Russell U.S. Small & Mid Cap Fund Enhanced blend of small-cap managers Class S September 30, 2008 About the fund In this fund, Russell chooses managers that invest using many different investment styles, from looking for companies they believe have rapidly growing earnings to ones that are undervalued. For example, a growth manager and a value manager each use distinct investment processes. One may maintain a concentrated portfolio of companies focusing on earnings growth momentum, resulting in higher risk relative to the benchmark. The other may use a quantitative process to pick stocks and manage the portfolio, which keeps its risk exposures close to the benchmark. When combined, all the managers within this fund provide a less volatile investment approach than offered by any single one of the underlying managers on a stand-alone basis. – Christopher Tessin Investment strategy   Seeks to provide long-term capital growth. Emphasis on small-cap stocks. Specialty fund offering additional diversification. Fund highlights   May provide lower risk than many small- and mid-cap funds by blending multiple managers with very different multiple managers with very different consistency. Blended exposure to multiple managers using growth and value styles. Managing money differently The Russell approach has been trusted for decades by many of the world's largest investors; our mutual funds allow you to employ that same approach. We identify investment managers we believe have exceptional capabilities, blend them to help manage risk through diversification, and constantly monitor them. Regardless of market conditions, Russell's investment approach remains constant. Allocation of fund assets     % Allocated   Year assigned Growth         Gould Investment Partners, LLC   9%   2004 Ranger Investment Management, L.P.   11%   2007 Tygh Capital Management, Inc.   20%   2005 Market-oriented         ClariVest Asset Management, LLC   10%   2006 PanAgora Asset Management, Inc.   10%   2006 Value         Delphi Management, Inc.   10%   1989 DePrince, Race & Zollo, Inc.   10%   2008 Jacobs Levy Equity Management, Inc.   12%   1995 Signia Capital Management, LLC   8%   2008 Money managers listed are current as of 09/02/08. Subject to the fund's Board approval, Russell has the right to engage or terminate a money manager at any time and without a shareholder vote, based on an exemptive order from the Securities and Exchange Commission. The investment strategies are the goals of the individual money managers; there is no assurance that the exact objective will always be met. Small capitalization (small cap) investments involve stocks of companies with smaller levels of market capitalization (generally less than $2 billion) than larger company stocks (large cap). Small cap investments are subject to considerable price fluctuations and are more volatile than large company stocks. Investors should consider the additional risks involved in small cap investments. Sector weightings   % of total equity Auto and Transportation Consumer Discretionary Consumer Staples Financial Services Health Care Integrated Oils Materials and Processing Other Energy Producer Durables Technology Utilities Miscellaneous   4.2 17.4 1.8 15.8 13.7 0.1 9.8 9.2 7.8 14.8 3.9 1.4 Due to rounding totals may not equal 100%. Top ten holdings   % of fund Illumina, Inc. Corrections Corp. of America Psychiatric Solutions, Inc. NICE Systems, Ltd. Affiliated Managers Group, Inc. Amphenol Corp. Waste Connections, Inc. URS Corp. Atwood Oceanics, Inc. MICROS Systems, Inc.   1.0 0.6 0.6 0.6 0.6 0.6 0.5 0.5 0.5 0.5     6.0 *The top ten holdings list does not reflect the investment of cash reserves and cash collateral received in securities lending transactions in one or more of RIC's money market funds. Performance review | as of September 30, 2008 Russell U.S. Small & Mid Cap Fund - Class S         Annualized returns QTR   YTD   1 yr   3 yrs   5 yrs   10 yrs   Since inception 12/28/81 -11.87   -21.14   -23.57   -0.82   6.09   7.83   11.17 Fund Fees and Expenses Annual Fund Operating Expenses Total Net 0.99% 0.99% Growth of $10,000 - class S shares Performance information is historical and does not guarantee future results. Investment return and principal value will fluctuate so that redeemed shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Current to the most recent month-end performance for Russell mutual funds is available by visiting: www.russell.com/us/fundperformance. Characteristics Total net assets   Net asset value $1.7 billion   $19.47     Cusip   Ticker Class A   782494546   RLACX Class C   782494538   RLECX Class E   782493274   REBEX Class I   782493209   REBSX Class S   782494520   RLESX Class Y   782493266   REBYX The fund offers other classes of shares with higher fees and expenses. These other classes may charge up to a 0.75% distribution fee and a 0.25% shareholder servicing fee which will result in a higher expense ratio and lower performance than that shown above. For a full description of other available classes, please see the prospectus. The fund first issued class S shares on September 2, 2008. The returns shown for class S shares prior to that date are the returns of the fund’s class I shares. Fund objectives, risks, charges and expenses should be carefully considered before investing. For a prospectus containing this and other important information call Russell at 1-866-676-7680 or go to the prospectus and reports page to download one. Please read the prospectus carefully before investing. On September 2, 2008, the name of the Equity II Fund changed to Russell U.S. Small & Mid Cap Fund. Fund performance is reported net of fund advisory and administrative fees, and gross of financial intermediary fees. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. For more information on Russell Funds, contact your investment professional or plan administrator for assistance. Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company. The Russell logo is a trademark and service mark of Russell Investments. Securities products and services offered through Russell Financial Services, Inc. (formerly Russell Fund Distributors, Inc.), member FINRA, part of Russell Investments. For information on the Financial Industry Regulatory Authority, go to www.finra.org. Copyright © Russell Investments 2007-2008. All rights reserved. First used October 2008. RFD 08-0676 Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.			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