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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)
909 A STREET, TACOMA WASHINGTON 98402
(Address of principal executive offices) (Zip code)
GREGORY J. LYONS, ASSISTANT SECRETARY
RUSSELL INVESTMENT FUNDS
909 A STREET
TACOMA, WASHINGTON 98402
253-439-2406
------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 253-572-9500
Date of fiscal year end: DECEMBER 31
Date of reporting period: January 1, 2006 -- June 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS
RUSSELL INVESTMENT FUNDS
(FRANK RUSSELL INVESTMENT FUNDS GRAPHIC)
2006 SEMIANNUAL REPORT
MULTI-STYLE EQUITY FUND
AGGRESSIVE EQUITY FUND
NON-U.S. FUND
REAL ESTATE SECURITIES FUND
CORE BOND FUND
JUNE 30, 2006
(FRANK RUSSELL LOGO)
Russell Investment Funds
Russell Investment Funds is a series investment company with five different
investment portfolios referred to as Funds. These financial statements report on
all five of the Funds.
Frank Russell Investment Management Company*
Responsible for overall management and administration of the Funds.
* On July 1, 2006, Frank Russell Investment Management Company changed its name
to Russell Investment Management Company.
[Blank Page]
Russell Investment Funds
Semiannual Report
June 30, 2006 (Unaudited)
Table of Contents
<Table>
<Caption>
Page
Multi-Style Equity Fund.............................................. 3
Aggressive Equity Fund............................................... 10
Non-U.S. Fund........................................................ 22
Real Estate Securities Fund.......................................... 37
Core Bond Fund....................................................... 41
Notes to Schedules of Investments.................................... 58
Statement of Assets and Liabilities.................................. 60
Statement of Operations.............................................. 64
Statement of Changes in Net Assets................................... 66
Financial Highlights................................................. 68
Notes to Financial Highlights........................................ 70
Notes to Financial Statements........................................ 71
Shareholder Requests for Additional Information...................... 82
Basis for Approval of Investment Advisory Contracts.................. 83
Disclosure of Information about Fund Directors....................... 87
Manager, Money Managers and Service Providers........................ 92
</Table>
Copyright (c) Russell Investment Group 2006. All rights reserved.
The Russell logo is a trademark and service mark of Russell Investment Group.
Russell Investment Group and Standard & Poor's Corporation are the owners of the
trademarks, service marks, and copyrights related to their respective indexes.
Indexes are unmanaged and cannot be invested in directly.
Russell Investment Group (Russell) holds the largest market share of the global
manager of managers market which includes "collective investment funds or
institutional separate accounts with assets managed as segregated accounts by
multiplying underlying managers." The Cerulli Report(TM), Quantitative Update:
Global Multimanager Product, 2003-2004.
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.
On July 1, 2006, Frank Russell Investment Management Company changed its name to
Russell Investment Management Company.
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.
Russell Fund Distributors, Inc., Member NASD, is the distributor of Russell
Investment Funds.
RUSSELL INVESTMENT FUNDS
MULTI-STYLE EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- JUNE 30, 2006 (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 SEMIANNUAL
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 management 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, 2006 to June 30, 2006.
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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
PERFORMANCE BEFORE EXPENSES)
-------------- ----------------
Beginning Account Value
January 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
June 30, 2006 $ 1,024.20 $ 1,020.48
Expenses Paid During
Period* $ 4.37 $ 4.36
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.87%
(representing the one-half year period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
Multi-Style Equity Fund 3
RUSSELL INVESTMENT FUNDS
MULTI-STYLE EQUITY FUND
SCHEDULE OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 94.1%
Auto and Transportation - 2.9%
Alaska Air Group, Inc. (AE) 2,300 91
Burlington Northern Santa Fe Corp. 7,350 582
CH Robinson Worldwide, Inc. (N) 6,900 368
CSX Corp. 15,850 1,116
FedEx Corp. 4,300 502
Ford Motor Co. (N) 33,600 233
General Motors Corp. (N) 2,100 62
Genuine Parts Co. 5,400 225
Norfolk Southern Corp. 25,600 1,362
Polaris Industries, Inc. (N) 9,000 390
Swift Transportation Co., Inc. (AE)(N) 7,500 238
Toyota Motor Corp. - ADR 5,370 562
TRW Automotive Holdings Corp. (AE) 4,500 123
Union Pacific Corp. 22,900 2,129
United Parcel Service, Inc. Class B 29,000 2,388
UTI Worldwide, Inc. 8,600 217
------------
10,588
------------
Consumer Discretionary - 12.5%
Best Buy Co., Inc. 12,660 694
Blockbuster, Inc. Class A (N) 51,500 257
Boyd Gaming Corp. (N) 7,200 291
Carnival Corp. 4,250 177
Circuit City Stores, Inc. (N) 3,300 90
Coach, Inc. (AE) 26,720 799
Costco Wholesale Corp. 12,800 731
Dick's Sporting Goods, Inc. (AE)(N) 6,200 246
Dress Barn, Inc. (AE)(N) 10,500 266
Electronic Arts, Inc. (AE) 40,200 1,730
Estee Lauder Cos., Inc. (The) Class A 30,400 1,176
Gap, Inc. (The) 38,900 677
Google, Inc. Class A (AE) 14,899 6,248
Hasbro, Inc. 47,900 867
Hewitt Associates, Inc. Class A (AE) 34,400 773
International Flavors & Fragrances, Inc. (N) 12,700 448
International Game Technology 19,750 749
JC Penney Co., Inc. 9,000 608
Kimberly-Clark Corp. 11,000 679
Kohl's Corp. (AE) 48,400 2,861
Las Vegas Sands Corp. (AE) 11,900 927
Limited Brands, Inc. 14,900 381
Liz Claiborne, Inc. 4,300 159
Manpower, Inc. 2,400 155
Mattel, Inc. 9,400 155
McDonald's Corp. 146,350 4,917
Newell Rubbermaid, Inc. (N) 26,100 674
Nike, Inc. Class B 35,200 2,851
Nutri System, Inc. (AE)(N) 6,600 410
Office Depot, Inc. (AE) 10,400 395
Omnicom Group, Inc. 21,740 1,937
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Quiksilver, Inc. (AE)(N) 52,800 643
RR Donnelley & Sons Co. 19,300 617
Sabre Holdings Corp. Class A 21,000 462
Scientific Games Corp. Class A (AE)(N) 25,390 904
Scotts Miracle-Gro Co. (The) Class A (N) 4,100 174
Sears Holdings Corp. (AE)(N) 5,900 914
ServiceMaster Co. (The) 34,700 358
Six Flags, Inc. (AE)(N) 4,800 27
Starbucks Corp. (AE) 29,950 1,131
Starwood Hotels & Resorts Worldwide, Inc. (o) 26,080 1,574
Tiffany & Co. 10,500 347
Urban Outfitters, Inc. (AE)(N) 29,800 521
Wal-Mart Stores, Inc. 59,050 2,844
Walt Disney Co. 33,000 990
Yahoo!, Inc. (AE) 24,500 809
Yum! Brands, Inc. 12,240 615
------------
46,258
------------
Consumer Staples - 6.6%
Altria Group, Inc. 41,400 3,040
Coca-Cola Co. (The) 31,800 1,368
Coca-Cola Enterprises, Inc. 14,100 287
Colgate-Palmolive Co. 46,500 2,785
ConAgra Foods, Inc. 18,600 411
CVS Corp. 64,600 1,983
Hansen Natural Corp. (AE) 2,340 445
Hershey Co. (The) 11,000 606
Kroger Co. (The) 22,600 494
Molson Coors Brewing Co. Class B (N) 9,400 638
PepsiCo, Inc. 102,530 6,156
Procter & Gamble Co. 73,500 4,087
Walgreen Co. 29,700 1,332
Whole Foods Market, Inc. 11,180 723
------------
24,355
------------
Financial Services - 18.2%
AG Edwards, Inc. 7,100 393
Allstate Corp. (The) 11,400 624
American Express Co. 60,000 3,193
American International Group, Inc. 101,050 5,967
AmSouth Bancorp 22,800 603
Annaly Mortgage Management,
Inc. (o)(N) 34,500 442
AON Corp. 58,400 2,033
</Table>
4 Multi-Style Equity Fund
RUSSELL INVESTMENT FUNDS
MULTI-STYLE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Aspen Insurance Holdings, Ltd. 17,800 415
Astoria Financial Corp. 11,700 356
Bank of America Corp. 136,041 6,544
Bank of New York Co., Inc. (The) 14,800 477
BB&T Corp. (N) 11,400 474
Capital One Financial Corp. 12,700 1,085
CB Richard Ellis Group, Inc. Class A (AE) 21,390 533
Charles Schwab Corp. (The) 35,730 571
Chicago Mercantile Exchange Holdings, Inc. Class
A 1,290 634
Chubb Corp. 21,500 1,073
CIT Group, Inc. 7,100 371
Citigroup, Inc. 109,650 5,289
City National Corp. 900 59
Colonial BancGroup, Inc. (The) 6,700 172
Commerce Bancorp, Inc. (N) 12,300 439
Countrywide Financial Corp. 24,200 922
Dow Jones & Co., Inc. (N) 16,000 560
Equity Office Properties Trust (o)(N) 9,700 354
Fifth Third Bancorp (N) 9,400 347
First Data Corp. 11,800 531
First Horizon National Corp. 6,700 269
Franklin Resources, Inc. 6,200 538
Fulton Financial Corp. (N) 1,890 30
Global Payments, Inc. 9,660 469
Goldman Sachs Group, Inc. 14,770 2,222
H&R Block, Inc. 13,200 315
Hartford Financial Services Group, Inc. 11,900 1,007
Huntington Bancshares, Inc. (N) 35,500 837
JPMorgan Chase & Co. 133,650 5,613
Keycorp 4,300 153
LandAmerica Financial Group, Inc. Class A (N) 1,700 110
Loews Corp. 11,400 404
Marsh & McLennan Cos., Inc. 12,800 344
Marshall & Ilsley Corp. (N) 7,600 348
Mellon Financial Corp. 9,700 334
Merrill Lynch & Co., Inc. 17,000 1,182
Metlife, Inc. 10,400 533
Morgan Stanley 28,400 1,795
New York Community Bancorp,
Inc. (N) 36,800 608
PartnerRe, Ltd. 6,500 416
Paychex, Inc. 34,400 1,341
Philadelphia Consolidated Holding Co. (AE)(N) 3,300 100
PNC Financial Services Group, Inc. 7,400 519
Popular, Inc. (N) 6,100 117
Principal Financial Group, Inc. (N) 8,100 451
Progressive Corp. (The) 14,900 383
Protective Life Corp. 100 5
Raymond James Financial, Inc. (N) 5,000 151
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
RenaissanceRe Holdings, Ltd. (N) 8,100 393
Simon Property Group, Inc. (o) 2,000 166
Sky Financial Group, Inc. 1,900 45
South Financial Group, Inc. (The) (N) 21,100 557
St. Paul Travelers Cos., Inc. (The) 43,261 1,929
Stancorp Financial Group, Inc. 2,300 117
State Street Corp. 5,600 325
SunTrust Banks, Inc. 18,400 1,403
UBS AG 5,400 592
UnionBanCal Corp. 1,000 65
US Bancorp 34,400 1,062
Wachovia Corp. 36,200 1,958
Washington Mutual, Inc. 19,000 866
Wells Fargo & Co. 31,780 2,132
Whitney Holding Corp. (N) 2,300 81
WR Berkley Corp. 11,800 403
------------
67,149
------------
Health Care - 12.5%
Abbott Laboratories 82,500 3,598
Aetna, Inc. 1,100 44
Allergan, Inc. (N) 12,360 1,326
Amgen, Inc. (AE) 60,300 3,933
Amylin Pharmaceuticals, Inc. (AE)(N) 8,200 405
AstraZeneca PLC - ADR 21,230 1,270
Baxter International, Inc. 79,800 2,934
Bio-Rad Laboratories, Inc. Class A (AE)(N) 900 59
Cardinal Health, Inc. 12,300 791
Caremark Rx, Inc. 62,700 3,127
Celgene Corp. (AE)(N) 13,880 658
Covance, Inc. (AE) 6,980 427
Coventry Health Care, Inc. (AE)(N) 15,700 863
DaVita, Inc. (AE) 17,430 866
Eli Lilly & Co. 66,300 3,664
Express Scripts, Inc. Class A (AE) 8,160 585
Fisher Scientific International, Inc. (AE) 13,200 964
Genentech, Inc. (AE) 25,580 2,093
Gilead Sciences, Inc. (AE) 20,720 1,226
Henry Schein, Inc. (AE) 8,900 416
Human Genome Sciences, Inc. (AE)(N) 77,500 829
Humana, Inc. (AE) 2,600 140
IMS Health, Inc. 3,700 99
Intuitive Surgical, Inc. (AE)(N) 3,470 409
Johnson & Johnson 37,300 2,235
Kinetic Concepts, Inc. (AE) 7,700 340
Medco Health Solutions, Inc. (AE) 26,800 1,535
</Table>
Multi-Style Equity Fund 5
RUSSELL INVESTMENT FUNDS
MULTI-STYLE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Medtronic, Inc. 34,800 1,633
Merck & Co., Inc. 11,100 404
Novartis AG - ADR 28,200 1,521
Panacos Pharmaceuticals, Inc. (AE)(N) 30,700 170
PDL BioPharma, Inc. (AE)(N) 24,900 458
Pfizer, Inc. 132,700 3,115
Quest Diagnostics, Inc. 9,710 582
Resmed, Inc. (AE) 9,520 447
Stryker Corp. 35,200 1,482
Tenet Healthcare Corp. (AE)(N) 12,200 85
UnitedHealth Group, Inc. 9,900 443
Varian Medical Systems, Inc. (AE) 4,500 213
WellPoint, Inc. (AE) 5,700 415
Wyeth 3,400 151
------------
45,955
------------
Integrated Oils - 6.3%
Chevron Corp. 36,600 2,271
ConocoPhillips 67,800 4,443
Exxon Mobil Corp. 122,350 7,506
Hess Corp. 28,800 1,522
Marathon Oil Corp. 51,502 4,290
Occidental Petroleum Corp. 30,200 3,097
Suncor Energy, Inc. 1,400 114
------------
23,243
------------
Materials and Processing - 4.7%
Alcoa, Inc. 16,000 518
Allegheny Technologies, Inc. 6,990 484
Archer-Daniels-Midland Co. 35,090 1,449
Avery Dennison Corp. 8,900 517
Bemis Co. (N) 13,900 426
BHP Billiton, Ltd. - ADR 13,100 564
Bowater, Inc. (N) 20,800 473
Cameco Corp. (N) 9,300 372
Chemtura Corp. (N) 36,600 342
Dow Chemical Co. (The) 27,900 1,089
EI Du Pont de Nemours & Co. 21,800 907
EMCOR Group, Inc. (AE) 2,900 141
International Paper Co. 70,650 2,282
Lennox International, Inc. 2,900 77
Lubrizol Corp. 13,600 542
Lyondell Chemical Co. 18,500 419
MeadWestvaco Corp. (N) 21,400 598
Monsanto Co. 13,440 1,131
Mueller Industries, Inc. 2,000 66
Packaging Corp. of America 26,300 579
Phelps Dodge Corp. 3,400 279
Praxair, Inc. 6,800 367
Quanex Corp. (N) 2,200 95
Rockwood Holdings, Inc. New (AE) 2,400 55
Rohm & Haas Co. 14,400 722
RPM International, Inc. (N) 22,300 401
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Sonoco Products Co. 13,400 424
United States Steel Corp. 13,450 943
USEC, Inc. (N) 5,600 66
Valspar Corp. 15,400 407
Vulcan Materials Co. (N) 4,000 312
Weyerhaeuser Co. 4,400 274
------------
17,321
------------
Miscellaneous - 5.8%
3M Co. 60,100 4,854
Foster Wheeler, Ltd. (AE)(N) 4,900 212
General Electric Co. 323,620 10,666
Hillenbrand Industries, Inc. (N) 900 44
Honeywell International, Inc. 96,450 3,887
ITT Industries, Inc. 900 44
Textron, Inc. 18,970 1,749
------------
21,456
------------
Other Energy - 3.5%
Anadarko Petroleum Corp. 9,800 467
Apache Corp. 19,000 1,297
Baker Hughes, Inc. (N) 21,400 1,752
Devon Energy Corp. 6,200 375
ENSCO International, Inc. 2,900 133
Halliburton Co. 61,400 4,556
National-Oilwell Varco, Inc. (AE) 6,110 387
Newfield Exploration Co. (AE)(N) 13,700 670
Peabody Energy Corp. 7,800 435
Schlumberger, Ltd. 33,800 2,201
Valero Energy Corp. 12,200 812
------------
13,085
------------
Producer Durables - 3.7%
Agilent Technologies, Inc. (AE) 13,700 432
Alcatel SA - ADR (AE)(N) 44,700 564
American Power Conversion Corp. 40,400 787
Applied Materials, Inc. 101,430 1,651
Boeing Co. 29,030 2,378
Caterpillar, Inc. 16,500 1,229
Crown Castle International Corp. (AE) 15,100 522
Diebold, Inc. (N) 11,100 451
Emerson Electric Co. 17,000 1,425
ESCO Technologies, Inc. (AE) 4,400 235
Hubbell, Inc. Class B 9,700 462
Itron, Inc. (AE)(N) 3,000 178
Joy Global, Inc. 8,855 461
Manitowoc Co., Inc. (The) 7,600 338
</Table>
6 Multi-Style Equity Fund
RUSSELL INVESTMENT FUNDS
MULTI-STYLE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Regal-Beloit Corp. (N) 4,700 208
Steelcase, Inc. Class A (N) 2,400 39
Technitrol, Inc. 3,100 72
Teradyne, Inc. (AE)(N) 20,300 283
Thermo Electron Corp. (AE) 14,900 540
United Technologies Corp. 22,800 1,446
------------
13,701
------------
Technology - 12.0%
Akamai Technologies, Inc. (AE)(N) 26,750 968
Amkor Technology, Inc. (AE)(N) 20,100 190
Analog Devices, Inc. 11,300 363
Apple Computer, Inc. (AE) 45,910 2,622
Avnet, Inc. (AE) 5,100 102
Benchmark Electronics, Inc. (AE) 3,600 87
BMC Software, Inc. (AE) 3,800 91
Broadcom Corp. Class A (AE) 38,380 1,153
Cadence Design Systems, Inc. (AE) 6,000 103
Cisco Systems, Inc. (AE) 120,300 2,349
Citrix Systems, Inc. (AE) 8,460 340
Conexant Systems, Inc. (AE)(N) 16,200 41
Corning, Inc. (AE) 56,240 1,360
Electronic Data Systems Corp. (N) 9,100 219
EMC Corp. (AE) 43,900 482
Formfactor, Inc. (AE)(N) 5,800 259
General Dynamics Corp. 8,400 550
Hewlett-Packard Co. 182,370 5,777
Imation Corp. 1,400 57
Intel Corp. 90,800 1,721
International Business Machines Corp. 16,150 1,241
JDS Uniphase Corp. (AE)(N) 561,830 1,421
Juniper Networks, Inc. (AE) 49,700 795
Kemet Corp. (AE)(N) 1,800 17
L-3 Communications Holdings, Inc. 13,300 1,003
Linear Technology Corp. (N) 12,500 419
Maxim Integrated Products, Inc. 51,100 1,641
Micron Technology, Inc. (AE)(N) 112,100 1,688
Microsoft Corp. 133,900 3,120
Motorola, Inc. 79,550 1,603
National Semiconductor Corp. 35,500 847
Plexus Corp. (AE)(N) 1,600 55
Qualcomm, Inc. 131,310 5,262
Red Hat, Inc. (AE)(N) 15,900 372
Research In Motion, Ltd. (AE) 20,400 1,423
Rockwell Automation, Inc. 8,880 639
Salesforce.com, Inc. (AE)(N) 13,140 350
SanDisk Corp. (AE)(N) 16,600 846
Sanmina-SCI Corp. (AE) 13,100 60
Seagate Technology, Inc. (AE) 2,300 --
Silicon Image, Inc. (AE) 31,500 340
Sun Microsystems, Inc. (AE)(N) 106,500 442
Sycamore Networks, Inc. (AE) 9,800 40
Symantec Corp. (AE) 6,900 107
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Synopsys, Inc. (AE) 10,200 191
Texas Instruments, Inc. 39,600 1,199
Unisys Corp. (AE) 21,900 138
------------
44,093
------------
Utilities - 5.4%
Alltel Corp. 6,400 409
Ameren Corp. (N) 4,000 202
Aqua America, Inc. (N) 2,700 62
AT&T, Inc. 39,400 1,099
Atmos Energy Corp. 5,600 156
BellSouth Corp. 58,600 2,121
Citizens Communications Co. (N) 45,500 594
Comcast Corp. Class A (AE) 16,800 550
Consolidated Edison, Inc. (N) 4,700 209
Dominion Resources, Inc. 26,200 1,959
Edison International 4,500 175
Entergy Corp. (N) 31,900 2,257
Exelon Corp. 22,800 1,296
FirstEnergy Corp. 2,100 114
FPL Group, Inc. (N) 15,500 641
NII Holdings, Inc. (AE) 9,000 507
NiSource, Inc. 19,400 424
Northeast Utilities 36,400 752
NSTAR (N) 14,200 406
Progress Energy, Inc. 1,300 --
SCANA Corp. 5,100 197
Southern Co. (The) (N) 9,400 301
Sprint Nextel Corp. 86,800 1,735
TECO Energy, Inc. 8,100 121
TXU Corp. 15,400 921
Valor Communications Group, Inc. (N) 27,300 313
Verizon Communications, Inc. 61,000 2,043
Vodafone Group PLC - ADR 21,400 456
Wisconsin Energy Corp. 1,800 73
------------
20,093
------------
TOTAL COMMON STOCKS
(cost $318,657) 347,297
------------
</Table>
Multi-Style Equity Fund 7
RUSSELL INVESTMENT FUNDS
MULTI-STYLE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 5.9%
Frank Russell Investment Company Money Market
Fund 20,910,000 20,910
United States Treasury Bills (z)(sec.)
4.885% due 09/14/06 1,000 990
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $21,900) 21,900
------------
OTHER SECURITIES - 8.2%
State Street Securities Lending Quality Trust
(X) 30,172,012 30,172
------------
TOTAL OTHER SECURITIES
(cost $30,172) 30,172
------------
TOTAL INVESTMENTS - 108.2%
(identified cost $370,729) 399,369
OTHER ASSETS AND LIABILITIES,
NET - (8.2%) (30,419)
------------
NET ASSETS - 100.0% 368,950
============
</Table>
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 1000 Index
expiration date 09/06 (7) 2,440 (3)
S&P 500 E-Mini Index (CME)
expiration date 09/06 (65) 4,158 44
S&P 500 Index (CME)
expiration date 09/06 (18) 5,757 68
S&P Midcap 400 E-Mini Index (CME)
expiration date 09/06 (115) 8,873 215
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts 324
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
8 Multi-Style Equity Fund
RUSSELL INVESTMENT FUNDS
MULTI-STYLE EQUITY FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- JUNE 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------------
Auto and Transportation 2.9
Consumer Discretionary 12.5
Consumer Staples 6.6
Financial Services 18.2
Health Care 12.5
Integrated Oils 6.3
Materials and Processing 4.7
Miscellaneous 5.8
Other Energy 3.5
Producer Durables 3.7
Technology 12.0
Utilities 5.4
Short-Term Investments 5.9
Other Securities 8.2
---------------
Total Investments 108.2
Other Assets and Liabilities, Net (8.2)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
See accompanying notes which are an integral part of the financial statements.
Multi-Style Equity Fund 9
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE -- JUNE 30, 2006 (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 SEMIANNUAL
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 management 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, 2006 to June 30, 2006.
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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
PERFORMANCE BEFORE EXPENSES)
-------------- ----------------
Beginning Account Value
January 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
June 30, 2006 $ 1,074.50 $ 1,019.59
Expenses Paid During
Period* $ 5.40 $ 5.26
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.05%
(representing the one-half year period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
10 Aggressive Equity Fund
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 95.1%
Auto and Transportation - 2.9%
AAR Corp. (AE)(N) 22,649 503
ABX Air, Inc. (AE) 23,400 141
Airtran Holdings, Inc. (AE) 21,380 318
Alaska Air Group, Inc. (AE) 6,400 252
ArvinMeritor, Inc. (N) 19,200 330
Dana Corp. 33,200 88
Expeditors International Washington, Inc. 5,686 318
Frozen Food Express Industries (AE)(N) 2,400 26
Grupo TMM SA - ADR (AE) 13,500 55
Hayes Lemmerz International, Inc. (AE)(N) 5,100 16
Hub Group, Inc. Class A (AE) 11,114 273
Kansas City Southern (AE)(N) 6,200 172
Kirby Corp. (AE)(N) 8,400 332
Laidlaw International, Inc. 15,000 378
Marten Transport, Ltd. (AE) 1,619 35
Monaco Coach Corp. (N) 5,000 63
Navistar International Corp. (AE) 14,000 345
Noble International, Ltd. (N) 1,800 26
Oshkosh Truck Corp. 7,780 370
PAM Transportation Services, Inc. (AE) 1,300 38
SCS Transportation, Inc. (AE) 2,400 66
Tidewater, Inc. 1,300 64
TRW Automotive Holdings Corp. (AE) 11,200 305
Universal Truckload Services, Inc. (AE)(N) 6,200 212
US Xpress Enterprises, Inc. Class A (AE)(N) 3,400 92
UTI Worldwide, Inc. 20,343 513
Visteon Corp. (AE) 42,800 309
Wabtec Corp. 20,629 771
------------
6,411
------------
Consumer Discretionary - 16.7%
1-800-FLOWERS.COM, Inc. Class A (AE)(N) 4,700 27
Abercrombie & Fitch Co. Class A 5,180 287
Adesa, Inc. 12,500 278
Administaff, Inc. (N) 3,893 139
Advisory Board Co. (The) (AE) 7,071 340
Advo, Inc. 2,000 49
Allied Waste Industries, Inc. (AE) 7,500 85
Ambassadors Group, Inc. 6,980 202
Amerco, Inc. (AE)(N) 700 70
American Greetings Corp. Class A (N) 9,630 202
AMN Healthcare Services, Inc. (AE) 28,700 583
AnnTaylor Stores Corp. (AE)(N) 12,100 525
Asbury Automotive Group, Inc. (AE)(N) 1,600 34
Autonation, Inc. (AE) 2,449 53
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Baidu.com - ADR (AE)(N) 1,800 149
Bally Technologies, Inc. (AE)(N) 7,700 127
Barnes & Noble, Inc. 3,000 109
Belo Corp. Class A 11,222 175
Big Lots, Inc. (AE) 41,378 707
Bob Evans Farms, Inc. 1,600 48
Bon-Ton Stores, Inc. (The) (N) 11,950 261
Borders Group, Inc. 22,400 414
Boyd Gaming Corp. (N) 4,500 182
Brightpoint, Inc. (AE)(N) 29,420 398
Brink's Co. (The) 693 39
Brinker International, Inc. (N) 4,400 160
Brown Shoe Co., Inc. 12,650 431
Buffalo Wild Wings, Inc. (AE)(N) 12,800 490
Callaway Golf Co. 22,900 297
Catalina Marketing Corp. (N) 12,878 367
Central European Distribution Corp. (AE)(N) 2,500 63
Cenveo, Inc. (AE)(N) 12,300 221
Charlotte Russe Holding, Inc. (AE)(N) 10,200 244
Charming Shoppes, Inc. (AE) 15,300 172
Cheesecake Factory, Inc. (The) (AE) 5,416 146
Chemed Corp. 10,986 599
Chico's FAS, Inc. (AE) 5,440 147
Choice Hotels International, Inc. (N) 12,540 760
Christopher & Banks Corp. 16,300 473
Coach, Inc. (AE) 5,628 168
Convergys Corp. (AE) 23,200 452
Corinthian Colleges, Inc. (AE)(N) 12,600 181
Corrections Corp. of America (AE)(N) 23,600 1,249
Cox Radio, Inc. Class A (AE)(N) 13,800 199
CROCS, Inc. (AE)(N) 20,400 513
Ctrip.com International, Ltd. - ADR (N) 2,000 102
DeVry, Inc. (AE) 11,500 253
Dollar Thrifty Automotive
Group (AE)(N) 8,300 374
Domino's Pizza, Inc. 1,300 32
DreamWorks Animation SKG, Inc. Class A (AE) 22,163 508
Dress Barn, Inc. (AE)(N) 23,400 593
Earthlink, Inc. (AE)(N) 25,500 221
Entercom Communications Corp. Class A 3,600 94
FTI Consulting, Inc. (AE) 14,300 383
Furniture Brands International, Inc. (N) 8,400 175
</Table>
Aggressive Equity Fund 11
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Gemstar-TV Guide International, Inc. (AE) 181,800 640
Getty Images, Inc. (AE) 5,431 345
Global Imaging Systems, Inc. (AE) 2,000 83
Group 1 Automotive, Inc. 8,044 453
Guess?, Inc. (AE)(N) 6,800 284
Harman International Industries, Inc. 2,936 251
Hasbro, Inc. 20,900 378
Hewitt Associates, Inc. Class A (AE) 8,700 196
Iconix Brand Group, Inc. (AE)(N) 11,670 191
IKON Office Solutions, Inc. 20,204 255
International Speedway Corp. Class A 5,000 232
Intrawest Corp. 8,571 273
Isle of Capri Casinos, Inc. (AE)(N) 4,800 123
ITT Educational Services, Inc. (AE) 5,400 355
J Crew Group, Inc. (AE) 1,900 52
Jack in the Box, Inc. (AE) 11,100 435
Jackson Hewitt Tax Service, Inc. (N) 15,300 480
Jarden Corp. (AE)(N) 3,700 113
Jo-Ann Stores, Inc. (AE)(N) 11,700 171
John Wiley & Sons, Inc. Class A 1,000 33
Jones Apparel Group, Inc. 3,606 115
Kellwood Co. (N) 14,479 424
Korn/Ferry International (AE) 27,259 534
Landry's Restaurants, Inc. (N) 10,800 350
Leapfrog Enterprises, Inc. Class A (AE)(N) 12,000 121
Lee Enterprises, Inc. 4,900 132
Libbey, Inc. (N) 3,900 29
Life Time Fitness, Inc. (AE)(N) 16,900 782
Lifetime Brands, Inc. (N) 2,000 43
Lightbridge, Inc. (AE) 7,000 91
Liquidity Services, Inc. (AE) 1,300 20
Lithia Motors, Inc. Class A (N) 2,100 64
Live Nation, Inc. (AE) 3,900 79
Liz Claiborne, Inc. 7,793 289
Lone Star Steakhouse & Saloon, Inc. 8,500 223
Manpower, Inc. 5,818 376
Marcus Corp. 4,100 86
MAXIMUS, Inc. 2,600 60
Media General, Inc. Class A 1,500 63
MPS Group, Inc. (AE)(N) 61,433 925
MSC Industrial Direct Co., Inc. Class A 3,300 157
NetFlix, Inc. (AE)(N) 16,700 454
O'Reilly Automotive, Inc. (AE) 10,485 327
Orient-Express Hotels, Ltd. Class A 8,884 345
Papa John's International, Inc. (AE)(N) 4,600 153
Penn National Gaming, Inc. (AE)(N) 26,606 1,032
Perficient, Inc. (AE)(N) 14,100 174
Perry Ellis International, Inc. (AE)(N) 1,900 48
PHH Corp. (AE) 12,656 349
Phillips-Van Heusen Corp. 6,100 233
Pier 1 Imports, Inc. (N) 19,600 137
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Pre-Paid Legal Services, Inc. (N) 5,577 192
Prestige Brands Holdings, Inc. (AE)(N) 18,700 186
ProQuest Co. (AE)(N) 7,800 96
Providence Service Corp. (The) (AE)(N) 4,800 131
Quiksilver, Inc. (AE) 13,500 164
Radio One, Inc. Class D (AE) 13,700 101
RadioShack Corp. (N) 14,500 203
Regal Entertainment Group Class A 17,322 352
Ross Stores, Inc. 4,100 115
RR Donnelley & Sons Co. 1,700 54
Rush Enterprises, Inc. Class B (AE) 2,300 39
Russell Corp. (N) 15,600 283
Scholastic Corp. (AE)(N) 9,200 239
Scotts Miracle-Gro Co. (The) Class A (N) 7,900 334
Six Flags, Inc. (AE)(N) 21,200 119
Skechers USA, Inc. Class A (AE) 4,976 120
Sonic Automotive, Inc. Class A (N) 22,980 510
Sourcecorp, Inc. (AE) 7,704 191
Spanish Broadcasting System, Inc. Class A (AE) 5,000 26
Speedway Motorsports, Inc. (N) 2,900 109
Spherion Corp. (AE) 40,700 371
Stamps.com, Inc. (AE)(N) 3,000 83
Stanley Works (The) 10,421 492
Steven Madden, Ltd. 3,500 104
Stewart Enterprises, Inc. Class A (N) 33,800 194
Stride Rite Corp. 4,000 53
Tech Data Corp. (AE) 4,760 182
TeleTech Holdings, Inc. (AE)(N) 15,800 200
Tiffany & Co. (N) 8,800 291
Trans World Entertainment Corp. (AE)(N) 1,000 7
Tuesday Morning Corp. (N) 12,300 162
Tweeter Home Entertainment Group, Inc. (AE)(N) 7,400 53
Under Armour, Inc. Class A (AE)(N) 2,400 102
Valassis Communications, Inc. (AE) 5,300 125
Volcom, Inc. (AE)(N) 4,900 157
Warnaco Group, Inc. (The) (AE) 12,500 233
WESCO International, Inc. (AE)(N) 9,500 655
Wet Seal, Inc. (The) Class A (AE)(N) 12,200 60
World Fuel Services Corp. 900 41
------------
36,237
------------
Consumer Staples - 1.9%
Church & Dwight Co., Inc. 9,200 335
Dean Foods Co. (AE) 5,600 208
</Table>
12 Aggressive Equity Fund
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Flowers Foods, Inc. 1,600 46
Great Atlantic & Pacific Tea Co. (N) 10,123 230
Herbalife, Ltd. (AE) 7,100 283
Ingles Markets, Inc. Class A 2,905 50
J&J Snack Foods Corp. 1,100 37
Longs Drug Stores Corp. 16,418 749
M&F Worldwide Corp. (AE)(N) 21,620 348
Maui Land & Pineapple Co., Inc. (AE)(N) 500 19
Molson Coors Brewing Co. Class B (N) 4,100 278
National Beverage Corp. (N) 3,300 47
Pathmark Stores, Inc. (AE)(N) 9,700 91
PepsiAmericas, Inc. 9,600 212
Performance Food Group Co. (AE)(N) 9,697 295
Premium Standard Farms, Inc. (N) 2,800 46
Ralcorp Holdings, Inc. (AE) 4,800 204
Schweitzer-Mauduit International, Inc. 1,700 37
Seaboard Corp. (N) 362 463
Smithfield Foods, Inc. (AE) 6,448 186
Spartan Stores, Inc. (N) 3,700 54
------------
4,218
------------
Financial Services - 18.9%
Advent Software, Inc. (AE) 17,100 617
Affiliated Managers Group, Inc. (AE) 5,536 481
Affirmative Insurance Holdings, Inc. (N) 1,500 23
Affordable Residential Communities (N) 5,000 54
AG Edwards, Inc. 6,300 348
Alleghany Corp. (AE) 787 217
Alliance Data Systems Corp. (AE)(N) 27,570 1,622
AMB Property Corp. (o) 9,200 465
Amcore Financial, Inc. (N) 7,400 217
American Capital Strategies, Ltd. (N) 10,900 365
American Financial Group, Inc. 6,400 275
American Home Mortgage Investment Corp. (o)(N) 8,546 315
American Physicians Capital, Inc. (AE) 1,200 63
AmeriCredit Corp. (AE) 16,300 455
Anthracite Capital, Inc. (o)(N) 14,622 178
Anworth Mortgage Asset Corp. (o) 7,000 58
Apollo Investment Corp. 9,700 179
Ashford Hospitality Trust, Inc. (o)(N) 17,900 226
Associated Banc-Corp. 7,899 249
Assurant, Inc. 7,359 356
BancFirst Corp. 1,000 45
Bank of Hawaii Corp. 15,209 754
Banner Corp. (N) 1,000 39
BioMed Realty Trust, Inc. (o) 16,900 506
BlackRock, Inc. Class A 1,500 209
BOK Financial Corp. 1,030 51
Brookline Bancorp, Inc. (N) 13,700 189
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Capital Trust, Inc. Class A (o)(N) 1,600 57
Cash America International, Inc. (N) 11,500 368
CBL & Associates Properties, Inc. (o) 5,200 202
Checkfree Corp. (AE) 4,620 229
Chittenden Corp. 1,800 47
CIT Group, Inc. 4,000 209
City National Corp. 10,640 693
Colonial BancGroup, Inc. (The) 16,000 411
Commerce Bancshares, Inc. 2,200 110
Commerce Group, Inc. 5,200 154
Community Bank System, Inc. (N) 9,500 192
CompuCredit Corp. (AE)(N) 13,157 506
Corus Bankshares, Inc. (N) 10,860 284
Cousins Properties, Inc. (o) 5,000 155
Covanta Holding Corp. (AE)(N) 13,100 231
Cullen/Frost Bankers, Inc. (N) 2,900 166
Cybersource Corp. (AE)(N) 23,000 269
Deerfield Triarc Capital Corp. (o) 3,100 40
Delphi Financial Group Class A 12,433 452
DiamondRock Hospitality Co. (o)(A) 20,800 309
Digital Insight Corp. (AE) 3,400 117
Dun & Bradstreet Corp. (AE) 2,100 146
EMC Insurance Group, Inc. (N) 3,900 112
Equity One, Inc. (o)(N) 11,400 238
Euronet Worldwide, Inc. (AE)(N) 10,000 384
Federal Realty Investors Trust (o) 5,300 371
FelCor Lodging Trust, Inc. (o) 12,600 274
Fidelity Bankshares, Inc. (N) 4,100 130
Fieldstone Investment Corp. (o)(N) 15,600 143
First American Corp. 14,200 600
First Cash Financial Services, Inc. (AE) 4,293 85
First Citizens BancShares, Inc. Class A (N) 600 120
First Community Bancorp 1,800 106
First Financial Bankshares, Inc. (N) 1,000 37
First Indiana Corp. (AE)(N) 5,151 134
First Niagara Financial Group, Inc. 18,400 258
First Regional Bancorp (AE)(N) 1,000 88
First Republic Bank 2,600 119
FirstFed Financial Corp. (AE)(N) 8,400 484
Fremont General Corp. (N) 30,300 562
Fulton Financial Corp. (N) 5,460 87
GFI Group, Inc. (AE)(N) 1,400 76
Global Payments, Inc. 14,200 689
Gramercy Capital Corp. (o)(N) 1,676 43
Greater Bay Bancorp (N) 8,700 250
H&E Equipment Services, Inc. (AE)(N) 2,100 62
Hanmi Financial Corp. (N) 5,700 111
</Table>
Aggressive Equity Fund 13
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Hanover Insurance Group, Inc. (The) 10,000 475
Harbor Florida Bancshares, Inc. (N) 1,500 56
Harleysville Group, Inc. 1,000 32
HCC Insurance Holdings, Inc. 850 25
Health Care Property Investors, Inc. (o)(N) 900 24
HealthExtras, Inc. (AE)(N) 18,100 547
Heartland Payment Systems, Inc. (AE)(N) 8,000 223
Horace Mann Educators Corp. 6,000 102
Hospitality Properties Trust (o) 4,100 180
HRPT Properties Trust (o) 44,600 516
IBERIABANK Corp. (N) 900 52
IMPAC Mortgage Holdings, Inc. (o) 1,000 11
IndyMac Bancorp, Inc. 9,900 454
Infinity Property & Casualty Corp. 3,200 131
Innkeepers USA Trust (o) 1,900 33
Intersections, Inc. (AE)(N) 1,100 12
iStar Financial, Inc. (o) 7,650 289
ITLA Capital Corp. 500 26
Jameson Inns, Inc. (AE)(N) 92,200 269
Jefferies Group, Inc. 12,000 356
JER Investors Trust, Inc. (o)(N)(p) 6,168 96
Jersey Investment Trust, Inc. (AE) 9,200 144
Jones Lang LaSalle, Inc. 4,300 376
KKR Financial Corp. (o) 12,650 263
Knight Capital Group, Inc. Class A (AE) 13,600 207
LandAmerica Financial Group, Inc. Class A (N) 15,290 988
Legg Mason, Inc. 2,500 249
Liberty Property Trust (o)(N) 7,000 309
Luminent Mortgage Capital, Inc. (o) 8,600 80
Macatawa Bank Corp. (N) 8,705 204
Mack-Cali Realty Corp. (o) 6,800 312
MAF Bancorp, Inc. 2,300 99
Marshall & Ilsley Corp. 4,040 185
MB Financial, Inc. (AE) 2,000 71
Medical Properties Trust, Inc. (o)(N) 12,100 134
Mercantile Bank Corp. (N) 5,635 225
Mercantile Bankshares Corp. 2,876 103
Mid-America Apartment Communities, Inc. (o) 4,200 234
Morningstar, Inc. (AE)(N) 8,765 364
National Health Investors, Inc. (o)(N) 2,300 62
National Penn Bancshares, Inc. (N) 983 20
National Retail Properties, Inc. (o) 30,500 608
Nationwide Financial Services, Inc. (N) 5,900 260
Navigators Group, Inc. (AE) 5,600 245
New Century Financial Corp. (AE)(o) 1,200 55
New York Community Bancorp, Inc. (N) 3,900 64
Newcastle Investment Corp. (o)(N) 10,300 261
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
NorthStar Realty Finance Corp. (o) 4,100 49
Oak Hill Financial, Inc. 5,800 148
OceanFirst Financial Corp. (N) 1,503 33
Ohio Casualty Corp. 7,400 220
Old Republic International Corp. 12,875 275
Omega Financial Corp. (N) 356 11
Open Solutions, Inc. (AE)(N) 7,100 189
optionsXpress Holdings, Inc. (N) 8 --
Parkvale Financial Corp. (N) 3,557 104
Philadelphia Consolidated Holding Co. (AE) 7,000 212
Portfolio Recovery Associates, Inc. (AE)(N) 8,400 384
PowerShares Dynamic Retail Portfolio 5,500 95
Preferred Bank 2,000 107
Presidential Life Corp. (N) 4,900 120
ProAssurance Corp. (AE) 12,244 590
Protective Life Corp. 2,900 135
Provident Financial Services, Inc. 5,300 95
PS Business Parks, Inc. (o) 1,600 94
R&G Financial Corp. Class B 8,400 72
Raymond James Financial, Inc. (N) 13,000 393
Realty Income Corp. (o)(N) 3,000 66
Regency Centers Corp. (o) 2,100 130
Reinsurance Group of America, Inc. 2,735 134
Rewards Network, Inc. (AE) 5,200 42
RLI Corp. 2,100 101
Ryder System, Inc. 10,700 625
S1 Corp. (AE)(N) 13,700 66
Safety Insurance Group, Inc. (N) 9,100 433
Scottish Re Group, Ltd. (N) 12,400 207
SeaBright Insurance Holdings, Inc. (AE) 4,150 67
SEI Investments Co. 5,900 288
Selective Insurance Group, Inc. 600 33
Senior Housing Properties Trust (o) 20,660 370
Sky Financial Group, Inc. 5,000 118
Spirit Finance Corp. (o)(N) 17,790 200
Stancorp Financial Group, Inc. 8,800 448
State Auto Financial Corp. 1,200 39
Sterling Bancorp (N) 1,260 25
Sterling Bancshares, Inc. 7,600 142
Sterling Financial Corp. (N) 1,000 22
Stewart Information Services Corp. 12,360 449
Susquehanna Bancshares, Inc. 5,200 124
TCF Financial Corp. (N) 4,800 127
Thomas Weisel Partners Group, Inc. (AE)(N) 17,499 333
</Table>
14 Aggressive Equity Fund
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TNS, Inc. (AE) 9,600 199
Tower Group, Inc. 30,511 923
UMB Financial Corp. 1,400 47
Umpqua Holdings Corp. (N) 1,200 31
United PanAm Financial Corp. (AE) 9,300 283
United Rentals, Inc. (AE)(N) 24,700 790
Ventas, Inc. (o) 7,175 243
W Holding Co., Inc. (N) 16,600 110
Washington Real Estate Investment Trust (o)(N) 5,300 194
Weingarten Realty Investors (o) 1,200 46
Whitney Holding Corp. 3,700 131
Wilshire Bancorp, Inc. (N) 4,028 73
World Acceptance Corp. (AE) 6,800 242
WSFS Financial Corp. 4,660 286
Zenith National Insurance Corp. 3,100 123
------------
41,133
------------
Health Care - 8.8%
Accelrys, Inc. (AE)(N) 20,900 149
Adams Respiratory Therapeutics, Inc. (AE)(N) 3,400 152
Affymetrix, Inc. (AE) 10,999 282
Air Methods Corp. (AE) 4,300 113
Albany Molecular Research, Inc. (AE)(N) 25,400 271
Alkermes, Inc. (AE)(N) 33,400 632
Allscripts Healthcare Solutions, Inc. (AE)(N) 31,214 548
Alpharma, Inc. Class A 6,300 151
American Medical Systems Holdings, Inc. (AE) 30,508 508
Analogic Corp. (N) 4,800 224
Applera Corp. - Celera Genomics Group (AE) 26,600 344
Arthrocare Corp. (AE) 6,028 253
Barr Pharmaceuticals, Inc. (AE) 3,620 173
Beckman Coulter, Inc. 1,800 100
Bio-Rad Laboratories, Inc. Class A (AE) 3,737 243
Cephalon, Inc. (AE)(N) 2,600 156
Cerner Corp. (AE)(N) 7,262 269
Charles River Laboratories International, Inc.
(AE) 7,400 272
Community Health Systems, Inc. (AE) 19,065 701
Cooper Cos., Inc. (The) (N) 7,800 345
Dade Behring Holdings, Inc. 2,449 102
DaVita, Inc. (AE) 14,369 714
Diagnostic Products Corp. 900 52
Digene Corp. (AE)(N) 10,000 387
Discovery Laboratories, Inc. (AE)(N) 10,600 22
Emdeon Corp. (AE) 4,900 61
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Endo Pharmaceuticals Holdings, Inc. (AE) 23,500 775
Exelixis, Inc. (AE) 9,200 92
Flamel Technologies SA - ADR (AE)(N) 3,100 57
Genesis HealthCare Corp. (AE) 4,150 197
Genomic Health, Inc. (AE) 1,000 12
Greatbatch, Inc. (AE)(N) 9,800 231
HealthTronics, Inc. (AE) 15,800 121
Healthways, Inc. (AE) 7,239 381
Henry Schein, Inc. (AE) 7,047 329
Hologic, Inc. (AE)(N) 11,419 564
Hooper Holmes, Inc. (N) 800 2
Illumina, Inc. (AE)(N) 15,966 474
Immucor, Inc. (AE) 2,280 44
Intralase Corp. (AE)(N) 20,000 335
Kendle International, Inc. (AE)(N) 3,200 118
Kyphon, Inc. (AE)(N) 6,800 261
Lifecell Corp. (AE)(N) 24,700 764
LifePoint Hospitals, Inc. (AE) 5,400 174
Magellan Health Services, Inc. (AE) 2,800 127
Medcath Corp. (AE)(N) 2,100 40
Mentor Corp. 10,280 447
MGI Pharma, Inc. (AE)(N) 6,300 135
Mylan Laboratories, Inc. 2,200 44
Myriad Genetics, Inc. (AE)(N) 7,400 187
Neurocrine Biosciences, Inc. (AE)(N) 3,700 39
Neurometrix, Inc. (AE)(N) 8,600 262
New River Pharmaceuticals, Inc. (AE)(N) 2,102 60
NuVasive, Inc. (AE)(N) 1,704 31
Omnicare, Inc. (N) 2,000 95
Pain Therapeutics, Inc. (AE)(N) 10,600 89
Palomar Medical Technologies, Inc. (AE)(N) 1,400 64
Parexel International Corp. (AE) 5,400 156
PDL BioPharma, Inc. (AE)(N) 5,800 107
Pediatrix Medical Group, Inc. (AE) 1,100 50
Per-Se Technologies, Inc. (AE)(N) 4,800 121
Pharmacopeia Drug Discovery, Inc. (AE)(N) 10,250 41
Pharmacyclics, Inc. (AE)(N) 1,600 6
Phase Forward, Inc. (AE) 18,900 218
Quality Systems, Inc. 8,828 325
Res-Care, Inc. (AE) 5,600 112
Resmed, Inc. (AE) 14,768 693
Sciclone Pharmaceuticals, Inc. (AE)(N) 5,800 13
Sierra Health Services, Inc. (AE)(N) 17,126 771
SonoSite, Inc. (AE)(N) 12,900 504
Sunrise Senior Living, Inc. (AE)(N) 25,429 703
</Table>
Aggressive Equity Fund 15
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SurModics, Inc. (AE)(N) 1,840 66
Tenet Healthcare Corp. (AE)(N) 10,600 74
Thoratec Corp. (AE)(N) 12,200 169
United Surgical Partners International, Inc.
(AE) 11,114 334
Universal Health Services, Inc. Class B 3,000 151
Varian Medical Systems, Inc. (AE) 4,709 223
Watson Pharmaceuticals, Inc. (AE)(N) 13,500 314
West Pharmaceutical Services, Inc. 4,000 145
Zymogenetics, Inc. (AE)(N) 7,500 142
------------
19,213
------------
Materials and Processing - 8.5%
Airgas, Inc. (N) 25,161 937
Aleris International, Inc. (AE) 5,893 270
Ashland, Inc. (N) 2,300 153
Barnes Group, Inc. (N) 13,000 259
Bluegreen Corp. (AE)(N) 2,900 33
BlueLinx Holdings, Inc. (N) 8,021 105
Builders FirstSource, Inc. (AE)(N) 4,100 83
Building Material Holding Corp. (N) 6,600 184
Cambrex Corp. (N) 8,700 181
Celanese Corp. Class A 13,100 268
Century Aluminum Co. (AE)(N) 13,379 477
Ceradyne, Inc. (AE)(N) 3,000 148
CF Industries Holdings, Inc. 17,500 250
Chesapeake Corp. (N) 900 15
Chicago Bridge & Iron Co. NV 10,883 263
Coeur d'Alene Mines Corp. (AE)(N) 30,700 148
Comfort Systems USA, Inc. (N) 33,000 472
Commercial Metals Co. 7,000 180
Consolidated-Tomoka Land Co. (N) 2,700 149
Constar International, Inc. (AE)(N) 9,800 38
Crown Holdings, Inc. (AE) 6,100 95
Cytec Industries, Inc. 5,400 290
Dycom Industries, Inc. (AE)(N) 10,900 232
Eagle Materials, Inc. (N) 1,700 81
ElkCorp (N) 7,400 205
EMCOR Group, Inc. (AE)(N) 12,500 608
Energizer Holdings, Inc. (AE)(N) 5,290 310
Energy Conversion Devices, Inc. (AE) 3,987 145
FMC Corp. 5,300 341
Granite Construction, Inc. 7,100 321
Greif, Inc. Class A 900 67
Griffon Corp. (AE)(N) 9,000 235
Harsco Corp. (N) 8,200 639
HB Fuller Co. (N) 9,000 392
Healthcare Services Group (N) 6,000 126
Hercules, Inc. (AE) 33,400 510
Infrasource Services, Inc. (AE)(N) 1,700 31
Innospec, Inc. (N) 900 23
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Insituform Technologies, Inc. Class A (AE)(N) 16,000 366
Lamson & Sessions Co. (The) (AE)(N) 3,100 88
Lennox International, Inc. 5,000 132
Lubrizol Corp. 9,500 379
Martin Marietta Materials, Inc. (N) 2,800 255
Maverick Tube Corp. (AE)(N) 4,300 272
Metal Management, Inc. 3,200 98
Mueller Industries, Inc. (N) 20,500 677
Mueller Water Products, Inc. Class A (AE) 19,412 338
Myers Industries, Inc. (N) 2,900 50
Newkirk Realty Trust, Inc. (N) 12,200 212
NewMarket Corp. (N) 14,680 720
NS Group, Inc. (AE) 1,762 97
OM Group, Inc. (AE) 15,708 485
Packaging Corp. of America 9,000 198
Pactiv Corp. (AE) 6,600 163
Perini Corp. (AE) 1,000 23
PGT, Inc. (AE) 1,100 17
PolyOne Corp. (AE) 13,000 114
Quanex Corp. (N) 8,700 375
Reliance Steel & Aluminum Co. 3,700 307
Rock-Tenn Co. Class A 3,000 48
Rockwood Holdings, Inc. (AE) 10,422 240
Rogers Corp. (AE)(N) 6,800 383
RTI International Metals, Inc. (AE)(N) 4,800 268
Schulman A, Inc. (N) 8,200 188
Shaw Group, Inc. (The) (AE) 1,300 36
Silgan Holdings, Inc. 1,800 67
Sonoco Products Co. 10,700 339
Spartech Corp. 6,700 151
Standard Register Co. (The) (N) 7,800 92
Stepan Co. 1,459 46
Superior Essex, Inc. (AE) 2,000 60
Symyx Technologies, Inc. (AE) 1,800 43
Tejon Ranch Co. (AE)(N) 3,400 140
Trammell Crow Co. (AE)(N) 2,000 70
United States Steel Corp. 700 49
URS Corp. (AE) 5,400 227
USEC, Inc. (N) 9,100 108
USG Corp. (AE)(N) 1,900 139
Valmont Industries, Inc. (N) 4,600 214
Washington Group International, Inc. 12,892 688
Watsco, Inc. (N) 2,900 173
Westlake Chemical Corp. 2,400 72
------------
18,471
------------
</Table>
16 Aggressive Equity Fund
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Miscellaneous - 1.4%
Brunswick Corp. 500 16
Castlepoint Holdings, Ltd. (AE)(p) 30,900 340
Foster Wheeler, Ltd. (AE)(N) 7,400 320
Hillenbrand Industries, Inc. (N) 6,000 291
Kaman Corp. Class A 6,800 124
McDermott International, Inc. (AE) 17,553 798
SPX Corp. (N) 5,500 308
Trinity Industries, Inc. (N) 8,300 335
Walter Industries, Inc. 8,185 472
------------
3,004
------------
Other Energy - 7.1%
Alon USA Energy, Inc. 1,800 57
Arch Coal, Inc. 3,000 127
Atwood Oceanics, Inc. (AE)(N) 10,300 511
Basic Energy Services, Inc. (AE)(N) 21,300 651
Berry Petroleum Co. Class A (N) 1 --
Bois d'Arc Energy, Inc. (AE)(N) 5,200 86
Bronco Drilling Co., Inc. (AE)(N) 7,100 148
Cameron International Corp. (AE) 5,407 258
CARBO Ceramics, Inc. (N) 1,900 93
Cimarex Energy Co. (N) 10,500 452
Consol Energy, Inc. (N) 5,400 252
Core Laboratories NV (AE) 9,864 602
Denbury Resources, Inc. (AE) 6,491 206
Diamond Offshore Drilling, Inc. 4,338 364
Dresser-Rand Group, Inc. (AE)(N) 3,300 78
Edge Petroleum Corp. (AE)(N) 3,200 64
ENSCO International, Inc. (N) 5,400 249
Equitable Resources, Inc. 5,500 184
FMC Technologies, Inc. (AE) 14,300 965
Forest Oil Corp. (AE) 4,200 139
Foundation Coal Holdings, Inc. 8,000 375
Global Industries, Ltd. (AE)(N) 27,500 459
Grant Prideco, Inc. (AE)(N) 6,500 291
Helix Energy Solutions Group, Inc. (AE)(N) 12,000 484
Hercules Offshore, Inc. (AE)(N) 5,700 200
Holly Corp. 6,000 289
Hornbeck Offshore Services, Inc. (AE) 1,100 39
Input/Output, Inc. (AE)(N) 16,000 151
Meridian Resource Corp. (AE)(N) 21,700 76
NATCO Group, Inc. Class A (AE) 5,600 225
National-Oilwell Varco, Inc. (AE) 6,693 424
Oceaneering International, Inc. (AE)(N) 5,600 257
Oil States International, Inc. (AE)(N) 12,100 415
Ormat Technologies, Inc. (N) 3,500 134
Peabody Energy Corp. 4,400 245
Petroleum Development Corp. (AE) 1,405 53
Reliant Energy, Inc. (AE)(N) 10,712 128
SEACOR Holdings, Inc. (AE)(N) 4,700 386
Superior Energy Services, Inc. (AE) 7,000 237
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Superior Well Services, Inc. (AE)(N) 2,300 57
Swift Energy Co. (AE) 14,300 614
Tetra Technologies, Inc. (AE) 27,363 829
Todco Class A (N) 4,600 188
Trico Marine Services, Inc. (AE)(N) 15,600 530
Unit Corp. (AE)(N) 12,700 723
Veritas DGC, Inc. (AE)(N) 22,158 1,143
W&T Offshore, Inc. (N) 2,400 93
W-H Energy Services, Inc. (AE) 14,100 717
Weatherford International, Ltd. (AE) 3,331 165
Western Refining, Inc. (N) 2,500 54
------------
15,467
------------
Producer Durables - 7.7%
Actuant Corp. Class A (N) 7,900 395
Ametek, Inc. (N) 4,300 204
Andrew Corp. (AE) 1,500 13
AO Smith Corp. (N) 13,800 640
Applied Industrial Technologies, Inc. (N) 12,000 292
Arris Group, Inc. (AE) 5,300 70
ASML Holding NV (AE) 21,672 438
Astec Industries, Inc. (AE)(N) 8,322 284
Axcelis Technologies, Inc. (AE) 21,700 128
BE Aerospace, Inc. (AE) 16,844 385
Brooks Automation, Inc. (AE) 3,200 38
Bucyrus International, Inc. Class A 1,100 56
Cascade Corp. (N) 900 36
Champion Enterprises, Inc. (AE) 15,800 174
CNH Global NV 3,640 87
Credence Systems Corp. (AE)(N) 10,100 35
Crown Castle International Corp. (AE)(N) 9,100 314
Cymer, Inc. (AE) 4,300 200
Desarrolladora Homex SA de CV - ADR (AE) 9,324 306
EFJ, Inc. (AE)(N) 18,500 111
EnPro Industries, Inc. (AE)(N) 4,975 167
Entegris, Inc. (AE)(N) 26,931 257
ESCO Technologies, Inc. (AE)(N) 16,671 891
Esterline Technologies Corp. (AE)(N) 1,600 67
Flowserve Corp. (AE) 2,800 159
Gardner Denver, Inc. (AE) 27,200 1,047
General Cable Corp. (AE)(N) 3,700 130
Genlyte Group, Inc. (AE) 4,900 355
Intevac, Inc. (AE)(N) 19,600 425
Itron, Inc. (AE)(N) 4,100 243
JLG Industries, Inc. (N) 2,700 61
Kennametal, Inc. 8,456 526
</Table>
Aggressive Equity Fund 17
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Kimball International, Inc. Class B 4,020 79
LTX Corp. (AE) 12,400 87
Manitowoc Co., Inc. (The) 12,000 534
Mattson Technology, Inc. (AE) 16,900 165
Measurement Specialties, Inc. (AE)(N) 3,700 82
Mettler Toledo International, Inc. (AE) 8,657 524
Middleby Corp. (AE)(N) 1,300 113
Milacron, Inc. (AE)(N) 31,245 31
MKS Instruments, Inc. (AE) 5,600 113
MTS Systems Corp. (N) 7,830 309
NACCO Industries, Inc. Class A (N) 4,843 666
Orleans Homebuilders, Inc. (N) 1,200 20
Pall Corp. 11,900 333
Photon Dynamics, Inc. (AE) 1,700 21
Polycom, Inc. (AE)(N) 15,600 342
Power-One, Inc. (AE)(N) 28,200 186
Robbins & Myers, Inc. 4,300 112
Rofin-Sinar Technologies, Inc. (AE) 3,600 207
Rudolph Technologies, Inc. (AE)(N) 3,800 55
SBA Communications Corp. Class A (AE)(N) 15,700 410
Steelcase, Inc. Class A (N) 5,600 92
Technical Olympic USA, Inc. (AE)(N) 10,350 149
Technitrol, Inc. 5,700 132
Tecumseh Products Co. Class A (N) 12,900 248
Tektronix, Inc. 29,483 867
Teledyne Technologies, Inc. (AE) 8,900 292
Tennant Co. 1,300 65
Tollgrade Communications, Inc. (AE) 1,800 17
Ultratech, Inc. (AE)(N) 7,200 113
United Industrial Corp. (N) 3,700 167
Varian Semiconductor Equipment Associates, Inc.
(AE)(N) 30,047 980
Viisage Technology, Inc. (AE)(N) 13,900 211
Waters Corp. (AE) 2,621 116
Xyratex, Ltd. (AE) 14,447 382
------------
16,754
------------
Technology - 17.0%
3Com Corp. (AE) 35,500 182
Adaptec, Inc. (AE)(N) 42,900 186
Aeroflex, Inc. (AE) 11,900 139
Agile Software Corp. (AE)(N) 56,900 361
Akamai Technologies, Inc. (AE)(N) 18,300 662
Alliance Semiconductor Corp. (AE)(N) 14,000 38
Altera Corp. (AE) 23,358 410
American Reprographics Co. (AE) 7,371 267
AMIS Holdings, Inc. (AE) 600 6
Amkor Technology, Inc. (AE)(N) 19,100 181
Amphenol Corp. Class A 16,395 917
Anaren, Inc. (AE) 8,617 177
Anixter International, Inc. 6,000 285
Ansoft Corp. (AE) 12,600 258
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ansys, Inc. (AE) 2,100 100
Applera Corp. - Applied Biosystems Group 14,900 482
Ariba, Inc. (AE)(N) 12,100 100
ASE Test, Ltd. (AE)(N) 21,900 199
Aspen Technology, Inc. (AE)(N) 8,800 115
Atmel Corp. (AE)(N) 93,000 516
Avanex Corp. (AE)(N) 32,400 57
Avici Systems, Inc. (AE)(N) 1,000 6
Avid Technology, Inc. (AE)(N) 3,700 123
Avnet, Inc. (AE) 25,200 505
BEA Systems, Inc. (AE) 66,400 869
BearingPoint, Inc. (AE)(N) 21,100 177
Benchmark Electronics, Inc. (AE)(N) 42,600 1,028
Blackbaud, Inc. 20,180 458
BMC Software, Inc. (AE) 3,500 84
Brocade Communications Systems, Inc. (AE) 53,600 329
Cadence Design Systems, Inc. (AE) 16,900 290
Cbeyond Communications, Inc. (AE)(N) 9,800 214
Checkpoint Systems, Inc. (AE) 7,600 169
ChipMOS TECHNOLOGIES Bermuda, Ltd. (AE)(N) 21,700 128
Ciena Corp. (AE)(N) 145,109 698
Cirrus Logic, Inc. (AE)(N) 7,000 57
Cognizant Technology Solutions Corp. Class A
(AE) 2,200 148
Comtech Telecommunications Corp. (AE)(N) 7,950 233
Comverse Technology, Inc. (AE) 19,539 386
Conexant Systems, Inc. (AE)(N) 110,100 275
Cray, Inc. (AE)(N) 1,800 18
CSG Systems International, Inc. (AE) 9,069 224
Cubic Corp. (N) 6,200 122
Daktronics, Inc. (N) 16,800 485
Digital River, Inc. (AE)(N) 2,000 81
Diodes, Inc. (AE)(N) 6,400 265
Electronics for Imaging, Inc. (AE)(N) 21,388 447
Emulex Corp. (AE) 7,600 124
Equinix, Inc. (AE)(N) 8,500 466
ESS Technology, Inc. (AE) 7,000 15
Fairchild Semiconductor International, Inc.
Class A (AE) 9,200 167
Filenet Corp. (AE) 4,400 118
Flir Systems, Inc. (AE)(N) 4,300 95
Formfactor, Inc. (AE)(N) 26,571 1,186
Foundry Networks, Inc. (AE) 11,300 120
Freescale Semiconductor, Inc. Class A (AE) 21,700 629
</Table>
18 Aggressive Equity Fund
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Garmin, Ltd. 1,600 169
Gartner, Inc. (AE)(N) 42,700 606
Hittite Microwave Corp. (AE) 19,300 698
Hyperion Solutions Corp. (AE) 5,300 146
Ikanos Communications, Inc. (AE)(N) 6,400 97
Imation Corp. 4,400 181
InFocus Corp. (AE)(N) 17,500 50
Informatica Corp. (AE)(N) 10,100 133
Ingram Micro, Inc. Class A (AE) 11,600 210
Integrated Device Technology, Inc. (AE)(N) 21,300 302
Intergraph Corp. (AE) 9,916 312
Intersil Corp. Class A 7,300 170
Intervideo, Inc. (AE)(N) 1,100 11
Interwoven, Inc. (AE)(N) 15,000 129
IXYS Corp. (AE) 11,000 106
j2 Global Communications, Inc. (AE)(N) 6,000 187
JDS Uniphase Corp. (AE)(N) 68,500 173
Keynote Systems, Inc. (AE)(N) 12,300 127
Komag, Inc. (AE)(N) 9,000 416
Lawson Software, Inc. (AE)(N) 26,000 174
Lions Gate Entertainment Corp. (AE)(N) 22,500 192
McAfee, Inc. (AE) 3,600 87
Mentor Graphics Corp. (AE)(N) 54,198 703
Merix Corp. (AE) 100 1
Methode Electronics, Inc. 22,100 232
Micros Systems, Inc. (AE) 7,824 342
Microsemi Corp. (AE)(N) 11,000 268
Napster, Inc. (AE)(N) 19,500 60
NAVTEQ Corp. (AE) 7,282 325
Nuance Communications, Inc. (AE)(N) 36,500 367
ON Semiconductor Corp. (AE)(N) 19,646 116
Openwave Systems, Inc. (AE) 16,199 187
Optical Communication Products, Inc. Class A
(AE)(N) 3,100 6
Orckit Communications, Ltd. (AE)(N) 9,700 99
Park Electrochemical Corp. (N) 19,700 507
Plexus Corp. (AE)(N) 12,100 414
PMC - Sierra, Inc. (AE)(N) 33,200 312
PowerDsine, Ltd. (AE)(N) 10,600 77
Progress Software Corp. (AE) 700 16
Quantum Corp. (AE)(N) 61,100 160
Rackable Systems, Inc. (AE)(N) 7,700 304
RADWARE, Ltd. (AE)(N) 4,600 59
RealNetworks, Inc. (AE)(N) 43,236 463
Redback Networks, Inc. (AE)(N) 22,713 417
RF Micro Devices, Inc. (AE)(N) 8,300 50
Rockwell Automation, Inc. 8,536 615
RSA Security, Inc. (AE)(N) 19,400 527
Safeguard Scientifics, Inc. (AE)(N) 3,900 8
Sanmina-SCI Corp. (AE) 38,300 176
Seachange International, Inc. (AE)(N) 17,200 120
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Seagate Technology (N) 9,797 222
Semtech Corp. (AE) 20,400 295
Silicon Storage Technology, Inc. (AE)(N) 25,000 102
Skyworks Solutions, Inc. (AE)(N) 42,800 236
Solectron Corp. (AE) 62,500 214
SPSS, Inc. (AE)(N) 2,800 90
Stellent, Inc. 4,300 41
SupportSoft, Inc. (AE) 3,100 12
Sybase, Inc. (AE) 2,000 39
Sycamore Networks, Inc. (AE)(N) 36,800 149
SYKES Enterprises, Inc. (AE) 10,931 177
SYNNEX Corp. (AE) 1,200 23
Synopsys, Inc. (AE) 48,797 916
Taleo Corp. Class A (AE)(N) 100 1
Talx Corp. 1,800 39
Tekelec (AE) 16,100 199
Tessera Technologies, Inc. (AE) 22,397 616
TIBCO Software, Inc. (AE) 32,400 228
Transaction Systems Architects, Inc. (AE) 23,549 982
Trident Microsystems, Inc. (AE)(N) 8,100 154
Triquint Semiconductor, Inc. (AE)(N) 28,800 128
Trizetto Group, Inc. (The) (AE)(N) 17,400 257
TTM Technologies, Inc. (AE) 4,200 61
Ultimate Software Group, Inc. (AE)(N) 6,500 125
Unisys Corp. (AE)(N) 103,900 652
Utstarcom, Inc. (AE)(N) 21,200 165
VeriFone Holdings, Inc. (AE)(N) 30,358 925
Vocus, Inc. (AE)(N) 22,400 319
WatchGuard Technologies, Inc. (AE) 8,100 33
Wavecom SA - ADR (AE)(N) 6,100 67
webMethods, Inc. (AE)(N) 38,600 381
Western Digital Corp. (AE)(N) 44,200 876
Witness Systems, Inc. (AE)(N) 8,500 171
Zoran Corp. (AE) 1,900 46
------------
36,925
------------
Utilities - 4.2%
AGL Resources, Inc. 8,200 313
Allete, Inc. 6,700 317
Alliant Energy Corp. 15,750 540
Aqua America, Inc. (N) 5,800 132
Black Hills Corp. (N) 3,170 109
Cascade Natural Gas Corp. (N) 1,500 32
Centerpoint Energy, Inc. (N) 16,200 203
CenturyTel, Inc. 11,750 437
Cleco Corp. 9,400 219
</Table>
Aggressive Equity Fund 19
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
CMS Energy Corp. (AE) 33,600 435
Dobson Communications Corp. Class A (AE) 39,127 302
El Paso Electric Co. (AE) 11,800 238
Energen Corp. 18,200 699
Golden Telecom, Inc. (N) 3,545 90
Laclede Group, Inc. (The) (N) 2,000 69
Leap Wireless International, Inc. (AE) 5,933 282
MDU Resources Group, Inc. 8,200 300
NeuStar, Inc. Class A (AE)(N) 21,642 730
New Jersey Resources Corp. (N) 3,700 173
NII Holdings, Inc. (AE) 4,760 268
NorthWestern Corp. (N) 10,900 374
NSTAR 2,800 80
OGE Energy Corp. (N) 8,700 305
Pepco Holdings, Inc. 16,800 396
Pinnacle West Capital Corp. 6,000 239
RCN Corp. (AE)(N) 2,900 72
Sierra Pacific Resources (AE) 7,040 99
Southern Union Co. (N) 9,700 262
Talk America Holdings, Inc. (AE)(N) 6,800 42
TECO Energy, Inc. 26,300 393
Telephone & Data Systems, Inc. 5,300 219
UGI Corp. 26,200 645
Unisource Energy Corp. 1,800 56
WPS Resources Corp. 1,000 50
------------
9,120
------------
TOTAL COMMON STOCKS
(cost $187,782) 206,953
------------
PREFERRED STOCKS - 0.1%
Auto and Transportation - 0.1%
Quintana Maritime, Ltd. (AE)(B) 2,900 272
Quintana Maritime, Ltd. (AE) 2,900 --
------------
TOTAL PREFERRED STOCKS
(cost $271) 272
------------
WARRANTS & RIGHTS - 0.0%
Auto and Transportation - 0.0%
Quintana Maritime, Ltd. Rights 11,600 --
------------
Financial Services - 0.0%
Washington Mutual, Inc.
2050 Warrants 35,400 8
------------
TOTAL WARRANTS & RIGHTS
(cost $8) 8
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.6%
Frank Russell Investment Company Money Market
Fund 9,276,000 9,276
United States Treasury Bills (z)(sec.)
4.888% due 09/14/06 700 693
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $9,969) 9,969
------------
OTHER SECURITIES - 34.9%
State Street Securities Lending Quality Trust
(X) 75,953,500 75,954
------------
TOTAL OTHER SECURITIES
(cost $75,954) 75,954
------------
TOTAL INVESTMENTS - 134.7%
(identified cost $273,984) 293,156
OTHER ASSETS AND LIABILITIES,
NET - (34.7%) (75,509)
------------
NET ASSETS - 100.0% 217,647
============
</Table>
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.
20 Aggressive Equity Fund
RUSSELL INVESTMENT FUNDS
AGGRESSIVE EQUITY FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Russell 2000 Mini Index (CME)
expiration date 09/06 (135) 9,875 311
---------------
Total Unrealized Appreciation
(Depreciation) on Open Futures
Contracts 311
===============
</Table>
- --------------------------------------------------------------------------------
PRESENTATION OF PORTFOLIO HOLDINGS -- JUNE 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------------
Auto and Transportation 2.9
Consumer Discretionary 16.7
Consumer Staples 1.9
Financial Services 18.9
Health Care 8.8
Materials and Processing 8.5
Miscellaneous 1.4
Other Energy 7.1
Producer Durables 7.7
Technology 17.0
Utilities 4.2
Preferred Stock 0.1
Warrants & Rights --*
Short-Term Investments 4.6
Other Securities 34.9
---------------
Total Investments 134.7
Other Assets and Liabilities, Net (34.7)
---------------
100.0
===============
Futures Contracts 0.1
</Table>
* Less than .05% of net assets
See accompanying notes which are an integral part of the financial statements.
Aggressive Equity Fund 21
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SHAREHOLDER EXPENSE EXAMPLE -- JUNE 30, 2006 (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 SEMIANNUAL
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 management 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, 2006 to June 30, 2006.
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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
PERFORMANCE BEFORE EXPENSES)
-------------- ----------------
Beginning Account Value
January 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value June
30, 2006 $ 1,087.20 $ 1,019.09
Expenses Paid During
Period* $ 5.95 $ 5.76
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 1.15%
(representing the one-half year period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
22 Non-U.S. Fund
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 91.8%
Australia - 3.4%
Alumina, Ltd. (N) 8,500 43
Amcor, Ltd. 102,713 510
AMP, Ltd. 50,600 343
Australia & New Zealand Banking Group, Ltd. (N) 31,139 615
Australian Gas Light Co., Ltd. (N) 3,600 47
Australian Stock Exchange, Ltd. (N) 5,100 123
Australian Wealth Management, Ltd. 36,600 66
AXA Asia Pacific Holdings, Ltd. 13,300 62
Babcock & Brown, Ltd. 2,300 37
BHP Billiton, Ltd. (N) 61,364 1,322
Billabong International, Ltd. 8,400 96
BlueScope Steel, Ltd. 9,000 53
Boral, Ltd. 11,400 69
Bradken, Ltd. 9,800 38
Burns Philp & Co., Ltd. (AE) 108,741 74
Caltex Australia, Ltd. 4,200 74
Centro Properties Group 8,100 40
CFS Gandel Retail Trust 15,000 21
Challenger Financial Services Group, Ltd. 12,700 30
Coca-Cola Amatil, Ltd. (N) 54,500 287
Coles Myer, Ltd. 8,800 74
Commonwealth Bank of Australia (N) 9,300 307
Computershare, Ltd. 49,600 289
ConnectEast Group 55,603 47
CSL, Ltd. 1,200 48
CSR, Ltd. (N) 32,100 80
David Jones, Ltd. 15,500 34
DB RREEF Trust (o) 11,747 13
Downer EDI, Ltd. 28,522 158
Dyno Nobel, Ltd. (AE) 17,900 33
GPT Group 13,500 44
ING Industrial Fund 9,400 16
Insurance Australia Group, Ltd. (N) 46,540 185
Investa Property Group (N) 1,800 3
Leighton Holdings, Ltd. 5,200 67
Lend Lease Corp., Ltd. 2,300 24
Macquarie Bank, Ltd. (N) 9,800 503
Macquarie Goodman Group 8,100 36
Macquarie Infrastructure Group (N) 13,000 32
McGuigan Simeon Wines, Ltd. 33,480 62
Metcash, Ltd. 30,729 85
Mirvac Group (N) 2,600 8
National Australia Bank, Ltd. (N) 56,674 1,481
OneSteel, Ltd. (N) 26,000 79
Origin Energy, Ltd. (N) 2,500 14
Pacific Brands, Ltd. 42,900 69
Publishing & Broadcasting, Ltd. 6,720 91
Qantas Airways, Ltd. 42,300 93
QBE Insurance Group, Ltd. 32,873 501
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ramsay Health Care, Ltd. 12,506 89
Rinker Group, Ltd. 24,236 295
Rio Tinto, Ltd. (N) 3,100 179
Santos, Ltd. 7,900 71
Sons of Gwalia, Ltd. (AE)(N)(B) 8,400 --
Stockland (N) 8,200 43
Suncorp-Metway, Ltd. 4,600 66
Symbion Health, Ltd. (N) 63,908 145
TABCORP Holdings, Ltd. 41,250 466
Toll Holdings, Ltd. (N) 940 10
Transurban Group (N) 21,600 112
United Group, Ltd. (N) 11,300 121
Westfield Group 8,856 114
Westpac Banking Corp. (N) 11,400 197
Woodside Petroleum, Ltd. 2,000 65
Woolworths, Ltd. 32,870 492
------------
10,891
------------
Austria - 0.3%
Erste Bank der oesterreichischen Sparkassen AG 14,221 801
Verbund - Oesterreichische
Elektrizitaetswirtschafts AG Class A 2,500 120
------------
921
------------
Belgium - 0.7%
Belgacom SA 600 20
Dexia 600 14
Fortis (N) 25,630 874
Groupe Bruxelles Lambert SA 700 73
InBev NV 1,100 54
KBC Groep NV 9,399 1,009
Mobistar SA 400 32
Umicore 600 80
------------
2,156
------------
Bermuda - 0.1%
Esprit Holdings, Ltd. 21,000 172
Kerry Properties, Ltd. (N) 5,500 19
Li & Fung, Ltd. 84,800 171
Orient Overseas International, Ltd. (N) 5,800 21
Shangri-La Asia, Ltd. 24,000 46
Yue Yuen Industrial Holdings 12,000 33
------------
462
------------
</Table>
Non-U.S. Fund 23
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Brazil - 0.5%
Cia Vale do Rio Doce - ADR (N) 52,100 1,252
Petroleo Brasileiro SA - ADR 4,600 411
------------
1,663
------------
Canada - 0.9%
Cameco Corp. (N) 10,800 432
Rogers Communications, Inc. Class B 14,600 587
SNC-Lavalin Group, Inc. 27,300 718
Suncor Energy, Inc. 13,500 1,093
------------
2,830
------------
Cayman Islands - 0.0%
Foxconn International Holdings, Ltd. (AE)(N) 35,000 75
Hutchison China Meditech, Ltd. (AE) 1 --
------------
75
------------
China - 0.0%
China Life Insurance Co., Ltd. Class H 40,000 63
------------
Denmark - 0.3%
AP Moller - Maersk A/S 1 8
Danske Bank A/S 19,990 761
East Asiatic Co., Ltd. A/S 1,200 45
FLSmidth & Co. A/S (N) 2,200 83
GN Store Nord (N) 2,400 27
Novo-Nordisk A/S Series B 850 54
Topdanmark A/S (AE)(N) 700 98
------------
1,076
------------
Finland - 0.9%
Fortum OYJ 28,800 737
Kone OYJ Class B 640 27
M-real OYJ Class B (N) 53,090 263
Metso OYJ 2,900 105
Neste Oil OYJ (N) 8,500 299
Nokia OYJ 29,650 605
Nokia OYJ - ADR 5,138 104
Nokian Renkaat OYJ (N) 900 12
Orion OYJ Series B 3,400 67
Rautaruukki OYJ 3,250 98
Sampo OYJ Series A 5,400 103
Stora Enso OYJ Series R 1,400 20
UPM-Kymmene OYJ 23,199 500
------------
2,940
------------
France - 9.8%
Air France-KLM (N) 6,600 155
AXA SA (N) 34,719 1,140
BNP Paribas (N) 30,764 2,945
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Capgemini SA (N) 4,500 257
Carrefour SA (N) 13,340 782
Casino Guichard Perrachon SA (N) 2,400 183
Christian Dior SA (N) 4,600 451
Cie Generale d'Optique Essilor International SA
(N) 7,391 744
Compagnie Generale des Etablissements Michelin 1,300 78
Credit Agricole SA 32,130 1,223
Electricite de France (N) 5,700 300
France Telecom SA (N) 55,630 1,196
Groupe Danone (N) 16,772 2,131
Lafarge SA (N) 6,032 757
Lagardere SCA (N) 3,000 221
LVMH Moet Hennessy Louis Vuitton SA (N) 10,613 1,053
Natexis Banques Populaires (N) 185 43
Peugeot SA 21,658 1,348
Sanofi-Aventis (N) 33,769 3,296
Societe BIC SA (N) 2,400 155
Societe Generale (N) 10,500 1,544
Sodexho Alliance SA (N) 4,200 202
Suez SA (AE)(N) 22,228 924
Suez SA (AE) 1,228 --
Thomson (N) 21,470 355
Total SA - ADR 12,032 788
Total SA (N) 57,332 3,773
Unibail 4,907 856
Valeo SA (N) 19,106 680
Vallourec SA (N) 1,760 2,116
Veolia Environnement (N) 40,450 2,091
------------
31,787
------------
Germany - 6.7%
Aareal Bank AG (AE) 4,763 180
Adidas AG (N) 3,700 177
Allianz AG 3,050 482
BASF AG 600 48
Bayer AG 15,900 731
Bilfinger Berger AG 5,600 305
Celesio AG 2,500 227
Commerzbank AG 47,165 1,716
Continental AG 7,300 746
DaimlerChrysler AG 5,900 292
Deutsche Bank AG (N) 7,729 870
Deutsche Boerse AG (N) 9,547 1,300
Deutsche Lufthansa AG (N) 20,927 385
</Table>
24 Non-U.S. Fund
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Deutsche Post AG 46,330 1,242
Deutsche Telekom AG (N) 57,050 918
E.ON AG 24,999 2,878
GEA Group AG (AE) 16,400 281
Hannover Rueckversicherung AG (AE)(N) 22,590 790
Hochtief AG 7,000 389
Infineon Technologies AG (AE) 62,010 691
MAN AG 6,700 485
Medion AG (N) 6,300 83
Merck KGaA (AE)(N) 5,000 455
Metro AG 7,970 452
Muenchener Rueckversicherungs AG 2,340 320
RWE AG 2,300 191
Salzgitter AG 4,500 382
SAP AG 11,093 2,341
Siemens AG 13,840 1,204
Suedzucker AG (N) 1,400 31
ThyssenKrupp AG 4,900 168
Volkswagen AG (N) 11,880 833
Wincor Nixdorf AG 1,900 243
------------
21,836
------------
Greece - 0.8%
EFG Eurobank Ergasias SA 21,980 609
OPAP SA 42,532 1,540
Public Power Corp. 17,320 410
------------
2,559
------------
Hong Kong - 0.9%
Bank of East Asia, Ltd. 82,073 338
BOC Hong Kong Holdings, Ltd. (N) 157,500 308
Cheung Kong Holdings, Ltd. (N) 20,000 217
China Netcom Group Corp. Hong Kong, Ltd. 26,500 46
Citic Pacific, Ltd. 66,800 197
CLP Holdings, Ltd. 16,500 97
CNOOC, Ltd. (N) 52,000 41
Hang Lung Properties, Ltd. (N) 10,000 18
Henderson Land Development Co., Ltd. (N) 3,000 16
Hong Kong Exchanges and Clearing, Ltd. (N) 10,000 64
HongKong Electric Holdings 17,000 77
Hopewell Holdings 18,000 51
Hutchison Whampoa, Ltd. 31,000 283
Link REIT (The) (AE)(o) 9,000 18
MTR Corp. 17,000 41
New World Development, Ltd. 24,000 40
Shun TAK Holdings, Ltd. (N) 360,000 470
Sino Land Co. (N) 18,000 29
Sun Hung Kai Properties, Ltd. 7,000 71
Swire Pacific, Ltd. 29,500 304
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Television Broadcasts, Ltd. 17,000 105
Wharf Holdings, Ltd. (N) 39,000 139
------------
2,970
------------
Indonesia - 0.0%
Telekomunikasi Indonesia Tbk
PT - ADR 1,750 56
------------
Ireland - 0.9%
Bank of Ireland PLC 50,688 904
CRH PLC 22,200 723
Elan Corp. PLC - ADR (AE)(N) 39,200 655
Ryanair Holdings PLC - ADR (AE)(N) 11,605 612
------------
2,894
------------
Italy - 3.3%
Banca Intesa SpA (N) 40,203 235
Banco Popolare di Verona e Novara SCRL (N) 30,770 825
Benetton Group SpA (N) 5,900 88
Enel SpA (N) 55,200 476
ENI SpA (N) 101,109 2,976
ERG SpA (N) 16,300 407
Fiat SpA (AE)(N) 34,400 457
Fondiaria-Sai SpA 10,800 442
Italcementi SpA (N) 18,400 466
Lottomatica SpA (N) 12,185 463
Mediaset SpA (N) 49,280 581
Milano Assicurazioni SpA (N) 51,100 373
Parmalat Finanziaria SpA (AE)(N)(B) 12,500 --
Saras SpA (AE)(N) 24,400 156
Seat Pagine Gialle SpA 170,000 79
Telecom Italia SpA 139,949 362
UniCredito Italiano SpA (N) 245,330 1,921
Unipol SpA 135,180 435
------------
10,742
------------
Japan - 21.7%
77 Bank, Ltd. (The) 66,300 462
Access Co., Ltd. (AE)(N) 15 107
Aeon Co., Ltd. 56,600 1,241
Aida Engineering, Ltd. 16,000 108
Aiful Corp. (N) 15,744 841
Aioi Insurance Co., Ltd. 11,000 82
Aisin Seiki Co., Ltd. 8,400 250
Ajinomoto Co., Inc. 25,500 282
Alpen Co., Ltd. 3,700 121
</Table>
Non-U.S. Fund 25
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Alps Electric Co., Ltd. (N) 4,100 51
Arrk Corp. 9,400 222
Aruze Corp. 4,000 87
Asahi Breweries, Ltd. (N) 4,200 59
Asahi Glass Co., Ltd. (N) 17,000 216
Asahi Kasei Corp. 19,000 124
Astellas Pharma, Inc. 19,100 701
Bandai Visual Co., Ltd. 37 139
Bank of Fukuoka, Ltd. (The) (N) 7,000 53
Calsonic Kansei Corp. 9,000 57
Canon Marketing Japan, Inc. (N) 2,800 58
Canon, Inc. (N) 35,804 1,755
Chubu Electric Power Co., Inc. 3,000 81
Citizen Watch Co., Ltd. (N) 6,400 58
Credit Saison Co., Ltd. 13,700 649
Cyber Communications, Inc. (N) 25 57
Dai Nippon Printing Co., Ltd. 6,000 93
Daiei, Inc. (The) (AE) 6,900 145
Daiichi Sankyo Co., Ltd. (N) 26,200 721
Daikin Industries, Ltd. (N) 6,700 232
Daiwa House Industry Co., Ltd. (N) 6,000 96
Daiwa Securities Group, Inc. 46,000 548
Denki Kagaku Kogyo Kabushiki Kaisha 14,000 58
Denso Corp. 4,700 154
Dentsu, Inc. (N) 302 834
East Japan Railway Co. 58 431
Eisai Co., Ltd. 21,700 977
Exedy Corp. 5,300 167
Fanuc, Ltd. 700 63
FCC Co., Ltd. (N) 5,700 113
Frontier Real Estate Investment Corp. (o)(N) 13 95
Fuji Electric Holdings Co., Ltd. 16,000 84
Fuji Photo Film Co., Ltd. 37,200 1,248
Fujikura, Ltd. 9,000 99
Fujitsu, Ltd. 41,000 318
Funai Electric Co., Ltd. (N) 5,700 553
Glory, Ltd. 2,700 52
Hino Motors, Ltd. (N) 125,600 731
Hiroshima Bank, Ltd. (The) 18,000 110
Hitachi Construction Machinery Co., Ltd. 3,200 77
Hitachi High-Technologies Corp. 1,200 36
Hitachi Koki Co., Ltd. (N) 20,000 305
Hitachi, Ltd. (N) 21,000 139
Hokuhoku Financial Group, Inc. (N) 17,000 71
Honda Motor Co., Ltd. 12,600 400
Hoya Corp. (N) 10,900 388
Index Corp. (N) 150 148
Inpex Holdings, Inc. (AE)(N) 32 282
Itochu Corp. 26,000 228
Itochu-Shokuhin Co., Ltd. 3,000 113
Iyo Bank, Ltd. (The) 4,000 39
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Izumi Co., Ltd. (N) 1,300 47
Japan Asia Investment Co., Ltd. 19,000 136
Japan Logistics Fund, Inc. (o) 22 164
Japan Tobacco, Inc. 347 1,264
JFE Holdings, Inc. (N) 12,700 538
JS Group Corp. 22,900 481
JSR Corp. 36,800 929
JTEKT Corp. (N) 29,000 560
Kadokawa Holdings, Inc. 4,900 175
Kamigumi Co., Ltd. 5,000 38
Kansai Electric Power Co., Inc. (The) 6,700 150
Kansai Paint Co., Ltd. 22,000 176
Kanto Tsukuba Bank, Ltd. (The) (AE) 3,300 34
Kao Corp. 31,100 814
Kawasaki Kisen Kaisha, Ltd. (N) 27,000 156
KDDI Corp. 75 461
Keihin Corp. 2,900 62
Keio Corp. 23,000 149
Kirin Brewery Co., Ltd. (N) 5,000 79
Kobayashi Pharmaceutical Co., Ltd. 3,300 135
Kobe Steel, Ltd. 41,000 128
Koei Co., Ltd. (N) 8,610 153
Koito Manufacturing Co., Ltd. 10,000 149
Komatsu, Ltd. 15,000 298
Komori Corp. 3,000 64
Kose Corp. (N) 3,000 94
Kubota Corp. 23,000 218
Kuraray Co., Ltd. 31,300 350
Kurita Water Industries, Ltd. (N) 6,100 125
Kyocera Corp. 1,100 85
Kyushu-Shinwa Holdings, Inc. (AE)(N) 2,000 3
Lawson, Inc. 100 4
Leopalace21 Corp. 1,800 62
Mabuchi Motor Co., Ltd. (N) 6,300 377
Makita Corp. 4,000 127
Marui Co., Ltd. 10,700 167
Matsumotokiyoshi Co., Ltd. (N) 16,200 412
Matsushita Electric Industrial Co., Ltd. 40,000 844
Matsushita Electric Works, Ltd. 10,000 111
Mazda Motor Corp. (N) 18,000 113
Meiji Dairies Corp. (N) 14,000 98
Millea Holdings, Inc. 7 130
Minebea Co., Ltd. (N) 30,000 163
Mitsubishi Chemical Holdings Corp. 2,000 12
Mitsubishi Corp. 11,600 232
Mitsubishi Electric Corp. (N) 26,000 208
Mitsubishi Estate Co., Ltd. 6,000 127
</Table>
26 Non-U.S. Fund
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Mitsubishi Gas Chemical Co., Inc. 6,000 69
Mitsubishi Heavy Industries, Ltd. 16,000 69
Mitsubishi Logistics Corp. (N) 7,000 110
Mitsubishi Rayon Co., Ltd. (N) 27,000 220
Mitsubishi UFJ Financial Group, Inc. 130 1,818
Mitsui & Co., Ltd. 44,000 621
Mitsui Chemicals, Inc. 10,000 65
Mitsui Fudosan Co., Ltd. 23,000 499
Mitsui OSK Lines, Ltd. (N) 16,000 109
Mitsui Sumitomo Insurance Co., Ltd. 32,000 402
Mitsui Trust Holdings, Inc. 25,200 303
Mizuho Financial Group, Inc. 184 1,558
Mori Seiki Co., Ltd. (N) 6,800 147
Nabtesco Corp. (N) 5,000 56
Nafco Co., Ltd. 2,500 75
Netprice, Ltd. (AE)(N) 20 43
NGK Spark Plug Co., Ltd. 2,000 40
Nidec Corp. 2,500 179
Nidec Sankyo Corp. (N) 10,000 123
Nikko Cordial Corp. (N) 4,000 51
Nikon Corp. (N) 3,000 52
Nintendo Co., Ltd. 10,300 1,728
Nippon Electric Glass Co., Ltd. (N) 10,000 201
Nippon Express Co., Ltd. (N) 212,000 1,145
Nippon Kayaku Co., Ltd. 6,000 50
Nippon Mining Holdings, Inc. 9,000 76
Nippon Oil Corp. 50,000 365
Nippon Paper Group, Inc. (N) 77 315
Nippon Steel Corp. (N) 75,000 284
Nippon Telegraph & Telephone Corp. 78 382
Nippon Yusen KK (N) 25,000 163
Nissan Chemical Industries, Ltd. (N) 5,000 62
Nissan Motor Co., Ltd. (N) 100,500 1,098
Nissha Printing Co., Ltd. 4,000 149
Nitto Denko Corp. 6,400 456
Nomura Holdings, Inc. (N) 6,800 127
NSK, Ltd. 6,000 50
NTN Corp. (N) 7,000 55
NTT Urban Development Corp. 42 327
Obic Co., Ltd. 880 178
Omron Corp. 6,800 173
ORIX Corp. 4,880 1,192
Osaka Gas Co., Ltd. 59,000 190
Parco Co., Ltd. 10,100 103
Rakuten, Inc. (N) 3,052 1,813
Rengo Co., Ltd. (N) 9,000 68
Resona Holdings, Inc. 52 164
Ricoh Co., Ltd. 44,000 863
Rinnai Corp. (N) 13,300 352
Rohm Co., Ltd. (N) 12,100 1,082
Sanyo Special Steel Co., Ltd. 6,000 49
SBI Holdings, Inc. (N) 376 166
Sekisui Chemical Co., Ltd. 83,300 719
Sekisui House, Ltd. 61,800 848
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Seven & I Holdings Co., Ltd. 4,200 138
SFCG Co., Ltd. 1,465 333
Sharp Corp. 25,000 395
Shin-Etsu Chemical Co., Ltd. 15,900 864
Shinko Electric Industries Co., Ltd. 4,400 128
Shinsei Bank, Ltd. 227,000 1,438
Shionogi & Co., Ltd. (N) 7,000 125
Sompo Japan Insurance, Inc. 34,000 475
Sony Corp. (N) 4,700 207
Stanley Electric Co., Ltd. (N) 10,700 221
Sumisho Lease Co., Ltd. 1,500 83
Sumitomo Chemical Co., Ltd. 20,000 167
Sumitomo Corp. 14,000 185
Sumitomo Electric Industries, Ltd. 18,300 268
Sumitomo Forestry Co., Ltd. 12,000 125
Sumitomo Heavy Industries, Ltd. 11,000 102
Sumitomo Metal Industries, Ltd. 61,000 252
Sumitomo Mitsui Financial Group, Inc. (N) 248 2,622
Sumitomo Realty & Development Co., Ltd. 35,000 862
Sumitomo Trust & Banking Co., Ltd. (The) 35,000 382
Sumitomo Warehouse Co., Ltd. (The) (N) 14,000 103
Suzuken Co., Ltd. 1,100 44
Take And Give Needs Co., Ltd. (N) 191 229
Takeda Pharmaceutical Co., Ltd. 17,600 1,095
Takefuji Corp. 13,200 787
Tanabe Seiyaku Co., Ltd. 6,000 74
TDK Corp. 7,400 563
Teijin, Ltd. 55,000 349
Telewave, Inc. (N) 40 132
Terumo Corp. 5,800 194
Tokai Carbon Co., Ltd. (N) 23,000 129
Tokai Tokyo Securities Co., Ltd. 8,000 47
Tokyo Electric Power Co., Inc. (The) 8,800 243
Tokyo Electron, Ltd. 13,700 958
Toppan Printing Co., Ltd. (N) 9,000 102
Toshiba Corp. (N) 61,000 398
Toshiba Machine Co., Ltd. (N) 5,000 57
Toyobo Co., Ltd. 18,000 51
Toyoda Gosei Co., Ltd. 12,700 255
Toyota Motor Corp. 63,500 3,324
Trend Micro, Inc. (N) 5,000 169
Ube Industries, Ltd. 49,000 142
UFJ NICOS Co., Ltd. 4,000 32
UNY Co., Ltd. 9,000 133
</Table>
Non-U.S. Fund 27
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Valor Co., Ltd. 4,300 78
West Japan Railway Co. 21 87
Xebio Co., Ltd. 2,400 82
Yahoo! Japan Corp. 301 159
Yamaha Corp. (N) 1,800 34
Yamato Holdings Co., Ltd. 5,000 89
Yokogawa Electric Corp. (N) 8,700 124
Yokohama Rubber Co., Ltd. (The) (N) 24,000 106
------------
70,754
------------
Luxembourg - 0.3%
Arcelor 1,700 82
Tenaris SA - ADR (N) 21,600 875
------------
957
------------
Mexico - 0.9%
America Movil SA de CV
Series L (N) 35,200 1,171
Coca-Cola Femsa SA de CV - ADR (N) 12,100 357
Grupo Televisa SA - ADR (N) 60,000 1,159
Telefonos de Mexico SA de CV - ADR Series L 17,090 356
------------
3,043
------------
Netherlands - 3.6%
ABN AMRO Holding NV 35,929 983
Aegon NV 39,938 683
ASML Holding NV (AE) 44,957 911
Buhrmann NV 17,200 249
CSM 900 25
Euronext NV 900 84
Euronext NV (N) 23,015 2,158
European Aeronautic Defense and Space Co. NV (N) 8,900 256
Hagemeyer NV (AE)(N) 3,300 15
Heineken NV 14,098 598
Hunter Douglas NV 1,100 74
ING Groep NV 500 20
Koninklijke BAM Groep NV 4,600 91
Koninklijke Philips Electronics NV (N) 10,500 327
Koninklijke Philips Electronics NV 73,481 2,296
Mittal Steel Co. NV (N) 5,300 164
OCE NV (N) 4,000 59
Randstad Holdings NV 3,300 194
Rodamco Europe NV 3,800 373
Royal KPN NV 6,700 75
Royal Numico NV 32,400 1,454
Unilever NV 23,300 528
------------
11,617
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Norway - 0.8%
DNB Nor Bank ASA 51,192 635
Statoil ASA 62,500 1,772
Yara International ASA (N) 13,400 179
------------
2,586
------------
Papua New Guinea - 0.0%
Oil Search, Ltd. (N) 35,300 108
------------
Singapore - 1.1%
CapitaLand, Ltd. 54,200 154
City Developments, Ltd. 21,000 124
CSE Global, Ltd. 45,000 33
DBS Group Holdings, Ltd. 119,910 1,371
Fraser and Neave, Ltd. 30,000 76
Jardine Cycle & Carriage, Ltd. 6,000 38
Keppel Corp., Ltd. 42,000 390
NatSteel, Ltd. 10,000 8
Neptune Orient Lines, Ltd. 18,000 21
Oversea-Chinese Banking Corp. 18,000 75
Overseas Union Enterprise, Ltd. 4,000 26
Parkway Holdings, Ltd. 74,000 115
SembCorp Industries, Ltd. 29,880 61
Singapore Exchange, Ltd. (N) 61,000 136
Singapore Petroleum Co., Ltd. 14,000 45
Singapore Post, Ltd. 71,000 48
Singapore Technologies Engineering, Ltd. 5,000 9
United Overseas Bank, Ltd. 90,200 889
United Overseas Land, Ltd. 8,300 15
United Test and Assembly Center, Ltd. (AE) 96,000 49
Want Want Holdings, Ltd. 22,000 30
------------
3,713
------------
South Africa - 0.1%
Nedbank Group, Ltd. 17,644 278
------------
South Korea - 0.9%
Hana Financial Group, Inc. 17,760 835
Korea Electric Power Corp. - ADR 14,590 277
KT Corp. - ADR (N) 15,200 326
Samsung Electronics Co., Ltd. 2,140 1,360
SK Telecom Co., Ltd. - ADR 11,620 272
------------
3,070
------------
</Table>
28 Non-U.S. Fund
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Spain - 2.9%
Actividades de Construccion y Servicios SA (N) 19,013 793
Altadis SA (N) 37,200 1,759
Antena 3 de Television SA (N) 2,000 46
Banco Bilbao Vizcaya Argentaria SA (N) 36,932 760
Banco Santander Central Hispano SA 75,455 1,102
Cia de Distribucion Integral Logista SA 4,600 274
Cia Espanola de Petroleos SA (N) 500 36
Corporaction Mapfre SA 37,130 685
Endesa SA (N) 4,200 146
Fomento de Construcciones y Contratas SA 900 68
Gamesa Corp. Tecnologica SA (N) 2,340 50
Gas Natural SDG SA (N) 13,930 425
Gestevision Telecinco SA (N) 17,900 429
Iberia Lineas Aereas de Espana (N) 32,400 84
Repsol YPF SA (N) 24,090 690
Repsol YPF SA - ADR 21,839 613
Sociedad General de Aguas de Barcelona SA Class
A (N) 1,100 30
Telefonica SA 85,424 1,423
------------
9,413
------------
Sweden - 2.3%
Alfa Laval AB 1,300 39
Atlas Copco AB Class A (N) 1,900 53
Axfood AB 600 17
Electrolux AB (N) 4,100 59
Elekta AB Class B (N) 3,100 52
Fabege AB 1,700 32
Hennes & Mauritz AB Series B 24,165 937
Holmen AB Class B 2,200 89
Husqvarna AB Class B (AE)(N) 4,400 53
Kungsleden AB 2,800 33
Lundin Petroleum AB (AE)(N) 8,600 104
Nordea Bank AB (N) 24,500 293
Sandvik AB 40,600 472
Securitas AB Series B (N) 31,572 605
Skandinaviska Enskilda Banken AB Class A (N) 7,000 167
Skanska AB Series B 4,700 72
Ssab Svenskt Stal AB (N) 10,500 204
Svenska Cellulosa AB Series B (N) 10,080 417
Svenska Handelsbanken Series A (N) 23,793 613
Swedish Match AB 42,300 682
Tele2 AB Series B (N) 2,100 21
Telefonaktiebolaget LM Ericsson Series B 681,158 2,253
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
TeliaSonera AB 29,500 168
Volvo AB Series B (N) 400 20
------------
7,455
------------
Switzerland - 6.8%
ABB, Ltd. 75,039 976
Ciba Specialty Chemicals AG 16,618 926
Clariant AG (N) 22,650 321
Compagnie Financiere Richemont AG Class A (N) 13,540 620
Credit Suisse Group (N) 29,483 1,650
Georg Fischer AG (AE) 202 87
Givaudan 462 364
Logitech International SA (AE) 32,033 1,237
Nestle SA (N) 7,955 2,499
Novartis AG (N) 56,615 3,066
Pargesa Holding SA Class B 2,741 260
Roche Holding AG (N) 24,780 4,096
Sulzer AG 218 163
Swatch Group AG 24,012 839
Swiss Reinsurance (N) 13,281 928
UBS AG 35,349 3,874
Zurich Financial Services AG (AE)(N) 611 134
------------
22,040
------------
Taiwan - 0.4%
HON HAI Precision Industry Co., Ltd. 127,000 785
United Microelectronics Corp. - ADR (N) 141,250 439
------------
1,224
------------
United Kingdom - 20.3%
3i Group PLC 79,369 1,323
Anglo American PLC 30,801 1,263
Antofagasta PLC 30,500 236
ARM Holdings PLC 555,926 1,164
AstraZeneca PLC 46,888 2,830
Aviva PLC 35,100 497
BAA PLC 4,500 78
BAE Systems PLC 149,900 1,025
Barclays PLC 98,878 1,124
Barratt Developments PLC 13,400 235
BG Group PLC 113,400 1,515
BHP Billiton PLC 108,353 2,102
BOC Group PLC 1,900 56
Boots Group PLC 80,778 1,149
BP PLC 423,117 4,933
Bradford & Bingley PLC 25,600 220
Brambles Industries PLC 38,200 304
British Airways PLC (AE) 137,374 871
</Table>
Non-U.S. Fund 29
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
British American Tobacco PLC 33,200 836
British Land Co. PLC 76,805 1,794
BT Group PLC 124,561 551
Cadbury Schweppes PLC 2,000 19
Capita Group PLC 50,300 429
Carphone Warehouse Group PLC (AE) 245,904 1,444
Centrica PLC 205,340 1,083
Cobham PLC 73,100 226
Compass Group PLC 4,100 20
Cookson Group PLC 7,900 77
Davis Service Group PLC 9,300 81
De La Rue PLC 12,700 128
Debenhams PLC Class W (AE) 233,092 810
Diageo PLC 23,297 392
DSG International PLC 2,500 9
easyJet PLC (AE) 45,844 327
EMI Group PLC 247,668 1,391
Friends Provident PLC 32,100 106
GKN PLC 92,431 467
GlaxoSmithKline PLC 143,238 4,002
Hanson PLC 23,100 280
HBOS PLC 73,310 1,274
HMV Group PLC 68,100 217
HSBC Holdings PLC 171,624 3,020
Imperial Tobacco Group PLC 8,000 247
Inchcape PLC (AE) 33,400 292
ITV PLC 12,100 24
J Sainsbury PLC 103,030 637
Kazakhmys PLC 10,800 238
Land Securities Group PLC 3,800 126
Legal & General Group PLC 153,300 364
Liberty International PLC 3,200 63
Lloyds TSB Group PLC 15,200 149
Man Group PLC 20,300 957
Marks & Spencer Group PLC 114,600 1,244
Old Mutual PLC 328,443 992
Pearson PLC 24,100 328
Prudential PLC 49,766 562
Reckitt Benckiser PLC 18,916 707
Reed Elsevier PLC 102,062 1,030
Rentokil Initial PLC 154,130 445
Reuters Group PLC 96,500 687
RHM PLC 15,100 80
Rio Tinto PLC 11,900 629
Rolls-Royce Group PLC 61,700 472
Royal & Sun Alliance Insurance Group PLC 112,000 279
Royal Bank of Scotland Group PLC 60,567 1,991
Royal Dutch Shell PLC Class A 69 2,334
Royal Dutch Shell PLC Class B 51,481 1,800
SABMiller PLC 4,000 72
Scottish & Southern Energy PLC 43,200 919
Smiths Group PLC 59,110 974
Standard Chartered PLC 67,827 1,656
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Taylor Woodrow PLC 34,000 210
Tesco PLC 73,726 455
Travis Perkins PLC 4,980 139
Trinity Mirror PLC 49,480 447
Unilever PLC 63,491 1,428
Vodafone Group PLC 1,012,235 2,157
Xstrata PLC 24,625 934
------------
65,976
------------
United States - 0.2%
Synthes, Inc. 5,814 701
------------
TOTAL COMMON STOCKS
(cost $234,820) 298,856
------------
PREFERRED STOCKS- 0.3%
Germany - 0.3%
Fresenius AG 5,610 935
Italy - 0.0%
Unipol SpA 100 --
------------
TOTAL PREFERRED STOCKS
(cost $412) 935
------------
</Table>
<Table>
NOTIONAL
AMOUNT
$
------------
<Caption>
OPTIONS PURCHASED - 0.1%
Belgium - 0.1%
Bel20 Index Futures
Jul 2006 3,541.60 (EUR) Call (31) 1,404 265
Switzerland - 0.0%
Swiss Market Index Futures
Sep 2006 7,186.75 (EUR) Put (4) 235 90
Sep 2006 7,275.61 (EUR) Put (22) 1,309 16
------------
106
------------
TOTAL OPTIONS PURCHASED
(cost $300) 371
------------
</Table>
30 Non-U.S. Fund
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
- -----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 7.6%
United States - 7.6%
Frank Russell Investment Company
Money Market Fund 21,324,000 21,324
United States Treasury Bills (z)
4.909% due 09/14/06 (sec.) 1,500 1,485
4.850% due 09/21/06 2,000 1,979
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $24,787) 24,788
------------
OTHER SECURITIES - 23.6%
State Street Securities Lending Quality Trust
(X) 76,816,559 76,817
------------
TOTAL OTHER SECURITIES
(cost $76,817) 76,817
------------
TOTAL INVESTMENTS - 123.4%
(identified cost $337,136) 401,767
OTHER ASSETS AND LIABILITIES,
NET - (23.4%) (76,192)
------------
NET ASSETS - 100.0% 325,575
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 31
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
AEX Index (Netherlands)
expiration date 07/06 (48) 5,410 240
CAC-40 Index (France)
expiration date 07/06 (33) 2,099 132
expiration date 09/06 (37) 2,362 161
DAX Index (Germany)
expiration date 09/06 (16) 2,929 183
EUR STOXX 50 Index (EMU)
expiration date 09/06 (100) 4,682 243
FTSE-100 Index (UK)
expiration date 09/06 (55) 5,925 247
TOPIX Index (Japan)
expiration date 09/06 (88) 12,236 529
Short Positions
Hang Seng Index (Hong Kong)
expiration date 07/06 (7) 735 (24)
IBEX Plus Index (Spain)
expiration date 07/06 (18) 2,651 (181)
MIB-30 (Italy)
expiration date 09/06 (12) 2,813 (136)
OMX Stockholm 30 Index (Sweden)
expiration date 07/06 (148) 1,968 (63)
SPI 200 Index (Australia)
expiration date 09/06 (36) 3,397 (150)
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts 1,181
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Belgium
Bel20 Index Futures
Jul 2006 3,541.60 (EUR) Put (31) 1,404 (198)
Switzerland
Swiss Market Index Futures
Sep 2006 7,186.75 (EUR) Call (4) 235 (32)
Sep 2006 7,275.61 (EUR) Call (22) 1,309 (161)
---------------
Total Liability for Options Written
(premiums received $300) (391)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
32 Non-U.S. Fund
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 21 AUD 28 07/03/06 --
USD 32 AUD 43 07/03/06 --
USD 54 AUD 72 07/05/06 --
USD 137 AUD 187 09/20/06 1
USD 219 AUD 298 09/20/06 2
USD 252 AUD 342 09/20/06 2
USD 327 AUD 444 09/20/06 2
USD 327 AUD 444 09/20/06 2
USD 427 AUD 579 09/20/06 3
USD 439 AUD 597 09/20/06 4
USD 870 AUD 1,183 09/20/06 8
USD 86 CHF 106 09/20/06 1
USD 425 CHF 522 09/20/06 6
USD 6,263 CHF 7,702 09/20/06 93
USD 8,260 CHF 10,156 09/20/06 123
USD 46 DKK 269 09/20/06 1
USD 67 DKK 396 09/20/06 1
USD 5 EUR 4 07/03/06 --
USD 5 EUR 4 07/03/06 --
USD 260 EUR 205 07/03/06 3
USD 47 EUR 37 07/05/06 --
USD 380 EUR 300 09/20/06 6
USD 382 EUR 300 09/20/06 4
USD 389 EUR 300 09/20/06 (3)
USD 505 EUR 400 09/20/06 10
USD 529 EUR 418 09/20/06 9
USD 632 EUR 500 09/20/06 11
USD 636 EUR 500 09/20/06 7
USD 645 EUR 500 09/20/06 (2)
USD 652 EUR 500 09/20/06 (9)
USD 1,043 EUR 825 09/20/06 18
USD 2,606 EUR 2,000 09/20/06 (34)
USD 5,058 EUR 4,000 09/20/06 87
USD 10,687 EUR 8,200 09/20/06 (142)
USD 44 GBP 24 07/03/06 1
USD 251 GBP 137 07/03/06 3
USD 130 GBP 70 07/05/06 --
USD 140 GBP 76 07/05/06 --
USD 93 GBP 51 09/20/06 1
USD 365 GBP 200 09/20/06 6
USD 373 GBP 200 09/20/06 (2)
USD 376 GBP 200 09/20/06 (6)
USD 376 GBP 200 09/20/06 (6)
USD 896 GBP 484 09/20/06 2
USD 987 GBP 534 09/20/06 2
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 987 GBP 534 09/20/06 2
USD 987 GBP 534 09/20/06 2
USD 1,223 GBP 664 09/20/06 7
USD 1,580 GBP 858 09/20/06 9
USD 1,693 GBP 900 09/20/06 (26)
USD 2,669 GBP 1,449 09/20/06 16
USD 3,681 GBP 2,000 09/20/06 25
USD 5,268 GBP 2,800 09/20/06 (81)
USD 30 HKD 229 09/20/06 --
USD 82 HKD 632 09/20/06 --
USD 86 HKD 666 09/20/06 --
USD 102 HKD 788 09/20/06 --
USD 198 JPY 23,047 07/03/06 3
USD 29 JPY 3,273 07/05/06 --
USD 31 JPY 3,519 07/05/06 --
USD 447 JPY 50,000 09/20/06 (5)
USD 453 JPY 50,000 09/20/06 (11)
USD 453 JPY 50,000 09/20/06 (11)
USD 455 JPY 50,000 09/20/06 (13)
USD 558 JPY 63,534 09/20/06 4
USD 857 JPY 97,588 09/20/06 6
USD 1,360 JPY 150,000 09/20/06 (34)
USD 1,687 JPY 192,135 09/20/06 11
USD 4,400 JPY 500,000 09/20/06 20
USD 7,620 JPY 840,000 09/20/06 (195)
USD 265 NOK 1,657 07/03/06 1
USD 48 NOK 297 09/20/06 --
USD 134 NOK 830 09/20/06 1
USD 199 NOK 1,237 09/20/06 1
USD 4,618 NOK 28,682 09/20/06 16
USD 8,393 NOK 52,123 09/20/06 28
USD 350 NZD 570 09/20/06 (4)
USD 309 SEK 2,263 09/20/06 7
USD 864 SEK 6,342 09/20/06 24
USD 1,568 SEK 11,354 09/20/06 21
USD 3,661 SEK 26,855 09/20/06 96
USD 8 SGD 12 09/20/06 --
USD 41 SGD 66 09/20/06 --
USD 408 SGD 649 09/20/06 4
USD 3,739 SGD 5,948 09/20/06 33
AUD 6 USD 4 07/05/06 --
AUD 10 USD 7 07/05/06 --
AUD 11 USD 8 07/05/06 --
AUD 15 USD 11 07/05/06 --
AUD 18 USD 13 07/05/06 --
</Table>
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 33
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
AUD 32 USD 24 07/05/06 --
AUD 498 USD 366 09/20/06 (3)
AUD 1,106 USD 813 09/20/06 (7)
AUD 1,406 USD 1,034 09/20/06 (9)
AUD 1,436 USD 1,050 09/20/06 (16)
AUD 4,103 USD 3,016 09/20/06 (30)
CHF 1,589 USD 1,298 09/20/06 (14)
CHF 1,589 USD 1,298 09/20/06 (14)
CHF 2,696 USD 2,202 09/20/06 (23)
CHF 3,604 USD 2,932 09/20/06 (43)
CHF 9,008 USD 7,324 09/20/06 (110)
DKK 6 USD 1 09/20/06 --
DKK 12 USD 2 09/20/06 --
DKK 56 USD 9 09/20/06 --
DKK 258 USD 44 09/20/06 (1)
EUR 107 USD 137 07/05/06 --
EUR 135 USD 171 07/05/06 (1)
EUR 239 USD 302 09/20/06 (5)
EUR 300 USD 382 09/20/06 (4)
EUR 400 USD 516 09/20/06 2
EUR 449 USD 565 09/20/06 (12)
EUR 500 USD 633 09/20/06 (10)
EUR 550 USD 708 09/20/06 1
EUR 700 USD 912 09/20/06 12
EUR 869 USD 1,099 09/20/06 (19)
EUR 1,700 USD 2,216 09/20/06 29
EUR 7,000 USD 8,870 09/20/06 (132)
EUR 7,484 USD 9,464 09/20/06 (161)
GBP 160 USD 297 09/20/06 1
GBP 200 USD 375 09/20/06 4
GBP 322 USD 587 09/20/06 (10)
GBP 600 USD 1,129 09/20/06 17
GBP 2,911 USD 5,360 09/20/06 (32)
GBP 3,000 USD 5,536 09/20/06 (22)
HKD 283 USD 36 07/03/06 --
HKD 19 USD 2 09/20/06 --
HKD 150 USD 19 09/20/06 --
HKD 776 USD 100 09/20/06 --
JPY 865 USD 7 07/03/06 --
JPY 676 USD 6 07/05/06 --
JPY 865 USD 8 07/05/06 --
JPY 1,727 USD 15 07/05/06 --
JPY 8,683 USD 76 07/05/06 --
JPY 12,689 USD 111 07/05/06 --
JPY 13,204 USD 115 07/05/06 --
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
JPY 21,398 USD 184 07/05/06 (3)
JPY 17,248 USD 150 09/20/06 (2)
JPY 50,000 USD 435 09/20/06 (7)
JPY 57,289 USD 503 09/20/06 (4)
JPY 75,000 USD 670 09/20/06 7
JPY 111,176 USD 980 09/20/06 (2)
JPY 114,241 USD 1,003 09/20/06 (7)
JPY 117,556 USD 1,032 09/20/06 (7)
JPY 168,421 USD 1,485 09/20/06 (4)
JPY 170,000 USD 1,541 09/20/06 38
JPY 262,233 USD 2,303 09/20/06 (15)
JPY 321,403 USD 2,822 09/20/06 (19)
JPY 389,116 USD 3,432 09/20/06 (8)
JPY 700,000 USD 6,165 09/20/06 (23)
NOK 1,336 USD 213 09/20/06 (3)
NOK 1,992 USD 321 09/20/06 (1)
NOK 14,029 USD 2,254 09/20/06 (13)
NOK 15,249 USD 2,455 09/20/06 (9)
NZD 570 USD 344 09/20/06 (2)
SEK 1,388 USD 189 09/20/06 (5)
SEK 2,585 USD 352 09/20/06 (9)
SEK 11,573 USD 1,577 09/20/06 (42)
SEK 14,883 USD 2,028 09/20/06 (55)
SEK 16,385 USD 2,231 09/20/06 (62)
SGD 78 USD 49 09/20/06 --
SGD 297 USD 187 09/20/06 (2)
SGD 1,260 USD 793 09/20/06 (6)
SGD 1,423 USD 895 09/20/06 (8)
SGD 1,754 USD 1,103 09/20/06 (10)
SGD 1,864 USD 1,172 09/20/06 (10)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts (733)
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
34 Non-U.S. Fund
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INDEX SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------
UNREALIZED
APPRECIATION
FUND RECEIVES COUNTER NOTIONAL FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY AMOUNT FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
MCSI Austria 1 Month EUR LIBOR
Local Net Total Return Index Merrill Lynch EUR 35 plus 0.15% 12/27/06 (4)
MCSI Norway 1 Month NOK NIBOR
Local Net Total Return Index Merrill Lynch NOK 5,486 plus 0.15% 12/27/06 (2)
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts (6)
================
</Table>
<Table>
<Caption>
% OF MARKET
NET VALUE
INDUSTRY DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Auto and Transportation 5.6 18,962
Consumer Discretionary 10.0 32,645
Consumer Staples 6.4 21,219
Financial Services 24.0 77,346
Health Care 7.6 25,643
Integrated Oils 7.1 22,890
Materials and Processing 11.8 38,004
Miscellaneous 0.9 2,647
Other Energy 0.5 2,024
Producer Durables 5.9 19,082
Technology 5.0 15,698
Utilities 7.3 23,631
Options Purchased 0.1 371
Short-Term Investments 7.6 24,788
Other Securities 23.6 76,817
--------------- ---------------
Total Investments 123.4 401,767
Other Assets and Liabilities, Net (23.4) (76,192)
--------------- ---------------
Net Assets 100.0 325,575
=============== ===============
</Table>
<Table>
<Caption>
% OF MARKET
NET VALUE
GEOGRAPHIC DIVERSIFICATION ASSETS $
- ------------------------------------------------------------------------------------
Africa 0.1 278
Asia 6.7 22,095
Europe 40.8 132,285
Japan 21.7 70,754
Latin America 1.5 5,243
Other Regions 8.7 28,319
United Kingdom 20.3 65,976
Other Securities 23.6 76,817
--------------- ---------------
Total Investments 123.4 401,767
Other Assets and Liabilities, Net (23.4) (76,192)
--------------- ---------------
Net Assets 100.0 325,575
=============== ===============
</Table>
See accompanying notes which are an integral part of the financial statements.
Non-U.S. Fund 35
RUSSELL INVESTMENT FUNDS
NON-U.S. FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- JUNE 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Australia 3.4
Austria 0.3
Belgium 0.7
Bermuda 0.1
Brazil 0.5
Canada 0.9
Cayman Islands --*
China --*
Denmark 0.3
Finland 0.9
France 9.8
Germany 6.7
Greece 0.8
Hong Kong 0.9
Indonesia --*
Ireland 0.9
Italy 3.3
Japan 21.7
Luxembourg 0.3
Mexico 0.9
Netherlands 3.6
Norway 0.8
Papua New Guinea --*
Singapore 1.1
South Africa 0.1
South Korea 0.9
Spain 2.9
Sweden 2.3
Switzerland 6.8
Taiwan 0.4
United Kingdom 20.3
United States 0.2
Preferred Stocks 0.3
Options Purchased 0.1
Short-Term Investments 7.6
Other Securities 23.6
---------------
Total Investments 123.4
Other Assets and Liabilities, Net (23.4)
---------------
100.0
===============
Futures Contracts 0.4
Options Written (0.1)
Foreign Currency Exchange Contracts (0.2)
Index Swap Contracts (--)*
</Table>
* Less than .05% of net assets
See accompanying notes which are an integral part of the financial statements.
36 Non-U.S. Fund
RUSSELL INVESTMENT FUNDS
REAL ESTATE SECURITIES FUND
SHAREHOLDER EXPENSE EXAMPLE -- JUNE 30, 2006 (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 SEMIANNUAL
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 management 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, 2006 to June 30, 2006.
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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
PERFORMANCE BEFORE EXPENSES)
-------------- ----------------
Beginning Account Value
January 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
June 30, 2006 $ 1,139.70 $ 1,020.28
Expenses Paid During
Period* $ 4.83 $ 4.56
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.91%
(representing the one-half year period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period).
Real Estate Securities Fund 37
RUSSELL INVESTMENT FUNDS
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
COMMON STOCKS - 96.7%
Apartments - 19.0%
Apartment Investment & Management Co. Class A
(o) 107,925 4,689
Archstone-Smith Trust (o) 430,072 21,878
AvalonBay Communities, Inc. (o)(N) 210,700 23,308
BRE Properties, Inc. Class A (o) 23,100 1,270
Camden Property Trust (o) 132,800 9,767
Equity Residential (o) 379,600 16,980
Essex Property Trust, Inc. (o)(N) 63,450 7,085
GMH Communities Trust (o)(N) 229,600 3,026
Home Properties, Inc. (o) 19,800 1,099
Mid-America Apartment Communities, Inc. (o) 27,800 1,550
United Dominion Realty Trust, Inc. (o)(N) 144,600 4,050
------------
94,702
------------
Diversified - 6.5%
Colonial Properties Trust (o) 35,700 1,764
iStar Financial, Inc. (o)(N) 34,800 1,314
Spirit Finance Corp. (o)(N) 272,400 3,067
Vornado Realty Trust (o) 268,914 26,232
------------
32,377
------------
Free Standing Retail - 0.1%
Realty Income Corp. (o)(N) 31,500 690
------------
Health Care - 3.0%
Health Care REIT, Inc. (o) 24,100 842
Healthcare Realty Trust, Inc. (o)(N) 53,800 1,713
LTC Properties, Inc. (o)(N) 19,800 443
Nationwide Health Properties, Inc. (o) 106,600 2,400
Omega Healthcare Investors, Inc. (o)(N) 86,700 1,146
Ventas, Inc. (o) 250,950 8,502
------------
15,046
------------
Industrial - 6.7%
AMB Property Corp. (o) 145,350 7,348
First Potomac Realty Trust (o)(N) 23,900 712
ProLogis (o) 485,100 25,283
------------
33,343
------------
Lodging/Resorts - 10.3%
DiamondRock Hospitality Co. (o) 47,900 709
FelCor Lodging Trust, Inc. (o) 59,800 1,300
Hilton Hotels Corp. 266,900 7,548
Hospitality Properties Trust (o)(N) 16,500 725
Host Hotels & Resorts, Inc. (o)(N) 989,296 21,636
Innkeepers USA Trust (o) 39,000 674
LaSalle Hotel Properties (o) 104,000 4,815
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc. (o) 192,532 11,617
Strategic Hotels & Resorts, Inc. (o)(N) 29,000 602
Sunstone Hotel Investors, Inc. (o) 67,298 1,956
------------
51,582
------------
Manufactured Homes - 0.4%
Equity Lifestyle Properties, Inc. (o) 46,900 2,056
------------
Mixed Industrial/Office - 2.3%
Duke Realty Corp. (o) 41,500 1,459
EastGroup Properties, Inc. (o)(N) 36,600 1,708
Liberty Property Trust (o)(N) 114,500 5,061
PS Business Parks, Inc. (o)(N) 53,050 3,130
------------
11,358
------------
Office - 19.2%
Alexandria Real Estate Equities, Inc. (o)(N) 27,400 2,430
American Financial Realty Trust (o) 61,100 592
BioMed Realty Trust, Inc. (o)(N) 147,440 4,414
Boston Properties, Inc. (o)(N) 241,950 21,872
Brandywine Realty Trust (o)(N) 196,886 6,334
Brookfield Properties Corp. 323,200 10,397
CarrAmerica Realty Corp. (o) 12,000 535
Columbia Equity Trust, Inc. (o)(N) 88,900 1,366
Corporate Office Properties Trust (o)(N) 37,050 1,559
Equity Office Properties Trust (o) 256,400 9,361
Highwoods Properties, Inc. (o) 74,000 2,677
Kilroy Realty Corp. (o) 68,000 4,913
Mack-Cali Realty Corp. (o)(N) 117,300 5,386
Maguire Properties, Inc. (o)(N) 14,550 512
Reckson Associates Realty Corp. (o)(N) 135,550 5,609
SL Green Realty Corp. (o)(N) 91,050 9,967
Trizec Properties, Inc. (o)(N) 268,200 7,681
------------
95,605
------------
Regional Malls - 13.7%
CBL & Associates Properties, Inc. (o) 47,200 1,838
General Growth Properties, Inc. (o)(N) 240,800 10,850
Macerich Co. (The) (o)(N) 191,300 13,429
Simon Property Group, Inc. (o)(N) 439,200 36,427
Taubman Centers, Inc. (o) 144,000 5,890
------------
68,434
------------
</Table>
38 Real Estate Securities Fund
RUSSELL INVESTMENT FUNDS
REAL ESTATE SECURITIES FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Self Storage - 4.3%
Extra Space Storage, Inc. (o)(N) 114,300 1,856
Public Storage, Inc. (o) 194,475 14,761
Shurgard Storage Centers, Inc. Class A (o)(N) 25,200 1,575
U-Store-It Trust (o)(N) 167,200 3,153
------------
21,345
------------
Shopping Centers - 9.9%
Acadia Realty Trust (o) 148,100 3,503
Developers Diversified Realty Corp. (o)(N) 221,000 11,532
Federal Realty Investors Trust (o)(N) 132,300 9,261
Kimco Realty Corp. (o) 151,700 5,535
Kite Realty Group Trust (o) 53,000 826
Pan Pacific Retail Properties, Inc. (o) 49,100 3,406
Regency Centers Corp. (o) 250,500 15,569
------------
49,632
------------
Specialty - 1.3%
Digital Realty Trust, Inc. (o) 190,200 4,696
Plum Creek Timber Co., Inc. (o) 55,000 1,953
------------
6,649
------------
TOTAL COMMON STOCKS
(cost $322,694) 482,819
------------
SHORT-TERM INVESTMENTS - 2.8%
Frank Russell Investment Company Money Market
Fund 13,911,000 13,911
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $13,911) 13,911
------------
OTHER SECURITIES - 13.4%
State Street Securities Lending
Quality Trust (X) 66,946,335 66,946
------------
TOTAL OTHER SECURITIES
(cost $66,946) 66,946
------------
TOTAL INVESTMENTS - 112.9%
(identified cost $403,551) 563,676
OTHER ASSETS AND LIABILITIES,
NET - (12.9%) (64,558)
------------
NET ASSETS - 100.0% 499,118
============
</Table>
See accompanying notes which are an integral part of the financial statements.
Real Estate Securities Fund 39
RUSSELL INVESTMENT FUNDS
REAL ESTATE SECURITIES FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- JUNE 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Apartments 19.0
Diversified 6.5
Free Standing Retail 0.1
Health Care 3.0
Industrial 6.7
Lodging/Resorts 10.3
Manufactured Homes 0.4
Mixed Industrial/Office 2.3
Office 19.2
Regional Malls 13.7
Self Storage 4.3
Shopping Centers 9.9
Specialty 1.3
Short-Term Investments 2.8
Other Securities 13.4
---------------
Total Investments 112.9
Other Assets and Liabilities, Net (12.9)
---------------
100.0
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
40 Real Estate Securities Fund
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SHAREHOLDER EXPENSE EXAMPLE -- JUNE 30, 2006 (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 SEMIANNUAL
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 management 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, 2006 to June 30, 2006.
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.
<Table>
<Caption>
HYPOTHETICAL
PERFORMANCE
ACTUAL (5% RETURN
PERFORMANCE BEFORE EXPENSES)
-------------- ----------------
Beginning Account Value
January 1, 2006 $ 1,000.00 $ 1,000.00
Ending Account Value
June 30, 2006 $ 991.20 $ 1,021.32
Expenses Paid During
Period* $ 3.46 $ 3.51
</Table>
* Expenses are equal to the Fund's annualized expense ratio of 0.70%
(representing the one-half year period annualized), multiplied by the average
account value over the period, multiplied by 181/365 (to reflect the one-half
year period). Reflects amounts waived and/or reimbursed by the investment
adviser. Without the waiver and/or reimbursement, expenses would have been
higher.
Core Bond Fund 41
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
LONG-TERM INVESTMENTS - 81.3%
Asset-Backed Securities - 3.4%
AAA Trust (E)(p)
Series 2005-2 Class A1
5.181% due 11/26/35 40 40
Accredited Mortgage Loan Trust (E)
Series 2004-2 Class A2
5.623% due 07/25/34 74 75
ACE Securities Corp. (E)
Series 2005-SD3 Class A
5.723% due 08/25/45 472 472
Ameriquest Mortgage Securities, Inc. (E)
Series 2002-D Class M1
7.823% due 02/25/33 90 91
Series 2004-R10 Class A5
5.713% due 11/25/34 104 104
Series 2004-R8 Class A5
5.451% due 09/25/34 356 357
Argent Securities, Inc. (E)
Series 2005-W4 Class A2A
5.221% due 02/25/36 402 402
Bayview Financial Acquisition Trust
Series 2006-A Class 1A3
5.865% due 02/28/41 190 186
Carrington Mortgage Loan Trust (E)
Series 2005-NC3 Class A1A
5.403% due 06/25/35 18 18
Citifinancial Mortgage Securities, Inc.
Series 2003-3 Class AF2
3.082% due 08/25/33 7 7
Series 2003-4 Class AF3
3.221% due 10/25/33 29 29
Countrywide Asset-Backed Certificates
Series 2004-13 Class AF2
3.683% due 08/25/24 61 61
Series 2004-BC1 Class M1 (E)
5.823% due 02/25/34 105 106
Series 2006-11 Class 1AF4
6.263% due 07/25/36 170 169
GSAA Home Equity Trust
Series 2006-4 Class 1A2
5.986% due 03/25/36 294 291
GSAA Trust (E)
Series 2006-2 Class 2A3
5.351% due 12/25/35 320 321
GSAMP Trust (E)
Series 2003-HE2 Class M1
5.731% due 08/25/33 175 176
Series 2004-SEA Class A2A
5.371% due 03/25/34 143 143
Heritage Property Investment Trust
5.125% due 04/15/14 150 138
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Home Equity Asset Trust (E)
Series 2003-5 Class M1
6.023% due 12/25/33 265 267
Series 2005-2 Class 2A2
5.281% due 07/25/35 170 170
Indymac Residential Asset Backed Trust (E)
Series 2006-H2 Class A
5.485% due 06/28/36 667 665
Lehman XS Trust (E)
Series 2005-1 Class 2A2
4.660% due 07/25/35 198 197
Mastr Asset Backed Securities Trust (E)
Series 2003-WMC Class M2
6.731% due 08/25/33 114 115
Morgan Stanley ABS Capital I (E)
Series 2003-NC8 Class M3
7.181% due 09/25/33 200 202
New Century Home Equity Loan Trust (E)
Series 2004-4 Class M2
5.611% due 02/25/35 215 216
NWA Trust (o)
Series 1995-2 Class A
9.250% due 12/21/12 98 100
Option One Mortgage Loan Trust (E)
Series 2003-2 Class M2
6.781% due 04/25/33 200 200
Series 2003-3 Class M3
7.081% due 06/25/33 150 151
Series 2003-4 Class M2
6.731% due 07/25/33 130 131
Park Place Securities, Inc. (E)
Series 2005-WCW Class M1
5.531% due 09/25/35 210 211
Parker Hannifin Employee Stock Ownership Trust
(A)
6.340% due 07/15/08 138 138
Popular ABS Mortgage Pass-Through Trust
Series 2005-1 Class AF2
3.914% due 05/25/35 85 84
Series 2005-6 Class A3
5.680% due 01/25/36 230 227
Renaissance Home Equity Loan Trust
Series 2006-1 Class AF6
5.746% due 05/25/36 175 172
</Table>
42 Core Bond Fund
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc.
Series 2003-RS1 Class AI6A
5.980% due 12/25/33 205 205
Series 2004-RS1 Class AI2
3.620% due 07/25/26 46 46
Residential Asset Securities Corp.
Series 2003-KS1 Class M2 (E)
6.831% due 01/25/33 44 45
Series 2003-KS2 Class MI1
4.800% due 04/25/33 450 435
Series 2004-KS8 Class AI2
3.340% due 10/25/24 200 199
Small Business Administration
Series 2000-P10 Class 1
7.449% due 08/01/10 15 15
Structured Asset Investment Loan Trust (E)
Series 2003-BC1 Class 3A5
5.561% due 10/25/33 21 21
Series 2005-3 Class M2
5.521% due 04/25/35 120 120
Structured Asset Securities Corp.
Series 2004-19X Class A2
4.370% due 10/25/34 400 394
Tenaska Alabama II Partners, LP (p)
6.125% due 03/30/23 107 104
------------
8,016
------------
Corporate Bonds and Notes - 11.0%
Abbott Laboratories
5.600% due 05/15/11 155 154
5.875% due 05/15/16 80 79
Alamosa Delaware, Inc.
8.500% due 01/31/12 100 106
Altria Group, Inc.
7.750% due 01/15/27 175 196
American Electric Power Co., Inc.
Series C
5.375% due 03/15/10 35 34
American General Finance Corp.
4.875% due 05/15/10 225 217
American International Group, Inc. (p)
4.700% due 10/01/10 130 125
5.050% due 10/01/15 130 121
American RE Corp.
Series B
7.450% due 12/15/26 250 266
Americo Life, Inc. (p)
7.875% due 05/01/13 50 50
AmerUs Group Co.
5.950% due 08/15/15 150 145
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
ANZ Capital Trust (f)(p)
4.484% due 12/31/49 225 212
AT&T, Inc.
5.100% due 09/15/14 45 42
BAE Systems Holdings, Inc. (p)
6.400% due 12/15/11 330 336
Ball Corp.
6.625% due 03/15/18 80 75
Bally Total Fitness Holding Corp.
10.500% due 07/15/11 150 157
Bank of America Corp.
5.875% due 02/15/09 80 81
5.406% due 06/19/09 (E) 900 900
7.800% due 02/15/10 30 32
BellSouth Corp.
6.550% due 06/15/34 35 33
BNP Paribas Capital
Trust (f)(p)
9.003% due 12/29/49 450 501
Boeing Capital Corp.
6.100% due 03/01/11 50 51
Boston Scientific Corp.
5.500% due 11/15/15 60 58
6.400% due 06/15/16 60 58
Burlington Northern Santa Fe Corp.
6.875% due 12/01/27 25 27
6.750% due 03/15/29 10 11
CenterPoint Energy Houston Electric LLC
Series J2
5.700% due 03/15/13 110 108
CenterPoint Energy Resources Corp.
Series B
7.875% due 04/01/13 120 130
Cingular Wireless Services, Inc.
8.750% due 03/01/31 45 55
CIT Group, Inc.
6.875% due 11/01/09 45 46
Citigroup Global Markets Holdings, Inc. (E)
Series MTNM
5.273% due 03/07/08 400 400
Citigroup, Inc.
3.500% due 02/01/08 560 542
6.500% due 01/18/11 130 134
4.700% due 05/29/15 50 46
Citizens Communications Co.
6.250% due 01/15/13 -- --
</Table>
Core Bond Fund 43
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Clear Channel Communications, Inc.
6.250% due 03/15/11 50 49
Clorox Co.
4.200% due 01/15/10 100 95
5.000% due 01/15/15 45 42
Columbus Southern Power Co.
Series A
5.500% due 03/01/13 10 10
Comcast Cable Communications Holdings, Inc.
9.455% due 11/15/22 125 155
Comcast Corp.
5.900% due 03/15/16 20 19
6.450% due 03/15/37 45 42
COX Communications, Inc.
4.625% due 01/15/10 350 334
Credit Suisse First Boston USA, Inc.
4.875% due 08/15/10 65 63
6.500% due 01/15/12 25 26
5.500% due 08/15/13 45 44
Credit Suisse USA, Inc.
5.250% due 03/02/11 55 54
Detroit Edison Co.
6.350% due 10/15/32 50 49
Dex Media East Finance Co.
12.125% due 11/15/12 110 123
Dominion Resources, Inc.
Series B
6.250% due 06/30/12 30 30
DPL, Inc.
6.875% due 09/01/11 133 137
Dresdner Funding Trust I (p)
8.151% due 06/30/31 130 145
Drummond Co., Inc. (p)
7.375% due 02/15/16 230 213
Duke Energy Field Services LLC
6.875% due 02/01/11 20 21
El Paso Corp.
8.050% due 10/15/30 400 401
Eli Lilly & Co.
6.770% due 01/01/36 170 184
Embarq Corp.
7.995% due 06/01/36 100 101
FedEx Corp.
7.600% due 07/01/97 75 82
Financing Corp.
Principal Only STRIP
Series 10P
Zero coupon due 11/30/17 510 273
Series 15P
Zero coupon due 03/07/19 70 35
Series 2P
Zero coupon due 11/30/17 60 32
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 6P
Zero coupon due 08/03/18 300 154
FirstEnergy Corp.
Series B
6.450% due 11/15/11 375 382
Series C
7.375% due 11/15/31 150 161
Ford Motor Credit Co.
7.875% due 06/15/10 1,000 922
General Electric Capital Corp.
5.500% due 04/28/11 155 154
Series MTNA
5.450% due 01/15/13 260 256
General Electric Co. (E)
5.323% due 12/09/08 200 200
General Motors Acceptance Corp.
6.750% due 12/01/14 250 232
Glencore Funding LLC (p)
6.000% due 04/15/14 135 123
Goldman Sachs Group, Inc.
6.875% due 01/15/11 220 229
5.350% due 01/15/16 425 401
Greater Bay Bancorp
Series B
5.250% due 03/31/08 150 148
Hess Corp.
6.650% due 08/15/11 45 46
7.300% due 08/15/31 70 74
Historic TW, Inc.
9.125% due 01/15/13 205 234
8.050% due 01/15/16 185 203
6.625% due 05/15/29 10 10
HJ Heinz Co.
6.375% due 07/15/28 20 19
HJ Heinz Finance Co.
6.750% due 03/15/32 30 29
HSBC Bank USA NA (E)
Series BKNT
5.000% due 09/21/07 500 500
HSBC Finance Corp.
6.375% due 11/27/12 160 164
5.000% due 06/30/15 85 78
Innophos Investments Holdings, Inc. (E)
13.170% due 02/15/15 253 253
International Business Machines Corp.
7.125% due 12/01/96 160 172
International Lease Finance Corp.
5.750% due 06/15/11 70 69
</Table>
44 Core Bond Fund
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
International Paper Co.
6.750% due 09/01/11 100 103
5.500% due 01/15/14 75 71
iStar Financial, Inc.
Series B
5.125% due 04/01/11 200 191
ITT Industries, Inc.
7.400% due 11/15/25 100 112
JP Morgan Chase Bank
Series EMTN
Zero coupon due 05/16/45 1,819 568
JPMorgan Chase & Co.
5.600% due 06/01/11 65 65
5.150% due 10/01/15 150 140
Kellogg Co.
Series B
6.600% due 04/01/11 320 331
KeySpan Corp.
7.625% due 11/15/10 150 159
Kraft Foods, Inc.
5.625% due 11/01/11 600 591
Kroger Co. (The)
8.000% due 09/15/29 15 16
7.500% due 04/01/31 10 11
Lehman Brothers Holdings, Inc.
5.000% due 01/14/11 175 170
5.500% due 04/04/16 65 62
Manufacturers & Traders Trust Co.
5.585% due 12/28/20 84 81
May Department Stores Co. (The)
4.800% due 07/15/09 50 49
5.750% due 07/15/14 55 53
MedQuest, Inc.
Series B
11.875% due 08/15/12 185 172
Merrill Lynch & Co., Inc.
Series MTNC
4.250% due 02/08/10 410 390
Midamerican Energy Holdings Co. (p)
6.125% due 04/01/36 125 117
Miller Brewing Co. (p)
5.500% due 08/15/13 110 106
Monumental Global Funding II (p)
4.625% due 03/15/10 95 92
Morgan Stanley
5.375% due 10/15/15 100 95
Series GMTN (E)
5.276% due 02/09/09 500 501
Natexis Ambs Co. LLC (f)(p)
8.440% due 12/29/49 120 126
National Rural Utilities Cooperative Finance
Corp.
5.750% due 08/28/09 45 45
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
News America Holdings, Inc.
7.900% due 12/01/95 90 93
8.250% due 10/17/96 20 21
Nisource Finance Corp.
7.875% due 11/15/10 100 107
Norfolk Southern Corp.
7.700% due 05/15/17 20 23
7.050% due 05/01/37 40 44
7.900% due 05/15/97 305 354
6.000% due 03/15/2105 105 93
Occidental Petroleum Corp. (N)
9.250% due 08/01/19 95 121
Ohio Edison Co.
6.875% due 07/15/36 100 102
Ohio Power Co.
Series F
5.500% due 02/15/13 20 19
Pacific Gas & Electric Co.
4.200% due 03/01/11 60 56
6.050% due 03/01/34 65 61
Pemex Project Funding Master Trust (p)
Series 144a
5.750% due 12/15/15 100 92
Phoenix Life Insurance Co. (p)
7.150% due 12/15/34 150 147
Popular North America, Inc.
Series MTNE
3.875% due 10/01/08 275 263
Progress Energy, Inc.
7.100% due 03/01/11 100 104
7.000% due 10/30/31 75 77
Qwest Corp.
7.625% due 06/15/15 200 198
RBS Capital Trust I (f)
5.512% due 09/29/49 190 177
Residential Capital Corp.
6.000% due 02/22/11 190 184
Reynolds American, Inc. (p)
7.625% due 06/01/16 105 103
RH Donnelley, Inc.
10.875% due 12/15/12 110 121
Safeway, Inc.
7.250% due 02/01/31 20 20
SB Treasury Co. LLC (f)(p)
9.400% due 12/29/49 350 372
SBC Communications, Inc.
6.150% due 09/15/34 75 69
</Table>
Core Bond Fund 45
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Simmons Co.
10.000% due 12/15/14 70 47
Six Flags, Inc.
9.625% due 06/01/14 95 86
Smithfield Foods, Inc.
Series B
7.750% due 05/15/13 105 103
Southern Copper Corp. (p)
Series 144a
7.500% due 07/27/35 435 415
Sprint Capital Corp.
7.625% due 01/30/11 350 373
8.750% due 03/15/32 170 205
Symetra Financial Corp. (p)
6.125% due 04/01/16 150 145
Tele-Communications-TCI Group
9.800% due 02/01/12 140 162
7.875% due 08/01/13 305 329
Tronox Worldwide LLC/Tronox Finance Corp. (p)
9.500% due 12/01/12 165 170
Tyson Foods, Inc.
8.250% due 10/01/11 75 79
6.600% due 04/01/16 40 39
Union Pacific Corp.
6.125% due 01/15/12 120 121
Union Planters Corp.
7.750% due 03/01/11 50 54
Verizon Communications, Inc.
5.550% due 02/15/16 190 178
Verizon Global Funding Corp.
7.250% due 12/01/10 420 440
5.850% due 09/15/35 105 91
Wachovia Capital Trust III (f)
5.800% due 03/15/42 190 184
WellPoint, Inc.
5.850% due 01/15/36 40 36
Wells Fargo & Co.
4.950% due 10/16/13 65 61
Wells Fargo Bank NA
5.750% due 05/16/16 80 79
Westvaco Corp.
8.200% due 01/15/30 100 108
Windstream Corp. (p)
8.125% due 08/01/13 155 158
8.625% due 08/01/16 125 128
Wisconsin Central Transport
6.625% due 04/15/08 325 331
Wyeth
6.950% due 03/15/11 390 407
Zurich Capital Trust I (p)
8.376% due 06/01/37 245 259
------------
25,726
------------
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
International Debt - 4.3%
Abbey National PLC (f)
6.700% due 06/29/49 150 152
America Movil SA de CV
5.500% due 03/01/14 100 92
Argentina Bonos
Series V
7.000% due 03/28/11 95 90
AXA SA
8.600% due 12/15/30 35 42
BNP Paribas (f)(p)
5.186% due 06/29/49 300 272
Brazilian Government International Bond
7.875% due 03/07/15 100 105
8.875% due 04/15/24 525 583
British Telecommunications PLC
8.875% due 12/15/30 150 184
Colombia Government International Bond (N)
8.125% due 05/21/24 230 233
Conoco Funding Co.
6.350% due 10/15/11 310 319
Deutsche Telekom International Finance BV
8.250% due 06/15/30 155 179
Egypt Government AID Bonds
4.450% due 09/15/15 390 361
EnCana Corp.
6.500% due 08/15/34 35 35
Export-Import Bank of China (p)
4.875% due 07/21/15 110 102
Export-Import Bank of Korea
4.125% due 02/10/09 (p) 120 115
5.125% due 02/14/11 100 97
Falconbridge, Ltd.
6.000% due 10/15/15 70 67
Gaz Capital for Gazprom (p)
8.625% due 04/28/34 80 92
HSBC Holdings PLC
6.500% due 05/02/36 45 44
Intelsat Bermuda, Ltd. (p)
11.250% due 06/15/16 110 113
Intelsat Subsidiary Holding Co., Ltd.
8.625% due 01/15/15 95 95
</Table>
46 Core Bond Fund
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ispat Inland ULC
9.750% due 04/01/14 239 263
Kerzner International, Ltd.
6.750% due 10/01/15 255 266
Korea Electric Power Corp. (p)
5.125% due 04/23/34 60 57
Mexico Government International Bond
8.300% due 08/15/31 215 248
Mizuho Financial Group Cayman, Ltd. (p)
5.790% due 04/15/14 100 98
Panama Government International Bond
9.375% due 07/23/12 100 111
Petrobras International Finance Co.
8.375% due 12/10/18 305 327
Poland Government International Bond
Series RSTA
(Step Up, 5.000%, 10/27/06)
4.750% due 10/27/24 200 174
Province of Quebec Canada
Series PJ
6.125% due 01/22/11 375 383
Ras Laffan Liquefied Natural Gas Co., Ltd. II
(p)
5.298% due 09/30/20 75 70
Ras Laffan LNG III (p)
5.838% due 09/30/27 250 233
Resona Bank, Ltd. (f)(p)
5.850% due 09/29/49 255 237
Royal Bank of Scotland Group PLC (f)
Series 1
9.118% due 03/31/49 700 769
Royal KPN NV
8.000% due 10/01/10 90 95
Russia Government International Bond
8.250% due 03/31/10 178 185
5.000% due 03/31/30 (p) 315 335
Santander Financial Issuances
6.375% due 02/15/11 110 112
Sanwa Finance Aruba AEC
8.350% due 07/15/09 135 144
Sumitomo Mitsui Banking
Corp. (f)(p)
5.625% due 07/29/49 400 373
Systems 2001 AT LLC (p)
7.156% due 12/15/11 118 121
Telecom Italia Capital SA
5.250% due 10/01/15 265 240
Telefonica Emisones SAU
5.714% due 06/19/09 (E) 300 300
7.045% due 06/20/36 75 75
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Telefonica Europe BV
7.750% due 09/15/10 325 345
TELUS Corp.
8.000% due 06/01/11 250 271
Tyco International Group SA
6.750% due 02/15/11 400 413
UFJ Finance Aruba AEC
6.750% due 07/15/13 35 36
Vale Overseas, Ltd.
6.250% due 01/11/16 150 143
8.250% due 01/17/34 25 27
Woori Bank (f)(p)
6.125% due 05/03/16 105 103
------------
9,926
------------
Loan Agreements - 0.6%
Starbound Reinsurance, Ltd.
7.230% due 03/31/08 1,500 1,500
------------
Mortgage-Backed Securities - 43.6%
ABN Amro Mortgage Corp.
Series 2003-13 Class A3
5.500% due 01/25/34 1,491 1,388
Adjustable Rate Mortgage Trust (E)
Series 2005-3 Class 8A2
5.563% due 07/25/35 392 393
American Home Mortgage Investment Trust (E)
Series 2004-4 Class 4A
4.390% due 02/25/45 191 185
Banc of America Commercial Mortgage, Inc.
Series 2004-3 Class A3
4.875% due 06/10/39 465 452
Series 2004-4 Class A3
4.128% due 07/10/42 300 287
Series 2005-3 Class A2
4.501% due 07/10/43 150 144
Series 2005-5 Class A4
5.115% due 10/10/45 500 473
Banc of America Funding Corp.
Series 2005-D Class A1 (E)
4.115% due 05/25/35 169 163
Series 2006-3 Class 5A8
5.500% due 03/25/36 475 453
Series 2006-A Class 3A2
5.948% due 02/20/36 243 243
</Table>
Core Bond Fund 47
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2006-A Class 4A1 (E)
5.563% due 02/20/36 527 520
Banc of America Mortgage Securities
Series 2004-1 Class 5A1
6.500% due 09/25/33 21 21
Series 2004-11 Class 2A1
5.750% due 01/25/35 462 446
Series 2005-L Class 3A1 (E)
5.457% due 01/25/36 260 255
Bank of America Alternative Loan Trust
Series 2003-10 Class 2A2 (E)
5.773% due 12/25/33 277 278
Series 2003-2 Class CB2 (E)
5.823% due 04/25/33 127 128
Series 2006-5 Class CB17
6.000% due 06/25/36 253 250
Bear Stearns Adjustable Rate Mortgage Trust
Series 2003-1 Class 6A1
5.066% due 04/25/33 85 84
Series 2003-8 Class 4A1
4.666% due 01/25/34 176 173
Bear Stearns Alt-A Trust
Series 2005-4 Class 23A1
5.407% due 05/25/35 354 350
Citigroup Mortgage Loan Trust, Inc.
Series 2005-11 Class A2A (E)
4.700% due 12/25/35 95 92
Series 2006-WF1 Class A2F
5.657% due 03/01/36 325 315
Citigroup/Deutsche Bank Commercial Mortgage
Trust
Series 2005-CD1 Class A4
5.226% due 07/15/44 1,000 959
Series 2006-CD2 Class A4
5.362% due 01/15/46 500 482
Countrywide Alternative Loan Trust
Series 2005-J13 Class 2A3
5.500% due 11/25/35 165 162
Countrywide Home Loan Mortgage Pass Through
Trust (E)
Series 2004-16 Class 1A1
5.723% due 09/25/34 508 510
Series 2005-3 Class 1A2
5.613% due 04/25/35 63 63
Series 2005-HYB Class 3A2A
5.250% due 02/20/36 92 91
Series 2006-OA5 Class 2A1
5.523% due 04/25/46 990 991
Deutsche ALT-A Securities, Inc. Alternate Loan
Trust
Series 2005-AR1 Class 2A3
5.024% due 08/25/35 465 458
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
DLJ Commercial Mortgage Corp.
Series 1998-CF1 Class A1B
6.410% due 02/18/31 316 318
Series 1999-CG1 Class S
Interest Only STRIP
1.030% due 04/10/23 3,592 80
Fannie Mae
15 Year TBA (I)
4.500% 13,270 12,536
5.000% 1,945 1,873
30 Year TBA (I)
4.500% 530 480
5.000% 1,670 1,561
5.500% 2,935 2,818
6.000% 1,940 1,908
6.500% 825 829
6.000% due 2016 22 22
4.706% due 2017 (E) 86 85
5.000% due 2017 687 663
6.000% due 2017 126 126
4.000% due 2018 1,000 924
4.500% due 2018 388 367
5.000% due 2018 298 287
4.500% due 2019 2 2
5.000% due 2019 1,550 1,495
4.500% due 2020 254 241
5.000% due 2020 1,285 1,239
8.000% due 2021 292 295
5.481% due 2022 (E) 417 420
5.500% due 2029 98 95
5.431% due 2032 (E) 217 217
6.000% due 2032 645 638
7.000% due 2032 291 298
3.904% due 2033 (E) 395 383
4.654% due 2033 (E) 240 237
5.000% due 2033 681 640
5.481% due 2033 (E) 404 406
5.500% due 2033 3,336 3,220
6.000% due 2033 254 249
5.000% due 2034 786 738
5.500% due 2034 5,178 4,989
5.000% due 2035 516 483
5.500% due 2035 24,154 23,233
6.000% due 2035 223 220
4.926% due 2036 (E) 592 592
5.500% due 2036 999 960
</Table>
48 Core Bond Fund
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Fannie Mae Grantor Trust (E)
Series 2005-T2 Class 1A1
5.221% due 11/28/35 9 9
Fannie Mae Whole Loan
Series 2003-W1 Class 1A1
6.500% due 12/25/42 60 61
Federal Home Loan Mortgage Corp. Structured Pass
Through Securities
Series 2004-H01 Class A1
2.614% due 07/15/11 13 12
Series 2005-63 Class 1A1 (E)
5.210% due 02/25/45 73 72
First Horizon Alternative Mortgage Securities
Series 2006-FA3 Class A6
6.000% due 07/25/36 265 264
First Horizon Asset Securities, Inc. (E)
Series 2005-AR5 Class 3A1
5.523% due 10/25/35 136 134
Freddie Mac
30 Year TBA (I)
5.000% 1,460 1,363
5.500% 1,545 1,484
6.000% 270 266
4.000% due 2019 1,998 1,846
4.639% due 2034 (E) 280 277
Series 2000-226 Class F (E)
5.649% due 11/15/30 23 23
Series 2003-262 Class AB
2.900% due 11/15/14 428 411
Series 2004-276 Class IP
Interest Only STRIP
5.500% due 07/15/23 398 23
Series 2004-281 Class DF (E)
5.649% due 06/15/23 158 159
5.000% due 08/01/18 497 479
Series 2005-292 Class IG
Interest Only STRIP
5.000% due 04/15/23 218 41
Series 2005-294 Class FA (E)
5.369% due 03/15/20 309 308
5.000% due 07/01/19 942 908
Freddie Mac Gold
6.000% due 2016 39 39
5.000% due 2018 312 301
5.500% due 2020 1,038 1,020
6.108% due 2030 (E) 3 3
5.000% due 2033 246 231
Ginnie Mae I
30 Year TBA (I)
5.500% 565 547
6.000% due 2029 17 17
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Ginnie Mae II (E)
4.375% due 2026 296 296
4.750% due 2027 20 20
4.750% due 2032 188 187
Government National Mortgage Association (E)
Series 2000-29 Class F
5.581% due 09/20/30 33 34
Greenwich Capital Commercial Funding Corp.
Series 2004-GG1 Class A7
5.317% due 06/10/36 465 449
Harborview Mortgage Loan Trust
Series 2005-14 Class 3A1A
5.319% due 12/19/35 137 135
Impac Secured Assets CMN Owner Trust (E)
Series 2004-3 Class 1A1
5.281% due 11/25/34 2 2
JP Morgan Chase Commercial Mortgage Securities
Corp.
Series 2004-LN2 Class A1
4.475% due 07/15/41 371 354
Series 2006-LDP Class A4
5.876% due 04/15/45 270 269
LB-UBS Commercial Mortgage Trust
Series 2006-C1 Class A4
5.156% due 02/15/31 1,000 948
Series 2006-C4 Class A4
5.900% due 06/15/38 105 106
Lehman Mortgage Trust
Series 2005-3 Class 1A3
5.500% due 01/25/36 685 679
Mastr Alternative Loans Trust
Series 2003-4 Class B1
5.656% due 06/25/33 208 203
Series 2004-10 Class 5A6
5.750% due 09/25/34 170 165
Mellon Residential Funding Corp. (E)
Series 2000-TBC Class A1
5.439% due 06/15/30 281 282
MLCC Mortgage Investors, Inc. (E)
Series 2004-HB1 Class A2
5.110% due 04/25/29 109 109
Morgan Stanley Capital I
Series 2005-IQ1 Class AAB
5.178% due 09/15/42 415 401
</Table>
Core Bond Fund 49
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
MortgageIT Trust (E)
Series 2005-AR1 Class 1A1
5.573% due 11/25/35 858 860
Prime Mortgage Trust (E)
Series 2004-CL1 Class 1A2
5.723% due 02/25/34 58 58
Residential Accredit Loans, Inc.
Series 2004-QS5 Class A6 (E)
5.681% due 04/25/34 82 82
Series 2004-QS8 Class A4 (E)
5.481% due 06/25/34 419 421
Series 2005-QA8 Class NB3
5.514% due 07/25/35 292 289
Series 2006-QS6 Class 1A13
6.000% due 06/25/36 445 447
Residential Asset Securities Corp. (E)
Series 2003-KS4 Class AIIB
5.371% due 06/25/33 129 130
Residential Asset Securitization Trust (E)
Series 2003-A15 Class 1A2
5.531% due 02/25/34 470 471
Residential Funding Mortgage Security I (E)
Series 2003-S14 Class A5
5.481% due 07/25/18 244 245
Series 2003-S5 Class 1A2
5.531% due 11/25/18 236 237
Sequoia Mortgage Trust (E)
Series 2001-5 Class A
5.430% due 10/19/26 128 128
Small Business Administration Participation
Certificates
Series 2005-20G Class 1
4.750% due 07/01/25 982 916
Structured Asset Mortgage Investments, Inc. (E)
Series 2006-AR2 Class A1
5.311% due 02/25/36 938 938
Structured Asset Securities Corp.
Series 2004-21X Class 1A3
4.440% due 12/25/34 650 637
Wachovia Bank Commercial Mortgage Trust
Series 2005-C21 Class A4
5.196% due 10/15/44 1,000 957
Wamu Alternative Mortgage Pass-Through
Certificates
Series 2005-4 Class CB11
5.500% due 06/25/35 90 85
Washington Mutual, Inc.
Series 2003-S9 Class A2 (E)
5.631% due 10/25/33 426 428
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Series 2005-AR1 Class 1A1
4.843% due 10/25/35 370 363
Series 2005-AR1 Class A1A1 (E)
5.613% due 10/25/45 85 85
5.593% due 12/25/45 931 934
Series 2005-AR6 Class B3 (E)
5.741% due 04/25/45 255 254
Wells Fargo Mortgage Backed Securities Trust
Series 2006-2 Class 2A3
5.500% due 03/25/36 535 526
Series 2006-AR2 Class 2A1
4.950% due 03/25/36 385 376
------------
101,780
------------
Municipal Bonds - 0.6%
Eagle Mountain & Saginaw Independent School
District General Obligation Unlimited, weekly
demand
4.750% due 08/15/33 600 589
Golden State Tobacco
Securitization Corp. Revenue Bonds, weekly
demand
6.750% due 06/01/39 400 447
Tobacco Settlement Financing Corp. Revenue
Bonds, weekly demand
4.375% due 06/01/19 65 65
6.250% due 06/01/43 200 217
------------
1,318
------------
Non-US Bonds - 0.9%
Argentina Bocon
2.000% due 01/03/16 ARS 330 181
Bundesrepublik Deutschland
Series 03
4.750% due 07/04/34 EUR 130 178
Quebec Residual
Principal Only STRIP
Zero coupon due 12/01/36 CAD 490 89
United Kingdom Gilt
5.750% due 12/07/09 GBP 400 761
4.750% due 06/07/10 GBP 530 978
------------
2,187
------------
</Table>
50 Core Bond Fund
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Government Agencies - 5.6%
Fannie Mae
4.200% due 03/24/08 2,000 1,955
3.875% due 02/15/10 (N) 710 673
Federal Home Loan Bank
4.800% due 05/02/08 3,100 3,064
Series 577
4.500% due 09/26/08 2,900 2,842
Federal Home Loan Bank System
Series IY08
3.400% due 03/18/08 1,000 966
Financing Corp.
Principal Only STRIP
Series 1
Zero coupon due 05/11/16 80 47
Series 12P
Zero coupon due 12/06/18 245 124
Series 13
Zero coupon due 12/27/16 275 155
Series 13P
Zero coupon due 12/27/18 670 336
Series 16P
Zero coupon due 04/05/19 380 188
Series 19
Zero coupon due 06/06/16 230 134
Series 1P
Zero coupon due 05/11/18 95 50
Series 3P
Zero coupon due 11/30/17 170 91
Series 5P
Zero coupon due 02/08/18 65 34
Series 8P
Zero coupon due 08/03/18 605 311
Series 9P
Zero coupon due 10/06/17 310 168
Freddie Mac
3.450% due 03/12/08 1,000 967
2.750% due 03/15/08 210 201
4.750% due 01/18/11 555 539
Residual Funding
Principal Only STRIP
Zero coupon due 10/15/20 600 276
------------
13,121
------------
United States Government Treasuries - 11.3%
United States Treasury Inflation Indexed Bonds
3.375% due 01/15/12 1,061 1,111
2.000% due 01/15/14 218 210
2.000% due 07/15/14 769 741
2.000% due 01/15/16 503 481
2.375% due 01/15/25 427 416
2.000% due 01/15/26 609 558
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
United States Treasury Notes
4.375% due 12/31/07 (N) 1,735 1,714
4.625% due 02/29/08 (N) 3,700 3,666
4.875% due 05/15/09 8,900 8,839
4.375% due 12/15/10 2,275 2,210
4.250% due 08/15/13 (N) 800 759
4.250% due 08/15/15 (N) 1,570 1,469
6.000% due 02/15/26 (N) 1,430 1,549
4.500% due 02/15/36 (N) 550 493
United States Treasury Principal
Principal Only STRIP
Zero coupon due 11/15/21 4,770 2,107
------------
26,323
------------
TOTAL LONG-TERM INVESTMENTS
(cost $192,925) 189,897
------------
COMMON STOCKS - 0.2%
Financial Services - 0.2%
DG Funding Trust (E)(A) 49 517
------------
TOTAL COMMON STOCKS
(cost $517) 517
------------
PREFERRED STOCKS - 0.2%
Utilities - 0.2%
Rural Cellular Corp. (AE) 300 364
------------
TOTAL PREFERRED STOCKS
(cost $349) 364
------------
WARRANTS & RIGHTS - 0.0%
Miscellaneous - 0.0%
Mexico Government International Bond Value
Recovery Rights
Series D 2,496,000 15
Series E 1,900,000 48
------------
TOTAL WARRANTS & RIGHTS
(cost $21) 63
------------
</Table>
Core Bond Fund 51
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
NOTIONAL MARKET
AMOUNT VALUE
$ $
- -----------------------------------------------------------------------------
OPTIONS PURCHASED - 0.0%
Eurodollar Futures
Sep 2006 94.00 Put (33) 7,755 --
Dec 2006 91.75 Put (13) 2,982 --
Dec 2006 92.00 Put (56) 12,880 1
Dec 2006 92.25 Put (36) 8,303 --
Dec 2006 92.50 Put (45) 10,406 --
Dec 2006 92.75 Put (24) 5,565 --
Mar 2007 92.00 Put (9) 2,070 --
Mar 2007 92.25 Put (49) 11,301 --
Mar 2007 92.50 Put (5) 1,156 --
Jun 2007 91.00 Put (59) 13,423 1
Jun 2007 91.25 Put (71) 16,197 1
Swaptions
(Fund Pays/Fund Receives)
USD Three Month LIBOR/USD 4.750%
Aug 2006 0.00 Call (1) 2,000 --
USD Three Month LIBOR/USD 4.500%
Oct 2006 0.00 Call (2) 5,000 --
USD Three Month LIBOR/USD 4.800%
Dec 2006 0.00 Call (1) 3,000 --
USD Three Month LIBOR/USD 5.170%
Feb 2007 0.00 Call (1) 2,300 3
USD Three Month LIBOR/USD 5.000%
Mar 2007 0.00 Call (2) 4,000 3
USD Three Month LIBOR/USD 5.080%
Apr 2007 0.00 Call (1) 23,000 3
USD Three Month LIBOR/USD 5.200%
May 2007 0.00 Call (2) 10,000 24
USD Three Month LIBOR/USD 5.250%
Jun 2007 0.00 Call (1) 5,000 16
USD Three Month LIBOR/USD 5.500%
Jun 2007 0.00 Call (1) 4,000 19
------------
TOTAL OPTIONS PURCHASED
(cost $168) 71
------------
<Caption>
PRINCIPAL
AMOUNT ($)
OR SHARES
------------
SHORT-TERM INVESTMENTS - 30.4%
Abbey National NA LLC (c)(z)
5.100% due 07/05/06 1,300 1,299
American General Finance Corp. (E)
Series MTNG
5.489% due 03/23/07 100 100
AT&T, Inc. (p)
4.214% due 06/05/07 300 296
Barclays Bank PLC (z)
5.036% due 01/29/07 1,100 1,103
Barclays US Funding Corp. (c)(z)
5.055% due 08/16/06 2,300 2,285
</Table>
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
BNP Paribas (c)(z)
5.000% due 08/28/06 3,100 3,075
DaimlerChrysler NA Holding Corp. (E)
Series MTND
5.503% due 11/17/06 600 600
Danske Corp. (c)(z)
5.080% due 08/24/06 2,400 2,382
Dexia Delaware LLC (c)(z)
5.275% due 07/05/06 1,500 1,499
DNB Nor Bank ASA (c)(z)
4.990% due 08/18/06 1,200 1,192
Duke Energy Field Services LLC
5.750% due 11/15/06 30 30
Fannie Mae (E)
5.312% due 09/22/06 400 400
Fannie Mae Discount Note (c)(z)
4.926% due 08/02/06 3,100 3,086
Federal National Mortgage
Association Discount Note (c)(z)
4.960% due 08/21/06 400 397
Ford Motor Credit Co. (E)
6.374% due 03/21/07 500 498
France Treasury Bill BTF
Zero coupon due 12/21/06 550 693
Frank Russell Investment Company
Money Market Fund 34,275,000 34,275
Freddie Mac Discount Note (c)(z)
Series RB
4.935% due 08/08/06 100 99
German Treasury Bills
Series 0106
Zero coupon due 07/12/06 300 383
Series 0306
Zero coupon due 09/13/06 400 509
HBOS Treasury Services PLC (c)(z)
5.055% due 08/17/06 2,100 2,086
Rabobank Capital Funding II (c)(z)
5.250% due 07/03/06 1,500 1,500
Skandinaviska Enskilda Banken (c)(z)
5.280% due 07/20/06 2,500 2,493
Societe Generale North America (c)(z)
5.260% due 07/05/06 500 500
4.985% due 08/22/06 1,400 1,390
5.100% due 08/24/06 800 794
</Table>
52 Core Bond Fund
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands (except share amounts)
<Table>
<Caption>
PRINCIPAL MARKET
AMOUNT ($) VALUE
OR SHARES $
- -----------------------------------------------------------------------------
Societe Generale North America Commercial Paper
(c)(z)
5.270% due 07/03/06 100 100
Svenska Handelsbanken AB (c)(z)
5.190% due 09/11/06 1,500 1,484
Total Fina ELF Capital (c)(z)
5.270% due 07/03/06 2,500 2,499
UBS Financial Del LLC (c)(z)
4.990% due 08/22/06 700 695
UBS Financial LLC (c)(z)
5.270% due 07/03/06 2,000 1,999
United States Treasury Bills (z)(sec.)
4.686% due 08/31/06 10 10
4.710% due 08/31/06 185 183
4.715% due 08/31/06 5 5
4.752% due 08/31/06 50 50
4.000% due 09/14/06 115 114
4.720% due 09/14/06 55 54
4.770% due 09/14/06 10 10
4.795% due 09/14/06 215 213
4.930% due 09/14/06 315 312
United States Treasury Inflation Indexed Bonds
(sec.)
2.898% due 01/15/07 127 127
United States Treasury Notes
7.000% due 07/15/06 85 85
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $70,838) 70,904
------------
OTHER SECURITIES - 2.7%
State Street Securities Lending Quality Trust
(X) 6,315,075 6,315
------------
TOTAL OTHER SECURITIES
(cost $6,315) 6,315
------------
TOTAL INVESTMENTS - 114.8%
(identified cost $271,133) 268,131
OTHER ASSETS AND LIABILITIES,
NET - (14.8%) (34,617)
------------
NET ASSETS - 100.0% 233,514
============
</Table>
Core Bond Fund 53
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
UNREALIZED
NOTIONAL APPRECIATION
FUTURES CONTRACTS AMOUNT (DEPRECIATION)
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Long Positions
Eurodollar Futures (CME)
expiration date 09/06 (31) 7,318 (21)
expiration date 12/06 (175) 41,302 (260)
expiration date 03/07 (108) 25,499 (204)
expiration date 06/07 (93) 21,969 (153)
expiration date 09/07 (72) 17,015 (105)
expiration date 12/07 (41) 9,691 (44)
expiration date 03/08 (20) 4,728 (13)
Three Month Euro (Euribor) Interest Rate Futures
(EMU)
expiration date 09/06 (6) 885 2
Three Month Short Sterling Interest Rate Futures
(UK)
expiration date 12/06 (29) 6,373 1
United States Treasury Bonds
expiration date 09/06 (13) 1,387 (11)
United States Treasury 2 Year Notes
expiration date 09/06 (52) 10,545 (12)
United States Treasury 5 Year Notes
expiration date 09/06 (96) 9,927 (48)
United States Treasury 10 Year Notes
expiration date 09/06 (47) 4,928 (23)
Short Positions
Australian 3 Year Treasury Bond (Australia)
expiration date 09/06 (7) 1,345 1
Australian 10 Year Treasury Bond (Australia)
expiration date 06/06 (5) 2,676 4
Bankers Acceptance Futures (Canada)
expiration date 12/06 (30) 6,426 19
Euro-Bobl Futures (Germany)
expiration date 09/06 (26) 3,627 22
Japanese 10 Year Bond (Japan)
expiration date 09/06 (3) 3,455 6
Long Gilt Futures (UK)
expiration date 09/06 (9) 1,813 12
United States Treasury 5 Year Notes
expiration date 09/06 (13) 1,344 (4)
United States Treasury 10 Year Notes
expiration date 09/06 (46) 4,824 23
---------------
Total Unrealized Appreciation (Depreciation) on
Open Futures Contracts (808)
===============
<Caption>
NOTIONAL MARKET
OPTIONS WRITTEN AMOUNT VALUE
(NUMBER OF CONTRACTS) $ $
- ------------------------------------------------------------------------------------
Eurodollar Futures
Sep 2006 95.50 Call (4) 955 --
Sep 2006 95.00 Put (3) 713 (4)
Sep 2006 95.25 Put (19) 4,524 (41)
Sep 2006 95.50 Put (4) 955 (11)
Dec 2006 95.00 Put (11) 2,613 (16)
Dec 2006 95.25 Put (98) 23,336 (207)
Dec 2006 95.50 Put (15) 3,581 (41)
Mar 2007 94.75 Put (4) 948 (4)
Mar 2007 95.25 Put (4) 953 (8)
Swaptions
(Fund Pay/Fund Receives)
GBP 4.50%/GBP Six Month LIBOR
Dec 2006 0.00 Put (1) 3,698 (22)
USD Three Month LIBOR/USD 4.780%
Aug 2006 0.00 Call (1) 1,000 --
USD Three Month LIBOR/USD 4.540%
Oct 2006 0.00 Call (1) 1,000 --
USD Three Month LIBOR/USD 4.560%
Oct 2006 0.00 Call (1) 1,000 --
USD Three Month LIBOR/USD 4.850%
Dec 2006 0.00 Call (1) 1,000 (1)
USD Three Month LIBOR/USD 5.240%
Feb 2007 0.00 Call (1) 1,000 (4)
USD Three Month LIBOR/USD 5.040%
Mar 2007 0.00 Call (2) 2,000 (5)
USD Three Month LIBOR/USD 5.220%
Apr 2007 0.00 Call (1) 1,000 (5)
USD Three Month LIBOR/USD 5.300%
May 2007 0.00 Call (1) 2,000 (13)
USD Three Month LIBOR/USD 5.315%
May 2007 0.00 Call (1) 2,200 (14)
USD Three Month LIBOR/USD 5.600%
Jun 2007 0.00 Call (1) 2,000 (22)
United States Treasury Notes
10 Year Futures
Aug 2006 106.00 Call (7) 742 (2)
Aug 2006 108.00 Call (4) 432 --
Aug 2006 103.00 Put (11) 1,133 (2)
---------------
Total Liability for Options Written
(premiums received $291) (422)
===============
</Table>
See accompanying notes which are an integral part of the financial statements.
54 Core Bond Fund
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
USD 424 AUD 573 09/20/06 1
USD 425 AUD 569 09/20/06 (3)
USD 135 CAD 149 07/27/06 (2)
USD 417 CAD 467 09/20/06 3
USD 425 CHF 519 09/20/06 3
USD 425 CHF 520 09/20/06 3
USD 1,260 CHF 1,540 09/20/06 9
USD 111 CNY 859 03/19/07 (1)
USD 516 EUR 401 07/31/06 (2)
USD 425 EUR 334 09/20/06 4
USD 851 EUR 672 09/20/06 12
USD 165 EUR 130 09/22/06 2
USD 529 GBP 287 07/27/06 2
USD 241 GBP 131 08/16/06 1
USD 351 GBP 190 08/16/06 1
USD 650 GBP 351 08/16/06 --
USD 425 GBP 230 09/20/06 2
USD 69 JPY 7,824 08/15/06 --
USD 69 JPY 7,827 08/15/06 --
USD 315 JPY 34,485 08/15/06 (11)
USD 2,187 JPY 239,666 08/15/06 (79)
USD 212 JPY 24,000 09/20/06 --
USD 323 JPY 35,560 09/20/06 (9)
USD 537 JPY 59,740 09/20/06 (9)
USD 563 JPY 64,790 09/20/06 10
USD 564 JPY 62,810 09/20/06 (8)
USD 567 JPY 64,150 09/20/06 --
USD 1,103 JPY 122,990 09/20/06 (15)
USD 1,036 NOK 6,384 09/20/06 (5)
USD 1,042 NOK 6,384 09/20/06 (10)
USD 425 NZD 683 09/20/06 (10)
USD 425 NZD 690 09/20/06 (6)
USD 837 SEK 6,060 09/20/06 9
USD 20 SGD 32 08/24/06 --
USD 21 SGD 33 08/24/06 --
USD 21 TWD 642 08/24/06 (1)
USD 21 TWD 660 08/24/06 (1)
AUD 576 USD 425 09/20/06 (2)
BRL 2,105 USD 910 09/05/06 31
CAD 472 USD 425 09/20/06 1
CAD 942 USD 851 09/20/06 3
CHF 524 USD 425 09/20/06 (7)
EUR 146 USD 183 07/28/06 (3)
EUR 540 USD 692 07/31/06 (1)
EUR 360 USD 455 08/31/06 (8)
EUR 336 USD 425 09/20/06 (7)
EUR 1,007 USD 1,275 09/20/06 (19)
</Table>
<Table>
<Caption>
FOREIGN CURRENCY EXCHANGE CONTRACTS
UNREALIZED
APPRECIATION
AMOUNT AMOUNT SETTLEMENT (DEPRECIATION)
SOLD BOUGHT DATE $
- ------------------- -------------------- ----------- --------------
EUR 1,325 USD 1,676 09/20/06 (26)
EUR 346 USD 439 09/29/06 (6)
GBP 1,202 USD 2,236 08/16/06 12
GBP 230 USD 425 09/20/06 (2)
GBP 677 USD 1,250 09/20/06 (4)
JPY 14,968 USD 132 08/15/06 1
JPY 44,650 USD 402 09/20/06 7
JPY 48,862 USD 425 09/20/06 (7)
JPY 64,790 USD 577 09/20/06 4
JPY 65,230 USD 600 09/20/06 23
JPY 95,147 USD 839 09/20/06 (1)
JPY 123,890 USD 1,085 09/20/06 (10)
NOK 2,621 USD 425 09/20/06 2
NZD 686 USD 425 09/20/06 9
NZD 1,114 USD 689 09/20/06 13
NZD 1,131 USD 702 09/20/06 15
NZD 1,131 USD 702 09/20/06 16
SEK 3,089 USD 425 09/20/06 (6)
--------------
Total Unrealized Appreciation (Depreciation) on Open
Foreign Currency Exchange Contracts (82)
==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 55
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
SCHEDULE OF INVESTMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
Amounts in thousands
<Table>
<Caption>
INDEX SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------
UNREALIZED
NOTIONAL APPRECIATION
FUND RECEIVES COUNTER AMOUNT FUND PAYS TERMINATION (DEPRECIATION)
UNDERLYING SECURITY PARTY $ FLOATING RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
1 Month USD LIBOR minus
Lehman Brothers High Yield Bear Stearns 1,000 0.200% 07/01/06 (12)
----------------
Total Unrealized Appreciation (Depreciation) on Open Index Swap Contracts (12)
================
</Table>
<Table>
<Caption>
INTEREST RATE SWAP CONTRACTS
- -------------------------------------------------------------------------------------------------
COUNTER NOTIONAL
PARTY AMOUNT FUND RECEIVES FUND PAYS
- ----------------------- -------------- -------------------- -------------------------------
Bank of America USD 6,500 5.473% Three Month LIBOR
Bank of America USD 1,800 5.548% Three Month LIBOR
Bank of America USD 1,500 5.628% Three Month LIBOR
Barclays Bank PLC USD 1,500 5.000% Three Month LIBOR
Barclays Bank PLC GBP 50 5.000% Six Month LIBOR
BNP Paribas EUR 500 2.090% Consumer Price Index (France)
Lehman Brothers USD 4,700 5.000% Three Month LIBOR
Merrill Lynch GBP 100 4.000% Six Month LIBOR
Total Market Value of Open Interest Rate Swap Contracts Premiums Paid (Received) - ($104)
<Caption>
INTEREST RATE SWAP CONT INTEREST RATE SWAP CONTRACTS
- ----------------------- -----------------------------------
MARKET
COUNTER TERMINATION VALUE
PARTY DATE $
- ----------------------- ---------------- ----------------
Bank of America 06/14/11 (49)
Bank of America 06/14/16 (24)
Bank of America 06/16/36 (37)
Barclays Bank PLC 12/20/08 (32)
Barclays Bank PLC 06/16/11 (1)
BNP Paribas 10/15/10 (2)
Lehman Brothers 12/20/11 (89)
Merrill Lynch 12/12/35 4
----------------
Total Market Value of O (230)
================
</Table>
<Table>
<Caption>
CREDIT DEFAULT SWAP CONTRACTS
- ---------------------------------------------------------------------------------------------------------------------------
NOTIONAL MARKET
REFERENCE COUNTER AMOUNT FUND RECEIVES TERMINATION VALUE
ENTITY PARTY $ FIXED RATE DATE $
- ------------------------------ ---------------- --------- ----------------------- -------------- ----------------
General Motors Acceptance
Corp. Bear Stearns 400 2.100% 12/20/06 --
Russia Government
International Bond JP Morgan 100 0.460% 06/20/07 --
----------------
Total Market Value of Open Credit Default Swap Contracts Premiums Paid (Received) - ($0) --
================
</Table>
See accompanying notes which are an integral part of the financial statements.
56 Core Bond Fund
RUSSELL INVESTMENT FUNDS
CORE BOND FUND
PRESENTATION OF PORTFOLIO HOLDINGS -- JUNE 30, 2006 (UNAUDITED)
<Table>
<Caption>
% OF
NET
CATEGORIES ASSETS
- -------------------------------------------------------------
Asset-Backed Securities 3.4
Corporate Bonds and Notes 11.0
International Debt 4.3
Loan Agreements 0.6
Mortgage-Backed Securities 43.6
Municipal Bonds 0.6
Non-US Bonds 0.9
United States Government Agencies 5.6
United States Government Treasuries 11.3
Common Stocks 0.2
Preferred Stocks 0.2
Warrants & Rights --*
Options Purchased --*
Short-Term Investments 30.4
Other Securities 2.7
---------------
Total Investments 114.8
Other Assets and Liabilities, Net (14.8)
---------------
100.0
===============
Futures Contracts (0.3)
Options Written (0.2)
Foreign Currency Exchange Contracts --*
Index Swap Contracts --*
Interest Rate Swap Contracts (0.1)
Credit Default Swap Contracts --*
</Table>
* Less than .05% of net assets
See accompanying notes which are an integral part of the financial statements.
Core Bond Fund 57
RUSSELL INVESTMENT FUNDS
NOTES TO SCHEDULES OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
FOOTNOTES:
(AE) Nonincome-producing security.
(I) Forward commitment.
(E) Adjustable or floating rate security. Rate shown reflects rate in effect
at period end.
(f) Perpetual floating rate security. Rate shown reflects rate in effect at
period end.
(o) Real Estate Investment Trust (REIT).
(u) Bond is insured by a guarantor.
(B) Illiquid security.
(O) In default.
(c) At amortized cost, which approximates market.
(z) Rate noted is yield-to-maturity from date of acquisition.
(ae) Pre-refunded: These bonds are collateralized by US 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.
(S) 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.
(x) The security is purchased with the cash collateral from the securities
loaned.
(N) All or a portion of the shares of this security are on loan.
(p) 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.
(A) Illiquid and restricted security.
ABBREVIATIONS:
ADR - American Depositary Receipt
ADS - American Depositary Share
CIBOR - Copenhagen Interbank Offered Rate
CME - Chicago Mercantile Exchange
CMO - Collateralized Mortgage Obligation
CVO - Contingent Value Obligation
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
FOREIGN CURRENCY ABBREVIATIONS:
<Table>
ARS - Argentine peso HKD - Hong Kong dollar PHP - Philippine peso
AUD - Australian dollar HUF - Hungarian forint PKR - Pakistani rupee
BRL - Brazilian real IDR - Indonesian rupiah PLN - Polish zloty
CAD - Canadian dollar ILS - Israeli shekel RUB - Russian ruble
CHF - Swiss franc INR - Indian rupee SEK - Swedish krona
CLP - Chilean peso ISK - Iceland krona SGD - Singapore dollar
CNY - Chinese renminbi yuan JPY - Japanese yen SKK - Slovakian koruna
COP - Colombian peso KES - Kenyan schilling THB - Thai baht
CRC - Costa Rica colon KRW - South Korean won TRY - Turkish lira
CZK - Czech koruna MXN - Mexican peso TWD - Taiwanese dollar
DKK - Danish krone MYR - Malaysian ringgit USD - United States dollar
EGP - Egyptian pound NOK - Norwegian krone VEB - Venezuelan bolivar
EUR - Euro NZD - New Zealand dollar VND - Vietnamese dong
GBP - British pound sterling PEN - Peruvian nouveau sol ZAR - South African rand
</Table>
58 Notes to Schedules of Investments
(This page intentionally left blank)
RUSSELL INVESTMENT FUNDS
STATEMENT OF ASSETS AND LIABILITIES -- JUNE 30, 2006 (UNAUDITED)
<Table>
<Caption>
MULTI-STYLE
AMOUNTS IN THOUSANDS EQUITY FUND
- ---------------------------------------------------------------------------------------------
ASSETS
Investments, at identified cost $ 370,729
- ---------------------------------------------------------------------------------------------
Investments, at market*** 399,369
Foreign currency holdings* --
Unrealized appreciation on foreign currency exchange contracts --
Receivables:
Dividends and interest 351
Dividends from affiliated money market funds 84
Investments sold 5,400
Fund shares sold 80
Foreign taxes recoverable --
From Adviser 5
Daily variation margin on futures contracts 21
Prepaid expenses 2
Interest rate swap contracts, at market value**** --
-------------------
Total assets 405,312
-------------------
LIABILITIES
Payables:
Due to custodian --
Investments purchased 5,818
Fund shares redeemed 102
Accrued fees to affiliates 235
Other accrued expenses 35
Daily variation margin on futures contracts --
Unrealized depreciation on foreign currency exchange contracts --
Options written, at market value** --
Payable upon return of securities loaned 30,172
Unrealized depreciation on index swap contracts --
Interest rate swap contracts, at market value**** --
-------------------
Total liabilities 36,362
-------------------
NET ASSETS $ 368,950
===================
Net Assets Consist of:
Undistributed (overdistributed) net investment income $ 866
Accumulated net realized gain (loss) (37,810)
Unrealized appreciation (depreciation) on:
Investments 28,640
Futures contracts 324
Options written --
Index swap contracts --
Interest rate swap contracts --
Foreign currency-related transactions --
Shares of beneficial interest 271
Additional paid-in capital 376,659
-------------------
NET ASSETS $ 368,950
===================
</Table>
See accompanying notes which are an integral part of the financial statements.
60 Statement of Assets and Liabilities
<Table>
<Caption>
AGGRESSIVE REAL ESTATE
EQUITY FUND NON-U.S. FUND SECURITIES FUND CORE BOND FUND
- -------------------------------------------------------------------------
$ 273,984 $ 337,136 $ 403,551 $ 271,133
- -------------------------------------------------------------------------
293,156 401,767 563,676 268,131
-- 1,314 -- 13
-- 867 -- 199
147 388 1,672 1,317
40 95 57 182
1,768 1,159 3,672 16,054
13 214 315 268
-- 67 -- --
12 19 -- 1
137 504 -- 429
1 2 3 4
-- -- -- 4
-------------- -------------- -------------- --------------
295,274 406,396 569,395 286,602
-------------- -------------- -------------- --------------
-- 18 -- 158
1,440 1,616 2,953 45,453
35 37 -- 69
169 255 349 116
29 81 29 20
-- -- -- 8
-- 1,600 -- 281
-- 391 -- 422
75,954 76,817 66,946 6,315
-- 6 -- 12
-- -- -- 234
-------------- -------------- -------------- --------------
77,627 80,821 70,277 53,088
-------------- -------------- -------------- --------------
$ 217,647 $ 325,575 $ 499,118 $ 233,514
============== ============== ============== ==============
$ 108 $ 1,398 $ 3,324 $ 2,707
23,047 (1,600) 20,940 (3,387)
19,172 64,631 160,125 (3,002)
311 1,181 -- (808)
-- (91) -- (131)
-- (6) -- (12)
-- -- -- (126)
-- (736) -- (67)
143 237 258 233
174,866 260,561 314,471 238,107
-------------- -------------- -------------- --------------
$ 217,647 $ 325,575 $ 499,118 $ 233,514
============== ============== ============== ==============
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 61
RUSSELL INVESTMENT FUNDS
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
<Table>
<Caption>
MULTI-STYLE
EQUITY FUND
- ---------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share:
Net asset value per share***** $ 13.63
Net assets $ 368,949,593
Shares outstanding ($.01 par value) 27,063,264
- ---------------------------------------------------------------------------------------------
Amounts in thousands
* Foreign currency holdings - cost $ --
** Premiums received on options written $ --
*** Securities on loan included in investments $ 29,463
**** Interest rate swap contracts - premiums paid (received) $ --
***** Net asset value per share equals net assets divided by shares of
beneficial interest outstanding
</Table>
See accompanying notes which are an integral part of the financial statements.
62 Statement of Assets and Liabilities
<Table>
<Caption>
AGGRESSIVE REAL ESTATE
EQUITY FUND NON-U.S. FUND SECURITIES FUND CORE BOND FUND
- -------------------------------------------------------------------------
$ 15.22 $ 13.74 $ 19.37 $ 10.02
$ 217,646,998 $ 325,574,818 $ 499,118,232 $ 233,514,436
14,302,649 23,688,805 25,767,173 23,296,437
- -------------------------------------------------------------------------
$ -- $ 1,305 $ -- $ 12
$ -- $ 300 $ -- $ 291
$ 75,105 $ 76,141 $ 66,401 $ 6,185
$ -- $ -- $ -- $ (104)
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Assets and Liabilities 63
RUSSELL INVESTMENT FUNDS
STATEMENT OF OPERATIONS -- FOR THE PERIOD ENDED JUNE 30, 2006 (UNAUDITED)
<Table>
<Caption>
MULTI-STYLE
AMOUNTS IN THOUSANDS EQUITY FUND
- ----------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends $ 2,856
Dividends from affiliated money market fund 425
Interest 22
Securities lending income 16
Less foreign taxes withheld --
--------------------
Total investment income 3,319
--------------------
EXPENSES
Management fees 1,423
Custodian fees 116
Transfer agent fees 8
Professional fees 24
Trustees' fees 5
Printing fees 3
Miscellaneous 10
--------------------
Expenses before reductions 1,589
Expense reductions (1)
--------------------
Net expenses 1,588
--------------------
Net investment income (loss) 1,731
--------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investments 14,250
Futures contracts (527)
Options written --
Index swap contracts --
Interest rate swap contracts --
Foreign currency-related transactions --
--------------------
Net realized gain (loss) 13,723
--------------------
Net change in unrealized appreciation (depreciation) on:
Investments (7,670)
Futures contracts 501
Options written --
Index swap contracts --
Interest rate swap contracts --
Foreign currency-related transactions --
--------------------
Net change in unrealized appreciation (depreciation) (7,169)
--------------------
Net realized and unrealized gain (loss) 6,554
--------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 8,285
====================
</Table>
See accompanying notes which are an integral part of the financial statements.
64 Statement of Operations
<Table>
<Caption>
AGGRESSIVE EQUITY NON-U.S. REAL ESTATE CORE BOND
FUND FUND SECURITIES FUND FUND
- ------------------------------------------------------------------------------
$ 898 $ 5,451 $ 6,879 $ 54
269 577 368 619
12 75 24 5,210
103 220 3 --
-- (527) -- --
---------------- ---------------- ---------------- ----------------
1,282 5,796 7,274 5,883
---------------- ---------------- ---------------- ----------------
1,062 1,574 2,076 675
139 391 84 88
5 7 11 5
15 23 21 13
3 4 6 3
2 3 4 2
5 7 11 5
---------------- ---------------- ---------------- ----------------
1,231 2,009 2,213 791
(57) (104) -- (3)
---------------- ---------------- ---------------- ----------------
1,174 1,905 2,213 788
---------------- ---------------- ---------------- ----------------
108 3,891 5,061 5,095
---------------- ---------------- ---------------- ----------------
24,329 21,511 22,138 (2,197)
(168) (2,557) -- (257)
-- (4) -- 69
-- 306 -- 9
-- -- -- (190)
-- 455 -- 168
---------------- ---------------- ---------------- ----------------
24,161 19,711 22,138 (2,398)
---------------- ---------------- ---------------- ----------------
(10,138) 960 34,123 (3,329)
472 860 -- (882)
-- (92) -- (172)
-- (51) -- (12)
-- -- -- (162)
-- (570) -- (78)
---------------- ---------------- ---------------- ----------------
(9,666) 1,107 34,123 (4,635)
---------------- ---------------- ---------------- ----------------
14,495 20,818 56,261 (7,033)
---------------- ---------------- ---------------- ----------------
$ 14,603 $ 24,709 $ 61,322 $ (1,938)
================ ================ ================ ================
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Operations 65
RUSSELL INVESTMENT FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<Table>
<Caption>
MULTI-STYLE EQUITY
FUND
-------------------------------------------
SIX MONTHS FISCAL YEAR
ENDED ENDED
JUNE 30, 2006 DECEMBER 31,
AMOUNTS IN THOUSANDS (UNAUDITED) 2005
- -----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 1,731 $ 3,158
Net realized gain (loss) 13,723 29,276
Net change in unrealized appreciation (depreciation) (7,169) (8,211)
------------------- --------------------
Net increase (decrease) in net assets from operations 8,285 24,223
------------------- --------------------
DISTRIBUTIONS
From net investment income (1,717) (3,627)
From net realized gain -- --
------------------- --------------------
Net decrease in net assets from distributions (1,717) (3,627)
------------------- --------------------
SHARE TRANSACTIONS
Net increase (decrease) in net assets from share
transactions 12,723 (3,696)
------------------- --------------------
TOTAL NET INCREASE (DECREASE) IN NET ASSETS 19,291 16,900
NET ASSETS
Beginning of period 349,659 332,759
------------------- --------------------
End of period $ 368,950 $ 349,659
=================== ====================
Undistributed (overdistributed) net investment income
included in net assets $ 866 $ 852
</Table>
See accompanying notes which are an integral part of the financial statements.
66 Statement of Changes in Net Assets
<Table>
<Caption>
AGGRESSIVE EQUITY NON-U.S. REAL ESTATE CORE BOND
FUND FUND SECURITIES FUND FUND
----------------------------- ----------------------------- ----------------------------- -----------------------------
SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR SIX MONTHS FISCAL YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31, JUNE 30, 2006 DECEMBER 31,
(UNAUDITED) 2005 (UNAUDITED) 2005 (UNAUDITED) 2005 (UNAUDITED) 2005
- ---------------------------------------------------------------------------------------------------------------------------------
$ 108 $ 404 $ 3,891 $ 3,842 $ 5,061 $ 7,632 $ 5,095 $ 7,313
24,161 16,846 19,711 23,903 22,138 38,341 (2,398) (1,000)
(9,666) (4,751) 1,107 9,254 34,123 7,220 (4,635) (2,319)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
14,603 12,499 24,709 36,999 61,322 53,193 (1,938) 3,994
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
-- (355) (1,051) (4,388) (1,737) (8,794) (2,687) (7,205)
(3,686) (18,690) -- -- (6,355) (38,314) -- (1,809)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
(3,686) (19,045) (1,051) (4,388) (8,092) (47,108) (2,687) (9,014)
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
2,438 15,255 (344) 10,884 2,796 57,274 21,365 45,943
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
13,355 8,709 23,314 43,495 56,026 63,359 16,740 40,923
204,292 195,583 302,261 258,766 443,092 379,733 216,774 175,851
------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
$ 217,647 $ 204,292 $ 325,575 $ 302,261 $ 499,118 $ 443,092 $ 233,514 $ 216,774
============= ============= ============= ============= ============= ============= ============= =============
$ 108 $ -- $ 1,398 $ (1,442) $ 3,324 $ -- $ 2,707 $ 299
</Table>
See accompanying notes which are an integral part of the financial statements.
Statement of Changes in Net Assets 67
RUSSELL INVESTMENT FUNDS
FINANCIAL HIGHLIGHTS -- FOR THE PERIODS ENDED
For a Share Outstanding Throughout Each Period.
<Table>
<Caption>
$ $ $ $
NET ASSET VALUE, NET NET REALIZED TOTAL INCOME
BEGINNING OF INVESTMENT AND UNREALIZED (LOSS) FROM
PERIOD INCOME (LOSS)(A) GAIN (LOSS) OPERATIONS
- --------------------------------------------------------------------------------------------------------------
MULTI-STYLE EQUITY FUND
June 30, 2006* 13.37 .07 .25 .32
December 31, 2005 12.60 .12 .79 .91
December 31, 2004 11.56 .11 1.02 1.13
December 31, 2003 9.04 .08 2.51 2.59
December 31, 2002 11.84 .06 (2.80) (2.74)
December 31, 2001 14.13 .07 (2.06) (1.99)
- --------------------------------------------------------------------------------------------------------------
AGGRESSIVE EQUITY FUND
June 30, 2006* 14.40 .01 1.07 1.08
December 31, 2005 14.90 .03 .90 .93
December 31, 2004 13.47 .02 1.95 1.97
December 31, 2003 9.26 .01 4.21 4.22
December 31, 2002 11.44 (.02) (2.16) (2.18)
December 31, 2001 11.73 --(d) (.28) (.28)
- --------------------------------------------------------------------------------------------------------------
NON-U.S. FUND
June 30, 2006* 12.68 .16 0.94 1.10
December 31, 2005 11.33 .16 1.38 1.54
December 31, 2004 9.76 .11 1.66 1.77
December 31, 2003 7.20 .09 2.69 2.78
December 31, 2002 8.64 .06 (1.37) (1.31)
December 31, 2001 11.15 .06 (2.52) (2.46)
- --------------------------------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
June 30, 2006* 17.28 .19 2.21 2.40
December 31, 2005 17.09 .32 1.82 2.14
December 31, 2004 13.71 .36 4.33 4.69
December 31, 2003 10.51 .55 3.28 3.83
December 31, 2002 10.75 .54 (.13) .41
December 31, 2001 10.67 .57 .24 .81
- --------------------------------------------------------------------------------------------------------------
CORE BOND FUND
June 30, 2006* 10.23 .23 (.32) (.09)
December 31, 2005 10.50 .38 (.17) .21
December 31, 2004 10.47 .24 .24 .48
December 31, 2003 10.43 .31 .31 .62
December 31, 2002 10.13 .36 .52 .88
December 31, 2001 10.07 .54 .18 .72
- --------------------------------------------------------------------------------------------------------------
<Caption>
$ $
DISTRIBUTIONS DISTRIBUTIONS $
FROM NET FROM NET RETURN OF
INVESTMENT INCOME REALIZED GAIN CAPITAL
- ----------------------------------------------------------------------------------------
MULTI-STYLE EQUITY FUND
June 30, 2006* (.06) -- --
December 31, 2005 (.14) -- --
December 31, 2004 (.09) -- --
December 31, 2003 (.07) -- --
December 31, 2002 (.06) -- --
December 31, 2001 (.06) (.24) --
- ----------------------------------------------------------------------------------------
AGGRESSIVE EQUITY FUND
June 30, 2006* -- (.26) --
December 31, 2005 (.03) (1.40) --
December 31, 2004 (.02) (.52) --
December 31, 2003 (.01) -- --
December 31, 2002 -- -- --
December 31, 2001 --(d) -- (.01)
- ----------------------------------------------------------------------------------------
NON-U.S. FUND
June 30, 2006* (.04) -- --
December 31, 2005 (.19) -- --
December 31, 2004 (.20) -- --
December 31, 2003 (.22) -- --
December 31, 2002 (.13) -- --
December 31, 2001 (.04) -- (.01)
- ----------------------------------------------------------------------------------------
REAL ESTATE SECURITIES FUND
June 30, 2006* (.07) (.24) --
December 31, 2005 (.37) (1.58) --
December 31, 2004 (.36) (.95) --
December 31, 2003 (.61) -- (.02)
December 31, 2002 (.57) (.08) --
December 31, 2001 (.55) (.18) --
- ----------------------------------------------------------------------------------------
CORE BOND FUND
June 30, 2006* (.12) -- --
December 31, 2005 (.37) (.11) --
December 31, 2004 (.26) (.19) --
December 31, 2003 (.38) (.20) --
December 31, 2002 (.30) (.28) --
December 31, 2001 (.60) (.06) --
- ----------------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
68 Financial Highlights
<Table>
<Caption>
$ $
$ NET ASSET VALUE, (%) NET ASSETS
TOTAL END OF TOTAL END OF PERIOD
DISTRIBUTIONS PERIOD RETURN(B) (000)
- -----------------------------------------------------------------------------
(.06) 13.63 2.42 368,950
(.14) 13.37 7.27 349,659
(.09) 12.60 9.81 332,759
(.07) 11.56 28.86 296,767
(.06) 9.04 (23.19) 206,794
(.30) 11.84 (14.21) 251,730
- -----------------------------------------------------------------------------
(.26) 15.22 7.45 217,647
(1.43) 14.40 6.36 204,292
(.54) 14.90 14.73 195,583
(.01) 13.47 45.60 166,385
-- 9.26 (19.06) 97,794
(.01) 11.44 (2.36) 111,693
- -----------------------------------------------------------------------------
(.04) 13.74 8.72 325,575
(.19) 12.68 13.69 302,261
(.20) 11.33 18.30 258,766
(.22) 9.76 38.78 206,619
(.13) 7.20 (15.15) 137,840
(.05) 8.64 (22.03) 154,494
- -----------------------------------------------------------------------------
(.31) 19.37 13.97 499,118
(1.95) 17.28 12.96 443,092
(1.31) 17.09 34.88 379,733
(.63) 13.71 37.21 254,691
(.65) 10.51 3.80 160,176
(.73) 10.75 7.84 111,982
- -----------------------------------------------------------------------------
(.12) 10.02 (.88) 233,514
(.48) 10.23 2.01 216,774
(.45) 10.50 4.66 175,851
(.58) 10.47 6.15 147,202
(.58) 10.43 8.84 140,280
(.66) 10.13 7.41 109,971
- -----------------------------------------------------------------------------
<Caption>
% % %
RATIO OF EXPENSES RATIO OF EXPENSES RATIO OF NET
TO AVERAGE TO AVERAGE INVESTMENT INCOME %
NET ASSETS NET ASSETS TO AVERAGE PORTFOLIO
NET(C)(E) GROSS(C) NET ASSETS(C)(E) TURNOVER RATE(B)
- ---------------------------------------------------------------------------------
.87 .87 .95 65.19
.83 .87 .94 130.00
.87 .88 .96 123.29
.87 .95 .82 107.67
.92 .99 .61 145.90
.92 .99 .57 131.67
- ---------------------------------------------------------------------------------
1.05 1.10 .10 89.26
.99 1.13 .21 130.09
1.05 1.17 .17 150.26
1.06 1.26 .10 138.95
1.25 1.36 (.17) 139.24
1.25 1.38 .01 180.38
- ---------------------------------------------------------------------------------
1.15 1.21 2.35 41.37
1.12 1.26 1.41 87.98
1.15 1.28 1.11 73.45
1.16 1.41 1.14 50.29
1.30 1.48 .77 60.98
1.30 1.43 .64 79.79
- ---------------------------------------------------------------------------------
.91 .91 2.07 29.52
.91 .91 1.86 64.24
.92 .92 2.43 47.21
.95 .95 4.66 38.84
.99 .99 5.01 55.43
1.06 1.06 5.35 55.13
- ---------------------------------------------------------------------------------
.70 .70 4.53 130.50
.70 .72 3.70 192.66
.70 .73 2.41 216.23
.71 .78 2.86 232.64
.80 .80 3.52 207.60
.80 .88 5.25 205.62
- ---------------------------------------------------------------------------------
</Table>
See accompanying notes which are an integral part of the financial statements.
Financial Highlights 69
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL HIGHLIGHTS -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
* For the six months ended June 30, 2006 (Unaudited).
(a) Average month-end shares outstanding were used for this calculation.
(b) Periods less than one year are not annualized.
(c) The ratios for periods less than one year are annualized.
(d) Less than $.01 per share.
(e) May reflect amounts waived and/or reimbursed by FRIMCo as the investment
adviser and transfer agent.
See accompanying notes which are an integral part of the financial statements.
70 Notes to Financial Highlights
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
Russell Investment Funds (the "Investment Company") is a series investment
company with five different investment portfolios referred to as Funds. These
financial statements report on all five of 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 operates as a Massachusetts business
trust under a master trust agreement dated July 11, 1996. The Investment
Company's master trust agreement permits the Board of Trustees (the "Board")
to issue an unlimited number of shares of beneficial interest at a $.01 par
value per share.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds' financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("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, including Market Value Procedures, Fair Value
Procedures and Pricing Services. Debt obligation securities maturing within
60 days of the time of purchase are priced using the amortized cost method of
valuation, unless the Board determines that amortized cost does not represent
market value of short-term debt obligations. The Board has delegated the
responsibility for administration of the Securities Valuation Procedures to
Frank Russell Investment Management Company ("FRIMCo" or "Adviser"). On July
1, 2006, Frank Russell Investment Management Company changed its name to
Russell Investment Management Company ("RIMCo").
Ordinarily, the Funds value each portfolio security based on market
quotations provided by Pricing Services or alternative pricing services or
dealers (when permitted by the Market Value Procedures). Generally, Fund
securities are valued at the close of the market on which they are traded as
follows:
- US listed equities; equity and fixed income options: Last sale price; last
bid price if no last sale price;
- US over-the-counter equities: Official closing price; last bid price if no
closing price;
- Listed ADRs/GDRs: Last sale price; last bid price if no sales;
- Municipal bonds, US bonds, Eurobonds/foreign bonds: Evaluated bid price;
broker quote if no evaluated bid price;
- Futures: Settlement price.
- Investments in other mutual funds are valued at their net asset value per
share, calculated at 4 p.m. Eastern time or as of the close of the NYSE,
whichever is earlier.
- The value of swap agreements are equal to the Funds' obligation (or rights)
under swap contracts which will generally be equal to the net amounts to be
paid or received under the contracts based upon the relative values of the
positions held by each party to the contracts.
- Equity securities traded on a national securities foreign exchange or an
over-the-counter market (foreign or domestic) are valued on the basis of
the official closing price, or lacking the official closing price, at the
last sale price of the primary exchange on which the security is traded.
If market quotations are not readily available for a security or if
subsequent events suggest that a market quotation is not reliable, the Funds
will use the security's fair value, as determined in accordance with the Fair
Value Procedures. This generally means that equity securities and fixed
income securities listed and traded principally on any national securities
exchange are valued on the basis of the last sale price or, lacking any
sales, at the closing bid price, on the primary exchange on which the
security is traded. The Fair Value Procedures may involve subjective
judgments as to the fair value of securities. The effect of fair value
pricing is that securities may not be priced on the basis of quotations from
the primary market in which they are traded, but rather may be priced by
another method that the Funds' Board of Trustees believes reflects fair
value. The use of fair value pricing by a Fund may cause the net asset value
of its shares to differ significantly from the net asset value that would
Notes to Financial Statements 71
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
be calculated using normal pricing methods. Fair value pricing could also
cause discrepancies between the daily movement of the value of Fund shares
and the daily movement of the benchmark index if the index is valued using
another pricing method.
This policy is intended to assure that the Funds' net asset values fairly
reflect security values as of the time of pricing. Events or circumstances
affecting the values of Fund securities that occur between the closing of the
principal markets on which they trade and the time the net asset value of
Fund shares is determined may be reflected in the calculation of net asset
values for each applicable Fund when the Funds deem that the particular event
or circumstance would materially affect such Fund's net asset value. 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. 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 US securities
market (defined in the Fair Value Procedures as the movement by any two of
four major US Indexes greater than a certain percentage) or other significant
event; foreign market holidays if on a daily basis, Fund exposure exceeds 20%
in aggregate (all closed markets combined); a company development; a natural
disaster; or an armed conflict.
Because foreign securities can trade on non-business days, the net asset
value of a Fund's portfolio that includes foreign securities may change on
days when shareholders will not be able to purchase or redeem fund shares.
Investment Transactions
Securities transactions are recorded on a trade date basis. 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 part of interest income. All premiums and
discounts, including original issue discounts, are amortized/accreted using
the 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.
It is each Fund's intention to qualify as a regulated investment company and
distribute all of its taxable income and capital gains. Therefore, no federal
income tax provision was required for the Funds.
Dividends and Distributions to Shareholders
For all Funds, income and capital gain distributions, if any, are recorded on
the ex-dividend date. Income 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.
The timing and characterization of certain income and capital gain
distributions are determined in accordance with federal tax regulations which
may differ from GAAP. As a result, net investment income and net realized
gain (or loss) on investment and foreign currency-related transactions for a
reporting period may differ significantly from distributions during such
period. The differences between tax regulations and 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.
72 Notes to Financial Statements
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Expenses
The Funds will pay their own expenses other than those expressly assumed by
FRIMCo. 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 US dollars. Foreign
currency amounts and transactions of the Funds are translated into US 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.
Reported 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
Non-U.S. Fund's books and the US 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, at year-end, as a result
of changes in the exchange rates.
The Funds do not isolate that portion of the results of operations of the
Funds that arises as a result of changes in exchange rates from that portion
that arises from changes in market prices of investments during the year.
Such fluctuations are included with the net realized and unrealized gain or
loss from investments. However, for federal income tax purposes the Funds do
isolate the effects of changes in foreign exchange rates from the
fluctuations arising from changes in market prices for realized gain (or
loss) on debt obligations.
Capital Gains Taxes
The Non-U.S. Fund may be subject to capital gains taxes and repatriation
taxes imposed by certain countries in which it invests. The Non-U.S. Fund may
record a deferred tax liability in respect of unrealized appreciation on
foreign securities for potential capital gains and repatriation taxes at June
30, 2006. The accrual for capital gains and repatriation taxes is included in
net unrealized appreciation (depreciation) on investments in the Statement of
Assets and Liabilities for the Non-U.S. Fund, if applicable. The amounts
related to capital gains taxes are included in net realized gain (loss) on
investments in the Statement of Operations for the Fund. The Non-U.S. Fund
had no deferred tax liability or capital gains taxes for the period ended
June 30, 2006.
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, swaptions, forwards, structured notes and stripped
securities. These instruments offer unique characteristics and risks that
assist the Funds in meeting their investment strategies.
The Funds typically use derivatives in two ways: hedging and return
enhancement. The Funds may use a hedging strategy for their cash reserves to
achieve a strategy of being fully invested by exposing those reserves to the
performance of appropriate markets by purchasing equity or fixed income
securities, as appropriate, and/or derivatives. Hedging is also used by some
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. By purchasing certain instruments, Funds may more
effectively achieve the desired portfolio characteristics that assist them in
meeting their investment objectives. Depending on how the derivatives are
structured and utilized, the risks associated with them may vary widely.
These risks are generally categorized as market risk, liquidity risk and
counterparty or credit risk.
Foreign Currency Exchange Contracts
In connection with portfolio purchases and sales of securities denominated in
a foreign currency, the Non-U.S. and Core Bond Funds may enter into foreign
currency exchange spot contracts and forward foreign currency exchange
contracts ("contracts").
Notes to Financial Statements 73
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
The Non-U.S. and Core Bond Funds may enter into foreign currency forward
overlays on liquidity reserve balances. Additionally, from time to time the
Non-U.S. and Core Bond Funds may enter into contracts to hedge certain
foreign currency-denominated assets. Contracts are recorded at market value.
Certain risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts and are
generally limited to the amount of unrealized gain on the contracts, if any,
that are recognized in the Statement 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. Open contracts at
June 30, 2006 are presented on the Schedule of Investments for the Non-U.S.
and Core Bond Funds.
Forward Commitments
The Funds may contract to purchase securities for a fixed price at a future
date beyond customary settlement time consistent with a Fund's ability to
manage its investment portfolio and meet redemption requests. 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 realize short-term gains (or losses) upon such sale.
When effecting such transactions, cash or liquid high-grade debt obligations
of the Fund in a dollar amount sufficient to make payment for the portfolio
securities to be purchased will be segregated on the Fund's records at the
trade date and maintained 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.
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. A Fund's investments in loans may be in the form of
participations in loans or assignments of all or a portion of loans from
third parties. A loan is often administered by a bank or other financial
institution (the "lender") 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, a Fund has the right to receive payments
of principal, interest and any fees to which it is entitled only from the
lender selling the loan agreement and only upon receipt by the lender of
payments from the borrower. A Fund generally has no right to enforce
compliance with the terms of the loan agreement with the borrower. As a
result, a Fund may be subject to the credit risk of both the borrower and the
lender that is selling the loan agreement. When a Fund purchases assignments
from lenders it acquires direct rights against the borrower on the loan. For
the period ended June 30, 2006, there were no unfunded loan commitments in
the Core Bond Fund.
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 equitize liquidity reserve balances.
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 either 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.
The Funds' use of written options involves, to varying degrees, elements of
market risk in excess of the amount recognized in the Statement 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.
74 Notes to Financial Statements
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Futures Contracts
The Funds may invest in futures contracts (i.e., interest rate, foreign
currency and index futures contracts) to a limited extent. 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 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.
Swap Agreements
The Funds may enter into several different types of agreements including
interest rate, index, credit default and currency swaps.
The Funds may enter into index swap agreements as an additional hedging
strategy for cash reserves held by those Funds 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). Amounts paid to and received
from the swap counterparties representing capital appreciation and
depreciation on the underlying securities and accrued interest expense and
interest income are recorded as net realized gain (loss). The Fund is exposed
to credit risk in the event of non-performance by the swap counterparties;
however, the Fund does not anticipate non-performance by the counterparties.
The Core Bond Fund may enter into swap agreements, on either an asset-based
or liability-based basis, depending on whether it is hedging its assets or
its liabilities, and will usually enter into swaps on a net basis, i.e., the
two payment streams are netted out, with the Fund receiving or paying, as the
case may be, only the net amount of the two payments. When the Core Bond 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).
Interest rate swaps are a counterparty agreement and can be customized to
meet each parties needs and involves 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 which are
followed by a series of interest payments that are exchanged based on the
principal cash flow. At maturity the principal amounts are exchanged back.
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 Core Bond Fund expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio or to protect against any increase in the price of securities it
anticipates purchasing at a later date. The net amount of the excess, if any,
of the Core Bond Fund's obligations over its entitlements with respect to
each swap will be accrued on a daily basis and an amount of cash or liquid
high-grade debt securities having an aggregate net asset value at least equal
to the accrued excess will be maintained in a segregated account by the Core
Bond Fund's custodian. To the extent that the Core Bond Fund enters into
swaps on other than a net basis, the amount maintained in a segregated
account will be the full amount of the Core Bond Fund's 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 Core Bond Fund
will have contractual remedies pursuant to the agreement related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals
and as agents utilizing standardized swap documentation. As a result, the
swap market has become relatively liquid.
Investments in Emerging Markets
Investing in emerging markets may involve special risks and considerations
for the Non-U.S. Fund not typically associated with investing in the United
States markets. These risks include revaluation of currencies, high rates of
inflation, repatriation, restrictions on income and capital, and future
adverse political and economic developments. Moreover, securities issued in
Notes to Financial Statements 75
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
these markets may be less liquid, subject to government ownership controls,
delayed settlements, and their prices may be more volatile than those of
comparable securities in the United States.
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.
3. INVESTMENT TRANSACTIONS
Securities
During the period ended June 30, 2006, purchases and sales of investment
securities (excluding US Government and Agency obligations, short-term
investments, options, futures and repurchase agreements) were as follows:
<Table>
<Caption>
FUNDS PURCHASES SALES
- ----------------------------------------------------------------
Multi-Style Equity $ 237,823,114 $ 226,464,631
Aggressive Equity 190,249,207 193,412,851
Non-U.S. 126,031,580 128,724,906
</Table>
<Table>
- ----------------------------------------------------------------
<Caption>
FUNDS PURCHASES SALES
Real Estate
Securities $ 140,256,274 $ 143,162,227
Core Bond 130,044,888 77,064,199
</Table>
Purchases and sales of US Government and Agency obligations (excluding
short-term investments, options, futures and repurchase agreements) were as
follows:
<Table>
<Caption>
FUND PURCHASES SALES
--------------------------------------------------------------------------------
Core Bond $ 127,144,350 $ 172,296,109
</Table>
Written Options Contracts
Transactions in written options contracts for the period ended June 30, 2006
were as follows:
<Table>
<Caption>
NON-U.S. FUND CORE BOND FUND
------------------------------------------ ------------------------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
CONTRACTS RECEIVED CONTRACTS RECEIVED
------------------------------------------------------------------------------------------------------------------------------
Outstanding December 31, 2005 11 $ 42,642 183 $ 184,555
Opened 132 642,963 112 175,123
Closed (81) (354,576) (2) (13,663)
Expired (5) (30,794) (97) (55,074)
------------------- ------------------- ------------------- -------------------
Outstanding June 30, 2006 57 $ 300,235 196 $ 290,941
=================== =================== =================== ===================
</Table>
Securities Lending
The Investment Company has a securities lending program whereby each Fund can
loan securities with a value up to 33 1/3% of its total assets. The Fund
receives cash (US currency), US Government or US Government agency
obligations as 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 Corporation ("State Street") in short-term
instruments, money market mutual funds and other short-term investments that
meet certain quality and diversification requirements. Cash collateral
invested in money market funds is included in the Schedule of Investments.
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
76 Notes to Financial Statements
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
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 US securities) or 105% (for
non-US 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 Funds 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 of good financial standing.
As of June 30, 2006, the non-cash collateral received for the securities on
loan in the Aggressive Equity and Non-US Funds was $29,323 and $1,594,604,
respectively. The non-cash collateral consists of a pool of US Government
securities.
4. RELATED PARTY TRANSACTIONS, FEES AND EXPENSES
Manager
FRIMCo manages all of the Funds which comprise the Investment Company. FRIMCo
is a wholly-owned subsidiary of Frank Russell Company (a subsidiary of The
Northwestern Mutual Life Insurance Company). Frank Russell Company provides
money manager evaluation services to FRIMCo.
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), and
also may invest a portion of the collateral received from the Investment
Company's securities lending program in the Frank Russell Investment Company
("FRIC") Money Market Fund. FRIC is a registered investment company that
employs the same investment adviser as the Investment Company. On July 1,
2006, Frank Russell Investment Company changed its name to Russell Investment
Company ("RIC"). As of June 30, 2006, $99,696,000 of the Money Market Fund's
net assets represents investments by the Funds.
The management fees are based upon the average daily net assets of each Fund
and the rates specified in the table below are payable monthly and total
$6,809,746 for the period ended June 30, 2006.
<Table>
<Caption>
FUNDS ANNUAL RATE
----------------------------------------------------------
Multi-Style Equity 0.78%
Aggressive Equity 0.95
Non-U.S. 0.95
Real Estate Securities 0.85
Core Bond 0.60
</Table>
FRIMCo has contractually agreed to waive, at least until April 30, 2007, a
portion of its management fee for each Fund, up to the full amount of its
fee, equal to the amount by which the Fund's total operating expenses exceed
a specified percentage of a Fund's average net assets on an annual basis and
to reimburse each Fund for all remaining expenses, after fee waivers, that
exceed such percentages. There were no contractual reimbursements for the
period ended June 30, 2006. The expense caps and management fees waived for
the period ended June 30, 2006 were as follows:
<Table>
<Caption>
MANAGEMENT FEES
FUNDS EXPENSE CAP WAIVED
--------------------------------------------------------------------------------
Multi-Style Equity 0.87% $ --
Aggressive Equity 1.05 56,508
Non-U.S. 1.15 103,159
Real Estate Securities 1.10 --
Core Bond 0.70 295
</Table>
FRIMCo does not have the ability to recover amounts waived or reimbursed from
previous periods.
Notes to Financial Statements 77
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
Custodian
The Funds have entered into arrangements with their Custodian whereby custody
credits realized as a result of uninvested cash balances were used to reduce
a portion of the Funds' expenses. For the period ended June 30, 2006, the
Funds' custodian fees were reduced by the following amounts under these
arrangements:
<Table>
<Caption>
CUSTODY CREDIT
FUNDS AMOUNT
----------------------------------------------------------
Multi-Style Equity $ 725
Aggressive Equity 893
Non-U.S. 624
Real Estate Securities 382
Core Bond 2,594
</Table>
Transfer Agent
FRIMCo serves as Transfer and Dividend Disbursing Agent for the Investment
Company. For this service, FRIMCo is paid a fee for transfer agency and
dividend disbursing services provided to the Funds. FRIMCo 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 for
the Funds for the period ended June 30, 2006 were $35,931.
Distributor
Russell Fund Distributors, Inc. (the "Distributor"), a wholly-owned
subsidiary of FRIMCo, is the principal underwriter for Investment Company
shares. The Distributor receives no compensation from the Investment Company
for its services.
Brokerage Commissions
The Funds will effect transactions through Frank Russell Securities, Inc.
("FRS") (On July 1, 2006, Frank Russell Securities, Inc. changed its name to
Russell Implementation Services) and its global network of unaffiliated
correspondent brokers. FRS is a registered broker and investment adviser and
an affiliate of FRIMCo. Trades placed through FRS and its correspondents are
used (i) to obtain research services for FRIMCo to assist it in its capacity
as a manager of managers, (ii) to generate commission rebates to the Funds on
whose behalf the trades were made, (iii) to manage trading associated with
changes in managers, rebalancing across existing managers, cash flows and
other portfolio transitions, or (iv) to execute portfolio securities
transactions selected by money managers. Effective January 1, 2006, the Funds
began transitioning trades used to obtain research services and to generate
commission rebates from FRS and LJR (as defined and described more fully
below). During the transition, some of these trades may continue to be
executed through FRS. For purposes of trading to obtain research services for
FRIMCo or to generate commission rebates to the Funds, the Funds' money
managers are requested to and FRIMCo may, with respect to transactions it
places, effect transactions with or through FRS and its correspondents or
other brokers only to the extent that the Funds will receive competitive
execution, price and commissions. In addition, FRIMCo recommended targets for
the amount of trading that money managers allocated through FRS based upon
asset class, investment style and other factors. Research services provided
to FRIMCo by FRS or other brokers include performance measurement statistics,
fund analytics systems and market monitoring systems. Research services will
generally be obtained from unaffiliated third parties at market rates.
Research provided to FRIMCo may benefit the particular Funds generating the
trading activity and may also benefit other Funds within the Investment
Company and other funds and clients managed or advised by FRIMCo or its
affiliates. Similarly, the Funds may benefit from research provided with
respect to trading by those other funds and clients. In some cases, research
may also be provided by non-affiliated brokers.
Effective January 1, 2006, the Funds began effecting transactions though
Lynch, Jones & Ryan, Inc. ("LJR") and its global network of correspondent
brokers. LJR is a registered broker and is not an affiliate of the Funds or
FRIMCo. Trades placed through LJR and its correspondents are used (i) to
obtain research services for FRIMCo to assist it in its capacity as a manager
of managers and (ii) to generate commission rebates to the Funds on whose
behalf the trades were made. For purposes of trading to obtain research
services for FRIMCo or to generate commission rebates to the Funds, the
Funds' money managers are requested to and FRIMCo may, with respect to
transactions it places, effect transactions with or through LJR and its
correspondents or other brokers only to the extent that the Funds will
receive competitive execution, price and commissions. In addition, FRIMCo
recommends targets for the amount of trading that money managers allocate
through LJR based upon asset class, investment style and other factors.
Research services provided to FRIMCo by LJR or other brokers include
performance measurement statistics, fund analytics systems and market
monitoring systems. Research services will be generally obtained
78 Notes to Financial Statements
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
from unaffiliated third parties at market rates. Research provided to FRIMCo
may benefit the particular Funds generating the trading activity and may also
benefit other Funds within the Investment Company and other funds and clients
managed or advised by FRIMCo or its affiliates. Similarly, the Funds may
benefit from research provided with respect to trading by those other funds
and clients.
FRS, LJR or other brokers also may rebate to the Funds a portion of
commissions earned on certain trading by the Funds through FRS, LJR 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 Dollar Committee once
FRIMCo's research budget has been met, as determined annually in the Soft
Dollar Committee budgeting process.
Amounts retained by FRS for the period ended June 30, 2006 were as follows:
<Table>
<Caption>
FUNDS AMOUNT
----------------------------------------------------------
Multi-Style Equity $ 118
Aggressive Equity 426
Real Estate Securities 42
</Table>
Additionally, the Funds paid brokerage commissions to non-affiliated brokers
who provided brokerage and research services to FRIMCo.
Accrued fees payable to affiliates as of June 30, 2006 were as follows:
<Table>
<Caption>
MULTI-STYLE EQUITY AGGRESSIVE EQUITY NON-U.S. REAL ESTATE SECURITIES CORE BOND
------------------------------------------------------------------------------------------------------------------------------
Management fees $ 233,248 $ 167,972 $ 253,381 $ 345,939 $ 115,046
Transfer agent fees 1,305 768 1,154 1,765 831
Trustee fees 736 336 471 1,282 504
-------------- -------------- -------------- -------------- --------------
$ 235,289 $ 169,076 $ 255,006 $ 348,986 $ 116,381
============== ============== ============== ============== ==============
</Table>
Board of Trustees
The Russell Fund Complex consists of Frank Russell Investment Company
("FRIC"), which has 34 Funds, and Russell Investment Funds ("RIF"), which has
five Funds. Each of the Trustees is a Trustee of both FRIC and RIF. During
the period, the Russell Fund Complex paid each of its independent Trustees a
retainer of $52,000 per year, $6,500 ($5,000 prior to January 1, 2006) for
each regular quarterly meeting attended in person, $2,000 for each special
meeting attended in person, and $2,000 for each Audit Committee meeting,
Nominating and Governance Committee meeting or Investment Committee meeting
or any other committee meeting established and approved by the Board that is
attended in person. Each Trustee receives a $500 fee for attending the
meetings (quarterly, special, committee) 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. During the period, the Audit
Committee Chair was paid a fee of $12,000 per year and the Nominating and
Governance Committee chair and Investment Committee chair were each paid a
fee of $6,000 per year. The chairperson of the Board receives an additional
$52,000 per year.
5. FEDERAL INCOME TAXES
At December 31, 2005, the following Funds had net tax basis capital loss
carryforwards which may be applied against any net realized taxable gains in
each succeeding year or until their respective expiration dates, whichever
occurs first. Available capital loss carryforwards and expiration dates are
as follows:
<Table>
<Caption>
FUNDS 10/31/09 10/31/10 10/31/11 10/31/12 TOTALS
------------------------------------------------------------------------------------------------------------------------------
Multi-Style Equity $ 2,793,373 $ 42,288,325 $ 3,302,725 $ -- $ 48,384,423
Non-U.S. -- 14,535,990 5,528,524 -- 20,064,514
Core Bond -- -- -- 305,131 305,131
</Table>
Notes to Financial Statements 79
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2006, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
<Table>
<Caption>
REAL ESTATE
MULTI-STYLE EQUITY AGGRESSIVE EQUITY NON-U.S. SECURITIES CORE BOND
------------------------------------------------------------------------------------------------------------------------------
Cost of Investments $ 370,051,691 $ 273,929,360 $ 339,770,452 $ 403,436,366 $ 271,076,490
================ ================ ================ ================ ================
Unrealized Appreciation $ 39,840,453 $ 27,512,709 $ 65,913,088 $ 161,668,164 $ 877,928
Unrealized Depreciation (10,523,085) (8,286,359) (3,916,261) (1,428,453) (3,823,048)
---------------- ---------------- ---------------- ---------------- ----------------
Net Unrealized Appreciation
(Depreciation) $ 29,317,368 $ 19,226,350 $ 61,996,827 $ 160,239,711 $ (2,945,120)
================ ================ ================ ================ ================
</Table>
As permitted by tax regulations, the Core Bond Fund intends to defer a net
realized capital loss of $255,270 incurred from November 1, 2005 to December
31, 2005.
6. FUND SHARE TRANSACTIONS (amounts in thousands)
Share transactions for the six months ended June 30, 2006 and the fiscal year
ended December 31, 2005 were as follows:
<Table>
<Caption>
SHARES DOLLARS
------------------------------------- -------------------------------------
2006 2005 2006 2005
----------------- ----------------- ----------------- -----------------
Multi-Style Equity
Proceeds from shares sold 1,548 3,229 $ 21,413 $ 41,168
Proceeds from reinvestment of
distributions 122 288 1,717 3,627
Payments for shares redeemed (758) (3,769) (10,407) (48,491)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 912 (252) $ 12,723 $ (3,696)
================= ================= ================= =================
Aggressive Equity
Proceeds from shares sold 868 1,195 $ 13,462 $ 17,241
Proceeds from reinvestment of
distributions 240 1,312 3,685 19,045
Payments for shares redeemed (990) (1,447) (14,709) (21,031)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 118 1,060 $ 2,438 $ 15,255
================= ================= ================= =================
Non-U.S.
Proceeds from shares sold 2,097 3,350 $ 28,698 $ 38,487
Proceeds from reinvestment of
distributions 80 372 1,051 4,388
Payments for shares redeemed (2,320) (2,719) (30,093) (31,991)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) (143) 1,003 $ (344) $ 10,884
================= ================= ================= =================
Real Estate Securities
Proceeds from shares sold 1,825 4,011 $ 34,005 $ 68,272
Proceeds from reinvestment of
distributions 436 2,759 8,092 47,108
Payments for shares redeemed (2,130) (3,350) (39,301) (58,106)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 131 3,420 $ 2,796 $ 57,274
================= ================= ================= =================
Core Bond
Proceeds from shares sold 2,542 4,891 $ 25,786 $ 50,716
Proceeds from reinvestment of
distributions 266 875 2,687 9,014
Payments for shares redeemed (703) (1,326) (7,108) (13,787)
----------------- ----------------- ----------------- -----------------
Total net increase (decrease) 2,105 4,440 $ 21,365 $ 45,943
================= ================= ================= =================
</Table>
80 Notes to Financial Statements
RUSSELL INVESTMENT FUNDS
NOTES TO FINANCIAL STATEMENTS, CONTINUED -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
7. RECORD OWNERSHIP
As of June 30, 2006, the following table includes shareholders of record with
greater than 10% of the total outstanding shares of each respective Fund.
Northwestern Mutual Life Insurance Company separate accounts were the largest
shareholder in each Fund.
<Table>
<Caption>
FUNDS # OF SHAREHOLDERS %
--------------------------------------------------------------------------------
Multi-Style Equity 2 84.6
Aggressive Equity 3 87.7
Non-U.S. 3 91.8
Real Estate Securities 2 82.6
Core Bond 2 87.6
</Table>
8. 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 (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. 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.
The following table lists restricted securities held by a Fund that are
illiquid. The following table does not include (1) securities deemed liquid
by FRIMCo or a money manager pursuant to Board approved policies and
procedures or (2) illiquid securities that are not restricted securities as
designated on the Fund's Schedule of Investments.
<Table>
<Caption>
PRINCIPAL COST MARKET VALUE
FUND - % OF NET ASSETS ACQUISITION AMOUNT ($) COST PER UNIT (000) (000)
SECURITIES DATE OR SHARES $ $ $
-----------------------------------------------------------------------------------------------------------------------------
Aggressive Equity Fund - 0.2%
Diamondrock Hospitality Co. 06/26/04 20,800 10.00 208 309
--------------
309
==============
Core Bond Fund - 0.3%
DG Funding Trust 11/03/04 49 10,537.12 516 516
Parker Hannifin Employee Stock
Ownership Trust 03/09/99 137,847 100.00 138 138
--------------
654
==============
</Table>
Illiquid securities and restricted securities may be priced by the Funds
using fair value procedures approved by the Board of Trustees.
9. DIVIDENDS
On July 3, 2006, the Funds declared the following dividends from net
investment income payable on July 7, 2006 to shareholders on record July 5,
2006.
<Table>
<Caption>
NET INVESTMENT
FUNDS INCOME
----------------------------------------------------------
Multi-Style Equity $ 0.0320
Aggressive Equity 0.0076
Real Estate Securities 0.1111
Core Bond 0.1155
</Table>
Notes to Financial Statements 81
RUSSELL INVESTMENT FUNDS
SHAREHOLDER REQUESTS FOR ADDITIONAL INFORMATION -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
As a courtesy to Fund shareholders, 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 FRIMCo, as RIF's investment manager, 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. FRIMCo has established a proxy voting committee ("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 a
Fund. A description of the P&P, Guidelines and Portfolio Holdings Disclosure
Policy are contained in the Funds' Statement of Additional Information ("SAI").
The SAI is 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.
82 Shareholder Requests for Additional Information
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 management agreement with FRIMCo
(the "FRIMCo Agreement") and the portfolio management contract with each Money
Manager of the Funds (collectively, the "portfolio management contracts") at a
meeting held on April 18, 2006. 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, and the management of the
Funds by FRIMCo. In preparation for the annual review, the Independent Trustees,
with the advice and assistance of independent counsel, also requested and the
Board considered (1) information and reports prepared by FRIMCo relating to the
services provided by FRIMCo (and its affiliates) to the Funds, including
information requested by the Independent Trustees; (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 ("Comparable Funds") not managed by FRIMCo believed by the
provider to be generally comparable in investment objectives and size to the
Funds; and (3) an analysis of the Third-Party Information prepared by FRIMCo
(the "FRIMCo Analysis" and, with the other information requested by the
Independent Trustees or provided by FRIMCo in connection with the Board's
consideration of the portfolio management contracts, the "Agreement Renewal
Information") addressing, among other things, performance and expense
differentials between certain Funds and their respective Comparable Funds. The
Independent Trustees also received a memorandum from independent counsel
discussing the legal standards for their consideration of the proposed
continuances.
On April 17, 2006, the Independent Trustees met in person to review the
Agreement Renewal Information in a private session with independent counsel at
which no representatives of FRIMCo or management were present. At the April 18
meeting of the Board of Trustees, the Board, including the Independent Trustees,
reviewed the proposed continuance of the FRIMCo Agreement and the portfolio
management contracts with management and independent counsel to the Independent
Trustees. Following this review, but prior to voting, the Independent Trustees
again met in a private session with their independent counsel to evaluate
additional information and analysis received from FRIMCo and management at the
Board meeting. The discussion below reflects all of these reviews.
In evaluating the portfolio management contracts, the Board considered 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. FRIMCo has engaged multiple
Money Managers for all Funds.
The Board considered that FRIMCo (rather than any Money Manager) is responsible
under the FRIMCo Agreement for determining, implementing and maintaining the
investment program for each Fund. Assets of each Fund have been allocated among
the multiple Money Managers selected by FRIMCo, subject to Board approval, for
that Fund. FRIMCo manages directly a portion of certain Fund's assets as
described below and otherwise exercises investment discretion over the portion
of each Fund's assets that FRIMCo determines not to allocate to the Money
Managers and for each Fund's cash reserves by selecting the individual portfolio
securities for those portions of assets. FRIMCo may also directly manage
portions of a Fund during transitions between Money Managers.
FRIMCo is responsible for selecting Money Managers for each Fund and for
determining allocations and reallocations of assets among the Money Managers.
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 FRIMCo in accordance with the Fund's
applicable investment objective, policies and restrictions (each, a "segment").
FRIMCo 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 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, FRIMCo is
responsible for recommending to the Board the restructuring of Fund segments and
additions of new Money Managers or replacements of existing Money Managers at
any time when, based on FRIMCo's research and analysis, such actions are
appropriate. FRIMCo may develop specific 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 a Fund in a
complementary manner. Therefore, FRIMCo'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. The performance of
individual Money Managers for a Fund may reflect the roles assigned to them by
FRIMCo in the Fund's investment activities and any constraints placed by FRIMCo
upon their selection of portfolio securities. In light of the foregoing, the
overall performance of each Fund over appropriate periods reflects in great part
the performance of FRIMCo in designing the Fund's investment program,
structuring Fund segments, selecting an effective Money Manager for each segment
with a style 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.
Basis for Approval of Investment Advisory Contracts 83
RUSSELL INVESTMENT FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
The Board also considered that the prospectus for the Funds and other public
disclosures emphasize to investors FRIMCo's role as the principal investment
manager for each Fund, rather than the investment selection role of the Funds'
Money Managers, and describe the manner in which the Funds operate so that
investors may take the information into account when deciding to purchase shares
of any such Fund.
The Board also considered the special expertise of FRIMCo with respect to the
manager-of-managers structure of the Funds and the likelihood that, at the
current expense ratio of each such Fund, there would be no acceptable
alternative investment managers to replace FRIMCo on comparable terms given the
need to conduct the manager-of-managers strategy of each 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 FRIMCo Agreement,
including the following:
1. The nature, scope and quality of the services provided to the Fund by FRIMCo;
2. The management fee paid by the Fund to FRIMCo 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 FRIMCo as to other fees and benefits received by
FRIMCo or its affiliates from the Fund, including any administrative,
transfer agent, cash management and securities lending fees, soft dollar
arrangements and commissions in connection with portfolio securities
transactions;
4. Information provided by FRIMCo as to expenses incurred by the Fund; and
5. Information provided by FRIMCo as to the profits that FRIMCo derives from its
mutual fund operations generally and from each Fund.
At the April 18 Board meeting, FRIMCo and management reviewed the reasonableness
of the Funds' management fees. In discussing whether the Funds' performance
supported these fees, FRIMCo noted differences between the investment strategies
of certain Funds and their respective Comparable Funds in pursuing their
investment objectives, including 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
Comparable Funds. According to FRIMCo, these strategies may be expected to
result, and for certain Funds during the periods covered by the Third-Party
Information did result, in lower relative performance than that of some of their
respective Comparable Funds. FRIMCo stated that the strategies pursued by the
Funds are intended to result in less volatile, more moderate returns relative to
each Fund's performance benchmark rather than more volatile, more extreme
returns than its Comparable Funds may experience over time.
On the basis of the Agreement Renewal Information, including the FRIMCo
Analysis, and other information previously received by the Board from FRIMCo
during the course of the year or presented at the Board meeting by FRIMCo, the
Board, in respect of each Fund, found the management fee charged by FRIMCo to be
reasonable in light of the nature, scope and quality of the services provided to
the Funds, after giving effect to waivers and/or reimbursements and considering
differences in the composition and investment strategies of their respective
Comparable Funds. The Board also determined that the relative expense ratio of
each Fund was comparable to those of its Comparable Funds; FRIMCo's methodology
of allocating expenses of operating funds in the complex was reasonable; and
FRIMCo's profitability with respect to each Fund was not excessive in light of
the nature, scope and quality of the services provided by FRIMCo.
The Board concluded that the performance of the Funds supported continuation of
the FRIMCo Agreement, again based upon the Agreement Renewal Information,
including the FRIMCo Analysis, and other information previously received by the
Board from FRIMCo during the course of the year or presented at the Board
meeting by FRIMCo. In evaluating performance, the Board considered each Fund's
absolute performance and its performance relative to appropriate benchmarks and
indices and its Comparable Funds. In evaluating the Funds' performance, the
Board also considered FRIMCo's investment strategy of managing the Funds in a
risk aware manner.
The Board considered for each Fund whether economies of scale have been realized
and whether the fees for such Fund appropriately reflect or should be revised to
reflect any such economies. In its deliberations, the Board noted its findings
reached at a meeting held on February 28, 2006 that the management fees for each
Fund appropriately reflect any economies of scale realized by that Fund. Its
findings at the earlier meeting were based upon information and analyses
prepared by FRIMCo, including information as to variability of Money Manager
investment advisory fees and other factors associated with the
manager-of-managers structure employed by the Funds.
The Trustees considered that fees payable to FRIMCo by institutional clients
with investment objectives similar to those of the Funds are lower, and may, in
some cases, be substantially lower, than the rates paid by the Funds. FRIMCo
reviewed with the Trustees the differences in the scope of services it provides
to institutional clients and the Funds. For example, institutional clients have
fewer
84 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
administrative needs than the Funds. It was further 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. Accordingly,
the Trustees did not regard these fee differences as relevant to their
deliberations.
In voting to approve the continuation of the FRIMCo Agreement on its current
terms and conditions for each Fund, the Board, after considering the foregoing
and other relevant factors, determined that continuation of the FRIMCo Agreement
was in the best interests of the Funds and their respective shareholders.
With respect to the evaluation of the terms of portfolio management contracts
with Money Managers, the Board received and considered information from FRIMCo
reporting for each Money Manager, among other things, the Money Manager's
performance over various periods; FRIMCo's assessment of the performance of each
Money Manager; any significant business relationships between the Money Manager
and FRIMCo or Russell Fund Distributors, Inc., the Funds' underwriter; and
FRIMCo'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. FRIMCo recommended that each Money Manager be retained at its current
fee rate. FRIMCo 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 FRIMCo; FRIMCo is
aware of the fees charged by Money Managers to other clients; and FRIMCo
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 FRIMCo's explanation in light of the Board's findings as to the
aggregate management fees paid by each Fund and the fact that each Money
Manager's fee is paid by FRIMCo.
Based substantially upon FRIMCo's recommendations together with the information
received from FRIMCo in support of its recommendations, the Board concluded that
the fees paid to the Money Managers of each Fund were reasonable in light of the
quality of the investment advisory services provided and that continuation of
the portfolio management agreement with each Money Manager of each Fund was in
the best interests of the Fund and its shareholders.
At a meeting held on May 23, 2006, the Board of Trustees received a proposal
from FRIMCo to effect a money manager change for the Multi-Style Equity Fund and
the Core Bond Fund. In the case of each such Fund, the Trustees approved the
terms of the proposed portfolio management contract with the successor Money
Manager based substantially upon FRIMCo's recommendation to hire the Money
Manager at the proposed fee rate; any significant business relationships between
the Money Manager and FRIMCo or Russell Fund Distributors, Inc., the Fund's
underwriter; FRIMCo'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 negotiation with FRIMCo; FRIMCo's awareness of the fees charged by
the Money Manager to other clients; and FRIMCo'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 18, 2006 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 FRIMCo.
During 2005 and 2006, the Trustees received proposals from FRIMCo to manage
directly approximately up to 10% of the assets of the Multi-Style Equity Fund
and the Non-U.S. Fund (each a "Participating Fund") utilizing a "select holdings
strategy" pursuant to the terms of the FRIMCo Agreement, the actual allocation
to be determined by each Participating Fund's FRIMCo portfolio manager. Under
this strategy, FRIMCo analyzes the holdings of a Participating Fund's Money
Managers to identify particular stocks that are concurrently overweighted by the
Money Managers. FRIMCo uses a proprietary model to rank these stocks. Based on
this ranking, FRIMCo will purchase additional shares of certain stocks for the
Participating Fund. The strategy is designed to increase the Participating
Fund's exposure to stocks that are collectively viewed as attractive by multiple
Money Managers of a Participating Fund. Implementation of this strategy includes
periodic rebalancing of the Participating Fund's holdings. In connection with
FRIMCo's proposals, the Trustees received and considered information from FRIMCo
regarding the potential enhancements to the Participating Fund's performance
based upon FRIMCo's experience in employing the same strategy for other types of
investment accounts under its management. The Trustees also considered that
FRIMCo would not be required to pay investment advisory fees to a Money Manager
with respect to assets for which the select holdings strategy is utilized and
that the profits derived by FRIMCo generally and from the Participating Fund
consequently may increase incrementally. The Board, however, considered FRIMCo's
advice that it will pay certain Money Managers additional fees for providing
information and other services in connection with the select holdings strategy
and expects to incur additional costs in implementing and carrying out the
select holdings strategy; the limited amount of assets that would be managed
directly by FRIMCo pursuant to the select holdings strategy; and the fact that
the aggregate management fees paid by the Participating Fund would not increase
as a result of the implementation of the select holdings strategy. FRIMCo has
advised the Board that the select holdings strategy has been implemented for the
Multi-Style Equity Fund, although a reasonable period of time is needed to
evaluate fairly its impact on the Participating Fund's performance, and it may
be implemented in the Non-U.S. Fund sometime in the future. Based upon the
information
Basis for Approval of Investment Advisory Contracts 85
RUSSELL INVESTMENT FUNDS
BASIS FOR APPROVAL OF INVESTMENT ADVISORY CONTRACTS, CONTINUED (UNAUDITED)
- --------------------------------------------------------------------------------
received from FRIMCo during 2005 and 2006 in connection with its select holdings
strategy proposals, the Agreement Renewal Information and additional discussion
at the April 18 meeting concerning the select holdings strategy, the Board in
the case of the Participating Funds concluded that the management fees paid to
FRIMCo by each such Fund under the FRIMCo Agreement in connection with the
select holdings strategy continue to be reasonable in light of the nature and
anticipated quality of the management services to be rendered by FRIMCo.
In their deliberations, the Trustees did not identify any particular information
as to the FRIMCo Agreement or, other than FRIMCo's recommendation, the portfolio
management agreement 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.
86 Basis for Approval of Investment Advisory Contracts
RUSSELL INVESTMENT FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS -- JUNE 30, 2006 (UNAUDITED)
- --------------------------------------------------------------------------------
The following tables provide information for each officer and trustee of the
Russell Fund Complex. The Russell Fund Complex consists of Frank Russell
Investment Company ("FRIC"), which has 34 funds, and Russell Investment Funds
("RIF"), which has five funds. Each of the trustees is a trustee of both FRIC
and RIF. The first table provides information for trustees who are interested
trustees. The second table provides information for the independent trustees.
The third table provides information for the trustees emeritus. The fourth table
provides information for the officers.
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
*Michael J.A. Trustee Since Appointed until - Chairman of the Board, FRC 39 None
Phillips, 2002 successor is - 1990-2003, President, FRC
Born January 20, duly elected - 1993-2003, CEO, FRC
1948 and qualified - Trustee, FRIC and RIF
- Director, FRTC; Frank
909 A Street Russell Investments (Suisse)
Tacoma, Washington S.A. (global investment
98402-1616 services); Frank Russell
Company Limited (consultant
to institutional investors
in Europe
and the UK)
- Chairman of the Board and
President, Russell 20-20
Association; and Frank
Russell Investments
(Delaware), Inc. (general
partner in various limited
partnerships ("FRIDI"))
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- ----------------------------------------------------------------------------------------------------------------------------
**Thaddas L. Alston Trustee since Appointed until - Senior Vice President, Larco 39 None
Born April 7, 2006 successor is Investments, Ltd.
1945 duly elected
and qualified
909 A Street
Tacoma,
Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul E. Anderson, Trustee since Appointed until - President, Anderson 39 None
Born October 15, 1984 successor is Management Group LLC
1931 duly elected (private investments
Chairman of the and qualified consulting)
909 A Street Nominating and - February 2002 to June 2005,
Tacoma, Washington Governance Appointed until Lead Trustee, FRIC and RIF
98402-1616 Committee since successor is
2006 duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Phillips is also an officer and/or director of one or more affiliates of
FRIC and RIF and is therefore an interested trustee.
** Mr. Alston was elected to the Board of Trustees effective May 1, 2006.
Disclosure of Information about Fund Directors 87
RUSSELL INVESTMENT FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- JUNE 30, 2006
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Kristianne Blake, Trustee since Appointed until - President, Kristianne Gates 39 - Trustee, WM
Born January 22, 2000 successor is Blake, P.S. (accounting Group of Funds
1954 duly elected services) (investment
Chairperson and qualified - Director and Chairman of the company);
909 A Street since 2005 Audit Committee, Avista - Director,
Tacoma, Washington Annual Corp. Avista Corp
98402-1616 - Trustee and Chairman of the
Operations and Distribution
Committee, WM Group of Funds
- February 2002 to June 2005,
Chairman of the Audit
Committee, FRIC and RIF
- ----------------------------------------------------------------------------------------------------------------------------
Daniel P. Connealy, Trustee since Appointed until - June 2004 to present, Senior 39 None
Born June 6, 1946 2003 successor is Vice President and Chief
duly elected Financial Officer, Waddell &
909 A Street Chairman of and qualified Reed Financial, Inc.
Tacoma, Washington Audit Committee - 2003, Retired
98402-1616 since 2005 Appointed until - 2001-2003, Vice President
successor is and Chief Financial Officer,
duly elected Janus Capital Group Inc.
and qualified - 1979-2001, Audit and
Accounting Partner,
PricewaterhouseCoopers LLP
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jonathan Fine, Trustee since Appointed until - President and Chief 39 None
Born July 8, 1954 2004 successor is Executive Officer, United
duly elected Way of King County, WA
909 A Street and qualified
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Raymond P. Trustee since Appointed until - President, Simpson 39 None
Tennison, Jr., 2000 successor is Investment Company and
Born December 21, duly elected several additional
1955 and qualified subsidiary companies,
including Simpson Timber
909 A Street Company, Simpson Paper
Tacoma, Washington Company and Simpson Tacoma
98402-1616 Kraft Company
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Jack Thompson, Trustee since Appointed until - September 2003 to present, 39 - Director, Sparx
Born March 21, 1949 2005 successor is Independent Board Chair and Japan Fund
duly elected Chairman of the Audit
909 A Street and qualified Committee, Sparx Japan Fund
Tacoma, Washington - May 1999 to May 2003,
98402-1616 President, Chief Executive
Officer and Director, Berger
Financial Group, LLC
- May 1999 to May 2003,
President and Trustee,
Berger Funds
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
Mr. Michael Phillips is the Chairman of the Board of Frank Russell Company which
controls FRIMCo, the investment adviser of the Funds. He is also an Interested
Trustee of the Funds. On May 26, 2005, Mr. Phillips became a director of Simpson
Investment Company, a privately held company. Mr. Raymond P. Tennison, Jr., an
Independent Trustee of the Funds is the President of Simpson Investment Company.
88 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- JUNE 30, 2006
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Julie W. Weston, Trustee since Appointed until - Retired since 2000 39 None
Born October 2, 2002 successor is - 1987 to 2002, Director,
1943 duly elected Smith Barney Fundamental
Chairperson of and qualified Value Fund
909 A Street the Investment
Tacoma, Washington Committee since Appointed until
98402-1616 2006 successor is
duly elected
and qualified
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS
- ----------------------------------------------------------------------------------------------------------------------------
*George F. Russell, Trustee Emeritus Until - Director Emeritus, Frank 39 None
Jr., and Chairman resignation or Russell Company (investment
Born July 3, 1932 Emeritus since removal consultant
1999 to institutional investors
909 A Street ("FRC"));
Tacoma, Washington and FRIMCo
98402-1616 - Chairman Emeritus, FRIC and
RIF; Frank Russell
Securities, Inc.
(broker-dealer and
investment adviser ("FRS"));
Russell 20-20 Association
(non-profit corporation);
and Frank Russell Trust
Company (non-depository
trust company ("FRTC"))
- Chairman, Sunshine
Management Services, LLC
(investment adviser)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Paul Anton, Ph.D., Trustee Emeritus Five year term - Retired since 1997 39 None
Born December 1, since 2003 - Trustee of FRIC and RIF
1919 until 2002
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
William E. Baxter, Trustee Emeritus Five year term - Retired since 1986 39 None
Born June 8, 1925 since 2004 - Trustee of FRIC and RIF
until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
* Mr. Russell is also a director emeritus of one or more affiliates of FRIC and
RIF.
Disclosure of Information about Fund Directors 89
RUSSELL INVESTMENT FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- JUNE 30, 2006
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- ----------------------------------------------------------------------------------------------------------------------------
No. of
Portfolios
in Russell
Position(s) Held Fund
Name, with Fund and Term Principal Occupation(s) Complex Other
Age, Length of of During the Overseen Directorships Held
Address Time Served Office Past 5 Years by Trustee by Trustee
- ----------------------------------------------------------------------------------------------------------------------------
TRUSTEES EMERITUS (CONTINUED)
- ----------------------------------------------------------------------------------------------------------------------------
Lee C. Gingrich, Trustee Emeritus Five year term - Retired since 1995 39 None
Born October 6, since 2006 - Trustee of FRIC and RIF
1930 until 2005
- Chairman of the Nominating
909 A Street and Governance Committee
Tacoma, Washington 2001-2005
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Eleanor W. Palmer, Trustee Emeritus Five year term - Retired since 1981 39 None
Born May 5, 1926 since 2004 - Trustee of FRIC and RIF
until 2004
909 A Street
Tacoma, Washington
98402-1616
- ----------------------------------------------------------------------------------------------------------------------------
</Table>
90 Disclosure of Information about Fund Directors
RUSSELL INVESTMENT FUNDS
DISCLOSURE OF INFORMATION ABOUT FUND DIRECTORS, CONTINUED -- JUNE 30, 2006
(UNAUDITED)
- --------------------------------------------------------------------------------
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------------------------
Position(s) Held
Name, with Fund and Term Principal Occupation(s)
Age, Length of of During the
Address Time Served Office Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------------------------------------------------------------------------------------------------------------------------
Cheryl Wichers, Chief Compliance Until removed - Chief Compliance Officer, FRIC
Born December 16, 1966 Officer since by Independent - Chief Compliance Officer, RIF
2005 Trustees - Chief Compliance Officer, FRIMCo
909 A Street - April 2002-May 2005, Manager, Global Regulatory
Tacoma, Washington Policy
98402-1616 - 1998-2002, Compliance Supervisor, Russell Investment
Group
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Greg J. Stark, President and Until successor - President and CEO, FRIC and RIF
Born May 3, 1968 Chief Executive is chosen and - Chairman of the Board, President and CEO, FRIMCo
Officer since qualified by - Chairman of the Board, President and CEO, RFD
909 A Street 2004 Trustees - Chairman of the Board and President, Russell
Tacoma, Washington Insurance Agency, Inc. (insurance agency ("RIA"))
98402-1616 - Until 2004, Managing Director of Individual Investor
Services, FRC
- 2000 to 2004, Managing Director, Sales and Client
Service, FRIMCo
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Mark E. Swanson, Treasurer and Until successor - Treasurer, Chief Accounting Officer and CFO, FRIC and
Born November 26, 1963 Chief Accounting is chosen and RIF
Officer since qualified by - Director, Funds Administration, FRIMCo, FRTC and RFD
909 A Street 1998 Trustees - Treasurer and Principal Accounting Officer, SSgA
Tacoma, Washington Funds
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Thomas F. Hanly, Chief Investment Until removed - Chief Investment Officer, FRIC, RIF, FRC, FRTC
Born November 17, 1964 Officer since by Trustees - Director and Chief Investment Officer, FRIMCo and RFD
2004 - 1999 to 2003, Chief Financial Officer, FRC, FRIC and
909 A Street RIF
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
Karl J. Ege, Secretary since Until successor - General Counsel and Managing Director of Law and
Born October 8, 1941 1994 is chosen and Government Affairs, Secretary, FRC
qualified by
909 A Street Trustees
Tacoma, Washington
98402-1616
- --------------------------------------------------------------------------------------------------------------------------
</Table>
Disclosure of Information about Fund Directors 91
RUSSELL INVESTMENT FUNDS
909 A Street, Tacoma, Washington 98402
(800) 787-7354
- --------------------------------------------------------------------------------
TRUSTEES
Thaddas L. Alston
Paul E. Anderson
Kristianne Blake
Daniel P. Connealy
Jonathan Fine
Michael J.A. Phillips
Raymond P. Tennison, Jr.
Jack R. Thompson
Julie W. Weston
TRUSTEES EMERITUS
George F. Russell, Jr.
Paul Anton, Ph.D.
William E. Baxter
Lee C. Gingrich
Eleanor W. Palmer
OFFICERS
Gregory J. Stark, President and Chief Executive Officer
Cheryl Wichers, Chief Compliance Officer
Thomas F. Hanly, Chief Investment Officer
Mark E. Swanson, Treasurer and Chief Accounting Officer
Karl J. Ege, Secretary
MANAGER AND TRANSFER AND DIVIDEND DISBURSING AGENT
Frank Russell Investment Management Company
909 A Street
Tacoma, WA 98402
CUSTODIAN
State Street Bank and Trust Company
Allan Forbes Building
150 Newport Avenue AFB35
North Quincy, MA 02171
OFFICE OF SHAREHOLDER INQUIRIES
909 A Street
Tacoma, WA 98402
(800) 787-7354
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
DISTRIBUTOR
Russell Fund Distributors, Inc.
909 A Street
Tacoma, WA 98402
MONEY MANAGERS AS OF JUNE 30, 2006
Multi-Style Equity Fund
Ark Asset Management Co., Inc., New York, NY
DePrince, Race & Zollo, Inc., Orlando, FL
Institutional Capital LLC, Chicago, IL
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Montag & Caldwell, Inc., Atlanta, GA
Suffolk Capital Management, LLC, New York, NY
Turner Investment Partners, Inc., Berwyn, PA
Aggressive Equity Fund
CapitalWorks Investment Partners, LLC, San Diego, CA
David J. Greene and Company, LLC, New York, NY
Geewax, Terker & Company, Chadds Ford, PA
Goldman Sachs Asset Management, L.P., New York, NY
Gould Investment Partners, LLC, Berwyn, PA
Jacobs Levy Equity Management, Inc., Florham Park, NJ
Nicholas-Applegate Capital Management LLC, San Diego, CA
Tygh Capital Management, Inc., Portland, OR
Non-U.S. Fund
AQR Capital Management, LLC, Greenwich, CT
Fidelity Management & Research Company, Boston, MA
The Boston Company Asset Management, LLC, Boston, MA
Wellington Management Company, LLP, Boston, MA
Real Estate Securities Fund
AEW Management and Advisors, L.P., Boston, MA
Heitman Real Estate Securities LLC, Chicago, IL
INVESCO Institutional (N.A.), Inc., through its INVESCO Real Estate Division,
Dallas, TX
RREEF America L.L.C., Chicago, IL
Core Bond Fund
Bear Stearns Asset Management Inc., New York, NY
Goldman Sachs Asset Management, L.P., New York, NY
Pacific Investment Management Company LLC, Newport Beach, CA
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.
92 Manager, Money Managers and Service Providers
(FRANK RUSSELL LOGO)
RUSSELL INVESTMENT FUNDS
909 A Street
Tacoma, Washington 98402
800-787-7354
Fax: 253-591-3495
36-08-072 (06/06)
www.russell.com
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]
ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. [NOT APPLICABLE]
ITEM 6. [SCHEDULE OF INVESTMENTS IS 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.
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/ Greg J. Stark
----------------------------------------------------------------------------
Greg J. Stark
Principal Executive Officer and Chief Executive Officer
Date: August 14, 2006
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/ Greg J. Stark
----------------------------------------------------------------------------
Greg J. Stark
Principal Executive Officer and Chief Executive Officer
Date: August 14, 2006
By: /s/ Mark E. Swanson
----------------------------------------------------------------------------
Mark E. Swanson
Principal Financial Officer, Principal Accounting Officer and Treasurer
Date: August 14, 2006