possessions of the United States and the District of Columbia and their political subdivisions, agencies, and instrumentalities, or multi-state agencies or authorities to obtain funds to support special government needs or special projects.

The Fund may invest in securities issued by registered investment companies that are money market funds. Additionally, the Fund may invest in indexed commercial paper. The Fund holds securities issued or guaranteed by the U.S. government or its agencies. The Fund may invest in STRIPS (Separate Trading of Registered Interest and Principal of Securities). STRIPS are created by separating the interest and the principal components of an outstanding U.S. Treasury or agency note or bond and selling them as individual securities.

RISKS

An investment in the Funds, like any investment, has risks. The value of each Fund fluctuates and you could lose money. The following table lists the Funds and the types of risks the Funds are subject to, and identifies which Funds are most likely to be affected by each risk. Other Funds that are not listed may be subject to one or more of the risks, but not in a way that is expected to principally affect the performance of such Funds as a whole. Please refer to the discussion following the chart and the Funds’ Statement of Additional Information for a discussion of risks associated with types of securities held by the Funds and the investment practices employed by the individual Funds.

· = Principal Risk

^¡ = Non-Principal Risk

Russell U.S.
Core
Equity

Russell
U.S.
Quantitative
Equity

Russell
U.S.
Growth

Russell
U.S.
Value

Russell
U.S.
Small & Mid
Cap

Russell
International
Developed
Markets

Russell
Global
Equity

Russell
Emerging
Markets

Russell Tax-
Managed
U.S.
Large Cap

Russell Tax-
Managed
U.S.
Mid & Small
Cap

Russell
Strategic
Bond

Russell
Investment
Grade Bond

Russell
Short
Duration
Bond

Russell
Tax
Exempt
Bond

Russell
Real
Estate
Securities

Russell
Money
Market

RISKS

Multi-Manager Approach

Security Selection and Market Risk

“Select Holdings” Strategy

Tax-Sensitive Management

Use of Multiple Money Managers in a Tax-Sensitive Fund

Large Redemptions and Long Portfolio Holding Periods in a Tax-Sensitive Fund

Equity Securities

Common Stocks

Value Stocks

Growth Stocks

Market-Oriented Investments

Quantitative Investing

Securities of Small and Micro Capitalization Companies

·*

Preferred Stocks

Fixed-Income Securities

Non-Investment Grade Fixed-Income Securities (High-Yield or “Junk Bonds”)

Government Issued or Guaranteed Securities, U.S. Government Securities

^¡

Municipal Obligations

^¡

Money Market Securities (including instruments of U.S. Banks and Corporations)

Stable $1.00 Net Asset Value Risk

· = Principal Risk

^¡ = Non-Principal Risk

Russell U.S.
Core
Equity

Russell
U.S.
Quantitative
Equity

Russell
U.S.
Growth

Russell
U.S.
Value

Russell
U.S.
Small & Mid
Cap

Russell
International
Developed
Markets

Russell
Global
Equity

Russell
Emerging
Markets

Russell Tax-
Managed
U.S.
Large Cap

Russell Tax-
Managed
U.S.
Mid & Small
Cap

Russell
Strategic
Bond

Russell
Investment
Grade Bond

Russell
Short
Duration
Bond

Russell
Tax
Exempt
Bond

Russell
Real
Estate
Securities

Russell
Money
Market

Mortgage or Asset Backed Securities

Asset-Backed Commercial Paper

Funding Agreements

Credit and Liquidity Enhancements

Repurchase Agreements

^¡

Demand Notes

International Securities

Non-U.S. Equity Securities

Non-U.S. Debt Securities

Emerging Markets Debt

Brady Bonds

Emerging Market Countries

Instruments of U.S. and Foreign Banks and Foreign Corporations

Currency Risk

Synthetic Foreign Equity Securities

^¡

Equity Linked Notes

^¡

Derivatives (Futures Contracts, Options, Forwards and Swaps)

^¡

Forward Currency Contracts

Leveraging Risk

Short Sales

Real Estate Securities

^¡

REITs

^¡

Depositary Receipts

^¡

Illiquid Securities

^¡

Non-Diversification Risk

Industry Concentration Risk

Exposing Cash Reserves to Appropriate Markets

^¡

Securities Lending

^¡

Funds of Funds Investment Risk

Includes small-cap risk only

In order to determine which risks are principal or non-principal risks for a Fund, please refer to the table at the beginning of the Risks section.

Multi-Manager Approach

The investment styles employed by a Fund’s money managers may not be complementary. The interplay of the various strategies employed by a Fund’s multiple money managers may result in a Fund holding a concentration of certain types of securities. This concentration may be beneficial or detrimental to a Fund’s performance depending upon the performance of those securities and the overall economic environment. The money managers selected for a Fund may underperform the market generally or other money managers that could have been selected for that Fund. The multi-manager approach could increase a Fund’s portfolio turnover rates which may result in higher levels of realized capital gains or losses with respect to a Fund’s portfolio securities, higher brokerage commissions and other transaction costs.

Security Selection and Market Risk

The securities chosen by RIMCo or a money manager to be in a Fund’s portfolio may decline in value. Security selection risk may cause a Fund to underperform other funds with similar investment objectives and investment strategies. Despite the Funds’ strategies to achieve positive investment returns regardless of general market conditions, the values of the Funds’ investments will change with market conditions, and so will the value of any investment in the Funds. Investment in the Funds could be lost or the Funds could underperform other investments.

•

“Select Holdings” Strategy

The “select holdings” strategy amplifies a Fund’s security selection risk and potential underperformance.

Tax-Sensitive Management

A Fund’s tax-managed equity investment strategy may provide a lower return before consideration of federal income tax consequences than other mutual funds that are not tax-managed. A tax-sensitive investment strategy involves active management and a Fund may, at times, take steps to postpone the realization of capital gains that other mutual funds that are not tax-managed may not. This may lead to a difference in pre-tax returns. While the Funds’ money managers investment approaches typically result in the realization of long-term capital gains, short-term capital gains will be realized from time to time when the money managers believe it is appropriate or as a result of corporate actions. At times, it may also be impossible to implement the tax-managed strategy if, for example, a Fund does not have any capital losses to offset capital gains.

•

Use of Multiple Money Managers in a Tax-Sensitive Fund

A tax-managed Fund which also uses a multi-manager approach is subject to unique risks. Money managers with distinct and different investment approaches are selected in an attempt to reduce overlap in holdings across money managers and reduce the instance of wash sales. However, this does not guarantee that wash sales will not occur from time to time. To the extent that they do occur from time to time the ability of the Fund to achieve its investment objective may be impacted. Additionally, transitions between money managers may require the sale of portfolio securities resulting in the Fund realizing net capital gains.

•

Large Redemptions and Long Portfolio Holding Periods in a Tax-Sensitive Fund

If large shareholder redemptions occur unexpectedly, a Fund could be required to sell portfolio securities resulting in its realization of net capital gains. If a Fund holds individual securities that have significantly appreciated over a long period of time it may be difficult for the Fund to sell them without realizing net capital gains. Transitions between money managers may also require the sale of portfolio securities resulting in the Fund realizing net capital gains. The realization of such capital gains could prevent the Fund from meeting its investment objective.

Equity Securities

•

Common Stocks

The value of common stocks will rise and fall in response to the activities of the company that issued the stock, general market conditions and/or economic conditions. If an issuer is liquidated or declares bankruptcy, the claims of owners of bonds will take precedence over the claims of owners of common stocks.

•

Value Stocks

Investments in value stocks are subject to the risks of common stocks, as well as the risks that (i) their intrinsic values may never be realized by the market or (ii) such stock may turn out not to have been undervalued.

•

Growth Stocks

Investments in growth stocks are subject to the risks of common stocks. Growth company stocks generally provide minimal dividends which could otherwise cushion stock prices in a market decline. The value of growth company stocks may rise and fall significantly based, in part, on investors’ perceptions of the company, rather than on fundamental analysis of the stocks.

•

Market-Oriented Investments

Market-oriented investments are subject to the risks of common stocks, as well as the risks associated with growth and value stocks.

•

Quantitative Investing

Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. Additionally, commonality of holdings across quantitative money managers may amplify losses.

•

Securities of Small and Micro Capitalization Companies

Investments in securities of small capitalization companies are subject to the risks of common stocks. Investments in small and micro capitalization companies may involve greater risks because these companies generally have a limited track record. Small and micro capitalization companies often have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. These risks may be even more pronounced for micro capitalization companies as compared to small capitalization companies. Micro capitalization company stocks are also more likely to suffer from significant diminished market liquidity. As a result of these factors, the performance of small and micro capitalization companies can be more volatile, which may increase the volatility of a Fund’s portfolio.

•

Preferred Stocks

Investments in preferred stocks are subject to the risks of common stocks, as well as the risk that interest rates will rise and make the fixed dividend feature, if any, less appealing to investors. Preferred stock does not usually have voting rights. The absence of voting rights may result in approval by the holders of the common stock of a corporate action to restructure a company for the benefit of the holders of the common stock to the detriment of the holders of the preferred stocks.

Fixed-Income Securities

Prices of fixed-income securities rise and fall in response to interest rate changes. Generally, when interest rates rise, prices of fixed-income securities fall. Expectations of higher inflation generally cause interest rates to rise. The longer the duration of the security, the more sensitive the security is to this risk. A 1% increase in interest rates would reduce the value of a $100 note by approximately one dollar if it had a one-year duration. There is also a risk that fixed income securities will be downgraded in credit rating or go into default. Lower-rated bonds, and bonds with longer final maturities, generally have higher credit risks.

•

Non-Investment Grade Fixed-Income Securities (High-Yield or “Junk Bonds”)

Although lower rated debt securities generally offer a higher yield than higher rated debt securities, they involve higher risks, higher volatility and higher risk of default than investment grade bonds. They are especially subject to:

•

Adverse changes in general economic conditions and in the industries in which their issuers are engaged,

•

Changes in the financial condition of their issuers and

•

Price fluctuations in response to changes in interest rates.

As a result, issuers of lower rated debt securities are more likely than other issuers to miss principal and interest payments or to default which could result in a loss to a Fund.

•

Government Issued or Guaranteed Securities, U.S. Government Securities

Bonds guaranteed by a government are subject to inflation risk and price depreciation risk. Bonds issued by non-U.S. governments are also subject to default risk. No assurance can be given that the U.S. government will provide financial support to certain U.S. government agencies or instrumentalities since it is not obligated to do so by law. Accordingly, bonds issued by U.S. government agencies or instrumentalities may involve risk of loss of principal and interest. These risks could result in losses to a Fund.

•

Municipal Obligations

Municipal obligations are affected by economic, business or political developments. These securities may be subject to provisions of litigation, bankruptcy and other laws affecting the rights and remedies of creditors, or may become subject to future laws extending the time for payment of principal and/or interest, or limiting the rights of municipalities to levy taxes.

•

Money Market Securities (including instruments of U.S. Banks and Corporations)

Prices of money market securities rise and fall in response to interest rate changes. Generally, when interest rates rise, prices of money market securities fall. Money market securities are also subject to reinvestment risk. As interest rates decline, a money market fund’s dividends (income) may decline because the fund must then invest in lower-yielding instruments. There is also a risk that money market securities will be downgraded in credit rating or go into default. Lower-rated securities, and securities with longer final maturities, generally have higher credit risks.

•

Stable $1.00 Net Asset Value Risk

There is no assurance that the Money Market Fund will maintain a net asset value of $1.00 per share on a continuous basis and it is possible to lose money by investing in the Money Market Fund.

•

Mortgage-Backed Securities

Mortgage-backed securities (“MBS”) often have stated maturities of up to thirty years when they are issued, depending upon the length of the mortgages underlying the securities. In practice, however, unscheduled or early payments of principal and interest on the underlying mortgages may make the securities’ effective maturity shorter than this, and the prevailing interest rates may be higher or lower than the current yield of a Fund’s portfolio at the time the Fund receives the payments for reinvestment. MBS may have less potential for capital appreciation than comparable fixed income securities due to the likelihood of increased prepayments of mortgages as interest rates decline. If a Fund buys MBS at a premium, mortgage foreclosures and prepayments of principal by mortgagors (which may be made at any time without penalty) may result in some loss of the Fund’s principal investment to the extent of the premium paid. The value of MBS may also change due to shifts in the market’s perception of issuers. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole. Non-governmental MBS may offer higher yields than those issued by government entities, but also may be subject to greater price changes than governmental issues.

of securities by an SPV in multiple classes or “tranches,” with one or more classes being senior to other subordinated classes as to the payment of principal and interest, with the result that defaults on the underlying mortgage loans are borne first by the holders of the subordinated class); creation of “reserve funds” (in which case cash or investments, sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and “overcollateralization” (in which case the scheduled payments on, or the principal amount of, the underlying mortgage loans exceeds that required to make payment of the securities and pay any servicing or other fees). However, there can be no guarantee that credit enhancements, if any, will be sufficient to prevent losses in the event of defaults on the underlying mortgage loans. In addition, MBS that are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable to those MBS that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying private MBS may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored MBS and have wider variances in a number of terms including interest rate, term, size, purpose and borrower characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured housing loans. The coupon rates and maturities of the underlying mortgage loans in a private-label MBS pool may vary to a greater extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans. Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans. For these reasons, the loans underlying these securities have had in many cases higher default rates than those loans that meet government underwriting requirements. The risk of non-payment is greater for MBS that are backed by mortgage pools that contain subprime loans, but a level of risk exists for all loans. Privately issued MBS are not traded on an exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, MBS held in a Fund’s portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans.

•

Asset-Backed Securities

Asset-backed securities may include MBS, loans, receivables or other assets. Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities. For purposes of determining the percentage of a Fund’s total assets invested in securities of issuers having their principal business activities in a particular industry, asset-backed securities will be classified separately, based on the nature of the underlying assets, according to the following categories: captive auto, diversified, retail and consumer loans, captive equipment and business, business trade receivables, nuclear fuel and capital and mortgage lending. Asset-backed securities (other than MBS) present certain risks that are not presented by MBS. Primarily, these securities may not have the benefit of any security interest in the related assets. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. There is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses results from payment of the insurance obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Funds will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information

respecting the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an investment in such a security. The availability of asset-backed securities may be affected by legislative or regulatory developments. It is possible that such developments may require the Funds to dispose of any then existing holdings of such securities.

•

Asset-Backed Commercial Paper

Asset-backed commercial paper is subject to the same risks as money market securities generally. In addition, asset-backed commercial paper is usually unregistered. Therefore, transfer of these securities is restricted by the Securities Act of 1933.

•

Funding Agreements

Funding agreements are subject to reinvestment risk and credit risk, as are all money market securities. Because there is normally no secondary market for these investments, funding agreements purchased by the Fund may be regarded as illiquid and therefore will be subject to the Fund’s limitation on illiquid investments.

•

Credit and Liquidity Enhancements

Third parties issue credit and/or liquidity enhancements, which may include letters of credit. Liquidity enhancements may be used to shorten the maturity of the debt obligation through a demand feature. Adverse changes in a guarantor’s credit quality if contemporaneous with adverse changes in the guaranteed security could cause losses to a Fund and may affect its net asset value. The use of credit and liquidity enhancements exposes a Fund to counterparty risk, which is the risk that the entity issuing the credit and/or liquidity enhancement may not be able to honor its financial commitments.

•

Repurchase Agreements

The use of repurchase agreements involves certain risks. One risk is the seller’s ability to pay the agreed-upon repurchase price on the repurchase date. If the seller defaults, the Fund may incur costs in disposing of the collateral, which would reduce the amount realized thereon. If the seller seeks relief under bankruptcy laws, the disposition of the collateral may be delayed or limited. For example, if the other party to the agreement becomes insolvent and subject to liquidation or reorganization under bankruptcy or other laws, a court may determine that the underlying securities are collateral for a loan by the Fund not within its control and therefore the realization by the Fund on such collateral may be automatically stayed. Finally, it is possible that the Fund may not be able to substantiate its interest in the underlying securities and may be deemed an unsecured creditor of the other party to the agreement.

•

Demand Notes

Demand notes are obligations with the right to a “put.” The ability of the Fund to exercise the put may depend on the seller’s ability to purchase the securities at the time the put is exercised or on certain restrictions in the buy back arrangement. Such restrictions may prohibit the Funds from exercising the put except to maintain portfolio flexibility and liquidity. In the event the seller would be unable to honor a put for financial reasons, the Fund may, in the opinion of Fund management, be a general creditor of the seller. There may be certain restrictions in the buy back arrangement which may not obligate the seller to repurchase the securities.

International Securities

A Fund’s return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country. Non-U.S. markets, economies and political systems may be less stable than U.S. markets, and changes in exchange rates of foreign currencies can affect the value of a Fund’s foreign assets. Non-U.S. laws and accounting standards typically are not as comprehensive as they are in the U.S. and there may be less public information available about foreign companies. Non-U.S. securities markets may be less liquid and have fewer transactions than U.S. securities markets. Additionally, international markets may experience delays and disruptions in securities settlement procedures for a Fund’s portfolio securities. Investments in foreign countries could be affected by

potential difficulties in enforcing contractual obligations and could be subject to extended settlement periods or restrictions affecting the prompt return of capital to the U.S.

•

Non-U.S. Equity Securities

Non-U.S. equity securities can involve additional risks relating to political, economic or regulatory conditions in foreign countries. Less information may be available about foreign companies than about domestic companies, and foreign companies generally are not subject to the same uniform accounting, auditing and financial reporting standards or to other regulatory practices and requirements comparable to those applicable to domestic companies.

•

Non-U.S. Debt Securities

A Fund’s non-U.S. debt securities are typically obligations of sovereign governments and corporations. To the extent that a Fund invests a significant portion of its assets in a concentrated geographic area like Eastern Europe or Asia, the Fund will generally have more exposure to regional economic risks associated with foreign investments.

•

Emerging Markets Debt

A Fund’s emerging markets debt securities may include obligations of governments and corporations. These securities are particularly subject to a risk of default from political instability. There is also the risk that the emerging markets debt securities will be downgraded in credit rating or go into default.

•

Brady Bonds

Brady Bonds involve various risk factors including residual risk and the history of defaults with respect to commercial bank loans by public and private entities of countries issuing Brady Bonds. There can be no assurance that Brady Bonds in which a Fund may invest will not be subject to restructuring arrangements or to requests for new credit, which may cause the fund to suffer a loss of interest or principal on any of its holdings.

•

Emerging Market Countries

Investments in emerging or developing markets involve exposure to economic structures that are generally less diverse and mature, and to political systems which have less stability than those of more developed countries. These securities are particularly subject to a risk of loss from political instability. Emerging market securities are subject to currency transfer restrictions and may experience delays and disruptions in securities settlement procedures for a Fund’s portfolio securities. The volatility of emerging markets can be significantly higher than other equity asset classes.

•

Instruments of U.S. and Foreign Banks and Foreign Corporations

Non-U.S. corporations and banks issuing dollar denominated instruments in the U.S. are not necessarily subject to the same regulatory requirements that apply to U.S. corporations and banks, such as accounting, auditing and recordkeeping standards, the public availability of information and, for banks, reserve requirements, loan limitations and examinations. This complicates efforts to analyze these securities, and may increase the possibility that a non-U.S. corporation or bank may become insolvent or otherwise unable to fulfill its obligations on these instruments.

•

Currency Risk

Foreign (non-U.S.) securities that trade in, and receive revenues in, foreign (non-U.S.) currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time due to the imposition of currency controls or other political developments in the U.S. or abroad. As a result, the Funds’ investments in non-U.S. dollar-denominated securities and currencies may reduce the returns of the Funds.

•

Synthetic Foreign Equity Securities (also referred to as International Warrants, Local Access Products, Participation Notes or Low Exercise Price Warrants)

International warrants are a form of derivative security issued by foreign banks that either give holders the right to buy or sell an underlying security or securities for a particular price or give holders the right to receive a cash payment relating to the value of the underlying security or securities. Local access products are similar to options in that they are exercisable by the holder for an underlying security or the value of that security, but are generally exercisable over a longer term than typical options. Investments in these instruments involve the risk that the issuer of the instrument may default on its obligation to deliver the underlying security or its value. These instruments may also be subject to liquidity risk, foreign risk and currency risk. In the case of any exercise of the instruments, there may be a time delay between the time a holder gives instructions to exercise and the time the price of the security or the settlement date is determined, during which time the price of the underlying security could change significantly. In addition, the exercise or settlement date may be affected by certain market disruption events which could cause the local access products to become worthless if the events continue for a period of time.

•

Equity Linked Notes

An equity linked note is a note, typically issued by a company or financial institution, whose performance is tied to a single stock or a basket of stocks. Generally, upon the maturity of the note, the holder receives a return of principal based on the capital appreciation of the underlying linked securities. The terms of an equity linked note may also provide for the periodic interest payments to holders at either a fixed or floating rate. Equity linked notes are generally subject to the risks associated with the debt securities of foreign issuers and with securities denominated in foreign currencies and, because they are equity-linked, may return a lower amount at maturity because of a decline in value of the linked security or securities. Equity linked notes are also subject to default risk and counterparty risk.

Derivatives (Futures Contracts, Options, Forwards and Swaps)

Derivatives are financial contracts whose value depends on, or is derived from, the value of an underlying asset, reference rate or index. The various derivative instruments that the Funds may use are described in more detail under “Other Financial Instruments Including Derivatives” in the Statement of Additional Information. The Funds typically use derivatives as a substitute for taking a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as currency risk. The Funds may also use derivatives for leverage, in which case their use would involve leveraging risk. The Funds’ use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of risks such as liquidity risk, market risk, credit risk and management risk. They also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate or index. A fund investing in a derivative instrument could lose more than the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in these transactions to reduce exposure to other risks when that would be beneficial.

Participation in the options or futures markets, as well as the use of various swap instruments and forward contracts, involves investment risks and transaction costs to which a Fund would not be subject absent the use of these strategies. If a Fund’s predictions of movements in the direction of the securities, currencies or interest rate markets are inaccurate, the adverse consequences to a Fund may leave the Fund in a worse position than if such strategies were not used. Risks inherent in the use of options, futures contracts, options on futures contracts, forwards and swaps include: (i) dependence on a Fund’s ability to predict correctly movements in the direction of interest rates and securities prices; (ii) imperfect correlation between the price of options and futures contracts and options thereon and movements in the prices of the securities being hedged; (iii) the fact that skills needed to use these strategies are different from those needed to select portfolio securities; (iv) the absence of a liquid secondary market for any particular instrument at any time; (v) the possible need to defer closing out certain hedged positions to avoid adverse tax consequences; (vi) for swaps, the risk of counterparty default and the risk of failing to correctly evaluate the creditworthiness of the company on which the credit default swap is based and (vii) the possible inability of a Fund to purchase or sell a portfolio security at a time that otherwise would be favorable for it to do so, or the possible need for a Fund to sell the security

at a disadvantageous time, due to the requirement that the Fund maintain “cover” or collateral securities in connection with use of certain derivatives. A Fund could lose the entire amount it invests in futures. The loss from investing in other derivatives is potentially unlimited. There also is no assurance that a liquid secondary market will exist for futures contracts and options in which a Fund may invest. Each Fund limits its investment in futures contracts so that the notional value (meaning the stated contract value) of the futures contracts does not exceed the net assets of the Fund.

Furthermore, regulatory requirements for the Funds to set aside assets to meet their obligations with respect to derivatives may result in a Fund being unable to purchase or sell securities when it would otherwise be favorable to do so, or in a Fund needing to sell securities at a disadvantageous time. A Fund may also be unable to close out its derivatives positions when desired. Investments in derivatives can cause the Funds to be more volatile, and can result in significant losses. Certain derivatives have the potential for unlimited loss. The Funds may also use derivatives for leverage, in which case their use would involve leveraging risk.

Forward Currency Contracts

The Funds may engage in forward currency contracts to hedge against uncertainty in the level of future exchange rates or to effect investment transactions consistent with the Funds’ investment objectives and strategies. The Funds will conduct their forward foreign currency exchange transactions either on a spot (i.e., cash) basis at the rate prevailing in the currency exchange market, or through entering into forward currency exchange contracts (“forward contract”) to purchase or sell currency at a future date. A forward contract involves an obligation to purchase or sell a specific currency. Forward currency contracts are subject to the risk that should forward prices increase, the Fund will suffer a loss to the extent that the price of the currency it has agreed to purchase exceeds the price of the currency that it has agreed to sell.

Leveraging Risk

Certain transactions may give rise to a form of leverage. Such transactions may include, among others, reverse repurchase agreements, borrowing, loans of portfolio securities, and the use of when-issued, delayed delivery or forward commitment transactions and short sales. The use of derivatives may also create leveraging risk. To mitigate leveraging risk, the Funds will segregate or “earmark” liquid assets or otherwise cover the transactions that may give rise to such risk. The use of leverage may cause a Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations or to meet segregation requirements. Leverage may cause a Fund to be more volatile than if the Fund had not been leveraged. This is because leverage tends to exaggerate the effect of any increase or decrease in the value of a Fund’s portfolio securities.

Short Sales

The Russell U.S. Quantitative Equity Fund will enter into short sales pursuant to a limited long-short strategy. In a short sale, the seller sells a security that it does not own, typically a security borrowed from a broker or dealer. Because the seller remains liable to return the underlying security that it borrowed from the broker or dealer, the seller must purchase the security prior to the date on which delivery to the broker or dealer is required. The Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund must return the borrowed security. The Fund will realize a gain if the security declines in price between those dates. The making of short sales exposes the Fund to the risk of liability for the market value of the security that is sold (the amount of which liability increases as the market value of the underlying security increases), in addition to the costs associated with establishing, maintaining and closing out the short position.

Although the Fund’s potential for gain as a result of a short sale is limited to the price at which it sold the security short less the cost of borrowing the security, its potential for loss is theoretically unlimited because there is no limit to the cost of replacing the borrowed security. When the Fund makes a short sale, the Fund may use all or a portion of the cash proceeds of short sales to purchase other securities or for any other permissible Fund purpose. To the extent necessary to meet collateral requirements, the Fund is required to pledge assets in a segregated account maintained by the Fund’s custodian for the benefit of the broker. The Fund also may use securities it owns to meet any such collateral obligations. Until a Fund returns a borrowed security in connection with a short sale, the Fund will: (a) maintain daily a segregated account, containing cash, cash equivalents, or liquid marketable securities, at such a level that the amount deposited in the segregated account plus the amount deposited with the broker as collateral will equal the current requirement under Regulation T promulgated by the Board of Governors of the Federal Reserve System under the

authority of sections 7 and 8 of the Securities Exchange Act of 1934, as amended; or (b) otherwise cover its short position in accordance with positions taken by the staff of the SEC (e.g., taking an offsetting long position in the security sold short).

Real Estate Securities

Just as real estate values go up and down, the value of the securities of companies involved in the industry, and in which a Fund invests, also fluctuates. A Fund that invests in real estate securities is also subject to the risks associated with direct ownership of real estate. Additional risks include declines in the value of real estate, changes in general and local economic and real estate market conditions, increases in property taxes or other operating expenses and changes in tax laws and interest rates. The value of securities of companies that service the real estate industry may also be affected by such risks.

•

REITs

REITs may be affected by changes in the value of the underlying properties owned by the REITs and by the quality of tenants’ credit. Moreover, the underlying portfolios of REITs may not be diversified, and therefore subject to the risk of investing in a limited number of properties. REITs are also dependent upon management skills and are subject to heavy cash flow dependency, defaults by tenants, self-liquidation and the possibility of failing either to qualify for tax-free pass-through of income under federal tax laws or to maintain their exemption from certain federal securities laws.

Depositary Receipts

Depositary receipts are securities traded on a local stock exchange that represent interests in securities issued by a foreign publicly-listed company. Depositary receipts have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with the underlying non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. The value of depositary receipts will rise and fall in response to the activities of the company that issued the securities represented by the depositary receipts, general market conditions and/or economic conditions. Also, if there is a rise in demand for the underlying security and it becomes less available to the market, the price of the depositary receipt may rise, causing the Fund to pay a premium in order to obtain the desired depositary receipt. Conversely, changes in foreign market conditions or access to the underlying securities could result in a decline in the value of the depositary receipt.

Illiquid Securities

An illiquid security is one that does not have a readily available market or that is subject to resale restrictions. A Fund with an investment in an illiquid security may not be able to sell the security quickly and at a fair price, which could cause the Fund to realize losses on the security if the security is sold at a price lower than that at which it had been valued. An illiquid security may also have large price volatility.

Non-Diversification Risk

As a non-diversified fund, the Russell Real Estate Securities Fund is subject to additional risk. To the extent the Fund invests a relatively high percentage of its assets in the securities of a single issuer or group of issuers, the Fund’s performance will be more vulnerable to changes in the market value of the single issuer or group of issuers, and more susceptible to risks associated with a single economic, political or regulatory occurrence, than it would be if the Fund were a diversified fund.

Industry Concentration Risk

The Russell Real Estate Securities Fund concentrates its investments in real estate securities, including REITs. By concentrating in a single industry, the Fund carries much greater risk of adverse developments in that industry than a fund that invests in a wide variety of industries. Companies in the same or similar industries may share common characteristics and are more likely to react similarly to industry-specific market or economic developments. The value of securities of issuers in the real estate industry can be affected by changes in real estate values and rental income, property taxes, interest rates and tax and regulatory requirements.

Exposing Cash Reserves to Appropriate Markets

By exposing its cash reserves to the performance of appropriate markets by purchasing equity securities (in the case of equity funds) or fixed income securities (in the case of fixed income funds) and/or derivatives, a Fund’s performance tends to correlate more closely to the performance of that market as a whole. However, the market performance of these instruments may not correlate precisely to the performance of the corresponding market. This approach increases a Fund’s performance if the particular market rises and reduces a Fund’s performance if the particular market declines.

Securities Lending

If a borrower of a Fund’s securities fails financially, the Fund’s recovery of the loaned securities may be delayed or the Fund may lose its rights to the collateral which could result in a loss to a Fund. While securities are on loan, each Fund is subject to: the risk that the borrower may default on the loan and that the collateral could be inadequate in the event the borrower defaults, the risk that the earnings on the collateral invested may not be sufficient to pay fees incurred in connection with the loan, the risk that the principal value of the collateral invested may decline and may not be sufficient to pay back the borrower for the amount of the collateral posted, the risk that the borrower may use the loaned securities to cover a short sale which may place downward pressure on the market prices of the loaned securities, the risk that return of loaned securities could be delayed and could interfere with portfolio management decisions and the risk that any efforts to recall the securities for purposes of voting may not be effective.

Funds of Funds Investment Risk

Certain of the Funds are used as investments for funds of funds which have the same investment adviser as the Funds. These Funds may have a large percentage of their shares owned by such funds of funds. Should RIMCo change a fund of funds’ investment strategies or investment allocations such that a fund of funds invests fewer of its assets in a Fund or a Fund is no longer used as an investment of a fund of funds, that Fund could experience large redemptions of its shares. If these large redemptions occur, a Fund could be required to sell portfolio securities before its money managers would otherwise decide to do so. Large redemptions in a Fund may also result in increased expense ratios, higher levels of realized capital gains or losses with respect to a Fund’s portfolio securities, higher brokerage commissions and other transaction costs.

PORTFOLIO TURNOVER

The portfolio turnover rates for multi-manager funds are likely to be somewhat higher than the rates for comparable mutual funds with a single money manager. Each of the Funds’ money managers makes decisions to buy or sell securities independently from other money managers. Thus, one money manager for a Fund may be selling a security when another money manager for the Fund (or for another Fund) is purchasing the same security. Also, when a Fund replaces a money manager, the new money manager may significantly restructure the investment portfolio. These practices may increase the Funds’ portfolio turnover rates which may result in higher levels of realized gains or losses with respect to a Fund’s portfolio securities, higher brokerage commissions and other transaction costs. Brokerage commissions and transaction costs will reduce Fund performance. The annual portfolio turnover rates for each of the Funds, which in certain cases exceed 100%, are shown in the Financial Highlights tables in this Prospectus.

PORTFOLIO DISCLOSURE

A description of the Funds’ policies and procedures with respect to the disclosure of each Fund’s portfolio securities is available in the Funds’ Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes substantially all of its net investment income and net capital gains to shareholders each year.

Income Dividends

The amount and frequency of distributions are not guaranteed; all distributions are at the Board’s discretion. Currently, the Board intends to declare dividends from net investment income, if any, according to the following schedule:


Declared	Payable	Funds
Daily	Monthly	Russell Money Market Fund

Monthly	Early in the following month	Russell Tax Exempt Bond Fund

Quarterly	April, July, October and December	Russell U.S. Core Equity, Russell U.S. Quantitative Equity, Russell U.S. Value, Russell Strategic Bond*, Russell Investment Grade Bond, Russell Short Duration Bond and Russell Real Estate Securities Funds

Annually	Mid-December	Russell U.S. Growth, Russell U.S. Small & Mid Cap, Russell International Developed Markets, Russell Global Equity, Russell Emerging Markets, Russell Tax-Managed U.S. Large Cap and Russell Tax-Managed U.S. Mid & Small Cap Funds

Effective October 1, 2008, the Russell Strategic Bond Fund will declare and pay dividends on a monthly basis.

An additional distribution of net investment income may be declared and paid by a Fund if required to avoid the imposition of a federal tax on the Fund.

The Russell Money Market Fund determines net investment income immediately prior to the determination of its net asset values. This occurs at the earlier of 4:00 p.m. or the close of the New York Stock Exchange on each business day. Net investment income is credited daily to the accounts of shareholders of record prior to the net asset value calculation. The income is accrued daily and paid monthly.

Capital Gains Distributions

The Board will declare capital gains distributions (both short-term and long-term) once a year in mid-December to reflect any net short-term and net long-term capital gains, if any, realized by a Fund in the prior fiscal year. An additional distribution may be declared and paid by a Fund if required to avoid the imposition of a federal tax on the Fund. Distributions that are declared in October, November or December to shareholders of record in such months, and paid in January of the following year, will be treated for tax purposes as if received on December 31 of the year in which they were declared.

Buying a Dividend

If you purchase Shares just before a distribution, you will pay the full price for the Shares and receive a portion of the purchase price back as a taxable distribution. This is called “buying a dividend.” Unless your account is a tax-deferred account, dividends paid to you would be included in your gross income for tax purposes even though you may not have participated in the increase of the net asset value of a Fund, regardless of whether you reinvested the dividends. To avoid “buying a dividend,” check a Fund’s distribution dates before you invest.

Automatic Reinvestment

Your dividends and other distributions will be automatically reinvested at the closing net asset value on the record date, in additional Shares of the appropriate Fund, unless you elect to have the dividends or distributions paid in cash or invested in another Fund. You may change your election by delivering written notice no later than ten days prior to the record date to your Financial Intermediary.

Special Dividend

In connection with the Reorganizations discussed in the section entitled “Subsequent Events,” each of the Russell U.S. Quantitative Equity and the Russell Strategic Bond Funds will declare and pay to its shareholders of record one or more dividends and/or other distributions so that it will have distributed all of its investment company taxable income (computed without regard to any deduction for dividends paid), if any, for the current taxable year through the closing date of the respective Reorganization. The record date for this special dividend is September 9, 2008, based on Fund records as of the close of business on September 8, 2008.

TAXES

In general, distributions from a Fund are taxable to you as either ordinary income or capital gains. This is true whether you reinvest your distributions in additional Shares or receive them in cash. Any long-term capital gains distributed by a Fund are taxable to you as long-term capital gains no matter how long you have owned your Shares. Every January, you will receive a statement that shows the tax status of distributions you received for the previous year.

If you are an individual investor, a portion of the dividends you receive from a Fund may be treated as “qualified dividend income” which is taxable to individuals at the same rates that are applicable to long-term capital gains. A Fund distribution is treated as qualified dividend income to the extent that the Fund receives dividend income from taxable domestic corporations and certain qualified foreign corporations, provided that certain holding period and other requirements are met. Fund distributions generally will not qualify as qualified dividend income to the extent attributable to interest, capital gains, REIT distributions and, in many cases, distributions from non-U.S. corporations.

When you sell or exchange Shares, you may have capital gains or losses. Any losses you incur if you sell or exchange Shares that you have held for six months or less will be treated as long-term capital losses, but only to the extent that the Fund has paid you long-term capital gains dividends with respect to those Shares during that period. The tax rate on any gains from the sale or exchange of your Shares depends on how long you have held your Shares.

The Funds make no representation as to the amount or variability of each Fund’s capital gains distributions which may vary as a function of several factors including, but not limited to, prevailing dividend yield levels, general market conditions, shareholders’ redemption patterns and Fund cash equitization activity.

Fund distributions and gains from the sale or exchange of your Shares will generally be subject to state and local income tax. Non-U.S. investors may be subject to U.S. withholding and estate taxes. Under a temporary provision that was scheduled to expire for Fund taxable years beginning January 1, 2009 (but may possibly be temporarily extended), a portion of Fund distributions received by a non-U.S. investor may, however, be exempt from U.S. withholding tax to the extent attributable to U.S. source interest income and short-term capital gains earned by the Fund. Also, for Fund taxable years beginning on or after January 1, 2009 (subject to a possible temporary extension), U.S. estate taxes may not apply to that portion of Shares held by a non-U.S. investor that is attributable to Fund assets consisting of certain debt obligations or other property treated as not within the United States for U.S. estate tax purposes. You should consult your tax professional about federal, state, local or foreign tax consequences of holding Shares.

When a Fund invests in securities of certain foreign countries, the Fund may have taxes withheld on the income received from these securities. If more than 50% of the total fair market value of the Fund’s assets at the close of its taxable year is made up of foreign securities, the Fund may elect to pass through such taxes to shareholders who may then (subject to limitations) claim a foreign tax credit.

If you are a corporate investor, a portion of the dividends from net investment income paid by Russell U.S. Core Equity Fund, Russell U.S. Quantitative Equity Fund, Russell U.S. Growth Fund, Russell U.S. Value Fund, Russell U.S. Small & Mid Cap Fund, Russell Global Equity Fund, Russell Tax-Managed U.S. Large Cap Fund or Russell

Tax-Managed U.S. Mid & Small Cap Fund will generally qualify, in part, for the corporate dividends-received deduction. However, the portion of the dividends so qualified depends on the aggregate qualifying dividend income received by each Fund from domestic (U.S.) sources. Certain holding period and debt financing restrictions may apply to corporate investors seeking to claim the deduction. You should consult your tax professional with respect to the applicability of these rules.

Although the Russell Tax-Managed U.S. Large Cap and the Russell Tax-Managed U.S. Mid & Small Cap Funds consider the tax consequences of portfolio trading activity among other factors during a particular year, the realization of capital gains is not entirely within either the Fund’s or their money managers’ control. Shareholder purchase and redemption activity, as well as the Fund’s performance, will impact the amount of capital gains realized. Capital gains distributions by the Russell Tax-Managed U.S. Large Cap Fund and Russell Tax-Managed U.S. Mid & Small Cap Fund may vary considerably from year to year.

The Russell Tax Exempt Bond Fund intends to continue to qualify to pay “exempt-interest dividends” to its shareholders by maintaining, as of the close of each quarter of its taxable years, at least 50% of the value of its total assets in municipal obligations. If the Fund satisfies this requirement, distributions from net investment income to shareholders will be exempt from federal income taxation, including the alternative minimum tax, to the extent that net investment income is represented by interest on municipal obligations. However, to the extent dividends are derived from taxable income from temporary investments, short-term capital gains, or income derived from the sale of bonds purchased with market discount, the dividends are treated as ordinary income, whether paid in cash or reinvested in additional Shares. If the Fund invests in private activity bonds, a portion of any dividends derived from income from such investments may be treated as a preference item in determining your alternative minimum tax.

For the Russell Money Market Fund, no portion of the Fund’s distributions is expected to qualify for the reduced tax rates applicable to “qualified dividend income” for individual shareholders, or for the dividends received deduction for corporate shareholders. Because the Russell Money Market Fund expects to maintain a stable $1.00 Share price, you should not have any gains or losses if you sell your shares.

By law, a Fund must withhold the legally required amount of your distributions and proceeds if you do not provide your correct taxpayer identification number, or certify that such number is correct, or if the IRS instructs the Fund to do so.

The tax discussion set forth above is included for general information only. You should consult your own tax adviser concerning the federal, state, local or foreign tax consequences of an investment in a Fund.

Additional information on these and other tax matters relating to each Fund and its shareholders is included in the section entitled “Taxes” in the Funds’ Statement of Additional Information.

HOW NET ASSET VALUE IS DETERMINED

Net Asset Value Per Share

The net asset value per share is calculated for Shares of each Class of each Fund on each business day on which Shares are offered or redemption orders are tendered. For each Fund, a business day is one on which the New York Stock Exchange (NYSE) is open for regular trading. Each Fund determines net asset value at 4:00 p.m. Eastern Time or as of the close of the NYSE, whichever is earlier. The price of Fund Shares is computed by dividing the current value of a Fund’s assets (less liabilities) by the number of Shares of the Fund outstanding and rounding to the nearest cent. Share value for purchase, redemption or exchange will be based on the net asset value next calculated after your order is received in good form (i.e., when all required documents and your check or wired funds are received) by the Funds or an authorized Fund agent. See “How to Purchase Shares,” “How to Redeem Shares” and “Exchange Privilege” for more information.

Valuation of Portfolio Securities

The Funds value portfolio securities according to Board-approved Securities Valuation Procedures, including Market Value Procedures, Fair Value Procedures and Pricing Services. Under the Board-approved Securities Valuation Procedures, the Board has delegated the day-to-day valuation functions to RFSC. However, the Board retains oversight over the valuation process.

Money market fund securities are priced using the amortized cost method of valuation, as are debt obligation securities maturing within 60 days of the date of purchase, unless the Board determines that amortized cost does not represent market value of short-term debt obligations. 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 4:00 p.m. Eastern Time or as of the close of the NYSE, whichever is earlier. The circumstances under which these companies will use fair value pricing and the effects of using fair value pricing can be found in the other mutual funds’ prospectuses.

Ordinarily, the Funds value each portfolio security based on market quotations provided by Pricing Services or brokers (when permitted by the Market Value Procedures).

If market quotations are not readily available for a security or if subsequent events suggest that a market quotation is not reliable, the Funds will use the security’s fair value, as determined in accordance with the Fair Value Procedures. This generally means that equity securities and fixed income securities listed and traded principally on any national securities exchange are valued on the basis of the last sale price or, lacking any sales, at the closing bid price, on the primary exchange on which the security is traded. The Fair Value Procedures may involve subjective judgments as to the fair value of securities. The effect of fair value pricing is that securities may not be priced on the basis of quotations from the primary market in which they are traded, but rather may be priced by another method that the Funds’ Board believes reflects fair value. The use of fair value pricing by a Fund may cause the net asset value of its Shares to differ significantly from the net asset value that would be calculated using current market values. Fair value pricing could also cause discrepancies between the daily movement of the value of Fund Shares and the daily movement of the benchmark index if the index is valued using another pricing method.

This policy is intended to assure that the Funds’ net asset values fairly reflect security values as of the time of pricing. Events or circumstances affecting the values of Fund securities that occur between the closing of the principal markets on which they trade and the time the net asset value of Fund Shares is determined may be reflected in the calculation of net asset values for each applicable Fund when the Funds deem that the particular event or circumstance would materially affect such Fund’s net asset value. RIC Funds that invest primarily in frequently traded exchange listed securities will use fair value pricing in limited circumstances since reliable market quotations will often be readily available. RIC Funds that invest in foreign securities are likely to use fair value pricing more often since significant events may occur between the close of foreign markets and the time of pricing which would trigger fair value pricing of the foreign securities. RIC Funds that invest in low rated debt securities are also likely to use fair value pricing more often since the markets in which such securities are traded are generally thinner, more limited and less active than those for higher rated securities. Examples of events that could trigger fair value pricing of one or more securities are: a material market movement of the U.S. Securities Market (defined in the Fair Value Procedures as the movement of a single major U.S. Index greater than a certain percentage) or other significant event; foreign market holidays if on a daily basis fund exposure exceeds 20% in aggregate (all closed markets combined); a company event such as a material business development, dividend declaration, stock split or rights offering; a natural disaster or emergency situation; or an armed conflict.

Because foreign securities can trade on non-business days, the net asset value of a Fund’s portfolio that includes foreign securities may change on days when shareholders will not be able to purchase or redeem Fund Shares.

CHOOSING A CLASS OF SHARES TO BUY

The Funds offer more than one Class of Shares. Each class of shares has different expenses, allowing you to choose the class that best meets your needs. Which Class is more beneficial to an investor depends on the amount and intended length of the investment.

COMPARING THE FUNDS’ CLASSES

Your Financial Intermediary can help you decide which Class of Shares meets your goals. Your Financial Intermediary may receive different compensation depending upon which class you choose.

Class of Shares may be best for you to invest in, please keep in mind that your Financial Intermediary may receive different compensation depending on the Class of Shares that you invest in and you may receive different services in connection with investments in different Classes of Shares. You should consult with your Financial Intermediary about the comparative pricing and features of each Class, the services available for shareholders in each Class, the compensation that will be received by the Financial Intermediary in connection with each Class and other factors that may be relevant to your decision as to which Class of Shares to buy.


Class A Shares, Russell Money Market Fund Only
Initial sales charge		None
Annual 12b-1 fees and Service Fees		Up to 0.15% of average daily assets

Class A Shares (excluding Russell Money Market Fund)
Initial sales charge		Up to 5.75% for the equity Funds and up to 3.75% for the fixed-income Funds; reduced, waived or deferred for large purchases and certain investors
Deferred Sales Charge		1.00% on redemptions of class A Shares made within 12 months of a purchase on which no front-end sales charge was paid and your Financial Intermediary was paid a commission by the Funds’ Distributor
Annual 12b-1 fees and Service Fees		Up to 0.25% of average daily assets

Class C Shares
Initial sales charge		None
Deferred Sales Charge		None
Annual 12b-1 fees and Service Fees		Up to 1.00% of average daily assets

Class E Shares
Initial sales charge		None
Deferred Sales Charge		None
Annual 12b-1 fees and Service Fees		Up to 0.25% of average daily assets

Class S Shares
Initial sales charge		None
Deferred Sales Charge		None
Annual 12b-1 fees and Service Fees		None

FRONT-END SALES CHARGES

Class C, E and S Shares

Class C, E and S Shares of all Funds offered in this Prospectus are sold without an initial sales charge.

Class A Shares, Russell Money Market Fund Only

Class A Shares of the Russell Money Market Fund are sold without an initial sales charge. However, if Shares of the Russell Money Market Fund are exchanged for Class A Shares of another RIC Fund, the sales charge applicable to the other fund may apply.

Class A Shares (excluding Russell Money Market Fund)

Class A Shares are sold at the offering price, which is the net asset value plus a front-end sales charge. You pay a lower front-end sales charge as the size of your investment increases to certain levels. You do not pay a front-end sales charge on the Funds’ distributions of dividends or capital gains you reinvest in additional Class A Shares.

The table below shows the rate of front-end sales charge that you pay, depending on the amount that you purchase. The table below also shows the amount of compensation that is paid to your Financial Intermediary out of the front-end sales charge. This compensation includes commissions to Financial Intermediaries that sell Class A Shares. Financial Intermediaries may also receive the distribution fee payable on Class A Shares at an annual rate of up to 0.25% of the average daily net assets represented by the Class A Shares serviced by them. The equity Funds and the fixed-income Funds have different front-end sales charges. The equity Funds include the Russell U.S. Core Equity, Russell U.S. Quantitative Equity, Russell U.S. Small & Mid Cap, Russell International Developed Markets, Russell Global Equity, Russell Emerging Markets and Russell Real Estate Securities Funds. The fixed-income Funds include the Russell Strategic Bond and Russell Short Duration Bond Funds.


Equity Funds Front-End Sales Charges	Front-end sales charge as % of		Financial Intermediary commission as % of offering price
Amount of Purchase	Offering Price	Net amount Invested
Less than $50,000	5.75	6.10	5.00
$50,000 but less than $100,000	4.50	4.71	3.75
$100,000 but less than $250,000	3.50	3.63	2.75
$250,000 but less than $500,000	2.50	2.56	2.00
$500,000 but less than $1,000,000	2.00	2.04	1.60
$1,000,000 or more	-0-	-0-	up to 1.00


Fixed-Income Funds Front-End Sales Charges	Front-end sales charge as % of		Financial Intermediary commission as % of offering price
Amount of Purchase	Offering Price	Net amount Invested	Financial Intermediary commission as % of offering price
Less than $50,000	3.75	3.90	3.00
$50,000 but less than $100,000	3.50	3.63	2.75
$100,000 but less than $250,000	2.50	2.56	2.00
$250,000 but less than $500,000	2.00	2.04	1.60
$500,000 but less than $1,000,000	1.50	1.52	1.20
$1,000,000 or more	-0-	-0-	up to 1.00

Investments of $1,000,000 or more. You do not pay a front-end sales charge when you buy $1,000,000 or more of shares of RIC Funds (other than money market funds). However, if your Financial Intermediary was paid a commission by the Funds’ Distributor on those Class A Shares and you redeem those Class A Shares within one year of purchase, you will pay a deferred sales charge of 1.00%. Additional information on commissions paid to your Financial Intermediary on purchases of $1,000,000 or more is available in the Funds’ SAI.

Reducing Your Front-End Sales Charge. To receive a reduced front-end sales charge on purchases of Class A Shares as described below, you must notify your Financial Intermediary of your ability to qualify for a reduced front-end sales charge at the time your order for Class A Shares is placed.

Front-end Sales Charge Waivers. Purchases of Class A Shares may be made at net asset value without a front-end or back-end sales charge in the following circumstances. There is no commission paid to the Financial Intermediaries for shares purchased under the following circumstances:

Sales to RIC trustees and employees of Russell (including retired trustees and employees), to the immediate families (as defined below) of such persons, or to a pension, profit-sharing or other benefit plan for such persons

Offers of Class A Shares to any other investment company to effect the combination of such company with a fund by merger, acquisition of assets or otherwise

Sales to employer sponsored Defined Contribution plans, excluding SEPs, SIMPLE-IRA and individual 403(b) Plans

Sales to endowments or foundations with $50 million or more in assets

Sales to current/retired registered representatives of broker-dealers having sales agreements with the Funds’ Distributor to sell Class A Shares of the Funds and sales to a current spouse or the equivalent thereof, child, step-child (with respect to current union only), parent, step-parent or parent-in-law of such registered representative or to a family trust in the name of such registered representative

Accounts managed by a member of Russell Investments

Shares purchased by tax-exempt organizations (as defined in Section 501(c)(3) of the IRC)

Shares purchased through accounts that are part of certain qualified fee-based programs.

Moving Between Accounts. Under certain circumstances, you may transfer Class A shares of a Fund from an account with one registration to an account with another registration within 90 days without incurring a front-end sales charge. For example, you may transfer shares without paying a front-end sales load in the following cases:

•

From a non-retirement account to an IRA or other individual retirement account

•

From an IRA or other individual retirement account, such as a required minimum distribution, to a non-retirement account

In some cases, due to operational limitations or reporting requirements, you must redeem shares from one account and purchase shares in another account to achieve this type of transfer.

If you want to learn more about front-end sales charge waivers, contact your Financial Intermediary.

Aggregated Investments. The following types of accounts may be combined to qualify for reduced front-end sales charge including purchases made pursuant to rights of accumulation or letter of intent as described below:

The following accounts owned by you and/or a member of your immediate family (as defined below):

Accounts held individually or jointly

Those established under the Uniform Gift to Minors Act or Uniform Transfer to Minors Act

IRA accounts and certain single participant retirement plan accounts

Solely controlled business accounts

Trust accounts benefiting you or a member of your immediate family

For purposes of aggregated investments, your immediate family includes your spouse, or the equivalent thereof, and your children and step-children under the age of 21.

Purchases made in nominee or street name accounts may NOT be aggregated with those made for other accounts and may NOT be aggregated with other nominee or street name accounts unless otherwise qualified as described above.

Rights of Accumulation (“ROA”). You may combine current purchases of any RIC Fund (other than money market funds) with the value of your existing holdings of all RIC Funds (other than money market funds) to determine your current front-end sales charge. You must notify your Financial Intermediary at the time an order is placed for a purchase or purchases which would qualify for the reduced front-end sales charge due to existing investments or other purchases. The reduced front-end sales charge may not be applied if such notification is not furnished at the time of the order.

For purchases to be aggregated for the purpose of qualifying for the ROA, they must be made on the same day through one Financial Intermediary. Your Financial Intermediary may require certain information to verify that the purchase qualifies for the reduced front-end sales charge. The right of accumulation is subject to modification or discontinuance at any time with respect to all Shares purchased thereafter. Additional information is available from your Financial Intermediary.

Letter of intent (“LOI”). A non-binding LOI allows you to combine purchases of Shares of any RIC Funds (other than money market funds) you intend to make over a 13-month period with the market value of your current RIC Fund holdings (other than money market funds) to determine the applicable front-end sales charge. Any appreciation of your current RIC Fund holdings and any shares issued from reinvestment of dividends or capital gains will not be considered purchases made during the 13-month period. A portion of your account (up to 5%) will be held in escrow to cover additional Class A front-end sales charges that may be due. If you purchase less than the amount specified in the LOI and the LOI period expires or a full-balance redemption is requested or the account is transferred to another Financial Intermediary during the LOI period, shares in your account will be automatically redeemed to pay additional front-end sales charges that may be due. Fund shares held in plan or omnibus accounts are not eligible for an LOI unless the plan or omnibus account can maintain the LOI on their record keeping system. If the shareholder dies within the 13-month period, no additional front-end sales charges are required to be paid.

Exchange Privilege. Generally, exchanges between Class A Shares of the RIC Funds are not subject to a front-end sales charge. Class A Shares of the Russell Money Market Fund initially purchased without payment of a front-end sales charge will be subject to the applicable front-end sales charge when exchanged into Class A Shares of another RIC Fund. Exchanges may have the same tax consequences as ordinary sales and purchases. Please contact your Financial Intermediary and/or tax adviser for more detailed information.

Reinstatement Privilege. You may reinvest proceeds from a redemption or distribution of Class A Shares (other than money market funds) into any Class A Shares of a RIC Fund without paying a front-end sales charge if such reinvestment is made within 90 days after the redemption or distribution date. Proceeds will be reinvested at the net asset value next determined after receipt of your purchase order in proper form. The privilege may not be exercised if proceeds are subject to a purchase restriction as described in the section entitled “Frequent Trading Policies and Limitations on Trading Activity” and certain other restrictions may apply. Contingent deferred sales charges will be credited to your account at current net asset value following notification to the Fund by your Financial Intermediary.

The Funds make available free of charge, on the Funds’ website at www.russell.com, information about sales charges and sales charge waivers.

MORE ABOUT DEFERRED SALES CHARGES

You do not pay a front-end sales charge when you buy $1,000,000 or more of shares of RIC Funds. However, if your Financial Intermediary was paid a commission by the Funds’ Distributor on Class A Shares (other than Class A Shares of the Russell Money Market Fund) and you redeem those Class A Shares within one year of purchase, you will pay a deferred sales charge of 1.00%. The 1.00% is charged on the lesser of the purchase price of the Shares being redeemed or the net asset value of those Shares at the time of redemption. Class A Shares not subject to a deferred sales charge (those issued upon reinvestment of dividends or capital gains) are redeemed first followed by the Class A Shares you have held the longest. Exchanges between Class A Shares of the RIC Funds are not subject to a deferred sales charge.

The deferred sales charge may be waived on:

•

Shares sold within 12 months following the death or disability of a shareholder

•

redemptions made in connection with the minimum required distribution from retirement plans or IRAs upon the attainment of age 70¹/2

•

as part of a systematic withdrawal plan equaling no more than 1% of the account value per any monthly redemption

•

involuntary redemptions

•

redemptions of Class A Shares to effect a combination of a Fund with any investment company by merger, acquisition of assets or otherwise

All waivers of deferred sales charges are subject to confirmation of your status or holdings.

If you want to learn more about deferred sales charges, contact your Financial Intermediary.

DISTRIBUTION AND SHAREHOLDER SERVICES ARRANGEMENTS AND PAYMENTS TO FINANCIAL INTERMEDIARIES

The Funds offer multiple Classes of Shares in this Prospectus: Class A Shares, Class C Shares, Class E Shares and Class S Shares. Class A Shares are discussed in the sections entitled “Choosing a Class of Shares to Buy,” “Front-End Sales Charges,” and “More About Deferred Sales Charges.”

Class A Shares participate in the Funds’ Rule 12b-1 distribution plan. Under the distribution plan, the Russell Money Market Fund’s Class A Shares currently pay distribution fees of up to 0.15% annually for the sale and distribution of Class A Shares. All other Funds’ Class A shares currently pay distribution fees of 0.25% annually for the sale and distribution of Class A shares. The distribution fees are paid out of the Funds’ Class A Shares assets on an

ongoing basis, and over time will increase the cost of your investment in the Funds, and the distribution fee may cost an investor more than paying other types of sales charges.

Class C Shares participate in the Funds’ Rule 12b-1 distribution plan and in the Funds’ shareholder services plan. Under the distribution plan, the Funds’ Class C Shares pay distribution fees of 0.75% annually for the sale and distribution of Class C Shares. Under the shareholder services plan, the Funds’ Class C Shares pay shareholder services fees of 0.25% on an annualized basis for services provided to Class C shareholders. Because both of these fees are paid out of the Funds’ Class C Share assets on an ongoing basis, over time these fees will increase the cost of your investment in Class C Shares of the Funds, and the distribution fee may cost an investor more than paying other types of sales charges.

Class E Shares participate in the Funds’ shareholder services plan. Under the shareholder services plan, the Funds’ Class E Shares pay shareholder services fees of 0.25% on an annualized basis for services provided to Class E shareholders. The shareholder services fees are paid out of the Funds’ Class E Share assets on an ongoing basis, and over time will increase the cost of your investment in the Funds.

Class S Shares participate in neither the Funds’ distribution plan nor the Funds’ shareholder services plan.

Financial Intermediaries may receive distribution compensation from the Funds’ Distributor with respect to Class A Shares of the Funds pursuant to the Funds’ Rule 12b-1 distribution plan. Financial Intermediaries may receive distribution compensation and shareholder services compensation from the Funds’ Distributor with respect to Class C Shares of the Funds pursuant to the Funds’ Rule 12b-1 distribution plan and the Funds’ shareholder services plan. Financial Intermediaries may receive shareholder services compensation from the Funds’ Distributor with respect to Class E Shares of the Funds pursuant to the Funds’ shareholder services plan. These payments are reflected in the fees and expenses listed in the annual fund operating expenses table earlier in the Prospectus.

In addition to the foregoing payments, RIMCo, RFSC or the Funds’ Distributor may make cash payments, from its own resources, to key Financial Intermediaries (including those who may offer Fund Shares through specialized programs such as tax deferred retirement programs) in recognition of, or to pay a portion of costs related to, marketing, account consolidation, education, transaction processing and/or administrative services support. These compensation arrangements may vary by Financial Intermediary and may increase as the dollar value of Fund Shares held through a particular Financial Intermediary increases. Because these payments are not made by the Funds, these payments are not reflected in the fees and expenses listed in the annual fund operating expenses table.

RIMCo or the Funds’ Distributor may pay or allow other promotional incentive payments to Financial Intermediaries to the extent permitted by the rules adopted by the Securities and Exchange Commission and the Financial Industry Regulatory Authority relating to the sale of mutual fund shares. Depending upon the arrangements in place at any particular time, Financial Intermediaries may have a financial incentive to recommend a particular Fund or share class.

To enable Financial Intermediaries to provide a higher level of service and information to prospective and current Fund shareholders, RIMCo also offers them a range of complimentary software tools and educational services. RIMCo provides such tools and services from its own resources.

Ask your Financial Intermediary for additional information as to what compensation, if any, it receives from the Funds, the Funds’ Distributor or RIMCo.

HOW TO PURCHASE SHARES

Unless you are eligible to participate in a Russell employee investment program, Shares are only available through a select network of Financial Intermediaries. If you are not currently working with one of these Financial Intermediaries, please call 800-787-7354 for assistance in contacting an investment professional near you.

Except for the Russell Money Market Fund, Class E and S Shares of each Fund may only be purchased by:

(1)

clients of Financial Intermediaries who charge an advisory fee, management fee, consulting fee, fee in lieu of brokerage commissions or other similar fee for their services for the shareholder account in which the Class E or S Shares are held or clients of Financial Intermediaries where the Financial Intermediary would typically charge such a fee but has determined to waive its fee in a particular instance as the result of a potential conflict of interest;

(2)

employee benefit and other plans, such as 401(k) plans, 457 plans, employer sponsored 403(b) plans, profit sharing plans, money purchase plans, defined benefit plans and non-qualified deferred compensation plans, that consolidate and hold all Fund Shares in plan level or omnibus accounts on behalf of participants. SEPs, SIMPLE-IRA and individual 403(b) Plans are not considered plans for purposes of this paragraph;

(3)

clients of Financial Intermediaries who are members of Russell Investments;

(4)

individuals pursuant to employee investment programs of Russell or its affiliates; or

(5)

current/retired registered representatives of broker-dealers having sales agreements with the Funds’ Distributor to sell Class E or Class S Shares of the Funds.

The Funds generally do not have the ability to enforce these limitations on access to Class E and S Shares. It is the sole responsibility of each Financial Intermediary to ensure that it only makes Class E and S Shares available to those categories of investors listed above that qualify for access to Class E and S Shares. However, the Funds will not knowingly sell Class E or S Shares to any investor not meeting one of the foregoing criteria.

There is currently no required minimum initial investment for the Funds offered by this Prospectus. However, each Fund reserves the right to close any account whose balance falls below $1,000 and to change the categories of investors eligible to purchase its Shares.

If you purchase, redeem, exchange or hold Shares through a Financial Intermediary, your Financial Intermediary may charge you transaction-based fees, activity based fees and other fees for its services based upon its own policies and procedures. Those fees are retained entirely by your Financial Intermediary and no part of those fees are paid to RIMCo, the Funds’ Distributor or the Funds. Please contact your Financial Intermediary for more information about these fees as they may apply to your investments and your accounts.

You may purchase Shares through a Financial Intermediary on any business day of the Funds (a day on which the NYSE is open for regular trading). Purchase orders are processed at the next net asset value per share calculated after a Fund receives your order in proper form (as determined by your Financial Intermediary). The Funds will close early if the NYSE closes early. Any purchase order received after the close of the NYSE will be processed on the following business day at the next calculated net asset value per share. Because Financial Intermediaries’ processing times may vary, please ask your Financial Intermediary when your account will be credited.

For Class A Shares: You must place purchase orders for Class A Shares through a Financial Intermediary in U.S. dollars. Specific payment arrangements should be made with your Financial Intermediary. However, exceptions may be made by prior special arrangement.

For Class C, Class E and Class S Shares: All purchases must be made in U.S. dollars. Checks and other negotiable bank drafts must be drawn on U.S. banks and made payable to “Russell Investment Company” or as otherwise instructed by your Financial Intermediary. Each Fund may reject purchase orders if a payment check does not clear the bank or payment does not arrive in proper form by the settlement date. Generally, the settlement date is the first business day following receipt by the Funds of your order. However, Financial Intermediaries settling through National Securities Clearing Corporation, or in limited circumstances with prior arrangement with the Funds, may settle trades on the third business day following receipt by the Funds of your order. If you fail to properly settle a purchase, you will be responsible for any resulting loss to the Funds (i.e., any difference in net asset value between the trade date and the settlement date). In the case of an insufficient funds check, an overdraft charge may also be applied. Third party checks are generally not accepted, however exceptions may be made by prior special arrangements with certain Financial Intermediaries. Cash, checks drawn on credit card accounts, cashiers checks, money orders, traveler checks, and other cash equivalents will not be accepted.

Customer Identification Program: To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account and to determine whether such person’s name appears on government lists of known or suspected terrorists and terrorist organizations. When you open a new account to buy Shares of the Funds, the Funds or your Financial Intermediary will ask your name, address, date of birth, taxpayer identification or other government identification number and other information that will allow the Funds to identify you. If the Funds or your Financial Intermediary are unable to adequately identify you within the time frames set forth in the law, your Shares may be automatically redeemed. If the net asset value per share has decreased since your purchase, you will lose money as a result of this redemption.

Offering Dates and Times

For the Russell Money Market Fund: An order will be effective on the date received if (i) the order is received by the Fund or an authorized Fund agent prior to the following designated times (the “order cut-off time”) and (ii) payment by federal funds wire is received that day:

Russell Money Market Fund—4:00 p.m. Eastern Time

If an order is received (1) after the applicable order cut-off time, (2) on a non-business day, (3) after the recommended closure time on a day on which the Bond Market Association recommends an early closure of the bond markets, (4) on a day on which the Bond Market Association recommends a complete closure of the bond markets, (5) after the closure time on a day on which the NYSE closes early, (6) on a day the NYSE is not open for regular trading or (7) on a Federal Reserve Holiday on which the NYSE is open, then the order will be effective on the next business day.

Orders received by the Fund (1) prior to the applicable order cut-off time will receive the dividend declared on the date of receipt of the order if payment by federal funds wire is received that day and (2) at or after the applicable order cut-off time will not receive the dividend determined on the date of receipt of the order.

Check settlement payments received by the Fund prior to or after the applicable order cut-off time will receive the dividend declared on the first business day following receipt of the order.

Purchases can be made on any day when Shares are offered. Certain authorized Fund agents are contractually designated by Russell Financial Services, Inc. or its affiliates to receive and accept orders for the purchase and redemption of Shares of the Funds. Some, but not all, Financial Intermediaries are authorized Fund agents, and some, but not all, authorized Fund agents are Financial Intermediaries.

For all other Funds: Orders must be received by a Fund or an authorized Fund agent prior to 4:00 p.m. Eastern Time or the close of the NYSE, whichever is earlier, to be processed at the net asset value calculated on that day. Purchases can be made on any day when Shares are offered. Certain authorized Fund agents are contractually designated by Russell Financial Services, Inc. or its affiliates to receive and accept orders for the purchase and redemption of Shares of the Funds. Some, but not all, Financial Intermediaries are authorized Fund agents, and some, but not all, authorized Fund agents are Financial Intermediaries.

Order and Payment Procedures

Generally, you must place purchase orders for Shares through your Financial Intermediary. You may pay for your purchase by mail or funds transfer. Please contact your Financial Intermediary for instructions on how to place orders and make payment to the Funds.

Automated Investment Program

For Class A Shares: Your Financial Intermediary may offer an automated investment program whereby you may choose to make regular investments in an established account. Contact your Financial Intermediary for further information.

For Class C, Class E and Class S Shares: If you invest through certain Financial Intermediaries, you may choose to make regular investments (with a minimum of $25 per Fund) in an established account on a monthly, quarterly, semiannual, or annual basis by automatic electronic funds transfer from an account held within U.S. financial institutions that are members of the Federal Reserve System. Depending on the capabilities of your Financial Intermediary, a separate transfer may be made for each Fund in which you purchase Shares. You may change the amount or stop the automatic purchase at any time. Contact your Financial Intermediary for further information on this program.

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EXCHANGE PRIVILEGE

How to Exchange Shares

Exchanges Between Funds. Through your Financial Intermediary you may exchange Shares you own in one Fund for Shares of any other Fund offered by this Prospectus on the basis of the current net asset value per share at the time of the exchange. Shares of a Fund offered by this Prospectus may only be exchanged for Shares of a RIC Fund offered through another Prospectus under certain conditions and only in states where the exchange may be legally made. For additional information, including Prospectuses for other RIC Funds, contact your Financial Intermediary.

Exchanges Between Classes. Through your Financial Intermediary, you may exchange Shares you own of a Fund for Shares of any other Class of Shares of that Fund on the basis of the current net asset value per share at the time of the exchange if you meet any applicable initial minimum investment or investor eligibility requirements stated in the Prospectus for that Class of Shares. Shares of a Fund offered by the Funds may only be exchanged for shares of a RIC Fund offered through another Prospectus under certain conditions and only in states where the exchange may be legally made. For additional information, including Prospectuses for other RIC Funds, contact your Financial Intermediary.

Contact your Financial Intermediary for assistance in exchanging Shares and, because Financial Intermediaries’ processing times may vary, to find out when your account will be credited or debited. To request an exchange in writing, please contact your Financial Intermediary.

An exchange between Funds involves the redemption of Shares, which is treated as a sale for income tax purposes. Thus, capital gains or losses may be realized. Please consult your tax adviser for more information.

For Class A Shares, exchanges must be made through your Financial Intermediary.

Systematic Exchange Program

If you invest in Class A Shares, your Financial Intermediary may offer a systematic exchange program. If you would like to establish a systematic exchange program, please contact your Financial Intermediary.

If you invest in Class C, Class E or Class S Shares, and if you invest through certain Financial Intermediaries, the Funds, except for the Russell Tax-Managed U.S. Large Cap and Russell Tax-Managed U.S. Mid & Small Cap Funds, offer a systematic exchange program which allows you to redeem Shares from one or more Funds and purchase Shares of certain other RIC Funds. Systematic exchanges may be established to occur on a monthly, quarterly, semiannual or annual basis. If you would like to establish a systematic exchange program, please contact your Financial Intermediary.

A systematic exchange involves the redemption of Shares, which is treated as a sale for income tax purposes. Thus, capital gains or losses may be realized. Please consult your tax adviser for more information.

The Russell Tax-Managed U.S. Large Cap and Russell Tax-Managed U.S. Mid & Small Cap Funds do not offer a systematic exchange program in view of their portfolio management strategies.

RIGHT TO REJECT OR RESTRICT

PURCHASE AND EXCHANGE ORDERS

For the Funds other than the Russell Money Market Fund, the Board has adopted frequent trading policies and procedures which are described below. The Funds will apply these policies uniformly. The Board believes that it is unnecessary for the Russell Money Market Fund to have such frequent trading policies because the Russell Money Market Fund (i) may be used as a short-term investment, and (ii) intends to maintain a stable net asset value, which limits the opportunities for price arbitrage.

The Funds, other than the Russell Money Market Fund, discourage frequent purchases and redemptions of Fund Shares by Fund shareholders. The Funds do not accommodate frequent purchases and redemptions of Fund Shares by Fund shareholders.

Each Fund reserves the right to restrict or reject, without prior notice, any purchase or exchange order for any reason. A Fund may, in its discretion, restrict or reject a purchase or exchange order even if the transaction is not subject to the specific limitations on frequent trading described below if the Fund or its agents determine that accepting

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the order could interfere with the efficient management of a Fund’s portfolio or otherwise not be in a Fund’s best interests.

In the event that a Fund rejects an exchange request, the Fund will seek additional instructions from the Financial Intermediary regarding whether or not to proceed with the redemption side of the exchange.

Additionally, because short-term investments are inconsistent with the Russell Tax-Managed U.S. Large Cap and Russell Tax-Managed U.S. Mid & Small Cap Funds’ long-term strategy, these Funds will apply their general right to reject any purchases by rejecting purchase orders from investors whose patterns of purchases and redemptions are, in the opinion of these Funds, inconsistent with the Funds’ strategy.

Frequent Trading Policies and Limitations on Trading Activity

Frequent trading of Fund shares, often in response to short-term fluctuations in the market, also known as “market timing”, is not knowingly permitted by the Funds. Frequent traders and market-timers should not invest in the Funds. The Funds are intended for long-term investors. The Funds, subject to the limitations described below, take steps reasonably designed to curtail frequent trading practices by investors or Financial Intermediaries.

Each Fund monitors for “substantive” round trip trades over a certain dollar threshold that each Fund determines, in its discretion, could adversely affect the management of the Fund. A single substantive round trip is a purchase and redemption or redemption and purchase of shares of a Fund within a rolling 60 day period. Each Fund permits two substantive round trip trades within a 60 day period.

While the Funds monitor for substantive trades over a certain dollar threshold, a Fund may deem any round trip trade to be substantive depending on the potential impact to the applicable Fund or Funds.

If after two “substantive” round trips, an additional purchase or redemption transaction is executed within that rolling 60 day period, future purchase transactions will be rejected or restricted for 60 days. If after expiration of such 60 day period, there are two “substantive” round trips followed by an additional purchase or redemption transaction within that rolling 60 day period, that shareholder’s right to purchase shares of any Fund advised by RIMCo will be permanently revoked.

If the Funds do not have direct access to the shareholder’s account to implement the purchase revocation, the Funds will require the shareholder’s Financial Intermediary to impose similar revocation of purchase privileges on the shareholder. In the event that the Financial Intermediary cannot, due to regulatory or legal obligations, impose a revocation of purchase privileges, the Funds may accept an alternate trading restriction reasonably designed to protect the Funds from improper trading practices.

Any exception to the permanent revocation of a shareholder’s purchase privileges, or an alternative trading restriction designed to protect the Funds from improper trading practices, must be approved by the Funds’ Chief Compliance Officer.

The Funds, through their agents, will use their best efforts to exercise the Funds’ right to restrict or reject purchase and exchange orders as described above.

In certain circumstances, with prior agreement between a Financial Intermediary and the Funds, the Funds may rely on a Financial Intermediary’s frequent trading policies if it is determined that the Financial Intermediary’s policies are sufficient to detect and deter improper frequent trading. Any reliance by the Funds on a Financial Intermediary’s frequent trading polices must be approved by the Funds’ Chief Compliance Officer after a determination that such polices are sufficient to detect and deter improper frequent trading. Therefore, with respect to frequent trading, shareholders who invest through a Financial Intermediary should be aware that they may be subject to the policies and procedures of their Financial Intermediary which may be more or less restrictive than the Funds’ policies and procedures.

This policy will not apply to

•

Money Market Funds. The Board of Trustees believes that it is unnecessary for any money market fund to have frequent trading policies because these funds (i) may be used as short term investments, and (ii) intend to maintain a stable net asset value, which limits the opportunities for price arbitrage.

•

Transactions in a Fund by certain other funds (i.e. funds of funds), including any Russell Investment Company and Russell Investment Funds funds of funds, and any other approved unaffiliated fund of funds. The Board of Trustees believes these transactions do not offer the opportunity for price arbitrage.

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•

Institutional accounts such as foundations and endowments where subscriptions and redemptions are based on donor directed activity so long as such subscriptions and redemptions do not interfere with the efficient management of a Fund’s portfolio or are not otherwise not in a Fund’s best interests.

•

Scheduled rebalancing of asset allocated strategies.

•

Systematic purchase or redemption programs, if available.

In applying the policy on limitations on trading activity, the Funds consider the information available to them at the time and reserve the right to consider trading history in any Fund including trading history in other accounts under common ownership or control in determining whether to suspend or terminate trading privileges.

This policy will not affect any shareholder’s redemption rights.

Risks of Frequent Trading

Short-term or excessive trading into and out of a Fund may harm a Fund’s performance by disrupting portfolio management strategies and by increasing expenses. These expenses are borne by all Fund shareholders, including long-term investors who do not generate such costs. Frequent trading may interfere with the efficient management of a Fund’s portfolio, and may result in the Fund engaging in certain activities to a greater extent than it otherwise would, such as maintaining higher cash balances, using interfund lending and engaging in portfolio transactions. Increased portfolio transactions and use of interfund lending would correspondingly increase the Fund’s operating expenses and decrease the Fund’s performance. For Funds that use hedging strategies to ensure that each Fund is fully invested, maintenance of a higher level of cash balances would not decrease a Fund’s exposure to market moves but would decrease the proportion of the Fund that is actively managed.

Additionally, to the extent that a Fund invests significantly in foreign securities traded on markets which may close prior to when the Fund determines its net asset value (referred to as the valuation time), frequent trading by certain shareholders may cause dilution in the value of Fund shares held by other shareholders. Because events may occur after the close of these foreign markets and before the valuation time of the Funds that influence the value of these foreign securities, investors may seek to trade Fund shares in an effort to benefit from their understanding of the value of these foreign securities as of the Fund’s valuation time (referred to as price arbitrage). These Funds have procedures designed to adjust closing market prices of foreign securities under certain circumstances to better reflect what they believe to be the fair value of the foreign securities as of the valuation time. To the extent that a Fund does not accurately value foreign securities as of its valuation time, investors engaging in price arbitrage may cause dilution in the value of Fund shares held by other shareholders.

Because certain small cap equity securities may be traded infrequently, to the extent that a Fund invests significantly in small cap equity securities investors may seek to trade Fund shares in an effort to benefit from their understanding of the value of these securities (referred to as price arbitrage). Any such frequent trading strategies may interfere with efficient management of a Fund’s portfolio to a greater degree than Funds which invest in highly liquid securities, in part because the Fund may have difficulty selling these small cap portfolio securities at advantageous times or prices to satisfy large and/or frequent redemption requests. Any successful price arbitrage may also cause dilution in the value of Fund shares held by other shareholders.

Limitations on the Ability to Detect and Curtail Frequent Trading

The Funds will use reasonable efforts to detect frequent trading activity but may not be able to detect such activity in certain circumstances. While the Funds have the authority to request and analyze data on shareholders in omnibus accounts and will use their best efforts to enforce the policy described above, there may be limitations on the ability of the Funds to detect and curtail frequent trading practices and the Funds may still not be able to completely eliminate the possibility of improper trading under all circumstances. Shareholders seeking to engage in frequent trading activities may use a variety of strategies to avoid detection and, despite the efforts of the Funds to prevent frequent trading, there is no guarantee that the Funds or their agents will be able to identify each such shareholder or curtail their trading practices.

Any Fund may make exceptions to this policy, if in its judgment, the transaction does not constitute improper trading or other trading activity that may be harmful to it.

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HOW TO REDEEM SHARES

For the Russell Money Market Fund: Shares may be redeemed through your Financial Intermediary on any business day of the Fund as outlined in the “Redemption Dates and Times” section of this Prospectus. Redemption requests received by the applicable cut-off time specified below are processed at the next net asset value per share calculated after the Fund receives an order in proper form as determined by your Financial Intermediary. Shares recently purchased by check may not be available for redemption for 15 days following the purchase or until the check clears, whichever occurs first, to assure the Fund has received payment for your purchase. Because Financial Intermediaries’ processing times may vary, please ask your Financial Intermediary when your account will be debited.

For all other Funds: Shares may be redeemed through your Financial Intermediary on any business day of the Funds (a day on which the NYSE is open for regular trading). Redemption requests are processed at the next net asset value per share calculated after a Fund receives an order in proper form as determined by your Financial Intermediary. The Funds will close early if the NYSE closes early. Any redemption requests received following an early closure will be processed on the following business day at the next calculated net asset value per share. Shares recently purchased by check may not be available for redemption for 15 days following the purchase or until the check clears, whichever occurs first, to assure that a Fund has received payment for your purchase.

Redemption Dates and Times

For the Russell Money Market Fund: If a wire or non-wire redemption request is received (1) after the applicable redemption cut-off time specified below, (2) on a non-business day, (3) after the recommended closure time on a day on which the Bond Market Association recommends an early closure of the bond markets, (4) on a day on which the Bond Market Association recommends a complete closure of the bond markets, (5) after the closure time on a day on which the NYSE closes early, (6) on a day the NYSE is not open for regular trading or (7) on a Federal Reserve Holiday on which the NYSE is open, then the request will be effective on the next business day.

Non-Wire Redemption Requests. Redemption requests for payment other than by wire must be received by the Fund or an authorized Fund agent prior to 4:00 p.m. Eastern Time or the close of the NYSE, whichever is earlier (the “non-wire redemption cut-off time”) to be processed at the net asset value calculated on that day. Non-wire redemption requests received prior to the non-wire redemption cut-off time will receive the dividend declared on the date of receipt of the redemption request.

Wire Redemption Requests. Redemption requests for payment by wire must be received by the Fund or an authorized Fund agent prior to the following designated times (the “redemption cut-off time”) to be effective on the date received.

Russell Money Market Fund—4:00 p.m. Eastern Time

Wire redemption requests received by the Fund (1) prior to the applicable redemption cut-off time will not receive the dividend declared on the date of receipt of the redemption request and (2) at or after the applicable wire redemption cut-off time will receive the dividend determined on the date of receipt of the redemption request.

For all other Funds: Redemption requests must be received by the Fund or an authorized Fund agent prior to 4:00 p.m. Eastern Time or the close of the NYSE, whichever is earlier, to be processed at the net asset value calculated on that day. Please contact your Financial Intermediary for instructions on how to place redemption requests. Because Financial Intermediaries’ processing times may vary, please ask your Financial Intermediary when your account will be debited.

Systematic Withdrawal Program

For Class A Shares: Your Financial Intermediary may offer a systematic withdrawal program whereby you may choose to redeem your Shares and receive regular payments from your account. If you would like to establish a systematic withdrawal program, please contact your Financial Intermediary. When you redeem your Shares under a systematic withdrawal program, it may be a taxable transaction.

For Class C, Class E and Class S Shares: If you invest through certain Financial Intermediaries, the Funds, except the Russell Tax-Managed U.S. Large Cap and Russell Tax-Managed U.S. Mid & Small Cap Funds, offer a systematic withdrawal program which allows you to redeem your Shares and receive regular payments from your account on a monthly, quarterly, semiannual or annual basis. If you would like to establish a systematic withdrawal

104

program, please contact your Financial Intermediary. You will generally receive your payment by the end of the month in which a payment is scheduled. When you redeem your Shares under a systematic withdrawal program, it may be a taxable transaction.

The Russell Tax-Managed U.S. Large Cap and Russell Tax-Managed U.S. Mid & Small Cap Funds do not offer a systematic withdrawal program in view of their portfolio management strategies.

You may discontinue the systematic withdrawal program, or change the amount and timing of withdrawal payments by contacting your Financial Intermediary.

PAYMENT OF REDEMPTION PROCEEDS

Payment will ordinarily be made within seven days of receipt of your request in proper form. Each Fund reserves the right to suspend redemptions or postpone the date of payment for more than seven days if an emergency condition (as determined by the SEC) exists.

For Class A Shares: When you redeem your Shares, the Funds will pay your redemption proceeds to your Financial Intermediary for your benefit within seven days after the Funds receive the redemption request in proper form. Your Financial Intermediary is then responsible for settling the redemption with you as agreed between you and your Financial Intermediary.

For Class C, Class E and Class S Shares: Your redemption proceeds will be paid in one of the following manners: (1) if you invest through certain Financial Intermediaries, your redemption proceeds will be sent directly to your Financial Intermediary who is then responsible for settling the redemption with you as agreed between you and your Financial Intermediary; (2) a check for the redemption proceeds may be sent to the shareholder(s) of record at the address of record within seven days after the Funds receive a redemption request in proper form; or (3) if you have established the electronic redemption option, your redemption proceeds can be (a) wired to your predesignated bank account on the next bank business day after a Fund receives your redemption request in proper form or (b) sent by Electronic Funds Transfer (EFT) to your predesignated bank account on the second business day after a Fund receives your redemption request in proper form. On Federal Reserve holidays, funds will settle on the next day the Federal Reserve is open. Each Fund may charge a fee to cover the cost of sending a wire transfer for redemptions, and your bank may charge an additional fee to receive the wire. The Funds will always charge a fee when sending an international wire transfer. The Funds reserve the right to charge a fee when sending a domestic wire transfer for redemptions. The Funds do not charge for EFT though your bank may charge a fee to receive the EFT. Wire transfers and EFTs can be sent to U.S. financial institutions that are members of the Federal Reserve System.

OTHER INFORMATION ABOUT SHARE TRANSACTIONS

Written Instructions

For Class A Shares: Written instructions must be in proper form as determined by your Financial Intermediary.

For Class C, Class E and Class S Shares: The Funds require that written instructions be in proper form and reserve the right to reject any written instructions that are not in proper form. Your Financial Intermediary will assist you in preparing and submitting transaction instructions to the Funds to insure proper form. Generally, your instructions must include:

•

The Fund name and account number

•

Details related to the transaction including type and amount

•

Signatures of all owners exactly as registered on the account

•

Any supporting legal documentation that may be required

Responsibility for Fraud

Please take precautions to protect yourself from fraud. Keep your account information private and immediately review any account confirmations or statements that the Funds or your Financial Intermediary send you. Contact your Financial Intermediary immediately about any transactions that you believe to be unauthorized.

105

Signature Guarantee

For Class C, Class E and Class S Shares: Each Fund reserves the right to require a signature guarantee for any request related to your account including, but not limited to, requests for transactions or address maintenance. A signature guarantee verifies the authenticity of your signature. You should be able to obtain a signature guarantee from a bank, broker, credit union, savings association, clearing agency, or securities exchange or association, but not a notary public. If a signature guarantee is required, the Funds will only accept STAMP2000 Medallion Imprints. Contact your Financial Intermediary for assistance in obtaining a signature guarantee.

In-Kind Exchange of Securities

RIMCo, in its capacity as each Fund’s investment adviser, may, at its discretion, permit you to acquire Shares in exchange for securities you currently own. Any securities exchanged must meet the investment objective, policies, and limitations of the appropriate Fund; have a readily ascertainable market value; be liquid; not be subject to restrictions on resale; and have a market value, plus any additional monetary investments, equal to at least $100,000.

Shares purchased in exchange for securities generally may not be redeemed or exchanged for 15 days following the purchase by exchange or until the transfer has settled, whichever comes first. If you are a taxable investor, you will generally realize gains or losses on the exchange for federal income tax purposes. If you are contemplating an in-kind exchange you should consult your tax adviser.

The price at which the exchange will take place will depend upon the relative net asset value of the Shares purchased and securities exchanged. Securities accepted by a Fund will be valued in the same way the Fund values its assets. Any interest earned on the securities following their delivery to a Fund and prior to the exchange will be considered in valuing the securities. All interest, dividends, subscription or other rights attached to the securities becomes the property of the Funds, along with the securities. Please contact your Financial Intermediary for further information.

Redemption In-Kind

A Fund may pay for any portion of a redemption amount in excess of $250,000 by a distribution of in-kind securities from the Fund’s portfolio, instead of in cash. It is possible that an in-kind distribution of portfolio securities could include illiquid securities. Illiquid securities may not be able to be sold quickly and at a fair price, which could cause you to realize losses on the security if the security is sold at a price lower than that at which it had been valued. If you receive an in-kind distribution of portfolio securities, and choose to sell them, you will incur brokerage charges and continue to be subject to tax consequences and market risk pending any sale.

Uncashed Checks

For Class C, Class E and Class S Shares: Please make sure you promptly cash checks issued to you by the Funds. If you do not cash a dividend, distribution, or redemption check, the Funds will act to protect themselves and you. This may include restricting certain activities in your account until the Funds are sure that they have a valid address for you. After 180 days, the Funds will no longer honor the issued check and, after attempts to locate you, the Funds will follow governing escheatment regulations in disposition of check proceeds. No interest will accrue on amounts represented by uncashed checks.

Registration of Fund Accounts

Many brokers, employee benefit plans and bank trusts combine their clients’ holdings in a single omnibus account with the Funds held in the brokers’, plans’, or bank trusts’ own name or “street name.” Therefore, if you hold Shares through a brokerage account, employee benefit plan or bank trust fund, a Fund may have records only of that Financial Intermediary’s omnibus account. In this case, your broker, employee benefit plan or bank is responsible for keeping track of your account information. This means that you may not be able to request transactions in your Shares directly through the Funds, but can do so only through your broker, plan administrator or bank. Ask your Financial Intermediary for information on whether your Shares are held in an omnibus account.

106

FINANCIAL HIGHLIGHTS

The following financial highlights tables are intended to help you understand the Funds’ financial performance for at least the past 60 months (or, if a Fund or Class has not been in operation for 60 months, since the beginning of operations for that Fund or Class). Certain information reflects financial results for a single Fund Share throughout each of the periods shown below. The total returns in the tables represent how much your investment in a Fund would have increased (or decreased) during each period, assuming reinvestment of all dividends and distributions. This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds’ financial statements, are included in the Funds’ annual report, which are available upon request.

The information in the following tables represents the Financial Highlights for the Funds’ Class A, Class C, Class E and Class S Shares, respectively, for the periods shown. No Class A, Class C or Class S Shares of the Russell U.S. Core Equity Fund, Russell U.S. Quantitative Equity Fund, Russell U.S. Small & Mid Cap Fund, Russell International Developed Markets Fund or Russell Strategic Bond Fund were outstanding as of October 31, 2007.

Russell U.S. Core Equity Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	33.51		$	30.81		$	27.56		$	25.75		$	21.46

Income From Operations
Net investment income (loss) (a)		.29			.25			.25			.16			.15
Net realized and unrealized gain (loss)		6.08			3.96			3.24			1.82			4.28

Total income from operations		6.37			4.21			3.49			1.98			4.43

Distributions
From net investment income		(.28	)		(.24	)		(.24	)		(.17	)		(.14	)
From net realized gain		(1.51	)		(1.27	)		—			—			—

Total distributions		(1.79	)		(1.51	)		(.24	)		(.17	)		(.14	)

Net Asset Value, End of Period	$	38.09		$	33.51		$	30.81		$	27.56		$	25.75

Total Return (%)		19.82			14.07			12.70			7.69			20.79

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	49,355		$	43,911		$	37,666		$	33,143		$	32,632
Ratios to average net assets (%):
Operating expenses, net (b)		.93			.93			.92			.94			.99
Operating expenses, gross		.95			.96			.96			.96			.99
Net investment income (loss) (b)		.82			.78			.83			.61			.68

Portfolio turnover rate (%)		112.52			98.17			109.71			129.94			115.73

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

107

Russell U.S. Quantitative Equity Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	39.35		$	35.20		$	32.32		$	30.10		$	24.90

Income From Operations
Net investment income (loss) (a)		.31			.35			.35			.23			.22
Net realized and unrealized gain (loss)		3.80			5.02			2.88			2.24			5.18

Total income from operations		4.11			5.37			3.23			2.47			5.40

Distributions
From net investment income		(.33	)		(.35	)		(.35	)		(.25	)		(.20	)
From net realized gain		(2.84	)		(.87	)		—			—			—

Total distributions		(3.17	)		(1.22	)		(.35	)		(.25	)		(.20	)

Net Asset Value, End of Period	$	40.29		$	39.35		$	35.20		$	32.32		$	30.10

Total Return (%)		11.11			15.56			10.03			8.22			21.76

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	61,842		$	56,703		$	46,352		$	47,570		$	40,924
Ratios to average net assets (%):
Operating expenses, net (b)		1.07	(c)		.94	(c)		.91			.92			.94
Operating expenses, gross		1.09			.96			.93			.93			.94
Net investment income (loss) (b)		.79			.93			1.01			.71			.80

Portfolio turnover rate (%)		100.85			106.45			117.34			102.51			114.72

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

(c)

The annualized net expense ratio is .93% not including the dividend expense from short sales.

108

Russell U.S. Growth Fund—Class C Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	7.84		$	7.45		$	6.85		$	6.85		$	5.23

Income From Operations
Net investment income (loss) (a)		(.09	)		(.09	)		(.08	)		(.11	)		(.09	)
Net realized and unrealized gain (loss)		1.42			.48			.68			.11			1.71

Total income from operations		1.33			.39			.60			—			1.62

Net Asset Value, End of Period	$	9.17		$	7.84		$	7.45		$	6.85		$	6.85

Total Return (%)		16.96			5.23			8.76			(.15	)		31.17

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	11,204		$	9,764		$	8,149		$	5,942		$	3,265
Ratios to average net assets (%):
Operating expenses, net (b)		2.23			2.22			2.23			2.25			2.20
Operating expenses, gross		2.27			2.27			2.32			2.50			2.74
Net investment income (loss) (b)		(1.14	)		(1.20	)		(1.15	)		(1.53	)		(1.57	)

Portfolio turnover rate (%)		138.41			148.35			127.68			134.00			149.76

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

109

Russell U.S. Growth Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	8.25		$	7.76		$	7.08		$	7.03		$	5.31

Income From Operations
Net investment income (loss) (a)		(.02	)		(.03	)		(.01	)		(.05	)		(.04	)
Net realized and unrealized gain (loss)		1.49			.52			.69			.10			1.76

Total income from operations		1.47			.49			.68			.05			1.72

Net Asset Value, End of Period	$	9.72		$	8.25		$	7.76		$	7.08		$	7.03

Total Return (%)		17.82			6.31			9.60			.71			32.39

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	7,104		$	6,590		$	4,255		$	5,749		$	4,865
Ratios to average net assets (%):
Operating expenses, net (b)		1.37			1.36			1.28			1.36			1.26
Operating expenses, gross		1.41			1.42			1.40			1.54			1.79
Net investment income (loss) (b)		(.28	)		(.34	)		(.15	)		(.65	)		(.62	)

Portfolio turnover rate (%)		138.41			148.35			127.68			134.00			149.76

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

110

Russell U.S. Growth Fund—Class S Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	8.38		$	7.87		$	7.15		$	7.08		$	5.34

Income From Operations
Net investment income (loss) (a)		(.01	)		(.01	)		—	(b)		(.03	)		(.02	)
Net realized and unrealized gain (loss)		1.52			.52			.72			.10			1.76

Total income from operations		1.51			.51			.72			.07			1.74

Net Asset Value, End of Period	$	9.89		$	8.38		$	7.87		$	7.15		$	7.08

Total Return (%)		18.02			6.48			10.07			.99			32.58

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	79,962		$	71,433		$	57,324		$	51,569		$	42,421
Ratios to average net assets (%):
Operating expenses, net (c)		1.16			1.15			1.06			1.09			1.03
Operating expenses, gross		1.20			1.21			1.18			1.27			1.56
Net investment income (loss) (c)		(.07	)		(.13	)		.04			(.38	)		(.40	)

Portfolio turnover rate (%)		138.41			148.35			127.68			134.00			149.76

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Less than $.01 per share.

(c)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

111

Russell U.S. Value Fund—Class C Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	12.44		$	11.27		$	10.15		$	8.97		$	7.41

Income From Operations
Net investment income (loss) (a)		.01			.01			(.02	)		(.03	)		(.01	)
Net realized and unrealized gain (loss)		1.16			1.83			1.16			1.22			1.58

Total income from operations		1.17			1.84			1.14			1.19			1.57

Distributions
From net investment income		(.02	)		(.03	)		(.01	)		(.01	)		(.01	)
From net realized gain		(.75	)		(.64	)		(.01	)		—			—

Total distributions		(.77	)		(.67	)		(.02	)		(.01	)		(.01	)

Net Asset Value, End of Period	$	12.84		$	12.44		$	11.27		$	10.15		$	8.97

Total Return (%)		9.73			17.01			11.23			13.24			21.19

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	25,688		$	26,168		$	21,228		$	16,834		$	9,972
Ratios to average net assets (%):
Operating expenses, net (b)		2.09			2.11			2.18			2.25			2.15
Operating expenses, gross		2.09			2.11			2.20			2.32			2.42
Net investment income (loss) (b)		.06			.08			(.18	)		(.31	)		(.12	)

Portfolio turnover rate (%)		128.36			86.60			84.74			96.07			105.71

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

112

Russell U.S. Value Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	12.66		$	11.43		$	10.28		$	9.05		$	7.46

Income From Operations
Net investment income (loss) (a)		.11			.11			.09			.05			.06
Net realized and unrealized gain (loss)		1.19			1.87			1.16			1.23			1.58

Total income from operations		1.30			1.98			1.25			1.28			1.64

Distributions
From net investment income		(.11	)		(.11	)		(.09	)		(.05	)		(.05	)
From net realized gain		(.75	)		(.64	)		(.01	)		—			—

Total distributions		(.86	)		(.75	)		(.10	)		(.05	)		(.05	)

Net Asset Value, End of Period	$	13.10		$	12.66		$	11.43		$	10.28		$	9.05

Total Return (%)		10.64			18.15			12.14			14.31			22.01

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	10,774		$	10,871		$	8,770		$	9,167		$	7,778
Ratios to average net assets (%):
Operating expenses, net (b)		1.27			1.27			1.25			1.39			1.21
Operating expenses, gross		1.27			1.27			1.30			1.39			1.48
Net investment income (loss) (b)		.88			.91			.78			.55			.77

Portfolio turnover rate (%)		128.36			86.60			84.74			96.07			105.71

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

113

Russell U.S. Value Fund—Class S Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	12.67		$	11.44		$	10.29		$	9.05		$	7.45

Income From Operations
Net investment income (loss) (a)		.14			.13			.11			.08			.07
Net realized and unrealized gain (loss)		1.17			1.87			1.16			1.24			1.60

Total income from operations		1.31			2.00			1.27			1.32			1.67

Distributions
From net investment income		(.13	)		(.13	)		(.11	)		(.08	)		(.07	)
From net realized gain		(.75	)		(.64	)		(.01	)		—			—

Total distributions		(.88	)		(.77	)		(.12	)		(.08	)		(.07	)

Net Asset Value, End of Period	$	13.10		$	12.67		$	11.44		$	10.29		$	9.05

Total Return (%)		10.87			18.32			12.36			14.61			22.53

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	274,355		$	253,586		$	198,551		$	173,635		$	128,383
Ratios to average net assets (%):
Operating expenses, net (b)		1.05			1.09			1.07			1.10			1.01
Operating expenses, gross		1.05			1.10			1.10			1.10			1.28
Net investment income (loss) (b)		1.10			1.09			.95			.84			1.03

Portfolio turnover rate (%)		128.36			86.60			84.74			96.07			105.71

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

114

Russell U.S. Small & Mid Cap Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004		2003
Net Asset Value, Beginning of Period	$	34.16		$	38.43		$	39.28		$	36.12	$	25.54

Income From Operations
Net investment income (loss) (a)		.05			.02			(.04	)		.04		.01
Net realized and unrealized gain (loss)		4.59			5.76			4.44			3.12		10.65

Total income from operations		4.64			5.78			4.40			3.16		10.66

Distributions
From net investment income		—			—			(.06	)		—		(.08	)
From net realized gain		(7.01	)		(10.05	)		(5.19	)		—		—

Total distributions		(7.01	)		(10.05	)		(5.25	)		—		(.08	)

Net Asset Value, End of Period	$	31.79		$	34.16		$	38.43		$	39.28	$	36.12

Total Return (%)		15.98			17.91			11.53			8.72		41.88

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	38,520		$	39,987		$	34,849		$	80,542	$	46,901
Ratios to average net assets (%):
Operating expenses, net (b)		1.13			1.11			1.08			1.09		1.12
Operating expenses, gross		1.15			1.14			1.11			1.09		1.12
Net investment income (loss) (b)		.17			.07			(.09	)		.09		.04

Portfolio turnover rate (%)		142.82			154.76			156.39			125.94		132.27

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

115

Russell International Developed Markets Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	50.51		$	40.45		$	35.15		$	31.22		$	24.71

Income From Operations
Net investment income (loss) (a)		.83			.87			.57			.38			.30
Net realized and unrealized gain (loss)		12.10			9.87			5.41			4.29			6.59

Total income from operations		12.93			10.74			5.98			4.67			6.89

Distributions
From net investment income		(1.41	)		(.68	)		(.68	)		(.74	)		(.38	)
From net realized gain		(5.06	)		—			—			—			—

Total distributions		(6.47	)		(.68	)		(.68	)		(.74	)		(.38	)

Net Asset Value, End of Period	$	56.97		$	50.51		$	40.45		$	35.15		$	31.22

Total Return (%)		28.47			26.84			17.19			15.20			28.33

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	61,533		$	51,470		$	41,415		$	35,442		$	24,163
Ratios to average net assets (%):
Operating expenses, net (b)		1.16			1.17			1.15			1.19			1.26
Operating expenses, gross		1.18			1.19			1.18			1.20			1.26
Net investment income (loss) (b)		1.64			1.88			1.49			1.13			1.14

Portfolio turnover rate (%)		108.46			83.09			80.36			81.19			79.40

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

116

Russell Global Equity Fund—Class A Shares


	Fiscal Year Ended October 31, 2007(1)
Net Asset Value, Beginning of Period	$	10.00

Income From Operations
Net investment income (loss) (a)		.05
Net realized and unrealized gain (loss)		1.32

Total income from operations		1.37

Net Asset Value, End of Period	$	11.37

Total Return (%) (b) (e)		13.70

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	2,445
Ratios to average net assets (%):
Operating expenses, net (c) (d)		1.58
Operating expenses, gross (c)		1.58
Net investment income (loss) (c) (d)		.77

Portfolio turnover rate (%) (b)		62.05

(1)

For the period February 28, 2007 (commencement of operations) to October 31, 2007.

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Periods less than one year are not annualized.

(c)

The ratios for periods less than one year are annualized.

(d)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

(e)

Excludes the effects of sales charges. If sales charges were included, the total return would be lower.

117

Russell Global Equity Fund—Class C Shares


	Fiscal Year Ended October 31, 2007(1)
Net Asset Value, Beginning of Period	$	10.00

Income From Operations
Net investment income (loss) (a)		—	(e)
Net realized and unrealized gain (loss)		1.31

Total income from operations		1.31

Net Asset Value, End of Period	$	11.31

Total Return (%) (b)		13.10

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	10,802
Ratios to average net assets (%):
Operating expenses, net (c) (d)		2.33
Operating expenses, gross (c)		2.33
Net investment income (loss) (c) (d)		(.04	)

Portfolio turnover rate (%) (b)		62.05

(1)

For the period February 28, 2007 (commencement of operations) to October 31, 2007.

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Periods less than one year are not annualized.

(c)

The ratios for periods less than one year are annualized.

(d)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

(e)

Less than $.01 per share.

118

Russell Global Equity Fund—Class E Shares


	Fiscal Year Ended October 31, 2007(1)
Net Asset Value, Beginning of Period	$	10.00

Income From Operations
Net investment income (loss) (a)		.06
Net realized and unrealized gain (loss)		1.31

Total income from operations		1.37

Net Asset Value, End of Period	$	11.37

Total Return (%) (b)		13.70

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	15,683
Ratios to average net assets (%):
Operating expenses, net (c) (d)		1.58
Operating expenses, gross (c)		1.58
Net investment income (loss) (c) (d)		.90

Portfolio turnover rate (%) (b)		62.05

(1)

For the period February 28, 2007 (commencement of operations) to October 31, 2007.

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Periods less than one year are not annualized.

(c)

The ratios for periods less than one year are annualized.

(d)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

119

Russell Global Equity Fund—Class S Shares


	Fiscal Year Ended October 31, 2007(1)
Net Asset Value, Beginning of Period	$	10.00

Income From Operations
Net investment income (loss) (a)		.08
Net realized and unrealized gain (loss)		1.31

Total income from operations		1.39

Net Asset Value, End of Period	$	11.39

Total Return (%) (b)		13.90

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	1,128,142
Ratios to average net assets (%):
Operating expenses, net (c) (d)		1.33
Operating expenses, gross (c)		1.33
Net investment income (loss) (c) (d)		1.12

Portfolio turnover rate (%) (b)		62.05

(1)

For the period February 28, 2007 (commencement of operations) to October 31, 2007.

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Periods less than one year are not annualized.

(c)

The ratios for periods less than one year are annualized.

(d)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

120

Russell Emerging Markets Fund—Class A Shares


	Fiscal Year Ended October 31, 2007(1)
Net Asset Value, Beginning of Period	$	20.50

Income From Operations
Net investment income (loss) (a)		.14
Net realized and unrealized gain (loss)		10.21

Total income from operations		10.35

Net Asset Value, End of Period	$	30.85

Total Return (%) (b) (e)		50.49

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	3,537
Ratios to average net assets (%):
Operating expenses, net (c) (d)		1.88
Operating expenses, gross (c)		1.89
Net investment income (loss) (c) (d)		.86

Portfolio turnover rate (%) (b)		66.66

(1)

For the period March 1, 2007 (commencement of operations) to October 31, 2007.

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Periods less than one year are not annualized.

(c)

The ratios for periods less than one year are annualized.

(d)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

(e)

Excludes the effects of sales charges. If sales charges were included, the total return would be lower.

121

Russell Emerging Markets Fund—Class C Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	21.17		$	16.73		$	12.52		$	10.68		$	7.22

Income From Operations
Net investment income (loss) (a)		(.02	)		.01			.04			—	(b)		.02
Net realized and unrealized gain (loss)		11.80			5.14			4.22			2.08			3.44

Total income from operations		11.78			5.15			4.26			2.08			3.46

Distributions
From net investment income		(.25	)		(.28	)		(.05	)		(.24	)		—
From net realized gain		(3.04	)		(.43	)		—			—			—

Total distributions		(3.29	)		(.71	)		(.05	)		(.24	)		—

Net Asset Value, End of Period	$	29.66		$	21.17		$	16.73		$	12.52		$	10.68

Total Return (%)		63.90			31.63			33.98			20.04			47.58

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	66,707		$	44,977		$	33,961		$	20,467		$	12,306
Ratios to average net assets (%):
Operating expenses, net (c)		2.63			2.68			2.74			2.83			3.09
Operating expenses, gross		2.64			2.68			2.76			2.87			3.09
Net investment income (loss) (c)		(.07	)		.07			.29			.02			.19

Portfolio turnover rate (%)		66.66			68.52			71.86			82.02			95.13

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Less than $.01 per share.

(c)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

122

Russell Emerging Markets Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	21.89		$	17.25		$	12.93		$	10.98		$	7.41

Income From Operations
Net investment income (loss) (a)		.16			.17			.16			.09			.09
Net realized and unrealized gain (loss)		12.24			5.29			4.34			2.15			3.49

Total income from operations		12.40			5.46			4.50			2.24			3.58

Distributions
From net investment income		(.41	)		(.39	)		(.18	)		(.29	)		(.01	)
From net realized gain		(3.04	)		(.43	)		—			—			—

Total distributions		(3.45	)		(.82	)		(.18	)		(.29	)		(.01	)

Net Asset Value, End of Period	$	30.84		$	21.89		$	17.25		$	12.93		$	10.98

Total Return (%)		65.17			32.64			34.94			20.88			48.39

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	41,911		$	27,862		$	18,855		$	14,169		$	9,598
Ratios to average net assets (%):
Operating expenses, net (b)		1.88			1.93			1.99			2.07			2.36
Operating expenses, gross		1.89			1.93			2.01			2.12			2.37
Net investment income (loss) (b)		.68			.83			1.02			.75			1.02

Portfolio turnover rate (%)		66.66			68.52			71.86			82.02			95.13

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

123

Russell Emerging Markets Fund—Class S Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	21.91		$	17.25		$	12.94		$	10.98		$	7.43

Income From Operations
Net investment income (loss) (a)		.22			.21			.20			.12			.11
Net realized and unrealized gain (loss)		12.23			5.31			4.34			2.15			3.48

Total income from operations		12.45			5.52			4.54			2.27			3.59

Distributions
From net investment income		(.46	)		(.43	)		(.23	)		(.31	)		(.04	)
From net realized gain		(3.04	)		(.43	)		—			—			—

Total distributions		(3.50	)		(.86	)		(.23	)		(.31	)		(.04	)

Net Asset Value, End of Period	$	30.86		$	21.91		$	17.25		$	12.94		$	10.98

Total Return (%)		65.53			33.04			35.27			21.22			48.27

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	1,760,393		$	1,092,083		$	794,086		$	549,626		$	386,560
Ratios to average net assets (%):
Operating expenses, net (b)		1.63			1.68			1.73			1.83			2.11
Operating expenses, gross		1.64			1.68			1.76			1.87			2.11
Net investment income (loss) (b)		.94			1.06			1.30			1.00			1.30

Portfolio turnover rate (%)		66.66			68.52			71.86			82.02			95.13

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

124

Russell Tax-Managed U.S. Large Cap Fund—Class C Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	19.62		$	17.68		$	16.55		$	15.02		$	12.61

Income From Operations
Net investment income (loss) (a)		(.06	)		(.02	)		.01			(.06	)		(.04	)
Net realized and unrealized gain (loss)		3.22			1.96			1.14			1.59			2.45

Total income from operations		3.16			1.94			1.15			1.53			2.41

Distributions
From net investment income		—			—			(.02	)		—			—

Net Asset Value, End of Period	$	22.78		$	19.62		$	17.68		$	16.55		$	15.02

Total Return (%)		16.11			10.97			6.94			10.19			19.11

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	21,692		$	19,112		$	16,955		$	13,304		$	10,022
Ratios to average net assets (%):
Operating expenses, net (b)		1.92			1.92			1.91			1.92			1.94
Operating expenses, gross		1.92			1.92			1.91			1.92			1.94
Net investment income (loss) (b)		(.30	)		(.13	)		.08			(.38	)		(.30	)

Portfolio turnover rate (%)		50.10			60.63			42.92			32.15			127.47

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

125

Russell Tax-Managed U.S. Large Cap Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	20.12		$	18.09		$	16.93		$	15.30		$	12.83

Income From Operations
Net investment income (loss) (a)		.10			.11			.15			.06			.06
Net realized and unrealized gain (loss)		3.31			2.02			1.15			1.63			2.50

Total income from operations		3.41			2.13			1.30			1.69			2.56

Distributions
From net investment income		(.12	)		(.10	)		(.14	)		(.06	)		(.09	)

Net Asset Value, End of Period	$	23.41		$	20.12		$	18.09		$	16.93		$	15.30

Total Return (%)		17.01			11.82			7.72			11.05			20.04

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	16,891		$	12,726		$	8,695		$	5,991		$	4,743
Ratios to average net assets (%):
Operating expenses, net (b)		1.17			1.17			1.16			1.17			1.19
Operating expenses, gross		1.17			1.17			1.16			1.17			1.19
Net investment income (loss) (b)		.45			.60			.84			.37			.46

Portfolio turnover rate (%)		50.10			60.63			42.92			32.15			127.47

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

126

Russell Tax-Managed U.S. Large Cap Fund—Class S Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	20.21		$	18.16		$	16.99		$	15.34		$	12.87

Income From Operations
Net investment income (loss) (a)		.15			.17			.20			.10			.10
Net realized and unrealized gain (loss)		3.32			2.02			1.15			1.63			2.48

Total income from operations		3.47			2.19			1.35			1.73			2.58

Distributions
From net investment income		(.16	)		(.14	)		(.18	)		(.08	)		(.11	)

Net Asset Value, End of Period	$	23.52		$	20.21		$	18.16		$	16.99		$	15.34

Total Return (%)		17.28			12.12			7.98			11.33			20.24

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	572,138		$	458,002		$	386,605		$	342,640		$	307,458
Ratios to average net assets (%):
Operating expenses, net (b)		.92			.92			.90			.92			.94
Operating expenses, gross		.92			.92			.91			.92			.94
Net investment income (loss) (b)		.70			.87			1.12			.62			.71

Portfolio turnover rate (%)		50.10			60.63			42.92			32.15			127.47

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

127

Russell Tax-Managed U.S. Mid & Small Cap Fund—Class C Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	13.22		$	11.59		$	10.17		$	9.33		$	7.12

Income From Operations
Net investment income (loss) (a)		(.13	)		(.14	)		(.12	)		(.13	)		(.08	)
Net realized and unrealized gain (loss)		2.18			1.77			1.54			.97			2.29

Total income from operations		2.05			1.63			1.42			.84			2.21

Distributions
From net realized gain		(.20	)		—			—			—			—

Net Asset Value, End of Period	$	15.07		$	13.22		$	11.59		$	10.17		$	9.33

Total Return (%)		15.70			14.06			13.96			9.00			31.04

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	14,088		$	11,975		$	9,295		$	6,041		$	5,025
Ratios to average net assets (%):
Operating expenses, net (b)		2.25			2.25			2.24			2.25			2.25
Operating expenses, gross		2.30			2.35			2.37			2.34			2.49
Net investment income (loss) (b)		(.93	)		(1.09	)		(1.06	)		(1.33	)		(1.06	)

Portfolio turnover rate (%)		56.71			54.34			57.90			203.33			81.91

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

128

Russell Tax-Managed U.S. Mid & Small Cap Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	13.93		$	12.13		$	10.56		$	9.62		$	7.28

Income From Operations
Net investment income (loss) (a)		(.03	)		(.05	)		(.04	)		(.06	)		(.02	)
Net realized and unrealized gain (loss)		2.33			1.85			1.61			1.00			2.36

Total income from operations		2.30			1.80			1.57			.94			2.34

Distributions
From net realized gain		(.20	)		—			—			—			—

Net Asset Value, End of Period	$	16.03		$	13.93		$	12.13		$	10.56		$	9.62

Total Return (%)		16.70			14.84			14.87			9.77			32.14

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	3,654		$	2,523		$	1,663		$	1,279		$	850
Ratios to average net assets (%):
Operating expenses, net (b)		1.50			1.50			1.48			1.50			1.50
Operating expenses, gross		1.55			1.60			1.62			1.59			1.74
Net investment income (loss) (b)		(.19	)		(.34	)		(.32	)		(.58	)		(.31	)

Portfolio turnover rate (%)		56.71			54.34			57.90			203.33			81.91

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

129

Russell Tax-Managed U.S. Mid & Small Cap Fund—Class S Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	14.13		$	12.27		$	10.65		$	9.68		$	7.31

Income From Operations
Net investment income (loss) (a)		.01			(.01	)		(.01	)		(.03	)		—	(b)
Net realized and unrealized gain (loss)		2.36			1.87			1.63			1.00			2.37

Total income from operations		2.37			1.86			1.62			.97			2.37

Distributions
From net realized gain		(.20	)		—			—			—			—

Net Asset Value, End of Period	$	16.30		$	14.13		$	12.27		$	10.65		$	9.68

Total Return (%)		16.97			15.16			15.21			10.02			32.42

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	265,807		$	198,081		$	156,596		$	123,045		$	106,738
Ratios to average net assets (%):
Operating expenses, net (c)		1.25			1.25			1.22			1.25			1.25
Operating expenses, gross		1.30			1.35			1.38			1.34			1.49
Net investment income (loss) (c)		.07			(.09	)		(.06	)		(.32	)		(.06	)

Portfolio turnover rate (%)		56.71			54.34			57.90			203.33			81.91

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Less than $.01 per share.

(c)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

130

Russell Strategic Bond Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	10.48		$	10.44		$	10.70		$	10.67		$	10.11

Income From Operations
Net investment income (loss) (a)		.50			.45			.35			.28			.38
Net realized and unrealized gain (loss)		.01			.04			(.21	)		.31			.52

Total income from operations		.51			.49			.14			.59			.90

Distributions
From net investment income		(.46	)		(.42	)		(.32	)		(.38	)		(.34	)
From net realized gain		—			(.03	)		(.08	)		(.18	)		—

Total distributions		(.46	)		(.45	)		(.40	)		(.56	)		(.34	)

Net Asset Value, End of Period	$	10.53		$	10.48		$	10.44		$	10.70		$	10.67

Total Return (%)		4.99			4.81			1.37			5.65			9.05

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	18,101		$	15,119		$	9,268		$	7,489		$	6,481
Ratios to average net assets (%):
Operating expenses, net (b)		.93			.92			.93			.96			1.00
Operating expenses, gross		.96			.96			.95			.96			1.00
Net investment income (loss) (b)		4.69			4.27			3.32			2.64			3.61

Portfolio turnover rate (%)		697.71			270.24			197.66			195.68			266.11

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

131

Russell Investment Grade Bond Fund—Class C Shares


	Fiscal Year Ended October 31, 2007(1)
Net Asset Value, Beginning of Period	$	20.76

Income From Operations
Net investment income (loss) (a)		.08
Net realized and unrealized gain (loss)		(.08	)

Total income from operations		—

Net Asset Value, End of Period	$	20.76

Total Return (%) (b)		—

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	35,689
Ratios to average net assets (%):
Operating expenses, net (c) (d)		1.60
Operating expenses, gross (c)		1.62
Net investment income (loss) (c) (d)		4.21

Portfolio turnover rate (%) (b)		198.79

(1)

For the period October 22, 2007 (commencement of operations) to October 31, 2007.

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Periods less than one year are not annualized.

(c)

The ratios for periods less than one year are annualized.

(d)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

132

Russell Investment Grade Bond Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	20.82		$	20.75		$	21.88		$	22.12		$	22.15

Income From Operations
Net investment income (loss) (a)		.96			.92			.74			.63			.72
Net realized and unrealized gain (loss)		(.02	)		.04			(.61	)		.48			.36

Total income from operations		.94			.96			.13			1.11			1.08

Distributions
From net investment income		(.99	)		(.89	)		(.73	)		(.69	)		(.67	)
From net realized gain		—			—			(.53	)		(.66	)		(.44	)

Total distributions		(.99	)		(.89	)		(1.26	)		(1.35	)		(1.11	)

Net Asset Value, End of Period	$	20.77		$	20.82		$	20.75		$	21.88		$	22.12

Total Return (%)		4.64			4.79			.60			5.22			5.01

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	53,663		$	31,504		$	29,632		$	27,515		$	27,009
Ratios to average net assets (%):
Operating expenses, net (b)		.65			.64			.65			.65			.67
Operating expenses, gross		.67			.67			.68			.66			.67
Net investment income (loss) (b)		4.76			4.45			3.49			2.88			3.25

Portfolio turnover rate (%)		198.79			125.38			201.90			153.79			184.29

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

133

Russell Investment Grade Bond Fund—Class S Shares


	Fiscal Year Ended October 31, 2007(1)
Net Asset Value, Beginning of Period	$	20.75

Income From Operations
Net investment income (loss) (a)		.01

Net Asset Value, End of Period	$	20.76

Total Return (%) (b)		.05

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	226,995
Ratios to average net assets (%):
Operating expenses, net (c) (d)		.53
Operating expenses, gross (c)		.55
Net investment income (loss) (c) (d)		5.30

Portfolio turnover rate (%) (b)		198.79

(1)

For the period October 22, 2007 (commencement of operations) to October 31, 2007.

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Periods less than one year are not annualized.

(c)

The ratios for periods less than one year are annualized.

(d)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

134

Russell Short Duration Bond Fund—Class A Shares


	Fiscal Year Ended October 31, 2007(1)
Net Asset Value, Beginning of Period	$	18.71

Income From Operations
Net investment income (loss) (a)		.49
Net realized and unrealized gain (loss)		.09

Total income from operations		.58

Distributions
From net investment income		(.48	)

Net Asset Value, End of Period	$	18.81

Total Return (%) (b) (e)		3.16

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	1,363
Ratios to average net assets (%):
Operating expenses, net (c) (d)		.92
Operating expenses, gross (c)		.93
Net investment income (loss) (c) (d)		3.92

Portfolio turnover rate (%) (b)		172.85

(1)

For the period March 1, 2007 (commencement of operations) to October 31, 2007.

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Periods less than one year are not annualized.

(c)

The ratios for periods less than one year are annualized.

(d)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

(e)

Excludes the effects of sales charges. If sales charges were included, the total return would be lower.

135

Russell Short Duration Bond Fund—Class C Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	18.66		$	18.63		$	19.04		$	19.01		$	18.98

Income From Operations
Net investment income (loss) (a)		.59			.50			.31			.19			.31
Net realized and unrealized gain (loss)		.14			.03			(.40	)		(.01	)		.06

Total income from operations		.73			.53			(.09	)		.18			.37

Distributions
From net investment income		(.63	)		(.50	)		(.31	)		(.15	)		(.34	)
From net realized gain		—			—			(.01	)		—			—

Total distributions		(.63	)		(.50	)		(.32	)		(.15	)		(.34	)

Net Asset Value, End of Period	$	18.76		$	18.66		$	18.63		$	19.04		$	19.01

Total Return (%)		3.98			2.89			(.50	)		.97			1.97

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	16,075		$	21,840		$	30,290		$	38,427		$	41,644
Ratios to average net assets (%):
Operating expenses, net (b)		1.67			1.65			1.65			1.63			1.56
Operating expenses, gross		1.68			1.66			1.66			1.66			1.72
Net investment income (loss) (b)		3.18			2.71			1.65			1.00			1.63

Portfolio turnover rate (%)		172.85			111.57			202.53			131.57			187.92

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

136

Russell Short Duration Bond Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	18.73		$	18.70		$	19.10		$	19.08		$	19.04

Income From Operations
Net investment income (loss) (a)		.72			.65			.46			.34			.48
Net realized and unrealized gain (loss)		.14			.03			(.41	)		(.01	)		.03

Total income from operations		.86			.68			.05			.33			.51

Distributions
From net investment income		(.77	)		(.65	)		(.44	)		(.31	)		(.47	)
From net realized gain		—			—			(.01	)		—			—

Total distributions		(.77	)		(.65	)		(.45	)		(.31	)		(.47	)

Net Asset Value, End of Period	$	18.82		$	18.73		$	18.70		$	19.10		$	19.08

Total Return (%)		4.72			3.69			.25			1.74			2.70

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	17,092		$	26,800		$	24,851		$	23,181		$	20,274
Ratios to average net assets (%):
Operating expenses, net (b)		.92			.90			.90			.88			.80
Operating expenses, gross		.93			.91			.91			.91			.97
Net investment income (loss) (b)		3.95			3.49			2.43			1.76			2.52

Portfolio turnover rate (%)		172.85			111.57			202.53			131.57			187.92

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

137

Russell Short Duration Bond Fund—Class S Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	18.70		$	18.67		$	19.07		$	19.05		$	19.01

Income From Operations
Net investment income (loss) (a)		.75			.69			.51			.38			.52
Net realized and unrealized gain (loss)		.16			.03			(.41	)		(.01	)		.03

Total income from operations		.91			.72			.10			.37			.55

Distributions
From net investment income		(.82	)		(.69	)		(.49	)		(.35	)		(.51	)
From net realized gain		—			—			(.01	)		—			—

Total distributions		(.82	)		(.69	)		(.50	)		(.35	)		(.51	)

Net Asset Value, End of Period	$	18.79		$	18.70		$	18.67		$	19.07		$	19.05

Total Return (%)		4.99			3.95			.51			1.98			2.95

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	435,704		$	1,106,946		$	1,158,439		$	1,135,332		$	958,064
Ratios to average net assets (%):
Operating expenses, net (b)		.67			.65			.65			.63			.56
Operating expenses, gross		.68			.65			.66			.66			.72
Net investment income (loss) (b)		4.20			3.73			2.67			2.01			2.70

Portfolio turnover rate (%)		172.85			111.57			202.53			131.57			187.92

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

138

Russell Tax Exempt Bond Fund—Class C Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	21.63		$	21.45		$	22.03		$	21.99		$	21.94

Income From Operations
Net investment income (loss) (a)		.58			.57			.51			.53			.58
Net realized and unrealized gain (loss)		(.32	)		.17			(.61	)		.04			.07

Total income from operations		.26			.74			(.10	)		.57			.65

Distributions
From net investment income		(.58	)		(.56	)		(.48	)		(.53	)		(.60	)

Net Asset Value, End of Period	$	21.31		$	21.63		$	21.45		$	22.03		$	21.99

Total Return (%)		1.21			3.50			(.46	)		2.62			2.98

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	12,722		$	11,819		$	10,493		$	10,611		$	8,701
Ratios to average net assets (%):
Operating expenses, net (b)		1.55			1.56			1.53			1.53			1.56
Operating expenses, gross		1.55			1.56			1.53			1.53			1.56
Net investment income (loss) (b)		2.72			2.66			2.31			2.39			2.62

Portfolio turnover rate (%)		72.45			63.34			43.13			36.68			37.46

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

139

Russell Tax Exempt Bond Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	21.70		$	21.52		$	22.10		$	22.06		$	21.99

Income From Operations
Net investment income (loss) (a)		.76			.73			.67			.69			.75
Net realized and unrealized gain (loss)		(.34	)		.17			(.60	)		.04			.06

Total income from operations		.42			.90			.07			.73			.81

Distributions
From net investment income		(.74	)		(.72	)		(.65	)		(.69	)		(.74	)

Net Asset Value, End of Period	$	21.38		$	21.70		$	21.52		$	22.10		$	22.06

Total Return (%)		1.96			4.26			.31			3.38			3.75

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	19,442		$	11,805		$	8,572		$	6,488		$	5,849
Ratios to average net assets (%):
Operating expenses, net (b)		.80			.80			.78			.78			.81
Operating expenses, gross		.80			.81			.78			.78			.81
Net investment income (loss) (b)		3.48			3.41			3.07			3.14			3.37

Portfolio turnover rate (%)		72.45			63.34			43.13			36.68			37.46

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

140

Russell Tax Exempt Bond Fund—Class S Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	21.67		$	21.49		$	22.07		$	22.03		$	21.96

Income From Operations
Net investment income (loss) (a)		.80			.79			.72			.75			.80
Net realized and unrealized gain (loss)		(.32	)		.16			(.60	)		.03			.07

Total income from operations		.48			.95			.12			.78			.87

Distributions
From net investment income		(.79	)		(.77	)		(.70	)		(.74	)		(.80	)

Net Asset Value, End of Period	$	21.36		$	21.67		$	21.49		$	22.07		$	22.03

Total Return (%)		2.26			4.53			.55			3.64			4.01

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	336,275		$	274,438		$	228,604		$	185,587		$	144,402
Ratios to average net assets (%):
Operating expenses, net (b)		.55			.55			.53			.53			.56
Operating expenses, gross		.55			.56			.53			.53			.56
Net investment income (loss) (b)		3.72			3.66			3.31			3.39			3.62

Portfolio turnover rate (%)		72.45			63.34			43.13			36.68			37.46

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

141

Russell Real Estate Securities Fund—Class A Shares


	Fiscal Year Ended October 31, 2007(1)
Net Asset Value, Beginning of Period	$	57.37

Income From Operations
Net investment income (loss) (a)		.11
Net realized and unrealized gain (loss)		(4.50	)

Total income from operations		(4.39	)

Distributions
From net investment income		(.69	)

Net Asset Value, End of Period	$	52.29

Total Return (%) (b) (e)		(7.70	)

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	7,868
Ratios to average net assets (%):
Operating expenses, net (c) (d)		1.32
Operating expenses, gross (c)		1.33
Net investment income (loss) (c) (d)		.35

Portfolio turnover rate (%) (b)		70.46

(1)

For the period March 1, 2007 (commencement of operations) to October 31, 2007.

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Periods less than one year are not annualized.

(c)

The ratios for periods less than one year are annualized.

(d)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

(e)

Excludes the effects of sales charges. If sales charges were included, the total return would be lower.

142

Russell Real Estate Securities Fund—Class C Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	56.11		$	46.08		$	43.10		$	33.94		$	26.52

Income From Operations
Net investment income (loss) (a)		.20			.22			.42			.46			1.11
Net realized and unrealized gain (loss)		.27			15.14			6.66			9.92			7.53

Total income from operations		.47			15.36			7.08			10.38			8.64

Distributions
From net investment income		(.34	)		(.35	)		(.43	)		(1.21	)		(1.11	)
From net realized gain		(4.82	)		(4.98	)		(3.67	)		(.01	)		(.11	)

Total distributions		(5.16	)		(5.33	)		(4.10	)		(1.22	)		(1.22	)

Net Asset Value, End of Period	$	51.42		$	56.11		$	46.08		$	43.10		$	33.94

Total Return (%)		.56			36.63			17.22			30.97			33.23

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	98,745		$	110,287		$	81,876		$	61,089		$	32,784
Ratios to average net assets (%):
Operating expenses, net (b)		2.07			2.07			2.10			2.12			2.20
Operating expenses, gross		2.08			2.08			2.10			2.12			2.30
Net investment income (loss) (b)		.38			.45			.95			1.20			3.67

Portfolio turnover rate (%)		70.46			48.64			63.95			38.04			46.09

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

143

Russell Real Estate Securities Fund—Class E Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	56.95		$	46.62		$	43.55		$	34.24		$	26.72

Income From Operations
Net investment income (loss) (a)		.62			.59			.76			.75			1.34
Net realized and unrealized gain (loss)		.28			15.36			6.74			10.04			7.60

Total income from operations		.90			15.95			7.50			10.79			8.94

Distributions
From net investment income		(.67	)		(.64	)		(.76	)		(1.47	)		(1.31	)
From net realized gain		(4.82	)		(4.98	)		(3.67	)		(.01	)		(.11	)

Total distributions		(5.49	)		(5.62	)		(4.43	)		(1.48	)		(1.42	)

Net Asset Value, End of Period	$	52.36		$	56.95		$	46.62		$	43.55		$	34.24

Total Return (%)		1.33			37.65			18.09			32.00			34.21

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	51,299		$	59,768		$	40,296		$	29,436		$	16,651
Ratios to average net assets (%):
Operating expenses, net (b)		1.32			1.32			1.35			1.37			1.43
Operating expenses, gross		1.33			1.32			1.35			1.37			1.62
Net investment income (loss) (b)		1.13			1.19			1.71			1.95			4.46

Portfolio turnover rate (%)		70.46			48.64			63.95			38.04			46.09

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

144

Russell Real Estate Securities Fund—Class S Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	57.53		$	47.03		$	43.90		$	34.51		$	26.89

Income From Operations
Net investment income (loss) (a)		.75			.73			.88			.87			1.42
Net realized and unrealized gain (loss)		.28			15.51			6.79			10.09			7.67

Total income from operations		1.03			16.24			7.67			10.96			9.09

Distributions
From net investment income		(.80	)		(.76	)		(.87	)		(1.56	)		(1.36	)
From net realized gain		(4.82	)		(4.98	)		(3.67	)		(.01	)		(.11	)

Total distributions		(5.62	)		(5.74	)		(4.54	)		(1.57	)		(1.47	)

Net Asset Value, End of Period	$	52.94		$	57.53		$	47.03		$	43.90		$	34.51

Total Return (%)		1.57			38.04			18.35			32.30			34.58

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	2,126,802		$	1,903,365		$	1,434,109		$	1,171,513		$	830,448
Ratios to average net assets (%):
Operating expenses, net (b)		1.07			1.07			1.10			1.11			1.18
Operating expenses, gross		1.08			1.07			1.10			1.11			1.18
Net investment income (loss) (b)		1.38			1.46			1.95			2.23			4.66

Portfolio turnover rate (%)		70.46			48.64			63.95			38.04			46.09

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

145

Russell Money Market Fund—Class A


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003(1)
Net Asset Value, Beginning of Period	$	1.0000		$	1.0000		$	1.0000		$	1.0000		$	1.0000

Income From Operations
Net investment income (loss) (a)		.0517			.0464			.0271			.0108			.0051

Distributions
From net investment income		(.0517	)		(.0464	)		(.0271	)		(.0108	)		(.0051	)

Net Asset Value, End of Period	$	1.0000		$	1.0000		$	1.0000		$	1.0000		$	1.0000

Total Return (%) (b)		5.30			4.74			2.74			1.08			.59

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	291,636		$	76,031		$	14,410		$	3,989		$	682
Ratios to average net assets (%):
Operating expenses, net (c) (d)		.25			.25			.25			.25			.26
Operating expenses, gross (c)		.40			.40			.40			.40			5.24
Net investment income (loss) (c) (d)		5.18			4.82			2.91			1.18			.96

(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 RIMCo as the investment adviser and custody credit arrangements.

146

Russell Money Market Fund—Class S


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	1.0000		$	1.0000		$	1.0000		$	1.0000		$	1.0000

Income From Operations
Net investment income (loss) (a)		.0527			.0474			.0280			.0117			.0121

Distributions
From net investment income		(.0527	)		(.0474	)		(.0280	)		(.0117	)		(.0121	)

Net Asset Value, End of Period	$	1.0000		$	1.0000		$	1.0000		$	1.0000		$	1.0000

Total Return (%)		5.40			4.84			2.82			1.17			1.28

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	5,429,652		$	4,166,051		$	3,145,592		$	2,958,692		$	2,363,623
Ratios to average net assets (%):
Operating expenses, net (b)		.15			.15			.15			.15			.16
Operating expenses, gross		.30			.30			.30			.30			.31
Net investment income (b)		5.27			4.78			2.83			1.16			1.21

(a)

Average month-end shares were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and custody credit arrangements.

147

MONEY MANAGER INFORMATION

The money managers have no affiliations with the Funds or the Funds’ service providers other than their management of Fund assets. Each money manager is principally engaged in managing institutional investment accounts. These managers may also serve as managers or advisers to other investment companies unaffiliated with RIC, other RIC Funds, or to other clients of RIMCo or of Frank Russell Company, including Frank Russell Company’s wholly-owned subsidiary, Russell Trust Company. The Funds may engage or terminate a money manager at any time, subject to the approval of the Funds’ Board of Trustees, without a shareholder vote. A complete list of current money managers for the Funds can also be found at www.Russell.com. Assets not allocated to money managers are managed by RIMCo.

Russell U.S. Core Equity Fund

AllianceBernstein L.P., 1345 Avenue of the Americas, New York, NY 10105.

Arnhold and S. Bleichroeder Advisers, LLC, 1345 Avenue of the Americas, 44th Floor, New York, NY 10105.

Columbus Circle Investors, One Station Place, Metro Center—8th Floor, Stamford, CT 06902.

Institutional Capital LLC, 225 W. Wacker Drive, Suite 2400, Chicago, IL 60606.

Marsico Capital Management, LLC, 1200 17th Street, Suite 1600, Denver, CO 80202.

MFS Institutional Advisors, Inc., 500 Boylston Street, 21st Floor, Boston, MA 02116-3741.

Montag & Caldwell, Inc., 3455 Peachtree Road, NE, Suite 1200, Atlanta, GA 30326-3248.

Schneider Capital Management Corporation, 460 E. Swedesford Road, Suite 2000, Wayne, PA 19087.

Suffolk Capital Management, LLC, 1633 Broadway, 40th Floor, New York, NY 10019.

Turner Investment Partners, Inc., 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312.

Russell U.S. Quantitative Equity Fund

Aronson+Johnson+Ortiz, LP, 230 South Broad Street, 20th Floor, Philadelphia, PA 19102.

Franklin Portfolio Associates, LLC, One Boston Place, 34th Floor, Boston, MA 02108.

Goldman Sachs Asset Management, L.P., 32 Old Slip, 32nd Floor, New York, NY 10005.

Jacobs Levy Equity Management, Inc., 100 Campus Drive, P.O. Box 650, Florham Park, NJ 07932-0650.

Russell U.S. Growth Fund

Cornerstone Capital Management, Inc., 7101 West 78th Street, Suite 201, Bloomington, MN 55439.

Delaware Management Company, a series of Delaware Management Business Trust, 2005 Market Street, Philadelphia, PA 19103-3682.

Fuller & Thaler Asset Management, Inc. 411 Borel Avenue, Suite 300, San Mateo, CA 94402.

Suffolk Capital Management, LLC, 1633 Broadway, 40th Floor, New York, NY 10019.

Sustainable Growth Advisers, LP, 301 Tresser Blvd, Suite 1310, Stamford, CT 06901

Turner Investment Partners, Inc., 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312.

Russell U.S. Value Fund

DePrince, Race & Zollo, Inc., 250 Park Avenue South, Suite 250, Winter Park, FL 32789.

Iridian Asset Management LLC, 276 Post Road West, Westport, CT 06880-4704.

148

JS Asset Management, LLC, One Tower Bridge 100 Front Street, Suite 501, West Conshohocken, PA 19428.

Systematic Financial Management, L.P., 300 Frank W. Burr Boulevard, Glenpointe East, 7th Floor, Teaneck, NJ 07666.

Russell U.S. Small & Mid Cap Fund

ClariVest Asset Management LLC, 11452 El Camino Real, Suite 250, San Diego, CA 92130.

Delphi Management, Inc., 50 Rowes Wharf, Suite 540, Boston, MA 02110.

DePrince, Race & Zollo, Inc., 250 Park Avenue South, Suite 250, Winter Park, FL 32789.

Gould Investment Partners LLC, 1235 Westlakes Drive, Suite 280, Berwyn, PA 19312.

Jacobs Levy Equity Management, Inc., 100 Campus Drive, P.O. Box 650, Florham Park, NJ 07932-0650.

PanAgora Asset Management, Inc., 470 Atlantic Avenue, 8th Floor, Boston, MA 02109.

Ranger Investment Management, L.P., 300 Crescent Court, Suite 1100, Dallas, TX 75201.

Signia Capital Management, LLC, 108 North Washington Street, Suite 305, Spokane, WA 99201.

Tygh Capital Management, Inc., 1211 S.W. Fifth Avenue, Suite 2100, Portland, OR 97204.

Russell International Developed Markets Fund

AllianceBernstein L.P., 1345 Avenue of the Americas, New York, NY 10105.

Altrinsic Global Advisors, LLC, 100 First Stamford Place, 6th Floor East, Stamford, CT 06902.

AQR Capital Management, LLC, Two Greenwich Plaza, 3rd Floor, Greenwich, CT 06830.

Axiom International Investors LLC, 55 Railroad Avenue, Greenwich, CT 06830-6378.

Marsico Capital Management, LLC, 1200 17th Street, Suite 1600, Denver, CO 80202.

MFS Institutional Advisors, Inc. 500 Boylston Street, 21st Floor, Boston, MA 02116-3741.

Mondrian Investment Partners Limited, 10 Gresham Street, 5th Floor, London EC2V 7JD United Kingdom.

UBS Global Asset Management (Americas) Inc., One North Wacker Drive, Chicago, IL 60606.

Wellington Management Company, LLP, 75 State Street, Boston, MA 02109.

Russell Global Equity Fund

ClariVest Asset Management LLC, 11452 El Camino Real, Suite 250, San Diego, CA 92130.

Gartmore Global Partners, 8 Fenchurch Place, London EC3M 4PB United Kingdom.

Harris Associates, L.P., 2 North LaSalle Street, Suite 500, Chicago, IL 60602.

Tradewinds Global Investors, LLC, 2049 Century Park East, 18th Floor, Los Angeles, CA, 90067.

T. Rowe Price International, Inc., 100 East Pratt Street, Baltimore, MD 21202.

Russell Emerging Markets Fund

AllianceBernstein L.P., 1345 Avenue of the Americas, New York, NY 10105.

Arrowstreet Capital, Limited Partnership, The John Hancock Tower, 200 Clarendon Street, 30th Floor, Boston, MA 02116.

Genesis Asset Managers, LLP, 21 Knightsbridge, London SWIX 7LY United Kingdom.

Harding Loevner LLC, 50 Division Street, Suite 401, Somerville, NJ 08876.

T. Rowe Price International, Inc., 100 East Pratt Street, Baltimore, MD 21202.

UBS Global Asset Management (Americas) Inc., One North Wacker Drive, Chicago, IL 60606.

149

Russell Tax-Managed U.S. Large Cap Fund

Armstrong Shaw Associates Inc., 45 Grove Street, New Canaan, CT 06840.

J.P. Morgan Investment Management Inc., 245 Park Avenue, New York, NY 10167.

Palisades Investment Partners, LLC, 1453 Third Street Promenade, Suite 310, Santa Monica, CA 90401.

Sands Capital Management, Inc., 1101 Wilson Boulevard, Suite 2300, Arlington, VA 22209.

Turner Investment Partners, Inc., 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312.

Russell Tax-Managed U.S. Mid & Small Cap Fund

Chartwell Investment Partners, 1235 Westlakes Drive, Suite 400, Berwyn, PA 19312.

Netols Asset Management, Inc., 1045 West Glen Oaks Lane, Suite 3, Mequon, WI 53092.

Parametric Portfolio Associates LLC, 1151 Fairview Avenue North, Seattle, WA 98109.

Transamerica Investment Management, LLC, 11111 Santa Monica Boulevard, Suite 820, Los Angeles, CA 90025.

Turner Investment Partners, Inc., 1205 Westlakes Drive, Suite 100, Berwyn, PA 19312.

Russell Strategic Bond Fund

Drake Capital Management, LLC, 660 Madison Avenue, 16th Floor, New York, NY 10021.

Goldman Sachs Asset Management, L.P., 32 Old Slip, 32nd Floor, New York, NY 10005.

Hyperion Brookfield Asset Management, Inc., Three World Financial Center, 200 Vesey Street, 10th Floor, New York, NY 10281.

Logan Circle Partners, L.P., 1717 Arch Street, Suite 1500, Philadelphia, PA 19103.

Metropolitan West Asset Management, LLC, 11766 Wilshire Boulevard, Suite 1580, Los Angeles, CA 90025.

Pacific Investment Management Company LLC, 840 Newport Center Drive, Suite 300, P.O. Box 6430, Newport Beach, CA 92660-6430.

Russell Investment Grade Bond Fund

Lehman Brothers Asset Management LLC, 190 South LaSalle Street, Suite 2400, Chicago, IL 60603.

Metropolitan West Asset Management, LLC, 11766 Wilshire Boulevard, Suite 1580, Los Angeles, CA 90025.

Pacific Investment Management Company LLC, 840 Newport Center Drive, Suite 300, P.O. Box 6430, Newport Beach, CA 92660-6430.

Western Asset Management Company, 385 East Colorado Boulevard, Pasadena, CA 91101.

Western Asset Management Company Limited, 10 Exchange Square, Primrose Street, London, EC2A 2EN England.

Russell Short Duration Bond Fund

Logan Circle Partners, L.P., 1717 Arch Street, Suite 1500, Philadelphia, PA 19103.

Pacific Investment Management Company LLC, 840 Newport Center Drive, Suite 300, P.O. Box 6430, Newport Beach, CA 92660-6430.

STW Fixed Income Management, 6185 Carpinteria Avenue, Carpinteria, CA 93013.

150

Russell Tax Exempt Bond Fund

Delaware Management Company, a series of Delaware Management Business Trust, One Commerce Square, 2005 Market Street, Philadelphia, PA 19103.

Standish Mellon Asset Management Company LLC, Mellon Financial Center, One Boston Place, Suite 2900, Boston, MA 02108-4408.

Russell Real Estate Securities Fund

AEW Management and Advisors, L.P., World Trade Center East, Two Seaport Lane, Boston, MA 02210-2021.

Cohen & Steers Capital Management, Inc., 280 Park Avenue, 10th Floor, New York, NY 10017-1216.

Heitman Real Estate Securities LLC, 191 North Wacker Drive, Suite 2500, Chicago, IL 60606.

INVESCO Institutional (N.A.), Inc. which acts as a money manager to the Fund through its INVESCO Real Estate Division, Three Galleria Tower, Suite 500, 13155 Noel Road, Dallas, TX 75240.

RREEF America L.L.C., The Hancock Building, 875 North Michigan Avenue, 41st Floor, Chicago IL 60611.

Russell Money Market Fund

Russell Investment Management Company, 909 A Street, Tacoma, WA 98402.

When considering an investment in the Funds, do not rely on any information unless it is contained in this Prospectus or in the Funds’ Statement of Additional Information. The Funds have not authorized anyone to add any information or to make any additional statements about the Funds. The Funds may not be available in some jurisdictions or to some persons. The fact that you have received this Prospectus should not, in itself, be treated as an offer to sell Shares to you. Changes in the affairs of the Funds or in the Funds’ money managers may occur after the date on the cover page of this Prospectus. This Prospectus will be amended or supplemented to reflect any material changes to the information it contains.

151

The following notice does not constitute part of and is not incorporated into the Prospectus

NOTICE OF PRIVACY AND SECURITY

RUSSELL INVESTMENTS

Russell Investments has a long history of respecting every individual’s right to the privacy of his or her personal information. We consider our relationship with consumers to be a very valuable asset. You should know that we do not sell or rent to anyone the information you have entrusted to us. In addition, we do not share your information with marketers outside Russell Investments.

This notice describes our privacy policy and security procedures, which are designed to cover all personally identifiable information. As required by law, we will advise you of our privacy policy and security procedures at least once annually and at any time there is a material change.

CONFIDENTIALITY AND SECURITY

Confidentiality and privacy of personal information are responsibilities we have always taken very seriously. We have and maintain strict policies and procedures to protect the confidentiality of your information during all stages of your relationship with us. For example, our associates are bound by a Code of Ethics that requires them to treat all personal information as confidential, and they are subject to disciplinary action if they fail to follow this Code. In addition, we maintain physical, electronic and procedural safeguards to protect your personal information from unauthorized access and anticipated threats or hazards. Access to your information by our employees and other representatives is restricted to those individuals having a business need for such information in order to service your account.

INFORMATION WE MAY COLLECT AND USE

In order to service your account, from time to time, we collect personal information about you from the following sources:

•

Information we or our agents receive from you on applications or other forms; and

•

Information about your transactions with us, our affiliates, our agents or others. Other information may, from time to time, be provided to us as we facilitate transactions that you have requested.

INFORMATION WE MAY DISCLOSE

We occasionally disclose nonpublic personal information about you to affiliates and third parties as permitted by law. Some instances when we have shared information include:

•

Disclosing information to a third party to process account transactions that you request or authorize;

•

Disclosing information to an affiliate to process accounting statements that you request or authorize;

•

Disclosing your name and address to companies that mail fund-related materials such as shareholder reports; and

•

Disclosing information in connection with legal proceedings.

In situations where we have shared information with third parties, they are contractually obligated to keep the information that we provide to them confidential, and are not permitted to use the information for any purpose other than to assist in the servicing of your account.

RUSSELL INVESTMENTS

The following is a list of the members of Russell Investments to which this policy applies:

•

U.S. open-end or private funds managed or advised by a member of Russell Investments, including Russell Investment Company or Russell Investment Funds

•

Frank Russell Company

•

Russell Real Estate Advisors Inc.

•

Russell Implementation Services Inc.

•

Russell Investment Management Company

•

Russell Trust Company

•

Russell International Services Company Inc.

•

Russell Investments Delaware Inc.

•

Russell Financial Services, Inc.

•

Pantheon Ventures Inc.

•

Russell Institutional Services Inc.

•

Russell Fund Services Company

For more information about the Funds, the following documents are available without charge:

ANNUAL/SEMIANNUAL REPORTS: Additional information about the Funds’ investments is available in the Funds’ annual and semiannual reports to shareholders. In each Fund’s annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year.

STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed information about the Funds.

The annual report for each Fund and the SAI are incorporated into this Prospectus by reference. You may obtain free copies of the annual report, semiannual report or the SAI, and may request other information or make other inquiries, by contacting your Financial Intermediary or the Funds at:

Russell Investment Company

909 A Street

Tacoma, WA 98402

Telephone: 1-800-787-7354

Fax: 253-591-3495

The Funds’ SAI and annual and semiannual reports to shareholders are available, free of charge, on the Funds’ Web site at www.russell.com.

Each year you are automatically sent an updated prospectus and annual and semiannual reports for the Funds. You may also occasionally receive notifications of prospectus changes and proxy statements for the Funds. In order to reduce the volume of mail you receive, when possible, only one copy or one mailing of these documents will be sent to shareholders who are part of the same family, sharing the same name and the same household address. If you would like to opt out of the household-based mailings, please call your Financial Intermediary.

Some Financial Intermediaries may offer electronic delivery of the Funds’ prospectus and annual and semiannual reports. Please contact your Financial Intermediary for further details.

You can review and copy information about the Funds (including the SAI) at the Securities and Exchange Commission’s Public Reference Room in Washington, D.C. You can obtain information on the operation of the Public Reference Room by calling the Commission at 1-202-942-8090. Reports and other information about the Funds are available on the EDGAR Database on the Commission’s Internet website at http://www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov, or by writing the Commission’s Public Reference Section, Washington, D.C. 20549.

LOGO

Distributor: Russell Financial Services, Inc.

Russell Investment Company’s SEC File No. 811-03153

36-08-180 (0908)

00062045

PROSPECTUS

Russell Funds

FEBRUARY 29, 2008, AS SUPPLEMENTED THROUGH SEPTEMBER 2, 2008


FUND	SHARE CLASS	FUND NAME PRIOR TO SEPTEMBER 2, 2008

U.S. Equity Funds

Russell U.S. Core Equity Fund	I	Equity I Fund

Russell U.S. Quantitative Equity Fund	I	Equity Q Fund

Russell U.S. Growth Fund	I	Select Growth Fund

Russell U.S. Value Fund	I	Select Value Fund

Russell U.S. Small & Mid Cap Fund	I	Equity II Fund

International and Global Equity Funds

Russell International Developed Markets Fund	I	International Fund

Taxable Fixed Income Funds

Russell Strategic Bond Fund	I	Fixed Income III Fund

Russell Investment Grade Bond Fund	I	Fixed Income I Fund

909 A Street Tacoma, Washington 98402

800-787-7354

Table of Contents


Risk/Return Summary		1
Investment Objective, Principal Investment Strategies and Principal Risks		1
U.S. Equity Funds
Russell U.S. Core Equity Fund		1
Russell U.S. Quantitative Equity Fund		2
Russell U.S. Growth Fund		3
Russell U.S. Value Fund		4
Russell U.S. Small & Mid Cap Fund		5
International and Global Equity Funds
Russell International Developed Markets Fund		7
Taxable Fixed Income Funds
Russell Strategic Bond Fund		8
Russell Investment Grade Bond Fund		10
Performance		12
Fees and Expenses		21
Management of the Funds		23
The Money Managers		25
Subsequent Events		25
Investment Objective and Investment Strategies		28
U.S. Equity Funds
Russell U.S. Core Equity Fund		28
Russell U.S. Quantitative Equity Fund		29
Russell U.S. Growth Fund		31
Russell U.S. Value Fund		33
Russell U.S. Small & Mid Cap Fund		34
International and Global Equity Funds
Russell International Developed Markets Fund		36
Taxable Fixed Income Funds
Russell Strategic Bond Fund		39
Russell Investment Grade Bond Fund		40
Risks		43
Portfolio Turnover		52
Portfolio Disclosure		52
Dividends and Distributions		52
Taxes		53
How Net Asset Value is Determined		54
Distribution and Shareholder Services Arrangements and Payments to Financial Intermediaries		55
How to Purchase Shares		56
Exchange Privilege		57
Right to Reject or Restrict Purchase and Exchange Orders		58
How to Redeem Shares		60
Payment of Redemption Proceeds		60
Other Information About Share Transactions		61
Financial Highlights		63
Money Manager Information		71

RISK/RETURN SUMMARY

Investment Objective, Principal Investment Strategies and Principal Risks

RUSSELL U.S. CORE EQUITY FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to money managers.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL U.S. QUANTITATIVE EQUITY FUND

Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to money managers.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. ADRs have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. The use of the select holdings strategy by the Fund will amplify the Fund’s security selection risk and potential underperformance. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor, and changes from the factors’ historical trends. Making short sales in securities that it does not own exposes the Fund to the risk that the Fund will incur a loss should the price of the security sold short increase between the date of the short sale and the date on which the Fund must return the borrowed security. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL U.S. GROWTH FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

companies represented by the Russell 1000^® Index. The Fund defines small capitalization stocks as stocks of those companies represented by the Russell 2000^® Index and micro capitalization stocks to be all stocks of those companies represented by the Russell Microcap^™ Index. The Fund may also invest in securities of non-U.S. issuers, typically by purchasing American Depositary Receipts (“ADRs”).

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL U.S. VALUE FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL U.S. SMALL & MID CAP FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

have been publicly traded for less than five years and smaller companies, including companies not listed in the Russell 2500™ Index. The Fund may also invest in securities of non-U.S. issuers, typically by purchasing American Depositary Receipts (“ADRs”).

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses three principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

The value of equity securities will rise and fall in response to the activities of the company that issued them, general market conditions and/or economic conditions. ADRs have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. Investments in small capitalization companies may involve greater risks because these companies generally have a limited track record, and may also have narrower markets, more limited resources and a less diversified product offering than larger, more established companies. REITs may be affected by changes in the value of the underlying properties owned by the REITs and by the quality of tenants’ credit. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover. The Growth Style of investing generally results in the selection of stocks that do not pay significant dividends, which could otherwise cushion stock prices in a market decline. The Value Style of investing is subject to the risks that the intrinsic values of the stocks picked may never be realized by the market or the stocks may turn out not to have been undervalued. The Market-Oriented Style of investing is subject to the risks associated with growth and value stocks. Securities selected using a quantitative analysis can perform differently from the market as a whole as a result of the factors used in the analysis, the weight placed on each factor,

and changes from the factors’ historical trends. The Fund is used as an investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL INTERNATIONAL DEVELOPED MARKETS FUND

Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses three principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

Money managers may employ a fundamental investment approach or a quantitative investment approach.

RIMCo may employ a “select holdings” strategy for a portion of the Fund’s assets that RIMCo determines not to allocate to money managers.

The Fund intends to be fully invested at all times.

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

An investment in the Russell International Developed Markets Fund, like any investment, has risks. The value of the Fund fluctuates and you could lose money. The principal risks of investing in the Fund are those associated with investing in equity securities (common stock and preferred stock), including securities of small capitalization companies and particularly in international and emerging market securities, purchasing forward currency contracts, investing in depositary receipts, using a multi-manager approach, using a quantitative investment approach, security selection and funds of funds investment risk.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL STRATEGIC BOND FUND

Non-Fundamental Investment Objective

Seeks to provide current income, and as a secondary objective, capital appreciation.

Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

investment for certain funds of funds and may have a large percentage of its shares owned by such funds of funds. To the extent that such other funds of funds make large redemptions of the Fund’s shares, the Fund’s expenses could increase and/or the Fund could incur high brokerage commissions or other transaction costs.

Please refer to the “Risks” section later in this Prospectus for further details.

RUSSELL INVESTMENT GRADE BOND FUND

Fundamental Investment Objective

Seeks to provide current income and the preservation of capital.

Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

Please refer to the “Investment Objective and Investment Strategies” section later in this Prospectus for further details.

Principal Risks

securities could incur a prepayment of principal, which may expose the Fund to a lower rate of return upon reinvestment of principal. Payment of principal and interest on asset-backed securities may be largely dependent upon the cash flows generated by the assets backing the securities and asset-backed securities may not have the benefit of any security interest in the related assets. Since the Fund invests in international securities, its return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country; also, the value of the Fund’s foreign assets may be affected by changes in exchange rates of foreign currencies. Prices of emerging markets debt can be severely affected not only by rising interest rates and adverse currency fluctuations, but also by the deterioration of credit quality or outright default by the issuer. The value of Brady bonds can fluctuate significantly based on the issuer’s ability or perceived ability to make payments. Price movements of derivatives may not be identical to price movements of portfolio securities or a securities index resulting in the risk that, when the Fund buys a derivative, the hedge may not be effective. Derivatives are subject to a number of risks, such as liquidity risk, market risk, credit risk and management risk. An illiquid security is one that does not have a readily available market or that is subject to resale restrictions. The investment styles employed by the Fund’s managers may not be complementary, and the use of a multi-manager approach could result in the Fund holding a concentration of certain types of securities and/or having a high level of portfolio turnover.

Please refer to the “Risks” section later in this Prospectus for further details.

An investment in any Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Performance

The following bar charts illustrate the risks of investing in the Funds by showing how the performance of Class I Shares of the Russell U.S. Core Equity, Russell U.S. Quantitative Equity, Russell U.S. Growth, Russell U.S. Value, Russell U.S. Small & Mid Cap, Russell International Developed Markets, Russell Strategic Bond and Russell Investment Grade Bond Funds varies from year to year over a 10-year period (or, if a Fund has not been in operation for 10 years, since the beginning of such Fund’s operations). The highest and lowest returns for a full quarter during the periods shown in the bar charts for the Funds’ Class I Shares are set forth below the bar charts.

The tables accompanying the bar charts further illustrate the risks of investing in the Funds by showing how each Fund’s average annual returns for 1, 5 and 10 years (or, if a Fund has not been in operation for 10 years, since the beginning of operations of the Fund) compare with the returns of certain indexes that measure broad market performance. Index returns do not reflect deduction for fees, expenses or taxes. Index returns do not include fair valuation adjustments which may be included in fund returns. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns are not relevant to investors who hold their Shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns for the Russell International Developed Markets Fund reflect foreign tax credits passed by the Fund to its shareholders thereby increasing total returns after taxes on distributions and total returns after taxes on distributions and sale of Fund Shares. If a Fund has realized capital losses, the total return after taxes on distributions and sale of Fund Shares may be higher than the total return before taxes and the total return after taxes on distributions. The calculation of total return after taxes on distributions and sale of Fund Shares assumes that a shareholder has sufficient capital gains of the same character to offset any capital losses on a sale of Fund Shares and that the shareholder may therefore deduct the entire capital loss.

Past performance, both before-tax and after-tax, is no indication of future results.

Russell U.S. Core Equity Fund

Annual Total Returns

(for the years ended December 31)

Class I

LOGO

Best Quarter: 22.54% (4Q/98)

Worst Quarter: (16.77)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class I	10.76%	14.39%	5.69%

Return After Taxes on Distributions, Class I	8.73%	13.51%	4.58%

Return After Taxes on Distributions and Sale of Fund Shares, Class I	8.57%	12.44%	4.48%

Russell 1000^® Index	5.77%	13.43%	6.20%

Russell U.S. Quantitative Equity Fund

Annual Total Returns

(for the years ended December 31)

Class I

LOGO

Best Quarter: 23.00% (4Q/98)

Worst Quarter: (17.20)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class I	2.77%	12.40%	5.90%

Return After Taxes on Distributions, Class I	0.83%	11.48%	4.50%

Return After Taxes on Distributions and Sale of Fund Shares, Class I	3.75%	10.73%	4.59%

Russell 1000^® Index	5.77%	13.43%	6.20%

Russell U.S. Growth Fund

Annual Total Returns

(for the years ended December 31)

Class I

LOGO

Best Quarter: 18.32% (2Q/03)

Worst Quarter: (17.83)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	Since Inception*

Return Before Taxes, Class I	12.15%	13.01%	(0.53)%

Return After Taxes on Distributions, Class I	11.42%	12.86%	(0.62)%

Return After Taxes on Distributions and Sale of Fund Shares, Class I	8.85%	11.41%	(0.45)%

Russell 1000^® Growth Index	11.81%	12.11%	(0.73)%

Commenced operations on January 31, 2001.

Russell U.S. Value Fund

Annual Total Returns

(for the years ended December 31)

Class I

LOGO

Best Quarter: 16.80% (2Q/03)

Worst Quarter: (17.57)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	Since Inception*

Return Before Taxes, Class I	(2.78)%	13.79%	5.49%

Return After Taxes on Distributions, Class I	(5.83)%	12.46%	4.47%

Return After Taxes on Distributions and Sale of Fund Shares, Class I	1.09%	11.86%	4.51%

Russell 1000^® Value Index	(0.17)%	14.63%	6.76%

Commenced operations on January 31, 2001.

Russell U.S. Small & Mid Cap Fund

Annual Total Returns

(for the years ended December 31)

Class I

LOGO

Best Quarter: 23.14% (2Q/03)

Worst Quarter: (21.69)% (3Q/98)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class I	4.77%	16.77%	8.82%

Return After Taxes on Distributions, Class I	1.07%	13.29%	6.32%

Return After Taxes on Distributions and Sale of Fund Shares, Class I	5.52%	13.66%	6.71%

Russell 2500^™ Index	1.38%	16.99%	9.01%

Russell 2000^® Index	(1.57)%	16.25%	7.08%

Russell International Developed Markets Fund

Annual Total Returns

(for the years ended December 31)

Class I

LOGO

Best Quarter: 20.31% (2Q/03)

Worst Quarter: (20.45)% (3Q/02)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class I	12.91%	21.56%	8.67%

Return After Taxes on Distributions, Class I	8.64%	19.79%	7.37%

Return After Taxes on Distributions and Sale of Fund Shares, Class I	11.21%	18.60%	7.13%

MSCI EAFE^® Index (net of tax on dividends from foreign holdings)	11.17%	21.59%	8.66%

Russell Strategic Bond Fund

Annual Total Returns

(for the years ended December 31)

Class I

LOGO

Best Quarter: 3.84% (3Q/01)

Worst Quarter: (1.95)% (2Q/04)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class I	6.40%	5.05%	5.80%

Return After Taxes on Distributions, Class I	4.52%	3.44%	3.66%

Return After Taxes on Distributions and Sale of Fund Shares, Class I	4.13%	3.38%	3.64%

Lehman Brothers Aggregate Bond Index	6.97%	4.42%	5.97%

To obtain current yield information, please call 1-800-787-7354.

Russell Investment Grade Bond Fund

Annual Total Returns

(for the years ended December 31)

Class I

LOGO

Best Quarter: 4.49% (3Q/01)

Worst Quarter: (2.27)% (2Q/04)


Average annual total returns for the periods ended December 31, 2007	1 Year	5 Years	10 Years

Return Before Taxes, Class I	6.20%	4.21%	5.70%

Return After Taxes on Distributions, Class I	4.36%	2.46%	3.52%

Return After Taxes on Distributions and Sale of Fund Shares, Class I	4.00%	2.60%	3.56%

Lehman Brothers Aggregate Bond Index	6.97%	4.42%	5.97%

To obtain current yield information, please call 1-800-787-7354.

Fees and Expenses

The following tables describe the fees and expenses that you may pay if you buy and hold Shares of the Funds.

Shareholder Fees

(fees paid directly from your investment)


	Maximum Sales Charge (Load) Imposed on Purchases	Maximum Sales Charge (Load) Imposed on Reinvested Dividends	Maximum Deferred Sales Charge (Load)	Redemption Fees*	Exchange Fees
All Funds, Class I	None	None	None	None	None

Annual Fund Operating Expenses#

(expenses that are deducted from Fund assets)

(% of net assets)


	Advisory Fee		Distribution (12b-1) Fees		Other Expenses##		Acquired Fund Fees and Expenses##		Total Annual Fund Operating Expenses##		Less Fee Waivers and Expense Reimbursements***		Net Annual Fund Operating Expenses##
Class I Shares*
Russell U.S. Core Equity Fund	0.55	%	0.00	%	0.20	%	0.00	%	0.75	%	(0.05	)%	0.70	%
Russell U.S. Quantitative Equity Fund**	0.55	%	0.00	%	0.40	%	0.00	%	0.95	%	(0.05	)%	0.90	%
Russell U.S. Growth Fund	0.80	%	0.00	%	0.32	%	0.00	%	1.12	%	(0.08	)%	1.04	%
Russell U.S. Value Fund	0.70	%	0.00	%	0.25	%	0.00	%	0.95	%	0.00	%	0.95	%
Russell U.S. Small & Mid Cap Fund	0.70	%	0.00	%	0.21	%	0.00	%	0.91	%	0.00	%	0.91	%
Russell International Developed Markets Fund	0.70	%	0.00	%	0.23	%	0.01	%	0.94	%	(0.05	)%	0.89	%
Russell Strategic Bond Fund	0.50	%	0.00	%	0.18	%	0.03	%	0.71	%	(0.05	)%	0.66	%
Russell Investment Grade Bond Fund	0.25	%	0.00	%	0.22	%	0.00	%	0.47	%	(0.05	)%	0.42	%

“Other Expenses” includes an administrative fee of 0.05% of average daily net assets.

For the Russell U.S. Quantitative Equity Fund, a portion of “Other Expenses” is attributable to interest expense and dividend expense from short sales as follows:


	Class I
Interest Expense from Short Sales	0.06	%
Dividend Expense from Short Sales	0.14	%
Remainder of other Expenses	0.20	%

Total Other Expenses	0.40	%

***

In addition to the above waivers, Russell Fund Services Company (“RFSC”) has contractually agreed to waive, at least through February 28, 2010, a portion of its transfer agency fees as follows:


Russell U.S. Core Equity- Class I	0.05	%
Russell U.S. Quantitative Equity- Class I	0.05	%
Russell U.S. Growth- Class I	0.05	%
Russell International Developed Markets- Class I	0.05	%
Russell Strategic Bond- Class I	0.05	%
Russell Investment Grade Bond- Class I	0.05	%

(notes continued on next page)

These foregoing waivers may not be terminated during the relevant period except at the Board’s discretion.

Effective October 1, 2008, the Russell Strategic Bond Fund’s direct Fund-level expenses will be capped at 0.51% through February 28, 2010. As a result, effective October 1, 2008, the Total Net Annual Fund Operating Expenses for Class I Shares of the Russell Strategic Bond Fund will be 0.59%. Direct Fund-level operating expenses do not include 12b-1 fees, shareholder services fees, transfer agency fees, the expenses of other investment companies in which the Russell Strategic Bond Fund invests which are borne indirectly by the Russell Strategic Bond Fund or extraordinary expenses.

Expenses Restatements. “Other Expenses,” “Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for all Funds have been restated to reflect higher or lower expenses expected to be incurred for the fiscal year ending October 31, 2008, and for the Russell U.S. Core Equity, Russell U.S. Quantitative Equity, Russell U.S. Small & Mid Cap, Russell International Developed Markets and Russell Strategic Bond Funds, to reflect the impact of increased assets under management resulting from the reorganizations described in the section entitled “Subsequent Events” in this Prospectus. For Shares of the Russell U.S. Core Equity, Russell U.S. Quantitative Equity, Russell U.S. Small & Mid Cap, Russell International Developed Markets, Russell Investment Grade Bond and Russell Strategic Bond Funds, “Other Expenses” has been restated not to reflect a 0.02% administrative fee waiver that was in effect for the fiscal year ending October, 31, 2007.

Acquired Fund Fees and Expenses. In addition to the advisory and administrative fees payable by the Funds to RIMCo and RFSC, each Fund that invests its cash reserves in the Russell Money Market Fund will bear indirectly a proportionate share of the Russell Money Market Fund’s operating expenses, which include the advisory and administrative fees that the Russell Money Market Fund pays to RIMCo and RFSC. The cash reserves for all Funds are invested in the Russell Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo and RFSC on the cash reserves invested in the Russell Money Market Fund is 0.10% (net of fee waivers and reimbursements).

“Other Expenses,” “Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for the Russell U.S. Core Equity, Russell U.S. Quantitative Equity, Russell U.S. Growth, Russell U.S. Value, Russell U.S. Small & Mid Cap and Russell Investment Grade Bond Funds have been restated to reflect each Fund’s proportionate share of the operating expenses of any other fund, including the Russell Money Market Fund, in which the Fund invests.

“Total Annual Fund Operating Expenses” and “Net Annual Fund Operating Expenses” for the Russell International Developed Markets and Russell Strategic Bond Fund have been restated to reflect the Fund’s proportionate share of the operating expenses of any other fund, including the Russell Money Market Fund, in which the Fund invests. These Funds’ proportionate share of these operating expenses is reflected under “Acquired Fund Fees and Expenses.”

Example

This example is intended to help you compare the cost of investing in each Fund with the cost of investing in other mutual funds.

Although your actual costs may be higher or lower, under these assumptions your costs would be:


	1 Year		3 Years		5 Years		10 Years
Class I Shares
Russell U.S. Core Equity Fund	$	72	$	235	$	413	$	926
Russell U.S. Quantitative Equity Fund		92		298		521		1,162
Russell U.S. Growth Fund		106		348		609		1,356
Russell U.S. Value Fund		97		303		526		1,167
Russell U.S. Small & Mid Cap Fund		93		291		505		1,120
Russell International Developed Markets Fund		91		295		516		1,151
Russell Strategic Bond Fund		67		222		390		878
Russell Investment Grade Bond Fund		43		146		258		588

MANAGEMENT OF THE FUNDS

The Funds’ administrator and transfer agent is Russell Fund Services Company (“RFSC”), a wholly-owned subsidiary of RIMCo.

RIMCo’s employees who manage the RIC Funds, oversee the money managers of the RIC Funds and have primary responsibility for the management of the RIC Funds (the “RIMCo Managers”) are:

•

Dennis Jensen, Portfolio Manager since February 2004. From 1998 to 2004 Mr. Jensen was a Research Analyst. Mr. Jensen has primary responsibility for the management of the Russell U.S. Value Fund.

•

James A. Jornlin, Portfolio Manager since July 1996. Mr. Jornlin has primary responsibility for the management of the Russell International Developed Markets Fund.

•

Stephen W. Skatrud, Portfolio Manager since December 2001. Mr. Skatrud has primary responsibility for the management of the Russell U.S. Core Equity Fund.

•

collateral for all Funds are invested in the Russell Money Market Fund. The aggregate annual rate of advisory and administrative fees payable to RIMCo and RFSC on the cash reserves and securities lending collateral invested in the Russell Money Market Fund is 0.10% (net of fee waivers and reimbursements). These fees are included in the Acquired Fund Fees and Expenses in the Funds’ Annual Fund Operating Expenses table above.

THE MONEY MANAGERS

Each Fund allocates most of its assets among the money managers listed under “Money Manager Information” at the end of this Prospectus. Assets not allocated to money managers are managed by RIMCo. RIMCo, as the Funds’ adviser, may change the allocation of a Fund’s assets at any time.

The Funds received an exemptive order from the Securities and Exchange Commission (SEC) that permits RIMCo to engage or terminate a money manager at any time, subject to the approval by the Funds’ Board, without a shareholder vote. A Fund notifies its shareholders within 60 days of when a money manager begins providing services. Each Fund selects money managers based primarily upon the research and recommendations of RIMCo. RIMCo, utilizing the money manager research provided by Russell, evaluates quantitatively and qualitatively the money managers’ investment style and process, performance record and portfolio characteristics in managing assets for specific asset classes, investment styles and strategies. Short-term investment performance, by itself, is not a controlling factor in the selection or termination of any money manager.

SUBSEQUENT EVENTS

The following information relates to the following reorganizations:


Acquired Fund		Acquiring Fund

Diversified Equity Fund	into	Russell U.S. Core Equity Fund

Quantitative Equity Fund	into	Russell U.S. Quantitative Equity Fund

Special Growth Fund	into	Russell U.S. Small & Mid Cap Fund

International Securities Fund	into	Russell International Developed Markets Fund

Multistrategy Bond Fund	into	Russell Strategic Bond Fund

At a meeting held on May 20, 2008, the Board of Trustees of RIC, upon the recommendation of RIMCo, approved a separate Agreement and Plan of Reorganization (each a “Plan”) with respect to the reorganization of each Acquired Fund into its corresponding Acquiring Fund (each a “Reorganization”). In connection with the meeting, the Board of Trustees received information from and presentations by RIMCo regarding each Reorganization. After evaluating the merits of each Reorganization as explained by RIMCo, the Board of Trustees of RIC determined that each Reorganization is in the best interests of Shareholders of the Acquired Fund and the Acquiring Fund.

In connection with the Reorganizations, you should note the following:

•

Each Reorganization will be effected without a vote of the Shareholders of the Acquired or Acquiring Funds, as permitted by RIC’s Amended and Restated Master Trust Agreement.

•

Each Reorganization is expected to qualify as a tax-free transaction.

•

The value of your investment will not change as a result of the Reorganizations.

Board Considerations

Effects of the Reorganizations on Shareholders

Investment Objectives, Strategies and Risks

RIMCo is the investment adviser for each Acquired Fund and each Acquiring Fund. The Money Managers for each Acquiring Fund are identical to the Money Managers for the corresponding Acquired Fund.

The investment objectives of the Acquired Funds and the corresponding Acquiring Funds are identical and are as follows:


Acquired Fund	Acquiring Fund	Investment Objective
Diversified Equity Fund*	Russell U.S. Core Equity Fund*	The Fund seeks to provide long term capital growth.

Quantitative Equity Fund*	Russell U.S. Quantitative Equity Fund**	The Fund seeks to provide long term capital growth.

Special Growth Fund*	Russell U.S. Small & Mid Cap Fund*	The Fund seeks to provide long term capital growth.

International Securities Fund*	Russell International Developed Markets Fund**	The Fund seeks to provide long term capital growth.

Multistrategy Bond Fund*	Russell Strategic Bond Fund*	The Fund seeks to provide current income, and as a secondary objective, capital appreciation.

These Funds’ investment objectives are non-fundamental and may be changed by the Board of Trustees without shareholder approval.

These Funds’ investment objectives are fundamental and may not be changed by the Board of Trustees without shareholder approval.

result of the change in names of the Acquiring Funds, effective September 2, 2008, some of the Funds will be subject to new or different 80% investment policies. A fund with a name suggesting a focus on a particular type of investment is required to invest at least 80% of fund assets in the type of investment suggested by the fund’s name. These policies, however, will not change the management of the Acquiring Funds.

Timing of Reorganizations

The Reorganizations are expected to occur on the dates set forth below. On September 2, 2008, prior to the Reorganizations, each Acquiring Fund changed its name.

Tax Consequences

INVESTMENT OBJECTIVE AND INVESTMENT STRATEGIES

Each of the following Funds has either a fundamental or a non-fundamental investment objective as noted below. A fundamental investment objective may only be changed with shareholder approval. A non-fundamental investment objective may be changed by the Board of that Fund without shareholder approval. If a Fund’s investment objective is changed, the Prospectus will be supplemented to reflect the new investment objective. To the extent that there is a material change in a Fund’s investment objective, shareholders will be provided with reasonable notice. The Board may, if it deems appropriate to do so, authorize the liquidation or merger of a Fund without shareholder approval. Unless Fund Shares are held in a tax-deferred account, a Fund liquidation may result in a taxable event for shareholders of the liquidated Fund.

RUSSELL U.S. CORE EQUITY FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

RUSSELL U.S. QUANTITATIVE EQUITY FUND

Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell U.S. Quantitative Equity Fund invests primarily in common stocks of medium and large capitalization companies which are predominantly U.S. based. While market capitalization changes over

time and there is not one universally accepted definition of the lines between large, medium and small capitalization companies, the Fund defines large and medium capitalization stocks as stocks of those companies represented by the Russell 1000^® Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $468.5 billion to $2.5 billion. The market capitalization of these companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund may invest in companies not included within the Russell 1000^® Index.

Short sales are transactions in which the Fund sells a security it does not own in anticipation of a decline in the market value of that security. The Fund borrows the security and sells it to the buyer. The Fund then is obligated to replace the security borrowed by purchasing the security at its market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. The Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which the Fund must return the borrowed security. The Fund will realize a gain if the security declines in price between those dates. This result is the opposite of what one would expect from a cash purchase of a long position in a security. The Fund may also make short sales “against the box.” In this type of short sale, at the time of the sale, the Fund owns or has the immediate and unconditional right to acquire the identical security at no additional cost. The Fund

currently does not intend to make a short sale if, after giving effect to such sale, the market value of all securities sold short exceeds 30% of the value of its total assets. Although short selling implies the use of leverage, the Fund maintains a special custody account that mitigates the leverage effect in that the short sales are fully collateralized.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

RUSSELL U.S. GROWTH FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

and there is not one universally accepted definition of the lines between large, medium, small and micro capitalization companies. The Fund defines large and medium capitalization stocks as stocks of those companies represented by the Russell 1000^® Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $468.5 billion to $2.5 billion. The Fund defines small capitalization stocks as stocks of those companies represented by the Russell 2000^® Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $2.5 billion to $261.8 million. The Fund considers micro capitalization stocks as stocks of those companies represented by the Russell Microcap™ Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell Indexes, the market capitalization of these companies ranged from $711.4 million to $78.6 million. The market capitalization of these large, medium, small and micro capitalization companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund may invest in companies not included within the Russell 1000^® Index, Russell 2000^® Index or Russell Microcap™ Index.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

RUSSELL U.S. VALUE FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

another. While specific stock selection criteria are unique to each manager, each manager purchases stocks of companies deemed to be undervalued in the market. Fund assets not allocated to money managers are managed by RIMCo.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

RUSSELL U.S. SMALL & MID CAP FUND

Non-Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Russell U.S. Small & Mid Cap Fund invests primarily in common stocks of small and medium capitalization companies most of which are U.S. based. While market capitalization changes over time

and there is not one universally accepted definition of the lines between large, medium and small capitalization, the Fund defines medium and small capitalization stocks as stocks of those companies represented by the Russell 2500™ Index. On May 31, 2007, the day on which capitalization data was used for the annual reconstitution of the Russell indexes, the market capitalization of these companies ranged from approximately $6.2 billion to $261.8 million. The market capitalization of these companies will change with market conditions and these capitalization ranges may vary significantly between an index reconstitution and at the time of the next index reconstitution. The Fund’s investments may include companies that have been publicly traded for less than five years and smaller companies, including companies not listed in the Russell 2500™ Index.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

RUSSELL INTERNATIONAL DEVELOPED MARKETS FUND

Fundamental Investment Objective

Seeks to provide long term capital growth.

Principal Investment Strategies

The Fund’s investments span most of the developed nations of the world to maintain a high degree of diversification among countries and currencies. The distinction between developed markets and emerging markets is generally determined by measures of economic wealth and ability to invest in markets. Providers of global market indices generally use economic criteria and classifications and market criteria from the World Bank in determining a market’s economic development status. However, there are subtle differences in which of these criteria or classifications may be used by a provider and how such criteria or classification are applied. As such, some markets may be classified as developed by some and emerging by others and, at times, some markets may be classified as both developed and emerging. For example, some providers currently classify South Korea and Israel as both developed and emerging markets. Additionally, the categorization of a market may change over time.

The Fund employs a “multi-style, multi-manager” approach whereby portions of the Fund are allocated to different money managers who employ distinct investment styles. Fund assets not allocated to money managers are managed by RIMCo. The Fund uses the following principal investment styles intended to complement one another:

•

Growth Style emphasizes investments in equity securities of companies with above-average earnings growth prospects.

•

Market-Oriented Style emphasizes investments in companies from the broad equity market rather than focusing on the growth or value segments of the market.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

RUSSELL STRATEGIC BOND FUND

Non-Fundamental Investment Objective

Seeks to provide current income, and as a secondary objective, capital appreciation.

Principal Investment Strategies

bond price’s sensitivity to a change in interest rates. In general, as interest rates rise, the value of the bonds held in the Fund will tend to decline, and, as interest rates fall, the value of the bonds held in the Fund will tend to rise. Bonds with longer durations tend to be more sensitive to changes in interest rates than those with shorter durations.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

The Fund, like any mutual fund, maintains cash reserves, (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses). Cash reserves are invested in short-term investments, including the Russell Money Market Fund. In addition to investing in such short-term investments, the Fund may pursue its strategy to be fully invested by purchasing fixed income securities and/or derivatives to expose the Fund’s cash reserves to changes in interest rates.

RUSSELL INVESTMENT GRADE BOND FUND

Fundamental Investment Objective

Seeks to provide current income and the preservation of capital.

Principal Investment Strategies

borrowed and to generally pay interest. The Fund will invest principally in securities of “investment grade” quality at the time of purchase, meaning either that a nationally recognized statistical rating organization (for example, Moody’s Investor Service, Inc., Standard & Poor’s Rating Service, or Fitch Investors Service, Inc.) has rated the securities Baa3 or BBB- (or the equivalent) or better, or a Fund’s money manager has determined the securities to be of comparable quality.

The Fund invests in securities of issuers in a variety of sectors of the fixed-income market. For example, the money managers may identify sectors of the fixed-income market that they believe are undervalued and focus their investments in those sectors. These sectors will differ over time. To a lesser extent, the Fund may attempt to anticipate shifts in interest rates and hold securities that the Fund expects to perform well in relation to market indexes as a result of such shifts. However, a portion of the Fund’s assets may be allocated to money managers who focus specifically on security selection rather than sector rotation and interest rate strategies.

The Fund invests in certain types of derivative instruments. The Fund may purchase and sell futures contracts, including interest rate, foreign currency and Treasury futures, and enter into options, when issued transactions (also called forward commitments), forward foreign currency contracts, swap agreements or swaptions as a substitute for holding securities directly, for hedging purposes, to take a net short position in certain markets, or to adjust the interest rate sensitivity and duration of the Fund’s portfolio. The Fund may buy or sell credit default swaps or other credit derivatives as an alternative to buying or selling the debt securities themselves or otherwise to increase the Fund’s total return. The Fund may invest in STRIPS (Separate Trading of Registered Interest and Principal of Securities). STRIPS are created by separating the interest and the principal components of an outstanding corporate, U.S. Treasury or agency note or bond and selling them as individual securities.

The duration of the Fund’s portfolio typically ranges within 10% of the duration of the Lehman Brothers Aggregate Bond Index, which was 4.5 years as of December 31, 2007, but may vary up to 25% from the Index’s duration. The Fund has no restrictions on individual security duration. Duration is a measure of a bond price’s sensitivity to a change in interest rates. In general, as interest rates rise, the value of the bonds held in the Fund will tend to decline, and, as interest rates fall, the value of the bonds held in the Fund will tend to rise. Bonds with longer durations tend to be more sensitive to changes in interest rates than those with shorter durations.

A portion of the Fund’s net assets may be “illiquid” securities (i.e., securities that do not have a readily available market or that are subject to resale restrictions).

The Fund employs multiple money managers, each with its own investment style. When determining how to allocate its assets among money managers, the Fund considers a variety of factors. These factors

include a money manager’s investment style, investment approach, investment substyle and expected return potential of a money manager relative to its assigned benchmark, as well as the characteristics of the money manager’s typical investment portfolio. These characteristics include portfolio biases, magnitude of sector shifts and duration movements. The Fund also considers the manner in which money managers’ historical and expected investment returns correlate with one another. Fund assets not allocated to money managers are managed by RIMCo.

The Fund intends to be fully invested at all times.

Non-Principal Investment Strategies

The Fund, like any mutual fund, maintains cash reserves, (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses). Cash reserves are invested in short-term investments, including the Russell Money Market Fund. In addition to investing in such short-term investments, the Fund may pursue its strategy to be fully invested by purchasing fixed income securities and/or derivatives to expose the Fund’s cash reserves to changes in interest rates.

RISKS

· = Principal Risk

^¡ = Non-Principal Risk

Russell
U.S. Core
Equity

Russell U.S.
Quantitative
Equity

Russell
U.S.
Growth

Russell
U.S.
Value

Russell
U.S. Small
& Mid Cap

Russell
International
Developed
Markets

Russell
Strategic
Bond

Russell
Investment
Grade
Bond

RISKS

Multi-Manager Approach

Security Selection and Market Risk

“Select Holdings” Strategy

Equity Securities

Common Stocks

Value Stocks

Growth Stocks

Market-Oriented Investments

Quantitative Investing

Securities of Small and Micro Capitalization Companies

Preferred Stocks

Fixed-Income Securities

Non-Investment Grade Fixed-Income Securities (High-Yield or “Junk Bonds”)

Government Issued or Guaranteed Securities, U.S. Government Securities

Municipal Obligations

^¡

Mortgage or Asset Backed Securities

Credit and Liquidity Enhancements

Repurchase Agreements

^¡

International Securities

Non-U.S. Equity Securities

Non-U.S. Debt Securities

Emerging Markets Debt

Brady Bonds

Emerging Market Countries

Instruments of U.S. and Foreign Banks and Foreign Corporations

Currency Risk

Synthetic Foreign Equity Securities

^¡

Equity Linked Notes

^¡

Derivatives (Futures Contracts, Options, Forwards and Swaps)

^¡

Forward Currency Contracts

Leveraging Risk

Short Sales

Real Estate Securities

^¡

REITs

^¡

Depositary Receipts

Illiquid Securities

^¡

Exposing Cash Reserves to Appropriate Markets

^¡

Securities Lending

^¡

Funds of Funds Investment Risk

^¡

Includes small-cap risk only

In order to determine which risks are principal or non-principal risks for a Fund, please refer to the table at the beginning of the Risks section.

Multi-Manager Approach

Security Selection and Market Risk

•

“Select Holdings” Strategy

The “select holdings” strategy amplifies a Fund’s security selection risk and potential underperformance.

Equity Securities

•

Common Stocks

•

Value Stocks

•

Growth Stocks

•

Market-Oriented Investments

Market-oriented investments are subject to the risks of common stocks, as well as the risks associated with growth and value stocks.

•

Quantitative Investing

•

Securities of Small and Micro Capitalization Companies

Investments in securities of small capitalization companies are subject to the risks of common stocks. Investments in small and micro capitalization companies may involve greater risks because

these companies generally have a limited track record. Small and micro capitalization companies often have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. These risks may be even more pronounced for micro capitalization companies as compared to small capitalization companies. Micro capitalization company stocks are also more likely to suffer from significant diminished market liquidity. As a result of these factors, the performance of small and micro capitalization companies can be more volatile, which may increase the volatility of a Fund’s portfolio.

•

Preferred Stocks

Fixed-Income Securities

•

Non-Investment Grade Fixed-Income Securities (High-Yield or “Junk Bonds”)

•

Adverse changes in general economic conditions and in the industries in which their issuers are engaged,

•

Changes in the financial condition of their issuers and

•

Price fluctuations in response to changes in interest rates.

As a result, issuers of lower rated debt securities are more likely than other issuers to miss principal and interest payments or to default which could result in a loss to a Fund.

•

Government Issued or Guaranteed Securities, U.S. Government Securities

•

Municipal Obligations

•

Mortgage-Backed Securities

higher or lower than the current yield of a Fund’s portfolio at the time the Fund receives the payments for reinvestment. MBS may have less potential for capital appreciation than comparable fixed income securities due to the likelihood of increased prepayments of mortgages as interest rates decline. If a Fund buys MBS at a premium, mortgage foreclosures and prepayments of principal by mortgagors (which may be made at any time without penalty) may result in some loss of the Fund’s principal investment to the extent of the premium paid. The value of MBS may also change due to shifts in the market’s perception of issuers. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole. Non-governmental MBS may offer higher yields than those issued by government entities, but also may be subject to greater price changes than governmental issues.

Through its investments in MBS, including those that are issued by private issuers, a Fund may have exposure to subprime loans as well as to the mortgage and credit markets generally. Private issuers include commercial banks, savings associations, mortgage companies, investment banking firms, finance companies and special purpose finance entities (called special purpose vehicles or SPVs) and other entities that acquire and package mortgage loans for resale as MBS. Unlike MBS issued or guaranteed by the U.S. government or one of its sponsored entities, MBS issued by private issuers do not have a government or government-sponsored entity guarantee, but may have credit enhancements provided by external entities such as banks or financial institutions or achieved through the structuring of the transaction itself. Examples of such credit support arising out of the structure of the transaction include the issue of senior and subordinated securities (e.g., the issuance of securities by an SPV in multiple classes or “tranches,” with one or more classes being senior to other subordinated classes as to the payment of principal and interest, with the result that defaults on the underlying mortgage loans are borne first by the holders of the subordinated class); creation of “reserve funds” (in which case cash or investments, sometimes funded from a portion of the payments on the underlying mortgage loans, are held in reserve against future losses); and “overcollateralization” (in which case the scheduled payments on, or the principal amount of, the underlying mortgage loans exceeds that required to make payment of the securities and pay any servicing or other fees). However, there can be no guarantee that credit enhancements, if any, will be sufficient to prevent losses in the event of defaults on the underlying mortgage loans. In addition, MBS that are issued by private issuers are not subject to the underwriting requirements for the underlying mortgages that are applicable to those MBS that have a government or government-sponsored entity guarantee. As a result, the mortgage loans underlying private MBS may, and frequently do, have less favorable collateral, credit risk or other underwriting characteristics than government or government-sponsored MBS and have wider variances in a number of terms including interest rate, term, size, purpose and borrower characteristics. Privately issued pools more frequently include second mortgages, high loan-to-value mortgages and manufactured housing loans. The coupon rates and maturities of the underlying mortgage loans in a private-label MBS pool may vary to a greater extent than those included in a government guaranteed pool, and the pool may include subprime mortgage loans. Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their loans. For these reasons, the loans underlying these securities have had in many cases higher default rates than those loans that meet government underwriting requirements. The risk of non-payment is greater for MBS that are backed by mortgage pools that contain subprime loans, but a level of risk exists for all loans. Privately issued MBS are not traded on an exchange and there may be a limited market for the securities, especially when there is a perceived weakness in the mortgage and real estate market sectors. Without an active trading market, MBS held in a Fund’s portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans.

•

Asset-Backed Securities

categories: captive auto, diversified, retail and consumer loans, captive equipment and business, business trade receivables, nuclear fuel and capital and mortgage lending. Asset-backed securities (other than MBS) present certain risks that are not presented by MBS. Primarily, these securities may not have the benefit of any security interest in the related assets. Credit card receivables are generally unsecured and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owed on the credit cards, thereby reducing the balance due. There is the possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make payments, the securities may contain elements of credit support which fall into two categories: (i) liquidity protection, and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets. Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses results from payment of the insurance obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. The Funds will not pay any additional or separate fees for credit support. The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets. Delinquency or loss in excess of that anticipated or failure of the credit support could adversely affect the return on an investment in such a security. The availability of asset-backed securities may be affected by legislative or regulatory developments. It is possible that such developments may require the Funds to dispose of any then existing holdings of such securities.

•

Credit and Liquidity Enhancements

•

Repurchase Agreements

International Securities

securities settlement procedures for a Fund’s portfolio securities. Investments in foreign countries could be affected by potential difficulties in enforcing contractual obligations and could be subject to extended settlement periods or restrictions affecting the prompt return of capital to the U.S.

•

Non-U.S. Equity Securities

•

Non-U.S. Debt Securities

•

Emerging Markets Debt

•

Brady Bonds

•

Emerging Market Countries

•

Instruments of U.S. and Foreign Banks and Foreign Corporations

•

Currency Risk

•

Synthetic Foreign Equity Securities (also referred to as International Warrants, Local Access Products, Participation Notes or Low Exercise Price Warrants)

•

Equity Linked Notes

Derivatives (Futures Contracts, Options, Forwards and Swaps)

Forward Currency Contracts

Leveraging Risk

Short Sales

Real Estate Securities

•

REITs

Depositary Receipts

Depositary receipts are securities traded on a local stock exchange that represent interests in securities issued by a foreign publicly-listed company. Depositary receipts have the same currency and economic risks as the underlying shares they represent. They are affected by the risks associated with the underlying non-U.S. securities, such as changes in political or economic conditions of other countries and changes in the exchange rates of foreign currencies. The value of depositary receipts will rise and fall in response to the activities of the company that issued the securities represented by the depositary receipts, general market conditions and/ or economic conditions. Also, if there is a rise in demand for the underlying security and it becomes less available to the market, the price of the depositary receipt may rise, causing the Fund to pay a premium in order to obtain the desired depositary receipt. Conversely, changes in foreign market conditions or access to the underlying securities could result in a decline in the value of the depositary receipt.

Illiquid Securities

Exposing Cash Reserves to Appropriate Markets

Securities Lending

securities, the risk that return of loaned securities could be delayed and could interfere with portfolio management decisions and the risk that any efforts to recall the securities for purposes of voting may not be effective.

Funds of Funds Investment Risk

PORTFOLIO TURNOVER

PORTFOLIO DISCLOSURE

A description of the Funds’ policies and procedures with respect to the disclosure of each Fund’s portfolio securities is available in the Funds’ Statement of Additional Information.

DIVIDENDS AND DISTRIBUTIONS

Each Fund distributes substantially all of its net investment income and net capital gains to shareholders each year.

Income Dividends


Declared	Payable	Funds
Quarterly	April, July, October and December	Russell U.S. Core Equity, Russell U.S. Quantitative Equity, Russell U.S. Value, Russell Strategic Bond* and Russell Investment Grade Bond Funds

Annually	Mid-December	Russell U.S. Growth, Russell U.S. Small & Mid Cap and Russell International Developed Markets Funds

Effective October 1, 2008, the Russell Strategic Bond Fund will declare and pay dividends on a monthly basis.

An additional distribution of net investment income may be declared and paid by a Fund if required to avoid the imposition of a federal tax on the Fund.

Capital Gains Distributions

Buying a Dividend

Automatic Reinvestment

Special Dividend

In connection with the Reorganizations discussed in the section entitled “Subsequent Events,” the Russell U.S. Quantitative Equity and the Russell Strategic Bond Funds will declare and pay to their shareholders of record one or more dividends and/or other distributions so that it will have distributed all of its investment company taxable income (computed without regard to any deduction for dividends paid), if any, for the current taxable year through the closing date of the respective Reorganization. The record date for this special dividend is September 9, 2008, based on Fund records as of the close of business on September 8, 2008.

TAXES

a portion of Fund distributions received by a non-U.S. investor may, however, be exempt from U.S. withholding tax to the extent attributable to U.S. source interest income and short-term capital gains earned by the Fund. Also, for Fund taxable years beginning on or after January 1, 2009 (subject to a possible temporary extension), U.S. estate taxes may not apply to that portion of Shares held by a non-U.S. investor that is attributable to Fund assets consisting of certain debt obligations or other property treated as not within the United States for U.S. estate tax purposes. You should consult your tax professional about federal, state, local or foreign tax consequences of holding Shares.

If you are a corporate investor, a portion of the dividends from net investment income paid by Russell U.S. Core Equity Fund, Russell U.S. Quantitative Equity Fund, Russell U.S. Growth Fund, Russell U.S. Value Fund or Russell U.S. Small & Mid Cap Fund will generally qualify, in part, for the corporate dividends-received deduction. However, the portion of the dividends so qualified depends on the aggregate qualifying dividend income received by each Fund from domestic (U.S.) sources. Certain holding period and debt financing restrictions may apply to corporate investors seeking to claim the deduction. You should consult your tax professional with respect to the applicability of these rules.

Additional information on these and other tax matters relating to each Fund and its shareholders is included in the section entitled “Taxes” in the Funds’ Statement of Additional Information.

HOW NET ASSET VALUE IS DETERMINED

Net Asset Value Per Share

Valuation of Portfolio Securities

Ordinarily, the Funds value each portfolio security based on market quotations provided by Pricing Services or brokers (when permitted by the Market Value Procedures).

DISTRIBUTION AND SHAREHOLDER SERVICES ARRANGEMENTS AND PAYMENTS TO FINANCIAL INTERMEDIARIES

RIMCo, RFSC or the Funds’ Distributor may make cash payments, from its own resources, to key Financial Intermediaries (including those who may offer Fund Shares through specialized programs such as tax deferred retirement programs) in recognition of, or to pay a portion of costs related to, marketing, account consolidation, education, transaction processing and/or administrative services support. These compensation arrangements may vary by Financial Intermediary and may increase as the dollar value of Fund Shares held through a particular Financial Intermediary increases. Because these payments are not made by the Funds, these payments are not reflected in the fees and expenses listed in the annual fund operating expenses table.

Ask your Financial Intermediary for additional information as to what compensation, if any, it receives from the Funds, the Funds’ Distributor or RIMCo.

HOW TO PURCHASE SHARES

Class I Shares of each Fund may only be purchased by:

(1)

clients of Financial Intermediaries who charge an advisory fee, management fee, consulting fee, fee in lieu of brokerage commissions or other similar fee for their services for the shareholder account in which the Class I Shares are held or clients of Financial Intermediaries where the Financial Intermediary would typically charge such a fee but has determined to waive its fee in a particular instance as the result of a potential conflict of interest;

(2)

(3)

clients of Financial Intermediaries who are members of Russell Investments;

(4)

individuals pursuant to employee investment programs of Russell or its affiliates; or

(5)

current/retired registered representatives of broker-dealers having sales agreements with the Funds’ Distributor to sell Class I Shares of the Funds.

The Funds generally do not have the ability to enforce these limitations on access to Class I Shares. It is the sole responsibility of each Financial Intermediary to ensure that it only makes Class I Shares available to those categories of investors listed above that qualify for access to Class I Shares. However, the Funds will not knowingly sell Class I Shares to any investor not meeting one of the foregoing criteria.

Minimum Investment. For Class I Shares of the Funds, there is a $100,000 minimum initial investment for each account in each Fund.

If a Fund detects a pattern of trading that appears to be designed to evade the minimum initial investment requirement, the Fund reserves the right to close the account(s). Each Fund reserves the right to close any account invested in Class I Shares whose balance falls below $1,000 and to change the categories of investors eligible to purchase its Shares or the required minimum investment amounts. You may be eligible to purchase Shares if you do not meet the required initial minimum investment. You should consult your Financial Intermediary for details, which are summarized in the Funds’ Statement of Additional Information.

All purchases must be made in U.S. dollars. Checks and other negotiable bank drafts must be drawn on U.S. banks and made payable to “Russell Investment Company” or as otherwise instructed by your Financial Intermediary. Each Fund may reject purchase orders if a payment check does not clear the bank or payment does not arrive in proper form by the settlement date. Generally, the settlement date is the first business day following receipt by the Funds of your order. However, Financial Intermediaries settling through National Securities Clearing Corporation, or in limited circumstances with prior arrangement with the Funds, may settle trades on the third business day following receipt by the Funds of your order. If you fail to properly settle a purchase, you will be responsible for any resulting loss to the Funds (i.e., any difference in net asset value between the trade date and the settlement date). In the case of an insufficient funds check, an

overdraft charge may also be applied. Third party checks are generally not accepted, however exceptions may be made by prior special arrangements with certain Financial Intermediaries. Cash, checks drawn on credit card accounts, cashiers checks, money orders, traveler checks and other cash equivalents will not be accepted.

Offering Dates and Times

Orders must be received by a Fund or an authorized Fund agent prior to 4:00 p.m. Eastern Time or the close of the NYSE, whichever is earlier, to be processed at the net asset value calculated on that day. Purchases can be made on any day when Shares are offered. Certain authorized Fund agents are contractually designated by Russell Financial Services, Inc. or its affiliates to receive and accept orders for the purchase and redemption of Shares of the Funds. Some, but not all, Financial Intermediaries are authorized Fund agents, and some, but not all, authorized Fund agents are Financial Intermediaries.

Order and Payment Procedures

Automated Investment Program

If you invest through certain Financial Intermediaries, you may choose to make regular investments (with a minimum of $25 per Fund) in an established account on a monthly, quarterly, semiannual, or annual basis by automatic electronic funds transfer from an account held within U.S. financial institutions that are members of the Federal Reserve System. Depending on the capabilities of your Financial Intermediary, a separate transfer may be made for each Fund in which you purchase Shares. You may change the amount or stop the automatic purchase at any time. Contact your Financial Intermediary for further information on this program.

EXCHANGE PRIVILEGE

How to Exchange Shares

Exchanges Between Funds. Through your Financial Intermediary you may exchange Shares you own in one Fund for Shares of any other Fund offered by this Prospectus on the basis of the current net asset value per share at the time of the exchange. Shares of a Fund offered by this Prospectus may only be exchanged for Shares of a RIC Fund offered through another Prospectus under certain conditions and only in states where the exchange may be legally made. For additional information, including Prospectuses for other RIC Funds, contact your Financial Intermediary.

Exchanges Between Classes. Through your Financial Intermediary, you may exchange Shares you own of a Fund for Shares of any other Class of Shares of that Fund on the basis of the current net asset value per share at the time of the exchange if you meet any applicable initial minimum investment or investor eligibility requirements stated in the Prospectus for that Class of Shares. Shares of a Fund offered by the Funds may only be exchanged for shares of a RIC Fund offered through another Prospectus under certain conditions and only in states where the exchange may be legally made. For additional information, including Prospectuses for other RIC Funds, contact your Financial Intermediary.

Systematic Exchange Program

If you invest through certain Financial Intermediaries, the Funds offer a systematic exchange program which allows you to redeem Shares from one or more Funds and purchase Shares of certain other RIC Funds. Systematic exchanges may be established to occur on a monthly, quarterly, semiannual or annual basis. If you would like to establish a systematic exchange program, please contact your Financial Intermediary.

RIGHT TO REJECT OR RESTRICT

PURCHASE AND EXCHANGE ORDERS

For the Funds, the Board has adopted frequent trading policies and procedures which are described below. The Funds will apply these policies uniformly.

The Funds discourage frequent purchases and redemptions of Fund Shares by Fund shareholders. The Funds do not accommodate frequent purchases and redemptions of Fund Shares by Fund shareholders.

Frequent Trading Policies and Limitations on Trading Activity

The Funds, through their agents, will use their best efforts to exercise the Funds’ right to restrict or reject purchase and exchange orders as described above.

This policy will not apply to

•

Money Market Funds. The Board of Trustees believes that it is unnecessary for any money market fund to have frequent trading policies because these funds (i) may be used as short term investments, and (ii) intend to maintain a stable net asset value, which limits the opportunities for price arbitrage.

•

Scheduled rebalancing of asset allocated strategies.

•

Systematic purchase or redemption programs, if available.

This policy will not affect any shareholder’s redemption rights.

Risks of Frequent Trading

Limitations on the Ability to Detect and Curtail Frequent Trading

Any Fund may make exceptions to this policy, if in its judgment, the transaction does not constitute improper trading or other trading activity that may be harmful to it.

HOW TO REDEEM SHARES

Shares may be redeemed through your Financial Intermediary on any business day of the Funds (a day on which the NYSE is open for regular trading). Redemption requests are processed at the next net asset value per share calculated after a Fund receives an order in proper form as determined by your Financial Intermediary. The Funds will close early if the NYSE closes early. Any redemption requests received following an early closure will be processed on the following business day at the next calculated net asset value per share. Shares recently purchased by check may not be available for redemption for 15 days following the purchase or until the check clears, whichever occurs first, to assure that a Fund has received payment for your purchase.

Redemption Dates and Times

Redemption requests must be received by the Fund or an authorized Fund agent prior to 4:00 p.m. Eastern Time or the close of the NYSE, whichever is earlier, to be processed at the net asset value calculated on that day. Please contact your Financial Intermediary for instructions on how to place redemption requests. Because Financial Intermediaries’ processing times may vary, please ask your Financial Intermediary when your account will be debited.

Systematic Withdrawal Program

If you invest through certain Financial Intermediaries, the Funds offer a systematic withdrawal program which allows you to redeem your Shares and receive regular payments from your account on a monthly, quarterly, semiannual or annual basis. If you would like to establish a systematic withdrawal program, please contact your Financial Intermediary. You will generally receive your payment by the end of the month in which a payment is scheduled. When you redeem your Shares under a systematic withdrawal program, it may be a taxable transaction.

You may discontinue the systematic withdrawal program, or change the amount and timing of withdrawal payments by contacting your Financial Intermediary.

PAYMENT OF REDEMPTION PROCEEDS

fee to cover the cost of sending a wire transfer for redemptions, and your bank may charge an additional fee to receive the wire. The Funds will always charge a fee when sending an international wire transfer. The Funds reserve the right to charge a fee when sending a domestic wire transfer for redemptions. The Funds do not charge for EFT though your bank may charge a fee to receive the EFT. Wire transfers and EFTs can be sent to U.S. financial institutions that are members of the Federal Reserve System.

OTHER INFORMATION ABOUT SHARE TRANSACTIONS

Written Instructions

The Funds require that written instructions be in proper form and reserve the right to reject any written instructions that are not in proper form. Your Financial Intermediary will assist you in preparing and submitting transaction instructions to the Funds to insure proper form. Generally, your instructions must include:

•

The Fund name and account number

•

Details related to the transaction including type and amount

•

Signatures of all owners exactly as registered on the account

•

Any supporting legal documentation that may be required

Responsibility for Fraud

Signature Guarantee

Each Fund reserves the right to require a signature guarantee for any request related to your account including, but not limited to, requests for transactions or address maintenance. A signature guarantee verifies the authenticity of your signature. You should be able to obtain a signature guarantee from a bank, broker, credit union, savings association, clearing agency, or securities exchange or association, but not a notary public. If a signature guarantee is required, the Funds will only accept STAMP2000 Medallion Imprints. Contact your Financial Intermediary for assistance in obtaining a signature guarantee.

In-Kind Exchange of Securities

Redemption In-Kind

cause you to realize losses on the security if the security is sold at a price lower than that at which it had been valued. If you receive an in-kind distribution of portfolio securities, and choose to sell them, you will incur brokerage charges and continue to be subject to tax consequences and market risk pending any sale.

Uncashed Checks

Please make sure you promptly cash checks issued to you by the Funds. If you do not cash a dividend, distribution, or redemption check, the Funds will act to protect themselves and you. This may include restricting certain activities in your account until the Funds are sure that they have a valid address for you. After 180 days, the Funds will no longer honor the issued check and, after attempts to locate you, the Funds will follow governing escheatment regulations in disposition of check proceeds. No interest will accrue on amounts represented by uncashed checks.

Registration of Fund Accounts

FINANCIAL HIGHLIGHTS

The information in the following tables represents the Financial Highlights for the Funds’ Class I Shares for the periods shown.

Russell U.S. Core Equity Fund—Class I Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	33.49		$	30.79		$	27.54		$	25.72		$	21.44

Income From Operations
Net investment income (loss) (a)		.37			.32			.32			.23			.21
Net realized and unrealized gain (loss)		6.10			3.96			3.24			1.82			4.26

Total income from operations		6.47			4.28			3.56			2.05			4.47

Distributions
From net investment income		(.37	)		(.31	)		(.31	)		(.23	)		(.19	)
From net realized gain		(1.51	)		(1.27	)		—			—			—

Total distributions		(1.88	)		(1.58	)		(.31	)		(.23	)		(.19	)

Net Asset Value, End of Period	$	38.08		$	33.49		$	30.79		$	27.54		$	25.72

Total Return (%)		20.17			14.34			12.97			7.99			21.02

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	1,396,706		$	1,095,931		$	825,172		$	697,537		$	580,055
Ratios to average net assets (%):
Operating expenses, net (b)		.68			.71			.69			.71			.75
Operating expenses, gross		.70			.73			.73			.72			.75
Net investment income (loss) (b)		1.07			1.01			1.06			.84			.92

Portfolio turnover rate (%)		112.52			98.17			109.71			129.94			115.73

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

Russell U.S. Quantitative Equity Fund—Class I Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	39.36		$	35.20		$	32.32		$	30.10		$	24.89

Income From Operations
Net investment income (loss) (a)		.40			.44			.44			.30			.27
Net realized and unrealized gain (loss)		3.81			5.03			2.88			2.24			5.19

Total income from operations		4.21			5.47			3.32			2.54			5.46

Distributions
From net investment income		(.43	)		(.44	)		(.44	)		(.32	)		(.25	)
From net realized gain		(2.84	)		(.87	)		—			—			—

Total distributions		(3.27	)		(1.31	)		(.44	)		(.32	)		(.25	)

Net Asset Value, End of Period	$	40.30		$	39.36		$	35.20		$	32.32		$	30.10

Total Return (%)		11.40			15.87			10.30			8.46			22.04

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	1,369,379		$	1,201,844		$	1,009,002		$	1,018,806		$	822,548
Ratios to average net assets (%):
Operating expenses, net (b)		.82	(d)		.70	(c)		.66			.69			.72
Operating expenses, gross		.84			.72			.69			.69			.72
Net investment income (loss) (b)		1.04			1.18			1.26			.94			1.02

Portfolio turnover rate (%)		100.85			106.45			117.34			102.51			114.72

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

(c)

The annualized net expense ratio is .69% not including the dividend expense from short sales.

(d)

The annualized net expense ratio is .68% not including the dividend expense from short sales.

Russell U.S. Growth Fund—Class I Shares


	Fiscal Year Ended October 31,
	2007		2006			2005		2004			2003
Net Asset Value, Beginning of Period	$	8.44	$	7.91		$	7.19	$	7.10		$	5.35

Income From Operations
Net investment income (loss) (a)		.01		.01			.01		(.02	)		(.02	)
Net realized and unrealized gain (loss)		1.53		.52			.71		.11			1.77

Total income from operations		1.54		.53			.72		.09			1.75

Distributions
From net investment income		—		—	(b)		—		—			—

Net Asset Value, End of Period	$	9.98	$	8.44		$	7.91	$	7.19		$	7.10

Total Return (%)		18.25		6.75			10.17		1.13			32.71

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	113,989	$	90,953		$	112,112	$	60,006		$	32,003
Ratios to average net assets (%):
Operating expenses, net (c)		1.00		.95			.92		.95			.93
Operating expenses, gross		1.06		1.13			1.08		1.20			1.58
Net investment income (loss) (c)		.09		.07			.12		(.23	)		(.31	)

Portfolio turnover rate (%)		138.41		148.35			127.68		134.00			149.76

(a)

Average month-end shares outstanding were used for this calculation.

(b)

Less than $.01 per share.

(c)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

Russell U.S. Value Fund—Class I Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	12.69		$	11.46		$	10.30		$	9.07		$	7.46

Income From Operations
Net investment income (loss) (a)		.16			.15			.13			.10			.08
Net realized and unrealized gain (loss)		1.18			1.87			1.17			1.22			1.61

Total income from operations		1.34			2.02			1.30			1.32			1.69

Distributions
From net investment income		(.15	)		(.15	)		(.13	)		(.09	)		(.08	)
From net realized gain		(.75	)		(.64	)		(.01	)		—			—

Total distributions		(.90	)		(.79	)		(.14	)		(.09	)		(.08	)

Net Asset Value, End of Period	$	13.13		$	12.69		$	11.46		$	10.30		$	9.07

Total Return (%)		10.97			18.47			12.63			14.77			22.60

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	139,538		$	131,494		$	135,759		$	102,397		$	74,600
Ratios to average net assets (%):
Operating expenses, net (b)		.94			.94			.86			.95			.90
Operating expenses, gross		.94			.94			.91			.95			1.23
Net investment income (loss) (b)		1.21			1.26			1.14			1.00			1.12

Portfolio turnover rate (%)		128.36			86.60			84.74			96.07			105.71

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

Russell U.S. Small & Mid Cap Fund—Class I Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	34.31		$	38.57		$	39.39		$	36.19		$	25.59

Income From Operations
Net investment income (loss) (a)		.12			.09			.04			.10			.06
Net realized and unrealized gain (loss)		4.60			5.79			4.45			3.15			10.66

Total income from operations		4.72			5.88			4.49			3.25			10.72

Distributions
From net investment income		(.04	)		(.09	)		(.12	)		(.05	)		(.12	)
From net realized gain		(7.01	)		(10.05	)		(5.19	)		—			—

Total distributions		(7.05	)		(10.14	)		(5.31	)		(.05	)		(.12	)

Net Asset Value, End of Period	$	31.98		$	34.31		$	38.57		$	39.39		$	36.19

Total Return (%)		16.21			18.17			11.77			8.98			42.08

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	480,645		$	471,745		$	496,716		$	674,280		$	606,333
Ratios to average net assets (%):
Operating expenses, net (b)		.93			.91			.87			.90			.94
Operating expenses, gross		.95			.94			.91			.90			.94
Net investment income (loss) (b)		.38			.27			.12			.27			.22

Portfolio turnover rate (%)		142.82			154.76			156.39			125.94			132.27

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

Russell International Developed Markets Fund—Class I Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	50.55		$	40.47		$	35.16		$	31.20		$	24.74

Income From Operations
Net investment income (loss) (a)		.95			1.00			.68			.46			.36
Net realized and unrealized gain (loss)		12.10			9.86			5.39			4.29			6.53

Total income from operations		13.05			10.86			6.07			4.75			6.89

Distributions
From net investment income		(1.53	)		(.78	)		(.76	)		(.79	)		(.43	)
From net realized gain		(5.06	)		—			—			—			—

Total distributions		(6.59	)		(.78	)		(.76	)		(.79	)		(.43	)

Net Asset Value, End of Period	$	57.01		$	50.55		$	40.47		$	35.16		$	31.20

Total Return (%)		28.75			27.17			17.48			15.47			28.37

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	1,792,063		$	1,420,218		$	1,127,303		$	915,469		$	597,650
Ratios to average net assets (%):
Operating expenses, net (b)		.91			.91			.90			.95			1.06
Operating expenses, gross		.93			.93			.93			.96			1.06
Net investment income (loss) (b)		1.87			2.15			1.76			1.36			1.38

Portfolio turnover rate (%)		108.46			83.09			80.36			81.19			79.40

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

Russell Strategic Bond Fund—Class I Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	10.46		$	10.43		$	10.69		$	10.65		$	10.09

Income From Operations
Net investment income (loss) (a)		.52			.47			.38			.30			.40
Net realized and unrealized gain (loss)		.02			.03			(.22	)		.32			.52

Total income from operations		.54			.50			.16			.62			.92

Distributions
From net investment income		(.49	)		(.44	)		(.34	)		(.40	)		(.36	)
From net realized gain		—			(.03	)		(.08	)		(.18	)		—

Total distributions		(.49	)		(.47	)		(.42	)		(.58	)		(.36	)

Net Asset Value, End of Period	$	10.51		$	10.46		$	10.43		$	10.69		$	10.65

Total Return (%)		5.27			4.95			1.65			5.99			9.27

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	1,415,575		$	744,559		$	560,896		$	461,966		$	297,726
Ratios to average net assets (%):
Operating expenses, net (b)		.67			.70			.69			.72			.78
Operating expenses, gross		.70			.73			.71			.72			.78
Net investment income (loss) (b)		4.97			4.51			3.55			2.85			3.83

Portfolio turnover rate (%)		697.71			270.24			197.66			195.68			266.11

(a)

Average month-end shares outstanding were used for this calculation.

(b)

May reflect amounts waived and/or reimbursed by RIMCo as the investment adviser and transfer agent, and for certain funds, custody credit arrangements.

Russell Investment Grade Bond Fund—Class I Shares


	Fiscal Year Ended October 31,
	2007			2006			2005			2004			2003
Net Asset Value, Beginning of Period	$	20.82		$	20.75		$	21.87		$	22.11		$	22.15

Income From Operations
Net investment income (loss) (a)		1.04			.97			.80			.68			.78
Net realized and unrealized gain (loss)		(.06	)		.05			(.61	)		.49			.35

Total income from operations		.98			1.02			.19			1.17			1.13

Distributions
From net investment income		(1.04	)		(.95	)		(.78	)		(.75	)		(.73	)
From net realized gain		—			—			(.53	)		(.66	)		(.44	)

Total distributions		(1.04	)		(.95	)		(1.31	)		(1.41	)		(1.17	)

Net Asset Value, End of Period	$	20.76		$	20.82		$	20.75		$	21.87		$	22.11

Total Return (%)		4.85			5.06			.88			5.52			5.26

Ratios/Supplemental Data:
Net Assets, end of period (in thousands)	$	689,651		$	829,914		$	788,808		$	752,229		$	639,846
Ratios to average net assets (%):
Operating expenses, net (b)		.40			.40			.38			.39			.41
Operating expenses, gross		.42			.42			.40			.40			.41
Net investment income (loss) (b)		4.99			4.70			3.76			3.15			3.50

Portfolio turnover rate (%)		198.79			125.38			201.90			153.79			184.29