Tax-Managed Mid & Small Cap Fund Tax-efficient management for mid-cap and smaller stocks Class S March 31, 2008 About the fund "Russell chooses managers that use many different investment styles based on our confidence in their stock-selection capabilities and the level of tax-efficiency of their approaches. For example, we may have a growth manager that selects higher quality growth companies, focusing on longer-term economic, geo-political and business trends. Another growth manager may focus on security selection with the belief that earnings expectations and momentum drive stock prices. One value manager may be selected for its strong value-based, bottom-up research, while another may focus on attractively priced value stocks with clear drivers of profit growth and price appreciation. We may also include a taxfocused, enhanced index manager that is expected to help harvest taxable losses to enhance post-tax returns. These managers' different approaches should reduce the overlap in holdings and the incidence of wash sales, as should the fact that all of the fund's managers are informed of sales." – Tereasa Gandhi Investment strategy   Seeks to provide long-term capital growth on an after-tax basis. Emphasis on mid- and small-capitalization stocks. Uses managers with tax-sensitive investment approaches. Equity exposure is through a passive, tax-friendly strategy that focuses on generating taxable losses to the fullest extent possible to offset potential taxable gains by managers with growth and value investment styles. Fund highlights   Provides broad exposure to small-cap stocks by blending managers that invest in diverse syles across the mid- and small-capitalization spectrum without the tax impact of a fund that buys and sells with no regard for taxes. Helps tax-sensitive investors by seeking to maximize after-tax returns. 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         Transamerica Investment Management, LLC   21%   2004 Turner Investment Partners Inc.   11%   2004 Market-oriented         Parametric Portfolio Associates LLC   30%   2004 Value         Chartwell Investment Partners   17%   2004 Netols Asset Management, Inc.   21%   2004 Money managers listed are current as of 03/31/2008. 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. Income from funds managed for tax efficiency may be subject to an alternative minimum tax and/or any applicable state and local taxes. 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   6.1 17.0 2.7 17.9 13.8 0.1 9.0 7.1 7.2 13.8 4.5 0.6 Due to rounding totals may not equal 100%. Top ten holdings   % of fund Strayer Education, Inc. Informatica Corp. NeuStar, Inc. Valueclick, Inc. Macrovision Corp. Tenneco, Inc. UTI Worldwide, Inc. Zebra Technologies Corp. Wabtec Corp. Nighthawk Radiology Holdings, Inc.   1.0 1.0 1.0 0.9 0.8 0.8 0.8 0.8 0.7 0.7     8.5 *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 March 31, 2008 Tax-Managed Mid & Small Cap Fund - Class S             Annualized returns     QTR   YTD   1 yr   3 yrs   5 yrs   Since inception 11/30/99 Return Before Taxes   -10.63   -10.63   -8.97   6.44   14.01   3.90 Pre-Liquidation After Tax Returns1,2   -10.63   -10.63   -10.22   5.88   13.65   3.70 Post-Liquidation After Tax Returns2,3   -6.91   -6.91   -4.24   5.51   12.31   3.37 Fund Fees and Expenses Annual Fund Operating Expenses Total Net 1.31% 1.26% Net annual operating expense ratio reflects the actual expenses expected to be borne by shareholders. The fund's adviser has contractually agreed to waive, for certain funds, at least until February 28, 2009, up to the full amount of its advisory fees and then to reimburse the fund for certain other direct fund-level expenses to the extent those expenses exceed a specified percentage of the average daily net assets of the fund for the period specified in the prospectus. Details of the waivers and reimbursements are in the current prospectus. 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 market value   Net asset value $252.08 million   $12.44     Class C   Class E   Class S Cusip   782478507   782478887   782478408 Ticker   RTSCX   RTSEX   RTSSX 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. 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. 1Return after taxes on distributions. If the fund has realized capital losses, the return after taxes on distributions and sale of fund shares may be higher than the return before taxes and the return after taxes on distributions. The calculation of return after taxes on distributions and sale of fund share 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. 2After-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 shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. 3Return after taxes on distributions and sales of fund shares. Returns after taxes on distributions may be the same as returns before taxes for the same period if there were no distributions for that period. 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 April 2007. RFD 07-6572 (0276) 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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