OMB APPROVAL
OMB Number:
3235-0570
Expires: February
28, 2017
Estimated average
burden hours per
response: 20.6
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-05371
Russell Investment Funds
(Exact name of registrant as specified in charter)
1301 2nd Avenue 18th Floor, Seattle Washington 98101
(Address of principal executive offices) (Zip code)
Mary Beth R. Albaneze, Secretary and Chief Legal Officer
1301 2nd Avenue
18th Floor
Seattle, Washington 98101
206-505-4846
(Name and address of agent for service)
Registrant's telephone number, including area code: 800-787-7354
Date of fiscal year end: December 31
Date of reporting period: January 1, 2016 to December 31, 2016
Item 1. Reports to Stockholders
Russell Investment Funds
Russell Investment Funds is
a series investment company
with nine different investment
portfolios referred to as Funds.
These financial statements report
on five of these Funds.
Russell Investment Funds
Annual Report
December 31, 2016
Table of Contents
Page | |
To Our Shareholders | 3 |
Market Summary | 4 |
Multi-Style Equity Fund | 10 |
Aggressive Equity Fund | 27 |
Non-U.S. Fund | 49 |
Core Bond Fund | 73 |
Global Real Estate Securities Fund | 111 |
Notes to Schedules of Investments | 131 |
Notes to Financial Highlights | 133 |
Notes to Financial Statements | 134 |
Report of Independent Registered Public Accounting Firm | 154 |
Tax Information | 155 |
Affiliated Brokerage Transactions | 156 |
Basis for Approval of Investment Advisory Contracts | 157 |
Shareholder Requests for Additional Information | 158 |
Disclosure of Information about Fund Trustees and Officers | 159 |
Adviser, Money Managers and Service Providers | 164 |
Russell Investment Funds
Copyright © Russell Investments 2017. All rights reserved.
Russell Investments’ ownership is composed of a majority stake held by funds managed by TA Associates with
minority stakes held by funds managed by Reverence Capital Partners and Russell Investments’ management.
Frank Russell Company is the owner of the Russell trademark contained in this material and all trademark rights
related to the Russell trademarks, which the members of the Russell Investment group of companies are permitted
to use under license from Frank Russell Company. The members of the Russell Investments group of companies
are not affiliated in any manner with Frank Russell Company or any entity operation under the “FTSE RUSSELL”
brand.
Fund objectives, risks, charges and expenses should be carefully considered before in-
vesting. A prospectus containing this and other important information must precede or
accompany this material. Please read the prospectus carefully before investing.
Securities distributed through Russell Investments Financial Services, LLC, member FINRA and part
of Russell Investments.
Indices and benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance,
are not a guarantee of future performance, and are not indicative of any specific investment. Index return
information is provided by vendors and although deemed reliable, is not guaranteed by Russell Investments or its
affiliates.
Performance quoted represents past performance and does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance data quoted.
To Our Shareholders
Fellow Shareholder,
2016 goes down as a year of great restlessness, and certainly a bruising year for forecasters. To call the political landscape
restive seems understated, but for all the referendums, coups and national elections, the markets remained orderly,
delivering returns right down the middle of the road. In fact, you might say that it was a remarkably positive result in view
of how plausible major market sell offs would have been!
With record stock market highs, why the rattled nerves? Our current climate appears increasingly unconventional, and
delivering returns moving forward could prove increasingly challenging, especially in the U.S. where corporate profits are
thinning out and interest rates are likely to continue on an upward trajectory. Following the Federal Reserve’s decision to
raise interest rates in December 2016, our global team of market strategists continues to keep a close eye on two possible
hikes in 2017, supported by the modest economic growth and a gradual firming in inflation we’ve seen this year. The
numbers from the U.S. labor market in 2016 remained healthy, and showed no signs of imbalances in business investment.
We are, however, keeping a close eye on warning signs stemming from the corporate sector, including a troubling rise in
corporate leverage throughout 2016. U.S. corporate earnings appear to have bottomed, while the most recent earnings
growth was positive but tepid. While our team still has an underweight U.S. equities view, their modeling shows only a
modest risk of recession, and they continue with a ‘buy-the-dips and sell-the-rallies’ investment strategy.
At the same time, change is inseparable with opportunity. Our strategists and portfolio managers work diligently to ensure
that portfolios are well positioned to take advantage of new opportunities, while seeking to avoid as much of the downside
risk as possible. If bond yields rise, if inflation increases in some regions while deflation occurs elsewhere, a dynamic
investment process can respond. We also are active currency investors in certain portfolios, looking to see if the U.S. dollar
will test previous highs or whether the British pound remains at risk, as investors focus on the full implications of Brexit’s
implementation.
We believe more than ever that securing your desired investment outcomes takes a dynamic process, comprehensive
asset class coverage, and the tools required to identify and manage risk. But as important as that contribution can be,
we also believe it’s never been more vital for shareholders to have solid, long-term financial plans, realistic goals, and
regular check-ins with personal financial advisors. The following pages provide additional insights on the markets and the
performance of Russell Investments Funds (RIF) for the fiscal year ending December 31, 2016.
Thank you for your continued trust. As always, our purpose at Russell Investments is to improve the financial security of
people like you. We take that purpose very seriously.
Best regards,
Len Brennan
Chief Executive Officer, Russell Investments
To Our Shareholders 3
Russell Investment Funds
Market Summary as of December 31, 2016 (Unaudited)
U.S. Equity Markets
Broadly measured by the Russell 3000® Index, U.S. stocks returned 12.74% for the one year period which is the eighth
straight year that the Russell 3000® Index has finished with a positive absolute return. The Russell 3000® Index finished
with a positive absolute return in nine of the year’s twelve months.
Within U.S. large capitalization stocks, factors that were rewarded during the fiscal year included low price-to-earnings,
low price-to-book and low price-to-cash flow ratios, and high dividend yield. Factors that trailed the market included high
forecasted growth, positive price momentum, and rising earnings estimates. Additionally, dynamic stocks outperformed
defensive stocks within the Russell 1000® Index although defensive led dynamic within the Russell 2000® Index. From a
sector perspective, energy, telecommunication services, and financials outperformed the Russell 1000® Index by 14.5%,
11.9%, and 9.3%, respectively. Sectors that failed to find traction during the one year period were health care, consumer
staples, and real estate, which trailed the Russell 1000® Index by 15.0%, 6.4%, and 6.3%, respectively.
The Russell 3000® Index ended the January through March period of 2016 with a positive absolute return of 0.97%
although the quarter was defined by two very distinct periods. The first half of the quarter was characterized by slowing
growth in China coupled with an ongoing commodities rout (especially in oil), which created significant market volatility
and substantial risk-off sentiment. Interest rate sensitive sectors and traditional non-cyclical sectors such as utilities,
consumer staples, and real estate investment trusts (“REITs”) were big outperformers and traded at an unusual valuation
premium to the broader market. However, in the latter part of the quarter there was a rebound in the traditional cyclical
areas of the market driven in part by more dovish rhetoric from the U.S. Federal Reserve (the “Fed”) alongside oil price
stabilization. Gross domestic product (“GDP”) growth from the fourth quarter of 2015 was revised upward to 1.4% (quarter-
over-quarter). Nonfarm payrolls rose by 242,000 in February and the core inflation rate (2.3% year-over-year in February)
was slightly above expectations of 2.2%. However, at the first quarter Federal Open Market Committee (“FOMC”) meeting,
Fed Chair Yellen explained that even though domestic “economic forecasts have not changed much since December”, this
was being overshadowed by “global economic and financial developments”, posing a risk to growth. As a result, FOMC
“dots” reduced to two the number of likely interest rate hikes in 2016 down from four earlier in the year.
The Russell 3000® Index finished with a positive absolute return of 2.63% in the April through June quarter. The U.S.
equity market gained over the period despite the U.K. Brexit referendum on European Union membership. The U.K.’s
decision to potentially leave the EU threw worldwide markets into turmoil during the month of June. This caused valuations
to become even more stretched within utilities, REITs and consumer staples stocks and was a catalyst for discussion about
what some in the industry called a “low volatility bubble.” The final revision to first quarter GDP growth was upward to
1.1%, beating consensus estimates of 1.0%. However, a weak May U.S. jobs report came out in early June with non-farm
payrolls advancing by only 38,000 versus the 164,000 expected and this reduced expectations about Fed rate hikes.
Inflation also continued to remain below target at 1.0% year-over-year, while retail sales were up 2.5% year-over-year in
May. Mixed U.S. economic data, combined with global uncertainties, caused the Fed to take a more dovish stance relating
to increasing interest rates over the intermediate term.
During the third quarter, the Russell 3000® Index rose 4.4%, as the recession fears that characterized the end of the second
quarter began to dissipate. The Fed ended the latest round of deliberations on whether to raise rates, with a hawkish hold.
This, combined with moderately favorable economic data and second quarter earnings reports, caused low volatility stocks
to underperform while banks and technology stocks outperformed. The final revision for second quarter GDP growth was
increased to 1.4% quarter-over-quarter. U.S. retail sales cooled over the period, declining 0.3% month-over-month in the
latest reading for August. The non-farm payrolls numbers reported during the quarter impressed markets, increasing by a
robust 406,000 over July and August combined, which beat consensus estimates of 360,000. The FOMC left interest rates
unchanged at 0.5%, but strongly signalled that “the case for an increase in the federal funds rate has strengthened.” While
signalling that a rate hike was likely in the months ahead, Fed officials lowered their economic growth forecast and trimmed
the number of rate hikes they foresaw in 2017 from three to two.
4 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
The Russell 3000® Index closed out 2016 on a strong note returning 4.21% for the fourth quarter. Most of the positive
return for the quarter came in November and December with the Russell 3000® Index returning 4.48% and 1.95%,
respectively. In early November, non-farm payroll growth for October was reported at 161,000 which was below consensus
of 178,000 although was generally considered strong enough for a Fed rate increase in December. Reported October non-
farm payroll growth combined with the President-elect’s plan to provide potential fiscal stimulus, including infrastructure
spending, caused certain industries to react favorably in November, most notably banks, which outperformed the Russell
3000® Index by over 13.50%. Leveraged industries that are seen as bond substitutes due to high dividend yields, such
as electric utilities and REITs, underperformed the Russell 3000® Index by 10.88% and 7.54%, respectively. In mid-
December, the Fed raised short term interest rates for the second time since the global financial crisis. This did not result
in a significant market reaction because the increase had been expected by the market and November non-farm payroll
growth was reported 8,000 above consensus at 178,000. Fed officials emphasized that they intend to raise interest rates
gradually, and only if economic growth continues to materialize into 2017.
Non-U.S. Developed Equity Markets
For the fiscal year ended December 31, 2016, the developed non-U.S. equity market, as measured by the Russell
Developed ex-U.S. Large Cap® Index (the “Index”), was up 2.33%. The fiscal year saw a number of macroeconomic events
cause market volatility, the significant drivers of which were the U.S. Federal Reserve (the “Fed’) rate hike, the U.K.
Brexit referendum, the U.S. Presidential election and uncertainty around economic data in emerging markets following an
emerging market slowdown during the previous fiscal year.
Amid the market volatility, value factor outperformed the most within the Index during the fiscal year, especially gaining
traction in the second half of the fiscal year. Momentum and low volatility factors underperformed the most as the fiscal year
saw some trend reversals with investors rotating out of defensive areas of the market. Compared to the previous fiscal year
ending December 31, 2015 when commodity driven sectors, particularly energy and materials, were the worst hit, the 2016
fiscal year saw a reversal in sector trends with these sectors gaining traction as commodity prices stabilized.
For the first half of the fiscal year ending December 31, 2016, uncertainties grew as market attention became fixated upon
the U.K., culminating in the U.K. exiting the European Union on June 23rd’s Brexit referendum result, severing a 43-year
membership. Broadly, this coupled with concerns over China and Fed rate hike uncertainty caused several months of
volatility in the first half of 2016.
In the third quarter of the fiscal year ending December 31, 2016, emerging markets recovered with better than expected
economic data from China in July 2016. As the fiscal year progressed, the Fed took a more cautious stance and lowered
the expected pace of rate hikes to a one hike scenario as the most likely case for the remainder of 2016. Markets stabilized
post July after witnessing months of volatility through the end of June 2016.
Markets became jittery again towards end of October ahead of the U.S. Presidential election. 2016 continued to be a year
to expect the unexpected and on November 8th, Donald Trump won the electoral college vote and Republicans took the
clean sweep with a majority in the house and senate. The result for markets was volatility followed by a gradual recovery. In
mid-December, the U.S. finally saw a rate hike as the Fed raised its target for short-term interest rates by 0.25% to a range
of 0.50% to 0.75% citing the pick-up in economic growth since the middle of the year. It was the second time in a decade
that the Fed has raised rates, the first being in December 2015. Non-U.S. developed markets were down for a couple of
days following the rate hike but stabilized as the year closed. The U.S. dollar remained strong in the second half of the year.
During the fiscal year ending December 31, 2016, Asia Pacific ex-Japan and Canada were the stand out non-U.S. developed
markets, while the U.K. and developed Europe ex-U.K. lagged the most. Stabilization in commodity prices helped the
commodity heavy economies over the fiscal year ending December 31, 2016.
Market Summary 5
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
In terms of sector returns within the Index for the fiscal year ended December 31, 2016, commodity driven sectors, mainly
materials and energy, had the strongest outperformance, while certain defensive and rate sensitive sectors, especially
health care and utilities, were the biggest laggards.
Emerging Markets
The Russell Emerging Markets® Index, as measured in U.S. dollar terms (the “Index”), gained 10.5% over the fiscal year
ended December 31, 2016. The asset class experienced a strong reversal from a negative 2015. Political tailwinds, strong
growth and low interest rates fueled a positive market environment.
The Index recorded a strong 4.8% increase in the first quarter of 2016. This was a sharp contrast to developed markets. The
market climb was driven by strong March performance, following falls in January and February. Turmoil in Chinese equity
markets and volatility in the price of oil drove a negative start to the period, in a broadly risk-off environment for equity
markets. The market rebounded from mid-February as equity market and oil price volatility stabilized. A more dovish
outlook for U.S. interest rate rises provided support to emerging markets, particularly countries with large current account
deficits. A weakening of the U.S. dollar acted as a further tailwind. Unlike most of 2015, it was a positive period for Latin
American countries. Brazil overcame a negative start to the year to climb 27.8%. Investors appeared hopeful of a change of
government and ignored weak economic data. The Brazilian Democratic Movement party withdrew from the ruling coalition.
Meanwhile, fourth quarter GDP growth contracted 5.9% year-over-year. Elsewhere, Turkey enjoyed a positive start to 2016
(20.4%), aided by low interest rate prospects in the U.S. Russia climbed 16.5% as the ruble recovered some of its 2015
depreciation. South Africa (15.1%) also benefited from speculation of accommodative U.S. Federal Reserve policy. In Asia,
China was the weakest-performing country in the first quarter. The market slipped 5.6% as economic slowdown concerns
remained. After a tumultuous January, where sentiment was hampered by the failed government-implemented market
“stop” on the main stock markets, the People’s Bank of China introduced further accommodative measures to improve
market liquidity. In February, the central bank moved to daily open market operations and cut its required reserve ratio
for banks by 0.5%. Nevertheless, Standard & Poor’s cut its outlook on China to negative due to economic outlook. India
also experienced a slowdown (-3.6%). Capitalization concerns within the nation’s banking system weighed on sentiment.
The Index recovered from a negative May to edge 1.0% higher in the second quarter of 2016. Emerging markets continued
to outperform developed markets. Fears of an impending U.S. interest rate rise weighed on sentiment, although these
concerns eased over the period. This followed U.S. Federal Reserve Chair Yellen’s more “dovish” comments in June.
Expectations of future U.S. interest rate hikes were pushed out further after the U.K. Brexit referendum to leave the
European Union. The Index echoed the developed market selloff following the Brexit vote, before a subsequent rebound
at quarter-end. It was also a turbulent but positive quarter for Brazil (14.7%). After a protracted process, President Dilma
Rousseff was eventually suspended from office. China extended its weak 2016 performance, as it underperformed to
finish flat over the period (-0.2%). In addition, the yuan sold off on speculation that China may devalue its currency
following Brexit. Economic data remained healthy but weakened over the period. Elsewhere, Taiwan edged 0.2% higher.
At quarter-end, the central bank reduced its key interest rate as expected to 1.375% from 1.5% in an effort to boost
growth. Europe was the weakest-performing region within the Index. Poland was the standout laggard in the second quarter
(-15.7%), hardest hit by the U.K.’s decision to leave the European Union. Greece slid 9.6% despite surging higher in May.
Meanwhile, political developments drove market movements in Turkey (-7.9%). The market reacted negatively to Prime
Minister Ahmet Davutoglu’s resignation in May.
The Index surged 8.7% in the third quarter of 2016 in a risk-on environment. Emerging markets continued to outperform
with the strongest quarterly return in over three years. Returns were amplified after the U.S. Federal Reserve failed to
increase interest rates in September. The subsequent weakening of the U.S. dollar was a tailwind to the market. It was
a volatile period for oil. The price surged 8.5% in the week ending the quarter as OPEC members agreed in principle
to reduce output. However, the price per barrel fell 3.8% over the period. China was the strongest performing country
during the quarter (13.4%), as positive economic data increased investor confidence in the economy. Second quarter GDP
6 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
growth was positive at 6.7% year-over-year, beating estimates of 6.6%. The modest surprise was driven by an increase in
consumption. The Caixin China services purchasing managers' index (“PMI”) climbed above 50 over the period. However,
the inflation rate fixed lower in August to 1.3% year-over-year (from 1.9% in June). Meanwhile, Brazil continued its strong
year-to-date rebound with an 11.8% climb. The impeachment process against former President Dilma Rousseff finally
concluded, with investor confidence boosted on hopes President Michel Temer would implement market-friendly reforms.
Economic data also improved from recent lows. Industrial production beat expectations at -6.0% year-over-year in June,
the strongest in close in one year, while the manufacturing PMI edged higher. South Korea (9.1%), Indonesia (9.2%) and
Taiwan (11.5%) also outperformed the broader Index return. In Korea, second quarter GDP growth beat expectations at
0.8% quarter-over-quarter. Elsewhere, Indonesia also beat second quarter GDP growth expectations at 4.0% quarter-over-
quarter. The central bank lowered its interest rate to 5.0% as inflation remained subdued. Positive sentiment towards
Taiwan was driven by strong corporate earnings, which led to large investor inflows. Mexico and Turkey were among the
worst-performing countries for the quarter, with both the peso and lira the weakest currencies against the U.S. dollar over
the period. In Mexico (-2.0%), the “Trump effect” weighed on investor confidence. Corruption scandals and the resignation
of finance minister Luis Videgaray also put pressure on President Enrique Pena Nieto. Meanwhile, in Turkey (-4.8%),
markets reacted negatively to July’s failed military coup and subsequent strengthening of power by President Erdogan.
Moody’s downgrade of the country’s credit rating to “junk” status, based on increased risks to the country’s balance of
payments and weaker expected future growth, further weighed on sentiment.
The Index slipped 4.2% in a volatile fourth quarter. The U.S. Presidential election victory for Donald Trump caused
an emerging markets equity sell-off, with uncertainty regarding his protectionist policies weighing on sentiment. The
U.S. Federal Reserve’s December rate hike drove further U.S. dollar strength, which also negatively impacted emerging
markets. However, oil exporters benefited from the oil price climb after an OPEC production deal in November, causing a
wide spread among Index constituent returns. The weakest-performing countries suffered from currency weakness. Turkey,
which has a large current account deficit, slumped 13.1%. Mexico (-10.3%) sold off on fears President-elect Donald
Trump would enact protectionist measures against the country after his election victory. Elsewhere, political uncertainty
weighed on sentiment towards Korea (-7.4%) as President Park Geun-hye remained in power despite Parliament passing
an impeachment motion in early December amid her links to corruption allegations. In India (-7.0%), Prime Minister
Narendra Modi’s decision to withdraw the 500 and 1000 rupee banknotes as part of a corruption crackdown negatively
impacted investor confidence. China slipped 6.6%, suffering from year-end profit taking in a period where the yuan
depreciated against the U.S. dollar. Increased regulatory restrictions on insurance companies also weighed on sentiment.
However, third-quarter Chinese GDP growth was in-line with estimates at 6.7% year-over-year, while both manufacturing
and non-manufacturing PMIs improved over the period. Russia surged 16.9% in a quarter where the ruble was one of the
few currencies to strengthen against the U.S. dollar. Rising oil prices and potentially warmer relations with the U.S. under
President-elect Donald Trump buoyed sentiment. Brazil experienced a volatile quarter, but extended its 2016 rally with a
2.4% climb. The real also strengthened on the back of gains in global commodity prices and expectations of reform under
new president Michel Temer. Amid widespread protests, President Temer’s proposal to cap government spending for 20
years was passed by the Senate. South Africa (-3.4%) also outperformed the broader Index return. This came after the rand
strengthened in December. Fraud charges against respected finance minister Pravin Gordhan were dropped after months of
investigations. Other commodity exporters also outperformed including Colombia (-3.2%), Peru (-1.9%) and Chile (1.8%).
Taiwan (-2.6%) benefited from strong economic growth, which read 2.1% year-over-year for the third quarter.
U.S./Global Fixed Income Markets
The fiscal year ended December 31, 2016 was characterized by a sharply risk off market early in the period followed by
a similarly sharp rebound and extended rally in risky assets (e.g. lower rated credit and emerging market currencies).
Overall, this proved positive for most fixed income sectors around the globe. U.S. interest rates rose modestly across the
yield curve, but global interest rate markets were more mixed. Corporate and emerging sovereign credit markets suffered in
January and February, but returns turned positive as the year went on and eventually very significantly so. A key indicator
Market Summary 7
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
of global fixed income performance, the Bloomberg Barclays Global Aggregate Bond Index, returned 3.95% for the fiscal
year, in U.S. dollar-hedged terms, as yields fell modestly in most major non-U.S. countries and spreads tightened during
a fiscal year where monetary policy remained generally accommodative and recession fears early in the period were never
realized.
Regionally, Europe outperformed the U.S. as the Fed hiked rates once again in the U.S. and greater exposure to the
corporate energy sector represented headwinds to the U.S. market. The Bloomberg Barclays Pan-European Aggregate
Bond Index returned 5.82% during the period (in U.S. dollar-hedged terms), led by the corporate sector of the market,
where the European Central Bank (the “ECB”) began to buy investment grade corporate bonds as a part of its expanded
quantitative easing program. A sharp bond rally in the U.K. following the Brexit referendum also supported European bond
performance. The U.S., in comparison, returned 2.61% during the fiscal year as measured by the Bloomberg Barclays U.S.
Aggregate Bond Index. While the U.S. corporate market performed strongly, Treasury yields rose across the yield curve
representing a headwind to performance in the US.
In the U.S., economic data remained broadly positive, with solid nonfarm payroll gains and a steady decline in the
unemployment rate to below 5.0%. GDP growth regained steam over the period reaching as high as 3.5% after having
dipped below 1% in the first quarter of 2016. Inflation also began to tick up through the period. The Consumer Price
Index was lifted by a recovery in energy prices, but the fiscal year also witnessed modest gains in wage and producer price
inflation supporting expectations that the Fed might be on a path to raise rates again, which it did in December.
In Europe, the ECB elected to further loosen monetary policy by expanding its asset purchase program to include investment
grade corporate debt. In spite of continued lackluster growth in the Eurozone, the corporate market produced over 2.6%
excess returns over equivalent duration government bonds during the period as ECB demand and support dominated any
fundamental issues. European peripheral markets were mixed during the period as idiosyncratic political events led to
more divergent performance. A series of delayed and failed bank restructurings as well as a failed referendum on political
reform led Italian bonds to lag in the market rally. Spain, on the other hand, held an election with an ambiguous result but
by the end of the period appeared on a path for the current lead party to maintain power. As a result, Spanish 10-year bond
yields fell over 20 basis points.
Emerging markets suffered more than most early in the period as commodity prices fell, but ultimately rallied to produce
exceptionally strong performance for the fiscal year. China’s growth beat expectations with 6.7% reported GDP growth for
3 consecutive quarters. In Brazil, the President was impeached, which the market took very favorably. The Brazilian Real
was the strongest performing major currency worldwide up over 35% against the U.S. dollar. One country that struggled
in emerging markets throughout the year was Mexico. Beaten down by market sentiment early in the year, Mexican assets
failed to rally later in the year as the possibility and ultimate eventuality of a Trump presidency in the U.S. appeared to pose
significant risks to that economy. Emerging market (“EM”) debt outperformed developed markets (the Bloomberg Barclays
EM Hard Currency Aggregate Bond Index outperformed equivalent-duration U.S. Treasuries by 8.80%) as growth and
sentiment stabilized. Local currency EM bonds (those issued in the issuing country’s own currency) did not return quite
as strongly (the Bloomberg Barclays EM Local Currency Government Bond Index returned 3.51%) as the drawdown in the
first quarter of the year was much sharper for EM currencies than credit, though the subsequent rally was similarly fierce.
Strong corporate new issuance volumes continued in the fiscal year period after a brief lull in the first quarter of 2016.
Overall, corporate credit was up globally (the Bloomberg Barclays Global Aggregate Corporate Bond Index returned 5.83%
over equivalent-duration government bonds), with particularly strong performance out of the industrial sector of the market.
Financials performed well versus government bonds, but lagged their industrial counterparts as sustained flat yield curves
weighed on banking sector profitability and organic growth outlook.
8 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
High yield corporate credit was among the best-performing segments of the market (the Bloomberg Barclays Global High
Yield Bond Index returned 13.98% over equivalent-duration Treasuries), as market sentiment flipped early in the year and
defaults were limited outside of the energy sector.
Market Summary 9
Russell Investment Funds
Multi-Style Equity Fund
Portfolio Management Discussion and Analysis — December 31, 2016 (Unaudited)
Multi-Style Equity Fund | Russell 1000® Index** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 10.64% | 1 Year | 12.05 | % | |||
5 Years | 13.95%§ | 5 Years | 14.69 | %§ | |||
10 Years | 6.62%§ | 10 Years | 7.08 | %§ |
10 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
The Multi-Style Equity Fund (the “Fund”) employs a multi- | of 2016 had a negative effect on Fund performance as the pace of |
manager approach whereby portions of the Fund are allocated | interest rate increases was slower than the market had expected |
to different money manager strategies. Fund assets not allocated | and investors became concerned that the odds of a recession may |
to money managers are managed by Russell Investment | be increasing. However, market conditions in the second half of |
Management, LLC (“RIM”), the Fund’s advisor. RIM may change | 2016 allowed the Fund to produce performance improvement as |
the allocation of the Fund’s assets among money managers at | expectations firmed-up regarding the economic outlook and the |
any time. An exemptive order from the Securities and Exchange | U.S. Federal Reserve raised short term interest rates in December |
Commission (“SEC”) permits RIM to engage or terminate a money | for the second time since the global financial crisis. |
manager at any time, subject to approval by the Fund’s Board, | |
without a shareholder vote. Pursuant to the terms of the exemptive | How did the investment strategies and techniques employed |
order, the Fund is required to notify its shareholders within 90 | by the Fund and its money managers affect its benchmark- |
days of when a money manager begins providing services. As of | relative performance? |
December 31, 2016, the Fund had five money managers. | A tilt away from high dividend yield stocks was not rewarded |
as those stocks outperformed in 2016. Overweights to the | |
What is the Fund’s investment objective? | pharmaceuticals and personal products industries detracted. Stock |
The Fund seeks to provide long term capital growth. | selection within the consumer discretionary sector (overweights to |
How did the Fund perform relative to its benchmark for the | Liberty Global and Royal Caribbean Cruises) held back relative |
fiscal year ended December 31, 2016? | returns. An overweight to stocks with below-benchmark price-to- |
earnings, price-to-book and price-to-cash flow ratios contributed | |
For the fiscal year ended December 31, 2016, the Fund gained | positively to benchmark-relative performance. |
10.64%. This is compared to the Fund’s benchmark, the Russell | |
1000® Index, which gained 12.05% during the same period. The | The Fund employs discretionary and non-discretionary money |
Fund’s performance includes operating expenses, whereas index | managers. The Fund’s discretionary money managers select the |
returns are unmanaged and do not include expenses of any kind. | individual portfolio securities for the assets assigned to them. |
The Fund’s non-discretionary money managers provide a model | |
For the fiscal year ended December 31, 2016, the Morningstar® | portfolio to RIM representing their investment recommendations, |
Insurance Large Blend Category, a group of funds that Morningstar | based upon which RIM purchases and sells securities for the |
considers to have investment strategies similar to those of the | Fund. Fund assets not allocated to discretionary money managers |
Fund, gained 11.25%. This result serves as a peer comparison | include assets managed by RIM based upon model portfolios |
and is expressed net of operating expenses. | provided by non-discretionary money managers, the Fund’s |
RIM may assign a money manager a specific style or | liquidity reserves and assets which may be managed directly by |
capitalization benchmark other than the Fund’s index. However, | RIM to effect the Fund’s investment strategies and/or to actively |
the Fund’s primary index remains the benchmark for the Fund | manage the Fund’s overall exposures by investing in securities or |
and is representative of the aggregate of each money manager’s | other instruments that RIM believes will achieve the desired risk/ |
benchmark index. | return profile for the Fund. |
How did the market conditions described in the Market | With respect to certain of the Fund’s money managers, Jacobs |
Summary report affect the Fund’s performance? | Levy Equity Management, Inc. was the best performing manager |
During the fiscal year, the U.S. large capitalization equity market | for the period and outperformed the Russell 1000® Value Index. |
produced positive returns. Fund exposures included tilts toward | A tilt toward stocks with below-benchmark valuation ratios (lower |
value stocks with low price-to-earnings, price-to-book and | price-to-earnings, price-to-book and price-to-cash flow ratios) |
price-to-cash flow ratios and financials stocks, which was due to | was rewarded. Stock selection within the information technology |
attractive valuations in a market that was relatively expensive. | sector (overweights to Advanced Micro Devices, Inc., Mentor |
The Fund was tilted away from most of the interest rate sensitive | Graphics Corporation and Marvell Technology Group) contributed |
areas of the market, except for telecommunications services | positively to relative performance. |
stocks which were less expensive than other high dividend yield | Mar Vista Investment Partners, LLC was the worst performing |
stocks. The Fund was also tilted away from less economically | manager for the period and underperformed the Russell 1000® |
sensitive, high dividend yield, and low beta stocks (beta is a | Index. Factor exposures were not rewarded, including a tilt |
measure of a stock’s sensitivity to the direction of the market) | toward stocks with above-benchmark valuation ratios and a tilt |
such as utilities, real estate investment trusts (“REITs”), and | away from high dividend yield stocks. Stock selection within the |
consumer staples. Overall, the market conditions of the first half | consumer discretionary sector (overweights to Liberty Global |
Multi-Style Equity Fund 11
Russell Investment Funds
Multi-Style Equity Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
and Starbucks Corporation) and within the financials sector (an | Blair”) due to RIM’s greater conviction in William Blair’s excess | |
overweight to Markel Corporation) detracted. | return potential. | |
RIM managed a positioning strategy during the period which fully | Money Managers as of December 31, | |
replicated the Russell Top 200® Defensive Index. This strategy | 2016 | Styles |
was transitioned to an active positioning strategy at year end, | Barrow, Hanley, Mewhinney & Strauss, LLC | Value |
which focuses on valuations, quality, and volatility exposures | Jacobs Levy Equity Management, Inc. | Value |
to help control the Fund’s above-benchmark beta and volatility | Mar Vista Investment Partners, LLC | Market-Oriented |
exposures that may come from the money managers’ portfolios. | Suffolk Capital Management LLC | Market-Oriented |
The positioning strategy’s low beta exposure was not rewarded | William Blair Investment Management, LLC | Growth |
in 2016, as the Russell Top 200® Defensive Index trailed the | The views expressed in this report reflect those of the | |
Russell 1000® Index by over 2.40%. | portfolio managers only through the end of the period | |
covered by the report. These views do not necessarily | ||
During the period, RIM used index futures contracts to equitize | represent the views of RIM, or any other person in RIM or | |
the Fund’s cash. The decision to equitize the Fund’s cash was | any other affiliated organization. These views are subject to | |
beneficial to Fund performance for the fiscal year as the market | change at any time based upon market conditions or other | |
had a positive absolute return. | events, and RIM disclaims any responsibility to update the | |
Describe any changes to the Fund’s structure or the money | views contained herein. These views should not be relied | |
manager line-up. | on as investment advice and, because investment decisions | |
for a Russell Investment Funds (“RIF”) Fund are based on | ||
In December 2016, RIM terminated Columbus Circle Investors | numerous factors, should not be relied on as an indication | |
and hired William Blair Investment Management, LLC (“William | of investment decisions of any RIF Fund. |
* Assumes initial investment on January 1, 2007.
** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results. Additionally, the returns presented herein may differ from the performance reported
in the Financial Highlights as the returns herein are calculated in a manner consistent with standardized performance in accordance with Securities and Exchange
Commission rules, while the performance in the Financial Highlights has been calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”).
12 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Shareholder Expense Example — December 31, 2016 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2016 to December 31, 2016. | July 1, 2016 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2016 | $ | 1,082.20 | $ | 1,021.01 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 4.29 | $ | 4.17 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.82% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/366 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | |||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
Multi-Style Equity Fund 13
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
Common Stocks - 94.3% | Pinnacle Foods, Inc. | 21,751 | 1,163 | ||||
Consumer Discretionary - 10.1% | Procter & Gamble Co. (The) | 6,663 | 560 | ||||
Aaron's, Inc. Class A | 35,300 | 1,129 | Reynolds American, Inc. | 1,150 | 64 | ||
Amazon.com, Inc.(Æ) | 7,751 | 5,813 | Sanderson Farms, Inc. | 4,800 | 452 | ||
Avon Products, Inc.(Æ) | 25,100 | 127 | Sysco Corp. | 1,371 | 76 | ||
CarMax, Inc.(Æ) | 873 | 56 | TreeHouse Foods, Inc.(Æ) | 2,939 | 212 | ||
CBS Corp. Class B | 17,596 | 1,119 | Tyson Foods, Inc. Class A | 6,400 | 395 | ||
Chipotle Mexican Grill, Inc. Class A(Æ) | 2,367 | 893 | Unilever NV | 73,816 | 3,031 | ||
Comcast Corp. Class A | 6,275 | 433 | United Natural Foods, Inc.(Æ) | 15,000 | 716 | ||
Costco Wholesale Corp. | 1,142 | 183 | Walgreens Boots Alliance, Inc. | 118 | 10 | ||
Coty, Inc. Class A | 15,351 | 281 | 32,409 | ||||
Delphi Automotive PLC | 14,658 | 988 | |||||
Discovery Communications, Inc. Class A(Æ) | 38,367 | 1,052 | |||||
DISH Network Corp. Class A(Æ) | 943 | 55 | Energy - 7.6% | ||||
Anadarko Petroleum Corp. | 18,977 | 1,324 | |||||
DR Horton, Inc. | 2,010 | 55 | Antero Resources Corp.(Æ) | 25,200 | 596 | ||
Estee Lauder Cos., Inc. (The) Class A | 8,889 | 680 | BP PLC - ADR | 24,756 | 925 | ||
Ford Motor Co. | 129,931 | 1,576 | Chevron Corp. | 2,992 | 352 | ||
Gap, Inc. (The) | 33,803 | 759 | ConocoPhillips | 21,660 | 1,086 | ||
General Motors Co. | 43,280 | 1,508 | Core Laboratories NV | 24,607 | 2,953 | ||
Home Depot, Inc. (The) | 20,208 | 2,709 | Devon Energy Corp. | 17,672 | 807 | ||
Lowe's Cos., Inc. | 905 | 64 | Diamond Offshore Drilling, Inc.(Æ) | 12,100 | 214 | ||
Macy's, Inc. | 1,537 | 55 | Energen Corp.(Æ) | 10,800 | 623 | ||
McDonald's Corp. | 2,168 | 264 | Ensco PLC Class A | 53,000 | 515 | ||
News Corp. Class A | 47,200 | 541 | EOG Resources, Inc. | 15,900 | 1,607 | ||
Nike, Inc. Class B | 30,176 | 1,533 | Exxon Mobil Corp. | 67,716 | 6,111 | ||
O'Reilly Automotive, Inc.(Æ) | 10,743 | 2,991 | Newfield Exploration Co.(Æ) | 9,200 | 373 | ||
PVH Corp. | 6,257 | 565 | Occidental Petroleum Corp. | 46,247 | 3,294 | ||
Royal Caribbean Cruises, Ltd. | 670 | 55 | PBF Energy, Inc. Class A | 26,818 | 748 | ||
Starbucks Corp. | 130,760 | 7,260 | Phillips 66 | 17,473 | 1,510 | ||
Target Corp. | 23,617 | 1,706 | Pioneer Natural Resources Co. | 10,619 | 1,912 | ||
Thomson Reuters Corp. | 671 | 29 | QEP Resources, Inc.(Æ) | 56,100 | 1,033 | ||
Time Warner, Inc. | 11,781 | 1,137 | Schlumberger, Ltd. | 53,996 | 4,533 | ||
Time, Inc. | 5,700 | 102 | Tesoro Corp. | 6,700 | 586 | ||
TJX Cos., Inc. | 32,767 | 2,461 | Valero Energy Corp. | 22,300 | 1,524 | ||
VF Corp. | 801 | 43 | Weatherford International PLC(Æ) | 78,300 | 391 | ||
Viacom, Inc. Class B | 10,269 | 360 | World Fuel Services Corp. | 11,100 | 510 | ||
Wal-Mart Stores, Inc. | 60,386 | 4,174 | 33,527 | ||||
Walt Disney Co. (The) | 12,891 | 1,343 | |||||
Whirlpool Corp. | 4,412 | 802 | |||||
Yum China Holdings, Inc.(Æ) | 87 | 2 | Financial Services - 22.5% | ||||
Yum! Brands, Inc. | 87 | 6 | Affiliated Managers Group, Inc.(Æ) | 7,505 | 1,090 | ||
44,909 | Aflac, Inc. | 1,031 | 72 | ||||
Allstate Corp. (The) | 19,959 | 1,479 | |||||
American Express Co. | 22,815 | 1,690 | |||||
Consumer Staples - 7.3% | American International Group, Inc. | 43,620 | 2,849 | ||||
Altria Group, Inc. | 28,988 | 1,961 | American Tower Corp.(ö) | 54,612 | 5,772 | ||
Archer-Daniels-Midland Co. | 28,600 | 1,306 | Ameriprise Financial, Inc. | 11,096 | 1,231 | ||
Bunge, Ltd. | 13,900 | 1,004 | Aon PLC | 685 | 76 | ||
Coca-Cola Co. (The) | 10,145 | 421 | Aspen Insurance Holdings, Ltd. | 8,052 | 443 | ||
Colgate-Palmolive Co. | 2,244 | 147 | Assurant, Inc. | 2,000 | 186 | ||
CVS Health Corp. | 16,112 | 1,272 | Assured Guaranty, Ltd. | 10,251 | 387 | ||
General Mills, Inc. | 18,238 | 1,127 | Bank of America Corp. | 242,346 | 5,355 | ||
Kimberly-Clark Corp. | 944 | 108 | Bank of New York Mellon Corp. (The) | 25,430 | 1,205 | ||
Kraft Heinz Co. (The) | 10,994 | 960 | BB&T Corp. | 1,966 | 92 | ||
Kroger Co. (The) | 60,367 | 2,083 | Berkshire Hathaway, Inc. Class B(Æ) | 48,049 | 7,830 | ||
Mead Johnson Nutrition Co. Class A | 17,671 | 1,250 | BlackRock, Inc. Class A | 1,480 | 563 | ||
Mondelez International, Inc. Class A | 60,088 | 2,663 | Capital One Financial Corp. | 11,200 | 977 | ||
Monster Beverage Corp.(Æ) | 21,411 | 949 | Chubb, Ltd. | 1,195 | 158 | ||
PepsiCo, Inc. | 52,715 | 5,514 | Citigroup, Inc. | 67,942 | 4,038 | ||
Philip Morris International, Inc. | 54,268 | 4,965 | Citizens Financial Group, Inc. | 19,930 | 710 |
14 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
CME Group, Inc. Class A | 481 | 55 | Cerner Corp.(Æ) | 20,669 | 979 | ||
Comerica, Inc. | 15,200 | 1,035 | Cigna Corp. | 198 | 26 | ||
Castle International Corp.(ö) | 485 | 42 | Eli Lilly & Co. | 2,537 | 187 | ||
DDR Corp.(ö) | 39,800 | 608 | Endo International PLC(Æ) | 8,490 | 140 | ||
Discover Financial Services | 108 | 8 | Express Scripts Holding Co.(Æ) | 779 | 54 | ||
E*Trade Financial Corp.(Æ) | 10,500 | 364 | Humana, Inc. | 125 | 26 | ||
East West Bancorp, Inc. | 11,991 | 610 | ICU Medical, Inc.(Æ) | 1,420 | 209 | ||
Ecolab, Inc. | 27,873 | 3,267 | IDEXX Laboratories, Inc.(Æ) | 4,832 | 567 | ||
Equity Residential(ö) | 930 | 60 | Johnson & Johnson | 83,659 | 9,637 | ||
Franklin Resources, Inc. | 683 | 27 | LifePoint Health, Inc.(Æ) | 700 | 40 | ||
Goldman Sachs Group, Inc. (The) | 10,272 | 2,460 | Mallinckrodt PLC(Æ) | 6,400 | 319 | ||
Hanover Insurance Group, Inc. (The) | 2,800 | 255 | Medtronic PLC | 29,298 | 2,087 | ||
Hartford Financial Services Group, Inc. | 28,143 | 1,341 | Merck & Co., Inc. | 47,574 | 2,801 | ||
Intercontinental Exchange, Inc. | 13,626 | 769 | Molina Healthcare, Inc.(Æ) | 10,000 | 543 | ||
JPMorgan Chase & Co. | 69,373 | 5,986 | Mylan NV(Æ) | 29,693 | 1,133 | ||
KeyCorp | 56,952 | 1,041 | Perrigo Co. PLC | 1,250 | 104 | ||
Loews Corp. | 41,211 | 1,930 | Pfizer, Inc. | 83,226 | 2,703 | ||
Markel Corp.(Æ) | 5,050 | 4,568 | Stryker Corp. | 884 | 106 | ||
Marsh & McLennan Cos., Inc. | 1,008 | 68 | Thermo Fisher Scientific, Inc. | 8,413 | 1,187 | ||
Mastercard, Inc. Class A | 27,328 | 2,821 | UnitedHealth Group, Inc. | 23,263 | 3,723 | ||
MetLife, Inc. | 46,315 | 2,496 | WellCare Health Plans, Inc.(Æ) | 2,100 | 288 | ||
Moody's Corp. | 18,266 | 1,722 | Zoetis, Inc. Class A | 35,035 | 1,875 | ||
PNC Financial Services Group, Inc. (The) | 22,251 | 2,602 | 44,510 | ||||
Popular, Inc. | 5,300 | 232 | |||||
Principal Financial Group, Inc. | 23,400 | 1,354 | Materials and Processing - 1.7% | ||||
Prudential Financial, Inc. | 13,740 | 1,430 | AdvanSix, Inc.(Æ) | 78 | 2 | ||
Public Storage(ö) | 384 | 86 | Air Products & Chemicals, Inc. | 250 | 36 | ||
Regions Financial Corp. | 72,082 | 1,035 | Celanese Corp. Class A | 10,890 | 857 | ||
Retail Properties of America, Inc. Class A(ö) | 22,800 | 350 | Dow Chemical Co. (The) | 9,486 | 543 | ||
Simon Property Group, Inc.(ö) | 5,595 | 994 | EI du Pont de Nemours & Co. | 23,891 | 1,753 | ||
SL Green Realty Corp.(ö) | 9,340 | 1,005 | International Paper Co. | 20,844 | 1,106 | ||
State Street Corp. | 31,633 | 2,459 | PPG Industries, Inc. | 9,822 | 931 | ||
SunTrust Banks, Inc. | 21,700 | 1,190 | Praxair, Inc. | 16,269 | 1,906 | ||
Synchrony Financial | 40,778 | 1,479 | Rio Tinto PLC - ADR | 13,798 | 531 | ||
Travelers Cos., Inc. (The) | 13,578 | 1,663 | Sherwin-Williams Co. (The) | 166 | 45 | ||
US Bancorp | 61,960 | 3,183 | Versum Materials, Inc.(Æ) | 125 | 4 | ||
Visa, Inc. Class A | 30,832 | 2,406 | 7,714 | ||||
Voya Financial, Inc. | 35,000 | 1,373 | |||||
Wells Fargo & Co. | 126,112 | 6,950 | |||||
XL Group, Ltd. | 37,835 | 1,410 | Producer Durables - 12.7% | ||||
Zions Bancorporation | 15,800 | 680 | 3M Co. | 1,530 | 273 | ||
99,617 | Accenture PLC Class A | 10,773 | 1,261 | ||||
Adient PLC(Æ) | 13,212 | 774 | |||||
AECOM(Æ) | 28,772 | 1,046 | |||||
Health Care - 10.0% | AGCO Corp. | 9,300 | 538 | ||||
Abbott Laboratories | 3,358 | 129 | Automatic Data Processing, Inc. | 1,196 | 123 | ||
Aetna, Inc. | 11,338 | 1,406 | Boeing Co. (The) | 78 | 12 | ||
Agilent Technologies, Inc. | 21,600 | 984 | CSX Corp. | 256 | 9 | ||
Allergan PLC(Æ) | 24,015 | 5,042 | Danaher Corp. | 15,377 | 1,197 | ||
Allscripts Healthcare Solutions, Inc.(Æ) | 25,828 | 264 | Delta Air Lines, Inc. | 13,534 | 666 | ||
Amgen, Inc. | 1,089 | 159 | Eaton Corp. PLC | 58 | 4 | ||
Anthem, Inc. | 10,008 | 1,439 | Emerson Electric Co. | 366 | 20 | ||
Baxter International, Inc. | 1,279 | 57 | FedEx Corp. | 6,380 | 1,188 | ||
Becton Dickinson and Co. | 485 | 80 | Fortive Corp. | 51,026 | 2,736 | ||
Biogen, Inc.(Æ) | 6,037 | 1,712 | General Dynamics Corp. | 7,817 | 1,350 | ||
Bristol-Myers Squibb Co. | 25,790 | 1,508 | General Electric Co. | 7,028 | 222 | ||
Cardinal Health, Inc. | 29,927 | 2,154 | Honeywell International, Inc. | 47,804 | 5,538 | ||
Celgene Corp.(Æ) | 3,666 | 424 | Huntington Ingalls Industries, Inc. | 5,226 | 963 | ||
Centene Corp.(Æ) | 7,400 | 418 | Illinois Tool Works, Inc. | 700 | 86 |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 15
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||
Principal | Fair | Principal | Fair | ||||||
Amount ($) or | Value | Amount ($) or | Value | ||||||
Shares | $ | Shares | $ | ||||||
Jacobs Engineering Group, Inc.(Æ) | 6,800 | 388 | JDS Uniphase Corp. Class W(Æ) | 121,500 | 994 | ||||
Johnson Controls International PLC | 32,596 | 1,343 | Juniper Networks, Inc. | 45,700 | 1,291 | ||||
Kansas City Southern | 26,027 | 2,208 | L3 Technologies, Inc. | 7,160 | 1,089 | ||||
Lockheed Martin Corp. | 442 | 110 | Liberty Interactive Corp.(Æ) | 6,500 | 240 | ||||
ManpowerGroup, Inc. | 14,427 | 1,282 | Marvell Technology Group, Ltd. | 89,300 | 1,239 | ||||
Mettler-Toledo International, Inc.(Æ) | 8,004 | 3,350 | Microsoft Corp. | 77,540 | 4,818 | ||||
Norfolk Southern Corp. | 8,946 | 967 | NetApp, Inc. | 29,800 | 1,051 | ||||
Northrop Grumman Corp. | 437 | 102 | Nuance Communications, Inc.(Æ) | 48,100 | 717 | ||||
Parker-Hannifin Corp. | 780 | 109 | NXP Semiconductors NV(Æ) | 4,898 | 480 | ||||
Quanta Services, Inc.(Æ) | 16,154 | 563 | ON Semiconductor Corp.(Æ) | 77,400 | 988 | ||||
Raytheon Co. | 25,934 | 3,683 | Oracle Corp. | 164,175 | 6,312 | ||||
Rockwell Automation, Inc. | 6,743 | 906 | QUALCOMM, Inc. | 40,578 | 2,646 | ||||
Ryder System, Inc. | 4,500 | 335 | Red Hat, Inc.(Æ) | 18,815 | 1,311 | ||||
Sensata Technologies Holding NV(Æ) | 42,299 | 1,648 | SBA Communications Corp. Class A(Æ) | 10,305 | 1,064 | ||||
SkyWest, Inc. | 6,600 | 241 | Tech Data Corp.(Æ) | 11,820 | 1,001 | ||||
Snap-on, Inc. | 6,445 | 1,104 | Texas Instruments, Inc. | 28,416 | 2,073 | ||||
Southwest Airlines Co. | 38,420 | 1,915 | Twitter, Inc.(Æ) | 10,300 | 168 | ||||
Stanley Black & Decker, Inc. | 14,083 | 1,615 | VMware, Inc. Class A(Æ) | 16,800 | 1,323 | ||||
Stericycle, Inc.(Æ) | 4,400 | 339 | Western Digital Corp. | 16,200 | 1,101 | ||||
Terex Corp. | 4,600 | 145 | Zynga, Inc. Class A(Æ) | 230,500 | 592 | ||||
Textron, Inc. | 26,100 | 1,267 | 73,793 | ||||||
TransDigm Group, Inc. | 20,478 | 5,098 | |||||||
Trinity Industries, Inc. | 19,400 | 539 | Utilities - 5.7% | ||||||
Union Pacific Corp. | 41,899 | 4,344 | American Electric Power Co., Inc. | 16,483 | 1,038 | ||||
United Parcel Service, Inc. Class B | 1,798 | 206 | AT&T, Inc. | 157,344 | 6,693 | ||||
United Technologies Corp. | 15,240 | 1,671 | CenturyLink, Inc. | 12,700 | 302 | ||||
Verisk Analytics, Inc. Class A(Æ) | 13,384 | 1,086 | Consolidated Edison, Inc. | 14,100 | 1,039 | ||||
Waste Management, Inc. | 7 | — | Dominion Resources, Inc. | 1,159 | 89 | ||||
WESCO International, Inc.(Æ) | 3,800 | 253 | Duke Energy Corp. | 21,562 | 1,674 | ||||
Xerox Corp. | 83,600 | 730 | Edison International | 10,700 | 770 | ||||
Xylem, Inc. | 14,571 | 722 | Entergy Corp. | 33,106 | 2,433 | ||||
56,275 | FirstEnergy Corp. | 31,100 | 963 | ||||||
Great Plains Energy, Inc. | 10,100 | 276 | |||||||
Technology - 16.7% | NextEra Energy, Inc. | 8,461 | 1,010 | ||||||
Adobe Systems, Inc.(Æ) | 36,557 | 3,764 | NiSource, Inc. | 16,800 | 372 | ||||
Alphabet, Inc. Class A(Æ) | 3,916 | 3,104 | PG&E Corp. | 21,954 | 1,334 | ||||
Alphabet, Inc. Class C(Æ) | 8,922 | 6,886 | Pinnacle West Capital Corp. | 5,100 | 398 | ||||
Apple, Inc. | 45,800 | 5,304 | Southern Co. (The) | 26,047 | 1,281 | ||||
ARRIS International PLC(Æ) | 35,100 | 1,058 | Telephone & Data Systems, Inc. | 7,200 | 208 | ||||
Arrow Electronics, Inc.(Æ) | 7,600 | 542 | T-Mobile US, Inc.(Æ) | 20,661 | 1,188 | ||||
ASML Holding NV Class G | 8,335 | 935 | US Cellular Corp.(Æ) | 4,900 | 214 | ||||
Avnet, Inc. | 16,080 | 766 | Verizon Communications, Inc. | 73,878 | 3,943 | ||||
Broadcom, Ltd. | 5,982 | 1,057 | 25,225 | ||||||
Cisco Systems, Inc. | 47,906 | 1,448 | |||||||
Cognizant Technology Solutions Corp. Class | Total Common Stocks | ||||||||
A(Æ) | 1,186 | 66 | |||||||
Computer Sciences Corp. | 17,533 | 1,042 | (cost $357,328) | 417,979 | |||||
Dell Technologies, Inc. Class V Class V(Æ) | 116 | 6 | |||||||
Electronic Arts, Inc.(Æ) | 14,032 | 1,105 | Short-Term Investments - 5.3% | ||||||
Facebook, Inc. Class A(Æ) | 48,346 | 5,563 | U.S. Cash Management Fund | 23,386,389 | (8) | 23,391 | |||
Finisar Corp.(Æ) | 15,400 | 466 | Total Short-Term Investments | ||||||
FireEye, Inc.(Æ) | 5,300 | 63 | (cost $23,389) | 23,391 | |||||
Harris Corp. | 10,208 | 1,046 | |||||||
HP, Inc. | 86,200 | 1,279 | Total Investments 99.6% | ||||||
Intel Corp. | 71,993 | 2,611 | |||||||
International Business Machines Corp. | 10,675 | 1,772 | (identified cost $380,717) | 441,370 | |||||
Intuit, Inc. | 27,503 | 3,152 | Other Assets and Liabilities, Net | ||||||
Jabil Circuit, Inc. | 11,000 | 260 | - 0.4% | 1,683 |
See accompanying notes which are an integral part of the financial statements.
16 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | |
Principal | Fair |
Amount ($) or | Value |
Shares | $ |
Net Assets - 100.0% | 443,053 |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 17
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — December 31, 2016
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
S&P 500 E-Mini Index Futures | 143 | USD | 15,988 | 03/17 | (116 | ) | |
S&P Consumer Discretionary Select Sector Index Futures | 42 | USD | 3,449 | 03/17 | (83 | ) | |
S&P Health Care Select Sector Index Futures | 50 | USD | 3,457 | 03/17 | 10 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | (189 | ) |
Presentation of Portfolio Holdings | |||||||||||||||
Amounts in thousands | |||||||||||||||
Fair Value | |||||||||||||||
Practical | |||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | |||||||||
Common Stocks | |||||||||||||||
Consumer Discretionary | $ | 44,909 | $ | — | $ | — | $ | — | $ | 44,909 | 10.1 | ||||
Consumer Staples | 32,409 | — | — | — | 32,409 | 7.3 | |||||||||
Energy | 33,527 | — | — | — | 33,527 | 7.6 | |||||||||
Financial Services | 99,617 | — | — | — | 99,617 | 22.5 | |||||||||
Health Care | 44,510 | — | — | — | 44,510 | 10.0 | |||||||||
Materials and Processing | 7,714 | — | — | — | 7,714 | 1.7 | |||||||||
Producer Durables | 56,275 | — | — | — | 56,275 | 12.7 | |||||||||
Technology | 73,793 | — | — | — | 73,793 | 16.7 | |||||||||
Utilities | 25,225 | — | — | — | 25,225 | 5.7 | |||||||||
Short-Term Investments | — | — | — | 23,391 | 23,391 | 5.3 | |||||||||
Total Investments | 417,979 | — | — | 23,391 | 441,370 | 99.6 | |||||||||
Other Assets and Liabilities, Net | 0.4 | ||||||||||||||
100.0 | |||||||||||||||
Other Financial Instruments | |||||||||||||||
Assets | |||||||||||||||
Futures Contracts | 10 | — | — | — | 10 | —* | |||||||||
Liabilities | |||||||||||||||
Futures Contracts | (199 | ) | — | — | — | (199 | ) | (—)* | |||||||
Total Other Financial Instruments** | $ | (189 | ) | $ | — | $ | — | $ | — | $ | (189 | ) |
* Less than 0.05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the investments.
(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified
in the fair value levels. The fair value amounts presented in the table are intended to permit reconciliation to the amounts presented in the Schedule of
Investments.
For a description of the Levels, see note 2 in the Notes to Financial Statements.
For a disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2016, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
18 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Fair Value of Derivative Instruments — December 31, 2016
Amounts in thousands
Equity | ||||
Derivatives not accounted for as hedging instruments | Contracts | |||
Location: Statement of Assets and Liabilities - Assets | ||||
Variation margin on futures contracts* | $ | 10 | ||
Location: Statement of Assets and Liabilities - Liabilities | ||||
Variation margin on futures contracts* | $ | 199 | ||
Equity | ||||
Derivatives not accounted for as hedging instruments | Contracts | |||
Location: Statement of Operations - Net realized gain (loss) | ||||
Futures contracts | $ | 1,818 | ||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||
Futures contracts | $ | (315 | ) |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 19
Russell Investment Funds
Multi-Style Equity Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 104 | $ | — | $ | 104 | ||
Total Financial and Derivative Liabilities | 104 | — | 104 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (104) | — | (104 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | — | $ | — | $ | — |
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
20 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Statement of Assets and Liabilities — December 31, 2016
Amounts in thousands | |||
Assets | |||
Investments, at identified cost | $ | 380,717 | |
Investments, at fair value(>) | 441,370 | ||
Cash (restricted)(a) | 1,120 | ||
Receivables: | |||
Dividends and interest | 540 | ||
Dividends from affiliated funds | 11 | ||
Investments sold | 2,388 | ||
Fund shares sold | 60 | ||
Total assets | 445,489 | ||
Liabilities | |||
Payables: | |||
Investments purchased | 1,919 | ||
Fund shares redeemed | 29 | ||
Accrued fees to affiliates | 299 | ||
Other accrued expenses | 85 | ||
Variation margin on futures contracts | 104 | ||
Total liabilities | 2,436 | ||
Net Assets | $ | 443,053 | |
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 1,460 | |
Accumulated net realized gain (loss) | 11,331 | ||
Unrealized appreciation (depreciation) on: | |||
Investments | 60,653 | ||
Futures contracts | (189 | ) | |
Shares of beneficial interest | 259 | ||
Additional paid-in capital | 369,539 | ||
Net Assets | $ | 443,053 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 17.08 | |
Net assets | $ | 443,052,860 | |
Shares outstanding ($.01 par value) | 25,944,638 | ||
Amounts in thousands | |||
(>) Investments in affiliates, U.S. Cash Management Fund | $ | 23,391 | |
(a) Cash Collateral for Futures | $ | 1,120 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 21
Russell Investment Funds
Multi-Style Equity Fund
Statement of Operations — For the Period Ended December 31, 2016
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 8,605 | |
Dividends from affiliated funds | 100 | ||
Total investment income | 8,705 | ||
Expenses | |||
Advisory fees | 3,211 | ||
Administrative fees | 220 | ||
Custodian fees (1) | 44 | ||
Transfer agent fees | 19 | ||
Professional fees | 79 | ||
Trustees’ fees | 16 | ||
Printing fees | 59 | ||
Miscellaneous | 18 | ||
Total expenses | 3,666 | ||
Net investment income (loss) | 5,039 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 34,132 | ||
Futures contracts | 1,818 | ||
Net realized gain (loss) | 35,950 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | 3,552 | ||
Futures contracts | (315 | ) | |
Net change in unrealized appreciation (depreciation) | 3,237 | ||
Net realized and unrealized gain (loss) | 39,187 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 44,226 | |
(1) Includes a reimbursement for overbilling of custody out-of-pocket fees from prior years. See note 9 in the Notes to Financial Statements. |
See accompanying notes which are an integral part of the financial statements.
22 Multi-Style Equity Fund
Russell Investment Funds
Multi-Style Equity Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2016 | 2015 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 5,039 | $ | 4,014 | ||
Net realized gain (loss) | 35,950 | 34,412 | ||||
Net change in unrealized appreciation (depreciation) | 3,237 | (32,395 | ) | |||
Net increase (decrease) in net assets from operations | 44,226 | 6,031 | ||||
Distributions | ||||||
From net investment income | (4,595 | ) | (3,910 | ) | ||
From net realized gain | (27,937 | ) | (39,327 | ) | ||
Net decrease in net assets from distributions | (32,532 | ) | (43,237 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | (22,982 | ) | 3,016 | |||
Total Net Increase (Decrease) in Net Assets | (11,288 | ) | (34,190 | ) | ||
Net Assets | ||||||
Beginning of period | 454,341 | 488,531 | ||||
End of period | $ | 443,053 | $ | 454,341 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | 1,460 | $ | 1,016 |
* Share transaction amounts (in thousands) for the periods ended December 31, 2016 and December 31, 2015 were as follows: | ||||||||||||
2016 | 2015 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 439 | $ | 7,344 | 1,477 | $ | 26,296 | ||||||
Proceeds from reinvestment of distributions | 1,943 | 32,532 | 2,546 | 43,237 | ||||||||
Payments for shares redeemed | (3,735 | ) | (62,858 | ) | (3,700 | ) | (66,517 | ) | ||||
Total increase (decrease) | (1,353 | ) | $ | (22,982 | ) | 323 | $ | 3,016 |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 23
Russell Investment Funds
Multi-Style Equity Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period. | ||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||
Net Asset Value, | Net | Net Realized | Total from | Distributions | Distributions | |||||||||
Beginning of | Investment | and Unrealized | Investment | from Net | from Net | |||||||||
Period | Income (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||
December 31, 2016 | 16.64 | .19 | 1.53 | 1.72 | (.17 | ) | (1.11 | ) | ||||||
December 31, 2015 | 18.11 | .15 | .05 | .20 | (.15 | ) | (1.52 | ) | ||||||
December 31, 2014 | 18.85 | .22 | 1.94 | 2.16 | (.22 | ) | (2.68 | ) | ||||||
December 31, 2013 | 15.15 | .19 | 4.75 | 4.94 | (.22 | ) | (1.02 | ) | ||||||
December 31, 2012 | 13.24 | .19 | 1.88 | 2.07 | (.16 | ) | — | |||||||
See accompanying notes which are an integral part of the financial statements.
24 Multi-Style Equity Fund
% | % | % | ||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | ||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | ||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | |||||||||
Total Distributions | Period | Return(d) | (000 | ) | Gross(e) | Net(b)(e) | Net Assets(b) | Turnover Rate | ||||||||
(1.28 | ) | 17.08 | 10.64 | 443,053 | .83 | .83 | 1.15 | 101 | ||||||||
(1.67 | ) | 16.64 | 1.11 | 454,341 | .84 | .84 | .84 | 99 | ||||||||
(2.90 | ) | 18.11 | 11.70 | 488,531 | .86 | .86 | 1.13 | 101 | ||||||||
(1.24 | ) | 18.85 | 32.92 | 475,100 | .84 | .84 | 1.07 | 86 | ||||||||
(.16 | ) | 15.15 | 15.69 | 390,549 | .87 | .87 | 1.28 | 109 |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 25
Russell Investment Funds
Multi-Style Equity Fund
Related Party Transactions, Fees and Expenses
Accrued fees payable to affiliates for the period ended December 31, 2016 were as follows: | ||
Advisory fees | $ | 275,177 |
Administration fees | 18,848 | |
Transfer agent fees | 1,658 | |
Trustee fees | 3,413 | |
$ | 299,096 |
Transactions (amounts in thousands) during the period ended December 31, 2016 with Underlying Funds which are, or were, an
affiliated company are as follows:
Fair Value, | Change in | ||||||||||||||||||
Beginning of | Realized Gain | Unrealized | Fair Value, End | Income | Capital Gains | ||||||||||||||
Period | Purchases | Sales | (Loss) | Gain (Loss) | of Period | Distributions | Distributions | ||||||||||||
U.S. Cash Management Fund | $ | 19,043 | $ | 159,373 | $ | 155,031 | $ | 3 | $ | 3 | $ | 23,391 | $ | 100 | $ | — | |||
$ | 19,043 | $ | 159,373 | $ | 155,031 | $ | 3 | $ | 3 | $ | 23,391 | $ | 100 | $ | — |
Federal Income Taxes
At December 31, 2016, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Cost of Investments | $ | 383,203,536 | ||
Unrealized Appreciation | $ | 63,934,443 | ||
Unrealized Depreciation | (5,768,277 | ) | ||
Net Unrealized Appreciation (Depreciation) | $ | 58,166,166 | ||
Undistributed Ordinary Income | $ | 5,835,513 | ||
Undistributed Long-Term Capital Gains | ||||
(Capital Loss Carryforward) | $ | 9,253,731 | ||
Tax Composition of Distributions | ||||
Ordinary Income | $ | 8,651,011 | ||
Long-Term Capital Gains | $ | 23,881,563 |
Net investment income and net realized gains (losses) in the financial statements may differ from taxable net investment income and
net realized gains (losses). Capital accounts within the financial statements are adjusted for permanent book-tax differences. Book-tax
differences are primarily due to foreign currency gains and losses, reclassifications of dividends, differences in treatment of income
from swaps, net operating losses, investments in partnerships, investments in passive foreign investment companies (PFICs), tax
straddle transaction, use of tax equalization and foreign capital gains taxes. These adjustments have no impact on the net assets. At
December 31, 2016, there were no adjustments to the Statement of Assets and Liabilities.
See accompanying notes which are an integral part of the financial statements.
26 Multi-Style Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Portfolio Management Discussion and Analysis — December 31, 2016 (Unaudited)
Aggressive Equity Fund | Aggressive Equity Linked Benchmark*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 18.66 | % | 1 Year | 21.31 | % | ||
5 Years | 12.65 | %§ | 5 Years | 14.72 | %§ | ||
10 Years | 5.34 | %§ | 10 Years | 7.77 | %§ | ||
Russell 2000® Index** | |||||||
Total | |||||||
Return | |||||||
1 Year | 21.31 | % | |||||
5 Years | 14.46 | %§ | |||||
10 Years | 7.07 | %§ |
Aggressive Equity Fund 27
Russell Investment Funds
Aggressive Equity Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
The Aggressive Equity Fund (the “Fund”) employs a multi- | the back half of 2016, amid anticipation for Trump policies post- | ||
manager approach whereby Russell Investment Management, | election, an expected shift towards trade protectionism renewed | ||
LLC (“RIM”) manages a portion of the Fund's assets based upon | focus on U.S. domestic companies which resulted in small cap | ||
model portfolios provided by multiple non-discretionary money | markets rallying almost 9% in the fourth quarter. | ||
managers. The Fund’s money managers have non-discretionary | Over the period, the Fund maintained exposure to small and micro | ||
asset management assignments pursuant to which they provide | capitalization stocks trading at discounted valuations as well | ||
a model portfolio to RIM representing their investment | as companies with higher quality characteristics such as lower | ||
recommendations, based upon which RIM purchases and sells | financial leverage and higher returns-on-equity. Within the U.S. | ||
securities for the Fund. RIM also manages the portion of the | small cap market, a preference for smaller capitalization stocks | ||
Fund’s assets that RIM determines not to manage based upon | positively impacted Fund performance. Meanwhile, the Fund’s | ||
model portfolios provided by the Fund's money managers. RIM | quality positioning was a negative contributor as companies with | ||
may change the allocation of the Fund's assets at any time. An | low financial leverage lagged. An overweight to higher momentum | ||
exemptive order from the Securities and Exchange Commission | stocks was also a headwind. | ||
(“SEC”) permits RIM to engage or terminate a money manager | |||
at any time, subject to approval by the Fund’s Board, without a | From a sector standpoint, the expectation for a slow growth | ||
shareholder vote. Pursuant to the terms of the exemptive order, the | U.S. economic environment led to the Fund’s overweight in | ||
Fund is required to notify its shareholders within 90 days of when | sectors such as technology and industrials. The Fund remained | ||
a money manager begins providing services. As of December 31, | underweight the highly volatile biotechnology industry as well | ||
2016, the Fund had five money managers. | as sectors that are traditionally considered to be interest rate | ||
sensitive such as real estate and utilities. The Fund’s interest rate | |||
What is the Fund’s investment objective? | sensitive positioning detracted from Fund performance, while | ||
The Fund seeks to provide long term capital growth. | the underweight to biotech was additive. Stock selection was the | ||
primary headwind due to underperforming holdings within the | |||
How did the Fund perform relative to its benchmark for the | technology and consumer discretionary sectors. | ||
fiscal year ended December 31, 2016? | |||
For the fiscal year ended December 31, 2016, the Fund gained | How did the investment strategies and techniques employed | ||
18.66%. This is compared to the Fund’s benchmark, the Russell | by the Fund and its money managers affect its benchmark- | ||
2000® Index, which gained 21.31% during the same period. The | relative performance? | ||
Fund’s performance includes operating expenses, whereas index | The Fund’s money managers have non-discretionary asset | ||
returns are unmanaged and do not include expenses of any kind. | management assignments pursuant to which they provide a model | ||
For the fiscal year ended December 31, 2016, the Morningstar® | portfolio to RIM representing their investment recommendations, | ||
Insurance Small Blend Category, a group of funds that Morningstar | based upon which RIM purchases and sells securities for the | ||
considers to have investment strategies similar to those of the | Fund. With respect to this portion of the Fund, RIM manages | ||
Fund, gained 21.50%. This result serves as a peer comparison | the Fund’s assets based upon the model portfolios provided by | ||
and is expressed net of operating expenses. | the Fund’s money managers. RIM also manages the portion of | ||
the Fund's assets that RIM determines not to manage based upon | |||
RIM may assign a money manager a specific style or | model portfolios provided by the Fund's money managers. This | ||
capitalization benchmark other than the Fund’s index. However, | includes assets managed directly by RIM to effect the Fund's | ||
the Fund’s primary index remains the benchmark for the Fund | investment strategies and/or to actively manage the Fund's overall | ||
and is representative of the aggregate of each money manager’s | exposures to seek to achieve the desired risk/return profile for the | ||
benchmark index. | Fund. RIM also manages the Fund’s liquidity reserves. | ||
How did the market conditions described in the Market | With respect to certain of the Fund’s money managers, DePrince, | ||
Summary report affect the Fund’s performance? | Race & Zollo, Inc. (“DePrince”) was the best performing money | ||
The fiscal year ended December 31, 2016 saw the Fund | manager for the fiscal year and outperformed the Russell 2000® | ||
underperform the Russell 2000® Index. Through the beginning | Value Index. Stock selection within the energy and financials | ||
of 2016 into mid-February, the U.S. small cap market sold off as | sectors was a positive contributor. A preference for holdings with | ||
recessionary fears spiked on the back of weak business surveys, | lower levels of momentum was also beneficial. | ||
a lackluster U.S. earnings season, and concerns surrounding the | Timpani Capital Management LLC (“Timpani”) faced the strongest | ||
global economy. From February, markets reversed and rallied in | headwinds over the fiscal year and underperformed the Russell | ||
tandem with commodity prices as economic data strengthened. In | 2000® Growth Index. Stock selection within the technology and |
28 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
consumer discretionary sectors negatively impacted performance. | Describe any changes to the Fund’s structure or the money | |
An overweight to volatility and higher momentum stocks were the | manager line-up. | |
primary headwinds over the period. | There were no changes to the Fund’s structure or money manager | |
During the period, RIM utilized a positioning strategy to control | line-up during the fiscal year. | |
Fund-level exposures and risks through the purchase of a | ||
diversified stock portfolio. Using the output from a quantitative | Money Managers as of December 31, | |
model, the strategy seeks to position the portfolio to meet RIM’s | 2016 | Styles |
overall preferred positioning with respect to Fund exposures along | DePrince, Race & Zollo, Inc. | Small Cap Value |
Monarch Partners Asset Management, LLC | Small Cap Core | |
factor and industry dimensions. Over the period, the positioning | RBC Global Asset Management (U.S.) Inc. | Micro Cap Core |
strategy was designed to provide lower capitalization, and higher | Snow Capital Management L.P. | Small Cap Value |
value and quality exposure relative to the Fund’s benchmark in | Timpani Capital Management, LLC | Small Cap Growth |
order to manage Fund-level risk. | The views expressed in this report reflect those of the | |
The positioning strategy underperformed the Russell 2000® Index | portfolio managers only through the end of the period | |
for the fiscal year. An underweight to the industrials sector was | covered by the report. These views do not necessarily | |
penalized as was the quality positioning as holdings with higher | represent the views of RIM, or any other person in RIM or | |
profitability and lower levels of financial leverage negatively | any other affiliated organization. These views are subject to | |
impacted performance. An overweight to stocks trading at low | change at any time based upon market conditions or other | |
valuation multiples offset further losses. | events, and RIM disclaims any responsibility to update the | |
views contained herein. These views should not be relied | ||
During the period, RIM equitized the Fund’s cash using index | on as investment advice and, because investment decisions | |
futures contracts to provide the Fund with full market exposure. | for a Russell Investment Funds (“RIF”) Fund are based on | |
This had a positive impact on the Fund’s performance. | numerous factors, should not be relied on as an indication | |
of investment decisions of any RIF Fund. |
* Assumes initial investment on January 1, 2007.
** Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000® Index is a subset of the Russell 3000®
Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a
combination of their market cap and current index membership. The Russell 2000® Index is constructed to provide a comprehensive and unbiased small-cap
opportunity barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap
opportunity set.
*** The Aggressive Equity Linked Benchmark provides a means to compare the Fund’s average annual returns to a secondary benchmark that takes into account
historical changes in the Fund’s primary benchmark. The Aggressive Equity Linked Benchmark represents the returns of the Russell 2500TM Index through
April 30, 2012 and the returns of the Russell 2000® Index thereafter.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results. Additionally, the returns presented herein may differ from the performance reported
in the Financial Highlights as the returns herein are calculated in a manner consistent with standardized performance in accordance with Securities and Exchange
Commission rules, while the performance in the Financial Highlights has been calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”).
Aggressive Equity Fund 29
Russell Investment Funds
Aggressive Equity Fund
Shareholder Expense Example — December 31, 2016 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2016 to December 31, 2016. | July 1, 2016 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2016 | $ | 1,164.20 | $ | 1,020.06 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 5.49 | $ | 5.13 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 1.01% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/366 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | |||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
30 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
Common Stocks - 95.1% | Penn National Gaming, Inc.(Æ) | 45,694 | 630 | ||||
Consumer Discretionary - 13.1% | Performance Sports Group, Ltd.(Æ) | 15,783 | 24 | ||||
Acushnet Holdings Corp.(Æ) | 19,662 | 388 | Planet Fitness, Inc. Class A | 25,508 | 513 | ||
American Axle & Manufacturing Holdings, | Red Robin Gourmet Burgers, Inc.(Æ) | 4,152 | 234 | ||||
Inc.(Æ) | 4,433 | 86 | RH(Æ) | 5,388 | 165 | ||
American Eagle Outfitters, Inc.(Ñ) | 16,430 | 249 | Salem Media Group, Inc. Class A | 33,092 | 207 | ||
American Outdoor Brands Corp.(Æ) | 18,056 | 381 | Skechers U.S.A., Inc. Class A(Æ) | 11,042 | 271 | ||
Big Lots, Inc.(Ñ) | 25,653 | 1,289 | SodaStream International, Ltd.(Æ) | 10,035 | 396 | ||
Bloomin' Brands, Inc. | 55,570 | 1,003 | Stamps.com, Inc.(Æ)(Ñ) | 8,095 | 929 | ||
Blue Nile, Inc. | 4,814 | 196 | Steven Madden, Ltd.(Æ) | 6,234 | 223 | ||
Bojangles', Inc.(Æ) | 18,352 | 342 | Superior Uniform Group, Inc. | 10,370 | 203 | ||
Boot Barn Holdings, Inc.(Æ)(Ñ) | 16,051 | 201 | Tandy Leather Factory, Inc.(Æ) | 36,727 | 297 | ||
Build-A-Bear Workshop, Inc. Class A(Æ) | 9,986 | 137 | Tenneco, Inc.(Æ) | 4,878 | 305 | ||
Cato Corp. (The) Class A | 6,430 | 193 | Texas Roadhouse, Inc. Class A | 3,500 | 169 | ||
Central Garden & Pet Co.(Æ) | 8,416 | 278 | Tower International, Inc. | 2,308 | 65 | ||
Century Communities, Inc.(Æ) | 20,448 | 429 | TRI Pointe Group, Inc.(Æ) | 8,874 | 102 | ||
Chegg, Inc.(Æ) | 56,568 | 417 | Tuesday Morning Corp.(Æ) | 9,829 | 53 | ||
Chico's FAS, Inc. | 20,366 | 293 | Universal Electronics, Inc.(Æ) | 17,434 | 1,126 | ||
Children's Place, Inc. (The) | 5,060 | 511 | Vera Bradley, Inc.(Æ) | 4,875 | 57 | ||
ClubCorp Holdings, Inc. | 52,229 | 749 | Winnebago Industries, Inc. | 4,035 | 128 | ||
Columbia Sportswear Co. | 12,914 | 753 | Wolverine World Wide, Inc. | 28,984 | 636 | ||
Conn's, Inc.(Æ) | 17,894 | 226 | ZAGG, Inc.(Æ) | 58,455 | 415 | ||
Cooper Tire & Rubber Co. | 6,843 | 266 | Zoe's Kitchen, Inc.(Æ)(Ñ) | 9,231 | 221 | ||
Cooper-Standard Holdings, Inc.(Æ) | 399 | 41 | 29,978 | ||||
Dana, Inc. | 6,005 | 114 | |||||
Dave & Buster's Entertainment, Inc.(Æ) | 7,563 | 426 | |||||
Delta Apparel, Inc.(Æ) | 25,605 | 531 | Consumer Staples - 2.7% | ||||
Destination Maternity Corp.(Æ) | 8,633 | 45 | Andersons, Inc. (The) | 28,351 | 1,268 | ||
Destination XL Group, Inc.(Æ) | 71,373 | 303 | Cal-Maine Foods, Inc.(Æ)(Ñ) | 2,252 | 99 | ||
Duluth Holdings, Inc. Class B(Æ) | 1,333 | 34 | Flowers Foods, Inc. | 22,003 | 439 | ||
Express, Inc.(Æ) | 11,337 | 122 | Hain Celestial Group, Inc. (The)(Æ) | 12,960 | 506 | ||
Finish Line, Inc. (The) Class A | 43,823 | 824 | J&J Snack Foods Corp. | 1,257 | 168 | ||
Fox Factory Holding Corp.(Æ) | 38,369 | 1,066 | John B Sanfilippo & Son, Inc. | 10,781 | 759 | ||
Gentherm, Inc.(Æ) | 2,280 | 77 | Lancaster Colony Corp. | 160 | 23 | ||
Grand Canyon Education, Inc.(Æ) | 9,867 | 577 | Medifast, Inc. | 2,179 | 91 | ||
Gray Television, Inc.(Æ) | 51,615 | 560 | MGP Ingredients, Inc. | 6,409 | 320 | ||
Habit Restaurants, Inc. (The) Class A(Æ) | 10,796 | 186 | Omega Protein Corp.(Æ) | 13,270 | 332 | ||
Helen of Troy, Ltd.(Æ) | 1,199 | 101 | Primo Water Corp.(Æ) | 47,582 | 584 | ||
Hibbett Sports, Inc.(Æ)(Ñ) | 15,661 | 584 | Snyders-Lance, Inc. | 25,025 | 960 | ||
HSN, Inc. | 18,337 | 629 | Universal Corp. | 2,650 | 169 | ||
IMAX Corp.(Æ) | 3,131 | 98 | USANA Health Sciences, Inc.(Æ) | 1,116 | 68 | ||
Jack in the Box, Inc. | 1,995 | 223 | Village Super Market, Inc. Class A | 3,140 | 97 | ||
Kona Grill, Inc.(Æ)(Ñ) | 17,478 | 219 | Weis Markets, Inc. | 2,527 | 169 | ||
LGI Homes, Inc.(Æ)(Ñ) | 10,783 | 310 | 6,052 | ||||
Libbey, Inc. | 24,330 | 473 | |||||
Lithia Motors, Inc. Class A | 3,180 | 308 | Energy - 4.4% | ||||
Malibu Boats, Inc. Class A(Æ) | 23,319 | 445 | Callon Petroleum Co.(Æ) | 75,958 | 1,168 | ||
Marcus Corp. | 23,036 | 726 | Delek US Holdings, Inc. | 31,165 | 750 | ||
MarineMax, Inc.(Æ) | 21,675 | 419 | Gulfport Energy Corp.(Æ) | 12,057 | 261 | ||
Marriott Vacations Worldwide Corp. | 6,498 | 551 | Hostess Brands, Inc.(Æ) | 56,523 | 735 | ||
Meredith Corp. | 7,394 | 437 | Matrix Service Co.(Æ) | 4,540 | 103 | ||
Nautilus, Inc.(Æ) | 27,467 | 508 | Oceaneering International, Inc. | 31,018 | 875 | ||
Nutrisystem, Inc. | 15,713 | 544 | Oil States International, Inc.(Æ) | 2,712 | 106 | ||
Ollie's Bargain Outlet Holdings, Inc.(Æ) | 20,808 | 592 | PBF Energy, Inc. Class A | 91,396 | 2,549 | ||
Outfront Media, Inc. (ö) | 31,486 | 783 | Ring Energy, Inc.(Æ) | 37,682 | 489 | ||
Oxford Industries, Inc. | 10,606 | 638 | Southwestern Energy Co.(Æ) | 102,876 | 1,113 | ||
Panera Bread Co. Class A(Æ) | 1,563 | 321 | Synergy Resources Corp.(Æ)(Ñ) | 75,680 | 674 | ||
Papa John's International, Inc. | 4,065 | 348 | Western Refining, Inc. | 3,096 | 117 | ||
Papa Murphy's Holdings, Inc.(Æ)(Ñ) | 14,025 | 59 | Whiting Petroleum Corp.(Æ) | 67,844 | 815 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 31
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
WPX Energy, Inc.(Æ) | 22,858 | 333 | First Foundation, Inc.(Æ) | 1,232 | 35 | ||
10,088 | First Horizon National Corp. | 49,378 | 988 | ||||
First Industrial Realty Trust, Inc.(ö) | 3,387 | 95 | |||||
Financial Services - 24.4% | First Interstate BancSystem, Inc. Class A | 6,380 | 271 | ||||
Acadia Realty Trust(ö) | 2,389 | 78 | First Merchants Corp. | 14,656 | 552 | ||
Agree Realty Corp.(ö) | 5,965 | 275 | First Midwest Bancorp, Inc. | 23,331 | 589 | ||
Alexander's, Inc. (ö) | 188 | 80 | First NBC Bank Holding Co.(Æ)(Ñ) | 6,232 | 45 | ||
Ambac Financial Group, Inc.(Æ) | 7,581 | 171 | Flagstar Bancorp, Inc.(Æ) | 6,431 | 173 | ||
American Assets Trust, Inc. (ö) | 1,311 | 56 | FNB Corp. | 194,561 | 3,118 | ||
American Equity Investment Life Holding | Franklin Financial Network, Inc.(Æ) | 11,039 | 462 | ||||
Co. | 72,948 | 1,644 | Franklin Street Properties Corp. (ö) | 6,261 | 81 | ||
Amerisafe, Inc. | 21,055 | 1,313 | Fulton Financial Corp. | 4,538 | 85 | ||
Ares Commercial Real Estate Corp. (ö) | 3,937 | 54 | Genworth Financial, Inc. Class A(Æ) | 18,598 | 71 | ||
Armada Hoffler Properties, Inc. (ö) | 4,066 | 59 | German American Bancorp, Inc. | 8,249 | 434 | ||
Ashford Hospitality Trust, Inc. (ö) | 9,861 | 77 | Getty Realty Corp. (ö) | 3,214 | 82 | ||
Astoria Financial Corp. | 18,017 | 336 | Gladstone Commercial Corp. (Ñ)(ö) | 3,218 | 65 | ||
Atlas Financial Holdings, Inc.(Æ) | 19,844 | 358 | Government Properties Income Trust (ö) | 3,473 | 66 | ||
Banc of California, Inc.(Ñ) | 12,568 | 218 | Gramercy Property Trust (ö) | 21,118 | 194 | ||
BancFirst Corp. | 838 | 78 | Great Ajax Corp. (ö) | 4,085 | 54 | ||
Bancorp, Inc. (The)(Æ) | 65,548 | 515 | Green Dot Corp. Class A(Æ) | 40,584 | 956 | ||
Bank of the Ozarks, Inc. | 1,646 | 87 | Hancock Holding Co. | 12,408 | 535 | ||
Banner Corp. | 14,272 | 797 | Hannon Armstrong Sustainable Infrastructure | ||||
BofI Holding, Inc.(Æ) | 6,950 | 198 | Capital, Inc. (ö) | 1,804 | 34 | ||
Brandywine Realty Trust(ö) | 35,540 | 587 | Hanover Insurance Group, Inc. (The) | 16,334 | 1,487 | ||
Brookline Bancorp, Inc. | 21,382 | 351 | Healthcare Realty Trust, Inc.(ö) | 3,181 | 96 | ||
Capitol Federal Financial, Inc. | 7,247 | 119 | Heritage Financial Corp. | 18,192 | 468 | ||
CareTrust, Inc. (ö) | 4,510 | 69 | Hersha Hospitality Trust Class A(ö) | 3,384 | 73 | ||
CatchMark Timber Trust, Inc. Class A(ö) | 6,505 | 73 | Hilltop Holdings, Inc. | 12,638 | 377 | ||
Cathay General Bancorp | 2,373 | 90 | Houlihan Lokey, Inc. Class A | 8,661 | 270 | ||
Cedar Realty Trust, Inc. (ö) | 6,993 | 46 | Hudson Pacific Properties, Inc.(ö) | 18,562 | 646 | ||
Chatham Lodging Trust (ö) | 2,957 | 61 | Iberiabank Corp. | 12,454 | 1,043 | ||
Chemical Financial Corp. | 11,476 | 622 | Investors Real Estate Trust (Ñ)(ö) | 7,533 | 54 | ||
Chesapeake Lodging Trust(ö) | 2,838 | 73 | iStar, Inc. (Æ)(ö) | 5,583 | 69 | ||
CoBiz Financial, Inc. | 23,871 | 403 | JER Investment Trust, Inc.(Æ)(Å) | 1,771 | — | ||
Cohen & Steers, Inc. | 18,485 | 621 | Kinsale Capital Group, Inc. | 4,540 | 154 | ||
Collectors Universe, Inc. | 946 | 20 | Kite Realty Group Trust (ö) | 2,885 | 68 | ||
Colony Capital, Inc. Class A(Ñ)(ö) | 4,293 | 87 | LaSalle Hotel Properties(ö) | 5,432 | 166 | ||
Colony Starwood Homes(ö) | 2,863 | 82 | LendingTree, Inc.(Æ) | 7,126 | 722 | ||
Columbia Banking System, Inc. | 4,953 | 221 | Lexington Realty Trust (ö) | 8,191 | 88 | ||
Columbia Property Trust, Inc.(ö) | 25,699 | 555 | LTC Properties, Inc. (ö) | 1,708 | 80 | ||
Community Bank System, Inc. | 7,265 | 449 | Mack-Cali Realty Corp.(ö) | 3,216 | 93 | ||
Community Healthcare Trust, Inc. (ö) | 20,019 | 461 | Medical Properties Trust, Inc.(ö) | 7,262 | 89 | ||
CoreSite Realty Corp. Class A(ö) | 1,428 | 113 | Mercantile Bank Corp. | 11,768 | 444 | ||
Cousins Properties, Inc.(ö) | 11,957 | 102 | Meridian Bancorp, Inc. | 56,944 | 1,076 | ||
DuPont Fabros Technology, Inc.(ö) | 2,152 | 95 | MGIC Investment Corp.(Æ) | 31,245 | 318 | ||
Easterly Government Properties, Inc. (ö) | 4,564 | 91 | Midland States Bancorp, Inc. | 2,628 | 95 | ||
EastGroup Properties, Inc. (ö) | 1,144 | 84 | Monmouth Real Estate Investment Corp. (ö) | 5,583 | 85 | ||
Education Realty Trust, Inc.(ö) | 17,179 | 727 | National Bank Holdings Corp. Class A | 9,117 | 291 | ||
Employers Holdings, Inc. | 5,322 | 211 | National General Holdings Corp. | 27,478 | 687 | ||
Equity Commonwealth (Æ)(ö) | 6,371 | 193 | National Health Investors, Inc.(ö) | 1,180 | 88 | ||
Essent Group, Ltd.(Æ) | 1,103 | 36 | National Storage Affiliates Trust (ö) | 3,035 | 67 | ||
Evercore Partners, Inc. Class A | 2,553 | 175 | National Western Life Group, Inc. Class A | 375 | 117 | ||
FCB Financial Holdings, Inc. Class A(Æ) | 9,720 | 464 | Navigators Group, Inc. (The) | 3,135 | 369 | ||
FelCor Lodging Trust, Inc. (ö) | 7,075 | 57 | New Residential Investment Corp. (ö) | 4,047 | 64 | ||
Fidelity & Guaranty Life | 7,589 | 180 | Northrim BanCorp, Inc. | 15,426 | 487 | ||
First Bancorp | 13,469 | 366 | Northwest Bancshares, Inc. | 19,593 | 353 | ||
First Citizens BancShares, Inc. Class A | 238 | 84 | OFG Bancorp | 109,783 | 1,438 | ||
First Commonwealth Financial Corp. | 78,522 | 1,113 | Old National Bancorp | 52,017 | 944 | ||
OM Asset Management PLC | 71,181 | 1,032 |
See accompanying notes which are an integral part of the financial statements.
32 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
OneBeacon Insurance Group, Ltd. Class A | 17,446 | 280 | Zions Bancorporation | 33,976 | 1,462 | ||
Owens Realty Mortgage, Inc. (ö) | 3,054 | 57 | 55,849 | ||||
Pacific Premier Bancorp, Inc.(Æ) | 35,139 | 1,242 | |||||
Parkway, Inc.(Æ)(ö) | 2,631 | 59 | Health Care - 8.9% | ||||
Pebblebrook Hotel Trust(ö) | 2,966 | 88 | Abaxis, Inc. | 1,284 | 68 | ||
Pennsylvania Real Estate Investment Trust | Abiomed, Inc.(Æ) | 2,955 | 333 | ||||
(ö) | 2,586 | 49 | Adamas Pharmaceuticals, Inc.(Æ)(Ñ) | 1,561 | 26 | ||
Physicians Realty Trust(ö) | 6,627 | 126 | Aduro Biotech, Inc. Class A(Æ)(Ñ) | 3,663 | 42 | ||
Potlatch Corp. (ö) | 17,402 | 725 | Advaxis, Inc.(Æ)(Ñ) | 4,483 | 32 | ||
Preferred Apartment Communities, Inc. Class | Akorn, Inc.(Æ) | 18,039 | 394 | ||||
A(ö) | 4,414 | 66 | Alder Biopharmaceuticals, Inc.(Æ) | 1,424 | 30 | ||
Preferred Bank | 11,109 | 582 | Amicus Therapeutics, Inc.(Æ)(Ñ) | 7,811 | 39 | ||
PrivateBancorp, Inc. Class A | 4,616 | 250 | Analogic Corp. | 5,144 | 427 | ||
ProAssurance Corp. | 6,657 | 374 | Anavex Life Sciences Corp.(Æ)(Ñ) | 16,801 | 67 | ||
Prosperity Bancshares, Inc. | 11,416 | 819 | Anika Therapeutics, Inc.(Æ) | 1,012 | 50 | ||
QCR Holdings, Inc. | 1,584 | 69 | Ardelyx, Inc.(Æ)(Ñ) | 3,231 | 46 | ||
QTS Realty Trust, Inc. Class A(ö) | 2,117 | 105 | ARIAD Pharmaceuticals, Inc.(Æ) | 6,865 | 85 | ||
Radian Group, Inc. | 19,747 | 355 | Array BioPharma, Inc.(Æ) | 6,948 | 61 | ||
Ramco-Gershenson Properties Trust (ö) | 4,208 | 70 | Asterias Biotherapeutics, Inc.(Æ)(Ñ) | 15,324 | 70 | ||
Real Industry, Inc.(Æ) | 33,517 | 204 | Athersys, Inc.(Æ)(Ñ) | 16,854 | 26 | ||
Redwood Trust, Inc. (ö) | 4,654 | 71 | Atrion Corp. | 340 | 172 | ||
Resource Capital Corp. (ö) | 528 | 4 | Avexis, Inc.(Æ) | 968 | 46 | ||
Retail Opportunity Investments Corp.(ö) | 28,165 | 595 | AxoGen, Inc.(Æ) | 30,170 | 272 | ||
Rexford Industrial Realty, Inc.(ö) | 3,219 | 75 | Axovant Sciences, Ltd.(Æ)(Ñ) | 3,421 | 42 | ||
RLJ Lodging Trust(ö) | 4,253 | 104 | Bellicum Pharmaceuticals, Inc.(Æ)(Ñ) | 2,857 | 39 | ||
Sabra Health Care , Inc. (ö) | 2,341 | 57 | BioCryst Pharmaceuticals, Inc.(Æ) | 11,458 | 73 | ||
Safeguard Scientifics, Inc.(Æ) | 11,803 | 159 | BioScrip, Inc.(Æ) | 27,956 | 29 | ||
Saul Centers, Inc. (ö) | 744 | 50 | BioTelemetry, Inc.(Æ) | 17,393 | 389 | ||
Select Income (ö) | 3,162 | 80 | BioTime, Inc.(Æ)(Ñ) | 15,959 | 58 | ||
Seritage Growth Properties (Ñ)(ö) | 1,405 | 60 | Bluebird Bio, Inc.(Æ)(Ñ) | 930 | 57 | ||
SLM Corp.(Æ) | 33,705 | 371 | Blueprint Medicines Corp.(Æ) | 2,047 | 57 | ||
STAG Industrial, Inc. (ö) | 23,897 | 570 | Cambrex Corp.(Æ) | 10,728 | 579 | ||
State Auto Financial Corp. | 6,549 | 176 | Cardiovascular Systems, Inc.(Æ) | 9,943 | 241 | ||
State Bank Financial Corp. | 10,908 | 293 | Celldex Therapeutics, Inc.(Æ)(Ñ) | 11,196 | 40 | ||
Sterling Bancorp | 24,524 | 574 | Chemed Corp. | 1,234 | 198 | ||
Stifel Financial Corp.(Æ) | 4,846 | 242 | ChemoCentryx, Inc.(Æ) | 6,010 | 44 | ||
STORE Capital Corp.(ö) | 23,689 | 585 | Cidara Therapeutics, Inc.(Æ)(Ñ) | 4,981 | 52 | ||
Summit Hotel Properties, Inc. (ö) | 4,870 | 78 | Dimension Therapeutics, Inc.(Æ) | 11,816 | 51 | ||
TCF Financial Corp. | 41,799 | 819 | Editas Medicine, Inc.(Æ) | 2,045 | 33 | ||
Terreno Realty Corp.(ö) | 4,331 | 123 | Eiger BioPharmaceuticals, Inc.(Æ)(Ñ) | 3,053 | 36 | ||
Texas Capital Bancshares, Inc.(Æ) | 5,497 | 431 | Envision Healthcare Corp.(Æ) | 6,683 | 423 | ||
TrustCo Bank Corp. | 14,199 | 124 | Enzo Biochem, Inc.(Æ) | 7,742 | 54 | ||
UMB Financial Corp. | 9,555 | 737 | Epizyme, Inc.(Æ)(Ñ) | 4,164 | 50 | ||
Umpqua Holdings Corp. | 4,950 | 93 | Exact Sciences Corp.(Æ) | 4,406 | 59 | ||
Universal Health Realty Income Trust (ö) | 836 | 55 | Exactech, Inc.(Æ) | 11,101 | 303 | ||
Univest Corp. of Pennsylvania | 3,357 | 104 | Exelixis, Inc.(Æ) | 6,365 | 95 | ||
Urban Edge Properties(ö) | 2,998 | 82 | FibroGen, Inc.(Æ) | 2,949 | 63 | ||
Urstadt Biddle Properties, Inc. Class A(ö) | 3,826 | 92 | Flexion Therapeutics, Inc.(Æ) | 2,690 | 51 | ||
Voya Financial, Inc. | 20,957 | 822 | Foundation Medicine, Inc.(Æ)(Ñ) | 2,032 | 36 | ||
Washington Prime Group, Inc.(ö) | 7,070 | 74 | Glaukos Corp.(Æ) | 18,852 | 647 | ||
Washington Real Estate Investment Trust(ö) | 2,755 | 90 | Global Blood Therapeutics, Inc.(Æ)(Ñ) | 2,491 | 36 | ||
WesBanco, Inc. | 19,180 | 826 | Globus Medical, Inc. Class A(Æ) | 9,576 | 238 | ||
Westamerica Bancorporation | 1,126 | 71 | GlycoMimetics, Inc.(Æ) | 7,264 | 44 | ||
Western Alliance Bancorp(Æ) | 9,518 | 464 | Halozyme Therapeutics, Inc.(Æ) | 5,793 | 57 | ||
Whitestone Class B(ö) | 4,509 | 65 | Healthways, Inc.(Æ) | 22,176 | 505 | ||
Wintrust Financial Corp. | 13,383 | 971 | Heska Corp.(Æ) | 15,576 | 1,115 | ||
WisdomTree Investments, Inc.(Ñ) | 9,197 | 102 | ICU Medical, Inc.(Æ) | 9,044 | 1,333 | ||
Xenia Hotels & Resorts, Inc.(ö) | 4,378 | 85 | Immune Design Corp.(Æ) | 5,610 | 31 | ||
Xenith Bankshares, Inc.(Æ) | 1,225 | 35 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 33
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
INC Research Holdings, Inc. Class A(Æ) | 16,967 | 892 | FMC Corp. | 9,245 | 523 | ||
Inogen, Inc.(Æ) | 12,325 | 828 | FutureFuel Corp. | 19,720 | 274 | ||
Inovio Pharmaceuticals, Inc.(Æ)(Ñ) | 8,266 | 57 | Haynes International, Inc. | 10,007 | 430 | ||
Integra LifeSciences Holdings Corp.(Æ) | 6,102 | 523 | Ingevity Corp.(Æ) | 10,273 | 564 | ||
Ironwood Pharmaceuticals, Inc. Class A(Æ) | 5,181 | 79 | Insteel Industries, Inc. | 8,604 | 307 | ||
Kindred Healthcare, Inc. | 46,739 | 367 | Interface, Inc. Class A | 55,337 | 1,027 | ||
Kite Pharma, Inc.(Æ)(Ñ) | 1,495 | 67 | ITT, Inc. | 18,979 | 732 | ||
Lannett Co., Inc.(Æ)(Ñ) | 66,108 | 1,457 | KapStone Paper and Packaging Corp. | 29,831 | 658 | ||
Lexicon Pharmaceuticals, Inc.(Æ) | 3,650 | 50 | Koppers Holdings, Inc.(Æ) | 13,624 | 549 | ||
Ligand Pharmaceuticals, Inc. Class B(Æ)(Ñ) | 4,418 | 449 | Kronos Worldwide, Inc.(Ñ) | 62,461 | 746 | ||
Loxo Oncology, Inc.(Æ)(Ñ) | 2,118 | 68 | Landec Corp.(Æ) | 15,132 | 209 | ||
MediciNova, Inc.(Æ) | 3,125 | 19 | LB Foster Co. Class A | 33,622 | 457 | ||
Minerva Neurosciences, Inc.(Æ) | 3,995 | 47 | LSB Industries, Inc.(Æ)(Ñ) | 90,540 | 762 | ||
National HealthCare Corp. | 3,999 | 303 | MRC Global, Inc.(Æ) | 25,632 | 519 | ||
NeoGenomics, Inc.(Æ) | 31,055 | 266 | NN, Inc. | 23,342 | 445 | ||
Nevro Corp.(Æ)(Ñ) | 4,861 | 353 | Omnova Solutions, Inc.(Æ) | 61,205 | 612 | ||
NuVasive, Inc.(Æ) | 11,550 | 778 | Owens-Illinois, Inc.(Æ) | 19,573 | 341 | ||
Ophthotech Corp.(Æ) | 1,333 | 6 | Patrick Industries, Inc.(Æ) | 18,399 | 1,405 | ||
Otonomy, Inc.(Æ) | 4,018 | 64 | PGT Innovations, Inc.(Æ) | 40,550 | 464 | ||
Owens & Minor, Inc. | 6,631 | 234 | PolyOne Corp. | 25,504 | 817 | ||
PAREXEL International Corp.(Æ) | 637 | 42 | Quaker Chemical Corp. | 551 | 70 | ||
Penumbra, Inc.(Æ)(Ñ) | 10,743 | 685 | Silgan Holdings, Inc. | 15,999 | 819 | ||
Pfenex, Inc.(Æ) | 1,996 | 18 | Summit Materials, Inc. Class A(Æ) | 19,186 | 456 | ||
PRA Health Sciences, Inc.(Æ) | 7,336 | 404 | UFP Technologies, Inc.(Æ) | 1,961 | 50 | ||
PTC Therapeutics, Inc.(Æ) | 8,139 | 89 | United States Steel Corp. | 20,884 | 689 | ||
Radius Health, Inc.(Æ)(Ñ) | 944 | 36 | Universal Stainless & Alloy Products, Inc.(Æ) | 17,017 | 230 | ||
Rigel Pharmaceuticals, Inc.(Æ) | 16,863 | 40 | US Concrete, Inc.(Æ) | 16,947 | 1,110 | ||
RTI Surgical, Inc.(Æ) | 15,899 | 52 | 20,139 | ||||
Sage Therapeutics, Inc.(Æ) | 904 | 46 | |||||
Sangamo BioSciences, Inc.(Æ) | 12,056 | 37 | Producer Durables - 16.3% | ||||
Sarepta Therapeutics, Inc.(Æ) | 1,939 | 53 | AAR Corp. | 16,268 | 538 | ||
Seres Therapeutics, Inc.(Æ)(Ñ) | 3,711 | 37 | ACCO Brands Corp.(Æ) | 129,228 | 1,685 | ||
Sorrento Therapeutics, Inc.(Æ)(Ñ) | 9,278 | 45 | Advanced Energy Industries, Inc.(Æ) | 12,765 | 699 | ||
Spark Therapeutics, Inc.(Æ) | 1,107 | 55 | Air Transport Services Group, Inc.(Æ) | 69,619 | 1,111 | ||
Supernus Pharmaceuticals, Inc.(Æ) | 11,062 | 279 | Altra Industrial Motion Corp. | 11,537 | 426 | ||
Surmodics, Inc.(Æ) | 8,219 | 209 | Atlas Air Worldwide Holdings, Inc.(Æ) | 23,115 | 1,205 | ||
Synergy Pharmaceuticals, Inc.(Æ)(Ñ) | 27,886 | 170 | AZZ, Inc. | 11,856 | 758 | ||
TESARO, Inc.(Æ) | 733 | 99 | Brink's Co. (The) | 11,480 | 474 | ||
Triple-S Management Corp. Class B(Æ) | 2,751 | 57 | Casella Waste Systems, Inc. Class A(Æ) | 61,136 | 759 | ||
Ultragenyx Pharmaceutical, Inc.(Æ) | 1,146 | 81 | CEB, Inc.(Æ) | 13,360 | 810 | ||
US Physical Therapy, Inc. | 7,903 | 555 | Chicago Bridge & Iron Co. | 6,663 | 212 | ||
Vanda Pharmaceuticals, Inc.(Æ) | 2,809 | 45 | Columbus McKinnon Corp. | 28,700 | 776 | ||
Versartis, Inc.(Æ)(Ñ) | 4,431 | 66 | Compass Diversified Holdings | 63,048 | 1,129 | ||
WebMD Health Corp. Class A(Æ) | 8,656 | 429 | Convergys Corp. | 2,896 | 71 | ||
Zeltiq Aesthetics, Inc.(Æ)(Ñ) | 6,824 | 297 | Covanta Holding Corp. | 45,412 | 708 | ||
20,277 | Crane Co. | 10,051 | 725 | ||||
Deluxe Corp. | 2,621 | 188 | |||||
Materials and Processing - 8.8% | Ducommun, Inc.(Æ) | 17,813 | 455 | ||||
A Schulman, Inc. | 46,221 | 1,547 | Dycom Industries, Inc.(Æ) | 5,950 | 478 | ||
Aceto Corp. | 8,435 | 185 | Ennis, Inc. | 19,667 | 341 | ||
Allegheny Technologies, Inc. | 16,828 | 268 | Essendant, Inc.(Æ) | 3,869 | 81 | ||
American Vanguard Corp. | 2,928 | 56 | Flir Systems, Inc. | 15,470 | 560 | ||
Armstrong Flooring, Inc.(Æ) | 3,238 | 64 | Forrester Research, Inc. | 1,122 | 48 | ||
Atkore International Group, Inc.(Æ)(Ñ) | 9,383 | 224 | Forward Air Corp. | 7,251 | 344 | ||
Beacon Roofing Supply, Inc.(Æ) | 4,834 | 223 | Genesee & Wyoming, Inc. Class A(Æ) | 5,113 | 355 | ||
Cabot Microelectronics Corp. | 9,504 | 600 | GP Strategies Corp.(Æ) | 10,659 | 305 | ||
Carpenter Technology Corp. | 16,870 | 610 | Granite Construction, Inc. | 20,321 | 1,118 | ||
Compass Minerals International, Inc.(Ñ) | 14,006 | 1,097 | Greenbrier Cos., Inc.(Ñ) | 12,347 | 513 |
See accompanying notes which are an integral part of the financial statements.
34 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) or | Value | Amount ($) or | Value | ||||
Shares | $ | Shares | $ | ||||
Hudson Technologies, Inc.(Æ) | 84,576 | 677 | Cypress Semiconductor Corp. | 108,541 | 1,241 | ||
John Bean Technologies Corp. | 9,761 | 839 | CYREN, Ltd.(Æ) | 67,902 | 146 | ||
KBR, Inc. | 80,120 | 1,336 | Datalink Corp.(Æ) | 4,754 | 54 | ||
Keysight Technologies, Inc.(Æ) | 17,104 | 625 | Diebold Nixdorf, Inc. | 66,806 | 1,679 | ||
KLX, Inc.(Æ) | 12,406 | 560 | Donnelley Financial Solutions, Inc.(Æ) | 15,391 | 354 | ||
Knight Transportation, Inc. | 12,449 | 411 | ePlus, Inc.(Æ) | 1,610 | 185 | ||
Korn/Ferry International | 30,655 | 902 | Evolent Health, Inc. Class A(Æ)(Ñ) | 7,961 | 118 | ||
LCI Industries | 2,471 | 266 | Exar Corp.(Æ) | 45,676 | 492 | ||
Lydall, Inc.(Æ) | 15,974 | 988 | Fabrinet(Æ) | 14,495 | 584 | ||
Marten Transport, Ltd. | 8,236 | 192 | Five9, Inc.(Æ) | 61,505 | 873 | ||
MasTec, Inc.(Æ) | 27,096 | 1,036 | FormFactor, Inc.(Æ) | 33,860 | 379 | ||
McGrath RentCorp | 20,865 | 818 | Gigamon, Inc.(Æ) | 18,907 | 861 | ||
Mitek Systems, Inc.(Æ) | 35,352 | 217 | Glu Mobile, Inc.(Æ)(Ñ) | 37,589 | 73 | ||
Modine Manufacturing Co.(Æ) | 30,805 | 459 | GTT Communications, Inc.(Æ) | 28,549 | 821 | ||
NV5 Global, Inc.(Æ) | 24,510 | 819 | II-VI, Inc.(Æ) | 14,848 | 440 | ||
Old Dominion Freight Line, Inc.(Æ) | 6,271 | 538 | Insight Enterprises, Inc.(Æ) | 7,206 | 291 | ||
On Assignment, Inc.(Æ) | 4,263 | 188 | Integrated Device Technology, Inc.(Æ) | 2,700 | 64 | ||
OSI Systems, Inc.(Æ) | 7,601 | 579 | iRobot Corp.(Æ) | 2,186 | 128 | ||
Polar Power, Inc.(Æ) | 16,210 | 145 | Ixia(Æ) | 17,641 | 284 | ||
Primoris Services Corp. | 40,792 | 929 | KEYW Holding Corp. (The)(Æ) | 22,420 | 264 | ||
Quanta Services, Inc.(Æ) | 21,663 | 755 | LogMeIn, Inc. | 5,415 | 523 | ||
Radiant Logistics, Inc.(Æ) | 77,379 | 302 | Lumentum Holdings, Inc.(Æ) | 22,308 | 862 | ||
Student Transportation, Inc. | 61,080 | 341 | Manhattan Associates, Inc.(Æ) | 10,364 | 550 | ||
Sun Hydraulics Corp. | 3,608 | 144 | Match Group, Inc.(Æ)(Ñ) | 13,140 | 225 | ||
Swift Transportation Co. Class A(Æ)(Ñ) | 8,988 | 219 | MeetMe, Inc.(Æ) | 9,496 | 47 | ||
Sykes Enterprises, Inc.(Æ) | 8,785 | 254 | Mercury Systems, Inc.(Æ) | 19,458 | 588 | ||
Terex Corp. | 34,929 | 1,101 | Methode Electronics, Inc. | 6,496 | 269 | ||
Tidewater, Inc.(Æ)(Ñ) | 172,120 | 587 | MKS Instruments, Inc. | 1,108 | 66 | ||
TransDigm Group, Inc. | 1,424 | 355 | Monolithic Power Systems, Inc. | 2,504 | 205 | ||
Triumph Group, Inc. | 34,552 | 916 | NETGEAR, Inc.(Æ) | 4,225 | 230 | ||
Vishay Precision Group, Inc.(Æ) | 14,904 | 282 | NIC, Inc. | 8,149 | 195 | ||
Wesco Aircraft Holdings, Inc.(Æ) | 48,176 | 720 | Novanta, Inc.(Æ) | 51,053 | 1,072 | ||
WNS Holdings, Ltd. - ADR(Æ) | 22,908 | 631 | Open Text Corp. | 12,374 | 765 | ||
Zebra Technologies Corp. Class A(Æ) | 15,579 | 1,336 | Orbotech, Ltd.(Æ) | 35,121 | 1,173 | ||
37,339 | PC Connection, Inc. | 10,048 | 282 | ||||
Pegasystems, Inc. | 10,093 | 363 | |||||
Technology - 14.7% | Photronics, Inc.(Æ) | 4,416 | 50 | ||||
A10 Networks, Inc.(Æ) | 26,276 | 218 | Q2 Holdings, Inc.(Æ) | 11,118 | 321 | ||
Acacia Research Corp.(Æ) | 53,194 | 346 | RADCOM, Ltd.(Æ) | 23,212 | 413 | ||
ADTRAN, Inc. | 56,582 | 1,264 | Rambus, Inc.(Æ) | 5,438 | 75 | ||
Airgain, Inc.(Æ) | 10,436 | 150 | RealPage, Inc.(Æ) | 21,144 | 634 | ||
Anixter International, Inc.(Æ) | 5,577 | 452 | Rudolph Technologies, Inc.(Æ) | 11,616 | 271 | ||
Asure Software, Inc.(Æ) | 7,451 | 63 | Sanmina Corp.(Æ) | 5,799 | 213 | ||
AVX Corp. | 3,898 | 61 | Sapiens International Corp. NV | 52,244 | 749 | ||
AXT, Inc.(Æ) | 26,156 | 126 | Sparton Corp.(Æ) | 10,625 | 253 | ||
Bazaarvoice, Inc.(Æ) | 15,685 | 76 | Streamline Health Solutions, Inc.(Æ) | 44,115 | 55 | ||
Benchmark Electronics, Inc.(Æ) | 10,706 | 327 | Synaptics, Inc.(Æ) | 4,752 | 255 | ||
Black Box Corp. | 27,323 | 417 | Synchronoss Technologies, Inc.(Æ) | 7,863 | 301 | ||
CACI International, Inc. Class A(Æ) | 852 | 106 | Syntel, Inc. | 5,333 | 106 | ||
Callidus Software, Inc.(Æ) | 15,218 | 256 | Tangoe, Inc.(Æ) | 17,784 | 140 | ||
Carbonite, Inc.(Æ) | 52,079 | 854 | Tech Data Corp.(Æ) | 620 | 53 | ||
Castlight Health, Inc. Class B(Æ) | 40,907 | 202 | TESSCO Technologies, Inc. | 17,246 | 224 | ||
CEVA, Inc.(Æ) | 18,427 | 618 | Tessera Holding Corp. | 28,066 | 1,241 | ||
Ciena Corp.(Æ) | 16,585 | 405 | TTM Technologies, Inc.(Æ) | 13,556 | 185 | ||
Coherent, Inc.(Æ) | 7,327 | 1,007 | Tyler Technologies, Inc.(Æ) | 3,861 | 551 | ||
Cohu, Inc. | 29,489 | 410 | Varonis Systems, Inc.(Æ) | 22,296 | 598 | ||
CommVault Systems, Inc.(Æ) | 16,802 | 864 | VeriFone Systems, Inc.(Æ) | 77,798 | 1,378 | ||
comScore, Inc.(Æ) | 3,494 | 110 | Web.com Group, Inc.(Æ) | 9,255 | 196 | ||
Wix.com, Ltd.(Æ) | 6,263 | 279 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 35
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | |||||||
Principal | Fair | ||||||
Amount ($) or | Value | ||||||
Shares | $ | ||||||
Xplore Technologies Corp.(Æ) | 41,484 | 84 | |||||
33,703 | |||||||
Utilities - 1.8% | |||||||
Allete, Inc. | 669 | 43 | |||||
ATN International, Inc. | 847 | 68 | |||||
Black Hills Corp. | 3,080 | 189 | |||||
Boingo Wireless, Inc.(Æ) | 35,960 | 438 | |||||
California Water Service Group | 2,148 | 73 | |||||
Chesapeake Utilities Corp. | 1,586 | 106 | |||||
Cogent Communications Holdings, Inc. | 6,188 | 256 | |||||
Dynegy, Inc. Class A(Æ) | 5,998 | 51 | |||||
Idacorp, Inc. | 3,418 | 275 | |||||
Northwest Natural Gas Co. | 1,055 | 63 | |||||
NorthWestern Corp. | 500 | 28 | |||||
NRG Yield, Inc. Class C | 3,328 | 53 | |||||
ONE Gas, Inc. | 4,630 | 296 | |||||
Ormat Technologies, Inc. | 1,412 | 76 | |||||
Portland General Electric Co. | 961 | 42 | |||||
Shenandoah Telecommunications Co. | 809 | 22 | |||||
Spire, Inc. | 4,041 | 261 | |||||
Spok Holdings, Inc. | 11,651 | 242 | |||||
Unitil Corp. | 18,623 | 844 | |||||
Vonage Holdings Corp.(Æ) | 70,732 | 485 | |||||
WGL Holdings, Inc. | 1,106 | 84 | |||||
3,995 | |||||||
Total Common Stocks | |||||||
(cost $182,085) | 217,420 | ||||||
Short-Term Investments - 4.2% | |||||||
U.S. Cash Management Fund | 9,565,025 | (8) | 9,567 | ||||
Total Short-Term Investments | |||||||
(cost $9,566) | 9,567 | ||||||
Other Securities - 5.5% | |||||||
U.S. Cash Collateral Fund(×) | 12,595,642 | (8) | 12,596 | ||||
Total Other Securities | |||||||
(cost $12,596) | 12,596 | ||||||
Total Investments 104.8% | |||||||
(identified cost $204,247) | 239,583 | ||||||
Other Assets and Liabilities, Net | |||||||
- | (4.8%) | (10,868 | ) | ||||
Net Assets - 100.0% | 228,715 |
See accompanying notes which are an integral part of the financial statements.
36 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2016
Restricted Securities | ||||||||||||
Amounts in thousands (except share and cost per unit amounts) | ||||||||||||
Principal | Cost per | Cost | Fair Value | |||||||||
% of Net Assets | Acquisition | Amount ($) | Unit | (000 | ) | (000 | ) | |||||
Securities | Date | or shares | $ | $ | $ | |||||||
0.0% | ||||||||||||
JER Investment Trust, Inc. | 05/27/04 | 1,771 | 82.03 | 145 | — | |||||||
— | ||||||||||||
For a description of restricted securities see note 7 in the Notes to Financial Statements. |
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
Russell 2000 Mini Index Futures | 140 | USD | 9,498 | 03/17 | (121 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | (121 | ) |
Presentation of Portfolio Holdings | ||||||||||||||||
Amounts in thousands | ||||||||||||||||
Fair Value | ||||||||||||||||
Practical | ||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | ||||||||||
Common Stocks | ||||||||||||||||
Consumer Discretionary | $ | 29,978 | $ | — | $ | — | $ | — | $ | 29,978 | 13.1 | |||||
Consumer Staples | 6,052 | — | — | — | 6,052 | 2.7 | ||||||||||
Energy | 10,088 | — | — | — | 10,088 | 4.4 | ||||||||||
Financial Services | 55,849 | — | — | — | 55,849 | 24.4 | ||||||||||
Health Care | 20,277 | — | — | — | 20,277 | 8.9 | ||||||||||
Materials and Processing | 20,139 | — | — | — | 20,139 | 8.8 | ||||||||||
Producer Durables | 37,339 | — | — | — | 37,339 | 16.3 | ||||||||||
Technology | 33,703 | — | — | — | 33,703 | 14.7 | ||||||||||
Utilities | 3,995 | — | — | — | 3,995 | 1.8 | ||||||||||
Short-Term Investments | — | — | — | 9,567 | 9,567 | 4.2 | ||||||||||
Other Securities | — | — | — | 12,596 | 12,596 | 5.5 | ||||||||||
Total Investments | 217,420 | — | — | 22,163 | 239,583 | 104.8 | ||||||||||
Other Assets and Liabilities, Net | (4.8 | ) | ||||||||||||||
100.0 | ||||||||||||||||
Other Financial Instruments | ||||||||||||||||
Liabilities | ||||||||||||||||
Futures Contracts | (121 | ) | — | — | — | (121 | ) | (0.1 | ) | |||||||
Total Other Financial Instruments* | $ | (121 | ) | $ | — | $ | — | $ | — | $ | (121 | ) |
* Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the investments.
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 37
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — December 31, 2016
(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified
in the fair value levels. The fair value amounts presented in the table are intended to permit reconciliation to the amounts presented in the Schedule of
Investments.
For a description of the Levels, see note 2 in the Notes to Financial Statements.
For a disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2016, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
38 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Fair Value of Derivative Instruments — December 31, 2016
Amounts in thousands
Equity | ||||
Derivatives not accounted for as hedging instruments | Contracts | |||
Location: Statement of Assets and Liabilities - Liabilities | ||||
Variation margin on futures contracts* | $ | 121 | ||
Equity | ||||
Derivatives not accounted for as hedging instruments | Contracts | |||
Location: Statement of Operations - Net realized gain (loss) | ||||
Futures contracts | $ | 2,131 | ||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||
Futures contracts | $ | (152 | ) |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 39
Russell Investment Funds
Aggressive Equity Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2016
Amounts in thousands | ||||||||
Offsetting of Financial Assets and Derivative Assets | ||||||||
Gross | Net Amounts | |||||||
Amounts | of Assets | |||||||
Gross | Offset in the | Presented in | ||||||
Amounts of | Statement of | the Statement | ||||||
Recognized | Assets and | of Assets and | ||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | ||||
Securities on Loan* | Investments, at fair value | $ | 12,124 | $ | — | $ | 12,124 | |
Total Financial and Derivative Assets | 12,124 | — | 12,124 | |||||
Financial and Derivative Assets not subject to a netting agreement | — | — | — | |||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 12,124 | $ | — | $ | 12,124 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | ||||||||||
Gross Amounts Not Offset in | ||||||||||
the Statement of Assets and | ||||||||||
Liabilities | ||||||||||
Net Amounts | ||||||||||
of Assets | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | ||||||
Barclays | $ | 794 | $ | — | $ | 794 | $ | — | ||
Citigroup | 535 | — | 535 | — | ||||||
Fidelity | 1,262 | — | 1,262 | — | ||||||
Goldman Sachs | 1,717 | — | 1,717 | — | ||||||
ING | 160 | — | 160 | — | ||||||
JPMorgan Chase | 2,913 | — | 2,913 | — | ||||||
Merrill Lynch | 699 | — | 699 | — | ||||||
Morgan Stanley | 3,988 | — | 3,988 | — | ||||||
UBS | 56 | — | 56 | — | ||||||
Total | $ | 12,124 | $ | — | $ | 12,124 | $ | — |
See accompanying notes which are an integral part of the financial statements.
40 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 40 | $ | — | $ | 40 | ||
Total Financial and Derivative Liabilities | 40 | — | 40 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (40) | — | (40 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | — | $ | — | $ | — |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 41
Russell Investment Funds
Aggressive Equity Fund
Statement of Assets and Liabilities — December 31, 2016
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 204,247 |
Investments, at fair value(*)(>) | 239,583 | |
Cash (restricted)(a) | 745 | |
Receivables: | ||
Dividends and interest | 266 | |
Dividends from affiliated funds | 5 | |
Investments sold | 1,874 | |
Fund shares sold | 49 | |
Total assets | 242,522 | |
Liabilities | ||
Payables: | ||
Investments purchased | 877 | |
Fund shares redeemed | 39 | |
Accrued fees to affiliates | 188 | |
Other accrued expenses | 67 | |
Variation margin on futures contracts | 40 | |
Payable upon return of securities loaned | 12,596 | |
Total liabilities | 13,807 | |
Net Assets | $ | 228,715 |
See accompanying notes which are an integral part of the financial statements.
42 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Statement of Assets and Liabilities, continued — December 31, 2016
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 261 | |
Accumulated net realized gain (loss) | (4,220 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 35,336 | ||
Futures contracts | (121 | ) | |
Shares of beneficial interest | 150 | ||
Additional paid-in capital | 197,309 | ||
Net Assets | $ | 228,715 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 15.21 | |
Net assets | $ | 228,714,570 | |
Shares outstanding ($.01 par value) | 15,033,545 | ||
Amounts in thousands | |||
(*) Securities on loan included in investments | $ | 12,124 | |
(>) Investments in affiliates, U.S. Cash Management Fund and U.S. Cash Collateral Fund | $ | 22,163 | |
(a) Cash Collateral for Futures | $ | 745 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 43
Russell Investment Funds
Aggressive Equity Fund
Statement of Operations — For the Period Ended December 31, 2016
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 3,466 | |
Dividends from affiliated funds | 48 | ||
Securities lending income (net) | 213 | ||
Securities lending income from affiliated funds (net) | 73 | ||
Total investment income | 3,800 | ||
Expenses | |||
Advisory fees | 1,906 | ||
Administrative fees | 106 | ||
Custodian fees (1) | 41 | ||
Transfer agent fees | 9 | ||
Professional fees | 68 | ||
Trustees’ fees | 8 | ||
Printing fees | 29 | ||
Miscellaneous | 23 | ||
Total expenses | 2,190 | ||
Net investment income (loss) | 1,610 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 1,047 | ||
Futures contracts | 2,131 | ||
Net realized gain (loss) | 3,178 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | 32,649 | ||
Futures contracts | (152 | ) | |
Net change in unrealized appreciation (depreciation) | 32,497 | ||
Net realized and unrealized gain (loss) | 35,675 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 37,285 |
(1) Includes a reimbursement for overbilling of custody out-of-pocket fees from prior years. See note 9 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
44 Aggressive Equity Fund
Russell Investment Funds
Aggressive Equity Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2016 | 2015 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 1,610 | $ | 1,468 | ||
Net realized gain (loss) | 3,178 | 12,739 | ||||
Net change in unrealized appreciation (depreciation) | 32,497 | (30,791 | ) | |||
Net increase (decrease) in net assets from operations | 37,285 | (16,584 | ) | |||
Distributions | ||||||
From net investment income | (1,537 | ) | (1,595 | ) | ||
From net realized gain | (116 | ) | (21,431 | ) | ||
From return of capital | (219 | ) | - | |||
Net decrease in net assets from distributions | (1,872 | ) | (23,026 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | (24,761 | ) | 3,870 | |||
Total Net Increase (Decrease) in Net Assets | 10,652 | (35,740 | ) | |||
Net Assets | ||||||
Beginning of period | 218,063 | 253,803 | ||||
End of period | $ | 228,715 | $ | 218,063 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | 261 | $ | 203 |
* Share transaction amounts (in thousands) for the periods ended December 31, 2016 and December 31, 2015 were as follows:
2016 | 2015 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 497 | $ | 6,506 | 759 | $ | 11,186 | ||||||
Proceeds from reinvestment of distributions | 137 | 1,872 | 1,733 | 23,025 | ||||||||
Payments for shares redeemed | (2,463 | ) | (33,139 | ) | (1,990 | ) | (30,341 | ) | ||||
Total increase (decrease) | (1,829 | ) | $ | (24,761 | ) | 502 | $ | 3,870 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 45
Russell Investment Funds
Aggressive Equity Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | |||||||||||||||||||
$ | Net | $ | $ | $ | $ | ||||||||||||||
Net Asset Value, | Investment | Net Realized | Total from | Distributions | Distributions | $ | |||||||||||||
Beginning of | Income | and Unrealized | Investment | from Net | from Net | Return of | |||||||||||||
Period | (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Realized Gain | Capital | |||||||||||||
December 31, 2016 | 12.93 | .10 | 2.30 | 2.40 | (.10 | ) | (.01 | ) | (.01 | ) | |||||||||
December 31, 2015 | 15.51 | .09 | (1.19 | ) | (1.10 | ) | (.10 | ) | (1.38 | ) | — | ||||||||
December 31, 2014 | 16.88 | .06 | .18 | .24 | (.04 | ) | (1.57 | ) | — | ||||||||||
December 31, 2013 | 13.02 | .08 | 5.11 | 5.19 | (.07 | ) | (1.26 | ) | — | ||||||||||
December 31, 2012 | 11.36 | .13 | 1.67 | 1.80 | (.14 | ) | — | — | |||||||||||
See accompanying notes which are an integral part of the financial statements.
46 Aggressive Equity Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(d) | (000 | ) | Gross(e) | Net(b)(e) | Net Assets(b) | Turnover Rate | |||||||||
(.12 | ) | 15.21 | 18.66 | 228,715 | 1.03 | 1.03 | .76 | 106 | |||||||||
(1.48 | ) | 12.93 | (7.19 | ) | 218,063 | 1.06 | 1.04 | .61 | 138 | ||||||||
(1.61 | ) | 15.51 | 1.56 | 253,803 | 1.06 | 1.01 | .35 | 80 | |||||||||
(1.33 | ) | 16.88 | 40.00 | 237,828 | 1.05 | 1.00 | .50 | 77 | |||||||||
(.14 | ) | 13.02 | 15.84 | 185,902 | 1.09 | 1.04 | 1.08 | 150 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 47
Russell Investment Funds
Aggressive Equity Fund
Related Party Transactions, Fees and Expenses
Accrued fees payable to affiliates for the period ended December 31, 2016 were as follows: | ||
Advisory fees | $ | 175,548 |
Administration fees | 9,753 | |
Transfer agent fees | 858 | |
Trustee fees | 1,648 | |
$ | 187,807 |
Transactions (amounts in thousands) during the period ended December 31, 2016 with Underlying Funds which are, or were, an
affiliated company are as follows:
Fair Value, | Change in | ||||||||||||||||||
Beginning of | Realized Gain | Unrealized | Fair Value, End | Income | Capital Gains | ||||||||||||||
Period | Purchases | Sales | (Loss) | Gain (Loss) | of Period | Distributions | Distributions | ||||||||||||
U.S. Cash Collateral Fund | $ | 13,404 | $ | 77,143 | $ | 77,951 | $ | — | $ | — | $ | 12,596 | $ | 73 | $ | — | |||
U.S. Cash Management Fund | 12,216 | 65,922 | 68,573 | 1 | 1 | 9,567 | 48 | — | |||||||||||
$ | 25,620 | $ | 143,065 | $ | 146,524 | $ | 1 | $ | 1 | $ | 22,163 | $ | 121 | $ | — |
Federal Income Taxes
At December 31, 2016, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Cost of Investments | $ | 206,355,279 | ||
Unrealized Appreciation | $ | 38,929,688 | ||
Unrealized Depreciation | (5,701,695 | ) | ||
Net Unrealized Appreciation (Depreciation) | $ | 33,227,993 | ||
Undistributed Long-Term Capital Gains | ||||
(Capital Loss Carryforward) | $ | (1,971,209 | ) | |
Tax Composition of Distributions | ||||
Ordinary Income | $ | 1,551,331 | ||
Long-Term Capital Gains | $ | 100,814 | ||
Tax Return of Capital | $ | 219,432 |
Net investment income and net realized gains (losses) in the financial statements may differ from taxable net investment income and
net realized gains (losses). Capital accounts within the financial statements are adjusted for permanent book-tax differences. Book-tax
differences are primarily due to foreign currency gains and losses, reclassifications of dividends, differences in treatment of income
from swaps, net operating losses, investments in partnerships, investments in passive foreign investment companies (PFICs), tax
straddle transaction, use of tax equalization and foreign capital gains taxes. These adjustments have no impact on the net assets. At
December 31, 2016, the Statement of Assets and Liabilities have been adjusted by the following amounts (in thousands):
Undistributed net investment income | $ | 204 | |
Accumulated net realized gain (loss) | 15 | ||
Additional paid-in capital | (219 | ) |
See accompanying notes which are an integral part of the financial statements.
48 Aggressive Equity Fund
Russell Investment Funds
Non-U.S. Fund
Portfolio Management Discussion and Analysis — December 31, 2016 (Unaudited)
Non-U.S. Fund | Russell Developed ex-U.S. Large Cap® Index Net** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 2.36 | % | 1 Year | 2.42 | % | ||
5 Years | 7.11 | %§ | 5 Years | 6.36 | %§ | ||
10 Years | 0.94 | %§ | 10 Years | 1.14 | %§ | ||
International Developed Markets Linked Benchmark*** | |||||||
Total | |||||||
Return | |||||||
1 Year | 2.42 | % | |||||
5 Years | 6.36 | %§ | |||||
10 Years | 0.64 | %§ |
Non-U.S. Fund 49
Russell Investment Funds
Non-U.S. Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
The Non-U.S. Fund (the “Fund”) employs a multi-manager | in sector trends with these sectors gaining traction as commodity | ||
approach whereby portions of the Fund are allocated to different | prices stabilized. The Fund’s underweight to materials was | ||
money manager strategies. Fund assets not allocated to money | unfavorable in this environment. | ||
managers are managed by Russell Investment Management, LLC | During the fiscal year ending December 31, 2016, Asia Pacific | ||
(“RIM”), the Fund’s advisor. RIM may change the allocation of the | ex-Japan and Canada were the stand out non-U.S. developed | ||
Fund’s assets among money managers at any time. An exemptive | markets, while the U.K. and developed Europe ex-U.K. lagged | ||
order from the Securities and Exchange Commission (“SEC”) | the most. Stabilization in commodity prices helped the commodity | ||
permits RIM to engage or terminate a money manager at any time, | heavy economies over the fiscal year ending December 31, 2016. | ||
subject to approval by the Fund’s Board, without a shareholder | As a result, the Fund’s underweight to Canada was unfavorable. | ||
vote. Pursuant to the terms of the exemptive order, the Fund | |||
is required to notify its shareholders within 90 days of when a | The Fund’s active factor exposures did not have a significant | ||
money manager begins providing services. As of December 31, | impact on performance in the fiscal year ending December 31, | ||
2016, the Fund had four money managers. | 2016. | ||
What is the Fund’s investment objective? | How did the investment strategies and techniques employed | ||
The Fund seeks to provide long term capital growth. | by the Fund and its money managers affect its benchmark- | ||
relative performance? | |||
How did the Fund perform relative to its benchmark for the | The Fund modestly underperformed its benchmark during | ||
fiscal year ended December 31, 2016? | the one year period ending December 31, 2016. The Fund’s | ||
For the fiscal year ended December 31, 2016, the Fund gained | underweight to Canada and the U.S. were unfavorable. This was | ||
2.36%. This is compared to the Fund’s benchmark, the Russell | partially offset by an overweight to emerging markets. Broadly, | ||
Developed ex-U.S. Large Cap® Index (Net), which gained 2.42% | the Fund’s underweight to defensive sectors (especially health | ||
during the same period. The Fund’s performance includes | care and telecom) were favorable. This was partially offset by an | ||
operating expenses, whereas index returns are unmanaged and | underweight to materials. | ||
do not include expenses of any kind. | The Fund employs discretionary money managers. The Fund’s | ||
For the fiscal year ended December 31, 2016, the Morningstar® | discretionary money managers select the individual portfolio | ||
Insurance Foreign Large Blend Category, a group of funds that | securities for the assets assigned to them. Fund assets not | ||
Morningstar considers to have investment strategies similar to | allocated to discretionary money managers include the Fund’s | ||
those of the Fund, gained 0.61%. This result serves as a peer | liquidity reserves and assets which may be managed directly by | ||
comparison and is expressed net of operating expenses. | RIM to effect the Fund’s investment strategies and/or to actively | ||
manage the Fund’s overall exposures by investing in securities or | |||
How did the market conditions described in the Market | other instruments that RIM believes will achieve the desired risk/ | ||
Summary report affect the Fund’s performance? | return profile for the Fund. | ||
For the fiscal year ended December 31, 2016, the developed | |||
non-U.S. equity market, as measured by the Russell Developed | With respect to certain of the Fund’s money managers, Pzena | ||
ex-U.S. Large Cap® Index (the “Index”), was up 2.42%. The | Investment Management, LLC was the best performing money | ||
fiscal year saw a number of macroeconomic events cause market | manager during the period and outperformed the Fund’s | ||
volatility, the significant drivers of which were the U.S. Federal | benchmark. The manager’s dynamic value orientation was | ||
Reserve (the “Fed’) rate hike, the U.K. Brexit referendum, the | favorable as value and volatility broadly outperformed during | ||
U.S. Presidential election and uncertainty around economic data | the period. Moreover, the manager’s stock selection was additive, | ||
in emerging markets following an emerging market slowdown | especially in the technology sector. | ||
during the previous fiscal year. | MFS Institutional Advisors, Inc. had the most challenging year | ||
Amid the market volatility, value factor outperformed the most | relative to the other money managers in the Fund. The manager | ||
within the Index during the fiscal year, especially gaining traction | faced significant headwinds from its defensive growth orientation. | ||
in the second half of the fiscal year. Momentum and low volatility | Stock selection was challenging, especially in financials, | ||
factors underperformed the most as the fiscal year saw some trend | materials and utilities. | ||
reversals with investors rotating out of defensive areas of the | During the period, RIM utilized a positioning strategy to control | ||
market. Compared to the previous fiscal year ending December | Fund-level exposures and risks through the purchase of a | ||
31, 2015 when commodity driven sectors, particularly energy and | stock portfolio. Using the output from a quantitative model, | ||
materials, were the worst hit, the 2016 fiscal year saw a reversal | the positioning strategy is designed to express RIM’s preferred |
50 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
Fund positioning across multiple factors and sectors, specifically | Describe any changes to the Fund’s structure or the money | ||
increasing the Fund’s value exposure while moderating the | manager line-up. | ||
Fund’s volatility exposure. The positioning strategy’s benchmark- | There were no changes to the Fund’s structure or money manager | ||
relative performance was slightly negative for the period. The | line-up during the fiscal year. | ||
strategy’s overweight to value was additive, while the underweight | |||
to volatility detracted. | Money Managers as of December 31, | ||
In addition, RIM utilized equity futures and currency forward | 2016 | Styles | |
contracts in order to position the portfolio to meet RIM’s overall | Barrow, Hanley, Mewhinney & Strauss, LLC | Value | |
MFS Institutional Advisors, Inc. | Growth | ||
preferred positioning with respect to country and currency | Pzena Investment Management LLC | Value | |
exposures. This strategy generated positive performance during | William Blair Investment Management, LLC | Growth | |
the fiscal year ended December 31, 2016. | The views expressed in this report reflect those of the | ||
During the period, RIM equitized the Fund’s cash using index | portfolio managers only through the end of the period | ||
futures contracts to provide the Fund with full market exposure. | covered by the report. These views do not necessarily | ||
This did not have a significant impact on the Fund’s performance | represent the views of RIM or any other person in RIM or | ||
for the period. | any other affiliated organization. These views are subject to | ||
change at any time based upon market conditions or other | |||
Fair value pricing adjustments on the last business day of the | events, and RIM disclaims any responsibility to update the | ||
period had a modestly positive impact on the Fund’s benchmark- | views contained herein. These views should not be relied | ||
relative performance because the Fund’s index does not use fair | on as investment advice and, because investment decisions | ||
value pricing adjustments. | for a Russell Investment Funds (“RIF”) Fund are based on | ||
numerous factors, should not be relied on as an indication | |||
of investment decisions of any RIF Fund. |
* Assumes initial investment on January 1, 2007.
** The Russell Developed ex-U.S. Large Cap® Index Net is an index which offers investors access to the large-cap segment of the global equity market, excluding
companies assigned to the United States. It is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely
reconstituted annually to accurately reflect the changes in the market over time and is net of tax on dividends from foreign holdings.
*** The International Developed Markets Linked Benchmark provides a means to compare the Fund’s average annual returns to a secondary benchmark that takes
into account historical changes in the Fund’s primary benchmark. The International Developed Markets Linked Benchmark represents the returns of the MSCI
EAFE Index (net of tax on dividends from foreign holdings) through December 31, 2010 and the returns of the Russell Developed ex-U.S. Large Cap® Index Net
thereafter.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results. Additionally, the returns presented herein may differ from the performance reported
in the Financial Highlights as the returns herein are calculated in a manner consistent with standardized performance in accordance with Securities and Exchange
Commission rules, while the performance in the Financial Highlights has been calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”).
Non-U.S. Fund 51
Russell Investment Funds
Non-U.S. Fund
Shareholder Expense Example — December 31, 2016 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2016 to December 31, 2016. | July 1, 2016 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2016 | $ | 1,065.70 | $ | 1,020.26 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 5.04 | $ | 4.93 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.97% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/366 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | |||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
52 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||||
Principal | Fair | Principal | Fair | ||||||||
Amount ($) | Value | Amount ($) | Value | ||||||||
or Shares | $ | or Shares | $ | ||||||||
Common Stocks - 92.3% | Constellation Software, Inc. | 2,074 | 942 | ||||||||
Australia - 1.6% | Element Fleet Management Corp. | 36,563 | 339 | ||||||||
AGL Energy, Ltd. | 14,951 | 238 | Emera, Inc. | 5,521 | 187 | ||||||
Australia & New Zealand Banking | Empire Co., Ltd. Class A(Ñ) | 8,012 | 94 | ||||||||
Group, Ltd. - ADR | 8,991 | 197 | Fairfax Financial Holdings, Ltd. | 148 | 71 | ||||||
Commonwealth Bank of Australia - ADR | 5,014 | 297 | First Capital Realty, Inc. Class A | 10,384 | 160 | ||||||
CSL, Ltd. | 3,288 | 238 | Great-West Lifeco, Inc. | 4,729 | 124 | ||||||
Macquarie Group, Ltd. | 18,813 | 1,186 | Hydro One, Ltd.(Þ) | 4,298 | 75 | ||||||
Mirvac Group(ö) | 62,352 | 96 | IGM Financial, Inc. | 9,200 | 262 | ||||||
National Australia Bank, Ltd. - ADR | 7,486 | 165 | Jean Coutu Group PJC, Inc. (The) Class | ||||||||
Orica, Ltd. | 18,292 | 232 | A | 5,311 | 83 | ||||||
QBE Insurance Group, Ltd. | 153,600 | 1,381 | Loblaw Cos., Ltd. | 7,017 | 370 | ||||||
Rio Tinto, Ltd. - ADR | 14,436 | 621 | Power Corp. of Canada | 14,328 | 321 | ||||||
Tabcorp Holdings, Ltd. | 58,664 | 204 | Royal Bank of Canada - GDR | 4,300 | 291 | ||||||
Transurban Group - ADR(Æ) | 15,623 | 116 | SNC-Lavalin Group, Inc. | 6,867 | 296 | ||||||
Washington H Soul Pattinson & Co., Ltd. | 10,277 | 112 | Suncor Energy, Inc. | 58,234 | 1,904 | ||||||
Wesfarmers, Ltd.(Æ) | 3,342 | 101 | Toronto Dominion Bank | 36,154 | 1,783 | ||||||
Westfield Corp.(ö) | 20,249 | 137 | 12,165 | ||||||||
Westpac Banking Corp. | 10,945 | 256 | |||||||||
5,577 | China - 1.3% | ||||||||||
Alibaba Group Holding, Ltd. - ADR(Æ) | 18,035 | 1,583 | |||||||||
Austria - 0.6% | China Overseas Land & Investment, Ltd. | 156,000 | 411 | ||||||||
Erste Group Bank AG(Æ) | 72,129 | 2,111 | China Shenhua Energy Co., Ltd. Class H | 234,500 | 437 | ||||||
EVN AG | 10,140 | 120 | Lenovo Group, Ltd. | 662,000 | 399 | ||||||
2,231 | NetEase, Inc. - ADR | 3,878 | 835 | ||||||||
Tencent Holdings, Ltd. | 29,400 | 714 | |||||||||
Belgium - 0.9% | Yangzijiang Shipbuilding Holdings, Ltd. | 226,200 | 127 | ||||||||
Anheuser-Busch InBev SA | 11,106 | 1,172 | 4,506 | ||||||||
Elia System Operator SA | 3,205 | 168 | |||||||||
Groupe Bruxelles Lambert SA | 6,205 | 521 | Colombia - 0.1% | ||||||||
KBC Group NV | 21,264 | 1,317 | Ecopetrol SA - ADR(Æ) | 51,600 | 467 | ||||||
Sofina SA | 571 | 75 | |||||||||
3,253 | Czech Republic - 0.1% | ||||||||||
Komercni Banka AS | 4,700 | 162 | |||||||||
Bermuda - 0.4% | |||||||||||
Orient Overseas International, Ltd.(Æ) | 64,000 | 265 | Denmark - 0.7% | ||||||||
XL Group, Ltd. | 28,075 | 1,046 | Carlsberg A/S Class B | 4,353 | 376 | ||||||
1,311 | Danske Bank A/S | 41,362 | 1,254 | ||||||||
Novo Nordisk A/S Class B | 22,850 | 821 | |||||||||
Brazil - 0.6% | TDC AS(Æ) | 13,496 | 69 | ||||||||
Ambev SA - ADR | 75,995 | 373 | 2,520 | ||||||||
Cielo SA | 67,100 | 573 | |||||||||
Embraer SA - ADR(Æ) | 59,600 | 1,147 | Finland - 0.5% | ||||||||
2,093 | Fortum OYJ | 13,535 | 207 | ||||||||
Kone OYJ Class B | 15,390 | 689 | |||||||||
Canada - 3.4% | Sampo OYJ Class A | 22,191 | 993 | ||||||||
Agrium, Inc. | 1,597 | 161 | 1,889 | ||||||||
Alimentation Couche-Tard, Inc. Class B | 18,896 | 857 | |||||||||
Bank of Montreal | 8,155 | 587 | France - 11.4% | ||||||||
BCE, Inc. | 2,969 | 128 | Air Liquide SA Class A | 24,024 | 2,668 | ||||||
Brookfield Asset Management, Inc. | Airbus Group SE | 35,100 | 2,316 | ||||||||
Class A | 41,768 | 1,378 | Alstom SA(Æ) | 1,000 | 28 | ||||||
CAE, Inc. | 7,657 | 107 | Arkema SA | 8,979 | 877 | ||||||
Canadian Imperial Bank of Commerce | 1,439 | 117 | AXA SA | 6,310 | 159 | ||||||
Canadian National Railway Co. | 16,382 | 1,104 | BNP Paribas SA | 18,974 | 1,209 | ||||||
Canadian Real Estate Investment | Bouygues SA - ADR | 58,455 | 2,092 | ||||||||
Trust(ö) | 4,125 | 142 | Bureau Veritas SA | 1,550 | 30 | ||||||
Choice Properties Real Estate | Capgemini SA | 1,047 | 88 | ||||||||
Investment Trust(ö) | 10,419 | 105 | Casino Guichard Perrachon SA | 11,300 | 542 | ||||||
Cominar Real Estate Investment Trust(ö) | 16,114 | 177 | Cie de Saint-Gobain | 43,600 | 2,030 | ||||||
See accompanying notes which are an integral part of the financial statements. |
Non-U.S. Fund 53
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
or Shares | $ | or Shares | $ | |||||||
Credit Agricole SA | 107,513 | 1,333 | Guoco Group, Ltd. | 22,000 | 242 | |||||
Danone SA | 13,248 | 839 | Hongkong & Shanghai Hotels, Ltd. (The) | 78,500 | 87 | |||||
Dassault Systemes SE | 6,361 | 485 | Hopewell Holdings, Ltd. | 56,000 | 193 | |||||
Engie SA | 47,018 | 599 | Kerry Properties, Ltd. | 30,500 | 82 | |||||
Essilor International SA | 945 | 107 | Li & Fung, Ltd. | 472,000 | 206 | |||||
Faurecia | 30,218 | 1,171 | Link(ö) | 29,000 | 187 | |||||
Gecina SA(ö) | 551 | 76 | New World Development Co., Ltd. | 68,000 | 71 | |||||
Hermes International | 291 | 119 | Wharf Holdings, Ltd. (The) | 45,466 | 299 | |||||
Legrand SA - ADR | 10,309 | 584 | Wheelock & Co., Ltd. | 56,000 | 314 | |||||
L'Oreal SA | 3,695 | 674 | 5,959 | |||||||
LVMH Moet Hennessy Louis Vuitton | ||||||||||
SE - ADR | 6,910 | 1,318 | India - 1.0% | |||||||
Natixis SA | 79,358 | 447 | HDFC Bank, Ltd. - ADR | 25,959 | 1,575 | |||||
Pernod Ricard SA | 12,700 | 1,376 | Housing Development Finance Corp., | |||||||
Publicis Groupe SA - ADR | 33,237 | 2,293 | Ltd. | 30,923 | 575 | |||||
Renault SA | 5,844 | 520 | Tata Consultancy Services, Ltd. | 18,162 | 631 | |||||
Safran SA | 375 | 27 | Tata Motors, Ltd. - ADR | 23,802 | 819 | |||||
Sanofi - ADR | 50,632 | 4,094 | 3,600 | |||||||
Schneider Electric SE | 53,539 | 3,719 | ||||||||
Technip SA | 30,500 | 2,164 | Ireland - 1.9% | |||||||
Thales SA | 1,978 | 192 | CRH PLC | 100,888 | 3,504 | |||||
Total SA | 62,513 | 3,191 | Kingspan Group PLC | 31,365 | 850 | |||||
Unibail-Rodamco SE(ö) | 282 | 67 | Paddy Power Betfair PLC | 5,523 | 590 | |||||
Valeo SA | 23,157 | 1,331 | Ryanair Holdings PLC - ADR(Æ) | 12,823 | 1,068 | |||||
Vallourec SA(Æ) | 189,504 | 1,294 | Willis Towers Watson PLC | 6,772 | 828 | |||||
Veolia Environnement SA | 5,136 | 87 | 6,840 | |||||||
Vinci SA | 6,065 | 412 | ||||||||
40,558 | Israel - 0.8% | |||||||||
Bank Leumi Le-Israel BM(Æ) | 57,863 | 238 | ||||||||
Germany - 5.8% | Check Point Software Technologies, Ltd. | |||||||||
Adidas AG | 424 | 67 | (Æ) | 7,177 | 606 | |||||
Allianz SE | 4,566 | 755 | Teva Pharmaceutical Industries, Ltd. | |||||||
BASF SE | 3,064 | 286 | - ADR | 51,215 | 1,856 | |||||
Bayer AG | 39,558 | 4,127 | Teva Pharmaceutical Industries, Ltd. | 3,484 | 126 | |||||
Bayerische Motoren Werke AG | 3,247 | 304 | 2,826 | |||||||
Beiersdorf AG | 10,087 | 856 | ||||||||
Continental AG | 4,717 | 919 | Italy - 2.7% | |||||||
Daimler AG | 5,483 | 406 | Enel SpA | 392,875 | 1,729 | |||||
Deutsche Boerse AG(Æ) | 36,733 | 2,992 | ENI SpA - ADR | 314,662 | 5,102 | |||||
Deutsche Post AG | 2,795 | 92 | Italgas SpA(Æ) | 11,004 | 43 | |||||
Fresenius SE & Co. KGaA | 1,103 | 86 | Luxottica Group SpA | 26,439 | 1,424 | |||||
Hannover Rueck SE | 3,478 | 377 | Parmalat SpA | 91,712 | 286 | |||||
Linde AG | 12,750 | 2,090 | Snam Rete Gas SpA | 55,022 | 226 | |||||
MAN SE | 3,812 | 379 | Telecom Italia SpA(Æ) | 827,875 | 729 | |||||
Merck KGaA | 4,925 | 514 | 9,539 | |||||||
MTU Aero Engines AG | 2,360 | 272 | ||||||||
ProSiebenSat.1 Media SE | 8,475 | 328 | Japan - 15.7% | |||||||
Rational AG | 750 | 334 | Aozora Bank, Ltd. | 28,000 | 99 | |||||
Rhoen Klinikum AG | 14,116 | 381 | Astellas Pharma, Inc. | 107,900 | 1,496 | |||||
SAP SE - ADR | 15,522 | 1,356 | Bridgestone Corp. | 13,800 | 496 | |||||
Siemens AG | 28,462 | 3,499 | Canon, Inc. | 76,300 | 2,136 | |||||
20,420 | Central Japan Railway Co. | 600 | 99 | |||||||
Dai-ichi Life Holdings, Inc. | 58,950 | 976 | ||||||||
Hong Kong - 1.7% | Daikin Industries, Ltd. | 17,500 | 1,603 | |||||||
AIA Group, Ltd. | 422,000 | 2,363 | Daito Trust Construction Co., Ltd. | 4,600 | 691 | |||||
China Mobile, Ltd. | 80,500 | 844 | Denso Corp. | 20,800 | 899 | |||||
CLP Holdings, Ltd. | 10,000 | 91 | East Japan Railway Co. | 800 | 69 | |||||
Global Brands Group Holding, Ltd.(Æ) | 1,252,000 | 165 | FANUC Corp. | 9,700 | 1,640 | |||||
Guangdong Investment, Ltd. | 620,600 | 815 | Fuji Electric Co., Ltd. | 511,000 | 2,644 |
See accompanying notes which are an integral part of the financial statements.
54 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
or Shares | $ | or Shares | $ | |||||||
Fuji Heavy Industries, Ltd. | 28,500 | 1,159 | Yamaguchi Financial Group, Inc. | 32,000 | 348 | |||||
FUJIFILM Holdings Corp. | 4,200 | 159 | 55,598 | |||||||
Fujitsu, Ltd. | 447,000 | 2,476 | ||||||||
Hachijuni Bank, Ltd. (The) | 36,400 | 210 | Jersey - 0.3% | |||||||
Hitachi, Ltd. | 311,000 | 1,676 | Shire PLC - ADR | 19,455 | 1,102 | |||||
Honda Motor Co., Ltd. | 96,300 | 2,804 | ||||||||
Hoya Corp. | 51,800 | 2,171 | Luxembourg - 0.1% | |||||||
IHI Corp. | 672,000 | 1,742 | Tenaris SA | 9,607 | 171 | |||||
Iida Group Holdings Co., Ltd. | 31,200 | 591 | ||||||||
Inpex Corp. | 98,600 | 984 | Macao - 0.1% | |||||||
Isuzu Motors, Ltd. | 141,400 | 1,785 | Sands China, Ltd. | 100,800 | 434 | |||||
ITOCHU Corp. | 66,000 | 874 | ||||||||
Japan Petroleum Exploration Co., Ltd. | 6,100 | 135 | Mexico - 0.1% | |||||||
Japan Post Bank Co., Ltd. | 14,400 | 173 | Wal-Mart de Mexico SAB de CV | 125,700 | 225 | |||||
Japan Tobacco, Inc. | 19,200 | 631 | ||||||||
JX Holdings, Inc. | 58,300 | 246 | Netherlands - 5.2% | |||||||
Kansai Electric Power Co., Inc. (The)(Æ) | 13,200 | 144 | ABN AMRO Group NV(Þ) | 3,426 | 76 | |||||
Kao Corp. | 3,000 | 142 | Aegon NV | 322,500 | 1,773 | |||||
KDDI Corp. | 10,300 | 260 | AerCap Holdings NV(Æ) | 1,571 | 65 | |||||
Keyence Corp. | 1,700 | 1,165 | Akzo Nobel NV | 12,279 | 767 | |||||
Kubota Corp. | 29,100 | 414 | Heineken NV | 4,540 | 340 | |||||
Kyocera Corp. | 15,600 | 773 | ING Groep NV | 435,014 | 6,122 | |||||
Makita Corp. | 12,100 | 809 | Koninklijke KPN NV | 355,641 | 1,054 | |||||
Marubeni Corp. | 38,100 | 216 | Koninklijke Philips NV | 98,777 | 3,011 | |||||
Mitsubishi Corp. | 8,100 | 172 | NN Group NV | 1,680 | 57 | |||||
Mitsubishi UFJ Financial Group, Inc. | 420,700 | 2,586 | NXP Semiconductors NV(Æ) | 1,383 | 136 | |||||
Mitsui & Co., Ltd. | 18,100 | 248 | Randstad Holding NV | 20,528 | 1,112 | |||||
Mizuho Financial Group, Inc. | 103,900 | 186 | Royal Dutch Shell PLC Class A(Ñ) | 137,513 | 3,737 | |||||
MS&AD Insurance Group Holdings, Inc. | 8,600 | 266 | Royal Dutch Shell PLC Class B | 10,585 | 302 | |||||
NEC Corp. | 37,000 | 98 | 18,552 | |||||||
Nippon Prologis, Inc.(ö) | 288 | 589 | ||||||||
Nippon Telegraph & Telephone Corp. | 3,300 | 139 | Portugal - 0.0% | |||||||
Nippon Yusen KK | 94,000 | 174 | Banco BPI SA Class G(Æ) | 50,276 | 60 | |||||
Nissan Motor Co., Ltd. | 20,600 | 207 | ||||||||
Nitori Holdings Co., Ltd. | 7,500 | 857 | Russia - 0.4% | |||||||
Obayashi Corp. | 13,700 | 131 | Gazprom PJSC - ADR | 277,590 | 1,400 | |||||
ORIX Corp. | 99,600 | 1,543 | ||||||||
Park24 Co., Ltd. | 9,800 | 266 | Singapore - 1.6% | |||||||
Sekisui Chemical Co., Ltd. | 13,600 | 216 | DBS Group Holdings, Ltd. | 87,400 | 1,043 | |||||
Sekisui House, Ltd. | 17,200 | 286 | Jardine Cycle & Carriage, Ltd. | 40,000 | 1,132 | |||||
Seven & i Holdings Co., Ltd. | 2,400 | 91 | Singapore Telecommunications, Ltd. | 82,000 | 206 | |||||
Shimano, Inc. | 200 | 31 | United Overseas Bank, Ltd. | 146,800 | 2,060 | |||||
Shin-Etsu Chemical Co., Ltd. | 5,200 | 401 | Wilmar International, Ltd. | 545,800 | 1,347 | |||||
Sojitz Corp. | 66,800 | 162 | 5,788 | |||||||
Sompo Holdings, Inc. | 14,700 | 496 | ||||||||
Sony Corp. | 64,200 | 1,784 | South Africa - 0.1% | |||||||
Sumitomo Corp. | 173,200 | 2,035 | Bid Corp., Ltd. | 28,514 | 506 | |||||
Sumitomo Mitsui Financial Group, Inc. | 37,200 | 1,410 | South Korea - 1.8% | |||||||
Sumitomo Osaka Cement Co., Ltd. | 264,000 | 993 | Hana Financial Group, Inc. | 39,715 | 1,025 | |||||
Takeda Pharmaceutical Co., Ltd. | 2,100 | 87 | Hankook Tire Co., Ltd.(Æ) | 23,800 | 1,142 | |||||
Terumo Corp. | 26,700 | 984 | POSCO | 7,025 | 1,485 | |||||
Tokyo Electric Power Co. Holdings, Inc. | Samsung Electronics Co., Ltd. | 1,150 | 1,699 | |||||||
(Æ) | 56,500 | 228 | Shinhan Financial Group Co., Ltd.(Æ) | 31,071 | 1,165 | |||||
Toppan Printing Co., Ltd. | 17,000 | 162 | 6,516 | |||||||
Toyota Motor Corp. | 24,900 | 1,454 | ||||||||
Toyota Tsusho Corp. | 7,100 | 184 | Spain - 1.6% | |||||||
Trend Micro, Inc. | 31,900 | 1,131 | Aena SA(Þ) | 2,774 | 378 | |||||
West Japan Railway Co. | 17,400 | 1,066 | Amadeus IT Group SA Class A | 41,838 | 1,901 |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 55
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
or Shares | $ | or Shares | $ | |||||||
Banco de Sabadell SA - ADR | 930,177 | 1,295 | Thailand - 0.2% | |||||||
Banco Santander SA - ADR | 20,303 | 106 | Bangkok Bank PCL | 64,800 | 291 | |||||
Ebro Foods SA | 3,848 | 81 | Charoen Pokphand Foods PCL | 631,200 | 518 | |||||
Endesa SA - ADR | 4,000 | 85 | 809 | |||||||
Iberdrola SA | 66,122 | 434 | ||||||||
Industria de Diseno Textil SA | 31,591 | 1,078 | United Kingdom - 18.2% | |||||||
Red Electrica Corp. SA | 9,996 | 188 | Amec Foster Wheeler PLC - GDR | 55,225 | 318 | |||||
Repsol SA - ADR | 11,941 | 168 | Antofagasta PLC | 294,542 | 2,424 | |||||
5,714 | AstraZeneca PLC | 1,840 | 100 | |||||||
Aviva PLC | 196,861 | 1,175 | ||||||||
Sweden - 0.7% | BAE Systems PLC | 116,849 | 849 | |||||||
Atlas Copco AB Class A | 24,554 | 747 | Barclays PLC | 659,729 | 1,813 | |||||
Fastighets AB Balder Class B(Æ) | 6,922 | 140 | Barratt Developments PLC | 17,146 | 98 | |||||
Hennes & Mauritz AB Class B | 20,794 | 577 | BP PLC | 334,838 | 2,081 | |||||
Hexagon AB Class B | 19,433 | 693 | BP PLC - ADR | 28,700 | 1,073 | |||||
L E Lundbergforetagen AB Class B | 2,624 | 161 | British American Tobacco PLC | 2,963 | 168 | |||||
Melker Schorling AB | 2,566 | 151 | Bunzl PLC | 3,936 | 102 | |||||
Telefonaktiebolaget LM Ericsson Class B | 23,568 | 137 | Capital & Counties Properties PLC | 30,646 | 112 | |||||
2,606 | CNH Industrial NV | 251,500 | 2,186 | |||||||
Cobham PLC | 542,000 | 1,092 | ||||||||
Switzerland - 8.5% | Coca-Cola European Partners PLC | 55,900 | 1,755 | |||||||
ABB, Ltd.(Æ) | 75,250 | 1,584 | Compass Group PLC | 140,876 | 2,597 | |||||
ABB, Ltd. - ADR(Æ)(Ñ) | 20,800 | 438 | Croda International PLC | 4,528 | 178 | |||||
Actelion, Ltd.(Æ) | 6,242 | 1,350 | CYBG PLC(Æ) | 35,554 | 123 | |||||
Allreal Holding AG(Æ) | 1,833 | 272 | Dairy Crest Group PLC | 189,109 | 1,444 | |||||
Banque Cantonale Vaudoise | 219 | 139 | Delphi Automotive PLC | 3,201 | 216 | |||||
Basellandschaftliche Kantonalbank | 163 | 144 | Diageo PLC | 47,471 | 1,228 | |||||
Basler Kantonalbank | 2,817 | 185 | DS Smith PLC Class F | 591,670 | 2,967 | |||||
Berner Kantonalbank AG | 931 | 168 | Experian PLC | 81,703 | 1,581 | |||||
Credit Suisse Group AG(Æ) | 214,735 | 3,067 | Fiat Chrysler Automobiles NV | 264,800 | 2,405 | |||||
Geberit AG | 2,213 | 886 | GlaxoSmithKline PLC - ADR | 175,276 | 3,347 | |||||
Graubuendner Kantonalbank | 81 | 114 | Halma PLC | 9,880 | 109 | |||||
Helvetia Holding AG | 900 | 485 | HSBC Holdings PLC | 270,384 | 2,186 | |||||
Julius Baer Group, Ltd.(Æ) | 11,293 | 501 | IG Group Holdings PLC | 56,163 | 341 | |||||
Kuehne & Nagel International AG | 1,897 | 250 | Imperial Tobacco Group PLC | 92,695 | 4,032 | |||||
Lonza Group AG(Æ) | 3,678 | 636 | Intermediate Capital Group PLC(Æ) | 22,956 | 197 | |||||
Luzerner Kantonalbank AG(Æ) | 593 | 234 | Johnson Matthey PLC | 25,926 | 1,013 | |||||
Nestle SA | 51,379 | 3,686 | Kingfisher PLC | 77,037 | 332 | |||||
Novartis AG | 54,562 | 3,968 | Land Securities Group PLC(ö) | 7,362 | 97 | |||||
OC Oerlikon Corp. AG(Æ) | 14,900 | 146 | Micro Focus International PLC | 21,914 | 588 | |||||
Partners Group Holding AG | 1,612 | 754 | National Grid PLC | 112,123 | 1,311 | |||||
Roche Holding AG | 15,994 | 3,644 | Pearson PLC | 13,318 | 134 | |||||
St. Galler Kantonalbank AG | 614 | 239 | Prudential PLC | 23,993 | 479 | |||||
STMicroelectronics NV | 108,225 | 1,227 | Reckitt Benckiser Group PLC | 12,926 | 1,092 | |||||
Swiss Life Holding AG(Æ) | 3,900 | 1,103 | RELX NV | 22,066 | 371 | |||||
UBS Group AG(Æ) | 194,942 | 3,053 | RELX PLC | 57,008 | 1,014 | |||||
Wolseley PLC - ADR | 18,671 | 1,141 | Rio Tinto PLC | 44,566 | 1,698 | |||||
Zurich Insurance Group AG(Æ) | 2,800 | 769 | Rolls Royce Holdings PLC(Æ) | 178,974 | 1,472 | |||||
30,183 | Royal Bank of Scotland Group PLC(Æ) | 495,595 | 1,369 | |||||||
Royal Mail PLC | 48,653 | 277 | ||||||||
Taiwan - 1.2% | RSA Insurance Group PLC | 65,481 | 472 | |||||||
Hon Hai Precision Industry Co., Ltd. | 203,400 | 526 | Sage Group PLC (The) | 12,503 | 101 | |||||
Taiwan Semiconductor Manufacturing | Segro PLC(ö) | 22,434 | 127 | |||||||
Co., Ltd. | 253,000 | 1,418 | Shaftesbury PLC(ö) | 6,567 | 73 | |||||
Taiwan Semiconductor Manufacturing | Sky PLC | 16,434 | 200 | |||||||
Co., Ltd. - ADR | 35,826 | 1,030 | Smith & Nephew PLC | 6,412 | 96 | |||||
Teco Electric and Machinery Co., Ltd. | 1,306,900 | 1,127 | Smiths Group PLC | 17,727 | 308 | |||||
4,101 | St. James's Place PLC | 48,885 | 608 | |||||||
Standard Chartered PLC(Æ) | 168,053 | 1,377 |
See accompanying notes which are an integral part of the financial statements.
56 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
or Shares | $ | or Shares | $ | |||||||
Subsea 7 SA(Æ) | 10,590 | 134 | (cost $18,920) | 18,922 | ||||||
Tesco PLC(Æ) | 838,650 | 2,135 | ||||||||
Travis Perkins PLC | 136,200 | 2,433 | ||||||||
Unilever NV | 20,592 | 846 | Other Securities - 0.2% | |||||||
U.S. Cash Collateral Fund(×) | 548,026 | (8) | 548 | |||||||
Unilever PLC | 3,891 | 157 | Total Other Securities | |||||||
Vodafone Group PLC | 922,685 | 2,269 | ||||||||
WPP PLC | 169,641 | 3,793 | (cost $548) | 548 | ||||||
64,673 | ||||||||||
Total Investments 98.6% | ||||||||||
United States - 1.0% | (identified cost $329,661) | 350,275 | ||||||||
Ball Corp. | 1,389 | 104 | ||||||||
Carnival PLC | 5,290 | 268 | ||||||||
News Corp. Class A | 79,596 | 913 | Other Assets and Liabilities, Net | |||||||
News Corp. Class B | 10,710 | 126 | - 1.4% | 5,099 | ||||||
Philip Morris International, Inc. | 6,858 | 627 | Net Assets - 100.0% | 355,374 | ||||||
Yum China Holdings, Inc.(Æ) | 43,964 | 1,149 | ||||||||
Yum! Brands, Inc. | 5,261 | 333 | ||||||||
3,520 | ||||||||||
Total Common Stocks | ||||||||||
(cost $306,373) | 327,874 | |||||||||
Preferred Stocks - 0.8% | ||||||||||
Germany - 0.8% | ||||||||||
Bayerische Motoren Werke AG | 1,747 | 134 | ||||||||
Man SE | 728 | 71 | ||||||||
Porsche Automobil Holding SE | 7,868 | 428 | ||||||||
Volkswagen AG | 12,867 | 1,803 | ||||||||
2,436 | ||||||||||
Japan - 0.0% | ||||||||||
Shinkin Central Bank Class A | 79 | 157 | ||||||||
Sweden - 0.0% | ||||||||||
Fastighets AB Balder | 4,619 | 164 | ||||||||
Total Preferred Stocks | ||||||||||
(cost $2,742) | 2,757 | |||||||||
Options Purchased - 0.0% | ||||||||||
(Number of Contracts) | ||||||||||
EURO STOXX 50 Index | ||||||||||
Feb 2017 2,957.19 Put (11,090) | EUR | 32,795 | (ÿ) | 170 | ||||||
Total Options Purchased | ||||||||||
(cost $1,074) | 170 | |||||||||
Warrants & Rights - 0.0% | ||||||||||
Spain - 0.0% | ||||||||||
Repsol SA(Æ)(Ñ) | ||||||||||
2017 Rights | 11,941 | 4 | ||||||||
Total Warrants & Rights | ||||||||||
(cost $4) | 4 | |||||||||
Short-Term Investments - 5.3% | ||||||||||
United States - 5.3% | ||||||||||
U.S. Cash Management Fund | 18,917,875 | (8) | 18,922 | |||||||
Total Short-Term Investments |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 57
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2016
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
CAC40 Euro Index Futures | 36 | EUR | 1,751 | 01/17 | 27 | ||
DAX Index Futures | 5 | EUR | 1,433 | 03/17 | 17 | ||
EURO STOXX 50 Index Futures | 89 | EUR | 2,917 | 03/17 | 52 | ||
FTSE 100 Index Futures | 33 | GBP | 2,327 | 03/17 | 68 | ||
Hang Seng Index Futures | 4 | HKD | 4,392 | 01/17 | 11 | ||
S&P/TSX 60 Index Futures | 70 | CAD | 12,557 | 03/17 | (5 | ) | |
SPI 200 Index Futures | 88 | AUD | 12,388 | 03/17 | 207 | ||
TOPIX Index Futures | 147 | JPY | 2,231,459 | 03/17 | 463 | ||
Short Positions | |||||||
EURO STOXX 50 Index Futures | 182 | EUR | 5,964 | 03/17 | (156 | ) | |
FTSE 100 Index Futures | 144 | GBP | 10,152 | 03/17 | (355 | ) | |
Hang Seng Index Futures | 12 | HKD | 13,177 | 01/17 | (32 | ) | |
S&P 500 E-Mini Index Futures | 102 | USD | 11,405 | 03/17 | (24 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 273 |
Options Written | ||||||||
Amounts in thousands (except contract amounts) | ||||||||
Number of | Strike | Notional | Expiration | Fair Value | ||||
Call/Put | Contracts | Price | Amount | Date | $ | |||
EURO STOXX 50 Index | Call | 2,780 | 3,335.24 | USD | 9,272 | 02/17/17 | (462 | ) |
EURO STOXX 50 Index | Put | 11,090 | 2,858.78 | USD | 31,704 | 02/17/17 | (52 | ) |
Total Liability for Options Written (premiums received $506) | (514 | ) |
Transactions in options written contracts for the period ended December 31, 2016 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2015 | — | $ | — | |||
Opened | 22,214 | 528 | ||||
Closed | — | — | ||||
Expired | (8,344 | ) | (22 | ) | ||
Outstanding December 31, 2016 | 13,870 | $ | 506 |
Foreign Currency Exchange Contracts | |||||||||
Amounts in thousands | |||||||||
Unrealized | |||||||||
Appreciation | |||||||||
Amount | Amount | (Depreciation) | |||||||
Counterparty | Sold | Bought | Settlement Date | $ | |||||
Bank of New York | USD | 181 | AUD | 250 | 03/15/17 | (1 | ) | ||
Bank of New York | USD | 299 | CAD | 400 | 03/15/17 | (1 | ) | ||
Bank of New York | USD | 1,466 | EUR | 1,400 | 03/15/17 | 14 | |||
Bank of New York | USD | 495 | GBP | 400 | 03/15/17 | (2 | ) | ||
Bank of New York | USD | 129 | HKD | 1,000 | 03/15/17 | — | |||
Bank of New York | USD | 598 | JPY | 70,000 | 03/15/17 | 3 | |||
BNP Paribas | EUR | 500 | USD | 534 | 03/15/17 | 6 | |||
Brown Brothers Harriman | CHF | 5 | USD | 5 | 01/04/17 | — | |||
Brown Brothers Harriman | HKD | 2 | USD | — | 01/03/17 | — | |||
Brown Brothers Harriman | HKD | 4 | USD | 1 | 01/04/17 | — | |||
Brown Brothers Harriman | SGD | 4 | USD | 3 | 01/05/17 | — | |||
Citigroup | USD | 181 | AUD | 250 | 03/15/17 | (1 | ) |
See accompanying notes which are an integral part of the financial statements.
58 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
Citigroup | USD | 524 | AUD | 706 | 03/15/17 | (16 | ) | |
Citigroup | USD | 1,431 | AUD | 1,927 | 03/15/17 | (43 | ) | |
Citigroup | USD | 1,929 | AUD | 2,598 | 03/15/17 | (58 | ) | |
Citigroup | USD | 149 | CAD | 200 | 03/15/17 | — | ||
Citigroup | USD | 681 | CAD | 905 | 03/15/17 | (7 | ) | |
Citigroup | USD | 1,410 | CAD | 1,874 | 03/15/17 | (14 | ) | |
Citigroup | USD | 1,833 | CAD | 2,435 | 03/15/17 | (18 | ) | |
Citigroup | USD | 627 | EUR | 600 | 03/15/17 | 7 | ||
Citigroup | USD | 3,205 | EUR | 2,972 | 03/15/17 | (66 | ) | |
Citigroup | USD | 311 | GBP | 250 | 03/15/17 | (2 | ) | |
Citigroup | USD | 1,119 | GBP | 874 | 03/15/17 | (39 | ) | |
Citigroup | USD | 1,135 | GBP | 887 | 03/15/17 | (40 | ) | |
Citigroup | USD | 39 | HKD | 300 | 03/15/17 | — | ||
Citigroup | USD | 271 | HKD | 2,097 | 03/15/17 | — | ||
Citigroup | USD | 429 | JPY | 50,000 | 03/15/17 | 1 | ||
Citigroup | USD | 1,502 | JPY | 170,182 | 03/15/17 | (41 | ) | |
Citigroup | USD | 3,387 | JPY | 383,795 | 03/15/17 | (92 | ) | |
Citigroup | AUD | 100 | USD | 75 | 03/15/17 | 3 | ||
Citigroup | AUD | 100 | USD | 72 | 03/15/17 | — | ||
Citigroup | CAD | 100 | USD | 76 | 03/15/17 | 1 | ||
Citigroup | CAD | 100 | USD | 74 | 03/15/17 | — | ||
Citigroup | CHF | 567 | USD | 565 | 03/15/17 | 6 | ||
Citigroup | EUR | 300 | USD | 324 | 03/15/17 | 8 | ||
Citigroup | EUR | 400 | USD | 419 | 03/15/17 | (3 | ) | |
Citigroup | EUR | 1,380 | USD | 1,489 | 03/15/17 | 31 | ||
Citigroup | EUR | 4,240 | USD | 4,574 | 03/15/17 | 94 | ||
Citigroup | GBP | 100 | USD | 127 | 03/15/17 | 3 | ||
Citigroup | GBP | 100 | USD | 123 | 03/15/17 | — | ||
Citigroup | GBP | 2,321 | USD | 2,970 | 03/15/17 | 104 | ||
Citigroup | HKD | 3,202 | USD | 413 | 03/15/17 | — | ||
Citigroup | JPY | 20,000 | USD | 171 | 03/15/17 | (1 | ) | |
Citigroup | JPY | 20,000 | USD | 177 | 03/15/17 | 5 | ||
Citigroup | JPY | 31,667 | USD | 279 | 03/15/17 | 8 | ||
Citigroup | NOK | 2,333 | USD | 279 | 03/15/17 | 8 | ||
Commonwealth Bank of Australia | USD | 125 | GBP | 100 | 03/15/17 | (1 | ) | |
Goldman Sachs | AUD | 100 | USD | 74 | 03/15/17 | 2 | ||
Goldman Sachs | CAD | 100 | USD | 75 | 03/15/17 | 1 | ||
Goldman Sachs | EUR | 200 | USD | 213 | 03/15/17 | 2 | ||
Goldman Sachs | EUR | 200 | USD | 215 | 03/15/17 | 4 | ||
Goldman Sachs | GBP | 100 | USD | 126 | 03/15/17 | 3 | ||
Goldman Sachs | JPY | 10,000 | USD | 88 | 03/15/17 | 2 | ||
Goldman Sachs | JPY | 10,000 | USD | 88 | 03/15/17 | 2 | ||
HSBC | USD | 525 | AUD | 706 | 03/15/17 | (17 | ) | |
HSBC | USD | 1,433 | AUD | 1,927 | 03/15/17 | (45 | ) | |
HSBC | USD | 1,932 | AUD | 2,598 | 03/15/17 | (61 | ) | |
HSBC | USD | 681 | CAD | 905 | 03/15/17 | (7 | ) | |
HSBC | USD | 1,410 | CAD | 1,874 | 03/15/17 | (14 | ) | |
HSBC | USD | 1,833 | CAD | 2,435 | 03/15/17 | (18 | ) | |
HSBC | USD | 3,205 | EUR | 2,972 | 03/15/17 | (66 | ) | |
HSBC | USD | 1,119 | GBP | 874 | 03/15/17 | (39 | ) | |
HSBC | USD | 1,135 | GBP | 887 | 03/15/17 | (40 | ) | |
HSBC | USD | 271 | HKD | 2,097 | 03/15/17 | — | ||
HSBC | USD | 1,502 | JPY | 170,182 | 03/15/17 | (40 | ) | |
HSBC | USD | 3,386 | JPY | 383,795 | 03/15/17 | (91 | ) |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 59
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
HSBC | CHF | 567 | USD | 565 | 03/15/17 | 6 | |
HSBC | EUR | 1,380 | USD | 1,488 | 03/15/17 | 31 | |
HSBC | EUR | 4,240 | USD | 4,573 | 03/15/17 | 95 | |
HSBC | GBP | 2,321 | USD | 2,970 | 03/15/17 | 103 | |
HSBC | HKD | 3,202 | USD | 413 | 03/15/17 | — | |
HSBC | JPY | 31,667 | USD | 279 | 03/15/17 | 8 | |
HSBC | NOK | 2,333 | USD | 279 | 03/15/17 | 8 | |
National Australia Bank | USD | 1,433 | AUD | 1,927 | 03/15/17 | (45 | ) |
National Australia Bank | USD | 1,932 | AUD | 2,598 | 03/15/17 | (61 | ) |
National Australia Bank | USD | 1,411 | CAD | 1,874 | 03/15/17 | (14 | ) |
National Australia Bank | USD | 1,834 | CAD | 2,435 | 03/15/17 | (19 | ) |
National Australia Bank | USD | 1,133 | GBP | 887 | 03/15/17 | (38 | ) |
National Australia Bank | USD | 3,387 | JPY | 383,795 | 03/15/17 | (92 | ) |
National Australia Bank | CHF | 567 | USD | 565 | 03/15/17 | 6 | |
National Australia Bank | EUR | 1,380 | USD | 1,489 | 03/15/17 | 31 | |
National Australia Bank | EUR | 4,240 | USD | 4,576 | 03/15/17 | 97 | |
National Australia Bank | GBP | 2,321 | USD | 2,964 | 03/15/17 | 100 | |
National Australia Bank | HKD | 3,202 | USD | 413 | 03/15/17 | — | |
National Australia Bank | JPY | 31,667 | USD | 279 | 03/15/17 | 8 | |
National Australia Bank | NOK | 2,333 | USD | 279 | 03/15/17 | 8 | |
Royal Bank of Canada | USD | 72 | AUD | 100 | 03/15/17 | — | |
Royal Bank of Canada | USD | 1,932 | AUD | 2,598 | 03/15/17 | (61 | ) |
Royal Bank of Canada | USD | 222 | CAD | 300 | 03/15/17 | 2 | |
Royal Bank of Canada | USD | 1,833 | CAD | 2,435 | 03/15/17 | (18 | ) |
Royal Bank of Canada | USD | 526 | EUR | 500 | 03/15/17 | 2 | |
Royal Bank of Canada | USD | 3,386 | JPY | 383,795 | 03/15/17 | (91 | ) |
Royal Bank of Canada | CHF | 8 | USD | 8 | 01/03/17 | — | |
Royal Bank of Canada | EUR | 1,380 | USD | 1,489 | 03/15/17 | 31 | |
Royal Bank of Canada | GBP | 2,321 | USD | 2,969 | 03/15/17 | 104 | |
Royal Bank of Canada | HKD | 3,202 | USD | 413 | 03/15/17 | — | |
State Street | AUD | 100 | USD | 72 | 03/15/17 | — | |
State Street | AUD | 100 | USD | 72 | 03/15/17 | — | |
State Street | CAD | 2 | USD | 1 | 01/03/17 | — | |
State Street | CAD | 100 | USD | 74 | 03/15/17 | (1 | ) |
State Street | CAD | 200 | USD | 148 | 03/15/17 | (1 | ) |
State Street | DKK | 1,209 | USD | 170 | 01/03/17 | (1 | ) |
State Street | EUR | 15 | USD | 16 | 01/03/17 | — | |
State Street | EUR | 137 | USD | 144 | 01/03/17 | (1 | ) |
State Street | EUR | 400 | USD | 420 | 03/15/17 | (3 | ) |
State Street | EUR | 600 | USD | 629 | 03/15/17 | (5 | ) |
State Street | GBP | 8 | USD | 10 | 01/03/17 | — | |
State Street | GBP | 40 | USD | 50 | 01/03/17 | — | |
State Street | GBP | 120 | USD | 148 | 03/15/17 | (1 | ) |
State Street | GBP | 200 | USD | 246 | 03/15/17 | (1 | ) |
State Street | HKD | 800 | USD | 103 | 03/15/17 | — | |
State Street | JPY | 30,000 | USD | 256 | 03/15/17 | (1 | ) |
State Street | JPY | 30,000 | USD | 257 | 03/15/17 | (1 | ) |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (381 | ) |
See accompanying notes which are an integral part of the financial statements.
60 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2016
Presentation of Portfolio Holdings | |||||||||||||
Amounts in thousands | |||||||||||||
Fair Value | |||||||||||||
Practical | |||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | |||||||
Common Stocks | |||||||||||||
Australia | $ | — | $ | 5,577 | $ | — | $ | — | $ | 5,577 | 1.6 | ||
Austria | — | 2,231 | — | — | 2,231 | 0.6 | |||||||
Belgium | — | 3,253 | — | — | 3,253 | 0.9 | |||||||
Bermuda | 1,046 | 265 | — | — | 1,311 | 0.4 | |||||||
Brazil | 1,520 | 573 | — | — | 2,093 | 0.6 | |||||||
Canada | 12,165 | — | — | — | 12,165 | 3.4 | |||||||
China | 2,418 | 2,088 | — | — | 4,506 | 1.3 | |||||||
Colombia | 467 | — | — | — | 467 | 0.1 | |||||||
Czech Republic | — | 162 | — | — | 162 | 0.1 | |||||||
Denmark | — | 2,520 | — | — | 2,520 | 0.7 | |||||||
Finland | — | 1,889 | — | — | 1,889 | 0.5 | |||||||
France | — | 40,558 | — | — | 40,558 | 11.4 | |||||||
Germany | — | 20,420 | — | — | 20,420 | 5.8 | |||||||
Hong Kong | — | 5,959 | — | — | 5,959 | 1.7 | |||||||
India | 2,394 | 1,206 | — | — | 3,600 | 1.0 | |||||||
Ireland | 1,896 | 4,944 | — | — | 6,840 | 1.9 | |||||||
Israel | 2,462 | 364 | — | — | 2,826 | 0.8 | |||||||
Italy | 43 | 9,496 | — | — | 9,539 | 2.7 | |||||||
Japan | — | 55,598 | — | — | 55,598 | 15.7 | |||||||
Jersey | — | 1,102 | — | — | 1,102 | 0.3 | |||||||
Luxembourg | — | 171 | — | — | 171 | 0.1 | |||||||
Macao | — | 434 | — | — | 434 | 0.1 | |||||||
Mexico | 225 | — | — | — | 225 | 0.1 | |||||||
Netherlands | 201 | 18,351 | — | — | 18,552 | 5.2 | |||||||
Portugal | — | 60 | — | — | 60 | —* | |||||||
Russia | — | 1,400 | — | — | 1,400 | 0.4 | |||||||
Singapore | — | 5,788 | — | — | 5,788 | 1.6 | |||||||
South Africa | — | 506 | — | — | 506 | 0.1 | |||||||
South Korea | — | 6,516 | — | — | 6,516 | 1.8 | |||||||
Spain | — | 5,714 | — | — | 5,714 | 1.6 | |||||||
Sweden | — | 2,606 | — | — | 2,606 | 0.7 | |||||||
Switzerland | 438 | 29,745 | — | — | 30,183 | 8.5 | |||||||
Taiwan | 1,030 | 3,071 | — | — | 4,101 | 1.2 | |||||||
Thailand | — | 809 | — | — | 809 | 0.2 | |||||||
United Kingdom | 3,481 | 61,192 | — | — | 64,673 | 18.2 | |||||||
United States | 3,252 | 268 | — | — | 3,520 | 1.0 | |||||||
Preferred Stocks | — | 2,757 | — | — | 2,757 | 0.8 | |||||||
Options Purchased | — | 170 | — | — | 170 | —* | |||||||
Warrants & Rights | 4 | — | — | — | 4 | —* | |||||||
Short-Term Investments | — | — | — | 18,922 | 18,922 | 5.3 |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 61
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — December 31, 2016
Presentation of Portfolio Holdings | |||||||||||||||||
Amounts in thousands | |||||||||||||||||
Fair Value | |||||||||||||||||
Practical | |||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | |||||||||||
Other Securities | — | — | — | 548 | 548 | 0.2 | |||||||||||
Total Investments | 33,042 | 297,763 | — | 19,470 | 350,275 | 98.6 | |||||||||||
Other Assets and Liabilities, Net | 1.4 | ||||||||||||||||
100.0 | |||||||||||||||||
Other Financial Instruments | |||||||||||||||||
Assets | |||||||||||||||||
Futures Contracts | 845 | — | — | — | 845 | 0.2 | |||||||||||
Foreign Currency Exchange Contracts | — | 958 | — | — | 958 | 0.3 | |||||||||||
Liabilities | |||||||||||||||||
Futures Contracts | (572 | ) | — | — | — | (572 | ) | (0.2 | ) | ||||||||
Options Written | — | (514 | ) | — | — | (514 | ) | (0.1 | ) | ||||||||
Foreign Currency Exchange Contracts | — | (1,339 | ) | — | — | (1,339 | ) | (0.4 | ) | ||||||||
Total Other Financial Instruments** | $ | 273 | $ | (895 | ) | $ | — | $ | — | $ | (622 | ) |
* Less than 0.05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the investments.
(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified
in the fair value levels. The fair value amounts presented in the table are intended to permit reconciliation to the amounts presented in the Schedule of
Investments.
For a description of the Levels, see note 2 in the Notes to Financial Statements.
For a disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2016, see note 2 in the Notes to
Financial Statements.
Amounts in thousands | |||
Fair Value | |||
Sector Exposure | $ | ||
Consumer Discretionary | 53,052 | ||
Consumer Staples | 19,710 | ||
Energy | 26,691 | ||
Financial Services | 80,894 | ||
Health Care | 29,262 | ||
Materials and Processing | 34,854 | ||
Options Purchased | 170 | ||
Producer Durables | 48,396 | ||
Technology | 26,718 | ||
Utilities | 11,054 | ||
Warrants and Rights | 4 | ||
Short-Term Investments | 18,922 | ||
Other Securities | 548 | ||
Total Investments | 350,275 |
See accompanying notes which are an integral part of the financial statements.
62 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Fair Value of Derivative Instruments — December 31, 2016
Amounts in thousands
Foreign | ||||||
Equity | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | ||||
Location: Statement of Assets and Liabilities - Assets | ||||||
Investments, at fair value* | $ | 170 | $ | — | ||
Unrealized appreciation on foreign currency exchange contracts | — | 958 | ||||
Variation margin on futures contracts** | 845 | — | ||||
Total | $ | 1,015 | $ | 958 | ||
Location: Statement of Assets and Liabilities - Liabilities | ||||||
Variation margin on futures contracts** | $ | 572 | $ | — | ||
Unrealized depreciation on foreign currency exchange contracts | — | 1,339 | ||||
Options written, at fair value | 514 | — | ||||
Total | $ | 1,086 | $ | 1,339 | ||
Foreign | ||||||
Equity | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | ||||
Location: Statement of Operations - Net realized gain (loss) | ||||||
Investments*** | $ | (195 | ) | $ | — | |
Futures contracts | (525 | ) | — | |||
Options written | 22 | — | ||||
Foreign currency-related transactions**** | — | 3,364 | ||||
Total | $ | (698 | ) | $ | 3,364 | |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||
Investments***** | $ | (904 | ) | $ | — | |
Futures contracts | $ | (451 | ) | $ | — | |
Options written | (8 | ) | — | |||
Foreign currency-related transactions****** | — | (766 | ) | |||
Total | $ | (1,363 | ) | $ | (766 | ) |
* Fair value of purchased options.
** Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
*** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
**** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
***** Includes net unrealized gain (loss) on purchased options as reported in the Schedule of Investments.
****** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 63
Russell Investment Funds
Non-U.S. Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Assets | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||
Options Purchased Contracts | Investments, at fair value | $ | 170 | $ | — | $ | 170 | ||
Securities on Loan* | Investments, at fair value | 529 | — | 529 | |||||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 958 | — | 958 | |||||
Futures Contracts | Variation margin on futures contracts | 116 | — | 116 | |||||
Total Financial and Derivative Assets | 1,773 | — | 1,773 | ||||||
Financial and Derivative Assets not subject to a netting agreement | (117) | — | (117 | ) | |||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 1,656 | $ | — | $ | 1,656 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||||
Gross Amounts Not Offset in | |||||||||||
the Statement of Assets and | |||||||||||
Liabilities | |||||||||||
Net Amounts | |||||||||||
of Assets | |||||||||||
Presented in | |||||||||||
the Statement | Financial and | ||||||||||
of Assets and | Derivative | Collateral | |||||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||||
Bank of America | $ | 170 | $ | 170 | $ | — | $ | — | |||
Bank of New York | 16 | 3 | — | 13 | |||||||
Barclays | 434 | — | 434 | — | |||||||
BNP Paribas | 6 | — | — | 6 | |||||||
Citigroup | 282 | 279 | 3 | — | |||||||
Credit Suisse | 48 | — | 48 | — | |||||||
Goldman Sachs | 16 | — | — | 16 | |||||||
HSBC | 252 | 252 | — | — | |||||||
National Australia Bank | 249 | 249 | — | — | |||||||
Royal Bank of Canada | 139 | 139 | — | — | |||||||
UBS | 44 | — | 44 | — | |||||||
Total | $ | 1,656 | $ | 1,092 | $ | 529 | $ | 35 |
See accompanying notes which are an integral part of the financial statements.
64 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 200 | $ | — | $ | 200 | ||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 1,339 | — | 1,339 | |||||
Options Written Contracts | Options written, at fair value | 514 | — | 514 | |||||
Total Financial and Derivative Liabilities | 2,053 | — | 2,053 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (202) | — | (202 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 1,851 | $ | — | $ | 1,851 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | ||||||||||
Gross Amounts Not Offset in | ||||||||||
the Statement of Assets and | ||||||||||
Liabilities | ||||||||||
Net Amounts | ||||||||||
of Liabilities | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | ||||||
Bank of America | $ | 514 | $ | 170 | $ | 310 | $ | 34 | ||
Bank of New York | 3 | 3 | — | — | ||||||
Citigroup | 442 | 279 | — | 163 | ||||||
Commonwealth Bank of Australia | 1 | — | — | 1 | ||||||
HSBC | 438 | 252 | — | 186 | ||||||
National Australia Bank | 268 | 249 | — | 19 | ||||||
Royal Bank of Canada | 171 | 139 | — | 32 | ||||||
State Street | 14 | — | — | 14 | ||||||
Total | $ | 1,851 | $ | 1,092 | $ | 310 | $ | 449 |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 65
Russell Investment Funds
Non-U.S. Fund
Statement of Assets and Liabilities — December 31, 2016
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 329,661 |
Investments, at fair value(*)(>) | 350,275 | |
Cash (restricted)(a) | 5,010 | |
Foreign currency holdings(^) | 1,448 | |
Unrealized appreciation on foreign currency exchange contracts | 958 | |
Receivables: | ||
Dividends and interest | 394 | |
Dividends from affiliated funds | 11 | |
Investments sold | 353 | |
Fund shares sold | 35 | |
Foreign capital gains taxes recoverable | 414 | |
Variation margin on futures contracts | 116 | |
Total assets | 359,014 | |
Liabilities | ||
Payables: | ||
Investments purchased | 639 | |
Accrued fees to affiliates | 290 | |
Other accrued expenses | 108 | |
Variation margin on futures contracts | 200 | |
Deferred capital gains tax liability | 2 | |
Unrealized depreciation on foreign currency exchange contracts | 1,339 | |
Options written, at fair value(x) | 514 | |
Payable upon return of securities loaned | 548 | |
Total liabilities | 3,640 | |
Net Assets | $ | 355,374 |
See accompanying notes which are an integral part of the financial statements.
66 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Statement of Assets and Liabilities, continued — December 31, 2016
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 2,246 | |
Accumulated net realized gain (loss) | (32,427 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments (net of deferred tax liability for foreign capital gains taxes) | 20,612 | ||
Futures contracts | 273 | ||
Options written | (8 | ) | |
Foreign currency-related transactions | (432 | ) | |
Shares of beneficial interest | 319 | ||
Additional paid-in capital | 364,791 | ||
Net Assets | $ | 355,374 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 11.15 | |
Net assets | $ | 355,373,859 | |
Shares outstanding ($.01 par value) | 31,861,621 | ||
Amounts in thousands | |||
(^) Foreign currency holdings - cost | $ | 1,460 | |
(x) Premiums received on options written | $ | 506 | |
(*) Securities on loan included in investments | $ | 529 | |
(>) Investments in affiliates, U.S. Cash Collateral Fund and U.S. Cash Management Fund | $ | 19,470 | |
(a) Cash Collateral for Futures | $ | 5,010 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 67
Russell Investment Funds
Non-U.S. Fund
Statement of Operations — For the Period Ended December 31, 2016
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 10,441 | |
Dividends from affiliated funds | 74 | ||
Securities lending income (net) | 156 | ||
Securities lending income from affiliated funds (net) | 26 | ||
Less foreign taxes withheld | (906 | ) | |
Total investment income | 9,791 | ||
Expenses | |||
Advisory fees | 3,150 | ||
Administrative fees | 175 | ||
Custodian fees (1) | 46 | ||
Transfer agent fees | 15 | ||
Professional fees | 96 | ||
Trustees’ fees | 13 | ||
Printing fees | 46 | ||
Miscellaneous | 13 | ||
Total expenses | 3,554 | ||
Net investment income (loss) | 6,237 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments (net of deferred tax liability for foreign capital gains taxes) | 7,072 | ||
Futures contracts | (525 | ) | |
Options written | 22 | ||
Foreign currency-related transactions | 3,237 | ||
Net realized gain (loss) | 9,806 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments (net of deferred tax liability for foreign capital gains taxes) | (6,270 | ) | |
Futures contracts | (451 | ) | |
Options written | (8 | ) | |
Foreign currency-related transactions | (772 | ) | |
Net change in unrealized appreciation (depreciation) | (7,501 | ) | |
Net realized and unrealized gain (loss) | 2,305 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 8,542 |
(1) Includes a reimbursement for overbilling of custody out-of-pocket fees from prior years. See note 9 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
68 Non-U.S. Fund
Russell Investment Funds
Non-U.S. Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2016 | 2015 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 6,237 | $ | 6,101 | ||
Net realized gain (loss) | 9,806 | 12,033 | ||||
Net change in unrealized appreciation (depreciation) | (7,501 | ) | (21,287 | ) | ||
Net increase (decrease) in net assets from operations | 8,542 | (3,153 | ) | |||
Distributions | ||||||
From net investment income | (11,300 | ) | (4,414 | ) | ||
Net decrease in net assets from distributions | (11,300 | ) | (4,414 | ) | ||
Share Transactions* | �� | |||||
Net increase (decrease) in net assets from share transactions | 7 | (13,983 | ) | |||
Total Net Increase (Decrease) in Net Assets | (2,751 | ) | (21,550 | ) | ||
Net Assets | ||||||
Beginning of period | 358,125 | 379,675 | ||||
End of period | $ | 355,374 | $ | 358,125 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | 2,246 | $ | 3,346 |
* Share transaction amounts (in thousands) for the periods ended December 31, 2016 and December 31, 2015 were as follows: | ||||||||||||
2016 | 2015 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 1,527 | $ | 16,521 | 1,896 | $ | 22,297 | ||||||
Proceeds from reinvestment of distributions | 1,055 | 11,301 | 371 | 4,414 | ||||||||
Payments for shares redeemed | (2,514 | ) | (27,815 | ) | (3,384 | ) | (40,694 | ) | ||||
Total increase (decrease) | 68 | $ | 7 | (1,117 | ) | $ | (13,983 | ) |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 69
Russell Investment Funds
Non-U.S. Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | $ | $ | $ | $ | |||||||||||||
Net Asset Value, | Net | Net Realized | Total from | Distributions | |||||||||||||
Beginning of | Investment | and Unrealized | Investment | from Net | $ | ||||||||||||
Period | Income (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Total Distributions | ||||||||||||
December 31, 2016 | 11.26 | .19 | .06 | .25 | (.36 | ) | (.36 | ) | |||||||||
December 31, 2015 | 11.54 | .19 | (.33 | ) | (.14 | ) | (.14 | ) | (.14 | ) | |||||||
December 31, 2014 | 12.32 | .26 | (.80 | ) | (.54 | ) | (.24 | ) | (.24 | ) | |||||||
December 31, 2013 | 10.31 | .18 | 2.05 | 2.23 | (.22 | ) | (.22 | ) | |||||||||
December 31, 2012 | 8.75 | .18 | 1.55 | 1.73 | (.17 | ) | (.17 | ) | |||||||||
See accompanying notes which are an integral part of the financial statements.
70 Non-U.S. Fund
% | % | % | ||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | ||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | ||||||||
End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||
Period | Return(d) | (000 | ) | Gross(e) | Net(b)(e) | Net Assets(b) | Turnover Rate | |||||||
11.15 | 2.36 | 355,374 | 1.02 | 1.02 | 1.78 | 36 | ||||||||
11.26 | (1.31 | ) | 358,125 | 1.06 | 1.04 | 1.60 | 35 | |||||||
11.54 | (4.45 | ) | 379,675 | 1.08 | 1.03 | 2.13 | 32 | |||||||
12.32 | 21.91 | 428,517 | 1.04 | .99 | 1.76 | 36 | ||||||||
10.31 | 19.81 | 356,856 | 1.07 | 1.01 | 1.94 | 47 |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 71
Russell Investment Funds
Non-U.S. Fund
Related Party Transactions, Fees and Expenses
Accrued fees payable to affiliates for the period ended December 31, 2016 were as follows: | ||
Advisory fees | $ | 270,552 |
Administration fees | 15,031 | |
Transfer agent fees | 1,323 | |
Trustee fees | 2,632 | |
$ | 289,538 |
Transactions (amounts in thousands) during the period ended December 31, 2016 with Underlying Funds which are, or were, an
affiliated company are as follows:
Fair Value, | Change in | ||||||||||||||||||
Beginning of | Realized Gain | Unrealized | Fair Value, End | Income | Capital Gains | ||||||||||||||
Period | Purchases | Sales | (Loss) | Gain (Loss) | of Period | Distributions | Distributions | ||||||||||||
U.S. Cash Collateral Fund | $ | 2,761 | $ | 103,423 | $ | 105,636 | $ | — | $ | — | $ | 548 | $ | 26 | $ | — | |||
U.S. Cash Management Fund | 17,236 | 127,661 | 125,979 | — | 4 | 18,922 | 74 | — | |||||||||||
$ | 19,997 | $ | 231,084 | $ | 231,615 | $ | — | $ | 4 | $ | 19,470 | $ | 100 | $ | — |
Federal Income Taxes
At December 31, 2016, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Cost of Investments | $ | 332,693,257 | |||
Unrealized Appreciation | $ | 38,760,978 | |||
Unrealized Depreciation | (21,179,012 | ) | |||
Net Unrealized Appreciation (Depreciation) | $ | 17,581,966 | |||
Undistributed Ordinary Income | $ | 2,815,464 | |||
Undistributed Long-Term Capital Gains | |||||
(Capital Loss Carryforward) | $ | (29,831,559 | ) | ||
Tax Composition of Distributions | |||||
Ordinary Income | $ | 11,299,904 |
Net investment income and net realized gains (losses) in the financial statements may differ from taxable net investment income and
net realized gains (losses). Capital accounts within the financial statements are adjusted for permanent book-tax differences. Book-tax
differences are primarily due to foreign currency gains and losses, reclassifications of dividends, differences in treatment of income
from swaps, net operating losses, investments in partnerships, investments in passive foreign investment companies (PFICs), tax
straddle transaction, use of tax equalization and foreign capital gains taxes. These adjustments have no impact on the net assets. At
December 31, 2016, the Statement of Assets and Liabilities have been adjusted by the following amounts (in thousands):
Undistributed net investment income | $ | 3,963 | |
Accumulated net realized gain (loss) | (3,963 | ) | |
Additional paid-in capital | — |
See accompanying notes which are an integral part of the financial statements.
72 Non-U.S. Fund
Russell Investment Funds
Core Bond Fund
Portfolio Management Discussion and Analysis — December 31, 2016 (Unaudited)
Core Bond Fund | Bloomberg Barclays U.S. Aggregate Bond Index** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 3.10 | % | 1 Year | 2.65 | % | ||
5 Years | 3.01 | %§ | 5 Years | 2.23 | %§ | ||
10 Years | 4.81 | %§ | 10 Years | 4.34 | %§ |
Core Bond Fund 73
Russell Investment Funds
Core Bond Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
The Core Bond Fund (the “Fund”) employs a multi-manager | The Fund’s global strategies also added value over the period. In |
approach whereby portions of the Fund are allocated to different | particular, a long U.S. dollar position benefited strongly early and |
money manager strategies. Fund assets not allocated to money | late in the year when market volatility was at its highest. RIM’s |
managers are managed by Russell Investment Management, LLC | global real yields strategy benefited over most of the period as real |
(“RIM”), the Fund’s advisor. RIM may change the allocation of the | yields converged, especially around Brexit, but the strategy gave |
Fund’s assets among money managers at any time. An exemptive | back those gains at the end of the period as the U.S. election led |
order from the Securities and Exchange Commission (“SEC”) | to disproportionate sell off in U.S. interest rates. |
permits RIM to engage or terminate a money manager at any time, | |
subject to approval by the Fund’s Board, without a shareholder | How did the investment strategies and techniques employed |
vote. Pursuant to the terms of the exemptive order, the Fund | by the Fund and its money managers affect its benchmark |
is required to notify its shareholders within 90 days of when a | relative performance? |
money manager begins providing services. As of December 31, | The Fund employs discretionary money managers. The Fund’s |
2016, the Fund had six money managers. | discretionary money managers select the individual portfolio |
securities for the assets assigned to them. Fund assets not | |
What is the Fund’s investment objective? | allocated to discretionary money managers include the Fund’s |
The Fund seeks to provide current income, and as a secondary | liquidity reserves and assets which may be managed directly by |
objective, capital appreciation. | RIM to effect the Fund’s investment strategies and/or to actively |
How did the Fund perform relative to its benchmark for the | manage the Fund’s overall exposures by investing in securities or |
fiscal year ended December 31, 2016? | other instruments that RIM believes will achieve the desired risk/ |
return profile for the Fund. | |
For the fiscal year ended December 31, 2016, the Fund gained | |
3.10%. This is compared to the Fund’s benchmark, the Bloomberg | With respect to certain of the Fund’s money managers, Colchester |
Barclays U.S. Aggregate Bond Index, which gained 2.65% during | Global Investors Limited was the top performing manager for |
the same period. The Fund’s performance includes operating | the year. An overweight to certain undervalued emerging market |
expenses, whereas index returns are unmanaged and do not | currencies, such as the Brazilian real, was the leading driver of |
include expenses of any kind. | their strong performance over the period. |
For the fiscal year ended December 31, 2016, the Morningstar® | Scout Investments, LLC was the worst performing manager over |
Insurance Intermediate-Term Bond Category, a group of funds | the period, but still meaningfully outperformed the benchmark |
that Morningstar considers to have investment strategies similar | during the year. Scout took an underweight position to corporate |
to those of the Fund, gained 3.22%. This result serves as a peer | credit midway through the year, but markets continued to rally, |
comparison and is expressed net of operating expenses. | which was a drag on performance. Still, tactical rotation into |
energy credits early in the year and a short duration position later | |
How did the market conditions described in the Market | in the year more than made up for those losses. |
Summary report affect the Fund’s performance? | During the period, RIM utilized futures and swaps to seek to |
The fiscal year ended December 31, 2016 was characterized by | achieve the Fund benchmark’s duration exposures with respect to |
a sharply risk off market early in the period followed by a similar | the portion of the Fund allocated to cash reserves. This performed |
sharp rebound and extended rally in risky assets (e.g., lower rated | as intended and was a positive in terms of absolute return |
credit and emerging market currencies). A surprise U.S. election | contribution, but lagged the benchmark as credit derivatives |
result in November led to a bifurcation of interest rates and credit | underperformed the cash bonds in the index. |
spreads as high quality bonds mostly tied to interest rate risk | |
suffered as rates rose, while riskier credit assets continued to rally | RIM also managed a three-pronged strategy to seek to generate |
into year-end on the back of bullish fiscal policy expectations. | active returns through currency positioning by supplementing the |
Overall, this proved positive for most fixed income sectors around | Fund’s existing active currency mandate with a more mechanistic |
the globe. Yield curves on global government bonds tended to | strategy and to further reduce the Fund’s reliance on traditional |
flatten modestly over the period. Corporate credit markets suffered | fixed income market risks. This approach incorporates a currency |
in January and February, but returns turned positive as the year | overlay, an index replication and an enhanced cash strategy. |
went on and eventually very significantly so. In this environment, | The currency overlay utilizes currency forward contracts to take |
the Fund’s strategic overweight to credit provided a tailwind to | long and short positions in global foreign exchange markets. |
benchmark relative performance. | Because the currency overlay is an out-of-benchmark position, |
RIM managed an index replication strategy in connection with | |
the currency overlay to provide benchmark-like exposure to |
74 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
its overall strategy. The enhanced cash strategy is designed to | return potential. At the end of the period, Schroder Investment | |
provide for modest returns on the cash held in connection with | Management North America Inc. (“Schroder”) was hired and | |
the currency overlay and index replication strategies. Over the | Logan Circle Partners, L.P. (“Logan”) was given a new manager- | |
year, the currency overlay strategy was positive for the Fund’s | level benchmark so that Schroder and Logan could serve as | |
benchmark-relative performance, but the benchmark replication | sector specialists covering the securitized and corporate portions | |
strategy underperformed due to its reliance on derivatives rather | of the Fund benchmark, respectively, while RIM instituted a | |
than cash bonds. | new positioning strategy to match the government portion of the | |
RIM also implemented a global real yield strategy using global | benchmark. This positioning strategy purchases a physical bond | |
government bond futures to take long positions in high quality | portfolio that seeks to replicate the Bloomberg Barclays U.S. | |
government bonds whose net-of-inflation yields are expected to | Government Index and replaced the derivatives-based enhanced | |
be relatively high and short positions where net-of-inflation yield | cash strategy discussed above. | |
is expected to be relatively low. This strategy had a considerably | Money Managers as of December 31, | |
positive impact on performance over the summer as Brexit | 2016 | Styles |
accelerated the convergence of real interest rates globally, but | Colchester Global Investors Limited | Fully discretionary |
gave back those gains after the U.S. election, leading to a neutral | Logan Circle Partners, L.P. | Sector Specialist |
contribution to the Fund’s performance. | Pareto Investment Management Limited | Fully discretionary |
Throughout the period, RIM also implemented tactical ‘tilts’ based | Schroder Investment Management North | |
America Inc. | Sector Specialist | |
on its judgments regarding shorter-term opportunities to seek to | Scout Investments, LLC | Fully discretionary |
generate returns and/or mitigate risk by purchasing and shorting | Western Asset Management Company | |
U.S. Treasury futures, credit derivatives and currency forward | and Western Asset Management Company | |
contracts. These tilts had a modestly positive benchmark-relative | Limited | Fully discretionary |
contribution during the period due to RIM’s tactical addition of | ||
credit risk via derivatives in the first half of the period. | ||
The views expressed in this report reflect those of the | ||
Describe any changes to the Fund’s structure or the money | portfolio managers only through the end of the period | |
manager line-up. | covered by the report. These views do not necessarily | |
A number of changes were affected over the period. Principal | represent the views of RIM, or any other person in RIM or | |
Global Investors LLC (“Principal”), and Metropolitan West Asset | any other affiliated organization. These views are subject to | |
Management LLC were both terminated during the year. Western | change at any time based upon market conditions or other | |
Asset Management Company (with its affiliate Western Asset | events, and RIM disclaims any responsibility to update the | |
Management Company Limited) was hired as a multi-strategy | views contained herein. These views should not be relied | |
core plus manager, but one with a heavy emphasis on credit in | on as investment advice and, because investment decisions | |
light of the significant credit opportunities available in the market. | for a Russell Investment Funds (“RIF”) Fund are based on | |
Pareto Investment Management Limited was hired to replace | numerous factors, should not be relied on as an indication | |
Principal, which RIM considers to be an upgrade in long term | of investment decisions of any RIF Fund. |
* Assumes initial investment on January 1, 2007.
** The Bloomberg Barclays U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds,
investment-grade corporate debt securities and mortgage-backed securities.
Effective August 24, 2016 the Barclays fixed income benchmark indices, including the Barclays Aggregate family of indices, were renamed the Bloomberg
Barclays family of indices.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results. Additionally, the returns presented herein may differ from the performance reported
in the Financial Highlights as the returns herein are calculated in a manner consistent with standardized performance in accordance with Securities and Exchange
Commission rules, while the performance in the Financial Highlights has been calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”).
Core Bond Fund 75
Russell Investment Funds
Core Bond Fund
Shareholder Expense Example — December 31, 2016 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | |||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | |||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | |||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | |||||
useful in comparing ongoing costs only, and will not help you | ||||||
Example | determine the relative total costs of owning different funds. In | |||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | |||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this on | |||||
administrative fees and other Fund expenses. The Example is | do not reflect any Insurance Company Separate Account Policy | |||||
intended to help you understand your ongoing costs (in dollars) | Charges. | |||||
of investing in the Fund and to compare these costs with the | Hypothetical | |||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | |||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | ||||
the period and held for the entire period indicated, which for this | Performance | expenses) | ||||
Beginning Account Value | ||||||
Fund is from July 1, 2016 to December 31, 2016. | July 1, 2016 | $ | 1,000.00 | $ | 1,000.00 | |
Ending Account Value | ||||||
Actual Expenses | December 31, 2016 | $ | 971.90 | $ | 1,021.87 | |
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 3.22 | $ | 3.30 | |
Performance” provides information about actual account values | ||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.65% | |||||
(representing the six month period annualized), multiplied by the average | ||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/366 (to reflect the one-half | |||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | |||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | |||||
= 8.6), then multiply the result by the number in the first column | ||||||
in the row entitled “Expenses Paid During Period” to estimate | ||||||
the expenses you paid on your account during this period. | ||||||
Hypothetical Example for Comparison Purposes | ||||||
The information in the table under the heading “Hypothetical | ||||||
Performance (5% return before expenses)” provides information | ||||||
about hypothetical account values and hypothetical expenses | ||||||
based on the Fund’s actual expense ratio and an assumed rate of | ||||||
return of 5% per year before expenses, which is not the Fund’s | ||||||
actual return. The hypothetical account values and expenses | ||||||
may not be used to estimate the actual ending account balance or | ||||||
expenses you paid for the period. You may use this information | ||||||
to compare the ongoing costs of investing in the Fund and other | ||||||
funds. To do so, compare this 5% hypothetical example with the | ||||||
5% hypothetical examples that appear in the shareholder reports | ||||||
of other funds. |
76 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Long-Term Investments - 88.5% | Series 2015-37A Class A | ||||||
Asset-Backed Securities - 5.4% | 2.380% due 04/15/27 (Ê)(Þ) | 1,050 | 1,052 | ||||
Aames Mortgage Investment Trust | FFMLT Trust | ||||||
Series 2005-1 Class M6 | Series 2005-FF8 Class M2 | ||||||
1.793% due 06/25/35 (Ê) | 1,040 | 736 | 1.112% due 09/25/35 (Ê) | 760 | 686 | ||
American Express Credit Account | Fieldstone Mortgage Investment Trust | ||||||
Master Trust | Series 2004-4 Class M3 | ||||||
Series 2014-2 Class A | 2.438% due 10/25/35 (Ê) | 696 | 664 | ||||
1.260% due 01/15/20 | 1,665 | 1,666 | Ford Credit Auto Owner Trust | ||||
AmeriCredit Automobile Receivables | Series 2015-B Class A3 | ||||||
Trust | 1.160% due 11/15/19 | 736 | 735 | ||||
Series 2013-3 Class C | GSAMP Trust | ||||||
2.380% due 06/10/19 | 1,210 | 1,215 | |||||
Series 2006-HE4 Class A1 | |||||||
Series 2014-4 Class A3 | 0.732% due 06/25/36 (Ê) | 935 | 831 | ||||
1.270% due 07/08/19 | 527 | 527 | |||||
Hertz Vehicle Financing LLC | |||||||
Series 2016-1 Class A2A | |||||||
1.520% due 06/10/19 | 543 | 544 | Series 2015-2A Class A | ||||
2.020% due 09/25/19 (Þ) | 920 | 911 | |||||
Series 2016-2 Class A2A | |||||||
1.420% due 10/08/19 | 532 | 533 | Home Equity Asset Trust | ||||
Ameriquest Mortgage Securities, | Series 2005-9 Class M1 | ||||||
Inc. Asset-Backed Pass-Through | 0.580% due 04/25/36 (Ê) | 380 | 349 | ||||
Certificates | Honda Auto Receivables Owner Trust | ||||||
Series 2005-R5 Class M1 | Series 2015-2 Class A3 | ||||||
0.955% due 07/25/35 (Ê) | 46 | 46 | 1.040% due 02/21/19 | 1,069 | 1,068 | ||
Asset-Backed Funding Trust Certificates | HSI Asset Securitization Corp. Trust | ||||||
Series 2005-WF1 Class M1 | Series 2007-OPT1 Class 1A | ||||||
1.132% due 11/25/34 (Ê) | 1,187 | 1,148 | 0.628% due 12/25/36 (Ê) | 325 | 240 | ||
Bank of The West Auto Trust | Hyundai Auto Receivables Trust | ||||||
Series 2014-1 Class A3 | Series 2015-A Class A3 | ||||||
1.090% due 03/15/19 (Þ) | 683 | 683 | 1.050% due 04/15/19 | 427 | 427 | ||
Blackbird Capital Aircraft Lease | Series 2015-C Class A2B | ||||||
Securitization, Ltd. | 0.851% due 11/15/18 (Ê) | 128 | 128 | ||||
Series 2016-1A Class AA | Series 2015-C Class A3 | ||||||
2.487% due 12/16/41 (Þ) | 600 | 601 | 1.460% due 02/18/20 | 305 | 305 | ||
Capital Auto Receivables Asset Trust | Long Beach Mortgage Loan Trust | ||||||
Series 2014-2 Class A4 | Series 2004-4 Class M1 | ||||||
1.620% due 10/22/18 | 1,320 | 1,321 | 1.425% due 10/25/34 (Ê) | 1,109 | 1,013 | ||
Capital One Multi-Asset Execution Trust | Magnetite XI, Ltd. | ||||||
Series 2014-A1 Class A1 | Series 2014-11A Class A1 | ||||||
1.080% due 11/15/19 (Ê) | 2,030 | 2,029 | 2.129% due 01/18/27 (Ê)(Þ) | 600 | 600 | ||
Carlyle Global Market Strategies CLO, | Mercedes-Benz Auto Receivables Trust | ||||||
Ltd. | |||||||
Series 2014-3A Class A1A | Series 2016-1 Class A2A | ||||||
2.346% due 07/27/26 (Ê)(Þ) | 500 | 500 | 1.110% due 03/15/19 | 1,410 | 1,410 | ||
Cedar Funding III CLO, Ltd. | Merrill Lynch Mortgage Investors Trust | ||||||
Series 2006-FF1 Class M4 | |||||||
Series 2014-3A Class A1 | 0.895% due 08/25/36 (Ê) | 790 | 762 | ||||
1.863% due 05/20/26 (Ê)(Þ) | 1,500 | 1,504 | |||||
Chase Issuance Trust | MSCC Heloc Trust | ||||||
Series 2007-1 Class A | |||||||
Series 2014-A6 Class A6 | 0.625% due 12/25/31 (Ê) | 62 | 62 | ||||
1.260% due 07/15/19 | 1,730 | 1,731 | |||||
Series 2016-A7 Class A7 | National Collegiate Student Loan Trust | ||||||
1.060% due 09/16/19 | 1,570 | 1,569 | Series 2006-4 Class A3 | ||||
0.748% due 02/26/29 (Ê) | 107 | 104 | |||||
Citibank Credit Card Issuance Trust | |||||||
Series 2014-A2 Class A2 | Nissan Auto Receivables Owner Trust | ||||||
1.020% due 02/22/19 | 3,670 | 3,670 | Series 2013-B Class A4 | ||||
1.310% due 10/15/19 | 478 | 478 | |||||
Dryden 34 Senior Loan Fund | |||||||
Series 2014-34A Class A | Series 2015-A Class A3 | ||||||
2.310% due 10/15/26 (Ê)(Þ) | 1,220 | 1,224 | 1.050% due 10/15/19 | 302 | 302 | ||
Dryden 37 Senior Loan Fund | Option One Mortgage Loan Trust | ||||||
Series 2004-3 Class M1 |
Core Bond Fund 77
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
1.314% due 11/25/34 (Ê) | 1,053 | 1,030 | Abbott Laboratories | ||||
Popular ABS Mortgage Pass-Through | 2.350% due 11/22/19 | 710 | 711 | ||||
Trust | 2.900% due 11/30/21 | 885 | 882 | ||||
Series 2006-C Class A4 | 3.750% due 11/30/26 | 905 | 899 | ||||
0.775% due 07/25/36 (Ê) | 1,282 | 1,243 | 4.750% due 11/30/36 | 80 | 81 | ||
Series 2006-D Class A3 | 4.900% due 11/30/46 | 100 | 103 | ||||
0.852% due 11/25/46 (Ê) | 1,500 | 1,339 | AbbVie, Inc. | ||||
RAMP Trust | 2.500% due 05/14/20 | 841 | 841 | ||||
Series 2003-RS11 Class AI6A | 3.600% due 05/14/25 | 60 | 59 | ||||
5.879% due 12/25/33 | 79 | 83 | AES Corp. | ||||
Series 2006-RZ1 Class M4 | 5.500% due 03/15/24 | 50 | 51 | ||||
1.058% due 03/25/36 (Ê) | 960 | 740 | Aetna, Inc. | ||||
Renaissance Home Equity Loan Trust | 1.700% due 06/07/18 | 160 | 160 | ||||
Series 2006-1 Class AF6 | 1.900% due 06/07/19 | 1,060 | 1,058 | ||||
5.746% due 05/25/36 | 107 | 70 | 2.400% due 06/15/21 | 40 | 40 | ||
Series 2007-1 Class AF2 | 2.800% due 06/15/23 | 30 | 30 | ||||
5.512% due 04/25/37 | 1 | — | 3.200% due 06/15/26 | 895 | 885 | ||
Santander Drive Auto Receivables Trust | 4.375% due 06/15/46 | 170 | 171 | ||||
Series 2012-4 Class D | Albemarle Corp. | ||||||
3.500% due 06/15/18 | 644 | 646 | 4.150% due 12/01/24 | 320 | 327 | ||
Series 2013-1 Class D | Series 30YR | ||||||
2.270% due 01/15/19 | 1,170 | 1,175 | 5.450% due 12/01/44 | 720 | 773 | ||
Series 2014-4 Class B | Allison Transmission, Inc. | ||||||
1.820% due 05/15/19 | 239 | 239 | 5.000% due 10/01/24 (Þ) | 90 | 91 | ||
Series 2015-2 Class B | Ally Financial, Inc. | ||||||
1.830% due 01/15/20 | 880 | 882 | 3.250% due 11/05/18 | 530 | 531 | ||
Series 2015-4 Class A3 | 8.000% due 11/01/31 | 100 | 116 | ||||
1.580% due 09/16/19 | 535 | 536 | Altria Group, Inc. | ||||
SLC Student Loan Trust | 9.250% due 08/06/19 | 294 | 347 | ||||
Series 2008-2 Class A3 | 2.850% due 08/09/22 | 220 | 220 | ||||
1.500% due 09/15/18 (Ê) | 442 | 439 | 10.200% due 02/06/39 | 482 | 835 | ||
SLM Private Credit Student Loan Trust | 5.375% due 01/31/44 | 170 | 196 | ||||
Series 2005-B Class A4 | Amazon.com, Inc. | ||||||
1.180% due 06/15/39 (Ê) | 650 | 589 | 4.950% due 12/05/44 | 60 | 68 | ||
Series 2006-A Class A5 | American Airlines Pass-Through Trust | ||||||
0.943% due 06/15/39 (Ê) | 280 | 255 | Series 2011.1 Class A | ||||
SLM Student Loan Trust | 5.250% due 01/31/21 | 213 | 227 | ||||
Series 2003-11 Class A6 | Series 2013-2 Class A | ||||||
1.600% due 12/15/25 (Ê)(Þ) | 390 | 388 | 4.950% due 01/15/23 | 160 | 170 | ||
Series 2008-9 Class B | Series 2014-1 Class B | ||||||
2.965% due 10/25/83 (Ê) | 205 | 200 | 4.375% due 10/01/22 | 382 | 381 | ||
Structured Asset Securities Corp. | Series 2016-1 Class B | ||||||
Mortgage Loan Trust | 5.250% due 01/15/24 | 359 | 368 | ||||
Series 2006-BC6 Class A4 | American Axle & Manufacturing, Inc. | ||||||
0.762% due 01/25/37 (Ê) | 806 | 739 | 6.625% due 10/15/22 | 50 | 52 | ||
Terwin Mortgage Trust | American Builders & Contractors Supply | ||||||
Series 2006-3 Class 1A2 | Co., Inc. | ||||||
0.822% due 04/25/37 (Ê)(Þ) | 696 | 680 | 5.750% due 12/15/23 (Þ) | 50 | 52 | ||
Toyota Auto Receivables Owner Trust | American Express Credit Corp. | ||||||
Series 2015-A Class A3 | 1.700% due 10/30/19 | 610 | 604 | ||||
1.120% due 02/15/19 | 313 | 313 | Series F | ||||
USAA Auto Owner Trust | 2.600% due 09/14/20 | 870 | 877 | ||||
Series 2016-1 Class A2 | American International Group, Inc. | ||||||
1.070% due 03/15/19 | 940 | 939 | 6.400% due 12/15/20 | 920 | 1,047 | ||
45,899 | 4.875% due 06/01/22 | 405 | 443 | ||||
Corporate Bonds and Notes - 18.4% | 3.750% due 07/10/25 | 150 | 151 | ||||
21st Century Fox America, Inc. | Amgen, Inc. | ||||||
6.900% due 08/15/39 | 635 | 797 | 3.625% due 05/22/24 | 10 | 10 |
See accompanying notes which are an integral part of the financial statements.
78 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
4.400% due 05/01/45 | 100 | 96 | Series L | ||||
Anadarko Petroleum Corp. | 2.600% due 01/15/19 | 50 | 50 | ||||
4.850% due 03/15/21 | 100 | 107 | Series X | ||||
5.550% due 03/15/26 | 40 | 45 | 6.250% due 09/29/49 (ƒ) | 50 | 50 | ||
6.450% due 09/15/36 | 1,007 | 1,199 | Bank of America NA | ||||
4.500% due 07/15/44 | 125 | 117 | Series BKNT | ||||
6.600% due 03/15/46 | 90 | 111 | 1.750% due 06/05/18 | 1,105 | 1,106 | ||
Anheuser-Busch InBev Finance, Inc. | 2.050% due 12/07/18 | 315 | 317 | ||||
2.650% due 02/01/21 | 160 | 161 | Bank of New York Mellon Corp. (The) | ||||
3.300% due 02/01/23 | 250 | 254 | 2.600% due 08/17/20 | 1,195 | 1,205 | ||
3.650% due 02/01/26 | 1,580 | 1,604 | 2.200% due 08/16/23 | 700 | 668 | ||
4.700% due 02/01/36 | 800 | 841 | Bank One Capital III | ||||
4.900% due 02/01/46 | 100 | 108 | 8.750% due 09/01/30 | 270 | 380 | ||
Anthem, Inc. | Barrick NA Finance LLC | ||||||
1.875% due 01/15/18 | 790 | 790 | 4.400% due 05/30/21 | 265 | 278 | ||
2.250% due 08/15/19 | 385 | 384 | 5.700% due 05/30/41 | 130 | 133 | ||
3.700% due 08/15/21 | 40 | 41 | 5.750% due 05/01/43 | 300 | 315 | ||
3.125% due 05/15/22 | 605 | 605 | BB&T Corp. | ||||
Apache Corp. | 2.050% due 06/19/18 | 805 | 809 | ||||
6.900% due 09/15/18 | 200 | 217 | Bear Stearns Cos. LLC (The) | ||||
3.250% due 04/15/22 | 20 | 20 | 7.250% due 02/01/18 | 195 | 206 | ||
5.100% due 09/01/40 | 140 | 146 | Becton Dickinson and Co. | ||||
4.750% due 04/15/43 | 130 | 134 | 3.734% due 12/15/24 | 19 | 19 | ||
4.250% due 01/15/44 | 20 | 20 | 4.685% due 12/15/44 | 10 | 10 | ||
Apollo Management Holdings, LP | Berkshire Hathaway Energy Co. | ||||||
4.400% due 05/27/26 (Þ) | 425 | 423 | 6.500% due 09/15/37 | 50 | 65 | ||
Apple, Inc. | Blue Cube Spinco, Inc. | ||||||
1.740% due 02/22/19 (Ê) | 591 | 599 | Series WI | ||||
1.181% due 05/06/19 (Ê) | 480 | 482 | 10.000% due 10/15/25 | 805 | 972 | ||
2.450% due 08/04/26 | 110 | 103 | BMW US Capital LLC | ||||
4.650% due 02/23/46 | 100 | 108 | 1.500% due 04/11/19 (Þ) | 840 | 832 | ||
Assurant, Inc. | Boeing Co. (The) | ||||||
2.500% due 03/15/18 | 660 | 667 | 4.875% due 02/15/20 | 100 | 109 | ||
AT&T, Inc. | Braskem Finance, Ltd. | ||||||
1.847% due 11/27/18 (Ê) | 300 | 302 | 6.450% due 02/03/24 | 225 | 237 | ||
3.000% due 02/15/22 | 40 | 40 | Burlington Northern Santa Fe LLC | ||||
3.400% due 05/15/25 | 330 | 318 | 4.150% due 04/01/45 | 100 | 101 | ||
4.350% due 06/15/45 | 100 | 89 | |||||
4.750% due 05/15/46 | 200 | 189 | Capital One Bank NA | ||||
Series BKNT | |||||||
Series WI | 1.650% due 02/05/18 | 645 | 644 | ||||
4.550% due 03/09/49 | 1,100 | 994 | 2.250% due 02/13/19 | 760 | 763 | ||
AutoNation, Inc. | Capital One NA | ||||||
4.500% due 10/01/25 | 520 | 526 | 2.350% due 08/17/18 | 610 | 614 | ||
BAC Capital Trust XIV | Cardinal Health, Inc. | ||||||
Series G | 1.700% due 03/15/18 | 781 | 780 | ||||
4.000% due 09/29/49 (Ê)(ƒ) | 70 | 55 | Caterpillar Financial Services Corp. | ||||
Ball Corp. | 1.350% due 05/18/19 | 360 | 355 | ||||
5.250% due 07/01/25 | 110 | 115 | CCO Holdings LLC / CCO Holdings | ||||
Bank of America Corp. | Capital Corp. | ||||||
5.000% due 05/13/21 | 230 | 250 | 5.125% due 05/01/23 (Þ) | 50 | 52 | ||
2.503% due 10/21/22 | 525 | 508 | 5.375% due 05/01/25 (Þ) | 110 | 113 | ||
4.250% due 10/22/26 | 170 | 172 | Celgene Corp. | ||||
6.110% due 01/29/37 | 460 | 539 | 3.550% due 08/15/22 | 30 | 31 | ||
4.875% due 04/01/44 | 290 | 315 | 5.000% due 08/15/45 | 110 | 114 | ||
Series GMTN | CF Industries, Inc. | ||||||
3.300% due 01/11/23 | 460 | 462 | 5.375% due 03/15/44 | 855 | 706 | ||
4.450% due 03/03/26 | 30 | 31 | |||||
3.500% due 04/19/26 | 2,315 | 2,283 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 79
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Charter Communications Operating LLC | Continental Airlines Pass-Through Trust | ||||||
/ Charter Communications Operating | Series 1999-1 Class A | ||||||
Capital | 6.545% due 02/02/19 | 110 | 115 | ||||
Series WI | Series 2007-1 Class A | ||||||
4.464% due 07/23/22 | 930 | 972 | 5.983% due 04/19/22 | 83 | 92 | ||
4.908% due 07/23/25 | 100 | 105 | |||||
Continental Resources, Inc. | |||||||
6.384% due 10/23/35 | 345 | 394 | 3.800% due 06/01/24 | 90 | 83 | ||
6.484% due 10/23/45 | 100 | 116 | Crestwood Midstream Partners, LP / | ||||
Chesapeake Energy Corp. | Crestwood Midstream Finance Corp. | ||||||
6.125% due 02/15/21 | 50 | 49 | 6.125% due 03/01/22 | 60 | 62 | ||
5.750% due 03/15/23 | 10 | 9 | Crown Castle Towers LLC | ||||
Chevron Corp. | 6.113% due 01/15/20 (Þ) | 400 | 433 | ||||
1.411% due 05/16/18 (Ê) | 155 | 156 | CVS Health Corp. | ||||
1.790% due 11/16/18 | 100 | 100 | 2.750% due 12/01/22 | 90 | 89 | ||
2.954% due 05/16/26 | 120 | 118 | 5.125% due 07/20/45 | 440 | 490 | ||
Chubb INA Holdings, Inc. | Daimler Finance NA LLC | ||||||
2.300% due 11/03/20 | 20 | 20 | 2.000% due 08/03/18 (Þ) | 980 | 981 | ||
2.875% due 11/03/22 | 370 | 373 | 1.750% due 10/30/19 (Þ) | 595 | 587 | ||
3.350% due 05/03/26 | 30 | 30 | Darden Restaurants, Inc. | ||||
Cisco Systems, Inc. | 6.800% due 10/15/37 | 635 | 730 | ||||
1.850% due 09/20/21 | 540 | 527 | DaVita, Inc. | ||||
CIT Group, Inc. | 5.000% due 05/01/25 | 160 | 157 | ||||
6.625% due 04/01/18 (Þ) | 50 | 53 | Delta Air Lines Pass-Through Trust | ||||
5.000% due 08/01/23 | 90 | 93 | Series 2002-1 Class G-1 | ||||
Citigroup Capital III | 6.718% due 01/02/23 | 92 | 104 | ||||
7.625% due 12/01/36 | 500 | 584 | Series 2007-1 Class A | ||||
Citigroup, Inc. | 6.821% due 08/10/22 | 489 | 562 | ||||
1.800% due 02/05/18 | 1,180 | 1,180 | Devon Energy Corp. | ||||
2.150% due 07/30/18 | 1,300 | 1,305 | 3.250% due 05/15/22 | 110 | 109 | ||
4.450% due 09/29/27 | 1,395 | 1,417 | 5.850% due 12/15/25 | 370 | 420 | ||
8.125% due 07/15/39 | 130 | 193 | 5.000% due 06/15/45 | 180 | 177 | ||
5.300% due 05/06/44 | 101 | 109 | Devon Financing Co. LLC | ||||
4.650% due 07/30/45 | 508 | 536 | 7.875% due 09/30/31 | 675 | 856 | ||
4.750% due 05/18/46 | 20 | 20 | Diageo Investment Corp. | ||||
Series P | 2.875% due 05/11/22 | 90 | 91 | ||||
5.950% due 12/31/49 (ƒ) | 280 | 277 | Diamond 1 Finance Corp. / Diamond 2 | ||||
Clear Channel Worldwide Holdings, Inc. | Finance Corp | ||||||
Series B | 3.480% due 06/01/19 (Þ) | 150 | 153 | ||||
6.500% due 11/15/22 | 600 | 614 | 4.420% due 06/15/21 (Þ) | 240 | 248 | ||
CME Group, Inc. | 7.125% due 06/15/24 (Þ) | 100 | 111 | ||||
5.300% due 09/15/43 | 30 | 35 | 6.020% due 06/15/26 (Þ) | 645 | 699 | ||
CNOOC Finance USA LLC | 8.350% due 07/15/46 (Þ) | 830 | 1,022 | ||||
3.500% due 05/05/25 | 300 | 292 | Discovery Communications LLC | ||||
Comcast Cable Communications | 6.350% due 06/01/40 | 440 | 467 | ||||
Holdings, Inc. | DISH DBS Corp. | ||||||
9.455% due 11/15/22 | 60 | 81 | 5.875% due 07/15/22 | 50 | 53 | ||
Comcast Corp. | Series WI | ||||||
1.625% due 01/15/22 | 475 | 455 | 5.875% due 11/15/24 | 100 | 103 | ||
3.375% due 08/15/25 | 30 | 30 | Dollar Tree, Inc. | ||||
6.500% due 11/15/35 | 100 | 128 | Series WI | ||||
3.200% due 07/15/36 | 90 | 81 | 5.750% due 03/01/23 | 70 | 74 | ||
6.400% due 03/01/40 | 100 | 130 | Dominion Resources, Inc. | ||||
Commonwealth Edison Co. | 7.000% due 06/15/38 | 20 | 26 | ||||
5.800% due 03/15/18 | 290 | 305 | Duke Energy Carolinas LLC | ||||
Concho Resources, Inc. | 5.300% due 02/15/40 | 30 | 36 | ||||
5.500% due 04/01/23 | 80 | 83 | 4.000% due 09/30/42 | 100 | 99 | ||
Constellation Brands, Inc. | Duke Energy Progress LLC | ||||||
6.000% due 05/01/22 | 390 | 440 | 4.100% due 03/15/43 | 310 | 310 | ||
4.750% due 11/15/24 | 390 | 414 |
See accompanying notes which are an integral part of the financial statements.
80 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Eaton Corp. | 6.875% due 02/15/23 (Þ) | 20 | 21 | ||||
2.750% due 11/02/22 | 150 | 149 | Fresenius Medical Care US Finance II, | ||||
4.150% due 11/02/42 | 40 | 39 | Inc. | ||||
Ecolab, Inc. | 4.750% due 10/15/24 (Þ) | 110 | 111 | ||||
4.350% due 12/08/21 | 10 | 11 | General Electric Co. | ||||
5.300% due 02/11/21 | 130 | 144 | |||||
Emera US Finance, LP | 5.875% due 01/14/38 | 550 | 692 | ||||
3.550% due 06/15/26 (Þ) | 410 | 403 | |||||
4.750% due 06/15/46 (Þ) | 260 | 262 | 4.500% due 03/11/44 | 430 | 462 | ||
Energy Transfer Partners, LP | Series GMTN | ||||||
4.050% due 03/15/25 | 840 | 831 | 6.875% due 01/10/39 | 901 | 1,270 | ||
6.050% due 06/01/41 | 315 | 323 | Series NOTZ | ||||
5.150% due 03/15/45 | 235 | 225 | 1.680% due 04/15/20 (Ê) | 200 | 203 | ||
EnLink Midstream Partners, LP | General Motors Co. | ||||||
2.700% due 04/01/19 | 585 | 585 | 3.500% due 10/02/18 | 425 | 433 | ||
4.875% due 10/02/23 | 1,050 | 1,101 | |||||
Enterprise Products Operating LLC | 6.250% due 10/02/43 | 120 | 133 | ||||
Series B | |||||||
7.034% due 01/15/68 | 370 | 378 | 5.200% due 04/01/45 | 365 | 352 | ||
EOG Resources, Inc. | General Motors Financial Co., Inc. | ||||||
2.450% due 04/01/20 | 640 | 641 | 4.375% due 09/25/21 | 20 | 21 | ||
4.150% due 01/15/26 | 30 | 31 | 4.250% due 05/15/23 | 10 | 10 | ||
EP Energy LLC / Everest Acquisition | 5.250% due 03/01/26 | 640 | 672 | ||||
Finance, Inc. | Georgia-Pacific LLC | ||||||
Series WI | 8.875% due 05/15/31 | 395 | 585 | ||||
6.375% due 06/15/23 | 90 | 71 | Gilead Sciences, Inc. | ||||
Exelon Corp. | 2.550% due 09/01/20 | 890 | 899 | ||||
2.850% due 06/15/20 | 555 | 561 | 3.650% due 03/01/26 | 150 | 152 | ||
Exxon Mobil Corp. | 4.000% due 09/01/36 | 455 | 436 | ||||
1.113% due 03/15/19 (Ê) | 800 | 803 | 4.750% due 03/01/46 | 110 | 114 | ||
3.043% due 03/01/26 | 70 | 70 | Glencore Funding LLC | ||||
4.114% due 03/01/46 | 40 | 41 | 4.625% due 04/29/24 (Þ) | 40 | 41 | ||
Farmers Exchange Capital III | GLP Capital, LP / GLP Financing II, Inc. | ||||||
5.454% due 10/15/54 (Þ) | 680 | 662 | 5.375% due 11/01/23 | 80 | 86 | ||
Fifth Third Bank | Goldman Sachs Capital I | ||||||
Series BKNT | 6.345% due 02/15/34 | 1,420 | 1,689 | ||||
2.875% due 10/01/21 | 700 | 708 | Goldman Sachs Capital II | ||||
First Data Corp. | 4.000% due 06/01/43 (Ê)(ƒ) | 3 | 2 | ||||
5.375% due 08/15/23 (Þ) | 260 | 270 | Goldman Sachs Group, Inc. (The) | ||||
5.000% due 01/15/24 (Þ) | 50 | 50 | 5.250% due 07/27/21 | 380 | 416 | ||
FirstEnergy Corp. | 3.850% due 07/08/24 | 150 | 153 | ||||
Series A | 4.250% due 10/21/25 | 310 | 315 | ||||
2.750% due 03/15/18 | 30 | 30 | 3.500% due 11/16/26 | 895 | 874 | ||
Series B | 6.450% due 05/01/36 | 10 | 12 | ||||
4.250% due 03/15/23 | 100 | 103 | 6.750% due 10/01/37 | 645 | 796 | ||
Series C | 6.250% due 02/01/41 | 160 | 198 | ||||
7.375% due 11/15/31 | 280 | 361 | 5.150% due 05/22/45 | 30 | 32 | ||
Florida East Coast Holdings Corp. | 4.750% due 10/21/45 | 250 | 264 | ||||
6.750% due 05/01/19 (Þ) | 50 | 52 | Series D | ||||
Ford Motor Co. | 6.000% due 06/15/20 | 150 | 166 | ||||
4.750% due 01/15/43 | 50 | 47 | Series GMTN | ||||
Ford Motor Credit Co. LLC | 7.500% due 02/15/19 | 300 | 333 | ||||
2.551% due 10/05/18 | 1,060 | 1,065 | 2.640% due 10/28/27 (Ê) | 975 | 994 | ||
5.875% due 08/02/21 | 200 | 221 | Goodyear Tire & Rubber Co. (The) | ||||
Series FXD | 5.125% due 11/15/23 | 50 | 52 | ||||
2.145% due 01/09/18 | 1,575 | 1,578 | Great Plains Energy, Inc. | ||||
Freeport-McMoRan, Inc. | 5.292% due 06/15/22 | 550 | 596 | ||||
3.550% due 03/01/22 | 90 | 84 | Halliburton Co. | ||||
5.450% due 03/15/43 | 665 | 550 | 3.800% due 11/15/25 | 70 | 71 | ||
Series WI-1 | 4.850% due 11/15/35 | 130 | 137 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 81
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Harris Corp. | 5.125% due 06/01/44 (Þ) | 685 | 647 | ||||
1.999% due 04/27/18 | 445 | 445 | KLA-Tencor Corp. | ||||
4.854% due 04/27/35 | 40 | 42 | 4.650% due 11/01/24 | 30 | 32 | ||
5.054% due 04/27/45 | 40 | 42 | Kohl's Corp. | ||||
HCA, Inc. | 5.550% due 07/17/45 | 805 | 769 | ||||
4.750% due 05/01/23 | 50 | 51 | Kraft Foods Group, Inc. | ||||
5.375% due 02/01/25 | 140 | 140 | 3.500% due 06/06/22 | 100 | 102 | ||
Hess Corp. | Kraft Heinz Foods Co. | ||||||
4.300% due 04/01/27 | 450 | 448 | 4.875% due 02/15/25 (Þ) | 1,240 | 1,339 | ||
Hewlett Packard Enterprise Co. | Series WI | ||||||
Series WI | 5.000% due 07/15/35 | 40 | 42 | ||||
6.200% due 10/15/35 | 945 | 962 | 5.200% due 07/15/45 | 20 | 21 | ||
6.350% due 10/15/45 | 340 | 343 | 4.375% due 06/01/46 | 100 | 94 | ||
HSBC Bank USA NA | Kroger Co. (The) | ||||||
Series BKNT | 5.150% due 08/01/43 | 20 | 22 | ||||
5.875% due 11/01/34 | 475 | 553 | L Brands, Inc. | ||||
HSBC Finance Corp. | 5.625% due 10/15/23 | 30 | 32 | ||||
6.676% due 01/15/21 | 100 | 112 | Lamb Weston Holdings, Inc. | ||||
Humana, Inc. | 4.875% due 11/01/26 (Þ) | 60 | 59 | ||||
3.150% due 12/01/22 | 10 | 10 | Land O' Lakes, Inc. | ||||
4.625% due 12/01/42 | 20 | 19 | 6.000% due 11/15/22 (Þ) | 755 | 823 | ||
Huntington National Bank (The) | Legg Mason, Inc. | ||||||
2.200% due 11/06/18 | 775 | 777 | 4.750% due 03/15/26 | 775 | 802 | ||
Intel Corp. | Lockheed Martin Corp. | ||||||
3.700% due 07/29/25 | 20 | 21 | 3.350% due 09/15/21 | 270 | 279 | ||
4.900% due 07/29/45 | 10 | 11 | 4.500% due 05/15/36 | 10 | 11 | ||
International Business Machines Corp. | Series 10YR | ||||||
1.272% due 02/12/19 (Ê) | 220 | 221 | 3.550% due 01/15/26 | 90 | 92 | ||
International Lease Finance Corp. | Lowe's Cos., Inc. | ||||||
8.625% due 01/15/22 | 50 | 60 | 4.375% due 09/15/45 | 890 | 917 | ||
5.875% due 08/15/22 | 210 | 228 | McDonald's Corp. | ||||
International Paper Co. | 2.100% due 12/07/18 | 470 | 473 | ||||
8.700% due 06/15/38 | 305 | 441 | 3.700% due 01/30/26 | 60 | 61 | ||
IPALCO Enterprises, Inc. | Medtronic, Inc. | ||||||
5.000% due 05/01/18 | 50 | 52 | Series WI | ||||
Janus Capital Group, Inc. | 3.150% due 03/15/22 | 870 | 891 | ||||
4.875% due 08/01/25 | 450 | 464 | 3.500% due 03/15/25 | 150 | 154 | ||
JPMorgan Chase & Co. | Merck & Co., Inc. | ||||||
6.000% due 01/15/18 | 100 | 104 | 1.269% due 05/18/18 (Ê) | 1,665 | 1,672 | ||
2.750% due 06/23/20 | 440 | 444 | 2.750% due 02/10/25 | 40 | 39 | ||
4.250% due 10/15/20 | 300 | 317 | MetLife, Inc. | ||||
2.550% due 03/01/21 | 580 | 578 | 6.400% due 12/15/36 | 100 | 108 | ||
2.295% due 08/15/21 | 1,055 | 1,035 | 10.750% due 08/01/39 | 795 | 1,221 | ||
4.350% due 08/15/21 | 130 | 139 | 4.050% due 03/01/45 | 430 | 412 | ||
4.125% due 12/15/26 | 230 | 235 | Metropolitan Life Global Funding I | ||||
4.250% due 10/01/27 | 30 | 31 | 1.875% due 06/22/18 (Þ) | 300 | 301 | ||
6.400% due 05/15/38 | 490 | 635 | 1.350% due 09/14/18 (Þ) | 1,640 | 1,631 | ||
4.950% due 06/01/45 | 355 | 379 | MGM Resorts International | ||||
KeyCorp | 6.000% due 03/15/23 | 80 | 86 | ||||
2.300% due 12/13/18 | 700 | 704 | Microsoft Corp. | ||||
Kinder Morgan, Inc. | 2.400% due 08/08/26 | 200 | 189 | ||||
5.550% due 06/01/45 | 460 | 484 | 3.750% due 02/12/45 | 100 | 94 | ||
Kindred Healthcare, Inc. | Morgan Stanley | ||||||
Series WI | 5.625% due 09/23/19 | 200 | 217 | ||||
8.750% due 01/15/23 | 60 | 56 | 2.625% due 11/17/21 | 910 | 899 | ||
KKR Group Finance Co. II LLC | 2.282% due 10/24/23 (Ê) | 1,395 | 1,411 | ||||
5.500% due 02/01/43 (Þ) | 10 | 10 | Series GMTN | ||||
KKR Group Finance Co. III LLC | 3.875% due 01/27/26 | 865 | 874 |
See accompanying notes which are an integral part of the financial statements.
82 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
MPLX, LP | Procter & Gamble Co. (The) | ||||||
Series WI | 1.156% due 11/01/19 (Ê) | 230 | 230 | ||||
4.875% due 12/01/24 | 720 | 741 | Progress Energy, Inc. | ||||
4.875% due 06/01/25 | 100 | 103 | 4.400% due 01/15/21 | 30 | 32 | ||
Mutual of Omaha Insurance Co. | Quicken Loans, Inc. | ||||||
4.297% due 07/15/54 (Þ) | 440 | 428 | 5.750% due 05/01/25 (Þ) | 30 | 29 | ||
Navient Corp. | QVC, Inc. | ||||||
8.000% due 03/25/20 | 70 | 78 | 4.375% due 03/15/23 | 230 | 228 | ||
NBCUniversal Media LLC | Range Resources Corp. | ||||||
4.375% due 04/01/21 | 150 | 162 | Series WI | ||||
NCL Corp., Ltd. | 4.875% due 05/15/25 | 100 | 97 | ||||
4.625% due 11/15/20 (Þ) | 40 | 41 | Raytheon Co. | ||||
4.750% due 12/15/21 (Þ) | 30 | 30 | 6.400% due 12/15/18 | 450 | 492 | ||
Netflix, Inc. | Regency Energy Partners, LP / Regency | ||||||
5.875% due 02/15/25 | 60 | 65 | Energy Finance Corp. | ||||
5.875% due 03/01/22 | 60 | 66 | |||||
Newell Brands, Inc. | Reliance Standard Life Global Funding | ||||||
3.150% due 04/01/21 | 20 | 20 | |||||
3.850% due 04/01/23 | 60 | 62 | II | ||||
2.500% due 01/15/20 (Þ) | 475 | 472 | |||||
4.200% due 04/01/26 | 40 | 42 | Reynolds American, Inc. | ||||
Series WI | 6.875% due 05/01/20 | 960 | 1,090 | ||||
5.000% due 11/15/23 | 700 | 751 | 3.250% due 06/12/20 | 40 | 41 | ||
Noble Energy, Inc. | 8.125% due 05/01/40 | 340 | 454 | ||||
8.250% due 03/01/19 | 90 | 101 | 5.850% due 08/15/45 | 440 | 521 | ||
3.900% due 11/15/24 | 150 | 151 | Reynolds Group Issuer, Inc. / Reynolds | ||||
5.250% due 11/15/43 | 10 | 10 | Group Issuer LLC | ||||
Noble Holding International, Ltd. | 5.750% due 10/15/20 | 84 | 87 | ||||
7.200% due 04/01/25 | 210 | 197 | Rockies Express Pipeline LLC | ||||
NVR, Inc. | 6.850% due 07/15/18 (Þ) | 260 | 275 | ||||
3.950% due 09/15/22 | 445 | 454 | Roper Technologies, Inc. | ||||
Occidental Petroleum Corp. | 2.800% due 12/15/21 | 240 | 240 | ||||
3.125% due 02/15/22 | 30 | 31 | RPI Finance Trust 1st Lien Term Loan | ||||
3.400% due 04/15/26 | 50 | 50 | B5 | ||||
3.000% due 02/15/27 | 160 | 155 | 3.498% due 10/14/22 (Ê) | 188 | 190 | ||
4.625% due 06/15/45 | 30 | 31 | Sabine Pass Liquefaction LLC | ||||
4.400% due 04/15/46 | 20 | 20 | 5.000% due 03/15/27 (Þ) | 340 | 343 | ||
4.100% due 02/15/47 | 170 | 166 | Schlumberger Holdings Corp. | ||||
Oracle Corp. | 4.000% due 12/21/25 (Þ) | 435 | 456 | ||||
1.900% due 09/15/21 | 770 | 752 | Seagate HDD Cayman | ||||
2.650% due 07/15/26 | 355 | 337 | 4.750% due 06/01/23 | 580 | 575 | ||
PACCAR Financial Corp. | South Carolina Electric & Gas Co. | ||||||
1.650% due 02/25/19 | 245 | 244 | 6.050% due 01/15/38 | 320 | 396 | ||
1.200% due 08/12/19 | 210 | 207 | Southwest Airlines Co. | ||||
Pacific Gas & Electric Co. | 2.650% due 11/05/20 | 540 | 541 | ||||
6.050% due 03/01/34 | 200 | 250 | Spectrum Brands, Inc. | ||||
5.800% due 03/01/37 | 60 | 73 | Series WI | ||||
Party City Holdings, Inc. Term Loan | 5.750% due 07/15/25 | 50 | 52 | ||||
3.820% due 08/19/22 (Ê) | 184 | 186 | Sprint Capital Corp. | ||||
Pfizer, Inc. | 8.750% due 03/15/32 | 825 | 908 | ||||
1.263% due 06/15/18 (Ê) | 1,323 | 1,327 | Sprint Communications, Inc. | ||||
3.000% due 12/15/26 | 450 | 444 | 9.000% due 11/15/18 (Þ) | 50 | 55 | ||
Pharmacia LLC | Sprint Spectrum Co. LLC / Sprint | ||||||
6.500% due 12/01/18 | 240 | 261 | Spectrum Co II LLC / Sprint Spectrum | ||||
Philip Morris International, Inc. | Co III LLC | ||||||
2.500% due 08/22/22 | 90 | 88 | Series A-1 | ||||
4.500% due 03/20/42 | 40 | 41 | 3.360% due 09/20/21 (Þ) | 440 | 441 | ||
Prime Security Services Borrower LLC / | State Street Corp. | ||||||
Prime Finance, Inc. | 4.956% due 03/15/18 | 150 | 155 | ||||
9.250% due 05/15/23 (Þ) | 120 | 131 | Taylor Morrison Communities, Inc. / | ||||
Monarch Communities Inc |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 83
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
5.625% due 03/01/24 (Þ) | 100 | 101 | 3.875% due 04/01/24 | 20 | 19 | ||
Teachers Insurance & Annuity | 5.850% due 09/01/43 | 310 | 304 | ||||
Association of America | Virginia Electric & Power Co. | ||||||
4.900% due 09/15/44 (Þ) | 40 | 43 | Series B | ||||
Tenet Healthcare Corp. | 2.950% due 11/15/26 | 150 | 146 | ||||
4.463% due 06/15/20 (Ê) | 80 | 81 | |||||
8.125% due 04/01/22 | 650 | 613 | Series C | ||||
4.000% due 11/15/46 | 405 | 404 | |||||
Time Warner Cable LLC | Visa, Inc. | ||||||
4.125% due 02/15/21 | 150 | 155 | 3.150% due 12/14/25 | 150 | 151 | ||
7.300% due 07/01/38 | 30 | 37 | 4.300% due 12/14/45 | 190 | 201 | ||
5.875% due 11/15/40 | 230 | 245 | Volkswagen Group of America Finance | ||||
Time Warner, Inc. | LLC | ||||||
4.750% due 03/29/21 | 825 | 884 | 2.450% due 11/20/19 (Þ) | 425 | 424 | ||
3.800% due 02/15/27 | 610 | 606 | Voya Financial, Inc. | ||||
TJX Cos., Inc. (The) | 2.900% due 02/15/18 | 455 | 461 | ||||
2.250% due 09/15/26 | 20 | 18 | Wachovia Capital Trust II | ||||
Toyota Motor Credit Corp. | 1.380% due 01/15/27 (Ê) | 485 | 435 | ||||
Series GMTN | Walgreens Boots Alliance, Inc. | ||||||
2.800% due 07/13/22 | 365 | 368 | 3.450% due 06/01/26 | 70 | 69 | ||
Transcontinental Gas Pipe Line Co. LLC | 4.800% due 11/18/44 | 100 | 103 | ||||
7.850% due 02/01/26 (Þ) | 220 | 277 | Wal-Mart Stores, Inc. | ||||
Transocean, Inc. | 6.200% due 04/15/38 | 10 | 13 | ||||
6.800% due 03/15/38 | 270 | 209 | 4.750% due 10/02/43 | 100 | 112 | ||
Tyson Foods, Inc. | Waste Management, Inc. | ||||||
5.150% due 08/15/44 | 10 | 10 | 3.500% due 05/15/24 | 190 | 196 | ||
Union Pacific Railroad Co. Pass-Through | Wells Fargo & Co. | ||||||
Trust | 2.500% due 03/04/21 | 400 | 397 | ||||
Series 2006-1 | 4.600% due 04/01/21 | 220 | 236 | ||||
5.866% due 07/02/30 | 141 | 158 | 2.117% due 10/31/23 (Ê) | 1,455 | 1,474 | ||
United Rentals NA, Inc. | 3.000% due 04/22/26 | 400 | 382 | ||||
5.750% due 11/15/24 | 60 | 63 | 3.000% due 10/23/26 | 800 | 762 | ||
United Technologies Corp. | 4.650% due 11/04/44 | 200 | 197 | ||||
3.100% due 06/01/22 | 100 | 103 | 4.400% due 06/14/46 | 30 | 29 | ||
4.500% due 06/01/42 | 30 | 32 | 4.750% due 12/07/46 | 150 | 152 | ||
UnitedHealth Group, Inc. | Series GMTN | ||||||
1.900% due 07/16/18 | 560 | 562 | 2.600% due 07/22/20 | 880 | 885 | ||
3.875% due 10/15/20 | 10 | 11 | 4.300% due 07/22/27 | 320 | 329 | ||
4.625% due 07/15/35 | 100 | 109 | 4.900% due 11/17/45 | 250 | 257 | ||
5.700% due 10/15/40 | 60 | 73 | West Corp. | ||||
Univision Communications, Inc. | 5.375% due 07/15/22 (Þ) | 110 | 106 | ||||
5.125% due 05/15/23 (Þ) | 50 | 49 | Western Gas Partners, LP | ||||
5.125% due 02/15/25 (Þ) | 60 | 57 | 4.650% due 07/01/26 | 40 | 41 | ||
US Airways Pass-Through Trust | Westlake Chemical Corp. | ||||||
Series 2011-1 Class A | 4.875% due 05/15/23 (Þ) | 390 | 405 | ||||
7.125% due 10/22/23 | 329 | 379 | WestRock MWC LLC | ||||
Series 2012-1 Class A | 7.375% due 09/01/19 | 310 | 350 | ||||
5.900% due 10/01/24 | 534 | 595 | Williams Partners, LP | ||||
USF&G Capital III | 3.600% due 03/15/22 | 845 | 849 | ||||
8.312% due 07/01/46 (Þ) | 730 | 930 | Xcel Energy, Inc. | ||||
Verizon Communications, Inc. | 3.350% due 12/01/26 | 435 | 435 | ||||
2.709% due 09/14/18 (Ê) | 100 | 102 | ZFS Finance USA Trust V | ||||
1.375% due 08/15/19 | 940 | 925 | 6.500% due 05/09/37 (Þ) | 675 | 677 | ||
5.150% due 09/15/23 | 990 | 1,095 | |||||
156,193 | |||||||
6.550% due 09/15/43 | 70 | 87 | International Debt - 5.7% | ||||
Series WI | 1011778 BC Unlimited Liability Co. / | ||||||
4.862% due 08/21/46 | 130 | 132 | New Red Finance, Inc. | ||||
4.672% due 03/15/55 | 1,185 | 1,114 | 6.000% due 04/01/22 (Þ) | 110 | 115 | ||
Viacom, Inc. | 1011778 BC Unlimited Liability Co. 1st | ||||||
Lien Term Loan B2 |
See accompanying notes which are an integral part of the financial statements.
84 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||
Principal | Fair | Principal | Fair | |||||
Amount ($) | Value | Amount ($) | Value | |||||
or Shares | $ | or Shares | $ | |||||
3.750% due 12/12/21 (Ê) | 159 | 161 | Celulosa Arauco y Constitucion SA | |||||
Actavis Funding SCS | Series WI | |||||||
3.450% due 03/15/22 | 40 | 41 | 4.750% due 01/11/22 | 40 | 42 | |||
3.800% due 03/15/25 | 60 | 60 | Colombia Government International | |||||
4.750% due 03/15/45 | 70 | 69 | Bond | |||||
AerCap Global Aviation Trust | 5.625% due 02/26/44 | 270 | 278 | |||||
6.500% due 06/15/45 (Þ) | 370 | 373 | Commonwealth Bank of Australia | |||||
AerCap Ireland Capital, Ltd. / AerCap | 5.000% due 10/15/19 (Þ) | 30 | 32 | |||||
Global Aviation Trust | Cooperatieve Rabobank UA | |||||||
4.625% due 07/01/22 | 735 | 757 | 4.375% due 08/04/25 | 400 | 410 | |||
Altice Luxembourg SA | 11.000% due 06/29/49 (ƒ)(Þ) | 364 | 428 | |||||
7.750% due 05/15/22 (Þ) | 700 | 747 | Credit Suisse AG | |||||
America Movil SAB de CV | 1.750% due 01/29/18 | 755 | 754 | |||||
5.000% due 03/30/20 | 695 | 743 | Credit Suisse Group Funding Guernsey, | |||||
ArcelorMittal | Ltd. | |||||||
7.250% due 02/25/22 | 110 | 124 | Series WI | |||||
6.125% due 06/01/25 | 295 | 323 | 4.875% due 05/15/45 | 300 | 308 | |||
7.750% due 03/01/41 | 155 | 165 | Danone SA | |||||
Argentine Republic Government | 2.077% due 11/02/21 (Þ) | 690 | 670 | |||||
International Bond | Ecopetrol SA | |||||||
7.500% due 04/22/26 (Þ) | 170 | 179 | 5.375% due 06/26/26 | 60 | 60 | |||
Aristocrat International Pty, Ltd. Term | 5.875% due 05/28/45 | 300 | 259 | |||||
Loan B | ||||||||
3.612% due 10/20/21 (Ê) | 159 | 161 | Emera, Inc. | |||||
Series 16-A | ||||||||
AstraZeneca PLC | 6.750% due 06/15/76 | 610 | 653 | |||||
2.375% due 11/16/20 | 820 | 817 | ||||||
Avago Technologies Cayman Finance, | Ensco PLC | |||||||
Ltd. Term Loan B3 | 4.700% due 03/15/21 | 60 | 58 | |||||
3.704% due 02/01/23 (Ê) | 320 | 324 | 5.750% due 10/01/44 | 515 | 373 | |||
Bank of Montreal | Equate Petrochemical BV | |||||||
2.100% due 12/12/19 | 400 | 400 | 4.250% due 11/03/26 (Þ) | 200 | 191 | |||
1.900% due 08/27/21 | 420 | 407 | GE Capital International Funding Co. | |||||
Unlimited Co. | ||||||||
Bank of Nova Scotia (The) | Series WI | |||||||
1.619% due 06/14/19 (Ê) | 1,300 | 1,303 | 4.418% due 11/15/35 | 200 | 210 | |||
Barrick Gold Corp. | ||||||||
4.100% due 05/01/23 | 513 | 526 | GlaxoSmithKline Capital PLC | |||||
5.250% due 04/01/42 | 280 | 273 | 2.850% due 05/08/22 | 60 | 60 | |||
Bharti Airtel, Ltd. | HBOS PLC | |||||||
4.375% due 06/10/25 (Þ) | 500 | 493 | Series GMTN | |||||
6.750% due 05/21/18 (Þ) | 300 | 316 | ||||||
BHP Billiton Finance USA, Ltd. | ||||||||
3.250% due 11/21/21 | 120 | 124 | HSBC Bank PLC | |||||
2.875% due 02/24/22 | 10 | 10 | 7.650% due 05/01/25 | 375 | 458 | |||
5.000% due 09/30/43 | 40 | 45 | HSBC Holdings PLC | |||||
2.650% due 01/05/22 | 835 | 815 | ||||||
BP Capital Markets PLC | 3.900% due 05/25/26 | 220 | 222 | |||||
3.245% due 05/06/22 | 10 | 10 | ||||||
3.216% due 11/28/23 | 650 | 656 | 4.375% due 11/23/26 | 530 | 534 | |||
Indonesia Government International | ||||||||
3.119% due 05/04/26 | 120 | 117 | Bond | |||||
BPCE SA | Series REGS | |||||||
2.750% due 12/02/21 | 270 | 267 | 3.750% due 04/25/22 | 430 | 432 | |||
Brazilian Government International Bond | Intelsat Jackson Holdings SA | |||||||
2.625% due 01/05/23 | 220 | 196 | 7.250% due 04/01/19 | 725 | 609 | |||
5.625% due 01/07/41 | 270 | 240 | 9.500% due 09/30/22 (Þ) | 260 | 289 | |||
British Telecommunications PLC | Johnson Controls International PLC | |||||||
9.125% due 12/15/30 | 30 | 46 | 5.125% due 09/14/45 | 325 | 346 | |||
Canadian Oil Sands, Ltd. | LyondellBasell Industries NV | |||||||
7.750% due 05/15/19 (Þ) | 450 | 496 | 5.000% due 04/15/19 | 395 | 417 | |||
4.500% due 04/01/22 (Þ) | 680 | 681 | Mallinckrodt International Finance SA | |||||
CDP Financial, Inc. | 4.750% due 04/15/23 | 70 | 61 | |||||
5.600% due 11/25/39 (Þ) | 215 | 266 | Mexico Government International Bond |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 85
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
4.750% due 03/08/44 | 20 | 18 | 1.462% due 11/10/18 (Ê) | 1,000 | 1,007 | ||
5.550% due 01/21/45 | 660 | 675 | 4.375% due 03/25/20 | 10 | 11 | ||
Mondelez International Holdings | 2.875% due 05/10/26 | 310 | 300 | ||||
Netherlands BV | 4.375% due 05/11/45 | 250 | 253 | ||||
1.625% due 10/28/19 (Þ) | 810 | 794 | 4.000% due 05/10/46 | 400 | 383 | ||
Mylan NV | Shire Acquisitions Investments Ireland | ||||||
3.950% due 06/15/26 (Þ) | 1,460 | 1,366 | DAC | ||||
5.250% due 06/15/46 (Þ) | 435 | 401 | 1.900% due 09/23/19 | 975 | 963 | ||
Nationwide Building Society | Sirius International Group, Ltd. | ||||||
4.000% due 09/14/26 (Þ) | 1,060 | 1,010 | 7.506% due 05/29/49 (ƒ)(Þ) | 365 | 367 | ||
Nokia OYJ | Sky PLC | ||||||
6.625% due 05/15/39 | 785 | 828 | 6.100% due 02/15/18 (Þ) | 505 | 527 | ||
Pernod Ricard SA | Southern Copper Corp. | ||||||
4.450% due 01/15/22 (Þ) | 150 | 159 | 6.750% due 04/16/40 | 10 | 11 | ||
Perrigo Co. PLC | 5.250% due 11/08/42 | 390 | 357 | ||||
4.000% due 11/15/23 | 1,375 | 1,363 | Standard Chartered PLC | ||||
Peru Government International Bond | 5.700% due 03/26/44 (Þ) | 200 | 200 | ||||
6.550% due 03/14/37 | 10 | 13 | Suncor Energy, Inc. | ||||
5.625% due 11/18/50 | 130 | 147 | 5.950% due 12/01/34 | 441 | 521 | ||
Petrobras Global Finance BV | Telefonica Emisiones SAU | ||||||
5.750% due 01/20/20 | 30 | 30 | 5.134% due 04/27/20 | 40 | 43 | ||
5.375% due 01/27/21 | 940 | 919 | Tengizchevroil Finance Co. International, | ||||
6.250% due 03/17/24 | 80 | 77 | Ltd. | ||||
4.000% due 08/15/26 (Þ) | 225 | 211 | |||||
Petroleos Mexicanos | Teva Pharmaceutical Finance | ||||||
4.607% due 03/11/22 (Ê)(Þ) | 200 | 206 | Netherlands III BV | ||||
5.375% due 03/13/22 (Þ) | 750 | 768 | 2.200% due 07/21/21 | 650 | 622 | ||
6.875% due 08/04/26 (Þ) | 190 | 200 | 2.800% due 07/21/23 | 560 | 530 | ||
6.500% due 03/13/27 (Þ) | 545 | 562 | |||||
6.625% due 06/15/35 | 100 | 99 | Toronto-Dominion Bank (The) | ||||
1.722% due 01/22/19 (Ê) | 250 | 252 | |||||
6.375% due 01/23/45 | 250 | 228 | 2.125% due 04/07/21 | 555 | 547 | ||
Series REGS | 3.625% due 09/15/31 | 600 | 586 | ||||
6.875% due 08/04/26 | 30 | 32 | Transcanada Trust | ||||
Series WI | Series 16-A | ||||||
4.500% due 01/23/26 | 340 | 310 | 5.875% due 08/15/76 | 1,090 | 1,134 | ||
5.625% due 01/23/46 | 650 | 540 | UBS AG | ||||
Province of Quebec Canada | Series BKNT | ||||||
1.172% due 09/04/18 (Ê) | 335 | 335 | 1.800% due 03/26/18 | 1,390 | 1,390 | ||
1.161% due 07/21/19 (Ê) | 480 | 480 | |||||
Vale Overseas, Ltd. | |||||||
Qatar Government International Bond | 6.875% due 11/21/36 | 370 | 364 | ||||
4.625% due 06/02/46 (Þ) | 430 | 429 | Valeant Pharmaceuticals International, | ||||
Republic of Poland Government | Inc. | ||||||
International Bond | 5.875% due 05/15/23 (Þ) | 190 | 143 | ||||
5.125% due 04/21/21 | 370 | 404 | |||||
4.000% due 01/22/24 | 40 | 41 | Validus Holdings, Ltd. | ||||
8.875% due 01/26/40 | 270 | 354 | |||||
Rio Tinto Finance USA, Ltd. | Virgin Media Investment Holdings, Ltd. | ||||||
3.750% due 09/20/21 | 70 | 74 | Term Loan I | ||||
Royal Bank of Scotland Group PLC | 3.500% due 01/31/25 | 147 | 148 | ||||
6.400% due 10/21/19 | 180 | 196 | Vodafone Group PLC | ||||
6.125% due 12/15/22 | 70 | 74 | 5.450% due 06/10/19 | 300 | 323 | ||
3.875% due 09/12/23 | 935 | 898 | 7.875% due 02/15/30 | 560 | 730 | ||
5.125% due 05/28/24 | 220 | 219 | Yara International ASA | ||||
Royal Bank of Scotland NV | 3.800% due 06/06/26 (Þ) | 820 | 804 | ||||
4.650% due 06/04/18 | 30 | 30 | 48,521 | ||||
Schlumberger Norge AS | Loan Agreements - 0.7% | ||||||
Series 144a | Air Medical Group Holdings, Inc. Term | ||||||
4.200% due 01/15/21 (Þ) | 70 | 74 | Loan B | ||||
SFR Group SA | 4.250% due 04/28/22 (Ê) | 99 | 99 | ||||
7.375% due 05/01/26 (Þ) | 430 | 441 | Albertsons LLC Term Loan B4 | ||||
Shell International Finance BV | 3.770% due 08/22/21 | 75 | 76 |
See accompanying notes which are an integral part of the financial statements.
86 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||
Principal | Fair | Principal | Fair | |||||
Amount ($) | Value | Amount ($) | Value | |||||
or Shares | $ | or Shares | $ | |||||
Albertsons LLC Term Loan B6 | 4.250% due 04/21/22 (Ê) | 200 | 203 | |||||
4.061% due 06/23/23 (Ê) | 165 | 167 | Reynolds Group Holdings, Inc. Term | |||||
American Airlines, Inc. Term Loan | Loan | |||||||
3.256% due 05/21/20 (Ê) | 150 | 151 | 4.250% due 01/21/23 (Ê) | 180 | 182 | |||
American Builders & Contractors Supply | Sungard Availability Services Capital, | |||||||
Co., Inc. Term Loan B | Inc. Covenant-Lite 1st Lien Term | |||||||
3.520% due 09/23/23 (Ê) | 150 | 151 | Loan B | |||||
6.000% due 03/31/19 (Ê) | 393 | 379 | ||||||
B/E Aerospace, Inc. Term Loan B | ||||||||
3.940% due 12/16/21 (Ê) | 175 | 176 | T-Mobile USA, Inc. Term Loan B | |||||
3.520% due 11/09/22 (Ê) | 174 | 176 | ||||||
Berry Plastics Group, Inc. Term Loan H | Univision Communications, Inc. Term | |||||||
3.750% due 10/01/22 (Ê) | 123 | 125 | Loan C4 | |||||
Boyd Gaming Corp. Term Loan B2 | 4.000% due 03/01/20 (Ê) | 239 | 240 | |||||
3.756% due 09/15/23 (Ê) | 100 | 101 | UPC Financing Partnership Term Loan | |||||
Catalent Pharma Solutions, Inc. Term | 4.080% due 08/31/24 (Ê) | 200 | 202 | |||||
Loan B | ||||||||
4.020% due 05/20/21 (Ê) | 186 | 187 | XPO Logistics, Inc. Term Loan B | |||||
Charter Communications Operating LLC | 4.250% due 10/30/21 (Ê) | 127 | 129 | |||||
Term Loan | Zebra Technologies Corp. Term Loan B | |||||||
3.005% due 01/24/23 (Ê) | 174 | 175 | 3.434% due 10/27/21 (Ê) | 90 | 91 | |||
CSC Holdings LLC Term Loan | 5,954 | |||||||
3.876% due 10/31/24 (Ê) | 166 | 168 | Mortgage-Backed Securities - 21.5% | |||||
CWGS Group LLC Term Loan | American Home Mortgage Investment | |||||||
4.500% due 11/08/23 (Ê) | 70 | 71 | Trust | |||||
Dollar Tree, Inc. 1st Lien Term Loan B3 | Series 2004-4 Class 4A | |||||||
3.250% due 07/06/22 (Ê) | 33 | 33 | 3.258% due 02/25/45 (Ê) | 30 | 30 | |||
Banc of America Commercial Mortgage | ||||||||
First Data Corp. Term Loan | Trust | |||||||
3.756% due 03/24/21 (Ê) | 237 | 239 | ||||||
Series 2007-2 Class AJ | ||||||||
HCA Inc. Term Loan B7 | 5.634% due 04/10/49 | 120 | 114 | |||||
3.520% due 03/01/24 | 179 | 181 | ||||||
Hilton Worldwide Finance LLC Term | Series 2007-3 Class AJ | |||||||
Loan | 5.730% due 06/10/49 | 1,140 | 1,155 | |||||
3.256% due 10/25/23 (Ê) | 184 | 186 | Series 2008-1 Class A4 | |||||
Keurig Green Mountain, Inc. Term Loan | 6.437% due 02/10/51 | 390 | 400 | |||||
B | Banc of America Merrill Lynch | |||||||
5.313% due 03/03/23 (Ê) | 86 | 87 | Commercial Mortgage Securities Trust | |||||
Landry's, Inc. 1st Lien Term Loan | Series 2014-520M Class A | |||||||
4.000% due 09/22/23 (Ê) | 125 | 126 | 4.325% due 08/15/46 (Þ) | 200 | 214 | |||
Banc of America Mortgage Securities, | ||||||||
Level 3 Financing, Inc. Term Loan B2 | Inc. | |||||||
3.500% due 05/31/22 (Ê) | 200 | 202 | ||||||
Lions Gate Enterntainment, Inc. 1st Lien | Series 2004-11 Class 2A1 | |||||||
Term Loan | 5.750% due 01/25/35 | 31 | 32 | |||||
3.750% due 10/12/23 | 150 | 151 | Banc of America Re-REMIC Trust | |||||
MacDermid, Inc. 1st Lien Term Loan B4 | Series 2010-UB5 Class A4A | |||||||
5.000% due 06/07/23 (Ê) | 537 | 543 | 5.649% due 02/17/51 (Þ) | 222 | 223 | |||
MGM Growth Properties Operating | Bayview Commercial Asset Trust | |||||||
Partnership, LP Term Loan B | Series 2006-2A Class A2 | |||||||
3.520% due 04/25/23 (Ê) | 99 | 101 | 0.804% due 07/25/36 (Ê)(Þ) | 285 | 248 | |||
Michaels Stores, Inc. Term Loan B | BCAP LLC Trust | |||||||
3.750% due 01/28/23 (Ê) | 184 | 187 | Series 2009-RR11 Class 7A1 | |||||
MultiPlan, Inc. Term Loan B | 2.916% due 02/26/36 (Ê)(Þ) | 76 | 76 | |||||
5.000% due 05/25/23 (Ê) | 170 | 173 | Series 2010-RR7 Class 3A1 | |||||
PET Acquisition Merger Sub LLC Term | 2.908% due 08/26/35 (Ê)(Þ) | 160 | 159 | |||||
Loan | ||||||||
5.000% due 01/26/23 (Ê) | 150 | 150 | Series 2010-RR7 Class 3A12 | |||||
2.798% due 08/26/35 (Ê)(Þ) | 1,000 | 733 | ||||||
PetSmart, Inc. 1st Lien Term Loan B | ||||||||
4.000% due 03/10/22 (Ê) | 175 | 175 | Series 2011-R11 Class 15A1 | |||||
Pharmaceutical Product Development | 3.072% due 10/26/33 (Ê)(Þ)(Å) | 197 | 198 | |||||
LLC Term Loan B | Series 2011-R11 Class 20A5 | |||||||
4.250% due 08/18/22 (Ê) | 169 | 171 | 3.096% due 03/26/35 (Ê)(Þ) | 96 | 96 | |||
Prime Security Services Borrower LLC | Series 2012-RR4 Class 3A5 | |||||||
1st Lien Term Loan | 2.579% due 07/26/37 (Ê)(Þ) | 324 | 323 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 87
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
Series 2013-RR5 Class 2A2 | Series 2016-C3 Class A5 | ||||||
2.462% due 03/26/37 (Ê)(Þ) | 801 | 539 | 2.890% due 09/10/49 | 240 | 234 | ||
Bear Stearns Adjustable Rate Mortgage | EQTY Mortgage Trust | ||||||
Trust | Series 2014-INNS Class E | ||||||
Series 2005-2 Class A1 | 3.954% due 05/08/31 (Ê)(Þ) | 500 | 489 | ||||
2.920% due 03/25/35 (Ê) | 209 | 210 | Fannie Mae | ||||
Bear Stearns Alterative-A Trust | 3.170% due 2018 | 1,158 | 1,178 | ||||
Series 2005-2 Class 1M1 | 3.950% due 2020 | 405 | 429 | ||||
1.342% due 03/25/35 (Ê) | 900 | 831 | 5.500% due 2020 | 10 | 10 | ||
Bear Stearns Commercial Mortgage | 4.250% due 2021 | 395 | 427 | ||||
Securities Trust | 4.284% due 2021 | 620 | 664 | ||||
Series 2007-PW15 Class A4 | 2.500% due 2022 | 474 | 483 | ||||
5.331% due 02/11/44 | 153 | 153 | |||||
2.860% due 2022 | 218 | 222 | |||||
Series 2007-T26 Class AM | 5.500% due 2022 | 55 | 58 | ||||
5.513% due 01/12/45 | 500 | 507 | 2.000% due 2023 | 1,538 | 1,554 | ||
CFCRE Commercial Mortgage Trust | 2.500% due 2024 | 703 | 719 | ||||
Series 2016-C3 Class A3 | 4.000% due 2025 | 238 | 251 | ||||
3.865% due 01/10/48 | 1,150 | 1,196 | 4.500% due 2025 | 491 | 523 | ||
CGBAM Commercial Mortgage Trust | 2.320% due 2026 | 393 | 375 | ||||
Series 2016-IMC Class E | 3.100% due 2026 | 275 | 278 | ||||
8.104% due 11/15/21 (Ê)(Þ) | 590 | 597 | 3.190% due 2026 | 369 | 376 | ||
CHL Mortgage Pass-Through Trust | 3.400% due 2026 | 359 | 369 | ||||
Series 2005-3 Class 1A2 | 4.000% due 2026 | 227 | 234 | ||||
0.824% due 04/25/35 (Ê) | 11 | 10 | 6.000% due 2026 | 63 | 71 | ||
Citigroup Commercial Mortgage Trust | 2.500% due 2027 | 525 | 537 | ||||
Series 2015-GC29 Class C | 2.640% due 2027 | 416 | 406 | ||||
4.293% due 04/10/48 | 100 | 95 | 2.660% due 2027 | 395 | 382 | ||
Citigroup Mortgage Loan Trust, Inc. | 4.500% due 2027 | 391 | 402 | ||||
Series 2005-11 Class A2A | 6.000% due 2027 | 38 | 43 | ||||
2.930% due 10/25/35 (Ê) | 15 | 15 | 2.560% due 2028 | 370 | 347 | ||
Series 2006-AR9 Class 1M1 | 3.050% due 2028 | 425 | 419 | ||||
0.865% due 11/25/36 (Ê) | 1,060 | 840 | 3.630% due 2029 | 344 | 359 | ||
Series 2007-AR8 Class 2A1A | 3.320% due 2030 | 383 | 388 | ||||
3.165% due 07/25/37 (Ê) | 264 | 236 | 3.360% due 2030 | 394 | 401 | ||
Commercial Mortgage Trust | 3.500% due 2030 | 212 | 222 | ||||
Series 2013-300P Class A1 | 2.600% due 2031 | 375 | 348 | ||||
4.353% due 08/10/30 (Þ) | 390 | 422 | 3.030% due 2031 | 415 | 407 | ||
Series 2013-CR6 Class B | 5.000% due 2031 | 200 | 219 | ||||
3.397% due 03/10/46 (Þ) | 211 | 211 | 6.000% due 2032 | 42 | 48 | ||
Series 2013-CR13 Class A1 | 3.000% due 2033 | 1,406 | 1,434 | ||||
1.259% due 11/10/18 | 457 | 457 | 3.500% due 2033 | 1,113 | 1,158 | ||
Series 2014-277P Class A | 5.000% due 2033 | 10 | 11 | ||||
3.732% due 08/10/49 (Þ) | 410 | 424 | 6.150% due 2033(Ê) | 75 | 83 | ||
Series 2014-UBS4 Class A1 | 3.500% due 2034 | 236 | 245 | ||||
1.309% due 08/10/47 | 190 | 189 | 3.700% due 2034 | 497 | 506 | ||
Series 2015-LC19 Class A4 | 5.500% due 2034 | 28 | 31 | ||||
3.183% due 02/10/48 | 191 | 192 | 4.500% due 2035 | 682 | 740 | ||
Series 2015-LC19 Class B | 5.500% due 2037 | 216 | 241 | ||||
3.829% due 02/10/48 | 100 | 102 | 5.500% due 2038 | 838 | 942 | ||
Series 2016-GCT Class A | 6.000% due 2039 | 81 | 91 | ||||
2.681% due 08/10/29 (Þ) | 140 | 140 | 4.000% due 2040 | 425 | 452 | ||
5.500% due 2040 | 987 | 1,108 | |||||
CSAIL Commercial Mortgage Trust | 6.000% due 2040 | 237 | 269 | ||||
Series 2015-C4 Class E | |||||||
3.585% due 11/15/48 | 500 | 338 | 4.000% due 2041 | 733 | 777 | ||
6.000% due 2041 | 257 | 291 | |||||
CSMC Mortgage-Backed Trust | 3.000% due 2042 | 810 | 809 | ||||
Series 2011-4R Class 5A1 | 3.500% due 2043 | 1,566 | 1,615 | ||||
2.948% due 05/27/36 (Þ)(Å) | 120 | 119 | 4.000% due 2044 | 1,382 | 1,469 | ||
DBJPM Mortgage Trust | 3.500% due 2045 | 5,591 | 5,738 |
See accompanying notes which are an integral part of the financial statements.
88 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
3.000% due 2046 | 498 | 496 | 0.849% due 01/25/19 | 639 | 638 | ||
4.000% due 2046 | 2,394 | 2,532 | Series 2016-M2 Class ABV2 | ||||
4.500% due 2046 | 772 | 839 | 2.131% due 01/25/23 | 660 | 647 | ||
15 Year TBA(Ï) | Series 2016-M3 Class ASQ2 | ||||||
2.500% | 900 | 901 | 2.263% due 02/25/23 | 895 | 878 | ||
3.000% | 1,000 | 1,026 | Series 2016-M6 Class AB2 | ||||
3.500% | 900 | 938 | 2.395% due 05/25/26 | 860 | 806 | ||
4.000% | 400 | 412 | Series 2016-M7 Class A2 | ||||
30 Year TBA(Ï) | 2.499% due 09/25/26 | 210 | 199 | ||||
3.000% | 19,165 | 19,039 | Series 2016-M7 Class AV2 | ||||
3.500% | 2,100 | 2,152 | 2.157% due 10/25/23 | 2,035 | 1,986 | ||
4.000% | 4,100 | 4,364 | FDIC Trust | ||||
4.500% | 2,600 | 2,797 | Series 2010-R1 Class A | ||||
Fannie Mae Connecticut Avenue | 2.184% due 05/25/50 (Þ)(Å) | 482 | 483 | ||||
Securities | Series 2011-R1 Class A | ||||||
Series 2016-C02 Class 1M2 | 2.672% due 07/25/26 (Þ) | 18 | 18 | ||||
6.438% due 09/25/28 (Ê) | 220 | 246 | First Horizon Mortgage Pass-Through | ||||
Series 2016-C04 Class 1M2 | Trust | ||||||
4.726% due 01/25/29 (Ê) | 720 | 747 | Series 2005-AR4 Class 2A1 | ||||
Fannie Mae Grantor Trust | 2.902% due 10/25/35 (Ê) | 436 | 361 | ||||
Series 2001-T4 Class A1 | Freddie Mac | ||||||
7.500% due 07/25/41 | 312 | 365 | 4.500% due 2018 | 1,158 | 1,188 | ||
Fannie Mae REMIC Trust | 4.500% due 2020 | 3,218 | 3,302 | ||||
Series 2004-W5 Class A1 | 3.500% due 2030 | 175 | 184 | ||||
6.000% due 02/25/47 | 226 | 252 | 5.500% due 2038 | 549 | 628 | ||
Fannie Mae REMICS | 6.000% due 2038 | 130 | 149 | ||||
Series 1999-56 Class Z | 5.000% due 2040 | 374 | 407 | ||||
7.000% due 12/18/29 | 17 | 19 | 4.000% due 2041 | 1,769 | 1,882 | ||
Series 2005-24 Class ZE | 4.500% due 2041 | 367 | 395 | ||||
5.000% due 04/25/35 | 343 | 376 | 5.500% due 2041 | 384 | 433 | ||
Series 2009-96 Class DB | 3.500% due 2043 | 1,346 | 1,388 | ||||
4.000% due 11/25/29 | 267 | 282 | 4.000% due 2044 | 846 | 894 | ||
Series 2012-55 Class PC | 3.500% due 2045 | 4,062 | 4,177 | ||||
3.500% due 05/25/42 | 700 | 721 | 4.000% due 2045 | 1,474 | 1,552 | ||
Series 2016-23 Class ST | 3.000% due 2046 | 3,152 | 3,133 | ||||
Interest Only STRIP | 3.500% due 2046 | 7,202 | 7,381 | ||||
5.547% due 11/25/45 (Ê) | 553 | 115 | 4.000% due 2046 | 2,718 | 2,864 | ||
Series 2016-61 Class BS | 30 Year TBA(Ï) | ||||||
Interest Only STRIP | 3.000% | 6,500 | 6,455 | ||||
5.613% due 09/25/46 (Ê) | 554 | 99 | 3.500% | 1,000 | 1,024 | ||
Freddie Mac Multifamily Structured Pass | |||||||
Fannie Mae-Aces | Through Certificates | ||||||
Series 2012-M8 Class ASQ2 | Series 2016-KJ08 Class A2 | ||||||
1.520% due 12/25/19 | 807 | 808 | 2.356% due 08/25/22 | 150 | 149 | ||
Series 2013-M4 Class ASQ2 | Freddie Mac Multifamily Structured | ||||||
1.451% due 02/25/18 | 400 | 400 | Pass-Through Certificates | ||||
Series 2014-M1 Class A1 | Series 2015-K045 Class A2 | ||||||
2.325% due 07/25/23 | 159 | 160 | 3.023% due 01/25/25 | 1,020 | 1,036 | ||
Series 2014-M13 Class AB2 | Series 2015-K046 Class A2 | ||||||
2.951% due 08/25/24 | 506 | 503 | 3.205% due 03/25/25 | 400 | 411 | ||
Series 2015-M1 Class ASQ2 | Series 2015-K047 Class A2 | ||||||
1.626% due 02/25/18 | 1,231 | 1,234 | 3.329% due 05/25/25 | 760 | 788 | ||
Series 2015-M7 Class ASQ1 | Series 2015-K048 Class A2 | ||||||
0.882% due 04/25/18 | 161 | 161 | 3.284% due 06/25/25 | 1,290 | 1,333 | ||
Series 2015-M7 Class ASQ2 | Series 2015-K049 Class A2 | ||||||
1.550% due 04/25/18 | 465 | 465 | 3.010% due 08/25/25 | 1,470 | 1,488 | ||
Series 2015-M11 Class A1 | Series 2015-K050 Class A2 | ||||||
2.097% due 04/25/25 | 711 | 701 | 3.334% due 08/25/25 | 1,270 | 1,316 | ||
Series 2015-M15 Class ASQ1 | Series 2016-K052 Class A2 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 89
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||
Principal | Fair | Principal | Fair | ||||
Amount ($) | Value | Amount ($) | Value | ||||
or Shares | $ | or Shares | $ | ||||
3.151% due 11/25/25 | 1,110 | 1,133 | Ginnie Mae I | ||||
Series 2016-K053 Class A2 | 2.140% due 2023 | 540 | 531 | ||||
2.995% due 12/25/25 | 390 | 393 | Ginnie Mae II | ||||
Series 2016-K058 Class A2 | 30 Year TBA(Ï) | ||||||
2.653% due 08/25/26 | 1,100 | 1,074 | 3.000% | 6,000 | 6,076 | ||
Series 2016-K058 Class X1 | 3.500% | 1,200 | 1,247 | ||||
Interest Only STRIP | 4.000% | 700 | 743 | ||||
0.931% due 08/25/26 | 4,157 | 292 | GMACM Mortgage Loan Trust | ||||
Series 2016-KF15 Class A | Series 2005-AR2 Class 4A | ||||||
1.426% due 02/25/23 (Ê) | 2,414 | 2,417 | 3.385% due 05/25/35 (Ê) | 5 | 5 | ||
Series 2016-KF17 Class A | GS Mortgage Securities Trust | ||||||
1.306% due 03/25/23 (Ê) | 1,522 | 1,523 | Series 2013-GC12 Class A1 | ||||
Freddie Mac Reference REMIC | 0.742% due 06/10/46 | 81 | 81 | ||||
Series 2006-R006 Class ZA | Series 2013-GC14 Class AS | ||||||
6.000% due 04/15/36 | 472 | 539 | 4.507% due 08/10/46 (Þ) | 235 | 253 | ||
Series 2006-R007 Class ZA | Series 2013-GC16 Class A1 | ||||||
6.000% due 05/15/36 | 407 | 457 | 1.264% due 11/10/46 | 19 | 19 | ||
Freddie Mac REMICS | Series 2015-GS1 Class C | ||||||
Series 2003-2624 Class QH | 4.570% due 11/10/48 | 180 | 180 | ||||
5.000% due 06/15/33 | 128 | 140 | GSMPS Mortgage Loan Trust | ||||
Series 2009-3569 Class NY | Series 2006-RP1 Class 1A2 | ||||||
5.000% due 08/15/39 | 1,400 | 1,524 | 7.500% due 01/25/36 (Þ) | 2 | 2 | ||
Series 2010-3632 Class PK | Hilton USA Trust | ||||||
5.000% due 02/15/40 | 268 | 293 | Series 2013-HLT Class EFX | ||||
Series 2010-3653 Class B | 4.602% due 11/05/30 (Þ) | 1,660 | 1,662 | ||||
4.500% due 04/15/30 | 363 | 394 | Series 2016-HHV Class D | ||||
Series 2012-4010 Class KM | 4.194% due 11/05/38 (Þ) | 1,240 | 1,167 | ||||
3.000% due 01/15/42 | 186 | 188 | Series 2016-HHV Class E | ||||
Series 2013-4233 Class MD | 4.194% due 11/05/38 (Þ)(Å) | 600 | 481 | ||||
1.750% due 03/15/25 | 238 | 239 | JPMBB Commercial Mortgage Securities | ||||
Freddie Mac Strips | Trust | ||||||
Series 2012-271 Class 30 | Series 2013-C14 Class AS | ||||||
3.000% due 08/15/42 | 1,236 | 1,228 | 4.409% due 08/15/46 | 250 | 267 | ||
JPMorgan Chase Commercial Mortgage | |||||||
Series 2014-334 Class S7 | Securities Trust | ||||||
Interest Only STRIP | Series 2004-LN2 Class B | ||||||
5.592% due 08/15/44 (Ê) | 247 | 56 | 5.466% due 07/15/41 | 150 | 149 | ||
Freddie Mac Structured Agency Credit | |||||||
Risk Debt Notes | Series 2007-LDPX Class A3 | ||||||
Series 2016-DNA2 Class M3 | 5.420% due 01/15/49 | 171 | 171 | ||||
5.786% due 10/25/28 (Ê) | 380 | 405 | Series 2015-MAR7 Class E | ||||
Freddie Mac Structured Pass-Through | 5.962% due 06/05/32 (Þ) | 500 | 470 | ||||
Certificates | LB Commercial Mortgage Trust | ||||||
Series 2003-56 Class A5 | Series 2007-C3 Class AM | ||||||
5.231% due 05/25/43 | 4 | 5 | 6.116% due 07/15/44 | 920 | 933 | ||
Freddie Mac Whole Loan Securities | LB-UBS Commercial Mortgage Trust | ||||||
Trust | Series 2005-C7 Class F | ||||||
Series 2016-SC01 Class M1 | 5.350% due 11/15/40 | 405 | 415 | ||||
3.883% due 07/25/46 | 216 | 212 | Series 2007-C6 Class AM | ||||
FREMF Mortgage Trust | 6.114% due 07/15/40 | 680 | 698 | ||||
Series 2016-K57 Class C | ML-CFC Commercial Mortgage Trust | ||||||
3.919% due 08/25/49 (Þ) | 120 | 95 | Series 2007-5 Class AJ | ||||
Ginnie Mae | 5.450% due 08/12/48 | 752 | 642 | ||||
Series 2016-21 Class ST | Series 2007-5 Class AJFL | ||||||
Interest Only STRIP | 5.450% due 08/12/48 (Þ) | 680 | 581 | ||||
5.638% due 02/20/46 (Ê) | 361 | 76 | Morgan Stanley Bank of America Merrill | ||||
Series 2016-51 Class NS | Lynch Trust | ||||||
Interest Only STRIP | Series 2015-C24 Class A4 | ||||||
5.518% due 04/20/46 (Ê) | 189 | 36 | 3.732% due 05/15/48 | 835 | 867 |
See accompanying notes which are an integral part of the financial statements.
90 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||
Principal | Fair | Principal | Fair | ||||||
Amount ($) | Value | Amount ($) | Value | ||||||
or Shares | $ | or Shares | $ | ||||||
Series 2015-C26 Class A3 | 6.000% due 11/25/35 | 2,647 | 2,409 | ||||||
3.211% due 10/15/48 | 875 | 880 | Series 2006-AR1 Class 2A1A | ||||||
Series 2016-C31 Class A1 | 1.594% due 01/25/46 (Ê) | 632 | 613 | ||||||
1.511% due 11/15/21 | 405 | 400 | Wells Fargo Commercial Mortgage Trust | ||||||
Morgan Stanley Capital I Trust | Series 2016-BNK1 Class A3 | ||||||||
Series 2007-IQ15 Class A4 | 2.652% due 08/15/49 | 460 | 440 | ||||||
5.902% due 06/11/49 | 302 | 307 | Series 2016-C37 Class C | ||||||
Series 2007-IQ16 Class AM | 4.495% due 12/15/49 | 150 | 146 | ||||||
6.277% due 12/12/49 | 1,140 | 1,174 | Wells Fargo Mortgage Backed Securities | ||||||
Series 2011-C1 Class A3 | Trust | ||||||||
4.700% due 09/15/47 (Þ) | 869 | 910 | Series 2004-P Class 2A1 | ||||||
Series 2011-C3 Class A4 | 2.994% due 09/25/34 (Ê) | 159 | 164 | ||||||
4.118% due 07/15/49 | 115 | 124 | Series 2006-AR2 Class 2A1 | ||||||
Series 2012-C4 Class A2 | 2.942% due 03/25/36 | 67 | 67 | ||||||
2.111% due 03/15/45 | 24 | 24 | WFRBS Commercial Mortgage Trust | ||||||
Series 2015-MS1 Class A4 | Series 2012-C9 Class A1 | ||||||||
3.779% due 05/15/48 | 200 | 208 | 0.673% due 11/15/45 | 12 | 12 | ||||
Series 2016-UBS9 Class A4 | Series 2013-C14 Class A1 | ||||||||
3.594% due 03/15/49 | 205 | 211 | 0.836% due 06/15/46 | 40 | 40 | ||||
MSCG Trust | Series 2014-C19 Class A3 | ||||||||
Series 2015-ALDR Class A2 | 3.660% due 03/15/47 | 500 | 523 | ||||||
3.462% due 06/07/35 (Þ) | 255 | 252 | Series 2014-C24 Class D | ||||||
New Residential Mortgage Loan Trust | 3.692% due 11/15/47 (Þ) | 280 | 171 | ||||||
Series 2016-3A Class A1B | 183,146 | ||||||||
3.250% due 09/25/56 (Þ) | 217 | 219 | Municipal Bonds - 0.4% | ||||||
County of Montgomery Ohio Revenue | |||||||||
Nomura Resecuritization Trust | Bonds | ||||||||
Series 2015-4R Class 1A14 | 0.570% due 11/15/39 (Ê) | 1,000 | 1,000 | ||||||
0.590% due 03/26/47 (Ê)(Þ) | 1,290 | 720 | Municipal Electric Authority of Georgia | ||||||
RBS Commercial Funding, Inc. Trust | Revenue Bonds | ||||||||
Series 2013-GSP Class A | 6.637% due 04/01/57 | 750 | 930 | ||||||
3.961% due 01/13/32 (Þ) | 200 | 210 | 7.055% due 04/01/57 | 600 | 682 | ||||
RBSSP Resecuritization Trust | Tender Option Bond Trust Receipts/ | ||||||||
Series 2010-3 Class 9A1 | Certificates General Obligation | ||||||||
5.500% due 02/26/35 (Þ) | 93 | 94 | Unlimited | ||||||
Residential Asset Securitization Trust | 0.740% due 08/01/49 (Ê)(Þ) | 500 | 500 | ||||||
Series 2003-A15 Class 1A2 | 3,112 | ||||||||
0.975% due 02/25/34 (Ê) | 30 | 27 | Non-US Bonds - 4.4% | ||||||
Sequoia Mortgage Trust | Australia Government Bond | ||||||||
Series 2013-6 Class A2 | Series 126 | ||||||||
3.000% due 05/25/43 | 806 | 791 | 4.500% due 04/15/20 | AUD | 2,810 | 2,186 | |||
Series 2015-1 Class A1 | Series 133 | ||||||||
3.500% due 01/25/45 (Þ) | 825 | 831 | 5.500% due 04/21/23 | AUD | 1,190 | 1,012 | |||
SG Commercial Mortgage Securities | Series 140 | ||||||||
Trust | 4.500% due 04/21/33 | AUD | 1,250 | 1,047 | |||||
Series 2016-C5 Class A4 | Brazil Notas do Tesouro Nacional Serie B | ||||||||
3.055% due 10/10/48 | 475 | 461 | Series NTNB | ||||||
Structured Adjustable Rate Mortgage | 6.000% due 05/15/45 | BRL | 404 | 382 | |||||
Loan Trust | Brazil Notas do Tesouro Nacional Serie F | ||||||||
Series 2006-5 Class 3A | |||||||||
3.101% due 06/25/36 (Ê) | 3,686 | 2,926 | Series NTNF | ||||||
10.000% due 01/01/21 | BRL | 3,630 | 1,074 | ||||||
Towd Point Mortgage Trust | 10.000% due 01/01/23 | BRL | 4,755 | 1,375 | |||||
Series 2016-3 Class A1 | 10.000% due 01/01/25 | BRL | 4,060 | 1,160 | |||||
2.250% due 08/25/55 (Þ) | 494 | 490 | |||||||
Washington Mutual Mortgage Pass- | Colombian Titulos de Tesoreria | ||||||||
Through Certificates Trust | Series B | ||||||||
Series 2003-AR7 Class A7 | 10.000% due 07/24/24 | COP | 8,206,800 | 3,227 | |||||
2.676% due 08/25/33 (Ê) | 114 | 114 | 6.000% due 04/28/28 | COP | 847,700 | 255 | |||
Series 2005-10 Class 3CB1 | Ireland Government International Bond | ||||||||
5.400% due 03/13/25 | EUR | 1,470 | 2,146 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 91
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||
Principal | Fair | Principal | Fair | ||||||
Amount ($) | Value | Amount ($) | Value | ||||||
or Shares | $ | or Shares | $ | ||||||
Malaysia Government International Bond | Series R209 | ||||||||
Series 0111 | 6.250% due 03/31/36 | ZAR | 8,450 | 438 | |||||
4.160% due 07/15/21 | MYR | 150 | 34 | Series R214 | |||||
Series 0114 | 6.500% due 02/28/41 | ZAR | 20,700 | 1,072 | |||||
4.181% due 07/15/24 | MYR | 540 | 119 | Russian Federal Bond - OFZ | |||||
Series 0116 | Series 6207 | ||||||||
3.800% due 08/17/23 | MYR | 3,850 | 843 | 8.150% due 02/03/27 | RUB | 41,540 | 674 | ||
Series 0215 | Series 6219 | ||||||||
3.795% due 09/30/22 | MYR | 1,610 | 353 | 7.750% due 09/16/26 | RUB | 42,660 | 670 | ||
Series 0314 | Singapore Government International | ||||||||
4.048% due 09/30/21 | MYR | 610 | 137 | Bond | |||||
0.500% due 04/01/18 | SGD | 410 | 281 | ||||||
Series 0315 | 2.000% due 07/01/20 | SGD | 350 | 244 | |||||
3.659% due 10/15/20 | MYR | 1,274 | 284 | ||||||
2.250% due 06/01/21 | SGD | 400 | 281 | ||||||
Series 0414 | |||||||||
3.654% due 10/31/19 | MYR | 1,060 | 237 | 3.125% due 09/01/22 | SGD | 450 | 328 | ||
2.750% due 07/01/23 | SGD | 380 | 270 | ||||||
Series 0515 | 3.000% due 09/01/24 | SGD | 450 | 324 | |||||
3.759% due 03/15/19 | MYR | 710 | 159 | 2.375% due 06/01/25 | SGD | 400 | 275 | ||
Mexican Bonos | 3.500% due 03/01/27 | SGD | 350 | 262 | |||||
Series M 20 | |||||||||
10.000% due 12/05/24 | MXN | 6,160 | 344 | 37,531 | |||||
7.500% due 06/03/27 | MXN | 10,682 | 513 | United States Government Agencies - 0.0% | |||||
Series M 30 | Ginnie Mae | ||||||||
10.000% due 11/20/36 | MXN | 24,459 | 1,434 | Series 2012-135 | |||||
8.500% due 11/18/38 | MXN | 11,830 | 606 | Interest Only STRIP | |||||
Series M | 0.611% due 01/16/53 | 2,106 | 87 | ||||||
7.750% due 05/29/31 | MXN | 2,940 | 142 | ||||||
7.750% due 11/13/42 | MXN | 37,400 | 1,777 | United States Government Treasuries - 32.0% | |||||
New Zealand Government International | United States Treasury Inflation Indexed | ||||||||
Bond | Bonds | ||||||||
1.375% due 07/15/18 | 7,359 | 7,636 | |||||||
Series 0423 | 0.125% due 04/15/20 | 3,424 | 3,459 | ||||||
5.500% due 04/15/23 | NZD | 1,710 | 1,359 | ||||||
0.125% due 04/15/21 | 1,173 | 1,180 | |||||||
Series 0427 | |||||||||
4.500% due 04/15/27 | NZD | 810 | 618 | 0.125% due 07/15/22 | 6,722 | 6,739 | |||
0.375% due 07/15/25 | 1,101 | 1,095 | |||||||
Series 0521 | 0.125% due 07/15/26 | 1,109 | 1,073 | ||||||
6.000% due 05/15/21 | NZD | 4,120 | 3,250 | 0.250% due 07/15/26 | 1,536 | 1,511 | |||
Series 0925 | 2.375% due 01/15/27 | 72 | 84 | ||||||
2.000% due 09/20/25 | NZD | 490 | 358 | 0.625% due 02/15/43 | 631 | 578 | |||
Norway Government International Bond | 1.375% due 02/15/44 | 1,442 | 1,573 | ||||||
Series 473 | 0.750% due 02/15/45 | 1,355 | 1,275 | ||||||
4.500% due 05/22/19 (Þ) | NOK | 8,550 | 1,078 | 1.000% due 02/15/46 | 3,234 | 3,248 | |||
Series 477 | United States Treasury Notes | ||||||||
1.750% due 03/13/25 (Þ) | NOK | 3,370 | 395 | 0.875% due 03/31/18 | 7,363 | 7,353 | |||
Peru Government International Bond | 0.625% due 04/30/18 | 2,000 | 1,990 | ||||||
5.700% due 08/12/24 | PEN | 4,510 | 1,326 | 0.750% due 07/31/18 | 2,575 | 2,562 | |||
6.900% due 08/12/37 | PEN | 3,220 | 955 | 1.250% due 12/15/18 | 3,000 | 3,003 | |||
Republic of Poland Government | |||||||||
International Bond | 1.000% due 03/15/19 | 10,000 | 9,947 | ||||||
Series 0420 | 0.875% due 04/15/19 | 7,320 | 7,254 | ||||||
1.500% due 04/25/20 | PLN | 1,490 | 344 | 1.250% due 02/29/20 | 11,458 | 11,367 | |||
3.500% due 05/15/20 | 1,415 | 1,504 | |||||||
Series 0421 | 8.750% due 05/15/20 | 828 | 1,022 | ||||||
2.000% due 04/25/21 | PLN | 1,480 | 342 | ||||||
2.625% due 08/15/20 | 1,360 | 1,406 | |||||||
Series 0726 | 2.125% due 08/31/20 | 520 | 528 | ||||||
2.500% due 07/25/26 | PLN | 3,280 | 712 | ||||||
Republic of South Africa Government | 1.375% due 09/30/20 | 12,670 | 12,526 | ||||||
International Bond | 2.625% due 11/15/20 | 2,240 | 2,315 | ||||||
Series R186 | 2.000% due 11/30/20 | 1,450 | 1,465 | ||||||
10.500% due 12/21/26 | ZAR | 5,270 | 423 | 2.375% due 12/31/20 | 1,422 | 1,457 | |||
Series R207 | 2.125% due 01/31/21 | 1,453 | 1,472 | ||||||
7.250% due 01/15/20 | ZAR | 5,710 | 406 | 3.625% due 02/15/21 | 2,490 | 2,673 |
See accompanying notes which are an integral part of the financial statements.
92 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||
Principal | Fair | Principal | Fair | ||||||
Amount ($) | Value | Amount ($) | Value | ||||||
or Shares | $ | or Shares | $ | ||||||
2.000% due 02/28/21 | 1,725 | 1,739 | Options Purchased - 0.0% | ||||||
2.250% due 03/31/21 | 1,805 | 1,838 | (Number of Contracts) | ||||||
3.125% due 05/15/21 | 2,422 | 2,552 | Cross Currency Options | ||||||
1.125% due 06/30/21 | 1,880 | 1,820 | (USD/EUR) | ||||||
1.125% due 08/31/21 | 1,635 | 1,580 | Jan 2017 1.04 Call (1,800,000) | USD | 1,863 | (ÿ) | — | ||
Cross Currency Options | |||||||||
1.250% due 10/31/21 | 23,650 | 22,934 | (USD/JPY) | ||||||
1.750% due 11/30/21 | 1,790 | 1,777 | Jan 2017 114.75 Call (1,800,000) | USD | 206,550 | (ÿ) | 34 | ||
1.125% due 12/31/21 | 26,130 | 25,259 | Jan 2017 118.25 Call (1,800,000) | USD | 212,850 | (ÿ) | 4 | ||
2.000% due 07/31/22 | 1,423 | 1,418 | Jan 2017 118.75 Call (1,800,000) | USD | 213,750 | (ÿ) | — | ||
1.750% due 09/30/22 | 8,615 | 8,452 | Feb 2017 112.50 Call (1,800,000) | USD | 202,500 | (ÿ) | 78 | ||
1.250% due 07/31/23 | 350 | 329 | United States 10 Year | ||||||
2.500% due 08/15/23 | 885 | 901 | Treasury Note Futures | ||||||
1.375% due 08/31/23 | 7,900 | 7,485 | Jan 2017 124.50 Call (6) | USD | 747 | (ÿ) | 3 | ||
1.375% due 09/30/23 | 1,350 | 1,279 | United States Treasury | ||||||
1.625% due 10/31/23 | 3,885 | 3,738 | Bond Futures | ||||||
2.750% due 11/15/23 | 1,410 | 1,456 | Jan 2017 152.00 Call (5) | USD | 760 | (ÿ) | 5 | ||
2.125% due 11/30/23 | 1,780 | 1,768 | Total Options Purchased | ||||||
2.750% due 02/15/24 | 1,017 | 1,050 | (cost $85) | 124 | |||||
2.500% due 05/15/24 | 1,155 | 1,172 | |||||||
2.375% due 08/15/24 | 1,500 | 1,507 | Short-Term Investments - 14.4% | ||||||
2.000% due 02/15/25 | 2,230 | 2,170 | |||||||
2.125% due 05/15/25 | 1,430 | 1,402 | America Movil SAB de CV | ||||||
1.625% due 05/15/26 | 6,000 | 5,595 | 5.625% due 11/15/17 | 40 | 41 | ||||
1.500% due 08/15/26 | 18,220 | 16,757 | American Honda Finance Corp. | ||||||
2.000% due 11/15/26 | 13,250 | 12,748 | 1.051% due 07/14/17 (Ê) | 1,250 | 1,251 | ||||
5.500% due 08/15/28 | 1,325 | 1,715 | |||||||
5.250% due 02/15/29 | 1,245 | 1,591 | 1.263% due 12/11/17 (Ê) | 100 | 100 | ||||
6.250% due 05/15/30 | 600 | 849 | Anheuser-Busch InBev Worldwide, Inc. | ||||||
3.500% due 02/15/39 | 3,500 | 3,828 | 1.212% due 04/21/17 (Þ)(~) | 460 | 458 | ||||
4.625% due 02/15/40 | 1,185 | 1,514 | 1.574% due 06/08/17 (Þ)(~) | 250 | 249 | ||||
3.875% due 08/15/40 | 1,839 | 2,111 | |||||||
3.750% due 11/15/43 | 2,310 | 2,619 | AT&T, Inc. | ||||||
3.125% due 08/15/44 | 2,150 | 2,176 | 1.600% due 02/15/17 | 335 | 335 | ||||
3.000% due 11/15/45 | 1,530 | 1,509 | 1.700% due 06/01/17 | 745 | 746 | ||||
2.500% due 02/15/46 | 170 | 151 | Bank of America Corp. | ||||||
2.500% due 05/15/46 | 12,995 | 11,548 | Series GMTN | ||||||
2.875% due 11/15/46 (§) | 17,750 | 14,987 | 6.400% due 08/28/17 | 200 | 206 | ||||
272,619 | Bank of America NA | ||||||||
Total Long-Term Investments | Series BKNT | ||||||||
(cost $767,582) | 753,062 | 1.303% due 05/08/17 (Ê) | 300 | 300 | |||||
Bank of Montreal | |||||||||
Common Stocks - 0.0% | Series YCD | ||||||||
Financial Services - 0.0% | 1.503% due 12/11/17 (Ê)(~) | 1,330 | 1,333 | ||||||
Escrow GM Corp.(Å) | 80,000 | — | Bear Stearns Cos. LLC (The) | ||||||
Total Common Stocks | 5.550% due 01/22/17 | 425 | 426 | ||||||
(cost $—) | — | BNP Paribas SA | |||||||
2.375% due 09/14/17 | 40 | 40 | |||||||
Preferred Stocks - 0.1% | Brazil Notas do Tesouro Nacional Serie F | ||||||||
Financial Services - 0.1% | Series NTNF | ||||||||
XLIT, Ltd. | 700 | 539 | 10.000% due 01/01/17 | BRL | 600 | 184 | |||
Chevron Corp. | |||||||||
Total Preferred Stocks | 1.076% due 11/15/17 (Ê) | 280 | 280 | ||||||
(cost $583) | 539 | Citigroup, Inc. | |||||||
1.630% due 11/24/17 (Ê) | 1,250 | 1,253 | |||||||
Compass Bank |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 93
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||
Principal | Fair | Principal | Fair | ||||||
Amount ($) | Value | Amount ($) | Value | ||||||
or Shares | $ | or Shares | $ | ||||||
Series BKNT | New York Life Global Funding | ||||||||
6.400% due 10/01/17 | 835 | 861 | 1.450% due 12/15/17 (Þ) | 645 | 646 | ||||
Cooperatieve Rabobank UA | Nordea Bank Finland PLC | ||||||||
1.176% due 03/09/17 (Ê)(~) | 1,330 | 1,331 | Series YCD | ||||||
CRC Funding LLC | 1.357% due 06/13/17 (Ê)(~) | 1,665 | 1,667 | ||||||
0.934% due 01/05/17 (ç)(Þ)(~) | 250 | 250 | Ontario Teachers' Finance Trust | ||||||
Credit Suisse AG | 1.211% due 02/10/17 (ç)(Þ)(~) | 500 | 499 | ||||||
Series GMTN | Province of British Columbia Canada | ||||||||
1.427% due 05/26/17 (Ê) | 300 | 300 | 1.200% due 04/25/17 | 335 | 335 | ||||
DCP Midstream Operating, LP | Samsung Electronics America, Inc. | ||||||||
2.500% due 12/01/17 | 115 | 114 | 1.750% due 04/10/17 (Þ) | 305 | 305 | ||||
Deutsche Telekom International Finance | Statoil ASA | ||||||||
BV | 3.125% due 08/17/17 | 20 | 20 | ||||||
2.250% due 03/06/17 (Þ) | 920 | 921 | Thomson Reuters Corp. | ||||||
DNB Bank ASA | |||||||||
Series YCD | 1.650% due 09/29/17 | 700 | 701 | ||||||
1.291% due 06/09/17 (Ê)(~) | 1,330 | 1,331 | Total Capital International SA | ||||||
eBay, Inc. | 1.550% due 06/28/17 | 895 | 897 | ||||||
1.350% due 07/15/17 | 610 | 610 | Toyota Motor Credit Corp. | ||||||
Fannie Mae-Aces | 1.101% due 02/16/17 (Ê) | 265 | 265 | ||||||
Series 2012-M13 Class ASQ2 | 1.125% due 05/16/17 | 1,200 | 1,199 | ||||||
1.246% due 08/25/17 | 402 | 401 | Transocean, Inc. | ||||||
Series 2014-M13 Class ASQ2 | 4.250% due 10/15/17 | 414 | 418 | ||||||
1.637% due 11/25/17 | 1,580 | 1,582 | Tyco Electronics Group SA | ||||||
FCA US LLC Term Loan B | 6.550% due 10/01/17 | 620 | 643 | ||||||
3.500% due 05/24/17 (Ê) | 328 | 329 | U.S. Cash Management Fund | 73,364,896 | (8) | 73,380 | |||
General Electric Co. | United States Treasury Bills | ||||||||
5.250% due 12/06/17 | 190 | 197 | 0.375% due 01/05/17 | 5,030 | 5,030 | ||||
Hartford Financial Services Group, Inc. | 0.010% due 04/20/17 | 5,050 | 5,042 | ||||||
(The) | United States Treasury Notes | ||||||||
5.375% due 03/15/17 | 200 | 202 | 0.500% due 04/30/17 | 3,990 | 3,990 | ||||
Hewlett Packard Enterprise Co. | 0.750% due 10/31/17 | 1,800 | 1,798 | ||||||
Series WI | Verizon Communications, Inc. | ||||||||
2.450% due 10/05/17 | 910 | 915 | 1.351% due 06/09/17 (Ê) | 650 | 651 | ||||
ING Bank NV | Vodafone Group PLC | ||||||||
3.750% due 03/07/17 (Þ) | 1,500 | 1,506 | 1.625% due 03/20/17 | 1,260 | 1,260 | ||||
Intesa Sanpaolo SpA | Wells Fargo Bank NA | ||||||||
2.375% due 01/13/17 | 320 | 320 | Series CD | ||||||
JPMorgan Chase Bank NA | 1.353% due 06/12/17 (Ê)(~) | 1,665 | 1,667 | ||||||
Series BKNT | Westpac Banking Corp. | ||||||||
6.000% due 10/01/17 | 400 | 413 | Series YCD | ||||||
Malaysia Government International Bond | 1.301% due 03/01/17 (Ê)(~) | 1,630 | 1,631 | ||||||
Series 0512 | Williams Partners, LP / Williams | ||||||||
3.314% due 10/31/17 | MYR | 460 | 103 | Partners Finance Corp. | |||||
Manufacturers & Traders Trust Co. | 7.250% due 02/01/17 | 235 | 236 | ||||||
Series BKNT | Total Short-Term Investments | ||||||||
1.400% due 07/25/17 | 780 | 781 | (cost $122,588) | 122,625 | |||||
Morgan Stanley | |||||||||
5.950% due 12/28/17 | 150 | 156 | Total Investments 103.0% | ||||||
National Australia Bank, Ltd. | (identified cost $890,838) | 876,350 | |||||||
1.278% due 06/30/17 (Ê)(Þ) | 520 | 520 |
See accompanying notes which are an integral part of the financial statements.
94 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | ||
Principal | Fair | |
Amount ($) | Value | |
or Shares | $ | |
Other Assets and Liabilities, | ||
Net - (3.0%) | (25,628 | ) |
Net Assets - 100.0% | 850,722 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 95
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Restricted Securities | ||||||||||||
Amounts in thousands (except share and cost per unit amounts) | ||||||||||||
Principal | Cost per | Cost | Fair Value | |||||||||
% of Net Assets | Acquisition | Amount ($) | Unit | (000 | ) | (000 | ) | |||||
Securities | Date | or shares | $ | $ | $ | |||||||
0.2% | ||||||||||||
BCAP LLC Trust | 11/26/13 | 196,621 | 104.14 | 205 | 198 | |||||||
CSMC Mortgage-Backed Trust | 07/26/13 | 119,836 | 97.47 | 117 | 119 | |||||||
Escrow GM Corp. | 04/21/11 | 80,000 | — | — | — | |||||||
FDIC Trust | 06/08/12 | 481,837 | 103.93 | 501 | 483 | |||||||
Hilton USA Trust | 11/22/16 | 600,000 | 80.82 | 485 | 481 | |||||||
1,281 | ||||||||||||
For a description of restricted securities see note 7 in the Notes to Financial Statements. |
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
Australia 10 Year Government Bond Futures | 403 | AUD | 51,481 | 03/17 | 235 | ||
Euro-BTP Futures | 49 | EUR | 6,630 | 03/17 | 48 | ||
United States 2 Year Treasury Note Futures | 86 | USD | 18,636 | 03/17 | (7 | ) | |
United States 5 Year Treasury Note Futures | 642 | USD | 75,540 | 03/17 | (265 | ) | |
United States 10 Year Treasury Note Futures | 861 | USD | 107,004 | 03/17 | (281 | ) | |
United States Long Bond Futures | 87 | USD | 13,107 | 03/17 | (51 | ) | |
United States Ultra Treasury Bond Futures | 9 | USD | 1,442 | 03/17 | 20 | ||
Short Positions | |||||||
British Pound Currency Futures | 23 | USD | 1,776 | 03/17 | 46 | ||
Euro Currency Futures | 18 | USD | 2,379 | 03/17 | (20 | ) | |
Euro-BOBL Futures | 42 | EUR | 5,612 | 03/17 | (39 | ) | |
Euro-Bund Futures | 250 | EUR | 41,037 | 03/17 | (650 | ) | |
Eurodollar Futures | 156 | USD | 38,595 | 03/17 | 3 | ||
Euro-OAT Futures | 20 | EUR | 3,036 | 03/17 | (35 | ) | |
Japan Government 10 Year Bond Futures | 5 | JPY | 751,201 | 03/17 | — | ||
Japanese Yen Currency Futures | 42 | USD | 4,513 | 03/17 | 40 | ||
Long Gilt Futures | 249 | GBP | 31,332 | 03/17 | (976 | ) | |
United States 2 Year Treasury Note Futures | 15 | USD | 3,250 | 03/17 | (5 | ) | |
United States 10 Year Treasury Note Futures | 37 | USD | 4,598 | 03/17 | 16 | ||
United States 10 Year Ultra Treasury Bond Futures | 112 | USD | 15,015 | 03/17 | 125 | ||
United States Long Bond Futures | 6 | USD | 904 | 03/17 | (12 | ) | |
United States Ultra Treasury Bond Futures | 8 | USD | 1,282 | 03/17 | 14 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | (1,794 | ) |
Options Written | ||||||||
Amounts in thousands (except contract amounts) | ||||||||
Number of | Strike | Notional | Expiration | Fair Value | ||||
Call/Put | Contracts | Price | Amount | Date | $ | |||
Cross Currency Options (USD/JPY) | Call | 1 | 118.00 | USD | 212,400 | 01/04/17 | (3 | ) |
Cross Currency Options (USD/JPY) | Call | 1 | 115.50 | USD | 207,900 | 02/23/17 | (44 | ) |
United States 5 Year Treasury Note Futures | Call | 54 | 117.75 | USD | 6,359 | 01/27/17 | (19 | ) |
United States 5 Year Treasury Note Futures | Call | 32 | 120.00 | USD | 3,840 | 01/27/17 | (1 | ) |
United States 5 Year Treasury Note Futures | Call | 5 | 117.75 | USD | 589 | 02/24/17 | (3 | ) |
United States 10 Year Treasury Note Futures | Call | 10 | 125.00 | USD | 1,250 | 01/27/17 | (4 | ) |
United States 10 Year Treasury Note Futures | Call | 5 | 126.00 | USD | 630 | 01/27/17 | (1 | ) |
United States 10 Year Treasury Note Futures | Call | 5 | 126.50 | USD | 633 | 01/27/17 | — | |
United States 10 Year Treasury Note Futures | Call | 5 | 127.50 | USD | 638 | 01/27/17 | — | |
United States 10 Year Treasury Note Futures | Call | 10 | 126.00 | USD | 1,260 | 02/24/17 | (4 | ) |
See accompanying notes which are an integral part of the financial statements.
96 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Options Written | ||||||||
Amounts in thousands (except contract amounts) | ||||||||
Number of | Strike | Notional | Expiration | Fair Value | ||||
Call/Put | Contracts | Price | Amount | Date | $ | |||
United States 10 Year Treasury Note Futures | Call | 11 | 127.50 | USD | 1,403 | 02/24/17 | (2 | ) |
United States Treasury Bond Futures | Call | 6 | 150.00 | USD | 900 | 01/27/17 | (12 | ) |
United States Treasury Bond Futures | Call | 2 | 151.00 | USD | 302 | 01/27/17 | (3 | ) |
United States Treasury Bond Futures | Put | 8 | 143.00 | USD | 1,144 | 01/27/17 | (1 | ) |
Total Liability for Options Written (premiums received $76) | (97 | ) |
Transactions in options written contracts for the period ended December 31, 2016 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2015 | 1 | $ | 107 | |||
Opened | 700 | 339 | ||||
Closed | (330 | ) | (235 | ) | ||
Expired | (216 | ) | (135 | ) | ||
Outstanding December 31, 2016 | 155 | $ | 76 |
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
Bank of America | USD | 187 | BRL | 646 | 02/22/17 | 9 | |
Bank of America | USD | 1,528 | BRL | 5,358 | 02/22/17 | 96 | |
Bank of America | USD | 119 | CLP | 79,653 | 02/22/17 | (1 | ) |
Bank of America | USD | 36 | CZK | 922 | 02/22/17 | — | |
Bank of America | USD | 3,433 | CZK | 86,070 | 02/22/17 | (73 | ) |
Bank of America | USD | 475 | GBP | 380 | 01/20/17 | (6 | ) |
Bank of America | USD | 95 | HUF | 28,558 | 02/22/17 | 2 | |
Bank of America | USD | 3,404 | HUF | 984,473 | 02/22/17 | (49 | ) |
Bank of America | USD | 24 | IDR | 324,349 | 02/22/17 | — | |
Bank of America | USD | 1,502 | INR | 103,115 | 02/22/17 | 9 | |
Bank of America | USD | 3,446 | KRW | 4,025,108 | 02/22/17 | (113 | ) |
Bank of America | USD | 40 | PLN | 171 | 02/22/17 | 1 | |
Bank of America | USD | 3,405 | PLN | 14,140 | 02/22/17 | (29 | ) |
Bank of America | USD | 333 | RUB | 20,857 | 02/22/17 | 3 | |
Bank of America | USD | 1,530 | RUB | 101,682 | 02/22/17 | 108 | |
Bank of America | USD | 92 | TRY | 329 | 02/22/17 | — | |
Bank of America | USD | 207 | TRY | 740 | 02/22/17 | 1 | |
Bank of America | USD | 1,474 | TRY | 4,998 | 02/22/17 | (72 | ) |
Bank of America | USD | 3,316 | TRY | 11,246 | 02/22/17 | (162 | ) |
Bank of America | USD | 13 | TWD | 416 | 02/22/17 | — | |
Bank of America | BRL | 287 | USD | 83 | 02/22/17 | (4 | ) |
Bank of America | BRL | 12,055 | USD | 3,438 | 02/22/17 | (216 | ) |
Bank of America | CLP | 2,308,589 | USD | 3,423 | 02/22/17 | (11 | ) |
Bank of America | CNY | 20,140 | USD | 2,962 | 01/20/17 | 84 | |
Bank of America | CZK | 410 | USD | 16 | 02/22/17 | — | |
Bank of America | CZK | 38,253 | USD | 1,526 | 02/22/17 | 32 | |
Bank of America | EUR | 150 | USD | 160 | 01/20/17 | 2 | |
Bank of America | EUR | 150 | USD | 157 | 01/20/17 | (1 | ) |
Bank of America | EUR | 200 | USD | 220 | 01/20/17 | 9 | |
Bank of America | HUF | 12,693 | USD | 42 | 02/22/17 | (1 | ) |
Bank of America | HUF | 437,544 | USD | 1,513 | 02/22/17 | 22 | |
Bank of America | IDR | 45,914,358 | USD | 3,354 | 02/22/17 | (24 | ) |
Bank of America | INR | 298 | USD | 4 | 02/22/17 | — |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 97
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
Bank of America | KRW | 27,247 | USD | 23 | 02/22/17 | 1 | |
Bank of America | RUB | 9,270 | USD | 148 | 02/22/17 | (1 | ) |
Bank of America | RUB | 228,784 | USD | 3,442 | 02/22/17 | (243 | ) |
Bank of America | TWD | 48,830 | USD | 1,539 | 02/22/17 | 32 | |
Bank of Montreal | USD | 1,513 | ZAR | 22,045 | 02/22/17 | 77 | |
Bank of Montreal | HKD | 11,915 | USD | 1,537 | 02/22/17 | — | |
Bank of Montreal | SGD | 2,169 | USD | 1,533 | 02/22/17 | 36 | |
Citigroup | USD | 900 | KRW | 1,050,000 | 01/18/17 | (30 | ) |
Citigroup | USD | 2,451 | NZD | 3,519 | 01/24/17 | (8 | ) |
Citigroup | USD | 8,578 | NZD | 12,317 | 01/24/17 | (27 | ) |
Citigroup | BRL | 1,550 | USD | 451 | 01/18/17 | (23 | ) |
Citigroup | SEK | 23,211 | USD | 2,480 | 01/24/17 | (71 | ) |
Citigroup | SEK | 81,239 | USD | 8,679 | 01/24/17 | (250 | ) |
Commonwealth Bank of Australia | USD | 5,612 | EUR | 5,366 | 01/24/17 | 42 | |
Commonwealth Bank of Australia | USD | 5,597 | GBP | 4,501 | 01/24/17 | (46 | ) |
Commonwealth Bank of Australia | CHF | 2,566 | USD | 2,502 | 01/24/17 | (22 | ) |
Commonwealth Bank of Australia | CHF | 5,774 | USD | 5,630 | 01/24/17 | (48 | ) |
Commonwealth Bank of Australia | GBP | 7,002 | USD | 8,707 | 01/24/17 | 72 | |
Goldman Sachs | CNY | 6,200 | USD | 895 | 01/18/17 | 8 | |
HSBC | CNY | 19,243 | USD | 2,778 | 01/18/17 | 26 | |
HSBC | KRW | 1,050,000 | USD | 905 | 01/18/17 | 36 | |
JPMorgan Chase | USD | 461 | BRL | 1,550 | 01/18/17 | 13 | |
JPMorgan Chase | USD | 1,934 | CAD | 2,554 | 02/14/17 | (31 | ) |
JPMorgan Chase | USD | 1,561 | CLP | 1,026,671 | 01/18/17 | (29 | ) |
JPMorgan Chase | USD | 281 | GBP | 230 | 01/20/17 | 3 | |
JPMorgan Chase | USD | 3,576 | GBP | 2,820 | 02/14/17 | (97 | ) |
JPMorgan Chase | USD | 1,107 | INR | 74,910 | 01/20/17 | (6 | ) |
JPMorgan Chase | USD | 78 | JPY | 9,140 | 01/20/17 | — | |
JPMorgan Chase | USD | 1,494 | JPY | 174,516 | 02/14/17 | 2 | |
JPMorgan Chase | USD | 1,500 | JPY | 175,933 | 02/14/17 | 9 | |
JPMorgan Chase | USD | 430 | MXN | 8,231 | 01/20/17 | (34 | ) |
JPMorgan Chase | USD | 808 | MXN | 16,080 | 01/20/17 | (34 | ) |
JPMorgan Chase | USD | 2,462 | NOK | 20,618 | 02/14/17 | (74 | ) |
JPMorgan Chase | USD | 1,256 | PLN | 5,205 | 02/14/17 | (13 | ) |
JPMorgan Chase | USD | 3,459 | SEK | 31,143 | 02/14/17 | (32 | ) |
JPMorgan Chase | USD | 940 | TRY | 3,249 | 02/14/17 | (27 | ) |
JPMorgan Chase | USD | 956 | ZAR | 13,240 | 02/14/17 | — | |
JPMorgan Chase | AUD | 10,757 | USD | 8,025 | 02/14/17 | 269 | |
JPMorgan Chase | BRL | 9,493 | USD | 2,764 | 01/18/17 | (141 | ) |
JPMorgan Chase | CHF | 3,670 | USD | 3,654 | 02/14/17 | 40 | |
JPMorgan Chase | CNY | 2,590 | USD | 377 | 01/20/17 | 7 | |
JPMorgan Chase | COP | 4,134,882 | USD | 1,363 | 01/18/17 | (10 | ) |
JPMorgan Chase | CZK | 2,731 | USD | 109 | 02/14/17 | 3 | |
JPMorgan Chase | DKK | 284 | USD | 41 | 02/14/17 | 1 | |
JPMorgan Chase | EUR | 770 | USD | 852 | 01/20/17 | 41 | |
JPMorgan Chase | EUR | 3,294 | USD | 3,556 | 02/14/17 | 82 | |
JPMorgan Chase | HKD | 571 | USD | 74 | 02/14/17 | — | |
JPMorgan Chase | HUF | 430,801 | USD | 1,478 | 02/14/17 | 9 | |
JPMorgan Chase | IDR | 30,634,297 | USD | 2,288 | 01/18/17 | 23 | |
JPMorgan Chase | JPY | 39,638 | USD | 374 | 01/20/17 | 35 | |
JPMorgan Chase | JPY | 85,140 | USD | 823 | 01/20/17 | 94 | |
JPMorgan Chase | JPY | 148,010 | USD | 1,438 | 01/20/17 | 170 | |
JPMorgan Chase | JPY | 368,345 | USD | 3,243 | 02/14/17 | 85 | |
JPMorgan Chase | MXN | 4,916 | USD | 240 | 02/14/17 | 4 |
See accompanying notes which are an integral part of the financial statements.
98 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
JPMorgan Chase | NZD | 14,898 | USD | 10,688 | 02/14/17 | 350 | |
JPMorgan Chase | PEN | 14,179 | USD | 4,150 | 01/18/17 | (68 | ) |
JPMorgan Chase | PHP | 79,603 | USD | 1,593 | 01/18/17 | (8 | ) |
JPMorgan Chase | SGD | 3,407 | USD | 2,401 | 02/14/17 | 49 | |
JPMorgan Chase | THB | 81,120 | USD | 2,275 | 01/18/17 | 10 | |
Royal Bank of Canada | USD | 2,468 | AUD | 3,386 | 01/24/17 | (27 | ) |
Royal Bank of Canada | USD | 8,640 | AUD | 11,849 | 01/24/17 | (92 | ) |
Royal Bank of Canada | ILS | 21,702 | USD | 5,600 | 01/24/17 | (37 | ) |
Royal Bank of Canada | NOK | 48,045 | USD | 5,525 | 01/24/17 | (40 | ) |
State Street | USD | 14 | HKD | 105 | 02/22/17 | — | |
State Street | USD | 5,562 | JPY | 658,173 | 01/24/17 | 76 | |
State Street | JPY | 292,522 | USD | 2,472 | 01/24/17 | (34 | ) |
State Street | JPY | 1,023,825 | USD | 8,652 | 01/24/17 | (118 | ) |
State Street | ZAR | 1,347 | USD | 95 | 02/22/17 | (2 | ) |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (402 | ) |
Total Return Swap Contracts (*) | |||||
Amounts in thousands | |||||
Notional | Termination | Fair Value | |||
Underlying Reference Entity | Counterparty | Amount | Date | $ | |
Barclays Capital U.S. Aggregate Bond Index | Barclays | USD | 9,911 | 04/28/17 | 7 |
Barclays Capital U.S. Aggregate Bond Index | Barclays | USD | 16,848 | 04/28/17 | 13 |
Barclays Capital U.S. Aggregate Bond Index | Barclays | USD | 21,413 | 06/30/17 | 16 |
Total Fair Value of Open Total Return Swap Contracts Premiums Paid (Received) - $— (å) | 36 |
(*) Total return swaps (which includes index swaps) are agreements between counterparties to exchange cash flows, one based on a market-linked
returns of an individual asset or a basket of assets (i.e. an index), and the other on a fixed or floating rate. The floating rate fees were all based
on the 1 Month LIBOR rate plus a fee of 0.10%.
Interest Rate Swap Contracts | ||||||||||
Amounts in thousands | ||||||||||
Termination | Fair Value | |||||||||
Counterparty | Notional Amount | Fund Receives | Fund Pays | Date | $ | |||||
JPMorgan Chase | DKK | 7,200 | Six Month CIBOR | 0.510 | % | 05/05/25 | 17 | |||
JPMorgan Chase | DKK | 10,470 | Six Month CIBOR | 0.943 | % | 05/05/25 | (34 | ) | ||
JPMorgan Chase | HKD | 8,440 | Three Month HIBOR | 1.420 | % | 05/14/25 | 90 | |||
JPMorgan Chase | HKD | 11,750 | Three Month HIBOR | 2.160 | % | 05/14/25 | 40 | |||
JPMorgan Chase | CZK | 26,650 | Six Month PRIBOR | 0.495 | % | 06/19/25 | 21 | |||
JPMorgan Chase | CZK | 36,930 | Six Month PRIBOR | 1.280 | % | 06/19/25 | (73 | ) | ||
Merrill Lynch | USD | 18,688 | Three Month LIBOR | 1.267 | % | 05/15/23 | 949 | |||
Total Fair Value on Open Interest Rate Swap Contracts Premiums Paid (Received) - $316 (å) | 1,010 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 99
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — December 31, 2016
Presentation of Portfolio Holdings | ||||||||||||||||
Amounts in thousands | ||||||||||||||||
Fair Value | ||||||||||||||||
Practical | ||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | ||||||||||
Long-Term Investments | ||||||||||||||||
Asset-Backed Securities | $ | — | $ | 45,899 | $ | — | $ | — | $ | 45,899 | 5.4 | |||||
Corporate Bonds and Notes | — | 156,193 | — | — | 156,193 | 18.4 | ||||||||||
International Debt | — | 48,521 | — | — | 48,521 | 5.7 | ||||||||||
Loan Agreements | — | 5,954 | — | — | 5,954 | 0.7 | ||||||||||
Mortgage-Backed Securities | — | 182,549 | 597 | — | 183,146 | 21.5 | ||||||||||
Municipal Bonds | — | 3,112 | — | — | 3,112 | 0.4 | ||||||||||
Non-US Bonds | — | 37,531 | — | — | 37,531 | 4.4 | ||||||||||
United States Government Agencies | — | 87 | — | — | 87 | —* | ||||||||||
United States Government Treasuries | — | 272,619 | — | — | 272,619 | 32.0 | ||||||||||
Common Stocks | — | — | — | — | — | |||||||||||
Preferred Stocks | — | 539 | — | — | 539 | 0.1 | ||||||||||
Options Purchased | 8 | 116 | — | — | 124 | —* | ||||||||||
Short-Term Investments | — | 49,240 | — | 73,385 | 122,625 | 14.4 | ||||||||||
Total Investments | 8 | 802,360 | 597 | 73,385 | 876,350 | 103.0 | ||||||||||
Other Assets and Liabilities, Net | (3.0 | ) | ||||||||||||||
100.0 | ||||||||||||||||
Other Financial Instruments | ||||||||||||||||
Assets | ||||||||||||||||
Futures Contracts | 547 | — | — | — | 547 | 0.1 | ||||||||||
Foreign Currency Exchange Contracts | — | 2,083 | — | — | 2,083 | 0.2 | ||||||||||
Interest Rate Swap Contracts | — | 1,117 | — | — | 1,117 | 0.1 | ||||||||||
Total Return Swap Contracts | — | 36 | — | — | 36 | —* | ||||||||||
Liabilities | ||||||||||||||||
Futures Contracts | (2,341 | ) | — | — | — | (2,341 | ) | (0.3 | ) | |||||||
Options Written | (47 | ) | (50 | ) | — | — | (97 | ) | (—)* | |||||||
Foreign Currency Exchange Contracts | — | (2,485 | ) | — | — | (2,485 | ) | (0.3 | ) | |||||||
Interest Rate Swap Contracts | — | (107 | ) | — | — | (107 | ) | (—)* | ||||||||
Total Other Financial Instruments** | $ | (1,841 | ) | $ | 594 | $ | — | $ | — | $ | (1,247 | ) |
* Less than 0.05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the investments.
(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified
in the fair value levels. The fair value amounts presented in the table are intended to permit reconciliation to the amounts presented in the Schedule of
Investments.
For a description of the Levels, see note 2 in the Notes to Financial Statements.
For a disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2016, see note 2 in the Notes to
Financial Statements.
Investments in which significant unobservable inputs (Level 3) were used in determining a fair value for the period ended
December 31, 2016, were less than 1% of net assets.
See accompanying notes which are an integral part of the financial statements.
100 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Fair Value of Derivative Instruments — December 31, 2016
Amounts in thousands
Foreign | |||||||||
Currency | Interest Rate | ||||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | |||||||
Location: Statement of Assets and Liabilities - Assets | |||||||||
Investments, at fair value* | $ | 116 | $ | 8 | |||||
Unrealized appreciation on foreign currency exchange contracts | 2,083 | — | |||||||
Variation margin on futures contracts** | 86 | 461 | |||||||
Total return swap contracts, at fair value | — | 36 | |||||||
Interest rate swap contracts, at fair value | — | 1,117 | |||||||
Total | $ | 2,285 | $ | 1,622 | |||||
Location: Statement of Assets and Liabilities - Liabilities | |||||||||
Variation margin on futures contracts** | $ | 20 | $ | 2,321 | |||||
Unrealized depreciation on foreign currency exchange contracts | 2,485 | — | |||||||
Options written, at fair value | 47 | 50 | |||||||
Interest rate swap contracts, at fair value | — | 107 | |||||||
Total | $ | 2,552 | $ | 2,478 | |||||
Foreign | |||||||||
Credit | Currency | Interest Rate | |||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | ||||||
Location: Statement of Operations - Net realized gain (loss) | |||||||||
Investments*** | $ | — | $ | (332 | ) | $ | (252 | ) | |
Futures contracts | — | — | 2,244 | ||||||
Options written | — | 59 | 260 | ||||||
Total return swap contracts | — | — | 3,557 | ||||||
Interest rate swap contracts | — | — | (856 | ) | |||||
Credit default swap contracts | 1,071 | — | — | ||||||
Foreign currency-related transactions**** | — | 445 | — | ||||||
Total | $ | 1,071 | $ | 172 | $ | 4,953 | |||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | |||||||||
Investments***** | $ | — | $ | 40 | $ | 46 | |||
Futures contracts | — | 66 | (1,638 | ) | |||||
Options written | — | (71 | ) | (28 | ) | ||||
Total return swap contracts | — | — | 68 | ||||||
Interest rate swap contracts | — | — | 1,022 | ||||||
Credit default swap contracts | (96 | ) | — | — | |||||
Foreign currency-related transactions****** | — | 124 | — | ||||||
Total | $ | (96 | ) | $ | 159 | $ | (530 | ) |
* Fair value of purchased options.
** Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
*** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
**** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions
reported within the Statement of Operations.
***** Includes net unrealized gain (loss) on purchased options as reported in the Schedule of Investments.
******Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-
related transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 101
Russell Investment Funds
Core Bond Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Assets | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||
Options Purchased Contracts | Investments, at fair value | $ | 124 | $ | — | $ | 124 | ||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 2,083 | — | 2,083 | |||||
Futures Contracts | Variation margin on futures contracts | 3,426 | — | 3,426 | |||||
Total Return Swap Contracts | Total return swap contracts, at fair value | 36 | — | 36 | |||||
Interest Rate Swap Contracts | Interest rate swap contracts, at fair value | 1,117 | — | 1,117 | |||||
Total Financial and Derivative Assets | 6,786 | — | 6,786 | ||||||
Financial and Derivative Assets not subject to a netting agreement | (4,375) | — | (4,375 | ) | |||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 2,411 | $ | — | $ | 2,411 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||||
Gross Amounts Not Offset in | |||||||||||
the Statement of Assets and | |||||||||||
Liabilities | |||||||||||
Net Amounts | |||||||||||
of Assets | |||||||||||
Presented in | |||||||||||
the Statement | Financial and | ||||||||||
of Assets and | Derivative | Collateral | |||||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||||
Bank of America | $ | 411 | $ | 323 | $ | — | $ | 88 | |||
Bank of Montreal | 113 | — | — | 113 | |||||||
Barclays | 36 | — | — | 36 | |||||||
Citigroup | 81 | 81 | — | — | |||||||
Commonwealth Bank of Australia | 114 | 114 | — | — | |||||||
Goldman Sachs | 43 | 3 | — | 40 | |||||||
HSBC | 62 | — | — | 62 | |||||||
JPMorgan Chase | 1,466 | 711 | 465 | 290 | |||||||
Merrill Lynch | 9 | 9 | — | — | |||||||
State Street | 76 | 76 | — | — | |||||||
Total | $ | 2,411 | $ | 1,317 | $ | 465 | $ | 629 |
See accompanying notes which are an integral part of the financial statements.
102 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 81 | $ | — | $ | 81 | ||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 2,485 | — | 2,485 | |||||
Options Written Contracts | Options written, at fair value | 97 | — | 97 | |||||
Interest Rate Swap Contracts | Interest rate swap contracts, at fair value | 107 | — | 107 | |||||
Total Financial and Derivative Liabilities | 2,770 | — | 2,770 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (82) | — | (82 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 2,688 | $ | — | $ | 2,688 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | ||||||||||
�� | Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | ||||||||||
Liabilities | ||||||||||
Net Amounts | ||||||||||
of Liabilities | ||||||||||
Presented in | ||||||||||
the Statement | Financial and | |||||||||
of Assets and | Derivative | Collateral | ||||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | ||||||
Bank of America | $ | 1,005 | $ | 323 | $ | — | $ | 682 | ||
Citigroup | 454 | 81 | — | 373 | ||||||
Commonwealth Bank of Australia | 116 | 114 | — | 2 | ||||||
Goldman Sachs | 3 | 3 | — | — | ||||||
JPMorgan Chase | 711 | 711 | — | — | ||||||
Merrill Lynch | 49 | 9 | — | 40 | ||||||
Royal Bank of Canada | 196 | — | — | 196 | ||||||
State Street | 154 | 76 | — | 78 | ||||||
Total | $ | 2,688 | $ | 1,317 | $ | — | $ | 1,371 |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 103
Russell Investment Funds
Core Bond Fund
Statement of Assets and Liabilities — December 31, 2016
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 890,838 |
Investments, at fair value(>) | 876,350 | |
Cash | 10,880 | |
Cash (restricted)(a)(b)(c) | 6,048 | |
Foreign currency holdings(^) | 1,317 | |
Unrealized appreciation on foreign currency exchange contracts | 2,083 | |
Receivables: | ||
Dividends and interest | 4,656 | |
Dividends from affiliated funds | 43 | |
Investments sold | 9,133 | |
Fund shares sold | 105 | |
Variation margin on futures contracts | 3,426 | |
Total return swap contracts, at fair value(8) | 36 | |
Interest rate swap contracts, at fair value(•) | 1,117 | |
Total assets | 915,194 | |
Liabilities | ||
Payables: | ||
Due to broker (d)(e) | 1,775 | |
Investments purchased | 59,357 | |
Fund shares redeemed | 9 | |
Accrued fees to affiliates | 424 | |
Other accrued expenses | 137 | |
Variation margin on futures contracts | 81 | |
Unrealized depreciation on foreign currency exchange contracts | 2,485 | |
Options written, at fair value(x) | 97 | |
Interest rate swap contracts, at fair value(•) | 107 | |
Total liabilities | 64,472 | |
Commitments and Contingencies (1) | ||
Net Assets | $ | 850,722 |
(1) See note 8 in the Notes to Financial Statements for a detailed description of commitments and contingencies.
See accompanying notes which are an integral part of the financial statements.
104 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Statement of Assets and Liabilities, continued — December 31, 2016
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | (1,821 | ) |
Accumulated net realized gain (loss) | (9,938 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | (14,488 | ) | |
Futures contracts | (1,794 | ) | |
Options written | (21 | ) | |
Total return swap contracts | 36 | ||
Interest rate swap contracts | 694 | ||
Foreign currency-related transactions | (443 | ) | |
Shares of beneficial interest | 840 | ||
Additional paid-in capital | 877,657 | ||
Net Assets | $ | 850,722 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 10.12 | |
Net assets | $ | 850,721,651 | |
Shares outstanding ($.01 par value) | 84,048,194 | ||
Amounts in thousands | |||
(^) Foreign currency holdings - cost | $ | 1,337 | |
(x) Premiums received on options written | $ | 76 | |
(>) Investments in affiliates, U.S. Cash Management | $ | 73,380 | |
(•) Interest rate swap contracts - premiums paid (received) | $ | 316 | |
(8) Total return swap contracts - premiums paid (received) | $ | — | |
(a) Cash Collateral for Futures | $ | 4,569 | |
(b) Cash Collateral for Swaps | $ | 732 | |
(c) Cash Collateral for TBAs | $ | 747 | |
(d) Due to Broker for Futures | $ | 314 | |
(e) Due to Broker for Swaps | $ | 1,461 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 105
Russell Investment Funds
Core Bond Fund
Statement of Operations — For the Period Ended December 31, 2016
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 44 | |
Dividends from affiliated funds | 653 | ||
Interest | 19,946 | ||
Total investment income | 20,643 | ||
Expenses | |||
Advisory fees | 4,788 | ||
Administrative fees | 435 | ||
Custodian fees (1) | 284 | ||
Transfer agent fees | 38 | ||
Professional fees | 125 | ||
Trustees’ fees | 32 | ||
Printing fees | 113 | ||
Miscellaneous | 18 | ||
Expenses before reductions | 5,833 | ||
Expense reductions | (174 | ) | |
Net expenses | 5,659 | ||
Net investment income (loss) | 14,984 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 7,639 | ||
Futures contracts | 2,244 | ||
Options written | 319 | ||
Total return swap contracts | 3,557 | ||
Interest rate swap contracts | (856 | ) | |
Credit default swap contracts | 1,071 | ||
Foreign currency-related transactions | 391 | ||
Net realized gain (loss) | 14,365 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (1,933 | ) | |
Futures contracts | (1,572 | ) | |
Options written | (99 | ) | |
Total return swap contracts | 68 | ||
Interest rate swap contracts | 1,022 | ||
Credit default swap contracts | (96 | ) | |
Foreign currency-related transactions | 155 | ||
Net change in unrealized appreciation (depreciation) | (2,455 | ) | |
Net realized and unrealized gain (loss) | 11,910 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 26,894 |
(1) Includes a reimbursement for overbilling of custody out-of-pocket fees from prior years. See note 9 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
106 Core Bond Fund
Russell Investment Funds
Core Bond Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2016 | 2015 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 14,984 | $ | 12,917 | ||
Net realized gain (loss) | 14,365 | 10,476 | ||||
Net change in unrealized appreciation (depreciation) | (2,455 | ) | (24,618 | ) | ||
Net increase (decrease) in net assets from operations | 26,894 | (1,225 | ) | |||
Distributions | ||||||
From net investment income (loss) | (13,853 | ) | (20,648 | ) | ||
From net realized gain (loss) | (24,296 | ) | (9,978 | ) | ||
Net decrease in net assets from distributions | (38,149 | ) | (30,626 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | 6,068 | 48,302 | ||||
Total Net Increase (Decrease) in Net Assets | (5,187 | ) | 16,451 | |||
Net Assets | ||||||
Beginning of period | 855,909 | 839,458 | ||||
End of period | $ | 850,722 | $ | 855,909 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | (1,821 | ) | $ | 672 |
* Share transaction amounts (in thousands) for the periods ended December 31, 2016 and December 31, 2015 were as follows: | ||||||||||||
2016 | 2015 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 4,915 | $ | 52,175 | 6,871 | $ | 72,808 | ||||||
Proceeds from reinvestment of distributions | 3,722 | 38,149 | 2,929 | 30,626 | ||||||||
Payments for shares redeemed | (7,908 | ) | (84,256 | ) | (5,219 | ) | (55,132 | ) | ||||
Total increase (decrease) | 729 | $ | 6,068 | 4,581 | $ | 48,302 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 107
Russell Investment Funds
Core Bond Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | $ | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Net | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Investment | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | Income (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2016 | 10.27 | .18 | .14 | .32 | (.17 | ) | (.30 | ) | ||||||||
December 31, 2015 | 10.66 | .16 | (.17 | ) | (.01 | ) | (.26 | ) | (.12 | ) | ||||||
December 31, 2014 | 10.46 | .15 | .43 | .58 | (.17 | ) | (.21 | ) | ||||||||
December 31, 2013 | 10.81 | .18 | (.35 | ) | (.17 | ) | (.15 | ) | (.03 | ) | ||||||
December 31, 2012 | 10.47 | .25 | .61 | .86 | (.25 | ) | (.27 | ) | ||||||||
See accompanying notes which are an integral part of the financial statements.
108 Core Bond Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(d) | (000 | ) | Gross | Net(b) | Net Assets(b) | Turnover Rate | |||||||||
(.47 | ) | 10.12 | 3.10 | 850,722 | .67 | .65 | 1.72 | 262 | |||||||||
(.38 | ) | 10.27 | (.14 | ) | 855,909 | .67 | .64 | 1.49 | 225 | ||||||||
(.38 | ) | 10.66 | 5.55 | 839,458 | .69 | .64 | 1.44 | 173 | |||||||||
(.18 | ) | 10.46 | (1.55 | ) | 763,901 | .67 | .62 | 1.73 | 133 | ||||||||
(.52 | ) | 10.81 | 8.38 | 676,018 | .72 | .66 | 2.32 | 192 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 109
Russell Investment Funds
Core Bond Fund
Related Party Transactions, Fees and Expenses
Accrued fees payable to affiliates for the period ended December 31, 2016 were as follows: | ||
Advisory fees | $ | 378,781 |
Administration fees | 35,734 | |
Transfer agent fees | 3,145 | |
Trustee fees | 6,216 | |
$ | 423,876 |
Transactions (amounts in thousands) during the period ended December 31, 2016 with Underlying Funds which are, or were, an
affiliated company are as follows:
Fair Value, | Change in | ||||||||||||||||||
Beginning of | Realized Gain | Unrealized | Fair Value, End | Income | Capital Gains | ||||||||||||||
Period | Purchases | Sales | (Loss) | Gain (Loss) | of Period | Distributions | Distributions | ||||||||||||
U.S. Cash Management Fund | $ | 153,874 | $ | 1,169,294 | $ | 1,249,803 | $ | 9 | $ | 6 | $ | 73,380 | $ | 653 | $ | — | |||
$ | 153,874 | $ | 1,169,294 | $ | 1,249,803 | $ | 9 | $ | 6 | $ | 73,380 | $ | 653 | $ | — |
Federal Income Taxes
At December 31, 2016, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Cost of Investments | $ | 892,651,721 | ||
Unrealized Appreciation | $ | 5,903,043 | ||
Unrealized Depreciation | (22,204,369 | ) | ||
Net Unrealized Appreciation (Depreciation) | $ | (16,301,326 | ) | |
Undistributed Ordinary Income | $ | - | ||
Undistributed Long-Term Capital Gains | ||||
(Capital Loss Carryforward) | $ | 23,871,124 | ||
Tax Composition of Distributions | ||||
Ordinary Income | $ | 36,328,240 | ||
Long-Term Capital Gains | $ | 1,820,412 |
Net investment income and net realized gains (losses) in the financial statements may differ from taxable net investment income and
net realized gains (losses). Capital accounts within the financial statements are adjusted for permanent book-tax differences. Book-tax
differences are primarily due to foreign currency gains and losses, reclassifications of dividends, differences in treatment of income
from swaps, net operating losses, investments in partnerships, investments in passive foreign investment companies (PFICs), tax
straddle transaction, use of tax equalization and foreign capital gains taxes. These adjustments have no impact on the net assets. At
December 31, 2016, the Statement of Assets and Liabilities have been adjusted by the following amounts (in thousands):
Undistributed net investment income | $ | (3,624 | ) |
Accumulated net realized gain (loss) | 3,623 | ||
Additional paid-in capital | 1 |
As permitted by tax regulations, the Fund intends to defer a net realized capital loss of $9,671,983 and a late year ordinary loss of
$1,690,277 incurred from November 1, 2016 to December 31, 2016, and treat it as arising in the fiscal year 2017.
See accompanying notes which are an integral part of the financial statements.
110 Core Bond Fund
Russell Investment Funds
Global Real Estate Securities Fund
Portfolio Management Discussion and Analysis — December 31, 2016 (Unaudited)
Global Real Estate Securities Fund | Russell Developed Index (Net)*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 3.02 | % | 1 Year | 8.18 | % | ||
5 Years | 9.40 | %§ | 5 Years | 10.74 | %§ | ||
10 Years | 2.09 | %§ | 10 Years | 4.09 | %§ | ||
Global Real Estate Linked Benchmark**** | |||||||
FTSE EPRA/NAREIT Developed Real Estate Index (Net)** | Total | ||||||
Return | |||||||
Total | |||||||
Return | 1 Year | 4.06 | % | ||||
1 Year | 4.06 | % | 5 Years | 9.48 | %§ | ||
5 Years | 9.48 | %§ | 10 Years | 2.24 | %§ | ||
10 Years | 1.48 | %§ |
Global Real Estate Securities Fund 111
Russell Investment Funds
Global Real Estate Securities Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
The Global Real Estate Securities Fund (the “Fund”) employs | Pacific and Europe. The United Kingdom was the weakest major |
a multi-manager approach whereby portions of the Fund are | market, posting declines both in anticipation of and immediately |
allocated to different money manager strategies. Fund assets not | subsequent to the U.K. referendum on EU membership. With |
allocated to money managers are managed by Russell Investment | respect to property sectors, the more cyclical, economically |
Management, LLC (“RIM”), the Fund’s advisor. RIM may change | sensitive lodging and industrial sectors delivered the strongest |
the allocation of the Fund’s assets among money managers at | performance. The health care and self-storage sectors were among |
any time. An exemptive order from the Securities and Exchange | the weakest-performing property types in light of expectations of |
Commission (“SEC”) permits RIM to engage or terminate a money | decelerating growth. These trends in regional and property sector |
manager at any time, subject to approval by the Fund’s Board, | performance posed a headwind for Fund performance. Although |
without a shareholder vote. Pursuant to the terms of the exemptive | the portfolio benefited from a tilt toward property sectors |
order, the Fund is required to notify its shareholders within 90 | characterized by strong fundamental growth, overweight positions |
days of when a money manager begins providing services. As of | in the United Kingdom and the Asia-Pacific region negatively |
December 31, 2016, the Fund had three money managers. | impacted Fund performance. |
What is the Fund’s investment objective? | How did the investment strategies and techniques employed |
The Fund seeks to provide current income and long term capital | by the Fund and its money managers affect its benchmark- |
growth. | relative performance? |
How did the Fund perform relative to its benchmark for the | The Fund employs discretionary money managers. The Fund’s |
fiscal year ended December 31, 2016? | discretionary money managers select the individual portfolio |
securities for the assets assigned to them. Fund assets not | |
For the fiscal year ended December 31, 2016, the Fund gained | allocated to discretionary money managers include the Fund’s |
3.02%. This is compared to the Fund’s benchmark, the FTSE | liquidity reserves and assets which may be managed directly by |
EPRA/NAREIT Developed Real Estate Index (Net), which gained | RIM to effect the Fund’s investment strategies and/or to actively |
4.06% during the same period. The Fund’s performance includes | manage the Fund’s overall exposures by investing in securities or |
operating expenses, whereas index returns are unmanaged and do | other instruments that RIM believes will achieve the desired risk/ |
not include expenses of any kind. | return profile for the Fund. |
For the fiscal year ended December 31, 2016, the Morningstar® | With respect to certain of the Fund’s money managers, Cohen & |
Insurance Global Real Estate Category, a group of funds that | Steers Capital Management, Inc., Cohen & Steers UK Limited and |
Morningstar considers to have investment strategies similar to | Cohen & Steers Asia Limited (together, “Cohen”) underperformed |
those of the Fund, gained 1.99%. This result serves as a peer | the Fund’s benchmark for the fiscal year. Cohen seeks to generate |
comparison and is expressed net of operating expenses. | excess returns through a combination of fundamental bottom- |
How did the market conditions described in the Market | up stock selection and top-down regional and property type |
Summary report affect the Fund’s performance? | allocation decisions. Negative stock selection within Continental |
For the fiscal year ended December 31, 2016, the global listed | Europe and an overweight position to the U.K. detracted from |
property market, as measured by the FTSE EPRA/NAREIT | performance during the period. An underweight to Canada and |
Developed Real Estate Index (Net), delivered a positive 4.06% | the U.S. industrial and net lease sectors had a negative impact. |
return. The sector began the fiscal year with negative performance | Contributing to performance was property sector allocation |
through February amid ongoing concern over fundamental | within the U.S. Underweight positions in the self-storage and |
sensitivity to China and anticipation of the U.K.’s approaching | retail sectors and overweights to the office and residential sectors |
referendum on EU membership. This weakness was followed | were beneficial. An overweight to Hong Kong and positive stock |
by a period of positive performance between March and July, as | selection within Australia contributed positively to performance. |
long-term government bond yields reached record lows in several | Morgan Stanley Investment Management, Inc., Morgan |
major markets, driving continued investor demand for higher- | Stanley Investment Management Limited and Morgan Stanley |
yielding equity sectors. The listed property sector underwent a | Investment Management Company (together, “Morgan Stanley”) |
correction to end the fiscal period, as a sharp increase in the U.S. | underperformed the Fund’s benchmark during the fiscal year. |
10 year treasury yield overwhelmed generally positive real estate | Morgan Stanley’s process focuses on identifying listed property |
fundamental growth. | companies that trade at discounts relative to underlying asset |
Within the global property securities market, the North America | values. Property sector allocation detracted from fiscal year |
region registered positive returns finishing ahead of Asia- | performance, due to underweight positions in the U.S. industrial, |
data center and net lease sectors. Overweight positioning in the |
112 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
Japanese developer sector and a corresponding underweight | (operating under the brand name Deutsche Asset Management) | ||
to Japanese real estate investment trusts (“REITs”) also had a | which manages a more concentrated strategy. | ||
negative effect. On a positive note, effective stock selection | |||
within Continental Europe and the U.S. health care sector were | Money Managers as of December 31, | ||
beneficial. An underweight to U.S. self-storage and an overweight | 2016 | Styles | |
to the U.S. lodging sector had a positive impact. | Cohen & Steers Capital Management, Inc., | ||
Cohen & Steers UK Limited and Cohen & | |||
During the period, RIM continued to utilize a strategy to implement | Steers Asia Limited | Market-Oriented | |
regional and property sector tilting through the direct purchase of | Morgan Stanley Investment Management | ||
real estate stocks. Using the output from a quantitative model, | Inc., Morgan Stanley Investment | ||
the strategy seeks to position the portfolio to meet RIM’s overall | Management Limited and Morgan Stanley | ||
preferred positioning with respect to regional and property type | Investment Management Company | Value | |
exposures. The strategy underperformed relative to the Fund’s | RREEF America L.L.C., Deutsche | ||
Investments Australia Limited and Deutsche | |||
benchmark as a result of a zero weight in Japan REITs and an | Alternatives Asset Management (Global) | ||
overweight position in Japanese developers. In addition, an | Limited operating under the brand name | ||
underweight to the U.S. data centers and net lease sectors had a | Deutsche Asset Management | Market-Oriented | |
negative impact. An overweight to Hong Kong and the U.S. office | The views expressed in this report reflect those of the | ||
sector, as well as an underweight to the U.S. self-storage, were | portfolio managers only through the end of the period | ||
modestly beneficial during the period. | covered by the report. These views do not necessarily | ||
During the period, the Fund used index futures and swap contracts | represent the views of RIM or any other person in RIM or | ||
to equitize the Fund’s cash. The use of these derivatives had a | any other affiliated organization. These views are subject to | ||
modestly negative impact on performance. | change at any time based upon market conditions or other | ||
events, and RIM disclaims any responsibility to update the | |||
Describe any changes to the Fund’s structure or the money | views contained herein. These views should not be relied | ||
manager line-up. | on as investment advice and, because investment decisions | ||
In order to seek to improve the excess return potential of the Fund, | for a Russell Investment Funds (“RIF”) Fund are based on | ||
in September 2016, INVESCO Advisers, Inc. was replaced with | numerous factors, should not be relied on as an indication | ||
RREEF America L.L.C., Deutsche Investments Australia Limited | of investment decisions of any RIF Fund. | ||
and Deutsche Alternatives Asset Management (Global) Limited |
* Assumes initial investment on January 1, 2007.
** The FTSE EPRA/NAREIT Developed Index (Net) is an unmanaged market-weighted total return index, which consists of publicly traded equity REITs and
listed property companies from developed markets whose floats are larger than $100 million and derive more than half of their revenue from property-related
activities and is net of dividend withholding taxes.
*** The Russell Developed Index (Net) measures the performance of the investable securities in developed countries globally and is net of tax on dividends from
foreign holdings.
**** The Global Real Estate Linked Benchmark provides a means to compare the Fund’s average annual returns to a secondary benchmark that takes into account
historical changes in the Fund’s primary benchmark. The Global Real Estate Linked Benchmark represents the returns of the FTSE NAREIT Equity REIT
Index through September 30, 2010 and the returns of the FTSE EPRA/NAREIT Developed Real Estate Index (net) thereafter. The FTSE NAREIT Equity REIT
Index is an unmanaged, market-capitalization-weighted index of all publicly traded U.S. REITs that invest predominantly in the equity ownership of real estate,
excluding timber and infrastructure. The index is designed to reflect the performance of all U.S. publicly traded equity REITs as a whole.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results. Additionally, the returns presented herein may differ from the performance reported
in the Financial Highlights as the returns herein are calculated in a manner consistent with standardized performance in accordance with Securities and Exchange
Commission rules, while the performance in the Financial Highlights has been calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”).
Global Real Estate Securities Fund 113
Russell Investment Funds
Global Real Estate Securities Fund
Shareholder Expense Example — December 31, 2016 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2016 to December 31, 2016. | July 1, 2016 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2016 | $ | 965.20 | $ | 1,020.41 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 4.64 | $ | 4.77 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.94% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/366 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | |||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
114 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||||
Principal | Fair | Principal | Fair | ||||||||
Amount ($) | Value | Amount ($) | Value | ||||||||
or Shares | $ | or Shares | $ | ||||||||
Common Stocks - 95.9% | alstria office REIT-AG(Æ)(ö) | 337,337 | 4,232 | ||||||||
Australia - 5.9% | Deutsche EuroShop AG | 4,184 | 170 | ||||||||
BGP Holdings PLC(Æ)(Å) | 926,311 | 51 | Deutsche Wohnen AG | 321,591 | 10,085 | ||||||
Dexus Property Group(Æ)(ö) | 1,041,574 | 7,251 | LEG Immobilien AG(Æ) | 27,964 | 2,170 | ||||||
Goodman Group(ö) | 441,544 | 2,278 | TLG Immobilien AG | 119,557 | 2,249 | ||||||
GPT Group (The)(ö) | 658,505 | 2,388 | Vonovia SE | 118,861 | 3,871 | ||||||
Investa Office Fund(ö) | 371,035 | 1,265 | 24,722 | ||||||||
Mirvac Group(ö) | 2,606,087 | 4,000 | |||||||||
Scentre Group(ö) | 3,900,021 | 13,091 | Hong Kong - 7.1% | ||||||||
Shopping Centres Australasia Property | Cheung Kong Property Holdings, Ltd. | 1,967,000 | 11,929 | ||||||||
Group(ö) | 97,618 | 156 | Hang Lung Properties, Ltd. - ADR | 1,831,000 | 3,834 | ||||||
Stockland(ö) | 443,817 | 1,465 | Henderson Land Development Co., Ltd. | 259,904 | 1,372 | ||||||
Vicinity Centres(ö) | 3,202,673 | 6,927 | Hongkong Land Holdings, Ltd. | 759,800 | 4,795 | ||||||
Viva Energy REIT(ö) | 627,226 | 1,088 | Hysan Development Co., Ltd. | 917,000 | 3,780 | ||||||
Westfield Corp.(ö) | 1,077,640 | 7,314 | Kerry Properties, Ltd. | 326,500 | 880 | ||||||
47,274 | Link REIT(ö) | 1,203,500 | 7,771 | ||||||||
New World Development Co., Ltd. | 1,096,155 | 1,149 | |||||||||
Austria - 0.6% | Sino Land Co., Ltd. | 1,500,000 | 2,220 | ||||||||
Atrium European Real Estate, Ltd.(Æ) | 54,641 | 226 | Sun Hung Kai Properties, Ltd. | 954,125 | 11,946 | ||||||
Buwog AG(Æ) | 207,702 | 4,831 | Swire Properties, Ltd. | 1,794,868 | 4,919 | ||||||
5,057 | Wharf Holdings, Ltd. (The) | 347,810 | 2,285 | ||||||||
56,880 | |||||||||||
Brazil - 0.0% | |||||||||||
BR Properties SA(Æ) | 10,845 | 25 | Ireland - 0.3% | ||||||||
Green REIT PLC(ö) | 490,699 | 708 | |||||||||
Canada - 1.8% | Hibernia REIT PLC(ö) | 1,554,425 | 2,020 | ||||||||
Allied Properties Real Estate Investment | 2,728 | ||||||||||
Trust(ö) | 124,097 | 3,323 | |||||||||
Boardwalk Real Estate Investment | Italy - 0.0% | ||||||||||
Trust(Ñ)(ö) | 26,472 | 959 | Beni Stabili SpA SIIQ(Æ)(ö) | 238,514 | 136 | ||||||
Brookfield Canada Office Properties(ö) | 27,175 | 530 | |||||||||
Chartwell Retirement Residences | 237,880 | 2,597 | Japan - 10.8% | ||||||||
Crombie Real Estate Investment Trust(ö) | 38,930 | 394 | Activia Properties, Inc.(ö) | 740 | 3,488 | ||||||
Dream Office Real Estate Investment | Advance Residence Investment Corp.(ö) | 941 | 2,488 | ||||||||
Trust(ö) | 23,103 | 336 | Daiwa Office Investment Corp.(ö) | 78 | 393 | ||||||
First Capital Realty, Inc. Class A | 186,097 | 2,865 | Frontier Real Estate Investment Corp.(ö) | 420 | 1,794 | ||||||
H&R Real Estate Investment Trust(ö) | 7,505 | 125 | Global One Real Estate Investment(ö) | 431 | 1,614 | ||||||
RioCan Real Estate Investment Trust(ö) | 88,188 | 1,749 | GLP J-REITt(ö) | 550 | 634 | ||||||
Smart Real Estate Investment Trust(ö) | 67,287 | 1,618 | Hulic Co., Ltd. | 61,200 | 543 | ||||||
14,496 | Hulic REIT, Inc.(ö) | 1,150 | 1,928 | ||||||||
Industrial & Infrastructure Fund | |||||||||||
China - 0.1% | Investment Corp.(ö) | 7 | 33 | ||||||||
China Overseas Land & Investment, Ltd. | 150,000 | 396 | Invincible Investment Corp.(ö) | 1,667 | 748 | ||||||
China Resources Land, Ltd. | 44,000 | 99 | Japan Hotel REIT Investment Corp.(ö) | 472 | 317 | ||||||
495 | Japan Logistics Fund, Inc.(ö) | 807 | 1,700 | ||||||||
Japan Real Estate Investment Corp.(ö) | 797 | 4,347 | |||||||||
Finland - 0.1% | Japan Rental Housing Investments, Inc. | ||||||||||
Citycon OYJ(Æ) | 349,048 | 859 | (ö) | 198 | 133 | ||||||
Japan Retail Fund Investment Corp.(ö) | 1,818 | 3,682 | |||||||||
France - 3.6% | Kenedix Office Investment Corp. Class | ||||||||||
Fonciere Des Regions(ö) | 6,131 | 535 | A(ö) | 417 | 2,395 | ||||||
Gecina SA(ö) | 46,226 | 6,392 | Mitsubishi Estate Co., Ltd. | 763,000 | 15,125 | ||||||
Icad, Inc.(ö) | 20,578 | 1,469 | Mitsui Fudosan Co., Ltd. | 879,129 | 20,287 | ||||||
Klepierre - GDR(ö) | 345,531 | 13,569 | Mori Hills REIT Investment Corp. Class | ||||||||
Mercialys SA(ö) | 9,988 | 203 | A(ö) | 1,715 | 2,319 | ||||||
Unibail-Rodamco SE(ö) | 28,033 | 6,687 | Mori Trust Sogo REIT, Inc.(ö) | 1,597 | 2,523 | ||||||
28,855 | Nippon Building Fund, Inc.(ö) | 710 | 3,934 | ||||||||
Nippon Prologis REIT, Inc.(ö) | 272 | 556 | |||||||||
Germany - 3.1% | Nomura Real Estate Master Fund, Inc. | ||||||||||
ADO Properties SA(Þ) | 57,802 | 1,945 | (Æ)(ö) | 1,930 | 2,919 |
Global Real Estate Securities Fund 115
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | ||||||||
Principal | Fair | Principal | Fair | ||||||
Amount ($) | Value | Amount ($) | Value | ||||||
or Shares | $ | or Shares | $ | ||||||
NTT Urban Development Corp. | 252,700 | 2,218 | Wihlborgs Fastigheter AB | 6,117 | 114 | ||||
Orix JREIT, Inc.(ö) | 371 | 585 | 6,887 | ||||||
Sekisui House REIT, Inc.(ö) | 311 | 398 | |||||||
Sumitomo Realty & Development Co., | Switzerland - 0.4% | ||||||||
Ltd. | 126,000 | 3,338 | PSP Swiss Property AG | 32,187 | 2,781 | ||||
Tokyo Tatemono Co., Ltd. | 350,200 | 4,673 | Swiss Prime Site AG Class A(Æ) | 6,192 | 507 | ||||
Tokyu REIT, Inc.(ö) | 45 | 57 | 3,288 | ||||||
United Urban Investment Corp.(ö) | 736 | 1,120 | |||||||
86,289 | United Kingdom - 5.4% | ||||||||
Assura PLC(ö) | 2,493,054 | 1,759 | |||||||
Netherlands - 0.4% | Big Yellow Group PLC(ö) | 339,723 | 2,883 | ||||||
Eurocommercial Properties NV | 23,825 | 917 | British Land Co. PLC (The)(ö) | 893,459 | 6,923 | ||||
InterXion Holding NV(Æ) | 40,385 | 1,416 | Capital & Regional PLC(ö) | 295,656 | 200 | ||||
NSI NV(ö) | 110,586 | 417 | Derwent London PLC(ö) | 59,768 | 2,040 | ||||
Vastned Retail NV(ö) | 6,525 | 253 | Great Portland Estates PLC(ö) | 444,822 | 3,658 | ||||
Wereldhave NV(ö) | 13,465 | 606 | Hammerson PLC(ö) | 399,349 | 2,814 | ||||
3,609 | Helical PLC | 7,379 | 27 | ||||||
Intu Properties PLC Class H(ö) | 206,088 | 716 | |||||||
Norway - 0.2% | Kennedy Wilson Europe Real Estate | ||||||||
Entra ASA(Þ) | 184,752 | 1,835 | PLC | 26,802 | 317 | ||||
Norwegian Property ASA | 88,880 | 103 | Land Securities Group PLC(ö) | 341,160 | 4,505 | ||||
1,938 | LondonMetric Property PLC(ö) | 1,504,831 | 2,874 | ||||||
LXB Retail Properties PLC(Æ) | 353,168 | 160 | |||||||
Singapore - 1.4% | Segro PLC(ö) | 1,348,888 | 7,634 | ||||||
Ascendas Real Estate Investment | Shaftesbury PLC(ö) | 4,154 | 46 | ||||||
Trust(ö) | 430,700 | 673 | St. Modwen Properties PLC | 350,854 | 1,314 | ||||
CapitaLand Commercial Trust, Ltd.(Æ) | UNITE Group PLC (The)(ö) | 550,116 | 4,112 | ||||||
(ö) | 436,300 | 443 | Urban & Civic PLC | 193,186 | 537 | ||||
CapitaLand Mall Trust Class A(Æ)(ö) | 1,191,200 | 1,544 | Workspace Group PLC(ö) | 52,873 | 515 | ||||
CapitaLand, Ltd. | 526,000 | 1,092 | 43,034 | ||||||
CDL Hospitality Trusts(Æ)(ö) | 190,200 | 176 | |||||||
City Developments, Ltd. | 380,700 | 2,168 | United States - 53.2% | ||||||
EC World Real Estate Investment Trust | Acadia Realty Trust(ö) | 14,496 | 474 | ||||||
Unit(Æ)(ö) | 105,600 | 51 | Agree Realty Corp.(ö) | 45,404 | 2,091 | ||||
Frasers Logistics & Industrial Trust(Æ) | Alexandria Real Estate Equities, Inc.(ö) | 101,003 | 11,225 | ||||||
(ö) | 1,847,300 | 1,178 | American Homes 4 Rent Class A(ö) | 287,296 | 6,028 | ||||
Global Logistic Properties, Ltd. | 1,368,700 | 2,074 | Apartment Investment & Management | ||||||
Keppel REIT(Æ)(ö) | 564,700 | 398 | Co. Class A(ö) | 176,607 | 8,027 | ||||
Mapletree Commercial Trust(Æ)(ö) | 287,000 | 276 | Apple Hospitality REIT, Inc.(ö) | 63,030 | 1,259 | ||||
Mapletree Logistics Trust(Æ)(ö) | 194,094 | 137 | AvalonBay Communities, Inc.(ö) | 93,228 | 16,515 | ||||
Suntec Real Estate Investment Trust(Æ) | Boston Properties, Inc.(ö) | 66,932 | 8,419 | ||||||
(ö) | 302,500 | 343 | Brixmor Property Group, Inc.(ö) | 401,129 | 9,795 | ||||
UOL Group, Ltd. | 114,500 | 472 | Camden Property Trust(ö) | 72,560 | 6,100 | ||||
11,025 | CBL & Associates Properties, Inc.(ö) | 16,817 | 193 | ||||||
Chesapeake Lodging Trust(ö) | 32,334 | 837 | |||||||
Spain - 0.6% | Columbia Property Trust, Inc.(ö) | 30,583 | 661 | ||||||
Hispania Activos Inmobiliarios Socimi | CoreSite Realty Corp. Class A(ö) | 38,843 | 3,083 | ||||||
SA(ö) | 117,981 | 1,389 | Corporate Office Properties Trust(ö) | 143,110 | 4,467 | ||||
Inmobiliaria Colonial SA | 85,106 | 590 | Cousins Properties, Inc.(ö) | 555,051 | 4,723 | ||||
Merlin Properties Socimi SA(ö) | 285,448 | 3,110 | Crown Castle International Corp.(ö) | 2,170 | 188 | ||||
5,089 | CubeSmart(ö) | 186,450 | 4,991 | ||||||
DDR Corp.(ö) | 59,801 | 913 | |||||||
Sweden - 0.9% | DiamondRock Hospitality Co.(ö) | 228,351 | 2,633 | ||||||
Atrium Ljungberg AB Class B | 24,174 | 377 | Digital Realty Trust, Inc.(ö) | 40,530 | 3,982 | ||||
Castellum AB | 56,483 | 774 | Douglas Emmett, Inc.(ö) | 152,930 | 5,592 | ||||
Fabege AB | 100,074 | 1,633 | Duke Realty Corp.(ö) | 73,788 | 1,959 | ||||
Fastighets AB Balder Class B(Æ) | 79,702 | 1,609 | DuPont Fabros Technology, Inc.(ö) | 90,135 | 3,960 | ||||
Hufvudstaden AB Class A | 150,969 | 2,380 | Education Realty Trust, Inc.(ö) | 120,416 | 5,094 |
See accompanying notes which are an integral part of the financial statements.
116 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2016
Amounts in thousands (except share amounts) | Amounts in thousands (except share amounts) | |||||||||
Principal | Fair | Principal | Fair | |||||||
Amount ($) | Value | Amount ($) | Value | |||||||
�� | or Shares | $ | or Shares | $ | ||||||
Empire State Realty Trust, Inc. Class | Urban Edge Properties(ö) | 120,698 | 3,320 | |||||||
A(ö) | 222,016 | 4,483 | Ventas, Inc.(ö) | 78,939 | 4,935 | |||||
Equity LifeStyle Properties, Inc. Class | VEREIT, Inc.(ö) | 409,417 | 3,464 | |||||||
A(ö) | 46,249 | 3,334 | Vornado Realty Trust(ö) | 246,438 | 25,721 | |||||
Equity One, Inc.(ö) | 45,728 | 1,404 | Washington Prime Group, Inc.(ö) | 34,501 | 360 | |||||
Equity Residential(ö) | 192,150 | 12,367 | Weingarten Realty Investors(ö) | 86,414 | 3,093 | |||||
Essex Property Trust, Inc.(ö) | 66,920 | 15,559 | Welltower, Inc.(ö) | 178,761 | 11,965 | |||||
Extra Space Storage, Inc.(ö) | 60,377 | 4,663 | Xenia Hotels & Resorts, Inc.(ö) | 36,204 | 703 | |||||
Federal Realty Investment Trust(ö) | 9,142 | 1,300 | 425,843 | |||||||
Four Corners Property Trust, Inc.(ö) | 84,001 | 1,724 | ||||||||
Gaming and Leisure Properties, Inc.(ö) | 72,999 | 2,235 | Total Common Stocks | |||||||
General Growth Properties, Inc.(ö) | 415,387 | 10,376 | (cost $702,634) | 768,529 | ||||||
HCP, Inc.(ö) | 373,288 | 11,095 | ||||||||
Healthcare Realty Trust, Inc.(ö) | 38,842 | 1,178 | ||||||||
Healthcare Trust of America, Inc. Class | Short-Term Investments - 3.4% | |||||||||
A(ö) | 120,206 | 3,499 | United States - 3.4% | |||||||
Hilton Worldwide Holdings, Inc. | 264,227 | 7,187 | U.S. Cash Management Fund | 26,919,662 | (8) | 26,925 | ||||
Host Hotels & Resorts, Inc.(ö) | 256,007 | 4,823 | Total Short-Term Investments | |||||||
Hudson Pacific Properties, Inc.(ö) | 212,108 | 7,378 | (cost $26,924) | 26,925 | ||||||
Kilroy Realty Corp.(ö) | 48,124 | 3,524 | ||||||||
Kimco Realty Corp.(ö) | 83,176 | 2,092 | Other Securities - 0.1% | |||||||
LaSalle Hotel Properties(ö) | 162,499 | 4,951 | U.S. Cash Collateral Fund(×) | 931,050 | (8) | 931 | ||||
Liberty Property Trust(ö) | 25,263 | 998 | Total Other Securities | |||||||
Life Storage, Inc.(Æ) | 23,322 | 1,989 | (cost $931) | 931 | ||||||
Macerich Co. (The)(ö) | 12,003 | 851 | ||||||||
Mack-Cali Realty Corp.(ö) | 13,796 | 400 | ||||||||
MedEquities Realty Trust, Inc.(ö) | 18,624 | 207 | Total Investments 99.4% | |||||||
Medical Properties Trust, Inc.(ö) | 98,041 | 1,206 | (identified cost $730,489) | 796,385 | ||||||
Mid-America Apartment Communities, | ||||||||||
Inc.(ö) | 61,239 | 5,996 | Other Assets and Liabilities, Net | |||||||
Monogram Residential Trust, Inc.(ö) | 12,785 | 139 | - 0.6% | 4,433 | ||||||
National Retail Properties, Inc.(ö) | 45,617 | 2,016 | Net Assets - 100.0% | 800,818 | ||||||
Omega Healthcare Investors, Inc.(ö) | 7,514 | 235 | ||||||||
Paramount Group, Inc.(ö) | 102,386 | 1,637 | ||||||||
Parkway, Inc.(Æ)(ö) | 31,290 | 696 | ||||||||
Pebblebrook Hotel Trust(ö) | 83,197 | 2,475 | ||||||||
Pennsylvania Real Estate Investment | ||||||||||
Trust(ö) | 79,963 | 1,516 | ||||||||
Piedmont Office Realty Trust, Inc. Class | ||||||||||
A(ö) | 9,718 | 203 | ||||||||
Prologis, Inc.(ö) | 383,100 | 20,224 | ||||||||
Public Storage(ö) | 61,189 | 13,676 | ||||||||
QTS Realty Trust, Inc. Class A(ö) | 66,549 | 3,305 | ||||||||
Quality Care Properties, Inc.(Æ)(ö) | 56,158 | 870 | ||||||||
Red Rock Resorts, Inc. Class A | 56,560 | 1,311 | ||||||||
Regency Centers Corp.(ö) | 65,411 | 4,510 | ||||||||
Retail Properties of America, Inc. Class | ||||||||||
A(ö) | 240,331 | 3,684 | ||||||||
Rexford Industrial Realty, Inc.(ö) | 209,563 | 4,860 | ||||||||
Senior Housing Properties Trust(ö) | 52,299 | 990 | ||||||||
Simon Property Group, Inc.(ö) | 244,656 | 43,466 | ||||||||
SL Green Realty Corp.(ö) | 59,405 | 6,389 | ||||||||
Spirit Realty Capital, Inc.(ö) | 764,747 | 8,305 | ||||||||
STORE Capital Corp.(ö) | 32,858 | 812 | ||||||||
Sun Communities, Inc.(ö) | 76,349 | 5,849 | ||||||||
Sunstone Hotel Investors, Inc.(ö) | 296,908 | 4,528 | ||||||||
Tanger Factory Outlet Centers, Inc.(ö) | 141,710 | 5,070 | ||||||||
Taubman Centers, Inc.(ö) | 12,528 | 926 | ||||||||
UDR, Inc.(ö) | 179,883 | 6,562 |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 117
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2016
Restricted Securities | ||||||||||||
Amounts in thousands (except share and cost per unit amounts) | ||||||||||||
Principal | Cost per | Cost | Fair Value | |||||||||
% of Net Assets | Acquisition | Amount ($) | Unit | (000 | ) | (000 | ) | |||||
Securities | Date | or shares | $ | $ | $ | |||||||
0.0% | ||||||||||||
BGP Holdings PLC | 08/06/09 | EUR | 926,311 | — | — | 51 | ||||||
51 | ||||||||||||
For a description of restricted securities see note 7 in the Notes to Financial Statements. |
Futures Contracts | ||||||
Amounts in thousands (except contract amounts) | ||||||
Unrealized | ||||||
Appreciation | ||||||
Number of | Notional | Expiration | (Depreciation) | |||
Contracts | Amount | Date | $ | |||
Long Positions | ||||||
Dow Jones U.S. Real Estate Index Futures | 389 | USD | 11,849 | 03/17 | 120 | |
FTSE/EPRA Europe Index Futures | 436 | EUR | 8,910 | 03/17 | 201 | |
Hang Seng Index Futures | 13 | HKD | 14,275 | 01/17 | 33 | |
MSCI Singapore Index Futures | 25 | SGD | 800 | 01/17 | 2 | |
S&P/TSX 60 Index Futures | 5 | CAD | 897 | 03/17 | — | |
SPI 200 Index Futures | 13 | AUD | 1,830 | 03/17 | 31 | |
TOPIX Index Futures | 20 | JPY | 303,600 | 03/17 | 45 | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 432 |
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
Brown Brothers Harriman | USD | 39 | CAD | 53 | 01/03/17 | — | ||
Brown Brothers Harriman | USD | 25 | CAD | 34 | 01/05/17 | — | ||
Brown Brothers Harriman | USD | 37 | HKD | 289 | 01/03/17 | — | ||
Brown Brothers Harriman | USD | 106 | HKD | 821 | 01/04/17 | — | ||
Brown Brothers Harriman | CAD | 56 | USD | 41 | 01/03/17 | — | ||
Brown Brothers Harriman | CAD | 34 | USD | 26 | 01/05/17 | — | ||
Brown Brothers Harriman | EUR | 10 | USD | 10 | 01/03/17 | — | ||
Brown Brothers Harriman | HKD | 757 | USD | 98 | 01/03/17 | — | ||
Brown Brothers Harriman | HKD | 1,284 | USD | 166 | 01/04/17 | — | ||
Citigroup | USD | 577 | AUD | 777 | 03/15/17 | (17 | ) | |
Citigroup | USD | 236 | CAD | 313 | 03/15/17 | (2 | ) | |
Citigroup | USD | 4,541 | EUR | 4,210 | 03/15/17 | (94 | ) | |
Citigroup | USD | 767 | HKD | 5,947 | 03/15/17 | — | ||
Citigroup | USD | 917 | JPY | 103,949 | 03/15/17 | (25 | ) | |
Citigroup | USD | 217 | SGD | 308 | 03/15/17 | (5 | ) | |
Goldman Sachs | USD | 74 | AUD | 100 | 03/15/17 | (2 | ) | |
Goldman Sachs | USD | 76 | CAD | 100 | 03/15/17 | (1 | ) | |
Goldman Sachs | USD | 746 | EUR | 700 | 03/15/17 | (7 | ) | |
Goldman Sachs | USD | 264 | JPY | 30,000 | 03/15/17 | (7 | ) | |
HSBC | USD | 578 | AUD | 777 | 03/15/17 | (18 | ) | |
HSBC | USD | 236 | CAD | 313 | 03/15/17 | (2 | ) | |
HSBC | USD | 4,541 | EUR | 4,210 | 03/15/17 | (94 | ) | |
HSBC | USD | 767 | HKD | 5,947 | 03/15/17 | — | ||
HSBC | USD | 917 | JPY | 103,949 | 03/15/17 | (25 | ) | |
HSBC | USD | 217 | SGD | 308 | 03/15/17 | (5 | ) | |
Royal Bank of Canada | USD | 86 | AUD | 120 | 03/15/17 | — | ||
Royal Bank of Canada | USD | 149 | AUD | 200 | 03/15/17 | (5 | ) |
See accompanying notes which are an integral part of the financial statements.
118 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
Royal Bank of Canada | USD | 42 | CAD | 57 | 01/04/17 | — | ||
Royal Bank of Canada | USD | 56 | CAD | 75 | 03/15/17 | — | ||
Royal Bank of Canada | USD | 76 | CAD | 100 | 03/15/17 | (1 | ) | |
Royal Bank of Canada | USD | 636 | EUR | 600 | 03/15/17 | (2 | ) | |
Royal Bank of Canada | USD | 842 | EUR | 800 | 03/15/17 | 4 | ||
Royal Bank of Canada | USD | 29 | GBP | 23 | 01/03/17 | — | ||
Royal Bank of Canada | USD | 129 | HKD | 1,000 | 03/15/17 | — | ||
Royal Bank of Canada | USD | 129 | HKD | 1,000 | 03/15/17 | — | ||
Royal Bank of Canada | USD | 172 | JPY | 20,000 | 03/15/17 | — | ||
Royal Bank of Canada | USD | 174 | JPY | 20,000 | 03/15/17 | (3 | ) | |
Royal Bank of Canada | USD | 70 | SGD | 100 | 03/15/17 | (1 | ) | |
Royal Bank of Canada | CAD | 54 | USD | 40 | 01/04/17 | — | ||
State Street | AUD | 150 | USD | 108 | 03/15/17 | (1 | ) | |
State Street | CAD | 75 | USD | 55 | 03/15/17 | (1 | ) | |
State Street | EUR | 14 | USD | 14 | 01/03/17 | — | ||
State Street | EUR | 900 | USD | 945 | 03/15/17 | (5 | ) | |
State Street | JPY | 15,000 | USD | 128 | 03/15/17 | (1 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | (320 | ) |
Presentation of Portfolio Holdings | |||||||||||||||||
Amounts in thousands | |||||||||||||||||
Fair Value | |||||||||||||||||
Practical | |||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | |||||||||||
Common Stocks | |||||||||||||||||
Australia | $ | — | $ | 47,223 | $ | 51 | $ | — | $ | 47,274 | 5.9 | ||||||
Austria | — | 5,057 | — | — | 5,057 | 0.6 | |||||||||||
Brazil | — | 25 | — | — | 25 | —* | |||||||||||
Canada | 14,496 | — | — | — | 14,496 | 1.8 | |||||||||||
China | — | 495 | — | — | 495 | 0.1 | |||||||||||
Finland | — | 859 | — | — | 859 | 0.1 | |||||||||||
France | 3,907 | 24,948 | — | — | 28,855 | 3.6 | |||||||||||
Germany | — | 24,722 | — | — | 24,722 | 3.1 | |||||||||||
Hong Kong | — | 56,880 | — | — | 56,880 | 7.1 | |||||||||||
Ireland | — | 2,728 | — | — | 2,728 | 0.3 | |||||||||||
Italy | — | 136 | — | — | 136 | —* | |||||||||||
Japan | — | 86,289 | — | — | 86,289 | 10.8 | |||||||||||
Netherlands | 1,416 | 2,193 | — | — | 3,609 | 0.4 | |||||||||||
Norway | — | 1,938 | — | — | 1,938 | 0.2 | |||||||||||
Singapore | 51 | 10,974 | — | — | 11,025 | 1.4 | |||||||||||
Spain | — | 5,089 | — | — | 5,089 | 0.6 | |||||||||||
Sweden | — | 6,887 | — | — | 6,887 | 0.9 | |||||||||||
Switzerland | — | 3,288 | — | — | 3,288 | 0.4 | |||||||||||
United Kingdom | — | 43,034 | — | — | 43,034 | 5.4 | |||||||||||
United States | 425,843 | — | — | — | 425,843 | 53.2 |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 119
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — December 31, 2016
Presentation of Portfolio Holdings | ||||||||||||||||||
Amounts in thousands | ||||||||||||||||||
Fair Value | ||||||||||||||||||
Practical | ||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | ||||||||||||
Short-Term Investments | — | — | — | 26,925 | 26,925 | 3.4 | ||||||||||||
Other Securities | — | — | — | 931 | 931 | 0.1 | ||||||||||||
Total Investments | 445,713 | 322,765 | 51 | 27,856 | 796,385 | 99.4 | ||||||||||||
Other Assets and Liabilities, Net | 0.6 | |||||||||||||||||
100.0 | ||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||
Assets | ||||||||||||||||||
Futures Contracts | 432 | — | — | — | 432 | 0.1 | ||||||||||||
Foreign Currency Exchange Contracts | — | 4 | — | — | 4 | —* | ||||||||||||
Liabilities | ||||||||||||||||||
Foreign Currency Exchange Contracts | — | (324 | ) | — | — | (324 | ) | (—)* | ||||||||||
Total Other Financial Instruments** | $ | 432 | $ | (320 | ) | $ | — | $ | — | $ | 112 |
* Less than 0.05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the investments.
(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified
in the fair value levels. The fair value amounts presented in the table are intended to permit reconciliation to the amounts presented in the Schedule of
Investments.
For a description of the Levels, see note 2 in the Notes to Financial Statements.
For a disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2016, see note 2 in the Notes to
Financial Statements.
Investments in which significant unobservable inputs (Level 3) were used in determining a fair value for the period ended
December 31, 2016, were less than 1% of net assets.
Amounts in thousands | |||
Fair Value | |||
Property Sector Exposure | $ | ||
Diversified | 217,894 | ||
Healthcare | 40,536 | ||
Industrial | 44,938 | ||
Lodging/Resorts | 30,637 | ||
Office | 113,809 | ||
Residential | 118,547 | ||
Retail | 173,966 | ||
Self Storage | 28,202 | ||
Short-Term Investments | 26,925 | ||
Other Securities | 931 | ||
Total Investments | 796,385 |
See accompanying notes which are an integral part of the financial statements.
120 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Fair Value of Derivative Instruments — December 31, 2016
Amounts in thousands
Foreign | |||||||
Equity | Currency | ||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | |||||
Location: Statement of Assets and Liabilities - Assets | |||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | 4 | |||
Variation margin on futures contracts* | 432 | — | |||||
Total | $ | 432 | $ | 4 | |||
Location: Statement of Assets and Liabilities - Liabilities | |||||||
Unrealized depreciation on foreign currency exchange contracts | $ | — | $ | 324 | |||
Total | $ | — | $ | 324 | |||
Foreign | |||||||
Equity | Currency | ||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | |||||
Location: Statement of Operations - Net realized gain (loss) | |||||||
Futures contracts | $ | (496 | ) | $ | — | ||
Foreign currency-related transactions** | — | (225 | ) | ||||
Total | $ | (496 | ) | $ | (225 | ) | |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | |||||||
Futures contracts | $ | (2 | ) | $ | — | ||
Foreign currency-related transactions*** | — | (335 | ) | ||||
Total | $ | (2 | ) | $ | (335 | ) |
* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
*** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 121
Russell Investment Funds
Global Real Estate Securities Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Assets | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||
Securities on Loan* | Investments, at fair value | $ | 906 | $ | — | $ | 906 | ||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 4 | — | 4 | |||||
Futures Contracts | Variation margin on futures contracts | 246 | — | 246 | |||||
Total Financial and Derivative Assets | 1,156 | — | 1,156 | ||||||
Financial and Derivative Assets not subject to a netting agreement | (246) | — | (246 | ) | |||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 910 | $ | — | $ | 910 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||||
Gross Amounts Not Offset in | |||||||||||
the Statement of Assets and | |||||||||||
Liabilities | |||||||||||
Net Amounts | |||||||||||
of Assets | |||||||||||
Presented in | |||||||||||
the Statement | Financial and | ||||||||||
of Assets and | Derivative | Collateral | |||||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||||
Citigroup | 725 | $ | — | $ | 725 | $ | — | ||||
Goldman Sachs | 181 | — | 181 | — | |||||||
Royal Bank of Canada | 4 | 4 | — | — | |||||||
Total | $ | 910 | $ | 4 | $ | 906 | $ | — |
See accompanying notes which are an integral part of the financial statements.
122 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 19 | $ | — | $ | 19 | ||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 324 | — | 324 | |||||
Total Financial and Derivative Liabilities | 343 | — | 343 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (19) | — | (19 | ) | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 324 | $ | — | $ | 324 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | |||||||||||
Gross Amounts Not Offset in | |||||||||||
the Statement of Assets and | |||||||||||
Liabilities | |||||||||||
Net Amounts | |||||||||||
of Liabilities | |||||||||||
Presented in | |||||||||||
the Statement | Financial and | ||||||||||
of Assets and | Derivative | Collateral | |||||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | |||||||
Citigroup | 143 | $ | — | $ | — | $ | 143 | ||||
Goldman Sachs | 17 | — | — | 17 | |||||||
HSBC | 144 | — | — | 144 | |||||||
Royal Bank of Canada | 12 | 4 | — | 8 | |||||||
State Street | 8 | — | — | 8 | |||||||
Total | $ | 324 | $ | 4 | $ | — | $ | 320 |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 123
Russell Investment Funds
Global Real Estate Securities Fund
Statement of Assets and Liabilities — December 31, 2016
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 730,489 |
Investments, at fair value(*)(>) | 796,385 | |
Cash (restricted)(a) | 1,870 | |
Foreign currency holdings(^) | 1,079 | |
Unrealized appreciation on foreign currency exchange contracts | 4 | |
Receivables: | ||
Dividends and interest | 2,996 | |
Dividends from affiliated funds | 15 | |
Investments sold | 2,235 | |
Fund shares sold | 21 | |
Foreign capital gains taxes recoverable | 100 | |
Variation margin on futures contracts | 246 | |
Total assets | 804,951 | |
Liabilities | ||
Payables: | ||
Due to custodian | 6 | |
Investments purchased | 2,117 | |
Fund shares redeemed | 20 | |
Accrued fees to affiliates | 573 | |
Other accrued expenses | 143 | |
Variation margin on futures contracts | 19 | |
Unrealized depreciation on foreign currency exchange contracts | 324 | |
Payable upon return of securities loaned | 931 | |
Total liabilities | 4,133 | |
Net Assets | $ | 800,818 |
See accompanying notes which are an integral part of the financial statements.
124 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Statement of Assets and Liabilities, continued — December 31, 2016
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | (12,213 | ) |
Accumulated net realized gain (loss) | (17,962 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 65,896 | ||
Futures contracts | 432 | ||
Foreign currency-related transactions | (382 | ) | |
Shares of beneficial interest | 572 | ||
Additional paid-in capital | 764,475 | ||
Net Assets | $ | 800,818 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 14.00 | |
Net assets | $ | 800,818,023 | |
Shares outstanding ($.01 par value) | 57,183,460 | ||
Amounts in thousands | |||
(^) Foreign currency holdings - cost | $ | 1,103 | |
(*) Securities on loan included in investments | $ | 906 | |
(>) Investments in affiliates, U.S. Cash Management Fund and U.S. Cash Collateral Fund | $ | 27,856 | |
(a) Cash Collateral for Futures | $ | 1,870 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 125
Russell Investment Funds
Global Real Estate Securities Fund
Statement of Operations — For the Period Ended December 31, 2016
Amounts in thousands | |||
Investment Income | |||
Dividends | $ | 24,646 | |
Dividends from affiliated funds | 111 | ||
Securities lending income (net) | 33 | ||
Securities lending income from affiliated funds (net) | 27 | ||
Less foreign taxes withheld | (1,072 | ) | |
Total investment income | 23,745 | ||
Expenses | |||
Advisory fees | 6,345 | ||
Administrative fees | 397 | ||
Custodian fees (1) | 354 | ||
Transfer agent fees | 35 | ||
Professional fees | 89 | ||
Trustees’ fees | 29 | ||
Printing fees | 99 | ||
Miscellaneous | 85 | ||
Total expenses | 7,433 | ||
Net investment income (loss) | 16,312 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 29,561 | ||
Futures contracts | (496 | ) | |
Foreign currency-related transactions | (444 | ) | |
Net realized gain (loss) | 28,621 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (20,327 | ) | |
Futures contracts | (2 | ) | |
Foreign currency-related transactions | (371 | ) | |
Net change in unrealized appreciation (depreciation) | (20,700 | ) | |
Net realized and unrealized gain (loss) | 7,921 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 24,233 |
(1) Includes a reimbursement for overbilling of custody out-of-pocket fees from prior years. See note 9 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
126 Global Real Estate Securities Fund
Russell Investment Funds
Global Real Estate Securities Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2016 | 2015 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 16,312 | $ | 14,621 | ||
Net realized gain (loss) | 28,621 | 30,811 | ||||
Net change in unrealized appreciation (depreciation) | (20,700 | ) | (43,119 | ) | ||
Net increase (decrease) in net assets from operations | 24,233 | 2,313 | ||||
Distributions | ||||||
From net investment income | (29,925 | ) | (12,834 | ) | ||
From net realized gain | (24,898 | ) | (35,698 | ) | ||
From return on capital | (6,508 | ) | - | |||
Net decrease in net assets from distributions | (61,331 | ) | (48,532 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | 59,825 | 46,934 | ||||
Total Net Increase (Decrease) in Net Assets | 22,727 | 715 | ||||
Net Assets | ||||||
Beginning of period | 778,091 | 777,376 | ||||
End of period | $ | 800,818 | $ | 778,091 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | (12,213 | ) | $ | (9,845 | ) |
* Share transaction amounts (in thousands) for the periods ended December 31, 2016 and December 31, 2015 were as follows: | ||||||||||||
2016 | 2015 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 2,178 | $ | 31,955 | 2,025 | $ | 31,721 | ||||||
Proceeds from reinvestment of distributions | 4,337 | 61,331 | 3,235 | 48,532 | ||||||||
Payments for shares redeemed | (2,221 | ) | (33,461 | ) | (2,115 | ) | (33,319 | ) | ||||
Total increase (decrease) | 4,294 | $ | 59,825 | 3,145 | $ | 46,934 |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 127
Russell Investment Funds
Global Real Estate Securities Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | ||||||||||||||||||
$ | Net | $ | $ | $ | $ | |||||||||||||
Net Asset Value, | Investment | Net Realized | Total from | Distributions | Distributions | $ | ||||||||||||
Beginning of | Income | and Unrealized | Investment | from Net | from Net | Return of | ||||||||||||
Period | (Loss)(a)(b) | Gain (Loss) | Operations | Investment Income | Realized Gain | Capital | ||||||||||||
December 31, 2016 | 14.71 | .31 | .13 | .44 | (.57 | ) | (.46 | ) | (.12 | ) | ||||||||
December 31, 2015 | 15.63 | .29 | (.25 | ) | .04 | (.25 | ) | (.71 | ) | — | ||||||||
December 31, 2014 | 14.68 | .28 | 1.89 | 2.17 | (.52 | ) | (.70 | ) | — | |||||||||
December 31, 2013 | 15.37 | .31 | .24 | .55 | (.63 | ) | (.61 | ) | — | |||||||||
December 31, 2012 | 12.65 | .30 | 3.15 | 3.45 | (.73 | ) | — | — | ||||||||||
See accompanying notes which are an integral part of the financial statements.
128 Global Real Estate Securities Fund
% | % | % | ||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | ||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | ||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | |||||||||
Total Distributions | Period | Return(d) | (000 | ) | Gross | Net(b) | Net Assets(b) | Turnover Rate | ||||||||
(1.15 | ) | 14.00 | 3.02 | 800,818 | .94 | .94 | 2.06 | 91 | ||||||||
(.96 | ) | 14.71 | .25 | 778,091 | .93 | .93 | 1.86 | 64 | ||||||||
(1.22 | ) | 15.63 | 14.75 | 777,376 | .95 | .95 | 1.76 | 64 | ||||||||
(1.24 | ) | 14.68 | 3.70 | 658,413 | .93 | .93 | 1.97 | 72 | ||||||||
(.73 | ) | 15.37 | 27.56 | 608,360 | .95 | .95 | 2.08 | 59 |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund 129
Russell Investment Funds
Global Real Estate Securities Fund
Related Party Transactions, Fees and Expenses
Accrued fees payable to affiliates for the period ended December 31, 2016 were as follows: | ||
Advisory fees | $ | 530,955 |
Administration fees | 33,185 | |
Transfer agent fees | 2,920 | |
Trustee fees | 5,559 | |
$ | 572,619 |
Transactions (amounts in thousands) during the period ended December 31, 2016 with Underlying Funds which are, or were, an
affiliated company are as follows:
Fair Value, | Change in | ||||||||||||||||||
Beginning of | Realized Gain | Unrealized | Fair Value, End | Income | Capital Gains | ||||||||||||||
Period | Purchases | Sales | (Loss) | Gain (Loss) | of Period | Distributions | Distributions | ||||||||||||
U.S. Cash Collateral Fund | $ | 8,223 | $ | 94,784 | $ | 102,076 | $ | — | $ | — | $ | 931 | $ | 27 | $ | — | |||
U.S. Cash Management Fund | 20,350 | 242,124 | 235,550 | — | 1 | 26,925 | 111 | — | |||||||||||
$ | 28,573 | $ | 336,908 | $ | 337,626 | $ | — | $ | 1 | $ | 27,856 | $ | 138 | $ | — |
Federal Income Taxes
At December 31, 2016, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Cost of Investments | $ | 756,639,541 | |||
Unrealized Appreciation | $ | 54,354,424 | |||
Unrealized Depreciation | (14,609,268 | ) | |||
Net Unrealized Appreciation (Depreciation) | $ | 39,745,156 | |||
Tax Composition of Distributions | |||||
Ordinary Income | $ | 32,902,669 | |||
Long-Term Capital Gains | $ | 21,919,738 | |||
Tax Return of Capital | $ | 6,508,158 |
Net investment income and net realized gains (losses) in the financial statements may differ from taxable net investment income and
net realized gains (losses). Capital accounts within the financial statements are adjusted for permanent book-tax differences. Book-tax
differences are primarily due to foreign currency gains and losses, reclassifications of dividends, differences in treatment of income
from swaps, net operating losses, investments in partnerships, investments in passive foreign investment companies (PFICs), tax
straddle transaction, use of tax equalization and foreign capital gains taxes. These adjustments have no impact on the net assets. At
December 31, 2016, the Statement of Assets and Liabilities have been adjusted by the following amounts (in thousands):
Undistributed net investment income | $ | 17,753 | |
Accumulated net realized gain (loss) | (12,394 | ) | |
Additional paid-in capital | (5,359 | ) |
As permitted by tax regulations, the Fund intends to defer a net realized capital loss of $3,010,817 and a late year ordinary loss of
$1,203,619 incurred from November 1, 2016 to December 31, 2016, and treat it as arising in the fiscal year 2017.
See accompanying notes which are an integral part of the financial statements.
130 Global Real Estate Securities Fund
Russell Investment Funds
Notes to Schedule of Investments — December 31, 2016
Footnotes:
(Æ) Non-income-producing security.
(ö) Real Estate Investment Trust (REIT).
(§) All or a portion of the shares of this security are pledged as collateral in connection with futures contracts purchased (sold), options
written, or swaps entered into by the Fund.
(~ ) Rate noted is yield-to-maturity from date of acquisition.
(ç) At amortized cost, which approximates market.
(Ê) Adjustable or floating rate security. Rate shown reflects rate in effect at period end.
(Ï) Forward commitment.
(ƒ) Perpetual floating rate security. Rate shown reflects rate in effect at period end.
(µ) Bond is insured by a guarantor.
(æ) Pre-refunded: These bonds are collateralized by U.S. Treasury securities, which are held in escrow by a trustee and used to pay
principal and interest in the tax-exempt issue and to retire the bonds in full at the earliest refunding date.
(Ø) In default.
(ß) Illiquid security.
(x) The security is purchased with the cash collateral from the securities loaned.
(Ñ) All or a portion of the shares of this security are on loan.
(Þ) Restricted security. Security may have contractual restrictions on resale, may have been offered in a private placement transaction,
and may not be registered under the Securities Act of 1933.
(Å) Illiquid and restricted security.
(å) Currency balances were pledged in connection with futures contracts purchased (sold), options written, or swaps entered into by the
Fund. See Note 2.
(8) Unrounded units
(v) Loan agreement still pending. Rate not available at period end. 1.000% rate is used as a placeholder.
Abbreviations:
144A - Represents private placement security for qualified buyers according to rule 144A of the Securities Act of 1933.
ADR - American Depositary Receipt
ADS - American Depositary Share
BBSW - Bank Bill Swap Reference Rate
CIBOR - Copenhagen Interbank Offered Rate
CME - Chicago Mercantile Exchange
CMO - Collateralized Mortgage Obligation
CVO - Contingent Value Obligation
EMU - European Economic and Monetary Union
EURIBOR - Euro Interbank Offered Rate
FDIC - Federal Deposit Insurance Company
GDR - Global Depositary Receipt
GDS - Global Depositary Share
HIBOR – Hong Kong Interbank Offered Rate
LIBOR - London Interbank Offered Rate
NIBOR - Norwegian Interbank Offered Rate
PIK - Payment in Kind
PRIBOR – Prague Interbank Offered Rate
REMIC - Real Estate Mortgage Investment Conduit
SIBOR – Singapore Interbank Offered Rate
STRIP - Separate Trading of Registered Interest and Principal of Securities
TBA - To Be Announced Security
UK - United Kingdom
Notes to Schedule of Investments 131
Russell Investment Funds
Notes to Schedule of Investments, continued — December 31, 2016
Foreign Currency Abbreviations: | ||
ARS - Argentine peso | HUF - Hungarian forint | PKR - Pakistani rupee |
AUD - Australian dollar | IDR - Indonesian rupiah | PLN - Polish zloty |
BRL - Brazilian real | ILS - Israeli shekel | RUB - Russian ruble |
CAD - Canadian dollar | INR - Indian rupee | SEK - Swedish krona |
CHF - Swiss franc | ISK - Icelandic krona | SGD - Singapore dollar |
CLP - Chilean peso | ITL - Italian lira | SKK - Slovakian koruna |
CNY - Chinese yuan renminbi | JPY - Japanese yen | THB - Thai baht |
COP - Colombian peso | KES - Kenyan schilling | TRY - Turkish lira |
CRC - Costa Rican colon | KRW - South Korean won | TWD - Taiwanese dollar |
CZK - Czech koruna | MXN - Mexican peso | USD - United States dollar |
DKK - Danish krone | MYR – Malaysian ringgit | VEB - Venezuelan bolivar |
EGP - Egyptian pound | NOK - Norwegian krone | VND - Vietnamese dong |
EUR - Euro | NZD - New Zealand dollar | ZAR - South African rand |
GBP - British pound sterling | PEN - Peruvian nuevo sol | |
HKD – Hong Kong dollar | PHP – Philippine peso |
132 Notes to Schedule of Investments
Russell Investment Funds
Notes to Financial Highlights — December 31, 2016
(a) Average daily shares outstanding were used for this calculation.
(b) May reflect amounts waived and/or reimbursed by Russell Investment Management, LLC (“RIM”).
(c) Less than $.01 per share.
(d) The total return does not reflect any Insurance Company Separate Account or Policy Charges.
(e) Gross and Net Expense Ratios for the period ended December 31, 2016 include a reimbursement from State Street for the overbilling of custody expenses in
prior years. Without the reimbursement, the expense ratios would have been higher by the amount listed below.
Impact of the fee reimbursement on | ||
Fund | gross and net expense ratios | |
Multi-Style Equity Fund | 0.01 | % |
Aggressive Equity Fund | 0.01 | % |
Non-U.S. Fund | 0.05 | % |
See accompanying notes which are an integral part of the financial statements.
Notes to Financial Highlights 133
Russell Investment Funds
Notes to Financial Statements — December 31, 2016
1. Organization
Russell Investment Funds (the “Investment Company” or “RIF”) is a series investment company with nine different investment
portfolios referred to as Funds (each a “Fund” and collectively the “Funds”). These financial statements report on five of these
Funds. The Investment Company provides the investment base for one or more variable insurance products issued by one or more
insurance companies. These Funds are offered at net asset value (“NAV”) to qualified insurance company separate accounts offering
variable insurance products. The Investment Company is registered under the Investment Company Act of 1940, as amended
(“Investment Company Act”), as an open-end management investment company. It is organized and operated as a Massachusetts
business trust under an Amended and Restated Master Trust Agreement dated October 1, 2008, as amended (“Master Trust
Agreement”), and the provisions of Massachusetts law governing the operation of a Massachusetts business trust. The Investment
Company’s Master Trust Agreement permits the Board of Trustees (the “Board”) to issue an unlimited number of shares of beneficial
interest. Each of the Funds is diversified. Under the Investment Company Act a diversified company is defined as a management
company which meets the following requirements: at least 75% of the value of its total assets is represented by cash and cash items
(including receivables), government securities, securities of other investment companies, and other securities for the purposes of
this calculation limited in respect of any one issuer to an amount not greater in value than five percent of the value of the total assets
of such management company and to not more than 10% of the outstanding voting securities of such issuer.
2. Significant Accounting Policies
The Funds’ financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)
which require the use of management estimates and assumptions at the date of the financial statements. Actual results could differ
from those estimates. The Funds are considered investment companies under U.S. GAAP and follow the accounting and reporting
guidance applicable to investment companies. The following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements.
In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, “final
rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final
rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial
statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017.
Management is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on the Funds’
financial statements and related disclosures.
Security Valuation
The Funds value portfolio securities according to Board-approved securities valuation procedures which include market and fair
value procedures. The Board has delegated the responsibility for administration of the securities valuation procedures to Russell
Investments Fund Services, LLC ("RIFUS").
U.S. GAAP defines fair value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly
transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes inputs to
valuation methods and requires a separate disclosure of the fair value hierarchy for each major category of assets and liabilities,
that segregates fair value measurements into levels (Level 1, 2, and 3). The inputs or methodology used for valuing securities are
not necessarily an indication of the risk associated with investing in those securities. Levels 1, 2 and 3 of the fair value hierarchy
are defined as follows:
• Level 1 — Quoted prices (unadjusted) in active markets or exchanges for identical assets and liabilities.
• Level 2 — Inputs other than quoted prices included within Level 1 that are observable, which may include, but are not
limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets
or liabilities in markets that are not active, and inputs such as interest rates, yield curves, implied volatilities, credit spreads
or other market corroborated inputs.
• Level 3 — Significant unobservable inputs based on the best information available in the circumstances, to the extent
observable inputs are not available, which may include assumptions made by RIFUS, acting at the discretion of the Board,
that are used in determining the fair value of investments.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for
example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and
other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised
134 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
in determining fair value is greatest for instruments categorized in Level 3. The inputs or methodology used for valuing securities
are not necessarily an indication of the risk associated with investing in those securities.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes,
the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that
is significant to the fair value measurement in its entirety.
The valuation techniques and significant inputs used in determining the fair market values of financial instruments categorized as
Level 1 and Level 2 of the fair value hierarchy are as follows:
Equity securities, including common and preferred stock, short securities and restricted securities that are traded on a national
securities exchange (or reported on the NASDAQ national market), are stated at the last reported sales price on the day of valuation
or official closing price, as applicable. To the extent these securities are actively traded, and valuation adjustments are not applied,
they are categorized as Level 1 of the fair value hierarchy. Preferred stock and other equities traded on inactive markets or valued
by reference to similar instruments are categorized as Level 2 of the fair value hierarchy. Certain foreign equity securities may
be fair valued using a pricing service that considers the correlation of the trading patterns of the foreign security to the intraday
trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, exchange-traded funds, and
the movement of certain indexes of securities, based on the statistical analysis of historical relationships. Foreign equity securities
prices as described above are categorized as Level 2 of the fair value hierarchy.
Fixed income securities including corporate, convertible, U.S. government agency, municipal bonds and notes, U.S. treasury
obligations, sovereign issues, bank loans, bank notes and non-U.S. bonds are normally valued by pricing service providers that use
broker dealer quotations or valuation estimates from their internal pricing models. The pricing service providers’ internal models
use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads and
default rates. Such fixed income securities that use pricing service internal models as described above are categorized as Level
2 of the fair value hierarchy. Such fixed income securities that use broker dealer quotations are categorized as Level 3 of the fair
value hierarchy.
Fixed income securities purchased on a delayed-delivery basis and marked-to-market daily until settlement at the forward settlement
date are categorized as Level 2 of the fair value hierarchy.
Mortgage and asset-backed securities are usually issued as separate tranches, or classes, of securities within each deal. These
securities are also normally valued by pricing service providers that use broker dealer quotations or valuation estimates from their
internal pricing models. The pricing models for these securities usually consider tranche-level attributes, including estimated cash
flows of each tranche, market-based yield spreads for each tranche, and current market data, as well as incorporate deal collateral
performance, as available. Mortgage and asset-backed securities that use these and similar valuation techniques and inputs as
described above are categorized as Level 2 of the fair value hierarchy.
Investments in privately held investment funds will be valued based upon the NAV of such investments. The Funds have adopted
the authoritative guidance under U.S. GAAP for estimating the fair value of investments in funds that have calculated NAV per
share in accordance with the specialized accounting guidance for investment companies. Accordingly, the Funds estimate the
fair value of an investment in a fund using the NAV per share without further adjustment as a practical expedient, if the NAV per
share of the investment is determined in accordance with the specialized accounting guidance for investment companies as of the
reporting entity’s measurement date.
Short-term investments having a maturity of 60 days or less are generally valued at amortized cost, which approximates fair market
value. These investments are categorized as Level 2 of the fair value hierarchy.
Derivative instruments are instruments such as foreign currency contracts, futures contracts, options contracts, or swap agreements
that derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors.
Derivatives may be classified into two groups depending upon the way that they are traded: privately traded over-the-counter
(“OTC”) derivatives that do not go through an exchange or intermediary and exchange-traded derivatives that are traded through
specialized derivatives exchanges or other regulated exchanges. OTC derivatives are normally valued on the basis of broker dealer
quotations or pricing service providers. Depending on the product and the terms of the transaction, the value of the derivative
instrument can be estimated by a pricing service provider using a series of techniques, including simulation pricing models.
The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest
rates, yield curves, dividends and exchange rates. OTC derivatives that use these and similar valuation techniques and inputs as
described above are categorized as Level 2 of the fair value hierarchy, with the exception of foreign currency spot contracts which
Notes to Financial Statements 135
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
are categorized as Level 1 of the fair value hierarchy. OTC derivatives that use broker dealer quotations are categorized as level 3 of
the fair value hierarchy. Exchange-traded derivatives are valued based on the last reported sales price on the day of valuation and
are categorized as Level 1 of the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are valued at
the daily settlement price determined by the respective exchange. For centrally cleared credit default swaps, the clearing facility
requires its members to provide actionable levels across complete term structures. These levels along with external third party
prices are used to produce daily settlement prices. These securities are categorized as Level 2 of the fair value hierarchy. Centrally
cleared interest rate swaps are valued using a pricing model that references the underlying rates including the overnight index
swap rate and London Interbank Offered Rate (“LIBOR”) forward rate to produce the daily settlement price. These securities are
categorized as Level 2 of the fair value hierarchy.
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 NAV of Fund shares is determined may be reflected in the calculation of NAV for each applicable
Fund when the Fund deems that the particular event or circumstance would materially affect such Fund’s NAV. 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. Funds that invest in foreign securities use fair value pricing daily as events may occur
between the close of foreign markets and the time of pricing. Although there are observable inputs assigned on a security level,
prices are derived from factors using proprietary models or matrix pricing. For this reason, fair value factors will cause movement
between Levels 1 and 2. Significant events that could trigger fair value pricing of one or more securities include: a company
development such as a material business development; a natural disaster or emergency situation; or an armed conflict.
The NAV 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, since foreign securities can trade on non-business days.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as
of year-end.
The Multi-Style Equity, Aggressive Equity, Non-U.S., Core Bond and Global Real Estate Securities Funds had no transfers between
Levels 1, 2, and 3 for the period ended December 31, 2016.
Level 3 Fair Value Investments
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of
the fair value hierarchy are as follows:
Securities and other assets for which market quotes are not readily available, or are not reliable, are valued at fair value as
determined in good faith by RIFUS and are categorized as Level 3 of the fair value hierarchy. Market quotes are considered not
readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or
broker quotes). When RIFUS applies fair valuation methods that use significant unobservable inputs to determine a Fund’s NAV,
securities will not be priced on the basis of quotes from the primary market in which they are traded, but instead may be priced by
another method that RIFUS believes accurately reflects fair value and will be categorized as Level 3 of the fair value hierarchy. Fair
value pricing may require subjective determinations about the value of a security. While the securities valuation procedures are
intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the process cannot
guarantee that fair values determined by RIFUS would accurately reflect the price that a Fund could obtain for a security if it were
to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ
from the value that would be realized if the security was sold.
RIFUS employs third party pricing vendors to provide fair value measurements. RIFUS oversees third-party pricing service
providers in order to support the valuation process throughout the year.
The significant unobservable input used in fair value measurement of certain of the Funds’ preferred equity securities is the
redemption value calculated on a fully-diluted basis if converted to common stock. Significant increases or decreases in the
redemption value would have a direct and proportional impact to fair value.
The significant unobservable input used in the fair value measurement of certain Funds’ debt securities is the yield to worst ratio.
Significant increases (decreases) in the yield to worst ratio would result in a lower (higher) fair value measurement.
These significant unobservable inputs are further disclosed in the Presentation of Portfolio Holdings for each respective Fund as
applicable.
136 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
If third party evaluated vendor pricing is neither available nor deemed to be indicative of fair value, RIFUS may elect to obtain
indicative market quotations (“broker quotes”) directly from the broker or passed through from a third party vendor. In the event
that the source of fair value is from a single source broker quote, these securities are classified as Level 3 per the fair value
hierarchy. Broker quotes are typically received from established market participants. Although independently received on a daily
basis, RIFUS does not have the transparency to view the underlying inputs which support the broker quotes. Significant changes
in the broker quote would have direct and proportional changes in the fair value of the security. There is a third-party pricing
exception to the quantitative disclosure requirement when prices are not determined by the reporting entity. RIFUS is exercising
this exception and has made a reasonable attempt to obtain quantitative information from the third party pricing vendors regarding
the unobservable inputs used.
For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances
for reported fair values that present changes attributable to total realized and unrealized gains or losses, purchases and sales, and
transfers in/out of the Level 3 category during the period. Additionally, U.S. GAAP requires quantitative information regarding the
significant unobservable inputs used in the determination of fair value of assets categorized as Level 3 in the fair value hierarchy. In
accordance with the requirements of U.S. GAAP, a fair value hierarchy, a Level 3 reconciliation and an additional disclosure about
fair value measurements, if any, has been included in the Presentation of Portfolio Holdings for each respective Fund.
Investment Transactions
Investment transactions are reflected as of the trade date for financial reporting purposes. This may cause the NAV stated in the
financial statements to be different from the NAV at which shareholders may transact. Realized gains and losses from securities
transactions, if applicable, are recorded on the basis of specific identified cost incurred within a particular Fund.
Investment Income
Dividend income is recorded net of applicable withholding taxes on the ex-dividend date, except that certain dividends from
foreign securities are recorded as soon as the Funds are informed of the dividend, subsequent to the ex-dividend date. To the
extent the dividend represents a return of capital or capital gain for tax purposes, reclassifications are made which may be based on
management's estimates. Interest income is recorded daily on the accrual basis. The Core Bond Fund classifies gains and losses
realized on prepayments received on mortgage-backed securities as an adjustment to interest income. All premiums and discounts,
including original issue discounts, are amortized/ accreted using the effective interest method. Debt obligation securities may be
placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest
receivable when the collection of all or a portion of interest has become doubtful.
Federal Income Taxes
Since the Investment Company is a Massachusetts business trust, each Fund is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be distributed to each Fund’s shareholders without regard
to the income and capital gains (or losses) of the other Funds.
For each year, each Fund intends to qualify or continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the “Code”) and intends to distribute all of its taxable income and capital gains.
Therefore, no federal income tax provision is required for the Funds.
The Funds comply with the authoritative guidance for uncertainty in income taxes which requires management to determine whether
a tax position of the Funds is more likely than not to be sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the
tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement with the relevant taxing authority. Management determined that no accruals need to be made in
the financial statements due to uncertain tax positions. Management continually reviews and adjusts the Funds’ liability for income
taxes based on analyses of tax laws and regulations, as well as their interpretations, and other relevant factors.
Each Fund files a U.S. tax return. At December 31, 2016, the Funds had recorded no liabilities for net unrecognized tax benefits
relating to uncertain income tax positions they have taken or expect to take in future tax returns. While the statute of limitations
remains open to examine the Funds’ U.S. tax returns filed for the fiscal years ended December 31, 2013 through December 31,
2015, no examinations are in progress or anticipated at this time. The Funds are not aware of any tax positions for which it is
reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Notes to Financial Statements 137
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
Dividends and Distributions to Shareholders
For all Funds, income, capital gain distributions and return of capital, if any, are recorded on the ex-dividend date. Income
distributions are generally declared and paid according to the following schedule:
Declared | Payable | Funds |
Quarterly | April, July, October and mid-December | Multi-Style Equity, Aggressive Equity, Core Bond and Global |
Real Estate Securities Funds | ||
Annually | Mid-December | Non-U.S. Fund |
The Funds intend to distribute substantially all of the distributions they receive from real estate investment trust ("REIT")
investments, less expenses, as well as income from other investments. Such distributions may be comprised of income, return of
capital, and capital gains. The Funds may also realize capital gains on the sale of its REIT shares and other investments.
Capital gain distributions are generally declared and paid annually. An additional distribution may be paid by the Funds to avoid
imposition of federal income and excise tax on any remaining undistributed capital gains and net investment income.
The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax
regulations which may differ from U.S. GAAP. As a result, net investment income and net realized gain (or loss) on investments
and foreign currency-related transactions for a reporting period may differ significantly from distributions during such period. The
differences between tax regulations and U.S. GAAP primarily relate to investments in options, futures, forward contracts, swap
contracts, passive foreign investment companies, foreign-denominated investments, mortgage-backed securities, certain securities
sold at a loss, wash sale deferrals and capital loss carryforwards. Accordingly, the Funds may periodically make reclassifications
among certain of their capital accounts without impacting their NAVs.
Expenses
The Funds pay their own expenses other than those expressly assumed by Russell Investment Management, LLC ("RIM"), the
Funds’ adviser, or RIFUS. Most expenses can be directly attributed to the individual Funds. Expenses which cannot be directly
attributed to a specific Fund are allocated among all Funds principally based on their relative net assets.
Foreign Currency Translations
The books and records of the Funds are maintained in U.S. dollars. Foreign currency amounts and transactions of the Funds are
translated into U.S. dollars on the following basis:
(a) Fair value of investment securities, other assets and liabilities at the closing rate of exchange on the valuation date.
(b) Purchases and sales of investment securities and income at the closing rate of exchange prevailing on the respective trade
dates of such transactions.
Net realized gains or losses from foreign currency-related transactions arise from: sales and maturities of short-term securities;
sales of foreign currencies; currency gains or losses realized between the trade and settlement dates on securities transactions; the
difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Funds’ books and the U.S.
dollar equivalent of the amounts actually received or paid. Net unrealized gains or losses from foreign currency-related transactions
arise from changes in the value of assets and liabilities, other than investments in securities, as a result of changes in the exchange
rates.
The Funds do not isolate that portion of the results of operations of the Funds that arises as a result of changes in exchange rates
from that portion that arises from changes in market prices of investments during the year. Such fluctuations are included with the
net realized and unrealized gain or loss from investments. However, for federal income tax purposes, the Funds do isolate the effects
of changes in foreign exchange rates from the fluctuations arising from changes in market prices for realized gain (or loss) on debt
obligations.
Capital Gains Taxes
The Non-U.S. and Global Real Estate Securities Funds may be subject to capital gains taxes and repatriation taxes imposed by
certain countries in which they invest. The Non-U.S. and Global Real Estate Securities Funds may record a deferred capital gains
tax liability with respect to the unrealized appreciation on foreign securities for potential capital gains and repatriation taxes at
December 31, 2016. The accrual for capital gains and repatriation taxes is included in net unrealized appreciation (depreciation)
on investments in the Statements of Assets and Liabilities. The amounts related to capital gains and repatriation taxes paid are
138 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
included in net realized gain (loss) on investments in the Statements of Operations. The Non-U.S. Fund had a deferred capital gains
tax liability of $2,455 as of December 31, 2016. The Non-U.S. Fund had $25,806 included in net realized gain (loss) on investments
in the Statements of Operations related to capital gains taxes for the period ended December 31, 2016.
Derivatives
Certain Funds may invest in derivatives. Derivative securities are instruments or agreements whose value is derived from an
underlying security or index. They include options, futures, swaps and forwards. These instruments offer unique characteristics and
risks that facilitate the Funds’ investment strategies.
The Funds typically use derivatives in three ways: exposing cash to markets, hedging and return enhancement. In addition, the
Non-U.S. and Global Real Estate Securities Funds may enter into foreign exchange contracts for trade settlement purposes. The
Funds may pursue their strategy of being fully invested by exposing cash to the performance of appropriate markets by purchasing
securities and/or derivatives. This is intended to cause the Funds to perform as though cash were actually invested in those markets.
Hedging may be used by certain Funds to limit or control risks, such as adverse movements in exchange rates and interest rates.
Return enhancement can be accomplished through the use of derivatives in a Fund, including using derivatives as a substitute for
holding physical securities, and using them to express various macro views (e.g., interest rate movements, currency movements,
and macro credit strategies). By purchasing certain instruments, the Funds may more effectively achieve the desired portfolio
characteristics that assist them in meeting their investment objectives. Depending on how the derivatives are structured and
utilized, the risks associated with them may vary widely. These risks include, but are not limited to, market risk, liquidity risk,
leveraging risk, counterparty risk, basis risk, reinvestment risk, political risk, prepayment risk, extension risk, valuation risk and
credit risk.
Futures, certain options and cleared swaps are traded or cleared on an exchange or central exchange clearing house. Exchange-
traded or exchange-cleared transactions generally present less counterparty risk to a Fund. The exchange’s clearing house stands
between the Fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the clearing
house and the clearing member. Cleared swap contracts are subject to clearing house rules, including initial and variation margin
requirement, daily settlement of obligations and the clearing house guarantee of payments to the broker. There is, however, still
counterparty risk due to the insolvency of the broker with respect to any margin held in the brokers’ customer accounts. While
clearing members are required to segregate customer assets from their own assets, in the event of insolvency, there may be a
shortfall in the amount of margin held by the broker for its clients. Collateral and margin requirements for exchange-traded or
exchange-cleared derivatives are established through regulation, as well as set by the broker or applicable clearing house. Margin
for exchange-traded and exchange-cleared transactions are detailed in the Statements of Assets and Liabilities as cash held at the
broker for futures contracts and cash held at the broker for swap contracts, respectively. Securities pledged by a Fund for exchange-
traded and exchange-cleared transactions are noted as collateral or margin requirements in the Schedule of Investments. Typically,
the Funds and counterparties are not permitted to sell, repledge, rehypothecate or otherwise use collateral pledged by the other
party unless explicitly permitted by each respective governing agreement.
In December 2015, the SEC proposed new regulations applicable to a mutual fund's use of derivatives. If adopted as proposed, these
regulations could potentially limit or impact a Fund's ability to invest in derivatives and negatively affect the Fund's performance
and ability to pursue its stated investment objectives.
The effects of derivative instruments, categorized by risk exposure, on the Statements of Assets and Liabilities and the Statements of
Operations, for the period ended December 31, 2016, if applicable, are disclosed in the Fair Value of Derivative Instruments table
following each applicable Fund’s Schedule of Investments.
Foreign Currency Exchange Contracts
Certain Funds may enter into foreign currency exchange spot contracts and forward foreign currency exchange contracts (“FX
contracts”). From time to time, certain Funds may enter into FX contracts to hedge certain foreign currency-denominated assets.
FX contracts are recorded at fair value. Certain risks may arise upon entering into these FX contracts from the potential inability
of counterparties to meet the terms of their FX contracts and are generally limited to the amount of unrealized gain on the FX
contracts, if any, that are disclosed in the Statements of Assets and Liabilities.
For the period ended December 31, 2016, the following Funds entered into foreign currency exchange contracts primarily for the
strategies listed below:
Notes to Financial Statements 139
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
Funds | Strategies |
Non-U.S. Fund | Return enhancement, hedging and exposing cash to markets |
Core Bond Fund | Return enhancement and hedging |
Global Real Estate Securities Fund | Exposing cash to markets and trade settlement |
The Funds’ foreign currency contract notional dollar values outstanding fluctuate throughout the fiscal year as required to meet
strategic requirements. The following tables illustrate the quarterly volume of foreign currency contracts. For the purpose of this
disclosure, volume is measured by the amounts bought and sold in USD.
Outstanding Contract Amounts Sold | |||||||||||
Quarter Ended | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |||||||
Non-U.S. Fund | $ | 148,438,997 | $ | 122,646,679 | $ | 114,040,484 | $ | 102,419,534 | |||
Core Bond Fund | 235,831,701 | 201,858,196 | 231,761,498 | 220,501,479 | |||||||
Global Real Estate Securities Fund | 19,476,641 | 22,680,343 | 33,943,538 | 20,103,402 | |||||||
Outstanding Contract Amounts Bought | |||||||||||
Quarter Ended | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |||||||
Non-U.S. Fund | $ | 149,117,873 | $ | 123,796,735 | $ | 114,080,179 | $ | 102,060,677 | |||
Core Bond Fund | 234,400,350 | 202,186,517 | 231,770,705 | 220,048,009 | |||||||
Global Real Estate Securities Fund | 19,725,640 | 22,571,870 | 33,811,637 | 19,742,095 |
Options
Certain Funds may purchase and sell (write) call and put options on securities and securities indices. Such options are traded on
a national securities exchange or in an OTC market. The Funds may also purchase and sell (write) call and put options on foreign
currencies.
When a Fund writes a covered call or a put option, an amount equal to the premium received by the Fund is included in the Fund’s
Statement of Assets and Liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-
to-market to reflect the current fair value of the option written. The Fund receives a premium on the sale of a call option but gives
up the opportunity to profit from any increase in the value of the underlying instrument above the exercise price of the option, and
when the Fund writes a put option it is exposed to a decline in the price of the underlying instrument.
When a Fund sells an uncovered call option, it does not simultaneously have a long position in the underlying security. When a
Fund sells an uncovered put option, it does not simultaneously have a short position in the underlying security. Uncovered options
are riskier than covered options because there is no underlying security held by the Fund that can act as a partial hedge.
Whether an option which the Fund has written expires on its stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss, if the cost of a closing purchase transaction exceeds the premium received when the
option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is
extinguished. If a call option which the Fund has written is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by the premium originally received. When a put option which
a Fund has written is exercised, the amount of the premium originally received will reduce the cost of the security which a Fund
purchases upon exercise of the option.
The Funds’ use of written options involves, to varying degrees, elements of market risk in excess of the amount recognized in the
Statements of Assets and Liabilities. The face or contract amounts of these instruments reflect the extent of the Funds’ exposure to
market risk. The risks may be caused by an imperfect correlation between movements in the price of the instrument and the price
of the underlying securities and interest rates.
Certain Funds may enter into a swaption (an option on a swap). In a swaption, in exchange for an option, the buyer gains the right
but not the obligation to enter into a specified swap agreement with the issuer on a specified future date. The writer of the contract
receives the premium and bears the risk of unfavorable changes in the preset rate on the underlying interest rate swap.
For the period ended December 31, 2016, the following Funds entered into options contracts primarily for the strategies listed
below.
Funds | Strategies |
Non-U.S. Fund | Hedging |
Core Bond Fund | Return enhancement and hedging |
140 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
The Non-U.S. and Core Bond Fund’s options contracts notional amounts fluctuate throughout the fiscal year as required to meet
strategic requirements. The following table illustrates the quarterly activity of options contracts measured by notional in USD.
Notional of Options Contracts Opened or Closed | ||||||||||||
Funds | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | ||||||||
Non-U.S. Fund | Opened | $ | — | $ | — | $ | — | $ | 109,379,371 | |||
Closed | — | — | — | 32,899,057 | ||||||||
Core Bond Fund | Opened | — | 10,340,000 | 321,198,850 | 1,847,041,200 | |||||||
Closed | 26,150,000 | 6,000,000 | 280,734,347 | 613,586,950 |
Futures Contracts
The Funds may invest in futures contracts (i.e., interest rate, foreign currency and index futures contracts).The face or contract
value of these instruments reflect the extent of the Funds’ exposure to off balance sheet risk. The primary risks associated with the
use of futures contracts are an imperfect correlation between the change in fair value of the securities held by the Funds and the
prices of futures contracts, and the possibility of an illiquid market. Upon entering into a futures contract, the Funds are required to
deposit with a broker an amount, termed the initial margin, which typically represents 5% to 10% of the purchase price indicated
in the futures contract. Payments to and from the broker, known as variation margin, are typically required to be made on a daily
basis as the price of the futures contract fluctuates. Changes in initial settlement value are accounted for as unrealized appreciation
(depreciation) until the contracts are terminated, at which time realized gains and losses are recognized.
For the period ended December 31, 2016, the following Funds entered into futures contracts primarily for the strategies listed
below:
Funds | Strategies |
Multi-Style Equity Fund | Exposing cash to markets |
Aggressive Equity Fund | Exposing cash to markets |
Non-U.S. Fund | Return enhancement, hedging and exposing cash to markets |
Core Bond Fund | Return enhancement, hedging and exposing cash to markets |
Global Real Estate Securities Fund | Exposing cash to markets |
The Funds’ futures contracts notional amounts fluctuate throughout the fiscal year as required to meet strategic requirements. The
following table illustrates the quarterly activity of futures contracts measured by notional in USD.
Notional of Futures Contracts Opened or Closed | ||||||||||||
Funds | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | ||||||||
Multi-Style Equity Fund | Opened | $ | 35,970,447 | $ | 32,922,959 | $ | 54,004,881 | $ | 45,084,820 | |||
Closed | 36,314,886 | 38,098,344 | 53,608,565 | 41,616,963 | ||||||||
Aggressive Equity Fund | Opened | 16,857,048 | 21,266,039 | 17,784,792 | 25,091,073 | |||||||
Closed | 18,691,805 | 20,087,414 | 20,517,298 | 26,291,123 | ||||||||
Non-U.S. Fund | Opened | 115,031,999 | 118,926,208 | 105,506,363 | 105,669,047 | |||||||
Closed | 116,607,396 | 129,192,180 | 111,162,242 | 103,946,234 | ||||||||
Core Bond Fund | Opened | 219,885,677 | 591,629,763 | 904,362,560 | 929,196,941 | |||||||
Closed | 159,153,875 | 472,306,642 | 790,794,429 | 920,497,686 | ||||||||
Global Real Estate Securities Fund | Opened | 36,486,516 | 29,739,657 | 61,297,993 | 46,126,102 | |||||||
Closed | 36,295,991 | 35,364,148 | 44,733,264 | 50,798,234 |
Swap Agreements
Certain Funds may enter into swap agreements, on either an asset-based or liability-based basis, depending on whether they are
hedging their assets or their liabilities, and will usually enter into swaps on a net basis (i.e., the two payment streams are netted
out, with the Funds receiving or paying only the net amount of the two payments). When a Fund engages in a swap, it exchanges
its obligations to pay or rights to receive payments for the obligations to pay or rights to receive payments of another party (i.e., an
exchange of floating rate payments for fixed rate payments).
Certain Funds may enter into several different types of swap agreements including credit default, interest rate, total return (equity
and/or index) and currency swaps. Credit default swaps are a counterparty agreement which allows the transfer of third party
credit risk (the possibility that an issuer will default on its obligation by failing to pay principal or interest in a timely manner)
from one party to another. The lender faces the credit risk from a third party and the counterparty in the swap agrees to insure this
Notes to Financial Statements 141
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
risk in exchange for regular periodic payments. Interest rate swaps are a counterparty agreement, can be customized to meet each
party’s needs, and involve the exchange of a fixed or variable payment per period for a payment that is not fixed. Equity swaps are
a counterparty agreement where two parties exchange two sets of cash flows on predetermined dates for an agreed upon amount of
time. The cash flows will typically be an equity index value swapped with a floating rate such as LIBOR plus or minus a predefined
spread. Index swap agreements are a counterparty agreement intended to expose cash to markets or to effect investment transactions
consistent with those Funds’ investment objectives and strategies. Currency swaps are a counterparty agreement where two parties
exchange specified amounts of different currencies which are followed by each paying the other a series of interest payments that
are based on the principal cash flow. At maturity the principal amounts are returned.
The Funds generally expect to enter into these transactions primarily to preserve a return or spread on a particular investment or
portion of their portfolios or to protect against any increase in the price of securities they anticipate purchasing at a later date, or for
return enhancement. Under most swap agreements entered into by a Fund, the parties' obligations are determined on a "net basis".
The net amount of the excess, if any, of the Funds’ obligations over their entitlements with respect to each swap will be accrued on a
daily basis and an amount of cash or liquid assets having an aggregate NAV at least equal to the accrued excess will be segregated.
To the extent that the Funds enter into swaps on other than a net basis, the amount maintained in a segregated account will be the
full amount of the Funds’ obligations, if any, with respect to such swaps, accrued on a daily basis. If there is a default by the other
party to such a transaction, the Funds will have contractual remedies pursuant to the agreement related to the transaction.
A Fund may not receive the expected amount under a swap agreement if the other party to the agreement defaults or becomes
bankrupt.
Credit Default Swaps
The Core Bond Fund may enter into credit default swaps. A credit default swap can refer to corporate issues, government issues,
asset-backed securities or an index of assets, each known as the reference entity or underlying asset. The Fund may act as either
the buyer or the seller of a credit default swap involving one party making a stream of payments to another party in exchange for
the right to receive a specified return in the event of a default or other credit event. Depending upon the terms of the contract, the
credit default swap may be closed via physical settlement. However, due to the possible or potential instability in the market, there
is a risk that the Fund may be unable to deliver the underlying debt security to the other party to the agreement. Additionally,
the Fund may not receive the expected amount under the swap agreement if the other party to the agreement defaults or becomes
bankrupt. In an unhedged credit default swap, the Fund enters into a credit default swap without owning the underlying asset or
debt issued by the reference entity. Credit default swaps allow the Fund to acquire or reduce credit exposure to a particular issuer,
asset or basket of instruments.
As the seller of protection in a credit default swap, the Fund would be required to pay the par or other agreed-upon value (or
otherwise perform according to the swap contract) of a reference debt obligation to the counterparty in the event of a default (or
other specified credit event) and the counterparty would be required to surrender the reference debt obligation. In return, the Fund
would receive from the counterparty a periodic stream of payments over the term of the contract provided that no credit event has
occurred. If no credit event occurs, the Fund would keep the stream of payments and would have no payment obligations. As a seller
of protection, the Fund would effectively add leverage to its portfolio because in addition to its total net assets, that Fund would be
subject to investment exposure on the notional amount of the swap.
The Fund may also purchase protection via credit default swap contracts in order to offset the risk of default of debt securities held
in their portfolios or to take a short position in a debt security, in which case the Fund would function as the counterparty referenced
in the preceding paragraph.
If a credit event occurs and cash settlement is not elected, a variety of other deliverable obligations may be delivered in lieu of
the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer
of protection’s right to choose the deliverable obligation with the lowest value following a credit event). The Fund may use credit
default swaps to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where the Fund owns or has
exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood (as measured by the
credit default swap’s spread) of a particular issuer’s default.
Deliverable obligations for credit default swaps on asset-backed securities in most instances are limited to the specific referenced
obligation as performance for asset-backed securities can vary across deals. Prepayments, principal paydowns, and other writedown
or loss events on the underlying mortgage loans will reduce the outstanding principal balance of the referenced obligation. These
reductions may be temporary or permanent as defined under the terms of the swap agreement and the notional amount for the swap
142 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
agreement generally will be adjusted by corresponding amounts. The Core Bond Fund may use credit default swaps on asset-backed
securities to provide a measure of protection against defaults (or other defined credit events) of the referenced obligation or to take
an active long or short position with respect to the likelihood of a particular referenced obligation’s default (or another defined credit
event).
Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for
the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of
the referenced entities comprising the credit index. A credit index is a basket of credit instruments or exposures designed to be
representative of some part of the credit market as a whole. These indices are made up of reference credits that are judged by a
poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the
indices may include, but are not limited to, investment grade securities, high yield securities, asset-backed securities, emerging
markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized
terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and
if there is a default, the credit event is settled based on that name’s weight in the index. The composition of the indices changes
periodically, usually every six months, and, for most indices, each name has an equal weight in the index. Traders may use credit
default swaps on indices to speculate on changes in credit quality.
Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swap agreements on
corporate issues as of period-end are disclosed in the Schedules of Investments and generally serve as an indicator of the current
status of the payment/performance risk and represent the likelihood or risk of default (or other defined credit event) for the credit
derivative. The implied credit spread of a particular referenced entity reflects the cost of entering into a credit default swap and
may include upfront payments required to be made to enter into the agreement. For credit default swap agreements on asset-
backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of
the payment/performance risk. Wider credit spreads and increasing fair values, in absolute terms when compared to the notional
amount of the swap, generally represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk
of default or other credit event occurring as defined under the terms of the agreement. The maximum potential amount of future
payments (undiscounted) that the Fund as a seller of protection could be required to make under a credit default swap agreement
equals the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of December
31, 2016, for which a Fund is the seller of protection are disclosed in the Schedules of Investments. These potential amounts would
be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the
agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the Fund
for the same referenced entity or entities.
Credit default swaps could result in losses if the Fund does not correctly evaluate the creditworthiness of the company or companies
on which the credit default swap is based. Credit default swap agreements may involve greater risks than if the Fund had invested
in the reference obligation directly since, in addition to risks relating to the reference obligation, credit default swaps are subject to
illiquidity and counterparty risk. The Fund will generally incur a greater degree of risk when it sells a credit default swap than when
it purchases a credit default swap. As a buyer of a credit default swap, the Fund may lose its investment and recover nothing should
a credit event fail to occur and the swap is held to its termination date. As seller of a credit default swap, if a credit event were
to occur, the value of any deliverable obligation received by the Fund, coupled with the upfront or periodic payments previously
received, may be less than what it pays to the buyer, resulting in a loss of value to the Fund.
If the creditworthiness of the Fund’s swap counterparty declines, the risk that the counterparty may not perform could increase,
potentially resulting in a loss to the Fund. To limit the counterparty risk involved in swap agreements, the Fund will only enter
into swap agreements with counterparties that meet certain standards of creditworthiness. Although there can be no assurance
that the Fund will be able to do so, the Fund may be able to reduce or eliminate its exposure under a swap agreement either by
assignment or other disposition, or by entering into an offsetting swap agreement with the same party or another creditworthy party.
The Fund may have limited ability to eliminate its exposure under a credit default swap if the credit quality of the reference entity
or underlying asset has declined.
For the period ended December 31, 2016, the Core Bond Fund entered into credit default swaps primarily for return enhancement,
hedging and exposing cash to markets.
The Core Bond Fund’s credit default swap contract notional amounts outstanding fluctuate throughout the fiscal year as required to
meet strategic requirements. The following table illustrates the quarterly volume of credit default swap contracts. For the purpose
of this disclosure, the volume is measured by notional amounts outstanding at each quarter end.
Notes to Financial Statements 143
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
Credit Default Swap Notional Amounts Outstanding | |||||||||||
Quarter Ended | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |||||||
Core Bond Fund | $ | 90,102,293 | $ | 12,880,000 | $ | 14,520,000 | $ | — |
Interest Rate Swaps
The use of interest rate swaps is a highly specialized activity which involves investment techniques and risks different from those
associated with ordinary portfolio securities transactions. If RIM or a money manager using this technique is incorrect in its forecast
of fair values, interest rates and other applicable factors, the investment performance of a Fund might diminish compared to what
it would have been if this investment technique were not used.
Interest rate swaps do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with
respect to interest rate swaps is limited to the net amount of interest payments that a Fund contractually obligated to make. Interest
rate swaps are traded on exchanges and are subject to central clearing. If the clearing house or futures commission merchant
defaults, a Funds' risk of loss consists of the net amount of interest payments that a Fund is contractually entitled to receive. The
counterparty risk for cleared derivatives is generally lower than for uncleared derivatives. However, clearing may subject a Fund to
increased costs or margin requirements.
For the period ended December 31, 2016, the Core Bond Fund entered into interest rate swaps primarily for return enhancement,
hedging and exposing cash to markets.
The Core Bond Fund’s interest rate swap contract notional amounts outstanding fluctuate throughout the fiscal year as required to
meet strategic requirements. The following table illustrates the quarterly volume of interest rate swap contracts. For the purpose of
this disclosure, the volume is measured by the base notional amounts outstanding at each quarter end.
Interest Rate Swap Notional Amounts Outstanding | |||||||||||
Quarter Ended | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |||||||
Core Bond Fund | $ | 8,536,815 | $ | 8,423,176 | $ | 19,048,289 | $ | 26,270,374 |
Total Return Swaps
Certain Funds may enter into index swap agreements to expose cash to markets or to effect investment transactions. Index swap
agreements are two party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more
than one year. In a standard index swap transaction, the two parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular investments or instruments. The returns to be exchanged between the parties are calculated with
respect to a “notional amount” (i.e., a specified dollar amount that is hypothetically invested in a “basket” of securities representing
a particular index).
For the period ended December 31, 2016, the Core Bond Fund entered into total return swaps primarily for the strategy of exposing
cash to markets.
The Core Bond Fund’s total return swap contract notional amounts outstanding fluctuate throughout the fiscal year as required to
meet strategic requirements. The following table illustrates the quarterly volume of total return swap contracts. For the purpose of
this disclosure, volume is measured by base notional amounts outstanding at each quarter end.
Total Return Swap Notional Amounts Outstanding | |||||||||||
Quarter Ended | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |||||||
Core Bond Fund | $ | 104,949,749 | $ | 78,811,752 | $ | 67,137,401 | $ | 48,171,688 |
Currency Swaps
Certain Funds may enter into currency swap agreements to enhance returns or for hedging purposes. Currency swap agreements are
agreements where two parties exchange specified amounts of different currencies which are followed by paying the other a series of
interest payments that are based on the principal cash flow. At maturity, the principal amounts are exchanged.
For the period ended December 31, 2016, none of the Funds entered into currency swaps.
Master Agreements
Certain Funds are parties to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”)
with counterparties that govern transactions in OTC derivative and foreign exchange contracts entered into by the Funds and
those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements,
144 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
collateral and events of default or termination. Events of termination and default include conditions that may entitle either party
to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement.
Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial
derivative transactions have different mechanics and are sometimes traded out of different legal entities of a particular counterparty
organization, each type of transaction may be covered by a different ISDA Master Agreement, resulting in the need for multiple
agreements with a single counterparty. As the ISDA Master Agreements are specific to unique operations of different asset types,
they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed
under a single agreement with a counterparty.
Master Repurchase Agreements (“Master Repo Agreements”) govern transactions between a Fund and select counterparties.
The Master Repo Agreements maintain provisions for, among other things, initiation, income payments, events of default, and
maintenance of collateral for repurchase and reverse repurchase agreements.
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern the considerations and factors
surrounding the settlement of certain forward settling transactions, such as delayed delivery by and between a Fund and select
counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment
and transfer, events of default, termination, and maintenance of collateral.
Disclosure about Offsetting Assets and Liabilities
Balance sheet disclosure is based on various netting agreements between brokers and counterparties, such as ISDA Master
Agreements, Master Repo Agreements and Master Forward Agreements. Certain funds utilize multiple counterparties. The
quantitative disclosure begins with disaggregation of counterparties by legal entity and the roll up of the data to reflect a single
counterparty in the table within the Funds’ financial statements. Net exposure represents the net receivable (payable) that would be
due from/to the counterparty in the event of default. Exposure from OTC derivatives can only be netted across transactions governed
under the same Master Agreement with the same legal entity.
Loan Agreements
The Core Bond Fund may invest in direct debt instruments which are interests in amounts owed by corporate, governmental, or
other borrowers to lenders or lending syndicates. The Fund’s investments in loans may be in the form of participations in loans
or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution
(the “agent”) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement.
When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it
is entitled only from the agent selling the loan agreement and only upon receipt by the agent of payments from the borrower. The
Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, the Fund
may be subject to the credit risk of both the borrower and the agent that is selling the loan agreement. When the Fund purchases
assignments from agents it acquires direct rights against the borrower on the loan. As of December 31, 2016, the Core Bond Fund
had no unfunded loan commitments.
Local Access Products
Certain Funds may invest in local access products, also known as certificates of participation, participation notes or participation
interest notes. Local access products are issued by banks or broker-dealers and are designed to replicate the performance of foreign
companies or foreign securities markets and can be used by the Fund as an alternative means to access the securities market of a
frontier emerging market country. The performance results of local access products will not replicate exactly the performance of
the foreign companies or foreign securities markets that they seek to replicate due to transaction and other expenses. Investments
in local access products involve certain risks in addition to those associated with a direct investment in the underlying foreign
companies or foreign securities markets whose return they seek to replicate. There can be no assurance that there will be a trading
market or that the trading price of local access products will equal the underlying value of the foreign company or foreign securities
market that it seeks to replicate. The Funds rely on the creditworthiness of the counterparty issuing the local access products and
have no rights against the issuer of the underlying security. The Funds minimize this risk by entering into agreements only with
counterparties that RIM deems creditworthy. Due to liquidity and transfer restrictions, the secondary markets on which the local
access products are traded may be less liquid than the markets for other securities, or may be completely illiquid.
Notes to Financial Statements 145
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
Emerging Markets Securities
Certain Funds may invest in emerging markets securities. Investing in emerging markets securities can pose some risks different
from, and greater than, risks of investing in U.S. or developed markets securities. These risks include: a risk of loss due to
exposure to economic structures that are generally less diverse and mature, and to political systems which may have less stability,
than those of more developed countries; smaller market capitalization of securities markets, which may suffer periods of relative
illiquidity; significant price volatility; restrictions on foreign investment; and possible difficulties in the repatriation of investment
income and capital. In addition, foreign investors may be required to register the proceeds of sales and future economic or political
crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization, or creation of
government monopolies. The currencies of emerging market countries may experience significant declines against the U.S. dollar,
and devaluation may occur subsequent to investments in these currencies by the Funds. Emerging market securities may be
subject to currency transfer restrictions and may experience delays and disruptions in settlement procedures. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of
certain emerging market countries.
Emerging Markets Debt
The Core Bond Fund may invest in emerging markets debt. The Fund's emerging markets debt securities may include obligations
of governments and corporations. As with any fixed income securities, emerging markets debt securities are subject to the risk of
being downgraded in credit rating due to the risk of default. In the event of a default on any investments in foreign debt obligations,
it may be more difficult for the Fund to obtain or to enforce a judgment against the issuers of such securities. With respect to debt
issued by emerging market governments, such issuers may be unwilling to pay interest and repay principal when due, either due
to an inability to pay or submission to political pressure not to pay, and as a result may default, declare temporary suspensions of
interest payments or require that the conditions for payment be renegotiated.
Repurchase Agreements
The Core Bond Fund may enter into repurchase agreements. A repurchase agreement is an agreement under which a 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 within a few days or weeks). The resale price reflects an agreed upon interest rate
effective for the period the security is held by a Fund and is unrelated to the interest rate on the security. The securities acquired
by a Fund constitute collateral for the repurchase obligation. In these transactions, the securities acquired by a 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 the
custodian bank until repurchased. A Fund will not invest more than 15% of its net assets (taken at current fair value) in repurchase
agreements maturing in more than seven days.
Mortgage-Related and Other Asset-Backed Securities
The Core Bond Fund may invest in mortgage or other asset-backed securities (“ABS”). These securities may include mortgage
instruments issued by U.S. government agencies (“agency mortgages”) or those issued by private entities (“non-agency mortgages”).
Specific types of instruments may include reverse mortgages, mortgage pass-through securities, collateralized mortgage obligations
(“CMO”), commercial mortgage-backed securities, mortgage dollar rolls, CMO residuals, stripped mortgage-backed securities and
other securities that directly or indirectly represent a participation in, or are secured by a payable from, mortgage loans on real
property. The value of a Fund’s mortgage-backed securities (“MBS”) may be affected by, among other things, changes or perceived
changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the mortgage, or the
quality of the underlying assets. The mortgages underlying the securities may default or decline in quality or value. Through its
investments in MBS, a Fund has exposure to subprime loans, Alt-A loans and non-conforming loans as well as to the mortgage
and credit markets generally. Underlying collateral related to subprime, Alt-A and non-conforming mortgage loans has become
increasingly susceptible to defaults and declines in quality or value, especially in a declining residential real estate market. In
addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole.
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 resulting in reinvestment risk.
146 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
Rising or high interest rates may result in slower than expected principal payments which may tend to extend the duration of MBS,
making them more volatile and more sensitive to changes in interest rates. This is known as extension risk.
MBS may have less potential for capital appreciation than comparable fixed income securities due to the likelihood of increased
prepayments of mortgages resulting from foreclosures or declining interest rates. These foreclosed or refinanced mortgages are paid
off at face value (par) or less, causing a loss, particularly for any investor who may have purchased the security at a premium or a
price above par. In such an environment, this risk limits the potential price appreciation of these securities.
Agency Mortgage-Backed Securities
Certain MBS may be issued or guaranteed by the U.S. government or a government sponsored entity, such as Fannie Mae (the Federal
National Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage Corporation). Although these instruments may
be guaranteed by the U.S. government or a government sponsored entity, many such MBS are not backed by the full faith and credit
of the United States and are still exposed to the risk of non-payment.
Privately Issued Mortgage-Backed Securities
MBS held by a Fund may be issued by private issuers including 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. These privately issued non-agency MBS may offer higher
yields than those issued by government agencies, but also may be subject to greater price changes than governmental issues.
Subprime loans refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments
on their loans. Alt-A loans refer to loans extended to borrowers who have incomplete documentation of income, assets, or other
variables that are important to the credit underwriting processes. Non-conforming mortgages are loans that do not meet the standards
that allow purchase by government-sponsored enterprises. MBS with exposure to subprime loans, Alt-A loans or nonconforming
loans 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, Alt-A and non-conforming loans, but a
level of risk exists for all loans.
Unlike agency MBS issued or guaranteed by the U.S. government or a government-sponsored entity (e.g., Fannie Mae and Freddie
Mac), 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 on 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.
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.
Notes to Financial Statements 147
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
Asset-Backed Securities
ABS may include MBS, loans, receivables or other assets. The value of the Funds’ ABS may be affected by, among other things,
actual or perceived changes in interest rates, factors concerning the interests in and structure of the issuer or the originator of the
receivables, the market’s assessment of the quality of underlying assets or actual or perceived changes in the credit worthiness of
the individual borrowers, the originator, the servicing agent or the financial institution providing the credit support.
Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities.
Rising or high interest rates tend to extend the duration of ABS, making them more volatile and more sensitive to changes in interest
rates. The underlying assets are sometimes subject to prepayments which can shorten the security’s weighted average life and may
lower its return. Defaults on loans underlying ABS have become an increasing risk for ABS that are secured by home equity loans
related to sub-prime, Alt-A or non-conforming mortgage loans, especially in a declining residential real estate market.
ABS (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. ABS 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 Fund 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 ABS 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.
Forward Commitments
The Core Bond Fund may contract to purchase securities for a fixed price at a future date beyond customary settlement time. The
price of the underlying securities and the date when the securities will be delivered and paid for are fixed at the time the transaction
is negotiated. The Fund may dispose of a forward commitment transaction prior to settlement if it is appropriate to do so and may
realize short-term gains (or losses) upon such sale. When effecting such transactions, cash or liquid high-grade debt obligations
of the Fund in a dollar amount sufficient to make payment for the portfolio securities to be purchased will be earmarked on the
Fund’s records at the trade date and until the transaction is settled. A forward commitment transaction involves a risk of loss if the
value of the security to be purchased declines prior to the settlement date or the other party to the transaction fails to complete the
transaction.
The Core Bond Fund may invest in to-be-announced ("TBA") mortgage-backed securities. A TBA security is a forward mortgage-
backed securities trade in which a seller agrees to issue a TBA mortgage-backed security at a future date. The securities are
purchased and sold on a forward commitment basis with an approximate principal amount and maturity date. The actual principal
amount and maturity date will be determined upon settlement when the specific mortgage pools are assigned. These securities are
within the parameters of industry “good delivery” standards.
As of December 31, 2016, the Core Bond Fund had no cash collateral balances in connection with TBAs.
Inflation-Indexed Bonds
The Core Bond Fund may invest in inflation-indexed securities, which are typically bonds or notes designed to provide a return
higher than the rate of inflation (based on a designated index) if held to maturity. A common type of inflation-indexed security is a
U.S. Treasury Inflation-Protected Security (“TIPS”). The principal of a TIPS increases with inflation and decreases with deflation,
as measured by the Consumer Price Index. When a TIPS matures, the adjusted principal or original principal is paid, whichever is
148 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
greater. TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest
payments rise with inflation and fall with deflation.
Guarantees
In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general
indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that
may be made against the Funds that have not yet occurred. However, the Funds expect the risk of loss to be remote.
Market, Credit and Counterparty Risk
In the normal course of business, the Funds trade financial instruments and enter into financial transactions where risk of potential
loss exists due to changes in the market (market risk) or failure of the other party to a transaction to perform (credit risk). Similar
to credit risk, the Funds may also be exposed to counterparty risk or risk that an institution or other entity with which the Funds
have unsettled or open transactions will default. The potential loss could exceed the value of the relevant assets recorded in the
Funds' financial statements (the “Assets”). The Assets consist principally of cash due from counterparties and investments. The
extent of the Funds’ exposure to market, credit and counterparty risks with respect to the Assets approximates their carrying value
as recorded in the Funds’ Statements of Assets and Liabilities.
Global economies and financial markets are becoming increasingly interconnected and political and economic conditions (including
recent instability and volatility) and events (including natural disasters) in one country, region or financial market may adversely
impact issuers in a different country, region or financial market. As a result, issuers of securities held by a Fund may experience
significant declines in the value of their assets and even cease operations. Such conditions and/or events may not have the same
impact on all types of securities and may expose a Fund to greater market and liquidity risk and potential difficulty in valuing
portfolio instruments held. This could cause a Fund to underperform other types of investments.
3. Investment Transactions
Securities
During the period ended December 31, 2016, purchases and sales of investment securities (excluding U.S. Government and Agency
obligations, short-term investments, options, futures and repurchase agreements) were as follows:
Purchases | Sales | |||||
Multi-Style Equity Fund | $ | 418,805,754 | $ | 469,998,759 | ||
Aggressive Equity Fund | 220,713,868 | 242,323,050 | ||||
Non-U.S. Fund | 121,753,979 | 127,820,193 | ||||
Core Bond Fund | 495,708,506 | 521,893,405 | ||||
Global Real Estate Securities Fund | 710,537,993 | 695,631,255 |
Purchases and sales of U.S. Government and Agency obligations (excluding short-term investments, options, futures and repurchase
agreements) were as follows:
Purchases | Sales | |||||
Core Bond Fund | $ | 1,581,421,669 | $ | 1,451,943,291 |
Securities Lending
The Investment Company has a securities lending program whereby each Fund can loan securities with a value up to 33 1/3% of
each Fund’s total assets. The maturity associated with these securities is considered continuous. The Fund receives cash (U.S.
currency), U.S. Government or U.S. Government Agency obligations as collateral against the loaned securities. The cash collateral
cannot be resold, repledged or rehypothecated. As of December 31, 2016, to the extent that a loan was collateralized by cash, such
collateral was invested by the securities lending agent, Brown Brothers Harriman & Co. (“BBH”), in the U.S. Cash Collateral Fund,
an unregistered fund advised by RIM. The collateral received is recorded on a lending Fund’s Statement of Assets and Liabilities
along with the related obligation to return the collateral.
Affiliated income generated from the investment of cash collateral, less negotiated rebate fees paid to participating brokers, is
divided between the Fund and BBH and is reported as securities lending income on the Fund’s Statement of Operations. To the
extent that a loan is secured by non-cash collateral, brokers pay the Fund negotiated lenders’ fees, which are divided between the
Fund and BBH and are recorded as securities lending income for the Fund. All collateral received will be in an amount at least
Notes to Financial Statements 149
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
equal to 102% (for loans of U.S. securities) or 105% (for loans of non-U.S. securities) of the fair value of the loaned securities at the
inception of each loan. The fair value of the loaned securities is determined at the close of business of the Fund and any additional
required collateral is delivered to the Fund the next day. Should the borrower of the securities fail financially, there is a risk of delay
in recovery of the securities or loss of rights in the collateral.
4. Related Party Transactions, Fees and Expenses
Adviser, Administrator, Transfer and Dividend Disbursing Agent
RIM provides or oversees the provision of all investment advisory and portfolio management services for the Funds, including
developing the investment program for each Fund and managing each Fund's overall exposures. From its advisory fees received
from the Funds, RIM, as agent for RIF, pays all fees to the money managers for their investment advisory services. Each money
manager has agreed that it will look only to RIM for the payment of the money manager’s fee, after RIF has paid RIM. Fees paid
to the money managers are not affected by any voluntary or statutory expense limitations. RIFUS is the Funds' administrator and
transfer agent. RIFUS, in its capacity as the Funds' administrator, provides or oversees the provision of all administrative services
for the Funds. RIFUS, in its capacity as the Funds' transfer agent and dividend disbursing agent, is responsible for providing
transfer agency and dividend disbursing services to the Funds. RIM is an indirect, wholly-owned subsidiary of Russell Investments
Group, Ltd., a Cayman company.
The Funds are permitted to invest their cash (i.e., cash awaiting investment or cash held to meet redemption requests or to pay
expenses) in the U.S. Cash Management Fund, an unregistered fund advised by RIM. As of December 31, 2016, the Funds
had invested $152,184,278 in the U.S. Cash Management Fund. In addition, all or a portion of the collateral received from the
Investment Company’s securities lending program in the amount of $14,074,717 is invested in the U.S. Cash Collateral Fund, an
unregistered fund advised by RIM.
The advisory fee is based upon the average daily net assets of each Fund and the administration fee of up to 0.05% is based on the
combined average daily net assets of the Funds. Advisory and administration fees are paid monthly.
Annual Rate | ||||||
Funds | Adviser(%) | Administrator(%) | ||||
Multi-Style Equity Fund | 0.73 | Up to 0.05 | ||||
Aggressive Equity Fund | 0.90 | Up to 0.05 | ||||
Non-U.S. Fund | 0.90 | Up to 0.05 | ||||
Core Bond Fund | 0.55 | Up to 0.05 | ||||
Global Real Estate Securities Fund | 0.80 | Up to 0.05 |
The following table shows the total amount of each of these fees paid by the Funds for the period ended December 31, 2016:
Advisory | Administrative | |||||
Multi-Style Equity Fund | $ | 3,210,967 | $ | 219,929 | ||
Aggressive Equity Fund | 1,906,489 | 105,916 | ||||
Non-U.S. Fund | 3,150,430 | 175,024 | ||||
Core Bond Fund | 4,787,767 | 435,251 | ||||
Global Real Estate Securities Fund | 6,344,953 | 396,559 |
RIM has agreed to certain waivers of its advisory fees as follows:
For the Core Bond Fund, RIM has contractually agreed, until April 30, 2017, to waive 0.02% of its 0.55% advisory fee. The waiver
may not be terminated during the relevant period except with Board approval. The total amount of the waiver for the period ended
December 31, 2016 was $174,101. There were no reimbursements during the period.
RIM does not have the ability to recover amounts waived or reimbursed from previous periods.
Transfer and Dividend Disbursing Agent
RIFUS serves as transfer agent and provides dividend disbursing services to the Funds. For this service, RIFUS is paid a fee based
upon the average daily net assets of the Funds for transfer agency and dividend disbursing services. RIFUS retains a portion of this
fee for services provided to the Funds and pays the balance to unaffiliated agents who assist in providing these services. Transfer
agency fees paid by the Funds presented herein for the period ended December 31, 2016 were as follows:
150 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
Amount | |||
Multi-Style Equity Fund | $ | 19,354 | |
Aggressive Equity Fund | 9,321 | ||
Non-U.S. Fund | 15,402 | ||
Core Bond Fund | 38,302 | ||
Global Real Estate Securities Fund | 34,897 |
Distributor
Russell Investments Financial Services, LLC (the “Distributor”), a wholly-owned subsidiary of RIM, is the distributor for the
Investment Company, pursuant to the distribution agreement with the Investment Company. The Distributor receives no compensation
from Investment Company for its services.
Affiliated Brokerage Commissions
The Funds effect certain transactions through Russell Investments Implementation Services, LLC (“RIIS”). RIIS is a registered
broker and investment adviser and an affiliate of RIM. RIIS uses a multi-venue trade management approach whereby RIIS allocates
trades among RIIS’ network of independent brokers for execution, clearing and other services. Trades placed through RIIS and its
independent brokers are made (i) to manage trading associated with changes in money managers, rebalancing across existing money
managers, cash flows and other portfolio transitions, (ii) to execute portfolio securities transactions for the portion of each Fund’s
assets that RIM determines not to allocate to money managers, including assets RIM may manage to effect a Fund’s investment
strategies and/or to modify a Fund's overall portfolio characteristics and for each Fund’s cash reserves, (iii) to execute portfolio
securities transactions for the portion of a Fund’s assets that RIM manages based upon model portfolios provided by the Fund’s
non-discretionary managers or (iv) to execute money manager’s portfolio securities transactions for the segment of a Fund’s portfolio
assigned to the money manager. RIM has authorized RIS to effect certain futures, swaps, OTC derivative transactions, and cleared
swaps, including foreign currency spots, forwards and options trading on behalf of the Funds.
The Funds are permitted to purchase or sell securities from or to certain related affiliated funds under specified conditions outlined
in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by the
Funds from or to another fund or portfolio that are, or could be, considered an affiliate by virtue of having a common investment
adviser (or affiliated investment advisers), common Trustees and/or common officers complies with Rule 17a -7 of the Investment
Company Act. Further, as defined under the procedures each transaction is effected at the current market value.
During the period ended December 31, 2016, the Funds below engaged in purchases and sales of securities pursuant to Rule 17a
-7 of the Investment Company Act, as follows (amounts in thousands):
Purchases | Sales | |||||
Global Real Estate Securities Fund | $ | 18,094 | $ | - |
Board of Trustees
The Russell Investments Fund Complex consists of Russell Investment Company ("RIC"), which has 42 funds and RIF, which has
9 funds. Each of the Trustees is a Trustee of RIC and RIF. The Russell Investments Fund Complex compensates each Trustee who
is not an employee of RIM or its affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based
on its net assets relative to other funds in the Russell Investments Fund Complex.
For the period ended December 31, 2016, the total amount of regular and special compensation paid to the Trustees by the Russell
Investments Fund Complex was $1,462,250.
5. Federal Income Taxes
At December 31, 2016, the following Funds had net tax basis capital loss carryforwards which may be applied against any net
realized taxable gains in each succeeding year or until their respective expiration dates, whichever occurs first. Available capital
loss carryforwards and expiration dates are as follows:
Notes to Financial Statements 151
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
No Expiration | ||||||||||||
Funds | 12/31/2017 | 10/31/2018 | 10/31/2019 | Short Term | Long-Term | Totals | ||||||
Aggressive Equity | ||||||||||||
Fund | $ | — | $ | — | $ | — | $ | 1,971,209 | $ | — | $ | 1,971,209 |
Non-U.S. Fund | 29,831,559 | — | — | — | — | 29,831,559 |
Under the Regulated Investment Company Modernization Act of 2010, the Funds will be permitted to carry forward capital losses
incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those
future taxable years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of
this ordering rule, pre-enactment capital loss carryforwards may be more likely to expire unused. Additionally, post-enactment
capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being
considered all short-term as under previous law.
6. Record Ownership
At December 31, 2016, the following table includes shareholders of record with greater than 10% of the total outstanding shares
of each respective Fund.
# of Shareholders | % | |||||
Multi-Style Equity Fund | 2 | 81.5 | ||||
Aggressive Equity Fund | 2 | 73.7 | ||||
Non-U.S. Fund | 2 | 73.4 | ||||
Core Bond Fund | 2 | 78.6 | ||||
Global Real Estate Securities Fund | 2 | 91.6 |
7. Restricted Securities
Restricted securities are subject to contractual limitations on resale, are often issued in private placement transactions, and are not
registered under the Act. The most common types of restricted securities are those sold under Rule 144A of the Act and commercial
paper sold under Section 4(2) of the Act.
A Fund may invest a portion of its net assets not to exceed 15% in securities that are illiquid. This limitation is applied at the time
of purchase. Illiquid securities are securities that may not be readily marketable, and that cannot be sold within seven days in
the ordinary course of business at the approximate amount at which the Fund has valued the securities. Restricted securities are
generally considered to be illiquid.
See each Fund’s Schedule of Investments for a list of restricted securities held by a Fund that are illiquid.
8. Commitments and Contingencies
The Core Bond Fund may enter into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to
fund these loan commitments at the borrowers' discretion. Unfunded loan commitments and funded portions of credit agreements
are marked to market daily and any unrealized appreciation or depreciation is included in the Statements of Assets and Liabilities
and the Statements of Operations. Funded portions of credit agreements are presented in the Schedules of Investments. For the
period ended December 31, 2016, there were no unfunded loan commitments held by the Fund.
Pending Legal Proceedings
On October 17, 2013, Fred McClure filed a derivative lawsuit against RIM on behalf of ten RIC funds: the Russell Commodity
Strategies Fund, Russell Emerging Markets Fund, Russell Global Equity Fund, Russell Global Infrastructure Fund, Russell Global
Opportunistic Credit Fund, Russell International Developed Markets Fund, Russell Multi-Strategy Alternative Fund (liquidated
in 2016), Russell Strategic Bond Fund, Russell U.S. Small Cap Equity Fund and Russell Global Real Estate Securities Fund.
The lawsuit, which was filed in the United States District Court for the District of Massachusetts, seeks recovery under Section
36(b) of the Investment Company Act, as amended, for the Funds’ alleged payment of excessive investment management fees to
RIM. On December 8, 2014, Fred McClure filed a second derivative lawsuit in the United States District Court for the District of
Massachusetts. This second suit involves the same ten RIC Funds, and the allegations are similar, although the second suit adds
a claim alleging that RIFUS charged the funds excessive administrative fees under Section 36(b). The plaintiff seeks on behalf of
the Funds recovery of the amount of the allegedly excessive compensation or payments received from these ten RIC Funds and
earnings that would have accrued to plaintiff had that compensation not been paid or, alternatively, rescission of the contracts
152 Notes to Financial Statements
Russell Investment Funds
Notes to Financial Statements, continued — December 31, 2016
and restitution of all excessive fees paid, for a period commencing one year prior to the filing of the lawsuit through the date of
the trial. On November 15, 2016, the Court granted RIM's and RIFUS's motion for summary judgment with respect to the Russell
Multi-Strategy Alternative Fund and granted the motion in part with respect to the other nine RIC Funds. A trial with respect to
plaintiff's claims on behalf of the remaining nine RIC Funds is currently scheduled to commence in March 2017. RIM and RIFUS
are vigorously defending the actions.
9. Custodian Fee Reimbursement
During the period ended December 31, 2016, several of the Funds received a reimbursement from State Street Bank for overbilling
of custody out-of-pocket fees from prior years. The table below provides a summary of actual custodian fees for the current fiscal
year prior to the reimbursement as well as the impact of the fee reimbursement to each Fund's custodian fee as presented in the
Statements of Operations.
Net Custodian Fees as | |||||||||
Custodian Fees Before | disclosed in the Statement of | ||||||||
Reimbursement | Fee Reimbursement | Operations | |||||||
Multi-Style Equity Fund | $ | 86,387 | $ | 42,760 | $ | 43,627 | |||
Aggressive Equity Fund | 65,136 | 23,897 | 41,239 | ||||||
Non-U.S. Fund | 216,034 | 170,449 | 45,585 | ||||||
Core Bond Fund | 317,260 | 33,519 | 283,741 | ||||||
Global Real Estate Securities Fund | 381,839 | 27,932 | 353,907 |
10. Subsequent Events
Management has evaluated the events and/or transactions that have occurred through the date the financial statements were issued
and noted no items requiring adjustments of the financial statements or additional disclosures.
Notes to Financial Statements 153
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Russell Investment Funds
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements
of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of
Multi-Style Equity Fund, Aggressive Equity Fund, Non-U.S. Fund, Core Bond Fund, and Global Real Estate Securities Fund (five of the
portfolios constituting Russell Investment Funds, hereafter collectively referred to as the “Funds”) as of December 31, 2016, the results
of each of their operations for the period then ended, the changes in each of their net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are
the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as
of December 31, 2016 by correspondence with the custodian, brokers and transfer agents, provide a reasonable basis for our opinion.
Seattle, Washington
February 15, 2017
154 Report of Independent Registered Public Accounting Firm
Russell Investment Funds
Tax Information — December 31, 2016 (Unaudited)
For the tax year ended December 31, 2016, the Funds hereby designate 100% or the maximum amount allowable, of its net taxable
income as qualified dividends taxed at individual net capital gain rates.
The Form 1099 you receive in January 2017 will show the tax status of all distributions paid to your account in calendar year 2016.
The Funds designate dividends distributed during the fiscal year as qualifying for the dividends received deduction for corporate
shareholders as follows:
Multi-Style Equity | 55.6 | % |
Aggressive Equity | 100 | % |
Non-U.S. | 0.0 | % |
Global Real Estate Securities | 0.0 | % |
Core Bond | 0.0 | % |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following amounts as long-term capital gain
dividends for their taxable year ended December 31, 2016:
Multi-Style Equity | $ | 23,881,563 |
Aggressive Equity | $ | 100,814 |
Non-U.S. | $ | — |
Global Real Estate Securities | $ | 21,919,738 |
Core Bond | $ | 1,820,412 |
The Funds listed below paid foreign taxes and recognized foreign source income during the taxable year ended December 31, 2016.
Pursuant to Section 853 of the Internal Revenue Code, the Funds designate the following per share amounts of foreign taxes paid and
income earned from foreign sources:
Foreign | Foreign | |||||||
Taxes | Source | |||||||
Foreign | Paid | Foreign Source | Income Per | |||||
Fund Name | Taxes Paid | Per Share | Income | Share | ||||
Non-U.S. | $ | 746,197 | $ | 0.0234 | $ | 9,814,121 | $ | 0.3080 |
Please consult a tax adviser for any questions about federal or state income tax laws.
Tax Information 155
Russell Investment Funds
Affiliated Brokerage Transactions — December 31, 2016 (Unaudited)
As mentioned in the Note 4 in the Notes to Financial Statements contained in this annual report, the Funds utilize RIIS and its
independent brokers. RIIS is a registered broker dealer and investment adviser and an affiliate of RIM. RIIS uses a multi-venue trade
management approach whereby RIIS allocates trades among RIIS’ network of independent brokers for execution, clearing, and other
services. Trades placed through RIIS and its independent brokers are made (i) to manage trading associated with changes in money
manager, rebalancing across existing money managers, cash flows and other portfolio transitions, (ii) to execute portfolio securities
transactions for each Fund’s assets that RIM determines not to allocate to money managers including assets RIM may manage to effect
a Fund’s investment strategies and/or to modify a Fund’s overall portfolio characteristics and for each Fund’s cash reserves, (iii) to
execute portfolio securities transactions for the portion of a Fund’s assets that RIM manages based upon model portfolios provided by
the Funds’ non-discretionary managers or (iv) to execute money manager portfolio securities transactions for the segment of a Fund’s
portfolio assigned to the money manager. RIM has authorized RIIS to effect certain futures, swaps, OTC derivative transactions, and
cleared swaps, including foreign currency spots, forwards and options trading on behalf of the Funds.
Amounts retained by RIIS for the period ended December 31, 2016 were as follows:
Affiliated Broker | Fund Name | 2016 | |
RIM | |||
Multi-Style Equity Fund | $ | 28,488 | |
Aggressive Equity Fund | — | ||
Non-U.S. Fund | 36,006 | ||
Core Bond Fund | 104,664 | ||
Global Real Estate Securities Fund | 124,297 |
156 Affiliated Brokerage Transactions
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts — (Unaudited)
Approval of Money Manager Contracts
The Board received the following proposals from RIM: (i) at a meeting held on August 30, 2016, to effect Money Manager changes for
the Global Real Estate Securities Fund and Core Bond Fund; and (ii) at a meeting held on December 6, 2016, to effect Money Manager
changes for the Multi-Style Equity Fund and at that same meeting to approve a new portfolio management contract for the Multi-Style
Equity Fund resulting from a change of control for one of the Fund’s Money Managers. In the case of each proposed change, the Trustees
approved the terms of the proposed portfolio management contract based upon RIM’s recommendation to hire the Money Manager at
the proposed fee rate; information as to reason for the proposed change; information as to the Money Manager’s role in the management
of the Fund’s investment portfolio (including the amount of Fund assets to be allocated to the Money Manager) and RIM’s evaluation
of the anticipated quality of the investment advisory services to be provided by the Money Manager; information as to any significant
business relationships between the Money Manager and RIM or Russell Investments Financial Services, LLC, the Fund’s underwriter;
the CCO’s evaluation of the Money Manager’s compliance program, policies and procedures, and certification that they were consistent
with applicable legal standards; RIM’s explanation as to the lack of relevance of Money Manager profitability to the evaluation of
portfolio management contracts with Money Managers because the willingness of Money Managers to serve in such capacity depends
upon arm’s-length negotiations with RIM; RIM’s awareness of the standard fee rates charged by the Money Manager to other clients;
RIM’s belief that the proposed investment advisory fees would be reasonable in light of the anticipated quality of investment advisory
services to be rendered; the increase or decrease in aggregate Money Manager fees to be paid by RIM from its Advisory Fee as a result
of the engagement of the Money Manager; and the expected costs of transitioning Fund assets to the Money Manager. The Trustees’
approval also reflected their findings at prior meetings, including their December 2015 meeting in connection with their evaluation
and approval of new investment advisory agreements with RIM and then current Money Managers for the Other RIM-Managed Funds,
as well as information received throughout the course of the year, regarding the reasonableness of the aggregate investment advisory
fees paid by the Funds, and the fact that the aggregate investment advisory fees paid by the Funds would not increase as a result of
the implementation of the proposed money manager changes because the money manager’s investment advisory fees are paid by RIM.
Basis for Approval of Investment Advisory Contracts 157
Russell Investment Funds
Shareholder Requests for Additional Information — December 31, 2016 (Unaudited)
A complete unaudited schedule of investments is made available generally no later than 60 days after the end of the first and third
quarters of each fiscal year. These reports are available (i) free of charge, upon request, by calling the Funds at (800) 787-7354, (ii)
on the Securities and Exchange Commission’s website at www.sec.gov, and (iii) at the Securities and Exchange Commission’s Office of
Investor Education and Advocacy (formerly, the Public Reference room).
The Board has delegated to RIM, as RIF’s investment adviser, the primary responsibility for monitoring, evaluating and voting proxies
solicited by or with respect to issuers of securities in which assets of the Funds may be invested. RIM has established a proxy voting
committee and has adopted written proxy voting policies and procedures (“P&P”) and proxy voting guidelines (“Guidelines”). The
Funds maintain a Portfolio Holdings Disclosure Policy that governs the timing and circumstances of disclosure to shareholders and
third parties of information regarding the portfolio investments held by the Funds. A description of the P&P, Guidelines, Portfolio
Holdings Disclosure Policy and additional information about Fund Trustees are contained in the Funds’ Statement of Additional
Information (“SAI”). The SAI and information regarding how the Funds voted proxies relating to portfolio securities during the most
recent 12-month period ended June 30, 2016 are available (i) free of charge, upon request, by calling the Funds at (800) 787-7354,
and (ii) on the Securities and Exchange Commission’s website at www.sec.gov.
If possible, depending on contract owner registration and address information, and unless you have otherwise opted out, only one copy
of the RIF prospectus and each annual and semi-annual report will be sent to contract owners at the same address. If you would like
to receive a separate copy of these documents, please contact your Insurance Company. If you currently receive multiple copies of the
prospectus, annual report and semi-annual report and would like to request to receive a single copy of these documents in the future,
please contact your insurance company.
Some insurance companies may offer electronic delivery of the Funds’ prospectuses and annual and semi-annual reports. Please
contact your insurance company for further details.
158 Shareholder Requests for Additional Information
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers — December 31, 2016
(Unaudited)
The following tables provide information for each officer and trustee of the Russell Investments Fund Complex. The Russell Investments
Fund Complex consists of Russell Investment Company (“RIC”), which has 42 funds and Russell Investment Funds (“RIF”), which
has 9 funds. Each of the trustees is a trustee of RIC and RIF. The first table provides information for the independent trustees.
The second table provides information for the Trustee Emeritus. The third table provides information for the officers. Furthermore,
each Trustee possesses the following specific attributes: Mr. Alston has business, financial and investment experience as a senior
executive of an international real estate firm and is trained as a lawyer; Ms. Blake has had experience as a certified public accountant
and has had experience as a member of boards of directors/trustees of other investment companies; Ms. Burgermeister has had
experience as a certified public accountant and as a member of boards of directors/trustees of other investment companies; Mr.
Connealy has had experience with other investment companies and their investment advisers, first as a partner in the investment
management practice of PricewaterhouseCoopers LLP and, subsequently, as the senior financial executive of two other investment
organizations sponsoring and managing investment companies, and has been determined by the Board to be an “audit committee
financial expert”; Ms. Krysty has had business, financial and investment experience as the founder and senior executive of a registered
investment adviser focusing on high net worth individuals as well as a certified public accountant and a member of the boards of
other corporations and non-profit organizations; Mr. Tennison has had business, financial and investment experience as a senior
executive of a corporation with international activities and was trained as an accountant; and Mr. Thompson has had experience in
business, governance, investment and financial reporting matters as a senior executive of an organization sponsoring and managing
other investment companies, and, subsequently, has served as a board member of other investment companies. Effective June 30,
2016, Ms. Sandra Cavanaugh retired from Russell Investments and resigned her position as an Interested Trustee of the Trust.
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Investments | During the | |||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES | |||||
Thaddas L. Alston, | Trustee since 2006 | Appointed until | Senior Vice President, Larco | 51 | Until October |
Born April 7, 1945 | successor is | Investments, Ltd. (real estate firm) | 2015, Trustee, | ||
1301 Second Avenue, | duly elected and | Russell Exchange | |||
18th Floor, Seattle, WA | qualified | Traded Funds | |||
98101 | Trust |
Disclosure of Information about Fund Trustees and Officers 159
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued — December
31, 2016 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Investments | During the | |||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
Kristianne Blake, | Trustee since 2000 | Appointed until | • Director and Chairman of the | 51 | • Director, Avista |
Born January 22, 1954 | Chairman since 2005 | successor is | Audit Committee, Avista Corp | Corp (electric | |
1301 Second Avenue, | duly elected and | (electric utilities) | utilities) | ||
18th Floor, Seattle, WA | qualified | • Regent, University of | • Until June 30, | ||
98101 | Approved annually | Washington | 2014, Director, | ||
• President, Kristianne Gates | Ecova (total | ||||
Blake, P.S. (accounting services) | energy and | ||||
• Until June 30, 2014, Director, | sustainability | ||||
Ecova (total energy and | management) | ||||
sustainability management) | • Until December | ||||
• Until December 31, 2013, | 31, 2013, | ||||
Trustee and Chairman of | Trustee, | ||||
the Operations Committee, | Principal | ||||
Principal Investors Funds and | Investors Funds | ||||
Principal Variable Contracts | (investment | ||||
Funds (investment company) | company) | ||||
• From April 2004 through | • Until December | ||||
December 2012, Director, Laird | 31, 2013, | ||||
Norton Wealth Management | Trustee Principal | ||||
and Laird Norton Tyee Trust | Variable | ||||
(investment company) | Contracts Funds | ||||
(investment | |||||
company) | |||||
• From April | |||||
2004 through | |||||
December 2012, | |||||
Director, Laird | |||||
Norton Wealth | |||||
Management and | |||||
Laird Norton | |||||
Tyee Trust | |||||
(investment | |||||
company) | |||||
• Until October | |||||
2015, Trustee, | |||||
Russell | |||||
Exchange | |||||
Traded Funds | |||||
Trust |
* Each Trustee is subject to mandatory retirement at age 75.
160 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued — December
31, 2016 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Investments | During the | |||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES (continued) | |||||
Cheryl Burgermeister, | Trustee since 2012 | Appointed until | • Retired | 51 | • Trustee and |
Born June 26, 1951 | successor is | • Trustee and Chairperson of | Chairperson of | ||
1301 Second Avenue, | duly elected and | Select Sector SPDR Funds | Select Sector | ||
18th Floor, Seattle, WA | qualified | (investment company) | SPDR Funds | ||
98101 | • Until December 31, 2014, | (investment | |||
Chairperson of Audit | company) | ||||
Committee, Select Sector SPDR | • Until May | ||||
Funds (investment company) | 6, 2016, | ||||
Trustee, ALPS | |||||
Series Trust | |||||
(investment | |||||
company) | |||||
• Until December | |||||
31, 2014, | |||||
Chairperson | |||||
of Audit | |||||
Committee, | |||||
Select Sector | |||||
SPDR Funds | |||||
(investment | |||||
company) | |||||
• Until October | |||||
2015, Trustee, | |||||
Russell | |||||
Exchange | |||||
Traded Funds | |||||
Trust | |||||
Daniel P. Connealy, | Trustee since 2003 | Appointed until | • Retired | 51 | Until October |
Born June 6, 1946 | Chairman of the | successor is | • June 2004 to June 2014, Senior | 2015, Trustee, | |
1301 Second Avenue, | Audit Committee | duly elected and | Vice President and Chief | Russell Exchange | |
18th Floor, Seattle, WA | since 2015 | qualified | Financial Officer, Waddell | Traded Funds | |
98101 | Appointed until | & Reed Financial, Inc. | Trust | ||
successor is | (investment company) | ||||
duly elected and | |||||
qualified | |||||
Katherine W. Krysty, | Trustee since 2014 | Appointed until | • Retired | 51 | Until October |
Born December 3, 1951 | successor is | • January 2011 through March | 2015, Trustee, | ||
1301 Second Avenue | duly elected and | 2013, President Emerita, Laird | Russell Exchange | ||
18th Floor, Seattle, WA | qualified | Norton Wealth Management | Traded Funds | ||
98101 | (investment company) | Trust |
Disclosure of Information about Fund Trustees and Officers 161
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued — December
31, 2016 (Unaudited)
Position(s) Held | Term | Principal Occupation(s) | No. of | Other | |
Name, | With Fund and | of | During the | Portfolios | Directorships |
Age, | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Address | Time Served | Investments | During the | ||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES (continued) | |||||
Raymond P. Tennison, | Trustee since 2000 | Appointed until | • Retired | 51 | Until October |
Jr., Born December 21, | Chairman of | successor is | • From January 2008 to December | 2015, Trustee, | |
1955 | the Nominating | duly elected and | 2011, Vice Chairman of the | Russell Exchange | |
1301 Second Avenue | and Governance | qualified | Board, Simpson Investment | Traded Funds | |
18th Floor, Seattle, WA | Committee since | Appointed until | Company (paper and forest | Trust | |
98101 | 2007 | successor is | products) | ||
duly elected and | |||||
qualified | |||||
Jack R. Thompson, | Trustee since 2005 | Appointed until | • Retired | 51 | • Until October |
Born March 21, 1949 | Chairman of | successor is | 2015, Trustee, | ||
1301 Second Avenue, | the Investment | duly elected and | Russell | ||
18th Floor, Seattle, WA | Committee since | qualified | Exchange | ||
98101 | 2015 | Appointed until | Traded Funds | ||
successor is | Trust | ||||
duly elected and | |||||
qualified |
* Each Trustee is subject to mandatory retirement at age 75.
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Investments | During the | |||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
TRUSTEE EMERITUS | |||||
George F. Russell, Jr., | Trustee Emeritus and | Until resignation or | • Director Emeritus, RIM | 51 | None |
Born July 3, 1932 | Chairman Emeritus | removal | |||
1301 Second Avenue, | since 1999 | ||||
18th Floor, Seattle, WA | |||||
98101 |
162 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
Disclosure of Information about Fund Trustees and Officers, continued — December
31, 2016 (Unaudited)
Name, | Positions(s) Held | Term | Principal Occupation(s) |
Age, | With Fund and | of | During the |
Address | Length of | Office | Past 5 Years |
Time Served | |||
OFFICERS | |||
Cheryl Wichers, | Chief Compliance | Until removed | • Chief Compliance Officer, RIC and RIF |
Born December 16, | Officer since 2005 | by Independent | • Chief Compliance Officer, Russell Investments Fund Services, LLC |
1966 | Trustees | (“RIFUS”) and U.S. One Inc. | |
1301 Second Avenue | • 2005 to 2011 Chief Compliance Officer, RIM | ||
18th Floor, Seattle, WA | |||
98101 | |||
Mark E. Swanson, | President and Chief | Until successor | • Global Head of Fund Services, Russell Investments |
Born November 26, | Executive Officer | is chosen and | • President, CEO, Treasurer, Chief Accounting Officer and CFO, RIC |
1963 | since 2016 | qualified by | and RIF |
1301 Second Avenue | Treasurer and Chief | Trustees | • Director, President and CEO, RIFUS |
18th Floor, Seattle, WA | Accounting Officer | • Director, RIM, Russell Investments Trust Company (“RITC”) and | |
98101 | since 1998 | Russell Investments Financial Services, LLC (“RIFIS”) | |
• October 2011 to December 2013, Head of North America Operations | |||
Russell Investments | |||
• May 2009 to October 2011, Global Head of Fund Operations, Russell | |||
Investments | |||
Jeffrey T. Hussey, | Chief Investment | Until removed by | • Global Chief Investment Officer, Russell Investments |
Born May 2, 1969 | Officer since 2013 | Trustees | • Chief Investment Officer, RIC and RIF |
1301 Second Avenue, | • Chairman of the Board, President and CEO, RIM | ||
18th Floor, Seattle WA | • Director, RITC, Russell Investments Implementation Services, LLC | ||
98101 | and Russell Investments Delaware, LLC | ||
• Board of Managers, Russell Investments Funds Management, LLC | |||
• 2003 to 2013 Chief Investment Officer, Fixed Income, Russell | |||
Investments | |||
Mary Beth R. Albaneze, | Secretary since 2010 | Until successor | • Associate General Counsel, Russell Investments |
Born April 25, 1969 | is chosen and | • Secretary, RIM, RIFUS and RIFIS | |
1301 Second Avenue, | qualified by | • Secretary and Chief Legal Officer, RIC and RIF | |
18th Floor, Seattle, WA | Trustees | • Assistant Secretary, Russell Investments Insurance Agency, LLC | |
98101 | (“RIIA”)(insurance agency) and U.S. One Inc. |
Disclosure of Information about Fund Trustees and Officers 163
Russell Investment Funds
Adviser, Money Managers and Service Providers — December 31, 2016
Independent Trustees | Independent Registered Public Accounting Firm |
Thaddas L. Alston | PricewaterhouseCoopers LLP |
Kristianne Blake | 1420 5th Avenue, Suite 2800 |
Cheryl Burgermeister | Seattle, WA 98101 |
Daniel P. Connealy | |
Katherine W. Krysty | Money Managers |
Raymond P. Tennison, Jr. | Multi-Style Equity Fund |
Jack R. Thompson | Barrow, Hanley, Mewhinney & Strauss, LLC, Dallas, TX |
Trustee Emeritus | Jacobs Levy Equity Management, Inc., Florham Park, NJ |
George F. Russell, Jr. | Mar Vista Investment Partners, LLC, Los Angeles, CA |
Suffolk Capital Management, LLC, New York, NY | |
Officers | William Blair Investment Management, LLC., Chicago, IL |
Mark E. Swanson, President, CEO, Treasurer, Chief | |
Accounting Officer & CFO | Aggressive Equity Fund |
Cheryl Wichers, Chief Compliance Officer | DePrince, Race & Zollo, Inc., Winter Park, FL |
Jeffrey T. Hussey, Chief Investment Officer | Monarch Partners Asset Management, LLC, Boston, MA |
Mary Beth R. Albaneze, Secretary | RBC Global Asset Management (U.S.) Inc., Minneapolis, MN |
Snow Capital Management L.P., Sewickley, PA | |
Adviser | Timpani Capital Management, LLC, Milwaukee, WI |
Russell Investment Management, LLC | |
1301 Second Avenue | Non-U.S. Fund |
Seattle, WA 98101 | Barrow, Hanley, Mewhinney & Strauss, LLC, Dallas, TX |
MFS Institutional Advisors, Inc., Boston, MA | |
Administrator, Transfer and Dividend Disbursing | Pzena Investment Management LLC, New York, NY |
Agent | William Blair Investment Management, LLC, Chicago, IL |
Russell Investments Fund Services, LLC | Core Bond Fund |
1301 Second Avenue | Colchester Global Investors Limited, London, England |
Seattle, WA 98101 | Logan Circle Partners, L.P., Philadelphia, PA |
Custodian | Pareto Investment Management Limited, London, United |
State Street Bank and Trust Company | Kingdom |
1 Heritage Drive | Schroder Investment Management North America Inc., New |
North Quincy, MA 02171 | York, NY |
Office of Shareholder Inquiries | Scout Investments, LLC., Kansas City, MO |
1301 Second Avenue | Western Asset Management Company, Pasadena, CA and |
Seattle, WA 98101 | Western Asset Management Company Limited, London, |
(800) 787-7354 | United Kingdom |
Legal Counsel | Global Real Estate Securities Fund |
Dechert LLP | Cohen & Steers Capital Management, Inc., Cohen & Steers |
One International Place, 40th Floor | UK Limited and Cohen & Steers Asia Limited, New York, NY |
100 Oliver Street | Morgan Stanley Investment Management Inc., Morgan Stanley |
Boston, MA 02110 | Investment Management Limited and Morgan Investment |
Management Company, New York, NY | |
Distributor | RREEF America L.L.C., Deutsche Investments Australia |
Russell Investments Financial Services, LLC | Limited and Deutsche Alternatives Asset Management |
1301 Second Avenue | (Global) Limited operating under the brand name Deutsche |
Seattle, WA 98101 | Asset Management, New York, NY |
This report is prepared from the books and records of the Funds and is submitted for the general information of shareholders and is not
authorized for distribution to prospective investors unless accompanied or preceded by an effective Prospectus. Nothing herein contained
is to be considered an offer of sale or a solicitation of an offer to buy shares of Russell Investment Funds. Such offering is made only by
Prospectus, which includes details as to offering price and other material information.
164 Adviser, Money Managers and Service Providers
Russell Investment Funds
Russell Investment Funds is
a series investment company
with nine different investment
portfolios referred to as Funds.
These financial statements report
on four of these Funds.
Russell Investment Funds
LifePoints® Funds
Variable Target Portfolio Series
Annual Report
December 31, 2016
Table of Contents
Page | |
To Our Shareholders | 3 |
Market Summary | 4 |
Moderate Strategy Fund | 10 |
Balanced Strategy Fund | 30 |
Growth Strategy Fund | 50 |
Equity Growth Strategy Fund | 70 |
Notes to Schedule of Investments | 90 |
Notes to Financial Highlights | 92 |
Notes to Financial Statements | 93 |
Report of Independent Registered Public Accounting Firm | 107 |
Tax Information | 108 |
Shareholder Requests for Additional Information | 109 |
Disclosure of Information about Fund Trustees and Officers | 110 |
Adviser and Service Providers | 115 |
Russell Investment Funds - LifePoints® Funds Variable Target Portfolio Series
Copyright © Russell Investments 2017. All rights reserved.
Russell Investments’ ownership is composed of a majority stake held by funds managed by TA Associates with
minority stakes held by funds managed by Reverence Capital Partners and Russell Investments’ management.
Frank Russell Company is the owner of the Russell trademark contained in this material and all trademark rights
related to the Russell trademarks, which the members of the Russell Investment group of companies are permitted
to use under license from Frank Russell Company. The members of the Russell Investments group of companies
are not affiliated in any manner with Frank Russell Company or any entity operation under the “FTSE RUSSELL”
brand.
Fund objectives, risks, charges and expenses should be carefully considered before in-
vesting. A prospectus containing this and other important information must precede or
accompany this material. Please read the prospectus carefully before investing.
Securities distributed through Russell Investments Financial Services, LLC, member FINRA and part
of Russell Investments.
Indices and benchmarks are unmanaged and cannot be invested in directly. Returns represent past performance,
are not a guarantee of future performance, and are not indicative of any specific investment. Index return
information is provided by vendors and although deemed reliable, is not guaranteed by Russell Investments or its
affiliates.
Performance quoted represents past performance and does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their
original cost. Current performance may be lower or higher than the performance data quoted.
To Our Shareholders
Fellow Shareholder,
2016 goes down as a year of great restlessness, and certainly a bruising year for forecasters. To call the political landscape
restive seems understated, but for all the referendums, coups and national elections, the markets remained orderly,
delivering returns right down the middle of the road. In fact, you might say that it was a remarkably positive result in view
of how plausible major market sell offs would have been!
With record stock market highs, why the rattled nerves? Our current climate appears increasingly unconventional, and
delivering returns moving forward could prove increasingly challenging, especially in the U.S. where corporate profits are
thinning out and interest rates are likely to continue on an upward trajectory. Following the Federal Reserve’s decision to
raise interest rates in December 2016, our global team of market strategists continues to keep a close eye on two possible
hikes in 2017, supported by the modest economic growth and a gradual firming in inflation we’ve seen this year. The
numbers from the U.S. labor market in 2016 remained healthy, and showed no signs of imbalances in business investment.
We are, however, keeping a close eye on warning signs stemming from the corporate sector, including a troubling rise in
corporate leverage throughout 2016. U.S. corporate earnings appear to have bottomed, while the most recent earnings
growth was positive but tepid. While our team still has an underweight U.S. equities view, their modeling shows only a
modest risk of recession, and they continue with a ‘buy-the-dips and sell-the-rallies’ investment strategy.
At the same time, change is inseparable with opportunity. Our strategists and portfolio managers work diligently to ensure
that portfolios are well positioned to take advantage of new opportunities, while seeking to avoid as much of the downside
risk as possible. If bond yields rise, if inflation increases in some regions while deflation occurs elsewhere, a dynamic
investment process can respond. We also are active currency investors in certain portfolios, looking to see if the U.S. dollar
will test previous highs or whether the British pound remains at risk, as investors focus on the full implications of Brexit’s
implementation.
We believe more than ever that securing your desired investment outcomes takes a dynamic process, comprehensive
asset class coverage, and the tools required to identify and manage risk. But as important as that contribution can be,
we also believe it’s never been more vital for shareholders to have solid, long-term financial plans, realistic goals, and
regular check-ins with personal financial advisors. The following pages provide additional insights on the markets and the
performance of Russell Investments Funds (RIF) for the fiscal year ending December 31, 2016.
Thank you for your continued trust. As always, our purpose at Russell Investments is to improve the financial security of
people like you. We take that purpose very seriously.
Best regards,
Len Brennan
Chief Executive Officer, Russell Investments
To Our Shareholders 3
Russell Investment Funds
Market Summary as of December 31, 2016 (Unaudited)
U.S. Equity Markets
Broadly measured by the Russell 3000® Index, U.S. stocks returned 12.74% for the one year period which is the eighth
straight year that the Russell 3000® Index has finished with a positive absolute return. The Russell 3000® Index finished
with a positive absolute return in nine of the year’s twelve months.
Within U.S. large capitalization stocks, factors that were rewarded during the fiscal year included low price-to-earnings,
low price-to-book and low price-to-cash flow ratios, and high dividend yield. Factors that trailed the market included high
forecasted growth, positive price momentum, and rising earnings estimates. Additionally, dynamic stocks outperformed
defensive stocks within the Russell 1000® Index although defensive led dynamic within the Russell 2000® Index. From a
sector perspective, energy, telecommunication services, and financials outperformed the Russell 1000® Index by 14.5%,
11.9%, and 9.3%, respectively. Sectors that failed to find traction during the one year period were health care, consumer
staples, and real estate, which trailed the Russell 1000® Index by 15.0%, 6.4%, and 6.3%, respectively.
The Russell 3000® Index ended the January through March period of 2016 with a positive absolute return of 0.97%
although the quarter was defined by two very distinct periods. The first half of the quarter was characterized by slowing
growth in China coupled with an ongoing commodities rout (especially in oil), which created significant market volatility
and substantial risk-off sentiment. Interest rate sensitive sectors and traditional non-cyclical sectors such as utilities,
consumer staples, and real estate investment trusts (“REITs”) were big outperformers and traded at an unusual valuation
premium to the broader market. However, in the latter part of the quarter there was a rebound in the traditional cyclical
areas of the market driven in part by more dovish rhetoric from the U.S. Federal Reserve (the “Fed”) alongside oil price
stabilization. Gross domestic product (“GDP”) growth from the fourth quarter of 2015 was revised upward to 1.4% (quarter-
over-quarter). Nonfarm payrolls rose by 242,000 in February and the core inflation rate (2.3% year-over-year in February)
was slightly above expectations of 2.2%. However, at the first quarter Federal Open Market Committee (“FOMC”) meeting,
Fed Chair Yellen explained that even though domestic “economic forecasts have not changed much since December”, this
was being overshadowed by “global economic and financial developments”, posing a risk to growth. As a result, FOMC
“dots” reduced to two the number of likely interest rate hikes in 2016 down from four earlier in the year.
The Russell 3000® Index finished with a positive absolute return of 2.63% in the April through June quarter. The U.S.
equity market gained over the period despite the U.K. Brexit referendum on European Union membership. The U.K.’s
decision to potentially leave the EU threw worldwide markets into turmoil during the month of June. This caused valuations
to become even more stretched within utilities, REITs and consumer staples stocks and was a catalyst for discussion about
what some in the industry called a “low volatility bubble.” The final revision to first quarter GDP growth was upward to
1.1%, beating consensus estimates of 1.0%. However, a weak May U.S. jobs report came out in early June with non-farm
payrolls advancing by only 38,000 versus the 164,000 expected and this reduced expectations about Fed rate hikes.
Inflation also continued to remain below target at 1.0% year-over-year, while retail sales were up 2.5% year-over-year in
May. Mixed U.S. economic data, combined with global uncertainties, caused the Fed to take a more dovish stance relating
to increasing interest rates over the intermediate term.
During the third quarter, the Russell 3000® Index rose 4.4%, as the recession fears that characterized the end of the second
quarter began to dissipate. The Fed ended the latest round of deliberations on whether to raise rates, with a hawkish hold.
This, combined with moderately favorable economic data and second quarter earnings reports, caused low volatility stocks
to underperform while banks and technology stocks outperformed. The final revision for second quarter GDP growth was
increased to 1.4% quarter-over-quarter. U.S. retail sales cooled over the period, declining 0.3% month-over-month in the
latest reading for August. The non-farm payrolls numbers reported during the quarter impressed markets, increasing by a
robust 406,000 over July and August combined, which beat consensus estimates of 360,000. The FOMC left interest rates
unchanged at 0.5%, but strongly signalled that “the case for an increase in the federal funds rate has strengthened.” While
signalling that a rate hike was likely in the months ahead, Fed officials lowered their economic growth forecast and trimmed
the number of rate hikes they foresaw in 2017 from three to two.
4 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
The Russell 3000® Index closed out 2016 on a strong note returning 4.21% for the fourth quarter. Most of the positive
return for the quarter came in November and December with the Russell 3000® Index returning 4.48% and 1.95%,
respectively. In early November, non-farm payroll growth for October was reported at 161,000 which was below consensus
of 178,000 although was generally considered strong enough for a Fed rate increase in December. Reported October non-
farm payroll growth combined with the President-elect’s plan to provide potential fiscal stimulus, including infrastructure
spending, caused certain industries to react favorably in November, most notably banks, which outperformed the Russell
3000® Index by over 13.50%. Leveraged industries that are seen as bond substitutes due to high dividend yields, such
as electric utilities and REITs, underperformed the Russell 3000® Index by 10.88% and 7.54%, respectively. In mid-
December, the Fed raised short term interest rates for the second time since the global financial crisis. This did not result
in a significant market reaction because the increase had been expected by the market and November non-farm payroll
growth was reported 8,000 above consensus at 178,000. Fed officials emphasized that they intend to raise interest rates
gradually, and only if economic growth continues to materialize into 2017.
Non-U.S. Developed Equity Markets
For the fiscal year ended December 31, 2016, the developed non-U.S. equity market, as measured by the Russell
Developed ex-U.S. Large Cap® Index (the “Index”), was up 2.33%. The fiscal year saw a number of macroeconomic events
cause market volatility, the significant drivers of which were the U.S. Federal Reserve (the “Fed’) rate hike, the U.K.
Brexit referendum, the U.S. Presidential election and uncertainty around economic data in emerging markets following an
emerging market slowdown during the previous fiscal year.
Amid the market volatility, value factor outperformed the most within the Index during the fiscal year, especially gaining
traction in the second half of the fiscal year. Momentum and low volatility factors underperformed the most as the fiscal year
saw some trend reversals with investors rotating out of defensive areas of the market. Compared to the previous fiscal year
ending December 31, 2015 when commodity driven sectors, particularly energy and materials, were the worst hit, the 2016
fiscal year saw a reversal in sector trends with these sectors gaining traction as commodity prices stabilized.
For the first half of the fiscal year ending December 31, 2016, uncertainties grew as market attention became fixated upon
the U.K., culminating in the U.K. exiting the European Union on June 23rd’s Brexit referendum result, severing a 43-year
membership. Broadly, this coupled with concerns over China and Fed rate hike uncertainty caused several months of
volatility in the first half of 2016.
In the third quarter of the fiscal year ending December 31, 2016, emerging markets recovered with better than expected
economic data from China in July 2016. As the fiscal year progressed, the Fed took a more cautious stance and lowered
the expected pace of rate hikes to a one hike scenario as the most likely case for the remainder of 2016. Markets stabilized
post July after witnessing months of volatility through the end of June 2016.
Markets became jittery again towards end of October ahead of the U.S. Presidential election. 2016 continued to be a year
to expect the unexpected and on November 8th, Donald Trump won the electoral college vote and Republicans took the
clean sweep with a majority in the house and senate. The result for markets was volatility followed by a gradual recovery. In
mid-December, the U.S. finally saw a rate hike as the Fed raised its target for short-term interest rates by 0.25% to a range
of 0.50% to 0.75% citing the pick-up in economic growth since the middle of the year. It was the second time in a decade
that the Fed has raised rates, the first being in December 2015. Non-U.S. developed markets were down for a couple of
days following the rate hike but stabilized as the year closed. The U.S. dollar remained strong in the second half of the year.
During the fiscal year ending December 31, 2016, Asia Pacific ex-Japan and Canada were the stand out non-U.S. developed
markets, while the U.K. and developed Europe ex-U.K. lagged the most. Stabilization in commodity prices helped the
commodity heavy economies over the fiscal year ending December 31, 2016.
Market Summary 5
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
In terms of sector returns within the Index for the fiscal year ended December 31, 2016, commodity driven sectors, mainly
materials and energy, had the strongest outperformance, while certain defensive and rate sensitive sectors, especially
health care and utilities, were the biggest laggards.
Emerging Markets
The Russell Emerging Markets® Index, as measured in U.S. dollar terms (the “Index”), gained 10.5% over the fiscal year
ended December 31, 2016. The asset class experienced a strong reversal from a negative 2015. Political tailwinds, strong
growth and low interest rates fueled a positive market environment.
The Index recorded a strong 4.8% increase in the first quarter of 2016. This was a sharp contrast to developed markets. The
market climb was driven by strong March performance, following falls in January and February. Turmoil in Chinese equity
markets and volatility in the price of oil drove a negative start to the period, in a broadly risk-off environment for equity
markets. The market rebounded from mid-February as equity market and oil price volatility stabilized. A more dovish
outlook for U.S. interest rate rises provided support to emerging markets, particularly countries with large current account
deficits. A weakening of the U.S. dollar acted as a further tailwind. Unlike most of 2015, it was a positive period for Latin
American countries. Brazil overcame a negative start to the year to climb 27.8%. Investors appeared hopeful of a change of
government and ignored weak economic data. The Brazilian Democratic Movement party withdrew from the ruling coalition.
Meanwhile, fourth quarter GDP growth contracted 5.9% year-over-year. Elsewhere, Turkey enjoyed a positive start to 2016
(20.4%), aided by low interest rate prospects in the U.S. Russia climbed 16.5% as the ruble recovered some of its 2015
depreciation. South Africa (15.1%) also benefited from speculation of accommodative U.S. Federal Reserve policy. In Asia,
China was the weakest-performing country in the first quarter. The market slipped 5.6% as economic slowdown concerns
remained. After a tumultuous January, where sentiment was hampered by the failed government-implemented market
“stop” on the main stock markets, the People’s Bank of China introduced further accommodative measures to improve
market liquidity. In February, the central bank moved to daily open market operations and cut its required reserve ratio
for banks by 0.5%. Nevertheless, Standard & Poor’s cut its outlook on China to negative due to economic outlook. India
also experienced a slowdown (-3.6%). Capitalization concerns within the nation’s banking system weighed on sentiment.
The Index recovered from a negative May to edge 1.0% higher in the second quarter of 2016. Emerging markets continued
to outperform developed markets. Fears of an impending U.S. interest rate rise weighed on sentiment, although these
concerns eased over the period. This followed U.S. Federal Reserve Chair Yellen’s more “dovish” comments in June.
Expectations of future U.S. interest rate hikes were pushed out further after the U.K. Brexit referendum to leave the
European Union. The Index echoed the developed market selloff following the Brexit vote, before a subsequent rebound
at quarter-end. It was also a turbulent but positive quarter for Brazil (14.7%). After a protracted process, President Dilma
Rousseff was eventually suspended from office. China extended its weak 2016 performance, as it underperformed to
finish flat over the period (-0.2%). In addition, the yuan sold off on speculation that China may devalue its currency
following Brexit. Economic data remained healthy but weakened over the period. Elsewhere, Taiwan edged 0.2% higher.
At quarter-end, the central bank reduced its key interest rate as expected to 1.375% from 1.5% in an effort to boost
growth. Europe was the weakest-performing region within the Index. Poland was the standout laggard in the second quarter
(-15.7%), hardest hit by the U.K.’s decision to leave the European Union. Greece slid 9.6% despite surging higher in May.
Meanwhile, political developments drove market movements in Turkey (-7.9%). The market reacted negatively to Prime
Minister Ahmet Davutoglu’s resignation in May.
The Index surged 8.7% in the third quarter of 2016 in a risk-on environment. Emerging markets continued to outperform
with the strongest quarterly return in over three years. Returns were amplified after the U.S. Federal Reserve failed to
increase interest rates in September. The subsequent weakening of the U.S. dollar was a tailwind to the market. It was
a volatile period for oil. The price surged 8.5% in the week ending the quarter as OPEC members agreed in principle
to reduce output. However, the price per barrel fell 3.8% over the period. China was the strongest performing country
during the quarter (13.4%), as positive economic data increased investor confidence in the economy. Second quarter GDP
6 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
growth was positive at 6.7% year-over-year, beating estimates of 6.6%. The modest surprise was driven by an increase in
consumption. The Caixin China services purchasing managers' index (“PMI”) climbed above 50 over the period. However,
the inflation rate fixed lower in August to 1.3% year-over-year (from 1.9% in June). Meanwhile, Brazil continued its strong
year-to-date rebound with an 11.8% climb. The impeachment process against former President Dilma Rousseff finally
concluded, with investor confidence boosted on hopes President Michel Temer would implement market-friendly reforms.
Economic data also improved from recent lows. Industrial production beat expectations at -6.0% year-over-year in June,
the strongest in close in one year, while the manufacturing PMI edged higher. South Korea (9.1%), Indonesia (9.2%) and
Taiwan (11.5%) also outperformed the broader Index return. In Korea, second quarter GDP growth beat expectations at
0.8% quarter-over-quarter. Elsewhere, Indonesia also beat second quarter GDP growth expectations at 4.0% quarter-over-
quarter. The central bank lowered its interest rate to 5.0% as inflation remained subdued. Positive sentiment towards
Taiwan was driven by strong corporate earnings, which led to large investor inflows. Mexico and Turkey were among the
worst-performing countries for the quarter, with both the peso and lira the weakest currencies against the U.S. dollar over
the period. In Mexico (-2.0%), the “Trump effect” weighed on investor confidence. Corruption scandals and the resignation
of finance minister Luis Videgaray also put pressure on President Enrique Pena Nieto. Meanwhile, in Turkey (-4.8%),
markets reacted negatively to July’s failed military coup and subsequent strengthening of power by President Erdogan.
Moody’s downgrade of the country’s credit rating to “junk” status, based on increased risks to the country’s balance of
payments and weaker expected future growth, further weighed on sentiment.
The Index slipped 4.2% in a volatile fourth quarter. The U.S. Presidential election victory for Donald Trump caused
an emerging markets equity sell-off, with uncertainty regarding his protectionist policies weighing on sentiment. The
U.S. Federal Reserve’s December rate hike drove further U.S. dollar strength, which also negatively impacted emerging
markets. However, oil exporters benefited from the oil price climb after an OPEC production deal in November, causing a
wide spread among Index constituent returns. The weakest-performing countries suffered from currency weakness. Turkey,
which has a large current account deficit, slumped 13.1%. Mexico (-10.3%) sold off on fears President-elect Donald
Trump would enact protectionist measures against the country after his election victory. Elsewhere, political uncertainty
weighed on sentiment towards Korea (-7.4%) as President Park Geun-hye remained in power despite Parliament passing
an impeachment motion in early December amid her links to corruption allegations. In India (-7.0%), Prime Minister
Narendra Modi’s decision to withdraw the 500 and 1000 rupee banknotes as part of a corruption crackdown negatively
impacted investor confidence. China slipped 6.6%, suffering from year-end profit taking in a period where the yuan
depreciated against the U.S. dollar. Increased regulatory restrictions on insurance companies also weighed on sentiment.
However, third-quarter Chinese GDP growth was in-line with estimates at 6.7% year-over-year, while both manufacturing
and non-manufacturing PMIs improved over the period. Russia surged 16.9% in a quarter where the ruble was one of the
few currencies to strengthen against the U.S. dollar. Rising oil prices and potentially warmer relations with the U.S. under
President-elect Donald Trump buoyed sentiment. Brazil experienced a volatile quarter, but extended its 2016 rally with a
2.4% climb. The real also strengthened on the back of gains in global commodity prices and expectations of reform under
new president Michel Temer. Amid widespread protests, President Temer’s proposal to cap government spending for 20
years was passed by the Senate. South Africa (-3.4%) also outperformed the broader Index return. This came after the rand
strengthened in December. Fraud charges against respected finance minister Pravin Gordhan were dropped after months of
investigations. Other commodity exporters also outperformed including Colombia (-3.2%), Peru (-1.9%) and Chile (1.8%).
Taiwan (-2.6%) benefited from strong economic growth, which read 2.1% year-over-year for the third quarter.
U.S./Global Fixed Income Markets
The fiscal year ended December 31, 2016 was characterized by a sharply risk off market early in the period followed by
a similarly sharp rebound and extended rally in risky assets (e.g. lower rated credit and emerging market currencies).
Overall, this proved positive for most fixed income sectors around the globe. U.S. interest rates rose modestly across the
yield curve, but global interest rate markets were more mixed. Corporate and emerging sovereign credit markets suffered in
January and February, but returns turned positive as the year went on and eventually very significantly so. A key indicator
Market Summary 7
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
of global fixed income performance, the Bloomberg Barclays Global Aggregate Bond Index, returned 3.95% for the fiscal
year, in U.S. dollar-hedged terms, as yields fell modestly in most major non-U.S. countries and spreads tightened during
a fiscal year where monetary policy remained generally accommodative and recession fears early in the period were never
realized.
Regionally, Europe outperformed the U.S. as the Fed hiked rates once again in the U.S. and greater exposure to the
corporate energy sector represented headwinds to the U.S. market. The Bloomberg Barclays Pan-European Aggregate
Bond Index returned 5.82% during the period (in U.S. dollar-hedged terms), led by the corporate sector of the market,
where the European Central Bank (the “ECB”) began to buy investment grade corporate bonds as a part of its expanded
quantitative easing program. A sharp bond rally in the U.K. following the Brexit referendum also supported European bond
performance. The U.S., in comparison, returned 2.61% during the fiscal year as measured by the Bloomberg Barclays U.S.
Aggregate Bond Index. While the U.S. corporate market performed strongly, Treasury yields rose across the yield curve
representing a headwind to performance in the US.
In the U.S., economic data remained broadly positive, with solid nonfarm payroll gains and a steady decline in the
unemployment rate to below 5.0%. GDP growth regained steam over the period reaching as high as 3.5% after having
dipped below 1% in the first quarter of 2016. Inflation also began to tick up through the period. The Consumer Price
Index was lifted by a recovery in energy prices, but the fiscal year also witnessed modest gains in wage and producer price
inflation supporting expectations that the Fed might be on a path to raise rates again, which it did in December.
In Europe, the ECB elected to further loosen monetary policy by expanding its asset purchase program to include investment
grade corporate debt. In spite of continued lackluster growth in the Eurozone, the corporate market produced over 2.6%
excess returns over equivalent duration government bonds during the period as ECB demand and support dominated any
fundamental issues. European peripheral markets were mixed during the period as idiosyncratic political events led to
more divergent performance. A series of delayed and failed bank restructurings as well as a failed referendum on political
reform led Italian bonds to lag in the market rally. Spain, on the other hand, held an election with an ambiguous result but
by the end of the period appeared on a path for the current lead party to maintain power. As a result, Spanish 10-year bond
yields fell over 20 basis points.
Emerging markets suffered more than most early in the period as commodity prices fell, but ultimately rallied to produce
exceptionally strong performance for the fiscal year. China’s growth beat expectations with 6.7% reported GDP growth for
3 consecutive quarters. In Brazil, the President was impeached, which the market took very favorably. The Brazilian Real
was the strongest performing major currency worldwide up over 35% against the U.S. dollar. One country that struggled
in emerging markets throughout the year was Mexico. Beaten down by market sentiment early in the year, Mexican assets
failed to rally later in the year as the possibility and ultimate eventuality of a Trump presidency in the U.S. appeared to pose
significant risks to that economy. Emerging market (“EM”) debt outperformed developed markets (the Bloomberg Barclays
EM Hard Currency Aggregate Bond Index outperformed equivalent-duration U.S. Treasuries by 8.80%) as growth and
sentiment stabilized. Local currency EM bonds (those issued in the issuing country’s own currency) did not return quite
as strongly (the Bloomberg Barclays EM Local Currency Government Bond Index returned 3.51%) as the drawdown in the
first quarter of the year was much sharper for EM currencies than credit, though the subsequent rally was similarly fierce.
Strong corporate new issuance volumes continued in the fiscal year period after a brief lull in the first quarter of 2016.
Overall, corporate credit was up globally (the Bloomberg Barclays Global Aggregate Corporate Bond Index returned 5.83%
over equivalent-duration government bonds), with particularly strong performance out of the industrial sector of the market.
Financials performed well versus government bonds, but lagged their industrial counterparts as sustained flat yield curves
weighed on banking sector profitability and organic growth outlook.
8 Market Summary
Russell Investment Funds
Market Summary as of December 31, 2016, continued — (Unaudited)
High yield corporate credit was among the best-performing segments of the market (the Bloomberg Barclays Global High
Yield Bond Index returned 13.98% over equivalent-duration Treasuries), as market sentiment flipped early in the year and
defaults were limited outside of the energy sector.
Market Summary 9
Russell Investment Funds
Moderate Strategy Fund
Portfolio Management Discussion and Analysis — December 31, 2016 (Unaudited)
Moderate Strategy Fund | Russell 1000® Index*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 7.75 | % | 1 Year | 12.05 | % | ||
5 Years | 5.66 | %§ | 5 Years | 14.69 | %§ | ||
Inception* | 4.33 | %§ | Inception* | 6.74 | %§ | ||
Bloomberg Barclays U.S. Aggregate Bond Index** | |||||||
Total | |||||||
Return | |||||||
1 Year | 2.65 | % | |||||
5 Years | 2.23 | %§ | |||||
Inception* | 4.28 | %§ |
10 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
The Moderate Strategy Fund (the “Fund”) is a fund of funds that | characterized by higher levels of volatility and dispersion across |
invests principally in other Russell Investment Funds (“RIF”) | return sources. Within the fixed/other income Underlying Funds, |
and Russell Investment Company (“RIC”) mutual funds (the | exposure to high yield debt was beneficial as it was one of the best |
“Underlying Funds”). The Underlying Funds employ a multi- | performing asset classes globally. With the expectations and the |
manager approach whereby portions of the Underlying Funds | eventual rise of interest rates in the last month of 2016, more rate |
are allocated to different money manager strategies. Underlying | sensitive real assets like global real estate investment trusts and |
Fund assets not allocated to money managers are managed by | global infrastructure suffered in performance. |
Russell Investment Management, LLC (“RIM”), the Fund’s | The U.S. equity market, as measured by the S&P 500® Index, was |
and Underlying Funds’ advisor. RIM, as the Underlying Funds’ | up 11.96% over the period but also experienced multiple draw |
advisor, may change the allocation of the Underlying Funds’ | downs. The Fund’s exposure to global equities proved beneficial |
assets among money managers at any time. An exemptive order | over the period as emerging markets rallied and outperformed |
from the Securities and Exchange Commission (“SEC”) permits | U.S. equities. In addition, the Fund’s allocation to U.S. small |
RIM to engage or terminate a money manager in an Underlying | cap equity contributed positively, as the market outpaced other |
Fund at any time, subject to approval by the Underlying Fund’s | asset classes. By contrast, non-U.S. developed equity was one of |
Board, without a shareholder vote. Pursuant to the terms of the | the lowest performing portions of the Fund’s exposure as falling |
exemptive order, an Underlying Fund is required to notify its | commodities and currencies weighed on returns. |
shareholders within 90 days of when a money manager begins | |
providing services. | How did the investment strategies and techniques employed |
What is the Fund’s investment objective? | by the Fund and the Underlying Funds affect the Fund’s |
performance? | |
The Fund seeks to provide current income and moderate long | The Fund is a fund of funds and its performance is based on RIM’s |
term capital appreciation. | strategic asset allocations, the performance of the Underlying |
How did the Fund perform relative to its benchmark for the | Funds in which the Fund invests, and tactical changes in the |
fiscal year ended December 31, 2016? | Fund’s asset allocation throughout the year. The Fund’s diverse |
For the fiscal year ended December 31, 2016, the Fund gained | investments across global equity, alternative and fixed/other |
7.75%. This is compared to the Fund’s primary benchmark, the | income Underlying Funds benefited performance relative to the |
Bloomberg Barclays U.S. Aggregate Bond Index, which gained | Bloomberg Barclays U.S. Aggregate Bond Index. |
2.65% during the same period. The Fund’s performance includes | The Fund’s strategic allocation to fixed income Underlying |
operating expenses, whereas index returns are unmanaged and do | Funds generally had a positive impact on its benchmark- |
not include expenses of any kind. | relative performance. An allocation to the RIF Core Bond Fund |
For the fiscal year ended December 31, 2016, the Morningstar® | contributed, as this Underlying Fund outperformed the Fund’s |
Insurance Allocation – 30% to 50% Equity Category, a group of | benchmark due to the positive performance of credit, particularly |
funds that Morningstar considers to have investment strategies | high yield corporate credit, given the Underlying Fund’s strategic |
similar to those of the Fund, gained 5.53%. This result serves as | overweight to credit risk. The excess returns in fixed income |
a peer comparison and is expressed net of operating expenses. | assets were partially offset by the performance of the RIC Russell |
Global Opportunistic Credit Fund. From an active management | |
The Fund’s outperformance relative to the Bloomberg Barclays | perspective, this Underlying Fund underperformed its benchmark |
U.S. Aggregate Bond was primarily due to the Fund’s strategic | due to the underperformance of bank loans and local currency |
exposure to global equities as emerging markets rallied and | emerging market debt, two sectors in which the Underlying Fund |
outperformed U.S. equities over the period; exposure to high yield | invests. |
debt, as it was one of the best performing asset classes globally; | |
and exposure to a stronger U.S. dollar. | The Fund’s global equity exposure had a mixed impact on its |
benchmark-relative performance. The Fund benefited from | |
How did the market conditions described in the Market | exposure to the RIC Russell Emerging Markets Fund as a result of |
Summary report affect the Fund’s performance? | the strong performance of emerging markets equities and security |
The Fund seeks to achieve its objective by investing in Underlying | selection within the Underlying Fund. By contrast, overweights |
Funds that provide exposure to a range of diversified investments, | to European securities in the RIF Non-U.S. Fund caused the |
and most major asset classes invested in by the Underlying | Underlying Fund to struggle as European equities continued to |
Funds produced positive absolute returns during the period. | lag the U.S. equity market. |
Markets during the fiscal year ended December 31, 2016 were |
Moderate Strategy Fund 11
Russell Investment Funds
Moderate Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
Describe any changes to the Fund’s structure or allocation | 2016, RIM reduced high yield credit exposure and increased the |
to the Underlying Funds. | Fund’s exposure to global real estate investment trusts. RIM’s |
RIM has the discretion to vary the Fund’s actual allocation | modifications to the Fund’s asset allocation were additive during |
from the target strategic asset allocation by up to +/- 5% at the | the period. |
equity, fixed/other income or alternative category level based on | RIM also made strategic asset allocation changes during the |
RIM’s capital markets research. In addition to investing in the | period. In September 2016, RIM added further diversity and |
Underlying Funds, RIM may seek to actively manage a Fund’s | dynamism to the Fund through the addition of the RIC Russell |
overall exposures by investing in derivatives that RIM believes | Multi-Strategy Income Fund and RIC Unconstrained Total Return |
will achieve the desired risk/return profile for the Fund. RIM’s | Fund as Underlying Funds. |
asset allocation modifications, implemented through both tactical | |
changes to Underlying Fund allocations and derivatives-based | The views expressed in this report reflect those of the |
exposures, benefited the Fund’s performance relative to the | portfolio managers only through the end of the period |
Fund’s target strategic asset allocation. | covered by the report. These views do not necessarily |
represent the views of RIM, or any other person in RIM or | |
RIM adapted the Fund’s asset allocation over the period as market | any other affiliated organization. These views are subject to |
opportunities and risks evolved. During the first quarter of 2016, | change at any time based upon market conditions or other |
equity markets declined substantially, and RIM added further risk | events, and RIM disclaims any responsibility to update the |
to the portfolio by overweighting exposure to high yield credit and | views contained herein. These views should not be relied |
emerging markets equity compared with core bond holdings and | on as investment advice and, because investment decisions |
cash. Markets subsequently rebounded from the February lows | for a Russell Investment Funds (“RIF”) Fund are based on |
and RIM reduced risk exposure to a more defensive stance with | numerous factors, should not be relied on as an indication |
the Fund’s equity allocation below strategic weights. In December | of investment decisions of any RIF Fund. |
* Assumes initial investment on April 30, 2007.
** The Bloomberg Barclays U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds,
investment grade corporate debt securities and mortgage-backed securities.
Effective August 24, 2016 the Barclays fixed income benchmark indices, including the Barclays Aggregate family of indices, were renamed the Bloomberg
Barclays family of indices.
*** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results. Additionally, the returns presented herein may differ from the performance reported
in the Financial Highlights as the returns herein are calculated in a manner consistent with standardized performance in accordance with Securities and Exchange
Commission rules, while the performance in the Financial Highlights has been calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”).
12 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Shareholder Expense Example — December 31, 2016 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2016 to December 31, 2016. | July 1, 2016 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2016 | $ | 1,024.70 | $ | 1,024.58 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 0.56 | $ | 0.56 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.11% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/366 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
Moderate Strategy Fund 13
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments — December 31, 2016
Amounts in thousands (except share amounts)
Fair | |||||
Value | |||||
Shares | $ | ||||
Investments in Affiliated Mutual Funds - 98.1% | |||||
Alternative - 7.6% | |||||
RIC Russell Commodity Strategies Fund Class Y | 563,665 | 3,224 | |||
RIC Russell Global Infrastructure Fund Class Y | 294,697 | 3,159 | |||
RIF Global Real Estate Securities Fund | 134,662 | 1,885 | |||
8,268 | |||||
Domestic Equities - 5.9% | |||||
RIC Russell U.S. Defensive Equity Fund Class Y | 1,727 | 83 | |||
RIC Russell U.S. Dynamic Equity Fund Class Y | 179,919 | 1,864 | |||
RIF Aggressive Equity Fund | 280,062 | 4,260 | |||
RIF Multi-Style Equity Fund | 6,112 | 104 | |||
6,311 | |||||
Fixed Income - 55.9% | |||||
RIC Russell Global Opportunistic Credit Fund Class Y | 1,884,610 | 17,678 | |||
RIC Russell Investment Grade Bond Fund Class Y | 632,795 | 13,244 | |||
RIC Unconstrained Total Return Fund Class Y | 543,118 | 5,377 | |||
RIF Core Bond Fund | 2,356,311 | 23,846 | |||
60,145 | |||||
International Equities - 18.7% | |||||
RIC Russell Emerging Markets Fund Class Y | 436,965 | 6,904 | |||
RIC Russell Global Equity Fund Class Y | 696,722 | 6,918 | |||
RIF Non-U.S. Fund | 568,877 | 6,343 | |||
20,165 | |||||
Specialty - 10.0% | |||||
RIC Russell Multi-Strategy Income Fund Class Y | 1,110,019 | 10,712 | |||
Total Investments in Affiliated Mutual Funds | |||||
(cost $103,183) | 105,601 | ||||
Options Purchased - 0.1% | |||||
(Number of Contracts) | |||||
iShares MSCI Emerging Markets Index | |||||
Mar 2017 36.60 Call (41,389) | USD | 1,515 | (ÿ) | 28 | |
S&P 500 Index | |||||
Mar 2017 2,279.87 Call (1,550) | USD | 3,534 | (ÿ) | 46 | |
Jan 2017 2,078.17 Put (1,072) | USD | 2,228 | (ÿ) | 1 | |
Total Options Purchased | |||||
(cost $171) | 75 | ||||
Short-Term Investments - 0.5% | |||||
U.S. Cash Management Fund | 516,036 | (8) | 516 | ||
Total Short-Term Investments | |||||
(cost $516) | 516 | ||||
Total Investments 98.7% | |||||
(identified cost $103,870) | 106,192 | ||||
Other Assets and Liabilities, Net - 1.3% | 1,440 | ||||
Net Assets - 100.0% | 107,632 |
See accompanying notes which are an integral part of the financial statements.
14 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments, continued — December 31, 2016
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
Amsterdam Index Futures | 4 | EUR | 386 | 01/17 | 8 | ||
CAC40 Euro Index Futures | 25 | EUR | 1,216 | 01/17 | 21 | ||
DAX Index Futures | 4 | EUR | 1,147 | 03/17 | 26 | ||
EURO STOXX 50 Index Futures | 23 | EUR | 754 | 03/17 | 18 | ||
FTSE/MIB Index Futures | 2 | EUR | 192 | 03/17 | 6 | ||
IBEX 35 Index Futures | 4 | EUR | 373 | 01/17 | 3 | ||
OMXS 30 Index Futures | 18 | SEK | 2,734 | 01/17 | (4 | ) | |
Russell 1000 Mini Index Futures | 2 | USD | 124 | 03/17 | (1 | ) | |
S&P 500 E-Mini Index Futures | 19 | USD | 2,124 | 03/17 | (15 | ) | |
S&P Mid 400 E-Mini Index Futures | 2 | USD | 332 | 03/17 | (7 | ) | |
Short Positions | |||||||
FTSE 100 Index Futures | 6 | GBP | 423 | 03/17 | (15 | ) | |
MSCI Emerging Markets Mini Index Futures | 53 | USD | 2,276 | 03/17 | 58 | ||
Russell 1000 Mini Index Futures | 4 | USD | 248 | 03/17 | 3 | ||
S&P 500 E-Mini Index Futures | 32 | USD | 3,578 | 03/17 | 24 | ||
S&P Mid 400 E-Mini Index Futures | 2 | USD | 332 | 03/17 | 4 | ||
S&P/TSX 60 Index Futures | 8 | CAD | 1,435 | 03/17 | — | ||
SPI 200 Index Futures | 9 | AUD | 1,267 | 03/17 | (22 | ) | |
TOPIX Index Futures | 9 | JPY | 136,620 | 03/17 | (27 | ) | |
United States 2 Year Treasury Note Futures | 7 | USD | 1,517 | 03/17 | 1 | ||
United States 5 Year Treasury Note Futures | 21 | USD | 2,471 | 03/17 | 7 | ||
United States 10 Year Treasury Note Futures | 13 | USD | 1,616 | 03/17 | 8 | ||
United States Long Bond Futures | 1 | USD | 150 | 03/17 | 1 | ||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 97 |
Options Written | |||||||||
Amounts in thousands (except contract amounts) | |||||||||
Number of | Strike | Notional | Expiration | Fair Value | |||||
Call/Put | Contracts | Price | Amount | Date | $ | ||||
iShares MSCI Emerging Markets Index | Put | 41,389 | 32.62 | USD | 1,350 | 03/17/17 | (25 | ) | |
S&P 500 Index | Put | 2,144 | 1,868.25 | USD | 4,006 | 01/06/17 | (1 | ) | |
S&P 500 Index | Put | 1,550 | 2,031.57 | USD | 3,149 | 03/17/17 | (23 | ) | |
Total Liability for Options Written (premiums received $72) | (49 | ) |
Transactions in options written contracts for the period ended December 31, 2016 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2015 | — | $ | — | |||
Opened | 49,859 | 283 | ||||
Closed | — | — | ||||
Expired | (4,776 | ) | (211 | ) | ||
Outstanding December 31, 2016 | 45,083 | $ | 72 |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 15
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
Bank of America | USD | 193 | RUB | 12,590 | 03/15/17 | 9 | ||
Bank of America | CNY | 2,030 | USD | 292 | 03/15/17 | 6 | ||
Bank of America | EUR | 160 | USD | 167 | 03/15/17 | (2 | ) | |
Bank of America | JPY | 15,470 | USD | 132 | 03/15/17 | (1 | ) | |
Bank of America | TWD | 9,520 | USD | 301 | 03/15/17 | 7 | ||
Royal Bank of Canada | USD | 2 | CHF | 2 | 01/10/17 | — | ||
Royal Bank of Canada | USD | 26 | EUR | 24 | 01/10/17 | — | ||
Royal Bank of Canada | USD | 18 | GBP | 14 | 01/10/17 | — | ||
Royal Bank of Canada | USD | 4 | HKD | 30 | 01/10/17 | — | ||
Royal Bank of Canada | USD | — | SEK | 3 | 01/10/17 | — | ||
Royal Bank of Canada | AUD | 11 | USD | 8 | 01/10/17 | — | ||
Royal Bank of Canada | CAD | 2 | USD | 2 | 01/10/17 | — | ||
Royal Bank of Canada | JPY | 4,056 | USD | 36 | 01/10/17 | — | ||
Royal Bank of Canada | SGD | 1 | USD | 1 | 01/10/17 | — | ||
Standard Chartered | USD | 291 | INR | 20,020 | 03/15/17 | 1 | ||
State Street | USD | 213 | AUD | 296 | 01/10/17 | — | ||
State Street | USD | 292 | CAD | 396 | 01/10/17 | 3 | ||
State Street | USD | 512 | CAD | 680 | 03/15/17 | (5 | ) | |
State Street | USD | 251 | CHF | 257 | 01/10/17 | 1 | ||
State Street | USD | 931 | EUR | 890 | 01/10/17 | 6 | ||
State Street | USD | 356 | EUR | 330 | 03/15/17 | (7 | ) | |
State Street | USD | 511 | GBP | 417 | 01/10/17 | 3 | ||
State Street | USD | 90 | GBP | 70 | 03/15/17 | (3 | ) | |
State Street | USD | 107 | HKD | 831 | 01/10/17 | — | ||
State Street | USD | 657 | JPY | 76,683 | 01/10/17 | — | ||
State Street | USD | 304 | JPY | 34,500 | 03/15/17 | (8 | ) | |
State Street | USD | 276 | MXN | 5,700 | 03/15/17 | (4 | ) | |
State Street | USD | 106 | SEK | 971 | 01/10/17 | — | ||
State Street | USD | 36 | SGD | 52 | 01/10/17 | — | ||
State Street | USD | 411 | ZAR | 5,730 | 03/15/17 | — | ||
State Street | AUD | 285 | USD | 212 | 01/10/17 | 6 | ||
State Street | AUD | 296 | USD | 213 | 02/07/17 | — | ||
State Street | AUD | 1,180 | USD | 877 | 03/15/17 | 28 | ||
State Street | CAD | 394 | USD | 294 | 01/10/17 | 1 | ||
State Street | CAD | 396 | USD | 293 | 02/07/17 | (3 | ) | |
State Street | CHF | 259 | USD | 256 | 01/10/17 | 1 | ||
State Street | CHF | 257 | USD | 251 | 02/07/17 | (2 | ) | |
State Street | EUR | 914 | USD | 975 | 01/10/17 | 12 | ||
State Street | EUR | 890 | USD | 932 | 02/07/17 | (6 | ) | |
State Street | GBP | 431 | USD | 539 | 01/10/17 | 7 | ||
State Street | GBP | 417 | USD | 511 | 02/07/17 | (3 | ) | |
State Street | HKD | 861 | USD | 111 | 01/10/17 | — | ||
State Street | HKD | 831 | USD | 107 | 02/07/17 | — | ||
State Street | JPY | 72,627 | USD | 643 | 01/10/17 | 22 | ||
State Street | JPY | 76,683 | USD | 657 | 02/07/17 | — | ||
State Street | SEK | 974 | USD | 107 | 01/10/17 | — | ||
State Street | SEK | 971 | USD | 106 | 02/07/17 | — | ||
State Street | SGD | 51 | USD | 36 | 01/10/17 | 1 | ||
State Street | SGD | 52 | USD | 36 | 02/07/17 | — | ||
UBS | KRW | 349,910 | USD | 300 | 03/15/17 | 10 | ||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | 80 |
See accompanying notes which are an integral part of the financial statements.
16 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments, continued — December 31, 2016
Total Return Swap Contracts (*) | ||||||
Amounts in thousands | ||||||
Notional | Termination | Fair Value | ||||
Underlying Reference Entity | Counterparty | Amount | Date | $ | ||
Dow Jones U.S. Real Estate Total Return Index | Bank of America | USD | 1,257 | 03/07/17 | (59 | ) |
Total Fair Value of Open Total Return Swap Contracts Premiums Paid (Received) - $— (å) | (59 | ) |
(*) Total return swaps (which includes index swaps) are agreements between counterparties to exchange cash flows, one based on a market-linked
returns of an individual asset or a basket of assets (i.e. an index), and the other on a fixed or floating rate. The floating rate fee was based on the
3 Month LIBOR rate plus a fee of 0.075%.
Credit Default Swap Contracts | |||||||
Amounts in thousands | |||||||
Credit Indices | |||||||
Fund (Pays)/ | |||||||
Receives | Termination | Fair Value | |||||
Reference Entity | Counterparty | Notional Amount | Fixed Rate | Date | $ | ||
CDX Emerging Markets Index | Barclays | USD | 3,700 | (1.000 | %) | 12/20/21 | 231 |
CDX NA High Yield Index | Morgan Stanley | USD | 2,800 | 5.000 | % | 12/20/21 | 178 |
Total Fair Value on Open Credit Indices Premiums Paid (Received) - $350 | 409 |
Presentation of Portfolio Holdings | ||||||||||||||||||
Amounts in thousands | ||||||||||||||||||
Fair Value | ||||||||||||||||||
Practical | ||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | ||||||||||||
Investments in Affiliated Mutual Funds | $ | 105,601 | $ | — | $ | — | $ | — | $ | 105,601 | 98.1 | |||||||
Options Purchased | — | 75 | — | — | 75 | 0.1 | ||||||||||||
Short-Term Investments | — | — | — | 516 | 516 | 0.5 | ||||||||||||
Total Investments | 105,601 | 75 | — | 516 | 106,192 | 98.7 | ||||||||||||
Other Assets and Liabilities, Net | 1.3 | |||||||||||||||||
100.0 | ||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||
Assets | ||||||||||||||||||
Futures Contracts | 188 | — | — | — | 188 | 0.2 | ||||||||||||
Foreign Currency Exchange Contracts | — | 124 | — | — | 124 | 0.1 | ||||||||||||
Credit Default Swap Contracts | — | 409 | — | — | 409 | 0.4 | ||||||||||||
Liabilities | ||||||||||||||||||
Futures Contracts | (91 | ) | — | — | — | (91 | ) | (0.1 | ) | |||||||||
Options Written | — | (49 | ) | — | — | (49 | ) | (—)* | ||||||||||
Foreign Currency Exchange Contracts | — | (44 | ) | — | — | (44 | ) | (—)* | ||||||||||
Total Return Swap Contracts | — | (59 | ) | — | — | (59 | ) | (0.1 | ) | |||||||||
Total Other Financial Instruments** | $ | 97 | $ | 381 | $ | — | $ | — | $ | 478 |
* Less than 0.05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the investments.
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 17
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments, continued — December 31, 2016
(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified
in the fair value levels. The fair value amounts presented in the table are intended to permit reconciliation to the amounts presented in the Schedule of
Investments.
For a description of the Levels, see note 2 in the Notes to Financial Statements.
For a disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2016, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
18 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Fair Value of Derivative Instruments — December 31, 2016
Amounts in thousands
Foreign | |||||||||
Equity | Credit | Currency | Interest Rate | ||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | Contracts | |||||
Location: Statement of Assets and Liabilities - Assets | |||||||||
Investments, at fair value* | $ | 75 | $ | — | $ | — | $ | — | |
Unrealized appreciation on foreign currency exchange contracts | — | — | 124 | — | |||||
Variation margin on futures contracts** | 171 | — | — | 17 | |||||
Credit default swap contracts, at fair value | — | 409 | — | — | |||||
Total | $ | 246 | $ | 409 | $ | 124 | $ | 17 | |
Location: Statement of Assets and Liabilities - Liabilities | |||||||||
Variation margin on futures contracts** | $ | 91 | $ | — | $ | — | $ | — | |
Unrealized depreciation on foreign currency exchange contracts | — | — | 44 | — | |||||
Options written, at fair value | 49 | — | — | — | |||||
Total return swap contracts, at fair value | 59 | — | — | — | |||||
Total | $ | 199 | $ | — | $ | 44 | $ | — | |
Foreign | |||||||||
Equity | Credit | Currency | Interest Rate | ||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | Contracts | |||||
Location: Statement of Operations - Net realized gain (loss) | |||||||||
Investments*** | $ | (212 | ) | $ | — | $ | — | $ | — |
Futures contracts | 180 | — | — | 165 | |||||
Options written | 211 | — | — | — | |||||
Total return swap contracts | (15 | ) | — | — | — | ||||
Credit default swap contracts | — | 242 | — | — | |||||
Foreign currency-related transactions**** | — | — | 225 | — | |||||
Total | $ | 164 | $ | 242 | $ | 225 | $ | 165 | |
Location: Statement of Operations - Net change in unrealized appreciation | |||||||||
(depreciation) | |||||||||
Investments***** | $ | (96 | ) | $ | — | $ | — | $ | — |
Futures contracts | 89 | — | — | 17 | |||||
Options written | 23 | — | — | — | |||||
Total return swap contracts | (40 | ) | — | — | — | ||||
Credit default swap contracts | — | 80 | — | — | |||||
Foreign currency-related transactions****** | — | — | 94 | — | |||||
Total | $ | (24 | ) | $ | 80 | $ | 94 | $ | 17 |
* Fair value of purchased options.
** Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
*** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
**** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
***** Includes net unrealized gain (loss) on purchased options as reported in the Schedule of Investments.
****** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 19
Russell Investment Funds
Moderate Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2016
Amounts in thousands | ||||||||||
Offsetting of Financial Assets and Derivative Assets | ||||||||||
Gross | Net Amounts | |||||||||
Amounts | of Assets | |||||||||
Gross | Offset in the | Presented in | ||||||||
Amounts of | Statement of | the Statement | ||||||||
Recognized | Assets and | of Assets and | ||||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | ||||||
Options Purchased Contracts | Investments, at fair value | $ | 75 | $ | — | $ | 75 | |||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 124 | — | 124 | ||||||
Futures Contracts | Variation margin on futures contracts | 66 | — | 66 | ||||||
Credit Default Swap Contracts | Credit default swap contracts, at fair value | 409 | — | 409 | ||||||
Total Financial and Derivative Assets | 674 | — | 674 | |||||||
Financial and Derivative Assets not subject to a netting agreement | (474 | ) | — | (474 | ) | |||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 200 | $ | — | $ | 200 | ||||
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Assets | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||
Bank of America | $ | 95 | $ | 95 | $ | — | $ | — | |
JPMorgan Chase | 1 | 1 | — | — | |||||
Royal Bank of Canada | 1 | 1 | — | — | |||||
Standard Chartered | 1 | — | — | 1 | |||||
State Street | 92 | 42 | — | 50 | |||||
UBS | 10 | — | — | 10 | |||||
Total | $ | 200 | $ | 139 | $ | — | $ | 61 |
See accompanying notes which are an integral part of the financial statements.
20 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 22 | $ | — | $ | 22 | ||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 44 | — | 44 | |||||
Options Written Contracts | Options written, at fair value | 49 | — | 49 | |||||
Total Return Swap Contracts | Total return swap contracts, at fair value | 59 | — | 59 | |||||
Total Financial and Derivative Liabilities | 174 | — | 174 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (21 | ) | — | (21 | ) | ||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 153 | $ | — | $ | 153 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Liabilities | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | |||||
Bank of America | $ | 109 | $ | 95 | $ | — | $ | 14 | |
JPMorgan Chase | 1 | 1 | — | — | |||||
Royal Bank of Canada | 1 | 1 | — | — | |||||
State Street | 42 | 42 | — | — | |||||
Total | $ | 153 | $ | 139 | $ | — | $ | 14 |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 21
Russell Investment Funds
Moderate Strategy Fund
Statement of Assets and Liabilities — December 31, 2016
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 103,870 |
Investments, at fair value(>) | 106,192 | |
Cash (restricted)(a) | 1,150 | |
Unrealized appreciation on foreign currency exchange contracts | 124 | |
Receivables: | ||
Dividends from affiliated funds | 1 | |
Fund shares sold | 91 | |
From affiliates | 4 | |
Variation margin on futures contracts | 66 | |
Credit default swap contracts, at fair value(+) | 409 | |
Total assets | 108,037 | |
Liabilities | ||
Payables: | ||
Due to broker (b) | 104 | |
Investments purchased | 91 | |
Accrued fees to affiliates | 5 | |
Other accrued expenses | 31 | |
Variation margin on futures contracts | 22 | |
Unrealized depreciation on foreign currency exchange contracts | 44 | |
Options written, at fair value(x) | 49 | |
Total return swap contracts, at fair value(8) | 59 | |
Total liabilities | 405 | |
Net Assets | $ | 107,632 |
See accompanying notes which are an integral part of the financial statements.
22 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Statement of Assets and Liabilities, continued — December 31, 2016
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | (7 | ) |
Accumulated net realized gain (loss) | (992 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 2,322 | ||
Futures contracts | 97 | ||
Options written | 23 | ||
Total return swap contracts | (59 | ) | |
Credit default swap contracts | 59 | ||
Foreign currency-related transactions | 80 | ||
Shares of beneficial interest | 111 | ||
Additional paid-in capital | 105,998 | ||
Net Assets | $ | 107,632 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 9.69 | |
Net assets | $ | 107,632,009 | |
Shares outstanding ($.01 par value) | 11,103,015 | ||
Amounts in thousands | |||
(x) Premiums received on options written | $ | 72 | |
(+) Credit default swap contracts - premiums paid (received) | $ | 350 | |
(8) Total return swap contracts - premiums paid (received) | $ | — | |
(>) Investments in affiliated funds | $ | 106,117 | |
(a) Cash Collateral for Futures | $ | 1,150 | |
(b) Due to Broker for Swaps | $ | 104 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 23
Russell Investment Funds
Moderate Strategy Fund
Statement of Operations — For the Period Ended December 31, 2016
Amounts in thousands | |||
Investment Income | |||
Dividends from affiliated funds | $ | 3,629 | |
Expenses | |||
Advisory fees | 222 | ||
Administrative fees | 47 | ||
Custodian fees (1) | 30 | ||
Transfer agent fees | 5 | ||
Professional fees | 35 | ||
Trustees’ fees | 4 | ||
Printing fees | 19 | ||
Miscellaneous | 7 | ||
Expenses before reductions | 369 | ||
Expense reductions | (248 | ) | |
Net expenses | 121 | ||
Net investment income (loss) | 3,508 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 3,851 | ||
Futures contracts | 345 | ||
Options written | 211 | ||
Total return swap contracts | (15 | ) | |
Credit default swap contracts | 242 | ||
Foreign currency-related transactions | 225 | ||
Capital gain distributions from affiliated funds | 771 | ||
Net realized gain (loss) | 5,630 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | (1,042 | ) | |
Futures contracts | 106 | ||
Options written | 23 | ||
Total return swap contracts | (40 | ) | |
Credit default swap contracts | 80 | ||
Foreign currency-related transactions | 94 | ||
Net change in unrealized appreciation (depreciation) | (779 | ) | |
Net realized and unrealized gain (loss) | 4,851 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 8,359 |
(1) Includes a reimbursement for overbilling of custody out-of-pocket fees from prior years. See note 8 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
24 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2016 | 2015 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 3,508 | $ | 2,871 | ||
Net realized gain (loss) | 5,630 | 2,533 | ||||
Net change in unrealized appreciation (depreciation) | (779 | ) | (7,223 | ) | ||
Net increase (decrease) in net assets from operations | 8,359 | (1,819 | ) | |||
Distributions | ||||||
From net investment income | (4,052 | ) | (2,802 | ) | ||
From net realized gain | (4,815 | ) | (2,669 | ) | ||
Net decrease in net assets from distributions | (8,867 | ) | (5,471 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | 95 | 417 | ||||
Total Net Increase (Decrease) in Net Assets | (413 | ) | (6,873 | ) | ||
Net Assets | ||||||
Beginning of period | 108,045 | 114,918 | ||||
End of period | $ | 107,632 | $ | 108,045 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | (7 | ) | $ | 250 |
* Share transaction amounts (in thousands) for the periods ended December 31, 2016 and December 31, 2015 were as follows: | ||||||||||||
2016 | 2015 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 1,057 | $ | 10,402 | 836 | $ | 8,599 | ||||||
Proceeds from reinvestment of distributions | 917 | 8,867 | 538 | 5,470 | ||||||||
Payments for shares redeemed | (1,921 | ) | (19,174 | ) | (1,321 | ) | (13,652 | ) | ||||
Total increase (decrease) | 53 | $ | 95 | 53 | $ | 417 |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 25
Russell Investment Funds
Moderate Strategy Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | ||||||||||||||||
$ | Net | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Investment | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Income (Loss) | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | (a)(b)(d) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2016 | 9.78 | .31 | .43 | .74 | (.38 | ) | (.45 | ) | ||||||||
December 31, 2015 | 10.45 | .26 | (.43 | ) | (.17 | ) | (.25 | ) | (.25 | ) | ||||||
December 31, 2014 | 10.41 | .31 | .19 | .50 | (.30 | ) | (.16 | ) | ||||||||
December 31, 2013 | 10.10 | .18 | .50 | .68 | (.18 | ) | (.19 | ) | ||||||||
December 31, 2012 | 9.41 | .30 | .73 | 1.03 | (.29 | ) | (.05 | ) | ||||||||
See accompanying notes which are an integral part of the financial statements.
26 Moderate Strategy Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(e) | (000 | ) | Gross(c) | Net(c)(d) | Net Assets(b)(d) | Turnover Rate | |||||||||
(.83 | ) | 9.69 | 7.75 | 107,632 | .33 | .11 | 3.17 | 38 | |||||||||
(.50 | ) | 9.78 | (1.71 | ) | 108,045 | .32 | .11 | 2.57 | 29 | ||||||||
(.46 | ) | 10.45 | 4.85 | 114,918 | .35 | .10 | 2.89 | 18 | |||||||||
(.37 | ) | 10.41 | 6.79 | 103,093 | .35 | .10 | 1.69 | 18 | |||||||||
(.34 | ) | 10.10 | 11.07 | 94,221 | .36 | .10 | 3.01 | 20 |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 27
Russell Investment Funds
Moderate Strategy Fund
Related Party Transactions, Fees and Expenses
Accrued fees payable to affiliates for the period ended December 31, 2016 were as follows: | ||
Administration fees | $ | 3,905 |
Transfer agent fees | 404 | |
Trustee fees | 774 | |
$ | 5,083 |
Transactions (amounts in thousands) during the period ended December 31, 2016 with Underlying Funds which are, or were, an
affiliated company are as follows:
Fair Value, | Change in | |||||||||||||||||||
Beginning of | Realized Gain | Unrealized | Fair Value, End | Income | Capital Gains | |||||||||||||||
Period | Purchases | Sales | (Loss) | Gain (Loss) | of Period | Distributions | Distributions | |||||||||||||
RIC Russell Commodity Strategies | ||||||||||||||||||||
Fund | $ | 1,628 | $ | 1,997 | $ | 674 | $ | (236 | ) $ | 509 | $ | 3,224 | $ | — | $ | — | ||||
RIC Russell Global Infrastructure | ||||||||||||||||||||
Fund | 3,240 | 1,081 | 1,180 | (39 | ) | 57 | 3,159 | 109 | 94 | |||||||||||
RIF Global Real Estate Securities | ||||||||||||||||||||
Fund | 1,080 | 1,190 | 304 | 2 | (83 | ) | 1,885 | 58 | 55 | |||||||||||
RIC Russell U.S. Defensive Equity | ||||||||||||||||||||
Fund | 4,303 | 310 | 4,844 | 2,536 | (2,222 | ) | 83 | 31 | 7 | |||||||||||
RIC Russell U.S. Dynamic Equity | ||||||||||||||||||||
Fund | 3,216 | 512 | 2,133 | (110 | ) | 379 | 1,864 | 35 | 75 | |||||||||||
RIF Aggressive Equity Fund | 4,279 | 814 | 1,623 | (147 | ) | 937 | 4,260 | 30 | 2 | |||||||||||
RIF Multi-Style Equity Fund | 4,835 | 450 | 5,432 | 1,570 | (1,319 | ) | 104 | 40 | 72 | |||||||||||
RIC Russell Global Opportunistic | ||||||||||||||||||||
Credit Fund | 14,098 | 5,289 | 2,902 | (108 | ) | 1,301 | 17,678 | 838 | — | |||||||||||
RIC Russell Investment Grade Bond | ||||||||||||||||||||
Fund | 17,353 | 1,519 | 5,336 | (53 | ) | (239 | ) | 13,244 | 674 | 41 | ||||||||||
RIC Unconstrained Total Return | ||||||||||||||||||||
Fund | — | 5,849 | 416 | (2 | ) | (54 | ) | 5,377 | 78 | 13 | ||||||||||
RIF Core Bond Fund | 34,671 | 3,102 | 14,170 | 290 | (47 | ) | 23,846 | 1,148 | 53 | |||||||||||
RIC Russell Emerging Markets Fund | 4,276 | 3,728 | 1,459 | (133 | ) | 492 | 6,904 | 88 | — | |||||||||||
RIC Russell Global Equity Fund | 6,458 | 2,674 | 2,248 | 274 | (240 | ) | 6,918 | 91 | 359 | |||||||||||
RIF Non-U.S. Fund | 6,441 | 1,236 | 1,334 | 232 | (232 | ) | 6,343 | 207 | — | |||||||||||
RIC Russell Multi-Strategy Income | ||||||||||||||||||||
Fund | — | 11,746 | 836 | (13 | ) | (185 | ) | 10,712 | 196 | — | ||||||||||
U.S. Cash Management Fund | 1,732 | 4,975 | 6,191 | — | — | 516 | 6 | — | ||||||||||||
$ | 107,610 | $ | 46,472 | $ | 51,082 | $ | 4,063 | $ | (946 | ) | $ | 106,117 | $ | 3,629 | $ | 771 |
Federal Income Taxes
At December 31, 2016, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Cost of Investments | $ | 105,646,631 | ||
Unrealized Appreciation | $ | 895,998 | ||
Unrealized Depreciation | (350,701 | ) | ||
Net Unrealized Appreciation (Depreciation) | $ | 545,297 | ||
Undistributed Ordinary Income | $ | 269,136 | ||
Undistributed Long-Term Capital Gains | ||||
(Capital Loss Carryforward) | $ | 888,804 |
See accompanying notes which are an integral part of the financial statements.
28 Moderate Strategy Fund
Russell Investment Funds
Moderate Strategy Fund
Federal Income Taxes, continued
Tax Composition of Distributions | ||
Ordinary Income | $ | 4,128,337 |
Long-Term Capital Gains | $ | 4,738,925 |
Net investment income and net realized gains (losses) in the financial statements may differ from taxable net investment income and
net realized gains (losses). Capital accounts within the financial statements are adjusted for permanent differences between book and
tax accounting. Book-tax differences may be due to foreign currency gains and losses, reclassifications of dividends and differences in
treatment of income from swaps. These adjustments have no impact on the net assets. At December 31, 2016, the Statement of Assets
and Liabilities have been adjusted by the following amounts (in thousands):
Undistributed net investment income | $ | 287 | |
Accumulated net realized gain (loss) | (288 | ) | |
Additional paid-in capital | 1 |
See accompanying notes which are an integral part of the financial statements.
Moderate Strategy Fund 29
Russell Investment Funds
Balanced Strategy Fund
Portfolio Management Discussion and Analysis — December 31, 2016 (Unaudited)
Balanced Strategy Fund | Russell 1000® Index*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 9.05 | % | 1 Year | 12.05 | % | ||
5 Years | 7.20 | %§ | 5 Years | 14.69 | %§ | ||
Inception* | 4.12 | %§ | Inception* | 6.74 | %§ | ||
Bloomberg Barclays U.S. Aggregate Bond Index** | Russell Developed ex-U.S. Large Cap® Index Net**** | ||||||
Total | |||||||
Total | Return | ||||||
Return | 1 Year | 2.42 | % | ||||
1 Year | 2.65 | % | 5 Years | 6.36 | %§ | ||
5 Years | 2.23 | %§ | Inception* | 0.27 | %§ | ||
Inception* | 4.28 | %§ |
30 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
The Balanced Strategy Fund (the “Fund”) is a fund of funds that | Markets during the fiscal year ended December 31, 2016 were |
invests principally in other Russell Investment Funds (“RIF”) | characterized by higher levels of volatility and dispersion across |
and Russell Investment Company (“RIC”) mutual funds (the | return sources. Within the fixed/other income Underlying Funds, |
“Underlying Funds”). The Underlying Funds employ a multi- | exposure to high yield debt was beneficial as it was one of the best |
manager approach whereby portions of the Underlying Funds | performing asset classes globally. With the expectations and the |
are allocated to different money manager strategies. Underlying | eventual rise of interest rates in the last month of 2016, more rate |
Fund assets not allocated to money managers are managed by | sensitive real assets like global real estate investment trusts and |
Russell Investment Management, LLC (“RIM”), the Fund’s | global infrastructure suffered in performance. |
and Underlying Funds’ advisor. RIM, as the Underlying Funds’ | The U.S. equity market, as measured by the S&P 500® Index, was |
advisor, may change the allocation of the Underlying Funds’ | up 11.96% over the period but also experienced multiple draw |
assets among money managers at any time. An exemptive order | downs. The Fund’s exposure to global equities proved beneficial |
from the Securities and Exchange Commission (“SEC”) permits | over the period as emerging markets rallied and outperformed |
RIM to engage or terminate a money manager in an Underlying | U.S. equities. In addition, the Fund’s allocation to U.S. small |
Fund at any time, subject to approval by the Underlying Fund’s | cap equity contributed positively, as the market outpaced other |
Board, without a shareholder vote. Pursuant to the terms of the | asset classes. By contrast, non-U.S. developed equity was one of |
exemptive order, an Underlying Fund is required to notify its | the lowest performing portions of the Fund’s exposure as falling |
shareholders within 90 days of when a money manager begins | commodities and currencies weighed on returns. |
providing services. | |
What is the Fund’s investment objective? | How did the investment strategies and techniques employed |
by the Fund and the Underlying Funds affect the Fund’s | |
The Fund seeks to provide above average long term capital | performance? |
appreciation and a moderate level of current income. | The Fund is a fund of funds and its performance is based on RIM’s |
How did the Fund perform relative to its benchmark for the | strategic asset allocations, the performance of the Underlying |
fiscal year ended December 31, 2016? | Funds in which the Fund invests, and tactical changes in the |
For the fiscal year ended December 31, 2016, the Fund gained | Fund’s asset allocation throughout the year. The Fund’s diverse |
9.05%. This is compared to the Fund’s primary benchmark, the | investments across global equity, alternative and fixed/other |
Bloomberg Barclays U.S. Aggregate Bond Index, which gained | income Underlying Funds benefited performance relative to the |
2.65% during the same period. The Fund’s performance includes | Bloomberg Barclays U.S. Aggregate Bond Index. |
operating expenses, whereas index returns are unmanaged and do | The Fund’s strategic allocation to fixed income Underlying |
not include expenses of any kind. | Funds generally had a positive impact on its benchmark- |
For the fiscal year ended December 31, 2016, the Morningstar® | relative performance. An allocation to the RIF Core Bond Fund |
Insurance Allocation – 50% to 70% Equity Category, a group of | contributed, as this Underlying Fund outperformed the Fund’s |
funds that Morningstar considers to have investment strategies | benchmark due to the positive performance of credit, particularly |
similar to those of the Fund, gained 6.47%. This result serves as | high yield corporate credit, given the Underlying Fund’s strategic |
a peer comparison and is expressed net of operating expenses. | overweight to credit risk. The excess returns in fixed income |
assets were partially offset by the performance of the RIC Russell | |
Global Opportunistic Credit Fund. From an active management | |
The Fund’s outperformance relative to the Bloomberg Barclays | perspective, this Underlying Fund underperformed its benchmark |
U.S. Aggregate Bond was primarily due to the Fund’s strategic | due to the underperformance of bank loans and local currency |
exposure to global equities as emerging markets rallied and | emerging market debt, two sectors in which the Underlying Fund |
outperformed U.S. equities over the period; exposure to high yield | invests. |
debt, as it was one of the best performing asset classes globally; | The Fund’s global equity exposure had a mixed impact on its |
and exposure to a stronger U.S. dollar. | benchmark-relative performance. The Fund benefited from |
How did the market conditions described in the Market | exposure to the RIC Russell Emerging Markets Fund as a result of |
Summary report affect the Fund’s performance? | the strong performance of emerging markets equities and security |
The Fund seeks to achieve its objective by investing in Underlying | selection within the Underlying Fund. By contrast, overweights |
Funds that provide exposure to a range of diversified investments, | to European securities in the RIF Non-U.S. Fund caused the |
and most major asset classes invested in by the Underlying | Underlying Fund to struggle as European equities continued to |
Funds produced positive absolute returns during the period. | lag the U.S. equity market. |
Balanced Strategy Fund 31
Russell Investment Funds
Balanced Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
Describe any changes to the Fund’s structure or allocation | 2016, RIM reduced high yield credit exposure and increased the |
to the Underlying Funds. | Fund’s exposure to global real estate investment trusts. RIM’s |
RIM has the discretion to vary the Fund’s actual allocation | modifications to the Fund’s asset allocation were additive during |
from the target strategic asset allocation by up to +/- 5% at the | the period. |
equity, fixed/other income or alternative category level based on | RIM also made strategic asset allocation changes during the |
RIM’s capital markets research. In addition to investing in the | period. In September 2016, RIM added further diversity and |
Underlying Funds, RIM may seek to actively manage a Fund’s | dynamism to the Fund through the addition of the RIC Russell |
overall exposures by investing in derivatives that RIM believes | Multi-Strategy Income Fund and RIC Unconstrained Total Return |
will achieve the desired risk/return profile for the Fund. RIM’s | Fund as Underlying Funds. |
asset allocation modifications, implemented through both tactical | |
changes to Underlying Fund allocations and derivatives-based | The views expressed in this report reflect those of the |
exposures, benefited the Fund’s performance relative to the | portfolio managers only through the end of the period |
Fund’s target strategic asset allocation. | covered by the report. These views do not necessarily |
represent the views of RIM, or any other person in RIM or | |
RIM adapted the Fund’s asset allocation over the period as market | any other affiliated organization. These views are subject to |
opportunities and risks evolved. During the first quarter of 2016, | change at any time based upon market conditions or other |
equity markets declined substantially, and RIM added further risk | events, and RIM disclaims any responsibility to update the |
to the portfolio by overweighting exposure to high yield credit and | views contained herein. These views should not be relied |
emerging markets equity compared with core bond holdings and | on as investment advice and, because investment decisions |
cash. Markets subsequently rebounded from the February lows | for a Russell Investment Funds (“RIF”) Fund are based on |
and RIM reduced risk exposure to a more defensive stance with | numerous factors, should not be relied on as an indication |
the Fund’s equity allocation below strategic weights. In December | of investment decisions of any RIF Fund. |
* Assumes initial investment on April 30, 2007.
** The Bloomberg Barclays U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds,
investment grade corporate debt securities and mortgage-backed securities.
Effective August 24, 2016 the Barclays fixed income benchmark indices, including the Barclays Aggregate family of indices, were renamed the Bloomberg
Barclays family of indices.
*** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
*** The Russell Developed ex-U.S. Large Cap® Index (net) is an index which offers investors access to the large-cap segment of the global equity market, excluding
companies assigned to the United States. It is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely
reconstituted annually to accurately reflect the changes in the market over time and is net of tax on dividends from foreign holdings.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results. Additionally, the returns presented herein may differ from the performance reported
in the Financial Highlights as the returns herein are calculated in a manner consistent with standardized performance in accordance with Securities and Exchange
Commission rules, while the performance in the Financial Highlights has been calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”).
32 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Shareholder Expense Example — December 31, 2016 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2016 to December 31, 2016. | July 1, 2016 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2016 | $ | 1,051.60 | $ | 1,024.58 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 0.57 | $ | 0.56 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.11% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/366 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
Balanced Strategy Fund 33
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments — December 31, 2016
Amounts in thousands (except share amounts) | |||||
Fair | |||||
Value | |||||
Shares | $ | ||||
Investments in Affiliated Mutual Funds - 97.6% | |||||
Alternative - 8.3% | |||||
RIC Russell Commodity Strategies Fund Class Y | 1,624,101 | 9,290 | |||
RIC Russell Global Infrastructure Fund Class Y | 773,014 | 8,287 | |||
RIF Global Real Estate Securities Fund | 408,950 | 5,725 | |||
23,302 | |||||
Domestic Equities - 22.1% | |||||
RIC Russell U.S. Defensive Equity Fund Class Y | 117,907 | 5,652 | |||
RIC Russell U.S. Dynamic Equity Fund Class Y | 1,931,142 | 20,007 | |||
RIF Aggressive Equity Fund | 1,146,844 | 17,444 | |||
RIF Multi-Style Equity Fund | 1,127,470 | 19,257 | |||
62,360 | |||||
Fixed Income - 36.2% | |||||
RIC Russell Global Opportunistic Credit Fund Class Y | 2,974,954 | 27,905 | |||
RIC Unconstrained Total Return Fund Class Y | 1,139,280 | 11,279 | |||
RIF Core Bond Fund | 6,214,959 | 62,895 | |||
102,079 | |||||
International Equities - 27.0% | |||||
RIC Russell Emerging Markets Fund Class Y | 1,218,624 | 19,254 | |||
RIC Russell Global Equity Fund Class Y | 2,917,601 | 28,972 | |||
RIF Non-U.S. Fund | 2,511,895 | 28,008 | |||
76,234 | |||||
Specialty - 4.0% | |||||
RIC Russell Multi-Strategy Income Fund Class Y | 1,171,000 | 11,300 | |||
Total Investments in Affiliated Mutual Funds | |||||
(cost $253,543) | 275,275 | ||||
Options Purchased - 0.1% | |||||
(Number of Contracts) | |||||
iShares MSCI Emerging Markets Index | |||||
Mar 2017 36.60 Call (212,465) | USD | 7,776 | (ÿ) | 142 | |
S&P 500 Index | |||||
Mar 2017 2,279.87 Call (7,930) | USD | 18,079 | (ÿ) | 236 | |
Jan 2017 2,137.94 Put (4,631) | USD | 9,901 | (ÿ) | 4 | |
Total Options Purchased | |||||
(cost $858) | 382 | ||||
Short-Term Investments - 0.7% | |||||
U.S. Cash Management Fund | 1,844,056 | (8) | 1,844 | ||
Total Short-Term Investments | |||||
(cost $1,844) | 1,844 | ||||
Total Investments 98.4% | |||||
(identified cost $256,245) | 277,501 | ||||
Other Assets and Liabilities, Net - 1.6% | 4,636 | ||||
Net Assets - 100.0% | 282,137 |
See accompanying notes which are an integral part of the financial statements.
34 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments, continued — December 31, 2016
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
Amsterdam Index Futures | 14 | EUR | 1,353 | 01/17 | 30 | ||
CAC40 Euro Index Futures | 85 | EUR | 4,134 | 01/17 | 73 | ||
DAX Index Futures | 13 | EUR | 3,726 | 03/17 | 82 | ||
EURO STOXX 50 Index Futures | 78 | EUR | 2,556 | 03/17 | 60 | ||
FTSE/MIB Index Futures | 9 | EUR | 864 | 03/17 | 27 | ||
IBEX 35 Index Futures | 14 | EUR | 1,304 | 01/17 | 10 | ||
OMXS 30 Index Futures | 59 | SEK | 8,962 | 01/17 | (14 | ) | |
S&P 500 E-Mini Index Futures | 6 | USD | 671 | 03/17 | (7 | ) | |
Short Positions | |||||||
FTSE 100 Index Futures | 27 | GBP | 1,904 | 03/17 | (73 | ) | |
Hang Seng Index Futures | 1 | HKD | 1,098 | 01/17 | (3 | ) | |
MSCI Emerging Markets Mini Index Futures | 193 | USD | 8,288 | 03/17 | 201 | ||
MSCI Singapore Index Futures | 1 | SGD | 32 | 01/17 | — | ||
Russell 1000 Mini Index Futures | 6 | USD | 372 | 03/17 | 4 | ||
S&P 500 E-Mini Index Futures | 190 | USD | 21,244 | 03/17 | 108 | ||
S&P Mid 400 E-Mini Index Futures | 3 | USD | 498 | 03/17 | 6 | ||
S&P/TSX 60 Index Futures | 29 | CAD | 5,202 | 03/17 | 1 | ||
SPI 200 Index Futures | 9 | AUD | 1,267 | 03/17 | (20 | ) | |
TOPIX Index Futures | 30 | JPY | 455,400 | 03/17 | (104 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 381 |
Options Written | ||||||||
Amounts in thousands (except contract amounts) | ||||||||
Number of | Strike | Notional | Expiration | Fair Value | ||||
Call/Put | Contracts | Price | Amount | Date | $ | |||
iShares MSCI Emerging Markets Index | Put | 212,465 | 32.62 | USD | 6,931 | 03/17/17 | (131 | ) |
S&P 500 Index | Put | 9,262 | 1,900.39 | USD | 17,601 | 01/06/17 | (4 | ) |
S&P 500 Index | Put | 7,930 | 2,031.57 | USD | 16,110 | 03/17/17 | (117 | ) |
Total Liability for Options Written (premiums received $367) | (252 | ) |
Transactions in options written contracts for the period ended December 31, 2016 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2015 | — | $ | — | |||
Opened | 255,058 | 1,207 | ||||
Closed | (5,070 | ) | (45 | ) | ||
Expired | (20,331 | ) | (795 | ) | ||
Outstanding December 31, 2016 | 229,657 | $ | 367 |
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
Bank of America | USD | 677 | RUB | 44,070 | 03/15/17 | 30 | ||
Bank of America | AUD | 140 | USD | 101 | 03/15/17 | — |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 35
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
Bank of America | CNY | 9,470 | USD | 1,362 | 03/15/17 | 28 | |
Bank of America | EUR | 260 | USD | 272 | 03/15/17 | (2 | ) |
Bank of America | JPY | 15,470 | USD | 132 | 03/15/17 | (1 | ) |
Bank of America | TWD | 28,550 | USD | 902 | 03/15/17 | 21 | |
BNP Paribas | AUD | 624 | USD | 464 | 01/10/17 | 14 | |
BNP Paribas | CAD | 861 | USD | 644 | 01/10/17 | 2 | |
BNP Paribas | CHF | 567 | USD | 559 | 01/10/17 | 2 | |
BNP Paribas | EUR | 1,998 | USD | 2,129 | 01/10/17 | 24 | |
BNP Paribas | GBP | 944 | USD | 1,178 | 01/10/17 | 15 | |
BNP Paribas | HKD | 1,884 | USD | 243 | 01/10/17 | — | |
BNP Paribas | JPY | 158,797 | USD | 1,404 | 01/10/17 | 46 | |
BNP Paribas | SEK | 2,131 | USD | 233 | 01/10/17 | (1 | ) |
BNP Paribas | SGD | 112 | USD | 78 | 01/10/17 | 1 | |
Citigroup | USD | 477 | AUD | 663 | 01/10/17 | 1 | |
Citigroup | USD | 654 | CAD | 886 | 01/10/17 | 6 | |
Citigroup | USD | 768 | CAD | 1,020 | 03/15/17 | (7 | ) |
Citigroup | USD | 561 | CHF | 574 | 01/10/17 | 3 | |
Citigroup | USD | 543 | CHF | 545 | 03/15/17 | (6 | ) |
Citigroup | USD | 2,083 | EUR | 1,991 | 01/10/17 | 14 | |
Citigroup | USD | 1,141 | GBP | 933 | 01/10/17 | 8 | |
Citigroup | USD | 240 | HKD | 1,860 | 01/10/17 | — | |
Citigroup | USD | 1,469 | JPY | 171,508 | 01/10/17 | (1 | ) |
Citigroup | USD | 997 | JPY | 113,025 | 03/15/17 | (27 | ) |
Citigroup | USD | 345 | MXN | 7,130 | 03/15/17 | (4 | ) |
Citigroup | USD | 238 | SEK | 2,172 | 01/10/17 | — | |
Citigroup | USD | 81 | SGD | 117 | 01/10/17 | — | |
Citigroup | USD | 515 | ZAR | 7,160 | 03/15/17 | (1 | ) |
Citigroup | AUD | 663 | USD | 477 | 02/07/17 | (1 | ) |
Citigroup | AUD | 1,910 | USD | 1,419 | 03/15/17 | 43 | |
Citigroup | CAD | 886 | USD | 654 | 02/07/17 | (6 | ) |
Citigroup | CHF | 574 | USD | 562 | 02/07/17 | (3 | ) |
Citigroup | EUR | 1,991 | USD | 2,085 | 02/07/17 | (14 | ) |
Citigroup | EUR | 780 | USD | 841 | 03/15/17 | 17 | |
Citigroup | GBP | 933 | USD | 1,142 | 02/07/17 | (8 | ) |
Citigroup | GBP | 310 | USD | 397 | 03/15/17 | 14 | |
Citigroup | HKD | 1,860 | USD | 240 | 02/07/17 | — | |
Citigroup | HKD | 580 | USD | 75 | 03/15/17 | — | |
Citigroup | JPY | 171,508 | USD | 1,471 | 02/07/17 | 1 | |
Citigroup | SEK | 2,172 | USD | 238 | 02/07/17 | — | |
Citigroup | SGD | 117 | USD | 81 | 02/07/17 | — | |
Commonwealth Bank of Australia | AUD | 624 | USD | 464 | 01/10/17 | 14 | |
Commonwealth Bank of Australia | CAD | 861 | USD | 643 | 01/10/17 | 2 | |
Commonwealth Bank of Australia | CHF | 567 | USD | 559 | 01/10/17 | 3 | |
Commonwealth Bank of Australia | EUR | 1,998 | USD | 2,131 | 01/10/17 | 27 | |
Commonwealth Bank of Australia | GBP | 944 | USD | 1,177 | 01/10/17 | 14 | |
Commonwealth Bank of Australia | HKD | 1,884 | USD | 243 | 01/10/17 | — | |
Commonwealth Bank of Australia | JPY | 158,797 | USD | 1,406 | 01/10/17 | 46 | |
Commonwealth Bank of Australia | SEK | 2,131 | USD | 233 | 01/10/17 | (1 | ) |
Commonwealth Bank of Australia | SGD | 112 | USD | 78 | 01/10/17 | 1 | |
Royal Bank of Canada | USD | 15 | EUR | 14 | 01/10/17 | — | |
Royal Bank of Canada | USD | 28 | GBP | 22 | 01/10/17 | (1 | ) |
Royal Bank of Canada | USD | 6 | HKD | 48 | 01/10/17 | — | |
Royal Bank of Canada | AUD | 78 | USD | 58 | 01/10/17 | 1 | |
Royal Bank of Canada | CAD | 49 | USD | 37 | 01/10/17 | — |
See accompanying notes which are an integral part of the financial statements.
36 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
Royal Bank of Canada | CHF | 15 | USD | 15 | 01/10/17 | — | |
Royal Bank of Canada | JPY | 25,423 | USD | 223 | 01/10/17 | 6 | |
Royal Bank of Canada | SEK | 83 | USD | 9 | 01/10/17 | — | |
Royal Bank of Canada | SGD | 11 | USD | 8 | 01/10/17 | — | |
Standard Chartered | USD | 291 | INR | 20,020 | 03/15/17 | 1 | |
State Street | USD | 477 | AUD | 663 | 01/10/17 | 1 | |
State Street | USD | 654 | CAD | 886 | 01/10/17 | 6 | |
State Street | USD | 561 | CHF | 574 | 01/10/17 | 3 | |
State Street | USD | 2,082 | EUR | 1,991 | 01/10/17 | 15 | |
State Street | USD | 1,142 | GBP | 933 | 01/10/17 | 7 | |
State Street | USD | 240 | HKD | 1,860 | 01/10/17 | — | |
State Street | USD | 1,469 | JPY | 171,508 | 01/10/17 | (1 | ) |
State Street | USD | 238 | SEK | 2,172 | 01/10/17 | 1 | |
State Street | USD | 81 | SGD | 117 | 01/10/17 | — | |
State Street | AUD | 663 | USD | 477 | 02/07/17 | (1 | ) |
State Street | CAD | 886 | USD | 654 | 02/07/17 | (6 | ) |
State Street | CHF | 574 | USD | 562 | 02/07/17 | (3 | ) |
State Street | EUR | 1,991 | USD | 2,085 | 02/07/17 | (14 | ) |
State Street | GBP | 933 | USD | 1,143 | 02/07/17 | (7 | ) |
State Street | HKD | 1,860 | USD | 240 | 02/07/17 | — | |
State Street | JPY | 171,508 | USD | 1,470 | 02/07/17 | — | |
State Street | SEK | 2,172 | USD | 238 | 02/07/17 | (1 | ) |
State Street | SGD | 117 | USD | 81 | 02/07/17 | — | |
UBS | KRW | 349,890 | USD | 300 | 03/15/17 | 10 | |
Westpac | USD | 767 | CAD | 1,020 | 03/15/17 | (7 | ) |
Westpac | USD | 543 | CHF | 545 | 03/15/17 | (5 | ) |
Westpac | USD | 997 | JPY | 113,025 | 03/15/17 | (26 | ) |
Westpac | USD | 345 | MXN | 7,130 | 03/15/17 | (4 | ) |
Westpac | USD | 514 | ZAR | 7,160 | 03/15/17 | — | |
Westpac | AUD | 1,910 | USD | 1,420 | 03/15/17 | 44 | |
Westpac | EUR | 780 | USD | 841 | 03/15/17 | 17 | |
Westpac | GBP | 310 | USD | 396 | 03/15/17 | 14 | |
Westpac | HKD | 580 | USD | 75 | 03/15/17 | — | |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | 364 |
Total Return Swap Contracts (*) | ||||||
Amounts in thousands | ||||||
Notional | Termination | Fair Value | ||||
Underlying Reference Entity | Counterparty | Amount | Date | $ | ||
Dow Jones U.S. Real Estate Total Return Index | Bank of America | USD | 1,480 | 03/07/17 | (69 | ) |
Total Fair Value of Open Total Return Swap Contracts Premiums Paid (Received) - $— (å) | (69 | ) |
(*) Total return swaps (which includes index swaps) are agreements between counterparties to exchange cash flows, one based on a market-linked
returns of an individual asset or a basket of assets (i.e. an index), and the other on a fixed or floating rate. The floating rate fee was based on the
3 Month LIBOR rate plus a fee of 0.075%.
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 37
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments, continued — December 31, 2016
Credit Default Swap Contracts | |||||||
Amounts in thousands | |||||||
Credit Indices | |||||||
Fund (Pays)/ | |||||||
Receives | Termination | Fair Value | |||||
Reference Entity | Counterparty | Notional Amount | Fixed Rate | Date | $ | ||
CDX Emerging Markets Index | Barclays | USD | 6,500 | (1.000 | %) | 12/20/21 | 406 |
CDX NA High Yield Index | Morgan Stanley | USD | 16,200 | 5.000 | % | 12/20/21 | 1,030 |
Total Fair Value on Open Credit Indices Premiums Paid (Received) - $1,015 | 1,436 |
Presentation of Portfolio Holdings | |||||||||||||||||
Amounts in thousands | |||||||||||||||||
Fair Value | |||||||||||||||||
Practical | |||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | |||||||||||
Investments in Affiliated Mutual Funds | $ | 275,275 | $ | — | $ | — | $ | — | $ | 275,275 | 97.6 | ||||||
Options Purchased | — | 382 | — | — | 382 | 0.1 | |||||||||||
Short-Term Investments | — | — | — | 1,844 | 1,844 | 0.7 | |||||||||||
Total Investments | 275,275 | 382 | — | 1,844 | 277,501 | 98.4 | |||||||||||
Other Assets and Liabilities, Net | 1.6 | ||||||||||||||||
100.0 | |||||||||||||||||
Other Financial Instruments | |||||||||||||||||
Assets | |||||||||||||||||
Futures Contracts | 602 | — | — | — | 602 | 0.2 | |||||||||||
Foreign Currency Exchange Contracts | — | 523 | — | — | 523 | 0.2 | |||||||||||
Credit Default Swap Contracts | — | 1,436 | — | — | 1,436 | 0.5 | |||||||||||
Liabilities | |||||||||||||||||
Futures Contracts | (221 | ) | — | — | — | (221 | ) | (0.1 | ) | ||||||||
Options Written | — | (252 | ) | — | — | (252 | ) | (0.1 | ) | ||||||||
Foreign Currency Exchange Contracts | — | (159 | ) | — | — | (159 | ) | (0.1 | ) | ||||||||
Total Return Swap Contracts | — | (69 | ) | — | — | (69 | ) | (—)* | |||||||||
Total Other Financial Instruments** | $ | 381 | $ | 1,479 | $ | — | $ | — | $ | 1,860 |
* Less than 0.05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the investments.
(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified
in the fair value levels. The fair value amounts presented in the table are intended to permit reconciliation to the amounts presented in the Schedule of
Investments.
For a description of the Levels, see note 2 in the Notes to Financial Statements.
For a disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2016, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
38 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Fair Value of Derivative Instruments — December 31, 2016
Amounts in thousands
Foreign | |||||||
Equity | Credit | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | ||||
Location: Statement of Assets and Liabilities - Assets | |||||||
Investments, at fair value* | $ | 382 | $ | — | $ | — | |
Unrealized appreciation on foreign currency exchange contracts | — | — | 523 | ||||
Variation margin on futures contracts** | 602 | — | — | ||||
Credit default swap contracts, at fair value | — | 1,436 | — | ||||
Total | $ | 984 | $ | 1,436 | $ | 523 | |
Location: Statement of Assets and Liabilities - Liabilities | |||||||
Variation margin on futures contracts** | $ | 221 | $ | — | $ | — | |
Unrealized depreciation on foreign currency exchange contracts | — | — | 159 | ||||
Options written, at fair value | 252 | — | — | ||||
Total return swap contracts, at fair value | 69 | — | — | ||||
Total | $ | 542 | $ | — | $ | 159 | |
Foreign | |||||||
Equity | Credit | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | ||||
Location: Statement of Operations - Net realized gain (loss) | |||||||
Investments*** | $ | (816 | ) | $ | — | $ | — |
Futures contracts | (510 | ) | — | — | |||
Options written | 831 | — | — | ||||
Total return swap contracts | (159 | ) | — | — | |||
Credit default swap contracts | — | 701 | — | ||||
Foreign currency-related transactions**** | — | — | 1,054 | ||||
Total | $ | (654 | ) | $ | 701 | $ | 1,054 |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | |||||||
Investments***** | $ | (476 | ) | $ | — | $ | — |
Futures contracts | 465 | — | — | ||||
Options written | 115 | — | — | ||||
Total return swap contracts | (13 | ) | — | — | |||
Credit default swap contracts | — | 490 | — | ||||
Foreign currency-related transactions****** | — | — | 437 | ||||
Total | $ | 91 | $ | 490 | $ | 437 |
* Fair value of purchased options.
** Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
*** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
**** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
***** Includes net unrealized gain (loss) on purchased options as reported in the Schedule of Investments.
****** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 39
Russell Investment Funds
Balanced Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Assets | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||
Options Purchased Contracts | Investments, at fair value | $ | 382 | $ | — | $ | 382 | ||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 523 | — | 523 | |||||
Futures Contracts | Variation margin on futures contracts | 245 | — | 245 | |||||
Credit Default Swap Contracts | Credit default swap contracts, at fair value | 1,436 | — | 1,436 | |||||
Total Financial and Derivative Assets | 2,586 | — | 2,586 | ||||||
Financial and Derivative Assets not subject to a netting agreement | (1,679 | ) | — | (1,679 | ) | ||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 907 | $ | — | $ | 907 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Assets | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||
Bank of America | $ | 461 | $ | 324 | $ | — | $ | 137 | |
BNP Paribas | 104 | 1 | — | 103 | |||||
Citigroup | 107 | 79 | — | 28 | |||||
Commonwealth Bank of Australia | 108 | 1 | — | 107 | |||||
Royal Bank of Canada | 7 | 1 | — | 6 | |||||
Standard Chartered | 1 | — | — | 1 | |||||
State Street | 33 | 33 | — | — | |||||
UBS | 10 | — | — | 10 | |||||
Westpac | 76 | 43 | — | 33 | |||||
Total | $ | 907 | $ | 482 | $ | — | $ | 425 |
See accompanying notes which are an integral part of the financial statements.
40 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 11 | $ | — | $ | 11 | ||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 159 | — | 159 | |||||
Options Written Contracts | Options written, at fair value | 252 | — | 252 | |||||
Total Return Swap Contracts | Total return swap contracts, at fair value | 69 | — | 69 | |||||
Total Financial and Derivative Liabilities | 491 | — | 491 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (9 | ) | — | (9 | ) | ||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 482 | $ | — | $ | 482 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Liabilities | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | |||||
Bank of America | $ | 324 | $ | 324 | $ | — | $ | — | |
BNP Paribas | 1 | 1 | — | — | |||||
Citigroup | 79 | 79 | — | — | |||||
Commonwealth Bank of Australia | 1 | 1 | — | — | |||||
Royal Bank of Canada | 1 | 1 | — | — | |||||
State Street | 33 | 33 | — | — | |||||
Westpac | 43 | 43 | — | — | |||||
Total | $ | 482 | $ | 482 | $ | — | $ | — |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 41
Russell Investment Funds
Balanced Strategy Fund
Statement of Assets and Liabilities — December 31, 2016
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 256,245 |
Investments, at fair value(>) | 277,501 | |
Cash (restricted)(a) | 3,300 | |
Unrealized appreciation on foreign currency exchange contracts | 523 | |
Receivables: | ||
Dividends from affiliated funds | 2 | |
Fund shares sold | 148 | |
Variation margin on futures contracts | 245 | |
Credit default swap contracts, at fair value(+) | 1,436 | |
Total assets | 283,155 | |
Liabilities | ||
Payables: | ||
Due to broker (b) | 317 | |
Investments purchased | 148 | |
Fund shares redeemed | 1 | |
Accrued fees to affiliates | 14 | |
Other accrued expenses | 47 | |
Variation margin on futures contracts | 11 | |
Unrealized depreciation on foreign currency exchange contracts | 159 | |
Options written, at fair value(x) | 252 | |
Total return swap contracts, at fair value(8) | 69 | |
Total liabilities | 1,018 | |
Net Assets | $ | 282,137 |
See accompanying notes which are an integral part of the financial statements.
42 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Statement of Assets and Liabilities, continued — December 31, 2016
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | 244 | |
Accumulated net realized gain (loss) | (1,298 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 21,256 | ||
Futures contracts | 381 | ||
Options written | 115 | ||
Total return swap contracts | (69 | ) | |
Credit default swap contracts | 421 | ||
Foreign currency-related transactions | 364 | ||
Shares of beneficial interest | 290 | ||
Additional paid-in capital | 260,433 | ||
Net Assets | $ | 282,137 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share:(#) | $ | 9.74 | |
Net assets | $ | 282,137,092 | |
Shares outstanding ($.01 par value) | 28,966,885 | ||
Amounts in thousands | |||
(x) Premiums received on options written | $ | 367 | |
(+) Credit default swap contracts - premiums paid (received) | $ | 1,015 | |
(8) Total return swap contracts – premiums paid (received) | $ | — | |
(>) Investments in affiliated funds | $ | 277,119 | |
(a) Cash Collateral for Futures | $ | 3,300 | |
(b) Due to Broker for Swaps | $ | 317 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 43
Russell Investment Funds
Balanced Strategy Fund
Statement of Operations — For the Period Ended December 31, 2016
Amounts in thousands | |||
Investment Income | |||
Dividends from affiliated funds | $ | 7,490 | |
Expenses | |||
Advisory fees | 564 | ||
Administrative fees | 120 | ||
Custodian fees (1) | 41 | ||
Transfer agent fees | 12 | ||
Professional fees | 44 | ||
Trustees’ fees | 10 | ||
Printing fees | 40 | ||
Miscellaneous | 11 | ||
Expenses before reductions | 842 | ||
Expense reductions | (533 | ) | |
Net expenses | 309 | ||
Net investment income (loss) | 7,181 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | 6,190 | ||
Futures contracts | (510 | ) | |
Options written | 831 | ||
Total return swap contracts | (159 | ) | |
Credit default swap contracts | 701 | ||
Foreign currency-related transactions | 1,054 | ||
Capital gain distributions from affiliated funds | 4,603 | ||
Net realized gain (loss) | 12,710 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | 2,980 | ||
Futures contracts | 465 | ||
Options written | 115 | ||
Total return swap contracts | (13 | ) | |
Credit default swap contracts | 490 | ||
Foreign currency-related transactions | 437 | ||
Net change in unrealized appreciation (depreciation) | 4,474 | ||
Net realized and unrealized gain (loss) | 17,184 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 24,365 |
(1) Includes a reimbursement for overbilling of custody out-of-pocket fees from prior years. See note 8 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
44 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2016 | 2015 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 7,181 | $ | 6,669 | ||
Net realized gain (loss) | 12,710 | 9,665 | ||||
Net change in unrealized appreciation (depreciation) | 4,474 | (23,183 | ) | |||
Net increase (decrease) in net assets from operations | 24,365 | (6,849 | ) | |||
Distributions | ||||||
From net investment income | (9,185 | ) | (6,507 | ) | ||
From net realized gain | (4,457 | ) | (17,348 | ) | ||
Net decrease in net assets from distributions | (13,642 | ) | (23,855 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | (17,261 | ) | 5,252 | |||
Total Net Increase (Decrease) in Net Assets | (6,538 | ) | (25,452 | ) | ||
Net Assets | ||||||
Beginning of period | 288,675 | 314,127 | ||||
End of period | $ | 282,137 | $ | 288,675 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | 244 | $ | 710 |
* Share transaction amounts (in thousands) for the periods ended December 31, 2016 and December 31, 2015 were as follows: | ||||||||||||
2016 | 2015 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 1,008 | $ | 9,687 | 1,258 | $ | 12,856 | ||||||
Proceeds from reinvestment of distributions | 1,411 | 13,642 | 2,420 | 23,854 | ||||||||
Payments for shares redeemed | (4,233 | ) | (40,590 | ) | (3,096 | ) | (31,458 | ) | ||||
Total increase (decrease) | (1,814 | ) | $ | (17,261 | ) | 582 | $ | 5,252 |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 45
Russell Investment Funds
Balanced Strategy Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period. | ||||||||||||||||
$ | ||||||||||||||||
$ | Net | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Investment | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Income (Loss) | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | (a)(b)(d) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2016 | 9.38 | .24 | .60 | .84 | (.32 | ) | (.16 | ) | ||||||||
December 31, 2015 | 10.40 | .22 | (.44 | ) | (.22 | ) | (.22 | ) | (.58 | ) | ||||||
December 31, 2014 | 10.44 | .31 | .17 | .48 | (.31 | ) | (.21 | ) | ||||||||
December 31, 2013 | 9.55 | .21 | .96 | 1.17 | (.21 | ) | (.07 | ) | ||||||||
December 31, 2012 | 8.66 | .23 | .89 | 1.12 | (.23 | ) | — | |||||||||
See accompanying notes which are an integral part of the financial statements.
46 Balanced Strategy Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(e) | (000 | ) | Gross(c) | Net(c)(d) | Net Assets(b)(d) | Turnover Rate | |||||||||
(.48 | ) | 9.74 | 9.05 | 282,137 | .30 | .11 | 2.55 | 19 | |||||||||
(.80 | ) | 9.38 | (2.30 | ) | 288,675 | .29 | .11 | 2.16 | 23 | ||||||||
(.52 | ) | 10.40 | 4.61 | 314,127 | .31 | .10 | 2.91 | 22 | |||||||||
(.28 | ) | 10.44 | 12.43 | 304,103 | .31 | .10 | 2.09 | 11 | |||||||||
(.23 | ) | 9.55 | 12.95 | 253,080 | .32 | .10 | 2.49 | 21 |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 47
Russell Investment Funds
Balanced Strategy Fund
Related Party Transactions, Fees and Expenses
Accrued fees payable to affiliates for the period ended December 31, 2016 were as follows: | ||
Advisory fees | $ | 1,160 |
Administration fees | 10,108 | |
Transfer agent fees | 1,047 | |
Trustee fees | 2,150 | |
$ | 14,465 |
Transactions (amounts in thousands) during the period ended December 31, 2016 with Underlying Funds which are, or were, an | ||||||||||||||||||||
affiliated company are as follows: | ||||||||||||||||||||
Fair Value, | Change in | |||||||||||||||||||
Beginning of | Realized Gain | Unrealized | Fair Value, End | Income | Capital Gains | |||||||||||||||
Period | Purchases | Sales | (Loss) | Gain (Loss) | of Period | Distributions | Distributions | |||||||||||||
RIC Russell Commodity Strategies | ||||||||||||||||||||
Fund | $ | 6,521 | $ | 3,287 | $ | 1,263 | $ | (259 | ) | $ | 1,004 | $ | 9,290 | $ | — | $ | — | |||
RIC Russell Global Infrastructure | ||||||||||||||||||||
Fund | 11,526 | 801 | 4,662 | 40 | 582 | 8,287 | 328 | 234 | ||||||||||||
RIF Global Real Estate Securities | ||||||||||||||||||||
Fund | 2,875 | 3,426 | 493 | 53 | (136 | ) | 5,725 | 160 | 158 | |||||||||||
RIC Russell U.S. Defensive Equity | ||||||||||||||||||||
Fund | 20,100 | 639 | 16,187 | 7,156 | (6,056 | ) | 5,652 | 180 | 388 | |||||||||||
RIC Russell U.S. Dynamic Equity | ||||||||||||||||||||
Fund | 20,094 | 1,469 | 3,250 | (378 | ) | 2,072 | 20,007 | 275 | 778 | |||||||||||
RIF Aggressive Equity Fund | 17,198 | 544 | 3,191 | (417 | ) | 3,310 | 17,444 | 120 | 9 | |||||||||||
RIF Multi-Style Equity Fund | 22,267 | 1,776 | 5,485 | 677 | 22 | 19,257 | 403 | 1,071 | ||||||||||||
RIC Russell Global Opportunistic | ||||||||||||||||||||
Credit Fund | 26,061 | 3,843 | 3,845 | (230 | ) | 2,076 | 27,905 | 1,269 | — | |||||||||||
RIC Unconstrained Total Return | ||||||||||||||||||||
Fund | — | 11,697 | 309 | — | (109 | ) | 11,279 | 160 | 27 | |||||||||||
RIF Core Bond Fund | 81,130 | 5,179 | 23,358 | 455 | (511 | ) | 62,895 | 2,792 | 133 | |||||||||||
RIC Russell Emerging Markets Fund | 17,194 | 3,892 | 3,485 | (318 | ) | 1,971 | 19,254 | 237 | — | |||||||||||
RIC Russell Global Equity Fund | 28,754 | 3,484 | 3,101 | 151 | (316 | ) | 28,972 | 455 | 1,805 | |||||||||||
RIF Non-U.S. Fund | 28,716 | 1,774 | 2,300 | 78 | (260 | ) | 28,008 | 898 | — | |||||||||||
RIC Russell Multi-Strategy Income | ||||||||||||||||||||
Fund | — | 11,690 | 195 | (2 | ) | (193 | ) | 11,300 | 199 | — | ||||||||||
U.S. Cash Management Fund | 4,030 | 15,480 | 17,666 | — | — | 1,844 | 14 | — | ||||||||||||
$ | 286,466 | $ | 68,981 | $ | 88,790 | $ | 7,006 | $ | 3,456 | $ | 277,119 | $ | 7,490 | $ | 4,603 |
Federal Income Taxes
At December 31, 2016, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Cost of Investments | $ | 260,729,164 | ||
Unrealized Appreciation | $ | 20,384,517 | ||
Unrealized Depreciation | (3,612,552 | ) | ||
Net Unrealized Appreciation (Depreciation) | $ | 16,771,965 | ||
Undistributed Ordinary Income | $ | 501,002 | ||
Undistributed Long-Term Capital Gains | ||||
(Capital Loss Carryforward) | $ | 5,139,167 | ||
Tax Composition of Distributions | ||||
Ordinary Income | $ | 9,185,278 | ||
Long-Term Capital Gains | $ | 4,457,346 |
See accompanying notes which are an integral part of the financial statements.
48 Balanced Strategy Fund
Russell Investment Funds
Balanced Strategy Fund
Federal Income Taxes, continued
Net investment income and net realized gains (losses) in the financial statements may differ from taxable net investment income and
net realized gains (losses). Capital accounts within the financial statements are adjusted for permanent differences between book and
tax accounting. Book-tax differences may be due to foreign currency gains and losses, reclassifications of dividends and differences in
treatment of income from swaps. These adjustments have no impact on the net assets. At December 31, 2016, the Statement of Assets
and Liabilities have been adjusted by the following amounts (in thousands):
Undistributed net investment income | $ | 1,538 | |
Accumulated net realized gain (loss) | (1,539 | ) | |
Additional paid-in capital | 1 |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund 49
Russell Investment Funds
Growth Strategy Fund
Portfolio Management Discussion and Analysis — December 31, 2016 (Unaudited)
Growth Strategy Fund | Bloomberg Barclays U.S. Aggregate Bond Index*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 9.73 | % | 1 Year | 2.65 | % | ||
5 Years | 7.94 | %§ | 5 Years | 2.23 | %§ | ||
Inception* | 3.43 | %§ | Inception* | 4.28 | %§ | ||
Russell Developed ex-U.S. Large Cap® Index Net**** | |||||||
Russell 1000® Index** | Total | ||||||
Return | |||||||
Total | |||||||
Return | 1 Year | 2.42 | % | ||||
1 Year | 12.05 | % | 5 Years | 6.36 | %§ | ||
5 Years | 14.69 | %§ | Inception* | 0.27 | %§ | ||
Inception* | 6.74 | %§ |
50 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
The Growth Strategy Fund (the “Fund”) is a fund of funds that | return sources. U.S. large cap stocks (as measured by the Russell |
invests principally in other Russell Investment Funds (“RIF”) | 1000® Index) returned 12.05% over the period, while non-U.S. |
and Russell Investment Company (“RIC”) mutual funds (the | equities returned 2.42% (as measured by the Russell Developed |
“Underlying Funds”). The Underlying Funds employ a multi- | ex-U.S. Large Cap® Index (Net)) and emerging markets returned |
manager approach whereby portions of the Underlying Funds | 10.52% (as measured by the Russell Emerging Markets® Index). |
are allocated to different money manager strategies. Underlying | The underperformance of non-U.S. equities versus U.S. equities |
Fund assets not allocated to money managers are managed by | was a key negative driver to the Fund’s benchmark-relative |
Russell Investment Management, LLC (“RIM”), the Fund’s | performance. |
and Underlying Funds’ advisor. RIM, as the Underlying Funds’ | Within the fixed/other income Underlying Funds, exposure to |
advisor, may change the allocation of the Underlying Funds’ | high yield debt was beneficial as it was one of the best performing |
assets among money managers at any time. An exemptive order | asset classes globally. With the expectations and the eventual rise |
from the Securities and Exchange Commission (“SEC”) permits | of interest rates in the last month of 2016, more rate sensitive |
RIM to engage or terminate a money manager in an Underlying | real assets like global real estate investment trusts and global |
Fund at any time, subject to approval by the Underlying Fund’s | infrastructure suffered in performance. |
Board, without a shareholder vote. Pursuant to the terms of the | |
exemptive order, an Underlying Fund is required to notify its | How did the investment strategies and techniques employed |
shareholders within 90 days of when a money manager begins | by the Fund and the Underlying Funds affect the Fund’s |
providing services. | performance? |
What is the Fund’s investment objective? | The Fund is a fund of funds and its performance is based on RIM’s |
The Fund seeks to provide high long term capital appreciation, | strategic asset allocations, the performance of the Underlying |
and as a secondary objective, current income. | Funds in which the Fund invests, and tactical changes in the |
Fund’s asset allocation throughout the year. The Fund’s diverse | |
How did the Fund perform relative to its benchmark for the | asset allocation partially hindered performance during the |
fiscal year ended December 31, 2016? | period as certain out-of-benchmark exposures underperformed |
For the fiscal year ended December 31, 2016, the Fund gained | the Russell 1000® Index. While areas like high yield bonds, as |
9.73%. This is compared to the Fund’s primary benchmark, the | measured by the BofA Merrill Lynch Global High Yield Index |
Russell 1000® Index, which gained 12.05% during the same | Hedged USD, outperformed the Russell 1000® Index, areas |
period. The Fund’s performance includes operating expenses, | like commodities and non-U.S. developed equities,as measured |
whereas index returns are unmanaged and do not include | by the Bloomberg Commodity Index Total Return and Russell |
expenses of any kind. | Developed ex-U.S. Large Cap® Index (Net), underperformed the |
Russell 1000® Index. | |
For the fiscal year ended December 31, 2016, the Morningstar® | |
Insurance Allocation – 70% to 85% Equity Category, a group of | The Fund’s global equity exposure had a mixed impact on its |
funds that Morningstar considers to have investment strategies | benchmark-relative performance. The Fund benefited from |
similar to those of the Fund, gained 7.40%. This result serves as | exposure to the RIC Russell Emerging Markets Fund as a result |
a peer comparison and is expressed net of operating expenses. | of the outperformance of emerging markets versus U.S. equities. |
By contrast, overweights to European securities in the RIF Non- | |
The Fund’s underperformance relative to the Russell 1000® Index | U.S. Fund caused the Underlying Fund to struggle as European |
was primarily due to the Fund’s out-of-benchmark allocation to | equities continued to lag the U.S. equity market. Within U.S. |
Underlying Funds invested in non-U.S. equities, which generally | equities, an allocation to U.S. small cap equity contributed to |
underperformed the U.S. large cap equity market as represented | excess returns as the asset class rallied over the period. |
by the Russell 1000® Index. | |
The Fund’s strategic allocation to fixed income Underlying Funds | |
How did the market conditions described in the Market | generally had a positive impact on its absolute performance but |
Summary report affect the Fund’s performance? | weighed down the Fund’s benchmark-relative performance given |
The Fund seeks to achieve its objective by investing in Underlying | the strong performance of the U.S. large cap equity market. |
Funds that provide exposure to a range of diversified investments, | |
and most major asset classes invested in by the Underlying | Describe any changes to the Fund’s structure or allocation |
Funds produced positive absolute returns during the period. | to the Underlying Funds. |
Markets during the fiscal year ended December 31, 2016 were | RIM has the discretion to vary the Fund’s actual allocation |
characterized by higher levels of volatility and dispersion across | from the target strategic asset allocation by up to +/- 5% at the |
equity, fixed/other income or alternative category level based on |
Growth Strategy Fund 51
Russell Investment Funds
Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
RIM’s capital markets research. In addition to investing in the | modifications to the Fund’s asset allocation were additive during | |
Underlying Funds, RIM may seek to actively manage a Fund’s | the period. | |
overall exposures by investing in derivatives that RIM believes | RIM also made strategic asset allocation changes during the | |
will achieve the desired risk/return profile for the Fund. RIM’s | period. In September 2016, RIM added further diversity and | |
asset allocation modifications, implemented through both tactical | dynamism to the Fund through the addition of the Unconstrained | |
changes to Underlying Fund allocations and derivatives-based | Total Return Fund as an Underlying Fund. | |
exposures, benefited the Fund’s performance relative to the | ||
Fund’s target strategic asset allocation. | The views expressed in this report reflect those of the | |
RIM adapted the Fund’s asset allocation over the period as market | portfolio managers only through the end of the period | |
opportunities and risks evolved. During the first quarter of 2016, | covered by the report. These views do not necessarily | |
equity markets declined substantially, and RIM added further risk | represent the views of RIM, or any other person in RIM or | |
to the portfolio by overweighting exposure to high yield credit and | any other affiliated organization. These views are subject to | |
emerging markets equity compared with core bond holdings and | change at any time based upon market conditions or other | |
cash. Markets subsequently rebounded from the February lows | events, and RIM disclaims any responsibility to update the | |
and RIM reduced risk exposure to a more defensive stance with | views contained herein. These views should not be relied | |
the Fund’s equity allocation below strategic weights. In December | on as investment advice and, because investment decisions | |
2016, RIM reduced high yield credit exposure and increased the | for a Russell Investment Funds (“RIF”) Fund are based on | |
Fund’s exposure to global real estate investment trusts. RIM’s | numerous factors, should not be relied on as an indication | |
of investment decisions of any RIF Fund. |
* Assumes initial investment on April 30, 2007.
** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
*** The Bloomberg Barclays U.S. Aggregate Bond Index is an index, with income reinvested, generally representative of intermediate-term government bonds,
investment grade corporate debt securities and mortgage-backed securities.
Effective August 24, 2016 the Barclays fixed income benchmark indices, including the Barclays Aggregate family of indices, were renamed the Bloomberg
Barclays family of indices.
**** The Russell Developed ex-U.S. Large Cap® Index (Net) is an index which offers investors access to the large-cap segment of the global equity market, excluding
companies assigned to the United States. It is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely
reconstituted annually to accurately reflect the changes in the market over time and is net of tax on dividends from foreign holdings.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results. Additionally, the returns presented herein may differ from the performance reported
in the Financial Highlights as the returns herein are calculated in a manner consistent with standardized performance in accordance with Securities and Exchange
Commission rules, while the performance in the Financial Highlights has been calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”).
52 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Shareholder Expense Example — December 31, 2016 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2016 to December 31, 2016. | July 1, 2016 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2016 | $ | 1,069.60 | $ | 1,024.53 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 0.62 | $ | 0.61 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.12% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/366 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
Growth Strategy Fund 53
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments — December 31, 2016
Amounts in thousands (except share amounts) | |||||
Fair | |||||
Value | |||||
Shares | $ | ||||
Investments in Affiliated Mutual Funds - 97.7% | |||||
Alternative - 8.8% | |||||
RIC Russell Commodity Strategies Fund Class Y | 1,092,973 | 6,252 | |||
RIC Russell Global Infrastructure Fund Class Y | 557,221 | 5,973 | |||
RIF Global Real Estate Securities Fund | 426,565 | 5,972 | |||
18,197 | |||||
Domestic Equities - 33.6% | |||||
RIC Russell U.S. Defensive Equity Fund Class Y | 211,815 | 10,154 | |||
RIC Russell U.S. Dynamic Equity Fund Class Y | 1,588,131 | 16,453 | |||
RIF Aggressive Equity Fund | 1,267,323 | 19,276 | |||
RIF Multi-Style Equity Fund | 1,363,192 | 23,283 | |||
69,166 | |||||
Fixed Income - 21.4% | |||||
RIC Russell Global Opportunistic Credit Fund Class Y | 1,717,645 | 16,111 | |||
RIC Unconstrained Total Return Fund Class Y | 832,197 | 8,239 | |||
RIF Core Bond Fund | 1,936,423 | 19,597 | |||
43,947 | |||||
International Equities - 33.9% | |||||
RIC Russell Emerging Markets Fund Class Y | 1,131,699 | 17,881 | |||
RIC Russell Global Equity Fund Class Y | 2,538,493 | 25,207 | |||
RIF Non-U.S. Fund | 2,400,316 | 26,764 | |||
69,852 | |||||
Total Investments in Affiliated Mutual Funds | |||||
(cost $183,523) | 201,162 | ||||
Options Purchased - 0.0% | |||||
(Number of Contracts) | |||||
iShares MSCI Emerging Markets Index | |||||
Mar 2017 36.60 Call (57,945) | USD | 2,121 | (ÿ) | 39 | |
S&P 500 Index | |||||
Mar 2017 2,279.87 Call (2,171) | USD | 4,950 | (ÿ) | 64 | |
Jan 2017 2,137.94 Put (4,399) | USD | 9,405 | (ÿ) | 4 | |
Total Options Purchased | |||||
(cost $416) | 107 | ||||
Short-Term Investments - 0.7% | |||||
U.S. Cash Management Fund | 1,370,217 | (8) | 1,371 | ||
Total Short-Term Investments | |||||
(cost $1,371) | 1,371 | ||||
Total Investments 98.4% | |||||
(identified cost $185,310) | 202,640 | ||||
Other Assets and Liabilities, Net - 1.6% | 3,304 | ||||
Net Assets - 100.0% | 205,944 |
See accompanying notes which are an integral part of the financial statements.
54 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments, continued — December 31, 2016
Futures Contracts | ||||||||||
Amounts in thousands (except contract amounts) | ||||||||||
Unrealized | ||||||||||
Appreciation | ||||||||||
Number of | Notional | Expiration | (Depreciation) | |||||||
Contracts | Amount | Date | $ | |||||||
Long Positions | ||||||||||
Amsterdam Index Futures | 15 | EUR | 1,449 | 01/17 | 32 | |||||
CAC40 Euro Index Futures | 80 | EUR | 3,890 | 01/17 | 69 | |||||
DAX Index Futures | 12 | EUR | 3,440 | 03/17 | 75 | |||||
EURO STOXX 50 Index Futures | 76 | EUR | 2,491 | 03/17 | 59 | |||||
FTSE/MIB Index Futures | 9 | EUR | 864 | 03/17 | 27 | |||||
IBEX 35 Index Futures | 14 | EUR | 1,304 | 01/17 | 10 | |||||
OMXS 30 Index Futures | 57 | SEK | 8,658 | 01/17 | (14 | ) | ||||
Russell 2000 Mini Index Futures | 8 | USD | 543 | 03/17 | (12 | ) | ||||
S&P 500 E-Mini Index Futures | 4 | USD | 447 | 03/17 | (4 | ) | ||||
Short Positions | ||||||||||
FTSE 100 Index Futures | 15 | GBP | 1,057 | 03/17 | (40 | ) | ||||
MSCI Emerging Markets Mini Index Futures | 52 | USD | 2,233 | 03/17 | 54 | |||||
Russell 1000 Mini Index Futures | 12 | USD | 744 | 03/17 | 5 | |||||
S&P 500 E-Mini Index Futures | 138 | USD | 15,430 | 03/17 | 8 | |||||
S&P Mid 400 E-Mini Index Futures | 6 | USD | 995 | 03/17 | 18 | |||||
S&P/TSX 60 Index Futures | 21 | CAD | 3,767 | 03/17 | 1 | |||||
SPI 200 Index Futures | 24 | AUD | 3,379 | 03/17 | (58 | ) | ||||
TOPIX Index Futures | 14 | JPY | 212,520 | 03/17 | (46 | ) | ||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 184 |
Options Written | ||||||||
Amounts in thousands (except contract amounts) | ||||||||
Number of | Strike | Notional | Expiration | Fair Value | ||||
Call/Put | Contracts | Price | Amount | Date | $ | |||
iShares MSCI Emerging Markets Index | Put | 57,945 | 32.62 | USD | 1,890 | 03/17/17 | (36 | ) |
S&P 500 Index | Put | 8,798 | 1,900.39 | USD | 16,720 | 01/06/17 | (4 | ) |
S&P 500 Index | Put | 2,171 | 2,031.57 | USD | 4,411 | 03/17/17 | (32 | ) |
Total Liability for Options Written (premiums received $194) | (72 | ) |
Transactions in options written contracts for the period ended December 31, 2016 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2015 | — | $ | — | |||
Opened | 93,254 | 967 | ||||
Closed | (5,070 | ) | (45 | ) | ||
Expired | (19,270 | ) | (728 | ) | ||
Outstanding December 31, 2016 | 68,914 | $ | 194 |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 55
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
Bank of America | USD | 387 | RUB | 25,180 | 03/15/17 | 17 | |
Bank of America | CNY | 7,440 | USD | 1,070 | 03/15/17 | 22 | |
Bank of America | EUR | 290 | USD | 304 | 03/15/17 | (3 | ) |
Bank of America | JPY | 15,470 | USD | 132 | 03/15/17 | (1 | ) |
Bank of America | TWD | 28,550 | USD | 902 | 03/15/17 | 21 | |
Citigroup | USD | 854 | CAD | 1,135 | 03/15/17 | (8 | ) |
Citigroup | USD | 444 | CHF | 445 | 03/15/17 | (5 | ) |
Citigroup | USD | 1,710 | JPY | 193,800 | 03/15/17 | (46 | ) |
Citigroup | USD | 184 | MXN | 3,800 | 03/15/17 | (2 | ) |
Citigroup | USD | 309 | ZAR | 4,295 | 03/15/17 | — | |
Citigroup | AUD | 2,955 | USD | 2,195 | 03/15/17 | 66 | |
Citigroup | EUR | 415 | USD | 448 | 03/15/17 | 9 | |
Citigroup | GBP | 55 | USD | 70 | 03/15/17 | 2 | |
Royal Bank of Canada | USD | 1 | CHF | 1 | 01/10/17 | — | |
Royal Bank of Canada | USD | 48 | EUR | 45 | 01/10/17 | — | |
Royal Bank of Canada | USD | 40 | GBP | 32 | 01/10/17 | (1 | ) |
Royal Bank of Canada | USD | 9 | HKD | 67 | 01/10/17 | — | |
Royal Bank of Canada | AUD | 42 | USD | 31 | 01/10/17 | 1 | |
Royal Bank of Canada | CAD | 17 | USD | 13 | 01/10/17 | — | |
Royal Bank of Canada | JPY | 14,494 | USD | 127 | 01/10/17 | 2 | |
Royal Bank of Canada | SEK | 18 | USD | 2 | 01/10/17 | — | |
Royal Bank of Canada | SGD | 6 | USD | 4 | 01/10/17 | — | |
State Street | USD | 650 | AUD | 903 | 01/10/17 | 1 | |
State Street | USD | 891 | CAD | 1,207 | 01/10/17 | 8 | |
State Street | USD | 764 | CHF | 782 | 01/10/17 | 4 | |
State Street | USD | 2,839 | EUR | 2,715 | 01/10/17 | 20 | |
State Street | USD | 1,557 | GBP | 1,271 | 01/10/17 | 10 | |
State Street | USD | 327 | HKD | 2,535 | 01/10/17 | — | |
State Street | USD | 2,003 | JPY | 233,844 | 01/10/17 | (1 | ) |
State Street | USD | 324 | SEK | 2,961 | 01/10/17 | 1 | |
State Street | USD | 110 | SGD | 160 | 01/10/17 | — | |
State Street | AUD | 861 | USD | 640 | 01/10/17 | 19 | |
State Street | AUD | 903 | USD | 650 | 02/07/17 | (1 | ) |
State Street | CAD | 1,190 | USD | 889 | 01/10/17 | 3 | |
State Street | CAD | 1,207 | USD | 892 | 02/07/17 | (8 | ) |
State Street | CHF | 783 | USD | 773 | 01/10/17 | 4 | |
State Street | CHF | 782 | USD | 765 | 02/07/17 | (5 | ) |
State Street | EUR | 2,760 | USD | 2,944 | 01/10/17 | 37 | |
State Street | EUR | 2,715 | USD | 2,843 | 02/07/17 | (19 | ) |
State Street | GBP | 1,303 | USD | 1,628 | 01/10/17 | 22 | |
State Street | GBP | 1,271 | USD | 1,558 | 02/07/17 | (10 | ) |
State Street | HKD | 2,602 | USD | 336 | 01/10/17 | — | |
State Street | HKD | 2,535 | USD | 327 | 02/07/17 | — | |
State Street | JPY | 219,350 | USD | 1,942 | 01/10/17 | 64 | |
State Street | JPY | 233,844 | USD | 2,005 | 02/07/17 | — | |
State Street | SEK | 2,943 | USD | 322 | 01/10/17 | (1 | ) |
State Street | SEK | 2,961 | USD | 325 | 02/07/17 | (1 | ) |
State Street | SGD | 154 | USD | 108 | 01/10/17 | 2 | |
State Street | SGD | 160 | USD | 110 | 02/07/17 | — | |
UBS | KRW | 233,270 | USD | 200 | 03/15/17 | 7 | |
Westpac | USD | 854 | CAD | 1,135 | 03/15/17 | (8 | ) |
Westpac | USD | 443 | CHF | 445 | 03/15/17 | (4 | ) |
Westpac | USD | 1,709 | JPY | 193,800 | 03/15/17 | (45 | ) |
Westpac | USD | 184 | MXN | 3,800 | 03/15/17 | (2 | ) |
See accompanying notes which are an integral part of the financial statements.
56 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | |||||||
Amounts in thousands | |||||||
Unrealized | |||||||
Appreciation | |||||||
Amount | Amount | (Depreciation) | |||||
Counterparty | Sold | Bought | Settlement Date | $ | |||
Westpac | USD | 308 | ZAR | 4,295 | 03/15/17 | — | |
Westpac | AUD | 2,955 | USD | 2,197 | 03/15/17 | 69 | |
Westpac | EUR | 415 | USD | 448 | 03/15/17 | 9 | |
Westpac | GBP | 55 | USD | 70 | 03/15/17 | 2 | |
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | 251 |
Total Return Swap Contracts (*) | ||||||
Amounts in thousands | ||||||
Notional | Termination | Fair Value | ||||
Underlying Reference Entity | Counterparty | Amount | Date | $ | ||
Dow Jones U.S. Real Estate Total Return Index | Bank of America | USD | 2,812 | 03/07/17 | (132 | ) |
Total Fair Value of Open Total Return Swap Contracts Premiums Paid (Received) - $— (å) | (132 | ) |
(*) Total return swaps (which includes index swaps) are agreements between counterparties to exchange cash flows, one based on a market-linked
returns of an individual asset or a basket of assets (i.e. an index), and the other on a fixed or floating rate. The floating rate fee was based on the
3 Month LIBOR rate plus a fee of 0.075%.
Credit Default Swap Contracts | |||||||
Amounts in thousands | |||||||
Credit Indices | |||||||
Fund (Pays)/ | |||||||
Receives | Termination | Fair Value | |||||
Reference Entity | Counterparty | Notional Amount | Fixed Rate | Date | $ | ||
CDX NA High Yield Index | Morgan Stanley | USD | 8,500 | 5.000 | % | 12/20/21 | 540 |
Total Fair Value on Open Credit Indices Premiums Paid (Received) - $300 | 540 |
Presentation of Portfolio Holdings | ||||||||||||||
Amounts in thousands | ||||||||||||||
Fair Value | ||||||||||||||
Practical | ||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | ||||||||
Investments in Affiliated Mutual Funds | $ | 201,162 | $ | — | $ | — | $ | — | $ | 201,162 | 97.7 | |||
Options Purchased | — | 107 | — | — | 107 | —* | ||||||||
Short-Term Investments | — | — | — | 1,371 | 1,371 | 0.7 | ||||||||
Total Investments | 201,162 | 107 | — | 1,371 | 202,640 | 98.4 | ||||||||
Other Assets and Liabilities, Net | 1.6 | |||||||||||||
100.0 |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 57
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments, continued — December 31, 2016
Presentation of Portfolio Holdings | ||||||||||||||||||
Amounts in thousands | ||||||||||||||||||
Fair Value | ||||||||||||||||||
Practical | ||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | ||||||||||||
Other Financial Instruments | ||||||||||||||||||
Assets | ||||||||||||||||||
Futures Contracts | 358 | — | — | — | 358 | 0.2 | ||||||||||||
Foreign Currency Exchange Contracts | — | 422 | — | — | 422 | 0.2 | ||||||||||||
Credit Default Swap Contracts | — | 540 | — | — | 540 | 0.3 | ||||||||||||
Liabilities | ||||||||||||||||||
Futures Contracts | (174 | ) | — | — | — | (174 | ) | (0.1 | ) | |||||||||
Options Written | — | (72 | ) | — | — | (72 | ) | (—)* | ||||||||||
Foreign Currency Exchange Contracts | — | (171 | ) | — | — | (171 | ) | (0.1 | ) | |||||||||
Total Return Swap Contracts | — | (132 | ) | — | — | (132 | ) | (0.1 | ) | |||||||||
Total Other Financial Instruments** | $ | 184 | $ | 587 | $ | — | $ | — | $ | 771 |
* Less than 0.05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the investments.
(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified
in the fair value levels. The fair value amounts presented in the table are intended to permit reconciliation to the amounts presented in the Schedule of
Investments.
For a description of the Levels, see note 2 in the Notes to Financial Statements.
For a disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2016, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
58 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Fair Value of Derivative Instruments — December 31, 2016
Amounts in thousands
Foreign | |||||||
Equity | Credit | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | ||||
Location: Statement of Assets and Liabilities - Assets | |||||||
Investments, at fair value* | $ | 107 | $ | — | $ | — | |
Unrealized appreciation on foreign currency exchange contracts | — | — | 422 | ||||
Variation margin on futures contracts** | 358 | — | — | ||||
Credit default swap contracts, at fair value | — | 540 | — | ||||
Total | $ | 465 | $ | 540 | $ | 422 | |
Location: Statement of Assets and Liabilities - Liabilities | |||||||
Variation margin on futures contracts** | $ | 174 | $ | — | $ | — | |
Unrealized depreciation on foreign currency exchange contracts | — | — | 171 | ||||
Options written, at fair value | 72 | — | — | ||||
Total return swap contracts, at fair value | 132 | — | — | ||||
Total | $ | 378 | $ | — | $ | 171 | |
Foreign | |||||||
Equity | Credit | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | ||||
Location: Statement of Operations - Net realized gain (loss) | |||||||
Investments*** | $ | (745 | ) | $ | — | $ | — |
Futures contracts | 178 | — | — | ||||
Options written | 764 | — | — | ||||
Total return swap contracts | (274 | ) | — | — | |||
Credit default swap contracts | — | 96 | — | ||||
Foreign currency-related transactions**** | — | — | 804 | ||||
Total | $ | (77 | ) | $ | 96 | $ | 804 |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | |||||||
Investments***** | $ | (309 | ) | $ | — | $ | — |
Futures contracts | 252 | — | — | ||||
Options written | 122 | — | — | ||||
Total return swap contracts | (17 | ) | — | — | |||
Credit default swap contracts | — | 240 | — | ||||
Foreign currency-related transactions****** | — | — | 276 | ||||
Total | $ | 48 | $ | 240 | $ | 276 |
* Fair value of purchased options.
** Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
*** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
**** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
***** Includes net unrealized gain (loss) on purchased options as reported in the Schedule of Investments.
****** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 59
Russell Investment Funds
Growth Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Assets | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||
Options Purchased Contracts | Investments, at fair value | $ | 107 | $ | — | $ | 107 | ||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 422 | — | 422 | |||||
Futures Contracts | Variation margin on futures contracts | 183 | — | 183 | |||||
Credit Default Swap Contracts | Credit default swap contracts, at fair value | 540 | — | 540 | |||||
Total Financial and Derivative Assets | 1,252 | — | 1,252 | ||||||
Financial and Derivative Assets not subject to a netting agreement | (719 | ) | — | (719 | ) | ||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 533 | $ | — | $ | 533 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Assets | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||
Bank of America | $ | 167 | $ | 167 | $ | — | $ | — | |
Citigroup | 78 | 62 | — | 16 | |||||
Royal Bank of Canada | 4 | 1 | — | 3 | |||||
State Street | 196 | 47 | — | 149 | |||||
UBS | 7 | — | — | 7 | |||||
Westpac | 81 | 60 | — | 21 | |||||
Total | $ | 533 | $ | 337 | $ | — | $ | 196 |
See accompanying notes which are an integral part of the financial statements.
60 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Liabilities | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | |||||
Futures Contracts | Variation margin on futures contracts | $ | 8 | $ | — | $ | 8 | ||
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 171 | — | 171 | |||||
Options Written Contracts | Options written, at fair value | 72 | — | 72 | |||||
Total Return Swap Contracts | Total return swap contracts, at fair value | 132 | — | 132 | |||||
Total Financial and Derivative Liabilities | 383 | — | 383 | ||||||
Financial and Derivative Liabilities not subject to a netting agreement | (6 | ) | — | (6 | ) | ||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 377 | $ | — | $ | 377 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Liabilities | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | |||||
Bank of America | $ | 207 | $ | 167 | $ | — | $ | 40 | |
Citigroup | 62 | 62 | — | — | |||||
Royal Bank of Canada | 1 | 1 | — | — | |||||
State Street | 47 | 47 | — | — | |||||
Westpac | 60 | 60 | — | — | |||||
Total | $ | 377 | $ | 337 | $ | — | $ | 40 |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 61
Russell Investment Funds
Growth Strategy Fund
Statement of Assets and Liabilities — December 31, 2016
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 185,310 |
Investments, at fair value(>) | 202,640 | |
Cash (restricted)(a) | 2,620 | |
Unrealized appreciation on foreign currency exchange contracts | 422 | |
Receivables: | ||
Dividends from affiliated funds | 1 | |
Fund shares sold | 35 | |
Variation margin on futures contracts | 183 | |
Credit default swap contracts, at fair value | 540 | |
Total assets | 206,441 | |
Liabilities | ||
Payables: | ||
Due to broker (b) | 32 | |
Investments purchased | 34 | |
Accrued fees to affiliates | 11 | |
Other accrued expenses | 37 | |
Variation margin on futures contracts | 8 | |
Unrealized depreciation on foreign currency exchange contracts | 171 | |
Options written, at fair value(x) | 72 | |
Total return swap contracts, at fair value(8) | 132 | |
Total liabilities | 497 | |
Net Assets | $ | 205,944 |
See accompanying notes which are an integral part of the financial statements.
62 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Statement of Assets and Liabilities, continued — December 31, 2016
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | (85 | ) |
Accumulated net realized gain (loss) | (2,268 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 17,330 | ||
Futures contracts | 184 | ||
Options written | 122 | ||
Total return swap contracts | (132 | ) | |
Credit default swap contracts | 240 | ||
Foreign currency-related transactions | 251 | ||
Shares of beneficial interest | 216 | ||
Additional paid-in capital | 190,086 | ||
Net Assets | $ | 205,944 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 9.53 | |
Net assets | $ | 205,943,854 | |
Shares outstanding ($.01 par value) | 21,605,397 | ||
Amounts in thousands | |||
(x) Premiums received on options written | $ | 194 | |
(+) Credit default swap contracts - premiums paid (received) | $ | 300 | |
(>) Investments in affiliated funds | $ | 202,533 | |
(8) Total return swap contracts - premiums paid (received) | $ | — | |
(a) Cash Collateral for Futures | $ | 2,620 | |
(b) Due to Broker for Swaps | $ | 32 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 63
Russell Investment Funds
Growth Strategy Fund
Statement of Operations — For the Period Ended December 31, 2016
Amounts in thousands | |||
Investment Income | |||
Dividends from affiliated funds | $ | 4,508 | |
Expenses | |||
Advisory fees | 399 | ||
Administrative fees | 85 | ||
Custodian fees (1) | 28 | ||
Transfer agent fees | 9 | ||
Professional fees | 39 | ||
Trustees’ fees | 7 | ||
Printing fees | 30 | ||
Miscellaneous | 10 | ||
Expenses before reductions | 607 | ||
Expense reductions | (369 | ) | |
Net expenses | 238 | ||
Net investment income (loss) | 4,270 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | (192 | ) | |
Futures contracts | 178 | ||
Options written | 764 | ||
Total return swap contracts | (274 | ) | |
Credit default swap contracts | 96 | ||
Foreign currency-related transactions | 804 | ||
Capital gain distributions from affiliated funds | 4,497 | ||
Net realized gain (loss) | 5,873 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | 7,690 | ||
Futures contracts | 252 | ||
Options written | 122 | ||
Total return swap contracts | (17 | ) | |
Credit default swap contracts | 240 | ||
Foreign currency-related transactions | 276 | ||
Net change in unrealized appreciation (depreciation) | 8,563 | ||
Net realized and unrealized gain (loss) | 14,436 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 18,706 |
(1) Includes a reimbursement for overbilling of custody out-of-pocket fees from prior years. See note 8 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
64 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2016 | 2015 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 4,270 | $ | 3,732 | ||
Net realized gain (loss) | 5,873 | 5,995 | ||||
Net change in unrealized appreciation (depreciation) | 8,563 | (16,703 | ) | |||
Net increase (decrease) in net assets from operations | 18,706 | (6,976 | ) | |||
Distributions | ||||||
From net investment income | (5,792 | ) | (3,824 | ) | ||
From net realized gain | (11 | ) | (13,529 | ) | ||
Net decrease in net assets from distributions | (5,803 | ) | (17,353 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | (7,075 | ) | 16,124 | |||
Total Net Increase (Decrease) in Net Assets | 5,828 | (8,205 | ) | |||
Net Assets | ||||||
Beginning of period | 200,116 | 208,321 | ||||
End of period | $ | 205,944 | $ | 200,116 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | (85 | ) | $ | 143 |
* Share transaction amounts (in thousands) for the periods ended December 31, 2016 and December 31, 2015 were as follows: | ||||||||||||
2016 | 2015 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 1,288 | $ | 11,888 | 1,379 | $ | 13,505 | ||||||
Proceeds from reinvestment of distributions | 617 | 5,803 | 1,836 | 17,354 | ||||||||
Payments for shares redeemed | (2,694 | ) | (24,766 | ) | (1,502 | ) | (14,735 | ) | ||||
Total increase (decrease) | (789 | ) | $ | (7,075 | ) | 1,713 | $ | 16,124 |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 65
Russell Investment Funds
Growth Strategy Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period.
$ | $ | $ | $ | $ | $ | |||||||||||
Net Asset Value, | Net Investment | Net Realized | Total from | Distributions | Distributions | |||||||||||
Beginning of | Income (Loss) | and Unrealized | Investment | from Net | from Net | |||||||||||
Period | (a)(b)(d) | Gain (Loss) | Operations | Investment Income | Realized Gain | |||||||||||
December 31, 2016 | 8.94 | .20 | .66 | .86 | (.27 | ) | —(f) | |||||||||
December 31, 2015 | 10.07 | .17 | (.48 | ) | (.31 | ) | (.18 | ) | (.64 | ) | ||||||
December 31, 2014 | 10.23 | .31 | .07 | .38 | (.30 | ) | (.24 | ) | ||||||||
December 31, 2013 | 8.97 | .22 | 1.26 | 1.48 | (.22 | ) | — | |||||||||
December 31, 2012 | 8.01 | .18 | .95 | 1.13 | (.17 | ) | — | |||||||||
See accompanying notes which are an integral part of the financial statements.
66 Growth Strategy Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(e) | (000 | ) | Gross(c) | Net(c)(d) | Net Assets(b)(d) | Turnover Rate | |||||||||
(.27 | ) | 9.53 | 9.73 | 205,944 | .30 | .12 | 2.14 | 18 | |||||||||
(.82 | ) | 8.94 | (3.31 | ) | 200,116 | .30 | .11 | 1.78 | 23 | ||||||||
(.54 | ) | 10.07 | 3.76 | 208,321 | .32 | .10 | 2.97 | 20 | |||||||||
(.22 | ) | 10.23 | 16.56 | 189,956 | .32 | .10 | 2.29 | 12 | |||||||||
(.17 | ) | 8.97 | 14.22 | 145,155 | .34 | .10 | 2.07 | 25 |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 67
Russell Investment Funds
Growth Strategy Fund
Related Party Transactions, Fees and Expenses
Accrued fees payable to affiliates for the period ended December 31, 2016 were as follows: | ||
Advisory fees | $ | 1,228 |
Administration fees | 7,298 | |
Transfer agent fees | 756 | |
Trustee fees | 1,455 | |
$ | 10,737 |
Transactions (amounts in thousands) during the period ended December 31, 2016 with Underlying Funds which are, or were, an
affiliated company are as follows:
Fair Value, | Change in | |||||||||||||||||||
Beginning of | Realized Gain | Unrealized | Fair Value, End | Income | Capital Gains | |||||||||||||||
Period | Purchases | Sales | (Loss) | Gain (Loss) | of Period | Distributions | Distributions | |||||||||||||
RIC Russell Commodity Strategies | ||||||||||||||||||||
Fund | $ | 6,054 | $ | 576 | $ | 1,009 | $ | (441 | ) | $ | 1,072 | $ | 6,252 | $ | — | $ | — | |||
RIC Russell Global Infrastructure | ||||||||||||||||||||
Fund | 10,028 | 635 | 5,246 | 14 | 542 | 5,973 | 240 | 170 | ||||||||||||
RIF Global Real Estate Securities | ||||||||||||||||||||
Fund | 6,019 | 702 | 554 | 21 | (216 | ) | 5,972 | 213 | 165 | |||||||||||
RIC Russell U.S. Defensive Equity | ||||||||||||||||||||
Fund | 15,984 | 1,109 | 7,514 | 1,751 | (1,176 | ) | 10,154 | 190 | 696 | |||||||||||
RIC Russell U.S. Dynamic Equity | ||||||||||||||||||||
Fund | 15,932 | 1,354 | 2,210 | (260 | ) | 1,637 | 16,453 | 224 | 639 | |||||||||||
RIF Aggressive Equity Fund | 17,884 | 1,081 | 2,784 | (312 | ) | 3,407 | 19,276 | 128 | 10 | |||||||||||
RIF Multi-Style Equity Fund | 21,950 | 2,661 | 1,933 | (125 | ) | 730 | 23,283 | 435 | 1,198 | |||||||||||
RIC Russell Global Opportunistic | ||||||||||||||||||||
Credit Fund | 10,079 | 7,362 | 1,718 | (103 | ) | 491 | 16,111 | 629 | — | |||||||||||
RIC Unconstrained Total Return | ||||||||||||||||||||
Fund | — | 8,606 | 290 | 1 | (78 | ) | 8,239 | 115 | 20 | |||||||||||
RIF Core Bond Fund | 24,162 | 4,229 | 8,799 | 163 | (158 | ) | 19,597 | 885 | 41 | |||||||||||
RIC Russell Emerging Markets Fund | 17,871 | 1,446 | 3,329 | (481 | ) | 2,374 | 17,881 | 219 | — | |||||||||||
RIC Russell Global Equity Fund | 24,005 | 3,299 | 1,938 | 114 | (273 | ) | 25,207 | 393 | 1,558 | |||||||||||
RIF Non-U.S. Fund | 25,960 | 2,807 | 1,861 | 211 | (353 | ) | 26,764 | 827 | — | |||||||||||
U.S. Cash Management Fund | 3,297 | 14,122 | 16,048 | — | — | 1,371 | 10 | — | ||||||||||||
$ | 199,225 | $ | 49,989 | $ | 55,233 | $ | 553 | $ | 7,999 | $ | 202,533 | $ | 4,508 | $ | 4,497 |
Federal Income Taxes
At December 31, 2016, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Cost of Investments | $ | 189,277,197 | |||
Unrealized Appreciation | $ | 17,482,994 | |||
Unrealized Depreciation | (4,120,217 | ) | |||
Net Unrealized Appreciation (Depreciation) | $ | 13,362,777 | ) | ||
Undistributed Long-Term Capital Gains | |||||
(Capital Loss Carryforward) | $ | 3,432,550 | |||
Tax Composition of Distributions | |||||
Ordinary Income | $ | 5,489,806 | |||
Long-Term Capital Gains | $ | 313,789 |
See accompanying notes which are an integral part of the financial statements.
68 Growth Strategy Fund
Russell Investment Funds
Growth Strategy Fund
Federal Income Taxes, continued
Net investment income and net realized gains (losses) in the financial statements may differ from taxable net investment income and
net realized gains (losses). Capital accounts within the financial statements are adjusted for permanent differences between book and
tax accounting. Book-tax differences may be due to foreign currency gains and losses, reclassifications of dividends and differences in
treatment of income from swaps. These adjustments have no impact on the net assets. At December 31, 2016, the Statement of Assets
and Liabilities have been adjusted by the following amounts (in thousands):
Undistributed net investment income | $ | 1,294 | |
Accumulated net realized gain (loss) | (1,296 | ) | |
Additional paid-in capital | 2 |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund 69
Russell Investment Funds
Equity Growth Strategy Fund
Portfolio Management Discussion and Analysis — December 31, 2016 (Unaudited)
Equity Growth Strategy Fund | Russell Developed ex-U.S. Large Cap® Index Net*** | ||||||
Total | Total | ||||||
Return | Return | ||||||
1 Year | 10.85 | % | 1 Year | 2.42 | % | ||
5 Years | 8.85 | %§ | 5 Years | 6.36 | %§ | ||
Inception* | 2.71 | %§ | Inception* | 0.27 | %§ | ||
Russell 1000® Index** | |||||||
Total | |||||||
Return | |||||||
1 Year | 12.05 | % | |||||
5 Years | 14.69 | %§ | |||||
Inception* | 6.74 | %§ |
70 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
The Equity Growth Strategy Fund (the “Fund”) is a fund of | 1000® Index) returned 12.05% over the period, while non-U.S. |
funds that invests principally in other Russell Investment Funds | equities returned 2.42% (as measured by the Russell Developed |
(“RIF”) and Russell Investment Company (“RIC”) mutual funds | ex-U.S. Large Cap® Index (Net)) and emerging markets returned |
(the “Underlying Funds”). The Underlying Funds employ a multi- | 10.52% (as measured by the Russell Emerging Markets® Index). |
manager approach whereby portions of the Underlying Funds | The underperformance of non-U.S. equities versus U.S. equities |
are allocated to different money manager strategies. Underlying | was a key negative driver to the Fund’s benchmark-relative |
Fund assets not allocated to money managers are managed by | performance. |
Russell Investment Management, LLC (“RIM”), the Fund’s | Within the fixed/other income Underlying Funds, exposure to |
and Underlying Funds’ advisor. RIM, as the Underlying Funds’ | high yield debt was beneficial as it was one of the best performing |
advisor, may change the allocation of the Underlying Funds’ | asset classes globally. With the expectations and the eventual |
assets among money managers at any time. An exemptive order | rise of interest rates in the last month of 2016, more rate sensitive |
from the Securities and Exchange Commission (“SEC”) permits | real assets like global real estate investment trusts and global |
RIM to engage or terminate a money manager in an Underlying | infrastructure suffered in performance. |
Fund at any time, subject to approval by the Underlying Fund’s | |
Board, without a shareholder vote. Pursuant to the terms of the | How did the investment strategies and techniques employed |
exemptive order, an Underlying Fund is required to notify its | by the Fund and the Underlying Funds affect the Fund’s |
shareholders within 90 days of when a money manager begins | performance? |
providing services. | The Fund is a fund of funds and its performance is based on RIM’s |
What is the Fund’s investment objective? | strategic asset allocations, the performance of the Underlying |
The Fund seeks to provide high long term capital appreciation. | Funds in which the Fund invests, and tactical changes in the |
Fund’s asset allocation throughout the year. The Fund’s diverse | |
How did the Fund perform relative to its benchmark for the | asset allocation partially hindered performance during the |
fiscal year ended December 31, 2016? | period as certain out-of-benchmark exposures underperformed |
For the fiscal year ended December 31, 2016, the Fund gained | the Russell 1000® Index. While areas like high yield bonds, as |
10.85%. This is compared to the Fund’s primary benchmark, | measured by the BofA Merrill Lynch Global High Yield Index |
the Russell 1000® Index, which gained 12.05% during the same | Hedged USD, outperformed the Russell 1000® Index, areas like |
period. The Fund’s performance includes operating expenses, | commodities and non-U.S. developed equities, as measured |
whereas index returns are unmanaged and do not include | by the Bloomberg Commodity Index Total Return and Russell |
expenses of any kind. | Developed ex-U.S. Large Cap® Index (Net), underperformed the |
Russell 1000® Index. | |
For the fiscal year ended December 31, 2016, the Morningstar® | |
Insurance Allocation – 70% to 85% Equity Category, a group of | The Fund’s global equity exposure had a mixed impact on its |
funds that Morningstar considers to have investment strategies | benchmark-relative performance. The Fund benefited from |
similar to those of the Fund, gained 7.40%. This result serves as | strategic exposure to the RIC Russell Emerging Markets Fund as |
a peer comparison and is expressed net of operating expenses. | a result of the outperformance of emerging markets versus U.S. |
equities. By contrast, overweights to European securities in the | |
The Fund’s underperformance relative to the Russell 1000® Index | RIF Non-U.S. Fund caused the Underlying Fund to struggle as |
was primarily due to the Fund’s out-of-benchmark allocation to | European equities continued to lag the U.S. equity market. Within |
Underlying Funds invested in non-U.S. equities, which generally | U.S. equities, an allocation to U.S. small cap equity contributed to |
underperformed the U.S. large cap equity market as represented | excess returns as the asset class rallied over the period. |
by the Russell 1000® Index. | |
The Fund’s strategic allocation to fixed income Underlying Funds | |
How did the market conditions described in the Market | generally had a positive impact on its absolute performance but |
Summary report affect the Fund’s performance? | weighed down the Fund’s benchmark-relative performance given |
The Fund seeks to achieve its objective by investing in Underlying | the strong performance of the U.S. large cap equity market. |
Funds that provide exposure to a range of diversified investments, | |
and most major asset classes invested in by the Underlying | Describe any changes to the Fund’s structure or allocation |
Funds produced positive absolute returns during the period. | to the Underlying Funds. |
Markets during the fiscal year ended December 31, 2016 were | RIM has the discretion to vary the Fund’s actual allocation |
characterized by higher levels of volatility and dispersion across | from the target strategic asset allocation by up to +/- 5% at the |
return sources. U.S. large cap stocks (as measured by the Russell | equity, fixed/other income or alternative category level based on |
RIM’s capital markets research. In addition to investing in the |
Equity Growth Strategy Fund 71
Russell Investment Funds
Equity Growth Strategy Fund
Portfolio Management Discussion and Analysis, continued — December 31, 2016
(Unaudited)
Underlying Funds, RIM may seek to actively manage a Fund’s | modifications to the Fund’s asset allocation were additive during |
overall exposures by investing in derivatives that RIM believes | the period. |
will achieve the desired risk/return profile for the Fund. RIM’s | RIM also made strategic asset allocation changes during the |
asset allocation modifications, implemented through both tactical | period. In September 2016, RIM added further diversity and |
changes to Underlying Fund allocations and derivatives-based | dynamism to the Fund through the addition of the Unconstrained |
exposures, benefited the Fund’s performance relative to the | Total Return Fund as an Underlying Fund. |
Fund’s target strategic asset allocation. | |
RIM adapted the Fund’s asset allocation over the period as market | The views expressed in this report reflect those of the |
opportunities and risks evolved. During the first quarter of 2016, | portfolio managers only through the end of the period |
equity markets declined substantially, and RIM added further risk | covered by the report. These views do not necessarily |
to the portfolio by overweighting exposure to high yield credit and | represent the views of RIM, or any other person in RIM or |
emerging markets equity compared with core bond holdings and | any other affiliated organization. These views are subject to |
cash. Markets subsequently rebounded from the February lows | change at any time based upon market conditions or other |
and RIM reduced risk exposure to a more defensive stance with | events, and RIM disclaims any responsibility to update the |
the Fund’s equity allocation below strategic weights. In December | views contained herein. These views should not be relied |
2016, RIM reduced high yield credit exposure and increased the | on as investment advice and, because investment decisions |
Fund’s exposure to global real estate investment trusts. RIM’s | for a Russell Investment Funds (“RIF”) Fund are based on |
numerous factors, should not be relied on as an indication | |
of investment decisions of any RIF Fund. |
* Assumes initial investment on April 30, 2007.
** The Russell 1000® Index includes the 1,000 largest companies in the Russell 3000® Index. The Russell 1000® Index represents the universe of stocks from
which most active money managers typically select. The Russell 1000® Index return reflects adjustments from income dividends and capital gain distributions
reinvested as of the ex-dividend dates.
*** The Russell Developed ex-U.S. Large Cap® Index (Net) is an index which offers investors access to the large-cap segment of the global equity market, excluding
companies assigned to the United States. It is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely
reconstituted annually to accurately reflect the changes in the market over time and is net of tax on dividends from foreign holdings.
§ Annualized.
The performance shown in this section does not reflect any Insurance Company Separate Account or Policy Charges. Performance is historical and assumes
reinvestment of all dividends and capital gains. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than when purchased. Past performance is not indicative of future results. Additionally, the returns presented herein may differ from the performance reported
in the Financial Highlights as the returns herein are calculated in a manner consistent with standardized performance in accordance with Securities and Exchange
Commission rules, while the performance in the Financial Highlights has been calculated in accordance with U.S. Generally Accepted Accounting Principles (“U.S.
GAAP”).
72 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Shareholder Expense Example — December 31, 2016 (Unaudited)
Fund Expenses | Please note that the expenses shown in the table are meant | ||||||
The following disclosure provides important information | to highlight your ongoing costs only and do not reflect any | ||||||
regarding the Fund’s Shareholder Expense Example | transactional costs. Therefore, the information under the heading | ||||||
(“Example”). | “Hypothetical Performance (5% return before expenses)” is | ||||||
useful in comparing ongoing costs only, and will not help you | |||||||
Example | determine the relative total costs of owning different funds. In | ||||||
As a shareholder of the Fund, you incur two types of costs: (1) | addition, if these transactional costs were included, your costs | ||||||
transaction costs, and (2) ongoing costs, including advisory and | would have been higher. The fees and expenses shown in this | ||||||
administrative fees and other Fund expenses. The Example is | section do not reflect any Insurance Company Separate Account | ||||||
intended to help you understand your ongoing costs (in dollars) | Policy Charges. | ||||||
of investing in the Fund and to compare these costs with the | Hypothetical | ||||||
ongoing costs of investing in other mutual funds. The Example | Performance (5% | ||||||
is based on an investment of $1,000 invested at the beginning of | Actual | return before | |||||
the period and held for the entire period indicated, which for this | Performance | expenses) | |||||
Beginning Account Value | |||||||
Fund is from July 1, 2016 to December 31, 2016. | July 1, 2016 | $ | 1,000.00 | $ | 1,000.00 | ||
Ending Account Value | |||||||
Actual Expenses | December 31, 2016 | $ | 1,083.20 | $ | 1,024.53 | ||
The information in the table under the heading “Actual | Expenses Paid During Period* | $ | 0.63 | $ | 0.61 | ||
Performance” provides information about actual account values | |||||||
and actual expenses. You may use the information in this column, | * Expenses are equal to the Fund's annualized expense ratio of 0.12% | ||||||
(representing the six month period annualized), multiplied by the average | |||||||
together with the amount you invested, to estimate the expenses | account value over the period, multiplied by 184/366 (to reflect the one-half | ||||||
that you paid over the period. Simply divide your account value by | year period). May reflect amounts waived and/or reimbursed. Without any | ||||||
$1,000 (for example, an $8,600 account value divided by $1,000 | waivers and/or reimbursements, expenses would have been higher. | ||||||
= 8.6), then multiply the result by the number in the first column | |||||||
in the row entitled “Expenses Paid During Period” to estimate | |||||||
the expenses you paid on your account during this period. | |||||||
Hypothetical Example for Comparison Purposes | |||||||
The information in the table under the heading “Hypothetical | |||||||
Performance (5% return before expenses)” provides information | |||||||
about hypothetical account values and hypothetical expenses | |||||||
based on the Fund’s actual expense ratio and an assumed rate of | |||||||
return of 5% per year before expenses, which is not the Fund’s | |||||||
actual return. The hypothetical account values and expenses | |||||||
may not be used to estimate the actual ending account balance or | |||||||
expenses you paid for the period. You may use this information | |||||||
to compare the ongoing costs of investing in the Fund and other | |||||||
funds. To do so, compare this 5% hypothetical example with the | |||||||
5% hypothetical examples that appear in the shareholder reports | |||||||
of other funds. |
Equity Growth Strategy Fund 73
Russell Investment Funds
Equity Growth Strategy Fund
Schedule of Investments — December 31, 2016
Amounts in thousands (except share amounts) | |||||
Fair | |||||
Value | |||||
Shares | $ | ||||
Investments in Affiliated Mutual Funds - 97.5% | |||||
Alternative - 7.8% | |||||
RIC Russell Commodity Strategies Fund Class Y | 254,436 | 1,455 | |||
RIC Russell Global Infrastructure Fund Class Y | 132,488 | 1,420 | |||
RIF Global Real Estate Securities Fund | 63,427 | 888 | |||
3,763 | |||||
Domestic Equities - 37.1% | |||||
RIC Russell U.S. Defensive Equity Fund Class Y | 71,723 | 3,438 | |||
RIC Russell U.S. Dynamic Equity Fund Class Y | 404,544 | 4,191 | |||
RIF Aggressive Equity Fund | 352,028 | 5,354 | |||
RIF Multi-Style Equity Fund | 286,148 | 4,888 | |||
17,871 | |||||
Fixed Income - 11.6% | |||||
RIC Russell Global Opportunistic Credit Fund Class Y | 518,503 | 4,864 | |||
RIC Unconstrained Total Return Fund Class Y | 73,969 | 732 | |||
5,596 | |||||
International Equities - 41.0% | |||||
RIC Russell Emerging Markets Fund Class Y | 365,498 | 5,775 | |||
RIC Russell Global Equity Fund Class Y | 775,418 | 7,700 | |||
RIF Non-U.S. Fund | 560,615 | 6,251 | |||
19,726 | |||||
Total Investments in Affiliated Mutual Funds | |||||
(cost $40,262) | 46,956 | ||||
Options Purchased - 0.0% | |||||
(Number of Contracts) | |||||
iShares MSCI Emerging Markets Index | |||||
Mar 2017 36.60 Call (13,797) | USD | 505 | (ÿ) | 9 | |
S&P 500 Index | |||||
Mar 2017 2,279.87 Call (532) | USD | 1,213 | (ÿ) | 16 | |
Jan 2017 2,137.94 Put (1,204) | USD | 2,574 | (ÿ) | 1 | |
Total Options Purchased | |||||
(cost $109) | 26 | ||||
Short-Term Investments - 0.7% | |||||
U.S. Cash Management Fund | 323,684 | (8) | 324 | ||
Total Short-Term Investments | |||||
(cost $323) | 324 | ||||
Total Investments 98.2% | |||||
(identified cost $40,694) | 47,306 | ||||
Other Assets and Liabilities, Net - 1.8% | 858 | ||||
Net Assets - 100.0% | 48,164 |
See accompanying notes which are an integral part of the financial statements.
74 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Schedule of Investments, continued — December 31, 2016
Futures Contracts | |||||||
Amounts in thousands (except contract amounts) | |||||||
Unrealized | |||||||
Appreciation | |||||||
Number of | Notional | Expiration | (Depreciation) | ||||
Contracts | Amount | Date | $ | ||||
Long Positions | |||||||
Amsterdam Index Futures | 4 | EUR | 386 | 01/17 | 8 | ||
CAC40 Euro Index Futures | 24 | EUR | 1,167 | 01/17 | 21 | ||
DAX Index Futures | 4 | EUR | 1,147 | 03/17 | 26 | ||
Dow Jones U.S. Real Estate Index Futures | 16 | USD | 487 | 03/17 | 5 | ||
EURO STOXX 50 Index Futures | 23 | EUR | 754 | 03/17 | 18 | ||
FTSE/MIB Index Futures | 3 | EUR | 288 | 03/17 | 9 | ||
IBEX 35 Index Futures | 4 | EUR | 373 | 01/17 | 3 | ||
OMX 30 Index Futures | 17 | SEK | 2,582 | 01/17 | (4 | ) | |
Russell 2000 Mini Index Futures | 2 | USD | 136 | 03/17 | (3 | ) | |
Short Positions | |||||||
FTSE 100 Index Futures | 5 | GBP | 352 | 03/17 | (14 | ) | |
MSCI Emerging Markets Mini Index Futures | 20 | USD | 859 | 03/17 | 22 | ||
Russell 1000 Mini Index Futures | 2 | USD | 124 | 03/17 | 1 | ||
S&P 500 E-Mini Index Futures | 38 | USD | 4,249 | 03/17 | 1 | ||
S&P Mid 400 E-Mini Index Futures | 2 | USD | 332 | 03/17 | 6 | ||
S&P/TSX 60 Index Futures | 5 | CAD | 897 | 03/17 | — | ||
SPI 200 Index Futures | 6 | AUD | 845 | 03/17 | (14 | ) | |
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 85 |
Options Written | ||||||||
Amounts in thousands (except contract amounts) | ||||||||
Number of | Strike | Notional | Expiration | Fair Value | ||||
Call/Put | Contracts | Price | Amount | Date | $ | |||
iShares MSCI Emerging Markets Index | Put | 13,797 | 32.62 | USD | 450 | 03/17/17 | (8 | ) |
S&P 500 Index | Put | 2,408 | 1,900.39 | USD | 4,576 | 01/06/17 | (1 | ) |
S&P 500 Index | Put | 532 | 2,031.57 | USD | 1,081 | 03/17/17 | (8 | ) |
Total Liability for Options Written (premiums received $51) | (17 | ) |
Transactions in options written contracts for the period ended December 31, 2016 were as follows: | ||||||
Number of | Premiums | |||||
Contracts | Received | |||||
Outstanding December 31, 2015 | — | $ | — | |||
Opened | 20,447 | 225 | ||||
Closed | — | — | ||||
Expired | (3,710 | ) | (174 | ) | ||
Outstanding December 31, 2016 | 16,737 | $ | 51 |
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
Bank of America | CNY | 2,710 | USD | 390 | 03/15/17 | 8 |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 75
Russell Investment Funds
Equity Growth Strategy Fund
Schedule of Investments, continued — December 31, 2016
Foreign Currency Exchange Contracts | ||||||||
Amounts in thousands | ||||||||
Unrealized | ||||||||
Appreciation | ||||||||
Amount | Amount | (Depreciation) | ||||||
Counterparty | Sold | Bought | Settlement Date | $ | ||||
Bank of America | TWD | 9,520 | USD | 301 | 03/15/17 | 7 | ||
Royal Bank of Canada | AUD | 22 | USD | 16 | 01/10/17 | — | ||
Royal Bank of Canada | CAD | 20 | USD | 15 | 01/10/17 | — | ||
Royal Bank of Canada | CHF | 9 | USD | 9 | 01/10/17 | — | ||
Royal Bank of Canada | EUR | 22 | USD | 23 | 01/10/17 | — | ||
Royal Bank of Canada | GBP | 8 | USD | 10 | 01/10/17 | — | ||
Royal Bank of Canada | HKD | 14 | USD | 2 | 01/10/17 | — | ||
Royal Bank of Canada | JPY | 6,717 | USD | 59 | 01/10/17 | 2 | ||
Royal Bank of Canada | SEK | 43 | USD | 5 | 01/10/17 | — | ||
Royal Bank of Canada | SGD | 4 | USD | 3 | 01/10/17 | — | ||
State Street | USD | 177 | AUD | 246 | 01/10/17 | — | ||
State Street | USD | 111 | AUD | 150 | 03/15/17 | (3 | ) | |
State Street | USD | 243 | CAD | 329 | 01/10/17 | 2 | ||
State Street | USD | 512 | CAD | 680 | 03/15/17 | (5 | ) | |
State Street | USD | 208 | CHF | 213 | 01/10/17 | 1 | ||
State Street | USD | 774 | EUR | 740 | 01/10/17 | 5 | ||
State Street | USD | 425 | GBP | 347 | 01/10/17 | 3 | ||
State Street | USD | 89 | HKD | 691 | 01/10/17 | — | ||
State Street | USD | 546 | JPY | 63,772 | 01/10/17 | — | ||
State Street | USD | 835 | JPY | 94,690 | 03/15/17 | (22 | ) | |
State Street | USD | 88 | SEK | 808 | 01/10/17 | — | ||
State Street | USD | 30 | SGD | 44 | 01/10/17 | — | ||
State Street | AUD | 224 | USD | 167 | 01/10/17 | 5 | ||
State Street | AUD | 246 | USD | 177 | 02/07/17 | — | ||
State Street | CAD | 309 | USD | 231 | 01/10/17 | 1 | ||
State Street | CAD | 329 | USD | 243 | 02/07/17 | (2 | ) | |
State Street | CHF | 204 | USD | 201 | 01/10/17 | 1 | ||
State Street | CHF | 213 | USD | 208 | 02/07/17 | (1 | ) | |
State Street | EUR | 718 | USD | 766 | 01/10/17 | 10 | ||
State Street | EUR | 740 | USD | 775 | 02/07/17 | (5 | ) | |
State Street | EUR | 620 | USD | 668 | 03/15/17 | 13 | ||
State Street | GBP | 339 | USD | 424 | 01/10/17 | 6 | ||
State Street | GBP | 347 | USD | 425 | 02/07/17 | (3 | ) | |
State Street | GBP | 30 | USD | 38 | 03/15/17 | 1 | ||
State Street | HKD | 677 | USD | 87 | 01/10/17 | — | ||
State Street | HKD | 691 | USD | 89 | 02/07/17 | — | ||
State Street | JPY | 57,055 | USD | 505 | 01/10/17 | 17 | ||
State Street | JPY | 63,772 | USD | 547 | 02/07/17 | — | ||
State Street | SEK | 765 | USD | 84 | 01/10/17 | — | ||
State Street | SEK | 808 | USD | 89 | 02/07/17 | — | ||
State Street | SGD | 40 | USD | 28 | 01/10/17 | — | ||
State Street | SGD | 44 | USD | 30 | 02/07/17 | — | ||
UBS | KRW | 116,630 | USD | 100 | 03/15/17 | 3 | ||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts | 44 |
See accompanying notes which are an integral part of the financial statements.
76 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Schedule of Investments, continued — December 31, 2016
Presentation of Portfolio Holdings | ||||||||||||||||||
Amounts in thousands | ||||||||||||||||||
Fair Value | ||||||||||||||||||
Practical | ||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Expedient (a) | Total | % of Net Assets | ||||||||||||
Investments in Affiliated Mutual Funds | $ | 46,956 | $ | — | $ | — | $ | — | $ | 46,956 | 97.5 | |||||||
Options Purchased | — | 26 | — | — | 26 | —* | ||||||||||||
Short-Term Investments | — | — | — | 324 | 324 | 0.7 | ||||||||||||
Total Investments | 46,956 | 26 | — | 324 | 47,306 | 98.2 | ||||||||||||
Other Assets and Liabilities, Net | 1.8 | |||||||||||||||||
100.0 | ||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||
Assets | ||||||||||||||||||
Futures Contracts | 120 | — | — | — | 120 | 0.2 | ||||||||||||
Foreign Currency Exchange Contracts | — | 85 | — | — | 85 | 0.2 | ||||||||||||
' | ||||||||||||||||||
Liabilities | ||||||||||||||||||
Futures Contracts | (35 | ) | — | — | — | (35 | ) | (0.1 | ) | |||||||||
Options Written | — | (17 | ) | — | — | (17 | ) | (—)* | ||||||||||
Foreign Currency Exchange Contracts | — | (41 | ) | — | — | (41 | ) | (0.1 | ) | |||||||||
Total Other Financial Instruments** | $ | 85 | $ | 27 | $ | — | $ | — | $ | 112 |
* Less than 0.05% of net assets.
** Futures and foreign currency exchange contract values reflect the unrealized appreciation (depreciation) on the investments.
(a) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified
in the fair value levels. The fair value amounts presented in the table are intended to permit reconciliation to the amounts presented in the Schedule of
Investments.
For a description of the Levels, see note 2 in the Notes to Financial Statements.
For a disclosure on transfers between Levels 1, 2 and 3 during the period ended December 31, 2016, see note 2 in the Notes to
Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 77
Russell Investment Funds
Equity Growth Strategy Fund
Fair Value of Derivative Instruments — December 31, 2016
Amounts in thousands
Foreign | |||||||
Equity | Currency | ||||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | |||||
Location: Statement of Assets and Liabilities - Assets | |||||||
Investments, at fair value* | $ | 26 | $ | — | |||
Unrealized appreciation on foreign currency exchange contracts | — | 85 | |||||
Variation margin on futures contracts** | 120 | — | |||||
Total | $ | 146 | $ | 85 | |||
Location: Statement of Assets and Liabilities - Liabilities | |||||||
Variation margin on futures contracts** | $ | 35 | $ | — | |||
Unrealized depreciation on foreign currency exchange contracts | — | 41 | |||||
Options written, at fair value | 17 | — | |||||
Total | $ | 52 | $ | 41 | |||
Foreign | |||||||
Equity | Credit | Currency | |||||
Derivatives not accounted for as hedging instruments | Contracts | Contracts | Contracts | ||||
Location: Statement of Operations - Net realized gain (loss) | |||||||
Investments*** | $ | (149 | ) | $ | — | $ | — |
Futures contracts | (12 | ) | — | — | |||
Options written | 174 | — | — | ||||
Total return swap contracts | (104 | ) | — | — | |||
Credit default swap contracts | — | 7 | — | ||||
Foreign currency-related transactions**** | — | — | 196 | ||||
Total | $ | (91 | ) | $ | 7 | $ | 196 |
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | |||||||
Investments***** | $ | (81 | ) | $ | — | $ | — |
Futures contracts | 105 | — | — | ||||
Options written | 34 | — | — | ||||
Total return swap contracts | 27 | — | — | ||||
Foreign currency-related transactions****** | — | — | 49 | ||||
Total | $ | 85 | $ | — | $ | 49 |
* Fair value of purchased options.
** Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedule of Investments. Only variation margin is reported within the
Statement of Assets and Liabilities.
*** Includes net realized gain (loss) on purchased options as reported in the Statement of Operations.
**** Only includes net realized gain (loss) on forward and spot contracts. May differ from the net realized gain (loss) on foreign currency-related transactions reported
within the Statement of Operations.
***** Includes net unrealized gain (loss) on purchased options as reported in the Schedule of Investments.
****** Only includes change in unrealized gain (loss) on forward and spot contracts. May differ from the net change in unrealized gain (loss) on foreign currency-related
transactions reported within the Statement of Operations.
For further disclosure on derivatives see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
78 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments —
December 31, 2016
Amounts in thousands | |||||||||
Offsetting of Financial Assets and Derivative Assets | |||||||||
Gross | Net Amounts | ||||||||
Amounts | of Assets | ||||||||
Gross | Offset in the | Presented in | |||||||
Amounts of | Statement of | the Statement | |||||||
Recognized | Assets and | of Assets and | |||||||
Description | Location: Statement of Assets and Liabilities - Assets | Assets | Liabilities | Liabilities | |||||
Options Purchased Contracts | Investments, at fair value | $ | 26 | $ | — | $ | 26 | ||
Foreign Currency Exchange Contracts | Unrealized appreciation on foreign currency exchange contracts | 85 | — | 85 | |||||
Futures Contracts | Variation margin on futures contracts | 56 | — | 56 | |||||
Total Financial and Derivative Assets | 167 | — | 167 | ||||||
Financial and Derivative Assets not subject to a netting agreement | (55 | ) | — | (55 | ) | ||||
Total Financial and Derivative Assets subject to a netting agreement | $ | 112 | $ | — | $ | 112 |
Financial Assets, Derivative Assets, and Collateral Held by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Assets | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Received^ | Net Amount | |||||
Bank of America | $ | 41 | $ | 17 | $ | — | $ | 24 | |
Royal Bank of Canada | 2 | — | — | 2 | |||||
State Street | 66 | 28 | — | 38 | |||||
UBS | 3 | — | — | 3 | |||||
Total | $ | 112 | $ | 45 | $ | — | $ | 67 |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 79
Russell Investment Funds
Equity Growth Strategy Fund
Balance Sheet Offsetting of Financial and Derivative Instruments, continued —
December 31, 2016
Amounts in thousands | ||||||||
Offsetting of Financial Liabilities and Derivative Liabilities | ||||||||
Gross | Net Amounts | |||||||
Amounts | of Liabilities | |||||||
Gross | Offset in the | Presented in | ||||||
Amounts of | Statement of | the Statement | ||||||
Recognized | Assets and | of Assets and | ||||||
Description | Location: Statement of Assets and Liabilities - Liabilities | Liabilities | Liabilities | Liabilities | ||||
Futures Contracts | Variation margin on futures contracts | $ | 1 | $ | — | $ | 1 | |
Foreign Currency Exchange Contracts | Unrealized depreciation on foreign currency exchange contracts | 41 | — | 41 | ||||
Options Written Contracts | Options written, at fair value | 17 | — | 17 | ||||
Total Financial and Derivative Liabilities | 59 | — | 59 | |||||
Financial and Derivative Liabilities not subject to a netting agreement | — | — | — | |||||
Total Financial and Derivative Liabilities subject to a netting agreement | $ | 59 | $ | — | $ | 59 |
Financial Liabilities, Derivative Liabilities, and Collateral Pledged by Counterparty | |||||||||
Gross Amounts Not Offset in | |||||||||
the Statement of Assets and | |||||||||
Liabilities | |||||||||
Net Amounts | |||||||||
of Liabilities | |||||||||
Presented in | |||||||||
the Statement | Financial and | ||||||||
of Assets and | Derivative | Collateral | |||||||
Counterparty | Liabilities | Instruments | Pledged^ | Net Amount | |||||
Bank of America | $ | 17 | $ | 17 | $ | — | $ | — | |
State Street | 42 | 28 | — | 14 | |||||
Total | $ | 59 | $ | 45 | $ | — | $ | 14 |
* Fair value of securities on loan as reported in the footnotes to the Statement of Assets and Liabilities.
^ Collateral received or pledged amounts may not reconcile to those disclosed in the Statement of Assets and Liabilities due to the inclusion of off-Balance
Sheet collateral and adjustments made to exclude overcollateralization.
For further disclosure on derivatives and counterparty risk see note 2 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
80 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Statement of Assets and Liabilities — December 31, 2016
Amounts in thousands | ||
Assets | ||
Investments, at identified cost | $ | 40,694 |
Investments, at fair value(>) | 47,306 | |
Cash (restricted)(a) | 800 | |
Unrealized appreciation on foreign currency exchange contracts | 85 | |
Receivables: | ||
Fund shares sold | 22 | |
From affiliates | 4 | |
Variation margin on futures contracts | 56 | |
Total assets | 48,273 | |
Liabilities | ||
Payables: | ||
Investments purchased | 22 | |
Accrued fees to affiliates | 2 | |
Other accrued expenses | 26 | |
Variation margin on futures contracts | 1 | |
Unrealized depreciation on foreign currency exchange contracts | 41 | |
Options written, at fair value(x) | 17 | |
Total liabilities | 109 | |
Net Assets | $ | 48,164 |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 81
Russell Investment Funds
Equity Growth Strategy Fund
Statement of Assets and Liabilities, continued — December 31, 2016
Amounts in thousands | |||
Net Assets Consist of: | |||
Undistributed (overdistributed) net investment income | $ | (35 | ) |
Accumulated net realized gain (loss) | (2,833 | ) | |
Unrealized appreciation (depreciation) on: | |||
Investments | 6,612 | ||
Futures contracts | 85 | ||
Options written | 34 | ||
Foreign currency-related transactions | 44 | ||
Shares of beneficial interest | 54 | ||
Additional paid-in capital | 44,203 | ||
Net Assets | $ | 48,164 | |
Net Asset Value, offering and redemption price per share: | |||
Net asset value per share: (#) | $ | 8.92 | |
Net assets | $ | 48,163,700 | |
Shares outstanding ($.01 par value) | 5,401,357 | ||
Amounts in thousands | |||
(x) Premiums received on options written | $ | 51 | |
(>) Investments in affiliated funds | $ | 47,280 | |
(a) Cash Collateral for Futures | $ | 800 | |
(#) Net asset value per share equals net assets divided by shares of beneficial interest outstanding. |
See accompanying notes which are an integral part of the financial statements.
82 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Statement of Operations — For the Period Ended December 31, 2016
Amounts in thousands | |||
Investment Income | |||
Dividends from affiliated funds | $ | 985 | |
Expenses | |||
Advisory fees | 95 | ||
Administrative fees | 20 | ||
Custodian fees (1) | 26 | ||
Transfer agent fees | 2 | ||
Professional fees | 32 | ||
Trustees’ fees | 2 | ||
Printing fees | 8 | ||
Miscellaneous | 6 | ||
Expenses before reductions | 191 | ||
Expense reductions | (135 | ) | |
Net expenses | 56 | ||
Net investment income (loss) | 929 | ||
Net Realized and Unrealized Gain (Loss) | |||
Net realized gain (loss) on: | |||
Investments | (321 | ) | |
Futures contracts | (12 | ) | |
Options written | 174 | ||
Total return swap contracts | (104 | ) | |
Credit default swap contracts | 7 | ||
Foreign currency-related transactions | 196 | ||
Capital gain distributions from Underlying Funds | 1,297 | ||
Net realized gain (loss) | 1,237 | ||
Net change in unrealized appreciation (depreciation) on: | |||
Investments | 2,521 | ||
Futures contracts | 105 | ||
Options written | 34 | ||
Total return swap contracts | 27 | ||
Foreign currency-related transactions | 49 | ||
Net change in unrealized appreciation (depreciation) | 2,736 | ||
Net realized and unrealized gain (loss) | 3,973 | ||
Net Increase (Decrease) in Net Assets from Operations | $ | 4,902 |
(1) Includes a reimbursement for overbilling of custody out-of-pocket fees from prior years. See note 8 in the Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 83
Russell Investment Funds
Equity Growth Strategy Fund
Statements of Changes in Net Assets
For the Periods Ended December 31, | ||||||
Amounts in thousands | 2016 | 2015 | ||||
Increase (Decrease) in Net Assets | ||||||
Operations | ||||||
Net investment income (loss) | $ | 929 | $ | 881 | ||
Net realized gain (loss) | 1,237 | 2,070 | ||||
Net change in unrealized appreciation (depreciation) | 2,736 | (4,825 | ) | |||
Net increase (decrease) in net assets from operations | 4,902 | (1,874 | ) | |||
Distributions | ||||||
From net investment income | (1,396 | ) | (767 | ) | ||
From net realized gain | — | (3,854 | ) | |||
Net decrease in net assets from distributions | (1,396 | ) | (4,621 | ) | ||
Share Transactions* | ||||||
Net increase (decrease) in net assets from share transactions | (3,393 | ) | 2,143 | |||
Total Net Increase (Decrease) in Net Assets | 113 | (4,352 | ) | |||
Net Assets | ||||||
Beginning of period | 48,051 | 52,403 | ||||
End of period | $ | 48,164 | $ | 48,051 | ||
Undistributed (overdistributed) net investment income included in net assets | $ | (35 | ) | $ | 187 |
* Share transaction amounts (in thousands) for the periods ended December 31, 2016 and December 31, 2015 were as follows: | ||||||||||||
2016 | 2015 | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Proceeds from shares sold | 669 | $ | 5,721 | 479 | $ | 4,396 | ||||||
Proceeds from reinvestment of distributions | 162 | 1,396 | 525 | 4,622 | ||||||||
Payments for shares redeemed | (1,233 | ) | (10,510 | ) | (740 | ) | (6,875 | ) | ||||
Total increase (decrease) | (402 | ) | $ | (3,393 | ) | 264 | $ | 2,143 |
See accompanying notes which are an integral part of the financial statements.
84 Equity Growth Strategy Fund
(This page intentionally left blank)
Russell Investment Funds
Equity Growth Strategy Fund
Financial Highlights — For the Periods Ended
For a Share Outstanding Throughout Each Period. | |||||||||||||||||
$ | |||||||||||||||||
$ | Net | $ | $ | $ | $ | ||||||||||||
Net Asset Value, | Investment | Net Realized | Total from | Distributions | Distributions | ||||||||||||
Beginning of | Income (Loss) | and Unrealized | Investment | from Net | from Net | ||||||||||||
Period | (a)(b)(d) | Gain (Loss) | Operations | Investment Income | Realized Gain | ||||||||||||
December 31, 2016 | 8.28 | .17 | .72 | .89 | (.25 | ) | — | ||||||||||
December 31, 2015 | 9.46 | .16 | (.50 | ) | (.34 | ) | (.13 | ) | (.71 | ) | |||||||
December 31, 2014 | 9.60 | .30 | .04 | .34 | (.32 | ) | (.16 | ) | |||||||||
December 31, 2013 | 8.21 | .23 | 1.39 | 1.62 | (.23 | ) | — | ||||||||||
December 31, 2012 | 7.22 | .15 | .98 | 1.13 | (.14 | ) | — | ||||||||||
See accompanying notes which are an integral part of the financial statements.
86 Equity Growth Strategy Fund
% | % | % | |||||||||||||||
$ | $ | Ratio of Expenses | Ratio of Expenses | Ratio of Net | |||||||||||||
Net Asset Value, | % | Net Assets, | to Average | to Average | Investment Income | % | |||||||||||
$ | End of | Total | End of Period | Net Assets, | Net Assets, | to Average | Portfolio | ||||||||||
Total Distributions | Period | Return(e) | (000 | ) | Gross(c) | Net(c)(d) | Net Assets(b)(d) | Turnover Rate | |||||||||
(.25 | ) | 8.92 | 10.85 | 48,164 | .40 | .12 | 1.97 | 21 | |||||||||
(.84 | ) | 8.28 | (3.87 | ) | 48,051 | .39 | .11 | 1.73 | 31 | ||||||||
(.48 | ) | 9.46 | 3.48 | 52,403 | .40 | .10 | 3.04 | 25 | |||||||||
(.23 | ) | 9.60 | 19.81 | 50,254 | .41 | .10 | 2.55 | 17 | |||||||||
(.14 | ) | 8.21 | 15.68 | 39,140 | .44 | .10 | 1.79 | 37 |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 87
Russell Investment Funds
Equity Growth Strategy Fund
Related Party Transactions, Fees and Expenses
Accrued fees payable to affiliates for the period ended December 31, 2016 were as follows: | ||
Administration fees | $ | 1,808 |
Transfer agent fees | 187 | |
Trustee fees | 321 | |
$ | 2,316 |
Transactions (amounts in thousands) during the period ended December 31, 2016 with Underlying Funds which are, or were, an
affiliated company are as follows:
Fair Value, | Change in | |||||||||||||||||||
Beginning of | Realized Gain | Unrealized | Fair Value, End | Income | Capital Gains | |||||||||||||||
Period | Purchases | Sales | (Loss) | Gain (Loss) | of Period | Distributions | Distributions | |||||||||||||
RIC Russell Commodity Strategies | ||||||||||||||||||||
Fund | $ | 1,460 | $ | 262 | $ | 416 | $ | (97 | ) | $ | 246 | $ | 1,455 | $ | — | $ | — | |||
RIC Russell Global Infrastructure | ||||||||||||||||||||
Fund | 2,410 | 367 | 1,481 | 16 | 108 | 1,420 | 58 | 43 | ||||||||||||
RIF Global Real Estate Securities | ||||||||||||||||||||
Fund | 1,443 | 290 | 816 | 57 | (86 | ) | 888 | 42 | 28 | |||||||||||
RIC Russell U.S. Defensive Equity | ||||||||||||||||||||
Fund | 4,317 | 659 | 1,624 | 61 | 25 | 3,438 | 58 | 259 | ||||||||||||
RIC Russell U.S. Dynamic Equity | ||||||||||||||||||||
Fund | 4,318 | 540 | 1,042 | 34 | 341 | 4,191 | 61 | 179 | ||||||||||||
RIF Aggressive Equity Fund | 5,270 | 532 | 1,363 | (161 | ) | 1,076 | 5,354 | 38 | 3 | |||||||||||
RIF Multi-Style Equity Fund | 4,798 | 623 | 655 | 2 | 120 | 4,888 | 95 | 268 | ||||||||||||
RIC Russell Global Opportunistic | ||||||||||||||||||||
Credit Fund | 4,358 | 1,373 | 1,105 | (39 | ) | 277 | 4,864 | 213 | — | |||||||||||
RIC Unconstrained Total Return | ||||||||||||||||||||
Fund | — | 791 | 52 | — | (7 | ) | 732 | 11 | — | |||||||||||
RIC Russell Emerging Markets Fund | 5,265 | 1,374 | 1,439 | (128 | ) | 703 | 5,775 | 74 | — | |||||||||||
RIC Russell Global Equity Fund | 7,207 | 1,732 | 1,150 | — | (89 | ) | 7,700 | 130 | 517 | |||||||||||
RIF Non-U.S. Fund | 6,241 | 1,175 | 1,136 | 83 | (112 | ) | 6,251 | 203 | — | |||||||||||
U.S. Cash Management Fund | 734 | 2,542 | 2,952 | — | — | 324 | 2 | — | ||||||||||||
$ | 47,821 | $ | 12,260 | $ | 15,231 | $ | (172 | ) | $ | 2,602 | $ | 47,280 | $ | 985 | $ | 1,297 |
Federal Income Taxes
At December 31, 2016, the cost of investments and net unrealized appreciation (depreciation), undistributed ordinary income and
undistributed long-term capital gains for income tax purposes were as follows:
Cost of Investments | $ | 43,550,621 | ||
Unrealized Appreciation | $ | 4,319,383 | ||
Unrealized Depreciation | (563,815 | ) | ||
Net Unrealized Appreciation (Depreciation) | $ | 3,755,568 | ||
Undistributed Long-Term Capital Gains | ||||
(Capital Loss Carryforward) | $ | 588,911 | ||
Tax Composition of Distributions | ||||
Ordinary Income | $ | 1,362,395 | ||
Long-Term Capital Gains | $ | 34,062 |
See accompanying notes which are an integral part of the financial statements.
88 Equity Growth Strategy Fund
Russell Investment Funds
Equity Growth Strategy Fund
Federal Income Taxes, continued
Net investment income and net realized gains (losses) in the financial statements may differ from taxable net investment income and
net realized gains (losses). Capital accounts within the financial statements are adjusted for permanent differences between book and
tax accounting. Book-tax differences may be due to foreign currency gains and losses, reclassifications of dividends and differences in
treatment of income from swaps. These adjustments have no impact on the net assets. At December 31, 2016, the Statement of Assets
and Liabilities have been adjusted by the following amounts (in thousands):
Undistributed net investment income | $ | 245 | |
Accumulated net realized gain (loss) | (247 | ) | |
Additional paid-in capital | 2 |
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund 89
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Schedule of Investments — December 31, 2016
Footnotes:
(å) Currency balances were pledged in connection with futures contracts purchased (sold), options written, or swaps entered into by the
Fund. See Statement of Assets and Liabilities.
(ÿ) Notional Amount in thousands.
(8) Unrounded units.
Abbreviations:
144A - Represents private placement security for qualified buyers according to rule 144A of the Securities Act of 1933.
ADR - American Depositary Receipt
ADS - American Depositary Share
BBSW - Bank Bill Swap Reference Rate
CIBOR - Copenhagen Interbank Offered Rate
CME - Chicago Mercantile Exchange
CMO - Collateralized Mortgage Obligation
CVO - Contingent Value Obligation
EMU - European Economic and Monetary Union
EURIBOR - Euro Interbank Offered Rate
FDIC - Federal Deposit Insurance Company
GDR - Global Depositary Receipt
GDS - Global Depositary Share
HIBOR – Hong Kong Interbank Offered Rate
LIBOR - London Interbank Offered Rate
NIBOR - Norwegian Interbank Offered Rate
PIK - Payment in Kind
PRIBOR – Prague Interbank Offered Rate
REMIC - Real Estate Mortgage Investment Conduit
SIBOR – Singapore Interbank Offered Rate
STRIP - Separate Trading of Registered Interest and Principal of Securities
TBA - To Be Announced Security
UK - United Kingdom
90 Notes to Schedule of Investments
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Schedule of Investments, continued — December 31, 2016
Foreign Currency Abbreviations: | ||
ARS - Argentine peso | HUF - Hungarian forint | PKR - Pakistani rupee |
AUD - Australian dollar | IDR - Indonesian rupiah | PLN - Polish zloty |
BRL - Brazilian real | ILS - Israeli shekel | RUB - Russian ruble |
CAD - Canadian dollar | INR - Indian rupee | SEK - Swedish krona |
CHF - Swiss franc | ISK - Icelandic krona | SGD - Singapore dollar |
CLP - Chilean peso | ITL - Italian lira | SKK - Slovakian koruna |
CNY - Chinese yuan renminbi | JPY - Japanese yen | THB - Thai baht |
COP - Colombian peso | KES - Kenyan schilling | TRY - Turkish lira |
CRC - Costa Rican colon | KRW - South Korean won | TWD - Taiwanese dollar |
CZK - Czech koruna | MXN - Mexican peso | USD - United States dollar |
DKK - Danish krone | MYR – Malaysian ringgit | VEB - Venezuelan bolivar |
EGP - Egyptian pound | NOK - Norwegian krone | VND - Vietnamese dong |
EUR - Euro | NZD - New Zealand dollar | ZAR - South African rand |
GBP - British pound sterling | PEN - Peruvian nuevo sol | |
HKD – Hong Kong dollar | PHP – Philippine peso |
Notes to Schedule of Investments 91
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Highlights — December 31, 2016
(a) Average daily shares outstanding were used for this calculation.
(b) Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the Underlying Funds in which the
Fund invests.
(c) The calculation includes only those expenses charged directly to the Fund and does not include expenses charged to the Underlying Funds in which
the Fund invests.
(d) May reflect amounts waived and reimbursed by Russell Investment Management, LLC ( “RIM”).
(e) The total return does not reflect any Insurance Company Separate Account or Policy Charges.
(f) Less than $.01 per share.
92 Notes to Financial Highlights
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements — December 31, 2016
1. Organization
Russell Investment Funds (the “Investment Company” or “RIF”) is a series investment company with nine different investment
portfolios referred to as Funds (each a “Fund” and collectively the “Funds”). These financial statements report on four of these
Funds. The Investment Company provides the investment base for one or more variable insurance products issued by one or more
insurance companies. These Funds are offered at net asset value (“NAV”) to qualified insurance company separate accounts offering
variable insurance products. The Investment Company is registered under the Investment Company Act of 1940, as amended
(“Investment Company Act”), as an open-end management investment company. It is organized and operated as a Massachusetts
business trust under an Amended and Restated Master Trust Agreement dated October 1, 2008, as amended (“Master Trust
Agreement”), and the provisions of Massachusetts law governing the operation of a Massachusetts business trust. The Investment
Company’s Master Trust Agreement permits the Board of Trustees (the “Board”) to issue an unlimited number of shares of beneficial
interest. Each of the Funds is diversified. Under the Investment Company Act a diversified company is defined as a management
company which meets the following requirements: at least 75% of the value of their total assets is represented by cash and cash
items (including receivables), government securities, securities of other investment companies, and other securities for the purposes
of this calculation limited in respect of any one issuer to an amount not greater in value than five percent of the value of the total
assets of such management company and to not more than 10% of the outstanding voting securities of such issuer.
Each of the Funds is a “fund of funds” and diversifies its assets by investing principally, at present, in shares of several Russell
Investment Company (“RIC”) Funds and other of the Investment Company’s Funds (together, the “Underlying Funds”). Each Fund
seeks to achieve its specific investment objective by investing in different combinations of the Underlying Funds. In addition to
investing in the Underlying Funds, Russell Investment Management, LLC (“RIM”), the Funds’ investment adviser, may seek to
actively manage the Funds' overall exposure by investing in derivatives, including futures, options, forwards and swaps, that RIM
believes will achieve the desired risk/return profile for the Funds. The Funds may hold cash in connection with these investments.
The Funds usually, but not always, pursue a strategy of being fully invested by exposing their cash to the performance of segments
of the global equity market by purchasing index futures contracts (also known as "equitization").
Each Fund intends its strategy of investing in combinations of equity, fixed/other income and alternative Underlying Funds to result
in investment diversification that an investor could otherwise achieve only by holding numerous individual investments. A Fund’s
actual allocation may vary from the target strategic asset allocation at any point in time (1) due to market movements, (2) by up to
+/- 5% at the equity, fixed/other income or alternative category level based on RIM’s capital markets research, and/or (3) due to the
implementation over a period of time of a change to the target strategic asset allocation including the addition of a new Underlying
Fund. There may be no changes in the asset allocation or to the Underlying Funds in a given year or such changes may be made
one or more times in a year.
The following table shows each Fund’s target strategic asset allocation effective on or about September 22, 2016 to alternative, equity
and fixed/other income asset classes. The alternative Underlying Funds in which the Funds may invest include the RIC Russell
Commodity Strategies, RIC Russell Global Infrastructure and RIF Global Real Estate Securities Funds. The equity Underlying
Funds in which the Funds may invest include the RIC Russell U.S. Defensive Equity, RIC Russell U.S. Dynamic Equity, RIF
Aggressive Equity, RIF Multi-Style Equity, RIC Russell Emerging Markets, RIC Russell Global Equity, and RIF Non-U.S. Funds.
The fixed/other income Underlying Funds in which the Funds may invest include the RIC Russell Global Opportunistic Credit, RIC
Russell Investment Grade Bond, RIC Russell Short Duration Bond, RIC Unconstrained Total Return, RIC Russell Multi-Strategy
Income and RIF Core Bond Funds.
Asset Allocation Targets* | ||||||||
Moderate | Balanced | Growth | ||||||
Strategy | Strategy | Strategy | Equity Growth | |||||
Fund | Fund | Fund | Strategy Fund | |||||
Alternative ** | 7.5 | % | 7 | % | 8 | % | 8 | % |
Equity | 29.5 | % | 51 | % | 70 | % | 85 | % |
Fixed/Other Income | 63 | % | 42 | % | 22 | % | 7 | % |
* Actual assets allocation may vary.
** Alternative Underlying Funds pursue investment strategies that differ from those of traditional broad market equity or fixed income funds or seek returns
with a low correlation to global equity markets.
Notes to Financial Statements 93
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
2. Significant Accounting Policies
The Funds’ financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”)
which require the use of management estimates and assumptions at the date of the financial statements. Actual results could differ
from those estimates. The Funds are considered investment companies under U.S. GAAP and follow the accounting and reporting
guidance applicable to investment companies. The following is a summary of the significant accounting policies consistently
followed by each Fund in the preparation of its financial statements.
In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules)
intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend
Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as
well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently
evaluating the impact that the adoption of the amendments to Regulation S-X will have on the Funds' financial statements and
related disclosures.
Security Valuation
The Funds value portfolio securities according to Board-approved securities valuation procedures which include market and fair
value procedures. The Board has delegated the responsibility for administration of the securities valuation procedures to Russell
Investments Fund Services, LLC ("RIFUS"). The Funds value the shares of the Underlying Funds at the current NAV per share
of each Underlying Fund. The Funds have adopted the authoritative guidance under U.S. GAAP for estimating the fair value of
investments in funds that have calculated NAV per share in accordance with the specialized accounting guidance for investment
companies. Accordingly, the Funds estimate the fair value of an investment in a fund using the NAV per share without further
adjustment as a practical expedient, if the NAV per share of the investment is determined in accordance with the specialized
accounting guidance for investment companies as of the reporting entity’s measurement date.
U.S. GAAP defines fair value as the price that a Fund would receive to sell an asset or pay to transfer a liability in an orderly
transaction between market participants at the measurement date. It establishes a fair value hierarchy that prioritizes inputs to
valuation methods and requires a separate disclosure of the fair value hierarchy for each major category of assets and liabilities,
that segregates fair value measurements into levels (Level 1, 2, and 3). The inputs or methodology used for valuing securities are
not necessarily an indication of the risk associated with investing in those securities. Levels 1, 2 and 3 of the fair value hierarchy
are defined as follows:
• Level 1 — Quoted prices (unadjusted) in active markets or exchanges for identical assets and liabilities.
• Level 2 — Inputs other than quoted prices included within Level 1 that are observable, which may include, but are not
limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets
or liabilities in markets that are not active, and inputs such as interest rates, yield curves, implied volatilities, credit spreads
or other market corroborated inputs.
• Level 3 — Significant unobservable inputs based on the best information available in the circumstances, to the extent
observable inputs are not available, which may include assumptions made by RIFUS, acting at the discretion of the Board,
that are used in determining the fair value of investments.
All the Funds' investments for the period ended December 31, 2016, were valued using Level 1 inputs.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for
example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and
other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised
in determining fair value is greatest for instruments categorized in Level 3. The inputs or methodology used for valuing securities
are not necessarily an indication of the risk associated with investing in those securities.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes,
the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that
is significant to the fair value measurement in its entirety.
The valuation techniques and significant inputs used in determining the fair market values of financial instruments categorized as
Level 1 and Level 2 of the fair value hierarchy are as follows:
94 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
Derivative instruments are instruments such as foreign currency contracts, futures contracts, options contracts, or swap agreements
that derive their value from underlying asset prices, indices, reference rates, and other inputs or a combination of these factors.
Derivatives may be classified into two groups depending upon the way that they are traded: privately traded over-the-counter
(“OTC”) derivatives that do not go through an exchange or intermediary and exchange-traded derivatives that are traded through
specialized derivatives exchanges or other regulated exchanges. OTC derivatives are normally valued on the basis of broker dealer
quotations or pricing service providers. Depending on the product and the terms of the transaction, the value of the derivative
instrument can be estimated by a pricing service provider using a series of techniques, including simulation pricing models.
The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest
rates, yield curves, dividends and exchange rates. OTC derivatives that use these and similar valuation techniques and inputs as
described above are categorized as Level 2 of the fair value hierarchy, with the exception of foreign currency spot contracts which
are categorized as Level 1 of the fair value hierarchy. OTC derivatives that use broker dealer quotations are categorized as level 3 of
the fair value hierarchy. Exchange-traded derivatives are valued based on the last reported sales price on the day of valuation and
are categorized as Level 1 of the fair value hierarchy.
Centrally cleared swaps listed or traded on a multilateral or trade facility platform, such as a registered exchange, are valued at
the daily settlement price determined by the respective exchange. For centrally cleared credit default swaps, the clearing facility
requires its members to provide actionable levels across complete term structures. These levels along with external third party
prices are used to produce daily settlement prices. These securities are categorized as Level 2 of the fair value hierarchy. Centrally
cleared interest rate swaps are valued using a pricing model that references the underlying rates including the overnight index
swap rate and London Interbank Offered Rate (“LIBOR”) forward rate to produce the daily settlement price. These securities are
categorized as Level 2 of the fair value hierarchy.
Level 3 Fair Value Investments
The valuation techniques and significant inputs used in determining the fair values of financial instruments classified as Level 3 of
the fair value hierarchy are as follows:
Securities and other assets for which market quotes are not readily available, or are not reliable, are valued at fair value as
determined in good faith by RIFUS and are categorized as Level 3 of the fair value hierarchy. Market quotes are considered not
readily available in circumstances where there is an absence of current or reliable market-based data (e.g., trade information or
broker quotes). When RIFUS applies fair valuation methods that use significant unobservable inputs to determine a Fund’s NAV,
securities will not be priced on the basis of quotes from the primary market in which they are traded, but instead may be priced by
another method that RIFUS believes accurately reflects fair value and will be categorized as Level 3 of the fair value hierarchy. Fair
value pricing may require subjective determinations about the value of a security. While the securities valuation procedures are
intended to result in a calculation of a Fund’s NAV that fairly reflects security values as of the time of pricing, the process cannot
guarantee that fair values determined by RIFUS would accurately reflect the price that a Fund could obtain for a security if it were
to dispose of that security as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Fund may differ
from the value that would be realized if the security was sold.
RIFUS employs third party pricing vendors to provide fair value measurements. RIFUS oversees third-party pricing service
providers in order to support the valuation process throughout the year.
If third party evaluated vendor pricing is neither available nor deemed to be indicative of fair value, RIFUS may elect to obtain
indicative market quotations (“broker quotes”) directly from the broker or passed through from a third party vendor. In the event
that the source of fair value is from a single source broker quote, these securities are classified as Level 3 per the fair value
hierarchy. Broker quotes are typically received from established market participants. Although independently received on a daily
basis, RIFUS does not have the transparency to view the underlying inputs which support the broker quotes. Significant changes
in the broker quote would have direct and proportional changes in the fair value of the security. There is a third-party pricing
exception to the quantitative disclosure requirement when prices are not determined by the reporting entity. RIFUS is exercising
this exception and has made a reasonable attempt to obtain quantitative information from the third party pricing vendors regarding
the unobservable inputs used.
For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances
for reported fair values that present changes attributable to total realized and unrealized gains or losses, purchases and sales, and
transfers in/out of the Level 3 category during the period. Additionally, U.S. GAAP requires quantitative information regarding the
significant unobservable inputs used in the determination of fair value of assets categorized as Level 3 in the fair value hierarchy. In
Notes to Financial Statements 95
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
accordance with the requirements of U.S. GAAP, a fair value hierarchy, a Level 3 reconciliation and an additional disclosure about
fair value measurements, if any, has been included in the Presentation of Portfolio Holdings for each respective Fund.
These significant unobservable inputs are further disclosed in the Presentation of Portfolio Holdings for each respective Fund as
applicable.
Investment Transactions
Investment transactions are reflected as of the trade date for financial reporting purposes. This may cause the NAV stated in the
financial statements to be different from the NAV at which shareholders may transact. Realized gains and losses from securities
transactions, if applicable, are recorded on the basis of specific identified cost incurred within a particular Fund or Underlying
Fund.
Investment Income
Distributions of income and capital gains from the Underlying Funds are recorded on the ex-dividend date.
Federal Income Taxes
Since the Investment Company is a Massachusetts business trust, each Fund is a separate corporate taxpayer and determines its
net investment income and capital gains (or losses) and the amounts to be distributed to each Fund’s shareholders without regard
to the income and capital gains (or losses) of the other Funds.
For each year, each Fund intends to qualify or continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the “Code”) and intends to distribute all of its taxable income and capital gains.
Therefore, no federal income tax provision is required for the Funds.
Each Fund files a U.S. tax return. At December 31, 2016, the Funds had recorded no liabilities for net unrecognized tax benefits
relating to uncertain income tax positions they have taken or expect to take in future tax returns. While the statute of limitations
remains open to examine the Funds’ U.S. tax returns filed for the fiscal years ended December 31, 2013 through December 31,
2015, no examinations are in progress or anticipated at this time. The Funds are not aware of any tax positions for which it is
reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
The Funds comply with the authoritative guidance for uncertainty in income taxes which requires management to determine whether
a tax position of the Funds is more likely than not to be sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the
tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being
realized upon ultimate settlement with the relevant taxing authority. Management determined that no accruals need to be made in
the financial statements due to uncertain tax positions. Management continually reviews and adjusts the Funds’ liability for income
taxes based on analyses of tax laws and regulations, as well as their interpretations, and other relevant factors.
Dividends and Distributions to Shareholders
Income dividends, capital gain distributions and return of capital, if any, are recorded on the ex-dividend date. Income dividends
are generally declared and paid quarterly. Capital gain distributions are generally declared and paid annually. An additional
distribution may be paid by the Funds to avoid imposition of federal income and excise tax on any remaining undistributed capital
gains and net investment income.
The timing and characterization of certain income and capital gain distributions are determined in accordance with federal tax
regulations which may differ from U.S. GAAP. As a result, net investment income and net realized gain (or loss) from investment
transactions for a reporting period may differ significantly from distributions during such period. The differences between tax
regulations and U.S. GAAP primarily relate to investments in options, futures, forward contracts, swap contracts, the Underlying
Funds sold at a loss, wash sale deferrals and capital loss carryforwards. Accordingly, the Funds may periodically make reclassifications
among certain of their capital accounts without impacting their NAVs.
96 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
Expenses
Expenses included in the accompanying financial statements reflect the expenses of each Fund and do not include those expenses
incurred by the Underlying Funds. Because the Underlying Funds have varied expense and fee levels and the Funds may own
different proportions of the Underlying Funds at different times, the amount of the Underlying Funds’ fees and expenses incurred
indirectly by the Funds will vary.
The Funds pay their own expenses other than those expressly assumed by RIM, the Funds’ adviser, or RIFUS. Most expenses can
be directly attributed to the individual Funds. Expenses which cannot be directly attributed to a specific Fund are allocated among
all Funds principally based on their relative net assets.
Derivatives
The Funds may invest in derivatives. Derivatives are instruments or agreements whose value is derived from an underlying security
or index. They include options, futures, swaps and forwards. These instruments offer unique characteristics and risks that facilitate
the Funds’ investment strategies.
The Funds typically use derivatives in three ways: exposing cash to markets, hedging and return enhancement. In addition, certain
Funds may enter into foreign exchange contracts for trade settlement purposes. The Funds may pursue their strategy of being fully
invested by exposing cash to the performance of segments of the global equity market by purchasing index futures contracts. This
is intended to cause the Funds to perform as though cash were actually invested in the global equity market.
Hedging may be used by the Funds to limit or control risks, such as adverse movements in exchange rates and interest rates. Return
enhancement can be accomplished through the use of derivatives in a Fund, including using derivatives as a substitute for holding
physical securities, and using them to express various macro views (e.g., interest rate movements, currency movements, and macro
credit strategies). By purchasing certain instruments, the Funds may more effectively achieve the desired portfolio characteristics
that assist them in meeting their investment objectives. Depending on how the derivatives are structured and utilized, the risks
associated with them may vary widely. These risks include, but are not limited to, market risk, liquidity risk, leveraging risk,
counterparty risk, basis risk, reinvestment risk, political risk, prepayment risk, extension risk, valuation risk and credit risk.
Futures, certain options and cleared swaps are traded or cleared on an exchange or central exchange clearing house. Exchange-
traded or exchange-cleared transactions generally present less counterparty risk to a Fund. The exchange’s clearing house stands
between the Fund and the broker to the contract and therefore, credit risk is generally limited to the failure of the clearing
house and the clearing member. Cleared swap contracts are subject to clearing house rules, including initial and variation margin
requirement, daily settlement of obligations and the clearing house guarantee of payments to the broker. There is, however, still
counterparty risk due to the insolvency of the broker with respect to any margin held in the brokers’ customer accounts. While
clearing members are required to segregate customer assets from their own assets, in the event of insolvency, there may be a
shortfall in the amount of margin held by the broker for its clients. Collateral and margin requirements for exchange-traded or
exchange-cleared derivatives are established through regulation, as well as set by the broker or applicable clearing house. Margin
for exchange-traded and exchange-cleared transactions are detailed in the Statements of Assets and Liabilities as cash held at the
broker for futures contracts and cash held at the broker for swap contracts, respectively. Securities pledged by a Fund for exchange-
traded and exchange-cleared transactions are noted as collateral or margin requirements in the Schedule of Investments. Typically,
the Funds and counterparties are not permitted to sell, repledge, rehypothecate or otherwise use collateral pledged by the other
party unless explicitly permitted by each respective governing agreement.
In December 2015, the SEC proposed new regulations applicable to a mutual fund's use of derivatives. If adopted as proposed, these
regulations could potentially limit or impact a Fund's ability to invest in derivatives and negatively affect the Fund's performance
and ability to pursue its stated investment objectives.
The effects of derivative instruments, categorized by risk exposure, on the Statements of Assets and Liabilities and the Statements of
Operations, for the period ended December 31, 2016, if applicable, are disclosed in the Fair Value of Derivative Instruments table
following each applicable Fund’s Schedule of Investments.
Foreign Currency Exchange Contracts
The Funds may enter into foreign currency exchange spot contracts and forward foreign currency exchange contracts (“FX
contracts”). From time to time, certain Funds may enter into FX contracts to hedge certain foreign currency-denominated assets.
FX contracts are recorded at fair value. Certain risks may arise upon entering into these FX contracts from the potential inability
Notes to Financial Statements 97
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
of counterparties to meet the terms of their FX contracts and are generally limited to the amount of unrealized gain on the FX
contracts, if any, that are disclosed in the Statements of Assets and Liabilities.
For the period ended December 31, 2016, the following Funds entered into foreign currency exchange contracts primarily for the
strategies listed below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement and hedging |
Balanced Strategy Fund | Return enhancement and hedging |
Growth Strategy Fund | Return enhancement and hedging |
Equity Growth Strategy Fund | Return enhancement and hedging |
The Funds’ foreign currency contract notional dollar values outstanding fluctuate throughout the fiscal year as required to meet
strategic requirements. The following tables illustrate the quarterly volume of foreign currency contracts. For the purpose of this
disclosure, volume is measured by the amounts bought and sold in USD.
Outstanding Contract Amounts Sold | |||||||||||
Quarter Ended | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |||||||
Moderate Strategy Fund | $ | 11,925,908 | $ | 12,092,987 | $ | 13,344,920 | $ | 13,900,072 | |||
Balanced Strategy Fund | 54,559,512 | 54,000,850 | 56,771,026 | 57,535,975 | |||||||
Growth Strategy Fund | 37,783,937 | 38,454,643 | 38,400,638 | 43,919,756 | |||||||
Equity Growth Strategy Fund | 9,998,568 | 9,943,481 | 10,231,368 | 10,694,924 | |||||||
Outstanding Contract Amounts Bought | |||||||||||
Quarter Ended | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |||||||
Moderate Strategy Fund | $ | 11,825,722 | $ | 12,145,299 | $ | 13,329,484 | $ | 13,987,328 | |||
Balanced Strategy Fund | 54,017,361 | 54,321,798 | 56,769,273 | 57,909,994 | |||||||
Growth Strategy Fund | 37,458,785 | 38,665,012 | 38,397,498 | 44,154,695 | |||||||
Equity Growth Strategy Fund | 9,918,782 | 9,994,189 | 10,219,041 | 10,731,908 |
Options
The Funds may purchase and sell (write) call and put options on securities and securities indices. Such options are traded on a
national securities exchange or in an OTC market. The Funds may also purchase and sell (write) call and put options on foreign
currencies.
When a Fund writes a covered call or a put option, an amount equal to the premium received by the Fund is included in the Fund’s
Statement of Assets and Liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-
to-market to reflect the current fair value of the option written. The Fund receives a premium on the sale of a call option but gives
up the opportunity to profit from any increase in the value of the underlying instrument above the exercise price of the option, and
when the Fund writes a put option it is exposed to a decline in the price of the underlying instrument.
When a Fund sells an uncovered call option, it does not simultaneously have a long position in the underlying security. When a
Fund sells an uncovered put option, it does not simultaneously have a short position in the underlying security. Uncovered options
are riskier than covered options because there is no underlying security held by the Fund that can act as a partial hedge.
Whether an option which the Fund has written expires on its stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss, if the cost of a closing purchase transaction exceeds the premium received when the
option was sold) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is
extinguished. If a call option which the Fund has written is exercised, the Fund realizes a capital gain or loss from the sale of the
underlying security, and the proceeds from such sale are increased by the premium originally received. When a put option which
a Fund has written is exercised, the amount of the premium originally received will reduce the cost of the security which a Fund
purchases upon exercise of the option.
The Funds’ use of written options involves, to varying degrees, elements of market risk in excess of the amount recognized in the
Statements of Assets and Liabilities. The face or contract amounts of these instruments reflect the extent of the Funds’ exposure to
market risk. The risks may be caused by an imperfect correlation between movements in the price of the instrument and the price
of the underlying securities and interest rates.
98 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
The Funds may enter into a swaption (an option on a swap). In a swaption, in exchange for an option, the buyer gains the right but
not the obligation to enter into a specified swap agreement with the issuer on a specified future date. The writer of the contract
receives the premium and bears the risk of unfavorable changes in the preset rate on the underlying interest rate swap.
For the period ended December, 2016, the Funds purchased or sold options primarily for the strategies listed below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement and hedging |
Balanced Strategy Fund | Return enhancement and hedging |
Growth Strategy Fund | Return enhancement and hedging |
Equity Growth Strategy Fund | Return enhancement and hedging |
The Funds’ options contracts notional amounts fluctuate throughout the fiscal year as required to meet strategic requirements. The
following table illustrates the quarterly activity of options contracts measured by notional in USD.
Notional of Options Contracts Opened or Closed | ||||||||||||
Funds | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | ||||||||
Moderate Strategy Fund | Opened | $ | 6,626,578 | $ | 8,977,546 | $ | — | $ | 20,011,567 | |||
Closed | — | 6,922,093 | 8,962,206 | 4,230,562 | ||||||||
Balanced Strategy Fund | Opened | 17,526,370 | 37,158,644 | 49,494,725 | 62,648,955 | |||||||
Closed | — | 18,307,964 | 52,217,525 | 20,623,950 | ||||||||
Growth Strategy Fund | Opened | 11,890,682 | 37,249,119 | 48,116,942 | 27,123,497 | |||||||
Closed | — | 12,420,951 | 52,307,316 | 20,623,950 | ||||||||
Equity Growth Strategy Fund | Opened | 3,127,497 | 9,457,675 | 7,150,219 | 4,899,478 | |||||||
Closed | — | 3,266,969 | 9,441,628 | 1,650,764 |
Futures Contracts
The Funds may invest in futures contracts (i.e., interest rate, foreign currency and index futures contracts).
The face or contract value of these instruments reflect the extent of the Funds’ exposure to off balance sheet risk. The primary risks
associated with the use of futures contracts are an imperfect correlation between the change in fair value of the securities held by
the Funds and the prices of futures contracts, and the possibility of an illiquid market. Upon entering into a futures contract, the
Funds are required to deposit with a broker an amount, termed the initial margin, which typically represents 5% to 10% of the
purchase price indicated in the futures contract. Payments to and from the broker, known as variation margin, are typically required
to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement value are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized.
For the period ended December 31, 2016, the following Funds entered into futures contracts primarily for the strategies listed
below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement, hedging, and exposing cash to markets |
Balanced Strategy Fund | Return enhancement, hedging, and exposing cash to markets |
Growth Strategy Fund | Return enhancement, hedging, and exposing cash to markets |
Equity Growth Strategy Fund | Return enhancement, hedging, and exposing cash to markets |
The Funds' futures contracts notional amounts fluctuate throughout the fiscal year as required to meet strategic requirements. The
following table illustrates the quarterly activity of futures contracts measured by notional in USD.
Notional of Futures Contracts Opened or Closed | ||||||||||||
Funds | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | ||||||||
Moderate Strategy Fund | Opened | $ | 5,675,810 | $ | 6,298,692 | $ | 48,053,432 | $ | 29,254,517 | |||
Closed | 5,723,478 | 5,754,530 | 35,443,830 | 24,310,946 | ||||||||
Balanced Strategy Fund | Opened | 29,790,268 | 30,799,950 | 82,691,459 | 81,822,194 | |||||||
Closed | 28,509,871 | 29,974,647 | 68,481,720 | 61,984,207 | ||||||||
Growth Strategy Fund | Opened | 16,850,689 | 16,701,723 | 85,065,487 | 70,367,251 | |||||||
Closed | 16,319,343 | 16,744,309 | 55,717,272 | 70,241,919 | ||||||||
Equity Growth Strategy Fund | Opened | 3,368,498 | 6,085,949 | 19,211,482 | 21,623,099 | |||||||
Closed | 3,374,874 | 4,787,698 | 13,643,423 | 19,241,055 |
Notes to Financial Statements 99
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
Swap Agreements
The Funds may enter into swap agreements, on either an asset-based or liability-based basis, depending on whether they are
hedging their assets or their liabilities, and will usually enter into swaps on a net basis (i.e., the two payment streams are netted
out, with the Funds receiving or paying only the net amount of the two payments). When a Fund engages in a swap, it exchanges
its obligations to pay or rights to receive payments for the obligations to pay or rights to receive payments of another party (i.e., an
exchange of floating rate payments for fixed rate payments).
The Funds may enter into several different types of swap agreements including credit default, interest rate, total return and currency
swaps. Credit default swaps are a counterparty agreement which allows the transfer of third party credit risk (the possibility that
an issuer will default on its obligation by failing to pay principal or interest in a timely manner) from one party to another. The
lender faces the credit risk from a third party and the counterparty in the swap agrees to insure this risk in exchange for regular
periodic payments. Interest rate swaps are a counterparty agreement, can be customized to meet each party’s needs, and involve the
exchange of a fixed or variable payment per period for a payment that is not fixed. Equity swaps are a counterparty agreement where
two parties exchange two sets of cash flows on predetermined dates for an agreed upon amount of time. The cash flows will typically
be an equity index value swapped with a floating rate such as LIBOR plus or minus a predefined spread. Index swap agreements
are a counterparty agreement intended to expose cash to markets or to effect investment transactions consistent with those Funds’
investment objectives and strategies. Currency swaps are a counterparty agreement where two parties exchange specified amounts
of different currencies which are followed by each paying the other a series of interest payments that are based on the principal cash
flow. At maturity the principal amounts are returned.
The Funds generally expect to enter into these transactions primarily to preserve a return or spread on a particular investment or
portion of their portfolios or to protect against any increase in the price of securities they anticipate purchasing at a later date, or for
return enhancement. Under most swap agreements entered into by a Fund, the parties' obligations are determined on a "net basis".
The net amount of the excess, if any, of the Funds’ obligations over their entitlements with respect to each swap will be accrued on a
daily basis and an amount of cash or liquid assets having an aggregate NAV at least equal to the accrued excess will be segregated.
To the extent that the Funds enter into swaps on other than a net basis, the amount maintained in a segregated account will be the
full amount of the Funds’ obligations, if any, with respect to such swaps, accrued on a daily basis. If there is a default by the other
party to such a transaction, the Funds will have contractual remedies pursuant to the agreement related to the transaction.
A Fund may not receive the expected amount under a swap agreement if the other party to the agreement defaults or becomes
bankrupt.
Credit Default Swaps
The Funds may enter into credit default swaps. A credit default swap can refer to corporate issues, government issues, asset-backed
securities or an index of assets, each known as the reference entity or underlying asset. Funds may act as either the buyer or the
seller of a credit default swap involving one party making a stream of payments to another party in exchange for the right to receive a
specified return in the event of a default or other credit event. Depending upon the terms of the contract, the credit default swap may
be closed via physical settlement. However, due to the possible or potential instability in the market, there is a risk that the Funds
may be unable to deliver the underlying debt security to the other party to the agreement. Additionally, the Funds may not receive
the expected amount under the swap agreement if the other party to the agreement defaults or becomes bankrupt. In an unhedged
credit default swap, Funds enter into a credit default swap without owning the underlying asset or debt issued by the reference
entity. Credit default swaps allow Funds to acquire or reduce credit exposure to a particular issuer, asset or basket of instruments.
As the seller of protection in a credit default swap, a Fund would be required to pay the par or other agreed-upon value (or otherwise
perform according to the swap contract) of a reference debt obligation to the counterparty in the event of a default (or other specified
credit event) and the counterparty would be required to surrender the reference debt obligation. In return, the Fund would receive
from the counterparty a periodic stream of payments over the term of the contract provided that no credit event has occurred. If no
credit event occurs, the Fund would keep the stream of payments and would have no payment obligations. As a seller of protection,
the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, that Fund would be subject to
investment exposure on the notional amount of the swap.
The Funds may also purchase protection via credit default swap contracts in order to offset the risk of default of debt securities held
in their portfolios or to take a short position in a debt security, in which case the Fund would function as the counterparty referenced
in the preceding paragraph.
100 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
If a credit event occurs and cash settlement is not elected, a variety of other deliverable obligations may be delivered in lieu of
the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer of
protection’s right to choose the deliverable obligation with the lowest value following a credit event). The Funds may use credit
default swaps to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where Funds own or have
exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood (as measured by the
credit default swap’s spread) of a particular issuer’s default.
Deliverable obligations for credit default swaps on asset-backed securities in most instances are limited to the specific referenced
obligation as performance for asset-backed securities can vary across deals. Prepayments, principal paydowns, and other writedown
or loss events on the underlying mortgage loans will reduce the outstanding principal balance of the referenced obligation. These
reductions may be temporary or permanent as defined under the terms of the swap agreement and the notional amount for the swap
agreement generally will be adjusted by corresponding amounts. The Funds may use credit default swaps on asset-backed securities
to provide a measure of protection against defaults (or other defined credit events) of the referenced obligation or to take an active
long or short position with respect to the likelihood of a particular referenced obligation’s default (or another defined credit event).
Credit default swap agreements on credit indices involve one party making a stream of payments to another party in exchange for
the right to receive a specified return in the event of a write-down, principal shortfall, interest shortfall or default of all or part of
the referenced entities comprising the credit index. A credit index is a basket of credit instruments or exposures designed to be
representative of some part of the credit market as a whole. These indices are made up of reference credits that are judged by a
poll of dealers to be the most liquid entities in the credit default swap market based on the sector of the index. Components of the
indices may include, but are not limited to, investment grade securities, high yield securities, asset-backed securities, emerging
markets, and/or various credit ratings within each sector. Credit indices are traded using credit default swaps with standardized
terms including a fixed spread and standard maturity dates. An index credit default swap references all the names in the index, and
if there is a default, the credit event is settled based on that name’s weight in the index. The composition of the indices changes
periodically, usually every six months, and, for most indices, each name has an equal weight in the index. Traders may use credit
default swaps on indices to speculate on changes in credit quality.
Implied credit spreads, represented in absolute terms, utilized in determining the fair value of credit default swap agreements on
corporate issues as of period-end are disclosed in the Schedules of Investments and generally serve as an indicator of the current
status of the payment/performance risk and represent the likelihood or risk of default (or other defined credit event) for the credit
derivative. The implied credit spread of a particular referenced entity reflects the cost of entering into a credit default swap and
may include upfront payments required to be made to enter into the agreement. For credit default swap agreements on asset-
backed securities and credit indices, the quoted market prices and resulting values serve as the indicator of the current status of
the payment/performance risk. Wider credit spreads and increasing fair values, in absolute terms when compared to the notional
amount of the swap, generally represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk
of default or other credit event occurring as defined under the terms of the agreement. The maximum potential amount of future
payments (undiscounted) that Funds as a seller of protection could be required to make under a credit default swap agreement
equals the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of December
31, 2016, for which a Fund is the seller of protection are disclosed in the Schedules of Investments. These potential amounts would
be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the
agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by a Fund for
the same referenced entity or entities.
Credit default swaps could result in losses if the Funds do not correctly evaluate the creditworthiness of the company or companies
on which the credit default swap is based. Credit default swap agreements may involve greater risks than if the Funds had invested
in the reference obligation directly since, in addition to risks relating to the reference obligation, credit default swaps are subject
to illiquidity and counterparty risk. A Fund will generally incur a greater degree of risk when it sells a credit default swap than
when it purchases a credit default swap. As a buyer of a credit default swap, a Fund may lose its investment and recover nothing
should a credit event fail to occur and the swap is held to its termination date. As seller of a credit default swap, if a credit event
were to occur, the value of any deliverable obligation received by a Fund, coupled with the upfront or periodic payments previously
received, may be less than what it pays to the buyer, resulting in a loss of value to the Fund.
If the creditworthiness of a Fund’s swap counterparty declines, the risk that the counterparty may not perform could increase,
potentially resulting in a loss to the Fund. To limit the counterparty risk involved in swap agreements, the Funds will only enter
into swap agreements with counterparties that meet certain standards of creditworthiness. Although there can be no assurance that
Notes to Financial Statements 101
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
the Funds will be able to do so, the Funds may be able to reduce or eliminate their exposure under a swap agreement either by
assignment or other disposition, or by entering into an offsetting swap agreement with the same party or another creditworthy party.
The Funds may have limited ability to eliminate their exposure under a credit default swap if the credit quality of the reference
entity or underlying asset has declined.
For the period ended December 31, 2016, the Funds entered into credit default swaps primarily for the strategies listed below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement, hedging and exposing cash to markets |
Balanced Strategy Fund | Return enhancement, hedging and exposing cash to markets |
Growth Strategy Fund | Return enhancement, hedging and exposing cash to markets |
The Funds' period end credit default swap contract notional amounts outstanding fluctuate throughout the fiscal year as required to
meet strategic requirements. The following table illustrates the quarterly volume of credit default swap contracts. For the purpose
of this disclosure, the volume is measured by notional amounts outstanding at each quarter end.
Credit Default Swap Notional Amounts Outstanding | |||||||||||
Quarter Ended | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |||||||
Moderate Strategy Fund | $ | 9,000,000 | $ | 9,000,000 | $ | 6,500,000 | $ | 6,500,000 | |||
Balanced Strategy Fund | 18,200,000 | 18,200,000 | 22,700,000 | 22,700,000 | |||||||
Growth Strategy Fund | — | — | 8,500,000 | 8,500,000 |
Total Return Swaps
The Funds may enter into index swap agreements to expose cash to markets or to effect investment transactions. Index swap
agreements are two party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more
than one year. In a standard index swap transaction, the two parties agree to exchange the returns (or differentials in rates of return)
earned or realized on particular investments or instruments.
The returns to be exchanged between the parties are calculated with respect to a “notional amount” (i.e., a specified dollar amount
that is hypothetically invested in a “basket” of securities representing a particular index).
For the period ended December 31, 2016, the Funds entered into total return swaps primarily for the strategies listed below:
Funds | Strategies |
Moderate Strategy Fund | Return enhancement and hedging |
Balanced Strategy Fund | Return enhancement and hedging |
Growth Strategy Fund | Return enhancement and hedging |
Equity Growth Strategy Fund | Return enhancement and hedging |
The Funds' period end total return swap contract notional amounts outstanding fluctuate throughout the fiscal year as required to
meet strategic requirements. The following table illustrates the quarterly volume of total return swap contracts. For the purpose of
this disclosure, volume is measured by base notional amounts outstanding at each quarter end.
Total Return Swap Notional Amounts Outstanding | |||||||||||
Quarter Ended | March 31, 2016 | June 30, 2016 | September 30, 2016 | December 31, 2016 | |||||||
Moderate Strategy Fund | $ | 1,082,743 | $ | 1,169,001 | $ | 1,600,056 | $ | 1,257,215 | |||
Balanced Strategy Fund | 3,141,452 | 3,391,718 | 4,600,303 | 1,479,749 | |||||||
Growth Strategy Fund | 6,499,453 | 7,017,236 | 8,200,141 | 2,811,836 | |||||||
Equity Growth Strategy Fund | 1,516,838 | 1,637,679 | 1,600,056 | — |
Master Agreements
Certain Funds are parties to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”)
with counterparties that govern transactions in OTC derivative and foreign exchange contracts entered into by the Funds and
those counterparties. The ISDA Master Agreements contain provisions for general obligations, representations, agreements,
collateral and events of default or termination. Events of termination and default include conditions that may entitle either party
to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement.
Any election to terminate early could be material to the financial statements. Since different types of forward and OTC financial
derivative transactions have different mechanics and are sometimes traded out of different legal entities of a particular counterparty
organization, each type of transaction may be covered by a different ISDA Master Agreement, resulting in the need for multiple
102 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
agreements with a single counterparty. As the ISDA Master Agreements are specific to unique operations of different asset types,
they allow a Fund to net its total exposure to a counterparty in the event of a default with respect to all the transactions governed
under a single agreement with a counterparty.
Master Repurchase Agreements (“Master Repo Agreements”) govern transactions between a Fund and select counterparties.
The Master Repo Agreements maintain provisions for, among other things, initiation, income payments, events of default, and
maintenance of collateral for repurchase and reverse repurchase agreements.
Master Securities Forward Transaction Agreements (“Master Forward Agreements”) govern the considerations and factors
surrounding the settlement of certain forward settling transactions, such as delayed delivery by and between a Fund and select
counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment
and transfer, events of default, termination, and maintenance of collateral.
Disclosure about Offsetting Assets and Liabilities
Balance sheet disclosure is based on various netting agreements between brokers and counterparties, such as ISDA Master
Agreements, Master Repo Agreements and Master Forward Agreements. Certain Funds utilized multiple counterparties. The
quantitative disclosure begins with disaggregation of counterparties by legal entity and the roll up of the data to reflect a single
counterparty in the table within the Funds’ financial statements. Net exposure represents the net receivable (payable) that would be
due from/to the counterparty in the event of default. Exposure from OTC derivatives can only be netted across transactions governed
under the same Master Agreement with the same legal entity.
Guarantees
In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general
indemnifications. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that
may be made against the Funds that have not yet occurred. However, the Funds expect the risk of loss to be remote.
Market, Credit and Counterparty Risk
In the normal course of business, the Funds and Underlying Funds trade financial instruments and enter into financial transactions
where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to a transaction to perform
(credit risk). Similar to credit risk, the Funds and Underlying Funds may also be exposed to counterparty risk or risk that an
institution or other entity with which the Funds or Underlying Funds have unsettled or open transactions will default. The potential
loss could exceed the value of the relevant assets recorded in the Funds' or Underlying Funds' financial statements (the “Assets”).
The Assets consist principally of cash due from counterparties and investments. The extent of the Funds' and Underlying Funds'
exposure to market, credit and counterparty risks with respect to the Assets approximates their carrying value as recorded in the
Funds' and Underlying Funds' Statements of Assets and Liabilities.
Global economies and financial markets are becoming increasingly interconnected and political and economic conditions (including
recent instability and volatility) and events (including natural disasters) in one country, region or financial market may adversely
impact issuers in a different country, region or financial market. As a result, issuers of securities held by a Fund or an Underlying
Fund may experience significant declines in the value of their assets and even cease operations. Such conditions and/or events may
not have the same impact on all types of securities and may expose a Fund or an Underlying Fund to greater market and liquidity
risk and potential difficulty in valuing portfolio instruments held. This could cause a Fund or an Underlying Fund to underperform
other types of investments.
3. Investment Transactions
Securities
During the period ended December 31, 2016, purchases and sales of investment securities (excluding short-term investments,
options and futures) were as follows:
Notes to Financial Statements 103
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
Purchases | Sales | |||||
Moderate Strategy Fund | $ | 41,496,963 | $ | 44,890,636 | ||
Balanced Strategy Fund | 53,501,132 | 71,123,525 | ||||
Growth Strategy Fund | 35,866,837 | 39,184,687 | ||||
Equity Growth Strategy Fund | 9,718,074 | 12,279,048 |
4. Related Party Transactions, Fees and Expenses
Adviser, Administrator, Transfer and Dividend Disbursing Agent
RIM provides or oversees the provision of all investment advisory and portfolio management services for the Funds, including
developing the investment program for each Fund and managing each Fund's overall exposures. RIFUS is the Funds' administrator
and transfer agent. RIFUS, in its capacity as the Funds' administrator, provides or oversees the provision of all administrative
services for the Funds. RIFUS, in its capacity as the Funds' transfer agent and dividend disbursing agent, is responsible for
providing transfer agency and dividend disbursing services to the Funds. RIM is an indirect, wholly-owned subsidiary of Russell
Investments Group, Ltd., a Cayman company.
The Funds are permitted to invest their cash (i.e., cash awaiting investment or cash held to meet redemption requests or to pay
expenses) in the U.S. Cash Management Fund, an unregistered fund advised by RIM. As of December 31, 2016, the Funds had
invested $4,054,804 in the U.S. Cash Management Fund.
An affiliated company is a company in which a Fund has ownership of at least 5% of the voting securities or which the Fund
controls, is controlled by or is under common control with. See each Fund’s Related Party Transactions, Fees and Expenses for
disclosure of transactions with affiliated companies.
The advisory fee of 0.20% is based upon the average daily net assets of each Fund and the administrative fee of up to 0.0425%
is based on the combined average daily net assets of the Funds. Advisory and administration fees are paid monthly. The following
table shows the total amount of each of these fees paid by the Funds for the period ended December 31, 2016:
Advisory | Administrative | |||||
Moderate Strategy Fund | $ | 221,675 | $ | 47,106 | ||
Balanced Strategy Fund | 563,623 | 119,770 | ||||
Growth Strategy Fund | 399,211 | 84,832 | ||||
Equity Growth Strategy Fund | 94,570 | 20,096 |
RIM has agreed to certain waivers of its advisory fees as follows:
For the Moderate Strategy Fund, RIM has contractually agreed, until April 30, 2017, to waive up to the full amount of its 0.20%
advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses
exceed 0.11% of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses do not include extraordinary
expenses or the expenses of other investment companies in which the Fund invests, including the Underlying Funds, which are
borne indirectly by the Fund. This waiver and reimbursement may not be terminated during the relevant period except with Board
approval.
For the Balanced Strategy Fund, RIM has contractually agreed, until April 30, 2017, to waive up to the full amount of its 0.20%
advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses
exceed 0.11% of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses do not include extraordinary
expenses or the expenses of other investment companies in which the Fund invests, including the Underlying Funds, which are
borne indirectly by the Fund. This waiver and reimbursement may not be terminated during the relevant period except with Board
approval.
For the Growth Strategy Fund, RIM has contractually agreed, until April 30, 2017, to waive up to the full amount of its 0.20% advisory
fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.12%
of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses do not include extraordinary expenses or
the expenses of other investment companies in which the Fund invests, including the Underlying Funds, which are borne indirectly
by the Fund. This waiver and reimbursement may not be terminated during the relevant period except with Board approval.
For the Equity Growth Strategy Fund, RIM has contractually agreed, until April 30, 2017, to waive up to the full amount of its
0.20% advisory fee and then to reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level
104 Notes to Financial Statements
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
expenses exceed 0.12% of the average daily net assets of the Fund on an annual basis. Direct Fund-level expenses do not include
extraordinary expenses or the expenses of other investment companies in which the Fund invests, including the Underlying Funds,
which are borne indirectly by the Fund. This waiver and reimbursement may not be terminated during the relevant period except
with Board approval.
For the period ended December 31, 2016, RIM waived/reimbursed the following expenses:
Waiver | Reimbursement | Total | |||||||
Moderate Strategy Fund | $ | 221,676 | $ | 26,337 | $ | 248,013 | |||
Balanced Strategy Fund | 532,665 | — | 532,665 | ||||||
Growth Strategy Fund | 369,210 | — | 369,210 | ||||||
Equity Growth Strategy Fund | 94,570 | 40,447 | 135,017 |
RIM does not have the ability to recover amounts waived or reimbursed from previous periods.
RIFUS is paid a fee based upon the average daily net assets of the Funds for transfer agency and dividend disbursing services.
RIFUS retains a portion of this fee for its services provided to the Funds and pays the balance to unaffiliated agents who assist in
providing these services. The following shows the total amount of this fee paid by the Funds for the period ended December 31,
2016:
Amount | |||
Moderate Strategy Fund | $ | 4,877 | |
Balanced Strategy Fund | 12,400 | ||
Growth Strategy Fund | 8,783 | ||
Equity Growth Strategy Fund | 2,081 |
Distributor
Russell Investments Financial Services, LLC, (the “Distributor”), a wholly-owned subsidiary of RIM, is the distributor for the
Investment Company pursuant to a distribution agreement with the Investment Company. The Distributor receives no compensation
from the Investment Company for its services.
Board of Trustees
The Russell Investments Fund Complex consists of RIC, which has 42 funds and RIF, which has 9 funds. Each of the Trustees is a
Trustee of RIC and RIF. The Russell Investments Fund Complex compensates each Trustee who is not an employee of RIM or its
affiliates. The costs of paying Trustee compensation and expenses are allocated to each Fund based on its net assets relative to other
funds in the Russell Investments Fund Complex.
For the period ended December 31, 2016, the total amount of regular and special compensation paid to the Trustees by the Russell
Investments Fund Complex was $1,462,250.
5. Federal Income Taxes
At December 31, 2016, the Funds did not have any capital losses available for carryforwards.
6. Record Ownership
As of December 31, 2016, the following table includes shareholders of record with greater than 10% of the total outstanding shares
of each respective Fund.
# of Shareholders | % | |||||
Moderate Strategy Fund | 1 | 91.6 | ||||
Balanced Strategy Fund | 1 | 91.4 | ||||
Growth Strategy Fund | 1 | 88.7 | ||||
Equity Growth Strategy Fund | 2 | 97.4 |
Notes to Financial Statements 105
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — December 31, 2016
7. Pending Legal Proceedings
On October 17, 2013, Fred McClure filed a derivative lawsuit against RIM on behalf of ten RIC funds, some of which are Underlying
Funds in which the Funds invest: the Russell Commodity Strategies Fund, Russell Emerging Markets Fund, Russell Global Equity
Fund, Russell Global Infrastructure Fund, Russell Global Opportunistic Credit Fund, Russell International Developed Markets
Fund, Russell Multi-Strategy Alternative Fund (liquidated in 2016), Russell Strategic Bond Fund, Russell U.S. Small Cap Equity
Fund and Russell Global Real Estate Securities Fund. The lawsuit, which was filed in the United States District Court for the
District of Massachusetts, seeks recovery under Section 36(b) of the Investment Company Act, as amended, for the Funds’ alleged
payment of excessive investment management fees to RIM. On December 8, 2014, Fred McClure filed a second derivative lawsuit
in the United States District Court for the District of Massachusetts. This second suit involves the same ten RIC Funds, and the
allegations are similar, although the second suit adds a claim alleging that RIFUS charged the funds excessive administrative fees
under Section 36(b). The plaintiff seeks on behalf of the Funds recovery of the amount of the allegedly excessive compensation or
payments received from these ten RIC Funds and earnings that would have accrued to plaintiff had that compensation not been paid
or, alternatively, rescission of the contracts and restitution of all excessive fees paid, for a period commencing one year prior to the
filing of the lawsuit through the date of the trial. On November 15, 2016, the Court granted RIM's and RIFUS's motion for summary
judgment with respect to the Russell Multi-Strategy Alternative Fund and granted the motion in part with respect to the other nine
RIC Funds. A trial with respect to plaintiff's claims on behalf of the remaining nine RIC Funds is currently scheduled to commence
in March 2017. RIM and RIFUS are vigorously defending the actions.
8. Custodian Fee Reimbursement
During the period ended December 31, 2016, several of the Funds received a reimbursement from State Street Bank for overbilling
of custody out-of-pocket fees from prior years. The table below provides a summary of actual custodian fees for the current fiscal
year prior to the reimbursement as well as the impact of the fee reimbursement to each Fund's custodian fee as presented in the
Statement of Operations.
Net Custodian Fees as | |||||||||
Custodian Fees Before | disclosed in the Statement of | ||||||||
Reimbursement | Fee Reimbursement | Operations | |||||||
Moderate Strategy Fund | $ | 30,478 | $ | 959 | $ | 29,519 | |||
Balanced Strategy Fund | 41,998 | 959 | 41,039 | ||||||
Growth Strategy Fund | 29,219 | 959 | 28,260 | ||||||
Equity Growth Strategy Fund | 26,539 | 959 | 25,580 |
9. Subsequent Events
Management has evaluated the events and /or transactions that have occurred through the date the financial statements were issued
and noted no items requiring adjustments to the financial statements or additional disclosures.
106 Notes to Financial Statements
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Russell Investment Funds
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements
of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position
of Moderate Strategy Fund, Balanced Strategy Fund, Growth Strategy Fund and Equity Growth Strategy Fund (four of the portfolios
constituting Russell Investment Funds, hereafter collectively referred to as the “Funds”) as of December 31, 2016, the results of each
of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”)
are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of
securities as of December 31, 2016 by correspondence with brokers and transfer agents, provide a reasonable basis for our opinion.
Seattle, Washington
February 15, 2017
Report of Independent Registered Public Accounting Firm 107
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Tax Information — December 31, 2016 (Unaudited)
For the tax year ended December 31, 2016, the Funds hereby designate 100% or the maximum amount allowable, of its net taxable
income as qualified dividends taxed at individual net capital gain rates.
The Form 1099 you receive in January 2017 will show the tax status of all distributions paid to your account in calendar year 2016.
The Funds designate dividends distributed during the fiscal year as qualifying for the dividends received deduction for corporate
shareholders as follows:
Moderate Strategy | 4.8 | % |
Balanced Strategy | 12.4 | % |
Growth Strategy | 19.3 | % |
Equity Growth Strategy | 24.8 | % |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following amounts as long-term capital gain
dividends for their taxable year ended December 31, 2016:
Moderate Strategy | $ | 4,738,925 |
Balanced Strategy | $ | 4,457,346 |
Growth Strategy | $ | 313,789 |
Equity Growth Strategy | $ | 34,062 |
108 Tax Information
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Shareholder Requests for Additional Information — December 31, 2016 (Unaudited)
A complete unaudited schedule of investments is made available generally no later than 60 days after the end of the first and third
quarters of each fiscal year. These reports are available (i) free of charge, upon request, by calling the Funds at (800) 787-7354; (ii) on
the Securities and Exchange Commission’s website at www.sec.gov; and (iii) at the Securities and Exchange Commission’s Office of
Investor Education and Advocacy (formerly, the Public Reference room).
The Board has delegated to RIM, as RIF’s investment adviser, the primary responsibility for monitoring, evaluating and voting
proxies solicited by or with respect to issuers of securities in which assets of the Funds and Underlying Funds may be invested. RIM
has established a proxy voting committee and has adopted written proxy voting policies and procedures (“P&P”) and proxy voting
guidelines (“Guidelines”). The Funds maintain a Portfolio Holdings Disclosure Policy that governs the timing and circumstances of
disclosure to shareholders and third parties of information regarding the portfolio investments held by the Funds. A description of the
P&P, Guidelines, Portfolio Holdings Disclosure Policy and additional information about Fund Trustees are contained in the Funds’
Statement of Additional Information (“SAI”). The SAI and information regarding how the Funds and Underlying Funds voted proxies
relating to portfolio securities during the most recent 12-month period ended June 30, 2016 are available (i) free of charge, upon
request, by calling the Funds at (800) 787-7354; and (ii) on the Securities and Exchange Commission’s website at www.sec.gov.
If possible, depending on contract owner registration and address information, and unless you have otherwise opted out, only one copy
of the RIF prospectus and each annual and semi-annual report will be sent to contract owners at the same address. If you would like
to receive a separate copy of these documents, please contact your Insurance Company. If you currently receive multiple copies of the
prospectus, annual report and semi-annual report and would like to request to receive a single copy of these documents in the future,
please contact your insurance company.
Some insurance companies may offer electronic delivery of the Funds’ prospectuses and annual and semi-annual reports. Please
contact your insurance company for further details.
Financial statements of the Underlying Funds can be obtained at no charge by calling the Funds at (800)787-7354.
Shareholder Requests for Additional Information 109
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers — December 31, 2016
(Unaudited)
The following tables provide information for each officer and trustee of the Russell Investments Fund Complex. The Russell Investments
Fund Complex consists of Russell Investment Company (“RIC”), which has 42 funds and Russell Investment Funds (“RIF”), which
has 9 funds. Each of the trustees is a trustee of RIC and RIF. The first table provides information for the independent trustees.
The second table provides information for the Trustee Emeritus. The third table provides information for the officers. Furthermore,
each Trustee possesses the following specific attributes: Mr. Alston has business, financial and investment experience as a senior
executive of an international real estate firm and is trained as a lawyer; Ms. Blake has had experience as a certified public accountant
and has had experience as a member of boards of directors/trustees of other investment companies; Ms. Burgermeister has had
experience as a certified public accountant and as a member of boards of directors/trustees of other investment companies; Mr.
Connealy has had experience with other investment companies and their investment advisers, first as a partner in the investment
management practice of PricewaterhouseCoopers LLP and, subsequently, as the senior financial executive of two other investment
organizations sponsoring and managing investment companies, and has been determined by the Board to be an “audit committee
financial expert”; Ms. Krysty has had business, financial and investment experience as the founder and senior executive of a registered
investment adviser focusing on high net worth individuals as well as a certified public accountant and a member of the boards of
other corporations and non-profit organizations; Mr. Tennison has had business, financial and investment experience as a senior
executive of a corporation with international activities and was trained as an accountant; and Mr. Thompson has had experience in
business, governance, investment and financial reporting matters as a senior executive of an organization sponsoring and managing
other investment companies, and, subsequently, has served as a board member of other investment companies. Effective June 30,
2016, Ms. Sandra Cavanaugh retired from Russell Investments and resigned her position as an Interested Trustee of the Trust.
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Investments | During the | |||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES | |||||
Thaddas L. Alston, | Trustee since 2006 | Appointed until | Senior Vice President, Larco | 51 | Until October |
Born April 7, 1945 | successor is | Investments, Ltd. (real estate firm) | 2015, Trustee, | ||
1301 Second Avenue, | duly elected and | Russell Exchange | |||
18th Floor, Seattle, WA | qualified | Traded Funds | |||
98101 | Trust |
110 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — December
31, 2016 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Investments | During the | |||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
Kristianne Blake, | Trustee since 2000 | Appointed until | • Director and Chairman of the | 51 | • Director, Avista |
Born January 22, 1954 | Chairman since 2005 | successor is | Audit Committee, Avista Corp | Corp (electric | |
1301 Second Avenue, | duly elected and | (electric utilities) | utilities) | ||
18th Floor, Seattle, WA | qualified | • Regent, University of | • Until June 30, | ||
98101 | Approved annually | Washington | 2014, Director, | ||
• President, Kristianne Gates | Ecova (total | ||||
Blake, P.S. (accounting services) | energy and | ||||
• Until June 30, 2014, Director, | sustainability | ||||
Ecova (total energy and | management) | ||||
sustainability management) | • Until December | ||||
• Until December 31, 2013, | 31, 2013, | ||||
Trustee and Chairman of | Trustee, | ||||
the Operations Committee, | Principal | ||||
Principal Investors Funds and | Investors Funds | ||||
Principal Variable Contracts | (investment | ||||
Funds (investment company) | company) | ||||
• From April 2004 through | • Until December | ||||
December 2012, Director, Laird | 31, 2013, | ||||
Norton Wealth Management | Trustee Principal | ||||
and Laird Norton Tyee Trust | Variable | ||||
(investment company) | Contracts Funds | ||||
(investment | |||||
company) | |||||
• From April | |||||
2004 through | |||||
December 2012, | |||||
Director, Laird | |||||
Norton Wealth | |||||
Management and | |||||
Laird Norton | |||||
Tyee Trust | |||||
(investment | |||||
company) | |||||
• Until October | |||||
2015, Trustee, | |||||
Russell | |||||
Exchange | |||||
Traded Funds | |||||
Trust |
* Each Trustee is subject to mandatory retirement at age 75.
Disclosure of Information about Fund Trustees and Officers 111
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — December
31, 2016 (Unaudited)
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Investments | During the | |||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES (continued) | |||||
Cheryl Burgermeister, | Trustee since 2012 | Appointed until | • Retired | 51 | • Trustee and |
Born June 26, 1951 | successor is | • Trustee and Chairperson of | Chairperson of | ||
1301 Second Avenue, | duly elected and | Select Sector SPDR Funds | Select Sector | ||
18th Floor, Seattle, WA | qualified | (investment company) | SPDR Funds | ||
98101 | • Until December 31, 2014, | (investment | |||
Chairperson of Audit | company) | ||||
Committee, Select Sector SPDR | • Until May | ||||
Funds (investment company) | 6, 2016, | ||||
Trustee, ALPS | |||||
Series Trust | |||||
(investment | |||||
company) | |||||
• Until December | |||||
31, 2014, | |||||
Chairperson | |||||
of Audit | |||||
Committee, | |||||
Select Sector | |||||
SPDR Funds | |||||
(investment | |||||
company) | |||||
• Until October | |||||
2015, Trustee, | |||||
Russell | |||||
Exchange | |||||
Traded Funds | |||||
Trust | |||||
Daniel P. Connealy, | Trustee since 2003 | Appointed until | • Retired | 51 | Until October |
Born June 6, 1946 | Chairman of the | successor is | • June 2004 to June 2014, Senior | 2015, Trustee, | |
1301 Second Avenue, | Audit Committee | duly elected and | Vice President and Chief | Russell Exchange | |
18th Floor, Seattle, WA | since 2015 | qualified | Financial Officer, Waddell | Traded Funds | |
98101 | Appointed until | & Reed Financial, Inc. | Trust | ||
successor is | (investment company) | ||||
duly elected and | |||||
qualified | |||||
Katherine W. Krysty, | Trustee since 2014 | Appointed until | • Retired | 51 | Until October |
Born December 3, 1951 | successor is | • January 2011 through March | 2015, Trustee, | ||
1301 Second Avenue | duly elected and | 2013, President Emerita, Laird | Russell Exchange | ||
18th Floor, Seattle, WA | qualified | Norton Wealth Management | Traded Funds | ||
98101 | (investment company) | Trust |
112 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — December
31, 2016 (Unaudited)
Position(s) Held | Term | Principal Occupation(s) | No. of | Other | |
Name, | With Fund and | of | During the | Portfolios | Directorships |
Age, | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Address | Time Served | Investments | During the | ||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
INDEPENDENT TRUSTEES (continued) | |||||
Raymond P. Tennison, | Trustee since 2000 | Appointed until | • Retired | 51 | Until October |
Jr., Born December 21, | Chairman of | successor is | • From January 2008 to December | 2015, Trustee, | |
1955 | the Nominating | duly elected and | 2011, Vice Chairman of the | Russell Exchange | |
1301 Second Avenue | and Governance | qualified | Board, Simpson Investment | Traded Funds | |
18th Floor, Seattle, WA | Committee since | Appointed until | Company (paper and forest | Trust | |
98101 | 2007 | successor is | products) | ||
duly elected and | |||||
qualified | |||||
Jack R. Thompson, | Trustee since 2005 | Appointed until | • Retired | 51 | • Until October |
Born March 21, 1949 | Chairman of | successor is | 2015, Trustee, | ||
1301 Second Avenue, | the Investment | duly elected and | Russell | ||
18th Floor, Seattle, WA | Committee since | qualified | Exchange | ||
98101 | 2015 | Appointed until | Traded Funds | ||
successor is | Trust | ||||
duly elected and | |||||
qualified |
* Each Trustee is subject to mandatory retirement at age 75.
Name, | Position(s) Held | Term | Principal Occupation(s) | No. of | Other |
Age, | With Fund and | of | During the | Portfolios | Directorships |
Address | Length of | Office * | Past 5 Years | in Russell | Held by Trustee |
Time Served | Investments | During the | |||
Fund | Past 5 Years | ||||
Complex | |||||
Overseen | |||||
by Trustee | |||||
TRUSTEE EMERITUS | |||||
George F. Russell, Jr., | Trustee Emeritus and | Until resignation or | • Director Emeritus, RIM | 51 | None |
Born July 3, 1932 | Chairman Emeritus | removal | |||
1301 Second Avenue, | since 1999 | ||||
18th Floor, Seattle, WA | |||||
98101 |
Disclosure of Information about Fund Trustees and Officers 113
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — December
31, 2016 (Unaudited)
Name, | Positions(s) Held | Term | Principal Occupation(s) |
Age, | With Fund and | of | During the |
Address | Length of | Office | Past 5 Years |
Time Served | |||
OFFICERS | |||
Cheryl Wichers, | Chief Compliance | Until removed | • Chief Compliance Officer, RIC and RIF |
Born December 16, | Officer since 2005 | by Independent | • Chief Compliance Officer, Russell Investments Fund Services, LLC |
1966 | Trustees | (“RIFUS”) and U.S. One Inc. | |
1301 Second Avenue | • 2005 to 2011 Chief Compliance Officer, RIM | ||
18th Floor, Seattle, WA | |||
98101 | |||
Mark E. Swanson, | President and Chief | Until successor | • Global Head of Fund Services, Russell Investments |
Born November 26, | Executive Officer | is chosen and | • President, CEO, Treasurer, Chief Accounting Officer and CFO, RIC |
1963 | since 2016 | qualified by | and RIF |
1301 Second Avenue | Treasurer and Chief | Trustees | • Director, President and CEO, RIFUS |
18th Floor, Seattle, WA | Accounting Officer | • Director, RIM, Russell Investments Trust Company (“RITC”) and | |
98101 | since 1998 | Russell Investments Financial Services, LLC (“RIFIS”) | |
• October 2011 to December 2013, Head of North America Operations | |||
Russell Investments | |||
• May 2009 to October 2011, Global Head of Fund Operations, Russell | |||
Investments | |||
Jeffrey T. Hussey, | Chief Investment | Until removed by | • Global Chief Investment Officer, Russell Investments |
Born May 2, 1969 | Officer since 2013 | Trustees | • Chief Investment Officer, RIC and RIF |
1301 Second Avenue, | • Chairman of the Board, President and CEO, RIM | ||
18th Floor, Seattle WA | • Director, RITC, Russell Investments Implementation Services, LLC | ||
98101 | and Russell Investments Delaware, LLC | ||
• Board of Managers, Russell Investments Funds Management, LLC | |||
• 2003 to 2013 Chief Investment Officer, Fixed Income, Russell | |||
Investments | |||
Mary Beth R. Albaneze, | Secretary since 2010 | Until successor | • Associate General Counsel, Russell Investments |
Born April 25, 1969 | is chosen and | • Secretary, RIM, RIFUS and RIFIS | |
1301 Second Avenue, | qualified by | • Secretary and Chief Legal Officer, RIC and RIF | |
18th Floor, Seattle, WA | Trustees | • Assistant Secretary, Russell Investments Insurance Agency, LLC | |
98101 | (“RIIA”)(insurance agency) and U.S. One Inc. |
114 Disclosure of Information about Fund Trustees and Officers
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Adviser and Service Providers — December 31, 2016
Independent Trustees | Administrator, Transfer and Dividend Disbursing |
Thaddas L. Alston | Agent |
Kristianne Blake | Russell Investments Fund Services, LLC |
Cheryl Burgermeister | 1301 Second Avenue |
Daniel P. Connealy | Seattle, WA 98101 |
Katherine W. Krysty | |
Raymond P. Tennison, Jr. | Custodian |
Jack R. Thompson | State Street Bank and Trust Company |
1 Heritage Drive | |
Trustee Emeritus | North Quincy, MA 02171 |
George F. Russell, Jr. | Office of Shareholder Inquiries |
Officers | 1301 Second Avenue |
Mark E. Swanson, President, CEO, Treasurer and Chief | Seattle, WA 98101 |
Accounting Officer and CFO | (800) 787-7354 |
Cheryl Wichers, Chief Compliance Officer | |
Jeffrey T. Hussey, Chief Investment Officer | Legal Counsel |
Mary Beth R. Albaneze, Secretary | Dechert LLP |
One International Place, 40th Floor | |
Adviser | 100 Oliver Street |
Russell Investment Management, LLC | Boston, MA 02110 |
1301 Second Avenue | |
Seattle, WA 98101 | Distributor |
Russell Investments Financial Services, LLC | |
1301 Second Avenue | |
Seattle, WA 98101 | |
Independent Registered Public Accounting Firm | |
PricewaterhouseCoopers LLP | |
1420 5th Avenue, Suite 2800 | |
Seattle, WA 98101 |
This report is prepared from the books and records of the Funds and is submitted for the general information of shareholders and is not
authorized for distribution to prospective investors unless accompanied or preceded by an effective Prospectus. Nothing herein contained
is to be considered an offer of sale or a solicitation of an offer to buy shares of Russell Investment Funds. Such offering is made only by
Prospectus, which includes details as to offering price and other material information.
Adviser and Service Providers 115
Item 2. Code of Ethics. [Annual Report Only]
(a) As of the end of the period covered by the report, the registrant has adopted a code of ethics
that applies to the registrant's principal executive officer and principal financial officer
(“Code”).
(b) That Code comprises written standards that are reasonably designed to deter wrongdoing and
to promote:
1) honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships;
2) full, fair, accurate, timely and understandable disclosure in reports and documents
that a registrant files with, or submits to, the Securities and Exchange Commission
(“SEC”) and in other public communications made by each Mutual Fund;
3) compliance with applicable laws and governmental rules and regulations;
4) the prompt internal reporting to an appropriate person or persons identified in the
Code of violations of the Code; and
5) accountability for adherence to the Code.
(c) The Code was restated as of August 2015; the restatement did not involve any material
change.
(d) As of the end of the period covered by the report, there have been no waivers granted from a
provision of the Code that applies to the registrant’s principal executive officer and principal
financial officer.
(e) Not applicable.
(f) The registrant has filed with the SEC, pursuant to Item 12(a)(1), a copy of the Code that
applies to the registrant’s principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions, as an exhibit to its
annual report on this Form N-CSR.
Item 3. Audit Committee Financial Expert. [Annual Report Only]
Registrant's board of trustees has determined that the Registrant has at least one audit committee
financial expert serving on its audit committee. Daniel P. Connealy has been determined to be
the Audit Committee Financial Expert and is also determined to be “independent” for purposes
of Item 3, paragraph (a)(2)(i) and (ii) of Form N-CSR.
Item 4. Principal Accountant Fees and Services. [Annual Report Only]
Audit Fees
(a) The aggregate fees billed for each of the last two fiscal years for professional services
rendered by the principal accountant for the audit of the registrant’s annual financial statements
or services that are normally provided by the accountant in connection with statutory and
regulatory filings or engagements for those fiscal years were as follows:
2015 $251,533
2016 $263,210
Audit-Related Fees
(b) The aggregate fees billed in each of the last two fiscal years for assurance and related
services by the principal accountant that are reasonably related to the performance of the audit of
the registrant’s financial statements and are not reported under paragraph (a) of this Item and the
nature of the services comprising those fees were as follows:
Fees | Nature of Services | ||
2015 | $ | 89,567 | Tax auditing services |
2016 | $ | 93,996 | Tax auditing services |
Tax Fees
(c) The aggregate fees billed in each of the last two fiscal years for professional services
rendered by the principal accountant for tax compliance, tax advice, and tax planning and the
nature of the services comprising the fees were as follows:
Fees | Nature of Services | ||
2015 | $ | 75,488 | Tax filing services |
2016 | $ | 79,262 | Tax filing services |
All Other Fees
(d) The aggregate fees billed in each of the last two fiscal years for products and services
provided by the principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item and the nature of the services comprising those fees were as follows:
Fees | Nature of Services | ||
2015 | $ | 0 | |
2016 | $ | 0 |
(e) (1) Registrant’s audit committee has adopted the following pre-approval policies and
procedures for certain services provided by Registrant’s accountants:
Russell Investment Funds
Audit and Non-Audit Services Pre-Approval Policy
Effective Date: August 30, 2016
I. Statement of Purpose.
This Policy has been adopted by the joint Audit Committee (the “Audit Committee”) of Russell
Investment Company (“RIC”) and Russell Investment Funds (“RIF”) to apply to any and all
engagements of the independent auditor to RIC and RIF, respectively, for audit, non-audit, tax or
other services. The term “Fund” shall collectively refer to each series of RIC and RIF. The
term “Investment Adviser” shall refer to the Funds’ advisor, Russell Investment Management,
LLC (“RIM”). This Policy does not delegate to management the responsibilities set forth herein
for the pre-approval of services performed by the Funds’ independent auditor.
II. Statement of Principles.
Under the Sarbanes-Oxley Act of 2002 (the “Act”), the Audit Committee of the Funds’ Board of
Trustees (the “Audit Committee”) is charged with responsibility for the appointment,
compensation and oversight of the work of the independent auditor for the Funds. As part of
these responsibilities, the Audit Committee is required to pre-approve the audit services and
permissible non-audit services such as audit-related, tax and other services (“non-audit services”)
performed by the independent auditor for the Funds to assure that the independence of the
auditor is not in any way compromised or impaired. In determining whether an auditor is
independent in light of the services it provides to a Fund, there are three guiding principles under
the Act that must be considered. In general, the independence of the auditor to the Funds would
be deemed impaired if the auditor provides a service whereby it:
· Functions in the role of management of the Funds, the adviser of the Funds or any
other affiliate* of the Funds;
· Is in the position of auditing its own work; or
· Serves in an advocacy role for the Funds, the adviser of the Funds or any other
affiliate of the Funds.
Accordingly, it is the Funds’ policy that the independent auditor for the Funds must not be
engaged to perform any service that contravenes any of the three guidelines set forth above, or
which in any way could be deemed to impair or compromise the independence of the auditor for
the Funds. This Policy is designed to accomplish those requirements and will henceforth be
applied to all engagements by the Funds of their independent auditor, whether for audit, audit-
related, tax, or other non-audit services.
Rules adopted by the United States Securities and Exchange Commission (the “SEC”) establish
two distinct approaches to the pre-approval of services by the Audit Committee. The proposed
services either may receive general pre-approval through adoption by the Audit Committee of a
list of authorized services for the fund, together with a budget of expected costs for those
services (“general pre-approval”), or specific pre-approval by the Audit Committee of all
services provided to the fund on a case-by-case basis (“specific pre-approval”).
* For purposes of this Policy, an affiliate of the Funds is defined as the Funds’ investment adviser (but not a sub-
adviser whose role is primarily portfolio management and whose activities are overseen by the principal investment
adviser), and any entity controlling, controlled by, or under common control with the investment adviser that
provides ongoing services to the Fund.
The Funds’ Audit Committee believes that the combination of these two approaches reflected in
this Policy will result in an effective and efficient procedure for the pre-approval of permissible
services performed by the Funds’ independent auditor. The Funds’ Audit and Non-Audit Pre-
Approved Services Schedule lists the audit, audit-related, tax and other services that have the
general pre-approval of the Audit Committee. As set forth in this Policy, unless a particular
service has received general pre-approval, those services will require specific pre-approval by
the Audit Committee before any such services can be provided by the independent auditor. Any
proposed service to the Funds that exceeds the pre-approved budget for those services will also
require specific pre-approval by the appropriate Audit Committee.
In assessing whether a particular audit or non-audit service should be approved, the Audit
Committee will take into account the ratio between the total amounts paid for audit, audit-
related, tax and other services, based on historical patterns, with a view toward assuring that the
level of fees paid for non-audit services as they relate to the fees paid for audit services does not
compromise or impair the independence of the auditor. The Audit Committee will review the list
of general pre-approved services, including the pre-approved budget for those services, at least
annually and more frequently if deemed appropriate by the Audit Committee, and may
implement changes thereto from time to time.
III. Delegation.
As provided in the Act and in the SEC’s rules, the Audit Committee from time to time may
delegate either general or specific pre-approval authority to one or more of its members. Any
member to whom such authority is delegated must report any pre-approval decisions to the Audit
Committee at its next scheduled meeting.
IV. Audit Services.
The annual audit services engagement terms and fees for the independent auditor for the Funds
require specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit and other procedures required to be performed by the independent
auditor in order to be able to form an opinion on the financial statements for the Funds for that
year. These other procedures include reviews of information systems, procedural reviews and
testing performed in order to understand and rely on the Funds’ systems of internal control, and
consultations relating to the audit. Audit services also include the attestation engagement for the
independent auditor’s report on the report from management on financial reporting internal
controls. The Audit Committee will review the audit services engagement as necessary or
appropriate in the sole judgment of the Audit Committee.
In addition to the pre-approval by the Audit Committee of the annual engagement of the
independent auditor to perform audit services, the Audit Committee may grant general pre-
approval to other audit services, which are those services that only the independent auditor
reasonably can provide. These services are generally related to the issuance of an audit opinion,
and may include statutory audits and services associated with the Funds’ SEC registration
statement on Form N-1A, periodic reports and documents filed with or information requested by
the SEC or other regulatory or self-regulatory organizations, or other documents issued in
connection with the Funds’ securities offerings.
The Audit Committee has pre-approved the audit services set forth in Schedule A of the Audit
and Non-Audit Pre-Approved Services Schedule. All other audit services not listed in Schedule
A of the Audit and Non-Audit Pre-Approved Services Schedule must be specifically pre-
approved by the Audit Committee or its delegate.
V. Audit-Related Services.
Audit-related services are assurance and related services that are reasonably related to the
performance of the audit or review of the financial statements for the Funds, or the separate
financial statements for a series of the Funds that are traditionally performed by the independent
auditor. Because the Audit Committee believes that the provision of audit-related services does
not compromise or impair the independence of the auditor and is consistent with the SEC’s rules
on auditor independence, the Audit Committee may grant pre-approval to audit related services.
“Audit related services” include, among others, accounting consultations related to accounting,
financial reporting or disclosure matters not classified as “audit services;” assistance with
understanding and implementing new accounting and financial reporting or disclosure matters
not classified as “audit services;” assistance with understanding and implementing new
accounting and financial reporting guidance from rulemaking authorities; agreed upon or
expanded audit procedures related to accounting and/or billing records required to respond to or
comply with financial, accounting or regulatory reporting matters; and assistance with internal
reporting requirements, including those under Form N-SAR and Form N-CSR.
The Audit Committee has pre-approved the audit-related services set forth in Schedule B of the
Audit and Non-Audit Pre-Approved Services Schedule. All other audit-related services not
listed in Schedule B of the Audit and Non-Audit Pre-Approved Services Schedule must be
specifically pre-approved by the Audit Committee or its delegate.
VI. Tax Services.
The Audit Committee believes that the independent auditor can provide tax services to the
Funds, such as tax compliance, tax planning and tax advice, without impairing the auditor’s
independence and the SEC has stated that the independent auditor may provide such services.
Consequently, the Audit Committee believes that it may grant general pre-approval to those tax
services that have historically been provided by the auditor, that the Audit Committee has
reviewed and believes would not impair the independence of the auditor, and that are consistent
with the SEC’s rules on auditor independence. However, the Audit Committee will not permit
the retention of the independent auditor to provide tax advice in connection with any transaction
recommended by the independent auditor, the sole business purpose of which may be tax
avoidance and the tax treatment of which may not be supported by the United States Internal
Revenue Code and related regulations or the applicable tax statutes and regulations that apply to
the Funds’ investments outside the United States. The Audit Committee will consult with the
Treasurer of the Funds or outside counsel to determine that the Funds’ tax planning and reporting
positions are consistent with this policy.
The Audit Committee has pre-approved the tax services set forth in Schedule C of the Audit and
Non-Audit Pre-Approved Services Schedule. All other tax services not listed in Schedule C of
the Audit and Non-Audit Pre-Approved Services Schedule must be specifically pre-approved by
the Audit Committee or its delegate.
VII. All Other Services.
The Audit Committee believes, based on the SEC’s rules prohibiting the independent auditor
from providing specific non-audit services, that other types of non-audit services are permitted.
Accordingly, the Audit Committee believes that it may grant general pre-approval to those
permissible non-audit services classified as “all other” services that the Audit Committee
believes are routine and recurring services, would not impair or compromise the independence of
the auditor and are consistent with the SEC’s rules on auditor independence.
The Audit Committee has pre-approved the permissible “all other services” set forth in Schedule
D of the Audit and Non-Audit Pre-Approved Services Schedule. Permissible “all other services”
not listed in Schedule D of the Audit and Non-Audit Pre-Approved Services Schedule must be
specifically pre-approved by the Audit Committee or its delegate.
A list of the SEC’s prohibited non-audit services are as follows:
· Bookkeeping or other services relating to the accounting records or financial statements
of the Funds
· Financial information system design and implementation
· Appraisal or valuation services, fairness opinions or contribution-in-kind reports
· Actuarial services
· Internal audit outsourcing services
· Management functions
· Human resources services
· Broker-dealer, investment adviser or investment banking services
· Legal services unrelated to the audit
· Expert services unrelated to the audit
The SEC’s rules and relevant official interpretations and guidance should be consulted to
determine the scope of these prohibited services and the applicability of any exceptions to certain
of the prohibitions. Under no circumstance may an executive, manager or associate of the
Funds, or the Investment Adviser, authorize the independent auditor for the Funds to provide
prohibited non-audit services.
VIII. De Minimis Waiver.
In accordance with the Act and SEC regulations, notwithstanding anything in this Policy to the
contrary, the pre-approval requirements of this Policy are waived with respect to the provision of
non-audit services that are permissible for an independent auditor to perform, provided:
(a) The aggregate amount of all such services provided constitutes no more than five
percent of the total amount of fees paid by RIC or RIF, as applicable, to the
independent auditor during the fiscal year in which the services were provided;
(b) Such services were not recognized by the Funds at the time of the engagement to
be non-audit services requiring pre-approval by the Audit Committee or its
delegate; and
(c) Such services are promptly brought to the attention of the Audit Committee and
approved by the Audit Committee or its delegate prior to the completion of the
audit, pursuant to the pre-approval provisions of this Policy.
In connection with the approval of any non-audit service pursuant to this de minimis exception, a
record shall be made indicating that each of the conditions for this exception has been satisfied.
IX. Pre-Approval Fee Levels or Budgeted Amounts.
Pre-approved fee levels or budgeted amounts for all services to be provided by the independent
auditor will be established annually by the Audit Committee and shall be subject to periodic
subsequent review during the year if deemed appropriate by the Audit Committee (separate
amounts may be specified for the Funds and for other affiliates in the investment company
complex subject to pre-approval). Any proposed services exceeding these levels or amounts will
require specific pre-approval by the Audit Committee. The Audit Committee will be mindful of
the overall relationship of fees for audit and non-audit services in determining whether to pre-
approve any such services. For each fiscal year, the Audit Committee may determine the
appropriateness of the ratio between the total amount of fees for audit, audit-related, and tax
services for the Funds (including any audit-related or tax services fees for affiliates subject to
pre-approval), and the total amount of fees for certain permissible non-audit services classified as
“all other services” for the Funds (including any such services for affiliates subject to pre-
approval by the Audit Committee or its delegate).
X. Procedures.
All requests or applications for services to be provided by the independent auditor that do not
require specific pre-approval by the Audit Committee will be submitted to the “RIC/RIF
Clearance Committee” (the “Clearance Committee”) (which shall be comprised of not less than
three members, including the Treasurer of the Funds who shall serve as its Chairperson) and
must include a detailed description of the services to be rendered and the estimated costs of those
services. The Clearance Committee will determine whether such services are included within the
list of services that have received general pre-approval by the Audit Committee. The Audit
Committee will be informed not less frequently than quarterly by the Chairperson of the
Clearance Committee of any such services rendered by the independent auditor for the Funds and
the fees paid to the independent auditors for such services.
Requests or applications to provide services that require specific pre-approval by the Audit
Committee will be submitted to the Audit Committee by both the independent auditor and the
Clearance Committee and must include a joint certification by the engagement partner of the
independent auditor and the Chairperson of the Clearing Committee that, in their view, the
request or application does not involve a prohibited non-audit service and is consistent with the
SEC’s rules governing auditor independence.
Russell Investments’ Internal Audit Department and the officers of RIC and RIF will report to
the Chairman of the Audit Committee any breach of this Policy that comes to the attention of the
Internal Audit Department or an officer of RIC or RIF.
XI. Additional Requirements.
The Audit Committee has determined to take additional measures on an annual basis to meet its
responsibility to oversee the work performed by the independent auditor and to assure the
independent auditor’s continuing independence from the Funds and their affiliates. Such efforts
will include, but not be limited to, reviewing a written annual statement from the independent
auditor delineating all relationships between the independent auditor and RIC, RIF, RIM and
their subsidiaries and affiliates, consistent with the Public Company Accounting Oversight
Board’s Independence Standards Board Standard No. 1, and discussing with the independent
auditor its methods and procedures for ensuring its independence.
(e) (2) The percentage of services described in each of paragraphs (b) through (d) of this Item
that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X is as follows:
Audit Fees | 0 | % |
Audit-Related Fees | 0 | % |
Tax Fees | 0 | % |
All Other Fees | 0 | % |
(f) For services, 50 percent or more of which were pre-approved, the percentage of hours
expended on the principal accountant’s engagement to audit the registrant’s financial statements
for the most recent fiscal year that were attributed to work performed by persons other than the
principal accountant’s full-time, permanent employees was 0%.
(g) The aggregate non-audit fees billed by registrant’s accountant for services rendered to the
registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant for each of the last two fiscal years of the
registrant were as follows:
2015 $0
2016 $0
(h) The registrant’s audit committee of the board of trustees has considered whether the
provision of nonaudit services that were rendered to the registrant’s investment adviser (not
including any subadviser whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity controlling, controlled by, or
under common control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants. [Not Applicable]
Item 6. [Schedules of Investments are included as part of the Report to Shareholders filed
under Item 1 of this form]
Items 7-9. [Not Applicable]
Item 10. Submission of Matters to a Vote of Security Holders
There have been no changes to the procedures by which shareholders may recommend
nominees to the Registrant’s Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures
(a) Registrant's principal executive officer and principal financial officer has concluded
that Registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under
the Investment Company Act of 1940 (the “Act”)) are effective, based on his evaluation
of these controls and procedures as of a date within 90 days of the date this report is filed
with the Securities and Exchange Commission.
(b) There were no significant changes in Registrant's internal control over financial
reporting that occurred during the period covered by this report that has materially
affected or is likely to materially affect Registrant's internal control over financial
reporting.
Item 12. Exhibit List
(a) Registrant’s code of ethics described in Item 2
(b) Certification for principal executive officer and principal financial officer of
Registrant as required by Rule 30a-2(a) under the Act.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment
Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Russell Investment Funds
By: /s/ Mark E. Swanson
Mark E. Swanson
President, Chief Executive Officer, Treasurer, Chief Accounting Officer and Chief
Financial Officer, Russell Investment Funds
Date: February 17, 2017