Table of Contents
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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 Rhoden, Secretary and Chief Legal Officer
Russell Investment Funds
18th Floor
Seattle, Washington 98101
206-505-4846
(Name and address of agent for service)
Registrant’s telephone number, including area code: 206-505-7877
Date of fiscal year end: December 31
Date of reporting period: January 1, 2012 – June 30, 2012
Table of Contents
Item 1. Reports to Stockholders
Table of Contents
2012 SEMI-ANNUAL REPORT
Russell
Investment Funds
JUNE 30, 2012
FUND
Multi-Style Equity Fund
Aggressive Equity Fund
Non-U.S. Fund
Core Bond Fund
Global Real Estate Securities Fund
Table of Contents
Russell Investment Funds
Russell Investment Funds is a series investment company with ten different investment portfolios referred to as Funds. These financial statements report on five of these Funds.
Table of Contents
Russell Investment Funds
Semi-annual Report
June 30, 2012 (Unaudited)
Table of Contents
Russell Investment Funds
Copyright © Russell Investments 2012. All rights reserved.
Russell Investments is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual Life Insurance Company.
Fund objectives, risks, charges and expenses should be carefully considered before investing. A prospectus containing this and other important information must precede or accompany this material. Please read the prospectus carefully before investing.
Securities distributed through Russell Financial Services, Inc., member FINRA and part of Russell Investments.
Russell Investments is the owner of the trademarks, service marks, and copyrights related to its respective indexes.
Performance quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Current to the most recent month-end performance data may be obtained by visiting www.russell.com/us/fundperformance.
Table of Contents
Russell Investment Funds
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value | ||||||||
January 1, 2012 | $ | 1,000.00 | $ | 1,000 .00 | ||||
Ending Account Value | ||||||||
June 30, 2012 | $ | 1,077.20 | $ | 1,020.64 | ||||
Expenses Paid During Period* | $ | 4.39 | $ | 4.27 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.85% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
Multi-Style Equity Fund | 3 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Common Stocks - 95.7% | ||||||||
Consumer Discretionary - 13.4% | ||||||||
Amazon.com, Inc. (Æ) | 13,360 | 3,051 | ||||||
Automated Security Holdings | 33,100 | 443 | ||||||
Avon Products, Inc. | 34,700 | 562 | ||||||
Bed Bath & Beyond, Inc. (Æ) | 6,688 | 413 | ||||||
CBS Corp. Class B | 26,500 | 869 | ||||||
Chipotle Mexican Grill, Inc. Class A (Æ) | 600 | 228 | ||||||
Coach, Inc. | 5,150 | 301 | ||||||
Comcast Corp. Class A | 27,300 | 873 | ||||||
Costco Wholesale Corp. | 9,900 | 941 | ||||||
Cracker Barrel Old Country Store, Inc. | 1,900 | 119 | ||||||
eBay, Inc. (Æ) | 73,970 | 3,108 | ||||||
Estee Lauder Cos., Inc. (The) Class A | 7,878 | 426 | ||||||
Ford Motor Co. (Ñ) | 69,421 | 666 | ||||||
GameStop Corp. Class A (Ñ) | 19,400 | 356 | ||||||
General Motors Co. (Æ) | 70,300 | 1,387 | ||||||
Genuine Parts Co. | 4,300 | 259 | ||||||
Guess?, Inc. (Ñ) | 25,900 | 787 | ||||||
Hanesbrands, Inc. (Æ) | 19,100 | 530 | ||||||
Hertz Global Holdings, Inc. (Æ) | 52,000 | 666 | ||||||
Home Depot, Inc. | 31,365 | 1,662 | ||||||
Johnson Controls, Inc. | 107,500 | 2,978 | ||||||
Kohl’s Corp. | 12,600 | 573 | ||||||
Las Vegas Sands Corp. | 39,155 | 1,704 | ||||||
Limited Brands, Inc. | 24,410 | 1,038 | ||||||
Lowe’s Cos., Inc. | 23,400 | 665 | ||||||
Lululemon Athletica, Inc. (Æ)(Ñ) | 5,000 | 298 | ||||||
Macy’s, Inc. | 22,100 | 759 | ||||||
McDonald’s Corp. | 6,800 | 602 | ||||||
McGraw-Hill Cos., Inc. (The) | 12,100 | 545 | ||||||
MGM Resorts International (Æ) | 33,700 | 376 | ||||||
Michael Kors Holdings, Ltd. (Æ) | 16,525 | 691 | ||||||
News Corp. Class A | 39,000 | 869 | ||||||
Nike, Inc. Class B | 7,300 | 641 | ||||||
priceline.com, Inc. (Æ) | 2,086 | 1,386 | ||||||
PVH Corp. | 4,100 | 319 | ||||||
Scholastic Corp. | 4,900 | 138 | ||||||
Snap-on, Inc. | 8,600 | 535 | ||||||
Starbucks Corp. | 56,740 | 3,026 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. (ö) | 25,300 | 1,342 | ||||||
Target Corp. | 11,800 | 687 | ||||||
Tesla Motors, Inc. (Æ)(Ñ) | 8,250 | 258 | ||||||
Texas Roadhouse, Inc. Class A | 8,200 | 151 | ||||||
Time Warner, Inc. | 139,050 | 5,353 | ||||||
Tractor Supply Co. | 2,600 | 216 | ||||||
Ulta Salon Cosmetics & Fragrance, Inc. | 3,200 | 299 | ||||||
Under Armour, Inc. Class A (Æ)(Ñ) | 3,900 | 368 | ||||||
Viacom, Inc. Class B | 56,250 | 2,644 | ||||||
Visteon Corp. (Æ) | 5,700 | 214 | ||||||
Walt Disney Co. (The) | 13,600 | 660 | ||||||
Warnaco Group, Inc. (The) (Æ) | 11,300 | 481 | ||||||
Whirlpool Corp. | 10,500 | 642 | ||||||
WMS Industries, Inc. (Æ) | 10,100 | 201 | ||||||
Yum! Brands, Inc. | 50,900 | 3,279 | ||||||
|
| |||||||
51,585 | ||||||||
|
|
Principal Amount ($) or Shares | Market Value $ | |||||||
Consumer Staples - 6.4% | ||||||||
Archer-Daniels-Midland Co. | 70,300 | 2,075 | ||||||
Bunge, Ltd. | 9,600 | 602 | ||||||
Cia de Bebidas das Americas - ADR | 25,510 | 978 | ||||||
Clorox Co. (The) | 6,500 | 471 | ||||||
Coca-Cola Co. (The) | 66,307 | 5,186 | ||||||
Colgate-Palmolive Co. | 20,100 | 2,092 | ||||||
Dean Foods Co. (Æ) | 53,700 | 915 | ||||||
Herbalife, Ltd. | 3,333 | 161 | ||||||
Kraft Foods, Inc. Class A | 51,600 | 1,992 | ||||||
Lorillard, Inc. | 6,900 | 910 | ||||||
Molson Coors Brewing Co. Class B | 16,800 | 699 | ||||||
PepsiCo, Inc. | 12,650 | 894 | ||||||
Philip Morris International, Inc. | 5,500 | 480 | ||||||
Procter & Gamble Co. (The) | 55,250 | 3,385 | ||||||
Safeway, Inc. (Ñ) | 36,200 | 657 | ||||||
Tyson Foods, Inc. Class A | 32,200 | 606 | ||||||
Walgreen Co. | 37,600 | 1,112 | ||||||
Whole Foods Market, Inc. | 12,490 | 1,190 | ||||||
|
| |||||||
24,405 | ||||||||
|
| |||||||
Energy - 9.5% | ||||||||
Anadarko Petroleum Corp. | 23,950 | 1,585 | ||||||
Apache Corp. | 17,840 | 1,568 | ||||||
Arch Coal, Inc. (Ñ) | 58,800 | 405 | ||||||
Cabot Oil & Gas Corp. | 12,166 | 479 | ||||||
Chevron Corp. | 35,460 | 3,740 | ||||||
Cimarex Energy Co. | 6,900 | 380 | ||||||
Exxon Mobil Corp. | 90,350 | 7,730 | ||||||
FMC Technologies, Inc. (Æ) | 5,600 | 220 | ||||||
Forest Oil Corp. (Æ) | 39,100 | 287 | ||||||
Halliburton Co. | 23,500 | 667 | ||||||
Marathon Oil Corp. | 44,100 | 1,128 | ||||||
Marathon Petroleum Corp. | 32,940 | 1,480 | ||||||
Murphy Oil Corp. | 38,000 | 1,911 | ||||||
National Oilwell Varco, Inc. | 37,615 | 2,425 | ||||||
Noble Corp. (Æ) | 7,000 | 228 | ||||||
Noble Energy, Inc. | 14,400 | 1,221 | ||||||
Occidental Petroleum Corp. | 27,500 | 2,359 | ||||||
Patterson-UTI Energy, Inc. | 31,100 | 453 | ||||||
Phillips 66 (Æ) | 40,475 | 1,345 | ||||||
Pioneer Natural Resources Co. | 2,400 | 212 | ||||||
Schlumberger, Ltd. | 33,480 | 2,173 | ||||||
SM Energy Co. | 9,500 | 467 | ||||||
Southwestern Energy Co. (Æ) | 40,200 | 1,284 | ||||||
Statoil ASA - ADR | 34,600 | 826 | ||||||
Total SA - ADR | 10,200 | 458 | ||||||
Valero Energy Corp. | 24,100 | 582 | ||||||
Whiting Petroleum Corp. (Æ) | 23,200 | 954 | ||||||
|
| |||||||
36,567 | ||||||||
|
| |||||||
Financial Services - 15.5% | ||||||||
Alert Care Corp. - ADR (Æ)(Ñ) | 55,800 | 807 | ||||||
Allied World Assurance Co. Holdings AG | 6,100 | 485 | ||||||
Allstate Corp. (The) | 2,300 | 81 | ||||||
American Express Co. | 34,018 | 1,981 |
4 | Multi-Style Equity Fund |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
American Tower Corp. Class A (ö) | 6,000 | 419 | ||||||
Aspen Insurance Holdings, Ltd. | 8,000 | 231 | ||||||
Assurant, Inc. | 10,100 | 352 | ||||||
Bank of New York Mellon Corp. (The) | 76,500 | 1,679 | ||||||
BB&T Corp. | 92,250 | 2,846 | ||||||
Berkshire Hathaway, Inc. Class B (Æ) | 1,300 | 108 | ||||||
BlackRock, Inc. Class A | 2,200 | 374 | ||||||
Capital One Financial Corp. | 66,344 | 3,626 | ||||||
Chubb Corp. (The) | 11,100 | 808 | ||||||
Citigroup, Inc. | 108,250 | 2,967 | ||||||
City National Corp. | 11,400 | 554 | ||||||
Cullen/Frost Bankers, Inc. | 17,100 | 983 | ||||||
Discover Financial Services | 60,687 | 2,099 | ||||||
Endurance Specialty Holdings, Ltd. | 6,500 | 249 | ||||||
Everest Re Group, Ltd. | 1,800 | 186 | ||||||
Extra Space Storage, Inc. (ö) | 17,500 | 536 | ||||||
Fifth Third Bancorp | 49,300 | 661 | ||||||
Goldman Sachs Group, Inc. (The) | 7,480 | 717 | ||||||
Hancock Holding Co. | 5,300 | 161 | ||||||
Hanover Insurance Group, Inc. (The) | 6,200 | 243 | ||||||
Hartford Financial Services Group, Inc. | 36,300 | 640 | ||||||
Hospitality Properties Trust (ö) | 6,300 | 156 | ||||||
Invesco, Ltd. | 33,600 | 759 | ||||||
Jefferies Group, Inc. (Ñ) | 18,294 | 238 | ||||||
JPMorgan Chase & Co. | 130,800 | 4,674 | ||||||
KeyCorp | 60,000 | 464 | ||||||
Liberty Property Trust (Ñ)(ö) | 19,300 | 711 | ||||||
Lincoln National Corp. | 30,100 | 658 | ||||||
Mastercard, Inc. Class A | 3,468 | 1,492 | ||||||
Mercury General Corp. | 13,100 | 546 | ||||||
MetLife, Inc. | 103,600 | 3,196 | ||||||
Morgan Stanley | 47,900 | 699 | ||||||
Northern Trust Corp. | 18,500 | 851 | ||||||
PartnerRe, Ltd. - ADR | 11,360 | 860 | ||||||
People’s United Financial, Inc. | 59,300 | 688 | ||||||
PNC Financial Services Group, Inc. | 13,100 | 800 | ||||||
ProAssurance Corp. | 4,200 | 374 | ||||||
Provident Financial Services, Inc. | 8,000 | 123 | ||||||
Prudential Financial, Inc. | 51,200 | 2,479 | ||||||
Reinsurance Group of America, Inc. Class A | 8,400 | 447 | ||||||
RLI Corp. | 1,200 | 82 | ||||||
Selective Insurance Group, Inc. | 3,800 | 66 | ||||||
Simon Property Group, Inc. (ö) | 5,320 | 828 | ||||||
Sovran Self Storage, Inc. (ö) | 3,800 | 190 | ||||||
StanCorp Financial Group, Inc. | 6,800 | 253 | ||||||
State Street Corp. | 45,300 | 2,023 | ||||||
SunTrust Banks, Inc. | 30,000 | 727 | ||||||
Symetra Financial Corp. | 7,600 | 96 | ||||||
Total System Services, Inc. | 19,490 | 466 | ||||||
Travelers Cos., Inc. (The) | 9,600 | 613 | ||||||
Unum Group | 21,100 | 404 | ||||||
Validus Holdings, Ltd. | 20,700 | 663 | ||||||
Valley National Bancorp (Ñ) | 33,337 | 353 | ||||||
Visa, Inc. Class A | 26,257 | 3,246 | ||||||
Webster Financial Corp. | 2,300 | 50 | ||||||
Wells Fargo & Co. | 128,900 | 4,310 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Western Union Co. (The) | 61,250 | 1,031 | ||||||
White Mountains Insurance Group, Ltd. | 174 | 91 | ||||||
|
| |||||||
59,500 | ||||||||
|
| |||||||
Health Care - 13.2% | ||||||||
Abbott Laboratories | 7,300 | 471 | ||||||
Aetna, Inc. | 19,200 | 744 | ||||||
Alexion Pharmaceuticals, Inc. (Æ) | 6,011 | 597 | ||||||
Allergan, Inc. | 10,466 | 969 | ||||||
AmerisourceBergen Corp. Class A | 9,600 | 378 | ||||||
Baxter International, Inc. | 19,000 | 1,010 | ||||||
Biogen Idec, Inc. (Æ) | 7,900 | 1,140 | ||||||
Boston Scientific Corp. (Æ) | 126,700 | 718 | ||||||
Bristol-Myers Squibb Co. | 45,600 | 1,639 | ||||||
Cardinal Health, Inc. | 6,500 | 273 | ||||||
Celgene Corp. (Æ) | 7,300 | 468 | ||||||
Cerner Corp. (Æ) | 30,540 | 2,525 | ||||||
Cigna Corp. | 1,900 | 84 | ||||||
CONMED Corp. | 5,100 | 141 | ||||||
Covidien PLC | 36,550 | 1,955 | ||||||
Eli Lilly & Co. | 25,000 | 1,073 | ||||||
Express Scripts Holding Co. (Æ) | 25,190 | 1,406 | ||||||
Gilead Sciences, Inc. (Æ) | 16,670 | 855 | ||||||
Hill-Rom Holdings, Inc. | 9,900 | 305 | ||||||
Humana, Inc. | 9,940 | 770 | ||||||
Intuitive Surgical, Inc. (Æ) | 3,430 | 1,899 | ||||||
Johnson & Johnson | 101,750 | 6,874 | ||||||
Magellan Health Services, Inc. (Æ) | 4,300 | 195 | ||||||
McKesson Corp. | 21,950 | 2,058 | ||||||
Medtronic, Inc. | 15,816 | 613 | ||||||
Merck & Co., Inc. | 96,891 | 4,045 | ||||||
Mylan, Inc. (AE) | 64,480 | 1,378 | ||||||
Novo Nordisk A/S - ADR | 10,400 | 1,512 | ||||||
Omnicare, Inc. | 16,800 | 525 | ||||||
Perrigo Co. | 13,880 | 1,637 | ||||||
Pfizer, Inc. | 341,380 | 7,851 | ||||||
Sanofi - ADR | 23,150 | 875 | ||||||
Teva Pharmaceutical Industries, Ltd. - ADR | 11,250 | 444 | ||||||
UnitedHealth Group, Inc. | 33,500 | 1,960 | ||||||
Valeant Pharmaceuticals International, | 17,444 | 781 | ||||||
WellPoint, Inc. | 11,900 | 759 | ||||||
|
| |||||||
50,927 | ||||||||
|
| |||||||
Materials and Processing - 5.1% | ||||||||
Air Products & Chemicals, Inc. | 9,400 | 759 | ||||||
Barrick Gold Corp. | 56,250 | 2,113 | ||||||
Bemis Co., Inc. | 17,200 | 539 | ||||||
Celanese Corp. Class A | 9,650 | 334 | ||||||
Ecolab, Inc. | 31,100 | 2,131 | ||||||
Freeport-McMoRan Copper & Gold, Inc. | 25,700 | 876 | ||||||
Huntsman Corp. | 60,900 | 788 | ||||||
LyondellBasell Industries NV Class A | 10,800 | 435 | ||||||
Martin Marietta Materials, Inc. (Ñ) | 6,800 | 536 | ||||||
Masco Corp. (Ñ) | 15,700 | 218 | ||||||
MeadWestvaco Corp. | 2,500 | 72 | ||||||
Monsanto Co. | 78,410 | 6,491 |
Multi-Style Equity Fund | 5 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Mueller Industries, Inc. | 1,300 | 55 | ||||||
Nucor Corp. | 19,100 | 724 | ||||||
Praxair, Inc. | 8,500 | 924 | ||||||
Precision Castparts Corp. | 2,800 | 461 | ||||||
Sealed Air Corp. | 48,400 | 747 | ||||||
Sherwin-Williams Co. (The) | 2,200 | 291 | ||||||
Steel Dynamics, Inc. | 53,900 | 633 | ||||||
Stillwater Mining Co. (Æ) | 13,300 | 114 | ||||||
Titanium Metals Corp. | 44,000 | 498 | ||||||
|
| |||||||
19,739 | ||||||||
|
| |||||||
Producer Durables - 12.8% | ||||||||
ABM Industries, Inc. | 2,000 | 39 | ||||||
Accenture PLC Class A | 14,090 | 847 | ||||||
AGCO Corp. (Æ) | 15,900 | 727 | ||||||
Air Lease Corp. Class A (Æ)(Ñ) | 15,600 | 302 | ||||||
Alaska Air Group, Inc. (Æ) | 19,400 | 696 | ||||||
Alliant Techsystems, Inc. | 500 | 25 | ||||||
Allison Transmission Holdings, Inc. (Ñ) | 6,500 | 114 | ||||||
Automatic Data Processing, Inc. | 35,300 | 1,965 | ||||||
Barnes Group, Inc. | 6,900 | 168 | ||||||
Boeing Co. (The) | 31,300 | 2,326 | ||||||
Booz Allen Hamilton Holding Corp. Class A | 3,200 | 49 | ||||||
Brink’s Co. (The) | 10,700 | 248 | ||||||
Bristow Group, Inc. | 3,100 | 126 | ||||||
Caterpillar, Inc. | 11,044 | 938 | ||||||
Con-way, Inc. | 21,000 | 758 | ||||||
Cummins, Inc. | 19,260 | 1,866 | ||||||
Danaher Corp. | 18,900 | 984 | ||||||
Danone - ADR (Æ) | 86,960 | 1,077 | ||||||
Deere & Co. | 11,182 | 904 | ||||||
Delta Air Lines, Inc. (Æ) | 51,400 | 563 | ||||||
Dover Corp. | 17,500 | 938 | ||||||
Eaton Corp. | 10,050 | 398 | ||||||
Electronics for Imaging, Inc. (Æ) | 3,230 | 52 | ||||||
EMCOR Group, Inc. | 6,100 | 170 | ||||||
Emerson Electric Co. | 21,300 | 992 | ||||||
FedEx Corp. | 25,548 | 2,340 | ||||||
GATX Corp. | 7,000 | 270 | ||||||
General Dynamics Corp. | 17,400 | 1,148 | ||||||
General Electric Co. | 242,450 | 5,053 | ||||||
Granite Construction, Inc. | 5,000 | 131 | ||||||
Harsco Corp. | 49,400 | 1,007 | ||||||
Honeywell International, Inc. | 66,200 | 3,696 | ||||||
Itron, Inc. (Æ) | 16,200 | 668 | ||||||
Joy Global, Inc. | 18,610 | 1,056 | ||||||
KBR, Inc. | 19,500 | 482 | ||||||
L-3 Communications Holdings, Inc. | 10,100 | 748 | ||||||
Lockheed Martin Corp. | 14,800 | 1,289 | ||||||
Manpower, Inc. | 5,500 | 202 | ||||||
Moog, Inc. Class A (Æ) | 3,900 | 161 | ||||||
Norfolk Southern Corp. | 10,500 | 754 | ||||||
PACCAR, Inc. | 6,400 | 251 | ||||||
Parker Hannifin Corp. | 10,900 | 838 | ||||||
Pentair, Inc. (Ñ) | 28,039 | 1,074 | ||||||
Pitney Bowes, Inc. (Ñ) | 30,200 | 452 | ||||||
Raytheon Co. | 16,000 | 905 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Republic Services, Inc. Class A | 28,100 | 744 | ||||||
Rockwell Automation, Inc. | 12,500 | 826 | ||||||
Roper Industries, Inc. | 2,000 | 197 | ||||||
RR Donnelley & Sons Co. (Ñ) | 34,900 | 411 | ||||||
Ryder System, Inc. | 25,800 | 929 | ||||||
Shaw Group, Inc. (The) (Æ) | 11,800 | 322 | ||||||
Stanley Black & Decker, Inc. | 17,750 | 1,143 | ||||||
Terex Corp. (Æ) | 13,485 | 240 | ||||||
Tetra Tech, Inc. (Æ) | 8,608 | 224 | ||||||
Textron, Inc. | 27,800 | 691 | ||||||
Tidewater, Inc. | 15,800 | 732 | ||||||
UniFirst Corp. | 1,500 | 96 | ||||||
Union Pacific Corp. | 5,400 | 644 | ||||||
United Continental Holdings, Inc. (Æ) | 14,800 | 360 | ||||||
United Parcel Service, Inc. Class B | 1,375 | 108 | ||||||
United Technologies Corp. | 5,950 | 449 | ||||||
URS Corp. | 18,000 | 628 | ||||||
UTi Worldwide, Inc. (Æ) | 17,400 | 254 | ||||||
Xylem, Inc. | 23,700 | 597 | ||||||
|
| |||||||
49,392 | ||||||||
|
| |||||||
Technology - 16.0% | ||||||||
Altera Corp. | 13,200 | 447 | ||||||
Apple, Inc. (Æ) | 18,134 | 10,590 | ||||||
Applied Materials, Inc. | 195,450 | 2,239 | ||||||
Avago Technologies, Ltd. | 38,800 | 1,392 | ||||||
Benchmark Electronics, Inc. (Æ) | 11,200 | 156 | ||||||
Broadcom Corp. Class A (Æ) | 10,653 | 360 | ||||||
Brocade Communications Systems, Inc. (Æ) | 36,400 | 179 | ||||||
Cisco Systems, Inc. | 212,750 | 3,653 | ||||||
Citrix Systems, Inc. (Æ) | 13,400 | 1,125 | ||||||
Dolby Laboratories, Inc. Class A (Æ) | 5,300 | 219 | ||||||
Electronic Arts, Inc. (Æ) | 36,900 | 456 | ||||||
EMC Corp. (Æ) | 33,308 | 854 | ||||||
F5 Networks, Inc. (AE) | 2,450 | 244 | ||||||
Facebook, Inc. Class A (AE)(Ñ) | 36,480 | 1,135 | ||||||
Fusion-io, Inc. (Æ)(Ñ) | 6,682 | 140 | ||||||
Google, Inc. Class A (Æ) | 6,257 | 3,629 | ||||||
Harris Corp. (Ñ) | 10,000 | 419 | ||||||
IAC/InterActiveCorp | 15,300 | 698 | ||||||
Integrated Device Technology, Inc. (Æ) | 33,400 | 188 | ||||||
Intel Corp. | 49,800 | 1,327 | ||||||
International Business Machines Corp. | 3,400 | 665 | ||||||
Intersil Corp. Class A | 24,800 | 264 | ||||||
Koninklijke Philips Electronics NV | 45,400 | 893 | ||||||
Linear Technology Corp. | 21,600 | 677 | ||||||
LinkedIn Corp. Class A (Æ)(Ñ) | 1,900 | 202 | ||||||
LSI Corp. (Æ) | 109,600 | 698 | ||||||
Marvell Technology Group, Ltd. | 36,900 | 416 | ||||||
Maxim Integrated Products, Inc. | 24,200 | 620 | ||||||
Mentor Graphics Corp. (Æ) | 10,800 | 162 | ||||||
Microsoft Corp. | 184,100 | 5,633 | ||||||
MKS Instruments, Inc. | 3,500 | 101 | ||||||
Molex, Inc. (Ñ) | 17,000 | 407 | ||||||
NCR Corp. (Æ) | 15,600 | 355 | ||||||
NetApp, Inc. (Æ) | 9,200 | 293 | ||||||
Plantronics, Inc. | 3,900 | 130 |
6 | Multi-Style Equity Fund |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
PMC - Sierra, Inc. (Æ) | 33,500 | 206 | ||||||
QUALCOMM, Inc. | 75,735 | 4,216 | ||||||
Rackspace Hosting, Inc. (Æ) | 10,700 | 470 | ||||||
Red Hat, Inc. (Æ) | 32,720 | 1,848 | ||||||
Salesforce.com, Inc. (Æ) | 8,628 | 1,193 | ||||||
SAP AG - ADR (Ñ) | 24,740 | 1,469 | ||||||
Synopsys, Inc. (Æ) | 16,900 | 497 | ||||||
Tellabs, Inc. | 169,900 | 566 | ||||||
Teradata Corp. (Æ) | 8,000 | 576 | ||||||
Texas Instruments, Inc. | 129,940 | 3,728 | ||||||
VeriFone Systems, Inc. (Æ) | 18,218 | 603 | ||||||
VMware, Inc. Class A (Æ) | 9,000 | 820 | ||||||
Vodafone Group PLC - ADR | 125,100 | 3,525 | ||||||
Western Digital Corp. (Æ) | 20,500 | 625 | ||||||
Xilinx, Inc. | 8,300 | 279 | ||||||
|
| |||||||
61,587 | ||||||||
|
| |||||||
Utilities - 3.7% | ||||||||
Ameren Corp. | 20,900 | 701 | ||||||
American Electric Power Co., Inc. | 35,100 | 1,401 | ||||||
American Water Works Co., Inc. | 7,600 | 261 | ||||||
AT&T, Inc. | 126,500 | 4,510 | ||||||
DTE Energy Co. | 9,600 | 570 | ||||||
Encana Corp. | 80,350 | 1,674 | ||||||
Entergy Corp. | 6,600 | 448 | ||||||
Exelon Corp. | 10,500 | 395 | ||||||
FirstEnergy Corp. | 14,100 | 694 | ||||||
Level 3 Communications, Inc. (Æ) | 7,550 | 167 | ||||||
National Fuel Gas Co. | 10,600 | 498 | ||||||
NextEra Energy, Inc. | 6,600 | 454 | ||||||
NorthWestern Corp. | 1,700 | 62 | ||||||
NV Energy, Inc. | 22,600 | 397 | ||||||
PPL Corp. | 27,800 | 773 | ||||||
Telephone & Data Systems, Inc. | 25,400 | 541 | ||||||
Verizon Communications, Inc. | 15,550 | 691 | ||||||
|
| |||||||
14,237 | ||||||||
|
| |||||||
Total Common Stocks (cost $329,591) | 367,939 | |||||||
|
| |||||||
Short-Term Investments - 4.2% | ||||||||
Russell U.S. Cash Management Fund | 15,955,207 | (¥) | 15,955 | |||||
|
| |||||||
Total Short-Term Investments (cost $15,955) | 15,955 | |||||||
|
|
Principal Amount ($) or Shares | Market Value $ | |||||||
Other Securities - 2.8% | ||||||||
Russell Investment Funds Liquidating | 84,460 | (¥) | 86 | |||||
Russell U.S. Cash Collateral Fund (×) | 10,765,028 | (¥) | 10,765 | |||||
|
| |||||||
Total Other Securities (cost $10,849) | 10,851 | |||||||
|
| |||||||
Total Investments - 102.6% (identified cost $356,395) | 394,745 | |||||||
Other Assets and Liabilities, Net - (2.6%) | (9,832 | ) | ||||||
|
| |||||||
Net Assets - 100.0% | 384,913 | |||||||
|
|
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund | 7 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except contract amounts)
Futures Contracts | Number of Contracts | Notional Amount | Expiration Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||
Long Positions | ||||||||||||||||||
Russell 1000 Mini Index Futures (CME) | 24 | USD | 1,794 | 09/12 | 55 | |||||||||||||
S&P 500 E-Mini Index Futures (CME) | 170 | USD | 11,529 | 09/12 | 335 | |||||||||||||
S&P 500 Index Futures (CME) | 12 | USD | 4,069 | 09/12 | 133 | |||||||||||||
|
| |||||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 523 | |||||||||||||||||
|
|
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Amounts in thousands
Market Value | % of Net Assets | |||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | ||||||||||||||||||||
Consumer Discretionary | $ | 51,585 | $ | — | $ | — | $ | 51,585 | 13.4 | |||||||||||
Consumer Staples | 24,405 | — | — | 24,405 | 6.4 | |||||||||||||||
Energy | 36,567 | — | — | 36,567 | 9.5 | |||||||||||||||
Financial Services | 59,500 | — | — | 59,500 | 15.5 | |||||||||||||||
Health Care | 50,927 | — | — | 50,927 | 13.2 | |||||||||||||||
Materials and Processing | 19,739 | — | — | 19,739 | 5.1 | |||||||||||||||
Producer Durables | 49,392 | — | — | 49,392 | 12.8 | |||||||||||||||
Technology | 61,587 | — | — | 61,587 | 16.0 | |||||||||||||||
Utilities | 14,237 | — | — | 14,237 | 3.7 | |||||||||||||||
Short-Term Investments | — | 15,955 | — | 15,955 | 4.2 | |||||||||||||||
Other Securities | — | 10,851 | — | 10,851 | 2.8 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | 367,939 | 26,806 | — | 394,745 | 102.6 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other Assets and Liabilities, Net | (2.6 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
100.0 | ||||||||||||||||||||
|
| |||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||||
Futures Contracts | 523 | — | — | 523 | 0.1 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Other Financial Instruments* | $ | 523 | $ | — | $ | — | $ | 523 | ||||||||||||
|
|
|
|
|
|
|
|
* | Other financial instruments reflected, such as futures, forwards, interest rate swaps and credit default swaps are valued at the unrealized appreciation/depreciation on the instruments. |
For a description of the levels see note 2 in the Notes to Financial Statements.
There were no significant transfers in and out of Levels 1, 2 and 3 during the period ended June 30, 2012.
See accompanying notes which are an integral part of the financial statements.
8 | Multi-Style Equity Fund |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Fair Value of Derivative Instruments — June 30, 2012 (Unaudited)
Amounts in thousands
Derivatives not accounted for as hedging instruments | Equity Contracts | |||
Location: Statement of Assets and Liabilities - Assets | ||||
Daily variation margin on futures contracts* | $ | 523 | ||
|
| |||
Derivatives not accounted for as hedging instruments | Equity Contracts | |||
Location: Statement of Operations - Net realized gain (loss) | ||||
Futures contracts | $ | 944 | ||
|
| |||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||
Futures contracts | $ | 500 | ||
|
|
* | Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
For further disclosure on derivatives see note 2 in Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund | 9 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 356,395 | ||
Investments, at market*, ** | 394,745 | |||
Cash | 108 | |||
Cash (restricted) | 1,350 | |||
Receivables: | ||||
Dividends and interest | 542 | |||
Dividends from affiliated Russell funds | 2 | |||
Investments sold | 2,935 | |||
Fund shares sold | 8 | |||
Daily variation margin on futures contracts | 438 | |||
Prepaid expenses | 4 | |||
|
| |||
Total assets | 400,132 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investments purchased | 3,714 | |||
Fund shares redeemed | 376 | |||
Accrued fees to affiliates | 242 | |||
Other accrued expenses | 38 | |||
Payable upon return of securities loaned | 10,849 | |||
|
| |||
Total liabilities | 15,219 | |||
|
| |||
Net Assets | $ | 384,913 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
10 | Multi-Style Equity Fund |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Statement of Assets and Liabilities, continued — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | 1,239 | ||
Accumulated net realized gain (loss) | (42,948 | ) | ||
Unrealized appreciation (depreciation) on: | ||||
Investments | 38,350 | |||
Futures contracts | 523 | |||
Shares of beneficial interest | 271 | |||
Additional paid-in capital | 387,478 | |||
|
| |||
Net Assets | $ | 384,913 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share: (a) | $ | 14.18 | ||
Net assets | $ | 384,913,186 | ||
Shares outstanding ($.01 par value) | 27,135,259 | |||
Amounts in thousands | ||||
* Securities on loan included in investments | $ | 11,532 | ||
** Investments in affiliates, Russell U.S. Cash Management Fund, Russell Investment Funds Liquidating Trust and Russell U.S. Cash Collateral Fund | $ | 26,806 |
(a) | 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 | 11 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Statement of Operations — For the Period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Dividends | $ | 3,797 | ||
Dividends from affiliated Russell funds | 13 | |||
Securities lending income | 85 | |||
|
| |||
Total investment income | 3,895 | |||
|
| |||
Expenses | ||||
Advisory fees | 1,433 | |||
Administrative fees | 98 | |||
Custodian fees | 80 | |||
Transfer agent fees | 9 | |||
Professional fees | 31 | |||
Trustees’ fees | 5 | |||
Printing fees | 10 | |||
Miscellaneous | 9 | |||
|
| |||
Total expenses | 1,675 | |||
|
| |||
Net investment income (loss) | 2,220 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | 14,372 | |||
Futures contracts | 944 | |||
|
| |||
Net realized gain (loss) | 15,316 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 10,792 | |||
Futures contracts | 500 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 11,292 | |||
|
| |||
Net realized and unrealized gain (loss) | 26,608 | |||
|
| |||
Net Increase (Decrease) in Net Assets from Operations | $ | 28,828 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
12 | Multi-Style Equity Fund |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 (Unaudited) | Fiscal Year Ended December 31, 2011 | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 2,220 | $ | 4,071 | ||||
Net realized gain (loss) | 15,316 | 35,308 | ||||||
Net change in unrealized appreciation (depreciation) | 11,292 | (45,310 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 28,828 | (5,931 | ) | |||||
|
|
|
| |||||
Distributions | ||||||||
From net investment income | (2,079 | ) | (3,847 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from distributions | (2,079 | ) | (3,847 | ) | ||||
|
|
|
| |||||
Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | (15,228 | ) | (17,504 | ) | ||||
Fund Reimbursements | — | 203 | ||||||
|
|
|
| |||||
Total Net Increase (Decrease) in Net Assets | 11,521 | (27,079 | ) | |||||
Net Assets | ||||||||
Beginning of period | 373,392 | 400,471 | ||||||
|
|
|
| |||||
End of period | $ | 384,913 | $ | 373,392 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income included in net assets | $ | 1,239 | $ | 1,098 |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund | 13 |
Table of Contents
Russell Investment Funds
Multi-Style Equity Fund
Financial Highlights
For a Share Outstanding Throughout the Period
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a)(b) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | |||||||||||||||||||
June 30, 2012(1) | 13.24 | .08 | .94 | 1.02 | (.08 | ) | — | |||||||||||||||||
December 31, 2011 | 13.58 | .14 | (.35 | ) | (.21 | ) | (.13 | ) | — | |||||||||||||||
December 31, 2010 | 11.77 | .11 | 1.81 | 1.92 | (.11 | ) | — | |||||||||||||||||
December 31, 2009 | 9.00 | .10 | 2.80 | 2.90 | (.13 | ) | — | |||||||||||||||||
December 31, 2008 | 15.65 | .19 | (6.52 | ) | (6.33 | ) | (.19 | ) | (.13 | ) | ||||||||||||||
December 31, 2007 | 14.93 | .16 | 1.37 | 1.53 | (.16 | ) | (.65 | ) |
See accompanying notes which are an integral part of the financial statements.
14 | Multi-Style Equity Fund |
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(d)(f) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Gross(e) | % Ratio of Expenses to Average Net Assets, Net(b)(e) | % Ratio of Net Investment Income to Average Net Assets(b)(e) | % Portfolio Turnover Rate(d) | |||||||||||||||||||||||
(.08 | ) | 14.18 | 7.72 | 384,913 | .85 | .85 | 1.13 | 56 | ||||||||||||||||||||||
(.13 | ) | 13.24 | (1.55 | ) | 373,392 | .85 | .85 | 1.03 | 133 | |||||||||||||||||||||
(.11 | ) | 13.58 | 16.46 | 400,471 | .89 | .89 | .93 | 105 | ||||||||||||||||||||||
(.13 | ) | 11.77 | 32.72 | 376,751 | .86 | .85 | 1.06 | 136 | ||||||||||||||||||||||
(.32 | ) | 9 .00 | (41.15 | ) | 298,211 | .89 | .87 | 1.50 | 135 | |||||||||||||||||||||
(.81 | ) | 15.65 | 10.36 | 479,922 | .87 | .87 | 1.04 | 136 |
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund | 15 |
Table of Contents
Russell Investment Funds
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value | ||||||||
January 1, 2012 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value | ||||||||
June 30, 2012 | $ | 1,089.80 | $ | 1,019.84 | ||||
Expenses Paid During Period* | $ | 5.25 | $ | 5.07 |
* | Expenses are equal to the Fund’s annualized expense ratio of 1.01% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
16 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Common Stocks - 97.7% | ||||||||
Consumer Discretionary - 13.9% | ||||||||
1-800-Flowers.com, Inc. Class A (Æ) | 12,200 | 43 | ||||||
Aeropostale, Inc. (Æ) | 5,100 | 91 | ||||||
AFC Enterprises, Inc. (Æ) | 13,500 | 312 | ||||||
Amerco, Inc. | 4,242 | 382 | ||||||
American Eagle Outfitters, Inc. | 12,595 | 248 | ||||||
American Greetings Corp. Class A (Ñ) | 13,300 | 194 | ||||||
America’s Car-Mart, Inc. (Æ) | 16,890 | 657 | ||||||
Ameristar Casinos, Inc. | 12,000 | 213 | ||||||
Arctic Cat, Inc. (Æ) | 10,291 | 376 | ||||||
BJ’s Restaurants, Inc. (Æ) | 6,900 | 262 | ||||||
Buffalo Wild Wings, Inc. (Æ) | 4,610 | 399 | ||||||
Build-A-Bear Workshop, Inc. | 2,800 | 13 | ||||||
Callaway Golf Co. (Ñ) | 60,681 | 359 | ||||||
Capella Education Co. (Æ) | 7,400 | 257 | ||||||
Career Education Corp. (Æ) | 18,000 | 120 | ||||||
Carmike Cinemas, Inc. (Æ) | 5,900 | 86 | ||||||
CEC Entertainment, Inc. | 19,800 | 719 | ||||||
Churchill Downs, Inc. | 2,300 | 135 | ||||||
Columbia Sportswear Co. (Ñ) | 9,560 | 513 | ||||||
Conn’s, Inc. (Æ)(Ñ) | 1,300 | 19 | ||||||
Cooper Tire & Rubber Co. | 36,390 | 638 | ||||||
Courier Corp. | 2,900 | 38 | ||||||
Cracker Barrel Old Country Store, Inc. | 8,400 | 528 | ||||||
CSS Industries, Inc. | 1,900 | 39 | ||||||
Destination Maternity Corp. | 11,900 | 257 | ||||||
Dollar Thrifty Automotive Group, Inc. (Æ) | 1,200 | 97 | ||||||
EW Scripps Co. Class A (Æ) | 15,700 | 151 | ||||||
Express, Inc. (Æ) | 14,090 | 256 | ||||||
Federal-Mogul Corp. (Æ) | 11,100 | 122 | ||||||
Finish Line, Inc. (The) Class A | 16,930 | 354 | ||||||
Francesca’s Holdings Corp. (Æ) | 13,510 | 365 | ||||||
Fred’s, Inc. Class A | 12,270 | 188 | ||||||
Fuel Systems Solutions, Inc. (Æ)(Ñ) | 15,563 | 260 | ||||||
Genesco, Inc. (Æ) | 5,690 | 342 | ||||||
Grand Canyon Education, Inc. (Æ) | 16,750 | 351 | ||||||
Group 1 Automotive, Inc. | 13,860 | 632 | ||||||
HealthStream, Inc. (Æ) | 36,750 | 955 | ||||||
Helen of Troy, Ltd. (Æ) | 4,300 | 146 | ||||||
Hibbett Sports, Inc. (Æ) | 19,210 | 1,108 | ||||||
Hillenbrand, Inc. | 16,880 | 310 | ||||||
Hot Topic, Inc. | 58,000 | 562 | ||||||
Iconix Brand Group, Inc. (Æ) | 23,300 | 407 | ||||||
Isle of Capri Casinos, Inc. (Æ) | 6,400 | 39 | ||||||
Jack in the Box, Inc. (Æ) | 8,100 | 226 | ||||||
Jones Group, Inc. (The) | 91,750 | 877 | ||||||
Kenneth Cole Productions, Inc. | 11,609 | 175 | ||||||
LeapFrog Enterprises, Inc. Class A (Æ) | 22,000 | 226 | ||||||
LIN TV Corp. Class A (Æ) | 7,400 | 22 | ||||||
Lincoln Educational Services Corp. | 11,600 | 75 | ||||||
Lithia Motors, Inc. Class A | 20,000 | 461 | ||||||
Marchex, Inc. Class A (Ñ) | 15,000 | 54 | ||||||
Martha Stewart Living Omnimedia Class A | 6,100 | 21 | ||||||
McClatchy Co. (The) Class A (Æ)(Ñ) | 14,800 | 33 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Men’s Wearhouse, Inc. (The) | 22,243 | 626 | ||||||
Meredith Corp. (Ñ) | 19,120 | 611 | ||||||
Monarch Casino & Resort, Inc. (Æ) | 2,000 | 18 | ||||||
Movado Group, Inc. | 17,100 | 428 | ||||||
Multimedia Games Holding Co., Inc. (Æ) | 12,500 | 175 | ||||||
New York & Co., Inc. (Æ) | 2,200 | 8 | ||||||
Papa John’s International, Inc. (Æ) | 5,600 | 266 | ||||||
Pier 1 Imports, Inc. | 48,830 | 801 | ||||||
Proto Labs, Inc. (Æ)(Ñ) | 10,000 | 288 | ||||||
Red Robin Gourmet Burgers, Inc. (Æ) | 17,290 | 528 | ||||||
Regis Corp. | 17,880 | 321 | ||||||
RG Barry Corp. | 1,000 | 14 | ||||||
Ritchie Bros Auctioneers, Inc. | 14,850 | 316 | ||||||
Ruby Tuesday, Inc. (Æ) | 33,882 | 231 | ||||||
Scholastic Corp. | 15,400 | 434 | ||||||
Shoe Carnival, Inc. | 9,105 | 196 | ||||||
Shuffle Master, Inc. (Æ) | 13,700 | 189 | ||||||
Sinclair Broadcast Group, Inc. Class A | 12,200 | 111 | ||||||
Skechers U.S.A., Inc. Class A (Æ) | 16,439 | 335 | ||||||
Smith & Wesson Holding Corp. (Æ) | 32,900 | 274 | ||||||
Sotheby’s Class A | 14,360 | 479 | ||||||
Stamps.com, Inc. (Æ) | 21,500 | 530 | ||||||
Standard Motor Products, Inc. | 26,500 | 374 | ||||||
Steven Madden, Ltd. (Æ) | 16,080 | 511 | ||||||
Stewart Enterprises, Inc. Class A | 35,560 | 254 | ||||||
Stoneridge, Inc. (Æ) | 10,000 | 68 | ||||||
Superior Industries International, Inc. | 9,712 | 159 | ||||||
Systemax, Inc. (Æ) | 1,700 | 20 | ||||||
Texas Roadhouse, Inc. Class A | 2,100 | 39 | ||||||
Thor Industries, Inc. | 6,700 | 184 | ||||||
Viad Corp. | 4,643 | 93 | ||||||
VOXX International Corp. Class A (Æ) | 7,800 | 73 | ||||||
West Marine, Inc. (Æ) | 200 | 2 | ||||||
Wolverine World Wide, Inc. | 9,040 | 351 | ||||||
World Wrestling Entertainment, Inc. | 4,100 | 32 | ||||||
Zipcar, Inc. (Æ)(Ñ) | 33,800 | 396 | ||||||
|
| |||||||
25,448 | ||||||||
|
| |||||||
Consumer Staples - 2.0% | ||||||||
Andersons, Inc. (The) | 9,718 | 414 | ||||||
Core-Mark Holding Co., Inc. | 4,700 | 226 | ||||||
Fresh Del Monte Produce, Inc. | 25,365 | 595 | ||||||
Harris Teeter Supermarkets, Inc. | 6,700 | 275 | ||||||
Ingredion, Inc. | 5,100 | 253 | ||||||
Nash Finch Co. | 3,900 | 84 | ||||||
Rite Aid Corp. (Æ) | 82,100 | 115 | ||||||
Seneca Foods Corp. Class A (Æ) | 1,000 | 27 | ||||||
Spartan Stores, Inc. | 5,500 | 100 | ||||||
SUPERVALU, Inc. (Ñ) | 41,100 | 213 | ||||||
TreeHouse Foods, Inc. (Æ)(Ñ) | 14,358 | 893 | ||||||
Universal Corp. | 8,170 | 379 | ||||||
|
| |||||||
3,574 | ||||||||
|
| |||||||
Energy - 4.4% | ||||||||
Approach Resources, Inc. (Æ)(Ñ) | 19,030 | 486 | ||||||
Cal Dive International, Inc. (Æ) | 66,987 | 194 |
Aggressive Equity Fund | 17 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (expect share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
CARBO Ceramics, Inc. (Ñ) | 9,600 | 736 | ||||||
Contango Oil & Gas Co. (Æ) | 11,000 | 651 | ||||||
Core Laboratories NV | 2,750 | 319 | ||||||
Delek US Holdings, Inc. | 25,000 | 440 | ||||||
DHT Holdings, Inc. (Æ)(Ñ) | 94 | 12 | ||||||
EnerNOC, Inc. (Æ) | 7,200 | 52 | ||||||
EXCO Resources, Inc. (Ñ) | 54,430 | 413 | ||||||
Gulfport Energy Corp. (Æ) | 10,100 | 208 | ||||||
Helix Energy Solutions Group, Inc. (Æ) | 23,000 | 377 | ||||||
Hornbeck Offshore Services, Inc. (Æ) | 6,100 | 237 | ||||||
Lufkin Industries, Inc. | 4,520 | 246 | ||||||
Nabors Industries, Ltd. (Æ) | 15,064 | 217 | ||||||
Natural Gas Services Group, Inc. (Æ) | 7,100 | 105 | ||||||
Pacific Drilling SA (Æ) | 26,390 | 225 | ||||||
Patterson-UTI Energy, Inc. | 10,981 | 160 | ||||||
Penn Virginia Corp. | 31,900 | 234 | ||||||
Pioneer Drilling Co. (Æ) | 1,600 | 13 | ||||||
REX American Resources Corp. (Æ) | 4,400 | 86 | ||||||
Rosetta Resources, Inc. (Æ) | 7,610 | 279 | ||||||
Rowan Companies PLC (Æ) | 10,480 | 339 | ||||||
Stone Energy Corp. (Æ) | 11,600 | 294 | ||||||
STR Holdings, Inc. (Æ)(Ñ) | 11,700 | 53 | ||||||
SunPower Corp. Class A (Æ) | 10,600 | 51 | ||||||
Superior Energy Services, Inc. (Æ) | 22,375 | 452 | ||||||
Tesco Corp. (Æ) | 9,700 | 116 | ||||||
TETRA Technologies, Inc. (Æ) | 23,127 | 165 | ||||||
Unit Corp. (Æ) | 4,259 | 157 | ||||||
W&T Offshore, Inc. | 44,220 | 677 | ||||||
Western Refining, Inc. | 6,900 | 154 | ||||||
|
| |||||||
8,148 | ||||||||
|
| |||||||
Financial Services - 24.2% | ||||||||
1st Source Corp. | 5,300 | 120 | ||||||
Advent Software, Inc. (Æ) | 24,900 | 675 | ||||||
AG Mortgage Investment Trust, Inc. (ö) | 30,500 | 656 | ||||||
American Campus Communities, Inc. (ö) | 5,700 | 256 | ||||||
American Capital Mortgage Investment Corp. (ö) | 12,920 | 309 | ||||||
American Safety Insurance Holdings, | 1,600 | 30 | ||||||
Ameriprise Financial, Inc. | 5,402 | 282 | ||||||
Anworth Mortgage Asset Corp. (ö) | 69,610 | 491 | ||||||
Apollo Residential Mortgage, Inc. | 53,300 | 1,027 | ||||||
Ares Capital Corp. | 10,839 | 173 | ||||||
Argo Group International Holdings, Ltd. | 8,700 | 255 | ||||||
Arlington Asset Investment Corp. | 5,700 | 124 | ||||||
Ashford Hospitality Trust, Inc. (ö) | 9,100 | 77 | ||||||
Associated Banc-Corp. | 7,300 | 96 | ||||||
Associated Estates Realty Corp. (ö) | 14,600 | 218 | ||||||
Astoria Financial Corp. | 30,100 | 295 | ||||||
Baldwin & Lyons, Inc. Class B | 1,100 | 26 | ||||||
Bancfirst Corp. (Ñ) | 1,100 | 46 | ||||||
Banco Latinoamericano de Comercio Exterior SA Class E | 46,300 | 993 | ||||||
Bancorp, Inc. (Æ) | 20,933 | 198 | ||||||
Bank of Marin Bancorp | 700 | 26 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Beneficial Mutual Bancorp, Inc. (Æ) | 6,000 | 52 | ||||||
Berkshire Hills Bancorp, Inc. | 9,700 | 213 | ||||||
BioMed Realty Trust, Inc. (ö) | 23,450 | 438 | ||||||
Boston Private Financial Holdings, Inc. | 30,172 | 269 | ||||||
Brookline Bancorp, Inc. | 45,040 | 399 | ||||||
Calamos Asset Management, Inc. Class A | 6,200 | 71 | ||||||
Capitol Federal Financial, Inc. | 49,751 | 591 | ||||||
CapLease, Inc. (ö) | 7,800 | 32 | ||||||
Capstead Mortgage Corp. (ö) | 36,800 | 512 | ||||||
Center Bancorp, Inc. | 2,300 | 26 | ||||||
Centerstate Banks, Inc. | 4,000 | 29 | ||||||
Central Pacific Financial Corp. (Æ) | 4,700 | 66 | ||||||
Chemical Financial Corp. | 5,900 | 127 | ||||||
Chesapeake Lodging Trust (ö) | 4,390 | 76 | ||||||
Citizens & Northern Corp. | 1,800 | 34 | ||||||
Citizens Republic Bancorp, Inc. (Æ) | 13,100 | 224 | ||||||
CNB Financial Corp. | 700 | 11 | ||||||
CoBiz Financial, Inc. | 11,300 | 71 | ||||||
Colonial Properties Trust (ö) | 10,762 | 238 | ||||||
Comerica, Inc. | 10,926 | 336 | ||||||
Community Bank System, Inc. | 3,562 | 97 | ||||||
Community Trust Bancorp, Inc. | 1,000 | 33 | ||||||
CoreLogic, Inc. (Æ) | 26,700 | 489 | ||||||
DFC Global Corp. (Æ) | 11,638 | 214 | ||||||
DiamondRock Hospitality Co. (ö) | 32,501 | 332 | ||||||
Dime Community Bancshares, Inc. | 10,570 | 140 | ||||||
Eagle Bancorp, Inc. (Æ) | 3,900 | 61 | ||||||
Entertainment Properties Trust (ö) | 5,100 | 210 | ||||||
Evercore Partners, Inc. Class A | 23,230 | 543 | ||||||
Extra Space Storage, Inc. (ö) | 13,300 | 407 | ||||||
FactSet Research Systems, Inc. | 3,375 | 314 | ||||||
Fair Isaac Corp. | 7,300 | 309 | ||||||
FBL Financial Group, Inc. Class A | 3,300 | 92 | ||||||
FBR & Co. (Æ) | 7,200 | 20 | ||||||
First American Financial Corp. | 58,440 | 991 | ||||||
First Community Bancshares, Inc. | 1,000 | 14 | ||||||
First Connecticut Bancorp, Inc. (Ñ) | 1,600 | 22 | ||||||
First Defiance Financial Corp. | 300 | 5 | ||||||
First Financial Bancorp | 880 | 14 | ||||||
First Industrial Realty Trust, Inc. (Æ)(ö) | 53,000 | 669 | ||||||
First Interstate Bancsystem, Inc. Class A | 3,400 | 48 | ||||||
First Merchants Corp. | 11,900 | 148 | ||||||
FirstMerit Corp. | 12,000 | 198 | ||||||
Flagstone Reinsurance Holdings SA (Å) | 74,050 | 593 | ||||||
Forestar Group, Inc. (Æ) | 19,080 | 244 | ||||||
Franklin Street Properties Corp. (ö) | 53,502 | 566 | ||||||
German American Bancorp, Inc. | 1,100 | 23 | ||||||
GFI Group, Inc. | 28,100 | 100 | ||||||
Global Cash Access Holdings, Inc. (Æ) | 55,400 | 399 | ||||||
Greenhill & Co., Inc. (Ñ) | 15,925 | 568 | ||||||
Hallmark Financial Services (Æ) | 3,300 | 26 | ||||||
Hanover Insurance Group, Inc. (The) | 10,175 | 398 | ||||||
Healthcare Realty Trust, Inc. (ö) | 20 | — | ||||||
Heartland Payment Systems, Inc. | 2,800 | 84 | ||||||
Hercules Technology Growth Capital, Inc. | 46,510 | 527 | ||||||
Heritage Financial Corp. | 1,700 | 25 | ||||||
Home BancShares, Inc. | 20,080 | 614 |
18 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (expect share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Home Federal Bancorp, Inc. | 1,900 | 20 | ||||||
Horace Mann Educators Corp. | 39,795 | 695 | ||||||
Hospitality Properties Trust (ö) | 13,884 | 344 | ||||||
Iberiabank Corp. | 11,510 | 581 | ||||||
Infinity Property & Casualty Corp. | 8,240 | 475 | ||||||
Inland Real Estate Corp. (ö) | 13,000 | 109 | ||||||
Interactive Brokers Group, Inc. Class A | 19,300 | 284 | ||||||
Invesco Mortgage Capital, Inc. (ö) | 19,000 | 348 | ||||||
Investment Technology Group, Inc. (Æ) | 16,200 | 149 | ||||||
Investors Real Estate Trust (Ñ)(ö) | 1,400 | 11 | ||||||
Jack Henry & Associates, Inc. | 10,400 | 359 | ||||||
JER Investors Trust, Inc. (Æ)(ß) | 1,771 | — | ||||||
KBW, Inc. (Ñ) | 66,663 | 1,096 | ||||||
KeyCorp | 45,351 | 351 | ||||||
Kite Realty Group Trust (ö) | 7,700 | 38 | ||||||
Knight Capital Group, Inc. Class A (Æ) | 50,213 | 600 | ||||||
Lakeland Financial Corp. | 13,851 | 372 | ||||||
Maiden Holdings, Ltd. | 21,700 | 188 | ||||||
MainSource Financial Group, Inc. | 5,000 | 59 | ||||||
Manning & Napier, Inc. Class A | 24,240 | 345 | ||||||
MarketAxess Holdings, Inc. | 12,920 | 344 | ||||||
Medical Properties Trust, Inc. (ö) | 43,660 | 420 | ||||||
Medley Capital Corp. | 1,000 | 12 | ||||||
Mission West Properties, Inc. (ö) | 1,500 | 13 | ||||||
Monmouth Real Estate Investment Corp. Class A (ö) | 8,600 | 101 | ||||||
Montpelier Re Holdings, Ltd. | 24,800 | 528 | ||||||
Morningstar, Inc. | 8,400 | 486 | ||||||
National Bankshares, Inc. | 500 | 15 | ||||||
Nelnet, Inc. Class A | 15,000 | 345 | ||||||
NGP Capital Resources Co. (Ñ) | 1,100 | 8 | ||||||
NorthStar Realty Finance Corp. (Ñ)(ö) | 29,400 | 154 | ||||||
OmniAmerican Bancorp, Inc. (Æ) | 4,200 | 90 | ||||||
One Liberty Properties, Inc. (ö) | 3,600 | 68 | ||||||
OneBeacon Insurance Group, Ltd. Class A | 10,000 | 130 | ||||||
Pacific Continental Corp. | 4,000 | 35 | ||||||
PacWest Bancorp | 14,800 | 350 | ||||||
Parkway Properties, Inc. (ö) | 4,953 | 57 | ||||||
PennantPark Investment Corp. | 15,762 | 163 | ||||||
PennyMac Mortgage Investment Trust (ö) | 42,200 | 833 | ||||||
Peoples Bancorp, Inc. | 2,500 | 55 | ||||||
Piper Jaffray Cos. (Æ) | 14,823 | 348 | ||||||
Post Properties, Inc. (ö) | 2,500 | 122 | ||||||
Potlatch Corp. (ö) | 29,350 | 938 | ||||||
PrivateBancorp, Inc. Class A | 23,535 | 347 | ||||||
ProAssurance Corp. | 7,600 | 677 | ||||||
Prosperity Bancshares, Inc. | 15,240 | 640 | ||||||
Protective Life Corp. | 5,100 | 150 | ||||||
Raymond James Financial, Inc. | 5,083 | 174 | ||||||
Reinsurance Group of America, Inc. Class A | 4,000 | 213 | ||||||
Renasant Corp. | 4,800 | 75 | ||||||
Republic Bancorp, Inc. Class A (Ñ) | 3,200 | 71 | ||||||
RLI Corp. | 5,700 | 389 | ||||||
RLJ Lodging Trust (ö) | 17,500 | 317 | ||||||
Sabra Health Care REIT, Inc. (ö) | 5,100 | 87 | ||||||
Safety Insurance Group, Inc. | 3,100 | 126 |
Principal Amount ($) or Shares | Market Value $ | |||||||
SCBT Financial Corp. | 200 | 7 | ||||||
SeaBright Holdings, Inc. | 6,600 | 59 | ||||||
Selective Insurance Group, Inc. | 1,200 | 21 | ||||||
Signature Bank (Æ) | 17,690 | 1,078 | ||||||
Southside Bancshares, Inc. (Ñ) | 9,345 | 210 | ||||||
Southwest Bancorp, Inc. (Æ) | 1,030 | 10 | ||||||
Sovran Self Storage, Inc. (ö) | 6,100 | 306 | ||||||
State Bank Financial Corp. (Æ) | 9,400 | 143 | ||||||
StellarOne Corp. | 24,322 | 304 | ||||||
Sterling Bancorp | 27,610 | 276 | ||||||
Strategic Hotels & Resorts, Inc. (Æ)(ö) | 29,600 | 191 | ||||||
Sunstone Hotel Investors, Inc. (Æ)(ö) | 35,500 | 390 | ||||||
Susquehanna Bancshares, Inc. | 15,200 | 157 | ||||||
SVB Financial Group (Æ) | 29,380 | 1,727 | ||||||
SY Bancorp, Inc. (Ñ) | 2,500 | 60 | ||||||
Symetra Financial Corp. | 7,900 | 100 | ||||||
Terreno Realty Corp. (ö) | 2,000 | 30 | ||||||
Texas Capital Bancshares, Inc. (Æ) | 21,818 | 881 | ||||||
THL Credit, Inc. | 1,700 | 23 | ||||||
Trico Bancshares | 1,500 | 23 | ||||||
TrustCo Bank Corp. | 22,400 | 122 | ||||||
United Financial Bancorp, Inc. | 1,500 | 22 | ||||||
United Fire Group, Inc. (Æ) | 6,500 | 139 | ||||||
ViewPoint Financial Group, Inc. | 10,277 | 161 | ||||||
Virginia Commerce Bancorp, Inc. (Æ) | 7,204 | 61 | ||||||
Washington Federal, Inc. | 25,757 | 435 | ||||||
Webster Financial Corp. | 42,400 | 918 | ||||||
West Coast Bancorp (Æ) | 2,078 | 41 | ||||||
Westwood Holdings Group, Inc. | 17,175 | 640 | ||||||
Whitestone REIT Class B (Ñ)(ö) | 3,547 | 49 | ||||||
Wilshire Bancorp, Inc. (Æ) | 41,300 | 226 | ||||||
Winthrop Realty Trust (ö) | 12,128 | 147 | ||||||
Wintrust Financial Corp. | 11,000 | 391 | ||||||
|
| |||||||
44,378 | ||||||||
|
| |||||||
Health Care - 10.2% | ||||||||
Abaxis, Inc. (Æ) | 22,550 | 834 | ||||||
Accelrys, Inc. (Æ) | 70,925 | 574 | ||||||
Accuray, Inc. (Æ) | 14,600 | 100 | ||||||
Affymetrix, Inc. (Æ) | 39,700 | 186 | ||||||
Air Methods Corp. (Æ) | 8,640 | 849 | ||||||
Akorn, Inc. (Æ) | 25,070 | 395 | ||||||
Albany Molecular Research, Inc. (Æ) | 7,200 | 18 | ||||||
Alere, Inc. (Æ) | 7,600 | 148 | ||||||
Align Technology, Inc. (Æ) | 26,450 | 886 | ||||||
Alphatec Holdings, Inc. (Æ)(Ñ) | 6,900 | 13 | ||||||
Analogic Corp. | 3,233 | 200 | ||||||
AngioDynamics, Inc. (Æ) | 9,600 | 115 | ||||||
Array BioPharma, Inc. (Æ) | 25,217 | 88 | ||||||
Assisted Living Concepts, Inc. Class A | 4,500 | 64 | ||||||
athenahealth, Inc. (Æ)(Ñ) | 6,580 | 521 | ||||||
Cambrex Corp. (Æ) | 28,300 | 266 | ||||||
Cantel Medical Corp. | 15,600 | 425 | ||||||
Catalyst Health Solutions, Inc. (Æ) | 7,950 | 743 | ||||||
Centene Corp. (Æ) | 12,510 | 377 | ||||||
Computer Programs & Systems, Inc. | 11,131 | 637 | ||||||
CONMED Corp. | 21,746 | 601 |
Aggressive Equity Fund | 19 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (expect share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Cross Country Healthcare, Inc. (Æ) | 7,300 | 32 | ||||||
CryoLife, Inc. (Æ) | 6,400 | 33 | ||||||
Cutera, Inc. (Æ) | 2,300 | 17 | ||||||
Cynosure, Inc. Class A (Æ) | 8,764 | 186 | ||||||
Cytokinetics, Inc. (Æ) | 23,600 | 15 | ||||||
Durect Corp. (Æ) | 1,300 | 1 | ||||||
Epocrates, Inc. (Æ)(Ñ) | 6,800 | 55 | ||||||
Exactech, Inc. (Æ) | 1,099 | 18 | ||||||
Geron Corp. (Æ)(Ñ) | 44,700 | 77 | ||||||
Greatbatch, Inc. (Æ) | 12,900 | 293 | ||||||
Health Management Associates, Inc. | 15,300 | 120 | ||||||
Health Net, Inc. (Æ) | 12,050 | 292 | ||||||
Hill-Rom Holdings, Inc. | 13,000 | 401 | ||||||
HMS Holdings Corp. (Æ) | 16,100 | 536 | ||||||
Impax Laboratories, Inc. (Æ) | 33,560 | 680 | ||||||
Insmed, Inc. (Æ) | 7,400 | 24 | ||||||
Invacare Corp. | 7,100 | 110 | ||||||
IPC The Hospitalist Co., Inc. (Æ) | 13,912 | 630 | ||||||
IRIS International, Inc. (Æ) | 3,600 | 41 | ||||||
Magellan Health Services, Inc. (Æ) | 7,000 | 317 | ||||||
Meridian Bioscience, Inc. | 54,475 | 1,115 | ||||||
Molina Healthcare, Inc. (Æ) | 25,500 | 598 | ||||||
National Research Corp. (Ñ) | 11,225 | 588 | ||||||
Neogen Corp. (Æ) | 16,625 | 768 | ||||||
Pacific Biosciences of California, Inc. (Æ) | 18,900 | 41 | ||||||
Par Pharmaceutical Cos., Inc. (Æ) | 5,600 | 202 | ||||||
PDL BioPharma, Inc. (Ñ) | 7,100 | 47 | ||||||
PerkinElmer, Inc. | 7,200 | 186 | ||||||
PharMerica Corp. (Æ) | 13,100 | 143 | ||||||
Pozen, Inc. (Æ) | 30,600 | 191 | ||||||
Quality Systems, Inc. | 13,300 | 366 | ||||||
RTI Biologics, Inc. (Æ) | 68,600 | 258 | ||||||
Solta Medical, Inc. (Æ) | 15,700 | 46 | ||||||
Steris Corp. | 23,490 | 737 | ||||||
Targacept, Inc. (Æ) | 10,600 | 46 | ||||||
Techne Corp. | 7,000 | 519 | ||||||
Triple-S Management Corp. Class B (Æ) | 10,866 | 199 | ||||||
Universal American Corp. (Æ) | 27,800 | 293 | ||||||
WellCare Health Plans, Inc. (Æ) | 9,000 | 477 | ||||||
|
| |||||||
18,738 | ||||||||
|
| |||||||
Materials and Processing - 6.8% | ||||||||
A Schulman, Inc. | 16,250 | 323 | ||||||
Aceto Corp. | 36,000 | 325 | ||||||
AK Steel Holding Corp. (Ñ) | 86,030 | 505 | ||||||
AMCOL International Corp. | 16,935 | 479 | ||||||
Apogee Enterprises, Inc. | 16,280 | 262 | ||||||
Balchem Corp. | 22,500 | 734 | ||||||
Buckeye Technologies, Inc. | 2,800 | 80 | ||||||
Cabot Corp. | 14,019 | 570 | ||||||
Chemtura Corp. (Æ) | 31,700 | 460 | ||||||
Comfort Systems USA, Inc. | 8,300 | 83 | ||||||
Commercial Metals Co. | 15,130 | 191 | ||||||
Cytec Industries, Inc. | 2,715 | 159 | ||||||
Encore Wire Corp. | 4,400 | 118 | ||||||
Gibraltar Industries, Inc. (Æ) | 12,466 | 129 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Globe Specialty Metals, Inc. | 44,020 | 591 | ||||||
IAMGOLD Corp. | 15,087 | 178 | ||||||
Kaiser Aluminum Corp. | 10,080 | 523 | ||||||
KapStone Paper and Packaging Corp. (Æ) | 10,400 | 165 | ||||||
Kaydon Corp. | 9,165 | 196 | ||||||
Kraton Performance Polymers, Inc. (Æ) | 16,717 | 366 | ||||||
Landec Corp. (Æ) | 8,355 | 72 | ||||||
LB Foster Co. Class A | 3,700 | 106 | ||||||
Materion Corp. | 8,500 | 196 | ||||||
Minerals Technologies, Inc. | 7,100 | 453 | ||||||
Mueller Industries, Inc. | 3,900 | 166 | ||||||
NCI Building Systems, Inc. (Æ) | 7,600 | 82 | ||||||
Neenah Paper, Inc. | 1,800 | 48 | ||||||
Noranda Aluminum Holding Corp. | 14,530 | 116 | ||||||
Northwest Pipe Co. (Æ) | 1,000 | 24 | ||||||
Olympic Steel, Inc. | 1,300 | 21 | ||||||
OM Group, Inc. (Æ) | 23,725 | 451 | ||||||
PH Glatfelter Co. | 18,600 | 304 | ||||||
PolyOne Corp. | 45,730 | 626 | ||||||
Rentech, Inc. (Æ) | 30,100 | 62 | ||||||
RTI International Metals, Inc. (Æ) | 8,322 | 188 | ||||||
Schweitzer-Mauduit International, Inc. | 5,700 | 388 | ||||||
Sensient Technologies Corp. | 19,496 | 716 | ||||||
Simpson Manufacturing Co., Inc. | 26,150 | 772 | ||||||
Stepan Co. | 1,700 | 160 | ||||||
Titanium Metals Corp. | 1,970 | 22 | ||||||
TPC Group, Inc. (Æ) | 12,010 | 444 | ||||||
Tredegar Corp. | 6,438 | 94 | ||||||
Universal Forest Products, Inc. | 3,880 | 151 | ||||||
WR Grace & Co. (Æ) | 6,500 | 328 | ||||||
|
| |||||||
12,427 | ||||||||
|
| |||||||
Producer Durables - 17.8% | ||||||||
ACCO Brands Corp. (Æ) | 9,600 | 99 | ||||||
Advisory Board Co. (The) (Æ) | 18,218 | 903 | ||||||
Aerovironment, Inc. (Æ) | 10,225 | 269 | ||||||
Alaska Air Group, Inc. (Æ) | 11,000 | 395 | ||||||
Alexander & Baldwin Holdings, Inc. | 4,235 | 226 | ||||||
American Railcar Industries, Inc. (Æ) | 6,300 | 171 | ||||||
American Superconductor Corp. (Æ)(Ñ) | 8,800 | 41 | ||||||
AO Smith Corp. | 5,400 | 264 | ||||||
Argan, Inc. | 1,300 | 18 | ||||||
Ascent Capital Group, Inc. Class A (Æ) | 900 | 47 | ||||||
Astec Industries, Inc. (Æ) | 16,823 | 517 | ||||||
BE Aerospace, Inc. (Æ) | 6,015 | 263 | ||||||
Brady Corp. Class A | 10,180 | 280 | ||||||
Briggs & Stratton Corp. (Ñ) | 17,250 | 302 | ||||||
Brink’s Co. (The) | 3,400 | 79 | ||||||
Bristow Group, Inc. | 17,000 | 691 | ||||||
CDI Corp. | 15,100 | 248 | ||||||
Celadon Group, Inc. | 7,800 | 128 | ||||||
Chart Industries, Inc. (Æ) | 5,975 | 411 | ||||||
CIRCOR International, Inc. | 7,298 | 249 | ||||||
Columbus McKinnon Corp. (Æ) | 16,500 | 249 | ||||||
Consolidated Graphics, Inc. (Æ) | 2,180 | 63 | ||||||
Con-way, Inc. | 17,300 | 625 | ||||||
Corrections Corp. of America | 4,200 | 124 |
20 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (expect share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
CoStar Group, Inc. (Æ) | 18,650 | 1,513 | ||||||
CRA International, Inc. (Æ) | 500 | 7 | ||||||
Crane Co. | 5,300 | 193 | ||||||
DHT Holdings, Inc. | 18,800 | 12 | ||||||
DXP Enterprises, Inc. (Æ) | 7,600 | 315 | ||||||
Electro Rent Corp. | 3,000 | 49 | ||||||
Electronics for Imaging, Inc. (Æ) | 29,952 | 487 | ||||||
EMCOR Group, Inc. | 1,400 | 39 | ||||||
EnerSys (Æ) | 12,400 | 435 | ||||||
Exponent, Inc. (Æ) | 5,100 | 269 | ||||||
FARO Technologies, Inc. (Æ) | 8,025 | 338 | ||||||
Flow International Corp. (Æ) | 19,900 | 63 | ||||||
FreightCar America, Inc. | 12,100 | 278 | ||||||
G&K Services, Inc. Class A | 6,200 | 193 | ||||||
GP Strategies Corp. (Æ) | 2,900 | 54 | ||||||
GrafTech International, Ltd. (Æ) | 22,089 | 213 | ||||||
Granite Construction, Inc. | 18,534 | 484 | ||||||
Gulfmark Offshore, Inc. Class A (Æ) | 8,000 | 272 | ||||||
H&E Equipment Services, Inc. (Æ) | 6,000 | 90 | ||||||
Hardinge, Inc. | 3,300 | 30 | ||||||
Harsco Corp. | 24,220 | 494 | ||||||
Hawaiian Holdings, Inc. (Æ) | 31,900 | 208 | ||||||
Heidrick & Struggles International, Inc. | 5,000 | 88 | ||||||
Hub Group, Inc. Class A (Æ) | 20,990 | 760 | ||||||
Huntington Ingalls Industries, Inc. (Æ) | 1,300 | 52 | ||||||
Huron Consulting Group, Inc. (Æ) | 2,000 | 63 | ||||||
InnerWorkings, Inc. (Æ)(Ñ) | 40,000 | 541 | ||||||
John B Sanfilippo & Son, Inc. (Æ) | 11,600 | 207 | ||||||
Kadant, Inc. (Æ) | 700 | 16 | ||||||
KBR, Inc. | 5,000 | 124 | ||||||
Kelly Services, Inc. Class A | 17,700 | 228 | ||||||
Kennametal, Inc. | 11,359 | 376 | ||||||
Kimball International, Inc. Class B | 4,100 | 32 | ||||||
Knight Transportation, Inc. | 41,910 | 670 | ||||||
Knoll, Inc. | 38,050 | 511 | ||||||
Layne Christensen Co. (Æ) | 10,490 | 217 | ||||||
Lexmark International, Inc. Class A | 5,000 | 133 | ||||||
Marlin Business Services Corp. | 1,800 | 30 | ||||||
Marten Transport, Ltd. | 4,400 | 94 | ||||||
MAXIMUS, Inc. | 12,767 | 661 | ||||||
McGrath RentCorp | 10,070 | 267 | ||||||
Metalico, Inc. (Æ) | 10,687 | 24 | ||||||
Met-Pro Corp. | 2,700 | 25 | ||||||
Modine Manufacturing Co. (Æ) | 20,400 | 141 | ||||||
NACCO Industries, Inc. Class A | 3,000 | 349 | ||||||
Navigant Consulting, Inc. (Æ) | 60,300 | 762 | ||||||
Net 1 UEPS Technologies, Inc. (Æ) | 13,800 | 116 | ||||||
Orbital Sciences Corp. (Æ) | 10,200 | 132 | ||||||
OSI Systems, Inc. (Æ) | 1,000 | 63 | ||||||
PHH Corp. (Æ)(Ñ) | 21,400 | 374 | ||||||
Primoris Services Corp. | 25,200 | 302 | ||||||
Quad/Graphics, Inc. (Ñ) | 8,200 | 118 | ||||||
Quality Distribution, Inc. (Æ) | 6,600 | 73 | ||||||
Quanta Services, Inc. (Æ) | 11,821 | 285 | ||||||
Raven Industries, Inc. | 17,275 | 1,201 | ||||||
Regal-Beloit Corp. | 2,495 | 155 | ||||||
Resources Connection, Inc. | 50,900 | 626 | ||||||
Roadrunner Transportation Systems, Inc. (Æ) | 7,300 | 123 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Robbins & Myers, Inc. | 2,800 | 117 | ||||||
Rollins, Inc. | 28,525 | 638 | ||||||
Ryder System, Inc. | 12,940 | 466 | ||||||
Saia, Inc. (Æ) | 14,700 | 322 | ||||||
ServiceSource International, Inc. (Æ)(Ñ) | 32,410 | 449 | ||||||
Shaw Group, Inc. (The) (Æ) | 12,000 | 328 | ||||||
SkyWest, Inc. | 7,200 | 47 | ||||||
Southwest Airlines Co. | 42,003 | 387 | ||||||
Spartan Motors, Inc. | 10,017 | 52 | ||||||
Steelcase, Inc. Class A | 32,920 | 297 | ||||||
Sun Hydraulics Corp. | 39,200 | 951 | ||||||
Swift Transportation Co. Class A (Æ) | 15,300 | 145 | ||||||
Sykes Enterprises, Inc. (Æ) | 18,700 | 298 | ||||||
Tetra Tech, Inc. (Æ) | 32,740 | 854 | ||||||
Tidewater, Inc. | 6,880 | 319 | ||||||
Titan Machinery, Inc. (Æ)(Ñ) | 11,300 | 343 | ||||||
Towers Watson & Co. Class A | 9,000 | 539 | ||||||
Trimas Corp. (Æ) | 5,700 | 115 | ||||||
Triumph Group, Inc. | 10,520 | 592 | ||||||
TrueBlue, Inc. (Æ) | 3,500 | 54 | ||||||
Tsakos Energy Navigation, Ltd. | 46,240 | 225 | ||||||
United Stationers, Inc. | 18,370 | 495 | ||||||
URS Corp. | 9,900 | 345 | ||||||
US Airways Group, Inc. (Æ)(Ñ) | 41,600 | 555 | ||||||
US Ecology, Inc. | 3,100 | 55 | ||||||
Wabtec Corp. | 10,824 | 844 | ||||||
Wesco Aircraft Holdings, Inc. (Æ)(Ñ) | 18,740 | 239 | ||||||
|
| |||||||
32,708 | ||||||||
|
| |||||||
Technology - 16.2% | ||||||||
Acacia Research Corp. (Æ) | 32,930 | 1,227 | ||||||
ACI Worldwide, Inc. (Æ) | 22,200 | 981 | ||||||
Actuate Corp. (Æ) | 4,800 | 33 | ||||||
ADTRAN, Inc. | 16,190 | 489 | ||||||
Akamai Technologies, Inc. (Æ) | 5,170 | 164 | ||||||
Allot Communications, Ltd. (Æ) | 16,780 | 467 | ||||||
American Software, Inc. Class A (Æ) | 24,900 | 198 | ||||||
Anadigics, Inc. (Æ) | 2,000 | 4 | ||||||
Arris Group, Inc. (Æ) | 5,400 | 75 | ||||||
Aviat Networks, Inc. (Æ) | 22,900 | 64 | ||||||
Avid Technology, Inc. (Æ) | 6,500 | 48 | ||||||
Axcelis Technologies, Inc. (Æ) | 79,714 | 96 | ||||||
Bel Fuse, Inc. Class B | 600 | 11 | ||||||
Blackbaud, Inc. | 20,225 | 519 | ||||||
Bottomline Technologies, Inc. (Æ) | 38,625 | 697 | ||||||
Brooks Automation, Inc. | 41,310 | 390 | ||||||
Calix, Inc. (Æ) | 10,700 | 88 | ||||||
Callidus Software, Inc. (Æ)(Ñ) | 45,210 | 225 | ||||||
CIBER, Inc. (Æ) | 5,300 | 23 | ||||||
Cohu, Inc. (Å) | 36,980 | 376 | ||||||
comScore, Inc. (Æ) | 18,750 | 309 | ||||||
Comtech Telecommunications Corp. | 10,200 | 292 | ||||||
Cray, Inc. (Æ) | 6,100 | 74 | ||||||
Cree, Inc. (Æ)(Ñ) | 8,834 | 227 | ||||||
CSG Systems International, Inc. (Æ) | 7,800 | 135 | ||||||
Diebold, Inc. | 8,100 | 299 | ||||||
Dot Hill Systems Corp. (Æ) | 15,300 | 17 |
Aggressive Equity Fund | 21 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (expect share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
DSP Group, Inc. (Æ) | 9,500 | 60 | ||||||
Electro Scientific Industries, Inc. | 33,187 | 392 | ||||||
Emulex Corp. (Æ) | 30,000 | 216 | ||||||
FormFactor, Inc. (Æ) | 38,600 | 250 | ||||||
Hittite Microwave Corp. (Æ) | 9,725 | 497 | ||||||
IAC/InterActiveCorp | 8,000 | 365 | ||||||
Inphi Corp. (Æ) | 54,560 | 517 | ||||||
Insight Enterprises, Inc. (Æ) | 19,100 | 322 | ||||||
Integrated Device Technology, Inc. (Æ) | 52,700 | 296 | ||||||
Integrated Silicon Solution, Inc. (Æ) | 10,400 | 105 | ||||||
International Rectifier Corp. (Æ) | 14,665 | 293 | ||||||
Intersil Corp. Class A | 108,110 | 1,152 | ||||||
Intevac, Inc. (Æ) | 9,100 | 68 | ||||||
IntraLinks Holdings, Inc. (Æ) | 10,541 | 46 | ||||||
InvenSense, Inc. Class A (Æ) | 15,326 | 173 | ||||||
Kemet Corp. (Æ) | 23,901 | 144 | ||||||
Kulicke & Soffa Industries, Inc. (Æ) | 35,100 | 313 | ||||||
LivePerson, Inc. (Æ) | 20,423 | 389 | ||||||
LSI Corp. (Æ) | 44,100 | 281 | ||||||
LTX-Credence Corp. (Æ) | 18,100 | 121 | ||||||
Manhattan Associates, Inc. (Æ) | 7,000 | 320 | ||||||
Mattson Technology, Inc. (Æ)(Ñ) | 30,900 | 54 | ||||||
Mentor Graphics Corp. (Æ) | 81,700 | 1,226 | ||||||
Mercury Computer Systems, Inc. (Æ) | 23,234 | 300 | ||||||
Methode Electronics, Inc. (Å) | 44,821 | 382 | ||||||
Micrel, Inc. | 72,810 | 694 | ||||||
Mindspeed Technologies, Inc. (Æ)(Ñ) | 17,300 | 43 | ||||||
MKS Instruments, Inc. | 23,300 | 674 | ||||||
NeuStar, Inc. Class A (Æ) | 6,200 | 207 | ||||||
NIC, Inc. | 52,100 | 662 | ||||||
NVE Corp. (Æ) | 13,800 | 742 | ||||||
PDF Solutions, Inc. (Æ) | 900 | 9 | ||||||
Perficient, Inc. (Æ) | 20,800 | 234 | ||||||
Pericom Semiconductor Corp. (Æ) | 6,700 | 60 | ||||||
Plantronics, Inc. | 2,500 | 84 | ||||||
Plexus Corp. (Æ) | 5,900 | 166 | ||||||
Polycom, Inc. (Æ) | 22,404 | 236 | ||||||
PROS Holdings, Inc. (Æ) | 42,525 | 715 | ||||||
Radisys Corp. (Æ) | 14,800 | 93 | ||||||
RealNetworks, Inc. | 5,602 | 48 | ||||||
Sanmina-SCI Corp. (Æ) | 46,200 | 378 | ||||||
Seachange International, Inc. (Æ) | 11,500 | 95 | ||||||
Sigma Designs, Inc. (Æ) | 14,200 | 91 | ||||||
Silicon Image, Inc. (Æ) | 26,900 | 111 | ||||||
Silicon Laboratories, Inc. (Æ) | 1,600 | 61 | ||||||
Silicon Motion Technology Corp. (Æ)(Ñ) | 13,425 | 189 | ||||||
SolarWinds, Inc. (Æ) | 13,100 | 571 | ||||||
Sonus Networks, Inc. (Æ) | 78,800 | 169 | ||||||
Sourcefire, Inc. (Æ) | 14,220 | 731 | ||||||
Spansion, Inc. Class A (Æ) | 17,400 | 191 | ||||||
Stratasys, Inc. (Æ)(Ñ) | 20,350 | 1,008 | ||||||
support.com, Inc. (Æ) | 7,614 | 24 | ||||||
Synchronoss Technologies, Inc. (Æ) | 28,980 | 535 | ||||||
SYNNEX Corp. (Æ) | 10,200 | 352 | ||||||
Syntel, Inc. | 1,300 | 79 | ||||||
Tangoe, Inc. (Æ) | 48,670 | 1,036 | ||||||
Tech Data Corp. (Æ) | 6,900 | 332 | ||||||
TeleNav, Inc. (Æ) | 1,917 | 12 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Tellabs, Inc. | 115,200 | 384 | ||||||
Tessera Technologies, Inc. | 54,730 | 841 | ||||||
TNS, Inc. (Æ) | 4,000 | 72 | ||||||
Tyler Technologies, Inc. (Æ) | 23,200 | 936 | ||||||
Ubiquiti Networks, Inc. (Æ)(Ñ) | 2,100 | 30 | ||||||
Unisys Corp. (Æ) | 17,800 | 348 | ||||||
United Online, Inc. | 19,700 | 83 | ||||||
Vishay Intertechnology, Inc. (Æ) | 27,884 | 263 | ||||||
Vocera Communications, Inc. (Æ) | 8,561 | 229 | ||||||
Xyratex, Ltd. | 10,300 | 116 | ||||||
|
| |||||||
29,744 | ||||||||
|
| |||||||
Utilities - 2.2% | ||||||||
Alaska Communications Systems Group, Inc. (Ñ) | 7,800 | 16 | ||||||
American States Water Co. | 400 | 16 | ||||||
Artesian Resources Corp. Class A | 1,200 | 26 | ||||||
Black Hills Corp. | 10,209 | 328 | ||||||
Cbeyond, Inc. (Æ) | 4,600 | 31 | ||||||
Chesapeake Utilities Corp. | 1,900 | 83 | ||||||
Cincinnati Bell, Inc. (Æ) | 42,100 | 157 | ||||||
Double Eagle Petroleum Co. (Æ) | 3,000 | 13 | ||||||
El Paso Electric Co. | 29,520 | 980 | ||||||
Fairpoint Communications, Inc. (Æ)(Ñ) | 6,400 | 39 | ||||||
GenOn Energy, Inc. (Æ) | 260,400 | 446 | ||||||
NorthWestern Corp. | 16,095 | 590 | ||||||
NTELOS Holdings Corp. | 855 | 16 | ||||||
PNM Resources, Inc. | 30,800 | 602 | ||||||
Portland General Electric Co. | 20,618 | 550 | ||||||
SJW Corp. | 3,100 | 74 | ||||||
|
| |||||||
3,967 | ||||||||
|
| |||||||
Total Common Stocks (cost $171,089) | 179,132 | |||||||
|
| |||||||
Short-Term Investments - 2.2% | ||||||||
Russell U.S. Cash Management Fund | 4,033,709 | (¥) | 4,034 | |||||
|
| |||||||
Total Short-Term Investments (cost $4,034) | 4,034 | |||||||
|
| |||||||
Other Securities - 4.5% | ||||||||
Russell Investment Funds Liquidating Trust (×) | 187,256 | (¥) | 190 | |||||
Russell U.S. Cash Collateral Fund (×) | 8,063,195 | (¥) | 8,063 | |||||
|
| |||||||
Total Other Securities (cost $8,250) | 8,253 | |||||||
|
| |||||||
Total Investments - 104.4% (identified cost $183,373) | 191,419 | |||||||
Other Assets and Liabilities, Net - (4.4%) | (8,072 | ) | ||||||
|
| |||||||
Net Assets - 100.0% | 183,347 | |||||||
|
|
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
22 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except contract amounts)
Futures Contracts | Number of Contracts | Notional Amount | Expiration Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||
Long Positions | ||||||||||||||||||
Russell 2000 Mini Index Futures (CME) | 1 | USD | 80 | 09/12 | 4 | |||||||||||||
|
| |||||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 4 | |||||||||||||||||
|
|
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Amounts in thousands
Market Value | ||||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | % of Net Assets | |||||||||||||||
Common Stocks | ||||||||||||||||||||
Consumer Discretionary | $ | 25,448 | $ | — | $ | — | $ | 25,448 | 13.9 | |||||||||||
Consumer Staples | 3,574 | — | — | 3,574 | 2.0 | |||||||||||||||
Energy | 8,136 | — | 12 | 8,148 | 4.4 | |||||||||||||||
Financial Services | 44,378 | — | — | 44,378 | 24.2 | |||||||||||||||
Health Care | 18,738 | — | — | 18,738 | 10.2 | |||||||||||||||
Materials and Processing | 12,427 | — | — | 12,427 | 6.8 | |||||||||||||||
Producer Durables | 32,708 | — | — | 32,708 | 17.8 | |||||||||||||||
Technology | 29,744 | — | — | 29,744 | 16.2 | |||||||||||||||
Utilities | 3,967 | — | — | 3,967 | 2.2 | |||||||||||||||
Short-Term Investments | — | 4,034 | — | 4,034 | 2.2 | |||||||||||||||
Other Securities | — | 8,253 | — | 8,253 | 4.5 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | 179,120 | 12,287 | 12 | 191,419 | 104.4 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other Assets and Liabilities, Net | (4.4 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
100.0 | ||||||||||||||||||||
|
| |||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||||
Futures Contracts | 4 | — | — | 4 | — | * | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Other Financial Instruments** | $ | 4 | $ | — | $ | — | $ | 4 | ||||||||||||
|
|
|
|
|
|
|
|
* | Less than .05% of net assets. |
** | Other financial instruments reflected, such as futures, forwards, interest rate swaps and credit default swaps are valued at the unrealized appreciation/depreciation on the instruments. |
For a description of the levels see note 2 in the Notes to Financial Statements.
Investments in which significant unobservable inputs (Level 3) used in determining a value for the period ended June 30, 2012 were less than 1% of net assets.
There were no significant transfers in and out of Levels 1, 2 and 3 during the period ended June 30, 2012.
Aggressive Equity Fund | 23 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Fair Value of Derivative Instruments — June 30, 2012 (Unaudited)
Amounts in thousands
Derivatives not accounted for as hedging instruments | Equity Contracts | |||
Location: Statement of Assets and Liabilities - Assets | ||||
Daily variation margin on futures contracts* | $ | 4 | ||
|
| |||
Derivatives not accounted for as hedging instruments | Equity Contracts | |||
Location: Statement of Operations - Net realized gain (loss) | ||||
Futures contracts | $ | 692 | ||
|
| |||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||
Futures contracts | $ | (20 | ) | |
|
|
* | Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
For further disclosure on derivatives see note 2 in Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
24 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 183,373 | ||
Investments, at market*, ** | 191,419 | |||
Cash (restricted) | 120 | |||
Receivables: | ||||
Dividends and interest | 235 | |||
Dividends from affiliated Russell funds | 1 | |||
Investments sold | 2,169 | |||
Fund shares sold | 1 | |||
Daily variation margin on futures contracts | 9 | |||
Prepaid expenses | 2 | |||
|
| |||
Total assets | 193,956 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investments purchased | 2,020 | |||
Fund shares redeemed | 171 | |||
Accrued fees to affiliates | 131 | |||
Other accrued expenses | 37 | |||
Payable upon return of securities loaned | 8,250 | |||
|
| |||
Total liabilities | 10,609 | |||
|
| |||
Net Assets | $ | 183,347 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund | 25 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Statement of Assets and Liabilities, continued — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | (17 | ) | |
Accumulated net realized gain (loss) | (15,967 | ) | ||
Unrealized appreciation (depreciation) on: | ||||
Investments | 8,046 | |||
Futures contracts | 4 | |||
Shares of beneficial interest | 148 | |||
Additional paid-in capital | 191,133 | |||
|
| |||
Net Assets | $ | 183,347 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share: (a) | $ | 12.35 | ||
Net assets | $ | 183,346,853 | ||
Shares outstanding ($.01 par value) | 14,844,008 | |||
Amounts in thousands | ||||
* Securities on loan included in investments | $ | 8,755 | ||
** Investments in affiliates, Russell U.S. Cash Management Fund, Russell Investment Funds Liquidating Trust and Russell U.S. Cash Collateral Fund | $ | 12,287 |
(a) | 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.
26 | Aggressive Equity Fund |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Statement of Operations — For the Period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Dividends | $ | 1,311 | ||
Dividends from affiliated Russell funds | 5 | |||
Securities lending income | 81 | |||
|
| |||
Total investment income | 1,397 | |||
|
| |||
Expenses | ||||
Advisory fees | 839 | |||
Administrative fees | 47 | |||
Custodian fees | 70 | |||
Transfer agent fees | 4 | |||
Professional fees | 27 | |||
Trustees’ fees | 2 | |||
Miscellaneous | 7 | |||
|
| |||
Expenses before reductions | 996 | |||
Expense reductions | (53 | ) | ||
|
| |||
Net expenses | 943 | |||
|
| |||
Net investment income (loss) | 454 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | 19,843 | |||
Futures contracts | 692 | |||
|
| |||
Net realized gain (loss) | 20,535 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (4,939 | ) | ||
Futures contracts | (20 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | (4,959 | ) | ||
|
| |||
Net realized and unrealized gain (loss) | 15,576 | |||
|
| |||
Net Increase (Decrease) in Net Assets from Operations | $ | 16,030 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund | 27 |
Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 (Unaudited) | Fiscal Year Ended December 31, 2011 | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 454 | $ | 704 | ||||
Net realized gain (loss) | 20,535 | 14,846 | ||||||
Net change in unrealized appreciation (depreciation) | (4,959 | ) | (22,975 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 16,030 | (7,425 | ) | |||||
|
|
|
| |||||
Distributions | ||||||||
From net investment income | (471 | ) | (943 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from distributions | (471 | ) | (943 | ) | ||||
|
|
|
| |||||
Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | (9,247 | ) | (6,475 | ) | ||||
Fund Reimbursements | — | 115 | ||||||
|
|
|
| |||||
Total Net Increase (Decrease) in Net Assets | 6,312 | (14,728 | ) | |||||
Net Assets | ||||||||
Beginning of period | 177,035 | 191,763 | ||||||
|
|
|
| |||||
End of period | $ | 183,347 | $ | 177,035 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income included in net assets | $ | (17 | ) | $ | — |
See accompanying notes which are an integral part of the financial statements.
28 | Aggressive Equity Fund |
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Table of Contents
Russell Investment Funds
Aggressive Equity Fund
Financial Highlights
For a Share Outstanding Throughout the Period
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a)(b) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | |||||||||||||||||||
June 30, 2012(1) | 11.36 | .03 | .99 | 1.02 | (.03 | ) | — | |||||||||||||||||
December 31, 2011 | 11.92 | .04 | (.54 | ) | (.50 | ) | (.06 | ) | — | |||||||||||||||
December 31, 2010 | 9.59 | .04 | 2.34 | 2.38 | (.05 | ) | — | |||||||||||||||||
December 31, 2009 | 7.18 | .05 | 2.40 | 2.45 | (.04 | ) | — | |||||||||||||||||
December 31, 2008 | 12.99 | .09 | (5.81 | ) | (5.72 | ) | (.09 | ) | — | (c) | ||||||||||||||
December 31, 2007 | 14.45 | .06 | .40 | .46 | (.05 | ) | (1.87 | ) |
See accompanying notes which are an integral part of the financial statements.
30 | Aggressive Equity Fund |
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(d)(f) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Gross(e) | % Ratio of Expenses to Average Net Assets, Net(b)(e) | % Ratio of Net Investment Income to Average Net Assets(b)(e) | % Portfolio Turnover Rate(d) | |||||||||||||||||||||||
(.03 | ) | 12.35 | 8.98 | 183,347 | 1.07 | 1.01 | .49 | 84 | ||||||||||||||||||||||
(.06 | ) | 11.36 | (4.20 | ) | 177,035 | 1.08 | 1.02 | .37 | 105 | |||||||||||||||||||||
(.05 | ) | 11.92 | 24.88 | 191,763 | 1.11 | 1.05 | .44 | 107 | ||||||||||||||||||||||
(.04 | ) | 9.59 | 34.32 | 158,671 | 1.13 | 1.02 | .65 | 161 | ||||||||||||||||||||||
(.09 | ) | 7.18 | (44.16 | ) | 123,088 | 1.18 | 1.05 | .84 | 161 | |||||||||||||||||||||
(1.92 | ) | 12.99 | 3.42 | 228,927 | 1.13 | 1.05 | .39 | 180 |
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund | 31 |
Table of Contents
Russell Investment Funds
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value January 1, 2012 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value June 30, 2012 | $ | 1,038.70 | $ | 1,019.94 | ||||
Expenses Paid During Period* | $ | 5.02 | $ | 4.97 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.99% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
32 | Non-U.S. Fund |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Common Stocks - 91.3% | ||||||||
Australia - 0.8% | ||||||||
QBE Insurance Group, Ltd. | 92,326 | 1,273 | ||||||
Wesfarmers, Ltd. | 20,200 | 622 | ||||||
Westpac Banking Corp. | 35,860 | 780 | ||||||
|
| |||||||
2,675 | ||||||||
|
| |||||||
Belgium - 0.4% | ||||||||
Anheuser-Busch InBev NV | 10,525 | 818 | ||||||
KBC Groep NV | 17,798 | 378 | ||||||
|
| |||||||
1,196 | ||||||||
|
| |||||||
Bermuda - 1.9% | ||||||||
Credicorp, Ltd. | 9,300 | 1,171 | ||||||
Li & Fung, Ltd. | 604,000 | 1,172 | ||||||
PartnerRe, Ltd. - ADR | 10,075 | 762 | ||||||
RenaissanceRe Holdings, Ltd. | 9,200 | 699 | ||||||
Seadrill, Ltd. (Ñ) | 34,000 | 1,208 | ||||||
Seadrill, Ltd. | 2,800 | 100 | ||||||
Yue Yuen Industrial Holdings, Ltd. | 289,000 | 910 | ||||||
|
| |||||||
6,022 | ||||||||
|
| |||||||
Brazil - 1.4% | ||||||||
BM&FBovespa SA | 121,800 | 622 | ||||||
BR Malls Participacoes SA | 55,700 | 638 | ||||||
Brookfield Incorporacoes SA | 469,900 | 774 | ||||||
Embraer SA - ADR (Æ) | 60,600 | 1,608 | ||||||
Tim Participacoes SA - ADR | 28,410 | 780 | ||||||
|
| |||||||
4,422 | ||||||||
|
| |||||||
Canada - 1.4% | ||||||||
Brookfield Asset Management, Inc. Class A | 41,100 | 1,360 | ||||||
Canadian National Railway Co. (Æ)(Þ) | 23,790 | 2,008 | ||||||
Toronto-Dominion Bank (The) (Ñ) | 16,700 | 1,307 | ||||||
|
| |||||||
4,675 | ||||||||
|
| |||||||
Cayman Islands - 0.9% | ||||||||
ASM Pacific Technology, Ltd. | 90,900 | 1,159 | ||||||
Baidu, Inc. - ADR (Æ) | 8,766 | 1,008 | ||||||
NetEase, Inc. - ADR (Æ)(Ñ) | 15,039 | 885 | ||||||
|
| |||||||
3,052 | ||||||||
|
| |||||||
China - 0.4% | ||||||||
Industrial & Commercial Bank of China Class H | 2,364,000 | 1,322 | ||||||
|
| |||||||
Czech Republic - 0.2% | ||||||||
Komercni Banka AS | 3,384 | 588 | ||||||
|
| |||||||
Denmark - 0.9% | ||||||||
Danske Bank A/S (Æ) | 94,476 | 1,317 | ||||||
Novo Nordisk A/S Class B | 11,954 | 1,729 | ||||||
|
| |||||||
3,046 | ||||||||
|
| |||||||
France - 7.6% | ||||||||
Air Liquide SA Class A | 15,652 | 1,791 | ||||||
Arkema SA | 11,911 | 780 | ||||||
BNP Paribas SA | 43,745 | 1,689 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Capital Gemini SA | 51,500 | 1,898 | ||||||
Casino Guichard Perrachon SA (Æ) | 4,500 | 395 | ||||||
Credit Agricole SA (Æ) | 99,985 | 441 | ||||||
Danone SA | 27,305 | 1,695 | ||||||
Dassault Systemes SA (Ñ) | 17,472 | 1,641 | ||||||
GDF Suez | 35,500 | 847 | ||||||
Lagardere SCA | 28,031 | 783 | ||||||
Legrand SA - ADR | �� | 29,744 | 1,012 | |||||
LVMH Moet Hennessy Louis Vuitton | 11,503 | 1,753 | ||||||
Natixis | 112,358 | 304 | ||||||
Pernod-Ricard SA | 16,559 | 1,771 | ||||||
Rallye SA | 45,285 | 1,295 | ||||||
Sanofi - ADR | 31,682 | 2,403 | ||||||
Schneider Electric SA | 27,333 | 1,523 | ||||||
Total SA | 42,275 | 1,909 | ||||||
UBISOFT Entertainment (Æ) | 102,545 | 688 | ||||||
|
| |||||||
24,618 | ||||||||
|
| |||||||
Germany - 7.9% | ||||||||
BASF SE | 20,775 | 1,444 | ||||||
Bayer AG | 34,299 | 2,473 | ||||||
Bayerische Motoren Werke AG | 18,212 | 1,320 | ||||||
Beiersdorf AG (Æ) | 22,737 | 1,475 | ||||||
Brenntag AG | 6,258 | 692 | ||||||
Deutsche Boerse AG | 28,584 | 1,543 | ||||||
E.ON AG | 51,600 | 1,111 | ||||||
Fresenius SE & Co. KGaA | 13,669 | 1,417 | ||||||
Henkel AG & Co. KGaA | 13,037 | 722 | ||||||
Linde AG | 19,126 | 2,979 | ||||||
Merck KGaA | 10,447 | 1,043 | ||||||
MTU Aero Engines Holding AG | 45,971 | 3,375 | ||||||
SAP AG - ADR | 56,158 | 3,317 | ||||||
Siemens AG | 17,225 | 1,448 | ||||||
Volkswagen AG | 9,866 | 1,489 | ||||||
|
| |||||||
25,848 | ||||||||
|
| |||||||
Hong Kong - 1.4% | ||||||||
AIA Group, Ltd. | 741,400 | 2,556 | ||||||
China Unicom Hong Kong, Ltd. | 520,000 | 653 | ||||||
CNOOC, Ltd. | 191,000 | 385 | ||||||
Lenovo Group, Ltd. | 1,318,000 | 1,125 | ||||||
|
| |||||||
4,719 | ||||||||
|
| |||||||
India - 0.4% | ||||||||
ICICI Bank, Ltd. - ADR | 35,940 | 1,165 | ||||||
Infosys, Ltd. - ADR (Ñ) | 4,910 | 221 | ||||||
|
| |||||||
1,386 | ||||||||
|
| |||||||
Ireland - 0.2% | ||||||||
DCC PLC | 30,400 | 704 | ||||||
|
| |||||||
Israel - 1.1% | ||||||||
Check Point Software Technologies, Ltd. (Æ)(Ñ) | 27,940 | 1,386 | ||||||
Teva Pharmaceutical Industries, Ltd. - ADR | 51,625 | 2,036 | ||||||
|
| |||||||
3,422 | ||||||||
|
|
Non-U.S. Fund | 33 |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Italy - 2.2% | ||||||||
Enel SpA | 309,700 | 999 | ||||||
ENI SpA - ADR | 141,607 | 3,022 | ||||||
Finmeccanica SpA (Æ)(Ñ) | 93,746 | 379 | ||||||
Snam Rete Gas SpA | 352,425 | 1,572 | ||||||
Telecom Italia SpA | 1,278,100 | 1,259 | ||||||
|
| |||||||
7,231 | ||||||||
|
| |||||||
Japan - 14.3% | ||||||||
Amada Co., Ltd. | 176,700 | 1,048 | ||||||
Canon, Inc. (Ñ) | 125,600 | 5,029 | ||||||
Dai-ichi Life Insurance Co., Ltd. (The) | 675 | 782 | ||||||
Daito Trust Construction Co., Ltd. | 6,000 | 569 | ||||||
Denso Corp. | 50,600 | 1,723 | ||||||
FANUC Corp. | 15,800 | 2,596 | ||||||
Fast Retailing Co., Ltd. | 6,800 | 1,365 | ||||||
Honda Motor Co., Ltd. | 43,000 | 1,498 | ||||||
Hoya Corp. | 45,800 | 1,009 | ||||||
Inpex Corp. | 251 | 1,407 | ||||||
ITOCHU Corp. | 247,100 | 2,593 | ||||||
Japan Tobacco, Inc. | 30,600 | 907 | ||||||
KDDI Corp. | 234 | 1,509 | ||||||
Lawson, Inc. | 19,300 | 1,350 | ||||||
Mabuchi Motor Co., Ltd. (Ñ) | 34,600 | 1,379 | ||||||
Mitsubishi UFJ Financial Group, Inc. | 186,700 | 894 | ||||||
Mori Seiki Co., Ltd. (Ñ) | 87,400 | 759 | ||||||
MS&AD Insurance Group Holdings | 67,100 | 1,174 | ||||||
Nikon Corp. | 49,000 | 1,489 | ||||||
Nintendo Co., Ltd. | 3,400 | 397 | ||||||
NTT DoCoMo, Inc. | 953 | 1,586 | ||||||
ORIX Corp. | 17,930 | 1,669 | ||||||
Shin-Etsu Chemical Co., Ltd. | 71,000 | 3,906 | ||||||
Softbank Corp. | 41,100 | 1,528 | ||||||
Sumitomo Corp. | 150,100 | 2,100 | ||||||
Sumitomo Mitsui Financial Group, Inc. | 39,900 | 1,316 | ||||||
THK Co., Ltd. | 61,600 | 1,167 | ||||||
Toshiba TEC Corp. | 100,479 | 378 | ||||||
Toyota Motor Corp. | 21,100 | 850 | ||||||
Yokogawa Electric Corp. | 253,900 | 2,621 | ||||||
|
| |||||||
46,598 | ||||||||
|
| |||||||
Jersey - 1.6% | ||||||||
Delphi Automotive PLC (Æ) | 56,620 | 1,444 | ||||||
Glencore International PLC (Ñ) | 196,595 | 913 | ||||||
Petrofac, Ltd. | 53,955 | 1,180 | ||||||
WPP PLC | 125,552 | 1,526 | ||||||
|
| |||||||
5,063 | ||||||||
|
| |||||||
Luxembourg - 0.2% | ||||||||
ArcelorMittal | 37,073 | 572 | ||||||
Oriflame Cosmetics SA | 5,700 | 191 | ||||||
|
| |||||||
763 | ||||||||
|
| |||||||
Netherlands - 5.6% | ||||||||
Aegon NV | 244,343 | 1,138 | ||||||
Akzo Nobel NV | 71,771 | 3,376 | ||||||
European Aeronautic Defence and Space Co. NV | 30,165 | 1,070 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Heineken NV | 43,469 | 2,271 | ||||||
ING Groep NV (Æ) | 539,145 | 3,637 | ||||||
Koninklijke Philips Electronics NV | 99,004 | 1,958 | ||||||
Randstad Holding NV (Æ) | 37,814 | 1,117 | ||||||
Reed Elsevier NV(Æ) | 101,750 | 1,164 | ||||||
Unilever NV | 73,723 | 2,467 | ||||||
|
| |||||||
18,198 | ||||||||
|
| |||||||
Norway - 1.7% | ||||||||
DNB ASA | 162,500 | 1,616 | ||||||
Marine Harvest ASA (Æ) | 1,981,100 | 1,413 | ||||||
Orkla ASA | 186,200 | 1,352 | ||||||
Statoil ASA Class N | 50,602 | 1,210 | ||||||
|
| |||||||
5,591 | ||||||||
|
| |||||||
Russia - 0.5% | ||||||||
Gazprom OAO - ADR (Æ) | 161,390 | 1,528 | ||||||
|
| |||||||
Singapore - 2.0% | ||||||||
DBS Group Holdings, Ltd. | 46,000 | 508 | ||||||
Jardine Cycle & Carriage, Ltd. | 95,500 | 3,523 | ||||||
Singapore Telecommunications, Ltd. | 185,000 | 484 | ||||||
United Overseas Bank, Ltd. | 132,100 | 1,963 | ||||||
|
| |||||||
6,478 | ||||||||
|
| |||||||
South Africa - 0.4% | ||||||||
FirstRand, Ltd. | 298,944 | 969 | ||||||
MTN Group, Ltd. | 23,829 | 412 | ||||||
|
| |||||||
1,381 | ||||||||
|
| |||||||
South Korea - 1.6% | ||||||||
Samsung Electronics Co., Ltd. | 3,569 | 3,784 | ||||||
Shinhan Financial Group Co., Ltd. | 44,871 | 1,562 | ||||||
|
| |||||||
5,346 | ||||||||
|
| |||||||
Spain - 1.3% | ||||||||
Amadeus IT Holding SA Class A | 57,328 | 1,214 | ||||||
Banco Santander SA - ADR | 321,483 | 2,147 | ||||||
Indra Sistemas SA (Ñ) | 47,450 | 443 | ||||||
Red Electrica Corp. SA (Ñ) | 9,213 | 402 | ||||||
|
| |||||||
4,206 | ||||||||
|
| |||||||
Sweden - 0.6% | ||||||||
Atlas Copco AB Class A | 49,838 | 1,076 | ||||||
Hennes & Mauritz AB Class B | 23,150 | 832 | ||||||
|
| |||||||
1,908 | ||||||||
|
| |||||||
Switzerland - 8.7% | ||||||||
ABB, Ltd. (Æ) | 64,900 | 1,059 | ||||||
ABB, Ltd. - ADR (Æ) | 29,600 | 483 | ||||||
ACE, Ltd. | 9,950 | 738 | ||||||
Cie Financiere Richemont SA | 5,633 | 309 | ||||||
Credit Suisse Group AG (Æ) | 33,512 | 612 | ||||||
GAM Holding AG (Æ) | 60,701 | 676 | ||||||
Geberit AG (Æ) | 4,710 | 929 | ||||||
Givaudan SA (Æ) | 446 | 438 |
34 | Non-U.S. Fund |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Helvetia Holding AG | 4,215 | 1,274 | ||||||
Julius Baer Group, Ltd. (Æ) | 42,980 | 1,556 | ||||||
Lindt & Spruengli AG (Æ) | 18 | 661 | ||||||
Nestle SA | 65,735 | 3,922 | ||||||
Novartis AG | 76,575 | 4,271 | ||||||
Partners Group Holding AG | 5,196 | 924 | ||||||
Roche Holding AG | 14,545 | 2,511 | ||||||
Sonova Holding AG (Æ) | 6,885 | 664 | ||||||
Swiss Re AG (Æ) | 10,574 | 664 | ||||||
Syngenta AG | 4,502 | 1,537 | ||||||
TE Connectivity, Ltd. | 45,400 | 1,449 | ||||||
UBS AG (Æ) | 192,685 | 2,253 | ||||||
Zurich Insurance Group AG (Æ) | 5,853 | 1,321 | ||||||
|
| |||||||
28,251 | ||||||||
|
| |||||||
Taiwan - 1.4% | ||||||||
Hon Hai Precision Industry Co., Ltd. | 643,624 | 1,941 | ||||||
Hon Hai Precision Industry Co., Ltd. - GDR | 99,784 | 604 | ||||||
Taiwan Semiconductor Manufacturing Co., Ltd. - ADR | 90,025 | 1,256 | ||||||
Teco Electric and Machinery Co., Ltd. | 1,326,700 | 867 | ||||||
|
| |||||||
4,668 | ||||||||
|
| |||||||
United Kingdom - 21.0% | ||||||||
Aegis Group plc(AE) | 518,197 | 1,316 | ||||||
Anglo American PLC | 51,774 | 1,699 | ||||||
ARM Holdings PLC | 142,819 | 1,137 | ||||||
Aviva PLC | 145,971 | 625 | ||||||
Babcock International Group PLC | 71,715 | 960 | ||||||
BAE Systems PLC | 422,300 | 1,911 | ||||||
Barclays PLC | 939,589 | 2,405 | ||||||
Berkeley Group Holdings PLC (Æ) | 34,800 | 771 | ||||||
BG Group PLC | 89,172 | 1,825 | ||||||
BP PLC | 587,700 | 3,938 | ||||||
BP PLC - ADR | 7,400 | 300 | ||||||
British American Tobacco PLC | 34,496 | 1,756 | ||||||
Burberry Group PLC | 63,366 | 1,322 | ||||||
Carillion PLC | 158,375 | 686 | ||||||
Compass Group PLC | 307,223 | 3,223 | ||||||
Dairy Crest Group PLC | 193,209 | 1,001 | ||||||
Diageo PLC | 71,027 | 1,827 | ||||||
GlaxoSmithKline PLC - ADR | 55,900 | 1,268 | ||||||
Hays PLC | 240,848 | 278 | ||||||
Home Retail Group PLC | 157,230 | 210 | ||||||
HSBC Holdings PLC | 453,282 | 3,997 | ||||||
Imperial Tobacco Group PLC | 106,147 | 4,083 | ||||||
Invensys PLC (Æ) | 98,200 | 343 | ||||||
Johnson Matthey PLC Class H | 37,612 | 1,304 | ||||||
National Grid PLC | 208,700 | 2,209 | ||||||
Pearson PLC | 70,163 | 1,394 | ||||||
Reckitt Benckiser Group PLC | 25,027 | 1,320 | ||||||
Rio Tinto PLC (Æ) | 28,270 | 1,350 | ||||||
Rolls-Royce Holdings PLC (Æ) | 132,822 | 1,792 | ||||||
Royal Bank of Scotland Group PLC (Æ) | 140,762 | 477 | ||||||
Royal Dutch Shell PLC Class A | 190,471 | 6,432 | ||||||
Royal Dutch Shell PLC Class B | 43,127 | 1,505 | ||||||
Sage Group PLC (The) | 220,021 | 956 | ||||||
Smith & Nephew PLC | 122,585 | 1,227 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Smiths Group PLC | 53,267 | 848 | ||||||
Standard Chartered PLC | 128,762 | 2,807 | ||||||
Travis Perkins PLC | 148,200 | 2,256 | ||||||
Vodafone Group PLC - ADR (Æ) | 1,739,592 | 4,886 | ||||||
Weir Group PLC (The) | 34,166 | 824 | ||||||
|
| |||||||
68,468 | ||||||||
|
| |||||||
United States - 1.2% | ||||||||
MercadoLibre, Inc. (Ñ) | 10,600 | 803 | ||||||
Philip Morris International, Inc. | 34,700 | 3,028 | ||||||
|
| |||||||
3,831 | ||||||||
|
| |||||||
Total Common Stocks (cost $293,925) | 297,204 | |||||||
|
| |||||||
Preferred Stocks - 0.3% | ||||||||
Brazil - 0.2% | ||||||||
Usinas Siderurgicas de Minas | 148,300 | 467 | ||||||
|
| |||||||
Germany - 0.1% | ||||||||
Porsche Automobil Holding SE (Æ)(Ñ) | 7,250 | 361 | ||||||
|
| |||||||
Total Preferred Stocks (cost $1,531) | 828 | |||||||
|
| |||||||
Warrants & Rights - 0.3% | ||||||||
United Kingdom - 0.3% | ||||||||
DS Smith PLC Class F (Æ) | 369,050 | 857 | ||||||
|
| |||||||
Total Warrants & Rights (cost $1,013) | 857 | |||||||
|
| |||||||
Short-Term Investments - 6.1% | ||||||||
United States - 6.1% | ||||||||
Russell U.S. Cash Management Fund | 19,709,433 | (¥) | 19,709 | |||||
|
| |||||||
Total Short-Term Investments (cost $19,709) | 19,709 | |||||||
|
| |||||||
Other Securities - 4.4% | ||||||||
Russell Investment Funds Liquidating Trust (×) | 645,054 | (¥) | 658 | |||||
Russell U.S. Cash Collateral Fund (×) | 13,769,829 | (¥) | 13,770 | |||||
|
| |||||||
Total Other Securities (cost $14,415) | 14,428 | |||||||
|
| |||||||
Total Investments - 102.3% (identified cost $330,593) | 333,026 | |||||||
Other Assets and Liabilities, Net - (2.3%) | (7,415 | ) | ||||||
|
| |||||||
Net Assets - 100.0% | 325,611 | |||||||
|
|
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund | 35 |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except contract amounts)
Futures Contracts | Number of Contracts | Notional | Expiration Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||
Long Positions | ||||||||||||||||||
ASX SPI 200 Index Futures (Australia) | 17 | AUD | 1,724 | 09/12 | (5 | ) | ||||||||||||
CAC 40 Index Futures (France) | 63 | EUR | 2,011 | 07/12 | 97 | |||||||||||||
DAX Index Futures (Germany) | 10 | EUR | 1,603 | 09/12 | 70 | |||||||||||||
EURO STOXX 50 Index Futures (EMU) | 165 | EUR | 3,721 | 09/12 | 193 | |||||||||||||
FTSE 100 Index Futures (UK) | 47 | GBP | 2,596 | 09/12 | 57 | |||||||||||||
Hang Seng Index Futures (Hong Kong) | 6 | HKD | 5,835 | 07/12 | 14 | |||||||||||||
S&P TSE 60 Index Futures (Canada) | 18 | CAD | 2,381 | 09/12 | 53 | |||||||||||||
TOPIX Index Futures (Japan) | 43 | JPY | 330,669 | 09/12 | 229 | |||||||||||||
|
| |||||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 708 | |||||||||||||||||
|
|
Foreign Currency Exchange Contracts | ||||||||||||||||||||||
Counterparty | Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||||||
Barclays Bank PLC | USD | 368 | AUD | 371 | 09/19/12 | 9 | ||||||||||||||||
Barclays Bank PLC | USD | 534 | CAD | 548 | 09/19/12 | 4 | ||||||||||||||||
Barclays Bank PLC | USD | 1,802 | EUR | 1,432 | 09/19/12 | 11 | ||||||||||||||||
Barclays Bank PLC | USD | 841 | GBP | 540 | 09/19/12 | 4 | ||||||||||||||||
Barclays Bank PLC | USD | 886 | JPY | 70,300 | 09/19/12 | (6 | ) | |||||||||||||||
Brown Brothers Harriman & Co. | USD | 199 | HKD | 1,540 | 09/19/12 | — | ||||||||||||||||
Brown Brothers Harriman & Co. | CAD | 19 | USD | 1,553 | 07/02/12 | — | ||||||||||||||||
Brown Brothers Harriman & Co. | HKD | 22 | USD | 1,755 | 07/03/12 | — | ||||||||||||||||
Brown Brothers Harriman & Co. | HKD | 2 | USD | 3 | 07/05/12 | — | ||||||||||||||||
Citibank | CAD | 121 | USD | 78 | 07/02/12 | 1 | ||||||||||||||||
Commonwealth Bank of Australia | USD | 368 | AUD | 371 | 09/19/12 | 9 | ||||||||||||||||
Commonwealth Bank of Australia | USD | 533 | CAD | 548 | 09/19/12 | 5 | ||||||||||||||||
Commonwealth Bank of Australia | USD | 1,803 | EUR | 1,432 | 09/19/12 | 11 | ||||||||||||||||
Commonwealth Bank of Australia | USD | 840 | GBP | 540 | 09/19/12 | 5 | ||||||||||||||||
Commonwealth Bank of Australia | USD | 199 | HKD | 1,540 | 09/19/12 | — | ||||||||||||||||
Commonwealth Bank of Australia | USD | 886 | JPY | 70,300 | 09/19/12 | (6 | ) | |||||||||||||||
Credit Suisse First Boston | USD | 499 | AUD | 500 | 09/19/12 | 9 | ||||||||||||||||
Credit Suisse First Boston | USD | 584 | CAD | 600 | 09/19/12 | 5 | ||||||||||||||||
Credit Suisse First Boston | USD | 2,766 | EUR | 2,200 | 09/19/12 | 20 | ||||||||||||||||
Credit Suisse First Boston | USD | 1,091 | GBP | 700 | 09/19/12 | 5 | ||||||||||||||||
Credit Suisse First Boston | USD | 193 | HKD | 1,500 | 09/19/12 | — | ||||||||||||||||
Credit Suisse First Boston | USD | 1,245 | JPY | 100,000 | 09/19/12 | 8 | ||||||||||||||||
Deutsche Bank AG | USD | 368 | AUD | 371 | 09/19/12 | 9 | ||||||||||||||||
Deutsche Bank AG | USD | 533 | CAD | 548 | 09/19/12 | 4 | ||||||||||||||||
Deutsche Bank AG | USD | 1,802 | EUR | 1,432 | 09/19/12 | 11 | ||||||||||||||||
Deutsche Bank AG | USD | 117 | GBP | 75 | 07/03/12 | — | ||||||||||||||||
Deutsche Bank AG | USD | 841 | GBP | 540 | 09/19/12 | 5 | ||||||||||||||||
Deutsche Bank AG | USD | 887 | JPY | 70,300 | 09/19/12 | (6 | ) | |||||||||||||||
Deutsche Bank AG | USD | 184 | NOK | 1,097 | 07/03/12 | — | ||||||||||||||||
Deutsche Bank AG | GBP | 1,632 | USD | 2,556 | 07/05/12 | — | ||||||||||||||||
HSBC Bank PLC | USD | 368 | AUD | 371 | 09/19/12 | 9 | ||||||||||||||||
HSBC Bank PLC | USD | 533 | CAD | 548 | 09/19/12 | 4 | ||||||||||||||||
HSBC Bank PLC | USD | 1,803 | EUR | 1,432 | 09/19/12 | 11 | ||||||||||||||||
HSBC Bank PLC | USD | 841 | GBP | 540 | 09/19/12 | 5 | ||||||||||||||||
HSBC Bank PLC | USD | 199 | HKD | 1,540 | 09/19/12 | — | ||||||||||||||||
HSBC Bank PLC | USD | 886 | JPY | 70,300 | 09/19/12 | (6 | ) | |||||||||||||||
JPMorgan Chase Bank | USD | 367 | AUD | 371 | 09/19/12 | 10 | ||||||||||||||||
JPMorgan Chase Bank | USD | 533 | CAD | 548 | 09/19/12 | 4 | ||||||||||||||||
JPMorgan Chase Bank | USD | 1,802 | EUR | 1,432 | 09/19/12 | 11 | ||||||||||||||||
JPMorgan Chase Bank | USD | 840 | GBP | 540 | 09/19/12 | 5 | ||||||||||||||||
JPMorgan Chase Bank | USD | 887 | JPY | 70,300 | 09/19/12 | (6 | ) | |||||||||||||||
JPMorgan Chase Bank | AUD | 600 | USD | 600 | 09/19/12 | (10 | ) |
See accompanying notes which are an integral part of the financial statements.
36 | Non-U.S. Fund |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands
Foreign Currency Exchange Contracts | ||||||||||||||||||||||
Counterparty | Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||||||
JPMorgan Chase Bank | CAD | 800 | USD | 781 | 09/19/12 | (3 | ) | |||||||||||||||
JPMorgan Chase Bank | EUR | 2,300 | USD | 2,913 | 09/19/12 | — | ||||||||||||||||
JPMorgan Chase Bank | GBP | 800 | USD | 1,255 | 09/19/12 | 2 | ||||||||||||||||
JPMorgan Chase Bank | HKD | 1,800 | USD | 232 | 09/19/12 | — | ||||||||||||||||
JPMorgan Chase Bank | JPY | 100,000 | USD | 1,273 | 09/19/12 | 20 | ||||||||||||||||
Royal Bank of Canada | USD | 199 | HKD | 1,540 | 09/19/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 98 | GBP | 63 | 07/03/12 | 1 | ||||||||||||||||
State Street Bank & Trust Co. | USD | 69 | NOK | 417 | 07/03/12 | 1 | ||||||||||||||||
State Street Bank & Trust Co. | AUD | 50 | USD | 50 | 09/19/12 | (1 | ) | |||||||||||||||
State Street Bank & Trust Co. | EUR | 100 | USD | 126 | 09/19/12 | (1 | ) | |||||||||||||||
State Street Bank & Trust Co. | EUR | 600 | USD | 747 | 09/19/12 | (12 | ) | |||||||||||||||
State Street Bank & Trust Co. | GBP | 100 | USD | 155 | 09/19/12 | (1 | ) | |||||||||||||||
State Street Bank & Trust Co. | HKD | 3,887 | USD | 49 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | HKD | 100 | USD | 13 | 09/19/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | JPY | 1,408 | USD | 18 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | JPY | 30,000 | USD | 378 | 09/19/12 | 2 | ||||||||||||||||
State Street Bank & Trust Co. | NOK | 10,134 | USD | 1,699 | 07/02/12 | (4 | ) | |||||||||||||||
|
| |||||||||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts |
| 158 | ||||||||||||||||||||
|
|
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund | 37 |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Amounts in thousands
Market Value | % of Net Assets | |||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | ||||||||||||||||||||
Australia | $ | — | $ | 2,675 | $ | — | $ | 2,675 | 0.8 | |||||||||||
Belgium | — | 1,196 | — | 1,196 | 0.4 | |||||||||||||||
Bermuda | 3,840 | 2,182 | — | 6,022 | 1.9 | |||||||||||||||
Brazil | 4,422 | — | — | 4,422 | 1.4 | |||||||||||||||
Canada | 4,675 | — | — | 4,675 | 1.4 | |||||||||||||||
Cayman Islands | 1,893 | 1,159 | — | 3,052 | 0.9 | |||||||||||||||
China | — | 1,322 | — | 1,322 | 0.4 | |||||||||||||||
Czech Republic | — | 588 | — | 588 | 0.2 | |||||||||||||||
Denmark | — | 3,046 | — | 3,046 | 0.9 | |||||||||||||||
France | — | 24,618 | — | 24,618 | 7.6 | |||||||||||||||
Germany | — | 25,848 | — | 25,848 | 7.9 | |||||||||||||||
Hong Kong | — | 4,719 | — | 4,719 | 1.4 | |||||||||||||||
India | 1,386 | — | — | 1,386 | 0.4 | |||||||||||||||
Ireland | — | 704 | — | 704 | 0.2 | |||||||||||||||
Israel | 3,422 | — | — | 3,422 | 1.1 | |||||||||||||||
Italy | — | 7,231 | — | 7,231 | 2.2 | |||||||||||||||
Japan | — | 46,598 | — | 46,598 | 14.3 | |||||||||||||||
Jersey | 1,444 | 3,619 | — | 5,063 | 1.6 | |||||||||||||||
Luxembourg | — | 763 | — | 763 | 0.2 | |||||||||||||||
Netherlands | — | 18,198 | — | 18,198 | 5.6 | |||||||||||||||
Norway | — | 5,591 | — | 5,591 | 1.7 | |||||||||||||||
Russia | — | 1,528 | — | 1,528 | 0.5 | |||||||||||||||
Singapore | — | 6,478 | — | 6,478 | 2.0 | |||||||||||||||
South Africa | — | 1,381 | — | 1,381 | 0.4 | |||||||||||||||
South Korea | — | 5,346 | — | 5,346 | 1.6 | |||||||||||||||
Spain | — | 4,206 | — | 4,206 | 1.3 | |||||||||||||||
Sweden | — | 1,908 | — | 1,908 | 0.6 | |||||||||||||||
Switzerland | 2,670 | 25,581 | — | 28,251 | 8.7 | |||||||||||||||
Taiwan | 1,256 | 3,412 | — | 4,668 | 1.4 | |||||||||||||||
United Kingdom | 300 | 68,168 | — | 68,468 | 21.0 | |||||||||||||||
United States | 3,831 | — | — | 3,831 | 1.2 | |||||||||||||||
Preferred Stocks | 467 | 361 | — | 828 | 0.3 | |||||||||||||||
Warrants & Rights | — | 857 | — | 857 | 0.3 | |||||||||||||||
Short-Term Investments | — | 19,709 | — | 19,709 | 6.1 | |||||||||||||||
Other Securities | — | 14,428 | — | 14,428 | 4.4 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | 29,606 | 303,420 | — | 333,026 | 102.3 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other Assets and Liabilities, Net | (2.3 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
100.0 | ||||||||||||||||||||
|
| |||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||||
Futures Contracts | 708 | — | — | 708 | 0.2 | |||||||||||||||
Foreign Currency Exchange Contracts | (1 | ) | 159 | — | 158 | — | * | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Other Financial Instruments** | $ | 707 | $ | 159 | $ | — | $ | 866 | ||||||||||||
|
|
|
|
|
|
|
|
* | Less than .05% of net assets. |
** | Other financial instruments reflected, such as futures, forwards, interest rate swaps and credit default swaps are valued at the unrealized appreciation/depreciation on the instruments. |
For a description of the levels see note 2 in the Notes to Financial Statements.
There were no significant transfers in and out of Levels 1, 2 and 3 during the period ended June 30, 2012.
See accompanying notes which are an integral part of the financial statements.
38 | Non-U.S. Fund |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Fair Value of Derivative Instruments — June 30, 2012 (Unaudited)
Amounts in thousands
Derivatives not accounted for as hedging instruments | Equity Contracts | Foreign Currency Contracts | ||||||
Location: Statement of Assets and Liabilities - Assets | ||||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | 220 | ||||
Daily variation margin on futures contracts* | 713 | — | ||||||
|
|
|
| |||||
Total | $ | 713 | $ | 220 | ||||
|
|
|
| |||||
Location: Statement of Assets and Liabilities - Liabilities | ||||||||
Unrealized depreciation on foreign currency exchange contracts | $ | — | $ | 62 | ||||
Daily variation margin on futures contracts* | 5 | — | ||||||
|
|
|
| |||||
Total | $ | 5 | $ | 62 | ||||
|
|
|
|
Derivatives not accounted for as hedging instruments | Equity Contracts | Foreign Currency Contracts | ||||||
Location: Statement of Operations - Net realized gain (loss) | ||||||||
Futures contracts | $ | 447 | $ | — | ||||
Foreign currency-related transactions | — | (656 | ) | |||||
|
|
|
| |||||
Total | $ | 447 | $ | (656 | ) | |||
|
|
|
| |||||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||||
Futures contracts | $ | 615 | $ | — | ||||
Foreign currency-related transactions | — | 552 | ||||||
|
|
|
| |||||
Total | $ | 615 | $ | 552 | ||||
|
|
|
|
* | Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
For further disclosure on derivatives see note 2 in Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund | 39 |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 330,593 | ||
Investments, at market**, *** | 333,026 | |||
Cash (restricted) | 1,800 | |||
Foreign currency holdings* | 2,082 | |||
Unrealized appreciation on foreign currency exchange contracts | 220 | |||
Receivables: | ||||
Dividends and interest | 828 | |||
Dividends from affiliated Russell funds | 3 | |||
Investments sold | 2,640 | |||
Fund shares sold | 1 | |||
Foreign taxes recoverable | 232 | |||
Daily variation margin on futures contracts | 589 | |||
Other receivable | 5 | |||
Prepaid expenses | 4 | |||
|
| |||
Total assets | 341,430 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investments purchased | 790 | |||
Fund shares redeemed | 235 | |||
Accrued fees to affiliates | 232 | |||
Other accrued expenses | 85 | |||
Unrealized depreciation on foreign currency exchange contracts | 62 | |||
Payable upon return of securities loaned | 14,415 | |||
|
| |||
Total liabilities | 15,819 | |||
|
| |||
Net Assets | $ | 325,611 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
40 | Non-U.S. Fund |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Statement of Assets and Liabilities, continued — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | 5,508 | ||
Accumulated net realized gain (loss) | (98,896 | ) | ||
Unrealized appreciation (depreciation) on: | ||||
Investments | 2,433 | |||
Futures contracts | 708 | |||
Foreign currency-related transactions | 164 | |||
Other investments | 5 | |||
Shares of beneficial interest | 362 | |||
Additional paid-in capital | 415,327 | |||
|
| |||
Net Assets | $ | 325,611 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share: (a) | $ | 9.00 | ||
Net assets | $ | 325,610,725 | ||
Shares outstanding ($.01 par value) | 36,161,514 | |||
Amounts in thousands | ||||
* Foreign currency holdings - cost | $ | 2,042 | ||
** Securities on loan included in investments | $ | 14,786 | ||
*** Investments in affiliates, Russell U.S. Cash Management Fund, Russell Investment Funds Liquidating Trust and Russell U.S. Cash Collateral Fund | $ | 34,137 |
(a) | 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 | 41 |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Statement of Operations — For the Period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Dividends | $ | 7,118 | ||
Dividends from affiliated Russell funds | 15 | |||
Securities lending income | 209 | |||
Less foreign taxes withheld | (621 | ) | ||
|
| |||
Total investment income | 6,721 | |||
|
| |||
Expenses | ||||
Advisory fees | 1,540 | |||
Administrative fees | 86 | |||
Custodian fees | 125 | |||
Transfer agent fees | 8 | |||
Professional fees | 34 | |||
Trustees’ fees | 4 | |||
Miscellaneous | 2 | |||
|
| |||
Expenses before reductions | 1,799 | |||
Expense reductions | (97 | ) | ||
|
| |||
Net expenses | 1,702 | |||
|
| |||
Net investment income (loss) | 5,019 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | (957 | ) | ||
Futures contracts | 447 | |||
Foreign currency-related transactions | (964 | ) | ||
|
| |||
Net realized gain (loss) | (1,474 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 9,031 | |||
Futures contracts | 615 | |||
Foreign currency-related transactions | 571 | |||
Other investments | (2 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | 10,215 | |||
|
| |||
Net realized and unrealized gain (loss) | 8,741 | |||
|
| |||
Net Increase (Decrease) in Net Assets from Operations | $ | 13,760 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
42 | Non-U.S. Fund |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 (Unaudited) | Fiscal Year Ended December 31, 2011 | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 5,019 | $ | 6,345 | ||||
Net realized gain (loss) | (1,474 | ) | 4,733 | |||||
Net change in unrealized appreciation (depreciation) | 10,215 | (58,506 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 13,760 | (47,428 | ) | |||||
|
|
|
| |||||
Distributions | ||||||||
From net investment income | (3,601 | ) | (6,022 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from distributions | (3,601 | ) | (6,022 | ) | ||||
|
|
|
| |||||
Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | (14,126 | ) | 16,122 | |||||
Fund Reimbursements | — | 36 | ||||||
|
|
|
| |||||
Total Net Increase (Decrease) in Net Assets | (3,967 | ) | (37,292 | ) | ||||
Net Assets | ||||||||
Beginning of period | 329,578 | 366,870 | ||||||
|
|
|
| |||||
End of period | $ | 325,611 | $ | 329,578 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income included in net assets | $ | 5,508 | $ | 4,090 |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund | 43 |
Table of Contents
Russell Investment Funds
Non-U.S. Fund
Financial Highlights
For a Share Outstanding Throughout the Period
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a)(b) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | |||||||||||||||||||
June 30, 2012(1) | 8.75 | .13 | .22 | .35 | (.10 | ) | — | |||||||||||||||||
December 31, 2011 | 10.21 | .17 | (1.46 | ) | (1.29 | ) | (.17 | ) | — | |||||||||||||||
December 31, 2010 | 9.25 | .12 | .92 | 1.04 | (.08 | ) | — | |||||||||||||||||
December 31, 2009 | 7.48 | .12 | 1.88 | 2.00 | (.23 | ) | — | |||||||||||||||||
December 31, 2008 | 13.20 | .21 | (5.83 | ) | (5.62 | ) | — | (.10 | ) | |||||||||||||||
December 31, 2007 | 15.01 | .25 | 1.14 | 1.39 | (.38 | ) | (2.82 | ) |
See accompanying notes which are an integral part of the financial statements.
44 | Non-U.S. Fund |
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(d)(f) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Gross(e) | % Ratio of Expenses to Average Net Assets, Net(b)(e) | % Ratio of Net Investment Income to Average Net Assets(b)(e) | % Portfolio Turnover Rate(d) | |||||||||||||||||||||||
(.10 | ) | 9.00 | 3.87 | 325,611 | 1.05 | .99 | 2.93 | 31 | ||||||||||||||||||||||
(.17 | ) | 8.75 | (12.88 | ) | 329,578 | 1.10 | 1.04 | 1.74 | 49 | |||||||||||||||||||||
(.08 | ) | 10.21 | 11.42 | 366,870 | 1.12 | 1.06 | 1.30 | 49 | ||||||||||||||||||||||
(.23 | ) | 9.25 | 27.33 | 322,145 | 1.12 | 1.04 | 1.56 | 133 | ||||||||||||||||||||||
(.10 | ) | 7.48 | (42.79 | ) | 255,750 | 1.21 | 1.15 | 2.01 | 123 | |||||||||||||||||||||
(3.20 | ) | 13.20 | 10.12 | 431,686 | 1.18 | 1.15 | 1.70 | 106 |
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund | 45 |
Table of Contents
Russell Investment Funds
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value January 1, 2012 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value June 30, 2012 | $ | 1,043.80 | $ | 1,021.63 | ||||
Expenses Paid During Period* | $ | 3.30 | $ | 3.27 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.65% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
46 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Long-Term Investments - 79.2% | ||||||||
Asset-Backed Securities - 5.7% | ||||||||
Access Group, Inc. | 626 | 631 | ||||||
ACE Securities Corp. | 46 | 45 | ||||||
Ally Master Owner Trust | 600 | 609 | ||||||
Series 2012-1 Class A2 | 445 | 448 | ||||||
AmeriCredit Automobile Receivables Trust | 430 | 436 | ||||||
Series 2010-4 Class B | 220 | 222 | ||||||
Series 2011-2 Class A3 | 240 | 242 | ||||||
Series 2011-3 Class B | 450 | 460 | ||||||
Series 2012-3 Class A1 | 1,290 | 1,289 | ||||||
Ameriquest Mortgage Securities, Inc. | — | — | ||||||
Asset Backed Securities Corp. Home Equity | 1,050 | 772 | ||||||
Series 2006-HE5 Class A5 | 1,200 | 428 | ||||||
Bayview Financial Acquisition Trust | 190 | 188 | ||||||
Brazos Higher Education Authority | 500 | 475 | ||||||
Series 2011-2 Class A3 | 210 | 200 | ||||||
Carrington Mortgage Loan Trust | 1,900 | 751 | ||||||
Chesapeake Funding LLC | 925 | 925 | ||||||
CIT Education Loan Trust | 504 | 460 | ||||||
Citigroup Mortgage Loan Trust, Inc. | 1,272 | 1,086 | ||||||
Series 2007-WFH1 Class A4 | 934 | 437 | ||||||
Series 2007-WFH4 Class A2B | 1,290 | 795 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Conseco Financial Corp. | 700 | 767 | ||||||
Series 1999-2 Class A5 | 499 | 503 | ||||||
Countrywide Asset-Backed Certificates | 150 | 137 | ||||||
Series 2006-11 Class 1AF3 | 128 | 85 | ||||||
Series 2006-13 Class 1AF3 | 263 | 172 | ||||||
Series 2007-4 Class A2 | 245 | 219 | ||||||
EFS Volunteer LLC | 500 | 475 | ||||||
Fannie Mae Grantor Trust | 48 | 48 | ||||||
Federal Home Loan Mortgage Corp. Structured Pass Through Securities | 33 | 36 | ||||||
Ford Credit Floorplan Master Owner Trust | 275 | 278 | ||||||
HSBC Home Equity Loan Trust | 137 | 126 | ||||||
HSI Asset Securitization Corp. Trust | 1,650 | 991 | ||||||
IXIS Real Estate Capital Trust | 124 | 123 | ||||||
JPMorgan Mortgage Acquisition Corp. | 2,350 | 881 | ||||||
Series 2007-HE1 Class AF6 | 1,912 | 1,138 | ||||||
Lehman XS Trust | 195 | 132 | ||||||
Series 2006-13 Class 1A2 | 186 | 121 | ||||||
Series 2006-19 Class A2 | 197 | 129 | ||||||
Long Beach Mortgage Loan Trust | 5 | 4 | ||||||
Series 2004-4 Class M1 | 1,200 | 975 | ||||||
Merrill Lynch First Franklin Mortgage Loan Trust | 136 | 60 |
Core Bond Fund | 47 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Series 2007-4 Class 2A2 | 1,037 | 582 | ||||||
Montana Higher Education Student Assistance Corp. | 650 | 603 | ||||||
Morgan Stanley ABS Capital I | 1,950 | 960 | ||||||
Series 2007-HE2 Class A2B | 1,043 | 370 | ||||||
Series 2007-HE5 Class A2C | 800 | 276 | ||||||
Series 2007-HE5 Class A2D | 800 | 280 | ||||||
Northstar Education Finance, Inc. | 475 | 442 | ||||||
Series 2007-1 Class A3 | 500 | 453 | ||||||
Popular ABS Mortgage Pass-Through Trust | 105 | 71 | ||||||
Series 2006-C Class A4 | 1,480 | 871 | ||||||
Series 2006-D Class A3 | 1,500 | 794 | ||||||
Renaissance Home Equity Loan Trust | 85 | 63 | ||||||
Series 2006-1 Class AF6 | 165 | 105 | ||||||
Series 2007-1 Class AF2 | 420 | 165 | ||||||
Series 2007-2 Class AF2 | 125 | 51 | ||||||
Residential Asset Mortgage Products, Inc. | 378 | 364 | ||||||
Series 2003-RS11 Class AI6A | 116 | 115 | ||||||
Residential Asset Securities Corp. | 28 | 16 | ||||||
Santander Drive Auto Receivables Trust | 180 | 183 | ||||||
Series 2011-3 Class B | 530 | 537 | ||||||
Series 2012-1 Class B | 340 | 346 | ||||||
Series 2012-2 Class B 2.090% due 08/15/16 | 430 | 433 | ||||||
Series 2012-4 Class A1 0.432% due 07/15/13 | 1,300 | 1,300 | ||||||
SG Mortgage Securities Trust | 1,500 | 462 |
Principal Amount ($) or Shares | Market Value $ | |||||||
SLM Student Loan Trust | 490 | 441 | ||||||
Series 2008-7 Class A2 | 2,480 | 2,486 | ||||||
Series 2011-A Class A2 | 220 | 233 | ||||||
Series 2011-B Class A2 | 575 | 594 | ||||||
Series 2012-A Class A2 | 385 | 398 | ||||||
Series 2012-B Class A2 | 280 | 287 | ||||||
Small Business Administration Participation Certificates | 517 | 576 | ||||||
Soundview Home Equity Loan Trust | 1,062 | 1,022 | ||||||
Series 2005-OPT3 Class A4 | 408 | 382 | ||||||
Structured Asset Securities Corp. | 199 | 198 | ||||||
Washington Mutual Asset-Backed Certificates | 556 | 273 | ||||||
|
| |||||||
35,031 | ||||||||
|
| |||||||
Corporate Bonds and Notes - 15.4% | ||||||||
ABB Finance USA, Inc. | 175 | 177 | ||||||
Ally Financial, Inc. | 1,900 | 2,014 | ||||||
4.625% due 06/26/15 | 400 | 402 | ||||||
7.500% due 09/15/20 | 100 | 112 | ||||||
Alta Wind Holdings LLC | 118 | 133 | ||||||
Alterra USA Holdings, Ltd. | 155 | 163 | ||||||
Altria Group, Inc. | 135 | 187 | ||||||
10.200% due 02/06/39 | 160 | 260 | ||||||
American Airlines 2011-2 Class A Pass Through Trust | 607 | 637 | ||||||
American Express Centurion Bank | 400 | 472 | ||||||
American Express Credit Corp. | 275 | 282 | ||||||
American International Group, Inc. | 440 | 467 | ||||||
5.600% due 10/18/16 | 700 | 761 | ||||||
5.450% due 05/18/17 | 1,000 | 1,086 |
48 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Ameriprise Financial, Inc. | 210 | 227 | ||||||
AmerisourceBergen Corp. | 155 | 176 | ||||||
Amgen, Inc. | 430 | 435 | ||||||
3.625% due 05/15/22 | 280 | 290 | ||||||
6.900% due 06/01/38 | 1,000 | 1,273 | ||||||
Anadarko Petroleum Corp. | 510 | 592 | ||||||
6.450% due 09/15/36 | 285 | 329 | ||||||
Anheuser-Busch Cos., Inc. | 215 | 255 | ||||||
Apache Corp. | 255 | 266 | ||||||
Arch Coal, Inc. | 70 | 67 | ||||||
7.000% due 06/15/19 (Ñ) | 350 | 296 | ||||||
AT&T Corp. | 175 | 259 | ||||||
AT&T, Inc. | 155 | 164 | ||||||
6.300% due 01/15/38 | 900 | 1,121 | ||||||
Bank of America Corp. | 710 | 764 | ||||||
4.750% due 08/01/15 | 320 | 332 | ||||||
5.625% due 10/14/16 | 450 | 478 | ||||||
6.000% due 09/01/17 | 335 | 362 | ||||||
5.750% due 12/01/17 | 140 | 149 | ||||||
Bank of America NA | 600 | 530 | ||||||
6.100% due 06/15/17 | 775 | 829 | ||||||
BB&T Corp. | 300 | 305 | ||||||
Bear Stearns Cos. LLC (The) | 180 | 194 | ||||||
7.250% due 02/01/18 | 195 | 233 | ||||||
Berkshire Hathaway Finance Corp. | 220 | 222 | ||||||
Berkshire Hathaway, Inc. | 250 | 267 | ||||||
Boston Scientific Corp. | 295 | 314 | ||||||
Braskem America Finance Co. | 460 | 459 | ||||||
Burlington Northern Santa Fe LLC | 25 | 31 | ||||||
6.750% due 03/15/29 | 10 | 12 | ||||||
Calpine Construction Finance Co., LP and CCFC Finance Corp. | 655 | 707 | ||||||
Capital One Financial Corp. | 300 | 302 | ||||||
CCO Holdings LLC / CCO Holdings Capital Corp. | 460 | 497 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Cellco Partnership / Verizon Wireless Capital LLC | 235 | 255 | ||||||
CenterPoint Energy Resources Corp. | 50 | 59 | ||||||
CF Industries, Inc. | 180 | 214 | ||||||
Chase Capital III | 295 | 214 | ||||||
CHS/Community Health Systems, Inc. | 166 | 170 | ||||||
8.000% due 11/15/19 | 180 | 192 | ||||||
Cigna Corp. | 200 | 213 | ||||||
CIT Group, Inc. | 154 | 154 | ||||||
6.625% due 04/01/18 (Ñ)(Þ) | 390 | 420 | ||||||
Citigroup Capital XXI | 500 | 501 | ||||||
Citigroup, Inc. | 100 | 105 | ||||||
2.467% due 08/13/13 (Ê) | 100 | 101 | ||||||
4.700% due 05/29/15 | 50 | 52 | ||||||
5.850% due 08/02/16 (Ñ) | 220 | 239 | ||||||
4.450% due 01/10/17 | 1,005 | 1,053 | ||||||
6.000% due 08/15/17 (Ñ) | 850 | 931 | ||||||
6.125% due 11/21/17 | 405 | 449 | ||||||
6.125% due 08/25/36 | 300 | 295 | ||||||
8.125% due 07/15/39 | 450 | 601 | ||||||
5.875% due 01/30/42 (Ñ) | 450 | 491 | ||||||
Comcast Corp. | 300 | 354 | ||||||
Commonwealth Edison Co. | 290 | 350 | ||||||
Continental Airlines 1999-1 | 171 | 183 | ||||||
Continental Airlines 2007-1 | 137 | 148 | ||||||
Continental Airlines 2009-1 | 221 | 253 | ||||||
Credit Suisse USA, Inc. | 45 | 47 | ||||||
Crown Castle Towers LLC | 130 | 132 | ||||||
CSC Holdings LLC | 460 | 506 | ||||||
CVS Caremark Corp. | 295 | 311 | ||||||
DCP Midstream Operating, LP | 275 | 279 |
Core Bond Fund | 49 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Delta Air Lines 2002-1 | 113 | 122 | ||||||
Devon Energy Corp. | 205 | 205 | ||||||
DIRECTV Holdings LLC / DIRECTV Financing Co., Inc. | 535 | 564 | ||||||
Discover Financial Services | 260 | 272 | ||||||
Dynegy Roseton / Danskammer Pass Through Trust | 700 | 434 | ||||||
E*Trade Financial Corp. | 235 | 269 | ||||||
Ecolab, Inc. | 255 | 283 | ||||||
Edison Mission Energy | 675 | 378 | ||||||
El Paso LLC Series GMTN | 200 | 227 | ||||||
El Paso Natural Gas Co. | 100 | 122 | ||||||
El Paso Pipeline Partners Operating Co. LLC | 125 | 145 | ||||||
5.000% due 10/01/21 | 650 | 703 | ||||||
Enterprise Products Operating LLC | 420 | 481 | ||||||
Series B | 290 | 310 | ||||||
Express Scripts Holding Co. | 285 | 312 | ||||||
7.250% due 06/15/19 | 235 | 295 | ||||||
4.750% due 11/15/21 (Þ) | 155 | 172 | ||||||
Farmers Exchange Capital | 845 | 970 | ||||||
7.200% due 07/15/48 (Þ) | 300 | 323 | ||||||
Fifth Third Bancorp | 1,100 | 1,493 | ||||||
Ford Motor Credit Co. LLC | 600 | 618 | ||||||
FPL Energy Wind Funding LLC | 131 | 108 | ||||||
Frontier Communications Corp. | 450 | 495 | ||||||
General Electric Capital Corp. | 350 | 380 | ||||||
5.625% due 05/01/18 | 230 | 264 | ||||||
4.375% due 09/16/20 | 300 | 325 | ||||||
5.875% due 01/14/38 | 850 | 975 | ||||||
Series EMTN | 400 | 392 | ||||||
6.375% due 11/15/67 | 1,900 | 1,978 | ||||||
Series GMTN | 350 | 452 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Series MTNA | 420 | 415 | ||||||
6.750% due 03/15/32 | 425 | 526 | ||||||
General Electric Co. | 340 | 397 | ||||||
GenOn REMA LLC | 343 | 338 | ||||||
Genworth Financial, Inc. | 365 | 210 | ||||||
Georgia-Pacific LLC | 340 | 479 | ||||||
Gilead Sciences, Inc. | 420 | 464 | ||||||
Goldman Sachs Group, Inc. (The) | 150 | 159 | ||||||
3.625% due 02/07/16 | 285 | 285 | ||||||
6.250% due 09/01/17 | 935 | 1,016 | ||||||
6.150% due 04/01/18 (Ñ) | 400 | 434 | ||||||
7.500% due 02/15/19 | 550 | 627 | ||||||
6.000% due 06/15/20 | 150 | 160 | ||||||
5.750% due 01/24/22 | 245 | 259 | ||||||
6.750% due 10/01/37 | 800 | 784 | ||||||
Great Plains Energy, Inc. | 170 | 183 | ||||||
Hartford Financial Services Group, Inc. | 150 | 154 | ||||||
HCA, Inc. | 450 | 500 | ||||||
7.250% due 09/15/20 | 250 | 275 | ||||||
HCP, Inc. | 425 | 493 | ||||||
Health Care REIT, Inc. | 400 | 423 | ||||||
4.950% due 01/15/21 | 300 | 315 | ||||||
5.250% due 01/15/22 | 200 | 212 | ||||||
6.500% due 03/15/41 | 200 | 214 | ||||||
Healthcare Realty Trust, Inc. | 700 | 765 | ||||||
HealthSouth Corp. | 1,156,000 | 979 | ||||||
Hewlett-Packard Co. | 275 | 276 | ||||||
4.650% due 12/09/21 | 380 | 398 | ||||||
Historic TW, Inc. | 195 | 234 | ||||||
HRPT Properties Trust | 165 | 169 | ||||||
HSBC Finance Corp. | 125 | 135 | ||||||
HSBC USA, Inc. | 235 | 238 | ||||||
Humana, Inc. | 160 | 182 | ||||||
8.150% due 06/15/38 | 170 | 230 | ||||||
Indiantown Cogeneration, LP | 231 | 241 |
50 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Intel Corp. | 205 | 212 | ||||||
International Lease Finance Corp. | 1,170 | 1,235 | ||||||
4.875% due 04/01/15 | 350 | 352 | ||||||
6.750% due 09/01/16 (Þ) | 100 | 108 | ||||||
International Paper Co. | 150 | 164 | ||||||
JPMorgan Chase & Co. | 170 | 180 | ||||||
3.150% due 07/05/16 | 300 | 309 | ||||||
6.000% due 01/15/18 | 200 | 230 | ||||||
4.250% due 10/15/20 | 300 | 315 | ||||||
5.400% due 01/06/42 | 330 | 362 | ||||||
Series 1 | 220 | 241 | ||||||
JPMorgan Chase Bank NA | 70 | 77 | ||||||
6.000% due 10/01/17 | 945 | 1,058 | ||||||
JPMorgan Chase Capital XIII | 480 | 362 | ||||||
JPMorgan Chase Capital XXI | 335 | 225 | ||||||
JPMorgan Chase Capital XXIII | 545 | 369 | ||||||
Kraft Foods, Inc. | 310 | 311 | ||||||
4.125% due 02/09/16 | 245 | 267 | ||||||
6.125% due 02/01/18 | 200 | 240 | ||||||
6.500% due 02/09/40 | 305 | 392 | ||||||
Lorillard Tobacco Co. | 370 | 438 | ||||||
Lowe’s Cos., Inc. | 215 | 220 | ||||||
Manufacturers & Traders Trust Co. | 84 | 83 | ||||||
MassMutual Global Funding II | 305 | 307 | ||||||
Merrill Lynch & Co., Inc. | 720 | 784 | ||||||
6.875% due 04/25/18 | 500 | 559 | ||||||
MetLife, Inc. | 100 | 98 | ||||||
10.750% due 08/01/39 | 275 | 384 | ||||||
Metropolitan Life Global Funding I | 200 | 214 | ||||||
3.125% due 01/11/16 (Þ) | 345 | 361 | ||||||
Mirant Mid Atlantic Pass Through Trust B | 362 | 373 | ||||||
Morgan Stanley | 655 | 584 | ||||||
0.916% due 10/18/16 (Ê) | 435 | 379 | ||||||
5.550% due 04/27/17 | 425 | 429 |
Principal Amount ($) or Shares | Market Value $ | |||||||
6.250% due 08/28/17 | 600 | 619 | ||||||
6.625% due 04/01/18 | 365 | 382 | ||||||
5.625% due 09/23/19 | 275 | 272 | ||||||
Series GMTN | 225 | 227 | ||||||
National City Bank | 700 | 655 | ||||||
National Rural Utilities Cooperative Finance Corp. | 145 | 149 | ||||||
NB Capital Trust IV | 215 | 220 | ||||||
New Cingular Wireless Services, Inc. | 105 | 160 | ||||||
Newmont Mining Corp. | 245 | 239 | ||||||
News America, Inc. | 20 | 24 | ||||||
Nextel Communications, Inc. | 205 | 205 | ||||||
Series E | 83 | 83 | ||||||
NII Capital Corp. | 225 | 193 | ||||||
Nisource Finance Corp. | 145 | 169 | ||||||
6.125% due 03/01/22 | 335 | 393 | ||||||
NRG Energy, Inc. | 160 | 166 | ||||||
8.500% due 06/15/19 (Ñ) | 155 | 162 | ||||||
7.875% due 05/15/21 (Ñ) | 125 | 126 | ||||||
Occidental Petroleum Corp. | 65 | 65 | ||||||
2.700% due 02/15/23 | 260 | 262 | ||||||
Oncor Electric Delivery Co. LLC | 550 | 657 | ||||||
O’Reilly Automotive, Inc. | 255 | 266 | ||||||
Pacific Bell Telephone Co. | 250 | 267 | ||||||
Panhandle Eastern Pipeline Co., LP | 450 | 558 | ||||||
PC Financial Partnership | 220 | 238 | ||||||
Petrohawk Energy Corp. | 230 | 259 | ||||||
Philip Morris International, Inc. | 250 | 302 | ||||||
Pioneer Natural Resources Co. | 130 | 130 | ||||||
PNC Funding Corp. | 285 | 291 | ||||||
Progress Energy, Inc. | 40 | 46 | ||||||
Prudential Holdings LLC | 550 | 679 |
Core Bond Fund | 51 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Public Service Co. of New Mexico | 260 | 311 | ||||||
QVC, Inc. | 260 | 289 | ||||||
Qwest Communications International, Inc. | 365 | 385 | ||||||
Rock-Tenn Co. | 185 | 190 | ||||||
Sabine Pass LNG, LP | 780 | 807 | ||||||
7.500% due 11/30/16 | 65 | 68 | ||||||
Series 144a | 380 | 384 | ||||||
Sempra Energy | 255 | 259 | ||||||
Simon Property Group, LP | 160 | 224 | ||||||
SLM Corp. | 1,800 | 1,890 | ||||||
SMART Trust | 465 | 472 | ||||||
Series 2012-1USA Class A4A | 310 | 311 | ||||||
South Carolina Electric & Gas Co. | 150 | 188 | ||||||
Southern Natural Gas Co. LLC / Southern Natural Issuing Corp. | 385 | 409 | ||||||
Southern Union Co. | 1,380 | 1,123 | ||||||
Springleaf Finance Corp. | 300 | 239 | ||||||
State Street Capital Trust III | 200 | 201 | ||||||
Symetra Financial Corp. | 250 | 244 | ||||||
TD Ameritrade Holding Corp. | 225 | 238 | ||||||
Tenet Healthcare Corp. | 400 | 458 | ||||||
Tennessee Gas Pipeline Co. LLC | 200 | 235 | ||||||
8.375% due 06/15/32 | 190 | 249 | ||||||
Textron, Inc. | 265 | 291 | ||||||
Time Warner, Inc. | 400 | 468 | ||||||
Timken Co. | 150 | 163 | ||||||
UAL 2009-1 Pass Through Trust | 73 | 83 | ||||||
Union Pacific Corp. | 349 | 389 | ||||||
UnitedHealth Group, Inc. | 3 | 4 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Verizon Communications, Inc. | 255 | 271 | ||||||
Wachovia Capital Trust III | 240 | 229 | ||||||
Wachovia Corp. | 100 | 113 | ||||||
5.750% due 02/01/18 | 200 | 237 | ||||||
Watson Pharmaceuticals, Inc. | 275 | 292 | ||||||
WEA Finance LLC / WT Finance Aust Pty, Ltd. | 205 | 224 | ||||||
6.750% due 09/02/19 (Þ) | 95 | 112 | ||||||
WellPoint, Inc. | 325 | 328 | ||||||
Wells Fargo & Co. | 3,300 | 3,622 | ||||||
Weyerhaeuser Co. | 125 | 148 | ||||||
Williams Cos., Inc. (The) | 161 | 203 | ||||||
8.750% due 03/15/32 | 108 | 147 | ||||||
Williams Partners, LP / Williams Partners Finance Corp. | 260 | 312 | ||||||
Willis NA, Inc. | 195 | 226 | ||||||
ZFS Finance USA Trust II | 730 | 730 | ||||||
|
| |||||||
94,850 | ||||||||
|
| |||||||
International Debt - 5.3% | ||||||||
Abbey National Treasury Services PLC | 870 | 857 | ||||||
AK Transneft OJSC Via TransCapitalInvest, Ltd. | 100 | 125 | ||||||
Anglo American Capital PLC | 330 | 329 | ||||||
ANZ National International, Ltd. | 600 | 629 | ||||||
ArcelorMittal | 220 | 217 | ||||||
6.250% due 02/25/22 | 245 | 240 | ||||||
AWAS Aviation Capital, Ltd. | 312 | 323 | ||||||
Banco Santander Brazil SA | 200 | 192 | ||||||
Bank of Montreal | 100 | 106 | ||||||
2.500% due 01/11/17 | 170 | 176 | ||||||
Bank of New York Mellon SA Institucion de Banca Multiple | 197 | 177 | ||||||
BBVA Bancomer SA | 200 | 202 | ||||||
BM&FBovespa SA | 100 | 106 |
52 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
BNP Paribas SA | 300 | 258 | ||||||
Braskem Finance, Ltd. | 300 | 308 | ||||||
British Telecommunications PLC | 230 | 233 | ||||||
Caisse Centrale Desjardins du Quebec | 410 | 424 | ||||||
Cooperatieve Centrale Raiffeisen-Boerenleenbank BA/Netherlands | 380 | 387 | ||||||
Corp. Andina de Fomento | 127 | 130 | ||||||
Corp. Nacional del Cobre de Chile | 200 | 253 | ||||||
Credit Suisse | 770 | 824 | ||||||
CSN Islands XI Corp. | 200 | 218 | ||||||
Dexia Credit Local SA | 500 | 470 | ||||||
Digicel Group, Ltd. | 185 | 187 | ||||||
9.125% due 01/15/15 (Þ) | 425 | 429 | ||||||
Series REGS | 80 | 81 | ||||||
Eksportfinans ASA | 225 | 200 | ||||||
Electricite de France SA | 200 | 212 | ||||||
6.500% due 01/26/19 (Ñ)(Þ) | 200 | 235 | ||||||
6.950% due 01/26/39 (Þ) | 200 | 237 | ||||||
Enel Finance International NV | 300 | 301 | ||||||
6.000% due 10/07/39 (Þ) | 175 | 137 | ||||||
Export-Import Bank of Korea | 700 | 765 | ||||||
Gazprom International SA for Gazprom | ||||||||
7.201% due 02/01/20 | 39 | 42 | ||||||
GlaxoSmithKline Capital PLC | 625 | 626 | ||||||
2.850% due 05/08/22 | 185 | 188 | ||||||
Government of the Cayman Islands | 230 | 252 | ||||||
HBOS PLC | 825 | 778 | ||||||
HSBC Bank PLC | 800 | 826 | ||||||
HSBC Holdings PLC | 100 | 110 | ||||||
6.500% due 09/15/37 | 100 | 111 | ||||||
Hutchison Whampoa International 11, Ltd. | 375 | 393 | ||||||
Indian Oil Corp., Ltd. | 400 | 410 |
Principal Amount ($) or Shares | Market Value $ | |||||||
ING Bank NV | 300 | 296 | ||||||
Intelsat Jackson Holdings SA | 400 | 443 | ||||||
Intesa Sanpaolo SpA | 200 | 188 | ||||||
IPIC GMTN, Ltd. | 125 | 136 | ||||||
6.875% due 11/01/41 (Þ) | 325 | 379 | ||||||
Koninklijke Philips Electronics NV | 350 | 363 | ||||||
Korea Electric Power Corp. | 60 | 63 | ||||||
Lloyds Banking Group PLC | 300 | 180 | ||||||
6.657% due 12/31/49 (ƒ)(Þ) | 265 | 175 | ||||||
Lloyds TSB Bank PLC | 215 | 222 | ||||||
Majapahit Holding BV | ||||||||
7.750% due 10/17/16 | 100 | 114 | ||||||
Methanex Corp. | 260 | 270 | ||||||
Montpelier Re Holdings, Ltd. | 305 | 317 | ||||||
Morgan Stanley | 200 | 217 | ||||||
Nexen, Inc. | 200 | 233 | ||||||
Noble Group, Ltd. | 100 | 97 | ||||||
Nokia OYJ | 155 | 122 | ||||||
Pernod-Ricard SA | 520 | 526 | ||||||
5.500% due 01/15/42 (Þ) | 125 | 128 | ||||||
Petrobras International Finance Co. - Pifco | 400 | 413 | ||||||
7.875% due 03/15/19 | 800 | 974 | ||||||
5.750% due 01/20/20 | 265 | 290 | ||||||
Province of Ontario Canada | 1,800 | 1,809 | ||||||
Province of Quebec Canada | 200 | 220 | ||||||
Qatar Government International Bond | 120 | 143 | ||||||
Rabobank Nederland NV | 285 | 359 | ||||||
Ralph Lauren Corp. | 125 | 163 | ||||||
Ras Laffan Liquefied Natural Gas Co., Ltd. III | 250 | 275 | ||||||
Series REGS | ||||||||
6.750% due 09/30/19 | 300 | 359 | ||||||
Resona Bank, Ltd. | 100 | 103 |
Core Bond Fund | 53 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Rio Tinto Finance USA PLC | 195 | 206 | ||||||
Royal Bank of Scotland Group PLC | 300 | 231 | ||||||
Series 1 | 300 | 258 | ||||||
Royal Bank of Scotland PLC (The) | 500 | 502 | ||||||
4.875% due 08/25/14 (Þ) | 900 | 925 | ||||||
Russian Foreign Bond - Eurobond | 345 | 361 | ||||||
RZD Capital, Ltd. | 500 | 534 | ||||||
Santander US Debt SA Unipersonal | 400 | 385 | ||||||
Sirius International Group, Ltd. | 360 | 345 | ||||||
Smurfit Kappa Treasury Funding, Ltd. | 165 | 165 | ||||||
Suncor Energy, Inc. | 160 | 181 | ||||||
Telefonos de Mexico SAB de CV | 360 | 394 | ||||||
Total Capital SA | 260 | 297 | ||||||
Transocean, Inc. | 330 | 358 | ||||||
6.375% due 12/15/21 | 225 | 257 | ||||||
7.350% due 12/15/41 | 345 | 417 | ||||||
Turkiye Garanti Bankasi AS | 200 | 185 | ||||||
Tyco Electronics Group SA | 240 | 287 | ||||||
UBS AG | 400 | 447 | ||||||
5.750% due 04/25/18 | 100 | 111 | ||||||
Vale Overseas, Ltd. | 400 | 443 | ||||||
Vivendi SA | 200 | 198 | ||||||
Vnesheconombank Via VEB Finance PLC | 280 | 279 | ||||||
Volvo Treasury AB | 385 | 420 | ||||||
Westpac Banking Corp. | 700 | 738 | ||||||
White Nights Gazprom Series REGS | ||||||||
10.500% due 03/08/14 | 200 | 223 | ||||||
10.500% due 03/25/14 | 200 | 224 | ||||||
Wind Acquisition Finance SA | 200 | 175 | ||||||
|
| |||||||
32,827 | ||||||||
|
| |||||||
Loan Agreements - 0.4% | ||||||||
Caesars Entertainment Operating | 800 | 711 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Chrysler Group LLC Term Loan B | 996 | 1,003 | ||||||
HCA, Inc. Extended Term Loan B3 | 507 | 492 | ||||||
|
| |||||||
2,206 | ||||||||
|
| |||||||
Mortgage-Backed Securities - 32.0% | ||||||||
ABN Amro Mortgage Corp. | 40 | 41 | ||||||
Adjustable Rate Mortgage Trust | 942 | 556 | ||||||
American Home Mortgage Assets LLC | 557 | 415 | ||||||
American Home Mortgage Investment Trust | 61 | 53 | ||||||
Series 2007-1 Class GA1C | 837 | 393 | ||||||
Banc of America Funding Corp. | 444 | 416 | ||||||
Series 2006-A Class 4A1 | 286 | 203 | ||||||
Series 2006-G Class 2A3 | 688 | 681 | ||||||
Series 2006-I Class 5A1 | 1,079 | 874 | ||||||
Series 2007-4 Class 3A1 | 1,084 | 634 | ||||||
Banc of America Large Loan, Inc. | 94 | 89 | ||||||
Banc of America Merrill Lynch Commercial Mortgage, Inc. | 122 | 125 | ||||||
Series 2003-1 Class SBC 5.790% due 03/11/32 (Þ) | 101 | 104 | ||||||
Series 2005-1 Class A3 | 69 | 69 | ||||||
Series 2005-1 Class A4 | 170 | 176 | ||||||
Series 2005-2 Class A4 | 8 | 8 | ||||||
Series 2005-2 Class A5 | 745 | 811 | ||||||
Series 2006-1 Class A4 | 280 | 311 | ||||||
Series 2006-2 Class A4 | 200 | 228 | ||||||
Series 2006-4 Class A4 | 250 | 282 | ||||||
Series 2008-1 Class A4 | 405 | 476 |
54 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Banc of America Mortgage Securities, Inc. | 4 | 4 | ||||||
Series 2004-11 Class 2A1 | 147 | 152 | ||||||
Series 2005-H Class 2A5 | 220 | 172 | ||||||
BCAP LLC Trust | 541 | 124 | ||||||
Bear Stearns Adjustable Rate Mortgage Trust | 19 | 19 | ||||||
Series 2003-8 Class 4A1 | 64 | 65 | ||||||
Series 2004-9 Class 22A1 | 38 | 38 | ||||||
Series 2005-2 Class A1 | 592 | 577 | ||||||
Series 2007-3 Class 1A1 | 231 | 152 | ||||||
Bear Stearns Alt-A Trust | 150 | 119 | ||||||
Series 2005-7 Class 22A1 | 355 | 243 | ||||||
Series 2005-10 Class 24A1 | 336 | 166 | ||||||
Series 2006-1 Class 21A2 | 419 | 188 | ||||||
Bear Stearns Commercial Mortgage Securities | 125 | 124 | ||||||
Series 2005-PWR9 Class A4B | 40 | 42 | ||||||
Series 2005-T20 Class A4A | 700 | 780 | ||||||
Series 2006-PW14 Class A4 | 1,600 | 1,807 | ||||||
Series 2006-T22 Class A4 | 505 | 572 | ||||||
Series 2007-PW16 Class A4 | 680 | 778 | ||||||
BNPP Mortgage Securities LLC | 390 | 409 | ||||||
Citicorp Mortgage Securities, Inc. | 219 | 214 | ||||||
Citigroup Commercial Mortgage Trust | 135 | 154 | ||||||
Series 2007-C6 Class A4 | 330 | 381 | ||||||
Citigroup Mortgage Loan Trust, Inc. | 41 | 36 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Series 2006-AR7 Class 1A4A | 484 | 335 | ||||||
Series 2007-10 Class 2A3A | 441 | 290 | ||||||
Series 2007-10 Class 2A4A | 276 | 198 | ||||||
Series 2007-AR8 Class 2A1A | 604 | 394 | ||||||
Citigroup/Deutsche Bank Commercial Mortgage Trust | 340 | 378 | ||||||
Commercial Mortgage Asset Trust | 115 | 121 | ||||||
Commercial Mortgage Pass Through Certificates | 240 | 243 | ||||||
Series 2006-C8 Class A4 | 200 | 225 | ||||||
Series 2007-C9 Class A4 | 165 | 192 | ||||||
Series 2011-THL Class A | 319 | 325 | ||||||
Countrywide Alternative Loan Trust | 282 | 151 | ||||||
Series 2005-48T1 Class A6 | 897 | 660 | ||||||
Series 2006-36T2 Class 1A9 | 232 | 121 | ||||||
Series 2006-45T1 Class 2A2 | 925 | 634 | ||||||
Countrywide Home Loan Mortgage Pass Through Trust | 127 | 104 | ||||||
Series 2004-HYB9 Class 1A1 | 209 | 171 | ||||||
Series 2005-1 Class 2A1 | 1,221 | 665 | ||||||
Series 2005-3 Class 1A2 | 21 | 13 | ||||||
Series 2005-HYB9 Class 3A2A 2.595% due 02/20/36 (Ê) | 41 | 30 | ||||||
Series 2007-2 Class A2 | 2,009 | 1,656 | ||||||
Series 2007-4 Class 1A10 6.000% due 05/25/37 | 1,784 | 1,429 | ||||||
Series 2007-HY5 Class 1A1 | 1,378 | 891 | ||||||
Credit Suisse First Boston Mortgage Securities Corp. | 75 | 75 | ||||||
Series 2002-CKS4 Class B | 170 | 170 |
Core Bond Fund | 55 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Series 2003-C5 Class D | 215 | 220 | ||||||
Series 2005-9 Class 2A1 5.500% due 10/25/35 | 284 | 252 | ||||||
Series 2005-C2 Class A3 | 203 | 210 | ||||||
Credit Suisse Mortgage Capital Certificates | 100 | 110 | ||||||
Series 2007-2 Class 3A4 | 977 | 888 | ||||||
DBRR Trust | 340 | 379 | ||||||
DBUBS Mortgage Trust | 900 | 960 | ||||||
Deutsche ALT-A Securities, Inc. Alternate Loan Trust | 465 | 270 | ||||||
Series 2007-AR3 Class 2A4 | 481 | 120 | ||||||
Series 2007-OA1 Class A1 | 1,919 | 879 | ||||||
Fannie Mae | 19 | 19 | ||||||
6.000% due 2017 | 16 | 17 | ||||||
3.416% due 2020 | — | — | ||||||
3.584% due 2020 | 589 | 642 | ||||||
3.632% due 2020 | — | — | ||||||
3.665% due 2020 | 805 | 882 | ||||||
3.763% due 2020 | 782 | 861 | ||||||
4.250% due 2020 | 775 | 871 | ||||||
5.500% due 2020 | 73 | 80 | ||||||
5.500% due 2021 | 109 | 120 | ||||||
3.016% due 2022 | 300 | 314 | ||||||
5.500% due 2022 | 154 | 169 | ||||||
4.000% due 2024 | 203 | 216 | ||||||
3.500% due 2025 | 86 | 91 | ||||||
4.000% due 2025 | 1,299 | 1,386 | ||||||
4.500% due 2025 | 1,967 | 2,131 | ||||||
3.500% due 2026 | 3,714 | 3,994 | ||||||
6.000% due 2026 | 269 | 296 | ||||||
3.000% due 2027 | 3,007 | 3,170 | ||||||
6.000% due 2027 | 159 | 175 | ||||||
6.000% due 2028 | 12 | 14 | ||||||
6.000% due 2032 | 167 | 188 | ||||||
5.000% due 2033 | 52 | 57 | ||||||
5.500% due 2033 | 10 | 11 | ||||||
6.000% due 2033 | 8 | 9 | ||||||
5.000% due 2034 | 654 | 713 | ||||||
5.500% due 2034 | 430 | 474 | ||||||
4.500% due 2035 | 50 | 53 | ||||||
5.000% due 2035 | 854 | 929 | ||||||
3.593% due 2036 (Ê) | 213 | 218 | ||||||
5.000% due 2036 | 296 | 322 | ||||||
5.500% due 2037 | 1,321 | 1,435 | ||||||
6.000% due 2037 | 14 | 15 |
Principal Amount ($) or Shares | Market Value $ | |||||||
5.500% due 2038 | 3,293 | 3,626 | ||||||
4.500% due 2039 | 55 | 59 | ||||||
4.000% due 2040 | 806 | 875 | ||||||
4.500% due 2040 | 569 | 613 | ||||||
5.500% due 2040 | 301 | 331 | ||||||
6.000% due 2040 | 1,633 | 1,800 | ||||||
4.000% due 2041 | 2,350 | 2,527 | ||||||
4.500% due 2041 | 1,464 | 1,579 | ||||||
15 Year TBA(Ï) | 1,700 | 1,751 | ||||||
3.000% | 3,350 | 3,510 | ||||||
3.500% | 875 | 924 | ||||||
30 Year TBA(Ï) | 570 | 583 | ||||||
3.500% | 12,045 | 12,636 | ||||||
4.000% | 19,680 | 20,915 | ||||||
4.500% | 4,500 | 4,828 | ||||||
5.000% | 2,650 | 2,868 | ||||||
5.500% | 2,830 | 3,087 | ||||||
6.000% | 1,700 | 1,868 | ||||||
Series 2003-343 Class 6 | 104 | 15 | ||||||
Series 2003-345 Class 18 | 197 | 12 | ||||||
Series 2003-345 Class 19 | 217 | 13 | ||||||
Series 2005-365 Class 12 | 395 | 50 | ||||||
Series 2006-369 Class 8 | 69 | 9 | ||||||
Series 2012-55 Class PC | 700 | 730 | ||||||
Fannie Mae Grantor Trust | 376 | 452 | ||||||
Fannie Mae REMICS | 46 | 53 | ||||||
Series 2003-32 Class FH | 55 | 55 | ||||||
Series 2003-35 Class FY | 117 | 117 | ||||||
Series 2005-110 Class MB | 135 | 149 | ||||||
Series 2006-27 Class SH | 2,206 | 374 | ||||||
Series 2007-30 Class AF | 78 | 78 | ||||||
Series 2009-39 Class LB | 405 | 449 | ||||||
Series 2009-96 Class DB | 575 | 629 |
56 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Series 2010-85 Class NJ | 700 | 753 | ||||||
Series 2010-95 Class S | 2,296 | 407 | ||||||
Series 2010-112 Class PI | 2,496 | 366 | ||||||
Fannie Mae Whole Loan | 25 | 29 | ||||||
Series 2004-W2 Class 2A2 | 348 | 402 | ||||||
FDIC Structured Sale Guaranteed Notes | 734 | 750 | ||||||
FDIC Trust | 508 | 510 | ||||||
Series 2011-R1 Class A | 729 | 746 | ||||||
Federal Home Loan Mortgage Corp. Multifamily Structured Pass Through Certificates | 1,285 | 109 | ||||||
Series 2011-K702 Class X1 | 4,788 | 348 | ||||||
Series 2012-K501 Class X1A | 4,994 | 271 | ||||||
Federal Home Loan Mortgage Corp. Structured Pass Through Securities | 19 | 19 | ||||||
First Horizon Asset Securities, Inc. | 881 | 705 | ||||||
Freddie Mac | 7 | 7 | ||||||
3.500% due 2025 | 1,259 | 1,342 | ||||||
2.572% due 2030 (Ê) | 1 | 1 | ||||||
5.000% due 2035 | 619 | 667 | ||||||
4.544% due 2037 (Ê) | 157 | 167 | ||||||
5.500% due 2037 | 678 | 732 | ||||||
5.500% due 2038 | 2,776 | 3,081 | ||||||
6.000% due 2038 | 618 | 686 | ||||||
4.500% due 2039 | 2,240 | 2,475 | ||||||
4.000% due 2041 | 6,612 | 7,157 | ||||||
4.500% due 2041 | 6,117 | 6,750 | ||||||
2.500% due 12/01/99 | 1,960 | 2,015 | ||||||
Freddie Mac Mortgage Trust | 510 | 531 | ||||||
Series 2011-K702 Class B | 340 | 348 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Freddie Mac Reference REMIC | 318 | 368 | ||||||
Freddie Mac REMICS | 8 | 8 | ||||||
Series 2003-2624 Class QH | 320 | 360 | ||||||
Series 2007-3335 Class BF | 82 | 82 | ||||||
Series 2007-3335 Class FT | ||||||||
0.392% due 08/15/19 (Ê) | 184 | 184 | ||||||
Series 2009-3569 Class NY | ||||||||
5.000% due 08/15/39 | 1,400 | 1,635 | ||||||
Series 2010-3640 Class JA | ||||||||
1.500% due 03/15/15 | 537 | 539 | ||||||
Series 2010-3653 Class B | ||||||||
4.500% due 04/15/30 | 730 | 816 | ||||||
Series 2010-3704 Class DC | ||||||||
4.000% due 11/15/36 | 500 | 547 | ||||||
GE Business Loan Trust | ||||||||
0.612% due 11/15/31 (Ê)(Þ) | 623 | 583 | ||||||
GE Capital Commercial Mortgage Corp. | ||||||||
5.688% due 07/10/37 (Þ) | 45 | 45 | ||||||
Series 2005-C4 Class A4 | ||||||||
5.486% due 11/10/45 | 170 | 190 | ||||||
Ginnie Mae I | 662 | 701 | ||||||
4.500% due 2039 | 1,627 | 1,781 | ||||||
30 Year TBA(Ï) | ||||||||
3.500% | — | — | ||||||
Ginnie Mae II | 102 | 106 | ||||||
1.625% due 2027 (Ê) | 7 | 7 | ||||||
1.625% due 2032 (Ê) | 36 | 37 | ||||||
3.500% due 2040 (Ê) | 1,387 | 1,470 | ||||||
4.000% due 2040 (Ê) | 282 | 300 | ||||||
4.502% due 2061 | 411 | 456 | ||||||
4.700% due 2061 | 345 | 389 | ||||||
5.245% due 2061 | 685 | 780 | ||||||
30 Year TBA(Ï) | ||||||||
3.500% | 2,075 | 2,218 | ||||||
GMAC Commercial Mortgage Securities, Inc. | ||||||||
4.547% due 12/10/41 | 118 | 118 | ||||||
GMAC Mortgage Corp. Loan Trust | 362 | 333 | ||||||
Government National Mortgage Association | 10 | 10 | ||||||
Series 2007-26 Class SD | 2,172 | 386 |
Core Bond Fund | 57 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Series 2010-116 Class MP | 1,780 | 1,901 | ||||||
Series 2011-67 Class B | 230 | 256 | ||||||
Series 2011-127 Class IO | 2,395 | 184 | ||||||
Granite Master Issuer PLC | 603 | 736 | ||||||
Greenwich Capital Commercial Funding Corp. | 140 | 141 | ||||||
Series 2004-GG1 Class A7 | 750 | 795 | ||||||
Series 2007-GG9 Class A4 | 315 | 350 | ||||||
GS Mortgage Securities Corp. II | 320 | 356 | ||||||
Series 2011-ALF Class A | 240 | 244 | ||||||
Series 2011-GC5 Class A4 | 735 | 771 | ||||||
Series 2012-ALOH Class A | 465 | 481 | ||||||
GSMPS Mortgage Loan Trust | 458 | 460 | ||||||
GSR Mortgage Loan Trust | 113 | 108 | ||||||
Series 2006-2F Class 3A3 | 884 | 726 | ||||||
Series 2006-3F Class 2A3 | 233 | 202 | ||||||
Series 2006-8F Class 4A17 | 406 | 337 | ||||||
Series 2007-AR2 Class 2A1 | 797 | 566 | ||||||
Harborview Mortgage Loan Trust | 105 | 75 | ||||||
Indymac Index Mortgage Loan Trust | 511 | 317 | ||||||
Series 2006-AR41 Class A3 | 1,113 | 543 | ||||||
Series 2007-AR5 Class 1A1 | 477 | 205 | ||||||
JPMorgan Alternative Loan Trust | 1,250 | 740 | ||||||
JPMorgan Chase Commercial Mortgage Securities Corp. | ||||||||
Series 2003-C1 Class A2 | 243 | 246 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Series 2005-LDP5 Class A4 | 555 | 621 | ||||||
Series 2006-CB15 Class A4 | 370 | 413 | ||||||
Series 2006-CB16 Class A4 | 220 | 248 | ||||||
Series 2006-LDP8 Class A3B | 250 | 260 | ||||||
Series 2006-LDP8 Class A4 | 770 | 872 | ||||||
Series 2007-CB18 Class A4 | 1,200 | 1,354 | ||||||
Series 2007-CB20 Class AJ | 125 | 107 | ||||||
Series 2007-LD12 Class A4 | 100 | 114 | ||||||
Series 2007-LDPX Class A3 | 700 | 783 | ||||||
Series 2010-CNTR Class A2 | 400 | 424 | ||||||
Series 2012-C6 Class A3 | 260 | 269 | ||||||
JPMorgan Mortgage Trust | 31 | 31 | ||||||
Series 2005-A5 Class TA1 | 301 | 297 | ||||||
Series 2005-A8 Class 1A1 | 244 | 227 | ||||||
Series 2005-S3 Class 1A2 | 64 | 59 | ||||||
Series 2006-A6 Class 1A2 | 167 | 119 | ||||||
Series 2006-A7 Class 2A4R | 1,302 | 917 | ||||||
Series 2007-S3 Class 1A8 | 1,068 | 851 | ||||||
LB-UBS Commercial Mortgage Trust | 45 | 46 | ||||||
Series 2003-C5 Class C | 130 | 134 | ||||||
Mastr Adjustable Rate Mortgages Trust | 133 | 116 | ||||||
Series 2007-HF2 Class A1 | ||||||||
0.555% due 09/25/37 (Ê) | 728 | 492 | ||||||
Mastr Alternative Loans Trust | 120 | 105 | ||||||
Series 2004-10 Class 5A6 | ||||||||
5.750% due 09/25/34 | 121 | 124 | ||||||
Mellon Residential Funding Corp. | 82 | 79 | ||||||
Merrill Lynch Mortgage Investors, Inc. | 74 | 54 |
58 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Series 2006-A1 Class 1A1 | 688 | 383 | ||||||
Merrill Lynch Mortgage Trust | 55 | 49 | ||||||
Series 2005-CIP1 Class AM | 295 | 318 | ||||||
Series 2008-C1 Class A4 | 530 | 603 | ||||||
Merrill Lynch/Countrywide Commercial Mortgage Trust | 100 | 109 | ||||||
MLCC Mortgage Investors, Inc. | 47 | 38 | ||||||
Morgan Stanley Capital I, Inc. | 100 | 100 | ||||||
Series 2005-T19 Class A4A | 750 | 822 | ||||||
Series 2006-HQ9 Class A4 | 515 | 587 | ||||||
Series 2006-T23 Class A4 | 490 | 568 | ||||||
Series 2007-IQ16 Class A4 | 680 | 787 | ||||||
Series 2007-T27 Class A4 | 720 | 836 | ||||||
Series 2011-C3 Class A2 | 195 | 208 | ||||||
Series 2011-C3 Class A4 | 115 | 125 | ||||||
Series 2012-C4 Class A4 | 510 | 515 | ||||||
Morgan Stanley Dean Witter Capital I | 50 | 52 | ||||||
OBP Depositor LLC Trust | 350 | 400 | ||||||
Prime Mortgage Trust | 13 | 12 | ||||||
Prudential Commercial Mortgage Trust | 50 | 50 | ||||||
RALI Trust | 316 | 211 | ||||||
Residential Asset Securitization Trust | 89 | 85 | ||||||
Series 2005-A10 Class A3 | 214 | 178 | ||||||
Series 2006-A9CB Class A6 | 217 | 119 |
Principal Amount ($) or Shares | Market Value $ | |||||||
RFMSI Trust | 219 | 156 | ||||||
RREF 2012 LT1 LLC | ||||||||
4.750% due 02/15/25 (Þ) | 384 | 385 | ||||||
Sequoia Mortgage Trust | 28 | 26 | ||||||
Structured Adjustable Rate Mortgage Loan Trust | 221 | 192 | ||||||
Structured Asset Mortgage Investments, Inc. | 123 | 107 | ||||||
Series 2007-AR6 Class A1 | 1,105 | 551 | ||||||
Structured Asset Securities Corp. | 665 | 641 | ||||||
Wachovia Bank Commercial Mortgage Trust | 65 | 65 | ||||||
Series 2005-C16 Class A4 | 725 | 780 | ||||||
Series 2005-C20 Class A7 | 800 | 883 | ||||||
Washington Mutual Alternative Mortgage Pass-Through Certificates | 1,135 | 402 | ||||||
Series 2006-AR9 Class 2A | 1,442 | 548 | ||||||
Series 2007-HY2 Class 2A3 | 959 | 559 | ||||||
Washington Mutual Mortgage Pass Through Certificates | 180 | 5 | ||||||
Series 2005-AR13 Class A1A1 | 24 | 19 | ||||||
Series 2007-HY3 Class 4A1 | 336 | 270 | ||||||
Wells Fargo Mortgage Backed Securities Trust | 154 | 144 | ||||||
Series 2006-AR2 Class 2A1 | 168 | 149 | ||||||
Series 2006-AR2 Class 2A3 | 253 | 218 | ||||||
Series 2006-AR4 Class 1A1 | 470 | 393 | ||||||
Series 2006-AR10 Class 4A1 | 47 | 35 | ||||||
Series 2006-AR17 Class A1 2.605% due 10/25/36 (Ê) | 838 | 639 |
Core Bond Fund | 59 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Series 2007-8 Class 1A16 | 168 | 155 | ||||||
Series 2007-AR8 Class A1 | 282 | 231 | ||||||
WF-RBS Commercial Mortgage Trust | 545 | 575 | ||||||
|
| |||||||
196,419 | ||||||||
|
| |||||||
Municipal Bonds - 1.5% | ||||||||
Chicago Transit Authority Revenue Bonds | 400 | 476 | ||||||
City of New York New York General Obligation Unlimited | 1,100 | 1,261 | ||||||
County of Clark Nevada Airport System Revenue Bonds | 100 | 137 | ||||||
Illinois Municipal Electric Agency Revenue Bonds | 100 | 119 | ||||||
Irvine Ranch Water District Revenue Bonds | 1,000 | 1,398 | ||||||
Los Angeles Unified School District General Obligation Unlimited | 400 | 442 | ||||||
Metropolitan Government of Nashville & Davidson County Convention Center Auth Revenue Bonds | 100 | 115 | ||||||
Municipal Electric Authority of Georgia Revenue Bonds | 370 | 429 | ||||||
7.055% due 04/01/57 | 345 | 365 | ||||||
New Jersey State Turnpike Authority Revenue Bonds | 240 | 338 | ||||||
New York City Municipal Water Finance Authority Revenue Bonds | 525 | 602 | ||||||
North Carolina Turnpike Authority Revenue Bonds | 100 | 115 | ||||||
Public Power Generation Agency Revenue Bonds | 100 | 119 | ||||||
San Diego County Regional Airport Authority Revenue Bonds | 100 | 110 | ||||||
State of California General Obligation Unlimited | 100 | 125 | ||||||
5.650% due 04/01/39 (Ê) | 100 | 104 | ||||||
7.550% due 04/01/39 | 505 | 650 | ||||||
7.600% due 11/01/40 | 325 | 423 |
Principal Amount ($) or Shares | Market Value $ | |||||||
State of Illinois General Obligation Unlimited | 750 | 832 | ||||||
7.350% due 07/01/35 | 350 | 407 | ||||||
State of Louisiana Gasoline & Fuels Tax Revenue Bonds | 400 | 401 | ||||||
University of California Revenue Bonds | 400 | 456 | ||||||
|
| |||||||
9,424 | ||||||||
|
| |||||||
Non-US Bonds - 4.0% | ||||||||
Australia Government Bond | ||||||||
6.000% due 02/15/17 | AUD | 5,140 | 6,059 | |||||
Austria Government Bond | EUR | 570 | 805 | |||||
3.650% due 04/20/22 | EUR | 460 | 644 | |||||
Canada Housing Trust No. 1 | CAD | 200 | 222 | |||||
Colombia Government International Bond | COP | 1,440,000 | 1,004 | |||||
Federative Republic of Brazil | BRL | 1,400 | 866 | |||||
Ireland Government Bond | EUR | 1,270 | 1,463 | |||||
5.400% due 03/13/25 | EUR | 1,270 | 1,462 | |||||
Italy Buoni Poliennali Del Tesoro | EUR | 960 | 1,098 | |||||
Mexican Bonos | MXN | 12,100 | 1,030 | |||||
Series M 30 | MXN | 9,900 | 1,031 | |||||
New Zealand Government Bond | NZD | 3,210 | 2,963 | |||||
Peruvian Government International Bond | PEN | 475 | 213 | |||||
6.950% due 08/12/31 | PEN | 285 | 124 | |||||
Province of Ontario Canada | CAD | 200 | 220 | |||||
4.000% due 06/02/21 | CAD | 855 | 930 | |||||
3.150% due 06/02/22 | CAD | 1,800 | 1,826 | |||||
4.700% due 06/02/37 | CAD | 400 | 472 | |||||
4.600% due 06/02/39 | CAD | 100 | 118 | |||||
Province of Quebec Canada | CAD | 300 | 330 | |||||
3.500% due 12/01/22 | CAD | 1,500 | 1,550 | |||||
|
| |||||||
24,430 | ||||||||
|
| |||||||
United States Government Agencies - 0.6% | ||||||||
Federal Home Loan Mortgage Corp. | 265 | 269 | ||||||
2.000% due 08/25/16 | 675 | 709 |
60 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
1.000% due 06/29/17 | 200 | 200 | ||||||
3.750% due 03/27/19 | 400 | 462 | ||||||
2.375% due 01/13/22 | 100 | 103 | ||||||
Federal National Mortgage Association | 100 | 100 | ||||||
1.250% due 01/30/17 | 500 | 508 | ||||||
Zero coupon due 10/09/19 | 675 | 547 | ||||||
Freddie Mac | 400 | 468 | ||||||
5.500% due 08/23/17 | 100 | 123 | ||||||
|
| |||||||
3,489 | ||||||||
|
| |||||||
United States Government Treasuries - 14.3% | ||||||||
United States Treasury Inflation Indexed Bonds | 104 | 108 | ||||||
1.250% due 07/15/20 | 633 | 735 | ||||||
0.125% due 01/15/22 | 305 | 323 | ||||||
2.375% due 01/15/25 | 1,098 | 1,446 | ||||||
2.375% due 01/15/27 | 2,053 | 2,755 | ||||||
1.750% due 01/15/28 | 110 | 138 | ||||||
2.125% due 02/15/41 | 1,066 | 1,522 | ||||||
United States Treasury Notes | 495 | 494 | ||||||
0.250% due 05/15/15 | 460 | 458 | ||||||
3.250% due 05/31/16 | 790 | 872 | ||||||
0.875% due 01/31/17 | 12,395 | 12,502 | ||||||
0.875% due 04/30/17 | 320 | 322 | ||||||
0.625% due 05/31/17 | 2,800 | 2,787 | ||||||
3.500% due 02/15/18 | 200 | 229 | ||||||
1.375% due 11/30/18 | 300 | 307 | ||||||
1.250% due 04/30/19 | 100 | 101 | ||||||
1.125% due 05/31/19 | 39,439 | 39,501 | ||||||
Zero coupon due 06/30/19 | 500 | 496 | ||||||
3.375% due 11/15/19 | 400 | 463 | ||||||
2.000% due 02/15/22 | 545 | 563 | ||||||
1.750% due 05/15/22 | 9,100 | 9,174 | ||||||
6.250% due 08/15/23 | 380 | 552 | ||||||
3.125% due 11/15/41 | 6,070 | 6,526 | ||||||
3.125% due 02/15/42 | 5,375 | 5,773 | ||||||
|
| |||||||
88,147 | ||||||||
|
| |||||||
Total Long-Term Investments (cost $474,807) | 486,823 | |||||||
|
| |||||||
Preferred Stocks - 0.1% | ||||||||
Financial Services - 0.1% | ||||||||
DG Funding Trust (Å) | 49 | 365 | ||||||
|
| |||||||
Total Preferred Stocks (cost $516) | 365 | |||||||
|
| |||||||
Short-Term Investments - 29.6% | ||||||||
Abbey National Treasury Services PLC | 300 | 295 | ||||||
1.602% due 06/10/13 (ž) | 2,000 | 1,962 | ||||||
Adam Aircraft Industries | 49 | — |
Principal Amount ($) or Shares | Market Value $ | |||||||
Allstate Life Global Funding Trusts | 200 | 208 | ||||||
American Express Bank FSB | 300 | 311 | ||||||
Appalachian Power Co. | 65 | 65 | ||||||
Australia & New Zealand Banking Group, Ltd. | 300 | 300 | ||||||
Bank of America Corp. | 700 | 700 | ||||||
Barclays Bank PLC | 1,300 | 1,311 | ||||||
BNP Paribas SA | 680 | 674 | ||||||
Citigroup, Inc. | 200 | 201 | ||||||
5.625% due 08/27/12 | 200 | 201 | ||||||
5.500% due 04/11/13 | 700 | 720 | ||||||
Continental Airlines 2006-1 Class G Pass Through Trust | 180 | 175 | ||||||
DDR Corp. | 205 | 205 | ||||||
Dell, Inc. | 400 | 412 | ||||||
Delta Air Lines 2002-1 Class G-2 Pass Through Trust | 500 | 506 | ||||||
Escrow GM Corp. (Å) | 80 | 120 | ||||||
Fannie Mae | 200 | 204 | ||||||
FCE Bank PLC | 600 | 782 | ||||||
Federal Farm Credit Banks | 1,700 | 1,699 | ||||||
Federal Home Loan Banks | 1,000 | 999 | ||||||
0.170% due 02/08/13 | 7,100 | 7,096 | ||||||
0.190% due 02/12/13 | 2,000 | 1,999 | ||||||
0.180% due 02/15/13 | 600 | 600 | ||||||
0.170% due 02/25/13 | 5,400 | 5,397 | ||||||
0.200% due 03/01/13 | 1,200 | 1,200 | ||||||
0.240% due 04/26/13 | 100 | 100 | ||||||
Federal Home Loan Mortgage Corp. | 2,970 | 2,971 | ||||||
Federal National Mortgage Association | 1,455 | 1,456 | ||||||
0.273% due 10/18/12 (Ê) | 1,485 | 1,486 | ||||||
Ford Motor Credit Co. LLC | 1,280 | 1,285 |
Core Bond Fund | 61 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Gazprom OAO Via RBS AG | 900 | 943 | ||||||
General Electric Capital Corp. | 75 | 76 | ||||||
Hewlett-Packard Co. | 700 | 698 | ||||||
HSBC Finance Corp. | 300 | 378 | ||||||
Hyundai Auto Lease Securitization | 2,000 | 2,001 | ||||||
ING Bank NV | 600 | 600 | ||||||
iPCS, Inc. | 440 | 435 | ||||||
Itau Unibanco SA | 500 | 500 | ||||||
MBNA Corp. | 200 | 205 | ||||||
Morgan Stanley | 200 | 200 | ||||||
National Australia Bank, Ltd. | 800 | 834 | ||||||
Nissan Auto Receivables Owner Trust | 4,630 | 4,634 | ||||||
NuStar Logistics, LP | 220 | 226 | ||||||
Ohio Power Co. | 10 | 10 | ||||||
Russell U.S. Cash Management Fund | 113,353,546 | (¥) | 113,354 | |||||
SLM Corp. | 150 | 186 | ||||||
Springleaf Finance Corp. | 100 | 100 | ||||||
Telefonica Emisiones SAU | 290 | 286 | ||||||
United States Treasury Bills | 19,000 | 18,999 | ||||||
0.100% due 09/13/12 (ž) | 40 | 40 | ||||||
United States Treasury Inflation Indexed Bonds | 457 | 458 | ||||||
UnitedHealth Group, Inc. | 200 | 205 | ||||||
Volkswagen Auto Lease Trust | 620 | 620 | ||||||
Wachovia Corp. | 490 | 509 | ||||||
|
| |||||||
Total Short-Term Investments (cost $182,005) | 182,137 | |||||||
|
|
Principal Amount ($) or Shares | Market Value $ | |||||||
Repurchase Agreements - 0.4% | ||||||||
Agreement with Goldman Sachs and Co. and State Street Bank (Tri-Party) of $100 dated June 21, 2012 at 0.180% to be repurchased at $100 on July 17, 2012 collateralized by: $96 par various United States Government Agency Obligations, valued at $103. | 100 | 100 | ||||||
Agreement with J.P. Morgan Securities Inc. and State Street Bank (Tri-Party) of $2,300 dated June 29, 2012 at 0.200% to be repurchased at $2,300 on July 2, 2012 collateralized by: $2,338 par various United States Treasury Obligations, valued at $2,348. | 2,300 | 2,300 | ||||||
|
| |||||||
Total Repurchase Agreements (cost $2,400) | 2,400 | |||||||
|
| |||||||
Other Securities - 1.0% | ||||||||
Russell Investment Funds Liquidating Trust (×) | 525,536 | (¥) | 536 | |||||
Russell U.S. Cash Collateral Fund (×) | 5,667,044 | (¥) | 5,667 | |||||
|
| |||||||
Total Other Securities (cost $6,193) | 6,203 | |||||||
|
| |||||||
Total Investments - 110.3% (identified cost $665,921) | 677,928 | |||||||
Other Assets and Liabilities, Net - (10.3%) | (63,514 | ) | ||||||
|
| |||||||
Net Assets - 100.0% | 614,414 | |||||||
|
|
A portion of the portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
62 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except contract amounts)
Futures Contracts | Number of Contracts | Notional | Expiration Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||
Long Positions | ||||||||||||||||||
Eurodollar Futures (CME) | 31 | USD | 7,714 | 09/12 | — | |||||||||||||
Eurodollar Futures (CME) | 34 | USD | 8,424 | 03/15 | 11 | |||||||||||||
Eurodollar Futures (CME) | 17 | USD | 4,207 | 06/15 | 4 | |||||||||||||
Eurodollar Futures (CME) | 5 | USD | 1,236 | 09/15 | 3 | |||||||||||||
United States Treasury 2 Year Note Futures | 187 | USD | 41,177 | 09/12 | (32) | |||||||||||||
United States Treasury 5 Year Note Futures | 218 | USD | 27,025 | 09/12 | (32) | |||||||||||||
United States Treasury 10 Year Note Futures | 127 | USD | 16,938 | 09/12 | (41) | |||||||||||||
Ultra Long Term United States Treasury Bond Futures | 5 | USD | 834 | 09/12 | (5) | |||||||||||||
United States Treasury Bonds | 127 | USD | 18,791 | 09/12 | (182) | |||||||||||||
Short Positions | ||||||||||||||||||
Canada Government 10 Year Bond Futures (Canada) | 15 | CAD | 2,077 | 09/12 | (5) | |||||||||||||
Euro-OAT Futures | 7 | EUR | 896 | 09/12 | 5 | |||||||||||||
German Euro Bobl Futures (Germany) | 17 | EUR | 2,140 | 09/12 | 13 | |||||||||||||
Japan Government 10 Year Bond Futures (Japan) | 1 | JPY | 143,690 | 09/12 | 6 | |||||||||||||
United Kingdom Long Gilt Bond Futures (UK) | 25 | GBP | 2,978 | 09/12 | 32 | |||||||||||||
United States Treasury 5 Year Note Futures | 9 | USD | 1,116 | 09/12 | — | |||||||||||||
United States Treasury 10 Year Note Futures | 57 | USD | 7,603 | 09/12 | 17 | |||||||||||||
United States Treasury Bonds | 8 | USD | 1,184 | 09/12 | (5) | |||||||||||||
| ||||||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) |
| (211) | ||||||||||||||||
|
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund | 63 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except contract amounts)
Options Written | Call/Put | Number of Contracts | Strike Price | Notional | Expiration Date | Market Value $ | ||||||||||||||||||||
Inflationary Floor Options | Call | 1 | 0.00 | USD | 810 | 11/23/20 | (2 | ) | ||||||||||||||||||
Inflationary Floor Options | Put | 1 | 0.00 | USD | 1,400 | 03/10/20 | (3 | ) | ||||||||||||||||||
Inflationary Floor Options | Put | 1 | 0.00 | USD | 1,000 | 03/12/20 | (1 | ) | ||||||||||||||||||
Inflationary Floor Options | Put | 1 | 0.00 | USD | 5,500 | 04/07/20 | (9 | ) | ||||||||||||||||||
Inflationary Floor Options | Put | 1 | 0.00 | USD | 300 | 09/29/20 | (1 | ) | ||||||||||||||||||
Swaptions | ||||||||||||||||||||||||||
(Fund Receives/Fund Pays) | ||||||||||||||||||||||||||
USD Three Month LIBOR/USD 1.400% | Call | 2 | 0.00 | 1,000 | 03/18/13 | (16 | ) | |||||||||||||||||||
USD 0.920%/USD Three Month LIBOR | Put | 2 | 0.00 | 4,200 | 11/14/12 | (2 | ) | |||||||||||||||||||
USD 1.000%/USD Three Month LIBOR | Put | 1 | 0.00 | 700 | 08/13/12 | — | ||||||||||||||||||||
USD 1.000%/USD Three Month LIBOR | Put | 1 | 0.00 | 2,500 | 11/19/12 | — | ||||||||||||||||||||
USD 1.200%/USD Three Month LIBOR | Put | 1 | 0.00 | 1,800 | 07/11/13 | (2 | ) | |||||||||||||||||||
USD 1.350%/USD Three Month LIBOR | Put | 1 | 0.00 | 1,600 | 08/13/12 | — | ||||||||||||||||||||
USD 1.400%/USD Three Month LIBOR | Put | 2 | 0.00 | 1,000 | 03/18/13 | (6 | ) | |||||||||||||||||||
USD 1.550%/USD Three Month LIBOR | Put | 5 | 0.00 | 17,800 | 08/13/12 | (1 | ) | |||||||||||||||||||
USD 1.700%/USD Three Month LIBOR | Put | 6 | 0.00 | 19,800 | 08/13/12 | — | ||||||||||||||||||||
USD 1.750%/USD Three Month LIBOR | Put | 1 | 0.00 | 2,900 | 11/19/12 | — | ||||||||||||||||||||
USD 2.000%/USD Three Month LIBOR | Put | 1 | 0.00 | 1,000 | 03/18/13 | (2 | ) | |||||||||||||||||||
USD 2.250%/USD Three Month LIBOR | Put | 5 | 0.00 | 12,300 | 09/24/12 | — | ||||||||||||||||||||
USD 2.250%/USD Three Month LIBOR | Put | 1 | 0.00 | 2,700 | 05/28/13 | — | ||||||||||||||||||||
USD 10.000%/USD Three Month LIBOR | Put | 2 | 0.00 | 10,200 | 07/10/12 | — | ||||||||||||||||||||
|
| |||||||||||||||||||||||||
Total Liability for Options Written (premiums received $658) |
| (45 | ) | |||||||||||||||||||||||
|
|
See accompanying notes which are an integral part of the financial statements.
64 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands
Foreign Currency Exchange Contracts | ||||||||||||||||||||||
Counterparty | Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||||||
Barclays Bank PLC | USD | 206 | BRL | 420 | 08/02/12 | 2 | ||||||||||||||||
Barclays Bank PLC | USD | 127 | EUR | 100 | 07/16/12 | (1 | ) | |||||||||||||||
Barclays Bank PLC | USD | 130 | EUR | 102 | 07/16/12 | (1 | ) | |||||||||||||||
Barclays Bank PLC | USD | 262 | EUR | 200 | 07/16/12 | (9 | ) | |||||||||||||||
Barclays Bank PLC | USD | 263 | EUR | 200 | 07/16/12 | (10 | ) | |||||||||||||||
Barclays Bank PLC | BRL | 2,079 | USD | 1,063 | 08/02/12 | 35 | ||||||||||||||||
Barclays Bank PLC | EUR | 1,727 | USD | 2,260 | 07/16/12 | 75 | ||||||||||||||||
BNP Paribas | USD | 2,467 | EUR | 1,977 | 07/03/12 | 35 | ||||||||||||||||
BNP Paribas | USD | 262 | EUR | 200 | 07/16/12 | (9 | ) | |||||||||||||||
BNP Paribas | USD | 263 | EUR | 200 | 07/16/12 | (10 | ) | |||||||||||||||
BNP Paribas | EUR | 989 | USD | 1,260 | 07/03/12 | 8 | ||||||||||||||||
BNP Paribas | EUR | 1,977 | USD | 2,468 | 08/02/12 | (35 | ) | |||||||||||||||
Citibank | USD | 775 | BRL | 1,599 | 07/18/12 | 19 | ||||||||||||||||
Citibank | USD | 127 | EUR | 100 | 07/16/12 | (1 | ) | |||||||||||||||
Citibank | USD | 3,170 | EUR | 2,541 | 09/14/12 | 48 | ||||||||||||||||
Citibank | AUD | 1,184 | USD | 1,204 | 07/13/12 | (7 | ) | |||||||||||||||
Citibank | BRL | 1,599 | USD | 860 | 07/18/12 | 67 | ||||||||||||||||
Credit Suisse First Boston | USD | 263 | EUR | 200 | 07/16/12 | (10 | ) | |||||||||||||||
Credit Suisse First Boston | AUD | 99 | USD | 96 | 07/19/12 | (5 | ) | |||||||||||||||
Credit Suisse First Boston | EUR | 1,728 | USD | 2,264 | 07/16/12 | 77 | ||||||||||||||||
Deutsche Bank AG | USD | 124 | EUR | 100 | 07/16/12 | 3 | ||||||||||||||||
Deutsche Bank AG | USD | 131 | EUR | 100 | 07/16/12 | (5 | ) | |||||||||||||||
Deutsche Bank AG | USD | 270 | EUR | 206 | 07/16/12 | (9 | ) | |||||||||||||||
Deutsche Bank AG | EUR | 1,727 | USD | 2,264 | 07/16/12 | 79 | ||||||||||||||||
HSBC Bank PLC | USD | 127 | EUR | 100 | 07/16/12 | (1 | ) | |||||||||||||||
HSBC Bank PLC | USD | 265 | EUR | 200 | 07/16/12 | (11 | ) | |||||||||||||||
HSBC Bank PLC | BRL | 145 | USD | 70 | 08/02/12 | (2 | ) | |||||||||||||||
JPMorgan Chase Bank | USD | 3,785 | GBP | 2,409 | 08/01/12 | (12 | ) | |||||||||||||||
JPMorgan Chase Bank | USD | 1,959 | KRW | 2,268,680 | 08/01/12 | 18 | ||||||||||||||||
JPMorgan Chase Bank | USD | 1,976 | MXN | 27,192 | 08/01/12 | 56 | ||||||||||||||||
JPMorgan Chase Bank | USD | 10 | MXN | 135 | 08/15/12 | — | ||||||||||||||||
JPMorgan Chase Bank | USD | 1,936 | MYR | 6,120 | 08/01/12 | (12 | ) | |||||||||||||||
JPMorgan Chase Bank | USD | 1,968 | NOK | 11,686 | 08/01/12 | (5 | ) | |||||||||||||||
JPMorgan Chase Bank | USD | 1,892 | PLN | 6,364 | 08/01/12 | 11 | ||||||||||||||||
JPMorgan Chase Bank | USD | 1,968 | SEK | 13,720 | 08/01/12 | 13 | ||||||||||||||||
JPMorgan Chase Bank | USD | 1,897 | ZAR | 15,692 | 08/01/12 | 14 | ||||||||||||||||
JPMorgan Chase Bank | AUD | 4,564 | USD | 4,630 | 08/01/12 | (29 | ) | |||||||||||||||
JPMorgan Chase Bank | AUD | 6,060 | USD | 6,156 | 08/01/12 | (29 | ) | |||||||||||||||
JPMorgan Chase Bank | BRL | 2,310 | USD | 1,124 | 08/01/12 | (19 | ) | |||||||||||||||
JPMorgan Chase Bank | CLP | 588,302 | USD | 1,180 | 08/01/12 | 9 | ||||||||||||||||
JPMorgan Chase Bank | COP | 1,416,200 | USD | 793 | 08/01/12 | 3 | ||||||||||||||||
JPMorgan Chase Bank | COP | 2,148,000 | USD | 1,199 | 08/01/12 | 1 | ||||||||||||||||
JPMorgan Chase Bank | CZK | 30,921 | USD | 1,542 | 08/01/12 | 9 | ||||||||||||||||
JPMorgan Chase Bank | EUR | 988 | USD | 1,260 | 07/03/12 | 10 | ||||||||||||||||
JPMorgan Chase Bank | EUR | 1,462 | USD | 1,854 | 08/01/12 | 3 | ||||||||||||||||
JPMorgan Chase Bank | EUR | 4,304 | USD | 5,472 | 08/01/12 | 24 | ||||||||||||||||
JPMorgan Chase Bank | IDR | 26,243,000 | USD | 2,752 | 08/01/12 | (32 | ) | |||||||||||||||
JPMorgan Chase Bank | JPY | 32,860 | USD | 416 | 08/01/12 | 5 | ||||||||||||||||
JPMorgan Chase Bank | JPY | 98,590 | USD | 1,248 | 08/01/12 | 14 | ||||||||||||||||
JPMorgan Chase Bank | JPY | 7,945 | USD | 100 | 09/10/12 | — | ||||||||||||||||
JPMorgan Chase Bank | JPY | 16,040 | USD | 200 | 09/10/12 | (1 | ) | |||||||||||||||
JPMorgan Chase Bank | MXN | 27,015 | USD | 1,965 | 08/01/12 | (55 | ) | |||||||||||||||
JPMorgan Chase Bank | NZD | 3,457 | USD | 2,746 | 08/01/12 | (16 | ) |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund | 65 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands
Foreign Currency Exchange Contracts
| ||||||||||||||||||||||
Counterparty | Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||||||
JPMorgan Chase Bank | NZD | 3,730 | USD | 2,966 | 08/01/12 | (14 | ) | |||||||||||||||
JPMorgan Chase Bank | RUB | 35,615 | USD | 1,090 | 08/01/12 | (4 | ) | |||||||||||||||
JPMorgan Chase Bank | TRY | 2,122 | USD | 1,167 | 08/01/12 | 2 | ||||||||||||||||
Morgan Stanley & Co., Inc. | USD | 84 | AUD | 85 | 07/19/12 | 3 | ||||||||||||||||
Royal Bank of Canada | USD | 127 | EUR | 100 | 07/16/12 | (1 | ) | |||||||||||||||
Royal Bank of Canada | USD | 391 | EUR | 300 | 07/16/12 | (11 | ) | |||||||||||||||
Royal Bank of Scotland PLC | USD | 127 | EUR | 100 | 07/16/12 | (1 | ) | |||||||||||||||
UBS AG | USD | 131 | EUR | 100 | 07/16/12 | (5 | ) | |||||||||||||||
UBS AG | USD | 132 | EUR | 100 | 07/16/12 | (6 | ) | |||||||||||||||
UBS AG | USD | 251 | EUR | 200 | 07/16/12 | 2 | ||||||||||||||||
UBS AG | USD | 259 | EUR | 200 | 07/16/12 | (6 | ) | |||||||||||||||
UBS AG | USD | 262 | EUR | 200 | 07/16/12 | (8 | ) | |||||||||||||||
UBS AG | AUD | 1,100 | USD | 1,125 | 07/13/12 | — | ||||||||||||||||
UBS AG | CAD | 5,100 | USD | 4,962 | 09/20/12 | (39 | ) | |||||||||||||||
UBS AG | JPY | 15,852 | USD | 198 | 09/10/12 | (1 | ) | |||||||||||||||
|
| |||||||||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts |
| 213 | ||||||||||||||||||||
|
|
Interest Rate Swap Contracts | ||||||||||||||||||
Counter | Notional Amount | Fund Receives | Fund Pays | Termination Date | Market Value $ | |||||||||||||
Bank of America | MXN | 1,000 | 5.500% | Mexico Interbank 28 Day Deposit Rate | 09/13/17 | 1 | ||||||||||||
Barclays Bank PLC | MXN | 700 | 5.600% | Mexico Interbank 28 Day Deposit Rate | 09/06/16 | 1 | ||||||||||||
Barclays Bank PLC | MXN | 5,000 | 5.500% | Mexico Interbank 28 Day Deposit Rate | 09/13/17 | 4 | ||||||||||||
Credit Suisse First Boston | USD | 2,500 | Three Month LIBOR | 2.750% | 06/20/42 | (133 | ) | |||||||||||
Goldman Sachs | USD | 3,300 | 1.500% | Three Month LIBOR | 03/18/16 | 13 | ||||||||||||
HSBC | MXN | 1,300 | 5.600% | Mexico Interbank 28 Day Deposit Rate | 09/06/16 | 2 | ||||||||||||
HSBC | MXN | 1,000 | 5.500% | Mexico Interbank 28 Day Deposit Rate | 09/13/17 | 1 | ||||||||||||
Morgan Stanley | MXN | 38,000 | 5.500% | Mexico Interbank 28 Day Deposit Rate | 09/13/17 | 26 | ||||||||||||
Morgan Stanley | MXN | 500 | 6.350% | Mexico Interbank 28 Day Deposit Rate | 06/02/21 | 2 | ||||||||||||
|
| |||||||||||||||||
Total Market Value on Open Interest Rate Swap Contracts Premiums Paid (Received) - $49 (å) | (83 | ) | ||||||||||||||||
|
|
Credit Default Swap Contracts | ||||||||||||||||||||||||
Corporate Issues | ||||||||||||||||||||||||
Reference | Counterparty | Implied Credit Spread | Notional Amount | Fund (Pays)/ Receives Fixed Rate | Termination Date | Market Value $ | ||||||||||||||||||
Bank of America Corp. | Deutsche Bank | 1.933% | USD | 400 | 1.000% | 09/20/14 | (8 | ) | ||||||||||||||||
GE Capital Corp. | Citibank | 0.874% | USD | 200 | 4.000% | 12/20/13 | 9 | |||||||||||||||||
GE Capital Corp. | Deutsche Bank | 0.874% | USD | 100 | 4.900% | 12/20/13 | 6 | |||||||||||||||||
|
| |||||||||||||||||||||||
Total Market Value on Open Corporate Issues Premiums Paid (Received) - ($8) | 7 | |||||||||||||||||||||||
|
|
See accompanying notes which are an integral part of the financial statements.
66 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands
Credit Indices | ||||||||||||||||||||||||
Reference | Counterparty | Notional Amount | Fund (Pays)/ Receives Fixed Rate | Termination Date | Market Value $ | |||||||||||||||||||
CMBX AJ Index | Bank of America | USD | 205 | (0.840% | ) | 10/12/52 | 31 | |||||||||||||||||
CMBX AJ Index | Barclays Bank PLC | USD | 360 | (0.840% | ) | 10/12/52 | 54 | |||||||||||||||||
CMBX AJ Index | Credit Suisse First Boston | USD | 765 | (0.840% | ) | 10/12/52 | 116 | |||||||||||||||||
Dow Jones CDX Index | Bank of America | USD | 200 | 5.000% | 12/20/15 | 16 | ||||||||||||||||||
Dow Jones CDX Index | Barclays Bank PLC | USD | 1,200 | 5.000% | 06/20/15 | 90 | ||||||||||||||||||
Dow Jones CDX Index | Credit Suisse First Boston | USD | 49,899 | (1.000% | ) | 06/20/17 | 294 | |||||||||||||||||
Dow Jones CDX Index | Deutsche Bank | USD | 772 | 0.708% | 12/20/12 | 3 | ||||||||||||||||||
Dow Jones CDX Index | Deutsche Bank | USD | 900 | 5.000% | 06/20/15 | 67 | ||||||||||||||||||
Dow Jones CDX Index | JPMorgan | USD | 386 | 0.553% | 12/20/17 | 3 | ||||||||||||||||||
Dow Jones CDX Index | Morgan Stanley | USD | 800 | 5.000% | 06/20/15 | 59 | ||||||||||||||||||
Dow Jones CDX Index | Pershing | USD | 193 | 0.548% | 12/20/17 | 2 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total Market Value on Open Credit Indices Premiums Paid (Received) - $586 | 735 | |||||||||||||||||||||||
|
|
Sovereign Issues | ||||||||||||||||||||||
Reference Entity | Counterparty | Implied Credit Spread | Notional Amount | Fund (Pays)/ Receives Fixed Rate | Termination Date | Market Value $ | ||||||||||||||||
Australia Commonwealth Government Bond | Bank of America | 0.682% | USD | 500 | 1.000% | 06/20/17 | 8 | |||||||||||||||
Australia Commonwealth Government Bond | UBS AG | 0.682% | USD | 400 | 1.000% | 06/20/17 | 6 | |||||||||||||||
Brazil Government International Bond | Barclays Bank PLC | 1.136% | USD | 500 | 1.000% | 06/20/15 | (2 | ) | ||||||||||||||
Brazil Government International Bond | Deutsche Bank | 1.136% | USD | 1,000 | 1.000% | 06/20/15 | (4 | ) | ||||||||||||||
Brazil Government International Bond | Goldman Sachs | 1.136% | USD | 500 | 1.000% | 06/20/15 | (2 | ) | ||||||||||||||
Brazil Government International Bond | HSBC | 1.171% | USD | 100 | 1.000% | 09/20/15 | (1 | ) | ||||||||||||||
Brazil Government International Bond | JPMorgan | 1.171% | USD | 100 | 1.000% | 09/20/15 | (1 | ) | ||||||||||||||
Brazil Government International Bond | Barclays Bank PLC | 1.224% | USD | 700 | 1.000% | 12/20/15 | (5 | ) | ||||||||||||||
Brazil Government International Bond | Bank of America | 1.269% | USD | 500 | 1.000% | 03/20/16 | (5 | ) | ||||||||||||||
Brazil Government International Bond | Credit Suisse Financial Products | 1.310% | USD | 200 | 1.000% | 06/20/16 | (3 | ) | ||||||||||||||
China Government International Bond | Barclays Bank PLC | 0.913% | USD | 800 | 1.000% | 06/20/16 | 3 | |||||||||||||||
France Government International Bond | Barclays Bank PLC | 1.369% | USD | 860 | 0.250% | 09/20/16 | (45 | ) | ||||||||||||||
France Government International Bond | UBS | 1.369% | USD | 2,100 | 0.250% | 12/20/15 | (76 | ) | ||||||||||||||
France Government International Bond | Goldman Sachs | 1.516% | USD | 400 | 0.250% | 06/20/16 | (19 | ) | ||||||||||||||
France Government International Bond | HSBC | 1.576% | USD | 100 | 0.250% | 09/20/16 | (5 | ) | ||||||||||||||
France Government International Bond | Goldman Sachs | 1.666% | USD | 800 | 0.250% | 12/20/16 | (47 | ) | ||||||||||||||
Germany Government Internationa Bond | Bank of America | 0.964% | USD | 1,100 | 0.250% | 06/20/17 | (37 | ) | ||||||||||||||
Germany Government International Bond | Citibank | 0.850% | USD | 100 | 0.250% | 12/20/16 | (3 | ) | ||||||||||||||
Germany Government International Bond | Goldman Sachs | 0.850% | USD | 200 | 0.250% | 12/20/16 | (5 | ) | ||||||||||||||
Japan Government International Bond | Bank of America | 0.625% | USD | 200 | 1.000% | 03/20/16 | 3 | |||||||||||||||
Japan Government International Bond | Bank of America | 0.625% | USD | 100 | 1.000% | 03/20/16 | 1 | |||||||||||||||
Japan Government International Bond | JPMorgan | 0.625% | USD | 700 | 1.000% | 03/20/16 | 10 | |||||||||||||||
Japan Government International Bond | Goldman Sachs | 0.676% | USD | 200 | 1.000% | 06/20/16 | 3 | |||||||||||||||
Korea Government International Bond | JPMorgan | 1.174% | USD | 200 | 1.000% | 06/20/17 | (2 | ) | ||||||||||||||
Korea Government International Bond | UBS | 1.174% | USD | 300 | 1.000% | 06/20/17 | (3 | ) | ||||||||||||||
Mexico Government International Bond | Barclays Bank PLC | 1.110% | USD | 100 | 1.000% | 03/20/16 | — | |||||||||||||||
Mexico Government International Bond | Citibank | 1.110% | USD | 500 | 1.000% | 03/20/16 | (2 | ) | ||||||||||||||
Mexico Government International Bond | HSBC | 1.110% | USD | 500 | 1.000% | 03/20/16 | (2 | ) | ||||||||||||||
Mexico Government International Bond | Goldman Sachs | 1.328% | USD | 100 | 1.000% | 06/20/17 | (2 | ) | ||||||||||||||
Mexico Government International Bond | HSBC | 1.658% | USD | 500 | 1.000% | 03/20/21 | (26 | ) | ||||||||||||||
Russia Government International Bond | Citibank | 0.642% | USD | 500 | 1.000% | 12/20/12 | 1 | |||||||||||||||
Russia Government International Bond | Citibank | 1.966% | USD | 700 | 1.000% | 03/20/16 | (25 | ) | ||||||||||||||
United Kingdom Gilt | Societe Generale | 0.281% | USD | 300 | 1.000% | 03/20/15 | 6 | |||||||||||||||
United Kingdom Gilt | UBS | 0.281% | USD | 100 | 1.000% | 03/20/15 | 2 | |||||||||||||||
United Kingdom Gilt | UBS | 0.281% | USD | 300 | 1.000% | 03/20/15 | 6 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund | 67 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands
Sovereign Issues | ||||||||||||||||||||||
Reference Entity | Counterparty | Implied Credit Spread | Notional Amount | Fund (Pays)/ Receives Fixed Rate | Termination Date | Market Value $ | ||||||||||||||||
United Kingdom Gilt | Deutsche Bank | 0.421% | USD | 200 | 1.000% | 03/20/16 | 5 | |||||||||||||||
United Kingdom Gilt | Bank of America | 0.463% | USD | 200 | 1.000% | 06/20/16 | 5 | |||||||||||||||
United Kingdom Gilt | Citibank | 0.463% | USD | 200 | 1.000% | 06/20/16 | 5 | |||||||||||||||
United Kingdom Gilt | Morgan Stanley | 0.463% | USD | 400 | 1.000% | 06/20/16 | 9 | |||||||||||||||
United Kingdom Gilt | UBS | 0.463% | USD | 400 | 1.000% | 06/20/16 | 9 | |||||||||||||||
United Kingdom Gilt | Citibank | 0.555% | USD | 900 | 1.000% | 12/20/16 | 19 | |||||||||||||||
United Kingdom Gilt | Goldman Sachs | 0.555% | USD | 600 | 1.000% | 12/20/16 | 13 | |||||||||||||||
|
| |||||||||||||||||||||
Total Market Value on Open Sovereign Issues Premiums Paid (Received) - ($315) |
| (208 | ) | |||||||||||||||||||
|
| |||||||||||||||||||||
Total Market Value on Open Credit Default Swap Contracts Premiums Paid (Received) - $263 (å) |
| 534 | ||||||||||||||||||||
|
|
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Amounts in thousands
Market Value | % of Net | |||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Long-Term Investments | ||||||||||||||||||||
Asset-Backed Securities | $ | — | $ | 33,742 | $ | 1,289 | $ | 35,031 | 5.7 | |||||||||||
Corporate Bonds and Notes | — | 91,968 | 2,882 | 94,850 | 15.4 | |||||||||||||||
International Debt | — | 32,827 | — | 32,827 | 5.3 | |||||||||||||||
Loan Agreements | — | 2,206 | — | 2,206 | 0.4 | |||||||||||||||
Mortgage-Backed Securities | — | 194,555 | 1,864 | 196,419 | 32.0 | |||||||||||||||
Municipal Bonds | — | 9,424 | — | 9,424 | 1.5 | |||||||||||||||
Non-US Bonds | — | 24,430 | — | 24,430 | 4.0 | |||||||||||||||
United States Government Agencies | — | 3,489 | — | 3,489 | 0.6 | |||||||||||||||
United States Government Treasuries | — | 88,147 | — | 88,147 | 14.3 | |||||||||||||||
Preferred Stocks | — | — | 365 | 365 | 0.1 | |||||||||||||||
Short-Term Investments | — | 181,336 | 801 | 182,137 | 29.6 | |||||||||||||||
Repurchase Agreements | — | 2,400 | — | 2,400 | 0.4 | |||||||||||||||
Other Securities | — | 6,203 | — | 6,203 | 1.0 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | — | 670,727 | 7,201 | 677,928 | 110.3 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other Assets and Liabilities, Net | (10.3 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
100.0 | ||||||||||||||||||||
|
| |||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||||
Futures Contracts | (211 | ) | — | — | (211 | ) | (— | )* | ||||||||||||
Options Written | — | (30 | ) | (15 | ) | (45 | ) | (— | )* | |||||||||||
Foreign Currency Exchange Contracts | — | 213 | — | 213 | — | * | ||||||||||||||
Interest Rate Swap Contracts | — | (132 | ) | — | (132 | ) | (— | )* | ||||||||||||
Credit Default Swap Contracts | — | 271 | — | 271 | — | * | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Other Financial Instruments** | $ | (211 | ) | $ | 322 | $ | (15 | ) | $ | 96 | ||||||||||
|
|
|
|
|
|
|
|
* | Less than .05% of net assets. |
** | Other financial instruments reflected such as futures, forwards, interest rate swaps and credit default swaps are valued at the unrealized appreciation/depreciation on the instruments. |
For a description of the levels see note 2 in the Notes to Financial Statements.
There were no significant transfers in and out of Levels 1, 2 and 3 during the period ended June 30, 2012.
See accompanying notes which are an integral part of the financial statements.
68 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Presentation of Portfolio Holdings, continued — June 30, 2012 (Unaudited)
Amounts in thousands
The significant inputs used in determining the fair values of Level 3 securities were as follows:
Subcategory | Inputs | Market Value $ | % Level 3 Instruments’ Total Market Value | |||||||
Asset-Backed Securities | Broker Quote | $ | 1,289 | 17.9 | ||||||
Corporate Bonds and Notes | Broker Quote | 2,882 | 40.1 | |||||||
Mortgage-Backed Securities | Broker Quote | 1,864 | 25.9 | |||||||
Preferred Stocks | Investment Manager Fair Value Recommendation | 365 | 5.1 | |||||||
Short-Term Investments | Broker Quote | 801 | 11.2 | |||||||
Options Written | Other | (13 | ) | (0.2 | ) | |||||
Options Written | Broker Quote | (2 | ) | — | * | |||||
|
|
|
| |||||||
$ | 7,186 | 100.0 | ||||||||
|
|
|
|
* | Less than .05% of Level 3 securities’ Total Market Value |
A reconciliation of investments which significant unobservable input (Level 3) were used in determining a value for the period ended June 30, 2012 were as follows:
Category and Subcategory | Beginning Balance as of 01/01/12 | Gross Purchases | Gross Sales | Accrued Discounts/ (Premium) | Realized Gain/ (Loss) | |||||||||||||||
Long-Term Investments | ||||||||||||||||||||
Asset-Backed Securities | $ | — | $ | 1,289 | $ | — | $ | — | $ | — | ||||||||||
Corporate Bonds and Notes | 2,995 | 530 | 714 | (1 | ) | 38 | ||||||||||||||
International Debt | 750 | — | 785 | (2 | ) | 105 | ||||||||||||||
Loan Agreements | — | 56 | 56 | — | — | |||||||||||||||
Mortgage-Backed Securities | 4,431 | 1,732 | 4,283 | 1 | 7 | |||||||||||||||
Preferred Stocks | 368 | — | — | — | — | |||||||||||||||
Short-Term Investments | 61 | 681 | 60 | (1 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | 8,605 | 4,288 | 5,898 | (3 | ) | 150 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other Financial Instruments | ||||||||||||||||||||
Options Written | (37 | ) | — | — | — | — | ||||||||||||||
Interest Rate Swap Contracts | 26 | — | — | — | — | |||||||||||||||
Credit Default Swap Contracts | (378 | ) | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Other Financial Instruments | $ | (389 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||
|
|
|
|
|
|
|
|
|
|
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund | 69 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Presentation of Portfolio Holdings, continued — June 30, 2012 (Unaudited)
Amounts in thousands
Category and Subcategory | Net Transfers into Level 3 | Net Transfers out of Level 3 | Net change in Unrealized Appreciation/ (Depreciation) | Ending Balance at 06/30/12 | Net change in Unrealized Appreciation/ (Depreciation) on Investments held as of 06/30/12 | |||||||||||||||
Long-Term Investments | ||||||||||||||||||||
Asset-Backed Securities | $ | — | $ | — | $ | — | $ | 1,289 | $ | — | ||||||||||
Corporate Bonds and Notes | — | — | 34 | 2,882 | 60 | |||||||||||||||
International Debt | — | 30 | (38 | ) | — | — | ||||||||||||||
Loan Agreements | — | — | — | — | — | |||||||||||||||
Mortgage-Backed Securities | — | — | (24 | ) | 1,864 | (23 | ) | |||||||||||||
Preferred Stocks | — | — | (3 | ) | 365 | (3 | ) | |||||||||||||
Short-Term Investments | 30 | — | 90 | 801 | 90 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | 30 | 30 | 59 | 7,201 | 124 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Other Financial Instruments | ||||||||||||||||||||
Options Written | — | — | 22 | (15 | ) | 22 | ||||||||||||||
Interest Rate Swap Contracts | — | — | (26 | ) | — | — | ||||||||||||||
Credit Default Swap Contracts | — | — | 378 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Other Financial Instruments | $ | — | $ | — | $ | 374 | $ | (15 | ) | $ | 22 | |||||||||
|
|
|
|
|
|
|
|
|
|
See accompanying notes which are an integral part of the financial statements.
70 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Fair Value of Derivative Instruments — June 30, 2012 (Unaudited)
Amounts in thousands
Derivatives not accounted for as hedging instruments | Credit Contracts | Foreign Currency Contracts | Interest Rate Contracts | |||||||||
Location: Statement of Assets and Liabilities - Assets | ||||||||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | 645 | $ | — | ||||||
Daily variation margin on futures contracts* | — | — | 91 | |||||||||
Interest rate swap contracts, at market value | — | — | 50 | |||||||||
Credit default swap contracts, at market value | 864 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 864 | $ | 645 | $ | 141 | ||||||
|
|
|
|
|
| |||||||
Location: Statement of Assets and Liabilities - Liabilities | ||||||||||||
Unrealized depreciation on foreign currency exchange contracts | $ | — | $ | 432 | $ | — | ||||||
Daily variation margin on futures contracts* | — | — | 302 | |||||||||
Interest rate swap contracts, at market value | — | — | 133 | |||||||||
Options written, at market value | — | — | 45 | |||||||||
Credit default swap contracts, at market value | 330 | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 330 | $ | 432 | $ | 480 | ||||||
|
|
|
|
|
| |||||||
Derivatives not accounted for as hedging instruments | Credit Contracts | Foreign Currency Contracts | Interest Rate Contracts | |||||||||
Location: Statement of Operations - Net realized gain (loss) | ||||||||||||
Investments** | $ | — | $ | — | $ | 17 | ||||||
Futures contracts | — | — | 2,206 | |||||||||
Options Written | — | — | 217 | |||||||||
Credit default swap contracts | (1,729 | ) | — | — | ||||||||
Interest rate swap contracts | — | — | 185 | |||||||||
Foreign currency-related transactions | — | 3 | — | |||||||||
|
|
|
|
|
| |||||||
Total | $ | (1,729 | ) | $ | 3 | $ | 2,625 | |||||
|
|
|
|
|
| |||||||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||||||||
Futures contracts | $ | — | $ | — | $ | (935 | ) | |||||
Options Written | — | — | 66 | |||||||||
Credit default swap contracts | 1,290 | — | — | |||||||||
Interest rate swap contracts | — | — | (242 | ) | ||||||||
Foreign currency-related transactions | — | (57 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Total | $ | 1,290 | $ | (57 | ) | $ | (1,111 | ) | ||||
|
|
|
|
|
|
* | Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s 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. |
For further disclosure on derivatives see note 2 in Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund | 71 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 665,921 | ||
Investments, at market***, ******* | 677,928 | |||
Cash | 2,049 | |||
Cash (restricted) | 1,405 | |||
Foreign currency holdings* | 128 | |||
Unrealized appreciation on foreign currency exchange contracts | 645 | |||
Receivables: | ||||
Dividends and interest | 3,416 | |||
Dividends from affiliated Russell funds | 20 | |||
Investments sold | 56,678 | |||
Fund shares sold | 509 | |||
Investments matured****** | 137 | |||
Daily variation margin on futures contracts | 70 | |||
Other receivable | 2 | |||
Prepaid expenses | 7 | |||
Interest rate swap contracts, at market value***** | 50 | |||
Credit default swap contracts, at market value**** | 864 | |||
|
| |||
Total assets | 743,908 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Due to broker | 986 | |||
Investments purchased | 120,200 | |||
Fund shares redeemed | 415 | |||
Accrued fees to affiliates | 278 | |||
Other accrued expenses | 130 | |||
Daily variation margin on futures contracts | 352 | |||
Unrealized depreciation on foreign currency exchange contracts | 432 | |||
Options written, at market value** | 45 | |||
Payable upon return of securities loaned | 6,193 | |||
Interest rate swap contracts, at market value***** | 133 | |||
Credit default swap contracts, at market value**** | 330 | |||
|
| |||
Total liabilities | 129,494 | |||
|
| |||
Net Assets | $ | 614,414 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
72 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Statement of Assets and Liabilities, continued — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | 4,361 | ||
Accumulated net realized gain (loss) | 6,146 | |||
Unrealized appreciation (depreciation) on: | ||||
Investments | 12,007 | |||
Futures contracts | (211 | ) | ||
Options written | 613 | |||
Credit default swap contracts | 271 | |||
Interest rate swap contracts | (132 | ) | ||
Investments matured | (427 | ) | ||
Foreign currency-related transactions | 211 | |||
Other investments | 1 | |||
Shares of beneficial interest | 570 | |||
Additional paid-in capital | 591,004 | |||
|
| |||
Net Assets | $ | 614,414 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share: (a) | $ | 10.77 | ||
Net assets | $ | 614,414,183 | ||
Shares outstanding ($.01 par value) | 57,030,015 | |||
Amounts in thousands | ||||
* Foreign currency holdings - cost | $ | 126 | ||
** Premiums received on options written | $ | 658 | ||
*** Securities on loan included in investments | $ | 6,077 | ||
**** Credit default swap contracts - premiums paid (received) | $ | 263 | ||
***** Interest rate swap contracts - premiums paid (received) | $ | 49 | ||
****** Investments matured - cost | $ | 563 | ||
******* Investments in affiliates, Russell U.S. Cash Management Fund, Russell Investment Funds Liquidating Trust and Russell U.S. Cash Collateral Fund | $ | 119,557 |
(a) | 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 | 73 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Statement of Operations — For the Period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Dividends | $ | 38 | ||
Dividends from affiliated Russell funds | 20 | |||
Interest | 9,692 | |||
Securities lending income | 1 | |||
|
| |||
Total investment income | 9,751 | |||
|
| |||
Expenses | ||||
Advisory fees | 1,588 | |||
Administrative fees | 144 | |||
Custodian fees | 186 | |||
Transfer agent fees | 13 | |||
Professional fees | 43 | |||
Trustees’ fees | 6 | |||
Printing fees | 52 | |||
Miscellaneous | 12 | |||
|
| |||
Expenses before reductions | 2,044 | |||
Expense reductions | (182 | ) | ||
|
| |||
Net expenses | 1,862 | |||
|
| |||
Net investment income (loss) | 7,889 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | 6,524 | |||
Futures contracts | 2,206 | |||
Options written | 217 | |||
Credit default swap contracts | (1,729 | ) | ||
Interest rate swap contracts | 185 | |||
Foreign currency-related transactions | 164 | |||
|
| |||
Net realized gain (loss) | 7,567 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 8,529 | |||
Futures contracts | (935 | ) | ||
Options written | 66 | |||
Credit default swap contracts | 1,290 | |||
Interest rate swap contracts | (242 | ) | ||
Investment matured | 467 | |||
Foreign currency-related transactions | (47 | ) | ||
Other investments | (1 | ) | ||
|
| |||
Net change in unrealized appreciation (depreciation) | 9,127 | |||
|
| |||
Net realized and unrealized gain (loss) | 16,694 | |||
|
| |||
Net Increase (Decrease) in Net Assets from Operations | $ | 24,583 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
74 | Core Bond Fund |
Table of Contents
Russell Investment Funds
Core Bond Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 (Unaudited) | Fiscal Year Ended December 31, 2011 | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 7,889 | $ | 16,784 | ||||
Net realized gain (loss) | 7,567 | 9,487 | ||||||
Net change in unrealized appreciation (depreciation) | 9,127 | (2,899 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 24,583 | 23,372 | ||||||
|
|
|
| |||||
Distributions | ||||||||
From net investment income | (4,931 | ) | (16,396 | ) | ||||
From net realized gain | (3,409 | ) | (9,204 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from distributions | (8,340 | ) | (25,600 | ) | ||||
|
|
|
| |||||
Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | 52,563 | 75,878 | ||||||
Fund Reimbursements | — | 60 | ||||||
|
|
|
| |||||
Total Net Increase (Decrease) in Net Assets | 68,806 | 73,710 | ||||||
Net Assets | ||||||||
Beginning of period | 545,608 | 471,898 | ||||||
|
|
|
| |||||
End of period | $ | 614,414 | $ | 545,608 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income included in net assets | $ | 4,361 | $ | 1,403 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund | 75 |
Table of Contents
Russell Investment Funds
Core Bond Fund
Financial Highlights
For a Share Outstanding Throughout the Period
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a)(b) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | |||||||||||||||||||
June 30, 2012(1) | 10.47 | .14 | .31 | .45 | (.09 | ) | (.06 | ) | ||||||||||||||||
December 31, 2011 | 10.51 | .35 | .14 | .49 | (.34 | ) | (.19 | ) | ||||||||||||||||
December 31, 2010 | 10.20 | .37 | .63 | 1.00 | (.40 | ) | (.29 | ) | ||||||||||||||||
December 31, 2009 | 9.33 | .44 | 1.02 | 1.46 | (.46 | ) | (.13 | ) | ||||||||||||||||
December 31, 2008 | 10.32 | .47 | (.86 | ) | (.39 | ) | (.39 | ) | (.21 | ) | ||||||||||||||
December 31, 2007 | 10.14 | .51 | .20 | .71 | (.53 | ) | — |
See accompanying notes which are an integral part of the financial statements.
76 | Core Bond Fund |
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(d)(f) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Gross(e) | % Ratio of Expenses to Average Net Assets, Net(b)(e) | % Ratio of Net Investment Income to Average Net Assets(b)(e) | % Portfolio Turnover Rate(d) | |||||||||||||||||||||||
(.15 | ) | 10.77 | 4.38 | 614,414 | .71 | .65 | 2.72 | 136 | ||||||||||||||||||||||
(.53 | ) | 10.47 | 4.68 | 545,608 | .72 | .65 | 3.29 | 203 | ||||||||||||||||||||||
(.69 | ) | 10.51 | 10.02 | 471,898 | .75 | .68 | 3.48 | 195 | ||||||||||||||||||||||
(.59 | ) | 10.20 | 16.18 | 400,569 | .73 | .66 | 4.49 | 151 | ||||||||||||||||||||||
(.60 | ) | 9.33 | (3.87 | ) | 319,109 | .77 | .70 | 4.70 | 164 | |||||||||||||||||||||
(.53 | ) | 10.32 | 7.24 | 346,067 | .78 | .70 | 5.04 | 965 |
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund | 77 |
Table of Contents
Russell Investment Funds
Global Real Estate Securities Fund
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value | ||||||||
January 1, 2012 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value | ||||||||
June 30, 2012 | $ | 1,141.10 | $ | 1,020.24 | ||||
Expenses Paid During Period* | $ | 4.95 | $ | 4.67 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.93% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
78 | Global Real Estate Securities Fund |
Table of Contents
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Common Stocks - 95.0% | ||||||||
Australia - 7.0% | ||||||||
BGP Holdings PLC (Æ)(Å) | 926,311 | — | ||||||
CFS Retail Property Trust Group (ö) | 1,953,093 | 3,885 | ||||||
Dexus Property Group (ö) | 4,638,070 | 4,437 | ||||||
FKP Property Group (Ñ) | 1,078,433 | 422 | ||||||
Goodman Group (ö) | 368,562 | 1,397 | ||||||
GPT Group (ö) | 1,131,821 | 3,828 | ||||||
Investa Office Fund (ö) | 453,500 | 1,266 | ||||||
Mirvac Group Class REIT (ö) | 1,440,374 | 1,886 | ||||||
Stockland (ö) | 1,750,705 | 5,543 | ||||||
Westfield Group (ö) | 1,225,785 | 11,943 | ||||||
Westfield Retail Trust (ö) | 1,135,369 | 3,328 | ||||||
|
| |||||||
37,935 | ||||||||
|
| |||||||
Austria - 0.1% | ||||||||
Conwert Immobilien Invest SE (Æ) | 48,070 | 528 | ||||||
|
| |||||||
Brazil - 0.2% | ||||||||
MRV Engenharia e Participacoes SA | 83,588 | 387 | ||||||
Multiplan Empreendimentos Imobiliarios SA | 34,300 | 839 | ||||||
PDG Realty SA Empreendimentos e Participacoes | 90,253 | 158 | ||||||
|
| |||||||
1,384 | ||||||||
|
| |||||||
Canada - 4.0% | ||||||||
Boardwalk Real Estate Investment Trust (ö) | 72,480 | 4,172 | ||||||
Brookfield Office Properties, Inc. (Ñ) | 353,971 | 6,173 | ||||||
Canadian Apartment Properties REIT (ö) | 53,800 | 1,257 | ||||||
Chartwell Seniors Housing Real Estate Investment Trust (ö) | 172,364 | 1,642 | ||||||
Dundee Real Estate Investment Trust (ö) | 39,100 | 1,467 | ||||||
First Capital Realty, Inc. Class A (Ñ) | 28,000 | 505 | ||||||
Primaris Retail Real Estate Investment Trust (ö) | 114,748 | 2,655 | ||||||
RioCan Real Estate Investment Trust (ö) | 136,218 | 3,706 | ||||||
|
| |||||||
21,577 | ||||||||
|
| |||||||
China - 0.3% | ||||||||
China Resources Land, Ltd. | 698,761 | 1,443 | ||||||
Guangzhou R&F Properties Co., Ltd. (Ñ) | 303,400 | 403 | ||||||
|
| |||||||
1,846 | ||||||||
|
| |||||||
Finland - 0.2% | ||||||||
Citycon OYJ | 125,000 | 353 | ||||||
Sponda OYJ | 155,600 | 583 | ||||||
|
| |||||||
936 | ||||||||
|
| |||||||
France - 3.8% | ||||||||
Gecina SA (ö) | 15,693 | 1,404 | ||||||
Klepierre - GDR (ö) | 128,248 | 4,226 | ||||||
Mercialys SA (ö) | 24,173 | 450 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Societe Immobiliere de Location pour l’Industrie et le Commerce (Æ)(Ñ)(ö) | 9,099 | 866 | ||||||
Unibail-Rodamco SE (ö) | 73,251 | 13,515 | ||||||
|
| |||||||
20,461 | ||||||||
|
| |||||||
Germany - 1.3% | ||||||||
Deutsche Euroshop AG | 8,146 | 288 | ||||||
Deutsche Wohnen AG | 297,209 | 5,009 | ||||||
GSW Immobilien AG (Ñ) | 51,185 | 1,749 | ||||||
|
| |||||||
7,046 | ||||||||
|
| |||||||
Hong Kong - 11.9% | ||||||||
Agile Property Holdings, Ltd. (Ñ) | 2,066,000 | 2,683 | ||||||
China Overseas Land & Investment, Ltd. | 538,038 | 1,262 | ||||||
Country Garden Holdings Co., Ltd. (Æ)(Ñ) | 6,225,146 | 2,462 | ||||||
Hang Lung Properties, Ltd. - ADR | 2,672,405 | 9,098 | ||||||
Henderson Land Development Co., Ltd. | 360,595 | 2,003 | ||||||
Hongkong Land Holdings, Ltd. | 1,392,408 | 8,018 | ||||||
Hysan Development Co., Ltd. | 793,248 | 3,017 | ||||||
Kerry Properties, Ltd. | 767,442 | 3,288 | ||||||
Link REIT (The) (ö) | 611,092 | 2,498 | ||||||
New World Development Co., Ltd. | 261,677 | 309 | ||||||
Orient-Express Hotels, Ltd. Class A (Æ) | 144,259 | 1,207 | ||||||
Shangri-La Asia, Ltd. | 368,014 | 706 | ||||||
Shimao Property Holdings, Ltd. | 1,483,268 | 2,297 | ||||||
Sino Land Co., Ltd. | 3,174,500 | 4,819 | ||||||
Soho China, Ltd. | 291,000 | 223 | ||||||
Sun Hung Kai Properties, Ltd. | 1,196,391 | 14,199 | ||||||
Wharf Holdings, Ltd. | 960,789 | 5,341 | ||||||
Wheelock & Co., Ltd. | 331,969 | 1,261 | ||||||
|
| |||||||
64,691 | ||||||||
|
| |||||||
Indonesia - 0.1% | ||||||||
Ciputra Development Tbk PT | 5,474,000 | 381 | ||||||
|
| |||||||
Italy - 0.1% | ||||||||
Beni Stabili SpA (ö) | 838,682 | 363 | ||||||
|
| |||||||
Japan - 9.0% | ||||||||
Advance Residence Investment Corp. | 385 | 748 | ||||||
Aeon Mall Co., Ltd. | 42,900 | 913 | ||||||
Japan Logistics Fund, Inc. Class A (ö) | 32 | 284 | ||||||
Japan Real Estate Investment Corp. | 180 | 1,655 | ||||||
Kenedix Realty Investment Corp. | 354 | 1,145 | ||||||
Mitsubishi Estate Co., Ltd. | 734,480 | 13,175 | ||||||
Mitsui Fudosan Co., Ltd. | 671,496 | 13,026 | ||||||
Mori Hills REIT Investment Corp. | 109 | 471 | ||||||
Nippon Accommodations Fund, Inc. | 41 | 266 |
Global Real Estate Securities Fund | 79 |
Table of Contents
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Nippon Building Fund, Inc. Class A (Ñ)(ö) | 460 | 4,455 | ||||||
Nomura Real Estate Holdings, Inc. | 110,227 | 2,018 | ||||||
Nomura Real Estate Office Fund, Inc. Class A (ö) | 17 | 96 | ||||||
NTT Urban Development Corp. | 359 | 290 | ||||||
Sumitomo Realty & Development Co., Ltd. | 301,600 | 7,421 | ||||||
Tokyu Land Corp. | 184,000 | 913 | ||||||
United Urban Investment Corp. Class A (ö) | 1,865 | 2,012 | ||||||
|
| |||||||
48,888 | ||||||||
|
| |||||||
Netherlands - 0.9% | ||||||||
Corio NV (ö) | 67,047 | 2,954 | ||||||
Eurocommercial Properties NV (ö) | 44,543 | 1,543 | ||||||
Vastned Retail NV (ö) | 5,417 | 211 | ||||||
|
| |||||||
4,708 | ||||||||
|
| |||||||
Norway - 0.3% | ||||||||
Norwegian Property ASA | 1,120,103 | 1,539 | ||||||
|
| |||||||
Philippines - 0.2% | ||||||||
SM Prime Holdings, Inc. | 4,260,551 | 1,326 | ||||||
|
| |||||||
Singapore - 4.3% | ||||||||
Ascendas Real Estate Investment Trust (ö) | 609,200 | 1,040 | ||||||
CapitaCommercial Trust (Æ)(ö) | 1,884,000 | 1,894 | ||||||
CapitaLand, Ltd. | 1,362,143 | 2,941 | ||||||
CapitaMall Trust Class A (ö) | 1,651,000 | 2,501 | ||||||
CapitaMalls Asia, Ltd. | 1,662,000 | 2,073 | ||||||
City Developments, Ltd. | 345,562 | 3,089 | ||||||
Global Logistic Properties, Ltd. (Æ) | 2,522,027 | 4,200 | ||||||
Keppel Land, Ltd. | 556,697 | 1,431 | ||||||
K-REIT Asia (Æ)(ö) | 350,801 | 296 | ||||||
Mapletree Industrial Trust (Æ)(ö) | 1,080,085 | 1,035 | ||||||
Perennial China Retail Trust (Æ) | 2,148,000 | 801 | ||||||
Suntec Real Estate Investment Trust (Æ)(ö) | 1,767,500 | 1,890 | ||||||
|
| |||||||
23,191 | ||||||||
|
| |||||||
Sweden - 1.0% | ||||||||
Castellum AB | 110,680 | 1,341 | ||||||
Fabege AB | 316,358 | 2,483 | ||||||
Hufvudstaden AB Class A | 74,800 | 803 | ||||||
Wihlborgs Fastigheter AB | 60,174 | 811 | ||||||
|
| |||||||
5,438 | ||||||||
|
| |||||||
Switzerland - 0.2% | ||||||||
PSP Swiss Property AG (Æ) | 15,500 | 1,368 | ||||||
|
| |||||||
United Kingdom - 5.5% | ||||||||
Big Yellow Group PLC (ö) | 119,104 | 543 | ||||||
British Land Co. PLC (ö) | 880,946 | 7,057 | ||||||
Capital & Counties Properties PLC | 133,400 | 439 | ||||||
Capital Shopping Centres Group PLC | 48,399 | 245 | ||||||
Derwent London PLC (ö) | 137,606 | 3,997 |
Principal Amount ($) or Shares | Market Value $ | |||||||
Great Portland Estates PLC (ö) | 264,181 | 1,635 | ||||||
Hammerson PLC (ö) | 681,826 | 4,753 | ||||||
Land Securities Group PLC (ö) | 693,125 | 8,039 | ||||||
Metric Property Investments PLC (ö) | 172,700 | 231 | ||||||
Segro PLC (ö) | 235,057 | 802 | ||||||
Shaftesbury PLC (ö) | 147,029 | 1,189 | ||||||
Unite Group PLC | 269,258 | 815 | ||||||
|
| |||||||
29,745 | ||||||||
|
| |||||||
United States - 44.6% | ||||||||
Acadia Realty Trust (ö) | 47,288 | 1,096 | ||||||
Alexandria Real Estate Equities, Inc. (ö) | 72,437 | 5,268 | ||||||
American Assets Trust, Inc. (ö) | 74,134 | 1,798 | ||||||
American Campus Communities, Inc. (ö) | 9,600 | 432 | ||||||
American Tower Corp. Class A (ö) | 12,433 | 869 | ||||||
Apartment Investment & Management Co. Class A (ö) | 92,713 | 2,506 | ||||||
AvalonBay Communities, Inc. (ö) | 86,209 | 12,198 | ||||||
BioMed Realty Trust, Inc. (ö) | 71,900 | 1,343 | ||||||
Boston Properties, Inc. (ö) | 97,938 | 10,613 | ||||||
Brandywine Realty Trust (ö) | 103,000 | 1,271 | ||||||
Camden Property Trust (ö) | 27,400 | 1,854 | ||||||
CBL & Associates Properties, Inc. (ö) | 46,381 | 906 | ||||||
Colonial Properties Trust (ö) | 57,349 | 1,270 | ||||||
Coresite Realty Corp. Class A (ö) | 14,000 | 361 | ||||||
Corporate Office Properties Trust (ö) | 56,707 | 1,333 | ||||||
CubeSmart Class A (ö) | 132,014 | 1,541 | ||||||
DCT Industrial Trust, Inc. (ö) | 289,367 | 1,823 | ||||||
DDR Corp. (ö) | 273,343 | 4,002 | ||||||
DiamondRock Hospitality Co. (ö) | 95,860 | 978 | ||||||
Digital Realty Trust, Inc. (Ñ)(ö) | 59,373 | 4,457 | ||||||
Duke Realty Corp. (ö) | 177,998 | 2,606 | ||||||
DuPont Fabros Technology, Inc. (ö) | 105,520 | 3,014 | ||||||
Education Realty Trust, Inc. Class A (ö) | 110,892 | 1,229 | ||||||
Entertainment Properties Trust (ö) | 31,000 | 1,274 | ||||||
Equity Lifestyle Properties, Inc. Class A (ö) | 32,774 | 2,260 | ||||||
Equity Residential (ö) | 225,663 | 14,072 | ||||||
Essex Property Trust, Inc. (ö) | 34,412 | 5,297 | ||||||
Extra Space Storage, Inc. (ö) | 55,600 | 1,701 | ||||||
Federal Realty Investment Trust (ö) | 22,600 | 2,352 | ||||||
First Industrial Realty Trust, Inc. (Æ)(ö) | 132,202 | 1,668 | ||||||
First Potomac Realty Trust (ö) | 79,200 | 932 | ||||||
Forest City Enterprises, Inc. Class A (Æ) | 59,500 | 869 | ||||||
General Growth Properties, Inc. (ö) | 383,347 | 6,934 | ||||||
HCP, Inc. (ö) | 183,532 | 8,103 | ||||||
Health Care REIT, Inc. (ö) | 37,565 | 2,190 | ||||||
Healthcare Realty Trust, Inc. (ö) | 66,006 | 1,574 | ||||||
Hersha Hospitality Trust Class A (ö) | 185,971 | 982 | ||||||
Host Hotels & Resorts, Inc. (ö) | 490,481 | 7,759 | ||||||
Hudson Pacific Properties, Inc. (ö) | 28,300 | 493 | ||||||
Hyatt Hotels Corp. Class A (Æ) | 48,601 | 1,806 | ||||||
Icad, Inc. (Æ)(Ñ)(ö) | 6,729 | 510 | ||||||
Kilroy Realty Corp. (ö) | 147,866 | 7,158 | ||||||
Kimco Realty Corp. (ö) | 108,633 | 2,067 | ||||||
Kite Realty Group Trust (ö) | 36,300 | 181 | ||||||
Liberty Property Trust (Ñ)(ö) | 82,307 | 3,032 |
80 | Global Real Estate Securities Fund |
Table of Contents
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Principal Amount ($) or Shares | Market Value $ | |||||||
Macerich Co. (The) (ö) | 88,613 | 5,233 | ||||||
National Retail Properties, Inc. (ö) | 26,700 | 755 | ||||||
Omega Healthcare Investors, Inc. (ö) | 66,700 | 1,501 | ||||||
Pebblebrook Hotel Trust (ö) | 77,281 | 1,801 | ||||||
Piedmont Office Realty Trust, Inc. | 30,000 | 516 | ||||||
Post Properties, Inc. (ö) | 19,300 | 945 | ||||||
Prologis, Inc. (ö) | 383,339 | 12,738 | ||||||
Public Storage (ö) | 59,638 | 8,613 | ||||||
Regency Centers Corp. (ö) | 116,992 | 5,565 | ||||||
Retail Opportunity Investments | 133,897 | 1,614 | ||||||
Retail Properties of America, Inc. | 53,900 | 524 | ||||||
RLJ Lodging Trust (ö) | 46,500 | 843 | ||||||
Select Income REIT (Æ)(ö) | 12,200 | 290 | ||||||
Simon Property Group, Inc. (ö) | 193,406 | 30,108 | ||||||
SL Green Realty Corp. (ö) | 41,532 | 3,332 | ||||||
Sovran Self Storage, Inc. (ö) | 27,618 | 1,383 | ||||||
Starwood Hotels & Resorts | 21,100 | 1,119 | ||||||
Strategic Hotels & Resorts, Inc. (Æ)(ö) | 132,274 | 854 | ||||||
Sunstone Hotel Investors, Inc. (Æ)(ö) | 70,099 | 770 | ||||||
Taubman Centers, Inc. (ö) | 11,183 | 863 | ||||||
UDR, Inc. (ö) | 129,066 | 3,335 | ||||||
Ventas, Inc. (ö) | 192,040 | 12,122 | ||||||
Vornado Realty Trust (ö) | 113,422 | 9,526 | ||||||
Weingarten Realty Investors (ö) | 55,273 | 1,456 | ||||||
|
| |||||||
241,788 | ||||||||
|
| |||||||
Total Common Stocks (cost $430,998) | 515,139 | |||||||
|
| |||||||
Short-Term Investments - 3.6% | ||||||||
United States - 3.6% | ||||||||
Russell U.S. Cash Management Fund | 19,800,986 | (¥) | 19,801 | |||||
|
| |||||||
Total Short-Term Investments (cost $19,801) | 19,801 | |||||||
|
| |||||||
Other Securities - 3.2% | ||||||||
Russell Investment Funds Liquidating Trust (×) | 2,016,806 | (¥) | 2,056 | |||||
Russell U.S. Cash Collateral Fund (×) | 15,228,673 | (¥) | 15,229 | |||||
|
| |||||||
Total Other Securities (cost $17,245) | 17,285 | |||||||
|
| |||||||
Total Investments - 101.8% (identified cost $468,044) | 552,225 | |||||||
Other Assets and Liabilities, Net - (1.8%) | (10,011 | ) | ||||||
|
| |||||||
Net Assets - 100.0% | 542,214 | |||||||
|
|
A portion of this portfolio has been fair valued as of period end.
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund | 81 |
Table of Contents
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands (except contract amounts)
Futures Contracts | Number of Contracts | Notional Amount | Expiration Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||
Long Positions | ||||||||||||||||||
ASX SPI 200 Index Futures (Australia) | 16 | AUD | 1,623 | 09/12 | (13 | ) | ||||||||||||
FTSE EPRA Europe Index Futures | 174 | EUR | 2,295 | 09/12 | 84 | |||||||||||||
Hang Seng Index Futures (Hong Kong) | 18 | HKD | 17,504 | 07/12 | 48 | |||||||||||||
S&P Midcap 400 E-Mini Index Futures (CME) | 118 | USD | 11,086 | 09/12 | 240 | |||||||||||||
S&P TSE 60 Index Futures (Canada) | 9 | CAD | 1,191 | 09/12 | 30 | |||||||||||||
SGX MSCI Singapore Index Futures | 16 | SGD | 1,063 | 07/12 | 26 | |||||||||||||
TOPIX Index Futures (Japan) | 20 | JPY | 153,800 | 09/12 | 133 | |||||||||||||
|
| |||||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Futures Contracts (å) | 548 | |||||||||||||||||
|
|
Foreign Currency Exchange Contracts | ||||||||||||||||||||||
Counterparty | Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||||||
Barclays Bank PLC | USD | 296 | AUD | 299 | 09/19/12 | 8 | ||||||||||||||||
Barclays Bank PLC | USD | 208 | CAD | 214 | 09/19/12 | 1 | ||||||||||||||||
Barclays Bank PLC | USD | 1,360 | EUR | 1,081 | 09/19/12 | 9 | ||||||||||||||||
Barclays Bank PLC | USD | 344 | JPY | 27,300 | 09/19/12 | (2 | ) | |||||||||||||||
Barclays Bank PLC | USD | 146 | SGD | 187 | 09/19/12 | 1 | ||||||||||||||||
Brown Brothers Harriman & Co. | USD | 485 | HKD | 3,763 | 09/19/12 | — | ||||||||||||||||
Citibank | GBP | 28 | EUR | 36 | 07/02/12 | — | ||||||||||||||||
Commonwealth Bank of Australia | USD | 296 | AUD | 299 | 09/19/12 | 8 | ||||||||||||||||
Commonwealth Bank of Australia | USD | 208 | CAD | 214 | 09/19/12 | 2 | ||||||||||||||||
Commonwealth Bank of Australia | USD | 1,361 | EUR | 1,081 | 09/19/12 | 8 | ||||||||||||||||
Commonwealth Bank of Australia | USD | 485 | HKD | 3,763 | 09/19/12 | — | ||||||||||||||||
Commonwealth Bank of Australia | USD | 344 | JPY | 27,300 | 09/19/12 | (2 | ) | |||||||||||||||
Commonwealth Bank of Australia | USD | 146 | SGD | 187 | 09/19/12 | 1 | ||||||||||||||||
Deutsche Bank AG | USD | 296 | AUD | 299 | 09/19/12 | 8 | ||||||||||||||||
Deutsche Bank AG | USD | 208 | CAD | 214 | 09/19/12 | 2 | ||||||||||||||||
Deutsche Bank AG | USD | 1,361 | EUR | 1,081 | 09/19/12 | 8 | ||||||||||||||||
Deutsche Bank AG | USD | 344 | JPY | 27,300 | 09/19/12 | (2 | ) | |||||||||||||||
Deutsche Bank AG | USD | 146 | SGD | 187 | 09/19/12 | 1 | ||||||||||||||||
HSBC Bank PLC | USD | 296 | AUD | 299 | 09/19/12 | 8 | ||||||||||||||||
HSBC Bank PLC | USD | 208 | CAD | 214 | 09/19/12 | 2 | ||||||||||||||||
HSBC Bank PLC | USD | 1,361 | EUR | 1,081 | 09/19/12 | 8 | ||||||||||||||||
HSBC Bank PLC | USD | 485 | HKD | 3,763 | 09/19/12 | — | ||||||||||||||||
HSBC Bank PLC | USD | 344 | JPY | 27,300 | 09/19/12 | (2 | ) | |||||||||||||||
HSBC Bank PLC | USD | 146 | SGD | 187 | 09/19/12 | 1 | ||||||||||||||||
JPMorgan Chase Bank | USD | 296 | AUD | 299 | 09/19/12 | 8 | ||||||||||||||||
JPMorgan Chase Bank | USD | 300 | AUD | 300 | 09/19/12 | 5 | ||||||||||||||||
JPMorgan Chase Bank | USD | 195 | CAD | 200 | 09/19/12 | 1 | ||||||||||||||||
JPMorgan Chase Bank | USD | 208 | CAD | 214 | 09/19/12 | 2 | ||||||||||||||||
JPMorgan Chase Bank | USD | 1,360 | EUR | 1,081 | 09/19/12 | 9 | ||||||||||||||||
JPMorgan Chase Bank | USD | 322 | HKD | 2,500 | 09/19/12 | — | ||||||||||||||||
JPMorgan Chase Bank | USD | 318 | JPY | 25,000 | 09/19/12 | (5 | ) | |||||||||||||||
JPMorgan Chase Bank | USD | 344 | JPY | 27,300 | 09/19/12 | (2 | ) | |||||||||||||||
JPMorgan Chase Bank | USD | 146 | SGD | 187 | 09/19/12 | 1 | ||||||||||||||||
JPMorgan Chase Bank | USD | 197 | SGD | 250 | 09/19/12 | — | ||||||||||||||||
JPMorgan Chase Bank | AUD | 100 | USD | 99 | 09/19/12 | (2 | ) | |||||||||||||||
JPMorgan Chase Bank | EUR | 100 | USD | 125 | 09/19/12 | (1 | ) | |||||||||||||||
JPMorgan Chase Bank | EUR | 150 | USD | 189 | 09/19/12 | (1 | ) | |||||||||||||||
JPMorgan Chase Bank | EUR | 3,200 | USD | 4,053 | 09/19/12 | — | ||||||||||||||||
JPMorgan Chase Bank | HKD | 500 | USD | 64 | 09/19/12 | — |
See accompanying notes which are an integral part of the financial statements.
82 | Global Real Estate Securities Fund |
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Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands
Foreign Currency Exchange Contracts | ||||||||||||||||||||||
Counterparty | Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||||||
JPMorgan Chase Bank | JPY | 5,000 | USD | 63 | 09/19/12 | — | ||||||||||||||||
Royal Bank of Canada | USD | 485 | HKD | 3,763 | 09/19/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 450 | AUD | 448 | 07/03/12 | 8 | ||||||||||||||||
State Street Bank & Trust Co. | USD | 100 | AUD | 100 | 09/19/12 | 2 | ||||||||||||||||
State Street Bank & Trust Co. | USD | 97 | CAD | 100 | 09/19/12 | 1 | ||||||||||||||||
State Street Bank & Trust Co. | USD | — | EUR | — | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 1 | EUR | 1 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 32 | EUR | 26 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 2 | EUR | 1 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 55 | EUR | 44 | 07/03/12 | 1 | ||||||||||||||||
State Street Bank & Trust Co. | USD | 249 | EUR | 200 | 09/19/12 | 4 | ||||||||||||||||
State Street Bank & Trust Co. | USD | 29 | HKD | 227 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 54 | HKD | 419 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 129 | HKD | 1,000 | 09/19/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 5 | JPY | 370 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 9 | JPY | 742 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 9 | JPY | 735 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 19 | JPY | 1,539 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | USD | 126 | JPY | 10,000 | 09/19/12 | (1 | ) | |||||||||||||||
State Street Bank & Trust Co. | USD | 78 | SGD | 100 | 09/19/12 | 1 | ||||||||||||||||
State Street Bank & Trust Co. | AUD | 121 | HKD | 947 | 07/03/12 | (2 | ) | |||||||||||||||
State Street Bank & Trust Co. | AUD | 1 | HKD | 10 | 07/04/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | AUD | 9 | JPY | 712 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | AUD | 272 | JPY | 22,284 | 07/04/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | AUD | 100 | USD | 101 | 09/19/12 | (1 | ) | |||||||||||||||
State Street Bank & Trust Co. | BRL | 400 | USD | 191 | 07/02/12 | (8 | ) | |||||||||||||||
State Street Bank & Trust Co. | BRL | 97 | USD | 48 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | BRL | 146 | USD | 72 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | CAD | 191 | USD | 188 | 07/05/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | CAD | 50 | USD | 49 | 09/19/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | CHF | 31 | EUR | 26 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | EUR | 3 | USD | 4 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | EUR | 6 | USD | 7 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | EUR | 34 | USD | 43 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | EUR | 37 | USD | 47 | 07/02/12 | (1 | ) | |||||||||||||||
State Street Bank & Trust Co. | EUR | 4 | USD | 5 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | EUR | 4 | USD | 5 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | EUR | 8 | USD | 10 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | EUR | 75 | USD | 93 | 07/03/12 | (2 | ) | |||||||||||||||
State Street Bank & Trust Co. | EUR | 763 | USD | 950 | 07/03/12 | (16 | ) | |||||||||||||||
State Street Bank & Trust Co. | EUR | 17 | USD | 22 | 07/05/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | EUR | 228 | USD | 288 | 07/05/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | EUR | 100 | USD | 127 | 09/19/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | GBP | 222 | EUR | 277 | 07/03/12 | 2 | ||||||||||||||||
State Street Bank & Trust Co. | GBP | 3 | EUR | 4 | 07/04/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | HKD | 134 | USD | 17 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | HKD | 181 | USD | 23 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | HKD | 214 | USD | 28 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | HKD | 1,054 | USD | 136 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | HKD | 427 | USD | 55 | 07/05/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | HKD | 512 | USD | 66 | 07/05/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | HKD | 869 | USD | 112 | 07/05/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | HKD | 500 | USD | 64 | 09/19/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | JPY | 2,212 | USD | 28 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | JPY | 3,618 | USD | 45 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | JPY | 2,242 | USD | 28 | 07/03/12 | — |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund | 83 |
Table of Contents
Russell Investment Funds
Global Real Estate Securities Fund
Schedule of Investments, continued — June 30, 2012 (Unaudited)
Amounts in thousands
Foreign Currency Exchange Contracts | ||||||||||||||||||||||
Counterparty | Amount Sold | Amount Bought | Settlement Date | Unrealized Appreciation (Depreciation) $ | ||||||||||||||||||
State Street Bank & Trust Co. | JPY | 1,801 | USD | 23 | 07/05/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | JPY | 8,000 | USD | 101 | 09/19/12 | 1 | ||||||||||||||||
State Street Bank & Trust Co. | NOK | 143 | EUR | 19 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | SEK | 399 | EUR | 46 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | SGD | 183 | AUD | 143 | 07/03/12 | 1 | ||||||||||||||||
State Street Bank & Trust Co. | SGD | 8 | USD | 6 | 07/02/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | SGD | 119 | USD | 93 | 07/02/12 | (1 | ) | |||||||||||||||
State Street Bank & Trust Co. | SGD | 21 | USD | 17 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | SGD | 23 | USD | 18 | 07/03/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | SGD | 205 | USD | 160 | 07/03/12 | (2 | ) | |||||||||||||||
State Street Bank & Trust Co. | SGD | 91 | USD | 72 | 07/05/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | SGD | 243 | USD | 192 | 07/05/12 | — | ||||||||||||||||
State Street Bank & Trust Co. | SGD | 100 | USD | 78 | 09/19/12 | (1 | ) | |||||||||||||||
|
| |||||||||||||||||||||
Total Unrealized Appreciation (Depreciation) on Open Foreign Currency Exchange Contracts |
| 69 | ||||||||||||||||||||
|
|
See accompanying notes which are an integral part of the financial statements.
84 | Global Real Estate Securities Fund |
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Russell Investment Funds
Global Real Estate Securities Fund
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Amounts in thousands
Market Value | % of Net | |||||||||||||||||||
Portfolio Summary | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Common Stocks | ||||||||||||||||||||
Australia | $ | — | $ | 37,935 | $ | — | $ | 37,935 | 7.0 | |||||||||||
Austria | — | 528 | — | 528 | 0.1 | |||||||||||||||
Brazil | 1,384 | — | — | 1,384 | 0.2 | |||||||||||||||
Canada | 21,577 | — | — | 21,577 | 4.0 | |||||||||||||||
China | — | 1,846 | — | 1,846 | 0.3 | |||||||||||||||
Finland | — | 936 | — | 936 | 0.2 | |||||||||||||||
France | — | 20,461 | — | 20,461 | 3.8 | |||||||||||||||
Germany | — | 7,046 | — | 7,046 | 1.3 | |||||||||||||||
Hong Kong | 1,207 | 63,484 | — | 64,691 | 11.9 | |||||||||||||||
Indonesia | — | 381 | — | 381 | 0.1 | |||||||||||||||
Italy | — | 363 | — | 363 | 0.1 | |||||||||||||||
Japan | — | 48,888 | — | 48,888 | 9.0 | |||||||||||||||
Netherlands | — | 4,708 | — | 4,708 | 0.9 | |||||||||||||||
Norway | — | 1,539 | — | 1,539 | 0.3 | |||||||||||||||
Philippines | — | 1,326 | — | 1,326 | 0.2 | |||||||||||||||
Singapore | — | 23,191 | — | 23,191 | 4.3 | |||||||||||||||
Sweden | — | 5,438 | — | 5,438 | 1.0 | |||||||||||||||
Switzerland | — | 1,368 | — | 1,368 | 0.2 | |||||||||||||||
United Kingdom | — | 29,745 | — | 29,745 | 5.5 | |||||||||||||||
United States | 241,278 | 510 | — | 241,788 | 44.6 | |||||||||||||||
Short-Term Investments | — | 19,801 | — | 19,801 | 3.6 | |||||||||||||||
Other Securities | — | 17,285 | — | 17,285 | 3.2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total Investments | 265,446 | 286,779 | — | 552,225 | 101.8 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other Assets and Liabilities, Net | (1.8 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
100.0 | ||||||||||||||||||||
|
| |||||||||||||||||||
Other Financial Instruments | ||||||||||||||||||||
Futures Contracts | 548 | — | — | 548 | 0.1 | |||||||||||||||
Foreign Currency Exchange Contracts | (18 | ) | 87 | — | 69 | — | * | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total Other Financial Instruments** | $ | 530 | $ | 87 | $ | — | $ | 617 | ||||||||||||
|
|
|
|
|
|
|
|
* | Less than .05% of net assets. |
** | Other financial instruments reflected, such as futures, forwards, interest rate swaps and credit default swaps are valued at the unrealized appreciation/depreciation on the instruments. |
For a description of the levels see note 2 in the Notes to Financial Statements.
Investments in which significant unobservable inputs (Level 3) used in determining a value for the period ended June 30, 2012 were less than 1% of net assets.
There were no significant transfers in and out of Levels 1, 2 and 3 during the period ended June 30, 2012.
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund | 85 |
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Russell Investment Funds
Global Real Estate Securities Fund
Fair Value of Derivative Instruments — June 30, 2012 (Unaudited)
Amounts in thousands
Derivatives not accounted for as hedging instruments | Equity Contracts | Foreign Currency Contracts | ||||||
Location: Statement of Assets and Liabilities - Assets | ||||||||
Unrealized appreciation on foreign currency exchange contracts | $ | — | $ | 123 | ||||
Daily variation margin on futures contracts* | 561 | — | ||||||
|
|
|
| |||||
Total | $ | 561 | $ | 123 | ||||
|
|
|
| |||||
Location: Statement of Assets and Liabilities - Liabilities | ||||||||
Unrealized depreciation on foreign currency exchange contracts | $ | — | $ | 54 | ||||
Daily variation margin on futures contracts* | 13 | — | ||||||
|
|
|
| |||||
Total | $ | 13 | $ | 54 | ||||
|
|
|
|
Derivatives not accounted for as hedging instruments | Equity Contracts | Foreign Currency Contracts | ||||||
Location: Statement of Operations - Net realized gain (loss) | ||||||||
Futures contracts | $ | 1,191 | $ | — | ||||
Foreign currency-related transactions | — | (365 | ) | |||||
|
|
|
| |||||
Total | $ | 1,191 | $ | (365 | ) | |||
|
|
|
| |||||
Location: Statement of Operations - Net change in unrealized appreciation (depreciation) | ||||||||
Futures contracts | $ | 215 | $ | — | ||||
Foreign currency-related transactions | — | 243 | ||||||
|
|
|
| |||||
Total | $ | 215 | $ | 243 | ||||
|
|
|
|
* | Includes cumulative appreciation/depreciation of futures contracts as reported in Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities. |
For further disclosure on derivatives see note 2 in Notes to Financial Statements.
See accompanying notes which are an integral part of the financial statements.
86 | Global Real Estate Securities Fund |
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Russell Investment Funds
Global Real Estate Securities Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 468,044 | ||
Investments, at market**, *** | 552,225 | |||
Cash (restricted) | 1,570 | |||
Foreign currency holdings* | 2,183 | |||
Unrealized appreciation on foreign currency exchange contracts | 123 | |||
Receivables: | ||||
Dividends and interest | 1,694 | |||
Dividends from affiliated Russell funds | 3 | |||
Investments sold | 4,864 | |||
Fund shares sold | 12 | |||
Foreign taxes recoverable | 30 | |||
Daily variation margin on futures contracts | 508 | |||
Prepaid expenses | 6 | |||
|
| |||
Total assets | 563,218 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investments purchased | 2,995 | |||
Fund shares redeemed | 286 | |||
Accrued fees to affiliates | 361 | |||
Other accrued expenses | 63 | |||
Unrealized depreciation on foreign currency exchange contracts | 54 | |||
Payable upon return of securities loaned | 17,245 | |||
|
| |||
Total liabilities | 21,004 | |||
|
| |||
Net Assets | $ | 542,214 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund | 87 |
Table of Contents
Russell Investment Funds
Global Real Estate Securities Fund
Statement of Assets and Liabilities, continued — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | 3,662 | ||
Accumulated net realized gain (loss) | (27,997 | ) | ||
Unrealized appreciation (depreciation) on: | ||||
Investments | 84,181 | |||
Futures contracts | 548 | |||
Foreign currency-related transactions | 134 | |||
Shares of beneficial interest | 379 | |||
Additional paid-in capital | 481,307 | |||
|
| |||
Net Assets | $ | 542,214 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share: (a) | $ | 14.30 | ||
Net assets | $ | 542,213,631 | ||
Shares outstanding ($.01 par value) | 37,923,385 | |||
Amounts in thousands | ||||
* Foreign currency holdings - cost | $ | 2,163 | ||
** Securities on loan included in investments | $ | 16,788 | ||
*** Investments in affiliates, Russell U.S. Cash Management Fund, Russell Investment Funds Liquidating Trust and Russell U.S. Cash Collateral Fund | $ | 37,086 |
(a) | 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.
88 | Global Real Estate Securities Fund |
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Russell Investment Funds
Global Real Estate Securities Fund
Statement of Operations — For the period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Dividends | $ | 9,319 | ||
Dividends from affiliated Russell funds | 14 | |||
Interest | 2 | |||
Securities lending income | 163 | |||
Less foreign taxes withheld | (352 | ) | ||
|
| |||
Total investment income | 9,146 | |||
|
| |||
Expenses | ||||
Advisory fees | 2,050 | |||
Administrative fees | 128 | |||
Custodian fees | 147 | |||
Transfer agent fees | 11 | |||
Professional fees | 40 | |||
Trustees’ fees | 6 | |||
Miscellaneous | 10 | |||
|
| |||
Total expenses | 2,392 | |||
|
| |||
Net investment income (loss) | 6,754 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | 8,123 | |||
Futures contracts | 1,191 | |||
Foreign currency-related transactions | (478 | ) | ||
|
| |||
Net realized gain (loss) | 8,836 | |||
|
| |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | 50,568 | |||
Futures contracts | 215 | |||
Foreign currency-related transactions | 311 | |||
|
| |||
Net change in unrealized appreciation (depreciation) | 51,094 | |||
|
| |||
Net realized and unrealized gain (loss) | 59,930 | |||
|
| |||
Net Increase (Decrease) in Net Assets from Operations | $ | 66,684 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund | 89 |
Table of Contents
Russell Investment Funds
Global Real Estate Securities Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 (Unaudited) | Fiscal Year Ended December 31, 2011 | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 6,754 | $ | 10,455 | ||||
Net realized gain (loss) | 8,836 | (737 | ) | |||||
Net change in unrealized appreciation (depreciation) | 51,094 | (45,106 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 66,684 | (35,388 | ) | |||||
|
|
|
| |||||
Distributions | ||||||||
From net investment income | (4,931 | ) | (11,195 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from distributions | (4,931 | ) | (11,195 | ) | ||||
|
|
|
| |||||
Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | 9,497 | 23,302 | ||||||
Fund Reimbursements | — | 349 | ||||||
|
|
|
| |||||
Total Net Increase (Decrease) in Net Assets | 71,250 | (22,932 | ) | |||||
Net Assets | ||||||||
Beginning of period | 470,964 | 493,896 | ||||||
|
|
|
| |||||
End of period | $ | 542,214 | $ | 470,964 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income included in net assets | $ | 3,662 | $ | 1,839 |
See accompanying notes which are an integral part of the financial statements.
90 | Global Real Estate Securities Fund |
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Table of Contents
Russell Investment Funds
Global Real Estate Securities Fund
Financial Highlights
For a Share Outstanding Throughout the Period
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a)(b) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | |||||||||||||||||||
June 30, 2012(1) | 12.65 | .18 | 1.60 | 1.78 | (.13 | ) | — | |||||||||||||||||
December 31, 2011 | 13.92 | .29 | (1.25 | ) | (.96 | ) | (.31 | ) | — | |||||||||||||||
December 31, 2010 | 11.58 | .33 | 2.29 | 2.62 | (.28 | ) | — | |||||||||||||||||
December 31, 2009 | 9.30 | .30 | 2.41 | 2.71 | (.43 | ) | — | |||||||||||||||||
December 31, 2008 | 15.22 | .38 | (6.03 | ) | (5.65 | ) | (.27 | ) | — | |||||||||||||||
December 31, 2007 | 21.34 | .35 | (3.68 | ) | (3.33 | ) | (.47 | ) | (2.32 | ) |
See accompanying notes which are an integral part of the financial statements.
92 | Global Real Estate Securities Fund |
Table of Contents
$ Total Distributions | $ Net Asset Value, End of Period | % Total Return(d)(f) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Gross(e) | % Ratio of Expenses to Average Net Assets, Net(b)(e) | % Ratio of Net Investment Income to Average Net Assets(b)(e) | % Portfolio Turnover Rate(d) | |||||||||||||||||||||||
(.13 | ) | 14.30 | 14.11 | 542,214 | .93 | .93 | 2.63 | 32 | ||||||||||||||||||||||
(.31 | ) | 12.65 | (7.05 | ) | 470,964 | .95 | .95 | 2.11 | 57 | |||||||||||||||||||||
(.28 | ) | 13.92 | 22.92 | 493,896 | .99 | .99 | 2.62 | 150 | ||||||||||||||||||||||
(.43 | ) | 11.58 | 31.16 | 410,708 | .97 | .97 | 3.36 | 110 | ||||||||||||||||||||||
(.27 | ) | 9.30 | (37.76 | ) | 303,416 | .96 | .96 | 2.72 | 71 | |||||||||||||||||||||
(2.79 | ) | 15.22 | (15.86 | ) | 488,809 | .92 | .92 | 1.75 | 77 |
See accompanying notes which are an integral part of the financial statements.
Global Real Estate Securities Fund | 93 |
Table of Contents
Russell Investment Funds
Notes to Schedules of Investments — June 30, 2012 (Unaudited)
Footnotes:
(Æ) | Nonincome-producing security. |
(ö) | Real Estate Investment Trust (REIT). |
(§) | All or a portion of the shares of this security are held 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 held in connection with futures contracts purchased (sold), options written, or swaps entered into by the Fund. See Note 2. |
(¥) | 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
LIBOR - London Interbank Offered Rate
NIBOR - Norwegian Interbank Offered Rate
PIK - Payment in Kind
REMIC - Real Estate Mortgage Investment Conduit
STRIP - Separate Trading of Registered Interest and Principal of Securities
TBA - To Be Announced Security
UK - United Kingdom
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 - Iceland krona | SGD - Singapore dollar | ||
CLP - Chilean peso | ITL - Italian lira | SKK - Slovakian koruna | ||
CNY - Chinese renminbi yuan | JPY - Japanese yen | THB - Thai baht | ||
COP - Colombian peso | KES - Kenyan schilling | TRY - Turkish lira | ||
CRC - Costa Rica 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 - Norwegion krone | VND - Vietnam dong | ||
EUR - Euro | NZD - New Zealand dollar | ZAR - South African rand | ||
GBP - British pound sterling | PEN - Peruvian nouveau sol | |||
HKD - Hong Kong dollar | PHP - Philippine peso |
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Notes to Financial Highlights — June 30, 2012 (Unaudited)
(1) | For the period ended June 30, 2012 (Unaudited). |
(a) | Average daily shares outstanding were used for this calculation. |
(b) | May reflect amounts waived and/or reimbursed by Russell Investment Management Company (“RIMCo”), and for certain funds, custody credit arrangements. |
(c) | Less than $.01 per share. |
(d) | Periods less than one year are not annualized. |
(e) | Periods less than one year are annualized. |
(f) | The total return does not reflect any Insurance Company Separate Account or Policy Charges. |
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Notes to Financial Statements — June 30, 2012 (Unaudited)
1. | Organization |
Russell Investment Funds (the “Investment Company” or “RIF”) is a series investment company with 10 different investment portfolios referred to as Funds. These financial statements report on five of these Funds (each a “Fund” and collectively the “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, 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”). The Investment Company’s Master Trust Agreement permits the Board of Trustees (the “Board”) to issue an unlimited number of shares of beneficial interest.
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 following is a summary of the significant accounting policies consistently followed by each Fund in the preparation of its financial statements.
Security Valuation
The Funds value portfolio securities according to Board-approved securities valuation procedures which include market and fair value procedures. Debt obligation securities maturing within 60 days at the time of purchase are priced using the amortized cost method of valuation, unless the Board determines that amortized cost does not represent the market value such of short-term debt obligations. The Board has delegated the responsibility for administration of the securities valuation procedures to Russell Fund Services Company (“RFSC”).
U.S. GAAP defines fair market 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 — Inputs using quoted prices in active markets or exchanges for identical assets and liabilities. |
• | Level 2 — Significant other observable inputs, 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 non-active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) 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 the Board or persons acting at their direction that are used in determining the fair market value of investments. |
The valuation techniques and significant inputs used in determining the fair market values of financial instruments classified as Level 1 and Level 2 of the fair value hierarchy are as follows:
Common stocks, exchange traded funds and derivatives that are traded on a national securities exchange are stated at the last reported sale or settlement price on the day of valuation. 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 also categorized as Level 2 of the fair value hierarchy.
Fixed income securities including corporate, convertible and municipal bonds and notes, U.S. government agencies, 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 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. Securities that use similar valuation techniques and inputs as described above are categorized as Level 2 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.
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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, estimated cash flows of each tranche, market-based yield spreads for each tranche, current market data and incorporate deal collateral performance, as available. Mortgage and asset-backed securities that use 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 and are categorized as Level 2 of the fair value hierarchy. 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, while NAV per share of an investment may not be determinative of fair value, as defined by U.S. GAAP, the Funds estimate the fair value of an investment in a fund using the NAV per share of the investment (or its equivalent) 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.
Financial over-the-counter 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. These contracts 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 contracts 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, curves, dividends and exchange rates. Derivatives that use similar valuation techniques and inputs as described above 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 are likely to use fair value pricing more often since significant events may occur between the close of foreign markets and the time of pricing which would trigger fair value pricing of the foreign securities. Although there are observable inputs assigned on a security level, prices are derived from factors using proprietary models or matrix pricing. For this reason, significant events will cause movement between Levels 1 and 2. Funds that invest in low-rated debt securities are also likely to use fair value pricing more often since the markets in which such securities are traded are generally thinner, more limited and less active than those for higher rated securities. Examples of events that could trigger fair value pricing of one or more securities are: a material market movement of the U.S. securities market (defined in the fair value procedures as the movement by a single major U.S. index greater than a certain percentage) or other significant event; foreign market holidays if, on a daily basis, a Fund’s foreign exposure exceeds 20% in the aggregate (all closed markets combined); a company development; a natural disaster; 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.
Level 3 Trading Assets and Trading Liabilities, at Fair Value
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 are valued at fair value as determined in good faith by the Board 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 RFSC 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 the Board or persons acting at their direction believe accurately reflects fair value and are 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 the Board or persons acting at their direction 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 securities were sold.
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For fair valuations using significant unobservable inputs, U.S. GAAP requires a reconciliation of the beginning to ending balances for reported market values that presents 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. In accordance with the requirements of U.S. GAAP, a fair value hierarchy and Level 3 reconciliation, if any, have been included in the Notes to the Schedule of Investments for each respective Fund.
In 2011, the Financial Accounting Standards Board (“FASB”) issued an update to requirements relating to fair valuation measurements which represent amendments to achieve common fair value measurements and disclosure requirements in U.S. GAAP and International Financial Reporting Standards. The amendments are of two types: (i) those that clarify the FASB’s intent about the application of existing fair value measurements and disclosure requirements and (ii) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.
The amendments that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements relate to (i) measuring the fair value of the financial instruments that are managed within a portfolio; (ii) application of premium and discount in a fair value measurement; and (iii) additional disclosures about fair value measurements. The update is effective for interim and annual periods beginning after December 15, 2011. Management does not believe the adoption of this update will have a material impact on the Funds’ financial statements.
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 any, are recorded on the basis of specific identified cost incurred by each money manager 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 thereafter as the Funds are informed of the ex-dividend date. 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.
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.
Each Fund qualifies as a regulated investment company under sub-chapter M of the Internal Revenue 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 its 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 June 30, 2012, 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 ending December 31, 2008 through December 31, 2010, 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.
Dividends and Distributions to Shareholders
For all Funds, income dividend and capital gain distributions, if any, are recorded on the ex-dividend date. Income dividend distributions are generally declared and paid quarterly, except for the Non-U.S. Fund, which generally declares and pays income distributions annually. 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.
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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 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 and capital loss carryforwards.
Expenses
The Funds pay their own expenses other than those expressly assumed by Russell Investment Management Company (“RIMCo”) or RFSC. 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) | Market 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 within 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 tax liability with respect to the unrealized appreciation on foreign securities for potential capital gains and repatriation taxes at June 30, 2012. The accrual for capital gains and repatriation taxes is included in net unrealized appreciation (depreciation) on investments in the Statements of Assets and Liabilities for the Funds. The amounts related to capital gains and repatriation taxes are included in net realized gain (loss) on investments in the Statements of Operations for the Funds. The Non-U.S. and Global Real Estate Securities Funds had $0 and $0, respectively in deferred tax liability as of June 30, 2012. The Non-U.S. and Global Real Estate Securities Funds had ($36,097) and $0 respectively in realized gain (loss) on investments for capital gains taxes for the period ended June 30, 2012.
Derivatives
To the extent permitted by the investment objectives, restrictions and policies set forth in the Funds’ Prospectus and Statement of Additional Information, the Funds may participate in various derivative-based transactions. 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 reserves 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 reserves to the performance of appropriate markets by purchasing securities and/or derivatives. This is intended to cause the Funds to perform as though cash reserves were actually invested in those markets. Hedging may also 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 bonds, 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
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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, counterparty risk, basis risk, reinvestment risk, political risk, prepayment risk, extension risk and credit risk.
The effects of derivative instruments, categorized by risk exposure, on the Statement of Assets and Liabilities and the Statement of Operations, for the period ended June 30, 2012, if applicable, are disclosed in the Fair Value of Derivative Instruments presentation following each Fund’s Schedule of Investments.
Foreign Currency Exchange Contracts
In connection with investment transactions consistent with the Funds’ investment objectives and strategies, 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 market 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. Realized gains or losses arising from such transactions are included in net realized gain (or loss) from foreign currency-related transactions.
For the period ended June 30, 2012, the following Funds entered into foreign currency exchange contracts primarily for the strategies listed below:
Funds | Strategies | |
Non-U.S. Fund | Exposing cash reserves to markets and trade settlement | |
Core Bond Fund | Return enhancement and hedging | |
Global Real Estate Securities Fund | Exposing cash reserves to markets and trade settlement |
The Funds’ foreign currency contract notional dollar values fluctuate throughout the operating 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 Bought | ||||||||
Quarter Ended | March 31, 2012 | June 30, 2012 | ||||||
Non-U.S. Fund | $ | 24,392,974 | $ | 44,033,099 | ||||
Core Bond Fund | 201,389,804 | 88,455,863 | ||||||
Global Real Estate Securities Fund | 19,413,069 | 51,348,230 | ||||||
Outstanding Contract Amounts Sold | ||||||||
Quarter Ended | March 31, 2012 | June 30, 2012 | ||||||
Non-U.S. Fund | $ | 24,176,468 | $ | 43,904,601 | ||||
Core Bond Fund | 142,022,556 | 88,318,290 | ||||||
Global Real Estate Securities Fund | 34,046,037 | 27,362,152 |
Options
The Funds may purchase and sell (write) call and put options on securities and securities indices, provided such options are traded on a national securities exchange or in an over-the-counter market. The Funds may also purchase and sell call and put options on foreign currencies. The domestic equity Funds may utilize options to expose cash reserves to markets.
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 market 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 stock value 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 security.
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. Realized gains (losses) on purchased options are included in net realized gain (loss) from investments on the Statements of Operations.
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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.
A Fund may enter into a swaption (swap option). In a swaption, 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. Unrealized gains/losses on swaptions are reflected in investment assets and investment liabilities in the Fund’s Statement of Assets and Liabilities.
For the period ended June 30, 2012, the Core Bond Fund purchased/sold options primarily for return enhancement and hedging.
The Core Bond Fund’s options contracts outstanding values fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of options contracts. For the purpose of this disclosure, volume is measured by contracts outstanding at period end.
Number of Option Contracts Outstanding | ||||||||
Quarter Ended | March 31, 2012 | June 30, 2012 | ||||||
Core Bond Fund | 45 | 36 |
Futures Contracts
The Funds may invest in futures contracts (i.e., interest rate, foreign currency and index futures contracts). The face or contract amounts 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 market value of the securities held by the Fund 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% 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 June 30, 2012, the following Funds entered into future contracts primarily for the strategies listed below:
Funds | Strategies | |
Multi-Style Equity Fund | Exposing cash reserves to markets | |
Aggressive Equity Fund | Exposing cash reserves to markets | |
Non-U.S. Fund | Exposing cash reserves to markets | |
Core Bond Fund | Return enhancement, hedging and exposing cash reserves to markets | |
Global Real Estate Securities Fund | Exposing cash reserves to markets |
The Funds’ futures contracts outstanding values fluctuate throughout the operating year as required to meet strategic requirements. The following table illustrates the quarterly volume of futures contracts. For the purpose of this disclosure, volume is measured by contracts outstanding at period end.
Number of Futures Contracts Outstanding | ||||||||
Quarter Ended | March 31, 2012 | June 30, 2012 | ||||||
Multi-Style Equity Fund | 252 | 206 | ||||||
Aggressive Equity Fund | 28 | 1 | ||||||
Non-U.S. Fund | 275 | 369 | ||||||
Core Bond Fund | 847 | 890 | ||||||
Global Real Estate Securities Fund | 509 | 371 |
As of June 30, 2012, the Funds had cash collateral balances in connection with futures contracts purchased (sold) as follows:
Cash Collateral for Futures | ||||
Multi-Style Equity Fund | $ | 1,350,000 | ||
Aggressive Equity Fund | 120,000 | |||
Non-U.S. Fund | 1,800,000 | |||
Core Bond Fund | 672,000 | |||
Global Real Estate Securities Fund | 1,570,000 |
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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, as the case may be, 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 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 agreements including interest rate, credit default, index (total return) and currency swaps. The Funds may enter into index swap agreements to expose cash reserves to markets or to effect investment transactions consistent with those Funds’ investment objectives and strategies. Interest rate swaps are a counterparty agreement, can be customized to meet each party’s needs, and involve the exchange of a fixed payment per period for a payment that is not fixed. Currency swaps are an agreement where two parties exchange specified amounts of different currencies followed by each paying the other a series of interest payments based on the principal cash flow. At maturity the principal amounts are returned. Credit default swaps are a counterparty agreement which allows the transfer of third party credit risk (the possibility that an issuer will default on their 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.
The Funds 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. 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 earmarked on the Funds’ records will be the full amount of the Funds’ obligations, if any, with respect to such interest rate 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. The market for swap agreements is largely unregulated. The Funds may enter into swap agreements with counterparties that meet RIMCo’s credit quality limitations. The Funds will not enter into any swap unless the counterparty has a minimum senior unsecured credit rating or long-term counterparty credit rating, including reassignments, of BBB- or better as defined by Standard & Poor’s or an equivalent rating from any nationally recognized statistical rating organization (using highest of split ratings) at the time of entering into such transaction.
As of June 30, 2012, the Core Bond Fund had cash collateral balances in connection with swap contracts purchased (sold) as follows:
Cash Collateral for Swaps | Due to Broker | |||||||
Core Bond Fund | $ | 732,829 | $ | 985,779 |
Credit Default Swaps
The Core Bond Fund may enter into credit default swaps. A credit default swap can refer to corporate 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 assets.
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); 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.
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The Fund may also purchase protection via credit default swap contracts in order to offset the risk of default of debt securities held in its portfolio, in which case the Fund would function as the counterparty referenced in the preceding paragraph.
If a credit event occurs on a corporate issue 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 on corporate issues 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.
Unlike credit default swaps on corporate issues, 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 write-down 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 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 other defined credit events).
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 market value of credit default swap agreements on corporate issues as of period end are disclosed in the Schedule 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 market 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 would be an amount equal to the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of June 30, 2012, for which the 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
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party. The Fund may have limited ability to eliminate its exposure under a credit default swap if the credit of the reference entity or underlying asset has declined.
For the period ended June 30, 2012, the Core Bond Fund entered into credit default swaps primarily for return enhancement and hedging.
The Core Bond Fund’s credit default swap contract notional amounts fluctuate throughout the operating year as required to meet the 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 the notional amounts outstanding.
Credit Default Swap Notional Amounts Outstanding | ||||||||
Quarter Ended | March 31, 2012 | June 30, 2012 | ||||||
Core Bond Fund | $ | 91,505,298 | $ | 75,540,298 |
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 a money manager using this technique is incorrect in its forecast of market 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 the Funds are contractually obligated to make. If the other party to an interest rate swap defaults, the Funds’ risk of loss consists of the net amount of interest payments that the Funds are contractually entitled to receive. Since interest rate swaps are individually negotiated, the Funds expect to achieve an acceptable degree of correlation between their rights to receive interest on their portfolio securities and their rights and obligations to receive and pay interest pursuant to interest rate swaps.
For the period ended June 30, 2012, the Core Bond Fund entered into interest rate swaps primarily for return enhancement and hedging.
The Core Bond Fund’s interest rate swap contract notional amounts fluctuate throughout the operating year as required to meet the 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 notional amounts outstanding.
Interest Rate Swap Notional Amounts Outstanding | ||||||||
Quarter Ended | March 31, 2012 | June 30, 2012 | ||||||
Core Bond Fund | $ | 65,665,000 | $ | 53,300,000 |
Index Swaps
Certain Funds may enter into index swap agreements to expose cash reserves to markets or to effect investment transactions consistent with these Funds’ investment objectives and strategies. 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 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 June 30, 2012, none of the Funds entered into index swaps.
ISDA Master Agreements
The Funds are parties to International Swaps and Derivatives Association, Inc. Master Agreements (“ISDA Master Agreements”) with counterparties that govern transactions in over-the-counter 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 include conditions that may entitle counterparties 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.
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
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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. At June 30, 2012, the Core Bond Fund had no unfunded loan commitments.
Investments in Emerging Markets
Emerging Markets Securities
The 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 political instability; 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 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 securities settlement procedures for a Fund’s portfolio securities. 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 and 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 the Fund acquires a fixed income security from a commercial bank, broker or dealer and simultaneously agrees to resell such security to the seller at an agreed upon price and date (normally within a few days or weeks). The resale price reflects an agreed upon interest rate effective for the period the security is held by the Fund and is unrelated to the interest rate on the security. The securities acquired by the Fund constitute collateral for the repurchase obligation. In these transactions, the securities acquired by the Fund (including accrued interest earned thereon) must have a total value in excess of the value of the repurchase agreement and must be held by the custodian bank until repurchased. The Fund will not invest more than 15% of its net assets (taken at current market 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 mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), 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 the 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 quality and value of the underlying assets may decline, or default This has become an increasing risk for collateral related to non-agency mortgages (e.g., sub-prime, Alternative A—paper (“Alt—A loans”)) and non-conforming mortgage loans, especially in a declining residential real estate market. In addition, regulatory or tax changes may adversely affect the mortgage securities markets as a whole.
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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 the Fund’s portfolio at the time resulting in reinvestment risk.
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 include commercial banks, savings associations, mortgage companies, investment banking firms, finance companies and special purpose finance entities (called special purpose vehicles or “SPVs”) and other entities that acquire and package mortgage loans for resale as MBS. 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 refers 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 non-conforming 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 (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation)), 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 the Fund’s portfolio may be particularly difficult to value because of the complexities involved in assessing the value of the underlying mortgage loans.
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Asset-Backed Securities
ABS may include MBS, loans, receivables or other assets. The value of the Fund’s 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 Fund 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 consistent with the Fund’s investment strategies. 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 Funds 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 Funds 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.
A to be announced (“TBA”) security is a forward mortgage-backed securities trade. 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. As of June 30, 2012, 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, or 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 greater. TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal, Therefore, 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.
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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 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 financial statements (the “Assets”). The Assets, which potentially expose the Funds to credit risk, consist principally of cash due from counterparties and investments. The extent of the Funds’ exposure to credit and counterparty risks with respect to the Assets approximates their carrying value as recorded in the Funds’ Statements of Assets and Liabilities.
On September 15, 2008, Lehman Brothers Holdings Inc. filed for protection under Chapter 11 of the United States Bankruptcy Code. The Core Bond Fund and Non-U.S. Fund had direct holdings, swap agreements, and securities and derivatives transactions outstanding with Lehman Brothers entities as issuers or counterparties at the time the relevant Lehman Brothers entities filed for protection or were placed in administration. The direct holdings associated with Lehman Brothers have been written down to their estimated recoverable values and incorporated as components of other receivables and liabilities on the Statements of Assets and Liabilities and net changes in realized gain (loss) or unrealized appreciation (depreciation) on the Statement of Operations. The Funds have also utilized certain netting arrangements to offset payables and receivables of Lehman Brothers securities.
On November 4, 2011, creditors of Lehman Brothers Holdings Inc. and its affiliated chapter 11 debtors (collectively, “Lehman Brothers”) voted to accept the Third Amended Joint Chapter 11 Plan of Lehman Brothers dated August 31, 2011 (the “Plan”). The Bankruptcy Court confirmed the Plan on December 6, 2011. Certain classes of creditors of Lehman Brothers received preliminary distributions in the first quarter of 2012. Pursuant to the Plan, there will be an initial distribution of “Available Cash” with semiannual distributions on each March 30th and September 30th thereafter. Reserved amounts that become available (through claims being disallowed or reduced, litigation being resolved, or distributions not being collected) will be included as Available Cash for the subsequent semi-annual distributions. Distributions will be made only to claimants holding “Allowed Claims” as of the relevant distribution date. The date for final distributions to creditors of Lehman Brothers is unknown.
3. | Investment Transactions |
Securities
During the period ended June 30, 2012, 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 | $ | 208,169,486 | $ | 227,301,353 | ||||
Aggressive Equity Fund | 150,328,312 | 156,846,510 | ||||||
Non-U.S. Fund | 99,088,650 | 112,858,444 | ||||||
Core Bond Fund | 150,949,567 | 130,359,231 | ||||||
Global Real Estate Securities Fund | 163,109,589 | 156,039,864 |
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 | $ | 546,384,449 | $ | 559,563,837 |
Written Options Contracts
Transactions in written options contracts for the period ended June 30, 2012 were as follows:
Core Bond Fund | ||||||||||||
| Number of Contracts | Premiums Received | ||||||||||
Outstanding December 31, 2011 | 49 | $ | 752,110 | |||||||||
Opened | 127 | 192,972 | ||||||||||
Closed | (140 | ) | (287,118 | ) | ||||||||
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Outstanding June 30, 2012 | 36 | $ | 657,964 | |||||||||
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Securities Lending
The Investment Company has a securities lending program whereby each Fund can loan securities with a value up to 331/3% of each Fund’s total assets. The Fund receives cash (U.S. currency), U.S. Government or U.S. Government Agency obligations as
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collateral against the loaned securities. To the extent that a loan is collateralized by cash, such collateral is invested by the securities lending agent, State Street Bank and Trust Company (“State Street”), in short-term instruments, pooled collateral vehicles that invest in short term instruments, money market mutual funds and other short-term investments that meet certain quality and diversification requirements. The collateral received is recorded on a lending Fund’s Statement of Assets and Liabilities along with the related obligation to return the collateral.
Income generated from the investment of cash collateral, less negotiated rebate fees paid to participating brokers and transaction costs, is divided between the Fund and State Street and is recorded as income for the Fund. 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 State Street and are recorded as securities lending income for the Fund. All collateral received will be in an amount at least equal to 102% (for loans of U.S. securities) or 105% (for loans of non-U.S. securities) of the market value of the loaned securities at the inception of each loan. The market 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. Consequently, loans are made only to borrowers which are deemed to be creditworthy by State Street.
Each Fund that participates in the securities lending program has most of the cash collateral invested in the Russell U.S. Cash Collateral Fund, an unregistered fund advised by RIMCo. Prior to December 3, 2010, the Funds that participated in securities lending had a portion of their cash collateral invested in the State Street Securities Lending Quality Trust Fund (“SLQT”), a securities lending cash collateral vehicle managed by State Street Global Advisers. On December 3, 2010, the Funds redeemed in-kind out of SLQT realizing certain losses as a result of such redemption, and proceeds of the redemption were invested in the RIF Liquidating Trust, an unregistered fund managed by State Street.
As of June 30, 2012, the non-cash collateral pledged for the securities on loan in the following funds was as follows:
Non-Cash Collateral Value | Non-Cash Collateral Holding | |||||||
Multi-Style Equity Fund | $ | 680,955 | Pool of U.S. Government Securities | |||||
Aggressive Equity Fund | 574,694 | Pool of U.S. Government Securities | ||||||
Non-U.S. Fund | 711,840 | Pool of U.S. Government Securities |
Custodian
The Funds have entered into arrangements with their custodian whereby custody credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ expenses. During the period ended June 30, 2012, the Funds’ custodian fees were not reduced under these arrangements.
Brokerage Commissions
The Funds effect certain transactions through Recapture Services, a division of BNY ConvergeEX Execution Solutions LLC (“BNY”) and its global network of correspondent brokers. BNY is a registered broker and is not an affiliate of the Funds or RIMCo. Trades placed through BNY and its correspondents are used (i) to obtain brokerage and research services for RIMCo to assist RIMCo in its investment decision-making process in its capacity as advisor to the Funds or (ii) to generate commission rebates to the Funds on whose behalf the trades were made. For purposes of trading to obtain brokerage and research services for RIMCo or to generate commission rebates to the Funds, the Funds’ money managers are requested to and RIMCo may, with respect to transactions it places, effect transactions with or through BNY and its correspondents or other brokers only to the extent that the money managers or RIMCo believe that the Funds will receive best execution. In addition, RIMCo recommends targets for the amount of trading that money managers allocate through BNY based upon asset class, investment style and other factors. Brokerage and research services provided to RIMCo by BNY or other brokers include, but are not limited to (1) advice either directly or indirectly through publications or writings as to the advisability of investing in, purchasing or selling securities and the availability of securities or of purchasers or sellers of securities; (2) analysis and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and the performance of accounts; and/or (3) services that are required in connection therewith. Research services will generally be obtained from unaffiliated third parties at market rates, which may be included in commission costs. Research provided to RIMCo may benefit the particular Funds generating the trading activity and may also benefit other Funds within RIF and other funds and clients managed or advised by RIMCo or its affiliates. Similarly, the Funds may benefit from research provided with respect to trading by those other funds and clients.
BNY may also rebate to the Funds a portion of commissions earned on certain trading by the Funds through BNY and their correspondents in the form of commission recapture. Commission recapture is paid solely to those Funds generating the applicable trades. Commission recapture is generated on the instructions of the Soft Money Commission once RIMCo’s research budget has been met, as determined annually in the Soft Money Commission budgeting process.
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Additionally, the Funds paid brokerage commissions to non-affiliated brokers who provided brokerage and research services to the adviser.
4. | Related Party Transactions, Fees and Expenses |
Adviser and Administrator
RIMCo is the Funds’ adviser and RFSC, a wholly-owned subsidiary of RIMCo, is the Funds’ administrator. RIMCo is a wholly-owned subsidiary of Frank Russell Company (a subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell Company provides ongoing money manager research and trade placement services to RIF and RIMCo.
The Funds are permitted to invest their cash reserves (i.e., cash awaiting investment or cash held to meet redemption requests or to pay expenses) in the Russell U.S. Cash Management Fund, an unregistered Fund advised by RIMCo. As of June 30, 2012, the Funds have invested $172,852,881 in the Russell U.S. Cash Management Fund. In addition, a portion of the collateral received from the Investment Company’s securities lending program in the amount of $53,493,769 is invested in the Russell U.S. Cash Collateral Fund, an unregistered fund advised by RIMCo.
The advisory and administrative fees specified in the table below are based upon the average daily net assets of each Fund and are payable monthly.
Annual Rate | ||||||||
Funds | Adviser | Administrator | ||||||
Multi-Style Equity Fund | 0.73 | % | .05 | % | ||||
Aggressive Equity Fund | 0.90 | .05 | ||||||
Non-U.S. Fund | 0.90 | .05 | ||||||
Core Bond Fund | 0.55 | .05 | ||||||
Global Real Estate Securities Fund | 0.80 | .05 |
The following shows the respective totals for advisory and administrative fees for the period ended June 30, 2012.
Advisory | Administrative | |||||||
Multi-Style Equity Fund | $ | 1,432,878 | $ | 98,142 | ||||
Aggressive Equity Fund | 839,118 | 46,618 | ||||||
Non-U.S. Fund | 1,540,273 | 85,571 | ||||||
Core Bond Fund | 1,587,932 | 144,358 | ||||||
Global Real Estate Securities Fund | 2,050,350 | 128,147 |
RIMCo has agreed to certain waivers of its advisory fees as follows:
For the Aggressive Equity Fund, RIMCo had contractually agreed, until April 30, 2012, to waive 0.06% of its 0.90% advisory fee. The waiver may not be terminated during the relevant period except with Board approval. Effective May 1, 2012 for the Aggressive Equity Fund, RIMCo has contractually agreed, until April 30, 2013, to waive 0.05% of its 0.90% 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 June 30, 2012 was $52,947. There were no reimbursements during the period.
For the Non-U.S. Fund, RIMCo had contractually agreed, until April 30, 2012, to waive 0.06% of its 0.90% advisory fee. The waiver may not be terminated during the relevant period except with Board approval. Effective May 1, 2012 for the Non-U.S. Fund, RIMCo has contractually agreed, until April 30, 2013, to waive 0.05% of its 0.90% 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 June 30, 2012 was $97,331. There were no reimbursements during the period.
For the Core Bond Fund, RIMCo had contractually agreed, until April 30, 2012, to waive 0.07% of its 0.55% advisory fee. The waiver may not be terminated during the relevant period except with Board approval. Effective May 1, 2012 for the Core Bond Fund, RIMCo has contractually agreed, until April 30, 2013, to waive 0.05% 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 June 30, 2012 was $181,875. There were no reimbursements during the period.
Transfer and Dividend Disbursing Agent
RFSC serves as transfer agent and provides dividend disbursing services to the Funds. For this service, RFSC is paid a fee based upon the average daily net assets of the Funds for transfer agency and dividend disbursing services. RFSC retains a portion of this
110 | Notes to Financial Statements |
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Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
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 June 30, 2012 were as follows:
Amount | ||||
Multi-Style Equity Fund | $ | 8,636 | ||
Aggressive Equity Fund | 4,102 | |||
Non-U.S. Fund | 7,530 | |||
Core Bond Fund | 12,703 | |||
Global Real Estate Securities Fund | 11,277 |
Contributions from Adviser
Fund reimbursements presented in the Statements of Changes in Net Assets include payments by RIMCo to certain Funds made during the period ended December 31, 2011 to compensate for fund share transactions relating to the valuation of a portfolio holding, the SLQT, in which the Funds invested cash collateral received in securities lending transactions.
Distributor
Russell Financial Services, Inc. (the “Distributor”), a wholly-owned subsidiary of RIMCo, serves as distributor for the Investment Company, pursuant to the Distribution Agreement with the Investment Company. The Distributor receives no compensation from the Investment Company for its services.
Accrued Fees Payable to Affiliates
Accrued fees payable to affiliates for the period ended June 30, 2012 were as follows:
| Multi-Style Equity Fund | Aggressive Equity Fund | Non-U.S. Fund | Core Bond Fund | Global Real Estate Securities Fund | |||||||||||||||
Advisory fees | $ | 224,456 | $ | 123,127 | $ | 218,103 | $ | 250,513 | $ | 338,028 | ||||||||||
Administration fees | 15,374 | 7,243 | 12,829 | 25,080 | 21,127 | |||||||||||||||
Transfer agent fees | 1,357 | 639 | 1,129 | 2,186 | 1,844 | |||||||||||||||
Trustee fees | 517 | 130 | 393 | — | 206 | |||||||||||||||
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$ | 241,704 | $ | 131,139 | $ | 232,454 | $ | 277,779 | $ | 361,205 | |||||||||||
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Affiliated Brokerage Commissions
The Funds effect certain transactions through Russell Implementation Services Inc. (“RIS”) and its global network of unaffiliated correspondent brokers. RIS is a registered broker and investment adviser and an affiliate of RIMCo. Trades placed through RIS and its correspondents are made (i) to manage trading associated with changes in managers, rebalancing across existing managers, cash flows and other portfolio transitions or (ii) to execute portfolio securities transactions for each Fund’s assets that RIMCo determines not to allocate to money managers and for each Fund’s cash reserves.
Amounts retained by RIS for the period ended June 30, 2012 were as follows:
Fund Name | Amount | |||
Multi-Style Equity Fund | $ | 12,039 | ||
Aggressive Equity Fund | 21,135 | |||
Non-U.S. Fund | 66,598 | |||
Core Bond Fund | 40,535 |
Board of Trustees
The Russell Fund Complex consists of Russell Investment Company (“RIC”), which has 38 funds, and RIF, which has 10 funds. Each of the Trustees is a Trustee of both RIC and RIF. During the period, the Russell Fund Complex paid each of its independent Trustees a retainer of $75,000 per year, each of its interested Trustees a retainer of $65,000 per year and each Trustee $7,000 for each regularly scheduled meeting attended in person, $3,500 for each special meeting and the Annual 38a-1 meeting attended in person, and for each Audit Committee meeting, Nominating and Governance Committee meeting, Investment Committee meeting or any other committee meeting established and approved by the Board that is attended in person. Each Trustee receives a $1,000 fee for attending the regularly scheduled and special meetings by phone instead of receiving the full fee had the member attended in person (except for telephonic meetings called pursuant to the Funds’ valuation and pricing procedures) and a $500 fee for attending committee meeting by phone instead of receiving the full fee had the member attended in person. Trustees’ out-of-pocket expenses are also paid by the Russell Fund Complex. The Audit Committee Chair and Investment Committee Chair
Notes to Financial Statements | 111 |
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are each paid a fee of $15,000 per year and the Nominating and Governance Committee Chair is paid a fee of $6,000 per year. The chairman of the Board receives additional annual compensation of $75,000 per year. Ms. Cavanaugh is not compensated by the Russell Fund Complex for her service as Trustee.
5. | Federal Income Taxes |
At December 31, 2011, 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. For the fiscal year ending December 31, 2011, the Funds had no short-term or long-term capital losses which may be carried forward indefinitely.
Funds | 12/31/2016 | 12/31/2017 | Totals | |||||||||
Multi-Style Equity Fund | $ | — | $ | 50,196,208 | $ | 50,196,208 | ||||||
Aggressive Equity Fund | — | 33,997,250 | 33,997,250 | |||||||||
Non-U.S. Fund | 40,217,249 | 51,040,031 | 91,257,280 | |||||||||
Global Real Estate Securities Fund | — | 24,647,989 | 24,647,989 |
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.
At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
| Multi-Style Equity Fund | Aggressive Equity Fund | Non-U.S. Fund | Core Bond Fund | Global Real Estate Securities Fund | |||||||||||||||
Cost of Investments | $ | 361,985,408 | $ | 184,261,824 | $ | 333,268,090 | $ | 666,093,016 | $ | 478,011,666 | ||||||||||
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Unrealized Appreciation | $ | 44,988,202 | $ | 15,304,402 | $ | 3,119,225 | $ | 17,758,941 | $ | 90,679,473 | ||||||||||
Unrealized Depreciation | (12,228,488 | ) | (8,147,184 | ) | (3,360,878 | ) | (5,923,608 | ) | (16,465,987 | ) | ||||||||||
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Net Unrealized Appreciation (Depreciation) | $ | 32,759,714 | $ | 7,157,218 | $ | (241,653 | ) | $ | 11,835,333 | $ | 74,213,486 | |||||||||
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As permitted by tax regulations, the funds intend to defer a net realized capital loss incurred from November 1, 2011 to December 31, 2011, and treat it as arising in the fiscal year 2012. As of December 31, 2011, the Fund had realized a capital losses as follows:
Fund | 12/31/2016 | |||
Multi-Style Equity Fund | $ | 1,313,759 | ||
Aggressive Equity Fund | 959,766 | |||
Non-U.S. Fund | 3,328,358 | |||
Global Real Estate Securities Fund | 2,036,911 |
6. | Fund Share Transactions (amounts in thousands) |
Share transactions for the periods ended June 30, 2012 and December 31, 2011 were as follows:
2012 | 2011 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Multi-Style Equity Fund | ||||||||||||||||
Proceeds from shares sold | 864 | $ | 12,374 | 2,272 | $ | 31,347 | ||||||||||
Proceeds from reinvestment of distributions | 140 | 2,079 | 284 | 3,847 | ||||||||||||
Payments for shares redeemed | (2,060 | ) | (29,681 | ) | (3,854 | ) | (52,698 | ) | ||||||||
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Total increase (decrease) | (1,056 | ) | $ | (15,228 | ) | (1,298 | ) | $ | (17,504 | ) | ||||||
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Aggressive Equity Fund | ||||||||||||||||
Proceeds from shares sold | 349 | $ | 4,302 | 1,277 | $ | 15,071 | ||||||||||
Proceeds from reinvestment of distributions | 36 | 472 | 82 | 942 | ||||||||||||
Payments for shares redeemed | (1,122 | ) | (14,021 | ) | (1,872 | ) | (22,488 | ) | ||||||||
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Total increase (decrease) | (737 | ) | $ | (9,247 | ) | (513 | ) | $ | (6,475 | ) | ||||||
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Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
2012 | 2011 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Non-U.S. Fund | ||||||||||||||||
Proceeds from shares sold | 1,390 | $ | 12,765 | 4,119 | $ | 39,765 | ||||||||||
Proceeds from reinvestment of distributions | 367 | 3,601 | 603 | 6,023 | ||||||||||||
Payments for shares redeemed | (3,269 | ) | (30,492 | ) | (2,983 | ) | (29,666 | ) | ||||||||
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Total increase (decrease) | (1,512 | ) | $ | (14,126 | ) | 1,739 | $ | 16,122 | ||||||||
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Core Bond Fund | ||||||||||||||||
Proceeds from shares sold | 6,029 | $ | 64,238 | 9,039 | $ | 95,798 | ||||||||||
Proceeds from reinvestment of distributions | 788 | 8,335 | 2,442 | 25,606 | ||||||||||||
Payments for shares redeemed | (1,878 | ) | (20,010 | ) | (4,286 | ) | (45,526 | ) | ||||||||
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Total increase (decrease) | 4,939 | $ | 52,563 | 7,195 | $ | 75,878 | ||||||||||
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2012 | 2011 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Global Real Estate Securities Fund | ||||||||||||||||
Proceeds from shares sold | 1,037 | $ | 14,292 | 2,665 | $ | 35,655 | ||||||||||
Proceeds from reinvestment of distributions | 351 | 4,932 | 818 | 11,195 | ||||||||||||
Payments for shares redeemed | (706 | ) | (9,727 | ) | (1,717 | ) | (23,548 | ) | ||||||||
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Total increase (decrease) | 682 | $ | 9,497 | 1,766 | $ | 23,302 | ||||||||||
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7. | Interfund Lending Program |
The Funds have been granted permission from the Securities and Exchange Commission to participate in a joint lending and borrowing facility (the “Credit Facility”). Funds may borrow money from each other for temporary purposes. All such borrowing and lending will be subject to a participating Fund’s fundamental investment limitations. A lending fund will lend through the program only when the returns are higher than those available from an investment in repurchase agreements or short-term reserves and the portfolio manager determines it is in the best interest of the lending fund. The Funds will borrow through the program only when the costs are equal to or lower than the cost of bank loans. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. A participating Fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. Any delay in repayment to the lending fund could result in a lost investment opportunity or additional borrowing costs. For the period ended June 30, 2012, the Funds did not borrow or loan through the interfund lending program.
8. | Record Ownership |
As of June 30, 2012, the following table includes shareholders of record with greater than 10% of the total outstanding shares of each respective Fund. The Northwestern Mutual Life Insurance Company accounts were the largest shareholder in each Fund.
# of Shareholders | % | |||||||
Multi-Style Equity Fund | 2 | 79.0 | ||||||
Aggressive Equity Fund | 2 | 79.7 | ||||||
Non-U.S. Fund | 2 | 74.6 | ||||||
Core Bond Fund | 3 | 84.4 | ||||||
Global Real Estate Securities Fund | 2 | 91.6 |
9. | Restricted Securities |
Restricted securities are subject to contractual limitations on resale, are often issued in private placement transactions, and are not registered under the Securities Act of 1933, as amended (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.
Notes to Financial Statements | 113 |
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Russell Investment Funds
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
The following table lists restricted securities held by a Fund that are illiquid. The following table does not include (1) securities deemed liquid by RIMCo or a money manager pursuant to Board approved policies and procedures or (2) illiquid securities that are not restricted securities as designated on a Fund’s Schedule of Investments.
Fund - % of Net Assets Securities | Acquisition Date | Principal Amount ($) or Shares | Cost per Unit $ | Cost (000) $ | Market Value (000) $ | |||||||||||||||
Aggressive Equity Fund - 0.7% | ||||||||||||||||||||
Cohu, Inc. | 03/02/07 | 36,980 | 11.76 | 435 | 376 | |||||||||||||||
Flagstone Reinsurance Holdings SA | 10/18/10 | 74,050 | 8.76 | 649 | 593 | |||||||||||||||
Methode Electronics, Inc. | 05/10/04 | 44,821 | 8.82 | 395 | 382 | |||||||||||||||
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Core Bond Fund - 0.2% | ||||||||||||||||||||
Australia & New Zealand Banking Group, Ltd. | 06/15/11 | 300,000 | 99.89 | 300 | 300 | |||||||||||||||
Adam Aircraft Industries | 05/22/07 | 48,786 | 1.00 | 56 | — | |||||||||||||||
BNPP Mortgage Securities LLC | 03/14/12 | 389,730 | 105.14 | 410 | 409 | |||||||||||||||
DG Funding Trust | 11/04/03 | 49 | 10,537.12 | 516 | 365 | |||||||||||||||
Escrow GM Corp. | 04/21/11 | 80,000 | — | — | 120 | |||||||||||||||
Vivendi SA | 04/03/12 | 200,000 | 99.99 | 200 | 198 | |||||||||||||||
Washington Mutual Mortgage Pass Through Certificates | 04/01/05 | 180,477 | 100.00 | 180 | 5 | |||||||||||||||
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1,397 | ||||||||||||||||||||
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Global Real Estate Securities Fund - 0.0% | ||||||||||||||||||||
BGP Holdings PLC | 08/06/09 | 926,311 | — | — | — | |||||||||||||||
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Illiquid securities and restricted securities may be priced by the Funds using fair value procedures approved by the Board.
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.
114 | Notes to Financial Statements |
Table of Contents
Russell Investment Funds
Basis for Approval of Investment Advisory Contracts — (Unaudited)
Approval of Investment Advisory Agreement
The Board of Trustees, including all of the Independent Trustees, last considered and approved the continuation of the advisory agreement with RIMCo (the “RIMCo Agreement”) and the portfolio management contract with each Money Manager of the Funds (collectively, the “portfolio management contracts”) at a meeting held in person on April 24, 2012 (the “Agreement Evaluation Meeting”). During the course of a year, the Trustees receive a wide variety of materials regarding the investment performance of the Funds, sales and redemptions of the Funds’ shares, management of the Funds by RIMCo and compliance with applicable regulatory requirements. In preparation for the annual review, the Independent Trustees, with the advice and assistance of their independent counsel, also requested and the Board considered (1) information and reports prepared by RIMCo relating to the services provided by RIMCo (and its affiliates) to the Funds; and (2) information (the “Third-Party Information”) received from an independent, nationally recognized provider of investment company information comparing the performance of each of the Funds and their respective operating expenses over various periods of time with other peer funds not managed by RIMCo, believed by the provider to be generally comparable in investment objectives to the Funds. In the case of each Fund, its other peer funds are collectively hereinafter referred to as the Fund’s “Comparable Funds,” and, with the Fund, such Comparable Funds are collectively hereinafter referred to as the Fund’s “Performance Universe” in the case of performance comparisons and the Fund’s “Expense Universe” in the case of operating expense comparisons. In the case of certain Funds, the Third-Party Information reflected changes in the Comparable Funds requested by RIMCo, which changes were noted in the Third-Party Information. The foregoing information requested by the Trustees or provided by RIMCo is collectively called the “Agreement Evaluation Information.” The Trustees’ evaluations also reflected the knowledge and familiarity gained as Board members of the Funds and other funds in the same complex with respect to services provided by RIMCo, RIMCo’s affiliates and each Money Manager. The Trustees received a memorandum from counsel to the Funds discussing the legal standards for their consideration of the continuations of the RIMCo Agreement and the portfolio management contracts, and the Independent Trustees separately received a memorandum regarding their responsibilities from their independent counsel.
On April 16, 2012, the Independent Trustees in preparation for the Agreement Evaluation Meeting met by conference telephone call to review the Agreement Evaluation Information received to that date in a private session with their independent counsel at which no representatives of RIMCo or the Funds’ management were present and, on the basis of that review, requested additional Agreement Evaluation Information. The Independent Trustees also met in person on April 23, 2012, in executive session with their independent counsel, to review additional Agreement Evaluation Information received to that date. At the Agreement Evaluation Meeting, the Board, including the Independent Trustees, reviewed the proposed continuance of the RIMCo Agreement and the portfolio management contracts with management, counsel to the Funds and independent counsel to the Independent Trustees. Presentations made by RIMCo to the Board at the Agreement Evaluation Meeting as part of this review encompassed the Funds and all other RIMCo-managed funds for which the Board has supervisory responsibility. Prior to voting at the Agreement Evaluation Meeting, the Independent Trustees again met in executive session with their independent counsel to consider additional Agreement Evaluation Information received from RIMCo and management at the Agreement Evaluation Meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, the Board considered RIMCo’s advice that the Funds, in employing a manager-of-managers method of investment, operate in a manner that is distinctly different from most other investment companies. In the case of most other investment companies, an advisory fee is paid by the investment company to its adviser which, in turn, employs and compensates individual portfolio managers to make specific securities selections consistent with the adviser’s style and investment philosophy. RIMCo has engaged multiple unaffiliated Money Managers for all Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible under the RIMCo Agreement for determining, implementing and maintaining the investment program for each Fund. Assets of each Fund generally have been allocated among the multiple Money Managers selected by RIMCo, subject to Board approval, for that Fund. RIMCo managed directly a portion of one Fund’s assets employing a “select holdings strategy,” as described below, during 2011 and a portion of 2012, and generally directly manages the investment of each Fund’s cash. RIMCo also may manage directly any portion of each Fund’s assets that RIMCo determines not to allocate to the Money Managers and portions of a Fund during transitions between Money Managers. RIMCo may also manage a Fund’s assets to manage risk in the Fund’s investment portfolio. In all cases, assets are managed directly by RIMCo pursuant to authority provided by the RIMCo Agreement.
RIMCo is responsible for selecting, subject to Board approval, Money Managers for each Fund and for actively managing allocations and reallocations of assets among the Money Managers. The Board has been advised that RIMCo’s goal is to construct and manage diversified portfolios in a risk-aware manner. Each Money Manager for a Fund in effect performs the function of an individual portfolio manager who is responsible for selecting portfolio securities for the portion of the Fund assigned to it by RIMCo (each, a “segment”) in accordance with the Fund’s applicable investment objective, policies and restrictions, any constraints placed by RIMCo upon their selection of portfolio securities and the Money Manager’s specified role in a Fund. RIMCo is responsible for communicating performance expectations to each Money Manager; supervising compliance by each Money Manager with each Fund’s investment objective and policies; authorizing Money Managers to engage in certain investment strategies for a Fund; and
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Russell Investment Funds
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
recommending annually to the Board whether portfolio management contracts should be renewed, modified or terminated. In addition to its annual recommendation as to the renewal, modification or termination of portfolio management contracts, RIMCo is responsible for recommending to the Board additions of new Money Managers or replacements of existing Money Managers at any time when, based on RIMCo’s research and ongoing review and analysis, such actions are appropriate. RIMCo may impose specific investment constraints from time to time for each Money Manager intended to capitalize on the strengths of that Money Manager or to coordinate the investment activities of Money Managers for the Fund in a complementary manner. Therefore, RIMCo’s selection of Money Managers is made not only on the basis of performance considerations but anticipated compatibility with other Money Managers in the same Fund. In light of the foregoing, the overall performance of each Fund over appropriate periods reflects, in great part, the performance of RIMCo in designing the Fund’s investment program, structuring the Fund, selecting an effective Money Manager with a particular investment style or sub-style for a segment that is complementary to the styles of the Money Managers of other Fund segments, and allocating assets among the Money Managers in a manner designed to achieve the objectives of the Fund.
The Board considered that the prospectuses for the Funds and other public disclosures emphasize to investors RIMCo’s role as the principal investment manager for each Fund, rather than the investment advisory or security selection role of the Funds’ Money Managers, and describe the manner in which the Funds operate so that investors may take that information into account when deciding to purchase shares of any such Fund. The Board further considered that Fund investors in pursuing their investment goals and objectives likely purchased their shares on the basis of this information and RIMCo’s reputation for and performance record in managing the Funds’ manager-of-managers structure.
The Board also considered the demands and complexity of managing the Funds pursuant to the manager-of-managers structure, the special expertise of RIMCo with respect to the manager-of-managers structure of the Funds and the likelihood that, at the current expense ratio of each Fund, there would be no acceptable alternative investment managers to replace RIMCo on comparable terms given the need to continue the manager-of-managers strategy of such Fund selected by shareholders in purchasing their shares.
In addition to these general factors relating to the manager-of-managers structure of the Funds, the Trustees considered, with respect to each Fund, various specific factors in evaluating renewal of the RIMCo Agreement, including the following:
1. | The nature, scope and overall quality of the investment management and other services provided, and expected to be provided, to the Fund by RIMCo; |
2. | The advisory fee paid by the Fund to RIMCo (the “Advisory Fee”) and the fact that it encompasses all investment advisory fees paid by the Fund, including the fees for any Money Managers of such Fund; |
3. | Information provided by RIMCo as to other fees and benefits received by RIMCo or its affiliates from the Fund, including any administrative, transfer agent or cash management fees and any fees received for management of securities lending cash collateral, soft dollar arrangements and commissions in connection with portfolio securities transactions; |
4. | Information provided by RIMCo as to expenses incurred by the Fund; and |
5. | Information provided by RIMCo as to the profits that RIMCo derives from its mutual fund operations generally and from the Fund. |
In evaluating the nature, scope and overall quality of the investment management and other services provided, and which are expected to be provided, to the Funds, including Fund portfolio management services, the Board discussed with senior representatives of RIMCo the impact on the Funds’ operations of significant changes in RIMCo’s senior management and other personnel providing investment advisory and other services to the Funds since 2011 to the date of the Agreement Evaluation Meeting. At the Agreement Evaluation Meeting, RIMCo assured the Board that such changes have not resulted and are not expected to result in any diminution in the nature, scope or quality of the investment advisory or other services provided to the Funds. The Board also discussed the impact of organizational changes on the compliance programs of the Funds and RIMCo with the Funds’ Chief Compliance Officer (the “CCO”) and received assurances from the CCO that such changes have not resulted in any diminution in the scope and quality of the Funds’ compliance programs.
As noted above, RIMCo, pursuant to the terms of the RIMCo Agreement, directly managed a portion—up to 10%—of the assets of the RIF Multi-Style Equity Fund (the “Participating Fund”) utilizing a select holdings strategy (the “select holdings strategy”) during 2011 and a portion of 2012, the actual allocation being determined by the Participating Fund’s RIMCo portfolio manager. The Board considered that the select holdings strategy utilized by RIMCo in managing such assets for the Participating Fund was designed to increase the Participating Fund’s exposure to stocks that were viewed as attractive by multiple Money Managers of the Participating Fund. The select holdings strategy was discontinued during 2012 with respect to the Participating Fund. The Board also considered the impact of the select holdings strategy upon the investment results of the Participating Fund. The Board considered that during the periods that the select holdings strategy was utilized, RIMCo was not required to pay investment advisory fees to a Money Manager with respect to assets for which the select holdings strategy was employed and that the profits derived by RIMCo generally, and from the Participating Fund consequently, may have increased incrementally. The Board, however, also considered RIMCo’s
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advice that it paid certain Money Managers additional fees for providing information and other services in connection with the select holdings strategy and incurred additional costs in carrying out the select holdings strategy; the limited amount of assets that were managed directly by RIMCo pursuant to the select holdings strategy; and the fact that the aggregate investment Advisory Fees paid by the Participating Fund were not increased as a result of the select holdings strategy.
In evaluating the reasonableness of the Funds’ Advisory Fees in light of Fund performance, the Board considered that, in the Agreement Evaluation Information and at past meetings, RIMCo noted differences between the investment strategies of certain Funds and their respective Comparable Funds in pursuing their investment objectives, including fund strategies which seek to achieve a lower tracking error (i.e., the difference, whether positive or negative, between the return of a fund and its benchmark) and resulting lower return volatility than their Comparable Funds. According to RIMCo, these strategies may be expected to result, and for certain Funds during the periods covered by the Third-Party Information did result, in lower performance than that of some of their Comparable Funds. According to RIMCo, the strategies pursued by the Funds, among other things, are intended to result in less volatile, more moderate returns relative to each Fund’s performance benchmark rather than more volatile, more extreme returns that its Comparable Funds may experience over time.
With respect to the Funds’ Advisory Fees, the Third-Party Information showed that, on a contractual basis, the Advisory Fee for each of the RIF Aggressive Equity Fund, RIF Global Real Estate Securities Fund and RIF Core Bond Fund was ranked in the fourth quintile of its Expense Universe and the Advisory Fee for each of the RIF Multi-Style Equity Fund and RIF Non-U.S. Fund was ranked in the fifth quintile of its Expense Universe. On an actual basis (i.e., giving effect to any voluntary fee waivers implemented by RIMCo and the advisers to such Fund’s Comparable Funds), the Advisory Fee for the RIF Core Bond Fund was ranked in the third quintile of its Expense Universe but the actual Advisory Fee for each of the other Funds was ranked in the fourth quintile of its Expense Universe. In these rankings, the first quintile represents funds with the lowest investment advisory fees among funds in the Expense Universe and the fifth quintile represents funds with the highest investment advisory fees among the Expense Universe funds. The comparison was based upon the latest fiscal years for the Expense Universe funds. In assessing the Funds’ Advisory Fees, the Board focused on actual rather than contractual Advisory Fees. The Board considered RIMCo’s explanation of the reasons for these Funds’ actual Advisory Fee rankings and its belief that the Funds’ Advisory Fees are fair and reasonable notwithstanding such comparisons. The Board determined that it would continue to monitor those fees against the Funds’ Comparable Funds’ advisory fees.
In discussing the Funds’ Advisory Fees generally, RIMCo noted, among other things, that its Advisory Fees for the Funds encompass services that may not be provided by investment advisers to the Funds’ Comparable Funds, such as cash equitization and management of portfolio transition costs when Money Managers are added, terminated or replaced. RIMCo also observed that its “margins” in providing investment advisory services to the Funds tend to be lower than competitors’ margins because of the demands and complexities of managing the Funds’ manager-of-managers structure, including RIMCo’s payment of a significant portion of the Funds’ Advisory Fees to their Money Managers. RIMCo expressed the view that Advisory Fees should be considered in the context of a Fund’s total expense ratio to obtain a complete picture. The Board, however, considered each Fund’s Advisory Fee on both a standalone basis and in the context of the Fund’s total expense ratio.
The Board considered for each Fund whether economies of scale have been realized and whether the Advisory Fee for such Fund appropriately reflects or should be revised to reflect any such economies. The Board determined that, after giving effect to any applicable fee or expense caps, waivers or reimbursements, the Advisory Fee for each Fund appropriately reflected any economies of scale realized by that Fund, based upon such factors as the variability of Money Manager investment advisory fees and other factors associated with the manager-of-managers structure employed by the Funds.
The Board considered, as a general matter, that fees payable to RIMCo by institutional clients with investment objectives similar to those of the Funds and other RIF funds under the Board’s supervision are lower, and, in some cases, may be substantially lower, than the rates paid by RIF funds supervised by the Board, including the Funds. The Trustees considered the differences in the nature and scope of services RIMCo provides to institutional clients and the Funds. RIMCo also noted that since the Funds must constantly issue and redeem their shares, they are more difficult to manage than institutional accounts, where assets are relatively stable. In addition, RIMCo noted that the Funds are subject to heightened regulatory requirements relative to institutional clients. The Board noted that RIMCo provides office space and facilities to the Funds and all of the Funds’ officers. Accordingly, the Trustees concluded that the services provided to the Funds are sufficiently different from the services provided to the other clients that comparisons are not probative and should not be given significant weight.
In evaluating the Funds’ Advisory Fees, the Board noted that the total expenses for each of the RIF Aggressive Equity Fund, RIF Non-US Fund and RIF Global Real Estate Securities Fund were ranked in the second quintile of the Fund’s Expense Universe and that the total expenses for the RIF Multi-Style Equity Fund were ranked in the third quintile of its Expense Universe. In these rankings, the first quintile represents the funds with the lowest total expenses among funds in the Expense Universe and the fifth quintile represents funds with the highest total expenses among the Expense Universe funds.
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On the basis of the Agreement Evaluation Information, and other information previously received by the Board from RIMCo during the course of the current year or prior years, or presented at or in connection with the Agreement Evaluation Meeting by RIMCo, the Board, in respect of each Fund, found, after giving effect to any applicable waivers and/or reimbursements and considering differences in the composition and investment strategies of their respective Comparable Funds (1) the Advisory Fee charged by RIMCo was reasonable in light of the nature, scope and overall quality of the investment management and other services provided, and expected to be provided, to the Funds; (2) the relative expense ratio of the Fund was comparable to those of its Comparable Funds; (3) RIMCo’s methodology of allocating expenses of operating funds in the complex was reasonable; (4) other benefits and fees received by RIMCo or its affiliates from the Funds were not excessive; and (5) RIMCo’s profitability with respect to the Fund was not excessive in light of the nature, scope and overall quality of the investment management and other services provided by RIMCo.
The Board concluded that, under the circumstances, the performance of each of the Funds was consistent with continuation of the RIMCo Agreement. The Board, in assessing the Funds’ performance, focused upon each Fund’s performance for the 3-year period ended December 31, 2011 as most relevant but also considered the Funds’ performance for the 1- and 5-year periods ended such date.
In evaluating the performance of the Funds generally relative to their Comparable Funds, the Board, in addition to the factors described above, also considered RIMCo’s advice that many of the Funds’ Comparable Funds do not “equitize” their cash (i.e., cash awaiting investment or disbursement to satisfy redemptions or other fund obligations) and may hold large cash positions uninvested in their investment portfolios. By contrast, the Funds generally follow a strategy of equitizing their cash and fully investing their assets in pursuit of their investment objectives (the Funds’ strategy of equitizing cash and fully investing their assets is hereinafter referred to as their “full investment strategy”). In support of the Funds’ full investment strategy, RIMCo in the past has noted that investors manage their own cash positions based upon their personal investment goals, strategies and risk tolerances and generally expect Fund assets to be fully invested. RIMCo noted that the Funds’ full investment strategy generally will detract from relative performance in a declining market but may enhance the Funds’ relative performance in a rising market.
With respect to the RIF Global Real Estate Securities Fund, the Third-Party Information showed that the Fund’s performance was ranked in the fifth quintile of its Performance Universe for the 1-year period ended December 31, 2011 and that its performance was ranked in the fourth quintile of its Performance Universe for each of the 3- and 5-year periods ended such date. In these rankings, the first quintile represents funds with the best performance among funds in the Performance Universe and the fifth quintile represents funds with the poorest performance among the Performance Universe funds. RIMCo noted that the Fund changed its investment strategy from a U.S. focused strategy to a global strategy on October 1, 2010 and that the Fund’s underperformance relative to its Comparable Funds largely occurred after that change. RIMCo noted further that the Fund’s Comparable Funds primarily included U.S. real estate-focused funds while the Fund now pursues a global strategy. U.S. real estate securities significantly outperformed international property stocks in 2011. Moreover, 2010 and 2011 saw historically large dispersions in the performance of individual regions within the global real estate securities universe.
In evaluating performance, the Board considered each Fund’s absolute performance and performance relative to appropriate benchmarks and indices in addition to such Fund’s performance relative to its Comparable Funds. In assessing the Funds’ performance relative to their Comparable Funds or benchmarks or in absolute terms, the Board also considered RIMCo’s stated investment strategy of managing the Funds in a risk-aware manner and the periodically volatile capital market conditions since 2008 that continue to impact the Funds’ relative performance for the 3- and, where applicable, 5-year periods ended December 31, 2011. The Board also considered that a number of Money Manager changes were made in 2010 and 2011 and that the performance of Money Managers continues to impact Fund performance for periods prior and subsequent to their termination.
After considering the foregoing and other relevant factors, the Board concluded that continuation of the RIMCo Agreement on its current terms and conditions would be in the best interests of each Fund and its respective shareholders and voted to approve the continuation of the RIMCo Agreement.
At the Agreement Evaluation Meeting, with respect to the evaluation of the terms of portfolio management contracts with Money Managers, the Board received and considered information from RIMCo reporting, among other things, for each Money Manager, the Money Manager’s performance over various periods; RIMCo’s assessment of the performance of each Money Manager; any significant business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc., the Funds’ underwriter; and RIMCo’s recommendation to retain the Money Manager at the current fee rate, to retain the Money Manager at a reduced fee rate or to terminate the Money Manager. The Board received reports during the course of the year from the Funds’ CCO regarding each Money Manager’s compliance program. RIMCo recommended that each Money Manager be retained at its current fee rate. RIMCo has advised the Board that it does not regard Money Manager profitability as relevant to its evaluation of the portfolio management contracts with Money Managers because the willingness of Money Managers to serve in such capacity depends upon arm’s-length negotiations with RIMCo; RIMCo is aware of the fees charged by Money Managers to other clients; and RIMCo believes that the fees agreed upon with Money Managers are reasonable in light of the anticipated quality of investment advisory services to be rendered. The Board accepted RIMCo’s explanation in light of the Board’s findings as to the reasonableness of the Advisory Fee paid by each Fund and the fact that each Money Manager’s fee is paid by RIMCo.
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Based substantially upon RIMCo’s recommendations, together with the Agreement Evaluation Information and other information received from RIMCo in support of its recommendations at the Agreement Evaluation Meeting, the Board concluded that the fees paid to the Money Managers of each Fund are reasonable in light of the quality of the investment advisory services provided and that continuation of the portfolio management contract with each Money Manager of each Fund would be in the best interests of the Fund and its shareholders.
In their deliberations, the Trustees did not identify any particular information as to the RIMCo Agreement or, other than RIMCo’s recommendation, the portfolio management contract with any Money Manager that was all-important or controlling and each Trustee attributed different weights to the various factors considered. The Trustees evaluated all information available to them on a Fund-by-Fund basis and their determinations were made in respect of each Fund.
Prior to the April 24, 2012 Agreement Evaluation Meeting, the Board of Trustees received a proposal from RIMCo at a meeting held on February 28, 2012, to effect a money manager change for the Aggressive Equity Fund. In the case of the proposed change, the Trustees approved the terms of the proposed portfolio management contract based substantially upon RIMCo’s recommendation to hire the Money Manager at the proposed fee rate; any significant business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc., the Fund’s underwriter; RIMCo’s explanation as to the lack of relevance of 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 RIMCo; RIMCo’s awareness of the fees charged by the Money Manager to other clients; and RIMCo’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 Trustees also considered their findings at their April 19, 2011 meeting as to the reasonableness of the aggregate investment advisory fees paid by the Fund, and the fact that the aggregate investment advisory fees paid by the Fund would not increase as a result of the implementation of the proposed money manager change because the money managers’ investment advisory fee is paid by RIMCo.
Subsequent to the April 24, 2012 Agreement Evaluation Meeting, the Board of Trustees received proposals from RIMCo at a meeting held on May 22, 2012, to effect a money manager change for the Non-U.S. Fund and the Core Bond Fund. In the case of each such proposed change, the Trustees approved the terms of the proposed portfolio management contract based substantially upon RIMCo’s recommendation to hire the Money Manager at the proposed fee rate; any significant business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc., the Fund’s underwriter; RIMCo’s explanation as to the lack of relevance of 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 RIMCo; RIMCo’s awareness of the fees charged by the Money Manager to other clients; and RIMCo’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 Trustees also considered their findings at their April 24, 2012 Agreement Evaluation Meeting as to the reasonableness of the aggregate investment advisory fees paid by the Fund, and the fact that the aggregate investment advisory fees paid by the Fund would not increase as a result of the implementation of the proposed money manager change because the money managers’ investment advisory fee is paid by RIMCo.
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Shareholder Requests for Additional Information — June 30, 2012 (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 each 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 public reference room.
The Board has delegated to RIMCo, 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. RIMCo 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, 2012 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 call your insurance company.
Some insurance companies may offer electronic delivery of the Funds’ prospectus and annual and semi-annual reports. Please contact your insurance company for further details.
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Disclosure of Information about Fund Trustees and Officers — June 30, 2012 (Unaudited)
The following tables provide information for each officer and trustee of the Russell Fund Complex. The Russell Fund Complex consists of Russell Investment Company (“RIC”), which has 38 funds, and Russell Investment Funds (“RIF”), which has 10 funds. Each of the trustees is a trustee of both RIC and RIF. The first table provides information for the interested trustees. The second table provides information for the independent trustees. The third table provides information for the trustee emeritus. The fourth 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; 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; Mr. Fine has had financial, business and investment experience as a senior executive of a non-profit organization and previously, as a senior executive of a large regional financial services organization with management responsibility for such activities as investments, asset management and securities brokerage; 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; 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 and has been determined by the Board to be an “audit committee financial expert”; and Ms. Weston has had experience as a tax and corporate lawyer, has served as general counsel of several corporations and has served as a director of another investment company. Ms. Cavanaugh, has had experience with other financial services companies, including companies engaged in the sponsorship, management and distribution of investment companies. As a senior officer of the Funds, the Adviser and various affiliates of the Adviser providing services to the Funds, Ms. Cavanaugh is in a position to provide the Board with such parties’ perspectives on the management, operations and distribution of the Funds.
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office* | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past 5 Years | |||||||
INTERESTED TRUSTEES | ||||||||||||
# Sandra Cavanaugh, Born May 10, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | President and Chief Executive Officer since 2010
Trustee since 2010 | Appointed until successor is duly elected and qualified
Until successor is chosen and qualified by Trustees | • President and CEO RIC and RIF • Chairman of the Board, President and CEO, Russell Financial Services, Inc. • Chairman of the Board, President and CEO, Russell Fund Services Company (“RFSC”) • Chairman of the Board and President, Russell Insurance Agency, Inc. (insurance agency (“RIA”)) • May 2009 to December 2009, Executive Vice President, Retail Channel, SunTrust Bank • 2007 to January 2009, Senior Vice President, National Sales — Retail Distribution, JPMorgan Chase/ Washington Mutual, Inc. • 1997 to 2007, President — WM Funds Distributor & Shareholder Services/WM Financial Services | 48 | None |
# | Ms. Cavanaugh is also an officer and/or director of one or more affiliates of RIC and RIF and is therefore an Interested Trustee. |
* | Each Trustee is subject to mandatory retirement at age 72. |
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Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office* | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past 5 Years | |||||||
INTERESTED TRUSTEES (continued) | ||||||||||||
## Daniel P. Connealy, Born June 6, 1948 1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2003
Chairman of Audit Committee since 2005 | Appointed until successor is duly elected and qualified Appointed until successor is duly elected and qualified | • June 2004 to present, Senior Vice President and Chief Financial Officer, Waddell & Reed Financial, Inc. | 48 | • Director, | |||||||
INDEPENDENT TRUSTEES | ||||||||||||
Thaddas L. Alston, Born April 7, 1945
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2006
Chairman of the Investment Committee since 2010 | Appointed until successor is duly elected and qualified
Appointed until successor is duly elected and qualified | • Senior Vice President, Larco Investments, Ltd. (real estate firm) | 48 | None | |||||||
Kristianne Blake, Born January 22, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2000
Chairman since 2005 | Appointed until successor is duly elected and qualified
Annual | • Director and Chairman of the Audit Committee, Avista Corp. • Trustee and Chairman of the Operations Committee, Principal Investors Funds and Principal Variable Contracts Funds • Regent, University of Washington • President, Kristianne Gates Blake, P.S. (accounting services) • February 2002 to June 2005, Chairman of the Audit Committee, RIC and RIF • Trustee and Chairman of the Operations and Distribution Committee, WM Group of Funds, 1999–2006 | 48 | • Director, Avista Corp (electric utilities); • Trustee, Principal Investors Funds (investment company); • Trustee, Principal Variable Contracts Funds (investment company) • Trustee, WM Group of Funds until 2006 (investment company) | |||||||
Jonathan Fine, Born July 8, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2004 | Appointed until successor is duly elected and qualified | • President and Chief Executive Officer, United Way of King County, WA | 48 | None |
## | Mr. Connealy is an officer of a broker-dealer that distributes shares of the Funds and is therefore an interested Trustee. |
* | Each Trustee is subject to mandatory retirement at age 72. |
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2012 (Unaudited)
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past 5 Years | |||||||
INDEPENDENT TRUSTEES (continued) | ||||||||||||
Raymond P. Tennison, Jr., Born December 21, 1955
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2000 Chairman of the Nominating and Governance Committee since 2007 | Appointed until successor is duly elected and qualified. Appointed until successor is duly elected and qualified | • Vice Chairman of the Board, Simpson Investment Company • Until November 2010, President, Simpson Investment Company and several additional subsidiary companies, including Simpson Timber Company, Simpson Paper Company and Simpson Tacoma Kraft Company | 48 | None | |||||||
Jack R. Thompson, Born March 21, 1949
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2005 | Appointed until successor is duly elected and qualified | • September 2003 to September 2009, Independent Board Chair and Chairman of the Audit Committee, Sparx Asia Funds • September 2007 to September 2010 Director, Board Chairman and Chairman of the Audit Committee, LifeVantage Corporation (health products company) | 48 | • Director, Board Chairman and Chairman of the Audit Committee, LifeVantage Corporation until September 2010 (health products company) • Director, Sparx Asia Funds until 2009 (investment company) | |||||||
Julie W. Weston, Born October 2, 1943
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2002 | Appointed until successor is duly elected and qualified | • Retired • Chairperson of the Investment Committee until December 2009 | 48 | None | |||||||
TRUSTEE EMERITUS | ||||||||||||
* George F. Russell, Jr., Born July 3, 1932
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee Emeritus and Chairman Emeritus since 1999 | Until resignation or removal | • Director Emeritus, Frank Russell Company (investment consultant to institutional investors (“FRC”)); and RIMCo • Chairman Emeritus, RIC and RIF; Russell Implementation Services Inc. (broker-dealer and investment adviser (“RIS”)); Russell 20-20 Association (non-profit corporation); and Russell Trust Company (non-depository trust company (“RTC”)) • Chairman, Sunshine Management Services, LLC (investment adviser) | 48 | None |
* | Mr. Russell is also a director emeritus of one or more affiliates of RIC and RIF. |
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2012 (Unaudited)
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the Past 5 Years | |||
OFFICERS | ||||||
Cheryl Wichers, Born December 16, 1966
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Chief Compliance Officer since 2005 | Until removed by Independent Trustees | • Chief Compliance Officer, RIC • Chief Compliance Officer, RIF • Chief Compliance Officer, RIMCo • Chief Compliance Officer, RFSC • Chief Compliance Officer, Russell Exchange Traded Funds Trust • April 2002–May 2005, Manager, Global Regulatory Policy | |||
Sandra Cavanaugh, Born May 10, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | President and Chief Executive Officer since 2010 | Until successor is chosen and qualified by Trustees | • President and CEO, RIC and RIF • Chairman of the Board, President and CEO, Russell Financial Services, Inc. • Chairman of the Board, President and CEO, RFSC • Chairman of the Board and President, Russell Insurance Agency, Inc. (insurance agency (“RIA”)) • May 2009 to December 2009, Executive Vice President, Retail Channel, SunTrust Bank • 2007 to January 2009, Senior Vice President, National Sales — Retail Distribution, JPMorgan Chase/Washington Mutual, Inc. • 1997 to 2007, President — WM Funds Distributor & Shareholder Services/WM Financial Services | |||
Mark E. Swanson, Born November 26, 1963
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Treasurer and Chief Accounting Officer since 1998 | Until successor is chosen and qualified by Trustees | • Treasurer, Chief Accounting Officer and CFO, RIC, RIF and Russell Exchange Traded Funds Trust • Director, Funds Administration, RIMCo, RFSC, RTC and Russell Financial Services, Inc. • Treasurer and Principal Accounting Officer, SSgA Funds | |||
Peter Gunning, Born February 22, 1967
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Chief Investment Officer since 2008 | Until removed by Trustees | • Chief Investment Officer, RIC and RIF • Director, FRC • Chairman of the Board, President and CEO, RIMCo • 1996 to 2008 Chief Investment Officer, Russell, Asia Pacific | |||
Mary Beth Rhoden, Born April 25, 1969
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Secretary since 2010 | Until successor is chosen and qualified by Trustees | • 1999 to 2010 Assistant Secretary, RIC and RIF • Associate General Counsel, FRC • Secretary, RIMCo, RFSC and Russell Financial Services, Inc. • Secretary and Chief Legal Officer, RIC, RIF and Russell Exchange Traded Funds Trust |
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1301 Second Avenue, Seattle, Washington 98101
(800) 787-7354
Interested Trustees
Sandra Cavanaugh
Daniel P. Connealy
Independent Trustees
Thaddas L. Alston
Kristianne Blake
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
Trustee Emeritus
George F. Russell, Jr.
Officers
Sandra Cavanaugh, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
Peter Gunning, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Mary Beth Rhoden, Secretary
Adviser
Russell Investment Management Company
1301 Second Avenue
Seattle, WA 98101
Administrator and Transfer and Dividend Disbursing Agent
Russell Fund Services Company
1301 Second Avenue
Seattle, WA 98101
Custodian
State Street Bank and Trust Company
Josiah Quincy Building
1200 Crown Colony Drive
CC1 – 5 North North
Quincy, MA 02169
Office of Shareholder Inquiries
1301 Second Avenue
Seattle, WA 98101
(800) 787-7354
Legal Counsel
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
Distributor
Russell Financial Services, Inc.
1301 Second Avenue
Seattle, WA 98101
Money Managers as of June 30, 2012
Multi-Style Equity Fund
BlackRock Capital Management, Inc., Wilmington, DE
Columbus Circle Investors, Stamford, CT
DePrince, Race & Zollo, Inc., Winter Park, FL
Institutional Capital LLC, Chicago, IL
Jacobs Levy Equity Management Inc, Florham Park, NJ
Suffolk Capital Management LLC, New York, NY
Sustainable Growth Advisers, LP, Stamford, CT
Aggressive Equity Fund
ClariVest Asset Management LLC, San Diego, CA
Conestoga Capital Advisors, LLC, Radnor, PA
DePrince, Race & Zollo, Inc., Winter Park, FL
Jacobs Levy Equity Management Inc, Florham Park, NJ
Ranger Investment Management, L.P., Dallas, TX
Signia Capital Management LLC, Spokane, WA
Non-U.S. Fund
Barrow, Hanley, Mewhinney & Strauss, LLC, Dallas, TX
MFS Institutional Advisors Inc., Boston, MA
Pzena Investment Management LLC, New York, NY
William Blair & Company L.L.C., Chicago, IL
Core Bond Fund
Colchester Global Investors Ltd, London, England
Logan Circle Partners, L.P., Philadelphia, PA
Metropolitan West Asset Management LLC, Los Angeles, CA
Pacific Investment Management Company LLC, Newport Beach, CA
Macro Currency Group — an investment group within Principal Global Investors LLC, Des Moines, IA*
Global Real Estate Securities Fund
AEW Capital Management LP, Boston, MA
Cohen & Steers Capital Management, Inc., New York, NY
INVESCO Advisers, Inc. which acts as a money manager to the Fund through its INVESCO Real Estate Division, Dallas, TX
* | Principal Global Investors LLC is the asset management arm of the Principal Financial Group® (The Principal®), which includes various member companies including Principal Global Investors, LLC, Principal Global Investors (Europe) Limited, and others. The Macro Currency Group is the specialist currency investment group within Principal Global Investors. Where used herein, Macro Currency Group means Principal Global Investors, LLC. |
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.
Manager, Money Managers and Service Providers | 125 |
Table of Contents
Russell Investment Funds | 1301 Second Avenue | 800-787-7354 | ||
Seattle, Washington 98101 | Fax: 206-505-3495 | |||
www.russell.com |
36-08-072
Table of Contents
2012 SEMI-ANNUAL REPORT
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
JUNE 30, 2012
FUND
Moderate Strategy Fund
Balanced Strategy Fund
Growth Strategy Fund
Equity Growth Strategy Fund
Table of Contents
Russell Investment Funds
Russell Investment Funds is a series investment company with ten different investment portfolios referred to as Funds. These financial statements report on four of these Funds.
Table of Contents
LifePoints® Funds
Variable Target Portfolio Series
Semi-annual Report
June 30, 2012 (Unaudited)
Table of Contents
Table of Contents
Russell Investment Funds - LifePoints® Funds Variable Target Portfolio Series.
Copyright © Russell Investments 2012. All rights reserved.
Russell Investments is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual Life Insurance Company.
Fund objectives, risks, charges and expenses should be carefully considered before investing. A prospectus containing this and other important information must precede or accompany this material. Please read the prospectus carefully before investing.
Securities distributed through Russell Financial Services, Inc., member FINRA and part of Russell Investments.
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.
Table of Contents
Moderate Strategy Fund
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value January 1, 2012 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value June 30, 2012 | $ | 1,048.60 | $ | 1,024.37 | ||||
Expenses Paid During Period* | $ | 0.51 | $ | 0.50 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.10% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
Moderate Strategy Fund | 3 |
Table of Contents
Russell Investment Funds
Moderate Strategy Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Shares | Market Value $ | |||||||
Investments - 100.0% | ||||||||
Russell Investment Company (“RIC”) and other Russell Investment Funds (“RIF”) Series Mutual Funds | ||||||||
Domestic Equities - 13.9% | ||||||||
RIC Russell U.S. Quantitative Equity Fund Class Y | 160,585 | 5,145 | ||||||
RIF Aggressive Equity Fund | 140,772 | 1,739 | ||||||
RIF Multi-Style Equity Fund | 348,914 | 4,951 | ||||||
|
| |||||||
11,835 | ||||||||
|
| |||||||
Fixed Income - 58.8% | ||||||||
RIC Russell Global Opportunistic Credit Fund Class Y | 163,625 | 1,702 | ||||||
RIC Russell Investment Grade Bond Fund Class Y | 798,169 | 18,094 | ||||||
RIF Core Bond Fund | 2,812,316 | 30,289 | ||||||
|
| |||||||
50,085 | ||||||||
|
|
Shares | Market Value $ | |||||||
International Equities - 18.1% | ||||||||
RIC Russell Emerging Markets Fund Class Y | 154,618 | 2,594 | ||||||
RIC Russell Global Equity Fund Class Y | 832,161 | 6,907 | ||||||
RIF Non-U.S. Fund | 652,172 | 5,870 | ||||||
|
| |||||||
15,371 | ||||||||
|
| |||||||
Real Assets - 9.2% | ||||||||
RIC Russell Commodity Strategies Fund Class Y | 290,406 | 2,637 | ||||||
RIC Russell Global Infrastructure Fund Class Y | 245,811 | 2,605 | ||||||
RIF Global Real Estate Securities Fund | 183,407 | 2,623 | ||||||
|
| |||||||
7,865 | ||||||||
|
| |||||||
Total Investments - 100.0% (identified cost $78,890) | 85,156 | |||||||
Other Assets and Liabilities, Net - (0.0%) | (20 | ) | ||||||
|
| |||||||
Net Assets - 100.0% | 85,136 | |||||||
|
|
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Categories | % of Net Assets | |||
Domestic Equities | 13.9 | |||
Fixed Income | 58.8 | |||
International Equities | 18.1 | |||
Real Assets | 9.2 | |||
|
| |||
Total Investments | 100.0 | |||
Other Assets and Liabilities, Net | (— | )* | ||
|
| |||
100.0 | ||||
|
|
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
4 | Moderate Strategy Fund |
Table of Contents
Russell Investment Funds
Moderate Strategy Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 78,890 | ||
Investments, at market | 85,156 | |||
Receivables: | ||||
Investments sold | 11 | |||
From affiliates | 6 | |||
Prepaid expenses | 1 | |||
|
| |||
Total assets | 85,174 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Fund shares redeemed | 11 | |||
Accrued fees to affiliates | 4 | |||
Other accrued expenses | 23 | |||
|
| |||
Total liabilities | 38 | |||
|
| |||
Net Assets | $ | 85,136 | ||
|
| |||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | 38 | ||
Accumulated net realized gain (loss) | (3,405 | ) | ||
Unrealized appreciation (depreciation) on investments | 6,266 | |||
Shares of beneficial interest | 87 | |||
Additional paid-in capital | 82,150 | |||
|
| |||
Net Assets | $ | 85,136 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share:(a) | $ | 9.74 | ||
Net assets | $ | 85,135,689 | ||
Shares outstanding ($.01 par value) | 8,739,400 |
(a) | 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.
Statement of Assets and Liabilities | 5 |
Table of Contents
Russell Investment Funds
Moderate Strategy Fund
Statement of Operations — For the Period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Income distribution from Underlying Funds | $ | 638 | ||
|
| |||
Expenses | ||||
Advisory fees | 82 | |||
Administrative fees | 20 | |||
Custodian fees | 11 | |||
Transfer agent fees | 2 | |||
Professional fees | 15 | |||
Trustees’ fees | 1 | |||
Printing fees | 5 | |||
Miscellaneous | 7 | |||
|
| |||
Expenses before reductions | 143 | |||
Expense reductions | (102 | ) | ||
|
| |||
Net expenses | 41 | |||
|
| |||
Net investment income (loss) | 597 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | (229 | ) | ||
Capital gain distributions from Underlying Funds | 92 | |||
|
| |||
Net realized gain (loss) | (137 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 3,188 | |||
|
| |||
Net realized and unrealized gain (loss) | 3,051 | |||
|
| |||
Net Increase (Decrease) in Net Assets from Operations | $ | 3,648 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
6 | Statement of Operations |
Table of Contents
Russell Investment Funds
Moderate Strategy Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 | Fiscal Year Ended | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 597 | $ | 1,844 | ||||
Net realized gain (loss) | (137 | ) | 196 | |||||
Net change in unrealized appreciation (depreciation) | 3,188 | (2,125 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 3,648 | (85 | ) | |||||
|
|
|
| |||||
Distributions | ||||||||
From net investment income | (659 | ) | (1,745 | ) | ||||
From net realized gain | (420 | ) | — | |||||
|
|
|
| |||||
Net decrease in net assets from distributions | (1,079 | ) | (1,745 | ) | ||||
|
|
|
| |||||
Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | 7,511 | 22,313 | ||||||
|
|
|
| |||||
Total Net Increase (Decrease) in Net Assets | 10,080 | 20,483 | ||||||
Net Assets | ||||||||
Beginning of period | 75,056 | 54,573 | ||||||
|
|
|
| |||||
End of period | $ | 85,136 | $ | 75,056 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income included in net assets | $ | 38 | $ | 100 |
See accompanying notes which are an integral part of the financial statements.
Statements of Changes in Net Assets | 7 |
Table of Contents
Russell Investment Funds
Moderate Strategy Fund
Financial Highlights
For a Share Outstanding Throughout Each Period.
$ Net Asset Value, | $ Net Investment | $ Net Realized | $ Total from | $ Distributions from Net | $ | $ Return of Capital | ||||||||||||||||||||||
June 30, 2012(1) | 9.41 | .07 | .39 | .46 | (.08 | ) | (.05 | ) | — | |||||||||||||||||||
December 31, 2011 | 9.64 | .27 | (.26 | ) | .01 | (.24 | ) | — | — | |||||||||||||||||||
December 31, 2010 | 8.95 | .42 | .69 | 1.11 | (.41 | ) | — | (.01 | ) | |||||||||||||||||||
December 31, 2009 | 7.67 | .36 | 1.34 | 1.70 | (.37 | ) | (.05 | ) | — | |||||||||||||||||||
December 31, 2008 | 9.99 | .33 | (2.32 | ) | (1.99 | ) | (.23 | ) | (.10 | ) | — | |||||||||||||||||
December 31, 2007(2) | 10.00 | .46 | (.11 | ) | .35 | (.36 | ) | — | (g) | — |
See accompanying notes which are an integral part of the financial statements.
8 | Financial Highlights |
Table of Contents
$ Total | $ Net Asset Value, Period | % Total | $ Net Assets, | % Ratio of Expenses Net Assets, | % Ratio of Expenses Net Assets, | % Ratio of Net Net Assets(b)(c)(f) | % Portfolio | |||||||||||||||||||||||
(.13 | ) | 9.74 | 4.86 | 85,136 | .35 | .10 | .73 | 9 | ||||||||||||||||||||||
(.24 | ) | 9.41 | .12 | 75,056 | .38 | .10 | 2.80 | 10 | ||||||||||||||||||||||
(.42 | ) | 9.64 | 12.62 | 54,573 | .44 | .10 | 4.56 | 45 | ||||||||||||||||||||||
(.42 | ) | 8.95 | 23.09 | 35,671 | .48 | .10 | 4.40 | 21 | ||||||||||||||||||||||
(.33 | ) | 7.67 | (20.39 | ) | 19,308 | .53 | .11 | 3.77 | 39 | |||||||||||||||||||||
(.36 | ) | 9.99 | 3.54 | 8,654 | 2.01 | .11 | 5.37 | 24 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights | 9 |
Table of Contents
Balanced Strategy Fund
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value January 1, 2012 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value June 30, 2012 | $ | 1,052.50 | $ | 1,024.37 | ||||
Expenses Paid During Period* | $ | 0.51 | $ | 0.50 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.10% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
10 | Balanced Strategy Fund |
Table of Contents
Russell Investment Funds
Balanced Strategy Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Shares | Market Value $ | |||||||
Investments - 100.0% | ||||||||
Russell Investment Company (“RIC”) and other Russell Investment Funds (“RIF”) Series Mutual Funds | ||||||||
Domestic Equities - 24.0% | ||||||||
RIC Russell U.S. Quantitative Equity Fund Class Y | 632,755 | 20,274 | ||||||
RIF Aggressive Equity Fund | 739,131 | 9,128 | ||||||
RIF Multi-Style Equity Fund | 1,751,588 | 24,855 | ||||||
|
| |||||||
54,257 | ||||||||
|
| |||||||
Fixed Income - 39.6% | ||||||||
RIC Russell Global Opportunistic Credit | 650,774 | 6,768 | ||||||
RIF Core Bond Fund | 7,661,039 | 82,509 | ||||||
|
| |||||||
89,277 | ||||||||
|
|
Shares | Market Value $ | |||||||
International Equities - 26.2% | ||||||||
RIC Russell Emerging Markets Fund Class Y | 540,282 | 9,066 | ||||||
RIC Russell Global Equity Fund Class Y | 2,729,813 | 22,658 | ||||||
RIF Non-U.S. Fund | 3,046,014 | 27,414 | ||||||
|
| |||||||
59,138 | ||||||||
|
| |||||||
Real Assets - 10.2% | ||||||||
RIC Russell Commodity Strategies | 1,011,458 | 9,184 | ||||||
RIC Russell Global Infrastructure | 647,114 | 6,859 | ||||||
RIF Global Real Estate Securities Fund | 486,614 | 6,959 | ||||||
|
| |||||||
23,002 | ||||||||
|
| |||||||
Total Investments - 100.0% (identified cost $211,644) | 225,674 | |||||||
Other Assets and Liabilities, Net - (0.0%) | (33 | ) | ||||||
|
| |||||||
Net Assets - 100.0% | 225,641 | |||||||
|
|
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Categories | % of Net Assets | |||
Domestic Equities | 24.0 | |||
Fixed Income | 39.6 | |||
International Equities | 26.2 | |||
Real Assets | 10.2 | |||
|
| |||
Total Investments | 100.0 | |||
Other Assets and Liabilities, Net | (— | )* | ||
|
| |||
100.0 | ||||
|
|
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
Balanced Strategy Fund | 11 |
Table of Contents
Russell Investment Funds
Balanced Strategy Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 211,644 | ||
Investments, at market | 225,674 | |||
Receivables: | ||||
Fund shares sold | 211 | |||
From affiliates | 5 | |||
Prepaid expenses | 3 | |||
|
| |||
Total assets | 225,893 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investments purchased | 206 | |||
Fund shares redeemed | 5 | |||
Accrued fees to affiliates | 10 | |||
Other accrued expenses | 31 | |||
|
| |||
Total liabilities | 252 | |||
|
| |||
Net Assets | $ | 225,641 | ||
|
| |||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | (57 | ) | |
Accumulated net realized gain (loss) | (8,715 | ) | ||
Unrealized appreciation (depreciation) on investments | 14,030 | |||
Shares of beneficial interest | 249 | |||
Additional paid-in capital | 220,134 | |||
|
| |||
Net Assets | $ | 225,641 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share:(a) | $ | 9.05 | ||
Net assets | $ | 225,640,785 | ||
Shares outstanding ($.01 par value) | 24,934,211 |
(a) | 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.
12 | Statement of Assets and Liabilities |
Table of Contents
Russell Investment Funds
Balanced Strategy Fund
Statement of Operations — For the Period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Income distribution from Underlying Funds | $ | 1,450 | ||
|
| |||
Expenses | ||||
Advisory fees | 217 | |||
Administrative fees | 54 | |||
Custodian fees | 10 | |||
Transfer agent fees | 5 | |||
Professional fees | 21 | |||
Trustees’ fees | 2 | |||
Printing fees | 11 | |||
Miscellaneous | 8 | |||
|
| |||
Expenses before reductions | 328 | |||
Expense reductions | (220 | ) | ||
|
| |||
Net expenses | 108 | |||
|
| |||
Net investment income (loss) | 1,342 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | (1,162 | ) | ||
Capital gain distributions from Underlying Funds | 231 | |||
|
| |||
Net realized gain (loss) | (931 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 9,952 | |||
|
| |||
Net realized and unrealized gain (loss) | 9,021 | |||
|
| |||
Net Increase (Decrease) in Net Assets from Operations | $ | 10,363 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
Statement of Operations | 13 |
Table of Contents
Russell Investment Funds
Balanced Strategy Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 | Fiscal Year Ended December 31, 2011 | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 1,342 | $ | 4,410 | ||||
Net realized gain (loss) | (931 | ) | 861 | |||||
Net change in unrealized appreciation (depreciation) | 9,952 | (10,967 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 10,363 | (5,696 | ) | |||||
|
|
|
| |||||
Distributions | ||||||||
From net investment income | (1,571 | ) | (4,238 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from distributions | (1,571 | ) | (4,238 | ) | ||||
|
|
|
| |||||
Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | 15,780 | 53,881 | ||||||
|
|
|
| |||||
Total Net Increase (Decrease) in Net Assets | 24,572 | 43,947 | ||||||
Net Assets | ||||||||
Beginning of period | 201,069 | 157,122 | ||||||
|
|
|
| |||||
End of period | $ | 225,641 | $ | 201,069 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income included in net assets | $ | (57 | ) | $ | 172 |
See accompanying notes which are an integral part of the financial statements.
14 | Statements of Changes in Net Assets |
Table of Contents
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Table of Contents
Russell Investment Funds
Balanced Strategy Fund
Financial Highlights
For a Share Outstanding Throughout Each Period.
$ Net Asset Value, Beginning of Period | $ Investment | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||||||||||||
June 30, 2012(1) | 8.66 | .06 | .40 | .46 | (.07 | ) | — | — | ||||||||||||||||||||
December 31, 2011 | 9.07 | .21 | (.42 | ) | (.21 | ) | (.20 | ) | — | — | ||||||||||||||||||
December 31, 2010 | 8.25 | .31 | .84 | 1.15 | (.31 | ) | — | (.02 | ) | |||||||||||||||||||
December 31, 2009 | 6.80 | .26 | 1.47 | 1.73 | (.24 | ) | (.04 | ) | — | |||||||||||||||||||
December 31, 2008 | 9.93 | .23 | (2.88 | ) | (2.65 | ) | (.21 | ) | (.27 | ) | — | |||||||||||||||||
December 31, 2007(2) | 10.00 | .47 | (.20 | ) | .27 | (.34 | ) | — | (g) | — |
See accompanying notes which are an integral part of the financial statements.
16 | Financial Highlights |
Table of Contents
$ Total Distributions | $ Period | % Total Return(c)(h) | $ Net Assets, End of Period (000) | % Net Assets, | % Net Assets, Net(d)(e)(f) | % Net Assets(b)(c)(f) | % Portfolio | |||||||||||||||||||||||
(.07 | ) | 9.05 | 5.25 | 225,641 | .30 | .10 | .62 | 7 | ||||||||||||||||||||||
(.20 | ) | 8.66 | (2.40 | ) | 201,069 | .31 | .10 | 2.36 | 8 | |||||||||||||||||||||
(.33 | ) | 9.07 | 14.06 | 157,122 | .36 | .10 | 3.67 | 23 | ||||||||||||||||||||||
(.28 | ) | 8.25 | 26.23 | 105,185 | .35 | .09 | 3.62 | 8 | ||||||||||||||||||||||
(.48 | ) | 6.80 | (27.70 | ) | 60,158 | .35 | .08 | 2.75 | 16 | |||||||||||||||||||||
(.34 | ) | 9.93 | 2.73 | 35,697 | .74 | .08 | 5.37 | 11 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights | 17 |
Table of Contents
Growth Strategy Fund
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value | ||||||||
January 1, 2012 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value | ||||||||
June 30, 2012 | $ | 1,052.90 | $ | 1,024.37 | ||||
Expenses Paid During Period* | $ | 0.51 | $ | 0.50 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.10% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
18 | Growth Strategy Fund |
Table of Contents
Russell Investment Funds
Growth Strategy Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Shares | Market Value $ | |||||||
Investments - 100.0% | ||||||||
Russell Investment Company (“RIC”) and other Russell Investment Funds (“RIF”) Series Mutual Funds | ||||||||
Domestic Equities - 29.5% | ||||||||
RIC Russell U.S. Quantitative Equity Fund Class Y | 441,013 | 14,130 | ||||||
RIF Aggressive Equity Fund | 631,190 | 7,795 | ||||||
RIF Multi-Style Equity Fund | 1,136,530 | 16,127 | ||||||
|
| |||||||
38,052 | ||||||||
|
| |||||||
Fixed Income - 21.1% | ||||||||
RIC Russell Global Opportunistic Credit Fund Class Y | 491,652 | 5,113 | ||||||
RIF Core Bond Fund | 2,060,864 | 22,196 | ||||||
|
| |||||||
27,309 | ||||||||
|
|
Shares | Market Value $ | |||||||
International Equities - 35.2% | ||||||||
RIC Russell Emerging Markets Fund Class Y | 386,151 | 6,480 | ||||||
RIC Russell Global Equity Fund Class Y | 2,183,797 | 18,125 | ||||||
RIF Non-U.S. Fund | 2,315,303 | 20,838 | ||||||
|
| |||||||
45,443 | ||||||||
|
| |||||||
Real Assets - 14.2% | ||||||||
RIC Russell Commodity Strategies Fund Class Y | 870,775 | 7,907 | ||||||
RIC Russell Global Infrastructure Fund Class Y | 490,515 | 5,199 | ||||||
RIF Global Real Estate Securities Fund | 365,926 | 5,233 | ||||||
|
| |||||||
18,339 | ||||||||
|
| |||||||
Total Investments - 100.0% (identified cost $123,013) | 129,143 | |||||||
Other Assets and Liabilities, Net - (0.0%) | (28 | ) | ||||||
|
| |||||||
Net Assets - 100.0% | 129,115 | |||||||
|
|
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Categories | % of Net Assets | |||
Domestic Equities | 29.5 | |||
Fixed Income | 21.1 | |||
International Equities | 35.2 | |||
Real Assets | 14.2 | |||
|
| |||
Total Investments | 100.0 | |||
Other Assets and Liabilities, Net | (— | )* | ||
|
| |||
100.0 | ||||
|
|
* | Less than .05% of net assets. |
See accompanying notes which are an integral part of the financial statements.
Growth Strategy Fund | 19 |
Table of Contents
Russell Investment Funds
Growth Strategy Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 123,013 | ||
Investments, at market | 129,143 | |||
Receivables: | ||||
Fund shares sold | 2 | |||
From affiliates | 5 | |||
Prepaid expenses | 2 | |||
|
| |||
Total assets | 129,152 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investments purchased | 2 | |||
Accrued fees to affiliates | 6 | |||
Other accrued expenses | 29 | |||
|
| |||
Total liabilities | 37 | |||
|
| |||
Net Assets | $ | 129,115 | ||
|
| |||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | (29 | ) | |
Accumulated net realized gain (loss) | (6,713 | ) | ||
Unrealized appreciation (depreciation) on investments | 6,130 | |||
Shares of beneficial interest | 154 | |||
Additional paid-in capital | 129,573 | |||
|
| |||
Net Assets | $ | 129,115 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share(a): | $ | 8.39 | ||
Net assets | $ | 129,115,203 | ||
Shares outstanding ($.01 par value) | 15,382,130 |
(a) | 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.
20 | Statement of Assets and Liabilities |
Table of Contents
Russell Investment Funds
Growth Strategy Fund
Statement of Operations — For the Period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Income distribution from Underlying Funds | $ | 619 | ||
|
| |||
Expenses | ||||
Advisory fees | 123 | |||
Administrative fees | 31 | |||
Custodian fees | 11 | |||
Transfer agent fees | 3 | |||
Professional fees | 17 | |||
Trustees’ fees | 1 | |||
Printing fees | 7 | |||
Miscellaneous | 7 | |||
|
| |||
Expenses before reductions | 200 | |||
Expense reductions | (139 | ) | ||
|
| |||
Net expenses | 61 | |||
|
| |||
Net investment income (loss) | 558 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | (504 | ) | ||
Capital gain distributions from Underlying Funds | 52 | |||
|
| |||
Net realized gain (loss) | (452 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 5,743 | |||
|
| |||
Net realized and unrealized gain (loss) | 5,291 | |||
|
| |||
Net Increase (Decrease) in Net Assets from Operations | $ | 5,849 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
Statement of Operations | 21 |
Table of Contents
Russell Investment Funds
Growth Strategy Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 | Fiscal Year Ended December 31, 2011 | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 558 | $ | 2,114 | ||||
Net realized gain (loss) | (452 | ) | 38 | |||||
Net change in unrealized appreciation (depreciation) | 5,743 | (7,848 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 5,849 | (5,696 | ) | |||||
|
|
|
| |||||
Distributions | ||||||||
From net investment income | (651 | ) | (2,051 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from distributions | (651 | ) | (2,051 | ) | ||||
|
|
|
| |||||
Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | 12,438 | 28,634 | ||||||
|
|
|
| |||||
Total Net Increase (Decrease) in Net Assets | 17,636 | 20,887 | ||||||
Net Assets | ||||||||
Beginning of period | 111,479 | 90,592 | ||||||
|
|
|
| |||||
End of period | $ | 129,115 | $ | 111,479 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income included innet assets | $ | (29 | ) | $ | 64 |
See accompanying notes which are an integral part of the financial statements.
22 | Statements of Changes in Net Assets |
Table of Contents
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Table of Contents
Russell Investment Funds
Growth Strategy Fund
Financial Highlights
For a Share Outstanding Throughout Each Period.
Net Asset Value, | $ Net Investment | $ Net Realized | $ Total from | $ Distributions from Net | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||||||||||||
June 30, 2012(1) | 8 .01 | .04 | .39 | .43 | (.05 | ) | — | — | ||||||||||||||||||||
December 31, 2011 | 8 .57 | .17 | (.57 | ) | (.40 | ) | (.16 | ) | — | — | ||||||||||||||||||
December 31, 2010 | 7 .66 | .23 | .91 | 1 .14 | (.22 | ) | — | (.01 | ) | |||||||||||||||||||
December 31, 2009 | 6 .11 | .19 | 1 .56 | 1 .75 | (.17 | ) | (.03 | ) | — | |||||||||||||||||||
December 31, 2008 | 9 .90 | .15 | (3 .46 | ) | (3 .31 | ) | (.14 | ) | (.34 | ) | — | |||||||||||||||||
December 31, 2007(2) | 10 .00 | .45 | (.24 | ) | .21 | (.31 | ) | — | — |
See accompanying notes which are an integral part of the financial statements.
24 | Financial Highlights |
Table of Contents
$ Total | $ Net Asset Value, Period | % Total | $ Net Assets, | % Ratio of Expenses Net Assets, | % Ratio of Expenses Net Assets, | % Ratio of Net Net Assets(b)(c)(f) | % Portfolio | |||||||||||||||||||||||
(.05 | ) | 8 .39 | 5 .29 | 129,115 | .33 | .10 | .49 | 7 | ||||||||||||||||||||||
(.16 | ) | 8 .01 | (4 .73 | ) | 111,479 | .34 | .10 | 2 .02 | 10 | |||||||||||||||||||||
(.23 | ) | 8 .57 | 15 .06 | 90,592 | .39 | .10 | 2 .88 | 29 | ||||||||||||||||||||||
(.20 | ) | 7 .66 | 29 .43 | 61,506 | .40 | .09 | 2 .80 | 6 | ||||||||||||||||||||||
(.48 | ) | 6 .11 | (34 .73 | ) | 34,742 | .40 | .04 | 1 .85 | 10 | |||||||||||||||||||||
(.31 | ) | 9 .90 | 2 .13 | 27,390 | .84 | .04 | 5 .05 | 3 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights | 25 |
Table of Contents
Equity Growth Strategy Fund
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value | ||||||||
January 1, 2012 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value | ||||||||
June 30, 2012 | $ | 1,056.40 | $ | 1,024.37 | ||||
Expenses Paid During Period* | $ | 0.51 | $ | 0.50 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.10% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
26 | Equity Growth Strategy Fund |
Table of Contents
Russell Investment Funds
Equity Growth Strategy Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Shares | Market Value $ | |||||||
Investments - 100.1% | ||||||||
Russell Investment Company (“RIC”) and other Russell Investment Funds (“RIF”) Series Mutual Funds | ||||||||
Domestic Equities - 37.9% | ||||||||
RIC Russell U.S. Quantitative Equity Fund Class Y | 157,462 | 5,045 | ||||||
RIF Aggressive Equity Fund | 206,726 | 2,553 | ||||||
RIF Multi-Style Equity Fund | 433,519 | 6,152 | ||||||
|
| |||||||
13,750 | ||||||||
|
| |||||||
Fixed Income - 6.0% | ||||||||
RIC Russell Global Opportunistic Credit Fund Class Y | 207,314 | 2,156 | ||||||
|
| |||||||
International Equities - 41.1% | ||||||||
RIC Russell Emerging Markets Fund Class Y | 151,368 | 2,540 | ||||||
RIC Russell Global Equity Fund Class Y | 612,505 | 5,084 | ||||||
RIF Non-U.S. Fund | 812,192 | 7,310 | ||||||
|
| |||||||
14,934 | ||||||||
|
|
Shares | Market Value $ | |||||||
Real Assets - 15.1% | ||||||||
RIC Russell Commodity Strategies Fund Class Y | 242,782 | 2,204 | ||||||
RIC Russell Global Infrastructure Fund Class Y | 137,420 | 1,457 | ||||||
RIF Global Real Estate Securities Fund | 127,977 | 1,830 | ||||||
|
| |||||||
5,491 | ||||||||
|
| |||||||
Total Investments - 100.1% | ||||||||
(identified cost $32,987) | 36,331 | |||||||
Other Assets and Liabilities, Net - (0.1%) | (21 | ) | ||||||
|
| |||||||
Net Assets -100.0% | 36,310 | |||||||
|
|
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Categories | % of Net Assets | |||
Domestic Equities | 37.9 | |||
Fixed Income | 6.0 | |||
International Equities | 41.1 | |||
Real Assets | 15.1 | |||
|
| |||
Total Investments | 100.1 | |||
Other Assets and Liabilities, Net | (0.1 | ) | ||
|
| |||
100.0 | ||||
|
|
See accompanying notes which are an integral part of the financial statements.
Equity Growth Strategy Fund | 27 |
Table of Contents
Russell Investment Funds
Equity Growth Strategy Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 32,987 | ||
Investments, at market | 36,331 | |||
Receivables: | ||||
Fund shares sold | 23 | |||
From affiliates | 5 | |||
|
| |||
Total assets | 36,359 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Investments purchased | 23 | |||
Accrued fees to affiliates | 2 | |||
Other accrued expenses | 24 | |||
|
| |||
Total liabilities | 49 | |||
|
| |||
Net Assets | $ | 36,310 | ||
|
| |||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | (9 | ) | |
Accumulated net realized gain (loss) | (5,700 | ) | ||
Unrealized appreciation (depreciation) on investments | 3,344 | |||
Shares of beneficial interest | 48 | |||
Additional paid-in capital | 38,627 | |||
|
| |||
Net Assets | $ | 36,310 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share(a) | $ | 7.59 | ||
Net assets | $ | 36,310,446 | ||
Shares outstanding ($.01 par value) | 4,786,408 |
(a) | 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.
28 | Statement of Assets and Liabilities |
Table of Contents
Russell Investment Funds
Equity Growth Strategy Fund
Statement of Operations — For the Period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Income distribution from Underlying Funds | $ | 146 | ||
|
| |||
Expenses | ||||
Advisory fees | 35 | |||
Administrative fees | 9 | |||
Custodian fees | 10 | |||
Transfer agent fees | 1 | |||
Professional fees | 14 | |||
Printing fees | 2 | |||
Miscellaneous | 7 | |||
|
| |||
Expenses before reductions | 78 | |||
Expense reductions | (60 | ) | ||
|
| |||
Net expenses | 18 | |||
|
| |||
Net investment income (loss) | 128 | |||
|
| |||
Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | (185 | ) | ||
|
| |||
Net realized gain (loss) | (185 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | 1,734 | |||
|
| |||
Net realized and unrealized gain (loss) | 1,549 | |||
|
| |||
Net Increase (Decrease) in Net Assets from Operations | $ | 1,677 | ||
|
|
See accompanying notes which are an integral part of the financial statements.
Statement of Operations | 29 |
Table of Contents
Russell Investment Funds
Equity Growth Strategy Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 | Fiscal Year Ended | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 128 | $ | 514 | ||||
Net realized gain (loss) | (185 | ) | (91 | ) | ||||
Net change in unrealized appreciation (depreciation) | 1,734 | (2,499 | ) | |||||
|
|
|
| |||||
Net increase (decrease) in net assets from operations | 1,677 | (2,076 | ) | |||||
|
|
|
| |||||
Distributions | ||||||||
From net investment income | (178 | ) | (473 | ) | ||||
|
|
|
| |||||
Net decrease in net assets from distributions | (178 | ) | (473 | ) | ||||
|
|
|
| |||||
Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | 3,966 | 6,578 | ||||||
|
|
|
| |||||
Total Net Increase (Decrease) in Net Assets | 5,465 | 4,029 | ||||||
Net Assets | ||||||||
Beginning of period | 30,845 | 26,816 | ||||||
|
|
|
| |||||
End of period | $ | 36,310 | $ | 30,845 | ||||
|
|
|
| |||||
Undistributed (overdistributed) net investment income included in net assets | $ | (9 | ) | $ | 41 |
See accompanying notes which are an integral part of the financial statements.
30 | Statements of Changes in Net Assets |
Table of Contents
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Table of Contents
Russell Investment Funds
Equity Growth Strategy Fund
Financial Highlights
For a Share Outstanding Throughout Each Period.
Net Asset Value, | $ Net Investment Income (Loss)(a)(b)(f) | $ Net Realized | $ Total from | $ Distributions | $ Distributions from Net Realized Gain | $ Return of Capital | ||||||||||||||||||||||
June 30, 2012(1) | 7.22 | .03 | .38 | .41 | (.04 | ) | — | — | ||||||||||||||||||||
December 31, 2011 | 7.82 | .13 | (.61 | ) | (.48 | ) | (.12 | ) | — | — | ||||||||||||||||||
December 31, 2010 | 6.98 | .14 | .91 | 1.05 | (.15 | ) | — | (.06 | ) | |||||||||||||||||||
December 31, 2009 | 5.42 | .12 | 1.56 | 1.68 | (.09 | ) | (.03 | ) | — | |||||||||||||||||||
December 31, 2008 | 9.83 | .07 | (3.92 | ) | (3.85 | ) | (.05 | ) | (.51 | ) | — | |||||||||||||||||
December 31, 2007(2) | 10.00 | .50 | (.38 | ) | .12 | (.29 | ) | — | — |
See accompanying notes which are an integral part of the financial statements.
32 | Financial Highlights |
Table of Contents
$ Total | $ Net Asset Value, Period | % Total | $ Net Assets, | % Ratio of Expenses Net Assets, | % Ratio of Expenses Net Assets, | % Ratio of Net Net Assets(b)(c)(f) | % Portfolio | |||||||||||||||||||||||
(.04 | ) | 7.59 | 5.64 | 36,310 | .45 | .10 | .37 | 7 | ||||||||||||||||||||||
(.12 | ) | 7.22 | (6.22 | ) | 30,845 | .49 | .10 | 1.72 | 15 | |||||||||||||||||||||
(.21 | ) | 7.82 | 15.09 | 26,816 | .53 | .10 | 1.89 | 42 | ||||||||||||||||||||||
(.12 | ) | 6.98 | 31.79 | 20,057 | .59 | .08 | 2.02 | 21 | ||||||||||||||||||||||
(.56 | ) | 5.42 | (41.18 | ) | 12,613 | .58 | .04 | .87 | 24 | |||||||||||||||||||||
(.29 | ) | 9.83 | 1.25 | 13,006 | 1.36 | .04 | 5.59 | 6 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights | 33 |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Highlights — June 30, 2012 (Unaudited)
(1) | For the period ended June 30, 2012 (Unaudited). |
(2) | For the period May 1, 2007 (commencement of operations) to December 31, 2007. |
(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) | Periods less than one year are not annualized. |
(d) | The ratios for periods less than one year are annualized. |
(e) | 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. |
(f) | May reflect amounts waived and reimbursed by Russell Investment Management Company (“RIMCo”). |
(g) | Less than $.01 per share. |
(h) | The total return does not reflect any Insurance Company Separate Account or Policy Charges. |
See accompanying notes which are an integral part of the financial statements.
34 | Notes to Financial Highlights |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements — June 30, 2012 (Unaudited)
1. | Organization |
Russell Investment Funds (the “Investment Company” or “RIF”) is a series investment company with 10 different investment portfolios referred to as Funds. These financial statements report on four of these Funds (each a “Fund” and collectively the “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 to qualified insurance company separate accounts offering variable insurance products. The Investment Company is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. It is organized and operated as a Massachusetts business trust under an Amended and Restated Master Trust Agreement dated October 1, 2008, as amended (“Master Trust Agreement”). The Investment Company’s Master Trust Agreement permits the Board of Trustees (the “Board”) to issue an unlimited number of shares of beneficial interest.
The Funds seek to achieve their objective by investing in a combination of Russell Investment Company (“RIC”) funds and other of the Investment Company’s Funds (together, the “Underlying Funds”) as set forth in the table below. Russell Investment Management Company (“RIMCo”), the Funds’ investment adviser, may modify the target asset allocation for any Fund and/or the Underlying Funds in which the Funds invest from time to time based on capital markets research or on factors such as RIMCo’s outlook for the economy, financial markets generally and/or relative market valuation of the asset classes represented by each Underlying Fund. Modifications in the allocations to the Underlying Funds are typically based on strategic, long-term allocation decisions. 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 +/- 3% at the equities, fixed income or real asset category level based on RIMCo’s assessment of relative market valuation of the asset classes represented by each Underlying Fund, (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. In the future, the Funds may also invest in other Underlying Funds that pursue investment strategies not pursued by the current Underlying Funds or represent asset classes which are not currently represented by the Underlying Funds.
Type of Underlying Fund | Moderate Strategy Fund | Balanced Strategy Fund | Growth Strategy Fund | Equity Growth Strategy Fund | ||||||||||||
Equity | 28-38 | % | 47-57 | % | 62-72 | % | 75-85 | % | ||||||||
Fixed Income | 53-63 | 33-43 | 14-24 | 0-10 | ||||||||||||
Real Asset | 4-14 | 5-15 | 9-19 | 10-20 |
Asset Allocation Targets as of May 1, 2012* | ||||||||||||||||
Moderate Strategy Fund | Balanced Strategy Fund | Growth Strategy Fund | Equity Growth Strategy Fund | |||||||||||||
Equity Underlying Funds | ||||||||||||||||
RIF Multi-Style Equity Fund | 0-10 | % | 5-15 | % | 7-17 | % | 10-20 | % | ||||||||
RIC Russell U.S. Quantitative Equity Fund | 1-11 | 4-14 | 6-16 | 9-19 | ||||||||||||
RIF Aggressive Equity Fund | 0-7 | 0-9 | 1-11 | 2-12 | ||||||||||||
RIF Non-U.S. Fund | 4-14 | 10-20 | 14-24 | 18-28 | ||||||||||||
RIC Russell Global Equity Fund | 3-13 | 5-15 | 9-19 | 9-19 | ||||||||||||
RIC Russell Emerging Markets Fund | 0-8 | 0-9 | 0-10 | 2-12 | ||||||||||||
Fixed Income Underlying Funds | ||||||||||||||||
RIC Russell Global Opportunistic Credit Fund | 0-7 | 0-8 | 0-9 | 0-10 | ||||||||||||
RIF Core Bond Fund | 31-41 | 30-40 | 10-20 | 0 | ||||||||||||
RIC Russell Investment Grade Bond Fund | 5-25 | 0 | 0 | 0 | ||||||||||||
Real Asset Underlying Funds** | ||||||||||||||||
RIC Russell Commodity Strategies Fund | 0-8 | 0-9 | 1-11 | 1-11 | ||||||||||||
RIC Russell Global Infrastructure Fund | 0-8 | 0-8 | 0-9 | 0-9 | ||||||||||||
RIF Global Real Estate Securities Fund | 0-8 | 0-8 | 0-9 | 0-10 |
* | Prospectus dated May 1, 2012. As described above, actual asset allocation may vary. |
** | A real asset is a tangible or physical asset that typically has intrinsic value. Examples of real assets include land, property, equipment, raw materials or infrastructure. The RIC Russell Commodity Strategies, RIC Russell Global Infrastructure and RIF Global Real Estate Securities Funds invest in securities that provide exposure to real assets. |
Notes to Financial Statements | 35 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
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 following is a summary of the significant accounting policies consistently followed by each Fund in the preparation of its financial statements.
Security Valuation
The Funds value their portfolio securities, the shares of the Underlying Funds, at the current net asset value per share of each Underlying Fund.
Fair value of securities is defined as the price that the Funds would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. To increase consistency and comparability in fair value measurement, the fair value hierarchy was established to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset, including assumptions about risk, (e.g., the risk inherent in a particular valuation technique, such as a pricing model or the risks inherent in the inputs to a particular valuation technique). Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy of inputs is summarized in the three broad levels listed below.
Level 1 — quoted prices (unadjusted) in active markets for identical investments.
Level 2 — other significant observable inputs including quoted market prices in non-active markets or prices derived from market data.
Level 3 — significant unobservable inputs including the Fund’s own assumptions in determining the fair value of investments.
The levels associated with valuing the Funds’ investments for the period ended June 30, 2012 were Level 1 for all Funds.
Investment Transactions
Investment transactions are reflected as of the trade date for financial reporting purposes. This may cause the net asset value stated in the financial statements to be different from the net asset value at which shareholders may transact. Realized gains and losses from securities transactions, if any, are recorded on the basis of specific identified cost.
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.
Each Fund qualifies as a regulated investment company and distributes all of its taxable income and capital gains. Therefore, no federal income tax provision was required for the Funds.
Each Fund files a U. S. tax return. At June 30, 2012, the Funds have 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 ending December 31, 2008 through December 31, 2010, 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%
36 | Notes to Financial Statements |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
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 its 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 relate primarily to investments in 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 net asset values.
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 fees and expenses incurred indirectly by the Funds will vary.
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 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 Underlying Funds may be exposed to counterparty risk or risk that an institution or other entity with which the Underlying Funds have unsettled or open transactions will default. The potential loss could exceed the value of the relevant assets recorded in the Underlying Funds’ financial statements (the “Assets”). The Assets, which potentially expose the Underlying Funds to credit risk, consist principally of cash due from counterparties and investments. The extent of the Underlying Funds’ exposure to credit and counterparty risks with respect to the Assets approximates their carrying value as recorded in the Underlying Funds’ Statements of Assets and Liabilities.
3. | Investment Transactions |
Securities
During the period ended June 30, 2012, purchases and sales of the Underlying Funds (excluding short-term investments) were as follows:
Purchases | Sales | |||||||
Moderate Strategy Fund | $ | 14,887,605 | $ | 7,760,785 | ||||
Balanced Strategy Fund | 32,091,251 | 16,314,815 | ||||||
Growth Strategy Fund | 21,273,506 | 8,873,782 | ||||||
Equity Growth Strategy Fund | 6,523,312 | 2,596,041 |
4. | Related Party Transactions, Fees and Expenses |
Adviser and Administrator
RIMCo advises the Funds and Russell Fund Services Company (“RFSC”) is the Funds’ administrator. RFSC is a wholly-owned subsidiary of RIMCo. RIMCo is a wholly-owned subsidiary of Frank Russell Company (a subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell Company provides ongoing money manager research and trade placement services to RIF and RIMCo.
Notes to Financial Statements | 37 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
The advisory fee of 0.20% and administrative fee of 0.05% are based upon the average daily net assets of the Funds and are payable monthly. The following shows the total amount of each of these fees paid by the Funds for the period ended June 30, 2012.
Advisory | Administrative | |||||||
Moderate Strategy Fund | $ | 81,680 | $ | 20,420 | ||||
Balanced Strategy Fund | 216,646 | 54,162 | ||||||
Growth Strategy Fund | 122,717 | 30,679 | ||||||
Equity Growth Strategy Fund | 34,740 | 8,685 |
RIMCo has contractually agreed, until April 30, 2013, to waive up to the full amount of its 0.20% advisory fee and then reimburse each Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.10% 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 Funds invest, including the Underlying Funds, which are borne indirectly by the Funds. These waivers and reimbursements may not be terminated during the relevant period except with Board approval.
For the period ended June 30, 2012, RIMCo waived/reimbursed the following expenses:
Waiver | Reimbursement | Total | ||||||||||
Moderate Strategy Fund | $ | 81,680 | $ | 20,683 | $ | 102,363 | ||||||
Balanced Strategy Fund | 216,646 | 2,928 | 219,574 | |||||||||
Growth Strategy Fund | 122,717 | 15,928 | 138,645 | |||||||||
Equity Growth Strategy Fund | 34,740 | 25,667 | 60,407 |
RIMCo and RFSC do not have the ability to recover amounts waived or reimbursed from previous periods.
Transfer and Dividend Disbursing Agent
RFSC serves as Transfer and Dividend Disbursing Agent for the Investment Company. For this service, RFSC is paid a fee based upon the average daily net assets of the Funds for transfer agency and dividend disbursing services. RFSC retains a portion of this fee for its services provided to the Funds and pays the balance to unaffiliated agents who assist in providing these services. Total fees paid for the Funds presented herein for the period ended June 30, 2012 were as follows:
Amount | ||||
Moderate Strategy Fund | $ | 1,797 | ||
Balanced Strategy Fund | 4,766 | |||
Growth Strategy Fund | 2,700 | |||
Equity Growth Strategy Fund | 764 |
Distributor
Russell Financial Services, Inc. (the “Distributor”), a wholly-owned subsidiary of RIMCo, 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.
Accrued Fees Payable to Affiliates
Accrued fees payable to affiliates for the period ended June 30, 2012 were as follows:
| Moderate Strategy Fund | Balanced Strategy Fund | Growth Strategy Fund | Equity Growth Strategy Fund |
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Administration fees | $ | 3,430 | $ | 9,000 | $ | 5,082 | $ | 1,420 | ||||||||||
Transfer agent fees | 302 | 800 | 453 | 127 | ||||||||||||||
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$ | 3,732 | $ | 9,800 | $ | 5,535 | $ | 1,547 | |||||||||||
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Board of Trustees
The Russell Fund Complex consists of Russell Investment Company, which has 38 funds, and RIF, which has 10 funds. Each of the Trustees is a Trustee of both RIC and RIF. During the period, the Russell Fund Complex paid each of its independent Trustees a retainer of $75,000 per year; each of its interested Trustees a retainer of $65,000 per year and each Trustee $7,000 for each regularly scheduled meeting attended in person and $3,500 for each special meeting and the Annual 38a-1 meeting attended in person, and for each Audit Committee meeting, Nominating and Governance Committee meeting, Investment
38 | Notes to Financial Statements |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
Committee meeting or any other committee meeting established and approved by the Board that is attended in person. Each Trustee receives a $1,000 fee for attending regularly scheduled and special meetings by phone instead of receiving the full fee had the member attended in person (except for telephonic meetings called pursuant to the Funds’ valuation and pricing procedures) and a $500 fee for attending the committee meeting by phone instead of receiving the full fee had the member attended in person. Trustees’ out-of-pocket expenses are also paid by the Russell Fund Complex. The Audit Committee Chair and Investment Committee Chair are each paid a fee of $15,000 per year and the Nominating and Governance Committee Chair is paid a fee of $6,000 per year. The chairman of the Board receives additional annual compensation of $75,000. Ms. Cavanaugh is not compensated by the Russell Fund Complex for her service as Trustee.
Transactions with Affiliated Companies
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. Transactions during the period ended June 30, 2012, with Underlying Funds which are, or were, an affiliated company are as follows:
Market Value | Purchases Cost | Sales Cost | Realized Gain (Loss) | Income Distributions | Capital Gains Distributions | |||||||||||||||||||
Moderate Strategy Fund | ||||||||||||||||||||||||
RIF Aggressive Equity Fund | $ | 1,739 | $ | 249 | $ | 149 | $ | 2 | $ | 4 | $ | — | ||||||||||||
RIF Multi-Style Equity Fund | 4,951 | 1,226 | 311 | (2 | ) | 22 | — | |||||||||||||||||
RIC Russell U.S. Quantitative Equity Fund | 5,145 | 581 | 340 | 4 | 11 | — | ||||||||||||||||||
RIF Core Bond | 30,289 | 4,240 | 1,738 | (2 | ) | 346 | 92 | |||||||||||||||||
RIC Russell Global Opportunistic Credit Fund | 1,702 | 348 | 265 | 2 | — | — | ||||||||||||||||||
RIC Russell Investment Grade Bond Fund | 18,094 | 3,947 | 1,259 | (3 | ) | 152 | — | |||||||||||||||||
RIF Non-U.S. Fund | 5,870 | 1,177 | 2,469 | (159 | ) | 73 | — | |||||||||||||||||
RIC Russell Emerging Markets Fund | 2,594 | 497 | 256 | (27 | ) | — | — | |||||||||||||||||
RIC Russell Global Equity Fund | 6,907 | 1,369 | 731 | (27 | ) | — | — | |||||||||||||||||
RIF Global Real Estate Securities Fund | 2,623 | 329 | 275 | (3 | ) | 24 | — | |||||||||||||||||
RIC Russell Commodity Strategies Fund | 2,637 | 599 | 76 | (12 | ) | — | — | |||||||||||||||||
RIC Russell Global Infrastructure Fund | 2,605 | 326 | 121 | (2 | ) | 6 | — | |||||||||||||||||
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$ | 85,156 | $ | 14,888 | $ | 7,990 | $ | (229 | ) | $ | 638 | $ | 92 | ||||||||||||
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Balanced Strategy Fund | ||||||||||||||||||||||||
RIF Aggressive Equity Fund | $ | 9,128 | $ | 909 | $ | 571 | $ | 16 | $ | 22 | $ | — | ||||||||||||
RIF Multi-Style Equity Fund | 24,855 | 3,960 | 1,012 | (23 | ) | 118 | — | |||||||||||||||||
RIC Russell U.S. Quantitative Equity Fund | 20,274 | 1,169 | 518 | (2 | ) | 44 | — | |||||||||||||||||
RIF Core Bond Fund | 82,509 | 14,290 | 4,330 | 8 | 864 | 231 | ||||||||||||||||||
RIC Russell Global Opportunistic Credit Fund | 6,768 | 844 | 587 | 4 | — | — | ||||||||||||||||||
RIF Non-U.S. Fund | 27,414 | 3,657 | 8,066 | (984 | ) | 324 | — | |||||||||||||||||
RIC Russell Emerging Markets Fund | 9,066 | 1,328 | 594 | (80 | ) | — | — | |||||||||||||||||
RIC Russell Global Equity Fund | 22,658 | 3,165 | 1,287 | (77 | ) | — | — | |||||||||||||||||
RIF Global Real Estate Securities Fund | 6,959 | 503 | 398 | (13 | ) | 63 | — | |||||||||||||||||
RIC Russell Commodity Strategies Fund | 9,184 | 1,734 | 46 | (8 | ) | — | — | |||||||||||||||||
RIC Russell Global Infrastructure Fund | 6,859 | 532 | 68 | (3 | ) | 15 | — | |||||||||||||||||
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$ | 225,674 | $ | 32,091 | $ | 17,477 | $ | (1,162 | ) | $ | 1,450 | $ | 231 | ||||||||||||
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Growth Strategy Fund | ||||||||||||||||||||||||
RIF Aggressive Equity Fund | $ | 7,795 | $ | 769 | $ | 243 | $ | (18 | ) | $ | 19 | $ | — | |||||||||||
RIF Multi-Style Equity Fund | 16,127 | 2,658 | 852 | (24 | ) | 80 | — | |||||||||||||||||
RIC Russell U.S. Quantitative Equity Fund | 14,130 | 1,098 | 226 | (4 | ) | 31 | — | |||||||||||||||||
RIF Core Bond Fund | 22,196 | 6,821 | 1,876 | 3 | 198 | 52 | ||||||||||||||||||
RIC Russell Global Opportunistic Credit Fund | 5,113 | 789 | 497 | 3 | — | — | ||||||||||||||||||
RIF Non-U.S. Fund | 20,838 | 2,932 | 4,309 | (352 | ) | 232 | — | |||||||||||||||||
RIC Russell Emerging Markets Fund | 6,480 | 1,002 | 356 | (50 | ) | — | — | |||||||||||||||||
RIC Russell Global Equity Fund | 18,125 | 2,751 | 825 | (50 | ) | — | — | |||||||||||||||||
RIF Real Estate Securities Fund | 5,233 | 340 | 161 | (7 | ) | 47 | — | |||||||||||||||||
RIC Russell Commodity Strategies Fund | 7,907 | 1,627 | 27 | (5 | ) | — | — | |||||||||||||||||
RIC Russell Global Infrastructure Fund | 5,199 | 487 | 6 | — | 12 | — | ||||||||||||||||||
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$ | 129,143 | $ | 21,274 | $ | 9,378 | $ | (504 | ) | $ | 619 | $ | 52 | ||||||||||||
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Notes to Financial Statements | 39 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
Market Value | Purchases Cost | Sales Cost | Realized Gain (Loss) | Income Distributions | Capital Gains Distributions | |||||||||||||||||||
Equity Growth Strategy Fund | ||||||||||||||||||||||||
RIF Aggressive Equity Fund | $ | 2,553 | $ | 348 | $ | 147 | $ | (4 | ) | $ | 6 | $ | — | |||||||||||
RIF Multi-Style Equity Fund | 6,152 | 1,462 | 272 | (6 | ) | 28 | — | |||||||||||||||||
RIC Russell U.S. Quantitative Equity Fund | 5,045 | 638 | 288 | (4 | ) | 11 | — | |||||||||||||||||
RIC Russell Global Opportunistic Credit Fund | 2,156 | 685 | 201 | — | — | — | ||||||||||||||||||
RIF Non-U.S. Fund | 7,310 | 1,251 | 1,329 | (129 | ) | 80 | — | |||||||||||||||||
RIC Russell Emerging Markets Fund | 2,540 | 399 | 91 | (10 | ) | — | — | |||||||||||||||||
RIC Russell Global Equity Fund | 5,084 | 749 | 137 | (10 | ) | — | — | |||||||||||||||||
RIF Global Real Estate Securities Fund | 1,830 | 199 | 126 | (4 | ) | 17 | — | |||||||||||||||||
RIC Russell Commodity Strategies Fund | 2,204 | 574 | 116 | (15 | ) | — | — | |||||||||||||||||
RIC Russell Global Infrastructure Fund | 1,457 | 218 | 74 | (3 | ) | 4 | — | |||||||||||||||||
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$ | 36,331 | $ | 6,523 | $ | 2,781 | $ | (185 | ) | $ | 146 | $ | — | ||||||||||||
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5. | Federal Income Taxes |
At December 31, 2011, 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. 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.
Funds | 12/31/2017 | 12/31/2018 | Totals | |||||||||
Balanced Strategy | $ | — | $ | 442,086 | $ | 442,086 | ||||||
Growth Strategy | — | 1,435,649 | 1,435,649 | |||||||||
Equity Growth Strategy | 215,85 | 720,380 | 936,215 |
At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
Moderate Strategy Fund | Balanced Strategy Fund | Growth Strategy Fund | Equity Growth Strategy Fund | |||||||||||||||
Cost of Investments | $ | 82,272,225 | $ | 219,631,784 | $ | 128,026,150 | $ | 37,637,894 | ||||||||||
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Unrealized Appreciation | 3,013,721 | 7,296,666 | 1,683,432 | 186,896 | ||||||||||||||
Unrealized Depreciation | (130,170 | ) | (1,254,695 | ) | (566,585 | ) | (1,494,275 | ) | ||||||||||
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Net Unrealized Appreciation (Depreciation) | $ | 2,883,551 | $ | 6,041,971 | $ | 1,116,847 | $ | (1,307,379 | ) | |||||||||
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As permitted by tax regulations, the funds intend to defer a net realized capital loss incurred from November 1, 2011 to December 31, 2011, and treat it as arising in the fiscal year 2012. As of December 31, 2011, the below funds had realized a capital losses as follows:
Fund | ||||
Moderate Strategy Fund | $ | 4,281 | ||
Balanced Strategy Fund | 36,024 | |||
Growth Strategy Fund | 70,848 | |||
Equity Growth Strategy Fund | 7,559 |
6. | Fund Share Transactions (amounts in thousands) |
Share transactions for the periods ended June 30, 2012 and December 31, 2011 were as follows:
2012 | 2011 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Moderate Strategy Fund | ||||||||||||||||
Proceeds from shares sold | 1,144 | $ | 11,182 | 2,646 | $ | 25,578 | ||||||||||
Proceeds from reinvestment of distributions | 110 | 1,079 | 183 | 1,744 | ||||||||||||
Payments for shares redeemed | (487 | ) | (4,750 | ) | (518 | ) | (5,009 | ) | ||||||||
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Total increase (decrease) | 767 | $ | 7,511 | 2,311 | $ | 22,313 | ||||||||||
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40 | Notes to Financial Statements |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
6. | Fund Share Transactions (amounts in thousands) (continued) |
2012 | 2011 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Balanced Strategy Fund | ||||||||||||||||
Proceeds from shares sold | 2,297 | $ | 20,995 | 6,359 | $ | 58,019 | ||||||||||
Proceeds from reinvestment of distributions | 169 | 1,571 | 477 | 4,238 | ||||||||||||
Payments for shares redeemed | (749 | ) | (6,786 | ) | (941 | ) | (8,376 | ) | ||||||||
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Total increase (decrease) | 1,717 | $ | 15,780 | 5,895 | $ | 53,881 | ||||||||||
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Growth Strategy Fund | ||||||||||||||||
Proceeds from shares sold | 1,700 | $ | 14,430 | 3,807 | $ | 32,607 | ||||||||||
Proceeds from reinvestment of distributions | 75 | 653 | 249 | 2,050 | ||||||||||||
Payments for shares redeemed | (312 | ) | (2,645 | ) | (702 | ) | (6,023 | ) | ||||||||
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Total increase (decrease) | 1,463 | $ | 12,438 | 3,354 | $ | 28,634 | ||||||||||
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Equity Growth Strategy Fund | ||||||||||||||||
Proceeds from shares sold | 765 | $ | 5,925 | 1,436 | $ | 11,225 | ||||||||||
Proceeds from reinvestment of distributions | 23 | 176 | 64 | 473 | ||||||||||||
Payments for shares redeemed | (274 | ) | (2,135 | ) | (655 | ) | (5,120 | ) | ||||||||
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Total increase (decrease) | 514 | $ | 3,966 | 845 | $ | 6,578 | ||||||||||
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7. | Interfund Lending Program |
The Funds have been granted permission from the Securities and Exchange Commission to participate in a joint lending and borrowing facility (the “Credit Facility”). Funds may borrow money from each other for temporary purposes. All such borrowing and lending will be subject to a participating Fund’s fundamental investment limitations. A lending fund will lend through the program only when the returns are higher than those available from an investment in repurchase agreements or short-term reserves and the portfolio manager determines it is in the best interest of the lending fund. The Funds will borrow through the program only when the costs are equal to or lower than the cost of bank loans. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. A participating Fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. Any delay in repayment to the lending fund could result in reduced returns or additional borrowing costs. For the period ended June 30, 2012, the Funds did not borrow or loan through the interfund lending program.
8. | Record Ownership |
As of June 30, 2012, 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 | 96.4 | ||||||
Balanced Strategy Fund | 1 | 94.4 | ||||||
Growth Strategy Fund | 1 | 91.9 | ||||||
Equity Growth Strategy Fund | 2 | 97.8 |
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 except the following:
As of August 15, 2012, the RIF LifePoints Funds are changing their asset allocations to new target allocations. The RIC Russell Multi-Strategy Alternative Fund and the RIC Russell U.S. Dynamic Equity Fund, both new Underlying Funds, will be added to the RIF LifePoints Funds allocations as part of the new target allocations.
Notes to Financial Statements | 41 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
New Target Asset Allocation to Underlying Funds Effective August 15, 2012:
The following tables show the Underlying Funds in which each Fund will invest and the expected approximate target allocation to each Underlying Fund. However, the actual target strategic asset allocation on August 15, 2012 may vary slightly.
Expected Target Strategic Asset Allocation of the Funds to the Underlying Funds as of August 15, 2012*
Type of Underlying Fund | Moderate Strategy Fund | Balanced Strategy Fund | Growth Strategy Fund | Equity Growth Strategy Fund | ||||||||||||
Equity | 25-35 | % | 44-54 | % | 58-68 | % | 70-80 | % | ||||||||
Fixed Income | 53-63 | % | 33-43 | % | 14-24 | % | 0-10 | % | ||||||||
Alternative | 7-17 | % | 8-18 | % | 13-23 | % | 15-25 | % |
Moderate Strategy Fund | Balanced Strategy Fund | Growth Strategy Fund | Equity Growth Strategy Fund | |||||||||||||
Equity Underlying Funds | ||||||||||||||||
RIF Multi-Style Equity Fund | 0-9 | % | 2-12 | % | 5-15 | % | 7-17 | % | ||||||||
RIC Russell U.S. Defensive Equity Fund** | 0-9 | % | 0-10 | % | 0-10 | % | 1-11 | % | ||||||||
RIC Russell U.S. Dynamic Equity Fund*** | 0-7 | % | 1-11 | % | 1-11 | % | 4-14 | % | ||||||||
RIF Aggressive Equity Fund | 0-7 | % | 0-9 | % | 1-11 | % | 2-12 | % | ||||||||
RIF Non-U.S. Fund | 3-13 | % | 9-19 | % | 13-23 | % | 17-27 | % | ||||||||
RIC Russell Global Equity Fund | 2-13 | % | 4-14 | % | 8-18 | % | 8-18 | % | ||||||||
RIC Russell Emerging Markets Fund | 0-8 | % | 0-9 | % | 0-10 | % | 1-11 | % | ||||||||
Fixed Income Underlying Funds | ||||||||||||||||
RIC Russell Global Opportunistic Credit Fund | 0-8 | % | 0-8 | % | 0-9 | % | 0-10 | % | ||||||||
RIF Core Bond Fund | 31-41 | % | 30-40 | % | 10-20 | % | 0 | % | ||||||||
RIC Russell Investment Grade Bond Fund | 15-25 | % | 0 | % | 0 | % | 0 | % | ||||||||
Alternative Underlying Funds# | ||||||||||||||||
RIC Russell Commodity Strategies Fund | 0-8 | % | 0-9 | % | 1-11 | % | 1-11 | % | ||||||||
RIC Russell Global Infrastructure Fund | 0-8 | % | 0-8 | % | 0-9 | % | 0-9 | % | ||||||||
RIF Global Real Estate Securities Fund | 0-8 | % | 0-8 | % | 0-9 | % | 0-10 | % | ||||||||
RIC Russell Multi-Strategy Alternative Fund*** | 0-8 | % | 0-8 | % | 0-9 | % | 0-10 | % |
* | Actual asset allocation may vary. |
** | Effective August 15, 2012, the RIC Russell U.S. Quantitative Equity Fund changed its investment strategy from a quantitative investment approach to investing in defensive stocks and discontinued its limited long-short strategy. The fund was renamed the RIC Russell U.S. Defensive Equity Fund. |
*** | The RIC Russell U.S. Dynamic Equity Fund and RIC Russell Multi-Strategy Alternative Fund are new Underlying Funds. Effective August 15, 2012, the RIC Russell U.S. Growth Fund changed its investment strategy from investing in growth stocks to investing in dynamic stocks and implemented a limited long-short strategy. The fund was renamed the RIC Russell U.S. Dynamic Equity Fund. |
# | Alternative Underlying Funds seek low correlation to equity and/or fixed income investments. The RIC Russell Commodity Strategies, RIC Russell Global Infrastructure, RIF Russell Global Real Estate Securities and RIC Russell Multi-Strategy Alternative Funds seek these characteristics. |
42 | Notes to Financial Statements |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts — (Unaudited)
Approval of Investment Advisory Agreement
The Board of Trustees, including all of the Independent Trustees, last considered and approved the continuation of the advisory agreement with RIMCo (the “RIMCo Agreement”) and the portfolio management contract with each Money Manager of the funds (collectively, the “portfolio management contracts”) in which the Funds invest (the “Underlying Funds”) at a meeting held in person on April 24, 2012 (the “Agreement Evaluation Meeting”). During the course of a year, the Trustees receive a wide variety of materials regarding the investment performance of the Funds, sales and redemptions of the Funds’ and Underlying Funds’ shares, management of the Funds and the Underlying Funds by RIMCo and compliance with applicable regulatory requirements. In preparation for the annual review, the Independent Trustees, with the advice and assistance of their independent counsel, also requested and the Board considered (1) information and reports prepared by RIMCo relating to the services provided by RIMCo (and its affiliates) to the Funds and the Underlying Funds; and (2) information (the “Third-Party Information”) received from an independent, nationally recognized provider of investment company information comparing the performance of each of the Funds and the Underlying Funds and their respective operating expenses over various periods of time with other peer funds not managed by RIMCo, believed by the provider to be generally comparable in investment objectives to the Funds and the Underlying Funds. In the case of each Fund, its other peer funds are collectively hereinafter referred to as the Fund’s “Comparable Funds,” and, with the Fund, such Comparable Funds are collectively hereinafter referred to as the Fund’s “Performance Universe” in the case of performance comparisons and the Fund’s “Expense Universe” in the case of operating expense comparisons. In the case of certain Funds, the Third-Party Information reflected changes in the Comparable Funds requested by RIMCo, which changes were noted in the Third-Party Information. The foregoing information requested by the Trustees or provided by RIMCo is collectively called the “Agreement Evaluation Information.” The Trustees’ evaluations also reflected the knowledge and familiarity gained as Board members of the Funds and other funds in the same complex with respect to services provided by RIMCo, RIMCo’s affiliates and each Money Manager. The Trustees received a memorandum from counsel to the Funds and Underlying Funds discussing the legal standards for their consideration of the continuations of the RIMCo Agreement and the portfolio management contracts, and the Independent Trustees separately received a memorandum regarding their responsibilities from their independent counsel.
On April 16, 2012, the Independent Trustees in preparation for the Agreement Evaluation Meeting met by conference telephone call to review the Agreement Evaluation Information received to that date in a private session with their independent counsel at which no representatives of RIMCo or the Funds’ management were present and, on the basis of that review, requested additional Agreement Evaluation Information. The Independent Trustees also met in person on April 23, 2012, in executive session with their independent counsel, to review additional Agreement Evaluation Information received to that date. At the Agreement Evaluation Meeting, the Board, including the Independent Trustees, reviewed the proposed continuance of the RIMCo Agreement and the portfolio management contracts with management, counsel to the Funds and Underlying Funds and independent counsel to the Independent Trustees. Presentations made by RIMCo to the Board at the Agreement Evaluation Meeting as part of this review encompassed the Funds and all other RIMCo-managed funds for which the Board has supervisory responsibility. Prior to voting at the Agreement Evaluation Meeting, the Independent Trustees again met in executive session with their independent counsel to consider additional Agreement Evaluation Information received from RIMCo and management at the Agreement Evaluation Meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, the Board considered RIMCo’s advice that the Underlying Funds, in employing a manager-of-managers method of investment, operate in a manner that is distinctly different from most other investment companies. In the case of most other investment companies, an advisory fee is paid by the investment company to its adviser which, in turn, employs and compensates individual portfolio managers to make specific securities selections consistent with the adviser’s style and investment philosophy. RIMCo has engaged multiple unaffiliated Money Managers for all Underlying Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible under the RIMCo Agreement for allocating assets of each Fund among its Underlying Funds and for determining, implementing and maintaining the investment program for each Underlying Fund. The assets of each Fund are invested in different combinations of the Underlying Funds pursuant to target asset allocations set by RIMCo. RIMCo may modify the target asset allocation for any Fund and/or the Underlying Funds in which the Funds invest. Assets of each Underlying Fund generally have been allocated among the multiple Money Managers selected by RIMCo, subject to Board approval, for that Underlying Fund. RIMCo managed directly a portion of one Underlying Fund’s assets employing a “select holdings strategy,” as described below, during 2011 and a portion of 2012, and generally directly manages the investment of each Underlying Fund’s cash. RIMCo also may manage directly any portion of each Underlying Fund’s assets that RIMCo determines not to allocate to the Money Managers and portions of an Underlying Fund during transitions between Money Managers. RIMCo may also manage a Fund’s assets to manage risk in the Fund’s investment portfolio. In all cases, assets are managed directly by RIMCo pursuant to authority provided by the RIMCo Agreement.
RIMCo is responsible for selecting, subject to Board approval, Money Managers for each Underlying Fund and for actively managing allocations and reallocations of its assets among the Money Managers. The Board has been advised that RIMCo’s goal is to construct
Basis for Approval of Investment Advisory Contracts | 43 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
and manage diversified portfolios in a risk-aware manner. Each Money Manager for an Underlying Fund in effect performs the function of an individual portfolio manager who is responsible for selecting portfolio securities for the portion of the Underlying Fund assigned to it by RIMCo (each, a “segment”) in accordance with the Underlying Fund’s applicable investment objective, policies and restrictions, any constraints placed by RIMCo upon their selection of portfolio securities and the Money Manager’s specified role in an Underlying Fund. RIMCo is responsible for communicating performance expectations to each Money Manager; supervising compliance by each Money Manager with each Underlying Fund’s investment objective and policies; authorizing Money Managers to engage in certain investment strategies for an Underlying Fund; and recommending annually to the Board whether portfolio management contracts should be renewed, modified or terminated. In addition to its annual recommendation as to the renewal, modification or termination of portfolio management contracts, RIMCo is responsible for recommending to the Board additions of new Money Managers or replacements of existing Money Managers at any time when, based on RIMCo’s research and ongoing review and analysis, such actions are appropriate. RIMCo may impose specific investment constraints from time to time for each Money Manager intended to capitalize on the strengths of that Money Manager or to coordinate the investment activities of Money Managers for an Underlying Fund in a complementary manner. Therefore, the performance of individual Money Managers for an Underlying Fund may reflect the roles assigned to them by RIMCo in the Underlying Fund’s investment activities and any constraints placed by RIMCo upon their selection of portfolio securities. In light of the foregoing, the overall performance of each Underlying Fund over appropriate periods reflects, in great part, the performance of RIMCo in designing the Underlying Fund’s investment program, structuring an Underlying Fund, selecting an effective Money Manager with a particular investment style or sub-style for a segment that is complementary to the styles of the Money Managers of other Underlying Fund segments, and allocating assets among the Money Managers in a manner designed to achieve the objectives of the Underlying Fund.
The Board considered that the prospectuses for the Funds and the Underlying Funds and other public disclosures emphasize to investors RIMCo’s role as the principal investment manager for each Underlying Fund, rather than the investment advisory or security selection role of the Underlying Funds’ Money Managers, and describe the manner in which the Funds or Underlying Funds operate so that investors may take that information into account when deciding to purchase shares of any such Fund. The Board further considered that Fund investors in pursuing their investment goals and objectives likely purchased their shares on the basis of this information and RIMCo’s reputation for and performance record in managing the Underlying Funds’ manager-of-managers structure.
The Board also considered the demands and complexity of managing the Underlying Funds pursuant to the manager-of-managers structure, the special expertise of RIMCo with respect to the manager-of-managers structure of the Underlying Funds and the likelihood that, at the current expense ratio of each Underlying Fund, there would be no acceptable alternative investment managers to replace RIMCo on comparable terms given the need to continue the manager-of-managers strategy of such Underlying Fund selected by shareholders in purchasing their shares of a Fund or Underlying Fund.
In addition to these general factors relating to the manager-of-managers structure of the Underlying Funds, the Trustees considered, with respect to each Fund and Underlying Fund, various specific factors in evaluating renewal of the RIMCo Agreement, including the following:
1. | The nature, scope and overall quality of the investment management and other services provided, and expected to be provided, to the Fund or the Underlying Fund by RIMCo; |
2. | The advisory fee paid by the Fund or the Underlying Fund to RIMCo (the “Advisory Fee”) and the fact that it encompasses all investment advisory fees paid by the Fund or Underlying Fund, including the fees for any Money Managers of such Underlying Fund; |
3. | Information provided by RIMCo as to other fees and benefits received by RIMCo or its affiliates from the Fund or Underlying Fund, including any administrative, transfer agent or cash management fees and any fees received for management of securities lending cash collateral, soft dollar arrangements and commissions in connection with portfolio securities transactions; |
4. | Information provided by RIMCo as to expenses incurred by the Fund or the Underlying Fund; and |
5. | Information provided by RIMCo as to the profits that RIMCo derives from its mutual fund operations generally and from the Fund or Underlying Fund. |
In evaluating the nature, scope and overall quality of the investment management and other services provided, and which are expected to be provided, to the Funds, including Fund portfolio management services, the Board discussed with senior representatives of RIMCo the impact on the Funds’ operations of significant changes in RIMCo’s senior management and other personnel providing investment advisory and other services to the Funds since 2011 to the date of the Agreement Evaluation Meeting. At the Agreement Evaluation Meeting, RIMCo assured the Board that such changes have not resulted and are not expected to result in any diminution in the nature, scope or quality of the investment advisory or other services provided to the Funds or the
44 | Basis for Approval of Investment Advisory Contracts |
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Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
Underlying Funds. The Board also discussed the impact of organizational changes on the compliance programs of the Funds, the Underlying Funds and RIMCo with the Funds’ Chief Compliance Officer (the “CCO”) and received assurances from the CCO that such changes have not resulted in any diminution in the scope and quality of the compliance programs of the Funds or the Underlying Funds.
As noted above, RIMCo, pursuant to the terms of the RIMCo Agreement, directly managed a portion — up to 10% — of the assets of the RIF Multi-Style Equity Fund (the “Participating Underlying Fund”) utilizing a select holdings strategy (the “select holdings strategy”) during 2011 and a portion of 2012, the actual allocation being determined by the Participating Underlying Fund’s RIMCo portfolio manager. The Board considered that the select holdings strategy utilized by RIMCo in managing such assets for the Participating Underlying Fund was designed to increase the Participating Underlying Fund’s exposure to stocks that were viewed as attractive by multiple Money Managers of the Participating Underlying Fund. The select holdings strategy was discontinued during 2012 with respect to the Participating Underlying Fund. The Board considered the impact of the select holdings strategy upon the investment results of the Participating Underlying Fund. The Board also considered that during the periods that the select holdings strategy was utilized for the Participating Underlying Fund, RIMCo was not required to pay investment advisory fees to a Money Manager with respect to assets for which the select holdings strategy was employed and that the profits derived by RIMCo generally, and from the Participating Underlying Fund consequently, may have increased incrementally. The Board, however, further considered RIMCo’s advice that it paid certain Money Managers additional fees for providing information and other services in connection with the select holdings strategy and incurred additional costs in carrying out the select holdings strategy; the limited amount of assets that were managed directly by RIMCo pursuant to the select holdings strategy; and the fact that the aggregate investment Advisory Fees paid by the Participating Underlying Fund were not increased as a result of the select holdings strategy.
In evaluating the reasonableness of the Funds’ and Underlying Funds’ Advisory Fees in light of Fund and Underlying Fund performance, the Board considered that, in the Agreement Evaluation Information and at past meetings, RIMCo noted differences between the investment strategies of certain Underlying Funds and their respective Comparable Funds in pursuing their investment objectives, including fund strategies which seek to achieve a lower tracking error (i.e., the difference, whether positive or negative, between the return of a fund and its benchmark) and resulting lower return volatility than their Comparable Funds. According to RIMCo, these strategies may be expected to result, and for certain Underlying Funds during the periods covered by the Third-Party Information did result, in lower performance of the Underlying Funds than that of some of their Comparable Funds. According to RIMCo, the strategies pursued by the Underlying Funds, among other things, are intended to result in less volatile, more moderate returns relative to each Underlying Fund’s performance benchmark rather than more volatile, more extreme returns that its Comparable Funds may experience over time.
In discussing the Advisory Fees for the Underlying Funds generally, RIMCo noted, among other things, that its Advisory Fees for the Underlying Funds encompass services that may not be provided by investment advisers to the Underlying Funds’ Comparable Funds, such as cash equitization and management of portfolio transition costs when Money Managers are added, terminated or replaced. RIMCo also observed that its “margins” in providing investment advisory services to the Underlying Funds tend to be lower than competitors’ margins because of the demands and complexities of managing the Underlying Funds’ manager-of-managers structure, including RIMCo’s payment of a significant portion of the Underlying Funds’ Advisory Fees to their Money Managers. RIMCo expressed the view that Advisory Fees should be considered in the context of a Fund’s or Underlying Fund’s total expense ratio to obtain a complete picture. The Board, however, considered each Fund’s and Underlying Fund’s Advisory Fee on both a standalone basis and in the context of the Fund’s or Underlying Fund’s total expense ratio.
The Board considered for each Fund and Underlying Fund whether economies of scale have been realized and whether the Advisory Fee for such Fund or Underlying Fund appropriately reflects or should be revised to reflect any such economies. The Board determined that, after giving effect to any applicable fee or expense caps, waivers or reimbursements, the Advisory Fee for each Fund or Underlying Fund appropriately reflected any economies of scale realized by that Fund, based upon such factors as the variability of Money Manager investment advisory fees and other factors associated with the manager-of-managers structure employed by the Underlying Funds.
The Board considered, as a general matter, that fees payable to RIMCo by institutional clients with investment objectives similar to those of the Funds, the Underlying Funds and other RIF funds under the Board’s supervision, including the Underlying Funds, are lower, and, in some cases, may be substantially lower, than the rates paid by the RIF funds supervised by the Board, including the Funds. The Trustees considered the differences in the nature and scope of services RIMCo provides to institutional clients and the funds under its supervision, including the Underlying Funds. RIMCo explained, among other things, that institutional clients have fewer administrative needs than the Funds. RIMCo also noted that since the Funds must constantly issue and redeem their shares, they are more difficult to manage than institutional accounts, where assets are relatively stable. In addition, RIMCo noted that the Funds are subject to heightened regulatory requirements relative to institutional clients. The Board noted that RIMCo provides office space and facilities to the Funds and Underlying Funds and all of the Funds’ and Underlying Funds’ officers. Accordingly, the
Basis for Approval of Investment Advisory Contracts | 45 |
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Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
Trustees concluded that the services provided to the Funds and Underlying Funds are sufficiently different from the services provided to the other clients that comparisons are not probative and should not be given significant weight.
With respect to the Funds’ Advisory Fees, the Third-Party Information showed that the Advisory Fee for each Fund, on a contractual basis, was ranked in the fourth quintile of its Expense Universe but was ranked in the first quintile of its Expense Universe on an actual basis (i.e., giving effect to any voluntary fee waivers implemented by RIMCo and the advisers to such Fund’s Comparable Funds). In these rankings, the first quintile represents funds with the lowest investment advisory fees among funds in the Expenses Universe and the fifth quintile represents funds with the highest investment advisory fees among the Expense Universe funds. The comparisons were based upon the latest fiscal years for the Expense Universe funds. In assessing the Funds’ Advisory Fees, the Board focused on actual Advisory Fees.
With respect to the Funds’ total expenses, the Third-Party Information showed that the total expenses for the Conservative Strategy Fund and the Moderate Strategy Fund were ranked in the second quintile of their Expense Universes. The total expenses for the Balanced Strategy Fund, Growth Strategy Fund and Equity Growth Strategy Fund, each were ranked in the fourth quintile of its Expense Universe. In these rankings, the first quintile represents funds with the lowest total expenses among the Expense Universe Funds and the fifth quintile represents funds with the highest total expenses among the Expense Universe Funds. The Board considered RIMCo’s advice with respect to the Balanced Strategy and Growth Strategy Fund that each Fund’s total expenses were within 5 basis points of the third quintile of its Expense Universe.
With respect to the Equity Growth Strategy Fund, the Board considered RIMCo’s explanation that the Fund has a higher equity allocation than its Comparable Funds. Equity funds generally have higher expense ratios than fixed income funds. The higher equity allocation of the Equity Growth Strategy Fund, and resulting higher indirect expenses of the Underlying Fund investments, made meaningful comparisons with its Comparable Funds difficult.
On the basis of the Agreement Evaluation Information, and other information previously received by the Board from RIMCo during the course of the current year or prior years, or presented at or in connection with the Agreement Evaluation Meeting by RIMCo, the Board, in respect of each Fund and Underlying Fund, found, after giving effect to any applicable waivers and/or reimbursements and considering differences in the composition and investment strategies of their respective Comparable Funds (1) the Advisory Fee charged by RIMCo was reasonable in light of the nature, scope and overall quality of the investment management and other services provided, and expected to be provided, to the Funds or Underlying Funds; (2) the relative expense ratio of each Fund and Underlying Fund was comparable to those of its Comparable Funds; (3) RIMCo’s methodology of allocating expenses of operating funds in the complex was reasonable; (4) other benefits and fees received by RIMCo or its affiliates from the Funds or Underlying Funds were not excessive; and (5) RIMCo’s profitability with respect to the Funds and each Underlying Fund was not excessive in light of the nature, scope and overall quality of the investment management and other services provided by RIMCo.
In evaluating the performance of the Funds and Underlying Funds generally relative to their Comparable Funds, the Board, in addition to the factors described above, also considered RIMCo’s advice that many of the Underlying Funds’ Comparable Funds do not “equitize” their cash (i.e., cash awaiting investment or disbursement to satisfy redemptions or other fund obligations) and may hold large cash positions uninvested in their investment portfolios. By contrast, the Underlying Funds generally follow a strategy of equitizing their cash and fully investing their assets in pursuit of their investment objectives (the Underlying Funds’ strategy of equitizing cash and fully investing their assets is hereinafter referred to as their “full investment strategy”). RIMCo noted that the Underlying Funds’ full investment strategy generally will detract from their relative performance, and therefore the relative performance of the Funds, in a declining market, but may enhance the Underlying Funds’ relative performance in a rising market.
The Board concluded that, under the circumstances, the performance of each of the Funds was consistent with continuation of the RIMCo Agreement. In evaluating performance, the Board considered each Fund’s and Underlying Fund’s absolute performance and performance relative to appropriate benchmarks and indices in addition to such Fund’s performance relative to its Comparable Funds. In assessing the Funds’ performance relative to their Comparable Funds or benchmarks or in absolute terms, the Board also considered RIMCo’s stated investment strategy of managing the Underlying Funds in a risk-aware manner and the periodically volatile capital market conditions since 2008.
After considering the foregoing and other relevant factors, the Board concluded that continuation of the RIMCo Agreement on its current terms and conditions would be consistent with the interests of each Fund and its respective shareholders and voted to approve the continuation of the RIMCo Agreement.
At the Agreement Evaluation Meeting, with respect to the evaluation of the terms of portfolio management contracts with Money Managers for the Underlying Funds, the Board received and considered information from RIMCo reporting, among other things, for each Money Manager, the Money Manager’s performance over various periods; RIMCo’s assessment of the performance of each Money Manager; any significant business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc.,
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LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
the Funds’ and Underlying Funds’ underwriter; and RIMCo’s recommendation to retain the Money Manager at the current fee rate, to retain the Money Manager at a reduced fee rate or to terminate the Money Manager. The Board received reports during the course of the year from the Funds’ CCO regarding each Money Manager’s compliance program. RIMCo recommended that each Money Manager be retained at its current fee rate, although RIMCo noted its intentions to recommend terminations of some Money Managers at the Board’s May 2012 meeting in connection with planned changes to the investment programs of certain Underlying Funds. RIMCo has advised the Board that it does not regard Money Manager profitability as relevant to its evaluation of the portfolio management contracts with Money Managers because the willingness of Money Managers to serve in such capacity depends upon arm’s-length negotiations with RIMCo; RIMCo is aware of the fees charged by Money Managers to other clients; and RIMCo believes that the fees agreed upon with Money Managers are reasonable in light of the anticipated quality of investment advisory services to be rendered. The Board accepted RIMCo’s explanation in light of the Board’s findings as to the reasonableness of the Advisory Fee paid by each Fund and Underlying Fund and the fact that each Money Manager’s fee is paid by RIMCo.
Based substantially upon RIMCo’s recommendations, together with the Agreement Evaluation Information and other information received from RIMCo in support of its recommendations at the Agreement Evaluation Meeting, the Board concluded that the fees paid to the Money Managers of each Underlying Fund are reasonable in light of the quality of the investment advisory services provided and that continuation of the portfolio management contract with each Money Manager of each Underlying Fund would be in the best interests of such Underlying Fund and its shareholders.
In their deliberations, the Trustees did not identify any particular information as to the RIMCo Agreement or, other than RIMCo’s recommendation, the portfolio management contract with any Money Manager for an Underlying Fund that was all-important or controlling and each Trustee attributed different weights to the various factors considered. The Trustees evaluated all information available to them on a Fund-by-Fund basis and their determinations were made in respect of each Fund and Underlying Fund.
Prior to the April 24, 2012 Agreement Evaluation Meeting, the Board of Trustees received a proposal from RIMCo at a meeting held on February 28, 2012, to effect a money manager change for the Aggressive Equity Fund. In the case of the proposed change, the Trustees approved the terms of the proposed portfolio management contract based substantially upon RIMCo’s recommendation to hire the Money Manager at the proposed fee rate; any significant business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc., the Fund’s underwriter; RIMCo’s explanation as to the lack of relevance of 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 RIMCo; RIMCo’s awareness of the fees charged by the Money Manager to other clients; and RIMCo’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 Trustees also considered their findings at their April 19, 2011 meeting as to the reasonableness of the aggregate investment advisory fees paid by the Fund, and the fact that the aggregate investment advisory fees paid by the Fund would not increase as a result of the implementation of the proposed money manager change because the money managers’ investment advisory fee is paid by RIMCo.
Subsequent to the April 24, 2012 Agreement Evaluation Meeting, the Board of Trustees received proposals from RIMCo at a meeting held on May 22, 2012, to effect a money manager change for the RIC Russell U.S. Quantitative Equity Fund, RIC Russell Emerging Markets Fund, RIF Non-U.S. Fund, RIC Russell Global Opportunistic Credit Fund, RIC Russell Investment Grade Bond Fund and the Core Bond Fund. In the case of each such proposed change, the Trustees approved the terms of the proposed portfolio management contract based substantially upon RIMCo’s recommendation to hire the Money Manager at the proposed fee rate; any significant business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc., the Fund’s underwriter; RIMCo’s explanation as to the lack of relevance of 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 RIMCo; RIMCo’s awareness of the fees charged by the Money Manager to other clients; and RIMCo’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 Trustees also considered their findings at their April 24, 2012 Agreement Evaluation Meeting as to the reasonableness of the aggregate investment advisory fees paid by the Fund, and the fact that the aggregate investment advisory fees paid by the Fund would not increase as a result of the implementation of the proposed money manager change because the money managers’ investment advisory fee is paid by RIMCo.
Basis for Approval of Investment Advisory Contracts | 47 |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
Shareholder Requests for Additional Information — June 30, 2012 (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 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 public reference room.
The Board has delegated to RIMCo, 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 Underlying Funds may be invested. RIMCo 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 Underlying Funds voted proxies relating to portfolio securities during the most recent 12-month period ended December 31, 2011 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 call your Insurance Company.
Some Insurance Companies may offer electronic delivery of the Funds’ prospectuses and annual and semi-annual. Please contact your Insurance Company for further details.
48 | Shareholder Requests for Additional Information |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers — June 30, 2012
(Unaudited)
The following tables provide information for each officer and trustee of the Russell Fund Complex. The Russell Fund Complex consists of Russell Investment Company (“RIC”), which has 38 funds, and Russell Investment Funds (“RIF”), which has 10 funds. Each of the trustees is a trustee of both RIC and RIF. The first table provides information for the interested trustees. The second table provides information for the independent trustees. The third table provides information for the trustee emeritus. The fourth 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; 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; Mr. Fine has had financial, business and investment experience as a senior executive of a non-profit organization and previously, as a senior executive of a large regional financial services organization with management responsibility for such activities as investments, asset management and securities brokerage; 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; 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 and has been determined by the Board to be an “audit committee financial expert”; and Ms. Weston has had experience as a tax and corporate lawyer, has served as general counsel of several corporations and has served as a director of another investment company. Ms. Cavanaugh, has had experience with other financial services companies, including companies engaged in the sponsorship, management and distribution of investment companies. As a senior officer of the Funds, the Adviser and various affiliates of the Adviser providing services to the Funds, Ms. Cavanaugh is in a position to provide the Board with such parties’ perspectives on the management, operations and distribution of the Funds.
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office* | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past 5 Years | |||||||
INTERESTED TRUSTEES | ||||||||||||
# Sandra Cavanaugh, Born May 10, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | President and Chief Executive Officer since 2010
Trustee since 2010 | Appointed until successor is duly elected and qualified
Until successor is chosen and qualified by Trustees | • President and CEO RIC and RIF • Chairman of the Board, President and CEO, Russell Financial Services, Inc. • Chairman of the Board, President and CEO, Russell Fund Services Company (“RFSC”) • Chairman of the Board and President, Russell Insurance Agency, Inc. (insurance agency (“RIA”)) • May 2009 to December 2009, Executive Vice President, Retail Channel, SunTrust Bank • 2007 to January 2009, Senior Vice President, National Sales — Retail Distribution, JPMorgan Chase/ Washington Mutual, Inc. • 1997 to 2007, President — WM Funds Distributor & Shareholder Services/WM Financial Services | 48 | None |
# | Ms. Cavanaugh is also an officer and/or director of one or more affiliates of RIC and RIF and is therefore an Interested Trustee. |
* | Each Trustee is subject to mandatory retirement at age 72. |
Disclosure of Information about Fund Trustees and Officers | 49 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — June 30, 2012
(Unaudited)
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office* | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past 5 Years | |||||||
INTERESTED TRUSTEES (continued) | ||||||||||||
##Daniel P. Connealy, Born June 6, 1946
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2003
Chairman of Audit Committee since 2005 | Appointed until successor is duly elected and qualified
Appointed until successor is duly elected and qualified
| • June 2004 to present, Senior Vice President and Chief Financial Officer, Waddell & Reed Financial, Inc. | 48 | • Director, Gold Banc Corporation until 2006 | |||||||
INDEPENDENT TRUSTEES | ||||||||||||
Thaddas L. Alston, Born April 7, 1945
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2006
Chairman of the Investment Committee since 2010 | Appointed until successor is duly elected and qualified
Appointed until successor is duly elected and qualified | • Senior Vice President, Larco Investments, Ltd. (real estate firm) | 48 | None | |||||||
Kristianne Blake, Born January 22, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2000
Chairman since 2005 | Appointed until successor is duly elected and qualified
Annual | • Director and Chairman of the Audit Committee, Avista Corp. • Trustee and Chairman of the Operations Committee, Principal Investors Funds and Principal Variable Contracts Funds • Regent, University of Washington • President, Kristianne Gates Blake, P.S. (accounting services) • February 2002 to June 2005, Chairman of the Audit Committee, RIC and RIF • Trustee and Chairman of the Operations and Distribution Committee, WM Group of Funds, 1999–2006 | 48 | • Director, Avista Corp (electric utilities); • Trustee, Principal Investors Funds (investment company); • Trustee, Principal Variable Contracts Funds (investment company) • Trustee, WM Group of Funds until 2006 (investment company) | |||||||
Jonathan Fine, Born July 8, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2004 | Appointed until successor is duly elected and qualified | • President and Chief Executive Officer, United Way of King County, WA | 48 | None |
## | Mr. Connealy is an officer of a broker-dealer that distributes shares of the Funds and is therefore an Interested Trustee. |
* | Each Trustee is subject to mandatory retirement at age 72. |
50 | Disclosure of Information about Fund Trustees and Officers |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — June 30, 2012
(Unaudited)
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office* | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past 5 Years | |||||||
INDEPENDENT TRUSTEES (continued) | ||||||||||||
Raymond P. Tennison, Jr., Born December 21, 1955
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2000
Chairman of the Nominating and Governance Committee since 2007 | Appointed until successor is duly elected and qualified.
Appointed until successor is duly elected and qualified | • Vice Chairman of the Board, Simpson Investment Company • Until November 2010, President, Simpson Investment Company and several additional subsidiary companies, including Simpson Timber Company, Simpson Paper Company and Simpson Tacoma Kraft Company | 48 | None | |||||||
Jack R. Thompson, Born March 21, 1949
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2005 | Appointed until successor is duly elected and qualified | • September 2003 to September 2009, Independent Board Chair and Chairman of the Audit Committee, Sparx Asia Funds • September 2007 to September 2010 Director, Board Chairman and Chairman of the Audit Committee, LifeVantage Corporation (health products company) | 48 | • Director, Board Chairman and Chairman of the Audit Committee, LifeVantage Corporation until September 2010 (health products company) • Director, Sparx Asia Funds until 2009 (investment company) | |||||||
Julie W. Weston, Born October 2, 1943
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2002 | Appointed until successor is duly elected and qualified | • Retired • Chairperson of the Investment Committee until December 2009 | 48 | None | |||||||
TRUSTEE EMERITUS | ||||||||||||
**George F. Russell, Jr., Born July 3, 1932
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee Emeritus and Chairman Emeritus since 1999 | Until resignation or removal | • Director Emeritus, Frank Russell Company (investment consultant to institutional investors (“FRC”)); and RIMCo • Chairman Emeritus, RIC and RIF; Russell Implementation Services Inc. (broker-dealer and investment adviser (“RIS”)); Russell 20-20 Association (non-profit corporation); and Russell Trust Company (non-depository trust company (“RTC”)) • Chairman, Sunshine Management Services, LLC (investment adviser) | 48 | None |
* | Each Trustee is subject to mandatory retirement at age 72. |
** | Mr. Russell is also a director emeritus of one or more affiliates of RIC and RIF. |
Disclosure of Information about Fund Trustees and Officers | 51 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — June 30, 2012
(Unaudited)
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the Past 5 Years | |||
OFFICERS | ||||||
Cheryl Wichers, Born December 16, 1966
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Chief Compliance Officer since 2005 | Until removed by Independent Trustees | • Chief Compliance Officer, RIC • Chief Compliance Officer, RIF • Chief Compliance Officer, RIMCo • Chief Compliance Officer, RFSC • Chief Compliance Officer, Russell Exchange Traded Funds Trust • April 2002-May 2005, Manager, Global Regulatory Policy | |||
Sandra Cavanaugh, Born May 10, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | President and Chief Executive Officer since 2010 | Until successor is chosen and qualified by Trustees | • President and CEO, RIC and RIF • Chairman of the Board, President and CEO, Russell Financial Services, Inc. • Chairman of the Board, President and CEO, RFSC • Chairman of the Board and President, Russell Insurance Agency, Inc. (insurance agency (“RIA”)) • May 2009 to December 2009, Executive Vice President, Retail Channel, SunTrust Bank • 2007 to January 2009, Senior Vice President, National Sales — Retail Distribution, JPMorgan Chase/Washington Mutual, Inc. • 1997 to 2007, President — WM Funds Distributor & Shareholder Services/WM Financial Services | |||
Mark E. Swanson, Born November 26, 1963
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Treasurer and Chief Accounting Officer since 1998 | Until successor is chosen and qualified by Trustees | • Treasurer, Chief Accounting Officer and CFO, RIC, RIF and Russell Exchange Traded Funds Trust • Director, Funds Administration, RIMCo, RFSC, RTC and Russell Financial Services, Inc. • Treasurer and Principal Accounting Officer, SSgA Funds | |||
Peter Gunning, Born February 22, 1967
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Chief Investment Officer since 2008 | Until removed by Trustees | • Chief Investment Officer, RIC and RIF • Director, FRC • Chairman of the Board, President and CEO, RIMCo • 1996 to 2008 Chief Investment Officer, Russell, Asia Pacific | |||
Mary Beth Rhoden, Born April 25, 1969
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Secretary since 2010 | Until successor is chosen and qualified by Trustees | • 1999 to 2010 Assistant Secretary, RIC and RIF • Associate General Counsel, FRC • Secretary, RIMCo, RFSC and Russell Financial Services, Inc. • Secretary and Chief Legal Officer, RIC, RIF and Russell Exchange Traded Funds Trust |
52 | Disclosure of Information about Fund Trustees and Officers |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
1301 Second Avenue, Seattle, Washington 98101
(800) 787-7354
Interested Trustees
Sandra Cavanaugh
Daniel P. Connealy
Independent Trustees
Thaddas L. Alston
Kristianne Blake
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
Trustee Emeritus
George F. Russell, Jr.
Officers
Sandra Cavanaugh, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
Peter Gunning, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Mary Beth Rhoden, Secretary
Adviser
Russell Investment Management Company
1301 Second Avenue
Seattle, WA 98101
Administrator and Transfer and Dividend Disbursing Agent
Russell Fund Services Company
1301 Second Avenue
Seattle, WA 98101
Custodian
State Street Bank and Trust Company
1200 Crown Colony Drive
CC1-5 North
Quincy, MA 02169
Office of Shareholder Inquiries
1301 Second Avenue
Seattle, WA 98101
(800) 787-7354
Legal Counsel
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
Distributor
Russell Financial Services, Inc.
1301 Second Avenue
Seattle, WA 98101
Money Managers of Underlying Funds as of June 30, 2012
RIC Russell U.S. Quantitative Equity Fund
Aronson+Johnson+Ortiz, LP, Philadelphia, PA
INTECH Investment Management LLC, West Palm Beach, FL
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Numeric Investors LLC, Boston, MA
PanAgora Asset Management LLC, Boston, MA
RIF Aggressive Equity Fund
ClariVest Asset Management LLC, San Diego, CA
Conestoga Capital Advisors, LLC, Radnor, PA
DePrince, Race & Zollo, Inc., Winter Park, FL
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Ranger Investment Management, L.P., Dallas, TX
Signia Capital Management, LLC, Spokane, WA
RIF Multi-Style Equity Fund
BlackRock Capital Management, Inc., Wilmington, DE
Columbus Circle Investors, Stamford, CT
DePrince, Race & Zollo, Inc., Winter Park, FL
Institutional Capital LLC, Chicago, IL
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Suffolk Capital Management, LLC, New York, NY
Sustainable Growth Advisers, LP, Stamford, CT
RIC Russell Global Opportunistic Credit Fund
DDJ Capital Management, LLC, Waltham, MA
Lazard Asset Management LLC, New York, NY
Oaktree Capital Management, L.P., Los Angeles, CA
Stone Harbor Investment Partners LP, New York, NY
RIC Russell Investment Grade Bond Fund
Logan Circle Partners, L.P., Philadelphia, PA
Metropolitan West Asset Management, LLC, Los Angeles, CA
Neuberger Berman Fixed Income LLC, Chicago, IL
Pacific Investment Management Company LLC, Newport Beach, CA
Macro Currency Group — an investment group within Principal Global Investors LLC, New York, NY*
RIF Core Bond Fund
Colchester Global Investors Ltd, London, England
Logan Circle Partners, L.P., Philadelphia, PA
Metropolitan West Asset Management, LLC, Los Angeles, CA
Pacific Investment Management Company LLC, Newport Beach, CA
Macro Currency Group — an investment group within Principal Global Investors LLC, Des Moines, IA*
RIC Russell Emerging Markets Fund
AllianceBernstein L.P., New York, NY
Arrowstreet Capital, Limited Partnership, Boston, MA
Delaware Management Company, a Series of Delaware Management Business Trust, Philadelphia, PA
Genesis Asset Managers, LLP, Guernsey, Channel Islands
Harding Loevner LP, Somerville, NJ
Principal Global Investors, LLC, Des Moines, IA
UBS Global Asset Management (Americas) Inc., Chicago, IL
Victoria 1522 Investments, LP, San Francisco, CA
RIC Russell Global Equity Fund
GLG Inc., New York, NY
Harris Associates, L.P., Chicago, IL MFS
MFS Institutional Advisors Inc., Boston, MA
Polaris Capital Management, LLC, Boston, MA
Sanders Capital, LLC, New York, NY
T. Rowe Price Associates, Inc., Baltimore, MD
* | Principal Global Investors LLC is the asset management arm of the Principal Financial Group® (The Principal®), which includes various member companies including Principal Global Investors, LLC, Principal Global Investors (Europe) Limited, and others. The Macro Currency Group is the specialist currency investment group within Principal Global Investors. Where used herein, Macro Currency Group means Principal Global Investors, LLC. |
Manager, Money Managers and Service Providers | 53 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
1301 Second Avenue, Seattle, Washington 98101
(800) 787-7354
RIF Non-U.S. Fund
Barrow, Hanley, Mewhinney & Strauss, LLC, Dallas, TX
MFS Institutional Advisors, Inc., Boston, MA
Pzena Investment Management, LLC, New York, NY
William Blair & Company LLC, Chicago, IL
RIC Russell Commodity Strategies Fund
Credit Suisse Asset Management, LLC, New York, NY
Goldman Sachs Asset Management, L.P., New York, NY
CoreCommodity Management, LLC, Stamford, CT
(formerly Jefferies Asset Management, LLC)
RIC Russell Global Infrastructure Fund
Cohen & Steers Capital Management, Inc., New York, NY
Macquarie Capital Investment LLC, New York, NY
Nuveen Asset Management, LLC, Chicago, IL
RIF Global Real Estate Securities Fund
AEW Capital Management, L.P., Boston, MA
Cohen & Steers Capital Management, Inc., New York, NY
INVESCO Advisers, Inc. which acts as a money manager to the Fund through its INVESCO Real Estate Division, Dallas, TX
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.
54 | Manager, Money Managers and Service Providers |
Table of Contents
Russell Investment Funds | 1301 Second Avenue | 800-787-7354 | ||
Seattle, Washington 98101 | Fax: 206-505-3495 | |||
www.russell.com |
36-08-188
Table of Contents
2012 SEMI-ANNUAL REPORT
Russell
Investment Funds
LifePoints® Funds Variable Target Portfolio Series
JUNE 30, 2012
FUND
Conservative Strategy Fund
Table of Contents
Russell Investment Funds
Russell Investment Funds is a series investment company with ten different investment portfolios referred to as Funds. These financial statements report on one of these Funds.
Table of Contents
Russell Investment Funds
LifePoints® Funds
Variable Target Portfolio Series
Semi-annual Report
June 30, 2012 (Unaudited)
Table of Contents
Russell Investment Funds - LifePoints® Funds Variable Target Portfolio Series.
Copyright © Russell Investments 2012. All rights reserved.
Russell Investments is a Washington, USA corporation, which operates through subsidiaries worldwide and is a subsidiary of The Northwestern Mutual Life Insurance Company.
Fund objectives, risks, charges and expenses should be carefully considered before investing. A prospectus containing this and other important information must precede or accompany this material. Please read the prospectus carefully before investing.
Securities distributed through Russell Financial Services, Inc., member FINRA and part of Russell Investments.
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.
Table of Contents
Conservative Strategy Fund
Shareholder Expense Example — June 30, 2012 (Unaudited)
Fund Expenses
The following disclosure provides important information regarding each Fund’s Expense Example, which appears on each Fund’s individual page in this Semi-annual Report. Please refer to this information when reviewing the Expense Example for a Fund.
Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including advisory fees and other Fund expenses. The Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period indicated, which for this Fund is from January 1, 2012 to June 30, 2012.
Actual Expenses
The information in the table under the heading “Actual Performance” provides information about actual account values and actual expenses. You may use the information in this column, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first column in the row entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical Performance (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the information under the heading “Hypothetical Performance (5% return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. The fee and expenses shown in this section do not reflect any Insurance Company Separate Account or Policy Charges.
Actual Performance | Hypothetical Performance (5% return before expenses) | |||||||
Beginning Account Value | ||||||||
January 1, 2012 | $ | 1,000.00 | $ | 1,000.00 | ||||
Ending Account Value | ||||||||
June 30, 2012 | $ | 1,041.90 | $ | 1,024.37 | ||||
Expenses Paid During Period* | $ | 0.51 | $ | 0.50 |
* | Expenses are equal to the Fund’s annualized expense ratio of 0.10% (representing the six month period annualized), multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). May reflect amounts waived, reimbursed and/or other credits. Without any waivers, reimbursements and/or other credits, expenses would have been higher. |
Conservative Strategy Fund | 3 |
Table of Contents
Russell Investment Funds
Conservative Strategy Fund
Schedule of Investments — June 30, 2012 (Unaudited)
Amounts in thousands (except share amounts)
Shares | Market Value $ | |||||||
Investments - 101.0% | ||||||||
Russell Investment Company (“RIC”) and other Russell Investment Funds (“RIF”) Series Mutual Funds | ||||||||
Domestic Equities - 6.7% | ||||||||
RIC Russell U.S. Quantitative Equity Fund Class Y | 995 | 32 | ||||||
RIF Multi-Style Equity Fund | 2,634 | 37 | ||||||
|
| |||||||
69 | ||||||||
|
| |||||||
Fixed Income - 79.2% | ||||||||
RIC Russell Global Opportunistic Credit Fund Class Y | 1,995 | 21 | ||||||
RIC Russell Investment Grade Bond Fund | 9,524 | 216 | ||||||
RIC Russell Short Duration Bond Fund Class Y | 9,532 | 185 | ||||||
RIF Core Bond Fund | 36,269 | 391 | ||||||
|
| |||||||
813 | ||||||||
|
|
Shares | Market Value $ | |||||||
International Equities - 8.9% | ||||||||
RIC Russell Global Equity Fund Class Y | 6,454 | 53 | ||||||
RIF Non-U.S. Fund | 4,186 | 38 | ||||||
|
| |||||||
91 | ||||||||
|
| |||||||
Real Assets - 6.2% | ||||||||
RIC Russell Commodity Strategies Fund | 2,347 | 21 | ||||||
RIC Russell Global Infrastructure Fund Class Y | 2,026 | 21 | ||||||
RIF Global Real Estate Securities Fund | 1,509 | 22 | ||||||
|
| |||||||
64 | ||||||||
|
| |||||||
Total Investments - 101.0% (identified cost $1,016) | 1,037 | |||||||
Other Assets and Liabilities, Net - (1.0%) | (10 | ) | ||||||
|
| |||||||
Net Assets - 100.0% | 1,027 | |||||||
|
|
Presentation of Portfolio Holdings — June 30, 2012 (Unaudited)
Categories | % of Net Assets | |||
Domestic Equities | 6 .7 | |||
Fixed Income | 79.2 | |||
International Equities | 8 .9 | |||
Real Assets | 6 .2 | |||
|
| |||
Total Investments | 101.0 | |||
Other Assets and Liabilities, Net | (1.0 | ) | ||
|
| |||
100.0 | ||||
|
|
See accompanying notes which are an integral part of the financial statements.
4 | Conservative Strategy Fund |
Table of Contents
Russell Investment Funds
Conservative Strategy Fund
Statement of Assets and Liabilities — June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Assets | ||||
Investments, at identified cost | $ | 1,016 | ||
Investments, at market | 1,037 | |||
Receivables: | ||||
From affiliates | 4 | |||
|
| |||
Total assets | 1,041 | |||
|
| |||
Liabilities | ||||
Payables: | ||||
Accrued fees to affiliates | — | * | ||
Other accrued expenses | 14 | |||
|
| |||
Total liabilities | 14 | |||
|
| |||
Net Assets | $ | 1,027 | ||
|
| |||
Net Assets Consist of: | ||||
Undistributed (overdistributed) net investment income | $ | 1 | ||
Accumulated net realized gain (loss) | 2 | |||
Unrealized appreciation (depreciation) on investments | 21 | |||
Shares of beneficial interest | 1 | |||
Additional paid-in capital | 1,002 | |||
|
| |||
Net Assets | $ | 1,027 | ||
|
| |||
Net Asset Value, offering and redemption price per share: | ||||
Net asset value per share(a) | $ | 9.86 | ||
Net assets | $ | 1,027,352 | ||
Shares outstanding ($.01 par value) | 104,190 |
* | Less than $500. |
(a) | 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.
Statement of Assets and Liabilities | 5 |
Table of Contents
Russell Investment Funds
Conservative Strategy Fund
Statement of Operations — For the Period Ended June 30, 2012 (Unaudited)
Amounts in thousands | ||||
Investment Income | ||||
Income distribution from Underlying Funds | $ | 9 | ||
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Expenses | ||||
Advisory fees | 1 | |||
Administrative fees | — | * | ||
Custodian fees | 4 | |||
Transfer agent fees | — | * | ||
Professional fees | 4 | |||
Trustees’ fees | — | * | ||
Printing fees | — | * | ||
Miscellaneous | 3 | |||
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Expenses before reductions | 12 | |||
Expense reductions | (12 | ) | ||
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Net expenses | — | * | ||
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Net investment income (loss) | 9 | |||
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Net Realized and Unrealized Gain (Loss) | ||||
Net realized gain (loss) on: | ||||
Investments | 1 | |||
Capital gain distributions from Underlying Funds | 1 | |||
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Net realized gain (loss) | 2 | |||
Net change in unrealized appreciation (depreciation) on investments | 35 | |||
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Net realized and unrealized gain (loss) | 37 | |||
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Net Increase (Decrease) in Net Assets from Operations | $ | 46 | ||
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* | Less than $500. |
See accompanying notes which are an integral part of the financial statements.
6 | Statement of Operations |
Table of Contents
Russell Investment Funds
Conservative Strategy Fund
Statements of Changes in Net Assets
Amounts in thousands | Period Ended June 30, 2012 (Unaudited) | Fiscal Year Ended | ||||||
Increase (Decrease) in Net Assets | ||||||||
Operations | ||||||||
Net investment income (loss) | $ | 9 | $ | 11 | ||||
Net realized gain (loss) | 2 | 5 | ||||||
Net change in unrealized appreciation (depreciation) | 35 | (14 | ) | |||||
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Net increase (decrease) in net assets from operations | 46 | 2 | ||||||
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Distributions | ||||||||
From net investment income | (8 | ) | (11 | ) | ||||
From net realized gain | (5 | ) | — | |||||
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Net decrease in net assets from distributions | (13 | ) | (11 | ) | ||||
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Share Transactions | ||||||||
Net increase (decrease) in net assets from share transactions | 20 | 983 | ||||||
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Total Net Increase (Decrease) in Net Assets | 53 | 974 | ||||||
Net Assets | ||||||||
Beginning of period | 974 | — | ||||||
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End of period | $ | 1,027 | $ | 974 | ||||
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Undistributed (overdistributed) net investment income included in net assets | $ | 1 | $ | — |
* | For the period May 3, 2011 (commencement of operations) to December 31, 2011. |
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets | 7 |
Table of Contents
Russell Investment Funds
Conservative Strategy Fund
Financial Highlights
For a Share Outstanding Throughout Each Period.
$ Net Asset Value, Beginning of Period | $ Net Investment Income (Loss)(a)(b)(f) | $ Net Realized and Unrealized Gain (Loss) | $ Total from Investment Operations | $ Distributions from Net Investment Income | $ Distributions from Net Realized Gain | $ Total Distributions | ||||||||||||||||||||||
June 30, 2012(1) | 9.59 | .10 | .30 | .40 | (.08 | ) | (.05 | ) | (.13 | ) | ||||||||||||||||||
December 31, 2011(2) | 10.00 | .29 | (.49 | ) | (.20 | ) | (.21 | ) | — | (g) | (.21 | ) |
See accompanying notes which are an integral part of the financial statements.
8 | Financial Highlights |
Table of Contents
$ Net Asset Value, End of Period | % Total Return(c)(h) | $ Net Assets, End of Period (000) | % Ratio of Expenses to Average Net Assets, Gross(d)(e) | % Ratio of Expenses to Average Net Assets, Net(d)(e)(f) | % Ratio of Net Investment Income to Average Net Assets(b)(c)(f) | % Portfolio Turnover Rate(c) | ||||||||||||||||||||
9.86 | 4.19 | 1,027 | 2.54 | .10 | .98 | 55 | ||||||||||||||||||||
9.59 | (1.96 | ) | 974 | 18.39 | .10 | 3.10 | 5 |
See accompanying notes which are an integral part of the financial statements.
Financial Highlights | 9 |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Highlights — June 30, 2012 (Unaudited)
(1) | For the period ended June 30, 2012 (Unaudited). |
(2) | For the period May 3, 2011 (commencement of operations) to December 31, 2011. |
(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) | Periods less than one year are not annualized. |
(d) | The ratios for periods less than one year are annualized. |
(e) | 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. |
(f) | May reflect amounts waived and reimbursed by Russell Investment Management Company (“RIMCo”). |
(g) | Less than $.01 per share. |
(h) | The total return does not reflect any Insurance Company Separate Account or Policy Charges. |
See accompanying notes which are an integral part of the financial statements.
10 | Notes to Financial Highlights |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements — June 30, 2012 (Unaudited)
1. | Organization |
Russell Investment Funds (the “Investment Company” or “RIF”) is a series investment company with 10 different investment portfolios referred to as Funds. These financial statements report on the Conservative Strategy Fund (the “Fund”). The Investment Company provides the investment base for one or more variable insurance products issued by one or more insurance companies. The Fund is offered at net asset value to qualified insurance company separate accounts offering variable insurance products. The Investment Company is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. It is organized and operated as a Massachusetts business trust under an Amended and Restated Master Trust Agreement dated October 1, 2008, as amended (“Master Trust Agreement”). The Investment Company’s Master Trust Agreement permits the Board of Trustees (the “Board”) to issue an unlimited number of shares of beneficial interest.
The Fund seeks to achieve its objective by investing in a combination of Russell Investment Company (“RIC”) funds and other of the Investment Company’s Funds (together, the “Underlying Funds”) as set forth in the table below. Russell Investment Management Company (“RIMCo”), the Fund’s investment adviser, may modify the target asset allocation for any Fund and/or the Underlying Funds in which the Fund invests from time to time based on capital markets research or on factors such as RIMCo’s outlook for the economy, financial markets generally and/or relative market valuation of the asset classes represented by each Underlying Fund. Modifications in the allocations to the Underlying Funds are typically based on strategic, long-term allocation decisions. The 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 +/- 3% at the equities, fixed income or real asset category level based on RIMCo’s assessment of relative market valuation of the asset classes represented by each Underlying Fund, (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. In the future, the Fund may also invest in other Underlying Funds that pursue investment strategies not pursued by the current Underlying Funds or represent asset classes which are not currently represented by the Underlying Funds.
Asset Allocation Targets as of May 1, 2012*
Type of Underlying Funds | Conservative Strategy Fund | |||
Equity | 11-21 | % | ||
Fixed Income | 73-83 | % | ||
Real Asset | 1-11 | % | ||
Equity Underlying Funds | ||||
RIF Multi-Style Equity Fund | 0-8 | % | ||
RIC Russell U.S. Quantitative Equity Fund | 0-8 | % | ||
RIF Non-U.S. Fund | 0-10 | % | ||
RIC Russell Global Equity Fund | 0-10 | % | ||
Fixed Income Underlying Funds | ||||
RIC Russell Global Opportunistic Credit Fund | 0-7 | % | ||
RIF Core Bond Fund | 33-43 | % | ||
RIC Russell Investment Grade Bond Fund | 15-25 | % | ||
RIC Russell Short Duration Bond Fund | 13-23 | % | ||
Real Asset Underlying Funds** | ||||
RIC Russell Commodity Strategies Fund | 0-7 | % | ||
RIC Russell Global Infrastructure Fund | 0-7 | % | ||
RIF Global Real Estate Securities Fund | 0-7 | % |
* | Prospectus dated May 1, 2012. As described above, actual asset allocation may vary. |
** | A real asset is a tangible or physical asset that typically has intrinsic value. Examples of real assets include land, property, equipment, raw materials or infrastructure. The RIC Russell Commodity Strategies, RIC Russell Global Infrastructure and RIF Global Real Estate Securities Funds invest in securities that provide exposure to real assets. |
2. | Significant Accounting Policies |
The Fund’s 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 following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements.
Notes to Financial Statements | 11 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
Security Valuation
The Fund values its portfolio securities, the shares of the Underlying Funds, at the current net asset value per share of each Underlying Fund.
Fair value of securities is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. To increase consistency and comparability in fair value measurement, the fair value hierarchy was established to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset, including assumptions about risk, (e.g., the risk inherent in a particular valuation technique, such as a pricing model or the risks inherent in the inputs to a particular valuation technique). Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy of inputs is summarized in the three broad levels listed below.
Level 1 — quoted prices (unadjusted) in active markets for identical investments.
Level 2 — other significant observable inputs including quoted market prices in non-active markets or prices derived from market data.
Level 3 — significant unobservable inputs including the Fund’s own assumptions in determining the fair value of investments.
The levels associated with valuing the Fund’s investments for the period ended June 30, 2012 were Level 1.
Investment Transactions
Investment transactions are reflected as of the trade date for financial reporting purposes. This may cause the net asset value stated in the financial statements to be different from the net asset value at which shareholders may transact. Realized gains and losses from securities transactions, if any, are recorded on the basis of specific identified cost.
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, the Fund is a separate corporate taxpayer and determines its net investment income and capital gains (or losses) and the amounts to be distributed to the Fund’s shareholders without regard to the income and capital gains (or losses) of the other Funds.
The Fund qualifies as a regulated investment company and distributes all of its taxable income and capital gains. Therefore, no federal income tax provision was required for the Fund.
The Fund files a U. S. tax return. At June 30, 2012, the Fund has 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. The Fund is 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 Fund complies with the authoritative guidance for uncertainty in income taxes which requires management to determine whether a tax position of the Fund 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 its 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 Fund to avoid imposition of federal income and excise tax on any remaining undistributed capital gains and net investment income.
12 | Notes to Financial Statements |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
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 relate primarily to investments in the Underlying Funds sold at a loss, wash sale deferrals and capital loss carryforwards. Accordingly, the Fund may periodically make reclassifications among certain of their capital accounts without impacting their net asset values.
Expenses
Expenses included in the accompanying financial statements reflect the expenses of the Fund and do not include those expenses incurred by the Underlying Funds. Because the Underlying Funds have varied expense and fee levels and the Fund may own different proportions of the Underlying Funds at different times, the amount of the fees and expenses incurred indirectly by the Fund will vary.
Guarantees
In the normal course of business, the Fund enters into contracts that contain a variety of representations which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund expects the risk of loss to be remote.
Market, Credit and Counterparty Risk
In the normal course of business, the 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 Underlying Funds may be exposed to counterparty risk or risk that an institution or other entity with which the Underlying Funds have unsettled or open transactions will default. The potential loss could exceed the value of the assets recorded in the Underlying Funds’ financial statements (the “Assets”). The Assets, which potentially expose the Underlying Funds to credit risk, consist principally of cash due from counterparties and investments. The extent of the Underlying Funds’ exposure to credit and counterparty risks with respect to the Assets approximates their carrying value as recorded in the Underlying Funds’ Statements of Assets and Liabilities.
3. | Investment Transactions |
Securities
During the period ended June 30, 2012, purchases and sales of the Fund (excluding short-term investments) were as follows:
Purchases | Sales | |||||||
Conservative Strategy Fund | $ | 584,094 | $ | 579,718 |
4. | Related Party Transactions, Fees and Expenses |
Adviser and Administrator
RIMCo advises the Fund and Russell Fund Services Company (“RFSC”) is the Fund’s administrator. RFSC is a wholly-owned subsidiary of RIMCo. RIMCo is a wholly-owned subsidiary of Frank Russell Company (a subsidiary of The Northwestern Mutual Life Insurance Company). Frank Russell Company provides ongoing money manager research and trade placement services to RIF and RIMCo.
The advisory fee of 0.20% and administrative fee of 0.05% are based upon the average daily net assets of the Fund and are payable monthly. The following shows the total amount of each of these fees paid by the Fund for the period ended June 30, 2012.
Advisory | Administrative | |||||||
Conservative Strategy Fund | $ | 984 | $ | 246 |
RIMCo has contractually agreed, until April 30, 2013, to waive up to the full amount of its 0.20% advisory fee and then reimburse the Fund for other direct Fund-level expenses to the extent that direct Fund-level expenses exceed 0.10% 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. These waivers and reimbursements may not be terminated during the relevant period except with Board approval.
Notes to Financial Statements | 13 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
For the period ended June 30, 2012, RIMCo waived/reimbursed the following expenses:
Waiver | Reimbursement | Total | ||||||||||
Conservative Strategy Fund | $ | 984 | $ | 11,026 | $ | 12,010 |
RIMCo does not have the ability to recover amounts waived or reimbursed from previous periods.
Transfer and Dividend Disbursing Agent
RFSC serves as Transfer and Dividend Disbursing Agent for the Investment Company. For this service, RFSC is paid a fee based upon the average daily net assets of the Fund for transfer agency and dividend disbursing services. RFSC retains a portion of this fee for its services provided to the Fund and pays the balance to unaffiliated agents who assist in providing these services. Total fees paid for the Fund presented herein for the period ended June 30, 2012 were as follows:
Amount | ||||
Conservative Strategy Fund | $ | 22 |
Distributor
Russell Financial Services, Inc. (the “Distributor”), a wholly-owned subsidiary of RIMCo, 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.
Accrued Fees Payable to Affiliates
Accrued fees payable to affiliates for the period ended June 30, 2012 were as follows:
Conservative Strategy Fund | ||||
Administration fees | $ | 38 | ||
Transfer agent fees | 3 | |||
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$ | 41 | |||
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Board of Trustees
The Russell Fund Complex consists of RIC, which has 38 funds, and RIF, which has 10 funds. Each of the Trustees is a Trustee of both RIC and RIF. During the period, the Russell Fund Complex paid each of its independent Trustees a retainer of $75,000 per year; each of its interested Trustees a retainer of $65,000 per year; and each Trustee $7,000 for each regularly scheduled meeting attended in person, $3,500 for each special meeting and the Annual 38a-1 meeting attended in person, and for each Audit Committee meeting, Nominating and Governance Committee meeting, Investment Committee meeting or any other committee meeting established and approved by the Board that is attended in person. Each Trustee receives a $1,000 fee for attending regularly scheduled and special meetings by phone instead of receiving the full fee had the member attended in person (except for telephonic meetings called pursuant to the Funds’ valuation and pricing procedures) and a $500 fee for attending the committee meeting by phone instead of receiving the full fee had the member attended in person. Trustees’ out-of-pocket expenses are also paid by the Russell Fund Complex. The Audit Committee Chair and Investment Committee Chair are each paid a fee of $15,000 per year and the Nominating and Governance Committee Chair is paid a fee of $6,000 per year. The chairman of the Board receives additional annual compensation of $75,000. Ms. Cavanaugh is not compensated by the Russell Fund Complex for her service as Trustee.
14 | Notes to Financial Statements |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
Transactions with Affiliated Companies
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. Transactions during the period ended June 30, 2012, with Underlying Funds which are, or were, an affiliated company are as follows:
| Market Value | Purchases Cost | Sales Cost | Realized Gain (Loss) | Income Distributions | Capital Gains Distributions | ||||||||||||||||||
Conservative Strategy Fund | ||||||||||||||||||||||||
RIF Multi-Style Equity Fund | $ | 37 | $ | 25 | $ | 20 | $ | 1 | $ | — | $ | — | ||||||||||||
RIC Russell U.S. Quantitative Equity Fund | 32 | 18 | 19 | 1 | — | — | ||||||||||||||||||
RIF Core Bond Fund | 391 | 206 | 206 | — | 4 | 1 | ||||||||||||||||||
RIC Russell Global Opportunistic Credit Fund | 21 | 14 | 15 | — | — | — | ||||||||||||||||||
RIC Russell Investment Grade Bond Fund | 216 | 122 | 110 | — | 2 | — | ||||||||||||||||||
RIC Russell Short Duration Bond Fund | 185 | 99 | 95 | — | 2 | — | ||||||||||||||||||
RIF Non-U.S. Fund | 38 | 30 | 44 | — | 1 | — | ||||||||||||||||||
RIC Russell Global Equity Fund | 53 | 33 | 32 | — | — | — | ||||||||||||||||||
RIF Global Real Estate Securities Fund | 22 | 12 | 13 | — | — | — | ||||||||||||||||||
RIC Russell Commodity Strategies Fund | 21 | 13 | 12 | (1 | ) | — | — | |||||||||||||||||
RIC Russell Global Infrastructure Fund | 21 | 12 | 12 | — | — | — | ||||||||||||||||||
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$ | 1,037 | $ | 584 | $ | 579 | $ | 1 | $ | 9 | $ | 1 | |||||||||||||
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5. | Federal Income Taxes |
At December 31, 2011, the Fund did not have any capital loss carryforward. Should the Fund have capital loss carryforwards, they may be applied against any net realized taxable gains. Under the Regulated Investment Company Modernization Act of 2010, the Fund 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.
At June 30, 2012, the cost of investments and net unrealized appreciation (depreciation) for tax purposes was as follows:
Conservative Strategy Fund | ||||
Cost of Investments | $ | 1,018,064 | ||
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Unrealized Appreciation | 21,250 | |||
Unrealized Depreciation | (1,887 | ) | ||
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Net Unrealized Appreciation (Depreciation) | $ | 19,363 | ||
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6. | Fund Share Transactions (amounts in thousands) |
Share transactions for the periods ended June 30, 2012 and December 31, 2011 were as follows:
Shares | Dollars | |||||||||||||||
Conservative Strategy Fund | 2012 | 2011* | 2012 | 2011* | ||||||||||||
Proceeds from shares sold | 55 | 101 | $ | 536 | $ | 973 | ||||||||||
Proceeds from reinvestment of distributions | 1 | 1 | 13 | 10 | ||||||||||||
Payments for shares redeemed | (53 | ) | — | (529 | ) | — | ||||||||||
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Total increase (decrease) | 3 | 102 | $ | 20 | $ | 983 | ||||||||||
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* | For the period May 3, 2011 (commencement of operations) to December 31, 2011. |
Notes to Financial Statements | 15 |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Notes to Financial Statements, continued — June 30, 2012 (Unaudited)
7. | Interfund Lending Program |
The Fund has been granted permission from the Securities and Exchange Commission to participate in a joint lending and borrowing facility (the “Credit Facility”). The Fund may borrow money from each other for temporary purposes. All such borrowing and lending will be subject to a participating Fund’s fundamental investment limitations. A lending fund will lend through the program only when the returns are higher than those available from an investment in repurchase agreements or short-term reserves and the portfolio manager determines it is in the best interest of the lending fund. The Fund will borrow through the program only when the costs are equal to or lower than the cost of bank loans. Interfund loans and borrowings normally extend overnight, but can have a maximum duration of seven days. Loans may be called on one business day’s notice. A participating Fund may have to borrow from a bank at a higher interest rate if an interfund loan is called or not renewed. Any delay in repayment to the lending fund could result in a lost investment opportunity or additional borrowing costs. For the period ended June 30, 2012, the Fund did not borrow or loan through the interfund lending program.
8. | Record Ownership |
As of June 30, 2012, the following table includes shareholders of record with greater than 10% of the total outstanding shares of the Fund.
# of Shareholders | % | |||||||
Conservative Strategy Fund | 1 | 100.0 |
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 except the following:
As of August 15, 2012, the RIF LifePoints Funds are changing their asset allocations to new target allocations. The RIC Russell Multi-Strategy Alternative Fund and the RIC Russell U.S. Dynamic Equity Fund, both new Underlying Funds, will be added to the RIF LifePoints Funds allocations as part of the new target allocations.
New Target Asset Allocation to Underlying Funds Effective August 15, 2012:
The following table shows the Underlying Funds in which the Fund will invest and the expected approximate target allocation to each Underlying Fund. However, the actual target strategic asset allocation on August 15, 2012 may vary slightly.
Expected Target Strategic Asset Allocation of the Fund to the Underlying Funds as of August 15, 2012*
Type of Underlying Fund | Conservative Strategy Fund | Type of Underlying Fund | Conservative Strategy Fund | |||||||
Equity | 9-19 | % | Fixed Income Underlying Funds | |||||||
Fixed Income | 73-83 | % | RIC Russell Global Opportunistic Credit Fund | 0-7 | % | |||||
Alternative | 3-13 | % | RIF Core Bond Fund | 33-43 | % | |||||
Equity Underlying Funds | RIC Russell Investment Grade Bond Fund | 15-25 | % | |||||||
RIF Multi-Style Equity Fund | 0-7 | % | RIC Russell Short Duration Bond Fund | 13-23 | % | |||||
RIC Russell U.S. Defensive Equity Fund** | 0-8 | % | Alternative Underlying Funds# | |||||||
RIC Russell U.S. Dynamic Equity Fund*** | 0-6 | % | RIC Russell Commodity Strategies Fund | 0-7 | % | |||||
RIF Non-U.S. Fund | 0-9 | % | RIC Russell Global Infrastructure Fund | 0-7 | % | |||||
RIC Russell Global Equity Fund | 0-9 | % | RIF Global Real Estate Securities Fund | 0-7 | % | |||||
RIC Russell Multi-Strategy Alternative Fund*** | 0-7 | % |
* | Actual asset allocation may vary. |
** | Effective August 15, 2012. the RIC Russell U.S. Quantitative Equity Fund changed its investment strategy from a quantitative investment approach to investing in defensive stocks and discontinued its limited long-short strategy. The fund was renamed the RIC Russell U.S. Defensive Equity Fund. |
*** | The RIC Russell U.S. Dynamic Equity Fund and RIC Russell Multi-Strategy Alternative Fund are new Underlying Funds. Effective August 15, 2012, the RIC Russell U.S. Growth Fund changed its investment strategy from investing in growth stocks to investing in dynamic stocks and implemented a limited long-short strategy. The fund was renamed the RIC Russell U.S. Dynamic Equity Fund. |
# | Alternative Underlying Funds seek low correlation to equity and/or fixed income investments. The RIC Russell Commodity Strategies, RIC Russell Global Infrastructure, RIF Russell Global Real Estate Securities and RIC Russell Multi-Strategy Alternative Funds seek these characteristics. |
16 | Notes to Financial Statements |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
Basis for Approval of Investment Advisory Contracts — (Unaudited)
Approval of Investment Advisory Agreement
The Board of Trustees, including all of the Independent Trustees, last considered and approved the continuation of the advisory agreement with RIMCo (the “RIMCo Agreement”) and the portfolio management contract with each Money Manager of the funds (collectively, the “portfolio management contracts”) in which the Fund invests (the “Underlying Funds”) at a meeting held in person on April 24, 2012 (the “Agreement Evaluation Meeting”). During the course of a year, the Trustees receive a wide variety of materials regarding the investment performance of the Fund, sales and redemptions of the Fund’s and Underlying Funds’ shares, management of the Fund and the Underlying Funds by RIMCo and compliance with applicable regulatory requirements. In preparation for the annual review, the Independent Trustees, with the advice and assistance of their independent counsel, also requested and the Board considered (1) information and reports prepared by RIMCo relating to the services provided by RIMCo (and its affiliates) to the Fund and the Underlying Funds; and (2) information (the “Third-Party Information”) received from an independent, nationally recognized provider of investment company information comparing the performance of the Fund and the Underlying Funds and their respective operating expenses over various periods of time with other peer funds not managed by RIMCo, believed by the provider to be generally comparable in investment objectives to the Fund and the Underlying Funds. In the case of the Fund, its other peer funds are collectively hereinafter referred to as the Fund’s “Comparable Funds,” and, with the Fund, such Comparable Funds are collectively hereinafter referred to as the Fund’s “Performance Universe” in the case of performance comparisons and the Fund’s “Expense Universe” in the case of operating expense comparisons. The Third-Party Information may reflect changes in the Comparable Funds requested by RIMCo, which changes were noted in the Third-Party Information. The foregoing information requested by the Trustees or provided by RIMCo is collectively called the “Agreement Evaluation Information.” The Trustees’ evaluations also reflected the knowledge and familiarity gained as Board members of the Fund and other funds in the same complex with respect to services provided by RIMCo, RIMCo’s affiliates and each Money Manager. The Trustees received a memorandum from counsel to the Fund and Underlying Funds discussing the legal standards for their consideration of the continuations of the RIMCo Agreement and the portfolio management contracts, and the Independent Trustees separately received a memorandum regarding their responsibilities from their independent counsel.
On April 16, 2012, the Independent Trustees in preparation for the Agreement Evaluation Meeting met by conference telephone call to review the Agreement Evaluation Information received to that date in a private session with their independent counsel at which no representatives of RIMCo or the Fund’s management were present and, on the basis of that review, requested additional Agreement Evaluation Information. The Independent Trustees also met in person on April 23, 2012, in executive session with their independent counsel, to review additional Agreement Evaluation Information received to that date. At the Agreement Evaluation Meeting, the Board, including the Independent Trustees, reviewed the proposed continuance of the RIMCo Agreement and the portfolio management contracts with management, counsel to the Fund and Underlying Funds and independent counsel to the Independent Trustees. Presentations made by RIMCo to the Board at the Agreement Evaluation Meeting as part of this review encompassed the Fund and all other RIMCo-managed funds for which the Board has supervisory responsibility. Prior to voting at the Agreement Evaluation Meeting, the Independent Trustees again met in executive session with their independent counsel to consider additional Agreement Evaluation Information received from RIMCo and management at the Agreement Evaluation Meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, the Board considered RIMCo’s advice that the Underlying Funds, in employing a manager-of-managers method of investment, operate in a manner that is distinctly different from most other investment companies. In the case of most other investment companies, an advisory fee is paid by the investment company to its adviser which, in turn, employs and compensates individual portfolio managers to make specific securities selections consistent with the adviser’s style and investment philosophy. RIMCo has engaged multiple unaffiliated Money Managers for all Underlying Funds.
The Board considered that RIMCo (rather than any Money Manager) is responsible under the RIMCo Agreement for allocating assets of the Fund among its Underlying Funds and for determining, implementing and maintaining the investment program for each Underlying Fund. The assets of the Fund are invested in different combinations of the Underlying Funds pursuant to target asset allocations set by RIMCo. RIMCo may modify the target asset allocation for the Fund and/or the Underlying Funds in which the Fund invests. Assets of each Underlying Fund generally have been allocated among the multiple Money Managers selected by RIMCo, subject to Board approval, for that Underlying Fund. RIMCo managed directly a portion of one Underlying Fund’s assets employing a “select holdings strategy,” as described below, during 2011 and a portion of 2012, and generally directly manages the investment of each Underlying Fund’s cash. RIMCo also may manage directly any portion of each Underlying Fund’s assets that RIMCo determines not to allocate to the Money Managers and portions of an Underlying Fund during transitions between Money Managers. RIMCo may also manage the Fund’s assets to manage risk in the Fund’s investment portfolio. In all cases, assets are managed directly by RIMCo pursuant to authority provided by the RIMCo Agreement.
RIMCo is responsible for selecting, subject to Board approval, Money Managers for each Underlying Fund and for actively managing allocations and reallocations of its assets among the Money Managers. The Board has been advised that RIMCo’s goal is to construct
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and manage diversified portfolios in a risk-aware manner. Each Money Manager for an Underlying Fund in effect performs the function of an individual portfolio manager who is responsible for selecting portfolio securities for the portion of the Underlying Fund assigned to it by RIMCo (each, a “segment”) in accordance with the Underlying Fund’s applicable investment objective, policies and restrictions, any constraints placed by RIMCo upon their selection of portfolio securities and the Money Manager’s specified role in an Underlying Fund. RIMCo is responsible for communicating performance expectations to each Money Manager; supervising compliance by each Money Manager with each Underlying Fund’s investment objective and policies; authorizing Money Managers to engage in certain investment strategies for an Underlying Fund; and recommending annually to the Board whether portfolio management contracts should be renewed, modified or terminated. In addition to its annual recommendation as to the renewal, modification or termination of portfolio management contracts, RIMCo is responsible for recommending to the Board additions of new Money Managers or replacements of existing Money Managers at any time when, based on RIMCo’s research and ongoing review and analysis, such actions are appropriate. RIMCo may impose specific investment constraints from time to time for each Money Manager intended to capitalize on the strengths of that Money Manager or to coordinate the investment activities of Money Managers for an Underlying Fund in a complementary manner. Therefore, the performance of individual Money Managers for an Underlying Fund may reflect the roles assigned to them by RIMCo in the Underlying Fund’s investment activities and any constraints placed by RIMCo upon their selection of portfolio securities. In light of the foregoing, the overall performance of each Underlying Fund over appropriate periods reflects, in great part, the performance of RIMCo in designing the Underlying Fund’s investment program, structuring an Underlying Fund, selecting an effective Money Manager with a particular investment style or sub-style for a segment that is complementary to the styles of the Money Managers of other Underlying Fund segments, and allocating assets among the Money Managers in a manner designed to achieve the objectives of the Underlying Fund.
The Board considered that the prospectuses for the Fund and the Underlying Funds and other public disclosures emphasize to investors RIMCo’s role as the principal investment manager for each Underlying Fund, rather than the investment advisory or security selection role of the Underlying Funds’ Money Managers, and describe the manner in which the Fund or Underlying Funds operate so that investors may take that information into account when deciding to purchase shares of the Fund. The Board further considered that Fund investors in pursuing their investment goals and objectives likely purchased their shares on the basis of this information and RIMCo’s reputation for and performance record in managing the Underlying Funds’ manager-of-managers structure.
The Board also considered the demands and complexity of managing the Underlying Funds pursuant to the manager-of-managers structure, the special expertise of RIMCo with respect to the manager-of-managers structure of the Underlying Funds and the likelihood that, at the current expense ratio of each Underlying Fund, there would be no acceptable alternative investment managers to replace RIMCo on comparable terms given the need to continue the manager-of-managers strategy of such Underlying Fund selected by shareholders in purchasing their shares of the Fund or Underlying Fund.
In addition to these general factors relating to the manager-of-managers structure of the Underlying Funds, the Trustees considered, with respect to the Fund and Underlying Fund, various specific factors in evaluating renewal of the RIMCo Agreement, including the following:
1. | The nature, scope and overall quality of the investment management and other services provided, and expected to be provided, to the Fund or the Underlying Fund by RIMCo; |
2. | The advisory fee paid by the Fund or the Underlying Fund to RIMCo (the “Advisory Fee”) and the fact that it encompasses all investment advisory fees paid by the Fund or Underlying Fund, including the fees for any Money Managers of such Underlying Fund; |
3. | Information provided by RIMCo as to other fees and benefits received by RIMCo or its affiliates from the Fund or Underlying Fund, including any administrative, transfer agent or cash management fees and any fees received for management of securities lending cash collateral, soft dollar arrangements and commissions in connection with portfolio securities transactions; |
4. | Information provided by RIMCo as to expenses incurred by the Fund or the Underlying Fund; and |
5. | Information provided by RIMCo as to the profits that RIMCo derives from its mutual fund operations generally and from the Fund or Underlying Fund. |
In evaluating the nature, scope and overall quality of the investment management and other services provided, and which are expected to be provided, to the Fund, including Fund portfolio management services, the Board discussed with senior representatives of RIMCo the impact on the Fund’s operations of significant changes in RIMCo’s senior management and other personnel providing investment advisory and other services to the Fund since 2011 to the date of the Agreement Evaluation Meeting. At the Agreement Evaluation Meeting, RIMCo assured the Board that such changes have not resulted and are not expected to result in any diminution in the nature, scope or quality of the investment advisory or other services provided to the Fund or the Underlying
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Funds. The Board also discussed the impact of organizational changes on the compliance programs of the Fund, the Underlying Funds and RIMCo with the Fund’s Chief Compliance Officer (the “CCO”) and received assurances from the CCO that such changes have not resulted in any diminution in the scope and quality of the compliance programs of the Fund or the Underlying Funds.
As noted above, RIMCo, pursuant to the terms of the RIMCo Agreement, directly managed a portion—up to 10%—of the assets of the RIF Multi-Style Equity Fund (the “Participating Underlying Fund”) utilizing a select holdings strategy (the “select holdings strategy”) during 2011 and a portion of 2012, the actual allocation being determined by the Participating Underlying Fund’s RIMCo portfolio manager. The Board considered that the select holdings strategy utilized by RIMCo in managing such assets for the Participating Underlying Fund was designed to increase the Participating Underlying Fund’s exposure to stocks that were viewed as attractive by multiple Money Managers of the Participating Underlying Fund. The select holdings strategy was discontinued during 2012 with respect to the Participating Underlying Fund. The Board considered the impact of the select holdings strategy upon the investment results of the Participating Underlying Fund. The Board also considered that during the periods that the select holdings strategy was utilized for the Participating Underlying Fund, RIMCo was not required to pay investment advisory fees to a Money Manager with respect to assets for which the select holdings strategy was employed and that the profits derived by RIMCo generally, and from the Participating Underlying Fund consequently, may have increased incrementally. The Board, however, further considered RIMCo’s advice that it paid certain Money Managers additional fees for providing information and other services in connection with the select holdings strategy and incurred additional costs in carrying out the select holdings strategy; the limited amount of assets that were managed directly by RIMCo pursuant to the select holdings strategy; and the fact that the aggregate investment Advisory Fees paid by the Participating Underlying Fund were not increased as a result of the select holdings strategy.
In evaluating the reasonableness of the Fund’s and Underlying Funds’ Advisory Fees in light of Fund and Underlying Fund performance, the Board considered that, in the Agreement Evaluation Information and at past meetings, RIMCo noted differences between the investment strategies of certain Underlying Funds and their respective Comparable Funds in pursuing their investment objectives, including fund strategies which seek to achieve a lower tracking error (i.e., the difference, whether positive or negative, between the return of a fund and its benchmark) and resulting lower return volatility than their Comparable Funds. According to RIMCo, these strategies may be expected to result, and for certain Underlying Funds during the periods covered by the Third-Party Information did result, in lower performance of the Underlying Funds than that of some of their Comparable Funds. According to RIMCo, the strategies pursued by the Underlying Funds, among other things, are intended to result in less volatile, more moderate returns relative to each Underlying Fund’s performance benchmark rather than more volatile, more extreme returns that its Comparable Funds may experience over time.
In discussing the Advisory Fees for the Underlying Funds generally, RIMCo noted, among other things, that its Advisory Fees for the Underlying Funds encompass services that may not be provided by investment advisers to the Underlying Funds’ Comparable Funds, such as cash equitization and management of portfolio transition costs when Money Managers are added, terminated or replaced. RIMCo also observed that its “margins” in providing investment advisory services to the Underlying Funds tend to be lower than competitors’ margins because of the demands and complexities of managing the Underlying Funds’ manager-of-managers structure, including RIMCo’s payment of a significant portion of the Underlying Funds’ Advisory Fees to their Money Managers. RIMCo expressed the view that Advisory Fees should be considered in the context of the Fund’s or Underlying Fund’s total expense ratio to obtain a complete picture. The Board, however, considered the Fund’s and Underlying Fund’s Advisory Fee on both a standalone basis and in the context of the Fund’s or Underlying Fund’s total expense ratio.
The Board considered for the Fund and Underlying Fund whether economies of scale have been realized and whether the Advisory Fee for the Fund or Underlying Fund appropriately reflects or should be revised to reflect any such economies. The Board determined that, after giving effect to any applicable fee or expense caps, waivers or reimbursements, the Advisory Fee for the Fund or Underlying Fund appropriately reflected any economies of scale realized by that Fund, based upon such factors as the variability of Money Manager investment advisory fees and other factors associated with the manager-of-managers structure employed by the Underlying Funds.
The Board considered, as a general matter, that fees payable to RIMCo by institutional clients with investment objectives similar to those of the Fund, the Underlying Funds and other RIF funds under the Board’s supervision, including the Underlying Funds, are lower, and, in some cases, may be substantially lower, than the rates paid by the RIF funds supervised by the Board, including the Fund. The Trustees considered the differences in the nature and scope of services RIMCo provides to institutional clients and the funds under its supervision, including the Underlying Funds. RIMCo explained, among other things, that institutional clients have fewer administrative needs than the Funds. RIMCo also noted that since the Fund must constantly issue and redeem its shares, it is more difficult to manage than institutional accounts, where assets are relatively stable. In addition, RIMCo noted that the Fund is subject to heightened regulatory requirements relative to institutional clients. The Board noted that RIMCo provides office space and facilities to the Fund and Underlying Funds and all of the Fund’s and Underlying Funds’ officers. Accordingly, the Trustees
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Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
concluded that the services provided to the Fund and Underlying Funds are sufficiently different from the services provided to the other clients that comparisons are not probative and should not be given significant weight.
With respect to the Fund’s Advisory Fees, the Third-Party Information showed that the Advisory Fee for the Fund, on a contractual basis, was ranked in the fourth quintile of its Expense Universe but was ranked in the first quintile of its Expense Universe on an actual basis (i.e., giving effect to any voluntary fee waivers implemented by RIMCo and the advisers to the Fund’s Comparable Funds). In these rankings, the first quintile represents funds with the lowest investment advisory fees among funds in the Expenses Universe and the fifth quintile represents funds with the highest investment advisory fees among the Expense Universe funds. The comparisons were based upon the latest fiscal years for the Expense Universe funds. In assessing the Fund’s Advisory Fees, the Board focused on actual Advisory Fees.
With respect to the Fund’s total expenses, the Third-Party Information showed that the total expenses for the Fund were ranked in the second quintile of its Expense Universe. In these rankings, the first quintile represents funds with the lowest total expenses among the Expense Universe Funds and the fifth quintile represents funds with the highest total expenses among the Expense Universe Funds. On the basis of the Agreement Evaluation Information, and other information previously received by the Board from RIMCo during the course of the current year or prior years, or presented at or in connection with the Agreement Evaluation Meeting by RIMCo, the Board, in respect of the Fund and each Underlying Fund, found, after giving effect to any applicable waivers and/or reimbursements and considering differences in the composition and investment strategies of their respective Comparable Funds (1) the Advisory Fee charged by RIMCo was reasonable in light of the nature, scope and overall quality of the investment management and other services provided, and expected to be provided, to the Fund or Underlying Funds; (2) the relative expense ratio of the Fund and each Underlying Fund was comparable to those of its Comparable Funds; (3) RIMCo’s methodology of allocating expenses of operating funds in the complex was reasonable; (4) other benefits and fees received by RIMCo or its affiliates from the Fund or Underlying Funds were not excessive; and (5) RIMCo’s profitability with respect to the Fund and each Underlying Fund was not excessive in light of the nature, scope and overall quality of the investment management and other services provided by RIMCo.
In evaluating the performance of the Fund and Underlying Funds generally relative to their Comparable Funds, the Board, in addition to the factors described above, also considered RIMCo’s advice that many of the Underlying Funds’ Comparable Funds do not “equitize” their cash (i.e., cash awaiting investment or disbursement to satisfy redemptions or other fund obligations) and may hold large cash positions uninvested in their investment portfolios. By contrast, the Underlying Funds generally follow a strategy of equitizing their cash and fully investing their assets in pursuit of their investment objectives (the Underlying Funds’ strategy of equitizing cash and fully investing their assets is hereinafter referred to as their “full investment strategy”). RIMCo noted that the Underlying Funds’ full investment strategy generally will detract from their relative performance, and therefore the relative performance of the Fund, in a declining market, but may enhance the Underlying Funds’ relative performance in a rising market.
The Board concluded that, under the circumstances, the performance of the Fund was consistent with continuation of the RIMCo Agreement. In evaluating performance, the Board considered the Fund’s and each Underlying Fund’s absolute performance and performance relative to appropriate benchmarks and indices in addition to the Fund’s performance relative to its Comparable Funds. In assessing the Fund’s performance relative to its Comparable Funds or benchmark or in absolute terms, the Board also considered RIMCo’s stated investment strategy of managing the Underlying Funds in a risk-aware manner and the periodically volatile capital market conditions since 2008.
After considering the foregoing and other relevant factors, the Board concluded that continuation of the RIMCo Agreement on its current terms and conditions would be consistent with the interests of the Fund and its respective shareholders and voted to approve the continuation of the RIMCo Agreement.
At the Agreement Evaluation Meeting, with respect to the evaluation of the terms of portfolio management contracts with Money Managers for the Underlying Funds, the Board received and considered information from RIMCo reporting, among other things, for each Money Manager, the Money Manager’s performance over various periods; RIMCo’s assessment of the performance of each Money Manager; any significant business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc., the Fund’s and Underlying Funds’ underwriter; and RIMCo’s recommendation to retain the Money Manager at the current fee rate, to retain the Money Manager at a reduced fee rate or to terminate the Money Manager. The Board received reports during the course of the year from the Fund’s CCO regarding each Money Manager’s compliance program. RIMCo recommended that each Money Manager be retained at its current fee rate, although RIMCo noted its intentions to recommend terminations of some Money Managers at the Board’s May 2012 meeting in connection with planned changes to the investment programs of certain Underlying Funds. RIMCo has advised the Board that it does not regard Money Manager profitability as relevant to its evaluation of the portfolio management contracts with Money Managers because the willingness of Money Managers to serve in such capacity depends upon arm’s-length negotiations with RIMCo; RIMCo is aware of the fees charged by Money Managers to other clients; and RIMCo believes
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Basis for Approval of Investment Advisory Contracts, continued — (Unaudited)
that the fees agreed upon with Money Managers are reasonable in light of the anticipated quality of investment advisory services to be rendered. The Board accepted RIMCo’s explanation in light of the Board’s findings as to the reasonableness of the Advisory Fee paid by the Fund and each Underlying Fund and the fact that each Money Manager’s fee is paid by RIMCo.
Based substantially upon RIMCo’s recommendations, together with the Agreement Evaluation Information and other information received from RIMCo in support of its recommendations at the Agreement Evaluation Meeting, the Board concluded that the fees paid to the Money Managers of each Underlying Fund are reasonable in light of the quality of the investment advisory services provided and that continuation of the portfolio management contract with each Money Manager of each Underlying Fund would be in the best interests of such Underlying Fund and its shareholders.
In their deliberations, the Trustees did not identify any particular information as to the RIMCo Agreement or, other than RIMCo’s recommendation, the portfolio management contract with any Money Manager for an Underlying Fund that was all-important or controlling and each Trustee attributed different weights to the various factors considered. The Trustees evaluated all information available to them on a Fund-by-Fund basis and their determinations were made in respect of the Fund and each Underlying Fund.
Prior to the April 24, 2012 Agreement Evaluation Meeting, the Board of Trustees received a proposal from RIMCo at a meeting held on February 28, 2012, to effect a money manager change for the Aggressive Equity Fund. In the case of the proposed change, the Trustees approved the terms of the proposed portfolio management contract based substantially upon RIMCo’s recommendation to hire the Money Manager at the proposed fee rate; any significant business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc., the Fund’s underwriter; RIMCo’s explanation as to the lack of relevance of 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 RIMCo; RIMCo’s awareness of the fees charged by the Money Manager to other clients; and RIMCo’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 Trustees also considered their findings at their April 19, 2011 meeting as to the reasonableness of the aggregate investment advisory fees paid by the Fund, and the fact that the aggregate investment advisory fees paid by the Fund would not increase as a result of the implementation of the proposed money manager change because the money managers’ investment advisory fee is paid by RIMCo.
Subsequent to the April 24, 2012 Agreement Evaluation Meeting, the Board of Trustees received proposals from RIMCo at a meeting held on May 22, 2012, to effect a money manager change for the RIC Russell U.S. Quantitative Equity Fund, RIC Russell Emerging Markets Fund, RIF Non-U.S. Fund, RIC Russell Global Opportunistic Credit Fund, RIC Russell Investment Grade Bond Fund, RIF Core Bond Fund and RIC Russell Short Duration Bond Fund. In the case of each such proposed change, the Trustees approved the terms of the proposed portfolio management contract based substantially upon RIMCo’s recommendation to hire the Money Manager at the proposed fee rate; any significant business relationships between the Money Manager and RIMCo or Russell Financial Services, Inc., the Fund’s underwriter; RIMCo’s explanation as to the lack of relevance of 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 RIMCo; RIMCo’s awareness of the fees charged by the Money Manager to other clients; and RIMCo’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 Trustees also considered their findings at their April 24, 2012 Agreement Evaluation Meeting as to the reasonableness of the aggregate investment advisory fees paid by the Fund, and the fact that the aggregate investment advisory fees paid by the Fund would not increase as a result of the implementation of the proposed money manager change because the money managers’ investment advisory fee is paid by RIMCo.
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Shareholder Requests for Additional Information — June 30, 2012 (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 year. These reports are available (i) free of charge, upon request, by calling the Fund 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 public reference room.
The Board has delegated to RIMCo, 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 Underlying Funds may be invested. RIMCo has established a proxy voting committee and has adopted written proxy voting policies and procedures (“P&P”) and proxy voting guidelines (“Guidelines”). The Fund maintains 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 Fund. A description of the P&P, Guidelines, Portfolio Holdings Disclosure Policy and additional information about Fund Trustees are contained in the Fund’s Statement of Additional Information (“SAI”). The SAI and information regarding how the Underlying Funds voted proxies relating to portfolio securities during the most recent 12-month period ended December 31, 2011 are available (i) free of charge, upon request, by calling the Fund 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 call your Insurance Company.
Some Insurance Companies may offer electronic delivery of the Fund’s prospectuses and annual and semi-annual reports. Please contact your Insurance Company for further details.
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LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers — June 30, 2012 (Unaudited)
The following tables provide information for each officer and trustee of the Russell Fund Complex. The Russell Fund Complex consists of Russell Investment Company (“RIC”), which has 38 funds, and Russell Investment Funds (“RIF”), which has 10 funds. Each of the trustees is a trustee of both RIC and RIF. The first table provides information for the interested trustees. The second table provides information for the independent trustees. The third table provides information for the trustee emeritus. The fourth 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; 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; Mr. Fine has had financial, business and investment experience as a senior executive of a non-profit organization and previously, as a senior executive of a large regional financial services organization with management responsibility for such activities as investments, asset management and securities brokerage; 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; 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, and has been determined by the Board to be an “audit committee financial expert”; and Ms. Weston has had experience as a tax and corporate lawyer, has served as general counsel of several corporations and has served as a director of another investment company. Ms. Cavanaugh, has had experience with other financial services companies, including companies engaged in the sponsorship, management and distribution of investment companies. As a senior officer of the Funds, the Adviser and various affiliates of the Adviser providing services to the Funds, Ms. Cavanaugh is in a position to provide the Board with such parties’ perspectives on the management, operations and distribution of the Funds.
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office* | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other During the Past 5 Years | |||||||
INTERESTED TRUSTEES | ||||||||||||
# Sandra Cavanaugh, Born May 10, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | President and Chief Executive Officer since 2010
Trustee since 2010 | Appointed until successor is duly elected and qualified
Until successor is chosen and qualified by Trustees | • President and CEO RIC and RIF • Chairman of the Board, President and CEO, Russell Financial Services, Inc. • Chairman of the Board, President and CEO, Russell Fund Services Company (“RFSC”) • Chairman of the Board and President, Russell Insurance Agency, Inc. (insurance agency (“RIA”)) • May 2009 to December 2009, Executive Vice President, Retail Channel, SunTrust Bank • 2007 to January 2009, Senior Vice President, National Sales–Retail Distribution, JPMorgan Chase/ Washington Mutual, Inc. • 1997 to 2007, President–WM Funds Distributor & Shareholder Services/WM Financial Services | 48 | None | |||||||
## Daniel P. Connealy, Born June 6, 1946
1301 Second Avenue, 18th Floor | Trustee since 2003
Chairman of Audit Committee since 2005 | Appointed until successor is duly elected and qualified
Appointed until successor is duly elected and qualified | • June 2004 to present, Senior Vice President and Chief Financial Officer, Waddell & Reed Financial, Inc. | 48 | • Director, Gold Banc Corporation until 2006 |
# | Ms Cavanaugh is also an officer and/or director of one or more affiliates of RIC and RIF and is therefore an Interested Trustee. |
## | Mr. Connealy is an officer of a broker dealer that distributes shares of the Funds and is therefore an interested Trustee. |
* | Each Trustee is subject to mandatory retirement at age 72. |
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Disclosure of Information about Fund Trustees and Officers, continued — June 30, 2012 (Unaudited)
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office* | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held During the Past 5 Years | |||||||
INDEPENDENT TRUSTEES | ||||||||||||
Thaddas L. Alston, Born April 7, 1945
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2006
Chairman of the Investment Committee since 2010 | Appointed until successor is duly elected and qualified
Appointed until successor is duly elected and qualified | • Senior Vice President, Larco Investments, Ltd. (real estate firm) | 48 | None | |||||||
Kristianne Blake, Born January 22, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2000
Chairman since 2005 | Appointed until successor is duly elected and qualified
Annual | • Director and Chairman of the Audit Committee, Avista Corp. • Trustee and Chairman of the Operations Committee, Principal Investors Funds and Principal Variable Contracts Funds • Regent, University of Washington • President, Kristianne Gates Blake, P.S. (accounting services) • February 2002 to June 2005, Chairman of the Audit Committee, RIC and RIF • Trustee and Chairman of the Operations and Distribution Committee, WM Group of Funds, 1999–2006 | 48 | • Director, Avista Corp (electric utilities); • Trustee, Principal Investors Funds (investment company); • Trustee, Principal Variable Contracts Funds (investment company) • Trustee, WM Group of Funds until 2006 (investment company) | |||||||
Jonathan Fine, Born July 8, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2004 | Appointed until successor is duly elected and qualified | • President and Chief Executive Officer, United Way of King County, WA | 48 | None |
* | Each Trustee is subject to mandatory retirement at age 72. |
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LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — June 30, 2012 (Unaudited)
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office* | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past 5 Years | |||||||
INDEPENDENT TRUSTEES (continued) | ||||||||||||
Raymond P. Tennison, Jr., Born December 21, 1955
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2000
Chairman of the Nominating and Governance Committee since 2007 | Appointed until successor is duly elected and qualified.
Appointed until successor is duly elected and qualified | • Vice Chairman of the Board, Simpson Investment Company • Until November 2010, President, Simpson Investment Company and several additional subsidiary companies, including Simpson Timber Company, Simpson Paper Company and Simpson Tacoma Kraft Company | 48 | None | |||||||
Jack R. Thompson, Born March 21, 1949
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2005 | Appointed until successor is duly elected and qualified | • September 2003 to September 2009, Independent Board Chair and Chairman of the Audit Committee, Sparx Asia Funds • September 2007 to September 2010 Director, Board Chairman and Chairman of the Audit Committee, LifeVantage Corporation (health products company) | 48 | • Director, Board Chairman and Chairman of the Audit Committee, LifeVantage Corporation until September 2010 (health products company) • Director, Sparx Asia Funds until 2009 (investment company) | |||||||
Julie W. Weston, Born October 2, 1943
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee since 2002 | Appointed until successor is duly elected and qualified | • Retired • Chairperson of the Investment Committee until December 2009 | 48 | None |
* | Each Trustee is subject to mandatory retirement at age 72. |
Disclosure of Information about Fund Trustees and Officers | 25 |
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Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — June 30, 2012 (Unaudited)
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the Past 5 Years | No. of Portfolios in Russell Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past 5 Years | |||||||
TRUSTEE EMERITUS | ||||||||||||
* George F. Russell, Jr., Born July 3, 1932
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Trustee Emeritus and Chairman Emeritus since 1999 | Until resignation or removal | • Director Emeritus, Frank Russell Company (investment consultant to institutional investors (“FRC”)); and RIMCo • Chairman Emeritus, RIC and RIF; Russell Implementation Services Inc. (broker-dealer and investment adviser (“RIS”)); Russell 20-20 Association (non-profit corporation); and Russell Trust Company (non-depository trust company (“RTC”)) • Chairman, Sunshine Management Services, LLC (investment adviser) | 48 | None |
*Mr. | Russell is also a director emeritus of one or more affiliates of RIC and RIF. |
26 | Disclosure of Information about Fund Trustees and Officers |
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Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
Disclosure of Information about Fund Trustees and Officers, continued — June 30, 2012 (Unaudited)
Name, Age, Address | Position(s) Held with Fund and Length of Time Served | Term of Office | Principal Occupation(s) During the Past 5 Years | |||
OFFICERS | ||||||
Cheryl Wichers, Born December 16, 1966
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Chief Compliance Officer since 2005 | Until removed by Independent Trustees | •Chief Compliance Officer, RIC •Chief Compliance Officer, RIF •Chief Compliance Officer, RIMCo •Chief Compliance Officer, RFSC •Chief Compliance Officer, Russell Exchange Traded Funds Trust •April 2002-May 2005, Manager, Global Regulatory Policy | |||
Sandra Cavanaugh, Born May 10, 1954
1301 Second Avenue, 18th Floor Seattle, WA 98101 | President and Chief Executive Officer since 2010 | Until successor is chosen and qualified by Trustees | •President and CEO, RIC and RIF •Chairman of the Board, President and CEO, Russell Financial Services, Inc. •Chairman of the Board, President and CEO, RFSC •Chairman of the Board and President, Russell Insurance Agency, Inc. (insurance agency (“RIA”)) •May 2009 to December 2009, Executive Vice President, Retail Channel, SunTrust Bank •2007 to January 2009, Senior Vice President, National Sales–Retail Distribution, JPMorgan Chase/Washington Mutual, Inc. •1997 to 2007, President–WM Funds Distributor & Shareholder Services/WM Financial Services | |||
Mark E. Swanson, Born November 26, 1963
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Treasurer and Chief Accounting Officer since 1998 | Until successor is chosen and qualified by Trustees | •Treasurer, Chief Accounting Officer and CFO, RIC, RIF and Russell Exchange Traded Funds Trust •Director, Funds Administration, RIMCo, RFSC, RTC and Russell Financial Services, Inc. •Treasurer and Principal Accounting Officer, SSgA Funds | |||
Peter Gunning, Born February 22, 1967
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Chief Investment Officer since 2008 | Until removed by Trustees | •Chief Investment Officer, RIC and RIF •Director, FRC •Chairman of the Board, President and CEO, RIMCo •1996 to 2008 Chief Investment Officer, Russell, Asia Pacific | |||
Mary Beth Rhoden, Born April 25, 1969
1301 Second Avenue, 18th Floor Seattle, WA 98101 | Secretary since 2010 | Until successor is chosen and qualified by Trustees | •1999 to 2010 Assistant Secretary, RIC and RIF •Associate General Counsel, FRC •Secretary, RIMCo, RFSC and Russell Financial Services, Inc. •Secretary and Chief Legal Officer, RIC, RIF and Russell Exchange Traded Funds Trust |
Disclosure of Information about Fund Trustees and Officers | 27 |
Table of Contents
LifePoints® Funds Variable Target Portfolio Series
1301Second Avenue, Seattle, Washington 98101
(800) 787-7354
Interested Trustees
Sandra Cavanaugh
Daniel P. Connealy
Independent Trustees
Thaddas L. Alston
Kristianne Blake
Jonathan Fine
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
Trustee Emeritus
George F. Russell, Jr.
Officers
Sandra Cavanaugh, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
Peter Gunning, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Mary Beth Rhoden, Secretary
Adviser
Russell Investment Management Company
1301 Second Avenue
Seattle, WA 98101
Administrator and Transfer and Dividend Disbursing Agent
Russell Fund Services Company
1301 Second Avenue
Seattle, WA 98101
Custodian
State Street Bank and Trust Company
1200 Crown Colony Drive
CC1-5 North
Quincy, MA 02169
Office of Shareholder Inquiries
1301 Second Avenue
Seattle, WA 98101
(800) 787-7354
Legal Counsel
Dechert LLP
200 Clarendon Street, 27th Floor
Boston, MA 02116-5021
Distributor
Russell Financial Services, Inc.
1301 Second Avenue
Seattle, WA 98101
Money Managers of Underlying Funds as of June 30, 2012
RIC Russell U.S. Quantitative Equity Fund
Aronson+Johnson+Ortiz, LP, Philadelphia, PA
INTECH Investment Management I, West Palm Beach, FL
Jacobs Levy Equity Management Inc, Florham Park, NJ
Numeric Investors LLC, Boston, MA
PanAgora Asset Management Inc, Boston, MA
RIF Multi-Style Equity Fund
BlackRock Capital Management, Inc., Wilmington, DE
Columbus Circle Investors, Stamford, CT
DePrince, Race & Zollo, Inc., Winter Park, FL
Institutional Capital LLC, Chicago, IL
Jacobs Levy Equity Management Inc, Florham Park, NJ
Suffolk Capital Management LLC, New York, NY
Sustainable Growth Advisers, LP, Stamford, CT
RIC Russell Global Opportunistic Credit Fund
DDJ Capital Management LLC, Waltham, MA
Lazard Asset Management LLC, New York, NY
Oaktree Capital Management, L.P., Los Angeles, CA
Stone Harbor Investment Partners LP, New York, NY
RIC Russell Investment Grade Bond Fund
Logan Circle Partners, L.P., Philadelphia, PA
Metropolitan West Asset Management, LLC, Los Angeles, CA
Neuberger Berman Fixed Income LLC, Chicago, IL
Pacific Investment Management Company LLC, Newport Beach, CA
Macro Currency Group — an investment group within Principal Global Investors LLC, Des Moines, IA*
RIC Russell Short Duration Bond Fund
Logan Circle Partners, L.P., Philadelphia, PA
Pacific Investment Management Company LLC, Newport Beach, CA
Wellington Management Company, LLP, Boston, MA
RIF Core Bond Fund
Colchester Global Investors Ltd, London, England
Logan Circle Partners, L.P., Philadelphia, PA
Metropolitan West Asset Management, LLC, Los Angeles, CA
Pacific Investment Management Company LLC, Newport Beach, CA
Macro Currency Group — an investment group within Principal Global Investors LLC, Des Moines, IA*
RIC Russell Global Equity Fund
GLG Inc., New York, NY
Harris Associates LP, Chicago, IL
MFS Institutional Advisors Inc., Boston, MA
Polaris Capital Management, LLC, Boston, MA
Sanders Capital, LLC, New York, NY
T. Rowe Price Associates, Inc., Baltimore, MD
RIF Non-U.S. Fund
Barrow, Hanley, Mewhinney & Strauss, LLC, Dallas, TX
MFS Institutional Advisors, Inc., Boston, MA
Pzena Investment Management, LLC, New York, NY
William Blair & Company L.L.C., Chicago, IL
* | Principal Global Investors LLC is the asset management arm of the Principal Financial Group® (The Principal ®), which includes various member companies including Principal Global Investors, LLC, Principal Global Investors (Europe) Limited, and others. The Macro Currency Group is the specialist currency investment group within Principal Global Investors. Where used herein, Macro Currency Group means Principal Global Investors, LLC. |
28 | Manager, Money Managers and Service Providers |
Table of Contents
Russell Investment Funds
LifePoints® Funds Variable Target Portfolio Series
1301Second Avenue, Seattle, Washington 98101
(800) 787-7354
RIC Russell Commodity Strategies Fund
Credit Suisse Asset Management, LLC, New York, NY
Goldman Sachs Asset Management, L.P., New York, NY
CoreCommodity Management, LLC, Stamford, CT (formerly Jefferies Asset Management, LLC)
RIC Russell Global Infrastructure Fund
Cohen & Steers Capital Management, Inc., New York, NY
Macquarie Capital Investment Management LLC, New York, NY
Nuveen Asset Management, LLC, Chicago, IL
RIF Global Real Estate Securities Fund
AEW Capital Management L.P., Boston, MA
Cohen & Steers Capital Management, Inc., New York, NY
INVESCO Advisers, Inc. which acts as a money manager to the Fund through its INVESCO Real Estate Division, Dallas, TX
This report is prepared from the books and records of the Fund 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.
Manager, Money Managers and Service Providers | 29 |
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Russell Investment Funds | 1301 Second Avenue | 800-787-7354 | ||
Seattle, Washington 98101 | Fax: 206-505-3495 | |||
www.russell.com |
36-08-432
Table of Contents
Item 2. Code of Ethics. [Annual Report Only]
Item 3. Audit Committee Financial Expert. [Annual Report Only]
Item 4. Principal Accountant Fees and Services. [Annual Report Only]
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 have 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 their 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) Certification for principal executive officer of Registrant as required by Rule 30a-2(a) under the Act and certification for principal financial officer of Registrant as required by Rule 30a-2(a) under the Act.
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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/ Sandra Cavanaugh | |
Sandra Cavanaugh | ||
Principal Executive Officer and Chief Executive Officer |
Date: August 31, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Sandra Cavanaugh | |
Sandra Cavanaugh | ||
Principal Executive Officer and Chief Executive Officer | ||
Date: August 31, 2012 | ||
By: | /s/ Mark E. Swanson | |
Mark E. Swanson | ||
Principal Financial Officer, Principal Accounting Officer and Treasurer | ||
Date: August 31, 2012 |